Exhibit 10.1


EXECUTIVE EMPLOYMENT AGREEMENT


THIS
EMPLOYMENT AGREEMENT (the “Agreement”) is between Bank Rhode Island, a
financial institution organized under the laws of the State of Rhode Island
with its executive offices located at One Turks Head Place, Providence, Rhode
Island 02903 (the “Bank”), Bancorp Rhode Island, Inc. a corporation organized under the laws of the State of Rhode Island and
sole shareholder of the Bank (the “Company”), and Merrill W. Sherman of
24 Channing Avenue, Providence, Rhode Island 
02906 (the “Executive”).


IT IS
MUTUALLY AGREED by the parties as follows:


1.             Employment; Duties


1.1           Responsibilities
and Authority.  (a)  The Bank hereby employs Executive to serve as
President and Chief Executive Officer of the Bank, and Executive hereby accepts
such employment. 
Executive shall have the
duties, responsibilities, authorities and powers normally incident to such
offices.  At all times, however,
Executive’s activities and authority with respect to such offices will be
subject to supervision, control and direction by the Board of Directors of the
Bank (the “Board”) or by the Executive Committee of the Board, and Executive
hereby agrees to carry out such duties and responsibilities as either of them
may from time to time reasonably assign to Executive.  Executive shall report from time to time or
routinely, upon request, to the Board as to the current status of any of
Executive’s assigned duties and responsibilities.


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


1.2           Compensation.
 The Bank shall pay  Executive
a base salary at the rate of Four Hundred Forty-Three Thousand ($443,000) per
year commencing on the date hereof and thereafter, payable on a bi-weekly
basis, or at such higher rate as shall be determined from time to time by the
Board.  In addition, Executive shall be
entitled to receive payments under any incentive compensation or bonus program
which the Bank may establish for its employees and/or senior executives (as in
effect from time to time), in such amounts as are provided by such programs, provided, however, that Executive shall be provided with an
annual bonus opportunity of no less than 60% of Executive’s base salary.


1.3           Employee
Benefits.  As a
full-time employee of the Bank, Executive shall be eligible to participate in
any and all employee benefit plans generally available to full-time 













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


1.4           Certain
Specific Employee Benefits.


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


(b)           Automobile.  The
Bank shall provide Executive with an automobile for Executive’s personal and
business use, both in the course of her employment hereunder and afterwards as
specifically provided herein, at the Bank’s expense.  All expenses related to the operation of such
automobile shall be paid for by the Bank, including but not limited to
automobile insurance, gasoline, maintenance, repairs, and other expenses
associated with the operation of such automobile, subject to applicable rules
and regulations regarding reporting of income and withholding of applicable
taxes.


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


1.6           Reimbursement
of Expenses. 
(a)  Executive
shall be reimbursed by the Bank for reasonable business expenses incurred by
Executive incident to her employment by the Bank upon presentation of
appropriate vouchers, receipts, and other supporting documents required by the
Bank.


(b)           Executive
shall be reimbursed by the Company for reasonable business expenses incurred by
Executive incident to her employment by the Company upon presentation of
appropriate vouchers, receipts, and other supporting documents required by the
Company.


1.7           Duty
to Perform Services.  So
long as Executive is employed by the Company or the Bank, Executive agrees to
devote her full business and productive time, skill, and energy diligently,
loyally, effectively, and to the best of her ability to the rendering of
services to the Company and the Bank, and will exert Executive’s best efforts
in the rendering of such services.  This
provision will not prohibit Executive from:


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


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



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


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


1.8           Death or Disability.


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


(b)           Disability.  In the event of Executive’s “disability” (as
defined below) during the term of her employment under this Agreement, the Bank
shall continue to pay Executive her base salary (reduced by any benefits she
may be entitled to receive under any state or federal disability insurance
program, such as Rhode Island temporary disability insurance or federal social
security) 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 unable
for any reason, either physical or mental, to perform the duties required of
her hereunder.


