SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant [x] Filed by a
Party other than the Registrant[ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[x] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 204.14a-11(c) or Section 240.14a-12
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
FIRST COMMONWEALTH FINANCIAL
CORPORATION
(Name of Registrant as Specified In Its Charter)
Payment
of Filing Fee (Check the appropriate box):
[x] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed pursuant to
Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid previously.
Identify the previous filing by registration statement number, or the Form or
Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration No.:
3) Filing Party:
4) Date Filed:
TABLE OF CONTENTS
|
PAGE
|
|
| Notice of Annual Meeting of Shareholders |
Cover
|
| General Information |
1
|
| Common Stock Ownership by Management |
2
|
| Section 16(A) Beneficial Ownership Reporting Compliance |
4
|
| Election of Directors |
5
|
| Nominees for a term ending in 2006 |
6
|
| Board Committees |
7
|
| Compensation of Directors |
9
|
| Summary Compensation Table |
10
|
| Stock Options: | |
| Stock Option Grants in Fiscal Year 2002 |
11
|
|
Aggregate
Stock Option Exercises in Fiscal Year |
12
|
| Report of the Executive Compensation Committee | |
| Executive Compensation Committee |
12
|
| Executive Compensation Principles |
13
|
| Executive Compensation Programs |
14
|
| Chief Executive Officer Compensation |
15
|
| Report of the Audit Committee |
15
|
| Stock Performance Graph |
17
|
| Executive Compensation Committee
Interlocks And Insider Participation |
18
|
| Interests of Nominees, Directors,
and Officers in Certain Transactions |
18
|
| Accountants |
20
|
| Appendix I, Audit Committee Charter |
24
|
FIRST COMMONWEALTH FINANCIAL CORPORATION
Old Courthouse Square, 22 North Sixth Street
Indiana, Pennsylvania 15701
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
April 21, 2003
TO THE SHAREHOLDERS:
Notice is hereby given that
the Annual Meeting of Shareholders of First Commonwealth Financial Corporation
(the "Corporation") will be held at First Commonwealth Place, 654
Philadelphia Street, Indiana, Pennsylvania, on Monday, April 21, 2003, at 3:00
p.m., local time, for the following purposes:
1. To elect three Directors to serve for terms expiring in 2006.
2. To act on such other matters as may properly come before the
meeting.
Only shareholders of record as of
the close of business on March 3, 2003, are entitled to notice of and to vote
at the Annual Meeting and any adjournments thereof. The Annual Report to Shareholders for the year ended December 31,
2002, which includes consolidated financial statements of the Corporation, is
enclosed.
YOU ARE URGED TO SIGN, DATE,
AND RETURN THE ENCLOSED PROXY CARD AS PROMPTLY AS POSSIBLE WHETHER OR NOT YOU
PLAN TO ATTEND THE MEETING IN PERSON.
IF YOU ATTEND THE MEETING, YOU MAY, IF YOU WISH, WITHDRAW YOUR PROXY AND
VOTE YOUR SHARES IN PERSON.
By
Order of the Board of Directors,
/S/DAVID
R. TOMB, JR.
David
R. Tomb, Jr.
Secretary
Indiana, Pennsylvania
March 21, 2003
FIRST COMMONWEALTH FINANCIAL
CORPORATION
Old Courthouse Square, 22 North Sixth Street
Indiana, Pennsylvania 15701
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
April 21, 2003
GENERAL INFORMATION
The
accompanying proxy is solicited by the Board of Directors of First Commonwealth
Financial Corporation (the "Corporation" or "FCFC") in
connection with its Annual Meeting of Shareholders to be held on Monday, April
21, 2003, 3:00 p.m., local time, and any adjournments thereof.
If the accompanying proxy is
duly executed and returned, the shares of Common Stock, par value $1.00 per
share (the "Common Stock"), of the Corporation represented thereby
will be voted and, where a specification is made by the shareholder as provided
therein, will be voted in accordance with that specification. A proxy may be revoked by the person
executing it at any time before it has been voted by notice of such revocation
to David R. Tomb, Jr., Secretary of the Corporation.
The three persons named in the
enclosed proxy have been selected by the Board of Directors and will vote
shares represented by valid proxies.
They have indicated that, unless otherwise specified in the proxy, they
intend to vote to elect as Directors the three nominees listed on page 6.
The Board of Directors has no
reason to believe that any of the nominees will be unable to serve as
Directors. In the event, however, of
the death or unavailability of any nominee or nominees, the proxy to that extent
will be voted for such other person or persons as the Board of Directors may
recommend.
The Corporation has no
knowledge of any other matters to be presented at the meeting. In the event other matters do properly come
before the meeting the persons named in the proxy will vote in accordance with
their judgment on such matters.
The approximate date on which
this Proxy Statement will be mailed to shareholders of the Corporation is March
21, 2003. Solicitation of proxies may
be made by personal interviews and telephone by management and regularly
engaged employees of the Corporation.
Brokerage houses and other custodians, nominees and fiduciaries will be
requested to forward solicitation material to the beneficial owners of the
stock held of record by such persons.
Expenses for solicitation of all proxies will be paid by the
Corporation.
1
As of the close of business on March
3, 2003, there were 58,986,772 shares of Common Stock outstanding. Three million (3,000,000) shares of
Preferred Stock have been authorized; however, none of the preferred shares is
outstanding. Only shareholders of
record as of the close of business on March 3, 2003, are entitled to receive
notice of and to vote at the Annual Meeting.
Shareholders are entitled to
one vote for each share held on all matters to be considered and acted upon at
the Annual Meeting. The Articles of
Incorporation of the Corporation do not permit cumulative voting. The three nominees for directors who receive
the highest number of votes cast for the election of directors at the Annual
Meeting, present in person or voting by proxy, a quorum being present, will be
elected as directors. An affirmative
vote of a majority of the shares present and voting at the meeting is required
for approval of all other items being submitted to the shareholders for their
consideration. Abstentions and broker
non-votes are each included in the determination of the number of shares
present and voting, but are not counted for purposes of determining whether a
proposal has been approved.
The Corporation conducts
business through two banking subsidiaries:
(1) First Commonwealth Bank ("FCB"); and (2) First
Commonwealth Trust Company ("FCTC"); and through First Commonwealth
Professional Resources Inc. ("FCPRI"), a professional services
affiliate, First Commonwealth Systems Corporation ("FCSC"), a data
processing subsidiary, First Commonwealth Insurance Agency ("FCIA"),
a wholly-owned insurance agency subsidiary of FCB, and First Commonwealth
Financial Advisors, Inc. ("FCFA"), a financial planning, consulting,
and asset management firm. The
Corporation also jointly owns Commonwealth Trust Credit Life Insurance Company
("CTCLIC"), a reinsurer of credit life and accident and health
insurance.
COMMON STOCK OWNERSHIP BY MANAGEMENT
The Corporation is not aware of any
person who, as of March 3, 2003, was the beneficial owner of more than 5% of
the Common Stock, except FCTC as more fully described on page 4. The following table sets forth information
concerning beneficial ownership by all directors and nominees, by each of the
executive officers named in the Summary Compensation Table on page 10 (the
"Summary Compensation Table") and by all directors and executive
officers as a group.
|
|
Amount/Nature |
|
|
|
Ray T. Charley |
144,971 |
(10) |
* |
|
Edward T. Cote |
216,800 |
(5,10) |
* |
|
David S. Dahlmann |
15,211 |
(3,10) |
* |
|
Alan R. Fairman |
1,129,821 |
(2,5,9) |
1.88% |
|
Johnston A. Glass |
238,762 |
(3,10) |
* |
|
Dale P. Latimer |
1,804,075 |
(3,5,10) |
2.99% |
2
|
James W. Newill |
470,200 |
(8,10) |
* |
|
Joseph E. O'Dell |
361,654 |
(2,4,10) |
* |
|
John A. Robertshaw, Jr. |
61,872 |
(2) |
* |
|
Laurie Stern Singer |
17,492 |
(10) |
* |
|
Gerard M. Thomchick |
207,016 |
(2,4,10) |
* |
|
David R. Tomb, Jr. |
741,084 |
(2,3,4,5,6,10) |
1.23% |
|
E. James Trimarchi |
951,876 |
(3,4,5,6,7,10) |
1.58% |
|
|
|
|
|
|
All
directors and executive |
5,480,559 |
|
9.10% |
|
|
|
|
|
|
*Less than 1% |
|
|
|
(1) Under regulations of the Securities and Exchange Commission,
a person who has or shares voting or investment power with respect to a
security is considered a beneficial owner of the security. Voting power is the power to vote or direct
the voting of shares, and investment power is the power to dispose of or direct
the disposition of shares. Unless
otherwise indicated in the other footnotes below, each director and executive
officer has sole voting power and sole investment power over the shares
indicated opposite his name in the table, and each member of a group has sole
voting power and sole investment power over the shares beneficially owned by
him that are included in the shares indicated for the group.
