-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Jm4crLswjA/Cl7D6aIE/C+xGOB3BHnXjlWHEpzOWsYRnVBK8w3YeJOJSKa6pPoiH LTq60iThXuX17yLHAB1VCA== 0001047469-05-011291.txt : 20050425 0001047469-05-011291.hdr.sgml : 20050425 20050425172630 ACCESSION NUMBER: 0001047469-05-011291 CONFORMED SUBMISSION TYPE: SB-2 PUBLIC DOCUMENT COUNT: 33 FILED AS OF DATE: 20050425 DATE AS OF CHANGE: 20050425 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PATRIOT NATIONAL BANCORP INC CENTRAL INDEX KEY: 0001098146 STANDARD INDUSTRIAL CLASSIFICATION: NATIONAL COMMERCIAL BANKS [6021] IRS NUMBER: 061559137 STATE OF INCORPORATION: CT FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SB-2 SEC ACT: 1933 Act SEC FILE NUMBER: 333-124312 FILM NUMBER: 05770989 BUSINESS ADDRESS: STREET 1: 900 BEDFORD ST CITY: STAMFORD STATE: CT ZIP: 06901 BUSINESS PHONE: 2033247500 SB-2 1 a2156305zsb-2.htm SB-2

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TABLE OF CONTENTS

As filed with the Securities and Exchange Commission on April 25, 2005

Registration No. 333-

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

Form SB-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

Patriot National Bancorp, Inc.
(Name of Small Business Issuer in Its Charter)

Connecticut
(State or Other Jurisdiction
of Incorporation or Organization)

6021
(Primary Standard Industrial
Classification Code Number)

06-1559137
(I.R.S. Employer
Identification Number)

900 Bedford Street
Stamford, Connecticut 06901
(203) 324-7500
(Address, including zip code, and telephone number, including area code, of registrant's principal executive offices)

Charles F. Howell
President

Robert F. O'Connell
Senior Executive Vice President and
Chief Financial Officer

Patriot National Bancorp, Inc.
900 Bedford Street
Stamford, Connecticut 06901
(203) 324-7500
(Name, address, including zip code, and telephone number, including area code, of agent for service)

Copies to:

William W. Bouton III, Esq.
Kerry John Tomasevich, Esq.
Tyler Cooper & Alcorn, LLP
185 Asylum Avenue
City Place 35th Floor
Hartford, CT 06103-3488
(860) 725-6200

Norman B. Antin, Esq.
Jeffrey D. Haas, Esq.
Patton Boggs LLP
2550 M Street, NW
Washington, D.C. 20037
(202) 457-6000

Approximate date of commencement of proposed sale to the public:
As soon as practicable after the effective date of this Registration Statement.

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration number of the earlier effective registration statement for the same offering. o

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration number of the earlier effective registration statement for the same offering. o

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration number of the earlier effective registration statement for the same offering. o

If delivery of the prospectus is expected to be made pursuant to Rule 434, check the following box. o

CALCULATION OF REGISTRATION FEE

Title of each class of securities to be registered	Proposed maximum aggregate offering price(1)	Amount of registration fee


Common Stock, $2.00 par value per share	$12,000,000	$1,413

(1): Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(o) under the Securities Act of 1933.

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.

The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.

Subject to Completion dated April 25, 2005

PRELIMINARY PROSPECTUS

				Shares of Common Stock (Maximum) Shares of Common Stock (Minimum) (par value $2.00 per share)
PATRIOT NATIONAL BANCORP, INC.

We are distributing non-transferable rights to subscribe for and purchase up to $ ( shares) of our common stock to persons who owned shares of our common stock as of the close of business on the record date, , 2005. You will receive the right to subscribe for one share of common stock, at a subscription price of $ , for each shares of common stock that you owned on , 2005. If you exercise all of your rights, you may also have the opportunity to purchase additional shares of common stock at the same purchase price.

You will be able to exercise your rights to purchase shares of common stock only during a limited period. If you do not exercise your rights before 5:00 p.m., Eastern Time, on , 2005, the rights will expire. We may decide to extend the rights offering, at our discretion, for up to 20 calendar days.

We intend to enter into agreements with certain institutions and high net worth individuals ("standby purchasers"), pursuant to which such standby purchasers will agree to purchase up to $ ( shares) of our common stock, if such shares are available following the completion of this offering. Such standby purchasers are expected to require that we agree to sell and guarantee the availability of at least $ ( shares) of our common stock to such standby purchasers following the completion of this offering.

Our common stock is listed on the NASDAQ SmallCap Market under the symbol "PNBK." On April 22, 2005, the last sale price of our common stock as reported on the NASDAQ SmallCap Market was $18.54 per share.

Investing in our common stock involves risks. See "Risk Factors" beginning on page 11.

Neither the Securities and Exchange Commission nor any state regulator has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

The securities offered hereby are not savings accounts, deposits or other debt obligations of a bank or savings association and are not insured by the Federal Deposit Insurance Corporation, the FDIC, or any governmental agency or otherwise.

		Price to Public	Underwriting Discounts and Commissions(1)	Proceeds to Company(2)
Minimum(3):
	Price Per Share	$	$	$
	Total	$	$	$
Maximum(4):
	Price Per Share	$	$	$
	Total	$	$	$

(1): As compensation for its services, we have agreed to pay Sandler O'Neill & Partners, L.P. ("Sandler O'Neill") upon completion of the offering a fee of 1% of the aggregate purchase price of the shares of our common stock sold in the offering pursuant to the exercise of rights by any of our directors, officers or employees; a fee of 3% of the aggregate purchase price of the shares of our common stock sold in the offering pursuant to the exercise of the rights by other persons; and a fee of 6.5% of the aggregate value of common stock committed to be purchased by the standby purchasers, except we have agreed to pay a fee of 4.25% of the aggregate value of the common stock committed to be purchased by not more than one standby purchaser to be identified and selected by us. We have also agreed to reimburse Sandler O'Neill for its reasonable out-of-pocket expenses pertaining to its engagement, including legal fees, and have agreed to indemnify Sandler O'Neill against certain liabilities arising out of its engagement, including certain liabilities arising under the Securities Act of 1933, as amended.
(2): Before deducting expenses payable by us, estimated at $ .
(3): The total minimum price to the public, underwriting discounts and commissions and total minimum proceeds to us assume the purchase of shares as follows: by our directors, officers and employees, by other holders of rights and by the standby purchasers.
(4): The total maximum price to the public, underwriting discounts and commissions and total maximum proceeds to us assume the purchase of shares as follows: by our directors, officers and employees, by other holders of rights and by the standby purchasers.

Sandler O'Neill & Partners, L.P.

The date of this prospectus is , 2005.

Patriot National Bancorp

Branch Office Locations

TABLE OF CONTENTS

Prospectus Summary		1
Risk Factors		11
Cautionary Statement Regarding Forward Looking Statements		17
The Rights Offering		19
Certain Federal Income Tax Consequences		28
Standby Purchase Agreements		29
Use of Proceeds		30
Capitalization		31
Selected Consolidated Financial and Other Data		32
Market Price of Common Stock and Dividend Policy		34
Management's Discussion and Analysis of Financial Condition and Results of Operations		35
Business		54
Supervision and Regulation		56
Security Ownership of Certain Beneficial Owners and Management		60
Management		62
Executive Compensation		64
Description of Capital Stock		67
Transfer Agent and Registrar		70
Legal Matters		70
Experts		70
Where You Can Find More Information		70
Index to Consolidated Financial Statements		F-1

You should rely only on the information contained in this prospectus. We have not, and Sandler O'Neill has not, authorized any other person to provide you with different information. If anyone provides you with different or inconsistent information, you should not rely on it. We are not, and Sandler O'Neill is not, making an offer to sell these securities in any jurisdiction where the offer or sale is not permitted. You should assume that the information appearing in this prospectus is accurate only as of the date on the front cover of this prospectus. Our business, financial condition, results of operations and prospects may have changed since that date.

Prospectus Summary

This summary highlights information contained elsewhere in this prospectus. It may not contain all the information that may be important to you. You should read the entire prospectus carefully before making an investment decision, especially the information presented under the heading "Risk Factors" and our Consolidated Financial Statements and the related notes included elsewhere in this prospectus.

In this prospectus, we frequently use the terms "we," "our" and "us" to refer to Patriot National Bancorp, Inc. and our subsidiary, Patriot National Bank.

Our Company

General

We are the bank holding company for Patriot National Bank, the Bank, the largest publicly-held commercial bank headquartered in Fairfield County, Connecticut. We conduct our operations solely through the Bank. Both we and the Bank are headquartered at our main office in Stamford, Connecticut, approximately 40 miles east of New York City. The Bank began operations in 1994 and was reorganized as our subsidiary in 1999. The Bank has nine branch office locations serving customers located in the Fairfield County communities of Stamford, Greenwich, Old Greenwich, Norwalk, Wilton and Darien, and has received approval to open an additional branch in Southport, Connecticut. In addition, our Residential Lending Group has mortgage origination offices in Stamford and Melville (Long Island), New York.

We offer a broad range of commercial and consumer banking services with an emphasis on serving the needs of small and medium-sized businesses, commercial real estate investors and builders, professionals such as accountants and attorneys, as well as individuals. We offer commercial real estate and construction loans to area businesses and developers, commercial loans to area businesses, as well as one- to four-family residential mortgage loans, home improvement loans and home equity lines of credit to individuals. We offer consumer and commercial deposit accounts such as checking accounts, insured money market accounts, time certificates of deposit, and savings accounts. As of December 31, 2004, on a consolidated basis, we had total assets of $405.0 million, net loans of $263.9 million, total deposits of $367.0 million and total shareholders' equity of $19.8 million.

Financial Highlights

We have achieved significant growth in assets, loans, deposits and net income over the past five years. From December 31, 1999 through December 31, 2004, we have grown:

•: Total assets from $177.2 million to $405.0 million, reflecting an 18.0% compounded annual growth rate;
•: Net loans from $107.8 million to $263.9 million, reflecting a 19.6% compounded annual growth rate;
•: Total deposits from $162.7 million to $367.0 million, reflecting a 17.7% compounded annual growth rate;
•: Non-interest bearing deposits from $12.6 million to $42.6 million, reflecting a 27.6% compounded annual growth rate; and
•: Net income from $349,000 for the year ended December 31, 1999 to $926,000 for the year ended December 31, 2004.

During this period of growth, we have emphasized the importance of a disciplined credit culture and have been successful in maintaining strong asset quality. We had approximately $42,000 of net loan charge-offs from December 31, 1999 to December 31, 2004, none of which related to our residential

construction portfolio, and we had an aggregate of $4.0 million of non-performing loans at December 31, 2004, which constituted 1.0% of total assets at such date. Our non-performing loans included three loans totaling $3.7 million that are well collateralized and in the process of collection, two of which totaling $3.5 million are current as to principal and interest. The Bank is considered a well-capitalized institution under applicable regulations, with a total risk-based capital ratio of 10.50% and a Tier 1 risk-based capital ratio of 9.29% at December 31, 2004.

Market Overview

Our primary market area encompasses the southwestern Fairfield County communities where our branches are located. We also serve adjoining areas of Fairfield County and neighboring Westchester County, New York and, through our Residential Lending Group, Long Island, New York. Our market is located within the greater New York City metropolitan area, and is highly dependent on the economy of New York City. In 2004, the population of Fairfield County was approximately 906,000 people, which represents approximately 25% of the population of Connecticut. From 2004 through 2009, the population of Fairfield County is expected to increase by approximately 3.2%. The median household income in 2004 was over $73,000, more than 50% higher than the median household income for the United States. In October 2004, unemployment in Fairfield County was reported to be 3.5%, compared to 4.2% for Connecticut and 5.1% for the United States.

As of December 31, 2004, the Bank had $367.0 million of total deposits. As of June 30, 2004, the most recent date such information is available, the Bank had approximately 1.32% of the total deposits within Fairfield County. Consequently, there are substantial opportunities for the Bank to continue to grow its market share of deposits within its primary market area.

Fairfield County is home to a large number of Fortune 500 corporate headquarters, including Pitney Bowes, Clairol, Xerox, GE Capital, Champion-International and Time Warner Cable, as well as the U.S. headquarters of several international companies, including UBS and Diageo-Guinness. Many senior executives and employees of these and other businesses based in New York City reside within our market area. Our market is also characterized by a large number of small and medium-sized businesses that have developed to meet the needs of the community. We are focused on serving these individuals and small to medium-size businesses.

Growth Strategy

Our goal is to continue to be the largest, independently owned commercial bank headquartered in Fairfield County. Our focus is on growing our core deposit base which will be utilized to fund our loan growth. We plan to attract new customers by providing a targeted line of commercial and consumer financial services while maintaining our reputation for excellent service, professionalism and integrity. We believe that the impact of recent and ongoing bank consolidations in Fairfield County provides a significant opportunity for us to continue to grow our community-focused banking business. Our strategy for achieving these objectives includes the following:

Expand our geographical footprint. We intend to continue to establish new branches in Fairfield County. As a result of the financial institution consolidation which has occurred within Connecticut, our market area includes several unused bank buildings and facilities, the availability of which has provided us in the past, and may provide us in the future, with an efficient and cost-effective alternative to building new facilities. Our management is very familiar with our market area, and regularly evaluates opportunities to lease existing facilities by reviewing market demographics with a view towards deposit growth, geographic location and customer accessibility, proximity to competitors, renovation costs, and suitability. We also intend to potentially expand into Westchester County and surrounding counties in New York, although under current law this would require us to establish a de novo bank or acquire a branch of an existing bank. While we have no current acquisition arrangements, we intend to consider

potential acquisition opportunities as they arise. Except for the acquisition of our Residential Lending Group, we have not historically supplemented our growth through acquisitions.

Increase our deposit balances. Our focus is on increasing our core deposits, which consist of savings accounts, money market deposit accounts, non-interest-bearing demand accounts and certificates of deposit in amounts less than $100,000. We have grown our core deposits from $127.9 million at December 31, 1999 to $295.7 million at December 31, 2004 with a weighted average interest rate of 1.84% as of December 31, 2004. We intend to continue to increase our core deposits by attracting new customers who seek a high level of personalized banking services. We believe that our personalized service and our role in providing commercial real estate and construction loans in the local business community distinguishes us from most of our competitors, many of which are larger banks and other institutions with a regional or national focus.

Attract and retain experienced lending professionals. Our senior management team includes individuals with extensive experience and business contacts in the Fairfield County area. We seek to hire additional experienced commercial lenders with strong business relationships and knowledge of our market area in order to expand and enhance our current commercial banking and loan operations. We also consider the availability of experienced lenders in connection with our plans to establish new branch locations within our market area.

Increase the number and size of our loans. We seek to expand and attract new lending relationships, particularly residential construction, commercial real estate and, to a lesser extent, commercial business loans. Additional capital will allow us to lend higher amounts and to better meet the lending needs of our borrowers. As we grow, our goal is to increase our loan-to-deposit ratio by shifting the mix of earning assets to a greater percentage of higher yielding loans.

Offer new products and services. We plan to increase the banking products and financial services we offer in order to diversify our revenue base, increase our fee income, and strengthen our customer relationships. We seek to exploit opportunities to cross-sell these additional services to our existing customers and to attract new customers. In 1999, we acquired a residential mortgage brokerage company which conducted business in Connecticut, New York and New Jersey. This business is now conducted through a division of the Bank. Our residential mortgage brokerage business has generated significant non-interest (fee) income in each year following the acquisition, although the division's performance in 2004 was adversely affected by increases in market rates of interest which resulted in a significant decrease in the volume of refinance transactions.

Experienced Management Team

Our growth since 1999 is primarily due to our hiring of an experienced team of banking executives, all of whom have considerable experience in community banking in Fairfield County, Connecticut. Our management team is led by Angelo De Caro, our Chairman and Chief Executive Officer, who is a former partner and senior financial officer of Goldman Sachs & Co. Mr. De Caro served on the executive committees of Goldman Sachs Swiss Private Bank and Goldman Sachs Trust Services. Mr. De Caro has extensive experience in financial management and risk analysis and his responsibilities at Goldman Sachs included auditing, tax and financial controls. He has focused us on our strategic growth objectives with respect to both our loan portfolio and core deposits. Our President, and the Chief Executive Officer of the Bank, Charles F. Howell, has over 30 years of banking experience in Fairfield County, including prior service as the president of a bank and as the chief operating officer and chief lending officer at another bank. Our Senior Executive Vice President and Chief Financial Officer, Robert F. O'Connell, has experience as a CPA in a major national accounting firm and has served as a senior executive officer and CFO of four other banks over a 28-year period. He also has responsibility for operations, retail banking and human resources. Our Chief Operating Officer, Philip W. Wolford, has 31 years of banking experience and has been a senior executive officer of three banks. Mr. Wolford

served as the controller of a large New York City savings bank and has had responsibility for operations, information technology, compliance, retail banking and loan operations. Our other four senior officers have over 100 years of combined banking and mortgage banking experience. We have also hired several senior commercial lenders with considerable experience and business relationships from other banks and financial institutions in our market area, and we expect to hire additional experienced lenders as we continue to grow.

Office and Other Information

Our principal executive offices are located at 900 Bedford Street, Stamford, Connecticut 06901, and our telephone number is (203) 324-7500. Our Internet address is www.pnbk.com. The information contained on our web site is not part of this prospectus.

The Rights Offering

Common Stock Offered		We are offering a minimum of shares and a maximum of shares of our common stock in the offering. We are offering our shareholders as of , 2005, the record date, the right to subscribe for and purchase up to shares of our common stock pursuant to the exercise of subscription rights. Each subscription right includes a basic subscription right and an oversubscription privilege for shareholders who exercise their basic subscription right in full, subject to availability and proration by us under certain circumstances. In this prospectus we refer to your basic subscription right as the "Basic Subscription Right" and to your oversubscription privilege as the "Oversubscription Privilege." In addition, in the event that there is not a sufficient number of shares of common stock remaining upon completion of the offering to satisfy the minimum number of shares we are required to sell to the standby purchasers, we will issue up to an additional shares of common stock to the standby purchasers. See "The Rights Offering."
Basic Subscription Right		Each of our shareholders will receive one Basic Subscription Right for every shares of common stock held on the record date. We will not issue fractional rights; the number of Basic Subscription Rights we offer to each shareholder will be rounded up or down to the nearest whole number.
Oversubscription Privilege		If you fully exercise your Basic Subscription Rights, subject to certain limits, you may also subscribe for up to two additional shares of common stock that other shareholders do not purchase for each Basic Subscription Right you hold. Shares of common stock available for purchase pursuant to the Oversubscription Privilege will be prorated if the number of oversubscribed shares exceeds the number of shares of common stock available. We will prorate in proportion to the number of shares of common stock each holder has subscribed for pursuant to the Basic Subscription Rights. The total number of shares that a shareholder may purchase in the offering as a result of the exercise of the Oversubscription Privilege (including shares purchased pursuant to the Basic Subscription Right) is limited to three times the number of shares purchased by such shareholder's exercise of the Basic Subscription Right.
Record Date		, 2005.
Subscription Price		$ per share.

Common Stock to be Outstanding after the Offering		2,489,391 shares of our common stock were outstanding as of the record date. A total of shares will be outstanding if we sell the minimum shares available in this offering and a total of shares will be outstanding if we sell the maximum shares available in this offering. You may experience substantial dilution in your equity ownership interest and voting power if you do not exercise your Basic Subscription Right or if additional shares are issued to the standby purchasers. See "Risk Factors—Risks Related to the Offering."
Expiration Time		5:00 p.m., Eastern Time, on , 2005, unless we extend the expiration date for up to [20] calendar days (but no later than 5:00 p.m., Eastern Time, on , 2005). No one may exercise rights after the expiration time.
Non-transferability of Rights		You may not sell or otherwise transfer any of your Basic Subscription Rights or your Oversubscription Privilege.
Regulatory Limitation		We will not be required to issue common stock to any rights holder pursuant to the exercise of the Basic Subscription Right or the Oversubscription Privilege or any standby purchaser who, in our opinion, could be required to obtain prior clearance or approval from, or submit a notice to, any federal or state bank regulatory authority to acquire, own or control such shares if, at the expiration time for the exercise of rights, such clearance or approval has not been obtained and/or any required waiting period has not expired. If we elect not to issue shares of common stock in such case, such shares will become available to satisfy oversubscriptions by other rights holders and will be available to the standby purchasers. See "The Rights Offering—Regulatory Limitation."
Subscription Agent		Registrar and Transfer Company
Information Agent		Registrar and Transfer Company
Financial Advisor		We have entered into an agreement with Sandler O'Neill & Partners, L.P., pursuant to which Sandler O'Neill is acting as our financial advisor in connection with the offering. We have agreed to pay certain fees to, and expenses of, Sandler O'Neill for its services in the offering. See "The Rights Offering—Financial Advisor."
Procedure for Subscribing		To exercise your subscription rights (including both the Basic Subscription Right and the Oversubscription Privilege), you should complete the subscription rights certificate and forward it along with payment in full for all of the shares for which you are subscribing to the subscription agent. You are responsible for ensuring that your subscription rights certificate reaches the subscription agent before the expiration time. If you plan to mail the subscription rights certificate, we recommend that you use insured, registered mail. See "The Rights Offering—Exercise of Subscription Rights."

Persons Holding Shares, or Wishing to Exercise Rights, Through Others		If you hold shares of common stock through a broker, dealer, commercial bank, trust company or other nominee, you should contact the institution and inform them if you wish to participate in this offering. See "The Rights Offering—Exercise of Subscription Rights—Shares Held by or for Others."
No Revocation		You may not revoke your subscription after the subscription agent receives your subscription rights certificate. Rights not exercised prior to the expiration time will expire.
Minimum Offering		The offering is conditioned upon the receipt of minimum offering proceeds of $ . We believe, however, that this condition will be satisfied as a result of the commitments made by the standby purchasers under the standby purchase agreements. The maximum amount committed to the standby purchasers is referred to as the "Maximum Standby Purchase Commitment," and the minimum we will be required to sell to the standby purchasers is referred to as the "Minimum Standby Purchase Obligation." See "Standby Purchase Agreements."
Standby Purchase Agreements		We anticipate that we will enter into standby purchase agreements pursuant to which the standby purchasers will severally agree to acquire from us at the $ per share subscription price up to shares remaining after exercise of the Basic Subscription Right and Oversubscription Privilege by all shareholders of record, subject, in each case, to a maximum standby purchase commitment and certain conditions. It is anticipated that each standby purchase agreement will require that we sell a minimum number of shares to the related standby purchaser if sufficient shares are not available after issuance of all underlying shares subscribed for by the exercise of the Basic Subscription Right and the Oversubscription Privilege. In such case, we will issue in the aggregate up to additional shares to satisfy the Minimum Standby Purchase Obligation, but in no event will this result in shares being issued in excess of the maximum number of shares offered hereby.
Our Right to Terminate the Offering		We reserve the right to terminate the offering at any time until it has expired and for any reason. If we terminate the offering, we will have no obligation to you other than to return any payment we have received from you, without interest.
Delivery of Shares		Assuming we receive the minimum offering proceeds, we will send you certificates representing the shares of common stock you purchased as soon as practicable after , 2005, whether you exercise your rights immediately before that date or earlier. If you hold your common stock through The Depository Trust Company (known as DTC), or arrange for delivery and payment through DTC, DTC will credit the appropriate account for the shares that you purchase.

Purchase Intentions of our Directors and Executive Officers		Our directors and executive officers as a group (14 persons) have indicated their intention to exercise rights to purchase, in the aggregate, approximately $1.7 million of our common stock in the offering. These indications of intent are based upon each director's and officer's evaluation of his or her own financial and other circumstances. While Mr. De Caro, our Chairman of the Board, beneficially owns approximately 27.4% of our common stock, and thereby holds rights to purchase up to approximately shares of common stock in this offering, he has indicated his intention to purchase only $1.0 million of our common stock in this offering, or approximately shares of our common stock assuming the maximum offering size, in order to permit a broader diversification of our shareholder base. Upon their acquisition of such shares, our directors and executive officers, as a group, will beneficially own shares, or a minimum of % and a maximum of % of the outstanding common stock after completion of the offering. Mr. De Caro will beneficially own shares, or a minimum of % and a maximum of % of the outstanding common stock after completion of the offering.
Listing		We are currently listed on the NASDAQ SmallCap Market. We intend to apply to have the shares offered hereby also approved for listing on the NASDAQ SmallCap Market.
No Board or Financial Advisor Recommendations		An investment in our common stock must be made pursuant to your evaluation of your best interests. Accordingly, neither our board of directors nor Sandler O'Neill makes any recommendation to you regarding whether you should exercise your rights or purchase our common stock.
Use of Proceeds		We currently intend to contribute all of the net proceeds of this offering to the Bank. The Bank intends to utilize the proceeds to continue its branch expansion program and for general corporate purposes. We believe that by continuing to grow the Bank, we will be able to create long-term value to our shareholders. The net proceeds will be invested initially in primarily short-term investments.
Risk Factors		Investing in our common stock involves risks, including the risks that are described on pages 11 to 17 of this prospectus.
Questions		You should direct any questions concerning the procedure for subscribing to the information agent, Registrar and Transfer Company. You may phone the information agent at (800) 866-1340, or contact the Corporate Relations Department of the Information Agent at the website maintained by the Information Agent at www.rtco.com/corp_contact.asp.

Condensed Summary Selected Consolidated Financial and Other Data

We have derived the summary selected consolidated financial and other data for the years ended December 31, 2004 and 2003 from our audited consolidated financial statements included elsewhere in this prospectus. We have derived the summary selected consolidated financial and other data for the years ended December 31, 2002, 2001 and 2000 from our audited consolidated financial statements that are not included in this prospectus. You should read the selected consolidated financial information below in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our consolidated financial statements and notes related to those financial statements included elsewhere in this prospectus.

			2004		2003		2002			2001		2000
			(dollars in thousands, except share and per share data)
Selected Operating Data:
Interest and dividend income			$	18,678	$	15,215	$	12,605		$	13,723	$	14,694
Interest expense				7,009		5,588		4,765			6,867		8,018

Net interest income				11,670		9,626		7,840			6,856		6,677
Provision for loan losses				556		563		468			250		326
Noninterest income:
	Mortgage-related fees(1)			2,020		3,963		3,618			3,320		2,538
	Securities gains and losses			—		308		(26	)		—		—
	Other non-interest income(2)			682		543		522			190		147

		Total noninterest income		2,702		4,814		4,114			3,510		2,685
Noninterest expense				12,257		11,659		9,813			8,676		7,693
Net income				926		1,341		1,052			876		767
Per Share Data:
Basic income per share			$	0.38	$	0.56	$	0.44		$	0.37	$	0.34
Diluted income per share				0.37		0.55		0.43			0.36		0.33
Dividends per share				0.135		0.115		0.095			0.060		—
Weighted average shares outstanding — Basic				2,449,679		2,400,879		2,400,525			2,400,488		2,281,993
Weighted average shares outstanding — Diluted				2,502,691		2,443,236		2,427,314			2,426,501		2,317,078
Common shares outstanding at end of period				2,486,391		2,408,607		2,400,525			2,400,525		2,400,375
Balance Sheet Data:
Cash and due from banks			$	6,670	$	4,024	$	5,386		$	7,544	$	3,656
Federal funds sold				37,500		15,000		3,000			12,700		29,500
Short term investments				11,460		10,431		3,349			6,789		—
Investment securities				78,259		92,331		61,721			35,817		34,074
Loans, net				263,875		214,421		170,795			135,680		126,411
Total assets				405,047		342,469		248,497			202,569		197,628
Total deposits				367,005		289,992		217,911			183,264		179,666
Total borrowings				16,248		31,301		10,293			839		945
Total shareholders' equity				19,756		18,780		18,545			17,406		16,427

Selected Financial Ratios and Other Data:
Return on average assets	0.26	%	0.46	%	0.47	%	0.46	%	0.42	%
Return on average equity	4.74		7.09		5.82		5.10		5.20
Average equity to average assets	5.48		6.50		8.13		9.05		8.12
Interest rate spread(3)	3.02		3.10		3.31		3.11		3.08
Net interest margin(4)	3.35		3.41		3.67		3.75		3.80
Average interest-earning assets to average interest-bearing liabilities	116.54		115.88		116.22		117.16		115.68
Non-interest expense to average assets	3.52		4.13		4.59		4.75		4.37
Efficiency ratio(5)	85.28		80.74		82.09		83.69		82.18
Number of full-service customer facilities	9		7		4		4		3
Regulatory Capital Ratios:(6)
Tier I capital to adjusted total assets	6.79	%	7.51	%	6.99	%	8.15	%	7.86	%
Tier I capital to total risk-weighted assets	9.04		10.00		9.13		9.61		9.97
Total capital to total risk-weighted assets	10.70		11.87		10.39		10.74		11.04
Asset Quality Ratios:
Nonperforming loans(7) as a percent of gross loans	1.51	%	0.14	%	0.79	%	2.14	%	1.77	%
Nonperforming assets as a percent of total assets	1.00		0.09		0.56		1.46		1.15
Allowance for loan losses as a percent of gross loans	1.31		1.35		1.37		1.38		1.28
Allowance for loan losses as a percent of total nonperforming loans	86.12		931.43		172.76		64.12		72.59

(1): Represents the revenue generated by our mortgage broker segment. See note 18 to our consolidated financial statements.
(2): Reflects fees and service charges on deposit accounts, loan fee income and other miscellaneous income generated by our commercial banking segment.
(3): Represents the difference between the weighted average yield on interest-earning assets and the weighted average cost of interest-bearing liabilities.
(4): Represents net interest income as a percent of average interest-earning assets.
(5): Represents non-interest expense divided by the sum of net interest income and noninterest income.
(6): See note 14 to our consolidated financial statements for additional information about our regulatory capital positions and requirements and the regulatory capital positions and requirements of the Bank.
(7): Consists of loans past due 90 days or more and still accruing, and loans placed on non-accrual status.

Risk Factors

Investing in our common stock involves a high degree of risk. Before you invest in our common stock, you should understand and carefully consider the risks below, as well as all of the other information contained in this prospectus and our financial statements and the related notes included elsewhere in this prospectus. Any of these risks could have a material adverse effect on our business, financial condition, results of operations and the trading price of our common stock, and you may lose all or part of your investment.

The shares of common stock offered through this prospectus are not savings accounts, deposits or other obligations of a bank or savings association and are not insured by the FDIC or any other governmental agency.

Risks Related to the Offering

You may not revoke your exercise of rights; we may terminate the offering.

Once you have exercised your subscription rights, you may not revoke your exercise. We may terminate this offering at our discretion, including without limitation if we fail to sell at least shares and raise at least $ ,000,000 in the offering. However, we believe that we will raise at least such amount due to our arrangements with the standby purchasers. If we terminate this offering, neither we nor the subscription agent will have any obligation to you with respect to the rights except to return any payment received by the subscription agent, without interest or penalty.

If you do not participate in this rights offering or do not exercise all of your subscription rights, you may suffer dilution of your percentage ownership of our common stock.

This rights offering is designed to enable us to raise capital while allowing all shareholders on the record date to avoid or limit dilution of their ownership interest in the Company. To the extent that you do not exercise your subscription rights and shares are purchased by other shareholders in the rights offering, your proportionate voting interest will be reduced, and the percentage that your original shares represent of our expanded equity after exercise of the subscription rights will be disproportionately diluted.

Even if you exercise your Basic Subscription Right, you may experience dilution if we issue additional shares to the standby purchasers.

You may experience substantial dilution in your voting rights and in your proportional interest in us because the standby purchasers will be able to purchase additional shares beyond the underlying shares even if you exercise your Basic Subscription Right. We will be obligated to sell such shares to the standby purchasers because the standby purchasers will have a right to purchase the Minimum Standby Purchase Obligation even if we issue all of the underlying shares subscribed for by the exercise of the Basic Subscription Right and Oversubscription Privilege.

We have broad discretion in the use of proceeds of this offering.

We have not designated the anticipated net proceeds of this offering for specific uses. Accordingly, our management will have considerable discretion in the application of the net proceeds of this offering and you will not have the opportunity, as part of your investment decision, to assess whether the proceeds are being used appropriately. See "Use of Proceeds."

We set the exercise price for the subscription rights without regard to net worth, earnings or any other similar value, and you should not consider this price to be an indication of the actual value of our common stock.

We set the $ subscription price for the shares of our common stock which may be purchased by exercising the subscription rights at a price less than the market price on the date on which we determined to proceed with this offering. We selected this price based on a number of factors, including the desire to encourage shareholder participation in this offering. You should not, however, consider this price to be an indication of the actual value of our common stock and it was not based on our net worth, earnings or any other established criteria of value. This price may not be indicative of the price that will prevail in the public market after the offering. In particular, the market price of our common stock may decline below $ . See "The Rights Offering—Determination of Subscription Price."

Risks Related to our Business

We intend to continue our emphasis on growth over earnings for the foreseeable future.

We have actively sought growth of our institution in recent years, by opening additional branches, initiating internal growth programs, and completing one acquisition of a mortgage brokerage company. We may not be able to sustain our historical rate of growth or may not even be able to continue to grow at all. Various factors, such as economic conditions and competition, may impede or prohibit us from opening new branches. In addition, we may not be able to obtain the financing necessary to fund additional growth and we may not be able to find suitable candidates for acquisition.

Sustaining our growth has placed significant demands on our management as well as on our administrative, operational and financial resources. For us to continue to manage our growth, we must continue to:

•: attract and retain qualified management and experienced bankers;
•: find suitable markets for expansion;
•: attract funding to support additional growth;
•: maintain our asset quality;
•: maintain adequate regulatory capital; and
•: maintain adequate controls.

Although we believe that our earnings will increase as we build our franchise, earnings are expected to continue to be adversely affected by the costs of opening new branches and the time necessary to build a customer base at each new branch.

If we are unable to continue our historical levels of growth, or if our growth comes at greater financial expense than has been incurred in the past, we may not be able to achieve our financial goals and our profitability may be adversely affected.

Because we intend to increase our commercial real estate, construction and commercial business loan originations, our lending risk will increase, and downturns in the real estate market could adversely affect our earnings.

Commercial real estate, construction and commercial business loans generally have more risk than residential mortgage loans. Both commercial real estate and construction loans, for example, often involve larger loan balances concentrated with single borrowers or groups of related borrowers as compared to single-family residential loans. Construction loans are secured by the property under construction, the value of which is uncertain prior to completion. Thus, it is more difficult to evaluate

accurately the total loan funds required to complete a project and the related loan-to-value ratios. Speculative construction loans involve additional risk because the builder does not have a contract for the sale of the property at the time of construction.

Because the repayment of commercial real estate, construction and commercial business loans depends on the successful management and operation of the borrower's properties or related businesses, repayment of such loans can be affected by adverse conditions in the real estate market or the local economy. As of December 31, 2004, 96.2% of our loan portfolio was secured by real estate located in Fairfield County, Connecticut and Westchester County, New York. As a result, a downturn in the real estate market, especially within our market area, could adversely impact the value of properties securing these loans. Our ability to recover on defaulted loans by selling the underlying real estate would be diminished, and we would be more likely to suffer losses on defaulted loans. As our commercial real estate, construction and commercial business loan portfolios increase, the corresponding risks and potential for losses from these loans may also increase.

Our business is subject to various lending and other economic risks that could adversely impact our results of operations and financial condition.

Changes in economic conditions, particularly an economic slowdown in Fairfield County, Connecticut and the New York metropolitan area, could hurt our business. Our business is directly affected by political and market conditions, broad trends in industry and finance, legislative and regulatory changes, changes in governmental monetary and fiscal policies and inflation, all of which are beyond our control. A deterioration in economic conditions, in particular an economic slowdown within Fairfield County, Connecticut and/or the New York metropolitan area, could result in the following consequences, any of which may hurt our business materially:

•: loan delinquencies may increase;
•: problem assets and foreclosures may increase;
•: demand for our products and services may decline; and
•: collateral for loans made by us, especially real estate, may decline in value, reducing in turn a customer's borrowing power, and reducing the value of assets and collateral associated with our loans receivable.

We may suffer losses in our loan portfolio despite our underwriting practices. We seek to mitigate the risks inherent in our loan portfolio by adhering to specific underwriting practices. These practices include analysis of a borrower's prior credit history, financial statements, tax returns and cash flow projections, valuation of collateral based on reports of independent appraisers and verification of liquid assets. Although we believe that our underwriting criteria are appropriate for the various kinds of loans we make, we may incur losses on loans that meet our underwriting criteria, and these losses may exceed the amounts set aside as reserves in our allowance for loan losses.

Our allowance for loan losses may not be adequate to cover actual losses.

Like all financial institutions, we maintain an allowance for loan losses to provide for loan defaults and non-performance. Our allowance for loan losses may not be adequate to cover actual loan losses, and future provisions for loan losses could materially and adversely affect our operating results. Our allowance for loan losses is based on an evaluation of the risks associated with our loans receivable as well as our prior experience. A substantial portion of our loans are unseasoned and lack an established record of performance. To date, we have experienced negligible losses. The amount of future losses is susceptible to changes in economic, operating and other conditions, including changes in interest rates, that may be beyond our control, and these losses may exceed current estimates. Federal regulatory agencies, as an integral part of their examination process, review our loans and assess the adequacy of

the allowance for loan losses. While we believe that our allowance for loan losses is adequate to cover current losses, we cannot assure you that we will not need to increase our allowance for loan losses or that regulators will not require us to increase this allowance. Either of these occurrences could materially and adversely affect our earnings and profitability.

Our business is subject to interest rate risk and variations in interest rates may negatively affect our financial performance.

We are unable to predict fluctuations of market interest rates, which are affected by many factors, including:

•: inflation;
•: recession;
•: a rise in unemployment;
•: tightening money supply; and
•: domestic and international disorder and instability in domestic and foreign financial markets.

Changes in the interest rate environment may reduce our profits. We realize income from the differential or "spread" between the interest earned on loans, securities and other interest-earning assets, and interest paid on deposits, borrowings and other interest-bearing liabilities. Net interest spreads are affected by the difference between the maturities and repricing characteristics of interest-earning assets and interest-bearing liabilities. We are vulnerable to a decrease in interest rates because our interest-earning assets generally have shorter durations than our interest-bearing liabilities. As a result, material and prolonged decreases in interest rates would decrease our net interest income. In contrast, an increase in the general level of interest rates may adversely affect the ability of some borrowers to pay the interest on and principal of their obligations. Accordingly, changes in levels of market interest rates could materially and adversely affect our net interest spread, asset quality, levels of prepayments and cash flow as well as the market value of our securities portfolio and overall profitability.

Our mortgage operations also are affected by interest rate fluctuations. Generally, increases in interest rates often lead to decreases in home refinancing activity, thus reducing the number of mortgage loans we originate.

Our investment portfolio includes securities which are sensitive to interest rates and variations in interest rates may adversely impact our profitability.

At December 31, 2004, our securities portfolio aggregated $76.3 million, all of which was classified as available-for-sale, and was comprised of mortgage-backed securities which are insured or guaranteed by U.S. government agencies or government-sponsored enterprises, U.S. government agency securities and money market preferred equity securities. These securities amounted to approximately 19% of our total assets and are sensitive to interest rate fluctuations. We also had $11.5 million in short-term investments in a single issuer money market fund. The unrealized gains or losses in our available-for-sale portfolio are reported as a separate component of shareholders' equity. As a result, future interest rate fluctuations may impact shareholders' equity, causing material fluctuations from quarter to quarter. Failure to hold our securities until payments are received on mortgage-backed securities or until maturity on other investments or until market conditions are favorable for a sale could adversely affect our earnings and profitability.

We are dependent on our management team, and the loss of our senior executive officers or other key employees could impair our relationship with our customers and adversely affect our business and financial results.

Our success is dependent upon the continued services and skills of Angelo De Caro, Charles F. Howell, Robert F. O'Connell, Philip W. Wolford and other senior officers including Martin G. Noble, our chief lender, Marcus Zavattaro, the division sales manager of our Residential Lending Group, and John Kantzas, a founder and an executive vice president. While we have employment agreements containing non-competition provisions with Messrs. Howell, O'Connell and Zavattaro, these agreements do not prevent any of them from terminating their employment with us. The unexpected loss of services of one or more of these key personnel could have an adverse impact on our business because of their skills, knowledge of our market, years of industry experience and the difficulty of promptly finding qualified replacement personnel.

Our success also depends, in part, on our continued ability to attract and retain experienced commercial lenders and residential mortgage originators, as well as other management personnel. The loss of the services of several of such key personnel could adversely affect our growth strategy and prospects to the extent we are unable to replace such personnel. We are attempting to hire several experienced commercial business relationship officers who have strong business relationships in order to expand and enhance our current deposit and commercial banking operations. Competition for commercial lenders and residential mortgage originators is strong within the commercial banking and mortgage banking industries, and we may not be successful in attracting or retaining the personnel we require.

A breach of information security could negatively affect our earnings.

Increasingly, we depend upon data processing, communication and information exchange on a variety of computing platforms and networks, and over the internet to conduct our business. We cannot be certain all our systems are entirely free from vulnerability to attack, despite safeguards we have instituted. In addition, we rely on the services of a variety of vendors to meet our data processing and communication needs. If information security is breached, information can be lost or misappropriated, resulting in financial loss or costs to us or damages to others. These costs or losses could materially exceed the amount of insurance coverage, if any, which would have an adverse effect on our results of operations and financial condition. In addition, the Bank could suffer reputational damages which also could materially adversely affect our financial condition and results of operations.

Risks Related to the Ownership of our Common Stock

There is a limited trading market for our common stock; it may be difficult to sell our shares after you have purchased them.

Our common stock is currently listed on the NASDAQ SmallCap Market under the symbol "PNBK." The volume of trading activity in our stock is relatively limited. Even if a more active market develops, there can be no assurance that such market will continue, or that you will be able to sell your shares at or above the offering price. You should carefully consider the lack of liquidity of your investment in the common shares when making your investment decision.

We may be unable to pay dividends in the future.

Our shareholders may receive dividends out of legally available funds if, and when, they are declared by our board of directors. Our policy has been to pay dividends out of cash in excess of the needs of the business. Our most recent quarterly dividend was at a rate of $0.035 per share.

Federal Reserve Board policy restricts our ability to pay dividends, and we cannot assure you that we will pay dividends on our common stock in the future. Federal Reserve Board policy states that

bank holding companies should pay cash dividends on common stock only out of net income available over the past year and only if prospective earnings retention is consistent with the organization's expected future needs and financial condition. The policy provides that a bank holding company should not maintain a level of cash dividends that undermines its ability to serve as a source of strength to its banking subsidiaries. In addition, the terms of the junior subordinated debt we issued in connection with the issuance of trust preferred securities by a statutory trust formed by us contains restrictions on our ability to pay dividends. We may incur additional indebtedness in the future that may prohibit or further restrict our ability to declare and pay dividends. Our ability to declare and pay dividends on the common stock may be restricted in the future due to state corporation laws, our financial condition and results of operations, capital requirements, covenants contained in our various financing agreements, management's assessment of future capital needs and other factors considered by our board of directors.

Our principal source of funds to pay dividends is cash dividends that we receive from Patriot National Bank. The Office of the Comptroller of the Currency regulates the Bank's dividend payments and must approve dividend payments in advance if the total of all dividends declared by the Bank's board of directors in any year will exceed (1) the total of the Bank's net profits for that year, plus (2) the Bank's retained net profits of the preceding two years, less any required net transfers to surplus. See "Supervision and Regulation—Payment of Dividends."

Our executive officers and directors as a group own sufficient shares of our common stock to significantly affect the results of any shareholder vote.

Our executive officers and directors beneficially own approximately 37.4% of our common stock, and will own approximately % of the outstanding common stock after completion of this offering, assuming the sale of the maximum number of shares available in this offering. Mr. De Caro, our Chairman, beneficially owns approximately 27.4% of our common stock, or approximately % of the outstanding common stock after completion of this offering, assuming his purchase of $1.0 million of our common stock in this offering and the sale of the maximum number of shares available in this offering. As a result, these executive officers and directors have the ability to significantly influence the outcome of matters requiring a shareholder vote, including the election of our board of directors, amendments to our organizational documents, or approval of any merger, sale of assets or other major corporate transaction. The interests of these executive officers and directors may differ from yours and these executive officers and directors may be able to delay or prevent us from entering into transactions that would result in a change in control, including transactions in which our shareholders might otherwise receive a premium over the then current market price for their shares. See "Security Ownership of Certain Beneficial Owners and Management" and "Description of Capital Stock."

Future common stock offerings may reduce the ownership percentage of our current shareholders.

In certain circumstances, our board of directors has the authority, without any vote of our shareholders, to issue shares of our authorized but unissued stock. In the future, we may issue additional securities, through public or private offerings, in order to raise additional capital. Any such issuance would dilute the percentage of ownership interest of existing shareholders.

Anti-takeover provisions in our certificate of incorporation, employment and change of control agreements and in our shareholder rights plan may adversely affect the price of our common stock.

We have in place several measures that could have the effect of discouraging take-over attempts. Several senior executive officers have employment agreements or change of control agreements that require lump sum payments and the immediate vesting of unvested stock grants and stock options upon a change of control. Our certificate of incorporation allows our board to issue, without shareholder approval, preferred stock having such voting rights, preferences and special rights as the board may

determine. The issuance of such preferred stock could make it more difficult for a third party to acquire us. In addition, in April 2004, our board adopted a shareholder rights plan that could make it more difficult for a person to acquire a controlling interest in our common stock. Under the shareholder rights plan, a dividend of one common stock purchase right was distributed on each outstanding share of our common stock. Each right entitles a shareholder to buy 8.152 shares of our common stock at a price of $60. The rights remain attached to the common stock until they become exercisable upon certain triggering events, including the acquisition of more than 15% of our common stock by any person or the commencement of a tender offer or exchange offer for our common stock. We are entitled to redeem the rights at $0.001 per right at any time before the trigger date. These measures could make it more difficult for a third party to acquire control of our company, even if the change in control might be beneficial to our shareholders. This could discourage potential takeover attempts and could adversely affect the market price of our common stock.

Risks related to our industry

Strong competition within our market area may limit our growth and profitability.

Competition in the banking and financial services industry is intense. The Fairfield County, Connecticut and the New York City metropolitan areas have a high concentration of financial institutions including large money center and regional banks, community banks and credit unions. Some of our competitors offer products and services that we currently do not offer, such as private banking and trust services. Many of these competitors have substantially greater resources and lending limits than we do and may offer certain services that we do not or cannot provide. Price competition for loans and deposits might result in us earning less on our loans and paying more on our deposits, which reduces net interest income. We expect competition to increase in the future as a result of legislative, regulatory and technological changes. Our profitability depends upon our continued ability to successfully compete in our market area.

Government regulation may have an adverse effect on our profitability and growth.

We are subject to extensive regulation, supervision and examination by the Office of the Comptroller of the Currency, or the OCC, as our chartering authority, by the FDIC, as insurer of deposits, and by the Federal Reserve Board as regulator of our holding company. Changes in state and federal banking laws and regulations or in federal monetary policies could adversely affect our ability to maintain profitability and continue to grow. For example, new legislation or regulation could limit the manner in which we may conduct our business, including our ability to obtain financing, attract deposits, make loans and achieve satisfactory interest spreads. Many of these regulations are intended to protect depositors, the public and the FDIC, not shareholders. In addition, the burden imposed by federal and state regulations may place us at a competitive disadvantage compared to competitors who are less regulated. The laws, regulations, interpretations and enforcement policies that apply to us have been subject to significant, and sometimes retroactively applied, changes in recent years, and may change significantly in the future. Future legislation or government policy may also adversely affect the banking industry or our operations.

Cautionary Statement Regarding Forward Looking Statements

The Private Securities Litigation Reform Act of 1995 provides a safe harbor for forward-looking statements made by us or on our behalf. The presentations, and certain of the other disclosure in this prospectus and in the documents incorporated by reference, including any statements preceded by, followed by or which include the words "may," "could," "should," "will," "would," "believe," "expect," "anticipate," "estimate," "intend," "plan," "assume" or similar expressions constitute forward-looking statements.

These forward-looking statements, implicitly and explicitly, include the assumptions underlying the statements and other information with respect to our beliefs, plans, objectives, goals, expectations, anticipations, estimates, intentions, financial condition, results of operations, future performance and business, including our expectations and estimates with respect to our revenues, expenses, earnings, return on equity, return on assets, efficiency ratio, asset quality and other financial data and capital and performance ratios.

Although we believe that the expectations reflected in our forward-looking statements are reasonable, these statements involve risks and uncertainties which are subject to change based on various important factors (some of which are beyond our control). The following factors, among others, could cause our financial performance to differ materially from our goals, plans, objectives, intentions, expectations, and other forward-looking statements:

•: The strength of the United States economy in general and the strength of the regional and local economies in which we conduct operations;
•: Geopolitical conditions, including acts or threats of terrorism, actions taken by the United States or other governments in response to acts or threats of terrorism and/or military conflicts which could impact business and economic conditions in the United States and abroad;
•: Adverse changes in the economic condition of Fairfield County or the New York City metropolitan area;
•: Adverse changes in the local real estate market, as most of our loans are concentrated in Fairfield County, Connecticut and Westchester County, New York, and the substantial majority of these loans have real estate as collateral;
•: The effects of, and changes in, trade, monetary and fiscal policies and laws, including interest rate policies of the Board of Governors of the Federal Reserve System;
•: Inflation, interest rate, market and monetary fluctuations;
•: The effects of opening new branches;
•: Our timely development of new products and services in a changing environment, including the features, pricing and quality compared to the products and services of our competitors;
•: The effects of any decision by us to engage in any business in which we have not historically been permitted to engage;
•: The willingness of users to substitute competitors' products and services for our products and services;
•: The impact of changes in financial services policies, laws and regulations, including laws, regulations and policies concerning taxes, banking, securities and insurance, and the application thereof by regulatory bodies;
•: Technological changes;
•: Changes in consumer spending and savings habits;
•: Regulatory or judicial proceedings; and
•: The other risks set forth under "Risk Factors."

If one or more of the factors affecting our forward-looking information and statements proves incorrect, then our actual results, performance or achievements could differ materially from those expressed in, or implied by, forward-looking information and statements contained in this prospectus. Therefore, we caution you not to place undue reliance on our forward-looking information and statements.

We do not intend to update our forward-looking information and statements, whether written or oral, to reflect change. All forward looking statements attributable to us are expressly qualified by these cautionary statements.

The Rights Offering

General

We are distributing to the holders of our common stock, at no cost to the holders, non-transferable rights to purchase shares of our common stock. We will distribute to each shareholder who owned shares at the end of the day on , 2005, the record date, one right for each shares of common stock held of record. Each right includes a Basic Subscription Right and an Oversubscription Privilege. We will not issue fractional rights; the number of rights we offer to each shareholder will be rounded up or down to the nearest whole number.

There will be no public market for the rights. You may not sell, assign or otherwise transfer your rights, except by operation of law in the event of your death or dissolution.

Basic Subscription Right

Each right will entitle you, upon payment of $ to us, to purchase one share of our common stock. We will send you certificates representing shares you purchase as soon as practicable after , 2005, whether you exercise your rights immediately before that date or earlier, unless the offering is extended. If you hold your common stock through DTC, or arrange for delivery and payment through DTC, DTC will credit the appropriate account for the shares you purchase.

Oversubscription Privilege

Each right also gives you an Oversubscription Privilege to purchase up to two additional shares of our common stock that other shareholders do not purchase for each right you hold. You may exercise your Oversubscription Privilege only if you exercise your Basic Subscription Right in full. The subscription price for any oversubscription shares you purchase will be $ , the same as if you exercise the Basic Subscription Right.

If you want to exercise your Oversubscription Privilege, you should indicate the number of additional shares that you would like to purchase in the space provided on your subscription rights certificate. The total number of shares that you may purchase if you exercise your Oversubscription Privilege (including those shares purchased pursuant to the Basic Subscription Right) is limited to three times the number of shares purchased through exercise of your Basic Subscription Right. When you send in your subscription rights certificate, you must send the full payment for the number of oversubscription shares that you have requested to purchase, if any, in addition to full payment for shares you are purchasing pursuant to your Basic Subscription Right.

If the number of shares remaining after the exercise of all Basic Subscription Rights is not sufficient to satisfy all Oversubscription Privileges, you will be allocated shares pro rata, subject to rounding to eliminate fractional shares, in proportion to the number of shares that you purchased by exercising your Basic Subscription Right.

As soon as practicable after , 2005, or the expiration time if the offering is extended, the subscription agent will determine the number of shares of our common stock that you may purchase pursuant to the Oversubscription Privilege. We will send you certificates representing these shares as soon as practicable after , 2005. If you hold your common stock through DTC, or arrange for delivery and payment through DTC, DTC will credit the appropriate account for the shares you purchase. If you request and pay for more oversubscription shares than are allocated to you, we will refund the amount of the overpayment, without interest.

Banks, brokers and other nominee holders who act on behalf of beneficial owners will have to certify to us and to the subscription agent as to the aggregate number of rights that they are exercising

and the number of shares of our common stock that they are requesting pursuant to the Oversubscription Privilege on behalf of each beneficial owner.

Expiration Time

The rights will expire at 5:00 p.m., Eastern Time, on , 2005, unless we, at our sole discretion, extend the expiration date for up to [20] calendar days, but no later than 5:00 p.m., Eastern Time, on , 2005. If you do not exercise your Basic Subscription Right and your Oversubscription Privilege prior to that time, your subscription rights will terminate and be null and void. We will not be required to issue shares of our common stock to you if the subscription agent receives your subscription rights certificate or your payment after the expiration time, regardless of when you sent the subscription rights certificate and payment, unless you sent them in compliance with the guaranteed delivery procedures described below.

Standby Purchase Agreements

We anticipate that we will enter into standby purchase agreements pursuant to which an aggregate of investors, as standby purchasers, will severally agree to acquire from us at $ per share up to shares of our common stock, if any, remaining after the exercise of Basic Subscription Rights and the Oversubscription Privilege of our shareholders of record subject in each case to the Maximum Standby Purchase Commitment and possible reduction under certain circumstances. See "—Regulatory Limitation." We expect that the standby purchase agreements will require that we sell the Minimum Standby Purchase Obligation (up to additional shares in the aggregate) to the standby purchasers if sufficient shares are not available after completion of the offering. The additional shares would be offered only to the standby purchasers. See "Standby Purchase Agreements."

No standby purchaser will be permitted to acquire shares of our common stock pursuant to its standby purchase commitment if, after such acquisition, its percentage ownership, together with that of its affiliates, of the total number of shares of our common stock would exceed 9.9%.

No Board or Financial Advisor Recommendation

You must make your decision whether to exercise your rights based on your own evaluation of your financial situation and our offer. Neither our board of directors nor Sandler O'Neill makes any recommendation to any holder of rights or other prospective purchasers regarding the exercise of their rights or the subscription for shares of our common stock.

Exercise of Subscription Rights

Important!

Please carefully read the instructions accompanying the subscription rights certificate and follow those instructions in detail. Do not send subscription rights certificates to us.

You are responsible for choosing the payment and delivery method for your subscription rights certificate, and you bear the risks associated with your choices. If you choose to deliver your subscription rights certificate and payment by mail, we recommend that you use registered mail, properly insured, with return receipt requested. We also recommend that you allow a sufficient number of days to ensure delivery to the subscription agent and clearance of payment prior to , 2005. Because uncertified personal checks may take at least five business days to clear, we strongly urge you to pay, or arrange for payment, by means of certified or cashier's check, money order or wire transfer of funds.

Method of Exercise

You may exercise your rights by delivering the following to the subscription agent, Registrar and Transfer Company, on or before , 2005:

•: The properly completed and signed subscription rights certificate accompanying this prospectus;
•: Any required signature guarantees; and
•: Payment in full of the subscription price for all of the shares of common stock you wish to purchase by exercising your Basic Subscription Right and your Oversubscription Privilege.

You should deliver your subscription rights certificate and payment in the enclosed envelope to the address set forth below under the caption, "—Subscription Agent."

Method of Payment

You must pay for the shares of common stock you subscribe for by means of (1) an uncertified check payable to "Registrar and Transfer Company," as subscription agent, (2) a certified check or bank draft (cashier's check) drawn on a United States bank or a postal or express money order payable to "Registrar and Transfer Company," as subscription agent, or (3) a wire transfer of funds to an account maintained by the subscription agent for the purpose of accepting subscriptions at , WIRE CLEARING ACCOUNT, ABA # , Account #: , Attn: (Patriot National Bancorp, Inc.). You will have paid the subscription price only:

•: In the case of an uncertified check, when it has cleared;
•: In the case of a certified check or bank draft drawn on a United States bank or a postal or express money order, when the subscription agent has received it; or
•: In the case of a wire transfer, when the subscription agent's account designated above has received the funds.

Guaranteed Delivery Procedures

If you want to exercise your rights, but time will not permit your subscription rights certificate to reach the subscription agent on or prior to 5:00 p.m., on , 2005, you may exercise your rights using the following guaranteed delivery procedures:

1.

On or before , 2005, you must have sent, and the subscription agent must have received, payment in full for each share of common stock you are purchasing through your Basic Subscription Right and your Oversubscription Privilege;

2.

On or before , 2005, you must have sent, and the subscription agent must have received, a Notice of Guaranteed Delivery, substantially in the form provided with the attached instructions, from a member firm of a registered national securities exchange or a member of the National Association of Securities Dealers, Inc., or a commercial bank or trust company having an office or correspondent in the United States. The Notice of Guaranteed Delivery must state:

•: Your name,
•: The number of rights that you hold,
•: The number of shares of common stock that you wish to purchase pursuant to your Basic Subscription Right, and
•: The number of shares of common stock, if any, you wish to purchase pursuant to your Oversubscription Privilege.

The Notice of Guaranteed Delivery must guarantee the delivery of your subscription rights certificate to the subscription agent within three NASDAQ SmallCap Market trading days following the date of the Notice of Guaranteed Delivery; and

3.: You must send, and the subscription agent must receive, your properly completed and duly executed subscription rights certificate, including any required signature guarantees, within three NASDAQ SmallCap Market trading days following the date of your Notice of Guaranteed Delivery. You may physically deliver the Notice of Guaranteed Delivery via the enclosed envelope to the subscription agent at its address set forth below. You can obtain additional copies of the Notice of Guaranteed Delivery from the subscription agent at the address set forth below under the caption, "—Subscription Agent."

Signature Guarantee

Signatures on the subscription rights certificate must be guaranteed by an Eligible Guarantor Institution, as defined in Rule 17Ad-15 of the Securities Exchange Act of 1934, as amended, subject to the standards and procedures adopted by the subscription agent. Eligible Guarantor Institutions that provide signature guarantee services include banks, brokers, dealers, credit unions, national securities exchanges and savings associations.

Signatures on the subscription rights certificate do not need to be guaranteed if the subscription rights certificate:

•: Provides that the shares of common stock you are purchasing are to be delivered directly to the record owner of the subscription rights; or
•: Is submitted for the account of a member firm of a registered national securities exchange or a member of the National Association of Securities Dealers, Inc., or a commercial bank or trust company having an office or correspondent in the United States.

Shares Held by or for Others

If you hold shares of common stock for the account of others, such as a broker, a trustee or a depository for securities, you should notify the respective beneficial owners of the shares as soon as possible to obtain instructions with respect to the subscription rights they beneficially own.

If you are a beneficial owner of common stock held by a holder of record, such as a broker, trustee or a depository for securities, you should contact the holder and ask the holder to effect transactions in accordance with your instructions.

Ambiguities in Exercise of the Subscription Rights

If you do not specify the number of rights being exercised on your subscription rights certificate, or if your payment is not sufficient to pay the total purchase price for all of the shares that you indicated you wish to purchase, you will be deemed to have exercised the maximum number of rights that could be exercised for the amount of the payment that the subscription agent receives from you.

If your payment exceeds the total purchase price for the number of shares of common stock that you have indicated you wish to exercise on your subscription rights certificate, your payment will be applied until depleted as follows:

1.: To subscribe for the number of shares of common stock that you indicated on the subscription rights certificate that you wish to purchase through your Basic Subscription Right;
2.: To subscribe for additional shares of common stock until your Basic Subscription Right has been fully exercised; and

3.: To subscribe for additional shares of common stock pursuant to your Oversubscription Privilege (subject to any applicable limitation or proration).

We will return any excess payment remaining after the foregoing allocation to you as soon as practicable by mail, without interest or deductions.

Validity of Subscriptions

We will determine all questions concerning the timeliness, validity, form and eligibility of any exercise of subscription rights. We may, at our sole discretion:

•: Waive any defect or irregularity;
•: Permit a defect or irregularity to be corrected within any period of time that we set; or
•: Reject the purported exercise of any right by reason of any defect or irregularity.

Any determination we make with respect to these matters will be final and binding. Subscriptions will not be deemed to have been received or accepted until the person submitting the subscription has cured all irregularities or we have waived them. This must occur within any period of time that we, in our sole discretion, set. Neither we nor the subscription agent will:

•: Be under any duty to notify anyone of any defect or irregularity in connection with the submission of any subscription rights certificate; or
•: Incur any liability for any failure to give notice of this sort.

Subscribers' Fees and Expenses

You are responsible for paying all commissions, fees, taxes and other expenses that you incur in exercising your subscription rights.

No Revocation

You may not revoke your subscription after the subscription agent receives your subscription rights certificate. You should not send your subscription rights certificate unless you are certain that you want to purchase shares of our common stock.

Right To Terminate Offering

We expressly reserve the right, at our sole discretion, at any time prior to delivery of the shares of our common stock offered by this prospectus, to terminate the offering if the offering is prohibited by law or regulation or our board of directors concludes, in its judgment, that it is not in our best interest, and that of our shareholders, to complete the offering under the circumstances. If the rights offering is terminated, all funds received pursuant to the rights offering or from standby purchasers will be promptly refunded, without interest.

Rights as a Shareholder

You will not have any rights as a shareholder with respect to shares of common stock you subscribe for until we issue the certificates representing those shares.

Listing

We intend to apply to have the shares of common stock to be issued on exercise of the subscription rights approved for listing on the NASDAQ SmallCap Market.

The rights themselves are non-transferable and will not be listed on any national securities exchange or quotation system.

Subscription Agent

We have appointed Registrar and Transfer Company, as subscription agent. The subscription agent's address for packages sent by mail or overnight delivery is: 10 Commerce Drive, Cranford, New Jersey 07016-3572.

The subscription agent's telephone number is (800) 866-1340.

You should deliver your subscription rights certificate, payment for the subscription price and Notice of Guaranteed Delivery (if any) to the subscription agent. Do not deliver them to us.

We will pay the fees and expenses of the subscription agent and have agreed to indemnify it against any liability that it may incur in connection with the offering, including liabilities under the Securities Act of 1933.

Questions About How to Subscribe

You should direct any questions concerning the procedure for subscribing to Registrar and Transfer Company, as information agent. The information agent's telephone number is (800) 866-1340. See "—Information Agent."

Procedures for DTC Participants

It is anticipated that the exercise of the Basic Subscription Right (but not the Oversubscription Privilege) may be effected through the facilities of DTC (rights which the holder exercises through DTC are referred to as "DTC rights"). A holder of DTC rights may exercise the Oversubscription Privilege in respect thereof by properly exercising and delivering to the subscription agent, at or prior to , 2005, a DTC Participant Oversubscription Exercise Form, together with payment of the appropriate subscription price for the number of shares for which the Oversubscription Privilege is exercised. Copies of the DTC Participant Oversubscription Exercise Form may be obtained from Registrar and Transfer Company, the information agent and subscription agent.

Determination of Subscription Price

The subscription price has been determined by us, in consultation with Sandler O'Neill. Among the factors considered by our board of directors in determining the subscription price were:

•: The market value of our common stock;
•: Our present and projected operating results and our financial condition;
•: The aggregate size of the offering;
•: The price at which our board of directors believes investors would pay to purchase all of the available shares of common stock offered;
•: The amount the standby purchasers would be willing to commit; and
•: Market and other relevant observations.

See "Capitalization" and "Risk Factors—Risks Related to the Offering."

There can be no assurance, however, that the market price of our common stock will not decline during the subscription period to a level equal to or below the subscription price, or that, following the issuance of the rights and of our common stock upon exercise of the rights or pursuant to the standby purchase agreements, a subscribing rights holder or standby purchaser will be able to sell shares purchased in the offering at a price equal to or greater than the subscription price. An investment in our common stock must be made pursuant to your evaluation of your best interests. Accordingly,

neither our board of directors nor Sandler O'Neill make any recommendation to rights holders or others regarding whether they should exercise the rights or purchase our common stock.

Financial Advisor

We have engaged Sandler O'Neill as our financial advisor in connection with the offering pursuant to an agency agreement between Sandler O'Neill and us. Sandler O'Neill is a nationally recognized investment banking firm whose principal business specialty is financial institutions. In the ordinary course of its investment banking business, Sandler O'Neill is regularly engaged in the valuation of financial institutions and their securities in connection with mergers and acquisitions and other corporate transactions.

In its capacity as financial advisor, Sandler O'Neill provided advice to us regarding the structure of the offering as well as with respect to marketing the shares of our common stock to be issued in the offering. Sandler O'Neill will identify potential standby purchasers and will assist us in negotiating standby purchase agreements with the standby purchasers.

Sandler O'Neill has not prepared any report or opinion constituting a recommendation or advice to us or our shareholders, nor has Sandler O'Neill prepared an opinion as to the fairness of the subscription price or the terms of the offering to us or our current shareholders. Sandler O'Neill expresses no opinion and makes no recommendation to holders of the rights as to the purchase by any person of shares of our common stock. Sandler O'Neill also expresses no opinion as to the prices at which shares to be distributed in connection with the rights offering may trade if and when they are issued or at any future time. See "Determination of Subscription Price."

As compensation for its services, upon completion of the offering, we have agreed to pay Sandler O'Neill a minimum fee of $300,000 consisting of:

•: 1% of the aggregate purchase price of shares of our common stock sold in the offering pursuant to the exercise of Basic Subscription Rights and Oversubscription Privileges by any of our directors, officers or employees; plus
•: 3% of the aggregate purchase price of shares of our common stock sold in the offering pursuant to the exercise of Basic Subscription Rights and Oversubscription Privileges by other shareholders; plus
•: 6.5% of the aggregate purchase price of shares of common stock committed to be purchased by the standby purchasers.

Notwithstanding the foregoing, we have agreed to pay Sandler O'Neill an amount equal to 4.25% of the aggregate purchase price of shares of common stock committed to be purchased by not more than one standby purchaser to be identified and selected by us. We have also agreed to reimburse Sandler O'Neill for its reasonable out-of-pocket expenses pertaining to its engagement, including legal fees, regardless of whether the rights offering is consummated. We have agreed to indemnify Sandler O'Neill against certain liabilities arising out of its engagement, including certain liabilities arising under the Securities Act of 1933.

We and each of our directors and executive officers have agreed with Sandler O'Neill that, without the prior written consent of Sandler O'Neill, none of us will, during the period ending 180 days after the closing date of this offering:

•: offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, lend or otherwise transfer or dispose of directly or indirectly, any shares of common stock or any securities convertible into or exercisable or exchangeable for common stock; or

•: enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of the common stock,

whether any transaction described above is to be settled by delivery of common stock or such other securities, in cash or otherwise. This 180-day period may be extended under certain circumstances if we announce or pre-announce earnings or material news or a material event within approximately 18 days prior to, or approximately 16 days after, the termination of the 180-day period.

The restrictions described in the preceding paragraph do not apply to:

•: the exercise, including the cashless exercise, of any options outstanding on the date of this prospectus;
•: the issuance by us of shares of common stock upon the exercise of any options outstanding on the date of this prospectus;
•: the issuance by us of options to purchase shares of common stock pursuant to our existing equity plans;
•: the transfer by any individual of shares of common stock or any securities exercisable for common stock to a trust for the benefit of such individual or members of such individual's immediate family, as a bona fide gift or which occurs by operation of law, if each transferee or donee agrees in writing as a condition precedent to such transfer or gift to be bound by the same restrictions; and
•: transactions by any person other than us relating to shares of common stock or other securities acquired in open market transactions after the completion of the offering of the shares.

Sandler O'Neill may in the future provide other investment banking services to us and will receive compensation for such services. In the ordinary course of its business as a broker-dealer, Sandler O'Neill may also purchase securities from and sell securities to us and may actively trade our equity or debt securities for its own account and for the accounts of customers and, accordingly, may at any time hold a long or short position in such securities.

Information Agent

We have appointed Registrar and Transfer Company as information agent for the offering. Any questions or requests for assistance concerning the method of subscribing for shares of our common stock or for additional copies of this prospectus, the instructions, or the Notice of Guaranteed Delivery may be directed to the Information Agent at the address and telephone number below:

Registrar and Transfer Company
10 Commerce Drive
Cranford, New Jersey 07016
Telephone No.: (800) 866-1340
Fax No.: (908) 497-2311

We will pay the fees and expenses of the information agent and have also agreed to indemnify the information agent from certain liabilities that it may incur in connection with the rights offering.

Dilution

Rights holders may experience substantial dilution of their percentage of equity ownership interest and voting power in us if they do not exercise their rights. If we are required to sell additional shares to the standby purchasers in excess of those offered pursuant to the Basic Subscription Rights and Oversubscription Privileges due to minimum guarantees in the standby purchase agreements,

subscription rights holders will suffer dilution in their equity ownership interest and voting power whether or not they exercise their Basic Subscription Right.

Purchase Intentions of Directors and Officers

Our directors and executive officers as a group (14 persons) have indicated their intention to exercise subscription rights to purchase, in the aggregate, approximately $1.7 million of our common stock. These indications of intent are based upon each director's and officer's evaluation of his or her own financial and other circumstances. Upon their acquisition of these shares, the directors and executive officers, as a group, will own beneficially shares, or a minimum of % and a maximum of % of our outstanding common stock after completion of the offering. Included in this amount is the ownership of our Chairman, Angelo De Caro, who will own shares, or a minimum of % and a maximum of % of our outstanding common stock after completion of the offering, assuming his purchase of $1.0 million of our common stock in the offering. In addition, certain other directors and executive officers have indicated their intention to exercise subscription rights to purchase, in the aggregate, approximately $700,000 of our common stock.

Foreign And Certain Other Shareholders

Subscription rights certificates will not be mailed to record date holders whose addresses are outside the United States and Canada or who have an APO or FPO address, but will be held by the subscription agent for each record date holders' accounts. To exercise their subscription rights, such persons must notify the subscription agent at or prior to 5:00 p.m., Eastern Time, on , 2005, at which time (if no contrary instructions have been received) the rights represented thereby will expire if not exercised.

Minimum Condition

The offering is conditioned upon us receiving minimum offering proceeds of $ . In the event the minimum condition is not achieved, any funds that have been deposited with the subscription agent will be returned, without interest. As a result of the standby purchase agreements (pursuant to which we expect that the standby purchasers will agree to acquire up to shares of our common stock), we believe that the minimum condition will be satisfied.

Regulatory Limitation

We will not be required to issue shares of common stock in the offering to any rights holder or standby purchaser who, in our sole judgment and discretion, is required to obtain prior clearance, approval or nondisapproval from any federal or state bank regulatory authority to own or control such shares unless, prior to the expiration time, evidence of such clearance, approval or nondisapproval has been provided to us. If we elect not to issue shares in such case, such shares will become available to satisfy subscriptions pursuant to the Oversubscription Privilege or to standby purchasers as to whom such conditions do not apply.

The Change in Bank Control Act prohibits a person or group of persons "acting in concert" from acquiring "control" of any insured depository institution, such as our bank, unless the appropriate federal regulatory agency has been given 60 days' prior written notice of such proposed acquisition and within that time period the applicable regulatory authority has not issued a notice disapproving the proposed acquisition or extending for up to another 30 days the period during which such a disapproval may be issued. An acquisition may be made prior to the expiration of the disapproval period if the applicable regulatory authority issues written notice of its intent not to disapprove the action.

Under applicable regulations, the acquisition of more than 25% of any class of voting stock of a banking institution constitutes the acquisition of control for purposes of the aforementioned notice

requirement. Also, under a rebuttable presumption established by federal banking regulators, the acquisition of more than 10% of any class of voting stock of a banking institution combined with the presence of other "control factors" (including if the acquirer would be one of the two largest holders of any class of voting stock of the institution) may, constitute the acquisition of control.

In addition to the notice requirement under the Change in Bank Control Act, any company that acquires control of a bank or bank holding company may itself become a bank holding company and must register as such within 90 days after acquiring control. A bank holding company is required to file periodic reports with the Federal Reserve. Bank holding companies are also subject to periodic examination and may be subject to, among other things, certain restrictions on their activities.

Certain Federal Income Tax Consequences

General

We have summarized below certain material United States federal income tax consequences of the offering to the holders of our common stock upon the distribution of the rights and to the holders of the rights upon their exercise.

This summary is based on provisions of the Internal Revenue Code of 1986, as amended, or the Code, final, temporary and proposed U.S. Treasury regulations and administrative and judicial interpretations, all as of the date of the prospectus and all of which are subject to change, possibly on a retroactive basis.

This summary is limited to those who hold the common stock, and will hold the rights and any shares acquired upon the exercise of rights as "capital assets" within the meaning of Section 1221 of the Code. This summary does not address all of the tax consequences that may be relevant to holders in light of their personal circumstances, or to holders who are subject to special rules, such as banks and other financial institutions, broker-dealers, real estate investment trusts, regulated investment companies, insurance companies, tax-exempt organizations and foreign taxpayers. This summary does not include any description of the tax laws of any state, local or non-U.S. government that may be applicable to a shareholder.

We urge shareholders to consult their own tax advisors with respect to the particular U.S. federal income consequences to them of this offering, as well as the tax consequences under state, local, non-U.S. and other tax laws and the possible effects of changes in tax laws.

Distribution of Rights

Shareholders will not recognize taxable income for federal income tax purposes upon receipt of the rights.

Shareholder Basis of the Rights

Except as provided in the following sentences, the basis of the rights received by a shareholder as a distribution with respect to such shareholder's common stock will be zero. If the fair market value of the rights on their date of issuance is 15% or more of the fair market value of a shareholder's common stock on the date the rights are received, the shareholder will be required to allocate his or her tax basis in the common stock between the common stock and the rights in proportion to their respective fair market values determined on the date the rights are received. If, however, the fair market value of the rights distributed to a shareholder is less than 15% of the fair market value of the shareholder's common stock on the date the rights are received, the shareholder's tax basis in the rights generally will be zero unless the shareholder properly elects to allocate his or her tax basis between the common stock and the rights in his or her federal income tax return for the taxable year in which the rights are received. Shareholders who intend to purchase shares in the offering and allocate basis between

presently owned shares of our common stock and the rights received will have to make their own determination of the value of the rights.

Lapse of the Rights

Shareholders who allow the rights received by them in this offering to lapse will not recognize any gain or loss, and no adjustment will be made to the basis of the common stock they own.

Exercise of the Rights; Basis and Holding Period of the Common Stock

Shareholders will not recognize any gain or loss upon the exercise of rights. The basis of the shares acquired through exercise of the rights will be equal to the sum of the subscription price and the shareholder's basis in the rights, if any. The holding period for the shares acquired through exercise of the rights will begin on the date they are exercised.

Sale of Shares

The sale of shares will result in the recognition of gain or loss to the shareholder in an amount equal to the difference between the amount realized and the shareholder's basis in the shares. Gain or loss upon the sale of the shares will be long- term capital gain or loss if the holding period for the shares is more than one year.

Standby Purchase Agreements

We expect to enter into standby purchase agreements with certain institutional investors and high net worth individuals. We expect the standby purchasers to severally agree, subject in each case to a Maximum Standby Purchase Commitment and certain conditions, to acquire from us at the subscription price of $ per share up to underlying shares, if any, remaining after the exercise of the rights, including those purchased pursuant to the Oversubscription Privilege. In addition, the standby purchase agreements will provide that we must sell the Minimum Standby Purchase Commitment (up to shares of our common stock in the aggregate) to the standby purchasers if such amount of underlying shares are not available for sale after the exercise of rights. The obligations of the standby purchasers will not be subject to the purchase of any minimum number of shares pursuant to the exercise of the rights by the rights holders, but are subject to certain conditions, including that the offering shall have been conducted substantially in the manner described in this prospectus.

We expect that each standby purchase agreement will provide that it may be terminated by the standby purchaser only upon the occurrence of the following events: (i) the suspension of trading in our common stock, the establishment of limited or minimum prices for our common stock, or a general suspension of trading in or the establishment of limited or minimum prices on the New York Stock Exchange or the NASDAQ market, any banking moratorium, any suspension of payments with respect to banks in the United States, or a declaration of war or national emergency in the United States; (ii) any circumstances that would result in the standby purchaser, individually or otherwise with any other person or entity, being required to register as a depository institution holding company under federal or state laws or regulations, or to submit an application, or notice, to a federal regulatory authority; (iii) prior to the expiration time, if we experience a material adverse change in our financial condition from our financial condition on , 2005, except as specifically disclosed in the prospectus; (iv) if the offering is not completed by through no fault of the standby purchaser; or (v) in the event that we are unable to obtain any required federal or state approvals for the offering on conditions reasonably satisfactory to us despite our reasonable efforts to obtain such approvals.

In the event that the number of underlying shares remaining after the exercise of the rights is less than the standby purchasers' aggregate Maximum Standby Purchase Commitment, such underlying shares will first be allocated among the standby purchasers in satisfaction of the Minimum Standby Purchase Commitments and any remaining underlying shares will be allocated pro rata among the standby purchases according to their respective Maximum Standby Purchase Commitments. In the event that such number of underlying shares is less than our aggregate Minimum Standby Purchase Commitment, we will issue and sell, at the subscription price, to the relevant standby purchasers sufficient additional shares of our common stock to satisfy the aggregate Minimum Standby Purchase Commitment, but in no event will this result in shares being issued in excess of the maximum shares offered hereby.

The following table sets forth certain information relating to the standby purchasers:

Standby Purchasers		Minimum Standby Purchase Commitment		Maximum Standby Purchase Commitment
		(shares)

Use of Proceeds

The net proceeds of the offering, after deducting expenses payable by us in connection with the offering, are estimated to be $ if the minimum number of shares are sold and $ if the maximum number of shares are sold.

We intend to contribute all of the net proceeds of this offering to the Bank. The Bank intends to utilize the proceeds to continue its branch expansion program and for general corporate purposes. We believe that by continuing to grow the Bank, we will be able to create long-term value to our shareholders. The net proceeds will be invested initially in primarily short-term investments.

Capitalization

The following table shows our capitalization as of December 31, 2004. It shows our capitalization on three bases: actual and as adjusted to give effect to the receipt of the net proceeds from the offering, assuming in the alternative that minimum and maximum of the offered shares are sold. The as adjusted capitalization assumes that we sell the indicated number of shares of common stock at $ per share and that the net proceeds from the offering, after deducting in each case $ of estimated offering expenses payable by us, are: (1) $ if the minimum amount of the shares are sold; and $ if the maximum amount of the shares are sold.

			December 31, 2004
			Actual			As Adjusted
						Minimum Sold	Maximum Sold
			(in thousands, except per share and share data)
Long-term borrowings:
	FHLB advances		$	8,000,000
	Junior subordinated debentures			8,248,000

		Total borrowings(1)	$	16,248,000

Shareholders' Equity:
	Preferred Stock, no par value per share; 1,000,000 shares authorized; no shares issued and outstanding
	Common stock; par value $2.00 per share; 30,000,000 shares authorized; 2,486,391 shares issued and outstanding; shares issued and outstanding as adjusted assuming the minimum amount of the shares are sold; and shares issued and outstanding as adjusted assuming the maximum amount of the shares are sold(2)		$	4,972,782
Additional paid-in capital				11,830,173
Retained earnings				3,346,718
Accumulated other comprehensive loss				(393,239	)

Total Shareholders' Equity			$	19,756,434

Bank regulatory capital ratios(3)
	Tier 1 capital (to average assets)			6.98	%
	Tier 1 capital (to risk weighted assets)			9.29	%
	Total capital (to risk weighted assets)			10.50	%

(1): In addition to the indebtedness reflected above, we had total deposits of $367.0 million at December 31, 2004.
(2): The number of shares of common stock to be outstanding after this offering is based on the number of shares outstanding as of March 31, 2005 and excludes 107,000 shares of our common stock issuable upon the exercise of outstanding options on such date, at a weighted average exercise price of $10.13. As of March 31, 2005, we did not have any shares available for future grant under our stock option plan.
(3): See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Liquidity—Capital" and "Supervision and Regulation." The as-adjusted ratios assume the contribution of $ million of the net proceeds of this offering to the Bank and the initial deployment of such proceeds in short-term assets with a 20% risk-weighting under applicable regulations.

Selected Consolidated Financial and Other Data

We have derived the selected consolidated financial and other data for the years ended December 31, 2004 and 2003 from our audited consolidated financial statements included elsewhere in this prospectus. We have derived the selected consolidated financial and other data for the years ended December 31, 2002, 2001 and 2000 from our audited consolidated financial statements that are not included in this prospectus. You should read the selected consolidated financial information below in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our consolidated financial statements and notes related to those financial statements included elsewhere in this prospectus.

			2004		2003		2002			2001		2000
			(dollars in thousands, except share and per share data)
Operating Data:
Interest and dividend income			$	18,678	$	15,215	$	12,605		$	13,723	$	14,694
Interest expense				7,009		5,588		4,765			6,867		8,018

Net interest income				11,670		9,626		7,840			6,856		6,677
Provision for loan losses				556		563		468			250		326
Noninterest income:
	Mortgage-related fees(1)			2,020		3,963		3,618			3,320		2,538
	Securities gains and losses			—		308		(26	)		—		—
	Other non-interest income(2)			682		543		522			190		147

		Total noninterest income		2,702		4,814		4,114			3,510		2,685
Noninterest expense				12,257		11,659		9,813			8,676		7,693
Net income				926		1,341		1,052			876		767
Per Share Data:
Basic income per share			$	0.38	$	0.56	$	0.44		$	0.37	$	0.34
Diluted income per share				0.37		0.55		0.43			0.36		0.33
Dividends per share				0.135		0.115		0.095			0.060		—
Weighted average shares outstanding — Basic				2,449,679		2,400,879		2,400,525			2,400,488		2,281,993
Weighted average shares outstanding — Diluted				2,502,691		2,443,236		2,427,314			2,426,501		2,317,078
Common shares outstanding at end of period				2,486,391		2,408,607		2,400,525			2,400,525		2,400,375
Book value per share				7.95		7.80		7.73			7.25		6.84
Tangible book value per share				7.57		7.41		7.34			6.86		6.40
Balance Sheet Data:
Cash and due from banks			$	6,670	$	4,024	$	5,386		$	7,544	$	3,656
Federal funds sold				37,500		15,000		3,000			12,700		29,500
Short term investments				11,460		10,431		3,349			6,789		—
Investment securities				78,259		92,331		61,721			35,817		34,074
Loans, net				263,875		214,421		170,795			135,680		126,411
Total assets				405,047		342,469		248,497			202,569		197,628
Total deposits				367,005		289,992		217,911			183,264		179,666
Total borrowings				16,248		31,301		10,293			839		945
Total shareholders' equity				19,756		18,780		18,545			17,406		16,427

Selected Financial Ratios and Other Data:
Return on average assets	0.26	%	0.46	%	0.47	%	0.46	%	0.42	%
Return on average equity	4.74		7.09		5.82		5.10		5.20
Average equity to average assets	5.48		6.50		8.13		9.05		8.12
Interest rate spread(3)	3.02		3.10		3.31		3.11		3.08
Net interest margin(4)	3.35		3.41		3.67		3.75		3.80
Average interest-earning assets to average interest-bearing liabilities	116.54		115.88		116.22		117.16		115.68
Efficiency ratio(5)	85.28		80.74		82.09		83.69		82.18
Number of full-service customer facilities	9		7		4		4		3
Regulatory Capital Ratios:(6)
Tier I capital to adjusted total assets	6.79	%	7.51	%	6.99	%	8.15	%	7.86	%
Tier I capital to total risk-weighted assets	9.04		10.00		9.13		9.61		9.97
Total capital to total risk-weighted assets	10.70		11.87		10.39		10.74		11.04
Asset Quality Ratios:
Nonperforming loans(7) as a percent of gross loans	1.51	%	0.14	%	0.79		2.14		1.77
Nonperforming assets as a percent of total assets	1.00		0.09		0.56		1.46		1.15
Allowance for loan losses as a percent of gross loans	1.31		1.35		1.37		1.38		1.28
Allowance for loan losses as a percent of total nonperforming loans	86.12		931.43		172.76		64.12		72.59

(1): Represents the revenue generated by our mortgage broker segment. See note 18 to our consolidated financial statements.
(2): Reflects fees and service charges on deposit accounts, loan fee income and other miscellaneous income generated by our commercial banking segment.
(3): Represents the difference between the weighted average yield on interest-earning assets and the weighted average cost of interest-bearing liabilities.
(4): Represents net interest income as a percent of average interest-earning assets.
(5): Represents non-interest expense divided by the sum of net interest income and noninterest income.
(6): See note 14 to our consolidated financial statements for additional information about our regulatory capital positions and requirements and the regulatory capital positions and requirements of the Bank.
(7): Consists of loans past due 90 days or more and still accruing, and loans placed on non-accrual status.

Market Price of Common Stock and Dividend Policy

Our policy has been to pay dividends out of funds in excess of the needs of the business. We declared cash dividends to our shareholders on a quarterly basis at a rate of $0.02 per share from the second quarter of 2001 through the first quarter of 2002, at a rate of $0.025 through the first quarter of 2003, and at a rate of $0.03 through the first quarter of 2004. In the second quarter of 2004, our board of directors increased the quarterly dividend to $0.035 per share.

Our ability to pay future dividends on our common stock depends on the Bank's ability to pay dividends to us. In accordance with OCC rules and regulations, the Bank may continue to pay dividends only if the total amount of all dividends that will be paid, including the proposed dividend, by the Bank in any calendar year does not exceed the total of the Bank's retained net income of that year to date, combined with the retained net income of the preceding two years, unless the proposed dividend is approved by the OCC. In addition, the OCC and/or the FDIC may impose further restrictions on dividends. We currently intend to continue to pay cash dividends, subject to compliance with Federal Reserve Board policy, OCC rules and regulations, state corporation laws, our financial condition and results of operations, capital requirements, covenants contained in our various financing agreements, management's assessment of future capital needs and other factors considered by our board of directors.

The following table sets forth, for the fiscal quarters indicated, the high and low sales prices of our common stock, as reported on the Nasdaq SmallCap Market, and the cash dividends declared.

		High and Low Sales Prices Common Stock
		High and Low Sales Prices Common Stock				Cash Dividends Declared
		High		Low		Cash Dividends Declared
Fiscal Year 2003
	First Quarter	$	10.56	$	9.50	$	0.025
	Second Quarter		10.80		9.10		0.030
	Third Quarter		11.45		9.65		0.030
	Fourth Quarter		12.50		10.76		0.030
Fiscal Year 2004
	First Quarter	$	16.25	$	12.49	$	0.030
	Second Quarter		15.25		14.03		0.035
	Third Quarter		14.99		13.51		0.035
	Fourth Quarter		18.60		14.01		0.035
Fiscal Year 2005
	First Quarter	$	18.40	$	17.00	$	0.035
	Second Quarter (Through April 22, 2005)		19.87		18.05		—

On December 31, 2004, there were approximately 761 holders of record of our common stock. On April 22, 2005, the most recent practicable date before the date of this prospectus, the high and low sales prices per share of our common stock on the NASDAQ SmallCap Market were $19.16 and $18.54, respectively.

Management's Discussion and Analysis of Financial Condition and Results of Operations

Summary

We are the bank holding company for the Bank, the largest publicly-held commercial bank headquartered in Fairfield County, Connecticut. Both Bancorp and the Bank are headquartered in Stamford, Connecticut, approximately 40 miles east of New York City. The Bank has nine branch office locations serving customers located in the Fairfield County communities of Stamford, Greenwich, Old Greenwich, Norwalk, Wilton and Darien. In addition, our Residential Lending Group has mortgage origination offices in Stamford and Melville (Long Island), New York.

The Bank has two reportable segments, the commercial bank and the mortgage broker or Residential Lending Group. The commercial bank offers a broad range of commercial and consumer banking services with an emphasis on serving the needs of small and medium-sized businesses, commercial real estate investors and builders, professionals such as accountants and attorneys, as well as individuals. The commercial bank offers consumer and commercial deposit accounts such as checking accounts, insured money market accounts, time certificates of deposit, and savings accounts and also offers commercial real estate and construction loans to area businesses and developers, commercial loans to area businesses, as well as home mortgages, home improvement loans and home equity lines of credit to individuals. The Residential Lending Group solicits and processes conventional mortgage applications from consumers on behalf of permanent investors and originates loans for sale. Revenues are generated from loan brokerage and application processing fees received from permanent investors and gains and origination fees from loans sold.

The Bank established two new branch banking offices during 2004; the first, located in Darien, Connecticut, opened in July 2004, and the second, located in Wilton, Connecticut, opened in November 2004. The Bank has received regulatory approval to open an additional branch office in Southport, Connecticut, which is expected to open in the second or third quarter of 2005. We plan to continue to open additional branches in Fairfield County in the future.

Total assets at December 31, 2004 amounted to $405.0 million, an increase of $62.5 million, or 18.3%, from December 31, 2003 and a new record high. The increase in the total assets is primarily attributable to a 23.1% increase in net loans, to $263.9 million from $214.4 million at December 31, 2003. The available for sale securities portfolio decreased $14.3 million, or 15.8%, to $76.3 million from $90.6 million at December 31, 2003. Loan growth was funded primarily through deposit growth. Deposits increased $77.0 million, or 26.6%, to $367.0 million at December 31, 2004; interest-bearing deposits increased $64.9 million, or 25.0%, and non-interest bearing deposits increased $12.1 million, or 39.7%. Borrowings decreased $15.1 million due to the payoff of certain Federal Home Loan Bank, or FHLB, advances and a repurchase agreement. The exercise of stock purchase warrants that expired in 2004, combined with the increase in retained earnings from net income, net of dividend payments and partially offset by the increase in other comprehensive loss from unrealized losses on the available for sale securities portfolio, resulted in an increase of $977,000 in shareholders' equity.

Our earnings were $926,000 ($0.38 basic income per share and $0.37 diluted income per share) in 2004 compared to $1.3 million ($0.56 basic income per share and $0.55 diluted income per share) in 2003. The decrease was primarily attributable to a decline in non-interest income, as mortgage related fees declined from $4.0 million in 2003 to $2.0 million in 2004. This decline was caused by a slowdown in our Residential Lending Group's business that resulted primarily from a decrease in home refinancing activity due to higher interest rates and lower staffing levels of loan origination officers. Net interest income for the year ended December 31, 2004 increased $2.1 million, or 21.2%, to $11.7 million as compared to $9.6 million for the year ended December 31, 2003. Non-interest expense increased from $11.7 million in 2003 to $12.3 million in 2004, primarily as a result of a $397,000 increase in occupancy and equipment expense, due to costs associated with the establishment of new branches, and the relocation of our Residential Lending Group office to Stamford.

General

Our total assets increased $62.5 million, or 18.3%, from $342.5 million at December 31, 2003 to $405.0 million at December 31, 2004. The growth in total assets was funded primarily by deposit growth of $77.0 million partially offset by decreases in borrowings of $15.1 million. Federal funds sold increased $22.5 million; cash and due from banks and short term investments increased $2.6 million and $1.0 million, respectively.

Investments

The following table is a summary of the Bank's investment portfolio valued at fair value at December 31 for the years shown.

	2004		2003		2002
	(dollars in thousands)
U. S. Government agency and sponsored agency obligations	$	14,823	$	11,866	$	9,130
Mortgage-backed securities(1)		52,446		66,697		38,461
Corporate bonds		—		—		384
Money market preferred equity securities		9,000		12,000		12,644
Federal Reserve Bank stock		693		691		481
Federal Home Loan Bank stock		1,297		1,077		621

Total investments	$	78,259	$	92,331	$	61,721

(1): Consists of $1.4 million of U.S. Government agency mortgage-backed securities and $50.7 million of U.S. Government sponsored agency mortgage-backed securities, all of which are scheduled to reprice within four years.

Total investments decreased $14.1 million to $78.3 million primarily due to principal payments on mortgage-backed securities and redeemed money market preferred equity securities exceeding new investment purchases. During the fourth quarter of 2004, the Bank redeployed excess liquidity into the purchase of adjustable-rate residential mortgage loans instead of additional investment securities purchases. The Bank is a member of the Federal Home Loan Bank of Boston which provides an additional source of liquidity.

The Bank generally looks to invest in instruments of shorter term duration, or with a variable return, to mitigate against interest rate risk. The Bank's investment focus is ancillary to its principal asset focus on loans. The Bank's objective is to provide an alternate source of low-risk investments when demand for loans is weak. The Bank's investments are designed to provide and maintain liquidity in a high-quality, low-risk diversified portfolio of investments which may also be used as collateral for pledging requirements. Investments are determined by the Bank's Chief Financial Officer and Chief Executive Officer, based on the Bank's investment policy and direction provided by an Asset Liability Committee comprised of the Bank's five most senior officers. The investment activity and interest rate risk position are also reviewed on a quarterly basis by the Asset Liability Committee of the board of directors.

The following table presents the maturity distribution of available for sale investment securities at December 31, 2004 and the weighted average yield of such securities. The weighted average yields were calculated based on the amortized cost and effective yields to maturity of each security.

		One year or less			Over one through five years			Over five through ten years			Over ten years			No maturity			Total(1)			Weighted Average Yield
		(dollars in thousands)
U. S. Government agency and sponsored agency obligations		$	—		$	14,000		$	1,000		$	—		$	—		$	15,000		3.47	%
Mortgage-backed securities			—			—			—			—			52,904	(2)		52,904		4.09	%
Money market preferred equity securities			—			—			—			—			9,000			9,000		2.34	%

	Total	$	—		$	14,000		$	1,000		$	—		$	61,904		$	76,904		3.76	%

Weighted average yield			—	%		3.40	%		4.38	%		—	%		3.83	%		3.76	%

(1): Reflects amortized cost as opposed to fair value. See note 3 to our consolidated financial statements.
(2): Our mortgage-backed securities generally have original terms to maturity of 10 or more years. However, original terms to maturity do not reflect the expected average lives of the mortgage-backed securities. We expect the average lives of our mortgage-backed securities to be substantially less than their contractual terms because of, among other things, amortization and prepayments.

The following table presents a summary of investments for any issuer that exceeds 10% of shareholders' equity at December 31, 2004.

	Amortized Cost		Fair Value
	(dollars in thousands)
Available for sale securities:
U.S. Government agency and sponsored agency obligations	$	15,000	$	14,823
U.S. Government agency and sponsored agency mortgage backed securities		52,904		52,446
Short term investments:
Merrill Lynch Premier Institutional Fund		11,460		11,460

Loans

The following table is a summary of the Bank's loan portfolio at December 31 for the years shown.

		At December 31,
		2004					2003					2002
		Amount			Percentage of Total Loans		Amount			Percentage of Total Loans		Amount			Percentage of Total Loans
		(dollars in thousands)
Real Estate
	Commercial	$	106,771		39.9	%	$	96,339		44.1	%	$	65,967		38.0	%
	Residential		36,966		13.8			21,773		10.0			27,012		15.5
	Construction		74,599		27.8			57,122		26.2			39,209		22.6
Commercial			17,562		6.5			15,533		7.1			13,022		7.5
Consumer installment			1,387		0.5			1,862		0.9			1,757		1.0
Consumer home equity			30,875		11.5			25,608		11.7			26,812		15.4

Total loans			268,160		100.0	%		218,237		100.0	%		173,779		100.0	%
Premiums			314					—					—
Net deferred fees			(1,117	)				(881	)				(612	)
Allowance for loan losses			(3,482	)				(2,935	)				(2,372	)

Loans, net		$	263,875				$	214,421				$	170,795

The Bank's net loan portfolio increased $49.5 million, or 23.1%, from $214.4 million at December 31, 2003 to $263.9 million at December 31, 2004. Included in the growth of the loan portfolio for 2004 is the purchase during the fourth quarter of $13.1 million in adjustable rate residential mortgage loans. Loan growth was funded through an increase in total deposits. At December 31, 2004, the net loan to deposit ratio was 71.9% and the net loan to asset ratio was 65.2%. At December 31, 2003, the net loan to deposit ratio was 73.9%, and the net loan to asset ratio was 62.6%.

During an historic environment of lower interest rates, loan activity continued to remain strong and the volume of new loans far exceeded principal reductions and payoffs.

The Bank employs a diversified credit administration process. All loans are underwritten by a credit analyst who is not the loan originator. Each loan requires at least three signatures. All loans are monitored on an on-going basis using a nine point risk rating system. The Bank engages an outside loan review company to perform annual loan reviews, with a target of reviewing loans totaling 75% of the loan portfolio. The review includes all new loans made during the year in excess of $250,000.

Commercial Real Estate Loans. We offer fixed rate and adjustable-rate mortgage loans secured by commercial real estate. Our commercial real estate loans are generally secured by office or retail buildings, as well as owner-occupied properties and investment one- to four-family residential properties located in our market area and used for business or residential rentals. We intend to continue to grow this segment of our loan portfolio. At December 31, 2004, we had an aggregate of $106.8 million of commercial real estate loans outstanding, which constituted 39.9% of our total loan portfolio at that date.

We originate adjustable-rate commercial real estate loans for terms up to 25 years. Interest rates and payments on these loans typically adjust every five years after a five year initial fixed period. Interest rates and payments on our adjustable rate loans generally are fixed at rates over The Federal Home Loan Bank of Boston amortizing advance rate. There are no adjustment period or lifetime interest rate caps. Loans are secured by first mortgages that generally do not exceed 75% of the

property's appraised value. At December 31, 2004, the largest outstanding commercial real estate loan was $3.5 million. This loan is secured by a first mortgage on an office/light industrial building in Norwalk, Connecticut and was performing according to its terms as of such date.

Loans secured by commercial real estate generally have larger balances and involve a greater degree of risk than one- to four-family residential mortgage loans. Of primary concern in commercial real estate lending is the borrower's creditworthiness and the feasibility and cash flow potential of the property. Payments on loans secured by income properties often depend on successful operation and management of the properties. As a result, repayment of such loans may be subject to adverse conditions in the real estate market or the economy. As of December 31, 2004, two loans totaling $3.5 million, or 3.3% of our commercial real estate loans, were non-accrual loans. As of such date, these two loans were current as to principal and interest.

To monitor cash flows on income properties, we require borrowers and loan guarantors, if any, to provide annual financial statements. We generally require a minimum debt service coverage ratio of 1.25. In reaching a decision on whether to make a commercial real estate loan, we consider the net operating income of the property, the borrower's expertise, credit history and profitability and the value of the underlying property. In addition, with respect to commercial real estate rental properties, we will consider the term of the leases and the quality of the tenants. Loan size for a borrower is limited to 85% of our legal lending limit. We require title insurance on all commercial real estate loans. An environmental survey or environmental insurance is generally required for commercial real estate loans secured by office buildings, shopping centers, or industrial properties or properties that had previous industrial uses.

One- to Four-Family Residential Loans. We originate residential mortgage loans to enable borrowers to purchase or refinance existing homes or to construct new residential dwellings in our market area. We include in our portfolio adjustable-rate mortgage loans with terms up to 30 years. Borrower demand for adjustable-rate loans versus fixed-rate loans is a function of the level of interest rates, the expectations of changes in the level of interest rates, the difference between the interest rates and loan fees offered for fixed-rate mortgage loans and the initial period interest rates and loan fees for adjustable-rate loans. The relative amount of adjustable-rate mortgage loans that can be originated at any time is largely determined by the demand for each in a competitive environment and the effect each has on our interest rate risk. The loan fees charged, interest rates and other provisions of mortgage loans are determined by us on the basis of our own pricing criteria and competitive market conditions. At December 31, 2004, we had an aggregate of $37.0 million, or 13.8% of total loans, invested in residential real estate loans.

Our adjustable-rate mortgage loans are generally based on a 30-year amortization schedule. Interest rates and payments on our adjustable-rate mortgage loans adjust annually after either of a three- or five-year initial fixed period. The maximum amount by which the interest rate may be increased or decreased is generally 2% per adjustment period and the lifetime interest rate cap is generally 6% over the initial interest rate of the loan.

While one- to four-family residential real estate loans are normally originated with up to 30-year terms; such loans typically remain outstanding for substantially shorter periods because borrowers often prepay their loans in full upon sale of the property pledged as security or upon refinancing the original loan. Therefore, average loan maturity is a function of, among other factors, the level of purchase and sale activity in the real estate market, prevailing interest rates and the interest rates payable on outstanding loans.

We generally make adjustable rate mortgage loans with a loan-to-value ratio of up to 80% only when secured by first liens on owner-occupied one- to four-family residences with a maximum debt ratio of 38%. We require all properties securing mortgage loans in excess of $250,000 to be appraised by an independent appraiser. We require title insurance on all first mortgage loans. Borrowers must

obtain hazard insurance, or flood insurance for loans on property located in a flood zone, before closing the loan.

Construction Loans. We originate loans to individuals and builders to finance the construction of residential dwellings. To a significantly lesser extent, we also make construction loans for commercial development projects, including condominiums, apartment buildings, and owner-occupied properties used for businesses. Our construction loans generally provide for the payment of interest only during the construction phase, which is usually 18 months. At the end of the construction phase, the loan generally converts to a permanent mortgage loan if owner-occupied, or repaid upon sale if to a builder. We limit the amount of a construction loan to 80% of our legal lending limit. Loans generally can be made with a maximum loan to value ratio of 65% of the "as completed" appraised value or 75% of the cost of the project, whichever is less. At December 31, 2004, we had an aggregate of $74.6 million, or 27.8% of total loans, invested in construction loans. At December 31, 2004, the largest outstanding residential construction loan commitment was for $5.0 million, of which $2.0 million was participated to another bank. The total outstanding balance on the loan was $4.2 million at December 31, 2004. At December 31, 2004, there were no outstanding commercial construction loans. Before making a commitment to fund a construction loan, we require an appraisal of the property by an independent licensed appraiser. We also will require an inspection of the property before disbursement of funds during the term of the construction loan.

