Exhibit 10.2


 


EMPLOYMENT
AGREEMENT


 


This Employment Agreement
(the “Agreement”) is made and entered into as of December 21, 2007
(the “Effective Date”) by and between Larry Prosi (“Executive”)
and 1st Pacific Bancorp, a California corporation (“Bancorp”)
and 1st Pacific Bank of California, a California state-chartered
bank (“Bank”) (collectively, Bancorp and Bank are referred to as the “Employer”),
with regard to the following:


 


A.                                   Executive has served as the Executive
Vice President and Chief Operating Officer of the Bank under an Employment
Agreement between Executive and Bank dated January 1, 2006 (the “Former
Employment Agreement”).


 


B.                                     Executive and the Employer have agreed
that Executive shall continue to serve as the Executive Vice President and
Chief Operating Officer and a full-time employee of the Employer under the
terms of this Agreement, and as such is expected to make a major contribution
to the profitability, growth and financial strength of the Employer.


 


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


 


D.                                    Executive is willing to be employed by
the Employer upon the understanding that the Employer will provide him with
income security and Benefits if his employment with the Employer is terminated,
upon certain terms and conditions.


 


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


 


1.                                       Definitions.


 


“Bancorp” means 1st Pacific Bancorp, a
California corporation, its successors and permitted assigns.


 


“Bancorp Board” means the Board of Directors of
Bancorp.


 


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


 


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


 


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


 


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“Benefits” means the types and amounts of
benefits provided under Paragraph 3.7, provided that if at the date of
reference the terms of any Employer insurance plan prohibit the continuance or
recommencement of insurance benefits that Executive formerly held, Employer
shall be obligated to pay to Executive in cash on a monthly basis an amount
equal to Employer’s former premium payments (pro rated on a monthly basis) for
the benefit of Executive under such plan, except that if Executive is entitled
to COBRA health insurance benefits the amount shall be increased to the amount
payable by Executive for such benefits if higher than Employer’s former premium
payments.


 


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


 


(i)                                     any “person” (as used in Section 13(d) of
the Securities Exchange Act of 1934 and the rules promulgated thereunder)
becomes the “beneficial owner” (as defined in Rule 13d-3) of securities
representing a majority of the voting power of the then outstanding securities
of the Bank;


 


(ii)                                  a sale of assets involving all or
substantially all of the assets of Bancorp or Bank; or


 


(iii)                               a merger or consolidation of Bancorp or Bank in which
the holders of securities of Bancorp or Bank immediately prior to such event
hold in the aggregate less than a majority of the securities of Bancorp or Bank
or any other surviving or resulting entity immediately after such event.


 


“Change of Control Severance Benefits” means (i) an
amount equal to the sum of (y) one (1) times Executive’s base annual
salary at the rate then in effect in accordance with Paragraph 3.1, plus (z) the
amount actually paid by the Employer to Executive under the Plan for the
immediately preceding year, if any; and (ii) continuation of Benefits
provided under Paragraph 3.7 or substitute equivalent Benefits in the
event that the particular Benefits (for instance, insurance coverage) are not
carried by the Employer under its programs following the Change of Control
Termination, for a period of twelve (12) months.


 


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


 


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


 


“Disability” shall be deemed to occur on the
date that benefits under the Employer’s group long term disability insurance
are first payable for the benefit of Executive.


 


“Employer” means Bancorp and Bank.


 


“Employer Board” means the Boards of Directors
of Bancorp and Bank.


 


“Executive” means Larry Prosi, or if deceased,
his Beneficiary.


 


“Expiration Date” means June 30, 2010.


 


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“Good Cause” means:  (i) a reduction in Executive’s base
salary below the rate then in effect in accordance with Paragraph 3.1; (ii) the
Employer requiring that Executive be based at a location more than fifty (50)
miles from the Employer’s headquarters as of the Effective Date (excluding travel
for Employer business and other temporary relocations of no more than 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 the duties or authority
of Executive so that he is no longer performing substantially all of the duties
of a chief operating officer of a community bank.


 


“Plan” means the 1st Pacific Bank of California
Senior Executive Bonus Plan (“SEBP”) for Senior Management, approved by the
applicable Bancorp Board or Bank Board no later than, and with an effective
date no later than, January 1, 2008.


 


“Separation and Consulting Agreement” means the
Separation and Consulting Agreement and General Release of Claims,
substantially in the form attached hereto as Exhibit A.


 


“Trade secrets and other proprietary and
confidential information” means and consists of, for example, and not
intending to be inclusive, information concerning any matters relating to the
business of the Employer, any of its customers, governmental relations,
customer contacts, underwriting methodology, loan program configuration and
qualification strategies, marketing strategies and proposals, or any other
information concerning the business of the Employer, its subsidiaries and
affiliates, and the Employer’s good will; provided that “Trade secrets and
other proprietary and confidential information” shall not be deemed to include
information that is or becomes, through no fault of Executive, in the public
domain.


 


2.                                       Rights and Duties of Executive.


 


2.1                                 Employment.  The Employer
hereby employs Executive as its Executive Vice President and Chief Operating
Officer, and Executive accepts the duties described herein, and agrees to discharge
the same faithfully and to the best of his ability.  Executive shall perform such other duties as
shall be from time to time prescribed by the Chief Executive Officer of the
Employer and shall report to and be subject to the direction of the Chief Executive
Officer of the Employer.  Executive shall
devote his full business time and attention to the business and affairs of the
Employer.


 


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


 


2.3                                 At-Will Employment. 
Executive’s employment with the Employer is not for a fixed period of
time and can be terminated at the will of either Executive or the Employer at
any time, with or without notice, and with or without cause.  There are no agreements between Executive and
the Employer contrary to Executive’s at-will status. Neither an Employer Board
member nor a manager, supervisor, employee or agent of the Employer is
authorized to alter Executive’s at-will status, except for the Chairperson of
the Employer Board, and then only in a writing signed both by the Chairperson
of the Employer Board and Executive following adoption


 


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of a resolution by the
Employer Board authorizing the specific change reflected in such writing and
authorizing the Chairperson of the Employer Board to sign such writing.
Executive should neither assume nor imply any promise of employment for any
specified period of time except through such a signed writing.  This Agreement shall terminate immediately
without further liability or obligation to Executive if (i) the Bank is
closed by any supervisory authority, or (ii) any supervisory authority
demands, by proposed consent agreement or by a prompt corrective action
directive, or pursuant to cease and desist powers, the removal of Executive
from his position as the Executive Vice President or Chief Operating Officer of
the Employer.  Should Executive remain
employed under this Agreement through the Expiration Date, Executive’s
employment with the Employer shall automatically terminate on that date and
this Agreement shall be of no force 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 materially interferes with the fulfillment of
Executive’s duties to the Employer. 
Executive shall not undertake expanded commitments to business or
charitable activities or engage in new such activities before consulting with
the President and Chief Executive Officer of the Employer.  Executive will not provide services to, hold
or make any investment in or loan to, or participate in the management or
business of, any bank, savings and loan, credit union, thrift and loan,
industrial loan or other entity engaged in the business of making loans or
accepting deposits or both without the consent of the Chief Executive Officer of
the Employer; provided that Executive may own less than 5% of the voting stock
of any company that files reports under the Securities Exchange Act of 1934.


 


3.                                       Compensation and Benefits. 
In consideration for the services to be rendered by Executive to the
Employer, the Employer agrees to provide Executive with the following
compensation and benefits:


 


3.1                                 Salary.  The Employer
shall pay Executive a minimum annual base salary of One Hundred Sixty Thousand
Dollars ($160,000) for the period of November 1, 2007 to June 30,
2010.  Other salary increases, if any,
shall only be as approved by the Employer Board in its sole discretion.


 


3.2                                 Stock Option Grant. Prior to the execution of this
Agreement, the Employer provided Executive with one grant of stock options
pursuant to the 1st Pacific Bancorp 2007 Omnibus Stock Incentive
Plan.  The grant was for 52,712 stock
options subject to the terms and conditions set forth in the Non-Qualified
Stock Option Agreement attached hereto as Exhibit C approved by the
Employer Board prior to its approval of this Agreement.  The Non-Qualified Stock Option Agreement is
incorporated by reference to this Agreement.


 


3.3                                 Withholding and Deductions. 
The Employer shall withhold and/or deduct from any and all salary or
other payments to Executive, all taxes which may be required to be deducted or
withheld under any provision of law (including, but not limited to, social
security payments and income tax withholding) now in effect or which may become
effective any time during Executive’s employment with the Employer.


 


3.4                                 Executive Incentive Compensation. 
In general, the Employer believes that superior performance of Executive
should be rewarded and encouraged by incentive 


 


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compensation.  The Employer Board shall adopt the Plan
pursuant to which Executive may be entitled to incentive compensation provided
that the performance goals of the Employer as set forth in the Plan are
achieved and the terms and conditions of the Plan are satisfied. The
performance goals contained in the Plan will be evaluated annually by the
Employer Board in consultation with Executive no later than the first month of
the calendar year. In addition, Executive shall be entitled to other incentive
compensation and bonuses as the Employer Board may determine in its sole
discretion.


