**Exhibit10.12**

**EMPLOYMENTAGREEMENT**

This Employment Agreement (the “Agreement”) iseffective as of November 17, 2006 (the “Effective Date”) by andbetween James H. Burgess (“Executive”) and 1st Pacific Bank of California, a Californiastate-chartered bank (the “Bank”), with regard to the following:

A.    Executive has served as the Executive Vice President and ChiefFinancial Officer of the Bank under an Employment Agreement between Executiveand the Bank dated November 17, 2003, as amended on November 17, 2004(collectively, the “Former Employment Agreement”).

B.    Executive and the Bank have agreed that Executive shall continueto serve as the Executive Vice President and Chief Financial Officer and afull-time employee of the Bank under the terms of this Agreement, and as suchis expected to make a major contribution to the profitability, growth andfinancial strength of the Bank.

C.    The Bank considers the availability of Executive’s services,managerial skills and business experience to be in the best interests of theBank and the shareholders of the Bank and desires to assure the continuedservices of Executive on behalf of the Bank.

D.    Executive is willing to be employed by the Bank upon theunderstanding that the Bank will provide him with income security and benefitsif his employment with the Bank is terminated, upon certain terms andconditions.

NOW, THEREFORE, for valuable consideration the receipt and sufficiencyof which are hereby acknowledged, the parties agree as follows:

1.             Definitions.

“Bank” means 1st Pacific Bank of California, aCalifornia state-chartered bank, its successors and permitted assigns.

“Bank Board” means the Board of Directors ofthe Bank.

“Beneficiary” means the person or entity toreceive rights or benefits under this Agreement, as set forth in thisAgreement, in the event of the death of Executive.  Unless otherwise specified in a writtennotice to the Bank, the Beneficiary shall be the spouse of Executive, if any,and if there is none, the estate of Executive (including any trust created bythe terms of Executive’s will) or, if Executive provides the Bank with writtennotice thereof prior to his death, any trust as to which Executive was asettlor with a power of revocation.

“Benefits” means the types and amounts ofbenefits provided under Paragraph 3.6, provided that if at the date ofreference the terms of any Bank insurance plan prohibit the continuance orrecommencement of insurance benefits that Executive formerly held, the Bankshall be obligated to pay to Executive in cash on a monthly basis an amountequal to the Bank’s former premium payments (pro rated on a monthly basis) forthe benefit of Executive under such plan, except that if Executive is entitledto COBRA health insurance benefits the

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amount shall be increasedto the amount payable by Executive for such benefits if higher than the Bank’sformer premium payments.

“Change of Control” means the occurrence of anyof the following events:

(i)            any“person” (as used in Section 13(d) of the Securities Exchange Act of1934 and the rules promulgated thereunder) becomes the “beneficial owner” (asdefined in Rule  13d-3) of securitiesrepresenting a majority of the voting power of the then outstanding securitiesof the Bank; or

(ii)           asale of assets involving all or substantially all of the assets of the Bank, ora merger or consolidation of the Bank in which the holders of securities of theBank immediately prior to such event hold in the aggregate less than a majorityof the securities of the Bank or any other surviving or resulting entityimmediately after such event.

Notwithstanding the foregoing, a Change in Controlshall not be deemed to have occurred in the event the Bank forms a holdingcompany as a result of which the holders of the Bank’s outstanding votingsecurities immediately prior to the transaction hold, in approximately the samerelative proportions as they held prior to the transaction, substantially allof the outstanding voting securities of a holding company owning all of theBank’s outstanding voting securities after the completion of the transaction.

“Change of Control Severance Benefits” means(i) an amount equal to the sum of (y) one (1) times Executive’s baseannual salary at the rate then in effect in accordance with Paragraph 3.1,plus (z) the amount actually paid by the Bank to Executive under the Planfor the immediately preceding year, if any; and (ii) continuation ofbenefits provided under Paragraph 3.6 or substitute equivalent benefits inthe event that the particular benefits (for instance, insurance coverage) arenot carried by the Bank under its programs following the Change of ControlTermination, for a period of twelve (12) months.

“Change of Control Termination” means thetermination of employment of Executive within twelve (12) months after a Changeof Control (i) by the Bank under Paragraph 4.1.5; or (ii) byExecutive under Paragraph 4.2 for Good Cause.

“Code” means the Internal Revenue Code of 1986,as amended.

“Disability” shall be deemed to occur on thedate the Executive is, by reason of any medically determinable physical ormental impairment that can be expected to result in death or can be expected tolast for a continuous period of not less than 12 months, receiving incomereplacement benefits for a period of not less than three months under anaccident and health plan covering employees of the Bank.

“Executive” means James H. Burgess.

“Expiration Date” means December 31, 2008.

“Good Cause” means:  (i) a reduction in Executive’s basesalary below the rate then in effect in accordance with Paragraph 3.1;(ii) the Bank requiring that Executive be based

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at a location more thanfifty (50) miles from the Bank’s headquarters as of the Effective Date(excluding travel for Bank business and other temporary relocations of no morethan thirty (30) days individually); (iii) a reduction in his title; or(iv) the continuation after a Change of Control, or imposition within six(6) months after a Change of Control, of a material reduction in theduties or authority of Executive so that he is no longer performingsubstantially all of the duties of a chief credit officer of a community bank.

“Plan” means the 1st Pacific Bank of CaliforniaIncentive Compensation Plan for Senior Management, in substantially the formattached hereto as Exhibit A, as the same may be amended from timeto time.

“Separation Agreement” means the Separation andGeneral Release of Claims, substantially in the form attached hereto as Exhibit B.

“Trade Secrets and Other Proprietary andConfidential Information” means and consist of, for example, and notintending to be inclusive, information concerning any matters relating to thebusiness of the Bank, any of its customers, governmental relations, customercontacts, underwriting methodology, loan program configuration andqualification strategies, marketing strategies and proposals, or any otherinformation concerning the business of the Bank, its subsidiaries andaffiliates, and the Bank’s good will; provided that “Trade Secrets and OtherProprietary and Confidential Information” shall not be deemed to includeinformation that is or becomes, through no fault of Executive, in the publicdomain.

2.             Rights and Duties of Executive.

2.1           Employment.  The Bank hereby employs Executive as itsExecutive Vice President and Chief Financial Officer, and Executive accepts theduties described herein, and agrees to discharge the same faithfully and to thebest of his ability.  Executive shallperform such other duties as shall be from time to time prescribed by the ChiefExecutive Officer of the Bank and shall report to and be subject to thedirection of the Chief Executive Officer of the Bank.  Executive shall devote his full business timeand attention to the business and affairs of the Bank.

2.2           Termination of Former EmploymentAgreement.  As of the Effective Date,the Former Employment Agreement shall terminate without further liability ofthe Bank or Executive thereunder of any kind.

2.3           At-Will Employment.  Executive’s employment with the Bank is notfor a fixed period of time and can be terminated at the will of eitherExecutive or the Bank at any time, with or without notice, and with or withoutcause.  There are no agreements betweenExecutive and the Bank contrary to Executive’s at-will status.  Neither a Bank Board member nor a manager,supervisor, employee or agent of the Bank is authorized to alter Executive’sat-will status, except for the Chairperson of the Bank Board, and then only ina writing signed both by the Chairperson of the Bank Board and Executivefollowing adoption of a resolution by the Bank Board authorizing the specificchange reflected in such writing and authorizing the Chairperson of the BankBoard to sign such writing.  Executiveshould neither assume nor imply any promise of employment for any specifiedperiod of time except through such a signed writing.  This

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Agreement shall terminate immediately without furtherliability or obligation to Executive if (i) the Bank is closed by anysupervisory authority, or (ii) any supervisory authority demands, byproposed consent agreement or by a Prompt Corrective Action Directive, orpursuant to cease and desist powers, the removal of Executive from his positionas the Executive Vice President or Chief Financial Officer of the Bank.  Should Executive remain employed under thisAgreement through the Expiration Date, Executive’s employment with the Bankshall automatically terminate on that date and this Agreement shall be of noforce or effect on or after that date, subject to Paragraphs 5.4 and 8.6.

