Unassociated Document


    Exhibit
10.1

     

    EMPLOYMENT
AGREEMENT

     

    PENNSYLVANIA
COMMERCE BANCORP, INC.

     

    


    


    


    HARRY
D. MADONNA

    


    


    


    EFFECTIVE
DATE _____________________


    
      
         


      

      
         


        
          

        

      

      
         


      

    


    TABLE OF
CONTENTS

    
 

    
      
        
          
            	 	
                    PAGE

                  
	 	 
	
                    1.
      Employment and Term of Employment.

                  	
                    1

                  
	
                    2.
      Services and Duties.

                  	
                    2

                  
	
                    3.
      Compensation.

                  	
                    2

                  
	
                    4.
      Fringe and Other Benefits.

                  	
                    3

                  
	
                    5.
      Disability and Death Compensation.

                  	
                    4

                  
	
                    6.
      Termination by Commerce for Cause.

                  	
                    5

                  
	
                    7.
      Termination by Commerce Without Cause.

                  	
                    6

                  
	
                    8.
      Termination “For Good Reason” by Executive.

                  	
                    7

                  
	
                    9.
      “Change in Control” and “Good Reason.”

                  	
                    7

                  
	
                    10.
      Additional Payments/Excise Taxes.

                  	
                    9

                  
	
                    11.
      Other Rights for Termination “Without Cause” or “For Good
      Reason”.

                  	
                    12

                  
	
                    12.
      Source of Payment and Timing.

                  	
                    13

                  
	
                    13.
      Interest..

                  	
                    14

                  
	
                    14.
      Reimbursement of Enforcement Expenses.

                  	
                    14

                  
	
                    15.
      Confidential Information and Non-Competition.

                  	
                    14

                  
	
                    16.
      Successions.

                  	
                    16

                  
	
                    17.
      Notices.

                  	
                    18

                  
	
                    18.
      General Provisions.

                  	
                    18

                  


          

        

      

    

    

 


    
      
         


      

      
         


        
          

        

      

      
         


      

    


    EMPLOYMENT
AGREEMENT

     

    


    This
Agreement dated _______________________, by and between PENNSYLVANIA COMMERCE
BANCORP, INC., a Pennsylvania corporation (“Commerce”) and Harry D. Madonna
(“Executive”) is conditioned upon and is to be effective upon consummation of
the Merger (defined below).

    


    BACKGROUND

    A. Commerce
and Republic First Bancorp, Inc. (“Republic First”) parent company of Republic
First Bank, a Pennsylvania bank (“RFB”), have entered into an Agreement and Plan
of Merger, dated as of November 7, 2008, pursuant to which Republic First will
be merged with and into Commerce and RFB will become a wholly-owned subsidiary
of Commerce (the “Merger”).

    


    B. Executive
and Republic First and RFB are parties to an employment agreement dated January
1, 2007 (the “Republic First Employment Agreement”) pursuant to which Executive
serves as Chairman, President and Chief Executive Officer of Republic First and
RFB.

    


    C. Upon  consummation
of the Merger, Executive and Commerce desire for this Agreement  to
supersede and replace the Republic First Employment Agreement and for Executive
to serve as the President and Chief Executive Officer of RFB and Vice Chairman
of the Board of Directors of Commerce.

    


    D. The Board
of Directors of Commerce (the "Board") has determined that the services of
Executive in these capacities are valuable to Commerce and RFB.

    


    E. Accordingly,
the Board wishes to have Executive’s services available to Commerce for at least
five (5) years and to provide supplemental benefits to Executive should his
employment with Commerce terminate under certain circumstances or should he die
or become disabled before the termination of this Agreement.

    


    NOW,
THEREFORE, in consideration of the mutual covenants and agreements contained
here, and intending to be legally bound, the parties agree as
follows:

    


    
      	
               
      

            	
              1.
      Employment and Term of
      Employment.

            


    

     

    1.1 Five Year
Term.  Commerce offers Executive employment, and Executive
accepts such employment, subject to all the terms and conditions of this
Agreement, for a term of five (5) years beginning on the effective date of the
Merger.