 


3.5                                 Automobile Allowance. 
The Employer shall pay the Executive an automobile allowance of Six
Hundred and Fifty Dollars ($650.00) per month, subject to withholding.  This is an allowance for all automobile costs
and expenses, including, but not limited to, fuel, license, maintenance,
insurance, repairs and purchase or lease payments.


 


3.6                                 Expense Reimbursement. 
The Employer agrees to reimburse Executive for all ordinary and
necessary expenses incurred by Executive on behalf of the Employer in
accordance with the Employer’s policies and procedures as in effect from time
to time, including entertainment, meal and travel expenses.


 


3.7                                 Benefits.  The Employer
shall provide life insurance with a life insurance benefit equal to at least
one and one-half times the annual salary of Executive at the rate then in
effect under Paragraph 3.1, which shall be provided through any group life
insurance plan of the Employer at the Employer’s option.  The Employer shall provide to Executive the
long-term disability insurance provided by the Employer to employees at the
Effective Date under the Employer’s group plan or shall replace it with similar
coverage so long as Executive is employed by the Employer.  Executive shall be entitled to participate in
such other insurance benefits as are generally provided to the employees of the
Employer from time to time.


 


3.8                                 Other Benefit Programs. 
Executive shall be entitled to participate in any other benefit programs
and/or to receive any other fringe benefits as are made available to or
provided for other members of executive management of the Employer.


 


3.9                                 Vacation.  In addition
to vacation accrued as of the Effective Date, Executive shall accrue five (5) weeks
of vacation time and pay per annum, which shall be scheduled in Executive’s
discretion, subject to and taking into account applicable banking laws and
regulations.  Unused vacation may be
accrued up to a maximum of six (6) weeks of unused vacation in addition to
the vacation to which Executive may be entitled in the current year, and
thereafter Executive shall cease to accrue unused vacation until used.  Vacation must be accrued before taken, and if
not yet accrued, must have the prior approval of the Chief Executive Officer of
the Employer to be taken.  Vacation may
be used only at the time or times approved by the Chief Executive Officer of
the Employer.


 


4.                                       Termination.


 


4.1                                 Employer Right to Terminate Employment. 
Nothing in this Agreement shall adversely affect the right of the
Employer Board to terminate Executive. 
The Employer Board has the right to terminate the employment of
Executive with the Employer at will, with or without cause, upon delivery of
written notice to Executive thirty (30) days in advance of such 


 


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termination (except in
the case of death of Executive or pursuant to Paragraph 4.1.3, in which event
termination shall automatically occur at the date of death or upon the event
described in Paragraph 4.1.3), and including, but not limited to, for any of
the following grounds:


 


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


 


4.1.2                        Malfeasance or misfeasance in the
performance of Executive’s duties hereunder, imposition of a regulatory order
to remove Executive, failure to comply with a direction by the Employer Board
or Employer Chief Executive Officer, material breach of Employer policy or
procedure, or breach of this Agreement.


 


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


 


4.1.4                        Disability or death;


 


4.1.5                        Determination in the complete discretion
of the Employer Board that the employment of Executive should be terminated
prior to the Expiration Date, without reference to the grounds set forth in
Paragraphs 4.1.1, 4.1.2, 4.1.3 or 4.1.4, and specification of the
termination date in the notice described in Paragraph 4.1.


 


4.2                                 Termination by Executive. 
Executive may terminate his employment with the Employer at will, for
any reason, and without advance notice. 
However, as a courtesy, Executive is requested to deliver written notice
to the Employer three (3) months in advance of the date such termination
is to take effect, except with respect to a termination for Good Cause.  Executive may terminate his employment with
the Employer prior to the Expiration Date for Good Cause upon thirty (30) days
notice to the Employer and the Employer’s failure to cure within that
time.  To be effective, such notice must
be given by Executive within fifteen (15) days from Executive’s actual
knowledge of the occurrence of the event that constitutes Good Cause, provided
that if Good Cause results from a material reduction in the duties or authority
of Executive so that he is no longer performing substantially all of the duties
of a chief operating officer of a community bank and such reduction occurs
before a Change of Control occurs and continues after the Change of Control
occurs, Executive shall be required to give the thirty (30) day notice
described above within fifteen (15) days of the Change of Control.


 


4.3                                 Termination Upon Expiration. 
Should Executive remain employed under this Agreement through the date
five (5) months prior to the Expiration Date, Executive shall have the
right, while he is still employed, to provide written notice to the Employer of
his desire to remain employed after the Expiration Date on or before the date
four (4) months prior to the Expiration Date.  If Executive and the Employer have not
entered into an amendment of this Agreement extending its term or another
written agreement replacing this Agreement on or prior to the date three (3) months
prior to the Expiration Date, and Executive’s employment is not otherwise
terminated, Executive’s employment shall automatically terminate on the
Expiration Date.  If such an extension or
replacement is not entered into on or prior to three (3) months prior 


 


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to the Expiration Date,
Executive shall be deemed to have been given advance notice by the Employer
that his employment with the Employer will terminate as of the Expiration
Date.  Nothing in this
Paragraph shall prejudice the at-will status of Executive or require the
Employer to negotiate with Executive.


 


4.4                                 Post-Notice Activities of Executive. 
In the event termination is not effective immediately upon the delivery
of notice of termination by the Employer or Executive, the Employer shall have
the right to require that during the period between the giving of notice and
the effective date of termination, Executive’s activities and responsibilities
be curtailed as deemed appropriate by the Employer.  Such curtailment shall include, without
limitation, removing Executive from corporate offices, requiring Executive to
be physically absent from the Employer’s facilities, and eliminating Executive’s
access to computer systems, e-mail and telephone systems.


 


4.5                                 Automatic Resignations. 
Upon notice of termination of employment Executive shall, automatically
and without further action by any party, be deemed to have resigned from all
directorships with the Employer and any of its subsidiaries and
affiliates.  Upon termination of
employment, Executive shall, automatically and without further action by any
party, be deemed to have resigned from all offices and other capacities with
the Employer and any of its subsidiaries and affiliates.


 


5.                                       Post-Termination Payments and Benefits. 
The following are the post-termination payments and benefits to which
Executive is entitled upon termination of employment with the Employer.


 


5.1                                 Termination Resulting from Breach. 
In the event the employment of Executive is terminated under
Paragraphs 4.1.1, 4.1.2 or 4.1.3, the Employer shall provide Executive
only the base salary, Benefits, and a payout of all accrued but unused vacation
days under Paragraph 3.9, if any, then-provided, on the terms then-provided,
due him through the date of termination and shall not be obligated to provide
any other compensation or Benefits.


 


5.2                                 Other Terminations.


 


5.2.1                        Payments – Disability. 
In the event the employment of Executive is terminated under
Paragraph 4.1.4 for disability, and subject to Executive first entering
into the Separation and Consulting Agreement and such agreement being fully
effective, the Employer shall provide Executive only the following:


 


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


 


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


 


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


 


(d)                                 continuation of the group medical and
other insurance benefits, if any, then-provided under Paragraph 3.7, for a
period of three (3) months from the date of 


 


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termination, subject to the limitations of and to the
extent permitted by the policy or policies under which such benefits are
provided.


 


5.2.2                        Payments – Death. 
In the event the employment of Executive is terminated under
Paragraph 4.1.4 for death, the Employer shall provide the Beneficiary only
the following:


 


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


 


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


 


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


 


(d)                                 continuation of the group medical and
other insurance benefits, if any, then-provided under Paragraph 3.7, for a
period of three (3) months from the date of termination, subject to the
limitations of and to the extent permitted by the policy or policies under
which such benefits are provided.


 


5.2.3                        Payments Termination Under Paragraph
4.1.5, or 4.2.  In the event the employment of Executive is
terminated under Paragraph 4.1.5, or under Paragraph 4.2 for Good Cause,
and subject to Executive first entering into the Separation and Consulting
Agreement and such agreement being fully effective, the Employer shall provide
Executive only the following:


 


(a)                                  continued salary at the rate then in
effect under Paragraph 3.1 and the automobile allowance then provided under
Paragraph 3.5 for a period of nine (9) months from the date notice of
termination is delivered to the Executive, or at the option of the Employer a
lump sum payment of such amount, all subject to withholding;


 


(b)                                 payment of certain incentive compensation
due Executive, if any, in compliance with the Plan, with Executive’s
termination under this Paragraph 5.2.3 being considered for the limited purpose
of interpreting the Plan in the context of this Agreement as being a
termination “without cause”;


 


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


 


(d)                                 continuation of the group medical and
other insurance benefits, if any, then-provided under Paragraph 3.7, for a
period of nine (9) months from the date of termination, subject to the
limitations of and to the extent permitted by the policy or policies under
which such benefits are provided.


 


5.2.4                        Executive’s Right to Waive Payments. 
Executive shall have the right to waive his rights to receive such
payments and Benefits otherwise due under this 


 


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Paragraph 5.2 by
giving advance written notice of such waiver to the Employer.  After receipt of such notice, the Employer
shall have no further obligation to provide any payments or Benefits under this
Paragraph 5.2.


