<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________ to _________
Commission File Number 0-9756
RIGGS NATIONAL CORPORATION
_________________________________________
(Exact name of registrant as specified in its charter)
Delaware 52-1217953
________________________________________________
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1503 Pennsylvania Avenue, N.W., Washington, D.C. 20005
________________________________________________
(Address of principal executive offices)
(Zip Code)
(202) 835-6000
_____________
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or shorter periods
that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days.
Yes X . No .
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the last practical date.
Common Stock, $2.50 par value 30,233,214 shares
_____________________________ ____________________________
(Title of Class) (Outstanding at August 12, 1994)
<PAGE>
RIGGS NATIONAL CORPORATION
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION PAGE NO.
<S> <C>
Item 1. Financial Statements-Unaudited
Consolidated Statements of Income
Three and six months ended June 30, 1994 and 1993 3
Consolidated Statements of Condition
June 30,1994 and 1993, and December 31, 1993 4
Consolidated Statements of Changes in
Stockholders' Equity
Six months ended June 30, 1994 and 1993 5
Consolidated Statements of Cash Flows
Six months ended June 30, 1994 and 1993 6
Financial Ratios and Other Financial Data 7
Notes to the Consolidated Statements 8-12
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 13-25
PART II. OTHER INFORMATION
Item 1. Legal Proceedings None
Item 2. Change in Securities None
Item 3. Defaults Upon Senior Securities None
Item 4. Submission of Matters to a Vote of Security Holders 26
Item 5. Other Information None
Item 6. Exhibits and Reports on Form 8-K 27
SIGNATURES 27
</TABLE>
2
<PAGE>
RIGGS NATIONAL CORPORATION
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
(In thousands, except per June 30, June 30,
share amounts) 1994 1993 1994 1993
===========================================================================
<S> <C> <C> <C> <C>
INTEREST INCOME
Interest and Fees on Loans:
Taxable $47,437 $37,561 $93,055 $75,715
Tax-Exempt 975 1,263 2,480 2,597
________________________________________________________________________________
Total Interest and Fees on Loans 48,412 38,824 95,535 78,312
Interest and Dividends on Securities
Available for Sale 7,316 8,425 13,777 9,457
Interest on Securities Held-to-
Maturity:
Taxable 4,478 8,147 10,933 25,183
Tax-Exempt -- 32 33 65
______________________________________________________________________________
Total Interest on Securities Held-
to-Maturity 4,478 8,179 10,966 25,248
Interest on Money Market Assets:
Time Deposits with Other Banks 2,049 5,191 4,679 11,014
Federal Funds Sold and Resale
Agreements 2,168 4,671 3,364 9,043
________________________________________________________________________________
Total Interest on Money Market
Assets 4,217 9,862 8,043 20,057
________________________________________________________________________________
Total Interest Income 64,423 65,290 128,321 133,074
INTEREST EXPENSE
Interest on Deposits:
Savings and NOW Accounts 4,742 4,767 9,500 10,020
Money Market Deposit Accounts 6,379 7,268 12,669 15,263
Time Deposits in Domestic Offices 5,884 7,125 11,903 14,507
Time Deposits in Foreign Offices 2,629 7,724 5,438 15,917
_______________________________________________________________________________
Total Interest on Deposits 19,634 26,884 39,510 55,707
Interest on Short-Term Borrowings
and Long-Term Debt:
Federal Funds Purchased and
Repurchase Agreements 998 1,073 1,592 2,030
U.S. Treasury Demand Notes and
Other Short-Term Borrowings 813 446 1,441 877
Long-Term Debt 4,744 3,641 10,585 7,259
________________________________________________________________________________
Total Interest on Short-Term
Borrowings and Long-Term Debt 6,555 5,160 13,618 10,166
_______________________________________________________________________________
Total Interest Expense 26,189 32,044 53,128 65,873
Net Interest Income 38,234 33,246 75,193 67,201
Less: Provision for Loan Losses 2,100 49,193 4,200 63,393
______________________________________________________________________________
Net Interest Income after Provision
for Loan Losses 36,134 (15,947) 70,993 3,808
NONINTEREST INCOME
Trust Income 7,538 7,349 14,995 13,901
Service Charges and Fees 12,454 14,039 23,221 25,588
Gain on Settlement of Mortgage
Insurance Claims -- -- 4,739 --
Other Noninterest Income 2,502 2,957 4,954 6,033
Securities Gains, Net 68 22,929 1,424 24,002
_______________________________________________________________________________
Total Noninterest Income 22,562 47,274 49,333 69,524
NONINTEREST EXPENSE
Salaries and Wages 16,236 17,830 32,881 36,041
Pensions and Other Employee Benefits 4,953 5,043 9,850 10,291
Occupancy Expense, Net 5,574 6,916 11,589 13,526
Furniture and Equipment Expense 2,334 2,945 4,948 6,065
Other Real Estate Owned Expense, Net (280) 15,402 1,006 14,710
FDIC Insurance Expense 2,431 2,638 4,863 5,276
Data Processing Services 4,243 4,347 8,666 8,649
Restructuring Expense (2,059) 20,804 (2,059) 34,554
Other Noninterest Expense 16,124 22,735 31,399 39,009
______________________________________________________________________________
Total Noninterest Expense 49,556 98,660 103,143 168,121
Income (Loss) before Taxes 9,140 (67,333) 17,183 (94,789)
Applicable Income Tax (Benefit)
Expense (693) 5,300 (563) 5,465
==============================================================================
NET INCOME (LOSS) $9,833 $(72,633) $17,746$(100,254)
Dividends on Preferred Stock (3,046) (358) (6,391) (717)
===============================================================================
Net Income (Loss) Available
for Common Stock $6,787 $(72,991) $11,355 $(100,971)
EARNINGS (LOSS) PER SHARE: $0.23 $(2.89) $0.38 $(4.00)
</TABLE>
3
<PAGE>
RIGGS NATIONAL CORPORATION
CONSOLIDATED STATEMENTS OF CONDITION
<TABLE>
<CAPTION>
(In thousands, except per share amounts)
June 30, June 30, December 31,
(Unaudited in June 30, 1994 and 1993) 1994 1993 1993
==============================================================================
<S> <C> <C> <C>
ASSETS
Cash and Due from Banks $197,840 $207,857 $210,639
Money Market Assets:
Time Deposits with Other Banks 162,480 692,516 200,946
Federal Funds Sold and Resale
Agreements 282,700 446,603 205,000
___________________________________________________________________________
Total Money Market Assets 445,180 1,139,119 405,946
Securities Available for Sale (Market
Value: June 30, 1994, $539,061; June 30, 1993,
$538,793; December 31, 1993, $708,137) 539,061 538,525 708,137
Securities Held-to-Maturity (Market Value:
June 30, 1994, $417,126; June 30, 1993,
$588,464; December 31, 1993, $660,773) 420,962 580,935 660,062
Loans, Net of Unearned Discount, Unamortized
Premium and Net Deferred Fees 2,650,024 2,153,879 2,528,133
Reserve for Loan Losses 92,094 86,146 86,513
___________________________________________________________________________
Loans, Net of Reserve for Loan Losses 2,557,930 2,067,733 2,441,620
Premises and Equipment, Net 156,159 167,132 161,098
Accrued Interest Receivable 24,192 18,562 22,911
Customers' Acceptance Liability 589 3,292 300
Other Real Estate Owned, Net 49,215 62,724 52,803
Other Assets 122,118 136,660 116,721
===========================================================================
Total Assets $4,513,246 $4,922,539 $4,780,237
LIABILITIES
Noninterest-Bearing Demand Deposits $934,883 $894,299 $864,549
Interest-Bearing Deposits:
Savings and NOW Accounts 895,519 910,771 955,711
Money Market Deposit Accounts 1,097,646 1,188,389 1,082,048
Time Deposits in Domestic Offices 602,912 704,460 643,736
Time Deposits in Foreign Offices 207,953 494,091 227,780
___________________________________________________________________________
Total Interest-Bearing Deposits 2,804,030 3,297,711 2,909,275
___________________________________________________________________________
Total Deposits 3,738,913 4,192,010 3,773,824
Short-Term Borrowings:
Federal Funds Purchased and Repurchase
Agreements 69,930 153,700 302,330
U.S. Treasury Demand Notes and Other
Borrowed Funds 150,406 151,154 151,697
__________________________________________________________________________
Total Short-Term Borrowings 220,336 304,854 454,027
Acceptances Outstanding 589 3,292 300
Other Liabilities 48,652 54,761 45,564
Long-Term Debt 217,625 213,325 213,325
__________________________________________________________________________
Total Liabilities 4,226,115 4,768,242 4,487,040
STOCKHOLDERS' EQUITY
Preferred Stock-$1.00 Par Value
Shares Authorized - 25,000,000 at June 30,
1994 and 1993, and December 31, 1993;
Liquidation Preference - $25 per share
Cumulative Convertible Series A - 764,537
shares at June 30, 1994 and 1993, and
December 31, 1993 765 765 765
Noncumulative Perpetual Series B -
4,000,000 shares at June 30, 1994
and December 31, 1993 4,000 -- 4,000
Common Stock-$2.50 Par Value
Shares Authorized - 50,000,000 at June 30,
1994 and 1993, and December 31, 1993;
Shares Issued-31,124,012 at June 30, 1994,
26,122,812 at June 30, 1993 and
31,122,812 at December 31, 1993 77,810 65,307 77,807
Surplus
Preferred Stock 109,473 18,232 109,541
Common Stock 156,004 131,572 156,023
Foreign Exchange Translation Adjustments (1,061) (1,565) (1,527)
Undivided Profits (Accumulated Deficit) (19,610) (36,291) (30,965)
Unrealized Net Gain (Loss) on
Securities Available for Sale (16,527) -- 1,276
Treasury Stock-900,798 shares at June 30,
1994 and 1993, and December 31, 1993 (23,723) (23,723) (23,723)
__________________________________________________________________________
Total Stockholders' Equity 287,131 154,297 293,197
=========================================================================
Total Liabilities and Stockholders' Equity $4,513,246$4,922,539$4,780,237
</TABLE>
4
<PAGE>
RIGGS NATIONAL CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Unrealized
Net
Foreign Undivided Gain (Loss)
Preferred Common Exchange Profits on Securities Total
(Unaudited) Stock Stock Translation (Accumulated Available Treasury Stockholders'
(In thousands) $1.00 Par $2.50 Par Surplus Adjustments Deficit) for Sale Stock Equity
===============================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance,
December 31, 1992 $765 $65,307 $149,804 $(11,413) $64,680 $ -- $(23,723) $245,420
Net Loss -- -- -- -- (100,254) -- -- (100,254)
Cash Dividends--
Preferred -- -- -- -- (717) -- -- (717)
Foreign Exchange
Translation
Adjustments -- -- -- 9,848 -- -- -- 9,848
===============================================================================================================
Balance,
June 30, 1993 $765 $65,307 $149,804 $(1,565) $(36,291) $ -- $(23,723) $154,297
Balance,
December 31, 1993 $4,765 $77,807 $265,564 $(1,527) $(30,965) $1,276 $(23,723) $293,197
Net Income -- -- -- -- 17,746 -- -- 17,746
Issuance of
Common Stock--
Stock Option Plan -- 3 8 -- -- -- -- 11
Cash Dividends--
Preferred -- -- -- -- (6,391) -- -- (6,391)
Unrealized Net Gain
(Loss) on Securities
Available for Sale -- -- -- -- -- (17,803) -- (17,803)
Foreign Exchange
Translation
Adjustments -- -- -- 466 -- -- -- 466
Other -- -- (95) -- -- -- -- (95)
===============================================================================================================
Balance,
June 30, 1994 $4,765 $77,810 $265,477 $(1,061) $(19,610) $(16,527) $(23,723) $287,131
</TABLE>
5
<PAGE>
RIGGS NATIONAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
(In thousands) June 30,
Increase (decrease ) in cash and cash equivalents 1994 1993
==============================================================================
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (Loss) $17,746 ($100,254)
Adjustments to Reconcile Net Income (Loss) to
Cash Provided By (Used In) Operating Activities:
Provisions for Loan Losses 4,200 63,393
Provisions for Other Real Estate Owned Writedowns 1,935 18,615
Depreciation Expense and Amortization of
Leasehold Improvements 6,123 6,672
Amortization of Purchase Accounting
Adjustments 1,934 3,677
Restructuring Charges (2,059) 34,554
(Gains) Losses on Securities Sales (1,424) (24,002)
(Gains) Losses on Sales from Other
Real Estate Owned (1,068) (391)
(Increase) Decrease in Accrued Interest Receivable (1,281) 8,171
(Increase) Decrease in Other Assets (3,581) 7,176
Increase (Decrease) in Other Liabilities 5,147 261
_______________________________________________________________________________
Total Adjustments 9,926 118,126
______________________________________________________________________________
Net Cash Provided By (Used In) By
Operating Activities 27,672 17,872
CASH FLOWS FROM INVESTING ACTIVITIES:
Net (Increase) Decrease In Time Deposits
With Other Banks 38,466 (44,064)
Proceeds from Securities Available for Sale 130,986 711,862
Purchase of Securities Available for Sale (34,046) (934,799)
Proceeds from the Maturity of Securities
Held-to-Maturity 1,109,079 375,710
Purchase of Securities Held-to-Maturity (814,222) (292,713)
Net (Increase) Decrease in Loans (127,720) (36,373)
Proceeds from Sales and Other Repayments
of Other Real Estate Owned 10,318 10,577
Net (Increase) Decrease in Premises and Equipment (1,184) 590
Other, Net (387) (521)
________________________________________________________________________________
Net Cash Provided by (Used In) Investing Activities 311,290 (209,731)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net Increase (Decrease) in:
Demand, NOW, Savings and Money Market
Deposit Accounts 25,740 (104,543)
Time Deposits (60,651) (141,045)
Federal Funds Purchased and Repurchase Agreements (232,400) 101,279
U.S. Treasury Demand Notes and Other
Short-Term Borrowings (1,291) 63,075
Net Proceeds From the Issuance of Long-Term Debt 121,250 --
Repayment of Long-Term Debt (120,700) --
Net Proceeds From the Issuance of Common Stock 11 --
Dividend Payments (6,391) (717)
Other, Net (95) --
_______________________________________________________________________________
Net Cash Provided by (Used In) Financing Activities (274,527) (81,951)
Effect of Exchange Rate Changes 466 (2,234)
________________________________________________________________________________
Net Increase (Decrease) in Cash and Cash Equivalents 64,901 (276,044)
Cash and Cash Equivalents at Beginning of Period 415,639 930,504
===============================================================================
Cash and Cash Equivalents at End of Period $480,540 $654,460
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING
AND FINANCING ACTIVITIES:
Loans Transferred to Other Real Estate Owned $7,210 $24,437
Loans to Finance the Sale of
Other Real Estate Owned Sales -- 21,969
SUPPLEMENTAL DISCLOSURES:
Interest Paid (Net of Amount Capitalized) $53,129 $65,874
Income Tax Payments (Refund) (5,414) 218
</TABLE>
6
<PAGE>
RIGGS NATIONAL CORPORATION
Financial Ratios and Other Financial Data
(Unaudited)
<TABLE>
<CAPTION>
Six months ended June 30, 1994 1993
======================================================================
<S> <C> <C>
PERFORMANCE:
Net Income (Loss) to Average Assets 0.78% (3.98%)
Net Income (Loss) to Average Earning Assets 0.88% (4.51%)
Net Income (Loss) to Average
Stockholders' Equity 12.43% N/M
Net Income (Loss) Available to Common Stock
to Average Common Equity 13.18% N/M
Net Interest Income to Average
Earning Assets 3.81% 3.15%
ASSET QUALITY:
Nonaccrual Loans as a % of Average Loans 2.86% 10.95%
Nonperforming Assets as a % of Total
Loans and OREO 4.72% 14.07%
Nonaccrual and Renegotiated Loans as
a % of Total Loans 2.95% 11.56%
Net Charge offs as a % of Average Loans N/M 2.82%
Reserve for Loan Losses as a % of
Total Loans 3.48% 4.00%
Reserve for Loan Losses as a % of
Nonaccrual and Renegotiated Loans 118% 35%
PER COMMON SHARE:
Net Income (Loss) $0.38 $(4.00)
Book Value (at period end) $5.72 $ 5.36
Common Shares Outstanding(at period end) 30,223,214 25,222,014
Average Common Shares Outstanding 30,222,664 25,222,014
CAPITAL RATIOS AT PERIOD END:
Tier I 11.27% 5.34%
Combined Tier I and Tier II 18.18% 10.29%
Leverage 6.59% 2.85%
N/M--Not Meaningful
</TABLE>
7
<PAGE>
RIGGS NATIONAL CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(In thousands, except per share amounts)
NOTE 1. BASIS OF PRESENTATION
In the opinion of management, the accompanying unaudited
financial statements contain all adjustments, of a normal
recurring nature, necessary to present fairly, in conformity with
generally accepted accounting principles applied on a consistent
basis, the Corporation's consolidated financial position at June
30, 1994 and 1993, and December 31, 1993 (audited), and the
related changes in stockholders' equity, the consolidated
statements of income and cash flows for the interim periods
presented. These statements should be read in conjunction with
the financial statements and accompanying notes included in the
Corporation's latest annual report. Certain reclassifications
have been made to prior period amounts to conform with the
current year's presentation. The results of operations for the
first half of 1994 are not necessarily indicative of the results
to be expected for the full 1994 year.
