---

 

November 14, 2008

Dear Shareholder:

This letter is to inform you of an opportunity for our company that requires us to conduct a special meeting of shareholders.

Voluntary Capital Purchase Program

First Financial Bancorp recently received preliminary approval to participate in the U.S. Department of the Treasury’s voluntary Capital Purchase Program (Program), which is a component of the Treasury Department’s Troubled Asset Relief Program. This Program, which targets “healthy institutions,” was established in response to the current economic conditions and designed to encourage qualifying U.S. financial institutions to increase the flow of lending to businesses and consumers in order to restore liquidity and stability in the U.S. financial system. First Financial has received preliminary approval for the maximum amount of approximately $80 million.

Under the Program, we would issue to the Treasury:

	§		Up to $80 million Series A non-voting preferred shares that carry a 5% coupon for each of the first five years and 9% per year thereafter
	§		Warrants to purchase First Financial common shares amounting to 15% of the senior preferred amount, with the exercise price based on the 20-day average trading price prior to closing
	§		Based on an estimated average price of $12.76, the Treasury would be eligible to exercise warrants to purchase approximately 940,000 shares, or approximately 2.5% of our outstanding shares

 

It is important to note that participation in the Program is voluntary and should be viewed as an investment by the Treasury in our industry's future, and not as a bailout plan for financial institutions.

Special Meeting of Shareholders, Proxy Statement and Voting Instructions

Your Board of Directors believes that it is in the best interest of First Financial and its shareholders to conduct a Special Meeting of Shareholders for the purpose of considering and voting on the adoption of a proposed amendment to our Articles of Incorporation to authorize us to issue preferred shares, and thereby allow us to participate in the Program.

The Special Meeting of Shareholders will be held on December 11, 2008, for shareholders of record as of the close of business on October 28, 2008.

Enclosed with this letter are the following materials related to the special meeting:

	§	Notice of the Special Meeting of Shareholders
	§	Proxy Statement
	§	Proxy Card
	§	Business Reply Postage-Paid Envelope

We encourage you to read these materials because they contain important information about the purpose of the special meeting and the proposed amendment will require the approval of two-thirds of the outstanding common shares to be adopted. Your failure to vote will have the effect of a vote Against this proposal.   

The Board of Directors of First Financial Bancorp urges you to vote For the amendment to our Articles of Incorporation and For a proposal to adjourn the meeting to solicit additional votes if necessary.

You may submit your vote by mail, on the internet, by telephone, or in person at the special meeting on December 11, 2008. Detailed voting instructions are included in the enclosed Proxy Statement and Proxy Card.

---

 

First Financial Bancorp - Strength and Stability

As you know, the financial services industry has been under significant stress throughout the past year. This was initially due to the sub-prime mortgage and credit crisis, but more recently is the result of overall economic deterioration and the tightening of available credit. We have continued to manage First Financial through these difficult times by:

	§	Remaining focused on building stronger client relationships
	§	Prudently growing loans and deposits
	§	Maintaining credit quality
	§	Managing our balance sheet and maintaining strong capital and liquidity positions

At September 30, 2008, our regulatory capital levels exceeded the amounts necessary to be classified as well-capitalized, and our total regulatory capital exceeded the minimum requirement by approximately $81 million on a consolidated basis.

We believe that First Financial continues to be positioned to avoid many of the troublesome areas that our industry has encountered during these difficult times. Our credit quality metrics have remained relatively stable over the past five quarters, which we believe is a result of:

	§	Maintaining strong underwriting policies
	§	Proactively managing resolution strategies for problem credits

Our origins date back to 1863 when First Financial Bank first opened for business in Hamilton, Ohio. Today, we operate 80 retail banking centers serving nine regional markets and 53 communities in Ohio, Indiana and Kentucky, and we continue in our efforts to strengthen and grow our business, reach new clients and expand our market share. Recently, we further expanded our presence with a new commercial lending team in Indianapolis, Indiana, and we opened a new business office and retail banking center in Dayton, Ohio. In addition, construction is currently underway on two new retail banking centers - one in Crown Point, Indiana, and the other in Cincinnati, Ohio. These expansions are   part of our strategic corporate plan, underscore our commitment to the communities we serve, and will contribute to the long-term growth of the company.

Please Participate by Voting

We are proud to be among the healthy institutions that the U.S. Treasury has invited to participate in this Program that is designed to stabilize the credit markets and restore confidence in the U.S. financial system. We believe that our participation in this Program will be advantageous for the company as it will provide us with a means to:

	§	Access low-cost capital that will further improve our already strong capital levels
	§	Increase our lending capacity
	§	Better position us to take advantage of opportunities to advance our strategic growth plans

For these reasons, whether or not you plan to attend the special meeting, it is important that your shares be represented and voted.

	§	If you choose to vote online or by telephone, please follow the instructions that are included in the enclosed materials.
	§	If you choose to vote by mail, please complete, sign, date and return the enclosed Proxy Card as soon as possible using the postage-paid envelope.

 

We are focused on the core fundamentals of banking and are committed to executing our strategic plans, which we believe will create superior long-term value for shareholders. We value the investment you have made in First Financial Bancorp.

Sincerely,	Sincerely,
Barry S. Porter Chairman of the Board	Claude E. Davis President & Chief Executive Officer

 

---

 

FIRST FINANCIAL BANCORP.

4000 Smith Road, Suite 400

Cincinnati, Ohio 45209

 

NOTICE OF SPECIAL MEETING

OF

SHAREHOLDERS

 

To be held December 11, 2008

 

November 14, 2008

 

To our Shareholders:

You are cordially invited to attend a Special Meeting of Shareholders of First Financial Bancorp. (“First Financial”), to be held at 4000 Smith Road, Suite 400, Cincinnati, OH 45209, on Thursday, December 11, 2008, at 3:00 p.m.., local time, for the following purposes:

 

1.

To consider and act upon an amendment to Article FOURTH of First Financial’s Articles of Incorporation, as amended, to authorize the issuance of up to 80,000 shares of a new class of preferred stock (the “Preferred Stock”), which stock First Financial may use to participate in the TARP Capital Purchase Program instituted under the Emergency Economic Stabilization Act of 2008 (“Proposal No. 1”).

 

2.

To approve the adjournment or postponement of the Special Meeting, if necessary, to solicit additional proxies, in the event (a) there are not sufficient votes at the time of the Special Meeting to adopt Proposal No. 1, or (b) a quorum is not present at the time of the Special Meeting (“Proposal No. 2” and together with Proposal No. 1, the “Proposals”).

 

3.	To consider and act upon such other matters as may properly come before the Special Meeting or any adjournment thereof.

 

Important notice regarding the availability of Proxy Materials for the Special Meeting of Shareholders: This Proxy Statement is available on our website at www.bankatfirst.com under the “Investor Relations” link by clicking “SEC Filings” or by going directly to 

 

http://www.snl.com/irweblinkx/docs.aspx?iid=100255

 

Shareholders of record of First Financial at the close of business on October 28, 2008, are entitled to notice of and to vote at the Special Meeting and at any adjournment thereof. Each shareholder is entitled to one vote for each common share held regarding each matter properly brought before the Special Meeting.

