<PAGE>   1
                                                                    EXHIBIT 10.7

                                BANK RHODE ISLAND

                               AMENDMENT NO. 2 TO

                     SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN

         WHEREAS, Bank Rhode Island (the "Bank") has adopted a Supplemental
Executive Retirement Plan (the "Plan"); and

         WHEREAS, under Section 3.1 of the Plan, the Board of Directors of the
Bank may from time to time select employees who shall be Participants in the
Plan and shall determine the Applicable Benefit Amount for such Participants (as
such terms are defined in the Plan); and

         WHEREAS, on December 21, 1999 the Board of Directors of the Bank
approved increasing the Applicable Benefit Amount payable under the Plan to
Merrill W. Sherman to $100,000 and adding James V. DeRentis to the list of
Schedule C Participants, at an Applicable Benefit Amount of $20,000.

         NOW, THEREFORE, the Plan is amended as follows:

         1. SCHEDULE B of the Plan be amended to increase the Applicable Benefit
Amount payable to Merrill W. Sherman to $100,000 as set forth in SCHEDULE B
attached hereto.

         2. SCHEDULE C of the Plan be amended to add James V. DeRentis as a
Participant with an Applicable Benefit Amount of $20,000 as set forth on
SCHEDULE C attached hereto.

         3. All other provisions of the Plan shall remain in full force and
effect and are hereby ratified, approved and confirmed.

         IN WITNESS WHEREOF, the Company has caused this Amendment No. 2 to the
Supplemental Executive Retirement Plan to be executed by its duly authorized
officer as of the 21st day of December, 1999.

                                                  BANK RHODE ISLAND

                                                  By:  /s/ Malcolm G. Chace
                                                     ----------------------
                                                       Malcolm G. Chace,
                                                       Chairman
Attest:

/s/ Margaret D. Farrell
-----------------------
Secretary


<PAGE>   2



                                   SCHEDULE B


         PARTICIPANTS:                               APPLICABLE BENEFIT AMOUNT
         ------------                                -------------------------

         Sherman, Merrill W.                                  $100,000


<PAGE>   3



                                   SCHEDULE C


         PARTICIPANTS:                               APPLICABLE BENEFIT AMOUNT
         ------------                                -------------------------

         DeRentis, James V.                                   $20,000
         McQueen, Donald C.                                   $43,400
         Rietheimer, Albert R.                                $43,400



<PAGE>   4



                                BANK RHODE ISLAND

                               AMENDMENT NO. 1 TO

                     SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN


         WHEREAS, Bank Rhode Island (the "Bank") desires to amend the provisions
of the Bank's Supplemental Executive Retirement Plan (the "Plan") to change the
definition of "Change of Control" under the Plan; and

         WHEREAS, under Article VIII of the Plan, the Board of Directors of the
Bank may amend the Plan at any time, provided that such amendment shall not
reduce the vested benefit of any Participant or amend Section 6.1 or 6.2 of the
Plan without the consent of all Participants; and

         WHEREAS, on September 21, 1999 the Board of Directors of the Bank has
approved amending the definition of "Change in Control" under the Plan;

         NOW, THEREFORE, the Plan is amended as follows:

         1. That SCHEDULE A of the Plan be amended in its entirety to read as
set forth on SCHEDULE A attached hereto.

         2. All other provisions of the Plan shall remain in full force and
effect and are hereby ratified, approved and confirmed.

         IN WITNESS WHEREOF, the Company has caused this Amendment No. 1 to the
Supplemental Executive Retirement Plan to be executed by its duly authorized
officer as of the 21st day of September, 1999.

                                                  BANK RHODE ISLAND

                                                  By:  /s/ Malcolm G. Chace
                                                     ----------------------
                                                       Malcolm G. Chace,
                                                       Chairman
Attest:

/s/ Margaret D. Farrell
-----------------------
Secretary



<PAGE>   5



                                   SCHEDULE A
                                       TO
                     SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN

         (A) CHANGE IN CONTROL. For purposes of this Plan, a "Change in Control"
shall be deemed to have occurred if and when:

         (1) the Bank effectuates a Takeover Transaction; or

         (2) the Bank commences substantive negotiations with a third party with
respect to a Takeover Transaction and within twelve (12) months of the
commencement of such negotiations, enters into a definitive agreement with
respect to a Takeover Transaction with any party with which negotiations were
originally commenced; or

         (3) any election of directors of the Bank (or, if the Bank reorganizes
into a holding company structure, directors of the holding company) occurs
(whether by the directors then in office or by the shareholders at a meeting or
by written consent) where a majority of the directors in office following such
election are individuals who were not nominated by a vote of two-thirds of the
members of the board of directors immediately preceding such election; or

         (4) the Bank effectuates a complete liquidation of the Bank or a sale
or disposition of all or substantially all of its assets. A reorganization in
which the Bank reorganizes into a holding company structure, or any similar
reorganization, will not constitute a Change in Control for purposes of this
agreement or for any other purpose; provided, however, that any such transaction
may constitute a Change in Control if accomplished in connection with a Takeover
Transaction.

