UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement.
[ ] CONFIDENTIAL, FOR USE OF THE COMMISSION ONLY (AS PERMITTED BY
RULE 14a-6(e)(2)).
[X] Definitive proxy statement.
[ ] Definitive additional materials.
[ ] Soliciting material pursuant to Section 240.14a-12
FIRST FINANCIAL CORPORATION
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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement if Other Than the Registrant)
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:
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(2) Aggregate number of securities to which transaction applies:
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(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):
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
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[ ] 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:
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(2) Form, Schedule or Registration Statement No.:
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(4) Date Filed:
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PERSONS WHO ARE TO RESPOND TO THE COLLECTION OF INFORMATION
CONTAINED IN THIS FORM ARE NOT REQUIRED TO RESPOND UNLESS
SEC 1913 (02-02) THE FORM DISPLAYS A CURRENTLY VALID OMB CONTROL NUMBER.
FIRST FINANCIAL CORPORATION
ONE FIRST FINANCIAL PLAZA
P.O. BOX 540
TERRE HAUTE, INDIANA 47808
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD APRIL 19, 2006
Notice is hereby given that, pursuant to the call of its Directors, an
Annual Meeting of Shareholders of First Financial Corporation ("Corporation")
will be held on April 19, 2006 at 11:00 o'clock a.m., local time, at One First
Financial Plaza, Terre Haute, Indiana.
The purposes of the meeting are:
(1) To elect Thomas T. Dinkel, Norman L. Lowery and Patrick
O'Leary to the Board of Directors of the Corporation for a
three (3) year term to expire in 2009;
(2) To elect Ronald K. Rich to the Board of Directors of the
Corporation for a one (1) year term to expire in 2007;
(3) To transact such other business as may properly be presented
at the meeting.
Only shareholders of record at the close of business on March 15, 2006
will be entitled to notice of and to vote at the meeting.
By Order of the Board of Directors
/S/ Donald E. Smith
DONALD E. SMITH
Chairman of the Board and President
March 21, 2006
IMPORTANT - PLEASE MAIL YOUR PROXY PROMPTLY
IN ORDER THAT THERE MAY BE PROPER REPRESENTATION AT
THE MEETING, YOU ARE URGED TO COMPLETE, SIGN, DATE AND
RETURN THE ENCLOSED PROXY IN THE ENVELOPE PROVIDED.
NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES.
PROXY STATEMENT OF
FIRST FINANCIAL CORPORATION
ONE FIRST FINANCIAL PLAZA
P.O. BOX 540 o TERRE HAUTE, INDIANA 47808
(812) 238-6000
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ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD APRIL 19, 2006
GENERAL INFORMATION
This Proxy Statement is furnished in connection with the solicitation by the
Board of Directors of First Financial Corporation (the "Corporation") of Proxies
for use at the Annual Meeting of Shareholders of the Corporation to be held on
April 19, 2006, at 11:00 a.m. local time at One First Financial Plaza, Terre
Haute, Indiana, and at any and all adjournments of such meeting. This Proxy
Statement and accompanying form of proxy were first mailed to the shareholders
on or about March 30, 2006.
The Corporation is a financial services holding company which owns First
Financial Bank N.A. ("FFB"), The Morris Plan Company of Terre Haute, Inc.,
Forrest Sherer, Inc. and First Financial Reinsurance Company, Ltd.
Only shareholders of record as of March 15, 2006, will be entitled to notice of,
and to vote at, the Annual Meeting. As of March 10, 2006 the Corporation had
issued and outstanding 13,323,785 shares of common stock, which were held by
approximately 885 shareholders of record. There are no other outstanding
securities of the Corporation entitled to vote. On the matters to be voted on at
this Annual Meeting, each share is entitled to one vote, exercisable in person
or by proxy.
The presence, in person or by proxy, of a majority of the outstanding shares of
Common Stock is necessary to constitute a quorum. Shares voting, abstaining or
withholding authority to vote on any issue will be counted as present for
purposes of determining a quorum. Approval by a plurality of the votes cast at
the meeting, assuming a quorum is present, is required for election of each
nominated director. Action on any other matters to come before the meeting must
be approved by an affirmative vote of a majority of the shares present, in
person, or by proxy. Abstentions, broker non-votes, and instructions on the
accompanying proxy card to withhold authority to vote for one or more of the
named nominees will result in the respective nominee receiving fewer votes.
The cost of soliciting proxies will be borne by the Corporation. In addition to
use of the mails, proxies may be solicited personally, electronically or by
telephone by officers, directors and certain employees who will not be specially
compensated for such soliciting.
Any shareholder giving a proxy has the right to revoke it at any time before it
is exercised. Therefore, execution of the proxy will not affect the
shareholder's right to vote in person if he or she attends the meeting.
Revocation may be made prior to the meeting (i) by written notice sent to
Michael A. Carty, Secretary, First Financial Corporation, One First Financial
Plaza, P.O. Box 540, Terre Haute, Indiana 47808, (ii) personally upon oral or
written request at the Annual Meeting, or (iii) by duly executing a proxy
bearing a later date.
The shares represented by proxies will be voted as instructed by the
shareholders giving the proxies. In the absence of specific instructions to the
contrary, proxies will be voted in favor of the election as directors of the
four (4) persons named as nominees in this Proxy Statement. If for any reason
any of the director/nominees becomes unable or is unwilling to serve at the time
of the meeting (an event which the Board of Directors does not anticipate), the
persons named as proxies in the accompanying form of proxy will have
discretionary authority to vote for a substitute nominee or nominees named by
the Governance/Nominating Committee if the Board of Directors elects to fill
such nominees' position. If any shareholder proposal intended to be presented at
the 2006 Annual Meeting was not received by the Corporation on or before
February 6, 2006, the proxies will have discretionary authority to vote on the
matter. Any other matters that may properly come before the meeting will be
acted upon by the persons named as proxies in the accompanying form of proxy in
accordance with his or her discretion.
ELECTION OF DIRECTORS
The Board of Directors is currently composed of ten (10) members. The
Corporation's Articles of Incorporation divide the Board of Directors into three
classes, as nearly equal in size as possible, with one class of directors
elected each year for a term extending to the third succeeding Annual Meeting
after such election. The nominees for election as director are nominated to
serve for terms to expire as of the 2009 Annual Meeting with the exception of
director Ronald Rich, who has been nominated to complete a term to expire as of
the 2007 Annual Meeting. Each nominee is a current director of the Corporation.
The following information is provided concerning each nominee and each incumbent
director continuing in office.
CERTAIN INFORMATION REGARDING DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information regarding directors, nominees
and the executive officers named in the Summary Compensation Table of the
Corporation, including beneficial ownership of the Corporation's common stock as
of March 10, 2006, by each of the Corporation's directors, nominees and the
Named Executive Officers; and all current directors and executive officers as a
group.