 

Your vote is important, regardless of the number of common shares you own. Whether or not you plan to attend the Special Meeting in person, it is important that your common shares be represented. Please sign, date and return your proxy card. A return envelope, which requires no postage if mailed in the United States, has been provided for your use. Alternatively, you may vote electronically via the Internet or by telephone. Please see the accompanying Proxy Statement and proxy card for details about electronic voting. If you later decide to revoke your proxy for any reason, you may do so in the manner described in the accompanying Proxy Statement.

	By Order of the Board of Directors,
	Gregory A. Gehlmann
	General Counsel & Secretary

 

EVERY SHAREHOLDER’S VOTE IS IMPORTANT. IF YOU ARE UNABLE TO BE PRESENT AT THE SPECIAL MEETING, YOU ARE REQUESTED TO COMPLETE AND RETURN PROMPTLY THE ENCLOSED PROXY SO THAT YOUR SHARES WILL BE REPRESENTED. A STAMPED, ADDRESSED ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE.

 

- 1 -

---

 

FIRST FINANCIAL BANCORP.

4000 Smith Road, Suite 400

Cincinnati, Ohio 45209

(513) 979-5837

 

PROXY STATEMENT FOR SPECIAL MEETING OF SHAREHOLDERS

Approximate Date to Mail – November 17. 2008

 

INTRODUCTION

We are sending this Proxy Statement and the accompanying proxy card to you as a shareholder of First Financial Bancorp., an Ohio corporation (“First Financial”), in connection with the solicitation of proxies for the Special Meeting of Shareholders (the “Special Meeting”) to be held at the offices of First Financial Bancorp, 4000 Smith Road, Suite 400, Cincinnati, Ohio, on Thursday, December 11, 2008, at 3 p.m., local time. First Financial’s Board of Directors is soliciting proxies for use at the Special Meeting, or any adjournment thereof. Only shareholders of record as of the close of business on October 28, 2008, which we refer to as the record date, will be entitled to vote at the Special Meeting. The proxy solicitation materials for the Special Meeting will be distributed to shareholders of record on or about November 17, 2008.

				Impact of Abstentions and Broker
Item		Vote Required		Non-Votes, if any
Amendment to Article FOURTH of First Financial’s Articles of Incorporation		Approval of two-thirds of the outstanding common shares		Abstention will not count as a vote cast on the proposal but has the same effect as a vote “AGAINST” the proposal
				Broker non-vote will have the same effect as a vote “AGAINST” the proposal
Adjournment of the Special Meeting		Approval of a majority of the common shares present in person or represented by proxy and entitled to vote at the Special Meeting		Abstention will not count as a vote cast on the proposal but has the same effect as a vote “AGAINST” the proposal
				Broker non-vote will not count as a vote on the proposal and will not affect the outcome of the vote

    

It is our policy to keep confidential proxy cards, ballots and voting tabulations that identify individual shareholders. However, exceptions to this policy may be necessary in some instances to comply with legal requirements and, in the case of any contested proxy solicitation, to verify the validity of proxies presented by any person and the results of the voting. Inspectors of election and any employees associated with processing proxy cards or ballots and tabulating the vote must acknowledge their responsibility to comply with this policy of confidentiality.

What is the recommendation of First Financial’s Board of Directors? 

    

 First Financial’s Board of Directors recommends that each shareholder vote “FOR” the adoption of the amendment to Article FOURTH of First Financial’s Articles of Incorporation to authorize First Financial to issue up to 80,000 shares of a new class of preferred shares and “FOR” the proposal to adjourn the Special Meeting, if necessary, to solicit additional proxies, in the event there are not sufficient votes at the time of the Special Meeting to adopt the proposed amendment to Article FOURTH of First Financial’s Articles of Incorporation.

 

- 6 -

---

 

What will the consequences be if the proposed amendment to Article FOURTH of First Financial’s Article of Incorporation is not adopted? 

If the proposed amendment to Article FOURTH of First Financial’s Articles of Incorporation to authorize First Financial to issue up to 80,000 preferred shares is not adopted, First Financial will not be able to take advantage of the Capital Purchase Program. First Financial may have a distinct disadvantage against competitors in the current environment and may be limited in its future ability to raise additional capital to ensure that during these uncertain times, First Financial is well-positioned to support its existing operations as well as anticipated future growth.

Who pays the cost of proxy solicitation? 

We will pay the costs of preparing, assembling, printing and mailing this Proxy Statement, the accompanying proxy card and other related materials and all other costs incurred in connection with the solicitation of proxies on behalf of the Board of Directors, other than the Internet access and telephone usage charges mentioned above.. Although we are soliciting proxies by mailing these proxy materials to our shareholders, our directors, officers and employees also may solicit proxies by further mailing, personal contact, telephone, facsimile or electronic mail without receiving any additional compensation for such solicitations. Arrangements will also be made with brokerage firms, financial institutions and other nominees who are record holders of common shares for the forwarding of solicitation materials to the beneficial owners of such common shares. We will reimburse these brokers, financial institutions and nominees for their reasonable out-of-pocket costs in connection therewith.

We have retained The Altman Group, Lyndhurst, New Jersey, to aid in the solicitation of proxies for the Special Meeting. The Altman Group will receive a base fee of $7,500, plus reimbursement of out-of-pocket fees and expenses for its proxy solicitation services.

Who should I call if I have questions concerning this proxy solicitation or the proposals to be considered at the Special Meeting? 

If you have any questions concerning the proposals to be considered at the Special Meeting or voting your shares, please call The Altman Group at 1-866-828-0221.

Does First Financial send multiple proxy statements to two or more registered shareholders who share an address? 

Only one copy of this Proxy Statement and the notice of the Special Meeting for the Special Meeting are being delivered to previously notified registered shareholders who share an address unless First Financial has received contrary instructions from one or more of the shareholders. A separate proxy card is being included for each account at the shared address.

Registered shareholders who share an address and would like to receive a separate Proxy Statement for the Special Meeting, may contact First Financial Bancorp Investor Relations to request a copy. Call 513-979-5837, or send a written request to: Patti Forsythe, Investor Relations, First Financial Bancorp, 4000 Smith Road, Suite 400, Cincinnati, Ohio 45209.

 

- 7 -

---

 

PROPOSAL NO. 1 - AMENDMENT OF THE ARTICLES OF INCORPORATION

TO AUTHORIZE PREFERRED STOCK

(Item 1 on Proxy Card)

General

A proposal will be submitted to shareholders at the Special Meeting to approve an amendment (the “Proposed Amendment”) to our Articles of Incorporation (“Articles”) to authorize a new class of capital stock. Article FOURTH of the Articles currently provides that our authorized capital stock consists of 160,000,000 shares of a single class of common stock having no par value. The Proposed Amendment would amend Article FOURTH so that it also authorizes us to issue up to 80,000 shares of no par preferred stock (“Preferred Stock”) as an additional class of capital stock. Subject to the limitations described herein, our Board of Directors would be authorized to issue shares of Preferred Stock to create separate series of shares within the new class, and to determine the number of shares, designations, terms, relative rights, preferences and limitations of the Preferred Stock at the time of issuance, all by its resolution and without further shareholder approval.