<PAGE>   6

         (B) TAKEOVER TRANSACTION. A "Takeover Transaction" shall mean:

         (1) The acquisition of voting securities of the Bank by any individual,
entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act")), other than by
the Bank or its subsidiaries or any employee benefit plan (or related trust) of
the Bank or its subsidiaries, which theretofore did not beneficially own (within
the meaning of Rule 13d-3 promulgated under the Exchange Act), securities
representing 30% or more of the voting power of all outstanding shares of voting
securities of the Bank, if such acquisition results in such individual, entity
or group owning securities representing more than 30% of the voting power of all
outstanding voting securities of the Bank; provided, that any acquisition by a
corporation with respect to which, following such acquisition, more than 50% of
the then outstanding shares of voting securities of such corporation, is then
beneficially owned, directly or indirectly, by all or substantially all of the
individuals and entities who were the beneficial owners of the voting securities
of the Bank outstanding immediately prior to such acquisition in substantially
the same proportion as their ownership, immediately prior to such acquisition,
of the outstanding voting securities of the Bank, shall not constitute a Change
in Control; or

         (2) The issuance of additional shares of common stock of the Bank in a
single transaction or a series of related transactions if the individuals and
entities who were the beneficial owners of the outstanding voting securities of
the Bank immediately prior to such issuance do not, following such issuance,
beneficially own, directly or indirectly, securities representing more than 50%
of the voting power of all then outstanding voting securities of the Bank; or


                                       2
<PAGE>   7

         (3) Consummation by the Bank of (a) a reorganization, merger or
consolidation, in each case, with respect to which all or substantially all of
the individuals and entities who were the beneficial owners of the voting
securities of the Bank immediately prior to such reorganization, merger or
consolidation do not, following such reorganization, merger or consolidation,
beneficially own, directly or indirectly, securities representing more than 50%
of the voting power of then outstanding voting securities of the corporation
resulting from such a reorganization, merger or consolidation, or (b) the sale,
exchange or other disposition (in one transaction or a series of related
transactions) of all or substantially all of the assets of the Bank (on a
consolidated basis) to a party which is not controlled by or under common
control with the Bank.

         For purposes of this Section (B), "voting power" means ordinary voting
power for the election of directors.


                                       3

<PAGE>   8








                                BANK RHODE ISLAND

                     SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN



<PAGE>   9



                              TABLE OF CONTENTS

                                                                     PAGE
                                                                     ----

ARTICLE I - Introduction...............................................1

ARTICLE II - Definitions...............................................2

ARTICLE III - Participation and Vesting................................3

ARTICLE IV - Source of Benefit Payment.................................4

ARTICLE V - Retirement Benefits........................................5

ARTICLE VI - Change of Control.........................................6

ARTICLE VII - Administration...........................................7

ARTICLE VIII - Amendment and Termination...............................8

ARTICLE IX - Miscellaneous.............................................9

Schedule A.............................................................11

Schedule B.............................................................13

Schedule C.............................................................14

Schedule D.............................................................15


Exhibit A - Trust Agreement


<PAGE>   10

                             ARTICLE I. INTRODUCTION

         1.1 PURPOSE OF PLAN. The purpose of this Plan is to promote loyalty, to
attract new employees and to encourage employees to make and continue careers
with the Bank and its subsidiaries by supplementing their retirement benefits,
thereby giving them assurance of retirement security and promoting their
continued loyalty to the Bank.

         1.2 STATUS. The Plan is intended to be a plan that is unfunded and is
maintained by the Bank primarily for the purpose of providing deferred
compensation for a select group of management or highly compensated employees
within the meaning of sections 201(2), 301(a)(3) and 401(a)(1) of the Employee
Retirement Income Security Act of 1974 (ERISA), and shall be interpreted and
administered accordingly.

         1.3 AUTHORIZATION. The Plan was approved by the Board of Directors on
January 26, 1999.



<PAGE>   11


                             ARTICLE II. DEFINITIONS

         The following terms have the following meanings:

         2.1 "Administrator" means the person designated by the Board to
administer the Plan pursuant to Article VII.

         2.2 "Board" means the Board of Directors of the Bank.

         2.3 "Change of Control" is defined in Schedule A.

         2.4 "Bank" means Bank Rhode Island, a Rhode Island banking corporation.

         2.5 "Effective Date" means January 1, 1999.

         2.6 "Employee" means an individual employed by the Bank.

         2.7 "Normal Retirement Age" means age 65.

         2.8 "Normal Retirement Benefit" means the benefit referred to in
Section 5.1 hereof.

         2.9 "Normal Retirement Date" means the first day of the month
coinciding with or next following the Participant's sixty-fifth birthday.

         2.10 "Participant" means any Employee selected to participate in the
Plan in accordance with Section 3.1.

         2.11 "Plan" means this Supplemental Executive Retirement Plan as set
forth herein and in all subsequent amendments hereto.

         2.12 "Spouse" means an individual who is the legally married husband or
wife of the Participant

         2.13 "Years of Service" means the period of an Employee's employment
with the Bank and its predecessor, EFC, Inc., measured from the Employee's
employment commencement date to the date the Employee quits or is discharged for
any reason.


                                       2
<PAGE>   12


                     ARTICLE III. PARTICIPATION AND VESTING

         3.1 SELECTION OF PARTICIPANTS. The Board will select from time to time
those Employees who will be Participants in the Plan and the Applicable Benefit
Amount. The Employees set forth in the attached Schedules B and C will become
Participants on the Effective Date. If and when additional Participants are
named by the Board, they will be added to the appropriate Schedule and will
become Participants at that time.

         3.2 VESTING.

         (a) Except as provided in paragraph (b) and in Section 6, a Participant
will be vested and entitled to receive benefits under this Plan only if he or
she is (i) an Employee listed on Schedule B, or (ii) an Employee listed on
Schedule C who has accumulated 5 Years of Service. A Participant who ceases to
be an Employee without becoming vested will forfeit all rights under the Plan

         (b) A Participant who ceases to be an Employee because of death before
satisfying the requirements of paragraph (a) shall become vested immediately and
entitled to receive benefits subject to the other provisions of the Plan.


                                       3
<PAGE>   13


                     ARTICLE IV. SOURCE OF BENEFIT PAYMENTS

         4.1 OBLIGATIONS OF THE BANK. The Bank will establish on its books
liabilities for obligations to pay benefits under the Plan. With respect to all
benefits payable under the Plan, each Participant (or other person entitled to
receive benefits with respect to a Participant) will be an unsecured general
creditor of the Bank.

         4.2 NO FUNDING REQUIRED. Except as otherwise provided in Article VI,
the Bank may, but shall not be required to, establish a trust of which it is
treated as the owner under Subpart E of Subchapter J, Chapter 1 of the Internal
Revenue Code of 1986, as amended (a "rabbi trust"). The Bank may from time to
time deposit funds with the trustee to provide a sound long-term funding
program.

