Proxy 2005
UNITED
STATES SECURITIES AND EXCHANGE COMMISSION
Washington, DC
20549
SCHEDULE 14A
(Rule 14A-101)
INFORMATION REQUIRED IN PROXY
STATEMENT
SCHEDULE
14A INFORMATION
Proxy
Statement Pursuant to Section 14(a) of the Securities
Exchange
Act of 1934
(Amendment
No. )
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Definitive
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Definitive
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Soliciting
Material Pursuant to §
240.14a-12 |
Washington
Trust Bancorp, Inc.
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(Name
of Registrant as Specified In Its Charter)
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(Name
of Person(s) Filing Proxy Statement if other than the
Registrant)
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WASHINGTON
TRUST
BANCORP,
INC. |
NOTICE
OF ANNUAL MEETING OF SHAREHOLDERS
To
Be Held April 26, 2005 |
To the
Shareholders of
Washington
Trust Bancorp, Inc.:
NOTICE IS
HEREBY GIVEN that the Annual Meeting of Shareholders of WASHINGTON TRUST
BANCORP, INC. (the “Corporation”), a Rhode Island corporation, will be held at
the Westerly Library, 44 Broad Street, Westerly, Rhode Island on Tuesday, the
26th of
April, 2005 at 11:00 a.m. for the purpose of considering and acting upon the
following:
1. |
The
election of 5 directors for three year terms, each to serve until their
successors are duly elected and qualified; |
2. |
The
ratification of the selection of independent auditors to audit the
Corporation’s consolidated financial statements for the year ending
December 31, 2005; and |
3. |
Such
other business as may properly come before the meeting, or any adjournment
thereof. |
Only
shareholders of record at the close of business on February 25, 2005 will be
entitled to notice of and to vote at such meeting. The transfer books of the
Corporation will not be closed.
IT
IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AND VOTED WHETHER OR NOT YOU PLAN
TO BE PRESENT AT THE ANNUAL MEETING. THEREFORE, IF YOU DO NOT EXPECT TO BE
PRESENT, PLEASE SIGN, DATE, AND FILL IN THE ENCLOSED PROXY AND RETURN IT BY MAIL
IN THE ENCLOSED ADDRESSED ENVELOPE OR VOTE YOUR SHARES AS OTHERWISE INSTRUCTED
IN THE ENCLOSED PROXY. IF YOU WISH TO VOTE YOUR SHARES IN PERSON AT THE ANNUAL
MEETING, YOUR PROXY MAY BE REVOKED.
By order
of the Board of Directors,
/s/ Harvey C. Perry, II
Harvey C.
Perry, II
Secretary
March 15,
2005
WASHINGTON
TRUST BANCORP, INC.
23 Broad
Street, Westerly, RI 02891 Telephone 401-348-1200
The
accompanying proxy is solicited by and on behalf of the Board of Directors of
Washington Trust Bancorp, Inc. (the “Corporation”) for use at the Annual Meeting
of Shareholders to be held on April 26, 2005, and any adjournment thereof, and
may be revoked at any time before it is exercised by submission of another proxy
bearing a later date, by attending the Annual Meeting and voting in person, or
by notifying the Corporation of the revocation in writing to the Secretary of
the Corporation, 23 Broad Street, Westerly, Rhode Island 02891. If not revoked,
the proxy will be voted at the Annual Meeting in accordance with the
instructions indicated by the shareholder or, if no instructions are indicated,
all shares represented by valid proxies received pursuant to this solicitation
(and not revoked before they are voted) will be voted FOR Proposals No. 1 and 2
referred to herein.
As of
February 25, 2005, the record date for determining shareholders entitled to
notice of and to vote at the Annual Meeting, there were issued and outstanding
13,296,360 shares of common stock, $.0625 par value (the “Common Stock”), of the
Corporation. Each share of Common Stock is entitled to one vote per share on all
matters to be voted upon at the Annual Meeting, with all holders of Common Stock
voting as one class. A majority of the outstanding shares of Common Stock
entitled to vote, represented in person or by proxy, will constitute a quorum
for the transaction of business at the Annual Meeting. Abstentions and broker
non-votes will be counted for purposes of determining if a quorum is
present.
With
regard to the election of directors, votes may be cast in favor or withheld.
Votes that are withheld have the same effect as a vote against a nominee.
Abstentions on the ratification of the selection of independent auditors will
have the same effect as a vote against such matter. A broker “non-vote” occurs
when a nominee holding shares for a beneficial owner does not vote on a
particular proposal because the nominee does not have discretionary voting power
with respect to that item and has not received instructions from the beneficial
owner. Broker non-votes will not be counted for purposes of approving the
matters to be acted upon at the Annual Meeting. As a result, broker non-votes
will have no effect on the outcome of the election of directors and the
ratification of the selection of independent auditors.
Management
knows of no matters to be brought before the Annual Meeting other than those
referred to in this Proxy Statement. If any other business should properly come
before the meeting, the persons named in the proxy will vote in accordance with
their best judgment.
The
approximate date on which this Proxy Statement and accompanying proxy cards will
first be mailed to shareholders is March 18, 2005.
ELECTION
OF DIRECTORS (Proposal 1 on the Proxy Ballot)
The
Corporation’s Board of Directors is divided into three approximately equal
classes, with each class serving staggered terms of three years, so that only
one class is elected in any one year. Notwithstanding such three-year terms,
pursuant to the Corporation’s by-laws, any director who reaches his or her
seventieth birthday agrees to resign from the Board of Directors as of the next
Annual Meeting of Shareholders following such director’s seventieth birthday.
There are presently 16 directors.
This
year, a total of 5 nominees for election to the Board of Directors have been
nominated to be elected at the Annual Meeting to serve until the 2008 Annual
Meeting and until their respective successors are elected and qualified. If all
5 nominees are elected, the Board of Directors will consist of 16 directors.
Directors are elected by the affirmative vote of holders of a majority of the
shares of Common Stock represented in person or by proxy at the Annual Meeting
and entitled to vote thereon (provided that a quorum is present).
Based on
the recommendation of the independent members of the Executive Committee, the
Board of Directors has nominated Gary P.
Bennett, Larry J. Hirsch, Mary E. Kennard, H. Douglas Randall, III, and John F.
Treanor for election at the Annual Meeting. Each of the nominees for director is
presently a director of the Corporation. Each of the nominees has consented to
being named a nominee in this Proxy Statement and has agreed to serve as a
director if elected at the Annual Meeting. In the event that any nominee is
unable to serve, the persons named in the proxy have discretion to vote for
other persons if the Board of Directors designates such other persons. The Board
of Directors has no reason to believe that any of the nominees will be
unavailable for election.
The
Board of Directors recommends that shareholders vote “FOR” this
proposal.
NOMINEE
AND DIRECTOR INFORMATION
Biographies
of directors, including business experience for past five years:
[Graphic Omitted] |
Gary
P. Bennett
Age
63
Director
since 1994
Consultant.
Former Chairman and Chief Executive Officer, Analysis & Technology,
until 1999 (interactive multimedia training, info. systems, engineering
services). |
|
|
[Graphic Omitted] |
Steven
J. Crandall
Age
52
Director
since 1983
Vice
President, Ashaway Line & Twine Manufacturing Co. (manufacturer of
tennis string, fishing line and surgical sutures).
|
|
|
|
|
|
|
[Graphic Omitted] |
Larry
J. Hirsch, Esq.
Age
66
Director
since 1994
Attorney.
Former
President,
Westerly
Jewelry Co., Inc. (retailer) (retired 1999).
|
|
|
[Graphic Omitted] |
Barry
G. Hittner
Age
58
Director
since 2003
Attorney.
Of Counsel, Cameron & Mittleman, LLP, 2003 to present.
Of
Counsel, Edwards & Angell, LLP, 1999-2003.
|
|
|
|
|
|
|
[Graphic Omitted] |
Mary
E. Kennard, Esq.
Age
50
Director
since 1994
Vice
President and University Counsel,
The
American University.
|
|
|
[Graphic Omitted] |
Katherine
W. Hoxsie
Age
56
Director
since 1991
Vice
President,
Hoxsie
Buick-Pontiac-
GMC
Truck, Inc.
|
|
|
|
|
|
|
[Graphic Omitted] |
Edward
M. Mazze, Ph.D.
Age
64
Director
since 2000
Dean,
College of Business Administration and The Alfred J. Verrecchia-Hasbro
Inc. Leadership Chair in Business, University of Rhode Island, since
1998.
|
|
|
[Graphic Omitted] |
Kathleen
McKeough
Age
54
Director
since 2003
Retired.
Former Senior Vice President, Human Resources, GTech Holdings Corp., 2000
- 2004 (lottery industry and financial transaction processing).
Independent consultant, 1999-2000. |
Biographies
of directors, including business experience for past five years,
continued: |
[Graphic Omitted] |
Victor
J. Orsinger II
Age
58
Director
since 1983
Partner,
Orsinger
& Nardone, Attorneys at Law.
|
|
|
[Graphic Omitted] |
H.
Douglas Randall, III
Age
57
Director
since 2000
President,
HD
Randall, Realtors
(real
estate).
|
|
|
|
|
|
|
[Graphic Omitted] |
Joyce
O. Resnikoff
Age
68
Director
since 2000
Chief
Executive Officer, Olde Mistick Village, Mystic, Connecticut
(property
management).
|
|
|
[Graphic Omitted] |
Patrick
J. Shanahan, Jr.
Age
60
Director
since 2002
Former
Chairman and Chief Executive Officer, First Financial Corp. (retired
2002).
|
|
|
|
|
|
|
[Graphic Omitted] |
James
P. Sullivan, CPA
Age
66
Director
since 1983
Consultant.