A copy of the Proposed Amendment, which includes the text of Article FOURTH as it is proposed to be amended, is attached as Appendix A to this Proxy Statement. If the Proposed Amendment is approved by shareholders, the Proposed Amendment will become effective upon filing with the Ohio Secretary of State, which we intend to do promptly following such approval.

            The recent challenges experienced as a result of turbulence in the financial markets make it necessary for financial institutions not only to preserve existing capital, but also to supplement such capital as a protection against further economic difficulties.  Recently, certain low cost capital-raising opportunities have been presented by the federal government that provides us with options to generate capital in a low-cost manner.  While our capital position is already sound, management would like to consider these opportunities to ensure that, during these uncertain times, we are well-positioned to support our existing operations as well as anticipated future growth. Our participation in the Program more fully discussed below will:

	§	increase credit availability to consumers and businesses;
	§	make our capital position even stronger;
	§	improve our ability to leverage future strategic opportunities to grow and add value for our shareholders and clients; and
	§	enhance our competitive position.

While the specifics of the Program continue to evolve, the Board believes sufficient information and knowledge regarding the Program has been gathered and analyzed, and that we believe we should take advantage of this unique opportunity.

Your Board of Directors recommends that you vote “FOR” the Proposed Amendment.

Terms of the Preferred Stock

 

The full text of the Proposed Amendment is attached to this proxy statement as Appendix “A.” If the amendment is approved, the Board would be authorized to issue Preferred Stock pursuant to the terms of the Program with all designations, preferences and relative, participating, optional or other special rights, and qualifications, limitations or restrictions upon the Preferred Stock, as may be provided in the resolution or resolutions adopted by the Board. The authority of the Board would include, but is not limited to, the determination or fixing of the following with respect to shares of any class or series of Preferred Stock:

 

§

The number of shares constituting that series and the distinctive designation of that series;

 

- 8 -

---

 

§

The dividend rate on the shares of the series, whether dividends shall be cumulative, and, if so, from which date or dates, and the relative rights of priority, if any, of payments of dividends on shares of that series;

 

§

Whether that series shall have voting rights, in addition to the voting rights provided by law, and, if so, the terms of such voting rights;

 

§

Whether that series shall have conversion privileges, and, if so, the terms and conditions of such conversion, including provisions for adjustment of the conversion rate in such events as the Board of Directors shall determine;

§

Whether or not the shares of that series shall be redeemable, and, if so, the terms and conditions of such redemption, including the date or dates upon or after which they shall be redeemable, and the amount per share payable in case of redemption, which amount may vary under different conditions and at different redemption rates;

 

§

Whether that series shall have a sinking fund for the redemption or purchase of shares of that series, and, if so, the terms and amount of such sinking fund;

 

§

The rights of the shares of that series in the event of voluntary or involuntary liquidation, dissolution or winding-up of First Financial, and the relative rights of priority, if any, of payment of shares of that series; and

 

§

Any other relative rights, preferences and limitations of that series.

 

The actual effect of the issuance of any shares of the Preferred Stock upon the rights of holders of common stock cannot be stated until the Board of Directors determines the specific rights of any shares issued pursuant to the Program. However, the effects might include, among other things, restricting dividends on the common stock, diluting the voting power of the common stock, reducing the market price of the common stock or impairing the liquidation rights of the common stock without further action by the shareholders. For a discussion of the current terms of the Program, see “Reasons for the Proposed Amendment,” “Effects of the Proposed Amendment,” and Appendix B elsewhere in this proxy statement. Holders of First Financial common shares will not have preemptive rights with respect to the Preferred Stock.

Reasons for the Proposed Amendment

The purpose of the Proposed Amendment is to authorize us to sell shares of Preferred Stock to the United States Department of the Treasury (the “Treasury”) under the voluntary Capital Purchase Program should the Board deem it to be in the best interest of First Financial and its shareholders.  On October 14, the Treasury announced the Program to encourage U.S. financial institutions to build capital to increase the flow of financing to U.S. businesses and consumers and to support the U.S. economy. The Program is designed to attract broad participation by healthy institutions and to do so in a way that attracts private capital to them as well. The purpose is to increase confidence in U.S. banks and increase the confidence of U.S. banks to deploy their capital. Increased confidence is expected to result in increased lending. The Program was instituted by the Treasury pursuant to the Emergency Economic Stabilization Act of 2008 which provides up to $700 billion to the Treasury to buy mortgages and other assets from financial institutions, to invest and take equity positions in financial institutions, and to establish programs that will allow companies to insure their troubled assets. Under the Program, the Treasury will purchase up to $250 billion of senior preferred shares (the “Senior Preferred Shares”) from qualifying financial institutions that meet the Program’s eligibility requirements and that elect to participate by November 14, 2008. On October 22, 2008 we filed an application with respect to the Program and on October 30, 2008 we were notified by the Treasury that we had received preliminary approval for the sale and issuance of up to $80,000,000 of Senior Preferred Shares to the Treasury.

 

- 9 -

---

 

At this point, except with respect to the Treasury’s notification that we received preliminary approval, there is no binding agreement or commitment with respect to the issuance of Senior Preferred Shares to the Treasury. Our company and the Treasury must still negotiate the terms and conditions of our company's participation in the Program, which means that closing of the transaction is not guaranteed. Although we have no reason to believe that we will not be able to participate in the Program, no assurances can be given:

	§	that we will be able to participate in the Program;
	§	as to the approximate number of shares of preferred stock that we may issue pursuant to the Program: or
	§	as to the approximate amount of consideration we will receive from Treasury for any such shares that may be issued by First Financial under the Program.

A summary of the expected terms of the securities that the Treasury would purchase from qualifying financial institutions is set forth in Appendix B attached hereto.

Currently, we are not authorized to issue preferred stock. If the Proposed Amendment is adopted by our shareholders, shares of Preferred Stock will be available for issuance in connection with the Program. No further vote of our shareholders will be required, unless required under Ohio law. The Board of Directors believes that it is advisable to increase our authorized capital to include the Preferred Stock in order take advantage of the Program and to help ensure that its wholly owned bank subsidiary, First Financial Bank, National Association (the “Bank”), remains well capitalized.

As an eligible institution, First Financial may sell an amount of Senior Preferred Shares to the Treasury equal to not less than 1% of the Bank’s risk-weighted assets and not more than 3% of the Bank’s risk-weighted assets.  The Senior Preferred Shares will:

	§	be issued with a liquidation preference of at least $1,000 per share;
	§	qualify as Tier 1 capital; and
	§	rank senior to the common shares.

By the terms of the Program, Senior Preferred Shares will:

	§	pay a cumulative dividend at a rate of 5% per annum for the first five years and will reset to a rate of 9% per annum after year five - the dividend will be payable quarterly in arrears;
	§	be non-voting, other than class voting rights on certain matters that could adversely affect the Senior Preferred Shares; and
	§	be callable by First Financial at par after three years. Prior to the end of three years, the Senior Preferred Shares may be redeemed at par with the proceeds from a qualifying equity offering of any Tier 1 perpetual preferred stock or common shares. The Treasury may also transfer the Senior Preferred Shares to a third party at any time.