 


5.3                                 Change of Control.


 


5.3.1                        Payment Following Certain Terminations
Related to Change of Control.  Subject to
Executive first entering into the Separation and Consulting Agreement and such
agreement being fully effective, in respect of any Change of Control
Termination the Employer shall pay to Executive the Change of Control Severance
Benefits in a lump sum (except for the Benefits under Paragraph 3.7, which
shall be continued) within five (5) days following the date the Separation
and Consulting Agreement is fully effective.


 


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


 


5.3.3                        The terms of this Paragraph 5.3.3
override and control any and all other terms of this Agreement to the extent
inconsistent with this Paragraph 5.3.3. 
This Paragraph 5.3.3 shall apply to the extent that the aggregate
present value of any or all payments and benefits in the nature of compensation
to (or for the benefit of) Executive provided under this Agreement or otherwise
provided to Executive by or on behalf of the Bank or any affiliate, parent or
controlling entity of the Bank, constitute a “parachute payment” under the
provisions of Section 280G of the Code, and the regulations thereunder
(the “Total Payments”).  In the event 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, as determined
by the independent public accountants for the Bank, Executive and the Bank
agree that the payments or benefits provided to Executive under this Agreement
shall be reduced (or the parties shall agree to a reduction in other payments
or benefits included in the Total Payments to the extent legally and
contractually permissible) so that the present value of the total amount
received by Executive that would constitute a “parachute payment” will be one
dollar ($1.00) less than three (3) times Executive’s base amount (as
defined in Section 280G of the Code) and so that no portion of the payment
or benefits received by Executive would be subject to the excise tax imposed by
Section 4999 of the Code.


 


5.3.4                        Section 409A. In the event that Section 409A
applies to any compensation with respect to separation from service, payment of
that compensation shall be delayed if Executive is a “specified employee,” as
defined in Section 409A(a)(2)(B)(i), and such delayed payment is required
under Section 409A. Such delay shall last six months from the date of
separation of service. On the day following the end of such six-month period,
Employer shall make a catch up payment to Executive equal to the total amount
of such payment that would have been made during the six-month period but for
this provision, with interest calculated at the prime rate as quoted by Bank at
the date of Executive’s separation from service.


 


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5.4                                 Termination at Expiration Date.  If Executive’s employment is terminated as a
result of expiration of this Agreement at the Expiration Date, the Employer
shall provide Executive only the following:


 


5.4.1                        if within ten (10) business days
following the Expiration Date, Executive first enters into the Separation and
Consulting Agreement and that agreement is fully effective, the Employer shall
pay Executive his base monthly salary at the rate in effect at the Expiration
Date under Paragraph 3.1 for a period of six (6) months from the date
the Separation and Consulting Agreement is fully effective, with the first
payment to be paid one month after such date, or at the option of the Employer
a lump sum payment of such amount.


 


5.4.2                        if within ten (10) business days
following the Expiration Date, Executive does not enter into the Separation and
Consulting Agreement and that agreement is not fully effective, the Employer has
the option to pay Executive his base monthly salary at the rate in effect at
the date of termination under Paragraph 3.1 for a period of six (6) months
from the date of termination, with the first payment to be paid on the one
month anniversary of such date, and if the Employer provides the first such
payment, regardless of whether Executive has executed and entered into the
Separation and Consulting Agreement with the Employer, Executive shall be
deemed bound by such agreement in the form attached hereto in exchange for the
consideration provided in this Paragraph, as if executed and delivered by him
and fully effective, other than with respect to releases of claims and
consideration for those releases;


 


5.4.3                        a payout of all accrued but unused
vacation as of the date of termination;


 


5.4.4                        in lieu of Employer-paid medical
benefits, six (6) monthly payments equal to Employer’s monthly defined
contribution in force at the date of termination including Employer premium
support and any Employer paid HSA contributions if executive is enrolled in a
HAS qualifying high deductible health plan on the date of termination. At his
own expense, Executive shall have the right to elect to continue Employer group
health coverage as permitted under COBRA;


 


5.4.5                        continuation of other non-medical
Benefits, if any, then provided under Paragraph 3.7, for a period of six (6) months
from the date of termination; and


 


5.4.6                        payment of certain incentive compensation
under the Plan, subject to the terms and conditions of the Plan that are not
contrary to this Paragraph 5.4.6.


 


5.5                                 Consideration for Payments and Remedies. 
Except as where Executive’s termination is caused by his death, and
without limiting any other remedies available to the Employer, the payments to
be made under Paragraphs 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 to Executive’s execution of the Separation and Consulting Agreement,
and Executive’s continued compliance with the Separation and Consulting
Agreement and the terms of this Agreement that are effective after termination
of Executive’s employment, through the making of the last such payment.


 


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


 


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


 


5.8                                 Claims Procedure. 
The Employer Board shall make all determinations as to rights to
benefits under this Paragraph 5.


 


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


 


5.10                           Right of Offset. Any and all of the compensation and
Benefits that would otherwise be provided under this Paragraph 5 are
subject to the Employer’s offset for any legal liability of Executive to the
Employer to the extent the Employer Board determines that such legal liability
exists.  In addition, without limiting
the remedies of the Employer otherwise available under this Agreement or
otherwise, all compensation and Benefits that would otherwise be payable under
this Paragraph 5 shall cease as of the date Executive first violates any
of the provisions included in Paragraphs 6.4, 6.5 or 6.6.


 


5.11                           Overlapping Benefits and Payments. 
In the event that Executive receives payments and/or Benefits under one
of Paragraphs 5.1 through 5.4, inclusive, Executive may not 


 


11

















 


receive payments and/or
Benefits under one of the other of such Paragraphs, and the first such
applicable of those Paragraphs shall apply.


 


6.                                       Additional Covenants.


 


6.1                                 Insurance.  The Employer
shall have the right to obtain and hold a “keyman” life insurance policy on the
life of Executive and disability insurance covering Executive, in each case,
with the Employer as beneficiary of such policy.  Executive agrees to provide any information
required for the issuance of any such policy and submit himself to any physical
examination required for any such policy.


 


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


 


6.3                                 Dispute Resolution. 
Simultaneously with the execution of this Agreement, the parties have
entered into the Arbitration Agreement attached as Exhibit B, which the
parties agree shall govern the resolution of any and all disputes referenced
therein.


 


6.4                                 Return of Documents. 
Executive expressly agrees that upon termination of employment he will
return to the Employer all Employer manuals, document, files, reports, studies,
customer lists, business plans, loan and deposit program plans and outlines,
customer solicitation and follow-up techniques and plans, marketing plans,
employee policies, incentive compensation arrangements, instruments, software,
and other materials used and/or developed by Executive during his employment,
whether in paper, computer readable, computer coded, magnetic, compact disk or
other tangible or electronic form.


 


6.5                                 Confidentiality.


 


6.5.1                        Definition.  During the
term of employment with the Employer, Executive will have access to and become
acquainted with various trade secrets and other proprietary and confidential
information which are owned by the Employer and which are used in the operation
of the Employer’s business, the wrongful use or disclosure of which to the
public or competitors of the Employer would materially adversely affect the
business and prospects of the Employer.


 


6.5.2                        No Disclosure. 
Executive shall not disclose or use in any manner, directly or
indirectly, any trade secrets and other proprietary and confidential
information either during the Term or at any time thereafter, except as
required in the course of employment with the Employer.


 


12

















 


6.5.3                        Nonsolicitation of Business. 
Without limiting Paragraph 6.5.2, Executive agrees that for a period of
twelve (12) months following the termination of his employment with the
Employer, Executive will not, directly or indirectly, solicit, attempt to
solicit, divert, or attempt to divert any customers of the Employer or any
business the Employer or a subsidiary or affiliate had enjoyed or solicited
from its customers, borrowers, depositors or investors by using any trade
secrets 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 the course of employment, or
during any period following the termination of his employment during which he
is receiving compensation or benefits under Paragraphs 5.2, 5.3 or 5.4,
voluntarily or involuntarily, directly or indirectly, (i) engage in any
banking or financial products or service business, loan origination or
deposit-taking business or any other business competitive with that of the
Employer, its subsidiaries or affiliates (“Competitive Business”) within
the county of San Diego (the “Market Area”), (ii) directly or
indirectly own, manage, operate, control, be employed by, or provide management
or consulting services in any capacity to any firm, corporation, or other
entity (other than the Employer or its subsidiaries or affiliates) engaged in
any Competitive Business in the Market Area, or (iii) directly or
indirectly solicit or otherwise intentionally cause any employee, officer, or
member of the Employer Board or any of its subsidiaries 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 Employer;
Employment of Employees.  Any attempt on the part of
Executive to induce others to leave the Employer’s employ, or the employ of any
of its subsidiaries or affiliates, or any effort by Executive to interfere with
the Employer’s relationship with its other employees would be harmful and
damaging to the Employer.  Executive
agrees that during the term of employment and during any period following the
termination of his employment during which he is receiving compensation or
Benefits under Paragraphs 5.2, 5.3 or 5.4, Executive will not in any way,
directly or indirectly (i) induce or attempt to induce any employee of the
Employer or any of its subsidiaries of affiliates to quit employment with the
Employer or the relevant subsidiary or affiliate; (ii) otherwise
interferes with or disrupt the relationships between the Employer and its
subsidiaries and affiliates and their respective employees; (iii) solicit,
entice, or hire away any employee of the Employer or any of its subsidiaries or
affiliates, or (iv) hire or engage any employee of the Employer or any
subsidiary or affiliate or any former employee of the Employer or any
subsidiary or affiliate whose employment with the Employer or the relevant
subsidiary or affiliate ceased after the date of termination of Executive’s
employment with the Employer.


