Amended and Restated Employment Agreement

2.  Location and Facilities.  Executive will operate from Bank’s and Company’s principal administrative offices or such other sites as Bank’s or Company’s Board of Directors may reasonably request.  Bank and Company shall provide working facilities and staff customary for Executive’s position and as are necessary to perform Executive’s duties.

3. Term.  Executive’s employment shall initially be for a one-year term commencing on September 12, 2008 (the “Start Date”) and shall renew for additional one-year periods thereafter on each anniversary of the Start Date unless at least thirty (30) days prior notice is provided by any party that it does not wish to renew.  Notwithstanding anything to the contrary in this Agreement, any party may terminate Executive’s employment at any time in accordance with this Agreement or applicable law.  The period of such initial term and any renewal period(s) through the date of termination of Executive’s employment shall be referred to as the “Term.”

5. Benefit Plans.  During the Term, Executive shall be entitled to participate in such welfare benefit, pension benefit, ESOP or other stock compensation, and other benefit plans or programs maintained by Bank or Company for which Executive is eligible in accordance with Bank or Company policy, as the case may be, and subject to the terms and conditions of such benefits, plans and programs.  Nothing in this Agreement shall affect Bank’s or Company’s right to change insurance carriers and to adopt, amend, terminate or modify such benefits, plans and programs at any time.

 

6. Vacation and Other Leave.  During the Term, Executive shall be entitled to vacation, paid time off, sick leave and other paid or unpaid leave benefits in accordance with Bank and Company policies for senior executives or as otherwise approved by the Boards of Directors of both Bank and Company.

7. Bonus Compensation. In addition to base salary, Executive shall be eligible during the Term beginning in calendar year 2009 for an annual bonus at a target of eighty percent (80%) of Executive’s annualized base salary rate (the “Annual Bonus”).  Executive must be employed on December 31 of a calendar year to be eligible for an Annual Bonus for that calendar year, except as otherwise provided in this Agreement.  Whether to pay an Annual Bonus and the amount of any Annual Bonus if paid shall be determined in the discretion of Bank’s and Company’s respective Board of Directors (or any committee(s) thereof) based on the attainment of reasonable performance-based criteria established by them so long as (a) Executive’s target Annual Bonus is eighty percent of his annualized base salary rate, and (b) the criteria are established to and do achieve qualified performance-based compensation status under Internal Revenue Code section 162(m), 26 U.S.C. § 162(m).  The performance-based criteria may include, but are not limited to, management of Bank’s balance sheet and product pricing, growth in financial products offered by Bank, adherence to internal controls, management of credit risk, internal and external audit results, customer service quality, “back office” support quality, maintenance of appropriate operating policies and procedures, efficient integration of acquired companies, and capital management policies.  The specific criteria for each calendar year shall be set by agreement between Executive and both Bank’s and Company’s Boards of Directors.  A portion of any Annual Bonus awarded will be in the form of stock option grants, as described in Section 8(b) below.  Any Annual Bonus awarded shall be paid (or granted in the case of any stock options grants) no later than March 15 of the year following the year for which it was awarded.

The parties agree that any such options awarded shall be for a term of ten years and shall vest in installments of one-third per year over a period of three years.  The parties also agree that, to the maximum extent permitted by law, each option will qualify as an “incentive stock option” within the meaning of Internal Revenue Code section 422, 26 U.S.C. § 422.   Bank and Company shall take all steps necessary to ensure compliance with Section 422.  This Section 8 shall not prohibit any other grants that Bank or Company may, in their discretion, make to Executive during the Term.