In conjunction with the purchase of Senior Preferred shares, the Treasury will receive warrants to purchase common shares with an aggregate market price equal to 15% of the investment in the Senior Preferred Shares. The initial exercise price on the warrants, and the market price for determining the number of shares of common stock subject to the warrants, will be the market price of our common shares at the time of issuance, calculated on a 20-trading-day trailing average, subject to customary anti-dilution adjustments.  The warrants will have a term of 10 years and such additional terms and features as set forth on Appendix B. The Treasury will agree not to exercise voting power with respect to any shares of common stock that it acquires upon exercise of the warrants. We will have to take the steps necessary to register, pursuant to the Securities Act of 1933, Senior Preferred Shares issued by us and the related warrants and underlying common stock purchasable upon exercise.

 

- 10 -

---

 

To participate in the Program, we are required to meet certain standards, including:

	§	ensuring that incentive compensation for senior executives does not encourage unnecessary and excessive risks that threaten the value of the company;
	§	requiring a clawback of any bonus or incentive compensation paid to a senior executive based on statements of earnings, gains or other criteria that are later proven to be materially inaccurate;
	§	prohibiting certain severance payments to senior executives generally referenced to as “golden parachute” payments above specified limits set forth in the U.S. Internal Revenue Code; and
	§	agreeing not to deduct for tax purposes executive compensation in excess of $500,000 for each senior executive.

 

The Board believes that it is in the best interests of First Financial and its shareholders to afford us the opportunity to obtain additional low cost capital through the Program.  Without the Proposed Amendment, First Financial will not be eligible to participate in the Program.  With the Proposed Amendment, First Financial may apply to participate in the Program which will provide us with an additional resource for obtaining capital.   The Board currently anticipates that it will issue up to 80,000 shares of Preferred Stock  for $80,000,000 (approximately 3% of the Bank’s risk adjusted assets) under the Program with the terms, rights and preferences set forth on Appendix B and will issue a number of warrants exercisable for shares of First Financial common shares having an aggregate market price equal to 15% of the amount of Senior Preferred Shares issued. More details can also be found at the Treasury’s website: http://www.ustreas.gov at Emergency Economic Stabilization Act - Capital Purchase Program.

Effect of the Proposed Amendment

Based on the Program term sheet provided by the Treasury, a copy of which is attached as Appendix B hereto, the following are the general effects on holders of common stock of participating financial institutions from the issuance of Senior Preferred Shares to the Treasury under the Program:

	§	Restrictions on Dividends. For as long as any Senior Preferred Shares are outstanding, no dividends may be declared or paid on junior preferred shares, preferred shares ranking pari passu with the Senior Preferred Shares, or common shares (other than in the case of pari passu preferred shares, dividends on a pro rata basis with the Senior Preferred Shares), nor may a participating financial institution repurchase or redeem any junior preferred shares, preferred shares ranking pari passu with the Senior Preferred Shares or common shares, unless (i) in the case of cumulative Senior Preferred Shares, all accrued and unpaid dividends for all past dividend periods on the Senior Preferred Shares are fully paid; or (ii) in the case of non-cumulative Senior Preferred Shares, the full dividend for the latest completed dividend period has been declared and paid in full.  In addition, the consent of the Treasury will be required for any increase in the per share dividends on common shares until the third anniversary of the date of the Senior Preferred Shares investment unless prior to such third anniversary, the Senior Preferred Shares are redeemed in whole or the Treasury has transferred all of the Senior Preferred Shares to third parties.
	§	Repurchases.   The Treasury’s consent shall be required for any share repurchases (other than (i) repurchases of the Senior Preferred Shares and (ii) repurchases of junior preferred shares or common shares in connection with any benefit plan in the ordinary course of business consistent with past practice) until the third anniversary of the date of the Treasury’s investment unless prior to such third anniversary, the Senior Preferred Shares are redeemed in whole or the Treasury has transferred all of the Senior Preferred Shares to third parties. In addition, there shall be no share repurchases of junior preferred shares, preferred shares ranking pari passu with the Senior Preferred Shares, or common shares if prohibited as described under “Restrictions on Dividends” above.
	§	Voting rights . The Senior Preferred Shares shall be non-voting, other than class voting rights on (i) any authorization or issuance of shares ranking senior to the Senior Preferred Shares, (ii) any amendment to the rights of Senior Preferred Shares, or (iii) any merger, exchange or similar transaction which would adversely affect the rights of the Senior Preferred Shares. If dividends on the Senior Preferred Shares are not paid in full for six dividend periods, whether or not consecutive, the Senior Preferred Shares will have the right to elect two directors. The right to elect directors will end when full dividends have been paid for four consecutive dividend periods.

 

- 11 -

---

 

If we issue $80 million of Senior Preferred Shares to the Treasury, we will also be required to issue to the Treasury warrants to purchase common shares equal to 15% of the Senior Preferred Shares, or $12 million. Based on the 20-day average trading price of our common shares on November 5, 2008 of $12.76 per share, we would be required to issue the Treasury a warrant to purchase approximately 940,000 First Financial common shares at $12.76 per share. If all warrants were exercised, it would amount to approximately 2.5% of our currently issued and outstanding shares as of the voting record date, which would dilute the relative equity interests of the current holders of our common shares.

If shareholders approve the Proposed Amendment, then, to establish the Senior Preferred Shares, the Board of Directors would approve and file a further amendment to the Articles (which it could do without further shareholder approval) that would specify the designation of that series of Preferred Stock and the number, terms, relative rights, preferences and limitations of shares as required by the Program. The Board of Directors will not issue shares of Preferred Stock other than pursuant to the Program described in this proxy statement.

Substantially all of the proceeds of any such sale of Senior Preferred Shares likely would be used to infuse additional capital into First financial to support its continued growth in earning assets and deposits. Portions of the net proceeds also might be used by us for other general corporate purposes, including: financing new banking centers and/or lending offices, or other capital improvements; acquiring other financial institutions or their assets and related liabilities, including branch offices; creating or acquiring non-bank providers of financial or other services; and continuing to expand and/or upgrade our products, systems, and operations. It is not possible to determine the types or amounts of investments we would make if we issued to the Treasury the Senior Preferred Shares under the Program.

Since the Senior Preferred Shares will be non-voting in accordance with the Program, the issuance of such Senior Preferred Shares should not dilute the relative voting power of the current holders of common stock, except for certain class of voting rights and the issuance of the warrants as described above. Current shareholders would not have preemptive rights to acquire any additional shares of capital stock issued by First Financial and would have no right to purchase a proportionate share, or any portion, of any shares of Preferred Stock issued.

The affirmative vote of two thirds of our issued and outstanding common shares is required to approve the Proposed Amendment. If the Proposed Amendment is not approved, we will not be eligible or have the option to participate in the Program.