(2) Does not include the following shares held by spouses, either
individually or jointly with other persons, as to which voting and investment
power is disclaimed by the director or officer: Mr. Fairman, 25,595; Mr. O'Dell, 5,480; Mr. Robertshaw, 6,264;
Mr. Thomchick, 7,304; Mr. Tomb, 528; and all directors and executive officers
as a group, 45,171.
(3) Includes the following shares held jointly with spouses, as
to which voting and investment power is shared with the spouse: Mr. Dahlmann, 12,211; Mr. Glass, 55,843; Mr.
Latimer, 54,581; Mr. Tomb, 63,692; Mr. Trimarchi, 75,736; and all directors and
executive officers as a group, 262,063.
(4) Includes 52,172 shares held by Atlas Investment Company, of
which Messrs. O'Dell, Thomchick, Tomb, and Trimarchi are each 25% owners and as
to which they share voting and investment power.
(5)
Includes 204,000 shares owned by Berkshire Securities Corporation. Berkshire
is a Pennsylvania corporation organized in 1976 for the purpose of acquiring
and holding the securities of Pennsylvania banks. The officers, directors
or stockholders of Berkshire include Messrs. Cote, Fairman, Latimer, Tomb, and
Trimarchi, each of whom is an officer or director of the Corporation, among
others. Each of the
3
foregoing persons may be deemed to share voting and investment power of these
shares.
(6) Includes 318,876 shares held by County Wide Real Estate,
Inc., of which Messrs. Tomb and Trimarchi are each 50% owners and as to which
they share voting and investment power.
(7) Includes 59,304 shares held by family interests of which Mr.
Trimarchi exercises sole voting and investment power.
(8) Includes 6,960 shares held by a family member over which Mr.
Newill exercises sole voting and investment power.
(9) Includes 907,656 shares held by Fairman Drilling
Company. Mr. Fairman is the Business
Manager of Fairman Drilling Company and is deemed to have an indirect
relationship with respect to investment power on these shares. Mr. Fairman was appointed by the Board of
Directors in October 2002 to fill a vacancy in the class of directors whose
terms expire in 2004.
(10) Includes the
following stock options currently vested or vesting within 60 days of the effective
date of the table: Mr. Charley, 12,000 shares; Mr. Cote, 12,000 shares;
Mr. Dahlmann, 3,000 shares; Mr. Fairman, 3,000 shares; Mr. Glass, 182,919 shares;
Mr. Latimer, 12,000 shares; Mr. Newill, 12,000 shares; Mr. O'Dell, 270,244 shares;
Ms. Singer, 10,000 shares; Mr. Thomchick, 134,151 shares; Mr. Tomb, 83,260 shares;
Mr. Trimarchi, 207,001 shares; and all directors and other executive officers
as a group, 1,270,241 shares.
As of February 28, 2003, FCTC,
acting in a fiduciary capacity for various trusts and estates, including the
Corporation Employee Stock Ownership Plan ("ESOP"), and the
Corporation 401(k) Retirement Savings and Investment Plan ("401(k)
Plan") held shares of Common Stock in an aggregate amount of 4,609,537 (7.81%
of the outstanding shares). FCTC has
either sole or shared voting and investment power on these shares as listed
below:
|
Total shares on which sole voting power is held: |
1,663,620 |
|
Total shares on which voting power is shared: |
2,945,917 |
|
Total shares on which sole investment power is held: |
1,469,573 |
|
Total shares on which investment power is shared: |
3,139,964 |
FCTC votes shares over which it has
sole voting power. Where voting power
is shared, shares are voted by FCTC in consultation with the other persons
having voting power.
SECTION 16(A)
BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities
Exchange Act of 1934 requires the Corporation's directors and executive
officers, and persons who own more than 10% of a registered class of
4
the Corporation's equity securities, to file with the Securities and Exchange
Commission (the "Commission") an initial report of ownership and
reports of changes in ownership of Common Stock and other equity securities of
the Corporation. Executive officers,
directors and greater than 10% shareholders are required by Commission
regulation to furnish the Corporation with copies of all Section 16(a) forms
which they file. The Corporation is not
aware of any late fillings or failures to file in 2002. In making this disclosure, the Corporation
has relied solely on written and oral representations of its directors,
executive officers and greater than 10% shareholders and copies of the reports
they have filed with the Commission.
ELECTION OF
DIRECTORS
The By-Laws of the Corporation
provide that the number of directors is fixed from time to time by resolution
of the Board, subject to a minimum of three and a maximum of twenty-five
directors. The number of directors is
currently fixed at 20. However, as a
result of the restructuring and consolidation of our subsidiary branches and
the passing away of director Brumbaugh, there are currently a total of twelve
active directors on the Board. The
Board believes that the ideal size for the Corporation's board of directors is
between twelve and fifteen directors, and the Board may nominate additional
directors for election at future annual meetings to achieve this target.
The Board is divided into
three classes, each of which is elected to serve a term of three years. Of the twelve active directors, three are in
the class whose term expires in 2003, three are in the class whose term expires
in 2004, and six are in the class whose term expires in 2005. Directors James W. Newill, John A.
Robertshaw Jr., and Laurie Stern Singer have been nominated for election at the
2003 Annual Meeting of Shareholders for terms expiring in 2006. Four directors whose terms were to expire in
2003 will not be standing for reelection.
Director Robert C. Williams resigned from the board effective April 22,
2002. Directors E. H. Brubaker, Thomas
J. Hanford, and H. H. Heilman Jr., elected to retire pursuant to the early
retirement incentive described below under "Compensation of
Directors." Notwithstanding that
fewer directors have been nominated than the number authorized, proxies cannot
be voted for a greater number of persons than the number of nominees named.
Each director elected this
year will continue in office until a successor has been elected. If any nominee is unable to serve, which the
Board has no reason to expect, the persons named in the accompanying proxy
intend to vote for the balance of those named and, if they deem it advisable,
for a substitute nominee. The names of
the nominees for directors and the names of directors whose terms of office
will continue after the Annual Meeting are listed in the following table.
Information about the
nominees, each of whom is presently a member of the Board, and about the other
directors whose terms of office will continue after the Annual Meeting, is set
forth in the table below. The nominees
and other directors have held the position shown for more than five years
unless otherwise indicated.
5
Nominees for a Term Ending in 2006:
|
|
Director |
Principal
Occupation or Employment; |
|
|
|
James W. Newill |
1998 |
Certified
Public Accountant, formerly President, |
||
John A. Robertshaw, Jr. |
1998 |
Formerly
Chairman, Laurel Vending, Inc. (vending |
||
|
Laurie Stern Singer |
1998 |
President,
Allegheny Valley Development |
||
Continuing Directors Whose Terms End in 2004:
|
David S. Dahlmann |
1998 |
Adjunct
Professor; formerly Vice Chairman of the |
|
Alan R. Fairman |
2002 |
Business
Manager, Fairman Drilling Company; |
|
E. James Trimarchi |
1982 |
Chairman
of the Board of the Corporation; Director |
6
Continuing Directors Whose Terms End in 2005:
|
Ray T. Charley |
1998 |
President,
Thomi Co. (retail grocers); Director of |
|
Edward T. Cote |
1984 |
Associate,
The Wakefield Group (Investment |
|
Johnston A. Glass |
1986 |
Vice
Chairman of the Corporation; President and |
|
Dale P. Latimer |
1984 |
Chairman
of the Board and Chief Executive |
|
Joseph E. O'Dell |
1994 |
President
and Chief Executive Officer of the |
|
David R. Tomb, Jr. |
1983 |
Partner,
Tomb and Tomb (attorneys-at-law); Senior |
BOARD
COMMITTEES
During
2002 there were six meetings of the Board of Directors of the Corporation. All directors attended at least 75% of the
total number of meetings of the Board of Directors of the Corporation and all
committees of which they were members.