NOTE 2. COMMON SHARES
Primary earnings per share are calculated using the weighted
average number of shares of common stock outstanding during the
period. The weighted average shares outstanding were 30,223,214
and 30,222,664 for the second quarter of 1994 and the six month
period ended June 30, 1994, respectively, with 25,222,014
weighted average shares outstanding for both the three and six
month periods in 1993. The weighted average number of shares of
common stock outstanding does not include shares subject to
unexercised options. Under the Riggs National Corporation 1993
Stock Option Plan (the "1993 Plan"), options to purchase up to
1,250,000 shares of common stock may be granted to key employees
of the Corporation. As of June 30, 1994, options to purchase
771,700 shares had been granted and remain outstanding under the
1993 Plan, at prices ranging from $9.00 to $9.88 per share and
are currently not dilutive. In May 1994, the board of directors
and the shareholders approved the Riggs National Corporation 1994
Stock Option Plan (the "1994 Plan"). Under the 1994 Plan,
options to purchase up to 1,250,000 shares of common stock may be
granted to key employees of the Corporation. At June 30, 1994,
no shares have been granted under the 1994 Plan.
NOTE 3. RESERVE FOR LOAN LOSSES
Changes in the reserve for loan losses are summarized as follows:
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, June 30,
1994 1993 1994 1993
====================================================================
==============
<S> <C> <C> <C> <C>
Balance, beginning
of period $86,711 $91,730 $86,513 $84,155
Provision for loan losses 2,100 49,193 4,200 63,393
Loans charged-off:
Domestic 3,426 37,466 5,464 42,468
Foreign 158 18,152 2,663 20,532
____________________________________________________________________
Total loans charged-off 3,584 55,618 8,127 63,000
Recoveries on
charged-off loans:
Domestic 4,024 278 6,014 1,056
Foreign 1,974 524 2,544 528
_____________________________________________________________________
Total recoveries on
charged-off loans 5,998 802 8,558 1,584
Net loans charged-off (2,414) 54,816 (431) 61,416
Foreign exchange
translation adjustment 869 39 950 14
=====================================================================
Balance, end of period $92,094 $86,146 $92,094 $86,146
</TABLE>
8
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
NOTE 4. OTHER REAL ESTATE OWNED
Changes in other real estate owned, net of reserves, are
summarized as follows:
<TABLE>
<CAPTION>
Six months ended
June 30,
1994 1993
==================================================================
<S> <C> <C>
Balance, beginning of period $52,803 $89,389
Additions 7,210 27,511
Deductions:
Sales and repayments 9,277 35,232
Charge-offs 1,908 19,994
Other -- (1,052)
_________________________________________________________________
Total Deductions 11,185 54,174
Foreign exchange
translation adjustments 387 (2)
=================================================================
Balance, end of period $49,215 $62,724
</TABLE>
Changes in the reserve for other real estate owned are summarized
as follows:
<TABLE>
<CAPTION>
Six months ended
June 30,
1994 1993
=====================================================================
<S> <C> <C>
Balance, beginning of period $3,716 $6,637
Additions:
Provision for OREO 1,935 18,615
Other additions 101 758
______________________________________________________________________
Total Additions 2,036 19,373
Deductions:
Charge-offs 1,908 19,994
Loss on sale of OREO
and selling expenses 1,598 --
Other -- --
_______________________________________________________________________
Total Deductions 3,506 19,994
Foreign exchange translation
adjustments 86 (3)
=======================================================================
Balance, end of period $2,332 $6,013
</TABLE>
9
<PAGE>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
NOTE 5. NEW FINANCIAL ACCOUNTING STANDARDS
At December 31, 1993, the Corporation implemented a narrower
definition of In-Substance Foreclosure as required by regulatory
agencies. Under previous financial accounting guidelines, a
nonaccrual loan was transferred from loans to other real estate
owned when foreclosure was probable or the loan was considered in-
substance foreclosed, which by definition in the Securities and
Exchange Commission's Financial Reporting Release No. 28 meant
that the borrower had little or no equity in the property,
proceeds for repayment of the loan could be expected to come only
from the operation or sale of the collateral, and the debtor had
either abandoned control of the collateral or it was doubtful
that the debtor would be able to rebuild equity in the collateral
or otherwise repay the loan in the foreseeable future. Loans
considered in-substance foreclosed must be recorded at the lower
of cost or fair value.
Under the revised regulatory accounting guidelines, a loan is
recognized as an in-substance foreclosure when the Corporation
has possession of an asset prior to obtaining legal title. This
definition is consistent with Statement of Financial Accounting
Standards No. 114, "Accounting by Creditors for Impairment of a
Loan." This change in treatment impacts only the classification
of accounts in the financial statements and does not result in a
change in the accounting policy related to the determination of
the assets' carrying value. The consolidated statements of
condition, income and cash flows and the related notes to the
consolidated financial statements reflect these
reclassifications.
NOTE 6. INCOME TAXES
The provision for income taxes is based on income reported for
consolidated financial statement purposes and includes deferred
taxes resulting from the recognition of certain revenues and
expenses in different periods for tax reporting purposes.
Income (loss) before income taxes relating to the operations of
domestic offices and foreign offices for the three and six month
periods ended June 30, 1994 and 1993, were as follows:
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, June 30,
1994 1993 1994 1993
=====================================================================
<S> <C> <C> <C> <C>
Domestic Offices $2,722 $(9,592) $ 2,958 $(30,126)
Foreign Offices 6,418 (57,741) 14,225 (64,663)
=====================================================================
Total $9,140 $(67,333) $17,183 $(94,789)
</TABLE>
The provision for income taxes for the three and six month
periods ended June 30, 1994 and 1993 consisted of the following:
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, June 30,
1994 1993 1994 1993
=====================================================================
<S> <C> <C> <C> <C>
Current Provision
(Benefit):
Federal $ -- $ (12) $ -- $ (24)
State 70 3 147 126
Foreign (763) -- (710) 54
_____________________________________________________________________
Total Current Provision
(Benefit) (693) (9) (563) 156
Deferred Provision
(Benefit):
Federal -- 5,309 -- 5,309
State -- -- -- --
Foreign -- -- -- --
_____________________________________________________________________
Total Deferred Provision
(Benefit) -- 5,309 -- 5,309
=====================================================================
Applicable Income Tax
(Benefit) Expense $(693) $5,300 $(563) $5,465
</TABLE>
10
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
NOTE 7. COMMITMENTS AND CONTINGENT LIABILITIES
In the normal course of business, various commitments and
contingent liabilities arise, including commitments to extend
credit, standby letters of credit, interest rate swaps, forward
contracts, futures, options on financial futures, and interest
rate caps, collars and floors. The following table summarizes
the Corporation's exposure to these off-balance sheet commitments
and contingent liabilities at June 30, 1994:
<TABLE>
<CAPTION>
Contractual
or Notional
Value at
June 30, 1994
=============================================================
<S> <C>
Commitments to Extend Credit:
Commercial $216,929
Real Estate 228,940
Consumer 64,403
______________________________________________________________
Total Commitments to Extend
Credit $510,272
Letters of Credit:
Commercial $97,838
Standby-Financial 30,607
Standby-Performance 34,539
______________________________________________________________
Total Letters of Credit $162,984
Financial Instruments with off-
balance sheet market risk:
Interest rate swap agreements $261,258
Interest rate option contracts 200,000
Foreign exchange contracts:
Commitments to purchase 34,486
Commitments to sell 186,360
</TABLE>
The Corporation's management believes financial derivatives can
be an important element of prudent balance sheet and interest
rate risk management. Interest-rate swaps, caps, collars and
floors are entered into as hedges against fluctuations in the
interest rate of specifically identified assets or liabilities.
There is no effect on total assets or liabilities of the
Corporation. Interest-rate swaps involve the contractual
exchange of fixed and variable interest payment obligations based
upon an underlying notional principal amount. Entering into
derivative transactions involves not only the risk of dealing
with counterparties and their ability to meet the terms of the
contracts but also the interest rate risk of unmatched positions.
Credit risk is managed through limits and monitoring procedures.
Net receivables or payables under agreements designated as hedges
are recorded when realized as adjustments to interest income or
interest expense related to the hedged asset or liability.
Related fees are deferred and amortized over the life of the
agreements as an adjustment to interest income or interest
expense related to the hedged asset or liability. Unrealized
gains and losses are not reflected in the accompanying financial
statements, unless the Corporation changes its intention relative
to the hedges or the underlying hedged assets are disposed.
Other than swaps entered into for customers, the Corporation's
involvement with derivative financial instruments has been for
hedging purposes, and includes a $200 million interest rate swap
agreement, entered into in July 1993, to hedge money market
assets against the possibility of declining interest rates.
Since inception, this swap agreement has functioned as an
effective hedge. At June 30, 1994, total net receivables and
payables relating to unpaid interest income/expense from the swap
agreement, totaled $2.1 million and $1.8 million, respectively,
with no unamortized fees outstanding at quarter-end. As interest
rates began to rise in early 1994, the market value of the swap
agreement has fluctuated resulting in an unrealized gain of $0.9
million at year-end 1993, to an unrealized loss of approximately
$11.0 million at June 30, 1994. Based on the possibility of
further increases in interest rates, in April 1994, the
Corporation purchased a separate instrument known as a corridor
to mitigate the negative impact of rising interest rates on the
cash flow from the swap agreement. At June 30, 1994, there were
not any net receivables and payables outstanding relating to
interest income/expense from the corridor, with unamortized fees
totaling $2.2 million and an unrealized gain of approximately
$600 thousand at quarter-end.
11
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
NOTE 8. OTHER DEVELOPMENTS
On February 1, 1994, the Corporation sold $125 million of 8.5%
subordinated notes due February 2006. The notes were sold at par
and are not callable for five years. The notes were sold under a
shelf registration statement declared effective on January 13,
1994. The net proceeds from the sale totaled $121.3 million and
were used to redeem approximately $51.5 million of floating-rate
subordinated notes and $69.2 million of floating-rate
subordinated capital notes, both bearing an interest rate of
5.25% at the date of redemption and maturing in 1996.
On May 9, 1994, the Corporation announced that Paul M. Homan had
decided to end his association with the Corporation as President,
Chief Executive Officer and a director of The Riggs National Bank
of Washington, D.C. ("Riggs-Washington"), and as Vice Chairman of
the Corporation. On July 13, 1994, the Corporation announced the
election of Fred L. Bollerer (formerly Executive Vice President-
General Banking of Riggs-Washington) to the positions of
President and Chief Executive Officer of Riggs-Washington.
The United States House of Representatives has approved a
conference committee bill that, if enacted, would authorize
interstate acquisitions of banks by bank holding companies
without geographic limitation one year after enactment and,
subject to the ability of states to opt-out, interstate mergers
of banks after June 1, 1997. The Corporation expects that the
bill will be approved by the Senate and signed by the President.
NOTE 9. REGULATORY MATTERS
In December 1992, new federal regulations were adopted to
implement the prompt corrective action provisions of the Federal
Deposit Insurance Corporation Improvement Act (FDICIA), which
group FDIC-insured institutions into categories based on certain
capital ratios and other criteria. The categories are "well
capitalized," "adequately capitalized," "undercapitalized,"
"significantly undercapitalized" and "critically
undercapitalized." Based on the numerical capital levels
specified in the implementing regulations, each of the
Corporation's insured banking subsidiaries would be classified as
"well-capitalized." However, because the regulations provide
that, irrespective of numerical capital levels, an institution is
not considered "well-capitalized" if it is subject to a formal
agreement requiring the maintenance of a specific level of
capital, Riggs-Washington is classified as "adequately
capitalized."
On May 14, 1993, the Corporation entered into a Memorandum of
Understanding with the Federal Reserve Bank of Richmond ("Federal
Reserve") and Riggs-Washington entered into a Written Agreement
with the Office of the Comptroller of the Currency (the "OCC").
The Memorandum of Understanding and the Written Agreement were
the result of regulatory concern over financial and operational
weaknesses and continued losses related primarily to the
Corporation's domestic and United Kingdom commercial real estate
exposure. Under the terms of the Memorandum of Understanding,
the Corporation must notify the Federal Reserve Bank in advance
of dividend declarations, the issuance and/or redemption of long-
term debt and the use of cash assets in certain circumstances.
The Corporation is also required to submit plans and reports to
the Federal Reserve Bank relating to capital, asset quality, loan
loss reserves and operations, including contingency measures if
projected operational results do not occur.
In accordance with the terms of the Written Agreement, a
committee of the Board of Directors of Riggs-Washington monitors
and coordinates compliance with the Written Agreement,
implementation of recommendations previously made by an
independent management consultant, and implementation of the
action plan and work plan previously adopted by Riggs-Washington.
The Corporation and Riggs-Washington are in substantial
compliance with the provisions and requirements of the Memorandum
of Understanding and the Written Agreement as of June 30, 1994.
12
<PAGE>
RIGGS NATIONAL CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
SUMMARY
The Corporation reported consolidated net income of $9.8 million
($0.23 per share) for the second quarter of 1994 compared to a
loss of $72.6 million ($2.89 per share) for the same quarter a
year earlier. The second quarter performance in 1994 is the
Corporation's fourth consecutive profitable quarter. Results for
the second quarter of 1994 reflect the benefits of a $4.5 million
(pretax) increase in the net interest income (on a tax equivalent
basis, see "Net Interest Income") and a $2.1 million (pretax)
credit representing the recapture of restructuring expenses
accrued in the first quarter of 1993 for the cost of implementing
BankStart '93 (see "Performance Enhancing Strategies"). Two
factors contributing to the 1993 loss were a $49.2 million
provision for loan losses and a $20.8 million charge relating to
the restructuring of the Corporation's domestic and certain
foreign operations (see "Performance Enhancing Strategies").
The provision for loan losses in the second quarter of 1994 was
$2.1 million. The reduced provision in 1994 when compared to the
prior year was the result of improvements in asset quality as
nonperforming assets were reduced over 59% from $311.8 million at
the end of the second quarter of 1993 to $127.5 million at the
end of the second quarter of 1994. The June 30, 1994 level of
nonperforming assets is the lowest since the third quarter of
1990. The Corporation's overall asset quality continues to
improve as a result of collection and asset-management efforts as
well as improved economic conditions domestically and in the
United Kingdom.
Consolidated net income for the first half of 1994 was $17.7
million ($0.38 per share) compared with a loss of $100.3 million
($4.00 per share) for the same period a year earlier.
Significant factors contributing to the 1993 loss were a $63.4
million provision for loan losses and restructuring charges of
$34.6 million (see "Performance Enhancing Strategies"). The 1993
provision for loan losses related to domestic commercial loans
and foreign (primarily United Kingdom) corporate loans. Results
for 1994 reflect the benefits of a $7.0 million (pretax) increase
in the net interest income (on a tax equivalent basis, see "Net
Interest Income"), a $4.7 million (pre-tax) gain from the
settlement of mortgage insurance claims related to other real
estate owned in the United Kingdom, and a $2.1 million (pretax)
credit representing the recapture of restructuring expenses
accrued in the first quarter of 1993 for the cost of implementing
BankStart '93 (see "Performance Enhancing Strategies"). The
reduced provision for the first half of 1994 was the result of
improved asset quality as discussed in the preceding paragraph.
Assets totaled $4.51 billion at June 30, 1994, down $267.0
million from year-end 1993, and a decrease of $409.3 million from
June 30, 1993. The decrease in total assets from June 30, 1993
consisted of decreases in securities and money market assets
totaling $853.4 million, offset by an increase in net loans of
$496.1 million. The decrease in short-term, lower-yielding
assets combined with the increase in higher-yielding, longer-term
assets is part of an overall asset/liability strategy implemented
in 1993 and ongoing in 1994 to improve the Corporation's overall
interest margin performance. Deposits at June 30, 1994 totaled
$3.74 billion, a decrease of $34.9 million from year-end 1993 and
a decrease of $453.1 million from June 30, 1993. The decrease
during the last twelve months is primarily due to reductions in
foreign time deposits of $286.1 million as the Corporation exited
from certain deposit gathering businesses in foreign operations,
combined with decreases in domestic time deposits of $101.5
million. Total liabilities decreased $260.9 million during the
first half of 1994 and decreased $542.1 million from a year ago.