2.4           Outside Activities.  Executive shall not have other employment,consulting, charitable or independent contractor work that materiallyinterferes with the fulfillment of Executive’s duties to the Bank.  Executive shall not undertake expandedcommitments to business or charitable activities or engage in new suchactivities before consulting with the President and Chief Executive Officer ofthe Bank.  Executive will not provideservices to, hold or make any investment in or loan to, or participate in the managementor business of, any bank, savings and loan, credit union, thrift and loan,industrial loan or other entity engaged in the business of making loans oraccepting deposits or both; provided that Executive may own less than 5% of thevoting stock of any company that files reports under the Securities ExchangeAct of 1934.

3.             Compensation and Benefits.  In consideration for the services to berendered by Executive to the Bank, the Bank agrees to provide Executive withthe following compensation and benefits:

3.1           Salary.  The Bank shall pay Executive a minimum annualsalary, pro rated for partial years, at the rate of One Hundred Forty SevenThousand Five Hundred Dollars ($147,500) for the period of the Effective Datethrough December 31, 2007, increasing to One Hundred Fifty Seven Thousand FiveHundred Dollars ($157,500) for the period of January 1, 2008 through December31, 2008, due and payable biweekly, or otherwise in accordance with the Bank’spolicy for the scheduling of salary payments to employees as in effect fromtime to time.  Other salary increases, ifany, shall only be as approved by the Bank Board in its sole discretion.

3.2           Withholding and Deductions.  The Bank shall withhold and/or deduct fromany and all salary or other payments to Executive, all taxes which may berequired to be deducted or withheld under any provision of law (including, butnot limited to, social security payments and income tax withholding) now ineffect or which may become effective any time during Executive’s employmentwith the Bank.

3.3           Executive Incentive Compensation.  In general, the Bank believes that superiorperformance of Executive should be rewarded and encouraged by incentivecompensation.  The Bank Board shall adoptthe Plan pursuant to which Executive may be entitled to incentive compensationprovided that the performance goals of the Bank as set forth in the Plan areachieved and the terms and conditions of the Plan are satisfied.  In addition, Executive shall be entitled toother incentive compensation and bonuses as the Bank Board may determine in itssole discretion.  Notwithstanding theforegoing, Executive shall not participate in the Bank’s Team Share Plan.

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3.4           Automobile Allowance.  The Bank shall pay Executive an automobileallowance of Six Hundred Dollars ($600.00) per month, subject towithholding.  This is an allowance forall automobile costs and expenses, including, but not limited to, fuel,license, maintenance, insurance, repairs and purchase or lease payments.

3.5           Expense Reimbursement.  The Bank agrees to reimburse Executive forall ordinary and necessary expenses incurred by Executive on behalf of the Bankin accordance with the Bank’s policies and procedures as in effect from time totime, including entertainment, meal and travel expenses.

3.6           Insurance.  The Bank shall provide life insurance with alife insurance benefit equal to at least one and one-half times the annualsalary of Executive at the rate then in effect under Paragraph 3.1, whichshall be provided through any group life insurance plan of the Bank at the Bank’soption.  The Bank shall provide toExecutive the long term disability insurance provided by the Bank to employeesat the Effective Date under the Bank’s group plan or shall replace it withsimilar coverage so long as Executive is employed by the Bank.  Executive shall be entitled to participate insuch other insurance benefits as are generally provided to the employees of theBank from time to time.

3.7           Vacation.  Executive shall be entitled to five (5) weeksof vacation time and pay per annum, which shall be scheduled in Executive’sdiscretion, subject to and taking into account applicable banking laws andregulations.  Unused vacation may beaccrued up to a maximum of six (6) weeks of unused vacation in addition to thevacation to which Executive may be entitled in the current year, and thereafterExecutive shall cease to accrue unused vacation until used.  Vacationmust be accrued before taken, and if not yet accrued, must have the priorapproval of the Chief Executive Officer of the Bank to be taken.  Vacation may be used only at the time ortimes approved by the Chief Executive Officer of the Bank.

4.             Termination.

4.1           Employer Right to TerminateEmployment.  Nothing in thisAgreement shall adversely affect the right of the Bank Board to terminateExecutive.  The Bank Board has the rightto terminate the employment of Executive with the Bank at will, with or withoutcause, upon delivery of written notice to Executive (except in the case ofdeath of Executive, in which event termination shall automatically occur at thedate of death), and including, but not limited to, for any of the followinggrounds:

4.1.1        Willful breach or habitual neglect orinability (except where such inability is due to Disability or death) toperform Executive’s duties hereunder, including without limitation failure tocooperate with the Bank Board in the structuring, documentation or negotiationof a transaction that might result in a Change of Control;

4.1.2        Malfeasance or misfeasance in theperformance of Executive’s duties hereunder, imposition of a regulatory orderto remove Executive, failure to comply with a direction by the Chief Executive Officer of the Bank,material breach of Bank policy or procedure, or breach of this Agreement;

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4.1.3        Immoral or illegal conduct, convictionof a felony, conviction of a misdemeanor involving moral turpitude;

4.1.4        Disability or death;

4.1.5        Determination in the complete discretionof the Bank Board that the employment of Executive should be terminated priorto the Expiration Date, without reference to the grounds set forth inParagraphs 4.1.1, 4.1.2, 4.1.3 or 4.1.4, and specification of thetermination date in the notice described in Paragraph 4.1.

4.2           Termination by Executive.  Executive may terminate his employment withthe Bank at will, for any reason, and without advance notice.  However, as a courtesy, Executive isrequested to deliver written notice to the Bank three (3) months inadvance of the date such termination is to take effect, except with respect toa termination for Good Cause.  Executivemay terminate his employment with the Bank prior to the Expiration Date forGood Cause upon thirty (30) days notice to the Bank and the Bank’s failure tocure within that time.  To be effective,such notice must be given by Executive within fifteen (15) days of theoccurrence of the event that constitutes Good Cause, provided that if GoodCause results from a material reduction in the duties or authority of Executiveso that he is no longer performing substantially all of the duties of a chieffinancial officer of a community bank and such reduction occurs before a Changeof Control occurs and continues after the Change of Control occurs, Executiveshall be required to give the thirty (30) day notice described above withinfifteen (15) days of the Change of Control.

4.3           Termination Upon Expiration.  If Executive and the Bank have not enteredinto an amendment of this Agreement extending its term or another writtenagreement replacing this Agreement on or prior to the Expiration Date, at thatdate his employment will automatically terminate as a result of expiration of this Agreement at the Expiration Date.  Nothing in this Paragraph shallprejudice the at-will status of Executive or require the Bank to negotiate withExecutive.

4.4           Post-Notice Activities ofExecutive.  In the event terminationis not effective immediately upon the delivery of notice of termination by theBank or Executive, the Bank shall have the right to require that during theperiod between the giving of notice and the effective date of termination,Executive’s activities and responsibilities be curtailed as deemed appropriateby the Bank.  Such curtailment shallinclude, without limitation, removing Executive from corporate offices,requiring Executive to be physically absent from the Bank’s facilities, andeliminating Executive’s access to computer systems, e-mail and telephonesystems.

4.5           Automatic Resignations.  Upon notice of termination of employmentExecutive shall, automatically and without further action by any party, be deemedto have resigned from all directorships with the Bank and any of itssubsidiaries and affiliates.  Upontermination of employment, Executive shall, automatically and without furtheraction by any party, be deemed to have resigned from all offices and othercapacities with the Bank and any of its subsidiaries and affiliates.

