SCHEDULE 14A
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
(Amendment No.)
Filed by the Registrant [X]
Filed by a party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
BANCORP RHODE ISLAND, INC.
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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[x] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
(1) Amount previously paid:
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(4) Date Filed:
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[BANCORP RHODE ISLAND, INC. LOGO]
April 12, 2002
Dear Shareholder:
You are cordially invited to attend the 2002 Annual Meeting of
Shareholders of Bancorp Rhode Island, Inc. to be held at the Courtyard by
Marriott, 32 Exchange Terrace, Providence, Rhode Island 02903, on
Wednesday, May 15, 2002 at 10:00 a.m.
The official Notice of Annual Meeting, Proxy Statement and Proxy are
included with this letter. The matters listed in the Notice of Annual
Meeting are more fully described in the Proxy Statement. I encourage you
to take the time to review the Proxy Statement.
It is important that your shares be represented and voted at the
Annual Meeting. Accordingly, regardless of whether or not you plan to
attend the meeting, please sign and date the enclosed proxy form and return
it in the enclosed postage paid envelope, so that your shares may be
represented at the meeting. If you decide to attend the meeting you may
revoke your proxy and vote your shares yourself.
Thank you for your consideration. I look forward to seeing you.
Very truly yours,
/s/ Malcolm G. Chace
Malcolm G. Chace
Chairman
BANCORP RHODE ISLAND, INC.
One Turks Head Place
Providence, Rhode Island 02903
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held Wednesday, May 15, 2002
To the Shareholders of Bancorp Rhode Island, Inc.:
The Annual Meeting of Shareholders of Bancorp Rhode Island, Inc. (the
"Meeting"), a Rhode Island corporation ("the Company"), will be held at the
Courtyard by Marriott, 32 Exchange Terrace, Providence, Rhode Island on
Wednesday, May 15, 2002, at 10:00 a.m. local time, for the following
purposes:
1. To elect four Class III Directors to serve until 2005 and to
elect Karen Adams as a Class I Director to serve until 2003;
2. To consider and act upon a proposal to adopt the Company's 2002
Incentive and Non-Qualified Stock Option Plan;
3. To consider and act upon a proposal to amend the Company's
Amended and Restated Non-Employee Director Stock Plan to
increase the number of shares of common stock reserved for
issuance thereunder by 25,000 shares;
4. To consider and act upon a proposal to ratify the appointment
of KPMG LLP as independent public accountants for the Company;
and
5. To transact such other business as may properly come before the
Meeting or any adjournments thereof.
The Board of Directors of the Company has fixed the close of business
on March 29, 2002 as the record date for the determination of Shareholders
entitled to receive notice of and to vote at the Meeting or any adjournment
thereof. The stock transfer books will not be closed.
All Shareholders are cordially invited and urged to attend the
Meeting. PLEASE SIGN, DATE AND RETURN THE PROXY EVEN THOUGH YOU PLAN TO
ATTEND THE MEETING. Upon your arrival your proxy will be returned to you
if you desire to revoke it or vote in person. Your attendance in person is
encouraged, but should anything prevent your attendance in person, your
presence by proxy will still allow your shares to be voted.
By Order of the Board of Directors
/s/ Margaret D. Farrell, Secretary
Margaret D. Farrell, Secretary
April 12, 2002
BANCORP RHODE ISLAND, INC.
One Turks Head Place
Providence, Rhode Island 02903
PROXY STATEMENT
This Proxy Statement is being furnished to the holders of Common
Stock (the "Shareholders") of Bancorp Rhode Island, Inc., a Rhode Island
corporation ("Bancorp"), in connection with the solicitation of proxies by
the Board of Directors of Bancorp for the Annual Meeting of Shareholders of
Bancorp (the "Meeting") to be held at the Courtyard by Marriott, 32
Exchange Terrace, Providence, Rhode Island on Wednesday, May 15, 2002 at
10:00 a.m. local time, and at any adjournments and postponements thereof.
This Proxy Statement and the related proxy form are being mailed on or
about April 12, 2002 to holders of record of Bancorp's Common Stock on
March 29, 2002. As used herein, the "Company" means both Bancorp and Bank
Rhode Island, a Rhode Island financial institution (the "Bank"), the only
significant operating subsidiary of Bancorp.
ACTION TO BE TAKEN UNDER THE PROXY
A proxy for use at the Meeting is enclosed. Subject to such
revocation or suspension, the proxy holders will vote all shares
represented by a properly executed proxy received in time for the 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 FOR approval of the proposals set forth in the Notice of Meeting.
Any proxy may be revoked by any Shareholder who attends the Meeting and
gives oral notice of his or her intention to vote in person, without
compliance with any other formalities. In addition, any proxy given
pursuant to this solicitation may be revoked prior to the Meeting by
delivering an instrument revoking it or a duly executed proxy bearing a
later date to the Secretary of Bancorp. The Secretary of Bancorp is
Margaret D. Farrell, and any revocation should be filed with her c/o
Hinckley, Allen & Snyder LLP, 1500 Fleet Center, Providence, Rhode Island
02903.
A proxy may confer discretionary authority to vote with respect to
any matter to be presented at the Meeting which management does not know of
a reasonable time before the date hereof. Management does not know of any
such matter which may come before the Meeting and which would be required
to be set forth in this Proxy Statement or the related proxy form. If any
other matter is properly presented to the Meeting for action, it is
intended that the persons named in the enclosed form of proxy and acting
thereunder will vote in accordance with their best judgment on such matter.
PERSONS MAKING THE SOLICITATION
The Board of Directors of Bancorp is soliciting these proxies.
Bancorp will bear the expense of preparing, assembling, printing and
mailing this Proxy Statement and the material used in the solicitation of
proxies for the Meeting. Bancorp contemplates that proxies will be
solicited principally through the use of the mail, but officers, directors
and employees of the Company may solicit proxies personally or by
telephone, without receiving special compensation therefor. Although there
is no formal agreement to do so, Bancorp 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, Bancorp may utilize the services of individuals or companies not
regularly employed by the Company in connection with the solicitation of
proxies, if management of Bancorp determines that this is advisable.
VOTING SECURITIES
Holders of record of Bancorp's common stock, par value $.01 per share
(the "Common Stock"), at the close of business on March 29, 2002 are
entitled to notice of and to vote at the Meeting. Holders of the Common
Stock are entitled to one vote for each share held on the matters properly
presented at the Meeting.
1
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 Meeting. A plurality of votes cast is
required to elect the directors. All other proposals to be voted upon at
the Meeting will require the affirmative vote of holders of a majority of
the Common Stock present in person or represented by proxy at the 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.
As of the close of business on March 29, 2002, the record date for
the determination of Shareholders entitled to notice of and to vote at the
Meeting, Bancorp had outstanding 3,756,550 shares of Common Stock entitled
to vote. Each share entitles the holder of record to one vote on each
matter submitted to Shareholders of Bancorp.
PROPOSAL NO. 1
ELECTION OF DIRECTORS
Bancorp's Articles of Incorporation provide 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,
effective January 16, 2002, increased the number of directors from twelve
to fourteen, of which five are designated as Class I Directors, four as
Class II Directors and five as Class III Directors. The Board of Directors
elected Karen Adams and Edward J. Mack II to fill the then existing
vacancies as a Class I Director and Class III Director, respectively, to
serve until the Meeting. Under Bancorp's Articles of Incorporation, any
directorship filled by reason of an increase in the number of directors may
be filled by the Board of Directors for a term of office continuing only
until the next election of directors by the Shareholders. The current
Class I Directors (other than Karen Adams) serve until the 2003 annual
meeting, Class II directors serve until the 2004 Annual Meeting and Class
III Directors serve until the Meeting. As each term expires, the directors
elected to each class will serve for a term of three years. 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 Meeting,
five Class III Directors are to be elected to serve until the 2005 annual
meeting and until their successors are duly elected and qualified. In
addition to the nominees for Class III Directors set forth below, Karen
Adams is nominated as a Class I Director to serve until the 2003 annual
meeting and her successor is duly elected and qualified. Other than Karen
Adams and Edward J. Mack II, all directors of Bancorp have served in such
capacity since Bancorp's formation on February 15, 2000 for the purpose of
becoming the holding company of the Bank. The Directors of Bancorp also
serve as directors of the Bank. All nominees are currently directors of
both Bancorp and the Bank.
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 five nominees named below
to the Board of Directors as Class III Directors and FOR the election of
Karen Adams to the Board of Directors as a Class I Director. If any
nominee named below is not available for election to the Board of Directors
at the time of the Meeting, it is the intention of the persons named 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 five
nominees for election as Class III Directors and Karen Adams, a nominee for
election as a Class I Director (the "Nominees"), and for those Class I
(other than Karen Adams) and Class II Directors whose terms expire at the
annual meetings of Bancorp's Shareholders in 2003 and 2004, respectively.
2
Business Experience Year First
Name Age During Past 5 Years Became Director*
---- --- ------------------- ----------------
NOMINEES FOR CLASS III DIRECTORS (Term to Expire 2005)
Anthony F. Andrade 54 President of A&H Composition and Printing and 1996
former President of Universal Press Graphics, Inc.
until his retirement in April 1997.
Malcolm G. Chace 67 Chairman of the Board of Bancorp since its formation 1996
and Chairman of the Board of the Bank since 1996.
Vice President of Gammon Corp. Financial Services
since 1986. Also, a director of Berkshire Hathaway,
Inc. 1996
Ernest J. Chornyei, Jr. 59 Business consultant since February 2000. Prior 1996
thereto, Chairman of the Board of Bradford Dyeing
Association, Inc. (textiles) in Westerly, Rhode Island.