The decrease from the preceding year's balance is due to the
aforementioned decline in deposits, in addition to an $84.5
million decrease in short-term borrowings.
PERFORMANCE ENHANCING STRATEGIES
During the first quarter of 1994, the Corporation continued to
see the positive impact of BankStart '93 and the financial
restructurings of domestic and certain foreign operations.
BankStart '93 was initiated in January 1993 and was a corporation-
wide project to improve efficiency and increase operational
effectiveness. In the first quarter of 1993, the Corporation
took a restructuring charge of $13.8 million, representing
management's estimate of the cost of implementing the program.
During the first half of 1994, the implementation of BankStart
'93 was substantially completed and a $2.1 million charge was
recognized, primarily from the recovery of severance related
expenses. This recovery was the result of lower than anticipated
expenses associated with staff reductions over the past year. At
June 30, 1994, $1.3 million of other restructuring related
expenses remained in the accrual and are expected to be paid
during the remainder of 1994.
13
<PAGE>
PERFORMANCE ENHANCING STRATEGIES, CONTINUED
At the end of the second quarter of 1993, the Corporation
announced a financial restructuring of its domestic and certain
foreign operations, which included enhancing certain lines of
business domestically and exiting unprofitable lines of business
in the United Kingdom, reducing its investments in certain
foreign subsidiaries and increasing reserves against problem
assets in order to facilitate their disposition. At June 30,
1994, the restructurings were substantially complete, with
reductions of current problem assets expected to continue
throughout 1994, as discussed in the "Asset Quality" section.
Accrued and unpaid restructuring expenses totaled $1.4 million at
June 30, 1994, with related disbursements expected to be made
during the remainder of 1994.
SECURITIES
Schedules detailing securities available for sale and securities
held-to-maturity follow:
<TABLE>
<CAPTION>
June 30, 1994 June 30, 1993
Available for Sale Amortized Market/ Amortized Cost/ Market
(In thousands) Cost Book Value Book Value Value
===========================================================================
<S> <C> <C> <C> <C>
U.S. Treasury Securities $ 45,482 $ 44,864 $438,607 $438,606
Mortgage-Backed Securities 496,342 480,433 99,918 100,187
Other Securities 13,764 13,764 -- --
===========================================================================
Total $555,588 $539,061 $538,525 $538,793
</TABLE>
<TABLE>
<CAPTION>
Held-To-Maturity June 30, 1994 June 30, 1993
(In thousands) Book Value Market Value Book Value Market Value
===========================================================================
<S> <C> <C> <C> <C>
U.S. Treasury
Securities $292,362 $291,522 $110,346 $112,115
Government Agencies
Securities 125,000 122,004 -- --
Obligations of
States & Political
Subdivisions -- -- 1,999 2,161
Mortgage-Backed
Securities -- -- 434,496 437,673
Other Securities 3,600 3,600 34,094 36,515
===========================================================================
Total $420,962 $417,126 $580,935 $588,464
</TABLE>
Investment securities and securities held for sale for 1993 are
presented in the held-to-maturity and available for sale
categories, respectively, in the tables above. Effective
December 31, 1993, the Corporation adopted SFAS No. 115,
"Accounting for Certain Investments in Debt and Equity
Securities." SFAS No. 115 requires that all unrealized gains and
losses from the securities available for sale portfolio be
included, net, in stockholders' equity until realized. This
treatment is a change from previous accounting policy, which
required such securities to be carried at the lower of cost or
market with any unrealized gains and losses included in earnings.
SFAS No. 115 may not be applied retroactively to prior years'
financial statements.
The weighted-average maturities and yields for securities held-to-
maturity, adjusted for anticipated prepayments, was approximately
1.7 years and 5.50% at June 30, 1994. The weighted-average
maturities and yields for securities available for sale, adjusted
for anticipated prepayments, was approximately 3.8 years and
5.55% at June 30, 1994. Total securities held-to-maturity and
available for sale decreased $408.2 million (29.8%) during the
first half of 1994, while decreasing $159.4 million (14.2%) since
June 30, 1993. The decrease in securities for the first half of
1994 is due to maturities and sales during the period being
shifted to residential mortgage loans and money market assets, as
well as being used to fund reductions in deposits and short-term
borrowings during the period. The decrease in securities during
the past year occurred as proceeds from maturities and sales were
invested in longer-term, fixed-rate residential mortgage loans,
as part of a strategy to improve earnings.
14
<PAGE>
LOANS
The following table reflects loans by type for the periods
indicated.
<TABLE>
<CAPTION>
June 30, June 30, December 31,
Loan Type (In thousands) 1994 1993 1993
=================================================================
<S> <C> <C> <C>
Commercial and Financial $455,296 $356,496 $412,006
Real Estate -
Commercial/Construction 354,504 481,563 388,442
Residential Mortgage 1,323,928 648,237 1,149,363
Home Equity 221,116 260,554 234,049
Consumer 75,834 89,266 82,819
Foreign 212,709 319,928 255,396
_________________________________________________________________
Total Loans 2,643,387 2,156,044 2,522,075
Less: Unearned Discount
(Unamortized Premium)
and Net Deferred Fees (6,637) 2,165 (6,058)
=================================================================
Total $2,650,024 $2,153,879 $2,528,133
</TABLE>
At June 30, 1994, total loans outstanding (net of
premiums/discounts) were $2.65 billion, compared with $2.53
billion at December 31, 1993, and $2.15 billion at June 30, 1993.
The increase in loans from June 30, 1993, was primarily
attributable to purchases of approximately $436 million in
residential mortgage loans during the fourth quarter of 1993 and
an additional $90 million during the first quarter of 1994,
combined with local area originations of residential mortgage
loans. The increase in residential mortgages is part of a
strategy to improve earnings (see "Securities"). The increase
from December 31, 1993, which totaled $121.9 million, is due
primarily to an increase in residential mortgages of $174.6
million during the first half of 1994, the result of residential
loan purchases of $90 million during the first quarter of 1994
combined with local area originations during the six-month
period. Commercial and financial loans also increased during the
first half of 1994 ($43.3 million), the result of new local area
commercial loan originations. These increases were partially
offset by net decreases in real estate-commercial/construction,
home equity, consumer and foreign loans, which decreased an
aggregate $96.5 million during the period.
REAL ESTATE-COMMERCIAL/CONSTRUCTION LOANS
GEOGRAPHIC DISTRIBUTION BY TYPE
JUNE 30, 1994
<TABLE>
<CAPTION>
Geographic Location
Project Type District of United
(In thousands) Columbia Virginia Maryland Kingdom Other Total
========================================================================
<S> <C> <C> <C> <C> <C> <C>
Land $16,710 $31,131 $29,085 $ -- $ -- $ 76,926
Construction:
Single-Family
Residential 10,080 16,128 5,117 -- -- 31,325
Office Buildings 37,412 18,505 17,401 -- 5,384 78,702
Multifamily
Residential 1,366 4,113 463 -- 2,750 8,692
Industrial/
Warehouse Loans 391 2,930 7,126 -- -- 10,447
Shopping Centers -- 16,592 18,479 -- -- 35,071
Hotels 4,621 5,671 -- -- -- 10,292
Other 1,219 1,985 98 -- -- 3,302
___________________________________________________________________________
Total Land and
Construction 71,799 97,055 77,769 -- 8,134 254,757
Commercial Mortgages 25,860 47,835 26,622 147,258 1,227 248,802
===========================================================================
Total Real Estate-
Commercial/
Construction Loans $97,659 $144,890 $104,391 $147,258 $9,361 $503,559
</TABLE>
15
<PAGE>
LOANS, CONTINUED
At June 30, 1994, the Corporation had no cross-border
outstandings exceeding 1% of its total assets to countries
experiencing difficulties in repaying their external debt. The
table below details the countries in which the Corporation had
total outstandings in excess of 1% of its total assets.
CROSS-BORDER OUTSTANDINGS WHICH EXCEED 1% OF TOTAL ASSETS
<TABLE>
<CAPTION>
% of 90 Days
Total or More Potential
(In millions) Amount Assets Nonaccrual Renegotiated Past Due Problem
===============================================================================
<S> <C> <C> <C> <C> <C> <C>
June 30, 1994
United Kingdom $178.5 4.0% $ 22.5 $ 0.4 $ -- $ 11.0
December 31, 1993
United Kingdom 186.8 3.9% 37.7 0.8 -- 8.9
June 30, 1993
United Kingdom 352.9 7.2% 52.8 1.0 -- 28.2
France 115.7 2.4% -- -- -- --
Italy 94.1 1.9% -- -- -- --
Netherlands 52.1 1.1% -- -- -- --
</TABLE>
At June 30, 1994, Italy was the only country to which the
Corporation had cross-border outstandings between .75% and 1.00%
of total assets, totaling $39.6 million (.88%), compared with
cross-border outstandings to Portugal totaling $43.8 million
(.89%), Switzerland totaling $41.0 million (.83%), and Australia
totaling $37.1 million (.75%), at June 30, 1993. The Corporation
did not have any cross-border outstandings between .75% and 1.00%
of total assets at December 31, 1993.
16
<PAGE>
ASSET QUALITY
Nonperforming assets, which include nonaccrual loans,
renegotiated loans and other real estate owned (net of reserves),
totaled $127.5 million at June 30, 1994, a $85.8 million (40.2%)
decrease from the year-end 1993 total of $213.3 million and a
$184.3 million (59.1%) decrease from the June 30, 1993 total.
The composition of nonperforming assets and past due loans is
detailed below.
NONPERFORMING AND PAST DUE LOANS
<TABLE>
<CAPTION>
June 30, June 30, December 31,
(In thousands) 1994 1993 1993
======================================================================
<S> <C> <C> <C>
NONPERFORMING ASSETS:
Nonaccrual Loans: (1)
Domestic $47,098 $163,646 $85,075
Foreign 27,688 74,590 45,099
______________________________________________________________________
Total Nonaccrual Loans 74,786 238,236 130,174
Renegotiated Loans: (2)
Domestic 3,064 9,799 29,465
Foreign 409 1,024 834
______________________________________________________________________
Total Renegotiated Loans 3,473 10,823 30,299
Other Real Estate Owned, Net:
Domestic 42,856 47,689 45,049
Foreign 6,359 15,035 7,754
______________________________________________________________________
Total Other Real Estate
Owned, Net 49,215 62,724 52,803
======================================================================
Total Nonperforming Assets $127,474 $311,783 $213,276
PAST DUE LOANS: (3)
Domestic $2,327 $1,697 $3,315
Foreign -- -- 4
======================================================================
Total Past Due Loans $2,327 $1,697 $3,319
</TABLE>
[FN]
(1) - Loans (other than consumer) that are in default in either
principal or interest for 90 days or more that are not well-
secured and in the process of collection.
(2) - Loans for which terms have been renegotiated to provide a
reduction of interest or principal as a result of a deterioration
in the financial position of the borrower in accordance with
Statement of Financial Accounting Standards No. 15. Renegotiated
loans do not include $14.4 million in loans renegotiated at
market terms that have returned to accrual status.
(3) - Loans contractually past due 90 days or more in principal or
interest that are well-secured and in the process of collection.
17
<PAGE>
ASSET QUALITY, CONTINUED
At June 30, 1994, nonaccrual loans, including both domestic and
foreign loans, were $74.8 million, or 2.82% of total loans,
compared with $130.2 million, or 5.2% of total loans at year-end
1993 and $238.2 million, or 11.1% of total loans at June 30,
1993. Loans are generally placed on nonaccrual status when, in
management's judgment, there is doubt as to the ability to
collect either principal or interest, or when interest or
principal is 90 days or more past due and the loan is not well-
secured and in the process of collection. The decrease in
nonaccrual loans during the six month period ended June 30, 1994
was due to paydowns and payoffs of $43.8 million, in addition to
loans returning to accrual status of $15.2 million, transfers to
other real estate owned of $7.2 million and charge-offs of $4.3
million. These reductions were partially offset by net additions
of $6.4 million, foreign exchange fluctuations of $1.3 million
and a transfer of a renegotiated loan totaling $7.4 million to
nonaccrual status. Of the $43.8 million in paydowns and payoffs
during the first half of 1994, $16.8 million (38%) related to
foreign nonaccrual loans and $27.0 million (62%) related to
domestic nonaccrual loans. Renegotiated loans decreased $26.8
million during the first half of 1994, with paydowns and payoffs
totaling $2.7 million, combined with charge-offs of $1.9 million
and transfers back to accrual status of $14.8 million and the
aforementioned $7.4 million transfer to nonaccrual status during
the period.
NONACCRUAL AND RENEGOTIATED REAL ESTATE-COMMERCIAL/CONSTRUCTION
LOANS
GEOGRAPHIC DISTRIBUTION BY TYPE
JUNE 30, 1994
<TABLE>
<CAPTION>
Geographic Location
Project Type District of United
(In thousands) Columbia Virginia Maryland Kingdom Other Total
===============================================================================
<S> <C> <C> <C> <C> <C> <C>
Land $ -- $9,124 $7,336 $ -- $ -- $16,460
Construction:
Single-Family
Residential -- 1,450 1,475 -- -- 2,925
Office Buildings -- 2,433 2,664 -- 2,929 8,026
Multifamily Residential 600 -- 253 -- -- 853
Warehouse Loans 391 1,250 1,381 -- -- 3,022
Shopping Centers -- -- -- -- -- --
Hotels -- -- -- -- -- --
Other 517 -- 97 -- -- 614
Commercial Mortgages -- -- -- 23,516 -- 23,516
================================================================================
Total Nonaccrual and
Renegotiated Real
Estate Commercial/
Construction Loans $1,508 $14,257 $13,206 $23,516 $2,929 $55,416
</TABLE>
Other real estate owned, net of valuation reserves, declined to
$49.2 million at June 30, 1994, from $52.8 million at December
31, 1993 and $62.7 million at June 30, 1993. The decrease during
the first half of 1994 was the result of paydowns, sales and
exchange rate fluctuations of $8.9 million and writedowns of $1.9
million, partially offset by net additions of $7.2 million. At
June 30, 1994, residential and commercial land composed 63% of
other real estate owned with office, industrial, retail and other
categories accounting for the remainder of the portfolio.
OTHER REAL ESTATE OWNED
GEOGRAPHIC DISTRIBUTION BY TYPE
JUNE 30, 1994
<TABLE>
<CAPTION>
Geographic Location
Project Type District of United
(In thousands) Columbia Virginia Maryland Kingdom Other Total
===============================================================================
<S> <C> <C> <C> <C> <C> <C>
Land $703 $26,065 $4,034 $-- $-- $30,802
Single-Family Residential 665 561 3,179 -- 15 4,420
Office Buildings/Retail 385 972 4,109 2,549 -- 8,015
Multifamily Residential -- -- -- -- -- --
Warehouse Loans 215 1,953 -- 2,004 -- 4,172
Shopping Centers -- -- -- 1,806 -- 1,806
Other -- -- -- -- -- --
===============================================================================
Total Other Real Estate
Owned, Net-(1) $1,968 $29,551 $11,322 $6,359 $15 $49,215
</TABLE>
[FN]
(1)-Balances are net of valuation reserves totaling $2.3 million.
18
<PAGE>
ASSET QUALITY, CONTINUED
Past due loans consist predominantly of residential real estate
and consumer loans that are well-secured and in the process of
collection and that are accruing interest. Past due loans
decreased $1.0 million during the first half of 1994 to $2.3
million, while increasing $630 thousand from June 30, 1993.
At June 30, 1994, the Corporation had identified approximately
$29.9 million in potential problem loans that are currently
performing but that management believes have certain attributes
that may lead to nonaccrual or past due status in the foreseeable
future. These loans consisted of $18.4 million of domestic
loans, primarily commercial and financial, and $11.5 million of
commercial property and corporate loans originated in the United
Kingdom.
The Corporation's banking subsidiaries maintain reserves for loan
losses that are available to absorb potential losses in the
current loan portfolio. The reserve for loan losses is based on
management's assessment of existing conditions and reflects
potential losses determined to be probable and subject to
reasonable estimation. The reserve for loan losses was $92.1
million, or 3.48% of total loans (net of premiums/discounts) at
June 30, 1994, compared with $86.5 million, or 3.42% of total
loans at December 31, 1993, and $86.1 million, or 4.00% of total
loans at June 30, 1993. The decrease in the percentage of
reserves to total loans from June 30, 1993 to June 30, 1994 was
due to the increase in total loans during the periods, primarily
in residential mortgage-type loans. The Corporation's coverage
ratio was 118% at June 30, 1994, 54% at year-end 1993 and 35% at
June 30, 1993. The increase in the coverage ratio during the
periods is primarily the result of a decline in total
nonperforming assets and an increase in the reserve for loan
losses during the periods.