     

    1.2 Conditions to
Term.  This five year term is subject to:

     

    (a) Automatic Renewal
and Extension.  Unless either party has provided the other with
written notice pursuant to Section 1.2 (b) below, this Agreement and Executive’s
employment shall automatically be renewed and extended (upon the same terms and


     

    
      
        
        

      

      
        1

        
          

        

      

      
        
        

      

    

    conditions)
for a one (1) year term on the fifth (5th)
Anniversary Date and on each Anniversary Date thereafter.

     

    (b) Termination Upon
Notice.  With written notice of termination to the other party
given not less than six (6) months prior to the expiration of the five-year term
or any annual extension term, either Commerce or Executive may terminate this
Agreement.  If such notice is given, termination shall be effective at
the applicable Anniversary Date.

     

    (c) Termination for
Other Reasons. This Agreement may be
terminated on Death, “For Cause”, “Without Cause”, or for “Good Reason” as
described in Sections 5, 6, 7 and 8 below.

     

    1.3 “Term”
Definition.  "Term"
means the original five (5) year employment period, as well as any
renewed or extended periods as provided for in this Agreement.

     

    1.4 “Anniversary Date “
Definition.  “Anniversary
Date” means ______________________20__, as well as each annual
____________ thereafter if this Agreement is automatically renewed or
extended.

     

    
      	
               
      

            	
              2.
      Services and
      Duties.

            


    

     

    2.1 Offices.  During the
Term, Executive shall be employed as Vice Chairman of Commerce and until
such time as RFB merges into Commerce Bank/Harrisburg (“CBH”), he shall also
serve as President and Chief Executive Officer of RFB.  Upon the
merger of RFB into CBH, Executive shall continue to serve as the Vice Chairman
and an employee of Commerce.

     

    2.2 Duties.  As the Vice
Chairman of Commerce and as President and Chief Executive Officer of RFB,
Executive shall have such powers and duties as are commensurate with such
positions and as may from time to time be prescribed by the Boards of Directors
of Commerce and RFB.

     

    (a) Full Time and
Best Efforts.  Executive accepts such duties and agrees to his
employment by Commerce and to devote his full time and efforts to the business
and affairs of Commerce, RFB and their subsidiaries, if any, and to use his best
efforts to promote the interests of Commerce, RFB and their
subsidiaries.  It is provided, however, that Executive may continue as
chairman of the board of directors of First Bank of Delaware.

     

    (b) Outside
Activities. Executive also has participated in and shall have discretion
to participate in other outside activities. Such outside activities are
expressly permitted, and shall be in addition to and notwithstanding Executive’s
obligation of full time and best efforts as described in Section
2.2(a)

     

    
      	
               
      

            	
              3.
      Compensation.

            


    

     

    
      
        
        

      

      
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    3.1 Compensation Definition.
“Compensation”
means the sum of the highest annual rate of base salary (described in Section
3.2) and highest cash bonus (described in Section 3.3) paid to Executive during
the most recent twenty-four (24) months of employment by RFB and/or
Commerce.

     

    3.2 Base Salary.  For
all positions held by him during the Term and for all services to be rendered by
him under this Agreement, Commerce shall pay Executive “base salary” at the rate of
$400,000 per year.

     

    (a) Payment.  Base
salary is payable at regular intervals in accordance with Commerce's normal
payroll practices now or subsequently in effect.

     

    (b) Adjustment.  Executive’s
base salary shall be subject to an annual review and subject to such upward
adjustments as may be deemed appropriate by the Board or a Board-designated
Committee.  The Board or Board-designated Committee may approve an
increase in salary for Executive, but shall have no obligation to do so. Base
salary may not be decreased without Executive’s written consent.

     

    3.3 Plans and
Programs.  During the Term, Executive shall be entitled to
participate in any cash or other bonus programs, incentive compensation plans,
stock option plans or similar benefit or compensation programs now or later in
effect that are generally made available to executive officers of
Commerce.

     

    (a) Annual
Bonus.   Any annual bonus (or prorated portion of an
annual bonus) earned and payable to Executive hereunder shall be paid on or
after January 1 but not later than March 15 of the calendar year following the
calendar year for which the annual bonus (or prorated portion of an annual
bonus) is earned.  It is understood by the parties that a bonus
payment is not guaranteed.

     

    (b) Pro-Ration.  For
any period less than a full year during the Term, Executive shall receive an
amount equal to the pro-rated portion of any payment pursuant to such plan or
program.

     

    3.4 Year. A “year” shall be deemed
to commence on the date of this Agreement and on January 1 of each subsequent
calendar year.

