**Exhibit 10.1**

**EXECUTIVE EMPLOYMENT AGREEMENT**

THISEMPLOYMENT AGREEMENT (the “Agreement”) is between Bank Rhode Island, afinancial institution organized under the laws of the State of Rhode Islandwith its executive offices located at One Turks Head Place, Providence, RhodeIsland 02903 (the “Bank”), Bancorp Rhode Island, Inc. a corporation organized under the laws of the State of Rhode Island andsole shareholder of the Bank (the “Company”), and Merrill W. Sherman of24 Channing Avenue, Providence, Rhode Island 02906 (the “Executive”).

IT ISMUTUALLY AGREED by the parties as follows:

**1.             Employment; Duties**

1.1           Responsibilitiesand Authority.  (a)  The Bank hereby employs Executive to serve asPresident and Chief Executive Officer of the Bank, and Executive hereby acceptssuch employment.** **Executive shall have theduties, responsibilities, authorities and powers normally incident to suchoffices.  At all times, however,Executive’s activities and authority with respect to such offices will besubject to supervision, control and direction by the Board of Directors of theBank (the “Board”) or by the Executive Committee of the Board, and Executivehereby agrees to carry out such duties and responsibilities as either of themmay from time to time reasonably assign to Executive.  Executive shall report from time to time orroutinely, upon request, to the Board as to the current status of any ofExecutive’s assigned duties and responsibilities.

(b)           The Company hereby employs Executive to serve as President and ChiefExecutive Officer of the Company and such other offices and positions as theCompany may determine, and Executive hereby accepts such employment.** **Executive shall havethe duties, responsibilities, authorities and powers normally incident to suchoffices.  At all times, however,Executive’s activities and authority with respect to such offices will besubject to supervision, control and direction by the Board of Directors of theCompany (the “Company Board”) or by the Executive Committee of the Company Board,and Executive hereby agrees to carry out such duties and responsibilities aseither of them may from time to time reasonably assign to Executive.  Executive shall report from time to time orroutinely, upon request, to the Company Board as to the current status of anyof Executive’s assigned duties and responsibilities.

1.2           Compensation.** **The Bank shall pay****Executivea base salary at the rate of Four Hundred Forty-Three Thousand ($443,000) peryear commencing on the date hereof and thereafter, payable on a bi-weeklybasis, or at such higher rate as shall be determined from time to time by theBoard.  In addition, Executive shall beentitled to receive payments under any incentive compensation or bonus programwhich the Bank may establish for its employees and/or senior executives (as ineffect from time to time), in such amounts as are provided by such programs, *provided,* however, that Executive shall be provided with anannual bonus opportunity of no less than 60% of Executive’s base salary.

1.3           EmployeeBenefits.  As afull-time employee of the Bank, Executive shall be eligible to participate inany and all employee benefit plans generally available to full-time 

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employeesof the Bank, including non-contributory plans and, at Executive’s option,contributory plans.

**1.4           CertainSpecific Employee Benefits.**

(a)           Grant of Stock Options.** **Executive shallreceive stock options to purchase shares of the Company’s common stock in suchnumber and at an exercise price and such other terms as the Compensation Committeeof the Company Board may determine, in its sole discretion, provided thatvesting of any options shall accelerate on a Change in Control (as defined in****Section 3.2).

(b)           Automobile.  TheBank shall provide Executive with an automobile for Executive’s personal andbusiness use, both in the course of her employment hereunder and afterwards asspecifically provided herein, at the Bank’s expense.  All expenses related to the operation of suchautomobile shall be paid for by the Bank, including but not limited toautomobile insurance, gasoline, maintenance, repairs, and other expensesassociated with the operation of such automobile, subject to applicable rulesand regulations regarding reporting of income and withholding of applicabletaxes.

1.5           Vacation.  Executive shallbe entitled to six weeks of vacation during each year of employment, suchvacation to be taken in accordance with the Bank’s customary vacation policiesand at such times and intervals as are mutually agreed upon by Executive andthe Bank.  Executive shall be entitled toholiday time and sick leave in accordance with the then existing policies ofthe Bank, as in effect from time to time.

1.6           Reimbursementof Expenses.** **(a)  Executiveshall be reimbursed by the Bank for reasonable business expenses incurred byExecutive incident to her employment by the Bank upon presentation ofappropriate vouchers, receipts, and other supporting documents required by theBank.

