defa14a.htm
UNITED STATES SECURITIES AND EXCHANGE
COMMISSION
WASHINGTON, D.C.
20549
SCHEDULE
14A
(Rule
14a-101)
INFORMATION
REQUIRED IN PROXY STATEMENT
SCHEDULE
14A INFORMATION
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Exchange
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WASHINGTON
TRUST BANCORP, INC.
(Name
of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy
Statement, if other than the Registrant)
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WASHINGTON
TRUST
BANCORP,
INC.
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NOTICE
OF ANNUAL MEETING OF SHAREHOLDERS
To
Be Held April 22, 2008
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To the
Shareholders of
Washington
Trust Bancorp, Inc.:
NOTICE IS
HEREBY GIVEN that the Annual Meeting of Shareholders of WASHINGTON TRUST
BANCORP, INC., a Rhode Island corporation (the “Corporation”), will be held at
the Westerly Library, 44 Broad Street, Westerly, Rhode Island on Tuesday, the
22nd
of April, 2008 at 11:00 a.m. (local time) for the purpose of considering and
acting upon the following:
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1.
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The
election of five directors for three year terms, each to serve until their
successors are duly elected and
qualified;
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2.
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The
ratification of the selection of independent auditors to audit the
Corporation’s consolidated financial statements for the year ending
December 31, 2008; and
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3.
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Such
other business as may properly come before the meeting, or any adjournment
thereof.
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Only
shareholders of record at the close of business on February 25, 2008 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 THROUGH THE INTERNET
OR BY TELEPHONE AS DESCRIBED IN THE ENCLOSED PROXY CARD. 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,
David V.
Devault
Secretary
March 14,
2008
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 at 11:00 a.m. (local time) on April 22, 2008 (the
“Annual Meeting”), 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
voting through the Internet or by telephone, 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.
As of
February 25, 2008, the record date for determining shareholders entitled to
notice of and to vote at the Annual Meeting, there were 13,386,835 shares of
common stock, $0.0625 par value (the “Common Stock”), of the Corporation issued
and outstanding. 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
matters. If a beneficial owner does not give a proxy to his or
her nominee with instructions as to how to vote the shares, the nominee may
still vote those shares on “routine” matters, such as the election of directors
and the ratification of KPMG LLP as the Corporation’s independent
auditors. Shares voted in this manner by a nominee are counted for
the purpose of establishing a quorum and also will be counted for the purpose of
determining the outcome of such “routine” proposals. In the event a
nominee indicates on a proxy that it does not have discretionary authority to
vote certain shares on a particular matter, referred to as a “broker non-vote,”
then those shares will not be considered entitled to vote with respect to that
matter, but will be treated as shares present for the purpose of determining the
presence of a quorum to transact business at the meeting.
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 Annual 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 card will
first be mailed to shareholders is March 14, 2008.
ELECTION
OF DIRECTORS (PROPOSAL NO. 1)
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 70th birthday agrees to resign from the Board of Directors as of the next
Annual Meeting of Shareholders following such director’s 70th
birthday. There are presently 15 directors. James P.
Sullivan will reach the age of 70 prior to the Annual Meeting and, pursuant to
the Corporation’s by-laws, will resign from the Board of Directors effective as
of the Annual Meeting.
This
year, based on the recommendation of the Nominating and Corporate Governance
Committee (the “Nominating Committee”), a total of five nominees for election to
the Board of Directors have been nominated to be elected at the Annual Meeting
to serve until the 2011 Annual Meeting of Shareholders and until their
respective successors are elected and qualified. If all five nominees
are elected, the Board of Directors will consist of 14
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 Nominating Committee, the Board of Directors has
nominated Gary P. Bennett, Larry J. Hirsh, Esq., Mary E. Kennard, Esq., 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 5
years:
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Director
Since
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Gary
P. Bennett
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Age
66; Consultant. Former Chairman and Chief Executive Officer,
Analysis & Technology, until 1999 (interactive multimedia training,
information systems, engineering services).
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1994
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Steven
J. Crandall
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Age
56; Vice President, Ashaway Line & Twine Manufacturing Co.
(manufacturer of sporting goods products and medical
threads).
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1983
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Larry
J. Hirsch, Esq.
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Age
69; Attorney. Former President, Westerly Jewelry Co., Inc.
(retailer) (retired 1999).
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1994
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Barry
G. Hittner, Esq.
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Age
61; Attorney. Of Counsel, Cameron & Mittleman, LLP (law
firm), 2003 to present. Of Counsel, Edwards & Angell, LLP
(law firm), 1999-2003.
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2003
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Katherine
W. Hoxsie, CPA
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Age
59; Vice President, Hoxsie Buick-Pontiac-GMC Truck, Inc. (automotive
dealership).
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1991
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Mary
E. Kennard, Esq.
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Age
53; Vice President, General Counsel and Secretary, The American
University.
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1994
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Edward
M. Mazze, Ph.D.
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Age
67; Dean, College of Business Administration and The Alfred J.
Verrecchia-Hasbro Inc. Leadership Chair in Business, University of Rhode
Island, 1998-2006. Distinguished University Professor of
Business Administration, University of Rhode Island, since
2006.
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2000
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Kathleen
E. McKeough
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Age
57; Retired. Former Senior Vice President, Human Resources,
GTECH Corporation, 2000 to 2004 (lottery industry and financial
transaction processing).
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2003
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Victor
J. Orsinger II, Esq.
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Age
61; Attorney. Partner, Orsinger & Nardone, Attorneys at
Law.
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1983
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H.
Douglas Randall, III
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Age
60; President, HD Randall, Realtors (real estate).
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2000
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Patrick
J. Shanahan, Jr.
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Age
63; Retired. Former Chairman and Chief Executive Officer, First Financial
Corp. (bank).
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2002
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James
P. Sullivan, CPA
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Age
69; Consultant. Former Finance Officer, Roman Catholic Diocese
of Providence (retired 2001).
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1983
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Neil
H. Thorp
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Age
68; President, Thorp & Trainer, Inc. (insurance
agency).
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1983
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John
F. Treanor
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Age
60; President and Chief Operating Officer of the Corporation and The
Washington Trust Company, since 1999.
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2001
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John
C. Warren
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Age
62; Chairman and Chief Executive Officer of the Corporation and The
Washington Trust Company, since 1999.
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1996
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None of
the director nominees or incumbents, with the exception of Edward M. Mazze,
Ph.D., serves as a director of any other company with a class of securities
registered pursuant to Section 12 of the Securities Exchange Act of 1934, as
amended (the “Exchange Act”), or registered as an investment company under the
Investment Company Act of 1940, as amended. Dr. Mazze is a director
of Technitrol, Inc., a manufacturer of electrical equipment, and the Barrett
Growth Fund.
The
following table presents all Washington Trust stock-based holdings, as of
February 25, 2008, 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 W.
Wallace and the Jean and David W. Wallace Foundation, who are believed by the
Corporation to be beneficial owners of more than 5% of the Corporation’s
outstanding Common Stock as of February 14, 2008. The stock ownership
information for Mr.
Wallace and the Jean and David W. Wallace Foundation is based on certain
filings made under Section 13 of the Exchange Act and other information provided
by these parties to the Corporation. All such information was
provided by the shareholders listed below.
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Term
Expiring
In
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Common
Stock
(a)
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Exercisable
Options (b)
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Vested
Restricted
Stock
Units (c)
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Total
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Percentage
Of
Class
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Nominees
and Directors:
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Gary
P. Bennett
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2011
(d)
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7,348
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13,376
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500
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21,224
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0.15%
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Larry
J. Hirsch, Esq.
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2011
(d)
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11,335
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8,688
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500
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20,523
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0.15%
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Mary
E. Kennard, Esq.
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2011
(d)
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3,005
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6,400
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500
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9,905
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0.07%
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H.
Douglas Randall, III
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2011
(d)
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11,819
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10,000
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500
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22,319
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0.16%
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John
F. Treanor
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2011
(d)
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7,740
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79,902
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0
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87,642
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0.63%
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Barry
G. Hittner, Esq.
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2010
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4,000
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2,000
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500
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6,500
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0.05%
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Katherine
W. Hoxsie, CPA
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2010
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133,873
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13,376
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500
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147,749
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1.06%
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Edward
M. Mazze, Ph.D.
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2010
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1,200
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5,500
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500
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7,200
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0.05%
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Kathleen
E. McKeough
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2010
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1,020
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2,000
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500
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3,520
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0.03%
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John
C. Warren
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2010
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52,065
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102,644
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0
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154,709
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1.11%
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Steven
J. Crandall
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2009
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3,313
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11,688
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500
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15,501
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0.11%
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Victor
J. Orsinger II, Esq.
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2009
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12,817
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8,688
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500
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22,005
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0.16%
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Patrick
J. Shanahan, Jr.
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2009
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38,830
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6,000
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500
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45,330
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0.32%
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James
P. Sullivan, CPA
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2009
(e)
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8,912
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11,688
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1,000
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21,600
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0.15%
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Neil
H. Thorp
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2009
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37,985
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11,688
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500
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50,173
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0.36%
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Certain
Executive Officers:
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Galan
G. Daukas
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2,666
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32,315
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0
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34,981
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0.25%
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David
V. Devault
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31,403
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57,085
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0
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88,488
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0.63%
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B.
Michael Rauh, Jr.
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16,869
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32,180
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0
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49,049
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0.35%
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All
directors and executive officers as a group (25 persons)
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419,715
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563,553
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7,000
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990,268
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7.09%
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Beneficial
Owners:
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David
W. Wallace (f)
680
Steamboat Road,
Greenwich,
CT 06830
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1,981,787
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0
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0
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1,981,787
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14.20%
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Jean
and David W. Wallace Foundation (g)
680
Steamboat Road,
Greenwich,
CT 06830
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942,787
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0
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0
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942,787
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6.75%
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(a)
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Includes
1,337; 610; and 1,666 common stock equivalents held by Messrs. Randall,
Treanor and Daukas, respectively, in the Corporation’s Nonqualified
Deferred Compensation Plan.
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(b) |
Stock
options that are or will become exercisable within 60 days of February 25,
2008. |
(c)
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Restricted
stock units that are or will become exercisable within 60 days of February
25, 2008.
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(e)
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James
P. Sullivan will reach the age of 70 prior to the Corporation's Annual
Meeting on April 22, 2008. Pursuant to the Corporation's
By-Laws, Mr. Sullivan will resign from the Board of Directors effective as
of the Annual Meeting.
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(f)
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Based
on information set forth in an Amendment No. 9 to a Schedule 13G/A filed
with the SEC on February 14, 2008 and other
information provided by Mr. Wallace to the
Corporation. Includes 134,000 shares owned by Mr. Wallace’s
spouse and 942,787 shares held by the Jean and David W. Wallace
Foundation, of which Mr. Wallace serves as President and
Trustee.
|
(g) |
Based
on information set forth in an Amendment No. 9 to a Schedule 13G/A filed
with the SEC on February 14, 2008 and other information provided by the
Jean and David W. Wallace Foundation. These shares are also
included in the shares owned by David W. Wallace as discussed in more
detail in footnote (f) above. |
_________________
BOARD
OF DIRECTORS AND COMMITTEES
The
Corporation’s Board of Directors (the “Corporation’s Board”) held 12 meetings in
2007. 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 in 2007. During 2007, 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 Mary E. Kennard who attended 73% of such
meetings. While the Corporation does not have a formal policy related
to Board member attendance at Annual Meetings of Shareholders, directors are
encouraged to attend each Annual Meeting to the extent reasonably
practicable. Each of the directors attended the 2007 Annual Meeting
of Shareholders except Barry G. Hittner.
Director
Independence
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 E. McKeough, Victor J. Orsinger II, H.
Douglas Randall, III, Patrick J. Shanahan, Jr., James P. Sullivan and Neil H.
Thorp 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 Securities and Exchange Commission (the “SEC”). 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 Corporation’s Board, which
procedures are described under the heading “Communications With the Board of
Directors” on page 32 of this Proxy Statement.
In 2007,
the committees of the Corporation’s Board consisted of an Executive Committee, a
Nominating and Corporate Governance Committee (the “Nominating Committee”), an
Audit Committee and a Compensation and Human Resources Committee (the
“Compensation Committee”).
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 SEC. The Executive
Committee met once in 2007, and when the Corporation’s Board is not in session,
is entitled to exercise all the powers and duties of the Corporation’s
Board.
Nominating
Committee
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 members of the
Nominating Committee regularly meet in executive session without the presence of
employee directors or management. The Corporation’s Board has
designated the Chairperson of the Nominating Committee to serve as the “Lead
Director” to preside over Board meetings when the Corporation’s Board meets in
executive session without the presence of employee directors.
The
Nominating Committee, which met six times in 2007, is responsible for
identifying individuals qualified to become Board members, consistent with
criteria approved by the Corporation’s Board, and recommending that the
Corporation’s Board select the director nominees recommended by the Nominating
Committee 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. The Corporation has adopted Corporate
Governance Guidelines, which are available on the Corporation’s website at
www.washtrust.com under Investor Relations – Governance Documents. A copy of the
Nominating Committee charter is also available to shareholders on the
Corporation’s website at www.washtrust.com under Investor Relations – Governance
Documents.
At a
minimum, each nominee, whether proposed by a shareholder or any other party,
must (1) 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; (2)
have previous experience on other boards; (3) have experience at a strategic or
policy-making level in a business, government, not-for-profit or academic
organization of high standing; (4) have a record of distinguished accomplishment
in his or her
field;
(5) be well regarded in the community and have a long-term reputation for the
highest ethical and moral standards; (6) 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 (7) 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, without 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 2009 Annual Meeting of Shareholders, it must be
submitted to the Corporation by November 14, 2008. All shareholder
recommendations for nominees must include the following information: (1) the
name and address of record of the shareholder; (2) 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; (3) the name, age, business and
residential address, educational background, current principal occupation or
employment, and principal occupation or employment for the preceding five full
fiscal years of the proposed nominee; (4) a description of the qualifications
and background of the proposed nominee that addresses the minimum qualifications
and other criteria for board membership approved by the Corporation’s Board; (5)
a description of all arrangements or understandings between the shareholder and
the proposed nominee; (6) the consent of the proposed nominee to (a) be named in
the proxy statement relating to the Corporation’s Annual Meeting of
Shareholders, and (b) serve as a director if elected at such Annual Meeting; and
(7) 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 (e) 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).
