<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
Riggs National Corporation
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.
(1) Amount previously paid:
- --------------------------------------------------------------------------------
(2) Form, schedule or registration statement no.:
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(3) Filing party:
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(4) Date filed:
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<PAGE> 2
[RIGGS LOGO]
RIGGS NATIONAL CORPORATION
1503 PENNSYLVANIA AVENUE, N.W.
WASHINGTON, D.C. 20005
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 14, 1999
Notice is hereby given that the Annual Meeting of Shareholders (the
"Meeting") of Riggs National Corporation (the "Corporation") will be held on
Wednesday, April 14, 1999, at 9:30 a.m., local time, at the JW Marriott Hotel,
1331 Pennsylvania Avenue, N.W., Washington, D.C. 20004, for the following
purposes:
1. To elect a board of directors for the ensuing year;
2. To consider an amendment to the 1996 Stock Option Plan to increase
the number of shares of the Corporation's Common Stock available for
stock option awards from four million to nine million shares;
3. To consider an amendment to the 1997 Non-Employee Directors Stock
Option Plan to increase the number of shares of the Corporation's
Common Stock available for stock option awards from three hundred
fifty thousand to six hundred thousand shares;
4. To consider a shareholder proposal requiring the Board take the
necessary steps to have the accountants elected each year by all of
the Shareholders; and
5. To consider and act upon any other matters that may properly be
brought before the Meeting or any adjournment or postponement
thereof.
Shareholders of record at the close of business on February 26, 1999, will
be entitled to vote at the Meeting or any adjournments or postponements thereof.
Whether or not you contemplate attending the Meeting, please execute the
enclosed proxy and return it in the enclosed postage-paid return envelope. You
may revoke your proxy at any time prior to its exercise by written notice to the
Assistant Corporate Secretary of the Corporation, by executing and delivering a
proxy bearing a later date, or by attending the Meeting and voting in person.
You are cordially invited to attend the Meeting in person.
By Order of the Board of Directors,
/s/ TIMOTHY C. COUGHLIN
TIMOTHY C. COUGHLIN
President
March 17, 1999
<PAGE> 3
[RIGGS LOGO]
RIGGS NATIONAL CORPORATION
1503 PENNSYLVANIA AVENUE, N.W.
WASHINGTON, D.C. 20005
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS TO BE
HELD ON APRIL 14, 1999
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors (the "Board") of Riggs National Corporation, a
Delaware corporation (the "Corporation"), to be used at the Annual Meeting of
Shareholders of the Corporation (the "Meeting") to be held on Wednesday, April
14, 1999, at 9:30 a.m. local time at the JW Marriott Hotel, 1331 Pennsylvania
Avenue, N.W., Washington, D.C. 20004, or at any adjournment or postponement
thereof. The Corporation owns all of the outstanding stock of Riggs Bank
National Association ("Riggs Bank N.A.").
Shareholders of record at the close of business on February 26, 1999 (the
"Record Date"), will be entitled to notice of, and to vote at, the Meeting. On
the Record Date, the Corporation had 28,328,247 shares of Common Stock, par
value $2.50 per share ("Common Stock"), outstanding and entitled to vote at the
Meeting. Each share of Common Stock is entitled to one vote. Under the
applicable provisions of the Corporation's By-Laws and the Delaware General
Corporation Law (the "Delaware GCL"), the presence, in person or by proxy, of
the holders of a majority of the shares of Common Stock is necessary to
constitute a quorum of the shareholders in order to elect directors or take
action on a proposal submitted to shareholders at a meeting of shareholders. For
these purposes, Common Stock that is present or represented by proxy at the
Meeting will be counted for quorum purposes regardless of whether the holder of
the Common Stock or proxy fails to vote to elect directors or to vote on the
proposal or whether a broker with discretionary voting authority with respect to
such election or proposal fails to so vote.
Once a quorum is established, under the applicable provisions of the
Delaware GCL and the Corporation's By-Laws, in order for a director to be
elected, the director must receive a plurality of the votes of the shares of
Common Stock present in person or represented by proxy at the Meeting. For
voting purposes, therefore, abstentions and "broker non-votes" will have no
effect on the outcome of such election. With regard to the other proposals to be
presented to shareholders at the Meeting, those proposals must be approved by
the affirmative vote of the holders of a majority of the shares of Common Stock
present in person or represented by proxy at the Meeting, and, for voting
purposes, abstentions will be counted as "no" votes and "broker non-votes" will
not be counted.
This Proxy Statement and the accompanying form of proxy are first being
sent to shareholders on or about March 17, 1999. Shares of Common Stock
represented by proxies that are properly executed and received in time for the
Meeting will be voted in accordance with the shareholders' specifications. In
the absence of specific instructions, executed proxies received in response to
this solicitation will be voted for the election of the persons listed herein as
directors, for the Corporation proposals described herein and against the
shareholder proposal described herein. The Corporation has not been notified of
any other matter that will come before the meeting. Should any other matters
properly come before the Meeting the persons named as proxies will, unless
otherwise specified in the proxy, vote upon such matters according to their sole
discretion. A proxy may be revoked at any time prior to its exercise by written
notice to the Assistant Corporate Secretary of the Corporation, by executing and
delivering a proxy bearing a later date, or by attending the Meeting and voting
in person.
1
<PAGE> 4
The Annual Report to Shareholders, including financial statements for the
year ended December 31, 1998, is enclosed with this Proxy Statement.
ELECTION OF DIRECTORS
(ITEM NO. 1 ON PROXY)
At the Meeting, ten (10) directors (which will constitute the entire Board
after the Meeting) are to be elected to hold office until the next Annual
Meeting of Shareholders and until their respective successors have been elected
and qualified. The shares of Common Stock represented by properly executed
proxies will be voted FOR the nominees named below unless otherwise specified on
the proxy. It is not contemplated that any of the nominees will become
unavailable to serve, but if that should occur before the Meeting, proxies that
do not withhold authority to vote for directors may be voted for another nominee
or nominees selected by the Board unless the Board votes to reduce the size of
the Board to the actual number of nominees. In no event may the proxies be voted
for a greater number of persons than the number of nominees named.
NOMINEES FOR DIRECTOR
The following table sets forth (i) the name and age of each nominee, (ii)
the year during which each nominee first became a director of the Corporation,
(iii) the principal occupation and business experience of the nominee during the
past five years, including all positions and offices with the Corporation and
(iv) the number of shares of Common Stock beneficially owned by each nominee as
of January 31, 1999. All nominees are currently directors of the Corporation.
The table has been prepared from information obtained from the nominees.
<TABLE>
<CAPTION>
COMMON STOCK
BENEFICIALLY OWNED
JANUARY 31, 1999,
NAME, AGE AND YEAR PRINCIPAL OCCUPATION, BUSINESS EXPERIENCE AND PERCENTAGE OF
BECAME A DIRECTOR IN LAST FIVE YEARS, OTHER DIRECTORSHIPS CLASS(1)
- ------------------ ----------------------------------------- ------------------
<S> <C> <C>
JOE L. ALLBRITTON Chairman of the Board and Chief Executive Officer 13,028,300(2)
Age 74 of the Corporation; Chairman of the Board and Chief 39.8%
1981 Executive Officer, Riggs Bank N.A. (a subsidiary of
the Corporation); Chairman, Riggs & Co. (a division
of Riggs Bank N.A.); Chairman of the Board, Riggs
Bank Europe Limited (an indirect subsidiary of
Corporation); Chairman of the Board and owner,
Perpetual Corporation, which owns Allbritton
Communications Company (owner of television
stations) and Allnewsco, Inc. (news programming
service); Chairman of the Board and owner,
Westfield News Advertiser, Inc. (owner of a
television station and newspapers); Chairman of the
Board and owner, University Bancshares, Inc. (a
Texas bank holding company) (1975-1997); President
and Trustee, The Allbritton Foundation; Trustee,
National Geographic Society.
ROBERT L. Director, Riggs Bank Europe Limited (an indirect 707,900(3)
ALLBRITTON subsidiary of the Corporation); Director, Perpetual 2.4%
Age 29 Corporation (owner of Allbritton Communications
1994 Company and Allnewsco, Inc.); President and
Director, Allbritton Communications Company (owner
of television stations); Director, Allnewsco, Inc.
(news programming service); Director, University
Bancshares, Inc. (a Texas bank holding company)
(1992-1997); Trustee and Vice President, The
Allbritton Foundation; Director, American Capital
Strategies (investment company).
</TABLE>
2
<PAGE> 5
<TABLE>
<CAPTION>
COMMON STOCK
BENEFICIALLY OWNED
JANUARY 31, 1999,
NAME, AGE AND YEAR PRINCIPAL OCCUPATION, BUSINESS EXPERIENCE AND PERCENTAGE OF
BECAME A DIRECTOR IN LAST FIVE YEARS, OTHER DIRECTORSHIPS CLASS(1)
- ------------------ ----------------------------------------- ------------------
<S> <C> <C>
TIMOTHY C. President of the Corporation; Director, Riggs 118,430(4)
COUGHLIN Investment Management Corporation (an indirect
Age 56 subsidiary of the Corporation); Director, J. Bush &
1988 Co. Incorporated (an indirect subsidiary of the
Corporation); Vice Chairman of the Board, Riggs
Bank N.A. (1996); Chairman, British American
Business Association; Treasurer, The Bankers
Roundtable; Trustee, Federal City Council; Trustee,
Greater Washington Research Center; Member, D.C.
Tax Revision Commission; Member, D.C. Federal
Judicial Nominating Commission; Director, Boys and
Girls Clubs of Greater Washington; Co-Chairman,
Metropolitan Dialogue; Trustee, Corcoran Gallery of
Art.
JOHN M. FAHEY, JR. President and Chief Executive Officer, National 3,500(5)
Age 47 Geographic Society; Executive Vice President and
1997 Chief Operating Officer, National Geographic
Society (1997-1998); President and Chief Executive
Officer, National Geographic Ventures (1996-1997);
Chairman, President and Chief Executive Officer,
Time Life, Inc. (a subsidiary of Time Warner,
Inc.)(1989-1995).
LAWRENCE I. HEBERT Director, Riggs Investment Management Corporation 536,000(6)
Age 52 (an indirect subsidiary of the Corporation); 1.8%
1988 Director, Riggs Bank Europe Limited (an indirect
subsidiary of the Corporation); President and
Director, Perpetual Corporation (owner of
Allbritton Communications Company and Allnewsco,
Inc.); Chairman and Chief Executive Officer,
Allbritton Communications Company (owner of
television stations); Director, Allnewsco, Inc.
