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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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BANCORP RHODE ISLAND, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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RHODE ISLAND 6021 05-0509802
(STATE OR OTHER JURISDICTION (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
OF INCORPORATION OR CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
ORGANIZATION)
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ONE TURKS HEAD PLACE, PROVIDENCE, RHODE ISLAND, 02903
(401) 456-5000
(ADDRESS AND TELEPHONE NUMBER OF PRINCIPAL EXECUTIVE OFFICES)
ONE TURKS HEAD PLACE, PROVIDENCE, RHODE ISLAND, 02903
(ADDRESS OF PRINCIPAL PLACE OF BUSINESS)
MERRILL W. SHERMAN, PRESIDENT AND CHIEF EXECUTIVE OFFICER
ONE TURKS HEAD PLACE, PROVIDENCE, RHODE ISLAND, 02903
(401) 456-5060
(NAME, ADDRESS AND TELEPHONE OF AGENT FOR SERVICE)
------------------------
COPY TO:
MARGARET D. FARRELL, ESQ., HINCKLEY, ALLEN & SNYDER LLP
1500 FLEET CENTER, PROVIDENCE, RHODE ISLAND, 02903
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC: As soon as practicable after the effective date.
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [X]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
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If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
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CALCULATION OF REGISTRATION FEE
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PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED(1) PER UNIT(2) OFFERING PRICE(2) FEE
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Common stock (Par Value $0.01
per share).................. 3,728,550 $9.4375 $35,188,191.00 $9,289.68
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(1) Represents the maximum number of shares of the Registrant's Common Stock to
be issued in connection with the merger described herein and Common Stock
issuable upon conversion of the Non-Voting Common Stock to be issued in
connection with the Merger described herein.
(2) Estimated based on the average high and low prices reported on The Nasdaq
Stock Market(R) on March 20, 2000 pursuant to Rule 457(f)(1) solely for the
purpose of calculating the registration fee.
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<PAGE> 2
BANK RHODE ISLAND
APRIL 13, 2000
Dear shareholder:
You are cordially invited to attend the annual meeting of shareholders of
Bank Rhode Island, which will be held at The Westin Hotel Providence, One West
Exchange Street, Providence, Rhode Island 02903 on May 17, 2000 at 10:00 a.m. At
this year's annual meeting, in addition to the matters typically dealt with at
such annual meetings, we will be considering and voting upon the proposed
restructuring of Bank Rhode Island into a holding company structure. We believe
that this holding company structure will provide us with several advantages over
our current structure. The more flexible holding company structure may permit us
to, among other things, raise less expensive capital through the use of trust
preferred securities, and will provide us the option to make acquisitions and
conduct certain nonbanking activities through subsidiaries of the holding
company rather than the bank. The formal notice of annual meeting of
shareholders and Proxy Statement/Prospectus accompanying this letter provides
detailed information concerning matters to be considered and acted upon at the
annual meeting.
Whether or not you plan to attend the annual meeting, please mark, sign,
date and return the enclosed proxy at your earliest convenience. If you later
attend the annual meeting and wish to vote in person, you may withdraw your
proxy and so vote at that time.
I look forward to seeing you at the annual meeting.
Sincerely,
/s/ MALCOLM G. CHACE
--------------------------------------
Malcolm G. Chace
Chairman of the Board
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
REGULATORS HAVE APPROVED EITHER THE REORGANIZATION DESCRIBED IN THIS PROXY
STATEMENT/PROSPECTUS OR THE BANCORP COMMON STOCK TO BE ISSUED IN THE
REORGANIZATION, NOR HAVE THEY DETERMINED IF THIS PROXY STATEMENT/PROSPECTUS IS
ACCURATE OR ADEQUATE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE BANCORP SECURITIES THAT YOU WILL RECEIVE IN THE REORGANIZATION
DESCRIBED IN THIS PROXY STATEMENT/PROSPECTUS ARE SUBJECT TO THE SAME RISKS AS
THE BANK RHODE ISLAND SECURITIES YOU CURRENTLY HOLD, INCLUDING THE RISK THAT YOU
COULD LOSE THE PRINCIPAL AMOUNT YOU INVESTED.
THE BANCORP SECURITIES THAT YOU WILL RECEIVE IN THE REORGANIZATION
DESCRIBED IN THIS PROXY STATEMENT/PROSPECTUS ARE NOT DEPOSITS AND ARE NOT
INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION.
<PAGE> 3
THE DATE OF THIS PROXY STATEMENT/PROSPECTUS IS APRIL 13, 2000
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
BANK RHODE ISLAND
TO: THE SHAREHOLDERS OF
BANK RI
Notice is hereby given that the annual meeting of shareholders of Bank
Rhode Island will be held at The Westin Hotel Providence, One West Exchange
Street, Providence, Rhode Island 02903, on May 17, 2000, at 10:00 a.m. local
time for the following purposes:
(1) To elect four Class I Directors to the Board of Directors, each to
serve until 2003;
(2) To ratify the appointment of KPMG LLP as Bank Rhode Island's
independent auditors;
(3) To consider and vote upon a Plan of Reorganization and Agreement
of Merger dated February 15, 2000. The plan of reorganization sets forth
the terms of the reorganization of Bank Rhode Island into a wholly owned
subsidiary of a newly formed holding company, Bancorp Rhode Island, Inc. As
a result, all shareholders of Bank Rhode Island will receive for their
shares of Bank Rhode Island's Common Stock and Non-Voting Common Stock an
equal number of shares of Bancorp Rhode Island's Common Stock and
Non-Voting Common Stock; and
(4) To transact such other business as may properly come before the
annual meeting or any adjournment thereof.
The matters to be acted upon at the annual meeting are more fully described
in the enclosed Proxy Statement/Prospectus, and in the plan of reorganization
which is attached as Annex A to the Proxy Statement/Prospectus.
The Board of Directors has fixed the close of business on March 31, 2000 as
the record date for determination of shareholders entitled to notice of, and the
right to vote at, the annual meeting.
Because the affirmative vote of shareholders holding not less than a
majority of the outstanding shares of Bank Rhode Island's Common Stock and
Non-Voting Common Stock, each voting as a separate class, is required to ratify
and confirm the plan of reorganization, it is essential that all shareholders
vote. You are urged to vote in favor of the proposal by signing and returning
the enclosed proxy as promptly as possible, whether or not you plan to attend
the annual meeting in person. If you do attend the annual meeting you may then
withdraw your proxy. The proxy may be revoked at any time prior to its exercise.
By Order of the Board of Directors
/s/ MARGARET D. FARRELL
--------------------------------------
Margaret D. Farrell,
Secretary
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PROXY STATEMENT OF BANK RHODE ISLAND
PROSPECTUS OF BANCORP RHODE ISLAND, INC
Bank Rhode Island ("Bank RI") is providing this Proxy Statement of Bank RI
and Prospectus of Bancorp Rhode Island, Inc. ("Bancorp") to shareholders of Bank
RI in connection with the annual meeting of shareholders of Bank RI to be held
The Westin Hotel Providence, One West Exchange Street, Providence, Rhode Island
02903, on May 17, 2000 at 10:00 a.m.
Shareholders of Bank RI will vote upon:
(1) the election of four Class I Directors, each to serve until 2003;
(2) the ratification of the appointment of KPMG LLP as Bank RI's
independent auditor;
(3) a proposal to approve the principal terms of the Plan of
Reorganization and Agreement of Merger dated February 15, 2000. Under the
plan of reorganization, shareholders of Bank RI will receive shares of
Bancorp Common Stock and Non-Voting Common Stock for their shares of Bank
RI's Common Stock and Non-Voting Common Stock. After the reorganization,
Bank RI will be the sole wholly owned subsidiary of Bancorp, and
shareholders of Bank RI immediately before the reorganization will maintain
their proportional interest in Bancorp immediately after the
reorganization; and
(4) such other matters as may properly come before the annual meeting
or any adjournment thereof.
The Board of Directors does not know of any business to be brought before
the annual meeting, other than as indicated in the notice, but it is intended
that, as to any other such business, votes may be cast pursuant to the proxies
in accordance with the judgment of the persons acting thereunder.
Shares of Bank RI's Common Stock and Non-Voting Common Stock represented by
proxies in the form solicited will be voted in the manner directed by the
shareholder. If no direction is made, the proxy will be voted FOR the election
of the nominees for director named in this proxy statement and FOR all other
proposals discussed herein.
You should rely only on the information contained in this Proxy
Statement/Prospectus or other information referred to in this document. Neither
Bank RI nor Bancorp has authorized anyone to provide you with different or other
information. This Proxy Statement/Prospectus is dated April 13, 2000. You should
not assume that the information contained in this Proxy Statement/Prospectus is
accurate as of any date other than that date, and neither the mailing of this
Proxy Statement/Prospectus to shareholders nor the issuance of shares of Bancorp
in the reorganization shall create any implication to the contrary.
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PROXY STATEMENT/PROSPECTUS
TABLE OF CONTENTS
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SUMMARY OF PROXY STATEMENT/PROSPECTUS....................... 1
Proposal No. 1 -- Election of Class I Directors........... 1
Proposal No. 2 -- Ratification of Appointment of
Independent Auditors................................... 1
Proposal No. 3 -- Bank Holding Company Reorganization and
Merger Between Bank RI and BKRI Interim Bank........... 1
Other Information Concerning the Annual Meeting........... 3
INTRODUCTION................................................ 4
REVOCABILITY OF PROXIES..................................... 4
PERSONS MAKING THE SOLICITATION............................. 4
VOTING SECURITIES........................................... 5
CAUTIONARY STATEMENT........................................ 5
PROPOSAL NO. 1 -- ELECTION OF DIRECTORS..................... 5
General Information About Board of Directors.............. 7
Compensation of Directors................................. 8
COMMON STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT............................................ 8
Security Ownership of 5% Beneficial Owners of Common
Stock.................................................. 8
Security Ownership of 5% Beneficial Owners of Non-Voting
Common................................................. 8
Security Ownership of Directors and Officers.............. 9
Section 16(a) Beneficial Ownership Reporting Compliance... 10
EXECUTIVE COMPENSATION...................................... 10
Summary Compensation Table................................ 10
Option/SAR Grants in Last Fiscal Year..................... 11
Aggregated Option/SAR Exercises in Last Fiscal Year and
Year-End Option/SAR Values............................. 11
Employment Agreements..................................... 11
401(k) Retirement Plan.................................... 13
Nonqualified Deferred Compensation Plan................... 13
Supplemental Employee Retirement Plan..................... 14
Compensation Committee Report on Executive Compensation... 14
PERFORMANCE GRAPH........................................... 16
TRANSACTIONS WITH MANAGEMENT................................ 16
PROPOSAL NO. 2 -- RATIFICATION OF APPOINTMENT OF
INDEPENDENT AUDITORS...................................... 17
PROPOSAL NO. 3 -- BANK HOLDING COMPANY REORGANIZATION AND
MERGER BETWEEN BANK RI AND BKRI INTERIM BANK.............. 17
General................................................... 17
Recommendation of Directors............................... 17
Reasons for the Reorganization: Benefits of the Use of
Holding Company Form to Shareholders of Bank RI........ 17
Description of the Reorganization and Merger Between Bank
RI and BKRI Interim Bank............................... 18
Ratification and Approval of the Plan of Reorganization:
Effective Date......................................... 19
No Dissenting Shareholder Rights.......................... 20
Accounting Treatment...................................... 20
Federal and Rhode Island Income Tax Consequences.......... 20
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i
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COMPARISON OF BANK RI AND BANCORP: ANALYSIS OF CAPITAL
STRUCTURE AND MANAGEMENT.................................. 20
Authorized and Outstanding Stock.......................... 21
Voting Rights.......................................... 21
Dividend Rights........................................ 21
Assessment of Shares................................... 22
Liquidation Rights..................................... 22
Preemptive Rights...................................... 22
Directors................................................. 22
Corporate Operation and Management........................ 22
Limitation of Liability of Directors and Officers......... 22
BUSINESS OF BANK RI......................................... 23
General................................................... 23
Lending Activities........................................ 23
Commercial Real Estate and Multi-Family Loans.......... 24
Construction Loans..................................... 24
Commercial and Industrial Loans........................ 25
Small Business Loans................................... 25
Residential Mortgage Loans............................. 25
Consumer and Other Loans............................... 26
Investment Activities..................................... 26
Deposits.................................................. 26
Nondeposit Investment Products and Services............... 27
Employees................................................. 27
Competition and Marketplace............................... 27
Properties................................................ 28
Legal Proceedings......................................... 29
OPERATIONS UNDER BANCORP.................................... 29
Organization.............................................. 29
Management and Directors of Bancorp....................... 29
SUPERVISION AND REGULATION OF BANCORP....................... 29
Recent Legislation and Other Changes...................... 30
BKRI INTERIM BANK........................................... 31
General Background........................................ 31
Initial Capitalization.................................... 31
SELECTED CONSOLIDATED FINANCIAL DATA........................ 32
PRICE RANGE AND DIVIDENDS OF BANK RI'S COMMON STOCK......... 34
UNAUDITED PRO FORMA CAPITALIZATION.......................... 35
AVAILABLE INFORMATION....................................... 35
EXPERTS..................................................... 36
LEGAL MATTERS............................................... 36
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE........... 36
OTHER BUSINESS OF THE ANNUAL MEETING........................ 37
SHAREHOLDER PROPOSALS FOR 2001.............................. 37
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SUMMARY OF PROXY STATEMENT/PROSPECTUS
This summary is qualified in its entirety by the more detailed information
appearing elsewhere herein.
The principal matter to be discussed and voted upon that the 2000 annual
meeting will be the proposed restructuring of Bank RI into a holding company
structure. As described later in this summary and more fully elsewhere in this
Proxy Statement/Prospectus, after the reorganization, Bank RI will continue its
current business operations, but its sole shareholder will be Bancorp. Thus, the
election of directors and the confirmation of Bank RI's independent auditors may
be of only limited significance. It is possible, however, that the
reorganization will not receive the necessary shareholder approval or that Bank
RI's Board of Directors will terminate the reorganization prior to its
completion. In any event, action taken at the 2000 annual meeting with respect
to the election of directors and ratification of KPMG LLP as Bank RI's
independent auditor will ensure the continuity of operations of Bank RI. The
following summary outlines the proposals management expects to be considered at
the 2000 annual meeting:
PROPOSAL NO. 1 -- ELECTION OF CLASS I DIRECTORS
Bank RI maintains a board of directors divided into three classes. Each
class of directors serves for a term of three years ending on successive years
such that only one class of directors is elected at each annual meeting. At the
2000 annual meeting, Class I Directors are to be elected. Management nominated
the following four individuals to serve as Class I Directors to serve until the
2003 annual meeting and until their successors are duly elected and qualified.
All nominees are currently directors of Bank RI.
Frederic James Hodges, Jr.
Donald J. Reaves
Cheryl L. Watkins
John A. Yena
PROPOSAL NO. 2. -- RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
Bank RI's Audit Committee of the Board of Directors recommended and the
Board of Directors has appointed KPMG LLP as independent auditors for the 2000
fiscal year. The Board requests ratification of this appointment by the
shareholders.
PROPOSAL NO. 3. -- BANK HOLDING COMPANY REORGANIZATION AND MERGER BETWEEN BANK
RI AND BKRI INTERIM BANK.
Bank RI formed Bancorp under Rhode Island law for the purpose of becoming
the holding company for Bank RI. Upon completion of the reorganization as
described in the Plan of Reorganization and Agreement of Merger dated February
15, 2000, attached hereto as Annex A, the business activities of Bancorp will
initially consist solely of the operation of Bank RI as a wholly owned bank
subsidiary. It is possible that in the future Bancorp may acquire or commence
additional businesses; however, no specific acquisitions or new business
activities are currently planned.
After the reorganization, Bancorp will be subject to additional regulation
and supervision by the Federal Reserve Board and will, for the first time, be
subject to the supervision and regulation of the Securities and Exchange
Commission ("SEC"). Presently, Bank RI is subject to regulation and supervision
by the Federal Deposit Insurance Corporation and the Rhode Island Department of
Business Regulation. Bank RI is also subject to many Federal Reserve Board
regulations. See "Supervision and Regulation of Bancorp."
After the reorganization, Bank RI will continue its current business and
operations as a Rhode Island state-chartered financial institution under its
existing name. The existing charter and bylaws of Bank RI will not be
substantially affected by the reorganization. See "Bank Holding Company
Reorganization and Merger Between Bank RI and BKRI Interim Bank."
The principal executive offices of Bank RI and Bancorp are located at One
Turks Head Place, Providence, Rhode Island 02903, and the telephone number is
(401) 456-5015.
<PAGE> 8
Description of the
Reorganization................ Bancorp will become the holding company for
Bank RI pursuant to the plan of reorganization.
Under the plan of reorganization, Bank RI
organized BKRI Interim Bank as a wholly owned
subsidiary of Bancorp. BKRI Interim Bank will
be merged with and into Bank RI with Bank RI as
the surviving corporation. The shareholders of
Bank RI will receive shares of Bancorp's Common
Stock and Non-Voting Common Stock on a
one-for-one basis for their shares of Bank RI's
Common Stock and Non-Voting Common Stock. The
shareholders of Bank RI will thus become the
sole shareholders of Bancorp which will be the
holding company for Bank RI. The reorganization
is subject to certain conditions including
shareholder and regulatory approvals. See "Bank
Holding Company Reorganization and Merger
Between Bank RI and BKRI Interim
Bank -- Description of the Reorganization and
Merger Between Bank RI and BKRI Interim Bank."
Reasons for the
Reorganization................ The reorganization may provide greater
financial flexibility. See "Bank Holding
Company Reorganization and Merger Between Bank
RI and BKRI Interim Bank -- Reasons for the
Reorganization: Benefits of the Use of Holding
Company Form to the Shareholders of Bank RI."
Tax Consequences of the
Reorganization.............. The plan of reorganization is structured to
qualify the reorganization as a tax-free
reorganization so that, among other things, no
gain or loss will be recognized by the
shareholders of Bank RI upon the exchange of
their shares of Bank RI's Common Stock for
shares of Bancorp's Common Stock.
Market for Bancorp Stock...... It is anticipated that the Bancorp Common Stock
received by Bank RI's shareholders in the
reorganization will be listed on The Nasdaq
Stock Market(R) ("Nasdaq") and that Bancorp's
Common Stock will be as marketable as Bank RI's
Common Stock. See "Price Range and Dividends of
Bank RI's Common Stock."
Management of Bancorp......... The directors of Bancorp are, and will be, the
current directors of Bank RI. The executive
officers of Bancorp will be the current senior
executive officers of Bank RI. See "Management
of Bancorp."
Regulation of Bancorp......... Bancorp will be subject to the regulation of
the Board of Governors of the Federal Reserve
System under the Bank Holding Company Act of
1956, as amended. In addition, Bancorp will be
subject to the regulation of the Securities and
Exchange Commission under the Securities
Exchange Act of 1934, as amended. See
"Operations Under Bancorp -- Supervision and
Regulation of Bancorp."
Voting Rights of
Shareholders.................. Each holder of Bank RI Common Stock will be
entitled to cast one vote for each share of
Common Stock held of record as of the close of
business on March 31, 2000 in voting on the
plan of reorganization. Directors and executive
officers of Bank RI own, in the aggregate,
approximately 19.7% of Bank RI's Common Stock
(not including options which may be
exercisable) entitled to vote on the plan of
reorganization. In addition, under Rhode Island
law, each holder of Bank RI Non-Voting Common
Stock will be entitled to cast one vote for
each share of Non-Voting Common Stock held of
2
<PAGE> 9
record as of the close of business on March 31,
2000 in voting on the plan of reorganization.
There are currently 280,000 shares of Bank RI
Non-Voting Common Stock issued and outstanding,
100% of which are owned by BT Investment
Partners, Inc.
Shareholder Vote Required for
Approval.................... Approval of the plan of reorganization requires
the affirmative vote of a majority of the
outstanding shares of Bank RI's Common Stock
and a majority of the outstanding shares of
Bank RI's Non-Voting Common Stock, each voting
as a separate class.
No Dissenters' Rights......... Rhode Island state law does not provide for the
exercise of dissenter's rights in this
transaction.
OTHER INFORMATION CONCERNING THE ANNUAL MEETING
Time and Place of Annual
Meeting....................... The annual meeting will be held the Westin
Hotel Providence, One West Exchange Street,
Providence, Rhode Island 02903 on May 17, 2000
at 10:00 a.m.
Additional Information........ For additional information, you may telephone
Bank RI's Communications Officer, Stephen
Turgeon, at (401) 456-5015 ext. 1652.
3
<PAGE> 10
INTRODUCTION
Management is furnishing you with this Proxy Statement/Prospectus in
connection with the solicitation of proxies for use at the annual meeting of
Bank RI to be held at The Westin Hotel Providence, One West Exchange Street,
Providence, Rhode Island 02903 on May 17, 2000 at 10:00 a.m., and at any and all
adjournments thereof.
It is expected that Bank RI will mail this Proxy Statement/Prospectus and
accompanying notice and form of proxy to shareholders on or about April 13,
2000.
At the annual meeting, the shareholders will consider and vote on:
(1) the election of four Class I Directors, each to serve until 2003;
(2) the ratification of the appointment of KPMG LLP as Bank RI's
independent auditor;
(3) a proposal to approve the principal terms of the Plan of
Reorganization and Agreement of Merger dated February 15, 2000. Under the
plan of reorganization, Bank RI will become a wholly owned subsidiary of
the newly formed holding company, Bancorp, as a result of which
shareholders of Bank RI will receive on a one-for-one basis shares of
Bancorp's Common Stock and Non-Voting Common Stock for their shares of Bank
RI's Common Stock and Non-Voting Common Stock. These transactions are more
fully described in this Proxy Statement/Prospectus, and in the plan of
reorganization attached as Annex A; and
(4) such other matters as may properly come before the annual meeting
or any adjournment thereof.
REVOCABILITY OF PROXIES
A proxy for use at the annual meeting is enclosed. Any shareholder who
executes and delivers such proxy has the right to revoke it at any time before
it is exercised, by filing with the Secretary of Bank RI an instrument revoking
it, or a duly executed proxy bearing a later date. The Secretary of Bank RI is
Margaret D. Farrell, and any revocation should be filed with her c/o Messrs.
Hinckley, Allen & Snyder LLP, 1500 Fleet Center, Providence, Rhode Island 02903.
In addition, the powers of the proxy holders will be revoked if the person
executing the proxy is present at the annual meeting and elects to vote in
person. Subject to such revocation or suspension, the proxy holders will vote
all shares represented by a properly executed proxy received in time for the
annual meeting in accordance with the instructions on the proxy. IF NO
INSTRUCTIONS ARE SPECIFIED WITH REGARD TO THE MATTERS TO BE ACTED UPON, THE
PROXY HOLDERS WILL VOTE THE SHARES REPRESENTED BY THE PROXY "FOR" EACH OF THE
MATTERS SCHEDULED TO BE CONSIDERED AT THE ANNUAL MEETING. IF ANY OTHER MATTER IS
PRESENTED AT THE ANNUAL MEETING, THE PROXY HOLDERS WILL VOTE IN ACCORDANCE WITH
THE RECOMMENDATIONS OF MANAGEMENT.
PERSONS MAKING THE SOLICITATION
The Board of Directors of Bank RI is soliciting these proxies. Bank RI will
bear the expense of preparing, assembling, printing and mailing this Proxy
Statement/Prospectus and the material used in the solicitation of proxies for
the annual meeting. Bank RI contemplates that proxies will be solicited
principally through the use of the mail, but officers, directors and employees
of Bank RI may solicit proxies personally or by telephone, without receiving
special compensation therefor. Although there is no formal agreement to do so,
Bank RI may reimburse banks, brokerage houses and other custodians, nominees and
fiduciaries for their reasonable expenses in forwarding these proxy materials to
their principals. In addition, Bank RI may utilize the services of individuals
or companies not regularly employed by Bank RI in connection with the
solicitation of proxies, if management of Bank RI determines that this is
advisable.
4
<PAGE> 11
VOTING SECURITIES
On March 31, 2000, which management has fixed as the record date for
purposes of determining the shareholders entitled to notice of, and to vote at,
the annual meeting, 3,448,550 shares of Bank RI's Common Stock were issued and
outstanding, and 280,000 shares of Bank RI's Non-Voting Common Stock (the Non-
Voting Common Stock and the Common Stock are sometimes referred to herein as the
"Stock") were issued and outstanding. Each holder of Bank RI's Common Stock will
be entitled to one vote for each share of Bank RI's Common Stock held of record
on the books of Bank RI as of the record date. With respect to the approval of
the principal terms of the Plan of Reorganization and Agreement of Merger only,
each holder of Bank RI's Non-Voting Common Stock will be entitled to one vote
for each share of Bank RI's Non-Voting Common Stock held of record on the books
of Bank RI as of the record date.
The holders of a majority of the shares entitled to vote, present in person
or represented by proxy, will constitute a quorum for the transaction of
business at the annual meeting. A plurality of votes cast is required to elect
the directors. The approval of the principal terms of the Plan of Reorganization
and Agreement of Merger will require the affirmative vote of not less than a
majority of the outstanding shares of Bank RI's Common Stock and Non-Voting
Common Stock, each voting as a separate class. All other proposals to be voted
upon at the annual meeting will require the affirmative vote of the holders of a
majority of the Common Stock present in person or represented by proxy at the
annual meeting. Abstentions are treated as present and entitled to vote and
therefore have the effect of a vote against a matter. A broker non-vote on a
matter is considered not entitled to vote on the matter and thus is not counted
in determining whether a matter requiring approval of a majority of the shares
present and entitled to vote has been approved.
CAUTIONARY STATEMENT
Certain statements contained herein are "Forward Looking Statements" within
the meaning of the Private Securities Litigation Reform Act of 1995. Forward
Looking Statements may be identified by reference to a future period or periods
or by the use of forward looking terminology such as "may," "believes,"
"intends," "expects," and "anticipates" or similar terms or variations of these
terms. Actual results may differ materially from those set forth in Forward
Looking Statements as a result of certain risks and uncertainties, including but
not limited to, changes in political and economic conditions, interest rate
fluctuations, competitive product and pricing pressures, equity and bond market
fluctuations, credit risk, inflation, as well as other risks and uncertainties
detailed from time to time in filings with the Federal Deposit Insurance
Corporation ("FDIC") and any future filings which may be made with the SEC.
PROPOSAL NO. 1
ELECTION OF DIRECTORS
Bank RI's Agreement to Form provides that the Board of Directors shall be
divided into three classes, designated as Class I, Class II and Class III, and
as nearly equal as possible. The Board of Directors has fixed the number of
directors at twelve, of which four are designated as Class I Directors, four as
Class II Directors and four as Class III Directors. The current Class I
Directors serve until the annual meeting, Class II directors serve until the
2001 annual meeting and Class III Directors serve until the 2002 annual meeting.
As each term expires, the directors elected to each class will serve for a term
of three years. In all cases, directors serve until their successors are duly
elected and qualified or until the director's earlier resignation or removal,
provided that a director's term will automatically terminate on the date of the
next annual meeting of shareholders following such director attaining age 72. At
the annual meeting, four directors are to be elected to serve until the 2003
annual meeting and until their successors are duly elected and qualified. All
nominees are currently directors of Bank RI.
Bancorp's Articles of Incorporation provide for a twelve member Board of
Directors divided into three classes designated identically to Bank RI.
Shareholders should be aware that each of the current directors of Bank RI
(including those nominated for election at the 2000 annual meeting) was elected
to serve in his or her respective class on the Board of Directors of Bancorp at
its organizational meeting of shareholders. If the
5
<PAGE> 12
nominees set forth below are elected at the 2000 annual meeting, the Boards of
Directors of both Bank RI and Bancorp will be identical in all respects.
Bancorp's Board of Directors, however, will be made up of all of Bank RI's
directors including the director nominees set forth below notwithstanding the
results of the vote at the 2000 annual meeting.
Unless authority to do so has been withheld or limited in a proxy, it is
the intention of the persons named as proxies to vote the shares to which the
proxy relates FOR the election of the four nominees named below to the Board of
Directors as Class I Directors. If any nominee named below is not available for
election to the Board of Directors at the time of the annual meeting, it is the
intention of the persons names as proxies to act to fill that office by voting
the shares to which a proxy relates FOR the election of such person or persons
as may be designated by the Board of Directors or, in the absence of such
designation, in such other manner as the proxies may in their discretion
determine, unless authority to do so has been withheld or limited in the proxy.
The Board of Directors anticipates that each of the nominees will be available
to serve if elected.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF THE NOMINEES
FOR ELECTION AS DIRECTORS.
The following table sets forth certain information for both the four
nominees for election as Class I Directors (the "Nominees"), and for those Class
II and Class III Directors whose terms expire at the annual meetings of Bank
RI's shareholders in 2001 and 2002, respectively.
<TABLE>
<CAPTION>
BUSINESS EXPERIENCE YEAR FIRST
NAME AGE DURING PAST 5 YEARS DIRECTOR
- - ---- --- ------------------- ----------
<S> <C> <C> <C>
NOMINEES FOR CLASS I DIRECTORS (TERM TO EXPIRE 2003)
Frederick James Hodges, Jr........... 60 Chairman of the Board of Hodges Badge Company 1996
(commemorative ribbon manufacturer) since 1995,
and President and CEO from 1972 through 1994.
Donald J. Reaves..................... 53 Executive Vice President for Finance and 1996
Administration and Chief Financial Officer of
Brown University since 1997, and Senior Vice
President for Finance and Administration and
Chief Financial Officer from 1993 to 1997.
Cheryl L. Watkins.................... 41 President and Chief Executive Officer of 1996
Banneker Industries, Inc. (manufacturing,
assembly and packaging and logistics
management) since 1991.
John A. Yena......................... 59 President of Johnson & Wales University. 1996
CLASS II DIRECTORS (TERM TO EXPIRE 2001)
John R. Berger....................... 56 Business consultant since 1994. Prior thereto, 1997
Executive Vice President and Director of
Mergers and Acquisitions (1993-94) and
Executive Vice President and Chief Investment
Officer (1985-93) for Shawmut National
Corporation.
Karl F. Ericson...................... 66 Business consultant and certified public 1996
accountant. Also a director Bacou, USA
(personal safety production products). From
1970 through 1990, a partner of KPMG LLP.
Margaret D. Farrell.................. 50 Partner of Hinckley, Allen & Snyder LLP (law 1996
firm) since 1981.
Mark R. Feinstein.................... 44 President of Northeast Management Inc. (video 1996
store franchisee) since 1991.
</TABLE>
6
<PAGE> 13
<TABLE>
<CAPTION>
BUSINESS EXPERIENCE YEAR FIRST
NAME AGE DURING PAST 5 YEARS DIRECTOR
- - ---- --- ------------------- ----------
<S> <C> <C> <C>
CLASS III DIRECTORS (TERM TO EXPIRE 2002)
Anthony F. Andrade................... 52 President of A&H Printing and former President 1996
of Universal Press Graphics, Inc. until his
retirement in April 1999.
Malcolm G. Chace..................... 65 Chairman of the Board of Bank RI since its 1996
formation, Chairman of the Board of Mossberg
Industries, Inc. (wire spool and reel
manufacturer) and a director of Berkshire
Hathaway, Inc.
Ernest J. Chornyei, Jr. ............. 57 Business Consultant since February 2000. Prior 1996
thereto, Chairman of the Board of Bradford
Dyeing Association, Inc. (textiles) in
Westerly, Rhode Island
Merrill W. Sherman................... 51 President and Chief Executive Officer of Bank 1996
RI since Bank RI commenced operation. Also a
director of Providence and Worcester Railroad
Company. From 1993 through 1995 when she became
associated with EFC, Inc. (Bank RI's agent in
connection with its formation), she was a
member of the law firm of Brown Rudnick Freed &
Gesmer, Ltd.
</TABLE>
GENERAL INFORMATION ABOUT BOARD OF DIRECTORS
The Board of Directors held 10 meetings during 1999. The Board has four
standing committees: the Executive Committee, the Audit Committee, the
Compensation Committee and the Directors' Loan Committee.
The Executive Committee did not meet in 1999. The members of the Executive
Committee are Malcolm G. Chace (Chairman), Merrill W. Sherman, Karl F. Ericson,
Margaret D. Farrell and Frederick James Hodges. The Executive Committee conducts
the affairs and business of Bank RI between meetings of the Board of Directors,
subject to certain limitations set forth in Bank RI's Agreement to Form.
The Compensation Committee met four times in 1999. The members of the
Compensation Committee are Frederick James Hodges (Chairman), Anthony F. Andrade
and John R. Berger. The Compensation Committee is responsible for the review and
recommendation of the compensation arrangements for directors and officers and
the award of options under Bank RI's 1996 Incentive and Nonqualified Stock
Option Plan.
The Audit Committee met four times in 1999. The members of the Audit
Committee are Karl F. Ericson (Chairman), Ernest J. Chornyei, Jr. and Cheryl L.
Watkins. The Audit Committee is responsible for recommending to the Board the
selection of independent auditors to conduct the annual audit of Bank RI's
financial statements; reviewing the scope of the audit plans of the independent
auditor and Bank RI's internal auditor; reviewing the scope of the non-audit
services provided by the independent auditor and reviewing the results of the
independent and internal auditors' work to ensure compliance with Bank RI
policies.
The Directors' Loan Committee met 12 times in 1999. The members of the
Directors' Loan Committee are Malcolm G. Chace, Mark R. Feinstein, Donald R.
Reaves and John A. Yena, as well as Bank RI's Chief Executive Officer, Chief
Lending Officer and Senior Credit Officer. The Directors' Loan Committee is
responsible for promoting the development, implementation, and maintenance of
quality credit policies and procedures bankwide; monitoring adherence to credit
policies and procedures on an ongoing basis; promoting strong credit culture;
monitoring trends in quality and growth of the loan portfolio; and approving
changes in Bank RI's loan policy.
7
<PAGE> 14
COMPENSATION OF DIRECTORS
Directors of Bank RI (other than Ms. Sherman) receive an annual retainer of
$2,500 and $450 for each annual meeting attended, as well as $450 for each
meeting of the Executive Committee, Audit Committee or Compensation Committee
attended, and $500 for each meeting of the Directors' Loan Committee attended.
Under the Non-Employee Director Stock Plan (the "Director Plan") approved
by the shareholders at the 1998 annual meeting, each non-employee director
elected at the 1998 annual meeting received an option to purchase 1,500 shares
of Common Stock, and each new non-employee director elected thereafter will
receive an option to purchase 1,000 shares of Common Stock, as of the date of
election to the Board. In addition, annual grants of options are made as of the
date of each annual meeting of shareholders to each non-employee director (other
than a director who is first elected at or within six months of the annual
meeting) to purchase 500 shares of Common Stock. All options have a ten-year
term and an exercise price equal to the fair market value on the date of grant.
Options may be exercised with cash, Common Stock, or both. Options vest six
months after the grant date, unless automatically accelerated in the event of
death, disability or a change in control.
COMMON STOCK OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
SECURITY OWNERSHIP OF 5% BENEFICIAL OWNERS OF COMMON STOCK
The following table sets forth information as of March 31, 2000, regarding
the beneficial owners of more than 5% of Bank RI's Common Stock:
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF PERCENT
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP(a) OF CLASS(b)
- - ------------------------------------ ----------------------- -----------
<S> <C> <C>
Malcolm G. Chace(c)......................................... 409,183 11.9%
c/o Point Gammon Corporation
One Providence Washington Plaza, Providence, RI 02903
Richard A. Grills(d)........................................ 249,995 7.2%
P.O. Box 539, Westerly, RI 02891
Greenwood Partners L.P.(e).................................. 228,300 6.6%
1601 Forum Place, Suite 905, W. Palm Beach, FL 33401
</TABLE>
- - ---------------
(a) All information is based upon ownership of record as reflected on the stock
transfer books of Bank RI or as reported on Schedule 13G or Schedule 13D
filed under Rule 13d-1 under the Securities Exchange Act of 1934, as
amended (the "Exchange Act").
(b) Assumes no conversion of Non-Voting Common Stock by the existing holder, who
also owns 120,000 shares of Common Stock. Presently, 280,000 shares of
Non-Voting Common Stock are outstanding, of which 51,502 shares may be
converted by the existing holder.
(c) Includes 342,733 shares held by trusts of which Mr. Chace or his spouse is
a co-trustee and has shared voting and investment power. Mr. Chace
disclaims any economic or beneficial interest in 43,100 of such shares.
Also includes 2,000 shares held by Mr. Chace's spouse and 2,000 shares that
may be acquired pursuant to options which are presently exercisable. Mr.
Chace is a director of Bank RI.
(d) Represents shares of Common Stock held in a trust of which Mr. Grills is the
sole beneficiary.
(e) Arnold Mullen, the general partner of Greenwood Partners, L.P., exercises
investment and voting power over, and may be deemed to be the beneficial
owner of, the Common Stock held by Greenwood Partners, L.P.
SECURITY OWNERSHIP OF 5% BENEFICIAL OWNERS OF NON-VOTING COMMON STOCK
The following table sets forth information as of March 31, 2000, regarding
the beneficial owners of more than 5% of Bank RI's Non-Voting Common Stock which
beneficial owners are entitled to vote on Proposal
8
<PAGE> 15
Number 3 to approve the Plan of Reorganization and Agreement of Merger dated
February 15, 2000 pursuant to Section 7-1.1-55 of the Rhode Island Business
Corporation Act:
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF PERCENT
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP(a) OF CLASS
- - ------------------------------------ ----------------------- --------
<S> <C> <C>
BT Investment Partners, Inc. ............................... 280,000(b) 100%
c/o Bankers Trust
One Bankers Trust Plaza
New York, NY 10006
</TABLE>
- - ---------------
(a) All information is based upon ownership of record as reflected on the stock
transfer books of Bank RI.
(b) 51,502 of these shares are convertible by the holder into shares of Common
Stock.
SECURITY OWNERSHIP OF DIRECTORS AND OFFICERS
The following tables set forth certain information regarding the beneficial
ownership of Bank RI's Common Stock as of March 31, 2000 by each director and
the Named Executive Officers of Bank RI and all directors and executive officers
as a group. Unless otherwise indicated, each person has sole voting and
dispositive power over the shares indicated as owned by such person.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF PERCENT
NAME OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP(a) OF CLASS(b)
- - ------------------------ ----------------------- -----------
<S> <C> <C>
Anthony F. Andrade(c)....................................... 62,000 1.8%
John R. Berger(c)........................................... 3,000 *
Malcolm G. Chace(c)(d)...................................... 409,183 11.9
Ernest J. Chornyei, Jr.(c)(e)............................... 110,000 3.2
Karl F. Ericson(c).......................................... 9,000 *
Margaret D. Farrell(c)...................................... 4,000 *
Mark R. Feinstein(c)........................................ 15,500 *
F. James Hodges, Jr.(c)(f).................................. 19,000 *
Donald J. Reaves(c)......................................... 3,000 *
Merrill W. Sherman(g)....................................... 146,475 4.1
Cheryl L. Watkins(c)........................................ 2,500 *
John A. Yena(c)............................................. 7,000 *
James V. DeRentis(h)........................................ 4,020 *
Donald C. McQueen (i)....................................... 30,380 *
Albert R. Rietheimer(j)..................................... 32,040 *
Directors and executive officers as a group (15
persons)(k)............................................... 857,098 23.6
</TABLE>
- - ---------------
* Less than one percent.
(a) If applicable, beneficially owned shares include shares owned by the
spouse, children and certain other relatives of the director or officer, as
well as shares held by trusts of which the person is a trustee or in which
he has a beneficial interest and shares acquirable pursuant to options
which are presently or will become exercisable within 60 days. All
information with respect to beneficial ownership has been furnished by the
respective directors and officers.
(b) Assumes no conversion of Non-Voting Common Stock by the existing holder.
Presently, 280,000 shares of Non-Voting Common Stock are outstanding of
which 51,502 shares may be converted by the existing holder.
(c) Includes 2,000 shares that may be acquired pursuant to options.
(d) Includes 342,733 shares held by trusts of which Mr. Chace or his spouse is a
co-trustee and has shared voting and investment power. Mr. Chace disclaims
any economic or beneficial interest in 63,100 of such shares. Also includes
2,000 shares held by Mr. Chace's spouse.
9
<PAGE> 16
(e) Includes 108,000 shares held by a trust of which Mr. Chornyei is a
beneficiary.
(f) Includes 6,000 shares held by Mr. Hodges' immediate family members.
(g) Includes 105,475 shares that may be acquired pursuant to options.
(h) Includes 3,920 shares that may be acquired pursuant to options.
(i) Includes 23,380 shares that may be acquired pursuant to options.
(j) Includes 24,040 shares that may be acquired pursuant to options.
(k) Includes 178,815 shares that may be acquired pursuant to options.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act and Section 335.601 of the Code of
Federal Regulations require executive officers and directors and persons who
beneficially own more than ten percent of Bank RI's Common Stock to file initial
reports of ownership and reports of changes in ownership with FDIC and any
national securities exchange on which Bank RI's securities are registered. Based
solely on a review of the copies of such forms furnished to Bank RI and written
representations from the executive officers and directors, Bank RI believes that
during 1999 its executive officers, directors and greater than ten percent
beneficial owners complied with all applicable Section 16(a) filing requirements
except for a Form F-8 disclosing a stock purchase filed by Malcolm G. Chace on
December 30, 1999 which was due on December 10, 1999.
EXECUTIVE COMPENSATION
The following table summarizes the compensation paid or accrued by Bank RI
to its Chief Executive Officer and each of its most highly compensated executive
officers who earned more than $100,000 in salary and bonus in 1999 (together,
the "Named Executive Officers"), for the last three completed fiscal years:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
ANNUAL COMPENSATION(a) COMPENSATION
----------------------------- ------------
SECURITIES
UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY(b) BONUS OPTIONS/SARS COMPENSATION
- - --------------------------- ---- --------- -------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Merrill W. Sherman................. 1999 $249,412 $126,800 23,700 $ 9,760(c)
(President and CEO) 1998 237,519 66,000 20,000 8,905(c)
1997 223,077 64,400 17,250 8,668(c)
Albert R. Rietheimer............... 1999 130,119 46,500 8,300 5,205(c)
(Chief Financial Officer 1998 122,538 33,500 7,500 4,902(c)
and Treasurer) 1997 113,923 32,480 8,700 10,640(d)
Donald C. McQueen.................. 1999 127,021 50,000 8,300 5,369(c)
(Executive Vice President and 1998 118,500 32,500 7,000 4,906(c)
Chief Lending Officer) 1997 103,077 30,800 8,250 4,123(c)
James V. DeRentis.................. 1999 99,077 25,000 5,200 3,963(c)
(Senior Vice President -- Retail 1998 86,477 12,000 -- 3,458(c)
Banking) 1997 81,392 7,500 1,000 1,628(c)
</TABLE>
- - ---------------
(a) Any perquisites or other personal benefits received from Bank RI by the
named executive were substantially less than 10% of the individual's salary
and bonus.
(b) Includes portion of salary deferred under the 401(k) Plan and the
Nonqualified Deferred Compensation Plan.
(c) Represents Bank RI's contribution under its 401(k) Plan.
10
<PAGE> 17
(d) Represents reimbursement for relocation expenses.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
The following table provides information on option grants in 1999 to the
Named Executive Officers. The Bank does not issue stock appreciation rights.
<TABLE>
<CAPTION>
NUMBER OF % OF TOTAL
SECURITIES OPTIONS/SARS EXERCISE
UNDERLYING GRANTED TO OR BASE
OPTIONS/SARS EMPLOYEES IN PRICE EXPIRATION GRANT DATE
NAME GRANTED FISCAL YEAR ($/SH) DATE VALUE(a)
- - ---- ------------ ------------ -------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Merrill W. Sherman............... 23,700(b) 27.9% $10.75 1/21/09 $53,325
Albert R. Rietheimer............. 8,300(c) 9.8 10.75 1/21/09 18,675
Donald C. McQueen................ 8,300(c) 9.8 10.75 1/21/09 18,675
James V. DeRentis................ 5,200(c) 6.1 10.75 1/21/09 11,700
</TABLE>
- - ---------------
(a) Amounts represent the fair value of each option granted and were estimated
as of the date of the grant using the Black-Scholes option-pricing model
with the following weighted average assumptions: expected volatility of
25%; expected life of 7 years; risk-free interest rate of 4.69% and Common
Stock dividend rate of 3.78%
(b) All of these options are nonqualified stock options exercisable in four
equal annual installments commencing on January 21, 1999.
(c) All of these options are incentive stock options exercisable in five equal
annual installments commencing on January 21, 1999.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND YEAR-END OPTION/SAR
VALUES
The following table sets forth certain information regarding stock options
exercised during 1999 and currently outstanding options held by the Named
Executive Officer as of December 31, 1999:
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF
SHARES OPTIONS/SARS AT FISCAL UNEXERCISED
ACQUIRED VALUE YEAR END 1999 IN-THE-MONEY
NAME ON EXERCISE REALIZED ($) EXERCISABLE/UNEXERCISABLE OPTION/SARS ($)(a)
- - ---- ----------- ------------ ------------------------- -------------------
<S> <C> <C> <C> <C>
Merrill W. Sherman......... 0 0 82,862/32,088 0
Albert R. Rietheimer....... 0 0 17,080/16,420 0
Donald C. McQueen.......... 0 0 16,610/15,940 0
James V. DeRentis.......... 0 0 1,640/ 4,560 0
</TABLE>
- - ---------------
(a) Based on the December 31, 1999 closing sale price of the Common Stock of
$9.875, less the exercise price of the options. All options were
out-of-the-money on December 31, 1999.
EMPLOYMENT AGREEMENTS
Bank RI has entered into employment agreements with Ms. Sherman, and
Messrs. McQueen, Rietheimer and DeRentis, which provide that during the term of
the contract, their base salary will not be reduced and they will remain
eligible for participation in Bank RI's executive compensation and benefit
programs.
Ms. Sherman's agreement provides for an initial three-year term expiring
January 30, 2001, which automatically renews for successive one-year terms
unless either party has given the other party written notice of election not to
extend the term at least 90 days prior to the next expiration date. In the event
Ms. Sherman's employment is terminated by Bank RI without cause or Ms. Sherman
terminates her employment for "Good Reason," Bank RI must pay her a lump sum
severance payment equal to two times her annual base salary and continue to pay
for all medical and life insurance coverage for 24 months. In addition, any
options which are
11
<PAGE> 18
exercisable on the date of termination shall not terminate until the earlier of
their expiration or three years after the date of termination. "Good Reason" is
defined in Ms. Sherman's agreement as (i) a significant reduction in the nature
or scope of her duties, responsibilities, authority and powers; (ii) any
requirement that she perform her duties at a location more than 50 miles from
where she currently performs her duties; or (iii) failure of Bank RI either to
renew the agreement or enter into a new agreement on terms not less favorable
than those existing immediately prior to such nonrenewal (other than a reduction
of fringe benefits required by law or applicable to all employees generally).
In the event of a "Terminating Event" within one year of a "Change in
Control," Ms. Sherman is entitled to receive as severance an amount equal to
2.99 times the sum of her annual base salary plus the average of her cash bonus
in the two years preceding the Change in Control, payable in a lump sum. A
"Terminating Event" for this purpose means either (a) termination of employment
for any reason other than death, disability or for cause, (b) resignation
following (i) a significant reduction in the nature or scope of Ms. Sherman's
duties, responsibilities, authority and powers from those exercised prior to the
Change in Control; (ii) a requirement that she perform her duties at a location
more than 50 miles from the location at where such duties were performed prior
to the Change in Control; (iii) failure of Bank RI to renew her employment on
terms not less favorable than those existing immediately prior to such
nonrenewal (other than a reduction of fringe benefits required by law or
applicable to all employees generally); (iv) the failure of Ms. Sherman and any
successor of Bank RI to mutually agree in writing for any reason, upon terms and
conditions of her employment within 90 days following a Change in Control, or
(c) Ms. Sherman's resignation from Bank RI or any successor of Bank RI following
a "Takeover Transaction" provided that such resignation occurs during the ninety
(90) day period which ends on the first anniversary of the Takeover Transaction.
If Ms. Sherman becomes entitled to a Severance Payment or any other payment
which subject her to the excise tax imposed by Section 4999 of the Internal
Revenue Code of 1986, as amended (the "Code"), Bank RI must pay to her within 30
days a gross-up payment such that Ms. Sherman receives the same amount after any
tax payments as she would have received absent the imposition of such excise
tax.
The agreements with Messrs. Rietheimer and McQueen provided for an initial
two-year term which expired on January 30, 2000 but were automatically renewed
for an additional one year term. The agreement with Mr. DeRentis provides for an
initial one-year term expiring June 20, 2000. The terms of each of these
agreements automatically renew for successive one-year terms unless either party
has given the other party written notice of election not to renew at least 30
days prior to the next expiration date. If Bank RI terminates the employment
relationship without cause or the executive terminates his employment following
Bank RI's failure to renew the agreement or enter into a new agreement on
substantially similar terms, the executive would be entitled to continuance of
his base salary and all medical and life insurance coverage for 12 months, in
the case of Messrs. McQueen and Rietheimer and for 6 months in the case of Mr.
DeRentis.
The agreements with Messrs. McQueen, Rietheimer and DeRentis provide that
in the event of a "Terminating Event" within one year of a Change in Control,
each of Messrs. McQueen and Rietheimer is entitled to receive a severance
benefit equal to two times his annual base salary plus the average of his cash
bonus in the two years preceding the Change in Control, payable as a lump sum.
Mr. DeRentis is entitled to receive a severance benefit equal to his annual base
salary plus his cash bonus in the year preceding the Change in Control. A
"Terminating Event" means for this purpose either (a) termination of employment
for any reason other than death, disability or for cause or (b) resignation
following (i) a significant reduction in the nature or scope of the executive's
duties, responsibilities, authority and powers from those exercised prior to the
Change in Control; (ii) a greater than 10% reduction in the executive's annual
base salary or fringe benefits (other than across-the-board salary reductions or
changes in fringe benefit plans); (iii) a requirement that the executive perform
duties at a location more than 50 miles from the location where such duties were
performed prior to the Change in Control; or (iv) failure of any successor of
Bank RI to continue the executive's employment on substantially similar
employment terms.
If Messrs. Rietheimer, McQueen or DeRentis become entitled to a Severance
Payment or any other payment which subject either to the excise tax imposed by
Section 4999 of the Code, Bank RI must pay to
12
<PAGE> 19
either one of them within 30 days a gross-up payment such that either receives
the same amount after any tax payments as he would have received absent the
imposition of such excise tax.
For purposes of all of the agreements, a "Change in Control" will be deemed
to have occurred if: (1) Bank RI effectuates a Takeover Transaction; or (2) Bank
RI commences substantive negotiations with a third party with respect to a
Takeover Transaction, and within 12 months of the commencement of such
negotiations, Bank RI enters into a definitive agreement with respect to a
Takeover Transaction with any party with which negotiations were originally
commenced; or (3) any election of directors of Bank RI (or, if Bank RI
reorganizes into a holding company structure, directors of the holding company)
(whether by the directors then in office or by the shareholders at a annual
meeting or by written consent) where a majority of the directors in office
following such election are individuals who were not nominated by a vote of
two-thirds of the members of the Board of Directors immediately preceding such
election; or (4) Bank RI effectuates a complete liquidation of Bank RI or a sale
or disposition of all or substantially all of its assets. The reorganization of
Bank RI into a holding company structure will not constitute a Change in Control
for purposes of the agreements unless accomplished in connection with a Takeover
Transaction.
A "Takeover Transaction" is defined as (a) the acquisition of voting
securities of Bank RI by any individual, entity or group other than by Bank RI
or its subsidiaries or any employee benefit plan (or related trust) of Bank RI
or its subsidiaries, which theretofore did not beneficially own securities
representing 30% or more of the voting power of all outstanding shares of voting
securities of Bank RI, if such acquisition results in such individual, entity or
group owning securities representing more than 30% of the voting power of all
outstanding voting securities of Bank RI; provided, that any acquisition by a
corporation with respect to which, following such acquisition, more than 50% of
the then outstanding shares of voting securities of such corporation, is then
beneficially owned, directly or indirectly, by all or substantially all of the
individuals and entities who were the beneficial owners of the voting securities
of Bank RI outstanding immediately prior to such acquisition in substantially
the same proportion as their ownership, immediately prior to such acquisition,
of the outstanding voting securities of Bank RI, shall not constitute a Change
in Control; or (b) the issuance of additional shares of Common Stock of Bank RI
in a single transaction or a series of related transactions if the individuals
and entities who were the beneficial owners of the outstanding voting securities
of Bank RI immediately prior to such issuance do not, following such issuance,
beneficially own, directly or indirectly, securities representing more than 50%
of the voting power of all then outstanding voting securities of Bank RI; or (c)
consummation by Bank RI of (i) a reorganization, merger or consolidation, in
each case, with respect to which all or substantially all of the individuals and
entities who were the beneficial owners of the voting securities of Bank RI
immediately prior to such reorganization, merger or consolidation do not,
following such reorganization, merger or consolidation, beneficially own,
directly or indirectly, securities representing more than 50% of the voting
power of then outstanding voting securities of the corporation resulting from
such a reorganization, merger or consolidation or (ii) the sale, exchange or
other disposition (in one transaction or a series of related transactions) of
all or substantially all of the assets of Bank RI (on a consolidated basis) to a
party which is not controlled by or under common control with Bank RI.
401(k) RETIREMENT PLAN
Bank RI maintains a 401(k) Plan which qualifies as a tax-exempt plan and
trust under sections 401 and 501 of the Code. Generally, Bank employees who were
employed by Bank RI on March 22, 1996 or who are at least 21 years of age and
have completed at least one year of service with Bank RI, are eligible to
participate in the 401(k) Plan. Under the 401(k) Plan Bank RI will make matching
contributions of up to 4% of an employee's compensation. These contributions are
vested monthly.
NONQUALIFIED DEFERRED COMPENSATION PLAN
Bank RI maintains a nonqualified deferred compensation plan under which
certain participants (including the Named Executive Officers) may contribute the
amounts they are precluded from contributing to Bank RI's 401(k) Plan because of
the qualified plan limitations, and additional compensation deferrals which may
be advantageous for personal income tax or other planning reasons. In addition,
under the deferred compensation plan participants receive an amount of employer
matching contributions that they have lost
13
<PAGE> 20
under Bank RI's 401(k) Plan as a result of the nondiscrimination rules
applicable to qualified plans. All amounts contributed by the participant and by
Bank RI under the plan are immediately vested. Any excess contributions which
cannot be contributed under the 401(k) Plan and which would otherwise be
returned to the participant at the end of the year, plus the amount of any
supplemental deferrals the participant may choose to make, and any matching
contributions provided for under the plan are credited to a deferred
compensation account (a bookkeeping account) which is credited with interest at
a rate equal to the greater of the Baa1 30-year corporate bond index, or Bank
RI's projected rate of return on average earning assets as reflected in its
budget for such year.
Participants are entitled to receive a distribution of their account upon
retirement, death, disability or termination of employment except that any
amounts attributable to employer contributions under the non-qualified plan are
subject to forfeiture if the participant is terminated for fraud, dishonesty or
willful violation of any law that is committed in connection with the
participant's employment. A participant is eligible to withdraw amounts credited
to the deferred compensation account in the event of unforeseeable financial
hardship.
The amount deferred under the plan is not includible in the income of the
participant until paid and, correspondingly, Bank RI is not entitled to a tax
deduction for any liabilities established under the plan until the amount
credited to the participant's deferred compensation account is paid to him or
her.
The amount credited to the deferred compensation account is not funded or
otherwise set aside or secure from the creditors of Bank RI and the participant
is subject to the risk that deferred compensation may not be paid in the event
of Bank RI's insolvency or Bank RI is otherwise unable to satisfy the
obligation. The plan permits (but does not require) Bank RI to establish a
grantor trust for the purpose of funding the plan. If such a trust were created,
the corpus of the trust would, under current federal income tax regulations,
have to be available to creditors of Bank RI in the event of insolvency or
bankruptcy in order to prevent adverse income tax consequences to the
participant.
SUPPLEMENTAL EMPLOYEE RETIREMENT PLAN
Bank RI has adopted a Supplemental Executive Retirement Plan ("SERP") for
certain of its senior executives under which participants designated by the
Board are entitled to an annual retirement benefit. Currently, Ms. Sherman and
Messrs. Rietheimer, McQueen and DeRentis are the only participants in the SERP.
The annual retirement benefit under the SERP is $100,000 for Ms. Sherman,
$43,400 for Messrs. Rietheimer and McQueen and $20,000 for Mr. DeRentis and is
payable upon the later of the executive attaining age 65 or the executive's
retirement. A surviving spouse will be entitled to an annual benefit equal to
50% of the participant's benefit. Ms. Sherman's benefit is fully vested while
the benefit for Messrs. Rietheimer, McQueen and DeRentis vests after five years
of service (including service with Bank RI's predecessor EFC, Inc.). In
addition, the benefit will vest immediately upon death or in the event of a
Change in Control. The SERP is unfunded but provides that upon the Change in
Control, Bank RI must deposit funds in a trust equal to the present value of all
accrued benefits provided under the SERP and thereafter make annual additional
deposits to reflect any increases in the accrued benefits. All benefits are
forfeited in the event that the executive's employment is terminated on account
of a criminal act of fraud, misappropriation, embezzlement or a felony which
involves property of Bank RI.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board (the "Committee") is composed
entirely of non-employee directors. From time to time Ms. Sherman meets with the
Committee to review the compensation program and make recommendations for
executives reporting to her. The Committee is charged with the broad
responsibility of seeing that officers and key management personnel are
effectively compensated in a manner which is internally equitable and externally
competitive.
Executive Compensation Philosophy. Bank RI's executive compensation
philosophy seeks to link executive compensation with the value, objectives,
business strategy, management initiatives and financial performance of Bank RI.
The overall objectives of the program are to attract and retain highly qualified
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<PAGE> 21
individuals in key executive positions, to motivate executives to achieve goals
inherent in Bank RI's business strategy, and to link executives' and
shareholders' interests. Bank RI also seeks to achieve a balance of the
compensation paid to a particular individual and the compensation paid to other
executives both inside Bank RI and at comparable financial institutions.
Base Salary. Base salaries for executive officers are substantially
dependent upon the base salaries paid for comparable positions at similar
financial institutions, the responsibilities of the position held, and the
experience level of the particular executive officer. The Committee sets the
base salary for executives by reviewing compensation for competitive positions
in the market and the historical compensation levels of the executives.
Cash Bonus Policy. Under the cash bonus policy adopted by Bank RI in 1998,
executive officers of Bank RI are eligible to receive bonuses of up to 40% (50%
in the case of the Chief Executive Officer) of their base salaries, subject to
adjustment based upon Bank RI's performance as compared to a peer group. All
bonuses for executive officers are determined at the discretion of the
Committee, which annually establishes specific goals and performance criteria
for each executive officer.
Stock Options. Total compensation at the senior executive level also
includes long-term incentives afforded by stock options granted under the 1996
Incentive and Nonqualified Stock Option Plan. The objectives of the program are
to align executive and shareholder long-term interests by creating a strong and
direct link between executive pay and total shareholder return, and to enable
executives to develop and maintain a significant, long-term stock ownership
position in Bank RI's Common Stock. Annual grants of stock options reflect the
executive's position with Bank RI and his or her contributions to Bank RI and
are set at levels to be competitive with other comparable companies with similar
performance. Options are granted at fair market value and generally have three
to four year vesting schedules to encourage key employees to continue in the
employ of Bank RI.
Compensation of Chief Executive Officer. In January of 1998, Bank RI
entered into a three-year employment agreement with Ms. Sherman which was
amended July 1999. The employment agreement provides Ms. Sherman with a base
salary, subject to annual adjustment, plus a cash bonus under Bank RI's cash
bonus policy described above. Ms. Sherman's base salary was established at
$253,600 based upon comparisons with comparable financial institutions. The
Committee awarded a bonus of $126,800 with respect to 1999, representing
approximately 100% of Ms. Sherman's maximum bonus opportunity. In 1999, Ms.
Sherman also received options to acquire 23,700 shares of Common Stock.
Conclusion. The Committee believes that the compensation program for
executives is competitive and that the program effectively ties executive
compensation to Bank RI's performance and resultant stock price performance.
COMPENSATION COMMITTEE
Frederick James Hodges -- Chairman
Anthony F. Andrade John R. Berger
Notwithstanding anything to the contrary set forth in any of Bank RI's
previous filings under the Exchange Act that might incorporate future filings,
including this Proxy Statement, in whole or in part, the foregoing Compensation
Committee Report on Executive Compensation and the following Performance Graph
shall not be deemed incorporated by reference into any such filing.
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<PAGE> 22
PERFORMANCE GRAPH
The following graph shows changes in the value of $100 invested at
month-end when Bank RI was formed in March 1996 through December 31, 1999, in
Bank RI's Common Stock, the S&P 500 Stock Index, and the Keefe, Bruyette &
Woods, Inc. New England Bank Index. The investment values are based on share
price appreciation plus dividends paid in cash, assuming that dividends were
reinvested on the date on which they were paid. Prior to July 31, 1997, the
Common Stock could be traded only in minimum blocks of 10,000 shares. There were
no trades in the Common Stock prior to August 1997.
LINE GRAPH
<TABLE>
<CAPTION>
KBW NEW ENGLAND
BARI S&P 500 INDEX BANK INDEX
---- ------------- ---------------
<S> <C> <C> <C>
Mar 96 100.00 100.00 100.00
Dec 96 100.00 116.65 137.84
Dec 97 110.00 155.51 237.97
Dec 98 108.75 199.86 218.99
Dec 99 99.74 241.87 194.35
</TABLE>
The Board of Directors and its Compensation Committee recognize that the
market price of stock is influenced by many factors, only one of which is issuer
performance. Bank RI's stock price may also be influenced by market perception
Bank RI in particular and the financial services industry in general, economic
conditions, fluctuating interest rates, and government regulation and
supervision. The stock price performance shown in the graph is not necessarily
indicative of future price performance.
TRANSACTIONS WITH MANAGEMENT
Bank RI has extended loans to certain of its officers, directors, and
principal shareholders, including their immediate families and affiliated
companies ("related parties"). Loans outstanding to related parties aggregated
$3.8 million at December 31, 1999. Loans to related parties are made in the
ordinary course of business under normal credit terms, including interest rates
and collateral, prevailing at the time of origination for comparable
transactions with other persons, and do not represent more than normal credit
risk.
The law firm of Hinckley, Allen & Snyder LLP, of which Margaret D. Farrell
(a director and Secretary of Bank RI) is a partner, provides legal services to
Bank RI.
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<PAGE> 23
PROPOSAL NO. 2
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
Upon recommendation of the Audit Committee of the Board of Directors, the
Board has appointed KPMG LLP as independent auditors for the 2000 fiscal year
and hereby requests shareholders to ratify such appointment.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE RATIFICATION OF THE
APPOINTMENT OF KPMG LLP AS INDEPENDENT PUBLIC ACCOUNTANTS.
Representatives of KPMG LLP will be present at the annual meeting and will
have an opportunity to make a statement if they so desire and to respond to
appropriate questions from shareholders.
PROPOSAL NO. 3
BANK HOLDING COMPANY REORGANIZATION AND MERGER
BETWEEN BANK RI AND BKRI INTERIM BANK
GENERAL
Bank RI is asking its shareholders to consider and approve the plan of
reorganization. Under the plan of reorganization, the business of Bank RI will
be conducted as a wholly owned subsidiary of Bancorp. If the plan of
reorganization is approved, the current shareholders of Bank RI will exchange
their shares of Bank RI's Stock for shares of Bancorp's Stock on a one-for-one
basis. For accounting purposes, the transaction will be accounted for in a
manner similar to that of a pooling of interests whereby the assets and
liabilities of the combining banks will be combined at their recorded amounts.
The Board of Directors of Bank RI approved the plan of reorganization on
January 25, 2000, and directed that the plan of reorganization be submitted to
the shareholders of Bank RI. The Board of Directors of Bank RI recommends that
the shareholders approve the plan of reorganization.
The detailed terms and conditions of the reorganization are set forth in
the plan of reorganization attached to this Proxy Statement/Prospectus as Annex
A. The statements made in this Proxy Statement/ Prospectus regarding the plan of
reorganization are qualified in their entirety by the more detailed information
appearing in the plan.
RECOMMENDATION OF DIRECTORS
THE BOARD OF DIRECTORS OF BANK RI HAS APPROVED THE TERMS AND CONDITIONS OF
THE PLAN OF REORGANIZATION. THE BOARD OF DIRECTORS OF BANK RI FURTHERMORE
RECOMMENDS A VOTE FOR APPROVAL OF THE PLAN OF REORGANIZATION.
REASONS FOR THE REORGANIZATION: BENEFITS OF THE USE OF HOLDING COMPANY FORM TO
THE SHAREHOLDERS OF BANK RI
As stated above, the Board of Directors of Bank RI has approved the plan of
reorganization and believes that the reorganization is in the best interests of
Bank RI and its shareholders, and recommends that the shareholders vote in favor
of approval of the plan of reorganization. Bank RI estimates the total costs
associated with the holding company formation to be approximately $125,000.
Bank RI desires to reorganize into a holding company structure pursuant to
the Bank Holding Company Act of 1956, as amended. Bank RI believes that a
holding company organizational framework will give it greater financial
flexibility in the future. For example, a holding company would provide the
structure necessary to enable Bank RI to issue trust-preferred securities and
have them treated as Tier 1 equity capital. Trust-preferred securities, which
have the usual characteristics of preferred equity, are issued by special
purpose subsidiaries; the proceeds are then loaned to the parent company. The
parent company's debt payments to the subsidiary fund the preferred payments to
the subsidiary's investors. In October 1996, the
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<PAGE> 24
Federal Reserve Board announced that, if properly structured, these instruments
qualify as Tier 1 equity capital for banks. As a result, these trust-preferred
securities have become desirable for banks because, while they qualify as equity
for regulatory purposes, they can be counted as debt for tax purposes, thus
allowing the bank to write-off the interest expense against income. In contrast,
a bank has to pay preferred dividends on regular preferred stock with after-tax
profits.
Neither Bank RI nor Bancorp has any present plans to issue trust-preferred
securities. Management nevertheless believes it is in the best interest of Bank
RI and its shareholders to put in place the capital structure to enable Bancorp
to do so.