 


6.6.3                        Equitable Relief. 
Executive acknowledges and agrees that irreparable injury will result to
the Employer in the event of a breach of any of the provisions of this
Paragraph 6 (the “Designated Provisions”) and that the Employer
will have no adequate remedy at law with respect thereto.  Accordingly, in the event of a material
breach of any Designated Provision, and in addition to any other legal or
equitable remedy the Employer or its subsidiaries or affiliates may have, the
Employer and any relevant subsidiary or affiliate shall be entitled to the
entry of a preliminary and permanent injunction (including, without limitation,
specific performance) to restrain the violation or breach thereof by Executive
or any affiliates, 


 


13

















 


agents, or any other
persons acting for or with Executive in any capacity whatsoever, and Executive
submits to the jurisdiction of such court in any such action.  Any such remedy shall be granted pursuant to
the dispute resolution procedures applicable under Paragraph 6.3.


 


6.6.4                        Severability. 
It is the desire and intent of the parties that the provisions of this
Paragraph 6 shall be enforced to the fullest extent permissible under the
laws and public policies applied in each jurisdiction in which enforcement is
sought.  Accordingly, if any particular
provision of this Paragraph 6 shall be adjudicated or found to be invalid
or unenforceable, such provisions shall be deemed amended to delete therefrom
the portion thus adjudicated or found to be invalid or unenforceable, such
deletion to apply only with respect to the operation of such provision in the
particular jurisdiction in which such adjudication or finding is made.  In addition, should any court or arbitrator
determine that the provisions of this Paragraph 6 shall be unenforceable
with respect to scope, duration, or geographic area, such court or arbitrator
shall be empowered to substitute, to the extent enforceable, provisions similar
hereto or other provisions so as to provide to the Employer, to the fullest
extent permitted by applicable law, the benefits intended by this
Paragraph 6.


 


6.7                                 Indemnification. 
Due to Executive’s relationship to the Employer as an officer or an
employee, and to the fullest extent permitted by law and in accordance with the
procedures and substantive requirements imposed by law and applicable
regulation (including 12 C.F.R. Part 359, or similar regulations or
regulatory action following similar principles), the Employer shall indemnify
Executive on an after-tax basis in the event he was or is a party or is
threatened to be made a party in any action brought by a third party against
Executive (whether or not the Employer is joined as a party defendant) against
expenses, judgments, fines, settlement, and other amounts actually and
reasonably incurred in connection with said action, provided Executive acted in
good faith and in a manner Executive reasonably believed to be in the best
interests of the Employer, and provided the alleged conduct of Executive arose
out of and was within the course and scope of his employment as an officer or
employee of the Employer.  This
Paragraph 6.7 shall not limit any other rights to indemnification that
Executive may now or hereafter have by law or under the articles, bylaws or
resolutions of the Employer or otherwise. 
Notwithstanding anything in this Agreement to the contrary, this
Paragraph 6.7 shall survive the termination of this Agreement.


 


7.                                       Other Agreements.


 


7.1                                 Employer Policies and Manuals. 
The parties further agree that to the extent of any inconsistency
between this Agreement and any employee manual or policy of the Employer, that
the terms of this Agreement shall supersede the terms of such employee manual
or policy.


 


8.                                       General Provisions.


 


8.1                                 Notices.  Unless
otherwise specifically permitted by this Agreement, all notices or other
communications required or permitted under this Agreement shall be in writing,
and shall be personally delivered or sent by registered or certified mail,
postage prepaid return receipt requested, or sent by facsimile, provided that
the facsimile cover sheet contain a notation of the date and time of
transmission, and shall be deemed received: (i) if personally delivered, 


 


14

















 


upon the date of delivery
to the address of the person to receive such notice, (ii) if mailed in
accordance with the provisions of this paragraph, two (2) business days
after the date placed in the United States mail, (iii) if mailed other
than in accordance with the provisions of this paragraph or mailed from
outside the United States, upon the date of 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:


 


Larry Prosi


C/O 1st Pacific Bank of California


9333 Genesee, Suite 300


San Diego, CA 92121


Fax: (858) 875-2020


 


If to the
Employer:


 


A. Vincent Siciliano


Chief Executive Officer


1st Pacific Bank of California


9333 Genesee, Suite 300


San Diego, CA 92121


Fax: (858) 875-2020


 


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 by giving notice of such change in accordance with this paragraph.


 


8.2                                 Complete Agreement; Modifications. 
This Agreement and written agreements, if any, entered into concurrently
herewith (i) constitute the parties’ entire agreement, including all
terms, conditions, definitions, warranties, representations, and covenants,
with respect to the subject matter hereof, (ii) merge all prior
discussions and negotiations between or among any or all of them as to 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 the subject matter
hereof.  This Agreement may not be
amended, altered or modified except by a writing signed by the party to be
bound.  With respect to the Employer,
such amendment, alteration or modification may only be made on behalf of the
Employer by the Chairperson of the Personnel Committee of the 


 


15

















 


Employer Board, the
Chairperson of the Employer Board or another person specifically designated by
the Employer Board.  With regard to such
amendments, alterations, or modifications, facsimile signatures shall be
effective as original signatures.  Any
amendment, alteration, or modification requiring the signature of more than one
party may be signed in counterparts.


 


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


 


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


 


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


 


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


 


8.6.1                        The obligations of Executive and the
rights of the Employer under Paragraphs 4.5, 5.9, 5.10, 5.11 and 6.3
through and including 6.6 shall survive the termination of this Agreement,
provided that if Executive and the Employer have entered into the Separation
and Consulting Agreement, the dispute resolution provisions of the Separation
and Consulting Agreement shall apply to and govern any and all disputes related
to this Agreement.


 


8.6.2                        The obligations of the Employer to
Executive which by their terms are to continue after termination of employment
under Paragraphs 5 and 6.7 shall survive such termination of employment
and termination of the Agreement.  The
notice provisions of Paragraph 8.1 and this Paragraph 8.6 shall survive
termination of employment and termination of the Agreement.


 


8.6.3                        Notwithstanding any provision of this
Agreement to the contrary, this Agreement shall terminate and, therefore, among
other things, none of the provisions providing for compensation or Benefits to
Executive shall be of any effect, in the event that the Employer is placed into
a conservatorship or receivership, it loses its Federal deposit insurance, or
its banking charter is revoked.


 


8.7                                 Severability. 
If any portion of this Agreement shall be held by a court of competent
jurisdiction to be invalid, void, or otherwise unenforceable, the remaining
provisions shall remain enforceable to the fullest extent permitted by law if
enforcement would not frustrate the overall intent of the parties (as such
intent is manifested by all provisions of the Agreement including such invalid,
void, or otherwise unenforceable portion).


 


8.8                                 Extension Not a Waiver. 
No delay or omission in the exercise of any power, remedy, or right
herein provided or otherwise available to any party shall impair or affect the
right of such party thereafter to exercise the same.  Any extension of time or other indulgence 


 


16

















 


granted 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 whom such extension or
indulgence is granted except as specifically waived.


 


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


 


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


 


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


 


8.12                           References.  A reference
to a particular paragraph of this Agreement shall be deemed to include
references to all subordinate paragraphs, if any.


 


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


 


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


 


8.15                           Representation by Counsel. 
This Agreement has been negotiated by the parties with the assistance of
their respective counsel and at their own cost and expense.  For this reason the principle that an agreement
shall be interpreted against the party that drafted it shall not apply to this
Agreement.


 


[The remainder of this page intentionally left
blank.]


 


17

















 


IN WITNESS WHEREOF, the
undersigned have executed this Agreement as of the date first written above.


 


	
   

  	
  /s/ Larry Prosi

  	
   

  
	
   

  	
  Larry Prosi

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  1st PACIFIC BANCORP, a

  
	
   

  	
  California corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
    /s/ A. Vincent Siciliano

  	
   

  
	
   

  	
   

  	
  A. Vincent Siciliano, Chief Executive Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  1st PACIFIC BANK OF CALIFORNIA, a

  
	
   

  	
  California state-chartered bank

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
    /s/ A. Vincent Siciliano

  	
   

  
	
   

  	
   

  	
  A. Vincent Siciliano, Chief Executive Officer

  
						



 

















 


EXHIBIT A


 


SEPARATION
AND CONSULTING AGREEMENT


AND


GENERAL
RELEASE OF CLAIMS


 


This Separation and Consulting Agreement and General Release
of Claims (this “Agreement”) is entered into by and between Larry Prosi (“Employee”),
and 1st Pacific Bancorp, a California corporation (“Bancorp”) and 1st
Pacific Bank of California, a California state bank (“Bank”) (collectively,
Bancorp and Bank are referred to as the “Employer”) .