Edward J. Mack II 43 President and owner of Tri-Mack Plastics 2002
Manufacturing Company (engineering, design and
manufacture of custom high performance plastic
parts) since 1990.
Merrill W. Sherman 53 President and Chief Executive Officer of each of 1996
Bancorp and the Bank since each commenced
operation. Also, a director of Providence and
Worcester Railroad Company and the Providence
Journal Co., a subsidiary of Belo Corp. From 1995
through 1996 she was the President of EFC, Inc. (the
Bank's agent in connection with its formation).
NOMINEE FOR CLASS I DIRECTOR (Term to Expire 2003)
Karen Adams 46 Television news anchor for WPRI-TV (Sunrise 2002
Television Corp.) since 1989.
CLASS I DIRECTORS (Term to Expire 2003)
F. James Hodges** 62 Chairman of the Board of Hodges Badge Company, 1996
Inc. (commemorative ribbon manufacturer) since
1995, and President and CEO from 1972 through
1994.
Donald J. Reaves 55 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 W. Snead 43 President and Chief Executive Officer of Banneker 1996
Industries, Inc. (manufacturing, assembly and
packaging and logistics management) since 1991.
John A. Yena 61 President of Johnson & Wales University. 1996
** Mr. Hodges has tendered his resignation from the Board of Directors
to be effective as of the Meeting.
3
Business Experience Year First
Name Age During Past 5 Years Became Director*
---- --- ------------------- ----------------
CLASS II DIRECTORS (Term to Expire 2004)
John R. Berger 58 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 68 Business consultant and certified public accountant. 1996
From 1970 through 1990, a partner of KPMG LLP.
Margaret D. Farrell 52 Partner of Hinckley, Allen & Snyder LLP (law firm) 1996
since 1981.
Mark R. Feinstein 46 President of Northeast Management, Inc. (video store 1996
franchisee) since 1991.
* The dates of directorship before 2000 reflect the years in which
certain of the directors were elected directors of the Bank, which
became a wholly-owned subsidiary of Bancorp on September 1, 2000.
General Information About Board of Directors
The Bancorp Board of Directors held seven meetings and the Bank's
Board of Directors held eight meetings during 2001. Both the Bancorp Board
and the Bank Board have three standing committees: the Executive
Committee, the Audit Committee and the Compensation Committee. The Bank
also has a Directors' Loan Committee. Karen Adams and Edward J. Mack II
were elected to the Bank's Board of Directors in December 2001 and to
Bancorp's Board of Directors in January 2002, and accordingly, neither
attended any Board of Director meetings in 2001.
The Executive Committees of Bancorp and the Bank did not meet during
2001. The members of the Executive Committees during 2001 were Malcolm G.
Chace (Chairman), Merrill W. Sherman, Karl F. Ericson, Margaret D. Farrell
and F. James Hodges. The Executive Committees conduct the affairs and
business of Bancorp or the Bank, as the case may be, between meetings of
the respective Board of Directors, subject to certain limitations set forth
in Bancorp's Articles of Incorporation and the Bank's Agreement to Form.
The Bancorp Compensation Committee met two times and the Bank's
Compensation Committee met three times in 2001. The members of both
Compensation Committees during 2001 were F. James Hodges, Jr. (Chairman),
Anthony F. Andrade, John R. Berger and Donald J. Reaves. The Compensation
Committee is responsible for the review and recommendation of the
compensation arrangements for directors and officers and the award of
options under the Company's Amended and Restated 1996 Incentive and
Nonqualified Stock Option Plan.
The Bancorp Audit Committee met five times and the Bank Audit
Committee met four times in 2001. The members of both Audit Committees,
all of whom are independent as defined by the NASDAQ listing standards, are
Karl F. Ericson (Chairman), Ernest J. Chornyei, Jr. and Cheryl W. Snead.
The Audit Committee is responsible for, among other things, recommending to
the Board the selection of independent auditors to conduct the annual audit
of the Company's financial statements, reviewing the scope of the audit
plans of the independent auditor and the Company'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 Company policies, all of which is set forth
in greater detail in the "Report of the Audit Committee," included in this
Proxy Statement. The Bancorp Audit Committee is governed by a written
charter approved by the Board of Directors on October 17, 2000.
4
Compensation of Directors
Directors of the Company (other than Ms. Sherman) receive a combined
annual retainer of $7,500, $5,000 for service as a Bancorp director and
$2,500 for service as a Bank director. Directors of the Company receive
$100 for each Bancorp Board meeting attended, as well as $50 for each
Bancorp Committee meeting attended. In addition, directors of the Company
receive $500 for each meeting of the Bank's Executive Committee, Audit
Committee or Compensation Committee attended, and $550 for each Directors'
Loan Committee meeting attended.
Under the Amended and Restated Non-Employee Director Stock Plan (the
"Director Plan") approved by the Bank's shareholders at the 1998 annual
meeting and assumed by Bancorp in connection with the reorganization of the
Bank into a holding company structure on September 1, 2000 (the
"Reorganization"), each non-employee director elected at the 1998 meeting
received an option to purchase 1,500 shares of Common Stock, and each new
non-employee director elected thereafter receives 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 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
The following table sets forth information as of March 29, 2002,
regarding the beneficial owners of more than 5% of Bancorp's Common Stock:
Amount and Nature of Percent
Name and Address of Beneficial Owner Beneficial Ownership (a) of Class
------------------------------------ ------------------------ --------
Malcolm G. Chace(b) 478,808 12.7%
c/o Point Gammon Corporation
One Providence Washington Plaza, Providence, RI 02903
Richard A. Grills 249,995 6.7%
P.O. Box 539, Westerly, RI 02891
Greenwood Partners L.P.(c) 205,684 5.5%
1601 Forum Place, Suite 905, W. Palm Beach, FL 33401
Merrill W. Sherman (d) 198,375 5.1%
c/o Bancorp Rhode Island, Inc.
One Turks Head Place, Providence, RI 02903
--------------------
(a) All information is based upon ownership of record as reflected on the
stock transfer books of Bancorp 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) Includes 474,808 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 20,700 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 Bancorp.
5
(c) 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. Mr. Mullen owns directly 16,909 shares of Common Stock.
(d) Includes 139,675 shares that may be acquired pursuant to options
which are presently exercisable and 7,700 shares of restricted stock.
Ms. Sherman is the President and Chief Executive Officer and a
Director of Bancorp.
Security Ownership of Directors and Officers
The following table sets forth certain information regarding the
beneficial ownership of Bancorp's Common Stock as of March 29, 2002 by each
director, each executive officer named in the Summary Compensation Table
appearing on page 8 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.
Amount and Nature of Percent
Name of Beneficial Owner Beneficial Ownership(a) of Class
------------------------ ----------------------- --------
Karen Adams 0 -
Anthony F. Andrade(b) 53,000 1.4%
John R. Berger(b) 5,000 *
Malcolm G. Chace(c) 478,808 12.7
Ernest J. Chornyei, Jr.(b)(d) 111,000 3.0
Karl F. Ericson(b) 11,000 *
Margaret D. Farrell(b) 5,000 *
Mark R. Feinstein(b) 16,500 *
F. James Hodges (b)(e) 37,820 1.0
Edward J. Mack II 0 -
Donald J. Reaves(b) 4,000 *
Merrill W. Sherman(f) 198,375 5.1
Cheryl W. Snead(b) 3,510 *
John A. Yena(b) 8,000 *
James V. DeRentis(g) 10,920 *
Donald C. McQueen(h) 47,190 1.2
Albert R. Rietheimer(i) 49,140 1.3
Directors and executive officers as a group (18 persons)(j) 1,041,763 25.9%
* 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) Includes 3,000 shares that may be acquired pursuant to options.
(c) Includes 474,808 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 20,700 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.
(d) Includes 108,000 shares held by a trust of which Mr. Chornyei is a
beneficiary.
(e) Includes 6,000 shares held by Mr. Hodges' immediate family members.
(f) Includes 139,675 shares that may be acquired pursuant to options and
7,700 shares of restricted stock.
(g) Includes 10,820 shares that may be acquired pursuant to options.
(h) Includes 40,190 shares that may be acquired pursuant to options.
(i) Includes 41,140 shares that may be acquired pursuant to options.
(j) Includes 266,225 shares that may be acquired pursuant to options.
6
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires executive officers and
directors and persons who beneficially own more than ten percent of
Bancorp's Common Stock to file initial reports of ownership and reports of
changes in ownership with the Securities and Exchange Commission (the
"SEC") and any national securities exchange on which Bancorp's securities
are registered. Based solely on a review of the copies of such forms
furnished to Bancorp and written representations from the executive
officers and directors, Bancorp believes that during 2001 its executive
officers, directors and greater than ten percent beneficial owners complied
with all applicable Section 16(a) filing requirements.
Audit Committee Report
Management is responsible for the Company's internal controls and
financial reporting process. The independent accountants are responsible
for performing an audit of the Company's consolidated financial statements
in accordance with generally accepted auditing standards and to issue a
report thereon. The Audit Committee's responsibility is to monitor and
oversee these processes.
The Audit Committee's responsibilities focus on two primary areas:
(1) the adequacy of the Company's internal controls and financial reporting
process and the reliability of the Company's financial statements; and (2)
the independence and performance of the Company's internal auditors and
independent auditors. The Audit Committee meets at least quarterly to, as
appropriate, recommend to the Board an accounting firm to be engaged as the
Company's independent accountants, and review, evaluate, and discuss with
the Company's management and internal and independent auditors the scope of
the audit plan, the results of the audit, the Company's financial
statements (including the Company's quarterly earnings release), disclosure
documents, quarterly reports issued by the Company's internal auditor, the
adequacy and effectiveness of the Company's internal controls and changes
in accounting principles. The Audit Committee regularly meets privately
with both the internal and independent auditors, each of whom has
unrestricted access to the Audit Committee.