1
SHARES OF COMPANY COMMON STOCK
NAME, AGE AND PRINCIPAL OCCUPATION DIRECTOR BENEFICIALLY OWNED ON MARCH 10, 2006
DURING THE PAST FIVE YEARS SINCE NUMBER PERCENT OF CLASS(1)
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NOMINEES FOR TERMS TO EXPIRE IN 2009
Thomas T. Dinkel, 55 1989 11,870 0.09%
President of Sycamore Engineering, Inc.
Norman L. Lowery, 59, Vice Chairman of the 1989 20,536 0.15% (3)
Board and CEO; Vice President of the Corporation;
President of First Financial Bank N.A.
Patrick O'Leary, 69 1983* 52,575 0.39%
President of Contract Services, LLC
NOMINEE FOR TERM TO EXPIRE IN 2007
Ronald K. Rich, 68 2005 2,050 0.02%
Financial Representative
Northwest Mutual Financial Network
INCUMBENT MEMBERS OF THE BOARD OF DIRECTORS
WHOSE TERMS EXPIRE IN 2007
W. Curtis Brighton, 52 2004 11,000 0.08%
Executive Vice President and General Counsel
Hulman and Company
Donald E. Smith, 79 1983* 153,728 1.15%
Chairman of the Board and President
INCUMBENT MEMBERS OF THE BOARD OF DIRECTORS
WHOSE TERMS EXPIRE IN 2008
B. Guille Cox, Jr., 60 1983* 84,569 0.63% (2)
Attorney-at-Law with Cox Zwerner Gambill & Sullivan
Anton H. George, 46 1989 618 0.01%
President of Indianapolis Motor Speedway Corp.,
Director of Vectren Corporation
Gregory L. Gibson, 43 1994 66,962 0.50%
President of ReTec, Inc.
Virginia L. Smith, 57 1987 10,952 0.08%
President of R.J. Oil, Inc.
* First Financial Corporation was formed in 1983.
OTHER EXECUTIVE OFFICERS
Thomas S. Clary, 54 268 0.01%
Senior Vice President & CCO of First Financial Bank N.A.
Michael A. Carty, 55, Secretary/Treasurer 14,345 0.11%
Senior Vice President & CFO of First Financial Bank N.A.
Richard O. White, 58 19,770 0.15%
Senior Vice President of First Financial Bank N.A.
All Directors and Executive Officers as a group beneficially own 449,377 shares,
which is 3.37% of the shares outstanding. This includes shares held for the
accounts of Donald E. Smith, Norman L. Lowery, Thomas S. Clary, Michael A. Carty
and Richard O. White in the First Financial Corporation Employee Stock Ownership
Plan.
(1) The information contained in this column is based upon stockholder records
of the Corporation and information furnished to the Corporation by the
individuals identified above. Unless otherwise indicated, each individual has
sole voting and investment power of the shares indicated.
(2) Mr. Cox, under certain circumstances, has the power, with the consent of
others, to vote an additional 339,906 shares (2.52%). These shares are not
reflected in the number of shares or percent of class attributed to him in the
above table.
(3) Mr. Lowery has the power to vote an additional 66,666 (.50%) shares as
co-trustee of the Root Children's Business Trust. These shares are not reflected
in the number of shares or percent of class attributed to him in the above
table.
2
The Corporation's executive officers served as executive officers of the
Corporation or FFB for the following periods:
NAME AND EXECUTIVE OFFICER POSITION EXECUTIVE OFFICER SINCE
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Donald E. Smith, Chairman and President 1983
Norman L. Lowery, Vice Chairman and CEO 1996
Michael A. Carty, Secretary, Treasurer, Senior Vice President and CFO 1983
Richard O. White, Senior Vice President of First Financial Bank N.A. 1983
Thomas S. Clary, CCO and Senior Vice President of First Financial Bank N.A. 2002
ADDITIONAL INFORMATION CONCERNING THE BOARD OF DIRECTORS
DIRECTOR INDEPENDENCE. The Board of Directors has determined that under the
rules of the NASDAQ Stock Market, a majority of the Board of Directors is
comprised of independent directors, and that the following directors are
independent: Messrs. Brighton, Rich, George, Gibson, Dinkel and O'Leary.
ATTENDANCE AT MEETINGS. During 2005 the Board of Directors of the Corporation
held 12 regular meetings and a total of 17 meetings. No incumbent director
attended fewer than 75% of the aggregate number of Board meetings and meetings
of committees on which he or she served. Although the Corporation has no formal
policy on director attendance at annual meetings of shareholders, they are
encouraged to attend such meetings. Eight directors attended the 2005 Annual
Meeting of Shareholders.
CERTAIN RELATIONSHIPS. Certain family relationships exist among the directors of
the Corporation. Donald E. Smith is the father of Virginia L. Smith and
father-in-law of Norman L. Lowery. There are no arrangements or understandings
between any of the directors pursuant to which any of them have been selected
for their respective positions.
CODE OF BUSINESS CONDUCT AND ETHICS. The Corporation has adopted a Code of
Business Conduct and Ethics (the "Code") that applies to all of the
Corporation's directors, officers and employees, including its principal
executive officer, principal financial officer, principal accounting officer and
controller. The Code is posted on the Corporation's website at
www.first-online.com. The Corporation intends to disclose any amendments to the
Code by posting such amendments on its website. In addition, any waivers of the
Code for directors or executive officers of the Corporation will be disclosed in
a report on Form 8-K.
COMMITTEES:
GOVERNANCE/NOMINATING COMMITTEE. Members consist of Messrs. O'Leary, Gibson and
Rich. The Board of Directors has determined that Messrs. O'Leary, Gibson and
Rich are independent under Rule 10A-3 of the SEC and the rules of the NASDAQ
Stock Market. The Governance/Nominating Committee identifies director nominees
through a combination of referrals, including management, existing board members
and shareholders. This Committee met four times during 2005. A copy of the
charter of this Committee is available on the Corporation's web site at
www.first-online.com. There are four director nominees for the 2006 Annual
Meeting, all of whom are incumbent directors.
AUDIT COMMITTEE. Members consist of Anton H. George, Thomas T. Dinkel and
Patrick O'Leary. The Board of Directors has determined that Messrs. George,
Dinkel and O'Leary are independent under Rule 10A-3 of the SEC and the rules of
the NASDAQ Stock Market. The Audit Committee reviews the Corporation's
operations and management, accounting functions, and the adequacy and
effectiveness of the internal controls and internal auditing methods and
procedures and is responsible for the appointment, compensation, retention and
oversight of the independent registered public accounting firm for the
Corporation. The Audit Committee had five meetings during 2005. A copy of the
charter of this Committee is posted on the Corporation's website at
www.first-online.com.