(news programming service); President, Westfield
News Advertiser, Inc. (owner of a television
station and newspapers); Vice President, University
Bancshares, Inc. (a Texas bank holding company)
(1975-1997); Trustee, The Allbritton Foundation;
Director, Allied Capital Corporation (an investment
company).
STEVEN B. PFEIFFER Director, Riggs Bank Europe Limited (an indirect 28,935(7)
Age 52 subsidiary of the Corporation); Partner in Charge
1989 of the Washington Office and Head of the
International Department, Fulbright & Jaworski
L.L.P. (law firm).
JOHN E.V. ROSE Chief Executive, Rolls-Royce plc since 1996; 625(8)
Age 46 Managing Director of Aerospace Group (1995-1996);
1998 Deputy Managing Director, Aerospace Group (1994);
Director, Corporate Development (1989-1994);
President and Chief Executive, Rolls-Royce, Inc. (a
U.S. subsidiary of Rolls-Royce plc) (1993-1994);
Director, Reckitt and Colman plc; Council Member,
The Prince's Trust (a UK charitable organization).
</TABLE>
3
<PAGE> 6
<TABLE>
<CAPTION>
COMMON STOCK
BENEFICIALLY OWNED
JANUARY 31, 1999,
NAME, AGE AND YEAR PRINCIPAL OCCUPATION, BUSINESS EXPERIENCE AND PERCENTAGE OF
BECAME A DIRECTOR IN LAST FIVE YEARS, OTHER DIRECTORSHIPS CLASS(1)
- ------------------ ----------------------------------------- ------------------
<S> <C> <C>
ROBERT L. SLOAN Vice Chairman of the Board of the Corporation; 31,945(9)
Age 52 Chief Executive Officer, Sibley Memorial Hospital,
1993 Washington, D.C.; Trustee, District of Columbia
Hospital Association; Founding Chairman, Potomac
Home Health Care Agency; Trustee, Catholic
Charities, Inc.
JACK VALENTI Chairman and Chief Executive Officer, Motion 33,207(10)
Age 77 Picture Association of America, Inc.; Director,
1986 American Film Institute.
EDDIE N. WILLIAMS President and Chief Executive Officer, Joint Center 19,271(11)
Age 66 for Political and Economic Studies; Director,
1993 Harrah's Entertainment Inc.; Director, Jazz Casino
Company L.L.C.; Director, Blue Cross/Blue Shield of
the National Capital Area; Director, Care First,
Inc.
</TABLE>
- ---------------
(1) Beneficial ownership, as determined in accordance with Rule 13d-3 under the
Securities Exchange Act of 1934, includes sole or shared power to vote or
direct the voting of, or to dispose or direct the disposition of, shares as
well as the right to acquire beneficial ownership within 60 days of January
31, 1999, through the exercise of an option or otherwise. Unless otherwise
indicated, the listed persons have sole voting power and sole investment
power with respect to the shares of Common Stock set forth in the table and
own less than 1% of the shares outstanding. The Corporation had 29,098,247
shares of Common Stock outstanding as of January 31, 1999.
(2) Included in this total are exercisable options to purchase 3,604,000 shares
of the Corporation's Common Stock. For a more complete description of Mr.
Allbritton's beneficial ownership of the Corporation's Common Stock, please
see "Beneficial Ownership of Corporation Stock."
(3) Included in this total are exercisable options to purchase 7,500 shares of
the Corporation's Common Stock. Under the federal securities laws, Robert
L. Allbritton may be deemed to share voting and investment power with
regard to 700,000 shares owned by charitable foundations of which Mr.
Allbritton, his father Joe L. Allbritton and his mother Barbara B.
Allbritton are trustees (the "Foundations").
(4) Included in this total are exercisable options to purchase 108,334 shares
of the Corporation's Common Stock.
(5) Included in this total are exercisable options to purchase 2,500 shares of
the Corporation's Common Stock.
(6) Included in this total are exercisable options to purchase 25,000 shares of
the Corporation's Common Stock. Additionally, Mr. Hebert is a voting
trustee of The Allbritton Foundation, which owns 500,000 shares of the
Corporation's Common Stock.
(7) Included in this total are exercisable options to purchase 20,000 shares of
the Corporation's Common Stock. Mr. Pfeiffer is a partner in the law firm
of Fulbright & Jaworski L.L.P, which performed legal services for the
Corporation during 1998 and is expected to perform legal services for the
Corporation in 1999.
(8) Included in this total are 225 shares of Phantom Stock (see "Director
Compensation," below).
(9) Included in this total are (i) exercisable options to purchase 20,000
shares of the Corporation's Common Stock and (ii) 4,618 shares of Phantom
Stock (see "Director Compensation," below).
4
<PAGE> 7
(10) Included in this total are (i) exercisable options to purchase 25,000
shares of the Corporation's Common Stock and (ii) 4,900 shares of Phantom
Stock (see "Director Compensation," below).
(11) Included in this total are (i) exercisable options to purchase 15,000
shares of the Corporation's Common Stock and (ii) 653 shares of Phantom
Stock (see "Director Compensation," below). On November 22, 1995, Harrah's
Jazz Company, a partnership for which Mr. Williams served on the Executive
Committee, and its wholly owned subsidiary Harrah's Jazz Finance
Corporation, for which Mr. Williams served as a director, filed petitions
for relief under Chapter 11 of the federal Bankruptcy Code. On October 30,
1998 a plan of reorganization was consummated and a new company, Jazz
Casino Company, L.L.C. was formed, for which Mr. Williams currently serves
as a director.
BOARD AND COMMITTEE MEETINGS
The Board has an Executive Committee, an Audit Committee, a Compensation
Committee, an Advertising and Public Relations Committee, a Budget Committee, an
International Strategy Committee, and the Riggs & Co. Committee. It does not
have a standing Nominating Committee. Directors of the Corporation are nominated
by the full Board.
The Executive Committee exercises the power of the Board between meetings
of the Board and such other powers as the Board may delegate. The Executive
Committee did not meet during 1998. The committee members during 1998 were
directors Joe L. Allbritton, Timothy C. Coughlin, Lawrence I. Hebert, and Robert
L. Sloan.
The Audit Committee reviews the audit and examination reports of the
internal auditors, independent public accountants and federal bank examiners as
they relate to the Corporation and its subsidiaries. The Audit Committee held
five meetings in 1998. The committee members during 1998 were directors John M.
Fahey, Jr., Steven B. Pfeiffer, and Robert L. Sloan.
The Compensation Committee assists the Board in fulfilling its
responsibilities related to compensation and benefits. The Compensation
Committee met three times in 1998. The committee members during 1998 were
directors Robert L. Sloan, Jack Valenti, and Eddie N. Williams.
The Advertising and Public Relations Committee reviews and approves
recommendations on the Corporation's advertising and marketing programs. The
Advertising and Public Relations Committee met three times in 1998. The
committee members during 1998 were directors Robert L. Allbritton, Timothy C.
Coughlin, and Jack Valenti.
The Budget Committee reviews and recommends to the full Board the budget
for the Corporation on an annual basis. The Budget Committee held one meeting in
1998. The committee members during 1998 were directors Joe L. Allbritton, Robert
L. Allbritton, Timothy C. Coughlin, John M. Fahey, Jr., Lawrence I. Hebert, and
Robert L. Sloan.
The International Strategy Committee establishes and monitors the mission
and strategic activities of the International Banking Group of Riggs Bank N.A.
The International Strategy Committee held three meetings in 1998. The committee
members during 1998 were directors Timothy C. Coughlin, Lawrence I. Hebert, John
E. V. Rose, and Steven B. Pfeiffer.
The Riggs & Co. Committee reviews the activities and performance of the
Riggs & Co. Division of Riggs Bank N.A. The Riggs & Co. Committee met four times
in 1998. The committee members during 1998 were directors Joe L. Allbritton,
Lawrence I. Hebert, Steven B. Pfeiffer, and Jack Valenti.
The Board held four meetings in 1998, and the various Committees of the
Board met a total of 23 times. Of the directors serving during 1998, Mr.
Williams attended fewer than 75% of the aggregate of the total number of
meetings of the Board and of the committees on which he served during 1998.
5
<PAGE> 8
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 and rules promulgated
under it require that certain officers, directors and beneficial owners of the
Corporation's equity securities ("insiders") file various reports with the
Securities and Exchange Commission ("SEC"). Based solely on its review of the
copies of such forms received by it, or written representations from certain
reporting persons that all required forms were filed, the Corporation believes
that all of the Corporation's insiders have timely filed the reports under
Section 16(a) required to be filed for 1998.
DIRECTOR COMPENSATION
Directors of the Corporation who are not employees of the Corporation
currently receive a retainer fee of $25,000 per year. The Vice-Chairman receives
an additional retainer fee of $25,000 per year. Directors receive an additional
fee of $750 for each committee meeting attended, and the Chairmen of the
committees receive an additional fee of $1,500 per committee meeting attended.
Officers of the Corporation who are directors do not receive compensation in
addition to their compensation as officers for attending Board or committee
meetings of the Corporation. In April 1994, a Deferred Compensation Plan was
adopted to allow non-employee directors of the Corporation to defer receipt of
all or a portion of director's fees to a specified date or termination of
service as a director. Under the plan, directors may elect to defer all fees and
to have such deferred amounts treated as having been invested in cash, shares of
the Corporation's Common Stock (the deferred stock is known as "Phantom Stock"),
and/or a combination of cash and shares. Deferred fees treated as invested in
cash are credited with interest at the rate paid by Riggs Bank N.A. on
certificates of deposit with a one-year maturity. Dividends on Phantom Stock are
reinvested in additional shares of Phantom Stock. Shares of Phantom Stock
acquired under the plan are priced at the closing market price of such shares on
the date on which fee payment is deferred.
In addition to the above fees, Directors Robert L. Allbritton, Lawrence I.
Hebert, and Steven B. Pfeiffer received a fee of L15,000 (approximately $25,000)
for service on the board of Riggs Bank Europe Limited. Mr. Pfeiffer also
received an additional L10,000 (approximately $17,000) for serving as Chairman
of the Audit Committee of Riggs Bank Europe Limited.
