SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
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 ss.240.14a-11(c) or ss.240.14a-12
FIRST FINANACIAL CORP.
------------------------------------------------
(Name of Registrant as Specified In Its Charter)
Payment of Filing Fee (Check the appropriate box):
/_/ $125 per Exchange Act Rule 0-11(c)(1)(ii), or 14a-6(i)(1), or
14a-6(i)(2), or Item 22(a) (2) of Schedule 14A.
/_/ $500 per each party to the controversy pursuant to
Exchange Act Rule 14a-6(i)(3).
/_/ Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0--11 (Set forth the amount on which the filing
fee is calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
/_/ Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which
the offsetting fee was paid previously. Identify the previous
filing by registration statement number or the Form or Schedule
and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration No.:
3) Filing Party:
4) Date Filed:
FIRST FINANCIAL CORP.
180 WASHINGTON STREET
PROVIDENCE, RHODE ISLAND 02903
April 9, 1997
To Our Shareholders:
On behalf of the Board of Directors, I cordially invite you to attend the
1997 Annual Meeting of Shareholders of First Financial Corp. The Annual Meeting
will begin at 3:00 p.m. on Wednesday, May 14, 1997, at the Squantum Association,
947 Veterans Memorial Parkway, East Providence, Rhode Island. The formal notice
of the Annual Meeting appears on the next page.
The attached proxy statement describes the matters that we will expect to
act upon at the Annual Meeting. Shareholders who are present at the Annual
Meeting will also have an opportunity to ask questions of broad interest to
First Financial Corp. shareholders.
It is extremely important that your views be represented whether or not you
are able to be present at the Annual Meeting. Please sign and date the enclosed
proxy card and return it promptly in the postage pre-paid envelope. The Board of
Directors recommends that shareholders vote FOR Items 1 and 2.
We are gratified by our shareholders continued interest in First Financial
Corp. and we are extremely pleased that in the past so many of you have voted
your shares either in person or by proxy. We hope that you will continue to
support your Corporation and urge you to return your proxy card as quickly as
possible.
Sincerely,
/s/Patrick J. Shanahan, Jr.
-------------------------------
PATRICK J. SHANAHAN, JR.
President and
Chief Executive Officer
FIRST FINANCIAL CORP.
180 WASHINGTON STREET
PROVIDENCE, RHODE ISLAND 02903
----------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 14, 1997
----------
Notice is hereby given that the regular Annual Meeting of Shareholders of
FIRST FINANCIAL CORP., a Rhode Island corporation (the "Company"), will be held
at the Squantum Association, 947 Veterans Memorial Parkway, East Providence,
Rhode Island on Wednesday, May 14, 1997, at 3 p.m. for the following purposes:
1. To elect three Directors of the Company, each of whom will serve
for a three-year term;
2. To ratify and appoint Arthur Andersen LLP as the Company's
independent public accountants for the fiscal year ending December
31, 1997; and
3. To transact any other business which may properly come before the
meeting, or any adjournment thereof.
The close of business on March 24, 1997 has been fixed as the record date
for determination of stockholders entitled to notice of and to vote at the
Annual Meeting. The bylaws require that the holders of a majority in interest of
all stock issued, outstanding and entitled to vote be present in person or
represented by proxy at the Annual Meeting in order to constitute a quorum for
the transaction of business.
By order of the Board of Directors
/s/ Willim F. Hague, Jr.
------------------------------
WILLIAM F. HAGUE, JR.
Secretary
First Financial Corp.
Providence, Rhode Island
April 9, 1997
FIRST FINANCIAL CORP.
180 WASHINGTON STREET
PROVIDENCE, RHODE ISLAND 02903
----------
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
MAY 14, 1997
----------
GENERAL INFORMATION
This Proxy Statement is furnished in connection with the solicitation of
proxies to be used at the Annual Meeting of Shareholders of First Financial
Corp. (the "Company") to be held on May 14, 1997 and at any adjournments
thereof. Shareholders of record at the close of business on March 24, 1997 will
be entitled to vote at the Annual Meeting. This Proxy Statement and the
accompanying form of proxy are first being mailed or given to holders of common
stock, par value $1.00 per share, of the Company (the "Common Stock") on or
about April 9, 1997.
The financial statements for the Company for the fiscal year ended December
31, 1996 are contained in the Annual Report to First Financial Corp.
Shareholders for the year ended December 31, 1996 (the "Annual Report"). A copy
of the Company's Annual Report has been previously mailed or mailed
simultaneously herewith to all Shareholders.
Proxies in the form enclosed are solicited by the Board of Directors of the
Company. Any stockholder giving a proxy in the enclosed form has the power to
revoke it at any time before it is exercised. A stockholder's right to revoke
his proxy is not limited by, or subject to, compliance with any specified formal
procedure. A stockholder may revoke a proxy by attending the meeting and voting
in person. Any such proxy, if received in time for voting and not revoked, will
be voted at the Annual Meeting in accordance with the instructions of the
shareholder. If no instructions are given on the proxy, the proxy will be voted
(i) FOR the election, as directors of the Company, of the nominees named within,
and (ii) FOR the ratification and appointment of Arthur Andersen LLP as the
Company's independent public accountants for the fiscal year ending December 31,
1997. At present, management knows of no additional matters to be presented at
the Annual Meeting, but if other matters are presented, the persons named in the
proxy and acting thereunder will vote or refrain from voting in accordance with
their best judgment pursuant to the discretionary authority conferred by the
proxy.
A proxy may be revoked at any time prior to its exercise (i) by submitting a
written notice, addressed to William F. Hague, Jr., at the principal office of
the Company, revoking such proxy, or (ii) in open meeting prior to the taking of
a vote. Any shareholder of the Company entitled to vote at the Annual Meeting
may attend the Annual Meeting and vote in person on any matter presented for a
vote to the shareholders of the Company at the Annual Meeting, whether or not
such shareholder has previously given a proxy.
