-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Eazdr0fwGYni193DAWSeqZm/bYYv6Z8sLOcnqNRpet2AOwqiA6u8dllvei1gbsLm AXFw3Iv0TVPp6PKJGGP04A== 0000737468-02-000014.txt : 20020814 0000737468-02-000014.hdr.sgml : 20020814 20020813185854 ACCESSION NUMBER: 0000737468-02-000014 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20020630 FILED AS OF DATE: 20020814 FILER: COMPANY DATA: COMPANY CONFORMED NAME: WASHINGTON TRUST BANCORP INC CENTRAL INDEX KEY: 0000737468 STANDARD INDUSTRIAL CLASSIFICATION: STATE COMMERCIAL BANKS [6022] IRS NUMBER: 050404671 STATE OF INCORPORATION: RI FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-13091 FILM NUMBER: 02731214 BUSINESS ADDRESS: STREET 1: 23 BROAD ST CITY: WESTERLY STATE: RI ZIP: 02891 BUSINESS PHONE: 4013481200 10-Q 1 q22002.txt FORM 10-Q Q2-2002 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 FORM 10-Q (Mark One) (X) Quarterly report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended JUNE 30, 2002 or ( ) Transition report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934 Commission file number: 000-13091 ------------------------------------- WASHINGTON TRUST BANCORP, INC. (Exact name of registrant as specified in its charter) ------------------------------------- RHODE ISLAND 05-0404671 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 23 BROAD STREET WESTERLY, RHODE ISLAND 02891 (Address of principal executive offices) (Zip Code) (401) 348-1200 (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. (X) Yes ( ) No The number of shares of common stock of the registrant outstanding as of July 31, 2002 was 13,032,570. Page 1 FORM 10-Q WASHINGTON TRUST BANCORP, INC. AND SUBSIDIARY For The Quarter Ended June 30, 2002 TABLE OF CONTENTS PART I. Financial Information Item 1. Financial Statements Consolidated Balance Sheets June 30, 2002 and December 31, 2001 Consolidated Statements of Income Three and Six Months Ended June 30, 2002 and 2001 Consolidated Statements of Changes in Shareholders' Equity Six Months Ended June 30, 2002 and 2001 Consolidated Statements of Cash Flows Six Months Ended June 30, 2002 and 2001 Condensed Notes to Consolidated Financial Statements Independent Auditors' Review Report Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Item 3. Quantitative and Qualitative Disclosures About Market Risk PART II. Other Information Item 4. Submission of Matters to a Vote of Security Holders Item 6. Exhibits and Reports on Form 8-K Signatures This report contains certain statements that may be considered forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. The Corporation's actual results could differ materially from those projected in the forward-looking statements as a result, among other factors, of changes in general national or regional economic conditions, changes in interest rates, reductions in the market value of trust and investment management assets under management, reductions in deposit levels necessitating increased borrowing to fund loans and investments, changes in the size and nature of the Corporation's competition, changes in loan default and charge-off rates and changes in the assumptions used in making such forward-looking statements. PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS WASHINGTON TRUST BANCORP, INC. AND SUBSIDIARY (Dollars in thousands) CONSOLIDATED BALANCE SHEETS (Unaudited) June 30, December 31, 2002 2001 - -------------------------------------------------------------------------------- Assets: Cash and due from banks $36,450 $30,399 Federal funds sold and other short-term investments 21,000 20,500 Mortgage loans held for sale 1,944 7,710 Securities: Available for sale, at fair value 503,992 453,956 Held to maturity, at cost; fair value $236,121 in 2002 and $177,595 in 2001 230,655 175,105 - -------------------------------------------------------------------------------- Total securities 734,647 629,061 Federal Home Loan Bank stock, at cost 24,582 23,491 Loans 742,987 605,645 Less allowance for loan losses 15,466 13,593 - -------------------------------------------------------------------------------- Net loans 727,521 592,052 Premises and equipment, net 24,478 22,102 Accrued interest receivable 8,035 7,124 Goodwill 22,695 - Other assets 33,101 29,790 - -------------------------------------------------------------------------------- Total assets $1,634,453 $1,362,229 - -------------------------------------------------------------------------------- Liabilities: Deposits: Demand $160,130 $134,783 Savings 428,942 316,953 Time 468,372 365,140 - -------------------------------------------------------------------------------- Total deposits 1,057,444 816,876 Dividends payable 1,824 1,569 Federal Home Loan Bank advances 432,731 431,490 Other borrowings 6,660 2,087 Accrued expenses and other liabilities 13,776 12,270 - -------------------------------------------------------------------------------- Total liabilities 1,512,435 1,264,292 - -------------------------------------------------------------------------------- Shareholders' Equity: Common stock of $.0625 par value; authorized 30 million shares; issued 13,086,795 shares in 2002 and 12,065,283 shares in 2001 818 754 Paid-in capital 28,798 10,696 Retained earnings 85,378 81,114 Accumulated other comprehensive income 8,183 6,416 Treasury stock, at cost; 60,167 shares in 2002 and 54,102 shares in 2001 (1,159) (1,043) - -------------------------------------------------------------------------------- Total shareholders' equity 122,018 97,937 - -------------------------------------------------------------------------------- Total liabilities and shareholders' equity $1,634,453 $1,362,229 - -------------------------------------------------------------------------------- The accompanying notes are an integral part of these consolidated financial statements.
WASHINGTON TRUST BANCORP, INC. AND SUBSIDIARY (Dollars in thousands, CONSOLIDATED STATEMENTS OF INCOME except per share data) (Unaudited) Three Months Six Months Periods ended June 30, 2002 2001 2002 2001 - ---------------------------------------------------------------------------------------------------------------------- Interest income: Interest and fees on loans $12,823 $12,659 $23,804 $25,820 Interest from securities 9,307 8,691 17,495 17,081 Dividends on corporate stock and Federal Home Loan Bank stock 497 582 980 1,199 Interest on federal funds sold and other short-term investments 46 180 108 383 - ----------------------------------------------------------------------------------------------------------------------- Total interest income 22,673 22,112 42,387 44,483 - ----------------------------------------------------------------------------------------------------------------------- Interest expense: Savings deposits 1,182 1,386 2,153 2,754 Time deposits 4,340 4,872 8,463 10,047 Federal Home Loan Bank advances 5,510 6,529 10,729 12,754 Other 20 25 37 53 - ----------------------------------------------------------------------------------------------------------------------- Total interest expense 11,052 12,812 21,382 25,608 - ----------------------------------------------------------------------------------------------------------------------- Net interest income 11,621 9,300 21,005 18,875 Provision for loan losses 100 150 200 350 - ----------------------------------------------------------------------------------------------------------------------- Net interest income after provision for loan losses 11,521 9,150 20,805 18,525 - ----------------------------------------------------------------------------------------------------------------------- Noninterest income: Trust and investment management 2,667 2,735 5,232 5,308 Service charges on deposit accounts 975 920 1,802 1,786 Merchant processing fees 776 650 1,222 991 Net gains on loan sales 398 627 914 836 Income from bank-owned life insurance 285 279 573 551 Net gains on sales of securities 381 403 672 408 Other income 303 355 598 678 - ----------------------------------------------------------------------------------------------------------------------- Total noninterest income 5,785 5,969 11,013 10,558 - ----------------------------------------------------------------------------------------------------------------------- Noninterest expense: Salaries and employee benefits 6,008 5,168 11,583 10,359 Net occupancy 670 629 1,295 1,352 Equipment 798 809 1,583 1,634 Legal, audit and professional fees 221 524 394 836 Merchant processing costs 614 530 971 800 Advertising and promotion 436 275 676 479 Office supplies 166 164 286 328 Acquisition related expenses 605 - 605 - Litigation settlement cost - - - 4,800 Other 1,956 1,675 3,245 2,934 - ----------------------------------------------------------------------------------------------------------------------- Total noninterest expense 11,474 9,774 20,638 23,522 - ----------------------------------------------------------------------------------------------------------------------- Income before income taxes 5,832 5,345 11,180 5,561 Income tax expense 1,808 1,545 3,412 1,607 - ----------------------------------------------------------------------------------------------------------------------- Net income $4,024 $3,800 $7,768 $3,954 - ----------------------------------------------------------------------------------------------------------------------- Per share information: Basic earnings per share $.31 $.32 $.62 $.33 Diluted earnings per share $.31 $.31 $.62 $.32 Cash dividends declared per share $.14 $.13 $.28 $.26
The accompanying notes are an integral part of these consolidated financial statements.
WASHINGTON TRUST BANCORP, INC. AND SUBSIDIARY (Dollars in thousands) CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (Unaudited) Accumulated Other Common Paid-in Retained Comprehensive Treasury Six months ended June 30, Stock Capital Earnings Income Stock Total - ------------------------------------------------------------------------------------------------------------------------ Balance at January 1, 2001 $750 $10,144 $74,265 $4,027 $- $89,186 Net income 3,954 3,954 Cumulative effect of change in accounting principle, net of tax (391) (391) Other comprehensive income, net of tax: Net unrealized gains on securities 2,138 2,138 Reclassification adjustments (402) (402) --------- Comprehensive income 5,299 Cash dividends declared (3,129) (3,129) Shares issued 3 302 305 - ------------------------------------------------------------------------------------------------------------------------ Balance at June 30, 2001 $753 $10,446 $75,090 $5,372 $- $91,661 - ------------------------------------------------------------------------------------------------------------------------ Balance at January 1, 2002 $754 $10,696 $81,114 $6,416 $(1,043) $97,937 Net income 7,768 7,768 Other comprehensive income, net of tax: Net unrealized gains on securities 2,426 2,426 Reclassification adjustments (659) (659) -------- Comprehensive income 9,535 Cash dividends declared (3,504) (3,504) Shares issued (153) 420 267 Shares issued for acquisition 64 18,255 18,319 Shares repurchased (536) (536) - ------------------------------------------------------------------------------------------------------------------------ Balance at June 30, 2002 $818 $28,798 $85,378 $8,183 $(1,159) $122,018 - ------------------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these consolidated financial statements. WASHINGTON TRUST BANCORP, INC. AND SUBSIDIARY (Dollars in thousands) CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) Six months ended June 30, 2002 2001 - -------------------------------------------------------------------------------- Cash flows from operating activities: Net income $7,768 $3,954 Adjustments to reconcile net income to net cash provided by operating activities: Provision for loan losses 200 350 Depreciation of premises and equipment 1,459 1,470 Amortization of premium in excess of accretion of discount on debt securities 508 59 Increase in bank-owned life insurance (573) (551) Depreciation (appreciation) of derivative instruments 324 (285) Net accretion of intangibles (8) - Net gains on sales of securities (672) (408) Net gains on loan sales (914) (836) Proceeds from sales of loans 39,297 40,967 Loans originated for sale (32,740) (42,981) (Increase) decrease in accrued interest receivable (437) 122 Increase in other assets (594) (1,968) Decrease in accrued expenses and other liabilities(2,362) (1,377) Other, net 350 501 - -------------------------------------------------------------------------------- Net cash provided (used) by operating activities 11,606 (983) - -------------------------------------------------------------------------------- Cash flows from investing activities: Securities available for sale: Purchases (145,737) (115,035) Proceeds from sales 28,603 238 Maturities and principal repayments 76,505 71,425 Securities held to maturity: Purchases (84,828) (53,257) Maturities and principal repayments 29,189 12,157 Purchase of Federal Home Loan Bank stock - (3,933) Principal collected on loans under loan originations (22,175) (12,918) Proceeds from sales of other real estate owned 13 150 Purchases of premises and equipment (1,293) (2,917) Cash acquired, net of payment made for acquisition 34,506 - - -------------------------------------------------------------------------------- Net cash used in investing activities (85,217) (104,090) - -------------------------------------------------------------------------------- Cash flows from financing activities: Net increase in deposits 103,054 18,675 Net increase in other borrowings 1,719 2,861 Proceeds from Federal Home Loan Bank advances 366,000 490,000 Repayment of Federal Home Loan Bank advances (387,007) (408,549) Purchase of treasury stock (536) - Net effect of common stock transactions 181 111 Cash dividends paid (3,249) (3,003) - -------------------------------------------------------------------------------- Net cash provided by financing activities 80,162 100,095 - -------------------------------------------------------------------------------- Net increase (decrease) in cash and cash equivalents 6,551 (4,978) Cash and cash equivalents at beginning of year 50,899 43,860 - -------------------------------------------------------------------------------- Cash and cash equivalents at end of period $57,450 $38,882 - -------------------------------------------------------------------------------- (Continued) WASHINGTON TRUST BANCORP, INC. AND SUBSIDIARY (Dollars in thousands) CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued) (Unaudited) Six months ended June 30, 2002 2001 - -------------------------------------------------------------------------------- Noncash Investing and Financing Activities: Net transfers from loans to other real estate owned (OREO) $ - $168 Loans charged off 209 122 Increase in unrealized gain on securities available for sale, net of tax 1,767 1,345 Increase in paid-in capital resulting from tax benefits on stock option exercises 86 194 In conjunction with the purchase acquisition detailed in Note 3 to the Consolidated Financial Statements, assets were acquired and liabilities were assumed as follows: Fair value of assets acquired $204,807 $- Less liabilities assumed 166,753 - Supplemental Disclosures: Interest payments $21,218 $26,203 Income tax payments 4,600 2,932 The accompanying notes are an integral part of these consolidated financial statements. WASHINGTON TRUST BANCORP, INC. AND SUBSIDIARY (Dollars in thousands) CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (1) Basis of Presentation The accounting and reporting policies of Washington Trust Bancorp, Inc. and subsidiary (the "Corporation") are in accordance with generally accepted accounting principles and conform to general practices of the banking industry. In the opinion of management, the accompanying consolidated financial statements present fairly the Corporation's financial position as of June 30, 2002 and December 31, 2001 and the results of operations and cash flows for the interim periods presented. The consolidated financial statements include the accounts of the Washington Trust Bancorp, Inc. and its wholly-owned subsidiary, The Washington Trust Company. All significant intercompany balances and transactions have been eliminated. The unaudited consolidated financial statements of the Corporation presented herein have been prepared pursuant to the rules of the Securities and Exchange Commission for quarterly reports on Form 10-Q and do not include all of the information and note disclosures required by accounting principles generally accepted in the United States of America. The Corporation has not changed its accounting and reporting policies from those disclosed in the Corporation's Annual Report on Form 10-K for the year ended December 31, 2001. (2) New Accounting Pronouncements In June 2001, the Financial Accounting Standards Board ("FASB") issued SFAS No. 141, "Business Combinations". SFAS 141 addresses financial accounting and reporting for business combinations and supersedes APB Opinion No. 16, "Business Combinations," and FASB Statement No. 38, "Accounting for Preacquisition Contingencies of Purchased Enterprises." All business combinations in the scope of this Statement are to be accounted for using one method - the purchase method. Therefore, this Statement eliminated the use of the pooling-of-interests method for accounting for business combinations. The provisions of SFAS 141 apply to all business combinations initiated after June 30, 2001, and also apply to all business combinations accounted for using the purchase method for which the date of acquisition is July 1, 2001 or later. Also in June 2001, the FASB issued SFAS No. 142, "Goodwill and Other Intangible Assets." This Statement addresses financial accounting and reporting for acquired goodwill and other intangible assets and supersedes APB Opinion No. 17, "Intangible Assets." It addresses how intangible assets that are acquired individually or with a group of other assets (but not those acquired in a business combination) should be accounted for in financial statements upon their acquisition. This Statement also addresses how goodwill and other intangible assets should be accounted for after they have been initially recognized in the financial statements. The provisions of this Statement were required to be applied starting with fiscal years beginning after December 15, 2001. The adoption of the foregoing pronouncements did not have a material impact on the Corporation's financial statements with respect to any business combinations that occurred prior to 2002. SFAS Nos. 141 and 142 were applied to the acquisition of First Financial Corp., which was completed on April 16, 2002. See Note 3 to the Consolidated Financial Statements for discussion of the First Financial Corp. acquisition. In August 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets." This Statement supersedes FASB Statement No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of," and the accounting and reporting provisions of APB Opinion No. 30, "Reporting the Results of Operations - Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions." This Statement established a single accounting model to be used for long-lived assets to be disposed of by sale, whether previously held and used or newly acquired, broadened the presentation of discontinued operations to include more disposal transactions, and resolves significant implementation issues related to SFAS No. 121. The provisions of this Statement are effective for financial statements issued for fiscal years beginning after December 15, 2001 and interim periods within those fiscal years. The provisions of this Statement are to be applied prospectively. The adoption of this pronouncement did not have a material impact on the Corporation's financial statements. (3) Acquisition On April 16, 2002, the Corporation completed the acquisition of First Financial Corp., the parent company of First Bank and Trust Company, a Rhode Island-chartered community bank. The results of First Financial Corp.'s operations have been included in the Corporation's Consolidated Statements of Income since that date. First Financial Corp. was headquartered in Providence, Rhode Island and its subsidiary, First Bank and Trust Company, operated banking offices in Providence, Cranston, Richmond and North Kingstown, Rhode Island. The Corporation closed the Richmond and North Kingstown offices and consolidated them into existing Washington Trust banking offices in May 2002. Pursuant to the Agreement and Plan of Merger dated November 12, 2001, the acquisition was effected by means of the merger of First Financial Corp. with and into Washington Trust Bancorp, Inc. and the merger of First Bank and Trust Company with and into The Washington Trust Company. The acquisition was accounted for as a purchase in accordance with SFAS No. 141 "Business Combinations" and the provisions of SFAS No. 142 "Goodwill and Other Intangible Assets" were also applied. The Corporation issued 1,021,512 common shares and paid $19.4 million in cash to the First Financial Corp. shareholders in connection with the acquisition. The total purchase price of First Financial Corp. was $38.1 million. Shareholders of First Financial common stock received 0.842 of a Washington Trust share plus $16.00 in cash for each share of First Financial common stock, with cash paid in lieu of fractional shares. The following table summarizes the fair values of the assets acquired and liabilities assumed for First Financial Corp. at the date of acquisition. The Corporation expects that some adjustments of the fair values assigned to the assets acquired and liabilities assumed at April 16, 2002 may be subsequently recorded, although such adjustments are not expected to be material. A substantial portion of the First Financial Corp. investment portfolio was liquidated prior to April 16, 2002. (Dollars in thousands) April 16, 2002 - -------------------------------------------------------------------------------- Assets: Cash and due from banks $43,034 Short-term investments 11,208 Investments 6,521 Federal Home Loan Bank stock 1,091 Net loans 113,703 Premises and equipment, net 2,539 Accrued interest receivable 474 Goodwill 21,866 Other assets 4,371 - -------------------------------------------------------------------------------- Total assets acquired $204,807 - -------------------------------------------------------------------------------- Liabilities: Deposits $137,729 Federal Home Loan Bank advances 22,303 Other borrowings 2,854 Accrued expenses and other liabilities 3,867 - -------------------------------------------------------------------------------- Total liabilities acquired $166,753 - -------------------------------------------------------------------------------- Net assets acquired $38,054 - -------------------------------------------------------------------------------- Other assets included core deposit intangibles of $1.8 million with an average useful life of 10 years. (4) Securities
Securities available for sale are summarized as follows: Amortized Unrealized Unrealized Fair Cost Gains Losses Value - --------------------------------------------------------------------------------------------------------------------- June 30, 2002 U.S. Treasury obligations and obligations of U.S. government-sponsored agencies $ 53,147 $ 2,152 $ - $ 55,299 Mortgage-backed securities 356,779 6,630 (325) 363,084 Corporate bonds 62,145 1,206 (1,445) 61,906 Corporate stocks 19,118 5,693 (1,108) 23,703 - --------------------------------------------------------------------------------------------------------------------- Total 491,189 15,681 (2,878) 503,992 - --------------------------------------------------------------------------------------------------------------------- December 31, 2001 U.S. Treasury obligations and obligations of U.S. government-sponsored agencies 64,368 2,348 (1) 66,715 Mortgage-backed securities 296,729 4,411 (1,090) 300,050 Corporate bonds 64,934 1,130 (1,915) 64,149 Corporate stocks 17,752 5,938 (648) 23,042 - --------------------------------------------------------------------------------------------------------------------- Total $443,783 $13,827 $(3,654) $453,956 - --------------------------------------------------------------------------------------------------------------------- For the six months ended June 30, 2002, proceeds from sales of securities available for sale amounted to $28.6 million while net realized gains on these sales amounted to $672 thousand.