Construction financing is generally considered to involve a higher degree of risk of loss than long-term financing on improved, occupied real estate. Risk of loss on a construction loan depends largely upon the accuracy of the initial estimate of the property's value at completion of construction or development and the estimated cost (including interest) of construction. During the construction phase, a number of factors could result in delays and cost overruns. If the estimate of construction costs proves to be inaccurate, we may be required to advance funds beyond the amount originally committed to permit completion of the development, although we generally require that an interest reserve be established at closing. If the estimate of value proves to be inaccurate, we may be confronted, at or before the maturity of the loan, with a project having a value which is insufficient to assure full repayment. As a result of the foregoing, construction lending often involves the disbursement of substantial funds with repayment dependent, in part, on the success of the ultimate project rather than the ability of the borrower or guarantor to repay principal and interest. If we are forced to foreclose on a project before or at completion due to a default, there can be no assurance that we will be able to recover all of the unpaid balance of, and accrued interest on, the loan as well as related foreclosure and holding costs. We generally limit speculative construction loans (loans for which there is not a contract for sale at the time of construction financing) to two for any one borrower at any one time. We also have internal guidelines which limit speculative construction loans to not more than 25% of the total loan portfolio. We may exceed the guidelines from time to time due to the uncertainty of forecasting cash flows on specific loan projects. At December 31, 2004, speculative construction loans constituted 26.1% of the total loan portfolio.

Commercial Loans. We make commercial business loans to a variety of small businesses primarily in our market area. We offer a variety of commercial lending products, the maximum amount of which is limited by our in-house loans-to-one-borrower limit of 85% of our legal lending limit. At December 31, 2004, we had an aggregate of $17.6 million, or 6.5% of total loans, invested in commercial loans. Our largest commercial loan relationship was a $1.5 million line of credit secured by all business assets, including accounts receivable and inventory, of which $225,000 was outstanding. This loan was performing according to its original terms at December 31, 2004.

Commercial loans are secured by business assets other than real estate, such as accounts receivable, business equipment and inventory. We originate lines of credit to finance the working capital needs of businesses to be repaid by seasonal cash flows or to provide a period of time during which the business can borrow funds for planned equipment purchases. These lines of credit generally

have a one-year term. We also offer time notes, stand-by letters of credit and Small Business Administration guaranteed loans. Time notes are short-term loans and will only be granted on the basis of a defined source of repayment of principal and interest from a specific foreseeable event.

When making commercial loans, we consider the financial statements of the borrower, the borrower's payment history of both corporate and personal debt, the debt service capabilities of the borrower, the projected cash flows of the business, the viability of the industry in which the borrower operates and the value of the collateral.

Unlike residential mortgage loans, which generally are made on the basis of the borrower's ability to make repayment from his or her employment or other income, and which are secured by real property whose value tends to be more easily ascertainable, commercial loans are of higher risk and typically are made on the basis of the borrower's ability to make repayment from the cash flow of the borrower's business. As a result, the availability of funds for the repayment of commercial loans may depend substantially on the success of the business itself. Further, any collateral securing such loans may depreciate over time, may be difficult to appraise and may fluctuate in value.

Home Equity and Consumer Loans. We offer home equity loans and lines of credit as well as consumer loans. At December 31, 2004, we had an aggregate of $32.3 million, or 12.0% of total loans, invested in home equity and consumer loans.

Home equity loans and lines of credit have adjustable rates of interest that are indexed to the Wall Street Journal prime rate. We offer home equity loans with maximum combined loan-to-value ratios of 75%. A home equity line of credit may be drawn down by the borrower for an initial period of ten years from the date of the loan agreement. During this period, the borrower has the option of paying, on a monthly basis, either principal and interest or only interest. If not renewed, the borrower has to pay back the amount outstanding under the line of credit over a term not to exceed 15 years, beginning at the end of the ten year period.

We also offer consumer loans, primarily as an accommodation to existing customers. The procedures for underwriting consumer loans include an assessment of the applicant's payment history on other debts and ability to meet existing obligations and payments on the proposed loans. Although the applicant's creditworthiness is a primary consideration, the underwriting process also includes a comparison of the value of the collateral, if any, to the proposed loan amount.

Home equity loans and lines of credit, and consumer loans may entail greater risk than do other loans, particularly in the case of consumer loans that are unsecured or secured by assets that depreciate rapidly. In such cases, repossessed collateral for a defaulted loan may not provide an adequate source of repayment for the outstanding loan and the remaining deficiency often does not warrant further substantial collection efforts against the borrower. In addition, loan collections depend on the borrower's continuing financial stability, and therefore are more likely to be adversely affected by job loss, divorce, illness or personal bankruptcy. Furthermore, the application of various federal and state laws, including federal and state bankruptcy and insolvency laws, may limit the amount which can be recovered on such loans.

Loan Approval Procedures and Authority. Our lending activities follow written, non-discriminatory, underwriting standards and loan origination procedures established by our board of directors and management. Every loan is underwritten by a credit analyst other than the loan origination officer and at least three signatures are required for every loan. The Bank's credit committee has the authority to approve loan amounts up to $500,000. Loan amounts up to $2.0 million must be approved by the management loan committee. Loan amounts over $2.0 million must be approved by the loan committee of the board of directors.

Loans to One Borrower. The maximum amount that we may lend to one borrower and the borrower's related entities is limited, by regulation, generally to 15% of our stated capital and reserves. At December 31, 2004, our regulatory limit on loans to one borrower was $4.5 million. At that date, our largest lending relationship to one borrower was $4.3 million, consisting of the Bank's portion of two loans in the aggregate amount of $13.0 million, each of which is secured by a first mortgage on residential properties in Greenwich. The remaining $8.7 million of the loans was participated to another bank. The loans were performing according to the original repayment terms at December 31, 2004. On April 22, 2005, the borrower repaid a total of approximately $4.2 million of principal outstanding under the loans, of which $1.4 million was paid to us, resulting in an outstanding balance payable to us of approximately $2.9 million.

Maturities and Sensitivities of Loans to Changes in Interest Rates. The following table presents the maturities of loans in the Bank's portfolio at December 31, 2004, by type of loan. The amounts are shown based on contractual terms to maturity or scheduled amortization excluding potential repayments. Loans with no stated schedule of repayment and no stated maturity are reported as due in one year or less.

		Due in one year or less		Due after one year through five years		Due after five years		Total
		(dollars in thousands)
Commercial real estate		$	10,797	$	38,262	$	57,712	$	106,771
Residential real estate			6,047		3,757		27,162		36,966
Construction loans			46,391		28,208		—		74,599
Commercial loans			7,209		9,695		659		17,563
Consumer installment			1,219		167		—		1,386
Consumer home equity			93		4,732		26,050		30,875

	Total	$	71,756	$	84,821	$	111,583	$	268,160

Fixed rate loans		$	5,242	$	21,454	$	10,796	$	37,492
Variable rate loans			66,514		63,367		100,787		230,668

	Total	$	71,756	$	84,821	$	111,583	$	268,160

Critical Accounting Policies

In the ordinary course of business, we have made a number of estimates and assumptions relating to reporting results of operations and financial condition in preparing our financial statements in conformity with accounting principles generally accepted in the United States of America. Actual results could differ significantly from those estimates under different assumptions and conditions. We believe the following discussion addresses our only critical accounting policy, which is the policy that is most important to the presentation of our financial results. This policy requires management's most difficult, subjective and complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain.

Allowance for Loan Losses

The allowance for loan losses is established as losses are estimated to have occurred through a provision for loan losses charged to earnings. Loan losses are charged against the allowance when management believes the uncollectibility of a loan balance is confirmed. Subsequent recoveries, if any, are credited to the allowance.

The allowance for loan losses is evaluated on a regular basis by management and is based upon management's periodic review of the collectibility of the loans in light of historical experience, the nature and volume of the loan portfolio, adverse situations that may affect the borrower's ability to repay, estimated value of any underlying collateral and prevailing economic conditions. This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available.

The allowance consists of specific, general and unallocated components. The specific component relates to loans that are considered impaired. A risk rating system is utilized to measure the adequacy of the general component of the allowance for loan losses. Under this system, each loan is assigned a risk rating between one and nine, which has a corresponding loan loss factor assigned, with a rating of "one" being the least risk and a rating of "nine" reflecting the most risk or a complete loss. Risk ratings are assigned by the originating loan officer or loan committee at the initiation of the transactions and are reviewed and changed, when necessary during the life of the loan. Loan loss reserve factors are multiplied against the balances in each risk rating category to arrive at the appropriate level for the allowance for loan losses. Loans assigned a risk rating of "six" or above are monitored more closely by the credit administration officers. The unallocated portion of the allowance reflects our estimate of probable but undetected losses inherent in the portfolio; such estimates are influenced by uncertainties in economic conditions, delays in obtaining information, including unfavorable information about a borrower's financial condition, difficulty in identifying triggering events that correlate perfectly to subsequent loss rates, and risk factors that have not yet manifested themselves in loss allocation factors. Loan quality control is continually monitored by management subject to oversight by the board of directors through its members who serve on the loan committee and is also reviewed by the full board of directors on a monthly basis. The methodology for determining the adequacy of the allowance for loan losses is consistently applied; however, revisions may be made to the methodology and assumptions based on historical information related to charge-off and recovery experience and our evaluation of the current loan portfolio.

Based upon this evaluation, we believe the allowance for loan losses of $3.5 million, at December 31, 2004, which represents 1.31% of gross loans outstanding, is adequate, under prevailing economic conditions, to absorb losses on existing loans. Nevertheless, there can be no assurance that additions to such allowance will not be necessary in future periods. At December 31, 2003, the allowance for loan losses was $2.9 million or 1.35% of gross loans outstanding.

The accrual of interest income on loans is discontinued whenever reasonable doubt exists as to its collectibility and generally is discontinued when loans are past due 90 days, based on contractual terms, as to either principal or interest. When the accrual of interest income is discontinued, all previously accrued and uncollected interest is reversed against interest income. The accrual of interest on loans past due 90 days or more, including impaired loans, may be continued if the loan is well secured, and it is believed all principal and accrued interest income due on the loan will be realized, and the loan is in the process of collection. A non-accrual loan is restored to an accrual status when it is no longer delinquent and collectibility of interest and principal is no longer in doubt.

We consider all non-accrual loans and restructured loans to be impaired. In most cases, loan payments that are past due less than 90 days, based on contractual terms, are considered minor collection delays and the related loans are not considered to be impaired. We consider consumer installment loans to be pools of smaller balance homogeneous loans, which are collectively evaluated for impairment.

Analysis of Allowance for Loan Losses

	2004			2003			2002			2001			2000
	(dollars in thousands)
Balance at beginning of period	$	2,934		$	2,372		$	1,894		$	1,645		$	1,360

Charge-offs		(9	)		(1	)		—			(2	)		(44	)
Recoveries		—			—			10			1			3

Net (charge-offs) recoveries		(9	)		(1	)		10			(1	)		(41	)

Additions charged to operations		556			563			468			250			326

Balance at end of period	$	3,481		$	2,934		$	2,372		$	1,894		$	1,645

Ratio of net (charge-offs) recoveries during the period to average loans outstanding during the period		(—	%)		(—	%)		0.01	%		(—	%)		(0.03	%)

Allocation of the Allowance for Loan Losses

The following table sets forth the allocation of the allowance for loan losses by category at the dates indicated.

		Amounts										Percent of loans in each category to total loans
		2004		2003		2002		2001		2000		2004		2003		2002		2001		2000
		(dollars in thousands)
Balance at end of each period applicable to:
Real Estate:
	Commercial	$	1,319	$	1,183	$	893	$	833	$	700	39.82	%	44.15	%	37.97	%	43.88	%	44.67	%
	Residential		304		230		276		153		34	13.78		9.98		15.54		5.44		3.93
	Construction		1,358		972		726		348		270	27.82		26.17		22.56		19.02		17.91
Commercial			185		155		129		142		185	6.55		7.12		7.49		10.63		10.01
Consumer installment			11		12		11		14		12	0.52		0.85		1.01		0.89		1.29
Consumer home equity			233		285		283		296		312	11.51		11.73		15.43		20.14		22.19
Unallocated			71		97		54		108		132	N/A		N/A		N/A		N/A		N/A

Total		$	3,481	$	2,934	$	2,372	$	1,894	$	1,645	100.00	%	100.00	%	100.00	%	100.00	%	100.00	%

Non-Accrual, Past Due and Restructured Loans

The following table is a summary of non-accrual and past due loans at December 31 of each of the last five years.

	2004			2003			2002			2001			2000
	(dollars in thousands)
Loans delinquent over 90 days but still accruing interest	$	373		$	165		$	1,172		$	1,300		$	507
Non-accruing loans		3,669			150			201			1,654			1,759

Total non-performing loans	$	4,042		$	315		$	1,373		$	2,954		$	2,266

Percent of total loans		1.51	%		0.14	%		0.79	%		2.14	%		1.77	%
Percent of total assets		1.00			0.09			0.56			1.46			1.15
Additional income on non-accrual loans if recognized on an accrual basis	$	18		$	18		$	67		$	159		$	115

There were no loans during the periods presented that were considered as "troubled debt restructurings." We did not have any other real estate owned during the periods presented.

Potential Problem Loans

The $3.7 million of non-accruing loans at December 31, 2004 is comprised of three loans, all of which are well collateralized and in the process of collection. Two of the loans totaling $3.5 million are current as to principal and interest payments.

At December 31, 2004, the Bank had no loans other than those described above, as to which management had significant doubts as to the ability of the borrower to comply with the present repayment terms. In the first quarter of 2005, three loans totaling $1.6 million were classified as loans delinquent over 90 days but were still accruing interest. All three loans are well collateralized. See "Recent Developments."

Deposits

The following table is a summary of the Bank's deposits at December 31 for each of the years shown.

		2004		2003		2002
		(dollars in thousands)
Non-interest-bearing		$	42,584	$	30,477	$	25,520

Interest-bearing:
	NOW		26,814		22,849		22,686
	Savings		22,104		23,793		26,848
	Money market		72,451		69,504		56,973
	Time certificates, less than $100,000		131,765		92,575		57,203
	Time certificates, $100,000 or more		71,287		50,794		28,681

	Total interest-bearing		324,421		259,515		192,391

Total deposits		$	367,005	$	289,992	$	217,911

Total deposits increased $77.0 million, or 26.6%, to $367.0 million at December 31, 2004. Based upon expansion and the increased penetration into the areas served by the Bank, non-interest-bearing deposits increased $12.1 million, or 39.7%, to $42.6 million at December 31, 2004. Included in that total are commercial demand accounts, which increased $7.5 million, and personal demand accounts, which increased $3.8 million, both of which represent increases of 39.0% as compared to December 31, 2003. Interest-bearing deposits increased $64.9 million or 25.0% to $324.4 million at December 31, 2004.

During 2004, the Bank established two new branch banking offices; these new offices attracted $19.1 million, or 24.8%, of the annual growth in deposits. The new branch offices' grand opening promotional campaigns were also a contributing factor to the growth of deposits in existing branches. Certificates of deposit and NOW account products increased $59.7 million and $4.0 million, respectively; money market fund accounts increased $2.9 million, while savings accounts decreased $1.7 million. Much of the growth in certificates of deposit is attributable to the promotional campaigns run in conjunction with the new branch openings and the ten year anniversary of the Bank; growth in certificates of deposit also resulted from the transfer of funds from money market fund accounts. The increase in certificates of deposit greater than $100,000 of $20.5 million is the result of successful sales efforts and branch expansion; these balances do not include brokered deposits. The Bank continues to offer attractive interest rates in the very competitive Fairfield County marketplace in order to attract additional deposits to fund loan growth.

As of December 31, 2004, the Bank's maturities of time deposits were as follows:

	$100,000 or greater		Less than $100,000		Totals
	(in thousands)
Three months or less	$	5,858	$	11,502	$	17,360
Three to six months		13,249		23,430		36,679
Six months to one year		13,695		27,494		41,189
Over one year		38,485		69,339		107,824

Total	$	71,287	$	131,765	$	203,052

Borrowings

Borrowings decreased $15.1 million to $16.2 million at December 31, 2004.

Borrowings include short term securities sold under agreements to repurchase, Federal Home Loan Bank advances, junior subordinated debentures, a capital lease and a collateralized borrowing.

During 2004, certain FHLB advances matured and, due to the liquidity position of the Bank, were not extended. We utilize FHLB advances to supplement our supply of lendable funds and to meet deposit account withdrawal requirements. As a member of the FHLB, we are required to own capital stock in the FHLB and are authorized to apply for advances on the security of the stock and certain of our mortgage loans and other assets, provided certain credit standards are met.

During 2004, short term securities sold under agreement to repurchase also matured and were not extended. At December 31, 2004, the Bank had $10.0 million in available borrowings under repurchase agreements, with no amounts outstanding. The average amount outstanding during 2004 was $2.2 million with a maximum outstanding of $5.7 million.

The final payment on a lease classified as a capital lease was made during 2004; in addition, a loan sold and classified as a collateralized borrowing was refinanced at the end of 2004.

The following table sets forth short term borrowing amounts along with the respective interest rates and maturities:

Federal Home Loan Bank advances:

			Average
Amount		Maturity	Rate		Amount Outstanding
$	2,000,000	04/29/2005	1.930	%	$	2,000,000
	2,000,000	05/13/2005	4.480	%		2,000,000

$	4,000,000		3.205	%	$	4,000,000

The maximum amount of short-term borrowings outstanding under Federal Home Loan Bank advances during 2004 was $9.0 million.

In addition to the short-term borrowings, there were $4.0 million in FHLB advances at December 31, 2004 that mature in 2006 and 2007. These advances represent the remainder in a series of advances from the FHLB that were part of two balance sheet leveraging strategies that we executed in 2002 and 2003. These advances funded mortgage-backed securities purchases with remaining principal balances of $6.2 million.

We issued trust preferred securities in 2003. These securities are shown as subordinated debt on our consolidated balance sheets and $8.2 million of principal remained outstanding on December 31,

2004. These securities bear interest at the three-month LIBOR plus 3.15%, mature on March 26, 2033 and can be redeemed at our election beginning in 2008. The trust preferred securities supplement our Tier 1 capital based on applicable regulatory guidelines. These securities are described in greater detail in note 7 to the consolidated financial statements.

The following table presents average balance sheets (daily averages), interest income, interest expense and the corresponding yields earned and rates paid:

		2004							2003							Fluctuations in Interest Income/Expense(1) Due to change in:
		Average Balance			Interest Income/ Expense		Average Rate		Average Balance			Interest Income/ Expense		Average Rate
		Average Balance			Interest Income/ Expense		Average Rate		Average Balance			Interest Income/ Expense		Average Rate		Volume			Rate			Total
		(dollars in thousands)
Interest-earning assets:
	Loans(2)	$	239,239		$	15,632	6.53	%	$	193,990		$	12,782	6.59	%	$	2,967		$	(117	)	$	2,850
	Short-term investments		8,356			105	1.26			7,124			79	1.11			13			13			26
	Investments(3)		87,631			2,752	3.14			72,250			2,256	3.12			477			19			496
	Federal funds sold		12,733			189	1.48			9,147			97	1.06			31			61			92

Total interest-earning assets			347,959			18,678	5.37			282,511			15,214	5.39			3,488			(24	)		3,464

Cash and due from banks			4,159							4,001
Premises and equipment, net			1,621							1,083
Allowance for loan losses			(3,190	)						(2,652	)
Other			6,396							5,798

Total assets		$	356,945						$	290,741

Interest-bearing liabilities:
	NOW accounts		23,107			152	0.66			22,627			149	0.66			3			—			3
	Savings accounts		23,666			294	1.24			24,824			337	1.36			(15	)		(28	)		(43	)
	Money market accounts		70,264			867	1.23			62,217			863	1.39			105			(101	)		4
	Time certificates	$	156,623		$	4,901	3.13	%	$	110,129		$	3,512	3.19	%	$	1,456		$	(67	)	$	1,389
	Repurchase agreements		2,243			28	1.25			5,700			91	1.60			(46	)		(17	)		(63	)
	FHLB advances		14,197			372	2.62			11,671			327	2.80			67			(22	)		45
	Subordinated debt		8,248			380	4.61			6,159			271	4.40			88			21			109
	Other borrowings		226			14	6.19			471			38	8.07			(17	)		(7	)		(24	)

Total interest bearing liabilities			298,574			7,008	2.35	%		243,798			5,588	2.29	%		1,641			(221	)		1,420

Demand deposits			36,456							25,892
Accrued expenses and other liabilities			2,362							2,140
Shareholders' equity			19,553							18,911

Total liabilities and equity		$	356,945						$	290,741

Net interest income					$	11,670						$	9,626			$	1,847		$	197		$	2,044

Interest margin							3.35	%						3.41	%

Interest spread							3.02	%						3.10	%

(1): The rate volume analysis reflects the changes in net interest income arising from changes in interest rates and from asset and liability volume, including changes attributable to both changes in rates and volume. The change in interest attributable to volume includes changes in interest attributable to changes in both rates and volume.
(2): Includes non-accruing loans.
(3): Yields are calculated at historical cost and excludes the effects of unrealized gain or loss on available for sale securities.

Results of Operations

General

For the year ended December 31, 2004, we earned $926,000 ($0.38 basic income per share and $0.37 diluted income per share), a decrease of 30.9% as compared to 2003 when we earned $1.3 million ($0.56 basic income per share and $0.55 diluted income per share). Noninterest income decreased $2.1 million, or 43.9%, to $2.7 million for 2004 from $4.8 million in 2003. An increase in long-term interest rates during the year resulted in a decrease in the volume of residential mortgage refinance transactions; the interest rate increase, along with the turnover of loan originators in the New York office which created a temporary staffing reduction, resulted in a decrease in mortgage brokerage and referral fees and loan processing fees aggregating $2.0 million. The results for 2003 included a gain from the sale of investment securities of $308,000; there were no such sales of investment securities during 2004.

Interest income increased $3.5 million to $18.7 million in 2004 as compared to 2003 when interest income was $15.2 million. This increase is due mainly to the growth in the loan portfolio and higher average balances in the available for sales securities portfolio.

Interest expense increased $1.4 million, or 25.4%, to $7.0 million in 2004 compared to $5.6 million in 2003. The increase in interest expense is due to the increase in total deposits and higher average balances in Federal Home Loan Bank borrowings and subordinated debt.

Noninterest expenses for 2004 totaled $12.3 million which represents an increase of $597,000, or 5.1%, over the prior year. The higher operating costs were primarily the result of the full year impact in 2004 of the three branch offices opened in 2003, the two new branch offices opened in 2004 and the relocation of a residential mortgage loan origination office from Greenwich to Stamford, all of which resulted in an increase in occupancy and equipment expenses of $397,000 over last year.

Interest income and expense

Our net interest income increased $2.1 million, or 21.2%, to $11.7 million in 2004 from $9.6 million in 2003. An increase in average earning assets of $65.4 million, or 23.2%, increased our interest income $3.5 million, or 22.8%, from $15.2 million in 2003 to $18.7 million in 2004. Average loans outstanding increased $45.2 million, or 23.3%, led by growth in construction and real estate loans, which reflects the continuing strength of the local real estate market. An increase in average investments and related yields resulted in an increase in interest income on available for sale securities of $496,000. Higher average balances in federal funds sold and short-term investments combined with interest rates which began increasing in the latter part of the year resulted in an increase of $118,000 in interest earned on Federal funds sold and short-term investments. Total average interest bearing liabilities increased by $54.8 million, or 22.5%; average certificates of deposits increased by $46.5 million; average money market deposits and NOW accounts increased $8.0 million and $500,000, respectively; average savings accounts decreased $1.2 million; average FHLB advances increased $2.5 million; average subordinated debt which was issued at the end of the first quarter of 2003 increased $2.1 million. Interest expense increased from $5.6 million in 2003 to $7.0 million in 2004. Interest expense on certificates of deposit increased $1.4 million as a result of higher average outstanding balances, partially offset by a decrease in the cost of funds for that portfolio from 3.19% in 2003 to 3.13% in 2004.

Provision for loan losses

The provision for loan losses charged to operations in 2004 of $556,000 is relatively unchanged as compared to the provision for loan losses charged to operations in 2003 of $563,000.

The provision for loan losses charged to operations in 2003 of $563,000 represents an increase of $95,000, or 20.3%, as compared to the provision for loan losses charged to operations in 2002 of $468,000. This increase is due to the credit risk factors assigned to the loan portfolio, which increased by $44.2 million, or 25.5%, in 2003 and was not caused by any adverse change in nonperforming loans.

An analysis of the changes in the allowance for loan losses is presented under "—Allowance for Loan Losses."

Noninterest income

Noninterest income decreased $2.1 million from $4.8 million in 2003 to $2.7 million in 2004. The decrease is primarily due to an increase in long term interest rates which resulted in a decrease in the volume of residential mortgage refinance transactions; this increase in interest rates combined with the turnover of loan originators in the New York office which created a temporary staffing reduction resulted in a decrease in mortgage brokerage referral fees of $1.6 million and a reduction in loan origination and processing fees of $260,000. Included in the results for 2003 are gains from the sale of investment securities of $308,000; during 2004 there were no sales of investment securities. Increases in deposit accounts and transaction volumes resulted in an increase in fees and service charges of $87,000 or 22.9% from $378,000 for the year ended December 31, 2003 to $465,000 for the year ended December 31, 2004.

Noninterest expenses

Noninterest expenses increased $597,000 in 2004 from $11.7 million in 2003 to $12.3 million in 2004. Salaries and benefits decreased slightly in 2004 as compared to 2003; increases in salaries, primarily due to staff additions resulting from the full year impact in 2004 of three branches opened in 2003 and two in 2004, loan and deposit sales and incentive compensation expense and stock based compensation were more than offset by lower levels of commissions and production and target related incentive compensation accruals as a direct result of the decrease in the volume of residential mortgage refinance transactions. Higher staffing levels and incentive compensation also resulted in higher payroll taxes and employee benefit costs. Occupancy and equipment expenses increased $397,000 from $1.3 million 2003 to $1.7 million in 2004; this increase is primarily due to the full year impact in 2004 of opening three new branch offices in 2003 and of opening two branches in 2004, as well as the costs associated with the relocation of the Greenwich loan origination office to a new facility in Stamford. Loan administration and processing expenses decreased $195,000, or 48.2%, from $404,000 for the year ended December 31, 2003 to $209,000 for the year ended December 31, 2004; this decrease is related to the decrease in the volume of residential mortgage loans and the resultant decreases in mortgage brokerage and loan processing fees. Other non-interest expenses increased $192,000, or 18.3%, from $1.0 million for the year ended December 31, 2003 to $1.2 million for the year ended December 31, 2004; included in the results for 2004 are nonrecurring items for a payment made to the State of Connecticut for an amendment to our certificate of incorporation to increase the number of shares the Company is authorized to issue and the write off of an externally perpetuated fraud of a customer's checks for which the Bank has submitted an insurance claim. In addition, there were increases in regulatory assessments as a direct result of the growth of the Bank.

Management believes that additional branch offices will contribute to our future growth and earnings. While the opening of these new branches will result in increased operating expenses, the openings will be strategically planned to maintain profitable operations.

Management regularly reviews loan and deposit rates and attempts to price our products competitively. With the assistance of its investment advisors, we track our mix of asset/liability maturities and strive to maintain a reasonable match. Performance ratios are reviewed monthly by management and the Board and are used to set strategies.

Income Taxes

The provision for income taxes of $633,000 in 2004 and $877,000 for 2003 represents the tax expense recognized for both federal and state income tax. The effective tax rates for 2004 and 2003 are 40.6% and 39.5%, respectively. Fluctuations in effective tax rates are due to the change in pre-tax income as well as to the exclusion, for state tax purposes, of certain holding company expenses.

Liquidity

Liquidity is the ability to meet current and future financial obligations of a short-term nature. Our primary sources of funds consist of deposit inflows, loan repayments, cash flow from mortgage-backed securities, maturities and sales of investment securities and borrowings from the Federal Home Loan Bank of Boston. While maturities and scheduled amortization of loans and securities are predictable sources of funds, deposit flows and mortgage prepayments are greatly influenced by general interest rates, economic conditions and competition.

Our liquidity ratio was 32.6% and 35.1% at December 31, 2004 and 2003, respectively. The liquidity ratio is defined as the percentage of liquid assets to total assets. The following categories in the accompanying balance sheets are considered liquid assets: cash and due from banks, federal funds sold, short-term investments and available-for-sale securities. Liquidity is a measure of our ability to generate adequate cash to meet financial obligations. The principal cash requirements of a financial institution are to cover increases in its loan portfolio and downward fluctuations in deposit accounts. Management believes our short-term assets have sufficient liquidity to satisfy loan demand, cover potential fluctuations in deposit accounts and to meet other anticipated cash requirements.

We regularly adjust our investments in liquid assets based upon our assessment of (1) expected loan demand, (2) expected deposits flows, (3) yields available on securities and (4) the objectives of our asset/liability management and liquidity policies. Excess liquid assets are invested generally in short-term investments and short- and intermediate-term U.S. Government agency obligations.

Our most liquid assets are cash and cash equivalents and short-term investments. The levels of these assets depend on the timing of and projections for deposit flows, loan fundings and payments from the loan and investment portfolios. At December 31, 2004, cash and cash equivalents totaled $55.6 million, including short-term investments of $11.5 million. Securities classified as available-for-sale, which provide additional sources of liquidity, totaled $76.3 million at December 31, 2004. In addition, at December 31, 2004, we had the ability to borrow a total of approximately $64.8 million from the Federal Home Loan Bank of Boston. On that date, we had advances outstanding of $8.0 million. Additionally, we had arranged overnight lines of credit of $2.0 million from the Federal Home Loan Bank of Boston. On that date, we had no overnight advances outstanding.

The Bank also had arranged an overnight line of credit of $3.0 million from a correspondent bank. At December 31, 2004, there was nothing outstanding under the line. At December 31, 2004, the Bank also had the ability to borrow $10 million under a repurchase agreement. There was nothing outstanding on that date.

At December 31, 2004, we had $96.9 million in loan commitments outstanding, which included $37.2 million in undisbursed construction loans, $27.1 in unused home equity lines of credit, and $7.2 million in commercial lines of credit. In addition, there were $23.5 million in commitments outstanding for loans that had not yet closed, $19.8 million of which were commitments for construction loans. Certificates of deposit due within one year of December 31, 2004 totaled $95.2 million, or 25.9% of total deposits. We believe that the large percentage of deposits in shorter-term certificates of deposit reflects customers' hesitancy to invest their funds in long-term certificates in the current low interest rate environment. If these maturing certificates of deposit do not remain with us, we will be required to seek other sources of funds, including other certificates of

deposit and borrowings. Depending on market conditions, we may be required to pay higher rates on such deposits or other borrowings than we currently pay on the certificates of deposit due on or before December 31, 2005. We have, however, increased our certificates of deposit maturing beyond one year by $23.2 million and we had $107.8 million in that category at December 31, 2004. This provides a stable cost-effective funding source in a rising rate environment. Additionally, we maintain a shorter duration in our securities portfolio to provide necessary liquidity to compensate for any deposit outflows. We believe, however, based on past experience, that a significant portion of our certificates of deposit will remain with us. We have the ability to attract and retain deposits by adjusting the interest rates offered.

Capital

The following table illustrates the Bank's regulatory capital ratios for each of the years shown:

	December 31,
	2004		2003		2002
Leverage capital	6.98	%	7.85	%	6.98	%
Tier 1 risk-based capital	9.29		10.47		9.11
Total risk-based capital	10.50		11.67		10.36

The following table illustrates our regulatory capital ratios for each of the years shown:

	December 31,
	2004		2003		2002
Leverage capital	6.79	%	7.51	%	6.99	%
Tier 1 risk-based capital	9.04		10.00		9.13
Total risk-based capital	10.70		11.87		10.39

Capital adequacy is one of the most important factors used to determine the safety and soundness of individual banks and the banking system. Based on the above ratios, the Bank is considered to be "well capitalized" under applicable regulations. To be considered "well-capitalized," an institution must generally have a leverage capital ratio of at least 5%, a Tier 1 risk-based capital ratio of at least 6% and a total risk-based capital ratio of at least 10%.

The increase in capital ratios during 2003 was primarily due to the issuance of junior subordinated debt in connection with the issuance by a statutory trust formed by us of trust preferred securities. The decrease in capital ratios during 2004 is primarily due to the growth of the Bank.

Management continuously assesses the adequacy of the Bank's capital to ensure that the Bank maintains its "well capitalized" classification. Management's strategic and capital plans contemplate various alternatives to raise additional capital to support the planned growth of the Bank, which plans include the opening of one new branch in the second or third quarter of 2005.

Market Risk

Market risk is defined as the sensitivity of income to fluctuations in interest rates, foreign exchange rates, equity prices, commodity prices and other market-driven rates or prices. Based upon the nature of our business, market risk is primarily limited to interest rate risk, which is the impact that changing interest rates have on current and future earnings.

Qualitative Aspects of Market Risk. Our goal is to maximize long term profitability while minimizing our exposure to interest rate fluctuations. The first priority is to structure and price our assets and liabilities to maintain an acceptable interest rate spread while reducing the net effect of changes in interest rates. In order to accomplish this, the focus is on maintaining a proper balance

between the timing and volume of assets and liabilities re-pricing within the balance sheet. One method of achieving this balance is to originate variable rate loans for the portfolio and purchase short term investments to offset the increasing short term re-pricing of the liability side of the balance sheet. In fact, a number of our interest bearing deposit products have no contractual maturity. Customers may withdraw funds from their accounts at any time and deposit balances may therefore run off unexpectedly due to changing market conditions. Additionally, loans and investments with longer term rate adjustment frequencies are matched against longer term deposits and borrowings to lock in a desirable spread.

The exposure to interest rate risk is monitored by our Management Asset and Liability Committee consisting of senior management personnel. The committee meets on a monthly basis, or more frequently, if needed. The committee reviews the interrelationships within the balance sheet to maximize net interest income within acceptable levels of risk. This committee reports to the board of directors on a monthly basis regarding its activities.

The Board Asset and Liability Committee, or ALCO, meets quarterly. That committee monitors the interest rate risk analysis, reviews investment transactions during the period and determines compliance with Bank policies.

Quantitative Aspects of Market Risk. We analyze our interest rate sensitivity position to manage the risk associated with interest rate movements through the use of interest income simulation and GAP analysis. The matching of assets and liabilities may be analyzed by examining the extent to which such assets and liabilities are "interest sensitive." An asset or liability is said to be interest rate sensitive within a specific time period if it will mature or reprice within that time period.

Our goal is to manage asset and liability positions to moderate the effects of interest rate fluctuations on net interest income. Interest income simulations are completed quarterly and presented to the Board ALCO Committee. The simulations provide an estimate of the impact of changes in interest rates on net interest income under a range of assumptions. Changes to these assumptions can significantly affect the results of the simulations. The simulation incorporates assumptions regarding the potential timing in the repricing of certain assets and liabilities when market rates change and the changes in spreads between different market rates.

Simulation analysis is only an estimate of our interest rate risk exposure at a particular point in time. We continually review the potential effect changes in interest rates could have on the repayment of rate sensitive assets and funding requirements of rate sensitive liabilities.

We have established interest rate risk guidelines measured by a behavioral GAP analysis calculated at the one year cumulative GAP level and a net interest income and economic value of portfolio equity simulation model measured by a 200 basis point interest rate shock.

The table below sets forth an approximation of our exposure to changing interest rates using our behavioral GAP analysis and as a percentage of estimated net interest income and estimated net portfolio value using interest income simulation. The calculations use projected repricing of assets and liabilities at December 31, 2004 on the basis of contractual maturities, anticipated repayments and scheduled rate adjustments.

	Basis Points	Interest Risk Guidelines		At December 31, 2004
Gap percentage total		+/-15	%	19.95	%
Net interest income	200	+/-15	%	20.34	%
	-200	+/-15	%	-21.65	%
Net portfolio value	200	+/-25	%	3.38	%
	-200	+/-25	%	-16.25	%

The interest rate risk position at December 31, 2004 exceeded guidelines for both the one year GAP and the 200 basis points interest rate shock net interest income simulation model. This position is the result of high liquidity levels imbedded in the balance sheet at the 2004 year-end resulting from significant growth in the fourth quarter of 2004. The interest rate risk level has been reduced in the first quarter of 2005 due to the redeployment of these assets into higher yielding loans and investments.

The table below sets forth examples of percentage changes in estimated net interest income and estimated net portfolio value based on projected interest rate increases and decreases.

Net Interest Income and Economic Value
Summary Performance

	Net Interest Income							Net Portfolio Value
Projected Interest Rate Scenario	Estimated Value		$ Change from Base			% Change from base		Estimated Value		$ Change from Base			% Change from base
+200	$	13,839	$	2,339		20.34	%	$	39,045	$	1,277		3.38	%
+100		12,534		1,034		8.99			38,794		1,026		2.27
BASE		11,500		—		—			37,768		—		—
-100		10,450		(1,051	)	(9.14	)		35,805		(1,963	)	(5.20	)
-200		9,011		(2,490	)	(21.65	)		31,618		(6,150	)	(16.28	)

Impact of Inflation and Changing Prices

Our financial statements have been prepared in terms of historical dollars, without considering changes in relative purchasing power of money over time due to inflation. Unlike most industrial companies, virtually all of the assets and liabilities of a financial institution are monetary in nature. As a result, interest rates have a more significant impact on our performance than the effect of general levels of inflation. Interest rates do not necessarily move in the same direction or in the same magnitude as the prices of goods and services. Notwithstanding this, inflation can directly affect the value of loan collateral, in particular, real estate. Inflation, or disinflation, could significantly affect our earnings in future periods.

Business

Our Company

We are a Connecticut corporation which was organized in 1999 for the purpose of becoming a one-bank holding company for the Bank, a national banking association headquartered in Stamford, Connecticut. Our reorganization into the holding company form became effective in December 1999. Upon consummation of the reorganization, each outstanding share of common stock of the Bank was converted into the right to receive one share of our common stock and each outstanding option or warrant to purchase Bank common stock became an option or warrant to purchase an equal number of shares of our common stock.

The Bank was granted preliminary approval by the OCC in March 1993. It received its charter and commenced operations as a national bank on August 31, 1994. Since then, the Bank has opened branch offices in Greenwich and Old Greenwich, Connecticut in 1997 and 1999; two branch offices in Norwalk, Connecticut, one in 2001 and a second in 2003; a second Stamford location in 2003; two branch offices in Wilton, Connecticut, one in 2003 and a second in 2004; and a branch office in Darien, Connecticut in 2004. The Bank has received regulatory approval to open a branch office in Southport, Connecticut.

In June 1999, we acquired all of the outstanding capital stock of three affiliated residential mortgage companies doing business in Connecticut, New Jersey and New York. Upon acquisition, we consolidated the mortgage brokerage business into the Bank's Residential Lending Group.

In March 2003, we formed Patriot National Statutory Trust I for the sole purpose of issuing trust preferred securities and investing the proceeds in subordinated debentures issued by us. We primarily invested the funds from the issuance of the debt in the Bank, which in turn used the proceeds to fund general operations of the Bank.

We offer a broad range of consumer and commercial banking services with an emphasis on serving the needs of individuals, small and medium-sized businesses and professionals. We offer commercial real estate and construction loans to area businesses and developers. Real estate loans made to individuals include one- to four-family residential mortgage loans, home improvement loans, bridge loans and home equity lines of credit. Other personal loans include lines of credit, installment loans and credit cards. Commercial loans offered to small and medium-sized businesses include secured and unsecured loans to service companies, real estate developers, manufacturers, restaurants, wholesalers, retailers and professionals doing business in our market area.

We offer consumer and commercial deposit accounts that include: checking accounts, interest-bearing "NOW" accounts, insured money market accounts, time certificates of deposit, savings accounts and IRA's (Individual Retirement Accounts). Other services include money orders, traveler's checks, ATM's (automated teller machines), internet banking and debit cards. In addition, we may in the future offer Keogh accounts and other financial services.

The Bank's Residential Lending Group solicits and processes residential mortgage loan applications from consumers on behalf of permanent investors and originates loans for sale. Revenues are generated from loan and application processing fees received from the permanent investors, and gains and origination fees from loans sold. The Residential Lending Group operates out of a main office in Stamford, Connecticut and a second office in Melville, (Long Island), New York. The Residential Lending Group employs loan originators operating out of both offices and also solicits and accepts mortgage applications through the Bank's website, www.pnbk.com.

The Residential Lending Group brokers home purchase and refinancing loans for multiple mortgage sources. In addition to Connecticut and New York, the Residential Lending Group originates loans in California, Florida, Massachusetts, New Jersey, North Carolina and Vermont.

We compete with a variety of financial institutions in our market area. Most of these institutions have greater financial resources and capitalization than we do, which gives them higher lending limits and the ability to conduct larger advertising campaigns to attract business. Generally, the larger institutions offer services such as trust and international banking which we are not equipped to offer directly. Currently, when the need arises, we make arrangements with correspondent institutions to provide such services. In the future, if we desire to offer trust services, prior approval of the OCC will be required. To attract business in this competitive environment, we rely on local promotional activities and personal contacts by officers, directors and shareholders and on our ability to offer personalized services.

Our customer base is diversified so that there is not a concentration of either loans or deposits within a single industry, a group of industries, a single person or groups of people. We do not depend on one or a few major customers for either our deposit or lending activities, the loss of any one of which would have a material adverse effect on our business.

The majority of our deposits come from residents and businesses located in Stamford, Greenwich, Norwalk, Wilton and Darien, Connecticut. We have focused our attention on serving the segments of our market area historically served by community banks. We compete in our market by providing a high level of personalized and responsive banking service for which we believe there is a need. Our primary market area is bordered by New York State to the west, the Town of Ridgefield to the north, the Town of Westport to the east, and Long Island Sound to the south.

Our loan customers extend beyond Stamford, Greenwich, Norwalk, Wilton and Darien to include nearby towns in Fairfield County, Connecticut, and towns in Westchester County, New York, although our loan business is not necessarily limited to these areas. Our mortgage brokerage business is concentrated in the areas surrounding our loan origination offices. While we do not currently hold or intend to attract significant deposit or loan business from major corporations with headquarters in the Fairfield County area, we believe that the service, professional and related businesses which have been attracted to this area, as well as the individuals that reside in this area, represent our current and potential customers.

In the normal course of business and subject to applicable government regulations, we invest a portion of our assets in investment securities, which may include certain debt and equity securities, including U.S. government securities. An objective of our investment policy is to seek to optimize our return on assets while limiting our exposure to interest rate movements and to maintain adequate levels of liquidity.

Our employees perform most routine day-to-day banking transactions at our main office and branch locations. However, we have entered into a number of arrangements with third parties for banking services such as correspondent banking, check clearing, data processing services, credit card processing and armored carrier service.

Competition

The cities of Stamford and Norwalk and the towns of Greenwich, Wilton and Darien are presently served by approximately 151 branches of commercial banks and savings banks, most of which are offices of banks which have headquarters outside of the area or are subsidiaries of bank or financial holding companies whose headquarters are outside of the state or areas served by us. In addition to banks with branches in the same areas as us, there are numerous banks and financial institutions serving the communities surrounding these areas, which also draw customers from Stamford, Greenwich, Norwalk, Wilton and Darien, posing significant competition to us for deposits and loans. Many of such banks and financial institutions are well established and well capitalized.

In recent years, intense market demands, economic pressures and significant legislative and regulatory actions have eroded banking industry classifications which were once clearly defined and have increased competition among banks, as well as other financial institutions. This increase in competition has caused banks and other financial service institutions to diversify their services and become more cost effective as a result of competition with one another and with new types of financial service companies, including non-bank competitors. The impact on us of federal legislation authorizing increased services by financial holding companies and interstate branching of banks has resulted in increased competition. These events have resulted in increasing homogeneity in the financial services offered by banks and other financial institutions. The impact on banks and other financial institutions of these market dynamics and legislative and regulatory changes has been increased customer awareness of product and service differences among competitors and increased merger activity.

Office Properties

We conduct business at our main office located at 900 Bedford Street, Stamford, Connecticut and at branch offices located at 838 High Ridge Road, Stamford, Connecticut, 100 Mason Street, Greenwich, Connecticut, 184 Sound Beach Avenue, Old Greenwich, Connecticut, 16 River Street and 365 Westport Avenue in Norwalk, Connecticut, One Danbury Road and 5 River Road in Wilton, Connecticut and 800 Post Road in Darien, Connecticut. Our mortgage origination offices are located at 1177 Summer Street, Stamford, Connecticut and 20 Broad Hollow Road, Melville, New York. We also lease space for additional parking at our main office. In March 2005, we entered into a lease for a new branch location in Southport, Connecticut which expires on March 22, 2015. In addition, we negotiated a lease for an additional residential mortgage origination office located in New York effective as of April 1, 2005.

We lease space for all of our offices and facilities. Lease commencement dates for office locations range from January 1, 2001 to September 1, 2004 and lease expiration dates fall between December 31, 2005 and October 15, 2014. Most of our leases contain rent escalation provisions as well as renewal options for one or more additional terms. Our leased space is in good condition, covered by insurance and adequate for our current needs.

We have sublet and licensed excess space in two of our locations to one of our directors. See "Management—Transactions with Management and Others."

Employees

As of December 31, 2004, we had 102 full-time employees and eight part-time employees. None of our employees is covered by a collective bargaining agreement, and we believe that our relationship with our employees is good.

Legal Proceedings

Neither we nor the Bank have any pending legal proceedings, other than ordinary routine litigation incidental to our business, to which we or the Bank is a party or any of our property is subject.

Supervision and Regulation

As a bank holding company, our operations are subject to regulation, supervision and examination by the Board of Governors of the Federal Reserve Board. The Federal Reserve Board has established capital adequacy guidelines for bank holding companies that are similar to the OCC's capital guidelines applicable to the Bank. The Bank Holding Company Act of 1956, as amended, or the BHC Act limits the types of companies that a bank holding company may acquire or organize and the activities in which it or they may engage. In general, bank holding companies and their subsidiaries are only permitted to engage in, or acquire direct control of any company engaged in, banking or in a business

so closely related to banking as to be a proper incident thereto. Federal legislation enacted in 1999 authorizes certain entities to register as financial holding companies. Registered financial holding companies are permitted to engage in businesses, including securities and investment banking businesses, which are prohibited to bank holding companies. While the creation of financial holding companies is evolving, to date there has been no significant impact on us.

Under the BHC Act, we are required to file annually with the Federal Reserve Board a report of our operations. We, the Bank and any other subsidiaries are subject to examination by the Federal Reserve Board. In addition, we will be required to obtain the prior approval of the Federal Reserve Board to acquire, with certain exceptions, more than 5% of the outstanding voting stock of any bank or bank holding company, to acquire all or substantially all of the assets of a bank or to merge or consolidate with another bank holding company. Moreover, we, the Bank and any other subsidiaries are prohibited from engaging in certain tying arrangements in connection with any extension of credit or provision of any property or services. The Bank is also subject to certain restrictions imposed by the Federal Reserve Act on issuing any extension of credit to us or any of its subsidiaries or making any investments in the stock or other securities thereof and on the taking of such stock or securities as collateral for loans to any borrower. If we want to engage in businesses permitted to financial holding companies but not to bank holding companies, we would need to register with the Federal Reserve Board as a financial holding company.

Payment of Dividends

The Federal Reserve Board has issued a policy statement on the payment of cash dividends by bank holding companies, which expresses the Federal Reserve Board's view that a bank holding company should pay cash dividends only to the extent that bank holding company's net income for the past year is sufficient to cover both the cash dividend and a rate of earnings retention that is consistent with the bank holding company's capital needs, asset quality and overall financial condition. The Federal Reserve Board has also indicated that it would be inappropriate for a company experiencing serious financial problems to borrow funds to pay dividends. Furthermore, under the prompt corrective action regulations adopted by the Federal Reserve Board pursuant to applicable law, the Federal Reserve Board may prohibit a bank holding company from paying any dividends if the bank holding company's bank subsidiary is classified as "undercapitalized."

A bank holding company is required to give the Federal Reserve Board prior written notice of any purchase or redemption of its outstanding equity securities if the gross consideration for the purchase or redemption, when combined with the net consideration paid for all such purchases or redemptions during the preceding 12 months, is equal to 10% or more of its consolidated retained earnings. The Federal Reserve Board may disapprove such a purchase or redemption if it determines that the proposal would constitute an unsafe or unsound practice or would violate any law, regulation, Federal Reserve Board order, or any condition imposed by, or written agreement with, the Federal Reserve Board.

The Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 was enacted to ease restrictions on interstate banking. Effective September 29, 1995, the Riegle-Neal Act allows the Federal Reserve Board to approve an application of an adequately capitalized and adequately managed bank holding company to acquire control of, or acquire all or substantially all of the assets of, a bank located in a state other than such holding company's state, without regard to whether the transaction is prohibited by the laws of any state. The Federal Reserve Board may not approve the acquisition of a bank that has not been in existence for the minimum time period (not exceeding five years) specified by the statutory law of the host state. The Riegle-Neal Act also prohibits the Federal Reserve Board from approving an application if the applicant (and its depository institution affiliates) controls or would control more than 10% of the insured deposits in the United States or 30% or more of the deposits in the target bank's home state or in any state in which the target bank maintains a branch.

The Riegle-Neal Act does not affect the authority of states to limit the percentage of total insured deposits in the state which may be held or controlled by a bank or bank holding company to the extent that such limitation does not discriminate against out-of-state banks or bank holding companies. Individual states may also waive the 30% statewide concentration limits contained in the Riegle-Neal Act.

We are subject to capital adequacy rules and guidelines issued by the OCC, the Federal Reserve Board and the FDIC and the Bank is subject to capital adequacy rules and guidelines issued by the OCC. These substantially identical rules and guidelines require us to maintain certain minimum ratios of capital to adjusted total assets and/or risk-weighted assets. Both we and the Bank comply with these rules and guidelines. Under the provisions of the Federal Deposit Insurance Corporation Improvements Act of 1991, the federal regulatory agencies are required to implement and enforce these rules in a stringent manner. We are also subject to applicable provisions of Connecticut law insofar as they do not conflict with, or are not otherwise preempted by Federal banking law.

The Bank's operations are subject to regulation, supervision and examination by the OCC and the FDIC.

Federal and state banking regulations regulate, among other things, the scope of the business of a bank, a bank holding company or a financial holding company, the investments a bank may make, deposit reserves a bank must maintain, the nature and amount of collateral for certain loans a bank makes, the establishment of branches and the activities of a bank with respect to mergers and acquisitions. The Bank is a member of the Federal Reserve System and is subject to applicable provisions of the Federal Reserve Act and regulations thereunder. The Bank is subject to the federal regulations promulgated pursuant to the Financial Institutions Supervisory Act to prevent banks from engaging in unsafe and unsound practices, as well as various other federal and state laws and consumer protection laws. The Bank is also subject to the comprehensive provisions of the National Bank Act.

The OCC regulates the number and locations of the branch offices of a national bank. The OCC may only permit a national bank to maintain branches in locations and under the conditions imposed by state law upon state banks. At this time, applicable Connecticut banking laws do not impose any material restrictions on the establishment of branches by Connecticut banks throughout Connecticut.

The earnings and growth of us, the Bank and the banking industry are affected by the monetary and fiscal policies of the United States Government and its agencies, particularly the Federal Reserve Board. The Open Market Committee of the Federal Reserve Board implements national monetary policy to curb inflation and combat recession. The Federal Reserve Board uses its power to adjust interest rates in United States Government securities, the Discount Rate and deposit reserve retention rates. The actions of the Federal Reserve Board influence the growth of bank loans, investments and deposits. They also affect interest rates charged on loans and paid on deposits. The nature and impact of any future changes in monetary policies cannot be predicted.

In addition to other laws and regulations, we are subject to the Community Reinvestment Act, or the CRA, which requires the federal bank regulatory agencies, when considering certain applications involving us or the Bank, to consider our record of helping to meet the credit needs of the entire community, including low- and moderate-income neighborhoods. The CRA was originally enacted because of concern over unfair treatment of prospective borrowers by banks and over unwarranted geographic differences in lending patterns. Existing banks have sought to comply with CRA in various ways; some banks have made use of more flexible lending criteria for certain types of loans and borrowers (consistent with the requirement to conduct safe and sound operations), while other banks have increased their efforts to make loans to help meet identified credit needs within the consumer community, such as those for home mortgages, home improvements and small business loans. For example, this may include participation in various government insured lending programs, such as Federal Housing Administration insured or Veterans Administration guaranteed mortgage loans, Small

Business Administration loans, and participation in other types of lending programs such as high loan-to-value ratio conventional mortgage loans with private mortgage insurance. To date, the market area from which we draw much of our business is Stamford, Greenwich, Norwalk, Wilton and Darien, which locations are characterized by a very diverse ethnic, economic and racial cross-section of the population. As we continue to expand, the market areas served by us will continue to evolve. We have not and will not adopt any policies or practices, which discourage credit applications from, or unlawfully discriminate against, individuals or segments of the communities served by us.

On October 26, 2001, the Uniting and Strengthening America by Providing Tools Required to Intercept and Obstruct Terrorism Act of 2001, or the USA Patriot Act, was enacted to further strengthen domestic security following the September 11, 2001 terrorist attacks. This Act amends various federal banking laws, particularly the Bank Secrecy Act, with the intent to curtail money laundering and other activities that might be undertaken to finance terrorist actions. Financial institutions in the United States are required to enhance already established anti-money laundering policies, procedures and audit functions and ensure that controls are reasonably designed to detect instances of money laundering through certain correspondent or private banking accounts. Financial institutions are also required to verify customer identification, maintain verification records and cross check names of new customers against government lists of known or suspected terrorists.

On July 20, 2002, the Sarbanes-Oxley Act of 2002 was enacted, the primary purpose of which is to protect investors through improved corporate governance and heightened responsibilities of, and disclosures by, public companies. The Act contains provisions for the limitations of services that external auditors may provide as well as requirements for the credentials of audit committee members. In addition, the principal executive and principal financial officers are required to certify in quarterly and annual reports that they have reviewed the report; and based on the officers' knowledge, the reports accurately present the financial condition and results of operations of the company and contain no untrue statement or omission of material fact. The officers also certify their responsibility for establishing and maintaining a system of internal controls which insure that all material information is made known to the officers; this certification also includes the evaluation of the effectiveness of disclosure controls and procedures and their impact upon financial reporting. Section 404 of the Act, requires that each annual report include an internal control report which states that it is the responsibility of management to establish and maintain an adequate internal control structure and procedures for financial reporting, as well as an assessment by management of the effectiveness of the internal control structure and procedures for financial reporting. This section further requires that the external auditors attest to, and report on, the assessment made by management. In March 2005, the Securities and Exchange Commission, or the SEC, extended the Section 404 compliance dates for non-accelerated filers such as us (those issuers with non-affiliated public float of less than $75 million) to fiscal years ending on or after July 16, 2006. Due to the burdens on smaller companies in designing and implementing compliance with this section, this one year extension will provide smaller companies, such as us, with the necessary opportunity to more thoroughly evaluate their systems of internal controls.

We do not anticipate that compliance with applicable federal and state banking laws will have a material adverse effect on our business or the business of the Bank. Neither we nor the Bank have any material patents, trademarks, licenses, franchises, concessions and royalty agreements or labor contracts, other than the charter granted to the Bank by the OCC. The Bank has, however, registered the trademark "Patriot" and the corresponding logo with the State of Connecticut Trademark Office. Compliance by us and the Bank with federal, state and local provisions which have been enacted or adopted regulating or otherwise relating to the discharge of material into the environment is not expected to have a material effect upon our capital expenditures, earnings or competitive position.

Security Ownership of Certain Beneficial Owners and Management

The table below provides certain information about beneficial ownership of our common stock as of April, 2005. The table shows information for:

•: each person, or group of affiliated persons, who is known to us to beneficially own more than 5% of our common stock;
•: each of our directors;
•: each of our named executive officers; and
•: all of our directors and executive officers as a group.

Except as otherwise noted, the persons or entities in this table have sole voting and investing power with respect to all shares of common stock beneficially owned by them, subject to community property laws, where applicable. The address of each person is care of us at our principal executive office, except for Mr. Lewis.

The percentage ownership information below is based on a total of 2,489,391 shares of common stock outstanding before the offering, shares of common stock outstanding after the offering, assuming the sale of the minimum number of shares available in this offering, and shares of common stock outstanding after the offering, assuming the sale of the maximum number of shares available in this offering. For purposes of the table below, we treat shares of common stock subject to options that are currently exercisable or exercisable within 60 days after March 31, 2005 to be outstanding and to be beneficially owned by the person holding the options for the purpose of computing the percentage ownership of the person, but we do not treat the shares as outstanding for the purpose of computing the percentage ownership of any other shareholder.

						Shares Owned After the Offering
							Percent
	Shares Owned Prior to the Offering						Percent
							Assuming Minimum Number of Shares Sold	Assuming Maximum Number of Shares Sold
Name					Shares to be Purchased in the Offering(1)
Name	Number		Percent		Shares to be Purchased in the Offering(1)	Number
5% Shareholder:
Barry Lewis(2)	201,439		8.1	%
Directors and Executive Officers:
Angelo De Caro	682,000	(3)	27.4
John J. Ferguson	1,000		*
Brian A. Fitzgerald	100		*
John A. Geoghegan	5,917		*
L. Morris Glucksman	58,891	(4)	2.3
Charles F. Howell	25,000		1.0
Michael F. Intrieri	40,507	(5)	1.6
Robert F. O'Connell	16,036		*
Paul C. Settelmeyer(6)	16,600		*
Philip W. Wolford	19,468	(7)	*
Martin G. Noble	866		*
Marcus Zavattaro	76,011		3.1
All directors and executive officers as a group (14 persons)	945,042	(8)	37.4	%

*: less than 1%

(1): Reflects the purchase of an aggregate of $1.7 million of our common stock by the following individuals: Mr. De Caro ($1.0 million); Mr. Ferguson ($8,446); Mr. Fitzgerald ($842); Mr. Geoghegan ($30,000); Mr. Glucksman ($100,000); Mr. Howell ($211,149); Mr. Intrieri ($200,000); Mr. O'Connell ($75,000); Mr. Settelmeyer ($50,000); Mr. Wolford ($25,000); and Mr. Noble ($6,600).
(2): Mr. Lewis' address is 177 South Mountain Road, New City, New York 10956.
(3): Includes 19,000 shares for which Mr. De Caro has sole voting power but in which he has no direct or indirect pecuniary interest.
(4): Includes 3,200 shares held by Mr. Glucksman as Trustee for Roslyn Glucksman, Mr. Glucksman's wife; 1,000 shares owned solely by Roslyn Glucksman; 5,500 shares held by Mr. Glucksman as Trustee for Rayna Glucksman, Mr. Glucksman's daughter; 5,500 shares held by Mr. Glucksman as Trustee for Janna Glucksman, Mr. Glucksman's daughter; and 10,800 shares held as Trustee for other than immediate family members. Also includes 17,133 shares of common stock issuable upon exercise of stock options exercisable within 60 days after March 31, 2005.
(5): Includes 1,200 shares held in joint tenancy with Karen Intrieri, Mr. Intrieri's wife, and 651 shares owned solely by Karen Intrieri; 600 shares held by Michael J. Intrieri, Mr. Intrieri's son, and 1,500 shares owned jointly by father and son; and 600 shares held by Jason Intrieri, Mr. Intrieri's son, and 1,500 shares owned jointly by father and son. Also includes 10,000 shares of common stock issuable upon exercise of stock options exercisable within 60 days after March 31, 2005.
(6): Mr. Settelmeyer will not stand for re-election as a director at our 2005 Annual Meeting of Shareholders.
(7): Includes 84 shares held in joint tenancy with, Regine Vantieghem, Mr. Wolford's wife; 83 shares held in joint tenancy with Jack A. Wolford, Mr. Wolford's father; 83 shares held in joint tenancy with Kathryn Rachel Wolford, Mr. Wolford's mother. Also includes 9,000 shares of common stock issuable upon exercise of stock options exercisable within 60 days after March 31, 2005.
(8): Includes 36,133 shares of common stock issuable upon exercise of stock options exercisable within 60 days after March 31, 2005.

Management

Executive Officers and Directors

The table below lists our executive officers and directors as of March 31, 2005:

Name	Age	Position
Angelo De Caro	62	Chairman and Chief Executive Officer of us; Chairman of the Bank
Charles F. Howell	56	President and Vice Chairman of us; President and Chief Executive Officer of the Bank
Robert F. O'Connell	56	Senior Executive Vice President, Chief Financial Officer and Director of us and the Bank
Philip W. Wolford	57	Chief Operating Officer, Secretary and Director of us and the Bank
Michael A. Capodanno	44	Senior Vice President and Controller of us and the Bank
John Kantzas	69	Executive Vice President and Cashier of the Bank
Martin G. Noble	55	Executive Vice President and Senior Lending Officer of the Bank
Marcus Zavattaro	40	Executive Vice President of the Bank
John J. Ferguson(1)(2)	65	Director of us and the Bank
Brian A. Fitzgerald(1)	56	Director of us and the Bank
John A. Geoghegan(2)	63	Director of us and the Bank
L. Morris Glucksman(2)	57	Director of us and the Bank
Michael F. Intrieri(1)(2)	61	Director of us and the Bank
Paul C. Settelmeyer(1)(2)	59	Director of us and the Bank

(1): Member of the Audit Committee
(2): Member of the Compensation Committee

Angelo De Caro has served as our director since our organization in 1999 and as our Chairman since his election in 2001. He has also served as our Chief Executive Officer since 2001 and was our President and Chief Executive Officer from our organization in 1999 to 2001. He has served as a director of the Bank since 1998, as Chairman of the board of directors of the Bank since September 2000, and as Chief Executive Officer of the Bank from June 1999 until October 2000. Mr. De Caro has been a private investor from 1996 to present. Mr. De Caro was a General Partner and Senior Financial Officer of Goldman, Sachs & Co. from 1979 to 1996. In addition he served on the Executive Committees of Goldman Sachs Swiss Private Bank and Goldman Sachs Trust Services.

Charles F. Howell has served as our Vice Chairman since 2000 and as our President since 2001. He has also served as a director and President and Chief Executive Officer of the Bank since 2000. From 1998 to 2000, Mr. Howell was a director and President of Summit Bank Connecticut. He also served as Executive Vice President, Chief Operating Officer and a director of each of NSS Bank from 1994 to 1998, and NSS Bancorp from the date of formation in 1997 to 1998.

Robert F. O'Connell has served as our director and Senior Executive Vice President and Chief Financial Officer since 2001 and as our Executive Vice President and Chief Financial Officer from 2000 to 2001. He has also served as a director and Senior Executive Vice President and Chief Financial

Officer of the Bank since 2001 and as Executive Vice President and Chief Financial Officer of the Bank from 2000 to 2001. From 1994 to 2000, Mr. O'Connell served as Senior Vice President and Chief Financial Officer of New Canaan Bank and Trust Company and Treasurer/Senior Financial Officer of its successor, Summit Bank, New Canaan, Connecticut.

Philip W. Wolford has served as our Chief Operating Officer and Secretary since June 2000. He has also served as Chief Operating Officer and Secretary of the Bank since September 2000. Mr. Wolford was our President and Secretary from December 1999 until June 2000. He was President, Chief Executive Officer and Secretary of the Bank from September 1994 until June 1999 and President and Secretary of the Bank from August 1999 until September 2000. Mr. Wolford has served as our director since 1999 and a director of the Bank since 1994.

Michael A. Capodanno has served as our Senior Vice President and Controller since April 2004. He has also served as Senior Vice President and Controller of the Bank since April 2004 and as Vice President and Controller of the Bank from 2001 to 2004. Mr. Capodanno was the Chief Financial Officer of The Greenwich Bank & Trust Company from 2000 to 2001.

John Kantzas has served as Executive Vice President and Cashier of the Bank since 1994.

Martin G. Noble has served as Executive Vice President and Senior Loan Officer of the Bank since February 1999. From 1996 to 1999, he served as Vice President and Manager—Risk Management for Cityscape Corporation, a mortgage banking company.

Marcus Zavattaro has served as Executive Vice President of the Bank and the Division Sales Manager of the Bank's Residential Lending Group since 2004. From 1999 to 2004, Mr. Zavattaro served as Executive Vice President of the Bank and President of the Pinnacle Financial Division of the Bank. From 1994 to 1999, he served as President of Pinnacle Financial Corp., a mortgage broker.

John J. Ferguson has served as a director of us and the Bank since 2001. He is a Senior Partner of the law firm of Bleakley Platt & Schmidt LLP, New York, New York.

Brian A. Fitzgerald has served as a director of us and the Bank since March 2005. He has also served as the Finance Director and Property Manager at Villa Maria Education Center in Stamford, Connecticut since 2001. From 1999 to 2001, Mr. Fitzgerald served as the Finance Director and Controller of Chromacol, a developer of consumables and accessories for chromatography. Mr. Fitzgerald was chairman of the audit committee of Summit Bank of Connecticut from 1999 to 2001, chairman of the audit committee of NSS Bancorp from 1997 to 1998, and chairman of the audit committee of NSS Bank from 1995 to 1997.

John A. Geoghegan has served as a director of us and the Bank since 1998. He is a Resident Principal (Partner) of the law firm of Gellert & Klein, P.C., Purchase, New York and its predecessor firm. Previously, Mr. Geoghegan was a director of Barclays Bank, N.A. for over eighteen years.

L. Morris Glucksman has served as a director of us and the Bank since 1993. Mr. Gluckman is a practicing attorney in Stamford, Connecticut.

Michael F. Intrieri has served as a director of us and the Bank since 1993. He is a facilitator in the Stamford, Connecticut Public School System. Mr. Intrieri holds an Ed.D. in education and counseling and is a licensed real estate broker.

Paul C. Settelmeyer has served as a director of us and the Bank since 2001. He previously served as our director from December 1999 to June 2000 and as a director of the Bank from 1998 until June 2000. Mr. Settelmeyer is a financial consultant who was working with financial institutions until March 2005 when he was elected the President, Chief Operating Officer and Director of Golden First Bank. Mr. Settelmeyer will not stand for re-election as a director at our 2005 Annual Meeting of Shareholders.

Executive Compensation

Compensation of Directors

Our directors who are also officers do not receive compensation for service as members of the board of directors or committees thereof. However, non-officer directors of the Bank receive a fee of $500 for each meeting of the board of directors attended, and $400 for each meeting of a standing committee of the board of directors attended. In addition, non-officer directors who serve as the chair of a board committee that meets at least four times in a year receive an additional $2,000 per year.

Currently, members of the Bank's board of directors, who serve on the board for five years, receive the cash equivalent of 1,500 shares of our common stock upon resignation or retirement from the board. This policy will terminate as of the date of the annual meeting in 2006. Pursuant to a new policy adopted by our board in February 2005, starting in 2005, outside directors serving on the board will receive an annual award of our common stock at the time of each year's annual meeting valued at $5,000 based on the last reported sales price on the trading day immediately preceding the annual meeting. The award will be prorated for directors who have served less than a full year.

Cash Compensation of Executive Officers

The following table sets forth certain information with respect to the compensation of our Chief Executive Officer and our four most highly compensated executive officers during the year ended December 31, 2004.

Summary Compensation Table

				Long-Term Compensation Payouts
Name and Principal Position	Year	Salary ($)	Bonus ($)	LTIP Payouts ($)	All Other Compensation $ (1)
Angelo De Caro Chairman and Chief Executive Officer of us and Chairman of the Bank	2004 2003 2002	127,846 77,885 84,615	54,323 77,004 57,947	— — —	— — —
Charles F. Howell President and Vice Chairman of us and President and Chief Executive Officer of the Bank	2004 2003 2002	227,308 188,134 171,154	54,323 77,004 57,947	101,770 54,925 29,544	6,150 3,032 1,572
Robert F. O'Connell Senior Executive Vice President and Chief Financial Officer of us and the Bank	2004 2003 2002	169,861 155,630 144,284	54,323 77,004 57,947	— — —	6,150 3,048 1,573
Marcus Zavattaro Executive Vice President of the Bank	2004 2003 2002	150,000 150,000 158,700	41,956 303,620 183,303	— — —	6,150 2,431 1,172
Martin G. Noble Executive Vice President of the Bank	2004 2003 2002	152,185 134,891 128,115	44,182 62,630 47,130	— — —	6,150 1,507 376

(1): The amounts in this column represent our contribution to the executive's account under our 401(k) plan.

Other Remuneration

Neither we nor the Bank afforded any perquisites or personal benefits for executive officers during 2004 that might be attributable to normal management or executive fringe benefits such as automobiles and country club membership.

Employment and Change of Control Agreements

We and the Bank entered into a three-year employment agreement with Charles F. Howell, dated October 23, 2003, pursuant to which Mr. Howell serves as President and Chief Executive Officer of the Bank and as President of us until December 31, 2006. Mr. Howell's base salary was $225,000 for the first year, $240,000 for the second year and will be $260,000 for the third year. Mr. Howell is entitled to receive annual discretionary cash bonuses in amounts to be determined by the board of directors.

If Mr. Howell's employment is terminated for cause (as defined in the agreement) or because of his death or disability, all unvested restricted stock awards and options will be forfeited. Mr. Howell was issued stock grants under his prior employment contract and may participate in future option grants if made by us. In the event that Mr. Howell's employment terminates for any other reason, including termination following a change of control (as defined in the agreement), all restricted stock awards and options will vest immediately.

In the event of the early termination of the agreement with Mr. Howell for any reason other than cause, he would be entitled to receive a lump sum payment equal to the greater of the aggregate salary payments that would be made to him for the remaining term of the agreement or 18 months of his stipulated base salary at the time of termination. In connection with a change of control (as defined in the agreement), in addition to immediate vesting of all restricted stock awards and options or cash payments in lieu thereof, Mr. Howell would be entitled to receive a lump sum cash payment equal to two times the greater of (i) Mr. Howell's then annual base salary; (ii) Mr. Howell's cash compensation from the Bank for services rendered for the last full calendar year immediately preceding the change of control; or (iii) Mr. Howell's average annual cash compensation for the two most recent taxable years ending before the date on which the change of control occurs.

We and the Bank entered into an employment agreement with Robert F. O'Connell, dated November 3, 2003, pursuant to which Mr. O'Connell serves as Chief Financial Officer and Senior Executive Vice President of the Bank until December 31, 2007. Mr. O'Connell's base salary is currently $175,000, subject to review and increase by the board of directors each year. If Mr. O'Connell's employment terminates without cause (as defined in the agreement), Mr. O'Connell would be entitled to a lump sum payment equal to the aggregate salary payments (based on the rate then in effect) for the balance of the employment period. If Mr. O'Connell's employment terminates without cause following a change of control, as defined in the agreement, he would be entitled to receive the greater of the amount described in the preceding sentence or the amount payable pursuant to his change of control agreement described below.

The Bank also entered into a change of control agreement with Mr. O'Connell pursuant to which he would be entitled to receive a lump sum cash payment if a change of control, as defined in the agreement, occurs while he is a full-time officer of the Bank or within six months following termination of his employment other than for cause, as defined in the agreement, or by death or disability. The amount of the payment would be equal to the greater of two times (i) the then current year's base salary or (ii) Mr. O'Connell's total compensation, including salary and any cash incentive compensation from the Bank for the last full calendar year preceding the change of control.

The Bank entered into an employment agreement, dated January 1, 2005, with Marcus Zavattaro pursuant to which Mr. Zavattaro serves as Executive Vice President of the Bank and Division Sales Manager of the Bank's Residential Lending Group until December 31, 2005. Mr. Zavattaro is entitled to receive salary and commissions totaling between $150,000 and $400,000 depending upon the amount of the fee income he generates from mortgage transactions. In addition, Mr. Zavattaro is entitled to receive incentive payments if the Residential Lending Group meets certain annual financial targets.

The Bank has also entered into a change of control agreement with Martin G. Noble pursuant to which he would be entitled to receive a lump sum cash payment equal to his annual base salary if a change of control, as defined in the agreement, occurs while he is a full-time officer of the Bank or within six months following termination of his employment other than for cause, as defined in the agreement, or by death or disability.

Exercise of rights under a change of control agreement by any executive officer will not result in adverse tax consequences to us under Section 280G of the Code.

Options and Stock Appreciation Rights

During 2004, we did not grant stock options or stock appreciation rights to any of the named executive officers.

During 2001, we adopted the Patriot National Bancorp, Inc. 2001 Stock Appreciation Rights Plan. Under the terms of the plan, we may grant stock appreciation rights, or SARs, to our officers that entitle them to receive upon exercise, in cash or shares of common stock, the appreciation in the value of the common stock from the date of grant. Each award vests at the rate of 20% per year from the date of grant. Any unexercised rights will expire ten years from the date of grant. As of March 31, 2005, there were 14,400 SARs issued and outstanding.

In connection with our holding company reorganization in 1999, we adopted the Bank's stock option plan. Under such plan, an aggregate of 110,000 shares were available for issuance thereunder, all of which have been awarded. There are no shares available for future grant under this plan.

The following table sets forth information as to options exercised by the named executive officers during 2004 and the values of options and stock appreciation rights as of December 31, 2004.

Aggregated Option/SAR Exercises In Last Fiscal Year and
FY-End Option/SAR Values

Name	Shares Acquired On Exercise (#)	Value Realized ($)	Number of Securities Underlying Unexercised Options/SAR's at FY-End (#) Exercisable/Unexercisable	Value of Unexercised In-the-Money Options/SAR's at FY-End ($) Exercisable/ Unexercisable
Angelo DeCaro	—	—	—	—
Charles F. Howell	—	—	25,000/15,000	248,850/114,550
Robert F. O'Connell	—	—	3,600/2,400	35,496/23,664
Marcus Zavattaro	—	—	—	—
Martin G. Noble	—	—	3,600/2,400	35,496/23,664

Securities Authorized for Issuance under Equity Compensation Plans

The following table presents information as of December 31, 2004 for our equity compensation plans.

Equity Compensation Plan Information

	Number of securities to be issued upon exercise of outstanding options, warrants and rights (a)		Weighted average exercise price of outstanding options, warrants and rights (b)		Number of securities remaining available for future under equity compensation plans (excluding securities reflected in column (a)) (c)
Equity compensation plans approved by shareholders	110,000		$	10.13	—
Equity compensation plans not approved by shareholders	—			—	—

Total	110,000	(1)	$	10.13	—

(1): Options to purchase 3,000 shares of common stock were exercised during the quarter ended March 31, 2005. Options exercisable for the purchase of 107,000 shares of common stock remain outstanding.

Transactions with Management and Others

In the ordinary course of business, the Bank has made loans to officers and directors (including loans to members of their immediate families and loans to companies of which a director owns 10% or more). The total amount of loans to officers and directors outstanding as of December 31, 2004 was $198,586. In the opinion of management, all of such loans were made in the ordinary course of business of the Bank on substantially the same terms, including interest rates and collateral requirements, as those then prevailing for comparable transactions with other persons and did not involve more than the normal risk of collectibility or present other unfavorable features.

We have entered into two sublease agreements with one of our directors, L. Morris Glucksman, Esq., for approximately 1,100 square feet of space in the building at 900 Bedford Street and 150 square feet of space in the building at 838 High Ridge Road, each at rental rates not to exceed the rental rates paid by us from time to time. The Bedford Street lease has expired but Mr. Glucksman continues to occupy the space on a month-to-month basis at the same rent. The High Ridge Road lease is revocable.

Description of Capital Stock

General

Our authorized capital stock currently consists of 30,000,000 shares of common stock, par value $2.00 per share, and 1,000,000 shares of preferred stock, no par value per share. On March 31, 2005, a total of 2,489,391 shares of common stock were outstanding and an additional 107,000 shares were reserved for issuance upon exercise of outstanding stock options. There are no shares of preferred stock outstanding. As of March 31, 2005, we had approximately 739 shareholders of record.

The following summary of certain provisions of our common and preferred stock does not purport to be complete. You should refer to our restated certificate of incorporation and our by-laws, both of which are included as exhibits to the registration statement we have filed with the SEC in connection with this offering. The summary below is also qualified by provisions of applicable law.

Common Stock

Holders of common stock are entitled to one vote per share on matters on which our stockholders vote. Holders have cumulative voting rights in all elections of directors. Holders of common stock are entitled to receive dividends, if declared by our board of directors, out of funds that we may legally use to pay dividends. See the section of this prospectus entitled "Market Price of Common Stock and Dividend Policy" for further information. If we liquidate or dissolve, holders of common stock are entitled to share ratably in our assets once our debts and liabilities (including all deposits in the Bank and interest accrued thereon) and any liquidation preference owed to any holders of then-outstanding preferred stock are paid. No shares of preferred stock will be outstanding immediately after the closing of this offering. The common stock represents nonwithdrawable capital and will not be an account that is insurable by the FDIC. All common stock that is outstanding as of the date of this prospectus, as well as all shares we are selling in this offering, upon issuance and sale, will be fully-paid and nonassessable.

Preferred Stock

Our board of directors is currently authorized to issue up to 1,000,000 shares of preferred stock in one or more series and to fix the rights of each series. These rights may include dividend rights, dividend rates, conversion rights, voting rights, terms of redemption, redemption prices, liquidation preferences, sinking fund terms, and the number of shares that constitute any series. The board of directors may exercise this authority subject to certain regulatory approvals, but without any further action by our shareholders.

We believe the power to issue preferred stock will provide our board of directors with flexibility in connection with certain possible corporate transactions. The issuance of preferred stock, however, could adversely affect the voting power of holders of our common stock, restrict their rights to receive payment upon liquidation, and have the effect of delaying, deferring, or preventing a change in control. We have no present plans to issue any shares of preferred stock.

Stock Options

At the closing of our holding company reorganization in 1999, a total of 110,000 options to purchase shares of the Bank's common stock were automatically converted into options to purchase 110,000 shares of our common stock at a weighted average exercise price of $10.13 per share, subject to adjustment in the event of a stock split, stock dividend, combination, or similar transaction. Options to purchase an aggregate of 107,000 remained outstanding as of March 31, 2005. These options will expire on August 12, 2009.

Anti-Takeover Measures

Connecticut Law

The laws of the State of Connecticut, where we are incorporated, impose restrictions on certain transactions between certain domestic corporations and significant shareholders. Section 33-844 of the Connecticut Business Corporation Act prohibits certain publicly-held domestic corporations that are based in Connecticut from engaging in a "business combination" (including the issuance of equity securities which have an aggregate market value of 5% or more of the total market value of the outstanding shares of the company) with an "interested shareholder" as defined in the Connecticut Business Corporation Act for a period of five years from the date of the shareholder's purchase of stock, unless approved in a prescribed manner. The application of this statute could prevent a change of control. Generally, approval is required by the board of directors, by 80% of the outstanding voting shares and two-thirds of the voting power of the outstanding shares of the voting stock other than shares held by the interested shareholder. These provisions may have the effect of deterring hostile

takeovers or delaying changes in control, which could depress the market price of our common stock and deprive shareholders of opportunities to realize a premium on shares of common stock held by them.

Charter and By-law Provisions

In addition to the board of directors' ability to issue shares of preferred stock, our certificate of incorporation and bylaws contain a number of provisions relating to corporate governance and rights of shareholders that might discourage future takeover attempts. As a result, shareholders who might desire to participate in such transactions may not have an opportunity to do so. The following description is a summary of the provisions of the certificate of incorporation and bylaws.

•: Our bylaws impose notice and information requirements in connection with the nomination by shareholders of candidates for election as directors;
•: Our by-laws include a provision prohibiting stockholder action by written consent; and
•: Under the certificate of incorporation and by-laws, our board of directors may enlarge the size of the board and fill the vacancies.

Rights Plan

On April 15, 2004, our board adopted a shareholder rights plan that could make it more difficult for a person to acquire a controlling interest in us. Under the shareholder rights plan, a dividend of one common stock purchase right was distributed on each outstanding share of our common stock. Each right entitles a shareholder to buy 8.152 shares of our common stock at a price of $60, subject to adjustment. The rights remain attached to the common stock until they become exercisable upon certain triggering events, including the acquisition of more than 15% of our common stock by any person or the commencement of a tender offer or exchange offer for our common stock. Angelo De Caro, our Chairman, is not considered an "Acquiring Person" (as defined in the rights plan) for the purposes of the rights plan. We will be entitled to redeem the rights at $0.001 per right at any time before the trigger date. The rights expire after ten years, unless the holders exercise them, or we redeem or exchange them, before that date.

Regulatory Restrictions

The Federal Change in Bank Control Act provides that no person, acting directly or indirectly or together with one or more other persons, may acquire control of a bank holding company, unless the Federal Reserve Board has been given 60 days prior written notice. Control means acquiring the ownership, control, or the power to vote 25% or more of any class of a bank holding company's voting stock. A person means an individual, corporation, partnership, and certain other entities. An acquiring person is presumed to acquire control if the person acquires the ownership, control or the power to vote 10% or more of any class of the holding company's voting stock if (a) the bank holding company's shares are registered under Section 12 of the Securities and Exchange Act of 1934, or 1934 Act, or (b) no other person will own, control or hold the power to vote a greater percentage of that class of voting securities. Accordingly, the prior approval of the Federal Reserve Board would be required before any person could acquire 10% or more of our common stock.

The Federal Reserve Board may prohibit an acquisition of control if:

•: It would result in a monopoly or substantially lessen competition;
•: The financial condition of the acquiring person might jeopardize the financial stability of the institution; or

•: The competence, experience or integrity of the acquiring person indicates that it would not be in the interest of the depositors or of the public to permit the acquisition of control by such person.

The BHCA provides that a company may not acquire control of a bank, directly or indirectly, without the prior approval of the Federal Reserve Board. Any company that acquires control of a bank becomes a "bank holding company" subject to registration, examination and regulation by the Federal Reserve Board. Under federal regulations, the term "company" is defined to include banks, corporations, partnerships, associations, and certain trusts and other entities. "Control" is deemed to exist if a company has voting control, directly or indirectly, of at least 25% of any class of a bank's voting stock. Control may be found to exist if a company controls in any manner the election of a majority of the directors of the bank or has the power to exercise a controlling influence over the management or policies of the bank. In addition, a bank holding company must obtain Federal Reserve Board approval prior to acquiring voting control of more than 5% of any class of voting stock of a bank or another bank holding company.

An acquisition of control of a bank that requires the prior approval of the Federal Reserve Board under the BHCA is not subject to the notice requirements of the Change in Bank Control Act. Accordingly, the prior approval of the Federal Reserve Board under the BHCA would be required (a) before any bank holding company could acquire 5% or more of our common stock and (b) before any other company could acquire 25% or more of our common stock.

Transfer Agent and Registrar

The Registrar and Transfer Company, Cranford, New Jersey acts as the transfer agent and registrar for our common stock.

Legal Matters

The validity of the shares of common stock offered hereby will be passed upon for us by Tyler Cooper & Alcorn, LLP, Hartford, Connecticut. Certain legal matters regarding the offering will be passed upon for Sandler O'Neill & Partners, L.P. by Patton Boggs LLP, Washington, D.C.

Experts

Our consolidated financial statements appearing in this prospectus and the registration statement on Form SB-2 have been audited by McGladrey & Pullen, LLP, an independent registered public accounting firm, to the extent and for the periods indicated in their report appearing elsewhere herein and are included in reliance on such report upon the authority of such firm as experts in accounting and auditing.

Where You Can Find More Information

We are subject to the informational requirements of the 1934 Act, and, in accordance therewith, file periodic reports, proxy statements and other information with the SEC. We have filed with the SEC a registration statement under the Securities Act of 1933, as amended, to register the common stock to be sold in the offering. The registration statement, including the exhibits, contains additional relevant information about us and our common stock. The rules and regulations of the SEC allow us to omit certain information included in the registration statement from this prospectus. You may read and copy the registration statement at the SEC's public reference room at 450 Fifth Street, N.W., Judiciary Plaza, Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on the SEC's public reference rooms. The registration statement also is available to the public from commercial document retrieval services and at the Internet World Wide Website maintained by the SEC at "http://www.sec.gov."

"Patriot" and the corresponding logo are our trademarks.

Index to Consolidated Financial Statements

Report of McGladrey & Pullen, LLP, Independent Registered Public Accounting Firm		F-2
Consolidated Balance Sheets as of December 31, 2004 and 2003		F-3
Consolidated Statements of Income for the years ended December 31, 2004 and 2003		F-4
Consolidated Statements of Shareholders' Equity for the years ended December 31, 2004 and 2003		F-5
Consolidated Statements of Cash Flows for the years ended December 31, 2004 and 2003		F-6
Notes to Consolidated Financial Statements		F-7

F-1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders and Board of Directors
Patriot National Bancorp, Inc. and Subsidiary
Stamford, Connecticut

We have audited the accompanying consolidated balance sheets of Patriot National Bancorp, Inc. and Subsidiary (the "Company") as of December 31, 2004 and 2003, and the related consolidated statements of income, shareholders' equity and cash flows for the years then ended. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Patriot National Bancorp, Inc. and Subsidiary as of December 31, 2004 and 2003, and the results of their operations and their cash flows for the years then ended, in conformity with U.S. generally accepted accounting principles.

/s/ McGladrey & Pullen, LLP

New Haven, Connecticut
March 3, 2005

F-2

PATRIOT NATIONAL BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS

December 31, 2004 and 2003

				2004			2003
ASSETS
Cash and due from banks (Note 2)				$	6,670,409		$	4,023,732
Federal funds sold					37,500,000			15,000,000
Short-term investments					11,460,057			10,430,939

			Cash and cash equivalents		55,630,466			29,454,671
Available for sale securities (at fair value) (Note 3)					76,269,475			90,562,083
Federal Reserve Bank stock					692,600			691,150
Federal Home Loan Bank stock (Note 7)					1,296,700			1,077,300
Loans receivable (net of allowance for loan losses: 2004 $3,481,525; 2003 $2,934,675) (Note 4)					263,874,820			214,420,528
Accrued interest receivable					1,758,339			1,470,622
Premises and equipment, net (Notes 5 and 8)					2,132,633			1,421,098
Deferred tax asset (Note 9)					1,677,042			1,524,125
Goodwill (Note 10)					930,091			930,091
Other assets (Note 7)					784,789			917,381

			Total assets	$	405,046,955		$	342,469,049

LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
	Deposits (Note 6):
		Noninterest bearing deposits		$	42,584,120		$	30,477,295
		Interest bearing deposits			324,421,205			259,514,887

			Total deposits		367,005,325			289,992,182
	Repurchase agreements (Note 7)				—			5,700,000
	Federal Home Loan Bank borrowings (Note 7)				8,000,000			17,000,000
	Subordinated debt (Note 7)				8,248,000			8,248,000
	Capital lease obligation (Note 8)				—			103,941
	Collateralized borrowings				—			249,444
	Accrued expenses and other liabilities				2,037,196			2,395,569

			Total liabilities		385,290,521			323,689,136

Commitments and Contingencies (Notes 7, 8, 11 and 13)
Shareholders' equity (Notes 11 and 14)
	Preferred stock, no par value: 1,000,000 shares authorized; no shares issued				—			—
	Common stock, $2 par value: 30,000,000 shares authorized; shares issued and outstanding: 2004 2,486,391; 2003 2,408,607				4,972,782			4,817,214
	Additional paid-in capital				11,830,173			11,519,037
	Retained earnings				3,346,718			2,752,541
	Accumulated other comprehensive loss—net unrealized loss on available for sale securities, net of taxes				(393,239	)		(308,879	)

			Total shareholders' equity		19,756,434			18,779,913

			Total liabilities and shareholders' equity	$	405,046,955		$	342,469,049

See Notes to Consolidated Financial Statements.

F-3

PATRIOT NATIONAL BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF INCOME

Years Ended December 31, 2004 and 2003

			2004		2003
Interest and Dividend Income
	Interest and fees on loans		$	15,631,838	$	12,782,457
	Interest and dividends on investment securities			2,856,928		2,335,552
	Interest on Federal funds sold			189,485		96,693

		Total interest and dividend income		18,678,251		15,214,702

Interest Expense
	Interest on deposits (Note 6)			6,213,732		4,861,152
	Interest on Federal Home Loan Bank borrowings			371,699		327,020
	Interest on subordinated debt			380,194		270,610
	Interest on other borrowings			42,883		129,473

		Total interest expense		7,008,508		5,588,255

		Net interest income		11,669,743		9,626,447
Provision for Loan Losses (Note 4)				556,000		563,000

		Net interest income after provision for loan losses		11,113,743		9,063,447

Noninterest Income
	Mortgage brokerage referral fees			1,717,756		3,356,470
	Loan origination and processing fees			408,152		668,410
	Fees and service charges			465,018		378,415
	Gain on sale of investment securities			—		307,739
	Other income			111,278		102,706

		Total noninterest income		2,702,204		4,813,740

Noninterest Expenses
	Salaries and benefits (Note 12)			7,544,055		7,574,532
	Occupancy and equipment expense, net			1,707,769		1,311,038
	Data processing and other outside services			802,536		690,168
	Professional services			386,110		301,016
	Advertising and promotional expenses			369,638		332,852
	Loan administration and processing expenses			209,283		404,231
	Other operating expenses			1,237,159		1,045,630

		Total noninterest expenses		12,256,550		11,659,467

		Income before income taxes		1,559,397		2,217,720
Provision for Income Taxes (Note 9)				633,000		877,000

		Net income	$	926,397	$	1,340,720

		Basic income per share (Note 11)	$	0.38	$	0.56

		Diluted income per share (Note 11)	$	0.37	$	0.55

		Dividends per share	$	0.135	$	0.115

See Notes to Consolidated Financial Statements.

F-4

PATRIOT NATIONAL BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

Years Ended December 31, 2004 and 2003

			Number of Shares	Common Stock		Additional Paid-in Capital		Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Total
Balance at December 31, 2002			2,400,525	$	4,801,050	$	11,484,649	$	1,688,158		$	571,098		$	18,544,955
Comprehensive income
	Net income		—		—		—		1,340,720			—			1,340,720
	Unrealized holding loss on available for sale securities, net of taxes (Note 16)		—		—		—		—			(879,977	)		(879,977	)

		Total comprehensive income													460,743

Dividends			—		—		—		(276,337	)		—			(276,337	)
Issuance of capital stock			8,082		16,164		34,388		—			—			50,552

Balance at December 31, 2003			2,408,607		4,817,214		11,519,037		2,752,541			(308,879	)		18,779,913

Comprehensive income
	Net income		—		—		—		926,397			—			926,397
	Unrealized holding loss on available for sale securities, net of taxes (Note 16)		—		—		—		—			(84,360	)		(84,360	)

		Total comprehensive income													842,037

Dividends			—		—		—		(332,220	)		—			(332,220	)
Issuance of capital stock			77,784		155,568		311,136		—			—			466,704

Balance, December 31, 2004			2,486,391	$	4,972,782	$	11,830,173	$	3,346,718		$	(393,239	)	$	19,756,434

See Notes to Consolidated Financial Statements.

F-5

PATRIOT NATIONAL BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS

Years Ended December 31, 2004 and 2003

					2004			2003
Cash Flows from Operating Activities
	Net income				$	926,397		$	1,340,720
	Adjustments to reconcile net income to net cash provided by operating activities:
		Amortization and accretion of investment premiums and discounts, net				500,847			593,490
		Provision for loan losses				556,000			563,000
		Gain on sales of investment securities				—			(307,739	)
		Depreciation and amortization of premises and equipment				536,029			417,377
		Loss on disposal of bank premises and equipment				3,804			2,037
		Deferred income taxes				(101,212	)		(230,089	)
		Change in assets and liabilities:
			Increase in deferred loan fees			235,734			270,013
			Increase in accrued interest receivable			(287,717	)		(159,169	)
			Decrease in other assets			132,592			31,555
			(Decrease) increase in accrued expenses and other liabilities			(373,139	)		635,461

				Net cash provided by operating activities		2,129,335			3,156,656

Cash Flows from Investing Activities
	Purchases of available for sale securities					(16,020,313	)		(71,907,123	)
	Proceeds from sales of available for sale securities					—			7,094,321
	Proceeds from maturities of available for sale securities					6,000,000			8,200,000
	Principal repayments on available for sale securities					23,676,009			24,964,017
	Purchase of Federal Reserve Bank stock					(1,450	)		(210,100	)
	Purchase of Federal Home Loan Bank stock					(219,400	)		(456,000	)
	Net increase in loans					(50,246,026	)		(44,458,602	)
	Purchases of premises and equipment					(1,251,368	)		(1,058,215	)
	Proceeds from sale of bank premises and equipment					—			6,900
	Investment in trust (Note 7)					—			(248,000	)

				Net cash used in investing activities		(38,062,548	)		(78,072,802	)

Cash Flows from Financing Activities
	Net increase in demand, savings and money market deposits					17,330,022			14,596,528
	Net increase in time certificates of deposit					59,683,121			57,484,394
	Decrease in securities sold under repurchase agreements					(5,700,000	)		—
	Proceeds from FHLB borrowings					17,000,000			16,000,000
	Principal repayments of FHLB borrowings					(26,000,000	)		(3,000,000	)
	Proceeds from issuance of subordinated debt					—			8,248,000
	Debt issuance costs					—			(240,000	)
	Decrease in other borrowings					(353,385	)		(239,290	)
	Proceeds from issuance of common stock					466,704			50,552
	Dividends paid on common stock					(317,454	)		(264,092	)

				Net cash provided by financing activities		62,109,008			92,636,092

				Net increase in cash and cash equivalents		26,175,795			17,719,946
Cash and cash equivalents
	Beginning					29,454,671			11,734,725

	Ending				$	55,630,466		$	29,454,671

Supplemental Disclosures of Cash Flow Information
	Cash paid for:
		Interest			$	7,020,278		$	5,569,011

		Income taxes			$	850,970		$	1,102,971

Supplemental Disclosure of Noncash Investing and Financing Activities
	Unrealized holding losses on available for sale securities arising during the period				$	(136,065	)	$	(1,419,317	)

	Accrued dividends declared on common stock				$	87,024		$	72,258

See Notes to Consolidated Financial Statements.

F-6

PATRIOT NATIONAL BANCORP, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1. Nature of Operations and Summary of Significant Accounting Policies

Patriot National Bancorp, Inc. (the "Company"), a Connecticut corporation, is a bank holding company that was organized in 1999. On December 1, 1999, all the issued and outstanding shares of Patriot National Bank (the "Bank") were converted into Company common stock and the Bank became a wholly owned subsidiary of the Company. The Bank is a nationally chartered commercial bank whose deposits are insured under the Bank Insurance Fund, which is administered by the Federal Deposit Insurance Corporation. The Bank provides a full range of banking services to commercial and consumer customers through its main office in Stamford, Connecticut, and eight branch offices in Fairfield County, Connecticut. The Bank's customers are concentrated in Fairfield County, Connecticut and Westchester County, New York. The Bank also conducts mortgage brokerage operations in Connecticut and New York through its Residential Lending Group.

On March 11, 2003, the Company formed Patriot National Statutory Trust I (the "Trust") for the purpose of issuing trust preferred securities and investing the proceeds in subordinated debentures issued by the Company, and on March 26, 2003, the first series of trust preferred securities were issued. In accordance with FASB Interpretation No. 46R, "Consolidation of Variable Interest Entities," ("FIN 46R") the Trust is not included in the Company's consolidated financial statement.

The following is a summary of the Company's significant accounting principles:

Significant group concentrations of credit risk

Most of the Company's activities are with customers located within Fairfield County, Connecticut and Westchester County, New York. Note 3 discusses the types of securities in which the Company invests. Note 4 discusses the types of lending in which the Company engages. The Company does not have any significant concentrations to any one industry or customer.

Principles of consolidation and basis of financial statement presentation

The consolidated financial statements include the accounts of the Company and its wholly owned subsidiary, the Bank, and the Bank's wholly owned subsidiary, PinPat Acquisition Corporation (currently inactive); and have been prepared in accordance with accounting principles generally accepted in the United States of America and general practices within the banking industry. All significant intercompany balances and transactions have been eliminated. In preparing the consolidated financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosures of contingent assets and liabilities, as of the balance sheet date and reported amounts of revenues and expenses for the reporting period. Actual results could differ from those estimates. Material estimates that are particularly susceptible to significant change in the near term relate to the determination of the allowance for loan losses and the evaluation of goodwill for impairment.

Cash and cash equivalents

Cash and due from banks, Federal funds sold and short-term investments are recognized as cash equivalents in the consolidated financial statements. Federal funds sold generally mature in one day. For purposes of reporting cash flows, the Company considers all highly liquid debt instruments purchased with a maturity of three months or less to be cash equivalents. Cash flows from loans and deposits are reported net. The Company maintains amounts due from banks and Federal funds sold which, at times, may exceed Federally insured limits. The Company has not experienced any losses

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from such concentrations. The short-term investment represents an investment in a money market mutual fund of a single issuer.

Investments in debt and marketable equity securities

Management determines the appropriate classification of securities at the date individual investment securities are acquired, and the appropriateness of such classification is reassessed at each balance sheet date.

Debt securities, if any, that management has the positive intent and ability to hold to maturity are classified as "held to maturity" and recorded at amortized cost. "Trading" securities, if any, are carried at fair value with unrealized gains and losses recognized in earnings. Securities not classified as held to maturity or trading, including equity securities with readily determinable fair values, are classified as "available for sale" and recorded at fair value, with unrealized gains and losses excluded from earnings and reported in other comprehensive income, net of taxes.

Purchase premiums and discounts are recognized in interest income using the interest method over the terms of the securities. Declines in the fair value of available for sale and held to maturity securities below their cost that are deemed to be other than temporary are reflected in earnings as realized losses. In estimating other-than-temporary impairment losses, management considers (1) the length of time and the extent to which the fair value has been less than cost, (2) the financial condition and near-term prospects of the issuer, and (3) the intent and ability of the Company to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value. Gains and losses on the sale of securities are recorded on the trade date and are determined using the specific identification method.

The sale of a held to maturity security within three months of its maturity date or after collection of at least 85% of the principal outstanding at the time the security was acquired is considered a maturity for purposes of classification and disclosure.

Loans held for sale

Loans held for sale are those loans the Company has the intent to sell in the foreseeable future, and are carried at the lower of aggregate cost or market value. Gains and losses on sales of loans are recognized at the trade dates, and are determined by the difference between the sales proceeds and the carrying value of the loans. Loans are sold with servicing released.

Loans receivable

Loans receivable are stated at their current unpaid principal balances and are net of the allowance for loan losses, net deferred loan origination fees and purchased loan premiums. The Company has the ability and intent to hold its loans for the foreseeable future or until maturity or payoff.

A loan is classified as a restructured loan when certain concessions have been made to the original contractual terms, such as reductions in interest rates or deferral of interest or principal payments, due to the borrower's financial condition.

Impaired loans are measured based on the present value of expected future cash flows discounted at the loan's effective interest rate or, as a practical expedient, at the loan's observable market price or

F-8

the fair value of the collateral if the loan is collateral dependent. The amount of impairment, if any, and any subsequent changes are recorded as adjustments to the allowance for loan losses. A loan is impaired when it is probable the Company will be unable to collect all contractual principal and interest payments due in accordance with the terms of the loan agreement.

Management considers all nonaccrual loans and restructured loans to be impaired. In most cases, loan payments that are past due less than 90 days, based on contractual terms, are considered minor collection delays, and the related loans are not considered to be impaired. The Company considers consumer installment loans to be pools of smaller balance homogeneous loans, which are collectively evaluated for impairment.

Allowance for loan losses

The allowance consists of specific, general and unallocated components. The specific component relates to loans that are considered impaired. For impaired loans, an allowance is established when the discounted cash flows (or collateral value or observable market price) of the impaired loan is lower than the carrying value of that loan. A risk rating system is utilized to measure the general component of the allowance for loan losses. Under this system, each loan is assigned a risk rating between one and nine, which has a corresponding loan loss factor assigned, with a rating of "one" being the least risk and a rating of "nine" reflecting the most risk or a complete loss. Risk ratings are assigned by the originating loan officer or loan committee at the initiation of the transactions and are reviewed and changed, when necessary, during the life of the loan. Loan loss reserve factors are multiplied against the balances in each risk rating category to arrive at the appropriate level for the allowance for loan losses. Loans assigned a risk rating of "six" or above are monitored more closely by the credit administration officers. An unallocated component is maintained to cover uncertainties that could affect management's estimate of probable losses. The unallocated component of the allowance reflects the margin of imprecision inherent in the underlying assumptions used in the methodologies for estimating specific and general losses in the portfolio.

The Company's real estate loans are collateralized by real estate located principally in Connecticut and New York, and accordingly, the ultimate collectibility of a substantial portion of the Company's loan portfolio is susceptible to changes in regional real estate market conditions.

F-9

Interest and fees on loans

Interest on loans is accrued and included in operating income based on contractual rates applied to principal amounts outstanding. The accrual of interest income is discontinued whenever reasonable doubt exists as to its collectibility and generally is discontinued when loans are past due 90 days, based on contractual terms, as to either principal or interest. When the accrual of interest income is discontinued, all previously accrued and uncollected interest is reversed against interest income. The accrual of interest on loans past due 90 days or more, including impaired loans, may be continued if the loan is well secured, and it is believed all principal and accrued interest income due on the loan will be realized, and the loan is in the process of collection. A nonaccrual loan is restored to an accrual status when it is no longer delinquent and collectibility of interest and principal is no longer in doubt.