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5.             Post-Termination Payments and Benefits.  The following are the post-terminationpayments and benefits to which Executive is entitled upon termination ofemployment with the Bank.

5.1           Termination Resulting from Breach.  In the event the employment of Executive isterminated under Paragraphs 4.1.1, 4.1.2 or 4.1.3, the Bank shall provideExecutive only a payout of all accrued but unused vacation as of the date oftermination, the base salary and Benefits, if any, then-provided, on the termsthen-provided, due him through the date of termination and shall not beobligated to provide any other compensation or Benefits.

5.2           Other Terminations.

5.2.1        Payments – Disability.  In the event the employment of Executive isterminated under Paragraphs 4.1.4 for disability, the Bank shall provideExecutive only the following:

(a)           the salary due Executive as of thedate of termination;

(b)           payment of certain incentivecompensation due Executive, if any, in compliance with the Plan;

(c)           a payout of all accrued but unusedvacation as of the date of termination; and

(d)           continuation of the group medical andother insurance benefits, if any, then-provided under Paragraph 3.6, for aperiod of three (3) months from the date of termination, subject to thelimitations of and to the extent permitted by the policy or policies underwhich such benefits are provided.

5.2.2        Payments – Death.  In the event the employment of Executive isterminated under Paragraphs 4.1.4 for death, the Bank shall provide theBeneficiary only the following:

(a)           the salary due Executive as of thedate of death plus a lump sum payment equal to three (3) months of the basesalary at the rate then in effect in accordance with Paragraph 3.1;

(b)           payment of certain incentivecompensation due Executive, if any, in compliance with the Plan;

(c)           a payout of all accrued but unusedvacation as of the date of termination; and

(d)           continuation of the group medical andother insurance benefits, if any, then-provided under Paragraph 3.6, for aperiod of three (3) months from the date of termination, subject to thelimitations of and to the extent permitted by the policy or policies underwhich such benefits are provided.

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5.2.3        Payments – Termination UnderParagraph 4.1.5.  In the eventthe employment of Executive is terminated under Paragraph 4.1.5 or underParagraph 4.2 for Good Cause, subject to Executive first entering into theSeparation Agreement and such agreement being fully effective, the Bank shallprovide Executive only the following:

(a)           continued salary at the rate then ineffect under Paragraph 3.1 and the automobile allowance then provided underParagraph 3.4 for a period of nine (9) months from the date notice oftermination is delivered to the Executive, or at the option of the Bank a lumpsum payment of such amount, all subject to withholding;

(b)           payment of certain incentivecompensation due Executive, if any, in compliance with the Plan, with Executive’stermination under this Paragraph 5.2.3 being considered for the limited purposeof interpreting the Plan in the context of this Agreement as being atermination “without cause”;

(c)           a payout of all accrued but unusedvacation as of the date of termination; and

(d)           continuation of the group medical andother insurance benefits, if any, then-provided under Paragraph 3.6, for aperiod of nine (9) months from the date of termination, subject to thelimitations of and to the extent permitted by the policy or policies underwhich such benefits are provided.

5.2.4        Executive’s Right to Waive Payments.  Executive shall have the right to waive hisrights to receive such payments and Benefits otherwise due under thisParagraph 5.2 by giving advance written notice of such waiver to the Bank.  After receipt of such notice, the Bank shallhave no further obligation to provide any payments or Benefits under thisParagraph 5.2.

5.3           Change of Control.

5.3.1        Payment Following CertainTerminations Related to Change of Control. Subject to Executive first entering into the Separation Agreement andsuch agreement being fully effective, in respect of any Change of ControlTermination the Bank shall pay to Executive the Change of Control SeveranceBenefits in a lump sum (except for the benefits under Paragraph 3.6, whichshall be continued) within five (5) days following the date the SeparationAgreement is fully effective.

5.3.2        Executive’s Right to Waive Payments.  Executive shall have the right to waive hisrights to receive payments and Benefits otherwise due under thisParagraph 5.3 by giving advance written notice of such waiver to theBank.  After receipt of such notice, theBank shall have no further obligation to provide any payments or Benefits underthis Paragraph 5.3.

5.3.3        Adjustments in Payments.  The terms of this Paragraph 5.3.3override and control any and all other terms of this Agreement to the extentinconsistent with this Paragraph 5.3.3. This Paragraph 5.3.3 shall apply to the extent that the aggregatepresent value of any or all payments and benefits in the nature of compensationto (or for the benefit of)

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Executive provided under this Agreement or otherwiseprovided to Executive by or on behalf of the Bank or any affiliate, parent orcontrolling entity of the Bank, constitute a “parachute payment” under theprovisions of Section 280G of the Code, and the regulations thereunder(the “Total Payments”).  In theevent that the Total Payments would exceed an amount equal to 299% of Executive’s“base amount” as that term is defined in Section 280G of the Code, asdetermined by the independent public accountants for the Bank, Executive andthe Bank agree that the payments or benefits provided to Executive under thisAgreement shall be reduced (or the parties shall agree to a reduction in otherpayments or benefits included in the Total Payments to the extent legally andcontractually permissible) so that the present value of the total amountreceived by Executive that would constitute a “parachute payment” will be onedollar ($1.00) less than three (3) times Executive’s base amount (as defined inSection 280G of the Code) and so that no portion of the payment or benefitsreceived by Executive would be subject to the excise tax imposed by Section4999 of the Code.

5.4           Termination at Expiration Date.  IfExecutive’s employment is terminated as a result of expiration of thisAgreement at the Expiration Date, subject to Executive first entering into theSeparation Agreement and such agreement being fully effective, the Bank shallprovide Executive only the following:

5.4.1        continued salary at the rate then ineffect under Paragraph 3.1 for a period of six (6) months from the date oftermination, or at the option of the Bank a lump sum payment of such amount,all subject to withholding;

5.4.2        continuation of the group medical andother insurance benefits, if any, then-provided under Paragraph 3.6, for aperiod of six (6) months from the date of termination, subject to thelimitations of and to the extent permitted by the policy or policies underwhich such benefits are provided;

5.4.3        a payout of all accrued but unusedvacation as of the date of termination; and

5.4.4        payment of certain incentivecompensation due Executive, if any, in compliance with the Plan, with Executive’stermination as a result of expiration being considered for the limited purposeof interpreting the Plan in the context of this Agreement as being atermination “without cause.”

5.5           Consideration for Payments andRemedies.  Without limiting any otherremedies available to the Bank, the payments to be made underParagraphs 5.2, 5.3 or 5.4 (subject to the exceptions stated therein)after the date of termination of Executive’s employment shall be subject toExecutive’s execution of the Separation Agreement, and Executive’s continuedcompliance with the Separation Agreement and the terms of this Agreement thatare effective after termination of Executive’s employment, through the makingof the last such payment.

5.6           Death Following Termination.  In the event that Executive dies whilereceiving any payments under this Paragraph 5, such payments shall becontinued for the benefit of the Beneficiary, as would otherwise be requiredunder this Paragraph 5.

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5.7           Nonassignability.  Neither Executive nor any other person orentity shall have any power or right to transfer, assign, anticipate,hypothecate, mortgage, commute, modify, or otherwise encumber in advance any ofthe rights or benefits of Executive under this Paragraph 5, nor shall anyof said rights or benefits be subject to seizure for the payment of any debts,judgments, alimony or separate maintenance, owed by Executive or any otherperson or entity, or be transferable by operation of law in the event ofbankruptcy, insolvency or otherwise.  Theterms of this Paragraph 5.7 shall not affect the interpretation of anyprovision of this Agreement.

5.8           Claims Procedure.  The Bank Board shall make all determinationsas to rights to benefits under this Paragraph 5.