Securities held to maturity are summarized as follows: Amortized Unrealized Unrealized Fair Cost Gains Losses Value - --------------------------------------------------------------------------------------------------------------------- June 30, 2002 U.S. Treasury obligations and obligations of U.S. government-sponsored agencies $ 6,000 $112 $ - $ 6,112 Mortgage-backed securities 204,838 4,569 - 209,407 States and political subdivisions 19,817 785 - 20,602 - --------------------------------------------------------------------------------------------------------------------- Total 230,655 5,466 - 236,121 - --------------------------------------------------------------------------------------------------------------------- December 31, 2001 U.S. Treasury obligations and obligations of U.S. government-sponsored agencies 8,311 307 - 8,618 Mortgage-backed securities 146,702 1,753 (48) 148,407 States and political subdivisions 20,092 485 (7) 20,570 - --------------------------------------------------------------------------------------------------------------------- Total $175,105 $2,545 $(55) $177,595 - --------------------------------------------------------------------------------------------------------------------- There were no sales of securities held to maturity during the six months ended June 30, 2002.
Securities available for sale and held to maturity with a fair value of $458.0 million and $394.4 million were pledged in compliance with state regulations concerning trust powers and to secure Treasury Tax and Loan deposits, borrowings, and public deposits at June 30, 2002 and December 31, 2001, respectively. In addition, securities available for sale and held to maturity with a fair value of $28.6 million and $28.4 million were collateralized for the discount window at the Federal Reserve Bank at June 30, 2002 and December 31, 2001, respectively. There were no borrowings with the Federal Reserve Bank at either date. (5) Loan Portfolio The following is a summary of loans: June 30, December 31, 2002 2001 - -------------------------------------------------------------------------------- Commercial: Mortgages (1) $185,918 $118,999 Construction and development (2) 11,432 1,930 Other (3) 175,245 139,704 - -------------------------------------------------------------------------------- Total commercial 372,595 260,633 Residential real estate: Mortgages (4) 236,652 223,681 Homeowner construction 12,439 11,678 - -------------------------------------------------------------------------------- Total residential real estate 249,091 235,359 Consumer 121,301 109,653 - -------------------------------------------------------------------------------- Total loans $742,987 $605,645 - -------------------------------------------------------------------------------- (1) Amortizing mortgages, primarily secured by income producing property (2) Loans for construction of residential and commercial properties and for land development (3) Loans to businesses and individuals, a substantial portion of which are fully or partially collateralized by real estate (4) A substantial portion of these loans is used as qualified collateral for FHLB borrowings (See Note 9 to the Consolidated Financial Statements for additional discussion of FHLB borrowings) (6) Allowance For Loan Losses The following is an analysis of the allowance for loan losses:
Three Months Six Months ------------------------------------------------------ Periods ended June 30, 2002 2001 2002 2001 - --------------------------------------------------------------------------------------------------------------------- Balance at beginning of period $13,665 $13,431 $13,593 $13,135 Allowance on acquired loans 1,829 - 1,829 - Provision charged to expense 100 150 200 350 Recoveries of loans previously charged off 24 134 53 267 Loans charged off (152) (85) (209) (122) - --------------------------------------------------------------------------------------------------------------------- Balance at end of period $15,466 $13,630 $15,466 $13,630 - ---------------------------------------------------------------------------------------------------------------------
(7) Goodwill and other intangibles The second quarter 2002 acquisition of First Financial Corp. resulted in the recording of goodwill of $22.7 million. Included in this amount were $829 thousand of business combination costs (primarily legal, accounting and investment advisor fees) capitalized in accordance with accounting principles generally accepted in the United States of America. In accordance with the provisions of SFAS No. 142, "Goodwill and Other Intangible Assets", goodwill acquired in business combinations after June 30, 2001 will not be amortized. Included in other assets at June 30, 2002 and December 31, 2001, were core deposit intangibles with carrying values of $2.3 million and $669 thousand, respectively. In conjunction with the 2002 First Financial Corp. acquisition, the Corporation recorded core deposit intangibles of $1.8 million. Amortization of core deposit intangibles, included in other noninterest expense, amounted to $141 thousand and $32 thousand for the second quarter of 2002 and 2001, respectively. Comparable amounts for the six months ended June 30, 2002 and 2001 were $174 thousand and $65 thousand, respectively. (8) Derivative Financial Instruments The Corporation was party to a five-year interest rate floor contract with a notional amount of $20 million that was to mature in February 2003. The floor contract entitled the Corporation to receive payment from a counterparty if the three-month LIBOR rate fell below 5.50%. The Corporation and the counterparty agreed to an early termination date of May 7, 2002 and the Corporation received a final payment from the counterparty of $606 thousand. The Corporation recognized the fair value of this derivative as an asset on the balance sheet and changes in fair value were recorded in current earnings. The carrying value of the interest rate floor contract amounted to $739 thousand at December 31, 2001. Included in interest income in the second quarter of 2002 and 2001, was appreciation in value amounting to $8 thousand and $16 thousand, respectively. Included in interest income for the six months ended June 30, 2002 was $229 thousand of depreciation in value through the termination date. Included in interest income for the six months ended June 30, 2001 was $270 thousand of appreciation in value of the interest rate floor contract. The Corporation recognizes commitments to originate and commitments to sell fixed rate mortgage loans as derivative financial instruments. Accordingly, the Corporation recognizes the fair value of these commitments as an asset on the balance sheet. At June 30, 2002 and December 31, 2001, the carrying value of these commitments amounted to ($9) thousand and $86 thousand, respectively. Changes in fair value are recorded in current earnings and amounted to $2 thousand and $33 thousand of appreciation in value for the three months ended June 30, 2002 and 2001, respectively. Included in earnings for the six months ended June 30, 2002 and 2001, was ($95) thousand of depreciation and $24 thousand of appreciation in value, respectively. (9) Borrowings Federal Home Loan Bank advances outstanding are summarized below: (Dollars in thousands) June 30, December 31, 2002 2001 - -------------------------------------------------------------------------------- FHLB advances $432,731 $431,490 - -------------------------------------------------------------------------------- In addition to outstanding advances, the Corporation also has access to an unused line of credit amounting to $8.0 million at June 30, 2002 and December 31, 2001. Under agreement with the FHLB, the Corporation is required to maintain qualified collateral, free and clear of liens, pledges, or encumbrances that, based on certain percentages of book and market values, has a value equal to the aggregate amount of the line of credit and outstanding advances ("FHLB borrowings"). The FHLB maintains a security interest in various assets of the Corporation including, but not limited to, residential mortgages loans, U.S. government or agency securities, U.S. government-sponsored agency securities and amounts maintained on deposit at the FHLB. The Corporation maintained qualified collateral in excess of the amount required to secure FHLB borrowings at June 30, 2002 and December 31, 2001. Included in the collateral were securities available for sale and held to maturity with a fair value of $433.2 million and $376.5 million that were specifically pledged to secure FHLB borrowings at June 30, 2002 and December 31, 2001, respectively. Unless there is an event of default under the agreement, the Corporation may use, encumber or dispose any portion of the collateral in excess of the amount required to secure FHLB borrowings, except for that collateral which has been specifically pledged. The following is a summary of other borrowings: (Dollars in thousands) June 30, December 31, 2002 2001 - -------------------------------------------------------------------------------- Treasury, Tax and Loan demand note balance $3,345 $1,583 Securities sold under repurchase agreements 2,862 - Other 453 504 - -------------------------------------------------------------------------------- Other borrowings $6,660 $2,087 - -------------------------------------------------------------------------------- INDEPENDENT AUDITORS' REVIEW REPORT The Board of Directors and Shareholders Washington Trust Bancorp, Inc.: We have reviewed the consolidated balance sheet of Washington Trust Bancorp, Inc. and subsidiary (the "Corporation") as of June 30, 2002, and the related consolidated statements of income for the three-month and six-month periods ended June 30, 2002 and 2001, changes in shareholders' equity and cash flows for the six-month periods ended June 30, 2002 and 2001. These consolidated financial statements are the responsibility of the Corporation's management. We conducted our review in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with auditing standards generally accepted in the United States of America, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. Based on our review, we are not aware of any material modifications that should be made to the consolidated financial statements referred to above for them to be in conformity with accounting principles generally accepted in the United States of America. We have previously audited, in accordance with auditing standards generally accepted in the United States of America, the consolidated balance sheet of Washington Trust Bancorp, Inc. and subsidiary as of December 31, 2001, and the related consolidated statements of income, changes in stockholders' equity and cash flows for the year then ended (not presented herein); and in our report dated January 15, 2002, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the consolidated balance sheet as of December 31, 2001, is fairly stated, in all material respects. KPMG LLP Providence, Rhode Island July 18, 2002 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Forward-Looking Statements This report contains statements that are "forward-looking statements." We may also make written or oral forward-looking statements in other documents we file with the Securities and Exchange Commission, in our annual reports to shareholders, in press releases and other written materials, and in oral statements made by our officers, directors or employees. You can identify forward-looking statements by the use of the words "believe," "expect," "anticipate," "intend," "estimate," "assume," "outlook," "will," "should," and other expressions which predict or indicate future events and trends and which do not relate to historical matters. You should not rely on forward-looking statements, because they involve known and unknown risks, uncertainties and other factors, some of which are beyond the control of the Corporation. These risks, uncertainties and other factors may cause the actual results, performance or achievements of the Corporation to be materially different from the anticipated future results, performance or achievements expressed or implied by the forward-looking statements. Some of the factors that might cause these differences include the following: changes in general national or regional economic conditions, changes in interest rates, reductions in the market value of trust and investment management assets under management, reductions in deposit levels necessitating increased borrowing to fund loans and investments, changes in the size and nature of the Corporation's competition, changes in loan default and charge-off rates and changes in the assumptions used in making such forward-looking statements. In addition, the factors described under "Risk Factors" in Item 1 of the Corporation's Annual Report on Form 10-K for the year ended December 31, 2001 may result in these differences. You should carefully review all of these factors, and you should be aware that there may be other factors that could cause these differences. These forward-looking statements were based on information, plans and estimates at the date of this report, and we do not promise to update any forward-looking statements to reflect changes in underlying assumptions or factors, new information, future events or other changes. Acquisition On April 16, 2002, the Corporation completed the acquisition of First Financial Corp., the parent company of First Bank and Trust Company, a Rhode Island-chartered community bank, headquartered in Providence, Rhode Island. First Bank and Trust Company operated banking offices in Providence, Cranston, Richmond and North Kingstown, Rhode Island. The Richmond and North Kingstown offices were closed and consolidated into existing Washington Trust banking offices in May 2002. The Corporation issued 1,021,512 common shares and paid $19.4 million in cash to First Financial Corp. shareholders in connection with the acquisition. The total purchase price of First Financial Corp. was $38.1 million. The Corporation recorded $22.7 million of goodwill and $1.8 million of core deposit intangibles in connection with this acquisition. In addition, the Corporation incurred special charges relating to the acquisition of $605 thousand ($417 thousand, net of tax). See Note 3 to the Consolidated Financial Statements for additional information concerning the acquisition. Results of Operations The Corporation reported net income of $4.0 million, or $.31 per diluted share, for the three months ended June 30, 2002. Net income for second quarter of 2001 amounted to $3.8 million, or $.31 per diluted share. In the second quarter of 2002, the Corporation completed the acquisition of First Financial Corp., parent company of First Bank and Trust Company. Second quarter 2002 results included special charges relating to the acquisition of $605 thousand ($417 thousand, net of tax). On an operating basis, exclusive of these special charges, earnings for the three months ended June 30, 2002 amounted to $4.4 million, or $.34 per diluted share, up 16.9% on a dollar basis and 9.7% on a diluted per share basis from the earnings reported for the same quarter a year ago. The Corporation's rates of return on average assets and average equity for the three months ended June 30, 2002 were 1.03% and 13.68%, respectively. On an operating basis, the Corporation's return on average assets and average equity for the quarter ended June 30, 2002 were 1.14% and 15.09%. Comparable amounts for the second quarter of 2001 were 1.18% and 16.72%, respectively. Net income for the six months ended June 30, 2002 amounted to $7.8 million, or $.62 per diluted share. Operating earnings for the first six months of 2002 amounted to $8.2 million, or $.65 per diluted share, up 12.2% on a dollar basis and 8.3% on a diluted per share basis from the $7.3 million, or $.60 per diluted share earned in the comparable 2001 period. Operating earnings exclude 2002 acquisition costs of $417 thousand, net of tax and a 2001 litigation settlement of $3.3 million, net of tax. The Corporation's rates of return on average assets and average equity for the six months ended June 30, 2002 were 1.07% and 14.27%, respectively. On an operating basis, the Corporation's return on average assets and average equity for the first six months of 2002 were 1.12% and 15.04%. Comparable amounts for the 2001 period, on an operating basis, were 1.16% and 16.01%, respectively. For the three months ended June 30, 2002, net interest income (the difference between interest earned on loans and investments and interest paid on deposits and other borrowings) amounted to $11.6 million, up 25% from the $9.3 million earned in the second quarter of 2001. Net interest income for the six months ended June 30, 2002 amounted to $21.0 million, up 11.3% from the $18.9 million earned in the corresponding 2001 period. These increases are primarily attributable to the purchase of First Financial Corp. in the second quarter of 2002. (See additional discussion under the caption "Net Interest Income".) The Corporation's provision for loan losses was $100 thousand and $150 thousand in the second quarter of 2002 and 2001, respectively. For the six months ended June 30, 2002 and 2001, the provision for loan losses amounted to $200 thousand and $350 thousand, respectively. The allowance for loan losses increased from $13.6 million at December 31, 2001 to $15.5 million at June 30, 2002 due to the $1.8 million allowance on acquired First Bank and Trust Company loans and the year to date 2002 provision and recoveries, net of charge-offs. The provision for the three-month and six-month periods ended June 30, 2002 decreased compared to the same periods last year due to management's belief that the allowance for loan losses is at a reasonable level based on its current evaluation. The allowance for loan losses is management's best estimate of the probable loan losses incurred as of the balance sheet date. The allowance is increased by provisions charged to earnings and by recoveries of amounts previously charged off, and is reduced by charge-offs on loans. Other noninterest income (noninterest income excluding net gains on sales of securities) amounted to $5.4 million for the quarter ended June 30, 2002, compared to $5.6 million for the second quarter of 2001. For the six months ended June 30, 2002, other noninterest income amounted to $10.3 million, up by $191 thousand from the comparable 2001 period. This increase is mainly attributable to increases in merchant processing fees, offset in part by lower trust and investment management revenues. Merchant processing fees for the six months ended June 30, 2002 amounted to $1.2 million, up $231 thousand or 23.3%, from $991 thousand earned for the six months ended June 30, 2001. Increases in merchant transaction volume, as well as the addition of new merchant accounts in 2002, are primarily responsible for the increase in merchant processing fees. Trust and investment management revenue totaled $5.2 million for the six months ended June 30, 2002, compared to $5.3 million for the corresponding 2001 period. Revenue growth has slowed reflecting financial market declines. The market value of trust and investment management assets under administration amounted to $1.5 billion and $1.6 billion at June 30, 2002 and December 31, 2001, respectively. Net realized securities gains for the three months ended June 30, 2002 amounted to $381 thousand, compared to $403 thousand for the comparable 2001 period. Included in net realized gains for the second quarter of 2002 and 2001 were gains totaling $381 thousand and $351 thousand, respectively, related to annual contributions of appreciated equity securities to the Corporation's charitable foundation. The costs associated with the contributions amounted to $403 thousand and $353 thousand and were included in other noninterest expenses in the second quarter of 2002 and 2001, respectively. For the six months ended June 30, 2002, net realized securities gains totaled $672 million, compared to $408 million for the same period in 2001. For the quarter ended June 30, 2002, total operating noninterest expense (total noninterest expense excluding the second quarter acquisition-related expenses of $605 thousand and the 2001 litigation settlement of $4.8 million) amounted to $10.9 million, an increase of 11.2% from the comparable 2001 amount. For the six months ended June 30, 2002, total operating noninterest expense amounted to $20.0 million, up 7.0% from $18.7 million for the first six months of 2001. Salaries and benefit expense amounted to $11.6 million for the six months ended June 30, 2002, up $1.2 million or 11.8%, from the $10.4 million reported for the comparable period in 2001. In addition, advertising and promotion expenses were up $197 thousand for the six months ended June 30, 2002 compared to the same period in 2001. Income tax expense amounted to $3.4 million and $1.6 million for the six months ended June 30, 2002 and 2001, respectively. The Corporation's effective tax rate for the first six months of 2002 was 30.5%, compared to 28.9% for the corresponding 2001 period. The increase in the effective tax rate was primarily due to the effect of the 2001 litigation settlement on the 2001 effective tax rate. Net Interest Income (The accompanying schedule entitled "Average Balances / Net Interest Margin - Fully Taxable Equivalent Basis (FTE)" should be read in conjunction with this discussion.) FTE net interest income for the six months ended June 30, 2002 amounted to $21.5 million, up $2.1 million or 11.0% from the same 2001 period. For the six months ended June 30, 2002, average interest-earning assets amounted to $1.360 billion, up $169.4 million, or 14.2%, over the comparable 2001 amount due to growth in securities and loans. Deposit growth and Federal Home Loan Bank ("FHLB") advances funded the growth in securities and loans. The net interest margins (FTE net interest income as a percentage of average interest-earning assets) for the six months ended June 30, 2002 and 2001 were 3.19% and 3.28%, respectively. The interest rate spread increased slightly to 2.77% for the six months ended June 30, 2002. The yield on total interest-earnings assets declined 126 basis points to 6.36%, while the cost of interest-bearing liabilities decreased 129 basis points to 3.59%. The increase in average interest-earnings assets was primarily responsible for the decrease in the net interest margin. Total average securities rose $117.5 million, or 20.0%, over the comparable prior year period, mainly due to purchases of taxable debt securities. The FTE rate of return on securities was 5.44% for the six months ended June 30, 2002, compared to 6.57% for the same 2001 period. The decrease in yields on securities reflects a combination of lower yields on variable rate securities tied to short-term interest rates and lower marginal rates on investment purchases in 2002 relative to the prior year. The yield on average total loans amounted to 7.34% for the six months ended June 30, 2002, down 129 basis points from 8.63% for the comparable 2001 period. This decline is primarily due to lower marginal yields on floating and adjustable rate loans for the first half of 2002 as compared to the prior year period and a decline in yields on new loan originations. Average loans for the six months ended June 30, 2002 rose $51.8 million over the prior year and amounted to $656.4 million. Average commercial loans rose 22.4% to $304.5 million while the yield on commercial loans declined 165 basis points to 7.89%. Included in interest income on commercial loans for the six months ended June 30, 2002, was $229 thousand of depreciation in value of the interest rate floor contract through the termination of the contract in May 2002 (See additional discussion in Note 8 "Derivative Financial Instruments"). Appreciation in the value of the interest rate contract for the same prior year period amounted to $270 thousand. Average residential real estate loans amounted to $237.6 million, down 6.1% from the prior year level. The yield on residential real estate loans decreased 64 basis points from the prior year period, amounting to 7.19%. Average consumer loans rose 11.3% over the prior year. The yield on consumer loans amounted to 6.17%, a decrease of 227 basis points from the prior year yield of 8.44% mainly due to a decline in yield on home equity lines. Average interest-bearing liabilities increased 13.7% to $1.203 billion at June 30, 2002. Due to lower rates paid on both borrowed funds and deposits, the Corporation's total cost of funds on interest-bearing liabilities amounted to 3.59% for the six months ended June 30, 2002, down from 4.88% for the comparable 2001 period. Average savings deposits for the six months ended June 30, 2002 increased $69.9 million, or 25.6%, to $342.6 million from the comparable 2001 amount. The rate paid on savings deposits for the first six months of 2002 was 1.27%, compared to 2.04% for the same 2001 period. Average time deposits increased $68.6 million to $425.5 million with a decrease of 167 basis points in the rate paid. For the six months ended June 30, 2002, average demand deposits, an interest-free funding source, were up by $30.4 million, or 29.6%, from the same prior year period. Average FHLB advances for the six months ended June 30, 2002 amounted to $431.2 million, up 1.3% from the comparable 2001 amount. The average rate paid on FHLB advances for the six months ended June 30, 2002 was 5.02%, a decrease of 102 basis points from the prior year rate. Average Balances / Net Interest Margin - Fully Taxable Equivalent Basis (FTE) The following table sets forth average balance and interest rate information. Income is presented on a fully taxable equivalent basis (FTE). For dividends on corporate stocks, the 70% federal dividends received deduction is also used in the calculation of tax equivalency. Loans held for sale, nonaccrual and renegotiated loans, as well as interest earned on these loans (to the extent recognized in the Consolidated Statements of Income) are included in amounts presented for loans. Customer overdrafts are excluded from amounts presented for loans. Average balances for securities are presented at cost, with any unrealized gains and losses of securities available for sale included in noninterest-earning assets.