DEPOSITS, SHORT-TERM BORROWINGS AND LONG-TERM DEBT
Deposits, which are offered through several banking subsidiaries
of the Corporation, are the primary and most stable source of
funds for the Corporation. Deposits totaled $3.74 billion at
June 30, 1994, a slight decrease from the year-end 1993 deposit
total and a decrease of $453.1 million (10.8%) from the June 30,
1993 deposit total. The decrease from last year's balance was
due to decreases in foreign time deposits ($286.1 million) as the
Corporation exited from certain foreign deposit gathering
businesses, in addition to declines in domestic time deposits
($101.5 million) consistent with the general decline in bank
deposits in response to the low interest rate environment.
Short-term borrowings decreased $233.7 million (51.5%) during the
first half of 1994, while decreasing $84.5 million (27.7%) since
the second quarter of 1993. The decrease in short-term
borrowings over the last year was attributable to repayments of
certain short-term borrowings from proceeds of sales and
maturities within the securities portfolio.
On February 1, 1994, the Corporation sold $125 million of 8.5%
Subordinated Notes, due February 2006. The notes were priced at
par and are not callable for five years. The notes were sold
under a shelf registration statement declared effective on
January 13, 1994. The Corporation has used the net proceeds from
the offering, $120.7 million, to redeem floating-rate
subordinated notes and subordinated capital notes due in 1996.
The proceeds were placed in short-term investments prior to the
redemption of the floating-rate notes in March 1994. The balance
of long-term debt at June 30, 1994 was $217.6 million, up
slightly from the balance at year-end and June 30, 1993 of $213.3
million. The increase from the year-end balance reflects the
difference between the gross proceeds from the sale of the
subordinated notes in February 1994 ($125.0 million) and the
amount of debt redeemed in March 1994 ($120.7 million).
19
<PAGE>
LIQUIDITY
The Corporation seeks to maintain sufficient liquidity to meet
the needs of depositors, borrowers and creditors, at a reasonable
cost and without undue stress on the operations of the
Corporation and its banking subsidiaries. The Corporation's
Asset-Liability Committee actively analyzes and manages liquidity
in coordination with other areas of the organization (see
"Interest Rate Risk Management" below). At June 30, 1994, the
Corporation's liquid assets, on a consolidated basis, which
includes cash and due from banks, U.S. Treasury securities and
Government obligations, federal funds sold, resale agreements and
time deposits at other banks, totaled $1.6 billion (35.1% of
total assets). This compares with $1.8 billion (36.9%) at
December 31, 1993 and $2.4 billion (49.4%) at June 30, 1993. The
decrease in total liquid assets and the percentage of liquid
assets to total assets from June 30, 1993 is the result of the
Corporation's strategy to improve earnings by increasing its loan-
to-deposit ratio. The Corporation expects liquid assets to
remain at approximately the June 30, 1994 level for the
foreseeable future.
Liquidity needs of the Corporation are met by the steady source
of funds maintained through the Corporation's core deposit
relationships, in addition to its ability to attract new deposits
and other sources of funds, such as short-term borrowings,
securities available for sale and assets available for
securitization.
INTEREST RATE RISK MANAGEMENT
Financial institutions manage the inherently different maturity
and repricing characteristics of their loan and deposit products
to achieve a desired interest rate sensitivity position and to
limit their exposure to interest rate risk. The Corporation
manages interest rate risk through its Asset-Liability Committee,
comprised of senior executives of the Corporation, which reports
to the Executive Committee of the Board of Directors. Policies,
approved by the board of directors, have been established related
to acceptable levels of interest rate risk.
As a result of the recent low interest rate environment, the
Corporation's interest sensitivity gap has turned liability
sensitive. Thus, increases in interest rates would tend to
decrease the Corporation's net interest income while downward
movements would tend to increase net interest income. The one-
year interest sensitivity gap is currently liability sensitive by
approximately $600 million, or 14% of total assets, at June 30,
1994.
The interest sensitivity gap position reflects the impact of the
off-balance sheet derivative transactions the Corporation has
entered into to help manage its interest rate risk. The
Corporation uses off-balance sheet instruments to manage interest
rate risk when such instruments present a cost effective
alternative to traditional on-balance sheet methods. The
Corporation is not a dealer in off-balance sheet instruments, nor
does it enter into off-balance sheet positions as a part of its
trading account activities.
20
<PAGE>
STOCKHOLDERS' EQUITY AND REGULATORY CAPITAL
Total stockholders' equity at June 30, 1994 was $287.1 million,
down $6.1 million from the year-end 1993 total and up $132.8
million from June 30, 1993. The decrease during 1994 was the
result of earnings totaling $17.7 million being more than offset
by $17.8 million of unrealized losses on securities in the
Corporation's available for sale portfolio, combined with
dividends on preferred stock of $6.4 million. The increase in
stockholders' equity over the preceding year is primarily
attributable to the issuance of common and preferred stock in
October 1993, which resulted in net proceeds of $132.3 million.
The Corporation's total (Combined Tier I and Tier II) and core
(Tier I) capital ratios were 18.18% and 11.27%, respectively, at
June 30, 1994, compared with 16.81% and 10.76% at December 31,
1993 and 10.29% and 5.34% at June 30, 1993, respectively. The
Federal Reserve Board's risk-based capital guidelines require
bank holding companies to meet a minimum ratio of qualifying
total (combined Tier I and Tier II) capital to risk-weighted
assets of 8.00%, at least half of which must be composed of core
(Tier I) capital elements. The Federal Reserve Board has
established an additional capital adequacy guideline-the leverage
ratio, which measures the ratio of Tier I capital to quarterly
average assets. The most highly rated bank holding companies are
required to maintain a minimum leverage ratio of 3.00%. However,
most bank holding companies, including the Corporation, are
expected to maintain an additional cushion of at least 100 to 200
basis points above the 3.00% minimum. The actual required ratio
for individual bank holding companies is based on the Federal
Reserve Board's assessment of the applicable company's asset
quality, earnings performance, interest-rate risk and liquidity.
The Federal Reserve Board has not advised the Corporation of a
specific leverage ratio requirement. The Corporation's leverage
ratio was 6.59% at June 30, 1994, compared with leverage ratios
of 6.03% and 2.85% at December 31, 1993 and June 30, 1993,
respectively. Regulatory capital ratios do not include the
impact of the $16.5 million unrealized loss on securities
available for sale portfolio. The Corporation's equity to assets
ratio which does include these unrealized losses remains solid
with a ratio of 6.36% at June 30, 1994 compared to 6.13% and
3.13% at December 31, 1993 and June 30, 1993, respectively.
The Corporation ensures that its operating subsidiaries are
capitalized in accordance with regulatory guidelines. The three
national bank subsidiaries of the Corporation are subject to
minimum capital ratios prescribed by the Office of the
Comptroller of the Currency, which are generally the same as
those of the Federal Reserve Board. The following table details
the actual and required minimum ratios for the Corporation and
its insured bank subsidiaries.
CAPITAL RATIOS
<TABLE>
<CAPTION>
Required
June 30, 1994 Dec. 31, 1993 June 30, 1993 Minimums
==============================================================================
<S> <C> <C> <C> <C>
Riggs National Corporation:
Tier I 11.27% 10.76% 5.34% 4.00%
Combined Tier I and Tier II 18.18 16.81 10.29 8.00
Leverage 6.59 6.03 2.85 3.00
The Riggs National Bank of
Washington, D.C.:(1)
Tier I 11.86 10.69 10.04 6.00
Combined Tier I and Tier II 13.14 11.97 11.31 10.00
Leverage 6.92 6.13 5.37 5.00
The Riggs National Bank of
Virginia:
Tier I 17.47 17.05 16.99 4.00
Combined Tier I and Tier II 18.72 18.31 18.24 8.00
Leverage 9.43 8.94 8.48 3.00
The Riggs National Bank of
Maryland:
Tier I 11.86 11.46 10.90 4.00
Combined Tier I and Tier II 13.11 12.74 12.16 8.00
Leverage 6.59 6.69 6.32 3.00
</TABLE>
[FN]
(1) Under the terms of the Written Agreement, Riggs-Washington
has committed to the OCC to maintain a Tier I ratio of 6.00%,
a combined ratio of 10.00% and a leverage ratio of 5.00%.
21
<PAGE>
NET INTEREST INCOME
Net interest income on a tax-equivalent basis (net interest
income plus an amount equal to the tax savings on tax-exempt
interest) totaled $39.0 million in the second quarter of 1994, up
$916 thousand from the first quarter of 1994, and up $4.5 million
from the second quarter of 1993. Net interest income on a tax-
equivalent basis was $77.0 million for the first half of 1994,
compared with $70.0 million for the same period in the prior
year. The net interest margin (net interest income on a tax-
equivalent basis divided by average earning assets) for the
second quarter of 1994 was 3.92% (see schedule on the following
page), an increase of 22 basis points from 3.70% for the first
quarter of 1994 and 83 basis points from 3.09% for the second
quarter of 1993. The net interest margin for the six-month
periods ended June 30, 1994 and 1993, was 3.81% and 3.15%,
respectively. Since June 30, 1993, the positive impact of the
lower interest rate environment on interest paid for deposits and
borrowings was only partially offset by lower yields on earning
assets. While interest rates rose during the first half of 1994,
the net interest margin continued to improve as assets generally
repriced faster than liabilities. The Corporation does not
anticipate significant changes in the net interest margin for the
remainder of the year. Also having a positive impact on the
Corporation's net interest income and margin have been decreases
in nonperforming assets, combined with a shift to longer-term,
higher-yielding assets from short-term investments (see
"Securities"). In 1993, the Corporation established a goal of
increasing its loan-to-deposit ratio to approximately 70% in
1994. The loan-to-deposit ratio stood at 70.9% at June 30, 1994.
The goal was largely accomplished through the purchase in the
open market of approximately $526 million of residential
mortgages in 1993 and the first quarter of 1994. The ratio of
loans to average earning assets was 66.0% for the second quarter
of 1994, compared with ratios of 62.4% and 48.8% for the first
quarter of 1994 and the second quarter of 1993, respectively.
Total interest income recognized on nonaccrual and restructured
loans totaled $1.1 million and $1.0 million for the six months
ended June 30, 1994 and 1993, respectively. Interest income
which would have been earned under the original terms of these
loans was $4.4 million and $6.1 million, respectively, which had
the effect of reducing the net interest margin by approximately
16 basis points in 1994 and 28 basis points in 1993.
INTEREST INCOME ON NONACCRUAL AND
RENEGOTIATED LOANS
<TABLE>
<CAPTION>
Six months
ended
(In thousands) June 30,
1994(1)
===================================================================
<S> <C>
Interest Income at Original
Terms:
Nonaccrual Loans:
Domestic Loans $2,590
Foreign Loans 1,448
Renegotiated Loans 371
===================================================================
Total $4,409
Actual Interest Income
Recognized:
Nonaccrual Loans:
Domestic Loans $371
Foreign Loans 732
Renegotiated Loans --
===================================================================
Total $1,103
</TABLE>
[FN]
(1) For loans on nonaccrual and renegotiated status at June 30,
1994, the table shows total interest income at original terms
and actual income recognized for the six months ended June
30, 1994.
22
<PAGE>
RIGGS NATIONAL CORPORATION
AVERAGE CONSOLIDATED STATEMENTS OF CONDITION AND RATES
<TABLE>
<CAPTION>
Three Months Ended Three Months Ended
June 30, 1994 June 30, 1993
(Tax-equivalent basis) Average Income/ Average Income/
(In thousands) Balance Expense Rate Balance Expense Rate
================================================================================
<S> <C> <C> <C> <C> <C> <C>
Assets
Loans: (1) (2)
Commercial - Taxable $ 390,259 $6,116 6.29 % $281,075 $4,568 6.52 %
Commercial - Tax-Exempt 63,254 1,496 9.49 86,924 1,968 9.08
Real Estate -
Commercial/Construction 360,663 6,985 7.77 528,651 7,723 5.86
Residential Mortgage 1,301,574 23,431 7.22 575,351 11,877 8.28
Home Equity 222,246 3,941 7.11 268,741 4,691 7.00
Consumer 73,383 2,207 12.06 90,083 2,757 12.28
Foreign 222,141 4,788 8.65 351,141 5,945 6.79
______________________________________________________________________________
Total Loans
(Including Fees) 2,633,520 48,964 7.46 2,181,966 39,529 7.27
Securities Available
for Sale 548,134 7,316 5.35 642,889 8,425 5.26
Securities Held-to-
Maturity: (1)
U.S. Treasury Securities 300,181 2,746 3.67 112,023 1,245 4.46
Obligations of States
and Political Subdivisions -- -- -- 1,999 51 10.23
Government Agencies and Mortgage-
Backed Securities 91,417 1,559 6.84 473,741 6,564 5.56
Other Securities 19,675 353 7.20 44,173 855 7.76
______________________________________________________________________________
Total Securities Held-to-
Maturity 411,273 4,658 4.54 631,936 8,715 5.53
Time Deposits with
Other Banks 179,440 2,049 4.58 408,540 5,191 5.10
Federal Funds Sold and
Resale Agreements 217,465 2,168 4.00 607,944 4,671 3.08
_______________________________________________________________________________
Total Earning Assets and
Average Rate Earned 3,989,832 65,155 6.55 4,473,275 66,531 5.97
Less: Reserve for
Loan Losses 89,579 92,231
Cash and Due from Banks 219,010 291,247
Premises and
Equipment, Net 158,170 171,269
Other Assets 185,241 209,612
===============================================================================
Total Assets $4,462,674 $5,053,172
Liabilities And
Stockholders' Equity
Interest-Bearing Deposits:
Savings and NOW Accounts $925,608 $4,742 2.05 % $929,103 $4,767 2.06 %
Money Market Deposit
Accounts 1,051,344 6,379 2.43 1,209,524 7,268 2.41
Time Deposits in
Domestic Accounts 724,946 5,884 3.26 841,089 7,615 3.63
Time Deposits in
Foreign Offices 214,529 2,629 4.92 526,486 7,234 5.51
______________________________________________________________________________
Total Interest-Bearing
Deposits 2,916,427 19,634 2.70 3,506,202 26,884 3.08
Borrowed Funds:
Federal Funds
Purchased and
Repurchase Agreements 107,953 998 3.71 157,813 1,073 2.73
U.S. Treasury Notes and
Other Borrowed Funds 90,009 813 3.62 65,236 446 2.74
Long-Term Debt 217,624 4,744 8.74 213,325 3,641 6.85
______________________________________________________________________________
Total Interest-Bearing Funds
and Average Rate Paid 3,332,013 26,189 3.15 3,942,576 32,044 3.26
Demand Deposits 799,543 838,053
Other Liabilities 49,255 48,849
Stockholders' Equity 281,863 223,694
==============================================================================
Total Liabilities and
Stockholders' Equity $4,462,674 $5,053,172
===============================================================================
Net Interest Income and Spread $38,966 3.40 % $34,487 2.71 %
==============================================================================
Net Interest Margin 3.92 % 3.09 %
</TABLE>
[FN]
(1) Income and rates are computed on a tax-equivalent basis using
a Federal income tax rate of 34% and local tax rates as
applicable.
(2) Nonperforming loans are included in average balances used to
determine rates.