Former
Finance Officer, Roman Catholic Diocese of Providence
(retired
2001).
|
|
|
[Graphic Omitted] |
Neil
H. Thorp
Age
65
Director
since 1983
President,
Thorp
& Trainer, Inc.
(insurance).
|
|
|
|
|
|
|
[Graphic Omitted] |
John
F. Treanor
Age
57
Director
since 2001
President
and Chief Operating Officer of the Corporation and the Bank since
1999.
|
|
|
[Graphic Omitted] |
John
C. Warren
Age
59
Director
since 1996
Chairman
and Chief Executive Officer of the Corporation and the Bank, since
1999.
|
The
following table presents all Washington Trust stock-based holdings, as of
February 25, 2005, of the directors and certain executive officers of the
Corporation and the Corporation’s subsidiary, The Washington Trust Company (the
“Bank”). The table also presents the stock-based holdings of David Wallace, as
of February 25, 2005, the person believed by the Corporation to be a beneficial
owner of more than 5% of the Corporation’s outstanding Common Stock. Mr.
Wallace’s stock ownership information is based on certain filings made under
Section 13 of the Securities Exchange Act of 1934, as amended (the “Exchange
Act”), and other information provided by Mr. Wallace to the Corporation. All
such information was provided by the shareholders listed below.
|
Term
Expiring
In |
Common
Stock
(1) |
Vested
Options
(2) |
Total |
Percentage
Of
Class |
Nominees
and Directors: |
|
|
|
|
|
Gary
P. Bennett |
2008
(3) |
6,082 |
10,642 |
16,724 |
0.12% |
Larry
J. Hirsch, Esq. |
2008
(3) |
12,724 |
7,376 |
20,100 |
0.14% |
Mary
E. Kennard, Esq. |
2008
(3) |
2,332 |
13,627 |
15,959 |
0.11% |
H.
Douglas Randall, III |
2008
(3) |
11,007 |
6,000 |
17,007 |
0.12% |
John
F. Treanor |
2008
(3) |
5,346 |
76,858 |
82,204 |
0.59% |
Steven
J. Crandall |
2006 |
3,041 |
11,064 |
14,105 |
0.10% |
Victor
J. Orsinger II |
2006 |
17,375 |
7,376 |
24,751 |
0.18% |
Patrick
J. Shanahan, Jr. |
2006 |
62,166 |
2,000 |
64,166 |
0.46% |
James
P. Sullivan, CPA |
2006 |
7,949 |
11,010 |
18,959 |
0.14% |
Neil
H. Thorp |
2006 |
34,857 |
11,064 |
45,921 |
0.33% |
Barry
G. Hittner |
2007 |
2,000 |
0 |
2,000 |
0.01% |
Katherine
W. Hoxsie |
2007 |
142,135 |
13,627 |
155,762 |
1.12% |
Edward
M. Mazze, Ph.D. |
2007 |
200 |
2,000 |
2,200 |
0.02% |
Kathleen
McKeough |
2007 |
1,020 |
0 |
1,020 |
0.01% |
Joyce
O. Resnikoff |
2007 |
2,518 |
6,000 |
8,518 |
0.06% |
John
C. Warren |
2007 |
40,038 |
118,256 |
158,294 |
1.14% |
|
|
|
|
|
|
Certain
Executive Officers: |
|
|
|
|
David
V. Devault |
21,192 |
60,461 |
81,653 |
0.59% |
Harvey
C. Perry II |
21,908 |
46,932 |
68,840 |
0.50% |
James
M. Vesey |
229 |
22,023 |
22,252 |
0.16% |
|
|
|
|
|
All
Directors and Executive Officers as a group
(26
persons) |
427,971 |
585,641 |
1,013,612 |
7.30% |
|
|
|
|
|
Beneficial
Owner: |
|
|
|
|
David
W. Wallace (4)
680
Steamboat Road, Greenwich, CT 06830 |
1,518,551 |
0 |
1,518,551 |
10.94% |
(1) |
Includes
925, 346, 229, and 1,095 common stock equivalents held by Messrs. Randall,
Treanor, Vesey and Warren, respectively, in the Corporation’s Nonqualified
Deferred Compensation Plan. |
(2) |
This
column includes stock options that are or will become exercisable within
60 days of February 25, 2005. |
(4) |
Based
on information set forth in an Amendment No. 5 to a Schedule 13G/A filed
with the Securities and Exchange Commission on February 9, 2005 and other
information provided by Mr. Wallace to the Corporation. Includes 125,000
shares owned by Mr. Wallace’s spouse, 542,580 shares held by the
Robert R. Young Foundation of which Mr. Wallace serves as President
and Trustee and 295,020 shares held by the Jean and David W. Wallace
Foundation of which Mr. Wallace serves as President and
Trustee. |
BOARD
OF DIRECTORS AND COMMITTEES
The
Corporation’s Board of Directors (the “Corporation’s Board”) held 9 meetings in
2004. In 2004, the Board of Directors of the Bank (the “Bank’s Board”), the
members of which included all of the Corporation’s Board members, held 13
meetings. During 2004, each member of the Corporation’s Board attended at least
75% of the aggregate number of meetings of the Corporation’s Board, the Bank’s
Board and the committees of the Corporation’s Board of which such person was a
member, except for Joyce O. Resnikoff. While the Corporation does not have a
formal policy related to Board member attendance at Annual Meetings, directors
are encouraged to attend each such Annual Meeting to the extent reasonably
practicable. Each of the directors attended the 2004 Annual Meeting of
Shareholders except Steven J. Crandall, Joyce O. Resnikoff and Patrick J.
Shanahan, Jr.
The
Corporation’s Board has determined that each of Gary P. Bennett,
Steven J. Crandall, Larry J. Hirsch, Barry G. Hittner,
Katherine W. Hoxsie, Mary E. Kennard, Edward M. Mazze, Kathleen
McKeough, Victor J. Orsinger II, H. Douglas Randall, III,
Joyce O. Resnikoff, James P. Sullivan and Neil H. Thorp is an
“independent director” as defined in Rule 4200(a)(15) of the National
Association of Securities Dealers’ listing standards. Therefore, a majority of
the Corporation’s Board is comprised of independent directors. Any interested
party who wishes to make their concerns known to the independent directors may
avail themselves of the same procedures utilized for shareholder communications
with the Board, which procedures are described herein under the heading
“Communications with the Board of Directors.”
In fiscal
2004, the committees of the Corporation’s Board included an Executive Committee,
a Compensation and Human Resources Committee (the “Compensation Committee”), and
an Audit Committee. Certain members of the Corporation’s Executive Committee
also performed the functions of a nominating and corporate governance committee
and were responsible for reviewing and overseeing the qualification and
nomination process for potential directors of the Corporation. In January 2005,
the Corporation created a Nominating and Corporate Governance Committee (the
“Nominating Committee”), which is responsible for, among other things,
identifying individuals qualified to become board members and recommending that
the Corporation’s Board select the director nominees for election at Annual
Meetings of Shareholders.
Executive
Committee
Members
of the Executive Committee are currently directors Orsinger (Chairperson),
Bennett, Hoxsie, Sullivan, Thorp, Treanor and Warren. Each of the non-employee
directors on the Executive Committee are considered “independent” within the
meaning of Rule 4200(a)(15) of the National Association of Securities Dealers’
listing standards and the rules of the Securities and Exchange Commission (the
“SEC”). The Executive Committee met 9 times in 2004 and, when the Corporation’s
Board is not in session, is entitled to exercise all the powers and duties of
the Corporation’s Board. The Corporation’s Board has designated the Chairperson
of the Executive Committee to serve as the “Lead Director” when the Board meets
in executive session without the presence of employee directors. In fiscal 2004,
the Executive Committee, excluding employee directors Treanor and Warren, was
responsible for the oversight of corporate governance matters.
In 2004,
the independent directors on the Executive Committee were also responsible for
reviewing the qualifications of potential nominees for election to the
Corporation’s Board. The Corporation did not have a written charter with respect
to the director nomination process in 2004.
The
criteria followed by the independent directors on the Executive Committee in
evaluating nominees, whether proposed by a shareholder or any other party,
included the requirement that all nominees have the highest personal and
professional integrity, demonstrate sound judgment and be able to effectively
interact with other members of the Corporation’s Board to serve the long-term
interests of the Corporation and its shareholders. The independent directors on
the Executive Committee also considered additional factors, including previous
experience on other boards; experience at a strategic or policy-making level in
a business, government, non-profit or academic organization of high standing; a
record of distinguished accomplishment in his or her field; sufficient time and
availability to devote to the affairs of the Corporation; relevant experience in
the banking industry; and whether the nominee would assist in achieving a mix of
Board members that represents a diversity of background or
experience.
In fiscal
2004, shareholders submitting candidates for consideration by the independent
directors on the Executive Committee were required to submit such nominations in
writing to the Secretary of the Corporation and to follow the timing,
informational and other requirements regarding shareholder nominations set forth
in clause (c) of Article Eighth of the Corporation’s Restated Articles of
Incorporation, as amended, and discussed herein under the heading “Nominating
Committee.” Each notice of a proposed nomination was required to include: (i)
the name, age, business address and, if known, residence address of each
nominee, (ii) the principal occupation or employment of each nominee, (iii) the
number of shares of stock of the Corporation which are beneficially owned by
each such nominee and (iv) any other information reasonably requested by the
Corporation.