     

    3.5 Compensation
Pro-Ration. Compensation for a portion of a year shall be
pro-rated. 

     

    
      	
               
      

            	
              4.
      Fringe and Other
      Benefits.  During
      the Term, Executive shall also be entitled
to:

            


    

     

    4.1 Generally Available Benefits.
Participate in all fringe benefits as then in effect that are generally
available to Commerce’s executive officers including, without limitation,
medical and hospitalization coverage, long-term care insurance, life insurance
coverage and disability coverage.

     

    
      
        
        

      

      
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    4.2 Other Benefits. Such other
fringe benefits as the Board, or a Board-designated Committee, shall deem
appropriate; provided that such benefits are consistent with those that he
currently enjoys including, without limitation, use of an automobile, paid
holidays,  four (4) weeks’ vacation each calendar year and club
memberships.

     

    4.3 Expenses. Reimbursement by
Commerce for all expenses incurred by Executive which Commerce determines to be
reasonable and necessary (in accord with its normal reimbursement practices now
or later in effect) for Executive to carry out his duties under this
Agreement.

     

    4.4 Indemnity. Indemnification by
Commerce to the fullest extent permitted by governing law and in accordance with
Commerce’s bylaws and policies, against all claims concerning Executive’s status
as an officer, director, employee, or agent of Commerce.

     

    
      	
               
      

            	
              5.
      Disability and Death
      Compensation.

            


    

     

    5.1 Permanent
Disability.  Executive shall be deemed to have become
permanently disabled if he is unable to engage in any substantial gainful
activity by reason of a medically determinable physical or mental impairment
that can be expected to result in death or can be expected to last for a
continuous period of not less than 12 months.  In the event Executive
becomes permanently disabled during the Term of this Agreement, he shall be
compensated for the balance of the Term as provided in Section 5.3.

     

    5.2 Disability Leave. Executive
shall qualify for disability leave under this Agreement if he becomes unable to
perform the duties and services of the character contemplated by this Agreement
because of any medically determinable physical or mental impairment that can be
expected to result in death or can be expected to last for a continuous period
of not less than six (6) months. If Executive
qualifies for disability leave while employed during the Term, this Agreement
will not terminate at such time but Executive shall be placed on disability
leave until the first to occur of: (i) Executive’s qualification for permanent
disability as provided in Section 5.1; (ii) the expiration of this Agreement; or
(iii) Executive’s recovery from disability.  It is provided, however,
that disability leave shall in no event be longer than twenty-nine (29)
months.

     

    5.3 Disability
Compensation.  Commerce shall compensate Executive during the
time he is on disability leave at a rate equal to 70% of his Compensation at the
time he is placed on disability leave.  If Executive becomes
permanently disabled during the time he is on disability leave and the Term of
this Agreement has not expired, Commerce shall continue the payments described
in this Section for the balance of the Term.

     

    (a) Monthly
Payments.  Commerce agrees that it will make the payments due
under this Section 5.3 on the first day of each month, commencing with the first
day of the month following the month in which Executive is placed on disability
leave, in an amount equal to 1/12 of 70% of his Compensation at the time he is
placed on disability leave.

     

    Insurance
Reductions.  Such payments shall be reduced each month by the
amount of any disability payments made to Executive under any Commerce-sponsored
disability 

     

    
      
        
        

      

      
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    insurance
plan.  The amount of the reduction under the preceding sentence shall
be computed as if Executive had elected to receive monthly payments of
disability benefits (regardless of the actual payment frequency).

     

    (b) Disability
Benefits.  If Executive is placed on disability leave or
becomes permanently disabled as provided in this Section 5, then he shall
nonetheless continue, after becoming so disabled and until the end of the
Term, to be entitled to receive at Commerce's expense such group hospitalization
coverage, life insurance coverage and disability coverage as is generally made
available from time to time to executive officers of Commerce, if and to the
extent permitted by the respective insurers of such coverage. Until such time as
Executive is placed on disability leave, he shall continue to receive his full
compensation and fringe benefits due him under Sections 3 and 4
above.