(b)           Executiveshall be reimbursed by the Company for reasonable business expenses incurred byExecutive incident to her employment by the Company upon presentation ofappropriate vouchers, receipts, and other supporting documents required by theCompany.

1.7           Dutyto Perform Services.  Solong as Executive is employed by the Company or the Bank, Executive agrees todevote her full business and productive time, skill, and energy diligently,loyally, effectively, and to the best of her ability to the rendering ofservices to the Company and the Bank, and will exert Executive’s best effortsin the rendering of such services.  Thisprovision will not prohibit Executive from:

(a)           making passive investments or servingas a fiduciary with respect to direct family investments;

(b)           serving on the board of directors ofany company, subject to the provisions of Section 4.2****belowand *provided that*Executive shall not render any material services with respect tothe operations or affairs of any such company; or

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(c)           engaging in religious, charitable orother community or non-profit activities which do not impair Executive’sability to fulfill her duties and responsibilities to the Company and Bank.

Executive agrees that inthe rendering of all services to the Company and Bank and in all aspects of heremployment in connection with Executive’s duties as President and ChiefExecutive Officer, she will comply with all directives, policies, standards,and regulations from time to time established by the Company or the Bank or byapplicable law.

1.8           Death or Disability.

(a)           Death.** **Inthe event of Executive’s death during the term of her employment under thisAgreement, the Bank shall immediately pay to Executive’s designated beneficiaryany salary accrued but unpaid as of the date of death.  Upon payment of the aforementioned sums, theBank’s obligations to make further salary payments shall terminate.  This provision shall not be construed tonegate any rights Executive may have to death benefits under any employeebenefit or welfare plan of the Company or Bank in which Executive may from timeto time be a participant or under any other written agreement with the Companyor Bank which specifically provides for such benefits.

(b)           Disability.  In the event of Executive’s “disability” (asdefined below) during the term of her employment under this Agreement, the Bankshall continue to pay Executive her base salary (reduced by any benefits shemay be entitled to receive under any state or federal disability insuranceprogram, such as Rhode Island temporary disability insurance or federal socialsecurity) for a period of one year from the date of “disability”.  For purposes of this Agreement, “disability”shall mean the good faith determination by the Board that Executive is unablefor any reason, either physical or mental, to perform the duties required ofher hereunder.

1.9           Termof Employment.** **The term of Executive’semployment under this Agreement shall commence on the date hereof and shallcontinue, unless sooner terminated pursuant to the provisions of thisAgreement, for a period of three years (the “Term”), which Term shallautomatically renew on each successive one year anniversary hereaftercommencing with the first anniversary hereof unless any party shall have givenwritten notice to the other parties of such party’s election not to extend theTerm within ninety (90) calendar days prior to any anniversary date.

1.10         Termination.  ThisAgreement and the rights of the parties hereunder will terminate (subject tothe provisions of Section 1.11 below) upon the occurrence of one of thefollowing:

(a)           Uponthe Executive’s death or disability as provided in Section 1.8 above;

(b)           Upontermination of employment by the Bank or the Company for Cause as provided inSection 3.5, immediately upon the giving of notice by the Company or the Bankor at such later time as such notice may specify or as may be required bySection 3.5;

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(c)           Upontermination of employment at the election of the Executive for Good Reason (ashereinafter defined) as provided in Section 2.2;

(d)           Uponexpiration of the Term, upon notice by any party not to renew the term asprovided in Section 1.9; or

(e)           Inthe event of the Executive’s resignation for any reason (other than the reasonsset forth in Sections 1.10(a), (c) or (d) above), upon thirty days’ priorwritten notice of such resignation to the Bank or the Company; or, in the eventof termination of Executive’s employment by the Bank or the Company for anyreason (other than the reasons set forth in Sections 1.10(a), (b) or (d)above), upon thirty days’ prior written notice of such termination to theExecutive.

1.11         Survival.  The provisions of Sections 1.8, 2.1, 2.2, 3.1through 3.11 inclusive, and 4.1, 4.2, 4.4, 4.5, 4.6, 4.7, 4.8, 4.9, 4.10, 4.12and 4.13 of the Agreement shall remain in full force and effect and shallcontinue to be enforceable in accordance with their terms beyond thetermination of employment and beyond expiration of this Agreement, except asotherwise agreed in writing by Executive and the Company and the Bank.