The Corporation maintains the 1997 Non-Employee Directors Stock Option Plan
(the "1997 Directors Plan") under which the Board may grant options to purchase
common stock of the Corporation to non-employee directors of the Corporation and
the non-employee directors of its subsidiaries. The amount, timing and terms of
such grants will be based on such considerations as the Board may consider
appropriate, subject to the provisions of the 1997 Directors Plan. The maximum
number of shares that may be issued currently under the 1997 Directors Plan is
350,000 shares of common stock. The 1997 Directors Plan is proposed to be
amended. In 1998, options with respect to a total of 2,500 shares of Common
Stock were granted to Mr. Fahey, who joined the Board in July 1997. Options for
a total of 310,000 shares have been granted under the 1997 Directors Plan.
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<PAGE> 9
BENEFICIAL OWNERSHIP OF CORPORATION STOCK
The following table sets forth information, as of January 31, 1999,
concerning (a) each person known by the Corporation to own beneficially more
than 5% of the Common Stock, (b) each of the executive officers named in the
Summary Compensation Table and (c) executive officers and directors (including
nominees) of the Corporation, including certain officers of Riggs Bank N.A., as
a group:
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
BENEFICIAL PERCENT OF
BENEFICIAL OWNERS OF COMMON STOCK OWNERSHIP(1) CLASS
--------------------------------- ------------ ----------
<S> <C> <C>
Joe L. Allbritton..................................... 13,028,300(2) 39.8%
Riggs National Corporation
1503 Pennsylvania Avenue, N.W
Washington, D.C. 20005
Barbara B. Allbritton................................. 2,046,732(3) 7.0%
Riggs National Corporation
1503 Pennsylvania Avenue, N.W
Washington, D.C. 20005
Timothy C. Coughlin................................... 118,430(4)
Timothy A. Lex........................................ 64,334(5)
John L. Davis......................................... 69,834(6)
J. David Hoffman...................................... 16,667(7)
All executive officers and directors (including
nominees) of the Corporation as a group (20
persons)............................................ 13,672,241(8) 41.1%
</TABLE>
- ---------------
(1) Beneficial ownership, as determined in accordance with Rule 13d-3 under the
Securities and Exchange Act of 1934, includes sole or shared power to vote,
or direct the disposition of, shares as well as the right to acquire
beneficial ownership within 60 days of January 31, 1999, through the
exercise of an option or otherwise. Except where noted, the listed persons
have sole voting power and sole investment power with respect to the shares
of Common Stock set forth in the table and own less than 1% of the shares
outstanding. The Corporation had 29,098,247 shares of Common Stock
outstanding as of January 31, 1999.
(2) Joe L. Allbritton has sole voting and investment power with regard to
7,394,300 of these shares, including 475,511 shares owned by Allwin, Inc.,
which is wholly owned by Mr. Allbritton. In addition, there are 700,000
shares owned by the Foundations as to which Mr. Allbritton, as a trustee,
shares voting and investment power with his wife and his son, Robert L.
Allbritton, and 1,330,000 shares are beneficially owned by Mr. Allbritton's
wife, Barbara B. Allbritton, as to which Mr. Allbritton shares voting and
investment power. Mr. Allbritton disclaims beneficial ownership of an
additional 1,732 shares owned by Mrs. Allbritton.
This amount includes 3,604,000 exercisable options of the Corporation's
Common Stock held by Mr. Allbritton as of January 31, 1999.
(3) Mrs. Allbritton has sole voting and investment power with regard to 1,732 of
these shares and shares voting and investment power with her husband, Joe L.
Allbritton, as to 1,330,000 shares, with respect to which she has granted to
him an irrevocable proxy to vote such shares and has agreed not to sell such
shares free of the proxy except in limited market transactions. Also
included are 700,000 shares owned by the Foundations as described in note 2
above, and exercisable options to purchase 15,000 shares of the
Corporation's Common Stock. Mrs. Allbritton disclaims beneficial ownership
of 7,394,300 shares beneficially owned by her husband.
(4) See note 4 under "Nominees for Director."
7
<PAGE> 10
(5) This amount includes exercisable options to purchase 63,334 shares of the
Corporation's Common Stock.
(6) This amount includes exercisable options to purchase 68,334 shares of the
Corporation's Common Stock.
(7) This entire amount represents exercisable options to purchase shares of the
Corporation's Common Stock.
(8) Of the 13,672,241 shares which are beneficially held by the executive
officers and directors (including nominees) of the Corporation, 4,157,005
are options which have vested and are exercisable and 10,397 are shares of
Phantom Stock.
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<PAGE> 11
COMPENSATION OF EXECUTIVE OFFICERS
The annual and other compensation paid by the Corporation and Riggs Bank
N.A. for 1998, 1997 and 1996 to the Chief Executive Officer and each of the four
most highly compensated executive officers of the Corporation, including certain
officers of Riggs Bank N.A., and the capacities in which they are currently
serving, are set forth below:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
----------------------------------- ------------
OTHER SECURITIES
ANNUAL UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION OPTIONS COMPENSATION
- --------------------------- ---- -------- -------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Joe L. Allbritton......... 1998 $685,029(1) $ --(2) 446 1,150,000 64,543(3)
Chairman of the Board 1997 549,680 -- 436 500,000 58,570
and Chief Executive 1996 497,683 -- 713 1,224,000 68,678
Officer of the
Corporation; Chairman of
the Board and Chief
Executive Officer of
Riggs Bank N.A
Timothy C. Coughlin....... 1998 312,692 165,000 -- 50,000 9,519(4)
President of the 1997 300,000 141,000 1,769 25,000 9,355
Corporation 1996 300,000 120,000 -- 25,000 9,314
Timothy A. Lex............ 1998 242,308 150,000 -- 20,000 9,322(5)
Executive Vice 1997 200,000 94,000 3,694 25,000 9,183
President and Chief 1996 197,115 80,000 -- 35,000 8,483
Operating Officer of
Riggs Bank N.A
John L. Davis............. 1998 192,827 101,750 -- 10,000 10,111(6)
Chief Financial Officer 1997 185,000 87,000 -- 10,000 9,890
of the Corporation; 1996 179,615 64,750 -- 20,000 9,573
Executive Vice President
and Chief Financial
Officer of Riggs Bank N.A
J. David Hoffman.......... 1998 184,231 65,000 -- 20,000 8,230(7)
Executive Vice 1997 99,615 102,000 -- 50,000 198
President and Chief
Information Officer of
Riggs Bank N.A
</TABLE>
- ---------------
(1) Each of the amounts listed as salary for Mr. Allbritton includes both his
base salary and director fees received for services as Chairman of the Board
of Riggs Bank Europe Limited.
(2) Mr. Allbritton requested that the Board not include him in the 1996, 1997
and 1998 Bonus Plans. See "1998 Compensation -- The Chairman and Chief
Executive Officer of Riggs National Corporation," found under "Compensation
Committee Report to Shareholders."
(3) $61,343 of the amount reported represents the economic benefit attributable
to the Split Dollar Life Insurance Plan and $3,200 of the amount reported is
attributable to profit sharing contributions to the Riggs Bank N.A. 401(k)
Plan account of Mr. Allbritton.
9
<PAGE> 12
(4) $1,469 of the amount reported represents the economic benefit attributable
to the Split Dollar Life Insurance Plan and $8,050 of the amount reported is
attributable to matching and profit sharing contributions to the Riggs Bank
N.A. 401(k) Plan account of Mr. Coughlin.
(5) $1,272 of the amount reported represents the economic benefit attributable
to the Split Dollar Life Insurance Plan and $8,050 of the amount reported is
attributable to matching and profit sharing contributions to the Riggs Bank
N.A. 401(k) Plan account of Mr. Lex.
(6) $2,061 of the amount reported represents the economic benefit attributable
to the Split Dollar Life Insurance Plan and $8,050 of the amount reported is
attributable to matching and profit sharing contributions to the Riggs Bank
N.A. 401(k) Plan account of Mr. Davis.
(7) $626 of the amount reported represents the economic benefit attributable to
the Split Dollar Life Insurance Plan and $7,604 of the amount reported is
attributable to matching and profit sharing contributions to the Riggs Bank
N.A. 401(k) Plan account of Mr. Hoffman. Mr. Hoffman joined Riggs Bank N.A.
in June 1997.
STOCK OPTION GRANTS IN 1998(1)
<TABLE>
<CAPTION>
NUMBER OF % OF TOTAL
SECURITIES OPTIONS
UNDERLYING GRANTED TO GRANT DATE
OPTIONS EMPLOYEES EXERCISE EXPIRATION PRESENT
NAME GRANTED IN 1998 PRICE DATE VALUE($)(2)
---- ---------- ---------- -------- ---------- -----------
<S> <C> <C> <C> <C> <C>
Joe L. Allbritton(3)..................... 1,150,000 87.8% $30.375 4/15/08 $16,557,585
Timothy C. Coughlin(4)(5)................ 35,000 2.0 25.875 1/21/08 421,036
15,000 0.9 30.25 7/15/08 214,148
Timothy A. Lex(5)........................ 20,000 1.2 30.25 7/15/08 285,530
John L. Davis(5)......................... 10,000 0.6 30.25 7/15/08 142,765
J. David Hoffman(5)...................... 20,000 1.2 30.25 7/15/08 285,530
</TABLE>
- ---------------
(1) Under the Corporation's 1996 Stock Option Plan (the "1996 Plan"), employees
who have substantial responsibility in the direction and management of the
Corporation or a subsidiary, including directors who are officers, (the "Key
Employees") are eligible to receive stock option grants. The Corporation
estimates that the number of Key Employees eligible to participate is 185.