Loan origination fees, net of direct loan origination costs, are deferred and amortized as an adjustment to the loan's yield generally over the contractual life of the loan, utilizing the interest method.

Loan brokerage activities

The Company receives loan brokerage fees for soliciting and processing conventional loan applications on behalf of permanent investors. Brokerage fee income is recognized upon closing of loans for permanent investors.

Transfers of financial assets

Transfers of financial assets are accounted for as sales, when control over the assets has been surrendered. Control over transferred assets is deemed to be surrendered when (1) the assets have been isolated from the Company, (2) the transferee obtains the right to pledge or exchange the transferred assets and no condition both constrains the transferee from taking advantage of that right and provides more than a trivial benefit for the transferor, and (3) the transferor does not maintain effective control over the transferred assets through either (a) an agreement that both entitles and obligates the transferor to repurchase or redeem the assets before maturity or (b) the ability to unilaterally cause the holder to return specific assets, other than through a cleanup call.

Other real estate owned

Other real estate owned, if any, consists of properties acquired through, or in lieu of, loan foreclosure or other proceedings and is initially recorded at fair value at the date of foreclosure, which establishes a new cost basis. After foreclosure, the properties are held for sale and are carried at the lower of cost or fair value less estimated costs of disposal. Any write-down to fair value at the time of acquisition is charged to the allowance for loan losses. Properties are evaluated regularly to ensure the recorded amounts are supported by current fair values, and valuation allowances are recorded as necessary to reduce the carrying amount to fair value less estimated cost of disposal. Revenue and expense from the operation of other real estate owned and valuation allowances are included in operations. Costs relating to the development and improvement of the property are capitalized, subject to the limit of fair value of the collateral. Gains or losses are included in operations upon disposal.

F-10

Premises and equipment

Premises and equipment are stated at cost for purchased assets, and at the lower of fair value or the net present value of the minimum lease payments required over the term of the lease for assets under capital leases, net of accumulated depreciation and amortization. Leasehold improvements are capitalized and amortized over the shorter of the terms of the related leases or the estimated economic lives of the improvements. Depreciation is charged to operations using the straight-line method over the estimated useful lives of the related assets which range from three to ten years. Amortization of premises under capital leases is charged to operations using the straight-line method over the life of the lease. Gains and losses on dispositions are recognized upon realization. Maintenance and repairs are expensed as incurred and improvements are capitalized.

Impairment of assets

Long-lived assets, which are held and used by the Company, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If impairment is indicated by that review, the asset is written down to its estimated fair value through a charge to noninterest expense.

Goodwill

Goodwill represents the cost in excess of net assets of businesses acquired and is tested for impairment annually, or more frequently under prescribed conditions.

Collateralized borrowings

Collateralized borrowings represent the portion of loans transferred to other institutions under loan participation agreements. Such transfers were not recognized as sales due to recourse provisions and/or restrictions on the participant's right to transfer their portion of the loan.

Income taxes

The Company recognizes income taxes under the asset and liability method. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases, and loss carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized.

Related party transactions

Directors and officers of the Company and the Bank and their affiliates have been customers of and have had transactions with the Bank, and it is expected that such persons will continue to have such transactions in the future. Management believes that all deposit accounts, loans, services and commitments comprising such transactions were made in the ordinary course of business, and on

F-11

substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with other customers who are not directors or officers. In the opinion of management, the transactions with related parties did not involve more than normal risks of collectibility or favored treatment or terms, or present other unfavorable features. Note 15 contains details regarding related party transactions.

Earnings per share

Basic earnings per share represents income available to common stockholders and is computed by dividing net income by the weighted-average number of common shares outstanding. Diluted earnings per share reflects additional common shares that would have been outstanding if potential dilutive common shares had been issued, as well as any adjustment to income that would result from the assumed issuance. Potential common shares that may be issued by the Company relate to outstanding stock options and warrants, and are determined using the treasury stock method.

Stock compensation plans

Statement of Financial Accounting Standards (SFAS) No. 123, "Accounting for Stock-Based Compensation," encourages all entities to adopt a fair value based method of accounting for employee stock compensation plans, whereby compensation cost is measured at the grant date based on the value of the award and is recognized over the service period, which is usually the vesting period. However, it also allows an entity to continue to measure compensation cost for those plans using the intrinsic value based method of accounting prescribed by Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees," whereby compensation cost is the excess, if any, of the quoted market price of the stock at the grant date (or other measurement date) over the amount an employee must pay to acquire the stock. Stock options issued under the Company's stock option plan, and stock warrants issued, have no intrinsic value at the grant date, and under Opinion No. 25 no compensation cost is recognized for them. The Company has elected to continue with the accounting methodology in Opinion No. 25 and, as a result, provides pro forma disclosures of net income and earnings per share and other disclosures, as if the fair value based method of accounting had been applied. There is no proforma disclosure required for 2004 and 2003, because no compensation cost related to stock options and warrants was attributed to those periods. See "Recent Accounting Pronouncements" below for developments regarding accounting for stock compensation plans.

Comprehensive income

Accounting principles generally require that recognized revenue, expenses, gains and losses be included in net income. Although certain changes in assets and liabilities, such as unrealized gains and losses on available for sale securities, are reported as a separate component of the shareholders' equity section of the consolidated balance sheets, such items, along with net income, are components of comprehensive income.

F-12

Fair values of financial instruments

The following methods and assumptions were used by the Company in estimating the fair value of its financial instruments:

Cash and due from banks, federal funds sold, short-term investments and accrued interest receivable

The carrying amount is a reasonable estimate of fair value.

Securities

Fair values, excluding restricted Federal Reserve Bank stock and Federal Home Loan Bank stock, are based on quoted market prices or dealer quotes, if available. If a quoted market price is not available, fair value is estimated using quoted market prices for similar securities. The carrying values of the Federal Reserve Bank stock and Federal Home Loan Bank stock approximate fair value based on the redemption provisions of the related stock.

Loans receivable

For variable rate loans which reprice frequently, and have no significant changes in credit risk, fair value is based on the loans' carrying value. The fair value of fixed rate loans is estimated by discounting the future cash flows using the year end rates at which similar loans would be made to borrowers with similar credit ratings and for the same remaining maturities.

Deposits

The fair value of demand deposits, regular savings and certain money market deposits is the amount payable on demand at the reporting date. The fair value of certificates of deposit and other time deposits is estimated using a discounted cash flow calculation that applies interest rates currently being offered for deposits of similar remaining maturities to a schedule of aggregated expected maturities on such deposits.

Borrowings

For variable rate borrowings which reprice frequently, and short-term borrowings, fair value is based on carrying value. The fair value of fixed rate borrowings is estimated by discounting the future cash flows using current interest rates for similar available borrowings with the same remaining maturities.

Off-balance-sheet instruments

Fair values for the Company's off-balance-sheet instruments (lending commitments and standby letters of credit) are based on fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the counterparties' credit standing.

Recent accounting pronouncements

In January 2003, the FASB issued Interpretation No. 46, "Consolidation of Variable Interest Entities," ("FIN 46"), which establishes guidance for determining when an entity should consolidate another entity that meets the definition of a variable interest entity. FIN 46 requires a variable interest entity to be consolidated by a company if that company will absorb a majority of the expected losses,

F-13

will receive a majority of the expected residual returns, or both. Transfers to qualified special-purpose entities ("QSPEs") and certain other interests in a QSPE are not subject to the requirements of FIN 46. On December 17, 2003, the FASB revised FIN 46 (FIN 46R) and deferred the effective date of FIN 46 to no later than the end of the first reporting period that ends after March 15, 2004, however, for special-purpose entities, FIN 46 would be required to be applied as of December 31, 2003. See Note 7 for the impact of the adoption of FIN 46 by the Company.

In April 2003, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 149, "Amendment of Statement 133 on Derivative Instruments and Hedging Activities." This Statement amends SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities," and clarifies accounting for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities under SFAS No. 133. This Statement is effective for contracts entered into or modified after June 30, 2003. This Statement had no effect on the Company's financial statements.

In December 2003, the Accounting Standards Executive Committee of the AICPA issued Statement of Position No. 03-3 ("SOP 03-3"), "Accounting for Certain Loans or Debt Securities Acquired in a Transfer." SOP 03-3 addresses the accounting for differences between contractual cash flows and the cash flows expected to be collected from purchased loans or debt securities if those differences are attributable, in part, to credit quality. SOP 03-3 requires purchased loans and debt securities to be recorded initially at fair value based on the present value of the cash flows expected to be collected with no carryover of any valuation allowance previously recognized by the seller. Interest income should be recognized based on the effective yield from the cash flows expected to be collected. To the extent that the purchased loans or debt securities experience subsequent deterioration in credit quality, a valuation allowance would be established for any additional cash flows that are not expected to be received. However, if more cash flows subsequently are expected to be received than originally estimated, the effective yield would be adjusted on a prospective basis. SOP 03-3 will be effective for loans and debt securities acquired after December 31, 2004. Management does not expect the adoption of this statement to have a material impact on the Company's financial statements.

On September 30, 2004, the Financial Accounting Standards Board ("FASB") issued FASB Staff Position ("FSP") Emerging Issues Task Force ("EITF") Issue No. 03-1-1 delaying the effective date of paragraphs 10-20 of EITF 03-1, "The Meaning of Other-Than-Temporary Impairment and its Application to Certain Investments," which provides guidance for determining the meaning of "other-than-temporarily impaired" and its application to certain debt and equity securities within the scope of SFAS No. 115, "Accounting for Certain Investments in Debt and Equity Securities," and investments accounted for under the cost method. The guidance requires that investments which have declined in value due to credit concerns or solely due to changes in interest rates must be recorded as other-than-temporarily impaired unless the Company can assert and demonstrate its intention to hold the security for a period of time sufficient to allow for a recovery of fair value up to or beyond the cost of the investment which might mean maturity. The delay of the effective date of EITF 03-1 will be superseded concurrent with the final issuance of proposed FSP Issue 03-1-a. Proposed FSP Issue 03-1-a is intended to provide implementation guidance with respect to all securities analyzed for impairment under paragraphs 10-20 of EITF 03-1. Management continues to closely monitor and evaluate how the provisions of EITF 03-1 and proposed FSP Issue 03-1-a will affect the Company.

F-14

In December 2004, the FASB published FASB Statement No. 123 (revised 2004), "Share-Based Payment" ("SFAS 123(R)"). SFAS 123(R) requires that the compensation cost relating to share-based payment transactions, including grants of employee stock options, be recognized in financial statements. That cost will be measured based on the fair value of the equity or liability instruments issued. SFAS 123(R) covers a wide range of share-based compensation arrangements including stock options, restricted share plans, performance-based awards, share appreciation rights, and employee share purchase plans. SFAS 123(R) is a replacement of FASB Statement No. 123, "Accounting for Stock-Based Compensation," and supersedes APB Opinion No. 25, "Accounting for Stock Issued to Employees," and its related interpretive guidance (APB 25).

The effect of SFAS 123(R) will be to require entities to measure the cost of employee services received in exchange for stock options based on the grant-date fair value of the award, and to recognize the cost over the period the employee is required to provide services for the award. SFAS 123(R) permits entities to use any option-pricing model that meets the fair value objective in the Statement.

The Company will be required to apply SFAS 123(R) as of the beginning of its first interim period that begins after December 15, 2005, which will be the quarter ending March 31, 2006.

SFAS 123(R) allows two methods for determining the effects of the transition: the modified prospective transition method and the modified retrospective method of transition. Under the modified prospective transition method, an entity would use the fair value based accounting method for all employee awards granted, modified, or settled after the effective date. As of the effective date, compensation cost related to the non-vested portion of awards outstanding as of that date would be based on the grant-date fair value of those awards as calculated under the original provisions of Statement No. 123; that is, an entity would not remeasure the grant-date fair value estimate of the unvested portion of awards granted prior to the effective date. An entity will have the further option to either apply SFAS 123(R) to all quarters in the fiscal year of adoption. Under the modified retrospective method of transition, an entity would revise its previously issued financial statements to recognize employee compensation cost for prior periods presented in accordance with the original provisions of Statement No. 123.

The Company has not completed its study of the transition methods or made any decisions about how it will adopt FAS 123(R). However, the Company does not believe that the adoption of SFAS 123(R) related to existing share-based payment transactions will have a significant effect on the Company's financial statements.

In March 2004, the Securities and Exchange Commission ("SEC") issued Staff Accounting Bulletin ("SAB") No. 105, "Application of Accounting Principles to Loan Commitments," which provides guidance regarding loan commitments that are accounted for as derivative instruments. In this SAB, the SEC determined that an interest rate lock commitment should generally be valued at zero at inception. The rate locks will continue to be adjusted for changes in value resulting from changes in market interest rates. This SAB did not have any effect on the Company's financial position or results of operations.

F-15

Note 2. Restrictions on Cash and Due From Banks

The Company is required to maintain reserves against its respective transaction accounts and non-personal time deposits. At December 31, 2004 and 2003, the Bank was required to have cash and liquid assets of approximately $2,820,000 and $1,617,000, respectively, to meet these requirements. In addition, at December 31, 2004 and 2003, the Company was required to maintain $25,000 in the Federal Reserve Bank for clearing purposes.

Note 3. Available for Sale Securities

The amortized cost, gross unrealized gains, gross unrealized losses and approximate fair values of available for sale securities at December 31, 2004 and 2003 are as follows:

2004	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
U.S. Government agency and sponsored agency obligations	$	15,000,000	$	937	$	(177,642	)	$	14,823,295
Mortgage-backed securities		52,903,731		69,719		(527,270	)		52,446,180
Money market preferred equity securities		9,000,000		—		—			9,000,000

	$	76,903,731	$	70,656	$	(704,912	)	$	76,269,475

2003	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
U.S. Government agency and sponsored agency obligations	$	12,018,111	$	7,500	$	(159,993	)	$	11,865,618
Mortgage-backed securities		67,042,163		147,589		(493,287	)		66,696,465
Money market preferred equity securities		12,000,000		—		—			12,000,000

	$	91,060,274	$	155,089	$	(653,280	)	$	90,562,083

The following table presents the Company's available for sale securities' gross unrealized losses and fair value, aggregated by the length of time the individual securities have been in a continuous loss position, at December 31, 2004:

	Less Than 12 Months					12 Months or More					Total
	Fair Value		Unrealized Loss			Fair Value		Unrealized Loss			Fair Value		Unrealized Loss
U.S. Government agency and sponsored agency	$	7,921,108	$	(78,892	)	$	3,901,250	$	(98,750	)	$	11,822,358	$	(177,642	)
Mortgage-backed securities		17,632,613		(134,422	)		20,361,275		(392,848	)		37,993,888		(527,270	)

Totals	$	25,553,721	$	(213,314	)	$	24,262,525	$	(491,598	)	$	49,816,246	$	(704,912	)

At December 31, 2003, all unrealized losses on available for sale securities existed for a period of less than twelve months.

At December 31, 2004, the Company had 27 available for sale securities in an unrealized loss position. Management believes that none of the unrealized losses on available for sale securities are

F-16

other than temporary due to the fact that they relate to debt and mortgage-backed securities issued by U.S. Government, Government agencies and Government sponsored agencies, which the Company has both the intent and ability to hold until maturity or until the fair value fully recovers. Additionally, management considers the issuers of the securities to be financially sound, and expects to receive all contractual principal and interest related to these investments.

At December 31, 2004 and 2003, available for sale securities with a carrying value of $1,280,000 and $7,599,558, respectively, were pledged to secure obligations under repurchase agreements and municipal deposits.

The amortized cost and fair value of available for sale debt securities at December 31, 2004 by contractual maturity are presented below. Actual maturities of mortgage-backed securities may differ from contractual maturities because the mortgages underlying the securities may be called or repaid without any penalties. Because mortgage-backed securities are not due at a single maturity date, they are not included in the maturity categories in the following maturity summary.

		Amortized Cost		Fair Value
Maturity:
	1–5 years	$	14,000,000	$	13,822,983
	5–10 years		1,000,000		1,000,312
	Mortgage-backed securities		52,903,731		52,446,180

Total		$	67,903,731	$	67,269,475

During 2003, proceeds from sales of available for sale securities were $7,094,321, and there were gross gains of $307,739 on such sales.

Note 4. Loans Receivable and Allowance for Loan Losses

A summary of the Company's loan portfolio at December 31, 2004 and 2003 is as follows:

			2004			2003
Real estate:
	Commercial		$	106,771,441		$	96,339,220
	Residential			36,965,661			21,772,759
	Construction			74,598,919			57,122,445
Commercial				17,562,523			15,532,902
Consumer installment				1,386,709			1,861,924
Consumer home equity				30,874,894			25,607,775

		Total loans		268,160,147			218,237,025
Premiums on purchased loans				313,754			—
Net deferred loan fees				(1,117,556	)		(881,822	)
Allowance for loan losses				(3,481,525	)		(2,934,675	)

		Loans receivable, net	$	263,874,820		$	214,420,528

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The changes in the allowance for loan losses for the years ended December 31, 2004 and 2003 are as follows:

		2004			2003
Balance, beginning of year		$	2,934,675		$	2,372,454
	Provision for loan losses		556,000			563,000
	Recoveries of loans previously charged-off		—			—
	Loans charged-off		(9,150	)		(779	)

Balance, end of year		$	3,481,525		$	2,934,675

At December 31, 2004 and 2003, the unpaid principal balances of loans delinquent 90 days or more were $522,751 and $315,127, respectively, and the unpaid principal balances of loans placed on nonaccrual status were $3,669,148 and $150,000, respectively. If nonaccrual loans had been performing in accordance with their original terms, the Company would have recorded approximately $18,000 of additional income during both of the years ended December 31, 2004 and 2003.

The following information relates to impaired loans as of and for the years ended December 31, 2004 and 2003:

	2004		2003
Loans receivable for which there is a related allowance for credit losses	$	150,000	$	—

Loans receivable for which there is no related allowance for credit losses	$	3,519,148	$	150,000

Allowance for credit losses related to impaired loans	$	22,500	$	—

Average recorded investment in impaired loans	$	2,990,191	$	157,678

During 2004, interest income collected and recognized on impaired loans was $184,565. There was no interest income on impaired loans collected or recognized in 2003. The Company has no commitments to lend additional funds to borrowers whose loans are impaired.

The Company's lending activities are conducted principally in Fairfield County, Connecticut and Westchester County, New York. The Company grants commercial real estate loans, commercial business loans and a variety of consumer loans. In addition, the Company grants loans for the construction of residential homes, residential developments and for land development projects. All residential and commercial mortgage loans are collateralized by first or second mortgages on real estate. The ability and willingness of borrowers to satisfy their loan obligations is dependent in large part upon the status of the regional economy and regional real estate market. Accordingly, the ultimate collectibility of a substantial portion of the loan portfolio and the recovery of a substantial portion of any resulting real estate acquired is susceptible to changes in market conditions.

The Company has established credit policies applicable to each type of lending activity in which it engages, evaluates the creditworthiness of each customer and, in most cases, extends credit of up to 75% of the market value of the collateral at the date of the credit extension depending on the Company's evaluation of the borrowers' creditworthiness and type of collateral. The market value of

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collateral is monitored on an ongoing basis and additional collateral is obtained when warranted. Real estate is the primary form of collateral. Other important forms of collateral are accounts receivable, inventory, other business assets, marketable securities and time deposits. While collateral provides assurance as a secondary source of repayment, the Company ordinarily requires the primary source of repayment to be based on the borrower's ability to generate continuing cash flows.

Note 5. Premises and Equipment

At December 31, 2004 and 2003, premises and equipment consisted of the following:

	2004			2003
Premises under capital lease	$	—		$	783,000
Leasehold improvements		1,811,187			1,372,576
Furniture, equipment and software		2,332,962			1,561,579

		4,144,149			3,717,155
Less accumulated depreciation and amortization		(2,011,516	)		(2,296,057	)

	$	2,132,633		$	1,421,098

For the years ended December 31, 2004 and 2003, depreciation and amortization expense related to premises and equipment totaled $536,029 and $417,377, respectively.

Note 6. Deposits

At December 31, 2004 and 2003, deposits consisted of the following:

				2004		2003
Noninterest bearing				$	42,584,120	$	30,477,295

Interest bearing:
	NOW				26,814,653		22,849,570
	Savings				22,104,121		23,792,811
	Money market				72,450,663		69,503,859
	Time certificates, less than $100,000				131,764,662		92,574,784
	Time certificates, $100,000 or more				71,287,106		50,793,863

		Total interest bearing			324,421,205		259,514,887

			Total deposits	$	367,005,325	$	289,992,182

Interest expense on certificates of deposit in denominations of $100,000 or more was $1,883,047 and $1,297,461 for the years ended December 31, 2004 and 2003, respectively.

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Contractual maturities of time certificates of deposit as of December 31, 2004 are summarized below:

Due within:
	1 year	$	95,228,157
	1–2 years		42,562,232
	2–3 years		22,269,921
	3–4 years		24,022,181
	4–5 years		18,969,277

		$	203,051,768

Note 7. Borrowings

Federal Home Loan Bank borrowings

The Bank is a member of the Federal Home Loan Bank of Boston ("FHLB"). At December 31, 2004, the Bank has the ability to borrow from the FHLB based on a certain percentage of the value of the Bank's qualified collateral, as defined in the FHLB Statement of Products Policy, comprised mainly of mortgage-backed securities delivered under collateral safekeeping to the FHLB, and a blanket lien on qualifying mortgage loans, at the time of the borrowing. In accordance with an agreement with the FHLB, the qualified collateral must be free and clear of liens, pledges and encumbrances. In addition, the Company has a $2,000,000 available line of credit with the FHLB. At December 31, 2004 and 2003, there were no advances outstanding under this line of credit. At December 31, 2004, other outstanding advances from the FHLB aggregated $8,000,000 at interest rates ranging from 1.93% to 5.11%, and at December 31, 2003, other outstanding advances aggregated $17,000,000 at interest rates ranging from 1.27% to 5.11%.

The Bank is required to maintain an investment in capital stock of the FHLB in an amount equal to a percentage of its outstanding mortgage loans and contracts secured by residential properties, including mortgage-backed securities. No ready market exists for FHLB stock and it has no quoted market value. For disclosure purposes, such stock is assumed to have a market value which is equal to cost since the Bank can redeem the stock with the FHLB at cost.

Repurchase agreements

At December 31, 2004, the Company has available borrowings under repurchase agreements of $10,000,000, and no amounts outstanding at December 31, 2004. At December 31, 2003, the Company had $5,700,000 outstanding under short-term securities sold under agreements to repurchase at 1.25%.

Subordinated debt

During 2003, the Company formed the Trust of which 100% of the Trust's common securities are owned by the Company. The Trust has no independent assets, and exists for the sole purpose of issuing trust securities and investing the proceeds thereof in an equivalent amount of junior subordinated debentures issued by the Company.

F-20

The Trust issued $8,000,000 of trust preferred securities in 2003. Pursuant to FIN46R, issued in December 2003, the Company deconsolidated the Trust at December 31, 2003. As a result, the balance sheet as of December 31, 2003 includes $8,248,000 of subordinated debt, which was previously presented in the Company's 2003 quarterly unaudited balance sheets as $8,000,000 in trust preferred securities after a consolidation elimination entry of $248,000. The Company's investment in the Trust of $248,000 is included in other assets. The overall effect on the financial position and operating results of the Company as a result of the deconsolidation was not material.

Trust preferred securities currently qualify for up to 25% of the Company's Tier I Capital, with the excess qualifying as Tier 2 Capital. On March 1, 2005, the Federal Reserve Board of Governors, which is the banking regulator for the Holding Company, approved final rules that allow for the continued inclusion of outstanding and prospective issuances of trust preferred securities in regulatory capital, subject to new, more strict limitations. The Company has until March 31, 2009 to meet the new limitations. Management does not believe these final rules will have a significant impact on the Company.

The subordinated debentures are unsecured obligations of the Company and are subordinate and junior in right of payment to all present and future senior indebtedness of the Company. The Company has entered into a guarantee, which together with its obligations under the subordinated debentures and the declaration of trust governing the Trust, including its obligations to pay costs, expenses, debts and liabilities, other than trust securities, provides a full and unconditional guarantee of amounts on the capital securities. The subordinated debentures, which bear interest at three month LIBOR plus 3.15% (5.69% at December 31, 2004), mature on March 26, 2033 and can be redeemed at the Company's option in 2008.

The duration of the Trust is 30 years with early redemption at par at the Company's option in 2008, or earlier in the event of certain regulatory or tax changes. The trust securities also bear interest at three month LIBOR plus 3.15%.

Other borrowings

At December 31, 2004, the Bank also has the ability to borrow up to $3,000,000 in federal funds or letters of credit from its correspondent bank.

F-21

Maturity of borrowings

The contractual maturities of the Company's borrowings at December 31, 2004, by year, are as follows:

	Fixed Rate		Floating Rate		Total
2005	$	4,000,000	$	—	$	4,000,000
2006		1,000,000		—		1,000,000
2007		3,000,000		—		3,000,000
2008		—		—		—
2009		—		—		—
Thereafter		—		8,248,000		8,248,000

Total borrowings	$	8,000,000	$	8,248,000	$	16,248,000

Note 8. Commitments and Contingencies

Capital lease

The Company leased the Bank's main office under a capital lease which expired in 2004. Premises under capital lease of $783,000 and related accumulated amortization of $730,800 as of December 31, 2003, were included in premises and equipment. During 2003, the Company entered into a new lease agreement for its existing main office that commenced in August 2004. This new lease was classified as an operating lease upon commencement.

The Company is obligated under the lease to pay executory costs including insurance, property taxes, maintenance and other related expenses.

Operating leases

The Company also has non-cancelable operating leases for its branch and mortgage brokerage offices. Under these lease agreements, the Company is required to pay certain executory costs such as insurance and property taxes. The Company also leases parking space under a noncancelable operating lease agreement and certain equipment under cancelable and noncancelable arrangements.

Future minimum rental commitments under the terms of these leases, by year and in the aggregate, are as follows:

Years Ending December 31,	Amount
2005	$	926,360
2006		888,052
2007		744,607
2008		560,839
2009		503,017
Thereafter		2,265,723

	$	5,885,598

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Total rental expense charged to operations for cancelable and noncancelable operating leases was $876,132 and $630,002 for the years ended December 31, 2004 and 2003, respectively.

Employment Agreements

President's Agreement

In October 2003, the Company and the Bank entered into an employment agreement (the "Agreement") with the Bank's President and Chief Executive Officer that expires on December 31, 2006. The Agreement provides for, among other things, a stipulated base salary for the first year of the Agreement, annual increases at each anniversary and a discretionary annual bonus to be determined by the Board of Directors.

In the event of the early termination of the Agreement for any reason other than cause, the Company would be obligated to compensate the President in one lump sum payment, an amount equal to the higher of the aggregate salary payments that would be made to the President under the remaining term of the Agreement, or eighteen months of the President's stipulated base salary at the time of termination.

The Agreement also includes change of control provisions that entitles the President to a lump sum payment of two times the greater of the President's stipulated base salary at the time of the change in control; total cash compensation, as defined, for the year preceding the change in control; or the average total cash compensation, as defined, for the two years preceding the change in control.

The provisions of the early termination clause apply only to termination of the Agreement prior to a change of control. Termination of the Agreement following a change of control shall be governed by the change of control provisions.

Under the terms of a prior employment agreement (the "Prior Agreement"), the Prior Agreement provided that the Company granted shares of the Company's common stock to the President on December 31, 2000, and annually thereafter through December 31, 2003. The number of shares granted was based on 30% of the President's stipulated base salary for the preceding annual employment period, as defined, and such shares granted would vest and be distributed to the President in four annual installments (with any balance distributed upon termination other than for cause). Compensation cost is being recognized over four years under the terms of the Prior Agreement. Under certain circumstances defined in the Prior Agreement, this stock grant may be settled in cash. The Prior Agreement also provided for the grant of options to purchase a minimum of 10,000 shares of the Company's common stock on December 31, 2000, and annually thereafter through December 2002, and on December 31, 2003, if the President remained employed by the Bank. In the event that the Company did not have stock options available to grant at any of the stipulated dates, which was the case at December 31, 2000, 2001, 2002 and 2003, the President may then elect, on a future determination date, as defined, to be chosen by the President, to receive cash compensation in the future equal to the difference between the value of the Company's stock at the time the options would have been granted, and the value of the Company's stock on the determination date. For the years ended December 31, 2004 and 2003, approximately $276,000 and $194,000, respectively, was charged to expense related to the stock and option compensation components of the Prior Agreement.

F-23

Other Employment Agreements

Effective January 1, 2005, the Company entered into a one-year employment agreement with an officer of the Residential Lending Group division, which replaced a contract that expired on December 31, 2004. The agreement provides for, among other things, a minimum and maximum base salary and commission arrangement, as well as additional compensation based upon the achievement of certain other financial results, and for reimbursement of expenses incurred incidental to duties as an officer. The agreement terminates on December 31, 2005.

In November 2003, the Company entered into an employment agreement with its Chief Financial Officer that expires on December 31, 2007. The agreement provides for, among other things, a stipulated base salary and annual discretionary bonuses as determined by the Board of Directors. In addition, the Chief Financial Officer has a change of control agreement that entitles the Chief Financial Officer to receive two years' compensation (as defined in the agreement) if a change of control (as defined in the agreement) occurs while the Chief Financial Officer is a full-time officer of the Bank or within six months following termination of employment other than for cause (as defined in the agreement) or by reason of death or disability.

In addition, certain officers of the Company have change of control agreements that entitle such officers to receive one year's compensation (as defined in the agreements) if a change of control (as defined in the agreements) occurs while such officers are full time officers of the Company or within six months following termination of employment other than for cause (as defined in the agreements) or by reason of death or disability.

Stock Appreciation Rights Plan

During 2001, the Company adopted the Patriot National Bancorp, Inc. 2001 Stock Appreciation Rights Plan (the "SAR Plan"). Under the terms of the SAR Plan, the Company may grant stock appreciation rights to officers of the Company that entitle the officers to receive, in cash or Company common stock, the appreciation in the value of the Company's common stock from the date of grant. Each award vests at the rate of 20% per year from the date of grant. Any unexercised rights will expire ten years from the date of grant. During 2001, the Company granted a total of 18,000 stock appreciation rights to three Company officers, and $99,216 and $36,576, respectively, was charged to operations under the SAR Plan for the years ended December 31, 2004 and 2003.

Legal Matters

The Company is involved in various legal proceedings which have arisen in the normal course of business. Management believes that resolution of these matters will not have a material effect on the Company's financial condition or results of operations.

Other

The Company expects to open two new branch offices in 2005. Subsequent to December 31, 2004, the Company entered into a non-cancelable lease for one of these locations.

F-24

Note 9. Income Taxes

The components of the income tax provision for the years ended December 31, 2004 and 2003 are as follows:

			2004			2003
Current
	Federal		$	554,723		$	842,241
	State			179,489			264,848

		Total		734,212			1,107,089

Deferred
	Federal			(81,723	)		(178,241	)
	State			(19,489	)		(51,848	)

		Total		(101,212	)		(230,089	)

		Provision for income taxes	$	633,000		$	877,000

A reconciliation of the anticipated income tax provision (computed by applying the statutory Federal income tax rate to the income before income taxes) to the income tax provision as reported in the statements of income for the years ended December 31, 2004 and 2003 is as follows:

		2004			2003
Provision for income taxes at statutory Federal rate		$	530,200		$	754,000
State taxes, net of Federal benefit			96,500			129,000
Dividends received deduction			(52,300	)		(45,900	)
Nondeductible expenses			16,800			10,900
Other			41,800			29,000

	Total provision for income taxes	$	633,000		$	877,000

F-25

At December 31, 2004 and 2003, the components of gross deferred tax assets and gross deferred tax liabilities are as follows:

			2004		2003
Deferred tax assets:
	Allowance for loan losses		$	1,356,056	$	1,172,111
	Investment securities			241,017		189,312
	Asset under capital lease			—		20,667
	Premises and equipment			138,986		230,643
	Accrued expenses			14,022		13,580
	Other			—		7,206

	Gross deferred tax assets			1,750,081		1,633,519

Deferred tax liabilities:
	Tax bad debt reserve			69,347		109,394
	Other			3,692		—

	Gross deferred tax liabilities			73,039		109,394

		Deferred tax asset, net	$	1,677,042	$	1,524,125

Note 10. Goodwill

Based on the Company's annual goodwill impairment tests performed in October 2004 and 2003, goodwill was not impaired for the years ended December 31, 2004 and 2003. In addition, no goodwill was acquired during 2004 and 2003.

F-26

Note 11. Shareholders' Equity

Income Per Share

The following is information about the computation of income per share for the years ended December 31, 2004 and 2003.

		2004
		Net Income		Shares	Per Share Amount
Basic Income Per Share
	Income available to common shareholders	$	926,397	2,449,679	$	0.38
Effect of Dilutive Securities
	Warrants and stock options outstanding		—	53,012		(0.01	)

Diluted Income Per Share
	Income available to common shareholders plus assumed conversions	$	926,397	2,502,691	$	0.37

		2003
		Net Income		Shares	Per Share Amount
Basic Income Per Share
	Income available to common shareholders	$	1,340,720	2,400,879	$	0.56
Effect of Dilutive Securities
	Warrants and stock options outstanding		—	42,357		(0.01	)

Diluted Income Per Share
	Income available to common shareholders plus assumed conversions	$	1,340,720	2,443,236	$	0.55

Stock warrants

The Bank issued warrants to certain of the Bank's original organizing group and certain other individuals to purchase up to 95,000 shares of the Bank's common stock at the original public offering price of $6 per share. The obligations related to all warrants issued by the Bank were assumed by the Company. During 2004, all unexercised warrants expired.

F-27

A summary of the status of the warrants at December 31, 2004 and 2003, and changes during the years ended on those dates, is as follows:

	2004			2003
	Number of Shares	Weighted-Average Exercise Price		Number of Shares	Weighted-Average Exercise Price
Outstanding at beginning of year	83,484	$	6.00	91,166	$	6.00
Expired	5,700		6.00	—
Exercised	77,784		6.00	7,682		6.00

Outstanding at end of year	—			83,484		6.00

Exercisable at end of year	—			83,484		6.00

Stock options

On August 17, 1999, the Bank adopted a stock option plan (the "Plan") for employees and directors, under which both incentive and non-qualified stock options could have been granted, and subsequently the Company assumed all obligations related to such options. The Plan provided for the grant of 110,000 non-qualified and incentive stock options in 1999 to certain directors of the Company, with an exercise price equal to the market value of the Company's stock on the date of grant. Such options were immediately exercisable and expire if unexercised ten years after the date of grant. The Company has reserved 110,000 shares of common stock for issuance under the Plan. No additional options may be granted under the Plan.

A summary of the status of the stock options at December 31, 2004 and 2003 is as follows:

	2004			2003
	Number of Shares	Weighted-Average Exercise Price		Number of Shares	Weighted-Average Exercise Price
Outstanding at beginning of year	110,000	$	10.13	110,000	$	10.13
Granted	—			—

Outstanding at end of year	110,000		10.13	110,000		10.13

Exercisable at end of year	110,000		10.13	110,000		10.13

The weighted-average remaining contractual life for the options outstanding at December 31, 2004 is 4.7 years.

Rights Agreement

On April 15, 2004, the Board of Directors of the Company declared, effective as of April 19, 2004, a dividend distribution of one Right for each outstanding share of common stock of the Company. The dividend was payable on April 29, 2004 to the stockholders of record as of the close of business on that date. Each Right entitles the registered holder to purchase from the Company 8.152 shares of the Company's common stock, at a price of $60.00, or $7.36 per share subject to adjustment. The description and terms of the Rights are set forth in a Rights Agreement, dated as of April 19, 2004 between the Company and Registrar and Transfer Company.

F-28

The Rights are not exercisable until the earliest of (i) the tenth business day after a public announcement that a person or group of affiliated or associated persons acquired, or obtained the right to acquire, beneficial ownership of 15% or more of the outstanding shares of the Company's common stock (an Acquiring Person); (ii) the tenth business day (or such later day as may be determined by action of the Board of Directors of the Company prior to such time as any person becomes an Acquiring Person) after the date of the commencement of a tender or exchange offer by any person (other than the Company) if, upon consummation such person would be an Acquiring Person; and (iii) the tenth business day (or such later day as may be determined by action of the Board of Directors of the Company prior to such time as any person becomes an Acquiring Person) after the filing by any Person (other than the Company) of a registration statement under the Securities Act of 1933, as amended, with respect to a contemplated exchange offer to acquire (when added to any shares as to which such person is the beneficial owner immediately prior to such filing) beneficial ownership of 15% or more of the issued and outstanding shares of the Company's common stock.

The Rights will expire on April 19, 2014, unless earlier redeemed or exchanged by the Company.

Note 12. 401(k) Savings Plan

The Company offers employees participation in the Patriot National Bank 401(k) Savings Plan (the "401(k) Plan") under Section 401(k) of the Internal Revenue Code. The 401(k) Plan covers substantially all employees who have completed six months of service, are 21 years of age and who elect to participate. Under the terms of the 401(k) Plan, participants can contribute up to the maximum amount allowed, subject to Federal limitations. The Company may make discretionary matching contributions to the 401(k) Plan. Participants are immediately vested in their contributions and Company contributions. The Company contributed approximately $127,000 and $73,000 to the 401(k) Plan in 2004 and 2003, respectively.

Note 13. Financial Instruments With Off-Balance-Sheet Risk

In the normal course of business, the Company is a party to financial instruments with off-balance-sheet risk to meet the financing needs of its customers. These financial instruments include commitments to extend credit and standby letters of credit and involve, to varying degrees, elements of credit and interest rate risk in excess of the amounts recognized in the balance sheets. The contract amounts of these instruments reflect the extent of involvement the Company has in particular classes of financial instruments.

The contractual amounts of commitments to extend credit and standby letters of credit represent the amounts of potential accounting loss should: the contract be fully drawn upon; the customer default; and the value of any existing collateral become worthless. The Company uses the same credit policies in making commitments and conditional obligations as it does for on-balance-sheet instruments and evaluates each customer's creditworthiness on a case-by-case basis. Management believes that the Company controls the credit risk of these financial instruments through credit approvals, credit limits, monitoring procedures and the receipt of collateral as deemed necessary.

F-29

Financial instruments whose contract amounts represent credit risk are as follows at December 31, 2004 and 2003:

	2004		2003
Commitments to extend credit:
Future loan commitments	$	23,484,674	$	23,618,500
Unused lines of credit		36,018,661		31,433,770
Undisbursed construction loans		37,224,376		31,958,302
Financial standby letters of credit		197,000		122,000

	$	96,924,711	$	87,132,572

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments to extend credit generally have fixed expiration dates or other termination clauses and may require payment of a fee by the borrower. Since these commitments could expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The amount of collateral obtained, if deemed necessary by the Company upon extension of credit, is based on management's credit evaluation of the counterparty. Collateral held varies, but may include residential and commercial property, deposits and securities.

Standby letters of credit are written commitments issued by the Company to guarantee the performance of a customer to a third party. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers. As of January 1, 2003, newly issued or modified guarantees that are not derivative contracts have been recorded on the Company's consolidated balance sheet at their fair value at inception. No liability related to guarantees was required to be recorded at December 31, 2004 and 2003.

Note 14. Regulatory Matters

The Company and the Bank are subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory—and possibly additional discretionary—actions by regulators that, if undertaken, could have a direct material effect on the Company's financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Company and the Bank must meet specific capital guidelines that involve quantitative measures of the Company's and the Bank's assets, liabilities, and certain off-balance-sheet items as calculated under regulatory accounting practices. The Company's and the Bank's capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.

Quantitative measures established by regulation to ensure capital adequacy require the Company and the Bank to maintain minimum amounts and ratios (set forth in the table below) of total and Tier I capital (as defined in the regulations) to risk-weighted assets (as defined), and of Tier I capital (as defined) to average assets (as defined). Management believes, as of December 31, 2004, that the Company and the Bank meet all capital adequacy requirements to which it is subject.

The most recent notification from the Office of the Comptroller of the Currency categorized the Bank as well capitalized under the regulatory framework for prompt corrective action. To be

F-30

categorized as well capitalized, the Bank must maintain minimum total risk-based, Tier I risk-based, and Tier-I leverage ratios as set forth in the table. There are no conditions or events since then that management believes have changed the Bank's category.

The Company's and the Bank's actual capital amounts and ratios at December 31, 2004 and 2003 were (dollars in thousands):

									To Be Well Capitalized Under Prompt Corrective Action Provisions
					For Capital Adequacy Purposes
	Actual
2004	Actual
2004	Amount		Ratio		Amount		Ratio		Amount		Ratio
The Company:
Tier I Capital (Average Assets)		25,936	6.79	%		15,279	4.00	%		N/A	N/A
Tier I Capital (to Risk Weighted Assets)		25,936	9.04	%		11,476	4.00	%		N/A	N/A
Total Capital (to Risk Weighted Assets)	$	30,701	10.70	%	$	22,954	8.00	%	$	N/A	N/A
The Bank:
Tier I Capital (to Average Assets)		26,642	6.98	%		15,268	4.00	%		19,085	5.00	%
Tier I Capital (to Risk Weighted Assets)		26,642	9.29	%		11,471	4.00	%		17,207	6.00	%
Total Capital (to Risk Weighted Assets)	$	30,124	10.50	%	$	22,952	8.00	%	$	28,690	10.00	%

									To Be Well Capitalized Under Prompt Corrective Action Provisions
					For Capital Adequacy Purposes
	Actual
2003	Actual
2003	Amount		Ratio		Amount		Ratio		Amount		Ratio
The Company:
Tier I Capital (Average Assets)		24,522	7.51	%		13,061	4.00	%		N/A	N/A
Tier I Capital (to Risk Weighted Assets)		24,522	10.00	%		9,809	4.00	%		N/A	N/A
Total Capital (to Risk Weighted Assets)	$	29,094	11.87	%	$	19,608	8.00	%	$	N/A	N/A
The Bank:
Tier I Capital (to Average Assets)		25,633	7.85	%		13,061	4.00	%		16,327	5.00	%
Tier I Capital (to Risk Weighted Assets)		25,633	10.47	%		9,793	4.00	%		14,689	6.00	%
Total Capital (to Risk Weighted Assets)	$	28,568	11.67	%	$	19,584	8.00	%	$	24,480	10.00	%

Restrictions on dividends, loans and advances

The Company's ability to pay dividends is dependent on the Bank's ability to pay dividends to the Company. However, certain restrictions exist regarding the ability of the Bank to transfer funds to the Company in the form of cash dividends, loans or advances. The approval of the Comptroller of the Currency is required to pay dividends in excess of the Bank's earnings retained in the current year plus retained net earnings for the preceding two years. As of December 31, 2004, the Bank had retained earnings of approximately $4,467,000, all of which is available for distribution to the Company as dividends without prior regulatory approval. The Bank is also prohibited from paying dividends that would reduce its capital ratios below minimum regulatory requirements, and the FRB may impose further dividend restrictions on the Company.

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Loans or advances to the Company by the Bank are limited to 10% of the Bank's capital stock and surplus on a secured basis.

Note 15. Related Party Transactions

In the normal course of business, the Company grants loans to executive officers, directors and members of their immediate families, as defined, and to entities in which these individuals have more than a 10% equity ownership. Such loans are transacted at terms, including interest rates, similar to those available to unrelated customers.

Changes in loans outstanding to such related parties during 2004 and 2003 are as follows:

	2004			2003
Balance, beginning of year	$	1,410,440		$	3,547,766
Additional loans		183,386			8,823
Repayments		(22,998	)		(2,129,708	)
Adjustment for former related parties		(1,372,242	)		(16,441	)

Balance, end of year	$	198,586		$	1,410,440

Related party deposits aggregated approximately $3,444,000 and $4,126,000 as of December 31, 2004 and 2003, respectively.

The Company leases office space to a director of the Company under two leases. Rental income under these leases was approximately $28,300 and $25,300, respectively, for the years ended December 31, 2004 and 2003.

During 2004 and 2003, the Company paid legal fees of approximately $20,900 and $30,400, respectively, to an attorney who is a director of the Company.

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Note 16. Other Comprehensive Income

Other comprehensive income, which is comprised solely of the change in unrealized gains and losses on available for sale securities, is as follows:

	2004
	Before-Tax Amount			Tax Effect		Net-of-Tax Amount
Unrealized holding losses arising during period	$	(136,065	)	$	51,705	$	(84,360	)
Less reclassification adjustment for gains recognized in net income		—			—		—

Unrealized holding loss on available for sale securities, net of taxes	$	(136,065	)	$	51,705	$	(84,360	)

	2003
	Before-Tax Amount			Tax Effect		Net-of-Tax Amount
Unrealized holding losses arising during period	$	(1,111,578	)	$	422,399	$	(689,179	)
Add reclassification adjustment for gains recognized in net income		(307,739	)		116,941		(190,798	)

Unrealized holding loss on available for sale securities, net of taxes	$	(1,419,317	)	$	539,340	$	(879,977	)

Note 17. Fair Value of Financial Instruments and Interest Rate Risk

SFAS No. 107, "Disclosures About Fair Value of Financial Instruments" ("Statement No. 107"), requires disclosure of fair value information about financial instruments, whether or not recognized in the statements of condition, for which it is practicable to estimate that value. In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rates and estimates of future cash flows. In that regard, the derived fair value estimates cannot be substantiated by comparisons to independent markets and, in many cases, could not be realized in immediate settlement of the instrument. Statement No. 107 excludes certain financial instruments from its disclosure requirements. Accordingly, the aggregate fair value amounts presented do not represent the underlying value of the Company.

Management uses its best judgment in estimating the fair value of the Company's financial instruments; however, there are inherent weaknesses in any estimation technique. Therefore, for substantially all financial instruments, the fair value estimates presented herein are not necessarily indicative of the amounts the Company could have realized in a sales transaction at December 31, 2004 and 2003. The estimated fair value amounts for 2004 and 2003 have been measured as of their respective year-ends, and have not been reevaluated or updated for purposes of these consolidated financial statements subsequent to those respective dates. As such, the fair values of these financial instruments subsequent to the respective reporting dates may be different from the amounts reported at each year-end.

The information presented should not be interpreted as an estimate of the fair value of the entire Company since a fair value calculation is only required for a limited portion of the Company's assets

F-33

and liabilities. Due to the wide range of valuation techniques and the degree of subjectivity used in making the estimate, comparisons between the Company's disclosures and those of other bank holding companies may not be meaningful.

As of December 31, 2004 and 2003, the recorded book balances and estimated fair values of the Company's financial instruments were (in thousands):

		2004				2003
		Recorded Book Balance		Fair Value		Recorded Book Balance		Fair Value
Financial Assets:
	Cash and due from banks	$	6,670	$	6,670	$	4,024	$	4,024
	Federal funds sold		37,500		37,500		15,000		15,000
	Short-term investments		11,460		11,460		10,431		10,431
	Available for sale securities		76,269		76,269		90,562		90,562
	Federal Reserve Bank stock		693		693		691		691
	Federal Home Loan Bank stock		1,297		1,297		1,077		1,077
	Loans receivable, net		263,875		265,206		214,421		218,064
	Accrued interest receivable		1,758		1,758		1,471		1,471
Financial Liabilities:
	Demand deposits	$	42,584	$	42,584	$	30,477	$	30,477
	Savings deposits		22,104		22,104		23,793		23,793
	Money market deposits		72,451		72,451		69,504		69,504
	NOW accounts		26,815		26,815		22,850		22,850
	Time deposits		203,052		206,539		143,369		148,005
	Repurchase agreements		—		—		5,700		5,700
	FHLB borrowings		8,000		8,082		17,000		17,107
	Subordinated debt		8,248		8,248		8,248		8,248
	Collateralized borrowings		—		—		249		249

Unrecognized financial instruments

Loan commitments on which the committed interest rate is less than the current market rate were insignificant at December 31, 2004 and 2003. The estimated fair value of fee income on letters of credit at December 31, 2004 and 2003 was insignificant.

The Company assumes interest rate risk (the risk that general interest rate levels will change) as a result of its normal operations. As a result, the fair values of the Company's financial instruments will change when interest rate levels change and that change may be either favorable or unfavorable to the Company. Management attempts to match maturities of assets and liabilities to the extent believed necessary to minimize interest rate risk. However, borrowers with fixed rate obligations are less likely to prepay in a rising rate environment and more likely to prepay in a falling rate environment. Conversely, depositors who are receiving fixed rates are more likely to withdraw funds before maturity in a rising rate environment and less likely to do so in a falling rate environment. Management monitors rates and maturities of assets and liabilities and attempts to minimize interest rate risk by

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adjusting terms of new loans and deposits and by investing in securities with terms that mitigate the Company's overall interest rate risk.

Note 18. Segment Reporting

The Company has two reportable segments, the commercial bank and the mortgage broker. The commercial bank segment provides its commercial customers with products such as commercial mortgage and construction loans, working capital loans, equipment loans and other business financing arrangements, and provides its consumer customers with residential mortgage loans, home equity loans and other consumer installment loans. The commercial bank segment also attracts deposits from both consumer and commercial customers and invests such deposits in loans, investments and working capital. The commercial bank's revenues are generated primarily from net interest income from its lending, investment and deposit activities.

The mortgage broker solicits and processes conventional mortgage loan applications from consumers on behalf of permanent investors and originates loans for sale. Revenues are generated from loan brokerage and application processing fees received from the permanent investors, and gains and origination fees from loans sold.

Information about reportable segments, and a reconciliation of such information to the consolidated financial statements as of and for the years ended December 31, 2004 and 2003 is as follows (in thousands):

2004	Commercial Bank		Mortgage Broker			Consolidated Totals
Net interest income	$	11,670	$	—		$	11,670
Noninterest income		682		2,020			2,702
Noninterest expenses		10,025		2,232			12,257
Provision for loan losses		556		—			556
Income (loss) before taxes		1,771		(212	)		1,559
Assets		403,959		1,088			405,047

2003	Commercial Bank		Mortgage Broker		Consolidated Totals
Net interest income	$	9,626	$	—	$	9,626
Noninterest income		851		3,963		4,814
Noninterest expenses		8,441		3,218		11,659
Provision for loan losses		563		—		563
Income before taxes		1,473		745		2,218
Assets		341,473		996		342,469

The accounting policies of the segments are the same as those described in the summary of significant accounting policies. Management allocates certain overhead expenses of the commercial bank to the mortgage broker segment. These allocations are based on a pre-determined monthly charge agreed to between the commercial bank and the mortgage broker segment. Management evaluates the performance of each segment based on profit or loss from operations before income taxes.

F-35

Intersegment revenues are accounted for at amounts that assume the revenues were between unrelated third parties at the current market prices at the time of the transactions.

The Company's reportable segments are strategic business units that offer different products and services. They are managed separately because each segment appeals to different markets and, accordingly, requires different technology and marketing strategies.

The Company does not have operating segments other than those reported, the Company does not have a single external customer from which it derives 10% or more of its revenues and the Company operates in one geographical area.

F-36

Shares (Maximum)
Shares (Minimum)

PATRIOT NATIONAL BANCORP, INC.

Common Stock

PROSPECTUS

, 2005

Sandler O'Neill & Partners, L.P.

PART II—INFORMATION NOT REQUIRED IN PROSPECTUS

Item 24. Indemnification of Directors and Officers.

Section 33-771 of the Connecticut Business Corporation Act as amended permits the indemnification of directors and other individuals as long as such individual's behavior conforms to certain standards. Section 33-636 provides that a corporation's certificate of incorporation may limit personal liability and make indemnification obligatory under certain circumstances.

Section VII of our Certificate of Incorporation, as amended, provides that we shall, to the fullest extent permitted under the Connecticut Business Corporation Act, indemnify anyone that we have the power to indemnify against any expenses, liabilities or other matters referred to in or covered by the Act. This indemnification is not exclusive of any other rights to which those seeking indemnification may be entitled under any by-law, agreement, vote of stockholders or disinterested directors, or otherwise. Both action in an official capacity and action in another capacity while holding office may be subject to indemnification. A person's right to indemnification does not cease solely because that person ceases to be a director, officer, employee or agent, or because that person dies.

Our Certificate of Incorporation does not provide for indemnification for expenses, penalties or other payments incurred in an administrative proceeding instituted by a bank regulatory agency resulting in civil monetary penalties or requiring payments to us. Director liability for breach of a duty to the company or its shareholders for monetary damages is limited to the amount of compensation for serving the corporation during the year of any violation, unless the breach:

•: involved a knowing and culpable violation of law;
•: enabled the director or an associate to receive an improper personal economic gain;
•: demonstrated a lack of good faith and conscious disregard for the duty;
•: constituted a sustained and unexcused pattern of inattention amounting to abdication of duty; or
•: created liability for an unlawful distribution under Section 33-757 of the Connecticut Business Corporation Act.

Section VII also stipulates that no amendment to or repeal of Section VII shall apply to the liability or alleged liability of any eligible individual with respect to any acts or missions occurring prior to such amendment or repeal.

We carry Directors' and Officers' insurance that covers our directors and officers against some liabilities they may incur when acting in their official capacities.

Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers or persons controlling the registrant pursuant to the foregoing provisions, the registrant has been informed that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is therefore unenforceable.

II-1

Item 25. Other Expenses of Issuance and Distribution.

The following table shows the costs and expenses, payable in connection with the sale and distribution of the securities being registered. We will pay all of these amounts. All amounts except the Securities and Exchange Commission registration fee are estimated.

SEC registration fee	$	1,413
NASDAQ SmallCap Market additional listing fee		*
NASD filing fee		1,700
Accounting fees and expenses		—*
Legal fees and expenses		—*
Printing fees and expenses		75,000
Transfer Agent fees and expenses		*
Information Agent fees and expenses		*
Subscription Agent fees and expenses		*
Blue sky fees and expenses (including legal fees)		15,000
Financial advisor fees and expenses		*
Miscellaneous		*

Total	$	*

*: To be filed by amendment

Item 26. Recent Sales of Unregistered Securities.

During the fourth quarter of 2004 we did not have any sales of unregistered securities.

Item 27. Exhibits.

See the Exhibit Index immediately following the signature page hereof.

Item 28. Undertakings.

(a)

The undersigned registrant hereby undertakes:

(1)

To supplement the prospectus, after the expiration time of the rights offering, to set forth the results of the rights offering and the amount of unsubscribed securities purchased in the public offering. If the registrant makes any public offering of the securities on terms different from those on the cover page of the prospectus, the registrant hereby undertakes to file a post-effective amendment to state the terms of such offering.

(2)

To file, during any period in which it offers or sells securities, a post-effective amendment to this registration statement to:

(i): Include any prospectus required by Section 10(a)(3) of the Securities Act;
(ii): Reflect in the prospectus any facts or events which, individually or together, represent a fundamental change in information in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20 percent change in the maximum aggregate offering price set forth in the "Calculation of Registration Fee" table in the effective registration statement; and

II-2

(iii): Include any additional or changed material information on the plan of distribution.

(3): For determining liability under the Securities Act of 1933, to treat each post-effective amendment as a new registration statement of the securities offered, and the offering of the securities at that time to be the initial bona fide offering.
(4): To file a post-effective amendment to remove from registration any of the securities that remain unsold at the end of the offering.

(b): Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act of 1933 and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.
(c): For purposes of determining any liability under the Securities Act of 1933, to treat the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or 497(h) under the Securities Act of 1933 shall be deemed to be part of this registration statement as of the time it was declared effective.
(d): For the purpose of determining any liability under the Securities Act of 1933, to treat each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

II-3

SIGNATURES

In accordance with the requirements of the Securities Act of 1933, the registrant certifies that it has reasonable grounds to believe that it meets all of the requirements of filing on Form SB-2 and authorized this registration statement to be signed on its behalf by the undersigned, in the City of Stamford, State of Connecticut, on April 25, 2005.

		PATRIOT NATIONAL BANCORP, INC. (Registrant)
		By:	/s/ ANGELO DE CARO Angelo De Caro Chairman & Chief Executive Officer

POWER OF ATTORNEY

We, the undersigned officers and directors of Patriot National Bancorp, Inc., hereby severally constitute and appoint Charles F. Howell, Robert F. O'Connell and Philip W. Wolford, and each of them singly, our true and lawful attorneys, with full power to them in any and all capacities, to sign any amendments to this Registration Statement on Form SB-2 (including pre-and post-effective amendments and registration statements filed pursuant to Rule 462(b) under the Securities Act of 1933), and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that each of said attorneys-in-fact may do or cause to be done by virtue hereof.

In accordance with the requirements of the Securities Act of 1933, this registration statement was signed by the following persons in the capacities and on the dates stated.

Signature	Title	Date

/s/ ANGELO DE CARO Angelo De Caro	Chairman and Chief Executive Officer (Principal Executive Officer)	April 25, 2005
/s/ CHARLES F. HOWELL Charles F. Howell	Vice Chairman and President	April 25, 2005
/s/ ROBERT F. O'CONNELL Robert F. O'Connell	Senior Executive Vice President, Chief Financial Officer and Director (Principal Financial Officer)	April 25, 2005
/s/ MICHAEL A. CAPODANNO Michael A. Capodanno	Senior Vice President and Controller (Principal Accounting Officer)	April 25, 2005
/s/ PHILIP W. WOLFORD Philip W. Wolford	Chief Operating Officer and Director	April 25, 2005

II-4

/s/ JOHN J. FERGUSON John J. Ferguson	Director	April 25, 2005
/s/ BRIAN A. FITZGERALD Brian A. Fitzgerald	Director	April 25, 2005
/s/ JOHN A. GEOGHEGAN John A. Geoghegan	Director	April 25, 2005
/s/ L. MORRIS GLUCKSMAN L. Morris Glucksman	Director	April 25, 2005
/s/ MICHAEL INTRIERI Michael Intrieri	Director	April 25, 2005
/s/ PAUL SETTELMEYER Paul Settelmeyer	Director	April 25, 2005

II-5

Exhibit Index

Exhibit Number		Description of Exhibit
1		Form of Agency Agreement by and between the Registrant and Sandler O'Neill & Partners, L.P.
2		Agreement and Plan of Reorganization dated as of June 28, 1999 between the Registrant and Patriot National Bank.
3.1		Certificate of Incorporation of the Registrant, as amended by the Certificate of Amendment of Certificate of Incorporation of the Registrant, filed September 27, 2004.
3.2		By-laws of the Registrant.
4.1		Rights Agreement, dated April 19, 2004, by and between Registrar and Transfer Company and the Registrant.
4.2		Form of Subscription Rights Certificate
5		Opinion of Tyler Cooper & Alcorn, LLP. (1)
10.1		1999 Stock Option Plan of Patriot National Bank.
10.2		2001 Stock Appreciation Rights Plan of Registrant.
10.3		Employment Agreement, dated as of October 23, 2000, as amended by a First Amendment, dated as of March 21, 2001, among the Registrant, Patriot National Bank and Charles F. Howell.
10.4		Second Amendment to Employment Agreement among the Registrant, Patriot National Bank and Charles F. Howell, dated as of May, 2002.
10.5		Employment Agreement, dated as of October 23, 2003, among the Registrant, Patriot National Bank and Charles F. Howell.
10.6		Amended and Restated Employment Agreement, dated as of November 3, 2003, among the Registrant, Patriot National Bank and Robert F. O'Connell.
10.7		Amended and Restated Senior Management Change of Control Agreement, dated as of November 3, 2003, between Robert F. O'Connell and Patriot National Bank.
10.8		Senior Management Change of Control Agreement, dated as of May 1, 2001, between Martin G. Noble and Patriot National Bank.
10.9		Employment Agreement, dated as of January 1, 2005, between Marcus Zavattaro and Patriot National Bank.
10.10		License Agreement, dated July 1, 2003, between Patriot National Bank and L. Morris Glucksman.
10.11		Form of Standby Purchase Agreement.
10.12		Form of Questions and Answers Regarding the Rights Offering.
10.13		Form of Subscription Agent Agreement between Registrar and Transfer Company and the Registrant.
10.14		Form of Information Agent Agreement between Registrar and Transfer Company and the Registrant.
21		Subsidiaries of the Registrant.
23.1		Consent of McGladrey & Pullen, LLP, Independent Auditors.
23.2		Consent of Tyler Cooper & Alcorn, LLP. Included in Exhibit 5.
24		Power of Attorney. Contained on the signature page hereto.
99.1		Form of Letter to Shareholders
99.2		Form of Letter to Foreign Shareholders.
99.3		Form of Letter to Securities Dealers, Commercial Banks, Brokers, Trust Companies and other Nominees.
99.4		Form of Letter to Beneficial Owners.
99.5		Form of Nominee Holder Oversubscription Certification.
99.6		Form of DTC Participant Oversubscription Certificate.
99.7		Instructions as to Use of Subscription Rights Certificate.

(1): To be filed by amendment.