The Board of Directors of the
Corporation has established the following standing committees: Executive, Audit, Governance, and Executive
Compensation. The Governance Committee
also acts as a Nominating Committee.
When the
Board of Directors is not in session, the Executive Committee, which is comprised
of Directors Trimarchi (Chairman), Tomb (Secretary), Charley, Cote, Dahlmann,
Fairman, Glass, Latimer, Newill, O'Dell, Robertshaw, and Singer possesses and
exercises all the powers of the Board, except for matters which are required
by law to be acted upon by the full Board. The Executive Committee considers
major policy matters and makes reports and recommendations to the Board.
The Committee met one time in 2002.
7
The Audit Committee is comprised of Directors Latimer (Chairman), Cote, and
Newill. The Committee met eight times in 2002. Former Audit Committee
member Joseph W. Proske retired and James W. Newill was elected as a member
of the Audit Committee on October 15, 2002. The function of the Audit
Committee is primarily to assist the Board in monitoring (1) the integrity of
the financial statements of First Commonwealth Financial Corporation (the "Corporation"),
(2) the independent auditor's qualifications and independence, (3) the
performance of the Corporation's internal audit function and independent auditors,
and (4) the compliance by the Corporation with legal and regulatory requirements.
The Audit Charter adopted by the Board in 2001 has been revised and is included
in Appendix I. The Board approved the revised Charter in January 2003.
A report of the Audit Committee follows on page 15.
The Governance Committee was
established as a permanent standing Committee by the Board in April 2001. The Committee acts as a nominating committee
for elections to the Board. In
addition, the Committee will also be responsible for measuring performance of
executive officers and Board members, and for recommending management
succession plans. The Committee is
comprised of Directors Trimarchi (Chairman), Tomb (Secretary), Fairman, Newill,
Robertshaw, and Singer. The Committee
met six times in 2002.
The Executive
Compensation Committee is comprised of Directors Cote (Chairman), Fairman, and
Latimer. The Committee met eight times in 2002. A report of the
Executive Compensation Committee follows on page 12.
The By-Laws of the Corporation
require that any shareholder who intends to nominate or cause to have nominated
any candidate for election to the Board of Directors (other than a candidate
proposed by the Corporation's then existing Board of Directors) must notify the
Secretary of the Corporation in writing not less than 120 days in advance of
the first anniversary date the Corporation's proxy statement was released to
its shareholders in connection with the previous year's annual meeting of
shareholders called for the election of directors (for the 2003 meeting of
shareholders, such notification must have been received by the Secretary on or
before November 21, 2002). Such notification
must contain (to the extent known by the notifying shareholder) the name,
address, age, principal occupation and number of shares of the Corporation
owned by each proposed nominee; the name, residence address and number of
shares of the Corporation owned by the notifying shareholder; the total number
of shares that, to the knowledge of the notifying shareholder, will be voted
for each proposed nominee; a description of all arrangements or understandings
between the shareholder and each nominee and any other person or persons
pursuant to which the nomination or nominations are to be made by the
shareholder; such other information regarding each nominee proposed by such
shareholder as would be required to be included in a proxy statement filed
pursuant to the proxy rules of the Securities and Exchange Commission had the
nominee been nominated by the Board of Directors; and the written consent of
each nominee, signed by such nominee, to serve as a director of the Corporation
if so elected. The Board of Directors
as a whole would consider nominations submitted by a shareholder if submitted
in accordance with the By-Laws and otherwise in time for such consideration.
8
COMPENSATION OF
DIRECTORS
Directors are compensated at the
rate of $1,750 per quarterly meeting attended.
Directors who do not serve in a management or affiliate management
capacity at FCFC also receive an annual retainer of $12,000. Committee members receive $1,000 per
committee meeting attended. Members who
act in the capacity of Chairman or Secretary also receive an additional $250
per committee meeting attended. In
addition, each member of the board who is not an employee of FCFC is eligible
to receive options to purchase FCFC stock pursuant to FCFC's Compensatory Stock
Option Plan. Such grants are made at
the discretion of the Executive Compensation Committee. Each non-employee director received options
to purchase 3,000 shares of common stock on January 23, 2002. These options are currently exercisable at a
strike price of $11.70 per share, and will expire on January 23, 2012.
In July 2002, the Board
approved a retirement incentive plan as part of the Corporation's overall plan
designed to streamline the organization and restructure the governance
function. Under this plan, directors
who elected to retire before the expiration of their terms received a one-time
cash payment based on a calculation of $6,000 for each year of service. Directors E. H. Brubaker, Thomas J. Hanford,
and H. H. Heilman Jr., each from the class of directors whose terms expire in
2003, and directors Ronald C. Geiser, David L. Johnson, and Joseph W. Proske,
each from the class of directors whose terms expire in 2004, elected to retire
under the retirement incentive plan and received $108,000 according to the
terms of the plan. In addition,
director Robert C. Williams resigned from the Board effective April 22, 2002,
and director Robert F. Koslow resigned from the Board effective June 18, 2002. None of the retiring or resigning directors
notified the Board of any disagreement with the Corporation's operations,
policies or practices. Alan R. Fairman
was appointed by the Board in October 2002 to fill one of the vacancies from
the class of directors whose terms expire in 2004. The Board has not nominated individuals to fill the remaining
vacancies in the 2003 and 2004 classes, but may nominate additional directors
for election at future annual meetings or nominate directors from the 2005
class for terms of less than three years to cause the classes to be
approximately equal in size.
The Deferred Compensation Plan
for Non-Employee Directors allows non-employee directors to defer receipt of
any retainers and Board and committee meeting fees, including amounts paid for
Advisory Board service. At the election
of the director, the deferred amounts are credited to a stock account, a
non-stock account, an investment account or any combination thereof. Payments under the plan are made as a lump
sum at the earlier of the cessation of service as a director or the death or
disability of the director.
9
COMPENSATION OF
EXECUTIVE OFFICERS
The table below sets forth certain
information regarding compensation received by the Chief Executive Officer and
the remaining four most highly compensated executive officers of the
Corporation (the "Named Executive Officers").
SUMMARY
COMPENSATION TABLE
|
|
|
Long-Term |
|
||
|
|
|
|
|
Securities |
|
|
Joseph
E. O'Dell |
2002 |
424,500 |
0 |
39,205 |
57,499 |
|
E.
James Trimarchi |
2002 |
397,500 |
0 |
36,667 |
19,540 |
|
Gerard
M. Thomchick |
2002 |
354,500 |
0 |
29,333 |
36,662 |
|
David
S. Dahlmann |
2002 |
334,000 |
0 |
30,509 |
446,721(4) |
|
Johnston
A. Glass |
2002 |
333,500 |
0 |
30,556 |
40,436 |
(1) Includes compensation for services on boards and committees
of the Corporation and before employee voluntary SERP (deferred compensation)
reduction.
10
(2) Includes for 2002 for Messrs. O'Dell, Trimarchi, Thomchick,
Dahlmann, and Glass, respectively, the following compensation amounts: (i) matching contributions to the
individual's account under the 401(k) plan of $8,000, $8,000, $8,000, $8,000,
and $8,000; (ii) discretionary contributions to the individual's account under
the 401(k) plan of $6,000, $6,000, $6,000, $6,000, and $6,000; (iii) the
allocation of shares under the ESOP of $5,540, $5,540, $5,540, $5,540, and
$5,540; (iv) matching and automatic contributions to the individual's account
under the SERP of $26,040, $0, $13,440, $14,940, and $15,000; (v) and the
actuarial value of the Corporation's contribution to the split-dollar life
insurance policies of $11,919, $0, $3,682, $6,616, and $5,896.
(3) Mr. Dahlmann's employment was voluntarily terminated on
December 31, 2002.
(4) Includes a total of $405,625 paid over 65 weeks in connection
with Mr. Dahlmann's separation package.
The following tables set forth
certain information regarding stock options granted in 2002 to the Chief
Executive Officer and the Named Executive Officers.