Pro Forma Financial Information

The following unaudited pro forma financial information of First Financial for the fiscal year ended December 31, 2007 and the nine-months ended September 30, 2008 show the effects of a minimum of $26.7 million and a maximum of $80.0 million of Senior Preferred Shares issued to the Treasury pursuant to the Captial Purchase Program. The pro forma financial data presented below may change materially under either the "Minimum" or "Maximum" scenario based on the actual proceeds received under the Capital Purchase Program if our application is approved by Treasury, the timing and utilization of the proceeds as well as certain other factors including the strike price of the warrants, any subsequent changes in First Financial's common stock price, and the discount rate used to determine the fair value of the preferred stock. Accordingly, we can provide no assurance that the "Minimum" or "Maximum" pro forma scenarios included in the following unaudited pro forma financial data will ever be achieved. We have included the following unaudited pro forma consolidated financial data solely for the purpose of providing shareholders with information that may be useful for purposes of considering and evaluating the proposals to amend our Articles of Incorporation.

- 12 -

---

					Pro Forma (2)
		Historical			September 30, 2008
		September 30, 2008			Minimum			Maximum
Balance sheet data:
ASSETS
Cash and due from banks			$90,341			$90,341			$90,341
Securities and other interest earning assets (1)			532,765			560,365			612,765
Loans, net of unearned			2,645,341			2,645,341			2,645,341
Other assets			243,229			243,229			243,229
Total assets			$3,511,676			$3,539,276			$3,591,676
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Deposits			$2,711,681			$2,711,681			$2,711,681
Borrowings			486,683			486,683			486,683
Other liabilities			36,092			36,092			36,092
Total liabilities			3,234,456			3,234,456			3,234,456
Shareholders' equity
Preferred stock (1)			0			27,600			80,000
Common stock			391,249			391,249			391,249
Warrants			0			1,900			5,600
Discount on preferred (3) (4)			0			(1,900	)		(5,600	)
Retained earnings			80,632			80,632			80,632
Accumulated comprehensive income			(6,285	)		(6,285	)		(6,285	)
Treasury Stock, at cost			(188,376	)		(188,376	)		(188,376	)
Total shareholders' equity			277,220			304,820			357,220
Total liabilities and shareholders' equity			$3,511,676			$3,539,276			$3,591,676
Common Shares outstanding			37,476,607			37,476,607			37,476,607

 

(1)	The pro forma financial information reflects the issuance of a minimum $27,600,000 and a maximum $80,000,000 of First Financial Bancorp Senior Preferred Shares.

(2)	The balance sheet data gives effect to the equity proceeds as of the balance sheet date.

(3)	The carrying values of the preferred stock and warrants are based on their estimated relative fair values at issue date.

(4)	The discount on the preferred stock is amortized over a five year period via the effective yield method.

 

- 13 -

---

		Historical			Pro Forma (1)
					Nine months ended
		Nine months ended			September 30, 2008
		September 30,2008			Minimum			Maximum
Income Statement Data:
Total interest income (2)			$138,219			$138,426			$138,818
Total interest expense			52,146			52,146			52,146
Net interest income			86,073			86,280			86,672
Provision for loan losses			8,935			8,935			8,935
Net interest income after
provision for loan losses			77,138			77,345			77,737
Total noninterest income			39,101			39,101			39,101
Total noninterest expenses			85,329			85,329			85,329
Income before income taxes			30,910			31,117			31,509
Income tax expense			10,032			10,104			10,242
Net income			$20,878			$21,013			$21,267
Effective dividend on preferred stock						1,286			3,729
Net income available to common shareholders						$19,727			$17,538
Selected Financial Ratios:
Earnings per share:
Basic			$0.56			$0.53			$0.47
Diluted			$0.56			$0.53			$0.46
Average basic shares outstanding			37,104,793			37,104,793			37,104,793
Average diluted shares outstanding (3)			37,487,037			37,572,458			37,734,635
Return on average equity - annualized			10.05	%		9.24	%		8.03	%

 

		Historical			Pro Forma (1)
					Twelve months ended
		Twelve months ended			December 31, 2007
		December 31, 2007			Minimum			Maximum
Income Statement Data:
Total interest income (2)			$206,442			$206,718			$207,242
Total interest expense			87,942			87,942			87,942
Net interest income			118,500			118,776			119,300
Provision for loan losses			7,652			7,652			7,652
Net interest income after
provision for loan losses			110,848			111,124			111,648
Total noninterest income			63,588			63,588			63,588
Total noninterest expenses			120,747			120,747			120,747
Income before income taxes			53,689			53,965			54,489
Income tax expense			18,008			18,105			18,288
Net income			$35,681			$35,860			$36,201
Effective dividend on preferred stock						1,715			4,972
Net income available to common shareholders						$34,145			$31,229
Selected Financial Ratios:
Earnings per share:
Basic			$0.93			$0.89			$0.81
Diluted			$0.93			$0.89			$0.81
Average basic shares outstanding			38,455,084			38,455,084			38,455,084
Average diluted shares outstanding (3)			38,459,138			38,544,559			38,706,736
Return on average equity - annualized			12.73	%		11.69	%		10.15	%

 

(1)	The income statement data gives effect to the equity proceeds at the beginning of the period.

(2)	The funds received from the preferred stock issue are assumed to be initially invested in federal funds sold, earning at a rate of 1.00%. An incremental tax rate of 35% was assumed. Subsequent redeployment of the funds is anticipated but the timing of such redeployment is uncertain.

(3)	The pro forma average diluted shares outstanding includes the estimated effect of the exercise of the warrants and are accounted for under the treasury stock method.

(4)	The issuance costs expected to be incurred are immaterial therefore, no effect was given in the pro forma.

 

- 14 -

---

 

		As Reported			Min			Max			Min			Max
		09/30/08			09/30/08			09/30/08			12/31/07			12/31/07
Total RBC			10.89	%		11.83	%		13.70	%		12.37	%		14.34	%
Leverage			7.95	%		8.66	%		10.05	%		9.00	%		10.45	%
Tier 1			9.80	%		10.75	%		12.62	%		11.28	%		13.25	%

 

Anti-Takeover Effects

The purpose of the Proposed Amendment is to provide the Board of Directors with the option of considering participation in the Program, not to establish any barriers to a change of control or acquisition of First Financial. However, pursuant to the terms of the Program, if we issue shares of Preferred Stock to the Treasury and we fail to pay the required dividends on the shares, the Treasury would have the right to elect two directors to our Board. This right would continue until any suspended dividends are fully paid for four consecutive quarters. This could be interpreted as having a potential anti-takeover effect. The Proposed Amendment is being recommended in order for us to be able to take advantage of the Treasury Program if we so choose, and is not in response to any specific effort of which First Financial is aware to obtain control of First Financial, nor does the Board of Directors have any present intent to use the Preferred Stock to impede a takeover attempt.

Anti-Takeover Effects of Certain Articles of Incorporation Provisions and Ohio Law

Our Articles contain certain provisions that make it more difficult to acquire control of us by means of a tender offer, open market purchase, a proxy fight or otherwise. These provisions are designed to encourage persons seeking to acquire control of us to negotiate with our directors. We believe that, as a general rule, the interests of our shareholders would be best served if any change in control results from negotiations with our directors.