 


RECITALS


 


A.           Employee commenced employment with the Employer on or
about                           .  Employee’s employment with the Employer
terminated on                     ,
        .


 


B.             Employee and the Employer desire to settle and
compromise any and all possible claims against the Employer by Employee arising
out of their relationship to date, including Employee’s employment with the
Employer and the termination of Employee’s employment, and to provide for a general
release of any and all such claims.


 


AGREEMENT


 


1.               Separation Pay/Consideration. 
In consideration of the covenants and releases set forth herein, the
Bank agrees to pay Employee the amount payable to him and the non-monetary
consideration (if any) due him, pursuant to and in accordance with,
Paragraphs 5.2, 5.3 or 5.4, as the case may be, of the Employment
Agreement dated                     ,
2007, by and between the Employer and Employee (the “Employment Agreement”),
less all applicable state and federal deductions (in each case, the “Payment”),
$2,000 of which shall be consideration for Employee’s release of ADEA claims as
set forth in Section 5, below; provided that no such Payment shall be made
until at least eight (8) days have past since Employee’s execution of this
Agreement.  The check representing the
Payment shall be mailed to Employee at his/her home address at                                                   .


 


2.               Consulting Services.  The Employer
will retain Employee as a consultant and Employee will provide consulting
services to the Employer, under the direction of the Chief Executive Officer of
the Bank or his delegee, for a period of six months (the “Consulting Term”), in
order to assist in the maintenance of Bank’s customer, investor and employee
relationships, including without limitation services of the following types: (a) provision
of specific information regarding the service requirements of specific
customers and their business and financial practices; (b) identification
of and introduction to prospective customers of Bank; (c) advice regarding
specific Bank employee relations and issues; (d) assistance in development
of marketing plans; (e) assistance in fostering continued relationships
with customers of Bank to whom Employee provided services or as to which he was
their primary contact at Bank; (f) assisting in litigation or arbitration
matters involving Bancorp or Bank, including appearing for depositions; (g) assisting
in regulatory relations and (h) performance of special projects as yet 


 

















 


undetermined. It is
specifically understood that if Executive is not subject to Section 409A
the Consulting Term shall be extended for an additional six months.


 


a.                                       During the Consulting Term, Employee
shall be available to provide consulting services to Employer upon reasonable
notice and at reasonable times on a quarterly basis not to exceed 40 hours per
month.


 


b.                                      Employee’s consulting obligation to
Employer shall not prevent him from engaging in other employment, consulting
and business relationships, provided these do not breach any of the other
provisions of this Agreement or any other agreement with Employer or prevent
him from providing consulting services hereunder.


 


3.               Covenants.  During the
Consulting Term and for the term of any Section 409A waiting period,
Employee re-affirms and agrees that he shall comply with his obligations and
duties under Section 6 of the Employment Agreement.


 


4.               Release of All Claims Except Age Discrimination in
Employment Act of 1967 (“ADEA”) Claims.


 


a.               In consideration of the payment and other benefits
described in Section 1, which Employee would otherwise not be entitled to
except for signing this Agreement, Employee does hereby unconditionally,
irrevocably and absolutely release and discharge the Employer 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, related directly or indirectly, or in any way connected with any
transaction, affairs or occurrences between them to date, including, but not
limited to, Employee’s employment with the Employer and the termination of said
employment.  This Agreement specifically
applies, without limitation, to any and all contract or tort claims, claims for
wrongful termination, wage claims, and claims arising under Title VII of the
Civil Rights Act of 1991, the Americans with Disabilities Act, the Equal Pay
Act, the California Fair Employment and Housing Act, the Fair Labor Standards
Act, the Family and Medical Leave Act, the California Family Rights Act, the
California Labor Code, and any and all federal or state statutes or provisions
governing the employment relationship or discrimination in employment except
the federal statute specifically excluded hereafter.  This release specifically excludes any and
all loss, liability, claims, demands, causes of action or suits of any type
arising under the ADEA.  Employee’s
release of ADEA claims will be addressed separately in Section 3 of this
Agreement.


 


b.              Employee irrevocably and absolutely agrees that he/she
will not prosecute nor allow to be prosecuted on his/her behalf, in any
administrative agency, 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 being the intention of the parties that with the execution
by Employee of this release, the Employer and any related holding, parent,
sister or subsidiary corporations 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 forever 


 

















 


discharged of and from
all obligations to or on behalf of Employee related in any way to the matters
discharged herein.


 


5.               Release of All ADEA Claims.


 


a.               This section of the Agreement exclusively addresses
Employee’s release of claims arising under federal law involving discrimination
on the basis 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 release of age discrimination claims under federal
law (the ADEA) is knowing and voluntary on the part of Employee.


 


b.              Employee represents, acknowledges and agrees that the
Employer has advised him/her, in writing, to discuss this Agreement with an
attorney, and to the extent, if any, that Employee has desired, Employee has
done so; that the Employer has given Employee twenty-one (21) days from receipt
of this Agreement to review and consider this Agreement before signing it, and
Employee understands that he may use as much of this twenty-one (21) day period
as he wishes prior to signing; that no promise, representation, warranty or
agreements not contained herein have been made by or with anyone to cause him
to sign this Agreement; that he has read this Agreement in its entirety, and
fully understands and is aware of its meaning, intent, content and legal
effect; and that he is executing this release voluntarily and free of any
duress or coercion.


 


c.               The parties acknowledge that for a period of seven (7) days
following the execution of this Agreement, Employee may revoke the Agreement,
and the Agreement shall not become effective or enforceable until the
revocation period has expired.  This
Agreement shall become effective eight (8) days after it has been signed
by Employee and the Employer, and in the event the parties do not sign on the
same date, then this Agreement shall become effective eight (8) days after
the date it is signed by Employee.


 


d.              In consideration of the separation payment and other
benefits made to Employee described in Section 1 of this Agreement, which
Employee would otherwise not be entitled to except for signing this Agreement,
Employee does hereby unconditionally, irrevocably and absolutely release and
discharge the Employer 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 arising under the ADEA and related directly or indirectly to Employee’s
employment with the Employer and the termination of said employment.


 


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


 


A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE
CREDITOR DOES NOT KNOW OF OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF
EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM 


 

















 


MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH THE
DEBTOR.


 


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


 


7.               Confidentiality.  Employee
agrees that all matters relative to this Agreement, including the negotiations
leading up to this Agreement and its terms, shall remain confidential.  Accordingly, Employee hereby agrees that,
with the exception of his spouse, regulatory agencies of the Employer and tax
and legal advisors, he will not discuss, disclose or reveal to any other
persons, entities or organizations, whether within or outside of the Employer,
the terms and conditions of this Agreement.


 


8.               Non-Disparagement.  Employee
agrees that he will not disparage the Employer or any of its directors,
employees, agents or volunteers or otherwise interfere with the Employer’s
business, vendor or other relationships. 
Employee agrees not to make any derogatory or adverse statements,
written or verbal, to anyone regarding the Employer or any of its present or
former directors, employees, agents or volunteers.  The Employer agrees that it will neither
disparage Employee nor make any derogatory or adverse statements, written or
verbal, to anyone regarding Employee.  If
an arbitrator determines that the Employer has breached its obligations under
this Section 6, to the extent the Payment has not been paid in full, the
Employer shall be required to make the Payment in full to Employee within five (5) days
following such arbitrator’s determination. 
Nothing in this Section 8 shall prohibit or relate to any statement
by any person to any bank regulatory agency.


 


9.               Entire Agreement.  The parties
further declare and represent that no promise, inducement or agreement not
herein expressed has been made to them and that this Agreement contains the
full and entire agreement between and among the parties, and that the terms of
this Agreement are contractual and not a mere recital.


 


10.         Future Employment.  Employee
agrees that the Employer will not be obligated to offer employment to him or to
hire him for any reason, regardless of the circumstances, at any time on or
after the date of this Agreement. 
Employee agrees that he will not apply for nor accept any such
employment.


 


11.         Trade Secret/Proprietary Information. 
Employee hereby reaffirms his obligations under his Employment Agreement
with the Employer to which this Agreement relates, which shall remain in effect
to the extent provided in the Employment Agreement.  Employee further agrees that he shall not
disclose to any person(s) or entity(ies) at any time or in any manner,
directly or indirectly, any information relating to the operations of the
Employer 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 information
and/or trade secrets; secret formulae; customer lists and/or names; product and
service prices; customer charges; contracts; 


 

















 


contract negotiations and
employee relations matters.  Employee
understands and agrees that this list is not all-inclusive.