1.9           Term
of Employment. 
The term of Executive’s
employment under this Agreement shall commence on the date hereof and shall
continue, unless sooner terminated pursuant to the provisions of this
Agreement, for a period of three years (the “Term”), which Term shall
automatically renew on each successive one year anniversary hereafter
commencing with the first anniversary hereof unless any party shall have given
written notice to the other parties of such party’s election not to extend the
Term within ninety (90) calendar days prior to any anniversary date.


1.10         Termination.  This
Agreement and the rights of the parties hereunder will terminate (subject to
the provisions of Section 1.11 below) upon the occurrence of one of the
following:


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


(b)           Upon
termination of employment by the Bank or the Company for Cause as provided in
Section 3.5, immediately upon the giving of notice by the Company or the Bank
or at such later time as such notice may specify or as may be required by
Section 3.5;



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(c)           Upon
termination of employment at the election of the Executive for Good Reason (as
hereinafter defined) as provided in Section 2.2;


(d)           Upon
expiration of the Term, upon notice by any party not to renew the term as
provided in Section 1.9; or


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


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


2.             Severance.


2.1           Severance
Benefit.  In the event of a termination of Executive’s
employment by the Bank or the Company without Cause (as such term is defined in
Section 3.5) at any time, or in the event of termination of Executive’s
employment by her for Good Reason, the Bank will pay to Executive within 30
days of the date of such termination or expiration, in lump sum, any base
salary and bonus previously awarded on account of services performed prior to
the Executive’s termination of employment which have not been previously paid
plus a severance payment equal to 2.99
times the sum of (a) Executive’s annual base salary then in effect and (b) an
amount equal to the average executive cash bonus earned by Executive with
respect to the two (2) full fiscal years immediately preceding the year in
which termination occurs (the “Severance Benefit”).  In addition, the Bank shall continue to pay
for all medical, dental and life insurance coverage provided on the date of
termination for the thirty-six month period commencing on the date of
termination of employment (the “Severance Period”); the Bank shall continue to
provide Executive with the same automobile then being used by Executive in
accordance with the provisions of 
Section 1.4(b) of this Agreement for the Severance Period (all of the
foregoing benefits to be provided at the expense of the Bank) and, at any time
during 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, to
purchase such automobile for a purchase price equal to 90% of the wholesale
value as established by the National Automobile Dealers Association Official
Used Car Guide published in the year of such notice; and, notwithstanding any
provision of any option agreement governing options to purchase common stock of
the Company granted to Executive (“Options”), any such Options which are
exercisable by Executive on the date of termination shall not terminate until
the expiration of the Severance Period and such Options as extended are herein
referred to as “Extended Options”.  Any
Severance Benefit paid under this Section 2.1 shall be credited against any
amounts 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 the
Severance Benefit to Executive in the event her employment is terminated with
Cause by the Bank or the Company or voluntarily by Executive without Good
Reason prior to a Change in Control.


2.2           “Good
Reason” Defined. 
For purposes of this
Agreement, “Good Reason” shall mean and include any of the following without
Executive’s prior written consent:


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


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


(iii)          any requirement by the Bank or any
person in control of the Bank that the location at which Executive performs the
principal duties for the Bank or the Company be outside a radius of 50 miles
from the location at which Executive performed such duties as of the date
hereof; or


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


provided,
however,
that Good Reason shall not be deemed to have occurred unless prior to Executive’s
termination of employment for Good Reason, Executive shall give not less than
30 days written notice to the Bank and the Company of her intent to terminate
for Good Reason stating the basis of the Good Reason sufficient to permit the
Bank and the Company to alleviate the basis of such Good Reason prior to
termination, and the Bank and the Company have not done so within such 30 day
period, and further provided, that Executive’s
continuing to work in the absence of entering into a new employment agreement
following a notice of non-renewal by the Company or the Bank shall be without
prejudice to her right to claim termination for Good Reason, absent written
agreement between Executive and the Bank or the Company to the contrary.