Solicitation of proxies will be made initially by mail. Proxies may also be
solicited personally, by telephone or by facsimile transmission by the
directors, officers and other employees of the Company or of the Company's
subsidiary, First Bank and Trust Company (the "Bank"). The Company will bear all
costs and expenses incurred in connection with this solicitation, including the
cost of printing and mailing these proxy materials and the expenses, charges and
fees of brokers, custodians, nominees and other fiduciaries who, at the request
of the management of the Company, mail material to or otherwise communicate with
the beneficial owners of the shares of Common Stock of the Company held of
record by such brokers, custodians, nominees or other fiduciaries.
Written notice of the results of the voting at the Annual Meeting or
adjournments thereof will not be mailed to shareholders, but will be available
upon request, without charge. The Company maintains its principal executive
offices at 180 Washington Street, Providence, Rhode Island 02903, and its
telephone number is (401) 421-3600.
VOTING SECURITIES
As of March 24, 1997, the record date for the Annual Meeting, all of the
1,261,241 shares of Common Stock of the Company outstanding are entitled to vote
at the Annual Meeting. Fractional shares are not entitled to be voted, but each
full share of Common Stock of the Company entitles the holder thereof to one
vote on all matters properly brought before the Annual Meeting. At present, the
Common Stock is the only class of capital stock of the Company that is issued
and outstanding.
The following table provides information regarding persons or organizations
known by the Company to be the beneficial owners of more than five percent
(5.0%) of the outstanding shares of Common Stock of the Company as of March 20,
1997.
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
BENEFICIAL PERCENT NOTES OF
NAME OF BENEFICIAL OWNER OWNERSHIP(1) OF CLASS EXPLANATION
------------------------ ------------ -------- -----------
<S> <C> <C> <C>
Wellington Management Company, LLP 120,000 9.5% (2)
Ricci Associates 99,700 7.9% (3)
John Hancock Mutual Life Insurance Company 95,000 7.5% (4)
William A. Carroll (deceased) 89,450 7.1% (5)
John Sheldon Clark 83,000 6.6% (6)
Patrick J. Shanahan, Jr. 78,521 6.2% (7)
</TABLE>
- --------
NOTES OF EXPLANATION
(1) In accordance with Rule 13d-3 under the Securities Exchange Act of 1934,
shares are shown as beneficially owned if the person named in the table has
or shares the power to vote or to direct the voting of, or the power to
dispose or to direct the disposition of such shares. Inclusion of shares in
the table does not necessarily mean that the persons named have any economic
interest in shares set opposite their respective names.
(2) All of such shares are held by Wellington Management Company LLP ("WMC") in
its capacity as investment adviser for clients of WMC. WMC has shared power
to vote 80,000 of such shares and sole power to vote 40,000 of such shares.
WMC's principal address is 75 State Street, Boston, Massachusetts 02109.
(3) Ricci Associates is a Rhode Island general partnership with an address of
201 Lorimar Avenue, Providence, Rhode Island 02906.
(4) Includes (i) 94,000 shares held by the John Hancock Bank and Thrift
Opportunity Fund, an indirect wholly-owned subsidiary of John Hancock Mutual
Life Insurance Company ("JHMLIC") and a closed-end diversified management
company registered under Section 8 of the Investment Company Act of 1940;
and (ii) 1,000 shares held by the Financial Industries Fund, an indirect
wholly-owned subsidiary of JHMLIC and an open-end diversified management
company registered under Section 8 of the Investment Company Act of 1940.
All of such shares are held pursuant to Advisory Agreements with John
Hancock Advisors, Inc. ("JHA"), an indirect subsidiary of JHMLIC and
affiliate of each of the funds. Pursuant to the Advisory Agreements, JHA has
sole voting power over all such shares.
(5) Includes 10,000 shares owned by Mr. Carroll's wife. Mr. Carroll was Chairman
of the Board of Directors of the Company until his death in February 1997.
(6) Includes (i) 25,000 shares held by the "Trust under the will of Charles M.
Clark, Jr. for the benefit of Valer C. Austin", of which Mr. Clark is
trustee and (ii) 17,500 shares held by the "Trust under the will of Charles
M. Clark, Jr. for the benefit of John Sheldon Clark", of which Mr. Clark is
trustee. As trustee of both trusts, Mr. Clark has sole voting power over all
of such shares. Mr. Clark resides at 6102 East Mockingbird, #622, Dallas,
Texas 75214.
(7) Includes 8,150 shares owned in the name of either Mr. Shanahan or Margaret
F. Shanahan, his wife and 500 shares owned by Margaret F. Shanahan
separately. Mr. Shanahan is President, Chief Executive Officer and a
Director of the Company and Chairman, President, Chief Executive Officer and
a Director of the Bank. See "Continuing Directors" for Mr. Shanahan's
biography.
2
ELECTION OF DIRECTORS
(PROPOSAL NUMBER 1)
The By-laws of the Company stipulate that the business and affairs of the
Company shall be managed by a Board of Directors (the "Company Board"), which
shall consist of not less than three nor more than thirteen individuals divided
into three classes as nearly equal in size as possible. The directors of the
Company are elected by the shareholders of the Company for staggered three year
terms or until their successors are elected and qualified. Currently the members
of the Company Board are also the members of the Board of Directors of the Bank
(the "Bank Board"). The directors of the Bank are elected annually for a one
year term.
The Company Board, following the recommendation of the Nominating Committee,
has recommended the following three nominees (all of whom are currently
Directors) to fill the three positions. If elected, each of Messrs. Coloian,
Nazarian and Shields will hold office for a three year term until the Annual
Meeting to be held in the year 2000.
NOMINEES FOR DIRECTORS OF THE COMPANY
The following table sets forth the names of the three nominees for Director
of the Company, their principal occupations, ages and periods of service as
Directors of the Company. Information regarding their ownership of shares of
Common Stock of the Company as of March 20, 1997 may be found at "Security
Ownership of Certain Beneficial Owners and Management".