The Board of Directors has determined that a current member of the Audit
Committee is financially sophisticated under applicable NASDAQ rules. The Board
of Directors selected the members of the Audit Committee based on the Board's
determination that they are fully qualified to monitor the performance of
management, the public disclosures by the Corporation of its financial condition
and performance, our internal accounting operations and our independent
auditors. In addition, the Audit Committee has the ability on its own to retain
independent accountants or other consultants whenever it deems appropriate.
The Board of Directors has determined that the Corporation currently does not
have a director who qualifies as a "financial expert" under federal securities
laws. To be considered a "financial expert," an individual's past experience
generally must include experience in the preparation or audit of comparable
public company financial statements, or the supervision of someone in the
preparation or audit of comparable public company financial statements. The
Corporation is actively engaged in recruiting a "financial expert" to serve as a
member of the Board of Directors and as a member of the Audit Committee. While
it might be possible to recruit a person who meets these qualifications of a
"financial expert," the Board has determined that in order to fulfill all the
functions of our Board and our Audit Committee, each member of our Board and our
Audit Committee, including any "financial expert," should ideally understand
community banking and understand the markets in which the Corporation operates,
and that it is not in the best interests of our Corporation to nominate as a
director someone who does not have all the experience, attributes and
qualifications we seek.
COMPENSATION COMMITTEE. Members consist of Messrs. George, O'Leary and Rich. The
Board of Directors has determined that Messrs. George, O'Leary and Rich are
independent under Rule 10A-3 of the SEC and the rules of the NASDAQ Stock
Market. The Compensation Committee approves the compensation of the officers of
the Corporation and its subsidiaries. Such Committee met three times in 2005.
COMPENSATION OF DIRECTORS. Each director of the Corporation is also a director
of FFB, the lead subsidiary bank of the Corporation, and receives directors'
fees from each of the Corporation and FFB. During 2005 each director of the
Corporation and FFB received a fee of $750 for each board meeting attended.
3
Non-employee directors also receive a fee for each meeting attended of the Audit
Committee of $1,000, the Compensation Committee of $1,000, the
Governance/Nominating Committee of $500 and the Loan Discount Committee of $300.
Each director also received from FFB a semi-annual director's fee of $2,500 on
July 15th and December 16th. No non-employee director served as a director of
any other subsidiary of the Corporation.
Directors of the Corporation and FFB who are not yet 70 years of age may
participate in a deferred director's fee program at each institution. Under this
program, a director may defer $6,000 of his or her director's fees each year
over a five-year period. Payment will be made in 120 monthly installments. If
the director is still a director at the end of the five-year period, then he or
she will be entitled to enter into a new compensation agreement. The amount of
deferred fees is used to purchase an insurance product which funds these
payments. Each year from the initial date of deferral until payments begin, the
Corporation accrues a non-cash expense which will equal in the aggregate the
amount of the payments to be made to the director over the ten-year period. The
Corporation expects that the cash surrender value of the insurance policy will
offset the amount of expenses accrued. If a director fails for any reason other
than death to serve as a director during the entire five-year period, or the
director fails to attend at least 60 regular or special meetings over the
five-year period, the amount of payment will be prorated appropriately. For
2005, the allocated cost of the deferred directors' fees was $164,376.
Directors also may be compensated under the Corporation's 2001 and 2005
Long-Term Incentive Plans, discussed under "Report of the Compensation Committee
on Executive Compensation." Under the plans, directors may receive 90%, 100% or
110% of the director's "award amount" if the Corporation and FFB attain certain
goals established by the Compensation Committee. For 2005, each director
received pursuant to the 2005 Long-Term Incentive Plan an award of $37,300 from
the Corporation, which represented 100% of the director's "award amount" under
that plan for 2005.
COMPENSATION OF OFFICERS
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
Decisions on compensation of the Corporation's executives are made by the
Compensation Committee of the Board, which also serves as the Compensation
Committee of FFB. The Board of Directors has determined that each member of the
Compensation Committee is "independent" under Rule 10A-3 of the SEC and the
rules of the NASDAQ Stock Market. All decisions of the Compensation Committee
relating to the compensation of the Corporation's executive officers are
reviewed and ratified by the full Board.
COMPENSATION POLICIES TOWARD EXECUTIVE OFFICERS. The Compensation Committee's
executive compensation policies are designed to provide competitive levels of
compensation to the executive officers and to reward officers for satisfactory
individual performance and for satisfactory performance of the Corporation as a
whole. The individual goals established in the strategic plan and budget for the
Corporation and FFB, and the goals relating to performance of the Corporation,
established under the 2005 Long-Term Incentive Plan discussed below, are also
utilized in setting compensation levels of executive officers.
BASE SALARY. Base salary for an executive officer is determined after the
executive officer is reviewed by the Compensation Committee. This review
includes an analysis of the performance of the Corporation and FFB and an
analysis of the individual's performance during the past fiscal year, with a
focus on the executive officer's quality and quantity of work; supervisory
skills; dependability; initiative; attendance; overall skill level; and overall
value to the Corporation. This analysis also includes a comparison of actual
individual performance versus established strategic planning and budgetary
goals.
ANNUAL BONUS AMOUNTS. The Compensation Committee determines whether a bonus
should be paid based primarily upon the overall performance of the Corporation.
For 2005, Messrs. Smith, Lowery, Carty, Clary and White each received a bonus of
$150,000, $150,000, $19,500, $15,000 and $14,000, respectively.
LONG-TERM INCENTIVE PLAN. Beginning in 1999 the Board began discussions with
several consultants regarding compensation programs. These discussions focused
on an analysis of compensation programs of other financial institutions and what
actions were needed to provide comparable compensation packages to directors,
officers and key employees of the Corporation and its subsidiaries. These
discussions and the analysis of the information received culminated with the
adoption by the Board in November 2000 of the 2001 Long-Term Incentive Plan (the
"2001 Plan"), effective January 1, 2001.
The 2001 Plan was adopted after lengthy Board discussions with and consultation
from an independent consultant. The 2001 Plan is designed to enhance stockholder
value of the Corporation by attracting and retaining directors, officers and
other key employees and provide further incentive for directors, officers and
other key employees to give their maximum effort to the continued growth and
success of the Corporation. This is an unfunded, nonqualified plan of deferred
compensation which is administered by the Compensation Committee. The 2001 Plan
was frozen effective December 31, 2004 to exempt all amounts under the 2001 Plan
from the application of Section 409A of the Internal Revenue Code of 1986, as
amended (the "Code"). The Board adopted the 2005 Long-Term Incentive Plan (the
"2005 Plan") as a replacement plan effective January 1, 2005. The terms of the
2005 Plan comply with Code Section 409A. Collectively the 2001 Plan and 2005
Plan are referred to as the "Plans."
