The Bank of Butterfield's shareholders rights plan -- the `poison pill' defence adopted by shareholders at this month's annual general meeting -- is exactly in line with the practices of the largest companies in the United States, the bank has revealed.

The survey which informed the bank's decision to institute the poison pill programme showed that 54 percent of America's top companies had such plans in place. In the banking sector, more than half the companies with such defences chose the same level the Bank of Butterfield chose to trigger the use of the rights issue deterrent.

The bank's defensive strategy was selected following advice from its New York investment bankers, Lehman Brothers, based on a survey of almost 2,000 top American companies listed in the Fortune 500, S&P 500 and Forbes/Business Week 1,000 listings.

The bank's defensive tactics include expanding the number of shares held by existing shareholders, by way of a rights issue, if a potential suitor appears offering a price the bank's board considers less than reasonable.

A rights issue can take many forms, but usually entails the issue of additional shares to existing shareholders. Rights issues are often used to raise capital and, as in the Bank of Butterfield's case, to defend from low bids.

The Bank of Butterfield's rights issue is `contingent', which means that it will lay dormant unless and until a potential buyer comes along who owns, or plans to own, 15 percent of the bank's shares and intends to make an offer for the remaining shares at a price the board considers unacceptably low.

"We chose 15 percent because an analysis of all poison pill plans put in place since January, 1998 shows that two-thirds of the companies chose 15 percent (as the trigger level),'' said Peter Rodger, senior vice president and group legal advisor of the bank.

A Bermuda Supreme Court decision in 1989, in the Sea Containers case, ruled that poison pill defences are effective in Bermuda.

The Bermuda Stock Exchange rules require listed companies to inform the exchange if they become aware that anyone has a shareholding of five percent or more in the company.

And the Banks & Deposit Companies Act, passed by the House but not yet introduced into law, will make it mandatory for anyone who seeks to acquire a 10 percent shareholding to seek the approval of the Bermuda Monetary Authority.

"The whole idea of a poison pill plan is that if someone is interested in acquiring the company, (the pill) acts as a deterrent. It suggests to potential acquirers that they should come and talk with the board,'' said Mr.

Rodger.

Peter Rodger