         4.3 NO CLAIM TO SPECIFIC ASSETS. Nothing in the Plan will be construed
to give any individual rights to any specific assets of the Bank, person or
entity.


                                       4
<PAGE>   14


                         ARTICLE V. RETIREMENT BENEFITS

5.1      NORMAL RETIREMENT BENEFIT.

         (a) Subject to Section 5.2, the Normal Retirement Benefit payable under
the Plan to a Participant will be a monthly benefit equal to one-twelfth of (i)
the Applicable Benefit Amount. For this purpose, the Applicable Benefit Amount
for a Participant is listed on Schedule B or Schedule C as the case may be.

         (b) The Participant's Normal Retirement Benefit will commence at his or
her Normal Retirement Date (or such later date on which the Participant actually
retires) and continue for his or her lifetime.

         5.2 DEATH BENEFITS. Except as otherwise provided in this paragraph, no
death benefits will be payable to anyone following the death of the Participant.

                  (a) POST RETIREMENT. If a Participant for whom retirement
benefits have commenced under this Plan dies leaving a surviving Spouse who was
married to the Participant at the time benefits commenced, the surviving Spouse
will thereafter be paid for the lifetime of the surviving Spouse a monthly
retirement benefit equal to 50% of the benefit being received by the Participant
at the date of his death.

                  (b) PRE-RETIREMENT. If a Participant with a vested benefit for
whom retirement benefits have not commenced dies leaving a surviving Spouse, the
surviving Spouse shall be entitled to a monthly retirement benefit, commencing
on the Participant's Normal Retirement Date, equal to 50% of the retirement
benefit that would have been payable to the Participant under Section 5.1.


                                       5
<PAGE>   15


                          ARTICLE VI. CHANGE OF CONTROL

         6.1 VESTING OF BENEFITS. In the event of a "Change of Control", a
Participant shall, notwithstanding any other provision of the Plan, immediately
become fully vested in his retirement benefits as described in Section 5.1.

         6.2 FUNDING OF BENEFIT. In the event of a Change of Control, the Bank
shall immediately establish a rabbi trust with a third party financial
institution with a net worth of at least $100 million (unless all Plan
Participants entitled to benefits and all surviving spouses receiving benefits
under the Plan consent in writing to the appointment of another trustee),
substantially in the form attached hereto as EXHIBIT A and shall deposit funds
with the trustee of the trust equal to the difference between the then present
value of all accrued benefits provided under the Plan (computed on the basis of
the actuarial assumptions stated in Schedule D hereto and taking into account
the benefits that become vested or payable in the event of a Change of Control)
and the then fair market value of the assets of the trust (if any) and shall
thereafter make annual additional deposits with the trustee to reflect increases
in the accrued benefits. If the principal of the trust, and any earnings
thereon, are not sufficient to make payment of the benefits provided for under
this Plan, the Bank shall make the balance of each such payment as it falls due.

         6.3 REDUCED PAYMENT IN THE EVENT OF EXCISE TAX. Notwithstanding the
foregoing, all payments to which Participant would be entitled under this
Section 6 shall be reduced to the extent necessary so that the Participant shall
not be liable for the federal excise tax levied on certain "excess parachute
payments" under Section 4999 of the Internal Revenue Code.


                                       6
<PAGE>   16


                           ARTICLE VII. ADMINISTRATION

         7.1 APPOINTMENT OF ADMINISTRATOR. The Plan will be administered by the
person designated by the Board to administer the Plan (the "Administrator"), but
the Board will have full discretionary authority to interpret the provisions of
the Plan and decide all questions and settle all disputes that may arise in
connection with the Plan. The Board may establish its own operative and
administrative rules and procedures in connection with the Plan, provided such
procedures are consistent with the requirements of Section 503 of ERISA and the
regulations thereunder. All interpretations, decisions and determinations made
by the Board will be binding on all persons concerned.

         7.2 DELEGATION. The Board in its sole discretion may delegate certain
of its duties and responsibilities to the Administrator or to an appropriate
Employee or Employees. For purposes of the Plan, any action taken by the
Administrator or a delegee Employee pursuant to such delegation will be
considered to have been taken by the Board. The Bank agrees to indemnify and to
defend to the fullest possible extent permitted by law any delegee of the Board
(including any person who formerly served as a delegee) against all liabilities,
damages, costs and expenses (including attorneys' fees and amounts paid in
settlement of any claims approved by the Bank) occasioned by any act or omission
to act in connection with the Plan, if such act or omission is in good faith.

         7.3 EXPENSES. All expenses incurred in the creation or administration
of this Plan shall be paid by the Bank.


                                       7
<PAGE>   17


                 ARTICLE VIII. AMENDMENT OR TERMINATION OF PLAN

     The Bank hopes and expects to continue the Plan in effect, but the Board
necessarily reserves the right to amend the Plan at any time, and from time to
time, or to terminate the Plan, provided that such amendment or termination
shall not reduce the vested benefit of any Participant or amend Section 6.1 or
6.2 without the consent of all Participants who have vested benefits under the
Plan. Any amendment or termination shall be stated in an instrument in writing
and signed by a duly authorized representative of the Board.


                                       8
<PAGE>   18


                            ARTICLE IX. MISCELLANEOUS

         9.1 NO ASSIGNMENT OR ALIENATION. None of the benefits, payments,
proceeds or claims of any person under this Plan shall be subject to any claim
of any creditor, spouse or former spouse of the person or to attachment or
garnishment or other legal process by any such creditor, Spouse or former
Spouse; nor shall any person have any right to alienate, anticipate, commute,
pledge, encumber or assign any of the benefits, payments or proceeds which he or
she may expect to receive, contingently or otherwise, under the Plan.