In connection with these responsibilities, the Audit Committee
reviewed and discussed the audited financial statements for the fiscal year
ended December 31, 2001 with management and the Company's independent
accountants, KPMG LLP. The Audit Committee also discussed with KPMG LLP
the matters required by Statement on Auditing Standards No. 61. The Audit
Committee received from KPMG LLP written disclosures and the letter
regarding its independence as required by Independence Standards Board
Standard No. 1, wherein KPMG LLP confirms their independence within the
meaning of the SEC and Independence Standards Board Rules and disclosed the
fees charged for professional services in the fiscal year ended December
31, 2001. The Audit Committee discussed this information with KPMG LLP and
also considered the compatibility of non-audit services provided by KPMG
LLP with maintaining its independence.
Based on the review of the audited financial statements and these
various discussions, the Audit Committee recommended to the Board of
Directors that the audited financial statements be included in the
Company's Annual Report on Form 10-K, to be filed with the SEC. The Audit
Committee further recommended to the Board of Directors the appointment of
KPMG LLP as the Company's independent auditors for the fiscal year ended
December 31, 2002, subject to ratification by the Shareholders at the 2002
Annual Meeting of Shareholders.
Audit Committee
KARL F. ERICSON - Chairman
ERNEST J. CHORNYEI, JR. CHERYL W. SNEAD
Audit Fees
Aggregate fees billed by KPMG LLP for professional services rendered
for the audit of the Company's annual financial statements for the fiscal
year ended December 31, 2001 and the reviews of interim financial
statements included in the Company's Quarterly Reports on Form 10-Q for
such year were $133,000.
7
Financial Information Systems Design and Implementation Fees
No fees were billed by KPMG LLP for financial information systems
design and implementation services during 2001.
All Other Fees
The aggregate fees billed by KPMG LLP for services rendered during
2001, other than the services described above, were $135,100. These
services were for tax returns and tax estimates ($17,500), information risk
management services ($46,600), information system vendor selection
($62,000) and employee benefit plan audits ($9,000). The Audit Committee
has determined that the provision of such services is compatible with
maintaining KPMG LLP's independence.
EXECUTIVE COMPENSATION
The following table summarizes the compensation paid or accrued by
the Company to its Chief Executive Officer and each of its four most highly
compensated executive officers who earned more than $100,000 in salary and
bonus in 2001 (together, the "Named Executive Officers"), for the calendar
years ending December 31, 2001, 2000 and 1999:
Summary Compensation Table
Long Term
Annual Compensation (a) Compensation
------------------------------ ------------
Securities
Underlying All Other
Name and Principal Position Year Salary (b) Bonus Options/SARs Compensation(c)
--------------------------- ---- ---------- ----- ------------ ---------------
Merrill W. Sherman 2001 $320,944 $157,000 25,200 $10,500
(President and CEO of both 2000 260,204 158,250 29,500 10,408
Bancorp and the Bank) 1999 249,412 126,800 23,700 9,760
Albert R. Rietheimer 2001 149,205 52,000 7,800 5,840
(Chief Financial Officer and Treasurer 2000 135,733 55,000 10,300 5,429
of both Bancorp and the Bank) 1999 130,119 46,500 8,300 5,205
Donald C. McQueen 2001 145,873 52,000 7,800 5,884
(Vice President and Assistant Secretary of 2000 132,517 55,000 10,300 5,589
Bancorp and Executive Vice President and 1999 127,021 50,000 8,300 5,369
Chief Credit & Administrative Officer of the Bank)
James V. DeRentis 2001 120,820 52,000 6,350 4,833
(Executive Vice President - Retail 2000 102,615 41,500 5,200 4,105
Banking & Marketing of the Bank) 1999 99,077 25,000 5,200 3,963
--------------------
(a) Any perquisites or other personal benefits received from the Company
by the Named Executive Officer were substantially less than 10% of the
individual's cash compensation.
(b) Includes portion of salary deferred under the 401(k) Plan and the
Nonqualified Deferred Compensation Plan.
(c) Represents the Company's contribution under the 401(k) Plan.
8
Option/SAR Grants in Last Fiscal Year
The following table provides information on option grants in 2001 to
the Named Executive Officers. The Company does not issue stock
appreciation rights.
Number of % of Total
Securities Options/SARs Exercise
Underlying Granted to or Base
Options/SARs Employees in Price Expiration Grant Date
Name Granted Fiscal Year ($/Sh) Date Value(a)
---- ------------ ------------ -------- ---------- ----------
Merrill W. Sherman 25,200(b) 42.97% $14.75 2/20/11 $108,360
Albert R. Rietheimer 7,800(c) 13.30 14.75 2/20/11 33,540
Donald C. McQueen 7,800(c) 13.30 14.75 2/20/11 33,540
James V. DeRentis 6,350(c) 10.83 14.75 2/20/11 27,305
--------------------
(a) Amounts represent the fair value of each option granted and were
estimated as of the date of the grant using the Black-Scholes option
-pricing model with the following weighted average assumptions:
expected volatility of 20%; expected life of 7 years; risk-free
interest rate of 5.03%; and Common Stock dividend rate of 2.92%.
(b) All of these options are nonqualified stock options exercisable in
four equal annual installments commencing on February 20, 2001.
(c) All of these options are incentive stock options exercisable in five
equal annual installments commencing on February 20, 2001.
Aggregated Option/SAR Exercises in Last Fiscal Year
and Year-End Option/SAR Values
The following table sets forth certain information regarding stock
options exercised during 2001 and currently outstanding options held by the
Named Executive Officer as of December 31, 2001:
Number of Securities Value of
Underlying Unexercised Unexercised
Options/SARs at Fiscal In-the-Money
Shares Acquired Value Year End 2001 Option/SARs($)(a)
Name on Exercise Realized($) Exercisable/Unexercisable Exercisable/Unexercisable
---- --------------- ----------- ------------------------- -------------------------
Merrill W. Sherman 10,000 $73,000 139,675/19,975 $905,970/$87,965
Albert R. Rietheimer 0 0 41,140/10,460 265,886/ 53,929
Donald C. McQueen 0 0 40,190/10,460 260,106/ 53,929
James V. DeRentis 0 0 10,820/ 6,930 64,883/ 32,405
--------------------
(a) Based on the December 31, 2001 closing sale price of the Common Stock
of $17.40, less the exercise price of the options.
Long-Term Incentive Plans - Awards in Last Fiscal Year
The following table provides information on long-term incentive plan
awards to Ms. Sherman, the only Named Executive Officer who received such
an award.
Estimated future pay-outs under non-stock
Performance or price based plans
Number of shares, other period until
units or maturation or Threshold Target Maximum
Name or other rights (#) payment ($ or #) ($ or #) ($ or #)
---- ------------------- ------------------ --------- -------- --------
Merrill W. Sherman 7,700 4 years from date of grant 6,930 7,315 7,700
The table set forth above reflects the award of 7,700 shares of
restricted Common Stock to Ms. Sherman, subject to achievement of certain
performance goals, pursuant to that certain Restricted Stock Agreement by
and between Ms. Sherman, Bancorp and the Bank, effective as of January 1,
2001. The restricted stock vests 50% on January 1, 2005 and 50% on January
1, 2006, and is subject to forfeiture if cumulative net income for the
three-year
9
period ending December 31, 2002 does not equal or exceed cumulative net
income forecasted in Bancorp's annual budgets for such period (the
"Performance Goal"). If Bancorp achieves less than 80% of the Performance
Goal, Ms. Sherman forfeits 100% of the restricted shares; if Bancorp
achieves at least 80% but less than 90% of the Performance Goal, Ms.
Sherman forfeits 10% of the restricted shares; and if Bancorp achieves at
least 90% but less than 100% of the Performance Goal, Ms. Sherman forfeits
5% of the restricted shares. The restricted shares are also subject to
forfeiture in the event of termination of Ms. Sherman's employment prior to
the applicable vesting dates for other than termination without cause by
the Company or without good reason by Ms. Sherman. All restrictions lapse
upon a Change in Control. In the event the award of the restricted stock
becomes subject to federal or state income tax upon vesting, the Bank will
make a "gross-up" payment to ensure the net after-tax amount retained by
Ms. Sherman (taking into account all taxes, including those on the gross-up
payment) is the same as if such income taxes had not applied. Bancorp
shall pay dividends on the restricted stock, but at the Compensation
Committee's discretion, such dividends may be either paid currently or
withheld for Ms. Sherman's account subject to the expiration or termination
of the restrictions on the restricted stock.
Employment Agreements. The Company entered into revised employment
agreements with Ms. Sherman and Messrs. McQueen, Rietheimer and DeRentis in
December 2000, which provide that during the term of the contract, their
base salary will not be reduced and they will remain eligible for
participation in the Company's executive compensation and benefit programs.
Ms. Sherman's agreement provides for an initial three-year term
expiring December 18, 2003, which automatically renews for successive
three-year terms on each successive one-year anniversary unless either
party has given the other party written notice of election not to extend
the term at least 90 days prior to any anniversary date. In the event Ms.
Sherman's employment is terminated by the Company without cause or Ms.