5.9           Regulatory Restrictions.  The parties understand and agree that at thetime any payment would otherwise be made or benefit provided under thisParagraph 5, depending on the facts and circumstances existing at suchtime, the satisfaction of such obligations by the Bank may be deemed by aregulatory authority to be illegal, an unsafe and unsound practice, or for someother reason not properly due or payable by the Bank.  Among other things, the regulations at 12C.F.R. Part 30, Appendix A promulgated pursuant to Section 39(a) ofthe Federal Deposit Insurance Act, and at 12 C.F.R. Part 359, or similarregulations or regulatory action following similar principles may apply at suchtime.  The Bank agrees that to the extentreasonably feasible, it will in good faith seek to determine the position ofthe appropriate regulatory authority in advance of each payment or benefitotherwise due under this Paragraph 5, including seeking the approval oracquiescence of the appropriate regulatory authorities, if required.  The parties understand, acknowledge and agreethat, notwithstanding any other provision of this Agreement, the Bank shall notbe obligated to make any payment or provide any benefit under thisParagraph 5 where (i) an appropriate regulatory authority does notapprove or acquiesce as required or (ii) the Bank has been informed eitherorally or in writing by a representative of the appropriate regulatoryauthority that it is the position of such regulatory authority that making suchpayment or providing such benefit would constitute an unsafe and unsoundpractice, violate a written agreement with the regulatory authority, violate anapplicable rule, law or regulation, or would cause the representative of theregulatory authority to recommend enforcement action against the Bank.

5.10         Right of Offset. Any and all ofthe compensation and benefits that would otherwise be provided under thisParagraph 5 are subject to the Bank’s offset for any liability ofExecutive to the Bank to the extent the Bank Board determines that suchliability exists.  In addition, withoutlimiting the remedies of the Bank otherwise available under this Agreement orotherwise, all compensation and benefits that would otherwise be payable underthis Paragraph 5 shall cease as of the date Executive first violates anyof the provisions included in Paragraphs 6.4, 6.5 or 6.6.

5.11         Overlapping Benefits and Payments.  In the event that Executive receives paymentsand/or benefits under one of Paragraphs 5.1 through 5.4, inclusive,Executive may not receive payments and/or benefits under one of the other ofsuch Paragraphs, and the first such applicable of those Paragraphs shallapply.

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5.12         Delayed Payments.  In the event that Code Section 409A (“**409A**”) applies to any compensation withrespect to a separation from service, payment of that compensation shall bedelayed if Executive is a “specified employee,” as defined in 409A(a)(2)(B)(i),and such delayed payment is required by 409A. Such delay shall last six months from the date of separation fromservice.  On the day following the end ofsuch six-month period, the Bank shall make a catch-up payment to Executiveequal to the total amount of such payments that would have been made during thesix-month period but for this Section 5.12, plus interest calculated at theprime rate as reported in The Wall Street Journal.

6.             Additional Covenants.

6.1           Insurance.  The Bank shall have the right to obtain andhold a “keyman” life insurance policy on the life of Executive and disabilityinsurance covering Executive, in each case, with the Bank as beneficiary ofsuch policy.  Executive agrees to provideany information required for the issuance of any such policy and submit himselfto any physical examination required for any such policy.

6.2           Unsecured General Creditor.  Neither Executive nor any other person orentity shall have any legal right or equitable rights interests or claims in orto any property or assets of the Bank under the provisions of thisAgreement.  No assets of the Bank shallbe held under any trust for the benefit of Executive or any other person orentity or held in any way as security for the fulfilling of the obligations ofthe Bank under this Agreement.  All ofthe Bank’s assets shall be and remain the general, unpledged, unrestrictedassets of the Bank.  The Bank’sobligations under this Agreement are unfunded and unsecured promises, and tothe extent such promises involve the payment of money, they are promises to paymoney in the future.  Executive and anyperson or entity claiming through him shall be unsecured general creditors withrespect to any rights or benefits hereunder.

6.3           Dispute Resolution.  Simultaneously with the execution of thisAgreement, the parties have entered into the Arbitration Agreement attached asExhibit C, which the parties agree shall govern the resolution of any andall disputes referenced therein.

6.4           Return of Documents.  Executive expressly agrees that upontermination of employment he will return to the Bank all Bank manuals,document, files, reports, studies, customer lists, business plans, loan anddeposit program plans and outlines, customer solicitation and follow-uptechniques and plans, marketing plans, employee policies, incentivecompensation arrangements, instruments, software, and other materials usedand/or developed by Executive during his employment, whether in paper, computerreadable, computer coded, magnetic, compact disk or other tangible orelectronic form.

6.5           Confidentiality.

6.5.1        No Disclosure.  During the term of employment with the Bank,Executive will have access to and become acquainted with various Trade Secretsand Other Proprietary and Confidential Information which are owned by the Bankand which are used in the operation of the Bank’s business, the wrongful use ordisclosure of which to the public or competitors of the Bank would materiallyadversely affect the business and prospects of the

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Bank.  Executive shall not disclose or use in anymanner, directly or indirectly, any Trade Secrets and Other Proprietary andConfidential Information either during his employment with the Bank or at anytime thereafter, except as required in the course of employment with the Bank.

6.5.2        Nonsolicitation of Business.  Without limiting Paragraph 6.5.1, Executiveagrees that for a period of twelve (12) months following the termination of hisemployment with the Bank, Executive will not, directly or indirectly, solicit,attempt to solicit, divert, or attempt to divert any customers of the Bank orany business the Bank or a subsidiary or affiliate had enjoyed or solicitedfrom its customers, borrowers, depositors or investors by using any TradeSecrets and Other Proprietary and Confidential Information.

6.6           Business Protection Covenants.

6.6.1        Covenant Not to Compete.  Executive agrees that he will not, during thecourse of employment, voluntarily or involuntarily, directly or indirectly,(i) engage in any banking or financial products or service business, loanorigination or deposit-taking business or any other business competitive withthat of the Bank, its subsidiaries or affiliates (“Competitive Business”)within the County of San Diego (the “Market Area”), (ii) own,manage, operate, control, be employed by, or provide management or consultingservices in any capacity to any firm, corporation, or other entity (other thanthe Bank or its subsidiaries or affiliates) engaged in any Competitive Businessin the Market Area, or (iii) solicit or otherwise intentionally cause anymember of the Bank Board or any employee or officer of the Bank or any of itssubsidiaries or affiliates to engage in any action prohibited under (i) or(ii) of this Paragraph 6.6.1.

6.6.2        Inducing Employees To Leave The Bank;Employment of Employees.  Any attempton the part of Executive to induce others to leave the Bank’s employ, or theemploy of any of its subsidiaries or affiliates, or any effort by Executive tointerfere with the Bank’s relationship with its other employees would beharmful and damaging to the Bank. Executive agrees that during the term of employment and during anyperiod following the termination of his employment during which he is receivingcompensation or benefits under Paragraphs 5.2, 5.3 or 5.4, Executive willnot in any way, directly or indirectly (i) induce or attempt to induce anyemployee of the Bank or any of its subsidiaries of affiliates to quitemployment with the Bank or the relevant subsidiary or affiliate;(ii) otherwise interfere with or disrupt the relationships between theBank and its subsidiaries and affiliates and their respective employees;(iii) solicit, entice, or hire away any employee of the Bank or any of itssubsidiaries or affiliates; or (iv) hire or engage any employee of theBank or any subsidiary or affiliate or any former employee of the Bank or anysubsidiary or affiliate whose employment with the Bank or the relevantsubsidiary or affiliate ceased after the date of termination of Executive’semployment with the Bank.