The
Corporation has not paid a fee to any third parties to identify or evaluate
Board or committee nominees.
Nominating
Committee
In
January 2005, the Corporation established the Nominating Committee. For fiscal
2005, the members of the Nominating Committee are directors Orsinger
(Chairperson), Bennett, Hoxsie, Sullivan and Thorp, each of whom is considered
“independent” within the meaning of Rule 4200(a)(15) of the National Association
of Securities Dealers listing standards and the rules of the SEC. The Nominating
Committee is now responsible for identifying individuals qualified to become
board members, consistent with criteria approved by the Corporation’s Board, and
recommending that the Board select the director nominees for election at each
Annual Meeting of Shareholders. The Nominating Committee is also responsible for
developing and recommending to the Corporation’s Board a set of corporate
governance guidelines, recommending any changes to such guidelines, and
overseeing the evaluation of the Corporation’s Board and management. A copy of
the Nominating Committee charter is available to shareholders on the
Corporation’s website at www.washtrust.com under Investor
Relations.
At a
minimum, each nominee, whether proposed by a shareholder or any other party,
must (i) have the highest personal and professional integrity, demonstrate sound
judgment and effectively interact with other members of the Corporation’s Board
to serve the long-term interests of the Corporation and its shareholders; (ii)
have previous experience on other boards; (iii) have experience at a strategic
or policy-making level in a business, government, not-for-profit or academic
organization of high standing; (iv) have a record of distinguished
accomplishment in his or her field; (v) be well regarded in the community and
have a long-term reputation for the highest ethical and moral standards; (vi)
have sufficient time and availability to devote to the affairs of the
Corporation, particularly in light of the number of boards on which the nominee
may serve; and (vii) to the extent such nominee serves or has previously served
on other boards, have a demonstrated history of actively contributing at board
meetings.
The
Nominating Committee will evaluate all such proposed nominees in the same
manner, with no regard to the source of the initial recommendation of such
proposed nominee. In seeking candidates to consider for nomination to fill a
vacancy on the Corporation’s Board, the Nominating Committee may solicit
recommendations from a variety of sources, including current directors, the
Chief Executive Officer of the Corporation and other executive officers. The
Nominating Committee may also engage a search firm to identify or evaluate or
assist in identifying or evaluating candidates.
The
Nominating Committee will consider nominees recommended by shareholders.
Shareholders who wish to submit recommendations for candidates to the Nominating
Committee must submit their recommendations in writing to the Secretary of the
Corporation at 23 Broad Street, Westerly, RI 02891, who will forward all
recommendations to the Nominating Committee. For a shareholder recommendation to
be considered by the Nominating Committee at the 2006 Annual Meeting of
Shareholders, it must be submitted to the Corporation by November 11, 2005. All
shareholder recommendations for nominees must include the following information:
(i) the name and address of record of the shareholder; (ii) a representation
that the shareholder is a record holder of the Corporation’s securities, or if
the shareholder is not a record holder, evidence of ownership in accordance with
Rule 14a-8(b)(2) of the Exchange Act; (iii) the name, age, business and
residential address, educational background, current principal occupation or
employment, and principal occupation or employment for the preceding 5 full
fiscal years of the proposed nominee; (iv) a description of the qualifications
and background of the proposed nominee which addresses the minimum
qualifications and other criteria for Board membership approved by the
Corporation’s
Board;
(v) a description of all arrangements or understandings between the shareholder
and the proposed nominee; (vi) the consent of the proposed nominee (a) to be
named in the proxy statement relating to the Corporation’s Annual Meeting of
Shareholders and (b) to serve as a director if elected at such Annual Meeting;
and (vii) any other information regarding the proposed nominee that is required
to be included in a proxy statement filed pursuant to the rules of the
SEC.
Shareholder
nominations that are not being submitted to the Nominating Committee for
consideration, may be made at an Annual Meeting of Shareholders in accordance
with the procedures set forth in clause (c) of Article Eighth of the
Corporation's Restated Articles of Incorporation, as amended. Specifically,
advanced written notice of any nominations must be received by the Secretary not
less than 14 days nor more than 60 days prior to any meeting of shareholders
called for the election of directors (provided that if fewer than 21 days’
notice of the meeting is given to shareholders, notice of the proposed
nomination must be received by the Secretary not later than the 10th day
following the day on which notice of the meeting was mailed to
shareholders).
Compensation
Committee
Members
of the Compensation Committee are currently directors Bennett (Chairperson),
Hirsch, Kennard, Mazze, McKeough and Orsinger, each of whom is considered
“independent” within the meaning of Rule 4200(a)(15) of the National Association
of Securities Dealers’ listing standards and the rules of the SEC. The
Compensation Committee, which met 8 times in 2004, is responsible for reviewing
compensation policies, for remuneration arrangements for executive officers and
for the administration of the Corporation’s Amended and Restated 1988 Stock
Option Plan (“1988 Plan”), the 1997 Equity Incentive Plan, as amended (“1997
Plan”), and the 2003 Stock Incentive Plan, as amended (“2003 Plan”). The
Committee is also responsible for oversight of employee benefit programs and
hiring policies. The Compensation Committee’s report on executive compensation
appears elsewhere in this Proxy Statement.
Audit
Committee
Members
of the Audit Committee are currently directors Hoxsie (Chairperson), Crandall,
Hittner, Mazze, Resnikoff and Sullivan. No member of the Audit Committee is an
employee of the Corporation and each is considered “independent” within the
meaning of Rule 4200(a)(15) of the National Association of Securities Dealers’
listing standards and Rule 10A-3(b)(ii) under the Exchange Act. The
Corporation’s Board has determined that members Hoxsie and Sullivan qualify as
“audit committee financial experts” under the Exchange Act. The Audit Committee
has a written charter that was amended and restated by the Board of Directors on
January 20, 2005. The Charter is available to shareholders on the Corporation’s
website at www.washtrust.com under Investor Relations and is attached as Exhibit
A to this Proxy Statement.
The Audit
Committee, which met 9 times in 2004, is directly responsible for the
appointment, compensation and oversight of the work of the Corporation’s
independent auditors. The Audit Committee is also responsible for, among other
things, reviewing the adequacy of the Corporation’s system of internal controls,
its audit program, the performance and findings of its internal audit staff and
action to be taken thereon by management, reports of the independent auditors,
the independence of the independent auditors, the audited financial statements
of the Corporation and discussing such results with the Corporation’s
management, considering the range of audit and non-audit fees and services and
the pre-approval thereof, and performing such other oversight functions as the
Corporation’s Board may request from time to time. While the Audit Committee
oversees the Corporation's financial reporting process for the Board of
Directors consistent with the Audit Committee Charter, management has primary
responsibility for this process, including the Corporation's system of internal
controls, and for the preparation of the Corporation's consolidated financial
statements in accordance with generally accepted accounting principles. In
addition, the Corporation's independent auditors, and not the Audit Committee,
are responsible for auditing those financial statements. The Audit Committee’s
report on the Corporation’s audited financial statements for the fiscal year
ended December 31, 2004 appears elsewhere in this Proxy Statement.
The Audit
Committee is also responsible for loan review for the Bank. The loan review
process includes oversight of the Bank’s procedures for determining the adequacy
of the allowance for loan losses, administration of its internal credit rating
systems and the reporting and monitoring of credit granting
standards.
Please
note, the information contained on our website is not incorporated by reference
in, or considered to be a part of, this Proxy Statement.
COMPENSATION
OF DIRECTORS
During
2004, non-employee directors received a $16,000 annual retainer. The
chairpersons of the Executive Committee and Audit Committee received an
additional annual retainer of $5,000 and the chairperson of the Compensation
Committee received an additional annual retainer of $2,000. All retainers are
paid quarterly. For each meeting of the Board of Directors of the Corporation
and of the Bank attended, non-employee directors received $350 and $700,
respectively. In addition, non-employee directors received $500 for each
Corporation and Bank committee meeting attended in person and $400 for each such
committee meeting attended telephonically. However, directors attending more
than two meetings in any one day (excluding meetings of the Corporation’s Board)
were generally paid only for two of such meetings.
The
Nonqualified Deferred Compensation Plan (the “Deferred Compensation Plan”),
effective January 1, 1999, provides standard arrangements pursuant to which
directors may elect to defer all or part of their fees. Deferred fees are
invested in any of several benchmark options, including the Corporation’s Common
Stock. Deferred fees are payable in a lump sum or installments following
termination of service as a director or at a specified future date; if the
investment benchmark selected is the Corporation’s Common Stock, the fees may
also be payable in the form of such stock.
The 1997
Plan provides that each non-employee director of the Corporation shall
automatically be granted a nonqualified option to purchase 2,000 shares of
Common Stock as of the date of each Annual Meeting after which such non-employee
director will continue to serve as a director of the Corporation at an option
price equal to the fair market value of the Common Stock on such date and the
expiration of which shall be the tenth anniversary thereof. These options are
exercisable on and after the date that is one year after the date of grant. In
addition, the Corporation’s Board may provide for such other terms and
conditions of these options, as shall be set forth in the applicable option
agreements, including acceleration of exercise upon a change of control of the
Corporation. As described below, the 2003 Plan provides that no further options
will be granted to non-employee directors under the 1997 Plan.