EX-1 2 a2156305zex-1.txt EXHIBIT 1 Exhibit 1 Maximum of ______________ Shares of Common Stock PATRIOT NATIONAL BANCORP, INC. AGENCY AGREEMENT ____________ __, 2005 Sandler O'Neill & Partners, L.P. 919 Third Avenue 6th Floor New York, New York 10022 Ladies and Gentlemen: Patriot National Bancorp, Inc. a Connecticut corporation (the "Company"), and Patriot National Bank, a national banking association (the "Bank"), confirm their agreement with Sandler O'Neill & Partners, L.P. (the "Agent") with respect to the offer and sale by the Company of up to _____________ shares of its common stock, par value $2.00 per share (the "Common Stock"). The Company is offering _____________ shares of Common Stock to the holders of record of Common Stock (a "Record Date Holder") at the close of business on ________ __, 2005 (the "Record Date"), at a subscription price of $_____ per share (the "Subscription Price") and, subject to the rights of such holders described below, to certain other purchasers on a standby basis. Each Record Date Holder will receive one (1) non-transferable subscription right ("Rights") for every ____ (__) shares of Common Stock held of record at the close of business on the Record Date. Each Right will enable the holder thereof to purchase from the Company one share of Common Stock (an "Underlying Share") at the Subscription Price (the "Basic Subscription Privilege"). Each Record Date Holder who fully exercises their Basic Subscription Privilege also will be eligible to subscribe at the Subscription Price for shares of Common Stock (the "Excess Shares") not otherwise purchased pursuant to the exercise of the Basic Subscription Privilege up to the total number of Underlying Shares, subject to availability, proration, and reduction by the Company in certain circumstances and, in all instances, a limit of _____ times the amount eligible for subscription pursuant to the Basic Subscription Privilege (the "Oversubscription Privilege"). The offer and sale of the Underlying Shares pursuant to the exercise of the Basic Subscription Privilege and the Oversubscription Privilege are referred to herein as the "Rights Offering." The Company also intends to enter into Standby Purchase Agreements pursuant to which an aggregate of __________ ( ) institutional investors and high net worth individuals (the "Standby Purchasers") have severally agreed, subject in each case to a maximum standby commitment and certain conditions, to acquire from the Company at the Subscription Price up to an aggregate of ____________ of the Underlying Shares remaining upon completion of the Rights Offering. The Standby Purchase Agreements will require that the Standby Purchasers agree to purchase and the Company agrees to sell, and thus guarantee the availability of, an aggregate minimum of __________ shares of Common Stock ("Additional Shares") at the Subscription Price if a sufficient number of Underlying Shares are not available after the exercise of the Basic Subscription Privilege and the Oversubscription Privilege to satisfy the purchase commitments of the Standby Purchasers, subject to reduction to a minimum of ___________ shares to the extent Record Date Holders subscribe for all of the Rights granted to them (the "Minimum Standby Obligation"). The Rights Offering and the offering to Standby Purchasers are together referred to herein as the "Offering," and the Underlying Shares and the Additional Shares are together referred to herein as the "Securities." Record Date Holders may exercise subscription rights by delivering to the subscription agent a properly completed and executed subscription rights certificate together with payment in full of the subscription price for each share subscribed for. Payment may be made only (i) by check or bank draft drawn upon a U.S. bank, or postal, telegraphic or express money order payable to Registrar and Transfer Company ("R&T") as subscription agent, or (ii) by wire transfer of funds to R&T for the purpose of accepting subscriptions in connection with the transactions contemplated hereby. The Company has filed with the Securities and Exchange Commission (the "Commission") a registration statement on Form SB-2 (No. 333-_______) including a prospectus for the registration of the Securities under the Securities Act of 1933, as amended (the "1933 Act"), has filed such amendments thereto, if any, and such amended prospectuses as may have been required to the date hereof by the Commission in order to declare such registration statement effective, and will file such additional amendments thereto and such amended prospectuses and prospectus supplements as may hereafter be required. Such registration statement (as amended to date, if applicable, and as from time to time amended or supplemented hereafter) and the prospectus constituting a part thereof (including in each case all documents, if any, deemed to be part thereof pursuant to the rules and regulations of the Commission under the 1933 Act, as from time to time amended or supplemented pursuant to the 1933 Act or otherwise (the "1933 Act Regulations")), are hereinafter referred to as the "Registration Statement" and the "Prospectus," respectively, except that if any revised prospectus shall be used by the Company in connection with the Offering which differs from the Prospectus on file with the Commission at the time the Registration Statement becomes effective (whether or not such revised prospectus is required to be filed by the Company pursuant to Rule 424(b) of the 1933 Act Regulations), the term "Prospectus" shall refer to such revised prospectus from and after the time it is first provided to the Agent for such use. Concurrently with the execution of this Agreement, the Company is delivering to the Agent copies of the Prospectus to be used in the Offering. Such Prospectus contains information with respect to the Company, the Bank and the Common Stock. SECTION 1. REPRESENTATIONS AND WARRANTIES. (a) The Company and the Bank jointly and severally represent and warrant to the Agent as of the date hereof as follows: (i) The Registration Statement has been declared effective by the Commission, no stop order has been issued with respect thereto and no proceedings therefor have been initiated or, to the knowledge of the Company and the Bank, threatened by the Commission. At the time the Registration Statement became effective and at the Closing Time referred to in Section 2 hereof, the Registration Statement complied and will comply in all material respects with the requirements of the 1933 Act and the 1933 Act Regulations and did not and will not contain an untrue statement of a material fact or omit to state a material 2 fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. The Prospectus, at the date hereof does not and at the Closing Time referred to in Section 2 hereof will not, include an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided, however, that the representations and warranties in this subsection shall not apply to statements in or omissions from the Registration Statement or the Prospectus made in reliance upon and in conformity with information with respect to the Agent furnished to the Company in writing by the Agent expressly for use in the Registration Statement or the Prospectus (the "Agent Information," which the Company and the Bank acknowledge appears only in the section of the Prospectus captioned "The Rights Offering -- Financial Advisor.") (ii) The Company will promptly file the Prospectus and any supplemental sales literature with the Commission. The Prospectus and all supplemental sales literature, as of the date the Registration Statement became effective and at the Closing Time referred to in Section 2, complied and will comply in all material respects with the applicable requirements of the 1933 Act Regulations and, at or prior to the time of their first use, will have received all required authorizations of the Commission for use in final form. (iii) No order, directive, request or other correspondence has been received by the Company or the Bank from the Board of Governors of the Federal Reserve System (the "FRB"), the Office of the Comptroller of the Currency (the "OCC") or the Federal Deposit Insurance Corporation (the "FDIC") which could have the effect of delaying or canceling the Offering. (iv) The accountants who audited the consolidated financial statements and supporting schedules of the Company included in the Registration Statement and the Prospectus are independent public accountants within the meaning of the Code of Ethics of the American Institute of Certified Public Accountants ("AICPA"); and such accountants are, with respect to the Company and its wholly owned subsidiaries, the Bank and Patriot National Statutory Trust I (the "Trust"), independent certified public accountants as required by the 1933 Act and the 1933 Act Regulations. (v) The consolidated historical financial statements of the Company, together with the related schedules and notes, included in the Registration Statement and the Prospectus present fairly, in all material respects, the respective consolidated statement of financial condition of the Company and its consolidated subsidiaries at the respective dates indicated, and the consolidated statements of income and cash flows of the Company and its consolidated subsidiaries for the respective periods specified; said financial statements have been prepared in conformity with generally accepted accounting principles ("GAAP") in the United States applied on a consistent basis throughout the periods involved, except as disclosed in the notes to such financial statements; the supporting schedules included in the Registration Statement and the Prospectus present fairly, in all material respects, the information required to be stated therein, and have been properly compiled on the bases described therein, and the assumptions used in the preparation thereof are reasonable and the adjustments used therein are appropriate to give effect to the transaction and circumstances referred to therein, and the summary financial data included in the Registration Statement and the Prospectus present fairly, in all material respects, the information shown therein and have been compiled on a basis consistent with that of the 3 audited consolidated financial statements included in the Registration Statement and the Prospectus. (vi) Except as described in the Registration Statement and the Prospectus, neither the Company nor any of its subsidiaries has any material liability, whether asserted or unasserted, whether absolute or contingent, whether accrued or unaccrued, whether liquidated or unliquidated, whether disclosed on the face of the Company's consolidated statement of financial condition or off balance sheet and whether due or to be come due, including any liability for taxes (and there is no past or present, fact, situation, circumstance, condition or other basis for any present or future action, suit, proceeding, hearing, charge, complaint, claim or demand against the Company or any of its subsidiaries giving rise to any such liability). (vii) Since the respective dates as of which information is given in the Registration Statement and the Prospectus, except as otherwise stated therein or contemplated thereby, there has not been (A) any material adverse change or any development (including any change in statutes or regulations affecting the Company or any of its subsidiaries) which could reasonably be expected to have a material adverse change, in the financial condition or in the earnings, business affairs or business prospects of the Company and its subsidiaries considered as one enterprise, whether or not arising in the ordinary course of business (a "Material Adverse Effect"), or (B) any transaction entered into by the Company or any of its subsidiaries, other than in the ordinary course of business, that is material to the Company and its subsidiaries considered as one enterprise. (viii) Neither the Company nor any of its subsidiaries is subject or is a party to, or has received any notice or advice that any of them may become subject or a party to any investigation with respect to, any cease-and-desist order, agreement, consent agreement, memorandum of understanding or other regulatory enforcement action, proceeding or order with or by, or is a party to any commitment letter or similar undertaking to, or is subject to any directive by, or has been a recipient of any supervisory letter from, or has adopted any board resolutions at the request of, any Regulatory Agency (as defined below) that currently restricts in any material respect the conduct of their business or that in any material manner relates to their capital adequacy, their credit policies, their management or their business (each, a "Regulatory Agreement"), nor has the Company or any of its subsidiaries been advised by any Regulatory Agency that it is considering issuing or requesting any such Regulatory Agreement; and there is no unresolved violation, criticism or exception by any Regulatory Agency with respect to any report or statement relating to any examinations of the Company or any of its subsidiaries which, in the reasonable judgment of the Company, is expected to result in a Material Adverse Effect. As used herein, the term "Regulatory Agency" means any federal or state agency charged with the supervision or regulation of depositary institutions, or holding companies of depositary institutions, or engaged in the insurance of depository institution deposits, or any court, administrative agency or commission or other governmental agency, authority or instrumentality having supervisory or regulatory authority with respect to the Company or any of its subsidiaries. (ix) The Company has been duly organized and is validly existing as a corporation in good standing under the laws of the State of Connecticut and has full power and authority under such laws to own, lease and operate its properties and to conduct its business as now being conducted as described in the Registration Statement and the Prospectus and to enter into and perform its obligations under this Agreement; and the Company is duly registered as a bank holding company under the Bank Holding Company 4 Act of 1956, as amended ("BHCA"); there are no subsidiaries of the Company other than the Bank and the Trust and there are no subsidiaries of the Bank. (x) The Bank has been duly organized and is validly existing under the laws of the United States and has full power and authority under such laws to own, lease and operate its properties and to conduct its business as now being conducted as described in the Registration Statement and the Prospectus and to enter into and perform its obligations under this Agreement; and the Bank's deposit accounts are insured up to the applicable limit by the Bank Insurance Fund of the FDIC to the fullest extent permitted by law and the rules and regulations of the FDIC; and no proceeding for the revocation or termination of such insurance is pending or, to the knowledge of the Company and the Bank, threatened. (xi) The Company and the Bank are each duly qualified as a foreign corporation to transact business and are each in good standing in each jurisdiction in which such qualification is required, whether by reason of the ownership or leasing of property or the conduct of business, except where the failure to so qualify or be in good standing would not result in a Material Adverse Effect. (xii) The authorized capital stock of the Company consists of 1,000,000 shares of preferred stock, no par value per share, none of which was outstanding as of the date hereof, and 30,000,000 shares of Common Stock, of which 2,486,391 shares were issued and outstanding as of the date hereof; all of the issued and outstanding capital stock of the Company has been duly authorized and validly issued and is fully paid and nonassessable; none of the issued and outstanding capital stock of the Company was issued in violation of any preemptive or similar rights arising by operation of law, under the certificate of incorporation or bylaws of the Company or under any agreement to which the Company is a party; except for: (a) the Rights, (b) options to acquire ____ shares of Common Stock pursuant to the Bank's 1999 Stock Option Plan which has been assumed by the Company, and (c) the right of each holder of a share of Common Stock to acquire 8.152 additional shares of Common Stock for each share of Common Stock held, subject to the terms and conditions specified in the Rights Agreement dated as of April 19, 2004 between the Company and R&T, as Rights Agent (the "Shareholder Rights Plan"), there are no options, warrants, calls, employee benefit or other plans, preemptive rights or commitments of any character relating to the authorized but unissued capital stock or any other equity security of the Company or any securities or obligations convertible into or exchangeable for or giving any person any right to subscribe for or acquire from the Company any shares of such capital stock. (xiii) All of the issued and outstanding capital stock of the Bank has been duly authorized and validly issued, is fully paid and nonassessable and is owned by the Company, free and clear of any security interest, mortgage, pledge, lien, encumbrance, claim or equitable right, and none of the issued and outstanding capital stock of the Bank was issued in violation of any preemptive or similar rights arising by operation of law, under the articles of association or bylaws of the Bank or under any agreement to which the Bank is a party. (xiv) The Trust has been duly created and is validly existing in good standing as a business trust under the laws of the State of Connecticut with the power and authority to own, lease and operate its properties and to conduct its business as described in the Registration Statement and the Prospectus, and is duly qualified to transact business and is in good standing in each jurisdiction in which such qualification is required, whether by 5 reason of the ownership or leasing of property or the conduct of business, except where the failure to so qualify or be in good standing would not result in a Material Adverse Effect; the activities of the Trust are permitted to a Connecticut chartered bank holding company by all applicable rules and regulations; all of the issued and outstanding capital stock of the Trust has been duly authorized and validly issued, is fully paid and nonassessable, and the Trust's common securities are owned by the Company, free and clear of any security interest, mortgage, pledge, lien, encumbrance, claim or equity. (xv) Upon completion of the Offering, the authorized equity capital of the Company will be within the range set forth in the Prospectus under the caption "Capitalization." The shares of Common Stock to be sold in the Offering have been duly and validly authorized for issuance and, when issued and delivered by the Company against payment of the consideration therefor, the shares of Common Stock will be duly and validly issued, fully paid and non-assessable and will be free and clear of any security interest, pledge, lien, encumbrance, claim or equity other than created by the purchaser thereof; and the issuance of the shares of Common Stock will not be in violation of any preemptive rights or other rights to subscribe for or to purchase, or any restriction upon the voting or transfer of, any shares of Common Stock pursuant to the Company's certificate of incorporation, bylaws or other governing documents or any agreement, plan or other instrument to which the Company is party or by which it is bound. The terms and provisions of the shares of Common Stock conform and will conform in all material respects to the description thereof contained in the Prospectus and the certificates representing the shares of Common Stock will conform with the requirements of applicable laws and regulations. (xvi) The execution, delivery and performance of this Agreement and the consummation of the transactions contemplated herein have been duly authorized by all necessary corporate action of the Company and the Bank, and this Agreement has been duly executed and delivered by and is the valid and binding agreement of the Company and the Bank enforceable in accordance with its terms, except as may be limited by bankruptcy, insolvency or other laws affecting the enforceability of the rights of creditors generally and judicial limitations on the right of specific performance and except as the enforceability of indemnification and contribution provisions may be limited by applicable securities laws. (xvii) No approval of any regulatory or supervisory or other public authority is required in connection with the execution and delivery of this Agreement or the issuance of the Securities, except for the declaration of effectiveness of any required post-effective amendment to the Registration Statement by the Commission and as may be required under the securities laws of various jurisdictions. (xviii) Neither the Company nor any of its subsidiaries is in violation of its respective certificate of incorporation, articles of association or bylaws, except to the extent such violation, conflict, breach or default would not adversely affect the transaction contemplated hereby or have a Material Adverse Effect. The Company and each of its subsidiaries have conducted and are conducting their business so as to comply in all material respects with all applicable statutes, regulations and administrative and court decrees. None of the Company or any subsidiary of the Company is in default in the performance or observance of any obligation, agreement, covenant or condition contained in any contract, indenture, mortgage, deed of trust, loan or credit agreement, note, lease or other agreement or instrument to which it is a party or by which it or any of them may be bound or to which any of its properties or assets is subject (collectively, "Agreements and Instruments"), except for such defaults under Agreements and Instruments that would not result in a Material Adverse 6 Effect; and the execution, delivery and performance of this Agreement by the Company and the Bank, the issuance, sale and delivery of the Securities, the consummation of the transaction contemplated by this Agreement, and compliance by the Company and the Bank with the terms of this Agreement have been duly authorized by all necessary corporate action on the part of the Company and the Bank and do not and will not, whether with or without the giving of notice or passage of time or both, violate, conflict with or constitute a breach of, or default or Repayment Event (as defined below) under, or result in the creation or imposition of any, security interest, mortgage, pledge, lien, charge, encumbrance, claim or equitable right upon any properties or assets of the Company or any of its subsidiaries pursuant to, any of the Agreements and Instruments, nor will such action result in any violation of the provisions of the certificate of incorporation, articles of association, certificate of trust or bylaws of the Company, the Bank or the Trust or any violation by any of them of any applicable law, statute, rule, regulation, judgment, order, writ or decree of any government, government authority, agency or instrumentality or court, domestic or foreign, including, without limitation, the FRB, the OCC, and the FDIC, having jurisdiction over the Company or any of its subsidiaries or their respective properties or assets (collectively, "Governmental Entities"), except to the extent such violation, conflict, breach or default would not adversely affect the transactions contemplated hereby or have a Material Adverse Effect. As used herein, a "Repayment Event" means any event or condition which gives the holder of any note, debenture or other evidence of indebtedness (or any person acting on such holder's behalf) the right to require the repurchase, redemption or repayment of all or a portion of such indebtedness by the Company or any of its subsidiaries prior to its scheduled maturity. (xix) No labor dispute with the employees of the Company or any of its subsidiaries exists or, to the knowledge of the Company, is imminent. (xx) There is no action, suit, proceeding, inquiry or investigation before or brought by any Governmental Entity, now pending or, to the knowledge of the Company, threatened against or affecting the Company or any of its subsidiaries, which is not disclosed in the Registration Statement and the Prospectus and which, in the reasonable judgment of the Company, is expected to result in a Material Adverse Effect, or which in the reasonable judgment of the Company might materially and adversely affect the properties or assets thereof or the consummation of the transactions contemplated by this Agreement or the performance by the Company of its obligations hereunder; the aggregate of all pending legal or governmental proceedings to which the Company or any of its subsidiaries is a party or of which any of their respective properties or assets is the subject which are not described in the Registration Statement and the Prospectus, including ordinary routine litigation incidental to the business, are not, in the reasonable judgment of the Company, expected to result in a Material Adverse Effect. (xxi) Each of the Company and its subsidiaries possesses such permits, licenses, approvals, consents and other authorizations (collectively, "Governmental Licenses") issued by the appropriate Governmental Entities necessary to conduct the business now operated by them, and each of the Company and its subsidiaries is in compliance with the terms and conditions of all such Governmental Licenses, except where the failure to so possess or to so comply would not, singly or in the aggregate, have a Material Adverse Effect; all of the Governmental Licenses are valid and in full force and effect, except when the invalidity of such Governmental Licenses or the failure of such Governmental Licenses to be in full force and effect would not have a Material Adverse Effect; and none of the Company or any of its subsidiaries has received any notice of proceedings relating to the 7 revocation or modification of any such Governmental Licenses which, singly or in the aggregate, in the reasonable judgment of the Company, is expected to result in a Material Adverse Effect. (xxii) Each of the Company and its subsidiaries has good and marketable title to all of their respective real and personal properties, in each case free and clear of all liens, encumbrances and defects, except such as would not result in a Material Adverse Effect; and all of the leases and subleases under which the Company or any subsidiary holds properties, are in full force and effect, except where the failure of such leases and subleases to be in full force and effect individually or in the aggregate, would not have a Material Adverse Effect, and none of the Company or any of its subsidiaries has any notice of any claim of any sort that has been asserted by anyone adverse to the rights of the Company or any of its subsidiaries under any of the leases or subleases mentioned above, or affecting or questioning the rights of such entity to the continued possession of the leased or subleased premises under any such lease or sublease, except for any such claim which, singly or in the aggregate, in the reasonable judgment of the Company, is not expected to result in a Material Adverse Effect. (xxiii) Each of the Company and its subsidiaries owns or possesses, or can acquire on reasonable terms, adequate patents, patent rights, licenses, inventions, copyrights, know how (including trade secrets and other unpatented and/or unpatentable proprietary or confidential information, systems or procedures), trademarks, service marks, trade names or other intellectual property (collectively, "Intellectual Property") presently employed by them in connection with the business now operated by them or reasonably necessary in order to conduct such business, except to the extent the failure to so own, possess or be able to obtain such Intellectual Property would not have a Material Adverse Effect; and neither the Company nor any of its subsidiaries has received any notice or is otherwise aware of any infringement of or conflict with asserted rights of others with respect to any Intellectual Property or of any facts or circumstances which would render any Intellectual Property invalid or inadequate to protect the interest of the Company or any of its subsidiaries therein, which infringement or conflict (if the subject of any unfavorable decision, ruling or finding) or invalidity or inadequacy, singly or in the aggregate, in the reasonable judgment of the Company, is likely to result in a Material Adverse Effect. (xxiv) The Company and each of its Subsidiaries has filed all foreign, federal, state and local tax returns that are required to be filed or has requested extensions thereof (except in any case in which the failure so to file would not have a Material Adverse Effect) and has paid all taxes required to be paid by it and any other assessment, fine or penalty levied against it, to the extent that any of the foregoing is due and payable, except for any such assessment, fine or penalty that is currently being contested in good faith or would not result in a Material Adverse Effect. (xxv) The Company and each of its subsidiaries are insured for reasonable amounts by insurance companies with an A.M. Best rating of A- or better against such losses and risks and in such amounts as are prudent and customary in the businesses in which they are engaged; all policies of insurance and fidelity or surety bonds insuring the Company or any of its subsidiaries or their respective businesses, assets, employees, officers and directors are in full force and effect in all material respects; the Company and its subsidiaries are in compliance with the terms of such policies and instruments in all material respects; there are no claims by the Company or any of its subsidiaries under any such policy or instrument as to which any insurance company is denying liability or defending under a 8 reservation of rights clause; neither the Company nor any of its subsidiaries has been refused any insurance coverage sought or applied for; and neither the Company nor any of its subsidiaries has any reason to believe that it will not be able to renew its existing insurance coverage as and when such coverage expires or to obtain similar coverage from similar insurers as may be necessary to continue its business at a cost that would not result in a Material Adverse Effect. (xxvi) No subsidiary of the Company is currently prohibited, directly or indirectly, from paying any dividends to the Company, from making any other distribution on such subsidiary's capital stock, from repaying to the Company any loans or advances to such subsidiary from the Company or from transferring any of such subsidiary's property or assets to the Company or any other subsidiary of the Company, except as such subsidiaries may be limited by regulations issued by Regulatory Agencies of general applicability. (xxvii) The Company and each of its subsidiaries have established and maintain adequate internal control over financial reporting and such internal control over financial reporting has not been changed during the Company's last fiscal quarter in any way that materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting. The Company's auditors and the Audit Committee of the Board of Directors have been advised of: (i) any known significant deficiencies in the design or operation of internal controls which could adversely affect the Company's ability to record, process, summarize, and report financial data and (ii) any known fraud, whether or not material, that involves management or other employees who have a role in the Company's internal controls; and such deficiencies or fraud have either been disclosed in the Registration Statement and the Prospectus or will not result in a Material Adverse Effect. (xxviii) The Company and each of its subsidiaries (i) are in compliance with any and all applicable foreign, federal, state and local laws and regulations relating to the protection of human health and safety, the environment or hazardous or toxic substances or wastes, pollutants or contaminants ("Environmental Laws"), (ii) have received and are in compliance with all permits, licenses or other approvals required of them under applicable Environmental Laws to conduct their respective businesses and (iii) have not received notice of any actual or potential liability for the investigation or remediation of any disposal or release of hazardous or toxic substances or wastes, pollutants or contaminants, except where such non-compliance with Environmental Laws, failure to receive required permits, licenses or other approvals, or liability would not, individually or in the aggregate, result in a Material Adverse Effect. Except as described in the Registration Statement and the Prospectus, neither the Company nor any of the subsidiaries has been named as a "potentially responsible party" under the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended. (xxix) Each of the Company and its subsidiaries has fulfilled, in all material respects, its obligations, if any, under the minimum funding standards of Section 302 of the United States Employee Retirement Income Security Act of 1974, as amended ("ERISA"), and the regulations promulgated thereunder with respect to each "plan" (as defined in Section 3(3) of ERISA and the regulations thereunder), which is maintained by the Company and its subsidiaries for their employees, and each such plan is in compliance in all material respects with the presently applicable provisions of ERISA and the regulations thereunder. The Company and its subsidiaries have not incurred any unpaid liability under Title IV of ERISA to the Pension Benefit Guaranty Corporation (other than for the payment of premiums in the ordinary course) or to any such plan. 9 (xxx) The Company has established and maintains disclosure controls and procedures (as such term is defined in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the "1934 Act")); and such disclosure controls and procedures are designed to ensure that material information relating to the Company is made known to the Company's Chief Executive Officer and its Chief Financial Officer by others within the Company to allow timely decisions regarding disclosures. (xxxi) The operations of the Company and the Bank are and have been conducted at all times in compliance in all material respects with applicable financial recordkeeping and reporting requirements of the Currency and Foreign Transactions Reporting Act of 1970, as amended, also known as the Bank Secrecy Act, the money laundering statues of all applicable jurisdictions, the rules and regulations thereunder and any related or similar rules, regulations or guidelines, issued, administered or enforced by any Governmental Entity having jurisdiction over the Company or the Bank (collectively, the "Money Laundering Laws") and no action, suit or proceeding by or before any court or governmental agency, authority or body or any arbitrator involving the Company or the Bank with respect to the Money Laundering Laws is pending or, to the knowledge of the Company and the Bank, threatened. Neither the Company, the Bank, nor, to the knowledge of the Company and the Bank, any director, officer, agent, employee or other person associated with or acting on behalf of the Company or the Bank has (A) used any corporate funds for any unlawful contribution, gift, entertainment or other unlawful expenses relating to political activity; (B) made any direct or indirect unlawful payment to any foreign or domestic government official or employee; (C) violated or is in violation of any provision of the Foreign Corrupt Practices Act of 1977; (D) made any bribe, rebate, payoff, influence payment, kickback or other unlawful payment; or (E) made any payment of funds to the Company or the Bank or received or retained funds in violation of any law, rule or regulation. (xxxii) Since January 1, 1999, the Company has timely filed all reports, schedules, forms, statements and other documents required to be filed by it with the Commission pursuant to the reporting requirements of the 1934 Act (all of the foregoing actually filed by the Company with the Commission prior to the date hereof and all exhibits included therein and financial statements and schedules thereto and documents incorporated by reference therein are hereinafter referred to collectively as the "SEC Documents"). As of their respective dates, the SEC Documents complied in all material respects with the requirements of the 1934 Act and the rules and regulations of the Commission applicable to the SEC Documents. None of the SEC Documents, at the time they were filed with the Commission, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. (xxxiii) To the knowledge of the Company and the Bank, there are no affiliations or associations (as such terms are defined by the National Association of Securities Dealers, Inc. ("NASD")) between any member of the NASD and any of the Company's or the Bank's officers or directors. (xxxiv) Neither the Company or the Bank has taken and will not take, directly or indirectly, any action designed to, or that might be reasonably expected to, cause or result in stabilization or manipulation of the price of the Securities. (xxxv) The Company is not, and immediately following the consummation of the transaction contemplate hereby and the application of the use of the net 10 proceeds as described in the Registration Statement and the Prospectus, the Company will not be, an investment company required to be registered under the Investment Company Act of 1940, as amended. (xxxvi) The Company has received approval, subject to issuance, to have the Securities quoted on the Small Cap Market of the National Association of Securities Dealers' Automated Quotation System ("Nasdaq Small Cap Market") effective on the Closing Date. (xxxvii) The statements set forth in the Prospectus under the caption "Description of Capital Stock," insofar as they purport to constitute a summary of the terms of the capital stock and options of the Company and under the captions "Prospectus Summary," "Risk Factors," "The Rights Offering," "Standby Purchase Agreements," "Management's Discussion and Analysis of Financial Condition and Results of Operations, "Business," "Management" and "Description of Capital Stock," insofar as they purport to describe the provisions of the documents referred to therein, are accurate, complete and fair. (xxxviii) The Company has obtained agreements substantially in the form included in Annex B hereto of the senior executive officers of the Company named in the preliminary Prospectus included in the Registration Statement and directors of the Company to the extent that such officers and directors will not, subject only to the exceptions set forth therein, sell, offer or agree to sell, hypothecate, contract to sell, grant any option to sell or otherwise dispose of, directly or indirectly, or enter into any agreement or arrangement that has the effect of transferring the economic effects of holding, any shares of Common Stock or securities convertible into or exchangeable or exercisable for Common Stock or warrants or other rights to purchase Common Stock or any other securities of the Company that are substantially similar to Common Stock or permit the registration under the 1933 Act of any shares of Common Stock for the period beginning from the Closing Date set forth herein and continuing to and including the date 180 days after the Closing Date (the "Lock-Up Period") without the prior written consent of the Agent. Notwithstanding the foregoing, if: (1) during the last 17 days of the Lock-Up Period, the Company issues an earnings release or material news or a material event relating to the Company occurs; or (2) prior to the expiration of the Lock-Up Period, the Company announces that it will release earnings results during the 16-day-period beginning on the last day of the Lock-Up Period, the restrictions imposed herein shall continue to apply until the expiration of the 18-day period beginning on the issuance of the earnings release or the occurrence of the material news or material event. (b) Any certificate signed by any officer of the Company or the Bank and delivered to either of the Agent or to counsel for the Agent shall be deemed a representation and warranty by the Company or the Bank to each as to the matters covered thereby. SECTION 2. APPOINTMENT OF AGENT; SALE AND DELIVERY OF THE SECURITIES; CLOSING. On the basis of the representations and warranties herein contained and subject to the terms and conditions herein set forth, the Company and the Bank hereby appoint Sandler O'Neill & Partners, L.P. as its Agent to consult with and advise the Company and the Bank regarding the structure of the Offering, as well as to identify Standby Purchasers and assist the Company and the Bank in negotiating Standby Purchase Agreements with the Standby Purchasers. On the basis of the representations and warranties herein contained, and subject to the terms and conditions herein set forth, the Agent accepts such appointment and agrees to provide services to the Company as to the matters described below; provided, however, that 11 the Agent shall not be obligated to sell any minimum number of shares of Common Stock to any particular category of purchaser or in the aggregate or take any action which is inconsistent with any applicable laws, regulations, decisions or orders. The services to be rendered by the Agent pursuant to this appointment include the following: (i) identifying prospective Standby Purchasers and assisting in the negotiation of Standby Purchase Agreements with such Standby Purchasers; (ii) assisting the Company's and the Bank's management in preparing for meetings with existing shareholders and other potential investors in the Offering; and (iii) providing such other general advice and assistance as may be requested and agreed to by the Agent to promote the successful completion of the Offering. If at least the total minimum of Securities, as disclosed on the cover of the Prospectus, are sold, the Company agrees to issue or have issued the Securities sold and to release for delivery certificates for such Securities at the Closing Time against payment therefor by release of funds from the subscription agent referred to herein. The closing shall be held at the offices of Patton Boggs LLP in Washington, D.C., at 10:00 a.m., Eastern Time, or at such other place and time as shall be agreed upon by the parties hereto, on a business day to be agreed upon by the parties hereto. The Company shall notify the Agent by telephone, confirmed in writing, when funds shall have been received for all the Securities. Certificates for Securities shall be delivered directly to the purchasers thereof in accordance with their directions. The date upon which the Company shall release for delivery all of the Securities, in accordance with the terms hereof, is herein called the "Closing Date." The hour on the Closing Date at which the Company shall release for delivery all of the Securities in accordance with the terms hereof is called the "Closing Time." Appropriate arrangements for placing the funds received from subscriptions for Securities or other offers to purchase Securities were made by the Company prior to the commencement of the Rights Offering, with provision for refund to the purchasers as set forth in Section 9 hereof, or for delivery to the Company if all Securities are sold. The Company shall not be deemed to have received any subscription offer or exercise of a Right accompanied by a check or comparable instrument until final payment has been made on such check or instrument. Each subscriber will pay any stock issue and transfer taxes which may be payable with respect to the sale of the Securities. In addition to reimbursement of the expenses specified in Section 4 hereof, the Agent will receive the following compensation for its services hereunder: (a) one percent (1.00%) of the aggregate purchase price of the Common Stock sold in the Offering pursuant to the exercise of the Rights by directors, officers and employees of the Company ("Interested Parties"); (b) three percent (3.00 %) of the aggregate purchase price of the Common Stock sold in the Offering pursuant to the exercise of Rights by persons other than Interested Parties; and (c) six and one half percent (6.50%) of the aggregate purchase price of the Common Stock committed by Standby Purchasers pursuant to Standby Purchase Agreements. Notwithstanding anything to the contrary herein, the minimum fee to be paid to the Agent hereunder shall not be less than $300,000. If this Agreement is terminated by the Agent in accordance with the provisions of Section 9(a) hereof or the Offering is terminated 12 by the Company, the Company shall reimburse Sandler O'Neill for all of its reasonable out-of-pocket expenses incurred prior to termination, including the reasonable fees and disbursements of counsel for the Agent, upon receipt by the Company or the Bank of a written accounting therefor setting forth in reasonable detail the expenses incurred by the Agent. All fees payable to the Agent hereunder shall be payable in immediately available funds at the Closing Time, or upon the termination of this Agreement, as the case may be. SECTION 3. COVENANTS OF THE COMPANY. The Company covenants with the Agent as follows: (a) The Company will prepare and file such amendments or supplements to the Registration Statement and the Prospectus as may hereafter be required by the 1933 Act Regulations or as may hereafter be requested by the Agent. The Company will notify the Agent immediately, and confirm the notice in writing, (i) of the effectiveness of any post-effective amendment of the Registration Statement or the filing of any supplement to the Prospectus, (ii) of the receipt of any comments from the Commission with respect to the transactions contemplated by this Agreement, (iii) of any request by the Commission for any amendment to the Registration Statement or any amendment or supplement to the Prospectus or for additional information, (iv) of the receipt of any order, directive, request or other correspondence from the applicable regulatory agency with jurisdiction over the Company and the Bank relating to the Offering, (v) of the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement or the initiation of any proceedings for that purpose, and (vi) of the receipt of any notice with respect to the suspension of any qualification of the Securities for offering or sale in any jurisdiction. The Company will make every reasonable effort to prevent the issuance of any stop order and, if any stop order is issued, to obtain the withdrawal thereof at the earliest possible moment. (b) The Company will give the Agent notice of its intention to file or prepare any amendment to the Registration Statement (including any post-effective amendment) or any amendment or supplement to the Prospectus (including any revised prospectus which the Company proposes for use in connection with the Offering of the Securities which differs from the prospectus on file at the Commission at the time the Registration Statement becomes effective, whether or not such revised prospectus is required to be filed pursuant to Rule 424(b) of the 1933 Act Regulations), will furnish the Agent with copies of any such amendment or supplement a reasonable amount of time prior to such proposed filing or use, as the case may be, and will not file any such amendment or supplement or use any such prospectus to which the Agent or counsel for the Agent shall object. (c) The Company will deliver to the Agent as many signed copies and as many conformed copies of the Registration Statement as originally filed and of each amendment thereto (including exhibits filed therewith or incorporated by reference therein) as the Agent may reasonably request, and from time to time such number of copies of the Prospectus as the Agent may reasonably request. (d) During the period when the Prospectus is required to be delivered, the Company will comply, at its own expense, with all requirements imposed upon it by the Commission, as from time to time in force, and by the 1933 Act, the 1933 Act Regulations, 13 the 1934 Act and the rules and regulations of the Commission promulgated thereunder, so far as necessary to permit the continuance of sales or dealing in shares of Common Stock during such period in accordance with the provisions hereof and the Prospectus. (e) If any event or circumstance shall occur as a result of which it is necessary, in the opinion of counsel for the Agent, to amend or supplement the Prospectus in order to make the Prospectus not misleading in the light of the circumstances existing at the time it is delivered to a purchaser, the Company will forthwith amend or supplement the Prospectus (in form and substance satisfactory to counsel for the Agent) so that, as so amended or supplemented, the Prospectus will not include an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances existing at the time it is delivered to a purchaser, not misleading, and the Company will furnish to the Agent a reasonable number of copies of such amendment or supplement. For the purpose of this subsection, the Company will furnish such information with respect to itself as the Agent may from time to time reasonably request. (f) The Company will take all necessary action, in cooperation with the Agent, to qualify the Securities for offering and sale under the applicable securities laws of such states of the United States and other jurisdictions as the Agent and the Company have agreed; provided, however, that the Company shall not be obligated to file any general consent to service of process or to qualify as a foreign corporation in any jurisdiction in which it is not so qualified. In each jurisdiction in which the Securities have been so qualified, the Company will file such statements and reports as may be required by the laws of such jurisdiction to continue such qualification in effect for a period of not less than six months from the effective date of the Registration Statement. (g) The Company authorizes the Agent to act as agent of the Company in distributing the Prospectus to persons having record addresses in the states or jurisdictions set forth in a survey of the securities or "blue sky" laws of the various jurisdictions in which the Offering will be made (the "Blue Sky Survey"). (h) The Company will make generally available to its security holders as soon as practicable, but not later than 60 days after the close of the period covered thereby, an earnings statement (in form complying with the provisions of Rule 158 of the 1933 Act Regulations) covering a twelve month period beginning not later than the first day of the Company's fiscal quarter next following the "effective date" (as defined in said Rule 158) of the Registration Statement. (i) During the period of five years hereafter, the Company will furnish to its stockholders as soon as practicable after the end of each fiscal year an annual report (including statements of financial condition and statements of income, stockholders' equity and cash flows of the Company, and its consolidated subsidiaries, certified by independent public accountants) and, as soon as practicable after the end of each of the first three quarters of each fiscal year (beginning with the fiscal quarter ending after the effective date of the Registration Statement), consolidated summary financial information of the Company, for such quarter in reasonable detail. In addition, such annual report and quarterly consolidated summary financial information shall be made public through the issuance of appropriate press releases at the same time or prior to the time of the furnishing thereof to stockholders of the Company. 14 (j) During the period of five years hereafter, the Company will furnish to the Agent (i) as soon as available, a copy of each report or other document of the Company furnished generally to stockholders of the Company or furnished to or filed with the Commission under the 1934 Act or any national securities exchange or system on which any class of securities of the Company is listed, and (ii) from time to time, such other information concerning the Company as the Agent may reasonably request. (k) The Company will use the net proceeds received by it from the sale of the Securities in the manner specified in the Prospectus under "Use of Proceeds." (l) The Company will file all documents and notices required by the Nasdaq Small Cap Market and will use its best efforts to maintain the listing of the Common Stock on the Nasdaq Small Cap Market. (m) The Company will take such actions and furnish such information as are reasonably requested by the Agent in order for the Agent to ensure compliance with Rule 2790 of the National Association of Securities Dealers, Inc. in connection with the sale of the Securities. (n) Other than the Prospectus or as permitted by applicable law, the Company will not distribute any prospectus or other offering material in connection with the offer and sale of the Securities and will not publish any writing which constitutes an offer or prospectus. (o) The Company will use all reasonable efforts to comply with such requirements as may be necessary for the Agent or other brokerage firms to make an active market for the shares of Common Stock. (p) The Company will cause to be maintained records of all funds submitted to R&T, as the Company's subscription agent, in connection with the Offering, to enable the Company to make appropriate refunds of such funds in the event that such refunds are required to be made. in accordance with the Offering as described in the Prospectus. (q) The Company shall not deliver the Securities until the Company has satisfied or caused to be satisfied each condition set forth in Section 5 hereof, unless such condition is waived by the Agent. (r) Subsequent to the respective dates as to which information in given in the Prospectus and prior to the Closing Date, except as otherwise may be indicated or contemplated therein, the Company will not (i) issue any securities, other than pursuant to the Company's existing stock option plans, or incur any liability or obligation, direct or contingent, for borrowed money, except borrowings from the same or similar sources indicated in the Prospectus in the ordinary course of business, or (ii) enter into any transaction, other than in the ordinary course of business which might result in a Material Adverse Effect. (s) During the Lock-Up Period, the Company will not sell, offer or agree to sell, hypothecate, contract to sell, grant any option to sell or otherwise dispose of, directly or indirectly, or enter into any agreement or arrangement that has the effect of transferring the economic effects of holding, any shares of Common Stock or securities convertible into or exchangeable or exercisable for Common Stock or warrants or other rights to purchase 15 Common Stock or any other securities of the Company that are substantially similar to Common Stock or permit the registration under the 1933 Act of any shares of Common Stock, except for the registration of the Securities and the sales contemplated pursuant to this Agreement and for prior commitments existing on the date hereof as set forth in Section 1(a)(xii), without the prior consent of the Agent. SECTION 4. PAYMENT OF EXPENSES. (a) The Company shall pay all expenses incident to the performance of its obligations under this Agreement, including but not limited to (i) the cost of obtaining all securities and any necessary regulatory approvals, (ii) the printing and filing of the Registration Statement as originally filed and of each amendment thereto, (iii) the preparation, issuance and delivery of the certificates for the Securities to the purchasers in the Offering, (iv) the fees and disbursements of the Company's counsel, accountants and other advisors, (v) the qualification of the Securities under securities laws in accordance with the provisions of Section 3(f) hereof, including filing fees and the fees and disbursements of counsel to the Agent in connection therewith and in connection with the preparation of the Blue Sky Survey, (vi) the printing and delivery to the Agent of copies of the Registration Statement as originally filed and of each amendment thereto and the printing and delivery of the Prospectus and any amendments or supplements thereto to the purchasers in the Offerings and the Agent, (vii) the printing and delivery to the Agent of copies of a Blue Sky Survey, (viii) the filing fees paid or incurred by the Agent in connection with all filings with the National Association of Securities Dealers, Inc. and (ix) the fees and expenses incurred in connection with the listing of the Securities on the Nasdaq SmallCap Market. In the event the Agent incurs any such fees and expenses on behalf of the Company, the Company will reimburse the Agent for such fees and expenses whether or not the Offering is consummated; provided, however, that the Agent shall not incur any substantial expenses on behalf of the Company pursuant to this Section without the prior approval of the Company (such approval not to be unreasonably withheld). (b) In addition to the expenses to be borne by the Company under paragraph (a) above, the Company shall reimburse the Agent, upon request made from time to time, for its reasonable out-of-pocket expenses incurred in connection with the transaction contemplated hereby, regardless of whether such transactions are consummated, including, without limitation, legal fees and disbursements of Patton Boggs LLP, counsel for the Agent, marketing, syndication and travel expenses. SECTION 5. CONDITIONS OF AGENT'S OBLIGATIONS. The Company and the Agent agree that the issuance and the sale of Securities and all obligations of the Agent hereunder are subject to the accuracy of the representations and warranties of the Company and the Bank herein contained as of the date hereof and as of the Closing Date, to the accuracy of the written statements of officers and directors of the Company made pursuant to the provisions hereof, to the performance by the Company of their obligations hereunder, and to the following further conditions: (a) No stop order suspending the effectiveness of the Registration Statement shall have been issued under the 1933 Act or proceedings therefor initiated or threatened by the Commission, no order suspending the sale of the Securities in any jurisdiction shall have been issued, and no order, directive, request or other correspondence 16 has been received by the Company or the Bank from the FRB, the OCC or the FDIC which could have the effect of delaying or canceling the Offering. (b) At the Closing Time, the Agent shall have received the favorable opinion, dated as of the Closing Time, of Tyler Cooper & Alcorn, LLP, counsel for the Company and the Bank, in form and substance reasonably satisfactory to counsel for the Agent, and in substantially the form annexed hereto as Annex A. Such counsel may state that, insofar as such opinion involves factual matters, they have relied, to the extent they deem proper, upon certificates of officers of the Company or any of its subsidiaries and certificates of public officials. (c) At the Closing Time, the Agent shall have received the favorable opinion, dated as of the Closing Time, of Patton Boggs LLP, counsel for the Agent, with respect to the incorporation and legal existence of the Company, the issuance of the Securities, the disclosure in the Registration Statement and the Prospectus and other related matters as the Agent may require. Such counsel may also state that, insofar as such opinion involves factual matters, they have relied, to the extent they deem proper, upon certificates of officers of the Company or any of its subsidiaries and public officials. (d)(i) At the Closing Time, there shall not have been, since the date hereof or since the respective dates as of which information is given in the Registration Statement and the Prospectus, any Material Adverse Effect and the Agent shall have received a certificate of each of the Chief Executive Officer and President of each of the Company and the Bank, and the Chief Financial Officer of the Company and the Bank, dated as of Closing Time, to the effect that (i) there has been no such Material Adverse Effect, (ii) there shall have been no material transaction entered into by the Company or any of its subsidiaries from the date of the latest statement of financial condition of the Company, as set forth in the Registration Statement and the Prospectus, other than transactions referred to or contemplated therein and transactions in the ordinary course of business, (iii) except as previously disclosed in the Prospectus neither the Company nor any of its subsidiaries shall have received from the FRB, the OCC or the FDIC any direction (oral or written) to make any material change in the method of conducting its business with which it has not complied (which direction, if any, shall have been disclosed to the Agent) or which materially and adversely would affect the business, financial condition or results of operations of the Company or any of its subsidiaries, (iv) the representations and warranties in Section 1 hereof are true and correct with the same force and effect as though expressly made at and as of the Closing Time, except as to any such representation or warranty which specifically relates to an earlier date, (v) the Company and the Bank have complied with all agreements and satisfied all conditions on their part to be performed or satisfied at or prior to Closing Time, (vi) no stop order suspending the effectiveness of the Registration Statement has been issued and no proceedings for that purpose have been initiated or threatened by the Commission, and (vii) no order, directive, request or other correspondence has been received by the Company or any of its subsidiaries from the FRB, the OCC or the FDIC which could have the effect of delaying or canceling the Offering. (ii) At the Closing Time, the Agent shall have received a certificate of each of the Chief Executive Officer and the President of each of the Company and the Bank and the Chief Financial Officer of the Company and the Bank dated as of Closing Time, to the effect that (i) they have reviewed the contents of the Registration Statement and the Prospectus; (ii) based on each of their knowledge, the Registration Statement and the Prospectus do not contain any untrue statement of a material fact or omit to state a material 17 fact necessary in order to make the statements made therein, in light of the circumstances under which such statements were made, not misleading; (iii) based on each of their knowledge, the financial statements and other financial information included in the Registration Statement and the Prospectus fairly present in all material respects the financial condition and results of operations of the Company and its subsidiaries as of and for the dates and periods presented in the Registration Statement and the Prospectus; (iv) they are responsible for establishing and maintaining disclosure controls and procedures; (v) they have designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under their supervision, to ensure that material financial information relating to the Company and its subsidiaries is made known to them; (vi) they have evaluated the effectiveness of their disclosure controls and procedures; and (vii) they have disclosed to McGladrey & Pullen, LLP and the Audit Committee of the Company (A) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Company's and the Bank's ability to record, process, summarize, and report financial data, and (B) any fraud, whether or not material, that involves management or other employees who have a significant role in the Company's and the Bank's internal control over financial reporting, and any such deficiencies or fraud have either been disclosed in the Registration Statement and the Prospectus or are not material to the Company and its subsidiaries taken as a whole. (e) At the time of the execution of this Agreement, the Agent shall have received from McGladrey & Pullen, LLP, a letter dated such date, in form and substance satisfactory to the Agent, to the effect that (i) they are independent certified public accountants with respect to the Company and its subsidiaries within the meaning of the Code of Ethics of the AICPA, the 1933 Act and the 1933 Act Regulations; (ii) it is their opinion that the consolidated financial statements and supporting schedules included in the Registration Statement and covered by their opinion therein comply as to form in all material respects with the applicable accounting requirements of the 1933 Act and the 1933 Act Regulations; (iii) based upon limited procedures as agreed upon by the Agent and McGladrey & Pullen, LLP, and set forth in detail in such letter, nothing has come to their attention which causes them to believe that (A) the unaudited financial statements and supporting schedules of the Company included in the Registration Statement do not comply as to form in all material respects with the applicable accounting requirements of the 1933 Act and the 1933 Act Regulations or are not presented in conformity with GAAP applied on a basis substantially consistent with that of the audited financial statements included in the Registration Statement and the Prospectus, (B) at a specified date not more than five days prior to the date of this Agreement, there has been any increase in the consolidated available for sale investment securities or total borrowings of the Company or any decrease in consolidated total assets, allowance for loan losses, total deposits or shareholders' equity of the Company, in each case as compared with the amounts shown in the December 31, 2004 balance sheet included in the Registration Statement or, (C) during the period from December 31, 2004 to a specified date not more than five days prior to the date of this Agreement, there were any decreases, as compared with the corresponding period in the preceding year, in total interest income, net interest income, net interest income after provision for loan losses, income before income tax expense or net income of the Company, except in all instances, for increases or decreases which the Registration Statement and the Prospectus disclose have occurred or may occur; and (iv) in addition to the examination referred to in their opinions and the limited procedures referred to in clause (iii) above, they have carried out certain specified procedures, not constituting an audit, with respect to certain amounts, percentages 18 and financial information which are included in the Registration Statement and Prospectus and which are specified by the Agent, and have found such amounts, percentages and financial information to be in agreement with the relevant accounting, financial and other records of the Company and its subsidiaries identified in such letter. (f) At the Closing Time, the Agent shall have received from McGladrey & Pullen, LLP a letter, dated as of Closing Time, to the effect that they reaffirm the statements made in the letter furnished pursuant to subsection (e) of this Section, except that the specified date referred to shall be a date not more than five days prior to Closing Time. (g) At the Closing Time, counsel for the Agent shall have been furnished with such documents and opinions as they may require for the purpose of enabling them to pass upon the issuance and sale of the Securities as herein contemplated and related proceedings, or in order to evidence the accuracy of any of the representations or warranties, or the fulfillment of any of the conditions, herein contained; and all proceedings taken by the Company in connection with the issuance and sale of the Securities as herein contemplated shall be satisfactory in form and substance to the Agent and counsel for the Agent. (h) The Agent shall have received Lock-up Agreements, dated as of the Closing Date, from all of the Company's executive officers and directors, in the form and to the effect contemplated in Section 1(xxxviii). (i) At any time prior to Closing Time, (i) there shall not have occurred any material adverse change in the financial markets in the United States or elsewhere or any outbreak of hostilities or escalation thereof or other calamity or crisis the effects of which, in the judgment of the Agent, are so material and adverse as to make it impracticable to market the Securities or to enforce contracts, including subscriptions or orders, for the sale of the Securities, and (ii) trading generally on either the New York Stock Exchange or NASDAQ shall not have been suspended, and minimum or maximum prices for trading shall not have been fixed, or maximum ranges for prices for securities have been required, by either the New York Stock Exchange, the NASD or by order of the Commission or any other governmental authority, and a banking moratorium shall not have been declared by Federal, New York or Connecticut authorities. (j) If any condition specified in this Section shall not have been fulfilled when and as required to be fulfilled, this Agreement may be terminated by the Agent by notice to the Company and the Bank at any time at or prior to the Closing Time, and such termination shall be without liability of any party to any other party except as provided in Section 4 hereof and except that Section 6 and 7 hereof shall survive any such termination and remain in full force and effect. SECTION 6. INDEMNIFICATION. (a) INDEMNIFICATION OF AGENT. The Company and the Bank agree to jointly and severally indemnify and hold harmless: (x) the Agent; (y) each person, if any, who controls (within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act) the Agent (each such person, a "controlling person"); and (z) the respective partners, directors, officers, employees and agents of the Agent or any such controlling person as follows: (i) against any and all loss, liability, claim, damages and expense whatsoever, as incurred, relating to or arising out of, or based upon, in whole or in part, (A) 19 any action taken by the Agent where acting as agent of the Company and the Bank or as otherwise described in Section 2 hereof, (B) any untrue statement or alleged untrue statement of a material fact included in the Registration Statement or the Prospectus, or any amendment or supplement thereto, or the omission or alleged omission therefrom of a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; (C) any untrue statement or alleged untrue statement of material fact contained in any information or documents executed in favor of or furnished or made available to the Agent by the Company and the Bank; (D) any omission or alleged omission to state in any information or documents executed in favor of or furnished or made available to the Agent by the Company and the Bank a material fact necessary to make the statements therein not misleading; or (E) the breach or alleged breach of any representation, warranty and agreement of the Company and the Bank contained herein; (ii) against any and all loss, liability, claim, damage and expense whatsoever, as incurred, to the extent of the aggregate amount paid in settlement of any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or of any claim whatsoever based upon any such untrue statement or omission, or any such alleged untrue statement or omission, or breach or alleged breach of any such representation, warranty or agreement; provided that (subject to Section 6(d) hereof) any such settlement is effected with the written consent of the Company and the Bank; and (iii) against any and all expense whatsoever, as incurred (including the fees and disbursements of counsel chosen by the Agent), reasonably incurred in investigating, preparing or defending against any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or any claim whatsoever based upon any such untrue statement or omission, or any such alleged untrue statement or omission, or breach or alleged breach of any such representation, warranty or agreement, to the extent that any such expense is not paid under (1) or (2) above; PROVIDED, HOWEVER, that this indemnity agreement shall not apply to any loss, liability, claim, damage or expense to the extent arising out of any untrue statement or omission or alleged untrue statement or omission made in reliance upon and in conformity with the Agent's Information. Notwithstanding the foregoing, the indemnification provided for in this paragraph (a) shall not apply to the Bank to the extent that such indemnification by the Bank is found in a final, non-appealable judgment by a court of competent jurisdiction to constitute a violation of any financial institution law or regulation applicable to national banks and the Bank, including if such indemnification is so found to constitute a covered transaction under 23A of the Federal Reserve Act. (b) INDEMNIFICATION OF OFFERORS, DIRECTORS, OFFICERS AND EMPLOYEES. The Agent agrees to indemnify and hold harmless the Company and the Bank, their directors, officers and employees, and each person, if any, who controls the Company, or the Bank within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act against any and all loss, liability, claim, damage and expense described in the indemnity contained in Section 6(a) above, as incurred, but only with respect to untrue statements or omissions, or alleged untrue statements or omissions, made in conformity with the Agent's Information. (c) ACTIONS AGAINST PARTIES; NOTIFICATION. Each indemnified party shall give notice as promptly as reasonably practicable to each indemnifying party of any action 20 commenced against it in respect of which indemnity may be sought hereunder, but failure to so notify an indemnifying party shall not relieve such indemnifying party from any liability hereunder to the extent it is not materially prejudiced as a result thereof, and in any event shall not relieve it from any liability which it may have otherwise than on account of this indemnity agreement. In the case of parties indemnified pursuant to Section 6(a) above, counsel to the indemnified parties shall be selected by the Agent, and, in the case of parties indemnified pursuant to Section 6(b) above, counsel to the indemnified parties shall be selected by the Company and the Bank. An indemnifying party may participate at its own expense in the defense of any such action; provided, however, that counsel to the indemnifying party shall not (except with the consent of the indemnified party) also be counsel to the indemnified party. In no event shall the indemnifying parties be liable for fees and expenses of more than one counsel (in addition to any local counsel) separate from their own counsel for all indemnified parties in connection with any one action or separate but similar or related actions in the same jurisdiction arising out of the same general allegations or circumstances. No indemnifying party shall, without the prior written consent of the indemnified parties, settle or compromise or consent to the entry of any judgment with respect to any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or any claim whatsoever in respect of which indemnification or contribution could be sought under this Section 6 or Section 7 hereof (whether or not the indemnified parties are actual or potential parties thereto), unless such settlement, compromise or consent (i) includes an unconditional release of each indemnified party from all liability arising out of such litigation, investigation, proceeding or claim and (ii) does not include a statement as to or an admission of fault, culpability or a failure to act by or on behalf of any indemnified party. (d) SETTLEMENT WITHOUT CONSENT IF FAILURE TO REIMBURSE. If at any time an indemnified party shall have validly requested an indemnifying party to reimburse the indemnified party for fees and expenses of counsel, such indemnifying party agrees that it shall be liable for any settlement of the nature contemplated by Section 6(a)(2) effected without its written consent if (i) such settlement is entered into more than 45 days after receipt by such indemnifying party of the aforesaid request, (ii) such indemnifying party shall have received notice of the terms of such settlement at least 30 days prior to such settlement being entered into and (iii) such indemnifying party shall not have reimbursed such indemnified party in accordance with such request prior to the date of such settlement. SECTION 7. CONTRIBUTION. In order to provide for just and equitable contribution in circumstances under which the indemnification provided for in Section 6 hereof is for any reason held to be unenforceable by an indemnified party in respect of any losses, liabilities, claims, damages or expenses referred to therein, then each indemnifying party shall contribute to the aggregate amount of such losses, liabilities, claims, damages and expenses incurred by such indemnified party, as incurred, (i) in such proportion as is appropriate to reflect the relative benefits received by the Company and the Bank, on the one hand, and the Agent, on the other hand, from the offering of the Securities pursuant to this Agreement or (ii) if the allocation provided by clause (i) is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the Company and the Bank, on the one hand, and the Agent, on the other hand, in connection with the statements or omissions which resulted in such losses, liabilities, claims, damages or expenses, as well as any other relevant equitable considerations. 21 In order to determine the relative benefits received by the Company and the Bank, on the one hand, and the Agent, on the other hand, the parties hereto agree that in connection with the offering of the Securities pursuant to this Agreement, the Agent shall be responsible for that portion represented by the percentage that the maximum aggregate marketing fees appearing on the cover page of the Prospectus bears to the maximum aggregate gross proceeds appearing thereon and the Company and the Bank are responsible for the balance. The relative fault of the Company and the Bank, on the one hand, and the Agent, on the other hand, shall be determined by reference to, among other things, whether any such untrue or alleged untrue statements of a material fact or omission or alleged omission to state a material fact relates to information supplied by the Company and the Bank or by the Agent and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The Company and the Bank and the Agent agree that it would not be just and equitable if contribution pursuant to this Section 7 were determined by pro rata allocation or by any other method of allocation which does not take account of the equitable considerations referred to above in this Section 7. The aggregate amount of losses, liabilities, claims, damages and expenses incurred by an indemnified party and referred to above in this Section 7 shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in investigating, preparing or defending against any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or any claim whatsoever based upon any such untrue or alleged untrue statement or omission or alleged omission. Notwithstanding the provisions of this Section 7, the Agent shall not be required to contribute any amount in excess of the aggregate marketing fees to which the Agent is entitled and actually paid pursuant to this Agreement received pursuant to Section 2 of this Agreement. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the 1933 Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. For purposes of this Section 7, each person, if any, who controls the Agent within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act and the respective partners, directors, officers, employees and agents of such Agent or any such controlling person shall have the same rights to contribution as the Agent, while each officer and director of the Company and the Bank, and each person, if any, who controls the Company and the Bank within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act shall have the same rights to contribution as the Company and the Bank. SECTION 8. REPRESENTATIONS, WARRANTIES AND AGREEMENTS TO SURVIVE DELIVERY. All representations, warranties and agreements contained in this Agreement, or contained in certificates of officers of the Company and the Bank submitted pursuant hereto, shall remain operative and in full force and effect, regardless of any investigation made by or on behalf of any Agent or controlling person, or by or on behalf of the Company and the Bank, and shall survive delivery of the Securities to the Purchasers thereof. 22 SECTION 9. TERMINATION OF AGREEMENT. (a) The Agent may terminate this Agreement, by notice to the Company and the Bank, at any time at or prior to Closing Time (i) if there has been, since the date of this Agreement or since the respective dates as of which information is given in the Registration Statement, any Material Adverse Effect; (ii) if there has occurred any material adverse change in the financial markets in the United States or elsewhere or any outbreak of hostilities or escalation thereof or other calamity or crisis the effects of which, in the judgment of the Agent, are so material and adverse as to make it impracticable to market the Securities or to enforce contracts, including subscriptions or orders, for the sale of the Securities; (iii) if trading generally on either the New York Stock Exchange or the NASDAQ has been suspended, or minimum or maximum prices for trading have been fixed, or maximum ranges for prices for securities have been required, by either the New York Stock Exchange, the NASD or by order of the Commission or any other governmental authority, or if a banking moratorium has been declared by either Federal, New York or Connecticut authorities; (iv) if any condition specified in Section 5 (other than Section 5(b)) shall not have been fulfilled when and as required to be fulfilled; (v) if there shall have been such material adverse change in the condition or prospects of the Company or the Bank or the prospective market for the Company's securities as in the Agent's good faith opinion would make it inadvisable to proceed with the offering, sale or delivery of the Securities; or (vi) if the Company is unable to sell at least the total minimum of Securities, as disclosed on the cover of the Prospectus, or if the Offering is not consummated for any other reason, prior to ___________, 2005. (b) If this Agreement is terminated pursuant to this Section, the Company shall notify the subscription agent who shall refund to any persons who have subscribed for any of the Securities the full amount which it may have received from them, without interest, as provided in the Prospectus, such termination shall be without liability of any party to any other party except that the provisions of Section 4 hereof relating to reimbursement of expenses and the provisions of Sections 6 and 7 hereof shall survive any termination of this Agreement. SECTION 10. NOTICES. All notices and other communications hereunder shall be in writing and shall be deemed to have been duly given if mailed or transmitted by any standard form of telecommunication. Notices to the Agent shall be directed to the Agent as follows: 919 Third Avenue, 6th Floor, New York, New York 10021, Attention: General Counsel, with a copy to Patton Boggs, LLP, 2550 M Street, NW, Washington, D.C., Attention: Norman B. Antin, Esq. and Jeffrey D. Haas, Esq.; notices to the Company and the Bank shall be directed to the Company at 900 Bedford Street, Stamford, Connecticut, 06901, Attention: Angelo De Caro, Chairman and Chief Executive Officer, with a copy to Tyler Cooper & Alcorn, LLP, 185 Asylum Avenue, City Place, 35th Floor, Hartford, Connecticut 06103, Attention: William W. Bouton, III, Esq. and Kerry John Tomasevich, Esq. SECTION 11. PARTIES. This Agreement shall inure to the benefit of and be binding upon the Agent, the Company, the Bank and their respective successors. Nothing expressed or mentioned in this Agreement is intended or shall be construed to give any person, firm or corporation, other than the Agent, the Company, the Bank and their respective successors and the controlling 23 persons and officers and directors referred to in Sections 6 and 7 and their heirs and legal representatives, any legal or equitable right, remedy or claim under or in respect of this Agreement or any provision herein or therein contained. This Agreement and all conditions and provisions hereof and thereof are intended to be for the sole and exclusive benefit of the Agent, the Company, the Bank and their respective successors, and said controlling persons and officers and directors and their heirs and legal representatives, and for the benefit of no other person, firm or corporation. No purchaser of Securities shall be deemed to be a successor by reason merely of such purchase. SECTION 12. COUNTERPARTS; FACSIMILE. This Agreement may be executed in any number of counterparts and by the parties hereto in separate counterparts, and signature pages may be delivered by facsimile, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. SECTION 13. SEVERABILITY. Any term or provision of this Agreement which is invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be ineffective to the extent of such invalidity or unenforceability without rendering invalid or unenforceable the remaining terms and provisions of this Agreement or affecting the validity or enforceability of any of the terms or provisions of this Agreement in any other jurisdiction. If any provision of this Agreement is so broad as to be unenforceable, the provision shall be interpreted to be only so broad as is enforceable. SECTION 14. GOVERNING LAW; JURISDICTION. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO CONFLICT OF LAW PRINCIPLES OF SAID STATE OTHER THAN SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW. EACH OF THE COMPANY AND THE BANK, ON BEHALF OF ITSELF AND ITS SUBSIDIARIES HEREBY IRREVOCABLY SUBMITS TO THE EXCLUSIVE JURISDICTION OF THE FEDERAL AND NEW YORK STATE COURTS LOCATED IN THE CITY OF NEW YORK IN CONNECTION WITH ANY SUIT, ACTION OR PROCEEDING RELATED TO THIS AGREEMENT OR ANY OF THE MATTERS CONTEMPLATED HEREBY, IRREVOCABLY WAIVES ANY DEFENSE OF LACK OF PERSONAL JURISDICTION AND IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUIT, ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN ANY SUCH COURT. EACH OF THE COMPANY AND THE BANK, ON BEHALF OF ITSELF AND ITS SUBSIDIARIES IRREVOCABLY WAIVES, TO THE FULLEST EXTENT IT MAY EFFECTIVELY DO SO UNDER APPLICABLE LAW, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT AND ANY CLAIM THAT ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. 24 SECTION 15. EFFECT OF HEADINGS. The Article and Section headings herein are for convenience only and shall not affect the construction hereof. SECTION 16. ENTIRE AGREEMENT. This Agreement represents the entire understanding of the parties hereto with reference to the transactions contemplated hereby and supersedes any and all other oral or written agreements heretofore made. SECTION 17. HEADINGS. Sections headings are not to be considered part of this Agreement, are for convenience and reference only, and are not to be deemed to be full or accurate descriptions of the contents of any paragraph or subparagraph. 25 If the foregoing is in accordance with your understanding of our agreement, please sign and return to the Company a counterpart hereof, whereupon this instrument, along with all counterparts, will become a binding agreement between the Agent, the Company and the Bank in accordance with its terms. Very truly yours, PATRIOT NATIONAL BANCORP, INC. By: ---------------------- Name: Angelo De Caro Title: Chairman and Chief Executive Officer PATRIOT NATIONAL BANK By: ---------------------- Name: Angelo De Caro Title: Chairman CONFIRMED AND ACCEPTED, as of the date first above written: Sandler O'Neill & Partners, L.P. By: Sandler O'Neill & Partners Corp., the sole general partner By: ---------------------- Name: Title 26 ANNEX A Pursuant to Section 5(a) of the Agency Agreement, counsel for the Company and the Bank shall deliver an opinion in substantially the following form: (i) The Registration Statement has been declared effective by the Commission and, to the knowledge of such counsel, no stop order has been issued with respect thereto and no proceedings therefor have been initiated or threatened by the Commission. At the time the Registration Statement became effective and at the Closing Time, the Registration Statement complied in all material respects with the requirements of the 1933 Act and the 1933 Act Regulations. (ii) The Company has been duly organized and is validly existing as a corporation under the laws of the State of Connecticut and has full power and authority under such laws to own, lease and operate its properties and to conduct its business as now being conducted as described in the Registration Statement and the Prospectus and to enter into and perform its obligations under the Agreement; and the Company is duly registered as a bank holding company under the BHCA; there are no subsidiaries of the Company other than the Bank and the Trust and there are no subsidiaries of the Bank. (iii) The Bank has been duly organized and is validly existing under the laws of the United States and has full power and authority under such laws to own, lease and operate its properties and to conduct its business as now being conducted as described in the Registration Statement and the Prospectus and to enter into and perform its obligations under the Agreement; and the Bank's deposit accounts are insured up to the applicable limit by the Bank Insurance Fund of the FDIC to the fullest extent permitted by law and the rules and regulations of the FDIC. (iv) The Company and the Bank are each duly qualified as a foreign corporation to transact business and are each in good standing in each jurisdiction in which such qualification is required, whether by reason of the ownership or leasing of property or the conduct of business, except where the failure to so qualify would not result in a Material Adverse Effect. (v) All of the issued and outstanding capital stock of the Company has been duly authorized and validly issued and is fully paid and nonassessable; none of the issued and outstanding capital stock of the Company was issued in violation of any preemptive or similar rights arising by operation of law, under the certificate of incorporation or bylaws of the Company or, to such counsel's knowledge after due inquiry, under any agreement to which the Company is a party. (vi) All of the issued and outstanding capital stock of the Bank has been duly authorized and validly issued, is fully paid and nonassessable and is owned by the Company, free and clear of any security interest, mortgage, pledge, lien, encumbrance, claim or equitable right, and none of the issued and outstanding capital stock of the Bank was issued in violation of any preemptive or similar rights arising by operation of law, under the articles of association or bylaws of the Bank or, to such counsel's knowledge after due inquiry, under any agreement to which the Bank is a party. (vii) The Trust has been duly created and is validly existing as a business trust under the laws of the State of Connecticut with the power and authority to own, lease and operate its properties and to conduct its business as described in the Registration Statement and the A - 1 Prospectus, and is duly qualified to transact business and is in good standing in each jurisdiction in which such qualification is required, whether by reason of the ownership or leasing of property or the conduct of business, except where the failure to so qualify or be in good standing would not result in a Material Adverse Effect; the activities of the Trust are permitted to a Connecticut chartered bank holding company by all applicable rules and regulations; all of the issued and outstanding capital stock of the Trust has been duly authorized and validly issued, is fully paid and nonassessable, and the Trust's common securities are owned by the Company, free and clear of any security interest, mortgage, pledge, lien, encumbrance, claim or equity. (viii) Based on such counsel's review of the Company's records, the authorized, issued and outstanding capital stock of the Company at the date indicated is as set forth in the Prospectus under "Capitalization," and there have not been any subsequent issuances of capital stock of the Company; upon completion of the Offering, the authorized equity capital of the Company will be within the range set forth in the Prospectus under the caption "Capitalization." The shares of Common Stock to be sold in the Offering have been duly and validly authorized for issuance and, when issued and delivered by the Company against payment of the consideration therefor, the shares of Common Stock will be duly and validly issued, fully paid and non-assessable and will be free and clear of any security interest, pledge, lien, encumbrance, claim or equity other than created by the purchaser thereof; and the issuance of the shares of Common Stock will not be in violation of any preemptive rights or other rights to subscribe for or to purchase, or any restriction upon the voting or transfer of, any shares of Common Stock pursuant to the Company's certificate of incorporation, bylaws or other governing documents or, to such counsel's knowledge after due inquiry, any agreement, plan or other instrument to which the Company is party or by which it is bound. The terms and provisions of the shares of Common Stock conform in all material respects to the description thereof contained in the Prospectus and the certificates representing the shares of Common Stock conform with the requirements of applicable laws and regulations. (ix) The execution, delivery and performance of the Agreement and the consummation of the transactions contemplated herein have been duly authorized by all necessary corporate action of the Company and the Bank, and the Agreement has been duly executed and delivered by and is the valid and binding agreement of the Company and the Bank enforceable in accordance with its terms, except as may be limited by bankruptcy, insolvency or other laws affecting the enforceability of the rights of creditors generally and judicial limitations on the right of specific performance and except as the enforceability of indemnification and contribution provisions may be limited by applicable securities laws. (x) No approval of any regulatory or supervisory or other public authority is required in connection with the execution and delivery of the Agreement for the issuance of the Securities, except for the declaration of effectiveness of any required post-effective amendment to the Registration Statement by the Commission and as may be required under the securities laws of various jurisdictions. (xi) To the knowledge of such counsel, neither the Company nor any of its subsidiaries is in violation of its respective certificate of incorporation, articles of association, certificate of trust or bylaws, except to the extent such violation, conflict, breach or default would not adversely affect the transaction contemplated hereby or have a Material Adverse Effect. To the knowledge of such counsel, the Company and each of its subsidiaries are in compliance in all material respects with all applicable statutes, regulations and administrative and court decrees. To the knowledge of such counsel, none of the Company or any subsidiary of the Company is in default in the performance or observance of any obligation, agreement, B - 2 covenant or condition contained in any Agreements and Instruments, except for such defaults under Agreements and Instruments that would not result in a Material Adverse Effect; and the execution, delivery and performance of this Agreement by the Company and the Bank, the issuance, sale and delivery of the Securities, the consummation of the transaction contemplated by this Agreement, and compliance by the Company and the Bank with the terms of this Agreement have been duly authorized by all necessary corporate action on the part of the Company and the Bank and do not and will not, whether with or without the giving of notice or passage of time or both, violate, conflict with or constitute a breach of, or default or Repayment Event under, or result in the creation or imposition of any, security interest, mortgage, pledge, lien, charge, encumbrance, claim or equitable right upon any properties or assets of the Company or any of its subsidiaries pursuant to, any of the Agreements and Instruments, except to the extent such violation, conflict, breach or default would not adversely affect the transactions contemplated hereby or have a Material Adverse Effect, nor will such action result in any violation of the provisions of the certificate of incorporation, articles of association, certificate of trust or bylaws of the Company, the Bank or the Trust or any violation by any of them of any applicable law, statute, rule, regulation, judgment, order, writ or decree of any Governmental Entities, except to the extent such violation, conflict, breach or default would not adversely affect the transactions contemplated hereby or have a Material Adverse Effect. (xii) There is no action, suit, proceeding, inquiry or investigation before or brought by any Governmental Entity, now pending or, to the knowledge of such counsel, threatened against or affecting the Company or any of its subsidiaries, that is required to be disclosed in the Registration Statement and the Prospectus and which is not disclosed therein, or that could result in a Material Adverse Effect, or which could adversely affect the transactions contemplated by this Agreement or the performance by the Company of its obligations hereunder; the aggregate of all pending legal or governmental proceedings to which the Company or any of its subsidiaries is a party or of which any of their respective properties or assets is the subject which are not described in the Registration Statement and the Prospectus, including ordinary routine litigation incidental to the business, are not expected to result in a Material Adverse Effect. (xiii) Each of the Company and its subsidiaries possesses such Governmental Licenses issued by the appropriate Governmental Entities necessary to conduct the business now operated by them, and each of the Company and its subsidiaries is in compliance with the terms and conditions of all such Governmental Licenses, except where the failure to so possess or to so comply would not, singly or in the aggregate, have a Material Adverse Effect; all of the Governmental Licenses are valid and in full force and effect, except when the invalidity of such Governmental Licenses or the failure of such Governmental Licenses to be in full force and effect would not have a Material Adverse Effect; and none of the Company or any of its subsidiaries has received any notice of proceedings relating to the revocation or modification of any such Governmental Licenses which, singly or in the aggregate, is expected to result in a Material Adverse Effect. (xiv) Each of the Company and its subsidiaries has good and marketable title to all of their respective real and personal properties, in each case free and clear of all liens, encumbrances and defects, except such as would not result in a Material Adverse Effect; and all of the leases and subleases under which the Company or any subsidiary holds properties, are in full force and effect, except where the failure of such leases and subleases to be in full force and effect individually or in the aggregate, would not have a Material Adverse Effect, and none of the Company or any of its subsidiaries has any notice of any claim of any sort that has been asserted by anyone adverse to the rights of the Company or any of its subsidiaries under any of B - 3 the leases or subleases mentioned above, or affecting or questioning the rights of such entity to the continued possession of the leased or subleased premises under any such lease or sublease, except for any such claim which, singly or in the aggregate, in the reasonable judgment of the Company, is not expected to result in a Material Adverse Effect. (xv) The Company is not, and immediately following the consummation of the transaction contemplate hereby and the application of the use of the net proceeds as described in the Registration Statement and the Prospectus, the Company will not be, an investment company required to be registered under the Investment Company Act of 1940, as amended. (xvi) The Company has received approval, subject to issuance, to have the Securities quoted on the Nasdaq Small Cap Market effective on the Closing Date. (xvii) The statements set forth in the Prospectus under the caption "Description of Capital Stock," insofar as they purport to constitute a summary of the terms of the capital stock and options or rights of the Company and under the captions "Prospectus Summary," "Risk Factors," "Certain Federal Income Tax Consequences," "The Rights Offering," "Standby Purchase Agreements," "Management's Discussion and Analysis of Financial Condition and Results of Operations, "Business," "Management" and "Description of Capital Stock," insofar as they purport to describe the provisions of the laws and documents referred to therein, are accurate, complete and fair. (xiii) To the best of such counsel's knowledge, there are no contracts, indentures, mortgages, loan agreements, notes, leases or other instruments required to be described or referred to in the Registration Statement or to be filed as exhibits thereto other than those described or referred to therein or filed as exhibits thereto and the descriptions thereof or references thereto are correct. In addition, such counsel shall state that such counsel has participated in conferences with officers and representatives of the Company, representatives of the independent public accountants for the Company and the Agent at which the contents of the Registration Statement and the Prospectus and related matters were discussed and, although such counsel is not passing upon and does not assume any responsibility for and has not verified the accuracy, completeness or fairness of the statements contained in the Registration Statement and the Prospectus, and has not made any independent check or verification thereof, on the basis of the foregoing, no facts have come to the attention of such counsel that lead such counsel to believe that either the Registration Statement at the time it became effective, or any amendment thereof made prior to the Closing Time, as of the date of such amendment, contained an untrue statement of a material fact or omitted to state any material fact required to be stated therein or necessary to make the statements therein not misleading or that the Prospectus as of its date (or any amendment thereof or supplement thereto made prior to the Closing Time, as of the date of such amendment or supplement) and as of the Closing Time contained or contains an untrue statement of a material fact or omitted or omits to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading (it being understood that such counsel need express no belief or opinion with respect to the exhibits and the financial statements and other financial and statistical data included herein). In rendering such opinion, such counsel may rely (A) as to matters involving the application of laws other than the laws of the United States and jurisdictions in which they are admitted, to the extent such counsel deems proper and to the extent specified in such B - 4 opinion, if at all, upon an opinion or opinions (in form and substance reasonably satisfactory to Agent's counsel) of other counsel reasonably acceptable to Agent's counsel, familiar with the applicable laws; (B) as to matters of fact, to the extent they deem proper, on certificates of responsible officers of the Company and the Bank and certificates or other written statements of officers of departments of various jurisdictions having custody of documents respecting the corporate existence or good standing of the Company and its subsidiaries, provided that copies of any such statements or certificates shall be delivered to Agent's counsel. The opinion of such counsel for the Company shall state that the opinion of any such other counsel is in form satisfactory to such counsel and, in their opinion, the Agent and they are justified in relying thereon. B - 5 ANNEX B FORM OF LOCK-UP AGREEMENT _________ __, 2005 Sandler O'Neill & Partners, L.P. 919 Third Avenue 6th Floor New York, New York 10022 Ladies and Gentlemen: The undersigned [director][officer] of Patriot National Bancorp, Inc., a Connecticut corporation (the "Company"), understands that the Company is offering up to ______ shares of its common stock, $2.00 par value per share (the "Common Stock"), to the holders of record at the close of business on _____ 2005 in a rights offering (the "Offering"). The Company also intends to enter into Standby Purchase Agreements with certain investors to acquire up to ________ of the shares offered, and will guarantee the availability of an aggregate minimum of ___ shares to such investors. The aggregate shares of common stock to be offered is referred to herein as the "Securities," with the specific details of the transaction subject to the terms and conditions stated in the Agency Agreement (the "Agency Agreement") to be entered into by the Company and Sandler O'Neill & Partners L.P. (the "Agent"). The undersigned, to facilitate the marketing of the Securities and in consideration of the Company and the Agent entering into the Agency Agreement, hereby irrevocably confirms and agrees for the benefit of the Company and the Agent that during the period beginning from the date hereof and continuing to and including the date 180 days after the Closing Date (as such term is defined in the Agency Agreement) (the "Lock-Up Period"), the undersigned will not sell, offer, agree to sell, contract to sell, hypothecate, pledge, grant any option to purchase, make any short sale or otherwise dispose of or hedge, directly or indirectly, any shares of Common Stock or securities convertible into, exchangeable or exercisable for any shares of Common Stock or warrants or other rights to purchase shares of Common Stock or any other securities of the Company that are substantially similar to the Common Stock, whether now owned or hereafter acquired, owned directly by the undersigned (including holding as a custodian) or with respect to which the undersigned has or may be deemed to have beneficial ownership in accordance with the rules and regulations of the Securities and Exchange Commission (collectively, the "UNDERSIGNED'S SHARES") or publicly announce an intention to do any of the foregoing. The foregoing restriction is expressly agreed to preclude the undersigned from engaging in any hedging or other transaction or arrangement that is designed to, or which reasonably could be expected to, lead to or result in a sale, disposition or transfer, in whole or in part, of any of the economic consequences of ownership of the Undersigned's Shares, whether any such transaction is to be settled by delivery of Common Stock or other securities, in cash or otherwise, even if such shares would be disposed of by someone other than the undersigned. Such prohibited hedging or other transactions would include, without limitation, any short sale or any purchase, sale or grant of any right (including, without limitation, any put or call option) with respect to any of the Undersigned's Shares or with B - 1 respect to any security that includes, relates to, or derives any significant part of its value from the Undersigned's Shares. Notwithstanding the foregoing, the undersigned may transfer the Undersigned's Shares (i) as a BONA FIDE gift or gifts, provided that the donee or donees thereof agree to be bound in writing by the restrictions set forth herein, (ii) to any trust for the direct or indirect benefit of the undersigned or the immediate family of the undersigned, provided that the trustee of the trust agrees to be bound in writing by the restrictions set forth herein, and provided further that any such transfer shall not involve a disposition for value, or (iii) with the prior written consent of Agent. For purposes of this Agreement, "immediate family" shall mean any relationship by blood, marriage or adoption, not more remote than first cousin. The undersigned now has and, except as contemplated by clause (i), (ii) or (iii) above, for the duration of this Agreement will have, good and marketable title to the Undersigned's Shares, free and clear of all liens, encumbrances, and claims whatsoever. The undersigned also agrees and consents to the entry of stop transfer instructions with the Company and its transfer agent and registrar against the transfer of the Undersigned's Shares, except in compliance with the foregoing restrictions. In furtherance of the foregoing, the Company is hereby authorized to decline to make or authorize any transfer of securities if such transfer would constitute a violation or breach of this Lock-Up Agreement (this "AGREEMENT"). Notwithstanding the foregoing, if: (1) during the last 17 days of the Lock-Up Period, the Company issues an earnings release or material news or a material event relating to the Company occurs; or (2) prior to the expiration of the Lock-Up Period, the Company announces that it will release earnings results during the 16-day-period beginning on the last day of the Lock-Up Period, the restrictions imposed by this letter shall continue to apply until the expiration of the 18-day period beginning on the issuance of the earnings release or the occurrence of the material news or material event. The undersigned understands that the Company and the Agent are relying upon this Agreement in proceeding toward consummation of the Offering. The undersigned represents and warrants that the undersigned has full power and authority to enter into this Agreement. The undersigned further understands that this Agreement is irrevocable and agrees that the provisions of this Agreement shall be binding also upon the successors, assigns, heirs and legal representatives of the undersigned. The undersigned understands that, if the Agency Agreement (other than the provisions thereof which survive termination) shall terminate or be terminated prior to payment for and delivery of the Common Stock to be sold thereunder, the undersigned shall be released from all obligations under this Agreement. B - 2 This Agreement shall be governed by and construed in accordance with the laws of the State of New York. Yours very truly, ----------------------- Signature ----------------------- Name ----------------------- Address B - 3 EX-2 3 a2156305zex-2.txt EXHIBIT 2 EXHIBIT 2 AGREEMENT AND PLAN OF REORGANIZATION BY AND BETWEEN PATRIOT NATIONAL BANCORP, INC. AND PATRIOT NATIONAL BANK AGREEMENT AND PLAN OF REORGANIZATION dated as of June 28, 1999, (this "Plan") by and between PATRIOT NATIONAL BANCORP, INC., a corporation formed under the laws of the State of Connecticut ("Bancorp"), and PATRIOT NATIONAL BANK, a banking association formed under the laws of the United States of America (the "Bank"). WHEREAS, Bancorp and the Bank desire to effect a reorganization (the "Reorganization") through a merger between the Bank and Patriot Interim Bank, National Association, a new banking association to be formed under the laws of the United States of America and to be wholly owned by Bancorp (the "Interim Bank"), wherein the Interim Bank would be the receiving association; and WHEREAS, pursuant to the terms of the Reorganization, each issued and outstanding share of Common Stock of the Bank (other than shares the holders of which shall have validly exercised rights as dissenting shareholders in accordance with 12 U.S.C. Section 215a(b)) shall be converted into shares of Common Stock of Bancorp and, if applicable, into cash as provided herein, and each issued and outstanding share of Common Stock of the Interim Bank would remain outstanding; NOW, THEREFORE, in consideration of the premises and the representations, warranties, and agreements herein contained, Bancorp and the Bank hereby agree as follows: ARTICLE I. THE PARTIES; CAPITAL; ADOPTION OF PLAN 1.1. BANCORP. Bancorp is a corporation duly organized and existing under the laws of the State of Connecticut with its principal place of business in Stamford, Connecticut. Immediately prior to the Effective Time (as hereinafter defined), the Capital of Bancorp will be not less than $200,000 divided into 100 shares of Common Stock, par value $2.00 ("Bancorp Common Stock"), Surplus of $199,800 and Retained Earnings of $0. The authorized capital stock of Bancorp will consist of 5,333,333 shares of Bancorp Common Stock, of which 100 shares will be issued and outstanding as of the Effective Time. 1.2. THE BANK. The Bank is a banking association duly organized and existing under the laws of the United States of America with its principal place of business in Stamford, Connecticut. The Capital of the Bank is $12,225,271 divided into 2,000,500 shares of Common Stock, par value $2.00 ("Bank Common Stock"), with Surplus of $9,072,747 and an Accumulated Deficit and Other Comprehensive Income of $848,476 as of March 31, 1999. 1.3. INTERIM BANK. Prior to the Effective Time, Bancorp will form the Interim Bank under the laws of the United States of America. Immediately prior to the Effective Time, the Capital of the Interim Bank will be not less than $200,000 divided into 100,000 shares of Common Stock, par value $2.00 ("Interim Bank Common Stock"), Surplus of $40,000 and Retained Earnings of $0. The authorized capital stock of the Interim Bank will consist of 200,000 shares of Interim Bank Common Stock, of which 100,000 shares will be issued and outstanding as of the Effective Time. 1.4. ADOPTION OF PLAN. This Plan has been approved by the Boards of Directors of Bancorp and the Bank, in each case by a majority of the entire board of the respective entity. Prior to the Effective Time, this Plan will be approved by the Board of Directors of the Interim Bank by a majority of the entire board, and the Interim Bank will become a party to this Plan. ARTICLE II. THE PLAN 2.1. THE REORGANIZATION. In accordance with the provisions of this Plan and the laws of the United States of America, at the Effective Time the Bank shall be merged with and into the Interim Bank under the Charter of the Bank, and the separate existence of the Bank shall cease. The Interim Bank shall be the receiving association and shall continue its existence under the laws of the United States of America as a wholly owned subsidiary of Bancorp, operating under the name "Patriot National Bank." 2.2. EFFECTIVE TIME. The time at which the Reorganization shall become effective (the "Effective Time") shall be the later of (a) the close of business on the date specified in the merger approval issued by the Office of the Comptroller of the Currency (the "Comptroller") pursuant to 12 U.S.C. Sections 215a and 1828(c) or (b) the close of business on the date on which the last of the conditions specified in Article V hereof shall have been satisfied or otherwise fulfilled or compliance therewith shall have been waived. 2.3. CONVERSION OF BANK COMMON STOCK. Each share of Bank Common Stock outstanding at the Effective Time (other than shares the holders of which have exercised their statutory right to receive payment as described in Section 2.5 hereof), shall, without any action on the part of the holder thereof, be converted into one share of Bancorp Common Stock. 2.4. STOCK CERTIFICATES. Following the Effective Time, Bancorp shall deem certificates theretofore representing shares of Bank Common Stock to be certificates representing an equal number of shares of Bancorp Common Stock without any physical exchange therefor; provided, however, that the holders of certificates that had represented Bank Common Stock shall be entitled to receive certificates representing Bancorp Common Stock in exchange for certificates that had represented an equal number of shares of Bank Common Stock. 2 2.5. DISSENTERS' RIGHTS. Following the approval of the Reorganization by the Comptroller, any person who is then, or was immediately prior to the Effective Time, a shareholder of the Bank and who either (a) voted against the Reorganization at the meeting of the shareholders at which the Reorganization was approved or (b) gave written notice at or prior to such meeting to the presiding officer that he or she dissents from the Plan (each a "Dissenting Shareholder"), shall be entitled to receive the value of the shares so held by him or her when the Reorganization is consummated and such shareholder shall have, prior to thirty days after the date of consummation of the Reorganization, made written request to the Interim Bank, accompanied by such shareholder's stock certificates. 2.6. SUPPLEMENTAL STOCK OPTION AGREEMENTS; WARRANTS, ETC. All rights outstanding under any options, warrants, stock appreciation rights, convertible debentures, commitments, plans, or arrangements of any kind to issue, sell, or deliver an equity interest in the Bank (including, without limitation, any options then outstanding under the 1999 Stock Option Plan of the Bank (the "Option Plan") and the Bank's outstanding warrants to purchase Bank Common Stock) that immediately prior to the Effective Time had given the holder thereof the right to purchase or receive shares of Bank Common Stock (the "Equity Rights"), shall, automatically and without further action on the part of the holder thereof, be converted into similar rights giving the holder thereof the right to purchase the same number of shares of Bancorp Common Stock at the same exercise price per share, and containing such other terms and conditions, as pertained to the Equity Rights as they were outstanding immediately prior to the Effective Time. 2.7. INTERIM BANK COMMON STOCK. Each share of Interim Bank Common Stock validly issued and outstanding at the Effective Time shall remain outstanding. 2.8. CANCELLATION OF BANCORP COMMON STOCK. At the Effective Time, all shares of Bancorp Common Stock then outstanding shall be cancelled. 2.9. NAME AND BUSINESS OF RECEIVING ASSOCIATION. As of the Effective Time, the name of the Interim Bank as the receiving association shall be "Patriot National Bank," and its business shall be that of a national banking association. This business shall be conducted by the Interim Bank as the receiving association at its main office, which shall be located at 900 Bedford Street, Stamford, Connecticut, and at its legally established branches. 2.10. CAPITAL OF RECEIVING ASSOCIATION. The amount of Capital of the Interim Bank as the receiving association immediately prior to the Effective Time shall be not less than $200,000 divided into 100,000 shares of Interim Bank Common Stock and Surplus of $40,000. All of such Capital and Surplus shall have been paid by Bancorp in cash prior to the Effective Time. 2.11. TRANSFER OF ASSETS; ASSUMPTION OF LIABILITIES. All assets of the Bank, as they exist at the Effective Time, shall pass to and vest in the Interim Bank as the receiving association without any conveyance or other transfer, and the Interim Bank shall be responsible for all of the liabilities of every kind and description of both the Interim Bank and the Bank existing at the Effective Time. 3 2.12. DIRECTORS AND OFFICERS OF THE RECEIVING ASSOCIATION. At the Effective Time, each person then serving as a director of the Bank shall become a director of Bancorp and of the Interim Bank as the receiving association to serve until the next annual meeting; such time as his or her successor has been elected and has qualified; or his or her earlier death, resignation, or removal. At the Effective Time, each person then serving as an officer of the Bank shall become an officer of identical title of the Interim Bank as the receiving association to serve until the next annual meeting; such time as his or her successor has been elected and has qualified; or his or her earlier death, resignation, or removal. ARTICLE III. REPRESENTATIONS AND WARRANTIES 3.1. REPRESENTATIONS AND WARRANTIES OF BANCORP. Bancorp hereby represents and warrants that: (a) it is a corporation duly organized, validly existing, and in good standing under the laws of the State of Connecticut, with all corporate power and authority to own its properties and to carry on its business as currently being conducted; (b) its authorized capital stock consists of 5,333,333 shares of Bancorp Common Stock; (c) the shares of Bancorp Common Stock to be issued in connection with the Reorganization will be, when issued in accordance with the provisions of this Plan, duly authorized, validly issued, fully paid, and non-assessable; (d) it has the full right, power, and authority to enter into, and become bound by the terms of, this Plan; this Plan has been duly approved by not less than a majority of its directors and has been duly executed and delivered on its behalf and constitutes a legal, valid, and binding obligation of Bancorp enforceable against Bancorp in accordance with its terms; and (e) the performance by it of its obligations under this Plan will not conflict with any provision of its charter or by-laws or conflict with, or result in a breach of or a default (without regard to the giving of notice or the passage of time) under, any indenture, contract, commitment, or obligation to which it is a party or by which it or its assets may be bound or violate any provision of any law, governmental rule or regulation, judgment, or decree binding on it or any of its assets. 3.2. REPRESENTATIONS AND WARRANTIES OF THE BANK. The Bank hereby represents and warrants that: (a) it is a national banking association duly organized, validly existing, and in good standing under the laws of the United States and has all requisite power and 4 authority to own, operate, and lease its real and personal properties in the manner and to the extent owned, operated, and leased as of the date hereof; that it is duly authorized and empowered to conduct a banking business at its main and branch offices existing as of the date hereof; and that no action or administrative proceeding is pending, or to its knowledge threatened or contemplated, that would in any way challenge its right or authority to conduct a general banking business at its main office or any of its branch offices; (b) to the best of its knowledge and belief, the Bank is in compliance with all material federal, state, and local laws, statutes, ordinances, and regulations applicable to it or the conduct of its business; (c) its authorized capital stock consists of 5,333,333 shares of Bank Common Stock, of which 2,005,198 shares are issued and outstanding as of the date hereof, all of which have been duly authorized and validly issued and are fully paid and non-assessable and its capital is as set forth in Section 1.1 hereof; (d) it has the full right, power, and authority to enter into, and become bound by the terms of, this Plan; this Plan has been duly approved by not less than a majority of its directors at a meeting duly called for the purpose and has been duly executed and delivered on its behalf and constitutes a legal, valid, and binding obligation of the Bank enforceable against the Bank in accordance with its terms; and (e) the performance by it of its obligations under this Plan will not conflict with any provision of its charter or by-laws or conflict with, or result in a breach of or a default (without regard to the giving of notice or the passage of time) under, any indenture, contract, commitment, or obligation to which it is a party or by which it or its assets may be bound or violate any provision of any law, governmental rule or regulation, judgment, or decree binding on it or any of its assets. ARTICLE IV. COVENANTS OF BANCORP AND THE BANK 4.1. REGULATORY COMPLIANCE. Bancorp and the Bank hereby undertake, and Bancorp hereby undertakes to cause the Interim Bank, to file such applications or notices as are necessary or desirable under applicable laws, rules, and regulations in connection with the consummation of the Reorganization, including, without limitation: (a) approval by the Comptroller of the organization of the Interim Bank and consummation of the Reorganization; (b) registration of Bancorp with the Board of Governors of the Federal Reserve System as a bank holding company under the Bank Holding Company Act of 1956, as amended (the "BHC Act"); (c) insurance of deposits of the Interim Bank as the receiving association by the Federal Deposit Insurance Corporation; and 5 (d) registration of the Bancorp Common Stock under Section 12 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). 4.2. PROXY STATEMENT. The Bank hereby undertakes to prepare and file with the Comptroller a proxy statement under the Exchange Act and the rules of the Comptroller in connection with soliciting the approval of this Plan by the shareholders of the Bank. 4.3. NASDAQ REGISTRATION. Bancorp hereby undertakes to apply for approval for the quotation of the shares of Bancorp Common Stock issuable in connection with the Reorganization on the NASDAQ Small Cap Market. 4.4. ORGANIZATION OF THE INTERIM BANK. Bancorp hereby agrees to organize the Interim Bank and to cause it to become a party to this Plan. 4.5. ASSUMPTION OF OBLIGATIONS UNDER EQUITY RIGHTS. Bancorp hereby assumes as of the Effective Time all of the obligations of the Bank to sell shares of Bank Common Stock pursuant to all Equity Rights outstanding as of the Effective Time or that may thereafter be issued under the Option Plan and to deliver one share of Bancorp Common Stock for each share of Bank Common Stock covered by such Equity Rights, subject to adjustment as provided in the instruments creating such Equity Rights. Bancorp agrees that any Bancorp Common Stock issued upon the exercise of Equity Rights will be duly authorized, validly issued, fully paid, and non-assessable. ARTICLE V. CONDITIONS PRECEDENT 5.1. CONDITIONS PRECEDENT TO OBLIGATIONS OF BANCORP, THE BANK, AND THE INTERIM BANK. All obligations of Bancorp, the Bank, and the Interim Bank under this Plan are subject to the fulfillment and satisfaction, prior to the Effective Time, of each of the following conditions: (a) all regulatory approvals and authorizations, including, without limitation, the approvals of (i) all state securities law agencies that have jurisdiction over the offer and sale of the securities issuable upon consummation of the Reorganization; (ii) the Board of Governors of the Federal Reserve System under the BHC Act; (iii) such approvals of the Comptroller as are necessary to permit organization of the Interim Bank and the consummation of the Reorganization; and (iv) all other consents, approvals, and permissions necessary to permit consummation of the Reorganization shall have been received and shall be in full force and effect and contain no conditions that Bancorp or the Bank deems undesirable, and any applicable waiting periods with respect to notices filed with regulatory authorities relating to the Reorganization shall have expired or been terminated; (b) the issuance by Bancorp of its securities in connection with the Reorganization shall have qualified for an exemption from the registration requirements of the Securities Act of 1933, as amended pursuant to Section 3(a)(12) of that Act; 6 (c) Bancorp shall have obtained approval for quotation of the shares of Bancorp Common Stock issuable in connection with the Reorganization on the NASDAQ Small Cap Market; (d) the Interim Bank shall have been organized under the laws of the United States of America and shall have become a party to this Plan; (e) this Plan shall have been approved by the holders of not less than two-thirds of the Bank Common Stock entitled to vote thereon; and (f) neither Bancorp nor the Bank shall have determined that the number of shares of Bank Common Stock owned by Dissenting Shareholders makes consummation of the Reorganization [undesirable]. 5.2. CONDITIONS PRECEDENT TO OBLIGATIONS OF BANCORP AND THE INTERIM BANK. All obligations of Bancorp and the Interim Bank under this Plan are subject to the fulfillment and satisfaction of each of the following conditions: (a) the representations and warranties of the Bank contained in this Plan shall be deemed to have been made again at and as of the Effective Time, and shall then be true and correct in all material respects; and (b) each of the obligations of the Bank to be performed by it prior to the Effective Time pursuant to the terms of this Plan shall have been duly performed. 5.3. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE BANK. All obligations of the Bank under this Plan are subject to the fulfillment and satisfaction of each of the following conditions: (a) the representations and warranties of Bancorp contained in this plan with respect to Bancorp and the Interim Bank shall be deemed to have been made again at and as of the Effective Time, and shall then be true and correct in all material respects; (b) each of the obligations of Bancorp and the Interim Bank to be performed by them prior to the Effective Time pursuant to the terms of this Plan shall have been duly performed at the Effective Time; and (c) Bancorp shall have taken such actions as may be requested by the Bank to confirm its assumption of obligations as of the Effective Time with respect to the Equity Rights. 7 ARTICLE VI. TERMINATION 6.1. MUTUAL CONSENT. This Plan may be terminated by the mutual agreement of the Boards of Directors of Bancorp and the Bank at any time prior to the Effective Time (whether or not it has theretofore been approved by the shareholders of the Bank). 6.2. TERMINATION BY BANCORP OR THE BANK. This Plan may be terminated by either Bancorp or the Bank at any time prior to the Effective Time in the event that: (a) the number of shares of Bank Common Stock owned by the Dissenting Shareholders shall make consummation of the Reorganization inadvisable in the opinion of the Bank or Bancorp; (b) any action, suit, proceeding, or claim has been instituted, made, or threatened relating to this Plan that would make consummation of the Reorganization inadvisable in the opinion of the Bank or Bancorp; or (c) for any other reason consummation of the Reorganization is inadvisable in the opinion of the Bank or Bancorp. 6.3. LIABILITY. In the event this Plan is terminated for any reason whatever, there shall be no liability hereunder or on account of such termination on the part of any of the parties hereto or the directors, officers, employees, agents, or shareholders of any of them. ARTICLE VII. MISCELLANEOUS 7.1. COUNTERPARTS. This Plan may be executed in any number of counterparts, each of which shall be deemed to be an original instrument, but all of which together shall constitute a single agreement. 7.2. ENTIRE AGREEMENT. This Plan constitutes the entire agreement, and supersedes all other prior agreements and understandings, both written and oral, among the parties hereto with respect to the subject matter hereof and shall not be supplemented or amended in any way except by a writing, approved by the Board of Directors of each of the parties and executed by a person or persons so authorized by them. 7.3. THIRD PARTY BENEFICIARIES. This Plan is not intended to confer upon any person not a party hereto any rights or remedies hereunder. 7.4. WAIVERS. Prior to the Effective Time, the failure of any party hereto to exercise any right, power, or privilege hereunder, or the partial exercise of any such right, power, or privilege, or the waiver of any term, condition, or condition precedent, shall neither prevent nor preclude the future or further exercise of any such right, power, or privilege, nor shall the same be construed to be a waiver of any other term, condition, or condition precedent. 8 7.5. CHOICE OF LAW; SUCCESSORS. This Plan shall be construed under the laws of the United States of America and of the State of Connecticut, without regard to the choice of law provisions thereof, and shall be binding upon and shall inure to the benefit of the parties hereto, their successors and assigns, except that neither party may assign its rights and benefits hereunder without the prior written consent of the other. 7.6. GOVERNMENTAL AGENCIES. All references to various applicable governmental regulatory agencies shall be deemed to include, to the extent required by law, any other such regulatory agency that, by virtue of legislative change or any action permitted to a party hereunder, properly assumes jurisdiction of any of the transactions contemplated herein. 7.7. CAPTIONS. The captions of the various Articles and Sections hereof are inserted solely for the convenience of the parties and are not to be construed as limitations upon the text to which they refer. IN WITNESS WHEREOF, the undersigned have executed this Plan as of the date first above written. PATRIOT NATIONAL BANCORP, INC. By /s/ PHILIP W. WOLFORD ---------------------------------- Philip W. Wolford President ATTEST: /s/ FRED A. DECARO, JR. - ----------------------- Secretary PATRIOT NATIONAL BANK By /s/ PHILIP W. WOLFORD ---------------------------------- Philip W. Wolford President ATTEST: /s/ JOHN KANTZAS - ---------------------- Cashier 9 STATE OF CONNECTICUT ) ) ss.: Stamford COUNTY OF FAIRFIELD ) On this 28th day of June, 1999, before me, a Notary Public for the State and County aforesaid, personally came Philip W. Wolford, as President of Patriot National Bancorp, Inc., and Fred A. DeCaro, Jr., as Secretary of Patriot National Bancorp, Inc., and in such capacities acknowledged the foregoing instrument to be the act and deed of the foregoing corporation. /s/ GARY S. SESSA ----------------------------------- Gary S. Sessa My commission expires January 31, 2001 STATE OF CONNECTICUT ) ) ss.: Stamford COUNTY OF FAIRFIELD ) On this 28th day of June, 1999, before me, a Notary Public for the State and County aforesaid, personally came Philip W. Wolford, as President of Patriot National Bank, and John Kantzas, as Cashier of Patriot National Bank, and in such capacities acknowledged the foregoing instrument to be the act and deed of the foregoing association. /s/ GARY S. SESSA ------------------------------------ Gary S. Sessa My commission expires January 31, 2001 10 The undersigned directors of Patriot National Bank, constituting a majority of the directors of said entity, hereby adopt and approve the foregoing Agreement and Plan of Reorganization pursuant to the requirements of 12 U.S.C. Section 215a (but are not deemed parties to such Agreement and Plan of Reorganization). /s/ HERBERT A. BREGMAN --------------------------- Herbert A. Bregman --------------------------- Angelo De Caro /s/ FRED A. DECARO, JR. --------------------------- Fred A. DeCaro, Jr. /s/ STEPHEN LAWRENCE FEIT --------------------------- Stephen Lawrence Feit --------------------------- John A. Geoghegan /s/ L. MORRIS GLUCKSMAN --------------------------- L. Morris Glucksman /s/ MICHAEL INTRIERI --------------------------- Michael Intrieri /s/ RICHARD NACLERIO --------------------------- Richard Naclerio --------------------------- Paul C. Settelmeyer --------------------------- Salvatore Travato /s/ PHILIP W. WOLFORD --------------------------- Philip W. Wolford 11 The undersigned directors of Patriot National Bancorp, Inc., constituting a majority of the directors of said entity, hereby adopt and approve the foregoing Agreement and Plan of Reorganization pursuant to the requirements of 12 U.S.C. Section 215a (but are not deemed parties to such Agreement and Plan of Reorganization). /s/ HERBERT A. BREGMAN --------------------------- Herbert A. Bregman --------------------------- Angelo De Caro /s/ FRED A. DECARO, JR. --------------------------- Fred A. DeCaro, Jr. /s/ L. MORRIS GLUCKSMAN --------------------------- L. Morris Glucksman /s/ PHILIP W. WOLFORD --------------------------- Philip W. Wolford 12 STATE OF CONNECTICUT ) ) ss.: Stamford COUNTY OF FAIRFIELD ) On this 28th day of June, 1999, before me, a Notary Public for the State and County aforesaid, personally came Herbert A. Bregman, Fred A. DeCaro, Jr., Stephen Lawrence Feit, L. Morris Glucksman, Michael Intrieri, Richard Naclerio and Philip W. Wolford, being a majority of the directors of Patriot National Bank, and each of them acknowledged the foregoing instrument to be the act and deed of the foregoing association and of himself as director thereof. /s/ GARY S. SESSA --------------------------- Gary S. Sessa My commission expires January 31, 2001 STATE OF CONNECTICUT ) ) ss.: Stamford COUNTY OF FAIRFIELD ) On this 28th day of June, 1999, before me, a Notary Public for the State and County aforesaid, personally came Herbert A. Bregman, Fred A. DeCaro, Jr., L. Morris Glucksman and Philip W. Wolford, being a majority of the directors of Patriot National Bancorp, Inc., and each of them acknowledged the foregoing instrument to be the act and deed of the foregoing corporation and of himself as director thereof. /s/ GARY S. SESSA --------------------------- Gary S. Sessa My commission expires January 31, 2001 13 The undersigned hereby acknowledges that it is the Interim Bank (as defined in the foregoing Agreement and Plan of Reorganization), hereby becomes a party to such Agreement and Plan of Reorganization, and has caused this Agreement and Plan of Reorganization to be executed on its behalf this 28th day of June, 1999. ATTEST: PATRIOT INTERIM BANK, N.A. /s/ FRED A. DECARO, JR. - ----------------------------- Fred A. DeCaro, Jr. Secretary By /s/ PHILIP W. WOLFORD --------------------------- Philip W. Wolford President and Chief Executive Office STATE OF CONNECTICUT ) ) ss.: COUNTY OF FAIRFIELD ) On this 28th day of June, 1999, before me, a Notary Public for the State and County aforesaid, personally came Philip W. Wolford, as President of Patriot Interim Bank, N.A., and Fred A DeCaro, Jr., as Secretary of Patriot Interim Bank, N.A., and in such capacities acknowledged the foregoing instrument to be the act and deed of the foregoing association. /s/ GARY S. SESSA --------------------------- Gary S. Sessa My commission expires January 31, 2001 14 The undersigned directors of Patriot Interim Bank, N.A., constituting a majority of the directors of said entity, hereby adopt and approve the foregoing Agreement and Plan of Reorganization pursuant to the requirements of 12 U.S.C. Section 215a (but are not deemed parties to such Agreement and Plan of Reorganization). /s/ HERBERT A. BREGMAN --------------------------- Herbert A. Bregman --------------------------- Angelo DeCaro /s/ FRED A. DECARO, JR. --------------------------- Fred A. DeCaro, Jr. /s/ L. MORRIS GLUCKSMAN --------------------------- L. Morris Glucksman /s/ PHILIP W. WOLFORD --------------------------- Philip W. Wolford 15 EX-3.1 4 a2156305zex-3_1.txt EXHIBIT 3.1 EXHIBIT 3.1 CERTIFICATE OF INCORPORATION OF PATRIOT NATIONAL BANCORP, INC. I. CORPORATE NAME. The name of the corporation is Patriot National Bancorp, Inc. (hereinafter the "Corporation"). The principal office of the Corporation shall be located in the City of Stamford, County of Fairfield and State of Connecticut. II. CAPITAL STOCK. (a) The amount of the capital stock of the Corporation hereby authorized is 5,333,333 shares of common stock, par value Two Dollars ($2.00) per share. (b) In all elections of directors, the number of votes each holder of common stock may cast will be determined by multiplying the number of shares he or she owns by the number of directors to be elected. Those votes may be cumulated and cast for a single candidate or may be distributed among two or more candidates in the manner selected by such holder of common stock. In all other matters, each holder of a share of Common Stock shall be entitled to one vote for each share held by such holder. Each share of Common Stock shall have the same relative rights as and be identical in all respects with all other shares of common stock. (c) No shareholder of the Corporation shall by reason of his holding shares of capital stock of the Corporation have any preemptive or preferential rights to purchase or subscribe to any share of any class of stock of the Corporation, now or hereafter to be authorized, or to any obligation convertible into stock of the Corporation, issued or sold, nor any right of subscription to any thereof other than such, if any, as the board of directors (the "Board"), in its discretion may from time to time determine and at such price as the Board may from time to time fix. (d) If a holder of common stock is entitled to fractional shares pursuant to preemptive rights, a stock dividend, consolidation or merger, reverse stock split or otherwise, the Corporation may: (i) issue fractional shares; or (ii) in lieu of the issuance of fractional shares, issue script or warrants entitling the holder to receive a full share upon surrendering enough script or warrants to equal a full share; (iii) if there is an established and active market in the Corporation's stock, make reasonable arrangements to provide the shareholder with an opportunity to realize a fair price through sale of the fraction, or purchase of the additional fraction required for a full share; (iv) remit the cash equivalent of the fraction to the shareholder; or (v) sell full shares representing all the fractions at public auction or to the highest bidder after having solicited and received sealed bids from at least three licensed stock brokers and distribute the proceeds pro rata to shareholder who otherwise would be entitled to the fractional shares. The holder of a fractional share is entitled to exercise the rights for shareholder, including the right to vote, to receive dividends, and to participate in the assets of the Corporation upon liquidation, in proportion to the fractional interest. The holder of script or warrants is not entitled to any of these rights unless the script or warrants explicitly provide for such rights. The script or warrants may be subject to such additional conditions as: (y) that the script or warrants will become void if not exchanged for full shares before a specified date; and (z) that the shares for which the script or warrants are exchangeable may be sold at the option of the Corporation and the proceeds paid to scriptholders. (e) In the event at any time there is more than one class of capital stock, all shares of voting stock shall be voted together as a class, on any matters requiring shareholder approval. If a proposed amendment would affect two or more classes in the same or a substantially similar, way, all the classes or series so affected, must vote together as a single voting group on the proposed amendment. In the event at any time there is more than one class of capital stock, (i) shares of the same class may be issued as a dividend on a pro rata basis and without consideration; and (ii) shares of another class may be issued as a share dividend in respect of class of stock if approved by a majority of the votes entitled to be cast by the class to be issued unless there are no outstanding shares of the class to be issued. Unless otherwise provided by the Board, the record date for determining shareholders entitled to a share dividend shall be the date the Board authorizes the share dividend. III. INITIAL REGISTERED OFFICE AND AGENT. The registered agent for the Corporation shall be Fred A. DeCaro, Jr., having a business address of 900 Summer Street, Stamford, Connecticut, 06904 and a residence address of 4 Sun Swept Drive, New Fairfield, Connecticut 06812. IV. INCORPORATOR. The sole incorporator of the Corporation is Robert W. Reeves, having a business address of c/o Cummings & Lockwood, 107 Elm Street, Stamford, Connecticut 06904. V. POWERS. The nature of the business to be transacted, and the purposes to be promoted, carried out or engaged in by the Corporation are the following activities: (a) To acquire, invest in, or hold stock in any subsidiary, where such act is permitted under the United States Bank Holding Company Act of 1956, 12 U.S.C. 1841, et. seq., as such statute may be amended from time to time, and to engage in any other enterprise or activity which may be lawfully conducted under said statute; and (b) To engage generally in any other business that may, in accordance with the above-named statute, lawfully be conducted and carried on by a Corporation organized under the Connecticut Business Corporation Act. 2 VI. DIRECTOR LIABILITY. The personal liability to the Corporation or its shareholders of a person who is or was a director of the Corporation for monetary damages for breach of duty as a director shall be limited to the amount of the compensation received by the director for serving the Corporation during the year of the violation if such breach did not involve a knowing and culpable violation of law by the director; enable the director or an associate, as defined in Section 33-840 or any similar successor provision of the Connecticut General Statutes, to receive an improper personal economic gain; show a lack of good faith and a conscious disregard for the duty of the director to the Corporation under circumstances in which the director was aware that his conduct or omission created an unjustifiable risk of serious injury to the Corporation; constitute a sustained and unexcused pattern of inattention that amounted to an abdication of the director's duty to the Corporation; or create liability under Sections 33-757 or 36a-58 of the Connecticut General Statutes, as they may be amended or replaced from time to time. This paragraph shall not limit or preclude the liability of a person who is or was a director for any act or omission occurring prior to the effective date hereof. Any lawful repeal or modification of this paragraph or the adoption of any provision inconsistent herewith by the Board and the shareholders of the Corporation shall not, with respect to a person who is or was a director, adversely affect any limitation of liability, right or protection existing at or prior to the effective date of such repeal, modification or adoption of a provision inconsistent herewith. VII. INDEMNIFICATION. The Corporation shall, to the fullest extent permitted or required by Sections 33-770 through 33-778, inclusive, of the Connecticut General Statutes, as the same may be amended and supplemented, indemnify any and all persons whom it shall have power to indemnify under said Sections from and against any and all of the expenses, liabilities or other matters referred to in or covered by said Sections, and the indemnification provided for herein shall not be deemed exclusive of any other rights to which those indemnified may be entitled under any law, agreement, vote of shareholders or disinterested directors or otherwise, both as to action in his official capacity and as to action in another capacity while holding such office, and shall continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of the heirs, executors and administrators of such a person. Notwithstanding the foregoing, in no event shall any director, officer or employee be indemnified against expenses, penalties or other payments incurred in an administrative proceeding or action instituted by an appropriate bank regulatory agency which proceeding or action results in a final order assessing civil money penalties or requiring affirmative action by an individual or individuals in the form of payments to the Corporation. The personal liability of a director to the Corporation or its shareholders for monetary damages for breach of duty as a director is limited to an amount that is not greater than the compensation received by the director for serving the Corporation during the year of the violation if such breach does not (a) involve a knowing and culpable violation of law by the director; (b) enable the director or an associate, as defined in Section 33-840 or any similar successor provision of the Connecticut General Statutes, to receive an improper personal economic gain; (c) show a lack of good faith and a conscious disregard for the duty of the director to the Corporation under circumstances in which the director was aware that his conduct or omission created an unjustifiable risk of serious injury to the Corporation; (d) constitute a sustained and unexcused patter of inattention that amounts to an abdication of the director's duty to the Corporation; or (e) create liability under Section 33-757 of the Connecticut General Statutes. No amendment or repeal of this Section VI, or the adoption of 3 any provision inconsistent herewith, shall eliminate or reduce the effect of this Section VI in respect of any matter occurring, or any cause of action, suit or claim accruing or arising, prior to such amendment, repeal or adoption of a provision inconsistent with this Section VI. VIII. DIRECTORS; BYLAWS. All the powers of the Corporation, insofar as the same may be lawfully vested by this Certificate of Incorporation in the Board, are hereby conferred upon the Board. In furtherance and not in limitation of that power, the Board shall have the power to make, adopt, alter, amend and repeal from time to time Bylaws of the Corporation ("Bylaws"), subject to the right of the shareholders entitled to vote with respect thereto to adopt, alter, amend and repeal Bylaws made by the Board. The business, property and affairs of the Corporation shall be managed by and under the direction of the Board. The number of directors shall be not less than five (5) and not more than twenty-five (25) as fixed from time to time by the Board pursuant to the Corporation's Bylaws. The terms, classifications, qualifications, and election of the Board, and the method of filling vacancies thereon shall be as provided herein and in the Bylaws. The undersigned sole incorporator hereby declares, under the penalties of false statement, that the statements made in the foregoing Certificate are true. Dated at Stamford, Connecticut, this 16th day of June, 1999. /s/ ROBERT W. REEVES ------------------------------- Robert W. Reeves Incorporator I, FRED A. DeCARO, JR., hereby consent to my appointment as the registered agent of the Corporation and agree to serve as such until duly removed or replaced. /s/ FRED A. DECARO, JR. ------------------------------- Fred A. DeCaro, Jr. Registered Agent 4 CERTIFICATE OF AMENDMENT OF CERTIFICATE OF INCORPORATION OF PATRIOT NATIONAL BANCORP, INC. The undersigned, being a duly authorized officer of Patriot National Bancorp, Inc., a corporation organized and existing under the laws of the State of Connecticut (the "Corporation"), does hereby certify: FIRST: That Article II.(a) of the Corporation's Certificate of Incorporation be amended in its entirety to read as follows: "(a) The total number of shares of capital stock which the Corporation shall have the authority to issue is 31,000,000 shares, consisting of 30,000,000 shares of common stock, par value two dollars ($2.00) per share, and 1,000,000 shares of serial preferred stock, without par value. (1) Subject to all of the rights of the Preferred Stock, if any, and except as provided by law or in this Article II (or in any certificate of designations of any series of preferred stock): (i) the holders of the common stock shall have the exclusive right to vote for the election of directors and on all other matters requiring shareholder action; (ii) dividends may be declared and paid or set apart for payment upon the common stock out of any assets or funds of the Corporation legally available for the payment of dividends, but only when and as declared by the Board of Directors; and (iii) upon the voluntary or involuntary liquidation, dissolution or winding up of the Corporation, the net assets of the Corporation shall be distributed pro rata to the holders of the Common Stock in accordance with their respective rights and interests. (2) The Board of Directors is authorized, subject to limitations prescribed by law and the provisions of this Article II, to provide by resolution for the issuance of the shares of preferred stock in one or more series, and by filing a certificate pursuant to the applicable law of the State of Connecticut, to establish from time to time the number of shares to be included in each such series, and to fix the designation, powers, preferences 5 and relative participating, optional or other special rights of the shares of each such series and the qualifications, limitations or restrictions thereof. The authority of the Board of Directors with respect to each series shall include, but not be limited to, determination of the following: (i) The number of shares constituting that series and the distinctive designation of the series; (ii) The dividend rate on the shares of that series, whether dividends shall be cumulative and, if so, from which date or dates, and the relative rights of priority, if any, of payment of dividends on shares of that series; (iii) Whether the shares of that series shall have voting rights, in addition to the voting rights provided by law and, if so, the terms of such voting rights; (iv) Whether the shares of that series shall have conversion or exchange privileges and, if so, the terms and conditions of such conversion or exchange, including provision for adjustment of the conversion or exchange rate in such events as the Board of Directors shall determine; (v) Whether the shares of that series shall be redeemable and, if so, the terms and conditions of such redemption, including the date or dates upon or after which they shall be redeemable, and the amount per share payable in case of redemption, which amount may vary under different conditions and at different redemption dates; (vi) Whether the shares of that series shall have a sinking fund for the redemption or purchase of shares of that series and, if so, the terms and amounts of such sinking fund; (vii) The rights of the shares of that series in the event of voluntary or involuntary liquidation, dissolution or winding up of the Corporation, and the relative rights of priority, if any, of payment of shares of that series; and (viii) Any other relative rights, preferences and limitations of that series. Dividends on outstanding shares of preferred stock shall be paid, or declared and set apart for payment, before any dividends shall be paid, or declared and set apart for payment, on the common stock with respect to the same dividend period. If, upon any voluntary or involuntary liquidation, dissolution or winding up of the Corporation, the assets available for distribution to holders of shares of preferred stock of all series shall be insufficient to pay such holders the full preferential amount to which they are entitled, then such assets shall be distributed ratably among the shares of all series of preferred stock in accordance with the respective preferential amounts (including unpaid cumulative dividends, if any) payable with respect thereto. 6 SECOND: That, pursuant to Section 33-800 of the Connecticut General Statutes, the amendment was duly adopted by the shareholders of the Corporation on June 15, 2004 at the Corporation's 2004 Annual Meeting of Shareholders with 1,575,870 shares of Common Stock, par value $2.00 per share (the "Common Stock"), cast in favor of the amendment, 140,476 shares cast against the amendment and 2,568 abstaining, such number of votes being sufficient for approval of such amendment. On the Record Date established for the Meeting, there were 2,428,607 shares of Common Stock outstanding and entitled to vote and 2,224,385 shares of Common Stock present in person or by proxy at the Meeting. THIRD: That the amendment was duly adopted and approved by the Corporation's shareholders in the manner required by Sections 33-600 to 33-998 of the Connecticut General Statutes, and by the Certificate of Incorporation. FOURTH: That all other provisions of the Certificate of Incorporation are unchanged. IN WITNESS WHEREOF, the undersigned officer is authorized to execute this amendment. Dated: July 16, 2004 By: /s/ Philip W. Wolford ----------------------------- Name: Philip W. Wolford Title: COO & Secretary 7 EX-3.2 5 a2156305zex-3_2.txt EXHIBIT 3.2 EXHIBIT 3.2 PATRIOT NATIONAL BANCORP, INC. (THE "CORPORATION") BY-LAWS ARTICLE I. MEETINGS OF SHAREHOLDERS SECTION 1.1. ANNUAL MEETING. The regular annual meeting of the shareholders to elect directors and transact whatever other business may properly come before the meeting, shall be held at the main office of the Corporation or such other place as the board of directors may designate, on the third Thursday of May of each year, or if that date falls on a legal holiday in the State of Connecticut, on the next following banking day, or on such other date in the months of April, May or June of each year as the Board of Directors may designate. Notice of the meeting shall be mailed, first-claim mail, postage prepaid, at least 10 days and no more than 60 days prior to the date thereof, addressed to each shareholder at his/her address appearing on the books of the Corporation. If, for any cause, an election of directors is not made on that date, or in the event of a legal holiday, on the next following banking day, an election may be held on any subsequent day within 60 days of the date fixed, to be designated by the board of directors, or, if the directors fail to fix the date, by shareholders representing two thirds of the shares. In all cases at least 10 days advance notice of the meeting shall be given to the shareholders by first class mail. SECTION 1.1.1. SPECIAL MEETINGS. Except as otherwise specifically provided by statute, special meetings of the shareholders may be called for any purpose at any time by the board of directors or by any two (2) or more shareholders owning, in the aggregate, not less than twenty (20%) percent of the stock of the Corporation. Every such special meeting, unless otherwise provided by law, shall be called by mailing, first-class mail, postage prepaid, not less than 10 days nor more than 60 days prior to the date fixed for the meeting, to each shareholder at the address appearing on the books of the Corporation a notice stating the purpose of the meeting. A special meeting may be called by shareholders or the board of directors to amend the articles of Corporation or bylaws, whether or not such bylaws may be amended by the board in the absence of shareholder approval. SECTION 1.2. RECORD DATE. The board of directors may fix a record date for determining shareholders entitled to notice and to vote at any meeting, in reasonable proximity to the date of giving notice to the shareholders of such meeting; provided that in no event may a record date be more than 70 days before the meeting. The record date for determining shareholders entitled to demand a special meeting is the date the first shareholder signs a demand for the meeting describing the purpose or purposes for which it is to be held. If an annual or special shareholders' meeting is adjourned to a different date, time, or place, notice need not be given of the new date, time or place, if the new date, time or place is announced at the meeting before adjournment, unless any additional items of business are to be considered, or the Corporation becomes aware of an intervening event materially affecting any matter to be voted on more than 10 days prior to the date to which the meeting is adjourned. If a new record date for the adjourned meeting is fixed, however, notice of the adjourned meeting must be given to persons who are shareholders as of the new record date. SECTION 1.3. NO WRITTEN CONSENT. Unless otherwise set forth herein, any action requiring approval of shareholders must be effected at a duly called annual or special meeting. SECTION 1.4. NOMINATIONS OF DIRECTORS. Nominations for election to the board of directors may be made by the board of directors or by any stockholder of any outstanding class of capital stock of the Corporation entitled to vote for the election of directors. Nominations, other than those made by or on behalf of the current directors of the Corporation, shall be made in writing and shall be delivered or mailed to the president of the Corporation, not less than 14 days nor more than 50 days prior to any meeting of shareholders called for the election of directors, provided, however, that if less than 21 days' notice of the meeting is given to shareholders, such nomination shall be mailed or delivered to the president of the Corporation not later than the close of business on the seventh day following the day on which the notice of meeting was mailed. Such notification shall contain the following information to the extent known to the notifying shareholder: (1) The name and address of each proposed nominee. (2) The principal occupation of each proposed nominee. (3) The total number of shares of capital stock of the Corporation that will be voted for each proposed nominee. (4) The name and residence address of the notifying shareholder. (5) The number of shares of capital stock of the Corporation owned by the notifying shareholder. Nominations not made in accordance herewith may, in his/her discretion, be disregarded by the chairperson of the meeting, and upon his/her instructions, the vote tellers may disregard all votes cast for each such nominee. SECTION 1.5. JUDGES OF ELECTION. Every election of directors shall be managed by three judges, who shall be appointed from among the shareholders by the board of directors. The judges of election shall hold and conduct the election at which they are appointed to serve. After the election, they shall file with the secretary of the Corporation a certificate signed by them, certifying the result thereof and the names of the directors elected. The judges of election, at the request of the chairperson of the meeting, shall act as tellers of any other vote by ballot taken at such meeting, and shall certify the result thereof. 2 SECTION 1.6. PROXIES. Shareholders may vote at any meeting of the shareholders by proxies duly authorized in writing, but no officer or employee of this Corporation shall act as proxy. Proxies shall be valid only for one meeting, to be specified therein, and any adjournments of such meeting. Proxies shall be dated and filed with the records of the meeting. Proxies with rubber stamped facsimile signatures may be used and unexecuted proxies may be counted upon receipt of a confirming telegram from the shareholder. Proxies meeting the above requirements submitted at any time during a meeting shall be accepted. SECTION 1.7. QUORUM. A majority of the outstanding capital stock, represented in person or by proxy, shall constitute a quorum at any meeting of shareholders, unless otherwise provided by law, or by the shareholders or directors pursuant to Section 8.2, but less than a quorum may adjourn any meeting, from time to time, and the meeting may be held, as adjourned, without further notice. A majority of the votes cast shall decide every question or matter submitted to the shareholders at any meeting, unless otherwise provided by law or by the Certificate of Incorporation, or by the shareholders or directors pursuant to Section 8.2. ARTICLE II. DIRECTORS SECTION 2.1. BOARD OF DIRECTORS. The board of directors (board) shall have the power to manage and administer the business and affairs of the Corporation. Except as expressly limited by law, all corporate powers of the Corporation shall be vested in and may be exercised by the board. SECTION 2.2. NUMBER. The board shall consist of not less than five nor more than twenty-five shareholders, the exact number within such minimum and maximum limits to be fixed and determined from time to time by resolution of a majority of the full board or by resolution of a majority of the shareholders at any meeting thereof. SECTION 2.3. ORGANIZATION MEETING. The secretary, upon receiving the certificate of the judges, of the result of any election, shall notify the directors-elect of their election and of the time at which they are required to meet at the main office of the Corporation to organize the new board and elect and appoint officers of the Corporation for the succeeding year. Such meeting shall be held on the day of the election or as soon thereafter as practicable and, in any event, within 30 days thereof. If, at the time fixed for such meeting, there shall not be a quorum, the directors present may adjourn the meeting, from time to time, until a quorum is obtained. SECTION 2.4. REGULAR MEETINGS. The regular meetings of the board of directors shall be held, without notice, on the third Tuesday of each month at the main office or other such place as the board may designate. When any regular meeting of the board falls upon a holiday, the meeting shall be held on the next banking business day unless the board shall designate another day. 3 SECTION 2.5. SPECIAL MEETINGS. Special meetings of the board of directors may be called by the of the Corporation, or at the request of two or more directors. Each member of the board of directors shall be given notice stating the time and place by telegram, letter, or in person, of each special meeting. SECTION 2.6. QUORUM. A majority of the director positions on the board shall constitute a quorum at any meeting, except when otherwise provided by law, or the bylaws, but a less number may adjourn any meeting, from time to time, and the meeting may be held, as adjourned, without further notice. If the number of directors is reduced below the number that would constitute a quorum, no business may be transacted. except selecting directors to fill vacancies in conformance with Section 2.7. If a quorum is present, the board of directors may take action through the vote of a majority of the directors who are in attendance. SECTION 2.7. VACANCIES. When any vacancy occurs among the directors, a majority of the remaining members of the board, according to the laws of the United States, may appoint a director to fill such vacancy at any regular meeting of the board, or at a special meeting called for that purpose at which a quorum is present, or if the directors remaining in office constitute fewer than a quorum of the board, by the affirmative vote of a majority of all the directors remaining in office, or by shareholders at a special meeting called for that purpose, in conformance with Section 1.2 of these by-laws. At any such shareholder meeting, each shareholder entitled to vote shall have the right to multiply the number of votes he or she is entitled to cast by the number of vacancies being filled and cast the product for a single candidate or distribute the product among two or more candidates. A vacancy that will occur at a specific later date (by reason of a resignation effective at a later date) may be filled before the vacancy occurs but the new director may not take office until the vacancy occurs. SECTION 2.8. RESIGNATION. A director may resign at any time by delivering written notice to the board of directors, its chairperson or to the Corporation, which resignation shall be effective when the notice is delivered unless the notice specifies a later effective date. SECTION 2.9. REMOVAL. A director may be removed by shareholders at a meeting called to remove him or her, when notice of the meeting stating that the purpose or one of the purposes is to remove him or her is provided, if there is a failure to fulfill one of the affirmative requirements for qualification, or for cause; provided, however, that a director may not be removed if the number of votes sufficient to elect him or her under cumulative voting is voted against his or her removal. 4 ARTICLE III. COMMITTEES OF THE BOARD The board of directors must formally ratify written policies authorized by committees of the board before such policies become effective. Each committee must have one or more member(s), who serve at the pleasure of the board of directors. Provisions of the articles and bylaws governing place of meetings, notice of meeting, quorum and voting requirements of the board of directors, apply to committees and their members as well. The creation of a committee and appointment of members to it must be approved by the board of directors. SECTION 3.1. EXECUTIVE COMMITTEE. There shall be an executive committee composed of the Chairperson of the board, the President and three other directors, appointed by the board annually or more often. The executive committee shall have the power and responsibility of monitoring the implementation by management of policies established by the board, and to exercise, when the board is not in session, all other powers of the board that may lawfully be delegated, and shall review for approval any contracts with third parties authorized by the board prior to execution thereof. The executive committee shall keep minutes of its meetings, and such minutes shall be submitted at the next regular meeting of the board of directors at which a quorum is present, and any action taken by the board with respect thereto shall be entered in the minutes of the board. SECTION 3.2. PERSONNEL COMMITTEE. There shall be a personnel committee composed of four directors, appointed by the board annually or more often. The duty of that committee shall be to review and recommend policies with respect to (i) a comprehensive personnel policy, (ii) staffing requirements of the Corporation, (iii) personnel compensation and benefits issues, and (iv) performance review of certain identified officer positions. This committee shall also review management's implementation of established policies and personnel compliance issues. The personnel committee shall keep minutes of its meetings, and such minutes shall be submitted at the next regular meeting of the board of directors at which a quorum is present, and any action taken by the board with respect thereto shall be entered in the minutes of the board. SECTION 3.3. LOAN COMMITTEE. There shall be a loan committee composed of the President and five other directors, appointed by the board annually or more often. The loan committee shall have power to discount and purchase bills, notes and other evidences of debt, to buy and sell bills of exchange, to examine, review and approve loans and discounts, to exercise authority regarding loans and discounts, and to exercise, when the board is not in session, all other powers of the board regarding extensions of credit that may lawfully be delegated. The loan committee shall keep minutes of its meetings, and such minutes shall be submitted at the next regular meeting of the board of directors at which a quorum is present, and any action taken by the board with respect thereto shall be entered in the minutes of the board. 5 SECTION 3.4. ASSET & LIABILITY AND INVESTMENT COMMITTEE. There shall be an asset & liability and investment committee composed of five directors, appointed by the board annually or more often. The investment committee shall have the power and responsibility to ensure adherence to the investment policy, to recommend amendments thereto, to purchase and sell securities, to exercise authority regarding investments and liquidity and to exercise, when the board is not in session, all other powers of the board regarding investment securities that may be lawfully delegated. The asset & liability and investment committee shall keep minutes of its meetings, and such minutes shall be submitted at the next regular meeting of the board of directors at which a quorum is present, and any action taken by the board with respect thereto shall be entered in the minutes of the board. SECTION 3.5. AUDIT, CREDIT REVIEW AND COMPLIANCE COMMITTEE. There shall be an audit, credit review and compliance committee composed of not less than five directors, exclusive of any active officers, appointed by the board annually or more often. The duty of that committee shall be to review and recommend policies regarding internal audit and credit review, to establish and implement regulatory policies, to monitor compliance with investment policies, to examine at least once during each calendar year and within 15 months of the last examination the affairs of the Corporation or cause suitable examinations to be made by auditors responsible only to the board of directors and to report the result of such examination in writing to the board at the next regular meeting thereafter. Such report shall state whether the Corporation is in a sound condition, and whether adequate internal controls and procedures are being maintained and shall recommend to the board such changes in the manner of conducting the affairs of the Corporation as shall be deemed advisable. SECTION 3.5.1. OTHER COMMITTEES. The board of directors may appoint, from time to time, from its own members, compensation, special litigation and other committees of one or more persons, for such purposes and with such powers as the board may determine. However, a committee may not: (1) Authorize distributions of assets or dividends. (2) Approve action required to be approved by shareholders. (3) Fill vacancies on the board of directors or any of its committees. (4) Amend articles of Corporation. (5) Adopt, amend or repeal bylaws. (6) Authorize or approve issuance or sale or contract for sale of shares, or determine the designation and relative rights, preferences and limitations of a class or series of shares. 6 ARTICLE IV. OFFICERS AND EMPLOYEES SECTION 4.1. CHAIRPERSON OF THE BOARD. The board of directors shall appoint one of its members to be the chairperson of the board to serve at its pleasure. Such person shall preside at all meetings of the board of directors. The chairperson of the board shall supervise the carrying out of the policies adopted or approved by the board; shall have general executive powers, as well as the specific powers conferred by these bylaws; and shall also have and may exercise such further powers and duties as from time to time may be conferred upon, or assigned by the board of directors. SECTION 4.2. PRESIDENT. The board of directors shall appoint one of its members to be the president of the Corporation. In the absence of the chairperson, the president shall preside at any meeting of the board. The president shall have general executive powers, and shall have and may exercise any and all other powers and duties pertaining by law, regulation, or practice, to the office of president, or imposed by these bylaws. The president shall also have and may exercise such further powers and duties as from time to time may be conferred, or assigned by the board of directors. SECTION 4.3. VICE PRESIDENTS. The board of directors may appoint one or more vice presidents, and one or more senior or executive vice presidents, who may also include a chief operating officer, a chief financial officer, a treasurer, and/or a senior credit officer. Each vice president shall have such powers and duties as may be assigned by the board of directors. One vice president shall be designated by the board of directors, in the absence of the president, to perform all the duties of the president. SECTION 4.4. SECRETARY. The board of directors shall appoint a secretary, cashier, or other designated officer who shall be secretary of the board and of the Corporation, and shall keep accurate minutes of all meetings. The secretary shall attend to the giving of all notices required by these bylaws; shall be custodian of the corporate seal, records, documents and papers of the Corporation; shall provide for the keeping of proper records of all transactions of the Corporation; shall have and may exercise any and all other powers and duties pertaining by law, regulation or practice, to the office of cashier, or imposed by these bylaws; and shall also perform such other duties as may be assigned from time to time, by the board of directors. SECTION 4.5. OTHER OFFICERS. The board of directors may appoint one or more assistant vice presidents, one or more trust officers, one or more assistant secretaries, one or more assistant cashiers, one or more managers and assistant managers of branches and such other officers and attorneys in fact as from time to time may appear to the board of directors to be required or desirable to transact the business of the Corporation. Such officers shall respectively exercise such powers and perform such duties as pertain to their several offices, or as may be conferred upon, or assigned to, them by the board of directors, the chairperson of the board, or the president. The board of directors may authorize an officer to appoint one or more officers or assistant officers. 7 SECTION 4.6. TENURE OF OFFICE. The president and all other officers shall hold office for the current year for which the board was elected, unless they shall resign, become disqualified, or be removed; and any vacancy occurring in the office of president shall be filled promptly by the board of directors. SECTION 4.7. RESIGNATION. An officer may resign at any time by delivering notice to the Corporation. A resignation is effective when the notice is given unless the notice specifies a later effective date. ARTICLE V. STOCK AND STOCK CERTIFICATES SECTION 5.1. TRANSFERS. Shares of stock shall be transferable on the books of the Corporation, and a transfer book shall be kept in which all transfers of stock shall be recorded. Every person becoming a shareholder by such transfer shall in proportion to his or her shares, succeed to all rights of the prior holder of such shares. The board of directors may impose conditions upon the transfer of the stock reasonably calculated to simplify the work of the Corporation with respect to stock transfers, voting at shareholder meetings, and related makers and to protect it against fraudulent transfers. SECTION 5.2. STOCK CERTIFICATES. Certificates of stock shall bear the signature of the president (which may be engraved, printed or impressed), and shall be signed manually or by facsimile process by the secretary, assistant secretary, cashier, assistant cashier, or any other officer appointed by the board of directors for that purpose, to be known as an authorized officer, and the seal of the Corporation shall be engraved thereon. Each certificate shall recite on its face that the stock represented thereby is transferable only upon the books of the Corporation properly endorsed. The board of directors may adopt or use procedures for replacing lost, stolen, or destroyed stock certificates as permitted by law. The Corporation may establish a procedure through which the beneficial owner of shares that are registered in the name of a nominee may be recognized by the Corporation as the shareholder. The procedure may set forth: (1) The types of nominees to which it applies. (2) The rights or privileges that the Corporation recognizes in a beneficial owner. (3) How the nominee may request the Corporation to recognize the beneficial owner as the shareholder. (4) The information that must be provided when the procedure is selected. 8 (5) The period over which the Corporation will continue to recognize the beneficial owner as the shareholder. (6) Other aspects of the rights and duties created. ARTICLE VI. CORPORATE SEAL The president, the cashier, the secretary or any assistant cashier or assistant secretary, or other officer thereunto designated by the board of directors, shall have authority to affix the corporate seal to any document requiring such seal, and to attest the same. Such seal shall be substantially in the following form: (Impression of Seal) ARTICLE VII. MISCELLANEOUS PROVISIONS SECTION 7.1. FISCAL YEAR. The fiscal year of the Corporation shall be the calendar year. SECTION 7.2. EXECUTION OF INSTRUMENTS. All agreements, indentures, mortgages, deeds, conveyances, transfers, certificates, declarations, receipts, discharges, releases, satisfactions, settlements, petitions, schedules, accounts, affidavits, bonds, undertakings, proxies and other instruments or documents may be signed, executed, acknowledged, verified, delivered or accepted on behalf of the Corporation by the chairperson of the board, or the president, or any vice president, or the secretary, or the cashier in accordance with the procedures and limitations established by the board. Any such instruments may also be executed, acknowledged, verified, delivered or accepted on behalf of the Corporation in such other manner and by such other officers as the board of directors may from time to time direct. The provisions of this section 7.2 are supplementary to any other provision of these bylaws. SECTION 7.3. RECORDS. The articles of Corporation, the bylaws and the proceedings of all meetings of the shareholders, the board of directors, and standing committees of the board, shall be recorded in appropriate minute books provided for that purpose. The minutes of each meeting shall be signed by the secretary, cashier or other officer appointed to act as secretary of the meeting. SECTION 7.4. GOVERNING LAW. The laws of the State of Connecticut shall govern the Corporation's corporate governance procedures. 9 ARTICLE VIII. BYLAWS SECTION 8.1. INSPECTION. A copy of the bylaws, with all amendments, shall at all times be kept in a convenient place at the main office of the Corporation, and shall be open for inspection to all shareholders during banking hours. SECTION 8.2. AMENDMENTS. The bylaws may be amended, altered or repealed, at any regular meeting of the board of directors, by a vote of a majority of the total number of the directors except as provided below. The Corporation's shareholders may amend or repeal the bylaws even though the bylaws also may be amended or repealed by its board of directors. I, Robert W. Reeves, certify that: (1) I am the sole incorporator of the Corporation; (2) the foregoing bylaws are the bylaws of the Corporation, and all of them are now lawfully in force and effect. I have hereunto affixed my official signature and the seal of the Corporation, in the city of Stamford, Connecticut, on this 17th day of June, 1999. /s/ Robert W. Reeves ------------------------ Robert W. Reeves, Incorporator 10 EX-4.1 6 a2156305zex-4_1.txt EXHIBIT 4.1 EXHIBIT 4.1 PATRIOT NATIONAL BANCORP, INC. and REGISTRAR AND TRANSFER COMPANY as Rights Agent RIGHTS AGREEMENT dated as of April 19, 2004 INDEX