Six months ended June 30, 2002 2001 - -------------------------------------------- ------------------------------------ ---------------------------------- Average Yield/ Average Yield/ (Dollars in thousands) Balance Interest Rate Balance Interest Rate - ---------------------------------------- ------------- ----------- ----------- -------------- ----------- ---------- Assets: Residential real estate loans $237,551 $8,467 7.19% $253,039 $9,821 7.83% Commercial and other loans 304,534 11,922 7.89% 248,876 11,768 9.54% Consumer loans 114,323 3,496 6.17% 102,681 4,298 8.44% - -------------------------------------------------------------------------------------------------------------------- Total loans 656,408 23,885 7.34% 604,596 25,887 8.63% Federal funds sold and other short-term investments 13,233 108 1.64% 15,436 383 5.00% Taxable debt securities 628,022 17,077 5.48% 512,207 16,597 6.53% Nontaxable debt securities 19,908 644 6.53% 22,588 744 6.64% Corporate stocks and FHLB stock 42,871 1,180 5.55% 36,260 1,376 7.66% - -------------------------------------------------------------------------------------------------------------------- Total securities 704,034 19,009 5.44% 586,491 19,100 6.57% - -------------------------------------------------------------------------------------------------------------------- Total interest-earning assets 1,360,442 42,894 6.36% 1,191,087 44,987 7.62% - -------------------------------------------------------------------------------------------------------------------- Non interest-earning assets 95,475 69,740 - -------------------------------------------------------------------------------------------------------------------- Total assets $1,455,9177 $1,260,827 - -------------------------------------------------------------------------------------------------------------------- Liabilities and Shareholders' Equity: Savings deposits $342,591 $2,153 1.27% $272,662 $2,754 2.04% Time deposits 425,452 8,463 4.01% 356,866 10,048 5.68% FHLB advances 431,161 10,729 5.02% 425,678 12,753 6.04% Other 3,393 37 2.22% 2,134 53 4.99% - -------------------------------------------------------------------------------------------------------------------- Total interest-bearing liabilities 1,202,597 21,382 3.59% 1,057,340 25,608 4.88% Demand deposits 133,150 102,707 Non interest-bearing liabilities 11,303 9,624 - -------------------------------------------------------------------------------------------------------------------- Total liabilities 1,347,050 1,169,671 Total shareholders' equity 108,867 91,156 - -------------------------------------------------------------------------------------------------------------------- Total liabilities and shareholders' equity $1,455,917 $1,260,827 - -------------------------------------------------------------------------------------------------------------------- Net interest income $21,512 $19,379 - -------------------------------------------------------------------------------------------------------------------- Net interest spread 2.77% 2.74% - -------------------------------------------------------------------------------------------------------------------- Net interest margin 3.19% 3.28% - --------------------------------------------------------------------------------------------------------------------
Interest income amounts presented in the preceding table include the following adjustments for taxable equivalency: (Dollars in thousands) Six months ended June 30, 2002 2001 - -------------------------------------------------------------------------------- Commercial and other loans $ 81 $ 67 Nontaxable debt securities 225 260 Corporate stocks 201 177 Financial Condition and Liquidity Total assets rose from $1.362 billion at December 31, 2001 to $1.634 billion at June 30, 2002. This increase was primarily attributable to the purchase of First Financial Corp. in the second quarter of 2002. Average assets totaled $1.456 billion for the six months ended June 30, 2002, up 15.5% over the comparable 2001 period. Securities Available for Sale - The carrying value of securities available for sale at June 30, 2002 amounted to $504.0 million, compared to the December 31, 2001 amount of $454.0 million. The net unrealized gains on securities available for sale amounted to $12.8 million at June 30, 2002 and $10.2 million at December 31, 2001. Securities Held to Maturity - The carrying value of securities held to maturity amounted to $230.7 million at June 30, 2002, up 31.7% from $175.1 million at December 31, 2001. This increase was due to purchases of mortgage-backed securities. The net unrealized gain on securities held to maturity amounted to $5.5 million at June 30, 2002, compared to $2.5 million at December 31, 2001. This increase was attributable to the effects of decreases in medium and long-term interest rates that occurred during the second quarter of 2002. Loans - At June 30, 2002, total loans amounted to $743.0 million, up by $137.3 million from the December 31, 2001 balance of $605.6 million. This increase was primarily a result of the acquisition of First Financial Corp. Residential real estate loans were also impacted by the refinancing of fixed rate residential loans being sold into the secondary market. For the six months ended June 30, 2002, average residential real estate loans decreased $15.5 million from the prior year. Total residential real estate loans amounted to $249.1 million at June 30, 2002, up from the December 31, 2001 balance of $235.4 million. Commercial loans increased $112.0 million from December 31, 2001 to $372.6 million at June 30, 2002. Total consumer loans amounted to $121.3 million at June 30, 2002, an increase of $11.6 million from December 31, 2001 due mainly to growth in home equity lines. Deposits - Total deposits amounted to $1.057 billion at June 30, 2002, up $240.6 million or 29.4% from December 31, 2001. Included in this amount are $137.7 million of deposits acquired from First Financial Corp. Savings deposits amounted to $428.9 million at June 30, 2002, an increase of $112.0 million from December 31, 2001. Time deposits increased $103.2 million, or 28.3%, from December 31, 2001 and amounted to $468.4 million at June 30, 2002. Demand deposits amounted to $160.1 million at June 30, 2002, up $25.3 million from the December 31, 2001 balance. Excluding the amounts acquired, the most significant area of deposit growth in 2002 was in savings accounts. Borrowings - The Corporation utilizes advances from the Federal Home Loan Bank as well as other borrowings as part of its overall funding strategy. FHLB advances were used to meet short-term liquidity needs and to purchase securities. FHLB advances amounted to $432.7 million at June 30, 2002, compared to $431.5 million at December 31, 2001. In addition, other borrowings outstanding at June 30, 2002 and December 31, 2001 amounted to $6.7 million and $2.1 million, respectively. For the six months ended June 30, 2002, net cash provided by operations amounted to $11.6 million. Proceeds from sales of loans in the first six months of 2002 amounted to $39.3 million, while loans originated for sale amounted to $32.7 million. Net cash used in investing activities amounted to $85.2 million and was primarily used to purchase securities. Included in net cash used in investing activities for the six months ended June 30, 2002 was $34.5 million of cash acquired, net of payment made for the acquisition of First Financial Corp. A substantial portion of the First Financial Corp. investment portfolio was liquidated prior to the date of acquisition. Net cash provided by financing activities was $80.2 million, the majority of which was derived from deposits. (See Consolidated Statements of Cash Flows for additional information.) Nonperforming Assets Nonperforming assets are summarized in the following table: June 30, December 31, (Dollars in thousands) 2002 2001 - -------------------------------------------------------------------------------- Nonaccrual loans 90 days or more past due $2,024 $2,195 Nonaccrual loans less than 90 days past due 2,018 1,632 - -------------------------------------------------------------------------------- Total nonaccrual loans 4,042 3,827 Other real estate owned 30 30 - -------------------------------------------------------------------------------- Total nonperforming assets $4,072 $3,857 - -------------------------------------------------------------------------------- Nonaccrual loans as a percentage of total loans .54% .63% Nonperforming assets as a percentage of total assets .25% .28% Allowance for loan losses to nonaccrual loans 382.63% 355.20% Allowance for loan losses to total loans 2.08% 2.24% Not included in the analysis of nonperforming assets at June 30, 2002 above are approximately $20 thousand of loans greater than 90 days past due and still accruing. These loans consist primarily of commercial loans secured by real estate. As of December 31, 2001, no accruing loans were 90 days or more past due. Impaired loans consist of all nonaccrual commercial loans. At June 30, 2002, the recorded investment in impaired loans was $2.3 million, which had a related allowance amounting to $95 thousand. During the six months ended June 30, 2002, the average recorded investment in impaired loans was $2.1 million. Also during this period, interest income recognized on impaired loans amounted to approximately $41 thousand. Interest income on impaired loans is recognized on a cash basis only. The following is an analysis of nonaccrual loans by loan category: June 30, December 31, (Dollars in thousands) 2002 2001 - -------------------------------------------------------------------------------- Residential real estate $ 993 $1,161 Commercial: Mortgages 784 1,472 Other 1,483 509 Consumer 782 685 - -------------------------------------------------------------------------------- Total nonaccrual loans $4,042 $3,827 - -------------------------------------------------------------------------------- Capital Resources Total equity capital increased $24.1 million, or 24.6%, during the first six months of 2002 and amounted to $122.0 million. This increase was principally attributable to common stock issued in connection with the acquisition of First Financial Corp. (See the Consolidated Statements of Changes in Shareholders' Equity and Note 3 to the Consolidated Financial Statements for additional information.) The ratio of total equity to total assets amounted to 7.5% at June 30, 2002, compared to 7.2% at December 31, 2001. Book value per share as of June 30, 2002 and December 31, 2001 amounted to $9.37 and $8.15, respectively. At June 30, 2002, the Corporation's Tier 1 risk-based capital ratio was 10.21% and the total risk-adjusted capital ratio was 11.70%. The Corporation's Tier 1 leverage ratio amounted to 5.83% at June 30, 2002. These ratios were above the ratios required to be categorized as well-capitalized. Dividends payable at June 30, 2002 amounted to $1.8 million, representing $.14 per share payable on July 15, 2002, consistent with the dividend declared in the first quarter of 2002. The source of funds for dividends paid by the Corporation is dividends received from its subsidiary bank. The subsidiary bank is a regulated enterprise, and as such its ability to pay dividends to the parent is subject to regulatory review and restriction. Recent Accounting Developments In June 2001, the FASB issued SFAS No. 143, "Accounting for Asset Retirement Obligations." SFAS 143 addresses financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs. This Statement applies to all entities and is effective for financial statements issued for all fiscal years beginning after June 15, 2002. The adoption of this pronouncement is not expected to have a material impact on the Corporation's financial statements. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Interest Rate Sensitivity and Liquidity Interest rate risk is one of the major market risks faced by the Corporation. The Corporation's objective is to manage assets and funding sources to produce results that are consistent with its liquidity, capital adequacy, growth, risk and profitability goals. The Corporation manages interest rate risk using income simulation to measure interest rate risk inherent in its on-balance sheet and off-balance sheet financial instruments at a given point in time by showing the effect of interest rate shifts on net interest income over a 60-month period. The simulation results are reviewed to determine whether the negative exposure of net interest income to changes in interest rates remains within established tolerance levels over a 12-month, 24-month and 60-month horizon, and to develop appropriate strategies to manage this exposure. As of June 30, 2002, the Corporation's estimated exposure as a percentage of net interest income for the first 12-month period, the subsequent 12-month period thereafter (months 13 - 24), and months 1-60, respectively, is as follows: Months Months Months 1 - 12 13-24 1 - 60 ------------------------------------------------------------------------------ 200 basis point increase in rates 3.09% 3.27% 4.04% 200 basis point decrease in rates -5.55% -13.15% -15.65% It should be noted that an interest rate decrease of 200 basis points is extremely unlikely in the current interest rate environment, as it would bring many interest rates to at or near zero. Since this simulation assumes the Corporation's balance sheet will remain static over the 60-month simulation horizon, the results do not reflect adjustments in strategy that the Corporation could implement in response to rate shifts, and should not be relied upon as a estimate of future net interest income. For a complete discussion of interest rate sensitivity and liquidity, including simulation assumptions, see the Corporation's Annual Report on Form 10-K for the year ended December 31, 2001. The Corporation also monitors the potential change in market value of its available for sale debt securities using both rate shifts of up to 400 basis points and "value at risk" analysis. The purpose is to determine market value exposure which may not be captured by income simulation, but which might result in changes to the Corporation's capital position. Results are calculated using industry-standard modeling analytics and securities data. The Corporation uses the results to manage the effect of market value changes on the Corporation's capital position. As of June 30, 2002, an immediate 200 basis point rise in rates would result in a 3.6% decline in the value of the Corporation's available for sale debt securities. Conversely, a 200 basis point fall in rates would result in a 1.4% increase in the value of the Corporation's available for sale debt securities. "Value at risk" analysis measures the theoretical maximum market value loss over a given time period based on recent historical price activity of different classes of securities. The anticipated maximum market value reduction for the Corporation's available for sale securities portfolio at June 30, 2002, including both debt and equity securities, was 4.1%, assuming a one-year time horizon and a 5% probability of occurrence for "value at risk" analysis. On May 7, 2002, the Corporation terminated a five-year interest rate floor contract with a notional amount of $20 million that was to mature in February 2003. The floor contract was intended to function as a hedge against reductions in interest income realized from prime-based loans and entitled the Corporation to receive payment from a counterparty if the three-month LIBOR rate fell below 5.50%. In connection with the early termination, the Corporation agreed to a final payment from the counterparty of $606 thousand. The Corporation recognized the fair value of this derivative as an asset on the balance sheet and changes in fair value were recorded in current earnings. PART II OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders (a) The Annual Meeting of Shareholders was held on April 23, 2002.
(b) The results of matters voted upon are presented below. i. Election of Directors to Serve Until 2005 Annual Meeting: Gary P. Bennett, Larry J. Hirsch, Esq., Mary E. Kennard, Esq., H. Douglas Randall, III and John F. Treanor were nominated and duly elected to hold office as Directors of Washington Trust Bancorp, Inc., each to serve a term of three years and until their successors are duly elected and qualified, by the number of votes set forth opposite each person's name as follows: Abstentions Votes Votes and Broker Term In Favor Withheld Non-votes ---------------------------------- ---------- ---------------- -------------- ----------------- Gary P. Bennett 3 years 10,096,427 144,260 0 Larry J. Hirsch, Esq. 3 years 10,205,644 35,043 0 Mary E. Kennard, Esq. 3 years 10,038,181 202,506 0 H. Douglas Randall, III 3 years 10,191,749 48,938 0 John F. Treanor 3 years 10,099,045 141,642 0 The following persons continued as Directors of Washington Trust Bancorp, Inc. following the Annual Meeting: Gary P. Bennett Larry J. Hirsch, Esq. Mary E. Kennard, Esq. H. Douglas Randall, III John F. Treanor Alcino G. Almeida Katherine W. Hoxsie, CPA Edward M. Mazze, Ph.D. Joyce O. Resnikoff John C. Warren Steven J. Crandall Richard A. Grills Victor J. Orsinger, II Patrick J. Shanahan, Jr. James P. Sullivan, CPA Neil H. Thorp ii. A proposal for the ratification of KPMG LLP to serve as independent auditors of the Corporation for the current fiscal year ending December 31, 2002 was passed by a vote of 9,966,235 shares in favor; 219,206 shares against, with 55,246 abstentions and broker non-votes.