<TABLE>
<CAPTION>
DIRECTOR OF
THE
CLASS NAME AGE PRINCIPAL OCCUPATION COMPANY SINCE
- ----- ---- --- -------------------- -------------
<S> <C> <C> <C> <C>
I Artin Coloian, Esq. ........ 32 Executive Assistant to the Mayor of 1996
Providence, RI
I John Nazarian, Ph.D. ........ 64 President, Rhode Island College 1996
I William P. Shields .......... 59 Commissioner, Rhode Island State Board 1993
of Elections
</TABLE>
The following biographical information is provided for the three nominees as
indicated above:
ARTIN COLOIAN, ESQ.
Mr. Coloian was appointed to the Company Board in June 1996, to fill the
unexpired term formerly held by Edward W. Ricci. Mr. Coloian has been Executive
Assistant to the Mayor of Providence, Rhode Island since August 1993. Prior to
such time, Mr. Coloian was an Executive Assistant to Senator John Chafee, United
States Senator from the State of Rhode Island.
JOHN NAZARIAN, PH.D.
John Nazarian, Ph.D. was appointed to the Company Board in June 1996. Dr.
Nazarian has been the President of Rhode Island College since May 1990. Dr.
Nazarian is a Director of Nazarian Corp., a California professional corporation.
WILLIAM P. SHIELDS
Mr. Shields has served as a Director of the Company since 1993. Since
December 1993, Mr. Shields has been a Commissioner of the Board of Elections of
the State of Rhode Island. From 1987 to 1994, Mr. Shields was the Vice President
of Bonnett Liquors. Mr. Shields served as a Deputy Director of Administration of
the Office of the Attorney General of Rhode Island from 1986 to 1992.
3
If at the time of the Annual Meeting any of the nominees should be unable to
serve or should decline to serve, the discretionary authority provided in the
proxies may be exercised to vote for a substitute or substitutes, who would be
designated by the Board of Directors of the Company, and would be elected to the
same class or classes as the nominees for whom they are substituted. The By-laws
of the Company provide that any shareholder of the Company may make nominations
for the election of Directors by providing written notice to the Secretary of
the Company not less than fourteen (14) days nor more than fifty (50) days prior
to any meeting of the shareholders at which election of directors has been
called.
An affirmative vote of a majority of the shares of Common Stock of the
Company represented in person or by proxy at the Annual Meeting is necessary for
the election of the individuals named above. There is no cumulative voting in
elections of directors of the Company. Unless otherwise specified, proxies will
be voted in favor of the nominated individuals.
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS THAT THE SHAREHOLDERS VOTE
"FOR" THE ELECTION OF THE NOMINEES LISTED ABOVE.
CONTINUING DIRECTORS
The following table sets forth certain information about those Directors of
the Company whose terms of office do not expire at the Annual Meeting and who
consequently are not nominees for re-election at the Annual Meeting.
<TABLE>
<CAPTION>
DIRECTOR OF TERM OF
THE OFFICE WILL
CLASS NAME AGE PRINCIPAL OCCUPATION COMPANY SINCE EXPIRE
- ----- ---- --- -------------------- ------------- ------
<S> <C> <C> <C> <C> <C>
II Patrick J. Shanahan, Jr. ... 52 President and Chief Executive 1980 1998
Officer of the Company and
Chairman, President and Chief
Executive Officer of the Bank
II Joseph V. Mega .............. 63 President, Crugnale Bakery 1994 1998
Providence, RI
III Raymond F. Bernardo ......... 79 Retired 1980 1999
III Joseph A. Keough, Esq. ..... 55 Attorney, Keough and Gearon 1980 1999
III Peter L. Mathieu, Jr., M.D. 72 Pediatrician 1980 1999
</TABLE>
Mr. Bernardo retired in 1995. Prior to such time, Mr. Bernardo served as
Chief Executive Officer of K.G.R. Realty Co. from 1970 until 1995. Mr. Bernardo
was also President and Chief Executive Officer of Providence Granite Co., Inc.
from 1947 through 1983.
Except as indicated above, each Director has been employed during the past
five years in his respective positions.
All of the above-named Directors of the Company are also Directors of the
Bank.
OTHER INFORMATION ABOUT THE BOARD AND ITS COMMITTEES
Attendance of Directors
The Company Board meets quarterly and the Bank Board meets monthly. Each
Board of Directors may have additional special meetings upon the request of the
Chairman of the Board, the President or any three members of their respective
Board of Directors. During the year ended December 31, 1996, the Company Board
met five (5) times and the Bank Board met eleven (11) times. In 1996, Carl H.
Rosati
4
attended 2 meetings of the Company Board and 3 meetings of the Bank Board prior
to his death in April 1996. In 1996, William A. Carroll attended 4 meetings of
the Company Board and 8 meetings of the Bank Board. Mr. Carroll failed to attend
one meeting of the Company Board and 3 meetings of the Bank Board because of
illness. Mr. Coloian and Dr. Nazarian were appointed to the Company Board and
the Bank Board in June 1996. Each has attended all meetings of the Company Board
and Bank Board subsequent to their appointment. Other than the foregoing
individuals, no director attended fewer than 75% of the total of board meetings
held by either the Company or the Bank during the year ended December 31, 1996.
Compensation of Directors
Currently, all Directors of the Company receive a Director's fee of three
hundred dollars ($300) for each Company Board meeting attended. Each Director
receives an annual retainer of $3,000 and a Director's fee of three hundred
dollars ($300) for each Bank Board meeting attended up to a maximum of six
hundred dollars ($600) for meetings attended on any given day. In addition, each
non-employee Director of the Company and the Bank receives a fee of three
hundred ($300) dollars for all committee meetings attended. The Company and the
Bank have implemented a deferred compensation plan for their Directors which
allows such directors to defer the receipt of Director's fees paid by the
Company and the Bank until their services with the Company Board and Bank Board
terminate.