STOCK OPTION
GRANTS IN FISCAL YEAR 2002
|
|
Number
of |
% of
Total |
|
|
|
||
|
|
|
|
|
|
0% |
5% |
10% |
|
Joseph E. O'Dell |
39,205 |
4.8 |
$11.70 |
1/23/12 |
$0 |
$288,473 |
$731,047 |
|
E. James Trimarchi |
36,667 |
4.5 |
$11.70 |
1/23/12 |
$0 |
$269,798 |
$683,722 |
|
Gerard M. Thomchick |
29,333 |
3.6 |
$11.70 |
1/23/12 |
$0 |
$215,834 |
$546,966 |
|
David S. Dahlmann |
30,509 |
3.7 |
$11.70 |
1/23/12 |
$0 |
$224,487 |
$568,895 |
|
Johnston A. Glass |
30,556 |
3.7 |
$11.70 |
1/23/12 |
$0 |
$224,833 |
$569,771 |
|
|
|
|
|
|
|
|
|
|
Gains applicable to all |
|
|
|
|
|
|
|
(1) Options in 2002 were granted under the 1995
Stock Option Plan with an exercise price equal to fair market value on the date
of the grant. The options became fully
vested on December 31, 2002.
(2) The potential realizable gain to all
shareholders (based on 59.0 million shares of First Commonwealth common stock
outstanding and the market price of $11.70) at 0%, 5%, and 10% assumed growth
rates over a term of ten years is provided as a comparison to the potential
gain realizable by the Named Officers at the same assumed annual rates of stock
appreciation.
11
AGGREGATE STOCK OPTION
EXERCISES IN FISCAL YEAR 2002
AND FISCAL YEAR-END OPTION VALUES
|
|
Number
of Securities |
Value
of Unexercised |
||||
|
|
Shares |
|
|
|
|
|
|
Joseph O'Dell |
0 |
0 |
270,244 |
0 |
242,621 |
0 |
|
E. James Trimarchi |
0 |
0 |
207,001 |
0 |
179,365 |
0 |
|
Gerard M. Thomchick |
0 |
0 |
134,151 |
0 |
48,194 |
0 |
|
David S. Dahlmann |
66,583 |
52,217 |
0 |
0 |
0 |
0 |
|
Johnston Glass |
0 |
0 |
182,919 |
0 |
141,809 |
0 |
|
|
|
|
|
|
|
|
Notwithstanding
anything to the contrary set forth in any of the Corporation's previous filings
under the Securities Act of 1933, as amended, or the Securities and Exchange
Act of 1934, as amended, that might incorporate future filings, including this
Proxy Statement in whole or in part, the following report and the Performance
Graph on page 17 shall not be incorporated by reference into any such filings.
REPORT OF THE
EXECUTIVE COMPENSATION COMMITTEE
The following is a report by the
Executive Compensation Committee of the Board of Directors of First
Commonwealth Financial Corporation (the "Committee"). The report provides shareholders an
explanation of the Committee's executive compensation policies and specific
compensation decisions.
Executive Compensation Committee
The Committee oversees compensation
of directors, senior executive officers, and the CEO of the Corporation. The Committee's goal is to administer an
executive compensation program that helps maximize shareholder value by using
incentives to place a portion of total compensation at risk and that provides
financial rewards only when the performance level of the Corporation justifies
such rewards.
In 2002 First Commonwealth
Financial Corporation established a charter for the Committee, highlights of
which are outlined below:
1. The Committee consists of a minimum of three independent directors
who are appointed by the Board.
2. The Committee reviews and approves goals related to executive
compensation.
3. The Committee conducts annual compensation reviews that consider
competitive pay practices and relative performance results.
12
4. Specifically, the salary, annual incentive opportunity, long-term
incentive opportunity, terms of any contractual arrangements, and the terms of
supplemental benefits offered to the CEO and senior executive officers are all
subject to the review and approval of the Committee.
5. The Committee approves the required public disclosures of
executive compensation.
6. The Committee has unfettered access to independent advisors to
assist it in discharging its duties.
7. The Committee makes regular reports to the Board.
The Committee met eight times in
2002. Each meeting of the Committee is
documented in the form of minutes and submitted to the Board of Directors.
Executive Compensation Principles
The Board of Directors has adopted
an Executive Compensation Statement of Principles. These Principles provide guidance for the deliberations of the
Committee and are the basis for the Committee's decisions. The Principles emphasize that base salaries
should be established based upon relevant peer group comparisons, that tax
advantaged plans should be used when appropriate, and that compensation
programs should optimize the incentive of the executive officers to increase
the Corporation's long-term performance.
Accordingly, the Executive
Compensation Program is structured to foster decisions and actions that will
have a strong positive impact on the Corporation's long-term performance. For this reason, participation in the
programs administered by the Committee is limited to those executives who have
the greatest opportunity to bring about the achievement of the Corporation's
long-term strategic objectives.
The Executive Compensation
Committee established the following parameters for executive compensation under
the 2002 program:
1. An overall program which is not overly complex and may be readily
communicated and easily understood by participants and shareholders.
2. Base salary that ranges from the fiftieth to seventy-fifth
percentile of the competitive rate for the position as defined by selected peer
group information.
3. Base salary adjustments that maintain internal equity.
4. An annual cash incentive payable on the basis of the Corporation's
financial success for the year.
13
5. Utilization of IRS "qualified" plans whenever they are
in the best interests of both the executive officer and the Corporation.
6. Use of equity-based compensation through the Corporation's 1995
Compensatory Stock Option Plan to provide a long-term incentive for the
executive officers and senior employees of the Corporation to maximize the
Corporation's stock price and increase shareholder value.
7. Use of nonqualified plans to restore the benefits of a select
group of executives that are otherwise limited due to limits under the tax
code.
The Executive Compensation Committee
utilized several factors to define an appropriate competitive peer group
including the type of company from which executive talent might be recruited, a
logical geographical region, and the ability to identify and make relevant
comparisons of executive officer positions in terms of responsibilities and
performance.
The 2002 peer group was
structured utilizing this methodology and philosophy and, in the opinion of the
Committee, represents a fair and reasonable standard against which executive
pay may be compared.
Executive Compensation Programs
The primary
components of the Corporation's Executive Compensation Program are base
salaries, an annual cash incentive plan, a stock option plan, and
benefits. Compensation was set to
correspond with the Principles identified earlier in this report.
Base salaries are determined
after taking into account the position, responsibilities, and competitive
salary data as defined by comparable peer group information from similarly
sized bank and bank holding companies in the Middle Atlantic and adjacent
states.
Under the annual cash
incentive plan, executive officers are rewarded based on the annual increase in
primary earnings per share.
Under the shareholder-approved
Compensatory Stock Option Plan, executives may be awarded incentive stock
options and non-qualified stock options.
These stock options enable the optionee to purchase (at some point in
the future) the Corporation's common stock at its market price as determined on
the day of the option award. The
Committee is currently evaluating what role options should play in the future.
Executives partake in the
normal benefit programs available to employees of the Corporation and its
affiliates. Supplemental arrangements
are used to restore benefits that would otherwise be limited by the tax code.
14
Chief Executive Officer Compensation
In 2002, Mr.
O'Dell completed his eighth year as President and Chief Executive Officer of
the Corporation. He received a base
salary of approximately $417,000. Based
on First Commonwealth's earnings per share in 2002, he did not earn a cash
incentive. Based on its governing
Principles and market practices, the Committee awarded Mr. O'Dell options on
39,205 shares in 2002. The options
vested on December 31, 2002, and accrue value only to the extent that First
Commonwealth's stock price rises. In
2002, Mr. O'Dell participated in the Corporation's 401(k) Plan and ESOP. As such, the Corporation made contributions
to his accounts in 2002.
The Committee believes these
compensation levels to be appropriate in light of the governing Principles
outlined herein.
Impact of IRC Section 162(m)
Section 162(m) of the Internal
Revenue Code (IRC) limits the deductibility of compensation paid to an employee
in excess of $1,000,000. Compensation
deemed to be "performance-based" is exempt from Section 162(m) if
certain criteria are met. Currently,
the Committee does not anticipate the loss of any deduction due to Section
162(m). The Committee will continue to
monitor its Executive Compensation Program in light of Section 162(m) and take
such actions as it deems appropriate.