The
Corporation has not paid a fee to any third parties to identify or evaluate
Board or committee nominees.
The
Nominating Committee recommended that Messrs. Bennett, Hirsch, Randall and
Treanor and Ms. Kennard be nominated for election to serve as directors until
the 2011 Annual Meeting of Shareholders.
Audit
Committee
Members
of the Audit Committee are currently directors Hoxsie (Chairperson), Crandall,
Hittner, Mazze, Shanahan 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)(1) under the Exchange
Act. The Corporation’s Board has determined that directors Hoxsie and
Sullivan qualify as “audit committee financial experts” under the Exchange
Act. The Audit Committee has a written charter that is available to
shareholders on the Corporation’s website at www.washtrust.com under Investor
Relations – Governance Documents.
The Audit
Committee, which met 11 times in 2007, 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 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
Corporation’s Board 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 U.S. 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, 2007 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.
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 met eight times in 2007.
The
Compensation Committee has a written charter that is available to shareholders
on the Corporation’s website at www.washtrust.com under Investor Relations –
Governance Documents. The Compensation Committee’s responsibilities,
which are discussed in detail in its charter, include, among other
things:
|
Establishing
and reviewing the Corporation’s compensation philosophy and
policies.
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Reviewing
and analyzing the compensation structure and vehicles provided to all
employees. Prior to February 2007, the Compensation Committee
would make recommendations on compensation matters concerning senior
executives (including the Chief Executive Officer) to the independent
directors of the Corporation’s Board, who were responsible for non-equity
compensation decisions for such employees. Effective February
2007, the Compensation Committee is responsible for all compensation
decisions, and reports all actions to the members of the Corporation’s
Board.
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Establishing,
reviewing and analyzing the compensation structure and vehicles provided
to the directors.
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Administering
the Corporation’s equity compensation plans, including the 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”).
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Administering
the Corporation’s retirement and benefit plans, programs, and
policies.
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A
schedule of meetings and preliminary agenda are established each December for
the coming fiscal year. The agenda for Compensation Committee
meetings is determined by its Chairperson with the assistance of the head of the
Corporation’s Human Resources department. Compensation Committee
meetings are regularly attended by the Chief Executive Officer and other members
of the senior management team. As appropriate, the Compensation
Committee may meet in executive session without the presence of employee
directors and management. The Committee met in executive session four
times during 2007.
The
Compensation Committee has authority under its charter to select, retain,
terminate, and approve the fees of advisors, counsel or other experts or
consultants, as it deems appropriate. The Compensation Committee has
engaged Pearl Meyer & Partners, an independent compensation consulting firm,
to assist in fulfillment of its duties. The compensation consultant
advises the Compensation Committee with respect to compensation and benefit
trends, best practices, market analysis, plan design, and establishing targets
for individual compensation awards. The use of an independent
compensation consultant provides additional assurance that our executive
compensation programs are reasonable and consistent with our philosophy and
objectives. The compensation consultant reports directly to the
Compensation Committee. The Compensation Committee meets with the
compensation consultant from time to time in executive session without the
presence of employee directors and management.
During
2007, Pearl Meyer & Partners received total remuneration of $50,600 for
consulting services related to compensation analysis and
planning. The Corporation did not engage Pearl Meyer & Partners
for any services other than those related to executive and director compensation
consulting.
The
Compensation Committee may delegate authority to fulfill certain administrative
duties regarding the compensation and benefit programs to the senior management
team. Although members of management generally attend Compensation
Committee meetings, employees are not present during executive session
deliberations regarding their own compensation. The Compensation
Committee solicits the input and recommendations of the Chief Executive Officer
for compensation awards to other officers. Such awards are further
discussed in executive session, with decisions made by the Compensation
Committee without the Chief Executive Officer’s involvement.
The
Compensation Committee’s report on executive compensation appears elsewhere in
this Proxy Statement.
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
DISCUSSION AND ANALYSIS
The
Compensation and Human Resources Committee (for purposes of this analysis, the
“Committee”) has responsibility for establishing, implementing and continually
monitoring adherence with our compensation philosophy. The Committee, among
other things, ensures that the total compensation paid to senior executives is
fair, reasonable and competitive.
Compensation
Philosophy and Objectives
Our
success is highly dependent on hiring, developing and retaining qualified people
who are motivated to perform for the benefit of the shareholders, the community,
and customers. The Committee believes that an effective executive
compensation program must be designed to reward the achievement of specific
annual, long-term and strategic goals, and align executive interests with
shareholders, with the ultimate objective of enhancing shareholder
value. The goal of our compensation program is to compensate senior
leadership in a manner that elicits superior corporate performance, defined as
at or above the top third of the Corporation’s peer group.
Our
compensation plan places emphasis on (1) attracting and retaining the best
talent in the financial services industry; (2) providing overall compensation
for key executives that is competitive with similarly-sized financial
institutions; (3) motivating executives to achieve the goals set in our
strategic plan; and (4) returning a fair value to shareholders. To
that end, the Committee believes that compensation packages provided to
executives, including the named executive officers listed in this Proxy
Statement, should include both cash and stock-based compensation that reward
performance as measured against established goals.
Compensation
Process
Prior to
the beginning of the fiscal year, the Committee consulted with Pearl Meyer &
Partners, an independent compensation consulting firm, to assess the
competitiveness and effectiveness of our executive compensation
program. The compensation consultant provided an analysis of base
salary, short-term incentive, long-term incentive and benefit practices of
comparable companies in the banking industry. For 2007, the analysis
was based on a peer group of banking institutions of generally similar asset
size and regional location, selected in consultation with the
Committee. For 2007, the compensation peer group was comprised of the
following financial institutions:
Arrow
Financial Corporation
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Independent
Bank Corp.
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Sterling
Financial Corporation
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Bancorp
Rhode Island, Inc.
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Lakeland
Bancorp, Inc.
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Tompkins
Financial Corporation
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Berkshire
Hills Bancorp, Inc.
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Omega
Financial Corporation
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TrustCo
Bank Corp NY
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Boston
Private Financial Holdings, Inc.
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Partners
Trust Financial Group, Inc.
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Univest
Corporation of Pennsylvania
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Brookline
Bancorp, Inc.
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Peapack-Gladstone
Financial Corporation
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U.S.B.
Holding Company, Inc.
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Century
Bancorp, Inc.
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Provident
New York Bancorp
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W.S.F.S.
Financial Corporation
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Flushing
Financial Corporation
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S
& T Bancorp, Inc.
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Yardville
National Bancorp
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Harleysville
National Corporation
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Sandy
Spring Bancorp, Inc.
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Because a
peer group analysis is limited to those positions for which compensation
information is disclosed publicly, these studies typically include only the five
most highly compensated officers at each company. Therefore, the
compensation consultant also relied upon published compensation surveys to
supplement information on these positions, as well as to provide the basis for
analysis for other company executives. Total compensation is
generally targeted at the 50th percentile or above for each
position. As would be expected, specific pay positioning varies by
executive. Differences may reflect individual roles, corporate and
individual performance, experience and leadership ability.
In
determining compensation for the Chief Executive Officer and the Chief Operating
Officer, the Committee considers the compensation consultant’s analysis,
compensation survey data and the assessment of the executive’s performance by
the independent directors of the Corporation’s Board. For all other
senior executives, the Committee considers the compensation consultant’s
analysis, compensation survey data, and the Chief Executive Officer’s assessment
of the executive’s performance. The Committee solicits the input and
recommendations of the Chief Executive Officer for compensation awards to other
officers. Prior to February 2007, the Committee would make
recommendations on compensation matters to the independent directors of the
Corporation’s Board, who were responsible for non-equity compensation
decisions. Effective February 2007, the Committee is responsible for
all compensation decisions, and reports all actions to the Corporation’s
Board.
Setting
Executive Compensation
After the
Committee has established targeted overall compensation for each executive,
compensation is allocated among base salary, performance-based cash incentive,
and equity compensation. Generally, our compensation package consists
of approximately 50% to 70% base salary, 20% to 30% cash incentive, and 10% to
20% equity compensation. As a result, 30% to 50% of compensation is
provided through at risk forms of compensation. We believe that this
mix will drive individual performance, short-term profitability and long-term
stock performance. Additionally, we provide retirement and other
benefits to attract and retain our employees.
The
Committee also considers the expected tenure of the executive in determining the
mix of cash and equity compensation, as well as the form of
equity. Because of the relative stability of our stock price, equity
in the form of stock options may be a better motivator for executives who are
expected to have a longer tenure. For those executives who are closer
to retirement, stock grants or cash incentives may be a more effective motivator
of corporate performance.
Base
Salary
In
reviewing the Chief Executive Officer’s and Chief Operating Officer’s base
salaries and the base salary recommendations made by the Chief Executive Officer
for other executives, the Committee primarily considers:
▪
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the
compensation consultant’s analysis and compensation survey
data;
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▪
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the
executive’s compensation relative to other
officers;
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▪
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recent
and expected performance of the
executive;
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▪
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our
recent and expected overall performance;
and
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▪
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our
overall budget for base salary
increases.
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For 2007,
base salaries for all executive officers were determined by the independent
directors of the Corporation’s Board, based upon the recommendation of the
Committee. The 2007 base salary for Mr. Warren, Chairman and Chief
Executive Officer, was $465,000, which positioned Mr. Warren’s salary in a
manner consistent with the general guidelines outlined earlier. For
2007, base salary was $350,000 for Mr. Treanor; $200,000 for Mr. Devault;
$300,000 for Mr. Daukas; and $156,000 for Mr. Rauh.
Equity
Compensation
The
granting of stock-based incentives is viewed as a desirable long-term incentive
compensation strategy because it closely links the interest of management with
shareholder value, aids in employee retention, and motivates executives to
improve the long-term stock market performance of our Common
Stock. Equity grants also provide an opportunity for increased equity
ownership.
When
granting stock-based incentives to senior executives, the Committee considers
the compensation consultant’s analysis, as described earlier. The
Committee also considers the Chief Executive Officer’s recommendations for other
executives, which are based on each officer’s level of responsibility and
contribution towards achievement of our business plan and
objectives.
Historically,
the primary form of equity compensation has been non-qualified stock options
because of favorable accounting and tax treatment. However, beginning in 2006,
the accounting treatment for stock options changed as a result of SFAS No. 123R
“Share Based Payment”, making stock options less attractive. As a result, the
Committee assessed the desirability of granting shares of restricted stock or
restricted stock units to employees, particularly members of senior management,
and concluded that restricted stock or restricted stock units would provide an
equally motivating form of incentive compensation while permitting us to issue
fewer shares, thereby reducing potential dilution.
Generally,
stock-based incentives have been granted on an annual basis. Employee
grants, including grants to newly hired employees, have historically been made
at a regularly-scheduled Committee meeting. All stock option awards
are made at the closing price for our Common Stock on the grant
date. All grants are effective either on the date of the Committee
meeting or at a specific future date coinciding with a triggering event such as
the employee’s date of hire. Director equity grants occur annually on
the date of the Annual Meeting of Shareholders. Grants of restricted
stock and restricted stock units include dividend equivalent rights, payable at
the same rate and on the same date as dividends paid to our
shareholders.
Equity
grants typically become vested after three to five years of
service. Unvested equity grants are typically forfeited upon
separation from employment. However, in the case of retirement,
employees are vested in a pro-rata share of restricted stock units and directors
are fully vested in all equity grants. In addition, employees and
directors become fully vested in restricted stock unit grants upon
death. All equity grants become fully vested in a change in control
of the Corporation.
Although
the Committee strongly believes that equity compensation is an important
component of total compensation, no grants were awarded to executive officers or
directors during 2007. There were a number of economic factors that
made 2007 very challenging for the financial services industry. Both
the executive officers and the directors agreed to forego their 2007 equity
compensation in order to avoid the expense associated with such grant and
improve the Corporation’s financial performance during 2007. This
resulted in a reduction in total compensation of approximately 10% to 20% for
executives and 15% to 30% for directors. The Committee expects to
make equity grants to both executives and directors in 2008 and
beyond.
Cash
Incentive
The
Committee believes that cash incentives are instrumental in motivating and
rewarding executives for achievement of corporate and division
goals. All of our named executive officers participate in the Annual
Performance Plan. In addition, Mr. Daukas participates in the Wealth
Management Business Building Incentive Plan, which rewards achievement of growth
targets for the wealth management product line.
Annual
Performance Plan
The
Annual Performance Plan provides for the payment of additional cash compensation
based on corporate performance and the achievement of individual objectives by
each participant in order to provide a link between performance and
compensation. The percentages allocated to the corporate performance
component and the individual performance component are 70% and 30% respectively,
for the Chief Executive Officer and the Chief Operating Officer, and 60% and
40%, respectively, for all other executive officers.
In
determining corporate performance, the Annual Performance Plan focuses primarily
on three financial metrics - net income, fully diluted earnings per share, and
return on equity, with each metric receiving equal weighting. At the
beginning of each year, the Corporation’s Board establishes performance targets
based upon our strategic objectives. At the end of each year, the
actual performance for each of the financial metrics is measured separately
against its target. Performance exceeding a threshold of 80% of the
performance target will result in progressively higher payment levels, ranging
from 50% to 150% of the target payment for the corporate performance
component.
The
individual performance component for the Chief Executive Officer and the Chief
Operating Officer is determined with consideration of matters such as leadership
of the senior management team, strategic planning and implementation, corporate
governance, and ability to focus the Corporation on the long-term interests of
the shareholders. For the other named executive officers, individual
performance is determined with consideration of matters such as leadership,
strategic planning, and achievement of business unit operational and/or
production goals. In order to qualify for an individual performance
component award, the weighted average of the financial metrics must be at least
80%. Once that threshold level is achieved, actual payments will be
based on an assessment of employee performance against expectations established
at the beginning of each year. The Committee relies upon the
assessment of the performance of the Chief Executive Officer and the Chief
Operating Officer by the independent directors of Corporation’s Board, and
considers the Chief Executive Officer’s assessment of the performance of all
other senior executives. Amounts not paid as a result of an employee not fully
meeting individual performance expectations may be reallocated to any other
employee who demonstrated extraordinary performance.
The
target bonus opportunity is determined as a percentage of regular base salary
earnings, and varies by level of responsibility. The target bonus
percentage is 45% for Mr. Warren; 40% for Mr. Treanor; and 30% for Messrs.
Devault, Daukas, and Rauh.