6.7           EquitableRelief.  Executive acknowledges andagrees that irreparable injury will result to the Bank in the event of a breachof any of the provisions of this Paragraph 6 (the “Designated Provisions”)and that the Bank will have no adequate remedy at law with respectthereto.  Accordingly, in the event of amaterial breach of any Designated Provision, and in addition to any other legalor equitable remedy the Bank or its subsidiaries or affiliates may

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have, the Bank and any relevant subsidiary or affiliate shall beentitled to the entry of a preliminary and permanent injunction (including,without limitation, specific performance) to restrain the violation or breachthereof by Executive or any affiliates, agents, or any other persons acting foror with Executive in any capacity whatsoever, and Executive submits to thejurisdiction of such court in any such action. Any such remedy shall be granted pursuant to the dispute resolutionprocedures applicable under Paragraph 6.3.

6.8           Severability.  It is the desire and intent of the partiesthat the provisions of this Paragraph 6 shall be enforced to the fullestextent permissible under the laws and public policies applied in eachjurisdiction in which enforcement is sought. Accordingly, if any particular provision of this Paragraph 6 shallbe adjudicated or found to be invalid or unenforceable, such provisions shallbe deemed amended to delete therefrom the portion thus adjudicated or found tobe invalid or unenforceable, such deletion to apply only with respect to theoperation of such provision in the particular jurisdiction in which suchadjudication or finding is made.  Inaddition, should any court or arbitrator determine that the provisions of thisParagraph 6 shall be unenforceable with respect to scope, duration, orgeographic area, such court or arbitrator shall be empowered to substitute, tothe extent enforceable, provisions similar hereto or other provisions so as toprovide to the Bank, to the fullest extent permitted by applicable law, thebenefits intended by this Paragraph 6.

6.9           Indemnification.  To the fullest extent permitted by law and inaccordance with the procedures and substantive requirements imposed by law andapplicable regulation (including 12 C.F.R. Part 359, or similar regulations orregulatory action following similar principles), the Bank shall indemnifyExecutive in the event he was or is a party or is threatened to be made a partyin any action brought by a third party against Executive (whether or not theBank is joined as a party defendant) against expenses, judgments, fines,settlement, and other amounts actually and reasonably incurred in connectionwith said action, provided Executive acted in good faith and in a manner Executivereasonably believed to be in the best interests of the Bank, and provided thealleged conduct of Executive arose out of and was within the course and scopeof his employment as an officer or employee of the Bank.  This Paragraph 6.7 shall not limit anyother rights to indemnification that Executive may now or hereafter have by lawor under the articles, bylaws or resolutions of the Bank or otherwise.

7.             Other Agreements.

7.1           BankPolicies and Manuals.  The partiesfurther agree that to the extent of any inconsistency between this Agreementand any employee manual or policy of the Bank, that the terms of this Agreementshall supersede the terms of such employee manual or policy.

7.2           OutstandingStock Options.  The provisions ofthis Agreement are not and shall not be interpreted to change the terms of anyoutstanding stock options previously granted by the Bank to Executive.  Without limiting the foregoing, theprovisions regarding the grant of options to Executive set forth in Paragraph4.4 of the Former Employment Agreement are not amended by this Agreement andshall be deemed included in this Agreement, and the references in thatparagraph to other provisions of the Former Employment Agreement are herebyincorporated by reference for the limited purpose of continuing to effectuatethe agreement of the

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parties set forth in Paragraph 4.4 of the Former EmploymentAgreement.  The parties intend that thisAgreement be considered as establishing an “extended term” for purposes of thatprovision.

8.             General Provisions.

8.1           Notices.  Unless otherwise specifically permitted bythis Agreement, all notices or other communications required or permitted underthis Agreement shall be in writing, and shall be personally delivered or sentby registered or certified mail, postage prepaid return receipt requested, orsent by facsimile, provided that the facsimile cover sheet contain a notationof the date and time of transmission, and shall be deemed received: (i) ifpersonally delivered, upon the date of delivery to the address of the person toreceive such notice, (ii) if mailed in accordance with the provisions ofthis paragraph, two (2) business days after the date placed in the UnitedStates mail, (iii) if mailed other than in accordance with the provisionsof this paragraph or mailed from outside the United States, upon the dateof delivery to the address of the person to receive such notice, or(iv) if given by facsimile, when sent. Notices shall be given at the following addresses:

If to Executive:

James H. Burgess

7728 Regents Road, Suite503

San Diego, CA  92122

Fax:                

If to the Bank:

James G. Knight, M.D.

Chairman

1st Pacific Bank ofCalifornia

c/o 6907 Camino Degrazia

San Diego, CA  92111

Fax: 619-222-8216

With a copy to:

Kurt L. Kicklighter, Esq.

Luce, Forward,Hamilton & Scripps LLP

601 West Broadway,Suite 2600

San Diego, CA  92101

Fax: 619-645-5339

The relevant party may change the address for delivery of notices bygiving notice of such change in accordance with this paragraph.

8.2           Complete Agreement; Modifications.  This Agreement and written agreements, ifany, entered into concurrently herewith (i) constitute the parties’ entireagreement, including all terms, conditions, definitions, warranties,representations, and covenants, with

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respect to the subject matter hereof, (ii) mergeall prior discussions and negotiations between or among any or all of them asto the subject matter hereof, and (iii) supersede and replace all terms,conditions, definitions, warranties, representations, covenants, agreements,promises and understandings, whether oral or written, with respect to thesubject matter hereof.  This Agreementmay not be amended, altered or modified except by a writing signed by the partyto be bound.  With respect to the Bank,such amendment, alteration or modification may only be made on behalf of theBank by the Chairperson of the Personnel Committee of the Bank Board, theChairperson of the Bank Board or another person specifically designated by theBank Board.  With regard to suchamendments, alterations, or modifications, facsimile signatures shall beeffective as original signatures.  Anyamendment, alteration, or modification requiring the signature of more than oneparty may be signed in counterparts.

8.3           Further Actions.  Each party agrees to perform any further actsand execute and deliver any further documents reasonably necessary to carry outthe provisions of this Agreement.

8.4           Assignment.  No party may assign its rights under thisAgreement without the prior written consent of the other parties hereto.

8.5           Successors and Assigns.  Except as explicitly provided herein to thecontrary, this Agreement shall be binding upon and inure to the benefit of theparties, their respective successors and permitted assigns.

8.6           Termination and Survival.  Upon the termination of the employment ofExecutive, the Bank may terminate this Agreement upon notice to Executive,which may be provided at the time notice of termination of employment isprovided by either party.

8.6.1        The obligations of Executive and therights of the Bank under Paragraphs 4.5, 5.9, 5.10, 5.11 and 6.3 throughand including 6.6 shall survive the termination of this Agreement, providedthat if Executive and the Bank have entered into the Separation Agreement, thedispute resolution provisions of the Separation Agreement shall apply to andgovern any and all disputes related to this Agreement.

8.6.2        The obligations of the Bank to Executivewhich by their terms are to continue after termination of employment underParagraph 5 shall survive such termination of employment and terminationof the Agreement.  The notice provisionsof Paragraph 8.1 and this Paragraph 8.6 shall survive termination ofemployment and termination of the Agreement.

8.6.3        Notwithstanding any provision of thisAgreement to the contrary, this Agreement shall terminate and, therefore, amongother things, none of the provisions providing for compensation or benefits toExecutive shall be of any effect, in the event that the Bank is placed into aconservatorship or receivership, it loses its Federal deposit insurance, or itsbanking charter is revoked.

8.7           Severability.  If any portion of this Agreement shall beheld by a court of competent jurisdiction to be invalid, void, or otherwiseunenforceable, the remaining provisions shall remain enforceable to the fullestextent permitted by law if enforcement would not frustrate

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the overall intent of the parties (as such intent ismanifested by all provisions of the Agreement including such invalid, void, orotherwise unenforceable portion).