         9.2 LIMITATION OF RIGHTS. Neither the establishment of the Plan, nor
any amendment thereof, nor the payment of any benefits will be construed as
giving any individual any legal or equitable right against the Bank, except for
those rights explicitly provided for in the Plan.

         9.3 FORFEITURE OF BENEFITS. A Participant shall forfeit all rights or
benefits remaining to him or her under the Plan if such Participant's employment
is terminated on account of, or such Participant is convicted of, or confesses
to, or permits a plea of nolo contendere to be entered with respect to, a
criminal act of fraud, misappropriation, embezzlement, or the like, which is a
felony and involves property of the Bank.

         9.4 GOVERNING LAW. The Plan will be construed, administered, and
governed under the laws of the State of Rhode Island, to the extent not
preempted by federal law.

         9.5 SEVERABILITY. If any provision of this Plan is held by a court of
competent jurisdiction to be invalid or unenforceable, the remaining provisions
shall continue to be fully effective.


                                       9
<PAGE>   19



         IN WITNESS WHEREOF, the Bank has caused this Plan to be executed by
their duly authorized officers this 21st day of April, 1999.

                                            BANK RHODE ISLAND


                                           By:  /s/ F. James Hodges
                                               ----------------------------
                                               F. James Hodges
                                               Compensation Committee Chairman






                                       10
<PAGE>   20



                                   SCHEDULE A

         (a) For purposes of this Plan, a "Change in Control" shall be deemed to
have occurred if and when:

         (1) the Bank effectuates a Takeover Transaction; or (2) the Bank
commences substantive negotiations with a third party with respect to a Takeover
Transaction if within twelve (12) months of the commencement of such
negotiations, enters into a definitive agreement with respect to a Takeover
Transaction with any party with which negotiations were originally commenced; or
(3) any election of directors of the Bank (or, if the Bank reorganizes into a
holding company structure, directors of the holding company) (whether by the
directors then in office or by the stockholders at a meeting or by written
consent) where a majority of the directors in office following such election are
individuals who were not nominated by a vote of two-thirds of the members of the
board of directors immediately preceding such election; or (4) the Bank
effectuates a complete liquidation of the Bank or a sale or disposition of all
or substantially all of its assets. A reorganization in which the Bank
reorganizes into a holding company structure, or any similar reorganization,
will not constitute a Change in Control for purposes of this agreement or for
any other purpose; provided, however, that any such transaction may constitute a
Change in Control if accomplished in connection with a Takeover Transaction.

         (b) A "Takeover Transaction" shall mean a (i) merger or consolidation
of the Bank with, or an acquisition of the Bank or all or substantially all of
its assets by, any other bank or corporation, other than a merger, consolidation
or acquisition in which the individuals who were members of the Board of
Directors of the Bank immediately prior

<PAGE>   21

to such merger or consolidation continue to constitute a majority of the Board
of Directors of the surviving bank (or, in the case of an acquisition involving
a holding company, constitute a majority of the Board of Directors of the
holding company) for a period of not less than twelve (12) months following the
closing of such transaction, or (ii) when any person or entity or group of
persons or entities (other than any trustee or other fiduciary holding
securities under an employee benefit plan of the Bank) either related or acting
in concert becomes the "beneficial owner" (as defined in Rule 13d-3 under the
Securities Exchange Act of 1934, as amended) of securities of the Bank
representing more than thirty percent (30%) of the total number of votes that
may be cast for the election of directors of the Bank, other than a person who
was already a 30% beneficial owner as of the effective date of this Plan.


                                       2
<PAGE>   22





                                   SCHEDULE B


         PARTICIPANTS:                               APPLICABLE BENEFIT AMOUNT

         Merrill W. Sherman                                   $80,000


<PAGE>   23


                                   SCHEDULE C


         PARTICIPANTS:                               APPLICABLE BENEFIT AMOUNT

         Albert R. Rietheimer                                 $43,400
         Donald C. McQueen                                    $43,400


<PAGE>   24


                                   SCHEDULE D

Actuarial Assumptions:

Mortality:      Blended GAM-1983
Interest:       30-year treasury rate for the month of October of the calendar
                year prior to the calendar year in which the calculation is
                being made


<PAGE>   25



                                                                       EXHIBIT A















                                BANK RHODE ISLAND
                     SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN


                                 TRUST AGREEMENT


<PAGE>   26


                                TABLE OF CONTENTS

ARTICLE                                                                  PAGE
-------                                                                  ----

ARTICLE I
        Establishment of Trust ............................................2

ARTICLE II
        Payments to Plan Participants and Their
        Surviving Spouses..................................................3

ARTICLE III
        Trustee Responsibility Regarding Payments to
        Trust Beneficiary When Bank Is Insolvent...........................4

ARTICLE IV
        Duties and Powers of the Trustee...................................6

ARTICLE V
        Disposition of Income..............................................8

ARTICLE VI
        Limitation of the Trustee's Liability..............................9

ARTICLE VII
        Expenses and Compensation..........................................10

ARTICLE VIII
        Substitution and Succession of the Trustee.........................11

ARTICLE IX
        Accounting Provisions..............................................12

ARTICLE X
        Amendment and Termination..........................................13

ARTICLE XI
        Successor Bank.....................................................14

ARTICLE XII
        Construction and Payment...........................................15

ARTICLE XIII
        Miscellaneous......................................................16



<PAGE>   27

                                 TRUST AGREEMENT


         This Agreement is made by and between Bank Rhode Island (hereinafter
the "Bank"), and [ _______________________ ] as Trustee(s) (hereinafter referred
to as the "Trustee").