Classification of Board of Directors. Our Articles provide for a classified Board, to which approximately one-third of our Board of Directors is elected each year at our annual meeting of shareholders. Accordingly, our directors serve three-year terms rather than one-year terms. The classification of our Board of Directors has the effect of making it more difficult for shareholders to change the composition of our Board of Directors. At least two annual meetings of shareholders, instead of one, will generally be required to effect a change in a majority of our Board of Directors. Such a delay may help ensure that our directors, if confronted by a holder attempting to force a proxy contest, a tender or exchange offer, or an extraordinary corporate transaction, would have sufficient time to review the proposal as well as any available alternatives to the proposal and to act in what they believe to be the best interests of our shareholders. The classification provisions apply to every election of directors, however, regardless of whether a change in the composition of our Board of Directors would be beneficial to us and our shareholders and whether or not a majority of our shareholders believe that such a change would be desirable.

The classification of our Board of Directors could also have the effect of discouraging a third party from initiating a proxy contest, making a tender offer or otherwise attempting to obtain control of us, even though such an attempt might be beneficial to us and our shareholders. The classification of our Board of Directors could thus increase the likelihood that incumbent directors will retain their positions. In addition, because the classification of our Board of Directors may discourage accumulations of large blocks of our shares by purchasers whose objective is to take control of us and remove a majority of our Board of Directors, the classification of our Board of Directors could tend to reduce the likelihood of fluctuations in the market price of our common shares that might result from accumulations of large blocks of our common shares for such a purpose. Accordingly, our shareholders could be deprived of certain opportunities to sell their shares at a higher market price than might otherwise be the case.

 

- 15 -

---

 

We believe that the power of our Board of Directors to issue additional authorized but unissued common shares of ours without further action by our shareholders, unless required by applicable law or the rules of any stock exchange or automated quotation system on which our securities may be listed or traded, will provide us with increased flexibility in structuring possible future financings and acquisitions and in meeting other needs that might arise. Our Board of Directors could authorize and issue a class or series of shares that could, depending upon the terms of such class or series, delay, defer or prevent a transaction or a change in control of us that might involve a premium price for holders of our common shares or that our shareholders otherwise consider to be in their best interest.

Other Limitations on Change in Control. In addition to the classification of the Board of Directors as discussed above, the following provisions of the Articles and Ohio law might have the effect of delaying, deferring or preventing a change in control of us and would operate only with respect to an extraordinary corporate transaction, such as a merger, reorganization, tender offer, sale or transfer of assets or liquidation involving the Company and certain persons described below.

The OGCL provides that the approval of two-thirds of the voting power of a corporation is required to effect mergers and similar transactions, to adopt amendments to the articles of incorporation of a corporation and to take certain other significant actions. Although under Ohio law the articles of incorporation of a corporation may permit such actions to be taken by a vote that is less than two-thirds (but not less than a majority), the Articles do not contain such a provision. The two-thirds voting requirement tends to make approval of such matters, including further amendments to the Articles, relatively difficult, and a vote of the holders of in excess of one-third of our outstanding common shares would be sufficient to prevent implementation of any of the corporate actions mentioned above.

     

Ohio, the state of our incorporation, has enacted OGCL Section 1701.831, a “control share acquisition” statute. The control share acquisition statute basically provides that any person acquiring shares of an “issuing public corporation” (which definition we meet) in any of the following three ownership ranges must seek and obtain shareholder approval of the acquisition transaction that first puts such ownership within each such range: (i) more than 20% but less than 33 1/3%; (ii) 33 1/3% but not more than 50%; and (iii) more than 50%.

     

The purpose of the control share acquisition statute is to give shareholders of Ohio corporations a reasonable opportunity to express their views on a proposed shift in control, thereby reducing the coercion inherent in an unfriendly takeover. The provisions of the control share acquisition statute grant to our shareholders the assurance that they will have adequate time to evaluate the proposal of the acquiring person, that they will be permitted to vote on the issue of authorizing the acquiring person’s purchase program to go forward in the same manner and with the same proxy information that would be available to them if a proposed merger of the Company were before them and, most importantly, that the interests of all shareholders will be taken into account in connection with such vote and the probability will be increased that they will be treated equally regarding the price to be offered for their common shares if the implementation of the proposal is approved.

The control share acquisition statute applies not only to traditional offers but also to open market purchases, privately negotiated transactions and original issuances by an Ohio corporation, whether friendly or unfriendly. The procedural requirements of the control share acquisition statute could render approval of any control share acquisition difficult in that the transaction must be authorized at a special meeting of shareholders, at which a quorum is present, by the affirmative vote of the majority of the voting power represented and by a majority of the portion of such voting power excluding interested shares. Any corporate defense against persons seeking to acquire control may have the effect of discouraging or preventing offers which some shareholders might find financially attractive. On the other hand, the need on the part of the acquiring person to convince our shareholders of the value and validity of the offer may cause such offer to be more financially attractive in order to gain shareholder approval.

 

- 16 -

---

 

Ohio has also enacted Chapter 1704, a “merger moratorium” statute. The merger moratorium statute provides that, unless a corporation’s articles of incorporation or regulations otherwise provide, an “issuing public corporation” (which definition we meet) may not engage in a “Chapter 1704 transaction” for three years following the date on which a person acquires more than 10% of the voting power in the election of directors of the issuing corporation, unless the Chapter 1704 transaction is approved by the corporation’s Board of Directors prior to such voting power acquisition. A person who acquires such voting power is an “interested shareholder”, and “Chapter 1704 transactions” involve a broad range of transactions, including mergers, consolidations, combinations, liquidations, recapitalizations and other transactions between an issuing public corporation and an interested shareholder if such transactions involve 5% of the assets or shares of the issuing public corporation or 10% of its earning power. After the initial three year moratorium, Chapter 1704 prohibits such transactions absent approval by disinterested shareholders or the transaction meeting certain statutorily defined fair price provisions. One significant effect of Chapter 1704 is to encourage a person to negotiate with the Board of Directors of a corporation prior to becoming an interested shareholder.

Ohio also has enacted a “greenmailer disgorgement” statute which provides that a person who announces a control bid must disgorge profits realized by that person upon the sale of any equity securities within 18 months of the announcement.

In addition, Section 1701.59 of the OGCL provides that, in determining what a director reasonably believes to be in the best interests of the corporation, such director may consider, in addition to the interests of the corporation’s shareholders, any of the interests of the corporation’s employees, suppliers, creditors and customers, the economy of the State of Ohio and the United States, community and societal considerations and the long-term as well as the short-term interests in the corporation and its shareholders, including the possibility that these interests may be best served by the continued independence of the corporation.

The overall effect of these statutes may be to render more difficult or discourage the removal of incumbent management or the assumption of effective control by other persons.

First Financial’s Shareholder Rights Plan. Each Common Share issued includes one “right” (the “Right”). Under the “shareholders rights plan” pursuant to the Rights Agreement, the Rights actually will be distributed only if one or more of certain designated actions involving the common shares occur. In the event of such a distribution, each Right would entitle a holder of common shares to purchase, at an exercise price as set forth in the shareholders rights plan, share or shares of the Company. In addition, upon the occurrence of certain other events, each Right holder would be entitled to receive common shares of any acquiring company worth two times the exercise price of the Right.