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-ii- RIGHTS AGREEMENT This Rights Agreement dated as of April 19, 2004 between PATRIOT NATIONAL BANCORP, INC., a Connecticut corporation (the "Company"), and REGISTRAR AND TRANSFER COMPANY, a New Jersey corporation, as Rights Agent (the "Rights Agent"). W I T N E S S E T H: WHEREAS, on April 15, 2004 the Board of Directors of the Company authorized and declared, effective as of April 19, 2004, a dividend distribution of one Right (hereafter referred to as a "Right") for each outstanding share of the Common Stock, par value $2.00 per share, of the Company (the "Common Stock") outstanding at the close of business on April 29, 2004 (hereinafter referred to as the "Record Date") (other than shares of such Common Stock held in the Company's treasury on such date) and has authorized the issuance of one Right (as such number may hereafter be adjusted pursuant to the provisions of Section 11(p) hereof) in respect of each share of Common Stock of the Company that shall become outstanding after the Record Date (whether originally issued or delivered from the Company's treasury) and on or prior to the earlier of the Distribution Date and the Expiration Date (as such terms are hereinafter defined), each Right representing the right to purchase 8.152 shares of the Company's Common Stock upon the terms and subject to the conditions hereinafter set forth (the "Rights"); NOW, THEREFORE, in consideration of the premises and the mutual agreements herein set forth, the parties hereby agree as follows: Section 1. CERTAIN DEFINITIONS. For purposes of this Agreement, the following terms have the meanings indicated; (a) "Acquiring Person" shall mean any Person (as hereinafter defined) who or which, together with all Affiliates (as hereinafter defined) and Associates (as hereinafter defined) of such Person, shall be the Beneficial Owner (as hereinafter defined) of 15% or more of the shares of Common Stock then outstanding, but shall not include (i) the Company, (ii) any Subsidiary (as hereinafter defined) of the Company, (iii) any employee benefit plan of the Company or any Subsidiary of the Company, or any entity (including its Affiliates) organized, appointed or established for or pursuant to the terms of any such plan acting solely in its capacity (or their capacities) under such plan, (iv) any Person who becomes the Beneficial Owner of 15% or more of the shares of Common Stock then outstanding as the result of an acquisition of Common Stock by the Company which, by reducing the number of shares outstanding, increases the proportionate number of shares beneficially owned by such Person to 15% or more of the shares of Common Stock then outstanding; PROVIDED, HOWEVER, that if a Person becomes the Beneficial Owner of 15% or more of the shares of Common Stock then outstanding by reason of share acquisitions -1- by the Company and shall, after such acquisitions, become the Beneficial Owner of any additional shares of Common Stock, then such Person shall be deemed to be an "Acquiring Person", or (v) any Person who in the good faith determination of the Board of Directors of the Company, has become the Beneficial Owner of 15% or more of the shares of Common Stock then outstanding inadvertently, and such Person divests as promptly as practicable (and in any event within ten Business Days after notification by the Company) a sufficient number of shares of Common Stock so that such Person would no longer be an Acquiring Person for the purposes of this paragraph. Angelo De Caro, Chairman of the Company, shall not be considered an Acquiring Person for the purposes of this Agreement. (b) "Affiliate", "Associate" and "Control" shall have the respective meanings ascribed to such terms in Rule l2b-2 of the General Rules and Regulations under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), as in effect on the date hereof. (c) A Person shall be deemed the "Beneficial Owner" of, and shall be deemed to "beneficially own", any securities: (i) which such Person or any of such Person's Affiliates or Associates, directly or indirectly, beneficially owns (as determined pursuant to Rule 13d-3 of the General Rules and Regulations under the Exchange Act as in effect on the date of this Agreement) or has the right to dispose of; (ii) which such Person or any of such Person's Affiliates or Associates, directly or indirectly, has (A) the right to acquire (whether such right is exercisable immediately or only after the passage of time) pursuant to any agreement, arrangement or understanding (whether or not in writing), or upon the exercise of conversion rights, exchange rights, rights (other than the Rights), warrants or options, or otherwise; or (B) the right to vote, including pursuant to any agreement, arrangement or understanding (whether or not in writing); PROVIDED, HOWEVER, that a Person shall not be deemed the "Beneficial Owner" of or to "beneficially own" any security under this clause (B) as a result of an agreement, arrangement or understanding to vote such security if such agreement, arrangement or understanding (1) arises solely from a revocable proxy given in response to public proxy solicitation made pursuant to, and in accordance with, the applicable rules and regulations under the Exchange Act and (2) is not also then reportable by such Person on Schedule 13D under the Exchange Act (or any comparable or successor report); or (iii) which are beneficially owned, directly or indirectly, by any other Person (or any Affiliate or Associate thereof) with which such Person or any of such Person's Affiliates or Associates has any agreement, arrangement or understanding (whether or not in writing) for the purpose of acquiring, holding, voting (except pursuant to a revocable proxy as described in paragraph 1(c)(ii)(B) hereof) or disposing of any voting securities of the Company. -2- (d) "Business Day" shall mean any day other than a Saturday, Sunday, or a day on which banking institutions in the State of Connecticut are authorized or obligated by law or executive order to close. (e) "Close of business" on any given date shall mean 5:00 p.m., Eastern time, on such date; PROVIDED, HOWEVER, that if such date is not a Business Day it shall mean 5:00 p.m., Eastern time, on the next succeeding Business Day. (f) "Common Stock" shall mean the Common Stock, par value $2.00 per share, of the Company, except that "Common Stock" when used with reference to any Person other than the Company shall mean the capital stock of such Person with the greatest voting power, or the equity securities or other equity interest having power to control or direct the management, of such Person. (g) "Common Stock Equivalent" shall mean a share, or depositary receipt exchangeable for a fraction of a share, of any authorized class or series of preferred stock of the Company having dividend, voting, liquidation and other rights which result, in the judgment of the Board of Directors, in such share, or depositary receipt, being approximately equivalent in value to one share of Common Stock as of the date of occurrence of a Section 11(a) (ii) Event (as such term is hereinafter defined) (the "Event Date"); PROVIDED, HOWEVER, that, if there is no authorized class or series of preferred stock of the Company or if in the judgment of the Board of Directors there are not sufficient authorized but unissued shares of preferred stock available for the creation of Common Stock Equivalents, "Common Stock Equivalent" shall mean such cash, reduction in Purchase Price (as such term is hereinafter defined), other equity securities, debt securities, other assets or any combination of the foregoing, that the Board of Directors shall determine to be approximately equivalent in value to one share of Common Stock as of the Event Date. (h) "Continuing Director" shall mean (i) any member of the Board of Directors of the Company, while such Person is a member of the Board, who is not an Acquiring Person or an Affiliate or Associate of an Acquiring Person or a representative or nominee of an Acquiring Person or of any such Affiliate or Associate, and was a member of the Board prior to the time any Person becomes an Acquiring Person, and (ii) any Person who subsequently becomes a member of the Board, while such Person is a member of the Board, who is not an Acquiring Person or an Affiliate or Associate of an Acquiring Person or a representative or nominee of an Acquiring Person or of any such Affiliate or Associate, if such Person's nomination for election or election to the Board is recommended or approved by a majority of the Continuing Directors. (i) "Distribution Date" shall have the meaning defined in Section 3 hereof. (j) "Event Date" shall have the meaning defined in Section 1(g) hereof. (k) "Exchange" and "Exchange Ratio" shall have the respective meanings -3- defined in Section 24 hereof. (l) "Exchange Date" shall have the meaning defined in Section 7(a) hereof. (m) "Expiration Date" and "Final Expiration Date" shall have the respective meanings defined in Section 7(a) hereof. (n) "Person" shall mean any individual, firm, limited liability company, corporation, partnership or other entity. (o) "Purchase Price" shall have the meaning defined in Section 7 hereof. (p) "Section 11(a) (ii) Event" shall mean the event described in Section 11(a) (ii). (q) "Stock Acquisition Date" shall mean the first date of public announcement (which, for purposes of this definition, shall include, without limitation, the filing of a report pursuant to Section 13(d) under the Exchange Act or pursuant to a comparable successor statute) by the Company or an Acquiring Person indicating that an Acquiring Person has become such. (r) "Subsidiary" of any Person shall mean any other Person of which securities or other ownership interests having ordinary voting power, in the absence of contingencies, to elect a majority of the board of directors or other Persons performing similar functions as a board of directors are at the time directly or indirectly owned by such first Person, or which is otherwise controlled by such first Person. (s) "Trading Day" shall have the meaning defined in Section 11(d) hereof. (t) "Triggering Event" shall mean any Section 11(a) (ii) Event or any event described in Section 13(a)(i), (ii) or (iii) hereof. Section 2. APPOINTMENT OF RIGHTS AGENT. The Company hereby appoints the Rights Agent to act as agent for the Company and the holders of the Rights (who, in accordance with Section 3 hereof, shall prior to the Distribution Date also be the holders of the Common Stock) in accordance with the terms and conditions hereof, and the Rights Agent hereby accepts such appointment. The Company may from time to time appoint such Co-Rights Agents as it may deem necessary or desirable. In the event the Company appoints one or more Co-Rights Agents, the respective duties of the Rights Agent and any Co-Rights Agents shall be as the Company shall determine. Section 3. ISSUE OF RIGHTS CERTIFICATES. (a) Until the earliest of (i) the close of business on the tenth Business Day after the Stock Acquisition Date (or, if the tenth Business Day after the Stock Acquisition Date occurs before the Record Date, the close of business on the Record Date); or (ii) the -4- close of business on the tenth Business Day (or such later Business Day as may be determined by action of the Board of Directors of the Company prior to such time as any Person becomes an Acquiring Person) after the date of the commencement of a tender or exchange offer by any Person (other than the Company) if, upon consummation thereof, such Person would be an Acquiring Person (including any such date which is after the date of this Agreement and prior to the issuance of the Rights); or (iii) the tenth Business Day (or such later Business Day as may be determined by action of the Board of Directors of the Company prior to such time as any person becomes an Acquiring Person) after the filing by any Person (other than the Company) of a registration statement under the Securities Act of 1933, as amended, with respect to a contemplated exchange offer to acquire (when added to any shares as to which such person is the beneficial owner immediately prior to such filing) beneficial ownership of 15% or more of the issued and outstanding shares of Common Stock; the earliest of such dates being herein referred to as the "Distribution Date"), (x) the Rights will be evidenced (subject to the provisions of paragraph (b) of this Section 3) by the certificates for the Common Stock registered in the names of the holders of the Common Stock (which certificates for Common Stock shall be deemed also to be Right Certificates) and not by separate Right Certificates, and (y) the Rights will be transferable only in connection with the transfer of the underlying shares of Common Stock. As soon as practicable after the Company has notified the Rights Agent of the occurrence of the Distribution Date, the Rights Agent will send, by first-class, insured, postage prepaid mail, to each record holder of the Common Stock as of the close of business on the Distribution Date, at the address of such holder shown on the records of the Company, one or more right certificates, in substantially the form of Exhibit A hereto (the "Right Certificates"), evidencing one Right for each full share of Common Stock so held, subject to adjustment as provided herein. In the event that an adjustment in the number of Rights per share of Common Stock has been made pursuant to Section 11(p) hereof, at the time of distribution of the Right Certificates, the Company shall make the necessary and appropriate rounding adjustments (in accordance with Section 14(a) hereof) so that the Right Certificates representing only whole numbers of Rights are distributed and cash is paid in lieu of any fractional Rights. As of and after the Distribution Date, the Rights will be evidenced solely by such Right Certificates. (b) As soon as practicable after the Record Date, the Company will send a copy of a Summary of Rights to Purchase Common Stock, in substantially the form of Exhibit B hereto (the "Summary of Rights"), by first-class, postage prepaid mail, to each record holder of the Common Stock as of the close of business on the Record Date at the address of such holder shown on the records of the Company. With respect to certificates for the Common Stock outstanding as of the Record Date, until the Distribution Date (or the earlier redemption, exchange or expiration of the Rights), the Rights will be evidenced by such certificates for the Common Stock registered in the names of the holders of the Common Stock together with a copy of the Summary of Rights, and the registered holders of the Common Stock shall also be registered holders of the associated Rights. Until the Distribution Data (or the earlier redemption, exchange or expiration of the Rights), the transfer of any of the certificates for the Common Stock outstanding as of the Record Date with or without a copy of the Summary of Rights attached thereto, shall also constitute the transfer of the Rights associated with the Common Stock represented -5- by such certificates. (c) Rights shall be issued in respect of all shares of Common Stock which become outstanding after the Record Date but on or prior to the Distribution Date (or the earlier redemption, exchange or expiration of the Rights). Certificates representative of such shares of Common Stock shall be deemed also to be certificates for Rights and shall have impressed on, printed on, written on or otherwise affixed to them the following legend: This certificate also evidences and entitles the holder hereof to certain Rights as set forth in a Rights Agreement between Patriot National Bancorp, Inc. and Registrar and Transfer Company, dated as of April 19, 2004 (the "Rights Agreement"), the terms of which are hereby incorporated herein by reference and a copy of which is on file at the principal executive offices of the Company. Under certain circumstances, as set forth in the Rights Agreement, such Rights will be evidenced by separate certificates and will no longer be evidenced by this certificate. The Company will mail to the holder of this certificate a copy of the Rights Agreement without charge promptly after receipt of a written request therefor. As described in the Rights Agreement, Rights beneficially owned by (i) an Acquiring Person or any Associate or Affiliate thereof (as such terms are defined in the Rights Agreement), (ii) a transferee of an Acquiring Person (or of any such Associate or Affiliate) who becomes a transferee after the Acquiring Person becomes such is designated as such, or (iii) under certain circumstances, a transferee of an Acquiring Person (or of any such Associate or Affiliate) who becomes a transferee before or concurrently with the Acquiring Person becoming such, shall become null and void. With respect to such certificates containing the foregoing legend, until the Distribution Date (or the earlier redemption, exchange or expiration of the Rights) the Rights associated with the Common Stock represented by such certificates shall be evidenced by such certificates alone, and the transfer of any of such certificates shall also constitute the transfer of the Rights associated with the Common Stock represented by such certificates. Section 4. FORM OF RIGHT CERTIFICATES. (a) The Right Certificates (and the forms of election to purchase and of assignment and the certificates to be printed on the reverse thereof) shall be substantially in the form of Exhibit A hereto and may have such marks of identification or designation and such legends, summaries or endorsements printed thereon as the Company may deem appropriate and as are not inconsistent with the provisions of this Agreement, or as may be required to comply with any applicable law, rule or regulation or with any rule or regulation of any stock exchange on which the Rights may from time to time be listed, or to conform to usage. Subject to the provisions of Section 11 and Section 22 hereof, the Right Certificates, whenever distributed, shall be dated as of the Record Date and on their -6- face shall entitle the holders thereof to purchase such number of shares of Common Stock as shall be set forth therein at the price set forth therein (such exercise price per share, the "Purchase Price"), but the amount and type of securities purchasable upon the exercise of each Right and the Purchase Price thereof shall be subject to adjustment as provided herein. (b) Any Right Certificate issued pursuant to Section 3(a), Section 11(i) or Section 22 hereof that represents Rights beneficially owned by: (i) an Acquiring Person or any Associate or Affiliate of an Acquiring Person, (ii) a transferee of an Acquiring Person (or of any such Associate or Affiliate) who becomes a transferee after the Acquiring Person becomes such, or (iii) a transferee of an Acquiring Person (or of any such associate of Affiliate) who becomes a transferee prior to or concurrently with the Acquiring Person becoming such and receive such Rights pursuant to either (A) a transfer (whether or not for consideration) from the Acquiring Person to holders of equity interests in such Acquiring Person or to any Person with whom such Acquiring Person has any continuing agreement, arrangement or understanding regarding the transferred Rights or (B) a transfer which the Board of Directors of the Company has determined is part of a plan, arrangement or understanding which has as a primary purpose or effect the voidance of Section 7(e) hereof, and any Right Certificate issued pursuant to Section 6 or Section 11 hereof upon transfer, exchange, replacement or adjustment of any other Right Certificate referred to in this sentence, shall contain (to the extent feasible) the following legend: The Rights represented by this Right Certificate are or were Beneficially Owned by a Person who was or became an Acquiring Person or an Affiliate or Associate of an Acquiring Person (as such terms are defined in the Rights Agreement). Accordingly, this Right Certificate and the Rights represented hereby may become null and void in the circumstances specified in Section 7(e) of the Rights Agreement. Section 5. COUNTERSIGNATURE AND REGISTRATION. (a) The Right Certificates shall be executed on behalf of the Company by its Chairman of the Board, its President or any Vice President, either manually or by facsimile signature, and shall have affixed thereto the Company's seal or a facsimile thereof which shall be attested by the Secretary or an Assistant Secretary of the Company, either manually or by facsimile signature. The Right Certificates shall be manually countersigned by the Rights Agent and shall not be valid for any purpose unless so countersigned. In case any officer of the Company whose manual or facsimile signature is affixed to the Right Certificates shall cease to be such officer of the Company before countersignature by the Rights Agent and issuance and delivery by the Company, such Right Certificates, nevertheless, may be countersigned by the Rights Agent, issued and delivered with the same force and effect as though the Person who signed such Right Certificates had not ceased to be such officer of the Company. Any Right Certificate may be signed on behalf of the Company by any Person who, at the actual date of the -7- execution of such Right Certificate, shall be a proper officer of the Company to sign such Right Certificate, although at the date of the execution of this Rights Agreement any such Person was not such an officer. (b) Following the Distribution Date, the Rights Agent will keep or cause to be kept, at its principal office or offices designated as the appropriate place for surrender of Right Certificates upon exercise or transfer, books for registration and transfer of the Right Certificates issued hereunder. Such books shall show the names and addresses of the respective holders of the Right Certificates, the number of Rights evidenced on its face by each of the Right Certificates, the certificate number of each of the Right Certificates and the date of each of the Right Certificates. Section 6. TRANSFER, SPLIT UP, COMBINATION AND EXCHANGE OF RIGHT CERTIFICATES; MUTILATED, DESTROYED, LOST OR STOLEN RIGHT CERTIFICATES. (a) Subject to the provisions of Section 4(b), Section 7(e) and Section 14 hereof, at any time after the close of business on the Distribution Date, and at or prior to the close of business on the Expiration Date (as such term is defined in Section 7(a) hereof), any Right Certificate or Right Certificates may be transferred, split up, combined or exchanged for another Right Certificate or Right Certificates, entitling the registered holder to purchase a like number of shares of Common Stock (or, following a Triggering Event, Common Stock, other securities, cash or assets, as the case may be) as the Right Certificate or Right Certificates surrendered then entitled such holder (or former holder in the case of a transfer) to purchase. Any registered holder desiring to transfer, split up, combine or exchange any Right Certificate or Certificates shall make such request in writing delivered to the Rights Agent, and shall surrender the Right Certificate or Right Certificates to be transferred, split up, combined or exchanged at the principal office or offices of the Rights Agent designated for such purpose. Neither the Rights Agent nor the Company shall be obligated to take any action whatsoever with respect to the transfer of any such surrendered Right Certificate until the registered holder shall have completed and signed the certificate contained in the form of assignment on the reverse side of such Right Certificate and shall have provided such additional evidence of the identity of the Beneficial Owner (or former Beneficial Owner) or Affiliates or Associates thereof as the Company shall reasonably request. Thereupon the Rights Agent shall, subject to Section 4(b), Section 7(e) and Section 14 hereof, countersign and deliver to the Person entitled thereto a Right Certificate or Right Certificates, as the case may be, as so requested. The Company may require payment of a sum sufficient to cover any tax or governmental charge that may be imposed in connection with any transfer, split up, combination or exchange of Right Certificates. (b) Upon receipt by the Company and the Rights Agent of evidence reasonably satisfactory to them of the loss, theft, destruction or mutilation of a Right Certificate, and, in case of loss, theft or destruction, of indemnity or security reasonably satisfactory to them, and, at the Company's request, reimbursement to the Company and the Rights Agent of all reasonable expenses incidental thereto, and upon surrender to the Rights Agent and cancellation of the Right Certificate if mutilated, the Company will -8- make and deliver a new Right Certificate of like tenor to the Rights Agent for countersignature and delivery to the registered owner in lieu of the Right Certificate so lost, stolen, destroyed or mutilated. Section 7. EXERCISE OF RIGHTS; PURCHASE PRICE; EXPIRATION OF RIGHTS. (a) The Rights shall not be exercisable prior to the Distribution Date. Subject to Section 7(e) hereof, the registered holder of any Right Certificate may exercise the Rights evidenced thereby (except as otherwise provided herein including, without limitation, the restrictions on exercisability set forth in Section 9(c), Section 11(a) (iii), Section 23(a) and Section 24 hereof) in whole or in part at any time after the Distribution Date upon surrender of the Right Certificate, with the form of election to purchase and the certificate on the reverse side thereof duly executed, to the Rights Agent at the principal office or offices of the Rights Agent designated for such purpose, together with payment of the aggregate Purchase Price with respect to the total number of shares of Common Stock (or other securities or property, as the case may be) as to which such surrendered Rights are then exercisable, at or prior to the earliest of (i) the close of business on April 19, 2014 (the "Final Expiration Date"), (ii) the time at which the Rights are redeemed as provided in Section 23 hereof, or (iii) the time at which the Rights are exchanged as provided in Section 24 hereof (the "Exchange Date") (the earliest of (i), (ii) and (iii) being herein referred to as the "Expiration Date"). (b) The Purchase Price for each share of Common Stock pursuant to the exercise of a Right shall initially be $7.36, shall be subject to adjustment from time to time as provided in Section 11 and Section 13(a) hereof and shall be payable in lawful money of the United States of America in accordance with paragraph (c) below. (c) Upon receipt of a Right Certificate representing exercisable Rights, with the form of election to purchase and the certificate duly executed, accompanied by payment, with respect to each Right so exercised, of the Purchase Price per share of Common Stock (or other shares, securities or property, as the case may be) to be purchased, and an amount equal to any applicable transfer tax, in cash, or in the form of a certified check or money order payment to the order of the Company, the Rights Agent shall, subject to Section 20(k) hereof, thereupon promptly (i) requisition from any transfer agent of the Common Stock (or make available, if the Rights Agent is the transfer agent therefor) certificates for the total number of shares of Common Stock to be purchased and the Company hereby irrevocably authorizes its transfer agent to comply with all such requests, (ii) requisition from the Company the amount of cash, if any, to be paid in lieu of issuance of fractional shares in accordance with Section 14 hereof, (iii) promptly after receipt of such certificates cause the same to be delivered to or upon the order of the registered holder of such Right Certificate, registered in such name or names as may be designated by such holder, and (iv) after receipt thereof, promptly deliver such cash, if any, to or upon the order of the registered holder of such Right Certificate. In the event that the Company is obligated to issue other securities of the Company, pay cash and/or distribute other property pursuant to Section 11(a) hereof, the Company will make -9- all arrangements necessary so that such other securities, cash and/or other property are available for distribution by the Rights Agent, if and when appropriate. (d) In case the registered holder of any Right Certificate shall exercise less than all the Rights evidenced thereby, a new Right Certificate evidencing Rights equivalent to the Rights remaining unexercised shall be issued by the Rights Agent and delivered to, or upon the order of, the registered holder of such Right Certificate, registered in such name or names as may be designated by such holder, subject to the provisions of Section 14 hereof. (e) Notwithstanding anything in this Agreement to the contrary, from and after the first occurrence of a Section 11(a)(ii) Event, any Rights beneficially owned by (i) an Acquiring Person or an Associate or Affiliate of an Acquiring Person, (ii) a transferee of an Acquiring Person (or of any such Associate or Affiliate) who becomes a transferee after the Acquiring Person becomes such, or (iii) a transferee of an Acquiring Person (or of any such Associate or Affiliate) who becomes a transferee prior to or concurrently with the Acquiring Person becoming such and receives such Rights pursuant to either (A) a transfer (whether or not for consideration) from the Acquiring Person (or from any such Associate or Affiliate) to holders of equity interests in such Acquiring Person (or in any such Associate or Affiliate) or to any Person with whom the Acquiring Person (or any such Associate or Affiliate) has any continuing agreement, arrangement or understanding regarding the transferred Rights or (B) a transfer which the Board of Directors of the Company has determined (whether before or after such transfer) is part of a plan, arrangement or understanding which has as a primary purpose or effect the avoidance of this Section 7(e), shall become null and void without any further action and no holder of such Rights shall have any rights whatsoever with respect to such Rights, whether under any provision of this Agreement or otherwise. No Right Certificate shall be issued pursuant to Section 3 hereof that represents Rights beneficially owned by an Acquiring Person or any Associate or Affiliate thereof and no Right Certificate shall be issued at any time upon the transfer of any Rights to an Acquiring Person or any Affiliate or Associate thereof or to any nominee of such Acquiring Person, Associate or Affiliate. Any Right Certificate delivered to the Rights Agent for transfer to any of the foregoing Persons, or which represents void Rights, shall be canceled. The Company shall use all reasonable efforts to insure that the provisions of this Section 7(e) are complied with, but shall have no liability to any holder of Right Certificates or other Person as a result of its failure to make any determinations with respect to an Acquiring Person or its Affiliates and Associates or any transferee of any of them hereunder. (f) Notwithstanding anything in this Agreement to the contrary, neither the Rights Agent nor the Company shall be obligated to undertake any action with respect to a registered holder of Rights upon the occurrence of any purported transfer as set forth in Section 6 hereof or exercise as set forth in this Section 7 unless such registered holder shall have (i) completed and signed the certificate contained in the form of election to purchase set forth on the reverse side of the Right Certificate surrendered for such exercise and (ii) provided such additional evidence of the identity of the Beneficial Owner (or former Beneficial Owner) or Affiliates or Associates thereof as the Company -10- shall reasonably request. Section 8. CANCELLATION AND DESTRUCTION OF RIGHT CERTIFICATES. All Right Certificates surrendered for the purpose of exercise, transfer, split up, combination or exchange shall, if surrendered to the Company or to any of its agents, be delivered to the Rights Agent for cancellation or in canceled form, or, if surrendered to the Rights Agent, shall be canceled by it, and no Right Certificates shall be issued in lieu thereof except as expressly permitted by any of the provisions of this Agreement. The Company shall deliver to the Rights Agent for cancellation and retirement, and the Rights Agent shall so cancel and retire, any other Right Certificate purchased or acquired by the Company otherwise than upon the exercise thereof. The Rights Agent shall deliver all canceled Right Certificates to the Company, or shall, at the written request of the Company, destroy such canceled Right Certificates, and in such case shall deliver a certificate of destruction thereof to the Company. Section 9. RESERVATION AND AVAILABILITY OF CAPITAL STOCK. (a) The Company covenants and agrees that it will cause to be reserved and kept available out of its currently authorized and unissued shares of Common Stock the number of shares of Common Stock that, as provided in this Agreement, including Section 11(a) (iii) hereof, will be sufficient to permit to the maximum extent possible the exercise of all outstanding Rights; PROVIDED, HOWEVER, that if the Company does not have sufficient authorized and unissued shares of Common Stock as of the date of this Agreement or at any other time, the Company will use its best efforts to amend its Certificate of Incorporation to increase the authorized number of shares to an amount sufficient to permit to the maximum extent possible the exercise of all outstanding Rights. (b) So long as the Common Stock issuable and deliverable upon the exercise of Rights may be listed on any national securities exchange (including the National Association of Securities Dealers, Inc. Automated Quotation System or such other system then in use), the Company shall use its best efforts to cause, from and after such time as the Rights became exercisable, all shares reserved for such issuance to be listed on such exchange upon official notice of issuance upon such exercise. (c) The Company shall use its best efforts to (i) file, as soon as practicable following the earliest date after the occurrence of a Section 11(a)(ii) Event as of which the consideration to be delivered by the Company upon exercise of the Rights has been determined in accordance with Section 11(a)(ii) or Section 11(a)(iii) hereof, or as soon as is required by law following the Distribution Date, as the case may be, a registration statement under the Securities Act of 1933, as amended (the "Act"), with respect to the securities purchasable upon exercise of the Rights on an appropriate form, (ii) cause such registration statement to become effective as soon as practicable after such filing, and (iii) cause such registration statement to remain effective (with a prospectus at all times meeting the requirements of the Act) until the earlier of (A) the date as of which the Rights are no longer exercisable for such securities and (B) the Expiration Date. The Company will also take such action as may be appropriate under, or to ensure compliance -11- with, the securities or "blue sky" laws of the various states in connection with the exercisability of the Rights. The Company may temporarily suspend, for a period of time not to exceed 90 days after the date set forth in clause (i) of the first sentence of this Section 9(c), the exercisability of the Rights in order to prepare and file such registration statement and permit it to become effective. Upon any such suspension, the Company shall issue a public announcement stating that the exercisability of the Rights has been temporarily suspended, as well as a public announcement at such time as the suspension is no longer in effect. Notwithstanding any such provision of this Agreement to the contrary, the Rights shall not be exercisable in any jurisdiction if the requisite qualification in such jurisdiction shall not have been obtained, the exercise thereof shall not be permitted under applicable law or a registration statement shall not have been declared effective. Nothing herein shall require the Company to bear the expense of obtaining registration if the cost of such registration in a particular jurisdiction presents an unreasonable burden on the Company under the circumstances. (d) The Company covenants and agrees that it will take all such action as may be necessary to ensure that all shares of Common Stock delivered upon exercise of Rights shall, at the time of delivery of the certificates for such shares (subject to payment of the Purchase Price), be duly and validly authorized and issued and fully paid and nonassessable. (e) The Company further covenants and agrees that it will pay when due and payable any and all federal and state transfer taxes and charges which may be payable in respect of the issuance or delivery of the Right Certificates and of any certificates for shares of Common Stock (and/or other securities, as the case may be) upon the exercise of Rights. The Company shall not, however, be required to pay any transfer tax which may be payable in respect of any transfer involved in the transfer or delivery of Right Certificates to a Person other than, or the issuance or delivery of Common Stock (and/or other securities, as the case may be) in respect of a name other than that of, the registered holder of the Right Certificate evidencing Rights surrendered for exercise or to issue or deliver any certificates for Common Stock (and/or other securities, as the case may be) in a name other than that of the registered holder upon the exercise of any Rights until any such tax shall have been paid (any such tax being payable by the holder of such Right Certificate at the time of surrender) or until it has been established to the Company's satisfaction that no such tax is due. Section 10. COMMON STOCK RECORD DATE. Each Person in whose name any certificate for a share of Common Stock (and/or other securities, as the case may be) is issued upon the exercise of Rights shall for all purposes be deemed to have become the holder of record of such shares of Common Stock (and/or other securities, as the case may be) represented thereby on, and such certificate shall be dated, the date upon which the Right Certificate evidencing such Rights was duly surrendered and payment of the Purchase Price (and any applicable transfer taxes) was made; PROVIDED, HOWEVER, that if the date of such surrender and payment is a date upon which the Common Stock transfer books of the Company are closed, such Person shall be deemed to have become the record holder of such shares on, and such certificate shall be dated, the next succeeding Business Day on which the Common Stock transfer books of the Company -12- are open. Prior to the exercise of the Rights evidenced thereby, the holder of a Right Certificate shall not be entitled to any rights of a stockholder of the Company with respect to shares for which the Rights shall be exercisable, including, without limitation, the right to vote, to receive dividends or other distributions or to exercise any preemptive rights, and shall not be entitled to receive any notice of any proceedings of the Company, except as provided herein. Section 11. ADJUSTMENT OF PURCHASE PRICE; NUMBER AND KIND OF SHARES OR NUMBER OF RIGHTS. The Purchase Price, the number and kind of shares covered by each Right and the number of Rights outstanding are subject to adjustment from time to time as provided in this Section 11. (a) (i) In the event the Company shall at any time after the date of this Agreement (A) declare a dividend on the Common Stock payable in shares of Common Stock, (B) subdivide the outstanding Common Stock, (C) combine the outstanding Common Stock into a smaller number of shares, or (D) issue any shares of its capital stock in a reclassification of the Common Stock (including any such reclassification in connection with a consolidation or merger in which the Company is the continuing or surviving corporation) except as otherwise provided in this Section 11(a) and Section 7(e) hereof, the Purchase Price in effect at the time of the record date for such dividend or of the effective date of such subdivision, combination or reclassification, and the number and kind of shares of Common Stock or capital stock, as the case may be, issuable on such date, shall be proportionately adjusted so that the holder of any Right exercised after such time shall be entitled to receive, upon payment of the Purchase Price then in effect, the aggregate number and kind of shares of Common Stock or capital stock, as the case may be, which, if such Right had been exercised immediately prior to such date and at a time when the Common Stock transfer books of the Company were open, such holder would have owned upon such exercise and been entitled to receive by virtue of such dividend, subdivision, combination or reclassification. (ii) In the event that any Person, alone or together with its Affiliates and Associates or otherwise, shall become an Acquiring Person (a "Section 11(a)(ii) Event"), then proper provision shall promptly be made so that each holder of a Right, except as provided below and in Section 7(e) hereof, shall thereafter have a right to receive, upon exercise thereof at the then current Purchase Price multiplied by the number of Shares of Common Stock for which a Right is then exercisable, in accordance with the terms of this Agreement, such number of shares of Common Stock of the Company as shall equal the result obtained by (x) multiplying the then current Purchase Price by the number of shares of Common Stock for which a Right is then exercisable and (y) dividing that product by 50% of the current market price per share of the Common Stock (determined pursuant to Section 11(d)) on the date of the occurrence of the Section 11(a) (ii) Event; PROVIDED, HOWEVER, that the Rights shall not be exercisable hereunder (a) until after the Distribution Date as provided in Section 7(a) hereof, (b) until the expiration of any applicable redemption period as provided in Section 23(a), and (c) if the event causing such Person to become an Acquiring Person is a transaction set forth in Section 13(a) hereof, then such provisions shall apply. -13- (iii) In the event that the number of shares of Common Stock which are authorized by the Company's certificate of incorporation but not outstanding or reserved for issuance for purposes other than upon exercise of the Rights is not sufficient to permit the exercise in full of the Rights in accordance with the foregoing subparagraph (ii) of this Section 11(a)(ii), proper provision shall promptly be made so that each holder of a Right, except as provided in Section 7(e) hereof, shall, in the discretion of the Company's Board of Directors, thereafter have a right to receive, upon exercise thereof in accordance with the terms of this Agreement, such number of Common Stock Equivalents or the maximum number of shares of Common Stock available for issuance to such holder at a reduced Purchase Price which reflects a per share Purchase Price of 50% of current market value as determined pursuant to Section 11(a)(ii) above. (b) In case the Company shall fix a record date for the issuance of rights, options or warrants (other than the Rights) to all holders of Common Stock entitling them to subscribe for or purchase (for a period expiring within 45 calendar days after such record date) Common Stock (or securities having the same rights, privileges and preferences as the shares of Common Stock ("equivalent common stock") or securities convertible into Common Stock or equivalent common stock at a price per share of Common Stock or per share of equivalent common stock (or having a conversion or exercise price per share, if a security convertible into or exercisable for Common Stock or equivalent common stock) less than the current market price (as determined pursuant to Section 11(d) hereof) per share of Common Stock on such record date, the Purchase Price to be in effect after such record date shall be determined by multiplying the Purchase Price in effect immediately prior to such date by a fraction, the numerator of which shall be the number of shares of Common Stock outstanding on such record date, plus the number of shares of Common Stock which the aggregate offering price of the total number of shares of Common Stock and/or equivalent common stock so to be offered (and/or the aggregate initial conversion price of the convertible securities so to be offered) would purchase at such current market price and the denominator of which shall be the number of shares of Common Stock outstanding on such record date plus the number of additional shares of Common Stock and/or equivalent common stock to be offered for subscription or purchase (or into which the convertible securities so to be offered are initially convertible). In case such subscription price may be paid by delivery of consideration part or all of which shall be in a form other than cash, the value of such consideration shall be as determined in good faith by the Board of Directors of the Company, whose determination shall be described in a statement filed with the Rights Agent and shall be binding on the Rights Agent and the holders of Rights. Shares of Common Stock owned by or held for the account of the Company shall not be deemed outstanding for the purpose of any such computation. Such adjustment shall be made successively whenever such a record date is fixed; and in the event that such rights or warrants are not so issued, the purchase Price shall be adjusted to be the Purchase Price which would then be in effect if such record date had not been fixed. (c) In case the Company shall fix a record date for the making of a distribution to all holders of Common Stock (including any such distribution made in connection with a consolidation or merger in which the Company is the continuing or -14- surviving corporation) of evidences of indebtedness, cash (other than a regular periodic cash dividend out of the earnings or retained earnings of the Company), assets (other than a dividend payable in Common Stock, but including any dividend payable in stock other than Common Stock) or convertible securities, subscription rights or warrants (excluding those referred to in Section 11(b) hereof), the Purchase Price to be in effect after such record date shall be determined by multiplying the Purchase Price in effect immediately prior to such record date by a fraction, the numerator of which shall be the current market price (as determined pursuant to Section 11(d) hereof) per share of Common Stock on such record date, less the fair market value (as determined in good faith by the Board of Directors of the Company, whose determination shall be described in a statement filed with the Rights Agent and shall be binding on the Rights Agent and the holders of Rights) of the portion of the cash, assets or evidences of indebtedness so to be distributed or of such convertible securities, subscription rights or warrants applicable to one share of Common Stock and the denominator of which shall be such current market price (as determined pursuant to Section 11(d) hereof) per share of Common Stock. Such adjustments shall be made successively whenever such a record date is fixed; and in the event that such distribution is not so made, the Purchase Price shall again be adjusted to be the Purchase Price which would then be in effect if such record date had not been fixed. (d) For the purpose of any computation hereunder, the "current market price" per share of Common Stock on any date shall be deemed to be the average of the daily closing prices per share of such Common Stock for the 30 consecutive Trading Days (as such term is hereinafter defined) immediately prior to such date; PROVIDED, HOWEVER, that in the event that the current market price per share of the Common Stock is determined during a period following the announcement by the issuer of such Common Stock of (A) a dividend or distribution on such Common Stock payable in shares of such Common Stock or securities convertible into shares of such Common Stock (other than the Rights), or (B) any subdivision, combination or reclassification of such Common Stock, and prior to the expiration of the requisite 30 Trading Day period, as set forth above, after the ex-dividend date for such dividend or distribution, or the record date for such subdivision, combination or reclassification, then, and in each such case, the "current market price" shall be properly adjusted to take into account ex-dividend trading. The closing price for each day shall be the last sale price, regular way, or, in case no such sale takes place on such day, the average of the closing bid and asked prices, regular way, in either case as reported in the principal consolidated transaction reporting system with respect to securities listed or admitted to trading on the New York Stock Exchange or, if the shares of Common Stock are not listed or admitted to trading on the New York Stock Exchange, as reported in the principal consolidated transaction reporting system with respect to securities listed on the principal national securities exchange on which the shares of Common Stock are listed or admitted to trading or, if the shares of Common Stock are not listed or admitted to trading on any national securities exchange, the last quoted price or, if not so quoted, the average of the high bid and low asked prices in the over-the-counter market, as reported by the National Association of Securities Dealers, Inc. Automated Quotation System ("NASDAQ") or such other system then in use, or, if on any such date the shares of Common Stock are not quoted by any such organization, the -15- average of the closing bid and asked prices as furnished by a professional market maker making a market in the Common Stock selected by the Board of Directors of the Company. If on any such date no market maker is making a market in the Common Stock, the fair value of such shares on such date as determined in good faith by the Board of Directors of the Company shall be used. The term "Trading Day" shall mean a day on which the principal national securities exchange on which the shares of Common Stock are listed or admitted to trading or traded is open for the transaction of business or, if the shares of Common Stock are not listed or admitted to trading on any national securities exchange, a Business Day. If the Common Stock is not publicly held or not so listed or traded, "current market price" per share shall mean the fair value per share as determined in good faith by the Board of Directors of the Company, or, if at the time of such determination there is an Acquiring Person, by a majority of the Continuing Directors then in office, or if there are no Continuing Directors, by a nationally recognized investment banking firm selected by the Board of Directors, which determination shall be described in a statement filed with the Rights Agent and shall be conclusive for all purposes. (e) Anything herein to the contrary notwithstanding, no adjustment in the Purchase Price shall be required unless such adjustment would require an increase or decrease of at least 1% in the Purchase Price; PROVIDED, HOWEVER, that any adjustments which by reason of this Section 11(e) are not required to be made shall be carried forward and taken into account in any subsequent adjustment. All calculations under this Section 11 shall be made to the nearest cent or to the nearest ten-thousandth of a share of Common Stock. Notwithstanding the first sentence of this Section 11(e), any adjustment required by this Section 11 shall be made no later than the earlier of (i) three years from the date of the transaction which mandates such adjustment or (ii) the Expiration Date. (f) In the event that at any time, as a result of an adjustment made pursuant to Section 11(a) (ii), Section 11(a) (iii), Section 13(a) or Section 24 hereof, the holder of any Right shall be entitled to receive upon exercise of such Right any shares of capital stock other than shares of Common Stock, thereafter the number of such other shares so receivable upon exercise of any Right and the Purchase Price thereof shall be subject to adjustment from time to time in a manner and on terms as nearly equivalent as practicable to the provisions with respect to the Common Stock contained in Sections 11(a), (b), (c) , (e) , (g) , (h) , (i), (j) , (k), (l) and (m), and the provisions of Sections 6, 7, 9, 10, 13 and 14 with respect to the Common Stock shall apply on like terms to any such other shares. (g) All Rights originally issued by the Company subsequent to any adjustment made to the Purchase Price hereunder shall evidence the right to purchase, at the adjusted Purchase Price, the number of shares of Common Stock purchasable from time to time hereunder upon exercise of the Rights, all subject to further adjustment as provided herein. (h) Unless the Company shall have exercised its election as provided in Section 11(i), upon each adjustment of the Purchase Price as a result of the calculations -16- made in Section 11(b) and (c), each Right outstanding immediately prior to the making of such adjustment shall thereafter evidence the right to purchase, at the adjusted Purchase Price, that number of shares of Common Stock (calculated to the nearest ten thousandth) obtained by (i) multiplying (x) the number of shares covered by a Right immediately prior to this adjustment by (y) the Purchase Price in effect immediately prior to such adjustment of the Purchase Price and (ii) dividing the product so obtained by the Purchase Price in effect immediately after such adjustment of the Purchase Price. (i) The Company may elect on or after the date of any adjustment of the Purchase Price to adjust the number of Rights, in lieu of any adjustment in the number of shares of Common Stock purchasable upon the exercise of a Right. Each of the Rights outstanding after such adjustment of the number of Rights shall be exercisable for the number of shares of Common Stock for which such Right was exercisable immediately prior to such adjustment. Each Right held of record prior to such adjustment of the number of Rights shall become that number of Rights (calculated to the nearest ten thousandth) obtained by dividing the Purchase Price in effect immediately prior to adjustment of the Purchase Price by the Purchase Price in effect immediately after adjustment of the Purchase Price. The Company shall make a public announcement of its election to adjust the number of Rights, indicating the record date for the adjustment, and, if known at the time, the amount of the adjustment to be made. This record date may be the date on which the Purchase Price is adjusted or any day thereafter, but, if the Right Certificates have been issued, shall be at least 10 days later than the date of the public announcement. If Right Certificates have been issued, upon each adjustment of the number of Rights pursuant to this Section 11(i), the Company shall, as promptly as practicable, cause to be distributed to holders of record of Right Certificates on such record date Right Certificates evidencing, subject to Section 14 hereof, the additional Rights to which such holders shall be entitled as a result of such adjustment, or, at the option of the Company, shall cause to be distributed to such holders of record in substitution and replacement for the Right Certificates held by such holders prior to the date of adjustment, and upon surrender thereof, if required by the Company, new Right Certificates evidencing all the Rights to which such holders shall be entitled after such adjustment. Right Certificates so to be distributed shall be issued, executed and countersigned in the manner provided for herein (and may bear, at the option of the Company, the adjusted Purchase Price) and shall be registered in the names of the holders of record of Right Certificates on the record date specified in the public announcement. (j) Irrespective of any adjustment or change in the Purchase Price or the number of shares of Common Stock issuable upon the exercise of the Rights, the Right Certificates theretofore and thereafter issued may continue to express the Purchase Price per share and the number of shares which were expressed in the initial Right Certificates issued hereunder. (k) Before taking any action that would cause an adjustment reducing the Purchase Price below the then par value, if any, of a share of Common Stock issuable upon exercise of the Rights, the Company shall take any corporate action which may, in the opinion of its counsel, be necessary in order that the Company may validly and -17- legally issue fully paid and nonassessable shares of Common Stock at such adjusted Purchase Price. (l) In any case in which this Section 11 shall require that an adjustment in the Purchase Price be made effective as of a record date for a specified event, the Company may elect to defer until the occurrence of such event the issuance to the holder of any Right exercised after such record date the number of shares of Common Stock and other capital stock or securities of the Company, if any, issuable upon such exercise over and above the number of shares of Common Stock and other capital stock or securities of the Company, if any, issuable upon such exercise on the basis of the Purchase Price in effect prior to such adjustment; PROVIDED, HOWEVER, that the Company shall deliver to such holder a due bill or other appropriate instrument evidencing such holder's right to receive such additional shares (fractional or otherwise) or securities upon the occurrence of the event requiring such adjustment. (m) Anything in this Section 11 to the contrary notwithstanding, the Company shall be entitled to make such reductions in the Purchase Price, in addition to those adjustments expressly required by this Section 11, as and to the extent that in their good faith judgment the Board of Directors of the Company in its sole discretion shall determine to be advisable in order that any (i) consolidation or subdivision of the Common Stock, (ii) issuance wholly for cash of any Common Stock at less than the current market price, (iii) issuance wholly for cash or Common Stock or securities which by their terms are convertible into or exchangeable for Common Stock, (iv) stock dividends or (v) issuance of rights, options or warrants referred to hereinabove in this Section 11, hereafter made by the Company to the holders of its Common Stock, shall not be taxable to such stockholders. (n) The Company covenants and agrees that it shall not at any time after the Distribution Date (i) consolidate with any other Person (other than a Subsidiary of the Company in a transaction that complies with Section 11(o) hereof), (ii) merge with or into (other than a Subsidiary of the Company in a transaction that complies with Section 11(o) hereof), or (iii) sell or transfer (or permit any Subsidiary to sell or transfer) in one transaction, or a series of related transactions, assets, cash flow or earning power aggregating more than 50% of the assets, cash flow or earning power of the Company and its Subsidiaries (taken as a whole), to any other Person or Persons (other than the Company and/or any of its Subsidiaries in one or more transactions each of which complies with Section 11 (o) hereof), if (x) at the time of or immediately after such consolidation, merger or sale there are any rights, warrants or other instruments outstanding or agreements or arrangements in effect which would substantially diminish or otherwise eliminate the benefits intended to be afforded by the Rights or (y) prior to, simultaneously with or immediately after such consolidation, merger or sale, the stockholders of a Person who constitutes, or would constitute, the "Principal Party" for the purposes of Section 13(a) hereof shall have received a distribution of Rights previously owned by such Person or any of its Affiliates and Associates. (o) The Company covenants and agrees that after the earlier of the Stock -18- Acquisition Date and the Distribution Date it will not, except as permitted by Section 23, Section 24 or Section 27 hereof, take (or permit any Subsidiary to take) any action if at the time such action is taken it is reasonably foreseeable that such action will substantially diminish or otherwise eliminate the benefits intended to be afforded by the Rights. (p) Anything in this Agreement to the contrary notwithstanding, in the event that the Company shall at any time after the date hereof and prior to the Distribution Date (i) declare a dividend on the outstanding shares of Common Stock payable in shares of Common Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine the outstanding Common Stock into a smaller number of shares, the number of Rights associated with each share of Common Stock then outstanding, or issued or delivered thereafter but prior to the Distribution Date, shall be proportionately adjusted so that the number of Rights thereafter associated with each share of Common Stock following any such event shall equal the result obtained by multiplying the number of Rights associated with each share of Common Stock immediately prior to such event by a fraction the numerator of which shall be the total number of shares of Common Stock outstanding immediately following the occurrence of the event and the denominator of which shall be the total number of shares of Common Stock outstanding immediately prior to the occurrence of such event. Section 12. CERTIFICATE OF ADJUSTED PURCHASE PRICE OR NUMBER OF SHARES OR COMMON STOCK EQUIVALENTS. Whenever an adjustment is made as provided in Sections 11, 13, 23 and 24 hereof, the Company shall (a) promptly prepare a certificate setting forth such adjustment and a brief statement of the facts accounting for such adjustment, (b) promptly file with the Rights Agent and with each transfer agent for the Common Stock a copy of such certificate and (c) mail a brief summary thereof to each holder of a Right Certificate (or, if prior to the Distribution Date, to each holder of a certificate representing shares of Common Stock) in accordance with Section 26 hereof. The Rights Agent shall be fully protected in relying on any such certificate and on any adjustment therein contained. Section 13. CONSOLIDATION, MERGER OR SALE OF ASSETS OR EARNING POWER. (a) In the event that, following the earlier of the Distribution Date and the Stock Acquisition Date, directly or indirectly, (x) the Company shall consolidate with, or merge with and into, any other Person (other than a Subsidiary of the Company in a transaction that complies with Section 11(o) hereof), and the Company shall not be the continuing or surviving corporation of such consolidation or merger, (y) any Person (other than a Subsidiary of the Company in a transaction that complies with Section 11(o) hereof) shall merge with and into the Company, and the Company shall be the continuing or surviving corporation of such merger and, in connection with such merger, all or part of the Common Stock shall be changed into or exchanged for stock or other securities of any other Person or cash or any other property, or (z) the Company shall sell or otherwise transfer (or one or more of its Subsidiaries shall sell or otherwise transfer), in one transaction or a series of related transactions, assets, cash flow or earning power aggregating more than 50% of the assets, cash flow or earning power of the Company -19- and its Subsidiaries (taken as a whole) to any other Person or Persons (other than a Subsidiary of the Company in a transaction that complies with Section 11(o) hereof), then, and in each such case, proper provision shall be made so that: (i) each holder of a Right, except as provided in Section 7(e) hereof, shall thereafter have the right to receive, upon the exercise thereof at the then current Purchase Price multiplied by the number of shares of Common Stock for which a Right is then exercisable (without taking into account any adjustment previously made pursuant to Section 11(a) (ii) or 11(a) (iii)), in accordance with the terms of this Agreement, such number of validly authorized and issued, fully paid and nonassessable shares of freely tradeable Common Stock of the Principal Party (as hereinafter defined), not subject to any rights of call or first refusal, liens, encumbrances or other claims, as shall be equal to the result obtained by (1) multiplying the then current Purchase Price by the number of shares of Common Stock for which a Right is then exercisable (without taking into account any adjustment previously made pursuant to Section 11(a) (ii) or 11(a) (iii)) and dividing that product by (2) 75% of the current market price (determined pursuant to Section 11(d) (i) hereof) per share of the Common Stock of such Principal Party on the date of consummation of such consolidation, merger, sale or transfer; (ii) the Principal Party shall thereafter be liable for, and shall assume, by virtue of such consolidation, merger, sale or transfer, all the obligations and duties of the Company pursuant to this Agreement; (iii) the term "Company" shall thereafter be deemed to refer to such Principal Party, it being specifically intended that the provisions of Section 11 hereof shall apply to such Principal Party; (iv) such Principal Party shall take such steps (including, but not limited to, the authorization and reservation of a sufficient number of shares of its Common Stock to permit exercise of all outstanding Rights in accordance with this Section 13(a)) in connection with such consummation as may be necessary to assure that the provisions hereof shall thereafter be applicable, as nearly as reasonably may be, in relation to the shares of its Common Stock thereafter deliverable upon the exercise of the Rights; and (v) the provisions of Section 11(a)(ii) hereof shall be of no effect following the fist occurrence of any event set forth in clauses (x), (y) or (z) of this Section 13. (b) "Principal Party" shall mean (1) in the case of any transaction described in clause (x) or (y) of the first sentence of Section 13(a), the Person that is the issuer of any securities into which shares of Common Stock of the Company are converted in such merger or consolidation, and if no securities are so issued, the Person that is the other party to the merger or consolidation; and (2) in the case of any transaction described in clause (z) of the first sentence of Section 13(a), the Person that is the party receiving the greatest portion of the assets or earning power transferred pursuant to such transaction or transactions; PROVIDED, HOWEVER, that in any such case, (x) if the Common Stock of such Person is not at such time and has not been continuously over the preceding 12-month period -20- registered under Section 12 of the Exchange Act, and such person is a direct or indirect Subsidiary of another Person the Common Stock of which is and has been so registered, "Principal Party" shall refer to such other Person; and (y) in case such Person is a Subsidiary, directly or indirectly, of more than one Person, the Common Stocks of two or more of which are and have been so registered, "Principal Party" shall refer to whichever of such Persons is the issuer of the Common Stock having the greatest aggregate market value. (c) The Company shall not consummate any such consolidation, merger, sale or transfer unless the Principal Party shall have a sufficient number of authorized shares of its Common Stock which have not been issued or reserved for issuance to permit the exercise in full of the Rights in accordance with this Section 13 and unless prior thereto the Company and such Principal Party shall have executed and delivered to the Rights Agent a supplemental agreement providing for the terms set forth in paragraphs (a) and (b) of this Section 13 and further providing that, as soon as practicable after the date of any consolidation, merger or sale of assets mentioned in paragraph (a) of this Section 13, the Principal Party will: (i) prepare and file a registration statement under the Act with respect to the Rights and the securities purchasable upon exercise of the Rights on an appropriate form, will use its best efforts to cause such registration statement to (A) become effective as soon as practicable after such filing and (B) to remain effective (with a prospectus at all times meeting the requirements of the Act) until the Expiration Date; (ii) take all such other action as may be necessary to enable the Principal Party to issue the securities purchasable upon exercise of the Rights, including but not limited to the registration or qualification of such securities under all requisite securities laws of jurisdictions of the various states and the listing of such securities on such exchanges and trading markets as may be necessary or appropriate; and (iii) will deliver to holders of the Rights historical financial statements for the Principal Party and each of its Affiliates which comply in all respects with the requirements for registration on Form 10 under the Exchange Act. The provisions of this Section 13 shall similarly apply to successive mergers or consolidations or sales or other transfers. If any event described in Section 13 (a) (x), (y) or (z) shall occur at any time after the occurrence of a Section 11(a) (ii) Event, the Rights which have not theretofore been exercised shall thereafter become exercisable in the manner described in Section 13 (a). Section 14. FRACTIONAL RIGHTS AND FRACTIONAL SHARES. (a) The Company shall not issue fractions of Rights or distribute Right -21- Certificates which evidence fractional Rights. In lieu of such fractional Rights, there shall be paid to the registered holders of the Right Certificates with regard to which such fractional Rights would otherwise be issuable, an amount in cash equal to the same fraction of the current market value of a whole Right. For the purposes of this Section 14(a), the current market value of a whole Right shall be the closing price of the Rights for the Trading Day immediately prior to the date on which such fractional Rights would have been otherwise issuable. The closing price of the Rights for any day shall be the last sale price, regular way, or, in case no such sale takes place on such day, the average of the closing bid and asked prices, regular way, in either case as reported in the principal consolidated transaction reporting system with respect to securities listed or admitted to trading on the New York Stock Exchange or, if the Rights are not listed or admitted to trading on the New York Stock Exchange, as reported in the principal consolidated transaction reporting system with respect to securities listed on the principal national securities exchange on which the Rights are listed or admitted to trading or, if the Rights are not listed or admitted to trading on any national securities exchange, the last quoted price, or, if not so quoted, the average of the high bid and low asked prices in the over-the-counter market, as reported by NASDAQ or such other system then in use or, if on any such date the Rights are not quoted by any such organization, the average of the closing bid and asked prices as furnished by a professional market maker making a market in the Rights selected by the Board of Directors of the Company. If on any such date no such market maker is making a market in the Rights the fair value of the Rights on such date as determined in good faith by the Board of Directors of the Company shall be used and shall be conclusive for all purposes. (b) The Company shall not issue fractions of shares of Common Stock upon exercise of the Rights or distribute certificates which evidence fractional shares of Common Stock. In lieu of fractional shares of Common Stock, the Company shall pay to the registered holders of Right Certificates at the time such Right Certificates are exercised as herein provided an amount in cash equal to the same fraction of the current market value of one share of Common Stock. For purposes of this Section 14(b), the current market value of one share of Common Stock shall be the closing price of a share of Common Stock (as determined pursuant to Section 11(d) hereof) for the Trading Day immediately prior to the date of such exercise. (c) The holder of a Right by the acceptance of the Rights expressly waives his right to receive any fractional Rights or any fractional share upon exercise of Rights. Section 15. RIGHTS OF ACTION. All rights of action in respect of this Agreement are vested in the respective registered holders of the Right Certificates (and, prior to the Distribution Date, the registered holders of Common Stock) and any registered holder of any Right Certificate (or, prior to the Distribution Date, of the Common Stock), without the consent of the Rights Agent or of the holder of any other Right Certificate (or, prior to the Distribution Date, of the Common Stock), may, in his own behalf and for his own benefit, enforce, and may institute and maintain any suit, action or proceeding against the Company to enforce, or otherwise act in respect of, his right to exercise the Rights evidenced by such Right Certificate in the manner provided in such Right Certificate and in this Agreement. Without limiting the foregoing or any -22- remedies available to the holders of Rights, it is specifically acknowledged that the holders of Rights would not have an adequate remedy at law for any breach of this Agreement and will be entitled to specific performance of the obligations under, and injunctive relief against actual or threatened violations of the obligations of, any Person subject to this Agreement. Section 16. AGREEMENT OF RIGHT HOLDERS. Every holder of a Right by accepting the same consents and agrees with the Company and the Rights Agent and with every other holder of a Right that: (a) prior to the Distribution Date, the Rights will be transferable only in connection with the transfer of Common Stock; (b) after the Distribution Date, the Right Certificates are transferable only on the registry books of the Rights Agent if surrendered at the principal office or offices of the Rights Agent designated for such purposes, duly endorsed or accompanied by a proper instrument of transfer and with the appropriate certificates fully executed; (c) subject to Section 6(a) and Section 7(f) hereof, the Company and the Rights Agent may deem and treat the Person in whose name the Right Certificate (or, prior to the Distribution Date, the associated Common Stock certificate) is registered as the absolute owner thereof and of the Rights evidenced thereby (notwithstanding any notations of ownership or writing on the Right Certificates or the associated Common Stock certificate made by anyone other than the Company or the Rights Agent) for all purposes whatsoever, and neither the Company nor the Rights Agent, subject to the last sentence of Section 7(e) hereof, shall be affected by any notice to the contrary; and (d) notwithstanding anything in this Agreement to the contrary, neither the Company nor the Rights Agent shall have any liability to any holder of a Right or other Person as a result of its inability to perform any of its obligations under this Agreement by reason of any preliminary or permanent injunction or other order, decree or ruling issued by a court of competent jurisdiction or by a governmental, regulatory or administrative agency or commission, or any statute, rule, regulation or executive order promulgated or enacted by any governmental authority prohibiting or otherwise restraining performance of such obligation; PROVIDED, HOWEVER, the Company must use its best efforts to have any such order, decree or ruling lifted or otherwise overturned as soon as possible. Section 17. RIGHT CERTIFICATE HOLDER NOT DEEMED A STOCKHOLDER. No holder, as such, of any Right Certificate shall be entitled to vote, receive dividends or be deemed for any purpose the holder of the number of shares of Common Stock or any other securities of the Company which may at any time be issuable on the exercise of the Rights represented thereby, nor shall anything contained herein or in any Right Certificate be construed to confer upon the holder of any Right Certificate, as such, any of the rights of a stockholder of the Company or any right to vote for the election of directors or upon any matter submitted to stockholders at any meeting thereof, or to give or withhold consent to any corporate action, or to receive notice of meetings or other actions affecting stockholders (except as provided in Section 25), or to receive -23- dividends or subscription rights, or otherwise, until the Right or Rights evidenced by such Right Certificate shall have been exercised in accordance with the provisions hereof. Section 18. CONCERNING THE RIGHTS AGENT. (a) The Company agrees to pay to the Rights Agent reasonable compensation for all services rendered by it hereunder and, from time to time, on demand of the Rights Agent, its reasonable expenses and counsel fees and disbursements and other disbursements incurred in the administration and execution of this Agreement and the exercise and performance of its duties hereunder. The Company also agrees to indemnify the Rights Agent for, and to hold it harmless against, any loss, liability, or expense, incurred without negligence, bad faith or willful misconduct on the part of the Rights Agent, for anything done or omitted by the Rights Agent in connection with the acceptance and administration of this Agreement, including the costs and expenses of defending against any claim of liability. (b) The Rights Agent shall be protected and shall incur no liability for or in respect of any action taken, suffered or omitted by it in connection with its administration of this Agreement in reliance upon any Right Certificate or certificate for Common Stock or for other securities of the Company, instrument of assignment or transfer, power of attorney, endorsement, affidavit, letter, notice, direction, consent, certificate, statement, or other paper or document believed by it to be genuine and to be signed, executed and, where necessary, verified or acknowledged, by the proper Person or Persons. Section 19. MERGER OR CONSOLIDATION OR CHANGE OF NAME OF RIGHTS AGENT. (a) Any corporation into which the Rights Agent or any successor Rights Agent may be merged or with which it may be consolidated, or any corporation resulting from any merger or consolidation to which the Rights Agent or any successor Rights Agent shall be a party, or any corporation succeeding to the corporate trust or stock transfer business of the Rights Agent or any successor Rights Agent, shall be the successor to the Rights Agent under this Agreement without the execution or filing of any paper or any further act on the part of any of the parties hereto, provided that such corporation would be eligible for appointment as a successor Rights Agent under the provisions of Section 21. In case at the time such successor Rights Agent shall succeed to the agency created by this Agreement, any of the Right Certificates shall have been countersigned but not delivered, any such successor Rights Agent may adopt the countersignature of the predecessor Rights Agent and deliver such Right Certificates so countersigned; and in case at that time any of the Right Certificates shall not have been countersigned, any successor Rights Agent may countersign such Right Certificates either in the name of the predecessor Rights Agent or in the name of the successor Rights Agent; and in all such cases such Right Certificates shall have the full force provided in the Right Certificates and in this Agreement. (b) In case at any time the name of the Rights Agent shall be changed and at such time any of the Right Certificates shall have been countersigned but not delivered, -24- the Rights Agent may adopt the countersignature under its prior name and deliver Right Certificates so countersigned; and in case at that time any of the Right Certificates shall not have been countersigned, the Rights Agent may countersign such Right Certificates either in its prior name or in its changed name; and in all such cases such Right Certificates shall have the full force provided in the Right Certificates and in this Agreement. Section 20. DUTIES OF RIGHTS AGENT. The Rights Agent undertakes the duties and obligations imposed by this Agreement upon the following terms and conditions, by all of which the Company and the holders of Right Certificates, by their acceptance thereof, shall be bound: (a) The Rights Agent may consult with legal counsel (who may be legal counsel for the Company), and the opinion of such counsel shall be full and complete authorization and protection to the Rights Agent as to any action taken or omitted by it in good faith and in accordance with such opinion. (b) Whenever in the performance of its duties under this Agreement the Rights Agent shall deem it necessary or desirable that any fact or matter (including, without limitation, the identity of any "Acquiring Person" and the determination of "current market price" and Common Stock Equivalent) be proved or established by the Company prior to taking or suffering any action hereunder, such fact or matter (unless other evidence in respect thereof be herein specifically prescribed) may be deemed to be conclusively proved and established by a certificate signed by the Chairman of the Board, the President or any Vice President and by the Treasurer or any Assistant Treasurer or the Secretary or any Assistant Secretary of the Company and delivered to the Rights Agent; and such certificate shall be full authorization to the Rights Agent for any action taken or suffered in good faith by it under the provisions of this Agreement in reliance upon such certificate. (c) The Rights Agent shall be liable hereunder only for its own negligence, bad faith or willful misconduct. (d) The Rights Agent shall not be liable for or by reason of any of the statements of fact or recitals contained in this Agreement or in the Right Certificates (except its countersignature thereof) or be required to verify the same, but all such statements and recitals are and shall be deemed to have been made by the Company only. (e) The Rights Agent shall not be under any responsibility in respect of the validity of this Agreement or the execution and delivery hereof (except the due execution hereof by the Rights Agent) or in respect of the validity or execution of any Right Certificate (except its countersignature thereof); nor shall it be responsible for any breach by the Company of any covenant or condition contained in this Agreement or in any Right Certificate; nor shall it be responsible for any change in the exercisability of the Rights (including the Rights becoming void pursuant to Section 7(e) hereof) or any adjustment in the terms of the Rights (including the manner, method or amount thereof) provided for in Sections 3, 11, 13, 23 or 24, or the ascertaining of the existence of facts -25- that would require any such adjustment (except with respect to the exercise of Rights evidenced by Right Certificates after actual notice of any such adjustment); nor shall it by any act hereunder be deemed to make any representation or warranty as to the authorization or reservation of any shares of Common Stock to be issued pursuant to this Agreement or any Right Certificate or as to whether any shares of Common Stock will, when issued, be validly authorized and issued, fully paid and nonassessable. (f) The Company agrees that it will perform, execute, acknowledge and deliver or cause to be performed, executed, acknowledged and delivered all such further and other acts, instruments and assurances as may reasonably be required by the Rights Agent for the carrying out or performing by the Rights Agent of the provisions of this Agreement. (g) The Rights Agent is hereby authorized and directed to accept instructions with respect to the performance of its duties hereunder from the Chairman of the Board, the President or any Vice President or the Secretary or any Assistant Secretary or the Treasurer or any Assistant Treasurer of the Company, and to apply to such officers for advice or instructions in connection with its duties, and it shall not be liable for any action taken or suffered to be taken by it in good faith in accordance with instructions of any such officer. (h) The Rights Agent and any shareholder, director, officer or employee of the Rights Agent may buy, sell or deal in any of the Rights or other securities of the Company or become pecuniarily interested in any transaction in which the Company may be interested, or contract with or lend money to the Company or otherwise act as fully and freely as though it were not the Rights Agent under this Agreement. Nothing herein shall preclude the Rights Agent from acting in any other capacity for the Company or for any other legal entity. (i) The Rights Agent may execute and exercise any of the rights or powers hereby vested in it or perform any duty hereunder either itself or by or through its attorneys or agents, and the Rights Agent shall not be answerable or accountable for any act, default, neglect or misconduct of any such attorneys or agents or for any loss to the Company resulting from any such act, default, neglect or misconduct, provided reasonable care was exercised in the selection and continued employment thereof. (j) No provision of this Agreement shall require the Rights Agent to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder or in the exercise of its rights if there shall be reasonable grounds for believing that repayment of such funds or adequate indemnification against such risk or liability is not reasonably assured to it. (k) If, with respect to any Right Certificate surrendered to the Rights Agent for exercise or transfer, the certificate attached to the form of assignment or form of election to purchase, as the case may be, has either not been completed or indicates an affirmative response to any item therein, the Rights Agent shall not take any further -26- action with respect to such requested exercise or transfer without first consulting with the Company. Section 21. CHANGE OF RIGHTS AGENT. The Rights Agent or any successor Rights Agent may resign and be discharged from its duties under this Agreement upon 30 days' notice in writing mailed to the Company and to each transfer agent of the Common Stock by registered or certified mail and to the holders of the Right Certificates by first-class mail. The Company may remove the Rights Agent or any successor Rights Agent upon 30 days' notice in writing, mailed to the Rights Agent or successor Rights Agent, as the case may be, and to each transfer agent of the Common Stock by registered or certified mail and to the holders of the Right Certificates by first-class mail. If the Rights Agent shall resign or be removed or shall otherwise become incapable of acting, the Company shall appoint a successor to the Rights Agent. If the Company shall fail to make such appointment within a period of 30 days after such removal or after it has been notified in writing of such resignation or incapacity by the resigning or incapacitated Rights Agent or by the holder of a Right Certificate (who shall, with such notice, submit his Right Certificate for inspection by the Company), then the registered holder of any Right Certificate may apply to any court of competent jurisdiction for the appointment of a new Rights Agent. Any successor Rights Agent, whether appointed by the Company or by such a court, shall be (a) a corporation organized and doing business under the laws of the United States or of any state of the United States, in good standing, having a principal office in the State of Connecticut or New York, which is authorized under such laws to exercise stock transfer or corporate trust powers and is subject to supervision or examination by federal or state authority and which has at the time of its appointment as Rights Agent a combined capital and surplus of at least $50,000,000 or (b) an Affiliate of a corporation described in clause (a) of this sentence. After appointment, the successor Rights Agent shall be vested with the same powers, rights, duties and responsibilities as if it had been originally named as Rights Agent without further act or deed; but the predecessor Rights Agent shall deliver and transfer to the successor Rights Agent any property at the time held by it hereunder, and execute and deliver any further assurance, conveyance, act or deed necessary for that purpose. Not later than the effective date of any such appointment, the Company shall file notice thereof in writing with the predecessor Rights Agent and each transfer agent of the Common Stock and mail a notice thereof in writing to the registered holders of the Right Certificates. Failure to give any notice provided for in this Section 21, however, or any defect therein, shall not affect the legality or validity of the resignation or removal of the Rights Agent or the appointment of the successor Rights Agent, as the case may be. Section 22. ISSUANCE OF NEW RIGHT CERTIFICATES. Notwithstanding any of the provisions of this Agreement or of the Rights to the contrary, the Company may, at its option, issue new Right Certificates evidencing Rights in such form as may be approved by its Board of Directors to reflect any adjustment or change in the Purchase Price and the number or kind or class of shares of stock or other securities or property purchasable under the Right Certificates made in accordance with the provisions of this Agreement. In addition, in connection with the issuance or sale of shares of Common Stock following the Distribution Date and prior to the earliest of the redemption, exchange or expiration of the Rights, the Company (a) shall, with respect to shares of Common Stock so issued or sold pursuant to the exercise of employee stock options or under or to any employee plan, profit sharing trust or other arrangement outstanding, granted or awarded as of the Distribution Date, or upon the exercise, conversion or exchange of -27- securities issued by the Company prior to such date, and (b) may, in any other case, if deemed necessary or appropriate by a majority of Continuing Directors, issue Right Certificates representing the appropriate number of Rights in connection with such issuance or sale; PROVIDED, HOWEVER, that (i) no such Right Certificate shall be issued if, and to the extent that, the Company shall be advised by counsel that such issuance would create a significant risk of material adverse tax consequences to the Company or the person to whom such Right Certificate would be issued, and (ii) no such Right Certificate shall be issued if, and to the extent that, appropriate adjustment shall otherwise have been made in lieu of the issuance thereof. Section 23. REDEMPTION. (a) The Board of Directors of the Company may, at its option, at any time prior to the earlier of (i) the close of business on the tenth Business Day after the Stock Acquisition Date (or such later date as determined by the Company in accordance with Section 27 hereof) or (ii) the Final Expiration Date, redeem all but not less than all the then outstanding Rights at a redemption price of $.00l per Right appropriately adjusted to reflect any stock split, stock dividend, reclassification or similar transaction occurring after the date hereof (such redemption price being hereinafter referred to as the "Redemption Price"); PROVIDED, HOWEVER, that if the Board of Directors of the Company authorizes redemption of the Rights at or after the time a Person becomes an Acquiring Person, then there must be Continuing Directors then in office and such authorization shall require the concurrence of a majority of such Continuing Directors. Notwithstanding anything in this Agreement to the contrary, the Rights shall not be exercisable after the first occurrence of a Section 11(a) (ii) Event until such time as the Company's right of redemption hereunder has expired. The Company may, at its option, pay the Redemption Price in cash, shares of Common Stock (based on the "current market price," as defined in Section 11(d) hereof, of the Common Stock at the time of redemption) or any other form of consideration deemed appropriate by the Board of Directors. (b) Immediately upon the action of the Board of Directors of the Company ordering the redemption of the Rights and without any further action and without any notice, the right to exercise the Rights will terminate and the only right thereafter of the holders of Rights shall be to receive the Redemption Price for each Right so held. Promptly after the action of the Board of Directors ordering the redemption of the Rights, the Company shall give notice of such redemption to the Rights Agent and the holders of the then outstanding Rights by mailing such notice to all such holders at their last addresses as they appear upon the registry books of the Rights Agent or, prior to the Distribution Date, on the registry books of the Transfer Agent for the Common Stock. Any notice which is mailed in the manner herein provided shall be deemed given, whether or not the holder receives the notice. Each such notice of redemption will state the method by which the payment of the Redemption Price will be made. Neither the Company nor any of its Subsidiaries may redeem, acquire or purchase for value any Rights at any time in any manner other than that specifically set forth in this Section 23 or in Section 24 hereof, and other than in connection with the purchase or other acquisition of shares of Common Stock prior to the Distribution Date. -28- Section 24. EXCHANGE. (a) The Board of Directors of the Company may, at its option, at any time after any Person becomes an Acquiring Person, exchange all or part of the then outstanding and exercisable Rights (which shall not include Rights that have become void pursuant to the provisions of Section 7(e) hereof) for Common Stock at an exchange ratio of one share of Common Stock per Right, appropriately adjusted to reflect any stock split, stock dividend or similar transaction occurring after the date hereof (such exchange ratio being hereinafter referred to as the "Exchange Ratio"). Notwithstanding the foregoing, the Board of Directors of the Company shall not be empowered to effect such exchange at any time after any Person (other than the Company, any Subsidiary of the Company, any employee benefit plan of the Company or any such Subsidiary, or any entity holding Common Stock for or pursuant to the terms of any such plan), together with all Affiliates and Associates of such Person, becomes the Beneficial Owner of 50% or more of the Common Stock then outstanding. (b) Immediately upon the action of the Board of Directors of the Company ordering the exchange of any Rights pursuant to subsection (a) of this Section 24 and without any further action and without any notice, the right to exercise such Rights shall terminate and the only right thereafter of a holder of such Rights shall be to receive that number of shares of Common Stock equal to the number of such Rights held by such holder multiplied by the Exchange Ratio. The Company shall promptly give public notice of any such exchange; provided, however, that the failure to give, or any defect in, such notice shall not affect the validity of such exchange. The Company promptly shall mail a notice of any such exchange to all of the holders of such Rights at their last addresses as they appear upon the registry books of the Rights Agent. Any notice which is mailed in the manner herein provided shall be deemed given, whether or not the holder receives the notice. Each such notice of exchange will state the method by which the exchange of the Common Stock for Rights will be effected and, in the event of any partial exchange, the number of Rights which will be exchanged. Any partial exchange shall be effected pro rata based on the number of Rights (other than Rights which have become void pursuant to the provisions of Section 7(e) hereof) held by each holder of Rights. (c) In the event that there shall not be sufficient shares of Common Stock issued but not outstanding or authorized but unissued to permit any exchange of rights as contemplated in accordance with this Section 24, the Company shall take all such action as may be necessary to authorize additional shares of Common Stock for issuance upon exchange of the Rights. (d) The Company shall not be required to issue fractions of shares of Common Stock or to distribute certificates which evidence fractional shares of Common Stock. In lieu of such fractional shares of Common Stock, there shall be paid to the registered holders of the Rights Certificates with regard to which such fractional shares of Common Stock would otherwise be issuable, an amount in cash equal to the same -29- fraction of the current market value of a whole share of Common Stock. For the purposes of this subsection (d), the current market price of a whole share of Common Stock shall be the closing price of a share of Common Stock (as determined pursuant to Section 11(d) hereof) for the Trading Day immediately prior to the date of exchange pursuant to this Section 24. (e) In any exchange pursuant to this Section 24, the Company, at its option, may substitute Common Stock Equivalents for each share of Common Stock, as appropriately adjusted to reflect stock splits, stock dividends and other similar transactions after the date hereof. In such event, "Event Date" as provided in the definition of Common Stock Equivalents in Section 1(g) hereof shall mean the Trading Day immediately prior to the date of exchange pursuant to this Section 24. Section 25. NOTICE OF PROPOSED ACTIONS. (a) In case the Company shall propose, at any time after the Distribution Date, (i) to pay any dividend payable in stock of any class to the holders of Common Stock or to make any other distribution to the holders of Common Stock (other than a regular quarterly cash dividend out of earnings or retained earnings of the Company), or (ii) to offer to the holders of its Common Stock rights or warrants to subscribe for or to purchase any additional shares of Common Stock or shares of stock of any class or any other securities, rights or options, or (iii) to effect any reclassification of its Common Stock (other than a reclassification involving only the subdivision of outstanding shares of Common Stock), or (iv) to effect any consolidation or merger into or with any other Person (other than the Company and/or any of its Subsidiaries in one or more transactions each of which complies with Section 11(o) hereof), or to effect any sale or other transfer (or to permit one or more of its Subsidiaries to effect any sale or other transfer), in one transaction or a series of related transactions, of more than 50% of the assets, cash flow or earning power of the Company and its Subsidiaries (taken as a whole) to any other Person or Persons (other than the Company and/or any of its Subsidiaries in one or more transactions each of which complies with Section 11(o) hereof), or (v) to effect the liquidation, dissolution or winding up of the Company, then, in each such case, the Company shall give to each holder of a Right, to the extent feasible and in accordance with Section 26, a notice of such proposed action, which shall specify the record date for the purposes of such stock dividend, distribution of rights or warrants, or the date on which such reclassification, consolidation, merger, sale, transfer, liquidation, dissolution, or winding up is to take place and the date of participation therein by the holders of Common Stock, if any such date is to be fixed, and such notice shall be so given in the case of any action covered by clause (i) or (ii) above at least 20 days prior to the record date for determining holders of the Common Stock for purposes of such action, and in the case of any such other action, at least 20 days prior to the date of the taking of such proposed action or the date of participation therein by the holders of Common Stock, whichever shall be the earlier. The failure to give notice required by this Section 25 or any defect therein shall not affect the legality or validity of the action taken by the Company or the vote upon any such action. -30- (b) In case any Section 11(a) (ii) Event shall occur, then, in any such case, the Company shall as soon as practicable thereafter give to each holder of a Right Certificate, to the extent feasible and in accordance with Section 26 hereof, a notice of the occurrence of such event, which shall specify the event and the consequences of the event to holders of Rights under Section 11(a)(ii) hereof. Section 26. NOTICES. Notices or demands authorized by this Agreement to be given or made by the Rights Agent or by the holder of any Right Certificate to or on the Company shall be sufficiently given or made if sent by first-class mail, postage prepaid, addressed (until another address is filed in writing with the Rights Agent) as follows: Patriot National Bancorp, Inc. 900 Bedford Street Stamford, Connecticut 06901 Attention: Corporate Secretary Subject to the provisions of Section 21, any notice or demand authorized by this Agreement to be given or made by the Company or by the holder of any Right Certificate to or on the Rights Agent shall be sufficiently given or made if sent by first-class mail, postage prepaid, addressed (until another address is filed in writing with the Company) as follows: Registrar and Transfer Company 10 Commerce Drive Cranford, New Jersey 07016 Attention: Michael Adamo Notices or demands authorized by this Agreement to be given or made by the Company or the Rights Agent to the holder of any Right Certificate (or, prior to the Distribution Date, to the holder of any certificate representing shares of Common Stock) shall be sufficiently given or made if sent by first-class mail, postage prepaid, addressed to such holder at the address of such holder as shown on the registry books of the Company. Section 27. SUPPLEMENTS AND AMENDMENTS. Prior to the Distribution Date and subject to the penultimate sentence of this Section 27, the Company and the Rights Agent shall, if the Company so directs, supplement or amend any provision of this Agreement (whether or not adverse to the holders of Rights) without the approval of any holders of Rights. From and after the Distribution Date and subject to the penultimate sentence of this Section 27, the Company and the Rights Agent shall, if the Company so directs, supplement or amend this Agreement without the approval of any holders of Rights in order (i) to cure any ambiguity, (ii) to correct or supplement any provision contained herein which may be defective or inconsistent with any other provisions herein, (iii) to shorten or lengthen any time period hereunder, or reinstate any expired redemption rights, or (iv) to change or supplement the provisions hereof in any manner which the Company may deem necessary or desirable and which shall not materially adversely affect the interests of the holders of Rights Certificates (other than an Acquiring Person or an -31- Affiliate or Associate of an Acquiring Person); PROVIDED, HOWEVER, that in the case of any amendment or supplement described in clauses (iii) and (iv) of this Section 27, such supplement or amendment shall be effective only if there are Continuing Directors then in office and shall require the concurrence of a majority of such Continuing Directors if such supplement or amendment occurs at or after the time a Person becomes an Acquiring Person. Upon the delivery of a certificate from an appropriate officer of the Company which states that the proposed supplement or amendment is in compliance with the terms of this Section 27, the Rights Agent shall execute such supplement or amendment. Notwithstanding anything contained in this Agreement to the contrary, no supplement or amendment shall be made which decreases the Redemption Price. Prior to the Distribution Date, the interests of the holders of Rights shall be deemed coincident with the interests of the holders of Common Stock. Section 28. SUCCESSORS. All the covenants and provisions of this Agreement by or for the benefit of the Company or the Rights Agent shall bind and inure to the benefit of their respective successors and assigns hereunder. Section 29. DETERMINATIONS AND ACTIONS BY THE BOARD OF DIRECTORS, ETC. For all purposes of this Agreement, any calculation of the number of shares of Common Stock outstanding at any particular time, including for purposes of determining the particular percentage of such outstanding shares of Common Stock of which any Person is the Beneficial Owner, shall be made in accordance with the last sentence of Rule l3d-3(d)(1)(i) of the General Rules and Regulations under the Exchange Act. The Board of Directors of the Company (with, where specifically provided for herein, the concurrence of the Continuing Directors) shall have the exclusive power and authority to administer this Agreement and to exercise all rights and powers specifically granted to the Board (with, where specifically provided for herein, the concurrence of the Continuing Directors) or to the Company, or as may be necessary or advisable in the administration of this Agreement, including without limitation, the right and power to (i) interpret the provisions of this Agreement and (ii) make all determinations deemed necessary or advisable for the administration of this Agreement (including a determination to redeem or not redeem the Rights, to exchange or not to exchange the Rights or to amend the Agreement). All such actions, calculations, interpretations and determinations (including, for purposes of clause (y) below, all omissions with respect to the foregoing) which are done or made by the Board (or, where specifically provided for herein, by the Continuing Directors) in good faith, shall (x) be final, conclusive and binding on the Company, the Rights Agent, the holders of the Rights and all other parties, and (y) not subject to the Board or the Continuing Directors to any liability to the holders of the Right. Section 30. BENEFITS OF THIS AGREEMENT. Nothing in this Agreement shall be construed to give to any Person other than the Company, the Rights Agent and the registered holders of the Right Certificates (and, prior to the Distribution Date, the Common Stock) any legal or equitable right, remedy or claim under this Agreement; but this Agreement shall be for the sole and exclusive benefit of the Company, the Rights Agent and the registered holders of the Right Certificates (and, prior to the Distribution Date, the Common Stock). Section 31. SEVERABILITY. If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction or other authority to be invalid, void or -32- unenforceable, the remainder of the terms, provisions, covenants and restrictions of this Agreement shall remain in full force and effect and shall in no way be affected, impaired or invalidated; provided, however, that notwithstanding anything in this Agreement to the contrary, if any such term, provision, covenant or restriction is held by such court or authority to be invalid, void or unenforceable and the Board of Directors of the Company determines in its good faith judgment that severing the invalid language from this Agreement would adversely affect the purpose or effect of this Agreement, the right of redemption set forth in Section 23 hereof shall be reinstated and shall not expire until the close of business on the tenth Business Day following the date of such determination by the Board of Directors. Without limiting the foregoing, if any provision requiring a specific group of directors of the Company to act is held by any court of competent jurisdiction or other authority to be invalid, void or unenforceable, such determination shall then be made by the Board of Directors of the Company in accordance with applicable law and the Company's Certificate of Incorporation, as amended, and By-laws. Section 32. GOVERNING LAW. This Agreement, each Right and each Right Certificate issued hereunder shall be deemed to be a contract made under the laws of the State of New Jersey and for all purposes shall be governed by and construed in accordance with the laws of such state applicable to contracts to be made and performed entirely within such state. Section 33. COUNTERPARTS. This Agreement may be executed in any number of counterparts and each of such counterparts shall for all purposes be deemed to be an original, and all such counterparts shall together constitute one and the same instrument. Section 34. DESCRIPTIVE HEADINGS. The captions herein and in the table of contents hereto are included for convenience of reference only, do not constitute a part of this Agreement and shall be ignored in the construction and interpretation hereof. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed, all as of the day and year first above written. Attest: PATRIOT NATIONAL BANCORP, INC. By /s/ Sarah Allen By /s/ Charles F. Howell --------------------------- ---------------------------------- Name: Sarah Allen Name: Charles F. Howell Title: Assistant Vice President Title: President Attest: REGISTRAR AND TRANSFER COMPANY By /s/ Mary Rose Cascaes By /s/ William P. Tatler --------------------------- ---------------------------------- Name: Mary Rose Cascaes Name: William P. Tatler Title: Executive Vice President and Title: Vice President Assistant Secretary EXHIBIT A Form of Right Certificate Certificate No. R- ____________Rights NOT EXERCISABLE AFTER APRIL 19, 2014 OR EARLIER IF REDEEMED OR EXCHANGED BY THE COMPANY. THE RIGHTS ARE SUBJECT TO REDEMPTION, AT THE OPTION OF THE COMPANY, AT $.001 PER RIGHT, AND TO EXCHANGE AT THE OPTION OF THE COMPANY, ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT. AS DESCRIBED IN THE RIGHTS AGREEMENT, RIGHTS BENEFICIALLY OWNED BY (1) AN ACQUIRING PERSON OR ANY ASSOCIATE OR AFFILIATE THEREOF (AS SUCH TERMS ARE DEFINED IN THE RIGHTS AGREEMENT), (2) A TRANSFEREE OF AN ACQUIRING PERSON (OR OF ANY SUCH ASSOCIATE OR AFFILIATE) WHO BECOMES A TRANSFEREE AFTER THE ACQUIRING PERSON BECOMES SUCH, OR (3) UNDER CERTAIN CIRCUMSTANCES, A TRANSFEREE OF AN ACQUIRING PERSON (OR OF ANY SUCH ASSOCIATE OF AFFILIATE) WHO BECOMES A TRANSFEREE BEFORE OR CONCURRENTLY WITH THE ACQUIRING PERSON BECOMING SUCH, SHALL BECOME NULL AND VOID. RIGHT CERTIFICATE PATRIOT NATIONAL BANCORP, INC. This certifies that _________________________, or registered assigns, is the registered owner of the number of Rights set forth above, each of which entitles the owner thereof, subject to the terms, provisions and conditions of the Rights Agreement, dated as of April 19, 2004 (the "Rights Agreement"), between PATRIOT NATIONAL BANCORP, INC., a Connecticut corporation (the "Company"), and REGISTRAR AND TRANSFER COMPANY, a New Jersey corporation (the "Rights Agent"), to purchase from the Company at any time after the Distribution Date (as such term is defined in the Rights Agreement) and prior to 5:00 p.m. (Eastern time) on April 19, 2014 (unless such date is extended prior thereto by the Board of Directors) at the office or offices of the Rights Agent designated far such purpose, or its successors as Rights Agent, one fully paid, non-assessable share of Common Stock (the "Common Stock") of the Company, at a cash purchase price of $7.36 per share (the "Purchase Price"), upon presentation and surrender of this Right Certificate with the Form of Election to Purchase and the related Certificate on the reverse hereof duly executed. The number of Rights evidenced by this Right Certificate (and the number of shares which may be purchased upon exercise thereof) set forth above, and the Purchase Price per share set forth above, are the number and Purchase Price as of April 19, 2004. Upon the occurrence of a Section 11(a) (ii) Event (as such term is defined in the Rights Agreement), if the Rights evidenced by this Right Certificate are beneficially owned by (i) an Acquiring Person or an Affiliate or Associate of any such Acquiring Person (as such terms are defined in the Rights Agreement), (ii) a transferee of an Acquiring Person (or of any such Affiliate or Associate) who becomes a transferee after the Acquiring Person becomes such), or (iii) under certain circumstances specified in the Rights Agreement, a transferee of an Acquiring Person (or of any such Affiliate or Associate) who becomes a transferee before or concurrently with the Acquiring Person becoming such), such Rights shall become null and void and no holder of this Right Certificate shall have any right with respect to such Rights from and after the occurrence of such Section 11(a) (ii) Event. As provided in the Rights Agreement, the Purchase Price and the number and kind of shares of Common Stock or other securities which may be purchased upon the exercise of the Rights evidenced by this Right Certificate are subject to modification and adjustment upon the happening of certain events. This Right Certificate is subject to all of the terms, provisions and conditions of the Rights Agreement, which terms, provisions and conditions are hereby incorporated herein by reference and made a part hereof and to which Rights Agreement reference is hereby made for a full description of the rights, limitations of rights, obligations, duties and immunities hereunder of the Rights Agent, the Company and the holders of the Right Certificates, which limitations of rights include the temporary suspension of the exercisability of such Rights under the specific circumstances set forth in the Rights Agreement. Copies of the Rights Agreement are on file at the above-mentioned office of the Rights Agent and are also available upon written request to the Company. This Right Certificate, with or without other Right Certificates, upon surrender at the office or offices of the Rights Agent designated for such purpose, may be exchanged for another Right Certificate or Right Certificates of like tenor and date evidencing Rights entitling the holder to purchase a like aggregate number of shares of Common Stock as the Rights evidenced by the Right Certificate or Right Certificates surrendered shall have entitled such holder to purchase. If this Right Certificate shall be exercised in part, the holder shall be entitled to receive upon surrender hereof another Right Certificate or Right Certificates for the number of whole Rights not exercised. Subject to the provisions of the Rights Agreement, the Rights evidenced by this Certificate (i) may be redeemed by the Company at its option at a redemption price of $ .001 per Right or (ii) may be exchanged by the Company, at its option, for shares of the Company's Common Stock, par value $2.00 per share (or, in certain circumstances, Common Stock Equivalents (as such term is defined in the Rights Agreement). No fractional shares of Common Stock will be issued upon the exercise of any Right or Rights evidenced hereby, but in lieu thereof a cash payment will be made, as provided in the Rights Agreement. No holder of this Right Certificate shall be entitled to vote or receive dividends or be deemed for any purpose the holder of shares of Common Stock or of any other securities of the Company which may at any time be issuable on the exercise hereof, nor shall anything contained in the Rights Agreement or herein be construed to confer upon the holder hereof, as such, any of the rights of a stockholder of the Company or any right to vote for the election of directors or upon any matter submitted to stockholders at any meeting thereof, or to give or withhold consent to any corporate action, or, to receive notice of meetings or other actions affecting stockholders (except as provided in the Rights Agreement), or to receive dividends or subscription rights, or otherwise, until the Right or Rights evidenced by this Right Certificate shall have been exercised as provided in the Rights Agreement. This Right Certificate shall not be valid or obligatory for any purpose until it shall have been countersigned by the Rights Agent. WITNESS, the facsimile signature of the proper officers of the Company and its corporate seal. ATTEST: PATRIOT NATIONAL BANCORP, INC. - -------------------------- ----------------------------- Secretary Name: (Seal) Countersigned: [-------------------------] - --------------------------- as Rights Agent By ------------------------- Authorized Signature [FORM OF REVERSE SIDE OF RIGHT CERTIFICATE] FORM OF ASSIGNMENT (To be executed by the registered holder if such holder desires to transfer the Right Certificate.) FOR VALUE RECEIVED _______________________________________ hereby sells, assigns and transfers unto______________________________________________________________ (Please print name and address of transferee) ________________________________________________________________________________ this Right certificate, together with all right, title and interest therein, and does hereby irrevocably constitute and appoint __________________________ Attorney, to transfer the within Right Certificate on the books of the within-named Company, with full power of substitution. Dated: ______________, 20_. ----------------------------- Signature Guaranteed: Signature [FORM OF REVERSE SIDE OF RIGHT CERTIFICATE, CONTINUED] CERTIFICATE OF ASSIGNMENT The undersigned hereby certifies by checking the appropriate boxes that: (1) this Right Certificate _____ are/ _____ are not being sold, assigned or transferred by or on behalf of a Person who is or was an Acquiring Person or an Affiliate or Associate of any such Acquiring Person (as such terms are defined in the Rights Agreement); (2) after due inquiry and to the best knowledge of the undersigned, the Rights evidenced by this Right Certificate _____ are/ _____ are not being sold, assigned and transferred to a Person who is an Acquiring Person, an Affiliate or Associate of an Acquiring Person or a nominee of any such Acquiring Person, Affiliate or Associate. Dated: ____________, 20__ ---------------------------- Signature Signature Guaranteed: NOTICE THE SIGNATURES TO THE FOREGOING ASSIGNMENT AND CERTIFICATE MUST CORRESPOND TO THE NAME AS WRITTEN UPON THE FACE OF THIS RIGHT CERTIFICATE IN EVERY PARTICULAR, WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATSOEVER. FORM OF ELECTION TO PURCHASE (To be executed if holder desires to exercise Rights represented by the Right Certificate.) To: Patriot National Bancorp, Inc. The undersigned hereby irrevocably elects to exercise ___________________ Rights represented by this Right Certificate to purchase the shares at Common Stock issuable upon the exercise of the Rights (or such other securities of the Company or of any other person which may be issuable upon the exercise of the Rights) and requests that certificates for such shares be issued in the name of and delivered to: Please insert social security or other identifying number: ____________________ ________________________________________________________________________________ (Please print name and address) If such number of Rights shall not be all the Rights evidenced by this Right Certificate, a new Right Certificate for the balance of such Rights shall be registered in the name of and delivered to: Please insert social security or other identifying number: ____________________ ________________________________________________________________________________ (Please print name and address) Dated: _________________, 20__. --------------------------------- Signature Signature Guaranteed: CERTIFICATE FOR ELECTION TO PURCHASE The undersigned hereby certifies by checking the appropriate boxes that: (1) the Rights evidenced by this Right Certificate ____ are/ ____ are not being exercised by or on behalf of a Person who is or was an Acquiring Person or an Affiliate or Associate of any such Acquiring Person (as such terms are defined in the Rights Agreement); (2) after due inquiry and to the best knowledge of the undersigned, it _____ did/ ______ did not acquire the Rights evidenced by this Right Certificate from any Person who is, was or subsequently became an Acquiring Person or an Affiliate or Associate of an Acquiring Person. Dated: ___________, 20__. ----------------------------- Signature Signature Guaranteed: NOTICE THE SIGNATURE TO THE FOREGOING ELECTION TO PURCHASE AND CERTIFICATE MUST CORRESPOND TO THE NAME AS WRITTEN UPON THE FACE OF THIS RIGHT CERTIFICATE IN EVERY PARTICULAR, WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATSOEVER. EXHIBIT B PATRIOT NATIONAL BANCORP, INC. SUMMARY OF RIGHTS TO PURCHASE COMMON SHARES On April 15, 2004, the Board of Directors of Patriot National Bancorp, Inc. (the "Company") declared, effective as of April 19, 2004, a dividend distribution of one Right for each outstanding share of Common Stock of the Company. The dividend is payable on April 29, 2004 to the stockholders of record as of the close of business on such date (the "Record Date"). Each Right entitles the registered holder to purchase from the Company one share of the Company's Common Stock, $2.00 par value (the "Common Stock"), at a price of $7.36 (the "Purchase Price"), subject to adjustment. The description and terms of the Rights are set forth in a Rights Agreement, dated as of April 19, 2004 (the "Rights Agreement"), between the Company and Registrar and Transfer Company (the "Rights Agent"). The Rights will be evidenced, with respect to any of the Company's Common Stock certificates outstanding as of the Record Date, by such Common Stock certificate and this Summary until the earliest of (i) the tenth Business Day after a public announcement that a person or group of affiliated or associated persons acquired, or obtained the right to acquire, beneficial ownership of 15% or more of the outstanding shares of Common Stock of the Company (an "Acquiring Person"); (ii) the tenth Business Day (or such later day as may be determined by action of the Board of Directors of the Company prior to such time as any person becomes an Acquiring Person) after the date of the commencement of a tender or exchange offer by any person (other than the Company) if, upon consummation such person would be an Acquiring Person; and (iii) the tenth Business Day (or such later day as may be determined by action of the Board of Directors of the Company prior to such time as any person becomes an Acquiring Person) after the filing by any Person (other than the Company) of a registration statement under the Securities Act of 1933, as amended, with respect to a contemplated exchange offer to acquire (when added to any shares as to which such person is the beneficial owner immediately prior to such filing) beneficial ownership of 15% or more of the issued and outstanding shares of Common Stock (the earliest of such dates being called the "Distribution Date"). The date of announcement of the existence of an Acquiring Person referred to in clause (i) above is hereinafter referred to as the "Stock Acquisition Date." The Rights Agreement provides that, until the Distribution Date, the Rights will be transferred with and only with the Company's Common Stock. New Common Stock certificates issued after the Record Date upon transfer or new issuance of the Company's Common Stock will contain a notation incorporating the Rights Agreement by reference. Until the Distribution Date, the surrender for transfer of any of the Common Stock certificates outstanding as of the Record Date will also constitute the transfer of the Rights associated with the Common Stock represented by such certificate and the number of Rights associated with each share of Common Stock shall be proportionately adjusted in the event of any dividend in Common Stock on the Common Stock or subdivision, combination or reclassification of the Common Stock. As soon as practicable following the Distribution Date, separate certificates evidencing the Rights ("Right Certificates") will be mailed to holders of record of the Company's Common Stock as of the close of business on the Distribution Date and such separate certificates alone will evidence Rights. The Rights are not exercisable until the Distribution Date. The Rights will expire on April 19, 2014, unless earlier redeemed or exchanged by the Company as described below. The Purchase Price payable, and the number of shares of Common Stock or other securities or property issuable, upon exercise of the Rights are subject to adjustment from time to time to prevent dilution in the event of a stock dividend on, or a subdivision, combination or reclassification of, the Common Stock. The Company has agreed to reserve and keep available out of its currently authorized and unissued shares of Common Stock the number of shares of Common Stock that will be sufficient to permit to the maximum extent possible the exercise of all outstanding Rights. Since the Company currently does not have such number of shares available to place in reserve, the Company has undertaken to use its best efforts to amend its Certificate of Incorporation to increase the authorized number of shares to an amount sufficient to permit the exercise of all outstanding Rights. In the event the Company does not receive shareholder approval to amend its Certificate of Incorporation, the Rights Agreement provided that each holder of a Right shall, in the discretion of the Board of Directors, have a right to receive, upon exercise of the Rights, such number of Common Stock Equivalents, as defined in the Rights Agreement, or the maximum number of shares of Common Stock available for issuance to such holder at a reduced Purchase Price, which reflects a per share Purchase Price of 50% of current market value as determined in the Rights Agreement. In the event that any Person becomes an Acquiring Person, then ten Business Days after such date, each holder of a Right, other than the Acquiring Person (whose Rights would thereafter be null and void) and certain of its transferees, would thereafter have the right to receive upon exercise that number of shares of the Company's Common Stock having a market value of twice the exercise price of the Right (i.e., a 50% discount to market value); if insufficient share are available to satisfy the Right, the Company may substitute other consideration, as appropriate, or make an adjustment to the exercise price of the Right to achieve substantially the intended economic benefit to shareholders (other than the Acquiring Person) of the 50% discount. In the event that, following the earlier of the Distribution Date and the Stock Acquisition Date, the Company (i) merges with or into another Person and the Company either is not the surviving corporation or is the surviving corporation but all of its Common Stock is exchanged for cash or securities of the other Person, or (ii) sells more than 50% of its assets, cash flow or earning power to any Person, then each holder of a Right, other than an Acquiring Person (whose Rights would be null and void), would have the right to receive, upon the exercise thereof at the then current exercise price of the Right, that number of shares of common stock of the surviving company (or its parent company or other controlling entity) which at the time of such transaction would have a market value of four times the exercise price of the Right. -42- With certain exceptions, no adjustment in the Purchase Price will be required until cumulative adjustments require an adjustment of at least 1% in such Purchase Price. No fractional shares of Common Stock will be issued and, in lieu thereof, if necessary, an adjustment in cash will be made based on the market price of the Common Shares on the last trading date prior to the date of exercise. At any time prior to the earlier of (i) the tenth Business Day after the Stock Acquisition Date or (ii) April 19, 2014, the Company may redeem the Rights in whole, but not in part, at a price of $ .001 per Right (payable in cash, shares of Common Stock or other consideration), appropriately adjusted to reflect any stock split, stock dividend or similar transaction occurring after the date hereof (the "Redemption Price"). Immediately upon the action of the Company electing to redeem the Rights, the right to exercise the Rights will terminate and the only right of the holders of Rights will be to receive the Redemption Price. In the event that any Person becomes an Acquiring Person, the Company may exchange all or part of the Rights (other than those held by the Acquiring Person) for Common Stock at an exchange ratio of one share of Common Stock per Right (the "Exchange Ratio"), appropriately adjusted to reflect any stock split, stock dividend or similar transaction occurring after the date hereof. Immediately upon the action of the Company electing to exchange the Rights, the right to exercise the Rights will terminate and the only right of the holders of Rights will be to receive that number of shares of Common Stock determined by reference to the Exchange Ratio. Until a Right is exercised, the holder thereof, as such, will have no rights as a stockholder of the Company, including, without limitation, no right to vote or to receive dividends. The terms of the Rights may be amended by the Company and the Rights Agent, provided that following the Distribution Date, the amendment does not materially adversely affect the interests of the holders of the Rights (other than an Acquiring Person) and provided that no amendment shall be made which decreases the Redemption Price. A copy of the Rights Agreement is being filed with the Securities and Exchange Commission as an Exhibit to a Registration Statement on Form 8-A. A copy of the Rights Agreement will be available free of charge from the Company. This summary description of the Rights does not purport to be complete and is qualified in its entirety by reference to the Rights Agreement, which is incorporated herein by reference. -43- EX-4.2 7 a2156305zex-4_2.txt EXHIBIT 4.2 EXHIBIT 4.2 SUBSCRIPTION RIGHTS CERTIFICATE NO.: NUMBER OF RIGHTS: PATRIOT NATIONAL BANCORP, INC. SUBSCRIPTION RIGHTS CERTIFICATE THE TERMS AND CONDITIONS OF THE OFFERING ARE SET FORTH IN THE COMPANY'S PROSPECTUS DATED ________________, 2005 (THE "PROSPECTUS") AND ARE INCORPORATED HEREIN BY REFERENCE. COPIES OF THE PROSPECTUS ARE AVAILABLE UPON REQUEST FROM REGISTRAR AND TRANSFER COMPANY WHICH IS ACTING AS THE SUBSCRIPTION AGENT AND THE INFORMATION AGENT (THE "SUBSCRIPTION AGENT" AND THE "INFORMATION AGENT," AS APPLICABLE). CAPITALIZED TERMS USED HEREIN WITHOUT DEFINITION SHALL HAVE THE MEANINGS ASCRIBED TO SUCH TERMS IN THE PROSPECTUS. THIS SUBSCRIPTION RIGHTS CERTIFICATE (THE "SUBSCRIPTION RIGHTS CERTIFICATE") OR A NOTICE OF GUARANTEED DELIVERY MUST BE RECEIVED BY THE SUBSCRIPTION AGENT WITH PAYMENT IN FULL BEFORE 5:00 P.M., EASTERN TIME, ON _______________, 2005, UNLESS EXTENDED BY THE COMPANY TO A TIME NOT LATER THAN 5:00 P.M., EASTERN TIME, ON _______________, 2005 (IN EITHER CASE, THE "EXPIRATION TIME"). THIS SUBSCRIPTION RIGHTS CERTIFICATE IS NOT TRANSFERABLE AND MAY NOT BE COMBINED OR DIVIDED OR ASSIGNED TO ANY OTHER PERSON. The rights (the "Rights) represented by this Subscription Rights Certificate may be exercised, in whole or in part, by duly completing Part A. Before exercising Rights, Rights Holders are urged to read carefully and in their entirety the Prospectus and Instructions as to Use of Subscription Rights Certificates (the "Instructions"), additional copies of which are available from the Information Agent and the Subscription Agent. IMPORTANT: COMPLETE FORM A, AND IF APPLICABLE, SPECIAL DELIVERY INSTRUCTIONS, AND SIGN ON REVERSE SIDE. SUBSCRIPTION PRICE: $______ PER SHARE REGISTERED HOLDER: SPECIMEN The registered owner whose name is inscribed hereon (the "Rights Holder"), is entitled to subscribe for and purchase from the Company, at the Subscription Price, one share of the Company's Common Stock, $2.00 par value (the "Common Stock"), pursuant to the Basic Subscription Right (an "Underlying Share"), and two shares of such Common Stock pursuant to the Oversubscription Privilege ("Excess Shares"). If the Basic Subscription Right is exercised in full, for each Right evidenced hereby, upon the terms and subject to the conditions set forth in the Prospectus and the Instructions. Underlying Shares subscribed pursuant to the Basic Subscription Right and Excess Shares subscribed for pursuant to the Oversubscription Privilege shall be delivered upon receipt of this Subscription Rights Certificate, duly completed, and upon payment of the applicable Subscription Price, as soon as practicable after the Expiration Time and after all prorations and reductions contemplated by the terms of the Offering have been effected. - ------------------------------ ------------------------------- Angelo De Caro Philip Wolford Chairman and Chief Executive Officer Secretary YOU SHOULD BE AWARE THAT IF YOU CHOOSE TO EXERCISE LESS THAN ALL OF THE RIGHTS EVIDENCED HEREBY, THE BALANCE OF YOUR RIGHTS WILL PERMANENTLY EXPIRE ON THE EXPIRATION DATE. YOUR EXERCISE OF RIGHTS IS IRREVOCABLE ONCE YOU HAVE SUBMITTED THIS SUBSCRIPTION RIGHTS CERTIFICATE TO THE SUBSCRIPTION AGENT. HOWEVER, THE COMPANY RESERVES THE RIGHT TO POSTPONE, MODIFY OR CANCEL THE RIGHTS OFFERING AT ANY TIME PRIOR TO THE EXPIRATION TIME IF IT DETERMINES THAT SUCH POSTPONEMENT, MODIFICATION OR CANCELLATION IS IN THE BEST INTERESTS OF THE COMPANY AND ITS SHAREHOLDERS. IMPORTANT: PLEASE READ ALL INSTRUCTIONS CAREFULLY FORM A EXERCISE AND SUBSCRIPTION The undersigned hereby irrevocably exercises one or more Rights to subscribe for shares of Common Stock as indicated below, on the terms and subject to the conditions specified in the Prospectus, receipt of which is hereby acknowledged. (a) Number of shares subscribed for pursuant to the Basic Subscription Right: (a)_____ (b) Number of shares subscribed for pursuant to the Oversubscription Privilege (1): (b)_____ (c) Total shares (sum of lines (a) and (b)): (c)_____ (d) Total number of shares subscribed for pursuant to the Basic Subscription Right (line (a)) multiplied by the Subscription Price of $_________ (2): (d)$____ (e) Total number of shares subscribed for pursuant to the Oversubscription Privilege (line (b)) multiplied by the Subscription Price of $__________ (2): (e)$____ (f) Total Subscription Price (sum of lines (d) and (e)): (f)$____