                              W I T N E S S E T H:

         WHEREAS, the Bank has established the Bank Rhode Island Supplemental
Executive Retirement Plan (the "Plan") for certain of its employees; and

         WHEREAS, the Bank wishes to establish a trust ("Trust") and to
contribute to the Trust assets that shall be held therein, subject to the claims
of the Bank's creditors in the event of the Bank's insolvency, as herein
defined, for the benefit of Plan Participants (as defined in Section 2.10 of the
Plan) and their surviving spouses in such manner and at such times as specified
in the Plan; and

         WHEREAS, it is the intention of the parties that this Trust shall
constitute an unfunded arrangement and shall not affect the status of the Plan
as an unfunded Plan maintained for the purpose of providing deferred
compensation for a select group of management or highly-compensated employees
for purposes of Title I of the Employee Retirement Income Security Act of 1974
("ERISA"); and

         WHEREAS, the Trustee has consented to act as trustee of the trust fund
and to hold and distribute the assets transferred to the trustee and accumulated
in respect of the Plan on the terms and conditions hereinafter set forth.

         NOW, THEREFORE, in consideration of the foregoing premises and the
mutual covenants hereinafter set forth, the Bank and the Trustee hereby agree as
set forth below.



<PAGE>   28



                                    ARTICLE I

                             ESTABLISHMENT OF TRUST


         1.1 The Trust Fund shall consist of such sums of money or other
property, in a form acceptable to the Trustee, as shall from time to time be
paid or delivered to the Trustee pursuant to the Plan which, together with all
earnings, profits, increments and accruals thereon, without distinction between
principal and income, shall constitute the Trust Fund hereby created and
established. The Trust Fund shall be held, administered and disposed of by the
Trustee as provided in this Trust Agreement. The Trust hereby established shall
be irrevocable.

         1.2 The Trust is intended to be a grantor trust, of which the Bank is
the grantor, within the meaning of subpart E, part I, subchapter J, chapter 1,
subtitle A of the Internal Revenue Code of 1986, as amended, and shall be
construed accordingly.

         1.3 The Trust Fund shall be held separate and apart from other funds of
the Bank and shall be used exclusively for the uses and purposes of Plan
Participants and general creditors as herein set forth. Plan Participants and
their surviving spouses shall have no preferred claim on, or any beneficial
ownership interest in, any assets of the Trust. Any rights created under the
Plan and this Trust Agreement shall be mere unsecured contractual rights of Plan
Participants and their surviving spouses against the Bank. Any assets held by
the Trust will be subject to the claims of the Bank's general creditors under
federal and state law in the event of insolvency, as defined in Article III
herein.

         1.4 Except as provided below or in Article III hereof, the Bank shall
have no right or power to direct the Trustee to return to the Bank or to divert
to others any of the Trust assets before all payment of benefits have been made
to Plan Participants and their surviving spouses pursuant to the terms of the
Plan.


                                       2
<PAGE>   29



                                   ARTICLE II

            PAYMENTS TO PLAN PARTICIPANTS AND THEIR SURVIVING SPOUSES

         2.1 The Bank shall designate an Administrator ("Administrator") in
accordance with the Plan and the Administrator shall deliver to the Trustee, at
least annually, a schedule ("the Payment Schedule") that indicates the amounts
payable in respect of each Plan Participant who has ceased to be an employee of
the Bank and each surviving spouse, that provides a formula or other
instructions acceptable to the Trustee for determining the amounts so payable,
the form in which such amount is to be paid (as provided for or available under
the Plan), and the time of commencement for payment of such amounts. Except as
otherwise provided herein, the Trustee shall make payments to the Plan
Participants and their surviving spouses in accordance with such Payment
Schedule. The Trustee shall make provisions for the reporting and withholding of
any federal, state or local taxes that may be required to be withheld with
respect to the payment of benefits pursuant to the terms of the Plan and shall
pay amounts withheld to the appropriate taxing authorities or determine that
such amounts have been reported, withheld and paid by the Bank. The
Administrator shall provide the Trustee with all information necessary to make
such tax withholding provisions and the Trustee shall be entitled to rely on
such information. The Bank shall be responsible for the remittance to the
appropriate tax authorities of its share of any applicable employment taxes, as
distinguished from those employment taxes required to be withheld from the
benefits due Plan Participants and their surviving spouses.

         2.2 The entitlement of a Plan Participant or his or her surviving
spouses to benefits under the Plan shall be determined by the Bank and/or the
Administrator as provided for in the Plan and any claim for such benefits shall
be considered and reviewed by the Administrator under the procedures set out in
the Plan.

         2.3 The Bank may make payment of benefits directly to Plan Participants
or their surviving spouses as they become due under the terms of the Plan. The
Bank shall notify the Trustee of its decision to make payment of benefits
directly prior to the time amounts are payable to participants or their
surviving spouses. In addition, if the principal of the Trust, and any earnings
thereon, are not sufficient to make payments of benefits in accordance with the
terms of the Plan, the Bank shall make the balance of each such payment as it
falls due. Trustee shall notify the Bank where principal and earnings are not
sufficient to cover payments required by the Payment Schedule under paragraph
2.1 hereof.


                                       3
<PAGE>   30


                                   ARTICLE III

         TRUSTEE RESPONSIBILITY REGARDING PAYMENTS TO TRUST BENEFICIARY
                             WHEN BANK IS INSOLVENT

         3.1 The Trustee shall cease payment of benefits to Plan Participants
and their surviving spouses if the Bank is Insolvent. The Bank shall be
considered "Insolvent" for purposes of this Trust Agreement if (i) the Bank is
unable to pay its debts as they become due, or (ii) the Bank is subject to a
pending proceeding as a debtor under any applicable federal or state
receivership law.

         3.2 At all times during the continuance of this Trust as provided in
paragraph 1.3 hereof, the principal and income of the Trust shall be subject to
claims of general creditors of the Bank under federal and state law as set forth
below:

         3.2.1 The Board of Directors and the Chief Executive Officer of the
Bank shall have the duty to inform the Trustee in writing of the Bank's
Insolvency. If a person claiming to be a creditor of the Bank alleges in writing
to the Trustee that the Bank has become Insolvent, the Trustee shall determine
whether the Bank is Insolvent and, pending such determination, the Trustee shall
discontinue payment of benefits to Plan Participants or their surviving spouses.