The terms
of the Annual Performance Plan, including the target bonus levels and
relationship of payouts to achievement of profitability measures, were
established by the Committee in consultation with the compensation consultant,
and approved by the Corporation’s Board. Annually, the Committee
reviews the plan to ensure that it is designed in a manner that continues to
motivate employees to achieve our profitability goals. Regardless of
the actual award determined by the plan parameters, the Committee has the
authority to modify any award.
In 2007,
the target ranges for the financial metrics related to a full payout under the
corporate performance component of the Annual Performance Plan
were: (i) net income: $25,281,000 to $26,577,000; (ii)
fully diluted earnings per share: $1.85 to $1.94; and (iii)
return on equity: 14.04% to 14.75%. Our actual profitability results
entitled the executive officers to a payout of 79.2% for the corporate
performance component. In recognition of the Corporation’s strong
performance as compared to its peer group and consideration of the decrease in
total compensation resulting from the lack of a 2007 equity grant, the Committee
modified this payout to 83.3%. Annual Performance Plan awards for the
named executive officers are outlined below:
▪
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Mr.
Warren fully met his individual performance expectations. In
consideration of both individual and corporate performance, Mr. Warren
received a bonus payment of $185,000, which is 88.4% of his target bonus
of $209,250. This includes a discretionary adjustment of $6,217
primarily related to the adjustment of the corporate performance component
to an 83.3% payout as described
above.
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▪
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Mr.
Treanor fully met his individual performance expectations. In
consideration of both individual and corporate performance, Mr. Treanor
received a bonus payment of $125,000, which is 89.3% of his target bonus
of $140,000. This includes a discretionary adjustment of $5,384
primarily related to the adjustment of the corporate performance component
to an 83.3% payout as described
above.
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▪
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Mr.
Devault fully met his individual performance expectations. In
consideration of both individual and corporate performance, Mr. Devault
received a bonus payment of $56,000, which is 93.3% of his target bonus of
$60,000. This includes a discretionary adjustment of $3,488
primarily related to the adjustment of the corporate performance component
to an 83.3% payout as described
above.
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▪
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Mr.
Daukas fully met his individual performance expectations. In
consideration of both individual and corporate performance, Mr. Daukas
received a bonus payment of $81,000, which is 90.0% of his target bonus of
$90,000. This includes a discretionary adjustment of $2,232
primarily related to the adjustment of the corporate performance component
to an 83.3% payout as described above. He also received a
payment under the Wealth Management Business Building Incentive Plan,
which is discussed below.
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▪
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Mr.
Rauh met his individual performance expectations. In
consideration of both corporate and individual performance, Mr. Rauh
received a bonus payment of $41,000, which is 87.6% of his target bonus of
$46,800. This includes a discretionary adjustment of $1,152
primarily related to the adjustment of the corporate performance component
to an 83.3% payout as described
above.
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Wealth
Management Business Building Incentive Plan
Mr.
Daukas is eligible for an additional bonus payment based upon the performance of
the wealth management division. This incentive is intended to drive
growth in the wealth management product line, which is an important contributor
to our net income. The target payment is $200,000, with a range of 0%
to 150% based upon actual performance. Plan performance is measured
in terms of division pre-tax earnings, revenues, and net new assets under
management, with each metric having equal weighting. In 2007, the
Committee refined the definition of net new assets under management to be
inclusive of all cash flows excluding investment income. Goal
achievement for the three metrics first must average at least 80% in order to
qualify for a plan payment. Once this threshold is met, plan payment
is determined by assessing achievement of each metric individually against its
target. Performance exceeding a threshold of 80% of the performance
target will result in progressively higher payment levels, ranging from 50% to
150% of the target payment.
In 2007,
plan targets were: (i) pre-tax earnings of $14,163,581; (ii) revenues
of $29,017,618; and (iii) net new assets under management of
$157,000,000. During 2007, the wealth management division met 104.5%
of the pre-tax earnings goal, 100.5% of the revenue goal, and 75.4% of the net
new assets under management goal. This performance resulted in a
total bonus payment of $141,600 to Mr. Daukas under this plan, which was 70.8%
of the target.
Retirement
and Other Benefits
Pension
Plan
The Bank
offers a tax-qualified defined benefit Pension Plan for the benefit of most
employees. During 2007, the Committee reviewed the Bank’s retirement
program, benefit trends, and best practices, and made a strategic decision to
shift retirement benefits from the Pension Plan to the 401(k)
Plan. Effective October 1, 2007, the Pension Plan was amended to
freeze plan entry to new hires and rehires. Existing employees hired
prior to October 1, 2007, including all named executive officers, continue to
accrue benefits under the Pension Plan.
The
annual pension benefit for an employee retiring at normal retirement age is the
sum of (1) 1.2% of average annual pension compensation plus (2) 0.65% of average
annual pension compensation in excess of the Social Security covered
compensation level, multiplied by the number of years of service limited to 35
years. Pension compensation consists of base salary plus payments
pursuant to the Annual Performance Plan, Wealth Management Business Building
Incentive Plan, and other cash-based payments. In 2007, the Social
Security covered compensation level was $53,820 for a participant retiring at
age 65.
Pension
benefits are available at normal retirement age, typically age
65. Participants may commence reduced benefits as early as age 55
with ten years of service. Mr. Warren is the only named executive
officer who currently meets the age and service requirements to commence pension
benefits.
The
Pension Plan was amended in 2005 to eliminate a special early retirement benefit
available to participants who had combined age and years of benefit service of
85 or more (the “Magic 85 Provision”). The plan amendment provided
that the Magic 85 Provision would still be available to qualifying grandfathered
employees retiring from active service on or after age 60. Under the
Magic 85 Provision, the pension benefit of qualifying participants is not
subject to reduction for early benefit commencement. Additionally,
qualifying participants are eligible for a temporary payment through age 62,
which is equal to the participant’s estimated Social Security benefit at age 62.
Mr. Devault is the only named executive officer who is expected to qualify for
the Magic 85 Provision.
Supplemental
Pension Plan
The Bank
also offers a Supplemental Pension Plan, which provides for payments of certain
amounts that would have been received under the Pension Plan in the absence of
IRS limits. We believe this Supplemental Pension Plan helps to retain
and attract executives whose benefits under the Pension Plan are otherwise
limited by the IRS. Benefits payable under the Supplemental Pension
Plan are an unfunded obligation of the Bank.
In 2007,
the Supplemental Pension Plan was restated to comply with Section 409A of the
Internal Revenue Code. Among other things, this restatement defined
the benefit commencement date as separation from service after age 65 or after
age 55 with at least ten years of service. In addition, the plan was
amended to impose a six-month delay of
payments
to a ‘specified employee’ within the meaning of Section 409A(a)(2)(B)(i) of the
Internal Revenue Code. Interest on these delayed payments will be
credited based on the Actuarial Equivalent interest rate.
This plan
covers substantially all employees who are impacted by IRS limits under the
Pension Plan. Messrs. Warren and Treanor are no longer eligible to
participate in this plan as further explained under “Executive Pension
Plan”.
Executive
Pension Plan
We also
maintain an Executive Pension Plan for the benefit of Messrs. Warren and
Treanor. Benefits provided under the Executive Pension Plan are
deemed necessary to attract and retain our top executives who were hired later
in their career. Our compensation consultant considers the benefits
provided under the Executive Pension Plan in its compensation analysis, and has
determined that the benefits are in line with market practice.
The
Executive Pension Plan provides a benefit of 30% of average annual pension
compensation plus 2% for each year of service up to a maximum of
55%. Benefits are offset by benefits provided by the Pension Plan,
Social Security, and any defined benefit pension plan of a prior
employer. A participant must have at least five years of service to
earn a benefit under the Executive Pension Plan. There is a minimum
benefit of $1,000 for each year of plan participation, up to a maximum of
$10,000.
In 2007,
the Executive Pension Plan was restated to comply with Section 409A of the
Internal Revenue Code. Among other things, this restatement defined
the benefit commencement date as separation from service after age 65 or after
age 55 with at least ten years of service. In addition, the plan was
amended to impose a six-month delay of payments to a ‘specified employee’ within
the meaning of Section 409A(a)(2)(B)(i) of the Internal Revenue
Code. Interest on these delayed payments will be credited based on
the Actuarial Equivalent interest rate.
Further,
the Supplemental Pension Plan and Executive Pension Plan must be treated as one
plan for purposes of Section 409A of the Internal Revenue
Code. Instead of amending the plans to act in tandem, the Committee
decided to exclude Messrs. Warren and Treanor from participation in the
Supplemental Pension Plan. All supplemental retirement benefits for
Messrs. Warren and Treanor are now provided through the Executive Pension
Plan. This did not result in a substantive increase or decrease in
the aggregate amounts of plan benefits or expense.
Mr.
Warren is the only participant who currently meets the age and service
requirements to commence benefits. Benefits payable under the
Executive Pension Plan are an unfunded obligation of the Bank.
401(k)
Plan
The Bank
maintains a 401(k) Plan that covers substantially all employees. The
401(k) Plan is an essential part of the retirement package needed to attract and
retain employees in the banking industry. The 401(k) Plan provides
for deferral of up to the lesser of 25% of plan compensation or the annual
dollar limit prescribed by the Internal Revenue Code. During 2007,
the Bank matched 50% of each participant’s first 2% of voluntary salary
deferrals and 100% of each participant’s next 2% of salary deferrals up to a
maximum match of 3%.
Effective
January 1, 2008, the 401(k) Plan was amended to promote shared responsibility
for retirement through personal savings, as well as to serve as the primary
retirement plan for employees who were hired or rehired after September 30,
2007. Plan provisions now include automatic enrollment at 3% of plan
compensation, and annual automatic increase by 1% to a maximum of
6%. The matching formula was revised to provide 100% of each
participant’s first 1% of voluntary salary deferrals and 50% of each
participant’s next 4% of salary deferrals up to a maximum match of
3%. Additionally, certain eligible employees who are hired or rehired
after September 30, 2007, and, therefore, are excluded from participation in the
Pension Plan, are eligible for a non-elective employer contribution of 4% of
plan compensation. No named executive officers are eligible for the
non-elective contribution. Employees hired after September 30, 2007
are subject to two-year cliff vesting of employer contributions. All
named executive officers are fully vested in employer
contributions.
Nonqualified
Deferred Compensation Plan
We
provide a Nonqualified Deferred Compensation Plan that permits key employees,
including the named executive officers, to defer salary and bonus with the
opportunity for supplemental retirement and tax benefits. Directors
are also eligible to participate by the deferral of retainer and meeting
fees.
The
Nonqualified Deferred Compensation Plan also provides for credits of certain
amounts that would have been matched by the Bank under the 401(k) Plan, but for
the deferral under the Nonqualified Deferred Compensation Plan and IRS
limitations on annual compensation under qualified plans. Directors
are not eligible for employer contributions. Employees hired after
September 30, 2007 are subject to two-year cliff vesting of employer
contributions. All named executive officers are fully vested in
employer contributions.
Deferrals
are credited with earnings/losses based upon the participant’s selection of
investment measurement options. The investment measurements include
publicly-traded mutual funds and our Common Stock. Because these
investment measurements are publicly traded securities, we do not consider any
of the earnings credited under the Nonqualified Deferred Compensation Plan to be
“above market”. The investment measurements are described further
under the heading "Nonqualified Deferred Compensation" beginning on page 21 of
this Proxy Statement.
The
Nonqualified Deferred Compensation Plan was restated during 2007 to comply with
Section 409A of the Internal Revenue Code. Benefits payable under
this plan are an unfunded obligation of the Bank.
Welfare
Benefits
In order
to attract and retain employees, we provide certain welfare benefit plans to our
employees, which include medical and dental insurance benefits. The
named executive officers participate in the medical and dental insurance plans
under the same terms as our other full-time employees. Cash-in-lieu
of benefit coverage is offered to all full-time employees, including the named
executive officers. During 2007, Mr. Rauh elected to receive $1,700
in lieu of medical and dental coverage that would otherwise have been
provided.
We
provide two times base salary in life and accidental death and dismemberment
insurance for our full-time employees, including the named executive
officers. This is provided through a combination of group life
insurance contracts and split dollar arrangements under Bank-owned life
insurance policies. The life insurance benefit provided to the named
executive officers does not exceed the benefit levels offered to other full-time
employees.
We also
provide disability insurance to our full-time employees including the named
executive officers, which provides up to 60% of base salary income replacement
after six months of qualified disability. In order to obtain a
competitive group rate, the group disability policy limits covered base salary
to $250,000. This group plan limit does not fully cover Messrs.
Warren, Treanor and Daukas’ base salaries. In order to provide a
benefit that is commensurate with the benefits provided to other full-time
employees, we have purchased a supplemental disability insurance policy for
Messrs. Warren and Treanor, and we reimburse Mr. Daukas for a pro-rata share of
his personal disability insurance policy.
Perquisites
and Other Personal Benefits
We
provide named executive officers with perquisites and other personal benefits
that the Committee believes are reasonable and consistent with the overall
compensation program. Perquisites include transportation benefits,
country club memberships, and relocation benefits (as
applicable). Annually, the Committee reviews the levels of
perquisites and other personal benefits provided to named executive
officers. In addition, on an annual basis the Chairperson of the
Compensation Committee reviews the expense reports of the named executive
officers to ensure that all reimbursements are reasonable and
appropriate. In February 2008, this review was completed with respect
to 2007 expense reimbursements, and no exceptions were noted.
Deductibility
of Executive Compensation
As part
of its role, the Committee reviews and considers the deductibility of executive
compensation under Section 162(m) of the Internal Revenue Code, which provides
that we may not deduct compensation of more than $1,000,000 that is paid to
certain individuals. This applies to base salary, all cash incentive
plans and equity grants other than stock options. During 2007, no
employee received taxable compensation in excess of $1,000,000, and therefore,
all such compensation was fully deductible for federal income tax
purposes.
Stock
Ownership Requirements
We have
adopted Corporate Governance Guidelines that call for each director to maintain
a minimum ownership in our Common Stock of 1,000 shares. This
requirement is expected to be met within three years of joining the
Corporation’s Board. All directors have met this
requirement.
Change
in Control Agreements
We have
entered into Change in Control Agreements (collectively, the “Agreements”) with
certain key employees, including the named executive officers. The
Agreements are designed to promote stability and continuity of senior
management. The Committee believes that the interests of shareholders
will be best served if the interests of senior management are aligned with
them. The Committee further believes that providing change in control
benefits should eliminate, or at least reduce, the reluctance of senior
management to pursue potential change in control transactions that may be in the
best interests of shareholders.