Sherman terminates her employment for "Good Reason," the Company must pay
her a lump sum severance payment equal to 2.99 times the sum of (i) her
annual base salary as in effect at the time of termination and (ii) an
amount equal to the average executive cash bonus earned by Ms. Sherman in
the two full fiscal years immediately preceding the year in which
termination occurs, and continue to pay for all medical and life insurance
coverage for 36 months. Ms. Sherman is also allowed continued use of the
automobile provided to her in her agreement (with an option to purchase).
In addition, any options which are 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 the Company 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 (i) her annual base salary in effect at the time
of the Change in Control plus (ii) the amount of the largest annual bonus
paid to Ms. Sherman in the three years preceding the Change in Control,
payable in a lump sum. In addition, Ms. Sherman is entitled to receive
continuing medical and life insurance benefits and use of the automobile
provided to her in the agreement (with an option to purchase), for three
years. All options vest upon a Change in Control and remain exercisable
for such three-year period. A "Terminating Event" for this purpose means
either (a) termination of employment for any reason other than for cause or
(b) resignation, death or disability following (i) a Takeover Transaction
or (ii) a Change in Control resulting from a new Board supermajority, in
either case, prior to the first anniversary of the Takeover Transaction or
Change in Control.
The agreements with Messrs. McQueen, Rietheimer and DeRentis provide
for an initial two-year term expiring December 18, 2002, which
automatically renews for successive two-year terms on each successive one
year anniversary unless either party has given the other party written
notice of election not to renew at least 90 days prior to any anniversary
date. If the Company terminates the employment relationship without cause
or the executive terminates his employment for "Good Reason", the executive
would be entitled to continuance of his base salary and all medical and
life insurance coverage for 18 months following the date of termination.
10
Messrs. DeRentis and McQueen forfeit their severance payments in the
event that within one year of the date of termination they accept certain
types of positions as specified in their agreements. "Good Reason" is
defined in the agreements of Messrs. Rietheimer, McQueen and DeRentis as
the Company's failure to renew the agreement on any anniversary date or
enter into a new employment agreement on substantially similar terms.
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, the executive is entitled to receive a severance benefit equal to
two times the sum of (i) his annual base salary in effect at the time of
the Change in Control, and (ii) an amount equal to the average executive
cash bonus earned by the executive in the two full fiscal years preceding
the Change in Control, payable in a lump sum. In addition, each executive
shall continue to receive medical and life insurance coverage for the 24
months commencing on the date of the Terminating Event. 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 the Company to
continue the executive's employment on substantially similar employment
terms. If payments under the employment agreements following a Change in
Control are subject to the "golden parachute" excise tax, the Company will
make a "gross-up" payment sufficient to ensure that the net after-tax
amount retained by the executive (taking into account all taxes, including
those on the gross-up payment) is the same as if such excise tax had not
applied.
For purposes of all of the agreements, a "Change in Control" will be
deemed to have occurred if: (1) the Company effectuates a Takeover
Transaction; or (2) the Company commences substantive negotiations with a
third party with respect to a Takeover Transaction, if within 12 months of
the commencement of such negotiations, the Company 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 Company (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 Company effectuates a complete
liquidation of Bancorp or the Bank.
A "Takeover Transaction" for this purpose means a (i) reorganization,
merger, acquisition or consolidation of Bancorp or the Bank with, or an
acquisition of Bancorp or the Bank or all or substantially all of Bancorp's
or the Bank's assets by, any other bank or corporation, in which the
individuals and entities who were the "beneficial owners" (as defined in
Rule 13d-3 under the Exchange Act) immediately prior to such
reorganization, merger, acquisition or consolidation, do not, following
such reorganization, merger, acquisition or consolidation, beneficially own
more than 50% of the voting power of the corporation resulting from the
reorganization, merger, acquisition or consolidation, (ii) the issuance of
additional shares of Bancorp or the Bank if the individuals or entities who
were the beneficial owners of the outstanding voting securities of Bancorp
or the Bank immediately prior to such issuance do not, following such
issuance, beneficially own securities representing more than 50% of the
voting power of Bancorp or the Bank or (iii) when any person or entity or
group of persons or entities (other than Bancorp or any trustee or other
fiduciary holding securities under an employee benefit plan of Bancorp)
either related or acting in concert becomes the beneficial owner of
securities of Bancorp representing more than 30% of the voting power of all
outstanding shares of voting securities of Bancorp, other than a person who
was already a 30% beneficial owner as of the date on which the executive's
employment with the Company commenced.
401(k) Retirement Plan. The Company maintains a 401(k) Plan which
qualifies as a tax-exempt plan and trust under sections 401 and 501 of the
Internal Revenue Code of 1986, as amended. Generally, Company employees who
are at least 21 years of age and have completed at least one year of
service with the Company, are eligible to participate in the 401(k) Plan.
Under the 401(k) Plan the Company will make matching contributions of up to
4% of an employee's compensation. These contributions are vested monthly.
11
Nonqualified Deferred Compensation Plan. The Company maintains a
nonqualified deferred compensation plan under which certain participants
may contribute the amounts they are precluded from contributing to the
Company'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 under the Company's 401(k) Plan as a
result of the nondiscrimination rules applicable to qualified plans. All
amounts contributed by the participant and by the Company 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 the Company'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 nonqualified
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, the Company is not
entitled to a 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 the Company
and the participant is subject to the risk that deferred compensation may
not be paid in the event of the Company's insolvency or the Company is
otherwise unable to satisfy the obligation. The plan permits (but does not
require) the Company 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 the Company in the event of insolvency or bankruptcy in
order to prevent adverse income tax consequences to the participant.
Supplemental Executive Retirement Plan. The Company 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 (collectively, the "SERP Participants")
are the only participants in the SERP. The annual retirement benefit under
the SERP is $250,000 for Ms. Sherman, $50,000 for Messrs. Rietheimer and
McQueen and $35,000 for Mr. DeRentis and is payable upon the later of the
executive attaining age 65 or the executive's retirement. In January 2002,
the SERP was amended to eliminate the 50% spousal survival benefit. In
lieu of the spousal survival benefit, the Company will provide a pre-
retirement death benefit equal to the projected age 65 accrual balance and
a post-retirement death benefit equal to the accrual balance at the date of
the SERP Participant's death. The pre-retirement and post-retirement death
benefits are funded through life insurance policies on the lives of the
SERP Participants purchased and owned by the Bank, which contain a split
dollar endorsement in favor of the SERP Participants.
The benefit for each current SERP Participant is fully vested. To
the extent any new SERP participants are not fully vested, 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, the Company
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 SERP Participant's employment is
terminated on account of a criminal act of fraud, misappropriation,
embezzlement or a felony which involves property of the Company. In
January 2001, the Bank entered into a CEO Deferred Compensation Agreement
with Ms. Sherman providing for annual contributions to a deferred
compensation account on behalf of Ms. Sherman. The CEO Deferred
Compensation Agreement was terminated in January 2002 in connection with an
amendment to the SERP increasing Ms. Sherman's annual retirement benefit
from $150,000 to $250,000.
12
Compensation Committee Report on Executive Compensation
The Compensation Committee of the Board (the "Compensation
Committee") is composed entirely of non-employee directors. From time to
time Ms. Sherman meets with the Compensation Committee to review the
compensation program and make recommendations for executives reporting to
her. The Compensation 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. The Compensation Committee utilizes a consultant to assist it
in its review and evaluation of the Company's compensation program for
executives and other senior management.
Executive Compensation Philosophy. The Company's executive
compensation philosophy seeks to link executive compensation with the
value, objectives, business strategy, management initiatives and financial
performance of the Company. The overall objectives of the program are to
attract and retain highly qualified individuals in key executive positions,
to motivate executives to achieve goals inherent in the Company's business
strategy, and to link executives' and Shareholders' interests. The Company
also seeks to achieve a balance of the compensation paid to a particular
individual and the compensation paid to other executives both inside the
Company and at comparable corporations.
Base Salary. Base salaries for executive officers are substantially
dependent upon the base salaries paid for comparable positions at similar
corporations, the responsibilities of the position held, and the experience
level of the particular executive officer. The Compensation Committee sets
the base salary for executives by reviewing compensation for competitive
positions in the market and the historical compensation levels of the
executives. In 2001, as part of the overall review of the Company's
executive compensation program, salaries of the Company's executives were
increased, effective January 1, 2002, in light of market data, as well as
to reflect promotions and increased responsibilities. The Compensation
Committee generally sought, through these increases, to place such salaries
at the median of the survey group.
Cash Bonus Policy. In keeping with the Company's philosophy to pay
for performance, cash bonuses tied to performance measures represent a
substantial portion of an executive's total compensation opportunity.
Under the cash bonus policy adopted by the Company in 1998, and revised in
2000, executive officers of the Company are eligible to receive bonuses of
up to 40% (60% in the case of the Chief Executive Officer) of their base
salaries. All bonuses for executive officers are determined at the
discretion of the Compensation Committee, which annually establishes
specific financial goals and performance criteria for each executive
officer. The Compensation Committee generally seeks to award bonuses for
superior performance that bring total cash compensation to the 75th
percentile of the survey group.
Stock Options. Total compensation at the senior executive level also
includes long-term incentives afforded by stock options granted under the
Amended and Restated 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 Bancorp's
Common Stock. Annual grants of stock options reflect the executive's
position with the Company and his or her contributions to the Company and
are set at levels to be competitive with other comparable companies with
similar performance. Options are granted at fair market value and have
three to four year vesting schedules to encourage key employees to continue
in the employ of the Company.
Compensation of Chief Executive Officer. In January 1998, the
Company entered into a three-year employment agreement with Ms. Sherman,
which was subsequently amended in July 1999 and most recently amended in
December 2000. In accordance with the agreement, the Committee has set Ms.