         3.2.2 Unless the Trustee has actual knowledge of the Bank's Insolvency,
or has received notice from the Bank or a person claiming to be a creditor
alleging that the Bank is Insolvent, the Trustee shall have no duty to inquire
whether the Bank is Insolvent. The Trustee may in all events rely on such
evidence concerning the Bank's solvency as may be furnished to the Trustee by
the Bank and that provides the Trustee with a reasonable basis for making a
determination concerning the Bank's solvency.

         3.2.3 If at any time the Trustee has determined that the Bank is
Insolvent, the Trustee shall discontinue payments to Plan Participants or their
surviving spouses and shall hold the assets of the Trust for the benefit of the
Bank's general creditors. While so holding such assets, the Trustee shall make
payments to such creditors if the Bank shall so direct or, if the Bank is
subject to a pending proceeding as a debtor under the United States Bankruptcy
code or state receivership law, as a court of competent jurisdiction shall
direct. Nothing in this Trust Agreement shall in any way diminish any rights of
Plan Participants or their surviving spouses to pursue their rights as general
creditors of the Bank with respect to benefits due under the Plan or otherwise.

         3.2.4 The Trustee shall resume the payment of benefits to Plan
Participants or their surviving spouses in accordance with Article II of this
Trust Agreement only after the Trustee has determined that the Bank is not
Insolvent (or is no longer Insolvent).

         3.3 If the Trustee discontinues the payment of benefits from the Trust
pursuant to paragraph 3.2 hereof and subsequently resumes such payments, the
first payment following such discontinuance shall include the aggregate amount
of all payments due


                                       4
<PAGE>   31

to Plan Participants or their surviving spouses under the terms of the Plan for
the period of such discontinuance, less the aggregate amount of any payments
made to Plan Participants or their surviving spouses by the Bank in lieu of the
payments provided for hereunder during any such period of discontinuance
provided that there are sufficient assets.


                                       5
<PAGE>   32



                                   ARTICLE IV

                        DUTIES AND POWERS OF THE TRUSTEE

         4.1 The Trustee shall act with the care, skill, prudence and diligence
under the circumstances then prevailing that a prudent person acting in like
capacity and familiar with such matters would use in the conduct of an
enterprise of a like character and with like aims, provided, however, that the
Trustee shall incur no liability to any person for any action taken pursuant to
a direction, request or approval given by the Bank or the Administrator which is
contemplated by, and in conformity with, the terms of the Plan or this Trust and
is given in writing by the Bank or the Administrator. In the event of a dispute
between the Bank and a party, the Trustee may apply to a court of competent
jurisdiction to resolve the dispute.

         4.2 The Trustee shall invest and reinvest the Trust Fund, without
distinction between principal and income, as directed from time to time by the
Bank. In addition to the powers and authority granted to the Trustee pursuant to
state law, the provisions of ERISA (to the extent applicable), and the common
law, the Trustee shall have the power and authority:

         4.2.1 To purchase or subscribe for and invest in any securities, but
not including any securities of the Bank or any affiliate of the Bank, or any
securities of the Trustee or any affiliate of the Trustee if the Trustee is a
corporation, and to retain any such securities in the Trust Fund. Without in any
way intending to limit the generality of the foregoing, the said term
"securities" shall be deemed to include common and preferred stocks, mortgages,
debentures, bonds, notes or other evidences of indebtedness, and other forms of
securities. All rights associated with assets of the Trust shall be exercised by
the Trustee or the person designated by the Trustee. The Trustee may invest and
reinvest all or a portion of the Trust Fund in shares of any open-ended
investment fund or Bank.

         4.2.2 To deal with all or any part of the Trust Fund; to acquire any
property by purchase, subscription, lease, or other means; to sell for cash or
on credit, convey, lease for long or short terms, or convert, redeem, or
exchange all or any part of the Trust Fund; to hold part of the Trust Fund
uninvested or in savings accounts or certificates of deposit including those
offered by the Trustee if the Trustee is a bank, or in money market funds
managed by the Trustee or an affiliate of the Trustee.

         4.2.3 To vote, or give proxies to vote, any stock or other security,
and to waive notice of meetings, to oppose, participate in, and consent to the
reorganization, merger, consolidation, or readjustment of the finances of any
enterprise, to pay assessments and expenses in connection therewith and to
deposit securities under deposit agreements.


                                       6
<PAGE>   33

         4.2.4 To register any investment held in the Trust in its own name or
in the name of its nominee, or to hold any investment in bearer form, but the
books and records of the Trustee shall at all times show that all such
investments are part of the Trust.

         4.2.5 To make, execute, acknowledge and deliver any and all documents,
deeds and conveyance, and any and all other instruments necessary or appropriate
to carry out the powers herein granted.

         4.2.6 To enforce by suit or otherwise, or to waive, its rights on
behalf of the Trust Fund, and to defend claims asserted against it or the Trust
Fund; to compromise, adjust and settle any and all claims against or in favor of
it or the Trust Fund.

         4.2.7 To renew, extend, or foreclose any mortgage or other security; to
bid on property in foreclosure; to take deeds in lieu of foreclosure, with or
without paying a consideration therefor.

         4.2.8 To employ agents, investment advisers, consultants and actuaries
necessary for the operation of the Trust and to request the advice and
assistance of counsel, including counsel for the Bank, or other counsel
designated by the Administrator or by the Trustee.

         4.2.9 In the event that the Bank authorizes the transfer of all or a
portion of the assets of the Trust to an insurance company, to enter into and
execute on behalf of the Trust all such documents and instruments necessary or
appropriate to carry out such transfer.

         4.2.10 To do all such other acts, execute all such other instruments
and take such other proceedings and exercise all such other privileges and
rights with relation to any asset constituting a part of the Trust as are
necessary to carry out the purpose of the Trust, and no person dealing with the
Trustee shall be bound to see to the application of any money or property paid
or delivered to the Trustee or to inquire into the validity or propriety of any
such transaction.