Item 6. Exhibits and Reports on Form 8-K (a) Exhibit index Exhibit No. 4.a Amended and Restated Rights Agreement 10.a Noncompetition Agreement 11 Statement re Computation of Per Share Earnings (b) On April 19, 2002, a Form 8-K was filed which reported that the Corporation completed the acquisition of First Financial Corp., parent of First Bank and Trust Company. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. WASHINGTON TRUST BANCORP, INC. (Registrant) August 13, 2002 By: John C. Warren ------------------------------------------- John C. Warren Chairman and Chief Executive Officer (principal executive officer) August 13, 2002 By: David V. Devault ------------------------------------------- David V. Devault Executive Vice President, Treasurer and Chief Financial Officer (principal financial and accounting officer) EX-4 4 q202ex4a.txt WTB & MELLON INVESTOR SERVICES RIGHTS AGREEMENT EXHIBIT 4.a Washington Trust Bancorp, Inc. Amended and Restated Rights Agreement WASHINGTON TRUST BANCORP, INC. and MELLON INVESTOR SERVICES LLC Rights Agent Amended and Restated Rights Agreement Dated as of March 1, 2002. TABLE OF CONTENTS Section 1. Certain Definitions Section 2. Appointment of Rights Agent Section 3. Issue of Right Certificates Section 4. Form of Right Certificates Section 5. Countersignature and Registration Section 6. Transfer, Split Up, Combination and Exchange of Right Certificates; Mutilated, Destoyed, Lost of Stolen Right Certificates Section 7. Exercise of Rights; Purchase Price; Final Expiration Date of Rights Section 8. Cancellation and Destruction of Right Certificates Section 9. Status of Common Shares Section 10. Common Shares Record Date Section 11. Adjustment of Purchase Price, Number of Shares or Number of Rights Section 12. Certificate of Adjustment Section 13. Consolidation, Merger or Sale or Transfer of Assets or Earning Power Section 14. Fractional Rights and Fractional Shares Section 15. Rights of Action Section 16. Agreement of Right Holders Section 17. Right Certificate Holder Not Deemed a Shareholder Section 18. Concerning the Rights Agent Section 19. Merger or Consolidation or Change of Name of Rights Agent Section 20. Duties of Rights Agent Section 21. Change of Rights Agent Section 22. Issuance of New Right Certificates Section 23. Redemption Section 24. Exchange Section 25. Notice of Certain Events Section 26. Notices Section 27. Supplements and Amendments Section 28. Successors Section 29. Benefits of this Agreement Section 30. Severability Section 31. Governing Law Section 32. Counterparts Section 33. Descriptive Headings Section 34. Administration Exhibit A - Form of Right Certificate Exhibit B - Summary of Rights AMENDED AND RESTATED RIGHTS AGREEMENT This Amended and Restated Rights Agreement, dated as of March 1, 2002 (this "Agreement"), by and between Washington Trust Bancorp, Inc., a Rhode Island corporation (the "Corporation"), and Mellon Investor Services LLC, a New Jersey limited liability company, as Rights Agent (the "Rights Agent"), amends and restates the Rights Agreement, dated as of August 15, 1996, by and between the Corporation and The Washington Trust Company, as Rights Agent. The Board of Directors of the Corporation has authorized and declared a dividend of one common share purchase right (a "Right") for each share of Common Stock, par value $0.0625 per share, of the Corporation (a "Common Share") outstanding on the close of business on September 3, 1996 (the "Record Date") and has authorized the issuance of one Right with respect to each additional Common Share that shall become outstanding between the Record Date and the earlier of the Distribution Date, or the Final Expiration Date (as such terms are defined herein), each Right representing the right to purchase securities of the Corporation as shall be hereinafter provided. Accordingly, in consideration of the premises and the mutual agreements herein set forth, the parties hereby agree as follows: Section 1. Certain Definitions. For purposes of this Agreement, the following terms have the meanings indicated: "Acquiring Person" shall mean any Person who or which, together with all Affiliates and Associates of such Person, shall be the Beneficial Owner of 15% or more of the Common Shares of the Corporation then outstanding, but shall not include (i) the Corporation, (ii) any Subsidiary of the Corporation, (iii) any employee benefit plan of the Corporation or any Subsidiary of the Corporation, or (iv) any entity holding Common Shares for or pursuant to the terms of any such employee benefit plan. Notwithstanding the foregoing, (1) no Person shall become an "Acquiring Person" as the result of an acquisition of Common Shares by the Corporation which, by reducing the number of shares outstanding, increases the proportionate number of shares beneficially owned by such Person to 15%, provided, however, that if a Person shall so become the Beneficial Owner of 15% or more of the Common Shares of the Corporation then outstanding by reason of an acquisition of Common Shares by the Corporation and shall, after such share purchases by the Corporation, become the Beneficial Owner of an additional 1% of the outstanding Common Shares of the Corporation, then such Person shall be deemed to be an "Acquiring Person"; (2) if the Board of Directors of the Corporation determines in good faith that a Person who would otherwise be an "Acquiring Person," as defined pursuant to the foregoing provisions of this paragraph, has become such inadvertently, and such Person divests as promptly as practicable a sufficient number of Common Shares so that such Person would no longer be an "Acquiring Person," as defined pursuant to the foregoing provisions of this paragraph, then such Person shall not be deemed to have become an "Acquiring Person" for any purposes of this Agreement; and (3) an underwriter or underwriters which become the Beneficial Owner of 15% or more of the Common Shares of the Corporation then outstanding in connection with an underwritten public offering with a view to the public distribution of such Common Shares shall not become an "Acquiring Person" hereunder. "Affiliate" and "Associate" shall have the respective meanings ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), as in effect on the date of this Agreement. A Person shall be deemed the "Beneficial Owner" of and shall be deemed to "beneficially own" any securities: (i) which such Person or any of such Person's Affiliates or Associates beneficially owns, directly or indirectly; (ii) which such Person or any of such Person's Affiliates or Associates has (A) the right to acquire (whether such right is exercisable immediately or only after the passage of time) pursuant to any agreement, arrangement or understanding (other than customary agreements with and between underwriters and selling group members with respect to a bona fide public offering of securities), written or otherwise, or upon the exercise of conversion rights, exchange rights, rights (other than the Rights), warrants or options, or otherwise; provided, however, that a Person shall not be deemed to be the Beneficial Owner of, or to beneficially own, securities tendered pursuant to a tender or exchange offer made pursuant to, and in accordance with, the applicable rules and regulations promulgated under the Exchange Act by or on behalf of such Person or any of such Person's Affiliates or Associates until such tendered securities are accepted for purchase or exchange; or (B) the right to vote pursuant to any agreement, arrangement or understanding; provided, however, that a Person shall not be deemed the Beneficial Owner of, or to beneficially own, any security if the agreement, arrangement or understanding to vote such security (1) arises solely from a revocable proxy or consent given to such Person in response to a public proxy or consent solicitation made pursuant to, and in accordance with, the applicable rules and regulations promulgated under the Exchange Act and (2) is not also then reportable on Schedule 13D under the Exchange Act (or any comparable or successor report); or (iii) which are beneficially owned, directly or indirectly, by any other Person with which such Person or any of such Person's Affiliates or Associates has any agreement, arrangement or understanding (other than customary agreements with and between underwriters and selling group members with respect to a bona fide public offering of securities), written or otherwise, for the purpose of acquiring, holding, voting (except to the extent contemplated by the proviso to section (B) of the immediately preceding paragraph (ii)) or disposing of any securities of the Corporation. Notwithstanding anything in this definition of Beneficial Ownership to the contrary, the phrase "then outstanding," when used with reference to a Person's Beneficial Ownership of securities of the Corporation, shall mean the number of such securities then issued and outstanding together with the number of such securities not then actually issued and outstanding which such Person would be deemed to own beneficially hereunder. "Business Day" shall mean any day other than a Saturday, Sunday, or a day on which banking institutions in the State of Rhode Island or the State of New York are authorized or obligated by law or executive order to close. "Close of Business" on any given date shall mean 5:00 P.M., Providence, Rhode Island time, on such date; provided, however, that if such date is not a Business Day it shall mean 5:00 P.M., Providence, Rhode Island time, on the next succeeding Business Day. "Common Shares" when used with reference to the Corporation shall mean the shares of common stock, par value $0.0625 per share, of the Corporation. "Common Shares" when used with reference to any Person other than the Corporation shall mean the capital stock (or equity interest) with the greatest voting power of such other Person or, if such other Person is a Subsidiary of another Person, the Person or Persons which ultimately control such first-mentioned Person. "Common stock equivalents" shall have the meaning set forth in Section 11(a)(iii)(B)(3). "Current Value" shall have the meaning set forth in Section 11(a)(iii)(A)(1) hereof. "Distribution Date" shall have the meaning set forth in Section 3 hereof. "Exchange Ratio" shall have the meaning set forth in Section 24(a). "Final Expiration Date" shall mean the Close of Business on August 31, 2006. "Person" shall mean any individual, firm, corporation, partnership, limited partnership, limited liability partnership, business trust, limited liability company, unincorporated association or other entity, and shall include any successor (by merger or otherwise) of such entity. "Purchase Price" shall have the meaning set forth in Section 7(b). "Redemption Date" shall mean the date on which the Rights are redeemed as provided in Section 23 hereof. "Right Certificate" shall mean a certificate evidencing a Right in substantially the form of Exhibit A hereto. "Section 11(a)(ii) Trigger Date" shall have the meaning set forth in Section 11(a)(iii) hereof. "Shares Acquisition Date" shall mean the earlier of the date of (i) the public announcement by the Corporation or an Acquiring Person that an Acquiring Person has become such or (ii) the public disclosure of facts by the Corporation or an Acquiring Person indicating that an Acquiring Person has become such. "Spread" shall have the meaning set forth in Section 11(a)(iii)(A)(2) hereof. "Subsidiary" of any Person shall mean any Person of which a majority of the voting power of the voting equity securities or equity interest is owned, directly or indirectly, by such Person. "Substitution Period" shall have the meaning set forth in Section 11(a)(iii) hereof. "Summary of Rights" shall mean the Summary of Rights in substantially the form of Exhibit B hereto. Section 2. Appointment of Rights Agent. The Corporation hereby appoints the Rights Agent to act as agent for the Corporation in accordance with the terms and conditions hereof, and the Rights Agent hereby accepts such appointment. The Corporation may from time to time appoint such co-Rights Agents as it may deem necessary or desirable. The Rights Agent shall have no duty to supervise, and shall in no event be liable for, the acts or omissions of any such co-Rights Agent. Section 3. Issue of Right Certificates. (a) Until the earlier of (i) the tenth day after the Shares Acquisition Date or (ii) the tenth Business Day (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) after the date of the commencement by any Person (other than the Corporation, any Subsidiary of the Corporation, any employee benefit plan of the Corporation or of any Subsidiary of the Corporation or any entity holding Common Shares for or pursuant to the terms of any such plan) of, or of the first public announcement of the intention of any Person (other than any of the Persons referred to in the preceding parenthetical) to commence, a tender or exchange offer the consummation of which would result in any Person becoming the Beneficial Owner of Common Shares aggregating 15% or more of the then outstanding Common Shares (such date being herein referred to as the "Distribution Date"), (x) the Rights will be evidenced (subject to the provisions of Section 3(b) hereof) by the certificates for Common Shares registered in the names of the holders thereof (which certificates shall also be deemed to be Right Certificates) and not by separate Right Certificates, and (y) the right to receive Right Certificates will be transferable only in connection with the transfer of Common Shares. As soon as practicable after the Distribution Date, the Corporation will prepare and execute, the Rights Agent will countersign, and the Corporation will send or cause to be sent (and the Rights Agent will, if requested and provided with the names and addresses of the Shareholders of Common Shares, send) by first-class, insured, postage-prepaid mail, to each record holder of Common Shares as of the Close of Business on the Distribution Date, at the address of such holder shown on the records of the Corporation, a Right Certificate evidencing one Right for each Common Share so held. As of the Distribution Date, the Rights will be evidenced solely by such Right Certificates. For purposes hereof, a tender or exchange offer shall not be deemed to have commenced, nor shall any Person be deemed to have publicly announced an intent to commence a tender or exchange offer, until such time as (i) one or more of the events specified by Rule 14d-2(a)(1), (2), (3) or (4) under the Exchange Act shall have occurred or any Person shall have filed a Schedule 14D-1 with the Securities and Exchange Commission under the Exchange Act with respect to the commencement of a tender or exchange offer (the first to occur of any such events or filing being deemed an "Event") or (ii) an Event shall have occurred following a public announcement by any Person (other than the Corporation, any Subsidiary of the Corporation, any employee benefit plan of the Corporation or of any Subsidiary of the Corporation or any entity holding Common Shares for or pursuant to the terms of any such plan) of the intention to commence a tender or exchange offer. (b) On the Record Date, or as soon as practicable thereafter, the Corporation will send a copy of the Summary of Rights by first-class, postage-prepaid mail, to each record holder of Common Shares as of the Close of Business on the Record Date, at the address of such holder shown on the records of the Corporation. With respect to certificates for Common Shares outstanding as of the Record Date, until the Distribution Date, the Rights will be evidenced by such certificates registered in the names of the holders thereof together with a copy of the Summary of Rights attached thereto. Until the Distribution Date (or the earlier of the Redemption Date or the Final Expiration Date), the surrender for transfer of any certificate for Common Shares outstanding on the Record Date, with or without a copy of the Summary of Rights attached thereto, shall also constitute the transfer of the Rights associated with the Common Shares evidenced thereby. (c) Certificates for Common Shares which become outstanding (including, without limitation, reacquired Common Shares referred to in the last sentence of this paragraph (c)) after the Record Date but prior to the earliest of the Distribution Date, the Redemption Date or the Final Expiration Date shall have impressed on, printed on, written on or otherwise affixed to them the following legend: This certificate also evidences and entitles the holder hereof to certain Rights as set forth in the Amended and Restated Rights Agreement, by and between Washington Trust Bancorp, Inc. and Mellon Investor Services LLC, a New Jersey limited liability company (as successor to The Washington Trust Company), as Rights Agent, dated as of March 1, 2002 (the "Rights Agreement"), the terms of which are hereby incorporated herein by reference and a copy of which is on file at the principal executive offices of Washington Trust Bancorp, Inc. Under certain circumstances, as set forth in the Rights Agreement, such Rights will be evidenced by separate certificates and will no longer be evidenced by this certificate. Washinton Trust Bancorp, Inc. will mail to the holder of this certificate a copy of the Rights Agreement without charge after receipt of a written request therefor. Under certain circumstances, Rights that are or were acquired or beneficially owned by Acquiring Persons (as defined in the Rights Agreement) may become null and void. With respect to such certificates containing the foregoing legend, until the Distribution Date, the Rights associated with the Common Shares represented by certificates shall be evidenced by such certificates alone, and the surrender for transfer of any such certificate shall also constitute the transfer of the Rights associated with the Common Shares represented thereby. In the event that the Corporation purchases or acquires any Common Shares after the Record Date but prior to the Distribution Date, any Rights associated with such Common Shares shall be deemed cancelled and retired so that the Corporation shall not be entitled to exercise any Rights associated with the Common Shares which are no longer outstanding. Section 4. Form of Right Certificates. The Right Certificates (and the forms of election to purchase Common Shares and of assignment to be printed on the reverse thereof) shall be substantially the same as Exhibit A hereto and may have such marks of identification or designation and such legends, summaries or endorsements printed thereon as the Corporation may deem appropriate and as are not inconsistent with the provisions of this Agreement and which do not affect the rights, duties or responsibilities of the Rights Agent, or as may be required to comply with any applicable law or with any rule or regulation made pursuant thereto or with any rule or regulation of any stock exchange on which the Rights may from time to time be listed, or to conform to usage. Subject to the other provisions of this Agreement, the Right Certificates shall entitle the holders thereof to purchase such number of Common Shares as shall be set forth therein at the Purchase Price, but the number of Common Shares and the Purchase Price shall be subject to adjustment as provided herein. Section 5. Countersignature and Registration. The Right Certificates shall be executed on behalf of the Corporation by its Chairman of the Board, its Chief Executive Officer, its President, any of its Vice Presidents, or its Treasurer, either manually or by facsimile signature, shall have affixed thereto the Corporation's seal or a facsimile thereof, and shall be attested by the Secretary or any Assistant Secretary of the Corporation, either manually or by facsimile signature. The Right Certificates shall be countersigned by the Rights Agent and shall not be valid for any purpose unless so countersigned, either manually or by facsimile. In case any officer of the Corporation who shall have signed any of the Right Certificates shall cease to be such officer of the Corporation before countersignature by the Rights Agent and issuance and delivery by the Corporation, such Right Certificates, nevertheless, may be countersigned by the Rights Agent and issued and delivered by the Corporation with the same force and effect as though the person who signed such Right Certificates had not ceased to be such officer of the Corporation; and any Right Certificate may be signed on behalf of the Corporation by any person who, at the actual date of the execution of such Right Certificate, shall be a proper officer of the Corporation to sign such Right Certificate, although at the date of the execution of this Rights Agreement any such person was not such an officer. Following the Distribution Date and receipt by the Rights Agent of all relevant information, the Rights Agent will keep or cause to be kept, at its office designated for such purpose (the "Rights Agent Office"), books for registration of the transfer of the Right Certificates issued hereunder. Such books shall show the names and addresses of the respective holders of the Right Certificates, the number of Rights evidenced on its face by each of the Right Certificates and the date of each of the Right Certificates. Section 6. Transfer, Split Up, Combination and Exchange of Right Certificates; Mutilated, Destroyed, Lost or Stolen Right Certificates. Subject to the provisions of Section 14 hereof, at any time after the Close of Business on the Distribution Date, and at or prior to the Close of Business on the earlier of the Redemption Date or the Final Expiration Date, any Right Certificate or Right Certificates (other than Right Certificates representing Rights that have become void pursuant to Section 11(a)(ii) hereof or that have been exchanged pursuant to Section 24 hereof) may be transferred, split up, combined or exchanged for another Right Certificate or Right Certificates, entitling the registered holder to purchase a like number of Common Shares as the Right Certificate or Right Certificates surrendered then entitled such holder to purchase. Any registered holder desiring to transfer, split up, combine or exchange any Right Certificate or Right Certificates shall make such request in writing delivered to the Rights Agent, and shall surrender the Right Certificate or Right Certificates to be transferred, split up, combined or exchanged at the Rights Agent Office. Thereupon the Rights Agent shall countersign and deliver to the person entitled thereto a Right Certificate or Right Certificates, as the case may be, as so requested. The Corporation may require payment of a sum sufficient for any tax or governmental charge that may be imposed in connection with any transfer, split up, combination or exchange of Right Certificates. The Rights Agent shall have no duty or obligation under this Section 6 unless and until it is satisfied that all such taxes and/or charges have been paid in full. Upon receipt by the Corporation and the Rights Agent of evidence reasonably satisfactory to them of the loss, theft, destruction or mutilation of a Right Certificate, and, in case of loss, theft or destruction, of indemnity or security satisfactory to them, and, at the Corporation's request, reimbursement to the Corporation and the Rights Agent of all reasonable expenses incidental thereto, and upon surrender to the Rights Agent and cancellation of the Right Certificate if mutilated, the Corporation will make and deliver a new Right Certificate of like tenor to the Rights Agent for delivery to the registered holder in lieu of the Right Certificate so lost, stolen, destroyed or mutilated. Section 7. Exercise of Rights; Purchase Price; Final Expiration Date of Rights. (a) The registered holder of any Right Certificate (other than a holder whose Rights have become void pursuant to Section 11(a)(ii) hereof or have been exchanged pursuant to Section 24 hereof) may exercise the Rights evidenced thereby in whole or in part at any time after the Distribution Date upon surrender of the Right Certificate, with the form of election to purchase on the reverse side thereof duly executed, to the Rights Agent at the Rights Agent Office, together with payment of the Purchase Price for each Common Share as to which the Rights are exercised, at or prior to the earliest of (i) the Close of Business on the Final Expiration Date, (ii) the Redemption Date, or (iii) the time at which such Rights are exchanged as provided in Section 24 hereof. (b) The purchase price for each Common Share to be purchased upon the exercise of a Right shall initially be One hundred twenty