SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A)OF THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
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| | Definitive Proxy Statement
| | Definitive Additional Materials
| | Soliciting Material Pursuant to ss.240.14a-11(c)or ss.240.14a-12
Washington Trust Bancorp, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
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<PAGE>
[GRAPHIC OF REGISTRANT'S LOGO OMITTED]
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD APRIL 29, 1997
To the Shareholders of
WASHINGTON TRUST BANCORP, INC.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of WASHINGTON
TRUST BANCORP, INC. (the "Corporation"), a Rhode Island corporation, will be
held at the Westerly Library, 38 Broad Street, Westerly, Rhode Island on
Tuesday, the 29th of April, 1997 at 11:00 a.m. for the purpose of considering
and acting upon the following:
1. The election of six directors to serve for terms of three years;
2. The adoption of the Corporation's 1997 Equity Incentive Plan;
3. The amendment to Article FOURTH of the Corporation's Restated
Articles of Incorporation to increase the number of shares of the
Corporation's Common Stock, $.0625 par value, that may be issued
thereunder from 10,000,000 to 30,000,000;
4. The ratification of the selection of independent auditors to
audit the Corporation's consolidated financial statements for the
year ending December 31, 1997; and
5. Such other business as may properly come before the meeting, or
any adjournment thereof.
Only shareholders of record at the close of business on March 10, 1997 will be
entitled to notice of and to vote at such meeting. The transfer books of the
Corporation will not be closed.
It is important that your shares be represented and voted whether or not you
plan to be present. Therefore, if you do not expect to be present at the
meeting, please sign, date, and fill in the enclosed proxy and return it by mail
in the enclosed addressed envelope.
By order of the Board of Directors
Harvey C. Perry II
Secretary
March 19, 1997
<PAGE>
WASHINGTON TRUST BANCORP, INC.
23 Broad Street
Westerly, RI 02891
Telephone 401-348-1200
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD APRIL 29, 1997
PROXY STATEMENT
The accompanying proxy is solicited by and on behalf of the Board of Directors
of Washington Trust Bancorp, Inc. (the "Corporation") for use at the Annual
Meeting of Shareholders to be held on April 29, 1997, and any adjournment
thereof and may be revoked at any time before it is exercised by submission of
another proxy bearing a later date, by attending the meeting and voting in
person, or by notifying the Corporation of the revocation in writing to the
Secretary, 23 Broad Street, Westerly, Rhode Island 02891. If not revoked, the
proxy will be voted at the Annual Meeting in accordance with the instructions
indicated on the proxy by the shareholder or, if no instructions are indicated,
all shares represented by valid proxies received pursuant to this solicitation
(and not revoked before they are voted) will be voted FOR Proposal Nos. 1
through 4 referred to herein.
As of March 10, 1997, the record date for determining shareholders entitled to
notice of and to vote at the Annual Meeting (the "Record Date"), there were
issued and outstanding [________] shares of common stock, $.0625 par value (the
"Common Stock"), of the Corporation. Each share of Common Stock is entitled to
one vote per share on all matters to be voted upon at the meeting, with all
holders of Common Stock voting as one class. A majority of the outstanding
shares of Common Stock entitled to vote, represented in person or by proxy, will
constitute a quorum for the transaction of business at the Annual Meeting.
Abstentions and broker non-votes will be counted for purposes of determining if
a quorum is present.
With regard to the election of directors, votes may be cast in favor or
withheld. Votes that are withheld will be excluded entirely from the vote and
will have no effect. Abstentions may be specified on all proposals other than
the election of directors and will be counted as present for purposes of the
item on which the abstention is noted. Abstentions on the adoption of the
Corporation's 1997 Equity Incentive Plan (the "1997 Plan"), the amendment to
Article FOURTH of the Corporation's Restated Articles of Incorporation (the
"Articles"), and the ratification of the selection of independent auditors will
have the same legal effect as a vote against such matters. A broker "non-vote"
occurs when a nominee holding shares for a beneficial owner does not vote on a
particular proposal because the nominee does not have discretionary voting power
with respect to that item and has not received instructions from the beneficial
owner. Broker non-votes will not be counted for purposes of approving the
matters to be acted upon at the Annual Meeting. As a result, broker non-votes
will have no effect on the outcome of the election of directors, the adoption of
the 1997 Plan and the ratification of the selection of independent auditors, but
will have the same legal effect as a vote against the amendment to Article
FOURTH of the Articles.
Management knows of no matters to be brought before the meeting other than those
referred to. If any other business should properly come before the meeting, the
persons named in the proxy will vote in accordance with their best judgment.
The approximate date on which this Proxy Statement and accompanying proxy cards
will first be mailed to shareholders is March 19, 1997.
<PAGE>
PRINCIPAL SHAREHOLDERS
The Corporation knows of no person who beneficially owned more than five percent
(5%) of the Corporation's outstanding Common Stock as of March 10, 1997.
ELECTION OF DIRECTORS
The Corporation's Board of Directors is divided into three classes, with each
class serving staggered terms of three years, so that only one class is elected
in any one year. There are at present 14 directors, Joseph H. Potter having
retired and resigned from the Board, effective May 1, 1996. This year, six
directors are to be elected at the Annual Meeting to serve until the 2000 Annual
Meeting and until their respective successors are elected and have qualified.
Directors are elected by the affirmative vote of the majority of the shares of
Common Stock entitled to vote thereon, represented in person or by proxy, at the
Annual Meeting when a quorum is present.
The nominees for election of directors at the Annual Meeting are Steven J.
Crandall, Richard A. Grills, James W. McCormick, Jr., Victor J. Orsinger II,
James P. Sullivan and Neil H. Thorp. Each of the nominees for director is
presently a director of the Corporation. Each has consented to being named a
nominee in this Proxy Statement and has agreed to serve as a director if elected
at the Annual Meeting. In the event that any nominee is unable to serve, the
persons named in the proxy have discretion to vote for other persons if such
other persons are designated by the Board of Directors. The Board of Directors
has no reason to believe that any of the nominees will be unavailable for
election.
<TABLE>
NOMINEE AND DIRECTOR INFORMATION
<CAPTION>
Common Stock Shares Beneficially
Owned on March 10, 1997 (2)
---------------------------
Common
Years as Stock Vested Percent
Name and Principal Occupation Director(1) Age Owned Options Total of Class
- ----------------------------- ----------- --- ------- ------- ----- --------
<S> <C> <C> <C> <C> <C> <C>
TERMS EXPIRING IN 2000:
(IF ELECTED):
Steven J. Crandall 14 44 1,105 12,938 14,043 0.30%
Vice President, Ashaway
Line & Twine Manufacturing Co.
(manufacturer of tennis string,
fishing line and surgical sutures)
Richard A. Grills 14 64 122,109 12,938 135,047 2.90%
Consultant and retired President,
Bradford Dyeing Association, Inc.
(textiles)
James W. McCormick, Jr. 14 66 12,835 4,938 17,773 0.38%
Former President,
McCormick's, Inc. (retailer)
<PAGE>
<CAPTION>
Common Stock Shares Beneficially
Owned on March 10, 1997 (2)
---------------------------
Common
Years as Stock Vested Percent
Name and Principal Occupation Director(1) Age Owned Options Total of Class
- ----------------------------- ----------- --- ------- ------- ----- --------
<S> <C> <C> <C> <C> <C> <C>
Victor J. Orsinger II 14 50 10,878 9,204 20,082 0.43%
Partner, Orsinger & Nardone,
Attorneys at Law
James P. Sullivan, CPA 14 58 1,773 11,645 13,418 0.29%
Finance Officer, Roman Catholic
Diocese of Providence
Neil H. Thorp 14 57 9,571 9,263 18,834 0.40%
President, Thorp & Trainer, Inc.
(insurance)
TERM EXPIRING IN 1998:
Katherine W. Hoxsie, CPA 6 48 22,621 12,938 35,559 0.76%
Vice President, Hoxsie
Buick-Pontiac-GMC Truck, Inc.;
formerly with the firm of Price
Waterhouse
Brendan P. O'Donnell 15 67 6,952 12,848 19,800 0.43%
Retired manufacturing executive;
formerly consultant Harris Graphics
Corp. (printing presses)
Anthony J. Rose, Jr. 25 66 71,022 11,626 82,648 1.77%
President, Technical Industries,
Inc. (chemicals)
John C. Warren 1 51 3,136 5,834 8,970 0.19%
President and Chief Operating
Officer of the Corporation and the
Bank since 1996; President and Chief
Executive Officer of Sterling
Bancshares Corporation 1990-1994,
Chairman 1993-1994
<PAGE>
<CAPTION>
Common Stock Shares Beneficially
Owned on March 10, 1997 (2)
---------------------------
Common
Years as Stock Vested Percent
Name and Principal Occupation Director(1) Age Owned Options Total of Class
- ----------------------------- ----------- --- ------ ------- ----- --------
TERM EXPIRING IN 1999:
<S> <C> <C> <C> <C> <C> <C>
Gary P. Bennett 3 55 432 3,375 3,807 0.08%
Chairman, Chief Executive Officer
and Director, Analysis & Technology,
Inc. (interactive multimedia
training systems, information
systems and engineering services)
Larry J. Hirsch 3 58 3,414 2,009 5,423 0.12%
President, Westerly Jewelry Co.,
Inc. (retailer)
Mary E. Kennard, Esq. 3 42 908 2,607 3,515 0.08%
Office of the University Counsel,
The American University; Vice
President and General Counsel of the
University of Rhode Island 1992-1994
Joseph J. Kirby 25 65 12,231 89,251 101,482 2.18%
Chairman of the Board and Chief
Executive Officer since 1996;
President of the Corporation 1984
-1995; President of the Bank 1982
-1995
<CAPTION>
In addition to the nominee and director information provided above, the
following summarizes the security ownership of certain executive officers of the
Corporation and the Corporation's subsidiary, The Washington Trust Company (the
"Bank"), who are not also directors of the Corporation:
<S> <C> <C> <C> <C>
David V. Devault, CPA 4,927 20,517 25,444 0.55%
Vice President and
Chief Financial Officer
Harvey C. Perry II 6,006 17,888 23,894 0.51%
Vice President and Secretary
Robert G. Cocks, Jr. 277 12,910 13,187 0.28%
Senior Vice President -
Lending of the Bank
Directors and Executive 297,640 284,674 582,314 12.50%
Officers as a Group (22
persons)
<FN>
- ----------
(1) The Corporation was organized in 1984. The years indicated include the
period the directors have been members of the Board of the Bank prior to
1984.
