**Exhibit 10.9**

 

**SEVERANCE AGREEMENT**

 

THIS SEVERANCEAGREEMENT (this “**Agreement**”) ismade and entered into as of 11/13/2002, by and between National MercantileBancorp, a California corporation (the “**Company**”),and Hank McCaffrey (“**Officer**”)with reference to the following facts:

 

A.            Officer is an officer of the Companyand/or one or more subsidiaries of the Company; and

 

B.            In order to induce Officer to remainemployed by the Company and/or its subsidiaries, the Company is willing toagree to pay severance to Officer under certain circumstances.

 

NOW,THEREFORE, in consideration of the foregoing and of the respective covenantsand agreements of the parties herein contained, it is agreed as follows:

 

1.             Definitions.  For purposes of this Agreement, the followingterms when used in this Agreement shall have the meanings set forth below:

 

1.1           “**Board**”shall mean the Board of Directors of the Company.

 

1.2           “**Cause**”shall mean Officer, after the date of this Agreement (i) has been convicted bya court of competent jurisdiction of any felony or any criminal offenseinvolving dishonesty, breach of trust or misappropriation, or has entered aplea of *nolo contendere* to suchan offense; or (ii) has committed an act of fraud, embezzlement, theft,dishonesty or any act which would cause termination of coverage under theCompany’s Banker’s Blanket Bond as to Officer (as distinguished fromtermination of coverage as to the Company as a whole); or (iii) has committed awillful violation of the Code of Conduct of any member of the Company Group or any law, rule orregulation governing the operation of the Company Group which the Boarddetermines in good faith will likely have or has had a material adverse effecton the business, interests of reputation of the Company Group or any Memberthereof; or (iv) has willfully refused to perform the duties assigned to him;or (v) has committed a willful and unauthorized disclosure of materialconfidential information regarding the Company Group, which disclosure theBoard determines in good faith will likely have or has had a material adverseeffect on the Company Group or any member thereof.

 

1.3           “**Changeof Control**” shall mean any transaction or series of relatedtransactions as a result of which

 

(i)            the Company consummates areorganization, merger or consolidation, or sale or other disposition of all orsubstantially all of its assets (each a “**BusinessCombination**”), in each case *unless*immediately following the consummation of such Business Combinationall of the following conditions are satisfied: (x) Persons, who,

 

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immediately prior to suchBusiness Combination, were the beneficial owners of the Outstanding VotingSecurities of the Company, beneficially own (within the meaning of Rule 13d-3promulgated under the Exchange Act, directly or indirectly, more than one-thirdof the combined voting power of the then Outstanding Voting Securities of theentity (the “**Resulting Entity**”)resulting from such Business Combination (including, without limitation, anentity which as a result of such transaction owns the Company or all orsubstantially all of the Company’s assets either directly or through one ormore subsidiaries); (y) no Person, other than the Existing Shareholder Group,beneficially owns (within the meaning of Rule 13d-3), directly or indirectly,more than 20% of the then outstanding combined voting power of the Outstanding Voting Securities of the ResultingEntity, except to  the extent that suchPerson’s beneficial ownership of the Company immediately prior to the BusinessCombination exceeded such threshold; and (z) at least one-half of the membersof the board of directors of the Resulting Entity were members of the Board atthe time the Board authorized the Company to enter into the definitiveagreement providing for such Business Combination; or

 

(ii)           any Person acquires beneficialownership (within the meaning of Rule 13d-3) of more than 20% of the combinedvoting power (calculated as provided in Rule 13d-3 in the case of rights toacquire securities) of the then Outstanding Voting Securities of the Company; provided,however, that for purposes of this clause, the following acquisitionsshall not constitute a Change of Control: (x) any acquisition directly from theCompany, (y) any acquisition by the Company, (z) any acquisition by anyemployee benefit plan (or related trust) sponsored or maintained by the Company or any entity controlledby the Company; or (zz) any acquisition by the Existing Shareholder Group.

 

1.4           “**Company****Group**” shall mean at any time theCompany and each subsidiary of the Company at such time which is consolidatedwith the Company for financial reporting purposes.

 

1.5           “**Disabilityof Officer**” shall mean if Officer is Disabled and such disabilitycontinues for a period of any six months out of a one-year period.  “**Disabled**”shall mean Officer’s inability, through physical or mental illness or othercause, to perform normal and customary duties which Officer is required toperform for the Company.  In determiningwhether Officer is Disabled, the Company may rely upon the written statementprovided by a licensed physician acceptable to the Company.  Officer shall allow examination from time totime by any licensed physician selected by the Company and agreed to byOfficer.  All such examinations will beconducted within a reasonable time period.