Directors and executive officers who are "highly compensated employees" within
the meaning of Section 201(2) of the Employee Retirement Income Security Act of
1974, as amended, and who are age 65 or under are eligible to participate in the
2005 Plan. The Compensation Committee has designated as participants in the 2005
Plan all directors of the Corporation, the executive officers listed in the
summary compensation table on the following page, the presidents of its
subsidiary banks and certain other officers. Individuals are not eligible to
receive rewards of compensation under the Plans after age 65; however, the
Compensation Committee exempted Messrs. Smith and O'Leary from the age
limitations at each Plan's inception.
4
Awards under the 2005 Plan are based upon the specific "award amount" for each
individual specified. There are four tiers of participants, with a different
award amount specified for each tier. The award amounts were established after
discussions with, and receipt of, advice from the Corporation's consultant, who
had performed an analysis of a peer group of companies for the Corporation and
the financial institutions industry generally.
Payments generally do not begin until the earlier of January 1, 2015, or the
January 1 immediately following the year in which the participant reaches age
65. If a Participant is a "key employee," as defined by Code Section 416(i),
then payments will be suspended for the six-month period following the date
payments were scheduled to begin. Payments are in cash only and are generally
made in 180 equal consecutive monthly installments.
Goals for the Terre Haute region were attained for 2005, resulting in awards
equal to 100% for directors, executive officers and managers in that region.
Four region and four product managers attained the first target level resulting
in a 90% individual award amount.
The following table indicates awards for the 2005 plan year:
LONG-TERM INCENTIVE PLAN AWARDS IN THE LAST FISCAL YEAR
NUMBER OF PERFORMANCE OR ESTIMATED FUTURE PAYOUT UNDER
SHARES, UNITS OTHER PERIOD NON-STOCK PRICED-BASED PLANS(2)
OR OTHER UNTIL MATURATION ---------------------------------------------
NAME RIGHTS OF PAYOUT(1) THRESHOLD ($) TARGET ($) MAXIMUM ($)
------------------------------------------------------------------------------------------------------------------
Donald E. Smith N/A 1-1-2010 $356,400 $396,000 $435,600
Norman L. Lowery N/A 1-1-2012 $296,820 $329,800 $362,780
Michael A. Carty N/A 1-1-2015 $ 70,290 $ 78,100 $ 85,910
Richard O. White N/A 1-1-2013 $ 62,856 $ 69,840 $ 76,824
Thomas S. Clary N/A 1-1-2015 $ 57,672 $ 64,080 $ 70,488
(1) Awards under the 2005 Plan are based on performance over one calendar year.
Payments generally do not begin until the earlier of January 1, 2015, or the
January 1 immediately following the year in which the participant reaches age
65. Directors and executives become 100% vested in their awards if or when they
have provided five years of service to the Corporation or the respective
subsidiary by which they are employed.
(2) Awards of compensation equal 90%, 100% or 110% of the individual's award
amount. The percentage of the award made is dependent upon whether the
Corporation and the subsidiary banks attain either the first, second or third
target level of performance goals established by the Compensation Committee for
the Corporation and each subsidiary bank. If the first target level is not
attained, no award is made. If the first, second or third levels of the
performance goals are attained, the award will equal 90%, 100% or 110% of the
award amount, respectively. Awards for 2005 were based on a weighted point total
of the following target goals for the Corporation: (i) product, and (ii)
regional contribution to income before tax.
OTHER COMPENSATION PLANS. At various times in the past the Corporation has
adopted certain broad-based employee benefit plans in which the executive
officers are permitted to participate on the same terms as other Corporation
employees who meet applicable eligibility criteria, subject to any legal
limitations on the amount that may be contributed or the benefits that may be
payable under the plans.
BENEFITS. The Corporation provides certain other benefits to the executive
officers which did not exceed 10% of salary and bonus for fiscal 2005.
CHIEF EXECUTIVE OFFICER'S 2005 COMPENSATION. The Compensation Committee
recommends Mr. Lowery's salary and bonus in the same manner as discussed above
for other executives. In establishing the elements of Mr. Lowery's compensation
for 2005, the Compensation Committee made an overall assessment of Mr. Lowery's
leadership in establishing the Corporation's long-term and short-term strategic
goals. Mr. Lowery's total compensation reflects these competitive issues and the
Corporation's and FFB's performance for 2005 and the past five years. In making
its recommendation, the Compensation Committee analyzed: (i) comparable
compensation levels of comparable peers in the same geographical location, (ii)
five independent sources regarding appropriate salary increases, (iii) inflation
adjustments, and (iv) job performance.
MEMBERS OF THE 2005 COMPENSATION COMMITTEE
Patrick O'Leary, Compensation Committee Chairman o
Anton H. George o Ronald K. Rich
SUMMARY COMPENSATION TABLE
The following table sets forth for each of the last three fiscal years the cash
compensation paid by the Corporation, as well as certain other compensation paid
or awarded during those years, to the Chief Executive Officer and each of the
next four most highly compensated executive officers of the Corporation or FFB
in all capacities in which they served.
5
NAME AND ANNUAL COMPENSATION(1)
PRINCIPAL POSITION YEAR SALARY(2) BONUS(3) ALL OTHER COMPENSATION(4)
------------------------------------------------------------------------------------------------------
DONALD E. SMITH 2005 $553,457 $150,000 $396,000
President & Chairman 2004 $535,230 $150,000 $375,600
of the Corporation; 2003 $519,630 $150,000 $402,225
Chairman of FFB
NORMAN L. LOWERY 2005 $457,434 $150,000 $334,695
Vice Chairman, CEO 2004 $446,700 $150,000 $317,695
& Vice President of the 2003 $429,944 $150,000 $300,395
Corporation; President
& CEO of FFB
MICHAEL A. CARTY 2005 $173,590 $ 19,500 $ 79,300
CFO, Secretary & 2004 $163,326 $ 19,000 $ 75,200
Treasurer of the 2003 $144,935 $ 16,000 $ 71,100
Corporation; Sr. Vice
President of FFB
RICHARD O. WHITE 2005 $143,593 $ 14,000 $ 71,040
Sr. Vice President 2004 $139,638 $ 16,000 $ 74,700
of FFB 2003 $134,280 $ 16,000 $ 70,600
THOMAS S. CLARY 2005 $153,622 $ 15,000 $ 66,424
Sr. Vice President 2004 $150,151 $ 16,000 $ 70,244
of FFB & COO 2003 $141,215 $ 16,000 $ 66,844
(1) While officers enjoy certain perquisites, such perquisites do not exceed the
lesser of $50,000 or 10% of such officer's salary and bonus and are not required
to be disclosed by applicable rules of the Securities and Exchange Commission.
(2) Salary reflects base compensation and income earned in the form of
director's fees from the Corporation or its affiliate banks during the indicated
calendar years.
(3) The bonus amounts are payable pursuant to determinations made by the
Compensation Committee of the Corporation, as described in the Compensation
Committee Report and as approved by the Board of Directors.