2.             Severance.

2.1           SeveranceBenefit.  In the event of a termination of Executive’semployment by the Bank or the Company without Cause (as such term is defined inSection 3.5) at any time, or in the event of termination of Executive’semployment by her for Good Reason, the Bank will pay to Executive within 30days of the date of such termination or expiration, in lump sum, any basesalary and bonus previously awarded on account of services performed prior tothe Executive’s termination of employment which have not been previously paidplus a severance payment equal to 2.99times the sum of (a) Executive’s annual base salary then in effect and (b) anamount equal to the average executive cash bonus earned by Executive withrespect to the two (2) full fiscal years immediately preceding the year inwhich termination occurs (the “Severance Benefit”).  In addition, the Bank shall continue to payfor all medical, dental and life insurance coverage provided on the date oftermination for the thirty-six month period commencing on the date oftermination of employment (the “Severance Period”); the Bank shall continue toprovide Executive with the same automobile then being used by Executive inaccordance with the provisions of Section 1.4(b) of this Agreement for the Severance Period (all of theforegoing benefits to be provided at the expense of the Bank) and, at any timeduring or within thirty (30) days of the expiration of the Severance Period,Executive shall have the right and option, on written notice to the Bank, topurchase such automobile for a purchase price equal to 90% of the wholesalevalue as established by the National Automobile Dealers Association OfficialUsed Car Guide published in the year of such notice; and, notwithstanding anyprovision of any option agreement governing options to purchase common stock ofthe Company granted to Executive (“Options”), any such Options which areexercisable by Executive on the date of termination shall not terminate untilthe expiration of the Severance Period and such Options as extended are hereinreferred to as “Extended Options”.  AnySeverance Benefit paid under this Section 2.1 shall be credited against anyamounts due Executive under Section 3 as a result of a 

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Change in Control.  The Bank shall have no obligation to pay theSeverance Benefit to Executive in the event her employment is terminated withCause by the Bank or the Company or voluntarily by Executive without GoodReason prior to a Change in Control.

2.2           “GoodReason” Defined.** **For purposes of thisAgreement, “Good Reason” shall mean and include any of the following withoutExecutive’s prior written consent:

(i)            a significant reduction in thenature or scope of Executive’s duties, responsibilities, authority and powersfrom the duties, responsibilities, authority and powers exercised by her on thedate hereof;

(ii)           a reduction of Executive’s salary orbonus opportunity or fringe benefits from those provided on the date hereof,other than a reduction of fringe benefits required by law or applicable to allemployees generally;

(iii)          any requirement by the Bank or anyperson in control of the Bank that the location at which Executive performs theprincipal duties for the Bank or the Company be outside a radius of 50 milesfrom the location at which Executive performed such duties as of the datehereof; or

(iv)          the election by the Company or theBank not to renew this Agreement on any anniversary date unless the Company andthe Bank enter into a new employment agreement with Executive on terms not lessfavorable than those existing immediately prior to such notice of non-renewal,other than a reduction of fringe benefits required by law or applicable to allemployees generally,

***provided,however***,that Good Reason shall not be deemed to have occurred unless prior to Executive’stermination of employment for Good Reason, Executive shall give not less than30 days written notice to the Bank and the Company of her intent to terminatefor Good Reason stating the basis of the Good Reason sufficient to permit theBank and the Company to alleviate the basis of such Good Reason prior totermination, and the Bank and the Company have not done so within such 30 dayperiod, and *further provided,*that Executive’scontinuing to work in the absence of entering into a new employment agreementfollowing a notice of non-renewal by the Company or the Bank shall be withoutprejudice to her right to claim termination for Good Reason, absent writtenagreement between Executive and the Bank or the Company to the contrary.

**3.             Change in Control**

3.1           Purpose.** **Inorder to allow Executive to consider the prospect of a Change in Control (asdefined in Section 3.2)****in anobjective manner and in consideration of the services rendered and to berendered by Executive to the Company and the Bank, the Bank is willing toprovide, subject to the terms of this Agreement, certain severance benefits toprotect Executive from the consequences of a Terminating Event (as defined inSection 3.4) occurring subsequent to a Change in Control.

 

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3.2           Changein Control.  A“Change in Control” will be deemed to have occurred if: (i)****aTakeover Transaction is effectuated; or (ii)****theCompany commences substantive negotiations with a third party with respect to aTakeover Transaction *if* withintwelve (12)****months of the commencement ofsuch negotiations, the Company enters into a definitive agreement with respectto a Takeover Transaction with any party with which negotiations wereoriginally commenced; or (iii)****any electionof directors of the Company occurs (whether by the directors then in office orby the shareholders at a meeting or by written consent) where a majority of thedirectors in office following such election are individuals who were notnominated by a vote of two-thirds of the members of the board of directors asconstituted immediately preceding each such individual’s election as adirector; or (iv) either the Company or the Bank effectuates a completeliquidation.