23
<PAGE>
RIGGS NATIONAL CORPORATION
AVERAGE CONSOLIDATED STATEMENTS OF CONDITION AND RATES
<TABLE>
<CAPTION
Six Month Ended Six Month Ended
June 30, 1994 June 30, 1993
(Tax-equivalent basis) Average Income/ Average Income/
(In thousands) Balance Expense Rate Balance Expense Rate
===============================================================================
<S> <C> <C> <C> <C> <C> <C>
Assets
Loans: (1) (2)
Commercial - Taxable $374,662 $11,055 5.95 % $282,123 $9,511 6.80 %
Commercial - Tax-Exempt 69,600 3,881 11.24 88,131 4,067 9.31
Real Estate -
Commercial/Construction 372,778 14,786 8.00 526,763 15,594 5.97
Residential Mortgage 1,277,987 45,547 7.19 556,670 22,933 8.31
Home Equity 225,526 7,832 7.00 270,901 9,427 7.02
Consumer 75,548 4,464 11.92 94,511 5,728 12.22
Foreign 220,019 9,370 8.59 356,831 12,522 7.08
_______________________________________________________________________________
Total Loans
(Including Fees) 2,616,120 96,935 7.47 2,175,930 79,782 7.39
Securities Available
for Sale 593,241 13,777 4.68 402,067 9,457 4.74
Securities Held-to-
Maturity:(1)
U.S. Treasury Securities 439,316 8,836 4.06 432,068 13,429 6.27
Obligations of States and
Political Subdivisions 983 52 10.67 1,999 103 10.39
Government Agencies and Mortgage-
Backed Securities 45,961 1,559 6.84 393,111 11,465 5.88
Other Securities 18,008 942 10.55 42,311 1,586 7.56
______________________________________________________________________________
Total Securities Held-to-
Maturity 504,268 11,389 4.55 869,489 26,583 6.17
Time Deposits with
Other Banks 182,005 4,679 5.18 447,189 11,014 4.97
Federal Funds Sold and
Resale Agreements 182,521 3,364 3.72 584,746 9,043 3.12
______________________________________________________________________________
Total Earning Assets and
Average Rate Earned 4,078,155 130,144 6.44 4,479,421 135,879 6.12
Less: Reserve for
Loan Losses 88,269 88,668
Cash and Due from Banks 229,938 291,240
Premises and Equipment, Net 159,227 172,227
Other Assets 185,622 229,451
===============================================================================
Total Assets $4,564,673 $5,083,671
Liabilities And
Stockholders' Equity
Interest-Bearing Deposits:
Savings and NOW Accounts $932,289 $9,500 2.05 % $935,220 $10,020 2.16 %
Money Market
Deposit Accounts 1,056,285 12,669 2.42 1,222,351 15,263 2.52
Time Deposits in
Domestic Offices 783,943 11,903 3.06 789,843 14,507 3.70
Time Deposits in
Foreign Offices 216,598 5,438 5.06 592,259 15,917 5.42
_______________________________________________________________________________
Total Interest-Bearing
Deposits 2,989,115 39,510 2.67 3,539,673 55,707 3.17
Borrowed Funds:
Federal Funds Purchased
and Repurchase Agreements 94,272 1,592 3.41 155,221 2,030 2.64
U.S. Treasury Notes and
Other Borrowed Funds 88,244 1,441 3.29 63,590 877 2.78
Long-Term Debt 248,206 10,585 8.60 213,325 7,259 6.86
_______________________________________________________________________________
Total Interest-Bearing
Funds and Average
Rate Paid 3,419,837 53,128 3.13 3,971,809 65,873 3.34
Demand Deposits 808,617 835,320
Other Liabilities 48,250 43,090
Stockholders' Equity 287,969 233,452
===============================================================================
Total Liabilities and
Stockholders' Equity $4,564,673 $5,083,671
==============================================================================
Net Interest Income and
Spread $77,016 3.31 % $70,006 2.78 %
===============================================================================
Net Interest Margin 3.81 % 3.15 %
</TABLE>
[FN]
(1) Income and rates are computed on a tax-equivalent basis using
a Federal income tax rate of 34% and local tax rates as
applicable.
(2) Nonperforming loans are included in average balances used to
determine rates.
24
<PAGE>
NONINTEREST INCOME
Noninterest income for the second quarter of 1994 was $22.6
million, compared with $26.8 million for the first quarter of
1994 and $47.3 million for the second quarter of 1993.
Noninterest income for the six-month periods ended June 30, 1994
and 1993, totaled $49.3 million and $69.5 million, respectively.
The $24.7 million decrease when comparing quarters on a year-to-
year basis is attributable to decreases in securities gains of
$22.9 million and $1.6 million in service charges and fees. The
$20.2 million decrease when comparing the six-month periods on a
year-to-year basis is the result of a similar decrease in
securities gains of $22.6 million, offset by $4.7 million in
pretax income from the settlement of mortgage insurance claims
relating to other real estate owned properties in the United
Kingdom. Increased trust income of $1.1 million, the result of
increased advisory fees, was offset by a decrease of $2.4 million
in service charges and other fee income.
NONINTEREST EXPENSE
Noninterest expense for the second quarter of 1994 was $49.6
million, a decrease of $49.1 million when compared with the
second quarter of 1993 and a $4.0 million decrease when compared
with the first quarter of 1994. The decrease when compared to
the second quarter of 1993 is primarily attributable to
restructuring charges, other real estate expenses and other
expense. Restructuring charges and other real estate expenses
account for $22.9 million and $15.7 million, respectively, of the
variance. Other noninterest expense in the second quarter of
1993 included unusual items of $3.6 million related to the write-
off of mortgage insurance claims related to other real estate
owned properties in the United Kingdom and $1.6 million related to
the write-off of goodwill associated with Riggs Valmet, S. A.,
a Swiss investment advisor in which the Corporation holds a 51%
stake.
Noninterest expense for the six-month periods ended June 30, 1994
and 1993, totaled $103.1 million and $168.1 million,
respectively. The $65.0 million decrease in noninterest expense
from the prior year is primarily due to the changes noted above
as well as the $13.8 million restructuring charge taken in the
first quarter of 1993 related to BankStart '93. In addition to
the significant items noted above, there were reductions in
expenses across the board with staff, occupancy and equipment
related expenses accounting for an additional $6.7 million of the
decrease.
TAXES
The Corporation's provision for income taxes includes both
federal and state income taxes. Income tax benefits totaling
$693 thousand were recognized for the quarter ended June 30,
1994, compared with income tax expense of $130 thousand and $5.3
million for the quarters ended March 31, 1994 and June 30, 1993.
Income tax benefits totaling $563 thousand, compared with income
tax expense of $5.5 million, was recognized for the six-month
periods ended June 30, 1994 and 1993, respectively. The 1994 tax
provision is less than the statutory rate due to the
Corporation's ability to carryforward net operating losses and
the settlement of an outstanding tax issue with the United
Kingdom taxing authorities. This settlement resulted in a tax
refund of $750 thousand.
25
<PAGE>
RIGGS NATIONAL CORPORATION
EXHIBITS AND SIGNATURES
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Annual Meeting of the shareholders of the Corporation
was held on May 11, 1994, in Washington, D.C. Chairman of
the Board Joe L. Allbritton presided and 24,370,440 of the
30,223,214 shares outstanding were represented at the
meeting in person or by proxy.
1-ELECTIONS OF DIRECTORS
Nominees for membership on the Board of Directors of the
Corporation, listed below, were elected by the
shareholders. The following schedule listed the number of
shares cast for each nominee:
<TABLE>
<CAPTION>
Total Total
Votes For Votes Withheld
===========================
<S> <C> <C>
Barbara B. Allbritton 24,162,747 730,524
Joe L. Allbritton 24,178,136 730,524
Robert L. Allbritton 23,475,962 730,524
Calvin Cafritz 24,210,782 730,524
Charles A. Camalier, III 24,217,108 730,524
Timothy C. Coughlin 24,222,151 730,524
Ronald E. Cuneo 24,234,051 730,524
Floyd E. Davis, III 24,225,771 730,524
Jacqueline C. Duchange 24,210,038 730,524
Michela A. English 24,214,307 730,524
James E. Fitzgerald 24,220,612 730,524
David J. Gladstone 24,196,682 730,524
Lawrence I. Hebert 24,224,707 730,524
Michael J. Jackson 24,196,234 730,524
Leo J. O'Donovan 24,230,983 730,524
Steven B. Pfeiffer 24,228,572 730,524
John A. Sargent 24,218,458 730,524
Robert L. Sloan 24,217,157 730,524
James W. Symington 24,179,897 730,524
Jack Valenti 24,171,232 730,524
Eddie N. Williams 24,227,769 730,524
</TABLE>
2-PROPOSAL TO ADOPT 1994 STOCK OPTION PLAN
By a vote of 22,594,855 For, to 1,090,964 Against, with
108,231 Abstaining, the Corporation's shareholders
approved a proposal to adopt the Riggs National
Corporation 1994 Stock Option Plan.
3-BOARD OF DIRECTORS OWNERSHIP OF MINIMUM NUMBER OF SHARES
OF VOTING STOCK
By a vote of 1,806,389 For, 17,098,558 Against, with
101,487 Abstaining, the Corporation's shareholders
rejected a proposal to require members of the
Corporation's Board of Directors to own at least 1,000
shares of voting stock of the Corporation.
4-CHIEF EXECUTIVE OFFICER POSITION COMBINED WITH CHAIRMAN
OF THE BOARD POSITION
By a vote of 1,363,068 For, 17,479,902 Against, with
163,464 Abstaining, the Corporation's shareholders
rejected a proposal recommending the Board of Directors
take the necessary steps to combine the positions of Chief
Executive Officer and Chairman of the Board, with the
Chief Executive Officer assuming both positions.
26
<PAGE>
RIGGS NATIONAL CORPORATION
EXHIBITS AND SIGNATURES
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
(10.6)- Amended 1993 Stock Option Plan
(10.7)- 1994 Stock Option Plan
(b) REPORTS FORM 8-K
On May 9, 1994, the Corporation filed a Form 8-K
announcing that Mr. Paul M. Homan, Vice Chairman of the
Corporation and President and Chief Executive Officer of
Riggs-Washington decided to end his association with the
Corporation and Riggs-Washington.
On July 14, 1994, the Corporation filed a Form 8-K
announcing the election of Fred L. Bollerer to the
position of President and Chief Executive Officer of Riggs-
Washington and the election of Robert L. Sloan (a director
of the Corporation) to Vice Chairman of the board of
directors of both the Corporation and Riggs-Washington.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
Date: August 15, 1994 /s/ TIMOTHY C. COUGHLIN
_________________ ___________________________
Timothy C. Coughlin
President
Date: August 15, 1994 /s/ JOHN L. DAVIS
_________________ __________________________
John L. Davis
Chief Financial Officer
(Principal Financial and
Accounting Officer)
27
<PAGE>
RIGGS NATIONAL CORPORATION
1993 STOCK OPTION PLAN
I. Purpose of the Plan.
This 1993 Stock Option Plan (the "Plan") of Riggs National
Corporation (the "Corporation") for key employees of the Corporation
and its subsidiaries is to advance the best interest of the Corporation
by providing such employees who have a substantial responsibility for
its management and growth with an additional incentive to continue to
contribute to the growth and success of the Corporation by increasing
their proprietary interest in the success of the Corporation.
II. Definitions.
A. "Board" means the Board of Directors of the Corporation.
B. "Common Stock" means the common shares, $2.50 par value per
share, of the Corporation.
C. "Joint Compensation Committee" means compensation committees
of the Board and of the Board of Directors of The Riggs
National Bank of Washington, D.C., but excluding any member
of either committee who is not a Disinterested Person.
D. "Corporation" means the Riggs National Corporation.
E. "Date of Grant" means the date on which an Option is approved
by the Outside Directors Committee.
F. "Director" means a member of the Corporation's Board of
Directors.
G. "Disability" as to an Option holder has the same meaning as
the term is used in the long-term disability insurance plan
contributed to by the Corporation or its Subsidiary on behalf
of the Option holder or if the Option holder is not covered
by any such plan, disability shall have the meaning provided
for in Section 22(e)(3) of the Internal Revenue Code of 1986,
as amended, or any successor statute thereto (the "Code").
H. "Disinterested Person" means a Director who was not granted
during the one (1) year immediately preceding the Director's
appointment to the committee, and is not granted while a
member of the committee, equity securities under the Plan or
any other plan of the Corporation or an affiliate of the
Corporation, except as may be otherwise permitted by Rule 16b-
3(c)(2) promulgated under the Securities Exchange Act of
1934.
I. "Fair Market Value" shall mean, with respect to a share of
Common Stock, (i) if the Common Stock is traded on the
National Market System or a national securities exchange, the
closing price of the Common Stock on the day immediately
preceding determination date or if there are no sales on such
date, then on the next preceding date on which there were
sales of Common Stock, all as published in the NASDAQ
National Market Issues report in the Eastern Edition of The
1
<PAGE>
Wall Street Journal, (ii) if the Common Stock is not traded on the
National Market System or listed on a national securities
exchange, the mean between the bid and asked prices last reported
by the National Association of Securities Dealers, Inc. for the
over-the-counter market on the day immediately preceding the deter-
mination date or, if no bid and asked prices are reported on such
date, then on the next preceding date on which there were such
quotations, or (iii) if the Common Stock, is not traded on the
National Market System or listed on a national securities exchange
and quotations for the Common Stock are not reported by the
National Association of Securities Dealers, Inc, the Fair Market
Value determined by the Compensation Committee on the basis of
available prices for the Common Stock or in such manner as the
Compensation Committee shall agree. Notwithstanding the preceding,
the Fair Market Value on a given determination date of Common
Stock subject to Incentive Stock Options or Common Stock valued in
connection with the exercise of Incentive Stock Options shall be
an amount which is equal to the Compensation Committee's good
faith determination of the Common Stock's value on the given
determination date and the Compensation Committee shall for all
purposes of this Plan have the authority to determine Fair Market
Value using methods other than those described in this Section, if
the Compensation Committee determines that such alternative
methods more properly reflect the Fair Market Value of the Common
Stock. Furthermore, in all cases, Fair Market Value shall not be
less than the Par Value of the Common Stock.
J. "Incentive Stock Option" means an Option qualifying for
special tax treatment under Section 422 of the Code.
K. "Insider" means any person subject to the provisions of
section 16 of the Act, including an "officer" of the
Corporation within the meaning of section 16 of the Act, a
"director" within the meaning of section 3(a)(7) of the Act,
and a "beneficial owner" of more than ten percent (10%) of
any class of the equity securities of the Corporation within
the meaning of section 16 of the Act.
L. "Key Employee" means any employee (including employees who
are also officers or directors, but not including directors
who are not also employees) of the Corporation or any
Subsidiary Corporation who have substantial responsibility in
the direction and management of the Corporation or a
Subsidiary Corporation as determined by the Joint
Compensation Committee.
M. "Nonqualified Stock Option" means an Option that is not an
Incentive Stock Option.
N. "Option" means an Incentive Stock Option or a Nonqualified
Stock Option granted under this Plan.
O. "Outside Director" means a Director who is neither an
employee or officer of the Corporation or its subsidiaries.
P. "Outside Directors Committee" means a committee composed of
all Outside Directors who are Disinterested Persons.
Q. "Parent Corporation" has the same meaning used in Section
424(e) of the Code.
R. "Plan" means the Riggs National Corporation 1993 Stock Option
Plan as set forth herein, which may be amended from time to
time.
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S. "Subsidiary Corporation" has the same meaning used in Section
424(f) of the Code.
III. Shares of Common Stock Subject to the Plan.
Subject to the provisions of Section 8 of the Plan, the aggregate
number of authorized but unissued shares of Common Stock that may be
issued pursuant to Options granted under the Plan will not exceed one
million two hundred fifty thousand (1,250,000) shares. Shares that by
reason of expiration of an Option or otherwise are no longer subject to
purchase pursuant to an Option granted under the Plan may again be
available for issuance pursuant to Options under the Plan.
IV. Administration of the Plan.
The Plan shall be administered by the Joint Compensation
Committee. The Joint Compensation Committee has the authority to
recommend to the Outside Directors Committee the Key Employees to be
granted Options, the times when Options will be granted, the number of
shares subject to each Option, the exercise price of each Option, the
vesting schedule (if any) of each Option, the conditions precedent (if
any) to acceleration of the vesting schedule of each Option, the method
of payment for shares acquired upon the exercise of Options, the
expiration date of each Option, the Fair Market Value of Common Stock
subject to Options, and any other terms and conditions of the Options
it deems appropriate. The Outside Directors Committee shall have the
authority to approve, reject or modify recommended grants of Options by
the Joint Compensation Committee. A majority of the Outside Directors
Committee shall constitute a quorum. All actions by the Outside
Directors Committee shall require a majority of the members of such
committee present at such meeting. Any action by the Outside Directors
Committee may be taken by a unanimous written consent of all members of
the committee, and action so taken shall be fully effective as if it
had been taken by a vote of the members at a meeting duly called and
held. No Option shall be granted unless and until such grant is
approved by the Outside Directors Committee.
All questions of interpretation of the Plan or of any Options will
be determined solely by the Joint Compensation Committee and any such
determination will be final and binding upon all persons having an
interest in the Plan.
V. Eligibility.
Key Employees of the Corporation and any Subsidiary Corporation
will be eligible to participate in the Plan, as approved by the
Compensation Committee.
VI. Terms and Conditions of Stock Options.
Each Option granted under this Plan will be evidenced by an Option
agreement between the Corporation and the recipient which sets forth
the exercise price of the Option, the vesting schedule (if any) of the
Option, the expiration date of the Option, and any other terms or
conditions approved by the Outside Directors Committee subject to the
following terms and conditions:
A. Option Price.
1. Nonqualified Options. The exercise price per share for
the shares subject to a Nonqualified Stock Option will
be no less than one hundred percent (100%) of the Fair
Market Value of the Common Stock on the Date of Grant.
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2. Incentive Options. The exercise price per share for the
shares subject to an Incentive Stock Option will be no
less than one hundred percent (100%) of the Fair Market
Value of the Common Stock on the Date of Grant.