(4) These amounts represent the amount awarded under the 2005 Plan. Payment of
these amounts will not begin until the earlier of January 1, 2015, or the
January 1 immediately following the year in which the participant reaches age
65. These payments generally will be annuitized over a 180-month period.
Interest accrues on these amounts at 3.50% from January 1, 2010, until payment
begins. When payment begins, interest will accrue on the unpaid portion at a
7.00% annual rate compounded monthly. The 2005 Plan requires vesting over a
five-year period. As such Mr. Clary, with three full years of vesting, is
entitled to receive only 60% of his awarded amount at December 31, 2005. See the
discussion under "Employment Agreements" concerning payments resulting from a
"change in control," as defined in the 2005 Plan.
These amounts also include Corporation payments for the years noted on behalf of
the above-named individuals (except Mr. Smith) pursuant to a life insurance
program (the "Life Insurance Program") for the executive officers of FFB. Under
the Life Insurance Program, FFB purchased a life insurance policy on behalf of
each executive officer of FFB. The policy is owned by the individual and will be
paid at age 65 for those who were 55 or older, and at age 60 for those who are
less than 55 years of age at the time the program was started. The annual cost
of this insurance for those reported (except for Mr. Smith) was as follows:
$4,895 for Mr. Lowery; $2,344 for Mr. Clary; $1,200 for Mr. Carty; and $1,200
for Mr. White.
Allocations to the named individual's respective account in the Corporation's
Employee Stock Ownership Plan for 2005, which are properly included in this
column, were not calculable as of the date of this Proxy Statement. Such amounts
for 2004 were as follows: $11,565 for Mr. Smith; $11,565 for Mr. Lowery; $9,908
for Mr. Carty; $8,798 for Mr. Clary; and $8,780 for Mr. White.
EMPLOYEE BENEFIT PLANS
SAVINGS PLAN. The First Financial Corporation Employees' 401(k) Savings Plan
(the "Savings Plan") is a qualified salary reduction plan within the meaning of
Code Section 401(k). Under the Savings Plan all eligible employees may make
before-tax contributions from their compensation to the Savings Plan Trust for
their accounts. Subject to limits established under the Internal Revenue Code,
contributions may be directed in any whole percentage between 1% and 15% of the
employee's base compensation and certain variable pay including overtime pay,
bonuses, commissions, but excluding welfare benefits, deferred compensation,
reimbursements and expense allowances. Amounts contributed to the Savings Plan
may be invested in certain investment choices.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN. The First Financial Corporation
Supplemental Executive Retirement Plan (the "SERP") provides supplemental
retirement benefits for a select group of management or highly compensated
employees to help recompense the employees for benefits lost due to the
imposition of Code limitations on benefits under the First Financial Corporation
Employees'
6
Pension Plan. Amounts payable under the SERP are offset by amounts payable under
the First Financial Executives' Deferred Compensation Plan. The SERP was frozen
effective December 31, 2004 to exempt all amounts under the SERP from Code
Section 409A. The Board adopted The First Financial Corporation 2005
Supplemental Executive Retirement Plan (the "2005 SERP") as a replacement plan
effective January 1, 2005. The 2005 SERP complies with Code Section 409A.
Amounts payable under the 2005 SERP will be offset by amounts payable under The
First Financial Corporation 2005 Executives' Deferred Compensation Plan.
EXECUTIVES' DEFERRED COMPENSATION PLAN. The First Financial Executives' Deferred
Compensation Plan (the "EDC Plan") permits a select group of management or
highly compensated employees to elect to defer compensation from the employers
without regard to the limitations imposed by the Internal Revenue Code on the
benefits which may accrue to those employees under the First Financial
Corporation Employee Stock Ownership Plan and to provide supplemental retirement
benefits to help recompense the employees for benefits lost due to the
imposition of Code limitations on the First Financial Corporation Employee Stock
Ownership Plan. Amounts payable under the EDC Plan will offset amounts payable
under the SERP. The EDC Plan was drafted to comply with Code Section 409A. The
EDC Plan was frozen effective December 31, 2004 to exempt all amount under the
SERP from Code Section 409A. The Board adopted The First Financial Corporation
2005 Executives' Deferred Compensation Plan (the "2005 EDC Plan") as a
replacement plan effective January 1, 2005. The 2005 EDC Plan complies with Code
Section 409A. Amounts payable under the 2005 EDC Plan will offset amounts
payable under the 2005 SERP.
EMPLOYEE STOCK OWNERSHIP PLAN. The Corporation sponsors the First Financial
Corporation Employee Stock Ownership Plan (the "ESOP") and the First Financial
Corporation Employees' Pension Plan (the "Pension Plan") for the benefit of
substantially all of the employees of the Corporation and its subsidiaries.
These plans constitute a "floor offset" retirement program, so that the Pension
Plan provides each participant with a minimum benefit which is offset by the
benefit provided by the ESOP.
Under the terms of the ESOP, the Corporation or its subsidiaries, as
participating employers, may contribute Corporation common stock to the ESOP or
contribute cash to the ESOP, which will be primarily invested in the
Corporation's common stock. The amount of contributions, when they are made, is
determined by the Board of Directors of the Corporation. No participant
contributions are required or allowed under the ESOP. Participants have the
right to direct the voting of the shares of the Corporation's stock allocated to
their accounts under the ESOP on all corporate matters.
For the year ended December 31, 2005, the Corporation contributed 41,500 shares
of the Corporation's stock valued at $1,143,740 to the ESOP. The stock will be
allocated to the individual ESOP accounts of the participants effective as of
December 31, 2005, although no allocation to the individual accounts had been
made or calculated as of the date of mailing of this Proxy Statement.
DEFINED BENEFIT PLAN. The Pension Plan was adopted in conjunction with, but is
separate from, the ESOP. The monthly guaranteed minimum benefit under the
Pension Plan is reduced by the monthly benefit derived from the participant's
vested portion of his ESOP account balance, calculated by the actuary for the
Pension Plan as a single life annuity. The normal retirement benefit will begin
at age 65 and be paid monthly for as long as the participant lives.
The following table shows the estimated annual benefits payable under the
Pension Plan upon retirement at age 65 in 2005 for various periods of Benefit
Service at specified levels of remuneration. A participant's Final Average
Annual Compensation shown under the Pension Plan is generally based on the
salary and bonus set forth in the Summary Compensation Table.