3.             Change in Control


3.1           Purpose.  In
order to allow Executive to consider the prospect of a Change in Control (as
defined in Section 3.2)  in an
objective manner and in consideration of the services rendered and to be
rendered by Executive to the Company and the Bank, the Bank is willing to
provide, subject to the terms of this Agreement, certain severance benefits to
protect Executive from the consequences of a Terminating Event (as defined in
Section 3.4) occurring subsequent to a Change in Control.


 



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3.2           Change
in Control.  A
“Change in Control” will be deemed to have occurred if: (i)  a
Takeover Transaction is effectuated; or (ii)  the
Company commences substantive negotiations with a third party with respect to a
Takeover Transaction if within
twelve (12)  months of the commencement of
such negotiations, the Company enters into a definitive agreement with respect
to a Takeover Transaction with any party with which negotiations were
originally commenced; or (iii)  any election
of directors of the 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 as
constituted immediately preceding each such individual’s election as a
director; or (iv) either the Company or the Bank effectuates a complete
liquidation.


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


(a)           The acquisition of voting securities of
the Company 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 Company or its subsidiaries or any employee benefit
plan (or related trust) of the Company 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 Company, 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
Company; 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 Company 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 Company, shall not constitute a Change in Control; or


(b)           The issuance of additional shares of
common stock of the Company or the Bank, as applicable, 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 Company or
the Bank, as applicable, 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 Company or the Bank, as applicable; or


(c)           Consummation by the Company or the Bank
of (i) 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 such entity 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 



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consolidation,
or (ii) 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
Company (on a consolidated basis) or the Bank to a party which is not
controlled by or under common control with such entity, or (iii) the sale by
the Company in one transaction or in a series of related transactions of voting
securities of the Bank such that following such transaction or transactions the
Company no longer beneficially owns, directly or indirectly, securities representing
more than 50% of the voting power of the then outstanding voting securities of
the Bank.


For
purposes of this Section 3.3, “voting power” means ordinary voting power for
the election of directors.


3.4           Terminating
Event. 
A “Terminating Event”
means either


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


(b)           Executive’s resignation as an
employee of the Company or the  Bank
or any successor thereof following a Takeover Transaction or a Change in
Control under Section 3.2(iii) whether or not for Good Reason prior to the
first anniversary of the Takeover Transaction or such Change of Control,
provided that the Company does not have “Cause” to terminate Executive’s
employment prior to such resignation; or


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


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


3.5           Termination
for “Cause” Defined. 
For purposes of this
Agreement, termination for Cause, as determined by the Board, shall include
termination by reason of any of the following:


(a)                                  Continuing
any arrangement, holding any position or engaging in any activities that
conflict with the interest of, or that interfere with Executive’s duties owed
to, the Company or the Bank, after ten (10)  days prior
written notice by the Company or the Bank, as applicable, to Executive of the
same;


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


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


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



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                                                which
continues after ten (10)  days prior
written notice by the Company or the Bank, as applicable, to Executive of the
same; and