 


12.         Return of Company Property. 
Employee agrees to promptly return all property or information belonging
to the Employer, including all keys, computers, cellular telephones, and any
document or property Employee generated during his employment at the Employer,
and agrees that no such property will be in his possession or control at the
time he receives the consideration specified in Section 1.  This includes all property or information
that may have come into his possession as a result of his employment with the
Employer.  Employee further acknowledges
that he has not retained any copies of any such information.


 


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


 


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


 


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


 


16.         Severability.  If any
provision of this Agreement, or part thereof, is held invalid, void or voidable
as against public policy or otherwise, 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 parts thereof, of this Agreement are declared to be severable.


 


17.         No Admission of Liability. 
It is understood that this Agreement is not an admission of any
liability by the Employer


 


18.         Successors and Assigns.  This
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective heirs, legal representatives, successors and assigns.


 


19.         Counterparts.  This
Agreement may be signed in counterparts. 
A facsimile signature shall have the same force and effect as an
original signature.


 


Employee and the Employer have read the foregoing Agreement
and know its contents and fully understand it. 
Employee and the Employer acknowledge that they have fully discussed
this Agreement with their respective attorneys to the extent desired, or have
had the opportunity to do so, and fully understand the consequences of this
Agreement.  No party is being influenced
by any statement made by or on behalf of any of the other party to this
Agreement.  Employee and the Employer have
relied and are relying solely upon his or its own judgment, belief and knowledge
of the nature, extent, effect and consequences relating to this Agreement
and/or upon the advice of their own legal counsel concerning the consequences
of this Agreement.


 

















 


IN WITNESS WHEREOF, the undersigned have executed this
Agreement on the dates shown below.


 


	
  Dated:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  [INSERT EMPLOYEE
  NAME]

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  1st
  Pacific Bank of California:

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Dated:

  	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
   

  	
  Its:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  1st
  Pacific Bancorp:

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Dated:

  	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
   

  	
  Its:

  	
   

  
									



 

















 


EXHIBIT B


 


EXECUTIVE
ARBITRATION AGREEMENT


 


THIS EXECUTIVE
ARBITRATION AGREEMENT (“Arbitration Agreement”) is made by and between 1st
Pacific Bancorp, a California corporation (“Bancorp”), and 1st
Pacific Bank of California, a California state-chartered bank (“Bank”),
and Larry Prosi (the “Executive”), effective as of the date that the
Employment Agreement between Bank, Bancorp and Executive executed
contemporaneously herewith (the “Employment Agreement”), becomes
effective.


 


The purpose of this
Arbitration Agreement is to establish final and binding arbitration for
disputes arising out of Executive’s employment, the Employment Agreement or the
termination of Executive’s employment. 
Executive and Bank and Bancorp desire to arbitrate their disputes on the
terms and conditions set forth below, in order to gain the benefits of a
speedy, impartial dispute-resolution procedure. 
Executive and Bank and Bancorp agree to the following:


 


1.                                       Claims Covered By The Arbitration
Agreement.  Executive, Bank and Bancorp mutually consent
to the resolution by final and binding arbitration of all claims or
controversies (“claims”) that Bank and/or Bancopr may have against
Executive or that Executive may have against Bank, Bancorp or against either of
their officers, directors, partners, employees, agents, pension or benefit
plans, administrators, or fiduciaries, or any subsidiary or affiliated company
or corporation (collectively referred to as the “Employer”), relating
to, resulting from, or in any way arising out of Executive’s employment
relationship with the Employer, the Employment Agreement and/or the termination
of Executive’s employment relationship with the Employer, to the extent
permitted by law.  The claims covered by
this Arbitration Agreement include, but are not limited to, claims for wages or
other compensation due; claims for breach of any contract or covenant (express
or implied); tort claims; claims for discrimination and harassment (including,
but not limited to, race, sex, religion, national origin, age, marital status
or medical condition, disability, sexual orientation, or any other
characteristic protected by federal, state or local law); claims for benefits
(except where an employee benefit or pension plan specifies that its claims
procedure shall culminate in an arbitration procedure different 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 serving
or mailing a written notice to the Board of Directors of Bancorp at Bancorp’s
administrative headquarters, care of the Corporate Secretary.  The Employer may initiate arbitration by
serving or mailing a written notice to Executive at his last known address.  The written notice must specify the claims
asserted against the other party.  Notice
of any claim sought to be arbitrated must be served within the limitations
period established by applicable federal or state law.


 


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


 

















 


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


 


4.                                       Discovery.  Discovery
shall be allowed and conducted pursuant to the then applicable arbitration 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, as applicable
to the claim(s) asserted.  The
arbitrator shall have authority to resolve any dispute relating to the
interpretation, applicability, enforceability or formation of this Arbitration
Agreement, including but not limited to any claim that all or any part of this
Arbitration Agreement is void or voidable.


 


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


 


7.                                       Application For Emergency Injunctive
And/Or Other Equitable Relief.  Claims by the
Employer or Executive for emergency injunctive and/or other equitable relief
relating to unfair competition and/or the use and/or unauthorized disclosure of
trade secrets or confidential information shall be subject to the then current
version of the AAA’s Optional Rules for Emergency Measures of Protection
set forth within the AAA’s Commercial Dispute Resolution Procedures.  The AAA shall appoint a single emergency
arbitrator to handle the claim(s) for emergency relief.  The emergency arbitrator selected by the AAA
shall be either a retired judge or an individual experienced in handling
matters involving claims for emergency injunctive and/or other equitable relief
relating to unfair competition and the use or unauthorized disclosure of trade
secrets and/or confidential information.


 


8.                                       Arbitration Decision. 
The arbitrator’s decision will be final and binding.  The arbitrator shall issue a written
arbitration decision revealing the essential findings and conclusions upon
which the decision and/or award is based. 
A party’s right to appeal the decision is limited to grounds provided
under applicable federal or state law.


 


9.                                       Place Of Arbitration. 
The arbitration will be at a mutually convenient location, which must be
within 50 miles of Executive’s last employment location with the Employer.  If the parties cannot agree upon a location,
then the arbitration will be held at AAA’s office nearest to Executive’s last
employment location with the Employer.


 


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


 


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


 

















 


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


 


13.                                 Consideration. 
The Employer’s offer to employ Executive, and the promises by the
Employer and Executive to arbitrate differences, rather than litigate them
before courts or other bodies, provide consideration for each other.


 


14.                                 Fees and Costs. 
Each party may be represented by an attorney or other representative
selected by the party.  Each party shall
be responsible for its own attorneys’ or representative’s fees.  However, if any party prevails on a statutory
claim which affords the prevailing party’s attorneys’ fees, or if there is a
written agreement providing for fees, the arbitrator may award reasonable 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 by Executive, if any, had
the dispute(s) arbitrated under this Arbitration Agreement been litigated
in state or federal court; the Employer shall be responsible for all
administrative fees exceeding such amount.


 


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


 


16.                                 Sole And Entire Agreement. 
This Arbitration Agreement expresses the entire agreement of the parties
and there are no other agreements, oral or written, concerning arbitration,
except as provided herein, and except for the Employment Agreement which
incorporates this Arbitration Agreement by reference.  By itself, this Arbitration Agreement is not,
and shall not be construed to create, any contract of employment, express or
implied.


 


17.                                 Requirements for Modification or
Revocation.  This Arbitration Agreement shall survive the
termination of Executive’s employment. 
It can only be revoked or modified by a writing signed by the
Chairperson of the Personnel Committee of Bancorp’s Board of Directors, the
Chairperson of Bancorp’s Board of Directors or another person specifically
designated by the Board of Directors of Bancorp and Executive, that
specifically states an intent to revoke or modify this Arbitration Agreement.


 


18.                                 Waiver of Jury Trial/Exclusive Remedy.  EXECUTIVE AND THE EMPLOYER WAIVE ANY CONSTITUTIONAL OR
STATUTORY RIGHT TO HAVE ANY DISPUTE BETWEEN THEM COVERED BY THE TERMS OF THIS
ARBITRATION AGREEMENT DECIDED BY A COURT OF LAW AND/OR BY A JURY IN A COURT.


 


19.                                 Voluntary Agreement. 
EXECUTIVE ACKNOWLEDGES THAT EXECUTIVE HAS CAREFULLY READ THIS
ARBITRATION AGREEMENT, UNDERSTANDS ITS TERMS, AND AGREES THAT ALL UNDERSTANDINGS
AND AGREEMENTS BETWEEN THE EMPLOYER AND EXECUTIVE RELATING TO THE SUBJECTS
COVERED IN THE ARBITRATION AGREEMENT ARE CONTAINED IN IT.  EXECUTIVE 


 

















 


HAS VOLUNTARILY ENTERED
INTO THE ARBITRATION AGREEMENT WITHOUT RELIANCE ON ANY PROVISIONS OR REPRESENTATIONS
BY THE EMPLOYER, OTHER THAN THOSE CONTAINED IN THIS ARBITRATION AGREEMENT OR
EMPLOYMENT AGREEMENT INTO WHICH IT IS INCORPORATED BY REFERENCE.