8.8           Extension Not a Waiver.  No delay or omission in the exercise of anypower, remedy, or right herein provided or otherwise available to any partyshall impair or affect the right of such party thereafter to exercise the same.  Any extension of time or other indulgencegranted to a party hereunder shall not otherwise alter or affect any power,remedy or right of any other party, or the obligations of the party to whomsuch extension or indulgence is granted except as specifically waived.

8.9           Time of Essence.  Time is of the essence of each and everyterm, condition, obligation and provision hereof.

8.10         No Third Party Beneficiaries.  This Agreement and each and every provisionhereof is for the exclusive benefit of the parties hereto and not for thebenefit of any third party.

8.11         Headings.  The headings in this Agreement are insertedonly as a matter of convenience, and in no way define, limit, or extend orinterpret the scope of this Agreement or of any particular provision hereof.

8.12         References.  A reference to a particular paragraph ofthis Agreement shall be deemed to include references to all subordinateparagraphs, if any.

8.13         Counterparts.  This Agreement may be signed in multiplecounterparts with the same force and effect as if all original signaturesappeared on one copy; and in the event this Agreement is signed incounterparts, each counterpart shall be deemed an original and all of thecounterparts shall be deemed to be one agreement.

8.14         Applicable Law.  This Agreement shall be construed inaccordance with, and governed by, the laws of the State of California.

8.15         Representation by Counsel.  This Agreement has been negotiated by theparties with the assistance of their respective counsel and at their own costand expense.  For this reason theprincipal that an agreement shall be interpreted against the party that draftedit shall not apply to this Agreement.

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IN WITNESS WHEREOF, the undersigned have executed thisAgreement as of the dates set forth below.
| Date:  |   |                              |                                     |
|--------|--------|-----------------------------------|------------------------------------------|
|   |   | James H. Burgess                  |
|   |   |                              |
|   |   |                              |
|   |   | 1st PACIFIC BANK OF CALIFORNIA, a |
|   |   | California state-chartered bank   |
|   |   |                              |
|   |   |                              |
| Date:  |   |                              | By:                                      |   |
|   |   |                              | A. Vincent  Siciliano, President and CEO |
|        |        |                                   |                                          |  |  |  |

 

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**EXHIBIT A**

**1****st PACIFIC BANK OF CALIFORNIA INCENTIVECOMPENSATION PLAN FOR**

**SENIORMANAGEMENT**

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**EXHIBIT B**

**SEPARATION AGREEMENT**

**AND**

**GENERALRELEASE OF CLAIMS**

This Separation Agreement and General Release of Claims (this “Agreement”)is entered into by and between James H. Burgess (“Employee”) and 1st Pacific Bank ofCalifornia, a California state bank (the “Bank”).

**RECITALS**

A.    Employee commenced employment with Bank on or about              .  Employee’s employment with the Bankterminated on           ,     .

B.    Employee and the Bank desire to settle and compromise any and allpossible claims against the Bank by Employee arising out of their relationshipto date, including Employee’s employment with the Bank and the termination ofEmployee’s employment, and to provide for a general release of any and all suchclaims.

**AGREEMENT**

1.     Separation Pay/Consideration.  In consideration of the covenants andreleases set forth herein, the Bank agrees to pay Employee the amount payableto him and the non-monetary consideration (if any) due him, pursuant to and inaccordance with, Paragraphs 5.2, 5.3 or 5.4, as the case may be, of theEmployment Agreement dated November 17, 2006, by and between the Bank andEmployee (the “Employment Agreement”), less all applicable state andfederal deductions (in each case, the “Payment”), $2,000 of which shallbe consideration for Employee’s release of ADEA claims as set forth inSection 3, below; provided that no such Payment shall be made until atleast eight (8) days have past since Employee’s execution of thisAgreement.  The check representing thePayment shall be mailed to Employee at his/her home address at                 .

2.     Release of All Claims Except Age Discrimination in EmploymentAct of 1967 (“ADEA”) Claims.

a.     In consideration of the payment and other benefits described inSection 1, which Employee would otherwise not be entitled to except forsigning this Agreement, Employee does hereby unconditionally, irrevocably andabsolutely release and discharge the Bank and any related holding, parent,sister or subsidiary entities and all of their respective boards of directors,officers, employees, agents, volunteers, attorneys, insurers, divisions,successors and assigns from any and all loss, liability, claims, demands,causes of action or suits of any type, whether in law and/or in equity, relateddirectly or indirectly, or in any way connected with any transaction, affairsor occurrences between them to date, including, but not limited to, Employee’semployment with the Bank and the termination of said employment.  This Agreement specifically applies, withoutlimitation, to any and all contract or tort claims, claims for wrongfultermination, wage claims, and claims arising under Title VII of the CivilRights Act

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of 1991, the Americanswith Disabilities Act, the Equal Pay Act, the California Fair Employment andHousing Act, the Fair Labor Standards Act, the Family and Medical Leave Act,the California Family Rights Act, the California Labor Code, and any and allfederal or state statutes or provisions governing the employment relationshipor discrimination in employment except the federal statute specificallyexcluded hereafter.  This releasespecifically excludes any and all loss, liability, claims, demands, causes ofaction or suits of any type arising under the ADEA.  Employee’s release of ADEA claims will beaddressed separately in Section 3 of this Agreement.

b.     Employee irrevocably and absolutely agrees that he/she will notprosecute nor allow to be prosecuted on his/her behalf, in any administrativeagency, whether federal or state, or in any court, whether federal or state,any claim or demand of any type related to the matters released above, it beingthe intention of the parties that with the execution by Employee of thisrelease, the Bank and any related holding, parent, sister or subsidiarycorporations or entities and all of their respective boards of directors,officers, employees, agents, volunteers, attorneys, insurers, divisions,successors and assigns will be absolutely, unconditionally and foreverdischarged of and from all obligations to or on behalf of Employee related inany way to the matters discharged herein.

3.     Release of All ADEA Claims.

a.     This section of the Agreement exclusively addresses Employee’srelease of claims arising under federal law involving discrimination on thebasis of age in employment (age 40 and above). This section is provided separately, in compliance with federal law,including but not limited to the Older Workers’ Benefit Protection Act of 1990,to ensure that Employee clearly understands his/her rights so that any releaseof age discrimination claims under federal law (the ADEA) is knowing andvoluntary on the part of Employee.

b.     Employee represents, acknowledges and agrees that the Bank hasadvised him/her, in writing, to discuss this Agreement with an attorney, and tothe extent, if any, that Employee has desired, Employee has done so; that theBank has given Employee twenty-one (21) days from receipt of this Agreement toreview and consider this Agreement before signing it, and Employee understandsthat he/she may use as much of this twenty-one (21) day period as he/she wishesprior to signing; that no promise, representation, warranty or agreements notcontained herein have been made by or with anyone to cause him/her to sign thisAgreement; that he/she has read this Agreement in its entirety, and fullyunderstands and is aware of its meaning, intent, content and legal effect; andthat he/she is executing this release voluntarily and free of any duress orcoercion.

c.     The parties acknowledge that for a period of seven (7) daysfollowing the execution of this Agreement, Employee may revoke the Agreement,and the Agreement shall not become effective or enforceable until therevocation period has expired.  ThisAgreement shall become effective eight (8) days after it has been signedby Employee and the Bank, and in the event the parties do not sign on the samedate, then this Agreement shall become effective eight (8) days after thedate it is signed by Employee.

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d.     In consideration of the separation payment and other benefitsmade to Employee described in Section 1 of this Agreement, which Employeewould otherwise not be entitled to except for signing this Agreement, Employeedoes hereby unconditionally, irrevocably and absolutely release and dischargethe Bank and any related holding, parent, sister or subsidiary entities and allof their respective boards of directors, officers, employees, agents,volunteers, attorneys, insurers, divisions, successors and assigns from any andall loss, liability, claims, demands, causes of action or suits of any typearising under the ADEA and related directly or indirectly to Employee’semployment with the Bank and the termination of said employment.