The Compensation Committee (as defined in the 1996 Plan) is responsible for
administration of the 1996 Plan. The amount, timing and terms of grants will
be based on such considerations as the Compensation Committee and the Non-
Employee Directors Committee (as defined in the 1996 Plan) consider
appropriate, subject to the provisions of the 1996 Plan. The options granted
under the 1996 Plan are either incentive options (within the meaning of
Section 422 of the Internal Revenue Code) or nonqualified options. The
exercise price per share for the shares subject to options will be not less
than 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 10% of the total combined voting power of all classes of stock of the
Corporation (or a subsidiary corporation), will not be less than 110% of the
fair market value of the Common Stock on the date of grant. The maximum term
of options under the 1996 Plan is 10 years. Vested options generally may be
exercised no later than three months after the optionee terminates
employment, provided that if the termination of employment is due to death
or disability, the options become fully vested and may be exercised until
the earlier of the expiration date of the option or one year after
termination of employment. In the event of changes in the Common Stock by
reason of capital adjustments, such as stock splits and recapitalizations,
appropriate adjustments will be made in the price of shares and the number
of shares subject to option. The Board may amend or terminate the 1996 Plan
with respect to future grants of options, provided that shareholder approval
is required for any amendment that increases the aggregate number of shares
available, changes the class of eligible persons or extends the term of the
1996 Plan. With the exception of Joe L. Allbritton, none of the executive
officers of the Corporation have yet been granted options under the 1996
Plan. Non-employee directors are not eligible to receive grants under the
1996 plan. Mr. Allbritton has been granted options
10
<PAGE> 13
with respect to 2,650,000 shares. As a group, Key Employees have been granted
options with respect to 2,775,000 shares. The closing price per share of the
Common Stock on the Nasdaq National Market on March 11, 1999, was $17.75.
An optionee generally will not be taxed when an option is granted under the
1996 Plan. When an optionee exercises a nonqualified option, the optionee
generally will have compensation equal to the amount by which the then fair
market value of the stock exceeds the option exercise price. The
Corporation generally will receive a deduction equal to the amount of
compensation income recognized by the optionee. An optionee holding an
incentive stock option who complies with the applicable holding periods
before disposing of the stock acquired upon exercise of the incentive
option will generally qualify for favorable tax treatment, and in such case
the Corporation generally will not receive a tax deduction. If the optionee
holding an incentive stock option fails to comply with the applicable
holding periods provided by the Internal Revenue Code to obtain favorable
tax treatment, the rules applicable to nonqualified stock options generally
will apply to both the optionee and the Corporation.
(2) The grant date present value estimate reflected in the above table has been
developed solely for purposes of comparative disclosure in accordance with
the rules and regulations of the SEC, and does not necessarily reflect the
Corporation's view of the appropriate value or methodology for the purposes
of financial reporting. This hypothetical value, determined by the
Black-Scholes model, is based on the following assumptions:
- Exercise price is equal to the closing market price on the day of
grant;
- The annual dividend rate is 0.7729% for options maturing January 21,
2008, 0.6584% for options maturing April 15, 2008, and 0.6611% for
options maturing July 15, 2008.
- Price volatility is based on weekly data for the preceding one-year
period;
- The risk-free rate is 4.68% for options maturing January 21, 2008, and
4.72% for options maturing April 15, 2008, and July 15, 2008, for the
expected term of the options with a yield of comparable maturing
Treasury securities; and
- There is a 9% discount for forfeiture of unexercised shares.
These assumptions are based upon historical experience and are not a
forecast of future stock price performance or volatility or of future
dividend policy. There is no assurance that the value received by an
executive will be at or near the value estimated by the Black-Scholes
model. The actual value of options will depend on the market value of the
Corporation's Common Stock on the dates upon which the options are
exercised. No realization of value from the options is possible without an
increase in the price of the Corporation's Common Stock, which would
benefit all shareholders.
(3) On April 15, 1998 (the "April Grant Date"), the Compensation Committee
recommended, and certain non-employee outside directors on the Board
approved, a stock option grant to the Chairman and Chief Executive Officer,
Mr. Allbritton, to purchase 1,150,000 shares of the Corporation's Common
Stock. Pursuant to the Corporation's 1996 Stock Option Plan, as approved by
shareholders, the option was granted at a price equal to the closing price
of the stock on the April Grant Date. The option was fully vested and
exercisable on the April Grant Date.
(4) On January 21, 1998 (the "January Grant Date"), the Compensation Committee
recommended, and certain non-employee outside directors on the Board
approved, a stock option grant to the President, Mr. Coughlin, to purchase
35,000 shares of the Corporation's Common Stock. Pursuant to the
Corporation's 1994 Stock Option Plan, as approved by shareholders, the
option was granted at a price equal to the closing price of the stock on the
January Grant Date. The option was fully vested and exercisable on the
January Grant Date.
(5) On July 15, 1998 (the "July Grant Date"), the Compensation Committee
recommended, and certain non-employee outside directors on the Board
approved, stock option grants to senior executive officers, Messrs.
Coughlin, Lex, Davis and Hoffman, to purchase 15,000, 20,000, 10,000 and
20,000 shares, respectively, of the Corporation's Common Stock. Pursuant to
the Corporation's 1994 Stock Option Plan,
11
<PAGE> 14
as approved by shareholders, the options were granted at a price equal to
the closing price of the stock on the July Grant Date. These options vest
and become exercisable as follows: (1) one-third equally over three years on
the respective grant date anniversaries or (2) upon a "change of control" of
the Corporation, as defined in the Corporation's 1994 Stock Option Plan.
STOCK OPTION EXERCISES IN 1998/FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
SHARES OPTIONS AT FY-END OPTIONS, FY-END
ACQUIRED ON VALUE EXERCISABLE/ EXERCISABLE/
NAME EXERCISE REALIZED UNEXERCISABLE UNEXERCISABLE
---- ----------- --------- -------------------- ------------------
<S> <C> <C> <C> <C>
Joe L. Allbritton................. -- -- 3,604,000/ 0 $17,307,350/ 0
Timothy C. Coughlin............... -- -- 108,334/ 31,666 654,584/ 10,416
Timothy A. Lex.................... -- -- 63,334/ 36,666 515,834/ 10,416
John L. Davis..................... -- -- 68,334/ 16,666 656,459/ 4,166
J. David Hoffman.................. -- -- 16,667/ 53,333 0/ 0
</TABLE>
RETIREMENT BENEFITS
PENSION PLAN TABLE
<TABLE>
<CAPTION>
SERVICE
COMPENSATION 5 10 15 20 25 30
<S> <C> <C> <C> <C> <C> <C>
10,000 325 650 975 1,300 1,625 1,950
20,000 825 1,650 2,475 3,300 4,125 4,950
30,000 1,325 2,650 3,975 5,300 6,625 7,950
40,000 1,825 3,650 5,475 7,300 9,125 10,950
50,000 2,325 4,650 6,975 9,300 11,625 13,950
60,000 2,825 5,650 8,475 11,300 14,125 16,950
70,000 3,325 6,650 9,975 13,300 16,625 19,950
80,000 3,825 7,650 11,475 15,300 19,125 22,950
90,000 4,325 8,650 12,975 17,300 21,625 25,950
100,000 4,825 9,650 14,475 19,300 24,125 28,950
110,000 5,325 10,650 15,975 21,300 26,625 31,950
120,000 5,825 11,650 17,475 23,300 29,125 34,950
130,000 6,325 12,650 18,975 25,300 31,625 37,950
140,000 6,825 13,650 20,475 27,300 34,125 40,950
150,000 7,325 14,650 21,975 29,300 36,625 43,950
160,000 7,825 15,650 23,475 31,300 39,125 46,950
</TABLE>
Senior officers of the Corporation and its subsidiaries are eligible to
receive pension benefits under the Riggs Bank N.A. Amended Pension Plan.
Effective December 31, 1995, the benefit formula for determining the pension
benefit payable under the plan is 1% times the officer's average compensation
for each year of service up to a maximum of 30 years less .35% of the officer's
compensation not in excess of $10,000 for each year of service up to a maximum
of 30 years. However, if a greater benefit would result under plan provisions in
effect prior to December 31, 1995, based on average compensation and years of
service prior to December 31, 1995, an officer's pension benefit payable under
the plan is protected at that level.
Average compensation is limited by the Riggs Bank N.A. Amended Pension Plan
to base salary. In accordance with applicable tax code provisions, base salary
has been limited since 1989. Base salary was
12
<PAGE> 15
limited to $160,000 for 1998. Applying the formula, the estimated annual pension
benefit for each of the highest paid executive officers, assuming each retired
as of his normal age (or his current age, if later), is as follows: Mr.
Allbritton $96,227; Mr. Coughlin $50,529; Mr. Lex $46,950; Mr. Davis $20,436;
and Mr. Hoffman $46,950.
The Corporation also has a Supplemental Executive Retirement Plan, which
provides supplemental retirement income to certain key employees of the
Corporation and its subsidiaries at the level of senior vice president and
above. The Compensation Committee determines the terms and conditions under
which the employee participates and becomes vested in the benefits of the plan,
including accelerating the vesting of benefits to any participant. Under
parameters adopted by the Compensation Committee, the level of benefits is based
on the participant's functional responsibility. Upon the later of a
participant's termination of employment with vested benefits or attainment of
age 62, the participant will begin receiving the vested portion of the
supplemental retirement benefit, payable for the life of the participant, but
for no more than 15 years. In the case of the death of a participant while
employed, the participant's beneficiary will receive the supplemental benefit
for 15 years. Based on the parameters set by the Compensation Committee, the
annual benefit payable to each of Messrs. Allbritton and Coughlin would be
$40,000. The annual benefit payable to Messrs. Lex and Davis would be $25,000
and $15,000, respectively. Mr. Hoffman currently does not receive any benefit
under the Plan.
TRANSACTIONS WITH MANAGEMENT
INDEBTEDNESS OF DIRECTORS, NOMINEES FOR DIRECTORS, EXECUTIVE OFFICERS AND
RELATED PERSONS
The Corporation's banking subsidiaries have had, and are expected to have
in the future, banking transactions in the ordinary course of their business
with directors of Riggs Bank N.A. and Riggs Bank Europe Limited and their
associates (primarily the businesses with which they are associated), and
directors and executive officers of the Corporation and their associates, on
substantially the same terms, including interest rates and collateral, as those
prevailing at the time for comparable transactions with other persons. In the
opinion of management, these transactions did not, at the time they were entered
into, involve more than the normal risk of collectability or present other
unfavorable features.
COMPENSATION COMMITTEE REPORT TO SHAREHOLDERS
GENERAL
The Compensation Committee of the Corporation is responsible for:
- reviewing the overall salary administration program for the
Corporation and its subsidiaries, including Riggs Bank N.A. (the
"Riggs Group");
- reviewing and making recommendations to the Board concerning annual
salary and bonus programs for the Riggs Group;
- reviewing and making recommendations to the Board concerning
compensation and benefits of executive officers of the Riggs Group;
and
- reviewing the Riggs Group's benefit plans, considering any new
benefits that significantly modify the existing plans and recommending
to the Board any changes requiring Board approval.
