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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:
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