Management and the Board of Directors of Bank RI believe that the formation
of a bank holding company, under which Bank RI will operate, also will provide
increased organizational and operational flexibility. Recent legislation has
broadened the range of activities that a bank may engage in through directly
held subsidiaries; see "Recent Legislation and Other Changes -- Recently Enacted
Legislation"; and Bank RI under Rhode Island law, may organize separate
financial activities into subsidiaries to the same extent permitted a federally
chartered FDIC-insured deposit-taking institution. Nevertheless, the bank
holding company structure will provide Bancorp with the opportunity, based on
future facts and circumstances, to determine whether it would be more
advantageous to conduct a given business activity or business line as a
subsidiary of the bank or as a subsidiary of the holding company. Neither Bank
RI nor Bancorp has any present plans to engage in any business activities or
lines of business through non-bank subsidiaries of the holding company.
DESCRIPTION OF THE REORGANIZATION AND MERGER BETWEEN BANK RI AND BKRI INTERIM
BANK
At the direction of the Board of Directors of Bank RI, management
incorporated Bancorp for the purpose of becoming a bank holding company under
the laws of the State of Rhode Island. BKRI Interim Bank, which is wholly owned
by Bancorp was also organized as a Rhode Island financial institution. The
reorganization will be accomplished by merging Bank RI with BKRI Interim Bank
pursuant to the terms of the plan of reorganization. Upon completion of the
reorganization, Bank RI will be the surviving entity and the name will remain
Bank RI. Upon the effective date of the reorganization, the shares of capital
stock of the respective parties to the plan of reorganization shall be converted
as follows:
- Each share of Bank RI's outstanding Stock shall be converted into an
equal number of shares of Bancorp's Stock. Shareholders of Bank RI will
be entitled to exchange their present share certificates for new
certificates evidencing shares of Bancorp's Stock. Until so exchanged,
the certificates for shares of Bank RI's Stock after the reorganization
shall be deemed to represent shares of Bancorp's Stock. Options to
purchase shares of Bank RI's Stock shall be assumed by Bancorp with the
same terms and conditions and for the same number of shares of Bancorp's
Stock.
- The shares of stock of BKRI Interim Bank outstanding immediately prior to
the reorganization will be converted into an equal number of shares of
the surviving bank and be owned by Bancorp.
- The shareholders of Bank RI will become shareholders of Bancorp. There
are no anticipated changes in Bank RI's shareholders' relative equity
ownership interest in Bank RI's assets. As shareholders of the Bancorp,
Bank RI's shareholders will have essentially the same rights to govern
that corporation's activities as they have with respect to Bank RI.
However, as shareholders of Bancorp they will not be entitled to vote on
matters requiring the approval of Bank RI's shareholders as Bancorp will
own 100 percent of Bank RI. Shareholders of Bancorp will be entitled to
vote on those matters affecting Bancorp. A discussion of those rights is
contained in the section entitled, "Comparison of Bank RI and Bancorp:
Analysis of Capital Structure and Management."
- Bancorp will adopt the Bank RI 1996 Incentive and Nonqualified Stock
Option Plan (the "1996 Option Plan") and the Non-Employee Director Plan
(the "Director Plan") which will automatically,
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<PAGE> 25
and without further action on the part of the shareholders, become the
stock option plans of Bancorp. All options previously granted will become
an equal number of options to purchase shares of Bancorp Common Stock
instead of shares of Bank RI Common Stock. The Board of Directors of
Bancorp may grant further options to purchase Bancorp Common Stock under
the 1996 Option Plan and directors of Bancorp will continue to receive
automatic grants of options to purchase Bancorp Common Stock under the
Director Plan, in accordance with the terms of such plans.
Upon the completion of the reorganization, the existing directors of Bank
RI will serve as the directors of both the surviving bank and Bancorp. The
surviving bank will operate under the Agreement to Form of Bank RI. The
following 12 persons who currently serve as directors of Bank RI, are expected
to serve as directors of the surviving bank after the reorganization:
<TABLE>
<CAPTION>
CLASS I DIRECTORS(1)* CLASS II DIRECTORS CLASS III DIRECTORS
(TERM EXPIRING 2003) (TERM EXPIRING 2001) (TERM EXPIRING 2002)
--------------------- -------------------- --------------------
<S> <C> <C>
Frederick James Hodges, Jr. John R. Berger Anthony F. Andrade
Donald J. Reaves Karl F. Ericson Malcolm G. Chace
Cheryl L. Watkins Margaret D. Farrell Ernest J. Chornyei, Jr.
John A. Yena Mark R. Feinstein Merrill W. Sherman
</TABLE>
- - ---------------
* Assumes that the nominees for Class I directors nominated as set forth herein
are elected to serve their respective terms.
RATIFICATION AND APPROVAL OF THE PLAN OF REORGANIZATION: EFFECTIVE DATE
Approvals of applications in connection with the proposed reorganization
must be obtained from the Board of Governors of the Federal Reserve, FDIC and
the Rhode Island Department of Business Regulation. Applications for the
necessary approvals have been made, and are now pending before those regulatory
agencies. If any of the above regulatory agencies should fail to give the
required approval for this transaction within a reasonable time, the Board of
Directors of Bank RI reserves the right, in its sole discretion, to terminate
and cancel the plan of reorganization. It is presently contemplated that,
assuming shareholder approval of the plan of reorganization, the reorganization
will become effective during fiscal 2000.
Completion of the reorganization between Bank RI and BKRI Interim Bank is
conditioned upon obtaining the required shareholder and regulatory approvals.
Approval of the reorganization by Bank RI's shareholders requires the
affirmative vote of the holders of not less than a majority of the outstanding
shares of Bank RI's Common Stock and Non-Voting Common Stock, each voting as a
separate class. The directors of Bank RI, BKRI Interim Bank and Bancorp have
approved the plan of reorganization. However, if any action, suit, or proceeding
should be threatened or instituted with respect to the proposed reorganization
or if the directors of Bank RI determine in their discretion that the
transaction is not in the best interests of Bank RI, then the Board of Directors
of Bank RI reserves the right, in its sole discretion, to terminate the
transaction at any time before the effective date.
If the shareholders of Bank RI should fail to approve the plan of
reorganization, or if the transaction is otherwise terminated as provided above,
then the business of Bank RI shall continue to operate under the ownership of
its existing shareholders as it has prior to the adoption of the plan of
reorganization.
It is estimated at this time that the total expenses of the reorganization
are approximately $125,000 and these expenses will be borne by Bancorp.
Should the plan of reorganization be terminated or canceled for any of the
reasons set forth above or in the attached plan, such termination or
cancellation will not result in any liability on the part Bank RI, Bancorp, BKRI
Interim Bank or any of their respective directors, officers, employees, agents
or shareholders.
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<PAGE> 26
NO DISSENTING SHAREHOLDER RIGHTS
Rhode Island state law does not provide for exercise of dissenters' rights
by Bank RI shareholders in the context of the reorganization.
ACCOUNTING TREATMENT
The reorganization will be accounted for in a manner substantially similar
to a pooling of interests. Costs incurred in the reorganization will be expensed
as organizational costs of Bancorp.
FEDERAL AND RHODE ISLAND INCOME TAX CONSEQUENCES
The plan of reorganization has been structured to qualify the
reorganization as a tax free reorganization under Section 368(a)(1)(A) and
Section 368(a)(2)(D) of the Code. The Board of Directors of Bank RI has reserved
the right to terminate the plan of reorganization if, in the opinion of its
counsel, the nontaxability of the reorganization is not assured.
A tax-free reorganization will have the following federal and Rhode Island
income tax consequences:
- No gain or loss will be recognized by Bank RI or any of the other parties
to the reorganization as a result of the reorganization.
- No gain or loss will be recognized by the shareholders of Bank RI, upon
the exchange of their shares of Bank RI's Stock solely for shares of
Bancorp's Stock.
- The basis and holding periods of the assets exchanged between the parties
to the reorganization shall remain the same as those prior to the
reorganization.
- The basis of the shares of Bancorp's Stock to be received by shareholders
of Bank RI will be the same as the basis of the shares of Bank RI's Stock
surrendered in exchange therefor.
- The holding period of the shares of Bancorp's Stock to be received by
shareholders of Bank RI will include the holding period of the shares of
Bank RI's Stock surrendered in exchange therefor, provided that such
stock is held as a capital asset on the date of the completion of the
reorganization.
Management cannot advise individual shareholders and prospective
shareholders of the proper tax consequences or suggest the methods of reporting
the reorganization. Each shareholder or prospective shareholder is advised to
contact his or her accountant or tax counsel with respect to the reorganization
and the means of reporting the transaction as well as regarding the state (other
than Rhode Island) and local tax consequences which may or may not parallel the
federal and Rhode Island income tax consequences.
COMPARISON OF BANK RI AND BANCORP
ANALYSIS OF CAPITAL STRUCTURE AND MANAGEMENT
Upon completion of the reorganization shareholders will recognize almost no
difference in the structure or capitalization from prior to the reorganization.
Other than a change in the par value from $1.00 per share to $0.01 per share for
both Common Stock and Non-Voting Common Stock, there will be little difference
in the authorized capitalization, voting, dividend, liquidation or preemptive
rights of capital stock. The current executive management of Bank RI will remain
the executive management of both Bank RI and Bancorp.
Bank RI currently has in place certain procedures that are designed to
protect Bank RI from an unsolicited takeover. Principal among these is Bank RI's
classified board, which generally prevents more than one-third of the directors
from being subject to election in any given year. In addition, the board has the
right to designate and issue, without shareholder approval preferred stock, with
such rights and preferences as it sees fit. Finally, Bank RI is subject to
certain restrictions on business combinations with certain principal
shareholders, which makes it more difficult to effect a hostile takeover. Each
of these anti-takeover provisions will be in effect for Bancorp after the
reorganization. These provisions may have the effect of discouraging a future
takeover attempt which is not approved by the Board of Directors but which
individual shareholders
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<PAGE> 27
may deem to be in their best interests or in which shareholders may receive a
substantial premium for their shares over then current market prices. As a
result, shareholders who might desire to participate in such a transaction may
not have an opportunity to do so. Such provisions will also render the
replacement of the current Board of Directors of Bancorp more difficult.
AUTHORIZED AND OUTSTANDING STOCK
Bank RI currently has an authorized capitalization of 7,000,000 shares of
Common Stock, $1.00 par value per share, 3,000,000 shares of Non-Voting Common
Stock, $1.00 per share and 1,000,000 shares of Preferred Stock, $10.00 par value
per share. Of these authorized capital shares, 3,448,550 shares of Bank RI's
Common Stock and 280,000 shares of Bank RI's Non-Voting Common Stock, were
issued and outstanding as of March 31, 2000. In addition, as of such date,
376,450 shares of Bank RI's Common Stock were reserved for issuance upon
exercise of options pursuant to the 1996 Option Plan and 40,000 shares of Bank
RI Common Stock were reserved for issuance upon exercise of options pursuant to
the Director Plan. Finally, Fleet Financial Group, Inc. holds a warrant to
purchase 136,315 shares of Common Stock at $10.00 per share. The warrant is
currently exercisable and will terminate on March 22, 2006. The warrant contains
standard anti-dilution provisions. Bank RI has reserved shares necessary to
issue upon exercise of this warrant.
Bancorp has an authorized capitalization of 10,000,000 shares of Common
Stock, $0.01 par value per share, 1,000,000 shares of Non-Voting Common Stock,
$0.01 par value per share and 1,000,000 shares of Preferred Stock, $.01 par
value per share. Upon completion of the reorganization, there will be 3,448,550
shares of Bancorp's Common Stock and 280,000 shares of Bancorp's Non-Voting
Common Stock issued and outstanding. In addition, existing options to purchase
323,250 shares of Bank RI Common Stock will become, without the need for any
action on the part of the option holders, options to purchase the same number of
shares of Bancorp Common Stock on the same terms and conditions as those set
forth the in the applicable option award agreement. Bancorp's board of directors
will take all necessary action to reserve for issuance a sufficient number of
shares of Bancorp Common Stock to issue shares upon exercise of all existing
outstanding Bank RI options.
Voting Rights. All voting rights are vested in the holders of Bank RI
Common Stock with each share being entitled to one vote. Holders of Bank RI
Non-Voting Common Stock have no voting rights except as required by Rhode Island
law. Shares of both Bank RI and Bancorp Non-Voting Common Stock are convertible
into Common Stock on a one-for-one basis.
Dividend Rights. Holders of Bank RI Stock are entitled to dividends
legally available therefor, when and as declared by Bank RI's Board of
Directors. Holders of Bancorp Stock will be entitled to dividends legally
available therefor, when and as declared by Bancorp's board of directors. The
Bancorp board of directors intends to continue Bank RI's current dividend
policy. However, inasmuch as Bancorp's sole source of revenue will be dividends
from Bank RI the ability of Bancorp's board of directors to declare dividends
will depend upon the receipt of dividends from Bank RI. See "Price Range and
Dividends of Bank RI's Common Stock."
The ability of Bancorp to obtain funds for the payment of dividends and for
other cash requirements will be dependent on the amount of dividends that may be
declared by Bank RI. Rhode Island law contains no separate provisions governing
the payment of dividends by state-chartered banks, however, such Rhode Island
banks are subject to the Rhode Island Business Corporation Act (the "RIBCA").
Under the RIBCA, a corporation may not pay dividends when it is insolvent or
when the payment of dividends would render the corporation insolvent. Further,
no distribution may be made if, after such distribution the corporation would
not be able to pay its debts as they become due in the usual course of business
or the corporation's total assets would be less than the sum of its total
liabilities plus the amount that would be needed to satisfy the preferential
rights upon dissolution of shareholders (if the corporation were to be dissolved
at the time of the distribution) whose preferential rights are superior to those
receiving the distribution.
State-chartered banks' ability to pay dividends also may be affected by
capital adequacy guidelines of the FDIC.
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<PAGE> 28
The ability of Bancorp to pay dividends also is governed by the RIBCA. In
addition, the Federal Reserve's policy statement governing the payment of cash
dividends provides that a bank holding company should not pay cash dividends on
Common Stock unless (i) the organization's net income for the past year is
sufficient to fully fund the dividends and (ii) the prospective rate of earnings
retention appears consistent with the organization's capital needs, asset
quality and overall financial condition. Bancorp intends to comply with this
Federal Reserve policy.
Also, regulatory authorities may prohibit banks and bank holding companies
from paying dividends if payment of dividends would constitute an unsafe and
unsound banking practice.
Assessment of Shares. Shares of Bank RI are not subject to assessment and
shares of Bancorp also will not be subject to assessment.
Liquidation Rights. The holders of Bank RI Stock are entitled to share
equally in Bank RI's assets legally available for distribution in the event of
liquidation or dissolution, subject to the rights of any senior security issued
by Bank RI. Similarly, holders of Bancorp Stock will have a pro rata right to
participate in the Bancorp's assets legally available for distribution in the
event of liquidation or dissolution, subject to the rights of any senior
security issued by Bancorp.
Preemptive Rights. The holders of Bank RI's Stock do not have preemptive
rights to subscribe to any additional shares of Bank RI's Stock being issued.
The holders of Bancorp Stock also do not have preemptive rights to subscribe to
any additional shares of Bancorp's Stock being issued. Therefore, shares of
Bancorp's Stock or other securities may be offered in the future to the
investing public or to shareholders at the discretion of Bancorp's board of
directors, and, subject to limitations imposed by Nasdaq, such other securities
may have rights that are senior to those of the shares of Bancorp's Stock.
DIRECTORS
Bank RI's By-laws authorize its Board of Directors or shareholders to
designate the number of directors at any number from 5 to 15 with certain
limitations, and Bancorp's By-laws authorize its board of directors or
shareholders to designate the number of directors at any number from 5 to 15.
There are no current plans to change the size of Bancorp's board of directors
from 12. Bank RI maintains a board of directors divided into three classes. Each
class of directors serves for a term of three years ending on successive years
such that only one class of directors is elected at each annual meeting.
Bancorp's board of directors similarly has three designated classes with each
class serving successive three-year terms. At Bancorp's organizational meeting
of shareholders, Bank RI's current directors were elected to their respective
director class of Bancorp's board of directors
CORPORATE OPERATION AND MANAGEMENT
The Agreement to Form and By-laws of Bank RI and the Articles of
Incorporation and By-laws of Bancorp are substantially similar in all material
provisions, except with respect to provisions in Bank RI's Agreement to Form and
By-laws required by Rhode Island banking laws and applicable only to Rhode
Island financial institutions or FDIC-insured depository institutions.
LIMITATION OF LIABILITY OF DIRECTORS AND OFFICERS
Bank RI's Agreement to Form provides that its directors and officers shall
not be liable to Bank RI or its respective shareholders for monetary damages for
breach of duty as a director or officer, except to the extent that exculpation
from liability is not permitted under the General Laws of Rhode Island as in
effect at the time such liability is determined. This provision limits the
rights of Bank RI and the shareholders (in a derivative suit filed on behalf of
Bank RI) to recover monetary damages against a director for breach of the
fiduciary duty of care owed by the director to Bank RI and its shareholders. The
director's or officer's liability cannot be limited under Rhode Island law,
however, for (a) breach of the director's duty of loyalty to Bank RI or its
shareholders, (b) acts or omissions not in good faith or which involve
intentional misconduct or knowing violation of law, (c) in respect of certain
unlawful dividend payments or stock redemptions or repurchases, and
22
<PAGE> 29
(d) for any transaction through which the director derived improper personal
benefit. In addition, the limitation of liability does not prevent Bank RI or
its shareholders from seeking non-monetary relief against the director breaching
his duty of care. Bancorp's Articles of Incorporation contain identical
provisions limiting the liability of directors and officers.
BUSINESS OF BANK RI
GENERAL
Bank RI is an FDIC-insured commercial bank chartered as a financial
institution in the State of Rhode Island. Headquartered in Providence, Rhode
Island, Bank RI conducts business through 13 full service branches, with nine
located in Providence County and four located in Kent County. Based on total
assets as of December 31, 1999, Bank RI is the fifth largest bank in Rhode
Island and the only mid-sized commercial bank in the greater Providence and
Warwick, Rhode Island areas. Bank RI was formed as a result of the acquisition
of certain assets and liabilities divested in connection with the merger of
Fleet Financial Group, Inc. ("Fleet") and Shawmut National Corporation (the
"Shawmut Franchise Acquisition"). From March 22, 1996, when it commenced
operations, to December 31, 1999, Bank RI's total assets have grown from $465.0
million to $632.0 million, while its deposits have increased from $421.1 million
to $513.4 million and total shareholders' equity has increased from $42.7
million to $47.7 million.
Bank RI provides a community banking alternative in the greater Providence
market which is dominated by three large regional banking institutions. Bank RI
offers a wide variety of deposit products, nondeposit investment products,
commercial, residential and consumer loans, and other traditional banking
products and services, designed to meet the needs of small and middle market
businesses and individuals. As a full service community bank, Bank RI seeks to
differentiate itself from its competitors through superior personal service,
responsiveness and local decision-making.
Bank RI's wholly-owned subsidiary, BRI Investment Corp., a Rhode Island
corporation, engages in the maintenance and management of intangible investments
and the collection and distribution of the income from such investments.
LENDING ACTIVITIES
General. In the Shawmut Franchise Acquisition, Bank RI acquired $85.4
million of commercial loans and $32.1 million of consumer loans which were
in-market loans largely associated with the acquired branches. To provide
sufficient assets to operate profitably, Bank RI also purchased $276.4 million
of residential mortgage loans, resulting in an asset mix more characteristic of
a thrift institution than that of a commercial bank. Bank RI's business strategy
is to grow its commercial loan portfolio and to allow the residential mortgage
loan portfolio to decline gradually as Bank RI is able to replace residential
mortgage loans with higher yielding, good quality commercial loans. Bank RI has
allocated substantial resources to its commercial lending function to facilitate
and promote such growth and seeks to maintain a staffing level greater than
necessary to service the existing portfolio. The commercial lending department
is comprised of the following positions: eleven officer and eleven support
positions. From March 22, 1996, when Bank RI commenced operations, until
December 31, 1999, commercial loan outstandings have increased by $89.1 million,
or 104.3%, to $174.5 million from $85.4 million.
Bank RI offers a variety of loan facilities to serve both commercial and
consumer borrowers primarily within the State of Rhode Island and nearby areas
of Massachusetts. Commercial and industrial loan products include revolving
lines of credit and term loans offered at fixed and variable rates. Bank RI's
real estate lending activities include originating loans secured by commercial,
multi-family (five or more units) and one-to four-family properties and
purchasing loans secured by one- to four-family properties. Loans are made on
existing properties and, to a lesser extent, on properties under construction.
Bank RI satisfies a variety of consumer credit needs by providing home equity
term loans, home equity lines of credit, direct automobile loans, savings
secured loans and personal loans, in addition to residential mortgage loans.
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<PAGE> 30
Bank RI has tiered lending authorities. Loan commitments up to $1.0 million
per customer may be approved by the Chief Lending Officer. All extensions of
credit of $1.0 million or more (up to Bank RI's in-house lending limit) per
customer require the approval of the Credit Committee, which consists of members
of Bank RI's senior management and one outside director. Certain senior officers
have loan approval authority for lesser amounts. The department heads of
Business Lending, Commercial Real Estate Lending and Retail Lending have loan
approval authority up to $500,000 per customer. The department head of Small
Business Lending has loan approval authority up to $250,000 per customer.
Bank RI issues loan commitments to prospective borrowers subject to various
conditions. Commitments generally are issued in conjunction with commercial
loans and residential mortgage loans and typically are for periods up to 90
days. The proportion of the total value of commitments derived from any
particular category of loan varies from time to time and depends upon market
conditions. At December 31, 1999, Bank RI had $12.4 million of aggregate loan
commitments outstanding to originate a variety of loans.
Commercial Real Estate and Multi-Family Loans. Bank RI originates loans
secured by mortgages on owner-occupied and nonowner-occupied commercial and
multi-family residential properties. At December 31, 1999, owner-occupied
commercial real estate loans totaled $34.0 million, or 7.4% of Bank RI's total
loan portfolio. Many of these customers have other commercial borrowing
relationships with Bank RI, as Bank RI finances their other business needs.
Nonowner-occupied commercial real estate loans totaled $56.2 million, or 12.2%
of Bank RI's total loan portfolio, and multi-family residential loans totaled
$16.3 million, or 3.5% of Bank RI's total loan portfolio. The majority of these
real estate secured loans are originated on a three-, or five-year adjustable
rate basis. Interest rates typically charged on these loans are higher than
those charged on adjustable rate loans secured by one- to four-family
residential units. Additionally, origination fees may be charged on these loans.
Bank RI's underwriting practices for commercial real estate and
multi-family residential loans are intended to ensure that the property securing
these loans will generate a positive cash flow after operating expenses and debt
service payments. Bank RI requires appraisals before making a loan and generally
requires the personal guarantee of the borrower. Permanent loans on commercial
real estate and multi-family properties generally are made at a loan-to-value
ratio of no more than 80%.
Loans secured by nonowner-occupied commercial real estate and multi-family
properties involve greater risks than owner-occupied properties because
repayment generally depends on the rental income generated by the property. In
addition, because the payment experience on loans secured by nonowner-occupied
properties is often dependent on successful operation and management of the
property, repayment of the loan is usually more subject to adverse conditions in
the real estate market or the general economy than is the case with
owner-occupied real estate loans. Also, the nonowner-occupied commercial real
estate and multi-family residential business is cyclical and subject to
downturns, over-building and local economic conditions.
Construction Loans. Bank RI originates residential construction loans to
individuals and professional builders to construct one- to four-family
residential units, either as primary residences or for resale. Bank RI also
makes construction loans for the purpose of constructing multi-family or
commercial properties. At December 31, 1999, outstanding construction loans
totaled $6.4 million, or 1.4% of Bank RI's total loan portfolio. Currently, Bank
RI offers interest-only construction loans during the construction period.
Bank RI's underwriting practices for construction loans are similar to
those for commercial real estate loans, but they also are intended to ensure
completion of the project and take into account the feasibility of the project,
among other things. As a matter of practice, Bank RI generally lends an amount
sufficient to pay a percentage of the property's acquisition costs and a
majority of the construction costs but requires that the borrower have equity in
the project. Property appraisals, and generally the personal guarantee of the
borrower, are required, as is the case with commercial real estate loans.
The risks associated with construction lending are greater than those with
commercial real estate lending and multi-family lending on existing properties
for a variety of reasons. Bank RI seeks to minimize these risks by, among other
things, often using the services of a consulting engineer for commercial
construction loans, advancing money only as the project is completed and
generally lending for construction of properties within
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<PAGE> 31
its market area to borrowers who are experienced in the type of construction for
which the loan is made, as well as by adhering to the lending standards
described above. In addition, Bank RI does not usually lend to fund the
construction of property being built for speculative purposes.
Commercial and Industrial Loans. Bank RI originates non-real estate
commercial loans that, in most instances, are secured by equipment, accounts
receivable or inventory, as well as the personal guarantees of the principal
owners of the borrower. Unlike many community banks, Bank RI is able to offer
asset-based commercial loan facilities that monitor advances against receivables
and inventories on a formula basis. A number of commercial and industrial loans
are granted in conjunction with the Small Business Administration's ("SBA") loan
programs and include some form of SBA credit enhancement. Commercial lending
activities are supported by noncredit products and services, such as letters of
credit and cash management services, responsive to the needs of Bank RI's
commercial customers.
Approximately 90% of businesses in Bank RI's market are small to mid-sized
(fewer than 50 employees). Bank RI believes the financing needs of these
businesses generally match Bank RI's lending profile and that Bank RI's branches
are well positioned to generate loans from this customer base. At December 31,
1999, commercial and industrial loans (including leases) totaled $48.6 million,
or 10.6% of Bank RI's total loan portfolio. Generally, commercial and industrial
loans are granted at higher rates than residential mortgage loans, with
relatively short-term maturities, or are at adjustable rates without interest
rate caps.
Unlike residential and commercial real estate loans, which generally are
based on the borrower's ability to make repayment from employment and rental
income and which are secured by real property whose value tends to be relatively
easily ascertainable, commercial and industrial loans are typically made on the
basis of the borrower's ability to make repayment from the cash flow of the
business and are generally secured by business assets, such as accounts
receivable, equipment and inventory. As a result, the availability of funds for
the repayment of commercial and industrial loans may be significantly dependent
on the success of the business itself. Further, the collateral securing the
loans may be difficult to value, fluctuate in value based on the success of the
business and deteriorate over time.
Small Business Loans. Bank RI originates loans of $250,000 or less to
small business customers through Bank RI's branch network. These loans are
generally secured by the assets of the business, as well as the personal
guarantees of the principal owners of the borrower. A number of these loans are
granted in conjunction with the SBA's Low-Doc loan program and include some form
of SBA credit enhancement. At December 31, 1999, small business loans totaled
$13.3 million, or 2.9% of Bank RI's total loan portfolio. Generally, small
business loans are granted at higher rates than commercial and industrial loans.
These loans have relatively short-term maturities or are at adjustable rates
without interest rate caps.
Bank RI's underwriting practices for small business loans are designed to
provide quick turn-around and minimize the fees and expenses to the customer.
Accordingly, Bank RI utilizes a credit scoring process to assist in evaluating
potential borrowers. In many cases traditional underwriting practices, similar
to those for commercial and industrial loans, are also employed to provide a
more balanced and judgmentally-based credit decision. Bank RI distinguishes
itself from larger financial institutions by providing personalized service
through a loan officer (usually a branch manager) assigned to the customer
relationships. Lending to small businesses may involve additional risks as a
result of their more limited financial resources and more niche-based
operations.
Residential Mortgage Loans. Bank RI's one- to four-family residential
mortgage loan portfolio consists primarily of whole loans purchased from other
financial institutions. Currently, Bank RI purchases new ARM whole loans from
other financial institutions in New England. Servicing rights related to Bank
RI's whole loan mortgage portfolio are retained by the mortgage servicing
companies. Bank RI pays a servicing fee from .25% to .375% to the mortgage
servicing companies for administration of the loan portfolios. Some of the loans
purchased subsequent to the formation of Bank RI were originated outside of New
England. As of December 31, 1999, approximately 14.5% of Bank RI's residential
mortgage loan portfolio consisted of loans originated outside of New England.
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<PAGE> 32
Additionally, but to a lesser extent, Bank RI originates ARMs for its own
portfolio. Bank RI also originates fixed rate mortgage loans and sells these
mortgages to its correspondents at the time of the loan's closing. While Bank RI
anticipates that its residential mortgage loan portfolio will decline over time
as it focuses its resources on commercial lending, Bank RI plans to increase its
own origination of one- to four-family residential mortgage loans, primarily in
its market area. Such activity would decrease Bank RI's need to purchase
residential mortgage loans in order to enhance profitability while it increases
its commercial loan portfolio, as well as facilitate overall growth of customer
relationships.
At December 31, 1999, one- to four-family residential mortgage loans
totaled $237.3 million, or 51.7% of Bank RI's total loan portfolio. The fixed
rate portion of this portfolio totaled $39.0 million and had original maturities
of 15 and 30 years. The adjustable rate portion of this portfolio totaled $196.9
million and had original maturities of 30 years. Interest rates on adjustable
rate loans are set for an initial period of either one, three, five, seven or
ten years with annual adjustments for the remainder of the loan. These loans
have periodic rate adjustment caps of primarily 2% and lifetime rate adjustment
caps of either 5% or 6%. There are no prepayment penalties for Bank RI's one- to
four-family residential mortgage loans.
Although adjustable rate mortgage loans allow Bank RI to increase the
sensitivity of its assets to changes in market interest rates, the terms of such
loans include limitations on upward and downward rate adjustments. These
limitations increase the likelihood of prepayments due to refinancings during
periods of falling interest rates, particularly if rate adjustment caps keep the
loan rate above market rates. Additionally, these limitations could keep the
market value of the portfolio below market during periods of rising interest
rates, particularly if rate adjustment caps keep the loan rate below market
rates.
Consumer and Other Loans. Bank RI originates a variety of term loans and
line of credit loans for consumers. At December 31, 1999, Bank RI's consumer
loan portfolio totaled $47.1 million, or 10.3% of Bank RI's total loan
portfolio, and is comprised primarily of home equity term loans and home equity
lines of credit. These loans and lines of credit are generally offered for up to
80% of the appraised value of the borrower's home, less the amount of the
remaining balance of the borrower's first mortgage. Bank RI also offers direct
automobile loans, savings secured loans and personal loans.
INVESTMENT ACTIVITIES
Investments, an important component of Bank RI's diversified asset
structure, are a source of earnings in the form of interest and dividends, and
provide a source of liquidity to meet lending demands and fluctuations in
deposit flows. Overall, the portfolio, comprised of U.S. Treasury and federal
agency securities, mortgage-backed securities, Federal Home Loan Bank of Boston
("FHLB") stock and federal funds sold, represents 21.5% of total assets, or
$135.9 million, as of December 31, 1999.
Loans receivable generally provide a better return than investments, and
accordingly, the Bank seeks to emphasize the generation of loans, rather than
increasing its investment portfolio. Bank RI's investments are managed by its
Chief Financial Officer, subject to the supervision and review of Bank RI's
Asset/Liability Committee and in compliance with the Investment Policy
established by Bank RI's Board of Directors.
Overall, investments produced total interest and dividend income of $8.4
million, or 20.1% of total interest and dividend income, in 1999 and $6.9
million, or 17.2% of total interest and dividend income, during 1998.
DEPOSITS
Deposits are Bank RI's principal source of funds for use in lending and for
other general business purposes. Bank RI attracts deposits from businesses and
the general public by offering a variety of deposit products ranging in maturity
from demand-type accounts to certificates of deposit with maturities of up to
ten years. Bank RI relies mainly on quality customer service and diversified
products, as well as competitive pricing policies and advertising, to attract
and retain deposits. Bank RI emphasizes retail deposits obtained locally in
contrast to wholesale deposits obtained from national or regional deposit
brokers.
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Bank RI seeks to develop relationships with its customers so as to be their
primary bank. In order to achieve this, Bank RI has stressed growing its "core"
account base, namely its checking and savings accounts. While Bank RI prices
certificate of deposit accounts competitively, and from time to time will run
special offers, Bank RI does not ordinarily solicit high cost certificates of
deposit.
Bank RI generally charges early withdrawal penalties on its certificates of
deposit in an amount equal to three months' interest on accounts with original
maturities of one year or less and six months' interest on accounts with
original maturities longer than one year. Interest credited to an account during
any term may be withdrawn without penalty at any time during the term. Upon
renewal of a certificate of deposit, only interest credited during the renewal
term may be withdrawn without penalty during the renewal term. Bank RI's
withdrawal penalties are intended to offset the potentially adverse effects of
the withdrawal of funds during periods of rising interest rates.
As a general policy, Bank RI systematically reviews the deposit accounts it
offers to determine whether the accounts continue to meet customers' needs and
Bank RI's asset/liability management goals. This review is the responsibility of
Bank RI's Pricing Committee which meets weekly to determine, implement and
monitor pricing policies and practices consistent with Bank RI's overall
earnings and growth goals. The Pricing Committee analyzes the cost of funds and
also reviews all sources of fee income.
Bank RI also derives funds from loan repayments, sales of investment
securities, and FHLB and other borrowings. Loan repayments and deposit inflows
and outflows, are significantly influenced by prevailing interest rates,
competition and general economic conditions. Borrowings may be used on a
short-term basis to compensate for reductions in normal sources of funds, or on
a longer term basis to support expanded lending activities.
NONDEPOSIT INVESTMENT PRODUCTS AND SERVICES
In October 1997, Bank RI introduced a nondeposit investment program through
which it makes available to its customers a variety of mutual funds and fixed
and variable annuities. These investment products are offered through an
arrangement with Essex Corporation, the largest and oldest national wholesaler
of mutual funds and annuities. In addition, during 1998, Bank RI began offering
trust services through a referral arrangement with a well-known, local, trust
company.
EMPLOYEES
At December 31, 1999, Bank RI had 146 full-time and 41 part-time employees.
Bank RI's employees are not represented by any collective bargaining unit, and
Bank RI believes its employee relations are good. Bank RI maintains a benefit
program which includes health and dental insurance, life and long-term
disability insurance and a 401(k) plan.
COMPETITION AND MARKETPLACE
Bank RI is headquartered in Providence, Rhode Island, operating in
Providence and Kent counties. Bank RI faces significant competition both in
making loans and generating deposits. In the past, Bank RI's most direct
competition has come from three large regional banks which have dominated the
Rhode Island market. These regional banks are well-established and have
substantially greater financial resources than Bank RI, which have enabled them
to market their products and services extensively, offer access to a greater
number of locations and products, and price competitively. Currently, two of
these three regional banks (Fleet Bank and BankBoston) are in the process of
merging. This will leave the surviving bank (FleetBoston) in an even more
dominant position in New England. As a result of the divestitures required by
this merger, an out-of-market institution (Sovereign Bancorp) will be entering
the Rhode Island market as its third largest institution. At this time it is
difficult to predict the exact effect on competition that Sovereign's entrance
to this marketplace will have. In addition, Bank RI faces competition for loans
from out-of-state financial institutions which have established loan production
offices as well as from non-bank competitors. Competition for deposits also
comes from short-term money market funds, other corporation and government
securities funds and other non-bank financial institutions such as brokerage
firms and insurance companies. Many of Bank RI's non-bank
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<PAGE> 34
competitors are not subject to the same degree of regulation as that imposed on
federally insured state chartered banks. As a result, such non-bank competitors
have advantages over Bank RI in providing certain services.
The population in Bank RI's market area is not growing and economic growth
in the Rhode Island area has been slow to moderate over the past several years,
lagging behind other parts of New England and the United States. Accordingly,
Bank RI's future growth depends largely upon its ability to increase its market
penetration. Moreover, economic conditions beyond Bank RI's control may have a
significant impact on Bank RI's operations. Examples of such conditions include
the strength of credit demand by customers and changes in the general levels of
interest rates. Furthermore, Bank RI's commercial and consumer lending
activities are conducted principally in Rhode Island and, to a lesser extent,
Southeastern Massachusetts. Its borrowers' ability to honor their repayment
commitments is generally dependent upon the level of economic activity and
general health of the regional economy, and any economic recession in Bank RI's
market area adversely affecting growth could cause significant increases in
nonperforming assets, thereby causing operating losses, impairing liquidity and
eroding capital.
PROPERTIES
Bank RI presently has a network of 13 offices located in Providence and
Kent counties. Six of these office facilities are owned and seven are leased.
Facilities are generally leased for a period of one to ten years with renewal
options. The termination of any short-term lease would not have a material
adverse effect on the operations of Bank RI. Bank RI is currently renovating
3,500 square feet of office space at 2975 West Shore Road, Warwick, which will
become a full service branch and is scheduled to open in April 2000. Bank RI has
also announced that it will be consolidating its Coventry and Centerville Road
offices in April 2000. In connection with this consolidation, Bank RI will be
vacating approximately 2,600 square feet at 17 Coventry Shoppers Park, presently
utilized as a branch office, and will be establishing a full service drive-up
ATM kiosk at that location. The offices of Bank RI are in good physical
condition and are considered adequate to meet the banking needs of its
customers.
The following are the locations of Bank RI's offices:
<TABLE>
<CAPTION>
SIZE YEAR OPENED OWNED OR LEASE
LOCATION (SQUARE FEET) OR ACQUIRED LEASED EXPIRATION DATE
- - -------- ------------- ----------- ----------- ---------------
<S> <C> <C> <C> <C>
17 Coventry Shoppers Park, Coventry, RI(a)... 2,600 1996 Leased 4/30/00
1047 Park Avenue, Cranston, RI............... 4,700 1996 Owned N.A.
383 Atwood Avenue, Cranston, RI.............. 4,700 1996 Owned N.A.
999 South Broadway, East Providence, RI...... 10,500 1996 Owned N.A.
195 Taunton Avenue, East Providence, RI...... 3,100 1996 Leased 2/28/03
1440 Hartford Avenue, Johnston, RI........... 4,700 1996 Land Leased 12/31/02
One Turks Head Place, Providence, RI
(branch)................................... 5,000 1996 Leased 4/30/09
One Turks Head Place, Providence, RI
(offices).................................. 14,900 1999 Leased 6/30/09
165 Pitman Street, Providence, RI............ 3,300 1998 Leased 10/18/08
445 Putnam Pike, Smithfield, RI.............. 3,500 1996 Leased 7/31/09
1062 Centerville Road, Warwick, RI........... 2,600 1996 Owned N.A.
1300 Warwick Avenue, Warwick, RI............. 4,200 1996 Leased 6/30/04
233 Lambert Lind Highway, Warwick, RI........ 4,800 1996 Leased 7/31/00
2975 West Shore Road, Warwick, RI(b)......... 3,500 2000 Leased 3/31/10
1175 Cumberland Hill Road, Woonsocket, RI.... 3,100 1998 Owned N.A.
</TABLE>
- - ---------------
(a) Coventry office being replaced by a full service ATM (scheduled for April
2000).
(b) West Shore Road office scheduled for opening April 2000.
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LEGAL PROCEEDINGS
There are no legal proceedings other than ordinary routine litigation
incidental to Bank RI's business pending against Bank RI to which Bank RI is a
party or of which any of its property is subject.
OPERATIONS UNDER BANCORP
ORGANIZATION
Bancorp was organized and incorporated under the laws of the State of Rhode
Island on February 15, 2000 at the direction of the Board of Directors of Bank
RI for the purpose of becoming a bank holding company to acquire all of the
outstanding capital stock of Bank RI. The principal location of Bancorp and its
operations will be at the head office of Bank RI located at One Turks Head
Place, Providence, Rhode Island 02903.
MANAGEMENT AND DIRECTORS OF BANCORP
The present board of directors of Bancorp is composed of 12 directors, and
consists of the following individuals:
<TABLE>
<CAPTION>
CLASS I DIRECTORS CLASS II DIRECTORS CLASS III DIRECTORS
(TERM EXPIRING 2003) (TERM EXPIRING 2001) (TERM EXPIRING 2002)
<S> <C> <C>
Frederick James Hodges, Jr. John R. Berger Anthony F. Andrade
Donald J. Reaves Karl F. Ericson Malcolm G. Chace
Cheryl L. Watkins Margaret D. Farrell Ernest J. Chornyei, Jr.
John A. Yena Mark R. Feinstein Merrill W. Sherman
</TABLE>
Upon completion of the reorganization, the business of Bank RI will be
conducted as a subsidiary of Bancorp, and will be carried on with the same
officers, personnel, property and name as before the transaction. Bancorp does
not currently expect to pay its executive officers any amounts in addition to
the amounts they receive as executive officers of Bank RI.
Bancorp's Class II directors shall serve until their successors have been
duly elected and qualified at Bancorp's next annual meeting of shareholders
which will be held in May 2001. Bancorp's Class III and Class I directors shall
serve until their successors have been duly elected and qualified at Bancorp's
2002 and 2003 annual meetings, respectively.
SUPERVISION AND REGULATION OF BANCORP
Upon completion of the reorganization, Bancorp will become a bank holding
company within the meaning of Bank Holding Company Act, and will become subject
to the supervision and regulation of the Board of Governors of the Federal
Reserve System (the "Federal Reserve"). A notice application for prior approval
to become a bank holding company has been filed by Bancorp with the Federal
Reserve pursuant to the Bank Holding Company Act.
As a bank holding company, Bancorp will be required to register with the
Federal Reserve within 180 days after the reorganization is completed, and,
thereafter, to file annual reports and other information concerning its business
operations and those of its subsidiaries as the Federal Reserve may require
pursuant to the Bank Holding Company Act. The Federal Reserve also has the
authority to examine Bancorp and each of its respective subsidiaries, as well as
any arrangements between Bancorp and any of its respective subsidiaries, with
the cost of any such examination to be borne by Bancorp.
As are banks, bank holding companies are subject to certain capital
requirements. In general, bank holding companies are required to maintain a
minimum ratio of total capital to risk-weighted assets of 8% and Tier 1 capital,
consisting principally of shareholders' equity, of at least 4%. In addition,
bank holding
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<PAGE> 36
companies are subject to a leverage ratio requirement (Tier 1 capital to total
assets). The minimum required leverage ratio for the highest rated companies is
3%. The minimum leverage ratio for all other bank holding companies is 4% or
higher.
In the future, Bancorp will be required to obtain the prior approval of the
Federal Reserve before it may acquire all or substantially all of the assets of
any bank, or ownership or control of voting securities of any bank if, after
giving effect to such acquisition, Bancorp would own or control more than 5
percent of the voting shares of such bank.
A bank holding company and its subsidiaries are also prohibited from
engaging in certain tie-in arrangements in connection with extensions of credit,
leases, sales, or the furnishing of services. For example, Bank RI will
generally be prohibited from extending credit to a customer on the condition
that the customer also obtain other services furnished by Bancorp, or any of its
subsidiaries, or on the condition that the customer promise not to obtain
financial services from a competitor. Bancorp and its subsidiaries will also be
subject to certain restrictions with respect to engaging in the underwriting,
public sale and distribution of securities. Bancorp and any subsidiaries which
it may acquire or organize after the reorganization will be deemed affiliates of
Bank RI within the meaning of the Federal Reserve Act. Pursuant thereto, loans
by Bank RI to affiliates, investments by Bank RI in affiliates' stock, and
taking affiliates' stock by Bank RI as collateral for loans to any borrower will
be limited to 10 percent of Bank RI's capital, in the case of each affiliate,
and 20 percent of Bank RI's capital, in the case of all affiliates. In addition,
such transactions must be on terms and conditions that are consistent with safe
and sound banking practices and, in particular, a bank and its subsidiaries
generally may not purchase from an affiliate a low-quality asset, as that term
is defined in the Federal Reserve Act. Such restrictions also prevent a bank
holding company and its other affiliates from borrowing from a banking
subsidiary of a bank holding company unless the loans are secured by marketable
collateral of designated amounts.
A bank holding company is also prohibited from itself engaging in or
acquiring direct or indirect ownership or control of more than 5% of the voting
shares of any company engaged in non-banking activities. One of the principal
exceptions to this prohibition is for activities found by the Federal Reserve by
order or regulation to be so closely related to banking or managing or
controlling banks as to be a proper incident thereto. In making these
determinations, the Federal Reserve considers whether the performance of such
activities by a bank holding company or a bank holding company subsidiary would
offer advantages to the public that outweigh possible adverse effects.
Federal Reserve Regulation Y sets out those activities which are regarded
as closely related to banking or managing or controlling banks, and thus, are
permissible activities that may be engaged in by bank holding companies subject
to approval in certain cases by the Federal Reserve. Most of these activities
are now permitted for national banks. There has been litigation challenging the
validity of certain activities authorized by the Federal Reserve for bank
holding companies, and the Federal Reserve has various regulations in this
regard still under consideration. The future scope of permitted activities is
uncertain.
Although Bancorp has no present plans, agreements or arrangements to engage
in any non-banking activities, Bancorp may consider in the future engaging in
one or more of the above activities, subject to the approval of the Federal
Reserve.
Directors, executive officers, and principal shareholders of Bancorp will
be subject to restrictions on the sale of their Bancorp stock under Rule 144 as
promulgated under the Securities Act.
RECENT LEGISLATION AND OTHER CHANGES
On November 12, 1999, President Clinton signed legislation which could have
a far-reaching impact on the financial services industry. The Gramm-Leach-Bliley
(G-L-B) Act authorizes affiliations between banking, securities and insurance
firms and authorizes bank holding companies and national banks to engage in a
variety of new financial activities. Among the new activities that will be
permitted to bank holding companies are securities and insurance brokerage,
securities underwriting, insurance underwriting and
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<PAGE> 37
merchant banking. The Federal Reserve, in consultation with the Department of
Treasury, may approve additional financial activities.
The G-L-B Act imposes new requirements on financial institutions with
respect to customer privacy. The G-L-B Act generally prohibits disclosure of
customer information to non-affiliated third parties unless the customer has
been given the opportunity to object and has not objected to such disclosure.
Financial institutions are further required to disclose their privacy policies
to customers annually. Financial institutions, however, will be required to
comply with state law if it is more protective of customer privacy than the
G-L-B Act. The G-L-B Act directed the federal banking agencies, the National
Credit Union Administration, the Secretary of the Treasury, the Securities and
Exchange Commission and the Federal Trade Commission, after consultation with
the National Association of Insurance Commissioners, to promulgate implementing
regulations. Each of the foregoing has issued proposed rules. The final rules
will become effective no earlier than six months after their adoption.
The G-L-B Act contains a variety of other provisions which impose
additional regulatory requirements on certain depository institutions and reduce
certain other regulatory burdens.
Bank RI is unable to predict the impact of the G-L-B Act on its operations
at this time. In granting other financial institutions more flexibility, the
G-L-B Act may increase the number and type of institutions engaging in the same
or similar activities as those of Bank RI, thereby creating a more competitive
atmosphere.
BKRI INTERIM BANK
GENERAL BACKGROUND
At the direction of the Board of Directors of Bank RI, BKRI Interim Bank
organized to facilitate the reorganization. On the effective date of the
reorganization, BKRI Interim Bank will merge with and into Bank RI, with Bank RI
as the surviving entity.
INITIAL CAPITALIZATION
Concurrent with the reorganization, BKRI Interim Bank will be capitalized
by Bancorp with $3,000,000, the minimum capital requirement for a Rhode Island
financial institution. Upon completion of the reorganization, the shares of
capital stock of BKRI Interim Bank issued and outstanding immediately prior to
the date of reorganization shall be converted into and exchanged by Bancorp on a
share-for-share basis for shares of Bank RI Common Stock. BKRI Interim Bank will
disappear and all of the outstanding shares of Bank RI Stock will be owned by
Bancorp.
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<PAGE> 38
SELECTED CONSOLIDATED FINANCIAL DATA
The following table represents selected consolidated financial data as of
and for the years ended December 31, 1999, 1998, 1997 and 1996. The selected
consolidated financial data is derived from Bank RI's Consolidated Financial
Statements which have been audited by KPMG LLP. The selected consolidated
financial data of Bank RI set forth below does not purport to be complete and
should be read in conjunction with, and are qualified in their entirety by, the
more detailed information, including the Consolidated Financial Statements and
related Notes, and "Management's Discussion and Analysis of Financial Condition
and Results of Operations," appearing in Bank RI's Annual Report on Form 10-K
which is enclosed herewith and incorporated herein by reference.
<TABLE>
<CAPTION>
AS OF AND FOR THE
YEAR ENDED DECEMBER 31,
----------------------------------------------------
1999 1998 1997 1996(a)
---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Interest income......................... $ 41,651 $ 40,034 $ 37,269 $ 26,514
Interest expense........................ 19,600 19,845 17,478 11,778
---------- ---------- ---------- ----------
Net interest income..................... 22,051 20,189 19,791 14,736
Provision for loan losses............... 1,000 1,017 1,000 837
Noninterest income...................... 3,222 2,727 1,916 1,237
Noninterest expense..................... 17,354 16,043 15,273 12,718
---------- ---------- ---------- ----------
Income before taxes and change in
accounting principle................. 6,919 5,856 5,434 2,418
Income taxes............................ 2,448 2,022 1,924 846
---------- ---------- ---------- ----------
Income before change in accounting
principle............................ 4,471 3,834 3,510 1,572
Cumulative effect of change in
accounting principle, net of taxes... 109 -- -- --
---------- ---------- ---------- ----------
Net income.............................. 4,362 3,834 3,510 1,572
Dividends on preferred stock............ 88 793 1,413 720
---------- ---------- ---------- ----------
Net income available to common
shareholders......................... $ 4,274 $ 3,041 $ 2,097 $ 852
========== ========== ========== ==========
PER SHARE DATA:
Basic earnings per common share:
Income before change in accounting
principle.......................... $ 1.18 $ 0.87 $ 0.75 $ 0.30
Cumulative effect of change in
accounting principle............... (0.03) -- -- --
---------- ---------- ---------- ----------
Net income........................... $ 1.15 $ 0.87 $ 0.75 $ 0.30
========== ========== ========== ==========
Basic cash earnings per common
share(d)............................. $ 1.35 $ 1.10 $ 1.03 $ 0.52
Diluted earnings per common share:
Income before change in accounting
principle.......................... $ 1.17 $ 0.85 $ 0.75 $ 0.30
Cumulative effect of change in
accounting principle............... (0.03) -- -- --
---------- ---------- ---------- ----------
Net income........................... $ 1.14 $ 0.85 $ 0.75 $ 0.30
========== ========== ========== ==========
</TABLE>
32
<PAGE> 39
<TABLE>
<CAPTION>
AS OF AND FOR THE
YEAR ENDED DECEMBER 31,
----------------------------------------------------
1999 1998 1997 1996(a)
---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Diluted cash earnings per common
share(d)............................. $ 1.34 $ 1.07 $ 1.03 $ 0.52
Book value per common share............. $ 12.79 $ 12.31 $ 10.77 $ 9.92
Tangible book value per common share.... $ 9.27 $ 8.44 $ 5.18 $ 3.89
Average common shares
outstanding -- Basic................. 3,727,010 3,506,573 2,800,061 2,800,000
Average common shares outstanding --
Diluted.............................. 3,741,778 3,584,820 2,805,688 2,800,000
BALANCE SHEET DATA:
Total assets............................ $ 631,977 $ 595,964 $ 533,025 $ 472,417
Investment securities................... 50,503 39,703 48,319 45,120
Mortgage-backed securities.............. 74,793 79,924 43,078 --
Total loans receivable.................. 458,958 431,402 405,819 383,039
Allowance for loan losses............... 5,681 5,018 4,340 4,024
Excess of costs over net assets
acquired............................. 13,094 14,424 15,658 16,892
Deposits................................ 513,416 500,713 464,907 424,817
Common shareholders' equity............. 47,675 45,835 30,165 27,785
Total shareholders' equity.............. 47,675 47,687 44,707 43,627
AVERAGE BALANCE SHEET DATA: (b)
Total assets............................ $ 616,426 $ 565,759 $ 499,382 $ 465,961
Investment securities................... 47,348 44,040 47,242 23,918
Mortgage-backed securities.............. 79,463 57,627 15,689 --
Total loans receivable.................. 439,099 421,554 395,684 384,857
Allowance for loan losses............... 5,358 4,799 4,210 3,772
Excess of costs over net assets
acquired............................. 13,720 15,077 16,318 16,788
Deposits................................ 516,610 476,227 442,604 420,709
Common shareholders' equity............. 46,169 40,568 27,981 26,605
Total shareholders' equity.............. 46,631 46,041 43,196 42,433
OPERATING RATIOS:
Interest rate spread.................... 3.25% 3.20% 3.68% 3.86%
Net interest margin..................... 3.80% 3.78% 4.22% 4.36%
Efficiency ratio(c)..................... 68.67% 70.01% 70.36% 79.63%
Cash basis efficiency ratio(c)(d)....... 64.06% 64.62% 64.67% 73.91%
Return on average assets(e)............. 0.73% 0.68% 0.70% 0.43%
Cash basis return on average
assets(d)(e)......................... 0.87% 0.84% 0.89% 0.62%
Return on average equity(e)............. 9.59% 8.33% 8.13% 4.76%
Cash basis return on average
equity(d)(e)......................... 11.20% 10.08% 9.97% 6.55%
ASSET QUALITY RATIOS:
Nonperforming loans to total loans...... 0.24% 0.36% 0.41% 0.35%
Nonperforming assets to total assets.... 0.18% 0.33% 0.38% 0.28%
Allowance for loan losses to
nonperforming loans.................. 510.88% 321.05% 258.49% 301.88%
Allowance for loan losses to total
loans................................ 1.24% 1.16% 1.07% 1.05%
Net loans charged-off to average loans
outstanding.......................... 0.08% 0.08% 0.17% 0.06%
</TABLE>
33
<PAGE> 40
<TABLE>
<CAPTION>
AS OF AND FOR THE
YEAR ENDED DECEMBER 31,
----------------------------------------------------
1999 1998 1997 1996(a)
---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
CAPITAL RATIOS:
Average shareholders' equity to average
total assets......................... 7.54% 8.14% 8.64% 9.11%
Tier I leverage ratio................... 5.88% 5.72% 5.62% 5.92%
Tier I risk-based capital ratio......... 9.70% 9.60% 9.41% 9.05%
Total risk-based capital ratio.......... 10.96% 10.85% 10.66% 10.30%
</TABLE>
- - ---------------
(a) Bank RI commenced operations on March 22, 1996.
(b) Average balances for 1996 are computed for the period subsequent to Bank
RI's opening (March 22, 1996).
(c) Calculated by dividing total noninterest expenses by net interest income
plus noninterest income.
(d) Excludes amortization of intangibles and any related income taxes.
(e) Excludes cumulative effect of change in accounting principle, net of taxes.
PRICE RANGE AND DIVIDENDS OF BANK RI'S COMMON STOCK
Bank RI's Common Stock is traded on The Nasdaq Stock Market(R) under the
symbol "BARI". Prior to March 24, 1998, the Common Stock was traded on the
Over-the-Counter Bulletin Board. The following table sets forth information
regarding the Common Stock for the periods indicated.
<TABLE>
<CAPTION>
STOCK PRICE
-----------------------------
HIGH LOW DIVIDENDS
------ ------ ---------
<S> <C> <C> <C>
1998
First Quarter............................................. $18.00 $16.44 $0.00
Second Quarter............................................ 18.25 15.50 0.00
Third Quarter............................................. 17.63 11.00 0.00
Fourth Quarter............................................ 13.81 9.50 0.00
1999
First Quarter............................................. $12.25 $ 9.81 0.00
Second Quarter............................................ 11.50 9.75 0.00
Third Quarter............................................. 12.00 9.75 0.05
Fourth Quarter............................................ 11.25 9.75 0.05
</TABLE>
As of March 17, 2000 there were approximately 1,100 holders of record of
the Common Stock.
Bank RI has declared and paid dividends on the Stock since August 1999 and
intends to continue to declare cash dividends on its Stock when and as funds are
available therefor. The payment of dividends in the future is subject to the
discretion of Bank RI's Board of Directors and will depend upon Bank RI's
earnings, financial condition and other factors, including applicable regulatory
orders and restrictions with respect to dividends. After the reorganization,
Bank RI expects to pay a dividend to Bancorp in the amount of approximately
$125,000 to pay for the reorganization costs and to provide Bancorp with working
capital. If the reorganization is approved, Bancorp intends to continue to
declare cash dividends on its Stock when and as funds are available therefor. In
the future, the declaration and payment of dividends on Bancorp's Stock is
subject to the discretion of the Bancorp board of directors and will depend upon
Bank RI paying a cash dividend to Bancorp as well as Bancorp's ability to
service any equity or debt obligations senior to its Stock. The ability of Bank
RI to pay a cash dividend to Bancorp will depend upon Bank RI's earnings,
financial condition and capital requirements, the general economic and
regulatory climate, and other factors deemed relevant by Bank RI's Board of
Directors. Regulatory authorities could impose stricter limitations on the
34
<PAGE> 41
ability of Bank RI or Bancorp to pay dividends if such limits were deemed
appropriate to preserve certain capital adequacy requirements.
UNAUDITED PRO FORMA CAPITALIZATION
The following table sets forth the audited actual capitalization of Bank RI
at December 31, 1999, the proposed capitalization of BKRI Interim Bank and
Bancorp immediately prior to completion of the reorganization, and the pro forma
capitalization of Bank RI and Bancorp on a consolidated basis to reflect the
completion of the reorganization.
<TABLE>
<CAPTION>
BKRI PRO FORMA OF
INTERIM BANCORP AND
BANK RI(a) BANK(b) BANCORP(c) BANK RI
---------- ----------- ----------- ------------
(AUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Shareholders' Equity:
Common Stock.......................... $ 3,729 $ 3,000 $ 0 $ 3,729
Additional Paid-In Capital............ 35,925 0 3,000 35,925
Retained Earnings..................... 9,763 0 0 9,763
Unrealized Gain/Loss on Securities,
Net................................ (1,742) 0 0 (1,742)
---------- ---------- ----------- -----------
Total Shareholders' Equity.... $ 47,675 $ 3,000 $ 3,000 $ 47,675
========== ========== =========== ===========
Share Data:
Preferred Stock:
Authorized......................... 1,000,000 0 1,000,000 1,000,000
Outstanding........................ 0 0 0 0
Common Stock:
Authorized......................... 7,000,000 3,000,000 10,000,000 10,000,000
Outstanding........................ 3,448,500 3,000,000 100 3,448,500
Non-Voting Common Stock:
Authorized......................... 3,000,000 0 1,000,000 1,000,000
Outstanding........................ 280,000 0 0 280,000
========== ========== =========== ===========
</TABLE>
- - ---------------
(a) Capital stock and outstanding shares are stated as of December 31, 1999.
(b) Funds to capitalize BKRI Interim Bank were obtained by issuing 3,000,000
shares to Bancorp for $3,000,000. At the time of the reorganization, BKRI
Interim Bank will be merged into Bank RI and the shares of BKRI Interim Bank
common stock will be exchanged for shares of Bank RI Common Stock.
(c) Funds to capitalize Bancorp were obtained by a loan in the amount of
$125,000 and issuing a total of 100 shares of Bancorp to Bank RI for the sum
of $3,000,100. Upon completion of the reorganization, the loan will be
repaid and the 100 shares shall be reacquired and canceled by Bancorp.
AVAILABLE INFORMATION
Bank RI files reports, proxy statements and other information with the FDIC
under the Exchange Act. All information filed by Bank RI with the FDIC under the
Exchange Act is available for inspection at, and may be obtained by writing to,
the Federal Deposit Insurance Corporation's Registration, Disclosure and
Securities Operations Unit at 550 17th Street, N.W., Rm. F-6043, Washington,
D.C. 20429 or by calling (202) 898-8913 or by facsimile at (202) 898-3909.
Bancorp has filed with the SEC a Registration Statement on Form S-4 under the
Securities Act of 1933 (the "Securities Act"), covering the transactions
described in the Proxy Statement/Prospectus. As permitted by the rules and
regulations of the SEC, this Proxy Statement/Prospectus omits certain
information, exhibits and undertakings contained in the Registration Statement.
Reference is made to the Registration Statement and to the exhibits thereto for
further
35
<PAGE> 42
information. Statements contained herein concerning such documents are not
necessarily complete and, in each instance, reference is made to the copy of
such document filed as an exhibit to the Registration Statement. Each such
statement is qualified in its entirety by such reference. When the transaction
is completed, the Common Stock of Bancorp will be registered under the Exchange
Act. Bancorp will be subject to the reporting and informational requirements of
the Exchange Act, and Bank RI will not. Bancorp will be required to file
reports, proxy statements and other information with the SEC. The Registration
Statement and the exhibits thereto, as well as the reports, proxy statements and
other information filed hereafter with the SEC by Bancorp under the Exchange
Act, may be inspected and copied at the public reference facilities maintained
by the SEC at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W. Washington,
D.C. 20549 and at the regional offices of the SEC located at:
<TABLE>
<S> <C>
Citicorp Center 7 World Trade Center
500 West Madison Street, 13th Floor
Suite 1400 New York, New York 10048
Chicago, Illinois 60661
</TABLE>
Copies of such material may also be obtained at prescribed rates from the
Public Reference Room of the SEC at 450 Fifth Street, N.W., Washington, D.C.
20549. Information on the operation of the Public Reference Room may be obtained
by calling the SEC at 1-800-SEC-0330. The SEC maintains an Internet web site
that contains reports, proxy and information statements and other information
regarding issuers that file electronically with the SEC. The address of that
site is http://www.sec.gov.
UPON REQUEST, BANK RI WILL FURNISH WITHOUT CHARGE A COPY OF THE BANK'S
ANNUAL REPORT ON FORM 10-K (WITHOUT EXHIBITS) FOR THE FISCAL YEAR ENDED DECEMBER
31, 1999, INCLUDING FINANCIAL STATEMENTS AND THE SCHEDULES AND ANY OTHER
DOCUMENT INCORPORATED HEREIN BY REFERENCE. THE FORM 10-K HAS BEEN FILED WITH THE
FDIC. IT MAY BE OBTAINED BY WRITING TO STEPHEN TURGEON, COMMUNICATIONS OFFICER,
BANK RHODE ISLAND, ONE TURKS HEAD PLACE, PROVIDENCE, RHODE ISLAND 02903.
EXPERTS
The consolidated financial statements of Bank RI at December 31, 1999, and
for each of the years in the three-year period ended December 31, 1999,
incorporated by reference in Bank RI's annual report on Form 10-K for the year
ended December 31, 1999 have been audited by KPMG, independent auditors, as set
forth in their report thereon incorporated therein and incorporated herein by
reference in reliance upon such reports given on the authority of said firm as
experts in accounting and auditing.
Representatives of KPMG will be present at the annual meeting and will have
an opportunity to make a statement if they so desire and to respond to
appropriate questions.
LEGAL MATTERS
Certain legal matters in connection with the issuance of the shares of
Bancorp's Stock in the reorganization will be passed upon by Messrs. Hinckley,
Allen & Snyder LLP, Providence, Rhode Island.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
Bank RI's audited consolidated balance sheets as of December 31, 1999 and
1998, and the related audited consolidated statements of operations, changes in
shareholders' equity and cash flows for each of the years in the three-year
period ended December 31, 1999, report of independent public accountants,
management's discussion and analysis of financial condition and the results of
operations are set forth in Bank RI's 1999 Annual Report to shareholders
delivered herewith and are incorporated into this Proxy Statement/ Prospectus by
reference.
36
<PAGE> 43
OTHER BUSINESS OF THE ANNUAL MEETING
The Board of Directors is not aware of any matters to come before the
annual meeting other than those stated in the Proxy Statement. In the event that
other matters properly come before the annual meeting or any adjournment
thereof, it is intended that the persons named in the accompanying proxy and
acting thereunder will vote in accordance with their best judgment.
SHAREHOLDER PROPOSALS FOR 2001
The next annual meeting is scheduled to be held on May 16, 2001. A
Shareholder who wants to have a qualified proposal considered for inclusion in
the Proxy Statement for the 2001 annual meeting of Shareholders must notify the
Secretary of the Bank not later than December 18, 2000. In the event that the
Reorganization and Merger described above is approved by the requisite number of
Bank RI shareholders, the 2001 annual meeting will be a annual meeting of the
Bancorp shareholders. Shareholder proposals that are to be considered at the
2001 annual meeting but not requested to be included in proxy statement must be
submitted no later March 19, 2001 and no earlier than December 15, 2000.
37
<PAGE> 44
ANNEX A
PLAN OF REORGANIZATION AND MERGER AGREEMENT
This PLAN OF REORGANIZATION AND MERGER AGREEMENT (the "Agreement"), dated
as of February 15, 2000, is by and among BANK RHODE ISLAND, a stock financial
institution organized and existing under the laws of the State of Rhode Island
(the "Bank"), the Bank's wholly-owned subsidiary, BANCORP RHODE ISLAND, INC., a
Rhode Island corporation (the "Holding Company"), and BKRI INTERIM BANK, a stock
interim financial institution to be organized under the laws of the State of
Rhode Island as a wholly-owned subsidiary of Holding Company ("Interim Bank").
W I T N E S S E T H
WHEREAS, the Boards of Directors of the Bank, the Holding Company and
Interim Bank have approved, and deem it advisable and in the best interests of
their respective shareholders to consummate the reorganization and business
combination set forth herein;
WHEREAS, the parties intend that, at the Effective Time as defined in
Section 1.2 hereof, in a reverse triangular merger, Interim Bank will be merged
with and into the Bank with the Bank as the survivor (the "Surviving Bank") as a
wholly owned subsidiary of the Holding Company (the "Merger");
WHEREAS, the parties intend that the Merger be structured as a
"reorganization" under Section 368(a)(1)(A) of the Internal Revenue Code of
1986, as amended (the "Code");
NOW, THEREFORE, in consideration of the mutual agreements of the parties
contained herein, the parties hereby agree as follows:
ARTICLE I
THE MERGER
1.1 The Merger. At the Effective Time, as defined in Section 1.2 hereof,
in accordance with the provisions of this Agreement and the laws of the State of
Rhode Island and the United States, Interim Bank shall be merged with and into
the Bank, the separate corporate existence of Interim Bank shall cease, and the
Bank shall continue its corporate existence as the Surviving Bank in the Merger
as a Rhode Island financial institution under the name "Bank Rhode Island" with
all of the powers provided to financial institutions under the laws of the State
of Rhode Island.
1.2 Effective Time. The "Effective Time" shall be the date and time set
forth in the Articles of Merger as filed with and approved by the Director of
the Department of Business Regulation of the State of Rhode Island and the Rhode
Island Secretary of State, and shall follow compliance with the conditions to
the effectiveness of the Merger under this Agreement and the laws and
regulations of the United States and the State of Rhode Island and as specified
in the approval of any Applicable Governmental Authorities (as defined in
Subsection 4.1(b) hereof).