(2) "Beneficial ownership" means, pursuant to Securities and Exchange
Commission ("SEC") regulations, the sole or shared power to vote, or to
direct the voting of, a security and/or investment power with respect to
a security (i.e., the power to dispose, or to direct the disposition, of
a security) and/or the right to acquire such ownership within 60 days.
</FN>
</TABLE>
COMMITTEES OF THE BOARD OF DIRECTORS
The Corporation's Board of Directors has the following committees:
Executive Committee. The Executive Committee met eleven times in 1996 and, when
the Board of Directors is not in session, is entitled to exercise all the powers
and duties of the Board. Members of the Executive Committee are Directors
O'Donnell (Chairman), Grills, Kirby, McCormick, Orsinger, Rose and Warren.
Compensation Committee. The Compensation Committee, which met four times in
1996, is responsible for making recommendations concerning remuneration
arrangements for senior management of the Corporation and the Bank. Members of
the Compensation Committee are Directors O'Donnell (Chairman), Bennett, Grills,
McCormick and Rose.
Audit Committee. The Audit Committee, which met five times in 1996, is
responsible for reviewing the adequacy of the Corporation's system of internal
controls, its audit program, the performance and findings of its internal audit
staff and action to be taken thereon by management, and reports of the
independent auditors. Committee members are Directors McCormick (Chairman),
Crandall, Hirsch and Hoxsie.
Stock Option Committee. The Stock Option Committee met three times in 1996 and
is responsible for the administration of the Corporation's Amended and Restated
1988 Stock Option Plan ("Stock Option Plan"). Committee members are Directors
Bennett (Chairman), Kennard, O'Donnell and Sullivan
Nominating Committee. The Nominating Committee met once in 1996 and is
responsible for reviewing the qualifications of potential nominees for election
to the Board of Directors of the Corporation and recommending to the
shareholders the election of directors of the Corporation. The Committee members
are Directors O'Donnell (Chairman), Bennett, Grills, McCormick and Rose.
Shareholders may make nominations for election as directors at any meeting
called for such purpose provided that written notice has been given to the
President of the Corporation not less than 14 nor more than 60 days prior to
such meeting. Such notice shall set forth the name, age, business address and
principal occupation of, and the number of shares of Common Stock beneficially
owned by, each nominee.
The Corporation's Board of Directors held five meetings in 1996. The Board of
Directors of the Bank, the members of which are the same as the Corporation's
Board, held twelve meetings in 1996. During 1996, each member of the
Corporation's Board attended at least 75% of the aggregate number of meetings of
the Corporation's Board, the Bank's Board and the Corporation's Board committees
of which such person was a member.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee makes recommendations concerning remuneration
arrangements for senior management of the Corporation and the Bank, subject to
the approval of the Board of Directors. The Compensation Committee members are
Directors O'Donnell (Chairman), Bennett, Grills, McCormick and Rose. The Stock
Option Committee is responsible for the administration of the Corporation's
Stock Option Plan and, in addition, will be responsible for the administration
of the 1997 Plan, if adopted. The Stock Option Committee members are Directors
Bennett (Chairman), Kennard, O'Donnell and Sullivan. No members of the
Compensation Committee or the Stock Option Committee are employees of the
Corporation or the Bank.
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
DIRECTORS' COMPENSATION
During 1996, for each meeting of the Board of Directors of the Corporation and
of the Bank attended, non-employee directors received $250 and $500,
respectively. In addition, non-employee directors received $300 for each
Corporation and Bank committee meeting attended (committee chairmen received
$500 per meeting).
However, directors attending more than one meeting in any one day (excluding
meetings of the Board of Directors of the Corporation) were generally paid only
for one of such meetings. In addition, non-employee directors received a $6,000
annual retainer which is paid quarterly. The retainer was increased to an annual
rate of $9,000 beginning with the fourth quarter of 1996 to coincide with the
termination of the Outside Director Retainer Continuation Plan (the "Retainer
Continuation Plan").
The Plan for Deferral of Directors' Fees adopted by the Corporation and the Bank
effective March 1, 1988 provides standard arrangements pursuant to which
directors may elect to defer all or part of their fees. Deferred fees earn
interest and are payable in a lump sum or installments following termination of
service as a director or attainment of a certain age. Deferred fees are unfunded
obligations of the Bank.
As of September 30, 1996, the Corporation terminated the Retainer Continuation
Plan which provided for retirement benefits to non-employee directors after
leaving the Board of Directors. Notwithstanding such termination, retired
directors currently receiving payments pursuant to the Retainer Continuation
Plan will continue to receive such payments in accordance with the terms and
conditions of such Plan. In consideration of the termination of the Retainer
Continuation Plan, the Corporation adopted the 1996 Directors' Stock Plan
pursuant to which the Corporation made a one-time grant, as of October 1, 1996,
to each of its current non-employee directors, of that number of shares of the
Corporation's Common Stock which was equivalent in value to the accrued benefit
actuarially determined for such director with respect to service rendered as a
director through September 30, 1996. For this purpose, the value of shares was
calculated using a per share price of $22.23. Directors received either
restricted stock or Common Stock without restrictions at their individual
option. The following chart reflects the number of shares received by each of
the Corporation's non-employee directors:
<TABLE>
<CAPTION>
Director Number of Shares Director Number of Shares
-------- ---------------- -------- ----------------
<S> <C> <C>
Gary P. Bennett 207 James W. McCormick, Jr. 1,692
Stephen J. Crandall 410 Brendan P. O'Donnell 1,890
Richard A. Grills 1,481 Victor J. Orsinger II 572
Larry J. Hirsch 252 Anthony J. Rose, Jr. 2,429
Katherine W. Hoxsie 257 James P. Sullivan 1,053
Mary E. Kennard 86 Neil H. Thorp 923
</TABLE>
The Corporation's Stock Option Plan provides that a nonqualified option to
purchase 2,250 shares of Common Stock shall automatically be granted to each
person who is initially elected or re-elected a director of the Corporation as
of the date of such election or re-election, at an option price equal to the
fair market value of the Common Stock on such date. These options are
exercisable in 25% installments commencing on the date of grant and on each
anniversary date thereafter. In the event of a Change in Control of the
Corporation (as defined in the Stock Option Plan) these options will become
immediately exercisable in full.
In the event that the 1997 Plan is adopted by the shareholders at the Annual
Meeting, in lieu of the options issuable under the Stock Option Plan, each
director of the Corporation who is not an employee of the Corporation shall
automatically be granted a nonqualified option to purchase 750 shares of Common
Stock as of the date of each Annual Meeting after which such director will
continue to serve as a director of the Corporation at an option price equal to
the fair market value of the Common Stock on such date and the expiration of
which shall be the tenth anniversary thereof. These options are exercisable on
and after the date that is one year after the date of grant. In addition, the
Board may provide for such other terms and conditions of these options, as shall
be set forth in the applicable option agreements, including acceleration of
exercise upon a change of control.
EXECUTIVE COMPENSATION
The following table shows, for the fiscal years ended December 31, 1996, 1995
and 1994, the compensation of the Chief Executive Officer and the other
executive officers of the Corporation and/or the Bank whose total annual salary
and bonus exceeded $100,000 for the year ended December 31, 1996 (the "Named
Executives").
<TABLE>
SUMMARY COMPENSATION TABLE
Long-Term
Compensation
Annual Compensation Awards
------------------- ------
Number of
Securities
Name Underlying
and Principal Options/ All Other
Position Year Salary Bonus (1) SARs (2) Compensation (3)
-------- ---- ------ --------- -------- ----------------
<S> <C> <C> <C> <C> <C>
Joseph J. Kirby, Chairman 1996 $232,000 $77,256 12,000 $7,698(4)
of the Board and Chief 1995 220,000 81,400 12,816 7,320
Executor Officer 1994 210,000 81,585 14,484 6,886
John C. Warren, President 1996 $153,846 $39,600 15,305 -$0-
and Chief Operating
Officer
David V. Devault, Vice 1996 $110,000 $25,438 3,750 $3,650
President and Chief 1995 105,000 26,316 6,117 3,494
Financial Officer 1994 100,000 26,417 3,450 3,279
Harvey C. Perry II, 1996 $98,300 $23,346 3,351 $3,262
Vice President and 1995 94,300 23,455 2,747 3,138
Secretary 1994 90,000 24,135 3,104 2,951
Robert G. Cocks, Jr., 1996 $90,000 $20,194 2,046 $2,986
Senior Vice President 1995 86,000 20,729 2,505 2,861
- Lending of the Bank 1994 82,000 21,683 2,829 2,689
<FN>
- ----------
(1) Bonus amounts represent amounts accrued for the years indicated under the
Corporation's Short-Term Incentive Plan for its executive officers and
other key employees (the "Incentive Plan"). The Incentive Plan provides
for annual payments to participants up to a maximum percentage of base
salary, which percentages vary among participants.
(2) None of the stock options granted to the Named Executives have tandem
stock appreciation rights ("SARs"). The numbers of securities underlying
stock options granted to the Named Executives have been adjusted to
reflect a three-for-two stock split effected by the Corporation on August
31, 1994 and a three-for-two stock split effected by the Corporation on
October 15, 1996.
(3) Under the Bank's tax-qualified 401(k) plan (the "401(k) Plan"), which
covers all full-time salaried employees, the Bank matches 50% of each
participant's first 2% of voluntary salary contributions and 100% of each
participant's next 2% of salary contributions up to a maximum match of
3%.