Submitted
by the Executive Compensation Committee:
Edward T. Cote, Chairman
Alan R. Fairman
Dale P. Latimer
REPORT OF THE
AUDIT COMMITTEE
The Board of Directors has adopted a
written charter outlining the duties and responsibilities for the Audit Committee,
which is included as revised in Appendix I to this proxy statement. The Audit Committee members are independent
as defined in the New York Stock Exchange (NYSE) listing standards.
The Audit Committee has:
1. Reviewed and discussed the audited financial statements with
management;
2. Discussed with the independent auditors, Deloitte & Touche LLP
("Deloitte & Touche"), the matters required to be discussed by
Statement on Auditing Standards No. 61; and,
15
3. Received the written disclosures and the letter from the
independent auditors, Deloitte & Touche, required by Independence Standards
Board Standard No. 1 and has discussed with the independent auditors the
independent auditor's independence.
Based on the review and discussions
noted above, the Audit Committee recommended to the Board of Directors that the
audited financial statements be included in the Corporation's annual report on
Form 10-K for the last fiscal year for filing with the Commission.
Submitted by the Audit Committee:
Dale P. Latimer, Chairman
Edward T. Cote
James W. Newill
16
PERFORMANCE
GRAPH
The following graph compares the yearly
percentage change in the cumulative total shareholder return on the
Corporation's Common Stock against the cumulative total return of the Russell
2000 Index and selected bank holding companies operating in Pennsylvania with
assets between one and eight billion dollars, including FNB Corporation, Fulton
Financial Corporation, S & T Bancorp Inc., Susquehanna Bancshares Inc., and
AmeriServ Financial, Inc. (peer group) for the five years commencing January 1,
1998 and ending December 31, 2002.
Cumulative
Five Year Total Return
First Commonwealth vs. Russell 2000 and Peer Group
|
|
Period Ending |
|||||
|
Index |
12/31/97 |
12/31/98 |
12/31/99 |
12/31/00 |
12/31/01 |
12/31/02 |
|
First Commonwealth Financial Corporation |
100.00 |
72.27 |
73.96 |
65.37 |
79.08 |
82.82 |
|
Russell 2000 |
100.00 |
97.45 |
118.17 |
114.60 |
117.45 |
93.39 |
|
First Commonwealth Peer Group* |
100.00 |
91.75 |
77.80 |
91.04 |
105.96 |
112.52 |
Assumes that the value of the investment in FCFC Common Stock
and each index was $100 on January 1, 1998 and that all dividends were
reinvested.
17
EXECUTIVE
COMPENSATION COMMITTEE
INTERLOCKS AND INSIDER PARTICIPATION
The Executive Compensation Committee
consists of Directors Cote, Fairman, and Latimer. No member was an officer or employee of the Corporation during
2002 nor has ever been an officer or employee of the Corporation or a
subsidiary. Further, during 2002, no executive
officer of the Corporation served on a compensation committee (or other board
committee performing equivalent functions) or Board of Directors of any entity
related to the above named Committee members or of any entity whose executive
officers served as a director of the Corporation.
INTERESTS OF
NOMINEES, DIRECTORS, AND OFFICERS
IN CERTAIN TRANSACTIONS
During 2002,
David S. Dahlmann served as Vice Chairman of FCFC and President and CEO of SWB
pursuant to an employment agreement which became effective December 31,
1998. Mr. Dahlmann's agreement was for
five years followed by successive one year automatic renewals unless either
party gave contrary written notice. In
exchange for his services Mr. Dahlmann
received cash compensation equal to three hundred thousand dollars per
year in the form of base pay which was subject to increases as the Corporation
deemed appropriate. In addition, Mr.
Dahlmann was eligible to receive all of the same employee benefits as other
employees of the Corporation who were at a similar level and
classification. As such he was a
participant in the Cash Incentive Bonus Plan, Supplemental Executive Retirement
Plan, Split-Dollar Life Insurance Plan, Compensatory Stock Option Plan, 401(k),
ESOP, and the group health, disability, and life insurance plans. If the Corporation had terminated Mr.
Dahlmann's employment without cause at any time, or if Mr. Dahlmann had
terminated his employment for good reason, the Corporation would have paid him
an amount equal to twelve month's base salary at his then current rate of
compensation. In addition, the
Corporation would have continued to pay its share of Mr. Dahlmann's health
insurance premiums for a period of not more than eighteen months. Had the Corporation terminated Mr. Dahlmann
for just cause, he would have had no right to compensation or other benefits
for any period after the date of termination.
If during the term of the agreement a change in control of the
Corporation had occurred as defined by the agreement, Mr. Dahlmann could have
terminated his employment for a period of up to twelve months following such a
change. He would then have been
eligible for a severance payment based upon the average aggregate annual
compensation for a defined period of time multiplied by three. The Corporation would have assumed
responsibility for the full cost of the health insurance premium for eighteen
months plus provide six months of outplacement assistance with an external
provider. Mr. Dahlmann's position as
President and CEO of SWB terminated with the merger of SWB and FCB October 15,
2002, and he elected to voluntarily resign his position of Vice Chairman of
FCFC effective December 31, 2002. In
conjunction with his resignation, Mr. Dahlmann received a separation package
that will pay him $405,625 over a 65-week period. This amount was calculated using a standard formula that was in
effect in 2002.
18
At the 1996 Annual Meeting, the
shareholders approved and ratified the Corporation's Change in Control
Agreement Program for the Corporation's executive officers and certain other
key employees. Except as described
below, all of the agreements are identical in all material aspects.
If, within one year following
the occurrence of a change in control, the employer involuntarily terminates
the employment of the executive (other than for cause as defined below),
substantially reduces the executive's title, responsibilities, power or
authority, reduces the executive's base compensation, assigns duties which are
inconsistent with previous duties, or undertakes similar actions, a severance
benefit equal to one year's base compensation (payable in twelve monthly
installments) will thereupon be payable to the former executive. Health insurance and other principal
employee benefits will be continued during that one year period. If the former executive enters into
competitive employment during the one year period, severance payments will
cease. Cause for termination shall
arise if the executive commits a felony resulting in, or intended to result in,
monetary harm to the Corporation, its customers, or affiliates, or if the
executive intentionally fails to perform his duties for 30 consecutive days
following written notice from the Corporation that such duties are not being
performed.
The agreement with Mr. O'Dell,
the President and Chief Executive Officer of the Corporation, provides for
severance payments to be made if the employer involuntarily terminates the
employment of the executive (other than for cause as defined above), or undertakes
similar action as described above, within three years of a change in control
(rather than one year as described above for other agreements). Furthermore, Mr. O'Dell's agreement provides
a severance benefit equal to three year's compensation (payable in thirty-six
monthly installments) with continuation of health insurance and other principal
employee benefits during that period.
In addition, Mr. O'Dell may also trigger the payment of severance
benefits (in the same amount and under the same conditions described above) by
voluntarily terminating employment within one year following a change in
control. However, the voluntary
termination provision will no longer be available once Mr. O'Dell attains
normal retirement age under any of the Corporation's regular retirement plans.
Separate agreements with Mr.
Thomchick, Senior Executive Vice President of the Corporation, and Mr. Glass,
Vice Chairman of FCFC and President and CEO of FCB, are identical to Mr.
O'Dell's agreement in all material respects except that severance payments are
triggered only if the involuntary termination of employment or other triggering
event occurs within two years of the change in control and the total severance
benefit in his case is equal to two years compensation (payable in twenty-four
monthly installments).
In December 1998, FCB executed
an agreement with Mr. Glass who serves as Vice Chairman of FCFC and President
and CEO of FCB. The agreement defines
the severance package Mr. Glass would receive should his employment be
terminated by the Employer for reasons other than for just cause prior to his
sixty-third (63rd) birthday.
Should such a termination occur, Mr. Glass would receive compensation
payments for twenty-four (24) months following his separation. The payments would be based upon the rate of
annual
19
compensation he was receiving at the time of separation. Mr. Glass would be prohibited from
employment with a competitor, directly or indirectly, in the Employer's market
area in the twenty-four (24) months following his termination without just
cause. The Employer is obligated to
continue to pay its share of the cost of health insurance premiums for Mr.