Dollars ($120.00) (the "Purchase Price"), shall be subject to adjustment from time to time as provided in Section 11 hereof and shall be payable in lawful money of the United States of America in accordance with paragraph (c) below. (c) Upon receipt of a Right Certificate representing exercisable Rights, with the form of election to purchase and certificate duly executed, accompanied by payment of the Purchase Price for the number of Common Share(s) to be purchased and an amount equal to any applicable transfer tax required to be paid by the holder of such Right Certificate in accordance with Section 9 hereof by cash, certified check, cashier's check or money order payable to the order of the Corporation, the Rights Agent shall thereupon promptly (i) (A) requisition from any transfer agent of the Common Shares certificates for the number of Common Shares to be purchased and the Corporation hereby irrevocably authorizes its transfer agent to comply with all such requests, or (B) requisition from any depositary agent for the Common Shares depositary receipts representing such number of Common Shares as are to be purchased (in which case certificates for the Common Shares represented by such receipts shall be deposited by the transfer agent with the depositary agent) and the Corporation hereby directs the depositary agent to comply with such request, (ii) when appropriate, requisition from the Corporation the amount of cash to be paid in lieu of issuance of fractional Common Shares in accordance with Section 14 hereof, (iii) after receipt of such certificates or depositary receipts, cause the same to be delivered to or upon the order of the registered holder of such Right Certificate, registered in such name or names as may be designated by such holder and (iv) when appropriate, after receipt, deliver such cash to or upon the order of the registered holder of such Right Certificate. (d) In case the registered holder of any Right Certificate shall exercise less than all the Rights evidenced thereby, a new Right Certificate evidencing Rights equivalent to the Rights remaining unexercised shall be issued by the Rights Agent to the registered holder of such Right Certificate or to his duly authorized assigns, subject to the provisions of Section 6 and Section 14 hereof. (e) Notwithstanding anything in this Agreement to the contrary, neither the Rights Agent nor the Corporation shall be obligated to undertake any action with respect to a registered holder upon the occurrence of any purported exercise as set forth in this Section 7 unless such registered holder shall have (i) properly completed and signed the certificate following the form of election to purchase set forth on the reverse side of the Right Certificate surrendered for such exercise and (ii) provided such additional evidence of the identity of the Beneficial Owner (or former Beneficial Owner) or Affiliates or Associates thereof as the Corporation or the Rights Agent shall reasonably request. Section 8. Cancellation and Destruction of Right Certificates. All Right Certificates surrendered for the purpose of exercise, transfer, split up, combination or exchange shall, if surrendered to the Corporation or to any of its agents, be delivered to the Rights Agent for cancellation or in canceled form, or, if surrendered to the Rights Agent, shall be canceled by it, and no Right Certificates shall be issued in lieu thereof except as expressly permitted by any of the provisions of this Rights Agreement. The Corporation shall deliver to the Rights Agent for cancellation and retirement, and the Rights Agent shall so cancel and retire, any other Right Certificate purchased or acquired by the Corporation otherwise than upon the exercise thereof. The Rights Agent shall deliver all canceled Right Certificates to the Corporation, or shall, at the written request of the Corporation, destroy such canceled Right Certificates, and in such case shall deliver a certificate of destruction thereof to the Corporation. Section 9. Status of Common Shares. (a) The Corporation covenants and agrees that it will take all such action as may be necessary to ensure that all Common Shares delivered upon exercise of Rights shall, at the time of delivery of the certificates for such Common Shares (subject to payment of the Purchase Price), be duly and validly authorized and issued and fully paid and non-assessable shares. (b) The Corporation further covenants and agrees that it will pay when due and payable any and all taxes and governmental charges which may be payable in respect of the issuance or delivery of the Right Certificates or of any Common Shares upon the exercise of Rights. The Corporation shall not, however, be required to pay any tax or governmental charge which may be payable in respect of any transfer or delivery of Right Certificates to a Person other than, or the issuance or delivery of certificates or depositary receipts for the Common Shares in a name other than that of, the registered holder of the Right Certificate evidencing Rights surrendered for exercise or to issue or to deliver any certificates or depositary receipts for Common Shares upon the exercise of any Rights until any such tax or charge shall have been paid (any such tax or charge being payable by the holder of such Right Certificate at the time of surrender) or until it has been established to the Corporation's reasonable satisfaction that no such tax or charge is due. Section 10. Common Shares Record Date. Each Person in whose name any certificate for Common Shares is issued upon the exercise of Rights shall for all purposes be deemed to have become the holder of record of the Common Shares represented thereby on, and such certificate shall be dated, the date upon which the Right Certificate evidencing such Rights was duly surrendered and payment of the Purchase Price (and any applicable taxes or charges) was made. Prior to the exercise of the Rights evidenced thereby, the holder of a Right Certificate shall not be entitled to any rights of a holder of Common Shares for which the Rights shall be exercisable, including, without limitation, the right to vote, to receive dividends or other distributions or to exercise any preemptive rights, and shall not be entitled to receive any notice of any proceedings of the Corporation, except as provided herein. Section 11. Adjustment of Purchase Price, Number of Shares or Number of Rights. The Purchase Price, the number of Common Shares covered by each Right and the number of Rights outstanding are subject to adjustment from time to time as provided in this Section 11. (a)(i) In the event the Corporation shall at any time after the date of this Agreement (A) declare or pay a dividend on the Common Shares payable in Common Shares, (B) subdivide the outstanding Common Shares, or (C) combine the outstanding Common Shares into a smaller number of Common Shares, except as otherwise provided in this Section 11(a), then in each case (x) the Purchase Price in effect after such adjustment will be equal to the Purchase Price in effect immediately prior to such adjustment divided by the number of Common Shares (the "Expansion Factor") that a holder of one Common Share immediately prior to such dividend, subdivision or combination would hold thereafter as a result thereof and (y) each Right held prior to such adjustment will become that number of Rights equal to the Expansion Factor, and the adjusted number of Rights will be deemed to be distributed among the Common Shares with respect to which the original Rights were associated (if they remain outstanding) and the shares issued in respect of such dividend, subdivision or combination, so that each such Common Share will have exactly one Right associated with it. Each adjustment made pursuant to this paragraph shall be made as of the payment or effective date for the applicable dividend, subdivision or combination. (ii) Subject to the following paragraph of this subparagraph (ii) and to Section 24 of this Agreement, in the event any Person shall become an Acquiring Person, each holder of a Right shall thereafter have a right to receive, upon exercise thereof at a price equal to the then current Purchase Price multiplied by the number of Common Shares for which a Right is then exercisable, in accordance with the terms of this Agreement, such number of Common Shares of the Corporation as shall equal the result obtained by (x) multiplying the then current Purchase Price by the number of Common Shares for which a Right is then exercisable and dividing that product by (y) 50% of the then current per share market price of the Corporation's Common Shares (determined pursuant to Section 11(d) hereof) on the date such Person became an Acquiring Person. In the event that any Person shall become an Acquiring Person and the Rights shall then be outstanding, the Corporation shall not take any action that would eliminate or diminish the benefits intended to be afforded by the Rights. From and after the occurrence of such an event, any Rights that are or were acquired or beneficially owned by such Acquiring Person (or any Associate or Affiliate of such Acquiring Person) on or after the earlier of (x) the Shares Acquisition Date and (y) the Distribution Date shall be void and any holder of such Rights shall thereafter have no right to exercise such Rights under any provision of this Agreement. No Right Certificate shall be issued pursuant to Section 3 that represents Rights beneficially owned by an Acquiring Person whose Rights would be null and void pursuant to the preceding sentence or any Associate or Affiliate thereof; no Right Certificate shall be issued at any time upon the transfer of any Rights to an Acquiring Person whose Rights would be null and void pursuant to the preceding sentence or any Associate or Affiliate thereof or to any nominee of such Acquiring Person, Associate or Affiliate; and any Right Certificate delivered to the Rights Agent for transfer to an Acquiring Person whose Rights would be null and void pursuant to the preceding sentence or any Associate or Affiliate thereof shall be canceled. (iii) In the event that the number of Common Shares which are authorized by the Corporation's articles of incorporation and not outstanding or subscribed for, or reserved or otherwise committed for issuance for purposes other than upon exercise of the Rights, are not sufficient to permit the holder of each Right to purchase the number of Common Shares to which he would be entitled upon the exercise in full of the Rights in accordance with the foregoing subparagraph (ii) of paragraph (a) of this Section 11, or should the Board of Directors so elect, the Corporation shall: (A) determine the excess of (1) the value of the Common Shares issuable upon the exercise of a Right (calculated as provided in the last sentence of this subparagraph (iii)) pursuant to Section 11(a)(ii) hereof (the "Current Value") over (2) the Purchase Price (such excess, the "Spread"), and (B) with respect to each Right, make adequate provision to substitute for such Common Shares, upon payment of the applicable Purchase Price, any one or more of the following having an aggregate value determined by the Board of Directors to be equal to the Current Value: (1) cash, (2) a reduction in the Purchase Price, (3) Common Shares or other equity securities of the Corporation (including, without limitation, shares, or units of shares, of preferred stock which the Board of Directors of the Corporation has determined to have the same value as shares of Common Stock (such shares of preferred stock, "common stock equivalents")), (4) debt securities of the Corporation, or (5) other assets; provided, however, if the Corporation shall not have made adequate provision to deliver value pursuant to clause (B) above within thirty (30) days following the first occurrence of an event triggering the rights to purchase Common Shares described in Section 11(a)(ii) the "Section 11(a)(ii) Trigger Date"), then the Corporation shall be obligated to deliver, upon the surrender for exercise of a Right and without requiring payment of the Purchase Price, shares of Common Stock (to the extent available) and then, if necessary, cash, which shares and cash have an aggregate value equal to the Spread. If the Board of Directors of the Corporation shall determine in good faith that it is likely that sufficient additional Common Shares could be authorized for issuance upon exercise in full of the Rights, the thirty (30) day period set forth above may be extended to the extent necessary, but not more than ninety (90) days after the Section 11(a)(ii) Trigger Date, in order that the Corporation may seek shareholder approval for the authorization of such additional shares (such period, as it may be extended, the "Substitution Period"). To the extent that the Corporation determines that some action need be taken pursuant to the first and/or second sentences of this Section 11(a)(iii), the Corporation (x) shall provide, subject to Section 7(e) hereof and the last paragraph of Section 11(a)(ii) hereof, that such action shall apply uniformly to all outstanding Rights, and (y) may suspend the exercisability of the Rights until the expiration of the Substitution Period in order to seek any authorization of additional shares and/or to decide the appropriate form of distribution to be made pursuant to such first sentence and to determine the value thereof. In the event of any such suspension, the Corporation shall make a public announcement, and shall deliver to the Rights Agent a statement, stating that the exercisability of the Rights has been temporarily suspended. At such time as the suspension is no longer in effect, the Corporation shall make another public announcement, and deliver to the Rights Agent a statement, so stating. For purposes of this Section 11(a)(iii), the value of the Common Shares shall be the current per share market price (as determined pursuant to Section 11(d)(i) hereof) of the Common Shares on the Section 11(a)(ii) Trigger Date and the value of any common stock equivalent shall be deemed to have the same value as the Common Shares on such date. (b) In the event the Corporation shall at any time after the date of this Agreement issue any Common Shares otherwise than in a transaction referred to in Section 11(a)(i) above, each such Common Share so issued shall automatically have one new Right associated with it, which Right shall be evidenced by the certificate representing such share. (c) In the event the Corporation shall at any time after the date of this Agreement issue or distribute any securities or assets in respect of, in lieu of or in exchange for Common Shares (other than pursuant to a regular periodic cash dividend or a dividend paid solely in Common Shares) whether by dividend, in a reclassification or recapitalization (including any such transaction involving a merger, consolidation or binding share exchange), or otherwise, the Corporation shall make such adjustments, if any, in the Purchase Price, number of Rights and/or securities or other property purchasable upon exercise of Rights as the Board of Directors of the Corporation, in its sole discretion, may deem to be appropriate under the circumstances in order to adequately protect the interests of the holders of Rights generally, and the Corporation and the Rights Agent shall amend this Agreement as necessary to provide for such adjustments. (d)(i) For the purpose of any computation hereunder, the "current per share market price" of any security (a "Security" for the purpose of this Section 11(d)(i)) on any date shall be deemed to be the average of the daily closing prices per share of such Security for the 30 consecutive Trading Days (as such term is hereinafter defined) immediately prior to such date; provided, however, that in the event that the current per share market price of the Security is determined during a period following the announcement by the issuer of such Security of (A) a dividend or distribution on such Security payable in shares of such Security or securities convertible into such shares, or (B) any subdivision, combination or reclassification of such Security and prior to the expiration of 30 Trading Days after the ex-dividend date for such dividend or distribution, or the record date for such subdivision, combination or reclassification, then, and in each such case, the current per share market price shall be appropriately adjusted to reflect the current market price per share equivalent of such Security. The closing price for each day shall be the last sale price, regular way, or, in case no such sale takes place on such day, the average of the closing bid and asked prices, regular way, in either case as reported in the principal consolidated transaction reporting system with respect to securities listed or admitted to trading on the New York Stock Exchange or, if the Security is not listed or admitted to trading on the New York Stock Exchange, as reported in the principal consolidated transaction reporting system with respect to securities listed on the principal national securities exchange on which the Security is listed or admitted to trading or, if the Security is not listed or admitted to trading on any national securities exchange, the last quoted price or, if not so quoted, the average of the high bid and low asked prices in the over-the-counter market, as reported by the National Association of Securities Dealers, Inc. Automated Quotations System ("NASDAQ") or such other system then in use, or, if on any such date the Security is not quoted by any such organization, the average of the closing bid and asked prices as furnished by a professional market maker making a market in the Security selected by the Board of Directors of the Corporation. The term "Trading Day" shall mean a day on which the principal national securities exchange on which the Security is listed or admitted to trading is open for the transaction of business or, if the Security is not listed or admitted to trading on any national securities exchange, a Business Day. (ii) For the purpose of any computation hereunder, the "current per share market price" of the Common Shares shall be determined in accordance with the method set forth in Section 11(d)(i). If the Common Shares are not publicly held or so listed or traded, "current per share market price" shall mean the fair value per share as determined in good faith by the Board of Directors of the Corporation, whose determination shall be described in a statement filed with the Rights Agent. (e) No adjustment in the Purchase Price shall be required unless such adjustment would require an increase or decrease of at least 1% in the Purchase Price; provided, however, that any adjustments which by reason of this Section 11(e) are not required to be made shall be carried forward and taken into account in any subsequent adjustment. All calculations under this Section 11 shall be made to the nearest cent or to the nearest one one-thousandth of a Common Share or of any other share or security as the case may be. Notwithstanding the first sentence of this Section 11(e), any adjustment required by this Section 11 shall be made no later than three years from the date of the transaction which requires such adjustment. (f) If as a result of an adjustment made pursuant to Section 11(a) hereof, the holder of any Right thereafter exercised shall become entitled to receive any shares of capital stock of the Corporation other than Common Shares, the number of such other shares so receivable upon exercise of any Right shall thereafter be subject to adjustment from time to time in a manner and on terms as nearly equivalent as practicable to the provisions with respect to the Common Shares contained in Sections 11(a) and (c), and the provisions of Sections 7, 9, 10 and 13 with respect to the Common Shares shall apply on like terms to any such other shares. (g) All Rights originally issued by the Corporation subsequent to any adjustment made to the Purchase Price hereunder shall evidence the right to purchase, at the adjusted Purchase Price, the number of Common Shares purchasable from time to time hereunder upon exercise of the Rights, all subject to further adjustment as provided herein. (h) Unless the Corporation shall have exercised its election as provided in Section 11(i), upon each adjustment of the Purchase Price as a result of the calculations made in Section 11(c), each Right outstanding immediately prior to the making of such adjustment shall thereafter evidence the right to purchase, at the adjusted Purchase Price, that number of Common Shares (calculated to the nearest one one-thousandth of a Common Share) obtained by (i) multiplying (x) the number of share(s) covered by a Right immediately prior to this adjustment by (y) the Purchase Price in effect immediately prior to such adjustment of the Purchase Price and (ii) dividing the product so obtained by the Purchase Price in effect immediately after such adjustment of the Purchase Price. (i) The Corporation may elect on or after the date of any adjustment of the Purchase Price to adjust the number of Rights in substitution for any adjustment in the number of Common Shares purchasable upon the exercise of a Right. Each of the Rights outstanding after such adjustment of the number of Rights shall be exercisable for the number of Common Shares for which a Right was exercisable immediately prior to such adjustment. Each Right held of record prior to such adjustment of the number of Rights shall become that number of Rights (calculated to the nearest one thousandth) obtained by dividing the Purchase Price in effect immediately prior to adjustment of the Purchase Price by the Purchase Price in effect immediately after adjustment of the Purchase Price. The Corporation shall make a public announcement and promptly notify the Rights Agent of its election to adjust the number of Rights, indicating the record date for the adjustment, and, if known at the time, the amount of the adjustment to be made. This record date may be the date on which the Purchase Price is adjusted or any day thereafter, but, if the Right Certificates have been distributed, shall be at least 10 days later than the date of the public announcement. If Right Certificates have been distributed, upon each adjustment of the number of Rights pursuant to this Section 11(i), the Corporation shall, as promptly as practicable, cause to be distributed to holders of record of Right Certificates on such record date Right Certificates evidencing, subject to Section 14 hereof, the additional Rights to which such holders shall be entitled as a result of such adjustment, or, at the option of the Corporation, shall cause to be distributed to such holders of record in substitution and replacement for the Right Certificates held by such holders prior to the date of adjustment, and upon surrender thereof, if required by the Corporation, new Right Certificates evidencing all the Rights to which such holders shall be entitled after such adjustment. Right Certificates to be so distributed shall be issued, executed and countersigned in the manner provided for herein and shall be registered in the names of the holders of record of Right Certificates on the record date specified in the public announcement. (j) Irrespective of any adjustment or change in the Purchase Price or the number of Common Shares issuable upon the exercise of the Rights, the Right Certificates theretofore and thereafter issued may continue to express the Purchase Price and the number of Common Shares which were expressed in the initial Right Certificates issued hereunder. (k) Before taking any action that would cause an adjustment reducing the Purchase Price below the then par value of the Common Shares issuable upon exercise of the Rights, the Corporation shall take any corporate action which may, in the opinion of its counsel, be necessary in order that the Corporation may validly and legally issue fully paid and non-assessable Common Shares at such adjusted Purchase Price. (1) In any case in which this Section 11 shall require that an adjustment in the Purchase Price be made effective as of a record date for a specified event, the Corporation may elect to defer (and shall promptly notify the Rights Agent of any such election) until the occurrence of such event the issuing to the holder of any Right exercised after such record date of the Common Shares and other capital stock or securities of the Corporation, if any, issuable upon such exercise over and above the Common Shares and other capital stock or securities of the Corporation, if any, issuable upon such exercise on the basis of the Purchase Price in effect prior to such