<PAGE>
[LOGO OF FIRST FINANCIAL CORP.]
FIRST FINANCIAL CORP.
180 Washington Street
Providence, Rhode Island 02903
April 7, 1999
To Our Shareholders:
On behalf of the Board of Directors, I cordially invite you to attend the
1999 Annual Meeting of Shareholders of First Financial Corp. The Annual
Meeting will begin at 3:00 p.m. on Wednesday, May 12, 1999, 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 expect to act
upon at the Annual Meeting. Shareholders who are present at the Annual Meeting
will have an opportunity to ask questions of management.
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. If
you are planning to attend the Annual Meeting, please check the appropriate
box on the proxy card.
We are gratified by the continued interest our shareholders have 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 certainly hope that
you will continue to support your Company and urge you to return your proxy
card as quickly as possible.
Very truly yours,
/s/ Patrick J. Shanahan, Jr.
Patrick J. Shanahan, Jr.
Chairman, President and
Chief Executive Officer
<PAGE>
[LOGO OF FIRST FINANCIAL CORP.]
FIRST FINANCIAL CORP.
180 Washington Street
Providence, Rhode Island 02903
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held on May 12, 1999
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 12, 1999, at 3 p.m. for the
following purposes:
1. To elect four 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, 1999; and
3. To transact any other business which may properly come before the
meeting, or any adjournment thereof.
The close of business on March 22, 1999 has been fixed as the record date
for determination of shareholders entitled to notice of and to vote at the
Annual Meeting. The By-laws 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/ William F. Hague, Jr.
William F. Hague, Jr.
Secretary
First Financial Corp.
Providence, Rhode Island
April 7, 1999
<PAGE>
PROXY STATEMENT
FIRST FINANCIAL CORP.
180 Washington Street
Providence, Rhode Island 02903
ANNUAL MEETING OF SHAREHOLDERS
May 12, 1999
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 12, 1999, and at any adjournments
thereof. Shareholders of record at the close of business on March 22, 1999
will be entitled to vote at the Annual Meeting. This Proxy Statement and the
accompanying proxy card have been mailed or given to holders of common stock,
par value $1.00 per share, of the Company (the "Common Stock") on or about
April 7, 1999.
The financial statements for the Company for the fiscal year ended December
31, 1998 are contained in the Company's Annual Report and Form 10-K for the
year ended December 31, 1998 (the "Annual Report"). A copy of the Company's
Annual Report and Form 10-K has been mailed simultaneously herewith to all
shareholders of the Company.
Proxies in the form enclosed are being solicited by the Board of Directors
of the Company. Any shareholder giving a proxy in the enclosed form has the
power to revoke it at any time before it is exercised. A shareholder's right
to revoke his proxy is not limited by, or subject to, compliance with any
specified formal procedure. A shareholder 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, 1999. 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., Secretary of the
Company, 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 held of record by such brokers, custodians, nominees or other
fiduciaries.
<PAGE>
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 and will be disclosed in future filings made by
the Company with the Securities and Exchange Commission. 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 22, 1999, the record date for the Annual Meeting, all of the
1,231,241 outstanding shares of the Common Stock are entitled to vote at the
Annual Meeting. Fractional shares are not entitled to be voted, but each full
share of the Common Stock 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 the Common Stock as of March 22, 1999.
<TABLE>
<CAPTION>
Amount and
Nature of
Beneficial Percent of Notes of
Name of Beneficial Owner Ownership (1) Class Explanation
------------------------ ------------- ---------- -----------
<S> <C> <C> <C>
Fleet Financial Group..................... 124,250 10.1% (2)
John Hancock Mutual Life Insurance
Company.................................. 109,000 8.9% (3)
John Sheldon Clark........................ 83,000 6.7% (4)
Patrick J. Shanahan, Jr................... 79,456 6.5% (5)
</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 Fleet National Bank, N.A., a national
banking association and principal banking subsidiary of Fleet Financial
Group, Inc. Pursuant to agreements entered into by Fleet with certain of
its customers, Fleet has sole power to vote and to dispose of 119,700 of
such shares. Fleet's principal address is One Federal Street, Boston,
Massachusetts 02110.
(3) Represents 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.
All of such shares are held pursuant to an Advisory Agreement with John
Hancock Advisors, Inc. ("JHA"), an indirect subsidiary of JHMLIC and
affiliate of the fund. Pursuant to the Advisory Agreement, JHA has sole
voting power over all such shares.
(4) 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.
(5) 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 Chairman, President and Chief Executive
Officer of the Company and the Bank. See "Executive Officers of the
Company and the Bank" for Mr. Shanahan's biography.