3.3           TakeoverTransaction.** **A “Takeover Transaction”shall mean:

(a)           The acquisition of voting securities ofthe Company by any individual, entity or group (within the meaning of Section13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the “ExchangeAct”)), other than by the Company or its subsidiaries or any employee benefitplan (or related trust) of the Company or its subsidiaries, which theretoforedid not beneficially own (within the meaning of Rule 13d-3 promulgated underthe Exchange Act) securities representing 30% or more of the voting power of alloutstanding shares of voting securities of the Company, if such acquisitionresults in such individual, entity or group owning securities representing morethan 30% of the voting power of all outstanding voting securities of theCompany; provided, that any acquisition by a corporation with respect to which,following such acquisition, more than 50% of the then outstanding shares ofvoting securities of such corporation, is then beneficially owned, directly orindirectly, by all or substantially all of the individuals and entities whowere the beneficial owners of the voting securities of the Company outstandingimmediately prior to such acquisition in substantially the same proportion astheir ownership, immediately prior to such acquisition, of the outstandingvoting securities of the Company, shall not constitute a Change in Control; or

(b)           The issuance of additional shares ofcommon stock of the Company or the Bank, as applicable, in a single transactionor a series of related transactions if the individuals and entities who werethe beneficial owners of the outstanding voting securities of the Company orthe Bank, as applicable, immediately prior to such issuance do not, followingsuch issuance, beneficially own, directly or indirectly, securities representingmore than 50% of the voting power of all then outstanding voting securities ofthe Company or the Bank, as applicable; or

(c)           Consummation by the Company or the Bankof (i) a reorganization, merger or consolidation, in each case, with respect towhich all or substantially all of the individuals and entities who were thebeneficial owners of the voting securities of such entity immediately prior tosuch reorganization, merger or consolidation do not, following suchreorganization, merger or consolidation, beneficially own, directly orindirectly, securities representing more than 50% of the voting power of thenoutstanding voting securities of the corporation resulting from such areorganization, merger or 

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consolidation,or (ii) the sale, exchange or other disposition (in one transaction or a seriesof related transactions) of all or substantially all of the assets of theCompany (on a consolidated basis) or the Bank to a party which is notcontrolled by or under common control with such entity, or (iii) the sale bythe Company in one transaction or in a series of related transactions of votingsecurities of the Bank such that following such transaction or transactions theCompany no longer beneficially owns, directly or indirectly, securities representingmore than 50% of the voting power of the then outstanding voting securities ofthe Bank.

Forpurposes of this Section 3.3, “voting power” means ordinary voting power forthe election of directors.

3.4           TerminatingEvent.** **A “Terminating Event”means either

(a)           Termination by the Bank or theCompany of Executive’s employment for any reason other than “Cause” (as suchterm is defined in Section 3.5 hereof); or

(b)           Executive’s resignation as anemployee of the Company or the****Bankor any successor thereof following a Takeover Transaction or a Change inControl under Section 3.2(iii) whether or not for Good Reason prior to thefirst anniversary of the Takeover Transaction or such Change of Control,provided that the Company does not have “Cause” to terminate Executive’semployment prior to such resignation; or

(c)           Termination of this Agreement byreason of Executive’s disability pursuant to Section 1.8, prior to the firstanniversary of the Takeover Transaction or such Change in Control; or

(d)           Executive’s death following aTakeover Transaction or a Change in Control under Section 3.2(iii), prior tothe first anniversary of the Takeover Transaction or such Change in Control.