adjustment; provided, however, that the Corporation shall deliver to such holder a due bill or other appropriate instrument evidencing such holder's right to receive such additional shares upon the occurrence of the event requiring such adjustment. (m) Anything in this Section 11 to the contrary notwithstanding, the Corporation shall be entitled to make such reductions in the Purchase Price, in addition to those adjustments expressly required by this Section 11, as and to the extent that it in its sole discretion shall determine to be advisable in order that any (i) consolidation or subdivision of the Common Shares, (ii) issuance wholly for cash of Common Shares or securities which by their terms are convertible into or exchangeable for Common Shares, (iii) dividends on Common Shares payable in Common Shares or (iv) other issuance of cash or securities hereafter made by the Corporation to holders of its Common Shares shall not be taxable to such shareholders. Section 12. Certificate of Adjustment. Whenever an adjustment is made as provided in Sections 11 or 13 hereof, the Corporation shall promptly (a) prepare a certificate setting forth such adjustment, and a brief statement of the facts and computations accounting for such adjustment, (b) file with the Rights Agent and with each transfer agent of the Common Shares a copy of such certificate and (c) mail a brief summary thereof to each holder of a Right Certificate in accordance with Section 25 hereof. The Rights Agent shall be fully protected in relying on any such certificate and on any adjustment therein contained and shall not be deemed to have knowledge of any adjustment unless and until it shall have received such certificate. Section 13. Consolidation, Merger or Sale or Transfer of Assets or Earning Power. In the event that, at any time after a Person becomes an Acquiring Person, directly or indirectly, (i) the Corporation shall consolidate with, or merge with and into, any other Person, (ii) any Person shall consolidate with the Corporation, or merge with and into the Corporation and the Corporation shall be the continuing or surviving corporation of such merger and, in connection with such merger, all or part of the Common Shares shall be changed into or exchanged for stock or other securities of any other Person (or the Corporation) or cash or any other property, or (iii) the Corporation shall sell or otherwise transfer (or one or more of its Subsidiaries shall sell or otherwise transfer), in one or more transactions, assets or earning power aggregating 50% or more of the assets or earning power of the Corporation and its Subsidiaries (taken as a whole) to any other Person other than the Corporation or one or more of its wholly-owned Subsidiaries, then, and in each such case, proper provision shall be made so that (A) each holder of a Right (except as otherwise provided herein) shall thereafter have the right to receive, upon the exercise thereof at a price equal to the then current Purchase Price multiplied by the number of Common Shares for which a Right is then exercisable, in accordance with the terms of this Agreement, such number of Common Shares of such other Person (including the Corporation as successor thereto or as the surviving corporation) as shall equal the result obtained by (x) multiplying the then current Purchase Price by the number of Common Shares for which a Right is then exercisable and dividing that product by (y) 50% of the then current per share market price of the Common Shares of such other Person (determined pursuant to Section 11(d) hereof) on the date of consummation of such consolidation, merger, sale or transfer; (B) the issuer of such Common Shares shall thereafter be liable for, and shall assume, by virtue of such consolidation, merger, sale or transfer, all the obligations and duties of the Corporation pursuant to this Agreement; (C) the term "Corporation" shall thereafter be deemed to refer to such issuer; and (D) such issuer shall take such steps in connection with such consummation as may be necessary to assure that the provisions hereof shall thereafter be applicable, as nearly as reasonably may be, in relation to the Common Shares thereafter deliverable upon the exercise of the Rights. The Corporation covenants and agrees that it shall not consummate any such consolidation, merger, sale or transfer unless prior thereto the Corporation and such issuer shall have executed and delivered to the Rights Agent a supplemental agreement so providing. The Corporation shall not enter into any transaction of the kind referred to in this Section 13 if at the time of such transaction there are any rights, warrants, instruments or securities outstanding or any agreements or arrangements which, as a result of the consummation of such transaction, would eliminate or substantially diminish the benefits intended to be afforded by the Rights. The provisions of this Section 13 shall similarly apply to successive mergers or consolidations or sales or other transfers. For purposes hereof, the "earning power" of the Corporation and its Subsidiaries shall be determined in good faith by the Corporation's Board of Directors on the basis of the operating earnings of each business operated by the Corporation and its Subsidiaries during the three fiscal years preceding the date of such determination (or, in the case of any business not operated by the Corporation or any Subsidiary during three full fiscal years preceding such date, during the period such business was operated by the Corporation or any Subsidiary). Section 14. Fractional Rights and Fractional Shares. (a) The Corporation shall not be required to issue fractions of Rights or to distribute Right Certificates which evidence fractional Rights. In lieu of such fractional Rights, there shall be paid to the registered holders of the Right Certificates with regard to which such fractional Rights would otherwise be issuable, an amount in cash equal to the same fraction of the current market value of a whole Right. For the purposes of this Section 14(a), the current market value of a whole Right shall be the closing price of the Rights for the Trading Day immediately prior to the date on which such fractional Rights would have been otherwise issuable. The closing price for any day shall be the last sale price, regular way, or, in case no such sale takes place on such day, the average of the closing bid and asked prices, regular way, in either case as reported in the principal consolidated transaction reporting system with respect to securities listed or admitted to trading on the New York Stock Exchange or, if the Rights are not listed or admitted to trading on the New York Stock Exchange, as reported in the principal consolidated transaction reporting system with respect to securities listed on the principal national securities exchange on which the Rights are listed or admitted to trading or, if the Rights are not listed or admitted to trading on any national securities exchange, the last quoted price or, if not so quoted, the average of the high bid and low asked prices in the over-the-counter market, as reported by NASDAQ or such other system then in use or, if on any such date the Rights are not quoted by any such organization, the average of the closing bid and asked prices as furnished by a professional market maker making a market in the Rights selected by the Board of Directors of the Corporation. If on any such date no such market maker is making a market in the Rights, the fair value of the Rights on such date as determined in good faith by the Board of Directors of the Corporation shall be used. (b) The Corporation shall not be required to issue fractions of Common Shares upon exercise of the Rights or to distribute certificates which evidence fractional Common Shares. Fractions of Common Shares may, at the election of the Corporation, be evidenced by depositary receipts, pursuant to an appropriate agreement between the Corporation and a depositary selected by it; provided, that such agreement shall provide that the holders of such depositary receipts shall have all the rights, privileges and preferences to which they are entitled as beneficial owners of the Common Shares represented by such depositary receipts. In lieu of fractional Common Shares, the Corporation shall pay to each registered holder of Right Certificates at the time such Rights are exercised as herein provided an amount in cash equal to the same fraction of the current market value of one Common Share as the fraction of one Common Share that such holder would otherwise receive upon the exercise of the aggregate number of rights exercised by such holder. For the purposes of this Section 14(b), the current market value of a Common Share shall be the closing price of a Common Share (as determined pursuant to the second sentence of Section 11(d)(i) hereof) for the Trading Day immediately prior to the date of such exercise. (c) The holder of a Right by the acceptance of the Right expressly waives any right to receive fractional Rights or fractional shares upon exercise of a Right (except as provided above). Section 15. Rights of Action. All rights of action in respect of this Agreement, excepting the rights of action given to the Rights Agent under Sections 18 and 20 hereunder, are vested in the respective registered holders of the Right Certificates (and, prior to the Distribution Date, the registered holders of the Common Shares); and any registered holder of any Right Certificate (or, prior to the Distribution Date, of the Common Shares) may, without the consent of the Rights Agent or of the holder of any other Right Certificate (or, prior to the Distribution Date, of the Common Shares), on his own behalf and for his own benefit, enforce, and may institute and maintain any suit, action or proceeding against the Corporation to enforce, or otherwise act in respect of, his right to exercise the Rights evidenced by such Right Certificate in the manner provided in such Right Certificate and in this Agreement. Without limiting the foregoing or any remedies available to the holders of Rights, it is specifically acknowledged that the holders of Rights would not have an adequate remedy at law for any breach of this Agreement and will be entitled to specific performance of the obligations under, and injunctive relief against actual or threatened violations of the obligations of any Person subject to, this Agreement. Section 16. Agreement of Right Holders. Every holder of a Right, by accepting the same, consents and agrees with the Corporation and the Rights Agent and with every other holder of a Right that: (a) prior to the Distribution Date, the Rights will be transferable only in connection with the transfer of the Common Shares; (b) after the Distribution Date, the Right Certificates are transferable only on the registry books maintained by the Rights Agent if surrendered at the Rights Agent Office, duly endorsed or accompanied by a proper instrument of transfer with a completed form of certification; (c) the Corporation and the Rights Agent may deem and treat the Person in whose name the Right Certificate (or, prior to the Distribution Date, the associated Common Shares certificate) is registered as the absolute owner thereof and of the Rights evidenced thereby (notwithstanding any notations of ownership or writing on the Right Certificates or the associated Common Shares certificate made by anyone other than the Corporation or the Rights Agent) for all purposes whatsoever, and neither the Corporation nor the Rights Agent shall be affected by any notice to the contrary; and (d) notwithstanding anything in this Agreement to the contrary, neither the Corporation nor the Rights Agent shall have any liability to any holder of a Right or other Person as a result of its inability to perform any of its obligations under this Agreement by reason of any preliminary or permanent injunction or other order, decree, judgment or ruling issued by a court of competent jurisdiction or by a governmental, regulatory or administrative agency or commission, or any statue, rule, regulation or executive order promulgated or enacted by any governmental agency prohibiting or otherwise restraining performance of such obligation. Section 17. Right Certificate Holder Not Deemed a Shareholder. No holder, as such, of any Right Certificate shall be entitled to vote, receive dividends or be deemed for any purpose the holder of the Common Shares or any other securities of the Corporation which may at any time be issuable on the exercise of the Rights represented thereby nor shall anything contained herein or in any Right Certificate be construed to confer upon the holder of any Right Certificate, as such, any of the rights of a shareholder of the Corporation or any right to vote for the election of directors or upon any matter submitted to shareholders at any meeting thereof, or to give or withhold consent to any corporate action, or to receive notice of meetings or other actions affecting shareholders (except as provided in Section 25 hereof), or to receive dividends or subscription rights, or otherwise, until the Right or Rights evidenced by such Right Certificate shall have been exercised in accordance with the provisions hereof. Section 18. Concerning the Rights Agent. The Corporation agrees to pay to the Rights Agent such compensation as shall be agreed to in writing and attached hereto between the Corporation and the Rights Agent for all services rendered by it hereunder and, from time to time, on demand of the Rights Agent, its reasonable expenses and counsel fees and disbursements and other disbursements incurred in the administration and execution of this Agreement and the exercise and performance of its duties hereunder. The Corporation also agrees to indemnify the Rights Agent for, and to hold it harmless against, any loss, liability, damage, judgment, fine, penalty, claim, demand, settlement, cost or expense, incurred without gross negligence, bad faith or willful misconduct (as each is finally determined by a court of competent jurisdiction) on the part of the Rights Agent for any action taken, suffered or omitted by the Rights Agent in connection with the administration of this Agreement or the exercise or performance of its duties hereunder, including, without limitation, the costs and expenses of defending against any claim of liability arising therefrom. The provisions of this Section 18 shall survive the termination of this Agreement, the exercise or expiration of the Rights and the resignation or removal of the Rights Agent. The costs and expenses incurred in enforcing this right of indemnification shall be paid by the Corporation, unless it is determined by a court of competent jurisdiction that the Rights Agent does not have the right to be indemnified hereunder, in which case the Rights Agent shall be solely responsible for all cost and expenses incurred, including, without limitation, reimbursing the Corporation for any such costs and expenses incurred by the Corporation in enforcing the Rights Agent's right of indemnification prior to the date of the determination by a court of competent jurisdiction that the Rights Agent is not entitled to indemnification hereunder. Neither the Rights Agent nor the Corporation, in defense of any claim or litigation, shall consent to entry of any judgment or enter into any settlement without the express written consent of the other Party. The Rights Agent shall be authorized to rely on, shall be protected and, subject to Section 20(c), shall incur no liability for or in respect of any action taken, suffered or omitted by it in connection with its administration of this Agreement or the exercise or performance of its duties hereunder in reliance upon any Right Certificate or certificate for Common Shares or for other securities of the Corporation, instrument of assignment or transfer, power of attorney, endorsement, affidavit, letter, notice, direction, consent, certificate, statement, or other paper or document believed by it to be genuine and to be signed, executed and, where necessary, verified or acknowledged, by the proper Person or Persons. Section 19. Merger or Consolidation or Change of Name of Rights Agent. Any Person into which the Rights Agent or any successor Rights Agent may be merged or with which it may be consolidated, or any Person resulting from any merger or consolidation to which the Rights Agent or any successor Rights Agent shall be a party, or any Person succeeding to the business of the Rights Agent or any successor Rights Agent, shall be the successor to the Rights Agent under this Agreement without the execution or filing of any paper or any further act on the part of any of the parties hereto, provided that such Person would be eligible for appointment as a successor Rights Agent under the provisions of Section 21 hereof. In case at the time such successor Rights Agent shall succeed to the agency created by this Agreement, any of the Right Certificates shall have been countersigned but not delivered, any such successor Rights Agent may adopt the countersignature of the predecessor Rights Agent and deliver such Right Certificates so countersigned; and in case at that time any of the Right Certificates shall not have been countersigned, any successor Rights Agent may countersign such Right Certificates either in the name of the predecessor Rights Agent or in the name of the successor Rights Agent; and in all such cases such Right Certificates shall have the full force provided in the Right Certificates and in this Agreement. In case at any time the name of the Rights Agent shall be changed and at such time any of the Right Certificates shall have been countersigned but not delivered, the Rights Agent may adopt the countersignature under its prior name and deliver Right Certificates so countersigned; and in case at that time any of the Right Certificates shall not have been countersigned, the Rights Agent may countersign such Right Certificates either in its prior name or in its changed name; and in all such cases such Right Certificates shall have the full force provided in the Right Certificates and in this Agreement. Section 20. Duties of Rights Agent. The Rights Agent only undertakes the duties and obligations expressly set forth in this Agreement and no implied duties or obligations shall be read into this Agreement against the Rights Agent. The Rights Agent shall perform those duties and obligations upon the following terms and conditions, by all of which the Corporation and the holders of Right Certificates, by their acceptance thereof, shall be bound: (a) The Rights Agent may consult with legal counsel (who may be legal counsel for the Corporation), and the written advice or opinion of such counsel shall be full and complete authorization and protection to the Rights Agent, and the Rights Agent shall incur no liability for, or in respect of, any action taken, suffered or omitted by it in good faith and in accordance with such written advice or opinion. (b) Whenever in the performance of its duties under this Agreement the Rights Agent shall deem it necessary or desirable that any fact or matter be proved or established by the Corporation prior to taking, suffering or omitting any action hereunder, such fact or matter (unless other evidence in respect thereof be herein specifically prescribed) may be deemed to be conclusively proved and established by a certificate signed by any one of the Chairman of the Board, the President, a Vice President, the Treasurer or the Secretary of the Corporation and delivered to the Rights Agent; and such certificate shall be full authorization and protection to the Rights Agent, and the Rights Agent shall incur no liability for, or in respect of, any action taken, suffered or omitted in good faith by it under the provisions of this Agreement in reliance upon such certificate. (c) Notwithstanding anything to the contrary contained in this Section 20 or elsewhere in this Agreement, the Rights Agent shall be liable hereunder only for its own gross negligence, bad faith or willful misconduct, as each is finally determined by a court of competent jurisdiction. Anything to the contrary notwithstanding, in no event shall the Rights Agent be liable for special, punitive, indirect, consequential or incidental loss or damage of any kind whatsoever (including but not limited to lost profits), even if the Rights Agent has been advised of the likelihood of such loss or damage. Any liability of the Rights Agent under this Rights Agreement will be limited to the amount of fees paid by the Corporation to the Rights Agent hereunder. The provisions of this Section 20 shall survive the termination of this Agreement, the exercise or expiration of the Rights and the resignation or removal of the Rights Agent. (d) The Rights Agent shall not be liable for or by reason of any of the statements of fact or recitals contained in this Agreement or in the Right Certificates (except as to its countersignature thereof) or be required to verify the same, but all such statements and recitals are and shall be deemed to have been made by the Corporation only. (e) The Rights Agent shall not have any liability for, nor be under any responsibility in respect of the validity of this Agreement or the execution and delivery hereof (except the due execution hereof by the Rights Agent) or in respect of the validity or execution of any Right Certificate (except its countersignature thereof); nor shall it be responsible or liable for any breach by the Corporation of any covenant or condition contained in this Agreement or in any Right Certificate; nor shall it be responsible or liable for any adjustment required under the provisions of Section 11 hereof or, responsible or liable for the manner, method or amount of any such adjustment or the ascertaining of the existence of facts that would require any such adjustment (except with respect to the exercise of Rights evidenced by Right Certificates after actual notice of any such adjustment); nor shall it by any act hereunder be deemed to make any representation or warranty as to the authorization or reservation of any shares to be issued pursuant to this Agreement or any Right Certificate or as to whether any shares will, when so issued, be validly authorized and issued, fully paid and nonassessable. (f) The Corporation agrees that it will perform, execute, acknowledge and deliver or cause to be performed, executed, acknowledged end delivered all such further and other acts, instruments and assurances as may reasonably be required by the Rights Agent for the carrying out or performing by the Rights Agent of the provisions of this Agreement. (g) The Rights Agent is hereby authorized and directed to accept instructions with respect to the performance of its duties hereunder from any one of the Chairman of the Board, the President, the Chief Financial Officer, a Senior Vice President, the Secretary or the Treasurer of the Corporation, and to apply to such officers for instructions in connection with its duties, and such instructions shall be full authorization and protection to the Rights Agent and the Rights Agent shall incur no liability for, or in respect of, any action taken, suffered or omitted to be taken by it in good faith in accordance with the instructions of any such officer. (h) The Rights Agent and any shareholder, director, officer, Affiliate or employee of the Rights Agent may buy, sell or deal in any of the Rights or other securities of the Corporation or become pecuniarily interested in any transaction in which the Corporation may be interested, or contract with or lend money to the Corporation or otherwise act as fully and freely as though it were not Rights Agent under this Agreement. Nothing herein shall preclude the Rights Agent from acting in any other capacity for the Corporation or for any other Person. (i) The Rights Agent may execute and exercise any of the rights or powers hereby vested in it or perform any duty hereunder either itself or by or through its attorneys or agents, and the Rights Agent shall not be answerable or accountable for any act, default, neglect or misconduct of any such attorneys or agents or for any loss to the Corporation, any holders of Rights or any other Person resulting from any such act, default, neglect or misconduct, absent gross negligence, bad faith or willful misconduct, as finally determined by a court of competent jurisdiction, in the selection and continued employment thereof. (j) No provision of this Agreement shall require the Rights Agent to expend or risk its own funds or otherwise incur any financial liability in the performance of its duties hereunder or in the exercise