COMMITTEES OF THE BOARDS OF DIRECTORS
The Company Board and the Bank Board have each appointed certain committees.
Each has an Audit Committee comprised of the same members. In addition, among
other committees, the Bank Board has established a CRA/Compliance Committee,
Asset/Liability Committee ("ALCO"), and a
Compensation Committee.
The Audit Committee reviews the scope and results of the annual audit of the
Company's consolidated financial statements conducted by the Company's
independent public accountants, the scope of other services provided by the
Company's independent public accountants, proposed changes in the Company's
financial and accounting standards and principles, and the Company's policies
and procedures with respect to its internal accounting, auditing and financial
controls, and makes recommendation to the Company Board on the engagement of the
independent public accountants, as well as other matters which may come before
it or as directed by the Company Board. In 1996, the Audit Committee of the
Company and the Bank consisted of Messrs. Keough, Bernardo, Carroll and Shields,
and was chaired by Mr. Keough. The Audit Committee meets quarterly.
The CRA/Compliance Committee is responsible for overseeing, coordinating and
evaluating the Bank's performance under the Community Reinvestment Act and the
Bank Secrecy Act. The Committee reviews specific policies and policy statements
and assesses the Bank's compliance with those policies and overall compliance
with federal and state law. The CRA/Compliance Committee of the Bank consists of
Messrs. Coloian and Mega and Drs. Mathieu and Nazarian. The CRA/Compliance
Committee meets quarterly.
The ALCO establishes, coordinates, communicates and controls the management
of asset/liability procedures. The primary role of the committee is to establish
and monitor the volume and mix of the Bank's assets and deposits (sources and
uses of funds). The objective of the committee is to manage assets and deposits
of the Bank while promoting consistency with the Bank's goals for liquidity,
capital growth, risk, and profitability. The ALCO consists of Messrs. Keough,
Mega, Shanahan, DePamphilis, Macomber and Mrs. Ricci and is chaired by Mr.
Macomber. The ALCO Committee meets semiannually.
The Compensation Committee is responsible for establishing the compensation
of the Company's directors, officers and employees, including salaries, bonuses,
commissions, benefit plans, the grant of options and other forms of, or matters
relating to, compensation. During 1996, the Compensation Committee consisted of
Messrs. Carroll, Bernardo and Mega.
EXECUTIVE COMPENSATION
The following table sets forth in summary form all compensation paid by the
Company and the Bank to Mr. Shanahan for services rendered in all capacities to
the Company and the Bank during the past two fiscal years. No other executive
officer received compensation in excess of $100,000 for such years.
5
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY COMPENSATION(1)
--------------------------- ---- ------ ---------------
<S> <C> <C> <C>
PATRICK J. SHANAHAN, JR. .......................... 1996 $223,350 $ 8,811
President and Chief Executive Officer 1995 $213,675 $ 8,759
</TABLE>
- --------
(1) Includes $1,311 and $1,259 in insurance premiums paid by the Company for a
term life insurance policy in favor of Mr. Shanahan in 1996 and 1995,
respectively, and $7,500 and $7,500 paid to Mr. Shanahan as director fees in
1996 and 1995, respectively.
OPTION GRANTS IN LAST FISCAL YEAR
The Company does not maintain any stock option or stock-based compensation
plans. No stock options were granted to Mr. Shanahan for the year ended December
31, 1996.
AGGREGATED OPTION EXERCISES IN LAST
FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES
The following table sets forth information with respect to (i) option
exercises by Mr. Shanahan for the fiscal year ended December 31, 1996; (ii) the
number of unexercised options held by Mr. Shanahan as of December 31, 1996; and
(iii) the value of unexercised in-the-money options (options for which the fair
market value of the Common Stock exceeds the exercise price) as of December 31,
1996.
<TABLE>
<CAPTION>
NUMBER OF VALUE OF
SECURITIES UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
SHARES DECEMBER 31, 1996 DECEMBER 31, 1996
ACQUIRED ON VALUE EXERCISABLE/ EXERCISABLE/
NAME EXERCISE(#) REALIZED($) UNEXERCISABLE UNEXERCISABLE
---- ----------- ----------- ------------- -------------
<S> <C> <C> <C> <C>
PATRICK J. SHANAHAN, JR.(1) ...... 28,041 $273,399.75 0/0 0/0
</TABLE>
- --------
(1) Pursuant to a stock option agreement dated November 24, 1986, Between the
Company And Mr. Shanahan, as amended (The "Option Agreement"), The Company
Granted To Mr. Shanahan An Option (The "Option") To Purchase 60,000 Shares
Of The Common Stock Of The Company At An Exercise Price Of $2.50 Per Share
(As Adjusted For The 10 For 1 Stock Split Declared By The Company In
December 1994). The Option Was To Expire If Not Exercised By Mr. Shanahan On
Or Before November 24, 1996. Mr. Shanahan Exercised The Option On May 13,
1996, At An Aggregate Exercise Price Of $150,000 (The "Aggregate Exercise
Price"). In Addition, As A Result Of The Exercise, Mr. Shanahan Incurred
Federal And State Income Tax Liability On The Difference Between The Fair
Market Value Of The Shares Acquired Upon Exercise ($9.75 Per Share On May
13, 1996) And The Aggregate Exercise Price (The "Option Value"). In
Connection With This Income Tax Liability, Upon The Exercise, Mr. Shanahan
Was Required To Pay To The Company The Applicable Minimum State And Federal
Withholding Tax As Applied To The Option Value (The "Immediate Withholding
Tax"). Pursuant To The Stock Option Agreement. Mr. Shanahan Exercised The
Option In A Manner By Which Both The Option Exercise Price And The Immediate
Withholding Tax Otherwise Payable By Mr. Shanahan To The Company Were Offset
Against The Shares Otherwise Issuable To Mr. Shanahan Upon Exercise Of The
Option. As A Result, The 60,000 Shares Of Common Stock Mr. Shanahan Was
Entitled To Receive Was Reduced By The Number Of Shares Equivalent In Value
To The Sum Of The Aggregate Exercise Price And The Immediate Withholding
Tax, Or 31,959 Shares. Upon The Exercise Of The Option By Mr. Shanahan (As
Described Above), The Option Agreement Terminated.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
The Company has implemented a non-qualified supplemental executive
retirement plan (the "SERP") to provide certain officers and highly compensated
employees with additional retirement benefits. Benefits under the SERP are
intended to supplement benefits payable under the defined Pension Plan (see
below)
6
which are subject to: (i) federal law limitations applicable to qualified
pension plans; and (ii) early retirement penalties set forth in the Pension
Plan. Benefits payable under the SERP are designed to recover those benefits
that would be payable under the Pension Plan if not for such limitations.