         4.3 No persons dealing with the Trustee shall be under any obligation
to see to the proper application of any money paid or property delivered to the
Trustee or to inquire into the Trustee's authority as to any transaction.

         4.4 The Trustee may make any distribution required hereunder by mailing
its check for the specified amount, or delivering the specified property, to the
person to whom such distribution or payment is to be made, at such address as
may have been last furnished to the Trustee, or if no such address shall have
been furnished, to such person in care of the Bank, or to the Administrator or
(if so directed by the Administrator) by crediting the account of such person or
by transferring the funds to such person's account by bank or wire transfer.


                                       7
<PAGE>   34



                                   ARTICLE V

                             DISPOSITION OF INCOME

         During the term of this Trust, all income received, net of expenses and
taxes, shall be accumulated and reinvested.


                                       8
<PAGE>   35


                                   ARTICLE VI

                      LIMITATION OF THE TRUSTEE'S LIABILITY

         6.1 The Trustee shall be accountable only for funds actually received
by it hereunder and shall have no duty or liability to determine that the amount
of the funds received by it comply with the provisions of the Plan. If the Bank
has established a contract with an insurance company to carry out the purposes
of the Plan, the Trustee shall not be liable for the acts or omissions of such
insurance company, or be under an obligation to invest or otherwise manage the
portion of the Trust Fund which is subject to the management of such insurance
company.

         6.2 Whenever the Trustee is required or authorized to take any action
hereunder pursuant to any written direction or notice of the Administrator or
the Bank, the Trustee, acting in accordance with such direction or notice, shall
not be responsible for the administration of such Plan or Trust, for the
correctness of any payments or disbursements from the Trust, or for any other
action taken by the Trustee in accordance with such written direction or notice.
Such direction or notice shall be sufficient protection to the Trustee if
contained in a writing signed by the Administrator or such other person
authorized to execute documents on behalf of the Administrator, in the case of
direction or notice required to be given by the Administrator; or by any officer
of the Bank, in the case of direction or notice required to be given by the
Bank, and the Trustee has actual knowledge that the payment or disbursement is
improper or incorrect.

         6.3 The Bank shall indemnify and hold harmless the Trustee from and
against any losses, costs, damages or expenses, including reasonable attorneys'
fees, which the Trustee may incur or pay out by reason of (i) the Trustee's
acting in accordance with the directions of the Bank or the Administrator or
failing to act in the absence of such directions; (ii) the Trustee's exercise
and performance of its powers and duties hereunder, unless the same are
determined to be due to the Trustee's negligence, bad faith or willful
misconduct; (iii) any (alleged or actual) action or inaction on the part of the
Bank or the Administrator, unless such losses, costs, damages, or expenses arise
out of the Trustee's negligence, bad faith, or willful misconduct; or (iv) the
failure of the Plan to be exempt from the requirements of Parts 2, 3 and 4 of
Title I of the Employee Retirement Income Security Act of 1974, as amended. In
addition, in the event that the Trustee undertakes or defends any litigation
(including but not limited to any audit, proceeding or any other administrative
action of any state, local or federal taxing authority) arising in connection
with the Trust Fund, the Bank agrees to indemnify the Trustee against the
Trustee's reasonable costs, expenses, and liabilities (including, without
limitation, reasonable attorneys' fees and expenses) relating thereto and to be
primarily liable for such payments. If the Bank does not pay such costs,
expenses, and liabilities described in this paragraph in a reasonably timely
manner, the Trustee may obtain payment from the Trust Fund.


                                       9
<PAGE>   36


                                   ARTICLE VII

                            EXPENSES AND COMPENSATION

         The Trustee, other than a trustee who is also an employee or officer of
the Bank, shall be paid such reasonable compensation as shall from time to time
be agreed upon by the Trustee and the Bank. All administrative expenses,
charges, taxes and assessments of the Trust Fund and Trustee's fees shall be the
obligation of the Bank.

         Any such fees may be paid from the Trust Fund, but the Bank shall
reimburse the Trust Fund for all such payments within seven (7) business days.


                                       10
<PAGE>   37


                                  ARTICLE VIII

                   SUBSTITUTION AND SUCCESSION OF THE TRUSTEE

         8.1 The Trustee may resign at any time by giving written notice to the
Administrator. Such resignation shall become effective ten (10) days thereafter
or upon the appointment of a successor Trustee, whichever occurs first. A
successor Trustee must be a third party financial institution with net worth of
at least $100 million, unless all Plan Participants entitled to benefits and all
surviving spouses receiving benefits pursuant to the Plan consent in writing to
the appointment of the successor Trustee. In the event a successor Trustee is
not appointed within ten (10) days, the Trustee may turn over the assets of the
Trust to the Administrator as successor Trustee. Except as provided below, the
Administrator may remove the Trustee by giving ten (10) days written notice to
the Trustee of such intent to remove, and by then giving written notice of the
appointment of a successor Trustee. The removal shall become effective upon
acknowledgment of the receipt of the assets of the Trust by the successor
Trustee. Following the occurrence of a Change in Control, as defined in the
Plan, the Trustee may not be removed without the written consent of all Plan
Participants entitled to benefits (other than a participant who is also a
trustee) and all surviving spouses receiving benefits pursuant to the terms of
the Plan. Each successor Trustee under this Trust shall be appointed in writing
by the Administrator and shall accept the Trust in writing. Such successor
Trustee shall become vested with any estate, property, right, power and duty of
the predecessor Trustee hereunder with like effect, as if originally named
Trustee. No successor Trustee shall be liable for any act or failure of any
predecessor Trustee, and with the approval of the Administrator, a successor
Trustee may accept the account rendered and the property delivered to it by the
predecessor Trustee without in so doing incurring any liability or
responsibility with respect to acts of default, if any, of the predecessor
Trustee.