The adoption of the Rights plan by the Company has no financial effect on the Company, is not dilutive to holders of common shares, is not taxable to the Company or to its shareholders and will not change the way in which our common shares are traded. Rights are not exercisable until distributed, and all Rights will expire at the close of business on December 6, 2008, unless earlier redeemed by the Company. The issuance of Rights, however, may have certain anti-takeover effects and possible disadvantages. The Rights will cause substantial dilution to a person or a group who attempts to acquire us or a significant common share ownership interest without conditioning the offer on the Rights being redeemed or a substantial number of Rights being acquired. Accordingly, an acquiring entity might decide not to acquire us or such an interest even though individual shareholders may view such an acquisition favorably. In addition, to the extent that issuance of the Rights discourages takeovers that would result in a change in our management or Board of Directors, such a change would be less likely to occur. The Board of Directors believes, however, that the advantages of discouraging potentially discriminatory and abusive takeover practices outweigh any potential disadvantages of the Rights. The Rights should not interfere with any merger or any business combination approved by the Board of Directors. The Rights are designed to protect shareholders against unsolicited attempts to acquire control of the Company, whether through accumulation of common shares in the open market or partial tender offers that do not offer a fair price for all shareholders.

 

- 17 -

---

 

Effectiveness of the Proposed Amendment

If shareholders approve the Proposed Amendment, First Financial will file an amendment to its Articles of Incorporation with the Ohio Secretary of State as soon as practicable following the Special Meeting. The Proposed Amendment would become effective at the time the Articles amendment is filed.

DESCRIPTION OF COMMON SHARES 

For purposes of this section, the terms “we,” “our” and “us” refer only to First Financial and not its subsidiaries.

The following description of our common shares, without par value, or “common shares,” is a summary only and is subject to applicable provisions of the Ohio General Corporation Law, as amended (the “OGCL”), and to our amended and restated articles of incorporation (“Articles”) and our amended and restated regulations (“Regulations”). You should refer to, and read this summary together with, our Articles and Regulations to review all of the terms of our common shares.

  

Our Articles provide that we may issue up to 160 million common shares, without par value. As of October 28, 2008, the voting record date, 37,476,607 of our common shares were issued and outstanding. All outstanding common shares are fully paid and nonassessable. Our common shares are listed on the Nasdaq Global Select Market under the symbol “FFBC”.

As discussed earlier, our Articles currently do not authorize the issuance of preferred stock.

Voting Rights. Each holder of common shares is entitled to cast one vote for each common share held of record on all matters submitted to a vote of shareholders, including the election of directors. The Board of Directors is divided into three classes as nearly equal in size as the total number of directors constituting the Board permits. The number of directors may be fixed or changed from time to time by the shareholders or the directors as discussed below, but, in any event, can be no less than nine and no more than twenty-five. Our directors are elected to three-year terms, with the term of office of one class expiring each year. Our shareholders annually elect only one of the three classes. This method of election could be considered an impediment for a takeover of control of the Company by third parties.

The size of the Board can be increased or decreased at any time by: (a) the affirmative vote of two-thirds of the whole authorized number of directors, or (b) the affirmative vote of the holders of at least two-thirds of the outstanding voting power of the Company at a meeting of shareholders, at which a quorum is present, called for the purpose of electing directors. The Company’s Board of Directors may not, under provisions of the Regulations, increase the authorized number of directors by more than three positions during any period between annual meetings.

As permitted by law, the Articles provide that the holders of common shares do not have preemptive rights or the right to exercise cumulative voting in the election of directors.

Dividends, Liquidation and Other Rights. Holders of common shares are entitled to participate equally in dividends or other distributions when, as and if declared by the Board of Directors out of funds legally available therefore. Subject to certain regulatory restrictions, dividends may be paid in cash, property or common shares, unless the Company is insolvent or the dividend payment would render it insolvent.

 

- 18 -

---

 

Holders of our common shares have no preference, conversion, exchange, sinking fund or redemption rights and have no preemptive rights to subscribe for any of our securities. Our Board of Directors may issue additional common shares or rights to purchase common shares without the approval of our shareholders.

Transfer Agent and Registrar. Subject to compliance with applicable federal and state securities laws, our common shares may be transferred without any restrictions or limitations. The transfer agent and registrar for our common shares is Registrar and Transfer Company.

 

PROPOSAL NO. 2 - ADJOURNMENTS OR POSTPONEMENTS OF THE SPECIAL MEETING

(Item 2 on Proxy Card)

A proposal will be submitted to shareholders at the Special Meeting to approve the adjournment or postponement of such Meeting, if necessary, to solicit additional proxies in the event (a) there are not sufficient votes at the time of the Special Meeting to adopt Proposal No. 1, or (b) a quorum is not present at the time of the Special Meeting. Any adjournment or postponement of the Special Meeting may be made without notice, other than by an announcement made at the Special Meeting. Any adjournment or postponement of the Special Meeting for the purpose of soliciting additional proxies will allow shareholders who have already sent in their proxies to revoke them at any time prior to their use.

 

Your Board of Directors recommends that you vote “FOR” proposal No. 2.

 

- 19 -

---

PRINCIPAL SHAREHOLDERS

 

SHAREHOLDER PROPOSALS FOR THE 2009 PROXY STATEMENT

In order for a shareholder proposal to be considered for inclusion in our proxy statement for the 2009 Annual Meeting of Shareholders, the written proposal must be received on or before November 15, 2008. The proposal must comply with SEC regulations regarding the inclusion of shareholder proposals in company-sponsored proxy materials. Any shareholder who intends to propose any other matter to be acted upon at the 2009 Annual Meeting of Shareholders must inform First Financial no later than January 31, 2009. If notice is not provided by that date, the person(s) named in First Financial’s Proxy for the 2009 Annual Meeting will be allowed to exercise his or her discretionary authority to vote upon any such proposal without the matter having been discussed in the Proxy Statement for the 2009 Annual Meeting. Proposals should be sent to our main office at 4000 Smith Road, Suite 400, Cincinnati, Ohio 45209, Attention: Corporate Secretary. The use of certified mail, return receipt requested, is advised if submitting such a proposal.

 

- 23 -

---

 

ADDITIONAL INFORMATION

Management and the Board of Directors of First Financial know of no business to be brought before the meeting other than as set forth in this Proxy Statement. However, if any matters other than those referred to in this Proxy Statement should properly come before the meeting, it is the intention of the persons named in the enclosed Proxy to vote such Proxy on such matters in accordance with their best judgment.

It is important that your proxy card be completed, signed and returned promptly. If you do not expect to attend the Special Meeting in person, please complete, sign and return the enclosed proxy card in the self-addressed envelope furnished herewith. Alternatively, please vote electronically via the Internet or by telephone following the instructions on your proxy card.

 

	By Order of the Board of Directors,
	Gregory A. Gehlmann General Counsel & Secretary
November 14, 2008

 

- 24 -

---

 

APPENDIX A

 

If approved, Article FOURTH of the Articles of Incorporation would be amended in its entirety to read as follows:

 

FOURTH.        (A) The maximum number of shares which the corporation is authorized to issue is One Hundred Sixty Million Eighty Thousand (160,080,000) shares, all of which shall be without par value.

(B) The total number of common shares which the corporation is authorized to issue is One Hundred Sixty Million (160,000,000) common shares, without par value.