Glass for a period of twenty-four (24) months following his separation. Mr. Glass may also elect to invoke the terms
of the agreement by terminating his employment for any reason. The agreement permits the Employer to
terminate Mr. Glass for just cause at any time. The agreement does not call for the payment of any compensation
or benefit coverage should a just cause termination occur. The agreement does not diminish the rights
of Mr. Glass under any other existing agreements, including a change of control
agreement.
During 2002, David
R. Tomb, Jr., attorney-at-law, and the law firm of Tomb and Tomb of which Mr.
Tomb is a partner performed legal services for the Corporation and FCB. Mr. Tomb is a director and executive officer
of the Corporation. The fees paid for
services during 2002 were $70,060.
The Company has made and
intends to continue to make loans through its subsidiary, First Commonwealth
Bank, to various of its Directors and executive officers, and to corporations
or other entities in which they may own a controlling interest. The loans to such persons (i) were made in
the ordinary course of business, (ii) were made on substantially the same
terms, including interest rates and collateral, as those prevailing at the time
for comparable transactions with other persons, and (iii) did not involve more
than a normal risk of collectibility or did not present other unfavorable
features.
In addition to loans made by
its banking subsidiary, the Corporation, through an executive loan plan, has
advanced amounts from time to time to executive officers of the
Corporation. During 2002 Mr. O'Dell and
Thaddeus J. Clements, each an executive officer, had outstanding loan balances
and these amounts are included in Note 24 "Related Party
Transactions" of the Corporation's Annual Report and Annual Report on Form
10-K along with those credits issued to Directors and executive officers
through the Corporation's banking subsidiary.
The highest amount outstanding during 2002 was $398,754 and $127,685 for
O'Dell and Clements, respectively. The
balance outstanding at February 28, 2003, was $370,255 and $117,485,
respectively. These loans were extended
through a line of credit and carry an interest rate at the New York City prime
rate. The Corporation discontinued
advancing amounts under this plan as of July 30, 2002.
ACCOUNTANTS
Deloitte & Touche was selected
by the Board of Directors to serve as the Corporation's independent public
accountant for its 2002 fiscal year.
On November 7, 2002, the Board
of Directors of the Corporation approved, by unanimous consent, the engagement
of Ernst & Young LLP ("Ernst & Young") as its independent
auditors for the year ending December 31, 2003, and the dismissal of Deloitte
& Touche effective upon completion of their audit of the Corporation's
financial statements for
20
the year ended December 31, 2002. The
Audit Committee of the Board of Directors approved the change in auditors on
November 5, 2002.
Deloitte & Touche was
notified on November 7 that they would be dismissed upon completion of their
audit of the Corporation's financial statements for the year ended December 31,
2002.
The reports of Deloitte &
Touche on the Corporation's financial statements for the years ended December
31, 2002, and December 31, 2001, did not contain an adverse opinion or a
disclaimer of opinion and were not qualified or modified as to uncertainty,
audit scope or accounting principles.
In connection with the audits
of the Corporation's financial statements for the fiscal years ended December
31, 2002, and December 31, 2001, there were no disagreements with Deloitte
& Touche on any matters of accounting principles or practices, financial
statement disclosure, or auditing scope and procedures, which if not resolved
to the satisfaction of Deloitte & Touche would have caused Deloitte &
Touche to make reference to the matter in their report.
Aggregate fees for
the fiscal year ended December 31, 2002, and December 31, 2001, billed or to be
billed by the Corporation's principal accounting firm, Deloitte & Touche
were:
|
|
2002 |
2001 |
|
Audit Fees |
$305,450 |
$277,300 |
|
Audit Related Fees (a) (b) |
$50,300 |
$30,850 |
|
Tax Fees |
$-0- |
$-0- |
|
All Other Fees |
$-0- |
$-0- |
(a) Deloitte & Touche's "Audit Related Fees" were
for employee benefit plan audits, accounting research and a student loan
attestation report, of which 94.4% for 2002 and 98.5% for 2001 were
pre-approved.
(b) The Audit Committee has considered whether the provision of
these services is compatible with maintaining the independent accountant's
independence.
All auditing services (which may
entail providing comfort letters in connection with securities underwritings)
and all non-audit services, provided to the Corporation by the Corporation's
auditors which are not prohibited by law shall be pre-approved by the Audit
Committee pursuant to such processes as are determined to be advisable. Pre-approved shall include blanket
pre-approval of non-prohibited services for limited dollar amounts which the
Audit Committee, in its business judgment, does not believe possess the
potential for abuse or conflict.
21
The pre-approval
requirement set forth above shall not be applicable with respect to the
provision of non-audit services, if:
(i) the aggregate amount of all such non-audit services provided
to the Corporation constitutes not more than 5 percent of the total amount of
revenues paid by the Corporation to its auditor during the fiscal year in which
the non-audit services are provided:
(ii) such services were not recognized by the Corporation at the
time of the engagement to be non-audit services; and
(iii) such services are promptly brought to the attention of the
Audit Committee and approved prior to the completion of the audit by the Audit
Committee or by one or more members of the Audit Committee who are members of
the Board of Directors to whom authority to grant such approvals has been
delegated by the Audit Committee.
The Audit Committee may delegate to
one or more designated members of the Audit Committee the authority to grant
required pre-approvals. The decisions
of any member to whom authority is delegated under this paragraph to
pre-approve an activity under this subsection shall be presented to the full
Audit Committee at its next scheduled meeting.
The hours expended on the
Deloitte & Touche engagement to audit the registrant's financial statements
for the most recent fiscal year that were attributed to work performed by
persons other than the Deloitte & Touche's full-time, permanent employees
was less than 50 percent.
Representatives from Deloitte
& Touche and Ernst & Young are expected to be present at the Annual
Meeting and will have an opportunity to make a statement, if they desire to do
so, and to respond to appropriate questions.
ANNUAL REPORT
A copy of the Corporation's Annual
Report for the fiscal year ended December 31, 2002, is enclosed with this Proxy
Statement.
A copy of the Corporation's
Form 10-K annual report for 2002 as filed with the Securities and Exchange
Commission may be obtained without charge upon written request to: David R. Tomb, Jr., Secretary/Treasurer, P.O.
Box 400, Indiana, Pennsylvania 15701.
22
SHAREHOLDER PROPOSALS
Proposals of Corporation
shareholders intended to be presented at the Annual Meeting of Shareholders to
be held in the year 2004 must be received by the Secretary of the Corporation
not later than November 22, 2003, in order to be considered for inclusion in
the Corporation's proxy statement for that meeting.
In connection with the 2004
Annual Meeting of Shareholders, if the Corporation does not receive notice of a
matter or proposal to be considered (whether or not the proponent thereof
intends to include such matter or proposal in the proxy statement of the
Corporation) on or before February 4, 2004 (45 days prior to mailing date of
this year's proxy) then the persons appointed by the Board of Directors to act
as the proxies for such annual meeting will be allowed to use their
discretionary voting authority with respect to any such matter or proposal at
such annual meeting, if such matter or proposal is raised at such annual
meeting.
23
APPENDIX I
FIRST COMMONWEALTH FINANCIAL CORPORATION
AUDIT COMMITTEE CHARTER
Purpose
The Audit Committee (the
"Committee") is appointed by the Board to assist the Board in
monitoring (1) the integrity of the financial statements of First Commonwealth
Financial Corporation (the "Corporation"), (2) the independent
auditor's qualifications and independence, and (3) the performance of the
Corporation's internal audit function and independent auditors, and (4) the
compliance by the Corporation with legal and regulatory requirements.
The primary responsibility of
the audit committee is to oversee the Corporation's financial reporting process
on behalf of the Board and report the results of their activities to the
Board. Management is responsible for
preparing the Corporation's financial statements and related disclosures and
the Corporation's independent auditors are responsible for auditing those
financial statements. It is not the
duty of the Audit Committee to plan or conduct audits or to determine that the
Corporation's financial statements are complete and accurate and in accordance
with GAAP. It shall be the duty of the
Audit Committee to assist the Board in the oversight of the Corporation's legal
and regulatory requirements. It is not
the duty of the Audit Committee to assure compliance with the Corporation's
Code of Conduct and Ethics.