In lieu
of stock options, which would have been granted pursuant to the 1997 Plan, the
2003 Plan provides that each non-employee director of the Corporation will be
automatically granted a nonqualified option to acquire 2,000 shares of Common
Stock as of the date of each Annual Meeting after which such non-employee
director will continue to serve as a director of the Corporation, beginning with
the 2003 Annual Meeting, at an exercise price equal to the fair market value of
the Common Stock on the grant date and expiring upon the tenth anniversary
thereof. Unless otherwise determined by the administrator of the 2003 Plan,
these stock options will be exercisable upon the earlier of the third
anniversary of the grant date or the date the non-employee director retires from
the Corporation’s Board. In December 2004, the 2003 Plan was amended to provide
that the Corporation’s Board may suspend the automatic award if it so
determines. As of the date hereof, the Corporation’s Board has not suspended
such automatic award to non-employee directors.
The
following table shows, for the fiscal years ended December 31, 2004, 2003,
and 2002, the compensation of each person who served as Chief Executive Officer
of the Corporation and the four most highly compensated executive officers of
the Corporation and/or the Bank, other than the Chief Executive Officer, whose
total annual salary and bonus exceeded $100,000 for the year ended
December 31, 2004 (collectively, the “Named Executives”).
|
SUMMARY
COMPENSATION TABLE |
|
Annual
Compensation |
|
Long-Term
Compensation
Awards |
|
Name
and
Principal
Position |
Year |
Salary |
Bonus
(1) |
Other
Annual
Compensation |
|
Restricted
Stock Award(s)
(2) |
Securities
Underlying Options/
SARs
(3) |
All
Other
Compensation
(4) |
|
|
|
|
|
|
|
|
|
John
C. Warren,
Chairman
and Chief Executive Officer |
2004
(5) |
$414,616 |
$180,000 |
$0 |
|
$129,855 |
0 |
$12,438
(6) |
2003 |
375,000 |
137,000 |
0 |
|
0 |
28,125 |
11,238
(6) |
2002 |
360,000 |
125,000 |
0 |
|
0 |
26,960 |
10,779
(6) |
|
|
|
|
|
|
|
|
|
John
F. Treanor,
President
and Chief Operating Officer |
2004
(5) |
$295,346 |
$114,000 |
$0 |
|
$75,552 |
0 |
$8,860
(6) |
2003 |
265,000 |
85,000 |
0 |
|
0 |
16,565 |
7,938
(6) |
2002 |
250,000 |
80,000 |
0 |
|
0 |
15,605 |
7,483
(6) |
|
|
|
|
|
|
|
|
|
David
V. Devault,
Executive
Vice President, Treasurer, and Chief Financial Officer |
2004
(5) |
$185,731 |
$60,000 |
$0 |
|
$35,415 |
0 |
$5,572 |
2003 |
174,000 |
48,000 |
0 |
|
0 |
8,700 |
5,216 |
2002 |
169,000 |
47,000 |
0 |
|
0 |
8,440 |
5,064 |
|
|
|
|
|
|
|
|
|
Harvey
C. Perry II,
Senior
Vice President
and
Secretary |
2004
(5) |
$153,600 |
$30,000 |
$0 |
|
$14,166 |
0 |
$6,208 |
2003 |
145,000 |
30,000 |
0 |
|
0 |
5.440 |
4,350 |
2002 |
145,000 |
15,000 |
0 |
|
0 |
5,430 |
4,347 |
|
|
|
|
|
|
|
|
|
James
M. Vesey,
Senior
Vice President
and
Chief Credit Officer, of the Bank |
2004
(5) |
$144,223 |
$40,000 |
$0 |
|
$21,249 |
0 |
$4,335 |
2003 |
135,000 |
31,000 |
0 |
|
0 |
5,065 |
4,047 |
2002 |
131,000 |
30,000 |
0 |
|
0 |
4,905 |
4,845 |
(1) |
Bonus
amounts represent amounts accrued for the years indicated under an annual
bonus plan for the Corporation’s executive officers and other key
employees (the “Annual Performance Plan”). The Annual Performance Plan
provides for annual payments to participants up to a maximum percentage of
base salary, which percentages vary among participants. The Annual
Performance Plan also permits certain additional discretionary payments.
In addition, the amounts earned for each fiscal year are paid during the
succeeding fiscal year. Thus, the 2002 bonus was paid in fiscal 2003, the
2003 bonus was paid in fiscal 2004 and the 2004 bonus was paid in fiscal
2005. |
(2) |
Represents
the dollar value of Restricted Stock Units (“RSUs”) awarded to each of the
Named Executives pursuant to the 1997 Plan, valued at $23.61 per unit, the
market value of the Corporation’s Common Stock on the award date, August
16, 2004. All 2004 RSU awards to the Named Executives vest on the 3-year
anniversary date of the award and require no consideration to be paid by
the Named Executive. Dividend equivalents are paid on the
RSUs. |
(3) |
None
of the stock options granted to the Named Executives has tandem stock
appreciation rights (“SARs”). |
(4) |
Under
the terms of the Bank’s tax-qualified 401(k) plan (the “401(k) Plan”),
which covers substantially all employees, the Bank matched 50% of each
participant’s first 2% of voluntary salary contributions and 100% of each
participant’s next 2% of salary contributions up to a maximum match of
3%. |
(5) |
In
a typical year, such as 2002 and 2003, the Corporation's salaried
employees are paid on a bi-weekly 26 pay period schedule. 2004 included an
extra pay period for the Corporation's salaried employees resulting in
salary payments approximately 3.8% higher than a typical year having 26
pay periods. |
(6) |
Includes
$6,288, $5,238 and $4,779 for 2004, 2003 and 2002, respectively, for Mr.
Warren and $2,710, $1,938 and $1,483 for 2004, 2003 and 2002,
respectively, for Mr. Treanor, accrued under the Bank’s Nonqualified
Deferred Compensation Plan, which provides for payments by the Bank of
certain amounts which would have been contributed by the Bank under the
401(k) Plan, but for limitations on employer contributions contained in
the Code, as hereinafter defined. |
The
following table sets forth information with respect to the Named Executives
concerning the exercise of options during the fiscal year ended
December 31, 2004 and unexercised options held as of the end of the
2004 fiscal year.
AGGREGATED
OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES |
|
Shares |
|
Number
of Securities Underlying Unexercised Options at FY-End (1) |
Value
of Unexercised
In-the-Money
Options
at
FY-End (1)(2) |
Name |
Acquired
on
Exercise
(3) |
Value
Realized |
Exercisable
(4) |
Unexercisable |
Exercisable |
Unexercisable |
John
C. Warren |
28,691 |
$352,409 |
111,516 |
25,490 |
$1,312,998 |
$237,110 |
John
F. Treanor |
1,000 |
$10,670 |
72,956 |
14,946 |
$859,425 |
$139,030 |
David
V. Devault |
7,763 |
$149,636 |
72,115 |
7,910 |
$1,091,736 |
$73,579 |
Harvey
C. Perry II |
0 |
$0 |
51,756 |
4,985 |
$773,118 |
$46,370 |
James
M. Vesey |
0 |
$0 |
20,796 |
4,604 |
$243,229 |
$42,826 |
(1) |
There
are no SARs attached to the stock options held by the Named
Executives. |
(2) |
Value
based on the fair market value of the Corporation’s Common Stock on
December 31, 2004, $29.31, minus the exercise
price. |
(3) |
Amounts
shown represent number of options exercised. Taking into consideration
shares exchanged for option cost and tax withholdings, Mr. Warren and Mr.
Devault acquired net amounts of 9,820 and 3,665 shares,
respectively. |
(4) |
Includes
options exercisable within 60 days of December 31,
2004. |
The Bank
maintains a qualified defined benefit pension plan (the “Pension Plan”) for
substantially all employees of the Corporation and the Bank. The Internal
Revenue Code of 1986, as amended (the “Code”), limits the compensation amount
used in determining the annual benefits payable from qualified plans to an
individual. However, the Bank’s Supplemental Pension Benefit and Profit Sharing
Plan (the “Supplemental Plan”) provides for payments by the Bank of certain
amounts, which employees of the Bank would have received under the Pension Plan
in the absence of such limitations in the Code. Benefits payable under the
Supplemental Plan are an unfunded obligation of the Bank.
The
following table shows the estimated annual benefits payable upon retirement,
assuming retirement at age 65 in 2004, under the Pension Plan and the
Supplemental Plan as it relates to the Pension Plan.