Sherman's annual base salary at $371,250 effective as of January 1, 2002,
subject to annual adjustment thereafter. Ms. Sherman's base salary was
established based upon comparisons with comparable corporations after
review of market data provided by the Committee's compensation consultant.
The substantial increase in Ms. Sherman's base salary effective January 1,
2002 was intended to bring her salary in line with the median for chief
executives of comparable
13
institutions. Under her employment agreement, Ms. Sherman is also entitled
to a cash bonus under the Company's cash bonus policy described above. The
Committee awarded a bonus of $157,000 for 2001, representing 80% of Ms.
Sherman's maximum bonus opportunity, in recognition of the strong financial
performance of the Company during 2001 and Ms. Sherman's contribution to
the Company's growth and profitability. The Committee also recommended,
and the Board approved, increasing the annual retirement benefit payable to
Ms. Sherman under the SERP from $150,000 to $250,000, to address a
significant deficiency in the Chief Executive Officer's retirement benefit
as compared with the market. Ms. Sherman also received options to acquire
25,200 shares of Common Stock and 7,700 shares of restricted stock.
Compliance with Internal Revenue Code Section 162(m). Section 162(m)
of the Internal Revenue Code generally disallows a tax deduction to public
companies for compensation over $1 million paid to a company's chief
executive officer and the four other most highly compensated executive
officers at year end. Qualifying performance-based compensation will not
be subject to the deduction limit if certain requirements are met. The
Committee's policy is to preserve corporate tax deductions by qualifying
compensation paid over $1 million to Named Executive Officers as
performance-based compensation. Nevertheless, maintaining tax
deductibility is but one consideration among many (and is not the most
important consideration) in the design of the compensation program for
senior executives. The Committee may, from time to time, conclude that
compensation arrangements are in the best interest of the Company and its
shareholders despite the fact that such arrangements might not, in whole or
in part, qualify for tax deductibility.
Conclusion. The Committee believes that the compensation program for
executives is competitive and that the program effectively ties executive
compensation to the Company's performance and Bancorp's resultant stock
price performance.
Compensation Committee
F. JAMES HODGES, Jr. - Chairman
ANTHONY F. ANDRADE JOHN R. BERGER DONALD J. REAVES
Notwithstanding anything to the contrary set forth in any of
Bancorp'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.
14
PERFORMANCE GRAPH
The following graph shows changes in the value of $100 invested on
December 31, 1996 through December 31, 2001, in Bancorp's Common Stock, the
S&P 500 Stock Index, and the SNL Financial L.C. 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.
Bancorp Rhode Island, Inc. vs. The Five Year
Total Return for the SNL Financial L.C.
New England Bank Index and
S&P 500 Index
[GRAPH]
Period Ending
--------------------------------------------------------------------
Index 12/31/96 12/31/97 12/31/98 12/31/99 12/31/00 12/31/01
--------------------------------------------------------------------------------------------------
Bancorp Rhode Island, Inc. 100.00 110.00 108.75 99.66 132.87 187.60
S&P 500 100.00 133.37 171.44 207.52 188.62 166.22
SNL New England Bank Index 100.00 159.19 174.19 162.83 214.74 204.66
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. Bancorp's stock price may also be influenced by
market perception, Bancorp 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.
15
TRANSACTIONS WITH MANAGEMENT
The Company 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 $5.5 million at December 31, 2001. 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 a normal risk of collectibility or other unfavorable
features.
The law firm of Hinckley, Allen & Snyder LLP, of which Margaret D.
Farrell (a director and Secretary of the Company) is a partner, provides
legal services to the Company. In addition, the spouse of director Edward
J. Mack II is also a partner in Hinckley, Allen & Snyder LLP.
PROPOSAL NO. 2
APPROVAL OF THE
2002 INCENTIVE AND NONQUALIFIED STOCK OPTION PLAN
On February 19, 2002, the Board of Directors adopted the Bancorp
Rhode Island, Inc. 2002 Incentive and Nonqualified Stock Option Plan (the
"Option Plan") in the form included with this Proxy Statement as Annex A,
subject to approval by the Shareholders. Under the Option Plan Bancorp may
grant to directors, officers and other employees, and consultants of the
Company, options for up to 200,000 shares of Common Stock, subject to
automatic incremental increases each year for nine years on the date of the
annual shareholder meeting commencing with the 2003 annual meeting of
Shareholders equal to the least of (i) 2% of total issued and outstanding
shares of Common Stock on such meeting date, (ii) 75,000 shares of Common
Stock and (iii) such lesser number of shares as determined by the Board.
Upon Shareholder approval, all directors, officers, employees and
consultants shall automatically participate in the Option Plan.
The Board of Directors recommends a vote "FOR" approval of the Option
Plan.
Purpose. The purpose of the Option Plan is to attract, retain and
motivate key employees by providing them with the opportunity to acquire a
proprietary interest in Bancorp and to link that interest with those of
shareholders.
Awards. Awards under the Option Plan may be granted to executive
officers and other key employees of Bancorp and its subsidiaries. The
Option Plan also provides that other individuals who perform services for,
or act as directors of, Bancorp and its subsidiaries may be granted stock
options. The Option Plan's eligibility criteria are intended to encompass
a group which is currently estimated at approximately 50 individuals. The
Committee appointed by the Board of Directors to administer the Option Plan
(and if no Committee is constituted, "Committee" shall mean the Board of
Directors) bases its selection of award recipients, and its determination
of the number of shares of Common Stock to be covered by each award, on the
nature of employees' duties and present and potential contributions to
Bancorp's success and other factors it deems relevant. Awards under the
Option Plan may be granted in the form of (i) incentive stock options
within the meaning of Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code"), and (ii) non-qualified stock options. The maximum
number of shares of Common Stock which may be subject to options granted
under the Option Plan to any one individual in any calendar year is 50,000.
Shares reserved for issuance, but never issued, such as shares covered by
expired or terminated options, may be available for subsequent awards.
Stock options have terms determined by the Committee, but no
incentive stock option may have a term exceeding ten years (or five years
in the case of incentive stock options granted to an employee or officer
holding 10% or more of the voting stock of Bancorp). Stock options become
exercisable as determined by the Committee. The Committee may accelerate
the exercisability of any option at any time. In addition, options may be
granted which become immediately exercisable upon a change in control of
Bancorp.
16
The option price of incentive stock options may not be less than the
market price of Common Stock on the date of grant (or not less than 110% of
such market value in the case of incentive stock options granted to an
employee or officer holding 10% or more of the voting stock of Bancorp).
An option may be exercised by payment of the option price in cash, or,
subject to the approval of the Committee, by payment in already owned
shares of Common Stock, or, subject to the approval of the Committee, by
such other consideration as may be acceptable to the Board of Directors, or
a combination of all three methods. At the discretion of the Committee,
options may also be exercised in accordance with a cashless exercise
program (through broker accommodation), if any, established by the
Committee. In addition, subject to the approval of the Committee, Bancorp
may make loans in connection with the exercise of the options. The terms
of any loan, including the interest rate thereof (which, except in the case
of incentive stock options, may be below the current market rates), shall
be determined by the Committee, but no loan may have an initial term
exceeding five years. The option holder will pledge shares of Common Stock
having a fair market value at least equal to the principal amount of the
loan to Bancorp as security for the unpaid principal balance of the loan.
Options will generally not be transferable otherwise than by will or
the laws of descent and distribution and may be exercised during the
holder's lifetime only by the holder. However, subject to the approval of
the Committee, a holder may transfer non-qualified options to certain
family members of the option holder. In addition, to the extent any
options exercisable by the holder have not been exercised at the time of
the holder's death, such options shall be exercisable by the holder's
designated beneficiary.
Upon the termination of employment of an employee or consultant for
cause, all options held by the employee under the Option Plan, to the
extent not theretofore exercised, will terminate. If employment or other
service is otherwise terminated, except by reason of death or total
disability, unless otherwise provided by the terms of the award and subject
to such restrictions as may be imposed by the Code, an option (to the
extent otherwise exercisable) may be exercised at any time within thirty
(30) days after the date of termination of the holder's employment or other
period of service voluntarily by the holder, and within ninety (90) days
after the date of termination of the holder by Bancorp without cause. In
the case of an employee whose termination results from retirement from
active employment at or after age 55, any options (to the extent otherwise
exercisable) may generally be exercised within a period ending on the
earlier of the expiration of the options or one year after the employee's
termination. In the case of the total disability of an employee, director
or consultant while employed, any previously granted options may be
exercised within a period ending on the earlier of the expiration of the
options or one year after the employee's, director's or consultant's total
disability. Generally, in the case of the death of an employee, director
or consultant while employed or within the three months (or, in the case of
an employee whose termination results from disability or retirement at or
after age 55, within one year) following termination of employment or other
service (other than for cause), any previously granted options (to the
extent otherwise exercisable) may be exercised within a period ending on
the earlier of the expiration of the options or one year after the
employee's, director's or consultant's death.
Tax Consequences. There are no federal income tax consequences to
either the option holder or Bancorp on the grant of a non-qualified option.
On the exercise of a non-qualified option, the holder has taxable ordinary
income equal to the excess of the fair market value of the shares of Common
Stock received on the exercise date (or the date on which any substantial
risk of forfeiture lapses) over the option price of the shares. Bancorp
will be entitled to a federal income tax deduction in an amount equal to
such excess. Upon a subsequent sale or taxable exchange of shares acquired
upon exercise of an option, a holder will recognize long-term or short-term
capital gain or loss equal to the difference between the amount realized on
the sale and the tax basis of such shares.