ESTIMATED MINIMUM ANNUAL RETIREMENT BENEFIT
FINAL AVERAGE ANNUAL COMPENSATION(1)
YEARS OF
BENEFIT 300K
SERVICE 70K 100K 130K 160K 190K 220K 250K OR MORE
--------------------------------------------------------------------------------------------------------------------
10 $15,235 $23,185 $31,135 $ 39,085 $ 47,035 $ 54,985 $ 62,935 $ 76,185
20 30,470 46,370 62,270 78,170 94,070 109,970 125,870 152,370
30 38,705 59,555 80,405 101,255 122,105 142,955 163,805 198,555
40 39,323 61,148 82,973 104,798 126,623 148,448 170,273 206,648
(1) The amounts indicated in the chart will be offset by any ESOP benefit the
participant has. If the ESOP benefit is greater than the Pension Plan benefit,
then no benefit will be paid by the Pension Plan. To the extent the Pension Plan
benefit exceeds the ESOP benefit, such excess will be paid by the Pension Plan.
The estimated total annual benefits, as determined under the Pension Plan's
formula, payable upon retirement at age 65 for the named executive officers in
the Summary Compensation Table are as follows: Donald E. Smith, $0.00, Norman L.
Lowery, $4,882.14, Michael A. Carty, $0.00, Richard O. White, $0.00, and Thomas
S. Clary, $3,228.74. Because ESOP data for 2005 was not available at the time of
this filing, 2004 ESOP and Pension Plan data was used to calculate these
amounts.
The estimated credited years of service for Donald E. Smith is 36 years, Norman
L. Lowery, 9 years, Michael A. Carty, 28 years, Richard O. White, 35 years, and
Thomas S. Clary, 3 years. The benefit amounts presented in the totals are annual
straight life annuity amounts without deduction for Social Security or other
offset amounts and without regard for the benefit limitations of the Internal
Revenue Code.
7
EMPLOYMENT CONTRACTS
EMPLOYMENT AGREEMENT. FFB entered into an Employment Agreement with Norman L.
Lowery, its President and Chief Executive Officer, effective January 1, 2006.
The Employment Agreement is a five-year agreement which may be extended each
year by the board of directors of FFB for an additional one-year term. Under the
Employment Agreement, Mr. Lowery receives an annual salary equal to his current
salary, which is $433,908 for 2006, subject to increases approved by the Board
of Directors, and is entitled to participate in other bonus and fringe benefit
plans available to the Corporation's and FFB's employees.
If Mr. Lowery is terminated "without cause" or if he terminated for "good
reason," and such termination does not occur within 12 months after a "change in
control" (as such terms are defined in the Employment Agreement), he would
receive an amount equal to the sum of his base salary and bonuses through the
end of the then-current term of the Employment Agreement. He is entitled to
receive cash reimbursements in an amount equal to his cost of obtaining all
benefits which he would have been eligible to participate in or receive though
the term of the Employment Agreement.
If Mr. Lowery is terminated for other than "just cause" or is constructively
discharged and this occurs within 12 months following a change in control, he
would be entitled to an amount equal to the greater of the compensation and
benefits described above if the termination did not occur within 12 months
following a change in control; or, the product of 2.99 times the sum of (i) his
base salary in effect as of the date of the change in control; (ii) an amount
equal to the bonuses received by or payable to him in or for the calendar year
prior to the year in which the change in control occurs; and (iii) cash
reimbursements in an amount equal to his cost of obtaining for a period of three
years, beginning on the date of termination, all benefits which he was eligible
to participate in or receive. Mr. Lowery is also entitled to the payment
provided for in the paragraph if a change in control occurs that was not
approved by a majority of the Board of Directors.
If Mr. Lowery qualifies as a "key employee" at the time of his separation from
service, the Corporation may not make certain payments earlier than six months
following the date of the his Separation from Service (or, if earlier, the date
of his death). Payments to which Mr. Lowery would otherwise be entitled during
the first six months following the date of his separation from service will be
accumulated and paid to Mr. Lowery on the first day of the seventh month
following his separation from service.
If as a result of a change in control Mr. Lowery becomes entitled to any
payments from FFB which are determined to be payments subject to the Code
Section 280G, the amount due will be increased to include payment equal to the
amount of excise tax imposed under Sections 280G and 4999 of the Code (the
"Excise Tax Payment") and the amount necessary to provide the Excise Tax Payment
net of all income, payroll and excise taxes.
LONG-TERM INCENTIVE PLANS. For purposes of the Plans, if Mr. Smith is terminated
within 12 months following a change in control, for reasons other than for
"cause," "disability" or death, he will be paid the vested account balance under
the 2001 and 2005 Long-Term Incentive Plans as of December 31, 2004 plus the
"projected amount" under both Plans. The applicable amount shall be paid in one
single sum, for each of the Plans, within 180 days following termination.
For purposes of the Plans, if Mr. Lowery is terminated within 12 months
following a change in control, for reasons other than for "cause," "disability"
or death, he will be paid the vested account balance under both Plans as of
December 31, 2004 plus the "projected amount" under both Plans. The applicable
amount shall be paid in a single lump sum, for each of the Plans, within 180
days following termination.
If as a result of a change in control Messrs. Smith or Lowery become entitled to
any payments from the Corporation or FFB which are determined to be payments
subject to the "golden parachute" rules of the Code, the amount due will be
increased to include payment equal to the amount of excise tax imposed under
Sections 280G and 4999 of the Code (the "Excise Tax Payment") and the amount
necessary to provide the Excise Tax Payment net of all income, payroll and
excise taxes.
TRANSACTIONS WITH MANAGEMENT
Directors and principal officers of the Corporation and their associates were
customers of, and have had transactions with, the Corporation and its subsidiary
banks in the ordinary course of business during 2005. Comparable transactions
may be expected to take place in the future.
During 2005 various directors and officers of the Corporation and their
respective associates were indebted to the subsidiary banks from time to time.
These loans were made in the ordinary course of business on substantially the
same terms, including interest rates and collateral, as those prevailing at the
time for similar transactions with other persons and did not involve more than
the normal risk of collectability or present other unfavorable features. Loans
made to directors and executive officers are in compliance with federal banking
regulations and thereby are exempt from the insider loan prohibitions included
in the Sarbanes-Oxley Act of 2002.
The law offices of B. Guille Cox, Jr., in which Mr. Cox is a partner, were paid
legal fees of approximately $73,000 by the Corporation and its subsidiaries for
the fiscal year ending December 31, 2005. In addition, during 2005, Hendrich
Abstract Co., Inc. received fees in connection with mortgage loans made by First
Financial Bank N.A., in the amount of approximately $200,000. Mr. Cox owns
one-third of Hendrich Abstract Co., Inc., and his spouse is the Vice President
of Hendrich Abstract Co., Inc.
COMPARATIVE PERFORMANCE GRAPH
The following graph compares cumulative total shareholder return on the
Corporation's common stock over the last five fiscal years with the returns of
(i) the Russell 2000 Index, comprised of the smallest 2000 companies of the
Russell 3000 Index which includes the 3000 largest market capitalization
corporations, and (ii) the SNL $1B--$5B Bank Index developed by SNL Securities
LC which includes all bank stocks with total assets in this size range. The
graph assumes $100.00 was invested on January 1, 2000 in the Corporation's
common stock and in each of the indices shown, and the reinvestment of all
dividends.