PENSION
PLAN TABLE |
Average
Annual |
Years
of Service |
Pension
Compensation |
15 |
20 |
25 |
30 |
35 |
$125,000 |
$30,175 |
$40,233 |
$50,291 |
$60,350 |
$70,408 |
150,000 |
37,112 |
49,483 |
61,854 |
74,225 |
86,595 |
175,000 |
44,050 |
58,733 |
73,416 |
88,100 |
102,783 |
200,000 |
50,987 |
67,983 |
84,979 |
101,975 |
118,970 |
225,000 |
57,925 |
77,233 |
96,541 |
115,850 |
135,158 |
250,000 |
64,862 |
86,483 |
108,104 |
129,725 |
151,345 |
300,000 |
78,737 |
104,983 |
131,229 |
157,475 |
183,720 |
350,000 |
92,612 |
123,483 |
154,354 |
185,225 |
216,095 |
400,000 |
106,487 |
141,983 |
177,479 |
212,975 |
248,470 |
450,000 |
120,362 |
160,483 |
200,604 |
240,725 |
280,845 |
500,000 |
134,237 |
178,983 |
223,729 |
268,475 |
313,220 |
550,000 |
148,112 |
197,483 |
246,854 |
296,225 |
345,595 |
600,000 |
161,987 |
215,983 |
269,979 |
323,975 |
377,970 |
Annual
payments to an employee retiring at age 65 are based on the average highest 36
consecutive months of pension compensation. Pension compensation consists of
base salary, plus, in the case of the Named Executives and certain other key
employees, payments pursuant to the Annual Performance Plan. Such amounts are
shown in the Salary and Bonus columns of the Summary Compensation Table. The
benefit is the sum of (i) 1.2% of pension compensation multiplied by the number
of years of service, plus (ii) .65% of pension compensation in excess of the
Social
Security covered compensation level, multiplied by the number of years of
service. In 2004, the covered Social Security compensation level was $46,284.
The benefits shown are straight-life annuity amounts not reduced by a joint
survivorship benefit, which is available.
In 2004,
the years of service accrued for purposes of the Corporation’s pension plans for
the following Named Executives were: Mr. Warren, 8 years; Mr. Treanor, 5 years;
Mr. Devault, 18 years; Mr. Perry, 30 years; and Mr. Bessette, 7
years.
The
Corporation also maintains an Executive Supplemental Pension Plan (the
“Executive Pension Plan”) for the benefit of Messrs. Warren and Treanor. The
maximum benefits payable under the Executive Pension Plan are 55% of a
participant’s average pension compensation, offset by benefits provided under
the Pension Plan, the Supplemental Plan, Social Security benefits and benefits
provided by any defined benefit pension plan of a prior employer, with a minimum
annual payment of no less than $1,000 for each year of plan participation, up to
ten years. Annual payments to a participant retiring at age 65 are based on the
average highest 36 consecutive months of pension compensation. The definition of
pension compensation is identical to that in the Pension Plan described above. A
participant must have at least five years of service to earn a benefit under the
Executive Pension Plan. Benefits payable under the Executive Pension Plan are an
unfunded obligation of the Corporation.
The
following table shows the estimated annual benefits payable upon retirement at
age 65 in 2004 under the Executive Pension Plan. The amounts do not reflect any
offset for Social Security benefits or benefits provided by any defined benefit
plan of a prior employer. Benefits are paid in the form a straight-life annuity,
with a 50% spouse benefit, if married. A minimum of 120 monthly payments are
guaranteed. The benefits shown are straight-life annuity amounts. Other forms of
annuity are also available.
EXECUTIVE
PENSION PLAN TABLE
(1) |
Average
Annual |
Years
of Service |
Pension
Compensation |
5 |
10 |
15 |
20 |
$125,000 |
$39,942 |
$42,383 |
$38,575 |
$28,517 |
150,000 |
47,629 |
50,258 |
45,388 |
33,017 |
175,000 |
55,317 |
58,133 |
52,200 |
37,517 |
200,000 |
63,004 |
66,008 |
59,013 |
42,017 |
225,000 |
70,692 |
73,883 |
65,825 |
46,517 |
250,000 |
78,379 |
81,758 |
72,638 |
51,017 |
300,000 |
93,754 |
97,508 |
86,263 |
60,017 |
350,000 |
109,129 |
113,258 |
99,888 |
69,017 |
400,000 |
124,504 |
129,008 |
113,513 |
78,017 |
450,000 |
139,879 |
144,758 |
127,138 |
87,017 |
500,000 |
155,254 |
160,508 |
140,763 |
96,017 |
550,000 |
170,629 |
176,258 |
154,388 |
105,017 |
600,000 |
186,004 |
192,008 |
168,013 |
114,017 |
(1) |
The
benefits provided for in this table do not reflect offsets for Social
Security benefits and benefits provided by the defined benefit plans of
prior employers. With respect to both Mr. Warren and Mr. Treanor, these
offsets will significantly reduce the benefits amount listed in the
table. |
CHANGE OF CONTROL AGREEMENTS
The Corporation entered into Change of Control Agreements (the
“Agreements”) with each of the Named Executives pursuant to which each such
executive may become entitled to receive severance pay and benefits continuation
if (a) within 13 months after a Change in Control (as defined in the Agreements)
of the Corporation or the Bank, (i) the Corporation or Bank terminates the
executive for reasons other than for Cause (as defined in the Agreements) or the
death or disability of the executive, or (ii) the executive resigns for Good
Reason (as defined in the Agreements), which includes a substantial adverse
change in the nature or scope of the executive’s responsibilities and duties, a
reduction in the executive’s salary and benefits, relocation, a failure of the
Corporation or Bank to pay deferred compensation when due, or a failure of the
Corporation or the Bank to obtain an effective agreement from any successor to
assume the Agreements, or (b) the executives resign for any reason during the
13th month after the Change in Control. The Agreements also provide that the
executive would become entitled to receive severance pay and benefits
continuation if his employment is terminated by the Corporation or the Bank for
any reason other than Cause, death or disability during the period of time after
the Corporation and/or the Bank enters into a definitive agreement to consummate
a transaction involving a Change in Control and before the transaction is
consummated so long as a Change in Control actually occurs. Benefits
continuation includes additional months of benefit accrual under the
Corporation's or the Bank's supplemental retirement plans. The Agreements
provide for an additional payment to cover the impact of the 20 percent excise
tax imposed by Section 280G of the Code in the event the Named Executive becomes
subject to such excise tax.
The
amount of severance (a multiple of the sum of base salary and most recent bonus)
and the length of benefits continuation vary for each executive and are set
forth in the table below.
Named
Executive |
Multiple
of Base and Bonus |
Length
of Benefits Continuation |
John
C. Warren |
3.00 |
36
months |
John
F. Treanor |
3.00 |
36
months |
David
V. Devault |
2.00 |
24
months |
Harvey
C. Perry |
2.00 |
24
months |
James
M. Vesey |
1.00 |
12
months |
COMPENSATION
COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The
Compensation Committee administers the executive compensation program of the
Corporation under the supervision of the Corporation’s Board. The success of the
Corporation is highly dependent on hiring, developing and training qualified
people who feel encouraged to perform for the good of the shareholders, the
community, the Corporation and customers. The executive compensation program
consists of three elements: base salary, short-term incentive compensation and
long-term incentives. Prior to the beginning of the fiscal year, the
Compensation Committee consulted with an independent compensation consultant
(the “Consultant”), which provided certain information regarding base salary and
short-term and long-term incentive practices of comparable companies in the
banking industry. This information was used by the Compensation Committee to
evaluate, adjust and approve recommendations made by the Chief Executive Officer
for the compensation package for each other executive officer, and to develop
and approve the compensation package of the Chief Executive Officer. The
Committee believes that compensation for executive officers should take into
account individual management skills, the long-term performance of the Bank and
shareholder returns. The underlying compensation plan places emphasis on (1)
attracting and retaining the most qualified executives in the banking industry;
(2) providing overall compensation for key executives, which is competitive with
similarly sized financial institutions; (3) accomplishing the goals set out in
the Bank’s strategic plan; and (4) returning a fair value to
shareholders.
Base
salary for all executive officers is determined by the Compensation Committee,
subject to approval of the Corporation’s Board. Salary levels for 2004 were
recommended for approval by the Compensation Committee for each executive
officer’s position based on an analysis of compensation level information
provided by the Consultant and taking into consideration both recent and
expected overall performance of the Corporation. The base annual salary
established by the Compensation Committee for Mr. Warren, Chairman and
Chief Executive Officer, was $400,000, which positioned Mr. Warren’s salary in a
manner consistent with the general guidelines outlined above.
The
Committee utilized the Consultant’s compensation level information and the
recommendations of the Chief Executive Officer to establish the base salary of
the other executive officers.
The
Annual Performance Plan provides for the payment of additional cash compensation
to officers based upon the achievement of target profitability measures
including return on equity, net income and earnings per share as well as the
achievement of individual objectives. The terms of the Annual Performance Plan,
including the target payout levels and relationship of payouts to the target
profitability measures, were established by the Compensation Committee in
consultation with the Consultant, and approved by the Board of Directors. The
Compensation Committee’s policy is to review periodically these performance
measures and adjust them as appropriate. The profitability target measures were
established by the Board of Directors based upon its review of banking industry
data and the Board and management’s expectations and recommendations. The target
performance payout for the Chief Executive Officer in 2004 was 45% of base
salary, 70% of which was based on profitability target measures and 30% of which
was based on individual objectives for such matters as leadership of the senior
management team, strategic planning, growing the Corporation, corporate
governance, and continuing to focus on the long-term interests of the
shareholders. The 45% target payout for the Chief Executive Officer was raised
from 40% in the previous year to reflect the Compensation Committee’s desire to
place additional emphasis on performance-based compensation.
In 2004,
the Corporation’s profitability results, measured on an operating basis
excluding acquisition expenses, net of related income taxes, entitled the
executive officers to a payout for 2004 performance of 100.0% of the
profitability portion of the target payout for each officer. Based on these
profitability results and its assessment of the Chief Executive Officer’s
overall management performance and achievement of individual objectives during
the year, the Compensation Committee, with Board approval, awarded an Annual
Performance Plan bonus of $180,000 to Mr. Warren for 2004. Payouts based on the
achievement of individual performance goals of the other executive officers were
determined by each participant’s supervisor, approved by the Compensation
Committee and ratified by the Corporation’s Board of Directors.