3.5           Terminationfor “Cause” Defined.** **For purposes of thisAgreement, termination for Cause, as determined by the Board, shall includetermination by reason of any of the following:

(a)                                  Continuingany arrangement, holding any position or engaging in any activities thatconflict with the interest of, or that interfere with Executive’s duties owedto, the Company or the Bank, after ten (10)****days priorwritten notice by the Company or the Bank, as applicable, to Executive of thesame;

(b)                                 Convictionof embezzlement or other crimes against the Company or the Bank;

(c)                                  Deliberatemisappropriation of the Company’s or the Bank’s funds;

(d)                                 Materialviolation of written policies of the Company or the Bank or material breach ofany of Executive’s obligations under the terms of this Agreement, 

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                                                whichcontinues after ten (10)****days priorwritten notice by the Company or the Bank, as applicable, to Executive of thesame; and

(e)                                  Refusalto perform assigned duties when such refusal is not justified or excused eitherby the terms of this Agreement or by actions taken by the Bank or the Companyin violation of this Agreement and, with respect to the first two refusals,Executive has been given reasonable written notice and explanation thereof andten (10) days to cure and no cure has been effected within ten (10) days ofsuch notice; *provided, however,*that ifExecutive should dispute the Bank’s or the Company’s determination that it hascaused Executive to terminate her employment, or if Executive asserts that thisact or omission was caused by actions taken by the Bank or the Company inviolation of this Agreement, the dispute will be governed by Section 4.8****hereof.

**3.6           PaymentIn Connection With Terminating Event.**  If a Terminating Event occurs within one (1)year after a Change inControl (which one year period shall be calculated from the effective date ofthe Takeover Transaction if the Terminating Event occurs after a TakeoverTransaction), the Bank will pay to Executive(a)an amount equal to any base salary and bonus earned on account of servicesperformed prior to the Terminating Event which have not been previously paidand Executive’s pro-rated bonus to the date of the Terminating Event under theBank’s Cash Incentive Plan, or any successor plan, based on the “Target Bonus”for the year in which the Terminating Event occurs (the “Past Service Amount”) *plus* (b) anamount (the “Severance Payment”) equal to 2.99 times the sum of (i) theannual base salary in effect at the time of the Change in Control plus (ii) theamount of Executive’s “Target Bonus” for the year in which the Change inControl occurs,which Past Service Amount and Severance Payment shall be payable in one lumpsum within 30 days of the date of termination of employment, or if such Changein Control is governed by clause (ii)of Section 3.2 andthe Terminating Event occursprior to entering into a definitive agreement, upon the entering into of adefinitive agreement by the Company.  Inaddition, during the Severance Period (which, for purposes of Section 3 shallbe deemed to commence on the date of a Terminating Event), Executive shall beentitled to receive continuing medical, dental and life insurance benefits asprovided by the Bank prior to the Terminating Event and use of an automobilewith the option to purchase (all of the foregoing benefits to be provided atthe expense of the Bank).  Options heldby Executive shall become Extended Options, all as more specifically set forthin Section 2.1 hereof, *provided,however*, that any unvested Options held by Executive shallaccelerate and become vested upon a Change in Control pursuant to Section1.4(a).  Furthermore, the Bank, at itsexpense, shall provide Executive with an office and the exclusive use of anexecutive assistant for a period of 12 months following a TerminatingEvent defined in subsection (a) or (b) of Section 3.4 hereof.  No Past Service Amount or Severance Paymentwill be paid to Executiveunder Section 3 if heremployment with the Company and the Bank terminates for any reason prior to aChange in Control, or if her employment with the Company and the Bankterminates after a Change in Control but such termination or resignation is nota Terminating Event.  In addition, noPast Service Amount or Severance Payment will be paid to Executiveunder Section 3.6 of thisAgreement with respect to a Terminating Event which occurs more than one yearafter a Change in Control (which one year period shall be calculated from theeffective date of the Takeover Transaction if the Terminating Event occursafter a Takeover Transaction). Notwithstanding the 

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**foregoing, if a Change of Control resulting from a TakeoverTransaction as described in Section 3.2(ii) occurs and Executive is terminatedwithout Cause prior to the closing of the Takeover Transaction undercircumstances where a Severance Benefit under Section 2.1 would be payable, Executiveshall be entitled to receive the Past Service Amount and a Severance Paymentcalculated under this Section 3.6 and any payments previously made underSection 2.1 shall be credited against the Company’s or the Bank’s obligationunder this Section 3.6.**

3.7           Applicability of Change in ControlProvisions.  The provisions ofSection 3****shall terminate upon the earliest of(i) the termination by the Company or the Bank of Executive’s employment forany reason prior to a Change in Control, (ii) the termination of Executive’semployment by the Company or the Bank after a Change in Control for Cause,(iii) Executive’s resignation or termination of employment with the Company orthe Bank for any reason other than Good Reason prior to a Change in Control,and (iv) Executive’s resignation or termination of employment after a Change inControl on or after the first anniversary of the Takeover Transaction or eventsspecified in Sections 3.2(iii) or (iv).