In 1998, the Compensation Committee approved a compensation framework for
executive officers in which executives' pay was directly linked to the financial
success of the bank. Specifically, the 1998 compensation framework consisted of:
(1) paying competitive market rates of base pay; (2) rewarding financial
performance of the Corporation through an annual bonus plan based on aggressive
goals for return on average assets ("ROA"), net income, and fee income; and (3)
granting competitive stock options to key employees of the Corporation as an
incentive to further the long-term growth and success of the Corporation.
13
<PAGE> 16
1998 COMPENSATION
THE CHAIRMAN AND CHIEF EXECUTIVE OFFICER OF RIGGS NATIONAL
CORPORATION. Joe L. Allbritton continued to serve as Chairman of the Board and
Chief Executive Officer of the Corporation throughout 1998, during which the
Corporation improved its financial performance. Under the Chairman's leadership,
the Corporation earned $61.8 million in net income and exceeded its ROA and fee
income goals.
In 1998, Mr. Allbritton's base salary was maintained at the same level he
has received since 1992. Per his request of the Board, Mr. Allbritton was not
included in the Corporation's 1998 Bonus Plan and, therefore, was not paid a
bonus.
In April 1998, Mr. Allbritton was granted the option to purchase 1,150,000
shares of the Corporation's Common Stock at a price of $30.375 per share upon
the approval of non-employee, outside directors of the Corporation. The option
vested and became exercisable on the grant date. This option grant took into
account the Compensation Committee's view of Mr. Allbritton's personal role in
the Corporation's outstanding financial success and the Board's high regard for
him and his contributions to the Corporation, and was not based on quantitative
criteria.
OTHER EXECUTIVE OFFICERS. The Compensation Committee established a
performance-based bonus plan for executive officers in 1998 under which bonuses
were paid to eligible officers taking into account the Corporation's achievement
of specified targets for 1998 ROA, net income, fee income and the executive's
performance based on distinct goals set for each executive. The Corporation
exceeded all of the specified targets in 1998. The Corporation used a rating
system to appraise all officer performance, including that of the senior
officers.
Additionally, stock option grants were made in 1998 based on corporate and
individual performance in 1998. See "Stock Option Grants in 1998," for a
description of the stock options granted to executive officers.
1999 COMPENSATION
The Board has approved a performance-based incentive plan for executive
officers in 1999, consistent with the 1998 plan.
TAX DEDUCTIBILITY OF EXECUTIVE COMPENSATION
Internal Revenue Code Section 162(m) does not permit the Corporation to
deduct certain non-performance-based compensation in excess of $1 million per
taxable year paid to the Chief Executive Officer or the four most highly
compensated executive officers named in the Proxy Statement.
For 1998, all compensation earned by the Corporation's Chief Executive
Officer and four mostly highly compensated officers satisfied the deductibility
requirements under Section 162(m). The Compensation Committee may, in the
future, review the adoption of a policy regarding Section 162(m).
14
<PAGE> 17
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee consists of the below-named three directors,
none of whom are present or former officers or employees of the Corporation or
any of its subsidiaries. No executive officer of the Corporation serves as an
officer, director, or member of a compensation committee of any entity whose
executive officer served on the Compensation Committee or as a director of the
Corporation. During fiscal year 1998, Compensation Committee member Robert L.
Sloan and an entity for which Mr. Sloan served as the Chief Executive Officer
had outstanding loans with Riggs Bank made in the ordinary course of business on
substantially the same terms, including interest rates and collateral, as those
prevailing at the time for comparable transactions with other persons. In the
opinion of management, these loans did not, at the time they were entered into,
involve more than the normal risk of collectability or present other unfavorable
features.
Respectfully Submitted,
Riggs National Corporation
Compensation Committee
Jack Valenti, Chairman
Robert L. Sloan
Eddie N. Williams
15
<PAGE> 18
STOCK PERFORMANCE CHART
The following graph shows the performance of the Corporation's Common Stock
over the past five fiscal years as compared to the NASDAQ Market Value Index and
the Middle Atlantic Banks Index.
[Performance Graph]
<TABLE>
<CAPTION>
SNL MID-ATLANTIC BANK
RIGGS NATIONAL CORPORATION NASDAQ - TOTAL US INDEX
-------------------------- ----------------- ---------------------
<S> <C> <C> <C>
12/31/93 100.00 100.00 100.00
12/31/94 97.10 97.75 97.22
12/31/95 150.72 138.26 155.59
12/31/96 202.26 170.01 223.27
12/31/97 318.22 208.58 317.32
12/31/98 243.05 293.21 351.79
</TABLE>
Assumes $100 invested on December 31, 1993.
Assumes dividends reinvested to fiscal year ended December 31, 1998.
- ---------------
(1) A list of the banks included in the Middle Atlantic Banks Index is available
to shareholders, at no charge, by writing to Mary B. LeMont, Assistant
Corporate Secretary, Riggs National Corporation, 800 17th Street, N.W., 7th
Floor, Washington, D.C. 20006.
16
<PAGE> 19
CORPORATION PROPOSAL
(ITEM NO. 2 ON PROXY)
AMENDMENT TO THE 1996 STOCK OPTION PLAN
Under the Corporation's 1996 Stock Option Plan (the "1996 Plan"), any
employee who has substantial responsibility in the direction and management of
the Corporation or a subsidiary (a "Key Employee") is eligible to receive stock
option grants.(1) The purpose of the 1996 Plan is to advance the best interests
of the Corporation by providing Key Employees with an additional incentive to
contribute to the growth and success of the Corporation by increasing their
proprietary interest in the success of the Corporation. The 1996 Plan also
provides the Corporation with an additional tool to retain critical employees.
The number of shares of Common Stock available for stock option awards under the
1996 Plan is currently four million; however, options with respect to 2,775,000
shares have already been granted. The 1996 Plan limits grants to any one Key
Employee during a calendar year to two million shares.
The Board of Directors has recommended an amendment to the 1996 Plan (the
"Amendment"). The Amendment would increase the number of shares of the
Corporation's Common Stock available for stock option awards from four million
to nine million shares. The Board believes that the Amendment would provide the
Corporation with sufficient stock option award shares for the near future and
reduce the Corporation's expense of repeatedly amending the 1996 Plan, including
the costs associated with preparation of required regulatory filings. Because
Key Employees of the Corporation are eligible for grants under the 1996 Plan,
any Key Employee of the Corporation, including any directors who are employees,
may be deemed to have an interest in the approval of the Amendment. The Board
has unanimously waived preemptive rights of the Corporation's Shareholders with
regard to such shares.
BOARD OF DIRECTORS' RECOMMENDATION
The Board recommends a vote FOR the Amendment to the 1996 Stock Option
Plan.
The shares of Common Stock represented by properly executed proxies will be
voted FOR the Amendment to the 1996 Stock Option Plan unless otherwise specified
on the proxy.
- ---------------
(1) Please see Note 1 under "Stock Option Grants in 1998".
17
<PAGE> 20
CORPORATION PROPOSAL
(ITEM NO. 3 ON THE PROXY)
AMENDMENT TO THE 1997 NON-EMPLOYEE DIRECTORS STOCK OPTION PLAN
Under the Corporation's 1997 Non-Employee Directors Stock Option Plan (the
"1997 Directors Plan"), any director of the Corporation or any subsidiary who is
not otherwise an employee of the Corporation or any subsidiary (a "Non-Employee
Director") is eligible to receive stock option grants. A total of 21 Non-
Employee Directors of the Corporation and its subsidiaries are currently
eligible to participate in the 1997 Directors Plan. The purpose of the 1997
Directors Plan is to increase the proprietary interest of Non-Employee Directors
of the Corporation and its subsidiaries by granting such directors options to
purchase Common Stock of the Corporation. In addition, the 1997 Directors Plan
further compensates Non-Employee Directors for the amount of time they spend in
connection with their Board service and helps the Corporation attract
independent directors to the Board. The grants are intended to more closely
align the interests of the Non-Employee Directors of the Corporation and its
subsidiaries with those of the shareholders. The number of shares of Common
Stock available for stock option awards under the 1997 Directors Plan is
currently 350,000; however, options with respect to 310,000 shares have already
been granted to the group of eligible Non-Employee Directors.
The Board is responsible for administration of the 1997 Directors Plan. The
amount, timing and terms of such grants will be based on such considerations as
the Board may consider appropriate, subject to the provisions of the 1997
Directors Plan. When an option becomes exercisable, the optionee may purchase
shares of the Corporation's Common Stock by paying the exercise price for the
number of shares being purchased. The exercise price per share of Common Stock
may not be less than the greater of the fair market value of a share of Common
Stock on the date of grant or the par value of the Common Stock. The maximum
term of options under the 1997 Directors Plan is 10 years. Vested options
generally may be exercised no later than three months after the optionee ceases
to be a director of the Corporation or a subsidiary, provided that if the
director terminates service due to death or disability, the director's options
become fully vested and may be exercised until the earlier of the expiration of
the options or one year after the termination of the director's service. In the
event of changes in the Common Stock by reason of capital adjustments, such as
stock splits and recapitalizations, appropriate adjustments will be made in the
price of shares and the number of shares subject to options. The Board retains
the right to amend or terminate the 1997 Directors Plan. An amendment or
termination of the 1997 Directors Plan may not adversely affect a director's
rights with respect to an outstanding option without such director's consent.
A director generally will not be taxed when a stock option is granted under
the 1997 Directors Plan. When a director exercises an option, the director
generally will have compensation income equal to the amount by which the fair
market value of the stock exceeds the option exercise price on the date of the
exercise. The Corporation generally will receive a tax deduction equal to the
amount of compensation income recognized by the director when the director
exercises a stock option granted under the 1997 Directors Plan.
Employees of the Corporation or any subsidiary, including directors who are
executive officers of or otherwise employed by the Corporation or any
subsidiary, are not eligible under the 1997 Directors Plan. As a group, all
current Non-Employee Directors of the Corporation have received options with
respect to 115,000 shares. Robert L. Allbritton, Mr. Fahey, Mr. Hebert, Mr.
Pfeiffer, Mr. Sloan, Mr. Valenti, and Mr. Williams have received options with
respect to 7,500, 2,500, 25,000, 20,000, 20,000, 25,000 and 15,000 shares,
respectively, under the 1997 Directors Plan. The closing price per share of the
Common Stock on the Nasdaq National Market on March 11, 1999, was $17.75.