As a
general rule, stock-based incentives have been granted to the executive officers
on an annual basis. Prior to 2004, grants were made in the form of stock
options. For 2004, stock-based incentive grants were made in the form of
restricted stock units. The granting of stock-based incentives is viewed as a
desirable long-term incentive compensation method because it closely links the
interest of management with shareholder value and aids in the retention and
motivation of executives to improve the long-term stock market performance of
the Corporation’s stock. When granting stock-based incentives to executive
officers, the Compensation Committee reviews data for comparable companies in
the banking industry provided by the Consultant and, for officers other than the
Chief Executive Officer, recommendations made by the Chief Executive Officer,
which are based on each officer’s level of responsibility and contribution
towards achievement of the Corporation’s business plan and
objectives.
The
foregoing report has been furnished by the members of the Compensation
Committee:
Gary
P. Bennett (Chairperson)
Larry
J. Hirsch, Esq.
Mary
E. Kennard, Esq. |
Edward
M. Mazze, Ph.D.
Kathleen
McKeough
Victor
J. Orsinger II, Esq. |
COMPENSATION
COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The
Compensation Committee makes recommendations concerning remuneration
arrangements for executive officers of the Corporation and the Bank, subject to
the approval of the Board of Directors. The Compensation Committee is also
responsible for the administration of the Corporation’s Amended and Restated
1988 Stock Option Plan, the 1997 Plan and the 2003 Plan. The Compensation
Committee members are directors Bennett (Chairperson), Hirsch, Kennard, Mazze,
McKeough and Orsinger. No members of the Compensation Committee are current or
former officers or employees of the Corporation, the Bank or any other
subsidiary of the Corporation. During 2004, the Bank paid approximately $7,898
in legal fees to the law firm of Orsinger & Nardone, of which Mr. Orsinger,
a member of the Compensation Committee, is a partner, for matters related to
customer loans. The Board
believes that this relationship does not impair Mr. Orsinger’s
independence.
SHAREHOLDER
RETURN PERFORMANCE PRESENTATION
Set forth
below is a line graph comparing the cumulative total shareholder return on the
Corporation’s Common Stock against the cumulative total return of The Nasdaq
Stock Market (U.S.) and the Nasdaq Bank Index for the five years ended
December 31, 2004. The historical information set forth below is not
necessarily indicative of future performance.
|
1999 |
2000 |
2001 |
2002 |
2003 |
2004 |
Washington
Trust Bancorp, Inc. |
$100.00
|
$80.74
|
$112.86
|
$119.17
|
$165.34
|
$189.68
|
The
Nasdaq Stock Market (U.S.) |
$100.00
|
$60.31
|
$47.84
|
$33.07
|
$49.45
|
$53.81
|
Nasdaq
Bank Index |
$100.00
|
$114.23
|
$123.68
|
$126.65
|
$162.92
|
$186.45
|
The
results presented assume that the value of the Corporation’s Common Stock and
each index was $100.00 on December 31, 1999. The total return assumes
reinvestment of dividends.
REPORT
OF THE AUDIT COMMITTEE
The Audit
Committee is responsible for providing independent, objective oversight of the
Corporation’s accounting functions and internal controls. In connection with its
responsibilities, the Audit Committee reviewed the scope of the overall audit
plans of both the internal audit staff and the independent auditors; evaluated
the results of audits performed by the internal audit staff and independent
auditors that included but were not limited to accounting issues and internal
controls; assessed the action that has been taken by management in response to
the audit results; and appraised the effectiveness of the internal and
independent audit efforts. The Audit Committee also assesses actions taken by
management in connection with the internal control documentation and testing of
internal controls over financial reporting and management’s assertions related
thereto in accordance with Section 404 of the Sarbanes-Oxley Act of 2002 and the
related reports of the independent auditors on these matters.
In
addition, the Audit Committee has:
§ |
Reviewed
and discussed the audited financial statements with
management; |
§ |
Discussed
with KPMG LLP, its independent auditors, the matters required to be
discussed by SAS 61; and |
§ |
Received
the written disclosures and the letter from KPMG LLP required by
Independence Standards Board Statement No. 1, and has discussed with KPMG
LLP the independent auditor’s independence. |
Based on
the review and discussions above, the Audit Committee recommended to the
Corporation’s Board that the audited financial statements be included in the
Corporation’s Annual Report on Form 10-K for the last fiscal year for filing
with the SEC.
The
foregoing report has been furnished by the members of the Audit
Committee:
Katherine
W. Hoxsie (Chairperson)
Steven
J. Crandall
Barry
G. Hittner |
Edward
M. Mazze, Ph.D.
Joyce
O. Resnikoff
James
P. Sullivan, CPA |
INDEPENDENT
AUDITORS
During
the years ended December 31, 2004 and December 31, 2003, the Corporation paid
the following fees to KPMG LLP:
|
2003 |
2004 |
Audit
fees |
$165,000 |
$459,500 |
|
|
|
Audit-related
fees (consists of employee benefit plan and common trust fund audits, USAP
procedures, and other matters related to the performance of the audit or
review of the Corporation’s annual financial statements, review of the
Corporation’s quarterly financial statements and accounting
consultations.) |
50,000 |
36,000 |
|
|
|
Tax
fees (consists of tax return preparation, tax compliance and tax
advice) |
50,804 |
25,860 |
|
|
|
All
other fees |
0 |
0 |
Total
fees paid to KPMG LLP |
$265,804 |
$521,360 |
The
increase in Audit Fees from 2003 to 2004 is primarily attributable to fees
incurred in complying with the requirements of Section 404 of the Sarbanes-Oxley
Act.
The Audit
Committee has adopted a policy whereby engagement of the independent auditors
for audit services and for non-audit services shall be pre-approved by the Audit
Committee, except in the case of the de minimus exception described in Section
10A(i)(1)(B) of the Exchange Act. During 2004, the Audit Committee pre-approved
100% of the Audit-Related Fees, Tax Fees and All Other Fees.
The Audit
Committee has considered whether the provision of the services identified under
the headings “Audit-Related Fees,” “Tax Fees” and “All Other Fees” is compatible
with maintaining KPMG LLP’s independence and has determined that provision of
such services is consistent with maintaining the principal auditor’s
independence.
INDEBTEDNESS
AND OTHER TRANSACTIONS
The Bank
has had transactions in the ordinary course of business, including borrowings,
with certain directors and executive officers of the Corporation and their
associates, all of which were made on substantially the same terms, including
interest rates (except that executive officers and all other employees are
permitted a modest interest rate benefit on first mortgages secured by a primary
residence and other consumer loans) and collateral, as those prevailing at the
time for comparable transactions with other persons, and did not involve more
than the normal risk of collectibility or present other unfavorable features
when granted. During 2004, the Bank paid legal fees to a law firm of which a
director is a partner. See the section entitled “Compensation Committee
Interlocks and Insider Participation” for more information.
Mr.
Shanahan was the former Chairman and Chief Executive Officer of First Financial
Corp. prior to its acquisition by the Corporation. In connection with such
acquisition, the Corporation has agreed to (i) provide Mr. Shanahan with health
insurance benefits under the Corporation’s health plan until he attains age 65,
and (ii) assume the obligation to provide Mr. Shanahan with a supplemental
retirement benefit equal to monthly installments of $20,854 payable for the life
of Mr. Shanahan with a 50% spousal survivor benefit. In return for a lump sum
payment of $840,000 by the Corporation in April, 2002, Mr. Shanahan has agreed
that for a three-year period following the acquisition, he will not become
associated with any banking institution in Rhode Island, Massachusetts or
Connecticut and he will not take action to solicit any former employees or
customers of First Financial Corp.
RATIFICATION
OF SELECTION OF AUDITORS (Proposal 2 on the Proxy Ballot)
The
ratification of the Audit Committee's decision to retain KPMG LLP to serve as
independent auditors of the Corporation for the current fiscal year ending
December 31, 2005 will be submitted to the shareholders at the Annual
Meeting. Representatives of KPMG LLP will be present at the Annual Meeting, will
have the opportunity to make a statement if they so desire and will be available
to answer appropriate questions. Action by shareholders is not required by law
in the appointment of independent auditors, but their appointment is submitted
by the Corporation’s Audit Committee in order to give the shareholders a voice
in the designation of auditors. If the appointment is not ratified by the
shareholders, the Corporation’s Audit Committee will reconsider its choice of
KPMG LLP as the Corporation’s independent auditors.
The
Board of Directors recommends that shareholders vote “FOR” this
proposal.
SECTION
16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section
16(a) of the Exchange Act requires the Corporation’s officers and directors, and
persons who own more than 10% of a registered class of the Corporation’s equity
securities (collectively, “Insiders”) to file reports of ownership and changes
in ownership with the SEC. Insiders are required by SEC regulations to furnish
the Corporation with copies of all Section 16(a) reports they file. Based solely
upon a review of the copies of such reports furnished to the Corporation, and on
written representations from certain reporting persons, the Corporation believes
that during 2004, all Section 16(a) filing requirements applicable to its
Insiders were complied with, with the following exceptions: Victor J.