1.3 Effect of Merger. At the Effective Time: (i) all rights, privileges,
franchises and property of Interim Bank, and all debts and liabilities due or to
become due to Interim Bank, including things in action and every interest or
asset of conceivable value or benefit, shall be deemed fully and finally and
without any right of reversion transferred to and vested in the Surviving Bank
without further act or deed, and the Surviving Bank shall have and hold the same
in its own right as fully as the same was possessed and held by Interim Bank,
(ii) all debts, liabilities, and obligations due or to become due of, and all
claims or demands for any cause existing against Interim Bank shall be and
become the debts, liabilities, obligations of, and the claims and demands
against, the Surviving Bank in the same manner as if the Surviving Bank had
itself incurred or become liable for them, (iii) all rights of creditors of
Interim Bank, and all liens upon the property of Interim Bank, shall be
preserved unimpaired, limited in lien to the property affected by the liens
immediately prior to the Effective Time, and (iv) any action or proceeding
pending by or against Interim
38
<PAGE> 45
Bank shall not be deemed to have abated or been discontinued, but may be
prosecuted to judgment, with the right to appeal or review as in other cases, as
if the Merger had not taken place or the Surviving Bank may be substituted for
Interim Bank.
1.4 Other Matters. Also at the Effective Time: (i) the Bank's main office
shall be the main office of the Surviving Bank and shall continue to be located
in Providence, Rhode Island, (ii) the Directors and officers of the Bank holding
office immediately prior to the Effective Time shall continue to be the
Directors and officers of the Surviving Bank, (iii) the Agreement to Form and
Bylaws of the Bank, as in effect immediately prior to the Effective Time, shall
be and remain the Agreement to Form and Bylaws of the Surviving Bank, (iv) the
Bank's insurance of deposits coverage by the Federal Deposit Insurance
Corporation ("FDIC") shall be and remain the insurance of deposits coverage of
the Surviving Bank.
1.5 Further Assurances. The Bank, the Holding Company and Interim Bank
each agree that at any time, or from time to time, as and when requested by the
Surviving Bank, or by the Surviving Bank's successors and assigns, it will
execute and deliver, or cause to be executed and delivered in its name, all
conveyances, assignments, transfers, deeds or other instruments, and will take
or cause to be taken such further or other action as the Surviving Bank, the
Surviving Bank's successors or assigns may deem necessary or desirable, in order
to evidence the transfer, vesting or devolution of any property right, privilege
or franchise or to vest or perfect in or confirm to the Surviving Bank, its
successors and assigns, title to and possession of all the property, rights,
privileges, powers, immunities, franchises and interests referred to in this
Section 1 and otherwise to carry out the intent and purposes hereof.
ARTICLE II
CAPITAL STOCK OF THE SURVIVING BANK
2.1 Stock of the Holding Company. At the Effective Time, all common stock
of the Holding Company issued and outstanding prior to the Effective Time shall
be transferred to the Holding Company by the Bank and shall be deemed to have
been reacquired by the Holding Company. The Holding Company shall thereafter
take all actions necessary to cancel said common stock so that said common stock
is held by the Holding Company as authorized but unissued shares.
2.2 Stock of Interim Bank. At the Effective Time, the shares of capital
stock of Interim Bank issued and outstanding immediately prior to the Effective
Time shall be converted into and exchanged by the Holding Company for 3,000,000
shares of fully paid and nonassessable common stock of the Bank as the Surviving
Bank.
2.3 Common Stock of the Bank.
(a) Voting Common Stock. At the Effective Time, each and every share of
Bank voting common stock, $1.00 par value per share ("Voting Common Stock"),
issued and outstanding shall, by virtue of the Merger and without any action on
the part of the holders thereof, be exchanged for and converted into the right
to receive one share of Holding Company voting common stock.
(b) Non-Voting Common Stock. At the Effective Time, each and every share
of Bank non-voting common stock, $1.00 par value per share ("Non-Voting Common
Stock," together with Voting Common Stock, "Common Stock"), issued and
outstanding shall, by virtue of the Merger and without any action on the part of
the holders thereof, be exchanged for and converted into the right to receive
one share of Holding Company non-voting common stock.
2.4 Exchange Procedures.
(a) Exchange Agent. Registrar and Transfer Company shall act as exchange
agent for the purpose of exchanging (i) certificates representing shares of
Voting Common Stock for shares of Holding Company voting common stock as
provided by Section 2.2 hereof, and (ii) certificates representing shares of
Non-Voting Common Stock for shares of Holding Company non-voting common stock as
provided by Section 2.2 hereof.
39
<PAGE> 46
(b) Lost or Destroyed Certificates. If any holder of Common Stock shall be
unable to surrender his or her stock certificates representing Common Stock
because such certificates have been lost or destroyed, such holder of Common
Stock may deliver in lieu thereof an indemnity bond in form and substance and
with a surety satisfactory to the Bank.
2.5 Stock Options. At the Effective Time, each outstanding option,
warrant, including, without limitation, that certain warrant issued to Fleet
Financial Group, Inc. to purchase 136,315 shares of Common Stock at an exercise
price of $10.00 per share, or other right to purchase Common Stock shall, by
virtue of the Merger and without any action on the part of the holders thereof,
be converted into an option, warrant or other right to purchase Holding Company
common stock.
ARTICLE III
APPROVALS
3.1 Shareholder Approvals. This Agreement shall be submitted to the
holders of Voting Common Stock and to the shareholders of Interim Bank for
ratification and approval in accordance with the applicable provisions of law.
3.2 Regulatory Approvals. The parties shall obtain the waivers, consents
and approvals of all regulatory authorities as required for consummation of the
Merger on the terms herein provided, including, without being limited to, those
consents and approvals referred to in Subsection 4.1(b) hereof.
ARTICLE IV
CONDITIONS
4.1 Conditions to the Merger. Consummation of the Merger is conditioned
upon:
(a) the ratification and approval of this Agreement by the
shareholders of the Bank and Interim Bank as required by law;
(b) the obtaining of all other consents and approvals, and
satisfaction of all other requirements prescribed by law which are
necessary for consummation of the Merger, including, but not limited to,
approval of the FDIC, approval of the Director of the Department of
Business Regulation of the State of Rhode Island, and approval of the Board
of Governors of the Federal Reserve System under the Bank Holding Company
Act of 1956, as amended (the "Applicable Governmental Authorities");
(c) the obtaining of all consents or approvals, governmental or
otherwise, which are or, in the opinion of counsel for the Bank may be,
necessary to permit or enable the Surviving Bank, upon and after the
Merger, to conduct all or any part of the business and activities of the
Bank up to the time of the Merger, in the manner in which such activities
and business are then conducted;
(d) the receipt by the Bank of an opinion from Hinckley, Allen &
Snyder LLP, in form and substance satisfactory to both the Bank and the
Holding Company, to the effect that the Merger of Interim Bank with and
into the Bank and the exchange of shares of Bank common stock for shares of
Holding Company common stock, will be considered a reorganization within
the meaning of Section 368(a)(1)(A) of the Code; no gain or loss will be
recognized by the Bank pursuant to consummation of the Merger; and no gain
or loss will be recognized by the shareholders of the Bank upon the
exchange of their shares of Bank Common Stock for shares of Holding Company
common stock, as provided for herein;
(e) the performance by each party hereto of all of its respective
obligations hereunder to be performed prior to the Effective Time.
40
<PAGE> 47
ARTICLE V
TERMINATION, EXPENSES, AMENDMENT, AND ASSIGNMENT
5.1 Termination of the Merger. If any condition in Section 4.1 hereof has
not been fulfilled with respect to the Merger, or, if in the opinion of a
majority of the Board of Directors of any of the parties:
(a) any action, suit, proceeding or claim has been instituted, made or
threatened relating to the Merger which makes consummation of the Merger
inadvisable; or
(b) for any other reason consummation of the Merger is inadvisable;
then this Agreement may be terminated at any time before the Merger becomes
effective. Upon termination, this Agreement shall be void and of no further
effect, and there shall be no liability by reason of this Agreement or the
termination thereof on the part of the parties or their respective directors,
officers, employees, agents or shareholders, except as provided in Section 5.2
hereof.
5.2 Expenses of the Merger. Subject to applicable federal laws and
regulations, the Bank initially shall bear all expenses of the Merger,
including, without limitation, filing fees, printing costs, mailing costs,
accountants' fees and legal fees (the "Expenses"); provided, however, that,
immediately following the Merger or shortly thereafter, the Holding Company
shall reimburse the Bank for the Expenses. The Bank covenants and agrees,
immediately following the Merger or shortly thereafter, to declare a dividend on
the stock of the Bank held by the Holding Company sufficient to allow the
Holding Company to reimburse the Bank for the Expenses.
5.3 Amendment. Subject to applicable law, at any time prior to the
consummation of the Merger, the parties, by action taken by the respective
Boards of Directors, may amend this Agreement; provided, however, that this
Agreement may not be amended except by an instrument in writing signed on behalf
of each of the parties hereto.
5.4 Assignment. No party hereunder shall have the right to assign its
rights or obligations under this Agreement.
ARTICLE VI
MISCELLANEOUS
6.1 Execution. This Agreement may be executed in counterparts, each of
which when so executed shall be deemed an original and such counterparts shall
together constitute one and the same instrument.
6.2 Governing Law. This Agreement is made and entered into in the State
of Rhode Island, and the laws of said State shall govern the validity and
interpretation hereof.
6.3 Headings. The Article and Section headings contained in this
Agreement are for reference purposes only and shall not effect in any way the
meaning or interpretation of this Agreement.
6.4 Entire Agreement. This Agreement contains the entire agreement
between the parties hereto with respect to the Merger and supersedes all prior
arrangements or understandings with respect thereto.
41
<PAGE> 48
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
by their duly authorized officers as of the day and year first above written.
BANK RHODE ISLAND
By: /s/ MERRILL W. SHERMAN
------------------------------------
Name: Merrill W. Sherman
Its: President & Chief Executive
Officer
BANCORP RHODE ISLAND, INC.
By: /s/ MERRILL W. SHERMAN
------------------------------------
Name: Merrill W. Sherman
Its: President & Chief Executive
Officer
BKRI INTERIM BANK
By: /s/ MERRILL W. SHERMAN
------------------------------------
Name: Merrill W. Sherman
Its: President & Chief Executive
Officer
42
<PAGE> 49
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Articles of Incorporation and By-laws of the Registrant provide for the
indemnification of the Registrant's directors and permit the indemnification of
the Registrant's officers and employees to the fullest extent permitted by, and
subject to the conditions set forth in, the Rhode Island Business Corporation
Act (the "RIBCA"). The indemnification provided under the Articles of
Incorporation and By-laws includes the right to be paid by the Registrant the
expenses (including attorneys' fees) in advance of any proceeding for which
indemnification may be obtained in advance of its final disposition, provided
that the payment of these expenses (including attorneys' fees) incurred by a
director or officer in advance of the final disposition of a proceeding may be
made only upon delivery to the Registrant of an undertaking by or on behalf of
the director or officer to repay all amounts so paid in advance if it is
ultimately determined that the director or officer is not entitled to be
indemnified.
The By-laws provide that the indemnification set forth in the Articles of
Incorporation and By-laws shall apply if such person acted in good faith and in
a manner reasonably believed to be in or not opposed to the best interests of
the Registrant. With respect to any criminal action or proceeding, such person
must have had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent, does not, of
itself, create a presumption that such person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to the best
interests of the Registrant, and, with respect to any criminal action or
proceeding, had reasonable cause to believe that such person's conduct was
unlawful.
No indemnification shall be made in respect of any claim, issue or matter
as to which such person shall have been finally adjudged to be liable to the
Registrant, unless and only to the extent that the court in which such action or
suit was brought shall determine upon application that, despite the adjudication
of liability but in view of all the circumstances of the case, such person is
fairly and reasonably entitled to indemnity for such expenses such court shall
deem proper.
Under the By-laws, the Registrant has the power, by a vote of a majority of
the full Board of Directors, to purchase and maintain insurance on behalf of any
person who is or was a director, officer, employee or agent of the Registrant,
or is or was serving at the request of the Registrant as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise against any liability asserted against him and incurred by him
in any such capacity, or arising out of his status as such, whether or not the
Registrant would have the power to indemnify him against such liability under
the provisions of the By-laws.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
- - ------- -----------
<C> <S>
2. Plan of Reorganization and Agreement of Merger dated
February 15, 2000 by and among Bank Rhode Island, Bancorp
Rhode Island, Inc. and BKRI Interim Bank attached as Annex A
to the Proxy Statement/Prospectus contained in Part I of
this Registration Statement.
3.1 Articles of Incorporation of Registrant
3.2 By-laws of Registrant
4.1 Specimen form of certificate for Bancorp Common Stock*
4.2 Specimen form of certificate for Bancorp Non-Voting Common
Stock*
5. Opinion re: legality*
10.1 Employment Agreement of Merrill W. Sherman, as amended
10.2 Employment Agreement of Albert R. Rietheimer, as amended
10.3 Employment Agreement of Donald C. McQueen, as amended
10.4 Employment Agreement of James V. DeRentis
10.5 Bank Rhode Island's 1996 Incentive and Nonqualified Stock
Option Plan, as amended
</TABLE>
<PAGE> 50
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
- - ------- -----------
<C> <S>
10.6 Bank Rhode Island's Non-Employee Director Stock Plan
10.7 Bank Rhode Island's Supplemental Executive Retirement Plan,
as amended
10.8 Bank Rhode Island's Nonqualified Deferred Compensation Plan,
as amended
10.9 Warrant for 136,315 shares of Common Stock Issued to Fleet
Financial Group, Inc.
13 Bank Rhode Island's Annual Report to shareholders for 1999,
portions of which have been incorporated by reference herein
are filed with the Commission. Those portions which have not
been incorporated by reference herein are provided for
information purposes only.*
21. Sole Subsidiary of the Registrant is Bank Rhode Island
23.1 Consent of Counsel is included with the opinion re: legality
as Exhibit 5 to this Registration Statement*
23.2 Consent of KPMG LLP, as accountants for the Registrant*
99.1 Form of Proxy for Common Stock to be utilized in connection
with the annual meeting of Bank Rhode Island
99.2 Form of Proxy for Non-Voting Common Stock to be utilized in
connection with the annual meeting of Bank Rhode Island
</TABLE>
- - ---------------
* To be filed by pre-effective amendment pursuant to Rule 475a.
ITEM 22. UNDERTAKINGS
(a)(1) The undersigned Registrant hereby undertakes to deliver or cause to
be delivered with the Proxy Statement/Prospectus, to each person to whom the
Proxy Statement/Prospectus is sent or given, the latest annual report to
security holders that is incorporated by reference in the Proxy
Statement/Prospectus furnished pursuant to and annual meeting the requirements
of Rule 14a-3 or Rule 14c-3 under the Securities Exchange Act of 1934; and,
where interim financial information required to be presented by Article 3 of
Regulation S-X are not set forth in the Proxy Statement/Prospectus, to deliver,
or cause to be delivered to each person to whom the prospectus is sent or given,
the latest quarterly report that is specifically incorporated by reference in
the prospectus to provide interim financial information.
(a)(2) The undersigned Registrant hereby undertakes as follows: that prior
to any public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this registration statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c), the
issuer undertakes that such reoffering prospectus will contain the information
called for by the applicable registration form with respect to reofferings by
persons who may be deemed underwriters, in addition to the information called
for by the other Items of the applicable form.
(a)(3) The Registrant undertakes that every prospectus (i) that is filed
pursuant to paragraph (g)(1) of Rule 145, or (ii) that purports to meet the
requirements of section 10(a)(3) of the Securities Act and is used in connection
with an offering of securities subject to Rule 415, will be filed as a part of
an amendment to the registration statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Securities Act, each such post-effective amendment shall be deemed to
be a new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(b) The undersigned Registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the Proxy Statement/Proxy
Statement/Prospectus pursuant to Items 4, 10(b), 11 or 13 of this Form, within
one business day of receipt of such request, and to send the incorporated
documents by first class mail or other equally prompt means. This includes
information contained in documents filed subsequent to the effective date of the
registration statement through the date of responding to the request.
(c) The undersigned Registrant hereby undertakes to supply by means of
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-2
<PAGE> 51
POWER OF ATTORNEY AND SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the City of Providence, State of Rhode
Island on March 22, 2000.
BANCORP RHODE ISLAND, INC.
/s/ MERRILL W. SHERMAN
--------------------------------------
By: Merrill W. Sherman
Its: President and Chief Executive
Officer
We, the undersigned officers and directors of Bancorp Rhode Island, Inc.,
in the city of Providence Rhode Island hereby severally constitute and appoint
Merrill W. Sherman, Albert R. Rietheimer and Margaret D. Farrell our true and
lawful attorneys with full power of substitution together, and each of them
singly, to sign for us and in our names in the capacities indicated below, the
Registration Statement of Form S-4 filed herewith and any and all pre-effective
and post-effective amendments to said Registration Statement, and generally to
do all such things in our names and on our behalf in our capacities as officers
and directors to enable Bancorp Rhode Island, Inc. to comply with the provisions
of the Securities Act of 1933, as amended, and all requirements of the
Securities and Exchange Commission, hereby ratifying and confirming our
signatures as they may be signed by our said attorneys, or any one of them, to
said Registration Statement and all amendments thereto.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ MERRILL W. SHERMAN President and Chief Executive March 22, 2000
- - --------------------------------------------------- Officer; Director
Merrill W. Sherman
/s/ ALBERT R. RIETHEIMER Chief Financial Officer and March 22, 2000
- - --------------------------------------------------- Treasurer (Principal Financial
Albert R. Rietheimer and Accounting Officer)
/s/ ANTHONY F. ANDRADE Director March 22, 2000
- - ---------------------------------------------------
Anthony F. Andrade
/s/ JOHN R. BERGER Director March 22, 2000
- - ---------------------------------------------------
John R. Berger
/s/ MALCOLM G. CHACE Director March 22, 2000
- - ---------------------------------------------------
Malcolm G. Chace
/s/ ERNEST J. CHORNYEI, JR. Director March 22, 2000
- - ---------------------------------------------------
Ernest J. Chornyei, Jr.
</TABLE>
II-3
<PAGE> 52
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ KARL F. ERICSON Director March 22, 2000
- - ---------------------------------------------------
Karl F. Ericson
/s/ MARGARET D. FARRELL Director March 22, 2000
- - ---------------------------------------------------
Margaret D. Farrell
/s/ MARK R. FEINSTEIN Director March 22, 2000
- - ---------------------------------------------------
Mark R. Feinstein
/s/ DONALD J. REAVES Director March 22, 2000
- - ---------------------------------------------------
Donald J. Reaves
/s/ FREDERICK JAMES HODGES, JR. Director March 22, 2000
- - ---------------------------------------------------
Frederick James Hodges, Jr.
/s/ CHERYL L. WATKINS Director March 22, 2000
- - ---------------------------------------------------
Cheryl L. Watkins
Director March , 2000
- - ---------------------------------------------------
John A. Yena
</TABLE>
II-4
<PAGE> 53
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION PAGE
- - ------- ----------- ----
<C> <S> <C>
2. Plan of Reorganization and Agreement of Merger dated
February 15, 2000 by and among Bank Rhode Island, Bancorp
Rhode Island, Inc. and BKRI Interim Bank attached as Annex A
to the Proxy Statement/Prospectus contained in Part I of
this Registration Statement. ...............................
3.1 Articles of Incorporation of Registrant.....................
3.2 By-laws of Registrant.......................................
4.1 Specimen form of certificate for Bancorp Common Stock*......
4.2 Specimen form of certificate for Bancorp Non-Voting Common
Stock*......................................................
5. Opinion re: legality*.......................................
10.1 Employment Agreement of Merrill W. Sherman, as amended......
10.2 Employment Agreement of Albert R. Rietheimer, as amended....
10.3 Employment Agreement of Donald C. McQueen, as amended.......
10.4 Employment Agreement of James V. DeRentis...................
10.5 Bank Rhode Island's 1996 Incentive and Nonqualified Stock
Option Plan, as amended.....................................
10.6 Bank Rhode Island's Non-Employee Director Stock Plan........
10.7 Bank Rhode Island's Supplemental Executive Retirement Plan,
as amended..................................................
10.8 Bank Rhode Island's Nonqualified Deferred Compensation Plan,
as amended..................................................
10.9 Warrant for 136,315 shares of Common Stock Issued to Fleet
Financial Group, Inc. ......................................
13 Bank Rhode Island's Annual Report to shareholders for 1999,
portions of which have been incorporated by reference herein
are filed with the Commission. Those portions which have not
been incorporated by reference herein are provided for
information purposes only.*.................................
21. Sole Subsidiary of the Registrant is Bank Rhode Island......
23.1 Consent of Counsel is included with the opinion re: legality
as Exhibit 5 to this Registration Statement*................
23.2 Consent of KPMG LLP, as accountants for the Registrant*
99.1 Form of Proxy for Common Stock to be utilized in connection
with the annual meeting of Bank Rhode Island................
99.2 Form of Proxy for Non-Voting Common Stock to be utilized in
connection with the annual meeting of Bank Rhode Island.....
</TABLE>
- - ---------------
* To be filed by pre-effective amendment pursuant to Rule 475a.
<PAGE> 1
EXHIBIT 2.
PLAN OF REORGANIZATION AND MERGER AGREEMENT
This PLAN OF REORGANIZATION AND MERGER AGREEMENT (the "AGREEMENT"),
dated as of February 15, 2000, is by and among BANK RHODE ISLAND, a stock
financial institution organized and existing under the laws of the State of
Rhode Island (the "BANK"), the Bank's wholly-owned subsidiary, BANCORP RHODE
ISLAND, INC., a Rhode Island corporation (the "HOLDING COMPANY"), and BKRI
INTERIM BANK, a stock interim financial institution to be organized under the
laws of the State of Rhode Island as a wholly-owned subsidiary of Holding
Company ("INTERIM BANK").
W I T N E S S E T H
WHEREAS, the Boards of Directors of the Bank, the Holding Company and
Interim Bank have approved, and deem it advisable and in the best interests of
their respective shareholders to consummate the reorganization and business
combination set forth herein;
WHEREAS, the parties intend that, at the Effective Time as defined in
Section 1.2 hereof, in a reverse triangular merger, Interim Bank will be merged
with and into the Bank with the Bank as the survivor (the "SURVIVING BANK") as a
wholly owned subsidiary of the Holding Company (the "MERGER");
WHEREAS, the parties intend that the Merger be structured as a
"reorganization" under Section 368(a)(1)(A) of the Internal Revenue Code of
1986, as amended (the "CODE");
NOW, THEREFORE, in consideration of the mutual agreements of the
parties contained herein, the parties hereby agree as follows:
ARTICLE I
THE MERGER
1.1 THE MERGER. At the Effective Time, as defined in Section 1.2
hereof, in accordance with the provisions of this Agreement and the laws of the
State of Rhode Island and the United States, Interim Bank shall be merged with
and into the Bank, the separate corporate existence of Interim Bank shall cease,
and the Bank shall continue its corporate existence as the Surviving Bank in the
Merger as a Rhode Island financial institution under the name "Bank Rhode
Island" with all of the powers provided to financial institutions under the laws
of the State of Rhode Island.
1.2 EFFECTIVE TIME. The "EFFECTIVE TIME" shall be the date and time set
forth in the Articles of Merger as filed with and approved by the Director of
the Department of Business Regulation of the State of Rhode Island and the Rhode
Island Secretary of State, and shall follow compliance with the conditions to
the effectiveness of the Merger under this Agreement and the laws and
regulations of the United States and the State of Rhode Island and as specified
in the approval of any Applicable Governmental Authorities (as defined in
Subsection 4.1(b) hereof).
1.3 EFFECT OF MERGER. At the Effective Time: (i) all rights,
privileges, franchises and property of Interim Bank, and all debts and
liabilities due or to become due to Interim Bank, including things in action and
every interest or asset of conceivable value or benefit, shall be deemed fully
and finally and without any right of reversion transferred to and vested in the
<PAGE> 2
Surviving Bank without further act or deed, and the Surviving Bank shall have
and hold the same in its own right as fully as the same was possessed and held
by Interim Bank, (ii) all debts, liabilities, and obligations due or to become
due of, and all claims or demands for any cause existing against Interim Bank
shall be and become the debts, liabilities, obligations of, and the claims and
demands against, the Surviving Bank in the same manner as if the Surviving Bank
had itself incurred or become liable for them, (iii) all rights of creditors of
Interim Bank, and all liens upon the property of Interim Bank, shall be
preserved unimpaired, limited in lien to the property affected by the liens
immediately prior to the Effective Time, and (iv) any action or proceeding
pending by or against Interim Bank shall not be deemed to have abated or been
discontinued, but may be prosecuted to judgment, with the right to appeal or
review as in other cases, as if the Merger had not taken place or the Surviving
Bank may be substituted for Interim Bank.
1.4 OTHER MATTERS. Also at the Effective Time: (i) the Bank's main
office shall be the main office of the Surviving Bank and shall continue to be
located in Providence, Rhode Island, (ii) the Directors and officers of the Bank
holding office immediately prior to the Effective Time shall continue to be the
Directors and officers of the Surviving Bank, (iii) the Agreement to Form and
Bylaws of the Bank, as in effect immediately prior to the Effective Time, shall
be and remain the Agreement to Form and Bylaws of the Surviving Bank, (iv) the
Bank's insurance of deposits coverage by the Federal Deposit Insurance
Corporation ("FDIC") shall be and remain the insurance of deposits coverage of
the Surviving Bank.
1.5 FURTHER ASSURANCES. The Bank, the Holding Company and Interim Bank
each agree that at any time, or from time to time, as and when requested by the
Surviving Bank, or by the Surviving Bank's successors and assigns, it will
execute and deliver, or cause to be executed and delivered in its name, all
conveyances, assignments, transfers, deeds or other instruments, and will take
or cause to be taken such further or other action as the Surviving Bank, the
Surviving Bank's successors or assigns may deem necessary or desirable, in order
to evidence the transfer, vesting or devolution of any property right, privilege
or franchise or to vest or perfect in or confirm to the Surviving Bank, its
successors and assigns, title to and possession of all the property, rights,
privileges, powers, immunities, franchises and interests referred to in this
Section 1 and otherwise to carry out the intent and purposes hereof.
ARTICLE II
CAPITAL STOCK OF THE SURVIVING BANK
2.1 STOCK OF THE HOLDING COMPANY. At the Effective Time, all common
stock of the Holding Company issued and outstanding prior to the Effective Time
shall be transferred to the Holding Company by the Bank and shall be deemed to
have been reacquired by the Holding Company. The Holding Company shall
thereafter take all actions necessary to cancel said common stock so that said
common stock is held by the Holding Company as authorized but unissued shares.
2.2 STOCK OF INTERIM BANK. At the Effective Time, the shares of capital
stock of Interim Bank issued and outstanding immediately prior to the Effective
Time shall be converted into and exchanged by the Holding Company for 3,000,000
shares of fully paid and nonassessable common stock of the Bank as the Surviving
Bank.
2
<PAGE> 3
2.3 COMMON STOCK OF THE BANK.
(A) VOTING COMMON STOCK. At the Effective Time, each and every
share of Bank voting common stock, $1.00 par value per share ("Voting Common
Stock"), issued and outstanding shall, by virtue of the Merger and without any
action on the part of the holders thereof, be exchanged for and converted into
the right to receive one share of Holding Company voting common stock.
(B) NON-VOTING COMMON STOCK. At the Effective Time, each and
every share of Bank non-voting common stock, $1.00 par value per share
("Non-Voting Common Stock," together with Voting Common Stock, "Common Stock"),
issued and outstanding shall, by virtue of the Merger and without any action on
the part of the holders thereof, be exchanged for and converted into the right
to receive one share of Holding Company non-voting common stock.
2.4 EXCHANGE PROCEDURES.
(A) EXCHANGE AGENT. Registrar and Transfer Company shall act
as exchange agent for the purpose of exchanging (i) certificates representing
shares of Voting Common Stock for shares of Holding Company voting common stock
as provided by Section 2.2 hereof, and (ii) certificates representing shares of
Non-Voting Common Stock for shares of Holding Company non-voting common stock as
provided by Section 2.2 hereof.
(B) LOST OR DESTROYED CERTIFICATES. If any holder of Common
Stock shall be unable to surrender his or her stock certificates representing
Common Stock because such certificates have been lost or destroyed, such holder
of Common Stock may deliver in lieu thereof an indemnity bond in form and
substance and with a surety satisfactory to the Bank.
2.5 STOCK OPTIONS. At the Effective Time, each outstanding option,
warrant, including, without limitation, that certain warrant issued to Fleet
Financial Group, Inc. to purchase 136,315 shares of Common Stock at an exercise
price of $10.00 per share, or other right to purchase Common Stock shall, by
virtue of the Merger and without any action on the part of the holders thereof,
be converted into an option, warrant or other right to purchase Holding Company
common stock.
ARTICLE III
APPROVALS
3.1 SHAREHOLDER APPROVALS. This Agreement shall be submitted to the
holders of Voting Common Stock and to the shareholders of Interim Bank for
ratification and approval in accordance with the applicable provisions of law.
3.2 REGULATORY APPROVALS. The parties shall obtain the waivers,
consents and approvals of all regulatory authorities as required for
consummation of the Merger on the terms herein provided, including, without
being limited to, those consents and approvals referred to in Subsection 4.1(b)
hereof.
3
<PAGE> 4
ARTICLE IV
CONDITIONS
4.1 CONDITIONS TO THE MERGER. Consummation of the Merger is conditioned
upon:
(A) the ratification and approval of this Agreement by the
shareholders of the Bank and Interim Bank as required by law;
(B) the obtaining of all other consents and approvals, and
satisfaction of all other requirements prescribed by law which are necessary for
consummation of the Merger, including, but not limited to, approval of the FDIC,
approval of the Director of the Department of Business Regulation of the State
of Rhode Island, and approval of the Board of Governors of the Federal Reserve
System under the Bank Holding Company Act of 1956, as amended (the "APPLICABLE
GOVERNMENTAL AUTHORITIES");
(C) the obtaining of all consents or approvals, governmental
or otherwise, which are or, in the opinion of counsel for the Bank may be,
necessary to permit or enable the Surviving Bank, upon and after the Merger, to
conduct all or any part of the business and activities of the Bank up to the
time of the Merger, in the manner in which such activities and business are then
conducted;
(D) the receipt by the Bank of an opinion from Hinckley, Allen
& Snyder LLP, in form and substance satisfactory to both the Bank and the
Holding Company, to the effect that the Merger of Interim Bank with and into the
Bank and the exchange of shares of Bank common stock for shares of Holding
Company common stock, will be considered a reorganization within the meaning of
Section 368(a)(1)(A) of the Code; no gain or loss will be recognized by the Bank
pursuant to consummation of the Merger; and no gain or loss will be recognized
by the shareholders of the Bank upon the exchange of their shares of Bank Common
Stock for shares of Holding Company common stock, as provided for herein;
(E) the performance by each party hereto of all of its
respective obligations hereunder to be performed prior to the Effective Time.
ARTICLE V
TERMINATION, EXPENSES,
AMENDMENT, AND ASSIGNMENT
5.1 TERMINATION OF THE MERGER. If any condition in Section 4.1 hereof
has not been fulfilled with respect to the Merger, or, if in the opinion of a
majority of the Board of Directors of any of the parties:
(A) any action, suit, proceeding or claim has been instituted,
made or threatened relating to the Merger which makes consummation of the Merger
inadvisable; or
(B) for any other reason consummation of the Merger is
inadvisable;
then this Agreement may be terminated at any time before the Merger becomes
effective. Upon termination, this Agreement shall be void and of no further
effect, and there shall be no liability by reason of this Agreement or the
termination thereof on the part of the parties or their
4
<PAGE> 5
respective directors, officers, employees, agents or shareholders, except as
provided in Section 5.2 hereof.
5.2 EXPENSES OF THE MERGER. Subject to applicable federal laws and
regulations, the Bank initially shall bear all expenses of the Merger,
including, without limitation, filing fees, printing costs, mailing costs,
accountants' fees and legal fees (the "Expenses"); provided, however, that,
immediately following the Merger or shortly thereafter, the Holding Company
shall reimburse the Bank for the Expenses. The Bank covenants and agrees,
immediately following the Merger or shortly thereafter, to declare a dividend on
the stock of the Bank held by the Holding Company sufficient to allow the
Holding Company to reimburse the Bank for the Expenses.
5.3 AMENDMENT. Subject to applicable law, at any time prior to the
consummation of the Merger, the parties, by action taken by the respective
Boards of Directors, may amend this Agreement; provided, however, that this
Agreement may not be amended except by an instrument in writing signed on behalf
of each of the parties hereto.
5.4 ASSIGNMENT. No party hereunder shall have the right to assign its
rights or obligations under this Agreement.
ARTICLE VI
MISCELLANEOUS
6.1 EXECUTION. This Agreement may be executed in counterparts, each of
which when so executed shall be deemed an original and such counterparts shall
together constitute one and the same instrument.
6.2 GOVERNING LAW. This Agreement is made and entered into in the State
of Rhode Island, and the laws of said State shall govern the validity and
interpretation hereof.
6.3 HEADINGS. The Article and Section headings contained in this
Agreement are for reference purposes only and shall not effect in any way the
meaning or interpretation of this Agreement.
6.4 ENTIRE AGREEMENT. This Agreement contains the entire agreement
between the parties hereto with respect to the Merger and supersedes all prior
arrangements or understandings with respect thereto.
5
<PAGE> 6
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their duly authorized officers as of the day and year first above
written.
BANK RHODE ISLAND
By: /s/ Merrill W. Sherman
-----------------------------------------
Name: Merrill W. Sherman
Its: President & Chief Executive Officer
BANCORP RHODE ISLAND, INC.
By: /s/ Merrill W. Sherman
-----------------------------------------
Name: Merrill W. Sherman
Its: President & Chief Executive Officer
BKRI INTERIM BANK
By: /s/ Merrill W. Sherman
-----------------------------------------
Name: Merrill W. Sherman
Its: President & Chief Executive Officer
6
<PAGE> 1
EXHIBIT 3.1
STATE OF RHODE ISLAND AND PROVIDENCE PLANTATIONS
Office of the Secretary of State
JAMES R. LANGEVIN, Secretary of State
CERTIFICATE OF AMENDMENT
TO THE ARTICLES OF INCORPORATION OF
BANCORP RHODE ISLAND, INC.
I, JAMES R. LANGEVIN, Secretary of State of the State of Rhode Island
and Providence Plantations, hereby certify that duplicate originals of Articles
of Amendment to the Articles of Incorporation of
BANCORP RHODE ISLAND, INC.
duly signed and verified pursuant to the provisions of Chapter 7-1.1-56 of the
General Laws, 1956, as amended, have been received in this office and are found
to conform to law. The affixed is a duplicate original of the Articles of
Amendment.
WITNESS my hand and the seal of the State of
Rhode Island and Providence Plantations this
8TH DAY OF MARCH, 2000.
James R. Langevin
SECRETARY OF STATE
By: /s/ Cathryn J. Villanis
-----------------------------------------
<PAGE> 2
EXHIBIT 3.1
FILING FEE $50.00 ID NUMBER:
STATE OF RHODE ISLAND AND PROVIDENCE PLANTATIONS
Office of the Secretary of State
Corporations Division
100 North Main Street
Providence, Rhode Island 02903-1335
BUSINESS CORPORATION
-------------
ARTICLES OF AMENDMENT TO THE
ARTICLES OF INCORPORATION
(TO BE FILED IN DUPLICATE ORIGINAL)
Pursuant to the provisions of Section 7-1.1-56 of the General Laws, 1956, as
amended, the undersigned corporation adopts the following Articles of Amendment
to its Articles of Incorporation:
1. The name of the corporation is Bancorp Rhode Island, Inc.
---------------------------------------------
2. The shareholders of the corporation (or, where no shares have been issued,
the board of directors of the corporation) on MARCH 6, 2000 , in the manner
prescribed by Chapter 7-1.1 of the General Laws, 1956, as amended, adopted
the following amendment(s) to the Articles of Incorporation:
[INSERT AMENDMENT(S)]
(If additional space is required, please list on separate attachment)
- - --------------------------------------------------------------------------------
SEE EXHIBIT A
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
3. The number of shares of the corporation outstanding at the time of such
adoption was 100; and the number of shares entitled to vote thereon was 100.
4. The designation and number of outstanding shares of each class entitled to
vote thereon as a class were as follows: (If inapplicable, insert "none.")
CLASS NUMBER OF SHARES
----- ----------------
Common Stock 100
- - ------------------------------------- ---------------------------------------
- - ------------------------------------- ---------------------------------------
- - ------------------------------------- ---------------------------------------
<PAGE> 3
EXHIBIT 3.1
5. The number of shares voted for such amendment was 100; and the number of
shares voted against such amendment was 0.
6. The number of shares of each class entitled to vote thereon as a class voted
for and against such amendment, respectively, was: (If inapplicable, insert
"none.")
NUMBER OF SHARES VOTED
---------------------------------------------------
CLASS FOR AGAINST
----- --- -------
Common Stock 100 0
- - --------------------------- ------------------------- ----------------------
- - --------------------------- ------------------------- ----------------------
- - --------------------------- ------------------------- ----------------------
7. The manner, if not set forth in such amendment, in which any exchange,
reclassification, or cancellation of issued shares provided for in the
amendment shall be effected, is as follows: (If no change, so state)
No Change
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
8. The manner in which such amendment effects a change in the amount of stated
capital, and the amount (expressed in dollars) of stated capital as changed by
such amendment, are as follows: (If no change, so state)
No Change
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
9. As required by Section 7-1.1-57 of the General Laws, the corporation has paid
all fees and franchise taxes.
10. Date when amendment is to become effective Upon Filing
---------------------------------
(not prior to, nor more than
30 days after, the filing
of these articles of amendment)
Date: March 7, 2000 Bancorp Rhode Island, Inc.
--------------------- --------------------------------------------------
Print Corporate Name
By /s/ Merrill W. Sherman
-----------------------------------------------
[X] President or [ ] Vice President (check one)
AND
By /s/ Margaret D. Farrell
------------------------------------------------
[X] Secretary or [ ] Assistant Secretary
(check one)
STATE OF Rhode Island
---------------------------------------
COUNTY OF Providence
---------------------------------------
In Providence, on this 7th day of March, 2000 personally appeared
before me Margaret D. Farrell who, being by me first duly sworn, declared that
she is the Secretary of the corporation and that she signed the foregoing
documents as such officer of the corporation and that the statements herein
contained are true.
/s/ Karen Shlevin Fink, Notary
-------------------------------------
Notary Public
My Commission Expires: April 14, 2003
<PAGE> 4
EXHIBIT 3.1
EXHIBIT A
TO THE
ARTICLES OF AMENDMENT TO THE
ARTICLES OF INCORPORATION
OF
BANCORP RHODE ISLAND, INC.
1. The eighth and ninth words in line one (1), subsection A.(c), of the
Supplemental Provisions to Article 4 of the Articles of Incorporation
of the Corporation are revised to read as follows:
"(c). preferred stock...."
2. Subsection B.(7)(B)(ii) of Section 2. of the Supplemental Provisions to
Article 6 of the Articles of Incorporation of the Corporation is
amended in its entirety to read as follows:
"(ii) any person who was the beneficial owner, directly or indirectly,
of ten percent (10%) or more of the outstanding Common Stock of Bank
Rhode Island (as "Common Stock" is defined in Section 1 of the
Supplemental Provisions of the Agreement to Form of Bank Rhode Island,
as amended) as of the initial capitalization of the Corporation (which
shall be the Corporation's first issuance of stock)."
<PAGE> 5
STATE OF RHODE ISLAND AND PROVIDENCE PLANTATIONS
Office of the Secretary of State
JAMES R. LANGEVIN, Secretary of State
CERTIFICATE OF INCORPORATION
OF
BANCORP RHODE ISLAND, INC.
I, JAMES R. LANGEVIN, Secretary of State of the State of Rhode Island
and Providence Plantations, hereby certify that duplicate originals of Articles
of Incorporation for the incorporation of
BANCORP RHODE ISLAND, INC.
duly signed and verified pursuant to the provisions of Chapter 7-1.1of the
General Laws, 1956, as amended, have been received in this office and are found
to conform to law. The affixed is a duplicate original of the Articles of
Incorporation.
WITNESS my hand and the seal of the State of
Rhode Island and Providence Plantations this
15th day of February, 2000.
James R. Langevin
SECRETARY OF STATE
By: /s/ Cathryn J. Villanis
-----------------------------------------
<PAGE> 6
EXHIBIT 3.1
FILING FEE $150.00 ID NUMBER:
STATE OF RHODE ISLAND AND PROVIDENCE PLANTATIONS
Office of the Secretary of State
Corporations Division
100 North Main Street
Providence, Rhode Island 02903-1335
BUSINESS CORPORATION
---------------
ARTICLES OF INCORPORATION
(TO BE FILED IN DUPLICATE ORIGINAL)
The undersigned acting as incorporator(s) of a corporation under Chapter 7-1.1
of the General Laws, 1956, as amended, adopt(s) the following Articles of
Incorporation for such corporation:
1. The name of the corporation is Bancorp Rhode Island, Inc.
-----------------------------------------------
- - --------------------------------------------------------------------------------
2. The period of its duration is (if perpetual, so state) Perpetual
-----------------------
3. The specific purpose or purposes for which the corporation is organized are:
To act as a financial institution and financial services holding company
- - --------------------------------------------------------------------------------
and to engage in all activities and render all services incidental or
- - --------------------------------------------------------------------------------
related thereto and to transact any or all other lawful business for which
- - --------------------------------------------------------------------------------
corporations may be incorporated under the Rhode Island Business
- - --------------------------------------------------------------------------------
Corporation Act, as the same may be amended
- - --------------------------------------------------------------------------------
from time to time hereafter.
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
4. The aggregate number of shares which the corporation shall have authority to
issue is:
(a) If only one class: Total number of shares _________(If the authorized
shares are to consist of one class only state the par value of such shares
or a statement that all of such shares are to be without par value.):
- - --------------------------------------------------------------------------------
OR
(b) If more than one class: Total number of shares 12,000,000 (State (A)
the number of shares of each class thereof that are to have a par value and
the par value of each share of each such class, and/or (B) the number of
such shares that are to be without par value, and (C) a statement of all or
any of the designations and the powers, preferences and rights, including
voting rights, and the qualifications, limitations or restrictions thereof,
which are permitted by the provisions of Chapter 7-1.1 of the General Laws,
1956, as amended, in respect of any class or classes of stock of the
corporation and the fixing of which by the articles of association is
desired, and an express grant of such authority as it may then be desired
to grant to the board of directors to fix by vote or votes any thereof that
may be desired but which shall not be fixed by the articles.):
consisting of 11,000,000 shares of common stock par value $0.01 per share
- - --------------------------------------------------------------------------------
and 1,000,000 shares of preferred stock, par value $0.01 per share. *See
- - --------------------------------------------------------------------------------
the Supplemental provisions attached comprised of pages 4-1 through 4-6
- - --------------------------------------------------------------------------------
which are hereby incorporated herein by reference and made a part hereof.
- - --------------------------------------------------------------------------------
5. Provisions, if any, dealing with the preemptive right of shareholders
pursuant to ss.7-1.1-24 of the GeneraL Laws, 1956, as amended:
Shareholders are denied the preemptive right of shareholders set forth in
- - --------------------------------------------------------------------------------
ss.7-1.1-24 of the Rhode Island Business Corporation Act and no shareholder
- - --------------------------------------------------------------------------------
shall have a preemptive right to acquire unissued or treasury shares of any
- - --------------------------------------------------------------------------------
class of capital stock of the corporation or securities convertible into
- - --------------------------------------------------------------------------------
such shares or carrying a right to subscribe or acquire such shares.
- - --------------------------------------------------------------------------------
<PAGE> 7
6. Provisions, if any, for the regulation of the internal affairs of the
corporation:
See the Supplemental Provisions attached hereto comprised of pages 6-1
- - --------------------------------------------------------------------------------
through 6-10, inclusively, are hereby incorporated herein by reference and
- - --------------------------------------------------------------------------------
made a part hereof.
- - --------------------------------------------------------------------------------
7. The address of the initial registered office of the corporation is
1500 FLEET CENTER
--------------------------------
(Street Address, NOT P.O. Box)
PROVIDENCE , RI 02903
-------------------------------------------- ---------------------
(City/Town) (Zip Code)
and the name of its initial registered agent at such address is
MARGARET D. FARRELL .
-----------------------------.
(Name of Agent)
8. the number of directors constituting the initial board of directors of the
corporation is TWELVE (12) and the names and addresses of the persons who
are to serve as directors until the first annual meeting of shareholders or
until their successors are elected and shall qualify are: (If this is a
close corporation pursuant to Section 7-1.1-51 of the General Laws, 1956,
as amended, and there shall be no board of directors, state the titles of
the initial officers of the corporation and the names and addresses of the
persons who are to serve as officers until the first annual meeting of
shareholders or until their successors be elected and qualify.)
TITLE NAME ADDRESS
----- ---- -------
As set forth in the
- - ------------------- ----------------------- ------------------------------
Supplemental Provisions
- - ------------------- ----------------------- ------------------------------
attached hereto and
- - ------------------- ----------------------- ------------------------------
made part hereof.
9. The name and address of each incorporator is:
NAME ADDRESS
---- -------
Margaret D. Farrell, Esq. Hinckley, Allen & Snyder LLP
- - ------------------------------------- ---------------------------------------
1500 Fleet Center
- - ------------------------------------- ---------------------------------------
Providence, RI 02903
10. Date when corporate existence is to begin February 15, 2000
----------------------------------
(not prior to, nor more than 30
days after, the filing of these
articles of incorporation)
Date: February 15, 2000 /S/ Margaret D. Farrell
--------------------- -----------------------------------------
-----------------------------------------
-----------------------------------------
Signature of each Incorporator
STATE OF Rhode Island
---------------------------
COUNTY OF Providence
---------------------------
In Providence, on this 15th day of February, 2000, personally appeared
before me Margaret D. Farrell, known to me and known by me to be the party
executing the foregoing instrument, and she acknowledged said instrument by her
subscribed to be her free act and deed.
/s/ Karen Shlevin Fink, Notary
-------------------------------------
Notary Public
My Commission Expires: April 14, 2003
<PAGE> 8
SUPPLEMENTAL PROVISIONS
TO ARTICLE 4 OF THE
ARTICLES OF INCORPORATION
OF
BANCORP RHODE ISLAND, INC. (THE "CORPORATION")
The total number of shares of all classes of capital stock which the
Corporation shall have authority to issue is 12,000,000 shares, of which
10,000,000 shares shall be common stock, $0.01 par value per share ("COMMON
STOCK"), 1,000,000 shall be Non-Voting Common Stock, $0.01 par value per share
("NON-VOTING COMMON STOCK") and 1,000,000 shares shall be preferred stock, $0.01
par value per share. The shares may be issued by the Corporation from time to
time as authorized by its Board of Directors without further approval of its
shareholders. Upon payment of lawful consideration, which shall not be less than
the par value per share, such shares shall be deemed to be fully paid and
nonassessable.
A. COMMON STOCK AND NON-VOTING COMMON STOCK.
(a) GENERAL. Except as provided below, the Common Stock and Non-Voting
Common Stock shall have the same rights and privileges and shall rank equally,
share ratably and be identical in all respects as to all matters, including
rights in liquidation.
(b) LIQUIDATION AND WINDING UP. In the event of any voluntary or
involuntary liquidation, dissolution, or winding up of the Corporation, after
there shall have been paid to or set aside for the holders of any class having
preference over the Common Stock and the Non-Voting Common Stock in the event of
liquidation, dissolution or winding up of the full preferential amounts of which
they are respectively entitled, the holders of the Common Stock and of the
Non-Voting Common Stock, and of any class or series of stock entitled to
participate therewith, in whole or in part, as to distribution of assets, shall
be entitled, after payment or provision for payment of all debts and liabilities
of the Corporation, to receive the remaining assets of the Corporation available
for distribution, in cash or in kind, in proportion to their holdings. The
holders of outstanding Common Stock and the Non-Voting Common Stock shall share
ratably in any distribution of the remaining assets and funds of the Corporation
in proportion to the number of shares of Common Stock and Non-Voting Common
Stock held by each.
In no event shall a reorganization, consolidation or merger of the
Corporation with or into one or more other entities, or a sale, lease, exchange
or other disposition of all or substantially all of the assets of the
Corporation, constitute a voluntary or involuntary liquidation, dissolution or
winding up of the Corporation within the meaning of these Articles of
Incorporation.
(c) DIVIDENDS. Subject to the rights of holders of Preferred Stock,
when, as and if dividends are declared on the Common Stock or Non-Voting Common
Stock, whether payable in cash, in property or in securities of the Corporation,
the holders of Common Stock and Non-Voting Common Stock shall be entitled to
share equally, share for share, in such dividends; provided, that if the
Corporation shall declare dividends that are payable in securities that are
entitled to vote for the election of directors of the Corporation or otherwise
entitled to vote, the Corporation shall make available to each such holder, at
such holder's request, dividends consisting of securities of the Corporation
that are not voting securities but that are otherwise identical to such voting
securities in all material respects, and that are convertible into or
exchangeable for such voting securities in a manner similar to the manner by
which Non-Voting Common Stock is convertible into Common Stock pursuant to
subsection (e) below.
Whenever there shall have been paid, or declared and set aside for
payment, to the holders of the outstanding shares of any class of stock having
preference over the Common Stock and the Non-Voting
4-1
<PAGE> 9
Common Stock as to the payment of dividends, the full amount of dividends and of
sinking fund or other retirement payments, if any, to which such holders are
respectively entitled in preference to the Common Stock and the Non-Voting
Common Stock, then dividends may be paid on the Common Stock and the Non-Voting
Common Stock on any class or series of stock entitled to participate therewith
as to dividends, out of any assets legally available for the payment of
dividends, when, as and if declared by the Board of Directors.
(d) VOTING. Except as otherwise provided by applicable law or in these
Articles of Incorporation (or in any certificate of establishment of series of
preferred stock), the holders of the Common Stock shall exclusively possess
voting power for the election of directors and for all other purposes. Each
holder of outstanding shares of Common Stock shall be entitled to one vote for
each share held by such holder Except as otherwise expressly required by law,
the holders of Non-Voting Common Stock shall have no right to vote on any matter
to be voted on by the shareholders of the Corporation (including, without
limitation, any election or removal of the directors of the Corporation) and the
Non-Voting Common Stock shall not be included in determining the number of
shares voting or entitled to vote on such matters. There shall be no cumulative
voting rights in the election of directors.
(e) CONVERSION. Each share of Non-Voting Common stock shall be
convertible at the option of the holder thereof into one validly issued, fully
paid and nonassessable share of Common Stock, subject to subsection (vi) below.
(i) To convert shares of Non-Voting Common Stock into Common
Stock, a holder must (1) surrender the certificate or certificates evidencing
the shares to be converted, duly endorsed in a form reasonably satisfactory to
the Corporation, at the office of the Corporation or of the transfer agent for
the Non-Voting Common Stock, (2) give written notice to the Corporation, at such
office, that such holder elects to convert such shares and the number of shares
to be converted, (3) state in writing the name or names in which the certificate
or certificates for shares of Common Stock are to be issued, (4) provide
evidence reasonably satisfactory to the Corporation that such holder has
satisfied any conditions contained in any agreement or any legend on the
certificates representing the shares to be converted, relating to the transfer
thereof, if shares are to be issued in a name or names other than the holder's,
and (5) pay any transfer or similar tax. In the event that a holder fails to
notify the Corporation of the number of shares to be converted, such holder
shall be deemed to have elected to convert all shares represented by the
certificate or certificates surrendered for conversion. Such conversion, to the
extent permitted by law, regulation, rule or other requirement of any
governmental authority (collectively, "LAWS"), and the provisions hereof, shall
be deemed to have been effected as of the close of business on the date on which
the holder satisfies all of the foregoing requirements with respect to such
conversion (such date is referred to herein as the "CONVERSION DATE", for
purposes of any such conversion). As soon as practical on or following the
Conversion Date, the Corporation shall deliver to such former holder of
Non-Voting common Stock, or at its direction, a certificate representing the
unconverted portion, if any, of the shares of Non-Voting Common Stock formerly
represented by the certificate or certificates surrendered for conversion.
(ii) Immediately following the conversion of shares of
Non-Voting Common Stock into shares of Common Stock, on the Conversion Date (1)
such converted shares shall be deemed no longer outstanding, and (2) the persons
entitled to receive the shares of Common Stock upon such conversion shall be
treated for all purposes as having become the owners of record of such shares.
Shares of Common Stock issued upon conversion of shares of Non-Voting Common
Stock shall be deemed to be duly authorized, validly issued, fully paid and
nonassessable. Notwithstanding anything to the contrary contained herein, any
holder of shares of Non-Voting Common Stock may convert such shares into Common
Stock on a conditional basis, such that such conversion will not take effect
unless the condition to which conversion is subject is satisfied, and the
Corporation shall make such arrangements as may be necessary or appropriate to
allow such conditional conversion and to enable the holder to satisfy such
condition.
4-2
<PAGE> 10
(iii) If there shall occur any capital reorganization or any
reclassification of the capital stock of the Corporation, consolidation or
merger of the Corporation with or into another entity, or the conveyance of all
or substantially all of the assets of the Corporation to another person or
entity, each share of Non-Voting Common Stock shall thereafter be convertible
into the number of shares or other securities or property to which a holder of
the number of shares of Common Stock deliverable upon conversion of such
Non-Voting Common Stock would have been entitled upon such reorganization,
reclassification, consolidation, merger or conveyance; and, in any such case,
appropriate adjustment (as determined in good faith in the sole discretion of
the Board of Directors of the Corporation) shall be made in the application of
the provisions herein set forth with respect to the rights and interests
thereafter of the holders of the Non-Voting Common Stock, to the end that the
provisions set forth herein shall thereafter be applicable, as nearly as
reasonably may be, in relation to any shares or other property thereafter
deliverable upon the conversion of the Non-Voting Common Stock; provided, that
if pursuant to any such reorganization, reclassification, consolidation, merger
or conveyance, the holders of Non-Voting Common Stock receive securities that
are entitled to vote for the election of directors of the Corporation or any
applicable successor, or otherwise entitled to vote, then the Corporation or
such successor shall make available, upon conversion of Non-Voting Common Stock,
at the request of each holder of Non-Voting Common Stock, securities that are
not voting securities but that are otherwise identical to such voting securities
in all material respects, and that are convertible into or exchangeable for such
voting securities in a manner similar to the manner by which Non-Voting Common
Stock is convertible into Common Stock pursuant to this subsection A. (e)(iii).
(iv) the Corporation shall at all times reserve and keep
available, out of its authorized but unissued shares of Common Stock or treasury
shares thereof, solely for the purpose of issuance upon the conversion of
Non-Voting Common Stock, the full number of shares of Common Stock deliverable
upon the conversion of all Non-Voting Common Stock from time to time
outstanding. The Corporation shall from time to time, in accordance with the
laws of the State of Rhode Island, increase the authorized amount of its Common
Stock if at any time the authorized number of shares of Common Stock remaining
unissued shall not be sufficient to meet the requirements of the preceding
sentence.
(v) The Corporation shall pay any documentary, stamp or
similar issue or transfer tax due on the issue of shares of Common Stock upon
conversion of Non-Voting Common Stock. The Corporation shall not, however, be
required to pay any tax which may be payable in respect of any transfer involved
in the issue and delivery of Common Stock in a name other than that in which the
Non-Voting Common Stock so converted was registered, and no such issue or
delivery shall be made unless and until the person requesting such issue has
paid to the Corporation the amount of any such tax, or has established to the
satisfaction of the Corporation that such tax has been paid.
(vi) Notwithstanding any right of conversion of Non-Voting
Common Stock provided for in this subsection (e), unless otherwise permitted by
applicable law or regulation, no shares of Non-Voting Common Stock beneficially
owned by a bank holding company or any Affiliate (as defined below) of a bank
holding company shall be converted into shares of Common Stock by the initial
holder thereof or any direct or indirect transferee of such holder such that
immediately after such conversion such person and it Affiliates would own more
than 4.9% of any class of voting securities (as interpreted by the Board of
Governors of the Federal Reserve System (the "FEDERAL RESERVE BOARD")) of the
Corporation, unless such shares are being distributed, disposed of or sold in
any one of the following transactions (each a "CONVERSION EVENT"):
(1) such shares are being sold in public offering of such shares
registered under the Securities Act of 1933, as amended (the "SECURITIES ACT"),
or a public sale pursuant to Rule 144 promulgated under the Securities Act or
any similar rule then in force;
4-3
<PAGE> 11
(2) such shares are being sold (including by virtue of a merger,
consolidation or similar transaction involving the Corporation) to a person or
group of persons (within the meaning of the Securities Exchange Act of 1934, as
amended (the "EXCHANGE ACT")) and, after such sale, such person or group of
persons in the aggregate would not own or control securities of the Corporation
(excluding any Common Stock to be issued upon such conversion and sold to such
person or group of persons in connection with such Conversion Event) which
possess in the aggregate the ordinary voting power to elect a majority of the
Corporation's directors;
(3) such shares are being sold to a person or group of persons (within
the meaning of the Exchange Act) and after such sale such person or group of
persons in the aggregate would not own, control or have the right to acquire
more than two percent of the outstanding securities of any class of voting
securities of the Corporation; or
(4) such shares are being sold in any other manner permitted by the
Federal Reserve Board.
For purposes of this subsection A(e): (x) the term "AFFILIATE" shall
mean, with respect to any person, any other person directly or indirectly
controlling or controlled by or under direct or indirect common control with
such specified person; and (y) percentages of the Corporation's outstanding
voting securities shall include shares issuable upon exercise or conversion of
Non-Voting Common Stock and other convertible securities, options, warrants or
other similar instruments owned by such bank holding company, its transferees
and their respective Affiliates, but shall not include shares issuable upon
exercise or conversion of convertible securities, options, warrants or other
similar instruments owned by any other person.
B. PREFERRED STOCK.
The Board of Directors of the Corporation is authorized by vote or
votes, from time to time adopted, to provide for the issuance of one or more
classes of preferred stock, which shall be separately identified. The Board of
Directors shall have the authority to divide any authorized class of preferred
stock of the Corporation into one or more series and to fix and state the voting
powers, designations, preferences and relative, participating, optional or other
special rights of the shares of any series so established and the
qualifications, limitations and restrictions thereof. Each such series shall be
separately designated so as to distinguish the shares thereof from the shares of
all other series and classes. All shares of the same class shall be identical
except as to the following relative rights and preferences, as to which there
may be variations between different series:
(a) The distinctive serial designation and the number of shares
constituting such series;
(b) The dividend rates or the amount of dividends to be paid on the
shares of such series, whether dividends shall be cumulative and, if so, from
which date or dates, the payment date or dates for dividends, and the
participating or other special rights, if any, with respect to dividends;
(c) The voting powers, full or limited, if any, of shares of such
series;
(d) Whether the shares of such series shall be redeemable and, if so,
the price or prices at which, and the terms and conditions on which, such shares
may be redeemed;
(e) The amount or amounts payable upon the shares of such series in the
event of voluntary or involuntary liquidation, dissolution or winding up of the
Corporation;
(f) Whether the shares of such series shall be entitled to the benefit
of a sinking or retirement fund to be applied to the purchase or redemption of
such shares and if so entitled, the amount of such fund and the manner
4-4
<PAGE> 12
of its application, including the price or prices at which such shares may be
redeemed or purchased through the application of such fund.;
(g) Whether the shares of such series shall be convertible into, or
exchangeable for, shares of any other class or classes or of any other series of
the same or any other class or classes of stock of the Corporation, and if so
convertible or exchangeable, the conversion price or prices or the rate or rates
of exchange, and the adjustments thereof, if any, at which such conversion or
exchange may be made, and any other terms and conditions of such conversion or
exchange;
(h) The price or other consideration for which the shares of such
series shall be issued; and
(i) Whether the shares of such series which are redeemed or converted
shall have the status of authorized but unissued shares of preferred stock and
whether such shares may be reissued as shares of the same or any other series of
stock.
Any such vote shall become effective when the Corporation files with
the Secretary of State of the State of Rhode Island a certificate of
establishment of one or more series of preferred stock signed by the President
or any Vice President and by the Secretary or any Assistant Secretary of the
Corporation, and acknowledged as required by applicable Rhode Island law,
setting forth a copy of the vote of the Board of Directors establishing and
designating the series and fixing and determining the relative rights and
preferences thereof, including, without limitation, the number of shares of
stock of the class or series, the date of adoption of such vote and a
certification that such vote was duly adopted by the Board of Directors.
Each share of each series of preferred stock shall have the same
relative rights as and be identical in all respects with all the other shares of
the same series.
4-5
<PAGE> 13
SUPPLEMENTAL PROVISIONS
TO ARTICLE 6 OF THE
ARTICLES OF INCORPORATION OF BANCORP RHODE ISLAND, INC.
SECTION 1. DIRECTORS. The business affairs of the Corporation shall be
managed by or under the direction of a Board of Directors which may exercise
such powers and do all such acts and things as may be provided by applicable
law, these Articles of Incorporation and the Bylaws of the Corporation.
The number of directors shall not be fewer than five (5) nor more than
fifteen (15) (exclusive of directors, if any, to be elected by holders of one or
more series of preferred stock of the Corporation, voting separately as a
class), unless otherwise required by applicable law or regulations. The number
of directors shall initially be set at 12. Within the foregoing limits, the
number of directors which shall constitute the whole Board of Directors shall
thereafter be determined by the affirmative vote of a majority of the directors
then in office at the time of such vote, unless at the time of such action there
shall be an Interested Shareholder (as defined in Section 2), in which case such
action shall in addition require the affirmative vote of at least two-thirds
(2/3) of the Continuing Directors (as defined in Section 2) then in office,
provided, however, that the number of directors may be decreased by vote of the
Board of Directors only to eliminate vacancies existing by reason of the death,
resignation or removal of one or more directors.
The names and addresses of the members of the initial Board of
Directors under these Articles of Incorporation are set forth in Article 8
hereof. Such persons shall hold office until the first annual meeting of the
shareholders and until their successors are elected and qualified. At the first
annual meeting of the shareholders, the shareholders shall elect directors to
hold office until the expiration of their respective terms as provided herein
and until their respective successors shall be duly elected and qualified.
Commencing with the directors elected at the first annual meeting of the
shareholders, the directors shall be divided into three classes, such classes to
be as nearly equal in number as possible, the term of office of directors of the
first class to expire at the second annual meeting of the shareholders, that of
the second class to expire at the third annual meeting of the shareholders, and
that of the third class to expire at the fourth annual meeting of the
shareholders. At each annual meeting of the shareholders after the first annual
meeting of the shareholders, the number of directors equal to the number of the
class whose term expires at the time of such meeting shall be elected to hold
office until the third succeeding annual meeting after their election and until
their successors shall be duly elected and qualified.
In the case of any decrease or increase in the number of directors, the
increase or decrease shall be distributed among the several classes of directors
as equally as possible, as shall be determined by the affirmative vote of a
majority of the directors then in office at the time of such vote, unless at the
time of such action there shall be an Interested Shareholder, in which case such
action shall in addition require the affirmative vote of at least two-thirds
(2/3) of the Continuing Directors then in office.
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Any vacancies in the Board of Directors for any reason, and any newly
created directorships resulting from any increase in the number of directors,
may be filled only by the affirmative vote of a majority of the Board of
Directors then in office, although less than a quorum, unless at the time of
such action there shall be an Interested Shareholder, in which case such action
shall in addition require the affirmative vote of at least two-thirds (2/3) of
the Continuing Directors then in office. A director elected to fill a vacancy
shall hold office, subject to the provisions of these Articles of Incorporation
and the Bylaws, for the unexpired term of his predecessor in office. Any
directorship to be filled by reason of an increase in the number of directors
may be filed by the Board of Directors for a term of office continuing only
until the next election of directors by the shareholders, provided, however,
that only three directors may be added to the Board of Directors by reason of
any increase in the size of the Board of Directors between meetings of the
shareholders.
Any director (including persons elected by directors to fill vacancies
in the Board of Directors) or the entire Board of Directors may be removed at
any time, for cause, by either (i) an affirmative vote of the holders of not
less than two-thirds (2/3) of the outstanding shares of Voting Stock, taking
such action at an annual meeting of shareholders, or at a special meeting of
shareholders duly called for such purpose, or (ii) the affirmative vote of not
less than two-thirds (2/3) of the directors then in office, unless at the time
of such action there shall be an Interested Shareholder, in which case such
action shall in addition require the affirmative vote of at least two-thirds
(2/3) of the Continuing Directors then in office. Any or all of the directors
may also be removed without cause by an affirmative vote of the holders of not
less than two-thirds (2/3) of the outstanding shares of Voting Stock, taking
such action at an annual meeting of shareholders, or at a special meeting of
shareholders duly called for such purpose.
SECTION 2. CERTAIN BUSINESS COMBINATIONS.
A. APPROVAL OF BUSINESS COMBINATIONS.
(a) VOTE REQUIRED FOR CERTAIN BUSINESS COMBINATIONS. In addition to any
affirmative vote required by the Rhode Island Business Corporation Act or by
these Articles of Incorporation, and except as otherwise expressly provided in
subsection (b), any Business Combination (as hereinafter defined) shall require
the affirmative vote of the holders of at least two-thirds (2/3) of the voting
power of the then outstanding shares of capital stock of the Corporation
entitled to vote generally in the election of directors (the "VOTING STOCK"),
voting together as a single class. Such affirmative vote shall be required
notwithstanding the fact that no vote may be required, or that a lesser
percentage may be specified, by law.
(b) WHEN HIGHER VOTE IS NOT REQUIRED. The provisions of subsection (a)
shall not be applicable to any particular Business Combination, and such
Business Combination shall require only such affirmative vote as is required by
law and any other provisions of these Articles of Incorporation, if all of the
conditions specified in either of the following paragraphs 1 and 2 are met:
1. APPROVAL BY CONTINUING DIRECTORS. The Business Combination shall
have been approved by a majority of the Continuing Directors (as hereinafter
defined) then in office.
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2. PRICE AND PROCEDURE REQUIREMENTS. All of the following conditions
shall have been met:
(i) The aggregate amount of the cash and the Market Value (as
hereinafter defined) of consideration other than cash, determined as of the date
of the consummation of the Business Combination, to be received per share by
holders of common stock in such Business Combination shall be at least equal to
the highest of the following:
(a) (if applicable) the highest per share price
(including any brokerage commissions, transfer taxes and soliciting dealers'
fees) paid by the Interested Shareholder for any shares of common stock acquired
by it (1) within the two-year period immediately prior to the first public
announcement of the proposal of the Business Combination (the "ANNOUNCEMENT
DATE") or (2) in the transaction in which it became an Interested Shareholder,
whichever is higher;
(b) the Market Value per share of Common Stock on the
Announcement Date or on the date on which the Interested Shareholder became an
Interested Shareholder (such later date is referred to in this Section 4 as the
"DETERMINATION DATE"), whichever is higher; or
(c) (if applicable) the price per share equal to the
Market Value per share of Common Stock determined pursuant to paragraph (i)(b)
above, multiplied by the ratio of (1) the highest per share price (including any
brokerage commissions, transfer taxes and soliciting dealers' fees) paid by the
Interested Shareholder for any shares of common stock acquired by it within the
two-year period immediately prior to the Announcement Date to (2) the Market
Value per share of Common Stock on the first day in such two-year period upon
which the Interested Shareholder acquired any shares of Common Stock.