         8.2 If the Trustee is a corporation, any corporation into which the
Trustee may merge or with which it may consolidate, or any corporation resulting
from any merger or consolidation to which the Trustee may be a party, shall be
the successor of the Trustee hereunder, without the execution or filing of any
additional instrument or the performance of any further act.


                                       11
<PAGE>   38


                                   ARTICLE IX

                              ACCOUNTING PROVISIONS

         9.1 The Trustee shall keep accurate and detailed records of all
investments, receipts, disbursements, and all other transactions required to be
made in the administration of the Trust Fund.

         9.2 Within a reasonable time after the close of each fiscal year, or of
any termination of the duties of the Trustee hereunder, the Trustee shall
prepare and deliver to the Administrator an account of its acts and transactions
as Trustee during such fiscal year or during such period from the close of the
last fiscal year to the termination of the Trustee's duties, respectively,
including a statement of the then current value of the Trust Fund. Any such
account shall be deemed accepted and approved by the Administrator, and the
Trustee shall be relieved and discharged, as if such account had been settled
and allowed by a judgment or decree of a court of competent jurisdiction, unless
protested by written notice to the Trustee within thirty (30) days of receipt
thereof by the Administrator.

         9.3 The Trustee or the Administrator shall have the right to apply at
any time to a court of competent jurisdiction for judicial settlement of any
account of the Trustee not previously settled as herein provided or for the
determination of any question of construction or for instructions. In any such
action or proceeding it shall be necessary to join as parties only the Trustee
and the Administrator (although the Trustee may also join such other parties as
it may deem appropriate), and any judgment or decree entered therein shall be
conclusive.


                                       12
<PAGE>   39


                                    ARTICLE X

                            AMENDMENT AND TERMINATION

         10.1. This Trust Agreement may be amended by a written instrument
executed by the Trustee and the Bank. Notwithstanding the foregoing, no such
amendment shall conflict with the terms of the Plan or shall make the Trust
revocable. Following a Change of Control, as defined in the Plan, any amendment
to this Trust Agreement shall not be effective unless or until each Plan
Participants, and each surviving spouse receiving benefits pursuant to the terms
of the Plan, has approved the amendment in writing.

         10.2 The Trust shall not terminate until the date on which Plan
Participants and their surviving spouses are no longer entitled to benefits
pursuant to the terms of the Plan unless sooner revoked as hereinafter provided
in this paragraph. Upon the written approval of all Plan Participants and all
surviving spouses receiving benefits pursuant to the terms of the Plan, the Bank
may terminate this Trust prior to the time all benefit payments under the Plan
have been made. Upon termination of the Trust, any assets remaining in the Trust
shall be returned to the Bank.


                                       13
<PAGE>   40


                                   ARTICLE XI

                                 SUCCESSOR BANK

         Unless this Trust be sooner terminated, a successor to the business of
the Bank, by whatever form or manner resulting, which succeeds said Bank under
the Plan as therein provided shall, upon notice in writing from the
Administrator that all action required by the Plan to effect such succession has
been taken, also succeed to all the rights, powers and duties of such Bank
hereunder.


                                       14
<PAGE>   41


                                   ARTICLE XII

                            CONSTRUCTION AND PAYMENT

         12.1 The Trust shall be construed and administered according to the
laws of the jurisdiction in which the principal office of the Trustee is
located. In any question of interpretation or other matter of doubt, the Trustee
may rely upon the opinion of counsel for the Bank or Administrator or any other
attorney at law designated by the Bank with approval of the Trustee.

         12.2. No person having any present or future interest in the Trust
shall have any right to assign, transfer, encumber, commute or anticipate his
payment under this Trust and such payment shall not in any way be subject to any
legal process or levy of execution upon, or attachment or garnishment proceeding
against, the same for the payment of any claim against any person having an
interest hereunder, nor shall such payment be subject to the jurisdiction of any
family court, bankruptcy court or insolvency proceedings.


                                       15
<PAGE>   42



                                  ARTICLE XIII

                                  MISCELLANEOUS

         13.1 The titles to the Articles in this Trust Agreement are included
for convenience of reference only and are not to be used in interpreting this
Trust Agreement.

         13.2 Neither the gender nor the number (singular or plural) of any word
shall be construed to exclude another gender or number when a different gender
or number would be appropriate.

         13.3 This Trust Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all of which
shall together constitute only one Trust Agreement.

         13.4 Communications to the Trustee shall be sent to the Trustee's
principal office or to such other address as the Trustee may specify in writing.
No communication shall be binding upon the trustee until it is received by the
Trustee. Communications to the Administrator or the Bank shall be sent to the
Bank's principal office or to such other address as the Bank may specify in
writing.


                                       16
<PAGE>   43


         IN WITNESS WHEREOF, the Bank and the Trustee have caused this
instrument to be executed this ____day of ________________, 1999.


         BANK:                      Bank Rhode Island

                                    By:
                                       ----------------------------------------
                                       Signature of Officer


         TRUSTEE:                   -------------------------------------------



STATE OF RHODE ISLAND
COUNTY OF PROVIDENCE

         In Providence on the ___day of _________, 1999, before me personally
appeared ________________________________________, to me known and known by me
to be the_____________________________of and the person who executed the
foregoing instrument for and on behalf of Bank Rhode Island and he acknowledged
said instrument by him executed to be the free act and deed of Bank Rhode Island
and his own free and voluntary act and deed in his capacity as
__________________________of said Bank.


                                               --------------------------------
                                               Notary Public


STATE OF
        -----------------------
COUNTY OF
         ----------------------

         In _____________ on the ___day of _________, 1999, before me personally
appeared ________________________________________, to me known and known by me
to be the_____________________________of and the person who executed the
foregoing instrument for and on behalf of __________________ and he acknowledged
said instrument by him executed to be the free act and deed of _____________ and
his own free and voluntary act and deed in his capacity as
__________________________of said ______________.


                                               --------------------------------
                                               Notary Public




                                       17