Orsinger, a director of the Corporation, filed one Form 4 after the applicable
due date reporting a total of 1 transaction; Patrick J. Shanahan, a director
of the Corporation, filed one Form 4 after the applicable due date reporting a
total of 2 transactions; and Katherine W. Hoxsie, a director of the Corporation,
filed one Form 4 after the applicable due date reporting a total of 1
transaction. In addition, David W. Wallace, a beneficial owner of more than 10%
of the Corporation’s stock, filed three Forms 4 after the applicable due date
reporting the acquisition of an aggregate of 42,955 shares of the Corporation’s
stock in a total of 28 transactions and reporting the acquisition of an
aggregate of 1,000 shares of the Corporation’s stock by Mr. Wallace’s spouse in
a total of 4 transactions.
SHAREHOLDER
PROPOSALS
Any
shareholder who wishes to submit a proposal for presentation to the 2006 Annual
Meeting of Shareholders must submit the proposal to the Corporation, 23 Broad
Street, Westerly, Rhode Island 02891, Attention: Chief Executive Officer, not
later than November 11, 2005 for inclusion, if appropriate, in the
Corporation’s Proxy Statement and the form of proxy relating to the 2006 Annual
Meeting. Such a proposal must also comply with the requirements as to form and
substance established by the SEC for such a proposal to be included in the Proxy
Statement. Proxies solicited by the Corporation’s Board will confer
discretionary voting authority with respect to shareholder proposals, other than
proposals to be considered for inclusion in the Corporation’s Proxy Statement
described above, that the Corporation receives at the above address after
February 1, 2006.
In
addition, in order for a nominee to be considered at an Annual Meeting, the
Corporation’s Restated Articles of Incorporation provide that director
nominations may be submitted by any shareholder entitled to vote for the
election of directors provided that advance written notice of such proposed
nomination, with appropriate supporting documentation as required by the
Corporation’s Restated Articles of Incorporation, is received by the Secretary
of the Corporation not less than 14 days nor more than 60 days prior to any
meeting of the shareholders called for the election of directors at which such
shareholder is present by person or by proxy; provided, however, that if fewer
than 21 days’ notice of the meeting is given to shareholders, such written
notice of such proposed nomination must be received by the Secretary of the
Corporation not later than the close of the tenth day following the day on which
notice of the meeting was mailed to shareholders.
COMMUNICATIONS
WITH THE BOARD OF DIRECTORS
Any
shareholder desiring to send communications to the Board of Directors, or any
individual director, may forward such communication to the Secretary of the
Corporation at the Corporation’s Westerly, Rhode Island offices. The Secretary
of the Corporation will collect all such communications and forward them to the
Board of Directors and any such individual director.
FINANCIAL
STATEMENTS
The
financial statements of the Corporation are contained in the Corporation’s
Annual Report on Form 10-K for the fiscal year ended
December 31, 2004, which has been provided to the shareholders
concurrently herewith. Such report and the financial statements contained
therein are not to be considered as a part of this soliciting
material.
OTHER
BUSINESS
Management
knows of no matters to be brought before the meeting other than those referred
to in this Proxy Statement, but if any other business should properly come
before the meeting, the persons named in the proxy intend to vote in accordance
with their best judgment.
INCORPORATION
BY REFERENCE
To the
extent that this Proxy Statement has been or will be specifically incorporated
by reference into any filing by the Corporation under the Securities Act of
1933, as amended, or the Exchange Act, the sections of the Proxy Statement
entitled “Compensation Committee Report on Executive Compensation,” “Shareholder
Return Performance Presentation,” and “Report of the Audit Committee” shall not
be deemed to be so incorporated, unless specifically otherwise provided in any
such filing.
ANNUAL
REPORT ON FORM 10-K
The
Corporation’s Annual Report on Form 10-K for the fiscal year ended
December 31, 2004
as filed with the SEC is available on the Corporation’s website at
www.washtrust.com under Investor Relations. Copies are also available without
charge upon written request addressed to Elizabeth B. Eckel, Senior Vice
President, Marketing, Washington Trust Bancorp, Inc., P.O. Box 512, Westerly,
Rhode Island 02891-0512.
EXPENSE
OF SOLICITATION OF PROXIES
The cost
of solicitation of proxies, including the cost of reimbursing brokerage houses
and other custodians, nominees or fiduciaries for forwarding proxies and Proxy
Statements to their principals, will be borne by the Corporation. Solicitations
may be made in person or by telephone or telegraph by officers or regular
employees of the Corporation, who will not receive additional compensation
therefor. In addition, the Corporation has retained Morrow & Co., Inc. to
assist in the solicitation of proxies for a fee of $4,000 plus customary
expenses.
Submitted
by order of the Board of Directors,
/s/
Harvey C. Perry, II
Harvey C.
Perry, II
Secretary
Westerly,
Rhode Island
March 15,
2005
WASHINGTON
TRUST BANCORP, INC. |
EXHIBIT
A |
THE
WASHINGTON TRUST COMPANY
AUDIT
COMMITTEE CHARTER
This
Audit Committee Charter was adopted by the Board of Directors of Washington
Trust Bancorp, Inc. (the “Corporation”) and the Board of Directors of The
Washington Trust Company (the “Bank”) on January 20, 2005.
PURPOSE
The role
of the Audit Committee of Washington Trust Bancorp, Inc. and The Washington
Trust Company is to act on behalf of the Board of Directors of each company and
oversee all material aspects of the organization’s financial reporting, control,
audit functions, and loan review except those specifically related to
responsibilities of another standing committee of the Board. The Audit Committee
does not itself prepare financial statements or perform audits, and its members
are not auditors or certifiers of the Corporation’s financial statements.
Nevertheless, the Audit Committee’s role includes a particular focus on the
qualitative aspects of financial reporting to shareholders, any government body
or the public, and on company processes for the management of business/financial
risk, for compliance with significant applicable legal and regulatory
requirements, for oversight of the Corporation’s Code of Ethics and to be an
informed and effective overseer of the Bank’s credit quality and allowance for
loan losses. Consistent with this function, the Audit Committee shall encourage
continuous improvement of, and foster adherence to, the Corporation’s policies,
procedures and practices at all levels.
MEMBERSHIP
The Audit
Committee shall have at least three members, each of whom the Board has selected
and determined to be “independent” in accordance with applicable rules of the
Securities and Exchange Commission (“SEC”) and the NASDAQ Stock Market
Marketplace Rules. No member of the Committee shall have participated in the
preparation of the financial statements of the Corporation or any current
subsidiary of the Corporation at any time during the past three years and each
member must be able to read and understand fundamental financial statements,
including a company's balance sheet, income statement, and cash flow statement.
In addition, at least one member of the Committee shall have past employment
experience in finance or accounting, requisite professional certification in
accounting, or any other comparable experience or background which results in
the individual's financial sophistication, including a current or past position
as a chief executive or financial officer or other senior officer with financial
oversight responsibilities, and shall qualify as an “audit committee financial
expert” as such term is defined under applicable SEC rules. Committee members
may enhance their familiarity with finance and accounting by participating in
educational programs conducted by the Corporation or an outside
consultant.
Committee
members shall continue to be members until their successors are elected and
qualified or until their earlier resignation or removal. Any member may be
removed by the Board, with or without cause, at any time. The Chairperson of the
Committee shall be appointed from among the Committee members by and serve at
the pleasure of the Board to convene and chair meetings. In the absence of the
Chairperson, the Committee shall elect a temporary substitute from among its
members.
MEETINGS
1. |
The
Committee will generally hold regular meetings at least quarterly, more
frequently if circumstances make that preferable. The Audit Committee
Chairperson has the power to call a Committee meeting in person or by
conference call whenever he or she thinks there is a need. Committee
meeting agendas shall be the responsibility of the Committee Chairperson,
with input from Committee members. The Audit Committee may designate
subcommittees of one or more of its members to report to the full
Committee. The majority of members of the Audit Committee shall constitute
a quorum. |
2. |
The
Committee Chairperson may require any member of the Corporation’s or the
Bank’s management or other personnel to attend a meeting of the Audit
Committee whenever the Committee Chairperson believes that such attendance
is necessary or appropriate to provide information to the Committee or
otherwise enable the Committee to fulfill its duties and
responsibilities. |
3. |
The
Audit Committee will meet with the Director of Internal Auditing and the
Corporation’s independent auditors, in executive session for private
consultation or otherwise, as and to the extent deemed to be necessary or
appropriate by the Committee Chairperson, with input from the remaining
Committee members. |
DUTIES
& RESPONSIBILITIES
Reports
to the Full Board of Directors will include:
4. |
Audit
Committee activity reports to be given to the full Board of Directors at
the next Board meeting following the Audit Committee
meeting. |
5. |
A
report on the adequacy of the Bank’s Allowance for Loan
Losses. |
To
Manage the Relationship With Independent Auditors the Committee
will:
6. |
Select
and engage the independent auditor for audits of the Corporation’s
consolidated financial statements, subject to shareholder ratification.