8
FIRST FINANCIAL CORPORATION
TOTAL RETURN PERFORMANCE
PERIOD ENDING
INDEX 12/31/00 12/31/01 12/31/02 12/31/03 12/31/04 12/31/05
--------------------------------------------------------------------------------------------------------------------------
First Financial Corporation $100.00 $141.16 $160.73 $203.22 $243.08 $192.97
Russell 2000 100.00 102.49 81.49 120.00 142.00 231.38
SNL $1B-$5B Bank Index 100.00 121.50 140.26 190.73 235.40 148.46
REPORT OF THE AUDIT COMMITTEE
In accordance with its written charter adopted by the Board of Directors, the
Audit Committee of the Board ("Committee") assisted the Board in fulfilling its
responsibility for oversight of the quality and integrity of the accounting,
auditing and financial reporting practices of the Corporation. All of the
members of the Committee are independent, as defined in the Corporation's
listing requirements, from management and the Corporation. During the current
year, the Committee met five times, and the Committee chair, as representative
of the Committee, discussed the interim financial information contained in each
quarterly earnings announcement with the CFO, controller and independent
auditors prior to public release.
In discharging its oversight responsibility as to the audit process, the
Committee obtained from the independent auditors a formal written statement
describing all relationships between the auditors and the Corporation that might
bear on the auditors' independence consistent with Independence Standards Board
Standard No. 1, "Independence Discussions with Audit Committees," discussed with
the auditors any relationships that may impact their objectivity and
independence and satisfied itself as to the auditors' independence. The
Committee also discussed with management, the internal auditors and the
independent auditors the quality and adequacy of the Corporation's internal
controls and the internal audit functions organization, responsibilities, budget
and staffing. The Committee reviewed both with the independent and internal
auditors their audit plans, audit scope and identification of audit risks.
The Committee discussed and reviewed with the independent auditors all
communications required by generally accepted auditing standards, including
those described in Statement on Auditing Standards No. 61, as amended,
"Communication with Audit Committees," and, with and without management present,
discussed and reviewed the results of the independent auditors' examination of
the financial statements. The Committee also discussed the results of the
internal audit examinations.
The Committee reviewed and discussed the audited financial statements of the
Corporation as of and for the year ended December 31, 2005, with management and
the independent auditors. Management has the responsibility for the preparation
of the Corporation's financial statements and the independent auditors have the
responsibility for the examination of those statements.
Based on the above-mentioned review and discussions with management and the
independent auditors, the Committee recommended to the Board that the
Corporation's audited financial statements be included in its Annual Report on
Form 10-K for the year ended December 31, 2005, for filing with the Securities
and Exchange Commission.
Anton H. George, Audit Committee Chairman Patrick O'Leary Thomas T. Dinkel
PRINCIPAL ACCOUNTANT FEES
FEES PAID TO CROWE CHIZEK AND COMPANY LLC
The following table sets forth the aggregate fees billed by Crowe Chizek and
Company LLC ("Crowe Chizek") for audit services rendered in connection with the
consolidated financial statements and reports for fiscal year 2005 and fiscal
year 2004 and for other services rendered during fiscal year 2005 and fiscal
year 2004 on behalf of the Corporation and its subsidiaries, as well as all
out-of-pocket costs incurred in connection with these services, which have been
billed to the Corporation:
FISCAL 2005 FISCAL 2004
----------- -----------
Audit Fees $280,000 $312,000
Audit Related Fees 4,150 3,950
Tax Fees 47,590 60,075
All Other Fees 3,250 202,820
-------- --------
Total $334,990 $578,845
9
AUDIT FEES: Consists of fees billed for professional services rendered
for (i) the audit of the Corporation's consolidated financial statements, (ii)
the integrated audit over internal controls as required under Section 404 of the
Sarbanes-Oxley Act applicable in 2004, (iii) the review of the interim condensed
consolidated financial statements included in quarterly reports, (iv) the
services that are normally provided by Crowe Chizek in connection with statutory
and regulatory filings or engagements, and (v) the attest services, except those
not required by statute or regulation.
AUDIT-RELATED FEES: Consists of fees billed for assurance and related
services that are reasonably related to the performance of the audit or review
of the Corporation's consolidated financial statements and are not reported
under "Audit Fees." These services include the review of management's
attestation and performance of agreed upon procedures for student loan servicing
for both 2005 and 2004.
TAX FEES: Consists of tax compliance/preparation and other tax
services. Tax compliance/preparation consists of fees billed for professional
services related to federal and state tax compliance, assistance with tax audits
and appeals and assistance related to the impact of mergers, acquisitions and
divestitures on tax return preparation. Other tax services consist of fees
billed for other miscellaneous tax consulting and planning.
ALL OTHER FEES: All other fees include consultation regarding
implementation of a real estate investment trust (REIT) and consultation and
assistance with the compliance with Sarbanes-Oxley Section 404 (SOX 404) in
2004, and SOX 404 software licensing fee in 2005.
AUDIT COMMITTEE PRE-APPROVAL OF AUDIT AND PERMISSIBLE NON-AUDIT SERVICES OF
INDEPENDENT AUDITORS
All of the fees and services described above under "audit fees," "audit-related
fees," "tax fees" and "all other fees" were pre-approved by the Audit Committee.
The Audit Committee pre-approves all audit and permissible non-audit services
provided by the independent auditors. These services may include audit services,
audit-related services, tax services and other services. The Audit Committee has
adopted a policy for the pre-approval of services provided by the independent
auditors. Under the policy, pre-approval is generally provided for up to one
year and any pre-approval is detailed as to the particular service or category
of services and is subject to a specific budget. In addition, the Audit
Committee may also pre-approve particular services on a case-by-case basis. For
each proposed service, the independent auditor is required to provide detailed
back-up documentation at the time of approval. The Audit Committee may delegate
pre-approval authority to one or more of its members. Such a member must report
any decisions to the Audit Committee at the next scheduled meeting.