Committee Membership
The Committee shall
consist of no fewer than three and no more than five members, each of whom
shall be a director of the Corporation.
Each member of the Committee shall meet the independence and experience
requirements of the listing standards of the New York Stock Exchange(1)
and the SEC(2)
and all other applicable legal requirements.
(1) The New York Stock Exchange
listing standards require that each member of the Audit Committee shall be a
person (i) who has no relationship to the Corporation that may interfere with
the exercise of independence from management and the Corporation; (ii) who is
not employed as an executive of another corporation where any of the
Corporation's executives serve on that corporation's compensation committee;
(iii) who is not or has not been an employee of the Corporation or any of its
affiliates for five years; and (iv) receives directors' fees as the only compensation
from the Corporation (normal directors' fees including equity-based awards
include the typical additional amounts paid to chairs of Committees and to
members of Committees that meet more frequently or for longer periods of time). A director (i) who is a partner, controlling
shareholder or executive officer of an organization that has a business
relationship with the Corporation or (ii) who has a direct business
relationship with the Corporation, may serve on the Audit Committee only if the
Corporation's Board of Directors determines in its business judgment that the
relationship does not interfere with the director's exercise of independent
judgment. A director who meets the
definition of "independence" mandated for all Audit Committee
members, but who also holds more 20% or more of the Corporation's stock (or who
is a general partner, controlling shareholder or officer of any such holder)
cannot chair, or be a voting member of the Audit Committee. There are also NYSE listing standards that
define an "independent director" as a director (i) who the
24
Each member of the
Committee shall be "financially" literate in the business judgment of
the Board. A majority of the members of
the Committee shall constitute a quorum.
The Committee members shall be
appointed in accordance with the Corporation's bylaws and policies established
by the Board. The Committee members may
be replaced by the Board.
The Committee may request any
officer or employee of the Corporation or the Corporation's outside counsel or
independent auditor to attend a meeting of the Committee or to meet with any
members of, or consultants to, the Committee without the consent of management
or the Board. The Committee shall meet
with management, the internal auditors and the independent auditor in separate
executive sessions periodically. The
Committee shall make regular reports to the Board. The Committee shall review and reassess the adequacy of this
Charter annually and recommend any proposed changes to the Board for approval. The Committee shall annually review the
Audit Committee's own performance and present such review to the Board.
Statement of Policy
The Committee shall
provide assistance to the Board in fulfilling its responsibility to the
shareholders, potential shareholders, the investment community and others
relating to the Corporation's corporate accounting and financial reporting
processes, the systems of internal accounting and financial controls, the
internal audit function, and the annual independent audit of the Corporation's
financial statements.
In carrying out its
responsibilities, the Committee believes its policies and procedures should
remain flexible, in order to best react to changing circumstances and
conditions.
The Committee, and each member
of the Committee in his or her capacity as such, shall be entitled to rely, in
good faith, on information, opinions, reports or statements, or other
information prepared or presented to them by (i) officers and other employees
of the Corporation or its direct or indirect subsidiaries, whom such member
believes to be reliable
Board of Directors affirmatively determines has no material relationship with
the listed Corporation (either directly or as a partner, shareholder or officer
of an organization that has a relationship with the Corporation); (ii) who has
not been an employee for the Corporation for at least five years; (iii) who is
not, or in the past five years has not been, affiliated or employed by a
(present or former) auditor of the Corporation (or of an affiliate) for at
least five years; (iv) who is not, or in the past five years has not been, part
of an interlocking directorate in which an executive officer of the Corporation
serves on the compensation committee of another Corporation that employs the
director; (v) who has immediate family members that have satisfied the
foregoing five-year "cooling-off" periods.
(2) Under the Sarbanes-Oxley Act of
2002, each member of the Committee shall be a member of the Board of Directors
of the Corporation, and shall otherwise be independent. In order to be considered to be independent,
a member of a Committee may not, other than in his or her capacity as a member
of the Committee, the Board of Directors, or any other Board committee (i)
accept any consulting, advisory, or other compensatory fee from the
Corporation; or (ii) be an affiliated person of the Corporation or any
subsidiary thereof.
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and
competent in the matters presented, (ii) counsel, public accountants or other
persons as to matters which the member believes to be within the professional
competence of such person.
Committee Authority and Responsibilities
Responsibilities Relating to Retention of Public Accounting Firms
- The Committee shall be directly responsible for the appointment,
compensation, oversight of the work, evaluation and termination of any
accounting firm employed by the Corporation (including resolving disagreements
between management and the auditor regarding financial reporting) for the
purpose of preparing or issuing an audit report and related work. The accounting firm shall report directly to
the Committee.
Pre-approval of Services - All auditing services (which may entail
providing comfort letters in connection with securities underwritings) and all
non-audit services provided to the Corporation by the Corporation's auditors
which are not prohibited by law shall be pre-approved by the Committee pursuant
to such processes as are determined to be advisable. Pre-approved shall include blanket pre-approval of non-prohibited
services for limited dollar amounts which the Committee, in its business
judgment, does not believe posseses the potential for abuse or conflict.
Exception - The pre-approval requirement set forth above, shall not be
applicable with respect to the provision of non-audit services, if:
(i) the aggregate amount of all such non-audit services provided
to the Corporation constitutes not more than 5 percent of the total amount of
revenues paid by the Corporation to its auditor during the fiscal year in which
the non-audit services are provided;
(ii) such services were not recognized by the Corporation at the
time of the engagement to be non-audit services; and
(iii) such services are promptly brought to the attention of the
Committee and approved prior to the completion of the audit by the Committee or
by one or more members of the Committee who are members of the Board of
Directors to whom authority to grant such approvals has been delegated by the
Committee.
Delegation
- The Committee may delegate to one or more designated members of the Committee
the authority to grant required pre-approvals.
The decisions of any member to whom authority is delegated under this
paragraph to pre-approve an activity under this subsection shall be presented
to the full Committee at its next scheduled meeting.
Complaints - The Committee shall establish procedures to facilitate:
(i) the receipt, retention, and treatment of complaints received
by the Corporation from third parties regarding accounting, internal accounting
controls, or auditing matters; and
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(ii) the confidential, anonymous submission by employees of the
Corporation of concerns regarding questionable accounting or auditing matters.
(iii) The Committee shall have the responsibility of discussing with
management, the internal auditors and the independent auditor any employee
complaints or published reports that raise material issues regarding the
Corporation's financial statements or accounting policies and review
management's replies to such correspondence, complaints, or reports.
Financial
Statement and Disclosure Matters. The Committee, to the extent it deems necessary or appropriate,
shall:
Review and discuss with management and the independent auditor the annual
audited financial statements, including disclosures made in management's
discussion and analysis of financial condition and results of operation, and
recommend to the Board whether the audited financial statements should be
included in the Corporation's Form 10-K.
Review and discuss with management and the independent auditor the
Corporation's quarterly financial statements, including the disclosures made in
management's discussion and analysis of financial condition and results of
operations prior to the filing of the Corporation's Form 10-Q, including the
results of the independent auditors' reviews of the quarterly financial
statements.
Discuss with management and the independent auditor significant financial
reporting issues and judgments made in connection with the preparation of the
Corporation's financial statements, including (i) any significant changes in
the Corporation's selection or application of accounting principles, (ii) any
major issues as to the adequacy of the Corporation's internal controls and
disclosure controls and procedures (as defined in SEC Rule 13a-14(c)), (iii)
the development, selection and disclosure of critical accounting estimates,
(iv) analyses of the effect of alternative assumptions, estimates or GAAP
methods on the Corporation's financial statements, (v) analyses and disclosure
of financial trends, and (vi) presentation of the financial statements and
notes thereto.
Discuss with management the Corporation's earnings press releases, including
the use of "pro forma," "adjusted" or other non-GAAP information,
as well as financial information and earnings guidance provided to analysts and
rating agencies.
Discuss with management and the independent auditor the effect of accounting
initiatives as well as off-balance sheet structures on the Corporation's financial
statements.
Discuss with management, the internal auditors and the legal/compliance
department the effect of regulatory initiatives on the Corporation's financial
statements.
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Discuss with management the Corporation's major financial risk exposures and
the steps management has taken to monitor and control such exposures, including
the Corporation's risk assessment and risk management policies.