- ---------- (1) To exercise the Oversubscription Privilege, you must fully exercise the Basic Subscription Right. (2) If the aggregate Subscription Price paid by an exercising Rights Holder is insufficient to purchase the number of Underlying Shares that such holder indicates are being subscribed for, or if an exercising Rights Holder does not specify the number of Underlying Shares to be purchased, then such Rights Holder will be deemed to have exercised first the Basic Subscription Right in full and second the Oversubscription Privilege to purchase Underlying Shares to the full extent of the payment rendered (subject to proration under certain circumstances as described in the Prospectus). If the aggregate Subscription Price paid by an exercising Rights Holder exceeds the amount necessary to purchase the number of Underlying Shares and Excess Shares for which the Rights Holder has indicated an intention to subscribe, then the Rights Holder will be deemed to have exercised first, the Basic Subscription Right (if not already fully exercised) and second, the Oversubscription Privilege to the full extent of the excess payment tendered. (g) METHOD OF PAYMENT (CHECK AND COMPLETE APPROPRIATE BOX(ES)) / / Check in the amount of $_________ payable to Subscription Agent. / / Certified check, bank draft or money order in the amount of $_________ payable to Subscription Agent. / / Wire transfer in the amount of $__________ directed to Registrar and Transfer Company, Subscription Agent, _______________, ___, ___, ABA #_________, Account________________, Attention: __________________. Indicate name of institution transferring funds and name of registered owner: (h) NOTICE OF GUARANTEED DELIVERY / / CHECK HERE IF RIGHTS ARE BEING EXERCISED PURSUANT TO A NOTICE OF GUARANTEED DELIVERY DELIVERED TO THE SUBSCRIPTION AGENT PRIOR TO THE DATE HEREOF AND COMPLETE THE FOLLOWING: Name(s) of Registered Owner(s)_________________________ Window Ticket Number (if any)__________________________ Date of Execution of Notice of Guaranteed Delivery ____ Name of Eligible Institution which Guaranteed Delivery ______________________________________ Telephone Number_______________________________________ FORM B SPECIAL DELIVERY INSTRUCTIONS Unless otherwise indicated below, the Subscription Agent is hereby authorized to issue and deliver certificates for Common Stock to the undersigned at the address appearing on the face of this Subscription Right Certificate. SPECIAL DELIVERY INSTRUCTIONS (See paragraph 3 of the Instructions) To be completed ONLY if the check evidencing a cash payment and/or the certificate evidencing the Common Stock, is to be sent to someone other than the registered holder or to an address on the face of this Subscription Right Certificate. Mail and deliver check and/or certificate for Common Stock to: Name: ________________________________________________________________ (Please Print) Address: (Including Zip Code)_________________________________________ ______________________________________________ (Tax Identification or Social Security Number) IMPORTANT: RIGHTS HOLDERS SIGN HERE IF RIGHTS ARE BEING EXERCISED AND COMPLETE SUBSTITUTE FORM W-9 SET FORTH BELOW Dated: ___________________, 2005 ----------------------------------------- (Signature(s) of Rights Holder(s)) Must be signed by the registered holder(s) as name(s) appear(s) on this Subscription Rights Certificate. If signature is by trustee(s), executor(s), administrator(s), guardian(s), attorney(s)-in-fact, agent(s), officer(s) of a corporation or another acting in a fiduciary or representative capacity, please provide the following information. See the Instructions. Name:_____________________________________ Capacity (Full Title):_______________________________________ (Please Print) Address:_________________________________________________________________________________________________ (Include Zip Code) Area Code and Home Telephone Number:____________ Area Code and Business Telephone Number: _______________ Tax Identification or Social Security Number:____________________________________________________________

SIGNATURE GUARANTEE (to be executed if Section(h) is completed; see paragraph 4 of the Instructions) The undersigned, an eligible guarantor institution pursuant to Rule 17Ad-15 promulgated under the Securities Exchange Act of 1934, as amended, and a participant in a Securities Transfer Association recognized signature program, does hereby guarantee that the signature of the Holder hereinabove is genuine. Dated:_____________________, 2005 Firm Name (If applicable)________________ Authorized Signature_____________________ Name and Title___________________________ SUBSTITUTE FORM W-9 PAYER'S REQUEST FOR TAXPAYER IDENTIFICATION NUMBER (TIN) PAYER'S NAME: Registrar and Transfer Company PART 1: Please provide your TIN and certify by signing and dating below. Social Security Number________________________ OR Employer Identification Number____________________ PART 2: For Payees NOT subject to backup withholding under the provisions of section 3406(a)(1)(C) of the Internal Revenue Code, see the enclosed Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9 and complete as instructed herein. PART 3: Awaiting TIN CERTIFICATION. Under penalty of perjury, I certify that (1) the number shown on this form is my correct Taxpayer Identification Number (or I am waiting for a number to be issued to me and either (a) I have mailed or delivered an application to receive a taxpayer identification number to the appropriate IRS center or Social Security Administration office or (b) I intend to mail or deliver an application in the near future) and (2) I am not subject to backup withholding either because I have not been notified by the IRS that I am subject to backup withholding as a result of a failure to report all interest or dividends, or the IRS has notified me that I am no longer subject to backup withholding. CERTIFICATION INSTRUCTIONS. You must cross out item (2) above if you have been notified by the IRS that you are subject to backup withholding because of underreporting interest or dividends on your tax return. However, if after being notified by the IRS that you were subject to backup withholding you received another notification from the IRS that you are no longer subject to backup withholding, do not cross out item (2). SIGNATURE_____________________ DATE _________________________________ Name__________________________ (Please Print) Address________________________________________________________________ (Including Zip Code) EX-5 8 a2156305zex-5.txt EXHIBIT 5 EXHIBIT 5 [TC&A LETTERHEAD] (860) 725-6200 _______________, 2005 Patriot National Bancorp, Inc. 900 Bedford Street Stamford, CT 06901 RE: REGISTRATION STATEMENT OF FORM SB-2 PATRIOT NATIONAL BANCORP, INC. Ladies and Gentlemen: We have acted as counsel to Patriot National Bancorp, Inc., a Connecticut corporation (the "Company"), in connection with the rights offering and registration under the Securities Act of 1933, as amended, by the Company of an aggregate of __________ shares of Common Stock, par value $2.00 per share (the "Shares"), of the Company and the related preparation and filing by the Company with the Securities and Exchange Commission of a Registration Statement on Form SB-2 (the "Registration Statement"). In rendering the opinion set forth below, we do not express any opinion concerning law other than the federal law of the United States and the corporate law of the State of Connecticut. We have examined originals or copies, certified or otherwise identified, of such documents, corporate records and other instruments, and have examined such matters of law, as we have deemed necessary or advisable for purposes of rendering the opinion set forth below. As to matters of fact, we have examined and relied upon the representations of the Company contained in the Registration Statement and, where we have deemed appropriate, representations or certificates of officers of the Company or public officials. We have assumed the authenticity of all documents submitted to us as originals, the genuineness of all signatures, the legal capacity of natural persons and the conformity to the originals of all documents submitted to us as copies. In making our examination of any documents, we have assumed that all parties had the corporate power and authority to enter into and perform all obligations thereunder, and, as to such parties, we have also assumed the due authorization by all requisite action, the due execution and delivery of such documents and the validity and binding effect and enforceability thereof. Based on the foregoing, we are of the opinion that the Shares to be issued and sold by the Company have been duly authorized and, when issued and sold as contemplated in the Registration Statement, will be validly issued and outstanding, fully paid and non-assessable. In rendering the opinion set forth above, we have not passed upon and do not purport to pass upon the application of securities or "blue-sky" laws of any jurisdiction (except federal securities laws). We consent to the filing of this opinion as an Exhibit to the Registration Statement and to the reference to our firm under the heading "Legal Matters" in the Prospectus which is part of such Registration Statement. Very truly yours, TYLER COOPER & ALCORN, LLP By: ----------------------------- William W. Bouton, III EX-10.1 9 a2156305zex-10_1.txt EXHIBIT 10.1 EXHIBIT 10.1 1999 STOCK OPTION PLAN PATRIOT NATIONAL BANK, a bank organized and existing under the laws of the United States of America (the "Bank"), has adopted its 1999 Stock Option Plan (this "Plan") with the intention of promoting the interests of the Bank and the shareholders of the Bank by providing officers and other employees of the Bank (including directors who are also employees of the Bank) and of its Subsidiaries with appropriate incentives and rewards to encourage them to enter into or continue in the employ of the Bank and by providing options to certain of its current directors who, without compensation, provided valuable assistance to the Bank in connection with its organization and initial operation which would allow such officers, employees and directors to acquire a proprietary interest in the long-term success of the Bank, thereby aligning their interest more closely to the interest of shareholders generally. I. PURPOSES OF THE PLAN The purposes of this Plan are as follows: 1.1. To provide an additional incentive for the officers and key employees of the Bank and it Subsidiaries to further the growth, development and financial success of the Bank by personally benefiting through the ownership of capital stock of the Bank; 1.2. To enable the Bank to obtain and retain the services of officers and key employees of the Bank and its Subsidiaries considered essential to the long-range success of the Bank by offering them an opportunity to own shares of the Bank's capital stock which will reflect such growth, development and financial success; and 1.3. To provide a benefit to those of its current directors who, without compensation, rendered valuable services to the Bank in connection with its organization and initial operation by offering them an opportunity to acquire shares of the Bank's capital stock which will reflect the growth, development and financial success of the Bank. II. DEFINITIONS; RULES OF CONSTRUCTION 2.1. DEFINITIONS. The terms defined in this Article shall have the following meanings for purposes of this Plan: (a) "Bank" shall mean Patriot National Bank, a bank organized and existing under the laws of the United States of America. (b) "Board of Directors" shall mean the Board of Directors of the Bank. (c) "Internal Revenue Code" shall mean the Internal Revenue Code of 1986, as amended. (d) "Change in Control" means: (i) a change in control of the direction and administration of the Bank's business of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A (or any successor rule or regulation) promulgated under the Exchange Act, whether or not the Bank is then subject to such reporting requirements; (ii) any person (as such term is used in Sections 14(d) and 14(d)(2) of the Exchange Act but excluding any employee benefit plan of the Bank) is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Bank representing 50% or more of the combined voting power of the Bank's outstanding securities then entitled ordinarily (and apart from rights accruing under special circumstances) to vote for the election of directors; (iii) during any period of two consecutive years, the individuals who at the beginning of such period constitute the Board of Directors or any individuals who would be Continuing Directors cease for any reason to constitute at least a majority thereof; (iv) the Board of Directors shall approve a sale of all or substantially all of the assets of the Bank; or (v) the Board of Directors shall approve any merger, consolidation or like business combination or reorganization of the Bank, the consummation of which would result in the occurrence of any event described in clause (ii) or (iii) above; provided, however, that none of the foregoing events shall constitute a Change in Control if such event occurs as a result of an agreement or transaction approved by the Continuing Directors, either before or after the occurrence of such event, and the Continuing Directors in approving such agreement or transaction determine that it is not in the best interest of the Bank for such agreement or transaction to constitute a Change in Control for purposes of this Plan; provided, further, that, if the reorganization of the Bank into a holding company structure by becoming a wholly owned subsidiary of Patriot National Bancorp, Inc., a Connecticut corporation, is approved at the 1999 Annual Meeting of Shareholders of the Bank and becomes effective, neither such approval nor such effectiveness shall constitute a Change in Control. (e) "Committee" shall mean the Personnel Committee of the Board of Directors or such other committee of the Board of Directors designates to allocate among Participants Options which may be granted pursuant to Article IV. hereof. (f) "Common Stock" shall mean the Common Stock, par value $2.00 per share, of the Bank. (g) "Continuing Directors" means each director of the Bank elected at the 1999 Annual Meeting of Shareholders of the Bank and any successor to any such director and any additional director who (i) after the 1999 Annual Meeting of Shareholders of the Bank was nominated or selected by a majority of the Continuing Directors in office at the time of his or her 2 nomination or selection and (ii) at the time of his or her nomination or selection is not an "affiliate" or "associate" (as defined in Regulation 12B under the Exchange Act) of any person who is the beneficial owner, directly or indirectly, of securities representing 25% or more of the combined voting power of the Bank's outstanding securities then entitled ordinarily to vote for the election of directors. (h) "Disability" shall mean: (i) any physical or mental condition that would qualify a Participant for a disability benefit under any long-term disability plan maintained by the Bank or a Subsidiary of the Bank and applicable to such Participant or (ii) when used in connection with the exercise of an Incentive Stock Option following termination of employment, disability within the meaning of Section 22(e)(3) of the Internal Revenue Code. (i) "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended. (j) "Fair Market Value" shall mean the average closing price per share of the Common Stock for the 20 trading days ending of the fifth trading day immediately preceding the applicable date as reported on the composite tape of the principal national stock exchange on which the Common Stock is then listed or, if the Common Stock is not listed on any national stock exchange, the closing price per share of Common Stock as reported on The NASDAQ Stock Market, Inc., or, if the Common Stock is not listed on any national stock exchange or quoted on The NASDAQ Stock Market, Inc., such other reporting system as shall be selected by the Board of Directors; provided, however, that for purposes of fixing the exercise price of any Incentive Stock Option, "Fair Market Value" shall be the greater of the amount determined a provided above or the closing price per share on the trading day immediately preceding the applicable date. If the Common Stock is not publicly traded, the Board of Directors shall determine the Fair Market Value using criteria as it shall determine, in its sole discretion, to be appropriate for the valuation. (k) "For Cause" shall mean (i) the continued failure by the Participant substantially to perform his or her duties as a director, officer or employee of the Bank (other than any such failure resulting from his or her incapacity due to physical or mental illness) or (ii) the engaging by the Participant in conduct which is materially injurious to the Bank, monetarily or otherwise, in either case as determined by the Board of Directors. (l) "Incentive Stock Option" shall mean an Option that is an "incentive stock option" within the meaning of Section 422 of the Internal Revenue Code. (m) "Option" shall mean an option granted to a Participant pursuant to this Plan. (n) "Option Agreement" shall mean any agreement between the Bank and a Participant evidencing an Option. (o) "Non-Qualified Stock Option" shall mean an Option that is not an Incentive Stock Option. 3 (p) "Participant" shall mean any director, officer or employee of the Bank or any Subsidiary who is granted an option pursuant to this Plan which remains outstanding. (q) "Plan" shall mean this 1999 Stock Option Plan, as amended from time to time. (r) "QDRO" shall mean a qualified domestic relations order as defined in Section 414(p) of the Internal Revenue Code or Title I, Section 206(d)(3) of the Employee Retirement Income Security Act of 1974, as amended (to the same extent as if this Plan were subject thereto), or the applicable rules thereunder. (s) "Rule 16(b)-3" shall mean Rule 16b-3 under Section 16 of the Exchange Act, as amended from time to time. (t) "Subsidiary" shall mean a "subsidiary corporation" within the meaning Section 414(f) of the Internal Revenue Code. (u) "10% Shareholder" shall mean any person who, at the time an Option is granted, owns shares of the Bank or any Subsidiary or parent corporation of the Bank which possess more than 10% of the total combined voting power of all classes of shares of the Bank or of any Subsidiary or parent corporation of the Bank. 2.2. RULES OF CONSTRUCTION. For purposes of this Plan and any Option Agreement, unless otherwise expressly provided or the context otherwise requires, the terms defined in this Plan include the plural and the singular, and pronouns of either gender or neutral shall include, as appropriate, the other pronoun forms. III. COMMON STOCK AVAILABLE UNDER THIS PLAN 3.1. AGGREGATE SHARE LIMIT. The maximum number of shares of Common Stock that may be issued under this Plan is 130,000, subject to adjustment as provided in Article VII. 3.2. AVAILABILITY OF SHARES UPON TERMINATION OF OPTIONS. If any Option or portion of an Option expires or otherwise terminates without having been exercised, the number of shares of Common Stock as to which such Option expires or otherwise terminates shall again become available for purposes of this Plan. 3.3. TREASURY SHARES; NO FRACTIONAL SHARES. The Common Stock which may be delivered upon exercise of an Option may be treasury or authorized but unissued shares of Common Stock or Common Stock acquired, subsequently or in anticipation of a transaction under this Plan, in the open market or in privately negotiated transactions to satisfy the requirements of this Plan. No fractional shares shall be issued. The Board of Directors shall determine whether cash or other property shall be issued or paid in lieu of such fractional shares of whether such fractional shares or any rights thereto shall be forfeited or otherwise eliminated. 3.4. EXERCISE PRICE; WITHHOLDING. The exercise price for the Common Stock issuable upon exercise of an Option and any withholding obligation under applicable tax laws 4 shall be paid in cash or any combination of (i) cash, (ii) a check payable to the order of the Bank, (iii) the delivery of Common Stock having a Fair Market Value equivalent to the applicable exercise price and withholding obligation, (iv) a reduction in the amount of Common Stock otherwise deliverable pursuant to such Option, (v) by notice and third party payment in such manner as may be authorized by the Board of Directors. In the case of a payment by the means described in clause (iii) or (iv) above, the value of the Common Stock so delivered or offset shall be determined by reference to the fair market value of the Common Stock on the date as of which the payment or offset is made. 3.5. CASHLESS EXERCISE. The Board of Directors may permit the exercise of an Option and the payment of any applicable withholding tax in respect of an Option by delivery of written notice, subject to the Bank's receipt of a third party payment in full in cash for the exercise price and the applicable withholding prior to issuance of Common Stock, in the manner and subject to the procedures as may be established by the Board of Directors. 3.6. TRANSFER OF COMMON STOCK TO A PARTICIPANT. As soon as practicable after receipt by the Bank of payment for Common Stock with respect to which an Option or portion thereof is exercised by a Participant, the Bank shall issue or transfer to the Participant the number of shares of Common Stock as to which such Option has been exercised. IV. GRANT OF OPTIONS TO EMPLOYEES 4.1. ELIGIBILITY. Except as otherwise provided with respect to grants of Options pursuant to Article V. of this Plan, the Board of Directors may grant Options, in such amounts and with such terms and conditions as the Board of Directors may determine, subject to the provisions of the Plan. The persons who shall be eligible to receive Options under this Article IV. shall be employees of the Bank or its Subsidiaries (including officers of the Bank or its Subsidiaries, whether or not they are directors of the Bank or its Subsidiaries) as the Board of Directors or the Committee may select from time to time. Directors who are not employees or officers of the Bank shall not be eligible to receive Options under this Plan except as otherwise provided in Article V. of this Plan. Each Option granted pursuant to this Article IV. shall be clearly identified in the applicable Option Agreement as either an Incentive Option or a Non-Qualified Stock Option. 4.2. ALLOCATION OF OPTIONS. The Board of Directors may grant Options under this Article IV. subject to the attainment of such performance goals as the Board of Directors may establish and may delegate to the Committee the authority to allocate the Options so granted to such employees and covering such number of shares of Common Stock as the Committee shall determine, the date that the Committee determines that such performance goals are met being the date of the grant of such Options. 4.3. EXERCISE PRICE. Each Option Agreement with respect to an Option shall set forth the amount per share (the "option exercise price") payable by the Participant to the Bank upon exercise the Option. The option exercise price per share shall be determined by the Board of Directors but shall in no event be less than the Fair Market Value of a share of Common Stock on the date the Option is granted; provided, however, that the option exercise price for any 5 Incentive Stock Option granted to a 10% Shareholder may not be less than 110% of the Fair Market Value on the date of grant. 4.4. EXERCISABILITY AND TERM OF OPTIONS. (a) An Option shall become exercisable as to one-third of the shares covered by it on the date of grant and on each of the first and second anniversaries, respectively, of the date of grant of the Option unless a different period is provided by the Board of Directors at the time of grant thereof. (b) The term of each Option shall be a period of ten years from the date of grant unless otherwise provided by the Board of Directors at the time of grant thereof; provided, however, that the term of any Incentive Stock Option granted to a 10% Shareholder shall be a period of five years from the date of grant unless a shorter period is provided by the Board of Directors at the time of grant thereof. 4.5. ACCELERATION OF EXERCISABILITY UPON A CHANGE IN CONTROL. In the event of a Change in Control of the Bank, all then outstanding Options shall immediately become exercisable in full. The Board of Directors, in its discretion, may determine that, upon the occurrence of a transaction described in clauses (i) through (v) of the definition of "Change in Control," each Option outstanding under this Plan shall terminate within a specified number of days after notice to the Participant, and such Participant shall receive, with respect to each share subject to such Option, cash in an amount equal to the excess of the Fair Market Value of such share immediately prior to the occurrence of such transaction over the option exercise price per share of such Option. The provisions contained in the preceding sentence shall be inapplicable to an Option granted within six months before the occurrence of a transaction described above if the Participant holding such Option is a director or officer of the Bank or the beneficial owner of the Common Stock who is described in Section 16(a) of the Exchange Act, except in the event of such Participant's death or Disability prior to the expiration of such six-month period. 4.6. LIMITATIONS ON INCENTIVE STOCK OPTIONS. To the extent that the aggregate Fair Market Value of shares of Common Stock with respect to which Incentive Stock Options are exercisable for the first time by a Participant during any calendar year under this Plan and any other stock option plan of the Bank (or any Subsidiary or parent corporation of the Bank) shall exceed $100,000, or such higher value as may be permitted under Section 422 of the Internal Revenue Code, such Incentive Stock Options shall be treated as Non-Qualified Stock Options. Such Fair Market Value shall be determined as of the date on which each such Incentive Stock Option is granted. 4.7. NOTIFICATION UPON DISQUALIFYING DISPOSITION UNDER SECTION 421(B) OF THE INTERNAL REVENUE CODE. Each Option Agreement with respect to an Incentive Stock Option shall require the Participant to notify the Bank of any disposition of shares of Common Stock delivered upon the exercise of an Incentive Stock Option under the circumstances described in Section 421(b) of the Internal Revenue Code (relating to certain disqualifying dispositions), within ten days of such disposition. 6 4.8. EFFECT OF TERMINATION OF EMPLOYMENT (a) Termination other than for Death, Disability or Cause. Unless the applicable Option Agreement provides otherwise, in the event that the employment with the Bank or a Subsidiary or parent corporation of the Bank of a Participant holding an Option granted under this Article IV. is terminated for any reason other than death, Disability or Cause, (i) such Options granted to such Participant, to the extent that they are exercisable at the time of such termination, shall remain exercisable until the date that is three months after such termination, on which date they shall expire and (ii) such Options granted to such Participant, to the extent that they were not exercisable at the time of such termination, shall expire at the close of business on the date of such termination. Notwithstanding the foregoing, no such Option shall be exercisable after the expiration of its term. (b) Termination for Death or Disability. Unless the applicable Option Agreement provides otherwise, in the event that the employment with the Bank or a Subsidiary or parent corporation of the Bank of a Participant holding an Option granted under this Article IV. is terminated on account of the Disability or death of the Participant; (i) such Options granted to such Participant, to the extent that they were exercisable at the time of such termination, shall remain exercisable until the first anniversary of such termination, on which date they shall expire and (ii) such Options granted to such Participant, to the extent that they were not exercisable at the time of such termination shall expire at the close of business on the date of such termination, Notwithstanding the foregoing, no such Option shall be exercisable after the expiration of its term. (c) Termination For Cause. Notwithstanding the foregoing, any Option outstanding under Article IV. of this Plan shall terminate immediately upon any termination of a Participant's employment with the Bank or any Subsidiary or parent corporation of the Bank For Cause. 4.9. ADJUSTMENTS. Options granted under this Article shall be subject to adjustment as provided in Article VII. of this Plan. 410. LIMITATIONS OF AMENDMENTS. The provisions of this Article IV. with respect to the amount, exercise price and timing of Options and the eligibility requirements shall not be amended more than once every six months (other than as may be necessary to conform to any applicable changes in the Internal Revenue Code or the rules thereunder), unless such amendment would be consistent with the provisions of Rule 16b-3. V. SPECIFIC GRANTS OF OPTIONS 5.1. GRANT OF OPTIONS TO CERTAIN DIRECTORS. Upon the approval of this Plan by the shareholders of the Bank at the 1999 Annual Meeting of Shareholders of the Bank, Options hereunder shall be awarded to the following directors of the Bank for the number of shares of Common Stock set forth opposite their names in the following table: 7
NAME OF DIRECTOR NUMBER OF SHARES Herbert A. Bregman 6,000 Fred DeCaro, Jr. 34,000 L. Morris Glucksman 16,000 Michael Intrieri 10,000 Richard Naclerio 15,000 Salvatore Trovato 20,000 Philip W. Wolford 9,000
The Options granted pursuant to this Article V. shall be Non-Qualified Stock Options except that the Options granted to Philip W. Wolford shall be Incentive Stock Options and the Options granted to Fred DeCaro, Jr. shall be Incentive Stock Options to the maximum extent permitted under the Internal Revenue Code. 5.2. EXERCISE PRICE. The option exercise price for the Options granted pursuant to this Article V. shall be the Fair Market Value per share of Common Stock as of the date of the 1999 Annual Meeting of Shareholders of the Bank. 5.3. EXERCISABILITY AND TERM. The Options granted pursuant to this Article V. shall be immediately exercisable on the date of grant and shall have a term of ten years from the date of grant. 5.4. EFFECT OF TERMINATION OF SERVICE. The Options granted pursuant to this Article V. shall remain exercisable for the term thereof notwithstanding that the holder thereof ceases to serve as a director of the Bank. 5.5. ADJUSTMENTS. Options granted under this Article V. shall be subject to adjustment as provided in Article VII. of this Plan. VI. OPTION AGREEMENTS 6.1. OPTION AGREEMENTS. Each Option under this Plan share be evidenced by an Option Agreement in a form approved by the Board of Directors setting forth the number of shares of Common Stock subject to the Option, and the price and term of the Option. The Option Agreement shall also set forth (or incorporate by reference) the other material terms and conditions applicable to the Option as determined by the Board of Directors consistent with the limitations of this Plan. 6.2. INCORPORATED PROVISIONS. Option Agreements shall be subject to the terms of this Plan and shall be deemed to include the following terms: (a) NON-ASSIGNABILITY. The Option shall not be assignable nor transferable, except (i) by will or by the laws of descent and distribution or (ii) pursuant to a QDRO or any other exception to transfer restrictions expressly permitted by the Board of Directors and set forth in the Option Agreement (or an amendment thereto). The restrictions on exercise and transfer shall not be deemed to prohibit, to the extent permitted by the Board of Directors, 8 transfers without consideration for estate and financial planning purposes, transfers to such other persons or in such other circumstances as the Board of Directors may in the Option Agreement expressly permit. During the lifetime of a Participant, the Option shall be exercised only by such Participant or by his or her guardian or legal representative, except as expressly otherwise provided consistent with the foregoing transfer restrictions. (b) RIGHTS AS SHAREHOLDER. A Participant shall have no rights as a holder of Common Stock with respect to any unissued Common Stock covered by an Option until the date the Participant becomes the holder of record of such Common Stock. (c) WITHHOLDING. The Participant shall be responsible for payment of any taxes or similar charges required by law to be withheld with respect to the exercise of an Option, and these obligations shall be paid by the Participant on or prior to the delivery of shares of Common Stock upon exercise of an Option. A Participant shall satisfy the withholding obligations as provided in Section 3.4. 6.3. CONTRACT RIGHTS, FORMS AND SIGNATURES. Any obligation of the Bank with respect to an Option shall be based solely upon the contractual obligations created by this Plan and the applicable Option Agreement. No Option shall be enforceable until the Option Agreement has been signed by the Participant and on behalf of the Bank. By executing an Option Agreement, a Participant shall be deemed to have accepted and consented to the terms of this Plan, and any action taken in good faith under this Plan by and within the discretion of the Board of Directors or its delegates. Except as expressly provided in this Plan or in an Option Agreement, there shall be no third party beneficiaries of the obligations of the Bank under such Option Agreement. VII. ADJUSTMENTS 7.1. CHANGES IN CAPITALIZATION. If there shall occur any recapitalization, stock split (including a stock split in the form of a stock dividend), reverse stock split, merger, combination, consolidation, or other reorganization or any extraordinary dividend or other extraordinary distribution in respect of the Common Stock (whether in the form of cash, Common Stock or other property), or any split-up, spin-off, extraordinary redemption, combination or exchange of outstanding shares of Common Stock, or there shall occur any other similar transaction or event in respect of the Common Stock, or a sale of all or substantially all of the assets of the Bank as an entirety, then the Board of Directors shall, in the manner and to the extent, if any, as it deems appropriate and equitable to the Participants and consistent with the terms of this Plan, and taking into consideration the effect on the event of the holders of the Common Stock: (a) proportionately adjust any or all of: (i) the number and type of Common Stock which thereafter may be made the subject of Options; (ii) the number, amount and type of Common Stock, other property or cash subject to any or all outstanding Options; 9 (iii) the exercise price of any or all outstanding Options; (iv) the securities, cash or other property deliverable upon exercise of the outstanding Options; (v) any other terms as are effected by the event; or (b) subject to any applicable limitations under generally accepted accounting principles, provide for: (i) an appropriate and proportionate cash settlement or distribution; or (ii) the substitution or exchange of any or all outstanding Options. 7.2. FORMATION OF BANK HOLDING COMPANY. Notwithstanding the provisions of Section 7.1 hereof, in the event that the reorganization of the Bank into a holding company structure by becoming a wholly owned subsidiary of Patriot National Bancorp, Inc., a Connecticut corporation, is approved at the 1999 Annual Meeting of Shareholders of the Bank and becomes effective, all references herein and in any Option Agreement to "Common Stock" shall thereafter be deemed references to the Common Stock of Patriot National Bancorp, Inc. The obligation of the Bank to issue or deliver shares of its Common Stock under any Option then outstanding or thereafter granted under this Plan shall be deemed to be satisfied in full by the issuance or delivery by Patriot National Bancorp, Inc. of an equal number of shares of its Common Stock; provided, however, that the number of shares subject to any Option shall thereafter be subject to adjustment as provided in this Article VII. based on changes in the capital stock of Patriot National Bancorp, Inc. VIII. ADMINISTRATION 8.1. AUTHORITY AND STRUCTURE. This Plan and all Options granted shall be administered by the Board of Directors. 8.2. CONSTRUCTION AND INTERPRETATION. The Board of Directors shall have the power to interpret and administer this Plan and the Option Agreements, and to adopt, amend and rescind related rules and procedures. All questions of interpretation and determinations with respect to this Plan, the number of shares of Common Stock and the terms of any Option Agreements, the adjustments required or permitted by Article VII. and other determinations hereunder shall be made by the Board of Directors and its determination shall be final and conclusive upon all parties in interest. In the event of any conflict between an Option Agreement and any non-discretionary provision of this Plan, the terms of this Plan shall govern. 8.3. RULE 16B-3 CONDITIONS; BIFURCATION OF PLAN. It is the intent of the Bank that this Plan and the Options hereunder satisfy and be interpreted in a manner that satisfies any applicable requirements of Rule 16b-3 so that the Participants will be entitled to the benefits of Rule 16b-3 or other exemptive rules under Section 16 of the Exchange Act and will not be 10 subjected to avoidable liability thereunder as to Options intended to be entitled to the benefits of Rule 16b-3. 8.4. DELEGATION AND RELIANCE. The Board of Directors may delegate to the officers or employees of the Bank the authority to execute and deliver those instruments and documents, to do all acts and things, and to take all other steps deemed necessary, advisable or convenient for the effective administration of this Plan in accordance with its terms and purpose. In making any determination or in taking or not taking any action under this Plan, the Board of Directors may obtain and may rely upon the advise of experts, including professional advisors to the Bank. No director, officer, employee or agent of the Bank shall be liable for any such action or determination made or omitted in good faith. 8.5. EXCULPATION AND INDEMNITY. Neither the Bank nor any member of the Board of Directors, nor any other person participating in any determination of any question under this Plan, or in the interpretation, administration or application of this Plan, shall have any liability to any person for any action taken or not taken in good faith under this Plan or for the failure of an Option to qualify for exemption or relief under Rule 16b-3 or to comply with any other law, compliance with which is not required on the part of the Bank. IX. MISCELLANEOUS 9.1. NO SPECIAL EMPLOYMENT RIGHTS; NO RIGHT TO OPTION. Nothing contained in this Plan or any Option or Option Agreement shall confer upon any Participant any right with respect to the continuation of service with the Bank or any Subsidiary or parent corporation of the Bank or interfere in any way with the right of the Bank or any Subsidiary or parent corporation of the Bank, subject to the terms of any separate employment agreement to the contrary, at any time to terminate such employment or to increase or decrease the compensation of the Participant. No person shall have any claim or right to receive an Option hereunder, except as provided in Article V. hereof. The grant of an Option to a Participant at any time shall neither require the grant of any other Option to such Participant or other person at any time or preclude the Board of Directors from making subsequent grants to such Participant or any other person. 9.2. EFFECTIVE DATE; DURATION. This Plan has been adopted by the Board of Directors. This Plan shall become effective upon and shall be subject to the approval of the shareholders of the Bank at the 1999 Annual Meeting of Shareholders of the Bank. This Plan shall remain in effect until any and all Options under this Plan have been exercised, converted or terminated under the terms of this Plan and the applicable Option Agreements. Notwithstanding the foregoing, no Option shall be granted under this Plan after the Annual Meeting of Shareholders of the Bank in 2000. Any Option granted prior to such date may be amended after such date in any manner that would have been permitted prior to such date, except that no such amendment shall increase the number of shares subject to such Option. 9.3. COMPLIANCE WITH LAWS. This Plan, any Option Agreement and the grant, exercise, conversion and operation of Options, and the issuance and delivery of Common Stock 11 and/or other securities or property under this Plan are subject to compliance with all applicable federal and state laws, rules and regulations (including, but not limited to, state and federal insider trading, registration, reporting and other securities laws and federal margin requirements) and to such approvals by any listing, regulatory or governmental authority as may, in the opinion of counsel for the Bank, be necessary or advisable in connection therewith. Any securities delivered under this Plan shall be subject to such restrictions (and the person acquiring such securities shall, if requested by the Bank, provide such evidence, assurance and representations to the Bank as to compliance with any thereof) as the Bank may deem necessary or desirable to assure compliance with all applicable legal requirements. The Bank shall be under no obligation to effect the registration pursuant to the Securities Act of 1933, as amended, or any regulation thereunder, of any interests in this Plan or any shares of Common Stock to be issued hereunder or to effect similar compliance under any state laws. Notwithstanding anything herein to the contrary, the Bank shall not be obligated to cause to be issued or delivered any certificates evidencing shares of Common Stock pursuant to this Plan unless and until the Bank is advised by its counsel that the issuance and delivery of such certificates is in compliance with all applicable laws, regulations of governmental authorities and the requirements of any securities exchange on which shares of Common Stock are traded. The Board of Directors may require as a condition of the issuance and delivery of certificates evidencing shares of Common Stock pursuant to the terms of this Plan, that the recipient of such shares make such covenants, agreements and representations, and that such certificates bear such legends, as the Board of Directors, in its sole discretion, deems necessary or desirable. The transfer of any shares of Common Stock hereunder shall be effective only at such time as counsel to the Bank shall have determined that the transfer of such shares is in compliance with all applicable laws, regulations of governmental authorities and the requirements of any stock exchange on which shares of Common Stock are traded. The Board of Directors may, in its sole discretion, defer the effectiveness of any transfer of shares of Common Stock hereunder in order to allow the transfer of such shares to be made pursuant to registration or an exemption from registration or other methods for compliance available under federal or state securities laws. The Board of Directors shall inform the Participant in writing of its decision to defer the effectiveness of a transfer. During the period of such deferral in connection with the exercise of an Option, the Participant may, by written notice, withdraw such exercise and obtain the refund of any amount paid with respect thereto. 9.4. NOTIFICATION OF ELECTION UNDER SECTION 83(B) OF THE INTERNAL REVENUE CODE. If any Participant shall, in connection with the acquisition of shares of Common Stock under this Plan, make the election permitted under Section 83(b) of the Internal Revenue Code (i.e., an election to include in gross income in the year of transfer the amounts specified in Section 83(b)), such Participant shall notify the Bank of such election within ten days of filing notice of the election with the Internal Revenue Service, in addition to any filing and notification required pursuant to regulations issued under the authority of Section 83(b) of the Internal Revenue Code. 12 9.5. OWNERSHIP AND TRANSFER RESTRICTIONS. Common Stock acquired upon exercise of Options shall be subject to the restrictions on ownership and transfer set forth in the Option Agreement. 9.6. NON-EXCLUSIVITY OF PLAN. Nothing in this Plan shall limit or be deemed to limit the authority of the Bank or the Board of Directors to grant awards or authorize any other compensation, with or without reference to the Common Stock, under any other plan or authority. 9.7. SEVERABILITY. In case any provision of this Plan shall be invalid, illegal or unenforceable in any jurisdiction, the validity, legality and enforceability of the remaining provisions, or of such provision in any other jurisdiction, shall not in any way be affected or impaired thereby. 9.8. EXPENSES AND RECEIPTS. The expenses of this Plan shall be paid by the Bank. Any proceeds received by the Bank in connection with any Option will be used for general corporate purposes. 9.9. FAILURE TO COMPLY. In addition to the remedies of the Bank elsewhere provided for herein, failure by a Participant (or beneficiary or transferee) to comply with any of the terms and conditions of this Plan or the applicable Option Agreement, unless such failure is remedied by such Participant (or beneficiary or transferee) within ten days after notice of such failure by the Board of Directors, shall be grounds for the cancellation and forfeiture of such Option, in whole or in part, as the Board of Directors, in its absolute discretion, may determine. 9.10. APPLICABLE LAW. This Plan, any Option Agreement and any related documents and matters shall be governed in accordance with the laws of the State of Connecticut, except as to matters of federal law. 13 EX-10.2 10 a2156305zex-10_2.txt EXHIBIT 10.2 EXHIBIT 10.2 PATRIOT NATIONAL BANCORP, INC. 2001 STOCK APPRECIATION RIGHTS PLAN PATRIOT NATIONAL BANCORP, INC., a corporation organized and existing under the laws of Connecticut (the "Corporation"), has adopted its 2001 Stock Appreciation Rights Plan (this "Plan") with the intention of promoting the interests of the Corporation and the shareholders of the Corporation by providing certain officers of the Corporation and of its Subsidiaries with appropriate incentives and rewards to encourage them to enter into or continue in the employ of the Corporation and/or such Subsidiaries. I. PURPOSES OF THE PLAN The purposes of this Plan are as follows: 1.1. To provide an additional incentive for such officers of the Corporation and its Subsidiaries to further the growth, development and financial success of the Corporation by personally benefiting from price appreciation of the capital stock of the Corporation; and 1.2. To enable the Corporation to obtain and retain the services of such officers of the Corporation and its Subsidiaries considered important to the long-range success of the Corporation by offering them an opportunity to benefit from the appreciation of the Corporation's capital stock which will reflect such growth, development and financial success. II. DEFINITIONS; RULES OF CONSTRUCTION 2.1. DEFINITIONS. The terms defined in this Article shall have the following meanings for purposes of this Plan: (a) "Actual Net Income" shall mean net income of the Corporation, calculated in accordance with GAAP for the relevant measuring period. (b) "Award" means any Stock Appreciation Right granted under the Plan. (c) "Award Agreement" shall mean any agreement between the Corporation and a Participant evidencing an Award. (d) "Board of Directors" shall mean the Board of Directors of the Corporation. (e) "Internal Revenue Code" shall mean the Internal Revenue Code of 1986, as amended. (f) "Change in Control" means: (i) a change in control of the direction and administration of the Corporation's business of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A (or any successor rule or regulation) promulgated under the Exchange Act, whether or not the Corporation is then subject to such reporting requirements; (ii) any person (as such term is used in Sections 14(d) and 14(d)(2) of the Exchange Act but excluding any employee benefit plan of the Corporation) is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Corporation representing 35% or more of the combined voting power of the Corporation's outstanding securities then entitled ordinarily (and apart from rights accruing under special circumstances) to vote for the election of directors; provided, however, that any increase in beneficial ownership of securities of the Corporation by Angelo DeCaro (and/or his family members or family trusts) or Fred DeCaro (and/or his family members or family trusts) shall not constitute a "Change in Control"; (iii) the Board of Directors shall approve a sale of all or substantially all of the assets of the Corporation; (iv) the Board of Directors of Patriot National Bank (the "Bank") shall approve a sale of all or substantially all of the assets of the Bank; or (v) the Board of Directors of the Corporation or the Board of Directors of the Bank shall approve any merger, consolidation or like business combination or reorganization of the Corporation or the Bank, respectively, the consummation of which would result in the occurrence of any event described in clause (ii) above. (g) "Committee" shall mean such committee of the Board of Directors that the Board of Directors designates to allocate among Participants Awards which may be granted pursuant to the terms of this Plan or, in the absence of any such designation, the Board of Directors. Any such committee so designated by the Board of Directors shall be composed of members who meet any qualification prescribed in Rule 16b-3. (h) "Common Stock" shall mean the Common Stock, $2.00 par value, of the Corporation. (i) "Continuing Directors" means each director of the Corporation as of the effective date of this Plan and any successor to any such director and any additional director who (i) after the effective date of this Plan was nominated or selected by a majority of the Continuing Directors in office at the time of his or her nomination or selection and (ii) at the time of his or her nomination or selection is not an "affiliate" or "associate" (as defined in Regulation 12B under the Exchange Act) of any person who is the beneficial owner, directly or indirectly, of securities representing 25% or more of the combined voting power of the Corporation's outstanding securities then entitled ordinarily to vote for the election of directors. 2 (j) "Corporation" shall mean Patriot National Bancorp, Inc., a corporation organized and existing under the laws of Connecticut. (k) "Disability" shall mean: (i) any physical or mental condition that would qualify a Participant for a disability benefit under any long-term disability plan maintained by the Corporation or a Subsidiary of the Corporation and applicable to such Participant or (ii) when used in connection with the exercise of an Incentive Stock Option following termination of employment, disability within the meaning of Section 22(e)(3) of the Internal Revenue Code. (l) "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended. (m) "Fair Market Value" shall mean the average closing price per share of the Common Stock for the 10 trading days immediately preceding the applicable date as reported on the composite tape of the principal national stock exchange on which the Common Stock is then listed or, if the Common Stock is not listed on any national stock exchange, the closing price per share of Common Stock as reported on The NASDAQ Stock Market, Inc. If the Common Stock is not listed on any national stock exchange or quoted on The NASDAQ Stock Market, Inc., Fair Market Value shall mean the average bid price per share of the Common Stock for the 10 trading days immediately preceding the applicable date as reported on such reporting system as shall be selected by the Committee. If the Common Stock is not publicly traded, the Committee shall determine the Fair Market Value to be the valuation determined by a qualified bank stock analyst or investment banking firm specializing in bank stock. (n) "For Cause" shall mean (i) the continued failure by the Participant substantially to perform his or her duties as an officer or employee of the Corporation (other than any such failure resulting from his or her incapacity due to physical or mental illness) or (ii) the engaging by the Participant in conduct which is materially injurious to the Corporation, monetarily or otherwise, in either case as determined by the Board of Directors. (o) "Participant" shall mean any officer of the Corporation or any Subsidiary who is granted an Award pursuant to this Plan which remains outstanding. (p) "Plan" shall mean this 2001 Stock Appreciation Rights Plan, as amended from time to time. (q) "QDRO" shall mean a qualified domestic relations order as defined in Section 414(p) of the Internal Revenue Code or Title I, Section 206(d)(3) of the Employee Retirement Income Security Act of 1974, as amended (to the same extent as if this Plan were subject thereto), or the applicable rules thereunder. 3 (r) "Rule 16b-3" shall mean Rule 16b-3 under Section 16 of the Exchange Act, as amended from time to time or any rule adopted in substitution therefor. (s) "Stock Appreciation Amount" is the amount that the holder of a Stock Appreciation Right is entitled to receive, subject to Stock Appreciation Restrictions and other terms and conditions set forth in an Award Agreement, calculated to be the appreciation in the value of a share of Common Stock as of the date the Stock Appreciation Right is exercised, above a base price established in the Award Agreement. (t) "Stock Appreciation Restriction" means the restriction on Stock Appreciation Rights under Section 5.2. (u) "Stock Appreciation Rights" means an Award under Section 5.1. (v) "Subsidiary" shall mean a "subsidiary corporation" within the meaning Section 424(f) of the Internal Revenue Code. (w) "Target Net Income" shall mean projected consolidated net income of the Corporation set forth in any Award Agreement granting Stock Appreciation Rights for purposes of calculating the Stock Appreciation Restriction. (x) "10% Shareholder" shall mean any person who, at the time an Award is granted, owns shares of the Corporation or any Subsidiary or parent corporation of the Corporation which possess more than 10% of the total combined voting power of all classes of shares of the Corporation or of any Subsidiary or parent corporation of the Corporation. 2.2. RULES OF CONSTRUCTION. For purposes of this Plan and any Award Agreement, unless otherwise expressly provided or the context otherwise requires, the terms defined in this Plan include the plural and the singular, and pronouns of either gender or neutral shall include, as appropriate, the other pronoun forms. III. CHANGE OF CONTROL; ADJUSTMENTS 3.1. ACCELERATION OF EXERCISABILITY UPON A CHANGE IN CONTROL. In the event of a Change in Control of the Corporation, all then outstanding Awards shall immediately become exercisable in full. The Committee, in its discretion, may determine that, upon the occurrence of a transaction described in clauses (i) through (v) of the definition of "Change in Control," each Award outstanding under this Plan shall terminate within (x) a specified number of days after notice to the Participant or (y) on the closing date of the transaction giving rise to a Change in Control of the Corporation, and such Participant shall receive, with respect to each share subject to such Award, cash in an amount equal to the excess of the Fair Market Value of such share immediately prior to the occurrence of such transaction over the exercise price per share (if any) of such Award. 4 3.2. ADJUSTMENTS. Awards granted under this Plan shall be subject to adjustment as provided in Article VIII of this Plan. IV. GRANT OF AWARDS TO OFFICERS 4.1. ELIGIBILITY. The Committee may grant Awards, in such amounts and with such terms and conditions as the Committee may determine, subject to the provisions of the Plan. The persons who shall be eligible to receive Awards under this Article IV shall be officers of the Corporation or its Subsidiaries (including officers of the Corporation or its Subsidiaries, whether or not they are directors of the Corporation or its Subsidiaries) as the Committee may select from time to time. Directors who are not employees or officers of the Corporation shall not be eligible to receive Awards under this Plan. Each Award granted pursuant to this Article IV shall be clearly identified in the applicable Award Agreement as a Stock Appreciation Right. The terms of each type of Award need not be identical, and the Committee need not treat Participants uniformly. 4.2. PERFORMANCE BASED AWARDS. The Committee may also grant Awards under this Plan subject to the attainment of such performance goals as the Committee may establish. V. STOCK APPRECIATION RIGHTS 5.1. AWARD DESCRIPTION. Subject to the provisions of the Plan, the Committee may grant Stock Appreciation Rights and impose such restrictions or conditions to the vesting of such Stock Appreciation Rights as it, in its sole discretion, deems appropriate, including the attainment of performance goals. Each Stock Appreciation Right is the right to receive, upon surrender of the right, but without other payment, the Stock Appreciation Amount, if any, payable in (i) cash, (ii) shares of Common Stock or (iii) such other form or combination of forms of payout, at times and upon conditions (which may include a Change of Control), as may be approved by the Committee. Without limiting anything in the foregoing Plan, the Committee hereby grants to each of Robert F. O'Connell, Philip W. Wolford and Martin G. Noble Stock Appreciation Rights in respect of 6,000 shares of Common Stock. 5.2. STOCK APPRECIATION RESTRICTIONS. Each Stock Appreciation Right shall be subject to forfeiture, in whole or in part, on the twelve month anniversary of the grant date according to the following Stock Appreciation Restrictions: (i) as to 100% of the Stock Appreciation Right, in the event that Actual Net Income is less than ninety percent (90%) of Target Net Income for the fiscal year 2001; (ii) as to eighty three percent (83%) of the Stock Appreciation Right, in the event that Actual Net Income is at least ninety percent (90%) but less than one hundred and ten percent (110%) of Target Net Income for the fiscal year 2001; and (iii) as to forty two percent (42%) of the Stock Appreciation Right, in the event that Actual Net Income is at least one hundred and ten percent (110%) but less than one hundred twenty percent (120%) of Target Net Income for the fiscal year 2001. No Stock Appreciation Restriction shall apply in the event that Actual Net Income is at least one hundred twenty percent (120%) of Target Net Income for fiscal year 2001. 5 5.3. EXERCISABILITY AND TERM OF STOCK APPRECIATION RIGHTS. (a) A Stock Appreciation Right shall become cumulatively exercisable (i) as to 20% of the Stock Appreciation Amount, if any, covered thereby on the first anniversary of March 31, 2001, subject to the Stock Appreciation Restriction; (ii) as to an additional 20% of the Stock Appreciation Amount, if any, covered thereby on the second anniversary of March 31, 2001; (iii) as to an additional 20% of the Stock Appreciation Amount, if any, covered thereby on the third anniversary of March 31, 2001; (iv) as to an additional 20% of the Stock Appreciation Amount, if any, covered thereby on the fourth anniversary of March 31, 2001; and (v) as to the remaining 20% of the Stock Appreciation Amount, if any, on the fifth anniversary of March 31, 2001, unless a different period is provided by the Committee at the time of grant thereof. Within each of the aforesaid applicable periods, each Stock Appreciation Right shall be exercisable as of a specific date (the "Determination Date"), which Determination Date shall be the date immediately preceding the date on which a written notice is received by the Corporation via overnight mail service and the applicable market value shall be the closing price of the shares of the Corporation on the Determination Date. Alternatively, the Participant may hand-deliver such a written notice to the Chairman of the Board of the Corporation after the closing of the NASDAQ market on any date during the relevant period stipulating that such date shall be the Determination Date in respect of the aforesaid procedure. (b) The term of each Stock Appreciation Right shall be a period of ten years from the date of grant unless otherwise provided by the Committee at the time of grant thereof. 5.4. TRANSFER OF STOCK APPRECIATION RIGHTS. Stock Appreciation Rights may not be sold, assigned, transferred, pledged or otherwise encumbered, except as permitted by this Plan, prior to the first anniversary of the date of grant. Following the first anniversary of the date of grant, Stock Appreciation Rights may not be sold, assigned, transferred, pledged or otherwise encumbered, except as permitted by this Plan, by will or by the laws of descent and distribution. 5.5. BASE PRICE. Unless the Committee provides otherwise, and such provision is reflected in the Award Agreement, the minimum base price of a Stock Appreciation Right granted under this Plan shall be not less than the Fair Market Value of the shares of Common Stock underlying the Award as of March 31, 2001. VI. AWARD AGREEMENTS 6.1. AWARD AGREEMENTS. Each Award under this Plan shall be evidenced by an Award Agreement in a form approved by the Committee setting forth the number of shares of Common Stock subject to the Award, and the price and term of the Award. The Award Agreement shall also set forth (or incorporate by reference) the other material terms and conditions applicable to the Award as determined by the Committee consistent with the limitations of this Plan. 6 6.2. INCORPORATED PROVISIONS. Award Agreements shall be subject to the terms of this Plan and shall be deemed to include the following terms: (a) Non-Assignability. The Award shall not be assignable nor transferable, except (i) by will or by the laws of descent and distribution or (ii) pursuant to a QDRO or any other exception to transfer restrictions expressly permitted by the Committee and set forth in the Award Agreement (or an amendment thereto). The restrictions on exercise and transfer shall not be deemed to prohibit, to the extent permitted by the Committee, transfers without consideration for estate and financial planning purposes and transfers to such other persons or in such other circumstances as the Committee may in the Award Agreement expressly permit. During the lifetime of a Participant, the Award shall be exercised only by such Participant or by his or her guardian or legal representative, except as expressly otherwise provided consistent with the foregoing transfer restrictions. (b) Rights as Shareholder. A Participant shall have no rights as a holder of Common Stock by virtue of an Award. (c) Withholding. The Participant shall be responsible for payment of any taxes or similar charges required by law to be withheld with respect to the exercise of an Award, and these obligations shall be paid by the Participant on or prior to the delivery of shares of Common Stock upon exercise of an Award. 6.3. CONTRACT RIGHTS, FORMS AND SIGNATURES. Any obligation of the Corporation with respect to an Award shall be based solely upon the contractual obligations created by this Plan and the applicable Award Agreement. No Award shall be enforceable until the Award Agreement has been signed by the Participant and on behalf of the Corporation. By executing an Award Agreement, a Participant shall be deemed to have accepted and consented to the terms of this Plan, and any action taken in good faith under this Plan by and within the discretion of the Committee or its delegates. Except as expressly provided in this Plan or in an Award Agreement, there shall be no third party beneficiaries of the obligations of the Corporation under such Award Agreement. VII. EFFECT OF TERMINATION OF EMPLOYMENT 7.1. TERMINATION OF STOCK APPRECIATION RIGHTS. Subject to such other provisions as the Committee may set forth in the applicable Award Agreement, and to the Committee's amendment authority under the Plan, unless the applicable Award Agreement provides otherwise, upon termination of a Participant's employment with Corporation or a Subsidiary or parent corporation of the Corporation, the following shall occur with respect to Stock Appreciation Rights: (a) Termination other than for Death, Disability or Cause. In the event that the employment is terminated for any reason other than death, Disability or For Cause, (i) Stock Appreciation Rights granted to such Participant, to the extent that they are exercisable at the time of such termination, shall remain exercisable until the date that is 7 three months after such termination, on which date they shall expire and (ii) such Stock Appreciation Rights granted to such Participant, to the extent that they were not exercisable at the time of such termination, shall expire at the close of business on the date of such termination. Notwithstanding the foregoing, no such Stock Appreciation Right shall be exercisable after the expiration of its term. (b) Termination for Death or Disability. In the event that the employment is terminated on account of the death or Disability of the Participant, (i) Stock Appreciation Rights granted to such Participant, to the extent that they were exercisable at the time of such termination, shall remain exercisable until the first anniversary of such termination, on which date they shall expire and (ii) such Stock Appreciation Rights granted to such Participant, to the extent that they were not exercisable at the time of such termination, shall expire at the close of business on the date of such termination. Notwithstanding the foregoing, no such Stock Appreciation Right shall be exercisable after the expiration of its term. (c) Termination For Cause. Notwithstanding the foregoing, any Stock Appreciation Right outstanding under this Plan shall terminate immediately upon any termination of a Participant's employment with the Corporation or any Subsidiary or parent corporation of the Corporation For Cause. VIII. ADJUSTMENTS 8.1. CHANGES IN CAPITALIZATION. If there shall occur any recapitalization, stock split (including a stock split in the form of a stock dividend), reverse stock split, merger, combination, consolidation, or other reorganization or any extraordinary dividend or other extraordinary distribution in respect of the Common Stock (whether in the form of cash, Common Stock or other property), or any split-up, spin-off, extraordinary redemption, combination or exchange of outstanding shares of Common Stock, or there shall occur any other similar transaction or event in respect of the Common Stock, or a sale of all or substantially all of the assets of the Corporation as an entirety, then the Committee shall, in the manner and to the extent, if any, as it deems appropriate and equitable to the Participants and consistent with the terms of this Plan, and taking into consideration the effect of the event on the holders of the Common Stock: (a) proportionately adjust any or all of: (i) the number, amount and type of Common Stock, other property or cash subject to any or all outstanding Awards; (ii) the base price of any or all outstanding Awards; (iii) the securities, cash or other property deliverable upon exercise of the outstanding Awards; (iv) any other terms as are effected by the event; or 8 (b) subject to any applicable limitations under generally accepted accounting principles, provide for: (i) an appropriate and proportionate cash settlement or distribution; or (ii) the substitution or exchange of any or all outstanding Awards. IX. ADMINISTRATION 9.1. AUTHORITY AND STRUCTURE. This Plan and all Awards granted shall be administered by the Committee. 9.2. CONSTRUCTION AND INTERPRETATION. The Committee shall have the power to interpret and administer this Plan and the Award Agreements, and to adopt, amend and rescind related rules and procedures. All questions of interpretation and determinations with respect to this Plan, the number of shares of Common Stock and the terms of any Award Agreements, the adjustments required or permitted by Article VIII. and other determinations hereunder shall be made by the Committee and its determination shall be final and conclusive upon all parties in interest. In the event of any conflict between an Award Agreement and any non-discretionary provision of this Plan, the terms of this Plan shall govern. 9.3. RULE 16B-3 CONDITIONS; BIFURCATION OF PLAN. It is the intent of the Corporation that this Plan and the Awards hereunder satisfy and be interpreted in a manner that satisfies any applicable requirements of Rule 16b-3 so that the Participants will be entitled to the benefits of Rule 16b-3 or other exemptive rules under Section 16 of the Exchange Act and will not be subjected to avoidable liability thereunder as to Awards intended to be entitled to the benefits of Rule 16b-3. 9.4. DELEGATION AND RELIANCE. The Committee may delegate to the officers or employees of the Corporation the authority to execute and deliver those instruments and documents, to do all acts and things, and to take all other steps deemed necessary, advisable or convenient for the effective administration of this Plan in accordance with its terms and purpose. In making any determination or in taking or not taking any action under this Plan, the Committee may obtain and may rely upon the advice of experts, including professional advisors to the Corporation. No director, officer, employee or agent of the Corporation shall be liable for any such action or determination made or omitted in good faith. 9.5. EXCULPATION AND INDEMNITY. Neither the Corporation nor any member of the Committee, nor any other person participating in any determination of any question under this Plan, or in the interpretation, administration or application of this Plan, shall have any liability to any person for any action taken or not taken in good faith under this Plan or for the failure of an Award to qualify for exemption or relief under Rule 16b-3 or to comply with any other law, compliance with which is not required on the part of the Corporation. 9 X. MISCELLANEOUS 10.1. NO SPECIAL EMPLOYMENT RIGHTS; NO RIGHT TO AWARD. Nothing contained in this Plan or any Award or Award Agreement shall confer upon any Participant any right with respect to the continuation of service with the Corporation or any Subsidiary or parent corporation of the Corporation or interfere in any way with the right of the Corporation or any Subsidiary or parent corporation of the Corporation, subject to the terms of any separate employment agreement to the contrary, at any time to terminate such employment or to increase or decrease the compensation of the Participant. No person shall have any claim or right to receive an Award hereunder. The grant of an Award to a Participant at any time shall neither require the grant of any other Award to such Participant or other person at any time or preclude the Committee from making subsequent grants to such Participant or any other person. 10.2. EFFECTIVE DATE. This Plan has been adopted by the Board of Directors. This Plan shall remain in effect until any and all Awards under this Plan have been exercised, converted or terminated under the terms of this Plan and the applicable Award Agreements. 10.3. SHAREHOLDER APPROVAL. The adoption of this Plan, or any amendment hereto, shall be subject to approval by shareholders only to the extent required by (i) the Code, (ii) the applicable rules of any stock exchange or over-the-counter stock market, or (iii) as otherwise required by law. Any such approval shall be obtained within the time required by such law or rule. Any shareholder approval of this Plan or any amendment requiring such approval shall mean the affirmative vote of at least a majority of the shares of capital stock present and entitled to vote at a duly held meeting of shareholders, unless a greater vote is required by state corporate law, the certificate of incorporation or by-laws of the Corporation or the law or rule requiring shareholder approval, in which case such greater requirement shall apply. Shareholder approval may be obtained by written consent in lieu of a meeting to the extent permitted by applicable state law. 10.4. COMPLIANCE WITH LAWS. This Plan, any Award Agreement and the grant, exercise, conversion and operation of Awards, and the issuance and delivery of Common Stock and/or other securities or property under this Plan are subject to compliance with all applicable federal and state laws, rules and regulations (including, but not limited to, state and federal insider trading, registration, reporting and other securities laws and federal margin requirements) and to such approvals by any listing, regulatory or governmental authority as may, in the opinion of counsel for the Corporation, be necessary or advisable in connection therewith. Any securities delivered under this Plan shall be subject to such restrictions (and the person acquiring such securities shall, if requested by the Corporation, provide such evidence, assurance and representations to the Corporation as to compliance with any thereof) as the Corporation may deem necessary or desirable to assure compliance with all applicable legal requirements. The Corporation shall be under no obligation to effect the registration pursuant to the Securities Act of 1933, as amended, or any regulation thereunder, of any interests in this Plan or to effect similar compliance under any state laws. 10 The transfer of any shares of Common Stock hereunder shall be effective only at such time as counsel to the Corporation shall have determined that the transfer of such shares is in compliance with all applicable laws, regulations of governmental authorities and the requirements of any stock exchange on which shares of Common Stock are traded. The Committee may, in its sole discretion, defer the effectiveness of any transfer of shares of Common Stock hereunder in order to allow the transfer of such shares to be made pursuant to registration or an exemption from registration or other methods for compliance available under federal or state securities laws. The Committee shall inform the Participant in writing of its decision to defer the effectiveness of a transfer. During the period of such deferral in connection with the exercise of an Award, the Participant may, by written notice, withdraw such exercise and obtain the refund of any amount paid with respect thereto. 10.5. OWNERSHIP AND TRANSFER RESTRICTIONS. Common Stock acquired upon exercise of Awards, if any, shall be subject to the restrictions on ownership and transfer set forth in the Award Agreement. 10.6. NON-EXCLUSIVITY OF PLAN. Nothing in this Plan shall limit or be deemed to limit the authority of the Corporation or the Committee to grant awards or authorize any other compensation, with or without reference to the Common Stock, under any other plan or authority. 10.7. SEVERABILITY. In case any provision of this Plan shall be invalid, illegal or unenforceable in any jurisdiction, the validity, legality and enforceability of the remaining provisions, or of such provision in any other jurisdiction, shall not in any way be affected or impaired thereby. 10.8. EXPENSES AND RECEIPTS. The expenses of this Plan shall be paid by the Corporation. Any proceeds received by the Corporation in connection with any Award will be used for general corporate purposes. 10.9. FAILURE TO COMPLY. In addition to the remedies of the Corporation elsewhere provided for herein, failure by a Participant (or beneficiary or transferee) to comply with any of the terms and conditions of this Plan or the applicable Award Agreement, unless such failure is remedied by such Participant (or beneficiary or transferee) within ten days after notice of such failure by the Committee, shall be grounds for the cancellation and forfeiture of such Award, in whole or in part, as the Committee, in its absolute discretion, may determine. 10.10. APPLICABLE LAW. This Plan, any Award Agreement and any related documents and matters shall be governed in accordance with the laws of the State of Connecticut, except as to matters of federal law. 11 EX-10.3 11 a2156305zex-10_3.txt EXHIBIT 10.3 EXHIBIT 10.3 [Composite Conformed Copy] EMPLOYMENT AGREEMENT This Employment Agreement, dated October 23, 2000 (this "Agreement") [as amended by First Amendment to Employment Agreement, dated as of March 21, 2001], is between PATRIOT NATIONAL BANK, a national banking association with headquarters located in Stamford, Connecticut (the "Bank"), PATRIOT NATIONAL BANCORP, INC., a Connecticut corporation ("Bancorp") and Charles F. Howell of Danbury, Connecticut (the "Executive"). RECITALS WHEREAS, the Executive and the Bank desire that the Executive be employed by the Bank as President and Chief Executive Officer. The Executive and the Bank desire to enter into this Employment Agreement with Executive for several primary reasons: (1) to provide Executive with job security, particularly in the event that the Bank experiences a change-of-control; (2) to provide further incentive to Executive in the discharge of his responsibilities to the Bank; and (3) to define Executive's duties and terms of employment; WHEREAS, the Bank and Executive contemplate that the Bank will: (i) disclose to Executive information concerning the Bank's business affairs, including certain confidential information; and (ii) assist Executive in establishing goodwill and rapport with certain customers of the Bank. The use by Executive of this information, goodwill and rapport in competing with or in aiding others in competing with the Bank would have a detrimental effect on future profitable operations of the Bank. NOW, THEREFORE, in consideration of the mutual promises and covenants hereinafter described, the parties agree as follows: 1. TERM OF EMPLOYMENT. The Bank agrees to employ Executive, and Executive agrees to accept employment with the Bank for a term commencing on October 23, 2000 and continuing for a period of three years, unless subsequently extended or sooner terminated as provided in this Agreement (the "Employment Period"). The Bank further agrees to initiate discussions with Executive promptly following the second anniversary of the date hereof for the purpose of determining whether a further extension to this Agreement is acceptable to the parties hereto, it being understood that neither party shall have any binding obligation to further extend the Employment Period. 2. DUTIES. (a) During the Employment Period, Executive shall perform the duties and exercise the powers relating to the office of the President and Chief Executive Officer, including all duties assigned to Executive by the Board of Directors of the Bank (the "Board of Directors"). All duties assigned shall be consistent with the customary duties of the above-described offices at a national bank. Bancorp shall use its best efforts to cause the Executive to be nominated as a director of Bancorp and the Bank, and as a Vice-Chairman of the Board of Directors of Bancorp. In the event Executive is not elected as a director of Bancorp and the Bank and as a Vice Chairman of Bancorp within one week of the date of this Agreement, Executive shall have the right to terminate this Agreement without any further duties or obligations on the part of Executive hereunder. (b) During the Employment Period, Executive shall devote his entire business time, best efforts and ability to the business of the Bank, shall faithfully and diligently perform his duties, shall comply in all material respects with the overall policies established by the Board of Directors of the Bank and shall do all that is reasonably in his power to promote, develop and extend the business of the Bank. Notwithstanding the foregoing, it is understood that the Executive shall be permitted to continue to serve on various civic and non-profit organizations approved by the Bank. 3. COMPENSATION AND BENEFITS. (a) BASE SALARY. The Bank shall pay Executive as compensation for his services during the Employment Period an annual base salary of One Hundred and Sixty Thousand ($160,000.00) Dollars for the first twelve (12) month period, One Hundred and Seventy Thousand ($170,000.00) Dollars for the second twelve (12) month period, and One Hundred and Eighty Thousand ($180,000.00) Dollars for the third twelve (12) month period (the "Base Salary"). Salary payments shall be made in equal installments consistent with the Bank's standard payroll practices for its officers. The Base Salary shall be reviewed by the Board of Directors each year during the Employment Period and set by the Board of Directors in an amount not less than the stated contract salary; any increase in Base Salary in excess of the stated contract may take the form of a contingent increase based upon the achievement of articulated personal or corporate goals, or both, at the discretion of the Board of Directors. (b) EXPENSES. Upon submission of appropriate invoices or vouchers, the Bank shall pay or reimburse Executive for all reasonable expenses incurred by him in the performance of his duties under this Agreement in furthering the business, and in keeping with the policies, of the Bank. (c) VACATION. Executive shall be entitled to four (4) weeks paid vacation each contract year, to be taken each year at a time or times as shall be mutually agreed upon by the Bank and Executive and consistent with applicable regulatory requirements. If Executive fails to use all of his vacation time during a particular calendar year, the unused portion shall not be carried over to the subsequent year, unless approved in writing by the Chairman of the Board of the Directors. (d) CASH INCENTIVE COMPENSATION. The Board of Directors, in its sole discretion, may authorize the payment of special cash incentive compensation to Executive from time to time in excess of the amount stated in any documented regular cash incentive plans. Any such special payment of incentive compensation will not set a precedent requiring or suggesting that similar incentive compensation will be paid in the future. The Bank's Board of Directors will consider the adoption of documented regular cash incentive compensation plans 2 whereby the Executive would receive specific cash compensation for the achievement of articulated goals as determined by the Board of Directors. Any such regular cash incentive compensation shall be separate and apart from any special cash incentive compensation. The Executive (President and CEO) shall work closely with senior management of the Bank to development such incentive plans. (e) INSURANCE POLICIES. (i) TERM LIFE INSURANCE. During the Employment Period, Bank shall provide term life insurance coverage for Executive in such form and amount as is not less favorable than that coverage provided by the Bank to other Bank employees from time to time generally. (ii) KEY MAN INSURANCE. During the Employment Period, Executive shall permit the Bank to insure his life under a policy or policies of life insurance issued by an insurance company or companies selected by the Bank, and to name the Bank as sole beneficiary thereunder. Executive agrees to submit to any physical examinations which may be reasonably required in connection with such policies. (iii) DISABILITY INSURANCE. During the Employment period, Bank shall provide Executive with disability insurance coverage in such form and amount consistent with that provided to other Bank employees generally. (f) BENEFITS. During the Employment Period, Executive shall be entitled to and shall be included under the same rules or restrictions in any employee welfare and retirement plan or program of the Bank available generally to its employees and/or officers including, without limitation, plans for hospital services, medical services benefits, sick pay, dental and other health plans. (g) STOCK PLANS. During the Employment Period, Executive may be included in any stock incentive, stock option, or stock compensation plan as the Board of Directors of the Bank may determine. Such plans may be documented by the Board of Directors and the Executive from time to time. The Executive (President and CEO) shall work with senior management of the Bank to develop such incentive plans. Without limiting the foregoing, the Bank agrees as follows: (i) STOCK GRANTS. Subject to the provisions of this subsection (i), the Executive will be granted the right to receive unregistered, restricted shares of the Common Stock of Bancorp. Grants of such shares will be made effective on December 31, 2000, December 31, 2001, December 31, 2002, and December 31, 2003. The number of shares granted on December 31, 2000 shall be that number having a value equal to $48,000 (based on a share price as determined below), and the number of shares granted on each subsequent December 31st shall be that number in each case having a value equal to 30% of the Executive's Base Salary in respect of the immediately preceding October 1 - September 30 period, with the price of such shares being the average of the closing price per share as reported by the NASDAQ Stock Market, Inc. for the ten trading 3 days prior to each respective December 31st. In respect of each grant, 25% of the amount of such shares shall be vested and distributed on each succeeding December 31st during the following four year period (i.e., the first 25% of the shares granted on December 31, 2000 will vest and be distributed on December 31, 2001). If for any reason such shares are not available in the reasonable opinion of the Board of Directors, the Bank shall pay to the Executive in cash, on the same schedule as aforesaid, the value of said shares based on the closing price of said shares on the applicable vesting date. In the event the Employment Period is terminated for cause (as defined herein), or is otherwise terminated by the Executive or by reason of the Executive's death or disability, the Executive shall forfeit the right to receive any of the aforesaid shares or cash which have not vested as of the date of such termination, provided, however, that in the event of a termination based upon a Change of Control (as hereinafter defined), or a termination other than for cause or by reason of the Executive's death or disability, all granted but unvested shares will be deemed to fully vest at the time of such termination. (ii) STOCK OPTIONS. The Executive will be granted stock options for a minimum of 10,000 unregistered, restricted shares of Common Stock of Bancorp on each of December 31, 2000, December 31, 2001, December 31, 2002, and October 16, 2003 (said latter date to be extended to December 31, 2003 in the event of the Executive remains employed by the Bank after October 16, 2003), exercisable for a period of ten (10) years from the date of grant and exercisable at a price equal to the fair market value of such shares on each such date of grant, all as determined by and subject to the terms of a stock option plan to be approved by the Board of Directors and the shareholders of the Bancorp. In the event that any future stock options are granted to any other employees or directors containing terms or conditions more favorable than the aforesaid options granted to the Executive, or any existing and outstanding options are modified to include any such more favorable provisions, the Executive shall have the right to have the terms and conditions of his stock options modified to incorporate such more favorable terms. In the event that the Board determines, in its reasonable discretion, that any of the aforesaid stock options for the Executive cannot be granted, the Executive shall have the right to receive, as additional compensation, within 30 days of the Determination Date (as defined below), an amount equal to the product of (A) the difference between (1) the market value of a share of Common Stock of Bancorp underlying such option had it been available on the date of the scheduled award (such market value to be equal to the average of the closing price of a share of the Common Stock of Bancorp as reported by the NASDAQ Stock Market Inc. for the ten (10) trading days prior to the respective December 31) and (2) the market value of a share of Common Stock of Bancorp on the date chosen by the Executive during the ten year period after the date of the scheduled award (the date chosen by the Executive, the "Determination Date"), multiplied by (B) the number of shares of Common Stock of Bancorp which would have been covered by such option had it been granted. The Determination Date shall be the date immediately preceding the date on which a written notice is received by the Bank via overnight mail service and the applicable market value shall be the closing price of the shares of Bancorp on the Determination Date. Alternatively, the Executive may hand-deliver such a written notice to the Chairman of the Board of Bancorp after the closing of the NASDAQ market on any date during said period stipulating that such date shall be the 4 Determination Date in respect of the aforesaid procedure. The aforesaid cash amount shall be payable to the Executive only in respect of option shares which otherwise have been fully vested as of any Determination Date. In the event the Employment Period is terminated for cause (as defined herein), or is otherwise terminated by the Executive or by reason of Executive's death or disability, the Executive shall forfeit the right to exercise any of the aforesaid options, provided, however, that in the event of a termination based upon a Change of Control (as hereinafter defined), or a termination other than for cause or by reason of the Executive's death or disability, all granted but unvested options will be deemed to fully vest at the time of such termination. 4. DISABILITY. If during any period in which Executive shall have continued to perform his duties as an employee of the Bank, Executive shall incur a total or partial disability (as defined in subsection (d) below), then until the earlier of (a) 180 days after the date such disability is incurred, or (b) the expiration of the term of the Employment Period (either shall be termed the "Disability Period"), the Bank shall pay Executive during the Disability Period on the basis of his then-regular salary (any payments that Executive does or would otherwise receive pursuant to the Bank's; disability coverage for employees generally for this period of disability shall be set off against these payments). (a) If Executive's total disability shall terminate prior to the expiration of the Employment Period, then Executive shall return to full and active employment with the Bank under the terms of this Agreement; provided that if he shall again become disabled within a period of three (3) months after such return, other than by reason of an event which is not causatively related to his original disability, then Executive shall be deemed to have been continuously disabled from the date he incurred his original disability; (b) In the event Executive shall incur a partial disability (as defined in (d) below), then during the period of the partial disability, the compensation to be paid to him in consideration of his services to the Bank shall be equitably adjusted to reflect the time that he is able to devote to the affairs of and the value of the service he is able to impart to the Bank; provided, however, that during the Disability Period, the compensation shall not be less than Executive would have received under this Section 4 had he been totally rather that partially disabled (this is to say, he shall receive his then-regular salary for that Disability Period); (c) Payments to Executive under this Section 4 shall be reduced by the amounts, if any, as may be payable to him by reason of his disability under policies of insurance maintained and/or paid for by the Bank; (d) As used in this Agreement, the term "total disability" shall mean a disability such that, for physical or mental reasons, Executive is unable to perform substantially his obligations hereunder for the reasonably foreseeable future (not less than 90 days), as determined by the Bank's Board of Directors after considering competent medical evidence. As used in this Agreement, the term "partial disability" shall mean a disability, other than a total disability, such that, for physical or mental reasons, Executive is unable to perform a material portion of his usual duties at the Bank on a full-time basis as determined by the Bank's Board of Directors after considering competent evidence. 5 5. TERMINATION. (a) TERMINATION BY DEATH. If Executive dies during the Employment Period, the Bank's obligations under this Agreement shall terminate immediately and Executive's estate shall be entitled to all arrearages of salary and expenses but shall not be entitled to further compensation. (b) TERMINATION WITH OR WITHOUT CAUSE. This Agreement and Executive's employment with the Bank may be terminated for cause at any time upon thirty (30) days advance written notice from the Bank to Executive, which notice shall set forth the facts on which the termination is based. Upon termination, Executive shall be entitled to all arrearages of salary and expenses, but shall not be entitled to further compensation or benefits. As used in this Agreement, and without limitation, "cause" shall include: (i) Executive's conviction by any trial court of any crime involving fraud, embezzlement, theft or dishonesty; (ii) serious willful misconduct by Executive, including personal dishonesty in connection with Bank business or customers or the breach of a fiduciary duty to the Bank or its customers; (iii) the total disability of Executive, as defined in Paragraph 4 above; (iv) any material breach by Executive of this Agreement; or (v) if the Bank's regulatory authorities issue an order removing Executive from his positions at the Bank, or if such regulatory authorities inform the Directors that continuation of Executive in his position at the Bank would constitute an unsafe and unsound banking practice. Executive's employment may be terminated by the Bank without cause at any time, provided that, in such event, Bank shall pay Executive, in one lump-sum payment within thirty (30) days after such termination, an amount equal to the higher of the following: (i) that amount which is equal to the aggregate amount of salary payments that would be made to Executive for the remainder of the Employment Period, calculated at the Executive's then annual Base Salary; or (ii) that amount which is equal to 1-1/2 years (18 months) Base Salary, calculated at Executive's then annual Base Salary, whichever is greater. In addition, if Executive is terminated without cause, the Bank shall either continue to carry Executive at no additional cost to him under the Bank's employee hospital, medical services, dental and other health plans for the remainder of the Employment Period, or, if he is not eligible for continued coverage under such plans, pay the cost of similar coverage for Executive pursuant to COBRA or similar private insurance plans offering comparable coverage. The provisions of this Section 5 shall apply only to termination of this Agreement prior to a Change of Control (as hereinafter defined). Termination of this Agreement following the occurrence of Change of Control shall be governed by Section 11 hereof. (c) IMMEDIATE CESSATION OF EMPLOYMENT. In the event Executive's employment terminates pursuant to subparagraph (b), the Bank may further direct Executive to cease immediately his activities on behalf of the Bank and to discontinue using any of the Bank's facilities; provided, however, that in the event of these directions, the Bank shall 6 continue to provide Executive with salary and other benefits required by this Agreement until the expiration of the notice period set forth in subparagraph (b). (d) SURVIVAL. Anything in this Agreement to the contrary notwithstanding the provisions of Sections 6, 7, 8, 9, and 10 shall survive the termination of Executive's employment with the bank. 6. NON-COMPETITION AGREEMENT. (a) Executive absolutely and unconditionally covenants and agrees with the Bank that, from the period commencing on the date of this Agreement and continuing for a period of one (1) year following the termination of his employment as provided for in this Agreement, Executive will not, anywhere in the Restricted Area (as defined in subparagraph (b) below), either directly or indirectly, solely or jointly with any person or persons (a "Competitor"), as an employee, consultant, or advisor (whether or not engaged in business for profit), or an individual proprietor, partner, shareholder (provided that share ownership of less than 5% of the share voting power shall be permitted), director, officer, joint venturer, investor (provided that such investment will not be a violation if it is limited to less than 5% of the ownership of such entity), lender, or in any other capacity, compete with the business of the Bank (i) as conducted as of the date of execution of this Agreement; or (ii) as conducted during the Employment Period; or (iii) as conducted as of the end of the Employment Period or (iv) as proposed to be conducted by the Bank as of the end of the Employment Period (collectively, the "Business"). Notwithstanding the foregoing, the provisions of this Section 6 (a) shall not apply in the event that (i) the Executive's employment is terminated by the Bank other than for cause or (ii) the Executive is employed by the Bank for the entire three (3) year term hereof and the Bank then determines not to further renew or extend this Agreement on substantially similar terms. In either of the foregoing events, however, the terms of Sections 7 and 8 hereof shall continue to be binding upon the Executive. In addition, and notwithstanding the foregoing, the non-compete provisions of this Section 6(a) shall apply to the Executive in the event the Executive receives the Severance Amount pursuant to Section 11 herein, and in such situation only, the "Restricted Area" shall be (i) the towns identified in Section 6(b) below, (ii) any town or city in which the Bank has an office or branch as of the time of the Change of Control, and (iii) Westchester County, New York. Upon any violation of the aforesaid provisions by the Executive, the Executive shall repay the Severance Amount to the Bank. (b) As used in this Section 6: (i) the term "compete" shall mean engaging, participating, or being involved in any respect in the business of banking, or furnishing any aid, assistance or service of any kind to any person in connection with, the Business and shall include, without limitation, being employed by any banking institution which has a branch or other place of business in the Restricted Area; (ii) except as otherwise provided in Section 6(a) above, the term "Restricted Area" shall mean the following six towns: Greenwich, Stamford, Darien, New Canaan, Norwalk and Westport. (c) If a Court or arbitration panel concludes through appropriate proceedings that Executive has breached the covenant set forth in this Section, the term of the covenant shall 7 be extended to a term equal to the period for which Executive is determined to have breached the covenant. 7. COVENANT NOT TO DISCLOSE. Executive agrees that, by virtue of the performance of the normal duties of his position with the Bank and by virtue of the relationship of trust and confidence between Executive and the Bank, he possesses and will possess certain data and knowledge of operations of the Bank which are proprietary in nature and confidential. Executive covenants and agrees that he will not, at any time, whether during the term of this Agreement or otherwise, reveal, divulge or make known to any person (other than the Bank) or use for his own account, any confidential or proprietary record, data, trade secret, price policy, rate structure, personnel policy, method or practice of obtaining or doing business by the Bank, or any other confidential or proprietary information whatever (the "Confidential Information"), whether or not obtained with the knowledge and permission of the Bank and whether or not developed, devised or otherwise created in whole or in part by his efforts. Executive further covenants and agrees that he shall retain all such knowledge and information which he shall acquire or develop respecting such Confidential Information in trust for the sole benefit of the Bank and its successors and assigns. 8. NON-INTERFERENCE COVENANT. Executive covenants and agrees that he will not, for a period of one (1) year following the termination of this Agreement, directly or indirectly, for whatever reason, whether for his own account or for the account of any other person, firm, corporation or other organization: (i) solicit, employ, or otherwise interfere with any of the Bank's contracts or relationships with any employee, officer, director or any independent contractor who is employed by or associated with the Bank at the time of termination of this Agreement; or (ii) actively solicit, or cause to be solicited or otherwise actively interfere with any of the Bank's contracts or relationships with any independent contractor, customer, client or supplier of the Bank. It shall not constitute a violation of this Section 8 if customers, clients or employees follow Executive to his new place of employment without any independent solicitation on the part of Executive (or caused by Executive) or if such customers or clients respond to any mass advertising solicitation conducted independently by Executive's new employer without input from Executive. 9. BUSINESS MATERIALS AND PROPERTY DISCLOSURE. All written materials, records, and documents made by Executive or coming into his possession concerning the business or affairs of the Bank shall be the sole property of the Bank and, upon termination of his employment with the Bank, Executive shall deliver the same to the Bank and shall retain no copies. Executive shall also return to the Bank all other property in his possession owned by the Bank upon termination of his employment. 10. BREACH BY EXECUTIVE. It is expressly understood, acknowledged and agreed by Executive that: (i) the restrictions contained in Sections 6, 7, 8, and 9 of this Agreement represent a reasonable and necessary protection of the legitimate interests of the Bank and that his failure to observe and comply with his covenants and agreements in those Sections will cause irreparable harm to the Bank; (ii) it is and will continue to be difficult to ascertain the nature, scope and extent of the harm; and (iii) a remedy at law for such failure by 8 Executive will be inadequate. Accordingly, it is the intention of the parties that, in addition to any other rights and remedies which the Bank may have in the event of any breach of said Sections, the Bank shall be entitled, and is expressly and irrevocably authorized by Executive, to demand and obtain specific performance, including without limitation, temporary and permanent injunctive relief, and all other appropriate equitable relief against Executive in order to enforce against Executive, or in order to prevent any breach or any threatened breach by Executive, of the covenants and agreements contained in those Sections. 11. CHANGE OF CONTROL. If, during the Employment Period (and after the Employment Period so long as the Executive is then still the full-time chief executive officer of the Bank), there is a "Change of Control" of the Bank (as defined below) and the Executive's employment is thereafter terminated by the Executive or by the Bank other than (i) for cause, or (ii) by reason of the Executive's death or disability, the Executive shall be entitled to receive a severance payment (the "Severance Amount") in consideration of services previously rendered to the Bank. The Severance Amount shall be made as a lump sum cash payment equal to two (2) times the greater of the following: (A) the Executive's then annual Base Salary; (B) the Executive's cash compensation (the "Cash Compensation") from the Bank for services rendered for the last full calendar year immediately preceding the Change of Control; or (C) the Executive's average annual cash Compensation with respect to the two (2) most recent taxable years ending before the date on which the Change of Control occurs. The Cash Compensation referred to above shall include the amount of Base Salary and any cash incentive compensation paid to Executive for services rendered for the time period in question, as such compensation is described in Sections 3(a) and 3(d) hereof, including any and all of said amounts as may have been deferred by Executive under deferral plans, if any, of the Bank, and shall include long-term compensation which, by its terms, is accelerated upon a Change of Control, or if not, shall by this Agreement be so accelerated and determined as the present value of any long-term cash incentive compensation previously awarded to Executive but not yet paid, measured at the time of award with the assumption that the award would be 100% earned over the performance period. Cash compensation will not include any cash received in lieu of stock options or restricted stock. Payment of the Severance Amount under this Section 11 shall be in lieu of any amount due or payable to the Executive under Sections 3 and 5 hereof. Payment under this Section 11 shall be paid in full within 90 days following the date of the Change of Control and shall not be reduced by any compensation which the Executive may receive from other employment with another employer should Executive's employment with the Bank terminate. The Executive shall not be entitled to the Severance Amount, and shall repay to the Bank (or its successors) any sums representing the Severance Amount previously paid to the Executive by the Bank, in the event that the Executive becomes employed as a senior officer of the Bank or any successor entity to the Bank within a two (2) year period following any such Change in Control. For purposes hereof, a "Change in Control" shall have occurred if: (1) Any "person" other than (i) Angelo DeCaro and his family members or family trusts, (ii) Fred DeCaro and his family members or family trusts, or (iii) any trustee or other fiduciary holding securities under an employee benefit plan of the Bank within the 9 meaning of Section 14(d) of the Securities Exchange Act of 1934 (the "Act"), by merger or otherwise, becomes the "beneficial owner" as defined in Rule 13d-3 thereunder, directly or indirectly, of more than 35% of the Bancorp's Common Stock; (2) any "person" other than (i) Angelo DeCaro and his family members or family trusts; (ii) Fred DeCaro and his family members or family trusts, or (iii) any trustee or other fiduciary holding securities under an employee benefit plan of the Bank, acquires by proxy or otherwise the right to vote more than 35% of Bancorp's Common Stock for the election of directors, other than solicitation of proxies by the Incumbent Board (as hereinafter defined), for any merger or consolidation of the Bank or for any other matter or question; (3) Bancorp's stockholders have approved the sale of all or substantially all of the assets of the Bank; or (4) the Board of Directors determines that a person other than (i) Angelo DeCaro and his family members or family trusts or (ii) Fred DeCaro and his family members or family trusts, directly or indirectly exercises a controlling influence over the management or policies of the Bank, A "Change of Control" shall be deemed not to have occurred if (A) such event is mandated or directed by a regulatory body having jurisdiction over the Bank's operations; or (B) it occurs pursuant to the terms of a plan for the acquisition of the capital stock of Bancorp by a newly formed bank holding company if in the consummation of such plan the shareholders of Bancorp will receive, pro rata, all of the common stock of such bank holding company; unless, in such transaction, a Person satisfies sub-paragraph (1), (2), or (4) above. A "Person" shall include a natural person, corporation, or other entity. When two or more persons act as a partnership, limited partnership, syndicate, or other group for the purpose of acquiring, holding or disposing of Bancorp capital stock, such partnership, syndicate or group shall be considered a Person. Beneficial ownership shall be determined under the then current provisions of Rule 13d-3 of the Securities Exchange Act of 1934, as amended, Reg. Section 240.13d-3, or their successor provision(s). The filing of a Form F-11A by a Person shall not be deemed a Change of Control. If, after a Change of Control of the Bank, the Executive incurs any fees and expenses of counsel to enforce this Agreement, the Bank agrees to pay such fees and expenses to Executive. The Executive's choice of counsel and his decision to retain counsel shall be in his reasonable discretion, provided any such fees and expenses must be reasonable and shall be payable only if the Executive prevails on the merits of his claim. Notwithstanding any other provision hereof, in the event that any payment or benefit received or to be received by the Executive in connection with a Change in Control of the Bank or the termination of the Employment Period (whether pursuant to the terms of this Agreement or any other plan, arrangement or agreement with the Bank, any person whose actions result in a Change in Control or any person affiliated with the Bank or such person (collectively with the 10 Severance Amount, "Total Payments")) would not be deductible (in whole or part) as a result of Section 280G of the Code, by the Bank, an affiliate or other person making such payment or providing such benefit, the Severance Amount shall be reduced until no portion of the Total Payments is not deductible, or the Severance Amount is reduced to zero. For purposes of this limitation (a) no portion of the Total Payments the receipt or enjoyment of which the Executive shall have effectively waived in writing prior to the date of payment of the Severance Amount shall be taken into account; (b) no portion of the Total Payments shall be taken into account which in the opinion of tax counsel selected by the Bank's independent auditors and acceptable to the Executive does not constitute a "parachute payment" within the meaning of Section 280G(b)(2) of the Code; (c) the Severance Amount shall be reduced only to the extent necessary so that the Total Payments (other than those referred to in clauses (1) or (2)) in their entirety constitute reasonable compensation for services actually rendered within the meaning of Section 280G(b)(4) of the Code or are otherwise not subject to disallowance as deductions, in the opinion of the tax counsel referred to in clause (b); and (d) the value of any non cash benefit or any deferred payment or benefit included in the Total Payments shall be determined by the Bank's independent auditors in accordance with the principles of Sections 280G(d)(3) and (4) of the Code. 12. REGULATORY RESTRICTIONS. Notwithstanding any provision to the contrary in this Agreement, the Bank shall not be required under this Agreement to continue Executive in his position(s) at the Bank, or to make any payments to Executive, if the regulatory authorities having jurisdiction over the Bank order the Executive's removal from the Bank, or if such regulations determine that any payment would constitute an illegal "excess parachute" payment under 12 U.S.C. Section 1828(k) and regulations promulgated thereunder, or an "unsafe or unsound banking practice" pursuant to 12 U.S.C. Section 1818(b). 13. ARBITRATION. Any dispute whatsoever relating to the interpretation, validity or performance of this Agreement, or any other dispute arising out of this Agreement which cannot be resolved by any party upon thirty (30) days' written notice to the other party shall be settled by arbitration in the City of Stamford, Connecticut, in accordance with the rules then prevailing of the American Arbitration Association, and the judgment upon the award rendered by the arbitrators may be entered in any court of competent jurisdiction. It is the purpose of this Agreement, and the intent of the parties hereto to make the submission to arbitration of any dispute or controversy arising out of this Agreement, as set forth hereinabove, an express condition precedent to any legal or equitable action or proceeding of any nature whatsoever. 14. GENERAL PROVISIONS: (a) All notices required by this Agreement shall be in writing and shall be sufficiently given if delivered or mailed by registered or certified mail, return receipt requested, to the parties at their respective addresses set forth below. Any party may specify a different address by written notice to the other, in accordance with this Section. All notices shall be deemed to have been given as of the date so delivered or mailed. To the Bank: 11 900 Bedford Street Stamford, CT Attention: Chairman of the Board of Directors To Executive: Charles F. Howell 13 Delno Drive Danbury, CT (b) Except insofar as Executive may be subject to general policies adopted by the Bank from time to time, this Agreement contains the entire agreement between the parties, and there are no other representations, warranties, conditions or agreements relating to the subject matter of this Agreement. (c) The waiver by any party of any breach or default of any provision of this Agreement shall not operate or be construed as a waiver of any subsequent breach. (d) This Agreement may not be changed orally but only by an agreement in writing duly executed on behalf of the party against which enforcement of any waiver, change, modification, consent or discharge is sought. (e) This Agreement shall be binding upon and inure to the benefit of the Bank and Executive and their respective successors, assigns, heirs and legal representatives. Insofar as Executive is concerned, this Agreement is personal and Executive's duties under it shall not be assigned by Executive. (f) Each of the parties agrees to execute all further instruments and documents and to take all further action as the other party may reasonably request in order to effectuate the terms and purposes of this Agreement. (g) This Agreement may be executed in one or more counterparts, all of which taken together shall constitute one and the same instrument. (h) This Agreement shall be construed pursuant to and in accordance with the laws of the State of Connecticut. (i) Wherever used in this Agreement, the masculine, feminine and neuter pronouns shall be fully interchangeable, and the singular shall include the plural where the context so requires and vice versa. (j) If any term or provision of this Agreement is held or deemed to be invalid or unenforceable, in whole or in part, by a court of competent jurisdiction, such term of provision shall be ineffective to the extent of such invalidity or unenforceability without rendering invalid or unenforceable the remaining terms and provisions of this Agreement. 12 IN WITNESS WHEREOF, the parties have executed this Agreement on the date first above written. PATRIOT NATIONAL BANK By: /s/ ANGELO DE CARO ------------------------------------- Chairman of Board of Directors PATRIOT NATIONAL BANCORP, INC. By: /s/ ANGELO DE CARO ------------------------------------- President & CEO /s/ CHARLES F. HOWELL ------------------------------------- Charles F. Howell Executive 13 EX-10.4 12 a2156305zex-10_4.txt EXHIBIT 10.4 EXHIBIT 10.4 SECOND AMENDMENT TO EMPLOYMENT AGREEMENT SECOND AMENDMENT, dated as of May __, 2002 (this "Amendment"), to the Employment Agreement referred to below among PATRIOT NATIONAL BANK, a national banking association with headquarters located in Stamford, Connecticut (the "BANK"), PATRIOT NATIONAL BANCORP, INC., a Connecticut corporation ("BANCORP") and CHARLES F. HOWELL of Danbury, Connecticut (the "EXECUTIVE"). W I T N E S S E T H WHEREAS, Bank, Bancorp and the Executive are parties to that certain Employment Agreement, dated as of October 23, 2000, as amended pursuant to that certain First Amendment to Employment Agreement dated, as of March 21, 2001 (as amended, the "EMPLOYMENT AGREEMENT"); and WHEREAS, there is an ambiguity in the provisions of Section 3(g)(ii) of the Employment Agreement arising from the fact that a stock option plan anticipated to be adopted by Bancorp has to date never been approved by the Board of Directors and the shareholders of Bancorp, which stock option plan would have provided for a four-year vesting schedule for stock options (25% per year) in the same manner as provided for the Executive's stock grants pursuant to Section (g)(i); WHEREAS, the parties have agreed to amend certain terms of the Employment Agreement, in the manner, and on the terms and conditions, provided for herein; NOW THEREFORE, in consideration of the premises and for other good and valuable consideration, the receipt, adequacy and sufficiency of which are hereby acknowledged, the parties hereby agree as follows: 1. DEFINITIONS. Capitalized terms not otherwise defined herein shall have the meanings ascribed to them in the Employment Agreement. 2. AMENDMENT TO SECTION 3(g)(ii) OF THE EMPLOYMENT AGREEMENT. By way of clarification, it is hereby expressly agreed that with respect to any grant of stock options provided for in Section 3(g)(ii) of the Employment Agreement, the options as to the first 25% of the shares covered by any such option grant shall vest on the succeeding December 31st (an "Initial Vesting Date") (e.g., options as to the first 25% of the shares covered by any grants on December 31, 2002 will vest on December 31, 2003) and options as to an additional 25% shall vest on each of the first, second and third anniversary dates of such Initial Vesting Date. In the event that the Board of Directors determines, in its reasonable discretion, that any of said stock options for the Executive cannot be granted, the remaining provisions of Section 3(g)(ii) shall continue to govern under such circumstances. 