In the
event of a change in control, the named executive officers would be eligible for
(a) a severance payment equal to a multiple of the sum of base salary in effect
at the time of termination plus the highest bonus paid in the 2-year period
prior to the change in control; (b) benefit continuation for a period of
additional months of medical, dental and life insurance coverage, as well as
additional months of benefit accrual under the Corporation’s or Bank’s
supplemental retirement plans; and (c) payment to cover the impact of the 20%
excise tax imposed by Section 280G of the Internal Revenue Code in the event the
named executive officer becomes subject to such excise tax. The terms
vary for each executive, as set forth in the following table.
|
Multiple
of Base and Bonus
|
Length
of Benefit Continuation
|
Messrs.
Warren and Treanor
|
3
|
36
months
|
Messrs.
Devault, Daukas, and Rauh
|
2
|
24
months
|
Payments
under the Agreements would be triggered if:
▪
|
in
the event of a change in control (as defined in the Agreements) of the
Corporation or Bank, (a) the Corporation or Bank terminates the executive
for reasons other than for Cause (as defined in the Agreements) or death
or disability of the executive within 13 months after such change in
control; or (b) within 12 months of a change in control, 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 Bank to obtain
an effective agreement from any successor to assume the Agreements;
or
|
▪
|
the
executive resigns for any reason during the 13th month after the change in
control; or
|
▪
|
the
executive is terminated by the Corporation or 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.
|
During
2007, the Agreements were amended to comply with Section 409A of the Internal
Revenue Code. The amendment imposed a six month delay in payments to
a “specified employee” within the meaning of Section 409A(a)(2)(B)(i) of the
Internal Revenue Code. If a six-month delay is required, the
Corporation has agreed, upon the executive’s termination of employment, to make
an irrevocable contribution to a grantor trust on behalf of the executive in the
amount of the severance, plus interest at the short-term applicable federal
rate.
Further
analysis of payments triggered by a change in control is provided under the
heading"Potential Post-Employment Payments" on page 23 of this Proxy
Statement.
COMPENSATION
COMMITTEE REPORT
The
Compensation Committee has reviewed and discussed the Compensation Discussion
and Analysis report beginning on page 8 of this Proxy Statement with
management. Based on that review and discussion, the Compensation
Committee recommended to the Corporation’s Board that the Compensation
Discussion and Analysis be included in this Proxy Statement.
The
foregoing report has been furnished by the members of the Compensation
Committee:
Gary
P. Bennett (Chairperson)
|
Edward
M. Mazze, Ph.D.
|
Larry
J. Hirsch, Esq.
|
Kathleen
E. McKeough
|
Mary
E. Kennard, Esq.
|
Victor
J. Orsinger II, Esq.
|
EXECUTIVE
COMPENSATION
Summary
Compensation Table
The
following table shows, for the fiscal years ended December 31, 2007 and December
31, 2006, the compensation of the person who served as Chief Executive Officer
of the Corporation, Chief Financial Officer of the Corporation, and each of the
three most highly compensated executive officers of the Corporation and/or the
Bank, other than the Chief Executive Officer and Chief Financial Officer, whose
total compensation exceeded $100,000 in each year.
SUMMARY COMPENSATION
TABLE
|
Name
and Principal
Position
|
Year
|
Salary
($)
|
Bonus
($)
(a)
|
Stock
Awards
($)
(b)
|
Option
Awards
($)
(c)
|
Non-Equity
Incentive
Plan
Compen-
sation
($)
(d)
|
Change
in
Pension
Value
&
Nonqualified
Deferred
Compensation
Earnings
($)
|
All
Other
Compensation
($)
(e)
|
Total
($)
|
John
C. Warren
Chairman
and Chief
|
2007
|
$465,000
|
|
$6,217
|
$134,695
|
$0
|
$178,783
|
|
$547,420
|
(f)
|
$43,103
|
$1,375,218
|
Executive
Officer
|
2006
|
$439,173
|
(g)
|
$36,719
|
$133,526
|
$7,310
|
$163,281
|
|
$402,807
|
(h)
|
$40,899
|
$1,223,715
|
John
F. Treanor
President
and Chief
|
2007
|
$350,000
|
|
$5,384
|
$79,643
|
$0
|
$119,616
|
|
$244,959
|
(f)
|
$33,244
|
$832,846
|
Operating
Officer
|
2006
|
$320,000
|
|
$32,000
|
$78,614
|
$4,310
|
$128,000
|
|
$105,587
|
(h)
|
$31,764
|
$700,275
|
David
V. Devault
Executive
Vice President,
|
2007
|
$200,000
|
|
$3,488
|
$6,886
|
$0
|
$52,512
|
|
$61,733
|
(f)
|
$6,192
|
$330,811
|
Secretary,
Treasurer and Chief Financial Officer
|
2006
|
$193,000
|
|
$2,100
|
$11,805
|
$2,262
|
$57,900
|
|
$58,438
|
(h)
|
$5,978
|
$331,483
|
Galan
G. Daukas
Executive
Vice
|
2007
|
$300,000
|
|
$2,232
|
$27,620
|
$0
|
$220,368
|
|
$27,041
|
(f)
|
$26,100
|
$603,361
|
President,
Wealth Management
|
2006
|
$285,000
|
|
$0
|
$27,620
|
$0
|
$360,500
|
(i)
|
$30,759
|
(h)
|
$216,461
|
$920,340
|
B.
Michael Rauh, Jr.
Executive
Vice
|
2007
|
$156,000
|
|
$1,152
|
$4,132
|
$0
|
$39,848
|
|
$14,090
|
(f)
|
$6,546
|
$221,768
|
President,
Sales, Service & Delivery
|
2006
|
$151,000
|
|
$0
|
$7,083
|
$1,270
|
$45,000
|
|
$0
|
(h)
|
$6,393
|
$210,746
|
(a)
|
Bonus
payments were accrued in the year indicated and paid in the succeeding
fiscal year. Thus, the 2007 bonus was paid in fiscal 2008 and
the 2006 bonus was paid in fiscal 2007. Bonus payments in 2007
include discretionary awards to Messrs. Warren, Treanor, Devault, Daukas,
and Rauh discussed in the Compensation Discussion and Analysis earlier in
this Proxy Statement. Bonus payments in 2006 include
discretionary awards to Messrs. Warren, Treanor, and Devault discussed in
the Corporation’s Proxy Statement dated March 15, 2007 for the 2007 Annual
Meeting of Shareholders (the “2007 Proxy
Statement”).
|
(b)
|
Amount
listed reflects the dollar amount recognized for financial statement
reporting purposes in 2007 and 2006, as applicable, in accordance with
SFAS No. 123R of restricted stock and restricted stock unit awards, and
thus includes amounts from awards granted in and prior to the year
indicated. For 2007, assumptions related to the financial
reporting of restricted stock and restricted stock units are presented in
Footnote 17 to the Consolidated Financial Statements presented in the
Corporation’s Annual Report on Form 10-K for the fiscal year ended
December 31, 2007 (the “2007 Form 10-K”). For 2006, assumptions
related to the financial reporting of restricted stock and restricted
stock units are presented in Footnote
17
|
|
to
the Consolidated Financial Statements presented in the Corporation's
Annual Report on Form 10-K for the fiscal year ended December 31, 2006
(the "2006 Form 10-K"). |
(c)
|
Amount
listed reflects the dollar amount recognized for financial statement
reporting purposes in the year indicated, as applicable, in accordance
with SFAS No. 123R on unexercisable stock option awards, and thus includes
amounts from awards granted in and prior to the year
indicated. All outstanding options were fully vested before
2007. Assumptions related to the financial reporting of stock
options are presented in Footnote 17 to the Consolidated Financial
Statements presented in the 2007 Form
10-K.
|
(d)
|
Amount
listed reflects payments under the Annual Performance Plan and Wealth
Management Business Building Incentive Plan as outlined earlier in this
Proxy Statement for 2007 and in the 2007 Proxy Statement for
2006. Bonus payments were accrued in the year indicated and
paid in the succeeding fiscal year. Thus, the 2007 bonus was
paid in fiscal 2008 and the 2006 bonus was paid in fiscal
2007.
|
(e)
|
The
following table shows the components of this column for
2007:
|
Named
Executive
Officer
|
Life
Insurance
Premiums
|
Disability
Insurance
Premiums
|
Employer
Match
Under
the
401(k)
Plan
|
Employer
Credits
Under
Nonqualified
Deferred
Compensation
Plan
|
Country
Club
Membership
|
Company
Provided
Vehicle
or
Auto
Allowance
|
Non-cash
Items
and
Related
Tax
Gross-up
Payment
(1)
|
Cash
In
Lieu
of
Medical
and
Dental
Coverage
|
Total
|
Warren
|
$228
|
$4,008
|
$6,750
|
$7,200
|
$7,434
|
$17,483
|
$0
|
$0
|
$43,103
|
Treanor
|
$228
|
$3,016
|
$6,750
|
$3,750
|
$11,100
|
$8,400
|
$0
|
$0
|
$33,244
|
Devault
|
$192
|
$0
|
$6,000
|
$0
|
$0
|
$0
|
$0
|
$0
|
$6,192
|
Daukas
|
$228
|
$577
|
$6,750
|
$2,250
|
$9,000
|
$7,200
|
$95
|
$0
|
$26,100
|
Rauh
|
$166
|
$0
|
$4,680
|
$0
|
$0
|
$0
|
$0
|
$1,700
|
$6,546
|
(1) Non-cash
items reflect the cash value of promotional merchandise received during the
year.
(f)
|
Amount
reflects aggregate change in the value of accumulated benefits under the
Pension Plan, Supplemental Pension Plan, and Executive Pension Plan
between September 30, 2006 and September 30, 2007. The amount
represents the increase due to an additional year of service; increases in
average annual compensation; the increase due to a reduction in the
discounting period; the increase or decrease due to changes in
assumptions; and the transfer of liability from the Supplemental Pension
Plan to the Executive Pension Plan for Messrs. Warren and Treanor as
described in the Compensation Discussion and Analysis earlier in this
Proxy Statement. Assumptions are described in footnotes to the
Pension Benefits Table included later in this Proxy
Statement. Amounts are based upon the earliest retirement age
at which the individual can receive unreduced benefits, which for Mr.
Devault is age 60 and for all others is age 65. The present
value calculations assume payment in the normal form, which is a life
annuity under the Pension Plan and Supplemental Pension Plan, and a 50%
joint and survivor annuity with 120 guaranteed monthly payments under the
Executive Pension Plan.
|
(g)
|
Mr.
Warren was on a medical leave of absence during 2006, and did not earn his
full base salary of $445,000. Amount listed reflects $362,846
in salary earnings and $76,327 in salary continuation
benefits. Salary continuation benefits are available to all
full-time employees and provide up to 26 weeks of salary continuation for
qualifying medical absence. Salary continuation benefits,
including the benefits payable to Mr. Warren, are offset by any amounts
received through other disability programs including the Rhode Island
Temporary Disability Insurance Program. The amount listed is
net of such offsets.
|
(h)
|
Amount
reflects aggregate change in the value of accumulated benefits under the
Pension Plan, Supplemental Pension Plan, and Executive Pension Plan
between September 30, 2005 and September 30, 2006. The amount
represents the increase due to an additional year of service; increases in
average annual compensation; the increase due to a reduction in the
discounting period; and the increase or decrease due to changes in
assumptions. Assumptions are described in footnotes to the
Pension Benefits Table included in the 2007 Proxy Statement. Amounts are based
upon the earliest retirement age at which the individual can receive
unreduced benefits, which for Mr. Devault is age 60 and for all others is
age 65. The present value calculations assume payment in the
normal form, which is a life annuity under the Pension Plan and
Supplemental Pension Plan, and a 50% joint and survivor annuity with 120
guaranteed monthly payments under the Executive Pension
Plan. Mr. Rauh experienced a decrease of $353 in the value of
his accumulated benefits, primarily as a result of the change in the
discount rate used to value his accumulated
benefits.
|
(i)
|
Includes
$36,050 deferred under the Nonqualified Deferred Compensation Plan during
2007.
|
________________
Grants
of Plan-Based Awards
The
following table contains information concerning grants of plan based awards
under the Corporation’s cash and equity incentive plans to the named executive
officers during the year ended December 31, 2007. No equity incentive
plan awards were made to the named executive officers during 2007.
GRANTS
OF PLAN-BASED AWARDS (a)
|
Name
|
Grant
Date
|
Estimated
Possible Payouts Under
Non-Equity
Incentive Plan Awards
|
All
Other Stock Awards: Number of Shares of Stock or
Units(#)
|
All
Other Option Awards: Number of Securities Underlying Options
(#)
|
Exercise
or Base Price of Option Awards ($/Sh)
|
Grant
Date Fair Value Of Stock And Option Awards
|
Threshold
($)
|
Target
($)
|
Maximum
($)
|
John
C. Warren
|
12/21/2006
|
$136,013
|
$209,250
|
$282,488
|
(b)
|
0
|
0
|
-
|
-
|
John
F. Treanor
|
12/21/2006
|
$91,000
|
$140,000
|
$189,000
|
(b)
|
0
|
0
|
-
|
-
|
David
V. Devault
|
12/21/2006
|
$42,000
|
$60,000
|
$78,000
|
(b)
|
0
|
0
|
-
|
-
|
Galan
G. Daukas
|
12/21/2006
|
$63,000
|
$90,000
|
$117,000
|
(b)
|
0
|
0
|
-
|
-
|
|
12/21/2006
|
$100,000
|
$200,000
|
$300,000
|
(c)
|
|
|
|
|
B.
Michael Rauh, Jr.
|
12/21/2006
|
$32,760
|
$46,800
|
$60,840
|
(b)
|
0
|
0
|
-
|
-
|
(a)
|
There
are no estimated future payouts under equity incentive plan awards
required to be reported in this table, and therefore, applicable columns
have been omitted.
|
(b)
|
Reflects
the 2007 threshold, target and maximum award available under the Annual
Performance Plan. The Annual Performance Plan is based upon
achievement of both corporate and individual goals. Threshold
awards assume corporate performance at 80% of plan (resulting in a 50%
payout on the corporate performance component) and individual performance
at 100%. This plan is described in detail earlier in this Proxy
Statement. Actual awards are reflected in the Summary
Compensation Table. The grant date represents the date that the
terms of the awards for 2007 under this plan were approved by the
Corporation’s Board.
|
(c)
|
Reflects
the 2007 threshold, target and maximum available under the Wealth
Management Business Building Incentive Plan. This plan is
described in detail earlier in this Proxy Statement. Actual
awards are reflected in the Summary Compensation Table. The
grant date represents the date that the terms of the award for 2007 under
this plan were approved by the Corporation’s
Board.
|
_______________________
Outstanding
Equity Awards at Fiscal Year-End
The
following table sets forth information with respect to the named executive
officers concerning unexercised stock option awards and unvested stock awards as
of December 31, 2007.