     

    5.4 Payment upon Executive’s
Death.  If Executive dies during the Term while employed
hereunder, then:

     

    (a) Termination of
Employment and Regular Compensation.  Executive’s employment
and his rights to compensation hereunder shall automatically terminate at the
close of the calendar week in which death occurs; and

     

    (b) Death
Benefit.   Commerce shall pay the person designated by
Executive in a notice filed with Commerce or to the personal representative of
Executive’s estate (if no person is designated by Executive) an amount equal to
the product of three (3) times Executive’s Compensation at the time of his death
in addition to any amount of compensation then accrued and owed to Executive
upon his death.

     

    (c) Life
Insurance.  The “death benefit” provided pursuant to Section
5.4(b) shall be in addition to any amount payable under any group life insurance
program maintained by Commerce or RFB.

     

    
      	
               
      

            	
              6.
      Termination by Commerce
      For Cause.

            


    

     

    6.1 “For Cause” Termination.
Commerce shall have the right at any time to terminate Executive’s employment
“For
Cause” only if:

     

    (a) Prior Written
Notice. Commerce shall give Executive not less than thirty (30) days
prior written notice of its intention to terminate his employment specifying in
detail the reason(s) for such termination and the date of termination;
and 

     

    (b) Failure to
Cure. After receipt of such notice, Executive fails to cure, cease or
remedy the reason(s) for such termination before the date of termination stated
in such notice. 

     

    6.2 “For Cause” Definition. “For Cause”
means only the following at any time during the Term:

     

    
      
        
        

      

      
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    (a) Conviction or
Plea.  If Executive is indicted for, convicted of or enters a
plea of guilty or nolo contendere to, a felony, a crime of falsehood or a crime
involving fraud, moral turpitude or dishonesty; or

     

    (b) Willful
Violation.  If Executive willfully violates any of the terms or
provisions of this Agreement, including, without limitation: 

    


    (i) the
willful failure of Executive to perform his duties hereunder or the instructions
of the Board after written notice of such instructions (other than any such
failure resulting from Executive’s incapacity due to illness or disability);
or

     

    (ii)
Executive engages in any conduct materially harmful to Commerce's business, and
in either case fails to cease such conduct or correct such conduct, as the case
may be, within thirty (30) days subsequent to receiving written notice from the
Board advising Executive of same (which conduct shall be specifically set forth
in such notice).

     

    6.3 Compensation on Termination “For
Cause.”  If Executive’s employment shall terminate For Cause,
then Commerce shall pay Executive in accordance with the regular payroll
practices of Commerce, his full base salary through the date of termination at
the rate currently in effect and pay such other compensation as may have accrued
and be due Executive pursuant to Sections 3 and 4.  Commerce shall
have no further obligations to Executive under this Agreement.

     

    
      	
               
      

            	
              7.
      Termination by Commerce
      Without Cause.

            


    

     

    7.1 “Without Cause” Termination.
Commerce shall have the right to terminate Executive’s employment “Without
Cause” by giving not less than thirty (30) days prior written notice of
its intention to terminate Executive’s employment “Without Cause” pursuant to
this Section 7. 

     

    7.2 “Without Cause” Definition.
Termination “Without
Cause” means any reason other than by either Termination “For Cause”
(Section 6 above), Termination at the Anniversary Date (Section 1.2(b) above),
or termination due to death or disability (Section 5 above).

     

    7.3 Compensation for Termination “Without
Cause.” Commerce shall pay Executive the following if Commerce terminates
Executive’s employment “Without Cause”:

     

    (a) Compensation
through Termination Date.  A pro-rated portion of Executive’s
full compensation through the date of termination in accordance with the regular
payroll practices of Commerce, and any compensation due him as provided in
Section 4 above; and

     

    (b) “Without Cause
Severance Payment.”  In lieu of any further Compensation
payments to Executive after the date of termination, a lump sum severance
payment equal to the greater of (i) three (3) times
Executive’s Compensation at the time of his 

     

    
      
        
        

      

      
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    termination
or (ii) Executive’s Compensation at the time of his termination multiplied by
the number of years (including any fractional year) then remaining in the
Term.

     

    
      	
               
      

            	
              8.
      Termination “For Good
      Reason” by Executive.

            


    

     

    8.1 “Good Reason” Termination.
Executive shall have the right to terminate his employment “For Good
Reason” (as defined in Section 9.2 below) if: 

     

    (a) Prior Written
Notice. Executive has given notice to Commerce of the existence of the
condition(s) described in Section 9.2 within ninety (90) days of the initial
existence of the condition(s);  

     

    (b) Failure to
Cure. If within a period of thirty (30) days after receipt of such notice
(the “Cure Period”),
Commerce fails to cure, cease or remedy the reason(s) for such termination;
and

     

    (c) Separation from
Service.  Executive’s separation from service occurs within a
period of ninety (90) days following the expiration of the Cure
Period.