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


3.6           Payment
In Connection With Terminating Event.  If a Terminating Event occurs within one (1)
year after a Change in
Control (which one year period shall be calculated from the effective date of
the Takeover Transaction if the Terminating Event occurs after a Takeover
Transaction), the Bank will pay to Executive
(a)
an amount equal to any base salary and bonus earned on account of services
performed prior to the Terminating Event which have not been previously paid
and Executive’s pro-rated bonus to the date of the Terminating Event under the
Bank’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) an
amount (the “Severance Payment”) equal to 2.99 times the sum of (i) the
annual base salary in effect at the time of the Change in Control plus (ii) the
amount of Executive’s “Target Bonus” for the year in which the Change in
Control occurs,
which Past Service Amount and Severance Payment shall be payable in one lump
sum within 30 days of the date of termination of employment, or if such Change
in Control is governed by clause (ii)
of Section 3.2 and
the Terminating Event occurs
prior to entering into a definitive agreement, upon the entering into of a
definitive agreement by the Company.  In
addition, during the Severance Period (which, for purposes of Section 3 shall
be deemed to commence on the date of a Terminating Event), Executive shall be
entitled to receive continuing medical, dental and life insurance benefits as
provided by the Bank prior to the Terminating Event and use of an automobile
with the option to purchase (all of the foregoing benefits to be provided at
the expense of the Bank).  Options held
by Executive shall become Extended Options, all as more specifically set forth
in Section 2.1 hereof, provided,
however, that any unvested Options held by Executive shall
accelerate and become vested upon a Change in Control pursuant to Section
1.4(a).  Furthermore, the Bank, at its
expense, shall provide Executive with an office and the exclusive use of an
executive assistant for a period of 12 months following a Terminating
Event defined in subsection (a) or (b) of Section 3.4 hereof.  No Past Service Amount or Severance Payment
will be paid to Executive
under Section 3 if her
employment with the Company and the Bank terminates for any reason prior to a
Change in Control, or if her employment with the Company and the Bank
terminates after a Change in Control but such termination or resignation is not
a Terminating Event.  In addition, no
Past Service Amount or Severance Payment will be paid to Executive
under Section 3.6 of this
Agreement with respect to a Terminating Event which occurs more than one year
after a Change in Control (which one year period shall be calculated from the
effective date of the Takeover Transaction if the Terminating Event occurs
after a Takeover Transaction). 
Notwithstanding the 



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foregoing, if a Change of Control resulting from a Takeover
Transaction as described in Section 3.2(ii) occurs and Executive is terminated
without Cause prior to the closing of the Takeover Transaction under
circumstances where a Severance Benefit under Section 2.1 would be payable, Executive
shall be entitled to receive the Past Service Amount and a Severance Payment
calculated under this Section 3.6 and any payments previously made under
Section 2.1 shall be credited against the Company’s or the Bank’s obligation
under this Section 3.6.


3.7           Applicability of Change in Control
Provisions.  The provisions of
Section 3  shall terminate upon the earliest of
(i) the termination by the Company or the Bank of Executive’s employment for
any reason prior to a Change in Control, (ii) the termination of Executive’s
employment by the Company or the Bank after a Change in Control for Cause,
(iii) Executive’s resignation or termination of employment with the Company or
the 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 in
Control on or after the first anniversary of the Takeover Transaction or events
specified in Sections 3.2(iii) or (iv).


3.8           Excise
Tax Equalization Payment.  In
the event that Executive becomes entitled to a Severance Payment or any other
payment or benefit under this Agreement, or under any other agreement with or
plan of the Company (in the aggregate, the “Total Payments”), and if any of the
Total Payments will be subject to the tax (the “Excise Tax”) imposed by Section
4999 of the Code (or any similar tax that may hereafter be imposed), then the
Bank 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 Excise
Tax upon the Total Payments and any Federal, state and local income tax and
Excise 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 to
Executive as soon as practical following the effective date of the Terminating
Event, but in no event beyond thirty (30) days from such date.


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


(a)           Any other payments or benefits
received or to be received by Executive in connection with a Change in Control
or Executive’s termination of employment (whether pursuant to the terms of this
Agreement or any other plan, arrangement, or agreement with the Company or the
Bank, or with any person (which shall have the meaning set forth in Section
3(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 affiliated
with 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 parachute
payments” within the meaning of Section 280G(b)(1) shall be treated as subject
to the Excise Tax, unless in the opinion of tax counsel as supported by the
Company’s independent auditors and acceptable to Executive, such other payments
or benefits (in whole or in part) do not constitute parachute payments, or
unless such excess parachute payments (in whole or in part) represent
reasonable compensation for services actually rendered within the meaning of
Section 280G(b)(4) of the Code in excess of the base amount within the meaning
of Section 280G (b)(3) of the Code, or are otherwise not subject to the Excise
Tax;



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


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


For
purposes of determining the amount of the Gross-Up Payment, Executive shall be
deemed to pay Federal income taxes at the highest marginal rate of Federal
income taxation in the calendar year in which the Gross-Up Payment is to be
made, and state and local income taxes at the highest marginal rate of taxation
in the state and locality of Executive’s residence on the effective date of the
Terminating Event, net of the maximum reduction in Federal income taxes which
could be obtained from deduction of such state and local taxes.