(4) Includes $2,734 accrued under the Supplemental Pension Benefit and
Profit Sharing Plan adopted by the Bank effective November 1, 1994 (the
"Supplemental Plan"), which provides for payments by the Bank of certain
amounts which would have been contributed by the Bank under the 401(k)
Plan, but for limitations on employer contributions contained in the
Internal Revenue Code.
</FN>
</TABLE>
--------------------------------
The following table contains information concerning the grant of stock options
pursuant to the Corporation's Stock Option Plan to the Named Executives during
the fiscal year ended December 31, 1996.
<TABLE>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
Individual Grants
-----------------------------------------------------------
<CAPTION>
Percent of Potential Realizable Value at
Number of Total Assumed Annual Rates of
Securities Options/SARs Stock Price Appreciation
Underlying Granted to Exercise for Option Term
Options/ Employees or Base ----------------------------
SARs in Fiscal Price Per Expiration
Name Granted (1) Year Share Date 5% 10%
---- ----------- ---- ----- ---- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Joseph J. Kirby 12,000 20.43% $22.00 5/13/2006 $166,027(2) $420,747(3)
John C. Warren 8,033 13.68% $19.92 1/16/2006 $100,616(4) $254,983(5)
7,272 12.38% $22.00 5/13/2006 $100,612(2) $254,972(3)
David V. Devault 3,760 6.38% $22.00 5/13/2006 $51,883(2) $131,483(3)
Harvey C. Perry II 3,351 5.70% $22.00 5/13/2006 $46,363(2) $117,493(3)
Robert G. Cocks, Jr. 2,046 3.48% $22.00 5/13/2006 $28,307(2) $71,737(3)
<FN>
(1) All options granted to the Named Executives were granted on May 13, 1996
under the Stock Option Plan, except that the grant to Mr. Warren of
options to acquire 8,033 shares was made on January 16, 1996. There are
no SARs attached to any options granted during 1996. The options become
exercisable in 25% installments commencing on the date of grant and on
each anniversary date thereafter, so long as employment with the
Corporation continues. If a Change in Control (as defined in the Stock
Option Plan) were to occur, the options would become immediately
exercisable in full.
(2) $22.00 at 5% annually for 10 years = $35.84
(3) $22.00 at 10% annually for 10 years = $57.07
(4) $19.92 at 5% annually for 10 years = $32.45
(5) $19.92 at 10% annually for 10 years = $51.67
</FN>
</TABLE>
<TABLE>
The following table sets forth information with respect to the Named Executives
concerning the exercise of options during the fiscal year ended December 31,
1996 and unexercised options held as of the end of the 1996 fiscal year.
<CAPTION>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options/SARS
Number of Options/SARs at FY-End (1) at FY-End (1)(2)
Shares Acquired Value ------------------------- -------------------------
Name on Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
---- ----------- -------- ------------------------- -------------------------
<S> <C> <C> <C> <C> <C> <C>
Joseph J. Kirby 15,268 $152,683 89,251 19,031 $1,743,439 $229,423
John C. Warren -0- -$0- 3,825 11,480 $38,606 $115,874
David V. Devault 1,861 $14,217 25,290 6,734 $487,249 $81,866
Harvey C. Perry II 1,950 $17,372 19,388 4,666 $381,121 $54,470
Robert G. Cocks, Jr. -0- -$0- 12,910 3,496 $260,208 $42,840
<FN>
(1) There are no SARs attached to the stock options held by the Named Executives.
(2) Value based on the fair market value of the Corporation's Common Stock on December 31, 1996 ($31.00) minus
the exercise price.
</FN>
</TABLE>
--------------------------------
The Bank maintains a qualified defined benefit pension plan (the "Pension Plan")
for salaried employees of the Corporation and the Bank. The Internal Revenue
Code limits the compensation amount used in determining the annual benefits
payable from qualified plans to an individual. However, the Bank has adopted a
Supplemental Pension Benefit and Profit Sharing Plan, effective November 1, 1994
(the "Supplemental Plan"), which provides for payments by the Bank of certain
amounts which employees of the Bank would have received under the Pension Plan
in the absence of such limitations in the Internal Revenue Code. Benefits
payable under the Supplemental Plan are an unfunded obligation of the Bank. The
following table shows the annual benefits payable upon retirement, assuming
retirement at age 65 in 1996, under the Pension Plan and the Supplemental Plan
as it relates to the Pension Plan. The benefits shown are straight-life annuity
amounts not reduced by a joint survivorship benefit, which is available.
<PAGE>
<TABLE>
<CAPTION>
PENSION PLAN TABLE
Years of Service
Average Annual
Pension Compensation 15 20 25 30 35
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$100,000 $25,061 $33,415 $41,769 $50,123 $58,476
125,000 31,999 42,665 53,331 63,998 74,664
150,000 38,936 51,915 64,894 77,873 90,851
175,000 45,874 61,165 76,456 91,748 107,039
200,000 52,811 70,415 88,019 105,623 123,226
225,000 59,749 79,665 99,581 119,498 139,414
250,000 66,686 88,915 111,144 133,373 155,601
275,000 73,624 98,165 122,706 147,248 171,789
300,000 80,561 107,415 134,269 161,123 187,976
325,000 87,499 116,665 145,831 174,998 204,164
350,000 94,436 125,915 157,394 188,873 220,351
</TABLE>
Annual payments to an employee retiring at age 65 are based on the average
highest 36 consecutive months of pension compensation. Pension compensation
consists of base salary, plus, in the case of the Named Executives and certain
other key employees, payments pursuant to the Incentive Plan. Such amounts are
shown in the Salary and Bonus columns of the Summary Compensation Table. The
benefit is the sum of (i) 1.2% of pension compensation multiplied by the number
of years of service, plus (ii) .65% of pension compensation in excess of the
Social Security covered compensation level multiplied by the number of years of
service. In 1996 the covered Social Security compensation level was $27,576.
The years of service accrued for purposes of the Pension Plan in 1996 for the
following Named Executives were: Mr. Kirby, 33 years; Mr. Warren, 0 years; Mr.
Devault, 10 years; Mr. Perry, 22 years, and Mr. Cocks, 4 years.
COMPENSATION COMMITTEE AND STOCK OPTION COMMITTEE
JOINT REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee administers the executive compensation program of the
Corporation under the supervision of the Board of Directors. The success of the
Corporation is highly dependent on hiring, developing and training qualified
people who feel encouraged to perform for the good of the shareholders, the
community, the Corporation and customers. The executive compensation program
consists of three elements: base salary, short-term incentive compensation and
long-term incentives. Prior to the beginning of the fiscal year, the
Compensation Committee and the Stock Option Committee consulted with an
independent compensation consultant (the "Consultant") which provided certain
information regarding base salary, short-term and long-term incentive practices
of comparable companies in the banking industry (the "Compensation Peer Group").
Base Salary. Base salary for all executive officers is determined by the
Compensation Committee, subject to approval of the full Board of Directors.
Salary levels were developed by the Compensation Committee for each executive
officer's position based on an analysis of compensation level information
provided by the Consultant. The general policy of the Compensation Committee is
to attempt to position executive base salary levels in the middle of the range
of base level salaries for comparable executives in the Compensation Peer Group,
with adjustments to reflect such subjective factors as technical, managerial and
human relations skills, problem solving capabilities, and level of
accountability. Generally, the Compensation Committee relied on the
recommendations of its Chief Executive Officer in following these guidelines to
establish the base salary of the other executive officers for 1996.
The Compensation Committee increased the Chief Executive Officer's salary for
1996 by 5.5% over the previous year based on the Compensation Committee's review
of the Chief Executive Officers' salaries in the Compensation Peer Group and
their subjective assessment of the Chief Executive Officer's overall performance
during the prior year.
Short-Term Incentive Plan. The Short-Term Incentive Plan (the "Incentive Plan")
provides for the payment of additional cash compensation to officers based upon,
for officers other than the Chief Executive Officer, the achievement of target
levels of return on equity and the achievement of individual objectives
established by senior management. The incentive payment for the Chief Executive
Officer is based solely upon the return on equity component. The return on
equity target levels were established by the Compensation Committee based upon
their review of data for the Compensation Peer Group provided by the Consultant
and management expectations and recommendations. The Compensation Committee's
policy is to periodically review these performance measures and adjust them as
appropriate. The total target payout for the Chief Executive Officer in 1996 was
37% of base salary.
In 1996, the Corporation's return on equity, as measured against the
Compensation Peer Group and the targets established by the Compensation
Committee, entitled the executive officers to a payout for 1996 performance of
90% of the return on equity portion of the target payout for each officer.
Payouts based on the achievement of individual performance goals were
subjectively determined by each participant's supervisor.
Long-Term Incentives. As a general rule, the Stock Option Committee has granted
stock options to its executive officers on an annual basis. This element of
compensation is viewed as a desirable long-term compensation method because it
closely links the interest of management with shareholder value and aids in the
retention and motivation of executives to improve long-term stock market
performance. In fixing the grant of stock options to executive officers, the
Stock Option Committee reviewed data for the Compensation Peer Group provided by
the Consultant and, for officers other than the Chief Executive Officer,
recommendations made by the Chief Executive Officer, which were based on the
individual officer's level of responsibility and contribution towards
achievement of the Corporation's business plan and objectives. During 1996, the
Stock Option Committee granted to the Chief Executive Officer, options to
purchase 12,000 shares with an exercise price of $22.00 per share. The grant to
the Chief Executive Officer was based upon his strong performance in promoting
shareholder value as measured both by the Corporation's financial and stock
price performance and to reward the Chief Executive Officer for his long and
meritorious service to the Corporation.
The foregoing report has been furnished by the Compensation Committee and the
Stock Option Committee.
COMPENSATION COMMITTEE: STOCK OPTION COMMITTEE:
Brendan P. O'Donnell (Chairman) Gary P. Bennett (Chairman)
Gary P. Bennett Mary E. Kennard, Esq.