However, the exercise price per share for shares subject
to an Incentive Stock Option granted to an individual
who on the Date of Grant owns more than ten percent
(10%) of the total combined voting power of all classes
of stock of the Corporation (or of a Parent Corporation
or a Subsidiary Corporation) will not be less than one
hundred and ten percent (110%) of the Fair Market Value
of the Common Stock on the Date of Grant.
B. Term of Options. Notwithstanding any other provisions of the
Plan or any Option agreement, no Option will be exercisable
after the expiration of ten (10) years from the Date of
Grant. Furthermore, no Incentive Stock Option granted to an
individual who on the Date of Grant owns more than ten
percent (10%) of the total combined voting power of all
classes of stock of the Corporation (or of a Parent
Corporation or a Subsidiary Corporation) will be exercisable
after the expiration of five (5) years from the Date of
Grant.
C. Maximum Value of Options which are Incentive Options. To the
extent that the aggregate Fair Market Value of the Common
Stock with respect to which Incentive Stock Options granted
to any person are exercisable for the first time during any
calendar year (under all stock option plans of the
Corporation, a Parent Corporation and any Subsidiary
Corporation) exceeds $100,000, the options are not Incentive
Stock Options. For purposes of this paragraph, the Fair
Market Value of the Common Stock will be determined as of the
time the Incentive Stock Option with respect to the Common
Stock is granted. This paragraph will be applied by taking
Incentive Stock Options into account in the order in which
they are granted.
D. Vesting of Options and Termination of Employment. An
Option will be exercisable only to the extent that it
vested on the date of exercise. Vesting of an Option will
cease on the date that an Option holder is no longer an
employee of the Corporation or a Parent Corporation or Subsid-
iary Corporation (the "date of termination"), and the Option
will be exercisable only to the extent the Option is vested
on the date of termination. However, if the Option holder is
no longer an employee because of death or Disability, any
Option that is not one hundred percent (100%) vested will
automatically become one hundred percent (100%) vested on the
date of termination. If the Option holder's termination is
for any reason other than death, the right to exercise the
Option (to the extent that it is vested) will expire ninety
(90) days after the date of termination. If the Option
holder's termination is for reason of death, the right to
exercise the Option will expire one (1) year after the date
of the holder's death, and until expiration, the holder's
heirs, legatees or legal representative may exercise the
Option.
E. Exercise.
1. Cash Payment. An Option may be exercised as to all or
any number of whole shares of the Common Stock with
respect to which the Option is vested. Options may be
exercised only by the Option holder's written notice to
the secretary of the
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Corporation (the "exercise notice") and only if the
exercise notice is accompanied by payment in cash of the
full exercise price for the shares with respect to which
the Option is exercised, except as otherwise provided
herein.
2. Noncash Payment. The Joint Compensation Committee may
approve payment of the exercise price in the form of (i)
Common Stock of the Corporation other than stock
acquired upon exercise of the Option, (ii) a combination
of cash and such Common Stock, or (ii) Common Stock
acquired upon exercise of the Option, provided that the
requirements of Rule 16b-3 promulgated under the Act are
met. The value of any Common Stock used to pay the
exercise price or any portion thereof will be the Fair
Market Value of Common Stock on the date of exercise.
3. Broker-Dealer Payment. The Joint Compensation Committee
may approve payment of the unpaid exercise price by a
broker-dealer or by the Option holder with cash advanced
by the broker-dealer, if the exercise notice is
accompanied by the Option holder's written irrevocable
instructions to deliver the Common Stock acquired upon
exercise of the Option to the broker-dealer.
F. Nontransferability. No Option granted under the Plan,
contingent or otherwise, will be transferable, assignable or
subject to any encumbrance, pledge, or charge of any nature,
except by will or the laws of descent and distribution.
During the lifetime of an Option holder, an Option will be
exercisable only by the Option holder or by the Option
holder's legal representative. The executor or administrator
of the estate of the Option holder may transfer any rights
with respect to such Option to the person or persons or
entity (including a trust) entitled thereto under the will of
the holder of such Option or under the laws of intestacy.
G. Stock Legend. The Corporation may require that certificates
evidencing shares of Common Stock purchased upon the exercise
of Incentive Stock Options issued under the Plan be endorsed
with a legend in substantially the following form:
The shares evidenced by this certificate may not be sold
or transferred prior to ______________, 19____, in the
absence of a written statement from Riggs National
Corporation (the "Corporation") to the effect that the
Corporation is aware of the fact of such sale or
transfer.
The blank contained in such legend shall be filled in with
the date that is the later of: (i) one year and one day
after the date of exercise of such Incentive Stock Option or
(ii) two years and one day after the date of grant of such
Incentive Stock Option. Upon delivery to the Corporation, at
its principal executive office, of a written statement to the
effect that such shares have been sold or transferred prior
to such date, the Corporation does hereby agree to promptly
deliver to the transfer agent for such shares a written
statement to the effect that the Corporation is aware of the
fact of such sale or transfer. The Corporation may also
require the inclusion of any additional legend which may be
necessary or appropriate.
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H. Change in Control. In the event of a Change in Control (as
hereinafter defined), all then-outstanding Options will
become one hundred percent (100%) vested and exercisable as
of the Change in Control. However, if exercise of any then-
outstanding Options would not be in conformity with all
applicable federal securities laws, the Option holder will be
paid in cash an amount equal to the difference between the
Fair Market Value of the shares of Common Stock subject to
the Option as of the Change in Control and the exercise price
of the Option, or if in the opinion of counsel to the
Corporation the immediate exercisability of such Options (or
cash payment), when taken into consideration with all other
"parachute payments" as defined in Section 280G of the Code,
would result in an "excess parachute payment" as defined in
such section, such Option shall not become immediately
exercisable, except and to the extent the Joint Compensation
Committee in its discretion shall otherwise determine. For
purposes of the Plan, "Change in Control" means the sale of
substantially all of the Corporation's assets or the
acquisition, whether directly, indirectly, beneficially
(within the meaning of Rule 13d-3 of the Act), or of record,
of securities of the Corporation representing twenty-five
percent (25%) or more in the aggregate voting power of the
Corporation's then-outstanding Common Stock by any "person"
(within the meaning of Sections 13(d) and 14(d) of the Act),
including any corporation or group of associated persons
acting in concert, other than (i) the Corporation or its
subsidiaries and/or (ii) any employee pension benefit plan
(within the meaning of Section 3(2) of the Employee
Retirement Income Security Act of 1974) of the Corporation or
of its subsidiaries, including a trust established pursuant
to any such plan; provided, that a Change in Control will not
result from a (A) transfer of the Corporation's voting
securities by a person who is the beneficial owner, directly
or indirectly, of twenty-five percent (25%) or more of the
voting securities of the Corporation (a "25 Percent Owner")
to (i) a member of such 25 Percent Owner's immediate family
(within the meaning of Rule 16a-1(e) of the Act) either
during such 25 Percent Owner's lifetime or by will or the
laws of descent and distribution; (ii) any trust as to which
the 25 Percent Owner or a member (or members) of his
immediate family (within the meaning of Rule 16a-1(e) of the
Act) is the beneficiary; (iii) any trust as to which the 25
Percent Owner is the settlor with sole power to revoke; (iv)
any entity over which such 25 Percent Owner has the power,
directly or indirectly, to direct or cause the direction of
the management and policies of the entity, whether through
the ownership of voting securities, by contract or otherwise;
or (v) any charitable trust, foundation or corporation under
Section 501(c)(3) of the Code which is funded by the 25
Percent Owner; or (B) the acquisition of voting securities of
the Corporation by either (i) a person who was a 25 Percent
Owner on the effective date of the Plan or (ii) a person,
trust or other entity described in the foregoing clauses
(A)(i)-(v) of this subsection.
VII. Termination and Amendment of the Plan and Options.
The Board may terminate the Plan at any time except with respect to any
outstanding Options. The Board may amend the Plan in any manner with
respect to future grants of Options and may amend outstanding Options in any
manner consistent with the Plan subject to the following limitations:
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<PAGE>
A. Except as provided in Section 8 of the Plan, no
amendment will be effective without the approval of the
shareholders of the Corporation if that amendment (i)
materially increases the benefits accruing to Insiders under
the Plan, (ii) materially increases the number of securities
which may be issued under the Plan, (iii) materially modifies
the requirements as to eligibility of Insiders for
participation in the Plan, within the meaning of Rule 16b-3
promulgated under the Act, (iv) changes the class of eligible
employees, officers or directors, (v) withdraws
administration of the Plan from a committee of Disinterested
Persons, or (vi) extends the term of the Plan or the period
during which any outstanding Incentive Stock Option may be
exercised.
B. No amendment will be effective if the amendment changes
the manner of determining the exercise price of Incentive
Stock Options, makes individuals who are not employees of the
Corporation or of any Parent or Subsidiary Corporation
eligible to be granted Incentive Stock Options, changes the
nontransferability of the Options, or alters or impairs any
rights or obligations of any outstanding Option without the
written consent of the Option holder.
VIII. Change in Capital Structure.
A. The existence of outstanding Options shall not affect in any
way the right or power of the Corporation or its stockholders
to make or authorize any or all adjustments,
recapitalizations, reorganizations or other changes in the
Corporations' capital structure or its business, or any
merger or consolidation of the Corporation, or any issue of
bonds, debentures, preferred or prior preference stock ahead
of or affecting the Common Stock or the rights thereof, or
the dissolution or liquidation of the Corporation, or any
sale or transfer of all or any part of its assets or
business, or any other corporate act or proceeding, whether
of a similar character or otherwise.
B. If the Corporation shall effect a subdivision or
consolidation of shares or other capital readjustment, the
payment of a stock dividend, or other increase or reduction
of the number of shares of the Common Stock outstanding,
without receiving compensation therefore in money, services
or property, then (i) the number, class, and per share price
of shares of Common Stock subject to outstanding Options
hereunder shall be appropriately adjusted in such a manner as
to entitle an optionee to receive upon exercise of an Option,
for the same aggregate cash consideration, the same total
number and class of shares as he would have received had the
optionee exercised his or her Option in full immediately
prior to the event requiring the adjustment; and (ii) the
number and class of shares then reserved for issuance under
the Plan shall be adjusted by substituting for the total
number and class of shares of Common Stock then reserved that
number and class of shares of Common Stock that would have
been received by the owner of an equal number of outstanding
shares of each class of Common Stock as the result of the
event requiring the adjustment.
C. After a merger of one or more corporations into the
Corporation or after a consolidation of the Corporation and
one or more corporations in which the Corporation shall be
the surviving corporation, each holder of an outstanding
Option shall, at no
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<PAGE>
additional cost, be entitled upon exercise of such Option to
receive (subject to any required action by stockholders) in
lieu of the number and class of shares as to which such
Option shall then be so exercisable, the number and class of
shares of stock or other securities to which such holder
would have been entitled pursuant to the terms of the
agreement of merger or consolidation if, immediately prior to
such merger or consolidation, such holder had been the holder
of record of the number and class of shares of Common Stock
equal to the number and class of shares as to which such
Option shall be so exercised.
D. If the Corporation is merged into or consolidated with
another corporation under circumstances where the Corporation
is not the surviving corporation, or if the Corporation is
liquidated, or sells or otherwise disposes of substantially
all of its assets to another corporation while unexercised
Options remain outstanding under the Plan, unless provisions
are made in connection with such transaction for the
continuance of the Plan and/or the assumption or substitution
of such Options with new options covering the stock of the
successor corporation, or parent or subsidiary thereof, with
appropriate adjustments as to the number and kind of shares
and prices, then all outstanding Options shall be cancelled
as of the effective date of any such merger, consolidation or
sale provided that (i) notice of such cancellation shall be
given to each holder of an Option and (ii) each holder of an
Option shall have the right to exercise such Option in full
(without regard to any vesting or other limitations on
exercise imposed on such Option) during the 30-day period
preceding the effective date of such merger, consolidation,
liquidation, or sale (the "corporate event"). Not
withstanding the preceding provisions if no provisions are
made for the continuance, assumption or substitution of
Options and if exercise of any then-outstanding Options
during the 30-day period preceding the effective date of such
corporate event would not be in conformity with all
applicable federal securities laws, the Option holder will be
paid in cash an amount equal to the difference between the
Fair Market Value of the shares of Common Stock subject to
the Option as of the corporate event and the exercise price
of the Option, or if in the opinion of counsel to the
Corporation the immediate exercisability of such Options (or
cash payment), when taken into consideration with all other
"parachute payments" as defined in Section 280G of the Code,
would result in an "excess parachute payment" as defined in
such section, such Option shall not become immediately
exercisable and shall be cancelled as of the effective date
of the corporate event, except and to the extent the Joint
Compensation Committee in its discretion shall otherwise
determine.
E. Except as hereinbefore expressly provided, the issue by the
Corporation of shares of stock of any class, or securities
convertible into shares of stock of any class, for cash or
property, or for labor or services either upon direct sale or
upon the exercise of rights or warrants to subscribe
therefor, or upon conversion of shares or obligations of the
Corporation convertible into such shares or other securities,
shall not affect, and no adjustment by reason thereof shall
be made with respect to, the number, class or price of shares
of Common Stock then subject to outstanding Options.
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<PAGE>
F. Adjustment under the preceding provisions of this section
will be made by the Joint Compensation Committee, whose
determination as to what adjustments will be made and the
extent thereof will be final, binding, and conclusive. No
fractional interest will be issued under the Plan on account
of any such adjustment. No adjustment will be made in a
manner that causes an Incentive Stock Option to fail to
continue to qualify as an Incentive Stock Option under the
Code.
IX. Holding Period.
Notwithstanding anything to the contrary in the Plan, Common Stock
acquired through exercise of an Option granted to an Insider may not be
disposed of by the Insider during the six-month period beginning on the
Date of Grant.
X. General Provisions.
A. The Corporation shall not be required to sell or issue any
shares under any Option if the issuance of such shares shall
constitute a violation by the Option holder or the
Corporation of any provision of any law, statute, or
regulation of any stock exchange upon which the Common Stock
may be listed or any governmental authority whether it be
Federal or State. Unless a registration statement is in
effect under the Securities Act of 1933, as amended (the
"Act") with respect to the shares of Common Stock covered by
an Option, the Corporation shall not be required to issue
shares upon exercise of any Option (i) unless the Joint
Compensation Committee has received evidence satisfactory to
it to the effect that the holder of such Option is acquiring
such shares for investment and not with a view to the
distribution thereof or (ii) unless an opinion of counsel to
the Corporation has been received by the Corporation, in a
form and substance which is deemed acceptable by the Joint
Compensation Committee, to the effect that a registration
statement is not required. Any determination in this
connection by the Joint Compensation Committee shall be
final, binding and conclusive. In the event the shares
issuable on exercise of an Option are not registered under
the Act, the Corporation may imprint the following legend or
any other legend which counsel for the Corporation considers
necessary or advisable to comply with the Act:
"The shares of stock represented by this
certificate have not been registered under the
Securities Act of 1933 or under the securities laws
of any State and may not be sold or transferred
except pursuant to an effective registration
statement or upon receipt by the Corporation of any
opinion of counsel, in form and substance
satisfactory to the Corporation, that registration
is not required for such sale or transfer."
The Corporation may, but shall in no event be obligated to,
register any securities covered hereby pursuant to the Act
and, in the event any shares are so registered, the
Corporation may remove any legend on certificates
representing such shares. The Corporation shall not be
obligated to take any affirmative action in order to cause
the exercise of an Option or the issuance of shares pursuant
thereto to comply with any law or regulation of any
governmental authority.
B. No Option holder and no beneficiary or other person claiming
under
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or through an Option holder will have any right, title or
interest in or to any shares of Common Stock allocated or
reserved under the Plan or subject to any Option except as to
such shares of Common Stock, if any, that have been issued or
transferred to such Option holder or beneficiary.
C. The Plan and all determinations made and actions taken
pursuant thereto will be governed by the laws of the State of
Delaware and construed in accordance therewith.
D. The Plan is intended to comply in all respects with Rule 16b-
3 promulgated under the Act (the "exemption"). If the Plan
is found not to qualify for the exemption, any disqualifying
Plan provision will be deemed replaced by a provision that
most nearly accomplishes the intent of the Board at the time
the Plan was adopted and that results in the Plan's qual-
ification for the exemption. If the Board's intent cannot be
accomplished through a substitute provision that results in
the Plan's qualification for the exemption, the Plan will
continue in full force and effect in the form adopted by the
Board notwithstanding the Plan's failure to qualify for the
exemption.