     

    8.2 Compensation for “Good Reason”
Termination. Commerce shall pay Executive the following if Executive
terminates his employment “For Good
Reason” (as defined in Section 9.2):

    


    (a) Compensation
through Termination Date.  A pro-rated portion of Executive’s
full compensation through the date of termination in accordance with the regular
payroll practices of Commerce, and any compensation due him as provided in
Section 4 above; and

     

    (b) “Good Reason
Severance Payment.”  In lieu of any further Compensation
payments to Executive after the date of termination,  a lump sum
severance payment equal to the greater of (i) three (3) times
Executive’s Compensation at the time of his termination or (ii) Executive’s
Compensation at the time of his termination multiplied by the number of years
(including any fractional year) then remaining in the Term..

     

    
      	
               
      

            	
              9.
      “Change in Control” and
      “Good Reason.”

            


    

     

    9.1 Change in Control Definition.
“Change in
Control” or “Change of
Control” means a change in control of Commerce of a nature that would be
required to be reported in response to Item 6(e) of Schedule 14A of Regulation
14A promulgated under the Securities Exchange Act of 1934, as amended (the
“Exchange Act”), or any
successor provisions under the Exchange Act, whether or not
Commerce  is subject to such reporting requirement; provided that, without
limitation, such a change in control shall have been deemed to occur
conclusively when any of the following events shall have occurred without
Executive’s prior written consent:

     

    (a) Board
Change. Within any period of two (2) consecutive years during the Term,
there is a change in at least a majority of the members of the Board or the
addition of 

     

    
      
        
        

      

      
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    five or
more new members to the Board, unless such change or
addition occurs with the affirmative vote in writing of Executive in his
capacity as a director or a shareholder; or

     

    (b) Beneficial
Ownership Change. A Person or group acting in concert as described in
Section 13(d)(2) of the Exchange Act holds or acquires beneficial ownership
within the meaning of Rule 13d-3 promulgated under the Exchange Act of a number
of common shares of Commerce which constitutes either:

     

    (i)
       more than fifty (50%) percent of the
shares which voted in the election of directors of Commerce at the shareholders’
meeting immediately preceding such determination; or

     

    (ii)
 more than thirty (30%) percent of Commerce’s outstanding common shares.
For this Section 9.1(b)(ii), unexercised warrants or options or unconverted
nonvoting securities shall count as constituting beneficial ownership of
Commerce’s common shares into which the warrants or options are exercisable or
the nonvoting convertible securities are convertible, notwithstanding anything
to the contrary contained in Rule 13d-3 of the Exchange Act.

     

     9.2
Good Reason Definition.
“Good
Reason” means: 

     

    (a) Both a Change in
Control and Other Reductions. Both a “change in
control” of Commerce (as defined in Section 9.1 above); and if any of the following
“Other
Reductions” occur within three (3) years after such
change in control without Executive’s prior written
consent: 

     

    (i) Reduction of Authority. The
nature and scope of Executive’s authority with Commerce or a surviving or
acquiring Person are materially reduced to a level below that which he enjoys
when the change in control occurs;

     

    (ii)
Materially Inconsistent
Duties. The duties and responsibilities assigned to Executive are
materially inconsistent with those which he enjoys when the change in control
occurs, resulting in a diminution of Executive’s authority, duties or
responsibilities;  

     

    (iii)
Materially Reduced
Benefits. The fringe benefits which Commerce provides Executive are
materially reduced to a level below that which he enjoys when the change in
control occurs;  

     

    (iv)
Reduction of Position or
Title. Executive’s position or title with Commerce or the surviving or
acquiring Person is reduced from his current position or title with Commerce
when the change in control occurs, resulting in a diminution of Executive’s
authority, duties or responsibilities; or

     

    (v) Transfer or Offices and
Relocation. Any relocation or transfer of Commerce’s principal executive
offices to a location more than fifty (50) miles from Executive’s principal
residence on the date when the change in control occurs; or, if Executive is


     

    
      
        
        

      

      
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    required,
without his prior written consent, to relocate more than fifty (50) miles from
his principal residence when the change in control occurs.