SECURITY OWNERSHIP OF PRINCIPAL SHAREHOLDERS
The following table contains information concerning individuals or entities who,
to the knowledge of the Corporation, beneficially owned on March 15, 2006, more
than 5% of the common stock of the Corporation:
NAME AND ADDRESS OF BENEFICIAL OWNER SHARES BENEFICIALLY OWNED PERCENT OF CLASS
---------------------------------------------------------------------------------------------------------------------
First Financial Corporation 819,088(1) 6.14%
Employee Stock Ownership Plan ("ESOP")
One First Financial Plaza
Terre Haute, Indiana 47807
T. Rigasco Trust Co-Trustees: 960,458 7.20%
National City Bank of Indiana
One National City Center
Indianapolis, Indiana 46255
Jack R. Snyder
One American Square
Indianapolis, Indiana 46282
Princeton Mining Company 1,314,714 9.86%
State Road 46 South
Terre Haute, Indiana 47803
(1) Represents shares held in Trust by the Corporation's subsidiary, First
Financial Bank N.A.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities and Exchange Act of 1934 requires the
Corporation's directors and executive officers, and persons who own more than
ten percent of a registered class of the Corporation's equity securities, to
file with the Securities and Exchange Commission initial reports of ownership
and reports of changes in ownership of Corporation common stock and other equity
securities of the Corporation. Officers, directors and greater than ten percent
shareholders are required by SEC regulations to furnish the Corporation with
copies of all Section 16(a) forms they file. To the best knowledge of the
Corporation, during the most recent fiscal year all officers, directors and
greater than ten percent beneficial owners of the Corporation timely filed all
statements of beneficial ownership required to be filed with the SEC.
10
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Audit Committee appointed Crowe Chizek and Company LLC, as independent
accountants to audit the books, records and accounts of the Corporation for 2005
and 2004. The Audit Committee anticipates that it will appoint an independent
public accountant to audit the books, records, and accounts of the Corporation
for 2006 in April, 2006. Representatives of Crowe Chizek are expected to be in
attendance at the annual meeting and will be provided an opportunity to make a
statement should they desire to do so and to respond to appropriate inquiries
from the shareholders.
SHAREHOLDER COMMUNICATION WITH THE BOARD OF DIRECTORS
Any shareholder who desires to contact the Chairman of the Board of Directors or
the other members of the Board of Directors, or who desires to make a
recommendation of a director candidate for consideration by the
Governance/Nominating Committee, may do so electronically by sending an email to
the following address: directors@ffc-in.com. Alternatively, a shareholder can
contact the Chairman of the Board or the other members of the Board by writing
to: Chairman, First Financial Corporation, P.O. Box 540, Terre Haute, IN 47808.
The Governance/Nominating Committee will consider any candidate submitted by a
shareholder in the manner described above. Communications received
electronically or in writing are distributed to the Chairman of the Board or the
other members of the Board as appropriate depending on the facts and
circumstances outlined in the communication received. For example, if any
complaints regarding accounting, internal accounting controls and auditing
matters are received, then they will be forwarded by the Secretary to the
Chairman of the Audit Committee for review.
SHAREHOLDERS PROPOSALS
Any proposals which shareholders desire to present at the 2007 Annual Meeting
must be received by the Corporation at its principal executive offices on or
before November 15, 2006 to be considered for inclusion in the Corporation's
proxy material for that meeting. The proxy rules of the Securities and Exchange
Commission govern the content and form of stockholder proposals and the minimum
stock holding requirement. All proposals must be a proper subject for action at
the 2007 Annual Meeting. In addition, any proposal submitted for consideration
at the 2007 Annual Meeting but not for inclusion in the Corporation's proxy
material for that meeting must be received no later than January 29, 2007 or
such proposal will be considered untimely.
If notice of any other shareholder proposal intended to be presented at the 2007
Annual Meeting is not received by the Corporation on or before February 6, 2007,
the proxies will have discretionary authority to vote on the matter. All
proposals and notifications should be addressed to the Secretary of the
Corporation.
ANNUAL REPORT TO SHAREHOLDERS
The 2005 Annual Report to Shareholders, containing financial statements for the
year ended December 31, 2005, and other information concerning the operations of
the Corporation is enclosed herewith, but is not to be regarded as proxy
soliciting material.
UPON WRITTEN REQUEST, THE CORPORATION WILL PROVIDE WITHOUT CHARGE TO EACH
REQUESTING SHAREHOLDER, A COPY OF THE CORPORATION'S ANNUAL REPORT ON FORM 10-K,
WHICH IS REQUIRED TO BE FILED WITH THE SECURITIES AND EXCHANGE COMMISSION FOR
THE YEAR ENDED DECEMBER 31, 2005. ADDRESS ALL REQUESTS TO:
MICHAEL A. CARTY, SECRETARY & TREASURER
FIRST FINANCIAL CORPORATION
ONE FIRST FINANCIAL PLAZA o P.O. BOX 540 o TERRE HAUTE, INDIANA 47808
OTHER MATTERS
The Annual Meeting is called for the purposes set forth in the Notice. The Board
of Directors of the Corporation does not know of any matters for action by
shareholders at such Annual Meeting other than the matters described in the
notice. However, the enclosed Proxy will confer discretionary authority with
respect to matters which were not known to the Board of Directors at the time of
the printing hereof and which may properly come before the Annual Meeting. It is
the intention of the persons named in the Proxy to vote pursuant to the Proxy
with respect to such matters in accordance with their best judgment.
By Order of the Board of Directors
/S/ Donald E. Smith
DONALD E. SMITH
Chairman of the Board and President
FIRST FINANCIAL CORPORATION
ONE FIRST FINANCIAL PLAZA
P.O. BOX 540
TERRE HAUTE, INDIANA 47808
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints James E. Brown and Richard J. Shagley, or
either of them as Proxies, each with the power to appoint his substitute, and
hereby authorizes them to represent and to vote, as designated below, all shares
of common stock of First Financial Corporation which the undersigned is entitled
to vote at the Annual Meeting of Shareholders to be held at One First Financial
Plaza, Terre Haute, Indiana on Wednesday, April 19, 2006, at 11:00 a.m. (local
time), or any adjournment thereof, on the following matters:
1. ELECTION OF DIRECTORS
A. [ ] For all nominees listed below for a three-year term to expire in
2009 (except as marked to the contrary below):
THOMAS T. DINKEL, NORMAN L. LOWERY, PATRICK O'LEARY
[ ] WITHHOLD AUTHORITY to vote for all nominees listed above.
B. [ ] For the nominee listed below for a one-year term to expire in 2007
(except as marked to the contrary below):
RONALD K. RICH
[ ] WITHHOLD AUTHORITY to vote for the nominee listed above:
(INSTRUCTIONS: To withhold authority to vote for any individual,
strike a line through the nominees' name in the list above.)
2. In their discretion, on such matters as may properly come before the
meeting.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS DIRECTED OR IF NO DIRECTION
IS INDICATED, WILL BE VOTED FOR ALL THE NOMINEES LISTED ABOVE.
Please sign exactly as name appears below. If there are two or more
owners, both must sign. When signing as attorney, executor, administrator,
trustee, or guardian, please give full title as such. If a corporation, please
sign in full corporate name by President or other authorized officer. If a
partnership, please sign in partnership name by authorized person.
Dated: , 2006 ---------------------------------------
------------------ (Signature)
---------------------------------------
(Signature, if held jointly)
Your vote is important. Please mark,
sign, and date and return this Proxy
promptly, using the enclosed envelope.