(1) Dividends. The holders of common shares shall be entitled to receive dividends, if and when declared payable from time to time by the Board of Directors, from any funds legally available therefore.

(2) Voting. Each outstanding common share of the corporation shall entitle the holder thereof to one vote and the exclusive voting power for all purposes shall be vested in the holders of common shares.

(3) Preemptive Rights. No holder of common shares of the corporation shall have preemptive rights to subscribe for or to purchase any common shares of the corporation or any other securities of the corporation, whether such share or shares are now or hereafter authorized.

(4) Purchase of Own Securities. The corporation shall be authorized to purchase or otherwise acquire, and to hold, own, pledge, transfer or otherwise dispose of, its own common shares and other securities, subject, however, to the laws of the State of Ohio and to federal statutes, and without limitation to the Bank Holding Company Act of 1956 as amended and as hereinafter may be amended or supplemented.

(5) The shareholders shall not have the right to vote cumulatively in the election of directors effective for the Annual Meeting occurring in 1988 and thereafter.

(C) The total number of preferred shares which the corporation shall have the authority to issue is Eighty Thousand (80,000) preferred shares, without par value. The Board of Directors is hereby authorized, subject to the limitations prescribed by law or the provisions of this Article Fourth, by filing articles of amendment pursuant to the applicable laws of Ohio, to provide for the issuance of preferred shares in series pursuant to the terms of any capital purchase program(s) authorized by the Emergency Economic Stabilization Act of 2008 (“EESA”) and implemented by the United States Department of the Treasury (the “Treasury”), and to fix the designations, powers, preferences and rights thereof in compliance with any EESA program. The preferred shares shall not be available for future issuance except pursuant to the terms of an EESA program established by the Treasury. Subject to the limitations set forth herein, the Board of Directors has the authority to determine and fix any express terms with respect to each series to the fullest extent permitted by the Revised Code of Ohio, which shall include, but not be limited to, the determination of the following:

(1)   the number of shares constituting that series and the distinct designation of that series;

(2)   the dividend rate, if any, on such shares of that series, whether dividends shall be cumulative, and, if so, from which date or dates, and the relative rights of priority, if any, of payment of dividends or other distributions on shares of that series;

 

A-1

---

(3)   whether that series shall have voting rights in addition to the voting rights provided by law, and, if so, the terms of such voting rights;

(4)   whether that series shall have conversion privileges, and, if so, the terms and conditions of such conversion, including provision for the adjustment of the conversion rate in such events as the Board of Directors shall determine;

(5)   whether the shares of that series shall be redeemable or exchangeable, and, if so, the terms and conditions of such redemption or exchange, including the date or dates upon or after which they shall be redeemable or exchangeable, and the amount per share payable in case of redemption or exchange, which amount may vary under different conditions and at different redemption or exchange rates;

(6)   whether that series shall have a sinking fund for redemption or purchase of shares of that series, and, if so, the terms and amount of such sinking fund;

(7)   the rights of the shares of that series in the event of voluntary or involuntary liquidation, dissolution or winding up of the Corporation, and the relative rights of priority, if any, of payment of shares of that series; and

Executive Compensation:		As a condition to the closing of this investment, the QFI and its senior executive officers covered by the EESA shall modify or terminate all benefit plans, arrangements and agreements (including golden parachute agreements) to the extent necessary to be in compliance with, and following the closing and for so long as UST holds any equity or debt securities of the QFI, the QFI shall agree to be bound by, the executive compensation and corporate governance requirements of Section 111 of the EESA and any guidance or regulations issued by the Secretary of the Treasury on or prior to the date of this investment to carry out the provisions of such subsection. As an additional condition to closing, the QFI and its senior executive officers covered by the EESA shall grant to the UST a waiver releasing the UST from any claims that the QFI and such senior executive officers may otherwise have as a result of the issuance of any regulations which modify the terms of benefits plans, arrangements and agreements to eliminate any provisions that would not be in compliance with the executive compensation and corporate governance requirements of Section 111 of the EESA and any guidance or regulations issued by the Secretary of the Treasury on or prior to the date of this investment to carry out the provisions of such subsection.
Summarv of Warrant Terms
Warrant:		The UST will receive warrants to purchase a number of shares of common stock of the QFI having an aggregate market price equal to 15% of the Senior Preferred amount on the date of investment, subject to reduction as set forth below under "Reduction". The initial exercise price for the warrants, and the market price for determining the number of shares of common stock subject to the warrants, shall be the market price for the common stock on the date of the Senior Preferred investment (calculated on a 20-trading day trailing average), subject to customary anti-dilution adjustments. The exercise price shall be reduced by 15% of the original exercise price on each six-month anniversary of the issue date of the warrants if the consent of the QFI stockholders described below has not been received, subject to a maximum reduction of 45% of the original exercise price.
Term:		10 years
Exercisabiltity:		Immediately exercisable, in whole or in part
Transferability:		The warrants will not be subject to any contractual restrictions on transfer; provided that the UST may only transfer or exercise an aggregate of one-half of the warrants prior to the earlier of (i) the date on which the QFI has received aggregate gross proceeds of not less than 100% of the issue price of the Senior Preferred from one or more Qualified Equity Offerings and (ii) December 31, 2009. The QFI will file a shelf registration statement covering the warrants and the common stock underlying the warrants as promptly as practicable after the date of this investment and, if necessary, shall take all action required to cause such shelf registration statement to be declared effective as soon as possible. The QFI will also grant to the UST piggyback registration rights for the warrants and the common stock underlying the warrants and will take such other steps as may be reasonably requested to facilitate the transfer of the warrants and the common stock underlying the warrants. The QFI will apply for the listing on the national exchange on which the QFl's common stock is traded of the common stock underlying the warrants and will take such other steps as may be reasonably requested to facilitate the transfer of the warrants or the common stock.

 

B-3

---

Voting:		The UST will agree not to exercise voting power with respect to any shares of common stock of the QFI issued to it upon exercise of the warrants.
Reduction:		In the event that the QFI has received aggregate gross proceeds of not less than 100% of the issue price of the Senior Preferred from one or more Qualified Equity Offerings on or prior to December 31, 2009, the number of shares of common stock underlying the warrants then held by the UST shall be reduced by a number of shares equal to the product of (i) the number of shares originally underlying the warrants (taking into account all adjustments) and (ii) 0.5.
Consent:		In the event that the QFI does not have sufficient available authorized shares of common stock to reserve for issuance upon exercise of the warrants and/or stockholder approval is required for such issuance under applicable stock exchange rules, the QFI will call a meeting of its stockholders as soon as practicable after the date of this investment to increase the number of authorized shares of common stock and/or comply with such exchange rules, and to take any other measures deemed by the UST to be necessary to allow the exercise of warrants into common stock.
Substitution:		In the event the QFI is no longer listed or traded on a national securities exchange or securities association, or the consent of the QFI stockholders described above has not been received within 18 months after the issuance date of the warrants, the warrants will be exchangeable, at the option of the UST, for senior term debt or another economic instrument or security of the QFI such that the UST is appropriately compensated for the value of the warrant, as determined by the UST.

 

B-4

---

 

]

 

 

---