(ii) The aggregate amount of the cash and the Market Value of
consideration other than cash, determined as of the date of the consummation of
the Business Combination, to be received per share by holders of shares of any
other class of outstanding Voting Stock shall be at least equal to the highest
of the following (it being intended that the requirements of this paragraph
2(ii) shall be required to be met with respect to every other class of
outstanding Voting Stock, whether or not the Interested Shareholder has
previously acquired any shares of a particular class of Voting Stock):
(a) (if applicable) the highest per share price
(including any brokerage commissions, transfer taxes and soliciting dealers'
fees) paid by the Interested Shareholder for any shares of such class of Voting
Stock acquired by it (1) within the two-year period immediately prior to the
Announcement Date or (2) in the transaction in which it became an Interested
Shareholder, whichever is higher;
(b) (if applicable) the highest preferential amount
per share to which the holders of shares of such class of Voting Stock are
entitled in the event of any voluntary or involuntary liquidation, dissolution
or winding up of the Corporation;
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(c) the Market Value per share of such class of Voting
Stock on the Announcement Date or on the Determination Date, whichever is
higher; or
(d) (if applicable) the price per share equal to the
Market Value per share of such class of Voting Stock determined pursuant to
paragraph (ii)(c) above, multiplied by the ratio of (1) the highest per share
price (including any brokerage commissions, transfer taxes and soliciting
dealers' fees) paid by the Interested Shareholder for any shares of such class
of Voting Stock acquired by it within the two-year period immediately prior to
the Announcement Date to (2) the Market Value per share of such class of Voting
Stock on the first day in such two-year period upon which the Interested
Shareholder acquired any shares of such class of Voting Stock.
(iii) The consideration to be received by holders of a
particular class of outstanding Voting Stock (including common stock) shall be
in cash or in the same form as the Interested Shareholder has previously paid
for shares of such class of Voting Stock. If the Interested Shareholder has paid
for shares of any class of Voting Stock with varying forms of consideration, the
form of consideration for such class of Voting Stock shall be either cash or the
form used to acquire the largest number of shares of such class of Voting Stock
previously acquired by it.
(iv) After such Interested Shareholder has become an
Interested Shareholder and prior to the consummation of any such Business
Combination: (a) there shall have been (1) no reduction in the annual rate of
dividends paid on the common stock (except as necessary to reflect any
subdivision of the common stock), except as approved by two-thirds (2/3) of the
Continuing Directors, and (2) an increase in such annual rate of dividends as
necessary to reflect any reclassification (including any reverse stock split),
recapitalization, reorganization or any similar transaction which has the effect
of reducing the number of outstanding shares of the common stock, unless the
failure so to increase such annual rate is approved by two-thirds (2/3) of the
Continuing Directors; and (b) such Interested Shareholder shall not have become
the beneficial owner of any additional shares of Voting Stock except as part of
the transaction which results in such Interested Shareholder becoming an
Interested Shareholder.
(v) After such Interested Shareholder has become an Interested
Shareholder, such Interested Shareholder shall not have received the benefit,
directly or indirectly (except proportionately as a shareholder), of any loans,
advances, guarantees, pledges or other financial assistance or any tax credits
or other tax advantages provided by the Corporation, whether in anticipation or
in connection with such Business Combination or otherwise.
(vi) A proxy or information statement describing the proposed
Business Combination and complying with the requirements of the Exchange Act and
the rules and regulations thereunder shall be mailed to public shareholders of
the Corporation at least 20 days prior to the consummation of such Business
Combination (whether or not such proxy or information statement is required to
be mailed pursuant to the Exchange Act).
In the event of any Business Combination in which the Corporation
survives, the phrase "other consideration to be received" as used in paragraphs
(b)2(i) and (ii) hereof shall include the
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shares of common stock and/or the shares of any other class of outstanding
Voting Stock retained by the holders of such shares.
B. DEFINITIONS.
As used in this section, unless the context otherwise requires, the
term:
(1) "Affiliate" means a person that directly, or indirectly through one
or more intermediaries, controls, or is controlled by, or is under common
control with, a specified person.
(2) "Associate", when used to indicate a relationship with any person,
means:
(A) Any corporation or organization of which the person is a
director, officer, or partner or is, directly or indirectly, the beneficial
owner of ten percent (10%) or more of any class of Voting Stock,
(B) Any trust or other estate in which the person has a
substantial beneficial interest or as to which the person serves as trustee or
in a similar fiduciary capacity, and
(C) Any relative or spouse of the person, or any relative of
the spouse, who has the same residence as the person.
(3) "Beneficial Owner" of any shares of Voting Stock means shares of
Voting Stock:
(i) which such person or any of its Affiliates or Associates
directly or indirectly, has (a) the right to acquire (whether such right is
exercisable immediately or only after the passage of time), pursuant to any
agreement, arrangement or understanding or upon the exercise of conversion
rights, warrants or options, or otherwise, (b) the right to vote pursuant to any
agreement, arrangement or understanding, or (c) the right to dispose of or
transfer; or
(ii) which are beneficially owned, directly or indirectly, by
any other person with which such person or any of its Affiliates or Associates
has any agreement, arrangement or understanding for the purpose of acquiring,
holding, voting or disposing of any shares of Voting Stock.
(4) "Business Combination" means:
(A) Any merger or consolidation of the Corporation or any
subsidiary of the Corporation with (i) the Interested Shareholder or (ii) any
other financial institution or corporation, as applicable, whether or not itself
an Interested Shareholder of the Corporation, which is, or after the merger or
consolidation would be, an Affiliate of the Interested Shareholder;
(B) Any sale, lease, exchange, mortgage, pledge, transfer, or
other disposition, in one transaction or a series of transactions, except
proportionately as a shareholder of the Corporation, to or with the Interested
Shareholder or any Affiliate of the Interested Shareholder,
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whether as a part of a dissolution or otherwise, of assets of the Corporation,
or any subsidiary of the Corporation, (i) having an aggregate Market Value equal
to ten percent (10%) or more of the aggregate Market Value of all the assets,
determined on a consolidated basis, of the Corporation, or (ii) representing ten
percent (10%) or more of the earning power or net income, determined on a
consolidated basis, of the Corporation;
(C) Any transaction which results in the issuance or transfer
by the Corporation or by any subsidiary of the Corporation of any stock of the
Corporation or of the subsidiary to the Interested Shareholder or an Affiliate
of the Interested Shareholder in exchange for cash, securities or other property
(or a combination thereof) having an aggregate Market Value of $100,000 or more;
(D) The adoption of any plan or proposal for the liquidation
or dissolution of the Corporation proposed by, or pursuant to any agreement,
arrangement, or understanding, whether or not in writing with the Interested
Shareholder or any Affiliate of the Interested Shareholder; or
(E) Any reclassification of securities, including, without
limitation, any stock split, stock dividend, or other distribution of stock in
respect to stock, or any reverse stock split, or recapitalization of the
Corporation or any merger or consolidation of the Corporation with any
subsidiary of the Corporation or any other transaction, whether or not with or
into or otherwise involving the Interested Shareholder which has the effect,
directly or indirectly, or increasing the proportionate share of the outstanding
shares of any class or series of Voting Stock or securities convertible into
Voting Stock of the Corporation or any subsidiary of the Corporation which is
directly or indirectly owned by the Interested Shareholder or any Affiliate of
the Interested Shareholder, except as a result of immaterial changes due to
fractional share adjustments.
(5) "Continuing Director" means any member of the Board of Directors of
the Corporation who is not an Affiliate of the Interested Shareholder and was a
member of the Board prior to the time that the Interested Shareholder became an
Interested Shareholder, and any successor of a Continuing Director who is
unaffiliated with the Interested Shareholder and is recommended to succeed a
Continuing Director by the majority of Continuing Directors then on the Board.
(6) "Exchange Act" means the Securities Exchange Act of 1934, as it has
been, and hereafter may be, amended from time to time.
(7) "Interested Shareholder" means any person, other than the
Corporation or any subsidiary of the Corporation or any employee benefit plan
maintained by the Corporation, who or which:
(A) (i) is the beneficial owner, directly or indirectly, of
ten percent (10%) or more of the outstanding Voting Stock; or
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(ii) is an Affiliate of the Corporation and at any time
within a two (2) year period immediately prior to the date in question was the
beneficial owner, directly or indirectly, of ten percent (10%) or more of the
then outstanding Voting Stock; or
(iii) is an assignee of or has otherwise succeeded to any
shares of Voting Stock which were at any time within the two year period
immediately prior to the date in question beneficially owned by any Interested
Shareholder, if such assignment or succession shall have occurred in the course
of a transaction or series of transactions not involving a public offering
within the meaning of the Securities Act of 1933 and such assignment or
succession was not approved by two-thirds (2/3) of the Continuing Directors.
(B) Notwithstanding the foregoing, the term "Interested
Shareholder" shall not include either of the following categories of persons:
(i) any person whose ownership of shares in excess of ten
percent (10%) limitation set forth herein is the result of action taken solely
by the Corporation; provided, however, that the person shall be an Interested
Shareholder if thereafter he or she acquires additional shares of Voting Stock
of the Corporation except as a result of further corporate action not caused,
directly or indirectly, by the person; or
(ii) any person who was the beneficial owner, directly or
indirectly, of ten percent (10%) or more of the outstanding Voting Stock as of
the initial capitalization of the Corporation (which shall be the Corporation's
first issuance of stock).
(C) For the purpose of determining whether a person is an
Interested Shareholder, the number of shares of Voting Stock deemed to be
outstanding shall include shares deemed to be beneficially owned by the person
but shall not include any other unissued shares of Voting Stock which may be
issuable pursuant to any agreement, arrangement or understanding, or upon
exercise of conversion rights, warrants, or options, or otherwise.
(8) "Market Value" means:
(A) In the case of stock, the highest closing sale price
during the thirty (30) day period immediately preceding the date in question of
a share of stock on the principal United States securities exchange registered
under the Exchange Act on which the stock is listed, or, if the stock is not
listed on any exchange, the highest closing bid quotation with respect to a
share of the stock during the thirty (30) day period preceding the date in
question on the National Association of Securities Dealers, Inc. automated
quotations system or any other quotations system then in use, or if no such
quotations are available, the fair market value on the date in question of a
share of such stock as determined by at least two-thirds (2/3) of the Continuing
Directors of the Corporation in good faith; and
(B) In the case of property other than cash or stock, the fair
market value of the property on the date in question as determined by at least
two-thirds (2/3) of the Continuing Directors of the Corporation in good faith.
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(9) "Person" shall mean an individual, a group acting in concert, a
corporation, a general or limited partnership, a limited liability company or
partnership, an association, a joint stock company, a trust, a business trust
and any unincorporated organization or similar association or entity.
(10) "Subsidiary" means any corporation of which a majority of any
class of equity security is owned, directly or indirectly, by the Corporation;
provided, however, that for the purposes of the definition of Interested
Shareholder herein, the term "subsidiary" shall mean only a corporation of which
a majority of each class of equity security is owned, directly or indirectly, by
the Corporation.
(11) "Voting Stock" means shares of capital stock of the Corporation
entitled to vote generally in the election of directors.
C. POWERS OF THE BOARD OF DIRECTORS.
A majority of the directors of the Corporation (or, if there is an
Interested Shareholder, a majority of the Continuing Directors then in office)
shall have the power to determine for the purposes of this Section 2, on the
basis of information known to them after reasonable inquiry, (A) whether a
person is an Interested Shareholder, (B) the number of shares of Voting Stock
beneficially owned by any person, (C) whether a person is an Affiliate or
Associate of another person, (D) the Market Value of the assets which are the
subject of any Business Combination or the consideration to be received for the
issuance or transfer of securities by the Corporation or any subsidiary in any
Business Combination.
D. NO EFFECT ON FIDUCIARY OBLIGATIONS OF INTERESTED SHAREHOLDERS.
Nothing contained in this Section 2 shall be construed to relieve any
Interested Shareholder from any fiduciary obligation imposed by law.
SECTION 3. DUTIES IN RESPONSE TO ACQUISITION PROPOSALS.
(a) In discharging the duties of their respective positions with
respect to any proposed business combination, including, but not limited to, any
offer of another person to (i) make a tender or exchange offer for any equity
security of the Corporation, (ii) merge or consolidate the Corporation with or
into another institution, or (iii) purchase or otherwise acquire all or
substantially all of the properties and assets of the Corporation, the Board of
Directors, committees of the Board, individual directors, and the individual
officers may, in considering the best interest of the Corporation, in addition
to considering the effects on shareholders, consider any of the following:
(1) The effect on the Corporation's employees, creditors, and
customers;
(2) The effect on the communities in which the Corporation
operates;
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(3) The long term as well as the short term interests of the
Corporation and its shareholders, including the possibility that these interests
may best be served by the continued independence of the Corporation.
(b) On the basis of the factors described in subsection (a) above, if
the Board of Directors determines that any business combination is not in the
best interests of the Corporation, it may reject the business combination. If
the Board of Directors determines to reject any business combination, the Board
of Directors shall have no obligation to facilitate, to remove any barriers to,
or to refrain from impeding, the business combination.
SECTION 4. ACTION BY SHAREHOLDERS WITHOUT A MEETING. The shareholders
of the Corporation shall not be authorized to take any action required or
permitted to be taken at a meeting of shareholders without a meeting upon the
written consent of less than all the shareholders entitled to vote thereon.
SECTION 5. LIMITATION OF DIRECTOR LIABILITY. A director of the
Corporation shall not be liable to the Corporation or its shareholders for
monetary damages for breach of duty as a director, except to the extent that
exculpation from liability is not permitted under the Rhode Island Business
Corporation Act as in effect at the time such liability is determined. No
amendment or repeal of this Section 5 shall apply to or have any effect on the
liability or alleged liability of any director of the Corporation for or with
respect to any cause of action arising prior to such amendment or repeal.
SECTION 6. AMENDMENT OF BYLAWS. The Board of Directors or the
shareholders may adopt, alter, amend or repeal the Bylaws of the Corporation.
Such action by the Board of Directors shall require the affirmative vote of at
least two-thirds (2/3) of the directors then in office, unless at the time of
such action there shall be an Interested Shareholder, in which case such action
shall in addition require the affirmative vote of at least a majority of the
Continuing Directors then in office. Such action by the shareholders shall (i)
first require approval by the affirmative vote of a majority of the Board of
Directors of the Corporation then in office, unless at the time of such action
there shall be an Interested Shareholder, in which case such action shall in
addition require the affirmative vote of at least a majority of the Continuing
Directors then in office, (ii) unless waived by the affirmative vote of the
Board of Directors or Continuing Directors (as the case may be) specified in the
preceding sentence, further require the submission by the shareholders of
written proposals for adopting, altering, amending, changing or repealing the
Bylaws at least sixty days prior to the meeting at which they are to be
considered and (iii) further require the affirmative vote of at least two-thirds
(2/3) of the total votes eligible to be cast by shareholders at a duly
constituted meeting of shareholders called expressly for such purpose.
Notwithstanding the foregoing, any amendment by the Bylaws by the Board of
Directors may be changed by the vote of at lest two-thirds (2/3) of the total
votes eligible to be cast by shareholders at a duly constituted meeting of
shareholders.
SECTION 7. AMENDMENT OF ARTICLES OF INCORPORATION. No amendment,
addition, alternation, change or repeal of these Articles of Incorporation shall
be made, unless the same is first proposed by the affirmative vote of two-thirds
(2/3) of the directors then in office, unless at the time of such action there
shall be an Interested Shareholder, in which case such action shall
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in addition require the affirmative vote of at least two-thirds (2/3) of the
Continuing Directors then in office, and thereafter approved by the shareholders
by a majority of the total votes eligible to be cast at a duly constituted
meeting, or, in the case of Sections 1, 2, 3, 5, 6 or 7 of the Supplemental
Provisions of Article 6 of these Articles of Incorporation, by no less than
two-thirds (2/3) of the total votes eligible to be cast by shareholders at a
duly constituted meeting.
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SUPPLEMENTAL PROVISIONS
TO ARTICLE 8 OF THE
ARTICLES OF INCORPORATION
DIRECTORS OF BANCORP RHODE ISLAND, INC.
NAME ADDRESS
- - ---- -------
Anthony F. Andrade 61 Winter Street
Rehoboth, MA 02769
John Berger 33 Belknap Road
West Hartford, CT 06117
Malcolm G. Chace 67 Oriole Avenue
Providence, RI 02906
Ernest J. Chornyei, Jr. 18 East Hills Road
Watch Hill, RI 02891
Karl F. Ericson 196 President Avenue
Providence, RI 02906
Margaret D. Farrell 27 Jenny's Lane
Barrington, RI 02806
Mark Feinstein 400 Laurel Avenue
Providence, RI 02906
Frederick J. Hodges, Jr. 330 Gray Craig Road
Middletown, RI 02842
Donald Reeves 20 Agawam Road
Sharon, MA 02067
Merrill W. Sherman 24 Channing Avenue
Providence, RI 02906
Cheryl L. Watkins 101 St. James Court
North Providence, RI 02904
John A. Yena 115 Watch Hill Drive
East Greenwich, RI 02818
<PAGE> 1
EXHIBIT 3.2
BANCORP RHODE ISLAND, INC.
(a stock corporation
organized pursuant to the
Rhode Island Business Corporation Act)
-----
BY-LAWS
-----
/s/ Margaret D. Farrell
------------------------------
Margaret D. Farrell, Secretary
As Adopted on February 15, 2000
<PAGE> 2
EXHIBIT 3.2
BANCORP RHODE ISLAND, INC.
(the "Corporation")
(a stock corporation organized pursuant to the Rhode Island
Business Corporation Act)
BY-LAWS
These By-Laws are subject to the Articles of Incorporation of the
Corporation. References herein to law, the Articles of Incorporation and these
By-Laws mean the law, the provisions of the Articles of Incorporation and the
By-Laws as from time to time in effect.
ARTICLE I
OFFICES
SECTION 1.01. REGISTERED OFFICE. The registered office of the
Corporation shall be at 1500 Fleet Center, Providence Rhode Island, or such
other location as the Board of Directors of the Corporation (the "Board") may
designate, subject to change as authorized by law.
SECTION 1.02. OTHER OFFICES. The Corporation may also have an office or
offices at such places both within and without the State of Rhode Island as may
from time to time be determined by the Board or as the business of the
Corporation may require.
ARTICLE II
SHAREHOLDERS
SECTION 2.01. PLACE OF MEETINGS. All meetings of the shareholders of the
Corporation shall be held at the principal executive offices of the Corporation
in Rhode Island or at such place either within or without the State of Rhode
Island as shall be fixed by the Board and specified in the respective notices or
waivers of notice of said meetings.
SECTION 2.02. ANNUAL MEETINGS.
(a) The annual meeting of the shareholders for the election of directors
and for the transaction of such other business as properly may come before the
meeting shall be held at the principal office of the Corporation in the State of
Rhode Island, or such place as shall be fixed by the Board, at 10:00 a.m., local
time, on the third Wednesday in May in each year, if not a legal holiday at the
place where such meeting is to be held, and, if a legal holiday, then on the
next succeeding business day not a legal holiday at the same hour.
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<PAGE> 3
(b) In respect of the annual meeting for any particular year, the Board
may, by resolution, fix a different day, time or place (either within or without
the State of Rhode Island) for the annual meeting.
(c) If the election of directors shall not be held on the day designated
herein or the day fixed by the Board, as the case may be, for any annual
meeting, or on the day of any adjourned session thereof, the Board shall cause
the election to occur at a special meeting to be held as soon thereafter as
practicable. At such special meeting the shareholders may elect the directors
and transact other business with the same force and effect as at an annual
meeting duly called and held.
SECTION 2.03. MATTERS TO BE CONSIDERED AT ANNUAL MEETINGS. At an annual
meeting of shareholders, only such new business shall be conducted, and only
such proposals shall be acted upon as shall be proper subjects for shareholder
action pursuant to the Articles of Incorporation, these By-Laws, or applicable
law and shall have been brought before the annual meeting (a) by, or at the
direction of, the Board, the Chairman of the Board, or the President or (b) by a
shareholder of the Corporation who complies with the notice procedures set forth
in this Section 2.03.
For a proposal to be properly brought before an annual meeting by a
shareholder, the shareholder must have given timely notice thereof in writing to
the Secretary of the Corporation. To be timely, a shareholder's notice must be
received at the principal executive offices of the Corporation not less than 60
days nor more than 150 days prior to the scheduled annual meeting, regardless of
any postponements, deferrals or adjournments of that meeting to a later date;
provided, however, that if less than 70 days' notice or prior public disclosure
of the date of the scheduled annual meeting is given or made, notice by the
shareholder to be timely must be so delivered or received not later than the
close of business on the tenth day following the earlier of the day on which
such notice of the date of the scheduled annual meeting was mailed or the day on
which public disclosure was made. A shareholder's notice to the Secretary shall
set forth as to each matter the shareholder proposes to bring before the annual
meeting (a) a brief description of the proposal desired to be brought before the
annual meeting and the reasons for conducting such business at the annual
meeting, (b) the name and address, as they appear on the Corporation's books, of
the shareholder proposing such business and any other shareholders known by such
shareholder to be supporting such proposal, (c) the class and number of shares
of the Corporation's capital stock which are beneficially owned by the
shareholder on the date of such shareholder notice and by any other shareholders
known by such shareholder to be supporting such proposal on the date of such
shareholder notice, and (d) any financial interest of the shareholder in such
proposal.
Nothing contained in this Section 2.03 shall require proxy materials
distributed by the management of the Corporation to include any information with
respect to shareholder proposals.
The Board may reject any shareholder proposal not timely made in
accordance with the terms of this Section 2.03. If there is an Interested
Shareholder (as defined below), any determinations to be made by the Board or a
designated committee thereof pursuant to the
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provisions of this paragraph shall also require the concurrence of a majority of
the Continuing Directors (as defined below) then in office.
This provision shall not prevent the consideration and approval or
disapproval at the annual meeting of reports of officers, Directors, and
committees, but in connection with such reports, no matter shall be acted upon
at such annual meeting unless stated and filed as herein provided.
As used in these By-Laws, the terms "Interested Shareholder" and
"Continuing Director" shall have the same respective meanings assigned to them
in the Articles of Incorporation. Any determination of beneficial ownership of
securities under these By-Laws shall be made in the manner specified in the
Articles of Incorporation.
SECTION 2.04. SPECIAL MEETINGS. A special meeting of the shareholders
for any purpose or purposes may be called at any time by the Chairman of the
Board or the President or by a majority of the Board then in office (provided,
however, that if there is an Interested Shareholder, any such call by the Board
shall also require the affirmative vote of a majority of the Continuing
Directors then in office).
SECTION 2.05. NOTICE OF MEETINGS. Except as otherwise required by law, a
written notice of each meeting of shareholders stating the place, day and hour
thereof and, in the case of a special meeting, the purposes for which the
meeting is called, shall be given not less than ten (10) nor more than sixty
(60) days before the date of the meeting, to each shareholder of record entitled
to vote thereat either personally or by depositing it in the United States mail,
postage prepaid, and addressed to such shareholder at his address as it appears
in the stock transfer books of the Corporation. Such notice shall be given by or
at the direction of the President, the Secretary or the officer or persons
calling the meeting. Notice of any adjourned session of a meeting of the
shareholders shall not be required to be given except when expressly required by
law. A written waiver of notice of any meeting of the shareholders signed by the
shareholder or shareholders entitled to notice, whether before or after the time
stated therein, shall be equivalent to the giving of notice of such meeting
(including any adjourned sessions thereof). Neither the business to be
transacted at, nor the purpose of any meeting of the shareholders or any
adjourned session thereof need be specified in the written waiver of notice.
Attendance of a shareholder at a meeting or any adjourned session thereof shall
constitute a waiver of notice of such meeting, except when the shareholder
attends a meeting for the express purpose of objecting to the transaction of any
business because the meeting is not lawfully called or convened.
SECTION 2.06. QUORUM.
(a) At each meeting of the shareholders, except where otherwise provided
by statute, the Articles of Incorporation or these By-Laws, the holders of
record of a majority of the issued and outstanding shares of stock of the
Corporation entitled to vote at such meeting, present in person or represented
by a proxy, shall constitute a quorum for the transaction of business.
(b) In the absence of a quorum a majority in interest of the
shareholders of the Corporation entitled to vote, present in person or
represented by proxy or, in the absence of all
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such shareholders, any officer entitled to preside at, or act as secretary of,
such meeting, shall have the power to adjourn the meeting from time to time,
until shareholders holding the requisite amount of stock shall be present or
represented. At any such adjourned meeting at which a quorum shall be present
any business may be transacted which might have been transacted at the meeting
as originally called.
SECTION 2.07. VOTING.
(a) Except as otherwise provided by law or by the Articles of
Incorporation or these By-Laws, at every meeting of the shareholders each
shareholder shall be entitled to one vote, in person or by proxy, for each share
of capital stock of the Corporation entitled to vote registered in his name on
the books of the Corporation:
(i) on the date fixed pursuant to Section 6.03 of these By-Laws as the
record date for the determination of shareholders entitled to vote at
such meeting; or
(ii) if no such record date shall have been fixed, then the record date
shall be at the close of business on the day on which notice of such
meeting is given.
(b) Neither treasury shares, nor shares held, directly or indirectly, by
another corporation if a majority of the shares entitled to vote for the
election of directors of such corporation is held by the Corporation, shall be
voted at any meeting of shareholders; provided, however, that the foregoing
shall not limit the right of the Corporation to vote stock, including but not
limited to its own stock, held in a fiduciary capacity.
(c) Any shareholder entitled to vote may do so in person or by his proxy
appointed by an instrument in writing subscribed by such shareholder or by his
attorney thereunto authorized, provided, however, that no proxy shall be voted
after eleven months from its date, unless said proxy provides for a longer
period. Proxies shall be filed with the Secretary at the meeting, or of any
adjournment thereof, before being voted. Proxies solicited on behalf of the
management shall be voted as directed by the shareholder or, in the absence of
such direction, as determined by a majority of the Board. Except as otherwise
limited therein, proxies shall entitle the persons authorized thereby to vote at
any adjournment of such meeting, but they shall not be valid after final
adjournment of such meeting. A proxy with respect to stock held in the name of
two or more persons shall be valid if executed by one of them unless at or prior
to exercise of the proxy the Secretary of the Corporation receives a specific
written notice to the contrary from any one of them. A proxy purporting to be
executed by or on behalf of a shareholder shall be deemed valid unless
successfully challenged at or prior to its exercise, and the burden of proving
invalidity shall rest on the challenger.
(d) At all meetings of the shareholders, all matters (except where other
provision is made by law or by the Articles of Incorporation or these By-Laws)
shall be decided by the vote of a majority in interest of the shareholders
entitled to vote thereon, present in person or by proxy at such meeting, a
quorum being present. Any election by shareholders shall be determined by a
plurality of votes cast, except where a larger vote is required by law, the
Articles of Incorporation
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or these By-Laws. No ballot shall be required for any election unless requested
by a shareholder entitled to vote in the election.
SECTION 2.08. INSPECTORS. The Chairman of the meeting may at any time
appoint two or more inspectors to serve at any meeting of the shareholders. Such
inspectors shall decide upon the qualifications of voters, accept and count the
votes for and against the questions presented, report the results of such votes,
and subscribe and deliver to the secretary of the meeting a certificate stating
the number of shares of stock issued and outstanding and entitled to vote
thereon and the number of shares voted for and against the questions presented.
The inspectors need not be shareholders of the Corporation, and any director or
officer of the Corporation may be an inspector on the question other than a vote
for or against his election to any position with the Corporation or on any other
question in which he may be directly interested. Before acting as herein
provided, each inspector shall subscribe an oath faithfully to execute the
duties of an inspection with strict impartiality and according to the best of
his ability.
SECTION 2.09. LIST OF SHAREHOLDERS.
(a) It shall be the duty of the Secretary or other office of the
Corporation who shall have charge of its stock ledger to prepare and make, or
cause to be prepared and made, at least ten days before every meeting of the
shareholders, a complete list of the shareholders entitled to vote thereat,
arranged in alphabetical order and showing the address of each shareholder and
the number of shares registered in the name of the shareholder
(b) Such list shall be produced and kept at the time and place of the
meeting during the whole time thereof, and may be inspected by any shareholder
who is present.
(c) The stock ledger shall be conclusive evidence as to who are the
shareholders entitled to examine the stock ledger and the listing of
shareholders required by this Section 2.09 on the books of the Corporation or to
vote in person or by proxy at any meeting of shareholders.
ARTICLE III
BOARD OF DIRECTORS
SECTION 3.01. GENERAL POWERS. The business, property and affairs of the
Corporation shall be managed by the Board. In the event of a vacancy in the
Board, the remaining directors, except as otherwise provided by law, may
exercise the powers of the full Board until the vacancy is filled.
SECTION 3.02. NUMBER, QUALIFICATION AND TERM OF OFFICE.
(a) The number of directors of the Corporation which shall constitute
the whole Board shall be determined in accordance with the provisions of the
Articles of Incorporation. No decrease in the number of directors shall have the
effect of shortening the term of any incumbent director.
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(b) The Board shall be divided into three classes in accordance with the
provisions of the Articles of Incorporation, shall be nominated in accordance
with the provisions of these By-Laws, and shall be elected and shall serve terms
in accordance with the provisions of the Articles of Incorporation and these
By-Laws.
(c) Each director shall have such qualifications as are required by
applicable law Directors need not be residents of Rhode Island or shareholders
of the Corporation. No director may continue in office after the next annual
meeting following his or her attainment of 72 years of age, and shall be deemed
to have resigned concurrent with such annual meeting.
SECTION 3.03. DIRECTOR NOMINATIONS. Nominations of candidates for
election as directors at any annual meeting of shareholders may be made (a) by,
or at the direction of, a majority of the Board (unless there is an Interested
Shareholder, in which case the affirmative vote of a majority of the Continuing
Directors shall also be required) or (b) by any shareholder entitled to vote at
such annual meeting. Only persons nominated in accordance with the procedures
set forth in this Section 3.03 shall be eligible for election as directors at
any annual meeting.
Nominations, other than those made by, or at the direction of, the
Board (or by the Continuing Directors, if required), shall be made pursuant to
timely notice in writing to the Secretary of the Corporation as set forth in
this Section 3.03. To be timely, a shareholder's notice shall be delivered to,
or mailed and received, at the principal executive offices of the Corporation
not less than 60 days nor more than 150 days prior to the date of the scheduled
annual meeting, regardless of postponements, deferrals, or adjournments of that
meeting to a later date; provided, however, that if less than 70 days' notice or
prior public disclosure of the date of the scheduled annual meeting is given or
made, notice by the shareholder to be timely must be so delivered or received
not later than the close of business on the tenth day following the earlier of
the day on which such notice of the date of the scheduled annual meeting was
mailed or the day on which such public disclosure was made. Such shareholder's
notice shall set forth (a) as to each person whom the shareholder proposes to
nominate for election or re-election as a director and as to the shareholder
giving the notice (i) the name, age, business address and residence address of
such person, (ii) the principal occupation or employment of such person, (iii)
the class and number of shares of the Corporation's capital stock which are
beneficially owned by such person on the date of such shareholder notice and
(iv) any other information relating to such person that is required to be
disclosed in solicitations of proxies with respect to nominees for election as
directors, pursuant to proxy regulations promulgated under the Securities
Exchange Act of 1934, as amended; and (b) as to the shareholder giving the
notice (i) the name and address as they appear on the Corporation's books, of
such shareholder and any other shareholders known by such shareholder to be
supporting such nominees and (ii) the class and number of shares of the
Corporation's capital stock which are beneficially owned by such shareholder on
the date of such shareholder notice and by any other shareholders known by such
shareholder to be supporting such nominees on the date of such shareholder
notice. At the request of the Board, any person nominated by, or at the
direction of, the Board for election as a director at an annual or special
meeting shall furnish to the Secretary of the Corporation that information
required to be set forth in the shareholder's notice of nomination which
pertains to the nominee.
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Nothing contained in this Section 3.03 shall require proxy materials
distributed by the management of the Corporation to include any information with
respect to nominations by shareholders.
No person shall be elected as a director of the Corporation unless
nominated in accordance with the procedures set forth in this Section 3.03.
Ballots bearing the names of all the persons who have been nominated for
election as directors at an annual or special meeting in accordance with the
procedures set forth in this Section 3.03 shall be provided for use at such
annual or special meeting.
The Board may reject any nomination by a shareholder that is not timely
made in accordance with this Section 3.03 or does not satisfy any requirements
of this Section 3.03 in any material respect. If there is an Interested
Shareholder, any determinations to be made by the Board or a designated
committee thereof pursuant to the provisions of this paragraph shall also
require the concurrence of a majority of the Continuing Directors then in
office.
SECTION 3.04. QUORUM AND MANNER OF ACTING.
(a) Except as otherwise provided by statute or by the Articles of
Incorporation, a majority of the directors at the time in office shall
constitute a quorum for the transaction of business at any meeting and the
affirmative action of a majority of the directors present at any meeting at
which a quorum is present shall be required for the taking of any action by the
Board.
(b) In the absence of a quorum at any meeting of the Board such meeting
need not be held, or a majority of the directors present thereat or, if no
director be present, the Secretary may adjourn such meeting from time to time
until quorum shall be present. Notice of any adjourned meeting need not be
given.
SECTION 3.05. OFFICES, PLACE OF MEETING AND RECORDS. The Board may hold
meetings, have an office or offices and keep the books and records of the
Corporation at such place or places within or without the State of Rhode Island
as the Board may from time to time determine. The place of meeting shall be
specified or fixed in the respective notices or waivers of notice thereof,
except where otherwise provided by statute, by the Articles of Incorporation or
these By-Laws.
SECTION 3.06. ANNUAL MEETING. The Board shall meet for the purpose of
organization, the election of offices and the transaction of other business, as
soon as practicable following each annual election of directors. Such meeting
shall be called and held at the place and time specified in the notice or waiver
of notice thereof as in the case of a special meeting of the Board.
SECTION 3.07. REGULAR MEETINGS. A regular meeting of the Board shall be
held without other notice than this By-law on the same date and at the same
place as the annual meeting of shareholders, or the special meeting held in lieu
thereof, following such meeting of shareholders. The Board may provide by
resolution, the time, date and place for the holding of regular meetings without
other notice than such resolution, provided that notice of the first regular
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meeting following any such determination shall be given to absent directors.
There shall be regular meetings of the Board at a place or places fixed from
time to time by the Board.
Regular meetings of any committee designated by the Board may be held
without call or notice at such places within or without the State of Rhode
Island and at such times as the Board or committee may from time to time
determine.
SECTION 3.08. SPECIAL MEETINGS; NOTICE. Special meetings of the Board
shall be held whenever called by the Chairman of the Board or the President or
by a majority of the directors. Notice of each such meeting shall be mailed to
each director, addressed to him at his residence or usual place of business, or
shall be sent to him at his residence or at such place of business by telegraph,
cable or other available means, at least three days before the day on which the
meeting is to be held, or shall be delivered personally or by telephone or
facsimile, not later than twenty-four hours before the meeting is to be held. If
mailed, such notice shall be deemed to be delivered when deposited in the mail,
with postage prepaid thereon. Each such notice shall state the time and place of
the meeting but need not state the purposes thereof except as otherwise herein
expressly provided. Notice of any such meeting need not be given to any
director, however, if waived by him in writing or by telegraph, cable or
otherwise, whether before or after such meeting shall be held. Attendance of a
director at a meeting shall constitute a waiver of notice of the meeting, except
where a director attends a meeting for the express purpose of objecting to the
transaction of any business because the meeting is not lawfully called or
convened.
SECTION 3.09. REMOVAL OF DIRECTORS. Any director (including persons
elected by directors to fill vacancies in the Board) or the entire Board may be
removed at any time, for cause, by either (i) an affirmative vote of the holders
of not less than two-thirds of the outstanding shares of voting stock, taking
such action at an annual meeting of shareholders, or at a special meeting of
shareholders duly called for such purpose, or (ii) the affirmative vote of not
less than two-thirds of the directors then in office, unless at the time of such
action there shall be an Interested Shareholder, in which case such action shall
in addition require the affirmative vote of at least two-thirds of the
Continuing Directors then in office. Any or all of the directors may also be
removed without cause by an affirmative vote of the holders of not less than
two-thirds of the outstanding shares of voting stock, taking such action at an
annual meeting of shareholders, or at a special meeting of shareholders duly
called for such purpose.
SECTION 3.10. RESIGNATION. Any director of the Corporation may resign at
any time by giving written notice of his resignation to the Board, to the
Chairman of the Board or the President of the Corporation. Such resignation
shall take effect at the date of receipt of such notice or at any later time
specified therein; and, unless otherwise specified therein, the acceptance of
such resignation shall not be necessary to make it effective.
SECTION 3.11. VACANCIES. Vacancies and newly created directorships shall
be filled only by the affirmative vote of a majority of the Board then in
office, although less than a quorum, unless at the time of such action there
shall be an Interested Shareholder, in which case such action shall in addition
require the affirmative vote of at least two-thirds of the Continuing Directors
then in office.
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SECTION 3.12. COMPENSATION. Each director, in consideration of his
serving as such, may be entitled to receive from the Corporation such amount per
annum or such fees for attendance at meetings of the Board and its committees,
or both, together with reimbursement for the reasonable expenses incurred by
such director in connection with the performance of his duties ,as the Board
shall from time to time determine, provided that nothing herein contained shall
be construed to preclude any director from serving the Corporation or its
subsidiaries in any other capacity and receiving proper compensation therefor.
SECTION 3.13. ACTION WITHOUT A MEETING. Except as may otherwise be
provided by the Articles of Incorporation or these By-laws, any action required
to be taken at any meeting of the Board, or any action which may be taken at a
meeting of the Board or a committee thereof, may be taken without a meeting if a
consent in writing, setting forth the action to be taken, is signed before or
after such action by all of the members of the Board or of such committee, as
the case may be. Such consent shall have the same effect as a unanimous vote for
all purposes, and may be stated as such in any certificate or other document
filed with the Secretary of State or retained in the Corporation's records.
SECTION 3.14. TELEPHONE MEETINGS. Members of the Board or any committee
designated by the Board may participate in a meeting of such Board or committee
by means of conference telephone or similar communications equipment by means of
which all persons participating in the meeting can hear each other.
SECTION 3.15. PRESUMPTION OF ASSENT. A director of the Corporation who
is present at a meeting of the Board at which action on any Corporation matter
is taken shall be presumed to have assented to the action taken unless his
dissent or abstention has been entered in the minutes of the meeting or unless
he has filed a written dissent to such action with the person acting as the
Secretary of the meeting before the adjournment thereof or has forwarded such
dissent by registered mail to the Secretary of the Corporation within five (5)
days after the date such dissenting director receives a copy of the minutes of
the meeting. Such right to dissent shall not apply to a director who voted in
favor of such action.
ARTICLE IV
COMMITTEES
SECTION 4.01. BOARD COMMITTEES. The Board by resolution passed by a
majority of the whole Board, shall elect from its number an Executive Committee,
and may from time to time, by resolution passed by a majority of the whole
Board, designate one or more other committees, each committee to consist of two
or more directors of the Corporation, provided that the Executive Committee
shall consist of five or more directors. The Board may delegate to such
committees some or all of its powers except those which by law, by the Articles
of Incorporation or by these By-laws may not be delegated. Any such committee,
to the extent provided in the resolution or in these By-Laws and as permitted by
applicable law, shall have and may exercise the powers of the Board in the
management of the business and affairs of the Corporation.
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A majority of all the members of any such committee may determine its
action and fix the time and place of its meetings, unless the Board shall
otherwise provide. The Board shall have the power to change the members of any
committee at any time, to fill vacancies and to discharge any such committee,
either with or without cause, at any time.
SECTION 4.02. ALTERNATES. The Board may, by resolution passed by a
majority of the whole Board, designate one or more directors as alternate
members of any committee who may replace any absent or disqualified member at
any meeting of the committee; provided, however, that in the absence of any such
designation of alternates the member or members of any committee present at any
meeting and not disqualified from acting, whether or not he or they constitute a
quorum, may unanimously appoint another member of the Board to act at the
meeting in the place of any absent or disqualified member.
SECTION 4.03. ADDITIONAL COMMITTEES. The Board may from time to time
create such additional advisory committees of directors, officers, employees or
other persons designated by it (or any combination of such persons) for the
purpose of advising with the Board and the officers and employees of the
Corporation in all such matters as the Board shall deem advisable and with such
functions and duties as the Board shall by resolutions prescribe.
A majority of all the members of any such committee may determine its
action and fix the time and place of its meetings, unless the Board shall
otherwise provide. The Board shall have power to change the members of any
committee at any time to fill vacancies and to discharge any such committee,
with or without cause, at any time.
ARTICLE V
OFFICERS
SECTION 5.01. NUMBER. The officers of the Corporation shall include a
Chairman of the Board (if elected pursuant to Section 5.07), a President, a
Treasurer and a Secretary and such other officers, if any, including, without
limitation, a Chief Executive Officer, a Chief Operating Officer, and one or
more Vice Presidents (the number thereof and variations in title to be
determined by the Board), as the Corporation may find necessary for the
management of its affairs. In addition, there may be such other or subordinate
officers, agents and employees as may be appointed in accordance with the
provisions of Section 5.03. Any two or more offices may be held by the same
person.
SECTION 5.02. ELECTION, QUALIFICATION AND TERM OF OFFICE. The officers
of the Corporation shall first be elected by its subscribers or by the initial
Board. Thereafter, each officer of the Corporation, except such officers as may
be appointed in accordance with the provisions of Section 5.03, shall be elected
annually by the Board and shall hold office until his successors shall have been
duly elected and qualified, or until his death, or until he shall have resigned
or shall have been removed in the manner herein provided. Each officer and
employee of the Corporation required by law to be bonded shall be bonded in such
form and in such amount, and with such filings or notices, as may be required by
law. Any officer may be
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required by the Board to secure the faithful performance of his duties to the
Corporation by giving bond in such amount and with sureties or otherwise as the
Board may determine. The Chairman of the Board and the President may serve and
remain as directors. Election or appointment of an officer, employee or agent
shall not of itself create contract rights to continued employment or otherwise.
The Board may authorize the Corporation to enter into an employment contract
with any officer in accordance with governing law or regulation, but no such
contract right shall preclude the Board from exercising its right to remove any
officer at any time in accordance with Section 5.04 hereof.
SECTION 5.03. OTHER OFFICERS. The Corporation may have such other
officers, agents, and employees as the Board may deem necessary, including a
Controller, one or more Assistant Controllers, one or more Assistant Treasurers
and one or more Assistant Secretaries, each of whom shall hold office for such
period, have such authority, and perform such duties as the Board, the Chairman
of the Board or the President may from time to time determine. The Board may
delegate to any principal officer the power to appoint or remove any such
subordinate officers, agents or employees.
SECTION 5.04. REMOVAL. Any officer may be removed, either with or
without cause, by the vote of a majority of the whole Board or, except in case
of any officer elected by the Board, by any committee or officer upon whom the
power of removal may be conferred by the Board (provided, however, that if there
is an Interested Shareholder, any such removal shall also require the
affirmative vote of a majority of the Continuing Directors then in office).
SECTION 5.05. RESIGNATION. Any officer may resign at any time by giving
written notice to the Board, the Chairman of the Board or the President. Any
such resignation shall take effect at the date of receipt of such notice or at
any later time specified therein; and, unless otherwise specified therein, the
acceptance of such resignation shall not be necessary to make it effective.
SECTION 5.06. VACANCIES. A vacancy in any office because of death,
resignation, removal, disqualification or any other case shall be filled for the
unexpired portion of the term in the manner prescribed in these By-Laws for
regular election or appointment to such office.
SECTION 5.07. CHAIRMAN OF THE BOARD. The Board may annually elect a
Chairman of the Board. The Chairman of the Board shall have the duties and
powers specified in these By-Laws and as may be determined by the Board. He
shall, when present, preside at all meetings of the Board and at all meetings of
the shareholders.
SECTION 5.08. PRESIDENT. Except as the Board shall otherwise determine,
the President shall have general supervision and control of the Corporation's
business, subject to the control of the Board. If there be no Chairman of the
Board or, in the absence of the Chairman of the Board, the President shall
preside at all meetings of the Board and at all meetings of the shareholders and
shall have such additional powers and shall perform further duties as may from
time to time be assigned to him by the Board.
SECTION 5.09. TREASURER. Except as the Board shall otherwise determine,
the Treasurer shall be the Chief Financial Officer of the Corporation and shall
be in charge of its funds, and
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shall have such other duties and powers as may be designated from time to time
by the Board or the President.
Any Assistant Treasurers shall have such duties and powers as shall be
designated from time to time by the Board, the President or the Treasurer.
SECTION 5.10. VICE PRESIDENTS. Each Vice President shall have such
powers and perform such duties as the Board may from time to time prescribe or
as shall be assigned to him by the President.
SECTION 5.11. SECRETARY. The Secretary shall record or cause to be
recorded in books provided for the purpose the minutes of the meeting of the
shareholders, the Board, and all committees of which a secretary shall not have
been appointed; shall see that all notices are duly given in accordance with the
provisions of these By-Laws and as required by law; shall be custodian of all
corporate records (other than financial) and of the seal of the Corporation and
see that the seal is affixed to all documents the execution of which on behalf
of the Corporation under its seal is duly authorized in accordance with the
provisions of these By-Laws; shall keep, or cause to be kept, the list of
shareholders as required by Section 2.10, which shall include the post-office
addresses of the shareholders and the number of shares held by them,
respectively, and shall make or cause to be made, all proper changes therein;
shall see that the books, reports, statements, certificates and all other
documents and records required by law are properly kept and filed; and, in
general, shall perform all duties incident to the office of Secretary and such
other duties as may from time to time be assigned to him by the Board or the
President.
Any Assistant Secretaries shall have such duties and powers as shall be
designated from time to time by the Board, the President or the Secretary.
SECTION 5.12. COMPENSATION. The compensation of the principal officers
of the Corporation shall be fixed from time to time by the Board except that the
Board may delegate to any committee of the Board or any officer or officers the
power to fix the compensation of any officer, except the President of the
Corporation. No officer shall be prevented from receiving a salary by reason of
the fact that he is also a director of the Corporation.
ARTICLE VI
BOOKS AND RECORDS
SECTION 6.01. PLACE. The books and records of the Corporation may be
kept at such places within or without the State of Rhode Island, as the Board
may from time to time determine. The stock record books and the blank stock
certificate books shall be kept by the Secretary or by any officer or agent
designated by the Board.
SECTION 6.02. ADDRESSES OF SHAREHOLDERS. Each shareholder shall furnish
to the Secretary of the Corporation or to the transfer agent of the Corporation
an address at which notices of meetings and all other corporate notices may be
served upon or mailed to him, and if any shareholder shall fail to designate
such address, corporate notices may be served upon him
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by mail, postage prepaid, to him at his post office address last known to the
Secretary of the Corporation or to the transfer agent of the Corporation or by
transmitting a notice thereof to him at such address by telegraph, cable or
other available method.
SECTION 6.03. RECORD DATES. The Board may fix in advance a date, not
exceeding sixty days preceding the date of any meeting of shareholders, or the
date for the payment of any dividend, or the date for the allotment of any
rights, or the date when any change or conversion or exchange of capital stock
of the Corporation shall go into effect, or a date in connection with obtaining
such consent, as a record date for the determination of the shareholders
entitled to notice of, and to vote at any such meeting or any adjournment
thereof, or entitled to receive payment of any such dividend, or to any such
allotment of rights, or to exercise the rights in respect of any change,
conversion or exchange of capital stock of the Corporation, or to give such
consent, and in each such case such shareholders and only such shareholders as
shall be shareholders of record on the date so fixed shall be entitled to notice
of, or to vote at, such meeting and any adjournment thereof, or to receive
payment of such dividend, or to receive such allotment of rights, or to exercise
such rights or to give such consent, as the case may be, notwithstanding any
transfer of any stock on the books of the Corporation after any such record date
fixed as aforesaid.
SECTION 6.04. AUDIT OF BOOKS AND ACCOUNTS. The books and accounts of the
Corporation shall be audited at least once in each fiscal year by certified
public accountants of good standing, elected by the Board upon the
recommendation of the Corporation's Audit Committee.
ARTICLE VII
SHARES AND THEIR TRANSFER
SECTION 7.01. CERTIFICATES OF STOCK. Every owner of stock of the
Corporation shall be entitled to have a certificate certifying the number of
shares owned by him in the Corporation and designating the class of stock to
which such shares belong, which shall otherwise be in such form as the Board
shall prescribe. Each such certificate shall be signed by the Chairman of the
Board or the President or a Vice President and the Treasurer or any Assistant
Treasurer or the Secretary or any Assistant Secretary of the Corporation and may
be sealed with the seal of the Corporation or a facsimile thereof. Any or all of
the signatures on the certificate may be a facsimile. In case an officer,
transfer agent, or registrar who has signed or whose facsimile signature has
been placed on such certificate shall have ceased to be such officer, transfer
agent, or registrar before such certificate is issued, it may be issued by the
Corporation with the same effect as if he were such officer, transfer agent, or
registrar at the date of its issue. No certificate shall be issued for any share
until such share is fully paid.
SECTION 7.02. RECORD. A record shall be kept of the name of the person,
firm or corporation owning the stock represented by each certificate of stock of
the Corporation issued, the number of shares represented by each such
certificate, and the date thereof, and, in the case of cancellation, the date of
cancellation. The person in whose name shares of stock stand on the
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<PAGE> 15
books of the Corporation shall be deemed the owner thereof for all purposes as
regards the Corporation.
SECTION 7.03. TRANSFER OF STOCK. Subject to the restrictions, if any,
stated or noted on the stock certificates, shares of stock may be transferred on
the books of the Corporation by the surrender to the Corporation or its transfer
agent of the certificate therefor properly endorsed or accompanied by a written
assignment and power of attorney properly executed, with necessary transfer
stamps affixed, and with such proof of the authenticity of signature as the
Board or the transfer agent of the Corporation may reasonably require. Except as
may be otherwise required by law, by the Articles of Incorporation or by these
By-Laws, the Corporation shall be entitled to treat the record holder of stock
as shown on its books as the owner of such stock for all purposes, including the
payment of dividends and the right to receive notice and to vote or to give any
consent with respect thereto and to be held liable for such calls and
assessments, if any, as may lawfully be made thereon, regardless of any
transfer, pledge or other disposition of such stock until the shares have been
properly transferred on the books of the Corporation.
It shall be the duty of each shareholder to notify the Corporation of
the post office address of such shareholder.
SECTION 7.04. TRANSFER AGENT AND REGISTRAR; REGULATIONS. The Corporation
shall, if and whenever the Board shall so determine, maintain one or more
transfer offices or agencies, each in charge of a transfer agent designated by
the Board, where the shares of the capital stock of the Corporation shall be
directly transferable, and also if and whenever the Board shall so determine,
maintain one or more registry offices, each in charge of a registrar designated
by the Board, where such shares of stock shall be registered. The Board may make
such rules and regulations as it may deem expedient, not inconsistent with these
By-Laws, concerning the issue, transfer and registration of certificates for
shares of the capital stock of the Corporation.
SECTION 7.05. LOST, DESTROYED OR MUTILATED CERTIFICATES. In case of the
alleged loss or destruction or the mutilation of a certificate representing
capital stock of the Corporation, a new certificate may be issued in place
thereof, in the manner and upon such terms as the Board may prescribe.
SECTION 7.06 ISSUANCE OF CAPITAL STOCK. The Board shall have the
authority to issue or reserve for issue from time to time the whole or any part
of the capital stock of the Corporation which may be authorized from time to
time, to such persons or organizations, for such consideration, whether cash,
property, services or expenses, and on such terms as the Board may determine,
subject to applicable law, including without limitation, the granting of
options, warrants or conversion or other rights to subscribe to said capital
stock.
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<PAGE> 16
ARTICLE VIII
SEAL
The Board shall have the power to adopt and alter the seal of the
Corporation.
ARTICLE IX
FISCAL YEAR
Except as otherwise determined by the Board, the fiscal year of the
Corporation shall be the twelve months ended December 31st.
ARTICLE X
INDEMNIFICATION
(a) The Corporation shall indemnify, in the manner and to the full
extent permitted by law, any person (or the personal representative of any
person) who at any time serves or shall have served as a director of the
Corporation, and the Board shall be authorized to cause the Corporation to
indemnify, in the manner and to the full extent permitted by law, any person (or
the personal representative of any person) who at any time serves or shall have
served as an officer, employee or agent of the Corporation, against and for any
and all claims and liabilities to which he may be or become subject by reason of
such service, and any person who was or is a party or is threatened to be made a
party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative (other than an action
by or in the right of the Corporation) by reason of the fact that he is or was a
director, officer, employee or agent of the Corporation, or is or was serving at
the request of the Corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
Corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order, settlement, conviction, or upon a
plea of NOLO CONTENDERE or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interests of the
Corporation, and, with respect to any criminal action or proceeding, had
reasonable cause to believe that his conduct was unlawful.
(b) The Corporation shall indemnify, in the manner and to the full
extent permitted by law, any person who was or is a party or is threatened to be
made a party to any threatened, pending or completed action or suit by or in the
right of the Corporation to procure a judgment in its favor by reason of the
fact that he (or the personal representative of any person) is or was a director
of the Corporation, and the Board shall be authorized to cause the Corporation
to
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<PAGE> 17
indemnify, in the manner and to the full extent permitted by law, any person who
was or is a party or is threatened to be made a party to any threatened, pending
or completed action or suit by or in the right of the Corporation to procure a
judgment in its favor by reason of the fact that he is or was an officer,
employee or agent of the Corporation or is or was serving at the request of the
Corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit if he acted in
good faith and in a manner he reasonably believed to be in or not opposed to the
best interests of the Corporation and except that no such indemnification shall
be made in respect of any claim, issue or matter as to which such person shall
have been finally adjudged to be liable to the Corporation, unless and only to
the extent that the court in which such action or suit was brought shall
determine upon application that, despite the adjudication of liability but in
view of all the circumstances of the case, such person is fairly and reasonably
entitled to indemnify for such expenses which such court shall deem proper.
(c) To the extent that a director, officer, employee or agent of the
Corporation shall be successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in paragraphs (a) and (b), or in defense
of any claim, issue or matter therein, he shall be indemnified, in the manner
and to the full extent permitted by law, against expenses (including attorneys'
fees) actually and reasonably incurred by him in connection therewith.
(d) Any indemnification under paragraphs (a) and (b) (unless ordered by
a court) shall be made by the Corporation only as authorized in the specific
case upon a determination that indemnification of the directors, officer,
employee or agent is proper in the circumstances because he has met the
applicable standard of conduct set forth in paragraphs (a) and (b). Such
determination shall be made (1) by the Board by a majority vote of a quorum
consisting of directors who were not parties to such action, suit or proceeding,
or (2) if a quorum cannot be obtained, by a majority vote of a committee of the
Board, duly designated to act in the matter by a majority vote of the full Board
(in which designation Directors who are parties to such action, suit or
proceeding may participate) consisting solely of two or more directors not at
the time parties to such action, suit or proceeding, or (3) if such a quorum is
not obtainable, by independent legal counsel in a written opinion, or (4) by the
shareholders.
(e) Expenses incurred in defending a civil or criminal action, suit or
proceeding may be paid by the Corporation in advance of the final disposition of
such action, suit or proceeding as authorized by the Board in the manner
provided in paragraph (d) upon receipt of (1) a written affirmation by the
Director of his good faith belief that he has met the standard of conduct
necessary for indemnification by the Corporation pursuant to applicable law and
(2) an undertaking by or on behalf of the directors, officer, employee or agent
to repay such amount unless it shall ultimately be determined that he is
entitled to be indemnified by the Corporation as authorized in this Article X.
(f) The indemnification provided by this Article X shall not be deemed
exclusive of any other rights to which those indemnified may be entitled under
any agreement, vote of shareholders or disinterested directors or otherwise,
both as to action in his official capacity and as to action in another capacity
while holding such office, and shall continue as to a person who
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<PAGE> 18
has ceased to be a director, officer, employee or agent and shall inure to the
benefit of the heirs, executors and administrators.
(g) The Board may authorize, by a vote of a majority of the full Board,
the Corporation to purchase and maintain insurance on behalf of any person who
is or was a director, officer, employee or agent of the Corporation, or is or
was serving at the request of the Corporation as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust or other
enterprise against any liability asserted against him and incurred by him in any
such capacity, or arising out of his status as such, whether or not the
Corporation would have the power to indemnify him against such liability under
the provisions of this Article X.
(h) For purposes of this Article X, references to "the Corporation"
shall include, in addition to the resulting corporation, any constituent
corporation (including any constituent of a constituent) absorbed in a
consolidation or merger which, if its separate existence had continued, would
have had power and authority to indemnify its directors, officers, and employees
or agents, so that any person who is or was a directors, officer, employee or
agent of such constituent corporation, or is or was serving at the request of
such constituent corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
shall stand in the same position under the provisions of this Article X with
respect to the resulting or surviving corporation as he would have with respect
to such constituent corporation if its separate existence had continued.
(i) For purposes of this Article X, references to "other enterprises"
shall include employee benefit plans; references to "fines" shall include any
excise taxes assessed on a person with respect to any employee benefits plan;
and references to "serving at the request of the Corporation" shall include any
service as a director, officer, employee or agent of the Corporation which
imposes duties on, or involves services by, such director, officer, employee or
agent with respect to an employee benefit plan, its participants, or
beneficiaries; and a person who acted in good faith and in a manner he
reasonably believed to be in the interest of the participants and beneficiaries
of an employee benefit plan shall be deemed to have acted in a manner "not
opposed to the best interests of the Corporation" as referred to in this Article
X.
ARTICLE XI
CERTAIN OPERATING PROVISIONS
SECTION 11.01. EXECUTION OF CONTRACTS. Unless the Board shall otherwise
determine, the Chairman of the Board, the President, or the Treasurer may enter
into any contract or execute any contract or other instrument, the execution of
which is not otherwise specifically provided for, in the name and on behalf of
the Corporation and such contract may be attested by the Secretary or any
Assistant Secretary. The Board, or any committee designated thereby with power
so to act, except as otherwise provided in these By-Laws, may authorize any
other or additional officer or officers or agent or agents of the Corporation to
enter into any contract or execute and deliver any instrument in the name and on
behalf of the Corporation, and such authority may be general
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<PAGE> 19
or confined to specific instances. Unless authorized so to do by these By-Laws
or by the Board or by any such committee, no officer, agent or employee shall
have any power or authority to bind the Corporation by any contract or
engagement or to pledge its credit or to render it liable pecuniarily for any
purpose or to any amount.
SECTION 11.02 CONVEYANCES AND FORECLOSURES. Unless otherwise provided by
law or the Board, the Chairman of the Board, the President, any Vice President,
any Assistant Vice President, the Treasurer, any Vice Treasurer, and any
Assistant are authorized and empowered severally to execute, acknowledge and
deliver, in the name and on behalf of the Corporation, whenever authorized by
the Board or the Executive Committee by general or specific vote, all deeds and
conveyances of real estate, all assignments, extensions, releases, partial
releases and discharges of mortgages, and all assignments and transfers of bonds
and other securities, and in connection with any of the foregoing said officers
are authorized and empowered severally to release or assign the interest of the
Corporation in any policy of insurance held by it.
Unless otherwise provided by law or the Board, in the event of a breach
of condition of any mortgage held by the Corporation, the Chairman of the Board,
the President, any Vice President, any Assistant Vice President, the Treasurer,
any Vice Treasurer, and any Assistant Treasurer are authorized and empowered
severally, in the name and on behalf of the Corporation, whenever authorized by
the Executive Committee or by the Board by general or specific vote, to make
entry for the purpose of taking possession of the mortgaged property or of
foreclosing such mortgage and to perform any and all acts necessary or proper to
consummate such foreclosure and effect the due execution of any power of sale
contained in such mortgage, including the execution, acknowledgment and delivery
of all deeds and instruments of conveyance to the purchaser and the execution of
all affidavits and certificates required by law or deemed necessary by any of
such officers.
SECTION 11.03 VOTING OF SECURITIES. Unless otherwise provided by the
Board, the Chairman of the Board, the President or Treasurer may waive notice of
and act on behalf of the Corporation, or appoint another person or persons to
act as proxy or attorney in fact for the Corporation with or without
discretionary power and/or power of substitution, at any meeting of shareholders
or shareholders of any other organization, any of whose securities are held by
the Corporation.
ARTICLE XII
AMENDMENTS
These By-Laws may be altered, amended or repealed, in whole or in part,
and new By-Laws may be adopted, in whole or in part only as provided in the
Articles of Incorporation.
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<PAGE> 1
EXHIBIT 10.1
July 20, 1999
Merrill W. Sherman
671 Neck Road
Tiverton, Rhode Island 02878
Re: Amendment to Executive Employment Agreement
Dear Merrill:
Reference is made to that certain letter agreement by and between Bank
Rhode Island (the "Bank") and you dated January 30, 1998 (the "Letter
Agreement") pursuant to which the Bank agreed to employ you in the position of
President and Chief Executive Officer of the Bank upon the terms and conditions
set forth therein. The Bank and you hereby agree that the Letter Agreement shall
be amended as set forth herein.
A. The Bank and you hereby agree that PART 3 of the Letter Agreement
shall be amended in its entirety as follows:
PART 3. CHANGE IN CONTROL
3.1 PURPOSE. In order to allow you to consider the prospect of a Change
in Control (as defined in Section 3.2) in an objective manner and in
consideration of the services rendered and to be rendered by you to the Bank,
the Bank is willing to provide, subject to the terms of this Letter Agreement,
certain severance benefits to protect you from the consequences of a Terminating
Event (as defined in Section 3.4) occurring subsequent to a Change in Control.
3.2 CHANGE IN CONTROL. A "Change in Control" will be deemed to have
occurred if: (i) the Bank effectuates a Takeover Transaction; or (ii) the Bank
commences substantive negotiations with a third party with respect to a Takeover
Transaction and within twelve (12) months of the commencement of such
negotiations, enters into a definitive agreement with respect to a Takeover
Transaction with any party with which negotiations were originally commenced; or
(iii) any election of directors of the Bank (or, if the Bank reorganizes into a
holding company structure, directors of the holding company) occurs (whether by
the directors then in office or by the shareholders at a meeting or by written
consent) where a majority of the directors in office following such election are
individuals who were not nominated by a vote of two-thirds of the members of the
board of directors immediately preceding such election; or (iv) the Bank
effectuates a complete liquidation of the Bank or a sale or disposition of all
or substantially all of its assets. You understand and agree that a
reorganization in which the Bank reorganizes into a holding company structure,
or any similar reorganization, will not constitute a Change in Control for
purposes of this agreement or for any other purpose; provided, however,
<PAGE> 2
Merrill W. Sherman
July 20, 1999
Page 2
that any such transaction may constitute a Change in Control if accomplished in
connection with a Takeover Transaction.
3.3 TAKEOVER TRANSACTION. A "Takeover Transaction" shall mean:
(a) The acquisition of voting securities of the Bank by any
individual, entity or group (within the meaning of Section 13(d)(3) or
14(d)(2) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act")), other than by the Bank or its subsidiaries or any
employee benefit plan (or related trust) of the Bank or its
subsidiaries, which theretofore did not beneficially own (within the
meaning of Rule 13d-3 promulgated under the Exchange Act), securities
representing 30% or more of the voting power of all outstanding shares
of voting securities of the Bank, if such acquisition results in such
individual, entity or group owning securities representing more than
30% of the voting power of all outstanding voting securities of the
Bank; provided, that any acquisition by a corporation with respect to
which, following such acquisition, more than 50% of the then
outstanding shares of voting securities of such corporation, is then
beneficially owned, directly or indirectly, by all or substantially all
of the individuals and entities who were the beneficial owners of the
voting securities of the Bank outstanding immediately prior to such
acquisition in substantially the same proportion as their ownership,
immediately prior to such acquisition, of the outstanding voting
securities of the Bank, shall not constitute a Change in Control; or
(b) The issuance of additional shares of common stock of the
Bank in a single transaction or a series of related transactions if the
individuals and entities who were the beneficial owners of the
outstanding voting securities of the Bank immediately prior to such
issuance do not, following such issuance, beneficially own, directly or
indirectly, securities representing more than 50% of the voting power
of all then outstanding voting securities of the Bank; or
(c) Consummation by the Bank of (i) a reorganization, merger
or consolidation, in each case, with respect to which all or
substantially all of the individuals and entities who were the
beneficial owners of the voting securities of the Bank immediately
prior to such reorganization, merger or consolidation do not, following
such reorganization, merger or consolidation, beneficially own,
directly or indirectly, securities representing more than 50% of the
voting power of then outstanding voting securities of the corporation
resulting from such a reorganization, merger or consolidation or (ii)
the sale, exchange or other disposition (in one transaction or a series
of related transactions) of all or substantially all of the assets of
the Bank (on a consolidated basis) to a party which is not controlled
by or under common control with the Bank.
For purposes of this Section 3.3, "voting power" means ordinary voting
power for the election of directors.
<PAGE> 3
Merrill W. Sherman
July 20, 1999
Page 3
3.4 TERMINATING EVENT. A "Terminating Event" means either
(a) Termination by the Bank of your employment with the Bank for any
reason other than (i) your death or disability or (ii) for "Cause" (as such term
is defined in Section 3.5 hereof); or
(b) Your resignation as an employee of the Bank, other than for reasons
of disability, following (i) a significant reduction in the nature or scope of
your duties, responsibilities, authority and powers from the duties,
responsibilities, authority and powers exercised by you immediately prior to the
Change in Control; or (ii) any requirement by the Bank or of any person in
control of the Bank that the location at which you perform the principal duties
for the Bank be outside a radius of 50 miles from the location at which you
performed such duties immediately prior to the Change in Control; or (iii)
failure of the Bank to renew your employment on terms not less favorable than
those existing immediately prior to such nonrenewal, other than a reduction of
fringe benefits required by law or applicable to all employees generally; or
(iv) the failure of you and any successor of the Bank to mutually agree in
writing for any reason, upon terms and conditions of employment with you within
ninety (90) days following a Change in Control; or
(c) Your resignation as an employee of the Bank or any successor of the
Bank following a Takeover Transaction, other than for reasons of disability, and
notwithstanding that you did not exercise any rights you may have had under
Section 3.4(b) to resign and receive the benefits provided under the provisions
of PART 3 of this Agreement, provided that such resignation occurs during the
ninety (90) day period which ends on the first anniversary of the Takeover
Transaction.