3.8           ExciseTax Equalization Payment.  Inthe event that Executive becomes entitled to a Severance Payment or any otherpayment or benefit under this Agreement, or under any other agreement with orplan of the Company (in the aggregate, the “Total Payments”), and if any of theTotal Payments will be subject to the tax (the “Excise Tax”) imposed by Section4999 of the Code (or any similar tax that may hereafter be imposed), then theBank shall pay to Executive in cash an additional amount (the “Gross-Up Payment”)such that the net amount retained by Executive after deduction of any ExciseTax upon the Total Payments and any Federal, state and local income tax andExcise Tax upon the Gross-Up Payment provided for by this Section 3.8(including FICA and FUTA), shall be equal to the Total Payments.  Such payment shall be made by the Bank toExecutive as soon as practical following the effective date of the TerminatingEvent, but in no event beyond thirty (30) days from such date.

3.9           TaxComputation.  For purposes of determining whether any ofthe Total Payments will be subject to the Excise Tax and the amounts of suchExcise Tax:

(a)           Any other payments or benefitsreceived or to be received by Executive in connection with a Change in Controlor Executive’s termination of employment (whether pursuant to the terms of thisAgreement or any other plan, arrangement, or agreement with the Company or theBank, or with any person (which shall have the meaning set forth in Section3(a)(9) of the Exchange Act, including a “group” as defined in Section 13(d)therein) whose actions result in a Change in Control or any person affiliatedwith the Company or such persons) shall be treated as “parachute payments”within the meaning of Section 280G(b)(1) of the Code, and all “excess parachutepayments” within the meaning of Section 280G(b)(1) shall be treated as subjectto the Excise Tax, unless in the opinion of tax counsel as supported by theCompany’s independent auditors and acceptable to Executive, such other paymentsor benefits (in whole or in part) do not constitute parachute payments, orunless such excess parachute payments (in whole or in part) representreasonable compensation for services actually rendered within the meaning ofSection 280G(b)(4) of the Code in excess of the base amount within the meaningof Section 280G (b)(3) of the Code, or are otherwise not subject to the ExciseTax;

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(b)           The amount of the Total Paymentswhich shall be treated as subject to the Excise Tax shall be equal to thelesser of: (i) the total amount of the Total Payments; or (ii) the amount ofexcess parachute payments within the meaning of Section 280G(b)(1) (afterapplying clause (a) above); and

(c)           The value of any noncash benefits orany deferred payment or benefit shall be determined by the Company’sindependent auditors in accordance with the principles of Sections 280G(d)(3)and (4) of the Code.

Forpurposes of determining the amount of the Gross-Up Payment, Executive shall bedeemed to pay Federal income taxes at the highest marginal rate of Federalincome taxation in the calendar year in which the Gross-Up Payment is to bemade, and state and local income taxes at the highest marginal rate of taxationin the state and locality of Executive’s residence on the effective date of theTerminating Event, net of the maximum reduction in Federal income taxes whichcould be obtained from deduction of such state and local taxes.

3.10         SubsequentRecalculation.  In the event the Internal Revenue Serviceadjusts the computation of the Bank under Section 3.9 herein so that Executivedid not receive the greatest net benefit, the Bank shall reimburse Executivefor the full amount necessary to make her whole, plus a market rate ofinterest, as determined by the Compensation Committee of the Board.

3.11         DisputeResolution.  Ifany dispute between the Bank and Executive as to any of the amounts to bedetermined under Sections 3.8 or 3.9, or the method of calculating suchamounts, cannot be resolved by Executive and the Bank, either the Bank orExecutive after giving three (3)****days writtennotice to the other, may refer the dispute to a partner in the Boston,Massachusetts office of a firm of independent certified public accountantsselected jointly by Executive and the Bank. The determination of such partner as to the amount to be determinedunder Section 3.8 and 3.9 and the method of calculating such amounts shall befinal and binding on Executive, the Bank and the Company.  The Bank shall bear the costs of any suchdetermination.  The Company shall havethe same rights and obligations as the Bank under this Section 3.11 in theevent of a dispute between the Company and Executive.