OUTSTANDING EQUITY AWARDS AT
FISCAL YEAR END
|
Name
|
Number
of Securities Underlying Unexercised Options (#)
Exercisable
|
Number
of Securities Underlying Unexercised Options (#)
Unexercisable
|
Equity
Incentive
Plan
Awards:
Number of Securities Underlying Unexercised Unearned Options
(#)
|
Option
Exercise Price ($)
|
Option
Expiration Date
|
Number
of Shares or Units of Stock That Have Not Vested (#)
|
Market
Value of Shares or Units of Stock That Have Not Vested ($)
(a)
|
Equity
Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights
That Have Not Vested (#)
|
Equity
Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or
Other Rights That Have Not Vested ($)
|
|
|
|
|
|
|
|
|
|
|
|
John
C. Warren
|
6,856
|
-
|
-
|
$17.50
|
5/17/2009
|
|
|
|
|
|
|
22,953
|
-
|
-
|
$15.25
|
5/15/2010
|
|
|
|
|
|
|
28,000
|
-
|
-
|
$17.80
|
4/23/2011
|
|
|
|
|
|
|
26,960
|
-
|
-
|
$20.03
|
4/22/2012
|
|
|
|
|
|
|
28,125
|
-
|
-
|
$20.00
|
5/12/2013
|
|
|
|
|
|
|
|
|
|
|
|
5,800
|
(b)
|
$146,334
|
-
|
-
|
|
|
|
|
|
|
6,500
|
(c)
|
$163,995
|
-
|
-
|
|
|
|
|
|
|
|
|
|
|
|
John
F. Treanor
|
12,122
|
-
|
-
|
$16.38
|
4/1/2009
|
|
|
|
|
|
|
9,642
|
-
|
-
|
$17.50
|
5/17/2009
|
|
|
|
|
|
|
13,968
|
-
|
-
|
$15.25
|
5/15/2010
|
|
|
|
|
|
|
16,000
|
-
|
-
|
$17.80
|
4/23/2011
|
|
|
|
|
|
|
11,605
|
-
|
-
|
$20.03
|
4/22/2012
|
|
|
|
|
|
|
16,565
|
-
|
-
|
$20.00
|
5/12/2013
|
|
|
|
|
|
|
|
|
|
|
|
3,400
|
(b)
|
$85,782
|
-
|
-
|
|
|
|
|
|
|
3,900
|
(c)
|
$98,397
|
-
|
-
|
|
|
|
|
|
|
|
|
|
|
|
David
V. Devault
|
8,400
|
-
|
-
|
$17.50
|
5/17/2009
|
|
|
|
|
|
|
10,100
|
-
|
-
|
$15.25
|
5/15/2010
|
|
|
|
|
|
|
9,045
|
-
|
-
|
$17.80
|
4/23/2011
|
|
|
|
|
|
|
8,440
|
-
|
-
|
$20.03
|
4/22/2012
|
|
|
|
|
|
|
8,700
|
-
|
-
|
$20.00
|
5/12/2013
|
|
|
|
|
|
|
6,200
|
-
|
-
|
$26.81
|
6/13/2015
|
|
|
|
|
|
|
6,200
|
-
|
-
|
$28.16
|
12/12/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Galan
G. Daukas
|
20,000
|
-
|
-
|
$27.62
|
8/30/2015
|
|
|
|
|
|
|
12,315
|
-
|
-
|
$28.16
|
12/12/2015
|
|
|
|
|
|
|
|
|
|
|
|
5,000
|
(d)
|
$126,150
|
-
|
-
|
|
|
|
|
|
|
|
|
|
|
|
B.
Michael Rauh,
|
4,415
|
-
|
-
|
$17.50
|
5/17/2009
|
|
|
|
|
|
Jr.
|
5,510
|
-
|
-
|
$15.25
|
5/15/2010
|
|
|
|
|
|
|
5,060
|
-
|
-
|
$17.80
|
4/23/2011
|
|
|
|
|
|
|
4,720
|
-
|
-
|
$20.03
|
4/22/2012
|
|
|
|
|
|
|
4,875
|
-
|
-
|
$20.00
|
5/12/2013
|
|
|
|
|
|
|
3,800
|
-
|
-
|
$26.81
|
6/13/2015
|
|
|
|
|
|
|
3,800
|
-
|
-
|
$28.16
|
12/12/2015
|
|
|
|
|
|
(a)
|
Based
upon 12/31/2007 fair market value of
$25.23.
|
(b)
|
Grant
vests on 6/13/2008.
|
(c)
|
Grant
vests on 4/25/2009.
|
(d)
|
Grant
vests on 8/30/2010.
|
______________________
Option
Exercises and Stock Vested
The
following table sets forth information with respect to the named executive
officers concerning the exercise of stock options and stock awards that vested
during the year ended December 31, 2007.
OPTION EXERCISES AND STOCK
VESTED
|
Option
Awards
|
Stock
Awards
|
Named
Executive Officer
|
Number
of Shares Acquired on Exercise (#)
|
Value
Realized on Exercise ($)
|
Number
of Shares Acquired on Vesting (#)
|
Value
Realized on Vesting ($)
|
John
C. Warren
|
13,272
|
(a)
|
$137,365
|
5,500
|
(b)
|
$152,625
|
John
F. Treanor
|
8,000
|
|
$58,681
|
3,200
|
(b)
|
$88,800
|
David
V. Devault
|
13,138
|
(a)
|
$179,924
|
1,500
|
(b)
|
$41,625
|
Galan
G. Daukas
|
0
|
|
$0
|
0
|
|
$0
|
B.
Michael Rauh, Jr.
|
9,101
|
(a)
|
$120,701
|
900
|
(b)
|
$24,975
|
(a)
|
Amounts
shown represent the number of options exercised. Taking into
consideration shares exchanged for option exercise price and tax
withholding, Mr. Warren, Mr. Devault, and Mr. Rauh acquired net amounts of
2,832; 4,548; and 3,041 shares,
respectively.
|
(b)
|
Amounts
shown represent the number of stock units vested during the
year. Taking into consideration shares withheld for payment of
applicable taxes, Mr. Warren, Mr. Treanor, Mr. Devault, and Mr. Rauh
acquired net amounts of 3,661; 2,130; 999; and 599 shares,
respectively.
|
_______________________
Pension
Benefits
The
following table sets forth information with respect to the pension benefits of
the named executive officers under the Pension Plan, Supplemental Pension Plan
and Executive Pension Plan. Information about these plans can be
found under the heading “Compensation Discussion and Analysis - Retirement and
Other Benefits” earlier in this Proxy Statement.
PENSION BENEFITS
Named
Executive Officer
|
Plan
Name
|
Number
of Years
Credited
Service
(#)
|
Present
Value of
Accumulated
Benefit
($)
(a)
|
Payments
During
Last
Fiscal Year ($)
|
John
C. Warren
|
Pension
Plan
|
11.7
|
$355,522
|
-
|
|
Executive
Pension Plan (b)
|
11.7
|
$2,050,136
|
-
|
John
F. Treanor
|
Pension
Plan
|
8.5
|
$226,263
|
-
|
|
Executive
Pension Plan (c)
|
8.5
|
$474,076
|
-
|
David
V. Devault
|
Pension
Plan (d)
|
20.9
|
$502,609
|
-
|
|
Supplemental
Pension Plan
|
20.9
|
$165,741
|
-
|
Galan
G. Daukas
|
Pension
Plan
|
2.1
|
$20,487
|
-
|
|
Supplemental
Pension Plan
|
2.1
|
$37,313
|
-
|
B.
Michael Rauh, Jr.
|
Pension
Plan
|
16.3
|
$157,963
|
-
|
|
Supplemental
Pension Plan
|
16.3
|
$0
|
-
|
(a)
|
Present
value of accumulated benefits under the Pension Plan, Supplemental Pension
Plan, and Executive Pension Plan as of September 30, 2007, determined
using mortality assumptions based on the 1994 Group Annuity Reserve tables
with no mortality assumption prior to benefit commencement and other
assumptions consistent with those presented in Footnote 16 to the
Consolidated Financial Statements presented in the 2007 Form 10-K, except
that retirement age is based upon the earliest retirement age at which the
named executive officer can receive unreduced benefits. For Mr.
Devault, this represents retirement under the Magic 85 Provision at age 60
and for all other named executive officers this represents normal
retirement at age 65. Present value is expressed as a lump-sum;
however, the plans do not provide for payment of benefits in a lump-sum,
but rather are payable only in the form of an annuity with monthly benefit
payments. The present value calculations assume payment in the
normal form, which is a life annuity under the Pension Plan and
Supplemental Pension Plan, and a 50% joint and survivor annuity with 120
guaranteed monthly payments under the Executive Pension
Plan. Also included are amounts that the named executive
officer may not currently be entitled to receive because such
|
(b)
|
In
the calculation of Mr. Warren's Executive Pension Plan benefits, the
following offset benefits are assumed: annual pension benefits
payable under the Pension Plan; estimated annual Social Security benefits
of $24,300 payable at age 65; and estimated annual pension benefits
payable as a life annuity at age 65 totaling $83,192 from defined benefit
pension plans of prior employers. Mr. Warren is no longer
entitled to a benefit under the Supplemental Pension Plan as explained
earlier in this Proxy Statement.
|
(c)
|
In
the calculation of Mr. Treanor's Executive Pension Plan benefits, the
following offset benefits are assumed: annual pension benefits
payable under the Pension Plan; estimated annual Social Security benefits
of $26,820 payable at age 65; and estimated annual pension benefits
payable as a life annuity at age 65 totaling $108,514 from defined benefit
pension plans of prior employers. Mr. Treanor is no longer
entitled to a benefit under the Supplemental Pension Plan as explained
earlier in this Proxy Statement.
|
(d)
|
Mr.
Devault’s Pension Plan benefit includes a temporary payment provided under
the Magic 85 Provision that is payable between ages 60 and
62. The Magic 85 Provision, including this special payment, is
discussed in detail earlier in this Proxy
Statement.
|
_______________________
In the
event of a change in control, the named executive officers would receive
additional years of credited service under the Supplemental Pension Plan and
Executive Pension Plan as described under the heading “Compensation Discussion
and Analysis - Change in Control Agreements” earlier in this Proxy
Statement.
Nonqualified
Deferred Compensation
We
provide executives with the opportunity to defer up to 25% of regular base
salary earnings and 100% of annual bonus earnings into the Nonqualified Deferred
Compensation Plan. This plan also provides for payments of certain
amounts that would have been contributed by the Bank under the 401(k) Plan
(“excess match”), as described earlier in this Proxy Statement.
Contributions
are credited with earnings/losses based upon the executive’s selection of
publicly-traded mutual funds and our Common Stock. The following
table summarizes the annual rate of return for the year ended December 31, 2007
for the investment options.
Washington
Trust Bancorp, Inc. Common Stock
|
-6.75%
|
Vanguard
500 Index Fund (a)
|
5.47%
|
Putnam
New Opportunities Fund (a)
|
5.60%
|
Columbia
Acorn USA Fund (a)
|
3.46%
|
Putnam
OTC & Emerging Growth Fund (a)
|
12.30%
|
Putnam
Growth and Income Fund (a)
|
-6.20%
|
Putnam
Voyager Fund (a)
|
5.30%
|
George
Putnam Fund of Boston (a)
|
0.90%
|
Putnam
Vista Fund (a)
|
3.60%
|
Royce
Total Return Fund (a)
|
2.40%
|
Putnam
International Equity Fund (a)
|
8.40%
|
Putnam
Income Fund (a)
|
5.20%
|
Putnam
Research Fund (a)
|
0.40%
|
Putnam
Money Market Fund (a)
|
5.00%
|
Putnam
Global Equity Fund (a)
|
8.90%
|
Russell
LifePoints Cons Strategy Fund (b)
|
5.48%
|
Principal
Inv Ptr Lg Cap Value Pfd Fund (b)
|
-3.99%
|
Russell
LifePoints Moderate Strategy Fund (b)
|
6.44%
|
Principal
Inv Lg Cap S&P 500 Index Pfd Fund (b)
|
5.11%
|
Russell
LifePoints Balanced Strategy Fund (b)
|
6.78%
|
Principal
Inv Ptr Lg Cap Growth I Pfd Fund (b)
|
8.09%
|
Russell
LifePoints Growth Strategy Fund (b)
|
7.04%
|
Principal
Inv Mid Cap S&P 400 Index Pfd Fund (b)
|
7.68%
|
Russell
LifePoints Equity Growth Strategy Fund (b)
|
7.38%
|
Principal
Inv Sm Cp S&P 600 Index Pfd Fund (b)
|
-0.59%
|
Russell
LifePoints 2010 Strategy Fund (b)
|
6.18%
|
American
Funds EuroPacific Growth Fund (b)
|
18.58%
|
Russell
LifePoints 2020 Strategy Fund (b)
|
6.55%
|
Principal
Inv Bond & Mortgage Secs Pfd Fund (b)
|
2.86%
|
Russell
LifePoints 2030 Strategy Fund (b)
|
6.88%
|
Principal
Inv Money Market Pfd Fund (b)
|
4.76%
|
Russell
LifePoints 2040 Strategy Fund (b)
|
6.73%
|
(a)
|
Fund
was available for selection as an investment benchmark from January 1,
2007 through November 14, 2007.
|
(b)
|
Fund
was available for selection as an investment benchmark from November 15,
2007 through December 31, 2007.
|
Investment
elections can be changed at any time. Transactions involving our
Common Stock are subject to insider trading windows.
As of
October 15, 2007, our Common Stock was no longer available as a new benchmark
investment. Further, employees and directors who currently have
selected our Common Stock as a benchmark investment (the “Bancorp Stock Fund”)
will be allowed to transfer from that fund during a transition period that will
run through September 15, 2008. After September 15, 2008,
employees and directors will not be allowed to make transfers from the Bancorp
Stock Fund, and any distributions will be made in whole shares of our Common
Stock to the extent of the benchmark investment election in the Bancorp Stock
Fund.
