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This Excessive/Luxury Expenditures Policy (the “Policy”) fulfills the requirements
outlined in Section 111 of the Emergency Economic Stabilization Act of 2008 (“EESA”), as
amended by the American Recovery and Reinvestment Act of 2009 (“ARRA”). The ARRA
requires each recipient of funds under the Capital Purchase Program of the Troubled Assets
Relief Program (“TARP”) to have in place a company-wide policy regarding excessive or luxury
expenditures.
Providence Bank (the “Bank”) prohibits excessive or luxury expenditures on
entertainment and events, office or facility renovations, transportation and lodging or other
activities or events. For the purpose of this Policy, excessive expenditures are those that the
Bank would reasonably consider as beyond normal limits or lacking restraint for the normal
course of the Bank’s business, in light of the Bank purpose for which the expenditure was made.
This Policy applies to all employees, officers and directors of the Bank and any
subsidiaries.
Bank employees are required to read, understand, and adhere to this Policy. Failure to
adhere to this Policy could result in the employee not being reimbursed and could further result in
disciplinary action up to and including termination, as noted below.
The higher the dollar amount of an expenditure, the higher the risk that such an
expenditure may be excessive and unreasonable in light of Bank objectives. The Chief Executive
Officer is responsible for compliance and oversight of Policy.
On no less than an annual basis, all senior officers of the Bank must certify as to their
understanding of and compliance with this Policy. A copy of the certification is attached hereto
as Appendix A.
Renovations of facilities and office spaces should be done in a reasonable and cost
effective manner. At no time should renovations be done that would have the appearance of
being extraordinary or excessive from a shareholder perspective.
Entertainment is defined as an activity which an Employee or Executive would use
corporate funds for business development purposes relating to (a) current customer(s) or (b)
prospective customer(s) or to further enhance the Company’s marketing efforts.
Our expectation is that all expenses incurred to the Company would be for company
purposes and used to drive business to the Company. Occasional events such as taking
customers or prospects on trips, playing golf, eating dinner, or taking them to other events the
customer/prospect would find pleasurable are a necessary part of the Company’s marketing
efforts and are not deemed as “entertainment” or violations of the Luxury Policy.
The Board encourages employees and directors to attend conferences, seminars and
similar events that provide appropriate educational opportunities. These conferences should be
related to the financial services industry and have a direct correlation to the employee’s job. At
times it may be acceptable that a spouse travels to these conferences with the Bank employee or
director. The Chief Executive Officer must approve any conference or training expenditure not
specified in a Board approved budget.
Hosted events include holiday parties, employee/customer recognition events, seminars,
and marketing events hosted by the Bank. Employee morale and Bank culture, as well as the
establishment of strong customer and community relationships, are important aspects of the
Bank’s business. The Bank supports and will continue to invest in these aspects of its business.
Expenditures on hosted events, however, should be in line with the spirit of this Policy. It is also
encouraged that such Bank sponsored events be held locally in the communities in which the
Bank operates. The Chief Executive Officer must approve any hosted event expenditure not
specified in a Board approved budget.
Board retreats may only be used for educational purposes with the corresponding
expenses deemed reasonable by any standard. It is recognized that Board education is a vital part
of attracting and maintaining a dynamic director base, and this Policy does not prohibit a retreat
that is focused on strategic planning or board education. Expenditures on Board retreats,
however, should be in line with the spirit of this Policy.
Transportation and lodging for Bank employees and directors on Bank business or for
Bank purposes should be conducted in the most cost appropriate way for the Bank. The cost,
efficiency and timeliness of travel and lodging shall be considered in making any determination
under this Policy. The Chief Executive Officer must approve any hosted transportation and
lodging expenditure not specified in a Board approved budget.
Expenses not specifically covered in this Policy should by made in compliance with the
Policy and, if not specified in a Board approved budget, must be approved in advance by the
Chief Executive Officer.
Any employee that suspects or becomes aware of a violation of this Policy shall immediately
report such violation to his or her supervisor for reporting to the Chief Executive Officer. The
Chief Executive Officer shall make the initial determination of whether a violation occurred and the
proper remedial measure that should be taken. If the suspected violation involves the chief executive
officer of the Bank, the suspected violation shall be reported to the Chairman of the Audit
Committee. The Audit Committee shall make the initial determination of whether a violation
occurred and the proper remedial measure that should be taken, which shall be reported to the non-
management members of the Board of Directors. The non-management members of the Board of
Directors shall have the final determination on whether an excessive expenditure has occurred and
what the proper remedial measure shall be.
Any director that suspects or becomes aware of a violation of this Policy shall immediately
report such violation to the Chairman of the Audit Committee. The Audit Committee shall make
the initial determination of whether a violation occurred and the proper remedial measure that should
be taken, which shall be reported to the full Board of Directors if the suspected violation does not
involve an executive officer or to the non-management members of the Board of Directors if the
suspected violation does involve an executive officer. The Board of Directors, as required by the
preceding sentence, shall have the final determination on whether an excessive expenditure has
occurred and what the proper remedial measure shall be.
A violator may be subject to various remedial measures, up to and including termination of
employment or a request to resign from the Board.
This Policy shall be interpreted and may be amended, as necessary, so as to be in compliance
with the TARP Standards for Compensation and Corporate Governance outlined in Section 111 of
EESA, as amended by the ARRA, and as interpreted from time to time by the U.S. Department of
Treasury. Any amendment to this Policy must be made by the affirmative vote of the Board of
Directors.
Adopted by the Board of Directors: December 17, 2009
Appendix A
Annual Senior Officer Certification
Policy: Excessive/Luxury Expenditures Policy
Date Originally Adopted: _________, 2009
This is to certify that I have read, understand and agree to comply with Providence Bank’s
Excessive/Luxury Expenditures Policy, adopted on ___________, 2009.
_________________________________________
Print Name
_________________________________________
Signature
_________________________________________
Date