9. Vesting of Options Upon Change of Control.  The option agreements covering any Company stock options granted to Executive pursuant to Section 8 shall provide that all options will vest immediately upon any Change of Control.  "Change of Control" shall mean either: (a) a consolidation or merger of Company with or into any other corporation or other entity or other corporate reorganization, in which the holders of equity interests of Company immediately prior to such consolidation, merger or reorganization own equity interests of the entity surviving such merger, consolidation or reorganization representing less than fifty percent (50%) of the combined voting power of the outstanding securities of such entity immediately after such consolidation, merger or reorganization, or (b) a sale of all or substantially all of the assets of Company (including a sale of the Bank) to an entity or person that is not an affiliate of Company.  The option agreements shall also provide for vesting of all options upon termination of Executive’s employment without Cause (as defined below) or upon Executive’s resignation from employment for Good Reason (as defined below).  Upon termination of Executive’s employment for any other reason, vesting of any stock options shall immediately cease, and any unvested options shall immediately be forfeited.

 

10. Expenses.  Bank or Company shall reimburse Executive for reasonable out-of-pocket expenses incurred by him during the Term in the discharge of his duties under this Agreement in accordance with Bank and Company policy.  All reimbursable expenses shall be documented in reasonable detail and submitted in a format consistent with Bank’s or Company’s expense reporting policies.

11. Automobile.  During the Term, Bank or Company shall pay Executive an automobile allowance of One Thousand Two-Hundred Fifty dollars ($1,250) per month, less any deductions and withholding required by law.  Executive shall be responsible for insurance, maintenance, and any other costs associated with any automobile operated by him, and he shall not be eligible for any further reimbursement or allowance for mileage, gasoline, or other automobile-related expenses.

13. Indemnification.  Executive has entered into the standard form of director and officer indemnification agreement entered into by directors and officers of Bank and Company.  Executive shall retain all rights he may have under California Labor Code § 2802.

14. Bank Transaction.  Notwithstanding anything to the contrary in this Agreement, Bank and Company shall have the option, from the Effective Date, not to continue Executive as President and Chief Executive Office of Bank and Company, respectively, as long as a successful Bank Transaction has not occurred.  If Bank and Company exercise such option, Executive shall receive a lump-sum payment in the amount of One Hundred Eighty Thousand dollars ($180,000) and Executive’s employment and this Agreement (except for Section 17) shall terminate.  Such payment, if made, shall be less any deductions and withholding required by law and shall be in lieu of any other payments pursuant to this Agreement.  An amount equal to the $180,000 payment has been deposited with a qualified escrow agent at Bank’s and Company’s expense.  Immediately upon a Bank Transaction, the $180,000 shall revert to and be released to Bank and Company (in proportion to their funding obligations under this Agreement), Executive’s employment shall continue as President and Chief Executive Officer, and this Agreement shall continue under its express terms.  For purposes of this Section, a “Bank Transaction” means the closing of a sale of Bank involving a capital investment into Bank.

 

16. Gross-Up Payments.  If any amounts payable to Executive are “excess parachute payments” under Internal Revenue Code section 280G, 26 U.S.C. § 280G, and are subject to excise tax under Internal Revenue Code section 4999, 26 U.S.C. § 4999 (or any similar tax or assessment), then Executive shall receive from Company an additional payment to offset the excise tax liability (“Gross-Up Payment”).  The parties intend that Executive will receive an amount sufficient to place Executive in the same after-tax position that Executive would have occupied if no amounts payable were excess parachute payments.  The Gross-Up Payment shall be made (net of all applicable withholding taxes, including the taxes required to be withheld under Section 4999 or any similar law or regulation) no later than fourteen (14) days prior to the last date Executive may pay the excise taxes without additional penalty or interest.

 

17. Confidentiality.  Executive will have access to confidential, proprietary and trade secret information (collectively, “Confidential Information”) during the course of employment under this Agreement.  Confidential Information includes any non-public information belonging to Bank or Company and the subject of reasonable efforts to maintain its confidentiality, such as operating methods, business methods, discoveries, processes, patents, business plans, financial or budget information, research plans and results, regulatory compliance plans, proposals (including without limitation the identities of any persons or entities submitting proposals), projects, the terms of any transaction, and information regarding past, present, and future customers or employees.  Confidential Information can exist in any form, including oral or written statements, information remembered, information stored electronically, and information embodied in objects or processes.  Executive shall hold all Confidential Information as confidential.  Furthermore, Executive shall not during the Term or thereafter, without prior written permission from the Boards of Directors of both Bank and Company or as necessary in the performance of his duties during the Term, publish, disclose, or transfer to anyone outside of Company or Bank, or use in any other business, any Confidential Information.