     

    (b) Material
Breaches. Commerce materially breaches this Agreement; or

     

    (c) Non-Assumption.
There is a failure or refusal of any successor to Commerce to assume all duties
and obligations of Commerce under this Agreement.

    


    
      	
               
      

            	
              10. Additional Payments/Excise
      Taxes.

            


    

     

    10.1
Gross-Up Payment.
Notwithstanding anything in this Agreement to the contrary or any termination of
this Agreement, Executive
shall be entitled to receive an additional payment (a “Gross-Up
Payment”) if: 

     

    (a) Tax is Determined
Due. It shall be determined that any payment or distribution or benefit
made or provided by Commerce or its affiliates to or for the benefit of
Executive, whether pursuant to this Agreement or some other plan or otherwise
and determined without regard to any additional payments required under this
Section 10 (a “Payment”),
would be an excess Parachute Payment that is not deductible by Commerce for
federal income tax purposes and subject to an excise tax; or 

     

    (b) Interest or
Penalties are Incurred. Any interest or penalties are incurred by
Executive concerning such excise tax. 

     

    (i) Excise Tax Definition.  “Excise
Tax” means both: any excise tax imposed on any compensation payments or
rights due to Executive because of Section 280G and Section 4999 of the Internal
Revenue Code of 1986 as amended (the “Code”) or
any successor Code provision, or any state or local law; and interest or
penalties incurred concerning such excise tax.

    


    (ii)
Gross-Up Payment
Definition. “Gross-Up
Payment” means any amount of additional payments to Executive that are
needed so that Executive incurs no out-of-pocket expense for Excise Taxes, and
to place Executive in the same position after all federal and state taxes -
including all income tax, Excise Tax, employment or other tax or any penalties
and interest - that Executive would have been in if: (a) Executive did not have
to pay the Excise Tax; (b) the Excise Tax did not apply for reasons other than
Sections 280G and 4999 of the Code; and (c) Executive did not have to pay any
interest or penalty charge for the imposition of any portion of the Excise
Tax.

    


    10.2
Gross-Up Payment
Determination. All determinations required to be made under this Section
10, including whether and when a Gross-Up Payment is required, the amount of
such Gross-Up Payment, the calculations under Section 280G and 4999 of the Code,
and the assumptions to be used in arriving at such determination, shall be made
by Commerce’s independent auditor or another nationally recognized accounting
firm chosen by the auditor with the consent of Commerce and Executive (the
“Accounting
Firm”). 

     

    
      
        
        

      

      
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    (a) Cooperation.
Commerce and Executive shall cooperate with Accounting Firm and provide
information needed for the determination. 

     

    (b) Calculations.
Accounting Firm shall provide detailed supporting calculations both to Commerce
and Executive within fifteen
(15) business days of the receipt of notice from Executive that there has
been a Payment or receipt of Notice of IRS claim under Section 10.3, or such
earlier time as is requested by Commerce. 

     

    (c) Fees and
Expenses. Commerce shall pay all fees and expenses of the Accounting Firm
for services for this determination. 

     

    (d) Payment
Timing. Commerce shall pay any Gross-Up Payment, as determined pursuant
to this Section 10, to Executive within five (5) days of the
receipt of the Accounting Firm’s determination, but in no event later than the
date specified in Treasury Regulation Section 1.409A-3(i)(v). 

     

    (e) Binding
Effect. Any determination by the Accounting Firm shall be binding upon
Commerce and Executive. 

     

    (f) Possible
Underpayment. As a result of the uncertainty in the application of
Section 4999 of the Code at the time of the initial determination by the
Accounting Firm, it is possible that Commerce may not make Gross-Up Payments
that should be made (“Underpayment”).

     

    (i) Determination. If Commerce
exhausts its remedies pursuant to Section 10.3 and Executive is later required,
directly or indirectly, to make a payment of any Excise Tax, then the Accounting
Firm shall determine the amount of the Underpayment that has occurred. Such
amount shall be sufficient to put Executive in the same position after all
federal and state taxes - including all income tax, Excise Taxes, employment, or
other taxes, and all penalties and interest on such taxes - as Executive would
have been in if there had been no Underpayment and Commerce had made the
appropriate Gross-Up Payment in the first instance.