Richard A. Grills Brendan P. O'Donnell
Anthony J. Rose, Jr. James P. Sullivan, CPA
SHAREHOLDER RETURN PERFORMANCE PRESENTATION
Set forth below is a line graph comparing the cumulative total shareholder
return on the Corporation's Common Stock against the cumulative total return of
the Nasdaq Stock Market (U.S.) and the Keefe, Bruyette & Woods, Inc. ("KBW")
Eastern Regional Bank Sub-index for the five years ended December 31, 1996.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
(The line graph referred to in the preceding paragraph appears in this space in
the proxy filed in paper format that will be provided to shareholders. The
following table provides the data points necessary to describe this graphic via
EDGAR.)
<TABLE>
<CAPTION>
1991 1992 1993 1994 1995 1996
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Washington Trust Bancorp, Inc. $100.00 $156.52 $230.20 $314.06 $434.09 $715.44
Nasdaq Stock Market (U.S.) $100.00 $116.38 $133.59 $130.59 $184.67 $227.16
KBW Eastern Regional Banks $100.00 $134.77 $136.70 $116.78 $191.35 $253.88
<FN>
Assumes that the value of Washington Trust Bancorp, Inc. Common Stock and each
index was $100 on December 31, 1991. Total return assumes reinvestment of
dividends.
</FN>
</TABLE>
INDEBTEDNESS AND OTHER TRANSACTIONS
The Bank has had transactions in the ordinary course of business, including
borrowings, with certain directors and executive officers of the Corporation and
their associates, all of which were made on substantially the same terms,
including interest rates and collateral, as those prevailing at the time for
comparable transactions with other persons, and did not involve more than the
normal risk of collectibility or present other unfavorable features when
granted.
During 1996, the Bank paid approximately $86,105 in legal fees related to
collection matters to the law firm of Orsinger & Nardone, of which Mr. Orsinger,
a member of the Board of Directors, is a partner.
PROPOSAL 2
ADOPTION OF THE 1997 EQUITY INCENTIVE PLAN
In December 1996, the Board of Directors adopted, subject to shareholder
approval, the Corporation's 1997 Equity Incentive Plan (the "1997 Plan"). The
purposes of the 1997 Plan are to attract and retain key employees, directors,
advisors and consultants, to provide an incentive for them to assist the
Corporation to achieve long-range performance goals and to enable them to
participate in the long-term growth of the Corporation. The following is a
summary description of the 1997 Plan and is qualified in its entirety by
reference to the full text of the 1997 Plan, which is attached hereto as Exhibit
A.
Under the 1997 Plan, the Corporation may grant (i) incentive stock options
intended to qualify under Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code"), (ii) options that are not qualified as incentive stock
options ("nonqualified stock options"), (iii) stock appreciation rights either
in tandem with an option or alone and unrelated to an option ( "SAR"), (iv)
shares of Common Stock awarded without payment therefor or based on achieving
certain performance goals ("award shares" or "performance shares") and (v)
restricted shares of Common Stock ("restricted stock").
All employees, and in the case of awards other than incentive stock options,
directors, advisors and consultants of the Corporation or any affiliate (as that
term is defined in the 1997 Plan) capable of contributing significantly to the
successful performance of the Corporation, other than a person who has
irrevocably elected not to be eligible, are eligible to participate in the 1997
Plan.
The 1997 Plan is administered by a committee, which shall initially be the Stock
Option Committee. The Board of Directors of the Corporation has the authority to
adopt, alter and repeal administrative rules, guidelines and practices governing
the operation of the 1997 Plan and to interpret provisions of the Plan. The
Board of Directors may delegate, to the extent permitted by applicable law, to
the Stock Option Committee the power to make awards to participants and all
determinations under the 1997 Plan with respect thereto.
There are a total of 450,000 shares of Common Stock available for issuance under
the 1997 Plan, subject to adjustment for any stock dividend, recapitalization,
stock split, stock combination or certain other corporate reorganizations.
Shares issued may consist in whole or in part of authorized but unissued shares
or treasury shares. Shares subject to an award that expires or is terminated
unexercised or is forfeited for any reason or settled in a manner that results
in fewer shares outstanding than were initially awarded will again be available
for award under the 1997 Plan. The closing price of the Corporation's Common
Stock on February 28, 1997 was $29.00.
STOCK OPTIONS
Subject to the provisions of the 1997 Plan, the Board may award incentive stock
options and nonqualified stock options and determine the number of shares to be
covered by each option, the option price therefor and the conditions and
limitations applicable to the exercise of the option. Each option shall be
exercisable at such times and subject to such terms and conditions as the Board
may specify in the applicable award or thereafter. The Board may provide for the
automatic award of an option upon the delivery of shares to the Corporation in
payment of an option for up to the number of shares so delivered.
The terms and conditions of incentive stock options shall be subject to and
comply with Section 422 of the Code and any regulations thereunder. No incentive
stock option granted under the 1997 Plan may be granted more than ten years
after the effective date of the 1997 Plan and no such grant may be exercisable
more than ten years from the date of grant (five years after the date of grant
for incentive stock options granted to holders of more than ten percent of the
Common Stock of the Corporation or of its parent or subsidiary corporation).
Incentive stock options shall be granted only to employees of the Corporation
and shall be transferable by the optionee only by the laws of descent and
distribution, and shall be exercisable only by the employee during his or her
lifetime.
Nonqualified stock options may be granted at an exercise price greater or lesser
than the fair market value of the Common Stock on the date of grant, in the
discretion of the Board. Incentive stock options, however, may not be granted at
less than the fair market value of the Common Stock and may be granted to
holders of more than 10% of the Common Stock only at an exercise price of at
least 110% of the fair market value of the Common Stock on the date of the
grant.
OPTIONS GRANTED TO NON-EMPLOYEE DIRECTORS
The 1997 Plan provides that, unless otherwise determined by the Board of
Directors, each director of the Corporation who is not an employee of the
Corporation shall automatically be granted a nonqualified option covering 750
shares of Common Stock as of the date of each Annual Meeting of the Corporation
after which such director will continue to serve as a director of the
Corporation, beginning with the 1997 Annual Meeting and in lieu of options which
would have been granted pursuant to the Corporation's Stock Option Plan, at an
option price equal to the fair market value of the Common Stock on such date and
the expiration of which shall be the tenth anniversary thereof. These options
are exercisable on and after the date that is one year after the date of grant.
In addition, the Board may provide for such other terms and conditions of these
options, as shall be set forth in the applicable option agreements, including
acceleration of exercise upon a change of control.
STOCK APPRECIATION RIGHTS
Subject to the provisions of the 1997 Plan, the Board of Directors may award
SARs in tandem with an option (at or after the award of the option) or alone and
unrelated to an option. An SAR entitles the holder to receive from the
Corporation an amount equal to the excess, if any, of the fair market value of
the Common Stock over the reference price. SARs granted in tandem with an option
will terminate to the extent that the related option is exercised, and the
related option will terminate to the extent that the tandem SARs are exercised.
PERFORMANCE OR AWARD SHARES
The 1997 Plan authorizes the Board of Directors to grant performance shares or
award shares to participants in the form of grants of shares of Common Stock.
Performance shares are earned over a period of time (a performance cycle)
selected by the Board from time to time. There may be more than one performance
cycle in existence at any one time and the duration of the performance cycles
may differ from each other. The payment value of the performance shares will be
equal to the fair market value of the Common Stock on the date the Board
determines that the performance shares have been earned. The Board shall
establish performance goals for each cycle, for the purpose of determining the
extent to which performance shares awarded for such cycle are earned. As soon as
practicable after the end of a performance cycle, the Board shall determine the
number of performance shares which have been earned on the basis of performance
in relation to the established performance goals. Payment values of earned
performance shares are distributed to the participant or, if the participant has
died, to the beneficiary designated by the participant.
The Board may also award "stock units," to be designated as award shares by the
Board, consisting of Common Stock and/or other rights granted as units that are
valued in whole or in part by reference to the value of the Common Stock. Such
shares shall be issued for no cash consideration or such minimum consideration
as may be required by applicable law.
RESTRICTED STOCK
Subject to provisions of the 1997 Plan, the Board of Directors may grant shares
of restricted stock to participants, with such restricted periods and other
conditions as the Board may determine and for no cash consideration or such
minimum consideration as may be required by applicable law. During the
restricted period, unless otherwise determined by the Board, stock certificates
evidencing the restricted shares will be held by the Corporation and may not be
sold, assigned, transferred, pledged or otherwise encumbered, except as
permitted by the Board. At the expiration of the restricted period, the
Corporation will deliver such certificates to the participant or, if the
participant has died, to the beneficiary designed by the participant.
GENERAL PROVISIONS
Each award shall be evidenced by a written document delivered to the participant
specifying the terms and conditions thereof and containing such other terms and
conditions not inconsistent with the provisions of the 1997 Plan as the Board
considers necessary or advisable. Each type of award may be made alone, in
addition to, or in relation to any other type of award. The terms of each type
of award need not be identical and the Board need not treat participants
uniformly. The Board may amend, modify or terminate any outstanding award,
including substituting therefor another award, changing the date of exercise or
realization and converting an incentive stock option to a nonqualified stock
option, provided that the participant's consent to such action shall be required
unless the Board determines that the action would not materially and adversely
affect the participant.
The Board of Directors may determine whether awards granted pursuant to the 1997
Plan are settled in whole or in part in cash, Common Stock, other securities of
the Corporation or other property. The Board may permit a participant to defer
all or any portion of a payment under the 1997 Plan. In the Board's discretion,
tax obligations required to be withheld in respect of an award may be paid in
whole or in part in shares of common stock, including shares retained from such
award. The Board will determine the effect on an award of the death, disability,
retirement or other termination of employment of a participant and the extent to
which and period during which the participant's legal representative, guardian
or designated beneficiary may receive payment of an award or exercise rights
thereunder.
The Board in its discretion may take certain actions in order to preserve a
participant's rights under an award in the event of a change in control of the
Corporation, including providing for the acceleration of any time period
relating to the exercise or realization of the award, providing for the cash
purchase of the award or adjusting the terms of the award in order to reflect
the change in control.