The Board of Directors has recommended an amendment to the 1997 Directors
Plan (the "Amendment"). The Amendment would increase the number of shares of the
Corporation's Common Stock available for stock option awards from 350,000 shares
to 600,000 shares. The Board believes that the Amendment would provide the
Corporation with sufficient stock option award shares for the near future and
reduce the Corporation's expense of repeatedly amending the 1997 Directors Plan,
including the costs associated with preparation of required regulatory filings.
Because Non-Employee Directors of the Corporation are eligible for
18
<PAGE> 21
grants under the 1997 Directors Plan, such Non-Employee Directors may be deemed
to have an interest in the approval of the Amendment. The Board has unanimously
waived preemptive rights of the Corporation's Shareholders with regard to such
shares.
BOARD OF DIRECTORS' RECOMMENDATION
The Board recommends a vote FOR the Amendment to the 1997 Non-Employee
Directors Stock Option Plan.
The shares of Common Stock represented by properly executed proxies will be
voted FOR the Amendment to the 1997 Non-Employee Directors Stock Option Plan
unless otherwise specified on the proxy.
19
<PAGE> 22
SHAREHOLDER PROPOSAL
(ITEM NO. 4 ON PROXY)
GENERAL
Mrs. Evelyn Y. Davis, Watergate Office Building, 2600 Virginia Avenue,
N.W., Suite 215, Washington, D.C. 20032, who is the owner of 500 shares of
Common Stock, has advised the Corporation that she intends to present the
following proposal for shareholder action at the Meeting:
RESOLVED: "That the stockholders of Riggs National Corporation recommend
that the Board take the necessary steps to have the accountant elected EACH
year by all the stockholders."
REASONS: "The majority of New York Stock Exchange listed companies elect
accountants each year."
"The accountants should be made 'accountable' to all shareholders, not just
the Board."
"We like the firm of Arthur Andersen, but they should be willing to stand
for election EACH year, as they do at MANY other companies."
"Last year the owners of 4,142,899 shares representing approximately 13.5%
of shares voting, voted FOR this resolution."
"If you AGREE, please mark your proxy FOR this resolution."
BOARD OF DIRECTORS' RECOMMENDATION
The Board recommends a vote AGAINST this proposal. The Board, through its
Audit Committee, is charged with the responsibility of monitoring the
Corporation's outside accountants, Arthur Andersen, and assessing their
performance. Some members of the Audit Committee and the Board are officers or
directors of other corporations which employ major accounting firms and,
therefore, are familiar with the relative merits of each firm and are well
qualified to make judgments in this area. The Corporation believes that
procedures currently in place adequately ensure the quality and independence of
the Corporation's outside accountants. Corporation officers and the Audit
Committee continually monitor and evaluate Arthur Andersen's performance.
Throughout the year, Corporation employees work with Arthur Andersen and report
the results of Arthur Andersen's effectiveness to senior management. Therefore,
the Board believes that it is in the best position to select the Corporation's
outside accountants.
The shares of Common Stock represented by properly executed proxies will be
voted AGAINST this proposal unless otherwise specified on the proxy.
20
<PAGE> 23
SHAREHOLDER PROPOSALS FOR THE 2000 ANNUAL MEETING
The Board anticipates that the next Annual Meeting of Shareholders will be
held on or about April 12, 2000. A shareholder who intends to present a proposal
at the 2000 Annual Meeting must submit the written text of the proposal to the
Corporation no later than November 15, 1999, in order for the proposal to be
considered for inclusion in the Corporation's proxy statement and form of proxy
for that meeting. Shareholder proposals submitted otherwise than for inclusion
in the proxy statement shall be deemed untimely and may not be properly brought
before the Annual Meeting if notice of any such proposal is not received by the
Corporation prior to January 27, 2000.
INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen LLP are the independent public accountants for the
Corporation and have served as the independent public accountants for the
Corporation since 1981. A representative of Arthur Andersen LLP is expected to
be present at the Meeting and will have the opportunity to make a statement, if
he or she desires to do so, and to respond to appropriate questions.
OTHER MATTERS
This proxy is solicited on behalf of the Board. The cost of solicitation of
proxies will be borne by the Corporation. The Corporation may solicit proxies
personally or by telephone, in addition to the solicitations by mail. All such
further solicitations will be made by directors, officers or regular employees
of the Corporation or of Riggs Bank N.A., who will not be additionally
compensated therefor. Arrangements will be made by the Corporation for the
forwarding, at the Corporation's expense, of solicitation materials by brokers,
nominees, fiduciaries and other custodians to their principals.
The Board is not aware of any other matters that may come before the
Meeting. If any other business properly comes before the Meeting the persons
designated as proxies will vote upon such matters according to their sole
discretion.
ANNUAL REPORT ON FORM 10-K
A COPY OF OUR ANNUAL REPORT ON FORM 10-K, AS FILED WITH THE SEC, IS
AVAILABLE WITHOUT CHARGE UPON WRITTEN REQUEST TO STEVEN T. TAMBURO, INVESTOR
RELATIONS, RIGGS NATIONAL CORPORATION, 808 17TH STREET, N.W., WASHINGTON, D.C.
20006.
By Order of the Board of Directors,
/s/ TIMOTHY C. COUGHLIN
TIMOTHY C. COUGHLIN
President
21
<PAGE> 24
ANNEX I
[RIGGS LOGO]
RIGGS NATIONAL CORPORATION
PROXY FOR 1999 ANNUAL MEETING OF SHAREHOLDERS
The undersigned hereby appoints Edward J. Miller, Jr., Joy Murtaugh and
H. Gregory Platts as Proxies, severally and each with full power of
substitution, to vote all the shares of Common Stock of Riggs National
Corporation standing in the name of the undersigned on its books on February
26, 1999, at the Annual Meeting of Shareholders to be held at the JW Marriott
Hotel, 1331 Pennsylvania Avenue, N.W., Washington, D.C. 20004, on April 14,
1999, at 9:30 a.m., or at any adjournments or postponements thereof, with all
the powers the undersigned would possess if personally present as follows:
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS AND IF
PROPERLY EXECUTED AND TIMELY DELIVERED, WILL BE VOTED AS DIRECTED HEREIN. IF NO
DIRECTION IS GIVEN, THIS PROXY WILL BE VOTED "FOR" ITEMS 1, 2 AND 3, "AGAINST"
ITEM 4, AND IN ACCORDANCE WITH THE RECOMMENDATION OF THE BOARD OF DIRECTORS
SHOULD ANY OTHER BUSINESS BE PROPERLY PRESENTED AT THE MEETING.
(CONTINUED, AND TO BE EXECUTED AND DATED ON THE OTHER SIDE.)
RIGGS NATIONAL CORPORATION
P.O. BOX 11188
NEW YORK, N.Y. 10203-0185
<PAGE> 25
RIGGS NATIONAL CORPORATION
1503 PENNSYLVANIA AVENUE, N.W. WASHINGTON, D.C. 20005
MARCH 17, 1999
The Annual Meeting of Shareholders (the "Meeting") of Riggs National
Corporation (the "Corporation") will be held on Wednesday, April 14, 1999, at
9:30 a.m., local time, at the JW Marriott Hotel, 1331 Pennsylvania Avenue, N.W.,
Washington, D.C. 20004, for the following purposes:
1. To elect a board of directors for the ensuing year;
2. To consider an amendment to the 1996 Stock Option Plan to increase the
number of shares of the Corporation's Common Stock available for stock option
awards from four million to nine million shares;
3. To consider an amendment to the 1997 Non-Employee Directors Stock
Option Plan to increase the number of shares of the Corporation's Common Stock
available for stock option awards from three hundred fifty thousand to six
hundred thousand shares;
4. To consider a shareholder proposal requiring the Board take the
necessary steps to have the accountants elected each year by all of the
Shareholders; and
5. To consider and act upon any other matters that may properly be
brought before the Meeting or any adjournment or postponement thereof.
Shareholders of record at the close of business of February 26, 1999, will
be entitled to vote at the Meeting or any adjournments or postponements
thereof. Whether or not you contemplate attending the Meeting, please execute
the Proxy Card below and return it in the enclosed postage-paid return
envelope. You may revoke your proxy at any time prior to its exercise by
written notice to the Assistant Corporate Secretary of the Corporation, by
executing and delivering a proxy bearing a later date, or by attending the
Meeting and voting in person.
DETACH PROXY CARD HERE
__ __
\/ \/
- --------------------------------------------------------------------------
-------
-------
<TABLE>
<S> <C> <C> <C>
1. ELECTION OF DIRECTORS FOR all nominees / / WITHHOLD AUTHORITY to vote / / *EXCEPTIONS / /
listed below for all nominees listed below
</TABLE>
Nominees: Joe L. Allbritton, Robert L. Allbritton, Timothy C. Coughlin,
John M. Fahey, Jr., Lawrence I. Hebert, Steven B. Pfeiffer, John
E.V. Rose, Robert L. Sloan, Jack Valenti, Eddie N. Williams
(INSTRUCTION: To withhold authority to vote for any individual nominee, mark
the "EXCEPTIONS" box and write that nominee's name on the following line.)
*EXCEPTIONS
------------------------------------------------------------------
2. Corporation Proposal to amend the 1998 Stock Option Plan to increase the
number of shares of the Corporation's Common Stock available for stock
option awards from four million to nine million shares.
FOR / / AGAINST / / ABSTAIN / /
3. Corporation Proposal to amend the 1997 Non-Employee Directors Stock Option
Plan to increase the number of shares of the Corporation's Common Stock
available for stock option awards from three hundred fifty thousand to six
hundred thousand shares.
FOR / / AGAINST / / ABSTAIN / /
4. Shareholder Proposal to require the Board take the necessary steps to have
the accountants elected each year by all of the Shareholders.
FOR / / AGAINST / / ABSTAIN / /
5. To consider and act upon any other matters that may properly be brought
before the Meeting or any adjournment or postponement thereof.
Change of Address and/or / /
Comments Mark Here
(When signing as attorney,
executor, administrator, trustee or
guardian, please give full title.
If more than one trustee, all
should sign.)
Dated: 1999
----------------------,
----------------------------------
Signature of Shareholder
----------------------------------
Signature of Shareholder
VOTES MUST BE INDICATED /X/
(X) IN BLACK OR BLUE INK.
PLEASE DATE, SIGN AND RETURN PROMPTLY IN THE ACCOMPANYING ENVELOPE.