 


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


 


 


	
  Dated:

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Larry Prosi, Executive

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  1st PACIFIC BANK OF CALIFORNIA,

  
	
   

  	
   

  	
   

  	
  a California state-chartered bank

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Dated:

  	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  A. Vincent Siciliano, Chief Executive Officer

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  1st PACIFIC BANCORP,

  
	
   

  	
   

  	
   

  	
  a California corporation

  
	
   

  	
   

  	
   

  	
   

  
	
  Dated:

  	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  A. Vincent Siciliano, Chief Executive Officer

  
								



 
















 


EXHIBIT C


 


NON-QUALIFIED STOCK OPTION AGREEMENT


 


1ST PACIFIC BANCORP 2007 OMNIBUS STOCK
INCENTIVE PLAN


 


Non-Qualified Stock Option Agreement


 


THIS Non-Qualified Stock Option Agreement (“Award
Agreement”) is made this 21st day of December, 2007, between 1st
Pacific Bancorp (the “Company”) and Larry Prosi (“Participant”) pursuant and
subject to the provisions of the 1st Pacific Bancorp 2007 Omnibus
Stock Incentive Plan (the “Plan”). 
Unless otherwise defined herein, all terms used in this Award Agreement
that are defined in the Plan shall have the meaning as defined in the Plan.


 


1.             Award of Non-Qualified Stock Option.  Pursuant to the provisions of the Plan, the
Company will and hereby does award to the Participant  Non-Qualified Stock Options to purchase up to
Fifty-Two Thousand Seven Hundred and Twelve (52,712) shares of Common Stock (“Shares”).  Subject to the other terms of this Award
Agreement and the provisions of the Plan that accelerate or terminate vesting
or result in early termination in certain circumstances, these Non-Qualified
Stock Options shall be exercisable only with respect to vested shares, on or
after the applicable Vesting Date, under the following terms:


 


(a)           Non-Performance Based Vesting
Schedule:  The Non-Qualified Stock
Option for 4,178 shares shall vest in Participant and may be exercised by
Participant on November 15, 2007. 
The Non-Qualified Stock Option for 7,778 shares shall vest in
Participant and may be exercised by Participant on November 15, 2008.  The Non-Qualified Stock Option for 7,778
shares shall vest in Participant and may be exercised by Participant on November 15,
2009.  The Non-Qualified Stock Option for
7,778 shares shall vest in Participant and may be exercised by Participant on November 15,
2010.  The Non-Qualified Stock Option for
3,600 shares shall vest in Participant and may be exercised by Participant on November 15,
2011.  The Non-Qualified Stock Option for
3,600 shares shall vest in Participant and may be exercised by Participant on November 15,
2012.


 


(b)           Performance Based Vesting Schedule:  Vesting of the Non-Qualified Stock Option for
the remaining 18,000 shares is subject to a performance-based graded vesting
schedule that annually measures ROAE of 1st Pacific Bank of
California (the “Bank”) for the Performance Period against ROAE of the
Comparative Group for that same Performance Period.  Each “Performance Period” shall be the
calendar year.  The first Performance
Period under this Agreement shall run from January 1, 2008 to December 31,
2008.  A maximum of 3,600 shares can
become vested for any single Performance Period.  Vesting shall be based on the Bank’s ROAE
during each Performance Period relative to the Comparative Group for that same
Performance Period, as shown on the following table:


 


	
  Bank ROAE Relative to Comparative Group

  (Performance Standard)

  	
   

  	
  Vesting Amount

  
	
   

  	
   

  	
   

  
	
  2008 Performance
  Period: Bank ROAE must be equal to or greater than the ROAE at the top of the
  lower 33rd percentile of members of the Comparative Group

  	
   

  	
  3,600
  Shares

  



 


1

















 


	
  2009 Performance
  Period: Bank ROAE must be equal to or greater than the ROAE at the top of the
  50th percentile of members of the Comparative Group

  	
   

  	
  3,600
  Shares

  
	
   

  	
   

  	
   

  
	
  2010 Performance
  Period: Bank ROAE must be equal to or greater than the ROAE at the top of the
  50th percentile of members of the Comparative Group

  	
   

  	
  3,600
  Shares

  
	
   

  	
   

  	
   

  
	
  2011 Performance
  Period: Bank ROAE must be equal to or greater than the ROAE at the top of the
  50th percentile of members of the Comparative Group

  	
   

  	
  3,600
  Shares

  
	
   

  	
   

  	
   

  
	
  2012 Performance
  Period: Bank ROAE must be equal to or greater than the ROAE at the top of the
  50th percentile of members of the Comparative Group

  	
   

  	
  3,600
  Shares

  
	
   

  	
   

  	
   

  
	
  Each Performance
  Period after 2012: Bank ROAE must be equal to or greater than the ROAE at the
  top of the 50th percentile of members of the Comparative Group

  	
   

  	
  100%
  of available Roll Forward Shares, if any, provided that a maximum of 3,600
  Shares may vest for any given Performance Period)

  



 


Vesting can occur for a
given Performance Period only if the Participant is still employed by the
Company (or a subsidiary thereof) on the last day of that Performance Period.


 


The Company may, in its
discretion, lower the performance standards for any given Performance
Period.  The Company shall lower the
performance standards for any given Performance Period to match the actual and
ultimate performance goals applicable under the 1st  Pacific
Bank of California Incentive Compensation Plan for Senior Management.


 


(c)  Roll Forward
Shares:  Any unvested
performance-based shares that do not become vested for a Performance Period
shall be rolled forward for possible vesting in a subsequent Performance
Period.  For example, if the performance
standards are not met for the first two Performance Periods (2008 and 2009),
then there will still be 18,000 unvested shares available for vesting after
2009.  Continuing this example, if the
performance standards are met for 2010, then 3,600 of the 18,000 unvested shares
will vest for that 2010 Performance Period, and the remaining 14,400 shares
will roll forward for possible vesting in subsequent Performance Periods.  All unvested shares will continue to roll
forward to subsequent Performance Periods during the term of this Award
Agreement.  A maximum of 3,600 shares can
become vested for any single Performance Period.


 


(d)  Vesting Date:  The Committee shall make the determination of
whether the above vesting Schedule is satisfied for a given Performance Period
using the information applicable to the Performance Period for the Bank and the
Comparative Group.  Such determination
shall occur as soon as administratively possible following such Performance
Period, and in no event


 


2

















 


later than two weeks after such data is available by
the FFIEC following the Performance Period for which ROAE would be
measured.  Notwithstanding anything in
this Agreement to the contrary, if ROAE of one or more members of a Comparative
Group cannot be calculated as of the end of a Performance Period because such
information is not available or for any other reason, then ROAE of such member
of the Comparative Group shall be calculated and construed in a manner that is
most favorable to the Participant.


 


(e)  ROAE Defined:  For purposes of this Agreement, and as
applied to the Bank and each member of the Comparative Group, ROAE for the
Performance shall be as set forth in the FFIEC data base.


 


(f)  Comparative
Group Defined:  Until Such time as
changed with the consent of the Participant, the Comparative Group for purposes
of this Agreement shall consist of the following:


 


	
  1. 1st Centennial Bank

  	
   

  	
  Redlands, California

  
	
  2. American Business Bank

  	
   

  	
  Los Angeles, California

  
	
  3. American River Bank

  	
   

  	
  Sacramento, California

  
	
  4. Bank of Alameda

  	
   

  	
  Alameda, California

  
	
  5. Bridge Bank, N.A.

  	
   

  	
  San Jose, California

  
	
  6. Butte Community Bank

  	
   

  	
  Chico, California

  
	
  7. Desert Hills Bank

  	
   

  	
  Phoenix, Arizona

  
	
  8. First Commerce Bank

  	
   

  	
  Encino, California

  
	
  9. First National Bank of Northern California

  	
   

  	
  Daly City, California

  
	
  10. Heritage Oaks Bank

  	
   

  	
  Paso Robles, California

  
	
  11. National Bank of California

  	
   

  	
  Los Angeles, California

  
	
  12. Nevada Security Bank

  	
   

  	
  Reno, Nevada

  
	
  13. Pacific State Bank

  	
   

  	
  Stockton, California

  
	
  14. Premier Commercial Bank

  	
   

  	
  Anaheim, California

  
	
  15. Premier Valley Bank

  	
   

  	
  Fresno, California

  
	
  16. Regents Bank, N.A.

  	
   

  	
  La Jolla, California

  
	
  17. Valley Business Bank

  	
   

  	
  Visalia, California

  



 


Notwithstanding the
foregoing, the Company reserves the right to adjust the Plan’s Comparative
Group from time to time.  If the
Participant and the Company do not agree on the Company’s proposed adjustments,
then the Participant shall have the right to present his position to the full
board of directors.  In that event ,
implementing the adjustments proposed by the Company shall require a two-thirds
majority of those directors present and eligible to vote.


 


2.             Exercise Price. 
The exercise price of this Award is Ten Dollars and Twenty-Five Cents
($10.25) per Share, which is not less than the Fair Market Value of Common
Stock on the date of grant of this Award. 
The exercise price per Share shall be paid upon exercise of all or any
part of each installment which has become exercisable by the Participant.  Payment of the exercise price shall be made
by cash at the time of exercise.