2
<PAGE>
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 four nominees (all of whom are currently
Directors) to fill the four positions. If elected, each of Messrs. Bernardo,
Keough and Simon and Dr. Mathieu will hold office for a three-year term until
the Annual Meeting to be held in the year 2002.
Nominees for Directors of the Company
The following table sets forth the names of the four 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
the Common Stock as of March 22, 1999 may be found at "Security Ownership of
Certain Beneficial Owners and Management".
<TABLE>
<CAPTION>
Director
of the
Company
Class Name Age Principal Occupation Since
----- ---- --- -------------------- --------
<C> <C> <S> <C> <C>
III Raymond F. Bernardo 81 Retired 1980
III Joseph A. Keough, Esq. 57 Magistrate, Rhode Island Superior Court 1980
III Peter L. Mathieu, Jr., M.D. 74 Pediatrician 1980
III Fred J. Simon, Jr. 50 President, Simon Chevolet-Buick, Ltd. 1998
</TABLE>
The following biographical information is provided for the four nominees as
indicated above:
Raymond F. Bernardo Mr. Bernardo has served as a Director of the Company
since 1980. 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.
Joseph A. Keough, Esq. Mr. Keough has served as a Director of the Company
since 1980. Mr. Keough has been Magistrate, Rhode Island Superior Court since
1998. From 1997 until 1998, Mr. Keough was Master, Rhode Island Superior
Court. Prior to such time, Mr. Keough was an attorney with the law firm of
Keough and Gearon.
Peter L. Mathieu, Jr., M.D. Dr. Mathieu has served as a Director of the
Company since 1980. Dr. Mathieu is a Pediatrician.
Fred J. Simon, Jr. Mr. Simon was appointed to the Company Board in November
1998. Mr. Simon is President, Simon Chevrolet-Buick, Ltd., an automobile
dealership located in Woonsocket, Rhode Island.
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 Company Board, 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
3
<PAGE>
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 the Common Stock
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
Company Office will
Class Name Age Principal Occupation Since Expire
----- ---- --- -------------------- ----------- -----------
<C> <C> <C> <S> <C> <C>
I Artin H. Coloian, Esq. 34 Executive Assistant to 1996 2000
the Mayor of Providence,
RI
I John Nazarian, Ph.D. 66 President, Rhode Island 1996 2000
College
I William P. Shields 61 Retired 1993 2000
II Patrick J. Shanahan, Jr. 54 Chairman, President and 1980 2001
Chief Executive Officer
of the Company and the
Bank
II Gary R. Alger 41 Director of E.R. Alger 1998 2001
and Company
II Joseph V. Mega 65 President, Crugnale 1994 2001
Bakery
</TABLE>
Mr. Coloian has been Executive Assistant to the Mayor of Providence, Rhode
Island since August 1993. Mr. Shields retired in 1998. From 1994 until 1998,
Mr. Shields was Commissioner, Rhode Island State Board of Elections. From 1987
to 1994, Mr. Shields was the Vice President of Bonnett Liquors. Mr. Shanahan
added the title of Chairman of the Company in 1997.
Except as indicated above, each Director has been employed during the past
five years in his respective positions.
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, 1998, the
Company Board met four (4) times and the Bank Board met twelve (12) times. Mr.
Coloian attended two of the four meetings of the Company Board held in 1998.
Except as set forth above, 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, 1998.
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 three thousand dollars ($3,000)
4
<PAGE>
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. The Company Board
has also appointed a Nominating Committee. In addition, among other
committees, the Bank Board has established a CRA/Compliance Committee,
Asset/Liability Committee ("ALCO"), a Compensation Committee and an Operating
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 1998, the Audit Committee of
the Company and the Bank consisted of Messrs. Alger, Bernardo, Keough and
Shields, and was chaired by Mr. Keough. The Audit Committee meets quarterly.
The Nominating Committee is responsible for making recommendations to the
Company Board concerning nominees to serve as members of the Company Board and
the Bank Board. The Nominating Committee consists of Messrs. Mega, Nazarian,
Shanahan and Shields. The Nominating Committee meets annually.
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, and
was chaired by Mr. Mega. The CRA/Compliance Committee met once in 1998.
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 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, Coughlin, 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. The Compensation Committee consists of
Messrs. Bernardo, Mega and Shanahan, and is chaired by Mr. Mega. The
Compensation Committee meets annually.
The Operating Committee is responsible for monitoring the operations of the
Company and the Bank to ensure compliance by the Company and the Bank with the
specific policy directives of the Company Board and the Bank Board. The
Operating Committee consists of Messrs. Shanahan, Coughlin, Macomber and
McCormick and Mrs. Ricci. The Operating Committee meets periodically.