The Board of Directors of the Corporation may amend, suspend or terminate the
1997 Plan or any portion thereof at any time; provided that no amendment shall
be made without shareholder approval if such approval is necessary to comply
with any applicable law, rules or regulations.
FEDERAL INCOME TAX CONSEQUENCES
The following general discussion of the Federal income tax consequences of
awards granted under the 1997 Plan is based upon the provisions of the Internal
Revenue Code as in effect on the date hereof, current regulations thereunder and
existing public and private administrative rulings of the Internal Revenue
Service. This discussion is not intended to be a complete discussion of all of
the Federal income tax consequences of the 1997 Plan or of all of the
requirements that must be met in order to qualify for the tax treatment
described herein. Changes in the law and regulations may modify the discussion,
and in some cases the changes may be retroactive. No information is provided as
to state tax laws. The 1997 Plan is not qualified under Section 401 of the Code,
nor is it subject to the provisions of the Employee Retirement Income Security
Act of 1974, as amended. The tax treatment of each kind of award under the 1997
Plan is as follows:
Nonqualified Stock Options. An option holder will not recognize any taxable
income upon the grant of a nonqualified option under the 1997 Plan. Generally,
an option holder recognizes ordinary taxable income at the time a nonqualified
option is exercised in an amount equal to the excess of the fair market value of
the shares of Common Stock on the date of exercise over the exercise price.
However, if (a) the Corporation imposes restrictions on the shares which do not
permit the recipient to transfer the shares to others and which require the
recipient to return the shares to the Corporation at less than fair market value
upon termination of employment (a "risk of forfeiture"), or (b) the recipient is
an officer or director of the Corporation subject to Section 16(b) of the
Securities Exchange Act of 1934, as amended ("Section 16(b)") then, upon their
sale of shares of Common Stock, the date on which taxable income (if any) is
recognized (the "Recognition Date") will be the date on which the stock becomes
"freely transferable" or not subject to risk of forfeiture. In this
circumstance, the option holder will generally recognize ordinary taxable income
on the Recognition Date in an amount equal to the excess of the fair market
value of the shares at that time over the exercise price.
Despite this general rule, if the Recognition Date is after the date of
exercise, then the option holder may make an election pursuant to Section 83(b)
of the Code. In this case, the option holder will recognize ordinary taxable
income at the time the option is exercised and not on the later date. In order
to be effective, the Section 83(b) election must be filed with the Corporation
and the Internal Revenue Service within 30 days of exercise.
The Corporation will generally be entitled to a compensation deduction for
Federal income tax purposes in an amount equal to the taxable income recognized
by the option holder, provided the Corporation reports the income on a form W-2
or 1099, whichever is applicable, that is timely provided to the option holder
and filed with the IRS.
When an option holder subsequently disposes of the shares of Common Stock
received upon exercise of a nonqualified option, he or she will recognize
long-term or short-term capital gain or loss (depending upon the holding
period), in an amount equal to the difference between the sale price and the
fair market value on the date on which the option holder recognized ordinary
taxable income as a result of the exercise of the nonqualified option.
An option holder who pays the exercise price for a nonqualified option, in whole
or in part, by delivering shares of Common Stock already owned by him or her
will recognize no gain or loss for Federal income tax purposes on the shares
surrendered, but otherwise will be taxed according to the rules described above.
Incentive Stock Options. An option holder generally will not recognize taxable
income upon either the grant or the exercise of an incentive stock option.
However, under certain circumstances, there may be alternative minimum tax or
other tax consequences, as discussed below.
An option holder will recognize taxable income upon the disposition of the
shares received upon exercise of an incentive stock option. Any gain recognized
upon a disposition that is not a "disqualifying disposition" will be taxable as
long-term capital gain. A "disqualifying disposition" means any disposition of
shares acquired on the exercise of an incentive stock option within two years of
the date the option was granted or within one year of the date the shares were
issued to the option holder. The use of shares acquired pursuant to the exercise
of an incentive stock option to pay the option price under another incentive
stock option is treated as a disposition for this purpose. In general, if an
option holder makes a disqualifying disposition, an amount equal to the excess
of (a) the lesser of (i) the fair market value of the shares on the date of
exercise or (ii) the amount actually realized over (b) the option exercise
price, will be taxable as ordinary income and the balance of the gain
recognized, if any, will be taxable as either long-term or short-term capital
gain, depending on the optionee's holding period for the shares. In the case of
a gift or certain other transfers, the amount of ordinary income taxable to the
optionee is not limited to the amount of gain which would be recognized in the
case of a sale. Instead, it is equal to the excess of the fair market value of
the shares on the date of exercise over the option exercise price.
As noted previously, the tax result may change if (a) the Corporation imposes
restrictions on the shares which do not permit the recipient to transfer the
shares to others and which require the recipient to return the shares to the
Corporation at less than fair market value upon termination of employment, or
(b) the recipient is an officer or director of the Corporation subject to
Section 16(b). In the case of a disqualifying disposition of shares acquired
pursuant to the exercise of such an incentive stock option, the date on which
the fair market value of the shares is determined will be postponed, and the tax
consequences will be similar to the treatment that applies to shares purchased
pursuant to options granted under the 1997 Plan, including the ability to make a
Section 83(b) election.
In general, in the year an incentive stock option is exercised, the holder must
include the excess of the fair market value of the shares issued upon exercise
over the exercise price in the calculation of alternative minimum taxable
income. The application of the alternative minimum tax rules for an option
holder subject to Section 16(b) or who receives shares that are not
"substantially vested" are more complex and may depend upon whether the holder
makes a Section 83(b) election, as described above.
The Corporation will not be entitled to any deduction with respect to the grant
or exercise of an incentive stock option provided the holder does not make a
disqualifying disposition. If the option holder does make a disqualifying
disposition, the Corporation will generally be entitled to a deduction for
Federal income tax purposes in an amount equal to the taxable income recognized
by the holder, provided the Corporation reports the income on a form W-2 that is
timely provided to the option holder and filed with the IRS.
Stock Appreciation Rights. A recipient of an SAR will not be considered to
receive any income at the time an SAR is granted, nor will the Corporation be
entitled to a deduction at that time. Upon the exercise of an SAR, the holder
will have ordinary income equal to the cash received upon the exercise. At that
time, the Corporation will be entitled to a tax deduction equal to the amount of
ordinary income realized by the holder.
Restricted Stock, Performance and Award Shares. The recipient of restricted
stock, performance or award shares will be treated in the same manner as a
person who has exercised a nonqualified stock option, as described above, for
which the Corporation has imposed restrictions on the shares received, and for
which the exercise price is either zero or a nominal amount. In general, this
means that the holder may either wait until the restrictions have elapsed (or
the performance goals have been met), and then pay tax at ordinary income tax
rates, based upon the fair market value of the shares at that time, or he or she
can file a Section 83(b) election, and pay tax based on the fair market value of
the shares at the time they are received. Again, the Corporation will get a
deduction that corresponds to the income recognized by the recipient. If a
recipient makes a Section 83(b) election but later forfeits some or all of the
shares as to which the election was made, he or she will not be entitled to a
deduction or other reduction related to the income previously recognized.
Awards of Units. A person who receives an award of stock units that includes
Common Stock will be treated, with regard to such Common Stock, in the same
manner as a person who has exercised a nonqualified stock option, as described
above. In general, this means that the holder will have taxable income at the
time the shares are received if they are not subject to restrictions, or as
described in the preceding paragraph for restricted stock, if they are subject
to restrictions. The tax treatment of an award of units that consists of other
rights will depend on the provisions of the award. It may be immediately taxable
if there are no restrictions on the receipt of the cash or other property that
the units represent, or the tax consequences may be deferred if the receipt of
cash or other property for the units is restricted, or subject to vesting or
performance goals. In those situations in which a participant receives property
subject to restrictions, the participant may wish to make a Section 83(b)
election, as described above. At the time that the holder of the unit has
ordinary income, the Corporation will be entitled to a tax deduction equal to
the amount of ordinary income realized by the holder.
An affirmative vote by the holders of a majority of the issued and outstanding
shares of Common Stock entitled to vote on the matter represented in person or
by proxy at the Annual Meeting is required to approve the 1997 Plan.
The Board of Directors recommends that shareholders vote "FOR" this proposal.
PROPOSAL 3
AMENDMENT TO ARTICLE FOURTH OF THE CORPORATION'S
RESTATED ARTICLES OF INCORPORATION
The Board of Directors has unanimously approved and recommends to the
Corporation's shareholders that they consider and approve the proposed amendment
to Article FOURTH of the Corporation's Articles to increase the number of shares
of Common Stock, $.0625 par value, that may be issued thereunder from 10,000,000
shares to 30,000,000 shares. The additional shares of Common Stock would be part
of the existing class of Common Stock and, if and when issued, would have the
same rights and privileges as the shares of Common Stock presently outstanding.
If the proposed amendment is approved by the Corporation's shareholders, the
first paragraph of Article FOURTH of the Articles would read in its entirety as
follows:
FOURTH. Capital Stock. The aggregate number of shares which the
Corporation shall have authority to issue is 30,000,000, par value
$.0625 per share, all of which shares are to be a class designated as
"Common Stock".
Pursuant to Rhode Island corporate law, the Board of Directors is authorized to
issue from time to time any and all authorized and unissued shares of Common
Stock for any proper corporate purposes without prior shareholder
approval,except as may otherwise be required for a particular transaction by law
or the Articles, or by the rules of The Nasdaq Stock Market, or any other stock
exchange on which the Corporation's securities may then be listed.
The Board of Directors believes that the proposed increase in the number of
authorized shares of Common Stock is in the best interests of the Corporation
and its shareholders. As of March 10, 1997, there were [_________] shares of
Common Stock issued and outstanding. An aggregate of [__________] shares of
Common Stock are currently reserved for issuance pursuant to the Stock Option
Plan and the Corporation's Amended and Restated Dividend Reinvestment and Stock
Purchase Plan. Moreover, if Proposal 2, regarding adoption of the 1997 Plan, is
approved, an additional 450,000 shares will be reserved for issuance pursuant to
the 1997 Plan.