of its rights if it believes that repayment of such funds or adequate indemnification against such risk or liability is not assured to it. Section 21. Change of Rights Agent. The Rights Agent or any successor Rights Agent may resign and be discharged from its duties under this Agreement upon 30 days' notice in writing mailed to the Corporation and to each transfer agent of the Common Shares by registered or certified mail, and to the holders of the Right Certificates by first-class mail. The Corporation may remove the Rights Agent or any successor Rights Agent upon 30 days' notice in writing, mailed to the Rights Agent or successor Rights Agent, as the case may be, and to each transfer agent of the Common Shares by registered or certified mail, and to the holders of the Right Certificates by first-class mail. If the Rights Agent shall resign or be removed or shall otherwise become incapable of acting, the Corporation shall appoint a successor to the Rights Agent. If the Corporation shall fail to make such appointment within a period of 30 days after giving notice of such removal or after it has been notified in writing of such resignation or incapacity by the resigning or incapacitated Rights Agent or by the holder of a Right Certificate (who shall, with such notice, submit his Right Certificate for inspection by the Corporation), then the registered holder of any Right Certificate may apply to any court of competent jurisdiction for the appointment of a new Rights Agent. Any successor Rights Agent, whether appointed by the Corporation or by such a court, shall be either a (i) Person organized and doing business under the laws of the United States or of any state of the United States, in good standing, which is authorized under such laws to exercise corporate trust powers or shareholder services and is subject to supervision or examination by federal or state authority and which has at the time of its appointment as Rights Agent a combined capital and surplus of at least $100 million, or (ii) an Affiliate of the Person described in clause (i) of this sentence. After appointment, the successor Rights Agent shall be vested with the same powers, rights, duties and responsibilities as if it had been originally named as Rights Agent without further act or deed; but the predecessor Rights Agent shall deliver and transfer to the successor Rights Agent any property at the time held by it hereunder, and execute and deliver any further assurance, conveyance, act or deed necessary for the purpose. Not later than the effective date of any such appointment the Corporation shall file notice thereof in writing with the predecessor Rights Agent and each transfer agent of the Common Shares, and mail a notice thereof in writing to the registered holders of the Right Certificates. Failure to give any notice provided for in this Section 21, however, or any defect therein, shall not affect the legality or validity of the resignation or removal of the Rights Agent or the appointment of the successor Rights Agent, as the case may be. Section 22. Issuance of New Right Certificates. Notwithstanding any of the provisions of this Agreement or of the Rights to the contrary, the Corporation may, at its option, issue new Right Certificates evidencing Rights in such form as may be approved by its Board of Directors to reflect any adjustment or change in the Purchase Price and the number or kind or class of shares or other securities or property purchasable under the Right Certificates made in accordance with the provisions of this Agreement. Section 23. Redemption. (a) The Board of Directors of the Corporation may, at its option, at any time prior to such time as any Person becomes an Acquiring Person, redeem all but not less than all the then outstanding Rights at a redemption price of $0.001 per Right, appropriately adjusted to reflect any stock split, stock dividend or similar transaction occurring after the date hereof (such redemption price being hereinafter referred to as the "Redemption Price"). The redemption of the Rights by the Board of Directors may be made effective at such time, on such basis and subject to such conditions as the Board of Directors in its sole discretion may establish. (b) Immediately upon the action of the Board of Directors of the Corporation ordering the redemption of the Rights pursuant to paragraph (a) of this Section 23, and without any further action and without any notice, the right to exercise the Rights will terminate and the only right thereafter of the holders of Rights shall be to receive the Redemption Price. The Corporation shall promptly give the Rights Agent notice and shall give public notice of any such redemption; provided, however, that the failure to give, or any defect in, any such notice shall not affect the validity of such redemption. Within 10 days after such action of the Board of Directors ordering the redemption of the Rights pursuant to paragraph (a), the Corporation shall mail a notice of redemption to all the holders of the then outstanding Rights at their last addresses as they appear upon the registry books of the Rights Agent or, prior to the Distribution Date, on the registry books of the transfer agent for the Common Shares. Any notice which is mailed in the manner herein provided shall be deemed given, whether or not the holder receives the notice. If the payment of the Redemption Price is not included with such notice, each such notice shall state the method by which the payment of the Redemption Price will be made. Neither the Corporation nor any of its Affiliates or Associates may redeem, acquire or purchase for value any Rights at any time in any manner other than that specifically set forth in this Section 23 or in Section 24 hereof, other than in connection with the purchase of Common Shares prior to the Distribution Date. Section 24. Exchange. (a) The Board of Directors of the Corporation may, at its option, at any time after any Person becomes an Acquiring Person, exchange all or part of the then outstanding and exercisable Rights (which shall not include Rights that have become null and void pursuant to the provisions of Section 11(a)(ii) hereof) for Common Shares at an exchange ratio of one Common Share per Right, appropriately adjusted to reflect any stock split, stock dividend or similar transaction occurring after the date hereof (such exchange ratio being hereinafter referred to as the "Exchange Ratio"). Notwithstanding the foregoing, the Board of Directors shall not be empowered to effect such exchange at any time after any Person (other than the Corporation, any Subsidiary of the Corporation, any employee benefit plan of the Corporation or any such Subsidiary, or any entity holding Common Shares for or pursuant to the terms of any such plan), together with all Affiliates and Associates of such Person, becomes the Beneficial Owner of a majority of the Common Shares then outstanding. (b) Immediately upon the action of the Board of Directors of the Corporation ordering the exchange of any Rights pursuant to subsection (a) of this Section 24 and without any further action and without any notice, the right to exercise such Rights shall terminate and the only right thereafter of a holder of such Rights shall be to receive that number of Common Shares equal to the number of such Rights held by such holder multiplied by the Exchange Ratio. The Corporation shall promptly give public notice (and prompt notice to the Rights Agent) of any such exchange; provided, however, that the failure to give, or any defect in, such notice shall not affect the validity of such exchange. The Corporation promptly shall mail a notice of any such exchange to all of the holders of such Rights at their last addresses as they appear upon the registry books of the Rights Agent. Any notice which is mailed in the manner herein provided shall be deemed given, whether or not the holder receives the notice. Each such notice of exchange will state the method by which the exchange of the Common Shares for Rights will be effected and, in the event of any partial exchange, the number of Rights which will be exchanged. Any partial exchange shall be effected pro rata based on the number of Rights (other than Rights which have become null and void pursuant to the provisions of Section 11(a)(ii) hereof) held by each holder of Rights. (c) In any exchange pursuant to this Section 24, the Corporation, at its option, may substitute common stock equivalents for Common Shares exchangeable for Rights, at the rate of an appropriate number of common stock equivalents for each Common Share, as determined by the Board of Directors in its sole discretion. (d) In the event that there shall not be sufficient Common Shares or common stock equivalents authorized by the Corporation's articles of incorporation and not outstanding or subscribed for, or reserved or otherwise committed for issuance for purposes other than upon exercise of Rights, to permit any exchange of Rights as contemplated in accordance with this Section 24, the Corporation shall take all such action as may be necessary to authorize additional Common Shares or common stock equivalents, for issuance upon exchange of the Rights. Section 25. Notice of Certain Events. (a) In case the Corporation shall after the Distribution Date propose (i) to effect any consolidation or merger into or with, or to effect any sale or other transfer (or to permit one or more of its Subsidiaries to effect any sale or other transfer), in one or more transactions, of 50% or more of the assets or earning power of the Corporation and its Subsidiaries (taken as a whole) to, any other Person, (ii) to effect the liquidation, dissolution or winding up of the Corporation, or (iii) to declare or pay any dividend on the Common Shares payable in Common Shares or to effect a subdivision, combination or consolidation of the Common Shares (by reclassification or otherwise than by payment of dividends in Common Shares), then, in each such case, the Corporation shall give to each holder of a Right Certificate and the Rights Agent, in accordance with Section 26 hereof, a notice of such proposed action, which shall specify the record date for the purposes of such stock dividend, or distribution of rights or warrants, or the date on which such reclassification, consolidation, merger, sale, transfer, liquidation, dissolution, or winding up is to take place and the date of participation therein by the holders of the Common Shares, if any such date is to be fixed, and such notice shall be so given in the case of any action covered by clause (iii) above at least 10 days prior to the record date for determining holders of the Common Shares for purposes of such action, and in the case of any such other action, at least 10 days prior to the date of the taking of such proposed action or the date of participation therein by the holders of the Common Shares, whichever shall be the earlier. (b) In case any event set forth in Section 11(a)(ii) hereof shall occur, then the Corporation shall as soon as practicable thereafter give to each holder of a Right Certificate and to the Rights Agent, in accordance with Section 26 hereof, a notice of the occurrence of such event, which notice shall describe such event and the consequences of such event to holders of Rights under Section 11(a)(ii) hereof. Section 26. Notices. Notices or demands authorized by this Agreement to be given or made by the Rights Agent or by the holder of any Right Certificate to or on the Corporation shall be sufficiently given or made if sent by first-class mail, postage prepaid, addressed (until another address is filed in writing with the Rights Agent) as follows: Washington Trust Bancorp, Inc. 23 Broad Street Westerly, RI 02891 Attention: Secretary Subject to the provisions of Section 21 hereof, any notice or demand authorized by this Agreement to be given or made by the Corporation or by the holder of any Right Certificate to or on the Rights Agent shall be sufficiently given or made if sent by first-class mail, postage prepaid, addressed (until another address is filed in writing with the Corporation) as follows: Mellon Investor Services LLC 1 Mellon Center, Suite 2122 500 Grant Street Pittsburgh, PA 15258 Attention: Relationship Manager Notices or demands authorized by this Agreement to be given or made by the Corporation or the Rights Agent to the holder of any Right Certificate shall be sufficiently given or made if in writing, sent by first-class mail, postage prepaid, addressed to such holder at the address of such holder as shown on the registry books of the Corporation. Section 27. Supplements and Amendments. The Corporation may from time to time, and the Rights Agent shall, if the Corporation so directs, supplement or amend this Agreement without the approval of any holders of Right Certificates in order to cure any ambiguity, to correct or supplement any provision contained herein which may be defective or inconsistent with any other provisions herein, or to make any change to or delete any provision hereof or to adopt any other provisions with respect to the Rights which the Corporation may deem necessary or desirable. Any such supplement or amendment will be evidenced by a writing signed by the Corporation and the Rights Agent; provided, however, that from and after such time as any Person becomes an Acquiring Person, this Agreement shall not be amended or supplemented in any manner which would adversely affect the interests of the holders of Rights (other than an Acquiring Person and its Affiliates and Associates). Upon the delivery of a certificate from an appropriate officer of the Corporation that states that the proposed supplement or amendment complies with this Section 27, the Rights Agent shall execute such supplement or amendment, provided, however, the Rights Agent shall not be obligated to enter into any amendment or supplement to this Agreement which changes or increases the Rights Agent's rights, duties, liabilities or obligations hereunder. Section 28. Successors. All the covenants and provisions of this Agreement by or for the benefit of the Corporation or the Rights Agent shall bind and inure to the benefit of their respective successors and assigns hereunder. Section 29. Benefits of this Agreement. Nothing in this Agreement shall be construed to give to any Person other than the Corporation, the Rights Agent and the registered holders of the Right Certificates (and, prior to the Distribution Date, the Common Shares) any legal or equitable right, remedy or claim under this Agreement; but this Agreement shall be for the sole and exclusive benefit of the Corporation, the Rights Agent and the registered holders of the Right Certificates (and, prior to the Distribution Date, the Common Shares). Section 30. Severability. If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction or other authority to be invalid, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions of this Agreement shall remain in full force and effect and shall in no way be affected, impaired or invalidated. Section 32. Counterparts. This Agreement may be executed in any number of counterparts and each of such counterparts shall for all purposes be deemed to be an original, and all such counterparts shall together constitute but one and the same instrument. Section 33. Descriptive Headings. Descriptive headings of the several Sections of this Agreement are inserted for convenience only and shall not control or affect the meaning or construction of any of the provisions hereof. Section 34. Administration. The Board of Directors of the Corporation shall have the exclusive power and authority to administer this Agreement and to exercise all rights and powers specifically granted to the Board of Directors or the Corporation or as may be necessary or advisable in the administration of this Agreement. All such actions, calculations, determinations and interpretations which are done or made by the Board of Directors in good faith shall be final, conclusive and binding on the Corporation, the Rights Agent, the holders of the Rights and all other parties and shall not subject the Board of Directors to any liability to the holders of the Rights. The Rights Agent may conclude without any obligation or responsibility to investigation or inquiry whatsoever that all actions, calculations, determination and interpretations which are done or made by the Board of Directors were done or made by it in good faith. [Remainder of the page intentionally left blank] IN WITNESS WHEREOF, the parties hereto have caused this Rights Agreement to be duly executed and their respective corporate seals to be hereunder affixed and attested, all as of the day and year first above written. Attest: WASHINGTON TRUST BANCORP, INC. Harvey C. Perry, II By: David V. Devault - ------------------- --------------------------------------- Name: David V. Devault Title: Executive Vice Pres., Treasurer and Chief Financial Officer Attest: MELLON INVESTOR SERVICES LLC By: Jack A. Livingston - ------------------- --------------------------------------- Name: Jack A. Livingston Title: Vice President Exhibit A Form of Right Certificate Certificate No R- ______ Rights NOT EXERCISABLE AFTER AUGUST 31, 2006 OR EARLIER IF REDEMPTION OR EXCHANGE OCCURS. THE RIGHTS ARE SUBJECT TO REDEMPTION AT $0.001 PER RIGHT AND TO EXCHANGE ON THE TERMS SET FORTH IN THE AMENDED AND RESTATED RIGHTS AGREEMENT. UNDER CERTAIN CIRCUMSTANCES, RIGHTS THAT ARE OR WERE BENEFICIALLY OWNED BY AN ACQUIRING PERSON OR ANY ASSOCIATES OR AFFILIATES THEREOF (AS SUCH TERMS ARE DEFINED IN THE RIGHTS AGREEMENT) OR ANY SUBSEQUENT HOLDER OF SUCH RIGHTS MAY BECOME NULL AND VOID. Right Certificate WASHINGTON TRUST BANCORP, INC. This certifies that _______________________, or registered assigns, is the registered owner of the number of Rights set forth above, each of which entitles the owner thereof, subject to the terms, provisions and conditions of the Amended and Restated Rights Agreement, dated as of March 1, 2002 (the "Rights Agreement"), between Washington Trust Bancorp, Inc., a Rhode Island corporation (the "Corporation"), and Mellon Investor Services LLC, as Rights Agent (the "Rights Agent"), to purchase from the Corporation at any time after the Distribution Date (as such term is defined in the Rights Agreement and prior to 5:00 P.M., Providence, Rhode Island time, on August 31, 2006, at the office of the Rights Agent, or at the office of its successor as Rights Agent, one fully paid non-assessable share of Common Stock, par value $0.0625 per share (the "Common Shares"), of the Corporation, at a purchase price of $120.00 per Common Share (the "Purchase Price"), upon presentation and surrender of this Right Certificate with the certification and the Form of Election to Purchase duly executed. The number of Rights evidenced by this Right Certificate (and the number of Common Shares which may be purchased upon exercise hereof) set forth above, and the Purchase Price set forth above, are the number and Purchase Price as of September 3, 1996, based on the Common Shares as constituted at such date. As provided in the Rights Agreement, the Purchase Price and the number of Common Shares which may be purchased upon the exercise of the Rights evidenced by this Right Certificate are subject to modification and adjustment upon the happening of certain events. From and after the occurrence of an event described in Section 11(a)(ii) of the Rights Agreement, if the Rights evidenced by this Right Certificate are or were at any time on or after the earlier of (x) the Shares Acquisition Date (as such term is defined in the Rights Agreement) and (y) the Distribution Date (as such term is defined in the Rights Agreement) acquired or beneficially owned by an Acquiring Person or an Associate or Affiliate of an Acquiring Person (as such terms are defined in the Rights Agreement), such Rights shall become null and void, and any holder of such Rights shall thereafter have no right to exercise such Rights. This Right Certificate is subject to all of the terms, provisions and conditions of the Rights Agreement, which terms, provisions and conditions are hereby incorporated herein by reference and made a part hereof and to which Rights Agreement reference is hereby made for a full description of the rights, limitations of rights, obligations, duties and immunities hereunder of the Rights Agent, the Corporation and the holders of the Right Certificates. Copies of the Rights Agreement are on file at the principal executive offices of the Corporation and the offices of the Rights Agent. This Right Certificate, with or without other Right Certificates, upon surrender at the office of the Rights Agent, may be exchanged for another Right Certificate or Right Certificates of like tenor and date evidencing Rights entitling the holder to purchase a like aggregate number of Common Shares as the Rights evidenced by the Right Certificate or Right Certificates surrendered shall have entitled such holder to purchase. If this Right Certificate shall be exercised in part, the holder shall be entitled to receive upon surrender hereof another Right Certificate or Right Certificates for the number of whole Rights not exercised. Subject to the provisions of the Rights Agreement, the Rights evidenced by this Certificate (i) may be redeemed by the Corporation at a redemption price of $0.001 per Right or (ii) may be exchanged in whole or in part for shares of the Corporation's Common Stock, par value $0.0625 per share. No fractional Common Shares are required to be issued upon the exercise of any Right or Rights evidenced hereby. Fractional shares may, at the election of the Corporation, be evidenced by depositary receipts. A cash payment may be made in lieu of fractional shares as provided in the Rights Agreement. No holder of this Right Certificate shall be entitled to vote or receive dividends or be deemed for any purpose the holder of the Common Shares or of any other securities of the Corporation which may at any time be issuable on the exercise hereof, nor shall anything contained in the Rights Agreement or herein be construed to confer upon the holder hereof, as such, any of the rights of a shareholder of the Corporation or any right to vote for the election of directors or upon any matter submitted to shareholders at any meeting thereof, or to give or withhold consent to any corporate action, or to receive notice of meetings or other actions affecting shareholders (except as provided in the Rights Agreement), or to receive dividends or subscription rights, or otherwise, until the Right or Rights evidenced by this Right Certificate shall have been exercised as provided in the Rights Agreement. This Right Certificate shall not be valid or obligatory for any purpose until it shall have been countersigned by the Rights Agent. WITNESS the facsimile signature of the proper officers of the Corporation and its corporate seal. Dated as of _________________, _______. Attest: WASHINGTON TRUST BANCORP, INC. ______________________________ By:______________________________ Countersigned: ______________________________ Mellon Investor Services LLC, as Rights Agent By:___________________________ Authorized Signature Form of Reverse Side of Right Certificate FORM OF ASSIGNMENT (To be executed by the registered holder if such holder desires to transfer the Right Certificate.) FOR VALUE RECEIVED __________________________sells, , assigns and transfers unto ____________________________________________________________ _______________________________ (Please print name and address of transferee) this Right Certificate, together with all right, title and interest therein, and does hereby irrevocably constitute and appoint , Attorney, to transfer the within Right Certificate on the books of the within-named Corporation, with full power of substitution. Dated: ______________,________ _______________________ Signature Signature Guaranteed: Signatures must be guaranteed by a member firm of a registered national securities exchange, a member of the National Association of Securities Dealers, Inc., or a commercial bank or trust Corporation having an office or correspondent in the United States. - -------------------------------------------------------------------------------- The undersigned hereby certifies that the Rights evidenced by this Right Certificate are not beneficially owned by an Acquiring Person or an Affiliate or Associate thereof (as defined in the Rights Agreement). _______________________ Signature - -------------------------------------------------------------------------------- Form of Reverse Side of Right Certificate -- continued FORM OF ELECTION TO PURCHASE (To be executed if