3.10         Subsequent
Recalculation.  In the event the Internal Revenue Service
adjusts the computation of the Bank under Section 3.9 herein so that Executive
did not receive the greatest net benefit, the Bank shall reimburse Executive
for the full amount necessary to make her whole, plus a market rate of
interest, as determined by the Compensation Committee of the Board.


3.11         Dispute
Resolution.  If
any dispute between the Bank and Executive as to any of the amounts to be
determined under Sections 3.8 or 3.9, or the method of calculating such
amounts, cannot be resolved by Executive and the Bank, either the Bank or
Executive after giving three (3)  days written
notice to the other, may refer the dispute to a partner in the Boston,
Massachusetts office of a firm of independent certified public accountants
selected jointly by Executive and the Bank. 
The determination of such partner as to the amount to be determined
under Section 3.8 and 3.9 and the method of calculating such amounts shall be
final and binding on Executive, the Bank and the Company.  The Bank shall bear the costs of any such
determination.  The Company shall have
the same rights and obligations as the Bank under this Section 3.11 in the
event of a dispute between the Company and Executive.


4.             Miscellaneous.


4.1           Confidential
Information.  Unless
Executive first secures the Company’s consent, Executive will not disclose or
use, at any time either during or subsequent to her employment by the Company
or the Bank, except as required by her duties to the Company or Bank, any
secret or confidential information of the Company or Bank of which Executive
becomes informed during her employment, whether or not developed by her.  The term “confidential information” includes,
without limitation, financial information, business plans, prospects, and
opportunities (such as lending relationships, financial product developments,
or possible acquisitions or dispositions of business or facilities) which have
been discussed or considered by the Company’s or Bank’s management, but does
not include any information which has become part of the public domain by means
other than Executive’s non-observance of her obligations hereunder.



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4.2           Non-Competition.  During
Executive’s employment by the Company and the Bank hereunder, and during a
period of one year following the date of termination of her employment with the
Company or the Bank for any reason, Executive will not, directly or indirectly
whether as partner, consultant, agent, employee, co-venturer, greater than 2%  owner, or otherwise, or through any Person (as hereafter
defined),


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


(b)           encourage any customer of the Company
or the Bank to conduct with any other Person any business or activity which
such customer conducts or could conduct with the Company or the Bank, as
applicable.


For purposes of this
Section 4.2,  the term “Person” shall mean an
individual, a  corporation, an association, a
partnership, an estate, a trust and any other entity or organization.


4.3           No
Conflicting Obligations. 
The Company and the
Bank, in entering into this Agreement, understand, and Executive hereby
represents, that she is not under any obligation to any former employer or any
person, 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 the
Bank.


4.4           Ethical
Behavior. 
Upon termination by the
Company or the Bank of Executive’s employment for any reason, Executive shall
act 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, shall
take no action which directly or indirectly could reasonably be expected to
have the effect of terminating or otherwise adversely affecting the
relationship of the Company or the Bank with any employee of, or others with
business or advantageous relationships with, the Company or any of its
affiliates, including the Bank.


4.5           Withholding.  All
payments made by the Bank or the Company under this Agreement will be net of
any tax or other amounts required to be withheld by the Bank or the Company
under applicable law.


4.6           Legal
Fees. 
Upon submission of
appropriate statements or documentation, the Company and the Bank jointly and
severally agree to reimburse Executive for reasonable legal fees actually
incurred by her in connection with the negotiation, review and enforcement of
the terms of this Agreement, provided,
however, that neither the Company nor the Bank shall be obligated to reimburse
Executive for any legal fees or expenses incurred by her in connection with the
Company’s or the Bank’s enforcement of the terms of this Agreement or in
connection with any arbitration or litigation in which the Company or the Bank
is the prevailing party.