- --------------------------------------------------------------------------
PLEASE DETACH HERE
__ YOU MUST DETACH THIS PORTION OF THE PROXY CARD __
\/ BEFORE RETURNING IT IN THE ENCLOSED ENVELOPE \/
<PAGE> 26
ANNEX II
[The following information will not be disseminated to holders of Riggs
National Corporation's Common Stock with the foregoing proxy statement.]
<PAGE> 27
RIGGS NATIONAL CORPORATION
1996 STOCK OPTION PLAN
AS AMENDED(1)
1. PURPOSE OF THE PLAN.
This 1996 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.
2. 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) "Compensation Committee" means the compensation committee of the Board,
but excluding any member who is not a Non-Employee Director.
(d) "Corporation" means the Riggs National Corporation.
(e) "Date of Grant" means the date on which an Option is approved by the
Non-Employee 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 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) "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 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 that 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
- ---------------
(1) 1998 amendments approved by resolutions of the Board of Directors on January
21, 1998 and by the shareholders on April 15, 1998.
1999 amendment approved by resolutions of the Board of Directors on March 5,
1999.
II A-1
<PAGE> 28
Common Stock. Furthermore, in all cases, Fair Market Value shall not be less
than the Par Value of the Common Stock.
(i) "Incentive Stock Option" means an Option qualifying for special tax
treatment under Section 422 of the Code.
(j) "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.
(k) "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 has
substantial responsibility in the direction and management of the
Corporation or a Subsidiary Corporation, as determined by the
Compensation Committee.
(l) "Non-Employee Director" means a Director who: (i) is not currently an
officer or otherwise employed by the Corporation, or by a Parent or
Subsidiary Corporation of the Corporation; (ii) does not receive
compensation directly or indirectly from the Corporation, its Parent
Corporation or its Subsidiary Corporation for services rendered as a
consultant or in any capacity other than as a director, except for an
amount for which disclosure would not be required pursuant to Item
404(a) of regulation S-K [$60,000]; (iii) does not possess an interest
in any other transaction for which disclosure would be required
pursuant to Item 404(a) of Regulation S-K [$60,000]; (iv) is not
engaged in a business relationship for which disclosure would be
required pursuant to Item 404(a) of regulation S-K; and (v) qualifies
as an "outside director" within the meaning of Section 162(m)(4) of
the Code, and applicable regulations thereunder or who is deemed to be
an outside director under the applicable regulations and authority.
(m) "Non-Employee Directors Committee" means a committee composed of all
Non-Employee Directors.
(n) "Nonqualified Stock Option" means an Option that is not an Incentive
Stock Option.
(o) "Option" means an Incentive Stock Option or a Nonqualified Stock
Option granted under this Plan.
(p) "Parent Corporation" has the same meaning used in Section 424(e) of
the Code.
(q) "Plan" means the Riggs National Corporation 1996 Stock Option Plan as
set forth herein, which may be amended from time to time.
(r) "Subsidiary Corporation" has the same meaning used in Section 424(f)
of the Code.
3. 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 nine million (9,000,000) shares.
The shares of Common Stock issued may be shares of authorized but unissued
Common Stock or shares of previously issued Common Stock that have been
reacquired by the Corporation. The maximum number of shares of Common Stock with
respect to which options may be issued to any one Key Employee during a calendar
year shall be two million (2,000,000). 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.
4. ADMINISTRATION OF THE PLAN.
The Plan shall be administered by the Compensation Committee. The
Compensation Committee has the authority to recommend to the Non-Employee
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
II A-2
<PAGE> 29
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 Non-Employee Directors Committee shall have the authority to
approve, reject or modify recommended grants of Options by the Compensation
Committee. A majority of the Non-Employee Directors Committee shall constitute a
quorum. All actions by the Non-Employee Directors Committee shall require a
majority of the members of such committee present at such meeting. Any action by
the Non-Employee 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
Non-Employee Directors Committee.
All questions of interpretation of the Plan or of any Option will be
determined solely by the Compensation Committee, and any such determination will
be final and binding upon all persons having an interest in the Plan.
5. ELIGIBILITY.
Key Employees of the Corporation and any Subsidiary Corporation will be
eligible to participate in the Plan, as approved by the Compensation Committee.
6. 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 that states whether it is
intended to be an Incentive Stock Option or a Nonqualified Stock Option and that
it is to be subject to the applicable rules in the Plan and in the Code which
apply to that form of option and 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 Non-Employee Directors
Committee subject to the following terms and conditions:
(a) OPTION PRICE.
(i) NONQUALIFIED STOCK 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.
(ii) INCENTIVE STOCK 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 STOCK 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
II A-3
<PAGE> 30
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 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 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 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. 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 three (3)
months after the date of termination. 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.
(i) 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 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.
(ii) NONCASH PAYMENT. Unless otherwise provided at the time of grant,
payment of the exercise price may be made in the form of (1) Common
Stock of the Corporation that has been held for at least six (6)
months prior to the date of exercise or (2) a combination of cash
and such Common Stock that has been held for at least six (6)
months prior to the date of exercise. 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.
Wherever in this Plan or any agreement a Key Employee is permitted
to pay the exercise price of an Option relating to the exercise of
an Option by delivering Common Stock, the Key Employee may, subject
to procedures satisfactory to the Compensation Committee, satisfy
such delivery requirement by presenting proof of beneficial
ownership of such Common Stock, in which case the Corporation shall
treat the Option as exercised without further payment and shall
withhold such number of Common Stock from the Common Stock acquired
by the exercise of the Option.
(iii) BROKER-DEALER PAYMENT. Unless otherwise provided at the time of
grant, 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 Incentive Stock Option granted under the Plan,
contingent or otherwise, and no Nonqualified Stock Option granted under
this Plan, unless the Non-Employee directors Committee directs
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. The
executor or administrator of the estate of the Option holder may
transfer any rights with respect to such Option
II A-4
<PAGE> 31
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 that 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 Compensation Committee in its discretion shall
otherwise determine.
For purposes of the Plan, "Change of Control" means (1) the sale of
substantially all of the Corporation's assets; (2) 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 its subsidiaries, including a trust established pursuant
to any such plan; (3) the Corporation is merged or consolidated with or
into another corporation in any transaction or series of transactions,
in which either (A) the persons who were the beneficial owners of the
Corporation's voting securities immediately prior to such transaction
do not beneficially own immediately after such transaction at least
fifty percent (50%) of the total outstanding voting power of the
surviving corporation or (B) 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 is or becomes the direct,
indirect or beneficial owner (within the meaning of Rule 13d-3 of the
Act) of twenty-five percent (25%) or more of the aggregate voting power
of resulting entity, provided that such person was not a twenty-five
percent (25%) or more owner of the Corporation prior to the transaction
or transactions; or (4) the Corporation is liquidated or dissolved or
adopts a plan of liquidation or dissolution. Notwithstanding the
foregoing, a Change of 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;
II A-5
<PAGE> 32
(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 or the resulting entity in the event of a
merger or consolidation, 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.
7. 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 Non-Employee 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) changes in the aggregate number of shares which
may be issued under this Plan, (ii) changes the class of eligible
employees, officers or directors, or (iii) 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.
8. 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, recapitalization, 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 consolidation of
shares or 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 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
of and class of shares of stock or other securities to which such
holder would have been entitled pursuant to
II A-6
<PAGE> 33
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 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 canceled 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 immediately exercisable and shall
be canceled as of the effective date of the corporate event, except and
to the extent the 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 by 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 Compensation Committee, whose determination as to what
adjustment 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.
9. HOLDING PERIOD.
Notwithstanding anything to the contrary in the Plan, Common Stock acquired
through exercise of an Incentive Stock Option that was outstanding on November
13, 1996, or any other Option granted to an Insider but which was not granted by
the Non-Employee Directors Committee or the Board or which was not approved by
the shareholders may not be disposed of by an Insider during the six-month
period beginning on the Date of Grant.
10. GENERAL PROVISIONS.
(a) The Corporation shall not be required to sell or issue any shares under
any Option if the issuance of such shares 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
II A-7
<PAGE> 34
Common Stock covered by an Option, the Corporation shall not be
required to issue shares upon exercise of any Option (i) unless the
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 that is deemed acceptable by
the Compensation Committee, to the effect that a registration statement
is not required. Any determination in this connection by the
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 that 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 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 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 corporate merger, consolidation, acquisition of property
or stock, separation, reorganization or liquidation of the employing
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 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 that 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.
11. TAXES.
(a) WITHHOLDING.
(i) 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
II A-8
<PAGE> 35
Corporation as a condition precedent to the issuance of shares
pursuant to the exercise of an Option.
(ii) 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.
12. INDEMNIFICATION OF BOARD AND COMMITTEES.
The members of the Board of Directors, the Compensation Committee and the
Non-Employee 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, 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 Compensation Committee and the
Non-Employee Directors Committee and shall be in addition to any and all other
rights of indemnification to which such members may be entitled as a matter of
law, contract, or otherwise.
13. 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.
14. EFFECTIVE DATE OF THE PLAN, DURATION OF THE PLAN.
(a) The Plan became effective as of March 26, 1996, 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 1996 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.
II A-9
<PAGE> 36
RIGGS NATIONAL CORPORATION
1997 NON-EMPLOYEE DIRECTORS
STOCK OPTION PLAN,
AS AMENDED(1)
ARTICLE I
PURPOSES
The purpose of the Riggs National Corporation 1997 Non-Employee Directors
Stock Option Plan is increase the proprietary interest of non-employee directors
of Riggs National Corporation (the "Corporation") and its subsidiaries by
granting such directors options to purchase common stock of the Corporation.
ARTICLE II
DEFINITIONS
2.1 Agreement means a written agreement (including any amendment or
supplement thereto) between the Corporation and an Eligible Director
specifying the terms and conditions of an Option granted to such
Eligible Director.
2.2 Board means the Board of Directors of the Corporation.
2.3 Common Stock means the common stock, $2.50 par value, of the
Corporation.
2.4 Corporation means Riggs National Corporation.
2.5 Director means a member of the Board of Directors of the Corporation
or a Subsidiary.
2.6 Disability means a complete and permanent inability by reason of
illness or accident to perform the duties of a Director, as determined
by the Board based on medical evidence acceptable to it.
2.7 Eligible Director means a member of the Board of Directors of the
Corporation or a Subsidiary who is not an employee of the Corporation
or a Subsidiary.