The SERP is a non-qualified benefit plan. Prior to the establishment of the
Company Compensation Committee, participants in the SERP were determined by the
Company Board. Any future participants in the SERP will be determined by the
Company Compensation Committee. Benefits are determined on the basis of the
participant's three highest years' base salary. Benefits are payable only upon
death, retirement in accordance with the terms of the SERP, or termination of
employment with the Company. As of December 31, 1996, the only participant in
the SERP was Mr. Shanahan. The Company incurred an expense of $64,714 with
respect to the SERP for the year ended December 31, 1996. If Mr. Shanahan were
to retire at age 53 on January 1, 1998, his annual benefit under the SERP would
be approximately $71,400.
The Company has established an irrevocable grantor's trust ("rabbi trust")
in connection with the SERP. This trust was funded with contributions from the
Company for the purpose of providing the benefits promised under the terms of
the SERP. The SERP participants have only the rights of unsecured creditors with
respect to the trust's assets, and do not recognize income with respect to
benefits provided by the SERP until such benefits are received by the
participants. The assets of the rabbi trust are considered part of the general
assets of the Company and are subject to the claims of the Company's creditors
in the event of the Company's insolvency. Earnings on the trust's assets are
taxable to the Company.
PENSION PLAN
The Bank is a member of the Financial Institutions Retirement Fund ("FIRF")
which sponsors a multiple employer pension plan (the "Pension Plan").
Contributions to the Pension Plan are determined on an actuarial basis for the
benefit of all qualifying employees. Employees become eligible for participation
on attainment of age 21 and completion of one year of service to the Bank. The
Pension Plan provides an annual benefit upon retirement calculated by adding the
products of (i): (a) 1.5% multiplied by; (b) the employee's years of benefit
service multiplied by; (c) the employee's highest average salary for three
consecutive years of service ("High-3 Average Compensation"); up to the covered
Compensation Level (defined generally as the average of the maximum social
security wage base for the 35-year period preceding social security retirement
age), and (ii): (x) 2.0% multiplied by; (y) the employee's years of benefit
service multiplied by; (z) the employee's High-3 Average Compensation to the
extent it exceeds the Covered Compensation Level. Under the terms of the Pension
Plan, benefits are calculated as a 10 year certain and continuous annuity.
Participants may elect payment in the "regular form" or in another one of the
annuity forms available under the Pension Plan. Benefit payments generally begin
at age 65, but they can begin earlier in a reduced amount, or, if the employee
continues working past 65, later in an increased amount. Administrative expenses
for the Pension Plan are paid by the Company. Benefits under the Pension Plan
become fully vested upon 5 or more years of service to the Company.
Benefits are not offset against Social Security.
The following table sets forth estimated annual benefits payable upon
retirement at age 65 assuming the employee chooses the regular form of benefit
under the Pension Plan.
PENSION PLAN TABLE
<TABLE>
<CAPTION>
YEARS OF BENEFIT SERVICE
------------------------
HIGH-3 AVERAGE
COMPENSATION 5 10 20 30 40
------------ - -- -- -- --
<S> <C> <C> <C> <C> <C>
$ 25,000 $ 1,900 $ 3,800 $ 7,500 $11,300 $ 15,600
50,000 4,300 8,500 17,100 25,600 34,900
75,000 6,800 13,500 27,100 40,600 54,900
100,000 9,300 18,500 37,100 55,600 74,900
125,000 11,800 23,500 47,100 70,600 94,900
150,000 and over(1) 14,300 28,500 57,100 85,600 114,900(1)
</TABLE>
- --------
(1) The Maximum amount payable under the pension plan in 1997 is $117,592.
For purposes of the table, Mr. Shanahan had 22 years of service with the
Company as of December 31, 1996.
7
401(K) PLAN
Effective as of January 1, 1997, the Company adopted the Financial
Institutions Thrift Plan, an employee profit-sharing plan established pursuant
to Section 401(k) of the Internal Revenue Code of 1986, as amended (the "401(k)
Plan"). Under the 401(k) Plan, eligible participants may defer portions of their
salaries for future receipt and the Company may match up to 50% of the deferral
contribution made by such participant up to a maximum deferral contribution of
6% of a participant's compensation during the previous fiscal year.
EXECUTIVE OFFICERS OF THE COMPANY AND THE BANK
The names and ages of the Executive Officers of the Company and the Bank and
each Executive Officers' position with the Company or the Bank is listed below.
<TABLE>
<CAPTION>
POSITIONS AND OFFICERS WITH THE
NAME AGE COMPANY OR THE BANK
---- --- -------------------
<S> <C> <C>
Patrick J. Shanahan, Jr. 52 President and Chief Executive Officer of the Company
and Chairman, President and Chief Executive
Officer of the Bank
John A. Macomber 49 Vice President, Treasurer and Chief Financial
Officer of the Company and the Bank
Robert D. McCormick 51 Vice President of the Bank -- Commercial Lending
Francis B. Geary 57 Vice President of the Bank -- Commercial Lending
Anthony J. DePamphilis, Jr. 37 Vice President of the Bank -- Information Systems and
Operations
Donna M. Dupuis 39 Vice President of the Bank -- Internal Audit
Betty C. Ricci 43 Vice President of the Bank -- Branch and Network Systems
</TABLE>
Mr. Shanahan has served as President and Chief Executive Officer of the
Company since 1980. Mr. Shanahan has served as Chairman of the Board of
Directors of the Bank since 1989 and President and Chief Executive Officer of
the Bank since 1975. In addition to his duties as Vice President and Treasurer
of the Company and the Bank, at which he has been employed since 1992, Mr.