 

18. Unfair Competition and Non-Solicitation of Employees.  Executive agrees that, following termination of or resignation from his employment for any reason, Executive shall not engage in unfair competition against Bank or Company.  Executive shall not, during the two (2) year period following the termination of or resignation from his employment for any reason, solicit, persuade, or induce any individual who is employed by Bank or Company to:  (a) terminate or refrain from continuing such employment, or (b) become an employee or consultant of any individual or entity other than Bank or Company.

19. Notice.  Notices under this Agreement shall be in writing and shall be personally delivered, sent via United States Mail or transmitted by facsimile.  Such notices shall be deemed received by a party (a) upon the date of personal delivery to Executive or to Bank’s or Company’s main administrative office, (b) three (3) business days after placement, postage-prepaid, in the United States Mail, or (c) one (1) business day after transmission by facsimile.  Any party may designate or change its address and facsimile number for notice under this Agreement so long as the designation or change is transmitted in writing to and received in advance by all parties.

d.            If at the time of Executive’s separation from service, (i) Executive is a specified employee (within the meaning of Section 409A and using the identification methodology selected by Bank or Company from time to time), and (ii) the Board of Directors (or committee thereof) of Bank or Company makes a good faith determination that an amount payable hereunder constitutes deferred compensation (within the meaning of Section 409A) the payment of which is required to be delayed pursuant to the six-month delay rule set forth in Section 409A in order to avoid taxes or penalties under Section 409A, then Bank or Company will not pay such amount on the otherwise scheduled payment date but will instead pay it in a lump sum on the first business day after such six-month period, together with interest for the period of delay, compounded annually, equal to the prime rate (as published in the Wall Street Journal) in effect as of the dates the payment should otherwise have been provided.

e.            Any amount that Executive is entitled to be reimbursed under this Agreement will be reimbursed to Executive as promptly as practical and in any event not later than the last day of the calendar year after the calendar year in which the expenses are incurred, and the amount of the expenses eligible for reimbursement during any calendar year will not affect the amount of expenses eligible for reimbursement in any other calendar year.

 

f.            To the extent Executive would be subject to the additional 20% tax imposed on certain deferred compensation arrangements pursuant to Section 409A as a result of any provision of this Agreement, such provision shall be deemed amended to the minimum extent necessary to avoid application of such tax and the parties shall promptly execute any amendment reasonably necessary to implement this Section 21(f)  Executive, Bank and Company agree to cooperate to make such amendments to the terms of this Agreement as may be necessary to avoid the imposition of penalties and additional taxes under Section 409A to the extent possible; provided however, that Bank and Company both agree that any such amendment shall provide Executive with economically equivalent payments and benefits, and Executive agrees that any such amendment will not materially increase the cost to, or liability of, Bank or Company with respect to any payments.

 

22. Construction.  This Agreement shall be deemed mutually drafted and shall not be strictly construed in favor of any party.

23. Severability.  Any invalid provision of this Agreement shall be deemed severed and shall not affect the continued operation of the Agreement’s remaining provisions.

24. Entire Agreement.  This document contains the entire agreement of the parties.  It supersedes any other agreements, whether oral or in writing, between the parties with respect to the employment of Executive as President and Chief Executive Officer of Bank and Company, except for any indemnification agreements of the type referenced in Section 13 above.  Specifically, this Agreement supersedes and renders null and void the September 12, 2008 Employment Agreement among Executive, Bank, and Company.  This Agreement may be modified only by express written agreement signed by Executive and authorized representatives of Bank and Company.

25. Effective Date.  The “Effective Date” of this Agreement shall be the date of this Agreement.

26.            Counterparts.  This Agreement may be executed in one or more counterparts, all of which together shall constitute one and the same instrument.