3. NO OTHER AMENDMENTS. Except as expressly amended herein, the Employment Agreement shall be unmodified and shall continue to be in full force and effect in accordance with its terms. In addition, except as specifically provided herein, this Amendment shall not be deemed a waiver of any term or condition of the Employment Agreement and shall not be deemed to prejudice any right or rights which either party may now have or may have in the future under or in connection with the Employment Agreement or any of the instruments or agreements referred to therein, as the same may be amended from time to time. 4. COUNTERPARTS. This Amendment may be executed by the parties hereto on any number of separate counterparts and all of said counterparts taken together shall be deemed to constitute one and the same instrument. IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and delivered as of the day and year first above written. PATRIOT NATIONAL BANK By: /s/ Angelo De Caro -------------------------------- Name: Title: PATRIOT NATIONAL BANCORP, INC. By: /s/ Angelo De Caro -------------------------------- Name: Title: /s/ Charles F. Howell ------------------------------------ Charles F. Howell 2 EX-10.5 13 a2156305zex-10_5.txt EXHIBIT 10.5 EXHIBIT 10.5 EMPLOYMENT AGREEMENT This Employment Agreement, dated October 23, 2003 (this "Agreement"), is between PATRIOT NATIONAL BANK, a national banking association with headquarters located in Stamford, Connecticut (the "Bank"), PATRIOT NATIONAL BANCORP, INC., a Connecticut corporation ("Bancorp") and Charles F. Howell of Danbury, Connecticut (the "Executive"). RECITALS WHEREAS, the Executive, the Bank and Bancorp desire that the Executive be employed as President and Chief Executive Officer of the Bank and as President of Bancorp. The Executive and the Bank desire to enter into this Employment Agreement with Executive for several primary reasons: (1) to provide Executive with job security, particularly in the event that the Bank experiences a change-of-control; (2) to provide further incentive to Executive in the discharge of his responsibilities to the Bank; and (3) to define Executive's duties and terms of employment; WHEREAS, the Bank and Executive contemplate that the Bank will: (i) disclose to Executive information concerning the Bank's business affairs, including certain confidential information; and (ii) assist Executive in establishing goodwill and rapport with certain customers of the Bank. The use by Executive of this information, goodwill and rapport in competing with or in aiding others in competing with the Bank would have a detrimental effect on future profitable operations of the Bank. NOW, THEREFORE, in consideration of the mutual promises and covenants hereinafter described, the parties agree as follows: 1. TERM OF EMPLOYMENT. The Bank agrees to employ Executive, and Executive agrees to accept employment with the Bank for a term commencing on October 23, 2003 and continuing through December 31, 2006, unless subsequently extended or sooner terminated as provided in this Agreement (the "Employment Period"). The Bank further agrees to initiate discussions with Executive promptly following the second anniversary of the date hereof for the purpose of determining whether a further extension to this Agreement is acceptable to the parties hereto, it being understood that neither party shall have any binding obligation to further extend the Employment Period. 2. DUTIES. (a) During the Employment Period, Executive shall perform the duties and exercise the powers relating to the office of the President and Chief Executive Officer of the Bank and the President of Bancorp, including all duties assigned to Executive by the respective Boards of Directors of the Bank and Bancorp (the "Boards of Directors"). Unless otherwise specifically indicated, the term "Board of Directors" as used herein shall mean the Board of Directors of the Bank. All duties assigned shall be consistent with the customary duties of the above-described offices at a national bank. The 1 Executive will be a director of Bancorp and the Bank, and Vice Chairman of the Board of Directors of Bancorp. In the event Executive is not so elected as a director of Bancorp and the Bank and as a Vice Chairman of Bancorp during any relevant period, Executive shall have the right to terminate this Agreement without any further duties or obligations on the part of Executive hereunder. (b) During the Employment Period, Executive shall devote his entire business time, best efforts and ability to the business of the Bank and Bancorp, shall faithfully and diligently perform his duties, shall comply in all material respects with the overall policies established by the Board of Directors of the Bank and Bancorp and shall do all that is reasonably in his power to promote, develop and extend the business of the Bank and Bancorp. Notwithstanding the foregoing, it is understood that the Executive shall be permitted to continue to serve on various civic and non-profit organizations approved by the Bank and Bancorp. 3. COMPENSATION AND BENEFITS. (a) BASE SALARY. The Bank shall pay Executive as compensation for his services during the Employment Period an annual base salary of Two Hundred Twenty-five Thousand Dollars ($225,000.00) for the first twelve (12) month period, Two Hundred Forty Thousand Dollars ($240,000.00) for the second twelve (12) month period, Two Hundred Sixty Thousand Dollars ($260,000.00) for the third twelve (12) month period, and at an annualized rate of Two Hundred Sixty Thousand Dollars ($260,000.00) for the remaining period ending December 31, 2006 (the "Base Salary"). Salary payments shall be made in equal installments consistent with the Bank's standard payroll practices for its officers. The Base Salary shall be reviewed by the Board of Directors each year during the Employment Period and set by the Board of Directors in an amount not less than the stated contract salary; any increase in Base Salary in excess of the stated contract may take the form of a contingent increase based upon the achievement of articulated personal or corporate goals, or both, at the discretion of the Board of Directors. (b) EXPENSES. Upon submission of appropriate invoices or vouchers, the Bank shall pay or reimburse Executive for all reasonable expenses incurred by him in the performance of his duties under this Agreement in furthering the business, and in keeping with the policies, of the Bank. (c) VACATION. Executive shall be entitled to four (4) weeks paid vacation each contract year, to be taken each year at a time or times as shall be mutually agreed upon by the Bank and Executive and consistent with applicable regulatory requirements. If Executive fails to use all of his vacation time during a particular calendar year, the unused portion shall not be carried over to the subsequent year, unless approved in writing by the Chairman of the Board of the Directors. (d) CASH INCENTIVE COMPENSATION. The Board of Directors, in its sole discretion, may authorize the payment of special cash incentive compensation to 2 Executive from time to time in excess of the amount stated in any documented regular cash incentive plans. Any such special payment of incentive compensation will not set a precedent requiring or suggesting that similar incentive compensation will be paid in the future. The Executive shall be entitled to participate in any Profit Sharing Plan or any additional compensation plan adopted by the Board of Directors and generally available to the officers and/or employees of the Bank. In the event that the Executive's profit share payout percentage is reduced to a level below any other member of senior management of the Bank, the Executive shall have the right to terminate this Agreement without any further duties or obligations on the part of Executive hereunder, and in such event Executive shall not be entitled to any termination payment under Section 5 hereof. (e) INSURANCE POLICIES. (i) TERM LIFE INSURANCE. During the Employment Period, Bank shall provide term life insurance coverage for Executive in such form and amount as is not less favorable than that coverage provided by the Bank to other Bank employees from time to time generally. (ii) KEY MAN INSURANCE. During the Employment Period, Executive shall permit the Bank to insure his life under a policy or policies of life insurance issued by an insurance company or companies selected by the Bank, and to name the Bank as sole beneficiary thereunder. Executive agrees to submit to any physical examinations which may be reasonably required in connection with such policies. (iii) DISABILITY INSURANCE. During the Employment period, Bank shall provide Executive with disability insurance coverage in such form and amount consistent with that provided to other Bank employees generally. (f) BENEFITS. During the Employment Period, Executive shall be entitled to and shall be included under the same rules or restrictions in any employee welfare and retirement plan or program of the Bank available generally to its employees and/or officers including, without limitation, plans for hospital services, medical services benefits, sick pay, dental and other health plans. (g) STOCK PLANS. During the Employment Period, as to any stock incentive, stock option, or stock compensation plan adopted by the Board of Directors, the Executive will be entitled to participate therein to the extent determined by the Board of Directors in its reasonable discretion. In addition, notwithstanding the expiration of the Executive's Employment Agreement dated October 23, 2000 (as amended) (the "2000 Employment Agreement"), the Executive shall continue to be entitled to all of the stock grant and stock option benefits set forth in Section 3(g) thereof, and the vesting of such stock grants and stock options and the effect thereon of any termination of the Executive's employment shall continue to be governed by the 2000 Employment Agreement. 3 4. DISABILITY. If during any period in which Executive shall have continued to perform his duties as an employee of the Bank, Executive shall incur a total or partial disability (as defined in subsection (d) below), then until the earlier of (a) 180 days after the date such disability is incurred, or (b) the expiration of the term of the Employment Period (either shall be termed the "Disability Period"), the Bank shall pay Executive during the Disability Period on the basis of his then-regular salary (any payments that Executive does or would otherwise receive pursuant to the Bank's; disability coverage for employees generally for this period of disability shall be set off against these payments). (a) If Executive's total disability shall terminate prior to the expiration of the Employment Period, then Executive shall return to full and active employment with the Bank under the terms of this Agreement; provided that if he shall again become disabled within a period of three (3) months after such return, other than by reason of an event which is not causatively related to his original disability, then Executive shall be deemed to have been continuously disabled from the date he incurred his original disability; (b) In the event Executive shall incur a partial disability (as defined in (d) below), then during the period of the partial disability, the compensation to be paid to him in consideration of his services to the Bank shall be equitably adjusted to reflect the time that he is able to devote to the affairs of and the value of the service he is able to impart to the Bank; provided, however, that during the Disability Period, the compensation shall not be less than Executive would have received under this Section 4 had he been totally rather that partially disabled (this is to say, he shall receive his then-regular salary for that Disability Period); (c) Payments to Executive under this Section 4 shall be reduced by the amounts, if any, as may be payable to him by reason of his disability under policies of insurance maintained and/or paid for by the Bank; (d) As used in this Agreement, the term "total disability" shall mean a disability such that, for physical or mental reasons, Executive is unable to perform substantially his obligations hereunder for the reasonably foreseeable future (not less than 90 days), as determined by the Bank's Board of Directors after considering competent medical evidence. As used in this Agreement, the term "partial disability" shall mean a disability, other than a total disability, such that, for physical or mental reasons, Executive is unable to perform a material portion of his usual duties at the Bank on a full-time basis as determined by the Bank's Board of Directors after considering competent evidence. 5. TERMINATION. (a) TERMINATION BY DEATH. If Executive dies during the Employment Period, the Bank's obligations under this Agreement shall terminate immediately and Executive's estate shall be entitled to all arrearages of salary and expenses but shall not be entitled to further compensation. 4 (b) TERMINATION WITH OR WITHOUT CAUSE. This Agreement and Executive's employment with the Bank may be terminated for cause at any time upon thirty (30) days advance written notice from the Bank to Executive, which notice shall set forth the facts on which the termination is based. Upon termination, Executive shall be entitled to all arrearages of salary and expenses, but shall not be entitled to further compensation or benefits. As used in this Agreement, and without limitation, "cause" shall include: (i) Executive's conviction by any trial court of any crime involving fraud, embezzlement, theft or dishonesty; (ii) serious willful misconduct by Executive, including personal dishonesty in connection with Bank business or customers or the breach of a fiduciary duty to the Bank or its customers; (iii) the total disability of Executive, as defined in Paragraph 4 above; (iv) any material breach by Executive of this Agreement; or (v) if the Bank's regulatory authorities issue an order removing Executive from his positions at the Bank, or if such regulatory authorities inform the Directors that continuation of Executive in his position at the Bank would constitute an unsafe and unsound banking practice. Executive's employment may be terminated by the Bank without cause at any time, provided that, in such event, Bank shall pay Executive, in one lump-sum payment within thirty (30) days after such termination, an amount equal to the higher of the following: (i) that amount which is equal to the aggregate amount of salary payments that would be made to Executive for the remainder of the Employment Period, calculated at the Executive's then annual Base Salary; or (ii) that amount which is equal to 1-1/2 years (18 months) Base Salary, calculated at Executive's then annual Base Salary, whichever is greater. In addition, if Executive is terminated without cause, the Bank shall either continue to carry Executive at no additional cost to him under the Bank's employee hospital, medical services, dental and other health plans for the remainder of the Employment Period, or, if he is not eligible for continued coverage under such plans, pay the cost of similar coverage for Executive pursuant to COBRA or similar private insurance plans offering comparable coverage. The provisions of this Section 5 shall apply only to termination of this Agreement prior to a Change of Control (as hereinafter defined). Termination of this Agreement following the occurrence of Change of Control shall be governed by Section 11 hereof. (c) The Executive shall have the right to terminate this Agreement without any further duties or obligations on his part in the event that any person other than Angelo De Caro holds the position of Chairman of the Board of the Bank or Bancorp or Chief Executive Officer of Bancorp, or in the event that Angelo De Caro and his family members or trusts reduce their beneficial ownership of Bancorp's common stock to an amount less than twenty-five percent (25%) of the total outstanding common stock of Bancorp. In the event of such a termination, Executive shall not be entitled to any termination payment. 5 (d) IMMEDIATE CESSATION OF EMPLOYMENT. In the event Executive's employment terminates pursuant to subparagraphs (b) or (c) above, the Bank may further direct Executive to cease immediately his activities on behalf of the Bank and to discontinue using any of the Bank's facilities; provided, however, that in the event of these directions, the Bank shall continue to provide Executive with salary and other benefits required by this Agreement until the expiration of the notice period set forth in subparagraph (b). (e) SURVIVAL. Anything in this Agreement to the contrary notwithstanding, the provisions of Sections 6, 7, 8 and 9, shall survive the termination of Executive's employment with the bank. 6. NON-COMPETITION AGREEMENT AND NON-INTERFERENCE COVENANTS. (a) Executive absolutely and unconditionally covenants and agrees with the Bank that, from the period commencing on the date of this Agreement and continuing for a period of one (1) year following the termination of his employment as provided for in this Agreement, Executive will not, anywhere in the Restricted Area (as defined in subparagraph (b) below), either directly or indirectly, solely or jointly with any person or persons (a "Competitor"), as an employee, consultant, or advisor (whether or not engaged in business for profit), or an individual proprietor, partner, shareholder (provided that share ownership of less than 5% of the share voting power shall be permitted), director, officer, joint venturer, investor (provided that such investment will not be a violation if it is limited to less than 5% of the ownership of such entity), lender, or in any other capacity, compete with the business of the Bank (i) as conducted as of the date of execution of this Agreement; or (ii) as conducted during the Employment Period; or (iii) as conducted as of the end of the Employment Period or (iv) as proposed to be conducted by the Bank as of the end of the Employment Period (collectively, the "Business"). In addition, Executive covenants and agrees that he will not, for a period of one (1) year following the termination of this Agreement, directly or indirectly, for whatever reason, whether for his own account or for the account of any other person, firm, corporation or other organization: (i) solicit, employ, or otherwise interfere with any of the Bank's contracts or relationships with any employee, officer, director or any independent contractor who is employed by or associated with the Bank at the time of termination of this Agreement; or (ii) actively solicit, or cause to be solicited or otherwise actively interfere with any of the Bank's contracts or relationships with any independent contractor, customer, client or supplier of the Bank. It shall not constitute a violation of this Section 8 if customers, clients or employees follow Executive to his new place of employment without any independent solicitation on the part of Executive (or caused by Executive) or if such customers or clients respond to any mass advertising solicitation conducted independently by Executive's new employer without input from Executive. Notwithstanding the foregoing, the provisions of this Section 6 (a) shall not apply in the event that (i) the Executive's employment is terminated by the Bank other than for cause or (ii) the Executive is employed by the Bank for the entire term hereof and the Bank and the Executive fail to agree, at least 6 months prior to the end of such term, as to the terms and conditions for a new contract or renewal hereof, provided, however, that the 6 provisions of this Section 6(a) shall continue to apply even in the event of the circumstances described in subsections (i) and (ii) immediately above in the event that the Bank determines, in its sole discretion, to pay to the Executive an amount equal to seventy-five percent (75%) of the Executive's total cash compensation in respect of the immediately preceding twelve month period (excluding stock related payments), such payment to be made to the Executive within ninety (90) days of the end of this Agreement, in which event the Executive shall then be subject to the restrictions of the aforesaid Section 6(a). In either of the foregoing events, however, the terms of Section 7 hereof shall continue to be binding upon the Executive. In addition, and notwithstanding the foregoing, the non-compete, non-solicitation and non-interference provisions of this Section 6(a) shall apply to the Executive in the event the Executive receives the Change of Control Amount pursuant to Section 10 herein, and in such situation only, the "Restricted Area" shall be (i) the towns identified in Section 6(b) below, (ii) any town or city in which the Bank has an office or branch as of the time of the Change of Control, and (iii) Westchester, Nassua and Suffolk Counties, New York. Upon any violation of the aforesaid provisions by the Executive, the Executive shall repay the Change of Control Amount to the Bank. (b) As used in this Section 6: (i) the term "compete" shall mean engaging, participating, or being involved in any respect in the business of banking, or furnishing any aid, assistance or service of any kind to any person in connection with, the Business and shall include, without limitation, being employed by any banking institution which has a branch or other place of business in the Restricted Area; (ii) except as otherwise provided in Section 6(a) above, the term "Restricted Area" shall mean the following towns: Greenwich, Stamford, Darien, New Canaan, Norwalk, Wilton and Westport and Westchester, Nassua and Suffolk Counties, New York. (c) If a Court or arbitration panel concludes through appropriate proceedings that Executive has breached the covenant set forth in this Section, the term of the covenant shall be extended to a term equal to the period for which Executive is determined to have breached the covenant. 7. COVENANT NOT TO DISCLOSE. Executive agrees that, by virtue of the performance of the normal duties of his position with the Bank and by virtue of the relationship of trust and confidence between Executive and the Bank, he possesses and will possess certain data and knowledge of operations of the Bank which are proprietary in nature and confidential. Executive covenants and agrees that he will not, at any time, whether during the term of this Agreement or otherwise, reveal, divulge or make known to any person (other than the Bank) or use for his own account, any confidential or proprietary record, data, trade secret, price policy, rate structure, personnel policy, method or practice of obtaining or doing business by the Bank, or any other confidential or proprietary information whatever (the "Confidential Information"), whether or not obtained with the knowledge and permission of the Bank and whether or not developed, devised or otherwise created in whole or in part by his efforts. Executive further covenants and agrees that he shall retain all such knowledge and information which he shall acquire or 7 develop respecting such Confidential Information in trust for the sole benefit of the Bank and its successors and assigns. 8. BUSINESS MATERIALS AND PROPERTY DISCLOSURE. All written materials, records, and documents made by Executive or coming into his possession concerning the business or affairs of the Bank shall be the sole property of the Bank and, upon termination of his employment with the Bank, Executive shall deliver the same to the Bank and shall retain no copies. Executive shall also return to the Bank all other property in his possession owned by the Bank upon termination of his employment. 9. BREACH BY EXECUTIVE. It is expressly understood, acknowledged and agreed by Executive that: (i) the restrictions contained in Sections 6, 7 and 8 of this Agreement represent a reasonable and necessary protection of the legitimate interests of the Bank and that his failure to observe and comply with his covenants and agreements in those Sections will cause irreparable harm to the Bank; (ii) it is and will continue to be difficult to ascertain the nature, scope and extent of the harm; and (iii) a remedy at law for such failure by Executive will be inadequate. Accordingly, it is the intention of the parties that, in addition to any other rights and remedies which the Bank may have in the event of any breach of said Sections, the Bank shall be entitled, and is expressly and irrevocably authorized by Executive, to demand and obtain specific performance, including without limitation, temporary and permanent injunctive relief, and all other appropriate equitable relief against Executive in order to enforce against Executive, or in order to prevent any breach or any threatened breach by Executive, of the covenants and agreements contained in those Sections. 10. CHANGE OF CONTROL. If there is a "Change of Control" of the Bank (as defined below) (i) during any time Executive is a full-time executive of the Bank, or (ii) within six (6) months following Executive's termination of employment other than (A) for cause, or (B) by reason of the Executive's death or disability, the Executive shall be entitled to receive a change of control payment (the "Change of Control Amount") in consideration of services previously rendered to the Bank. The Change of Control Amount shall be made as a lump sum cash payment equal to two (2) times the greater of the following: (A) the Executive's then annual Base Salary; (B) the Executive's cash compensation (the "Cash Compensation") from the Bank for services rendered for the last full calendar year immediately preceding the Change of Control; or (C) the Executive's average annual Cash Compensation with respect to the two (2) most recent taxable years ending before the date on which the Change of Control occurs. The Cash Compensation referred to above shall include the amount of Base Salary and any cash incentive compensation paid to Executive for services rendered for the time period in question, as such compensation is described in Sections 3(a) and 3(d) hereof, including any and all of said amounts as may have been deferred by Executive under deferral plans, if any, of the Bank, and shall include long-term compensation which, by its terms, is accelerated upon a Change of Control, or if not, shall by this Agreement be so accelerated and determined as the present value of any long-term cash incentive compensation previously awarded to Executive but not yet paid, measured at 8 the time of award with the assumption that the award would be 100% earned over the performance period. For purposes of computing the Change of Control Amount, Cash Compensation will NOT include any cash received in lieu of stock options or restricted stock, provided however, that the Executive shall be entitled to receive such cash in lieu of amounts to the extent otherwise payable under Section 3(g)(i) of the 2000 Employment Agreement. Payment of the Change of Control Amount under this Section 10 shall be in lieu of any amount due or payable to the Executive under Sections 3 and 5 hereof. Payment under this Section 10 shall be paid in full within 15 days following the date of the Change of Control, provided, however, that such payment may be deferred for such period (not to exceed 90 days) following the date of the Change of Control as the Bank requests the Executive to continue to provide services to the Bank, if requested by the Bank. If the Executive voluntarily terminates employment with the Bank prior to the date (not more than 90 days following the date of the Change of Control) specified by the Bank, the Executive shall forfeit the Change of Control Payment. The Change of Control Payment shall not be reduced by any compensation which the Executive may receive from other employment with another employer should Executive's employment with the Bank terminate. For purposes hereof, a "Change in Control" shall have occurred if: (1) Any "person" other than (i) Angelo DeCaro and his family members or family trusts, or (ii) any trustee or other fiduciary holding securities under an employee benefit plan of the Bank within the meaning of Section 14(d) of the Securities Exchange Act of 1934 (the "Act"), by merger or otherwise, becomes the "beneficial owner" as defined in Rule 13d-3 thereunder, directly or indirectly, of more than 25% of the Bancorp's Common Stock; (2) any "person" other than (i) Angelo DeCaro and his family members or family trusts; or (ii) any trustee or other fiduciary holding securities under an employee benefit plan of the Bank, acquires by proxy or otherwise the right to vote more than 25% of Bancorp's Common Stock for the election of directors, other than solicitation of proxies by the Incumbent Board (as hereinafter defined), for any merger or consolidation of the Bank or for any other matter or question; (3) Bancorp's stockholders have approved the sale of all or substantially all of the assets of the Bank; or (4) the Board of Directors determines that a person other than Angelo DeCaro and his family members or family trusts directly or indirectly exercises a controlling influence over the management or policies of the Bank, A "Change of Control" shall be deemed not to have occurred if (A) such event is mandated or directed by a regulatory body having jurisdiction over the Bank's operations; or (B) it occurs pursuant to the terms of a plan for the acquisition of the capital stock of Bancorp by a newly formed bank holding company if in the consummation of such plan the shareholders of Bancorp will receive, pro rata, all of the common stock of such bank 9 holding company; unless, in such transaction, a Person satisfies sub-paragraph (1), (2), or (4) above. A "Person" shall include a natural person, corporation, or other entity. When two or more persons act as a partnership, limited partnership, syndicate, or other group for the purpose of acquiring, holding or disposing of Bancorp capital stock, such partnership, syndicate or group shall be considered a Person. Beneficial ownership shall be determined under the then current provisions of Rule 13d-3 of the Securities Exchange Act of 1934, as amended, Reg. Section 240.13d-3, or their successor provision(s). The filing of a Form F-11A by a Person shall not be deemed a Change of Control. If, after a Change of Control of the Bank, the Executive incurs any fees and expenses of counsel to enforce this Agreement, the Bank agrees to pay such fees and expenses to Executive. The Executive's choice of counsel and his decision to retain counsel shall be in his reasonable discretion, provided any such fees and expenses must be reasonable and shall be payable only if the Executive prevails on the merits of his claim. Notwithstanding any other provision hereof, in the event that any payment or benefit received or to be received by the Executive in connection with a Change in Control of the Bank or the termination of the Employment Period (whether pursuant to the terms of this Agreement or any other plan, arrangement or agreement with the Bank, any person whose actions result in a Change in Control or any person affiliated with the Bank or such person (collectively with the Change of Control Amount, "Total Payments")) would not be deductible (in whole or part) as a result of Section 280G of the Code, by the Bank, an affiliate or other person making such payment or providing such benefit, the Change of Control Amount shall be reduced until no portion of the Total Payments is not deductible, or the Change of Control Amount is reduced to zero. For purposes of this limitation (a) no portion of the Total Payments the receipt or enjoyment of which the Executive shall have effectively waived in writing prior to the date of payment of the Change of Control Amount shall be taken into account; (b) no portion of the Total Payments shall be taken into account which in the opinion of tax counsel selected by the Bank's independent auditors and acceptable to the Executive does not constitute a "parachute payment" within the meaning of Section 280G(b)(2) of the Code; (c) the Change of Control Amount shall be reduced only to the extent necessary so that the Total Payments (other than those referred to in clauses (1) or (2)) in their entirety constitute reasonable compensation for services actually rendered within the meaning of Section 280G(b)(4) of the Code or are otherwise not subject to disallowance as deductions, in the opinion of the tax counsel referred to in clause (b); and (d) the value of any non cash benefit or any deferred payment or benefit included in the Total Payments shall be determined by the Bank's independent auditors in accordance with the principles of Sections 280G(d)(3) and (4) of the Code. 11. REGULATORY RESTRICTIONS. Notwithstanding any provision to the contrary in this Agreement, the Bank shall not be required under this Agreement to continue Executive in his position(s) at the Bank, or to make any payments to Executive, if the regulatory 10 authorities having jurisdiction over the Bank order the Executive's removal from the Bank, or if such regulations determine that any payment wold constitute an illegal "excess parachute" payment under 12 U.S.C. Section 1828(k) and regulations promulgated thereunder, or an "unsafe or unsound banking practice" pursuant to 12 U.S.C. Section 1818(b). 12. ARBITRATION. Any dispute whatsoever relating to the interpretation, validity or performance of this Agreement, or any other dispute arising out of this Agreement which cannot be resolved by any party upon thirty (30) days' written notice to the other party shall be settled by arbitration in the City of Stamford, Connecticut, in accordance with the rules then prevailing of the American Arbitration Association, and the judgment upon the award rendered by the arbitrators may be entered in any court of competent jurisdiction. It is the purpose of this Agreement, and the intent of the parties hereto to make the submission to arbitration of any dispute or controversy arising out of this Agreement, as set forth hereinabove, an express condition precedent to any legal or equitable action or proceeding of any nature whatsoever. 13. GENERAL PROVISIONS: (a) All notices required by this Agreement shall be in writing and shall be sufficiently given if delivered or mailed by registered or certified mail, return receipt requested, to the parties at their respective addresses set forth below. Any party may specify a different address by written notice to the other, in accordance with this Section. All notices shall be deemed to have been given as of the date so delivered or mailed. To the Bank: 900 Bedford Street Stamford, CT Attention: Chairman of the Board of Directors To Executive: Charles F. Howell 13 Delno Drive Danbury, CT (b) Except insofar as Executive may be subject to general policies adopted by the Bank from time to time, this Agreement contains the entire agreement between the parties, and there are no other representations, warranties, conditions or agreements relating to the subject matter of this Agreement. (c) The waiver by any party of any breach or default of any provision of this Agreement shall not operate or be construed as a waiver of any subsequent breach. 11 (d) This Agreement may not be changed orally but only by an agreement in writing duly executed on behalf of the party against which enforcement of any waiver, change, modification, consent or discharge is sought. (e) This Agreement shall be binding upon and inure to the benefit of the Bank and Executive and their respective successors, assigns, heirs and legal representatives. Insofar as Executive is concerned, this Agreement is personal and Executive's duties under it shall not be assigned by Executive. (f) Each of the parties agrees to execute all further instruments and documents and to take all further action as the other party may reasonably request in order to effectuate the terms and purposes of this Agreement. (g) This Agreement may be executed in one or more counterparts, all of which taken together shall constitute one and the same instrument. (h) This Agreement shall be construed pursuant to and in accordance with the laws of the State of Connecticut. (i) Wherever used in this Agreement, the masculine, feminine and neuter pronouns shall be fully interchangeable, and the singular shall include the plural where the context so requires and vice versa. (j) If any term or provision of this Agreement is held or deemed to be invalid or unenforceable, in whole or in part, by a court of competent jurisdiction, such term of provision shall be ineffective to the extent of such invalidity or unenforceability without rendering invalid or unenforceable the remaining terms and provisions of this Agreement. IN WITNESS WHEREOF, the parties have executed this Agreement on the date first above written. PATRIOT NATIONAL BANK By ------------------------------------- Chairman of Board of Directors PATRIOT NATIONAL BANCORP, INC. By: -------------- ----------------- Charles F. Howell Executive 12 EX-10.6 14 a2156305zex-10_6.txt EXHIBIT 10.6 EXHIBIT 10.6 AMENDED AND RESTATED EMPLOYMENT AGREEMENT This Amended and Restated Employment Agreement, dated as of November 3, 2003 (this "Agreement"), is between PATRIOT NATIONAL BANK, a national banking association with headquarters located in Stamford, Connecticut (the "Bank"), PATRIOT NATIONAL BANCORP, INC., a Connecticut corporation ("Bancorp") and Robert F. O'Connell of Walpole, Massachusetts (the "Executive"). RECITALS WHEREAS, the Executive and the Bank entered into an Employment Agreement dated as of September 19, 2001 (the "Original Employment Agreement") and the Executive and the Bank desire to modify certain provisions of the Original Employment Agreement and to amend and restate such agreement in its entirety as set forth herein; WHEREAS, the Executive and the Bank desire that the Executive be employed by the Bank as Chief Financial Officer and Senior Executive Vice President. The Executive and the Bank desire to enter into this Employment Agreement with Executive for several primary reasons: (1) to provide Executive with job security, particularly in the event that the Bank experiences a change-of-control; (2) to provide further incentive to Executive in the discharge of his responsibilities to the Bank; and (3) to define Executive's duties and terms of employment; WHEREAS, the Bank and Executive contemplate that the Bank will: (i) disclose to Executive information concerning the Bank's business affairs, including certain confidential information; and (ii) assist Executive in establishing goodwill and rapport with certain customers of the Bank. The use by Executive of this information, goodwill and rapport in competing with or in aiding others in competing with the Bank would have a detrimental effect on future profitable operations of the Bank. NOW, THEREFORE, in consideration of the mutual promises and covenants hereinafter described, the parties hereby amend and restate the Original Employment Agreement in its entirety and agree as follows: 1. TERM OF EMPLOYMENT. The Bank agrees to employ Executive, and Executive agrees to accept employment with the Bank for a term commencing as of the date hereof and continuing until December 31, 2007, unless sooner terminated as provided in this Agreement (the "Employment Period"). The Bank further agrees to participate in discussions with Executive promptly following the second anniversary of the date hereof for the purpose of determining whether a further extension to this Agreement is acceptable to the parties hereto, it being understood that neither party shall have any binding obligation to further extend the Employment Period, provided however that in all events, the Executive shall be required to and hereby agrees to provide the Bank with not less than six months prior written notice in the event the Executive determines not to seek 1 an extension of the Employment Period or otherwise determines to terminate his employment with the Bank. 2. DUTIES. (a) During the Employment Period, Executive shall perform the duties and exercise the powers relating to the office of Chief Financial Officer and Senior Executive Vice President, including all duties assigned to Executive by the Chief Executive Officer of the Bank. All duties assigned shall be consistent with the customary duties of the above-described offices at a national bank. (b) During the Employment Period, Executive shall devote his entire business time, best efforts and ability to the business of the Bank, shall faithfully and diligently perform his duties, shall comply in all material respects with the overall policies established by the Board of Directors of the Bank and shall do all that is reasonably in his power to promote, develop and extend the business of the Bank. Notwithstanding the foregoing, it is understood that the Executive shall be permitted to continue to serve on various civic and non-profit organizations approved by the Bank. 3. COMPENSATION AND BENEFITS. (a) BASE SALARY. The Bank shall pay Executive as compensation for his services during the Employment Period an annual base salary of One Hundred Sixty Five Thousand ($165,000.00) Dollars for the period ending on October 31, 2004 (the "Base Salary"). Salary payments shall be made in equal installments consistent with the Bank's standard payroll practices for its officers. The Base Salary shall be reviewed by the Board of Directors each year during the Employment Period and set by the Board of Directors in an amount not less than the stated contract salary; any increase in Base Salary in excess of the stated contract may take the form of a contingent increase based upon the achievement of articulated personal or corporate goals, or both, at the discretion of the Board of Directors. If, for any calendar year commencing on or after 2004, Executive's total compensation is not increased from the prior calendar year by at least the average of the increase in total compensation in such year for all officers of the Bank at the vice president level and above, then Executive shall have the right, by notice in writing to the Bank within thirty (30) days after such compensation increases are determined, to terminate this Agreement as of the date which is six months after the date of such notice, provided that in such event, Executive shall be bound by the provisions of Section 6 herein but only for a period of ninety (90) days instead of one year. (b) EXPENSES. Upon submission of appropriate invoices or vouchers, the Bank shall pay or reimburse Executive for all reasonable expenses incurred by him in the performance of his duties under this Agreement in furthering the business, and in keeping with the policies, of the Bank. (c) VACATION. Executive shall be entitled to four (4) weeks paid vacation each contract year, to be taken each year at a time or times as shall be mutually agreed upon by 2 the Bank and Executive and consistent with applicable regulatory requirements. If Executive fails to use all of his vacation time during a particular calendar year, the unused portion shall not be carried over to the subsequent year, unless approved in writing by the Chief Executive Officer or the Chairman of the Board of the Directors. (d) CASH INCENTIVE COMPENSATION. The Board of Directors, in its sole discretion, may authorize the payment of special cash incentive compensation to Executive from time to time in excess of the amount stated in any documented regular cash incentive plans. Any such special payment of incentive compensation will not set a precedent requiring or suggesting that similar incentive compensation will be paid in the future. The Bank's Board of Directors will consider the adoption of documented regular cash incentive compensation plans whereby the Executive would receive specific cash compensation for the achievement of articulated goals as determined by the Board of Directors. Any such regular cash incentive compensation shall be separate and apart from any special cash incentive compensation. (e) INSURANCE POLICIES. (i) TERM LIFE INSURANCE. During the Employment Period, Bank shall provide term life insurance coverage for Executive in such form and amount as is not less favorable than that coverage provided by the Bank to other Bank employees from time to time generally. (ii) DISABILITY INSURANCE. During the Employment period, Bank shall provide Executive with disability insurance coverage in such form and amount consistent with that provided to other Bank employees generally. (f) BENEFITS. During the Employment Period, Executive shall be entitled to and shall be included under the same rules or restrictions in any employee welfare and retirement plan or program of the Bank available generally to its employees and/or officers including, without limitation, plans for hospital services, medical services benefits, sick pay, dental and other health plans. (g) STOCK PLANS. During the Employment Period, Executive may be included in any stock incentive, stock option, or stock compensation plan as the Board of Directors of the Bank may determine. Such plans may be documented by the Board of Directors and the Executive from time to time. 4. DISABILITY. If during any period in which Executive shall have continued to perform his duties as an employee of the Bank, Executive shall incur a total or partial disability (as defined in subsection (d) below), then until the earlier of (a) 180 days after the date such disability is incurred, or (b) the expiration of the term of the Employment Period (either shall be termed the "Disability Period"), the Bank shall pay Executive during the Disability Period on the basis of his then-regular salary (any payments that Executive does or would otherwise receive pursuant to the Bank's; disability coverage for employees generally for this period of disability shall be set off against these payments). 3 (a) If Executive's total disability shall terminate prior to the expiration of the Employment Period, then Executive shall return to full and active employment with the Bank under the terms of this Agreement; provided that if he shall again become disabled within a period of three (3) months after such return, other than by reason of an event which is not causatively related to his original disability, then Executive shall be deemed to have been continuously disabled from the date he incurred his original disability; (b) In the event Executive shall incur a partial disability (as defined in (d) below), then during the period of the partial disability, the compensation to be paid to him in consideration of his services to the Bank shall be equitably adjusted to reflect the time that he is able to devote to the affairs of and the value of the service he is able to impart to the Bank; provided, however, that during the Disability Period, the compensation shall not be less than Executive would have received under this Section 4 had he been totally rather that partially disabled (this is to say, he shall receive his then-regular salary for that Disability Period); (c) Payments to Executive under this Section 4 shall be reduced by the amounts, if any, as may be payable to him by reason of his disability under policies of insurance maintained and/or paid for by the Bank; (d) As used in this Agreement, the term "total disability" shall mean a disability such that, for physical or mental reasons, Executive is unable to perform substantially his obligations hereunder for the reasonably foreseeable future (not less than 90 days), as determined by the Bank's Board of Directors after considering competent medical evidence. As used in this Agreement, the term "partial disability" shall mean a disability, other than a total disability, such that, for physical or mental reasons, Executive is unable to perform a material portion of his usual duties at the Bank on a full-time basis as determined by the Bank's Board of Directors after considering competent evidence. 5. TERMINATION. (a) TERMINATION BY DEATH. If Executive dies during the Employment Period, the Bank's obligations under this Agreement shall terminate immediately and Executive's estate shall be entitled to all arrearages of salary and expenses but shall not be entitled to further compensation. (b) TERMINATION WITH OR WITHOUT CAUSE. This Agreement and Executive's employment with the Bank may be terminated for cause at any time upon notice from the Bank to Executive, which notice shall set forth the facts on which the termination is based. Upon termination, Executive shall be entitled to all arrearages of salary and expenses, but shall not be entitled to further compensation or benefits. As used in this Agreement, and without limitation, "cause" shall include: (i) Executive's conviction by any trial court of any crime involving fraud, embezzlement, 4 theft or dishonesty; (ii) serious willful misconduct by Executive, including personal dishonesty in connection with Bank business or customers or the breach of a fiduciary duty to the Bank or its customers; (iii) the total disability of Executive, as defined in Section 4 above; (iv) any material breach by Executive of this Agreement; or (v) if the Bank's regulatory authorities issue an order removing Executive from his positions at the Bank, or if such regulatory authorities inform the Directors that continuation of Executive in his position at the Bank would constitute an unsafe and unsound banking practice. Executive's employment may be terminated by the Bank without cause at any time, provided that, in such event, Bank shall pay Executive, in one lump-sum payment within thirty (30) days after such termination, an amount equal to the aggregate amount of salary payments that would be made to Executive for the remainder of the Employment Period, calculated at the Executive's then annual Base Salary. In addition, if Executive is terminated without cause, the Bank shall either continue to carry Executive at no additional cost to him under the Bank's employee hospital, medical services, dental and other health plans for the remainder of the Employment Period, or, if he is not eligible for continued coverage under such plans, pay the cost of similar coverage for Executive pursuant to COBRA or similar private insurance plans offering comparable coverage. In addition to the foregoing, in the event that Executive's employment is terminated by the Bank without cause following the occurrence of a "Change of Control" as defined in that certain Amended and Restated Senior Management Change of Control Agreement dated as of November 3, 2003 between the Executive and the Bank (the "Change of Control Agreement"), the Executive shall be entitled to receive the higher of (i) the payment amount calculated pursuant to the third paragraph of this Section 5(b), or (ii) the amount payable pursuant to the Change of Control Agreement, but the Executive shall not be entitled to receive both of the aforesaid payment amounts. (c) IMMEDIATE CESSATION OF EMPLOYMENT. In the event Executive's employment terminates pursuant to subparagraph (b), the Bank may further direct Executive to cease immediately his activities on behalf of the Bank and to discontinue using any of the Bank's facilities. (d) SURVIVAL. Anything in this Agreement to the contrary notwithstanding the provisions of Sections 6, 7, 8, 9, and 10 shall survive the termination of Executive's employment with the bank. 6. NON-COMPETITION AGREEMENT. (a) Executive absolutely and unconditionally covenants and agrees with the Bank that, from the period commencing on the date of this Agreement and continuing for a period of one (1) year following the termination of his employment as provided for in this Agreement, Executive will not, anywhere in the Restricted Area (as defined in subparagraph (b) below), either directly or indirectly, solely or jointly with any person or 5 persons (a "Competitor"), as an employee, consultant, or advisor (whether or not engaged in business for profit), or an individual proprietor, partner, shareholder (provided that share ownership of less than 5% of the share voting power shall be permitted), director, officer, joint venturer, investor (provided that such investment will not be a violation if it is limited to less than 5% of the ownership of such entity), lender, or in any other capacity, compete with the business of the Bank (i) as conducted as of the date of execution of this Agreement; or (ii) as conducted during the Employment Period; or (iii) as conducted as of the end of the Employment Period or (iv) as proposed to be conducted by the Bank as of the end of the Employment Period (collectively, the "Business"). Notwithstanding the foregoing, the provisions of this Section 6 (a) shall not apply in the event that (i) the Executive's employment is terminated by the Bank other than for cause during the last six months of the Employment Period or (ii) the Executive is employed by the Bank for the entire three (3) year term hereof and the Bank then determines not to further renew or extend this Agreement on substantially similar terms. In either of the foregoing events, however, the terms of Sections 7 and 8 hereof shall continue to be binding upon the Executive. (b) As used in this Section 6: (i) the term "compete" shall mean engaging, participating, or being involved in any respect in the business of banking, or furnishing any aid, assistance or service of any kind to any person in connection with, the Business and shall include, without limitation, being employed by any banking institution which has a branch or other place of business in the Restricted Area; (ii) the term "Restricted Area" shall mean Greenwich, Stamford, Darien, New Canaan, Norwalk, Westport and any other town or city in which the Bank has an office or a branch as of the time of the termination of employment. (c) If a Court or arbitration panel concludes through appropriate proceedings that Executive has breached the covenant set forth in this Section, the term of the covenant shall be extended to a term equal to the period for which Executive is determined to have breached the covenant. 7. COVENANT NOT TO DISCLOSE. Executive agrees that, by virtue of the performance of the normal duties of his position with the Bank and by virtue of the relationship of trust and confidence between Executive and the Bank, he possesses and will possess certain data and knowledge of operations of the Bank which are proprietary in nature and confidential. Executive covenants and agrees that he will not, at any time, whether during the term of this Agreement or otherwise, reveal, divulge or make known to any person (other than the Bank) or use for his own account, any confidential or proprietary record, data, trade secret, price policy, rate structure, personnel policy, method or practice of obtaining or doing business by the Bank, or any other confidential or proprietary information whatever (the "Confidential Information"), whether or not obtained with the knowledge and permission of the Bank and whether or not developed, devised or otherwise created in whole or in part by his efforts. Executive further covenants and agrees that he shall retain all such knowledge and information which he shall acquire or develop respecting such Confidential Information in trust for the sole benefit of the Bank and its successors and assigns. 6 8. NON-INTERFERENCE COVENANT. Executive covenants and agrees that he will not, for a period of one (1) year following the termination of this Agreement, directly or indirectly, for whatever reason, whether for his own account or for the account of any other person, firm, corporation or other organization: (i) solicit, employ, or otherwise interfere with any of the Bank's contracts or relationships with any employee, officer, director or any independent contractor who is employed by or associated with the Bank at the time of termination of this Agreement; or (ii) actively solicit, or cause to be solicited or otherwise actively interfere with any of the Bank's contracts or relationships with any independent contractor, customer, client or supplier of the Bank. It shall not constitute a violation of this Section 8 if customers, clients or employees follow Executive to his new place of employment without any independent solicitation on the part of Executive (or caused by Executive) or if such customers or clients respond to any mass advertising solicitation conducted independently by Executive's new employer without input from Executive. 9. BUSINESS MATERIALS AND PROPERTY DISCLOSURE. All written materials, records, and documents made by Executive or coming into his possession concerning the business or affairs of the Bank shall be the sole property of the Bank and, upon termination of his employment with the Bank, Executive shall deliver the same to the Bank and shall retain no copies. Executive shall also return to the Bank all other property in his possession owned by the Bank upon termination of his employment. 10. BREACH BY EXECUTIVE. It is expressly understood, acknowledged and agreed by Executive that: (i) the restrictions contained in Sections 6, 7, 8, and 9 of this Agreement represent a reasonable and necessary protection of the legitimate interests of the Bank and that his failure to observe and comply with his covenants and agreements in those Sections will cause irreparable harm to the Bank; (ii) it is and will continue to be difficult to ascertain the nature, scope and extent of the harm; and (iii) a remedy at law for such failure by Executive will be inadequate. Accordingly, it is the intention of the parties that, in addition to any other rights and remedies which the Bank may have in the event of any breach of said Sections, the Bank shall be entitled, and is expressly and irrevocably authorized by Executive, to demand and obtain specific performance, including without limitation, temporary and permanent injunctive relief, and all other appropriate equitable relief against Executive in order to enforce against Executive, or in order to prevent any breach or any threatened breach by Executive, of the covenants and agreements contained in those Sections. 11. REGULATORY RESTRICTIONS. Notwithstanding any provision to the contrary in this Agreement, the Bank shall not be required under this Agreement to continue Executive in his position(s) at the Bank, or to make any payments to Executive, if the regulatory authorities having jurisdiction over the Bank order the Executive's removal from the Bank, or if such regulations determine that any payment wold constitute an illegal "excess parachute" payment under 12 U.S.C. Section 1828(k) and regulations promulgated thereunder, or an "unsafe or unsound banking practice" pursuant to 12 U.S.C. Section 1818(b). 7 12. ARBITRATION. Any dispute whatsoever relating to the interpretation, validity or performance of this Agreement, or any other dispute arising out of this Agreement which cannot be resolved by any party upon thirty (30) days' written notice to the other party shall be settled by arbitration in the City of Stamford, Connecticut, in accordance with the rules then prevailing of the American Arbitration Association, and the judgment upon the award rendered by the arbitrators may be entered in any court of competent jurisdiction. It is the purpose of this Agreement, and the intent of the parties hereto to make the submission to arbitration of any dispute or controversy arising out of this Agreement, as set forth hereinabove, an express condition precedent to any legal or equitable action or proceeding of any nature whatsoever. 13. GENERAL PROVISIONS: (a) All notices required by this Agreement shall be in writing and shall be sufficiently given if delivered or mailed by registered or certified mail, return receipt requested, to the parties at their respective addresses set forth below. Any party may specify a different address by written notice to the other, in accordance with this Section. All notices shall be deemed to have been given as of the date so delivered or mailed. To the Bank: 900 Bedford Street Stamford, CT Attention: Chairman of the Board of Directors To Executive: Robert F. O'Connell (b) Except insofar as Executive may be subject to general policies adopted by the Bank from time to time, this Agreement contains the entire agreement between the parties, and there are no other representations, warranties, conditions or agreements relating to the subject matter of this Agreement. (c) The waiver by any party of any breach or default of any provision of this Agreement shall not operate or be construed as a waiver of any subsequent breach. 8 (d) This Agreement may not be changed orally but only by an agreement in writing duly executed on behalf of the party against which enforcement of any waiver, change, modification, consent or discharge is sought. (e) This Agreement shall be binding upon and inure to the benefit of the Bank and Executive and their respective successors, assigns, heirs and legal representatives. Insofar as Executive is concerned, this Agreement is personal and Executive's duties under it shall not be assigned by Executive. (f) Each of the parties agrees to execute all further instruments and documents and to take all further action as the other party may reasonably request in order to effectuate the terms and purposes of this Agreement. (g) This Agreement may be executed in one or more counterparts, all of which taken together shall constitute one and the same instrument. (h) This Agreement shall be construed pursuant to and in accordance with the laws of the State of Connecticut. (i) Wherever used in this Agreement, the masculine, feminine and neuter pronouns shall be fully interchangeable, and the singular shall include the plural where the context so requires and vice versa. (j) If any term or provision of this Agreement is held or deemed to be invalid or unenforceable, in whole or in part, by a court of competent jurisdiction, such term of provision shall be ineffective to the extent of such invalidity or unenforceability without rendering invalid or unenforceable the remaining terms and provisions of this Agreement. IN WITNESS WHEREOF, the parties have executed this Agreement on the date first above written. PATRIOT NATIONAL BANK By: ------------------------------------ Chairman of Board of Directors PATRIOT NATIONAL BANCORP, INC. By: ------------------------------------ --------------------------------- Robert F. O'Connell Executive 9 EX-10.7 15 a2156305zex-10_7.txt EXHIBIT 10.7 EXHIBIT 10.7 AMENDED AND RESTATED SENIOR MANAGEMENT CHANGE OF CONTROL AGREEMENT This AMENDED AND RESTATED CHANGE OF CONTROL AGREEMENT (the "AGREEMENT") is made and entered into as of November 3, 2003, by and between ROBERT F. O'CONNELL of Walpole, Massachusetts ("EXECUTIVE") and PATRIOT NATIONAL BANK, a national banking association with headquarters located in Stamford, Connecticut ("BANK"). W I T N E S S E T H WHEREAS, the Executive and the Bank entered into a Senior Management Change of Control Agreement dated as of May 1, 2001 (the "Original Change of Control Agreement") and the Executive and the Bank desire to modify certain provisions of the Original Change of Control Agreement and to amend and restate such agreement in its entirety as set forth herein; and WHEREAS, it is contemplated that from time to time one or more entities may consider the possibility of acquiring Patriot (as hereinafter defined) or that a Change in Control (as hereinafter defined) may otherwise occur, with or without the approval of the Board of Directors of Bancorp (as hereinafter defined) or the Board of Directors of Bank (as hereinafter defined); and WHEREAS, the Board of Directors of Bank has determined that it is in the best interests of Bank and its securityholders to provide incentive to Executive to remain employed as an executive officer of Bank during any period prior to or during a possible Change of Control of Patriot and for a period of up to [six months] following a Change of Control of Patriot, with the continued dedication and objectivity of Executive, notwithstanding the possibility, threat or occurrence of a Change of Control; and WHEREAS, the Parties (as hereinafter defined) desire to enter into this Agreement to reflect the terms and conditions contained herein; NOW, THEREFORE, in consideration of the mutual promises and covenants hereinafter described and for other good and valuable consideration the receipt and sufficiency of which is hereby acknowledged, the Parties hereto hereby amend and restate the Original Change of Control Agreement in its entirety and agree as follows: 1. DEFINED TERMS. The terms defined below shall have the following meanings for purposes of this Agreement: (a) "AGREEMENT" means this Amended and Restated Senior Management Change of Control Agreement, as amended, restated, supplemented or modified from time to time and together with any exhibits or attachments hereto. (b) "BANCORP" means Patriot National Bancorp, Inc., a Connecticut corporation. 2 (c) "BANK" means Patriot National Bank, a national banking association, and wholly-owned subsidiary of Bancorp. (d) "BOARD OF DIRECTORS OF BANCORP" shall mean the board of directors of Bancorp. (e) "BOARD OF DIRECTORS OF BANK" shall mean the board of directors of Bank. (f) "CHANGE OF CONTROL" means: (i) a change in control of the direction and administration of Patriot's business of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A (or any successor rule or regulation) promulgated under the Exchange Act, whether or not Bank or Bancorp is then subject to such reporting requirements; (ii) any person (as such term is used in Sections 14(d) and 14(d)(2) of the Exchange Act but excluding any employee benefit plan of Patriot), other than (x) Angelo De Caro and his family members or family trusts, (y) Fred DeCaro and his family members or family trusts, or (z) any trustee or other fiduciary holding securities under an employee benefit plan of Patriot, by merger or otherwise, is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of Bancorp representing 35% or more of the combined voting power of Bancorp's outstanding securities then entitled ordinarily (and apart from rights accruing under special circumstances) to vote for the election of directors; (iii) the Board of Directors of Bancorp shall approve a sale of all or substantially all of the assets of Bancorp; (iv) the Board of Directors of Bank shall approve a sale of all or substantially all of the assets of Bank; (v) the Board of Directors of Bancorp shall approve any merger, consolidation or like business combination or reorganization of Bancorp, the consummation of which would result in the occurrence of any event described in clause (ii) above; (vi) the Board of Directors of Bank shall approve any merger, consolidation or like business combination or reorganization of Bank, the consummation of which would result in the occurrence of any event described in clause (ii) above; (vii) the Board of Directors of Bancorp determines that any person (as such term is used in Sections 14(d) and 14(d)(2) of the Exchange Act but excluding any employee benefit plan of Bancorp), other than (i) Angelo De Caro and his family members of family trusts or (ii) Fred DeCaro and his family members or family trusts, directly or indirectly exercises a controlling influence over the management or policies of Bancorp; or 3 (viii) the Board of Directors of Bank determines that any person (as such term is used in Sections 14(d) and 14(d)(2) of the Exchange Act but excluding any employee benefit plan of Bank), other than (i) Angelo De Caro and his family members or family trusts or (ii) Fred DeCaro and his family members or family trusts, directly or indirectly exercises a controlling influence over the management or policies of Bank; PROVIDED, HOWEVER, that (i) the filing of a Form F-11A by any person or (ii) any event mandated or directed by a regulatory body having jurisdiction over Bancorp's or Bank's operations, shall not be deemed a Change of Control. (g) "CHANGE OF CONTROL PAYMENTS" has the meaning set forth in Section 2 of this Agreement. (h) "CAUSE" shall mean (i) the continued failure by Executive substantially to perform his duties as an executive officer of Bank (other than any such failure resulting from his incapacity due to physical or mental illness) or (ii) the engaging by Executive in conduct which is materially injurious to Bank, monetarily or otherwise, in either case as determined by the Board of Directors of Bank. (i) "DISABILITY" means any physical or mental condition that (i) would qualify Executive for a disability benefit under any long-term disability plan maintained by Bank and applicable to such Executive or (ii) renders Executive unable to perform substantially his obligations as an executive officer of Bank for the reasonably foreseeable future (not less than ninety (90) days), as determined by the Board of Directors of Bank after considering competent medical evidence. (j) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended. (k) "INTERNAL REVENUE CODE" means the Internal Revenue Code of 1986, as amended. (l) "PARTY" or "PARTIES" means, individually or collectively, Executive and Bank. (m) "PATRIOT" means, collectively, Bancorp and Bank. 2. CHANGE OF CONTROL PAYMENT. (a) If there is a Change of Control, (i) during any time Executive is a full-time executive officer of Bank, or (ii) within six (6) months following Executive's termination of employment by Bank, other than for Cause or by reason of Executive's death or Disability, then Executive shall be entitled to receive a payment (the "CHANGE OF CONTROL PAYMENT") in consideration of services previously rendered to Bank. The Change of Control Payment shall be made as a lump sum cash payment equal to the greater of (A) two times (2x) Executive's annual base salary (calculated as of the date of the Change of Control or, in the case of Section 2(a)(ii), calculated as of the date of prior termination), or (B) Executive's total 4 compensation, including salary and any cash incentive compensation, from Bank for services rendered for the last full calendar year immediately preceding the Change of Control. The Change of Control Payment shall be paid in full within 15 days following the date of the Change of Control; PROVIDED, HOWEVER, that such payment may be deferred for such period (not to exceed six months) following the date of the Change of Control as the Bank requests that Executive continue to provide services to it. If Executive voluntarily terminates employment with Bank prior to the date (not more than six months following the date of the Change of Control) specified by Bank, Executive shall forfeit his right to receive the Change of Control Payment. The Change of Control Payment shall not be reduced by any compensation which Executive may receive from Bank or from other employment with another employer should Executive's employment with Bank terminate. In addition, and notwithstanding the foregoing, in the event Executive gives Bank notice that Executive will voluntarily terminate his employment pursuant to his employment agreement with Bank and thereafter a Change of Control occurs, Executive shall have no right to receive the Change of Control Payment. (b) All payments made pursuant to this Agreement will be subject to withholding of applicable income and employment taxes. (c) If, after a Change of Control, Executive prevails in any action to enforce this Agreement, then Bank shall be obligated to reimburse Executive for all reasonable fees and expenses, including reasonable attorneys' fees of counsel chosen by Executive in his sole discretion. (d) Notwithstanding any other provision of this Agreement or of any other agreement, understanding or compensation plan, Bank shall not be obligated to pay any amounts which violate restrictions imposed, or which may in the future be imposed, on such payments by Bank pursuant to Section 18(k)(1) of the Federal Deposit Insurance Act, or any regulations or orders which are or may be promulgated thereunder; nor shall any payments be made which would constitute an "unsafe or unsound banking practice" pursuant to 12 U.C.C. Section 18(b). (e) Notwithstanding any other provision hereof, in the event that any payment or benefit received or to be received by Executive in connection with a Change of Control would not be deductible (in whole or part) as a result of Section 280G of the Internal Revenue Code, by Bank, an affiliate or other person making such payment or providing such benefit, the Change of Control Payment shall reduced until no portion is not deductible, or the Change of Control Payment is reduced to zero. For purposes of this limitation, (i) no portion of the Change of Control Payment the receipt or enjoyment of which Executive shall have effectively waived in writing prior to the date of payment of the Change of Control Payment shall be taken into account; (ii) no portion of the Change of Control Payment shall be taken into account which in the opinion of tax counsel selected by Bank's independent auditors and acceptable to Executive does not constitute a "parachute payment" within the meaning of Section 280G(b)(2) of the Internal Revenue Code; (iii) the Change of Control Payment shall be reduced only to the extent necessary so that such payment shall constitute reasonable compensation for services actually rendered within the meaning of Section 280G(b)(4) of the Internal Revenue Code or are otherwise not subject to disallowance as deductions, in the opinion of the tax counsel 5 referred to in clause (ii); and (iv) the value of any non cash benefit or any deferred payment or benefit included in the Change of Control Payment shall be determined by Bank's independent auditors in accordance with the principles of Sections 280G(d)(3) and (4) of the Internal Revenue Code. 3. TERM. This Agreement shall terminate on the earliest of: (i) immediately, upon Executive's termination of employment with Bank for Cause, death or Disability, (ii) six months following Executive's termination of employment with Bank, other than for Cause, death or Disability, or (iii) six months following receipt by Executive of the Change of Control Payment. 4. ASSIGNMENT. This Agreement will be binding on and will inure to the benefit of the Parties hereto and their respective successors, permitted assigns and legal representatives. Without otherwise limiting the foregoing, "Bank" as used herein shall refer to any successor institution whether by merger, consolidation, acquisition or otherwise. 5. NON-COMPETITION AGREEMENT. If Executive receives the Change of Control Payment, Executive absolutely and unconditionally agrees with Bank that, for a period of six (6) months from the date of receipt of the Change of Control Payment, Executive will not, anywhere in the Restricted Area (as defined below), either directly or indirectly, solely or jointly with any person or persons (a "COMPETITOR"), as an employee, consultant or advisor (whether or not engaged in business for profit), or as an individual proprietor, partner, shareholder (provided that ownership of less than 5% of the voting power shall be permitted), director, officer, joint venturer, investor (provided that such investment will not be a violation if it is limited to less than 5% of the ownership of such entity), lender or in any other capacity, compete with the business of the Bank as conducted or proposed to be conducted as of the date of the Change of Control. As used herein, "RESTRICTED AREA" shall be the cities of Stamford and Norwalk, Connecticut, the Town of Greenwich, Connecticut, and any town or branch in which the Bank has an office as of the time of the Change of Control. 6. ENTIRE AGREEMENT; NO WAIVER. This Agreement contains the entire agreement between the Parties with respect to the subject matter herein and may not be modified or amended except by a written instrument signed by the Parties. Neither the failure to insist upon strict performance of any of the terms, covenants or conditions of this Agreement, nor the acceptance of monies due hereunder with knowledge of a breach of this Agreement, shall be deemed a waiver of any rights or remedies that either Party may have or a waiver of any subsequent breach or default in any of such agreements, terms, covenants and conditions. 7. FURTHER INSTRUMENTS. Each of the Parties agrees to execute all further instruments and documents and to take all further action as the other Party may reasonably request in order to effectuate the terms and purposes of this Agreement. 8. MODIFICATION AND SEVERABILITY. Wherever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement shall be prohibited by or invalid under applicable law, such provision shall be deemed modified to the extent necessary to make it enforceable under 6 applicable law. If any such provision is not enforceable as set forth in the preceding sentence, the unenforceability of such provision shall not affect the other provisions of this Agreement, but this Agreement shall be construed as if such unenforceable provision had never been contained herein. 9. GOVERNING LAW. It is the intention of the Parties that the internal substantive laws, and not the laws of conflicts, of the State of Connecticut should govern the enforceability and validity of this Agreement, the construction of its terms and the interpretation of the rights and duties of the Parties. 10. JURY WAIVER. The Parties, and any principals for whom they are agents, waive the right to a trial by jury in any action arising between the Parties or their principals under this Agreement, whether such actions are claims in contract, tort, statute, or otherwise, or made by claim, counterclaim, third-party claim or otherwise. 11. NOTICES. All notices, requests, consents, instructions, approvals and other communications required or permitted hereunder shall be validly given, if in writing and delivered personally, or sent by registered or certified mail or nationally recognized air courier service, postage prepaid at the address listed above or at such other address as such Party may specify by written notice to each other Party. Each such notice, request, consent, instruction, approval and other communication shall for all purposes of this Agreement be treated as being effective or having been given when delivered, if delivered personally, or, if sent by mail, at the earlier of its actual receipt or three (3) days after the same has been deposited in a regularly maintained receptacle for the deposit of United States mail, addressed and postage prepaid as aforesaid, and if by air courier, one (1) day after the same has been deposited with such air courier. 12. HEADINGS. The titles and headings of the various sections and paragraphs in this Agreement are intended solely for convenience of reference and are not intended for any other purpose whatsoever, or to explain, modify or place any construction upon or on any of the provisions of this Agreement. 13. INTERPRETATION. This Agreement shall be construed as a whole according to its fair meaning. It shall not be construed strictly for or against either Party. Unless the context indicates otherwise, the term "or" shall be deemed to include the term "and" and the singular or plural number shall be deemed to include the other. 14. COUNTERPARTS. This Agreement may be executed in one or more counterparts, each of which will be deemed an original, but which collectively will constitute one and the same instrument. [Signature page follows] 7 IN WITNESS WHEREOF, the Parties have executed this Agreement on the date first above written. PATRIOT NATIONAL BANK By: ------------------------------------ Chairman of the Board of Directors EXECUTIVE -------------------------------- Robert F. O'Connell EX-10.8 16 a2156305zex-10_8.txt EXHIBIT 10.8 EXHIBIT 10.8 SENIOR MANAGEMENT CHANGE OF CONTROL AGREEMENT This CHANGE OF CONTROL AGREEMENT (the "AGREEMENT") is made and entered into as of May 1, 2001, by and between MARTIN a NOBLE of Weston, Connecticut ("EXECUTIVE") and PATRIOT NATIONAL BANK, a national banking association with headquarters located in Stamford, Connecticut ("BANK"). WITNESSETH WHEREAS, it is contemplated that from time to time one or more entities may consider the possibility of acquiring Patriot (as hereinafter defined) or that a Change in Control (as hereinafter defined) may otherwise occur, with or without the approval of the Board of Directors of Bancorp (as hereinafter defined) or the Board of Directors of Bank (as hereinafter defined); and WHEREAS, the Board of Directors of Bank has determined that it is in the best interests of Bank and its security holders to provide incentive to Executive to remain employed as an executive officer of Bank during any period prior to or during a possible Change of Control of Patriot and for a period of up to 90 days following a Change of Control of Patriot, with the continued dedication and objectivity of Executive, notwithstanding the possibility, threat or occurrence of a Change of Control; and WHEREAS, the Parties (as hereinafter defined) desire to enter into this Agreement to reflect the terms and conditions contained herein; NOW, THEREFORE, in consideration of the mutual promises and covenants hereinafter described and for other good and valuable consideration the receipt and sufficiency of which is hereby acknowledged, the Parties hereto hereby amend and restate the Original Change of Control Agreement in its entirety and agree as follows: 1. DEFINED TERMS. The terms defined below shall have the following meanings for purposes of this Agreement: (a) "AGREEMENT" means this Amended and Restated Senior Management Change of Control Agreement, as amended, restated, supplemented or modified from time to time and together with any exhibits or attachments hereto. (b) "BANCORP" means Patriot National Bancorp, Inc., a Connecticut corporation. (c) "BANK" means Patriot National Bank, a national banking association, and wholly-owned subsidiary of Bancorp. (d) "BOARD OF DIRECTORS OF BANCORP" shall mean the board of directors of Bancorp. (e) "BOARD OF DIRECTORS OF BANK" shall mean the board of directors of Bank. (f) "Change of Control" means: (i) a change in control of the direction and administration of Patriot's business of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A (or any successor rule or regulation) promulgated under the Exchange Act, whether or not Bank or Bancorp is then subject to such reporting requirements; (ii) any person (as such term is used in Sections 14 (d) and 14(d)(2) of the Exchange Act but excluding any employee benefit plan of Patriot), other than (x) Angelo De Caro and his family members or family trusts, (y) Fred DeCaro and his family members or family trusts, or (z) any trustee or other fiduciary holding securities under an employee benefit plan of Patriot, by merger or otherwise, is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of Bancorp representing 35% or more of the combined voting power of Bancorp's outstanding securities then entitled ordinarily (and apart from rights accruing under special circumstances) to vote for the election of directors; (iii) the Board of Directors of Bancorp shall approve a sale of all or substantially all of the assets of Bancorp; (iv) the Board of Directors of Bank shall approve a sale of all or substantially all of the assets of Bank; (v) the Board of Directors of Bancorp shall approve any merger, consolidation or like business combination or reorganization of Bancorp, the consummation of which would result in the occurrence of any event described in clause (ii) above; (vi) the Board of Directors of Bank shall approve any merger, consolidation or like business combination or reorganization of Bank, the consummation of which would result in the occurrence of any event described in clause (ii) above; (vii) the Board of Directors of Bancorp determines that any person (as such term is used in Sections 14(d) and 14(d)(2) of the Exchange Act but excluding any employee benefit plan of Bancorp), other than (i) Angelo De Caro and his family members of family trusts or (ii) Fred DeCaro and his family members or family trusts, directly or indirectly exercises a controlling influence over the management or policies of Bancorp; or (viii) the Board of Directors of Bank determines that any person (as such term is used in Sections 14(d) and 14(d)(2) of the Exchange Act but excluding any employee benefit plan of Bank), other than (i) Angelo De Caro and his family members or family trusts or (ii) Fred DeCaro and his family members or family 2 trusts, directly or indirectly exercises a controlling influence over the management or policies of Bank; PROVIDED, HOWEVER, that (i) the filing of a Form F-11A by any person or (ii) any event mandated or directed by a regulatory body having jurisdiction over Bancorp's or Bank's operations, shall not be deemed a Change of Control. (g) "CHANGE OF CONTROL PAYMENTS" has the meaning set forth in Section 2 of this Agreement. (h) "CAUSE" shall mean (i) the continued failure by Executive substantially to perform his duties as an executive officer of Bank (other than any such failure resulting from his incapacity due to physical or mental illness) or (ii) the engaging by Executive in conduct which is materially injurious to Bank, monetarily or otherwise, in either case as determined by the Board of Directors of Bank. (i) "DISABILITY" means any physical or mental condition that (i) would qualify Executive for a disability benefit under any long-term disability plan maintained by Bank and applicable to such Executive or (ii) renders Executive unable to perform substantially his obligations as an executive officer of Bank for the reasonably foreseeable future (not less than ninety (90) days), as determined by the Board of Directors of Bank after considering competent medical evidence. (j) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended. (k) "INTERNAL REVENUE CODE" means the Internal Revenue Code of 1986, as amended. (l) "Party" or "Parties" means, individually or collectively, Executive and Bank. (m) "PATRIOT" means, collectively, Bancorp and Bank. 2. CHANGE OF CONTROL PAYMENT. (a) If there is a Change of Control, (i) during any time Executive is a full-time executive officer of Bank, or (ii) within six (6) months following Executive's termination of employment by Bank, other than for Cause or by reason of Executive's death or Disability, then Executive shall be entitled to receive a payment (the "CHANGE OF CONTROL PAYMENT") in consideration of services previously rendered to Bank. The Change of Control Payment shall be made as a lump sum cash payment equal to one times (1x) Executive's annual base salary (calculated as of the date of the Change of Control or, in the case of Section 2(a)(ii), calculated as of the date of prior termination). The Change of Control Payment shall be paid in full within 15 days following the date of the Change of Control; provided, however, that such payment may be-deferred for such period (not to exceed 90 days) following the date of the Change of Control as the Bank requests that Executive continue to provide services to it. If Executive voluntarily terminates 3 employment with Bank prior to the date (not more than 90 days following the date of the Change of Control) specified by Bank, Executive shall forfeit his right to receive the Change of Control Payment. The Change of Control Payment shall not be reduced by any compensation which Executive may receive from Bank or from other employment with another employer should Executive's employment with Bank terminate. (b) All payments made pursuant to this Agreement will be subject to withholding of applicable income and employment taxes (c) If, after a Change of Control Executive prevails in any action to enforce this Agreement, then Bank shall be obligated to reimburse Executive far all reasonable fees and expenses, including reasonable attorneys' fees of counsel chosen by Executive in his sole discretion. (d) Notwithstanding any other provision of this Agreement or of any other agreement, understanding or compensation plan, Bank shall not be obligated to pay any amounts which violate restrictions imposed, or which may in the future be imposed, on such payments by Bank pursuant to Section 18(k)(l) of the Federal Deposit Insurance Act, or any regulations or orders which are or may be promulgated thereunder; nor shall any payments be made which would constitute an "unsafe or unsound banking practice" pursuant to 12 U.C.C. Section 18(b). (e) Notwithstanding any other provision hereof, in the event that any payment or benefit received or to be received by Executive in connection with a Change of Control would not be deductible (in whole or part) as a result of Section 280G of the Internal Revenue Code, by Bank, an affiliate or other person making such payment or providing such benefit, the Change of Control Payment shall reduced until no portion is not deductible, or the Change of Control Payment is reduced to zero. For purposes of this limitation, (i) no portion of the Change of Control Payment the receipt or enjoyment of which Executive shall have effectively waived in writing prior to the date of payment of the Change of Control Payment shall be taken into account; (ii) no portion of the Change of Control Payment shall be taken into account which in the opinion of tax counsel selected by Bank's independent auditors and acceptable to Executive does not constitute a "parachute payment" within the meaning of Section 280G(b)(2) of the Internal Revenue Code; (iii) the Change of Control Payment shall be reduced only to the extent necessary so that such payment shall constitute reasonable compensation for services actually rendered within the meaning of Section 280G(b)(4) of the Internal Revenue Code or are otherwise not subject to disallowance as deductions, in the opinion of the tax counsel referred to in clause (ii); and (iv) the value of any non cash benefit or any deferred payment or benefit included in the Change of Control Payment shall be determined by Bank's independent auditors in accordance with the principles of Sections 280G(d)(3) and (4) of the Internal Revenue Code. 3. TERM. This Agreement shall terminate on the earliest of: (i) immediately, upon Executive's termination of employment with Bank for Cause, death or Disability, (ii) six months 4 following Executive's termination of employment with Bank, other than for Cause, death or Disability, or (iii) six months following receipt by Executive of the Change of Control Payment. 4. ASSIGNMENT. This Agreement will be binding on and will inure to the benefit of the Parties hereto and their respective successors, permitted assigns and legal representatives. Without otherwise limiting the foregoing, "Bank" as used herein shall refer to any successor institution whether by merger, consolidation, acquisition or otherwise. 5. NON-COMPETITION AGREEMENT. If Executive receives the Change of Control Payment, Executive absolutely and unconditionally agrees with Bank that, for a period of six (6) months from the date of receipt of the Change of Control Payment, Executive will not, anywhere in the Restricted Area (as defined below), either directly or indirectly, solely or jointly with any person or persons (a "COMPETITOR"), as an employee, consultant or advisor (whether or not engaged in business for profit), or as an individual proprietor, partner, shareholder (provided that ownership of less than 5% of the voting power shall be permitted), director, officer, joint venturer, investor (provided that such investment will not be a violation if it is limited to less than 5% of the ownership of such entity), lender or in any other capacity, compete with the business of the Bank as conducted or proposed to be conducted as of the date of the Change of Control. As used herein, "RESTRICTED AREA" shall be the cities of Stamford and Norwalk, Connecticut, the Town of Greenwich, Connecticut, and any town or branch in which the Bank has an office as of the time of the Change of Control. 6. ENTIRE AGREEMENT; NO WAIVER. This Agreement contains the entire agreement between the Parties with respect to the subject matter herein and may not be modified or amended except by a written instrument signed by the Parties. Neither the failure to insist upon strict performance of any of the terms, covenants or conditions of this Agreement, nor the acceptance of monies due hereunder with knowledge of a breach of this Agreement, shall be deemed a waiver of any rights or remedies that either Party may have or a waiver of any subsequent breach or default in any of such agreements, terms, covenants and conditions. 7. FURTHER INSTRUMENTS. Each of the Parties agrees to execute all further instruments and documents and to take all further action as the other Party may reasonably request in order to effectuate the terms and purposes of this Agreement. 8. MODIFICATION AND SEVERABILITY. Wherever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement shall be prohibited by or invalid under applicable law, such provision shall be deemed modified to the extent necessary to make it enforceable under applicable law. If any such provision is not enforceable as set forth in the preceding sentence, the unenforceability of such provision shall not affect the other provisions of this Agreement, but this Agreement shall be construed as if such unenforceable provision had never been contained herein. 9. GOVERNING LAW. It is the intention of the Parties that the internal substantive laws, and not the laws of conflicts, of the State of Connecticut should govern the enforceability and validity of this Agreement, the construction of its terms and the interpretation of the rights and duties of the Parties. 5 10. JURY WAIVER. The Parties, and any principals for whom they are agents, waive the right to a trial by jury in any action arising between the Parties or their principals under this Agreement, whether such actions are claims in contract, tort, statute, or otherwise, or made by claim, counterclaim, third-party claim or otherwise. 11. NOTICES. All notices, requests, consents, instructions, approvals and other communications required or permitted hereunder shall be validly given, if in writing and delivered personally, or sent by registered or certified mail or nationally recognized air courier service, postage prepaid at the address listed above or at such other address as such Party may specify by written notice to each other Party. Each such notice, request, consent, instruction, approval and other communication shall for all purposes of this Agreement be treated as being effective or having been given when delivered, if delivered personally, or, if sent by mail, at the earlier of its actual receipt or three (3) days after the same has been deposited in a regularly maintained receptacle for the deposit of United States mail, addressed and postage prepaid as aforesaid, and if by air courier, one (1) day after the same has been deposited with such air courier. 12. HEADINGS. The titles and headings of the various sections and paragraphs in this Agreement are intended solely for convenience of reference and are not intended for any other purpose whatsoever, or to explain, modify or place any construction upon or on any of the provisions of this Agreement. 13. INTERPRETATION. This Agreement shall be construed as a whole according to its fair meaning. It shall not be construed strictly for or against either Party. Unless the context indicates otherwise, the term "or" shall be deemed to include the term "and" and the singular or plural number shall be deemed to include the other. 14. COUNTERPARTS. This Agreement may be executed in one or more counterparts, each of which will be deemed an original, but which collectively will constitute one and the same instrument. [Signature page follows] 6 IN WITNESS WHEREOF, the Parties have executed this Agreement on the date first above written. PATRIOT NATIONAL BANK By: /s/ Angelo De Caro -------------------- Chairman of the Board of Directors EXECUTIVE /s/ Martin G. Noble ------------------- Martin G. Noble 7 EX-10.9 17 a2156305zex-10_9.txt EXHIBIT 10.9 EXHIBIT 10.9 EMPLOYMENT AGREEMENT This Employment Agreement dated as of January 1, 2005 is by and between Patriot National Bank, a national banking association ("Patriot") and Marcus Zavattaro (the "Executive"). RECITALS Patriot desires to employ the Executive and to have the benefit of his skills and services, and the Executive desires to be employed by Patriot on the terms and conditions set forth herein. NOW, THEREFORE, in consideration of the mutual promises, terms, covenants and conditions set forth herein, and the performance of each, the parties, intending legally to be bound, hereby agree as follows: AGREEMENTS SECTION 1. DEFINITIONS. For purposes of this Agreement, the following terms have the meanings set forth below: "BOARD" means the Board of Directors of Patriot as same is constituted from time to time. "BUSINESS" means the business operations of the Residential Lending Group of Patriot National Bank, which consists of the residential mortgage brokerage origination business as it exists on the date hereof. "CAUSE" means (a) the commission by the Executive of any act, on or after the date of this Agreement, constituting, as to any cash funds or other receipts of Patriot, or any material property of Patriot or any other Person, (i) theft, (ii) embezzlement, (iii) fraud, (iv) gross misconduct, (v) dishonesty or (vi) or misappropriation of material property under applicable law; (b) the conviction of the Executive of (i) a crime resulting in material injury to the business or property of Patriot or (ii) a felony; (c) the material breach by the Executive of this Agreement, including but not limited to the failure by the Executive to follow all reasonable and lawful directions of the Board as to any material matter, or the taking of any action by the Executive that would be reasonably likely to cause material injury to Patriot or that would be in conflict with any material interest to Patriot within a reasonable period of time following Executive's receipt of written notice thereof by Patriot, which notice is sufficiently specific so as to permit Executive reasonably to cure such misconduct; or (d) the misuse or unlawful use of drugs, alcohol or other controlled substances in contravention of written policies of Patriot that are applicable to all employees of Patriot. "CONFIDENTIAL INFORMATION" means information that was or is used, developed or obtained by Patriot in connection with its business, including (a) products or services, (b) fees, costs and pricing structures, (c) analyses, (d) computer software, including operating systems, applications and program listings, (e) flow charts, manuals and documentation, (f) data bases, (g) accounting and business methods, (h) inventions, devices, new developments, methods and processes, whether patentable or unpatentable and whether or not reduced to practice, (i) other copyrightable works, (j) all technology and trade secrets, and (k) all similar and related information in whatever form or medium. Notwithstanding the foregoing, this Agreement imposes no obligation upon the Executive with respect to Confidential Information which (a) was known to the Executive before receipt from Patriot, (b) is or becomes publicly available through no fault of the Executive, (c) is disclosed to the Executive by a third party without a duty of confidentiality on the part of the third party to Patriot, (d) is subsequently independently developed by the Executive without a breach of this Agreement, or (e) is required to be disclosed by the Executive in a judicial or administrative proceeding, provided that the Executive gives Patriot reasonable advance notice of such required disclosure so that Executive may contest the disclosure or seek a protective order. "EFFECTIVE DATE" means the date of this Agreement. "EMPLOYMENT PERIOD" has the meaning set forth in Section 5 of this Agreement. "EXECUTIVE" means Marcus Zavattaro. "PERMANENT DISABILITY" shall have occurred if as a result of physical or mental incapacity, the Employee shall have been incapable of performing Employee's duties hereunder for a period in excess of 120 consecutive days in any 6 month period, or an aggregate of 240 days in any 12 month period. "PERSON" means an individual, a partnership, a corporation, a limited liability company, an association, a trust, a joint venture, an unincorporated organization and a governmental entity or any department, agency or political subdivision thereof. "RLG" means the Residential Lending Group of Patriot. "REIMBURSABLE EXPENSES" has the meaning set forth in Section 4.4 of this Agreement. "SUBSIDIARY" means, with respect to any Person, any corporation, partnership, limited liability company, association or other business entity of which (a) if a corporation, a majority of the total voting power of shares of stock entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof is at the time owned or controlled, directly or indirectly, by that Person or a combination thereof, or (b) if a partnership, limited liability company, association or other business entity, a majority of the partnership or other similar ownership interests thereof is at the time owned or controlled, directly or indirectly, by that Person or one or more Subsidiaries of the Person or a combination thereof. For purposes of this Agreement, a Person or Persons will be deemed to have a majority ownership interest in a partnership, limited liability company, association or other business entity if such Person or Persons are allocated a majority of partnership, limited liability company, association or other business entity gains or losses or control the managing director or member or 2 general partner of such partnership, limited liability company, association or other business entity. "TERMINATION DATE" shall mean December 31, 2005. SECTION 2. EMPLOYMENT. Patriot hereby employs the Executive, and the Executive hereby accepts employment with Patriot, upon the terms and conditions set forth in this Agreement, for the Employment Period provided in Section 5. SECTION 3. POSITION AND DUTIES. 3.1 POSITION. The Executive shall hold the position of Executive Vice President of Patriot National Bank, and the title Division Sales Manager of the Residential Lending Group of Patriot National Bank. During the Employment Period, the Executive will perform such reasonable executive and management duties as may, from time to time, be determined and assigned to him by the Chairman, Chief Executive Officer, President and/or the Management Committee of Patriot National Bank, which duties shall be similar to the services the Executive rendered to RLG in the past and shall relate primarily to the residential real estate mortgage origination business of Patriot and its affiliates. Patriot shall not require the Executive to relocate to any office of Patriot outside of Fairfield County, Connecticut. 3.2 PERFORMANCE OF DUTIES; OTHER ACTIVITIES. The Executive shall devote his best efforts, attention and skills toward performing his duties on behalf of Patriot, and his full business and professional time to fully and faithfully perform such duties and responsibilities to the best of his abilities in a diligent, trustworthy, businesslike and efficient manner. The Executive shall do such traveling as may reasonably be required in connection with the performance of his duties and responsibilities hereunder, provided that the Executive will not be assigned to regular duties such as would require him to relocate his permanent residence. 3.3 REPORTING. The Executive will report to the Chairman, Chief Executive Officer, President and/or the Management Committee of Patriot National Bank. SECTION 4. COMPENSATION AND BENEFITS. 4.1 COMPENSATION. The compensation payable to the Executive by Patriot during the Employment Period is set forth on Schedule A hereto. 4.2 Executive Stock Purchases and Stock Options. The Executive may be granted options and opportunities to purchase Patriot Common Stock consistent with stock purchase plans and option plans provided to senior management of Patriot and as may be awarded in the sole discretion of Patriot's Board of Directors from time to time. 4.3 BENEFITS. In addition to the aforesaid compensation, the Executive shall be entitled to be included under the same rules or restrictions in any employee welfare and retirement plan or program of Patriot generally available to its employees and or officers, including, without 3 limitation, plans for hospital services, medical services benefits, sick pay, dental and other health plans, as well as the following benefits during the Employment Period: (a) four weeks of paid vacation per year during the Employment Period; (b) five personal/sick days per year; (c) participation in the 401K Plan of Patriot consistent with the participation afforded other similarly positioned Patriot executives. 4.4 EXPENSES. Patriot shall reimburse the Executive for any and all reasonable expenses incurred by him in the course of performing his duties under this Agreement which are consistent with Patriot's policies in effect from time to time with including business travel, entertainment, mileage expenses and other business expenses ("Reimbursable Expenses"), subject to Patriot's requirements with respect to reporting and documentation of expenses. SECTION 5. EMPLOYMENT PERIOD AND TERMINATION. 5.1 EMPLOYMENT PERIOD. The Executive's employment hereunder shall commence on the Effective Date, and, unless renewed or modified by written agreement between Patriot and the Executive, the Employment Period will terminate on the "Termination Date"; provided, however, that (a) the Employment Period shall terminate prior to such date upon the Executive's death or Permanent Disability, and (b) the Employment Period may be terminated by Patriot at any time prior to such date, if such termination shall be for Cause. The Executive and Patriot agree to begin negotiations to renew this employment agreement by September 15, 2005 and to use their best efforts to complete negotiations by October 15, 2005 provided, however, that neither the Executive nor Patriot shall have any legal obligation to renew this employment agreement. 5.2 UNJUSTIFIED TERMINATION. Except as otherwise provided in Section 5.3 below, if the Employment Period shall be terminated by Patriot prior to the Termination Date for any reason other than (a) for Cause, or (b) as a result of the death or Permanent Disability of the Executive (collectively, an "Unjustified Termination"), the Executive shall, so long as the Executive has not breached and does not breach the provisions of Sections 6, 7 or 8 of this Agreement, be entitled to receive during the unexpired portion of the Employment Period (i) continuation of his compensation, (ii) reimbursement of all Reimbursable Expenses incurred by the Executive prior to the termination of the Employment Period, and (iii) continuation of all medical benefits. 5.3 JUSTIFIED TERMINATION. If the Employment Period shall be terminated by Patriot prior to the Termination Date (a) for Cause, (b) as a result of the Executive's resignation, or (c) as a result of the death or permanent disability of the Executive (collectively, a "Justified Termination"), the Executive shall be entitled to receive his compensation through the date of termination and reimbursement of all Reimbursable Expenses incurred by the Executive prior to the termination of the Employment Period. A termination for Cause shall become effective on the date designated by Patriot. 4 5.4 BENEFITS. Except as otherwise required by law, all of the Executive's rights to fringe benefits under this Agreement, if any, accruing after the termination of the Employment Period as a result of a Justified Termination will cease upon such Justified Termination. SECTION 6. NON-COMPETITION AGREEMENT. (a) The Executive covenants and agrees that during the Employment Period, and for a period of 1 year following the Termination Date (the "Restricted Period") for any reason (excluding an Unjustified Termination by Patriot) of such employment, he will not, without the prior written consent of Patriot, on his own behalf or in the service or on behalf of others anywhere in Westchester, Nassau or Suffolk counties in the State of New York or in the State of Connecticut as an owner, manager, stockholder (except as a holder of no more than 1% of the issued and outstanding stock of a publicly traded company) consultant, director, officer, principal partner, agent or employee of any business entity, participate in the development or provision of goods or services in the area of residential conforming and non-conforming mortgage origination. The enforcement, which is at the discretion of Patriot, of this Section 6, for the period following the Termination Date, as a result of either (i) a non-renewal of the Employment Period under Section 5.1, or (ii) an Unjustified Termination under Section 5.2, shall be conditioned upon Patriot paying to the Executive the compensation payable under Section 4.1, Schedule A #1 - Salary/ Commission during the entire Restricted Period (at 75% of the amount and in the same manner as paid during the final year immediately preceding the Employment Period). (b) The Executive covenants and agrees that during the Restricted Period, the Executive will refrain from interfering with the employment relationship between Patriot and its employees and will not solicit any of such employees for employment by an entity other than Patriot. SECTION 7. DELIVERY OF MATERIALS UPON TERMINATION OF EMPLOYMENT. As requested by Patriot from time to time and upon the termination of the Executive's employment with Patriot for any reason, the Executive will promptly deliver to Patriot all copies and embodiments, in whatever form or medium, of all Confidential Information in the Executive's possession or within his control irrespective of the location or form of such material and, if requested by Patriot, will provide Patriot with written confirmation that all such materials have been delivered to Patriot. SECTION 8. NONDISCLOSURE AND NON-USE OF CONFIDENTIAL INFORMATION. The Executive will not, at any time, disclose or use any Confidential Information of which the Executive is or becomes aware, whether or not such information is developed by him, except to the extent that such disclosure or use is directly related to and required by the Executive's performance of duties assigned to the Executive pursuant to this Agreement. 5 SECTION 9. AFFILIATES; EQUITABLE RELIEF. The Executive acknowledges that a breach or threatened breach by him of any of his covenants contained in Sections 6, 7 and 8 of this Agreement could cause irreparable harm to Patriot for which it would have no adequate remedy at law. Accordingly, and in addition to any remedies which Patriot may have at law, in the event of an actual or threatened breach by the Executive of his covenants contained in Sections 6, 7 and 8 of this Agreement, Patriot shall have the absolute right to apply to any court of competent jurisdiction for such injunctive or other equitable relief as such court may deem necessary or appropriate in the circumstances. SECTION 10. NO PRIOR AGREEMENTS. The Executive hereby represents and warrants to Patriot that the execution of this Agreement by Executive, his employment by Patriot, and the performance of his duties hereunder will not violate or be a breach of any agreement with a former employer, client, or any other Person. Further, Executive agrees to indemnify and hold harmless Patriot and its officers, directors, and representatives for any claim, including, but not limited to, reasonable attorney's fees and expenses of investigation, of any such third party that such third party may now have or may hereafter come to have against Patriot or such other persons, based upon or arising out of any non-competition agreement, invention, secrecy, or other agreement between Employee and such third party that was in existence as of the date of this Agreement. To the extent that Employee had any oral or written employment agreement or understanding with Patriot, this Agreement shall automatically supersede such agreement or understanding, and upon execution of this Agreement by Employee and Patriot, such prior agreement or understanding automatically shall be deemed to have been terminated and shall be null and void. SECTION 11. MISCELLANEOUS. 11.1 REMEDIES. The parties to this Agreement shall have all rights and remedies set forth in this Agreement, all rights and remedies which either party has been granted at any time under any other agreement or contract and all of the rights which either has under any law. Both parties will be entitled to enforce such rights specifically, without posting a bond or other security, to recover damages by reason of any breach of any provision of this Agreement and to exercise all other rights granted by law or available in equity. 11.2 WAIVERS AND AMENDMENTS. The provisions of this Agreement may be amended or waived only by a written agreement executed and delivered by Patriot and the Executive. No other course of dealing between the parties to this Agreement or any delay in exercising any rights hereunder will operate as a waiver of any rights of any such parties. 11.3 SUCCESSORS AND ASSIGNS. All covenants and agreements contained in this Agreement by or on behalf of any of the parties hereto and their respective heirs, executors, administrators, personal representatives, successors and assigns, whether so expressed or not; provided that the Executive may not assign his rights or delegate his obligations under this Agreement without the written consent of Patriot. 11.4 SEVERABILITY. Whenever possible, each provision of this Agreement will be interpreted in such manner as to be effective and valid under applicable law, but if any provision 6 of this Agreement is held to be prohibited by or invalid under applicable law, such provision will be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of this Agreement. 11.5 COUNTERPARTS. This Agreement may be executed simultaneously in two or more counterparts, any one of which need not contain the signatures of more than one party, but all of which counterparts taken together will constitute one and the same agreement. 11.6 DESCRIPTIVE HEADINGS. The descriptive headings of this Agreement are inserted for convenience only and do not constitute a part of this Agreement. 11.7 NOTICES. All notices, demands or other communications to be given or delivered under or by reason of the provisions of this Agreement will be in writing and will be deemed to have been given when delivered personally to the recipient, two business days after the date when sent to the recipient by certified or registered mail, return receipt requested and postage prepaid. Such notices, demands, and other communications will be sent to the Executive and to Patriot at the addresses set forth below. If to the Executive: Marcus Zavattaro c/o Residential Lending Group of Patriot National Bank 1177 Summer Street Stamford, CT 06905 And Marcus Zavattaro 1 Highmeadow Road Old Greenwich, CT 06870 If to Patriot: Patriot National Bank 900 Bedford Street Stamford, CT 06901 Attn: Chairman or to such other address or to the attention of such other Person as the recipient party has specified by prior written notice to the sending party. 11.8 NO THIRD PARTY BENEFICIARY. This Agreement will not confer any rights or remedies upon any person other than Patriot, the Executive and their respective heirs, executors, administrators, personal representatives, successors and permitted assigns. 7 11.9 ENTIRE AGREEMENT. This Agreement constitutes the entire agreement among the parties and supersedes any prior understandings, agreements or representations by or among the parties, written or oral, that may have related in any way to the subject matter hereof. 11.10 CONSTRUCTION. The language used in this Agreement will be deemed to be the language chosen by the parties to express their mutual intent, and no rule of strict construction will be applied against any party. Any reference to any federal, state, local or foreign statute or law will be deemed also to refer to all rules and regulations promulgated thereunder, unless the context requires otherwise. The use of the word "including" in this Agreement means "including without limitation" and is intended by the parties to be by way of example rather than limitation. 11.11 LIFE INSURANCE. The Executive agrees that Patriot shall have the right to obtain life insurance on the Executive's life, at the sole expense of Patriot, as the case may be, and with Patriot as the sole beneficiary thereof. The Executive shall (a) cooperate fully in obtaining such life insurance, (b) sign any necessary consents, applications and other related forms or documents and (c) take any reasonably required medical examinations. 11.12 SURVIVAL. Sections 6, 7, 8 and 9, of this Agreement will survive and continue in full force in accordance with their terms notwithstanding any termination of the Employment Period. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written. PATRIOT NATIONAL BANK By: /s/ Angelo De Caro ---------------------- Its Chairman /s/ Marcus Zavattaro -------------------- Marcus Zavattaro 8 SCHEDULE A COMPENSATION Residential Lending Group 1. SALARY / COMMISSION. The Executive shall receive sixty (60%) percent of the fee income generated by the Residential Lending Group of Patriot National Bank from mortgage transactions for customers directly obtained by the Executive. The annual amount payable pursuant to the preceding sentence shall not exceed Four Hundred Thousand ($400,000.00) Dollars per year, but shall not be less than One Hundred Fifty Thousand ($150,000.00) Dollars per year. This salary will be payable by Patriot in regular installments in accordance with the general payroll practices of Patriot as in effect from time to time, initially at the rate of One Hundred Fifty Thousand ($150,000.00) Dollars per year until such time as Two Hundred and Fifty Thousand ($250,000.00) Dollars in fee income has been generated, and thereafter, such draw rate will be adjusted to reflect actual monthly fee income generation. The Executive shall not be entitled to receive salary/commissions in respect of new lines of business generated within the Residential Lending Group of Patriot National Bank (for example, warehouse lending), provided that any such additional or new business generated by the Executive shall be taken into account by Patriot's Management Committee and Board of Directors in considering possible bonuses for the Executive. 2. EMPLOYEE OVERRIDE. In addition, if the Residential Lending Group earns $225,000.00 after-tax (after deduction of all expenses, salaries, commissions and deduction for any employee override payments described below), the Executive shall receive payments equal to (i) five (5%) percent of the commissions paid to the employees reporting to the Executive where such employees earn fifty (50%) percent or less of the fee income generated by such employees and (ii) three (3%) percent of the commissions paid to the employees reporting to the Executive where such employees earn over fifty (50%) percent of the fee income generated by such employees. The amount of this employee override payment shall be payable annually after the results of the annual audit are certified provided that the Executive is employed by Patriot on the last day of the Employment Period. 3. PROFIT PARTICIPATION. After such time as the Residential Lending Group earns $330,000 (after deduction of all expenses, salaries, commissions and employee override payments and profit participation payments), the Executive shall receive Twenty Five (25%) percent of the after-tax profits of the Business over Three Hundred and Thirty Thousand ($330,000.00) Dollars (calculated on a after-tax basis). In calculating profits for purposes of this paragraph, the revenues and expenses of the Business shall be accounted for in accordance with generally accepted accounting principles, consistently applied. 4. RLG REFERRAL CREDITS. In calculating profits for purposes of paragraph 3 above, the Residential Lending Group of Patriot National Bank will receive credit for referral fees for any loans booked by Patriot and demand deposits maintained at Patriot, respectively, which are 9 referred to Patriot by the Executive. Such credits will not be included in calculating the salary, commissions or RLG division profits described in paragraph 1 above. Such credits shall be in the following amounts: (i) Residential First Mortgages -- One (1%) percent of principal, credited in twelve (12) equal monthly installments following the date such loan is booked, provided such loan remains on the books during such time; (ii) Commercial Loans -- One (1%) percent of principal (renewals of commercial loans and commercial lines of credit do not qualify); (iii) Bridge Loans -- one quarter of one percent (.25%) of the average annual balance for the first year; (iv) Home Equity and Other Lines of Credit -- one-half of one percent (0.50%) of the average annual balance for the first year; (v) Deposits -- Credited on a schedule equivalent to the schedule applicable for other loan officers of Patriot as determined by the Management Committee and the Board of Directors from time to time (see Schedule B attached); (vi) No referral credits will be given on residential mortgages, HELOC, or end-financing on construction loans originated by other Patriot employees, underwritten by Patriot and held in Patriot's portfolio. (vii) The Profit Participation amount shall be payable on an annual basis after the results of the annual audit are certified provided that the Executive is employed on the last day of the Employment Period. 5. EXECUTIVE JOB DESCRIPTION - SEE SCHEDULE "C". 10 SCHEDULE B Assumes a Base Salary of $150,000 % of Goal 90% 100% 125% 150% 175% 200% % of Bonus Target Pay Out 75% 100% 125% 150% 175% 200% Pay Out Deposits $ 3,936 $ 6,000 $ 7,500 $ 11,252 $ 13,124 $ 30,000