Grants of incentive stock options under the Option Plan have no
immediate tax consequences to Bancorp or the holder. If the holder
exercises an incentive stock option and does not dispose of the acquired
shares within two years after the grant of the option or within one year
after the date of the transfer of such shares to him (a "disqualifying
disposition"), he will realize no compensation income, and any gain or loss
that he realizes on his subsequent disposition of such shares will be
treated as long-term capital gain or loss. For purposes of the alternative
minimum tax, however, the amount by which the fair market value of the
acquired shares at the time of exercise exceeds the option price will be
included in alternative minimum taxable income.
17
If a holder makes a disqualifying disposition of shares acquired by
the exercise of an incentive stock option, he will be required to include
in income, as compensation, the lesser of (i) the difference between the
option price and the fair market value of the acquired shares on the
exercise date (or the date on which any substantial risk of forfeiture
lapses), and (ii) the amount of gain realized. In addition, depending upon
the amount received as the result of such disposition, the holder may
realize long-term or short-term capital gain or loss.
Bancorp will be entitled to a deduction at the same time and in the
same amount as the holder is in receipt of compensation income as a result
of a disqualifying disposition. If there is no disqualifying disposition,
no deduction will be available to Bancorp.
The exercise of any portion of an option that is accelerated as a
result of a change in control event may cause payments with respect to such
accelerated options to be treated as "parachute payments" as defined in the
Code. Any such parachute payments may be non-deductible, in whole or in
part, and may subject the holder to a non-deductible 20% federal excise tax
on all or a portion of such payment (in addition to other taxes ordinarily
payable).
Amendment and Termination. No option grant will be made after May
15, 2012. The Board of Directors may modify, revise or terminate the
Option Plan at any time and from time to time, except that the class of
persons eligible to receive options under the Option Plan and the aggregate
number of shares issuable pursuant to the Option Plan may not be changed or
increased, other than by operation of Sections 3.2 and 8 of the Option Plan
which deal with annual incremental increases and changes in the capital
structure of Bancorp, respectively, without the consent of the Shareholders
of Bancorp.
New Plan Benefits. Since awards under the Option Plan are
discretionary, total awards that may be granted for the current fiscal year
are not determinable until completion of the year. During 2001, options to
purchase an aggregate of 48,150 shares of Common Stock were granted under
the 1996 Incentive and Nonqualified Stock Option Plan (the "1996 Plan") to
all executive officers of Bancorp as a group at an average exercise price
of $14.75 and options to purchase an aggregate of 10,500 shares of Common
Stock were granted under the 1996 Plan to all employees (not including
executive officers) as a group. Options granted during 2001 to the Named
Executive Officers are set forth under "Executive Compensation - Option SAR
Grants in Last Fiscal Year." No options were granted under the 1996 Plan
to directors or Nominees who are not also executive officers of Bancorp and
it is not presently anticipated that options will be granted under the
Option Plan to non-employee directors. The closing price of Bancorp's
Common Stock on March 28, 2002 was $22.95.
Anti-Takeover Effects. Under the Option Plan, the Committee may
provide that, in the event of a change in control of Bancorp, (i) holders
of outstanding options may receive shares of such stock as were received by
the holders of Common Stock pursuant to the terms of any merger,
consolidation, reorganization, liquidation, sale or disposition, (ii)
exercise of outstanding options be accelerated, or (iii) outstanding
options be canceled. A "change in control" includes a merger or
consolidation of Bancorp where Bancorp is not the surviving entity, or
where Bancorp is the surviving entity, but the shareholders of Bancorp
immediately prior to such merger or consolidation do not own shares
representing at least 50% of the voting power of Bancorp following the
merger, or the sale or other disposition of substantially all of Bancorp's
assets to another corporation or the liquidation of Bancorp. The
provisions of the Option Plan permitting acceleration of the exercise of
outstanding options may have an anti-takeover effect.
PROPOSAL NO. 3
APPROVAL OF AMENDMENT OF THE Non-Employee Director Stock Plan
Under the Amended and Restated Non-Employee Director Stock Plan (the
"Director Plan"), which was approved at the Bank's 1998 annual meeting of
shareholders and assumed by Bancorp in connection with the Reorganization,
Bancorp may grant options for up to 40,000 shares of Common Stock to all
non-employee directors. Currently, options to acquire an aggregate of
34,000 shares are outstanding. Because there are insufficient shares
remaining in the Director Plan to permit future awards, on February 19,
2002, the Board of Directors voted in favor of amending the Director Plan
to increase the maximum number of shares for which
18
options may be granted from 40,000 shares of Common Stock to 65,000 shares
of Common Stock, subject to approval by the Shareholders.
The Board of Directors recommends a vote "FOR" approval of the
amendment of the Director Plan.
Purpose. The purpose of the Director Plan is to attract and retain
persons of exceptional ability to serve as directors and to solidify the
common interests of the Shareholders and the directors in enhancing the
value of Bancorp's Common Stock.
Award to Directors. Pursuant to the Director Plan, each non-employee
director elected at the 1998 annual meeting of shareholders received an
option to purchase 1,500 shares of Common Stock, and each new non-employee
director elected thereafter receives 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 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. The closing price of Bancorp's Common
Stock on March 28, 2002 was $22.95.
Tax Consequences. There will be no federal income tax consequences
to either the non-employee director or Bancorp on the grant of the options
described above. On the exercise of such options, the director has taxable
ordinary income equal to the excess of the fair market value of the Common
Stock received on the exercise date over the option price of the Common
Stock. Bancorp will be entitled to a federal income tax deduction in an
amount equal to such excess. Upon a subsequent sale or taxable exchange of
Common Stock acquired upon exercise of an option, a director will recognize
long-term or short-term capital gain or loss equal to the difference
between the amount realized on the sale and the tax basis of such shares.
In the event Common Stock is used to pay the option price for an
option, gain or loss is not normally recognized in connection with such
exchange. To the extent that the number of shares of Common Stock received
on exercise does not exceed the number of shares surrendered, the
director's basis in these shares is equal to the basis of the stock
surrendered, and the director's holding period therefor is the same holding
period as for the Common Stock surrendered.
To the extent the director receives an amount of shares in excess of
the number of shares surrendered, the director's basis in such additional
shares is zero (plus any cash paid in connection with the exercise) and the
holding period for such additional shares will begin from the date of such
exchange.
Amendment and Termination. No option grant will be made after May
20, 2008. The Board at any time will be permitted to amend, suspend or
terminate the Director Plan, but no such amendment shall permit directors
who are employees of the Company to participate in the Director Plan and no
such amendment shall affect the rights of any participating director to
previously granted options without his or her consent.
New Plan Benefits. The following table illustrates the aggregate
benefits which will be received by non-employee directors under the
Director Plan in 2002. Since the exercise price of the options is equal to
the fair market value on the date of grant, the value of such benefits is
reflected as zero. Annual awards under the Director Plan will be equal to
500 options for each non-employee director.
Dollar Number of
Value Options
------ ---------
Each nominee for election as a director $0 500
All current directors who are not executive
officers as a group 0 5,000*
* Karen Adams and Edward J. Mack II received 1,000 options under the
Director Plan upon their election to the Board of Directors on
January 16, 2002, and therefore are not eligible to receive an award
at the Meeting.
19
PROPOSAL NO. 4
RATIFICATION OF APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
Upon recommendation of the Audit Committee of the Board of Directors,
the Board has appointed KPMG LLP as independent public accountants for the
2002 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 Meeting and will
have an opportunity to make a statement if they so desire and to respond to
appropriate questions from Shareholders.
OTHER BUSINESS OF THE MEETING
The Board of Directors is not aware of any matters to come before the
Meeting other than those stated in the Proxy Statement. In the event that
other matters properly come before the 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.
ANNUAL REPORT AND FORM 10-K
The 2001 Annual Report of Bancorp was mailed to Shareholders with
this Proxy Statement. Upon request, Bancorp will furnish without charge a
copy of Bancorp's Annual Report on Form 10-K for the fiscal year ended
December 31, 2001, including financial statements, but without exhibits, a
copy of which has been filed with the SEC. It may be obtained by writing
to Stephen M. Turgeon, Corporate Communications, Bancorp Rhode Island,
Inc., One Turks Head Place, Providence, Rhode Island 02903.
SHAREHOLDER PROPOSALS FOR 2003
Bancorp's next annual meeting is scheduled to be held on May 21,
2003. A Shareholder who wants to have a qualified proposal considered for
inclusion in the Proxy Statement for the Company's 2003 annual meeting of
Shareholders must notify the Secretary of Bancorp not later than December
23, 2002. Shareholder proposals that are to be considered at the 2003
annual meeting but not requested to be included in the Proxy Statement must
be submitted no later than March 21, 2003 and no earlier than December 23,
2002.
20
ANNEX A
BANCORP RHODE ISLAND, INC.
2002 INCENTIVE AND NONQUALFIED STOCK OPTION PLAN
------------------------------------------------
SECTION 1. PURPOSE
This 2002 Incentive and Nonqualified Stock Option Plan (the "Plan")
of the Corporation, is designed to provide additional incentive to
executives and other key employees of the Corporation and its subsidiaries
and for certain other individuals providing services to or acting as
directors of the Corporation and its subsidiaries. The Corporation 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
Corporation through the acquisition of shares of its Common Stock. The
Corporation 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. 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 Corporation.