Macomber was appointed Chief Financial Officer of the Company and the Bank in
1996. Mr. Macomber served as Senior Vice President and Treasurer of Greater
Providence Deposit Corporation from 1985 to 1992. Mr. Macomber is a certified
public accountant. Mr. McCormick has been Vice President and Manager of Credit
and Loan Administration of the Bank since 1994. Mr. McCormick joined the Bank as
Vice President and Commercial Loan Officer in 1993. Prior to such time, Mr.
McCormick served as Vice President and as Senior Commercial Lender at New
England Savings Bank from 1991 to 1993. Mr. Geary has been employed as Vice
President of Commercial Lending and as a Commercial Loan Officer of the Bank
since 1995, and is responsible for Business Development. Prior to such time, Mr.
Geary was employed as Senior Asset Manager for the Resolution Trust Corporation
from 1993 to 1994. Prior to 1993, Mr. Geary was employed as Senior Vice
President and Division Head of Old Stone Bank. Mr. DePamphilis has been employed
with the Bank as Vice President of Information Systems and Operations of the
Bank since 1995. Mr. DePamphilis has been employed with the Bank since 1985 and
has served in numerous capacities during such time. Ms. Dupuis has been employed
as Vice President of Internal Audit of the Bank since 1992. From 1986 to 1992,
Ms. Dupuis served as Treasurer of the Company and the Bank. Ms. Dupuis has been
employed with the Bank since 1978. Mrs. Ricci has been
8
employed as Vice President of Branch and Network Systems of the Bank since
December 1996. From November 1995 to December 1996, Mrs. Ricci was Vice
President of Retail Banking at the Bank and from 1988 until November 1995, Mrs.
Ricci was Vice President of Deposit Operations at the Bank.
COMPENSATION COMMITTEE REPORT
The Compensation Committee represents both the Company and the Bank and, in
1996, consisted of three directors who were not officers or employees of the
Company; William A. Carroll, Joseph V. Mega and Raymond F. Bernardo as well as
Patrick J. Shanahan, Jr., President, Chief Executive Officer and a Director of
the Company and Chairman, President, Chief Executive Officer and a Director of
the Bank.
The Committee's primary responsibilities are to provide independent review
and oversight and promote corporate accountability for executive compensation,
approve performance and base compensation policies for executive management and
employees, approve-incentive plans, and to provide oversight of company benefit
programs.
Decisions on compensation of the Company's and the Bank's executives
generally are made by the Compensation Committee. All decisions by the
Compensation Committee relating to the compensation of the Company's and the
Bank's executive officers are reviewed by each of the full Company and Bank
Board. Pursuant to rules of the Securities and Exchange Commission, set forth
below is a report prepared by the Company's and the Bank's Board Compensation
Committee addressing the Company's and the Bank's compensation policies for 1996
as they affected Mr. Shanahan, the Company's chief executive officer, and the
other executive officers.
Compensation Policies Toward Executive Officers. The Company's and the
Bank's compensation program for executive officers consists of base salary. The
Compensation Committee's executive compensation policies are designed to provide
competitive levels of compensation that integrate pay with the Company's annual
and long-term performance goals, reward above average corporate performance,
recognize individual initiative and achievements, and assist the Company in
attracting and retaining qualified executives. Levels of executive compensation
are set at levels that the Compensation Committee believes to be consistent with
others in the Bank's industry.
Chief Executive Officer Compensation:
Mr. Shanahan serves the Bank pursuant to an employment agreement dated
February 6, 1996 which provides for his employment as President and Chief
Executive Officer of the Bank and Company. The terms of Mr. Shanahan's contract
were negotiated at arms-length. Mr. Shanahan's base salary was $223,350 in the
calendar year 1996 and is subject to an increase of no less than 5% each
calendar year. See "Employment Agreement."
Members of the Compensation Committee
PATRICK J. SHANAHAN, JR.
WILLIAM A. CARROLL
JOSEPH V. MEGA
RAYMOND F. BERNARDO
9
RELATED PARTY TRANSACTIONS
The Bank has had, and expects to have in the future, various loan and other
banking transactions in the ordinary course of business with the directors,
executive officers, and principal stockholders of the Company, the Bank and
entities with which such persons may be associated. All such transactions: (i)
have been and will be made in the ordinary course of business; (ii) have been
and will be made on substantially the same terms, including interest rates and
collateral on loans, as those prevailing at the time for comparable transactions
with unrelated persons; and (iii) in the opinion of management do not and will
not involve more than the normal risk of collectability or otherwise present
other terms less favorable to the Bank than would otherwise be obtained with
unrelated persons. As of December 31, 1996, the total dollar amount of
extensions of credit to directors, executive officers and any of their
associates were approximately $1,384,981, which represented approximately 11.0%
of total stockholders' equity as of such date.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 1996, each member of the Compensation Committee other than Mr.
Shanahan was an independent, non-employee Director of both the Company and the
Bank. Mr. Shanahan is President, Chief Executive Officer and a Director of the
Company and Chairman, President, Chief Executive Officer and a Director of the
Bank.
EMPLOYMENT AGREEMENT
Effective as of February 6, 1996, the Company entered into an amended and
restated employment agreement with Patrick J. Shanahan, Jr., President and Chief
Executive Officer of the Company and the Bank (the "Employment Agreement"). The
Employment Agreement provides that Mr. Shanahan's base salary from January 1,
1997 to December 31, 1997 will be $236,751, and that such salary shall be
reviewed each year and that there shall be an annual increase of not less than
five (5%) percent. In addition to base salary, the Employment Agreement provides
for, among other things, participation in other fringe benefits applicable to
executive officers including the Company's supplemental executive retirement
plan (described above).