Review and approve dismissal of the independent
auditor. |
7. |
Perform
an annual evaluation of the independence of the outside auditor, based in
part on review and discussion of a formal written statement delineating
all relationships between the auditor and the Corporation and any other
relationships that may adversely affect the independence of the
auditor. |
8. |
Provide
instructions to the independent auditor that the Audit Committee, as
representatives of the shareholders, is the auditor’s
client. |
9. |
Review
and discuss with the independent auditor the matters required to be
discussed with the independent auditor under generally accepted auditing
standards, including: (i) the auditor’s responsibility under generally
accepted auditing standards, the significant accounting principles used by
the Corporation, accounting estimates used by the Corporation, and the
process used by management in formulating them, any consultation with
other accountants and major issues discussed with management prior to its
retention; (ii) whether the Corporation’s accounting principles as applied
are conservative, moderate or aggressive from the perspective of income,
asset and liability recognition, and whether or not those principles
reflect common or minority practices; and (iii) the review of interim
financial information of the Corporation and any material modifications
that need to be made to the interim financial information for it to
conform to generally accepted accounting
principles. |
10. |
Conduct
an analysis and discussion with the independent auditor of fees charged to
the Corporation for services rendered by the independent
auditor. |
11. |
Establish
policies and procedures for the engagement of outside auditors to provide
non-audit services, including procedures for pre-approval of non-audit
services permitted by law to be performed by the independent auditor
outside the scope of the engagement letter, and consideration of whether
the independent auditor’s performance of such services, together with any
other non-audit services being performed, is compatible with the auditor’s
independence. |
Committee
Reviews will include:
12. |
Reviews
of the overall audit plans of both the internal and independent
auditors. |
13. |
The
review of any changes required in the planned scope of the independent
auditor or internal audit plans. |
14. |
Reviews
of the results of all audits performed by the external and internal
auditors that include but are not limited to accounting issues,
organizational, operational and data processing controls, discussion of
such results with external and internal auditors, and scrutiny of the
action that has been taken by management. |
15. |
Appraisal
of the effectiveness of the internal and external audit efforts and the
Corporation’s internal controls through discussions with the internal
auditor, independent auditor and
management. |
16. |
Reviews
and discussions with the internal auditor, independent auditor and
management of any material financial or other arrangements of the
Corporation, which do not appear on the financial statements of the
Corporation. |
17. |
Establishment
of policies and procedures for Committee review and approval of any
transactions or courses of dealing with parties related to the
Corporation. |
18. |
Approval
of the critical accounting policies and material estimates inherent in the
financial statements and any significant changes in the accounting
policies of the Corporation. Review of accounting and financial reporting
proposals that may have a significant impact on the Corporation’s
financial reports, based on discussion with management, the internal
auditors and the independent auditors. |
19. |
Supervision
of any other oversight functions requested by the full
Board. |
Oversight
of the Internal Audit Function will include:
20. |
Approval
of internal audit policies, internal audit charter, annual budget and
staffing. |
21. |
Review
of the performance, compensation, appointment or dismissal of the Director
of Internal Auditing. |
Committee’s
Loan Review Activities will include:
22. |
Approval
of the Loan Review policy manual. |
23. |
A
review of the Criticized Asset Reports with the criteria established in
the Loan Review manual. |
24. |
A
review of the Loan Review program, including the most recent Loan Review
results. |
25. |
A
periodic review of appraisal review
activities. |
26. |
Review
of the integrity of the credit rating
system. |
27. |
Approval
of the adequacy of the allowance for loan losses, based on a review of the
loan loss allocation, economic conditions and other information deemed
appropriate by the Committee. |
Oversight
of the Code of Ethics will include:
28. |
Annual
review of the organization’s Code of Ethics for recommendation to the
Board of Directors for approval. |
29. |
Review
of the program that supervises compliance with the organization’s
Corporate Code of Ethics to ensure that adequate oversight and enforcement
are in place, that communication of the Code is adequate within the
organization and that allegations of Code violations are reported
immediately to the full Committee. |
30. |
Supervision
of any investigations required to substantiate allegations of Code
violations through the use of the Internal Audit Department, Committee
Counsel or Independent Consultant. |
31. |
The
submission of a report on all allegations and the results of any
subsequent investigations to the full Board of
Directors. |
Other
Activities will include:
32. |
Review
of the organization’s annual financial statements including any
certification, report, opinion, or review rendered by the independent
auditor, including recommendations to the full Board whether,
based
upon its review and discussions with management and the auditors, the
financial statements should be included in the Corporation’s Annual Report
filed with the SEC. |
33. |
Review
and approval of the Corporation’s quarterly and annual financial reports
to the SEC and, to the extent the Committee deems advisable, the content
or presentation of any earnings releases, analyst conference calls or
other publication of financial results. |
34. |
Review
and assessment of the results of examinations by regulatory authorities in
terms of important findings, recommendations, and management’s
response. |
35. |
Establishment
and oversight of procedures for the receipt, retention and treatment of
complaints regarding accounting, internal accounting controls or auditing
matters, and the confidential, anonymous submission by employees of
concerns regarding questionable accounting or auditing
matters. |
36. |
Approval
of the nature and adequacy of the organization's insurance
coverage. |
37. |
Appraisal
of the effectiveness of the Corporation’s risk assessment and risk
management policies. |
38. |
Review
of the nature and adequacy of the organization's compliance, security and
electronic data processing systems through annual reports by department
supervisors. |
39. |
The
Committee will review Information Technology programs and policies and
submit them to the Board of Directors for final
approval. |
40. |
The
Committee will periodically review the disaster recovery or business
continuity plan and submit it to the Board of Directors for final
approval. |
41. |
Review,
assessment and update, as necessary, of the Committee’s Charter annually.
The Committee shall submit the Charter to the Board for approval
annually. |
42. |
The
performance of any other activities consistent with this Charter, the
Corporation’s By-laws and governing law, as the Committee or the Board
deems necessary or appropriate. |
43. |
Periodic
self-assessment of all of the above elements, as well as regular
assessments of internal and external audit
performance. |
The Audit
Committee has the power to conduct or authorize investigations into matters
within the Committee’s scope of responsibilities. The Committee is authorized to
retain independent counsel, accountants or others it needs to assist it in
carrying out its activities. The Corporation shall provide adequate resources to
support the Committee’s activities including compensation of the Committee’s
counsel, independent auditors and other advisors.
This
proxy when properly executed will be voted in the manner directed herein
by the shareholder. If no direction is made, this proxy will be voted FOR
Proposal Nos. 1 and 2. |
|
Please
Mark
Here
for
Address
Change
or
Comments |
o |
|
|
SEE
REVERSE SIDE |
|
The
Board of Directors recommends that you instruct the proxies to vote FOR
all the proposals, each of which has been made by the
Corporation. |
|
|
|
|
|
1. |
Election
of Directors |
FOR
all
nominees
(except
as indicated) |
|
WITHHOLD
AUTHORITY
to
vote for all
nominees |
|
|
|
FOR |
AGAINST |
ABSTAIN |
NOMINEES: |
|
01
Gary P. Bennett
02
Larry J. Hirsch
03
Mary E. Kennard
04
H. Douglas Randall, III
05
John F. Treanor |
o |
|
o |
|
2. |
To
ratify the selection of KPMG LLP as independent auditors of the
Corporation for the year ending December 31, 2005.
|
o |
o |
o |
|
|
|
|
|
3. |
In
their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting or any adjournments
thereof. |
(Instruction:
To withhold authority to vote for any individual nominee or nominees write
such nominee’s or nominees’ name(s) in the space provided
below.) |
|
Choose
MLinkSM
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materials, investment plan statements, tax documents and more. Simply log
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www.melloninvestor.com/isd where step-by-step instructions will prompt you
through enrollment. |
|
|
|
PLEASE
VOTE, DATE AND PROMPTLY RETURN THIS PROXY IN THE ENCLOSED RETURN ENVELOPE,
WHICH IS POSTAGE PREPAID IF MAILED IN THE UNITED
STATES. |
Signature
______________________ Date
______________ Signature
______________________ Date
______________ |
Please
sign exactly as your name appears on this Voting Form. If shares are
registered in more than one name, the signatures of all such persons are
required. A corporation should sign in its full corporate name by a duly
authorized officer, stating such officer’s title. Trustees, guardians,
executors and administrators should sign in their official capacity giving
their full title as such. A partnership should sign in the partnership
name by an authorized person, stating such person’s title and relationship
to the partnership. |
Vote
by Internet or Mail
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Hours a Day, 7 Days a Week
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voting is available through 11:59 PM Eastern Time
the
day prior to annual meeting day.
Your
Internet vote authorizes the named proxies to vote your shares in the same
manner
as
if you marked, signed and returned your proxy card.
|
Internet
http://www.proxyvoting.com/wash
Use
the internet to vote your proxy. Have your proxy card in hand when you
access the web site. |
|
OR |
|
Mail
Mark,
sign and date your
proxy card and
return
it in the enclosed
postage-paid envelope.
|
|
If you
vote your proxy by Internet, you do
NOT need to mail back your proxy card.
WASHINGTON
TRUST
BANCORP,
INC.
THIS
PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Victor J. Orsinger
II, John F. Treanor and John C. Warren, or any one of them, attorneys with full
power of subsititution to each for and in the name of the undersigned, with all
powers the undersigned would possess if personally present to vote the common
stock of the undersigned in Washington Trust Bancorp, Inc. at the Annual Meeting
of its shareholders to be held April 26, 2005 or any adjournment
thereof.
This
proxy when properly executed will be voted in the manner directed herein by the
shareholders. If no direction is made, this proxy will be voted FOR Proposal
Nos. 1 and 2.
PLEASE
SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
(Continued
and to be signed on the other side)
Address
Change/Comments (Mark
the corresponding box on the reverse side) |
|
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