(b) So long as the Corporation 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 appointed by the Board of the Corporation. It is the
intention of the Corporation that, so long as the Corporation 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 a Committee composed solely of two or more "Non-Employee
Directors" within the meaning of Rule l6b-3 under the Exchange Act
and/or two or more "Outside Directors" in accordance with Section
162(m) of the Code, 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 Non-Employee Director or Outside
Director. Except as specifically reserved to the Board under the
terms of the Plan, the Committee shall have full and final authority
to operate, manage, and administer the Plan on behalf of the
Corporation. Action by the Committee shall require the affirmative
vote of a majority of all members thereof. The term "Committee"
shall refer to the Board if at any time no committee of the Board is
constituted to administer the Plan. None of the members of the
Committee shall be an officer or other employee of the Corporation.
(c) Except to the extent prohibited by any applicable law,
rule or regulation, including, without limitation, the requirements
applicable under Section 162(m) of the Code to any option granted
under the Plan intended to be "qualified performance-based
compensation," or the requirements for any award granted under the
Plan to an officer or director to be covered by any exemptive rule
under Section 16 of the Exchange Act (including Rule 16b-3, or any
successor rule, as the same may be amended from time to time), the
Board or the Committee may delegate to one or more of its members or
to one or more agents such administrative duties as it may deem
advisable, and the Committee or any person to whom it has delegated
duties as aforesaid may employ one or more persons to render advice
with respect to any responsibility the Committee or such person may
have under the Plan.
2.2 Powers of the Board/Committee. Subject to the terms and
conditions of the Plan, the Committee shall have the power:
A-1
(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 Committee 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
Committee in the exercise of this power shall be final and binding
upon the Corporation 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 Corporation with respect to the Plan.
SECTION 3. STOCK
3.1 Share Reserve. The total number of shares that may be issued
pursuant to options granted under the Plan shall not exceed an aggregate of
two hundred thousand (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 and this Section 3.
3.2 Evergreen Share Reserve Increase. Notwithstanding Section 3.1
hereof and subject to the provisions of Section 8 hereof relating to
adjustments upon changes in Common Stock, on the day of each annual meeting
of shareholders of the Company (the "Calculation Date") for a period of
nine (9) years, commencing with the annual meeting of shareholders in 2003,
the aggregate number of shares of Common Stock that is available for
issuance under the Plan shall automatically be increased by that number of
shares equal to the least of (i) two percent (2%) of the total issued and
outstanding shares of Common Stock on such Calculation Date, (ii) seventy-
five thousand (75,000) shares of Common Stock, or (iii) such lesser number
of shares as determined by the Board.
3.3 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.
3.4 Source of Shares. The stock subject to the options granted
under the Plan shall be shares of the Corporation's authorized but unissued
Common Stock or shares of the Common Stock held in treasury.
SECTION 4. ELIGIBILITY
4.1 Persons Eligible. Incentive Stock Options under the Plan may
be granted only to officers and other employees of the Corporation or its
subsidiaries. Nonqualified Options may be granted to officers or other
employees of the Corporation or its subsidiaries, to members of the Board
of Directors of the Corporation or any of its subsidiaries (whether or not
employees), and to individuals who are not employees but who provide
services to the Corporation or its subsidiaries (regardless of whether they
are also employees), but only to the extent any such non-employees (i) are
natural persons; (ii) provide bona fide services to the Corporation or a
subsidiary; and (iii) provide services that are not in connection with the
offer or sale of the Corporation's or a subsidiary's securities in a
capital-raising transaction, and do not directly or indirectly promote or
maintain a market for the Corporation's or a subsidiary's securities (such
service providers who are neither employees nor directors are referred to
in the Plan as "consultants"), 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.
A-2
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 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 Corporation 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 Corporation 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).
4.4 Maximum Grant. Notwithstanding any other provision contained
in the Plan to the contrary, the maximum number of shares of Common Stock
which may be subject to options granted under the Plan to any single
optionee during any calendar year shall not exceed 50,000 shares of stock.
SECTION 5. TERMINATION OF SERVICE OR DEATH OF OPTIONEE
5.1 Termination of Service. Unless otherwise determined by the
Committee, and stated in the option agreement, and subject to such
restrictions as may be imposed by the Code in the case of any Incentive
Stock Options, in the event that the employment or other period of service
with the Corporation and its subsidiaries of an optionee to whom an option
has been granted under the Plan shall be terminated (except as set forth in
Section 5.2), such option may, subject to the provisions of the Plan, be
exercised (to the extent that the optionee was entitled to do so under the
Plan and the optionee's option agreement at the termination of his
employment or period of service) at any time within (i) thirty (30) days
after such termination voluntarily by the optionee; (ii) ninety (90) days
after such termination without cause by the Corporation; or (iii) in the
case of an employee whose termination results from retirement from active
employment at or after age 55 (as determined by the Committee in its good
faith discretion) within one year after such termination, but in no case
later than the date on which the option expires; provided, however, that
any option held by an employee or consultant whose employment or service
with the Corporation or a subsidiary is terminated for cause (as determined
by the Committee in its good faith discretion) shall forthwith terminate,
to the extent not theretofore exercised.
An employment relationship between the Corporation and the optionee shall
be deemed to exist during any period in which the optionee is employed by
the Corporation, 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 Corporation and the
optionee shall be determined by the Committee at the time thereof.
As used herein, "cause" shall have the meaning ascribed thereto in the
relevant option agreement or, in the absence of any such definition in such
agreement, shall mean (x) any material breach by the optionee of any
agreement to which the optionee and the Corporation are both parties, (y)
any act or omission to act by the optionee which may have a material and
adverse effect on the Corporation's business or on the optionee's ability
to perform services for the Corporation, 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 Corporation or any affiliate
of the Corporation.
5.2 Death or Permanent Disability of Optionee. If an optionee
ceases to be an employee, director or consultant of the Corporation or any
subsidiary by reason of "total disability," such optionee's option may be
exercised, to the extent that the optionee or a Permitted Transferee of the
option was entitled to do so at the termination of employment or service
with the Corporation or such a subsidiary, as set forth herein and in the
optionee's option agreement (subject to the restrictions set forth in
Section 7) at any time within one year after the
A-3
date of such termination of employment or service, but in no case later
than the date on which the option expires. If an optionee shall die while
an employee, director or consultant of the Corporation or its subsidiaries
or within three months (or, in the case of an employee whose termination
results from disability or retirement from active employment at or after
age 55, within one year) after the termination of such employment or other
relationship with the Corporation or such a subsidiary (other than
termination for cause), such optionee's option may be exercised, to the
extent that the optionee or a Permitted Transferee of the option was
entitled to do so at the termination of employment or service with the
Corporation or such a subsidiary (or at the date of death, if later), as
set forth herein and in the optionee's option agreement by the optionee, a
legatee or legatees of the optionee under the optionee's last will, by the
optionee's personal representatives or distributees or by the Permitted
Transferee, whichever is applicable, at any time within one year after the
date of the optionee's death, but in no case later than the date on which
the option expires. For purposes hereof, "total disability" is defined as
the permanent inability of an optionee, as a result of accident or
sickness, to perform any and every duty pertaining to such optionee's
occupation or employment for which the optionee is suited by reason of the
optionee's previous training, education and experience, as determined by
the Committee in its good faith discretion, and, for purposes of Incentive
Stock Options granted under the Plan, "total disability" shall mean
"permanent and total disability," as defined in Section 22(e)(3) of the
Code.
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 Committee
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 Committee, 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 stock option within the meaning of Section 422 of the Code.
So long as the Corporation 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 Corporation 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 not, 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
Committee 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 Committee at the time the option is granted;
provided, however, that the option price of any Incentive Stock Option
shall not, 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 purposes 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. The
Committee shall determine the date on which an option under the Plan is
granted, provided that such date is consistent with the
A-4
Code and any applicable rules or regulations thereunder. In the absence of
such determination, the date on which the Committee adopts a resolution
granting an option shall be considered the date on which such option is
granted, provided the optionee to whom the option is granted is promptly
notified of the grant and an option agreement is duly executed as of the
date of the resolution. The purchase price shall be subject to adjustment
as provided in Section 8.
6.4 Transferability of Options. (a) Except as otherwise provided
in this Section 6.4, options granted under the Plan shall not be
transferable otherwise than by will or the laws of descent and
distribution, and may be exercised during the lifetime of the optionee who
received such option only by such optionee.
(b) No transfer of any options by will or the laws of descent and
distribution shall be effective to bind the Corporation unless the
Committee shall have been furnished with (i) written notice thereof and
with a copy of the will and/or such evidence as the Committee may deem
necessary to establish the validity of the transfer and (ii) an agreement
by the transferee to comply with all the terms and conditions of the option
grant that are or would have been applicable to the individual to whom the
option was granted and to be bound by the acknowledgments made by such
individual in connection with the grant of the option.
(c) With the approval of the Committee and subject to such
conditions as the Committee may prescribe, an optionee may, upon providing
written notice to the Secretary of the Corporation, elect to transfer any
or all such optionee's non-qualified options to such optionee's spouse,
children, grandchildren and the spouses of children and grandchildren or to
trusts for the benefit of the optionee and/or any of the foregoing family
members of the optionee or to partnerships in which the optionee and/or
such family members are the only partners ("Permitted Transferees");
provided, however, that no such transfer by any optionee may be made in
exchange for consideration and following any such transfer the option may
not be subsequently transferred; and provided further, however, that
following any such transfer, the exercise, vesting and termination
provisions of such option and the Plan shall continue to be applied with
respect to the optionee who transferred such option.