**4.             Miscellaneous.**

4.1           ConfidentialInformation.  UnlessExecutive first secures the Company’s consent, Executive will not disclose oruse, at any time either during or subsequent to her employment by the Companyor the Bank, except as required by her duties to the Company or Bank, anysecret or confidential information of the Company or Bank of which Executivebecomes informed during her employment, whether or not developed by her.  The term “confidential information” includes,without limitation, financial information, business plans, prospects, andopportunities (such as lending relationships, financial product developments,or possible acquisitions or dispositions of business or facilities) which havebeen discussed or considered by the Company’s or Bank’s management, but doesnot include any information which has become part of the public domain by meansother than Executive’s non-observance of her obligations hereunder.

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4.2           Non-Competition.** **DuringExecutive’s employment by the Company and the Bank hereunder, and during aperiod of one year following the date of termination of her employment with theCompany or the Bank for any reason, Executive will not, directly or indirectlywhether as partner, consultant, agent, employee, co-venturer, greater than 2%****owner, or otherwise, or through any Person (as hereafterdefined),

(a)           attempt to recruit any employee ofthe Company or the Bank, assist in such hiring by any other Person, orencourage any such employee to terminate his or her relationship with theCompany or the Bank, or

(b)           encourage any customer of the Companyor the Bank to conduct with any other Person any business or activity whichsuch customer conducts or could conduct with the Company or the Bank, asapplicable.

For purposes of thisSection 4.2,****the term “Person” shall mean anindividual, a****corporation, an association, apartnership, an estate, a trust and any other entity or organization.

4.3           NoConflicting Obligations.** **The Company and theBank, in entering into this Agreement, understand, and Executive herebyrepresents, that she is not under any obligation to any former employer or anyperson, firm or corporation that would prevent, limit or impair, in any way,the performance by Executive of her duties as an employee of the Company or theBank.

4.4           EthicalBehavior.** **Upon termination by theCompany or the Bank of Executive’s employment for any reason, Executive shallact at all times in an ethical manner with regard to the Bank and the Company,and during the one-year period following the date of such termination, shalltake no action which directly or indirectly could reasonably be expected tohave the effect of terminating or otherwise adversely affecting therelationship of the Company or the Bank with any employee of, or others withbusiness or advantageous relationships with, the Company or any of itsaffiliates, including the Bank.

4.5           Withholding.** **Allpayments made by the Bank or the Company under this Agreement will be net ofany tax or other amounts required to be withheld by the Bank or the Companyunder applicable law.

4.6           LegalFees.** **Upon submission ofappropriate statements or documentation, the Company and the Bank jointly andseverally agree to reimburse Executive for reasonable legal fees actuallyincurred by her in connection with the negotiation, review and enforcement ofthe terms of this Agreement, *provided,*however, that neither the Company nor the Bank shall be obligated to reimburseExecutive for any legal fees or expenses incurred by her in connection with theCompany’s or the Bank’s enforcement of the terms of this Agreement or inconnection with any arbitration or litigation in which the Company or the Bankis the prevailing party.

4.7           Binding Effect.  This Agreementis binding upon and will inure to the benefit of the parties hereto and theirrespective heirs, administrators, executors, successors and assigns.  The Company and the Bank will require anysuccessor (whether direct or indirect, by purchase, 

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merger, consolidation or otherwise) to all orsubstantially all of the business and/or assets of the Company or the Bank, asthe case may be, to assume expressly and perform this Agreement.  Failure of the Company or the Bank, asapplicable, to obtain such assumption and agreement prior to the effectivenessof any such succession shall be a breach of this Agreement and shall entitleExecutive to compensation from the Bank in the same amount and on the sameterms as she would be entitled to hereunder following a Terminating Event,except that for purposes of implementing the foregoing, the date on which anysuch succession becomes effective shall be deemed the date on which Executivebecomes entitled to such compensation from the Bank.  As used in this Agreement, “Bank” shall meanthe Bank, as hereinbefore defined and any successor to its business and/orassets as aforesaid which assumes and agrees to perform the Agreement byoperation of law, or otherwise.

4.8           Arbitrationof Disputes.** **Any dispute, controversyor claim arising out of or relating to this Agreement or the breach orperformance hereof will be settled by arbitration in accordance with the lawsof the State of Rhode Island by an arbitrator mutually agreed upon by Executiveand the Company and/or the Bank.  If anarbitrator cannot be agreed upon, Executive shall choose an arbitrator and theCompany and/or the Bank shall choose an arbitrator, and these two togethershall select a third arbitrator.  If thefirst two arbitrators cannot agree on the appointment of a third arbitrator,then the third arbitrator will be appointed by the American ArbitrationAssociation in Providence, Rhode Island. Such arbitration will be conducted in the City of Providence in accordancewith the Commercial Arbitration Rules of the American Arbitration Association,except with respect to the selection of arbitrators which shall be as providedin this Section 4.8.** **Judgment upon the award renderedby the arbitrators may be entered in any court having jurisdiction thereof.