5
<PAGE>
Executive Compensation
The following table sets forth in summary form all compensation paid by the
Company and the Bank to Patrick J. Shanahan, Jr., Chairman, President and
Chief Executive Officer of the Company and the Bank, and John A. Macomber,
Vice President, Treasurer and Chief Financial Officer of the Company and the
Bank, for services rendered in all capacities to the Company and the Bank
during the past three fiscal years. No other executive officer of the Company
received compensation in excess of $100,000 for such years.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
All Other
Name and Principal Position Year Salary Bonus Compensation
--------------------------- ---- -------- ------- ------------
<S> <C> <C> <C> <C>
Patrick J. Shanahan, Jr. ............... 1998 $255,096 $37,500 $13,571(1)
Chairman, President and 1997 $236,750 $23,675 $13,221(2)
Chief Executive Officer 1996 $223,350 0 $ 8,811(3)
John A. Macomber........................ 1998 $ 96,731 $ 8,000 $ 2,902(4)
Vice President, Treasurer and 1997 $ 89,905 $ 9,000 $ 2,697(5)
Chief Financial Officer 1996 $ 84,911 0 0
</TABLE>
- --------
(1) Includes $4,800 in contributions made to the Company's 401(k) Plan on Mr.
Shanahan's behalf in 1998. Also, includes $971 in insurance premiums paid
by the Company for a term life insurance policy in favor of Mr. Shanahan
in 1998 and $7,800 paid to Mr. Shanahan as director fees in 1998.
(2) Includes $4,750 in contributions made to the Company's 401(k) Plan on Mr.
Shanahan's behalf in 1997. Also, includes $971 in insurance premiums paid
by the Company for a term life insurance policy in favor of Mr. Shanahan
in 1997 and $7,500 paid to Mr. Shanahan as director fees in 1997.
(3) Includes $1,311 in insurance premiums paid by the Company for a term life
insurance policy in favor of Mr. Shanahan in 1996 and $7,500 paid to Mr.
Shanahan as director fees in 1996.
(4) Includes $2,902 in contributions made to the Company's 401(k) Plan on Mr.
Macomber's behalf in 1998.
(5) Includes $2,697 in contributions made to the Company's 401(k) Plan on Mr.
Macomber's behalf in 1997.
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 Messrs. Shanahan and Macomber for the
year ended December 31, 1998.
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Option
Values
Neither Messrs. Shanahan and Macomber held any stock options during the year
ended December 31, 1998.
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) 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
6
<PAGE>
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,
1998, the only participant in the SERP was Mr. Shanahan. The Company incurred
an expense of $80,448 with respect to the SERP for the year ended December 31,
1998. If Mr. Shanahan were to retire at age 55 on January 1, 2000, his annual
benefit under the SERP would be approximately $102,000.
The Company has established an irrevocable grantor's trust ("rabbi trust")
in connection with the SERP. This trust is 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......................... 4,200 8,300 16,700 25,000 34,200
75,000......................... 6,700 13,300 26,700 40,000 54,200
100,000......................... 9,200 18,300 36,700 55,000 74,200
125,000......................... 11,700 23,300 46,700 70,000 94,200
150,000 and over (1)............ 14,200 28,300 56,700 85,000 114,200(1)
</TABLE>
- --------
(1) The Maximum amount payable under the pension plan in 1999 is $123,574.
For purposes of the table, Messrs. Shanahan and Macomber had 24 years and 6
years of service, respectively, with the Company as of December 31, 1998.
7
<PAGE>
401(k) Plan
Effective as of January 1, 1997, the Company adopted the Financial
Institutions Thrift Plan, an employee savings incentive 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 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 Company or the
Name Age Bank
---- --- ----------------------------------------------
<C> <C> <S>
Patrick J. Shanahan, Jr. 54 Chairman, President and Chief Executive Officer
of the Company and the Bank
John A. Macomber 51 Vice President, Treasurer and Chief Financial
Officer of the Company and the Bank
Robert D. McCormick 53 Vice President of the Bank Commercial Lending
Betty C. Ricci 45 Vice President of the Bank Information and
Network Systems and Operations
Thomas E. Coughlin 53 Vice President of the Bank Retail Banking
</TABLE>
Mr. Shanahan has served as Chairman of the Company since 1997 and President
and Chief Executive Officer of the Company since its formation in 1980. Mr.