The
following table outlines employee and employer contributions to the Nonqualified
Deferred Compensation Plan during the year ended December 31,
2007. The table also details earnings on plan balances during the
year and the aggregate amount of all Nonqualified Deferred Compensation Plan
obligations as of December 31, 2007.
NONQUALIFIED DEFERRED
COMPENSATION
Named
Executive Officer
|
Executive
Contributions in Last FY ($) (a)
|
Registrant
Contributions in Last FY ($) (b)
|
Aggregate
Earnings
in Last FY ($)
|
Aggregate
Withdrawals/ Distributions ($)
|
Aggregate
Balance at Last FYE ($) (c)
|
John
C. Warren
|
$0
|
$7,200
|
$19,210
|
-
|
$458,091
|
John
F. Treanor
|
$0
|
$3,750
|
($1,064)
|
-
|
$18,645
|
David
V. Devault
|
$0
|
$0
|
$0
|
-
|
$0
|
Galan
G. Daukas
|
$36,050
|
$2,250
|
$3,975
|
-
|
$44,268
|
B.
Michael Rauh, Jr.
|
$0
|
$0
|
$0
|
-
|
$0
|
(a)
|
Reflects
deferrals of salary and bonus payments that were accrued under the
Nonqualified Deferred Compensation Plan during 2007. Salary
amounts are disclosed in the Summary Compensation Table under the year
2007. Bonus amounts are disclosed in the Summary Compensation
Table under the year 2006. Mr. Daukas’ contribution represents
deferral of his 2006 bonus, which was payable and deferred in
2007.
|
(b)
|
Represents
credits for amounts which would have been contributed by the Bank under
the 401(k) Plan as described earlier in this Proxy
Statement. These amounts are disclosed in the Summary
Compensation Table, under All Other Compensation in
2007.
|
(c)
|
Reflects
employee and employer contributions that have been reflected in the
Summary Compensation Table in this Proxy Statement and previous proxy
statements as outlined in the following
table.
|
Named
Executive Officer
|
2007
($)
|
Previous
Years ($)
|
Total
($)
|
John
C. Warren
|
$7,200
|
$387,967
|
$395,167
|
John
F. Treanor
|
$3,750
|
$13,467
|
$17,217
|
David
V. Devault
|
$0
|
$0
|
$0
|
Galan
G. Daukas
|
$2,250
|
$38,000
|
$40,250
|
B.
Michael Rauh, Jr.
|
$0
|
$0
|
$0
|
_______________________
Upon
election to defer income, the individual must also elect distribution timing and
form of payment. In-service distributions may be in a lump sum
payable in a specific year or in four annual installments commencing in the year
a named student reaches age 18. Accounts may also be distributed
commencing in the year following retirement in a lump sum or annual installments
over five or ten years. Retirement is defined as separation from
employment after age 65 or after age 55 with 10 or more years of service for
executives, and for directors is termination of directorship after age
55. In the event of pre-retirement separation, accounts become
payable in a lump sum in the following year, regardless of distribution
election. Excess match accounts are always payable in a lump sum in
the year following separation. Distributions are paid in cash except
that distributions from the Bancorp Stock Fund may, at the option of the
participant, be in the form of our Common Stock. However, after
September 15, 2008, distributions from the Bancorp Stock Fund must be made in
the form of our Common Stock.
During
2007, the Nonqualified Plan was restated to comply with Section 409A of the
Internal Revenue Code, which imposed new rules on deferred compensation
programs. These rules generally apply to amounts deferred after
December
31, 2004 and related earnings (“post-409A accounts”). Amounts
deferred prior to January 1, 2005 and related earnings (“grandfathered
balances”) are subject to the rules applicable prior to the effective date of
Section 409A. Participants may change distribution timing and form on
grandfathered balances, provided a full calendar year passes between the year in
which the change was requested and the new distribution
date. Distribution elections on post-409A accounts may only be
changed if (a) the new election is made at least 12 months before the first
scheduled payment; (b) the distribution or first installment is delayed at least
five years from the originally scheduled payment date; and (c) the new election
is not effective until at least 12 months have elapsed. Participants
can receive an early distribution of grandfathered balances, less a withdrawal
penalty equal to 10% of the participant’s total grandfathered
balance. In the event of an unforeseeable emergency, executives and
directors may receive a distribution from grandfathered balances and/or
post-409A accounts, to the extent necessary to meet the emergency and resulting
income tax and penalties, subject to certain limitations outlined in the
plan.
Potential
Post-Employment Payments
The named
executive officers are entitled to certain compensation in the event of
termination of such executive’s employment. This section is intended
to discuss these post-employment payments, assuming separation from employment
on December 31, 2007.
Severance
Pay and Benefit Continuation
We do not
have an employment contract with any named executive
officer. Therefore, no severance benefit is payable and there is no
continuation of benefit coverage in the event of a named executive officer’s
voluntary or involuntary termination, retirement, or death. Severance
and benefit continuation are available in the event of a change in control as
presented in the Potential Post-Employment Payments table on page 25 of this
Proxy Statement.
Vested
Equity Grants
Vested
stock option grants are outlined in the Outstanding Equity Awards at Fiscal Year
End Table earlier in this Proxy Statement. A named executive officer
may exercise his vested stock options at any time through his separation from
employment date. The right to exercise vested stock options is
forfeited following his separation from employment for all reasons other than
retirement and death.
In the
event of the death of the named executive officer, the right to exercise vested
stock option grants would transfer to the named executive officer’s estate, and
would expire on the three year anniversary of the date of death. In the
event of retirement, the named executive officer would have the right to
exercise vested nonqualified stock options for three years following retirement
and vested incentive stock options for 90 days following
retirement. Mr. Warren is the only named executive officer who was
eligible to retire on December 31, 2007.
Information
regarding the effect on unvested equity grants in a separation from employment
is discussed in the Potential Post-Employment Payments Table and accompanying
footnotes on page 25 of this Proxy Statement.
Retirement
Benefits Payable
In the
event of any separation from employment on December 31, 2007, Messrs. Warren,
Treanor, Devault, and Rauh would be entitled to their vested benefit in the
Pension Plan, Supplemental Pension Plan, and Executive Pension Plan
(collectively, the “Defined Benefit Retirement Plans”), as
applicable. Mr. Daukas is not vested, and therefore, would forfeit
all benefits under the Defined Benefit Retirement Plans including any benefits
to his surviving spouse. Mr. Devault would forfeit his right to the
benefit of the Magic 85 Provision under the Pension Plan.
Retirement
benefits are not enhanced in the event of any named executive officer’s
voluntary or involuntary termination, retirement or death on December 31,
2007. In the event of a change in control, vested named executive
officers receive an enhanced benefit in the form of additional years of benefit
service under the Agreements as described earlier. The value of this
enhancement is outlined in the Potential Post-Employment Payments Table on page
25 of this Proxy Statement.
The
following table outlines the annual benefits available under the Defined Benefit
Retirement Plans, assuming separation from service on December 31, 2007 under
various termination scenarios:
|
|
Annual
Benefit Payable under Defined Benefit Retirement Plans
(a)
|
Named
Executive Officer
|
Retirement
Plan
|
Voluntary
or Involuntary Termination
|
Retirement
(b)
|
Death
Benefit Payable to Surviving Spouse
|
Change
in Control (c)
|
John
C. Warren
|
Pension
Plan
|
$35,726
|
$35,726
|
$15,878
|
(d)
|
$35,726
|
|
|
Executive
Pension Plan
|
$171,907
|
$171,907
|
$85,954
|
(e)
|
$178,393
|
|
John
F. Treanor
|
Pension
Plan
|
$30,805
|
$0
|
$14,151
|
(d)
|
$30,805
|
|
|
Executive
Pension Plan
|
$59,097
|
$0
|
$21,085
|
(e)
|
$61,774
|
(f)
|
David
V. Devault
|
Pension
Plan
|
$72,064
|
$0
|
$32,429
|
(d)
|
$72,064
|
|
|
Supplemental
Pension Plan
|
$17,928
|
$0
|
$8,067
|
(d)
|
$26,431
|
|
Galan
G. Daukas
|
Pension
Plan
|
$0
|
$0
|
$0
|
|
$0
|
|
|
Supplemental
Pension Plan
|
$0
|
$0
|
$0
|
|
$0
|
|
B.
Michael Rauh, Jr.
|
Pension
Plan
|
$46,214
|
$0
|
$20,796
|
(d)
|
$46,214
|
|
|
Supplemental
Pension Plan
|
$0
|
$0
|
$0
|
|
$5,602
|
|
(a)
|
Unless
otherwise noted, amount reflects annual benefit payable in the normal form
at age 65 for Messrs. Treanor, Devault and Rauh, and immediately for Mr.
Warren (since he was retirement-eligible on December 31,
2007). Mr. Warren’s benefit has been reduced for early
commencement. The normal form is a life annuity under the
Pension Plan and Supplemental Pension Plan, and is a 50% joint and
survivor annuity with 120 guaranteed monthly payments under the Executive
Pension Plan. The Executive Pension Plan further provides for
120 guaranteed monthly payments in the normal form under the Pension Plan
commencing upon the executive’s death after age 55, offset by actual
payments under that plan.
|
(b)
|
We
consider retirement as separation from service after age 65 or after age
55 with ten years of service. Mr. Warren is the only named
executive officer who was eligible to retire on December 31,
2007.
|
(c)
|
Assumes
change in control and immediate termination under a triggering event as
described under the heading “Compensation Discussion and Analysis - Change
in Control Agreements” earlier in this Proxy
Statement.
|
(d)
|
Amount
reflects annual pre-retirement death benefit equal to 50% of the qualified
50% joint and survivor annuity. Benefit is payable to the
surviving spouse from the executive’s 65th birthday for Messrs. Treanor,
Devault, and Rauh, and immediately for Mr. Warren. Mr. Warren’s
benefit reflects a reduction for early
commencement.
|
(e)
|
Amount
reflects annual pre-retirement death benefit equal to 50% of the qualified
50% joint and survivor annuity with 120 guaranteed monthly
payments. Benefit is payable to the surviving spouse
immediately, and reflects a reduction for such early
commencement. The Executive Pension Plan further provides a
temporary additional payment of $9,749 through Mr. Treanor’s 65th
birthday, which is intended to equal the death benefit that would have
been payable from the Pension Plan if Mr. Treanor were eligible to retire
on December 31, 2007. Amounts reflect offsets to the Executive
Pension Plan as outlined in the Pension Benefits Table and accompanying
footnotes earlier in this Proxy
Statement.
|
(f)
|
In
the event of a change in control, Mr. Treanor meets the criteria for early
commencement under the Executive Pension Plan as a result of the
additional years of service provided under his Change in Control Agreement
and, therefore, Executive Pension Plan benefits are payable
immediately. Amount reflects reduction for early
commencement.
|
_______________________
Nonqualified
Deferred Compensation Plan
Obligations
under the Nonqualified Deferred Compensation Plan generally would become payable
in a lump sum in the January following the separation from employment, subject
to the six month delay imposed under Section 409A of the Internal Revenue
Code. Mr. Warren’s separation from service would be deemed a
retirement, and his plan balance would be paid in ten annual
installments. The aggregate balance of the obligations under this
plan is detailed in the Nonqualified Deferred Compensation Table earlier in this
Proxy Statement. Plan balances represent accrued liabilities for
amounts earned, and are not enhanced for any voluntary or involuntary
termination.
The
following table presents potential post-employment payments assuming separation
from service on December 31, 2007 under various termination
scenarios:
POTENTIAL POST EMPLOYMENT
PAYMENTS
Named
Executive Officer
|
Type
of Payment
|
Involuntary
or Voluntary Termination
|
Retirement
(a)
|
Death
|
Change
in
Control
(b)
|
John
C. Warren
|
Severance
(c)
|
$0
|
$0
|
$0
|
$2,070,000
|
|
Intrinsic
Value of Accelerated Equity (d)
|
$0
|
$213,042
|
$310,329
|
$310,329
|
|
Value
of Increased Retirement Benefits (e)
|
$0
|
$0
|
$0
|
$81,771
|
|
Health
Benefits (f)
|
$0
|
$0
|
$0
|
$28,902
|
|
Gross
Up (g)
|
$0
|
$0
|
$0
|
$0
|
|
Total
|
$0
|
$213,042
|
$310,329
|
$2,491,002
|
John
F. Treanor
|
Severance
(c)
|
$0
|
n/a
|
$0
|
$1,530,000
|
|
Intrinsic
Value of Accelerated Equity (d)
|
$0
|
n/a
|
$184,179
|
$184,179
|
|
Value
of Increased Retirement Benefits (e)
|
$0
|
n/a
|
$0
|
$244,568
|
|
Health
Benefits (f)
|
$0
|
n/a
|
$0
|
$28,902
|
|
Gross
Up (g)
|
$0
|
n/a
|
$0
|
$760,981
|
|
Total
|
$0
|
n/a
|
$184,179
|
$2,748,630
|
David
V. Devault
|
Severance
(c)
|
$0
|
n/a
|
$0
|
$532,000
|
|
Intrinsic
Value of Accelerated Equity (d)
|
$0
|
n/a
|
$0
|
$0
|
|
Value
of Increased Retirement Benefits (e)
|
$0
|
n/a
|
$0
|
$41,784
|
|
Health
Benefits (f)
|
$0
|
n/a
|
$0
|
$24,384
|
|
Gross
Up (g)
|
$0
|
n/a
|
$0
|
$0
|
|
Total
|
$0
|
n/a
|
$0
|
$598,168
|
Galan
G. Daukas
|
Severance
(c)
|
$0
|
n/a
|
$0
|
$1,321,000
|
|
Intrinsic
Value of Accelerated Equity (d)
|
$0
|
n/a
|
$0
|
$126,150
|
|
Value
of Increased Retirement Benefits (e)
|
$0
|
n/a
|
$0
|
$0
|
|
Health
Benefits (f)
|
$0
|
n/a
|
$0
|
$24,459
|
|
Gross
Up (g)
|
$0
|
n/a
|
$0
|
$506,201
|
|
Total
|
$0
|
n/a
|
$0
|
$1,977,810
|
B.