4.9           Indemnification.  The Companyand the Bank each hereby covenants and agrees to indemnify Executive and holdher harmless fully, completely, and absolutely against and in respect to anyand all actions, suits, proceedings, claims, demands, judgments, costs,expenses (including attorney’s fees), losses, and damages resulting fromExecutive’s good faith performance of her duties and obligations under theterms of this Agreement.

4.10         Release.  Executive agrees, as a condition to receiptof payments and benefits under Sections 2.1, 3.6 and/or 3.8 hereof, that shewill execute a release agreement in form reasonably satisfactory to theCompany, releasing and waiving any and all claims against the Company, itssubsidiaries and affiliates other than the right of the Executive to enforcethis Agreement and other than claims arising after the effective date of therelease provided that, without limiting the generality of the foregoing, suchrelease shall specifically exclude each of the following:  (i) any claims arising out of the Executive’sstatus as a shareholder or investor in the Company; (ii) any rights Executivemay have under COBRA; (iii) any claims Executive may have to any ownershipinterest in the Company, including but not limited to claims to vested or non-vestedstock, restricted stock or stock options; (iv) Executive’s ability to fileclaims for vested benefits, if any, under any and all employee benefit plans ofthe Company or the Bank including without limitation the various SupplementalExecutive Retirement Plans in which Executive is a participant and the variousinsurance and disability benefit plans of the Company or the Bank; (v)Executive’s right to continued coverage under any Bank or Company-sponsoredlife insurance policy applicable to Executive’s life as provided under any suchpolicy or any plan 

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or program of the Company or the Bank; (vi) Executive’sright to any funds being held for Executive’s benefit or in Executive’s nameunder any deferred compensation programs of the Company or the Bank; (vii)Executive’s eligibility for indemnification in accordance with the provisionsof Section 4.9 of this Agreement or with the Company’s Articles ofIncorporation or corporate by-laws or under applicable law or any rightsExecutive may have under any applicable insurance policy with respect to anyliability Executive may incur or may have incurred as an employee or officer ofthe Bank or the Company; or (viii) any right Executive may have to obtaincontribution as permitted by law in the event of entry of judgment againstExecutive as a result of any act or failure to act for which Executive and theCompany or the Bank, or any agent of the Company or the Bank, are jointlyliable.

4.11         Interpretation.  In case of ambiguity with respect to themeaning or intent of any provision herein, whether in the course of arbitrationor otherwise, such provision shall be construed in the manner most favorable tothe Executive.

4.12         Guaranty.  The Company hereby guarantees the due andpunctual performance in full by the Bank of its covenants, agreements andobligations contained herein.

4.13         EntireAgreement.  This Agreementconstitutes the entire agreement and understanding between the parties heretoin respect of the subject matter hereof and supersedes any prior or contemporaneousagreement or understanding between the parties, written or oral, which relatesto the subject matter hereof.

[Remainder of Page Intentionally Blank]

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IN WITNESS WHEREOF, the parties have executed thisAgreement on the 20th day of February, 2007.
|   | BANCORP RHODE ISLAND, INC. |
|--------|----------------------------|
|   |                       |
|   |                       |
|   | By:                        |   | /s/ John R.  Berger |
|   |                       |   | John R. Berger,  Compensation |
|   |                       |   | Committee  Chairman |
|   |                       |   |   |
|   |                       |   |   |
|   | By:                        |   | /s/ Malcolm G.  Chace |
|   |                       |   | Malcolm G.  Chace, Chairman of the Board |
|   |                       |   |   |
|   |                       |   |   |
|   | BANK RHODE ISLAND          |
|   |                       |
|   | By:                        |   | /s/ John R.  Berger |
|   |                       |   | John R. Berger,  Compensation |
|   |                       |   | Committee  Chairman |
|   |                       |   |   |
|   |                       |   |   |
|   | By:                        |   | /s/ Malcolm G.  Chace |
|   |                       |   | Malcolm G. Chace, Chairman of the Board |
|   |                       |   |   |
|   |                       |   |   |
|   | EXECUTIVE                  |
|   |                       |
|   | /s/ Merrill W.  Sherman    |
|   | Merrill W.  Sherman        |
|   |                       |   |   |

 

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