(d) If any rights exercisable by the optionee or benefits
deliverable to an optionee under the Plan have not been exercised or
delivered, respectively, at the time of the optionee's death, such rights
shall be exercisable by the optionee's Designated Beneficiary, and such
benefits shall be delivered to the Designated Beneficiary, in accordance
with the provisions of the Plan and the applicable option agreement. The
"Designated Beneficiary" shall be the beneficiary or beneficiaries
designated by the optionee in a writing filed with the Committee in such
form and at such time as the Committee shall require. If a deceased
optionee fails to designate a beneficiary, or if the Designated Beneficiary
does not survive the optionee, any rights that would have been exercisable
by the optionee and any benefits distributable to the optionee shall be
exercised by or distributed to the legal representative of the estate of
the optionee. If a deceased optionee designates a beneficiary but the
Designated Beneficiary dies before the Designated Beneficiary's exercise of
all rights under the Plan or the option agreement or before the complete
distribution of benefits to the Designated Beneficiary under the option
agreement, then any rights that would have been exercisable by the
Designated Beneficiary shall be exercised by the legal representative of
the estate of the Designated Beneficiary, and any benefits distributable to
the Designated Beneficiary shall be distributed to the legal representative
of the estate of the Designated Beneficiary.
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 Corporation 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 Corporation, 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.
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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 Committee and subject to such terms and
conditions as it may determine, by delivery of shares of Common Stock of
the Corporation having a fair market value equal to the option price of
such shares, which have been owned by the optionee exercising such option
for more than six months (or such longer or shorter period of time required
to avoid a charge to earnings for financial accounting purposes, or (iii)
with the consent of the Committee and subject to such terms and conditions
as it may determine, by delivery of 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 Committee a combination of (i), (ii) and/or (iii), or
(v) at the discretion of the Committee, in accordance with a cashless
exercise program (through broker accommodation) if any, established by the
Committee. For the purpose of the preceding sentence, the fair market
value per share of Common Stock so delivered to the Corporation shall be
determined in the manner specified in Section 6.3. In addition, the
optionee exercising such option shall promptly pay to the Corporation in
cash any amount necessary to satisfy all applicable federal, state or local
tax requirements (and in no event shall Common Stock be delivered with
respect to such option until all such amounts have been fully paid to the
Corporation). The Committee may permit such amount to be paid in shares of
Common Stock previously owned by the optionee for more than six months
prior to such payment (or such longer or shorter period of time required to
avoid a charge to earnings for financial accounting purposes), or a portion
of the shares of Common Stock that otherwise would be distributed to such
optionee upon exercise of the option (provided, however, that the amount of
any Common Stock so withheld shall not exceed the amount necessary to
satisfy the Corporation's or any subsidiary's required tax withholding
obligations using the minimum statutory withholding rates for federal,
state, local and foreign tax purposes, including payroll taxes, that are
applicable to supplemental taxable income), in either case, based on the
fair market value of such shares on the date of payment, as determined by
the Board or the Committee, as the case may be, or a combination of cash
and shares of such Common Stock. The Corporation or a subsidiary shall, to
the extent permitted by law, have the right to deduct any such taxes from
any payment of any kind otherwise due to such optionee. As promptly as
practicable after receipt of the Notice and accompanying payment, the
Corporation 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 Corporation or a stock transfer agent of
the Corporation shall have deposited such certificates in the United States
mail, addressed to the optionee, at the address specified in the Notice.
7.3 Loans. The Corporation may make loans to such optionees as the
Committee, in its discretion, may determine (including a holder who is a
director or officer of the Corporation) in connection with the exercise of
options granted under the Plan; provided, however, that the Committee shall
not authorize the making of any loan where the possession of such
discretion or the making of such loan would result in a "modification" (as
defined in Section 424 of the Code) of any Incentive Stock Option. Such
loans shall be subject to the following terms and conditions and such other
terms and conditions as the Committee shall determine not inconsistent with
the Plan. Such loans shall bear interest at such rates as the Committee
shall determine from time to time, which rates may be below then current
market rates (except in the case of Incentive Stock Options). In no event
may any such loan exceed the fair market value, at the date of exercise, of
the shares covered by the option, or portion thereof, exercised by the
holder. No loan shall have an initial term exceeding five years, but any
such loan may be renewable at the discretion of the Committee. When a loan
shall have been made, shares of Common Stock having a fair market value at
least equal to the principal amount of the loan shall be pledged by the
holder to the Corporation as security for payment of the unpaid balance of
the loan. Every loan shall comply with all applicable laws, regulations and
rules of the Board of Governors of the Federal Reserve System and any other
governmental agency having jurisdiction.
SECTION 8. CHANGES IN THE CORPORATION'S CAPITAL STRUCTURE
8.1 Rights of the Corporation. The existence of outstanding
options shall not affect in any way the right or power of the Corporation
or its stockholders to make or authorize, without limitation, any or all
adjustments, recapitalizations, reorganizations or other changes in the
Corporation's capital structure or its business, or any merger or
consolidation of the Corporation, or any issue of Common Stock, or any
issue of bonds,
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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 Corporation, 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
Corporation 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 Corporation 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 Corporation, or after a consolidation of the
Corporation and one or more corporations in each case as a result of which
(i) the Corporation shall be the surviving corporation, and (ii) the
stockholders of the Corporation 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 Corporation, 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 Corporation is
merged into or consolidated with another corporation under circumstances
where the Corporation is not the surviving corporation, or if there is a
merger or consolidation where the Corporation is the surviving corporation
but the stockholders of the Corporation immediately prior to such merger or
consolidation do not own after such merger or consolidation shares
representing at least fifty percent (50%) of the voting power of the
Corporation, or if the Corporation 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 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
Committee 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 Committee 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 Corporation 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 Corporation 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.
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8.6 Miscellaneous. Adjustments under this Section 8 shall be
determined by the Committee 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 Corporation 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 Corporation 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 Corporation deems necessary or
appropriate in order to comply with federal and applicable state securities
laws.
9.2 Compliance with Securities Laws. The Corporation 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
Corporation 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 Corporation shall not be required to issue such shares
unless the Committee has received evidence satisfactory to it to the effect
that the holder 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 Corporation has been received by the
Corporation to the effect that such registration is not required. Any
determination in this connection by the Committee 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 Corporation may imprint
upon any certificate representing shares so issued the following legend or
any other legend which counsel for the Corporation 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 Corporation of an opinion of
counsel satisfactory to the Corporation, in form and substance
satisfactory to the Corporation, that registration is not required
for such sale or transfer."
The Corporation 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 Corporation may remove any legend on
certificates representing such shares. The Corporation 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 Corporation any obligation to employ or continue to employ
any optionee, and the right of the Corporation 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 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 3.2 or 8
hereof, without the consent of the shareholders of the Corporation.
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SECTION 11. NONEXCLUSIVITY OF THE PLAN
Neither the adoption of the Plan by the Board nor the submission of the
Plan to the shareholders of the Corporation for approval shall be construed
as creating any limitations on the power of the Board 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 later of the approval of the Plan
by the Board and the approval of the Plan by the shareholders of the
Corporation in accordance with applicable laws and regulations. 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 Common
Stock with respect to which options may be granted shall have been issued
upon the exercise of options or (y) by action of the Board pursuant to
Section 10 hereof, whichever shall first occur.
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[X] PLEASE MARK VOTES
AS IN THIS EXAMPLE
REVOCABLE PROXY
BANCORP RHODE ISLAND, INC.
Proxy Solicited on Behalf of the Board of Directors
for Annual Meeting of
Shareholders to be held May 15, 2002
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 Common
Stock, par value $.01 per share, of Bancorp Rhode Island, Inc. (the
"Company") held of record on March 29, 2002 by the undersigned at the
Annual Meeting of Shareholders to be held at 10:00 a.m. local time, on
Wednesday, May 15, 2002, at the Courtyard by Marriott, 32 Exchange Terrace,
Providence, Rhode Island, and at any adjournments or postponements thereof,
on all matters that may properly come before said meeting.
THE DIRECTORS RECOMMEND A VOTE FOR EACH PROPOSAL.
With- For All
For hold Except
PROPOSAL 1 - Election of five Class III Directors with [ ] [ ] [ ]
terms expiring in 2005, and election of Karen Adams as
a Class I Director with a term expiring in 2003:
Class III Directors Class I Director
------------------- ----------------
Anthony F. Andrade Karen Adams
Malcolm G. Chace
Ernest J. Chornyei, Jr.
Edward J. Mack II
Merrill W. Sherman
INSTRUCTION: To withhold authority to vote for any individual nominee,
mark "For All Except" and write that nominee's name in the space provided
below.
_______________________________________________________________________________
For Against Abstain
PROPOSAL 2 - Approve the 2002 Incentive and [ ] [ ] [ ]
Nonqualified Stock Option Plan
PROPOSAL 3 - Approve the Amendment of the [ ] [ ] [ ]
Non-Employee Director Stock Plan
PROPOSAL 4 - Ratify the appointment of KPMG LLP [ ] [ ] [ ]
as independent public accountants for the Company.
This proxy when properly executed will be voted (i) as directed above, or,
in the absence of such direction, this proxy will be voted FOR the
specified nominees in Proposal 1 and FOR Proposals 2, 3 and 4 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.
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Please be sure to sign and date |Date |
this Proxy in the box below. | |
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| |
| |
| |
---Shareholder sign above----------Co-holder (if any) sign above---
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Detach above card, sign, date and mail in postage paid envelope provided.
BANCORP RHODE ISLAND, INC.
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| 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. |
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IF YOUR ADDRESS HAS CHANGED, PLEASE CORRECT THE ADDRESS IN THE SPACE PROVIDED
BELOW AND RETURN THIS PORTION WITH THE PROXY IN THE ENVELOPE PROVIDED.
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