 

1.6           “**ExchangeAct**” shall mean the Securities Exchange Act of 1934, as amended, orany successor statute.

 

1.7           “**ExistingShareholder Group**” shall mean Carl R. Pohlad, members of theimmediate family of Carl R. Pohlad, and any affiliated Person of Carl R. Pohlador any member of his immediately family.

 

1.8           “**GoodReason**” shall mean with respect to Officer (i) Officer beingdelegated or assigned material duties by the Board or the Chief ExecutiveOfficer of the

 

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Company, by a communication inwriting, which are substantially inconsistent with the position and status heldby Officer immediately prior to the effective date of the Change of Control; or(ii) Officer having had removed by the Board or the Chief Executive Officer ofthe Company by a communication in writing such authority and responsibilitywhich is necessary to carry out the duties of the position held by Officerimmediately prior to the effective date of the Change of  Control; or (iii) Officer having a substantialand adverse alteration in the nature, status, or prestige of Officer’sresponsibilities due to the action of the Board or the Chief Executive Officer,which is verifiable by tangible evidence; or (iv) Officer being forced torelocate permanently to an office more than 25 miles from the location of theCompany’s executive offices as in effect immediately prior to the effectivedate of the Change of Control; or (v) Officer having his or her basecompensation reduced by 10% or more from such base compensation in effect onthe date immediately preceding the effective date of the Change ofControl.  Notwithstanding the foregoing,the loss of one or more titles, and corresponding responsibility(ies), shallnot be deemed to be “**Good Reason**”under (i), (ii) or (iii) above provided that the Officer retains at least onetitle no less senior than Executive Vice President and Chief Financial Officerat the Company or at least one subsidiary bank of the Company.

 

1.9           “**OutstandingVoting Securities**” of any Person means the outstanding securities ofsuch Person entitling the holders thereof to vote generally in the election ofdirectors of such Person.

 

1.10         “**Person**”shall have the meaning ascribed to such term in Section 3(a)(9) of the ExchangeAct, which definition shall include a "person" within the meaning ofSection 13(d)(3) of the Exchange Act.

 

1.11         “**WithoutCause**”****shall mean anytermination of Officer’s employment by the Company except for a termination (i)for Cause, (ii) as a result of the death of Officer, or (iii) as a result ofthe Disability of Officer.

 

2.             Severance Payment.

 

2.1           Except as provided in Section 2.2, if(i) Good Reason exists within one year following a Change of Control, andOfficer gives written notice to the Company within 90 days after the occurrenceof such Good Reason that Officer is terminating his or her employment with theCompany for Good Reason, or (ii) the Company terminates Officer’s employmentWithout Cause within one year following a Change of Control, the Company willpay Officer in a lump sum an amount (the “**SeverancePayment**”) equal to nine times Officer’s base monthly salary as ineffect at the time of termination or, if greater, immediately prior to theeffective date of the Change of Control. The Severance Payment shall be reduced by required deductions forapplicable taxes and other withholdings and for any outstanding obligationsowed by Officer to the Company that are then due and payable, which deductionsand withholdings are specifically authorized by Officer.  The Severance Payment shall be in lieu ofany other severance payments to which Officer would be entitled under the plansor policies of the Company and any of its subsidiaries.  The Severance Payment will be paid at thetime of termination of the Officer’s employment with the Company.  Each Change of

 

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Control and each Good Reasonfollowing a Change of Control shall give Officer a separate right to give thenotice set forth in the first sentence of this Section 2.

 

2.2           Notwithstanding any other provisionof this Agreement, the Company shall have no obligations to make the SeverancePayment if such Severance Payment is prohibited by applicable federal or statelaw, including without limitation Part 359 of the regulations of the FederalDeposit Insurance Corporation (12 CFR § 359 *etseq.*) or any successor provision.

 

2.3           As a condition to the obligation ofthe Company to pay the Severance Payment, the Officer must execute and delivera release in form and substance satisfactory to the Company releasing theCompany Group and its directors, officers, employees and agents (“**Released Parties**”) from any and all claimsthe Officer may have against the Released Parties, whether such claims areknown or unknown, absolute or contingent, other than claims under thisAgreement, claims for salary and other compensation and benefits accrued priorto termination, and rights under employee benefit plans.