4.7           Binding Effect.  This Agreement
is binding upon and will inure to the benefit of the parties hereto and their
respective heirs, administrators, executors, successors and assigns.  The Company and the Bank will require any
successor (whether direct or indirect, by purchase, 



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merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company or the Bank, as
the case may be, to assume expressly and perform this Agreement.  Failure of the Company or the Bank, as
applicable, to obtain such assumption and agreement prior to the effectiveness
of any such succession shall be a breach of this Agreement and shall entitle
Executive to compensation from the Bank in the same amount and on the same
terms as she would be entitled to hereunder following a Terminating Event,
except that for purposes of implementing the foregoing, the date on which any
such succession becomes effective shall be deemed the date on which Executive
becomes entitled to such compensation from the Bank.  As used in this Agreement, “Bank” shall mean
the Bank, as hereinbefore defined and any successor to its business and/or
assets as aforesaid which assumes and agrees to perform the Agreement by
operation of law, or otherwise.


4.8           Arbitration
of Disputes. 
Any dispute, controversy
or claim arising out of or relating to this Agreement or the breach or
performance hereof will be settled by arbitration in accordance with the laws
of the State of Rhode Island by an arbitrator mutually agreed upon by Executive
and the Company and/or the Bank.  If an
arbitrator cannot be agreed upon, Executive shall choose an arbitrator and the
Company and/or the Bank shall choose an arbitrator, and these two together
shall select a third arbitrator.  If the
first two arbitrators cannot agree on the appointment of a third arbitrator,
then the third arbitrator will be appointed by the American Arbitration
Association in Providence, Rhode Island. 
Such arbitration will be conducted in the City of Providence in accordance
with the Commercial Arbitration Rules of the American Arbitration Association,
except with respect to the selection of arbitrators which shall be as provided
in this Section 4.8.  Judgment upon the award rendered
by the arbitrators may be entered in any court having jurisdiction thereof.


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


4.10         Release.  Executive agrees, as a condition to receipt
of payments and benefits under Sections 2.1, 3.6 and/or 3.8 hereof, that she
will execute a release agreement in form reasonably satisfactory to the
Company, releasing and waiving any and all claims against the Company, its
subsidiaries and affiliates other than the right of the Executive to enforce
this Agreement and other than claims arising after the effective date of the
release provided that, without limiting the generality of the foregoing, such
release shall specifically exclude each of the following:  (i) any claims arising out of the Executive’s
status as a shareholder or investor in the Company; (ii) any rights Executive
may have under COBRA; (iii) any claims Executive may have to any ownership
interest in the Company, including but not limited to claims to vested or non-vested
stock, restricted stock or stock options; (iv) Executive’s ability to file
claims for vested benefits, if any, under any and all employee benefit plans of
the Company or the Bank including without limitation the various Supplemental
Executive Retirement Plans in which Executive is a participant and the various
insurance and disability benefit plans of the Company or the Bank; (v)
Executive’s right to continued coverage under any Bank or Company-sponsored
life insurance policy applicable to Executive’s life as provided under any such
policy or any plan 



 12
 









or program of the Company or the Bank; (vi) Executive’s
right to any funds being held for Executive’s benefit or in Executive’s name
under any deferred compensation programs of the Company or the Bank; (vii)
Executive’s eligibility for indemnification in accordance with the provisions
of Section 4.9 of this Agreement or with the Company’s Articles of
Incorporation or corporate by-laws or under applicable law or any rights
Executive may have under any applicable insurance policy with respect to any
liability Executive may incur or may have incurred as an employee or officer of
the Bank or the Company; or (viii) any right Executive may have to obtain
contribution as permitted by law in the event of entry of judgment against
Executive as a result of any act or failure to act for which Executive and the
Company or the Bank, or any agent of the Company or the Bank, are jointly
liable.


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


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


4.13         Entire
Agreement.  This Agreement
constitutes the entire agreement and understanding between the parties hereto
in respect of the subject matter hereof and supersedes any prior or contemporaneous
agreement or understanding between the parties, written or oral, which relates
to the subject matter hereof.


[Remainder of Page Intentionally Blank]



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IN WITNESS WHEREOF, the parties have executed this
Agreement 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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