 


3

















 


3.             Minimum Exercise. 
The minimum number of Shares with respect to which this Award may be
exercised at any one time is the lesser of 500 or the number of Shares as to
which this Award is exercisable at the date of exercise.


 


4.             Taxation. 
The Participant acknowledges that federal and state income and payroll
tax may apply upon exercise of this Award. 
The Participant hereby agrees that if withholding is required, the
Company shall withhold applicable taxes on such amount from other income or
assets payable to the Participant as required to satisfy all withholding
requirements.  If withholding pursuant to
the foregoing sentence is insufficient (in the sole judgment of the Company) to
satisfy the full withholding obligation, the Participant agrees that he or she
will pay over to the Company the amount of cash necessary to satisfy such
remaining withholding obligation on the date this Award is exercised or at a
time thereafter specified in writing by the Company.


 


5.             Assurances Upon Exercise.  The Participant hereby makes the following
representations, and the Company may require any person to whom this Award is
transferred under Section 9 of this Award Agreement to make the following
representations, as a condition of exercising this Award: (i) that he or
she has the requisite knowledge and experience in financial and business
matters and/or he or she will employ a purchaser representative reasonably
satisfactory to the Company who is knowledgeable and experienced in financial
and business matters, and that he or she is capable of evaluating, alone or
together with the purchaser representative, the merits and risks of exercising
this Award; and (ii) that he or she is acquiring Shares subject to this
Award for such person’s own account and not with any present intention of
selling or otherwise distributing the Shares. 
The foregoing requirements and assurances given pursuant to such
requirements, shall be inoperative if: (i) the issuance of the Shares upon
the exercise of this Award has been registered under a then currently effective
registration statement under the Securities Act of 1933, as amended; or (ii) as
to any particular requirement, a determination is made by counsel for the
Company that such requirement need not be met in the circumstances under the
then applicable securities laws.  The
Company may, upon advice of counsel to the Company, place legends on stock
certificates issued upon exercise of this Award as such counsel deems necessary
or appropriate in order to comply with Applicable Laws, including, but not
limited to, legends restricting the transfer of the stock.


 


6.             Term.  The
term of this Award Agreement commences on the date hereof and, unless sooner
terminated as set forth in the Plan, terminates ten (10) years from the
date it was granted.  Notwithstanding the
provisions of Section 6.4(b) of the Plan, if the Participant’s
employment with the Company is terminated as described in Section 4.1.5 of
the Participant’s Employment Agreement dated December 21, 2007 (the “Employment
Agreement”), then this Option shall remain exercisable for the remainder of the
otherwise applicable term of the Award Agreement, notwithstanding such
termination, provided that the Participant complies with the Business Protection
Covenants of Section 6.6 of the Employment Agreement.  If the Participant fails to comply with the
Business Protection Covenants of Section 6.6 of the Employment Agreement,
then the Options under this Award Agreement shall be automatically terminated.


 


7.             Participant Acknowledgments. By executing this
Award Agreement, the Participant acknowledges and agrees as follows:


 


4

















 


(a)           The
Participant and his or her transferees have no rights as a shareholder with
respect to any Shares covered by this Award Agreement until the date of the
issuance of a stock certificate for such Shares.


 


(b)           The
Company is not providing the Participant with advice, warranties or
representations regarding any of the legal or tax effects to the Participant
with respect to this Award Agreement or the Fair Market Value of the Common
Stock.


 


8.             Notice of Exercise.  This Award may be exercised, to the extent
specified above, by delivering written notice of exercise together with the
exercise price to the Secretary of the Company, or to such other person as the
Company may designate, during regular business hours, together with such
additional documents as the Company may then require pursuant to the Plan.  The notice must specify the number of Shares
to be purchased upon exercise and a date within fifteen (15) days after receipt
of the notice by the Company on which the purchase is to be completed.


 


9.             Transferability. 
Other than pursuant to a domestic relations order (within the meaning of
Rule 16a-12 promulgated under the Exchange Act) and unless determined
otherwise by the Administrator, this Award may not be sold, pledged, assigned,
hypothecated, transferred, or disposed of in any manner other than by will or
by the laws of descent or distribution, and may be exercised, during the
lifetime of the Participant, only by the Participant.


 


10.           Securities Registration.  THE
SECURITIES BEING OFFERED HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE “ACT”), OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT
BE OFFERED, SOLD OR OTHERWISE TRANSFERRED UNLESS SUCH SECURITIES ARE INCLUDED
IN AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT AND ARE QUALIFIED UNDER
APPLICABLE STATE SECURITIES LAWS, OR SUCH OFFER, SALE OR TRANSFER IS EXEMPT
THEREFROM.


 


11.           Successors and Assigns.  Except as otherwise expressly provided
herein, this Award Agreement shall be binding upon and inure to the benefit of
the parties hereto, and their respective representatives, successors and
assigns.  The Participant may not assign
any of his or her rights or delegate any of his or her duties hereunder,
without the written consent of the Company, which may be withheld in its sole
and absolute discretion, and any such attempted assignment or delegation without
such consent shall be void.


 


12.           Notices.  All notices, requests, demands and other
communications hereunder shall be in writing and shall be deemed to have been
duly given to the Company when received by the Secretary of the Company, and to
the Participant on the second business day following the date mailed by United
States Mail, postage prepaid, at the following addresses, or at such other
address as shall be given in writing by either party to the other:


 


	
  Company:

  	
   

  	
  A. Vincent
  Siciliano

  
	
   

  	
   

  	
  Chief Executive
  Officer

  
	
   

  	
   

  	
  1st Pacific Bank
  of California

  
	
   

  	
   

  	
  9333 Genesee,
  Suite 300

  



 


5

















 


	
   

  	
   

  	
  San Diego, CA
  92121

  
	
   

  	
   

  	
  Fax: (858)
  875-2020

  
	
   

  	
   

  	
   

  
	
  Participant:

  	
   

  	
  Larry Prosi

  
	
   

  	
   

  	
  C/O 1st Pacific
  Bank of California

  
	
   

  	
   

  	
  9333 Genesee,
  Suite 300

  
	
   

  	
   

  	
  San Diego, CA
  92121

  
	
   

  	
   

  	
  Fax: (858)
  875-2020

  



 


13.           Choice of Law and Venue.  This Award Agreement and all questions
relating to its validity, interpretation, performance and enforcement shall be
governed by and construed in accordance with the laws of the State of
California, without giving effect to the conflict of laws provisions
thereof.  Any legal proceeding arising
out of this Award Agreement shall be brought only in a state or federal court
of competent jurisdiction located in San Diego, California.


 


14.           Amendment.  This Award Agreement may be amended or
modified only by the written agreement of all parties hereto.


 


15.           Entire Agreement.  The Plan and this Award Agreement and the
other documents delivered hereunder constitute the full and entire
understanding and agreement between the parties with regard to the subject
matter hereof, and supersede all prior agreements, understanding, inducements
or conditions, express or implied, oral or written, relating to the subject
matter hereof, except as herein contained. 
The express terms of the Plan and this Award Agreement control and
supersede any course of performance and/or usage of trade inconsistent with any
of the terms hereof.


 


16.           Attorney Fees.  If any legal action is necessary to enforce
the terms of this Award Agreement, the prevailing party shall be entitled to
recover, in addition to other amounts to which the prevailing party may be
entitled, actual attorneys’ fees and costs.


 


17.           Severability.  The provisions of this Award Agreement are
severable.  In the event that one or more
of the provisions contained in the Plan or this Award Agreement or in any other
agreement referred to herein shall, for any reason, be held to be invalid,
illegal or unenforceable in any respect, such invalidity or unenforceability
shall not effect the remaining provisions of the Plan or the Award
Agreement.  Further a court of competent
jurisdiction shall have the authority to rewrite, interpret or construe the
terms of the Plan and Award Agreement so as to render them enforceable to the
maximum extent allowed by law, consistent with the intent of the parties as
evidenced hereby.


 


18.           Counterparts.  This Award Agreement may be executed in any
number of counterparts, each of which shall be deemed to be an original as
against any party whose signature appears thereon, and all of which shall
together constitute one and the same instrument.


 


6

















 


IN WITNESS WHEREOF, 1st
Pacific Bancorp has caused this Award Agreement to be signed by the
Administrator, and the Participant has affixed his or her signature hereto.


 


1st
Pacific Bancorp:


 


 


	
   

  
	
  A. Vincent
  Siciliano, Chief Executive Officer

  



 


ACCEPTANCE AND ACKNOWLEDGMENT


 


I, a resident of the State of California, accept the
Non-Qualified Stock Option Award described in this Award Agreement and in the
Plan, and acknowledge receipt of a copy of the Plan and this Award
Agreement.  I further acknowledge that I
have read the Plan and Award Agreement carefully, I fully understand their contents,
and I agree to be bound by the same.


 


 


	
  Dated:

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Larry Prosi