Discuss with the independent auditor the matters required to be discussed by
Statement on Auditing Standards No. 61 relating to the conduct of the audit
including:
(a) The adoption of, or changes to, the Corporation's significant
auditing and accounting principles and practices.
(b) The management letter provided by the independent auditor and
the Corporation's response to that letter.
(c) Any difficulties encountered in the course of the audit work, including any restrictions on the scope of activities or access to requested information, or personnel and any significant disagreements with management.
Oversight of the Corporation's Relationship with the Independent Auditor
Review the experience and qualifications of the senior members of the
independent auditor team.
Obtain and review a written report from the independent auditor at least annually
regarding (i) the auditor's internal quality-control procedures, (ii) any
material issues raised by the most recent quality-control review, or peer
review, of the firm, or by any inquiry or investigation by governmental or
professional authorities within the preceding five years concerning one or more
independent audits carried out by the firm, (iii) any steps taken to deal with
any such issues, and (iv) all relationships, both direct and indirect, between
the independent auditor and the Corporation.
Evaluate the qualifications, performance and independence of the
independent auditor, including considering whether the auditor's quality
controls are adequate and the provision of non-audit services is compatible
with maintaining the auditor's independence, and taking into account the
opinions of management and the internal auditor. The Committee shall present its conclusions to the Board and, if
so determined by the Committee, recommend that the Board take additional action
to satisfy itself of the qualifications, performance and independence of the
auditor.
Consider whether, in order to assure continuing auditor independence, it is
appropriate to adopt a policy of rotating the lead audit partner or even the
independent auditing firm itself on a regular basis.
Recommend to the Board policies for the Corporation's hiring of employees or
former employees of the independent auditor who were engaged on the
Corporation's account.
Discuss with the independent auditor issues on which the independent auditor
communicated with its national office regarding auditing or accounting issues.
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Meet with the independent auditor prior to the audit to discuss the planning
and staffing of the audit.
Oversight of the Corporation's Internal Audit Function
Review and approve the audit plan of the internal audit department.
Review the significant reports to management prepared by the internal auditing
department and management's responses.
Discuss with the independent auditor the internal audit department
responsibilities, budget and staffing of the internal audit function.
Compliance Oversight
Obtain from the independent auditor such assurance as it deems adequate
that such auditor has fulfilled its responsibilities under Section 10A of the
Securities Exchange Act of 1934.
Review the compliance reports and internal risk reports addressing legal and
regulatory compliance and current and potential litigation risk within the
Corporation. Also, discuss with
management, the internal auditors and the independent auditor any significant
or material correspondence with regulators or governmental agencies, including
all examination reports received from the various supervisory authorities. Review reports and disclosures of insider
and affiliated party transactions.
The Committee will address and take action, as it deems necessary or
appropriate, with respect to any issues regarding the provisions of section
VIII.A.(c) of the Code of Conduct and Ethics and paragraphs 2 and 3 of the
Corporation's Code of Ethics for Chief Executive Officer ("CEO") and
Senior Financial Officers to the extent the issue relates to accounting and
disclosure and regulations of the SEC, the NYSE, the Federal Reserve Board or
other bank regulatory authority, and paragraph 4 of such Code to the extent such
misrepresentation or omission relates to financial statements or related
financial information.
The Committee will address and take any action, as it deems necessary or
appropriate, with respect to any issues relating to inquiries or investigations
regarding the quality of financial reports filed by the Corporation with the
SEC or otherwise distributed to the public.
Miscellaneous Powers and Responsibilities
The Committee shall have the power to investigate any matter brought to its
attention within the scope of its duties.
The Committee shall have the responsibility to submit the minutes of all
meetings of the Committee to the Board of Directors.
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The Committee shall have the responsibility of reviewing and assessing the
adequacy of this Charter at least annually and submitting it to the Board for
approval.
The Committee shall have the responsibility to prepare the report required to
be included in the Corporation's annual proxy statement by the rules of the
SEC.
The Committee shall have the power to access the Corporation's counsel without
the approval of management, as it determines necessary to carry out its duties.
The Committee shall also have the authority without the consent of management
or the Board, at the Corporation's expense, to the extent it deems necessary or
appropriate, to retain special independent legal, accounting or other
consultants to advise the Committee in connection with fulfilling its
obligations hereunder.
Meetings
The Committee shall
meet as often as it determines, but not less frequently than quarterly. The Committee may form and delegate
authority to Committee members when appropriate, including specifically the
pre-approval of non-audit services and the review of earnings releases, and
earnings guidance.
Minutes of each meeting will
be compiled by the Corporation's Corporate Secretary who shall act as Secretary
to the Committee, or in the absence of the Corporate Secretary, by an Assistant
Corporate Secretary of the Corporation or any other person designated by the
Committee.
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APPENDIX
(PROXY CARD)
(This Section Intentionally Blank)
Detach Proxy Card Here
- - - - - - - - - - - - - - - - - - - - - - - - - -- - - - - - - - - - - - -
- - - - - - - - - - - - - - - - - - - - - - - -
Please Sign, Date and Return the
Proxy Promptly Using the Enclosed
Votes must be indicated
Enclosed Envelope
(x) in Black or Blue Ink.
1. Election of the following nominees as Directors to serve for
terms ending in 2006.
| FOR ALL [ ] | WITHHOLD [ ] FOR ALL |
EXCEPTIONS [ ] | To change your address, please mark this box. [ ] To include any comments, please mark this box. [ ] |
Nominees: James W. Newill, John A. Robertshaw, Jr., and Laurie Stern Singer
(INSTRUCTIONS: To withhold authority to vote for any individual nominee, mark
the
"Exceptions" box and write that nominee's name in the space provided
below.)
*Exceptions
SCAN LINE
Please sign exactly as name appears hereon. When signing as attorney,
executor, administrator, trustee or guardian, please give your full title as
such. For joint accounts each joint owner should sign. If a corporation,
please sign in full corporate name by President or other authorized officer,
giving your full title as such. If a partnership, please sign in name
by authorized person, giving your full title as such.
Date Share
Owner sign here
Co-Owner sign here
31
FIRST COMMONWEALTH FINANCIAL
CORPORATION
Old Courthouse Square, 22 North Sixth Street
Indiana, Pennsylvania 15701
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
April 21, 2003
The
Annual Meeting of Shareholders of First Commonwealth Financial Corporation will
be held at 654 Philadelphia Street, Indiana, PA on Monday, April 21, 2003 at
3:00 p.m., local time, for the following purposes:
1. To
elect three Directors to serve for terms expiring in 2006.
2. To
act on such other matters as may properly come before the Meeting.
Only holders of Common Stock of First Commonwealth Financial Corporation of
record at the close of business on March 3, 2003 will be entitled to vote at
the meeting or any adjournment thereof.
To be sure that your vote is counted, we urge you to complete and sign the
proxy/voting instruction card below, detach it from this letter and return it
in the postage paid envelope enclosed in this package. The giving of such proxy card does not
affect your right to vote in person if you attend the meeting.
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
- - - - - - - - - - - - - - - - - - - - - -
FIRST COMMONWEALTH FINANCIAL
CORPORATION
ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON APRIL 21, 2003
This Proxy is Solicited on
Behalf of the Board of Directors of
First Commonwealth Financial Corporation
The undersigned shareholder of First
Commonwealth Financial Corporation ("the Corporation") hereby
appoints Daniel J. McAnulty, Carrie L. Riggle, Sheila M. Hoover, and each of
them, as proxies of the undersigned to vote at the Annual Meeting of
Shareholders of the Corporation the shares which the undersigned would be
entitled to vote if personally present on the following matter and such other
matters as may properly come before the meeting.
This proxy when properly executed
will be voted in the manner directed herein.
If no direction is made, this proxy will be voted FOR Proposal 1.
The undersigned hereby revokes all
previous proxies for the Annual Meeting of Shareholders, hereby acknowledges
receipt of the Notice of Annual Meeting and Proxy Statement furnished therewith
and hereby ratifies all that the said proxies may do by virtue hereof.
(Continued, and to be signed and dated on the reverse side.)
FIRST COMMONWEALTH FINANCIAL CORPORATION
P. O. BOX 11043
NEW YORK, NY 10203-0043
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