3.5 TERMINATION FOR "CAUSE" DEFINED. For purposes of this Letter
Agreement, termination for Cause, as determined by the Board shall include
termination by reason of any of the following:
(a) Continuing any arrangement, holding any position or engaging
in any activities that conflict with the interest of, or that
interfere with your duties owed to, the Bank, after ten (10)
days prior written notice by the Bank to you of the same;
(b) Conviction of embezzlement or other crimes against the Bank;
(c) Deliberate misappropriation of the Bank's funds;
(d) Material violation of written policies of the Bank or material
breach of any of your obligations under the terms of this
Letter Agreement, which continues after ten (10) days prior
written notice by the Bank to you of the same; and
<PAGE> 4
Merrill W. Sherman
July 20, 1999
Page 4
(e) Refusal to perform assigned duties when such refusal is not
justified or excused either by the terms of this Letter
Agreement or by actions taken by the Bank in violation of this
Letter Agreement; provided, however, that if you should
dispute Bank's determination that it has caused you to
terminate your employment, or if you assert that this act or
omission was caused by actions taken by Bank in violation of
this Letter Agreement, the dispute will be governed by Section
4.7 hereof.
3.6 PAYMENT IN CONNECTION WITH TERMINATING EVENT. If a Terminating
Event occurs within one (1) year after a Change in Control (which one year
period shall be calculated from the effective date of the Takeover Transaction
if the Terminating Event occurs after a Takeover Transaction), the Bank will pay
to you an amount (the "Severance Payment") equal to 2.99 times the sum of (a)
your annual base salary in effect at the time of the Change in Control and (b)
an amount equal to the average executive cash bonus earned by you with respect
to the two (2) full fiscal years immediately preceding the Change in Control,
which Severance Payment shall be payable in one lump sum within 30 days of the
date of termination of your employment, or if such Change in Control is governed
by clause (ii) of Section 3.2 and the Terminating Event occurs prior to entering
into a definitive agreement, upon the entering into of a definitive agreement by
the Bank. In addition, the Bank shall continue to pay for all medical and life
insurance coverage provided on the date of the Terminating Event for the
twenty-four month period commencing on the effective date of the Terminating
Event, you shall continue to have the use of the automobile provided to you
under Section 1.4(b) of the Letter Agreement for such 24-month period and,
notwithstanding any provision of any option agreement governing any Options, any
Options shall be exercisable for the periods specified in Section 2.1 hereof. No
Severance Payment will be made to you under PART 3 if your employment with the
Bank terminates for any reason prior to a Change in Control, or if your
employment with the Bank terminates after a Change in Control but such
termination or resignation is not a Terminating Event. In addition, no Severance
Payment will be made to you under this Letter Agreement with respect to a
Terminating Event which occurs more than one year after a Change in Control
(which one year period shall be calculated from the effective date of the
Takeover Transaction if the Terminating Event occurs after a Takeover
Transaction).
3.7 APPLICABILITY OF CHANGE IN CONTROL PROVISIONS. (a) If there is a
Change in Control while this Letter Agreement is in effect and while you remain
actively employed by the Bank, the provisions of PART 3 shall apply and shall
continue to apply for a one-year period following the Change in Control (which
one-year period shall be calculated from the effective date of a Takeover
Transaction if a Terminating Event occurs after the Takeover Transaction), and
the provisions of PART 3 shall continue to apply regardless of whether this
Letter Agreement is terminated until all the obligations of the Bank hereunder
have been fulfilled and all benefits provided hereunder have been paid.
(b) The provisions of PART 3 shall terminate upon the earliest of (i)
the termination by the Bank of your employment for any reason prior to a Change
in Control, (ii) the termination
<PAGE> 5
Merrill W. Sherman
July 20, 1999
Page 5
of your employment by the Bank after a Change in Control because of death or
disability or for Cause, (iii) your resignation or termination of employment
with the Bank for any reason other than Good Reason prior to a Change in
Control, and (iv) your resignation or termination of employment after a Change
in Control for any reason other than the occurrence of any of the events
enumerated in Section 3.4 of this Letter Agreement.
3.8 EXCISE TAX EQUALIZATION PAYMENT. In the event that you become
entitled to a Severance Payment or any other payment or benefit under this
Letter Agreement, or under any other agreement with or plan of the Bank (in the
aggregate, the "Total Payments"), and if any of the Total Payments will be
subject to the tax (the "Excise Tax") imposed by Section 4999 of the Code (or
any similar tax that may hereafter be imposed), then the Bank shall pay to you
in cash an additional amount (the "Gross-Up Payment") such that the net amount
retained by you after deduction of any Excise Tax upon the Total Payments and
any Federal, state and local income tax and Excise Tax upon the Gross-Up Payment
provided for by this Section 3.8 (including FICA and FUTA), shall be equal to
the Total Payments. Such payment shall be made by the Bank to you as soon as
practical following the effective date of the Terminating Event, but in no event
beyond thirty (30) days from such date.
3.9 TAX COMPUTATION. For purposes of determining whether any of the
Total Payments will be subject to the Excise Tax and the amounts of such Excise
Tax:
(a) Any other payments or benefits received or to be received by you in
connection with a Change in Control of the Bank or your termination of
employment (whether pursuant to the terms of this Letter Agreement or any other
plan, arrangement, or agreement with the Bank, or with any person (which shall
have the meaning set forth in Section 3(a)(9) of the Exchange Act, including a
"group" as defined in Section 13(d) therein) whose actions result in a Change in
Control of the Bank or any person affiliated with the Bank or such persons)
shall be treated as "parachute payments" within the meaning of Section
280G(b)(1) of the Code, and all "excess parachute payments" within the meaning
of Section 280G(b)(1) shall be treated as subject to the Excise Tax, unless in
the opinion of tax counsel as supported by the Bank's independent auditors and
acceptable to you, such other payments or benefits (in whole or in part) do not
constitute parachute payments, or unless such excess parachute payments (in
whole or in part) represent reasonable compensation for services actually
rendered within the meaning of Section 280G(b)(4) of the Code in excess of the
base amount within the meaning of Section 280G (b)(3) of the Code, or are
otherwise not subject to the Excise Tax;
(b) The amount of the Total Payments which shall be treated as subject
to the Excise Tax shall be equal to the lesser of: (i) the total amount of the
Total Payments; or (ii) the amount of excess parachute payments within the
meaning of Section 280G(b)(1) (after applying clause (a) above); and
<PAGE> 6
Merrill W. Sherman
July 20, 1999
Page 6
(c) The value of any noncash benefits or any deferred payment or
benefit shall be determined by the Bank's independent auditors in accordance
with the principles of Sections 280G(d)(3) and (4) of the Code.
For purposes of determining the amount of the Gross-Up Payment, you
shall be deemed to pay Federal income taxes at the highest marginal rate of
Federal income taxation in the calendar year in which the Gross-Up Payment is to
be made, and state and local income taxes at the highest marginal rate of
taxation in the state and locality of your residence on the effective date of
the Terminating Event, net of the maximum reduction in Federal income taxes
which could be obtained from deduction of such state and local taxes.
3.10 SUBSEQUENT RECALCULATION. In the event the Internal Revenue
Service adjusts the computation of the Bank under Section 3.9 herein so that you
did not receive the greatest net benefit, the Bank shall reimburse you for the
full amount necessary to make you whole, plus a market rate of interest, as
determined by the Compensation Committee of the Board.
3.11 DISPUTE RESOLUTION. If any dispute between the Bank and you as to
any of the amounts to be determined under Sections 3.8 or 3.9, or the method of
calculating such amounts, cannot be resolved by you and the Bank, either the
Bank or you after giving three (3) days written notice to the other, may refer
the dispute to a partner in the Boston, Massachusetts office of a firm of
independent certified public accountants selected jointly by you and the Bank.
The determination of such partner as to the amount to be determined under
Section 3.8 and 3.9 and the method of calculating such amounts shall be final
and binding on both you and the Bank. The Bank shall bear the costs of any such
determination.
2. The Bank and you further agree that Section 4.7 of PART 4 of the
Letter Agreement shall be amended in its entirety to read as follows:
4.7 BINDING EFFECT. This Letter Agreement is binding upon and will
enure to the benefit of the parties hereto and their respective heirs,
administrators, executors, successors and assigns. The Bank will require any
successor (whether direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business and/or assets of the Bank
to assume expressly and perform the Letter Agreement. Failure of the Bank to
obtain such assumption and agreement prior to the effectiveness of any such
succession shall be a breach of the Letter Agreement and shall entitle you to
compensation from the Bank in the same amount and on the same terms as you would
be entitled to hereunder following a Terminating Event, except that for purposes
of implementing the foregoing, the date on which any such succession becomes
effective shall be deemed the date on which you become entitled to such
compensation from the Bank. As used in the Letter Agreement, "Bank" shall mean
the Bank, as hereinbefore defined and any successor to its business and/or
assets as aforesaid which assumes and agrees to perform the Letter Agreement by
operation of law, or otherwise.
<PAGE> 7
Merrill W. Sherman
July 20, 1999
Page 7
3. The Bank and you further agree that PART 4 of the Letter Agreement
be amended by the addition of the following Section 4.9.
4.9 INDEMNIFICATION. The Bank hereby covenants and agrees to indemnify
you and hold you harmless fully, completely, and absolutely against and in
respect to any and all actions, suits, proceedings, claims, demands, judgments,
costs, expenses (including attorney's fees), losses, and damages resulting from
your good faith performance of your duties and obligations under the terms of
the Letter Agreement.
4. The Bank and you further agree that Section 1.10 of PART 1 of the
Letter Agreement shall be amended in its entirety to read as follows:
1.10 TERMINATION AND SURVIVAL. The provisions of PART 1 of the Letter
Agreement shall terminate on the Contract Expiration Date. The provisions of
PART 2, PART 3 and PART 4, as amended hereby, shall survive the termination of
PART 1 and shall remain in full force and effect and shall continue to be
enforceable in accordance with their terms notwithstanding any termination of
PART 1. The provision of PART 2, PART 3 and Section 4.1, 4.2, 4.4, 4.6, 4.8 and
4.9 of the Letter Agreement, as amended hereby, shall remain in full force and
effect and shall continue to be enforceable in accordance with their terms
beyond the termination of employment.
Except as amended hereby the terms and provisions of the Letter
Agreement are ratified approved and confirmed.
If the foregoing correctly sets forth our understanding, please sign
this letter and the enclosed counterpart hereof in the space below and return to
the undersigned the counterpart copy that you have signed.
Sincerely yours,
BANK RHODE ISLAND
By: /s/ Malcolm G. Chace
----------------------
Malcolm G. Chace
Chairman of the Board
The foregoing correctly sets forth our agreement.
/s/ Merrill W. Sherman
- - ----------------------
Merrill W. Sherman
7/21/99
- - --------------
Date
<PAGE> 8
January 30, 1998
Merrill W. Sherman
88 Williams Street
Providence, Rhode Island 02906
Dear Merrill:
Bank Rhode Island (the "Bank") agrees to employ you in the position of
President and Chief Executive Officer of the Bank upon the following terms and
conditions.
PART 1. EMPLOYMENT; DUTIES, ETC.
1.1 RESPONSIBILITIES AND AUTHORITY. In your capacity as President and
Chief Executive Officer with the Bank, you will have the duties,
responsibilities, authorities and powers normally incident to such office. At
all times, however, your activities and authority will be subject to
supervision, control and direction by the Board of Directors of the Bank (the
"Board") or by the Executive Committee of the Board, and you agree to carry out
such duties and responsibilities as any of them may from time to time reasonably
assign to you. You shall report from time to time or routinely, upon request, to
the Board as to the current status of any of your assigned duties and
responsibilities.
1.2 COMPENSATION. Your base salary will be at the rate of $230,000 per
year, payable on a bi-weekly basis, or at such higher rate as shall be
determined from time to time by the Board. In addition, you will be entitled to
receive payments under any incentive compensation or bonus program which the
Board may establish for its employees and/or senior executives (as in effect
from time to time), in such amounts as are provided by such programs, provided,
however, that any incentive compensation or bonus arrangement shall provide a
bonus opportunity of no less than 50% of your base salary.
1.3 EMPLOYEE BENEFITS. As a full-time employee of the Bank, you will be
eligible to participate in any and all employee benefit plans generally
available to full-time employees, including non-contributory plans and, at your
option, contributory plans.
1.4 CERTAIN SPECIFIC EMPLOYEE BENEFITS.
(a) GRANT OF STOCK OPTIONS. You will receive stock options to purchase
shares of the Bank's common stock in such number and at an exercise price and
such other terms as the Compensation Committee of the Board may determine, in
its sole discretion. Any such options will become exercisable on a schedule no
less favorable then the following: 25% on the grant date and an additional 25%
on each of the first through third anniversaries of the grant date, with such
vesting to accelerate on a Change in Control (as defined in Section 3.2).
(B) AUTOMOBILE. The Bank shall provide to you an automobile for your
use.
<PAGE> 9
Merrill W. Sherman
January 30, 1998
Page 9
1.5 VACATION. You will be entitled to six weeks of vacation during each
year of your employment, such vacation to be taken in accordance with the Bank's
customary vacation policies and at such times and intervals as are mutually
agreed upon by you and the Bank. You will be entitled to holiday time and sick
leave in accordance with the then existing policies of the Bank, as in effect
from time to time.
1.6 REIMBURSEMENT OF EXPENSES. You will be reimbursed by the Bank for
reasonable business expenses incurred by you incident to your employment upon
presentation of appropriate vouchers, receipts, and other supporting documents
required by the Bank.
1.7 DUTY TO PERFORM SERVICES. So long as you are employed by the Bank,
you agree to devote your full business and productive time, skill, and energy
diligently, loyally, effectively, and to the best of your ability to the
rendering of services to the Bank, and will exert your best efforts in the
rendering of such services. This provision will not prohibit you from
(a) making passive investments;
(b) serving on the board of directors of any company, subject to the
provisions of Section 4.2 below and provided that you will not render any
material services with respect to the operations or affairs of any such company;
or
(c) engaging in religious, charitable or other community or non-profit
activities which do not impair your ability to fulfill your duties and
responsibilities to the Bank.
You agree that in the rendering of all services to the Bank and in all aspects
of your employment, in connection with your duties as President and Chief
Executive Officer, you will comply with all directives, policies, standards, and
regulations from time to time established by the Bank or by applicable law.
1.8 DEATH OR DISABILITY.
(A) DEATH. In the event of your death during the term of your
employment under this Letter Agreement, the Bank shall immediately pay to your
designated beneficiary any salary accrued but unpaid as of the date of your
death. Upon payment of the aforementioned sums, the Bank's obligations to make
further salary payments shall terminate. This provision shall not be construed
to negate any rights you may have to death benefits under any employee benefit
or welfare plan of the Bank in which you may from time to time be a participant
or under any other written agreement with the Bank which specifically provides
for such benefits.
(B) DISABILITY. In the event of your "disability" (as defined below)
during the term of your employment under this Letter Agreement, the Bank shall
continue to pay you your base salary (reduced by any benefits you are entitled
to receive under any state or federal disability insurance program, such as
Rhode Island temporary disability insurance or federal social security) for a
period of one year from the date of "disability". For purposes of this Letter
Agreement, "disability" shall mean a determination
<PAGE> 10
Merrill W. Sherman
January 30, 1998
Page 10
by the Board that you are unable for any reason, either physical or mental, to
perform the duties required of you hereunder.
1.9 TERM OF EMPLOYMENT. The term of your employment by the Bank under
this Letter Agreement shall continue, unless sooner terminated pursuant to the
provisions of this Agreement, for a period of three years from the date hereof
(the "Initial Term") and shall be automatically extended for each successive one
year period thereafter (each, a "Successive Term") unless either party shall
have given written notice to the other of such party's election not to extend
the term of this Letter Agreement within ninety (90) calendar days prior to the
end of the Initial Term or any Successive Term. The last day of such term, as it
may be extended from time to time, is herein sometimes referred to as the
"Contract Expiration Date".
1.10 TERMINATION AND SURVIVAL. The provisions of PART 1 of this Letter
Agreement shall terminate on the Contract Expiration Date. The provisions of
PART 2, PART 3 and PART 4 shall survive the termination of PART 1 and shall
remain in full force and effect and shall continue to be enforceable in
accordance with their terms notwithstanding any termination of PART 1. The
provisions of PART 2, PART 3 and Sections 4.1, 4.2, 4.4, 4.6 and 4.8 hereof
shall remain in full force and effect and shall continue to be enforceable in
accordance with their terms beyond the termination of employment.
PART 2. SEVERANCE
2.1 SEVERANCE BENEFIT. In the event of a termination of your employment
by the Bank without Cause (as such term is defined in Section 3.5) at any time,
whether before or after the Contract Expiration Date; or in the event of the
expiration of the term of your employment without extension of such Contract
Expiration Date; or in the event of termination of your employment by you for
Good Reason, the Bank will pay to you within 30 days of the date of such
termination or expiration, in lump sum, a severance payment equal to two (2)
times your annual base salary then in effect (the "Severance Benefit"). In
addition, the Bank shall continue to pay for all medical and life insurance
coverage provided on the date of termination for the twenty-four month period
commencing on the date of termination of your employment and notwithstanding any
provision of any option agreement governing options to purchase common stock of
the Bank granted to you ("Options"), any such Options which are exercisable by
you on the date of your termination shall not terminate until the earlier of (i)
the date of expiration of such Option or (ii) three (3) years after the date of
termination. Any Severance Benefit paid under this Section 2.1 shall be credited
against any amounts due you as a result of a Change in Control. Notwithstanding
anything herein to the contrary, the Bank shall have no obligation to pay the
Severance Benefit to you in the event your employment is terminated with Cause
by the Bank or voluntarily by you without Good Reason.
2.2 "GOOD REASON" DEFINED. For purposes of this Letter Agreement, "Good
Reason" shall mean and include any of the following without your prior written
consent:
(i) a significant reduction in the nature or scope of your duties,
responsibilities, authority and powers from the duties, responsibilities,
authority and powers exercised by you on the date hereof;
<PAGE> 11
Merrill W. Sherman
January 30, 1998
Page 11
(ii) any requirement by the Bank or any person in control of the Bank
that the location at which you perform the principal duties for the Bank be
outside a radius of 50 miles from the location at which you performed such
duties as of the date hereof; or
(iii) failure of the Bank to renew this Letter Agreement or enter into
a new employment agreement with you on terms not less favorable than those
existing immediately prior to such nonrenewal, other than a reduction of fringe
benefits required by law or applicable to all employees generally,
provided, however, that Good Reason shall not be deemed to have occurred unless
prior to your termination of employment for Good Reason, you shall give not less
than 30 days written notice to the Bank of your intent to terminate for Good
Reason stating the basis of the Good Reason sufficient to permit the Bank to
alleviate the basis of such Good Reason prior to termination, and the Bank has
not done so within such 30 day period, and further provided, that your
continuing to work in the absence of entering into a new employment agreement
shall be without prejudice to your right to claim termination for Good Reason,
absent written agreement between you and the Bank to the contrary.
PART 3. CHANGE IN CONTROL
3.1 PURPOSE. In order to allow you to consider the prospect of a Change
in Control (as defined in Section 3.2) in an objective manner and in
consideration of the services rendered and to be rendered by you to the Bank,
the Bank is willing to provide, subject to the terms of this Letter Agreement,
certain severance benefits to protect you from the consequences of a Terminating
Event (as defined in Section 3.4) occurring subsequent to a Change in Control.
3.2 CHANGE IN CONTROL. A "Change in Control" will be deemed to have
occurred if: (1) the Bank effectuates a Takeover Transaction; or (2) the Bank
commences substantive negotiations with a third party with respect to a Takeover
Transaction if within twelve (12) months of the commencement of such
negotiations, enters into a definitive agreement with respect to a Takeover
Transaction with any party with which negotiations were originally commenced; or
(3) any election of directors of the Bank (or, if the Bank reorganizes into a
holding company structure, directors of the holding company) (whether by the
directors then in office or by the stockholders at a meeting or by written
consent) where a majority of the directors in office following such election are
individuals who were not nominated by a vote of two-thirds of the members of the
board of directors immediately preceding such election; or (4) the Bank
effectuates a complete liquidation of the Bank or a sale or disposition of all
or substantially all of its assets. You understand and agree that a
reorganization in which the Bank reorganizes into a holding company structure,
or any similar reorganization, will not constitute a Change in Control for
purposes of this agreement or for any other purpose; provided, however, that any
such transaction may constitute a Change in Control if accomplished in
connection with a Takeover Transaction.
3.3 TAKEOVER TRANSACTION. A "Takeover Transaction" shall mean a (i)
merger or consolidation of the Bank with, or an acquisition of the Bank or all
or substantially all of its assets by, any other bank or corporation, other than
a merger, consolidation or acquisition in which the individuals
<PAGE> 12
Merrill W. Sherman
January 30, 1998
Page 12
who were members of the Board of Directors of the Bank immediately prior to such
merger or consolidation continue to constitute a majority of the Board of
Directors of the surviving bank (or, in the case of an acquisition involving a
holding company, constitute a majority of the Board of Directors of the holding
company) for a period of not less than twelve (12) months following the closing
of such transaction, or (ii) when any person or entity or group of persons or
entities (other than any trustee or other fiduciary holding securities under an
employee benefit plan of Bank) either related or acting in concert becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Securities Exchange Act
of 1934, as amended) of securities of the Bank representing more than thirty
percent (30%) of the total number of votes that may be cast for the election of
directors of the Bank, other than a person who was already a 30% beneficial
owner as of the date on which your employment with Bank commences.
3.4 TERMINATING EVENT. A "Terminating Event" means either
(a) Termination by the Bank of your employment with the Bank for any
reason other than (i) your death or disability or (ii) for "Cause" (as such term
is defined in Section 3.5 hereof); or
(b) Your resignation as an employee of the Bank, other than for reasons
of disability, following (i) a significant reduction in the nature or scope of
your duties, responsibilities, authority and powers from the duties,
responsibilities, authority and powers exercised by you immediately prior to the
Change in Control; or (ii) any requirement by the Bank or of any person in
control of the Bank that the location at which you perform the principal duties
for the Bank be outside a radius of 50 miles from the location at which you
performed such duties immediately prior to the Change in Control; or (iii)
failure of the Bank to renew your employment on terms not less favorable than
those existing immediately prior to such nonrenewal, other than a reduction of
fringe benefits required by law or applicable to all employees generally; or
(iv) the failure of you and any successor of the Bank to mutually agree in
writing for any reason, upon terms and conditions of employment with you within
ninety (90) days following a Change in Control.
3.5 TERMINATION FOR "CAUSE" DEFINED. For purposes of this Letter
Agreement, termination for Cause, as determined by the Board shall include
termination by reason of any of the following:
(a) Continuing any arrangement, holding any position or engaging in any
activities that conflict with the interest of, or that interfere
with your duties owed to, the Bank, after ten (10) days prior
written notice by the Bank to you of the same;
(b) Conviction of embezzlement or other crimes against the Bank;
(c) Deliberate misappropriation of the Bank's funds;
(d) Material violation of written policies of the Bank or material
breach of any of your obligations under the terms of this Letter
Agreement, which continues after ten (10) days prior written notice
by the Bank to you of the same; and
<PAGE> 13
Merrill W. Sherman
January 30, 1998
Page 13
(e) Refusal to perform assigned duties when such refusal is not
justified or excused either by the terms of this Letter Agreement
or by actions taken by the Bank in violation of this Letter
Agreement; provided, however, that if you should dispute Bank's
determination that it has caused you to terminate your employment,
or if you assert that this act or omission was caused by actions
taken by Bank in violation of this Letter Agreement, the dispute
will be governed by Section 4.7 hereof.
3.6 PAYMENT IN CONNECTION WITH TERMINATING EVENT. If a Terminating
Event occurs within one (1) year after a Change in Control (which one year
period shall be calculated from the effective date of the Takeover Transaction
if the Terminating Event occurs after a Takeover Transaction), the Bank will pay
to you an amount (the "Severance Payment") equal to 2.99 times the sum of (a)
your annual base salary in effect at the time of the Change in Control and (b)
an amount equal to the average executive cash bonus paid to you with respect to
the two (2) full fiscal years (or the executive cash bonus paid with respect to
1997 if the Terminating Event occurs prior to January 1, 1999) immediately
preceding the Change in Control, which Severance Payment shall be payable in one
lump sum within 30 days of the date of termination of your employment, or if
such Change in Control is governed by clause (2) of Section 3.2 and the
Terminating Event occurs prior to entering into a definitive agreement, upon the
entering into of a definitive agreement by the Bank. In addition, any Options
shall be exercisable for the periods specified in Section 2.1 hereof. No
Severance Payment will be made to you under PART 3 if your employment with the
Bank terminates for any reason prior to a Change in Control, or if your
employment with the Bank terminates after a Change in Control but such
termination or resignation is not a Terminating Event. In addition, no Severance
Payment will be made to you under this Letter Agreement with respect to a
Terminating Event which occurs more than one year after a Change in Control
(which one-year period shall be calculated from the. effective date of the
Takeover Transaction if the Terminating Event occurs after a Takeover
Transaction).
3.7 APPLICABILITY OF CHANGE IN CONTROL PROVISIONS. (a) If there is a
Change in Control while this Letter Agreement is in effect and while you remain
actively employed by the Bank, the provisions of PART 3 shall apply and shall
continue to apply for a one-year period following the Change in Control (which
one-year period shall be calculated from the effective date of a Takeover
Transaction if a Terminating Event occurs after the Takeover Transaction), and
the provisions of PART 3 shall continue to apply regardless of whether this
Letter Agreement is terminated.
(b) The provisions of PART 3 shall terminate upon the earliest of (i)
the termination by the Bank of your employment for any reason prior to a Change
in Control, (ii) the termination of your employment by the Bank after a Change
in Control because of death or disability or for Cause, (iii) your resignation
or termination of employment with the Bank for any reason other than Good Reason
prior to a Change in Control, and (iv) your resignation or termination of
employment after a Change in Control for any reason other than the occurrence of
any of the events enumerated in Section 3.4 of this Letter Agreement.
3.8 LIMITATION ON BENEFITS. (a) It is the intention of the parties that
no payments by the Bank to or for your benefit under this Letter Agreement or
any other agreement or plan pursuant to which you are entitled to receive
payments or benefits shall be non-deductible to the Bank by reason of
<PAGE> 14
Merrill W. Sherman
January 30, 1998
Page 14
the operation of Section 280G of the Internal Revenue Code of 1986, as amended
(the "Code"), relating to parachute payments. Accordingly, and notwithstanding
any other provision of this Letter Agreement or any such agreement or plan, if
by reason of the operation of said Section 280G, any such payments exceed the
amount which can be deducted by the Bank, such payments shall be reduced to the
maximum amount which can be deducted by the Bank. To the extent that payments
exceeding such maximum deductible amount have been made to you or your
beneficiary, you or your beneficiary shall refund such excess payments to the
Bank with interest thereon at the Applicable Federal Rate determined under
Section 1274(d) of the Code, compounded annually, or at such other rate as may
be required in order that no such payments shall be non-deductible to the Bank
by reason of the operation of said Section 280G. To the extent that there is
more than one method of reducing the payments to bring them within the
limitations of said Section 280G, you shall determine which method shall be
followed, provided that if you fail to make such determination within forty-five
(45) days after the Bank has sent you written notice of the need for such
reduction, the Bank may determine the method of such reduction in its sole
discretion.
(b) If any dispute between the Bank and you as to any of the amounts to
be determined under Section 3.8(a), or the method of calculating such amounts,
cannot be resolved by you and the Bank, either the Bank or you after giving
three (3) days written notice to the other, may refer the dispute to a partner
in the Boston, Massachusetts office of a firm of independent certified public
accountants selected jointly by you and the Bank. The determination of such
partner as to the amount to be determined under Section 3.8(a) and the method of
calculating such amounts shall be final and binding on both you and the Bank.
The Bank shall bear the costs of any such determination.
PART 4. MISCELLANEOUS
4.1 CONFIDENTIAL INFORMATION. Unless you first secure the Bank's
consent, you will not disclose or use, at any time either during or subsequent
to your employment by the Bank, except as required by your duties to the Bank,
any secret or confidential information of the Bank of which you become informed
during your employment, whether or not developed by you. The term "confidential
information" includes, without limitation, financial information, business
plans, prospects, and opportunities (such as lending relationships, financial
product developments, or possible acquisitions or dispositions of business or
facilities) which have been discussed or considered by the Bank's management,
but does not include any information which has become part of the public domain
by means other than your non-observance of your obligations hereunder.
4.2 NON-COMPETITION. During your employment by the Bank hereunder, and
during a period of one year following the date of termination of your employment
with the Bank for any reason, you will not, directly or indirectly whether as
partner, consultant, agent, employee, co-venturer, greater than 2% owner, or
otherwise, or through any Person (as hereafter defined),
(a) attempt to recruit any employee of the Bank, assist in such hiring
by any other Person, or encourage any such employee to terminate his or her
relationship with the Bank, or
<PAGE> 15
Merrill W. Sherman
January 30, 1998
Page 15
(b) encourage any customer of the Bank to conduct with any other Person
any business or activity which such customer conducts or could conduct with the
Bank.
For purposes of this Section 4.2, the term "Person" shall mean an individual, a
corporation, an association, a partnership, an estate, a trust and any other
entity or organization.
4.3 NO CONFLICTING OBLIGATIONS. The Bank, in entering into this Letter
Agreement, understands, and you hereby represent, that you are not under any
obligation to any former employer or any person, firm or corporation that would
prevent, limit or impair, in any way, the performance by you of your duties as
an employee of the Bank.
4.4 ETHICAL BEHAVIOR. Upon termination by the Bank of your employment
for any reason, you shall act at all times in an ethical manner with regard to,
and during the one-year period following the date of such termination, shall
take no action which directly or indirectly has or could reasonably be expected
to have the effect of terminating or otherwise adversely affecting the
relationship of the Bank with any employees of, or others with business or
advantageous relationships with, the Bank or any of its affiliates.
4.5 WITHHOLDING. All payments made by the Bank under this Letter
Agreement will be net of any tax or other amounts required to be withheld by the
Bank under applicable law.
4.6 LEGAL FEES. Upon submission of appropriate statements or
documentation, the Bank agrees to reimburse you for reasonable legal fees
actually incurred by you in connection with the negotiation, review and
enforcement of the terms of this Letter Agreement, provided, however, that the
Bank shall not be obligated to reimburse you for any legal fees or expenses
incurred by you in connection with the Bank's enforcement of the terms of this
Letter Agreement or in connection with any arbitration or litigation in which
the Bank is the prevailing party.
4.7 BINDING EFFECT. This Letter Agreement is binding upon and will
enure to the benefit of the parties hereto and their respective heirs,
administrators, executors, successors and assigns.
4.8 ARBITRATION OF DISPUTES. Any dispute, controversy or claim arising
out of or relating to this Letter Agreement or the breach or performance hereof
will be settled by arbitration in accordance with the laws of the State of Rhode
Island by an arbitrator mutually agreed upon by you and the Bank. If an
arbitrator cannot be agreed upon, you and the Bank shall each choose an
arbitrator, and these two together shall select a third arbitrator. If the first
two arbitrators cannot agree on the appointment of a third arbitrator, then the
third arbitrator will be appointed by the American Arbitration Association in
Providence, Rhode Island. Such arbitration will be conducted in the City of
Providence in accordance with the Commercial Arbitration Rules of the American
Arbitration Association, except with respect to the selection of arbitrators
which shall be as provided in this Section 4.8. Judgment upon the award rendered
by the arbitrators may be entered in any court having jurisdiction thereof.
<PAGE> 16
Merrill W. Sherman
January 30, 1998
Page 16
If the foregoing correctly sets forth our understanding, please sign
this letter and the enclosed counterpart hereof in the space below and return to
the undersigned the counterpart copy that you have signed.
We are happy that you are joining the management team of the Bank, and
we look forward to a mutually beneficial relationship.
Sincerely yours,
BANK RHODE ISLAND
By: /s/ Malcolm G. Chace
-----------------------
Malcolm G. Chace
Chairman of the Board
The foregoing correctly sets forth our agreement.
/s/ Merrill W. Sherman
- - ----------------------
Merrill W. Sherman
1/30/98
- - ------------
Date
<PAGE> 1
EXHIBIT 10.2
July 20, 1999
Albert R. Rietheimer
6 Hope Court
Barrington, Rhode Island 02806
Dear Al:
Reference is made to that certain letter agreement by and between Bank
Rhode Island (the "Bank") and you dated January 31, 1998 (the "Letter
Agreement") pursuant to which the Bank agreed to employ you in the position of
Chief Financial Officer and Treasurer of the Bank upon the terms and conditions
set forth therein. The Bank and you hereby agree that the Letter Agreement shall
be amended in its entirety as follows:
PART 1. EMPLOYMENT; DUTIES, ETC.
1.1 RESPONSIBILITIES AND AUTHORITY. In your capacity as Chief Financial
Officer and Treasurer with the Bank, you will have the duties, responsibilities,
authorities and powers normally incident to such office. At all times, however,
your activities and authority will be subject to supervision, control and
direction by the Board of Directors of the Bank (the "Board"), by the Executive
Committee of the Board, and by the President and Chief Executive Officer of the
Bank (the "Chief Executive Officer") and you agree to carry out such duties and
responsibilities as any of them may from time to time reasonably assign to you.
You shall report from time to time or routinely, upon request, to the Chief
Executive Officer or his or her designee as to the current status of any of your
assigned duties and responsibilities.
1.2 COMPENSATION. Your compensation will be at the rate of $132,200 per
year, payable on a bi-weekly basis, or at such higher rate as shall be
determined from time to time by the Board. In addition, you will be entitled to
receive payments under any incentive compensation or bonus program (as in effect
from time to time), which the Bank's Board may establish for its employees
and/or senior executives, in such amounts as are provided by such programs.
1.3 EMPLOYEE BENEFITS. As a full-time employee of the Bank, you will be
eligible to participate in any and all employee benefit plans generally
available to full-time employees, including non-contributory plans and, at your
option, contributory plans.
1.4 GRANT OF STOCK OPTIONS. You will receive options to purchase shares
of the Bank's common stock in such number, at an exercise price and on such
other terms as may be approved by the Compensation Committee of the Board, in
its sole discretion. Any such options
<PAGE> 2
Albert R. Rietheimer
July 20, 1999
Page 2
will become exercisable on a schedule no less favorable than the following: 20%
on the grant date and an additional 20% on each of the first through fourth
anniversaries of the grant date, with such vesting to accelerate on a Change in
Control (as defined in Section 3.2).
1.5 VACATION. You will be entitled to four weeks of vacation during
each year of your employment, such vacation to be taken in accordance with the
Bank's customary vacation policies and at such times and intervals as are
mutually agreed upon by you and the Bank. You will be entitled to holiday time
and sick leave in accordance with the then existing policies of the Bank, as in
effect from time to time.
1.6 REIMBURSEMENT OF EXPENSES. You will be reimbursed by the Bank for
reasonable business expenses incurred by you incident to your employment upon
presentation of appropriate vouchers, receipts, and other supporting documents
required by the Bank.
1.7 DUTY TO PERFORM SERVICES. So long as you are employed by the Bank,
you agree to devote your full business and productive time, skill, and energy
diligently, loyally, effectively, and to the best of your ability to the
rendering of service to the Bank, and will exert your best efforts in the
rendering of such services. This provision will not prohibit you from:
(a) making passive investments or serving as a fiduciary with
respect to direct family investments;
(b) serving on the board of directors of any company, provided
that you will not render any material services with respect to the operations or
affairs of any such company and provided further that serving on such board of
directors does not otherwise violate the terms of this Letter Agreement,
including, but not limited to, the provisions of Section 4.2 herein; or
(c) engaging in religious, charitable or other community or
non-profit activities which do not impair your ability to fulfill your duties
and responsibilities to the Bank.
You agree that in the rendering of all services to the Bank and in all aspects
of your employment, in connection with your duties as Chief Financial Officer,
you will comply with all directives, policies, standards, and regulations from
time to time established by the Bank or by applicable law.
1.8 DEATH OR DISABILITY.
(a) DEATH. In the event of your death during the term of your
employment under this Letter Agreement, the Bank shall immediately pay to your
designated beneficiary any salary accrued but unpaid as of the date of your
death. Upon payment of the aforementioned sums, the Bank's obligations to make
further salary payments shall terminate. This provision shall not be construed
to negate any rights you may have to death benefits under any employee
<PAGE> 3
Albert R. Rietheimer
July 20, 1999
Page 3
benefit or welfare plan of the Bank in which you may from time to time be a
participant or under any other written agreement with the Bank which
specifically provides for such benefits.
(b) DISABILITY. In the event of your "disability" (as defined
below) during the term of your employment under this Letter Agreement, the Bank
shall continue to pay you your base salary (reduced by any benefits you are
entitled to receive under any state or federal disability insurance program,
such as Rhode Island temporary disability insurance or federal social security)
for a period of six months from the date of "disability". For purposes of this
Letter Agreement, "disability" shall mean a determination by the Board that you
are unable for any reason, either physical or mental, to perform the duties
required of you hereunder.
1.9 TERM OF EMPLOYMENT. The term of your employment by the Bank under
this Letter Agreement shall continue, unless sooner terminated pursuant to the
provisions of this Letter Agreement, until January 31, 2000 (the "Initial Term")
and shall be automatically extended for each successive one-year period
thereafter (each, a "Successive Term"), unless either party shall have given
written notice to the other of such party's election not to extend the term of
this Letter Agreement within thirty (30) calendar days prior to the Initial Term
or any Successor Term. The last day of such term, as it may be extended from
time to time, is hereinafter sometimes referred to as the "Contract Expiration
Date".
1.10 TERMINATION AND SURVIVAL. The provisions of PART 1 of this Letter
Agreement shall terminate on the Contract Expiration Date. The provisions of
PART 2, PART 3 and PART 4 shall survive the termination of PART 1 and shall
remain in full force and effect and shall continue to be enforceable in
accordance with their terms notwithstanding any termination of PART 1. The
provisions of PART 2, PART 3 and Sections 4.1, 4.2, 4.4, 4.6, 4.7 and 4.9 hereof
shall remain in full force and effect and shall continue to be enforceable in
accordance with their terms beyond the Contract Expiration Date and beyond
termination of employment.
PART 2. SEVERANCE.
2.1 SEVERANCE BENEFIT. In the event of a termination of your employment
by the Bank without Cause (as such term is defined in Section 3.5) at any time,
whether before or after the Contract Expiration Date; or in the event of the
expiration of the term of your employment without extension of such Contract
Expiration Date; or in the event of termination of your employment by you after
the Contract Expiration Date, for Good Reason (as defined in Section 2.2), the
Bank will continue to pay you your base salary then in effect for a twelve (12)
month period (the "Severance Benefit") commencing on the date of termination
(the "Severance Period") plus the Bank will provide you with the medical and
life insurance coverage generally available to full-time employees during the
Severance Period or as required by law, whichever is longer. Notwithstanding
anything herein to the contrary, the Bank shall have no obligation to pay the
Severance Benefit to you in the event your employment is terminated with Cause
by the Bank or voluntarily by you without Good Reason.
<PAGE> 4
Albert R. Rietheimer
July 20, 1999
Page 4
2.2 "GOOD REASON" DEFINED. For purposes of this Letter Agreement "Good
Reason" shall mean the Bank's election under Section 1.9 not to extend the term
of this Letter Agreement and its failure to offer and enter into a new
employment agreement with you on terms which are substantially similar to those
of your employment existing immediately prior to such non-renewal (other than a
reduction of fringe benefits required by law or applicable to all employees
generally) provided, however, that Good Reason shall not be deemed to have
occurred unless prior to your termination of employment for Good Reason, you
shall give not less than 30 days written notice to the Bank of your intent to
terminate for Good Reason stating the basis of the Good Reason sufficient to
permit the Bank to alleviate the basis of such Good Reason prior to termination,
and the Bank has not done so within such 30 day period, and further provided,
that your continuing to work in the absence of entering into a new employment
agreement shall be without prejudice to your right to claim termination for Good
Reason, absent written agreement between you and the Bank to the contrary.
<PAGE> 5
Albert R. Rietheimer
July 20, 1999
Page 5
PART 3. CHANGE IN CONTROL
3.1 PURPOSE. In order to allow you to consider the prospect of a Change
in Control (as defined in Section 3.2) in an objective manner and in
consideration of the services rendered and to be rendered by you to the Bank,
the Bank is willing to provide, subject to the terms of this Letter Agreement,
certain severance benefits to protect you from the consequences of a Terminating
Event (as defined in Section 3.4) occurring subsequent to a Change in Control.
3.2 CHANGE IN CONTROL. A "Change in Control" will be deemed to have
occurred if: (i) the Bank effectuates a Takeover Transaction; or (ii) the Bank
commences substantive negotiations with a third party with respect to a Takeover
Transaction and within twelve (12) months of the commencement of such
negotiations, enters into a definitive agreement with respect to a Takeover
Transaction with any party with which negotiations were originally commenced; or
(iii) any election of directors of the Bank (or, if the Bank reorganizes into a
holding company structure, directors of the holding company) occurs (whether by
the directors then in office or by the shareholders at a meeting or by written
consent) where a majority of the directors in office following such election are
individuals who were not nominated by a vote of two-thirds of the members of the
board of directors immediately preceding such election; or (iv) the Bank
effectuates a complete liquidation of the Bank or a sale or disposition of all
or substantially all of its assets. You understand and agree that a
reorganization in which the Bank reorganizes into a holding company structure,
or any similar reorganization, will not constitute a Change in Control for
purposes of this agreement or for any other purpose; provided, however, that any
such transaction may constitute a Change in Control if accomplished in
connection with a Takeover Transaction.
3.3 TAKEOVER TRANSACTION. A "Takeover Transaction" shall mean:
(a) The acquisition of voting securities of the Bank by any
individual, entity or group (within the meaning of Section 13(d)(3) or
14(d)(2) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act")), other than by the Bank or its subsidiaries or any
employee benefit plan (or related trust) of the Bank or its
subsidiaries, which theretofore did not beneficially own (within the
meaning of Rule 13d-3 promulgated under the Exchange Act), securities
representing 30% or more of the voting power of all outstanding shares
of voting securities of the Bank, if such acquisition results in such
individual, entity or group owning securities representing more than
30% of the voting power of all outstanding voting securities of the
Bank; provided, that any acquisition by a corporation with respect to
which, following such acquisition, more than 50% of the then
outstanding shares of voting securities of such corporation, is then
beneficially owned, directly or indirectly, by all or substantially all
of the individuals and entities who were the beneficial owners of the
voting securities of the Bank outstanding immediately prior to such
acquisition in substantially the same proportion as their ownership,
immediately
<PAGE> 6
Albert R. Rietheimer
July 20, 1999
Page 6
prior to such acquisition, of the outstanding voting securities of the
Bank, shall not constitute a Change in Control; or
(b) The issuance of additional shares of common stock of the
Bank in a single transaction or a series of related transactions if the
individuals and entities who were the beneficial owners of the
outstanding voting securities of the Bank immediately prior to such
issuance do not, following such issuance, beneficially own, directly or
indirectly, securities representing more than 50% of the voting power
of all then outstanding voting securities of the Bank; or
(c) Consummation by the Bank of (i) a reorganization, merger
or consolidation, in each case, with respect to which all or
substantially all of the individuals and entities who were the
beneficial owners of the voting securities of the Bank immediately
prior to such reorganization, merger or consolidation do not, following
such reorganization, merger or consolidation, beneficially own,
directly or indirectly, securities representing more than 50% of the
voting power of then outstanding voting securities of the corporation
resulting from such a reorganization, merger or consolidation or (ii)
the sale, exchange or other disposition (in one transaction or a series
of related transactions) of all or substantially all of the assets of
the Bank (on a consolidated basis) to a party which is not controlled
by or under common control with the Bank.
For purposes of this Section 3.3, "voting power" means ordinary voting
power for the election of directors.
3.4 TERMINATING EVENT. A "Terminating Event" means either
(a) Termination by the Bank of your employment with the Bank
for any reason other than (i) your death or disability or (ii) for "Cause" (as
such term is defined in Section 3.5 hereof), or
(b) Your resignation as an employee of the Bank, other than
for reasons of disability, following (i) a significant reduction in the nature
or scope of your duties, responsibilities, authority and powers from the duties,
responsibilities, authority and powers exercised by you immediately prior to the
Change in Control or (ii) a greater than 10% reduction in your annual base
salary or fringe benefits as in effect on the date of the Change in Control,
except for the across-the-board salary reductions or change in fringe benefit
plans similarly affecting all management personnel of the Bank; or (iii) any
requirement by the Bank or of any person in control of the Bank that the
location at which you perform the principal duties of the Bank be outside a
radius of 50 miles from the location at which you performed such duties
immediately prior to the Change in Control; or (iv) the failure of any successor
of the Bank to agree in writing upon terms and conditions of employment with you
which are substantially
<PAGE> 7
Albert R. Rietheimer
July 20, 1999
Page 7
similar to those of your employment immediately prior to the Change in Control
and which are reasonably satisfactory to you within ninety (90) days following a
Change in Control.
3.5 TERMINATION FOR "CAUSE" DEFINED. For purposes of this Letter
Agreement, termination for Cause shall include termination by reason of any of
the following:
(a) Continuing any arrangement, holding any position or
engaging in any activities that conflict with the
interest of, or that interfere with your duties owed
to, the Bank, after ten (10) days prior written
notice by the Bank to you of the same;
(b) Conviction of embezzlement or other crimes against
the Bank, deliberate misappropriation of the Bank's
funds or dishonesty;
(c) Material violation of written policies of the Bank,
irresponsible acts in the performance of your duties
or material breach of any of your obligations under
the terms of this Letter Agreement;
(d) Material non-performance of your duties or material
acts (or omissions) of mismanagement; and
(e) Refusal to perform assigned duties when such refusal
is not justified or excused either by the terms of
this Letter Agreement or by actions taken by the Bank
in violation of this Letter Agreement.
3.6 PAYMENT IN CONNECTION WITH TERMINATING EVENT. If a Terminating
Event occurs within one (1) year after a Change in Control (which one year
period shall be calculated from the effective date of the Takeover Transaction
if the Terminating Event occurs after a Takeover Transaction), the Bank will pay
to you an amount (the "Severance Payment") equal to two times the sum of (a)
your annual base salary in effect at the time of the Change in Control, and (b)
an amount equal to the average executive cash bonus earned by you with respect
to the two full fiscal years immediately preceding the Change in Control, which
Severance Payment shall be payable in one lump sum within 30 days of the date of
termination of your employment, or if such Change in Control is governed by
clause (ii) of Section 3.2 and the Terminating Event occurs prior to entering
into a definitive agreement, upon the entering into of a definitive agreement by
the Bank. In addition, the Bank shall continue to pay for all medical and life
insurance coverage provided on the date of the Terminating Event for the twelve
month period commencing on the effective date of the Terminating Event. No
Severance Payment will be made to you under PART 3 if your employment with the
Bank terminates for any reason prior to a Change in Control, or if your
employment with the Bank terminates after a Change in Control but such
termination or resignation is not a Terminating Event. In addition, except as
provided
<PAGE> 8
Albert R. Rietheimer
July 20, 1999
Page 8
in PART 2, no Severance Payment will be made to you under this Letter Agreement
with respect to a Terminating Event which occurs more than one year after a
Change in Control.
3.7 APPLICABILITY OF CHANGE IN CONTROL PROVISIONS. (a) If there is a
Change in Control while this Letter Agreement is in effect and while you remain
actively employed by the Bank, the provisions of PART 3 shall apply and shall
continue to apply for a one - year period following the Change in Control (which
one-year period shall be calculated from the effective date of a Takeover
Transaction if a Terminating Event occurs after the Takeover Transaction), and
the provisions of PART 3 shall continue to apply regardless of whether this
Letter Agreement is terminated until all the obligations of the Bank hereunder
have been fulfilled and all benefits provided hereunder have been paid.
(b) The provisions of PART 3 shall terminate upon the earliest of (i)
the termination by the Bank of your employment for any reason prior to a Change
in Control, (ii) the termination of your employment by the Bank after a Change
in Control because of death or disability or for Cause, (iii) your resignation
or termination of employment with the Bank for any reason other than Good Reason
prior to a Change in Control, and (iv) your resignation or termination of
employment after a Change in Control for any reason other than the occurrence of
any of the events enumerated in Section 3.4 of this Letter Agreement.
3.8 EXCISE TAX EQUALIZATION PAYMENT. In the event that you become
entitled to a Severance Payment or any other payment or benefit under this
Letter Agreement, or under any other agreement with or plan of the Bank (in the
aggregate, the "Total Payments"), if any of the Total Payments will be subject
to the tax (the "Excise Tax") imposed by Section 4999 of the Code (or any
similar tax that may hereafter be imposed), the Bank shall pay to you in cash an
additional amount (the "Gross-Up Payment") such that the net amount retained by
you after deduction of any Excise Tax upon the Total Payments and any Federal,
state and local income tax and Excise Tax upon the Gross-Up Payment provided for
by this Section 3.8 (including FICA and FUTA), shall be equal to the Total
Payments. Such payment shall be made by the Bank to you as soon as practical
following the effective date of the Terminating Event, but in no event beyond
thirty (30) days from such date.
3.9 TAX COMPUTATION. For purposes of determining whether any of the
Total Payments will be subject to the Excise Tax and the amounts of such Excise
Tax:
(a) Any other payments or benefits received or to be received by you in
connection with a Change in Control of the Bank or your termination of
employment (whether pursuant to the terms of this Letter Agreement or any other
plan, arrangement, or agreement with the Bank, or with any person (which shall
have the meaning set forth in Section 3(a)(9) of the Exchange Act, including a
"group" as defined in Section 13(d) therein) whose actions result in a Change in
Control of the Bank or any person affiliated with the Bank or such persons)
shall be treated as "parachute payments" within the meaning of Section
280G(b)(1) of the Code, and all "excess
<PAGE> 9
Albert R. Rietheimer
July 20, 1999
Page 9
parachute payments" within the meaning of Section 280G(b)(1) shall be treated as
subject to the Excise Tax, unless in the opinion of tax counsel as supported by
the Bank's independent auditors and acceptable to you, such other payments or
benefits (in whole or in part) do not constitute parachute payments, or unless
such excess parachute payments (in whole or in part) represent reasonable
compensation for services actually rendered within the meaning of Section
280G(b)(4) of the Code in excess of the base amount within the meaning of
Section 280G(b)(3) of the Code, or are otherwise not subject to the Excise Tax;
(b) The amount of the Total Payments which shall be treated as subject
to the Excise Tax shall be equal to the lesser of: (i) the total amount of the
Total Payments; (or (ii) the amount of excess parachute payments within the
meaning of Section 280G(b)(1) (after applying clause (a) above); and
(c) The value of any noncash benefits or any deferred payment or
benefit shall be determined by the Bank's independent auditors in accordance
with the principles of Sections 280G(d)(3) and (4) of the Code.
For purposes of determining the amount of the Gross-Up Payment, you
shall be deemed to pay Federal income taxes at the highest marginal rate of
Federal income taxation in the calendar year in which the Gross-Up Payment is to
be made, and state and local income taxes at the highest marginal rate of
taxation in the state and locality of your residence on the effective date of
the Terminating Event, net of the maximum reduction in Federal income taxes
which could be obtained from deduction of such state and local taxes.
3.10 SUBSEQUENT RECALCULATION. In the event the Internal Revenue
Service adjusts the computation of the Bank under Section 3.9 herein so that you
did not receive the greatest net benefit, the Bank shall reimburse you for the
full amount necessary to make you whole, plus a market rate of interest, as
determined by the Compensation Committee of the Board.
3.11 DISPUTE RESOLUTION. If any dispute between the Bank and you as to
any of the amounts to be determined under Sections 3.8 or 3.9, or the method of
calculating such amounts, cannot be resolved by you and the Bank, either the
Bank or you after giving three (3) days written notice to the other, may refer
the dispute to a partner in the Boston, Massachusetts office of a firm of
independent certified public accountants selected jointly by you and the Bank.
The determination of such partner as to the amount to be determined under
Section 3.8 and 3.9 and the method of calculating such amounts shall be final
and binding on both you and the Bank. The Bank shall bear the costs of any such
determination.
PART 4. MISCELLANEOUS
4.1 CONFIDENTIAL INFORMATION. Unless you first secure the Bank's
consent, you will not disclose or use, at any time either during or subsequent
to your employment by the Bank,
<PAGE> 10
Albert R. Rietheimer
July 20, 1999
Page 10
except as required by your duties to the Bank, any secret or confidential
information of the Bank of which you become informed during your employment,
whether or not developed by you. The term "confidential information" includes,
without limitation, financial information, business plans, prospects, and
opportunities (such as lending relationships, financial product developments, or
possible acquisitions or dispositions of business or facilities) which have been
discussed or considered by the Bank's management, but does not include any
information which has become part of the public domain by means other than your
non-observance of your obligations hereunder.
4.2 NON-COMPETITION. During your employment by the Bank hereunder, and
during a period of one (1) year following the date of termination of your
employment with the Bank for any reason, you will not, directly or indirectly,
whether as partner, consultant, agent, employee, co-venturer, greater than 2%
owner, or otherwise, or through any Person (as hereafter defined),
(a) attempt to recruit any employee of the Bank, assist in
such hiring by any other Person, or encourage any such employee to terminate his
or her relationship with the Bank, or
(b) encourage any customer of the Bank to conduct with any
other Person any business or activity which such customer conducts or could
conduct with the Bank.
For purposes of this Section 4.2, the term "Person" shall mean an individual, a
corporation, an association, a partnership, an estate, a trust and any other
entity or organization.
4.3 NO CONFLICTING OBLIGATIONS. The Bank, in entering into this Letter
Agreement, understands, and you hereby represent, that you are not under any
obligation to any former employer or any person, firm or corporation that would
prevent, limit or impair, in any way, the performance by you of your duties as
an employee of the Bank.
4.4 ETHICAL BEHAVIOR. Upon termination by the Bank of your employment
for any reason, you shall act at all times in an ethical manner with regard to,
and during the one-year period following the date of such termination, shall
take no action which directly or indirectly has or could reasonably be expected
to have the effect of terminating or otherwise adversely affecting the
relationship of the Bank with any employees of, or others with business or
advantageous relationships with, the Bank or any of its affiliates.
4.5 WITHHOLDING. All payments made by the Bank under this Letter
Agreement will be net of any tax or other amounts required to be withheld by the
Bank under applicable law.
4.6 LEGAL FEES. Upon submission of appropriate statements or
documentation, the Bank agrees to reimburse you for reasonable legal fees
actually incurred by you in connection with the enforcement of the terms of this
Letter Agreement following a Change in Control,
<PAGE> 11
Albert R. Rietheimer
July 20, 1999
Page 11
provided, however, that the Bank shall not be obligated to reimburse you for any
legal fees or expenses incurred by you in connection with the Bank's enforcement
of the terms of this Letter Agreement or in connection with any arbitration or
litigation in which the Bank is the prevailing party.
4.7 INDEMNIFICATION. The Bank hereby covenants and agrees to indemnify
you and hold you harmless fully, completely, and absolutely against and in
respect to any and all actions, suits, proceedings, claims, demands, judgments,
costs, expenses (including attorney's fees), losses, and damages resulting from
your good faith performance of your duties and obligations under the terms of
this Letter Agreement.
4.8 BINDING EFFECT. This Letter Agreement is binding upon and will
enure to the benefit of the parties hereto and their respective heirs,
administrators, executors, successors and assigns. The Bank will require any
successor (whether direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business and/or assets of the Bank
to assume expressly and perform this Letter Agreement. Failure of the Bank to
obtain such assumption and agreement prior to the effectiveness of any such
succession shall be a breach of this Letter Agreement and shall entitle you to
compensation from the Bank in the same amount and on the same terms as you would
be entitled to hereunder following a Terminating Event, except that for purposes
of implementing the foregoing, the date on which any such succession becomes
effective shall be deemed the date on which you become entitled to such
compensation from the Bank. As used in this Letter Agreement, "Bank" shall mean
the Bank, as hereinbefore defined and any successor to its business and/or
assets as aforesaid which assumes and agrees to perform this Letter Agreement by
operation of law, or otherwise.
4.9 ARBITRATION OF DISPUTES. Any dispute, controversy or claim arising
out of or relating to this Letter Agreement or the breach or performance hereof
will be settled by arbitration in accordance with the laws of the State of Rhode
Island by an arbitrator mutually agreed upon by you and the Bank. If an
arbitrator cannot be agreed upon, you and the Bank shall each choose an
arbitrator, and these two together shall select a third arbitrator. If the first
two arbitrators cannot agree on the appointment of a third arbitrator, then the
third arbitrator will be appointed by the American Arbitration Association in
Providence, Rhode Island. Such arbitration will be conducted in the City of
Providence in accordance with the Commercial Arbitration Rules of the American
Arbitration Association, except with respect to the selection of arbitrators
which shall be as provided in this Section 4.9. Judgment upon the award rendered
by the arbitrators may be entered in any court having jurisdiction thereof.
If the foregoing correctly sets forth our understanding, please sign
this letter and the enclosed counterpart hereof in the space below and return to
the undersigned the counterpart copy that you have signed.
<PAGE> 12
Albert R. Rietheimer
July 20, 1999
Page 12
Sincerely yours,
BANK RHODE ISLAND
By: /s/ Merrill W. Sherman
--------------------------
Merrill W. Sherman
President
The foregoing correctly sets forth our agreement.
/s/ Albert R. Rietheimer
- - ------------------------
Albert R. Rietheimer
7/21/99
- - -------------
Date
<PAGE> 1
EXHIBIT 10.3
July 20, 1999
Donald C. McQueen
3 Shady Lane
Barrington, Rhode Island 02806
Dear Don:
Reference is made to that certain letter agreement by and between Bank
Rhode Island (the "Bank") and you dated January 31, 1998, as amended by an
amendment dated September 16, 1998 (the "Letter Agreement") pursuant to which
the Bank agreed to employ you in the position of Chief Lending Officer of the
Bank upon the terms and conditions set forth therein. The Bank agrees to employ
you in the position of Executive Vice President and Chief Lending Officer of the
Bank on the terms and conditions set forth herein. The Bank and you hereby agree
that the Letter Agreement shall be amended in its entirety as follows:
PART 1. EMPLOYMENT; DUTIES, ETC.
1.1 RESPONSIBILITIES AND AUTHORITY. In your capacity as Executive Vice
President and Chief Lending Officer with the Bank, you will have the duties,
responsibilities, authorities and powers normally incident to such office. At
all times, however, your activities and authority will be subject to
supervision, control and direction by the Board of Directors of the Bank (the
"Board"), by the Executive Committee of the Board, and by the President and
Chief Executive Officer of the Bank (the "Chief Executive Officer") and you
agree to carry out such duties and responsibilities as any of them may from time
to time reasonably assign to you. You shall report from time to time or
routinely, upon request, to the Chief Executive Officer or his or her designee
as to the current status of any of your assigned duties and responsibilities.
1.2 COMPENSATION. Your compensation will be at the rate of $129,150 per
year, payable on a bi-weekly basis, or at such higher rate as shall be
determined from time to time by the Board. In addition, you will be entitled to
receive payments under any incentive compensation or bonus program (as in effect
from time to time), which the Bank's Board may establish for its employees
and/or senior executives, in such amounts as are provided by such programs.
1.3 EMPLOYEE BENEFITS. As a full-time employee of the Bank, you will be
eligible to participate in any and all employee benefit plans generally
available to full-time employees, including non-contributory plans and, at your
option, contributory plans.
1.4 CERTAIN SPECIFIED EMPLOYEE BENEFITS
<PAGE> 2
Donald C. McQueen
July 20, 1999
Page 2
(a) GRANT OF STOCK OPTIONS. You will receive options to purchase shares
of the Bank's common stock in such number, at an exercise price and on such
other terms as may be approved by the Compensation Committee of the Board, in
its sole discretion. Any such options will become exercisable on a schedule no
less favorable than the following: 20% on the grant date and an additional 20%
on each of the first through fourth anniversaries of the grant date, with such
vesting to accelerate on a Change in Control (as defined in Section 3.2).
(b) CAR ALLOWANCE. You shall be entitled to receive a monthly car
allowance equal to $600 per month.
1.5 VACATION. You will be entitled to four weeks of vacation during
each year of your employment, such vacation to be taken in accordance with the
Bank's customary vacation policies and at such times and intervals as are
mutually agreed upon by you and the Bank. You will be entitled to holiday time
and sick leave in accordance with the then existing policies of the Bank, as in
effect from time to time.
1.6 REIMBURSEMENT OF EXPENSES. You will be reimbursed by the Bank for
reasonable business expenses incurred by you incident to your employment upon
presentation of appropriate vouchers, receipts, and other supporting documents
required by the Bank.
1.7 DUTY TO PERFORM SERVICES. So long as you are employed by the Bank,
you agree to devote your full business and productive time, skill, and energy
diligently, loyally, effectively, and to the best of your ability to the
rendering of service to the Bank, and will exert your best efforts in the
rendering of such services. This provision will not prohibit you from:
(a) making passive investments or serving as a fiduciary with
respect to direct family investments;
(b) serving on the board of directors of any company, provided
that you will not render any material services with respect to the operations or
affairs of any such company and provided further that serving on such board of
directors does not otherwise violate the terms of this Letter Agreement,
including, but not limited to, the provisions of Section 4.2 herein; or
(c) engaging in religious, charitable or other community or
non-profit activities which do not impair your ability to fulfill your duties
and responsibilities to the Bank.
You agree that in the rendering of all services to the Bank and in all aspects
of your employment, in connection with your duties as Executive Vice President
and Chief Lending Officer, you will comply with all directives, policies,
standards, and regulations from time to time established by the Bank or by
applicable law.
<PAGE> 3
Donald C. McQueen
July 20, 1999
Page 3
1.8 DEATH OR DISABILITY.
(a) DEATH. In the event of your death during the term of your
employment under this Letter Agreement, the Bank shall immediately pay to your
designated beneficiary any salary accrued but unpaid as of the date of your
death. Upon payment of the aforementioned sums, the Bank's obligations to make
further salary payments shall terminate. This provision shall not be construed
to negate any rights you may have to death benefits under any employee benefit
or welfare plan of the Bank in which you may from time to time be a participant
or under any other written agreement with the Bank which specifically provides
for such benefits.
(b) DISABILITY. In the event of your "disability" (as defined
below) during the term of your employment under this Letter Agreement, the Bank
shall continue to pay you your base salary (reduced by any benefits you are
entitled to receive under any state or federal disability insurance program,
such as Rhode Island temporary disability insurance or federal social security)
for a period of six months from the date of "disability". For purposes of this
Letter Agreement, "disability" shall mean a determination by the Board that you
are unable for any reason, either physical or mental, to perform the duties
required of you hereunder.
1.9 TERM OF EMPLOYMENT. The term of your employment by the Bank under
this Letter Agreement shall continue, unless sooner terminated pursuant to the
provisions of this Letter Agreement, until January 31, 2000 (the "Initial Term")
and shall be automatically extended for each successive one year period
thereafter (each, a "Successive Term"), unless either party shall have given
written notice to the other of such party's election not to extend the term of
this Letter Agreement within thirty (30) calendar days prior to the Initial Term
or any Successor Term. The last day of such term, as it may be extended from
time to time, is hereinafter sometimes referred to as the "Contract Expiration
Date".
1.10 TERMINATION AND SURVIVAL. The provisions of PART 1 of this Letter
Agreement shall terminate on the Contract Expiration Date. The provisions of
PART 2, PART 3 and PART 4 shall survive the termination of PART 1 and shall
remain in full force and effect and shall continue to be enforceable in
accordance with their terms notwithstanding any termination of PART 1. The
provisions of PART 2, PART 3 and Sections 4.1, 4.2, 4.4, 4.6, 4.7 and 4.9 hereof
shall remain in full force and effect and shall continue to be enforceable in
accordance with their terms beyond the Contract Expiration Date and beyond
termination of employment.
PART 2. SEVERANCE.
2.1 SEVERANCE BENEFIT. In the event of a termination of your employment
by the Bank without Cause (as such term is defined in Section 3.5) at any time,
whether before or after the Contract Expiration Date; or in the event of the
expiration of the term of your employment without extension of such Contract
Expiration Date; or in the event of termination of your employment by you after
the Contract Expiration Date, for Good Reason (as defined in Section
<PAGE> 4
Donald C. McQueen
July 20, 1999
Page 4
2.2), the Bank will continue to pay you your base salary then in effect for a
twelve (12) month period (the "Severance Benefit") commencing on the date of
termination (the "Severance Period") plus the Bank will provide you with the
medical and life insurance coverage generally available to full-time employees
during the Severance Period or as required by law, whichever is longer.
Notwithstanding anything herein to the contrary, the Bank shall have no
obligation to pay the Severance Benefit to you in the event your employment is
terminated with Cause by the Bank or voluntarily by you without Good Reason.
2.2 "GOOD REASON" DEFINED. For purposes of this Letter Agreement "Good
Reason" shall mean the Bank's election under Section 1.9 not to extend the term
of this Letter Agreement and its failure to offer and enter into a new
employment agreement with you on terms which are substantially similar to those
of your employment existing immediately prior to such non-renewal (other than a
reduction of fringe benefits required by law or applicable to all employees
generally) provided, however, that Good Reason shall not be deemed to have
occurred unless prior to your termination of employment for Good Reason, you
shall give not less than 30 days written notice to the Bank of your intent to
terminate for Good Reason stating the basis of the Good Reason sufficient to
permit the Bank to alleviate the basis of such Good Reason prior to termination,
and the Bank has not done so within such 30 day period, and further provided,
that your continuing to work in the absence of entering into a new employment
agreement shall be without prejudice to your right to claim termination for Good
Reason, absent written agreement between you and the Bank to the contrary.
PART 3. CHANGE IN CONTROL
3.1 PURPOSE. In order to allow you to consider the prospect of a Change
in Control (as defined in Section 3.2) in an objective manner and in
consideration of the services rendered and to be rendered by you to the Bank,
the Bank is willing to provide, subject to the terms of this Letter Agreement,
certain severance benefits to protect you from the consequences of a Terminating
Event (as defined in Section 3.4) occurring subsequent to a Change in Control.