4.     Section 1542 Waiver. Employee does expressly waive all of the benefits and rights granted to him/herpursuant to California Civil Code section 1542, which reads:

AGENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OFOR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IFKNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH THE DEBTOR.

Employee does certifythat he/she has read all of this Agreement, including the release provisionscontained herein and the quoted Civil Code section, above, and that he/shefully understands all of the same. Employee hereby expressly agrees that this Agreement shall extend andapply to all unknown, unsuspected and unanticipated injuries and damages(including, without limitation, those arising under the ADEA), as well as thoseinjuries and damages that are now disclosed.

5.     Confidentiality. Employee agrees that all matters relative to this Agreement, includingthe negotiations leading up to this Agreement and its terms, shall remainconfidential.  Accordingly, Employeehereby agrees that, with the exception of his/her spouse, regulatory agenciesof the Bank and tax and legal advisors, he/she will not discuss, disclose orreveal to any other persons, entities or organizations, whether within oroutside of the Bank, the terms and conditions of this Agreement.

6.     Non-Disparagement. Employee agrees that he/she will not disparage the Bank or any of itsdirectors, employees, agents or volunteers or otherwise interfere with theBank’s business, vendor or other relationships. Employee agrees not to make any derogatory or adverse statements,written or verbal, to anyone regarding the Bank or any of its present or formerdirectors, employees, agents or volunteers. The Bank agrees that it will neither disparage Employee nor make anyderogatory or adverse statements, written or verbal, to anyone regardingEmployee.  If an arbitrator determinesthat the Bank has breached its obligations under this Section 6, to theextent the Payment has not been paid in full, the Bank shall be required tomake the Payment in full to Employee within five (5) days following sucharbitrator’s determination.  Nothing inthis Section 6 shall prohibit or relate to any statement by any person to anybank regulatory agency.

7.     Entire Agreement. The parties further declare and represent that no promise, inducement oragreement not herein expressed has been made to them and that this Agreement

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contains the full andentire agreement between and among the parties, and that the terms of thisAgreement are contractual and not a mere recital.

8.     Future Employment. Employee agrees that the Bank will not be obligated to offer employmentto him/her or to hire him/her for any reason, regardless of the circumstances,at any time on or after the date of this Agreement.  Employee agrees that he/she will not applyfor nor accept any such employment.

9.     Trade Secret/Proprietary Information.  Employee hereby reaffirms his/her obligationsunder his/her Employment Agreement with the Bank to which this Agreementrelates, which shall remain in effect to the extent provided in the EmploymentAgreement.  Employee further agrees thathe/she shall not disclose to any person(s) or entity(ies) at any time orin any manner, directly or indirectly, any information relating to the operationsof the Bank which has not already been disclosed to the general public.  Employee agrees that this provision includes,but is not limited to, the following information: proprietary informationand/or trade secrets; secret formulae; customer lists and/or names; product andservice prices; customer charges; contracts; contract negotiations and employeerelations matters.  Employee understandsand agrees that this list is not all-inclusive.

10.   Return of Company Property.  Employee agrees to promptly return allproperty or information belonging to the Bank, including all keys, computers,cellular telephones, and any document or property Employee generated duringhis/her employment at the Bank, and agrees that no such property will be inhis/her possession or control at the time he/she receives the considerationspecified in Section 1.  Thisincludes all property or information that may have come into his/her possessionas a result of his/her employment with the Bank.  Employee further acknowledges that he/she hasnot retained any copies of any such information.

11.   Applicable Law.  The validity, interpretation, and performanceof this Agreement shall be construed and interpreted according to the laws ofthe State of California.

12.   Dispute Resolution.  Any dispute arising out of or related to thisAgreement shall be resolved through binding arbitration through JAMS/Endisputein San Diego, California, under the then current applicable rules ofJAMS/Endispute.  Each party shall beresponsible for its or his/her own costs and attorneys’ fees in connection withthe arbitration.

13.   Complete Defense.  This Agreement may be pleaded as a full andcomplete defense against any action, suit or proceeding which may beprosecuted, instituted or attempted by either party in breach thereof.

14.   Severability.  If any provision of this Agreement, or partthereof, is held invalid, void or voidable as against public policy orotherwise, the invalidity shall not affect other provisions, or parts thereof,which may be given effect without the invalid provision or part.  To this extent, the provisions, and partsthereof, of this Agreement are declared to be severable.

15.   No Admission of Liability.  It is understood that this Agreement is notan admission of any liability by the Bank

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16.   Successors and Assigns.  This Agreement shall be binding upon andinure to the benefit of the parties hereto and their respective heirs, legalrepresentatives, successors and assigns.

17.   Counterparts.  This Agreement may be signed incounterparts.  A facsimile signatureshall have the same force and effect as an original signature.

Employee and the Bank have read the foregoingAgreement and know its contents and fully understand it.  Employee and the Bank acknowledge that theyhave fully discussed this Agreement with their respective attorneys to theextent desired, or have had the opportunity to do so, and fully understand theconsequences of this Agreement.  No partyis being influenced by any statement made by or on behalf of any of the otherparty to this Agreement.  Employee andthe Bank have relied and are relying solely upon his/her or its own judgment,belief and knowledge of the nature, extent, effect and consequences relating tothis Agreement and/or upon the advice of their own legal counsel concerning theconsequences of this Agreement.

**IN WITNESS WHEREOF**, the undersigned have executed thisAgreement on the dates shown below.
| Dated:     |   |                                         |   |
|------------|--------|----------------------------------------------|--------|
| ** ** |   | James H. Burgess                             |
|       |   |                                         |
|       |   |                                         |
|       |   | **1****st Pacific Bank of California:** |
|       |   | ** **                                   |
|       |   | ** **                                   |
| Dated:     |   |                                         | By:    |   |
|       |   | Name:                                        |   |
|       |   | Its:                                         |   |
|            |        |                                              |        |  |  |  |  |

 

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**EXHIBIT C**

**EXECUTIVEARBITRATION AGREEMENT**

THIS EXECUTIVE ARBITRATION AGREEMENT (“ArbitrationAgreement”) is made by and between 1st Pacific Bank of California, aCalifornia state-chartered bank (the “Bank”), and James H. Burgess (the “Executive”),effective as of the date that the Employment Agreement between the Bank andExecutive executed contemporaneously herewith (the “Employment Agreement”),becomes effective.

The purpose of this Arbitration Agreement is toestablish final and binding arbitration for disputes arising out of Executive’semployment, the Employment Agreement or the termination of Executive’semployment.  Executive and the Bankdesire to arbitrate their disputes on the terms and conditions set forth below,in order to gain the benefits of a speedy, impartial dispute-resolutionprocedure.  Executive and the Bank agreeto the following:

1.             Claims Covered By The Arbitration Agreement.  Executive and the Bank mutually consent tothe resolution by final and binding arbitration of all claims or controversies(“claims”) that the Bank may have against Executive or that Executivemay have against the Bank or against its officers, directors, partners,employees, agents, pension or benefit plans, administrators, or fiduciaries, orany subsidiary or affiliated company or corporation (collectively referred toas the “Bank”), relating to, resulting from, or in any way arising outof Executive’s employment relationship with the Bank, the Employment Agreementand/or the termination of Executive’s employment relationship with the Bank, tothe extent permitted by law.  The claimscovered by this Arbitration Agreement include, but are not limited to, claimsfor wages or other compensation due; claims for breach of any contract orcovenant (express or implied); tort claims; claims for discrimination andharassment (including, but not limited to, race, sex, religion, nationalorigin, age, marital status or medical condition, disability, sexualorientation, or any other characteristic protected by federal, state or locallaw); claims for benefits (except where an employee benefit or pension planspecifies that its claims procedure shall culminate in an arbitration proceduredifferent from this one); and claims for violation of any public policy,federal, state or other governmental law, statute, regulation or ordinance.