 

3.             IRC Provisions.  Notwithstanding any other provision of thisAgreement, if the Company reasonably determines that the payment of theSeverance Payment to Officer would be nondeductible by the Company for federalincome tax purposes because of Section 280G of the Internal Revenue Code of1986, as amended (the “**Code**”), theSeverance Payment shall be reduced to an amount which maximizes the SeverancePayment without causing any portion of the same to be nondeductible by theCompany because of Section 280G of the Code. Any such reduction shall be applied to the Severance Payment or theother amounts due to Officer in such manner as Officer may reasonably specifywithin 30 days following notice from the Company of the need for such reductionor, if Officer fails to so specify timely, as determined by the Company.

 

4.             Employee Benefits.  All employee benefits provided by theCompany shall cease upon termination of Officer’s employment, whether for GoodReason, Without Cause, or for any other reason, and the Company shall have nofurther responsibility with respect thereto after such termination; provided,however, that: (a) nothing contained in this Agreement shall affect anyright Officer may have pursuant to the federal entitlement to continued grouphealth care coverage as provided in the Consolidated Omnibus BudgetReconciliation Act of 1985 (“**COBRA**”)****or any successor legislation or comparablestate law; (b) if Officer is entitled to receive a Severance Payment pursuantto Section 2 hereof, and if Officer elects under COBRA to continue to receiveany benefits thereunder, the Company shall reimburse Officer for the amount ofsuch Officer’s COBRA payments for the first six months after such termination;and (c) nothing shall alter or modify the post termination rights of Officerunder any employee benefit plan (such as the right to exercise vested optionsfor a specified period under the Stock Incentive Plan).

 

5.             Term.  The Agreement shall commence on the date setforth above and shall terminate upon 12 months prior written notice to theOfficer.

 

6.             Employment “At Will”.  Neither this Agreement nor the SeverancePayment payable hereunder shall be deemed to limit, replace or otherwise affectthe “at will” nature of

 

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Officer’s employment with theCompany Group.  Officer’s employment withany member of the Company Group continues to be for an unspecified term and maybe terminated at will at any time with or without cause or notice by suchmember of the Company Group or by Officer (but in the case of Officer, withoutthe written consent of the Company Officer must terminate his employment withall members of the Company Group).  Thisemployment “at-will” relationship cannot be changed absent an express intent asset forth in an individualized written employment contract signed by both Officerand the Chief Executive Officer of the Company.

 

7.             Mitigation.  Officer shall have no obligation to mitigatedamages based upon Officer’s termination pursuant to Section 2 of thisAgreement, and the Severance Payment shall not be reduced as a result ofOfficer obtaining other employment within nine months of Officer’s termination.

 

8.             Counterparts.  This Agreement may be executed in any numberof counterparts, each of which shall be deemed an original, and all of which,together, shall constitute one and the same instrument.

 

9.             Partial Invalidity.  Any provision of this Agreement which shallprove to be invalid, void or illegal shall in no way affect, impair orinvalidate any other provision hereof, and such other provisions shall remainin full force and effect.

 

10.           Governing Law.  The terms and provisions of this Agreementshall be governed and construed pursuant to the laws of the State of Californiaexcept to the extent governed by federal law.

 

11.           Construction.  Headings at the beginning of each sectionare solely for the convenience of the parties and are not a part of thisAgreement.  Whenever required by thecontext of this Agreement, the singular shall include the plural and themasculine shall include the feminine and vice versa.  This Agreement shall not be construed as if it had been preparedby one of the parties, but rather as if both parties had prepared thesame.  Unless otherwise indicated, allreferences to sections are to this Agreement.

 

12.           Integration.  This Agreement represents the entire andintegrated agreement between the Company and Officer regarding the subjectmatter hereof and supersedes all prior negotiations, representations oragreements, either written or oral.

 

13.           Successors and Assigns.  The terms, covenants and conditions hereincontained shall be binding upon and shall inure to the benefit of the heirs,successors and assigns of the parties hereto.

 

14.           No Waiver.  No waiver by either party of any breach ordefault hereunder shall be deemed a waiver of any other breach or default, andno delay or forbearance by either party hereunder in enforcing any of itsrights or remedies shall be deemed a waiver of any such rights or remedies,unless such waiver is embodied in a writing signed by the authorizedrepresentative of the party to be bound.

 

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IN WITNESSWHEREOF, this Agreement has been executed effective on the day and yearhereinabove set forth.

 
| THE  “COMPANY” |   | NATIONAL  MERCANTILE BANCORP |
|--------------------------|--------|------------------------------|
|                     |   |                         |
|                     |   |                         |
|                     |   | By:                          | Scott G. Montgomery |
|                     |   | Its:                         | President  & CEO |
|                     |   |                         |
| “OFFICER”      |   | /s/ Scott G.  Montgomery     |

 

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