2.8 Fair Market Value means, with respect to a share of Common Stock, 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 were no sales on such date, then on
the next preceding date on which there were sales, or in any other
case, the current fair market value of the Common Stock, shall be
determined by the Board using any reasonable method in good faith.
2.9 Option means a stock option that entitles the holder to purchase from
the Corporation a stated number of shares of Common Stock as specified
in the Agreement at the price set forth in the Agreement.
2.10 Participant means an Eligible Director who is selected by the Board to
receive an Option.
2.11 Plan means the Riggs National Corporation 1997 Non-Employee Directors
Stock Option Plan.
2.12 Subsidiary means any subsidiary of the Corporation.
2.13 Termination of Service means with respect to a Director, the date such
person ceases to serve as a Director.
ARTICLE III
ADMINISTRATION
The Plan shall be administered by the Board. The Board shall have
authority to grant Options to Eligible Directors upon such terms (not
inconsistent with the provisions of this Plan) as the Board may
- ---------------
(1) 1999 amendment approved by resolutions of the Board of Directors on March
11, 1999.
II B-1
<PAGE> 37
consider appropriate. Such terms may include conditions (in addition to those
contained in this Plan) on the exercisability of all or any part of an Option.
Notwithstanding any such conditions, the Board may, in its discretion,
accelerate the time at which any Option may be exercised. In addition, the Board
shall have complete authority to interpret all provisions of this Plan; to
prescribe the form of Agreements; to adopt, amend, and rescind rules and
regulations pertaining to the administration of the Plan; and to make all other
determinations necessary or advisable for the administration of this Plan. The
express grant in the Plan of any specific power to the Board shall not be
construed as limiting any power or authority of the Board. Any decision made, or
action taken, by the Board or in connection with the administration of this Plan
shall be final and conclusive on all persons having an interest in the Plan. No
member of the Board shall be liable for any act done in good faith with respect
to this Plan or any Agreement or Option. The Board may delegate its authority
with respect to administration of the Plan as it deems appropriate, provided
that such delegation does not cause grants of options to fail to be exempt
transactions under Rule 16B-3 promulgated under the Securities Exchange Act of
1934. All expenses of administering this Plan shall be borne by the Corporation.
ARTICLE IV
ELIGIBILITY
The Board may grant options under the Plan to Eligible Directors.
ARTICLE V
STOCK SUBJECT TO PLAN
5.1 SHARES ISSUED. Upon the exercise of a stock Option the Corporation may issue
shares of authorized but unissued Common Stock or shares of previously
issued Common Stock that has been reacquired by the Corporation.
5.2 AGGREGATE LIMIT. The maximum aggregate number of shares of Common Stock that
may be issued under this Plan pursuant to the exercise of Options is Six
Hundred Thousand (600,000) shares of Common Stock. The maximum aggregate
number of shares that may be issued under this Plan is subject to adjustment
as provided in Article VII.
5.3 REALLOCATION OF SHARES. If an Option is terminated or expires, in whole or
in part, for any reason other than its exercise, the number of shares of
Common Stock allocated to the Option or portion thereof may again be
available for issuance pursuant to Options under the Plan.
ARTICLE VI
OPTIONS
6.1 AWARD. In accordance with the provisions of Article IV, the Board will
designate each Eligible Director to whom an Option is to be granted and will
specify the vesting provisions and number of shares of Common Stock covered
by such Option.
6.2 OPTION PRICE. The exercise price per share for Common Stock subject to an
Option shall be determined by the Board on the date of grant; provided,
however, that the exercise price per share for Common Stock shall not be
less than the greater of the Fair Market Value on the date the Option is
granted or the par value of the Common Stock.
6.3 MAXIMUM OPTION PERIOD. Unless provided otherwise by the Board, the maximum
period during which an Option may be exercised shall be ten (10) years from
the date of grant.
6.4 VESTING AND TERMINATION OF SERVICE. Unless provided otherwise by the Board,
an Option shall be subject to the following provisions:
(a) 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 a
Participant incurs a Termination of Service, and the Option will be
exercisable only to the extent the Option is vested on the date of
Termination of Service.
II B-2
<PAGE> 38
However, if the Participant's Termination of Service results from 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 of Service.
(b) If the Participant's Termination of Service results from death or
Disability, the right to exercise the Option will expire on the earlier
of (i) one (1) year after the date of the holder's death or termination
by reason of Disability, or (ii) the expiration date under the terms of
the Agreement. Until the expiration date, in the case of the Option
holder's death, the holder's heirs, legatees or legal representative may
exercise the Option.
(c) If the Participant's Termination of Service is for any reason other than
death or Disability, the right to exercise the Option (to the extent
that it is vested) will expire on the earlier of (i) three (3) months
after the date of the holder's Termination of Service, or (ii) the date
the Option expires under the terms of the Agreement.
(d) If Termination of Service is for a reason other than the Participant's
death, and the Participant dies after Termination of Service but before
the right to exercise the Option has expired, the right to exercise the
Option shall expire on the earlier of (i) one (1) year after the date of
the Participant's Termination of Service, or (ii) the date the Option
expires under the terms of the Agreement, and, until expiration, the
Participant's heirs, legatees or legal representative may exercise the
Option.
6.5 NONTRANSFERABILITY. Except as provided in Section 6.6, each Option granted
under this Plan shall be nontransferable except by will or by the laws of
descent and distribution. Except to the extent an Option is transferred in
accordance with Section 6.6, during the lifetime of the Participant to whom
the Option is granted, the Option may be exercised only by the Participant.
No right or interest of a Participant in any Option shall be liable for, or
subject to, any lien, obligation, or liability of such Participant.
6.6 TRANSFERABLE OPTIONS. Section 6.5 to the contrary notwithstanding, if the
Board so provides, an Option may be transferred by a Participant to the
Participant's children, grandchildren, spouse, one or more trusts for the
benefit of such family members or a partnership in which such family members
are the only partners; provided, however, that Participant may not receive
any consideration for the transfer. The holder of an Option transferred
pursuant to this section shall be bound by the same terms and conditions
that governed the Option during the period that it was held by the
Participant.
6.7 EXERCISE. The Option holder must provide written notice to the Secretary of
the Corporation of the exercise of Options and the number of Options
exercised. Subject to the provisions of this Plan and the applicable
Agreement, an Option may be exercised to the extent vested in whole at any
time or in part from time to time at such times and in compliance with such
requirements as the Board shall determine. An Option granted under this Plan
may be exercised with respect to any number of whole shares less than the
full number for which the Option could be exercised. A partial exercise of
an Option shall not affect the right to exercise the Option from time to
time in accordance with this Plan and the applicable Agreement with respect
to the remaining shares subject to the Option. An Option may not be
exercised with respect to fractional shares of Common Stock.
6.8 PAYMENT. The option exercise price shall be paid in full at the time of
exercise (i) in cash, (ii) with Common Stock owned by the Participant, (iii)
by delivery to the Corporation of (x) irrevocable instructions to deliver
directly to a broker the stock certificates representing the shares of
Common Stock for which the Option is being exercised, and (y) irrevocable
instructions to such broker to sell such shares of Common Stock and promptly
deliver to the Corporation the portion of the proceeds equal to the option
exercise price, or (iv) any combination thereof. For purposes of making
payment in shares of Common Stock, such shares shall be valued at their Fair
Market Value on the date of exercise of the Option and shall have been held
by the Participant for at least six (6) months.
6.9 SHAREHOLDER RIGHTS. No Participant shall have any rights as a shareholder
with respect to shares subject to his Option until the date of exercise of
such Option.
II B-3
<PAGE> 39
ARTICLE VII
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, recapitalization, reorganizations or
other changes in the Corporation's capital structure or its business, or
any merger or consolidation of the Corporation, or any issuance 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 Option holder
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 Option holder 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 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
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 Option 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 Option 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, stock appreciation rights 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 canceled 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
immediately exercisable and shall be canceled as of the effective date
of the corporate event, except and to the extent the Board in its
discretion shall otherwise determine.
II B-4
<PAGE> 40
(e) Except as previously expressly provided, neither the issuance 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, nor the increase or decrease of the number of authorized
shares of stock, nor the addition or deletion of classes of stock,
shall 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 Board, 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.
ARTICLE VIII
COMPLIANCE WITH LAW
The Corporation shall not be required to sell or issue any shares under any
Option if the issuance of such shares 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 Board 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 that is deemed
acceptable by the Board, to the effect that a registration statement is not
required. Any determination in this connection by the Board 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 that 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 option 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.
ARTICLE IX
GENERAL PROVISIONS
9.1 EFFECT ON SERVICE. Neither the adoption of this Plan, its operation, nor
any documents describing or referring to this Plan (or any part thereof)
shall confer upon any individual any right to continue in the service of the
Corporation or a Subsidiary or in any way affect any right and power of the
Corporation or a Subsidiary to terminate the service of any individual at
any time with or without assigning a reason therefor.
9.2 UNFUNDED PLAN. The Plan, insofar as it provides for grants, shall be
unfunded, and the Corporation shall not be required to segregate any assets
that may at any time be represented by grants under this Plan. Any liability
of the Corporation to any person with respect to any grant under this Plan
shall be based solely upon any contractual obligations that may be created
pursuant to this Plan. No such obligation of the
II B-5
<PAGE> 41
Corporation shall be deemed to be secured by any pledge of, or other
encumbrance on, any property of the Corporation.
9.3 RULES OF CONSTRUCTION. Headings are given to the articles and sections of
this Plan solely as a convenience to facilitate reference. The reference to
any statute, regulation, or other provision of law shall be construed to
refer to any amendment to or successor of such provision of law.
9.4 CHOICE OF LAW. The Plan and all Agreements entered into under the Plan
shall be interpreted under the law of the state of Delaware.
ARTICLE X
AMENDMENT
The Board may amend or terminate this Plan from time to time; provided,
however, that no amendment shall, without a Participant's consent, adversely
affect any rights of such Participant under any Option outstanding at the time
such amendment is made.
ARTICLE XI
EFFECTIVE DATE OF PLAN, DURATION OF PLAN
(a) The Plan became effective as of July 9, 1997 upon adoption by the
Board, subject to approval by the holders of a majority of the shares
of Common Stock.
(b) Unless previously terminated, the Plan will terminate on July 8, 2007,
except that Options that are granted under the Plan prior to its
termination will continue to be administered under the terms of the
Plan until the Options terminate or are exercised.
II B-6