3.2 CHANGE IN CONTROL. A "Change in Control" will be deemed to have
occurred if: (i) the Bank effectuates a Takeover Transaction; or (ii) the Bank
commences substantive negotiations with a third party with respect to a Takeover
Transaction and within twelve (12) months of the commencement of such
negotiations, enters into a definitive agreement with respect to a Takeover
Transaction with any party with which negotiations were originally commenced; or
(iii) any election of directors of the Bank (or, if the Bank reorganizes into a
holding company structure, directors of the holding company) occurs (whether by
the directors then in office or by the shareholders at a meeting or by written
consent) where a majority of the directors in office following such election are
individuals who were not nominated by a vote of two-thirds of the members of the
board of directors immediately preceding such election; or (iv) the Bank
effectuates a complete liquidation of the Bank or a sale or disposition of all
or substantially all of its assets. You understand and agree that a
reorganization in which the Bank
<PAGE> 5
Donald C. McQueen
July 20, 1999
Page 5
reorganizes into a holding company structure, or any similar reorganization,
will not constitute a Change in Control for purposes of this agreement or for
any other purpose; provided, however, that any such transaction may constitute a
Change in Control if accomplished in connection with a Takeover Transaction.
3.3 TAKEOVER TRANSACTION. A "Takeover Transaction" shall mean:
(a) The acquisition of voting securities of the Bank by any
individual, entity or group (within the meaning of Section 13(d)(3) or
14(d)(2) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act")}, other than by the Bank or its subsidiaries or any
employee benefit plan (or related trust) of the Bank or its
subsidiaries, which theretofore did not beneficially own (within the
meaning of Rule 13d-3 promulgated under the Exchange Act), securities
representing 30% or more of the voting power of all outstanding shares
of voting securities of the Bank, if such acquisition results in such
individual, entity or group owning securities representing more than
30% of the voting power of all outstanding voting securities of the
Bank; provided, that any acquisition by a corporation with respect to
which, following such acquisition, more than 50% of the then
outstanding shares of voting securities of such corporation, is then
beneficially owned, directly or indirectly, by all or substantially all
of the individuals and entities who were the beneficial owners of the
voting securities of the Bank outstanding immediately prior to such
acquisition in substantially the same proportion as their ownership,
immediately prior to such acquisition, of the outstanding voting
securities of the Bank, shall not constitute a Change in Control; or
(b) The issuance of additional shares of common stock of the
Bank in a single transaction or a series of related transactions if the
individuals and entities who were the beneficial owners of the
outstanding voting securities of the Bank immediately prior to such
issuance do not, following such issuance, beneficially own, directly or
indirectly, securities representing more than 50% of the voting power
of all then outstanding voting securities of the Bank; or
(c) Consummation by the Bank of (i) a reorganization, merger
or consolidation, in each case, with respect to which all or
substantially all of the individuals and entities who were the
beneficial owners of the voting securities of the Bank immediately
prior to such reorganization, merger or consolidation do not, following
such reorganization, merger or consolidation, beneficially own,
directly or indirectly, securities representing more than 50% of the
voting power of then outstanding voting securities of the corporation
resulting from such a reorganization, merger or consolidation or (ii)
the sale, exchange or other disposition (in one transaction or a series
of related transactions) of all or substantially all of the assets of
the Bank (on a consolidated basis) to a party which is not controlled
by or under common control with the Bank.
<PAGE> 6
Donald C. McQueen
July 20, 1999
Page 6
For purposes of this Section 3.3, "voting power" means ordinary voting
power for the election of directors.
3.4 TERMINATING EVENT. A "Terminating Event" means either
(a) Termination by the Bank of your employment with the Bank
for any reason other than (i) your death or disability or (ii) for "Cause" (as
such term is defined in Section 3.5 hereof), or
(b) Your resignation as an employee of the Bank, other than
for reasons of disability, following (i) a significant reduction in the nature
or scope of your duties, responsibilities, authority and powers from the duties,
responsibilities, authority and powers exercised by you immediately prior to the
Change in Control or (ii) a greater than 10% reduction in your annual base
salary or fringe benefits as in effect on the date of the Change in Control,
except for the across-the-board salary reductions or change in fringe benefit
plans similarly affecting all management personnel of the Bank; or (iii) any
requirement by the Bank or of any person in control of the Bank that the
location at which you perform the principal duties of the Bank be outside a
radius of 50 miles from the location at which you performed such duties
immediately prior to the Change in Control; or (iv) the failure of any successor
of the Bank to agree in writing upon terms and conditions of employment with you
which are substantially similar to those of your employment immediately prior to
the Change in Control and which are reasonably satisfactory to you within ninety
(90) days following a Change in Control.
3.5 TERMINATION FOR "CAUSE" DEFINED. For purposes of this Letter
Agreement, termination for Cause shall include termination by reason of any of
the following:
(a) Continuing any arrangement, holding any position or
engaging in any activities that conflict with the
interest of, or that interfere with your duties owed
to, the Bank, after ten (10) days prior written
notice by the Bank to you of the same;
(b) Conviction of embezzlement or other crimes against
the Bank, deliberate misappropriation of the Bank's
funds or dishonesty;
(c) Material violation of written policies of the Bank,
irresponsible acts in the performance of your duties
or material breach of any of your obligations under
the terms of this Letter Agreement;
(d) Material non-performance of your duties or material
acts (or omissions) of mismanagement; and
<PAGE> 7
Donald C. McQueen
July 20, 1999
Page 7
(e) Refusal to perform assigned duties when such refusal
is not justified or excused either by the terms of
this Letter Agreement or by actions taken by the Bank
in violation of this Letter Agreement.
3.6 PAYMENT IN CONNECTION WITH TERMINATING EVENT. If a Terminating
Event occurs within one (1) year after a Change in Control (which one year
period shall be calculated from the effective date of the Takeover Transaction
if the Terminating Event occurs after a Takeover Transaction), the Bank will pay
to you an amount (the "Severance Payment") equal to two times the sum of (a)
your annual base salary in effect at the time of the Change in Control, and (b)
an amount equal to the average executive cash bonus earned by you with respect
to the two full fiscal years immediately preceding the Change in Control, which
Severance Payment shall be payable in one lump sum within 30 days of the date of
termination of your employment, or if such Change in Control is governed by
clause (ii) of Section 3.2 and the Terminating Event occurs prior to entering
into a definitive agreement, upon the entering into of a definitive agreement by
the Bank. In addition, the Bank shall continue to pay for all medical and life
insurance coverage provided on the date of the Terminating Event for the twelve
month period commencing on the effective date of the Terminating Event. No
Severance Payment will be made to you under PART 3 if your employment with the
Bank terminates for any reason prior to a Change in Control, or if your
employment with the Bank terminates after a Change in Control but such
termination or resignation is not a Terminating Event. In addition, except as
provided in PART 2, no Severance Payment will be made to you under this Letter
Agreement with respect to a Terminating Event which occurs more than one year
after a Change in Control.
3.7 APPLICABILITY OF CHANGE IN CONTROL PROVISIONS. (a) If there is a
Change in Control while this Letter Agreement is in effect and while you remain
actively employed by the Bank, the provisions of PART 3 shall apply and shall
continue to apply for a one - year period following the Change in Control (which
one-year period shall be calculated from the effective date of a Takeover
Transaction if a Terminating Event occurs after the Takeover Transaction), and
the provisions of PART 3 shall continue to apply regardless of whether this
Letter Agreement is terminated until all the obligations of the Bank hereunder
have been fulfilled and all benefits provided hereunder have been paid.
(b) The provisions of PART 3 shall terminate upon the earliest of (i)
the termination by the Bank of your employment for any reason prior to a Change
in Control, (ii) the termination of your employment by the Bank after a Change
in Control because of death or disability or for Cause, (iii) your resignation
or termination of employment with the Bank for any reason other than Good Reason
prior to a Change in Control, and (iv) your resignation or termination of
employment after a Change in Control for any reason other than the occurrence of
any of the events enumerated in Section 3.4 of this Letter Agreement.
3.8 EXCISE TAX EQUALIZATION PAYMENT. In the event that you become
entitled to a Severance Payment or any other payment or benefit under this
Letter Agreement, or under any
<PAGE> 8
Donald C. McQueen
July 20, 1999
Page 8
other agreement with or plan of the Bank (in the aggregate, the "Total
Payments"), if any of the Total Payments will be subject to the tax (the "Excise
Tax") imposed by Section 4999 of the Code (or any similar tax that may hereafter
be imposed), the Bank shall pay to you in cash an additional amount (the
"Gross-Up Payment") such that the net amount retained by you after deduction of
any Excise Tax upon the Total Payments and any Federal, state and local income
tax and Excise Tax upon the Gross-Up Payment provided for by this Section 3.8
(including FICA and FUTA), shall be equal to the Total Payments. Such payment
shall be made by the Bank to you as soon as practical following the effective
date of the Terminating Event, but in no event beyond thirty (30) days from such
date.
3.9 TAX COMPUTATION. For purposes of determining whether any of the
Total Payments will be subject to the Excise Tax and the amounts of such Excise
Tax:
(a) Any other payments or benefits received or to be received by you in
connection with a Change in Control of the Bank or your termination of
employment (whether pursuant to the terms of this Letter Agreement or any other
plan, arrangement, or agreement with the Bank, or with any person (which shall
have the meaning set forth in Section 3(a)(9) of the Exchange Act, including a
"group" as defined in Section 13(d) therein) whose actions result in a Change in
Control of the Bank or any person affiliated with the Bank or such persons)
shall be treated as "parachute payments" within the meaning of Section
280G(b)(1) of the Code, and all "excess parachute payments" within the meaning
of Section 280G(b)(1) shall be treated as subject to the Excise Tax, unless in
the opinion of tax counsel as supported by the Bank's independent auditors and
acceptable to you, such other payments or benefits (in whole or in part) do not
constitute parachute payments, or unless such excess parachute payments (in
whole or in part) represent reasonable compensation for services actually
rendered within the meaning of Section 280G(b)(4) of the Code in excess of the
base amount within the meaning of Section 280G(b)(3) of the Code, or are
otherwise not subject to the Excise Tax;
(b) The amount of the Total Payments which shall be treated as subject
to the Excise Tax shall be equal to the lesser of: (i) the total amount of the
Total Payments; (or (ii) the amount of excess parachute payments within the
meaning of Section 280G(b)(1) (after applying clause (a) above); and
(c) The value of any noncash benefits or any deferred payment or
benefit shall be determined by the Bank's independent auditors in accordance
with the principles of Sections 280G(d)(3) and (4) of the Code.
For purposes of determining the amount of the Gross-Up Payment, you
shall be deemed to pay Federal income taxes at the highest marginal rate of
Federal income taxation in the calendar year in which the Gross-Up Payment is to
be made, and state and local income taxes at the highest marginal rate of
taxation in the state and locality of your residence on the effective
<PAGE> 9
Donald C. McQueen
July 20, 1999
Page 9
date of the Terminating Event, net of the maximum reduction in Federal income
taxes which could be obtained from deduction of such state and local taxes.
3.10 SUBSEQUENT RECALCULATION. In the event the Internal Revenue
Service adjusts the computation of the Bank under Section 3.9 herein so that you
did not receive the greatest net benefit, the Bank shall reimburse you for the
full amount necessary to make you whole, plus a market rate of interest, as
determined by the Compensation Committee of the Board.
3.11 DISPUTE RESOLUTION. If any dispute between the Bank and you as to
any of the amounts to be determined under Sections 3.8 or 3.9, or the method of
calculating such amounts, cannot be resolved by you and the Bank, either the
Bank or you after giving three (3) days written notice to the other, may refer
the dispute to a partner in the Boston, Massachusetts office of a firm of
independent certified public accountants selected jointly by you and the Bank.
The determination of such partner as to the amount to be determined under
Section 3.8 and 3.9 and the method of calculating such amounts shall be final
and binding on both you and the Bank. The Bank shall bear the costs of any such
determination.
PART 4. MISCELLANEOUS
4.1 CONFIDENTIAL INFORMATION. Unless you first secure the Bank's
consent, you will not disclose or use, at any time either during or subsequent
to your employment by the Bank, except as required by your duties to the Bank,
any secret or confidential information of the Bank of which you become informed
during your employment, whether or not developed by you. The term "confidential
information" includes, without limitation, financial information, business
plans, prospects, and opportunities (such as lending relationships, financial
product developments, or possible acquisitions or dispositions of business or
facilities) which have been discussed or considered by the Bank's management,
but does not include any information which has become part of the public domain
by means other than your non-observance of your obligations hereunder.
4.2 NON-COMPETITION. During your employment by the Bank hereunder, and
during a period of one (1) year following the date of termination of your
employment with the Bank for any reason, you will not, directly or indirectly,
whether as partner, consultant, agent, employee, co-venturer, greater than 2%
owner, or otherwise, or through any Person (as hereafter defined),
(a) attempt to recruit any employee of the Bank, assist in
such hiring by any other Person, or encourage any such employee to terminate his
or her relationship with the Bank, or
(b) encourage any customer of the Bank to conduct with any
other Person any business or activity which such customer conducts or could
conduct with the Bank.
<PAGE> 10
Donald C. McQueen
July 20, 1999
Page 10
For purposes of this Section 4.2, the term "Person" shall mean an individual, a
corporation, an association, a partnership, an estate, a trust and any other
entity or organization.
4.3 NO CONFLICTING OBLIGATIONS. The Bank, in entering into this Letter
Agreement, understands, and you hereby represent, that you are not under any
obligation to any former employer or any person, firm or corporation that would
prevent, limit or impair, in any way, the performance by you of your duties as
an employee of the Bank.
4.4 ETHICAL BEHAVIOR. Upon termination by the Bank of your employment
for any reason, you shall act at all times in an ethical manner with regard to,
and during the one-year period following the date of such termination, shall
take no action which directly or indirectly has or could reasonably be expected
to have the effect of terminating or otherwise adversely affecting the
relationship of the Bank with any employees of, or others with business or
advantageous relationships with, the Bank or any of its affiliates.
4.5 WITHHOLDING. All payments made by the Bank under this Letter
Agreement will be net of any tax or other amounts required to be withheld by the
Bank under applicable law.
4.6 LEGAL FEES. Upon submission of appropriate statements or
documentation, the Bank agrees to reimburse you for reasonable legal fees
actually incurred by you in connection with the enforcement of the terms of this
Letter Agreement following a Change in Control, provided, however, that the Bank
shall not be obligated to reimburse you for any legal fees or expenses incurred
by you in connection with the Bank's enforcement of the terms of this Letter
Agreement or in connection with any arbitration or litigation in which the Bank
is the prevailing party.
4.7 INDEMNIFICATION. The Bank hereby covenants and agrees to indemnify
you and hold you harmless fully, completely, and absolutely against and in
respect to any and all actions, suits, proceedings, claims, demands, judgments,
costs, expenses (including attorney's fees), losses, and damages resulting from
your good faith performance of your duties and obligations under the terms of
this Letter Agreement.
4.8 BINDING EFFECT. This Letter Agreement is binding upon and will
enure to the benefit of the parties hereto and their respective heirs,
administrators, executors, successors and assigns. The Bank will require any
successor (whether direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business and/or assets of the Bank
to assume expressly and perform this Letter Agreement. Failure of the Bank to
obtain such assumption and agreement prior to the effectiveness of any such
succession shall be a breach of this Letter Agreement and shall entitle you to
compensation from the Bank in the same amount and on the same terms as you would
be entitled to hereunder following a Terminating Event, except that for purposes
of implementing the foregoing, the date on which any such succession becomes
effective shall be deemed the date on which you become entitled to such
compensation
<PAGE> 11
Donald C. McQueen
July 20, 1999
Page 11
from the Bank. As used in this Letter Agreement, "Bank" shall mean the Bank, as
hereinbefore defined and any successor to its business and/or assets as
aforesaid which assumes and agrees to perform this Letter Agreement by operation
of law, or otherwise.
4.9 ARBITRATION OF DISPUTES. Any dispute, controversy or claim arising
out of or relating to this Letter Agreement or the breach or performance hereof
will be settled by arbitration in accordance with the laws of the State of Rhode
Island by an arbitrator mutually agreed upon by you and the Bank. If an
arbitrator cannot be agreed upon, you and the Bank shall each choose an
arbitrator, and these two together shall select a third arbitrator. If the first
two arbitrators cannot agree on the appointment of a third arbitrator, then the
third arbitrator will be appointed by the American Arbitration Association in
Providence, Rhode Island. Such arbitration will be conducted in the City of
Providence in accordance with the Commercial Arbitration Rules of the American
Arbitration Association, except with respect to the selection of arbitrators
which shall be as provided in this Section 4.9. Judgment upon the award rendered
by the arbitrators may be entered in any court having jurisdiction thereof.
If the foregoing correctly sets forth our understanding, please sign
this letter and the enclosed counterpart hereof in the space below and return to
the undersigned the counterpart copy that you have signed.
Sincerely yours,
BANK RHODE ISLAND
By: /s/ Merrill W. Sherman
-------------------------
Merrill W. Sherman
President
The foregoing correctly sets forth our agreement.
/s/ Donald C. Mcqueen
- - ---------------------
Donald C. McQueen
8/5/99
- - ------------
Date
<PAGE> 1
EXHIBIT 10.4
July 20, 1999
James V. DeRentis
48 Laurel Avenue
Providence, Rhode Island 02906
Dear Jim:
Bank Rhode Island (the "Bank") agrees to employ you in the position of
Senior Vice President of Retail Banking of the Bank upon the terms and
conditions set forth therein.
PART 1. EMPLOYMENT; DUTIES, ETC.
1.1 RESPONSIBILITIES AND AUTHORITY. In your capacity as Senior Vice
President of Retail Banking with the Bank, you will have the duties,
responsibilities, authorities and powers normally incident to such office. At
all times, however, your activities and authority will be subject to
supervision, control and direction by the Board of Directors of the Bank (the
"Board"), by the Executive Committee of the Board, and by the President and
Chief Executive Officer of the Bank (the "Chief Executive Officer") and you
agree to carry out such duties and responsibilities as any of them may from time
to time reasonably assign to you. You shall report from time to time or
routinely, upon request, to the Chief Executive Officer or his or her designee
as to the current status of any of your assigned duties and responsibilities.
1.2 COMPENSATION. Your compensation will be at the rate of $100,000 per
year, payable on a bi-weekly basis, or at such higher rate as shall be
determined from time to time by the Board. In addition, you will be entitled to
receive payments under any incentive compensation or bonus program (as in effect
from time to time), which the Bank's Board may establish for its employees
and/or senior executives, in such amounts as are provided by such programs.
1.3 EMPLOYEE BENEFITS. As a full-time employee of the Bank, you will be
eligible to participate in any and all employee benefit plans generally
available to full-time employees, including non-contributory plans and, at your
option, contributory plans.
1.4 GRANT OF STOCK OPTIONS. You will receive options to purchase shares
of the Bank's common stock in such number, at an exercise price and on such
other terms as may be approved by the Compensation Committee of the Board, in
its sole discretion. Any such options will become exercisable on a schedule no
less favorable than the following: 20% on the grant date and an additional 20%
on each of the first through fourth anniversaries of the grant date, with such
vesting to accelerate on a Change in Control (as defined in Section 3.2).
<PAGE> 2
James V. DeRentis
July 20, 1999
Page 2
1.5 VACATION. You will be entitled to four weeks of vacation during
each year of your employment, such vacation to be taken in accordance with the
Bank's customary vacation policies and at such times and intervals as are
mutually agreed upon by you and the Bank. You will be entitled to holiday time
and sick leave in accordance with the then existing policies of the Bank, as in
effect from time to time.
1.6 REIMBURSEMENT OF EXPENSES. You will be reimbursed by the Bank for
reasonable business expenses incurred by you incident to your employment upon
presentation of appropriate vouchers, receipts, and other supporting documents
required by the Bank.
1.7 DUTY TO PERFORM SERVICES. So long as you are employed by the Bank,
you agree to devote your full business and productive time, skill, and energy
diligently, loyally, effectively, and to the best of your ability to the
rendering of service to the Bank, and will exert your best efforts in the
rendering of such services. This provision will not prohibit you from:
(a) making passive investments or serving as a fiduciary with
respect to direct family investments;
(b) serving on the board of directors of any company, provided
that you will not render any material services with respect to the operations or
affairs of any such company and provided further that serving on such board of
directors does not otherwise violate the terms of this Letter Agreement,
including, but not limited to, the provisions of Section 4.2 herein; or
(c) engaging in religious, charitable or other community or
non-profit activities which do not impair your ability to fulfill your duties
and responsibilities to the Bank.
You agree that in the rendering of all services to the Bank and in all aspects
of your employment, in connection with your duties as Senior Vice President of
Retail Banking, you will comply with all directives, policies, standards, and
regulations from time to time established by the Bank or by applicable law.
1.8 DEATH OR DISABILITY.
(a) DEATH. In the event of your death during the term of your
employment under this Letter Agreement, the Bank shall immediately pay to your
designated beneficiary any salary accrued but unpaid as of the date of your
death. Upon payment of the aforementioned sums, the Bank's obligations to make
further salary payments shall terminate. This provision shall not be construed
to negate any rights you may have to death benefits under any employee benefit
or welfare plan of the Bank in which you may from time to time be a participant
or under any other written agreement with the Bank which specifically provides
for such benefits.
<PAGE> 3
James V. DeRentis
July 20, 1999
Page 3
(b) DISABILITY. In the event of your "disability" (as defined
below) during the term of your employment under this Letter Agreement, the Bank
shall continue to pay you your base salary (reduced by any benefits you are
entitled to receive under any state or federal disability insurance program,
such as Rhode Island temporary disability insurance or federal social security)
for a period of six months from the date of "disability". For purposes of this
Letter Agreement, "disability" shall mean a determination by the Board that you
are unable for any reason, either physical or mental, to perform the duties
required of you hereunder.
1.9 TERM OF EMPLOYMENT. The term of your employment by the Bank under
this Letter Agreement shall continue, unless sooner terminated pursuant to the
provisions of this Letter Agreement, for a period of one year from the date
hereof (the "Initial Term") and shall be automatically extended for each
successive one year period thereafter (each, a "Successive Term"), unless either
party shall have given written notice to the other of such party's election not
to extend the term of this Letter Agreement within thirty (30) calendar days
prior to the Initial Term or any Successor Term. The last day of such term, as
it may be extended from time to time, is hereinafter sometimes referred to as
the "Contract Expiration Date".
1.10 TERMINATION AND SURVIVAL. The provisions of PART 1 of this Letter
Agreement shall terminate on the Contract Expiration Date. The provisions of
PART 2, PART 3 and PART 4 shall survive the termination of PART 1 and shall
remain in full force and effect and shall continue to be enforceable in
accordance with their terms notwithstanding any termination of PART 1. The
provisions of PART 2, PART 3 and Sections 4.1, 4.2, 4.4, 4.6, 4.7 and 4.9 hereof
shall remain in full force and effect and shall continue to be enforceable in
accordance with their terms beyond the Contract Expiration Date and beyond
termination of employment.
PART 2. SEVERANCE.
2.1 SEVERANCE BENEFIT. In the event of a termination of your employment
by the Bank without Cause (as such term is defined in Section 3.5) at any time,
whether before or after the Contract Expiration Date; or in the event of the
expiration of the term of your employment without extension of such Contract
Expiration Date; or in the event of termination of your employment by you after
the Contract Expiration Date, for Good Reason (as defined in Section 2.2), the
Bank will continue to pay you your base salary then in effect for a six (6)
month period (the "Severance Benefit") commencing on the date of termination
(the "Severance Period") plus the Bank will provide you with the medical and
life insurance coverage generally available to full-time employees during the
Severance Period or as required by law, whichever is longer. Notwithstanding
anything herein to the contrary, the Bank shall have no obligation to pay the
Severance Benefit to you in the event your employment is terminated with Cause
by the Bank or voluntarily by you without Good Reason.
2.2 "GOOD REASON" DEFINED. For purposes of this Letter Agreement "Good
Reason" shall mean the Bank's election under Section 1.9 not to extend the term
of this Letter Agreement
<PAGE> 4
James V. DeRentis
July 20, 1999
Page 4
and its failure to offer and enter into a new employment agreement with you on
terms which are substantially similar to those of your employment existing
immediately prior to such non-renewal (other than a reduction of fringe benefits
required by law or applicable to all employees generally) provided, however,
that Good Reason shall not be deemed to have occurred unless prior to your
termination of employment for Good Reason, you shall give not less than 30 days
written notice to the Bank of your intent to terminate for Good Reason stating
the basis of the Good Reason sufficient to permit the Bank to alleviate the
basis of such Good Reason prior to termination, and the Bank has not done so
within such 30 day period, and further provided, that your continuing to work in
the absence of entering into a new employment agreement shall be without
prejudice to your right to claim termination for Good Reason, absent written
agreement between you and the Bank to the contrary.
<PAGE> 5
James V. DeRentis
July 20, 1999
Page 5
PART 3. CHANGE IN CONTROL
3.1 PURPOSE. In order to allow you to consider the prospect of a Change
in Control (as defined in Section 3.2) in an objective manner and in
consideration of the services rendered and to be rendered by you to the Bank,
the Bank is willing to provide, subject to the terms of this Letter Agreement,
certain severance benefits to protect you from the consequences of a Terminating
Event (as defined in Section 3.4) occurring subsequent to a Change in Control.
3.2 CHANGE IN CONTROL. A "Change in Control" will be deemed to have
occurred if: (i) the Bank effectuates a Takeover Transaction; or (ii) the Bank
commences substantive negotiations with a third party with respect to a Takeover
Transaction and within twelve (12) months of the commencement of such
negotiations, enters into a definitive agreement with respect to a Takeover
Transaction with any party with which negotiations were originally commenced; or
(iii) any election of directors of the Bank (or, if the Bank reorganizes into a
holding company structure, directors of the holding company) occurs (whether by
the directors then in office or by the shareholders at a meeting or by written
consent) where a majority of the directors in office following such election are
individuals who were not nominated by a vote of two-thirds of the members of the
board of directors immediately preceding such election; or (iv) the Bank
effectuates a complete liquidation of the Bank or a sale or disposition of all
or substantially all of its assets. You understand and agree that a
reorganization in which the Bank reorganizes into a holding company structure,
or any similar reorganization, will not constitute a Change in Control for
purposes of this agreement or for any other purpose; provided, however, that any
such transaction may constitute a Change in Control if accomplished in
connection with a Takeover Transaction.
3.3 TAKEOVER TRANSACTION. A "Takeover Transaction" shall mean:
(a) The acquisition of voting securities of the Bank by any
individual, entity or group (within the meaning of Section 13(d)(3) or
14(d)(2) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act")), other than by the Bank or its subsidiaries or any
employee benefit plan (or related trust) of the Bank or its
subsidiaries, which theretofore did not beneficially own (within the
meaning of Rule 13d-3 promulgated under the Exchange Act), securities
representing 30% or more of the voting power of all outstanding shares
of voting securities of the Bank, if such acquisition results in such
individual, entity or group owning securities representing more than
30% of the voting power of all outstanding voting securities of the
Bank; provided, that any acquisition by a corporation with respect to
which, following such acquisition, more than 50% of the then
outstanding shares of voting securities of such corporation, is then
beneficially owned, directly or indirectly, by all or substantially all
of the individuals and entities who were the beneficial owners of the
voting securities of the Bank outstanding immediately prior to such
acquisition in substantially the same proportion as their ownership,
immediately
<PAGE> 6
James V. DeRentis
July 20, 1999
Page 6
prior to such acquisition, of the outstanding voting securities of the
Bank, shall not constitute a Change in Control; or
(b) The issuance of additional shares of common stock of the
Bank in a single transaction or a series of related transactions if the
individuals and entities who were the beneficial owners of the
outstanding voting securities of the Bank immediately prior to such
issuance do not, following such issuance, beneficially own, directly or
indirectly, securities representing more than 50% of the voting power
of all then outstanding voting securities of the Bank; or
(c) Consummation by the Bank of (i) a reorganization, merger
or consolidation, in each case, with respect to which all or
substantially all of the individuals and entities who were the
beneficial owners of the voting securities of the Bank immediately
prior to such reorganization, merger or consolidation do not, following
such reorganization, merger or consolidation, beneficially own,
directly or indirectly, securities representing more than 50% of the
voting power of then outstanding voting securities of the corporation
resulting from such a reorganization, merger or consolidation or (ii)
the sale, exchange or other disposition (in one transaction or a series
of related transactions) of all or substantially all of the assets of
the Bank (on a consolidated basis) to a party which is not controlled
by or under common control with the Bank.
For purposes of this Section 3.3, "voting power" means ordinary voting
power for the election of directors.
3.4 TERMINATING EVENT. A "Terminating Event" means either
(a) Termination by the Bank of your employment with the Bank
for any reason other than (i) your death or disability or (ii) for "Cause" (as
such term is defined in Section 3.5 hereof), or
(b) Your resignation as an employee of the Bank, other than
for reasons of disability, following (i) a significant reduction in the nature
or scope of your duties, responsibilities, authority and powers from the duties,
responsibilities, authority and powers exercised by you immediately prior to the
Change in Control or (ii) a greater than 10% reduction in your annual base
salary or fringe benefits as in effect on the date of the Change in Control,
except for the across-the-board salary reductions or change in fringe benefit
plans similarly affecting all management personnel of the Bank; or (iii) any
requirement by the Bank or of any person in control of the Bank that the
location at which you perform the principal duties of the Bank be outside a
radius of 50 miles from the location at which you performed such duties
immediately prior to the Change in Control; or (iv) the failure of any successor
of the Bank to agree in writing upon terms and conditions of employment with you
which are substantially
<PAGE> 7
James V. DeRentis
July 20, 1999
Page 7
similar to those of your employment immediately prior to the Change in Control
and which are reasonably satisfactory to you within ninety (90) days following a
Change in Control.
3.5 TERMINATION FOR "CAUSE" DEFINED. For purposes of this Letter
Agreement, termination for Cause shall include termination by reason of any of
the following:
(a) Continuing any arrangement, holding any position or
engaging in any activities that conflict with the
interest of, or that interfere with your duties owed
to, the Bank, after ten (10) days prior written
notice by the Bank to you of the same;
(b) Conviction of embezzlement or other crimes against
the Bank, deliberate misappropriation of the Bank's
funds or dishonesty;
(c) Material violation of written policies of the Bank,
irresponsible acts in the performance of your duties
or material breach of any of your obligations under
the terms of this Letter Agreement;
(d) Material non-performance of your duties or material
acts (or omissions) of mismanagement; and
(e) Refusal to perform assigned duties when such refusal
is not justified or excused either by the terms of
this Letter Agreement or by actions taken by the Bank
in violation of this Letter Agreement.
3.6 PAYMENT IN CONNECTION WITH TERMINATING EVENT. If a Terminating
Event occurs within one (1) year after a Change in Control (which one year
period shall be calculated from the effective date of the Takeover Transaction
if the Terminating Event occurs after a Takeover Transaction), the Bank will pay
to you an amount (the "Severance Payment") equal to one times the sum of (a)
your annual base salary in effect at the time of the Change in Control, and (b)
an amount equal to the average executive cash bonus earned by you with respect
to the two full fiscal years immediately preceding the Change in Control, which
Severance Payment shall be payable in one lump sum within 30 days of the date of
termination of your employment, or if such Change in Control is governed by
clause (ii) of Section 3.2 and the Terminating Event occurs prior to entering
into a definitive agreement, upon the entering into of a definitive agreement by
the Bank. In addition, the Bank shall continue to pay for all medical and life
insurance coverage provided on the date of the Terminating Event for the six
month period commencing on the effective date of the Terminating Event. No
Severance Payment will be made to you under PART 3 if your employment with the
Bank terminates for any reason prior to a Change in Control, or if your
employment with the Bank terminates after a Change in Control but such
termination or resignation is not a Terminating Event. In addition, except as
provided
<PAGE> 8
James V. DeRentis
July 20, 1999
Page 8
in PART 2, no Severance Payment will be made to you under this Letter Agreement
with respect to a Terminating Event which occurs more than one year after a
Change in Control.
3.7 APPLICABILITY OF CHANGE IN CONTROL PROVISIONS. (a) If there is a
Change in Control while this Letter Agreement is in effect and while you remain
actively employed by the Bank, the provisions of PART 3 shall apply and shall
continue to apply for a one - year period following the Change in Control (which
one-year period shall be calculated from the effective date of a Takeover
Transaction if a Terminating Event occurs after the Takeover Transaction), and
the provisions of PART 3 shall continue to apply regardless of whether this
Letter Agreement is terminated until all the obligations of the Bank hereunder
have been fulfilled and all benefits provided hereunder have been paid.
(b) The provisions of PART 3 shall terminate upon the earliest of (i)
the termination by the Bank of your employment for any reason prior to a Change
in Control, (ii) the termination of your employment by the Bank after a Change
in Control because of death or disability or for Cause, (iii) your resignation
or termination of employment with the Bank for any reason other than Good Reason
prior to a Change in Control, and (iv) your resignation or termination of
employment after a Change in Control for any reason other than the occurrence of
any of the events enumerated in Section 3.4 of this Letter Agreement.
3.8 EXCISE TAX EQUALIZATION PAYMENT. In the event that you become
entitled to a Severance Payment or any other payment or benefit under this
Letter Agreement, or under any other agreement with or plan of the Bank (in the
aggregate, the "Total Payments"), and if any of the Total Payments will be
subject to the tax (the "Excise Tax") imposed by Section 4999 of the Code (or
any similar tax that may hereafter be imposed), then the Bank shall pay to you
in cash an additional amount (the "Gross-Up Payment") such that the net amount
retained by you after deduction of any Excise Tax upon the Total Payments and
any Federal, state and local income tax and Excise Tax upon the Gross-Up Payment
provided for by this Section 3.8 (including FICA and FUTA), shall be equal to
the Total Payments. Such payment shall be made by the Bank to you as soon as
practical following the effective date of the Terminating Event, but in no event
beyond thirty (30) days from such date.
3.9 TAX COMPUTATION. For purposes of determining whether any of the
Total Payments will be subject to the Excise Tax and the amounts of such Excise
Tax:
(a) Any other payments or benefits received or to be received by you in
connection with a Change in Control of the Bank or your termination of
employment (whether pursuant to the terms of this Letter Agreement or any other
plan, arrangement, or agreement with the Bank, or with any person (which shall
have the meaning set forth in Section 3(a)(9) of the Exchange Act, including a
"group" as defined in Section 13(d) therein) whose actions result in a Change in
Control of the Bank or any person affiliated with the Bank or such persons)
shall be treated as "parachute payments" within the meaning of Section
280G(b)(1) of the Code, and all "excess
<PAGE> 9
James V. DeRentis
July 20, 1999
Page 9
parachute payments" within the meaning of Section 280G(b)(1) shall be treated as
subject to the Excise Tax, unless in the opinion of tax counsel as supported by
the Bank's independent auditors and acceptable to you, such other payments or
benefits (in whole or in part) do not constitute parachute payments, or unless
such excess parachute payments (in whole or in part) represent reasonable
compensation for services actually rendered within the meaning of Section
280G(b)(4) of the Code in excess of the base amount within the meaning of
Section 280G (b)(3) of the Code, or are otherwise not subject to the Excise Tax;
(b) The amount of the Total Payments which shall be treated as subject
to the Excise Tax shall be equal to the lesser of: (i) the total amount of the
Total Payments; or (ii) the amount of excess parachute payments within the
meaning of Section 280G(b)(1) (after applying clause (a) above); and
(c) The value of any noncash benefits or any deferred payment or
benefit shall be determined by the Bank's independent auditors in accordance
with the principles of Sections 280G(d)(3) and (4) of the Code.
For purposes of determining the amount of the Gross-Up Payment, you
shall be deemed to pay Federal income taxes at the highest marginal rate of
Federal income taxation in the calendar year in which the Gross-Up Payment is to
be made, and state and local income taxes at the highest marginal rate of
taxation in the state and locality of your residence on the effective date of
the Terminating Event, net of the maximum reduction in Federal income taxes
which could be obtained from deduction of such state and local taxes.
3.10 SUBSEQUENT RECALCULATION. In the event the Internal Revenue
Service adjusts the computation of the Bank under Section 3.9 herein so that you
did not receive the greatest net benefit, the Bank shall reimburse you for the
full amount necessary to make you whole, plus a market rate of interest, as
determined by the Compensation Committee of the Board.
3.11 DISPUTE RESOLUTION. If any dispute between the Bank and you as to
any of the amounts to be determined under Sections 3.8 or 3.9, or the method of
calculating such amounts, cannot be resolved by you and the Bank, either the
Bank or you after giving three (3) days written notice to the other, may refer
the dispute to a partner in the Boston, Massachusetts office of a firm of
independent certified public accountants selected jointly by you and the Bank.
The determination of such partner as to the amount to be determined under
Section 3.8 and 3.9 and the method of calculating such amounts shall be final
and binding on both you and the Bank. The Bank shall bear the costs of any such
determination.
PART 4. MISCELLANEOUS
4.1 CONFIDENTIAL INFORMATION. Unless you first secure the Bank's
consent, you will not disclose or use, at any time either during or subsequent
to your employment by the Bank,
<PAGE> 10
James V. DeRentis
July 20, 1999
Page 10
except as required by your duties to the Bank, any secret or confidential
information of the Bank of which you become informed during your employment,
whether or not developed by you. The term "confidential information" includes,
without limitation, financial information, business plans, prospects, and
opportunities (such as lending relationships, financial product developments, or
possible acquisitions or dispositions of business or facilities) which have been
discussed or considered by the Bank's management, but does not include any
information which has become part of the public domain by means other than your
non-observance of your obligations hereunder.
4.2 NON-COMPETITION. During your employment by the Bank hereunder, and
during a period of one (1) year following the date of termination of your
employment with the Bank for any reason, you will not, directly or indirectly,
whether as partner, consultant, agent, employee, co-venturer, greater than 2%
owner, or otherwise, or through any Person (as hereafter defined),
(a) attempt to recruit any employee of the Bank, assist in
such hiring by any other Person, or encourage any such employee to terminate his
or her relationship with the Bank, or
(b) encourage any customer of the Bank to conduct with any
other Person any business or activity which such customer conducts or could
conduct with the Bank.
For purposes of this Section 4.2, the term "Person" shall mean an individual, a
corporation, an association, a partnership, an estate, a trust and any other
entity or organization.
4.3 NO CONFLICTING OBLIGATIONS. The Bank, in entering into this Letter
Agreement, understands, and you hereby represent, that you are not under any
obligation to any former employer or any person, firm or corporation that would
prevent, limit or impair, in any way, the performance by you of your duties as
an employee of the Bank.
4.4 ETHICAL BEHAVIOR. Upon termination by the Bank of your employment
for any reason, you shall act at all times in an ethical manner with regard to,
and during the one-year period following the date of such termination, shall
take no action which directly or indirectly has or could reasonably be expected
to have the effect of terminating or otherwise adversely affecting the
relationship of the Bank with any employees of, or others with business or
advantageous relationships with, the Bank or any of its affiliates.
4.5 WITHHOLDING. All payments made by the Bank under this Letter
Agreement will be net of any tax or other amounts required to be withheld by the
Bank under applicable law.
4.6 LEGAL FEES. Upon submission of appropriate statements or
documentation, the Bank agrees to reimburse you for reasonable legal fees
actually incurred by you in connection with the enforcement of the terms of this
Letter Agreement following a Change in Control,
<PAGE> 11
James V. DeRentis
July 20, 1999
Page 11
provided, however, that the Bank shall not be obligated to reimburse you for any
legal fees or expenses incurred by you in connection with the Bank's enforcement
of the terms of this Letter Agreement or in connection with any arbitration or
litigation in which the Bank is the prevailing party.
4.7 INDEMNIFICATION. The Bank hereby covenants and agrees to indemnify
you and hold you harmless fully, completely, and absolutely against and in
respect to any and all actions, suits, proceedings, claims, demands, judgments,
costs, expenses (including attorney's fees), losses, and damages resulting from
your good faith performance of your duties and obligations under the terms of
this Letter Agreement.
4.8 BINDING EFFECT. This Letter Agreement is binding upon and will
enure to the benefit of the parties hereto and their respective heirs,
administrators, executors, successors and assigns. The Bank will require any
successor (whether direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business and/or assets of the Bank
to assume expressly and perform this Letter Agreement. Failure of the Bank to
obtain such assumption and agreement prior to the effectiveness of any such
succession shall be a breach of this Letter Agreement and shall entitle you to
compensation from the Bank in the same amount and on the same terms as you would
be entitled to hereunder following a Terminating Event, except that for purposes
of implementing the foregoing, the date on which any such succession becomes
effective shall be deemed the date on which you become entitled to such
compensation from the Bank. As used in this Letter Agreement, "Bank" shall mean
the Bank, as hereinbefore defined and any successor to its business and/or
assets as aforesaid which assumes and agrees to perform this Letter Agreement by
operation of law, or otherwise.
4.9 ARBITRATION OF DISPUTES. Any dispute, controversy or claim arising
out of or relating to this Letter Agreement or the breach or performance hereof
will be settled by arbitration in accordance with the laws of the State of Rhode
Island by an arbitrator mutually agreed upon by you and the Bank. If an
arbitrator cannot be agreed upon, you and the Bank shall each choose an
arbitrator, and these two together shall select a third arbitrator. If the first
two arbitrators cannot agree on the appointment of a third arbitrator, then the
third arbitrator will be appointed by the American Arbitration Association in
Providence, Rhode Island. Such arbitration will be conducted in the City of
Providence in accordance with the Commercial Arbitration Rules of the American
Arbitration Association, except with respect to the selection of arbitrators
which shall be as provided in this Section 4.9. Judgment upon the award rendered
by the arbitrators may be entered in any court having jurisdiction thereof.
If the foregoing correctly sets forth our understanding, please sign
this letter and the enclosed counterpart hereof in the space below and return to
the undersigned the counterpart copy that you have signed.
<PAGE> 12
James V. DeRentis
July 20, 1999
Page 12
We are happy that you are joining the management team of the Bank, and
we look forward to a mutually beneficial relationship.
Sincerely yours,
BANK RHODE ISLAND
By: /s/ Merrill W. Sherman
-----------------------
Merrill W. Sherman
President
The foregoing correctly sets forth our agreement.
/s/ James V. DeRentis
- - ---------------------
James V. DeRentis
7/21/99
- - ----------------
Date
<PAGE> 1
EXHIBIT 10.5
BANK RHODE ISLAND
AMENDMENT TO
1996 INCENTIVE AND NONQUALIFIED STOCK OPTION PLAN
WHEREAS, Bank Rhode Island (the "Company") desires to amend the
provisions of the Company's 1996 Incentive and Nonqualified Stock Option Plan
(the Plan") to reflect an increase in the maximum number of Shares for which
options may be granted under the Plan; and
WHEREAS, under Section 10 of the Plan, the Board of Directors of the
Company, may amend the Plan to increase the maximum number of Shares for which
options may be granted under the Plan, provided that such amendment shall not
become effective until the approval of the shareholders; and
WHEREAS, the Board of Directors and the Shareholders of the Company
have each approved the amendment to increase the maximum number of Shares for
which options may be granted under the Plan;
NOW, THEREFORE, the Plan is amended as follows:
1. That Section 3.1 of the Plan be amended by substituting the words
and number "three hundred eighty-five thousand (385,000)" for "two hundred
thousand (200,000)" in the first sentence thereof to increase the maximum number
of Shares for which options may be granted under the Plan.
2. All other provisions of the Plan shall remain in full force and
effect and are hereby ratified, approved and confirmed.
IN WITNESS WHEREOF, the Company has caused this Amendment to the 1996
Incentive and Nonqualified Stock Option Plan to be executed by its duly
authorized officer as of the 20th day of May, 1998.
BANK RHODE ISLAND
By: /s/ Merrill W. Sherman
------------------------
President
Attest:
/s/ Margaret D. Farrell
- - --------------------------
Secretary
<PAGE> 2
BANK RHODE ISLAND
1996 INCENTIVE AND NONQUALIFIED STOCK OPTION PLAN
SECTION 1. PURPOSE
This 1996 Incentive and Nonqualified Stock Option Plan (the "Plan") of
Bank Rhode Island, a Rhode Island financial institution (the "Bank"), is
designed to provide additional incentive to executives and other key employees
of the Bank and its subsidiaries and for certain other individuals providing
services to or acting as directors of the Bank and its subsidiaries. The Bank
intends that this purpose will be effected by the granting of incentive stock
options ("Incentive Stock Options") as defined in Section 422 of the Internal
Revenue Code of 1986, as amended (the "Code"), and nonqualified stock options
("Nonqualified Options") under the Plan which afford such executives, key
employees, directors and other eligible individuals an opportunity to acquire or
increase their proprietary interest in the Bank through the acquisition of
shares of its Common Stock. The Bank intends that Incentive Stock Options issued
under the Plan will qualify as "incentive stock options" as defined in Section
422 of the Code and the terms of the Plan shall be interpreted in accordance
with this intention; provided, however, that no option granted hereunder will
qualify as an "incentive stock option" unless the Plan is approved by the
stockholders of the Bank- within twelve months prior to or following the
adoption of the Plan by the Board. The terms "parent" and "subsidiary" as used
herein shall have the respective meanings set forth in Section 424 of the Code.
SECTION 2. ADMINISTRATION
2.1 BOARD OF DIRECTORS/ COMMITTEE.
(a) Except as otherwise provided in section 2. 1 (b) below, the Plan
shall be administered by the Board of Directors (the "Board") of the Bank.
(b) At such time as the Bank has a class of securities registered
pursuant to Section 12 of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), the Plan shall be administered by a Committee (the "Committee")
consisting of at least two members of the Board of Directors appointed by the
Board of Directors of the Bank. None of the members of the Committee shall be an
officer or other employee of the Bank. It is the intention of the Bank that, so
long as the Bank has a class of securities registered pursuant to the Exchange
Act, the Plan shall be administered, in accordance with the provisions of
Section 4 hereof, by "disinterested persons" within the meaning of Rule l6b-3
under the Exchange Act, but the authority and validity of any act taken or not
taken by the Committee shall not be affected if any person administering the
Plan is not a disinterested person. Except as specifically reserved to the Board
under the terms of the Plan, the Committee shall have full and final authority
to the Board under the operate, manage, and administer the Plan on behalf of the
Bank. Action by the Committee shall require the affirmative vote of a majority
of all members thereof.
2.2 POWERS OF THE BOARD/COMMITTEE. Subject to the terms and conditions
of the Plan, the Board or the Committee, as the case may be, shall have the
power:
A-1
<PAGE> 3
(a) To determine from time to time the persons eligible to
receive options and the options to be granted to such persons under the
Plan and to prescribe the terms, conditions, restrictions, if any, and
provisions (which need not be identical) of each option granted under
the Plan to such persons;
(b) To construe and interpret the Plan and options granted
thereunder and to establish, amend, and revoke rules and regulations
for administration of the Plan. In this connection, the Board or the
Committee, as the case may be, may correct any defect or supply any
omission, or reconcile any inconsistency in the Plan, or in any option
agreement, in the manner and to the extent it shall deem necessary or
expedient to make the Plan fully effective. All decisions and
determinations by the Board or the Committee, as the case may be, in
the exercise of this power shall be final and binding upon the Bank and
optionees;
(c) To make, in its sole discretion, changes to any
outstanding option granted under the Plan, including: (i) to reduce the
exercise price, (ii) to accelerate the vesting schedule or (iii) to
extend the expiration date; and
(d) Generally, to exercise such powers and to perform such
acts as are deemed necessary or expedient to promote the best interests
of the Bank with respect to the Plan.
SECTION 3. STOCK
3.1 STOCK TO BE ISSUED. The stock subject to the options granted under
the Plan shall be shares of the Bank's authorized but unissued common stock,
$1.00 par value (the "Common Stock"), or shares of the Bank's Common Stock held
in treasury. The total number of shares that may be issued pursuant to options -
ranted under the Plan shall not exceed an aggregate of 200,000 shares of Common
Stock; provided, however, that the class and aggregate number of shares which
may be subject to options granted under the Plan shall be subject to adjustment
as provided in Section 8 hereof.
3.2 EXPIRATION. CANCELLATION OR TERMINATION OF OPTION. Whenever any
outstanding option under the Plan expires, is cancelled or is otherwise
terminated (other than by exercise), the shares of Common Stock allocable to the
unexercised portion of such option may again be the subject of options under the
Plan.
SECTION 4. ELIGIBILITY
4.1 PERSONS ELIGIBLE. Incentive Stock Options under the Plan may be
granted only to officers and other employees of the Bank, or its subsidiaries.
Nonqualified Options may be granted to officers or other employees of the Bank
or its subsidiaries, to members of the Board of Directors of the Bank or its
subsidiaries, and to consultants or other persons who render services to the
Bank or its subsidiaries (regardless of whether they are also employees),
provided, however, that no such option may be granted to a person who is a
member of the Committee, if any, at the time of grant.
4.2 GREATER-THAN-TEN-PERCENT STOCKHOLDERS. Except as may otherwise be
permitted by the Code or other applicable law or regulation, no Incentive Stock
Option shall
A-2
<PAGE> 4
be granted to an individual who, at the time the option is granted, owns
(including ownership attributed pursuant to Section 424 of the Code) more than
ten percent of the total combined voting power of all classes of stock of the
Bank or any parent or subsidiary (a "greater-than-ten-percent stockholder"),
unless such Incentive Stock Option provides that (i) the purchase price per
share shall not be less than one hundred ten percent of the fair market value of
the Common Stock at the time such option is granted, and (ii) that such option
shall not be exercisable to any extent after the expiration of five years from
the date it is granted.
4.3 MAXIMUM AGGREGATE FAIR MARKET VALUE. The aggregate fair market
value (determined at the time the option is granted in the manner specified in
Section 6.3) of the Common Stock with respect to which Incentive Stock Options
are exercisable for the first time by any optionee during any calendar year
(under the Plan and any other plans of the Bank or any parent or subsidiary for
the issuance of incentive stock options) shall not exceed $100,000 (or such
greater amount as may from time to time be permitted with respect to incentive
stock options by the Code or any other applicable law or regulation).
SECTION 5. TERMINATION OF EMPLOYMENT OR DEATH OF OPTIONEE
5.1 TERMINATION OF EMPLOYMENT. Except as may be otherwise expressly
provided herein, options shall terminate on the earlier of:
(a) the date of expiration thereof,
(b) the date of termination of the optionee's employment with
or services to the Bank by it for cause (as determined by the Bank);
(c) 30 days after the date of termination of the optionee's
employment with or services to the Bank voluntarily by the optionee; or
(d) 90 days after the date of termination of the optionee's
employment with or services to the Bank by it without cause; PROVIDED,
that Nonqualified Options granted to persons who are not employees of
the Bank need not, unless the Board or the Committee, as the case may
be, determines otherwise, be subject to the provisions set forth in
clauses (b), (c) and (d) above.
An employment relationship between the Bank and the optionee shall be deemed to
exist during any period in which the optionee is employed by the Bank, or any
parent or subsidiary. Whether authorized leave of absence, or absence on
military or government service, shall constitute termination of the employment
relationship between the Bank and the optionee shall be determined by the Board
or the Committee, as the case may be, at the time thereof.
As used herein, "cause" shall mean (x) any material breach by the optionee of
any agreement to which the optionee and the Bank are both parties, (y) any act
or omission to act by the optionee which may have a material and adverse effect
on the Bank's business or on the optionee's ability to perform services for the
Bank, including, without limitation, the commission of any crime (other than
ordinary traffic violations), or (z) any material misconduct or material neglect
of duties by the optionee in connection with the business or affairs of the Bank
or any affiliate of the Bank.
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5.2 DEATH OR PERMANENT DISABILITY OF OPTIONEE. In the event of the
death or permanent and total disability of the holder of an option that is
subject to clause (b) or (c) of Section 5.1 above prior to termination of the
optionee's employment with or services to the Bank and before the date of
expiration of such option, such option shall terminate on the earlier of such
date of expiration or one year following the date of such death or disability.
After the death of the optionee, his/her executors, administrators or any person
or persons to whom his/her option may be transferred by will or by the laws of
descent and distribution, shall have ,the right, at any time prior to such
termination, to exercise the option to the extent the optionee was entitled to
exercise such option immediately prior to his/her death. An optionee is
permanently and totally disabled if he/she is unable to engage in any
substantial gainful activity by reason of any medically determinable physical or
mental impairment which can be expected to last for a continuous period of not
less than 12 months; permanent and total disability shall be determined in
accordance with Section 22(e)(3) of the Code and the regulations issued
thereunder.
SECTION 6. TERMS OF THE OPTION AGREEMENTS
Each option agreement shall be in writing and shall contain such terms,
conditions, restrictions, if any, and provisions as the Board or the Committee,
as the case may be, shall from time to time deem appropriate. Such provisions or
conditions may include without limitation restrictions on transfer, repurchase
rights, or such other provisions as shall be determined by the Board or the
Committee, as the case may be, PROVIDED that such additional provisions shall
not be inconsistent with any other term or condition of the Plan and such
additional provisions shall not cause any Incentive Stock Option granted under
the Plan to fail to qualify as an incentive option within the meaning of Section
422 of the Code. At such time as the Bank has a class of securities registered
pursuant to Section 12 of the Exchange Act, the shares of stock issuable upon
exercise of an option by any executive officer, director or beneficial owner of
more than ten percent of the Common Stock of the Bank may not be sold or
transferred (except that such shares may be issued upon exercise of such option)
by such officer, director or beneficial owner for a period of six months
following the grant of such option.
Option agreements need not be identical, but each option agreement by
appropriate language shall include the substance of all of the following
provisions:
6.1 EXPIRATION OF OPTION. Notwithstanding any other provision of the
Plan or of any option agreement, each option shall expire on the date specified
in the option agreement, which date shall hot, in the case of an Incentive Stock
Option, be later than the tenth anniversary (fifth anniversary in the case of a
greater-than-ten-percent stockholder) of the date on which the option was
granted, or as specified in Section 5 of this Plan.
6.2 EXERCISE. Each option may be exercised, so long as it is valid and
outstanding from time to time in part or as a whole, subject to any limitations
with respect to the number of shares for which the option may be exercised at a
particular time and to such other conditions as the Board or the Committee, as
the case may be, in its discretion may specify upon granting the option.
6.3 PURCHASE PRICE. The purchase price per share under each option
shall be determined by the Board or the Committee, as the case may be, at the
time the option is granted; provided, however, that the option price of any
Incentive Stock Option shall not,
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unless otherwise permitted by the Code or other applicable law or regulation, be
less than the fair market value of the Common Stock on the date the option is
granted (110 % of the fair market value in the case of a
greater-than-ten-percent stockholder). For the purpose of the Plan the fair
market value of the Common Stock shall be the closing price per share on the
date of grant of the option as reported on the Nasdaq Stock Market or by a
nationally recognized stock exchange, or, if the Common Stock is not listed on
the Nasdaq Stock Market or such an exchange, the fair market value as determined
by the Board or the Committee, as the case may be.
6.4 TRANSFERABILITY OF OPTIONS. Options shall not be transferable by
the optionee otherwise than by will or under the laws of descent and
distribution, and shall be exercisable, during his or her lifetime, only by him
or her.
6.5 RIGHTS OF OPTIONEES. No optionee shall be deemed for any purpose to
be the owner of any shares of Common Stock subject to any option unless and
until the option shall have been exercised pursuant to the terms thereof, and
the Bank shall have issued and delivered the shares to the optionee.
SECTION 7. METHOD OF EXERCISE, PAYMENT OF PURCHASE PRICE
7.1 METHOD OF EXERCISE. Any option granted under the Plan may be
exercised by the optionee by delivering to the Bank, on any business day a
written notice specifying the number of shares of Common Stock the optionee then
desires to purchase and specifying the address to which the certificates for
such shares are to be mailed (the "Notice"), accompanied by payment for such
shares.
7.2 PAYMENT OF PURCHASE PRICE. Payment for the shares of Common Stock
purchased pursuant to the exercise of an option shall be made either by (i)
cash, certified check, bank draft or postal or express money order equal to the
option price for the number of shares specified in the Notice, or (ii) with the
consent of the Board or the Committee, as the case may be, shares of Common
Stock of the Bank having a fair market value equal to the option price of such
shares, or (iii) with the consent of the Board or the Committee, as the case may
be, such other consideration which is acceptable to said Board or Committee, as
the case may be, and which has a fair market value equal to the option price of
such shares, or (iv) with the consent of the Board or the Committee as the case
may be, a combination of (i), (ii) and/or (iii). For the purpose of the
preceding sentence, the fair market value per share of Common Stock so delivered
to the Bank shall be determined in the manner specified in Section 6.3. As
promptly as practicable after receipt of the Notice and accompanying payment,
the Bank shall deliver to the optionee certificates for the number of shares
with respect to which such option has been so exercised, issued in the
optionee's name; provided, however, that such delivery shall be deemed effected
for all purposes when the Bank or a stock transfer agent of the Bank shall have
deposited such certificates in the United States mail, addressed to the
optionee, at the address specified in the Notice.
SECTION 8. CHANGES IN BANK'S CAPITAL STRUCTURE
8.1 RIGHTS OF BANK. The existence of outstanding options shall not
affect in any way the right or power of the Bank or its stockholders to make or
authorize, without limitation, any or all adjustments, recapitalizations,
reorganizations or other changes in the Bank's capital structure or its
business, or any merger or consolidation of the Bank, or any
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issue of Common Stock, or any issue of bonds, debentures, preferred or prior
preference stock or other capital stock ahead of or affecting the Common Stock
or the rights thereof, or the dissolution or liquidation of the Bank, or any
sale or transfer of all or any part of its assets or business, or any other
corporate act or proceeding, whether of a similar character or otherwise.
8.2 RECAPITALIZATION, STOCK SPLITS AND DIVIDENDS. If the Bank shall
effect a subdivision or consolidation of shares or other capital readjustment,
the payment of a stock dividend, or other increase or reduction of the number of
shares of the Common Stock outstanding, in any such case without receiving
compensation therefor in money, services or property, then (i) the number,
class, and price per share of shares of stock subject to outstanding options
hereunder shall be appropriately adjusted by the Bank in such a manner as to
entitle an optionee to receive upon exercise of an option, for the same
aggregate cash consideration, the same total number and class of shares as he or
she would have received as a result of the event requiring the adjustment had he
or she exercised his or her option in full immediately prior to such event; and
(ii) the number and class of shares with respect to which options may be granted
under the Plan shall be adjusted by substituting for the total number of shares
of Common Stock then reserved for issuance under the Plan that number and class
of shares of stock that the owner of an equal number of outstanding shares of
Common Stock would own as the result of the event requiring the adjustment.
8.3 MERGER WITHOUT CHANGE OF CONTROL. After a merger of one or more
corporations into the Bank, or after a consolidation of the Bank and one or more
corporations in each case as a result of which (i) the Bank shall be the
surviving corporation, and (ii) the stockholders of the Bank immediately prior
to such merger or consolidation own after such merger or consolidation shares
representing at least fifty percent of the voting power of the Bank, or after a
reorganization of the Bank under a "bank holding company" (as such term is
defined in the Bank Holding Company Act of 1956, as amended) in which the
stockholders of the Bank immediately prior to such reorganization own after such
reorganization shares representing at least fifty percent of the voting power of
such bank holding company, each holder of an outstanding option shall, at no
additional cost, be entitled upon exercise of such option to receive in lieu of
the number of shares as to which such option shall then be so exercisable, the
number and class of shares of stock or other securities to which such holder
would have been entitled pursuant to the terms of the agreement of merger,
consolidation or reorganization if, immediately prior to such merger,
consolidation or reorganization, such holder had been the holder of record of a
number of shares of, Common Stock equal to the number of shares for which such
option was exercisable.
8.4 SALE OR MERGER WITH CHANGE OF CONTROL. If the Bank is merged into
or consolidated with another corporation under circumstances where the Bank is
not the surviving corporation, or if there is a merger or consolidation where
the Bank is the surviving corporation but the stockholders of the Bank
immediately prior to such merger or consolidation do not own after such merger
or consolidation shares representing at least fifty percent of the voting power
of the Bank, or if the Bank is reorganized under a "bank holding g company" (as
such term is defined in the Bank Holding Company Act of 1956, as amended) in
which the stockholders of the Bank immediately prior to such reorganization own
after such reorganization shares representing less than fifty percent of the
voting power of such bank holding company, or if the Bank is liquidated, or
sells or otherwise disposes of substantially. all of its assets to another
corporation while unexercised options remain outstanding under the Plan (i)
subject to the provisions of clause (iii) below, after the
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effective date of such merger, consolidation, reorganization, liquidation; sale
or disposition, as the case may be, each holder of an outstanding option shall
be entitled, upon exercise of such option, to receive, in lieu of shares of
Common Stock, shares of such stock or other securities, cash or property as the
holders of shares of Common Stock received pursuant to the terms of the merger,
consolidation, reorganization, liquidation, sale or disposition; (ii) the Board
or the Committee, as the case may be, may accelerate the time for exercise of
all unexercised and unexpired options to and after a date prior to the effective
date of such merger, consolidation, reorganization, liquidation, sale or
disposition, as the case may be, specified by said Board or Committee; or (iii)
all outstanding options may be cancelled by the Board or the Committee, as the
case may be, as of the effective date of any such merger, consolidation,
reorganization, liquidation, sale or disposition provided that (x) notice of
such cancellation shall be given to each holder of an option and (y) each holder
of an option shall have the right to exercise such option to the extent that the
same is then exercisable or, if said Board or Committee shall have accelerated
the time for exercise of all unexercised and unexpired options, in full during,
the 30-day period preceding the effective date of such merger, consolidation,
reorganization, liquidation, sale or disposition.
8.5 ADJUSTMENTS TO COMMON STOCK SUBJECT TO OPTION. Except as
hereinbefore expressly provided, the issue by the Bank of shares of stock of any
class, or securities convertible into shares of stock of any class, for cash or
property, or for labor or services, either upon direct sale or upon the exercise
of rights or warrants to subscribe therefor, or upon conversion of shares or
obligations of the Bank convertible into such shares or other securities, shall
not affect, and no adjustment by reason thereof shall be made with respect to,
the number or price of shares of Common Stock then subject to outstanding
options.
8.6 MISCELLANEOUS. Adjustments under this Section 8 shall be determined
by the Board or the Committee, as the case may be, and such determinations shall
be conclusive. No fractional shares of Common Stock shall be issued under the
Plan on account of any adjustment specified above.
SECTION 9. GENERAL RESTRICTIONS
9.1 INVESTMENT REPRESENTATIONS. The Bank may require any person to whom
an option is granted, as a condition of exercising such option, to give written
assurances in substance and form satisfactory to the Bank to the effect that
such person is acquiring the Common Stock subject to the option for his or her
own account for investment and not with any present intention of selling or
otherwise distributing the same, and to such other effects as the Bank deems
necessary or appropriate in order to comply with federal and applicable state
securities laws.
9.2 COMPLIANCE WITH SECURITIES LAWS. The Bank shall not be required to
sell or issue any shares under any option if the issuance of such shares shall
constitute a violation by the optionee or by the Bank of any provisions of any
law or regulation of any governmental authority. In addition, in connection with
the Securities Act of 1933, as now in effect or hereafter amended (the
"Securities Act"), upon exercise of any option, the Bank shall not be required
to issue such shares unless the Board or the. Committee, as the case may be, has
received evidence satisfactory to it to the effect that the bolder of such
option will not transfer such shares except pursuant to a registration statement
in effect under such Act or unless an opinion of counsel satisfactory to the
Bank has been received by the Bank to the effect that such registration is not
required. Any determination in this connection by the Board or the
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Committee, as the case may be, shall be final, binding and conclusive. In the
event the shares issuable on exercise of an option are not registered under the
Securities Act, the Bank may imprint upon any certificate representing shares so
issued the following legend or any other legend which counsel for the Bank
considers necessary or advisable to comply with the Securities Act and with
applicable state securities laws:
The shares of stock represented by this certificate have not been registered
under the Securities Act of 1933 or under the securities laws of any State and
may not be sold or transferred except upon such registration or upon receipt by
the Bank of an opinion counsel satisfactory to the Bank, in form and substance
satisfactory to the Bank, that registration is not required for such sale or
transfer.
The Bank may, but shall in no event be obligated to, register any securities
covered hereby pursuant to the Securities Act; and in the event any shares are
so registered the Bank may remove any legend on certificates representing such
shares. The Bank shall not be obligated to take any other affirmative action in
order to cause the exercise of an option or the issuance of shares pursuant
thereto to comply with any law or regulation of any governmental authority.
9.3 EMPLOYMENT OBLIGATION. The granting of any option shall not impose
upon the Bank any obligation to employ or continue to employ any optionee; and
the right of the Bank to terminate the employment of any officer or other
employee shall not be diminished or affected by reason of the fact that an
option has been granted to him or her.
SECTION 10. AMENDMENT OR TERMINATION OF THE PLAN
The Board of Directors may modify, revise or terminate this Plan at any time and
from time to time, except that the class of persons eligible to receive options
and the aggregate number of shares issuable pursuant to this Plan shall not be
changed or increased, other than by operation of Section 8 hereof, without the
consent of the stockholders of the Bank.
SECTION 11. NONEXCLUSIVITY OF THE PLAN
Neither the adoption of the Plan by the Board of Directors nor the submission of
the Plan to the stockholders of the Bank for approval shall be construed as
creating any limitations on the power of the Board of Directors to adopt such
other incentive arrangements as it may deem desirable, including, without
limitation, the granting of stock options otherwise than under the Plan, and
such arrangements may be either applicable generally or only in specific cases.
SECTION 12. EFFECTIVE DATE AND DURATION OF PLAN
The Plan shall become effective upon the date of opening of the Bank for
business, provided, however, that the Plan shall be subject to (i) the approval
of the Bank's stockholders in accordance with applicable laws and regulations at
an annual or special meeting held within twelve months of such effective date
and (ii) the approval of the Rhode Island Division of Banking if required by
applicable law or regulation. No options granted under the Plan prior to such
regulatory and stockholder approvals may be exercised until such approvals have
been obtained. No option may be granted under the Plan after the tenth
anniversary of the effective date. The Plan shall terminate (x) when the total
amount of the Stock with respect to
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which options may be granted shall have been issued upon the exercise of options
or (y) by action of the Board of Directors pursuant to Section 10 hereof,
whichever shall first occur.
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EXHIBIT 10.6
BANK RHODE ISLAND
NON-EMPLOYEE DIRECTORS STOCK PLAN
This Bank Rhode Island Non-Employee Directors Stock Plan (the "Plan") is
adopted by Bank Rhode Island (the "Bank") for the purpose of advancing the
interests of the Bank by providing compensation and other incentives for the
continued services of the Bank's non-employee directors and by attracting and
retaining able individuals to directorships with the Bank.