The proposed increase in the number of authorized shares of Common Stock will
give the Corporation greater flexibility by allowing shares of Common Stock to
be issued by the Board of Directors without the delay and expense of a special
meeting of shareholders. For example, the Board of Directors may deem it
appropriate to make a private or public offering of the Common Stock in order to
raise funds for working capital or other purposes, or the Common Stock may be
issued to finance possible future acquisitions, or for distribution to the
Corporation's shareholders in the event of a stock dividend or additional stock
splits, or for distribution pursuant to employee benefit plans.
Shareholders of the Corporation do not now have preemptive rights to subscribe
for or purchase additional shares of Common Stock, and the shareholders will
have no preemptive rights to subscribe for or purchase any of the additional
shares authorized by the proposed amendment.
If the proposed amendment is adopted, the authority of the Board of Directors to
issue the newly-authorized but unissued shares of Common Stock might be
considered as having the effect of discouraging an attempt by another person or
entity to effect a takeover or otherwise gain control of the Corporation,
because the issuance of additional shares of Common Stock would dilute the
voting power of the Common Stock then outstanding. For example, the Board might
be able to place shares of Common Stock with persons supportive of management,
thereby diluting the voting stock ownership of current shareholders and
concentrating in the hands of management sufficient voting power to effectively
block attempts to take control of the Corporation. The recommendation to
increase the number of authorized shares of Common Stock is not in response to
any takeover or attempt to gain control of the Corporation as the Corporation is
not aware that any have been made or are planned in the future.
The Articles and Bylaws of the Corporation contain certain provisions which may
render more difficult an unfriendly tender offer, proxy contest, merger or
change in control of the Corporation. The Articles and Bylaws provide for a
staggered Board of Directors. See "Election of Directors." The Articles further
provide that the Corporation will not become a party to certain business
combinations with holders of 10% or more of the Corporation's capital stock
without either (i) prior approval by 80% of the Board of Directors, (ii)
approval by 80% of the Continuing Directors (as defined in the Articles) and a
majority of the Board of Directors and compliance with certain fair price and
other conditions, or (iii) approval by the holders of 80% or more of the
Corporation's outstanding shares entitled to vote. Amendments to the foregoing
provisions of the Articles and Bylaws must be approved by 80% of the Board of
Directors and a majority of the Continuing Directors and by the holders of 80%
of the outstanding shares entitled to vote. In considering the Amendment,
shareholders should also take into account that the Corporation's Stock Option
Plan provides for the immediate vesting of all outstanding options in the event
of a change of control.
In August 1996, the Board of Directors declared a dividend distribution of one
right (a "Right") for each outstanding share of Common Stock held of record on
September 3, 1996 (the "Record Date") or issued thereafter prior to the
"Distribution Date," as defined below. Each Right entitles the registered holder
to purchase from the Corporation one share of Common Stock at a price of $80 per
share, subject to adjustment. The description and terms of the Rights are set
forth in a Rights Agreement. After September 3, 1996 and for so long as the
Rights are not transferable separately from the Common Stock, one Right is
deemed to be delivered with each share of Common Stock issued or transferred by
the Corporation. Until the Distribution Date, the Rights will be transferred
with and only with the Common Stock.
The "Distribution Date" is the earlier to occur of (i) ten days following a
public announcement that a person or group of affiliated or associated persons
(an "Acquiring Person") has acquired beneficial ownership of 15% or more of the
outstanding Common Stock, or (ii) ten business days (or such later date as may
be determined by action of the Board of Directors prior to such time as any
person becomes an Acquiring Person) following the commencement of, or
announcement of an intention to make, a tender offer or exchange offer the
consummation of which would result in the beneficial ownership by a person or
group of 15% or more of such outstanding Common Stock.
The Rights are not exercisable until the Distribution Date. The Rights will
expire on August 31, 2006 unless such expiration date is extended or unless the
Rights are earlier redeemed by the Corporation. At any time prior to the time
any person becomes an Acquiring Person, the Board of Directors of the
Corporation may redeem the Rights in whole, but not in part, at a price of
$0.001 per Right.
In the event that any person becomes an Acquiring Person, proper provision shall
be made so that each holder of a Right, other than Rights beneficially owned by
the Acquiring Person and its affiliates and associates (which will thereafter be
void), will thereafter have the right to receive upon exercise that number of
shares of Common Stock having a market value of two times the exercise price of
the Right.
In the event that, at any time after a person becomes an Acquiring Person, the
Corporation is acquired in a merger or other business combination transaction or
50% or more of its consolidated assets or earning power are sold, proper
provision will be made so that each holder of a Right will thereafter have the
right to receive, upon the exercise thereof at the then current exercise price
of the Right, that number of shares of Common Stock of the acquiring company
which at the time of such transaction will have a market value of two times the
exercise price of the Right.
The proposed increase in the number of authorized shares of Common Stock will
have the effect of increasing the deterrence power of the Rights, thereby
rendering more difficult an unfriendly attempt to gain control of the
Corporation.
Section 7-5.2-4 of the Rhode Island Business Combination Act prohibits a Rhode
Island corporation from engaging in certain business combination transactions
with any interested shareholder, defined as the beneficial owner of 10% or more
of the outstanding voting stock of the corporation or any affiliate of the
corporation which, within the preceding five year period was the beneficial
owner of 10% or more of the outstanding voting stock, for a period of five years
following the interested shareholder's stock acquisition date, unless either,
(i) the transaction is approved by the Board of Directors prior to the
interested shareholder's stock acquisition date, or (ii) the holders of
two-thirds of the outstanding stock not beneficially owned by the interested
shareholder or any affiliate of the interested shareholder have approved the
transaction no earlier than five years after the interested shareholder's stock
acquition date or (iii) the transaction meets certain conditions, including
conditions relating to the nature, form and adequacy of the consideration to be
received by the corporation's shareholders in the transaction. By virtue of the
Corporations' decision not to elect out of the statute's provisions, the statute
applies to the Corporation.
The Rights, the provisions in the Articles and By-Laws referred to above, as
well as the authority of the Board of Directors to issue additional shares of
Common Stock could be used by the Board of Directors in a manner calculated to
prevent the removal of management and make more difficult or discourage a change
in control of the Corporation. The distribution of Rights and certain aspects of
the foregoing provisions in the Articles and By-Laws were designed to afford the
Board of Directors the opportunity to evaluate the terms of a takeover attempt
without haste or undue pressure, advise shareholders of its findings, and to
negotiate to protect the interests of all shareholders.
The Corporation is not aware of any efforts to accumulate the Corporation's
securities or to obtain control of the Corporation, and the Corporation has no
present intention or agreement to issue any additional shares of Common Stock,
other than pursuant to outstanding options and existing employee benefit plans.
Furthermore, the proposal to increase the number of authorized shares of Common
Stock is not part of any plan by the Corporation to adopt a series of
anti-takeover measures, and the Corporation has no present intention of
soliciting a shareholder vote on any such measures or series of measures.
An affirmative vote by the holders of a majority of the issued and outstanding
shares of Common Stock entitled to vote on the matter at the Annual Meeting is
required to approve this amendment.
The Board of Directors recommends that shareholders vote "FOR" this proposal.
PROPOSAL 4
RATIFICATION OF SELECTION OF AUDITORS
The ratification of KPMG Peat Marwick to serve as independent auditors of the
Corporation for the current fiscal year ending December 31, 1997, will be
submitted to the Annual Meeting. Such ratification requires the affirmative vote
of a majority of the shares of Common Stock entitled to vote thereon,
represented in person or by proxy, at the Annual Meeting when a quorum is
present. Representatives of KPMG Peat Marwick will be present at the Annual
Meeting, will have the opportunity to make a statement if they so desire and
will be available to answer appropriate questions. Action by shareholders is not
required by law in the appointment of independent auditors, but their
appointment is submitted by the Board of Directors in order to give the
shareholders a voice in the designation of auditors. If the appointment is not
ratified by the shareholders, the Board of Directors will reconsider its choice
of KPMG Peat Marwick as the Corporation's independent auditors.
The Board of Directors recommends that shareholders vote "FOR" this proposal.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), requires the Corporation's officers and directors, and persons who own
more than 10% of a registered class of the Corporation's equity securities
("Insiders"), to file reports of ownership and changes in ownership with the
SEC. Insiders are required by SEC regulations to furnish the Corporation with
copies of all Section 16(a) reports they file. Based solely upon a review of the
copies of such reports furnished to the Corporation, the Corporation believes
that during 1996 all Section 16(a) filing requirements applicable to its
Insiders were complied with, except that Mr.
Warren inadvertently failed to report on a timely basis one transaction in 1996.
SHAREHOLDER PROPOSALS
Any shareholder who wishes to submit a proposal for presentation to the 1998
Annual Meeting of Shareholders must submit the proposal to the Corporation, 23
Broad Street, Westerly, Rhode Island 02891, Attention: President, not later than
November 19, 1997 for inclusion, if appropriate, in the Corporation's Proxy
Statement and the form of proxy relating to the 1998 Annual Meeting.
FINANCIAL STATEMENTS
The financial statements of the Corporation are contained in the 1996 Annual
Report to Shareholders, which has been provided to the Shareholders concurrently
herewith. Such report and the financial statements contained therein are not to
be considered as a part of this soliciting material.
OTHER BUSINESS
The management knows of no matters to be brought before the meeting other than
those referred to, but if any other business should properly come before the
meeting, the persons named in the proxy intend to vote in accordance with their
best judgment.
INCORPORATION BY REFERENCE
To the extent that this Proxy Statement has been or will be specifically
incorporated by reference into any filing by the Corporation under the
Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as
amended, the sections of the Proxy Statement entitled "Compensation Committee
and Stock Option Committee Joint Report on Executive Compensation" and
"Shareholder Return Performance Presentation" shall not be deemed to be so
incorporated, unless specifically otherwise provided in any such filing.