Deposits: $1,800,000 in new average deposits for the calendar year 2005 comprised of checking, savings and money market accounts, of which at least $600,000 shall be non-interest bearing checking accounts. CD's are excluded. 11 SCHEDULE C MARCUS ZAVATTARO JOB RESPONSIBILITIES - 2005 RESIDENTIAL LENDING DIVISION Includes but not limited to: - Maintain high ethical standards for division - Recruit and train loan originators - Assist loan originators in structuring and closing deals - Manage the resolution of any customer related issues - Grow our revenue stream by hiring more loan originators, offering additional types of loans (B and C, FHA, etc.) - Establish loan origination officers in appropriate geographical locations, while considering the potential for possible bank branch expansion - Encourage loan originators to seek out commercial loans - Establish and cultivate new investor relationships - Keeping aware of new technology to support our employees and business - Administration and budgeting 12 EX-10.10 18 a2156305zex-10_10.txt EXHIBIT 10.10 EXHIBIT 10.10 LICENSE AGREEMENT THIS AGREEMENT (the "AGREEMENT") entered into as of this 1st day of July, 2003, between PATRIOT NATIONAL BANK ("LICENSOR"), having its principal place of business at 900 Bedford Street, Stamford, Connecticut 06905, and L. MORRIS GLUCKSMAN ("LICENSEE") an individual having an address at 1085 Sunset Road, Stamford, Connecticut 06903. W I T N E S S E T H WHEREAS, pursuant to that certain lease attached hereto as EXHIBIT A and dated as of January 15, 2003 (the "LEASE"), between Ottaviano & Tehrani, LLC, as landlord ("LANDLORD"), and Licensor, as tenant, Licensor is the holder of a leasehold interest in certain retail space presently, consisting of approximately 3,032 square feet ("LICENSOR'S PREMISES"), which is known as location 109 of Ridge Plaza, 838 High Ridge Road, Stamford, Connecticut (the "BUILDING"); and WHEREAS, Licensee is presently a member of the Board of Directors of the Licensor; and WHEREAS, Licensee desires to obtain from Licensor a license to occupy a portion of Licensor's Premises, constituting approximately 135 square feet (said portion, as more particularly outlined on EXHIBIT B hereto, the "LICENSED PREMISES"), and use the furniture contained therein (said furniture, as more particularly described on EXHIBIT C, the "FURNITURE"); and WHEREAS, Licensor is willing to grant such license under the terms and conditions as set forth in this Agreement; NOW, THEREFORE, for and in consideration of the foregoing premises, which are incorporated herein, and Ten ($10.00) Dollars and other good and valuable consideration which the parties hereto deem to be adequate, Licensor and Licensee hereby agree as follows: 1. LICENSE. Licensor hereby grants Licensee a revocable license (the "LICENSE"): (i) to use the Licensed Premises and the Furniture contained therein for the sole purpose of conducting general and executive offices uses only and; and (ii) for non-exclusive use of those portions of the Licensor's Premises necessary to access the Licensed Premises. Such License shall be limited to such hours when Licensor shall be open for business to the general public, subject to and in accordance with the terms and conditions of this Agreement. 2. TERM; TERMINATION. The term of the License (the "TERM") shall commence on April 1, 2003 (the "COMMENCEMENT DATE"), and terminate on the first to occur of: (i) the expiration or earlier termination of the Lease, (ii) when Licensor shall no longer occupy the Licensor's Premises, (iii) upon written notice to Licensee of Licensor's election to terminate the License; or (iv) the date upon which Licensee is no longer a director of Licensor. 3. LICENSE FEES; ELECTRICITY CHARGES; MANAGEMENT FEE. 2 (a) During the Term, Licensee shall pay Licensor, in consideration of Licensor granting to Licensee the License hereunder, (i) a monthly, base license charge as outlined on EXHIBIT D attached hereto; (ii) 4.453 percent of all additional rent charged to Licensor by Landlord under the Lease (including, but not limited to, charges for real estate taxes, insurance and Landlord's common area costs; and (iii) a monthly usage fee for use of the Furniture at the rate of $29.14 per month (or $349.71 per year (the charges or fees described in subsections (i) through (iii) above, collectively, the "LICENSE FEE"). Notwithstanding anything to the contrary contained herein, the definition of License Fee shall not include any portion of additional rent charged to Licensor by Landlord which is attributable to Licensor's default or delay in performing its obligations under the Lease. Said License Fee shall be paid in equal monthly installments specified above, in advance, on the first day of each month during the Term, to Licensor's address specified above, or elsewhere as directed in writing by Licensor. Said License Fee payments shall be paid throughout the Term, without notice or demand, and without set-off, abatement, deduction or counterclaim, except as specifically provided in this License Agreement. If Licensee fails to pay when due any License Fee payments, Licensee shall pay Licensor a late charge for Licensor's administrative expenses equal to five percent (5%) of such unpaid amount per month until paid. Licensee shall also pay Licensor interest on such unpaid amount at the rate of twelve percent (12%) per annum (but not to exceed the highest rate permitted by applicable "LAWS" (as hereinafter defined), said interest to apply from the date such payment was due until paid. Said late charge and interest shall be in addition to (and not in lieu of) any other rights or remedies available to Licensor under this License Agreement or at law or in equity. Any unperformed obligations of Licensee under this License Agreement (including, without limitation, any License Fee obligations) shall survive the Term. (b) During the Term, Licensee shall pay Licensor, in further consideration of Licensor granting to Licensee the License hereunder a monthly electricity fee at the rate of $19.68 per month (or $236.25 per year (the "ELECTRICITY FEE"). Said Electricity Fee shall be paid in equal monthly installments specified above, in advance, on the first day of each month during the Term, to Licensor's address specified above, or elsewhere as directed in writing by Licensor. Said Electricity Fee payments shall be paid throughout the Term, without notice or demand, and without set-off, abatement, deduction or counterclaim, except as specifically provided in this License Agreement. If Licensee fails to pay when due any Electricity Fee payments, Licensee shall pay Licensor a late charge for Licensor's administrative expenses equal to five percent (5%) of such unpaid amount per month until paid. Licensee shall also pay Licensor interest on such unpaid amount at the rate of twelve percent (12%) per annum (but not to exceed the highest rate permitted by applicable "LAWS" (as hereinafter defined), said interest to apply from the date such payment was due until paid. Said late charge and interest shall be in addition to (and not in lieu of) any other rights or remedies available to Licensor under this License Agreement or at law or in equity. Any unperformed obligations of Licensee under this License Agreement (including, without limitation, any License Fee obligations) shall survive the Term. (c) During the Term, Licensee shall pay Licensor, in further consideration of Licensor granting to Licensee the License hereunder a management fee at the rate of ten percent (10%) of the total amount of License Fee and Electricity Fee charged to Licensee by Licensor for the immediately preceding month (the "MANAGEMENT FEE"). Said Management Fee shall be paid by Licensee within ten (10) days of receiving an invoice therefor 3 from Licensor, to Licensor's address specified above, or elsewhere as directed in writing by Licensor. Said Management Fee payments shall be paid throughout the Term, without t set-off, abatement, deduction or counterclaim, except as specifically provided in this License Agreement. If Licensee fails to pay when due any Management Fee payments, Licensee shall pay Licensor a late charge for Licensor's administrative expenses equal to five percent (5%) of such unpaid amount per month until paid. Licensee shall also pay Licensor interest on such unpaid amount at the rate of twelve percent (12%) per annum (but not to exceed the highest rate permitted by applicable "LAWS" (as hereinafter defined), said interest to apply from the date such payment was due until paid. Said late charge and interest shall be in addition to (and not in lieu of) any other rights or remedies available to Licensor under this License Agreement or at law or in equity. Any unperformed obligations of Licensee under this License Agreement (including, without limitation, any License Fee obligations) shall survive the Term. 4. CONDITION; NO REPRESENTATIONS. Licensee hereby accepts the Licensed Premises, in their current, "as-is", "where-is" condition, and acknowledges that Licensor has made no promises or representations (express or implied) as to the suitability, legality or condition of the Licensed Premises or the Building for the Licensee's purposes. Licensor shall have no obligation to perform any fit-up, preparatory or demising work with respect to the Licensed Premises or in any other respect. 5. INDEMNITY. Licensee hereby agrees to indemnify, defend and hold Licensor harmless from and against any and all demands, claims, causes of action, damages, losses, liabilities, judgments, costs and expenses (including, without limitation, reasonable attorneys' fees and costs) incurred in connection with, or arising from, the use of the Licensed Premises (or any breaches of this Agreement) by Licensee or its invitees. This indemnity shall not apply to any adjudicated negligence or willful misconduct of Licensor. This indemnity shall survive the Term. 6. INSURANCE. Licensee, at its expense, shall maintain in force during the Term comprehensive general liability insurance (including, without limitation, legal liability, contractual liability coverages) in an amount not less than $1,000,000.00 for personal injury or death, and $1,000,000.00 for property damage (aggregate coverages), and excess and employer's liability insurance, in an amount not less than $1,000,000.00, all protecting Licensor as additional insured, against any and all claims in connection with the Licensed Premises. All Licensee's insurance coverages hereunder shall be provided by reputable insurance carrier(s) reasonably satisfactory to Licensor. The parties waive for themselves and their respective insurance carriers, and shall use reasonable efforts to cause their respective casualty and property damage insurance policies to contain a waiver of, the right of subrogation against the other party. Licensee shall provide Licensor with the original insurance policies required herein (or appropriate certificates therefor evidencing payment of all applicable premiums for same) on or before the commencement of the Term. 7. MAINTENANCE; REPAIRS; ETC. Licensee, at its expense, shall promptly perform (or cause to be performed) all maintenance and repairs, as and when needed, to keep the Licensed Premises and all property therein and appurtenances pertaining thereto (including, without limitation, any and all interior doors, carpeting, systems, fixtures, furniture, furnishings, equipment, non-structural items, and the interior portions thereof) in good order, repair and 4 condition, reasonable wear and tear excepted. Licensor or shall perform all necessary capital replacements and structural repairs in and to the License Area, including, without limitation, windows, building systems, and exterior portions thereof, except such items shall be performed by Licensor at Licensee's sole cost and expense if caused by the negligence or willful misconduct of Licensee or Licensee's agents, employees, guests, contractors or subcontractors. 8. LICENSEE'S COVENANTS; SURRENDER. Licensee hereby covenants and agrees that Licensee will not do anything in, about or with respect to the Licensed Premises, the Licensor's Premises or the Building which will constitute a default under the Lease or this Agreement, or fail to do anything which Licensee is obligated to do under the terms of this License which would constitute a default under the Lease or this Agreement. Licensee shall also not do or fail to do anything in or about the Licensed Premises or the Licensor's Premises which would interfere with Licensor's use and occupancy, or business operations of those portions of the Licensor's Premises excluding the Licensed Premises. Licensee hereby agrees to indemnify, defend and hold Licensor harmless from any and all losses, claims, liabilities, damages, costs or expenses (including, without limitation, reasonable attorneys' fees and costs) arising from Licensee's actions or omissions, or Licensee's failure to perform or observe any of the terms and conditions of the Lease or this License, or the use, occupancy or operation of the Licensed Premises by Licensee or Licensee's agents, employees, contractors, subcontractors, invitees, licensees, Licensees or assigns. In the event of any breach of the Lease or this Agreement by Licensee, Licensor shall have all of the rights and remedies available to Landlord against Licensor under the Lease or at law or equity, as if such breach occurred under such document. Licensee hereby warrants and represents that it has read and is familiar with all of the terms and provisions of the Lease. At the expiration or sooner termination of the Term, Licensee shall timely vacate and surrender the Licensed Premises vacant (except for the Furniture) "broom-clean" and in the same condition as existed on the commencement date of the Term, reasonable wear and tear excepted, and otherwise in accordance with all surrender and other relevant provisions of the Lease, and with all of the Furniture in as good condition and repair as when originally provided to Licensee. Licensee's obligations and covenants under this Section shall survive the Term. 9. ALTERATIONS; ETC. Licensee shall make no alterations, additions or improvements to the Licensed Premises. 10. TRANSFERS; ETC. Licensee shall have no right to assign, mortgage, hypothecate or otherwise transfer any right or interest under this License Agreement, nor shall Licensee have any right to sublet or further license all or any part of any interest in the Licensed Premises, or otherwise permit any other uses of the Licensed Premises. Any attempt by Licensee to so assign or sublet or otherwise transfer shall be null and void and of no effect. 11. LEGAL REQUIREMENTS: RULES AND REGULATIONS; BREACHES. The License is subject to the strict observance by Licensee, at Licensee's sole cost and expense, of: (a) any and all rules and regulations for the Licensed Premises and/or Building reasonably imposed by Licensor and or Landlord (the "RULES"), provided such Rules do not unreasonably impair Licensee's use of the Licensed Premises for the purposes permitted hereunder; and (b) with respect to Licensee's use of the Licensed Premises, any and all present and future applicable laws, rules, orders, ordinances, regulations, statutes, requirements, codes and executive orders 5 (collectively, "LAWS") of all governmental or any quasi-governmental authorities, in each case now existing or hereafter created, having jurisdiction over the Building or any portion thereof. Notwithstanding anything to the contrary contained in this License Agreement, in the case of any breach or violation by Licensee of any Rules or Laws, or of any material obligation under this License Agreement, which is not cured, to the satisfaction of the Licensor, within five (5) days after Licensor's written notice of such breach or violation to Licensee, this License Agreement may be terminated by Licensor upon written notice thereof to Licensee, and Licensee shall remain liable for Licensor's lawful damages incurred as a result of such breach(es) or violation(s). 12. USE; PROHIBITIONS. Licensee shall have the non-exclusive use of those portions of Licensor's Premises necessary to access the Licensed Premises solely to access the Licensed Premises. Licensee shall use the Licensed Premises in such a way as to not materially interfere with Licensor's use and enjoyment of the Licensor's Premises. 13. LICENSE AND NOT A LEASE: NO RECORDING. This License Agreement shall not be deemed to create a leasehold interest or any other type of conveyance. Licensee shall not record this License Agreement or any portion or memorandum thereof in the applicable Land Records or with any Town Clerk's Office or with any other public authority. 14. CURE AND REIMBURSEMENT. If Licensee shall be in violation of any obligation contained in this License Agreement to be performed by Licensee, Licensor may, upon at least five (5) days written notice to Licensee, or without notice if in Licensor's reasonable judgement a genuine emergency exists, perform the same for the account of and at the expense of Licensee. Licensee shall reimburse Licensor, within five (5) days of being billed therefor, for any and all lawful damages, and any costs and expenses incurred by Licensor (including, without limitation, reasonable attorney's fees and costs) in connection with any such violation. 15. ACCESS. Licensor and/or its agents shall have the right to enter the Licensed Premises at all reasonable times, after at least twenty-four (24) hours' prior written notice to Licensee (except for bona fide emergencies, for which immediate access shall be allowed), to examine the same, and/or to make such repairs, additions or alterations as Licensor may deem reasonably necessary for the safety, services, preservation, marketability or restoration of the Licensed Premises or Building (Licensor having no obligation therefor except as specifically provided in this License Agreement. 16. SUBORDINATION; INCORPORATION. This License is subject and subordinate to all of the covenants, agreements, terms, provisions, conditions and obligations of the Lease, as amended and/or extended. All of the covenants, agreements, terms, provisions, conditions, obligations and Rules and Regulations of the Lease are hereby incorporated herein by reference with the same force and effect as if they were fully set forth herein, and Licensee hereby agrees to be bound thereby except as clearly inconsistent with the terms hereof, I.E.: (a) Any reference in the Lease or to: 6 (b) "Landlord" or "Tenant" shall mean Licensor and Licensee, respectively, herein; and (b) the "Premises" shall mean the Licensed Premises hereunder; (c) In all instances where consent or approval of the Landlord is required under the Lease, the consent or approval of each of Landlord and Licensor shall be required hereunder; (d) Notwithstanding anything to the contrary contained herein, it is understood and agreed that, any and all work, maintenance, repairs, alterations, construction, restoration, replacements, or any facilities and services (all said items, collectively, the "Services") to be made and/or furnished to the Licensed Premises or the Building or any common areas or appurtenances thereof pursuant to any provisions of the Lease will in fact be furnished by Landlord, and not by Licensor. Licensor shall in no event be liable to Licensee, nor shall Licensee's obligations hereunder be impaired or the performance thereof excused, because of any failure or delay on the Landlord's part in furnishing any such Services. Licensee shall look solely to Landlord for the performance of such Services, and Licensor makes no representations hereunder (either express or implied) as to the availability or adequacy of such Services. Licensor agrees, however, at no cost to Licensor, to cooperate diligently and in good faith with Licensee to attempt to obtain any such Services from Landlord, provided Licensee is not in default hereunder. (e) Notwithstanding anything to the contrary contained herein, Sections 3.1, 3.2, 8.1, 11.1 and 24.12 of the Lease are not incorporated into this Sublease. (f) In the event of any conflict between the terms of the Lease and this License, this License shall govern and control in each instance with respect to Licensor's and Licensee's respective obligations hereunder. 17. NOTICES. Any notices, consents, demands, requests or other communications required or desired to be given under this License Agreement shall be in writing and shall be deemed sufficiently given or rendered if delivered by hand (against a signed receipt), or if delivered by reputable, commercial overnight courier (against a signed receipt), or three (3) business days after being sent if sent by registered or certified mail (postage prepaid, return receipt requested) addressed: (a) if to Licensee at Licensee's address set forth in this License Agreement; or (b) if to Licensor, notices shall be sent as to 900 Bedford Street, Stamford, CT 06901, Attn.: Chief Operating Officer; and in each case with copies to Cummings & Lockwood LLC, Four Stamford Plaza, 107 Elm Street, Stamford, Connecticut 06902 Attn.: Robert Reeves, Esq. Any such notice, consent, demand, request or other communication shall be deemed to have been rendered or given on the date when it has been hand delivered, on the date of delivery by overnight courier, or three (3) business days from when it has been mailed as provided in this Paragraph. The parties shall have the right to change their respective notice addresses, from time to time, by written notice to the other given in accordance with this Paragraph. 18. BROKERAGE. Each party hereby warrants and represents it has not engaged or dealt with any realtor, broker or agent in connection with the procurement or negotiation of 7 this License Agreement, and each party agrees to indemnify, defend and hold the other harmless from and against any and all claims, liabilities, damages and expenses (including reasonable attorneys' fees and costs), for any claims or charges raised or instituted by any broker claiming to have been retained by the indemnifying party in connection with this License Agreement. Said indemnity shall survive the Term. 19. LANDLORD CONSENT CONTINGENCY. Notwithstanding anything to the contrary contained in this Agreement, this Agreement is subject to and contingent upon Landlord's written consent to this Agreement, which Licensor, through itself or its designee(s), agrees to attempt to obtain with reasonable diligence promptly after the parties' execution and delivery of this Agreement. Licensee shall reasonably and promptly cooperate with Licensor, in good faith, in obtaining said consent (including, without limitation, complying with any of Landlord's commercially reasonable requirements in connection therewith). If Licensor is unable to obtain said consent by the date which is thirty (30) days after the date of this Agreement, then (unless Licensor otherwise agrees in writing to extend such date) this Agreement, upon notice from Licensor, shall be null and void and of no effect as of the date designated for termination in such notice. 20. MISCELLANEOUS. This License Agreement shall bind and inure to the benefit of the parties hereto and their respective successors and assigns. This License Agreement constitutes the complete agreement of the parties regarding the subject matters set forth herein, and supercedes any prior or contemporaneous agreements relating to such subject matters. This License Agreement shall not be changed or modified except by a writing signed by the party(ies) to be bound thereby. This License Agreement shall be governed by and construed under the laws of the State of Connecticut. If any provision of this License Agreement is found by a court of competent jurisdiction to be illegal, invalid or unenforceable, the remainder of this License Agreement shall not be affected thereby, and in lieu of each such defective provision, there shall be added, as a part of this License Agreement, a legal, valid and enforceable provision as similar to such defective provision as may be possible. This License Agreement may be signed in individual counterparts and, upon execution by and delivery to Licensor and Licensee hereto, each such executed and delivered counterpart shall constitute a fully executed counterpart of this License Agreement. This License Agreement shall in no event be binding on Licensor (and Licensee shall have no rights or claims whatsoever in connection with the License Premises or this License Agreement) unless and until Licensee executes and delivers this License Agreement to Licensor and Licensor thereafter executes same and returns a fully executed counterpart thereof to Licensor. This License Agreement maybe executed and delivered via facsimile transmission, and any faxed signatures shall constitute original signatures. This License Agreement is subject and subordinate to all instruments, mortgages, ground or superior License Agreements or other encumbrances which may now or hereafter affect the Licensed Premises or the Building, and to all renewals, modifications, consolidations, replacements and extensions thereof. This clause shall be self-operative and no further instrument of subordination shall be required. Mention of any particular remedies or damages in this License Agreement shall not prevent Licensor from claiming and/or collecting any available rights and/or remedies and/or collecting the maximum amounts of damages allowed by applicable Laws. There shall be no waiver or estoppel by Licensor in connection with this License Agreement unless same is effected specifically by written agreement executed and delivered by Licensor, and no waiver by Licensor of any breach or default hereunder shall be deemed a waiver of any subsequent breach 8 or default of the same or any other term herein, nor shall any custom, practice or course of dealings between Licensor and Licensee be construed as a waiver or diminution of Licensor's rights to insist upon the strict performance by Licensee of any of the terms contained in this License Agreement. IN WITNESS WHEREOF, the parties hereto have set their hands and seals on the date first above mentioned. LICENSOR: PATRIOT NATIONAL BANK By: --------------------------------------- LICENSEE: --------------------------------------- L. Morris Glucksman 9 EXHIBIT A LEASE (ATTACHED) 10 EXHIBIT B LICENSES PREMISES (see attached diagram) 11 EXHIBIT C FURNITURE Two Guest Chairs Credenza Desk Desk Chair 12 EXHIBIT D BASE LICENSE CHARGE
Lic. Year* Sq.Ft. Annual Rate Per Sq.Ft. Annual Rate Monthly Rate - --------- ------ ---------------------- ----------- ------------ ~~1-2 135 33.00 $ 4,455.00 $ 371.25 3 135 34.00 $ 4,590.00 $ 382.50~~
4 - end of License Term: the Base License Charge for the fourth License Year through the end of the License Term shall be adjusted annually using the Consumer Price index annual calendar year average for all urban consumers (U.S. City average, all items i.e. (CPI-U)) as reported by the U.S. Department of Labor, Bureau of Labor Statistics (1982-1984 = 100). If the publication of the Consumer Price Index shall be discontinued, the parties hereto shall thereafter accept comparable statistics from the U.S. Department of Labor, Bureau of Labor Statistics. Licensor shall endeavor to, on or before March 30th of each year, submit to Licensee a new annual Base License Charge for the upcoming License Year. Each new annual Base License Charge shall be the annual Base License Charge for the previous License Year adjusted by the percentage change of the previous calendar year's Consumer Price Index. * Lic. Year (or License Year) shall mean the twelve (12) month period beginning on the Commencement Date, and each ensuing twelve (12) month period during the Term, with the last License Year ending on the last day of the Term. Although this Exhibit contemplates that the Term of this License will exceed 4 License Years, the parties hereto acknowledge that the License Term may expire or terminate before such time, pursuant to the terms of the License. EX-10.11 19 a2156305zex-10_11.txt EXHIBIT 10.11 EXHIBIT 10.11 STANDBY PURCHASER AGREEMENT _____________, 2005 ______________________ ______________________ ______________________ Dear ____________: This letter confirms our agreement with respect to the intention of Patriot National Bancorp, Inc., a Connecticut corporation (the "Company"), to raise additional capital through a rights offering, with oversubscription privileges, of up to ___________ shares (the "Underlying Shares") of the Company's common stock, par value $2.00 per share (the "Common Stock"), to its shareholders of record as of date to be determined ("Rights Offering") with the participation of standby purchasers for any unsubscribed shares in the Rights Offering (the Rights Offering and the offering to standby purchasers are hereinafter referred to as the "Offering"). Capitalized terms used herein and not defined herein shall have the meanings set forth in the Prospectus (as hereinafter defined.) A REGISTRATION STATEMENT ON FORM SB-2 (THE "REGISTRATION STATEMENT") RELATING TO THE COMPANY'S COMMON STOCK WAS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ("SEC") ON APRIL __, 2005. NO OFFER TO BUY SECURITIES CAN BE ACCEPTED AND NO PART OF THE PURCHASE PRICE CAN BE RECEIVED UNTIL THE REGISTRATION STATEMENT HAS BECOME EFFECTIVE, AND ANY SUCH OFFER MAY BE WITHDRAWN OR REVOKED, WITHOUT OBLIGATION OR COMMITMENT OF ANY KIND, AT ANY TIME PRIOR TO NOTICE OF ITS ACCEPTANCE GIVEN AFTER THE EFFECTIVE DATE. 1. PURCHASE AND SALE OF UNSUBSCRIBED SHARES. (a) Subject to the terms and conditions and in reliance upon the representations and warranties herein set forth, the Company agrees to issue and sell to you as a standby purchaser (the "Standby Purchaser") and the Standby Purchaser agrees to purchase from the Company at the subscription price set forth in the Prospectus (the "Subscription Price") up to __________ shares of Common Stock (the "Standby Shares") which remain available for issuance in accordance with the Rights Offering after the issuance of all shares of Common Stock validly subscribed for through the exercise of rights (the "Rights"), including the exercise of all oversubscription privileges, in the Rights Offering (such remaining shares being hereinafter referred to as the "Unsubscribed Shares"). (b) The Standby Purchaser and the Company acknowledge and agree that the Company has entered into, or contemplates entering into, one or more other Standby Purchase Agreements with certain other parties (collectively, the "Standby Purchasers") on terms substantially similar to this Agreement, except that they may provide for the purchase of a different maximum number of Standby Shares in Section 1(a) and a different number of Minimum Shares (as defined in Section 1(c)). The Unsubscribed Shares available for issuance to Standby Purchasers and any additional shares which the Company shall have elected to issue shall be allocated (to the extent any allocation thereof is necessary) as nearly as possible on a pro rata basis among the Standby Purchasers based upon the number of Standby Shares subscribed for by each such Standby Purchaser, after giving effect to the limitation set forth in Section 2(a). (c) In the event there is not a sufficient number of Unsubscribed Shares remaining upon completion of the Rights Offering (including the exercise of all oversubscription privileges) to allow you to purchase at least __________ shares pursuant to Section l(a) (the "Minimum Shares"), subject to the maximum number of shares of Common Stock being offered for sale in the Offering as set forth in the Registration Statement, the Company agrees to issue and sell to the Standby Purchaser, and the Standby Purchaser agrees to purchase from the Company, at the Subscription Price and otherwise in accordance with this Agreement, sufficient additional shares so that the Standby Purchaser shall have purchased the Minimum Shares, provided that the Company may need to reduce the Minimum Shares committed to by the Standby Purchaser (on a pro rata basis with all other Standby Purchasers) in order to ensure that the number of shares issued by the Company in the Offering does not exceed the maximum number of shares of Common Stock being offered for sale in the Offering. The shares to be issued and sold to the Standby Purchaser (other than the Unsubscribed Shares) in order that the Standby Purchaser may purchase the Minimum Shares are hereinafter referred to as the "Additional Shares." 2. LIMITATIONS ON ISSUANCE OF STANDBY SHARES. (a) MAXIMUM HOLDING. The Standby Purchaser acknowledges and agrees that, notwithstanding anything to the contrary herein contained or implied, the Company will not issue to the Standby Purchaser shares of Common Stock in an amount which, when aggregated with other shares of Common Stock owned or controlled by the Standby Purchaser, would exceed 9.9% of the total issued and outstanding shares of Common Stock upon completion of the Offering, including shares issued pursuant to any Standby Purchase Agreements. (b) FAILURE TO OBTAIN REGULATORY APPROVAL. The Standby Purchaser hereby acknowledges and agrees that the Company may decline to issue shares of Common Stock to the Standby Purchaser hereunder if, in the opinion of the Company, the Standby Purchaser is required to obtain prior clearance or approval of such purchase from any state or federal bank regulatory authority and if such approval or clearance has not been obtained or if satisfactory evidence thereof has not been presented to the Company prior to the expiration of the Offering. 3. THE CLOSING. As soon as practicable following its determination of the number of Unsubscribed Shares, the Company shall notify the Standby Purchaser of the number of Standby Shares, if any, to be purchased by the Standby Purchaser pursuant to Section l(a) and the number of Additional Shares, if any, to be purchased by the Standby Purchaser pursuant to Section 1(c). The delivery of and payment for the Standby Shares and the Additional Shares shall take place at the offices 2 of Patton Boggs LLP, Washington, D.C., at 10:00 a.m., Eastern time, immediately after the closing of the sale of shares of Common Stock pursuant to the Rights Offering, such time and date to be not more than five (5) business days after the foregoing notification and to be specified therein (such time and date being referred to as the "Closing Time," the date of the Closing Time being referred to as the "Closing Date" and the consummation of the transaction being referred to as the "Closing"). 4. DELIVERY OF STANDBY SHARES AND ADDITIONAL SHARES. At the Closing, the Standby Shares and Additional Shares to be purchased by the Standby Purchaser hereunder, registered in the name of the Standby Purchaser or its nominee(s), as the Standby Purchaser may specify in writing at least three (3) days prior to the Closing Date, shall be delivered by or on behalf of the Company to the Standby Purchaser, for the Standby Purchaser's account, against delivery by the Standby Purchaser of the Subscription Price therefor in immediately available funds in the form of one or more federal funds checks or a wire transfer to an account designated by the Company. 5. REPRESENTATIONS AND WARRANTIES. The Company and the Standby Purchaser hereby confirm their agreement as follows: (a) The Company represents and warrants to, and covenants with, the Standby Purchaser as follows: (i) The Company has filed a Registration Statement on Form SB-2 with the SEC and all amendments thereto. Such Registration Statement as amended at the time it becomes effective (the "Effective Date"), including all exhibits, is herein called the "Registration Statement." The prospectus filed with the SEC pursuant to the Securities Act of 1933, as amended (the "Securities Act"), and the regulations promulgated thereunder ("Regulations"), and which constitutes a part of the Registration Statement, is herein called the "Prospectus." (ii) The Underlying Shares, the Standby Shares and the Additional Shares have been duly authorized by the Company, and when issued and delivered by the Company against payment therefor, will be duly and validly issued, fully paid and non-assessable. The Rights have been duly authorized by the Company, and when issued and delivered by the Company, will constitute valid and legally binding obligations of the Company, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors' rights and to general equity principles. (iii) The Company has been duly incorporated and is validly existing as a corporation in good standing under the laws of the State of Connecticut, with corporate power and authority to perform its obligations under this Agreement. (iv) The execution, delivery and performance of this Agreement by the Company and the consummation by the Company of the transactions contemplated hereby have been duly authorized by all necessary corporate action of the Company and this Agreement, when duly executed and delivered by the Standby Purchaser, will constitute a valid and legally binding agreement of the Company enforceable in accordance with its terms, except as may be 3 limited by bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors' fights and to general equity principles. (v) On the Closing Date and at the time when the Registration Statement was first filed with the SEC pursuant to the Securities Act and the Regulations, the Registration Statement and the Prospectus complied and will comply in all material respects with the requirements of the Securities Act and the Regulations and on the Closing Date, neither the Registration Statement nor the Prospectus will contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; except that the foregoing does not apply to statements or omissions in the Registration Statement or the Prospectus made in reliance upon and in conformity with information furnished by the Standby Purchaser to the Company expressly for use therein. (vi) Neither the Company nor any of its direct or indirect subsidiaries ("Subsidiaries") is in violation of its certificate of incorporation, articles of association, certificate of trust or bylaws or in default under any agreement, indenture or instrument to which the Company or any of its Subsidiaries is a party, the effect of which violation or default would be material to the business, properties, financial condition or results of operations of the Company and its Subsidiaries, taken as a whole, and the execution, delivery and performance of this Agreement by the Company and the consummation of the transactions contemplated hereby will not conflict with, or constitute a breach of, or default under, or result in the creation or imposition of any lien, charge or encumbrance upon any of the assets of the Company or its Subsidiaries pursuant to the terms of any agreement, indenture or instrument to which the Company or any of its Subsidiaries is a party, or result in a violation of the certificate of incorporation, articles of association, certificate of trust or bylaws of the Company or any of its Subsidiaries or any order, rule or regulation of any court or governmental agency having jurisdiction over the Company, any of its Subsidiaries or any of their property; and, except as required by the Regulations, the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and applicable state securities law, no consent, authorization or order of, or filing or registration with, any court or governmental agency is required for the execution, delivery and performance of this Agreement. (vii) The Company has applied to have the shares of Common Stock approved for quotation on the Nasdaq SmallCap Market and will use its best efforts to obtain such approval. (b) The Standby Purchaser represents and warrants to, and covenants with, the Company as follows: (i) (A) If the Standby Purchaser is an individual, he or she has full power and authority to perform his or her obligations under this Agreement. (B) If the Standby Purchaser is a corporation, the Standby Purchaser is a corporation duly incorporated, validly existing and in good standing under the laws of its 4 jurisdiction of incorporation, with corporate power and authority to perform its obligations under this Agreement. (C) If the Standby Purchaser is a trust, the Trustee has been duly appointed as trustee of the Standby Purchaser with full power and authority to act on behalf of the Standby Purchaser and to perform the obligations of the Standby Purchaser under this Agreement. (D) If the Standby Purchaser is a partnership or limited liability company, the Standby Purchaser is a partnership or limited liability company duly organized, validly existing and in good standing under the laws of its jurisdiction of incorporation or organization, with full power and authority to perform its obligations under this Agreement. (ii) The Standby Purchaser has received from the Company and has reviewed carefully a copy of the Prospectus as well as the public documents filed in connection therewith through the date hereof, and except as set forth in this Agreement and in the Prospectus, the Standby Purchaser is not relying on any information other than information contained in this Agreement or the Prospectus. (iii) The Standby Purchaser is acquiring the shares of Common Stock pursuant to this Agreement for its own account for investment only and not with a view to any resale, distribution or other disposition thereof. (iv) The execution, delivery and performance of this Agreement by the Standby Purchaser and the consummation by the Standby Purchaser of the transactions contemplated hereby have been duly authorized by all necessary action of the Standby Purchaser; and this Agreement, when duly executed and delivered by the Standby Purchaser, will constitute a valid and legally binding instrument, enforceable in accordance with its terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors' fights and to general equity principles. (v) The Standby Purchaser is not insolvent and has sufficient cash funds on hand to purchase the Standby Shares and Additional Shares on the terms and conditions contained in this Agreement and will have such funds on the Closing Date. The Standby Purchaser has simultaneously with the execution and delivery of this Agreement or prior thereto provided the Company with evidence or substantiated that such Standby Purchaser has the financial means to satisfy its financial obligations under this Agreement and the foregoing evidence and substantiation is a true and accurate representation of such means. (vi) No state, federal or foreign regulatory approvals, permits, licenses or consents or other contractual or legal obligations are required with respect to the Standby Purchaser in order for the Standby Purchaser to enter into this Agreement or purchase the Standby Shares and the Additional Shares. (vii) The execution and delivery of this Agreement, the consummation by the Standby Purchaser of the transactions herein contemplated and the compliance by the Standby Purchaser with the terms hereof do not and will not conflict with, or result in a breach or 5 violation of any of the terms or provisions of, or constitute a default under, any indenture, mortgage, deed of trust, loan agreement or other agreement or instrument to which the Standby Purchaser is a party or by which any of the Standby Purchaser's properties or assets are bound, or any applicable law, rule, regulation, judgment, order or decree of any government, governmental instrumentality or court, domestic or foreign, having jurisdiction over the Standby Purchaser or any of the Standby Purchaser's properties or assets; and no consent, approval, authorization, order, registration or qualification of or with any such government, governmental instrumentality or court, domestic or foreign, is required for the valid authorization, execution, delivery and performance by the Standby Purchaser of this Agreement or the consummation by the Standby Purchaser of the transactions contemplated by this Agreement that will not have been obtained prior to the Closing. (viii) The Standby Purchaser has not entered into any contracts, arrangements, understandings or relationships (legal or otherwise) with any other person or persons with respect to the transactions contemplated by this Agreement or any securities of the Company, including but not limited to transfer or voting of any of the securities, finder's fees, joint ventures, loan or option arrangements, puts or calls, guarantees of profits, division of profits or loss, or the giving or withholding of proxies; and the Standby Purchaser does not own any securities of the Company which are pledged or otherwise subject to a contingency, the occurrence of which would give another person voting power or investment power of such securities. 6. CONDITIONS. The respective obligations of the Company and the Standby Purchaser to purchase shares of Common Stock as set forth in this Agreement are subject to the following conditions: (a) No order suspending the effectiveness of the Registration Statement or any amendment or supplement thereto shall have been issued and no proceedings for such purpose shall be pending before or threatened by the SEC and any requests for additional information by the SEC (to be included in the Registration Statement, in the Prospectus or otherwise) shall have been complied with in all material respects. (b) The representations and warranties of the Company and the Standby Purchaser contained herein shall be true and correct in all material respects as of the Closing Date and the Company and the Standby Purchaser shall have performed all covenants and agreements herein required to be performed on its part at or prior to the Closing Date. (c) The Company shall have conducted the Rights Offering substantially in the manner described in the Prospectus. 7. TERMINATION. (a) The Standby Purchaser may terminate this Agreement (i) upon the occurrence of a suspension of trading in the Common Stock, the establishment of limited or minimum prices for the Common Stock or a general suspension of trading in or the establishment of limited or minimum prices on the New York Stock Exchange or the Nasdaq National Market, any banking moratorium, any suspension of payments with respect to banks in the United States or a 6 declaration of war or national emergency in the United States, (ii) under any circumstances which would result in the Standby Purchaser, individually or together with any other person or entity, being required to register as a depository institution holding company under federal or state laws or regulations, or to submit an application, or notice, to acquire or retain control of a depository institution or depository institution holding company, to a federal bank regulatory authority, or (iii) prior to the expiration of the Offering, if the Company experiences a material adverse change in its financial condition from its financial condition at December 31, 2004. (b) In the event (x) the Company, in its reasonable judgment, determines that it is not in the best interests of the Company and its shareholders to go forward with the Rights Offering or (y) consummation of the Rights Offering is prohibited by law, rule or regulation and the Company terminates the Rights Offering, in each case, the Company may terminate this Agreement without liability. (c) Either of the parties hereto may terminate this Agreement (i) if the transactions contemplated hereby are not consummated by __________, 2005, through no fault of the Standby Purchaser or (ii) in the event that the Company is unable to obtain any required federal or state approvals for the transactions contemplated hereby on conditions reasonably satisfactory to it despite its reasonable efforts to obtain such approvals. In addition, this Agreement shall terminate upon mutual consent of the parties hereto. (d) The Company and the Standby Purchaser hereby agree that any termination of this Agreement pursuant to Section 7(a) (b) or (c) (other than termination by one party in the event of a breach of this Agreement by the other party or misrepresentation of any of the statements made hereby by the other party), shall be without liability of the Company or the Standby Purchaser. 8. CONTINUING PROVISIONS. The representations and warranties of the Company and the Standby Purchaser set forth in this Agreement shall be true and correct in all material respects only as of the date of this Agreement and as of the Closing Date. All of the covenants, agreements and obligations of each of the Company and the Standby Purchaser required to be performed by the Closing Date shall have been duly performed and complied with by the Closing Date unless such performance shall have been waived in writing by the Company or the Standby Purchaser, as the case may be. The respective representations, warranties, covenants, agreements and obligations of the parties to this Agreement shall survive the Closing Date. 9. RECAPITALIZATION, ETC. Other than as disclosed in the Prospectus, prior to Closing, the Company shall not split, combine, reclassify or repurchase any of its capital stock or declare or pay any extraordinary dividends on any of its capital stock. 10. MISCELLANEOUS. This Agreement is made solely for the benefit of the Standby Purchaser and the Company, and their respective personal representatives and successors, and no other person, 7 partnership, association or corporation shall acquire or have any right under or by virtue of this Agreement. 11. ASSIGNMENT. Neither the Company nor the Standby Purchaser may assign any of its rights under this Agreement without the prior written consent of the other party hereto. 12. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement and understanding between the Standby Purchaser and the Company, and supersedes all prior agreements and understandings relating to the subject matter hereof. In case any one or more of the provisions contained in this Agreement, or the application thereof in any circumstance, is held invalid, illegal or unenforceable in any respect under the laws of any jurisdiction, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions contained herein shall not be in any way affected or impaired thereby or under the laws of any other jurisdiction. 13. COUNTERPARTS. This Agreement may be executed in any number of counterparts, each of which when so executed and delivered shall be an original, and all such counterparts together constitute but one and the same instrument. 14. AMENDMENTS. This Agreement may not be amended, modified or changed, in whole or in part, except by an instrument in writing signed by the Company and the Standby Purchaser. 15. NOTICES. Except as otherwise provided in this Agreement, and unless otherwise notified by the respective addressee, all notices and communications hereunder shall be in writing and mailed or delivered or by facsimile or telephone if subsequently confirmed in writing, to: If to the Company: Patriot National Bancorp, Inc 900 Bedford Street Stamford, Connecticut 06901 Attention: Angelo De Caro Chairman and Chief Executive Officer Telephone: 203-324-7500 Facsimile: 203-324-8085 8 With a copy to: Tyler Cooper & Alconn, LLP 185 Asylum Avenue City Place 35th Floor Hartford, CT 06103 Attention: William W. Bouton III, Esq. Kerry John Tomasevich, Esq. Telephone: 860-725-6200 Facsimile: 860-278-3802 If to the Standby Purchaser: ______________________ ______________________ ______________________ Attention: Telephone: Facsimile: 16. APPLICABLE LAW. This Agreement shall be governed by and construed in accordance with the laws of the State of Connecticut, without regard to the conflict of laws rules thereof. 17. BUSINESS DAY. The term "business day" shall mean a day on which banking institutions are open generally in New York. 9 IN WITNESS WHEREOF, and intending to be legally bound hereby, each of the Standby Purchaser and the Company has signed or caused to be signed its name as of the day and year first above written. PATRIOT NATIONAL BANCORP, INC. By: ------------------------------- Name: Angelo De Caro Title: Chairman and Chief Executive Officer Agreed and Accepted as of the day of the ___ day of __________, 2005: --------------------------- By: -------------------------- Name: Title: 10 EX-10.12 20 a2156305zex-10_12.txt EXHIBIT 10.12 EXHIBIT 10.12 PATRIOT NATIONAL BANCORP, INC. ___________, 2005 Dear Shareholder: Enclosed please find a Prospectus dated ______________, 2005 regarding the subscription rights offering (the "Rights Offering") for the common stock (the "Common Stock") of Patriot National Bancorp, Inc. (the "Company"). We felt it might be helpful to explain in the form of questions and answers certain issues relating to the Rights Offering. Nonetheless, for a complete explanation of, among other things, the Rights Offering and the procedures for exercising your rights (the "Rights"), you should carefully read the Prospectus and the Instructions included in the package containing the Subscription Rights Certificate. If you have additional questions, you may contact the Information Agent and Subscription Agent, Registrar and Transfer Company at (800) 866-1340. QUESTION 1. I CURRENTLY OWN 1,000 SHARES OF COMPANY COMMON STOCK AND I WANT TO SUBSCRIBE FOR THE MAXIMUM NUMBER OF SHARES OF COMMON STOCK IN THE RIGHTS OFFERING. HOW MANY SHARES OF COMMON STOCK AM I ENTITLED TO SUBSCRIBE FOR? ANSWER. For each _________ shares of Company common stock you hold, you will receive one Right. You will not receive fractional Rights, so the Rights you receive will be rounded up or down to the nearest whole number. For each Right you receive, you are entitled to subscribe for one share of Common Stock (your "Basic Subscription Right"), plus an Oversubscription Privilege of up to two times the number of shares purchased by your exercise of the Basic Subscription Right, if available. Consequently, you will be able to subscribe for _____________ shares of Common Stock at $________ per share or $_____________ pursuant to the Basic Subscription Right. You also may subscribe for additional two (2) shares of Common Stock at $__________ per share or $_______________ subject to availability pursuant to the Oversubscription Privilege. QUESTION 2. I OWN 1,000 SHARES OF COMPANY COMMON STOCK AND I WANT TO SUBSCRIBE FOR THE MAXIMUM NUMBER OF SHARES OF COMMON STOCK IN THE RIGHTS OFFERING. WHAT SHOULD I DO? ANSWER. Follow these procedures: - Complete Form A on the back of your Subscription Rights Certificate. - Send to Registrar and Transfer Company (the "Subscription Agent"), at 10 Commerce Drive, Cranford, NJ 07016 your properly completed and executed Subscription Rights Certificate, together with payment in the amount of $___________ by check or bank draft drawn upon a U.S. bank, or postal, telegraphic or express money order, in each case, payable to Registrar and Transfer Company, as Subscription Agent, or by wire transfer of funds to the account maintained by the Subscription Agent for such purpose of accepting subscriptions at. If you are paying by uncertified check, the funds paid may take at least five business days to clear. Thus, you must make payment sufficiently in advance of 5:00 p.m., Eastern Time, on _____________, 2005 (the "Expiration Time") to ensure that such payment is received and clears before the Expiration Time. You are urged to consider, in the alternative, payment by means of certified check, bank draft, money order or wire transfer of funds. QUESTION 3. IF I WANT TO SUBSCRIBE FOR ADDITIONAL SHARES OF COMMON STOCK PURSUANT TO THE OVERSUBSCRIPTION PRIVILEGE, DO I HAVE TO SEND MY MONEY NOW OR CAN I WAIT UNTIL THE COMPANY DECIDES WHETHER ANY SHARES OF COMMON STOCK ARE AVAILABLE? ANSWER. You must exercise the Oversubscription Privilege together with the Basic Subscription Right prior to the Expiration Time, unless the Company extends the Rights Offering to a period no later than 5:00 p.m.. Eastern Time, on _____________, 2005. In the event no shares are available, your money will be refunded to you, without interest or penalty. QUESTION 4. AS A RIGHTS HOLDER, AM I REQUIRED TO SUBSCRIBE IN THE RIGHTS OFFERING? ANSWER. No. While a Rights Holder is entitled either to exercise all or any portion of his or her Basic Subscription Right, a Rights Holder also may choose to do nothing with his or her Basic Subscription Right and allow the Rights to expire. In such event, your equity ownership in the Company will be diluted as a result. QUESTION 5. WHAT HAPPENS TO THOSE SHAREHOLDERS WHO DECIDE NOT TO EXERCISE THEIR RIGHTS TO PURCHASE SHARES OF COMMON STOCK IN THE RIGHTS OFFERING? ANSWER. Any time a company issues additional shares, a shareholder's investment in the Company may be "diluted." While all shareholders will experience dilution in their percentage interest in the Company as a result of the Rights Offering, a shareholder who does not exercise his, her or its Rights will experience a greater decrease in their percentage interest in the Company after the Rights Offering than a shareholder who does exercise his, her or its Rights. QUESTION 6. WHEN DO I HAVE TO MAKE A DECISION WHETHER TO SUBSCRIBE FOR ANY COMMON STOCK? ANSWER. The Expiration Time of the Rights Offering is 5:00 p.m., Eastern Time, on ____________, 2005, unless the Company extends it to a period no later than 5:00 p.m., Eastern Time, on __________, 2005. To participate in the Rights Offering, good funds will have to be received by the Subscription Agent by that time. QUESTION 7. IF I SEND IN MY SUBSCRIPTION RIGHTS CERTIFICATE AND MY MONEY NOW, CAN I CHANGE MY MIND ON WHETHER TO PURCHASE THE COMMON STOCK? ANSWER. No. Once you exercise Rights, you may not revoke your exercise. QUESTION 8. HOW MAY I SUBSCRIBE FOR MORE SHARES OF COMMON STOCK THAN THOSE ALLOCATED TO ME IN ACCORDANCE WITH MY BASIC SUBSCRIPTION RIGHT? ANSWER. Each Rights Holder who elects to exercise the Basic Subscription Right in full also may subscribe at the Subscription Price for additional shares of Common Stock, subject to availability after completion of the Rights Offering and subject to reduction and proration in the sole judgment and discretion of the Company. If an insufficient number of shares of Common Stock is available to satisfy fully all exercises of the Oversubscription Privilege then the available shares of Common Stock will be prorated among Rights Holders who exercise their Oversubscription Privilege. QUESTION 9. IF THE RIGHTS OFFERING IS NOT COMPLETED, WILL MY SUBSCRIPTION PAYMENT BE REFUNDED TO ME? ANSWER. Yes. All funds received with subscriptions will he held in escrow until the completion of the Offering. Funds will only be accepted and exchanged for shares if the conditions described in the Prospectus are satisfied. QUESTION 10. I HAVE DELIVERED MY SUBSCRIPTION RIGHTS CERTIFICATE AND MONEY TO MY BROKER FOR DELIVERY TO THE SUBSCRIPTION AGENT. IS THERE ANYTHING ELSE I MUST DO? ANSWER. Yes. You must complete the form entitled "Notice of Guaranteed Delivery for Subscription Right Certificates Issued by Patriot National Bancorp, Inc." and deliver it by facsimile transmission, overnight courier or mail to the Subscription Agent prior to the Expiration Time. QUESTION 11. I RECEIVED MANY OTHER FORMS IN MY PACKAGE. WHAT SHOULD I DO WITH THEM? ANSWER. Many of the forms will not apply to you if you hold your stock certificate for Company's Common Stock. However, if you hold the Company Common Stock in "street name," contact your broker who will advise you which ones must be completed. * * * We hope this letter will assist you with the documents sent to you. You are advised to read the Prospectus in its entirety. Very truly yours, By: ------------------------------------- Angelo De Caro CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE OFFICER EX-10.13 21 a2156305zex-10_13.txt EXHIBIT 10.13 EXHIBIT 10.13 SUBSCRIPTION AGENT AGREEMENT _____________, 2005 Registrar and Transfer Company 10 Commerce Drive Cranford, NJ 07016 Ladies and Gentlemen: In connection with your appointment as Subscription Agent in the transaction described herein, Patriot National Bancorp, Inc. (the Company), hereby confirms its arrangements with you as follows: 1. RIGHTS OFFERING: The Company is offering (the "Rights Offering") to the holders of shares of its Common Stock, par value $2.00 per share ("Common Stock"), on _______, 2005 (the "Record Date"), the right ("Rights") to subscribe for _______ (___) shares of Common Stock. Except as set forth under Paragraphs 7 and 8 below, Rights shall cease to be exercisable at 5:00 p.m., Eastern time, on _________, 2005 or such later date of which the Company notifies you orally and confirms in writing (the "Expiration Date"). One (1) Right is being issued for each _______ (____) shares of Common Stock held on the Record Date. One (1) Right and payment in full of the subscription price of $________ (the "Subscription Price") are required to subscribe for one share of Common Stock. Rights are evidenced by non-transferable subscription certificates in registered form ("Subscription Certificates"). Each holder of Subscription Certificate(s) who exercises the holder's right to subscribe for all shares of Common Stock that can be subscribed for with the Rights evidenced by such Subscription Certificate(s) (the "Basic Subscription Right") will have the right to subscribe for additional shares of Common Stock, if any, available as a result of any unexercised Rights (such additional subscription right being referred to hereafter as the "Oversubscription Privilege"). The Rights Offering will be conducted in the manner and upon the terms set forth in the Company's Prospectus dated ______________, 2005 (the "Prospectus"), which is incorporated herein by reference and made a part hereof as if set forth in full herein. 2. APPOINTMENT OF SUBSCRIPTION AGENT: You are hereby appointed as Subscription Agent to effect the Rights offering in accordance with the Prospectus. Each reference to you in this letter is to you in your capacity as Subscription Agent unless the context indicates otherwise. 3. DELIVERY OF DOCUMENTS: Enclosed herewith or previously provided to you are the following, the receipt of which you acknowledge by your execution hereof: (a) a copy of the Prospectus; (b) the form of Subscription Certificate (with instructions); (c) resolutions adopted by the Board of Directors of the Company in connection with the Rights Offering, certified by the secretary of the Company; and (d) Notice of Guaranteed Delivery. As soon as is reasonably practical, you shall mail or cause to be mailed to each holder of Common Stock at the close of business on the Record Date a Subscription Certificate evidencing the Rights to which such holder is entitled, a Notice of Guaranteed Delivery, a Prospectus, an envelope addressed to you, and such other documents as are provided by the Company. Prior to mailing, the Company will provide you with blank Subscription Certificates which you will prepare and issue in the names of holders of Common Shares of record at the close of business on the Record Date and for the number of Rights to which they are entitled. The Company will also provide you with a sufficient number of copies of each of the documents to be mailed with the Subscription Certificates. 4. SUBSCRIPTION PROCEDURE: (a) Upon your receipt prior to 5:00 p.m., Eastern time, on the Expiration Date (by mail or delivery), as Subscription Agent, of (i) any Subscription Certificate completed and endorsed for exercise, as provided on the reverse side of the Subscription Certificate (except as provided in paragraph 6 hereof), and (ii) payment in full of the Subscription Price in U.S. funds by check, bank draft, wire transfer or money order (without deduction for bank service charges or otherwise) to the order of Registrar and Transfer Company, you shall as soon as practicable after the Expiration Date, but after performing the procedures described in subparagraphs (b) and (c) below, mail to the subscriber's registered address on the books of the Company certificates representing the securities underlying each share of Common Stock duly subscribed for (pursuant to the Basic Subscription Right and the Oversubscription Privilege) and furnish a list of all such information to the Company. (b) As soon as practicable after the Expiration Date you shall calculate the number of shares of Common Stock to which each subscriber is entitled pursuant to the Oversubscription Privilege. The Oversubscription Privilege may only be exercised by holders who subscribe to all the shares of Common Stock that can be subscribed for under the Basic Subscription Right. The shares of Common Stock available for additional subscriptions will be those that have not been subscribed and paid for pursuant to the Basic Subscription Right (the "Remaining Shares of Common Stock"). Where there are sufficient Remaining Shares of Common Stock to satisfy all additional subscriptions by holders exercising their rights under the Oversubscription Privilege, each holder shall be allotted the number of Remaining Shares of Common Stock subscribed for. If the aggregate number of shares of Common Stock subscribed for under the Oversubscription Privilege exceeds the number of Remaining Shares of Common Stock, the number of Remaining shares of Common Stock allotted to each participant in the Oversubscription Privilege shall be the product (disregarding fractions) obtained by multiplying the number of Remaining Shares of Common Stock by a fraction of which the numerator is the number of shares of Common Stock subscribed for by that participant under the Oversubscription Privilege and the denominator is the aggregate number of Remaining Shares of Common Stock subscribed for by all participants under the Oversubscription Privilege. (c) Upon calculating the number of shares of Common Stock to which each subscriber is entitled pursuant to the Oversubscription Privilege and the amount overpaid, if any, by each subscriber, you shall, as soon as practicable, furnish a list of all such information to the Company. (d) Upon calculating the number of shares of Common Stock to which each subscriber is entitled pursuant to the Oversubscription Privilege and assuming payment for the additional shares of Common Stock subscribed for has been delivered, you shall mail, as contemplated in subparagraph (a) above, the 2. certificates representing the additional securities which the subscriber has been allotted. If a lesser number of shares of Common Stock is allotted to a subscriber under the Oversubscription Privilege than the subscriber has tendered payment for, you shall remit the difference to the subscriber without interest or deduction at the same time as certificates representing the securities allotted pursuant to the Oversubscription Privilege are mailed. (e) Funds received by you pursuant to the Basic Subscription Right and the Oversubscription Privilege shall be held by you in a segregated account. Upon mailing certificates representing the securities and refunding subscribers for additional shares of Common Stock subscribed for but not allocated, if any, you shall promptly remit to the Company all funds received in payment of the Subscription Price for shares of Common Stock sold in the Rights Offering. 5. DEFECTIVE EXERCISE OF RIGHTS; LOST SUBSCRIPTION CERTIFICATES: The Company shall have the absolute right to reject any defective exercise of Rights or to waive any defect in exercise. Unless requested to do so by the Company, you shall not be under any duty to give notification to holders of Subscription Certificates of any defects or irregularities in subscriptions. Subscriptions will not be deemed to have been made until any such defects or irregularities have been cured or waived within such time as the Company shall determine. You shall as soon as practicable return Subscription Certificates with the defects or irregularities which have not been cured or waived to the holder of the Rights. If any Subscription Certificate is alleged to have been lost, stolen or destroyed, you should follow the same procedures followed for lost stock certificates representing Common Stock you use in your capacity as transfer agent for the Company's Common Stock. 6. LATE DELIVERY: If prior to 5:00 p.m., Eastern time, on the Expiration Date you receive (i) payment in full of the Subscription Price for the shares of Common Stock being subscribed for and (ii) a guarantee notice substantially in the form of the Notice of Guaranteed Delivery delivered with the Subscription Certificate, from a financial institution having an office or correspondent in the United States, or a member firm of any registered United States national securities exchange or of the National Association of Securities Dealers, Inc. stating the certificate number of the Subscription Certificate relating to the Rights, the name and address of the exercising subscriber, the number of Rights represented by the Subscription Certificate held by such exercising subscriber, the number of shares of Common Stock being subscribed for pursuant to the Rights and guaranteeing the delivery to you of the Subscription Certificate evidencing such Rights within three business days following the date of the Notice of Guaranteed Delivery, then the Rights may be exercised even though the Subscription Certificate was not delivered to you prior to 5:00 p.m., Eastern time, on the Expiration Date, provided that within two business days following the date of the Notice of Guaranteed Delivery you receive the properly completed Subscription Certificate evidencing the Rights being exercised, with signatures guaranteed if required. 7. DELIVERY: You shall deliver to the Company the exercised Subscription Certificates in accordance with written directions received from the Company and shall deliver to the subscribers who have duly exercised Rights at their registered addresses certificates representing the securities subscribed for as instructed on the reverse side of the Subscription Certificates. 8. REPORTS. You shall notify the Company by telephone on and before the close of business on each business day during the period commencing 5 business days after the mailing of the Rights and ending at the Expiration Date (and in the case of guaranteed deliveries ending three business days after the Expiration Date) (a "daily notice"), which notice shall thereafter be confirmed in writing, of (i) the number of Rights exercised on the day covered by such daily notice, (ii) the number of Rights subject to 3. guaranteed exercises on the day covered by such daily notice, (iii) the number of Rights for which defective exercises have been received on the day covered by such daily notice, and (iv) the cumulative total of the information set forth in clauses (i) through (iii) above. At or before 5:00 p.m., Eastern time, on the first business day following the Expiration Date you shall certify in writing to the Company the cumulative total through the Expiration Date of all the information set forth in clauses (i) through (iii) above. At or before 10:00 a.m., Eastern time, on the fifth business day following the Expiration Date you will execute and deliver to the Company a certificate setting forth the number of Rights exercised pursuant to a Notice of Guaranteed Delivery and as to which Subscription Certificates have been timely received. You shall also maintain and update a listing of holders who have fully or partially exercised their Rights, holders who have transferred their Rights and their transferees, and holders who have not exercised their Rights. You shall provide the Company or its designees with such information compiled by you pursuant to this paragraph 8 as any of them shall request. 9. FUTURE INSTRUCTIONS: With respect to notices or instructions to be provided by the Company hereunder, you may rely and act on any written instruction signed by any one or more of the following authorized officers or employees of the Company: Angelo De Caro, Chairman and Chief Executive Officer, Robert O'Connell, Senior Executive Vice President and Chief Financial Officer or Philip Wolford, Chief Operating Officer and Secretary. 10. PAYMENT OF EXPENSES: The Company will pay you compensation for acting in your capacity as Subscription Agent hereunder in the amount of $_____________ plus your reasonable out-of-pocket expenses. 11. COUNSEL: You may consult with counsel satisfactory to you, which may be counsel to the Company, and the advice or opinion of such counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by you hereunder in good faith and in accordance with such advice an opinion of such counsel. 12. INDEMNIFICATION: The Company covenants and agrees to indemnify and hold you harmless against any costs, expenses (including reasonable fees of legal counsel), losses or damages, which may be paid, incurred or suffered by or to which you may become subject arising from or out of, directly or indirectly, any claim or liability resulting from your actions as Subscription Agent pursuant hereto; provided that such covenant and agreement does not extend to such costs, expenses, losses and damages incurred or suffered by you as a result of, or arising out of, your own gross negligence, misconduct or bad faith or that of any employees, agents or independent contractors used by you in connection with performance of your duties as Subscription Agent hereunder. 13. NOTICES: Unless otherwise provided herein, all reports, notices and other communications required or permitted to be given hereunder shall be in writing and delivered by hand or confirmed telecopy or by first class U.S. mail, postage prepaid, shall be deemed given if by hand or telecopy, upon receipt or if by U.S. mail, three business days after deposit in the U.S. mail and shall be addressed as follows (a) If to the Company, to: Patriot National Bancorp, Inc. 900 Bedford Street Stamford, CT 06901 Attention: Angelo De Caro 4. Chairman and Chief Executive Officer Telephone: (203) 324-7500 (b) If to you, to: Registrar and Transfer Company 10 Commerce Drive Cranford, NJ 07016 Telephone: 1 800 866-1340 If the foregoing terms accurately summarize our understanding, please date and sign the enclosed duplicate copy of this letter on behalf of Registrar and Transfer Company. Very truly yours, PATRIOT NATIONAL BANCORP, INC. By ----------------------------------------- Angelo De Caro Chairman and Chief Executive Officer Agreed and accepted as of this ___ day of _____________, 2005 REGISTRAR AND TRANSFER COMPANY By --------------------------------- Name: Title: 5. EX-10.14 22 a2156305zex-10_14.txt EXHIBIT 10.14 EXHIBIT 10.14 Patriot National Bancorp, Inc. 900 Bedford Street Stamford, CT 06901 _______________, 2005 Registrar and Transfer Company 10 Commerce Drive Cranford, NJ 07016 Ladies and Gentlemen: Patriot National Bancorp, Inc., a Connecticut corporation, proposes to offer for purchase up to ____________ shares of its common stock, $2.00 par value per share (the "Shares"), in connection with a rights offering (the "Offering") to its stockholders and certain standby purchasers and subject to the conditions set forth in the registration statement filed on Form SB-2 (the "Registration Statement") with the Securities and Exchange Commission on ____________, 2005, as such Registration Statement may be amended from time to time. We hereby confirm your appointment as our Information Agent in connection with the Offering, and by your signature below you hereby confirm your acceptance of such appointment. You hereby further agree that your authority and actions as Information Agent shall be governed by the terms of this Agreement, as follows. 1. DUTIES OF INFORMATION AGENT: It is understood and agreed that your primary duties as our Information Agent will include (a) advice to and confidential consultation with us and our authorized representative in connection with the Offering and our related communications; (b) disseminating printed materials relating to the Offering (including all amendments and supplements thereto) to brokers, securities dealers, banks, trust companies, nominees and any stockholder of the Company who may request the same; (c) responding promptly to parties who contact you as our Information Agent requesting information pertaining to the Offering; and (d) initiating calls to stockholders concerning the Offering (should we so elect). 2. COMPENSATION. In consideration of the services to be performed by you in connection with the Offering, we hereby agree to pay to you a fee of U.S. $____________ plus your ordinary and customary charges for reasonable disbursements and expenses incurred by you in connection with the Offering. We understand that disbursements and expenses include, without limitation all postage, air freight, trucking and other delivery costs relating to the forwarding of our printed materials to brokerage firms, banks and any stockholder of the Company who may request them. We acknowledge that our obligations under this Section 2 are not conditioned upon the successful consummation of the Offering or any number of Shares being subscribed to pursuant to the Offering. 3. INDEMNITY AND FAILURE: (a) We hereby covenant and agree to hold you harmless and to indemnify you against any loss, claim, damage, liability or expense (including reasonable fees and expenses of your legal counsel) arising out of or resulting from the performance of your duties under this Page 2 of 3 Agreement; except any such loss, claim, damage, liability or expense arising out of or resulting from your gross negligence or willful material breach of this Agreement. (b) Promptly after receipt by you of notice of the commencement of any action, you shall, if a claim in respect thereof is to be made against us, notify us in writing of the commencement thereof, but the omission so to notify us shall not relieve us from any liability which we may have to you. In case any such action shall be brought against you and you shall notify us of the commencement thereof, we shall be entitled to participate therein and, to the extent that we shall wish assume the defense thereof, with counsel satisfactory to you (who shall not, except with your consent, be our counsel), and, after notice from us to you of our election so to assume the defense thereof, we shall not be liable to you for any legal expenses of other counsel or any other expenses, in each case subsequently incurred by you in connection with the defense thereof other than reasonable costs of investigation. We shall not, without your written consent, effect the settlement or compromise of, or consent to the entry of any judgment with respect to, any pending or threatened action or claim in respect of which indemnification or contribution maybe sought hereunder (whether or not you are an actual or potential party to such action or claim) unless such settlement, compromise or judgment (i) includes your unconditional release from all liability arising out of such action or claim and (ii) does not include a statement as to or an admission of fault, culpability or a failure to act, by or on your behalf. In addition, you shall not, without our prior written consent, which shall not be unreasonably withheld, effect the settlement of any claim or litigation with respect to which you may seek indemnification from us. 4. ASSIGNMENT: This Agreement and the appointment as Information Agent hereunder shall inure to the benefit of, and the obligations created thereby shall be binding upon the successors and assigns of the parties hereto, except that if we assign this Agreement, we shall remain liable to you for the prompt and full payment of your fees and expenses, and you may neither assign your rights nor delegate your duties hereunder without our prior written consent. 5. INTERPRETATION: (a) This Agreement shall be construed and enforced in accordance with the laws of the State of New Jersey. (b) If any provision of this Agreement shall be held illegal, invalid or unenforceable by any court, this Agreement shall be construed and enforced as if such provision had not been contained herein and shall be deemed an agreement between us to the full extent permitted by applicable law. (c) Section headings have been inserted for convenience of reference only, are not part of this Agreement and shall not be used in any way in the interpretation of any of the provisions hereof. Page 3 of 3 Please acknowledge receipt of this Agreement and confirm the arrangements herein provided by signing and returning the enclosed copy of the undersigned, whereupon this Agreement and the terms and conditions herein provided shall constitute a binding agreement between us. Sincerely, By: - -------------------------------- --------------------------------- Robert F. O'Connell Angelo De Caro Senior Executive Vice President Chairman of the Board and Chief Financial Officer and Chief Executive Officer Accepted as of this ________ day of ______________, 2005 Registrar and Transfer Company - -------------------------------- ------------------------------ (Witness) Name: Title: EX-21 23 a2156305zex-21.txt EXHIBIT 21 EXHIBIT 21 SUBSIDIARIES OF PATRIOT NATIONAL BANCORP, INC. Patriot National Bank, a national banking association PinPat Acquisition Corp. Patriot National Statutory Trust I EX-23.1 24 a2156305zex-23_1.txt EXHIBIT 23.1 EXHIBIT 23.1 CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM We hereby consent to use in this Registration Statement of Patriot National Bancorp, Inc. on Form SB-2 of our report, dated March 3, 2005, appearing in the Prospectus, which is a part of this Registration Statement. We also consent to the reference to our firm under the caption "Experts" in such Prospectus. /S/ McGladrey & Pullen, LLP New Haven, Connecticut April 25, 2005 EX-99.1 25 a2156305zex-99_1.txt EXHIBIT 99.1 EXHIBIT 99.1 PATRIOT NATIONAL BANCORP, INC. _________, 2005 Dear Shareholder: Patriot National Bancorp, Inc. (the "Company") has begun an offering (the "Offering") of a minimum of ___________ shares and a maximum of ________ shares of its Common Stock, $2.00 par value per share (the "Common Stock"), to holders of record of Common Stock at the close of business on _____________, 2005 (the "Record Date"), pursuant to nontransferable subscription rights ("Rights") to subscribe for and purchase shares of Common Stock at a price of $______ per share (the "Subscription Price"). Each shareholder will receive one (1) Right for every ________ (___) shares of Common Stock held of record by such shareholder on the Record Date, and the aggregate number of Rights issued by the Company to each shareholder will be rounded up or down to the nearest whole number. Each Right will entitle the holder thereof (the "Rights Holder") to subscribe for and purchase at the Subscription Price one share of Common Stock (the "Basic Subscription Right"). Any Rights Holder who exercises the Basic Subscription Right in full is entitled to subscribe for and purchase up to two (2) additional shares of Common Stock that are not otherwise subscribed for by all Rights Holders pursuant to the exercise of the Basic Subscription Right, subject to proration and reduction by the Company under certain circumstances. The number of Rights to which you are entitled is printed on the front of your Subscription Rights Certificate. Enclosed for your review is the Prospectus, a nontransferable Subscription Rights Certificate and related documents concerning the Offering. The Offering will expire at 5:00 p.m., Eastern Time, on ____________, 2005, unless extended by the Company to a time no later than 5:00 p.m., Eastern Time, on ____________, 2005. Rights not exercised or sold by such time will expire and become worthless. Any questions or requests for assistance should be directed to Registrar and Transfer Company, the Information Agent and the Subscription Agent, at (800) 866-1340. The Offering is being made only pursuant to the Prospectus which sets forth detailed information about the Company and the Offering. Please read these enclosed materials carefully. Sincerely, Angelo De Caro Robert F. O'Connell CHAIRMAN OF THE BOARD AND SENIOR EXECUTIVE VICE PRESIDENT AND CHIEF CHIEF EXECUTIVE OFFICER FINANCIAL OFFICER EX-99.2 26 a2156305zex-99_2.txt EXHIBIT 99.2 EXHIBIT 99.2 SPECIAL NOTICE TO HOLDERS OF PATRIOT NATIONAL BANCORP, INC. COMMON STOCK ($2.00 PAR VALUE) WHOSE ADDRESSES ARE OUTSIDE THE UNITED STATES AND CANADA Dear Shareholder(s): Enclosed you will find materials relating to the rights offering (the "Offering") of Patriot National Bancorp, Inc. (the "Company"). A Subscription Rights Certificate representing Rights to subscribe for shares of the Company's Common Stock at $___ per share is not included in this mailing, but instead is being held on your behalf by the Subscription Agent, Registrar and Transfer Company. If you wish to exercise any or all of the Rights, you must so instruct the Subscription Agent in the manner described in the accompanying Prospectus and Instructions as to Use of Subscription Rights Certificate by 5:00 p.m., Eastern Time, on ______________, 2005. ANY QUESTIONS OR REQUESTS FOR ASSISTANCE CONCERNING THE OFFERING SHOULD BE DIRECTED TO REGISTRAR AND TRANSFER COMPANY, THE INFORMATION AGENT AND THE SUBSCRIPTION AGENT, AT (800) 866-1340. Sincerely, Angelo De Caro Robert F. O'Connell CHAIRMAN OF THE BOARD AND SENIOR EXECUTIVE VICE PRESIDENT AND CHIEF EXECUTIVE OFFICER CHIEF FINANCIAL OFFICER EX-99.3 27 a2156305zex-99_3.txt EXHIBIT 99.3 EXHIBIT 99.3 ___________ Shares (Maximum) ___________ Shares (Minimum) PATRIOT NATIONAL BANCORP, INC. Common Stock ($2.00 par value) Initially Offered Pursuant to Rights Distributed to Shareholders TO SECURITIES DEALERS, COMMERCIAL BANKS, BROKERS, TRUST COMPANIES AND OTHER NOMINEES: Enclosed are a Prospectus, dated ____________, 2005 (the "Prospectus"), and Instructions as to Use of Subscription Rights Certificates (the "Instructions"), relating to the offering (the "Offering") of a minimum of _________ and a maximum of ____________ shares of Common Stock, $2.00 par value per share (the "Common Stock"), of Patriot National Bancorp, Inc. (the "Company"), at a subscription price of $______ per share. Nontransferable subscription rights ("Rights") are being distributed to holders of record of shares of Common Stock ("Rights Holders") as of the close of business on ____________, 2005 (the "Record Date"). The Rights are described in the Prospectus and evidenced by a Subscription Rights Certificate (a "Subscription Rights Certificate") registered in your name or the name of your nominee. Each beneficial owner of Common Stock registered in your name or the name of your nominee is entitled to one Right for each ________ (_____) shares of Common Stock owned by such beneficial owner on the Record Date. In lieu of fractional shares, the aggregate number of rights issued in respect of each beneficial owner will be rounded up or down to the nearest whole number. We are asking you to contact your clients for whom you hold shares of Common Stock registered in your name, or in the name of your nominee to obtain instructions with respect to Rights. You will be reimbursed for customary mailing and handling expenses incurred by you in forwarding any of the enclosed materials to your clients. The Company will pay all transfer taxes, if any, applicable to the sale of shares of Common Stock to a Rights Holder upon exercise of Rights, subject to certain exceptions described in the Prospectus and the Subscription Rights Certificate. Enclosed are copies of the following documents: 1. The Prospectus; 2. The Instructions; 3. A form of letter which may be sent to your clients for whose accounts you hold shares of Common Stock registered in your name or the name of your nominee, with space provided for obtaining such clients' instructions with regard to the Rights; 4. A Form of Letter which may be sent to your clients explaining the Offering in a Question and Answer format; 5. A Nominee Holder Oversubscription Certification; and 6. A Notice of Guaranteed Delivery. Your prompt action is requested. The Rights will expire at 5:00 p.m.. Eastern Time, on __________, 2005 unless extended by the Company to a time not later than 5:00 p.m.. Eastern Time, on _________, 2005 (in either case, the "Expiration Time"). TO EXERCISE RIGHTS, PROPERLY COMPLETED AND EXECUTED SUBSCRIPTION RIGHTS CERTIFICATE(S) (UNLESS THE GUARANTEED DELIVERY PROCEDURES ARE COMPLIED WITH) AND PAYMENT IN FULL FOR ALL RIGHTS EXERCISED MUST BE DELIVERED TO THE SUBSCRIPTION AGENT AS INDICATED IN THE PROSPECTUS PRIOR TO THE EXPIRATION TIME. EXERCISE OF OVERSUBSCRIPTION PRIVILEGES (AS DEFINED IN THE PROSPECTUS) MUST BE ACCOMPANIED BY A COMPLETE NOMINEE HOLDER OVERSUBSCRIPTION CERTIFICATION. Additional copies of the enclosed materials may be obtained from Registrar and Transfer Company, the Information Agent and the Subscription Agent, at (800) 866-1340. Very truly yours, By: ------------------------------ Angelo De Caro CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE OFFICER NOTHING HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU OR ANY PERSON AS AN AGENT OF THE COMPANY, THE SUBSCRIPTION AGENT, THE INFORMATION AGENT OR ANY OTHER PERSON MAKING OR DEEMED TO BE MAKING OFFERS OF THE COMMON STOCK, OR AUTHORIZED YOU OR ANY OTHER PERSON TO MAKE ANY STATEMENTS ON BEHALF OF ANY OF THEM WITH RESPECT TO THE OFFERING, EXCEPT FOR STATEMENTS EXPRESSLY MADE IN THE PROSPECTUS OR THE SUBSCRIPTION DOCUMENTS. EX-99.4 28 a2156305zex-99_4.txt EXHIBIT 99.4 EXHIBIT 99.4 ________________ Shares (Maximum) _________________ Shares (Minimum) PATRIOT NATIONAL BANCORP, INC. Common Stock ($2.00 par value) Initially Offered Pursuant to Rights Distributed to Shareholders TO OUR CLIENTS: Enclosed for your consideration are a Prospectus dated ______________, 2005 (the "Prospectus"), and the Instructions as to Use of Subscription Rights Certificates (the "Instructions"), relating to the offering (the "Offering") of up to ____________ shares of Common Stock, $2.00 par value per share (the "Common Stock"), of Patriot National Bancorp, Inc. (the "Company"), at a price of $________ per share (the "Subscription Price"). Nontransferable subscription rights ("Rights") are being distributed to holders of record of Common Stock ("Rights Holders"), at the close of business on _____________, 2005 (the "Record Date"). As described in the accompanying Prospectus, you will receive one right for each ______ (____) shares of Common Stock beneficially owned as of the Record Date. Each Right will entitle you to subscribe for and purchase from the Company one (1) share of Common Stock (the "Basic Subscription Right") at the Subscription Price. If you exercise the Basic Subscription Right in full you will also have the right (the "Oversubscription Privilege") to subscribe, at the Subscription Price, for two (2) shares of Common Stock (for each Right held) available after satisfaction of all subscriptions pursuant to the Basic Subscription Right (the "Excess Shares"), subject to proration and reduction, all as more fully described in the Prospectus. If the number of Excess Shares is not sufficient to satisfy all subscriptions pursuant to the Oversubscription Privilege, such Excess Shares will be allocated pro rata (subject to the elimination of fractional shares) among those Rights Holders exercising the Oversubscription Privilege in proportion to the respective number of shares each such Rights Holder subscribes for pursuant to the Basic Subscription Right. The materials enclosed are being forwarded to you as the beneficial owner of shares of Common Stock carried by us in your account but not registered in your name. Exercises and sales of Rights may only be made by us as the registered holder of Rights and pursuant to your instructions. Accordingly, we request instructions as to whether you wish us to elect to subscribe for any shares of Common Stock to which you are entitled pursuant to the terms and subject to the conditions set forth in the enclosed Prospectus and Instructions. Your instructions to us should be forwarded as promptly as possible to permit us to exercise Rights on your behalf in accordance with the provisions of the Offering. The Offering will expire at 5:00 p.m., Eastern Time, on ____________, 2005, unless extended by the Company, to a date not later than 5:00 p.m., Eastern Time on ____________, 2005 (in either case, the "Expiration Time"). Once a Rights Holder has properly exercised the Basic Subscription Right and, if applicable, the Oversubscription Privilege, such exercise may not be revoked. If you wish to have us, on your behalf, exercise Rights to Purchase any shares of Common Stock to which you are entitled, please so instruct us by completing, executing and returning to us the instruction form on the reverse side of this letter. IF WE DO NOT RECEIVE COMPLETE WRITTEN INSTRUCTIONS IN ACCORDANCE WITH THE PROCEDURES OUTLINED IN THE PROSPECTUS, WE WILL NOT EXERCISE YOUR RIGHTS, AND YOUR RIGHTS WILL EXPIRE VALUELESS. ANY QUESTIONS OR REQUESTS FOR ASSISTANCE CONCERNING THE OFFERING SHOULD BE DIRECTED TO REGISTRAR AND TRANSFER COMPANY, THE INFORMATION AGENT AND THE SUBSCRIPTION AGENT, AT (800) 866-1340. Very truly yours, By: ---------------------------------- Angelo De Caro CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE OFFICER 2 INSTRUCTIONS TO RECORD DATE HOLDER The undersigned acknowledge(s) receipt of your letter and the enclosed materials referred to therein relating to the offering of shares of Common Stock. This will instruct you whether to exercise Rights to purchase Common Stock distributed with respect to the shares of Common Stock held by you for the account of the undersigned pursuant to the terms and subject to the conditions set forth in the Prospectus and the related Instructions as to Use of Subscription Rights Certificates. / / Please DO NOT EXERCISE RIGHTS for shares of Common Stock. / / Please EXERCISE RIGHTS for shares of Common Stock as set forth below: Basic Subscription Right:_______________ X $________ = $__________ (a) (no. of shares) Oversubscription Privilege:_______________ X $________ = $________ (b) (no. of shares) Total payment Required: the sum of (a) plus (b) = $_______________ (c) / / Payment in the following amount is enclosed: $____________________ (d) / / Please deduct payment from the following account maintained by you as follows: _____________________________ __________________ Type of Account Account No. Amount to be deducted: $ _______ (e) - ----------------------------- - -------------------------------- - ----------------------------- Signature(s) Please type or print name(s) below Date: ____________________ _____________________________ ___________________________ _________________________ 3 EX-99.5 29 a2156305zex-99_5.txt EXHIBIT 99.5 EXHIBIT 99.5 PATRIOT NATIONAL BANCORP, INC. NOMINEE HOLDER OVERSUBSCRIPTION CERTIFICATION The undersigned, a bank, broker or other nominee holder of Rights ("Rights") to purchase shares of Common Stock, $2.00 par value per share ("Common Stock"), of Patriot National Bancorp, Inc. (the "Company") pursuant to the Rights offering (the "Offering") described and provided for in the Company's Prospectus dated _______, 2005 (the "Prospectus"), hereby certifies to the Company and to Registrar and Transfer Company, as Subscription Agent for such Offering, that for each numbered line filled in below the undersigned has exercised, on behalf of the beneficial owner thereof (which may be the undersigned), the number of Rights specified on such line pursuant to the Basic Subscription Right (as defined in the Prospectus) and such beneficial owner wishes to subscribe for the purchase of additional shares of Common Stock pursuant to the Oversubscription Privilege (as defined in the Prospectus), in the amount set forth in the second column of such line:
NUMBER OF RIGHTS EXERCISED NUMBER OF SHARES SUBSCRIBED FOR PURSUANT TO BASIC SUBSCRIPTION RIGHT PURSUANT TO OVERSUBSCRIPTION PRIVILEGE - -------------------------------------- -------------------------------------- 1. ___________________________________ _________________________________________________ 2. ___________________________________ _________________________________________________ 3. ___________________________________ _________________________________________________ 4. ___________________________________ _________________________________________________ 5. ___________________________________ _________________________________________________ 6. ___________________________________ _________________________________________________ 7. ___________________________________ _________________________________________________ 8. ___________________________________ _________________________________________________ 9. ___________________________________ _________________________________________________ 10. __________________________________ _________________________________________________ Provide the following information, if applicable: _______________________________ _____________________________________ Name of Nominee Holder Depository Trust Company ("DTC") Participant Number By ----------------------------- ------------------------------------------------- Name: DTC Basic Subscription Title: Confirmation number(s) Dated:________________________, 2005
EX-99.6 30 a2156305zex-99_6.txt EXHIBIT 99.6 EXHIBIT 99.6 PATRIOT NATIONAL BANCORP, INC. DTC PARTICIPANT OVERSUBSCRIPTION EXERCISE FORM This form is to be used only by the Depository Trust Company ("DTC") participants to exercise the Oversubscription Privilege in respect of Rights with respect to which the Basic Subscription Right was exercised and delivered through the facilities of DTC. All other exercises of Oversubscription Privileges must be effected by the delivery of Subscription Rights Certificate(s). The terms and conditions of the Offering are set forth in the Prospectus dated _____, 2005 (the "Prospectus") of Patriot National Bancorp, Inc. (the "Company") and are available upon request from Registrar and Transfer Company, the Information Agent and the Subscription Agent. Terms used but not defined herein have the meaning ascribed to them in the Prospectus. VOID UNLESS RECEIVED BY THE SUBSCRIPTION AGENT WITH PAYMENT IN FULL BY 5:00 P.M., EASTERN TIME, ON _________, 2005, UNLESS EXTENDED BY THE COMPANY TO A TIME NOT LATER THAN 5:00 P.M., EASTERN TIME, ON __________, 2005 (IN EITHER CASE, THE "EXPIRATION TIME"). 1. The undersigned hereby certifies to the Company and Registrar and Transfer Company, as the Subscription Agent, that it is a participant in DTC and that it has either (a) exercised the Basic Subscription Right in respect of Rights and delivered such exercised Rights to the Subscription Agent by means of transfer to the DTC account of the Subscription Agent designated in the Prospectus or (b) delivered to the Subscription Agent a Notice of Guaranteed Delivery in respect of the exercise of the Basic Subscription Right and will deliver the Rights called for in such Notice of Guaranteed Delivery to the Subscription Agent by means of transfer to such DTC account of the Subscription Agent. 2. The undersigned hereby exercises the Oversubscription Privilege to purchase to the extent available, shares of Common Stock and certifies to the Company and the Subscription Agent that such Oversubscription Privilege is being exercised for the account or accounts of persons (which may include the undersigned) on whose behalf the Basic Subscription Right has been exercised in full. A true and correct Nominee Oversubscription Certification is attached as Exhibit A hereto. 3. The undersigned understands that payment of the Subscription Price of $______ per share of Common Stock subscribed for pursuant to the Oversubscription Privilege must be received by the Subscription Agent before the Expiration Time and represents that such payment in the aggregate amount of $ either (check appropriate box): / / has been or is being delivered to the Subscription Agent pursuant to the Notice of Guaranteed Delivery referred to above, / / is being delivered to the Subscription Agent herewith, or / / has been delivered separately to the Subscription Agent; and, in the case of funds not delivered pursuant to a Notice of Guaranteed Delivery, is or was delivered in the manner set forth below (check appropriate box and complete information relating thereto): / / Wire transfer of funds directed to Registrar and Transfer Company Name of transferor institution ___________________________________ Date of transfer ____________________________________________ Federal Reference number ____________________________________ / / Uncertified check payable to Registrar and Transfer Company (Payment by uncertified check will not be deemed to have been received by the Subscription Agent until such check has cleared. Rights holders paying by such means are urged to make payment sufficiently in advance of the Expiration Time to ensure that such payment clears by such date.) / / Certified check payable to Registrar and Transfer Company / / Bank draft payable to Registrar and Transfer Company / / Money order payable to Registrar and Transfer Company - -------------------------------------------------------------------------------- DATE AND SIGN HERE: By: ----------------------------------- ------------------------------------ Name: DTC Basic Subscription Title: Confirmation Number ------------------------------------ DTC Participant Number Dated:___________________________, 2005 _____________________________________ Name of DTC Participant PARTICIPANTS EXERCISING THE OVERSUBSCRIPTION PRIVILEGE PURSUANT HERETO MUST ALSO SUBMIT TO THE SUBSCRIPTION AGENT THE NOMINEE HOLDER OVERSUBSCRIPTION CERTIFICATION ATTACHED HERETO AS EXHIBIT A. EXHIBIT A PATRIOT NATIONAL BANCORP, INC. NOMINEE HOLDER OVERSUBSCRIPTION CERTIFICATION The undersigned, a bank, broker or other nominee holder of Rights ("Rights") to purchase shares of Common Stock, $2.00 par value per share ("Common Stock"), of Patriot National Bancorp, Inc. (the "Company") pursuant to the Rights offering (the "Offering") described and provided for in the Company's Prospectus dated ______, 2005 (the "Prospectus"), hereby certifies to the Company and to Registrar and Transfer Company, as Subscription Agent for such Offering, that for each numbered line filled in below the undersigned has exercised, on behalf of the beneficial owner thereof (which may be the undersigned), the number of Rights specified on such line pursuant to the Basic Subscription Right (as defined in the Prospectus) and such beneficial owner wishes to subscribe for the purchase of additional shares of Common Stock pursuant to the Oversubscription Privilege (as defined in the Prospectus) in the amount set forth in the second column of such line:
NUMBER OF RIGHTS EXERCISED NUMBER OF SHARES SUBSCRIBED FOR PURSUANT TO BASIC SUBSCRIPTION RIGHT PURSUANT TO OVERSUBSCRIPTION PRIVILEGE - ------------------------------------ -------------------------------------- 1. ____________________________________ _____________________________________ 2. ____________________________________ _____________________________________ 3. ____________________________________ _____________________________________ 4. ____________________________________ _____________________________________ 5. ____________________________________ _____________________________________ 6. ____________________________________ _____________________________________ 7. ____________________________________ _____________________________________ 8. ____________________________________ _____________________________________ 9. ____________________________________ _____________________________________ 10. ___________________________________ _____________________________________
Provide the following information, if Applicable: ______________________________________ ______________________________________ Name of Nominee Holder Depository Trust Company ("DTC") Participant Number By: ----------------------------------- -------------------------------------- Name: DTC Basic Subscription Title: Confirmation number(s) Dated:___________________________, 2005 EX-99.7 31 a2156305zex-99_7.txt EXHIBIT 99.7 EXHIBIT 99.7 INSTRUCTIONS AS TO USE OF SUBSCRIPTION RIGHTS CERTIFICATES PATRIOT NATIONAL BANCORP, INC. CONSULT THE INFORMATION AGENT, OR YOUR BANK OR BROKER, IF YOU HAVE ANY QUESTIONS AFTER READING THESE INSTRUCTIONS -------------------------------------------- The following instructions relate to the rights offering (the "Offering") by Patriot National Bancorp, Inc., a Connecticut corporation (the "Company"), to the holders of its Common Stock, $2.00 par value per share (the "Common Stock"), as described in the Company's Prospectus dated _________, 2005 (the "Prospectus"). Holders of record (a "Rights Holder") of Common Stock at the close of business on ______ ____, 2005 (the "Record Date") are receiving one non-transferable right (each a "Right") for each ____ (___) shares of Common Stock held on the Record Date. Each Right entitles the Rights Holder to subscribe for, and purchase from the Company, ________ (____) shares of Common Stock (the "Basic Subscription Right") at the subscription price (the "Subscription Price") of $______. In lieu of fractional Rights, the aggregate number of Rights issued to a Rights Holder have been rounded up or down to the nearest whole number. An aggregate number of up to __________ shares of Common Stock (the "Underlying Shares") will be distributed in connection with the Offering. Subject to the proration and possible reduction described below, each Right also entitles any Rights Holder exercising in full the Basic Subscription Right the right to subscribe for additional shares of Common Stock available after satisfaction of all subscriptions pursuant to the Basic Subscription Right (the "Oversubscription Privilege"). THE OVERSUBSCRIPTION PRIVILEGE MUST BE EXERCISED AT THE SAME TIME AS THE BASIC SUBSCRIPTION RIGHT. THE BASIC SUBSCRIPTION RIGHT AND THE OVERSUBSCRIPTION PRIVILEGE ARE NOT TRANSFERABLE. Subject to the allocation and possible reduction described below, shares of Common Stock will be available for purchase pursuant to the Oversubscription Privilege only to the extent that all Underlying Shares have not been subscribed for through the Basic Subscription Right. If the Underlying Shares not subscribed for through the Basic Subscription Right (the "Excess Shares") are not sufficient to satisfy all subscriptions pursuant to the Oversubscription Privilege, the Excess Shares will be allocated pro rata (subject to the elimination of fractional shares) among those Rights Holders exercising the Oversubscription Privilege in proportion to the respective numbers of shares each such Rights Holder subscribes for pursuant to the Basic Subscription Right; PROVIDED, HOWEVER, that if such pro rata allocation results in any Rights Holder being allocated a greater number of Excess Shares than such Rights Holder subscribed for pursuant to the exercise of the Oversubscription Privilege, then each such Rights Holder will be allocated only that number of Excess Shares for which such holder oversubscribed, and the remaining Excess Shares will be allocated among all other Rights Holders exercising the Oversubscription Privilege on the same pro rata basis as described above. The Subscription Price is payable in cash. See "The Rights Offering" in the Prospectus. The Rights will expire at 5:00 p.m., Eastern Time, on ________, 2005, unless extended by the Company to a time not later than 5:00 p.m., Eastern Time, on ___________, 2005 (in either case, the "Expiration Time"). The number of Rights to which you are entitled is printed on the face of your Subscription Rights Certificate. You should indicate your wishes with regard to the exercise of your Rights by completing the appropriate form or forms on the reverse side of your Subscription Rights Certificate and returning the Subscription Rights Certificate to the Subscription Agent in the envelope provided. Once a Rights Holder has properly exercised his or her rights, such exercise may not be revoked. YOUR SUBSCRIPTION RIGHTS CERTIFICATE OR NOTICE OF GUARANTEED DELIVERY MUST BE RECEIVED BY THE SUBSCRIPTION AGENT AND PAYMENT OF THE SUBSCRIPTION PRICE, INCLUDING FINAL CLEARANCE OF ANY UNCERTIFIED CHECKS MUST BE RECEIVED BY THE SUBSCRIPTION AGENT AT OR BEFORE 5:00 P.M., EASTERN TIME, ON ____________, 2005. YOU MAY NOT REVOKE ANY EXERCISE OF A RIGHT. 1. SUBSCRIPTION RIGHTS TO EXERCISE RIGHTS. To exercise your Rights, complete Form A of your Subscription Rights Certificate and send to the Subscription Agent your properly completed and executed Subscription Rights Certificate together with payment in full of the Subscription Price for each Underlying Share subscribed for pursuant to the Basic Subscription Right and the Oversubscription Privilege. Payment of the Subscription Price must be made for the full number of Underlying Shares being subscribed for (a) by check payable to Registrar and Transfer Company, as Subscription Agent, (b) by certified check or bank draft drawn upon a U.S. bank, or postal or express money order, in each ease, payable to "Registrar and Transfer Company," as Subscription Agent, or (c) by wire transfer of funds to the account maintained by the Subscription Agent for such purpose of accepting subscriptions at ______________ WIRE CLEARING ACCOUNT, ABA No. ________________, Account #_____________, Attention: _____________ (with Subscriber's name). The Subscription Price will be deemed to have been received by the Subscription Agent only upon (i) clearance of any uncertified check, (ii) receipt by the Subscription Agent of any certified check or bank draft drawn upon a U.S. bank, or of any postal or express money order or (iii) receipt of collected funds in the Subscription Agent's account designated above. IF PAYING BY UNCERTIFIED CHECK, PLEASE NOTE THAT THE FUNDS PAID THEREBY MAY TAKE AT LEAST FIVE BUSINESS DAYS TO CLEAR. ACCORDINGLY, RIGHTS HOLDERS WHO WISH TO PAY THE SUBSCRIPTION PRICE BY MEANS OF AN UNCERTIFIED CHECK ARE URGED TO MAKE PAYMENT SUFFICIENTLY IN ADVANCE OF THE EXPIRATION TIME TO ENSURE THAT SUCH PAYMENT IS RECEIVED AND CLEARS BEFORE THE EXPIRATION TIME AND ARE URGED TO CONSIDER, IN THE ALTERNATIVE, PAYMENT BY MEANS OF CERTIFIED CHECK, BANK DRAFT, MONEY ORDER OR WIRE TRANSFER OF FUNDS. If you have not indicated the number of Rights being exercised, or if you have not forwarded full payment of the Subscription Price for the number of Rights that you have indicated are being exercised, then you will be deemed to have exercised the Basic Subscription Right with respect to the maximum number of Rights which may be exercised for the aggregate payment delivered by you and, to the extent that the aggregate payment delivered by you exceeds the product of the Subscription Price multiplied by the number of Rights evidenced by the Subscription Rights Certificate(s) delivered by you (such excess being the "Subscription Excess"), you will be deemed to have exercised the Oversubscription Privilege to purchase, to the extent available, that number of whole Excess Shares equal to the quotient obtained by dividing the Subscription Excess by the Subscription Price and any amount remaining after such division shall be returned to you. TO EXERCISE RIGHTS THROUGH A NOMINEE. If you wish to have your bank, broker or other nominee exercise some or all of your Rights, you must complete Form A of your Subscription Rights Certificate providing clear direction as to how many Rights are to be exercised and what action should be taken in regards to any unexercised Rights. Banks, brokers and other nominees who exercise the Oversubscription 2 Privilege on behalf of the beneficial owners of Rights will be required to certify to the Subscription Agent and the Company, by delivery to the Subscription Agent of a Nominee Holder Oversubscription Certification in the form available from the Subscription Agent and the Information Agent, the aggregate number of Rights as to which the Oversubscription Privilege are being exercised and the number of Underlying Shares thereby subscribed for by each beneficial owner of Rights on whose behalf such nominee holder is acting. TO EXERCISE RIGHTS IF SUBSCRIPTION RIGHTS CERTIFICATE MIGHT NOT PROPERLY REACH THE SUBSCRIPTION AGENT PRIOR TO THE EXPIRATION TIME. You may cause a written guarantee substantially in the form of Exhibit A to these Instructions (the "Notice of Guaranteed Delivery") from a member firm of an approved Signature Guarantee Medallion Program (an "Eligible Institution"), to be received by the Subscription Agent at or prior to the Expiration Time; payment in full of the applicable Subscription Price may be made separately as long as such payment is also received by the Subscription Agent at or prior to the Expiration Time. Such Notice of Guaranteed Delivery must state your name, the number of Rights represented by your Subscription Rights Certificate and the number of Underlying Shares being subscribed for pursuant to the Basic Subscription Right and being subscribed for, if any, pursuant to the Oversubscription Privilege, and the Eligible Institution must guarantee the delivery to the Subscription Agent of your properly completed and executed Subscription Rights Certificate(s) evidencing those Rights within two (2) business days following the date of the Notice of Guaranteed Delivery. If this procedure is followed, your Subscription Rights Certificate(s) must be received by the Subscription Agent within two (2) business days following the date of the Notice of Guaranteed Delivery relating thereto. Additional copies of the Notice of Guaranteed Delivery may be obtained upon request from the Information Agent. LIMITATION ON SUBSCRIPTION PRIVILEGES. The Company will not be required to issue Underlying Shares pursuant to the Offering to any Rights Holder who, in the Company's sole judgment and discretion, is required to obtain prior clearance, approval or nondisapproval from any state or Federal bank regulatory authority to own or control such shares unless, prior to the Expiration Time, evidence of such clearance, approval or nondisapproval has been provided to the Company. If the Company elects not to issue shares in such case, such shares will become available to satisfy subscriptions pursuant to the Oversubscription Privilege. See "The Rights Offering--Regulatory Limitation" in the Prospectus. 2. THE SUBSCRIPTION AGENT AND THE INFORMATION AGENT The address and telephone and facsimile numbers of the Information Agent and the Subscription Agent are as follows: REGISTRAR AND TRANSFER COMPANY 10 Commerce Drive Cranford, NJ 07016 Telephone Number: (800) 866-1340 Facsimile: (908) 497-2311 3. ISSUANCE OF STOCK CERTIFICATES; EXCESS PAYMENTS The following issuances, deliveries and payments will be made to you at the address shown on the face of your Subscription Rights Certificate unless you provide special payment, issuance or delivery instructions to the contrary by completing the applicable part of Form B of your Subscription Rights Certificate. See "The Rights Offering--Exercise of Rights" in the Prospectus. COMMON STOCK CERTIFICATES. Subject to completion of the Offering, the Subscription Agent will 3 issue and mail in accordance with the instruction of the exercising Rights Holder, a certificate representing Underlying Shares purchased pursuant to the valid exercise of Rights, as soon as practicable after the Expiration Time and all prorations and reductions contemplated by the Offering have been effected. See "The Rights Offering--Basic Subscription Right" and -- "Oversubscription Privilege" in the Prospectus. REFUNDING OF EXCESS PAYMENTS. As soon as practicable after the Expiration Time and after all prorations and possible reductions contemplated by the terms of the Offering have been effected, the Subscription Agent will return by mail without interest or deduction to each Rights Holder exercising the Oversubscription Privilege any excess funds received in payment of the Subscription Price for Underlying Shares that were subscribed for by such Rights Holder but not allocated to such Rights Holder pursuant to the Oversubscription Privilege. 4. SIGNATURES EXECUTION BY RIGHTS HOLDER. The signature on the Subscription Rights Certificate must correspond with the name of the Rights Holder exactly as it appears on the face of the Subscription Rights Certificate without any alteration or change whatsoever. Persons who sign the Subscription Rights Certificate in a representative or other fiduciary capacity must indicate their capacity when signing and, unless waived by the Company in its sole and absolute discretion, must present to the Subscription Agent satisfactory evidence of their authority to so act. EXECUTION BY PERSON OTHER THAN RIGHTS HOLDER. If the Subscription Rights Certificate is executed by a person other than the Rights Holder named on the face of the Subscription Rights Certificate, proper evidence of authority of the person executing the Subscription Rights Certificate must accompany the same unless, for good cause, the Company dispenses with proof of authority. SIGNATURE GUARANTEES. Unless your Subscription Rights Certificate (i) provides that the Underlying Shares to be issued pursuant to the exercise of the Rights represented thereby are to be issued to you or (ii) is submitted for the account of an Eligible Institution (as defined in paragraph 1), your signature on each Subscription Rights Certificate must be guaranteed by an Eligible Institution (as defined herein). 5. METHOD OF DELIVERY The method of delivery of Subscription Rights Certificates and payment of the Subscription Price to the Subscription Agent will be at your election and risk, but, if sent by mail, you are urged to send such materials by registered mail, properly insured, with return receipt requested and are urged to allow a sufficient number of days to ensure delivery to the Subscription Agent and, if you are paying by uncertified check, the clearance of payment of the Subscription Price prior to the Expiration Time. Because uncertified checks may take at least five business days to clear, you are strongly urged to consider payment by means of certified check, cashier's check, money order or wire transfer. 4 6. LOST, STOLEN, DESTROYED OR MUTILATED SUBSCRIPTION RIGHTS CERTIFICATES Upon receipt by the Company and the Subscription Agent of evidence reasonably satisfactory to them of the loss, theft, destruction or mutilation of a Subscription Rights Certificate, and, in case of loss, theft or destruction, of indemnity and/or security satisfactory to them, in their sole discretion, and reimbursement to the Company and the Subscription Agent of all reasonable expenses incidental thereto, and upon surrender and cancellation of the Subscription Rights Certificate, if mutilated, the Subscription Agent will make and deliver a new Subscription Rights Certificate of like tenor to the registered Rights Holder in lieu of the Subscription Rights Certificate so lost, stolen, destroyed or mutilated. If required by the Company or the Subscription Agent, an indemnity bond must be sufficient in the judgment of each party to protect the Company, the Subscription Agent or any agent thereof from any loss which any of them may suffer if a lost, stolen, destroyed or mutilated Subscription Rights Certificate is replaced. 7. SPECIAL PROVISIONS RELATING TO THE DELIVERY OF RIGHTS THROUGH THE DEPOSITORY TRUST COMPANY In the case of Rights that are held of record through The Depository Trust Company ("DTC"), exercises of the Basic Subscription Right (but not the Oversubscription Privilege) may be effected by instructing DTC to transfer Rights (such Rights being "DTC Rights") from the DTC account of the Rights Holder to the DTC account of the Subscription Agent, together with payment of the Subscription Price for each Underlying Share subscribed for pursuant to the Basic Subscription Right. THE OVERSUBSCRIPTION PRIVILEGE IN RESPECT OF DTC RIGHTS MAY NOT BE EXERCISED THROUGH DTC. The holder of DTC Rights may exercise the Oversubscription Privilege in respect thereof by properly executing and delivering to the Subscription Agent at or prior to the Expiration Time, a DTC Participant Oversubscription Exercise Form, in the form available from the Information Agent and the Subscription Agent, together with payment of the appropriate Subscription Price for the number of Excess Shares for which the Oversubscription Privilege is exercised. If a Notice of Guaranteed Delivery relates to Rights with respect so which exercise of the Basic Subscription Right will be made through DTC and such Notice of Guaranteed Delivery also relates to the exercise of the Oversubscription Privilege, a DTC Participant Oversubscription Exercise Form must also be received by the Subscription Agent in respect of such exercise of the Oversubscription Privilege at or prior to the Expiration Time. 8. TRANSFER TAXES Except for the fees charged by the Subscription Agent (which will be paid by the Company as described herein), all commissions, fees and other expenses (including brokerage commissions and transfer taxes) incurred in connection with the exercise of Rights will be for the account of the Rights Holder, and none of such commissions, fees or expenses will be paid by the Company or the Subscription Agent. 9. IRREGULARITIES All questions concerning the timeliness, validity, form and eligibility of any exercise of Rights will be determined by the Company, whose determinations will be final and binding. The Company, in its sole discretion, may waive any defect or irregularity, or permit a defect or irregularity to be corrected within such time as it may determine, or reject the purported exercise of any Right. Subscription Rights Certificates will not be deemed to have been received or accepted until all irregularities have been waived or cured within such time as the Company determines, in its sole discretion. Neither the Company nor the Subscription Agent will be under any duty to give notification of any defect or irregularity in connection with the submission of Subscription Rights Certificates or incur any liability for failure to give such notification. The Company reserves the right to reject any exercise if such exercise is not in accordance with the terms of the Offering or not in proper form or if the acceptance thereof or the issuance of the 5 shares of Common Stock pursuant thereto could be deemed unlawful. 6 EXHIBIT A NOTICE OF GUARANTEED DELIVERY FOR SUBSCRIPTION RIGHTS CERTIFICATES ISSUED BY PATRIOT NATIONAL BANCORP, INC. This Form, or one substantially equivalent hereto, must be used to exercise Rights pursuant to the Offering described in the Prospectus dated _________, 2005 (the "Prospectus") of Patriot National Bancorp, Inc., a Connecticut corporation (the "Company"), if a holder of Rights cannot deliver the subscription rights certificate(s) evidencing the Rights (the "Subscription Rights Certificate(s)"), to the Subscription Agent listed below (the "Subscription Agent") at or prior to 5:00 p.m., Eastern Time, on ___________, 2005, unless extended by the Company to a time not later than 5:00 p.m., Eastern Time, on ___________, 2005 (in either case, the "Expiration Time"). This form must be delivered by hand or sent by facsimile transmission, overnight courier or mail to the Subscription Agent and must be received by the Subscription Agent at or prior to the Expiration Time. Properly completed and executed Subscription Rights Certificate(s) relating to this Notice of Guaranteed Delivery must be received by the Subscription Agent within three (3) business days following the date of this Notice of Guaranteed Delivery. See "The Rights Offering -- Exercise of Rights" in the Prospectus. Payment of the Subscription Price of $_______ per share for each Underlying Share subscribed for pursuant to the Basic Subscription Right and the Oversubscription Privilege must be received by the Subscription Agent in the manner specified in the Instructions as to Use of Subscription Rights Certificates at or prior to the Expiration Time, even if the Subscription Rights Certificate evidencing such Right is being delivered pursuant to the procedure for guaranteed delivery thereof. The Subscription Agent is: REGISTRAR AND TRANSFER COMPANY 10 Commerce Drive Cranford, NJ 07016 Telephone Number: (800) 866-1340 Facsimile: (908) 497-2311 DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE OTHER THAN THAT SET FORTH ABOVE DOES NOT CONSTITUTE A VALID DELIVERY. 7 Ladies and Gentlemen: The undersigned represents that he or she is the holder of Subscription Rights Certificate(s) representing Rights and that such Subscription Rights Certificate(s) cannot be delivered to the Subscription Agent at or before 5:00 p.m., Eastern Time on __________, 2005 or such later time to which the Rights offering has been extended by the Company to a time not later than 5:00 p.m., Eastern Time, on ___________, 2005 (in either case, the "Expiration Time"). Upon the terms and subject to the conditions set forth in the Prospectus, receipt of which is hereby acknowledged the undersigned hereby elects to exercise (i) the Basic Subscription Right to subscribe for ____ Shares of Common Stock per Right with respect to Rights represented by such Subscription Rights Certificate and (ii) the Oversubscription Privilege, to the extent that Excess Shares (as defined in the instructions as to Use of Subscription Rights Certificate (the "Instructions")) are available therefor, for an aggregate of up to two Excess Shares. The undersigned understands that payment of the Subscription Price of $___ per share for each share of Common Stock subscribed for pursuant to the Basic Subscription Right and the Oversubscription Privilege must be received by the Subscription Agent at or before the Expiration Time, and represents that such payment, in the aggregate amount of $______, either has or is being delivered by (check appropriate box(es)): / / Wire transfer of funds directed to Registrar and Transfer Company, ___________ WIRE CLEARING ACCOUNT, ABA No. ____________, Account #___________________, Attn: _______________________ Name of transferor institution _________________________________________________ Date of transfer _______________________________________________________________ Federal Reference number (if available)_________________________________________ / / Uncertified check payable to Registrar and Transfer Company. Payment by uncertified check will not be deemed to have been received by the Subscription Agent until such check has cleared. Rights holders paying by such means are urged to make payment sufficiently in advance of the Expiration Time to ensure that such payment clears by such date.) Name of maker________________________________________________________________ Date of check________________________________________________________________ Bank on which check is drawn_________________________________________________ / / Certified check or bank draft payable to ___________________________ Name of maker _______________________________________________________________ Date of draft _______________________________________________________________ / / Money order payable to _____________________________________________ Issuer of money order _______________________________________________________ Date of money order _________________________________________________________ 8 Signature(s): Address: - -------------------------------- ----------------------------------- - -------------------------------- ----------------------------------- Name(s): ___________________________________ (Include Zip Code) ________________________________ Please Type or Print Area Code and Telephone Number(s) ________________________________ ___________________________________ ________________________________ ___________________________________ Subscription Rights Certificate No(s) (if available)_______________________________ (IF SIGNATURE IS BY A TRUSTEE(S), EXECUTOR(S), ADMINISTRATOR(S), GUARDIAN(S), ATTORNEY(S)-IN- FACT, AGENT(S), OFFICER(S), OF A CORPORATION OR ANOTHER ACTING IN A FIDUCIARY OR REPRESENTATIVE CAPACITY, SUCH CAPACITY MUST BE CLEARLY INDICATED ABOVE). 9. GUARANTEE OF DELIVERY (NOT TO BE USED FOR SUBSCRIPTION RIGHTS CERTIFICATE SIGNATURE GUARANTEE) THE UNDERSIGNED, A MEMBER FIRM OF AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM, GUARANTEES THAT THE UNDERSIGNED WILL DELIVER TO THE SUBSCRIPTION AGENT THE SUBSCRIPTION RIGHTS CERTIFICATE(S) REPRESENTING THE RIGHTS BEING EXERCISED HEREBY, WITH ANY REQUIRED SIGNATURE GUARANTEES AND ANY OTHER REQUIRED DOCUMENTS, ALL WITHIN TWO (2) TRADING DAYS AFTER THE DATE HEREOF. _______________________________________ Date__________________, 2005 (Name of Firm) _______________________________________ Address:____________________________ (Authorized Signature) _______________________________________ ____________________________________ (Name) (Include Zip Code) _______________________________________ ____________________________________ (Title) (Area Code and Telephone Number) THE INSTITUTION WHICH COMPLETES THIS FORM MUST COMMUNICATE THE GUARANTEE TO THE SUBSCRIPTION AGENT AND MUST DELIVER THE SUBSCRIPTION RIGHTS CERTIFICATE(S) TO THE SUBSCRIPTION AGENT WITHIN THE TIME PERIOD SHOWN HEREIN. FAILURE TO DO SO COULD RESULT IN FINANCIAL LOSS TO SUCH INSTITUTION. 10. 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