1. DEFINITIONS. For purposes of this Plan, the following terms shall
have the meanings set forth below:
"ADMINISTRATOR" means the person(s) appointed by the Board to administer
the Plan as provided in Paragraph 2 hereof.
"ANNUAL MEETING" means the annual meeting of the Bank's shareholders.
"BANK" means Bank Rhode Island, a Rhode Island financial institution.
"BOARD" means the Board of Directors of Bank Rhode Island.
"CHANGE OF CONTROL" means (i) approval by the Bank's shareholders of a
merger in which the Bank does not survive as an independent, publicly owned
corporation, a consolidation, or a sale, exchange or other disposition of all or
substantially all the Bank's assets, or (ii) any acquisition of voting
securities of the Bank by any person or group (as such term is used in Sections
13(d) and 14(d) of the Exchange Act), but excluding (a) the Bank or any of its
subsidiaries, (b) any person who was an officer or director of the Bank on the
day prior to the Effective Date, or (c) any savings, pension or other benefits
plan for the benefit of employees of the Bank or any of its subsidiaries, which
theretofore did not beneficially own voting securities representing more than
30% of the voting power of all outstanding voting securities of the Bank, if
such acquisition results in such entity, person or group owning beneficially
securities representing more than 30% of the voting power of all outstanding
voting securities of the Bank. As used herein, "voting power" means ordinary
voting power for the election of directors of the Bank.
"COMMON SHARES" means the Bank's common stock, $1.00 par value per
share.
"EFFECTIVE DATE" means May 20, 1998, subject to the approval of the Plan
by the Bank's shareholders.
"GRANT DATE" means the effective date of a grant of options pursuant to
Paragraph 4(a) hereof.
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"MARKET VALUE" means the last sale price regular way or, in case no such
reported sales take place on such day, the average of the last reported bid and
asked prices regular way, in either case on the principal national securities
exchange on which the Common Shares are admitted to trading or listed, or if not
listed or admitted to trading on any such exchange, the representative closing
bid price as reported by NASDAQ, or other similar organization if NASDAQ is no
longer reporting such information, or if not so available, the fair market price
as determined by the Board of Directors of the Bank.
"PARTICIPANT" means a director who has met the requirements of
eligibility and participation described in Paragraph 3 hereof.
2. ADMINISTRATION. The Plan shall be administered by the Administrator.
The Administrator may establish, subject to the provisions of the Plan, such
rules and regulations as it deems necessary for the proper administration of the
Plan, and make such determination and take such action in connection therewith
or in relation to the Plan as it deems necessary or advisable, consistent with
the Plan.
3. ELIGIBILITY AND PARTICIPATION.
(a) A non-employee director of the Bank shall automatically become a
Participant in the Plan as of the later of (i) the Effective Date, or (ii) the
date of initial election to the Board. A director who is a regular employee of
the Bank is not eligible to participate in the Plan.
(b) A Participant shall cease participation in the Plan as of the date
the Participant (i) fails to be re-elected to the Board, (ii) resigns or
otherwise vacates his position on the Board, or (iii) becomes a regular employee
of the Bank.
4. OPTION AWARDS
(a) GRANT OF OPTIONS. Each person who is a Participant on the Effective
Date shall be awarded a non-qualified option to purchase 1,500 Common Shares
effective as of the Effective Date, at a price equal to the Market Value of
Common Shares on that date. Any person who becomes a Participant after the
Effective Date shall be awarded non-qualified options to purchase 1,000 Common
Shares effective as of the date of the Annual Meeting at which such election
occurs, or if the Participant is first elected to the Board other than at an
Annual Meeting, as of the date of such election, at a price equal to the Market
Value of Common Shares on that date.
Commencing with the 1999 Annual Meeting, on the date of the Annual
Meeting of each year, a Participant (other than a director who is first elected
at the Annual Meeting for that year or within six months prior to such Annual
Meeting), shall be awarded non-qualified options to purchase 500 Common Shares,
effective as of such date, at a price equal to the Market Value of Common Shares
on such date.
(b) TERM AND EXERCISABILITY. All options shall have a term of 10 years
and shall vest six (6) months after the Grant Date. Notwithstanding the
foregoing, all options shall become
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immediately exercisable upon a Change of Control of the Bank. In the event of a
Change of Control, the Board, or the board of directors of any corporation
assuming the obligations of the Bank hereunder may, as to outstanding options,
upon written notice to the Participants, provide that all unexercised options
must be exercised within two (2) years of the date of such notice or they will
be terminated.
(c) METHOD OF EXERCISE. An option granted under the Plan may be
exercised, in whole or in part, by submitting a written notice to the Board,
signed by the Participant or such other person who may be entitled to exercise
such option, and specifying the number of Common Shares as to which the option
is being exercised. Such notice shall be accompanied by the payment of the full
option price for such Common Shares, or shall fix a date (not more than ten
business days from the date of such notice) for the payment of the full option
price of the Common Shares being purchased. Payment shall be made in the form of
cash, Common Shares (to the extent permitted by law), or both. A certificate or
certificates for the Common Shares purchased shall be issued by the Bank after
the exercise of the option and full payment therefor.
(d) TERMINATION OF DIRECTORSHIP. If a Participant fails to be re-elected
to the Board, resigns or otherwise ceases to be a director of the Bank for
reasons other than death or disability (within the meaning of Section 22(e)(3)
of the Internal Revenue Code), all options granted under this Plan to such
Participant which are not exercisable on such date shall immediately terminate,
and any remaining options shall terminate if not exercised before twenty-four
(24) months following such termination, or at such earlier time as may be
applicable under Paragraph 4(b) above.
If a Participant ceases to be a director of the Bank by reason of death
or disability (within the meaning of Section 22(e)(3) of the Internal Revenue
Code), all options granted under this Plan to such Participant which are not
exercisable on such date shall become immediately exercisable, and may be
exercised at any time before the expiration of twenty-four (24) months following
the date of death or commencement of disability, or such earlier time as may be
applicable under Paragraph 4(b) above.
(e) NON-TRANSFERABILITY. Each option and all rights thereunder shall be
exercisable during the Participant's lifetime only by him and shall be
non-assignable and non-transferable by the Participant except, in the event of
the Participant's death, by will or by the laws of descent and distribution. In
the event the death of a Participant occurs, the representative or
representatives of the Participant's estate, or the person or persons who
acquired (by bequest or inheritance) the rights to exercise the Participant's
options in whole or in part may exercise the option prior to the expiration of
the applicable exercise period, as specified in Paragraph 4(d) above.
(f) NO RIGHTS AS SHAREHOLDER. A Participant shall have no rights as a
shareholder with respect to any Common Shares subject to the option prior to the
date of issuance of a certificate or certificates for such Common Shares.
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(g) COMPLIANCE WITH SECURITIES LAWS. Options granted and Common Shares
issued by the Bank upon exercise of options shall be granted and issued only in
full compliance with all applicable securities laws, including laws, rules and
regulations of the Securities and Exchange Commission and applicable state Blue
Sky Laws. With respect thereto, the Board may impose such conditions on
transfer, restrictions and limitations as it may deem necessary and appropriate
to assure compliance with such applicable securities laws.
5. SHARES SUBJECT TO THE PLAN.
(a) The Common Shares to be issued and delivered by the Bank upon the
exercise of options under the Plan may be either authorized but unissued shares
or treasury shares of the Bank.
(b) The aggregate number of Common Shares of the Bank which may be
issued under the Plan shall not exceed 40,000 shares; subject, however, to the
adjustment provided in Paragraph 6 in the event of stock splits, stock
dividends, exchanges of shares or the like occurring after the effective date of
this Plan.
(c) Common Shares covered by an option which is no longer exercisable
with respect to such shares shall again be available for issuance under this
Plan.
6. SHARE ADJUSTMENTS. In the event there is any change in the Bank's
Common Shares resulting from stock splits, stock dividends, combinations or
exchanges of shares, or other similar capital adjustments, equitable
proportionate adjustments shall automatically be made without further action by
the Board or Administrator in (i) the number of Common Shares available for
award under this Plan, (ii) the number of Common Shares subject to options
granted under this Plan, and (iii) the option price of options granted under
this Plan.
7. AMENDMENT OR TERMINATION. The Board may terminate this Plan at any
time, and may amend the Plan at any time or from time to time; provided,
however, that the Plan shall not be amended more than once every six months,
other than to comport with changes in the Internal Revenue Code, the Employee
Retirement Income Security Act, or the rules thereunder; and further provided
that any amendment that would increase the aggregate number of Common Shares
that may be issued under the Plan, materially increase the benefits accruing to
Participants under the Plan, or materially modify the requirements as to
eligibility for participation in the Plan shall be subject to the approval of
the Bank shareholders to the extent required by Rule 16b-3 under the Securities
Exchange Act of 1934, as amended, or any other governing rules or regulations
except that such increase or modification that may result from adjustments
authorized by Paragraph 6 does not require such approval. If the Plan is
terminated, any unexercised option shall continue to be exercisable in
accordance with its terms.
8. BANK RESPONSIBILITY. All expenses of this Plan, including the cost of
maintaining records, shall be borne by the Bank.
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9. IMPLIED CONSENT. Every Participant, by acceptance of an award under
this Plan, shall be deemed to have consented to be bound, on his or her own
behalf and on behalf of his or her heirs, assigns, and legal representatives, by
all of the terms and conditions of this Plan.
10. RHODE ISLAND LAW TO GOVERN. This Plan shall be construed and
administered in accordance with and governed by the laws of the State of Rhode
Island.
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EXHIBIT 10.7
BANK RHODE ISLAND
AMENDMENT NO. 2 TO
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
WHEREAS, Bank Rhode Island (the "Bank") has adopted a Supplemental
Executive Retirement Plan (the "Plan"); and
WHEREAS, under Section 3.1 of the Plan, the Board of Directors of the
Bank may from time to time select employees who shall be Participants in the
Plan and shall determine the Applicable Benefit Amount for such Participants (as
such terms are defined in the Plan); and
WHEREAS, on December 21, 1999 the Board of Directors of the Bank
approved increasing the Applicable Benefit Amount payable under the Plan to
Merrill W. Sherman to $100,000 and adding James V. DeRentis to the list of
Schedule C Participants, at an Applicable Benefit Amount of $20,000.
NOW, THEREFORE, the Plan is amended as follows:
1. SCHEDULE B of the Plan be amended to increase the Applicable Benefit
Amount payable to Merrill W. Sherman to $100,000 as set forth in SCHEDULE B
attached hereto.
2. SCHEDULE C of the Plan be amended to add James V. DeRentis as a
Participant with an Applicable Benefit Amount of $20,000 as set forth on
SCHEDULE C attached hereto.
3. All other provisions of the Plan shall remain in full force and
effect and are hereby ratified, approved and confirmed.
IN WITNESS WHEREOF, the Company has caused this Amendment No. 2 to the
Supplemental Executive Retirement Plan to be executed by its duly authorized
officer as of the 21st day of December, 1999.
BANK RHODE ISLAND
By: /s/ Malcolm G. Chace
----------------------
Malcolm G. Chace,
Chairman
Attest:
/s/ Margaret D. Farrell
- - -----------------------
Secretary
<PAGE> 2
SCHEDULE B
PARTICIPANTS: APPLICABLE BENEFIT AMOUNT
------------ -------------------------
Sherman, Merrill W. $100,000
<PAGE> 3
SCHEDULE C
PARTICIPANTS: APPLICABLE BENEFIT AMOUNT
------------ -------------------------
DeRentis, James V. $20,000
McQueen, Donald C. $43,400
Rietheimer, Albert R. $43,400
<PAGE> 4
BANK RHODE ISLAND
AMENDMENT NO. 1 TO
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
WHEREAS, Bank Rhode Island (the "Bank") desires to amend the provisions
of the Bank's Supplemental Executive Retirement Plan (the "Plan") to change the
definition of "Change of Control" under the Plan; and
WHEREAS, under Article VIII of the Plan, the Board of Directors of the
Bank may amend the Plan at any time, provided that such amendment shall not
reduce the vested benefit of any Participant or amend Section 6.1 or 6.2 of the
Plan without the consent of all Participants; and
WHEREAS, on September 21, 1999 the Board of Directors of the Bank has
approved amending the definition of "Change in Control" under the Plan;
NOW, THEREFORE, the Plan is amended as follows:
1. That SCHEDULE A of the Plan be amended in its entirety to read as
set forth on SCHEDULE A attached hereto.
2. All other provisions of the Plan shall remain in full force and
effect and are hereby ratified, approved and confirmed.
IN WITNESS WHEREOF, the Company has caused this Amendment No. 1 to the
Supplemental Executive Retirement Plan to be executed by its duly authorized
officer as of the 21st day of September, 1999.
BANK RHODE ISLAND
By: /s/ Malcolm G. Chace
----------------------
Malcolm G. Chace,
Chairman
Attest:
/s/ Margaret D. Farrell
- - -----------------------
Secretary
<PAGE> 5
SCHEDULE A
TO
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
(A) CHANGE IN CONTROL. For purposes of this Plan, a "Change in Control"
shall be deemed to have occurred if and when:
(1) the Bank effectuates a Takeover Transaction; or
(2) the Bank commences substantive negotiations with a third party with
respect to a Takeover Transaction and within twelve (12) months of the
commencement of such negotiations, enters into a definitive agreement with
respect to a Takeover Transaction with any party with which negotiations were
originally commenced; or
(3) any election of directors of the Bank (or, if the Bank reorganizes
into a holding company structure, directors of the holding company) occurs
(whether by the directors then in office or by the shareholders at a meeting or
by written consent) where a majority of the directors in office following such
election are individuals who were not nominated by a vote of two-thirds of the
members of the board of directors immediately preceding such election; or
(4) the Bank effectuates a complete liquidation of the Bank or a sale
or disposition of all or substantially all of its assets. A reorganization in
which the Bank reorganizes into a holding company structure, or any similar
reorganization, will not constitute a Change in Control for purposes of this
agreement or for any other purpose; provided, however, that any such transaction
may constitute a Change in Control if accomplished in connection with a Takeover
Transaction.
<PAGE> 6
(B) TAKEOVER TRANSACTION. A "Takeover Transaction" shall mean:
(1) The acquisition of voting securities of the Bank by any individual,
entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act")), other than by
the Bank or its subsidiaries or any employee benefit plan (or related trust) of
the Bank or its subsidiaries, which theretofore did not beneficially own (within
the meaning of Rule 13d-3 promulgated under the Exchange Act), securities
representing 30% or more of the voting power of all outstanding shares of voting
securities of the Bank, if such acquisition results in such individual, entity
or group owning securities representing more than 30% of the voting power of all
outstanding voting securities of the Bank; provided, that any acquisition by a
corporation with respect to which, following such acquisition, more than 50% of
the then outstanding shares of voting securities of such corporation, is then
beneficially owned, directly or indirectly, by all or substantially all of the
individuals and entities who were the beneficial owners of the voting securities
of the Bank outstanding immediately prior to such acquisition in substantially
the same proportion as their ownership, immediately prior to such acquisition,
of the outstanding voting securities of the Bank, shall not constitute a Change
in Control; or
(2) The issuance of additional shares of common stock of the Bank in a
single transaction or a series of related transactions if the individuals and
entities who were the beneficial owners of the outstanding voting securities of
the Bank immediately prior to such issuance do not, following such issuance,
beneficially own, directly or indirectly, securities representing more than 50%
of the voting power of all then outstanding voting securities of the Bank; or
2
<PAGE> 7
(3) Consummation by the Bank of (a) a reorganization, merger or
consolidation, in each case, with respect to which all or substantially all of
the individuals and entities who were the beneficial owners of the voting
securities of the Bank immediately prior to such reorganization, merger or
consolidation do not, following such reorganization, merger or consolidation,
beneficially own, directly or indirectly, securities representing more than 50%
of the voting power of then outstanding voting securities of the corporation
resulting from such a reorganization, merger or consolidation, or (b) the sale,
exchange or other disposition (in one transaction or a series of related
transactions) of all or substantially all of the assets of the Bank (on a
consolidated basis) to a party which is not controlled by or under common
control with the Bank.
For purposes of this Section (B), "voting power" means ordinary voting
power for the election of directors.
3
<PAGE> 8
BANK RHODE ISLAND
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
<PAGE> 9
TABLE OF CONTENTS
PAGE
----
ARTICLE I - Introduction...............................................1
ARTICLE II - Definitions...............................................2
ARTICLE III - Participation and Vesting................................3
ARTICLE IV - Source of Benefit Payment.................................4
ARTICLE V - Retirement Benefits........................................5
ARTICLE VI - Change of Control.........................................6
ARTICLE VII - Administration...........................................7
ARTICLE VIII - Amendment and Termination...............................8
ARTICLE IX - Miscellaneous.............................................9
Schedule A.............................................................11
Schedule B.............................................................13
Schedule C.............................................................14
Schedule D.............................................................15
Exhibit A - Trust Agreement
<PAGE> 10
ARTICLE I. INTRODUCTION
1.1 PURPOSE OF PLAN. The purpose of this Plan is to promote loyalty, to
attract new employees and to encourage employees to make and continue careers
with the Bank and its subsidiaries by supplementing their retirement benefits,
thereby giving them assurance of retirement security and promoting their
continued loyalty to the Bank.
1.2 STATUS. The Plan is intended to be a plan that is unfunded and is
maintained by the Bank primarily for the purpose of providing deferred
compensation for a select group of management or highly compensated employees
within the meaning of sections 201(2), 301(a)(3) and 401(a)(1) of the Employee
Retirement Income Security Act of 1974 (ERISA), and shall be interpreted and
administered accordingly.
1.3 AUTHORIZATION. The Plan was approved by the Board of Directors on
January 26, 1999.
<PAGE> 11
ARTICLE II. DEFINITIONS
The following terms have the following meanings:
2.1 "Administrator" means the person designated by the Board to
administer the Plan pursuant to Article VII.
2.2 "Board" means the Board of Directors of the Bank.
2.3 "Change of Control" is defined in Schedule A.
2.4 "Bank" means Bank Rhode Island, a Rhode Island banking corporation.
2.5 "Effective Date" means January 1, 1999.
2.6 "Employee" means an individual employed by the Bank.
2.7 "Normal Retirement Age" means age 65.
2.8 "Normal Retirement Benefit" means the benefit referred to in
Section 5.1 hereof.
2.9 "Normal Retirement Date" means the first day of the month
coinciding with or next following the Participant's sixty-fifth birthday.
2.10 "Participant" means any Employee selected to participate in the
Plan in accordance with Section 3.1.
2.11 "Plan" means this Supplemental Executive Retirement Plan as set
forth herein and in all subsequent amendments hereto.
2.12 "Spouse" means an individual who is the legally married husband or
wife of the Participant
2.13 "Years of Service" means the period of an Employee's employment
with the Bank and its predecessor, EFC, Inc., measured from the Employee's
employment commencement date to the date the Employee quits or is discharged for
any reason.
2
<PAGE> 12
ARTICLE III. PARTICIPATION AND VESTING
3.1 SELECTION OF PARTICIPANTS. The Board will select from time to time
those Employees who will be Participants in the Plan and the Applicable Benefit
Amount. The Employees set forth in the attached Schedules B and C will become
Participants on the Effective Date. If and when additional Participants are
named by the Board, they will be added to the appropriate Schedule and will
become Participants at that time.
3.2 VESTING.
(a) Except as provided in paragraph (b) and in Section 6, a Participant
will be vested and entitled to receive benefits under this Plan only if he or
she is (i) an Employee listed on Schedule B, or (ii) an Employee listed on
Schedule C who has accumulated 5 Years of Service. A Participant who ceases to
be an Employee without becoming vested will forfeit all rights under the Plan
(b) A Participant who ceases to be an Employee because of death before
satisfying the requirements of paragraph (a) shall become vested immediately and
entitled to receive benefits subject to the other provisions of the Plan.
3
<PAGE> 13
ARTICLE IV. SOURCE OF BENEFIT PAYMENTS
4.1 OBLIGATIONS OF THE BANK. The Bank will establish on its books
liabilities for obligations to pay benefits under the Plan. With respect to all
benefits payable under the Plan, each Participant (or other person entitled to
receive benefits with respect to a Participant) will be an unsecured general
creditor of the Bank.
4.2 NO FUNDING REQUIRED. Except as otherwise provided in Article VI,
the Bank may, but shall not be required to, establish a trust of which it is
treated as the owner under Subpart E of Subchapter J, Chapter 1 of the Internal
Revenue Code of 1986, as amended (a "rabbi trust"). The Bank may from time to
time deposit funds with the trustee to provide a sound long-term funding
program.
4.3 NO CLAIM TO SPECIFIC ASSETS. Nothing in the Plan will be construed
to give any individual rights to any specific assets of the Bank, person or
entity.
4
<PAGE> 14
ARTICLE V. RETIREMENT BENEFITS
5.1 NORMAL RETIREMENT BENEFIT.
(a) Subject to Section 5.2, the Normal Retirement Benefit payable under
the Plan to a Participant will be a monthly benefit equal to one-twelfth of (i)
the Applicable Benefit Amount. For this purpose, the Applicable Benefit Amount
for a Participant is listed on Schedule B or Schedule C as the case may be.
(b) The Participant's Normal Retirement Benefit will commence at his or
her Normal Retirement Date (or such later date on which the Participant actually
retires) and continue for his or her lifetime.
5.2 DEATH BENEFITS. Except as otherwise provided in this paragraph, no
death benefits will be payable to anyone following the death of the Participant.
(a) POST RETIREMENT. If a Participant for whom retirement
benefits have commenced under this Plan dies leaving a surviving Spouse who was
married to the Participant at the time benefits commenced, the surviving Spouse
will thereafter be paid for the lifetime of the surviving Spouse a monthly
retirement benefit equal to 50% of the benefit being received by the Participant
at the date of his death.
(b) PRE-RETIREMENT. If a Participant with a vested benefit for
whom retirement benefits have not commenced dies leaving a surviving Spouse, the
surviving Spouse shall be entitled to a monthly retirement benefit, commencing
on the Participant's Normal Retirement Date, equal to 50% of the retirement
benefit that would have been payable to the Participant under Section 5.1.
5
<PAGE> 15
ARTICLE VI. CHANGE OF CONTROL
6.1 VESTING OF BENEFITS. In the event of a "Change of Control", a
Participant shall, notwithstanding any other provision of the Plan, immediately
become fully vested in his retirement benefits as described in Section 5.1.
6.2 FUNDING OF BENEFIT. In the event of a Change of Control, the Bank
shall immediately establish a rabbi trust with a third party financial
institution with a net worth of at least $100 million (unless all Plan
Participants entitled to benefits and all surviving spouses receiving benefits
under the Plan consent in writing to the appointment of another trustee),
substantially in the form attached hereto as EXHIBIT A and shall deposit funds
with the trustee of the trust equal to the difference between the then present
value of all accrued benefits provided under the Plan (computed on the basis of
the actuarial assumptions stated in Schedule D hereto and taking into account
the benefits that become vested or payable in the event of a Change of Control)
and the then fair market value of the assets of the trust (if any) and shall
thereafter make annual additional deposits with the trustee to reflect increases
in the accrued benefits. If the principal of the trust, and any earnings
thereon, are not sufficient to make payment of the benefits provided for under
this Plan, the Bank shall make the balance of each such payment as it falls due.
6.3 REDUCED PAYMENT IN THE EVENT OF EXCISE TAX. Notwithstanding the
foregoing, all payments to which Participant would be entitled under this
Section 6 shall be reduced to the extent necessary so that the Participant shall
not be liable for the federal excise tax levied on certain "excess parachute
payments" under Section 4999 of the Internal Revenue Code.
6
<PAGE> 16
ARTICLE VII. ADMINISTRATION
7.1 APPOINTMENT OF ADMINISTRATOR. The Plan will be administered by the
person designated by the Board to administer the Plan (the "Administrator"), but
the Board will have full discretionary authority to interpret the provisions of
the Plan and decide all questions and settle all disputes that may arise in
connection with the Plan. The Board may establish its own operative and
administrative rules and procedures in connection with the Plan, provided such
procedures are consistent with the requirements of Section 503 of ERISA and the
regulations thereunder. All interpretations, decisions and determinations made
by the Board will be binding on all persons concerned.
7.2 DELEGATION. The Board in its sole discretion may delegate certain
of its duties and responsibilities to the Administrator or to an appropriate
Employee or Employees. For purposes of the Plan, any action taken by the
Administrator or a delegee Employee pursuant to such delegation will be
considered to have been taken by the Board. The Bank agrees to indemnify and to
defend to the fullest possible extent permitted by law any delegee of the Board
(including any person who formerly served as a delegee) against all liabilities,
damages, costs and expenses (including attorneys' fees and amounts paid in
settlement of any claims approved by the Bank) occasioned by any act or omission
to act in connection with the Plan, if such act or omission is in good faith.
7.3 EXPENSES. All expenses incurred in the creation or administration
of this Plan shall be paid by the Bank.
7
<PAGE> 17
ARTICLE VIII. AMENDMENT OR TERMINATION OF PLAN
The Bank hopes and expects to continue the Plan in effect, but the Board
necessarily reserves the right to amend the Plan at any time, and from time to
time, or to terminate the Plan, provided that such amendment or termination
shall not reduce the vested benefit of any Participant or amend Section 6.1 or
6.2 without the consent of all Participants who have vested benefits under the
Plan. Any amendment or termination shall be stated in an instrument in writing
and signed by a duly authorized representative of the Board.
8
<PAGE> 18
ARTICLE IX. MISCELLANEOUS
9.1 NO ASSIGNMENT OR ALIENATION. None of the benefits, payments,
proceeds or claims of any person under this Plan shall be subject to any claim
of any creditor, spouse or former spouse of the person or to attachment or
garnishment or other legal process by any such creditor, Spouse or former
Spouse; nor shall any person have any right to alienate, anticipate, commute,
pledge, encumber or assign any of the benefits, payments or proceeds which he or
she may expect to receive, contingently or otherwise, under the Plan.
9.2 LIMITATION OF RIGHTS. Neither the establishment of the Plan, nor
any amendment thereof, nor the payment of any benefits will be construed as
giving any individual any legal or equitable right against the Bank, except for
those rights explicitly provided for in the Plan.
9.3 FORFEITURE OF BENEFITS. A Participant shall forfeit all rights or
benefits remaining to him or her under the Plan if such Participant's employment
is terminated on account of, or such Participant is convicted of, or confesses
to, or permits a plea of nolo contendere to be entered with respect to, a
criminal act of fraud, misappropriation, embezzlement, or the like, which is a
felony and involves property of the Bank.
9.4 GOVERNING LAW. The Plan will be construed, administered, and
governed under the laws of the State of Rhode Island, to the extent not
preempted by federal law.
9.5 SEVERABILITY. If any provision of this Plan is held by a court of
competent jurisdiction to be invalid or unenforceable, the remaining provisions
shall continue to be fully effective.
9
<PAGE> 19
IN WITNESS WHEREOF, the Bank has caused this Plan to be executed by
their duly authorized officers this 21st day of April, 1999.
BANK RHODE ISLAND
By: /s/ F. James Hodges
----------------------------
F. James Hodges
Compensation Committee Chairman
10
<PAGE> 20
SCHEDULE A
(a) For purposes of this Plan, a "Change in Control" shall be deemed to
have occurred if and when:
(1) the Bank effectuates a Takeover Transaction; or (2) the Bank
commences substantive negotiations with a third party with respect to a Takeover
Transaction if within twelve (12) months of the commencement of such
negotiations, enters into a definitive agreement with respect to a Takeover
Transaction with any party with which negotiations were originally commenced; or
(3) any election of directors of the Bank (or, if the Bank reorganizes into a
holding company structure, directors of the holding company) (whether by the
directors then in office or by the stockholders at a meeting or by written
consent) where a majority of the directors in office following such election are
individuals who were not nominated by a vote of two-thirds of the members of the
board of directors immediately preceding such election; or (4) the Bank
effectuates a complete liquidation of the Bank or a sale or disposition of all
or substantially all of its assets. A reorganization in which the Bank
reorganizes into a holding company structure, or any similar reorganization,
will not constitute a Change in Control for purposes of this agreement or for
any other purpose; provided, however, that any such transaction may constitute a
Change in Control if accomplished in connection with a Takeover Transaction.
(b) A "Takeover Transaction" shall mean a (i) merger or consolidation
of the Bank with, or an acquisition of the Bank or all or substantially all of
its assets by, any other bank or corporation, other than a merger, consolidation
or acquisition in which the individuals who were members of the Board of
Directors of the Bank immediately prior
<PAGE> 21
to such merger or consolidation continue to constitute a majority of the Board
of Directors of the surviving bank (or, in the case of an acquisition involving
a holding company, constitute a majority of the Board of Directors of the
holding company) for a period of not less than twelve (12) months following the
closing of such transaction, or (ii) when any person or entity or group of
persons or entities (other than any trustee or other fiduciary holding
securities under an employee benefit plan of the Bank) either related or acting
in concert becomes the "beneficial owner" (as defined in Rule 13d-3 under the
Securities Exchange Act of 1934, as amended) of securities of the Bank
representing more than thirty percent (30%) of the total number of votes that
may be cast for the election of directors of the Bank, other than a person who
was already a 30% beneficial owner as of the effective date of this Plan.
2
<PAGE> 22
SCHEDULE B
PARTICIPANTS: APPLICABLE BENEFIT AMOUNT
Merrill W. Sherman $80,000
<PAGE> 23
SCHEDULE C
PARTICIPANTS: APPLICABLE BENEFIT AMOUNT
Albert R. Rietheimer $43,400
Donald C. McQueen $43,400
<PAGE> 24
SCHEDULE D
Actuarial Assumptions:
Mortality: Blended GAM-1983
Interest: 30-year treasury rate for the month of October of the calendar
year prior to the calendar year in which the calculation is
being made
<PAGE> 25
EXHIBIT A
BANK RHODE ISLAND
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
TRUST AGREEMENT
<PAGE> 26
TABLE OF CONTENTS
ARTICLE PAGE
- - ------- ----
ARTICLE I
Establishment of Trust ............................................2
ARTICLE II
Payments to Plan Participants and Their
Surviving Spouses..................................................3
ARTICLE III
Trustee Responsibility Regarding Payments to
Trust Beneficiary When Bank Is Insolvent...........................4
ARTICLE IV
Duties and Powers of the Trustee...................................6
ARTICLE V
Disposition of Income..............................................8
ARTICLE VI
Limitation of the Trustee's Liability..............................9
ARTICLE VII
Expenses and Compensation..........................................10
ARTICLE VIII
Substitution and Succession of the Trustee.........................11
ARTICLE IX
Accounting Provisions..............................................12
ARTICLE X
Amendment and Termination..........................................13
ARTICLE XI
Successor Bank.....................................................14
ARTICLE XII
Construction and Payment...........................................15
ARTICLE XIII
Miscellaneous......................................................16
<PAGE> 27
TRUST AGREEMENT
This Agreement is made by and between Bank Rhode Island (hereinafter
the "Bank"), and [ _______________________ ] as Trustee(s) (hereinafter referred
to as the "Trustee").
W I T N E S S E T H:
WHEREAS, the Bank has established the Bank Rhode Island Supplemental
Executive Retirement Plan (the "Plan") for certain of its employees; and
WHEREAS, the Bank wishes to establish a trust ("Trust") and to
contribute to the Trust assets that shall be held therein, subject to the claims
of the Bank's creditors in the event of the Bank's insolvency, as herein
defined, for the benefit of Plan Participants (as defined in Section 2.10 of the
Plan) and their surviving spouses in such manner and at such times as specified
in the Plan; and
WHEREAS, it is the intention of the parties that this Trust shall
constitute an unfunded arrangement and shall not affect the status of the Plan
as an unfunded Plan maintained for the purpose of providing deferred
compensation for a select group of management or highly-compensated employees
for purposes of Title I of the Employee Retirement Income Security Act of 1974
("ERISA"); and
WHEREAS, the Trustee has consented to act as trustee of the trust fund
and to hold and distribute the assets transferred to the trustee and accumulated
in respect of the Plan on the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the foregoing premises and the
mutual covenants hereinafter set forth, the Bank and the Trustee hereby agree as
set forth below.
<PAGE> 28
ARTICLE I
ESTABLISHMENT OF TRUST
1.1 The Trust Fund shall consist of such sums of money or other
property, in a form acceptable to the Trustee, as shall from time to time be
paid or delivered to the Trustee pursuant to the Plan which, together with all
earnings, profits, increments and accruals thereon, without distinction between
principal and income, shall constitute the Trust Fund hereby created and
established. The Trust Fund shall be held, administered and disposed of by the
Trustee as provided in this Trust Agreement. The Trust hereby established shall
be irrevocable.
1.2 The Trust is intended to be a grantor trust, of which the Bank is
the grantor, within the meaning of subpart E, part I, subchapter J, chapter 1,
subtitle A of the Internal Revenue Code of 1986, as amended, and shall be
construed accordingly.
1.3 The Trust Fund shall be held separate and apart from other funds of
the Bank and shall be used exclusively for the uses and purposes of Plan
Participants and general creditors as herein set forth. Plan Participants and
their surviving spouses shall have no preferred claim on, or any beneficial
ownership interest in, any assets of the Trust. Any rights created under the
Plan and this Trust Agreement shall be mere unsecured contractual rights of Plan
Participants and their surviving spouses against the Bank. Any assets held by
the Trust will be subject to the claims of the Bank's general creditors under
federal and state law in the event of insolvency, as defined in Article III
herein.
1.4 Except as provided below or in Article III hereof, the Bank shall
have no right or power to direct the Trustee to return to the Bank or to divert
to others any of the Trust assets before all payment of benefits have been made
to Plan Participants and their surviving spouses pursuant to the terms of the
Plan.
2
<PAGE> 29
ARTICLE II
PAYMENTS TO PLAN PARTICIPANTS AND THEIR SURVIVING SPOUSES
2.1 The Bank shall designate an Administrator ("Administrator") in
accordance with the Plan and the Administrator shall deliver to the Trustee, at
least annually, a schedule ("the Payment Schedule") that indicates the amounts
payable in respect of each Plan Participant who has ceased to be an employee of
the Bank and each surviving spouse, that provides a formula or other
instructions acceptable to the Trustee for determining the amounts so payable,
the form in which such amount is to be paid (as provided for or available under
the Plan), and the time of commencement for payment of such amounts. Except as
otherwise provided herein, the Trustee shall make payments to the Plan
Participants and their surviving spouses in accordance with such Payment
Schedule. The Trustee shall make provisions for the reporting and withholding of
any federal, state or local taxes that may be required to be withheld with
respect to the payment of benefits pursuant to the terms of the Plan and shall
pay amounts withheld to the appropriate taxing authorities or determine that
such amounts have been reported, withheld and paid by the Bank. The
Administrator shall provide the Trustee with all information necessary to make
such tax withholding provisions and the Trustee shall be entitled to rely on
such information. The Bank shall be responsible for the remittance to the
appropriate tax authorities of its share of any applicable employment taxes, as
distinguished from those employment taxes required to be withheld from the
benefits due Plan Participants and their surviving spouses.
2.2 The entitlement of a Plan Participant or his or her surviving
spouses to benefits under the Plan shall be determined by the Bank and/or the
Administrator as provided for in the Plan and any claim for such benefits shall
be considered and reviewed by the Administrator under the procedures set out in
the Plan.
2.3 The Bank may make payment of benefits directly to Plan Participants
or their surviving spouses as they become due under the terms of the Plan. The
Bank shall notify the Trustee of its decision to make payment of benefits
directly prior to the time amounts are payable to participants or their
surviving spouses. In addition, if the principal of the Trust, and any earnings
thereon, are not sufficient to make payments of benefits in accordance with the
terms of the Plan, the Bank shall make the balance of each such payment as it
falls due. Trustee shall notify the Bank where principal and earnings are not
sufficient to cover payments required by the Payment Schedule under paragraph
2.1 hereof.
3
<PAGE> 30
ARTICLE III
TRUSTEE RESPONSIBILITY REGARDING PAYMENTS TO TRUST BENEFICIARY
WHEN BANK IS INSOLVENT
3.1 The Trustee shall cease payment of benefits to Plan Participants
and their surviving spouses if the Bank is Insolvent. The Bank shall be
considered "Insolvent" for purposes of this Trust Agreement if (i) the Bank is
unable to pay its debts as they become due, or (ii) the Bank is subject to a
pending proceeding as a debtor under any applicable federal or state
receivership law.
3.2 At all times during the continuance of this Trust as provided in
paragraph 1.3 hereof, the principal and income of the Trust shall be subject to
claims of general creditors of the Bank under federal and state law as set forth
below:
3.2.1 The Board of Directors and the Chief Executive Officer of the
Bank shall have the duty to inform the Trustee in writing of the Bank's
Insolvency. If a person claiming to be a creditor of the Bank alleges in writing
to the Trustee that the Bank has become Insolvent, the Trustee shall determine
whether the Bank is Insolvent and, pending such determination, the Trustee shall
discontinue payment of benefits to Plan Participants or their surviving spouses.
3.2.2 Unless the Trustee has actual knowledge of the Bank's Insolvency,
or has received notice from the Bank or a person claiming to be a creditor
alleging that the Bank is Insolvent, the Trustee shall have no duty to inquire
whether the Bank is Insolvent. The Trustee may in all events rely on such
evidence concerning the Bank's solvency as may be furnished to the Trustee by
the Bank and that provides the Trustee with a reasonable basis for making a
determination concerning the Bank's solvency.
3.2.3 If at any time the Trustee has determined that the Bank is
Insolvent, the Trustee shall discontinue payments to Plan Participants or their
surviving spouses and shall hold the assets of the Trust for the benefit of the
Bank's general creditors. While so holding such assets, the Trustee shall make
payments to such creditors if the Bank shall so direct or, if the Bank is
subject to a pending proceeding as a debtor under the United States Bankruptcy
code or state receivership law, as a court of competent jurisdiction shall
direct. Nothing in this Trust Agreement shall in any way diminish any rights of
Plan Participants or their surviving spouses to pursue their rights as general
creditors of the Bank with respect to benefits due under the Plan or otherwise.
3.2.4 The Trustee shall resume the payment of benefits to Plan
Participants or their surviving spouses in accordance with Article II of this
Trust Agreement only after the Trustee has determined that the Bank is not
Insolvent (or is no longer Insolvent).
3.3 If the Trustee discontinues the payment of benefits from the Trust
pursuant to paragraph 3.2 hereof and subsequently resumes such payments, the
first payment following such discontinuance shall include the aggregate amount
of all payments due
4
<PAGE> 31
to Plan Participants or their surviving spouses under the terms of the Plan for
the period of such discontinuance, less the aggregate amount of any payments
made to Plan Participants or their surviving spouses by the Bank in lieu of the
payments provided for hereunder during any such period of discontinuance
provided that there are sufficient assets.
5
<PAGE> 32
ARTICLE IV
DUTIES AND POWERS OF THE TRUSTEE
4.1 The Trustee shall act with the care, skill, prudence and diligence
under the circumstances then prevailing that a prudent person acting in like
capacity and familiar with such matters would use in the conduct of an
enterprise of a like character and with like aims, provided, however, that the
Trustee shall incur no liability to any person for any action taken pursuant to
a direction, request or approval given by the Bank or the Administrator which is
contemplated by, and in conformity with, the terms of the Plan or this Trust and
is given in writing by the Bank or the Administrator. In the event of a dispute
between the Bank and a party, the Trustee may apply to a court of competent
jurisdiction to resolve the dispute.
4.2 The Trustee shall invest and reinvest the Trust Fund, without
distinction between principal and income, as directed from time to time by the
Bank. In addition to the powers and authority granted to the Trustee pursuant to
state law, the provisions of ERISA (to the extent applicable), and the common
law, the Trustee shall have the power and authority:
4.2.1 To purchase or subscribe for and invest in any securities, but
not including any securities of the Bank or any affiliate of the Bank, or any
securities of the Trustee or any affiliate of the Trustee if the Trustee is a
corporation, and to retain any such securities in the Trust Fund. Without in any
way intending to limit the generality of the foregoing, the said term
"securities" shall be deemed to include common and preferred stocks, mortgages,
debentures, bonds, notes or other evidences of indebtedness, and other forms of
securities. All rights associated with assets of the Trust shall be exercised by
the Trustee or the person designated by the Trustee. The Trustee may invest and
reinvest all or a portion of the Trust Fund in shares of any open-ended
investment fund or Bank.
4.2.2 To deal with all or any part of the Trust Fund; to acquire any
property by purchase, subscription, lease, or other means; to sell for cash or
on credit, convey, lease for long or short terms, or convert, redeem, or
exchange all or any part of the Trust Fund; to hold part of the Trust Fund
uninvested or in savings accounts or certificates of deposit including those
offered by the Trustee if the Trustee is a bank, or in money market funds
managed by the Trustee or an affiliate of the Trustee.
4.2.3 To vote, or give proxies to vote, any stock or other security,
and to waive notice of meetings, to oppose, participate in, and consent to the
reorganization, merger, consolidation, or readjustment of the finances of any
enterprise, to pay assessments and expenses in connection therewith and to
deposit securities under deposit agreements.
6
<PAGE> 33
4.2.4 To register any investment held in the Trust in its own name or
in the name of its nominee, or to hold any investment in bearer form, but the
books and records of the Trustee shall at all times show that all such
investments are part of the Trust.
4.2.5 To make, execute, acknowledge and deliver any and all documents,
deeds and conveyance, and any and all other instruments necessary or appropriate
to carry out the powers herein granted.
4.2.6 To enforce by suit or otherwise, or to waive, its rights on
behalf of the Trust Fund, and to defend claims asserted against it or the Trust
Fund; to compromise, adjust and settle any and all claims against or in favor of
it or the Trust Fund.
4.2.7 To renew, extend, or foreclose any mortgage or other security; to
bid on property in foreclosure; to take deeds in lieu of foreclosure, with or
without paying a consideration therefor.
4.2.8 To employ agents, investment advisers, consultants and actuaries
necessary for the operation of the Trust and to request the advice and
assistance of counsel, including counsel for the Bank, or other counsel
designated by the Administrator or by the Trustee.
4.2.9 In the event that the Bank authorizes the transfer of all or a
portion of the assets of the Trust to an insurance company, to enter into and
execute on behalf of the Trust all such documents and instruments necessary or
appropriate to carry out such transfer.
4.2.10 To do all such other acts, execute all such other instruments
and take such other proceedings and exercise all such other privileges and
rights with relation to any asset constituting a part of the Trust as are
necessary to carry out the purpose of the Trust, and no person dealing with the
Trustee shall be bound to see to the application of any money or property paid
or delivered to the Trustee or to inquire into the validity or propriety of any
such transaction.
4.3 No persons dealing with the Trustee shall be under any obligation
to see to the proper application of any money paid or property delivered to the
Trustee or to inquire into the Trustee's authority as to any transaction.
4.4 The Trustee may make any distribution required hereunder by mailing
its check for the specified amount, or delivering the specified property, to the
person to whom such distribution or payment is to be made, at such address as
may have been last furnished to the Trustee, or if no such address shall have
been furnished, to such person in care of the Bank, or to the Administrator or
(if so directed by the Administrator) by crediting the account of such person or
by transferring the funds to such person's account by bank or wire transfer.
7
<PAGE> 34
ARTICLE V
DISPOSITION OF INCOME
During the term of this Trust, all income received, net of expenses and
taxes, shall be accumulated and reinvested.
8
<PAGE> 35
ARTICLE VI
LIMITATION OF THE TRUSTEE'S LIABILITY
6.1 The Trustee shall be accountable only for funds actually received
by it hereunder and shall have no duty or liability to determine that the amount
of the funds received by it comply with the provisions of the Plan. If the Bank
has established a contract with an insurance company to carry out the purposes
of the Plan, the Trustee shall not be liable for the acts or omissions of such
insurance company, or be under an obligation to invest or otherwise manage the
portion of the Trust Fund which is subject to the management of such insurance
company.
6.2 Whenever the Trustee is required or authorized to take any action
hereunder pursuant to any written direction or notice of the Administrator or
the Bank, the Trustee, acting in accordance with such direction or notice, shall
not be responsible for the administration of such Plan or Trust, for the
correctness of any payments or disbursements from the Trust, or for any other
action taken by the Trustee in accordance with such written direction or notice.
Such direction or notice shall be sufficient protection to the Trustee if
contained in a writing signed by the Administrator or such other person
authorized to execute documents on behalf of the Administrator, in the case of
direction or notice required to be given by the Administrator; or by any officer
of the Bank, in the case of direction or notice required to be given by the
Bank, and the Trustee has actual knowledge that the payment or disbursement is
improper or incorrect.
6.3 The Bank shall indemnify and hold harmless the Trustee from and
against any losses, costs, damages or expenses, including reasonable attorneys'
fees, which the Trustee may incur or pay out by reason of (i) the Trustee's
acting in accordance with the directions of the Bank or the Administrator or
failing to act in the absence of such directions; (ii) the Trustee's exercise
and performance of its powers and duties hereunder, unless the same are
determined to be due to the Trustee's negligence, bad faith or willful
misconduct; (iii) any (alleged or actual) action or inaction on the part of the
Bank or the Administrator, unless such losses, costs, damages, or expenses arise
out of the Trustee's negligence, bad faith, or willful misconduct; or (iv) the
failure of the Plan to be exempt from the requirements of Parts 2, 3 and 4 of
Title I of the Employee Retirement Income Security Act of 1974, as amended. In
addition, in the event that the Trustee undertakes or defends any litigation
(including but not limited to any audit, proceeding or any other administrative
action of any state, local or federal taxing authority) arising in connection
with the Trust Fund, the Bank agrees to indemnify the Trustee against the
Trustee's reasonable costs, expenses, and liabilities (including, without
limitation, reasonable attorneys' fees and expenses) relating thereto and to be
primarily liable for such payments. If the Bank does not pay such costs,
expenses, and liabilities described in this paragraph in a reasonably timely
manner, the Trustee may obtain payment from the Trust Fund.
9
<PAGE> 36
ARTICLE VII
EXPENSES AND COMPENSATION
The Trustee, other than a trustee who is also an employee or officer of
the Bank, shall be paid such reasonable compensation as shall from time to time
be agreed upon by the Trustee and the Bank. All administrative expenses,
charges, taxes and assessments of the Trust Fund and Trustee's fees shall be the
obligation of the Bank.
Any such fees may be paid from the Trust Fund, but the Bank shall
reimburse the Trust Fund for all such payments within seven (7) business days.
10
<PAGE> 37
ARTICLE VIII
SUBSTITUTION AND SUCCESSION OF THE TRUSTEE
8.1 The Trustee may resign at any time by giving written notice to the
Administrator. Such resignation shall become effective ten (10) days thereafter
or upon the appointment of a successor Trustee, whichever occurs first. A
successor Trustee must be a third party financial institution with net worth of
at least $100 million, unless all Plan Participants entitled to benefits and all
surviving spouses receiving benefits pursuant to the Plan consent in writing to
the appointment of the successor Trustee. In the event a successor Trustee is
not appointed within ten (10) days, the Trustee may turn over the assets of the
Trust to the Administrator as successor Trustee. Except as provided below, the
Administrator may remove the Trustee by giving ten (10) days written notice to
the Trustee of such intent to remove, and by then giving written notice of the
appointment of a successor Trustee. The removal shall become effective upon
acknowledgment of the receipt of the assets of the Trust by the successor
Trustee. Following the occurrence of a Change in Control, as defined in the
Plan, the Trustee may not be removed without the written consent of all Plan
Participants entitled to benefits (other than a participant who is also a
trustee) and all surviving spouses receiving benefits pursuant to the terms of
the Plan. Each successor Trustee under this Trust shall be appointed in writing
by the Administrator and shall accept the Trust in writing. Such successor
Trustee shall become vested with any estate, property, right, power and duty of
the predecessor Trustee hereunder with like effect, as if originally named
Trustee. No successor Trustee shall be liable for any act or failure of any
predecessor Trustee, and with the approval of the Administrator, a successor
Trustee may accept the account rendered and the property delivered to it by the
predecessor Trustee without in so doing incurring any liability or
responsibility with respect to acts of default, if any, of the predecessor
Trustee.
8.2 If the Trustee is a corporation, any corporation into which the
Trustee may merge or with which it may consolidate, or any corporation resulting
from any merger or consolidation to which the Trustee may be a party, shall be
the successor of the Trustee hereunder, without the execution or filing of any
additional instrument or the performance of any further act.
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<PAGE> 38
ARTICLE IX
ACCOUNTING PROVISIONS
9.1 The Trustee shall keep accurate and detailed records of all
investments, receipts, disbursements, and all other transactions required to be
made in the administration of the Trust Fund.
9.2 Within a reasonable time after the close of each fiscal year, or of
any termination of the duties of the Trustee hereunder, the Trustee shall
prepare and deliver to the Administrator an account of its acts and transactions
as Trustee during such fiscal year or during such period from the close of the
last fiscal year to the termination of the Trustee's duties, respectively,
including a statement of the then current value of the Trust Fund. Any such
account shall be deemed accepted and approved by the Administrator, and the
Trustee shall be relieved and discharged, as if such account had been settled
and allowed by a judgment or decree of a court of competent jurisdiction, unless
protested by written notice to the Trustee within thirty (30) days of receipt
thereof by the Administrator.
9.3 The Trustee or the Administrator shall have the right to apply at
any time to a court of competent jurisdiction for judicial settlement of any
account of the Trustee not previously settled as herein provided or for the
determination of any question of construction or for instructions. In any such
action or proceeding it shall be necessary to join as parties only the Trustee
and the Administrator (although the Trustee may also join such other parties as
it may deem appropriate), and any judgment or decree entered therein shall be
conclusive.
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<PAGE> 39
ARTICLE X
AMENDMENT AND TERMINATION
10.1. This Trust Agreement may be amended by a written instrument
executed by the Trustee and the Bank. Notwithstanding the foregoing, no such
amendment shall conflict with the terms of the Plan or shall make the Trust
revocable. Following a Change of Control, as defined in the Plan, any amendment
to this Trust Agreement shall not be effective unless or until each Plan
Participants, and each surviving spouse receiving benefits pursuant to the terms
of the Plan, has approved the amendment in writing.
10.2 The Trust shall not terminate until the date on which Plan
Participants and their surviving spouses are no longer entitled to benefits
pursuant to the terms of the Plan unless sooner revoked as hereinafter provided
in this paragraph. Upon the written approval of all Plan Participants and all
surviving spouses receiving benefits pursuant to the terms of the Plan, the Bank
may terminate this Trust prior to the time all benefit payments under the Plan
have been made. Upon termination of the Trust, any assets remaining in the Trust
shall be returned to the Bank.
13
<PAGE> 40
ARTICLE XI
SUCCESSOR BANK
Unless this Trust be sooner terminated, a successor to the business of
the Bank, by whatever form or manner resulting, which succeeds said Bank under
the Plan as therein provided shall, upon notice in writing from the
Administrator that all action required by the Plan to effect such succession has
been taken, also succeed to all the rights, powers and duties of such Bank
hereunder.
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<PAGE> 41
ARTICLE XII
CONSTRUCTION AND PAYMENT
12.1 The Trust shall be construed and administered according to the
laws of the jurisdiction in which the principal office of the Trustee is
located. In any question of interpretation or other matter of doubt, the Trustee
may rely upon the opinion of counsel for the Bank or Administrator or any other
attorney at law designated by the Bank with approval of the Trustee.
12.2. No person having any present or future interest in the Trust
shall have any right to assign, transfer, encumber, commute or anticipate his
payment under this Trust and such payment shall not in any way be subject to any
legal process or levy of execution upon, or attachment or garnishment proceeding
against, the same for the payment of any claim against any person having an
interest hereunder, nor shall such payment be subject to the jurisdiction of any
family court, bankruptcy court or insolvency proceedings.
15
<PAGE> 42
ARTICLE XIII
MISCELLANEOUS
13.1 The titles to the Articles in this Trust Agreement are included
for convenience of reference only and are not to be used in interpreting this
Trust Agreement.
13.2 Neither the gender nor the number (singular or plural) of any word
shall be construed to exclude another gender or number when a different gender
or number would be appropriate.
13.3 This Trust Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all of which
shall together constitute only one Trust Agreement.
13.4 Communications to the Trustee shall be sent to the Trustee's
principal office or to such other address as the Trustee may specify in writing.
No communication shall be binding upon the trustee until it is received by the
Trustee. Communications to the Administrator or the Bank shall be sent to the
Bank's principal office or to such other address as the Bank may specify in
writing.
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<PAGE> 43
IN WITNESS WHEREOF, the Bank and the Trustee have caused this
instrument to be executed this ____day of ________________, 1999.
BANK: Bank Rhode Island
By:
----------------------------------------
Signature of Officer
TRUSTEE: -------------------------------------------
STATE OF RHODE ISLAND
COUNTY OF PROVIDENCE
In Providence on the ___day of _________, 1999, before me personally
appeared ________________________________________, to me known and known by me
to be the_____________________________of and the person who executed the
foregoing instrument for and on behalf of Bank Rhode Island and he acknowledged
said instrument by him executed to be the free act and deed of Bank Rhode Island
and his own free and voluntary act and deed in his capacity as
__________________________of said Bank.
--------------------------------
Notary Public
STATE OF
-----------------------
COUNTY OF
----------------------
In _____________ on the ___day of _________, 1999, before me personally
appeared ________________________________________, to me known and known by me
to be the_____________________________of and the person who executed the
foregoing instrument for and on behalf of __________________ and he acknowledged
said instrument by him executed to be the free act and deed of _____________ and
his own free and voluntary act and deed in his capacity as
__________________________of said ______________.
--------------------------------
Notary Public
17
<PAGE> 1
EXHIBIT 10.8
BANK RHODE ISLAND
AMENDMENT NO. 1 TO
NONQUALIFIED DEFERRED COMPENSATION PLAN
WHEREAS, Bank Rhode Island (the "Company") desires to amend the
provisions of the Company's Nonqualified Deferred Compensation Plan (the "Plan")
to reflect a change in the rate of interest which is credited on a participant's
account balance under the Plan; and
WHEREAS, under Section 7.1 of the Plan, the Board of Directors of the
Company may amend the Plan, provided that such amendment shall not reduce or
eliminate any balance on a Participant's Deferred Compensation Account accrued
through the date of such amendment; and
WHEREAS, the Board of Directors of the Company has approved amending
the rate of interest which is credited on a participant's account balance under
the Plan; and
NOW, THEREFORE, the Plan is amended as follows:
1. Section 4.2 of the Plan is amended in its entirety to read as
follows:
"4.2. INTEREST ON DEFERRAL ACCOUNT. As of each Valuation Date, the Plan
Administrator shall adjust amounts in a Participant's Deferred
Compensation Account to reflect earnings attributable to the
Participant's Deferred Compensation Account. Earnings on amounts in a
Participant's Deferred Compensation Account shall accrue commencing on
the date the Deferred Compensation Account first has a positive balance
and shall continue to accrue until the entire balance in the
Participant's Deferred Compensation Account has been distributed. Prior
to January 1, 1999 the earnings credited to a Participant's Deferred
Compensation Account for any Plan Year shall be credited at a rate of
interest equal to the yield quoted by Moody's Investors Service as of
the last business day of the preceding calendar year for the BaaI 30
year corporate bond index. Effective January 1, 1999 Participant's
account balances shall be credited with interest at the greater of (a)
the interest rate of 30 year Baa 1 rated corporate bond index and (b)
the Bank's projected rate of return on average earning assets as
reflected in the Bank's budget for such year."
2. All other provisions of the Plan shall remain in full force and
effect and are hereby ratified, approved and confirmed.
<PAGE> 2
IN WITNESS WHEREOF, the Company has caused this Amendment to the
Nonqualified Deferred Compensation Plan to be executed by its duly authorized
officer as of the 1st day of January 1999.
BANK RHODE ISLAND
By: /s/ Merrill W. Sherman
-----------------------
Merrill W. Sherman,
President
Attest:
/s/ Margaret D. Farrell
- - --------------------------
Secretary
2
<PAGE> 3
EXHIBIT 10.8
BANK RHODE ISLAND
NONQUALIFIED DEFERRED COMPENSATION PLAN
SECTION 1
DEFINITIONS
1.1. "CODE" means the Internal Revenue Code of 1986, as amended from time to.
time. Any reference to a section of the Code includes any comparable section or
sections of any future legislation that amends, supplements or supersedes that
section.
1.2. "COMPANY" means Bank Rhode Island, a Rhode Island banking corporation.
1.3. "COMPENSATION" means total taxable salary, bonuses and commissions paid to
a Participant by the Employer (determined without regard to any amounts in the
Participant's Deferred Compensation Account).
1.4. "DEFERRED COMPENSATION ACCOUNT" means the bookkeeping account maintained
under the Plan in the Participant's name to reflect amounts deferred under the
Plan pursuant to Section 3 and any Company Contributions made on behalf of the
Participant pursuant to Section 3.
1.5. "DEFERRAL ELECTION" means a written notice filed by the Participant with
the Company specifying the Compensation to be deferred by the Participant.
1.6. "DISTRIBUTION DATE" means the date a Participant terminates employment with
the Company for whatever reason, unless such termination of employment is for
Good Cause.
1.7. "EFFECTIVE DATE" means January 1, 1997.
1.8. "EMPLOYEE" means an employee of the Company who meets the eligibility
criteria set forth in Subsection 3.1 of the Plan and who is a member of a select
group of management or highly compensated employees as defined under ERISA or
the regulations thereunder.
1.9. "ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time. Any reference to a section of ERISA includes any
comparable section or sections of any future legislation that amends,
supplements or supersedes that section.
<PAGE> 4
1.10. "EXCESS CONTRIBUTIONS" means contributions determined to be excess
contributions or excess deferrals (as such terms are defined in the regulations
under Section 401(k) of the Code) for the Plan Year under a plan maintained by
an Company that is qualified under Sections 401(a) and 401(k) of the Code.
1.11. "PARTICIPANT" means an Employee who meets the eligibility criteria set
forth in Subsection 3.1 and who has made a Deferral Election in accordance with
the terms of the Plan.
1.12. "PLAN" means the provisions of the Plan, as set forth herein.
1.13. "PLAN YEAR" means the calendar year.
1.14. "UNFORESEEABLE FINANCIAL EMERGENCY" means a severe financial hardship of
the Participant resulting from:
(a) expenses incurred or necessary for medical care, described in Code
Section 213(d) of the Participant, his or her spouse, children and other
dependents,
(b) the purchase (excluding mortgage payments) of the principal
residence for the Participant,
(c) payment of tuition and related educational expenses for the next
twelve (12) months of post-secondary education for the Participant, his or her
spouse, children or other dependents,
(d) the need to prevent eviction of the Participant from or a
foreclosure on the mortgage of, the Participant's principal residence, or
(e) such other similar extraordinary and unforeseeable circumstances
resulting from events beyond the control of the Participant.
Whether a Participant has an Unforeseeable Financial Emergency shall be
determined in the sole discretion of the Plan Administrator.
1.15. "VALUATION DATE" means the last day of any calendar month.
1.16 "401(k) PLAN" means the Bank RI 401(k) Plan, as amended. -----------
SECTION 2
PURPOSE AND ADMINISTRATION
2.1. PURPOSE. The Company has established the Plan primarily for the purpose of
providing deferred compensation to a select group of management or
2
<PAGE> 5
highly compensated employees of the Company. The Plan is intended to be a
top-hat plan described in Section 201(2) of ERISA. The Company intends that the
Plan (and any Trust under the Plan (as described in Subsection 6.1)) shall be
treated as unfunded for tax purposes and for purposes of Title I of ERISA. The
Company's obligations hereunder, if any, to a Participant (or to a Participant's
beneficiary) shall be unsecured and shall be a mere promise by the Company to
make payments hereunder in the future. A Participant (or the Participant's
beneficiary) shall be treated as a general unsecured creditor of the Company.
2.2. ADMINISTRATION. The Plan shall be administered by the Plan Administrator.
The Plan Administrator shall serve at the pleasure of the Company's Board of
Directors and may be removed by such Board, with or without cause. The Plan
Administrator may resign upon prior written notice to the Company's Board of
Directors.
The Plan Administrator shall have the powers, rights, and duties set forth in
the Plan and shall have the power, in the Plan Administrator's sole and absolute
discretion, to determine all questions arising under the Plan, including the
determination of the rights of all persons with respect to the Plan and to
interpret the provisions of the Plan and remedy any ambiguities,
inconsistencies, or omissions. Any decisions of the Plan Administrator shall be
final and binding on all persons with respect to the Plan and the benefits
provided under the Plan. The Plan Administrator may delegate the Plan
Administrator's authority under the Plan to one or more officers or directors of
the Company; provided, however, that (a) such delegation must be in writing, and
(b) the officers or directors of the Company to whom the Plan Administrator is
delegating authority must accept such delegation in writing.
If a Participant is serving as the Plan Administrator (either individually or as
a member of a committee), the Participant may not decide or determine any matter
or question concerning such Participant's benefits under the Plan that the
Participant would not have the right to decide or determine if the Participant
were not serving as the Plan Administrator.
SECTION 3
ELIGIBILITY PARTICIPATION. DEFERRAL ELECTIONS.
AND EMPLOYER CONTRIBUTIONS
3.1. ELIGIBILITY AND PARTICIPATION. Subject to the conditions and limitations of
the Plan, only those Employees of the Company who are designated as eligible to
participate in the Plan by the Board of Directors of the Company shall be
eligible to participate in the Plan:
Any individuals specified above by the Company may be changed by action of the
Company. An Employee shall become a Participant in the Plan upon the
3
<PAGE> 6
execution and filing with the Plan Administrator of a written election to defer
a portion of the Employee's Compensation. A Participant shall remain a
Participant until the entire balance of the Participant's Deferred Compensation
Account has been distributed.
3.2. RULES FOR DEFERRAL ELECTIONS. Any person identified in Subsection 3.1 may
make a Deferral Election to defer receipt of Compensation he or she otherwise
would be entitled to receive for a Plan Year in accordance with the rules set
forth below:
(a) All Deferral Elections must be made in writing on the form
prescribed by the Plan Administrator and will be effective
only when filed with the Plan Administrator no later than the
date specified by the Plan Administrator. In no event may a
Deferral Election be made later than the last day of the Plan
Year preceding the Plan Year in which the amount being
deferred would otherwise be made available to the Participant.
However, in the case of a Participant's initial year of
employment or association with the Company, the Participant
may make a Deferral Election with respect to Compensation for
services to be performed subsequent to such Deferral Election,
provided such election is made no later than 30 days after the
date the Participant first becomes eligible for the Plan.
Furthermore, in the case of a short initial Plan Year, each
Participant may make a Deferral Election with respect to
Compensation for services to be performed subsequent to such
Deferral Election, provided such election is made no later
than 30 days after the Effective Date.
(b) With respect to Plan Years following the Participant's initial
Plan Year of participation in the Plan, failure to complete a
subsequent Deferral Election shall constitute a waiver of the
Participant's right to elect a different amount of
Compensation to be deferred for each such Plan Year and shall
be considered an affirmation and ratification to continue the
Participant's existing Deferral Election. However, a
Participant may, prior to the beginning of any Plan Year,
elect to increase or decrease the amount of Compensation to be
deferred for the next following Plan Year by filing another
Deferral Election with the Plan Administrator in accordance
with paragraph (a) above.
(c) A Deferral Election in effect for a Plan Year may not be
modified during the Plan Year, except that a Participant may
terminate the Participant's Deferral Election during a Plan
Year in the event of an Unforeseeable Financial Emergency.
3.3. AMOUNTS DEFERRED:
4
<PAGE> 7
(a) DEFERRAL OF A PERCENTAGE OF COMPENSATION. Commencing on the
Effective Date, a Participant may elect to defer (a) up to 50%
of the Participant's Compensation (other than bonus) for a
Plan Year and (b) up to 100% of the Participant's bonus for a
Plan Year. The amount of Compensation deferred by a
Participant shall be credited to the Participant's Deferred
Compensation Account as of the Valuation Date coincident with
or immediately following the date such Compensation would, but
for the Participant's Deferral Election, be payable to the
Participant.
(b) DEFERRAL OF EXCESS CONTRIBUTIONS. Commencing on the Effective
Date, a Participant may elect to defer an amount equal to the
Excess Contributions (as defined in Section 1) payable to the
Participant during a Plan Year. Such amount shall be credited
to the Participant's Deferred Compensation Account as of the
Valuation Date coincident with or immediately following the
date such amount would, but for the Participant's Deferral
Election, be payable to the Participant.
3.4. EMPLOYER CONTRIBUTIONS. The Company shall credit to the Deferred
Compensation Account of any Participant the amount of the matching contribution
the Company would have made for the Plan Year under the Company's 401(K) Plan
with respect to any Excess Contributions (as defined in Section 1). Any Company
Contribution for a Plan Year will be credited to a Participant's Deferred
Compensation Account as of the Valuation Date specified by the Company.
SECTION 4
DEFERRED COMPENSATION ACCOUNTS
4.1. DEFERRED COMPENSATION ACCOUNTS. All amounts deferred pursuant to one or
more Deferral Elections under the Plan and any Company Contributions shall be
credited to a Participant's Deferred Compensation Account and shall be adjusted
under Subsection 4.2.
4.2. INTEREST ON DEFERRAL ACCOUNT. As of each Valuation Date, the Plan
Administrator shall adjust amounts in a Participant's Deferred Compensation
Account to reflect earnings attributable to the Participant's Deferred
Compensation Account. Earnings on amounts in a Participant's Deferred
Compensation Account shall accrue commencing on the date the Deferred
Compensation Account first has a positive balance and shall continue to accrue
until the entire balance in the Participant's Deferred Compensation Account has
been distributed. The earnings credited to a Participant's Deferred Compensation
Account for any Plan Year shall be credited at a rate of interest
5
<PAGE> 8
equal to the yield quoted by Moody's Investors Service as of the last business
day of the preceding calendar year for the BaaI 30 year corporate bond index.
4.3. VESTING. A Participant shall be fully vested in the amounts in the
Participant's Deferred Compensation Account attributable to both the
Participant's Deferral Elections and the Company's Contributions under the Plan.
Notwithstanding the vesting set forth above, the balance in a
Participant's Deferred Compensation Account attributable to Company
Contributions will be forfeited (and neither the Participant nor the
Participant's beneficiaries will have any rights thereto) if the Participant's
employment with the Company is terminated for Good Cause. "Good Cause" means the
Participant's fraud, dishonesty, or willful violation of any law that is
committed in connection with the Participant's employment by the Company.
Whether a Participant has been terminated for Good Cause shall be determined by
the Plan Administrator.
SECTION 5
PAYMENT OF BENEFITS
5.1. TIME AND METHOD OF PAYMENT. Payment of the vested portion of a
Participant's Deferred Compensation Account shall be made as soon as practicable
following the Valuation Date coincident with or next following the Participant's
Distribution Date; Payment of the vested portion of a Participant's Deferred
Compensation Account shall be made in a single, lump sum payment.