ANNUAL REPORT ON FORM 10-K
COPIES OF THE CORPORATION'S ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED
DECEMBER 31, 1996 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ARE
AVAILABLE WITHOUT CHARGE UPON WRITTEN REQUEST ADDRESSED TO DAVID V. DEVAULT,
VICE PRESIDENT AND CHIEF FINANCIAL OFFICER, WASHINGTON TRUST BANCORP, INC., 23
BROAD STREET, WESTERLY, RHODE ISLAND 02891.
EXPENSE OF SOLICITATION OF PROXIES
The cost of solicitation of proxies, including the cost of reimbursing brokerage
houses and other custodians, nominees or fiduciaries for forwarding proxies and
Proxy Statements to their principals, will be borne by the Corporation.
Solicitation may be made in person or by telephone or telegraph by officers or
regular employees of the Corporation, who will not receive additional
compensation therefor. In addition, the Corporation has retained Morrow & Co.,
Inc. to assist in the solicitation of proxies for a fee of $3,500 plus customary
expenses.
Submitted by order of the Board of Directors,
Harvey C. Perry II
Secretary
Westerly, Rhode Island
March 19, 1997
<PAGE>
EXHIBIT A
WASHINGTON TRUST BANCORP, INC.
1997 EQUITY INCENTIVE PLAN
SECTION 1. PURPOSE
The purpose of the Washington Trust Bancorp, Inc. 1997 Equity Incentive
Plan (the "Plan") is to attract and retain key employees, directors, advisors
and consultants, to provide an incentive for them to assist Washington Trust
Bancorp, Inc. (the "Corporation") to achieve long-range performance goals, and
to enable them to participate in the long-term growth of the Corporation.
SECTION 2. DEFINITIONS
(a) "Affiliate" means any business entity in which the Corporation owns
directly or indirectly 50% or more of the total combined voting power or
has a significant financial interest as determined by the Committee.
(b) "Annual Meeting" means the annual meeting of shareholders or special
meeting in lieu of annual meeting of shareholders at which one or more
directors are elected.
(c) "Award" means any Option, Stock Appreciation Right, Performance
or Award Share, or Restricted Stock awarded under the Plan.
(d) "Award Share" means a share of Common Stock awarded to an employee,
director, advisor or consultant without payment therefor.
(e) "Board" means the Board of Directors of the Corporation.
(f) "Code" means the Internal Revenue Code of 1986, as amended from time to
time.
(g) "Committee" means the Stock Option Committee of the Board, or such other
committee of not less than three members of the Board appointed by the
Board to administer the Plan, provided that the members of such Committee
must be Non-Employee Directors as defined in Rule 16b-3(b) promulgated
under the Securities Exchange Act of 1934, as amended.
(h) "Common Stock" or "Stock" means the Common Stock, par value $.0625 per
share, of the Corporation.
(i) "Corporation" means Washington Trust Bancorp, Inc.
(j) "Designated Beneficiary" means the beneficiary designated by a Participant,
in a manner determined by the Board, to receive amounts due or exercise
rights of the Participant in the event of the Participant's death. In the
absence of an effective designation by a Participant, Designated
Beneficiary shall mean the Participant's estate.
(k) "Fair Market Value" means, with respect to Common Stock or any other
property, the fair market value of such property as determined by the Board
in good faith or in the manner established by the Board from time to time.
(l) "Incentive Stock Option" means an option to purchase shares of Common
Stock, awarded to a Participant under Section 6, which is intended to meet
the requirements of Section 422 of the Code or any successor provision.
(m) "Nonqualified Stock Option" means an option to purchase shares of Common
Stock, awarded to a Participant under Section 6 or Section 11, which is not
intended to be an Incentive Stock Option.
(n) "Option" means an Incentive Stock Option or a Nonqualified Stock Option.
(o) "Participant" means a person selected by the Board to receive an Award
under the Plan.
(p) "Performance Cycle" or "Cycle" means the period of time selected by the
Board during which performance is measured for the purpose of determining
the extent to which an award of Performance Shares has been earned.
(q) "Performance Shares" mean shares of Common Stock which may be earned by the
achievement of performance goals, awarded to a Participant under Section 8.
(r) "Restricted Period" means the period of time selected by the Board during
which an award of Restricted Stock may be forfeited to the Corporation.
(s) "Restricted Stock" means shares of Common Stock subject to forfeiture,
awarded to a Participant under Section 9.
(t) "Stock Appreciation Right" or "SAR" means a right to receive any excess in
value of shares of Common Stock over the reference price, awarded to a
Participant under Section 7.
(u) "Stock Unit" means an award of Common Stock and/or other rights granted as
units that are valued in whole or in part by reference to, or otherwise
based on, the value of Common Stock, awarded to a Participant under Section
10.
SECTION 3. ADMINISTRATION
The Plan shall be administered by the Committee, which shall initially
be the Stock Option Committee. The Board shall have authority to adopt, alter
and repeal such administrative rules, guidelines and practices governing the
operation of the Plan as it shall from time to time consider advisable, and to
interpret the provisions of the Plan. The Board's decisions shall be final and
binding. To the extent permitted by applicable law, the Board may delegate to
the Committee the power to make Awards to Participants and all determinations
under the Plan with respect thereto.
SECTION 4. ELIGIBILITY
All employees and, in the case of Awards other than Incentive Stock
Options, directors, advisors and consultants of the Corporation or any Affiliate
capable of contributing significantly to the successful performance of the
Corporation, other than a person who has irrevocably elected not to be eligible,
are eligible to be Participants in the Plan.
SECTION 5. STOCK AVAILABLE FOR AWARDS
(a) Subject to adjustment under subsection (b), Awards may be made under
the Plan of Options to acquire not in excess of 450,000 shares of
Corporation Common Stock. Other Awards may be made as the Board may
determine, provided that a maximum of 450,000 shares of Common Stock may be
issued under this Plan. If any Award in respect of shares of Common Stock
expires or is terminated unexercised or is forfeited for any reason or
settled in a manner that results in fewer shares outstanding than were
initially awarded, including without limitation the surrender of shares in
payment for the Award or any tax obligation thereon, the shares subject to
such Award or so surrendered, as the case may be, to the extent of such
expiration, termination, forfeiture or decrease, shall again be available
for award under the Plan, subject, however, in the case of Incentive Stock
Options, to any limitation required under the Code. Common Stock issued
through the assumption or substitution of outstanding grants from an
acquired Corporation shall not reduce the shares available for Awards under
the Plan. Shares issued under the Plan may consist in whole or in part of
authorized but unissued shares or treasury shares.
(b) In the event that the Board determines that any stock dividend,
extraordinary cash dividend, creation of a class of equity securities,
recapitalization, reorganization, merger, consolidation, split-up,
spin-off, combination, exchange of shares, warrants or rights offering to
purchase Common Stock at a price substantially below fair market value, or
other similar transaction affects the Common Stock such that an adjustment
is required in order to preserve the benefits or potential benefits
intended to be made available under the Plan, then the Board, subject, in
the case of Incentive Stock Options, to any limitation required under the
Code, shall equitably adjust any or all of (i) the number and kind of
shares in respect of which Awards may be made under the Plan, (ii) the
number and kind of shares subject to outstanding Awards, and (iii) the
award, exercise or conversion price with respect to any of the foregoing,
and if considered appropriate, the Board may make provision for a cash
payment with respect to an outstanding Award, provided that the number of
shares subject to any Award shall always be a whole number.
SECTION 6. STOCK OPTIONS
(a) Subject to the provisions of the Plan, the Board may award Incentive Stock
Options and Nonqualified Stock Options and determine the number of shares
to be covered by each Option, the option price therefor and the conditions
and limitations applicable to the exercise of the Option. The terms and
conditions of Incentive Stock Options shall be subject to and comply with
Section 422 of the Code, or any successor provision, and any regulations
thereunder.
(b) The Board shall establish the option price at the time each Option is
awarded, which price shall not be less than 100% of the Fair Market Value
of the Common Stock on the date of award with respect to Incentive Stock
Options.
(c) Each Option shall be exercisable at such times and subject to such terms
and conditions as the Board may specify in the applicable Award or
thereafter. The Board may impose such conditions with respect to the
exercise of Options, including conditions relating to applicable federal or
state securities laws, as it considers necessary or advisable.
(d) No shares shall be delivered pursuant to any exercise of an Option
until payment in full of the option price therefor is received by the
Corporation. Such payment may be made in whole or in part in cash or, to
the extent permitted by the Board at or after the award of the Option, by
delivery of a note or shares of Common Stock owned by the optionholder,
including Restricted Stock, valued at their Fair Market Value on the date
of delivery, by the reduction of the shares of Common Stock that the
optionholder would be entitled to receive upon exercise of the Option, such
shares to be valued at their Fair Market Value on the date of exercise,
less their option price (a so-called "cashless exercise"), or such other
lawful consideration as the Board may determine. In addition, an
optionholder may engage in a successive exchange (or series of exchanges)
in which the shares of Common Stock that such optionholder is entitled to
receive upon the exercise of an Option may be simultaneously utilized as
payment for the exercise of an additional Option or Options.
(e) The Board may provide for the automatic award of an Option upon the
delivery of shares to the Corporation in payment of an Option for up to the
number of shares so delivered.
(f) In the case of Incentive Stock Options the following additional conditions
shall apply:
(i) Such options shall be granted only to employees of the Corporation,
and shall not be granted to any person who owns stock that possesses
more than ten percent of the total combined voting power of all
classes of stock of the Corporation or of its parent or subsidiary
corporation (as those terms are defined in section 422(b) of the
Internal Revenue Code of 1986, as amended, and the regulations
promulgated thereunder), unless, at the time of such grant, the
exercise price of such option is at least 110% of the fair market
value of the stock that is subject to such option and the option
shall not be exercisable more than five years after the date of
grant;
(ii) Such options shall not be granted more than ten years from the
effective date of the Plan and shall not be exercisable more than ten
years from the date of grant;
(iii)Such options shall, by their terms, be transferable by the optionee
only by the laws of descent and distribution, and shall be
exercisable only by such employee during his lifetime.