The Employment Agreement provides that either the Company or Mr. Shanahan
may terminate the agreement upon 90 days notice to the other. The Employment
Agreement provides for termination by the Company for cause as defined in the
Employment Agreement at any time without further compensation. In the event the
Company chooses to terminate Mr. Shanahan's employment for reasons other than
cause, Mr. Shanahan would be entitled to continue to receive from the Company
his existing base salary and all benefits for twenty-four (24) months from the
date of termination.
Under the Employment Agreement, if Mr. Shanahan voluntarily terminates the
Employment Agreement upon a change of control of the Company (as defined in the
Employment Agreement), or Mr. Shanahan is deemed involuntarily terminated as a
result of certain events or circumstances following a change of control, then
Mr. Shanahan would be entitled, at his sole discretion, to either: (i) the
payments and benefits due under the Employment Agreement upon termination by the
Company other than for cause as set forth above; or (ii) 2.99 times the "base
amount" as defined in Section 280G(b)(3) of the Internal Revenue Code of 1986,
as amended, plus certain other entitlements, but excluding his W-2 earnings
resulting from the exercise of stock options, payable in one lump sum on the
date of termination.
In the event of a change in control of the Company, were Mr. Shanahan to opt
for the lump-sum payment of 2.99 times the "base amount", the total amount of
payments under the Employment Agreement, based solely on cash compensation paid
to Mr. Shanahan over the past five fiscal years and excluding any benefits under
any employee benefit plan which may be payable, would be approximately $609,000.
10
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information regarding the ownership of Common
Stock of the Company as of February 15, 1997 by each of the Directors and
Executive Officers and the Directors and Executive Officers as a group.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF PERCENT OF
NAME BENEFICIAL OWNERSHIP(1) CLASS
---- ----------------------- -----
<S> <C> <C>
Raymond F. Bernardo(a) .................................. 19,940(2) 1.6%
William A. Carroll(c) ................................... 89,450(3) 7.1%
Artin Coloian, Esq.(a) .................................. 500 *
Anthony J. DePamphilis, Jr.(b) .......................... 300 *
Donna M. Dupuis(b) ...................................... 100 *
Francis B. Geary(b) ..................................... 100 *
Joseph A. Keough(a) ..................................... 5,000 *
John A. Macomber(b) ..................................... 1,000 *
Peter J. Mathieu, Jr., M.D.(a) .......................... 58,800(4) 4.7%
Robert D. McCormick(b) .................................. 100(5) *
Joseph V. Mega(a) ....................................... 3,500(6) *
John Nazarian, Ph.D.(a) ................................. 500 *
Betty C. Ricci(b) ....................................... 100(7) *
Patrick J. Shanahan, Jr.(a)(b) .......................... 78,521(8) 6.2%
William P. Shields(a) ................................... 700 *
Directors and Executive Officers as a Group
(15 persons) .......................................... 256,911 20.5%
</TABLE>
- --------
* Shareholdings represent less than 1.0% of class
(a) Designates Director of the Company and the Bank
(b) Designates Executive Officer of the Company and/or the Bank
(c) Mr. Carroll was Chairman of the Board of Directors of the Company
until his death in February 1997.
NOTES:
(1) In accordance with Rule 13d-3 under the Securities Exchange Act of 1934,
shares are shown as beneficially owned if the person named in the table has
or shares the power to vote or direct the voting of, or the power to dispose
or to direct the disposition of such shares. Inclusion of shares in the
table does not necessarily mean that the persons named have any economic
interest in shares set opposite their respective names.
(2) Includes 19,940 shares held by the R.F. Bernardo Revocable Trust, of
which Mr. Bernardo is trustee.
(3) Incudes 10,000 shares owned by Mr. Carroll's wife, Elena Carroll.
(4) Includes 40,000 shares owned in joint tenancy with Dr. Mathieu's wife,
Betty Burkhardt Mathieu, M.D.
(5) Shares are owned in joint tenancy with Nancy A. McCormick, his wife.
(6) Shares are owned in joint tenancy with Antonette M. Mega, his wife.
(7) Shares are owned in joint tenancy with Vincent A. Ricci, Jr., her
husband.
(8) Includes 8,150 shares owned in joint tenancy with Mr. Shanahan's wife,
Margaret F. Shanahan and 500 shares owned by Margaret F. Shanahan
separately.
11
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
executive officers, directors, and 10% shareholders to file reports of ownership
(Form 3) and changes of ownership (Form 4) with respect to the Company's Common
Stock with the Securities and Exchange Commission. Executive officers, directors
and principal shareholders are required to furnish the Company with copies of
all Section 16(a) forms they file. Based upon a review of the filings for 1996
furnished to the Company, the Company notes that Dr. Peter J. Mathieu, Jr.,
M.D., a Director of the Company and the Bank filed a Form 3 report late by one
day.
RATIFICATION OF INDEPENDENT PUBLIC ACCOUNTANTS
(PROPOSAL NUMBER 2)
The Board of Directors has selected Arthur Andersen LLP ("Arthur Andersen"),
independent public accountants, as the independent public accountants for the
Company for the year ending December 31, 1997. At the Annual Meeting, the
shareholders will vote upon a proposal to ratify the selection of the firm as
independent public accountants.
The financial statements of the Company have been audited by Arthur Andersen
for each of the fiscal years since the Company's formation in 1980. The
financial statements of the Bank have been audited by Arthur Andersen for each
of the fiscal years since 1979. Other services rendered during the year 1996 by
Arthur Andersen included tax return review and tax planning consultations,
services to the Company in connection with filings with the Securities and
Exchange Commission ("SEC") pursuant to Section 12 of the Exchange Act and a
review of data processing systems alternatives and assistance in connection with
a customer survey. Additionally, Arthur Andersen reported on the financial
statements contained in a Registration Statement on Form S-1 filed pursuant to
the Securities Act of 1933, as amended (the "1933 Act") with the SEC in
connection with the public offering of shares of the Common Stock of the
Company. It is expected that representatives of Arthur Andersen will be present
at the Annual Meeting of the Company and that they will have an opportunity to
make statements if they so desire and will be available to respond to
appropriate questions.