5.2. PAYMENT UPON DISABILITY. In the event a Participant becomes disabled (as
defined below) while the Participant is employed by the Company, payment of the
Participant's Deferred Compensation Account shall be made as soon as practicable
after the Valuation Date coincident with or next following the date on which the
Plan Administrator determines that the Participant is disabled. For purposes of
this Subsection 5.2, a Participant shall be considered "Disabled" if the
Participant is unable to engage in any substantially gainful activity by reason
of any medically determined physical or mental impairment that can be expected
to result in death or that has lasted or can be expected to last for a
continuous period of not less than twelve months. Whether a Participant is
disabled for purposes of the Plan shall be determined by the Plan Administrator,
and in making such determination, the Plan Administrator may rely on the opinion
of a physician (or physicians) selected by the Plan Administrator for such
purpose.
5.3. PAYMENT UPON DEATH OF A PARTICIPANT. A Participant's Deferred Compensation
Account shall be paid to the Participant's beneficiary (designated in accordance
with Subsection 5.4) in a single lump sum as soon as practicable following the
Valuation Date coincident with or next following the Participant's death.
6
<PAGE> 9
5.4. BENEFICIARY. If a Participant is married on the date of the Participant's
death, the Participant's beneficiary shall be the Participant's spouse, unless
the Participant names a beneficiary or beneficiaries (other than the
Participant's spouse) to receive the balance of the Participant's Deferred
Compensation Account in the event of the Participant's death prior to the
payment of the Participant's Deferred Compensation Account. To be effective, any
beneficiary designation must be filed in writing with the Plan Administrator in
accordance with rules and procedures adopted by the Plan Administrator for that
purpose. A Participant may revoke an existing beneficiary designation by filing
another written beneficiary designation with the Plan Administrator. The latest
beneficiary designation received by the Plan Administrator shall be controlling.
If no beneficiary is named by a Participant, or if the Participant survives all
of the Participant's named beneficiaries and does not designate another
beneficiary, the Participant's Deferred Compensation Account shall be paid in
the following order of precedence:
(a) The Participant's spouse;
(b) The Participant's children (including adopted children) per
stirpes; or
(c) The Participant's estate.
5.5. UNFORESEEABLE FINANCIAL EMERGENCY. If the Plan Administrator determines
that a Participant has incurred an Unforeseeable Financial Emergency, the
Participant may receive in cash the portion of the balance of the Participant's
Deferred Compensation Account needed to satisfy the Unforeseeable Financial
Emergency, but only if the Unforeseeable Financial Emergency may not be relieved
(a) through reimbursement or compensation by insurance or otherwise or (b) by
liquidation of the Participant's assets to the extent the liquidation of such
assets would not itself cause severe financial hardship. A payment on account of
an Unforeseeable Financial Emergency shall not be in excess of the amount needed
to relieve such Unforeseeable Financial Emergency and shall be made as soon as
practicable following the date on which the Plan Administrator approves such
payment.
5.6. WITHHOLDING OF TAXES. In connection with the Plan, the Company shall
withhold any applicable Federal, state or local income tax and any employment
taxes, including Social Security taxes, at such time and in such amounts as is
necessary to comply with applicable laws and regulations.
7
<PAGE> 10
SECTION 6
MISCELLANEOUS
6.1. FUNDING. The Company may, but shall not be required to establish and
maintain one or more grantor trusts (individually, a "Trust") to hold assets to
be used for payment of benefits under the Plan. A Trust shall conform with the
terms of Internal Revenue Service Revenue Procedure 92-64 (or any subsequent
administrative ruling). The assets of the Trust with respect to benefits payable
to the Participants shall remain the assets of the Company subject to the claims
of its general creditors. Any payments by a Trust of benefits provided to a
Participant under the Plan shall be considered payment by the Company and shall
discharge the Company from any further liability under the Plan for such
payments.
6.2. RIGHTS. Establishment of the Plan shall not be construed to give any
Employee the right to be retained by the Company or to any benefits not
specifically provided by the Plan.
6.3. INTERESTS NOT TRANSFERABLE. Except as to withholding of any tax under the
laws of the United States or any state or locality and the provisions of
Subsection 6.7, no benefit payable at any time under the Plan shall be subject
in any manner to anticipation, alienation, sale, transfer, assignment, pledge,
or any other encumbrance of any kind or to any attachment, garnishment, or other
legal process of any kind. Any attempt by a person (including a Participant or a
Participant's beneficiary) to anticipate, alienate, sell, transfer, assign,
pledge, or otherwise encumber any benefits under the Plan, whether currently or
thereafter payable, shall be void. If any person shall attempt to, or shall
alienate, sell, transfer, assign, pledge or otherwise encumber such person's
benefits under the Plan, or if by any reason of such person' s bankruptcy or
other event happening at any time, such benefits would devolve upon any other
person or would not be enjoyed by the person entitled thereto under the Plan,
then the Plan Administrator, in the Plan Administrator's sole discretion, may
terminate the interest in any such benefits of the person otherwise entitled
thereto under the Plan and may hold or apply such benefits in such manner as the
Plan Administrator may deem proper.
6.4. UNCLAIMED AMOUNTS. Unclaimed amounts shall consist of the amounts in the
Deferred Compensation Account of a Participant that cannot be distributed
because of the Plan Administrator's inability, after a reasonable search, to
locate a Participant or the Participant's beneficiary, as applicable, within a
period of two years after the Distribution Date upon which the payment of
benefits became due. Unclaimed amounts shall be forfeited at the end of such
two-year period. These forfeitures will reduce the obligations of the Company,
if any, under the Plan. After an unclaimed amount has been forfeited, the
Participant or
8
<PAGE> 11
beneficiary, as applicable, shall have no further right to amounts in the
Participant's Deferred Compensation Account.
6.5. CONTROLLING LAW. The law of the state of incorporation of the Company shall
be controlling in all matters relating to the Plan to the extent not preempted
by Federal law.
6.6. ACTION BY THE COMPANY. Except as otherwise specifically provided herein,
any action required of or permitted to be taken by an Company under the Plan
shall be by resolution of its Board of Directors or by resolution of a duly
authorized committee of its Board of Directors or by action of a person or
persons authorized by resolution of such Board of Directors or such committee.
6.7. OFFSET FOR OBLIGATIONS TO COMPANY. If, at such time as a Participant or a
Participant's beneficiary becomes entitled to benefit payments hereunder, the
Participant has any debt, obligation or other liability representing an amount
owing to the Company or an affiliate of the Company, and if such debt,
obligation, or other liability is due and owing at the time benefit payments are
payable hereunder, the Company may offset the amount owing it or an affiliate
against the amount of benefits otherwise distributable hereunder.
6.8. CLAIMS PROCEDURES. Any person (hereinafter referred to as a "Claimant") who
believes that he or she is being denied a benefit to which he or she may be
entitled under the Plan may file a written request for such benefit with the
Plan Administrator. Such written request must set forth the Claimant's claim and
must be addressed to the Plan Administrator, at the Company's principal place of
business. Upon receipt of a claim, the Plan Administrator shall advise the
Claimant that a reply will be forthcoming within ninety days and shall deliver a
reply within ninety days. The Plan Administrator may, however, extend the reply
period for an additional ninety days for reasonable cause. If the claim is
denied in whole or in part, the Plan Administrator shall issue a written
determination, using language calculated to be understood by the Claimant,
setting forth:
(a) The specific reason or reasons for such denial;
(b) The specific reference to pertinent provisions of the Plan
upon which such denial is based;
(c) A description of any additional material or information
necessary for the Claimant to perfect the Claimant's claim and
an explanation why such material or such information is
necessary; and
(d) Appropriate information as to the steps to be taken if the
Claimant wishes to submit the claim for review, and the time
limits for requesting such a review.
9
<PAGE> 12
Within sixty days after the receipt by the Claimant of the written determination
described above, the Claimant may request in writing, that the Plan
Administrator review the Plan Administrator's determination. The request must be
addressed to the Plan Administrator, at the Company's principal place of
business. The Claimant or the Claimant's duly authorized representative may, but
need not, review the pertinent documents and submit issues and comments in
writing for consideration by the Plan Administrator. If the Claimant does not
request a review of the Plan Administrator's determination within such sixty day
period, the Claimant shall be barred and estopped from challenging the Plan
Administrator's determination. Within sixty days after the Plan Administrator's
receipt of a request for review, the Plan Administrator will review the
determination. After considering all materials presented by the Claimant, the
Plan Administrator will render a written determination, written in a manner
calculated to be understood by the Claimant, setting forth the specific reasons
for the decision and containing specific references to the pertinent provisions
of the Plan on which the decision is based. If special circumstances require
that the sixty day time period be extended, the Plan Administrator will so
notify the Claimant and will render the decision as soon as practicable, but no
later than one hundred twenty days after receipt of the request for review.
6.9. NOTICE. Any notice required or permitted to be given under the provisions
of the Plan shall be in writing, and shall be signed by the party giving or
making the same. If such notice, consent or demand is mailed to a party hereto,
it shall be sent by United States certified mail, postage prepaid, addressed to
such party's last known address as shown on the records of the Company. Notices
to the Plan Administrator should be sent in care of the Company at the Company's
principal place of business. The date of such mailing shall be deemed the date
of notice. Either party may change the address to which notice is to be sent by
giving notice of the change of address in the manner set forth above.
SECTION 7
AMENDMENT AND TERMINATION
7.1. The Company intends the plan to be permanent, but reserves the right at any
time to modify, amend or terminate the Plan; provided however, that except as
provided below, any amendment or termination of the Plan shall not reduce or
eliminate any balance in a Participant's Deferred Compensation Account accrued
through the date of such amendment or termination. Upon termination of the Plan,
the Company may provide that notwithstanding the Participant's Distribution
Date, all Deferred Compensation Account balances will be distributed on a date
selected by the Company.
10
<PAGE> 13
IN WITNESS WHEREOF, the Company has caused this Plan to be executed by
its duly authorized officers on this ___ day of December, 1996.
BANK RHODE ISLAND
By:
-------------------------------
Its:
------------------------------
11
<PAGE> 1
EXHIBIT 10.9
THIS WARRANT AND THE SHARES OF COMMON SHARES PURCHASABLE HEREUNDER HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY
STATE SECURITIES LAWS AND CANNOT BE OFFERED, SOLD OR TRANSFERRED IN THE ABSENCE
OF REGISTRATION OR THE AVAILABILITY OF AN EXEMPTION FROM REGISTRATION UNDER THE
ACT, APPLICABLE STATE SECURITIES LAWS AND REGULATIONS PROMULGATED THEREUNDER.
Void After March 22, 2006
WARRANT
TO PURCHASE COMMON SHARES OF
BANK RHODE ISLAND
Warrant No. 1
No. of Common Shares: 136,315
<PAGE> 2
<TABLE>
<CAPTION>
TABLE OF CONTENTS
PAGE
----
<S> <C> <C>
1. DEFINITIONS................................................................................. 1
2. EXERCISE OF WARRANT......................................................................... 4
2.1 Manner of Exercise.......................................................... 4
2.2 Common Shares Purchasable Upon Exercise of the Warrant...................... 4
2.3 Payment of Taxes............................................................ 4
2.4 No Fractional Shares........................................................ 4
2.5 Continued Validity.......................................................... 5
2.6 Conditional Exercise........................................................ 5
3. TRANSFER, DIVISION AND COMBINATION.......................................................... 5
3.1 Transfer.................................................................... 5
3.2 Division and Combination.................................................... 5
3.3 Expenses.................................................................... 5
3.4 Maintenance of Books........................................................ 6
4. ADJUSTMENTS................................................................................. 6
4.1 Stock Dividends, Subdivisions and Combination............................... 6
4.2 Certain Other Distributions................................................. 6
4.3 Issuance of Additional Common Shares........................................ 7
4.4 Issuance of Warrants or Other Rights........................................ 7
4.5 Issuance of Convertible Securities.......................................... 8
4.6 Superseding Adjustment...................................................... 8
4.7 Other Provisions Applicable to Adjustments under this Section............... 9
(a) Computation of Consideration........................................... 9
(b) When Adjustments to be Made............................................ 10
(c) Fractional Interests................................................... 10
(d) When Adjustment Not Required........................................... 10
(e) Escrow of Warrant Shares............................................... 10
4.8 Reorganization, Reclassification, Merger, Consolidation or
Disposition of Assets....................................................... 11
4.9 Other Action Affecting Common Shares........................................ 11
4.10 Certain Limitations......................................................... 12
5. NOTICES TO WARRANT HOLDERS.................................................................. 12
5.1 Notice of Adjustments....................................................... 12
5.2 Notice of Certain Corporate Action.......................................... 12
6. NO IMPAIRMENT............................................................................... 12
7. RESERVATION AND AUTHORIZATION OF COMMON SHARES;
REGISTRATION WITH OR APPROVAL OF ANY GOVERNMENTAL
AUTHORITY................................................................................... 12
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C> <C>
8. TAKING OF RECORD, SHARES AND WARRANT TRANSFER BOOKS......................................... 13
9. RESTRICTIONS OF TRANSFERABILITY............................................................. 13
9.1 Restrictive Legend.......................................................... 13
9.2 Proposed Transfers.......................................................... 14
9.3 Registration................................................................ 14
10. SUPPLYING INFORMATION....................................................................... 14
11. MANDATORY REDEMPTION OF WARRANT............................................................. 14
12. LOSS OR MUTILATION.......................................................................... 15
13. OFFICE OF THE BANK.......................................................................... 15
14. LIMITATION OF LIABILITY..................................................................... 15
15. EXPIRATION.................................................................................. 15
16. MISCELLANEOUS............................................................................... 15
16.1 Nonwaiver................................................................... 15
16.2 Notice Generally............................................................ 16
16.3 Remedies.................................................................... 17
16.4 Successors and Assigns...................................................... 17
16.5 Amendment................................................................... 17
16.6 Severability................................................................ 17
16.7 Headings.................................................................... 17
16.8 Governing Law............................................................... 17
</TABLE>
ii
<PAGE> 4
EXHIBIT 10.9
THIS WARRANT AND THE SHARES OF COMMON SHARES PURCHASABLE HEREUNDER HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY
STATE SECURITIES LAWS AND CANNOT BE OFFERED, SOLD OR TRANSFERRED IN THE ABSENCE
OF REGISTRATION OR THE AVAILABILITY OF AN EXEMPTION FROM REGISTRATION UNDER THE
ACT, APPLICABLE STATE SECURITIES LAWS AND REGULATIONS PROMULGATED THEREUNDER.
No. of Common Shares: 136,315 Warrant No. 1
March 22, 1996
WARRANT
TO PURCHASE COMMON SHARES OF
BANK RHODE ISLAND
THIS IS TO CERTIFY THAT FLEET FINANCIAL GROUP, INC. or registered
assigns, is entitled, at any time after the date hereof, to purchase from Bank
Rhode Island, a bank organized under the laws of the State of Rhode Island (the
"Bank"), One Hundred Thirty Six Thousand Three Hundred Fifteen (136,315) Common
Shares (as hereinafter defined and subject to adjustment as provided herein), at
a purchase price of ten dollars ($10.00) per share, all on the terms and
conditions and pursuant to the provisions hereinafter set forth.
1. DEFINITIONS
As used in this Warrant, the following terms have the respective
meanings set forth below:
"Additional Common Shares" means all Common Shares of any class issued
by the Bank after the date hereof, other than Warrant Shares.
"Affiliate" of a Person means a Person Controlled By, Controlling or
Under Common Control with such Person.
"Business Day" means any day that is not a Saturday or Sunday or a day
on which banks are generally closed for business in the State of Rhode Island.
A "Change of Control Event" shall have occurred if at any time the Bank
enters into a Definitive Agreement which would result, if completed, in a Change
of Control, in which the consideration is securities for which there is not a
publicly traded market.
"Change of Control" shall mean the acquisition by merger, sale of
assets or otherwise by a Person or Group Acting in Concert of voting securities
of the Bank having more than 40% of the votes which may be cast generally in the
election of directors of the Bank, other than (i) in connection with the
formation of a holding company for or other reorganization of the Bank in which
the shareholders of the Bank immediately prior to the reorganization remain in
control (by retaining their shares or by holding
<PAGE> 5
shares in the successor entity) of the Bank (directly or through ownership of a
holding company) or the successor entity immediately after such reorganization
or (2) the conversion of preferred stock issued in connection with the initial
capitalization of the Bank into Common Stock, provided an event described above
shall not be deemed a Change of Control Event so long as continuing Directors
constitute at least 50% of the directors of the Bank or, if the Bank is not the
surviving corporation upon the consummation of such merger or acquisition, of
the surviving or acquiring corporation or its parent.
"Commission" means the United States Securities and Exchange Commission
or any other agency then administering the Securities Act and other securities
laws.
"Common Shares" means (except where the context otherwise indicates)
shares of the common stock, par value $1.00 per share, of the Bank as
constituted on the date hereof, and any shares into which such Common Shares may
thereafter be changed, and shall also include (i) shares of the Bank of any
other class (regardless of how denominated) issued to the holders of shares of
any class of Common Shares upon any reclassification thereof which is also not
preferred as to dividends or assets over any other class of shares of the Bank
and which is not subject to redemption and (ii) common shares of any successor
or acquiring corporation (as defined in Section 4.8) received by or distributed
to the holders of any class of Common Shares of the Bank in the circumstances
contemplated by Section 4.8.
"Continuing Directors" means, as of any date of determination, any
members of the Board of Directors of the Bank who (i) was a member of such Board
of Directors on the Issuance Date or (ii) was nominated for election or elected
to such Board of Directors with the affirmative vote of a majority of the
Continuing Directors who were members of such Board of Directors at the time of
such nomination or election.
"Controlled By" or "Controlling" or "Under Common Control" shall mean
possession, directly or indirectly, of power to direct or cause direction of
management or policies (whether through ownership of voting securities, by
contract or otherwise).
"Convertible Securities" means evidences of indebtedness, shares or
other securities which are convertible into or exchangeable, with or without
payment of additional consideration in cash or property, for Additional Common
Shares, either immediately or upon the occurrence of a specified date or a
specified event.
"Current Warrant Price" in respect of a Common Share, means $10.00, as
adjusted after the Issuance Date in accordance with the provisions of this
Warrant.
"Group Acting in Concert" and "Person" shall have the meaning defined
in Section 13(d)(3) of the Exchange Act.
"Exchange Act" means the Exchange Act of 1934, as amended.
"GAAP" means generally accepted accounting principles, applied on a
consistent basis.
"Holder means the Person in which name the Warrant is registered on the
books of the Bank maintained for such purpose.
2
<PAGE> 6
"Issuance Date" means the date of this Warrant.
"Majority Holders" means the holders of Warrants exercisable for more
than 50% of the aggregate number of Common Shares purchasable upon exercise of
all Warrants, whether or not then exercisable.
"Other Property" has the meaning set forth in Section 4.8.
"Outstanding" means, when used with reference to Common Shares, at any
date as of which the number of shares thereof is to be determined, all issued
shares of Common Shares, except common Shares then owned or held by or for the
account of the Bank or any subsidiary thereof, and shall include all Common
Shares issuable in respect of outstanding scrip or any certificates representing
fractional interests in shares of Common Shares.
"Permitted Issuances" means (i) Common Shares issued upon exercise of
this Warrant and (ii) Common Shares issued to employees and directors of the
Bank or its subsidiaries pursuant to any stock purchase, stock ownership, stock
bonus or stock option plans heretofore or hereafter duly adopted or assumed by
the Bank or any subsidiary thereof.
"Person" means any individual, sole proprietorship, partnership, joint
venture, trust, incorporated organization, association, corporation,
institution, public benefit corporation, entity or government (whether federal,
state, county, city, municipal or otherwise, including, without limitation, any
instrumentality, division, agency, body or department thereof).
"Purchase Agreement" means the Amended and Restated Purchase and
Assumption Agreement among the Bank and certain affiliates of Fleet, dated as of
March 22, 1996.
"Restricted Common Shares" shall mean Common Shares which are, or which
upon their issuance on the exercise of this Warrant would be, evidenced by a
certificate bearing the restrictive legend set forth in Section 9.1.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations thereunder, all as the same shall be in effect at the
time.
"Transfer" means any disposition of any Warrant or of any interest
thereof.
"Warrants" means this Warrant and all Warrants issued upon transfer,
division or combination of, or in substitution for, any thereof. All Warrants
shall at all times be identical as to terms and conditions and date, except as
to the number of Common Shares for which they may be exercised.
"Warrant Price" means an amount equal to (i) the number of Common
Shares being purchased upon exercise of this Warrant pursuant to Section 2.1,
multiplied by (ii) the Current Warrant Price as of the date of such exercise.
3
<PAGE> 7
"Warrant Shares" means the Common Shares purchased by the holders of
the Warrants upon the exercise thereof.
2. EXERCISE OF WARRANT
2.1 MANNER OF EXERCISE. From and after the date hereof, Holder may
exercise this Warrant, on any Business Day, for any or all of the number of
Common Shares purchasable hereunder as specified in Section 2.2 hereof.
In order to exercise this Warrant, Holder shall deliver to the Bank at
its principal office or at the office or agency designated by the Bank pursuant
to Section 13, (i) a written notice of Holder's election to exercise this
Warrant, which notice shall specify the number of Common Shares to be purchased,
(ii) payment of the Warrant Price by Holder's check or wire transfer of
immediately available funds and (iii) this Warrant. Such notice shall be
substantially in the form of the subscription form appearing at the end of this
Warrant as Exhibit A, duly executed by Holder or its agent or attorney. Upon
receipt thereof, the Bank shall, as promptly as practicable, and in any event
within five (5) Business Days thereafter, execute or cause to be executed and
deliver or cause to be delivered to Holder a certificate or certificates
representing the aggregate number of full shares of Common Shares issuable upon
such exercise, as hereinafter provided. The share certificate or certificates so
delivered shall be, to the extent possible, in such denomination or
denominations as such Holder shall request in the notice and shall be registered
in the name of Holder or, subject to Section 9, such other name as shall be
designated in the notice. This Warrant shall be deemed to have been exercised
and such certificate or certificates shall be deemed to have been issued, and
Holder or any other Person so designated to be named therein shall be deemed to
have become a holder of record of such shares for all purposes, as of the date
the notice, together with the check or wire transfer and this Warrant, is
received by the Bank as described above and all taxes required to be paid by
Holder, if any, pursuant to Section 2.3 prior to the issuance of such shares
have been paid. Notwithstanding any provision herein to the contrary, the Bank
shall not be required to register shares in the name of any Person who acquired
this Warrant (or part hereof) or any Warrant Stock other than in accordance with
this Warrant.
2.2 COMMON SHARES PURCHASABLE UPON EXERCISE OF THE WARRANT. Shares
purchasable under this Warrant shall be One Hundred Thirty Six thousand Three
Hundred Fifteen (136,315), as such number may be adjusted in accordance with the
terms of this Warrant.
2.3 PAYMENT OF TAXES. All Common Shares issuable upon the exercise of
this Warrant pursuant to the terms hereof shall be validly issued, fully paid
and nonassessable and without any preemptive rights. The Bank shall pay all
expenses in connection with, and all taxes and other governmental charges, if
any, that may be imposed with respect to, the issue or delivery thereof. The
Bank shall not be required, however, to pay any tax or other charge imposed in
connection with any transfer involved in the issue of any certificate for Common
Shares issuable upon exercise of this Warrant in any name other than that of
Holder, and in such case the Bank shall not be required to issue or deliver any
stock certificate until such tax or other charge has been paid or it has been
established to the satisfaction of the Bank that no such tax or other charge is
due.
2.4 NO FRACTIONAL SHARES. The Bank shall not issue a fractional Common
Share upon exercise of any Warrant. As to any fraction in excess of 0.5 of a
share which the Holder of one or more
4
<PAGE> 8
Warrants, the rights under which are exercised in the same transaction, would
otherwise be entitled to purchase upon such exercise, the Bank shall issue one
Common Share and as to any lesser fraction any entitlement of the Holder shall
be deemed to be canceled.
2.5 CONTINUED VALIDITY. A holder of Common Shares issued upon the
exercise of this Warrant (other than a holder who acquires such shares after the
same have been publicly sold pursuant to a prospectus under the Securities Act
or otherwise distributed to the public under such legislation or comparable
legislation of any other jurisdiction), shall continue to be entitled with
respect to such shares to all rights to which it would have been entitled as
Holder under Sections 9, 10 and 16 of this Warrant. The Bank will, at the time
of each exercise of this Warrant, upon the request of the holder of the Common
Shares issued upon such exercise hereof, acknowledge in writing, in form
reasonably satisfactory to such holder, its continuing obligation to afford to
such holder all such rights; provided, however, that if such holder shall fail
to make any such request, such failure shall not affect the continuing
obligation of the Bank to afford to such holder all such rights.
2.6 CONDITIONAL EXERCISE. Notwithstanding any provision of this Warrant
to the contrary, the exercise of this Warrant may, at the Holder's election, be
made conditional upon the closing of the sale of the Warrant Shares pursuant to
a registered public offering thereof effected in accordance with the
Registration Rights Agreement referred to in Section 9.3 hereof.
3. TRANSFER, DIVISION AND COMBINATION
3.1 TRANSFER. Subject to compliance with Section 9, transfer of this
Warrant and all rights hereunder, in whole or in part, shall be registered on
the books of the Bank to be maintained for such purpose, upon surrender of this
Warrant at the principal office of the Bank referred to in Section 2.1 or the
office or agency designated by the Bank pursuant to Section 13, together with a
written assignment of this Warrant substantially in the form of Exhibit B hereto
duly executed by Holder or its agent or attorney and funds sufficient to pay any
transfer taxes payable upon the making of such transfer. Upon such surrender the
Bank shall, subject to Section 9, execute and deliver a new Warrant or Warrants
in the name of the assignee or assignees and in the denomination specified in
such instrument of assignment, and shall issue to the assignor a new Warrant
evidencing the portion of this Warrant not so assigned, and this Warrant shall
promptly be canceled. A Warrant, if properly assigned in compliance with Section
9, may be exercised by a new Holder for the purchase of Common Shares without
having a new Warrant issued.
3.2 DIVISION AND COMBINATION. Subject to Section 9, this Warrant may be
divided or combined with other Warrants upon presentation hereof at the
aforesaid office or agency of the Bank, together with a written notice
specifying the names and denominations in which new Warrants are to be issued,
signed by Holder or its agent or attorney. Subject to compliance with Section
3.1 and with Section 9, as to any transfer which may be involved in such
division or combination, the Bank shall execute and deliver a new Warrant or
Warrants in exchange for the Warrant or Warrants to be divided or combined in
accordance with such notice.
3.3 EXPENSES. The Bank shall prepare, issue and deliver at its own
expense (other than transfer taxes) the new Warrant or Warrants under this
Section 3.
5
<PAGE> 9
3.4 MAINTENANCE OF BOOKS. The Bank agrees to maintain, at its aforesaid
office or agency, books for the registration and the registration of transfer of
the Warrants.
4. ADJUSTMENTS
The number of Common Shares for which this Warrant is exercisable, or
the price at which such shares may be purchased upon exercise of this Warrant,
shall be subject to adjustment from time to time as set forth in this Section 4.
The Bank shall give each Holder notice of any event described below which
requires an adjustment pursuant to this Section 4 at the time of such event.
4.1 STOCK DIVIDENDS, SUBDIVISIONS AND COMBINATIONS. If at any time the
Bank shall:
(a) take a record of the holders of its Common Shares for the
purpose of entitling them to receive a dividend payable in, or other
distribution of, Additional Common Shares,
(b) subdivide its outstanding Common Shares into a larger
number of Common Shares, or
(c) combine its outstanding Common Shares into a smaller
number of Common Shares,
then (i) the number of Common Shares for which this Warrant is exercisable
immediately after the occurrence of any such event shall be adjusted to equal
the number of Common Shares which a record holder of the same number of Common
Shares for which this Warrant is exercisable immediately prior to the occurrence
of such event would own or be entitled to receive after the happening of such
event, and (ii) the Current Warrant Price shall be adjusted to equal the amount
obtained by multiplying the Current Warrant Price by a fraction, the numerator
of which is the number of Common Shares for which this Warrant is exercisable
immediately prior to the adjustment and the denominator of which is the number
of shares for which this Warrant is exercisable immediately after such
adjustment.
4.2 CERTAIN OTHER DISTRIBUTIONS. If at any time the Bank shall declare
or pay any dividend or make a distribution of:
(a) cash (other than a cash distribution or dividend payable
out of earnings or earned surplus legally available for the payment of
dividends under the laws of the jurisdiction of incorporation of the
Bank),
(b) any evidences of its indebtedness, any of its shares or
any other securities or property of any nature whatsoever (other than
cash, Convertible Securities or Additional Common Shares), or
(c) any warrants or other rights to subscribe for or purchase
any evidences of its indebtedness, any of its shares or any other
securities or property of any nature whatsoever (other than cash,
Convertible Securities or Additional Common Shares),
then in each such event provision shall be made so that the Holder of this
Warrant shall receive upon exercise hereof, in addition to the number of Common
Shares issuable upon exercise hereof, the cash,
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securities or other property which such Holder would have received as a dividend
or distribution (other than out of earnings or earned surplus legally available
for the payment of dividends under applicable law) if continuously since the
Issuance Date such Holder (i) had been the holder of record of the Common Shares
issuable upon such exercise and (ii) had retained all dividends in stock or
other securities (other than Common Shares or Convertible Securities) paid or
payable in respect of such Common Shares or in respect of any such securities so
paid or payable in respect of such securities so paid or payable as such
dividends or distributions. for purposes of this Section 4.2, a dividend or
distribution payable other than in cash shall be considered to be payable out of
earnings or earned surplus only to the extent that such earnings or earned
surplus shall be charged in an amount equal to the fair value of such dividend
or distribution, as determined by the Bank's Board of Directors.
4.3 ISSUANCE OF ADDITIONAL COMMON SHARES. (a) If at any time the Bank
shall (except as hereinafter provided) at any time issue or sell any Additional
Common Shares, other than Permitted Issuances, for consideration in an amount
per Additional Common Share less than the Current Warrant Price, then (i) the
number of Common Shares for which this Warrant is exercisable shall be adjusted
to equal the product obtained by multiplying the number of Common Shares for
which this Warrant is exercisable immediately prior to such issue or sale by a
fraction (A) the numerator of which shall be the number of Common Shares
Outstanding immediately after such issue or sale, and (B) the denominator of
which shall be the number of Common Shares Outstanding immediately prior to such
issue or sale plus the number of Common Shares which the aggregate offering
price of the total number of such Additional Common Shares would purchase at the
Current Warrant Price; and (ii) the Current Warrant Price as to the number of
shares for which this Warrant is exercisable prior to such adjustment shall be
adjusted by multiplying such Current Warrant Price by a fraction (X) the
numerator of which shall be the number of Common Shares for which this Warrant
is exercisable immediately prior to such issue or sale, and (Y) the denominator
of which shall be the number of Common Shares for which this Warrant is
exercisable immediately after such issue or sale.
(b) The provisions of paragraph (a) of Section 4.3 shall not
apply to any issuance of Additional Common Shares for which an adjustment is
provided under Section 4.1. No adjustment of the number of Common Shares for
which this Warrant shall be exercisable shall be made under paragraph (a) of
Section 4.3 upon the issuance of any Additional Common Shares which are issued
pursuant to the conversion or exchange rights in any Convertible Securities, if
any such adjustment shall previously have been made upon the issuance of such
Convertible Securities (or upon the issuance of any Option or other rights
therefore) pursuant to Section 4.4 or Section 4.5.
4.4 ISSUANCE OF WARRANTS OR OTHER RIGHTS. If at any time the Bank shall
take a record of the holders of its Common Shares for the purpose of entitling
them to receive a distribution of, or shall in any manner (whether directly or
by assumption in a merger in which the Bank is the surviving corporation other
than a merger described in Section 4.8) issue or sell, any warrants or other
rights to subscribe for or purchase any Additional Common Shares or any
Convertible Securities, other than Permitted Issuances, whether or not the
rights to exchange or convert thereunder are immediately exercisable, and the
price per share for which Common Shares are issuable upon the exercise of such
warrants or other rights or upon conversion or exchange of such Convertible
Securities shall be less than the Current Warrant Price, then the number of
shares for which this Warrant is exercisable and the Current Warrant Price shall
be adjusted as provided in Section 4.3 on the basis that the maximum number of
Additional Common Shares issuable pursuant to all such warrants or other rights
or necessary
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to effect the conversion or exchange of all such Convertible Securities shall be
deemed to have been issued and outstanding and the Bank shall have received all
of the minimum consideration payable therefor, if any, as of the date of the
actual issuance of such warrants or other rights. No additional adjustment of
the number of shares for which this Warrant is exercisable shall be made upon
the actual issue of such Common Shares or of such Convertible Securities upon
exercise of such warrants or other rights or upon the actual issue of such
Common Shares upon such conversion or exchange of such Convertible Securities.
4.5 ISSUANCE OF CONVERTIBLE SECURITIES. If at any time the Bank shall
take a record of the holders of its Common Shares for the purpose of entitling
them to receive a distribution of or shall in any manner (whether directly or by
assumption in a merger in which the Bank is the surviving corporation other than
a merger described in Section 4.8) issue or sell, any Convertible Securities,
whether or not the rights to exchange or convert thereunder are immediately
exercisable, and the price per share for which Common Shares are issuable upon
such conversion or exchange shall be less than the Current Warrant Price, then
the number of shares for which this Warrant is exercisable and the Current
Warrant Price shall be adjusted as provided in Section 4.3 on the basis that the
maximum number of Additional Common Shares necessary to effect the conversion or
exchange of all such Convertible Securities shall be deemed to have been issued
and outstanding and the Bank shall have received all of the consideration
payable therefor, if any, as of the date of actual issuance of such Convertible
Securities. No additional adjustment of the number of shares for which this
Warrant is exercisable shall be made under this Section 4.5 upon the issuance of
any Convertible Securities which are issued pursuant to the exercise of any
warrants or other subscription or purchase rights therefor, if any such
adjustment shall previously have been made upon the issuance of such warrants or
other rights pursuant to Section 4.4. No further adjustments of the number of
shares for which this Warrant is exercisable shall be made upon the actual issue
of such Common Shares upon conversion or exchange of such Convertible Securities
and, if any issue or sale of such Convertible Securities is made upon exercise
of any warrant or other right to subscribe for or to purchase any such
Convertible Securities for which adjustments of the number of shares for which
this Warrant is exercisable has been or is to be made pursuant to other
provisions of this Section 4, no further adjustments of the number of shares for
which this Warrant is exercisable shall be made by reason of such issue or sale.
4.6 SUPERSEDING ADJUSTMENT. If, at any time after any adjustment of the
number of Common Shares for which this Warrant is exercisable and the Current
Warrant Price shall have been made pursuant to Section 4.4 or Section 4.5 as the
result of any issuance of warrants, rights or Convertible Securities,
(a) such warrants or rights, or the right of conversion or
exchange in such other Convertible Securities, shall expire, and all or
a portion of such warrants or rights, or the right of conversion or
exchange with respect to all or a portion of such other Convertible
Securities, as the case may be, shall not have been exercised, or
(b) the consideration per share for which Common Shares are
issuable pursuant to such warrants or rights, or the terms of such
other Convertible Securities, shall be increased solely by virtue of
provisions therein contained for an automatic increase in such
consideration per share upon the occurrence of a specified date or
event,
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then such previous adjustment shall be rescinded and annulled and the Additional
Common Shares which were deemed to have been issued by virtue of the computation
made in connection with the adjustment so rescinded and annulled shall no longer
be deemed to have been issued by virtue of such computation. Thereupon, a
recomputation shall be made of the effect of such rights or options or other
Convertible Securities on the basis of
(c) treating the number of Additional Common Shares or other
property, if any, theretofore actually issued or issuable pursuant to
the previous exercise of any such warrants or rights or any such right
of conversion or exchange, as having been issued on the date or dates
of any such exercise and for the consideration actually received and
receivable therefor, and
(d) treating any such warrants or rights or any such other
Convertible Securities which then remain outstanding as having been
granted or issued immediately after the time of such increase of the
consideration per share for which Common Shares or other property are
issuable under such warrants or rights or other Convertible Securities;
whereupon a new adjustment of the number of Common Shares for which
this Warrant is exercisable and the Current Warrant Price shall be
made, which new adjustment shall supersede the previous adjustment so
rescinded and annulled.
4.7 OTHER PROVISIONS APPLICABLE TO ADJUSTMENTS UNDER THIS SECTION. the
following provisions shall be applicable to the making of adjustments of the
number of Common Shares for which this Warrant is exercisable and the Current
Warrant Price provided for in this Section 4:
(a) COMPUTATION OF CONSIDERATION. To the extent that any
Additional Common Shares or any Convertible Securities or any warrants
or other rights to subscribe for or purchase any Additional Common
Shares or any Convertible Securities shall be issued for cash
consideration, the consideration received by the Bank therefor shall be
the amount of the cash received by the Bank therefor, or, if such
Additional Common Shares or Convertible Securities are offered by the
Bank for subscription, the subscription price, or, if such Additional
Common Shares or Convertible Securities are sold to underwriters or
dealers for public offering without a subscription offering, the
initial public offering price (in any such case subtracting any amounts
paid or receivable for accrued interest or accrued dividends and
without taking into account any compensation, discounts or expenses
paid or incurred by the Bank for and in the underwriting of, or
otherwise in connection with, the issuance thereof). To the extent that
such issuance shall be for a consideration other than cash, then,
except as herein otherwise expressly provided, the amount of such
consideration shall be deemed to be the fair value of such
consideration at the time of such issuance as determined in good faith
by the Board of Directors of the Bank. In case any Additional Common
Shares or any Convertible Securities or any warrants or other rights to
subscribe for or purchase such Additional Common Shares or Convertible
Securities shall be issued in connection with any merger in which the
Bank issues any securities, the amount of consideration therefor shall
be deemed to be the fair value, as determined in good faith by the
Board of Directors of the Bank, of such portion of the assets and
business of the nonsurviving corporation as such Board in good faith
shall determine to be attributable to such Additional Common Shares,
Convertible Securities, warrants or other rights, as the case may be.
The consideration for any Additional Common Shares issuable pursuant to
any warrants or other rights to subscribe for or purchase the same
shall be the consideration received by the Bank for
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issuing such warrants or other rights plus the additional minimum
consideration payable to the Bank upon exercise of such warrants or
other rights. The consideration for any Additional Common Shares
issuable pursuant to the terms of any Convertible Securities shall be
the consideration received by the Bank for issuing warrants or other
rights to subscribe for or purchase such Convertible Securities, plus
the minimum consideration paid or payable to the Bank in respect of the
subscription for or purchase of such Convertible Securities, plus the
additional minimum consideration, if any, payable to the Bank upon the
exercise of the right of conversion or exchange in such Convertible
Securities. In case of the issuance at any time of any Additional
Common Shares or Convertible Securities in payment or satisfaction of
any dividends upon any class of stock other than Common Shares, the
Bank shall be deemed to have received for such Additional Common Shares
or Convertible Securities a consideration equal to the amount of such
dividend so paid or satisfied.
(b) WHEN ADJUSTMENTS TO BE MADE. The adjustments required by
this Section 4 shall be made whenever and as often as any specified
event requiring an adjustment shall occur, except that any adjustment
of the number of Common Shares for which this Warrant is exercisable
that would otherwise be required may be postponed (except in the case
of a subdivision or combination of the Common Shares, as provided for
in Section 4.1) up to, but not beyond the date of exercise if such
adjustment either by itself or with other adjustments not previously
made adds or subtracts less than 1% of the Common Shares for which this
Warrant is exercisable immediately prior to the making of such
adjustment. Any adjustment representing a change of less than such
minimum amount (except as aforesaid) which is postponed shall be
carried forward and made as soon as such adjustment, together with
other adjustments required by this Section 4 and not previously made,
would result in a minimum adjustment or on the date of exercise. For
the purpose of any adjustment, any specified event shall be deemed to
have occurred at the close of business on the date of its occurrence.
(c) FRACTIONAL INTERESTS. In computing adjustments under this
Section 4, fractional interests in Common Shares shall be taken into
account to the nearest 1/10th of a share.
(d) WHEN ADJUSTMENT NOT REQUIRED. If the Bank shall take a
record of the holders of its Common Shares for the purpose of entitling
them to receive a dividend or distribution or subscription or purchase
rights and shall, thereafter and before the distribution to
stockholders thereof, legally abandon its plan to pay or deliver such
dividend, distribution, subscription or purchase rights, then
thereafter no adjustment shall be required by reason of the taking of
such record and any such adjustment previously made in respect thereof
shall be rescinded and annulled.
(e) ESCROW OF WARRANT SHARES. If after any property becomes
distributable pursuant to this Section 4 by reason of the taking of any
record of the holders of Common Shares, but prior to the occurrence of
the event for which such record is taken, and Holder exercises this
Warrant, any Additional Common Shares issuable upon exercise by reason
of such adjustment shall be deemed the last Common Shares for which
this Warrant is exercised (notwithstanding any other provision to the
contrary herein) and such shares or other property shall be held in
escrow for Holder by the Bank to be issued to Holder upon and to the
extent that the event actually takes place, upon payment of the then
Current Warrant Price. Notwithstanding any other provision to
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the contrary herein, if the event for which such record was taken fails
to occur or is rescinded, then such escrowed shares shall be canceled
by the Bank and the escrowed property returned.
4.8 REORGANIZATION, RECLASSIFICATION, MERGER, CONSOLIDATION OR
DISPOSITION OF ASSETS. In case the Bank shall reorganize its capital, reclassify
its capital stock, consolidate or merge with or into another corporation (where
the Bank is not the surviving corporation or where there is a change in or
distribution with respect to the Common Shares of the Bank), or sell, transfer
or otherwise dispose of all or substantially all its property, assets or
business to another corporation and, pursuant to the terms of such
reorganization, reclassification, merger, consolidation or disposition of
assets, shares of common stock of the successor or acquiring corporation, or any
cash, shares of stock or other securities or property of any nature whatsoever
(including warrants or other subscription or purchase rights) in addition to or
in lieu of common shares of the successor or acquiring corporation ("Other
Property"), are to be received by or distributed to the holders of Common Shares
of the Bank, then each Holder shall have the right thereafter to receive, upon
exercise of such Warrant, the number of common shares of the successor or
acquiring corporation or of the Bank, if it is the surviving corporation, and
Other Property receivable upon or as a result of such reorganization,
reclassification, merger, consolidation or disposition of assets by a holder of
the number of Common Shares for which this Warrant is exercisable immediately
prior to such event. In case of any such reorganization, reclassification,
merger, consolidation or disposition of assets, the successor or acquiring
corporation (if other than the Bank) shall expressly assume the due and punctual
observance and performance of each and every covenant and condition of this
Warrant to be performed and observed by the Bank and all the obligations and
liabilities hereunder, subject to such modifications as may be deemed
appropriate (as determined by resolution of the Board of Directors of the Bank)
in order to provide for adjustments of the Common Shares for which this Warrant
is exercisable which shall be as nearly equivalent as practicable to the
adjustments provided for in this Section 4. For purposes of this Section 4.8
"common shares of the successor or acquiring corporation" shall include shares
of such corporation of any class which is not preferred as to dividends or
assets over any other class of shares of such corporation and which is not
subject to redemption and shall also include any evidences of indebtedness,
shares or other securities which are convertible into or exchangeable for any
such shares, either immediately or upon the arrival of a specified date or the
happening of a specified event and any warrants or other rights to subscribe for
or purchase any such shares. The foregoing provisions of this Section 4.8 shall
similarly apply to successive reorganizations, reclassifications, mergers,
consolidations or disposition of assets and shall apply to a corporate
reorganization in which a holding company is formed for the Bank.
4.9 OTHER ACTION AFFECTING COMMON SHARES. In case at any time or from
time to time the Bank shall take any action (of a type not contemplated by this
Section 4) in respect of its Common Shares, other than the payment of dividends
permitted by Section 4.2(a) or any other action described in this Section 4,
then, unless such action will not have an adverse effect upon the rights of the
Holders, the number of Common Shares or other shares for which this Warrant is
exercisable and/or the purchase price thereof shall be adjusted in such manner
as may be equitable in the circumstances. Without limitation, increases in the
number of authorized Common Shares shall not be deemed to have an adverse effect
upon the rights of the holders.
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4.10 CERTAIN LIMITATIONS. Notwithstanding anything herein to the
contrary, the Bank agrees not to enter into any transaction which, by reason of
any adjustment hereunder, would cause the current Warrant Price to be less than
the par value per share of the Common Shares.
5. NOTICES TO WARRANT HOLDERS
5.1 NOTICE OF ADJUSTMENTS. Whenever the number of Common Shares for
which this Warrant is exercisable, or whenever the price at which a common Share
may be purchased upon exercise of the Warrants, shall be adjusted pursuant to
Section 4, the Bank shall forthwith prepare a certificate to be executed by the
chief financial officer of the Bank setting forth, in reasonable detail, the
event requiring the adjustment and the method by which such adjustment was
calculated (including a description of the basis on which the Board of Directors
of the Bank determined the fair value of any evidences of indebtedness, shares,
other securities or property or Warrants or other subscription or purchase
rights referred to in Section 4.2 or 4.7(a)), specifying the number of Common
Shares for which this Warrant is exercisable and (if such adjustment was made
pursuant to Section 4.8 or 4.9) describing the number and kind of any other
shares or Other Property for which this Warrant is exercisable, and any change
in the purchase price or prices thereof, after giving effect to such adjustment
or change. The Bank shall promptly cause a signed copy of such certificate to be
delivered to each Holder in accordance with Section 16.2. The Bank shall keep at
its office or agency designated pursuant to Section 13 copies of all such
certificates and cause the same to be available for inspection at said office
during normal business hours by any Holder or any prospective purchaser of a
Warrant designated by a Holder thereof.
5.2 NOTICE OF CERTAIN CORPORATE ACTION. The Holder shall be entitled to
the same rights to receive notice of corporate action as any holder of Common
Shares.
6. NO IMPAIRMENT
The Bank shall not by any action including, without limitation,
amending its certificate or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms of this Warrant, but will at all times in good faith assist in the
carrying out of all such terms and in the taking of all such actions as may be
necessary or appropriate to protect the rights of Holder against impairment.
Without limiting the generality of the foregoing, the Bank will (a) take all
such action as may be necessary or appropriate in order that the Bank may
validly and legally issue fully paid and nonassessable Common Shares upon the
exercise of this Warrant, and (b) use its best efforts to obtain all such
authorizations, exemptions or consents from any public regulatory body having
jurisdiction thereof as may be necessary to enable the Bank to perform its
obligations under this Warrant.
Upon the request of Holder, the Bank will at any time during the period
this Warrant is outstanding acknowledge in writing, in form satisfactory to
Holder, the continuing validity of this Warrant and the obligations of the Bank
hereunder.
7. RESERVATION AND AUTHORIZATION OF COMMON SHARES; REGISTRATION WITH OR
APPROVAL OF ANY GOVERNMENTAL AUTHORITY
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From and after the date hereof, the Bank shall at all times reserve and
keep available for issue upon the exercise of Warrants such number of its
authorized but unissued Common Shares as will be sufficient to permit the
exercise in full of all outstanding Warrants. All Common Shares which shall be
so issuable, when issued upon exercise of any Warrant and paid for in accordance
with the terms of such Warrant, shall be duly and validly issued and fully paid
and nonassessable.
Before taking any action which would cause an adjustment reducing the
Current Warrant Price below the then par value per share of the Common Shares
issuable upon exercise of the Warrants, the Bank shall take any corporate action
which may be necessary in order that the Bank may validly and legally issue
fully paid and nonassessable Common Shares at such adjusted Current Warrant
Price.
Before taking any action which would result in an adjustment in the
number of Common Shares for which this Warrant is exercisable or in the Current
Warrant Price, the Bank shall obtain all such authorizations or exemptions
thereof, or consents thereto, as may be necessary from any public regulatory
body or bodies having jurisdiction in respect thereof.
If any Common Shares required to be reserved for issuance upon exercise
of Warrants require registration or qualification with any governmental
authority in the United States or any other jurisdiction (otherwise than as
provided in Section 9) or any stock exchange before such shares may be so
issued, the Bank will in good faith and as expeditiously as possible and at its
expense endeavor to cause such shares to be duly registered.
8. TAKING OF RECORD, SHARE AND WARRANT TRANSFER BOOKS
In the case of all dividends or other distributions by the Bank to the
holders of its Common Shares with respect to which any provision of Section 4
refers to the taking of a record of such holders, the Bank will in each such
case take such a record as of the close of business on a Business Day. The Bank
will not at any time, except upon dissolution, liquidation or winding up of the
Bank, close its stock transfer books or Warrant transfer books so as to result
in preventing or delaying the exercise or transfer of any Warrant.
9. RESTRICTIONS ON TRANSFERABILITY
No transfer or assignment of this Warrant or the Warrant Shares shall
be made before satisfaction of the conditions specified in this Section 9, which
conditions are intended to ensure compliance with the provisions of the
Securities Act with respect to the Transfer of any Warrant and the Warrant
Shares. Holder, by acceptance of this Warrant, agrees to be bound by the
provisions of this Section 9.
9.1 RESTRICTIVE LEGEND. Except as otherwise provided in this Section 9,
each certificate for Warrant Shares initially issued upon the exercise of this
Warrant, and each certificate for Warrant Shares issued to any subsequent
transferee of any such certificate, shall be stamped or otherwise imprinted with
a legend in substantially the following form:
"The shares represented by this certificate have not been
registered under the Securities Act of 1933, as amended (the "Act"), or
any state securities laws and cannot be offered, sold or
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transferred in the absence of registration or the availability of an
exemption from registration under the Act, applicable state securities
laws and regulations promulgated thereunder."
9.2 PROPOSED TRANSFERS. Prior to any Transfer or attempted Transfer of
any Warrants or any Restricted Common Shares, the holder of such Warrants or
Restricted Common Shares shall obtain from counsel to such Holder an opinion
that the proposed Transfer of such Warrants or such Restricted Common Shares may
be effected without registration under the Securities Act. Each certificate, if
any, evidencing such Restricted Common Shares issued upon such Transfer shall
bear the restrictive legend set forth in Section 9.1, and each Warrant issued
upon such Transfer shall bear the restrictive legend set forth on the first page
hereof unless in the opinion of Holder's counsel, which opinion and which
counsel shall be reasonably satisfactory to the Bank and to its counsel, such
legend is not required in order to ensure compliance with the Securities Act.
9.3 REGISTRATION. Fleet as Holder of the Warrant and Warrant Shares has
certain rights relating to registration and related matters, as provided for in
a Registration Rights Agreement made at even date herewith among the Bank, Fleet
Financial Group, Inc., and certain investors in the Bank, to which agreement
reference is hereby made.
10. SUPPLYING INFORMATION
The Bank shall cooperate with each Holder of a Warrant and each holder
of Restricted Common Shares in supplying such information as may be reasonably
necessary for such holder to complete and file any information reporting forms
presently or hereafter required by the Commission as a condition to the
availability of an exemption from the Securities Act for the sale of any Warrant
or Restricted Common Shares.
11. MANDATORY REDEMPTION OF WARRANT
If at any time from and after the Issuance Date a Change of Control
Event occurs, Holder shall have the right to sell this Warrant to the Bank (the
"Put"), and upon exercise of such right, the Bank shall purchase this Warrant
for an amount equal to the product of (A) the number of Warrant Shares issuable
hereunder and (B) (i) in an all cash transaction involving the acquisition of
the Bank, the cash price per share for the Bank's Common Shares as set forth in
such definitive agreement involving a Change of Control Event (or (x) in the
case of a stock for stock acquisition transaction, the average closing price of
the acquiror's stock during the five trading days following the public
announcement of the transaction, multiplied by the exchange ratio provided for
in or determined from such definitive agreement involving a Change of Control
Event; or (y) in the case of an acquisition transaction involving consideration
all or part of which is other than cash or common stock of the acquiror, the
fair market value of such other consideration to be paid in the acquisition
transaction for each Common Share, as determined by the Board of Directors of
the Bank, plus the amount of cash, if any, and the value of the common stock of
the acquiror, if any, to be paid for each Common Share in the transaction,
calculated as set forth above in this Section 11), less (ii) the then Current
Warrant Price.
The Put shall be exercised by written notice to the Bank of the
Holder's election to exercise the Put (the "Notice"). The closing of the
redemption of this Warrant shall take place at the office of the Bank on a date
designated by the Holder in the Notice, which date shall be not less than 15
days or more
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than 60 days after the date of the Notice. At such closing the Bank shall
deliver the amount to be paid for the purchase of the Warrant as provided above,
plus the amount to which the Holder would have been entitled to receive pursuant
to Section 4.2 if this Warrant had been exercised as of the date of the Bank's
purchase of the Warrant, by wire transfer of immediately available funds. At
such closing the Holder shall deliver the Warrant to the Bank.
If this Holder has been provided reasonable advance notice of the
pendency of a Change of Control Event, the Holder agrees to cooperate with the
Bank and inform the Bank whether or not it intends to exercise the Put in
connection with such Change of Control Event. If the Holder chooses to exercise
the Put in connection with a particular Change of Control Event, it agrees upon
request of the Bank to make its exercise of such Put conditional upon and
contemporaneous with the closing of the Change of Control Event. The Put shall
not be exercisable more than 90 days after the occurrence of a Change of Control
Event.
12. LOSS OR MUTILATION
Upon receipt by the Bank from any Holder of evidence reasonably
satisfactory to it of the ownership of and the loss, theft, destruction or
mutilation of this Warrant and indemnity reasonably satisfactory to it (it being
understood that the written agreement of Fleet Financial Group, Inc. shall be
sufficient indemnity) and in case of mutilation upon surrender and cancellation
hereof, the Bank will execute and deliver in lieu hereof a new Warrant of like
tenor to such Holder, PROVIDED, in the case of mutilation, no indemnity shall be
required if this Warrant in identifiable form is surrendered to the Bank for
cancellation.
13. OFFICE OF THE BANK
As long as any of the Warrants remain outstanding, the Bank shall
maintain an office or agency (which may be the principal executive offices of
the Bank) where the Warrants may be presented for exercise, registration of
transfer, division or combination as provided in this Warrant and shall advise
the holders of the Warrants of any change in such office or agency.
14. LIMITATION OF LIABILITY
No provision hereof, in the absence of affirmative action by Holder to
purchase Common Shares, and no enumeration herein of the rights or privileges of
Holder hereof, shall give rise to any liability of such Holder for the purchase
price of any Common Shares or as a stockholder of the Bank, whether such
liability is asserted by the Bank or by creditors of the Bank.
15. EXPIRATION
The right to exercise this Warrant shall expire on March 22, 2006.
16. MISCELLANEOUS
16.1 NONWAIVER. No course of dealing or any delay or failure to
exercise any right hereunder on the part of Holder shall operate as a waiver of
such right or otherwise prejudice Holder's rights,
15
<PAGE> 19
powers or remedies. if the Bank fails to make, when due, any payments provided
for hereunder, or fails to comply with any other material provision of this
Warrant, the Bank shall pay to Holder such amounts as shall be sufficient to
cover any out of pocket costs and expenses including, but not limited to,
reasonable legal fees, including those of court proceedings, incurred by Holder
in collecting any amounts due pursuant hereto or in otherwise enforcing any of
its rights, powers or remedies hereunder.
16.2 NOTICE GENERALLY. Any notice, demand, request, consent, approval,
declaration, delivery or other communication hereunder to be made pursuant to
the provisions of this Warrant shall be sufficiently given or made if in writing
and either delivered in person with receipt acknowledged or sent by registered
or certified mail, return receipt requested, postage prepaid or by telecopier or
other form of facsimile transmission, addressed as follows:
(a) If to the Bank:
Bank Rhode Island
999 South Broadway
East Providence, Rhode Island 02914
Facsimile Number: (401) 435-8614
Attention: Merrill W. Sherman, President
With a copy to:
Foley, Hoag & Eliot
One Post Office Square
Boston, Massachusetts 02109
Facsimile Number: (617) 832-7000
Attention: Peter W. Coogan, Esq.
If to Holder:
Fleet Financial Group, Inc.
One Federal Street
9th Floor
Boston, Massachusetts 02211
Facsimile Number: (617) 346-0131
Attention: William C. Mutterperl, Esq.
Senior Vice President,
General Counsel and Secretary
With a copy to:
Edwards & Angell
2700 Hospital Trust Tower
Providence, Rhode Island 02903
Facsimile Number: (401) 276-6611
Attention: V. Duncan Johnson, Esq.
16
<PAGE> 20
or in either case at such other address as may be substituted by notice given as
herein provided. The giving of any notice required hereunder may be waived in
writing by the party entitled to receive such notice. Every notice, demand,
request, consent, approval, declaration, delivery or other communication
hereunder shall be deemed to have been duly given or served on the date on which
personally delivered, with receipt acknowledged, or three (3) Business Days
after the same shall have been deposited in the United States mail or on the day
on which received if given by telecopier or other form of facsimile transmission
or on the next Business Day if received after normal business hours of the
recipient party. Failure or delay in delivering copies of any notice, demand,
request, approval, declaration, delivery or other communication to the person
designated above to receive a copy shall in no way adversely affect the
effectiveness of such notice, demand, request, approval, declaration, delivery
or other communication.
16.3 REMEDIES. Each holder of Warrant and Warrant Shares, in addition
to being entitled to exercise all rights granted by law, including recovery of
damages, will be entitled to specific performance of its rights under this
Warrant.
16.4 SUCCESSORS AND ASSIGNS. Subject to the provisions of Section 3.1,
this Warrant and the rights evidenced hereby shall inure to the benefit of and
be binding upon the successors of the Bank and the successors and assigns of
Holder. The provisions of this Warrant are intended to be for the benefit of all
Holders from time to time of this Warrant, and shall be enforceable by any such
Holder.
16.5 AMENDMENT. This Warrant and all other Warrants may be modified or
amended or the provisions hereof waived with the written consent of the Bank and
the Majority Holders, provided that no such Warrant may be modified or amended
to reduce the number of shares of Common Shares for which such Warrant is
exercisable (before giving effect to any adjustment as provided therein) without
the prior written consent of the Holder thereof.
16.6 SEVERABILITY. Wherever possible, each provision of this Warrant
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Warrant shall be prohibited by or
invalid under applicable law, such provision shall be ineffective to the extent
of such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Warrant.
16.7 HEADINGS. The headings used in this Warrant are for the
convenience of reference only and shall not, for any purpose, be considered in
the interpretation of this Warrant.
16.8 GOVERNING LAW. This Warrant shall be governed by the laws of the
State of Rhode Island, without regard to the provisions thereof relating to
conflict of laws.
* * * *
17
<PAGE> 21
WITNESS WHEREOF, the Bank has caused this Warrant to be duly executed
and its corporate seal to be impressed hereon and attested by its Secretary or
an Assistant Secretary.
Dated: March 22, 1996 BANK RHODE ISLAND
By: /s/ Merrill W. Sherman
-------------------------------------
Merrill W. Sherman
President and Chief Executive Officer
Attest:
/s/ Toby B. Richard
-------------------
Toby B. Richard
Assistant Secretary
Accepted and Agreed To:
Fleet Financial Group, Inc.
By: /s/ H. Jay Sarles
-----------------------
Name: H. Jay Sarles
Title: Vice Chairman
18
<PAGE> 22
EXHIBIT A
SUBSCRIPTION FORM
(To be executed only upon exercise of Warrant)
The undersigned registered owner of this Warrant irrevocably exercises
this Warrant for the purchase of Common Shares of Bank Rhode Island, and
herewith makes payment therefor, all at the price and on the terms and
conditions specified in this Warrant and requests that certificates for the
Common Shares hereby purchased (and any securities or other property issuable
upon such exercise) be issued in the name of and delivered to whose address is
and, if such Common Shares shall not include all of the Common Shares issuable
as provided in this Warrant, that a new Warrant of like tenor and date for the
balance of the Common Shares issuable hereunder be delivered to the undersigned.
-------------------------------
(Name of Registered Owner)
-------------------------------
(Signature of Registered Owner)
-------------------------------
(Street Address)
-------------------------------
(City) (State) (Zip Code)
NOTICE: The signature on this subscription must correspond with the name as
written upon the face of the within Warrant in every particular,
without alteration or enlargement or any change whatsoever.
19
<PAGE> 23
EXHIBIT B
ASSIGNMENT FORM
FOR VALUE RECEIVED the undersigned registered owner of this Warrant
hereby sells, assigns and transfers unto the Assignee named below all of the
rights of the undersigned under this Warrant, with respect to the number of
Common Shares set forth below:
NAME AND ADDRESS OF ASSIGNEE NO. OF COMMON SHARES
and does hereby irrevocably constitute and appoint attorney-in-fact to register
such transfer on the books of Bank Rhode Island maintained for the purpose, with
full power of substitution in the premises.
Dated: Print Name:
----------------------- ----------------------------
Signature:
-----------------------------
Witness:
-----------------------------
NOTICE: The signature of this assignment must correspond with the name as
written upon the face of the within Warrant in every particular,
without alteration or enlargement or any change whatsoever.
20
<PAGE> 1
<TABLE>
<CAPTION>
EXHIBIT 99.1
[X] PLEASE MARK VOTES REVOCABLE PROXY
AS IN THIS EXAMPLE BANK RHODE ISLAND
<S> <C>
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS WITH- FOR ALL
FOR ANNUAL MEETING OF SHAREHOLDERS PROPOSAL 1. FOR HOLD EXCEPT
TO BE HELD MAY 17, 2000 Election of four Class I Directors,
with terms expiring in 2003 (except [ ] [ ] [ ]
The undersigned hereby authorizes and appoints Malcolm G. as marked to the contrary below):
Chace, Merrill W. Sherman and Albert R. Rietheimer, and each of FREDERICK JAMES HODGES, JR., DONALD J.
them, as proxies with full power of substitution in each, to REAVES, CHERYL L. WATKINS, JOHN A. YENA
vote all shares of Common Stock, par value $1.00 per share, of
Bank Rhode Island (the "Bank") held of record on March 31, 2000 INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL
by the undersigned at the Annual Meeting of Shareholders to be NOMINEE, MARK "FOR ALL EXCEPT" AND WRITE THAT NOMINEE'S NAME IN
held at 10:00 a.m., local time, on Wednesday, May 17, 2000, at THE SPACE PROVIDED BELOW.
The Westin Hotel Providence, One West Exchange Street,
Providence, Rhode Island, and at any adjournments or ------------------------------------------------------
postponements thereof, on all matters that may properly come
before said meeting. FOR AGAINST ABSTAIN
PROPOSAL 2. [ ] [ ] [ ]
Ratify the appointment of KPMG LLP
as independent public
accountants for the Bank.
PROPOSAL 3. [ ] [ ] [ ]
Approve principal terms of the Plan
of Reorganization and Merger Agreement
dated February 15, 2000.
THE DIRECTORS RECOMMEND A VOTE FOR EACH PROPOSAL.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED (I) AS DIRECTED
Please be sure to sign and date ---------------------------- ABOVE, OR, IN THE ABSENCE OF SUCH DIRECTION, THIS PROXY WILL BE
this Proxy in the bow below. Date VOTED FOR THE SPECIFIED NOMINEES IN PROPOSAL 1 AND FOR PROPOSALS
- - ------------------------------------------------------------- 2 AND 3 AND (II) IN ACCORDANCE WITH THE JUDGMENT OF THE PROXIES
UPON OTHER MATTERS THAT MAY PROPERLY COME BEFORE SAID MEETING OR
ANY ADJOURNMENTS OR POSTPONEMENTS THEREOF.
Shareholder sign above Co-holder (if any) sign above
- - -------------------------------------------------------------
DETACH ABOVE CARD, SIGN, DATE AND MAIL IN POSTAGE PAID ENVELOPE PROVIDED
BANK RHODE ISLAND
- - ------------------------------------------------------------------------------------------------------------------------------------
THIS PROXY MUST BE SIGNED EXACTLY AS THE NAME OF THE SHAREHOLDER(S) APPEARS ON THIS CARD
Executors, administrators, trustees, etc. should give full title as such. If the signatory is a corporation, please sign full
corporate name by duly authorized officer.
PLEASE SIGN, DATE AND RETURN THIS PROXY PROMPTLY USING THE ENCLOSED
ENVELOPE WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES
- - ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 1
<TABLE>
<CAPTION>
EXHIBIT 99.2
[X] PLEASE MARK VOTES REVOCABLE PROXY
AS IN THIS EXAMPLE BANK RHODE ISLAND
<S> <C>
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR ANNUAL MEETING OF SHAREHOLDERS PROPOSAL 3. FOR AGAINST ABSTAIN
TO BE HELD MAY 17, 2000 Approve principal terms of the Plan of
Reorganization and Merger Agreement [ ] [ ] [ ]
Dated February 15, 2000.
The undersigned hereby authorizes and appoints Malcolm G.
Chace, Merrill W. Sherman and Albert R. Rietheimer, and each of
them, as proxies with full power of substitution in each, to
vote all shares of Non-Voting Common Stock, par value $1.00 per
share, of Bank Rhode Island (the "Bank") held of record on March
31, 2000 by the undersigned at the Annual Meeting of
Shareholders to be held at 10:00 a.m., local time, on Wednesday,
May 17, 2000, at The Westin Hotel Providence, One West Exchange
Street, Providence, Rhode Island, and at any adjournments or
postponements thereof, on all matters that may properly come
before said meeting.
Please be sure to sign and date ---------------------------- THE DIRECTORS RECOMMEND A VOTE FOR THE PROPOSAL.
this Proxy in the bow below. Date
- - ------------------------------------------------------------- THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS
DIRECTED ABOVE, OR, IN THE ABSENCE OF SUCH DIRECTION, THIS PROXY
WILL BE VOTED FOR PROPOSAL 3 AT THE ANNUAL MEETING OF
Shareholder sign above Co-holder (if any) sign above SHAREHOLDERS OR ANY ADJOURNMENTS OR POSTPONEMENTS THEREOF.
- - -------------------------------------------------------------
DETACH ABOVE CARD, SIGN, DATE AND MAIL IN POSTAGE PAID ENVELOPE PROVIDED
BANK RHODE ISLAND
- - ------------------------------------------------------------------------------------------------------------------------------------
THIS PROXY MUST BE SIGNED EXACTLY AS THE NAME OF THE SHAREHOLDER(S) APPEARS ON THIS CARD
Executors, administrators, trustees, etc. should give full title as such. If the signatory is a corporation, please sign full
corporate name by duly authorized officer.
PLEASE SIGN, DATE AND RETURN THIS PROXY PROMPTLY USING THE ENCLOSED
ENVELOPE WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES
- - ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