holder desires to exercise the Right Certificate.) To: WASHINGTON TRUST BANCORP, INC.: The undersigned hereby irrevocably elects to exercise ______________________________ Rights represented by this Right Certificate to purchase the Common Shares issuable upon the exercise of such Rights and requests that certificates for such Common Shares be issued in the name of: Please insert social security or other identifying number ________________________________________________________________________________ (Please print name and address) ________________________________________________________________________________ If such number of Rights shall not be all the Rights evidenced by this Right Certificate, a new Right Certificate for the balance remaining of such Rights shall be registered in the name of and delivered to: Please insert social security or other identifying number ________________________________________________________________________________ (Please print name and address) ________________________________________________________________________________ Dated: _______________, ________ ______________________________ Signature Signature Guaranteed: Signatures must be guaranteed by a member firm of a registered national securities exchange, a member of the National Association of Securities Dealers, Inc., or a commercial bank or trust company having an office or correspondent in the United States. - -------------------------------------------------------------------------------- The undersigned hereby certifies that the Rights evidenced by this Right Certificate are not beneficially owned by an Acquiring Person or an Affiliate or Associate thereof (as defined in the Rights Agreement). ______________________________ Signature - -------------------------------------------------------------------------------- NOTICE The signature in the foregoing Forms of Assignment and Election must conform to the name as written upon the face of this Right Certificate in every particular, without alteration or enlargement or any change whatsoever. In the event the certification set forth above in the Form of Assignment or the Form of Election to Purchase, as the case may be, is not completed, the Corporation and the Rights Agent will deem the beneficial owner of the Rights evidenced by this Right Certificate to be an Acquiring Person or an Affiliate or Associate thereof (as defined in the Rights Agreement) and such Assignment or Election to Purchase will not be honored. Exhibit B SUMMARY OF RIGHTS On August 15, 1996, the Board of Directors of Washington Trust Bancorp, Inc. (the "Corporation") declared a dividend of one common share purchase right (a "Right") for each share of common stock, par value $0.0625 per share (the "Common Shares") outstanding on September 3, 1996 (the "Record Date") to the shareholders of record on that date. Each Right entitles the registered holder to purchase from the Corporation, one Common Share of the Corporation, at a price of $120.00 per Common Share (the "Purchase Price"), subject to adjustment. The description and terms of the Rights are set forth in the Amended and Restated Rights Agreement, dated as of March 1, 2002 (the "Rights Agreement"), between the Corporation and Mellon Investor Services LLC, as Rights Agent (the "Rights Agent"). Until the earlier to occur of (i) 10 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 Shares, or (ii) 10 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 Shares (the earlier of such dates being called the "Distribution Date"), the Rights will be evidenced, with respect to any of the Common Share certificates outstanding as of the Record Date, by such Common Share certificate with a copy of this Summary of Rights attached thereto. In the event any Person becomes an Acquiring Person, each holder of a Right shall thereafter have a right to receive, upon exercise thereof at a price equal to the then current Purchase Price multiplied by the number of Common Shares for which a Right is then exercisable, such number of Common Shares of the Corporation as shall equal the result obtained by (x) multiplying the then current Purchase Price by the number of Common Shares for which a Right is then exercisable and dividing that product by (y) 50% of the then current per share market price of the Corporation's Common Shares. From and after the occurrence of such an event, any Rights owned by such Acquiring Person or its affiliates shall be void and any holder of such Rights shall have no right to exercise such Rights. The Rights Agreement provides that, until the Distribution Date, the Rights will be transferred with and only with the Common Shares. Until the Distribution Date (or earlier redemption or expiration of the Rights), new Common Share certificates issued after the Record Date or upon transfer or new issuance of Common Shares will contain a notation incorporating the Agreement by reference. Until the Distribution Date (or earlier redemption or expiration of the Rights), the surrender for transfer of any certificates for Common Shares outstanding as of the Record Date, even without such notation or a copy of this Summary of Rights being attached thereto, will also constitute the transfer of the Rights associated with the Common Shares represented by such certificate. As soon as practicable following the Distribution Date, separate certificates evidencing the Rights ("Right Certificates") will be mailed to holders of record of the Common Shares as of the Close of Business on the Distribution Date and such separate Right Certificates alone will evidence the Rights. The Rights are not exercisable until the Distribution Date. The Rights will expire on August 31, 2006 (the "Final Expiration Date"), unless the Final Expiration Date is extended or unless the Rights are earlier redeemed by the Corporation, in each case, as described below. The Purchase Price payable, and the number of Common Shares or other securities or property issuable, upon exercise of the Rights are subject to adjustment from time to time to prevent dilution in the event of a stock dividend on, or a subdivision or combination of, the Common Shares, in connection with a distribution of securities or assets in respect of, in lieu of or in exchange for Common Shares, whether by dividend, in a reclassification or recapitalization or otherwise as set forth in the Rights Agreement. 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 null and void), will thereafter have the right to receive upon exercise that number of Common Shares 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. If the Corporation does not have sufficient Common Shares to satisfy such obligation to issue Common Shares, or if the Board of Directors so elects, the Corporation shall deliver upon payment of the exercise price of a Right an amount of cash or securities equivalent in value to the Common Shares issuable upon exercise of a Right; provided that, if the Corporation fails to meet such obligation within 30 days following the later of (x) the first occurrence of an event triggering the right to purchase Common Shares and (y) the date on which the Corporation's right to redeem the Rights expires, the Corporation must deliver, upon exercise of a Right but without requiring payment of the exercise price then in effect, Common Shares (to the extent available) and cash equal in value to the difference between the value of the Common Shares otherwise issuable upon the exercise of a Right and the exercise price then in effect. The Board of Directors may extend the 30-day period described above for up to an additional 60 days to permit the taking of action that may be necessary to authorize sufficient additional Common Shares to permit the issuance of Common Shares upon the exercise in full of the Rights. At any time after any Person becomes an Acquiring Person and prior to the acquisition by any person or group of a majority of the outstanding Common Shares, the Board of Directors of the Corporation may exchange the Rights (other than Rights owned by such person or group which have become null and void), in whole or in part, at an exchange ratio of one Common Share per Right (subject to adjustment). With certain exceptions, no adjustment in the Purchase Price will be required until cumulative adjustments require an adjustment of at least 1% in such Purchase Price. No fractional Common Shares are required to be issued. Fractional shares may, at the election of the Corporation, be evidenced by depositary receipts. In lieu of fractional shares, an adjustment in cash will be made based on the market price of the Common Shares on the last trading day prior to the date of exercise. 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 (the "Redemption Price"). The redemption of the Rights may be made effective at such time, on such basis and with such conditions as the Board of Directors in its sole discretion may establish. Immediately upon any redemption of the Rights, the right to exercise the Rights will terminate and the only right of the holders of Rights will be to receive the Redemption Price. The terms of the Rights may be amended by the Board of Directors of the Corporation without the consent of the holders of the Rights, except that from and after such time as any person becomes an Acquiring Person no such amendment may adversely affect the interests of the holders of the Rights (other than the Acquiring Person and its Affiliates and Associates). Until a Right is exercised, the holder thereof, as such, will have no rights as a shareholder of the Corporation, including, without limitation, the right to vote or to receive dividends. A copy of the Agreement is available free of charge from the Corporation. This summary description of the Rights does not purport to be complete and is qualified in its entirety by reference to the Rights Agreement, which is hereby incorporated herein by reference. EX-10 5 q202ex10a.txt NONCOMPETITION AGREEMENT EXHIBIT 10.a Washington Trust Bancorp, Inc. NONCOMPETITION AGREEMENT This Noncompetition Agreement (the "Agreement") is made and entered into as of April 16, 2002, by and between Washington Trust Bancorp, Inc. (the "Company") and Patrick J. Shanahan, Jr. (the "Executive"). WITNESSETH: WHEREAS, the Company and First Financial Corp., (the "Seller") have entered into an Agreement and Plan of Merger dated as of November 12, 2001 (the "Merger Agreement") pursuant to which Seller will merge with and into Buyer (the "Merger"); WHEREAS, the Executive is currently the Chairman, Chief Executive Officer and President of the Seller and the parties acknowledge that the Executive has considerable knowledge, business contacts and expertise relating to the business of the Company, which knowledge, contacts and expertise, if used in competition with the Company would substantially harm the business and financial prospects of the Company; WHEREAS, the execution of this Agreement is a condition precedent to the Company's obligations to consummate the Merger NOW, THEREFORE, in consideration of the mutual covenants set forth herein and other good valuable consideration, the parties hereto agree as follows: 1. Agreement Consideration In consideration for execution of this Agreement and the Executive's performance of the covenants of the Executive contained herein, the Company agrees to pay to the Executive $840,000.00 within two (2) business days following consummation of the Merger. It is understood and agreed that the execution and delivery of this Agreement by the Executive is a material inducement to the willingness of the Company to enter into the Merger Agreement and to consummate the transactions contemplated thereby. 2. Non-Compete The Executive agrees that during the three-year period following consummation of the Merger, the Executive will not, directly or indirectly, (i) become a director, officer, employee, principal, agent, consultant or independent contractor of any insured depository institution, trust company or parent holding company of any such institution or company which has an office in Rhode Island, Massachusetts or Connecticut (a "Competing Business"); provided, however, that this provision shall not prohibit the Executive from owning bonds, non-voting preferred stock or up to two percent (2%) of the outstanding common stock of any such entity if such common stock is publicly traded; provided, further, however, that this provision shall not prohibit the Executive from owning the common stock or from serving as a director of the Company or any of its subsidiaries, (ii) solicit or induce, or cause others to solicit or induce, any employee of the Company or any of its subsidiaries to leave the employment of such entities or (iii) solicit (whether by mail, telephone, personal meeting or any other means) any customer of the Company or any of its subsidiaries to transact banking business with any other entity, whether or not a Competing Business, or to reduce or refrain from doing any banking business with the Company or its subsidiaries, or interfere with or damage (or attempt to interfere with or damage) any banking relationship between the Company or its subsidiaries and any such customers. 3. Confidentiality Except as required by law or regulation (including without limitation in connection with any judicial or administrative process or proceeding), the Executive shall keep secret and confidential and shall not disclose to any third party (other than the Company or its subsidiaries) in any fashion or for any purpose whatsoever any information regarding the Company, Seller or any of their respective subsidiaries, which is not available to the general public to which he had access at any time during the course of his employment by Seller or its subsidiaries, including without limitation, any such information relating to: business or operations, plans, strategies, prospects or objectives; products, technology, processes or specifications; research and development, operations or plans; customers and customer lists; distribution, sales, service, support and marketing practices and operations; financial condition, results of operations and prospects; operational strengths and weaknesses; and personnel and compensation policies and procedures. 4. Injunctive Relief; Remedies The Executive agrees that damages at law will be an insufficient remedy to the Company in the event that the Executive violates any of the provisions of Sections 2 or 3, and that the Company may apply for and, upon the requisite showing, have injunctive relief in any court of competent jurisdiction to restrain the breach of threatened or attempted breach of or otherwise to specifically enforce any of the covenants contained in Section 2 or 3. The Executive also agrees that such remedies shall be in addition to any and all remedies, including damages, available to the Company against the Executive for such breaches or threatened or attempted breaches. 5. Release (a) For, and in consideration of the commitments made herein by the Company, the Executive, for himself and for his heirs, successors and assigns, does hereby release completely and forever discharge the Company and its subsidiaries, affiliates, stockholders, attorneys officers, directors, agents and employees, successors and assigns, and any other party associated with the Company (the "Released Parties"), to the fullest extent permitted by applicable law, from any and all claims, rights, demands, actions, liabilities, obligations, causes of action of any and all kind, nature and character whatsoever, know or unknown, in any way connected with his employment by Seller or any of its subsidiaries (including in each case predecessors thereof) either as a director, officer or employee, or in connection with the termination of such employment. Notwithstanding the foregoing, the Executive does not release the Company from any obligations of the Company, Seller or any of their respective subsidiaries to the Executive under (i) any employee benefit plan, agreement or arrangement of Seller or the Company or any of their respective subsidiaries, whether or not referred to in this Agreement, pursuant to which the Executive is entitled to any benefits or payments, (ii) the Merger Agreement and (iii) this Agreement. (b) For and in consideration of the commitments made herein by the Executive, including without limitation the releases in paragraph (a) above, the Company, for itself, and for its successors and assigns does hereby release completely and forever discharge the Executive and his heirs, successors and assigns, to the fullest extent permitted by applicable law, from any and all claims, rights, demands, actions, liabilities, obligations, causes of action of any and all kind, nature and character whatsoever, known or unknown, in any way connected with the Executive's employment by Seller or any of its subsidiaries (including predecessors thereof), either as a director, officer or employee. Notwithstanding anything in the foregoing to the contrary, the Company does not release the Executive from claims arising out of any breach by the Executive of (i) any law or regulation by the Executive during the term of and related to his employment by Seller or any of its subsidiaries (including predecessors thereof), either as a director, officer or employee, or (ii) this Agreement. 6. No Disparagement The Executive agrees that he shall not, directly or indirectly, make any statement (whether orally, in writing or through any other media), or take any other action, if such statement, or action is intended or could reasonably be expected to disparage the Company, or any of its affiliates or to adversely affect the reputation or business or credit standing of the Company or any of its affiliates. 7. Representations and Warranties The Company and the Executive represent and warrant to each other that they have carefully read this Agreement and consulted with respect thereto with their respective counsel and that each of them fully understands the content of this Agreement and its legal effect. Each party hereto also represents and warrants that this Agreement is a legal, valid and binding obligation of such party which is enforceable against it in accordance with its terms. 8. Successors and Assigns This Agreement will inure to the benefit of and be binding upon the Executive and his heirs, successors and assigns, and upon the Company, including any successor to the Company by merger or consolidation or any other change in form or any other person or firm or corporation to which all or substantially all of the assets and business of the Company may be sold or otherwise transferred. This Agreement may not be assigned by any party hereto without the consent of the other party. 9. Notices All notices and other communications hereunder shall be in writing and shall be deemed given if delivered personally, telecopied (with confirmation), or delivered by an express courier (with confirmation) to the parties at the following addresses (or at such other address for a party as shall be specified by like notice): if to the Company, to: Washington Trust Bancorp, Inc. 23 Broad Street Westerly, RI 02891 Attn: John F. Treanor, President and John C. Warren, Chief Executive Officer with copies to: Goodwin Procter LLP Exchange Place Boston, MA 02109-2881 Attn: Paul W. Lee, P.C. and John T. Haggerty, Esq. and if to the Executive, to Patrick J. Shanahan, Jr. 10 Celestia Court North Kingstown, RI 02903 with a copy to: Bingham Dana LLP 150 Federal Street Boston, MA 02110 Attn: Neal J. Curtin, Esq. and Stephen H. Faberman, Esq. 10. Withholding The Company may withhold from any amounts payable under this Agreement such Federal, state, local or foreign taxes as shall be required to be withheld pursuant to any applicable law or regulation. 11. Entire Agreement; Severability (a) This Agreement incorporates the entire understanding between the parties relating to the subject matter hereof, recites the sole consideration for the promises exchanged and supersedes any and all prior agreements, both written and oral, between the Company and the Executive or the Seller and the Executive, in either case with respect to the subject hereof. In reaching this Agreement, no party has relied upon any representation or promise except those set forth herein. (b) Any term or provision of this Agreement which is invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be ineffective to the extent of such invalidity or unenforceability without rendering invalid or unenforceable the remaining terms and provisions of this Agreement or affecting the validity or enforceability of any of the terms and provisions of this Agreement in any other jurisdiction. If any provision of this Agreement is so broad as to be unenforceable, the provision shall be interpreted to be only so broad as is enforceable. In all such cases, the parties shall use their reasonable best efforts to substitute a valid, legal and enforceable provision which, insofar as practicable, implements the original purposes and intents of this Agreement. 12. Waiver Failure to insist upon strict compliance with any of the terms, covenants or conditions hereof shall not be deemed a waiver of such term, covenant or condition. A waiver of any provision of this Agreement must be made in writing, designated as a waiver and signed by the party against whom its enforcement is sought. Any waiver or relinquishment of any right or power hereunder at any one or more times shall not be deemed a waiver or relinquishment of such right or power at any other time or times. 13. Counterparts This Agreement may be executed in counterparts, all of which shall be considered one and the same agreement and shall become effective when counterparts have been signed by each of the parties and delivered to the other parties, it being understood that all parties need not sign the same counterpart. 14. Governing Law This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of Rhode Island applicable to agreements made and entirely to be performed within the jurisdiction. 15. Headings The headings of sections in this Agreement are for convenience of reference only and are not intended to qualify the meaning of any section. Any reference to a section number shall refer to a section of this Agreement, unless otherwise stated. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] IN WITNESS WHEREOF, the Company and the Executive have caused this Agreement to be executed as of the date first above written. WASHINGTON TRUST BANCORP, INC. John C. Warren ___________________________________________ By: John C. Warren Title: Chairman and Chief Executive Officer EXECUTIVE: Patrick J. Shanahan Jr. ___________________________________________ Patrick J. Shanahan, Jr. EX-11 6 q202ex11.txt COMPUTATION OF PER SHARE EARNINGS EXHIBIT 11 Washington Trust Bancorp, Inc. Computation of Per Share Earnings For the Periods Ended June 30, 2002 and 2001
Three months ended June 30, 2002 2001 - ---------------------------------------------------- ------------------------------------------------------------- (In thousands, except per share amounts) Basic Diluted Basic Diluted ------------------------------------------------------------- Net income $4,024 $4,024 $3,800 $3,800 Share amounts: Average outstanding 12,858.7 12,858.7 12,031.3 12,031.3 Common stock equivalents - 206.4 - 206.5 - ------------------------------------------------ ------------------------------------------------------------- Weighted average outstanding 12,858.7 13,065.1 12,031.3 12,237.8 - ------------------------------------------------ ------------------------------------------------------------- Earnings per share $.31 $.31 $.32 $.31 - ------------------------------------------------ ------------------------------------------------------------- Six months ended June 30, 2002 2001 - ---------------------------------------------------- ------------------------------------------------------------- (In thousands, except per share amounts) Basic Diluted Basic Diluted ------------------------------------------------------------- Net income $7,768 $7,768 $3,954 $3,954 Share amounts: Average outstanding 12,434.1 12,434.1 12,021.8 12,021.8 Common stock equivalents - 188.3 - 147.5 - ------------------------------------------------ ------------------------------------------------------------- Weighted average outstanding 12,434.1 12,622.4 12,021.8 12,169.3 - ------------------------------------------------ ------------------------------------------------------------- Earnings per share $.62 $.62 $.33 $.32 - ------------------------------------------------ -------------------------------------------------------------
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