Michael Rauh, Jr.
|
Severance
(c)
|
$0
|
n/a
|
$0
|
$402,000
|
|
Intrinsic
Value of Accelerated Equity (d)
|
$0
|
n/a
|
$0
|
$0
|
|
Value
of Increased Retirement Benefits (e)
|
$0
|
n/a
|
$0
|
$20,947
|
|
Health
Benefits (f)
|
$0
|
n/a
|
$0
|
$3,881
|
|
Gross
Up (g)
|
$0
|
n/a
|
$0
|
$0
|
|
Total
|
$0
|
n/a
|
$0
|
$426,828
|
(a)
|
We
consider retirement as separation from service after age 65 or after age
55 with ten years of service. Mr. Warren is the only named
executive officer who was eligible to retire on December 31,
2007.
|
(b)
|
Assumes
change in control and immediate termination under a triggering event as
described under the heading “Compensation Discussion and Analysis - Change
in Control Agreements” earlier in this Proxy
Statement.
|
(c)
|
Severance
payments are based upon the salary in effect at December 31, 2007 plus the
highest bonus paid during the two years prior to December 31, 2007, using
the multiple described under the heading “Compensation Discussion and
Analysis - Change in Control Agreements” earlier in this Proxy
Statement.
|
(d)
|
Reflects
the value of accelerated equity based upon market closing price of $25.23
on December 31, 2007. As of December 31, 2007, the only
unvested equity grants were restricted stock and restricted stock unit
awards to Messrs. Warren, Treanor, and Daukas, as outlined in the
Outstanding Equity Awards at Fiscal Year End Table earlier in this Proxy
Statement. All unvested awards would be forfeited upon
voluntary or involuntary termination. All unvested awards would
become fully vested upon a change in control. Upon death,
Messrs. Warren and Treanor would become fully vested in all awards, and
|
|
Mr.
Daukas’ award under the 1997 Equity Incentive Plan would be
forfeited. Mr. Warren’s unvested awards would be vested on a
pro-rated basis upon his retirement. |
(e)
|
Reflects
the increase in retirement benefits resulting from the additional months
of benefit accrual provided for the Supplemental Pension Plan and the
Executive Pension Plan under the Agreements. Since Mr. Daukas
is not vested in the Defined Benefit Retirement Plans, he is not eligible
for a retirement benefit and therefore, would not benefit from additional
months of benefit service upon a change in
control.
|
(f)
|
Reflects
the value of health benefits based upon actual 2008 carrier premiums,
increased by 8% for years 2 and 3, as
applicable.
|
(g)
|
Additional
payment to cover the impact of the 20% excise tax imposed by Section 280G
of the Code.
|
_______________________
DIRECTOR
COMPENSATION
We use a
combination of cash and stock-based incentive compensation to attract and retain
qualified candidates to serve on the Corporation’s Board. In setting
director compensation, we consider the role of the directors, amount of time
that directors expend in fulfilling their duties as well as the expertise
required of Board members.
Cash
Compensation Paid to Board Members
For the
year ended December 31, 2007, non-employee members of our Board received an
annual cash retainer of $20,000. The person serving as both the chair
of the Nominating Committee and the Executive Committee received a combined
additional annual retainer of $8,000; the chairperson of the Audit Committee
received an additional annual retainer of $8,000; and the chairperson of the
Compensation Committee received an additional annual retainer of
$4,000. All retainers are paid in quarterly
installments.
All
members of the Corporation’s Board are also members of the Bank’s
Board. Members of the Bank’s Board did not receive any additional
retainer for their involvement in the Bank’s Board, except the chairperson of
the Bank’s Trust Committee, who received an additional retainer of
$4,000.
For each
meeting of the Corporation’s Board and the Bank’s Board attended, non-employee
directors received $1,000; however, for meetings of the Corporation’s Board and
the Bank’s Board held on the same day, as is the general practice, non-employee
directors were paid for only one meeting. In addition, non-employee
directors received $800 for each Corporation or Bank Board committee meeting
attended in person and $700 for each such committee meeting attended
telephonically. Committee chairpersons who do not receive an
additional retainer for service as chairperson received an additional $200 per
committee meeting.
Equity
Compensation Paid to Directors
In order
to align Board interests with shareholders, non-employee directors typically
receive an annual equity grant. The 2003 Plan provides that each
non-employee director will be automatically granted a nonqualified option to
acquire 2,000 shares of our Common Stock as of the date of each Annual Meeting
of Shareholders after which such non-employee director will continue to serve as
our director, at an exercise price equal to the fair market value of our Common
Stock on the grant date and expiring upon the 10th anniversary of the option
grant. Unless otherwise determined by the Compensation Committee, these stock
options will be exercisable upon the earliest of (a) the three year anniversary
of the grant; (b) change in control of the Corporation; or (c) retirement from
the Corporation’s Board after attainment of age 70.
In 2005,
the Compensation Committee concluded that restricted stock units would provide
an equally motivating form of incentive compensation while permitting us to
issue fewer shares, thereby reducing potential dilution. In 2005 and
2006, pursuant to the terms of the 2003 Plan, the Corporation’s Board voted to
suspend the automatic nonqualified option award to non-employee directors for
each of those years. In 2005 and 2006, in lieu of such automatic
award, the Compensation Committee voted to grant each non-employee director 500
restricted stock units, which vest upon the earliest of (a) the three year
anniversary of the grant; (b) change in control of the Corporation; (c) death of
the director; or (d) retirement from the Corporation’s Board after attainment of
age 70. These grants included dividend equivalent
rights.
In 2007,
pursuant to the terms of the 2003 Plan, the Compensation Committee voted to
suspend the automatic nonqualified option award to non-employee directors for
the year and did not make any equity grant to the non-employee
directors. The decision to forego equity grants was made to avoid the
expense associated with such grants in order to improve the Corporation’s
financial performance during 2007. The Compensation Committee
strongly believes equity compensation is an important component of director pay,
and expects to make director equity grants in 2008 and beyond.
Retirement
Plans
Directors
are not eligible to participate in any defined benefit plan maintained by the
Corporation or the Bank. Directors are eligible to defer 100% of
retainers and meeting fees into the Nonqualified Deferred Compensation
Plan. Directors are not eligible for company
contributions. Provisions regarding types of accounts, investment
measurements, form and timing of payments, and distributions that apply to
employees also apply to directors. Retirement for directors is
defined in the Nonqualified Deferred Compensation Plan as termination of
directorship after attainment of age 55.
Welfare
Benefit Plans
Directors
are not eligible for medical, dental, life or disability insurance at our
expense. Directors may obtain coverage under the Bank’s group medical
and dental insurance plans at their own expense.
Director
Summary Compensation Table
The
following table summarizes the compensation paid to non-employee directors for
the fiscal year ended December 31, 2007. Directors who are employees
receive no additional compensation for Board service. The
compensation received by the employee directors as employees of the Corporation
is shown in the Summary Compensation Table earlier in this Proxy
Statement.
DIRECTOR COMPENSATION
TABLE
Name
|
Fees
Earned or Paid in Cash ($) (a)
|
Stock
Awards ($) (b)
|
Option
Awards ($) (c)
|
Non-Equity
Incentive Plan Compensation ($)
|
Total
($)
(d)
|
Gary
P. Bennett
|
$56,400
|
$8,733
|
$1,921
|
-
|
$67,054
|
Steven
J. Crandall
|
$48,300
|
$8,733
|
$1,921
|
-
|
$58,954
|
Larry
J. Hirsch, Esq.
|
$47,600
|
$8,733
|
$1,921
|
-
|
$58,254
|
Barry
G. Hittner, Esq.
|
$46,300
|
$8,733
|
$1,921
|
-
|
$56,954
|
Katherine
W. Hoxsie, CPA
|
$55,600
|
$8,733
|
$1,921
|
-
|
$66,254
|
Mary
E. Kennard, Esq.
|
$35,000
|
$8,733
|
$1,921
|
-
|
$45,654
|
Edward
M. Mazze, Ph.D.
|
$48,400
|
$8,733
|
$1,921
|
-
|
$59,054
|
Kathleen
E. McKeough
|
$58,400
|
$8,733
|
$1,921
|
-
|
$69,054
|
Victor
J. Orsinger II, Esq.
|
$54,000
|
$8,733
|
$1,921
|
-
|
$64,654
|
H.
Douglas Randall, III
|
$51,300
|
$8,733
|
$1,921
|
-
|
$61,954
|
Joyce
O. Resnikoff (e)
|
$17,200
|
$6,583
|
$1,921
|
-
|
$25,704
|
Patrick
J. Shanahan, Jr.
|
$58,200
|
$8,733
|
$1,921
|
-
|
$68,854
|
James
P. Sullivan, CPA
|
$74,400
|
$10,949
|
$1,921
|
-
|
$87,270
|
Neil
H. Thorp
|
$57,400
|
$8,733
|
$1,921
|
-
|
$68,054
|
(a)
|
Total
reflects fees and retainers earned. During 2007, Directors
Bennett, Hirsch, Hoxsie, Randall, and Thorp deferred $5,640; $6,000;
$5,560; $51,300; and $12,480, respectively, into the Nonqualified Deferred
Compensation Plan.
|
(b)
|
Amount
reflects the dollar amount recognized for financial statement reporting
purposes in 2007 in accordance with SFAS No. 123R with respect to awards
of 500 restricted stock units granted on April 26, 2005 and 500 restricted
stock units granted on April 25, 2006. Both grants will become
vested upon the earliest of the three-year anniversary of the grant,
change in control of the Corporation, the director's death, or the
director's retirement from the Corporation’s Board after attainment of age
70. Ms. Resnikoff’s grants vested upon her retirement on April
24, 2007. Mr. Sullivan's grants are assumed to vest upon his
retirement in April 2008. Fair value per share on April 26,
2005 was $25.81, or $12,905 per award, and on April 25, 2006 was $26.59,
or $13,295 per award.
|
(c)
|
Amount
reflects the dollar amount recognized for financial statement reporting
purposes in 2007 in accordance with SFAS No. 123R with respect to awards
of nonqualified stock options granted on April 27, 2004 to acquire 2,000
shares. This grant became vested upon the earliest of the
three-year anniversary of the grant, change in control of the Corporation,
or the director's retirement from the Corporation’s Board after the
attainment of age 70. The grant date fair value for the April
27, 2004 grant was $8.9789 per share, or $17,958 per
grant.
|
(d)
|
There
is no Other Income, change in pension value, nor Nonqualified Deferred
Compensation Plan earnings required to be disclosed in this
table.
|
(e)
|
Ms.
Resnikoff retired from the Corporation’s Board on April 24,
2007.
|
_______________________
The
following table sets forth information with respect to the directors concerning
outstanding stock option awards and unvested stock awards as of December 31,
2007.
Name
|
Grant
Date
|
Number
of Securities Underlying Unexercised Options (#)
(Exercisable)
|
Number
of Securities Underlying Unexercised Options (#)
(Unexercisable)
|
Option
Exercise Price ($)
|
Number
of Shares
or
Units of Stock That Have Not Vested (#)
|
Gary
P. Bennett
|
4/28/1998
|
1,688
|
-
|
$21.33
|
|
|
4/27/1999
|
1,688
|
-
|
$19.50
|
|
|
4/25/2000
|
2,000
|
-
|
$15.50
|
|
|
4/24/2001
|
2,000
|
-
|
$17.85
|
|
|
4/23/2002
|
2,000
|
-
|
$20.23
|
|
|
4/29/2003
|
2,000
|
-
|
$20.62
|
|
|
4/27/2004
|
2,000
|
-
|
$27.56
|
|
|
4/26/2005
|
|
|
|
500
|
|
4/25/2006
|
|
|
|
500
|
Steven
J. Crandall
|
4/28/1998
|
1,688
|
-
|
$21.33
|
|
|
4/27/1999
|
1,688
|
-
|
$19.50
|
|
|
4/25/2000
|
2,000
|
-
|
$15.50
|
|
|
4/24/2001
|
2,000
|
-
|
$17.85
|
|
|
4/23/2002
|
2,000
|
-
|
$20.23
|
|
|
4/29/2003
|
2,000
|
-
|
$20.62
|
|
|
4/27/2004
|
2,000
|
-
|
$27.56
|
|
|
4/26/2005
|
|
|
|
500
|
|
4/25/2006
|
|
|
|
500
|
Larry
J. Hirsch, Esq.
|
4/28/1999
|
1,688
|
-
|
$19.50
|
|
|
4/24/2001
|
1,000
|
-
|
$17.85
|
|
|
4/23/2002
|
2,000
|
-
|
$20.23
|
|
|
4/29/2003
|
2,000
|
-
|
$20.62
|
|
|
4/27/2004
|
2,000
|
-
|
$27.56
|
|
|
4/26/2005
|
|
|
|
500
|
|
4/25/2006
|
|
|
|
500
|
Barry
G. Hittner, Esq.
|
4/27/2004
|
2,000
|
-
|
$27.56
|
|
|
4/26/2005
|
|
|
|
500
|
|
4/25/2006
|
|
|
|
500
|
Katherine
W. Hoxsie, CPA
|
4/28/1998
|
1,688
|
-
|
$21.33
|
|
|
4/27/1999
|
1,688
|
-
|
$19.50
|
|
|
4/25/2000
|
2,000
|
-
|
$15.50
|
|
|
4/24/2001
|
2,000
|
-
|
$17.85
|
|
|
4/23/2002
|
2,000
|
-
|
$20.23
|
|
|
4/29/2003
|
2,000
|
-
|
$20.62
|
|
|
4/27/2004
|
2,000
|
-
|
$27.56
|
|
|
4/26/2005
|
|
|
|
500
|
|
4/25/2006
|
|
|
|
500
|
Mary
E. Kennard, Esq.
|
4/25/2000
|
300
|
-
|
$15.50
|
|
|
4/24/2001
|
100
|
-
|
$17.85
|
|
|
4/23/2002
|
2,000
|
-
|
$20.23
|
|
|
4/29/2003
|
2,000
|
-
|
$20.62
|
|
|
4/27/2004
|
2,000
|
-
|
$27.56
|
|
|
4/26/2005
|
|
|
|
500
|
|
4/25/2006
|
|
|
|
500
|
Name
|
Grant
Date
|
Number
of Securities Underlying Unexercised Options (#)
(Exercisable)
|
Number
of Securities Underlying Unexercised Options (#)
(Unexercisable)
|
Option
Exercise Price ($)
|
Number
of Shares
or
Units of Stock That Have Not Vested (#)
|
Edward
M. Mazze, Ph.D.
|
4/23/2002
|
1,500
|
-
|
$20.23
|
|
|
4/29/2003
|
2,000
|
-
|
$20.62
|
|
|
4/27/2004
|
2,000
|
-
|
$27.56
|
|
|
4/26/2005
|
|
|
|
500
|
|
4/25/2006
|
|
|
|
500
|
Kathleen
E. McKeough
|
4/27/2004
|
2,000
|
-
|
$27.56
|
|
|
4/26/2005
|
|
|
|
500
|
|
4/25/2006
|
|
|
|
500
|
Victor
J. Orsinger II, Esq.
|
4/28/1998
|
588
|
-
|
$21.33
|
|
|
4/27/1999
|
1,688
|
-
|
$19.50
|
|
|
4/24/2001
|
1,000
|
-
|
$17.85
|
|
|
4/23/2002
|
2,000
|
-
|
$20.23
|
|
|
4/29/2003
|
2,000
|
-
|
$20.62
|
|
|
4/27/2004
|
2,000
|
-
|
$27.56
|
|
|
4/26/2005
|
|
|
|
500
|
|
4/25/2006
|
|
|
|
500
|
H.