E. Options may be granted under this Plan from time to time in
substitution for stock options held by employees of other
corporations who become employees of the Corporation or a
Subsidiary Corporation as a result of a merger or
consolidation of the employing corporation with the
Corporation or a Subsidiary Corporation or the acquisition by
the Corporation or a Subsidiary Corporation of the assets of
the employing corporation, or the acquisition by the
Corporation or a Subsidiary Corporation of at least 50% of
the issued and outstanding stock of the employing corporation
as the result of which it becomes a Subsidiary Corporation of
the Corporation. The terms and conditions of the substitute
options so granted may vary from the terms and conditions set
forth in this Plan to such extent as the Joint Compensation
Committee at the time of grant may deem appropriate to
conform, in whole or in part, to the provisions of the stock
options in substitution for which they are granted, but with
respect to stock options which are Incentive Stock Options,
no such variation shall be such as to affect the status of
any such substitute option as an "incentive stock option"
under Section 422 of the Code.
XI. Taxes.
A. Withholding.
1. Cash Payment. The Corporation may make such provisions
as it deems appropriate to withhold any taxes the
Corporation determines it is required to withhold in
connection with any Option or require the Option holder
to pay the amount of the withholding taxes in cash to
the Corporation as a condition precedent to the issuance
of shares pursuant to the exercise of an Option.
2. Broker-Dealer Payment. If the exercise price of an
Option is paid by a broker-dealer, as provided herein,
payment of withholding taxes in connection with the
exercise of the Option, up to an amount calculated by
assuming the maximum
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federal, state, and local marginal tax rates, may be made by
the broker-dealer.
B. Tax Qualification. Incentive Stock Options granted under the
Plan are intended to qualify as Incentive Stock Options
within the meaning of Section 422 of the Code, and the terms
of the Plan and Options granted hereunder shall be so
construed. Notwithstanding the foregoing, nothing in the
Plan shall be interpreted as a representation, guarantee or
other undertaking on the part of the Corporation that any
Options are, or will be, determined to qualify as incentive
stock options within the meaning of the Code.
XII. Indemnification of Board and Committees
The members of the Board of Directors, the Joint Compensation
Committee and the Outside Directors Committee will be indemnified by
the Corporation against the reasonable expenses, including attorneys'
fees, actually and necessarily incurred in connection with the defense
of any action, suit or proceeding, or in connection with any appeal
therein, to which they or any of them may be a party by reason of any
action taken or failure to act under or in connection with the Plan or
Option agreements, and against all amounts paid by them in settlement
thereof (provided such settlement is approved by legal counsel selected
by the Corporation) or paid by them in satisfaction of a judgment in
any such action, suit or proceeding, except in relation to matters as
to which it is adjudged in such action, suit or proceeding that the
member is liable for negligence or misconduct in the performance of the
member's duties; provided that within sixty (60) days after institution
of any such action, suit or proceeding a member will in writing offer
the Corporation the opportunity, at its own expense, to defend the
same. The foregoing right of indemnification shall inure to the
benefit of the heirs, executors or administrators of each such member
of the Board of Directors, the Joint Compensation Committee and the
Outside Directors Committee and shall be in addition to any and all
other rights of indemnification to which such members may be entitled
to as a matter of law, contract, or otherwise.
XIII. Limitation of Rights
Neither the adoption and maintenance of the Plan nor the grant of
Options will:
A. limit the right of the Corporation, Parent Corporation or
Subsidiary Corporation to discharge or discipline any
employee, or otherwise terminate or modify the terms of any
employment agreement, or
B. confer upon any Option holder any contract or other right or
interest other than as specifically provided in the Plan and
the Option agreement.
XIV. Effective Date of the Plan, Duration of the Plan.
A. The Plan became effective as of March 10, 1993 upon adoption
by the Board, subject to approval by the holders of a
majority of the shares of Common Stock which are represented
in person or by proxy and entitled to vote on the subject at
the 1993 annual meeting of the shareholders of the
Corporation.
B. Unless previously terminated, the Plan will terminate ten
(10) years after the earlier of (i) the date the Plan is
adopted by the Board, or (ii) the date the Plan is approved
by the shareholders, except
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that Options that are granted under the Plan before its
termination will continue to be administered under the terms
of the Plan until the Options terminate or are exercised.
(as amended 6/22/94)
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RIGGS NATIONAL CORPORATION
1994 STOCK OPTION PLAN
I. PURPOSE OF THE PLAN.
This 1994 Stock Option Plan (the "Plan") of Riggs National
Corporation (the "Corporation") for key employees of the Corporation
and its subsidiaries is designed to advance the best interest of the
Corporation by providing such employees who have a substantial
responsibility for its management and growth with an additional
incentive to continue to contribute to the growth and success of the
Corporation by increasing their proprietary interest in the success
of the Corporation.
II. DEFINITIONS.
A. "Board" means the Board of Directors of the
Corporation.
B. "Common Stock" means the common shares, $2.50 par
value per share, of the Corporation.
C. "Joint Compensation Committee" means the compensation
committees of the Board and the Board of Directors of
The Riggs National Bank of Washington, D.C. meeting in
joint session, but excluding any member of either com-
mittee who is not both a Disinterested Person and an
Outside Director.
D. "Corporation" means the Riggs National Corporation.
E. "Date of Grant" means the date on which an Option is
approved by the Outside Directors Committee.
F. "Director" means a member of the Corporation's Board
of Directors.
G. "Disability" as to an Option holder has the same mean-
ing as the term is used in the long-term disability
insurance plan contributed to by the Corporation or
its Subsidiary Corporation on behalf of the Option
holder, or if the Option holder is not covered by any such
plan, disability shall have the meaning provided for
in Section 22(e)(3) of the Internal Revenue Code of
1986, as amended, or any successor statute thereto (the
"Code").
H. "Disinterested Person" means a Director who was not
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granted during the one (1) year immediately preceding
the Director's appointment to the committee, and is
not granted while a member of the committee, equity
securities under the Plan or any other plan of the Cor-
poration or an affiliate of the Corporation, except as
may be otherwise permitted by Rule 16b-3(c)(2) promul-
gated under the Securities Exchange Act of 1934.
I. "Fair Market Value" shall mean, with respect to a
share of Common Stock, (i) if the Common Stock is
traded on the National Market System or a national
securities exchange, the closing price of the Common
Stock on the determination date, or, if there are no
sales on such date, then on the next preceding date on
which there were sales of Common Stock, all as
published in the NASDAQ National Market Issues report
in the Eastern Edition of The Wall Street Journal,
(ii) if the Common Stock is not traded on the National
Market System or listed on a national securities
exchange, the closing price last reported by the
National Association of Securities Dealers,Inc. for
the over-the-counter market on the determination date,
or, if no sales are reported on such date, then on the
next preceding date on which there were such
quotations, or (iii) if the Common Stock, is not
traded on the National Market System or listed on a
national securities exchange and quotations for the
Common Stock are not reported by the National
Association of Securities Dealers, Inc, the Fair
Market Value determined by the Joint Compensation
Committee on the basis of available prices for the
Common Stock or in such manner as the Joint
Compensation Committee shall agree. Notwithstanding
the preceding, the Fair Market Value on a given
determination date of Common Stock subject to
Incentive Stock Options or Common Stock valued in
connection with the exercise of Incentive Stock
Options shall be an amount that is equal to the Joint
Compensation Committee's good faith determination of
the Common Stock's value on the given determination
date, and the Joint Compensation Committee shall for
all purposes of this Plan have the authority to
determine Fair Market Value using methods other than
those described in this Section if the Joint Compensa-
tion Committee determines that such alternative
methods more properly reflect the Fair Market Value of
the Common Stock. Furthermore, in all cases, Fair
Market Value shall not be less than the Par Value of
the Common Stock.
J. "Incentive Stock Option" means an Option qualifying
for special tax treatment under Section 422 of the
Code.
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K. "Insider" means any person subject to the provisions
of section 16 of the Act, including an "officer" of
the Corporation within the meaning of section 16 of
the Act, a "director" within the meaning of section
3(a)(7) of the Act, and a "beneficial owner" of more
than ten percent (10%) of any class of the equity
securities of the Corporation within the meaning of
section 16 of the Act.
L. "Key Employee" means any employee (including employees
who are also officers or directors, but not including
directors who are not also employees) of the Corpora-
tion or any Subsidiary Corporation who have
substantial responsibility in the direction and
management of the Corporation or a Subsidiary
Corporation as determined by the Joint Compensation
Committee.
M. "Nonqualified Stock Option" means an Option that is
not an Incentive Stock Option.
N. "Option" means an Incentive Stock Option or a
Nonqualified Stock Option granted under this Plan.
O. "Outside Director" means a Director who is neither an
employee nor an officer of the Corporation or its sub-
sidiaries and qualifies as an outside director within
the meaning of Section 162(m)(4) of the Code, and
applicable regulations and authority.
P. "Outside Directors Committee" means a committee com
posed of all Outside Directors who are Disinterested
Persons.
Q. "Parent Corporation" has the same meaning used in Sec-
tion 424(e) of the Code.
R. "Plan" means the Riggs National Corporation 1994 Stock
Option Plan as set forth herein, which may be amended
from time to time.
S. "Subsidiary Corporation" has the same meaning used in
Section 424(f) of the Code.
III. SHARES OF COMMON STOCK SUBJECT TO THE PLAN.
Subject to the provisions of Section 8 of the Plan, the
aggregate number of authorized but unissued shares of Common Stock
that may be issued pursuant to Options granted under the Plan will
not exceed one million two hundred fifty thousand (1,250,000) shares.
Shares that by reason of expiration of an Option or otherwise are no
longer subject to purchase pursuant to an Option
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granted under the Plan may again be available for issuance pursuant
to Options under the Plan.
IV. ADMINISTRATION OF THE PLAN.
The Plan shall be administered by the Joint Compensation
Committee. The Joint Compensation Committee has the authority to
recommend to the Outside Directors Committee the Key Employees to be
granted Options, the times when Options will be granted, the number
of shares subject to each Option, the exercise price of each Option,
the vesting schedule (if any) of each Option, the conditions
precedent (if any) to acceleration of the vesting schedule of each
Option, the method of payment for shares acquired upon the exercise
of Options, the expiration date of each Option, the Fair Market Value
of Common Stock subject to Options, and any other terms and
conditions of the Options it deems appropriate. The Outside
Directors Committee shall have the authority to approve, reject or
modify recommended grants of Options by the Joint Compensation
Committee. A majority of the Outside Directors Committee shall
constitute a quorum. All actions by the Outside Directors Committee
shall require a majority of the members of such committee present at
such meeting. Any action by the Outside Directors Committee may be
taken by a unanimous written consent of all members of the committee,
and action so taken shall be fully effective as if it had been taken
by a vote of the members at a meeting duly called and held. No
Option shall be granted unless and until such grant is approved by
the Outside Directors Committee.
All questions of interpretation of the Plan or of any Options
will be determined solely by the Joint Compensation Committee, and
any such determination will be final and binding upon all persons
having an interest in the Plan.
V. ELIGIBILITY.
Key Employees of the Corporation and any Subsidiary Corporation
will be eligible to participate in the Plan, as approved by the Joint
Compensation Committee.
No Key Employee shall be eligible to be granted Stock Options
under the Plan representing more than 100,000 shares of Common Stock
per year, regardless of whether the Stock Options are Incentive Stock
Options, Nonqualified Stock Options or a combination thereof.
VI. TERMS AND CONDITIONS OF STOCK OPTIONS.
Each Option granted under this Plan will be evidenced by an
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Option agreement between the Corporation and the recipient that sets
forth the exercise price of the Option, the vesting schedule (if any)
of the Option, the expiration date of the Option, and any other terms
or conditions approved by the Outside Directors Committee subject to
the following terms and conditions:
A. OPTION PRICE.
1. NONQUALIFIED OPTIONS. The exercise price per
share for the shares subject to a Nonqualified
Stock Option will be no less than one hundred per
cent (100%) of the Fair Market Value of the
Common Stock on the Date of Grant.
2. INCENTIVE OPTIONS. The exercise price per share
for the shares subject to an Incentive Stock
Option will be no less than one hundred percent
(100%) of the Fair Market Value of the Common
Stock on the Date of Grant. However, the
exercise price per share for shares subject to an
Incentive Stock Option granted to an individual
who on the Date of Grant owns more than ten
percent (10%) of the total combined voting power
of all classes of stock of the Corporation (or of
a Parent Corporation or a Subsidiary Corporation)
will not be less than one hundred and ten percent
(110%) of the Fair Market Value of the Common
Stock on the Date of Grant.
B. TERM OF OPTIONS. Notwithstanding any other provisions
of the Plan or any Option agreement, no Option will be
exercisable after the expiration of ten (10) years
from the Date of Grant. Furthermore, no Incentive
Stock Option granted to an individual who on the Date
of Grant owns more than ten percent (10%) of the total
combined voting power of all classes of stock of the
Corporation (or of a Parent Corporation or a
Subsidiary Corporation) will be exercisable after the
expiration of five (5) years from the Date of Grant.
C. MAXIMUM VALUE OF OPTIONS WHICH ARE INCENTIVE OPTIONS.
To the extent that the aggregate Fair Market Value of
the Common Stock with respect to which Incentive Stock
Options granted to any person are exercisable for the
first time during any calendar year (under all stock
option plans of the Corporation, a Parent Corporation
and any Subsidiary Corporation) exceeds $100,000, the
options are not Incentive Stock Options. For purposes
of this paragraph, the Fair Market Value of the Common
Stock will be determined as of the time the Incentive
Stock Option
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with respect to the Common Stock is granted. This
paragraph will be applied by taking Incentive Stock
Options into account in the order in which they are
granted.
D. VESTING OF OPTIONS AND TERMINATION OF EMPLOYMENT.
An Option will be exercisable only to the extent that
it is vested on the date of exercise. Vesting of an
Option will cease on the date that an Option holder is
no longer an employee of the Corporation or a Parent
Corporation or Subsidiary Corporation (the "date of
termination"), and the Option will be exercisable only
to the extent the Option is vested on the date of ter-
mination. However, if the Option holder is no longer
an employee because of death or Disability, any Option
that is not one hundred percent (100%) vested will
automatically become one hundred percent (100%) vested
on the date of termination. If the Option holder's
termination is for reason of death, the right to exer-
cise the Option will expire one (1) year after the
date of the holder's death, and until expiration, the
holder's heirs, legatees or legal representative may
exercise the Option. If the Option holder's
termination is for any reason other than death, the
right to exercise the Option (to the extent that it is
vested) will expire ninety (90) days after the date of
termination unless the Option would then expire during
the Pooling Period and the Common Stock received upon
the exercise of the Option would be subject to the
Pooling Period transfer restrictions and, in that
case, the right to exercise the Option will expire ten
(10) calendar days after the end of the Pooling
Period. "Pooling Period" means the period in which
property is subject to restrictions on transfer in
compliance with the "Pooling-of-Interests Accounting"
rules set forth in the Securities and Exchange
Commission Accounting Series Releases 130 and 135. If
termination is for a reason other than the holder's
death and the Option holder dies after his or her
termination but before the right to exercise the
Option has expired, the right to exercise the Option
shall expire one (1) year after the date of the
holder's termination of employment, and until
expiration, the holder's heirs, legatees or legal
representative may exercise the Option.
E. EXERCISE.
1. CASH PAYMENT. An Option may be exercised as to all or
any number of whole shares of the Common Stock with
respect to which the Option is vested. Options
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may be exercised only by the Option holder's written
notice to the Secretary of the Corporation (the
"exercise notice") and only if the exercise notice is
accompanied by payment in cash of the full exercise
price for the shares with respect to which the Option
is exercised, except as otherwise provided herein.
2. NONCASH PAYMENT. The Joint Compensation Committee may
approve payment of the exercise price in the form of
(i) Common Stock of the Corporation other than stock
acquired upon exercise of the Option, (ii) a
combination of cash and such Common Stock, or (ii)
Common Stock acquired upon exercise of the Option,
provided that the requirements of Rule 16b-3
promulgated under the Act are met. The value of any
Common Stock used to pay the exercise price or any
portion thereof will be the Fair Market Value of
Common Stock on the date of exercise.
3. BROKER-DEALER PAYMENT. The Joint Compensation
Committee may approve payment of the unpaid exercise
price by a broker-dealer or by the Option holder with
cash advanced by the broker-dealer, if the exercise
notice is accompanied by the Option holder's written
irrevocable instructions to deliver the Common Stock
acquired upon exercise of the Option to the broker-
dealer.
F. NONTRANSFERABILITY. No Option granted under the Plan,
contingent or otherwise, will be transferable, assignable
or subject to any encumbrance, pledge, or charge of any
nature, except by will or the laws of descent and
distribution. During the lifetime of an Option holder, an
Option will be exercisable only by the Option holder or by
the Option holder's legal representative. The executor or
administrator of the estate of the Option holder may
transfer any rights with respect to such Option to the
person or persons or entity (including a trust) entitled
thereto under the will of the holder of such Option or
under the laws of intestacy.