An affirmative vote of a majority of the shares of the Common Stock of the
Company represented in person or by proxy at the Annual Meeting is necessary for
ratification of the appointment of Arthur Andersen as independent public
accountants. The Board of Directors of the Company recommends that you vote
"FOR" ratifying the selection of Arthur Andersen. No determination has been made
as to what action the Board of Directors would take if the shareholders do not
ratify the appointment.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" RATIFICATION OF THE
APPOINTMENT OF ARTHUR ANDERSEN LLP AS INDEPENDENT PUBLIC ACCOUNTANTS FOR THE
FISCAL YEAR ENDING DECEMBER 31, 1997
OTHER MATTERS
The Company Board knows of no additional matters which are likely to be
presented for action at the Annual Meeting other than the two proposals
specifically set forth in the Notice and referred to herein. If any other matter
properly comes before the Annual Meeting for action, it is intended that the
persons named in the accompanying proxy and acting thereunder will vote or
refrain from voting in accordance with their best judgment pursuant to the
discretionary authority conferred by the proxy.
SUBMISSION OF SHAREHOLDER PROPOSALS FOR 1998 ANNUAL MEETING
Any stockholder of the Company may present a proposal for consideration at
future meetings of the stockholders of the Company. Any proposal for
consideration at the Company's 1998 Annual Meeting of stockholders must received
by the Company at its principal executive officers, 180 Washington Street,
Providence, Rhode Island 02903, no later
than December 10, 1997.
12
ANNUAL REPORT
A copy of the Company's Annual Report for the year ended December 31, 1996,
which includes financial statements, has been mailed to all shareholders with
this Proxy Statement and has been filed with the Securities and Exchange
Commission as an exhibit to the Company's Annual Report on Form 10-K for the
year ended December 31, 1996. The Annual Report is not to be regarded as proxy
soliciting material. Additional copies of the Annual Report may be obtained by
shareholders of the Company without charge on written request to John A.
Macomber at the address indicated below.
By Order of the Board of Directors
/s/ William F. Hague, Jr.
--------------------------------
180 Washington Street William F. Hague, Jr.
Providence, Rhode Island 02903 Secretary
April 9, 1997 First Financial Corp.
13
FORM OF PROXY CARD
[SIDE ONE]
FIRST FINANCIAL CORP.
PROXY SOLICITED BY THE BOARD OF DIRECTORS FOR
1997 ANNUAL MEETING OF SHAREHOLDERS ON MAY 14, 1997
The undersigned hereby appoints Patrick J. Shanahan, Jr. and William F.
Hague, Jr. and each of them proxies, each with power of substitution, to vote at
the 1997 Annual Meeting of Shareholders of FIRST FINANCIAL CORP. to be held on
May 14, 1997 (including any adjournments or postponements thereof), with all the
powers the undersigned would possess if personally present, as specified on the
reverse side of this ballot on the election of directors and the other matters
set forth herein and, in accordance with their discretion, on any other business
that may come before the meeting, and revokes all proxies previously given by
the undersigned with respect to the shares covered hereby.
(TO BE CONTINUED AND SIGNED ON THE OTHER SIDE)
[SIDE TWO]
A [X] PLEASE MARK YOUR
VOTE AS IN THIS
EXAMPLE.
FOR ALL NOMINEES WITHHOLD
LISTED AT RIGHT AUTHORITY
(EXCEPT AS WITHHELD IN (TO VOTE FOR
THE SPACE BELOW) AT RIGHT) NOMINEES:
Artin Coloian, Esq.
.............................................................John Nazarian
.............................................................William P. Shields
1. ELECTION [ ] [ ]
OF
DIRECTORS
INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY
INDIVIDUAL NOMINEE, WRITE THAT NOMINEE'S NAME IN
THE SPACE PROVIDED BELOW. ___________________
- -----------------------------------------
2. APPOINTMENT OF ARTHUR FOR AGAINST ABSTAIN
ANDERSEN LLP AS AUDITORS
The Board of Directors recommends
a vote FOR the proposal to appoint [ ] [ ] [ ]
Arthur Andersen LLP as the independent
public accountants of the Company for
the fiscal year ending December 31, 1997
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY
THE SHAREHOLDER. IF NO CONTRARY SPECIFICATION IS MADE, THIS PROXY WILL BE VOTED
FOR THE ELECTION OF THE NOMINEES OF THE BOARD OF DIRECTORS AND FOR THE
APPOINTMENT OF ARTHUR ANDERSEN LLP AS THE INDEPENDENT PUBLIC ACCOUNTANTS OF THE
COMPANY FOR THE FISCAL YEAR ENDING DECEMBER 31, 1997 AND UPON SUCH OTHER
BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING IN THE APPOINTED PROXIES'
DISCRETION.
PLEASE DATE, SIGN AS NAME APPEARS HEREON, AND RETURN THIS PROXY IN THE ENCLOSED
ENVELOPE, WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING. YOU MAY NEVERTHELESS
VOTE IN PERSON IF YOU DO ATTEND.
THE UNDERSIGNED HEREBY ACKNOWLEDGE(S) RECEIPT OF A COPY OF THE ACCOMPANYING
NOTICE OF 1997 ANNUAL MEETING OF SHAREHOLDERS AND RELATED PROXY STATEMENT.
SIGNATURE ______________ DATE ______ SIGNATURE ______________ DATE ______
NOTE: (Executors, administrators, trustees, custodians, etc. should indicate
capacity in which signing. When stock is held in the name of more than one
person, each person should sign the proxy.)