Douglas Randall, III
|
4/25/2000
|
2,000
|
-
|
$15.50
|
|
|
4/24/2001
|
2,000
|
-
|
$17.85
|
|
|
4/23/2002
|
2,000
|
-
|
$20.23
|
|
|
4/29/2003
|
2,000
|
-
|
$20.62
|
|
|
4/27/2004
|
2,000
|
-
|
$27.56
|
|
|
4/26/2005
|
|
|
|
500
|
|
4/25/2006
|
|
|
|
500
|
Joyce
O. Resnikoff
|
4/23/2002
|
2,000
|
-
|
$20.23
|
|
|
4/29/2003
|
2,000
|
-
|
$20.62
|
|
|
4/27/2004
|
2,000
|
-
|
$27.56
|
|
Patrick
J. Shanahan, Jr.
|
4/23/2002
|
2,000
|
-
|
$20.23
|
|
|
4/29/2003
|
2,000
|
-
|
$20.62
|
|
|
4/27/2004
|
2,000
|
-
|
$27.56
|
|
|
4/26/2005
|
|
|
|
500
|
|
4/25/2006
|
|
|
|
500
|
James
P. Sullivan, CPA
|
4/28/1999
|
1,688
|
-
|
$19.50
|
|
|
4/25/2000
|
2,000
|
-
|
$15.50
|
|
|
4/24/2001
|
2,000
|
-
|
$17.85
|
|
|
4/23/2002
|
2,000
|
-
|
$20.23
|
|
|
4/29/2003
|
2,000
|
-
|
$20.62
|
|
|
4/27/2004
|
2,000
|
-
|
$27.56
|
|
|
4/26/2005
|
|
|
|
500
|
|
4/25/2006
|
|
|
|
500
|
Neil
H. Thorp
|
4/27/1999
|
1,688
|
-
|
$19.50
|
|
|
4/25/2000
|
2,000
|
-
|
$15.50
|
|
|
4/24/2001
|
2,000
|
-
|
$17.85
|
|
|
4/23/2002
|
2,000
|
-
|
$20.23
|
|
|
4/29/2003
|
2,000
|
-
|
$20.62
|
|
|
4/27/2004
|
2,000
|
-
|
$27.56
|
|
|
4/26/2005
|
|
|
|
500
|
|
4/25/2006
|
|
|
|
500
|
COMPENSATION
COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The
Compensation Committee members are directors Bennett (Chairperson), Hirsch,
Kennard, Mazze, McKeough and Orsinger. The Corporation is not aware
of any compensation committee interlocks or relationships involving its
executive officers or members of the Corporation’s Board requiring disclosure in
this Proxy Statement.
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 (1) reviewed the scope
of the overall audit plans of both the internal audit staff and the independent
auditors; (2) 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; (3) assessed the action that has been taken by
management in response to the audit results; and (4) 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, as amended, and the related reports of the
independent auditors on these matters.
In
addition, the Audit Committee has:
▪
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Reviewed
and discussed the audited financial statements with
management;
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▪
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Discussed
with KPMG LLP, its independent auditors, the matters required to be
discussed by SAS 61, as amended;
and
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▪
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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.
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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, CPA (Chairperson)
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Edward
M. Mazze, Ph.D.
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Steven
J. Crandall
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Patrick
J. Shanahan, Jr.
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Barry
G. Hittner, Esq.
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James
P. Sullivan, CPA
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INDEPENDENT
AUDITORS
During
the years ended December 31, 2007 and December 31, 2006, the Corporation paid
the following fees to KPMG LLP:
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2007
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2006
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Audit
fees; consists of annual audit of consolidated and subsidiary financial
statements including Sarbanes-Oxley attestation, reviews of quarterly
financial statements, USAP procedures and other services provided by the
independent auditors in connection with statutory and regulatory
filings
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$640,500
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$512,000
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Audit-related
fees
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0
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0
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Tax
fees; tax return preparation, tax compliance and tax
advice
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45,750
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70,260
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All
other fees; consists of fees related to due diligence
procedures
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0
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1,500
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Total
fees paid to KPMG LLP
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$686,250
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$584,226
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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 2007 the Audit Committee
pre-approved 100% of the Audit Fees, 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. Similar transactions may be
expected to take place in the ordinary course of business in the
future. The aggregate extensions of credit outstanding at
December 31, 2007 to all directors, executive officers and their related
interests amounted to $17,160,000 in the
aggregate. Any such transaction presently in effect with any director
or executive officer is current as of this date, and is in compliance with
Regulation O.
Patrick
J. Shanahan, Jr., a director, was the former Chairman and Chief Executive
Officer of First Financial Corp. prior to its acquisition by the Corporation in
2002. In connection with such acquisition, the Corporation agreed to
(1) provide Mr. Shanahan with health insurance benefits under the Corporation’s
health plan until he attains age 65, and (2) 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 agreed that for a three-year period
following the acquisition, which expired in April 2005, he would not become
associated with any banking institution in Rhode Island, Massachusetts or
Connecticut and he would not take action to solicit any former employees or
customers of First Financial Corp. The Corporation’s Board determined
that, effective April 16, 2005, as a result of the termination of this 3-year
arrangement, Mr. Shanahan 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.
POLICIES
AND PROCEDURES FOR RELATED PARTY TRANSACTIONS
The
Corporation conducts annual procedures including the use of a written survey
form to (i) identify parties related to directors and executive officers and
(ii) document the existence and terms of any related party
transactions. As indicated previously, the approval of loan
transactions involving directors, executive officers and their related interest
is governed by the provisions of Regulation O. All other transactions
involving directors and executive officers are reviewed annually by the
Corporation’s Board. The purpose of the review is to determine that
such transactions are conducted on terms not materially less favorable than what
would be usual and customary in transactions between unrelated persons and, in
the case of transactions involving directors, to determine whether such
transactions affect the independence of a director in accordance with the
relevant rules and standards issued by the SEC and the National Association of
Securities Dealers. The Corporation does not maintain a formal
written policy concerning the aforementioned procedures. The
Corporation’s Code of Ethics provides guidance on business relations between the
Corporation and its directors, officers and employees.
RATIFICATION
OF SELECTION OF AUDITORS (PROPOSAL NO. 2)
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, 2008 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 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
2007, all
Section 16(a) filing requirements applicable to its Insiders were complied with,
with the following exception: David W. Wallace, a beneficial owner of more than
10% of the Corporation’s stock, failed to report four transactions, including
one transaction by Mr. Wallace's spouse, on a timely basis.
SHAREHOLDER
PROPOSALS
Any
shareholder who wishes to submit a proposal for presentation to the 2009 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 14, 2008 for inclusion, if appropriate, in the Corporation’s
Proxy Statement and the form of proxy relating to the 2009 Annual Meeting of
Shareholders. Any proposal submitted after November 14, 2008 will be
considered untimely. 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 January 31, 2009.
In
addition, in order for a nominee to be considered at an Annual Meeting, the
Corporation’s Restated Articles of Incorporation, as amended, 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 10th day following the day on which
notice of the meeting was mailed to shareholders. For this Annual
Meeting, such proposals must be received by the Corporation not earlier than
February 22, 2008 and not later than April 8, 2008.
COMMUNICATIONS
WITH THE BOARD OF DIRECTORS
Any
shareholder desiring to send communications to the Corporation’s Board, or any
individual director, may forward such communication to the Secretary of the
Corporation at the Corporation’s offices at 23 Broad Street, Westerly, Rhode
Island 02891. The Secretary of the Corporation will
collect all such communications and forward them to the Corporation’s Board 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, 2007, which
has been provided to the shareholders concurrently herewith. Such
report and the financial statements contained in the Corporation’s Annual Report
on Form 10-K are not to be considered as a part of this soliciting
material.
OTHER
BUSINESS
Management
knows of no matters to be brought before the Annual 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,” 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,
2007 as filed with the SEC, is available on the Corporation’s website at
www.washtrust.com under Investor Relations – SEC Filings. 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. Solicitation may be made in person or by telephone or
telegraph by officers or regular employees of the Corporation, who will not
receive additional compensation therefor. In addition, the
Corporation has retained Morrow & Co., Inc. to assist in the solicitation of
proxies for a fee of $4,500 plus customary expenses.
IMPORTANT
NOTICE REGARDING DELIVERY OF SHAREHOLDER DOCUMENTS
The
Securities and Exchange Commission has adopted rules that allow the Corporation
to deliver a single annual report, proxy statement, proxy statement combined
with a prospectus, or any information statement to any household at which two or
more shareholders reside who share the same last name or whom we believe to be
members of the same family. This is practice is known as
"householding."
If you
share the same last name and address with one or more shareholders, from now on,
unless we receive contrary instructions from you (or from one of these other
shareholders), you and all other shareholders who have your last name and live
at the same home address will receive only one copy of any of the Corporation’s
annual report, proxy statement for our Annual Meeting of Shareholders, proxy
statement we file and deliver in connection with any other meeting of
shareholders, proxy statement combined with a prospectus or information
statement. We will include with the householded materials for our
Annual Meeting of Shareholders, or any other shareholders' meeting, a separate
proxy card for each registered shareholder who shares your last name and lives
at your home address.
If you do
not wish to participate in the householding program, please contact our transfer
agent, American Stock Transfer & Trust Company, at 800-937-5449 to "opt-out"
or revoke your consent. If you "opt-out" or revoke your consent to
householding, each shareholder residing at your address will receive individual
copies of the Corporation’s proxy statement, annual report and other future
shareholder mailings.
If you do
not object to householding, (1) you are agreeing that your household will only
receive one copy of future shareholder mailings, and (2) your consent will be
implied and householding will start 60 days after the mailing of this notice, to
the extent you have not previously consented to participation in the
householding program. Your affirmative or implied consent to
householding will remain in effect until you revoke it. The
Corporation shall begin sending individual copies of applicable shareholder
communications subject to householding rules to a shareholder within 30 days
after revocation by the shareholder of prior affirmative or implied
consent. Your participation in the householding program is
encouraged. It will reduce the volume of duplicate information
received at your household as well as the cost to the Corporation of preparing
and mailing duplicate materials.
REGARDLESS
OF THE NUMBER OF SHARES YOU OWN,
YOUR
VOTE IS IMPORTANT TO THE CORPORATION.
PLEASE
COMPLETE, DATE AND SIGN AND PROMPTLY RETURN
THE
ENCLOSED PROXY CARD TODAY. YOU MAY ALSO VOTE
YOUR
SHARES THROUGH THE INTERNET OR BY TELEPHONE.
Submitted
by order of the Board of Directors,
David V.
Devault
Secretary
Westerly,
Rhode Island
March 14,
2008
ANNUAL MEETING OF SHAREHOLDERS
OF
WASHINGTON
TRUST BANCORP, INC.
April 22, 2008
Please
date, sign and mail
your
proxy card in the
envelope
provided as soon
as
possible.
Please
detach along perforated line and mail in the envelope
provided. |
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.
PLEASE SIGN, DATE AND
RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. PLEASE MARK YOUR VOTE IN BLUE OR
BLACK INK AS SHOWN HERE. x
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1.
Election of Directors:
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FOR
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AGAINST
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ABSTAIN
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NOMINEES: |
2.
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To
ratify the selection of KPMG LLP as independent auditors of the
Corporation for the year ending December 31, 2008. |
o
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o
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o
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o
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FOR
ALL NOMINEES |
m Gary P. Bennett
m Larry J.
Hirsh, Esq.
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o |
WITHHOLD
AUTHORITY FOR ALL NOMINEES |
m Mary E.
Kennard, Esq.
m H. Douglas
Randall, III
m John F.
Treanor
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3.
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In
their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting or any adjournments
thereof. |
o |
FOR
ALL EXCEPT (See instructions below) |
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The
undersigned hereby acknowledges receipt of the accompanying notice of
Annual Meeting of Shareholders, the Proxy Statement with respect thereto,
and the Corporation’s 2007 Annual Report and hereby revokes any proxy or
proxies heretofore given. This proxy may be revoked at any
time. |
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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.
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INSTRUCTION: |
To withhold authority
to vote for any individual nominee(s), mark “FOR
ALL EXCEPT” and
fill in the circle next to each nominee you wish to withhold, as shown
here: ● |
PLEASE
VOTE, DATE AND PROMPTLY RETURN THIS PROXY IN THE ENCLOSED RETURN ENEVLOPE,
WHICH IS
POSTAGE PREPAID IF MAILED IN THE UNITED STATES. |
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TO
INCLUDE ANY COMMENTS, USE
THE COMMENTS BOX ON THE REVERSE SIDE OF THE CARD.
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To
change the address on your account, please check the box at the right and
indicate your new address in the address space above. Please note that
changes to the registered name(s) on the account may not be submitted via
this method. |
o
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Signature
of Shareholder |
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Date:
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Signature
of Shareholder |
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Date:
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Note:
Please sign exactly as your name or names appear on this Proxy. When
shares are held jointly, each holder should sign. When signing as executor,
administrator, attorney, trustee, or guardian, please give full title as such.
If the signer
is a corporation, please sign full corporate name by duly authorized officer,
giving full title as such. If signer is a partnership, please sign in
partnership name by authorized person.
WASHINTON
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
substitution 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
shareholder to be held April 22, 2008 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 reverse side)