G. STOCK LEGEND. The Corporation may require that certif-
icates evidencing shares of Common Stock purchased upon the
exercise of Incentive Stock Options issued under the Plan
be endorsed with a legend in substantially the following
form:
The shares evidenced by this certificate may not be
7
<PAGE>
sold or transferred prior to ______________, 19____,
in the absence of a written statement from Riggs
National Corporation (the "Corporation") to the effect
that the Corporation is aware of the fact of such sale
or transfer.
The blank contained in such legend shall be filled in with
the date that is the later of: (i) one year and one day
after the date of exercise of such Incentive Stock Option
or (ii) two years and one day after the date of grant of
such Incentive Stock Option. Upon delivery to the
Corporation, at its principal executive office, of a
written statement to the effect that such shares have been
sold or transferred prior to such date, the Corporation
does hereby agree to promptly deliver to the transfer agent
for such shares a written statement to the effect that the
Corporation is aware of the fact of such sale or transfer.
The Corporation may also require the inclusion of any
additional legend which may be necessary or appropriate.
H. CHANGE OF CONTROL. In the event of a Change of Control (as
hereinafter defined), all then-outstanding Options will
become one hundred percent (100%) vested and exercisable as
of the Change of Control. However, if in the opinion of
counsel to the Corporation the immediate exercisability of
such Options, when taken into consideration with all other
"parachute payments" as defined in Section 280G of the
Code, would result in an "excess parachute payment" as
defined in such section, such Option shall not become
immediately exercisable, except and to the extent the Joint
Compensation Committee in its discretion shall otherwise
determine. For purposes of the Plan, "Change of Control"
means the sale of substantially all of the Corporation's
assets or the acquisition, whether directly, indirectly,
beneficially (within the meaning of Rule 13d-3 of the Act),
or of record, of securities of the Corporation representing
twenty-five percent (25%) or more in the aggregate voting
power of the Corporation's then-outstanding Common Stock by
any "person" (within the meaning of Sections 13(d) and
14(d) of the Act), including any corporation or group of
associated persons acting in concert, other than (i) the
Corporation or its subsidiaries and/or (ii) any employee
pension benefit plan (within the meaning of Section 3(2) of
the Employee Retirement Income Security Act of 1974) of the
Corporation or of its subsidiaries, including a trust
established pursuant to any such plan; provided, that a
Change of Control will not result from: (A) a
8
<PAGE>
transfer of the Corporation's voting securities by a person who
is the beneficial owner, directly or indirectly, of twenty-five
percent (25%) or more of the voting securities of the
Corporation (a "25 Percent Owner") to (i) a member of such 25
Percent Owner's immediate family (within the meaning of Rule 16a-
1(e) of the Act) either during such 25 Percent Owner's lifetime
or by will or the laws of descent and distribution; (ii) any
trust as to which the 25 Percent Owner or a member (or members)
of his immediate family (within the meaning of Rule 16a-1(e) of
the Act) is the beneficiary; (iii) any trust as to which the 25
Percent Owner is the settlor with sole power to revoke; (iv) any
entity over which such 25 Percent Owner has the power, directly
or indirectly, to direct or cause the direction of the
management and policies of the entity, whether through the
ownership of voting securities, by contract or otherwise; or
(v) any charitable trust, foundation or corporation under
Section 501(c)(3) of the Code that is funded by the 25 Percent
Owner; or (B) the acquisition of voting securities of the
Corporation by either (i) a person who was a 25 Percent Owner on
the effective date of the Plan or (ii) a person, trust or other
entity described in the foregoing clauses (A)(i)-(v) of this
subsection.
VII. Termination and Amendment of the Plan and Options.
The Board may terminate the Plan at any time except with respect to any
outstanding Options. The Board may amend the Plan in any manner with
respect to future grants of Options and the Outside Directors Committee
may amend outstanding Options in any manner consistent with the Plan
subject to the following limitations:
A. Except as provided in Section 8 of the Plan, no amendment will
be effective without the approval of the shareholders of the
Corporation if that amendment (i) materially increases the
benefits accruing to Insiders under the Plan, (ii) materially
increases the number of securities that may be issued under the
Plan, (iii) materially modifies the requirements as to
eligibility of Insiders for participation in the Plan, within
the meaning of Rule 16b-3 promulgated under the Act, (iv)
changes the class of eligible employees, officers or directors,
(v) withdraws administration of the Plan from a committee of
Disinterested Persons, or (vi) extends the term of the Plan or
the period during which any outstanding Incentive Stock Option
may be exercised.
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<PAGE>
B. No amendment will be effective if the amendment changes the
manner of determining the exercise price of Incentive Stock
Options, makes individuals who are not employees of the
Corporation or of any Parent or Subsidiary Corporation eligible
to be granted Incentive Stock Options, changes the
nontransferability of the Options, or alters or impairs any
rights or obligations of any outstanding Option without the
written consent of the Option holder.
VIII. CHANGE IN CAPITAL STRUCTURE.
A. The existence of outstanding Options shall not affect in
any way the right or power of the Corporation or its
stockholders to make or authorize any or all adjustments,
recapitalizations, reorganizations or other changes in the
Corporation's capital structure or its business, or any
merger or consolidation of the Corporation, or any issue of
bonds, debentures, preferred or prior preference stock
ahead of or affecting the Common Stock or the rights
thereof, or the dissolution or liquidation of the
Corporation, or any sale or transfer of all or any part of
its assets or business, or any other corporate act or
proceeding, whether of a similar character or otherwise.
B. If the Corporation shall effect a subdivision or con-
solidation of shares or other capital readjustment, the
payment of a stock dividend, or other increase or reduction
of the number of shares of the Common Stock outstanding,
without receiving compensation therefore in money, services
or property, then (i) the number, class, and per share
price of shares of Common Stock subject to outstanding
Options hereunder shall be appropriately adjusted in such a
manner as to entitle an optionee to receive upon exercise
of an Option, for the same aggregate cash consideration,
the same total number and class of shares as he would have
received had the optionee exercised his or her Option in
full immediately prior to the event requiring the adjust-
ment; and (ii) the number and class of shares then reserved
for issuance under the Plan shall be adjusted by
substituting for the total number and class of shares of
Common Stock then reserved that number and class of shares
of Common Stock that would have been received by the owner
of an equal number of outstanding shares of each class of
Common Stock as the result of the event requiring the
adjustment.
C. After a merger of one or more corporations into the
10
<PAGE>
Corporation or after a consolidation of the Corporation and
one or more corporations in which the Corporation shall be
the surviving corporation, each holder of an outstanding
Option shall, at no additional cost, be entitled upon
exercise of such Option to receive (subject to any required
action by stockholders) in lieu of the number and class of
shares as to which such Option shall then be so
exercisable, the number and class of shares of stock or
other securities to which such holder would have been
entitled pursuant to the terms of the agreement of merger
or consolidation if, immediately prior to such merger or
consolidation, such holder had been the holder of record of
the number and class of shares of Common Stock equal to the
number and class of shares as to which such Option shall be
so exercised.
D. If the Corporation is merged into or consolidated with
another corporation under circumstances where the
Corporation is not the surviving corporation, or if the
Corporation is liquidated, or sells or otherwise disposes
of substantially all of its assets to another corporation
while unexercised Options remain outstanding under the
Plan, unless provisions are made in connection with such
transaction for the continuance of the Plan and/or the
assumption or substitution of such Options with new options
covering the stock of the successor corporation, or parent
or subsidiary thereof, with appropriate adjustments as to
the number and kind of shares and prices, then all
outstanding Options shall be cancelled as of the effective
date of any such merger, consolidation or sale provided
that (i) notice of such cancellation shall be given to each
holder of an Option and (ii) each holder of an Option shall
have the right to exercise such Option in full (without
regard to any vesting or other limitations on exercise
imposed on such Option) during the 30-day period preceding
the effective date of such merger, consolidation,
liquidation, or sale (the "corporate event").
Notwithstanding the preceding provisions, if no provisions
are made for the continuance, assumption or substitution of
Options and if exercise of any then-outstanding Options
during the 30-day period preceding the effective date of
such corporate event would not be in conformity with all
applicable federal securities laws, or if in the opinion of
counsel to the Corporation the immediate exercisability of
such Options, when taken into consideration with all other
"parachute payments" as defined in Section 280G of the
Code, would result in an "excess parachute payment" as
defined in such section, such Option shall not become
11
<PAGE>
immediately exercisable and shall be cancelled as of the
effective date of the corporate event, except and to the
extent the Joint Compensation Committee in its discretion
shall otherwise determine.
E. Except as hereinbefore expressly provided, the issue by the
Corporation of shares of stock of any class, or securities
convertible into shares of stock of any class, for cash or
property, or for labor or services either upon direct sale
or upon the exercise of rights or warrants to subscribe
therefor, or upon conversion of shares or obligations of
the Corporation convertible into such shares or other
securities, shall not affect, and no adjustment by reason
thereof shall be made with respect to, the number, class or
price of shares of Common Stock then subject to outstanding
Options.
F. Adjustment under the preceding provisions of this section
will be made by the Joint Compensation Committee, whose
determination as to what adjustments will be made and the
extent thereof will be final, binding, and conclusive. No
fractional interest will be issued under the Plan on
account of any such adjustment. No adjustment will be made
in a manner that causes an Incentive Stock Option to fail
to continue to qualify as an Incentive Stock Option under
the Code.
IX. HOLDING PERIOD.
Notwithstanding anything to the contrary in the Plan, Common Stock
acquired through exercise of an Option granted to an Insider may not
be disposed of by the Insider during the six-month period beginning
on the Date of Grant.
X. GENERAL PROVISIONS.
A. The Corporation shall not be required to sell or issue any
shares under any Option if the issuance of such shares
shall constitute a violation by the Option holder or the
Corporation of any provision of any law, statute, or
regulation of any stock exchange upon which the Common
Stock may be listed or any governmental authority whether
it be Federal or State. Unless a registration statement is
in effect under the Securities Act of 1933, as amended (the
"Act") with respect to the shares of Common Stock covered
by an Option, the Corporation shall not be required to
issue shares upon exercise of any Option (i) unless the
Joint Compensation Committee has received
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<PAGE>
evidence satisfactory to it to the effect that the holder
of such Option is acquiring such shares for investment and
not with a view to the distribution thereof or (ii) unless
an opinion of counsel to the Corporation has been received
by the Corporation, in a form and substance that is deemed
acceptable by the Joint Compensation Committee, to the
effect that a registration statement is not required. Any
determination in this connection by the Joint Compensation
Committee shall be final, binding and conclusive. In the
event the shares issuable on exercise of an Option are not
registered under the Act, the Corporation may imprint the
following legend or any other legend which counsel for the
Corporation considers necessary or advisable to comply with
the Act:
"The shares of stock represented by this cer-
tificate have not been registered under the
Securities Act of 1933 or under the securities
laws of any State and may not be sold or
transferred except pursuant to an effective
registration statement or upon receipt by the
Corporation of any opinion of counsel, in form
and substance satisfactory to the Corporation,
that registration is not required for such sale
or transfer."
The Corporation may, but shall in no event be obligated to,
register any securities covered hereby pursuant to the Act
and, in the event any shares are so registered, the
Corporation may remove any legend on certificates
representing such shares. The Corporation shall not be
obligated to take any affirmative action in order to cause
the exercise of an Option or the issuance of shares
pursuant thereto to comply with any law or regulation of
any governmental authority.
B. No Option holder and no beneficiary or other person
claiming under or through an Option holder will have any
right, title or interest in or to any shares of Common
Stock allocated or reserved under the Plan or subject to
any Option except as to such shares of Common Stock, if
any, that have been issued or transferred to such Option
holder or beneficiary.
C. The Plan and all determinations made and actions taken
pursuant thereto will be governed by the laws of the State
of Delaware and construed in accordance therewith.
D. The Plan is intended to comply in all respects with Rule
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16b-3 promulgated under the Act (the "exemption"). If the
Plan is found not to qualify for the exemption, any
disqualifying Plan provision will be deemed replaced by a
provision that most nearly accomplishes the intent of the
Board at the time the Plan was adopted and that results in
the Plan's qualification for the exemption. If the Board's
intent cannot be accomplished through a substitute
provision that results in the Plan's qualification for the
exemption, the Plan will continue in full force and effect
in the form adopted by the Board notwithstanding the Plan's
failure to qualify for the exemption.
E. Options may be granted under this Plan from time to time in
substitution for stock options held by employees of other
corporations who become employees of the Corporation or a
Subsidiary Corporation as a result of a merger or
consolidation of the employing corporation with the
Corporation or a Subsidiary Corporation or the acquisition
by the Corporation or a Subsidiary Corporation of the
assets of the employing corporation, or the acquisition by
the Corporation or a Subsidiary Corporation of at least 50%
of the issued and outstanding stock of the employing
corporation as the result of which it becomes a Subsidiary
Corporation of the Corporation. The terms and conditions
of the substitute options so granted may vary from the
terms and conditions set forth in this Plan to such extent
as the Joint Compensation Committee at the time of grant
may deem appropriate to conform, in whole or in part, to
the provisions of the stock options in substitution for
which they are granted, but with respect to stock options
which are Incentive Stock Options, no such variation shall
be such as to affect the status of any such substitute
option as an "incentive stock option" under Section 422 of
the Code.
XI. TAXES.
A. WITHHOLDING.
1. CASH PAYMENT. The Corporation may make such pro
visions as it deems appropriate to withhold any taxes
the Corporation determines it is required to withhold
in connection with any Option or require the Option
holder to pay the amount of the withholding taxes in
cash to the Corporation as a condition precedent to
the issuance of shares pursuant to the exercise of an
Option.
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<PAGE>
2. BROKER-DEALER PAYMENT. If the exercise price of an
Option is paid by a broker-dealer, as provided herein,
payment of withholding taxes in connection with the
exercise of the Option, up to an amount calculated by
assuming the maximum federal, state, and local
marginal tax rates, may be made by the broker-dealer.
B. TAX QUALIFICATION. Incentive Stock Options granted under
the Plan are intended to qualify as Incentive Stock Options
within the meaning of Section 422 of the Code, and the
terms of the Plan and Options granted hereunder shall be so
construed. Notwithstanding the foregoing, nothing in the
Plan shall be interpreted as a representation, guarantee or
other undertaking on the part of the Corporation that any
Options are, or will be, determined to qualify as incentive
stock options within the meaning of the Code.
XII. INDEMNIFICATION OF BOARD AND COMMITTEES
The members of the Board of Directors and the Joint Compensation
Committee and the Outside Directors Committee will be indemnified by
the Corporation against the reasonable expenses, including attorneys'
fees, actually and necessarily incurred in connection with the
defense of any action, suit or proceeding, or in connection with any
appeal therein, to which they or any of them may be a party by reason
of any action taken or failure to act under or in connection with the
Plan or Option agreements, and against all amounts paid by them in
settlement thereof (provided such settlement is approved by legal
counsel selected by the Corporation) or paid by them in satisfaction
of a judgment in any such action, suit or proceeding, except in
relation to matters as to which it is adjudged in such action, suit
or proceeding that the member is liable for negligence or misconduct
in the performance of the member's duties; provided that within sixty
(60) days after institution of any such action, suit or proceeding a
member will in writing offer the Corporation the opportunity, at its
own expense, to defend the same. The foregoing right of
indemnification shall inure to the benefit of the heirs, executors or
administrators of each such member of the Board of Directors, the
Joint Compensation Committee and the Outside Directors Committee and
shall be in addition to any and all other rights of indemnification
to which such members may be entitled to as a matter of law,
contract, or otherwise.
XIII. LIMITATION OF RIGHTS
Neither the adoption and maintenance of the Plan nor the grant
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<PAGE>
of Options will:
A. limit the right of the Corporation, Parent Corporation or
Subsidiary Corporation to discharge or discipline any
employee, or otherwise terminate or modify the terms of any
employment agreement, or
B. confer upon any Option holder any contract or other right
or interest other than as specifically provided in the Plan
and the Option agreement.
XIV. EFFECTIVE DATE OF THE PLAN, DURATION OF THE PLAN.
A. The Plan is effective as of February 9, 1994 upon adoption
by the Board, subject to approval by the holders of a
majority of the shares of Common Stock which are
represented in person or by proxy and entitled to vote on
the subject at the 1994 annual meeting of the shareholders
of the Corporation.
B. Unless previously terminated, the Plan will terminate ten
(10) years after the earlier of (i) the date the Plan is
adopted by the Board, or (ii) the date the Plan is approved
by the shareholders, except that Options that are granted
under the Plan before its termination will continue to be
administered under the terms of the Plan until the Options
terminate or are exercised.
(as amended 6/22/94)
16