2.             Required Notice Of Claims And Statute Of Limitations.  Executive may initiate arbitration by servingor mailing a written notice to the Board of Directors of the Bank at the Bank’sadministrative headquarters, care of the Corporate Secretary.  The Bank may initiate arbitration by servingor mailing a written notice to Executive at his last known address.  The written notice must specify the claimsasserted against the other party.  Noticeof any claim sought to be arbitrated must be served within the limitationsperiod established by applicable federal or state law.

3.             Arbitration Procedures.  After demand for arbitration has been made byserving written notice under the terms of Section 3 of this ArbitrationAgreement, the party demanding arbitration shall file a demand for arbitrationwith the American Arbitration Association (“AAA”).  Except as otherwise provided in thisArbitration Agreement, the arbitration will be

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conducted according to the then applicable arbitrationrules of AAA for the arbitration of employment disputes.

4.             Discovery. Discovery shall be allowed and conducted pursuant to the then applicablearbitration rules of AAA for the arbitration of employment disputes.

5.             Choice of Law. The arbitrator shall apply the substantive law (and the law of remedies,if applicable) of the State of California, or federal law, or both, asapplicable to the claim(s) asserted. The arbitrator shall have authority to resolve any dispute relating tothe interpretation, applicability, enforceability or formation of thisArbitration Agreement, including but not limited to any claim that all or anypart of this Arbitration Agreement is void or voidable.

6.             Summary Judgment. Either party may file a motion for summary judgment with thearbitrator.  The arbitrator is entitledto resolve some or all of the asserted claims through such a motion.  The standards to be applied by the arbitratorin ruling on a motion for summary judgment shall be the applicable laws asspecified in Section 5 of this Arbitration Agreement.

7.             Application For Emergency Injunctive And/Or OtherEquitable Relief.  Claims by the Bankor Executive for emergency injunctive and/or other equitable relief relating tounfair competition and/or the use and/or unauthorized disclosure of tradesecrets or confidential information shall be subject to the then currentversion of the AAA’s Optional Rules for Emergency Measures of Protection setforth within the AAA’s Commercial Dispute Resolution Procedures.  The AAA shall appoint a single emergencyarbitrator to handle the claim(s) for emergency relief.  The emergency arbitrator selected by the AAAshall be either a retired judge or an individual experienced in handlingmatters involving claims for emergency injunctive and/or other equitable reliefrelating to unfair competition and the use or unauthorized disclosure of tradesecrets and/or confidential information.

8.             Arbitration Decision.  The arbitrator’s decision will be final andbinding.  The arbitrator shall issue awritten arbitration decision revealing the essential findings and conclusionsupon which the decision and/or award is based. A party’s right to appeal the decision is limited to grounds providedunder applicable federal or state law.

9.             Place Of Arbitration.  The arbitration will be at a mutuallyconvenient location, which must be within 50 miles of Executive’s lastemployment location with the Bank.  Ifthe parties cannot agree upon a location, then the arbitration will be held atAAA’s office nearest to Executive’s last employment location with the Bank.

10.           Severability.  Should any portion of this ArbitrationAgreement be found to be unenforceable, such portion will be severed from thisArbitration Agreement, and the remaining portions shall continue to beenforceable.

11.           Section Headings.  The section headings of this ArbitrationAgreement are intended solely for the convenience of reference and shall not inany manner amplify, limit, modify or otherwise be used in interpretation of anyprovisions hereof.

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12.           Construction.  This Arbitration Agreement shall not beinterpreted for or against any party on the basis that such party or its legalrepresentative caused part or all of this Arbitration Agreement to be drafted.

13.           Consideration.  The Bank’s offer to employ Executive, and thepromises by the Bank and Executive to arbitrate differences, rather thanlitigate them before courts or other bodies, provide consideration for eachother.

14.           Fees and Costs.  Each party may be represented by an attorneyor other representative selected by the party. Each party shall be responsible for its own attorneys’ or representative’sfees.  However, if any party prevails ona statutory claim which affords the prevailing party’s attorneys’ fees, or ifthere is a written agreement providing for fees, the arbitrator may awardreasonable fees to the prevailing party. In no event shall Executive be required to pay administrative fees,including arbitrator’s fees, beyond the fees which would have been incurred byExecutive, if any, had the dispute(s) arbitrated under this ArbitrationAgreement been litigated in state or federal court; the Bank shall beresponsible for all administrative fees exceeding such amount.

15.           Enforcement of ArbitrationAgreement.  Should either party filea court action concerning or refuse to arbitrate a claim which is subject toarbitration under this Arbitration Agreement, the other party shall be entitledto recover its costs and reasonable attorneys’ fees incurred in enforcing thisArbitration Agreement in court.

16.           Sole And Entire Agreement.  This Arbitration Agreement expresses theentire agreement of the parties and there are no other agreements, oral orwritten, concerning arbitration, except as provided herein, and except for theEmployment Agreement which incorporates this Arbitration Agreement byreference.  By itself, this ArbitrationAgreement is not, and shall not be construed to create, any contract ofemployment, express or implied.

17.           Requirements for Modification orRevocation.  This ArbitrationAgreement shall survive the termination of Executive’s employment.  It can only be revoked or modified by awriting signed by the Chairperson of the Personnel Committee of the Bank’sBoard of Directors, the Chairperson of the Bank’s Board of Directors or anotherperson specifically designated by the Board of Directors of the Bank andExecutive, that specifically states an intent to revoke or modify thisArbitration Agreement.

18.           Waiver of Jury Trial/ExclusiveRemedy.  **EXECUTIVE AND THE BANK WAIVE ANY CONSTITUTIONAL OR STATUTORY RIGHT TOHAVE ANY DISPUTE BETWEEN THEM COVERED BY THE TERMS OF THIS ARBITRATIONAGREEMENT DECIDED BY A COURT OF LAW AND/OR BY A JURY IN A COURT**.

19.           Voluntary Agreement.  EXECUTIVE ACKNOWLEDGES THAT EXECUTIVE HASCAREFULLY READ THIS ARBITRATION AGREEMENT, UNDERSTANDS ITS TERMS, AND AGREESTHAT ALL UNDERSTANDINGS AND AGREEMENTS BETWEEN THE BANK AND EXECUTIVE RELATINGTO THE SUBJECTS COVERED IN THE ARBITRATION AGREEMENT ARE CONTAINED IN IT.  EXECUTIVE HAS VOLUNTARILY ENTERED INTO THEARBITRATION AGREEMENT WITHOUT

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RELIANCE ON ANY PROVISIONS OR REPRESENTATIONS BY THEBANK, OTHER THAN THOSE CONTAINED IN THIS ARBITRATION AGREEMENT OR EMPLOYMENTAGREEMENT INTO WHICH IT IS INCORPORATED BY REFERENCE.

EXECUTIVE FURTHER ACKNOWLEDGES THAT EXECUTIVE HAS BEEN GIVEN THEOPPORTUNITY TO DISCUSS THIS ARBITRATION AGREEMENT AND THE EMPLOYMENT AGREEMENTWITH EXECUTIVE’S PRIVATE LEGAL COUNSEL AND EXECUTIVE HAS UTILIZED THATOPPORTUNITY TO THE EXTENT DESIRED.

 
| Dated: |   |                                 |   |
|--------|--------|--------------------------------------|--------|
|   |   | James H. Burgess, Executive          |
|   |   |                                 |
|   |   |                                 |
|   |   | 1st PACIFIC BANK OF CALIFORNIA, |
|   |   | a California  state-chartered bank   |
|   |   |                                 |
|   |   |                                 |
| Dated: |   |                                 | By:    |   |
|   |   |                                 |   | A. Vincent  Siciliano, President and CEO |
|        |        |                                      |        |  |  |

 

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