SECTION 7. STOCK APPRECIATION RIGHTS
Subject to the provisions of the Plan, the Board may award SARs in
tandem with an Option (at or after the award of the Option), or alone and
unrelated to an Option. SARs in tandem with an Option shall terminate to the
extent that the related Option is exercised, and the related Option shall
terminate to the extent that the tandem SARs are exercised.
SECTION 8. PERFORMANCE SHARES
(a) Subject to the provisions of the Plan, the Board may award Performance
Shares and determine the number of such shares for each Performance Cycle
and the duration of each Performance Cycle. There may be more than one
Performance Cycle in existence at any one time, and the duration of
Performance Cycles may differ from each other. The payment value of
Performance Shares shall be equal to the Fair Market Value of the Common
Stock on the date the Performance Shares are earned or, in the discretion
of the Board, on the date the Board determines that the Performance Shares
have been earned.
(b) The Board shall establish performance goals for each Cycle, for the purpose
of determining the extent to which Performance Shares awarded for such
Cycle are earned, on the basis of such criteria and to accomplish such
objectives as the Board may from time to time select. During any Cycle, the
Board may adjust the performance goals for such Cycle as it deems equitable
in recognition of unusual or non-recurring events affecting the
Corporation, changes in applicable tax laws or accounting principles, or
such other factors as the Board may determine.
(c) As soon as practicable after the end of a Performance Cycle, the Board
shall determine the number of Performance Shares which have been earned on
the basis of performance in relation to the established performance goals.
The payment values of earned Performance Shares shall be distributed to the
Participant or, if the Participant has died, to the Participant's
Designated Beneficiary, as soon as practicable thereafter. The Board shall
determine, at or after the time of award, whether payment values will be
settled in whole or in part in cash or other property, including Common
Stock or Awards.
SECTION 9. RESTRICTED STOCK
(a) Subject to the provisions of the Plan, the Board may award shares of
Restricted Stock and determine the duration of the Restricted Period during
which, and the conditions under which, the shares may be forfeited to the
Corporation and the other terms and conditions of such Awards. Shares of
Restricted Stock may be issued for no cash consideration or such minimum
consideration as may be required by applicable law.
(b) Shares of Restricted Stock may not be sold, assigned, transferred, pledged
or otherwise encumbered, except as permitted by the Board, during the
Restricted Period. Shares of Restricted Stock shall be evidenced in such
manner as the Board may determine. Any certificates issued in respect of
shares of Restricted Stock shall be registered in the name of the
Participant and unless otherwise determined by the Board, deposited by the
Participant, together with a stock power endorsed in blank, with the
Corporation. At the expiration of the Restricted Period, the Corporation
shall deliver such certificates to the Participant or if the Participant
has died, to the Participant's Designated Beneficiary.
SECTION 10. STOCK UNITS
(a) Subject to the provisions of the Plan, the Board may award Stock Units
subject to such terms, restrictions, conditions, performance criteria,
vesting requirements and payment rules as the Board shall determine.
(b) Shares of Common Stock awarded in connection with a Stock Unit Award shall
be issued for no cash consideration or such minimum consideration as may be
required by applicable law. Such shares of Common Stock may be designated
as Award Shares by the Board.
SECTION 11. OPTIONS GRANTED TO NON-EMPLOYEE DIRECTORS
Unless otherwise determined by the Board, each director of the
Corporation who is not an employee of the Corporation shall automatically be
granted a Nonqualified Option covering 750 shares as of the date of each Annual
Meeting of the Corporation after which such director will continue to serve as a
director of the Corporation, beginning with the 1997 Annual Meeting and in lieu
of options which would have been granted pursuant to Section 14 of the
Corporation's Amended and Restated 1988 Stock Option Plan, the option price for
which shall be the Fair Market Value of the Common Stock on such date and the
expiration of which shall be the tenth anniversary thereof.
Each Nonqualified Option granted pursuant to this Section 11 may be
exercised on and after the date that is one year after the date of grant.
In addition, the Board may provide for such other terms and conditions
of the Options granted pursuant to this Section 11 as it may determine in its
sole discretion and as shall be set forth in the applicable Option agreements,
including, without limitation, acceleration of exercise upon a change of
control, termination of the Options, and the effect on such Options of the
death, retirement or other termination of service as a director of the option
holder. Notwithstanding the foregoing, nothing herein shall preclude the Board
from granting Options to such non-employee directors in addition to, or in
substitution for, those provided for in this Section 11.
SECTION 12. GENERAL PROVISIONS APPLICABLE TO AWARDS
(a) Documentation. Each Award under the Plan shall be evidenced by a written
document delivered to the Participant specifying the terms and conditions
thereof and containing such other terms and conditions not inconsistent
with the provisions of the Plan as the Board considers necessary or
advisable to achieve the purposes of the Plan or comply with applicable tax
and regulatory laws and accounting principles.
(b) Board Discretion. Each type of Award may be made alone, in addition to or
in relation to any other type of Award. The terms of each type of Award
need not be identical, and the Board need not treat Participants uniformly.
Except as otherwise provided by the Plan or a particular Award, any
determination with respect to an Award may be made by the Board at the time
of award or at any time thereafter. Without limiting the foregoing, an
Award may be made by the Board, in its discretion, to any 401(k), savings,
pension, profit sharing or other similar plan of the Corporation in lieu of
or in addition to any cash or other property contributed or to be
contributed to such plan.
(c) Settlement. The Board shall determine whether Awards are settled in whole
or in part in cash, Common Stock, other securities of the Corporation,
Awards or other property. The Board may permit a Participant to defer all
or any portion of a payment under the Plan, including the crediting of
interest on deferred amounts denominated in cash and dividend equivalents
on amounts denominated in Common Stock.
(d) Dividends and Cash Awards. In the discretion of the Board, any Award under
the Plan may provide the Participant with (i) dividends or dividend
equivalents payable currently or deferred with or without interest, and
(ii) cash payments in lieu of or in addition to an Award.
(e) Termination of Employment. The Board shall determine the effect on an Award
of the disability, death, retirement or other termination of employment of
a Participant and the extent to which, and the period during which, the
Participant's legal representative, guardian or Designated Beneficiary may
receive payment of an Award or exercise rights thereunder.
(f) Change in Control. In order to preserve a Participant's rights under an
Award in the event of a change in control of the Corporation, the Board in
its discretion may, at the time an Award is made or at any time thereafter,
take one or more of the following actions: (i) provide for the acceleration
of any time period relating to the exercise or realization of the Award,
(ii) provide for the purchase of the Award upon the Participant's request
for an amount of cash or other property that could have been received upon
the exercise or realization of the Award had the Award been currently
exercisable or payable, (iii) adjust the terms of the Award in a manner
determined by the Board to reflect the change in control, (iv) cause the
Award to be assumed, or new rights substituted therefor, by another entity,
or (v) make such other provision as the Board may consider equitable and in
the best interests of the Corporation.
(g) Withholding. The Participant shall pay to the Corporation, or make
provision satisfactory to the Board for payment of, any taxes required by
law to be withheld in respect of Awards under the Plan no later than the
date of the event creating the tax liability. In the Board's discretion,
such tax obligations may be paid in whole or in part in shares of Common
Stock, including shares retained from the Award creating the tax
obligation, valued at their Fair Market Value on the date of delivery. The
Corporation and its Affiliates may, to the extent permitted by law, deduct
any such tax obligations from any payment of any kind otherwise due to the
Participant.
(h) Amendment of Award. The Board may amend, modify or terminate any
outstanding Award, including substituting therefor another Award of the
same or a different type, changing the date of exercise or realization and
converting an Incentive Stock Option to a Nonqualified Stock Option,
provided that the Participant's consent to such action shall be required
unless the Board determines that the action, taking into account any
related action, would not materially and adversely affect the Participant.
SECTION 13. MISCELLANEOUS
(a) No Right To Employment. No person shall have any claim or right to be
granted an Award, and the grant of an Award shall not be construed as
giving a Participant the right to continued employment. The Corporation
expressly reserves the right at any time to dismiss a Participant free from
any liability or claim under the Plan, except as expressly provided in the
applicable Award.
(b) No Rights As Shareholder. Subject to the provisions of the applicable
Award, no Participant or Designated Beneficiary shall have any rights as a
shareholder with respect to any shares of Common Stock to be distributed
under the Plan until he or she becomes the holder thereof. A Participant to
whom Common Stock is awarded shall be considered the holder of the Stock at
the time of the Award except as otherwise provided in the applicable Award.
(c) Effective Date. Subject to the approval of the shareholders of the
Corporation, the Plan shall be effective on April 29, 1997. Prior to such
approval, Awards may be made under the Plan expressly subject to such
approval.
(d) Amendment of Plan. The Board may amend, suspend or terminate the Plan or
any portion thereof at any time, provided that no amendment shall be made
without shareholder approval if such approval is necessary to comply with
any applicable tax requirement, any applicable rules or regulation of the
Securities and Exchange Commission, including Rule 16(b)-3 (or any
successor rule thereunder), or the rules and regulations of the Nasdaq
Stock Market or any other exchange or stock market over which the
Corporation's securities are listed.
(e) Governing Law. The provisions of the Plan shall be governed by and
interpreted in accordance with the laws of the State of Rhode Island.
(f) Indemnity. Neither the Board nor the Committee, nor any members of either,
nor any employees of the Corporation or any parent, subsidiary, or other
affiliate, shall be liable for any act, omission, interpretation,
construction or determination made in good faith in connection with their
responsibilities with respect to this Plan, and the Corporation hereby
agrees to indemnify the members of the Board, the members of the Committee,
and the employees of the Corporation and its parent or subsidiaries in
respect of any claim, loss, damage, or expense (including reasonable
counsel fees) arising from any such act, omission, interpretation,
construction or determination to the full extent permitted by law.