Shanahan has served as Chairman of the Board of Directors of the Bank since
1987 and President and Chief Executive Officer of the Bank since 1975. In
1996, Mr. Macomber was appointed Chief Financial Officer of the Company and
the Bank, 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
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. Mrs. Ricci has been employed as Vice President of Information and
Network Systems and Operations of the Bank since October 1997, and Branch and
Network Systems 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. Mr. Coughlin joined the Bank as Vice President of Retail Banking in
December 1996. Prior to joining the Bank, Mr. Coughlin held various positions
at BayBank, Inc. since 1970, most recently as Vice President and Area Manager.
Compensation Committee Report
The Compensation Committee represents both the Company and the Bank and, in
1998, consisted of two Directors who were not officers or employees of the
Company; Joseph V. Mega and Raymond F. Bernardo as well as Patrick J.
Shanahan, Jr., Chairman, 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
8
<PAGE>
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 1998 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 amended employment agreement
which provides for his employment as Chairman, 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 $250,000 in the
calendar year 1998 and is subject to an increase of no less than 5% each
calendar year. See "Employment Agreement."
Members of the Compensation Committee:
Joseph V. Mega, Chairman
Raymond F. Bernardo
Patrick J. Shanahan, Jr.
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 shareholders 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 collectibility or
otherwise present other terms less favorable to the Bank than would otherwise
be obtained with unrelated persons. As of December 31, 1998, the total dollar
amount of extensions of credit to Directors, Executive Officers and any of
their associates was $1,906,279, which represented approximately 12.9% of the
Company's total stockholders' equity as of such date.
Compensation Committee Interlocks and Insider Participation
During 1998, 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 Chairman, President and Chief Executive Officer of the
Company and the Bank.
Employment Agreement
Effective as of February 8, 1999, the Company entered into a Second Amended
and Restated Employment Agreement with Patrick J. Shanahan, Jr., Chairman,
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, 1999 to December 31, 1999 will be $265,000, 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
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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) the sum of (a)
2.99 times the "base amount" as defined in Section 280G(b)(3) of the Internal
Revenue Code of 1986, as amended, plus, (b) the amount of the bonus paid to
Mr. Shanahan by the Company or the Bank, if any, during the immediately
preceding year prior to the change of control, in each case, 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" plus the amount of
any bonus received by Mr. Shanahan in the preceding year, 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 $1,045,000.
Security Ownership of Certain Beneficial Owners and Management
The following table sets forth information regarding the ownership of the
Common Stock as of March 22, 1999 by each of the Directors and Executive
Officers and the Directors and Executive Officers as a group.
<TABLE>
<CAPTION>
Amount and
Nature of Percent
Beneficial of
Name Ownership(1) Class
---- ------------ -------
<S> <C> <C>
Gary R. Alger(a)....................................... 1,100 *
Raymond F. Bernardo(a)................................. 19,940(2) 1.6%
Artin H. Coloian, Esq.(a).............................. 500 *
Thomas E. Coughlin(b).................................. 250 *
Joseph A. Keough, Esq.(a).............................. 5,000 *
John A. Macomber(b).................................... 2,100(3) *
Peter L. Mathieu, Jr., M.D.(a)......................... 59,800(4) 4.9%
Robert D. McCormick(b)................................. 100(5) *
Joseph V. Mega(a)...................................... 4,500(6) *
John Nazarian, Ph.D.(a)................................ 1,300 *
Betty C. Ricci(b)...................................... 100(7) *
Patrick J. Shanahan, Jr.(a)(b)......................... 79,456(8) 6.5%
William P. Shields(a).................................. 2,200 *
Fred J. Simon, Jr.(a).................................. 12,500 1.0%
Directors and Executive
Officers as a Group (14 persons)...................... 188,846 15.3%
</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
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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) Includes 100 shares held by the John F. MacDonnell Trust, of which Mr.
Macomber is trustee.
(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.
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 1998 furnished to the Company, no required Section 16(a)
filing was reported late.
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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, 1999. 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 1998
by Arthur Andersen included tax return review and tax planning and services to
the Company in connection with filings with the Securities and Exchange
Commission ("SEC") pursuant to Section 12 of the Exchange Act. 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, 1999.
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 2000 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 2000 Annual Meeting of stockholders must be
received by the Company at its principal executive offices, 180 Washington
Street, Providence, Rhode Island 02903, no later than December 10, 1999.
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ANNUAL REPORT
A copy of the Company's Annual Report and Form 10-K for the year ended
December 31, 1998, which includes financial statements, has been mailed to all
shareholders with this Proxy Statement and has been filed with the Securities
and Exchange Commission. The Annual Report and Form 10-K are not to be
regarded as proxy soliciting material. Additional copies of the Annual Report
and Form 10-K 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.
William F. Hague, Jr.
Secretary
First Financial Corp.
180 Washington Street
Providence, Rhode Island 02903
April 7, 1999
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