     

    (ii)
Payment. Commerce shall
promptly pay to Executive or for the benefit of Executive any amounts determined
by Accounting Firm to be needed to satisfy any Underpayment.

     

    10.3
Notice of IRS Claim.
Executive shall notify Commerce in writing of any claim by the Internal Revenue
Service (“IRS”)
that, if successful, would require the payment by Commerce of the Gross-Up
Payment. 

     

    (a) Time and Content
of Notice. Such notification shall be given as soon as practicable but
not later than ten (10)
business days after Executive is informed in writing of such claim and
shall apprise Commerce of the nature of such claim and the date on which such
claim is requested to be paid. 

     

    
      
        
        

      

      
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    (b) Payment
Timing. Executive shall not pay such IRS claim until thirty (30) days
after the date on which he gives such notice to Commerce (or such shorter period
ending on the date that any payment of taxes on such claim is
due). 

     

    (c) Contest
Notice. If Commerce notifies Executive in writing before the expiration
of such thirty (30) day period that it desires to contest such IRS claim, then
Executive shall:  

     

    (i) Give
Commerce any information reasonably requested by Commerce relating to such IRS
claim;

     

    (ii) Take
such action in connection with contesting such IRS claim as Commerce shall
reasonably request in writing, including, without limitation, accepting legal
representation for such IRS claim by an attorney reasonably selected by
Commerce;

     

    (iii)
Cooperate with Commerce in good faith in order to effectively contest such IRS
claim; and

     

    (iv)
Permit Commerce to participate in any proceedings on such IRS claim.
 

     

    (d) Other Contest
Terms. Without limitation on the foregoing provisions of this Section
10.3: 

     

    (i)
Commerce shall bear and pay directly all costs and expenses (including
additional interest and penalties) incurred in connection with such contest and
shall indemnify and hold Executive harmless, on an after-tax basis, for any
Excise Tax or income tax (including interest and penalties with respect thereto)
imposed as a result of such representation and payment of costs and
expenses.

     

    (ii)
Commerce shall control all proceedings taken in connection with such contest
and, at its sole option, may pursue or forgo any and all administrative appeals,
proceedings, hearing and conferences with the taxing authority in respect of
such claim and may, at its sole option, either direct Executive to pay the tax
claimed and sue for a refund or contest the IRS claim in any permissible
manner;

     

    (iii)
Executive agrees to prosecute such contest to a determination before any
administrative tribunal, in a court of initial jurisdiction and in one or more
appellate courts, as Commerce shall determine;

     

    (iv) If
Commerce directs Executive to pay such IRS claim and sue for a refund, then
Commerce shall advance the amount of such payment to Executive on an
interest-free basis and shall indemnify and hold Executive harmless, on an
after-tax basis, from any Excise Tax or income tax (including interest
penalties) imposed regarding such advance or regarding any imputed income with
respect to such advance;

     

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

    (v) Any
extension of the statute of limitations relating to payment of taxes for the
taxable year of Executive with respect to which such contested amount is claimed
to be due is limited solely to such contested amount.

     

    (vi)
Commerce’s control of the contest shall be limited to issues with respect to
which a Gross-Up Payment would be payable under this Section 10 and Executive
shall be entitled to settle or contest, as the case may be, any other issue
raised by the Internal Revenue Service or any other taxing
authority.

     

    10.4
Refund. Executive shall,
subject to Commerce’s complying with the requirements of Section 10.3, promptly
pay to Commerce the amount of any refund actually received, including any
interest paid or credited after applicable taxes if, after the receipt by
Executive of an amount advanced by Commerce pursuant to Section 10.3, Executive
becomes entitled to receive any refund for such IRS claim. 

     

    (a) Denial of
Refund. If, after the receipt by Executive of an amount advanced by
Commerce pursuant to Section 10.3, a determination is made that Executive shall
not be entitled to any refund for such IRS claim and Commerce does not notify
Executive in writing of its intent to contest such denial of refund before the
expiration of thirty (30) days after such determination, then such advance shall
be forgiven and shall not be required to be repaid and the amount of such
advance shall offset the amount of Gross-Up Payment required to be
paid.

     

    
      	
               
      

            	
              11.
      Other Rights for
      Termination “Without Cause” or “For Good
  Reason”.

            


    

     

    11.1
Other Benefits.
Executive shall be entitled to the following from Commerce, in addition to the
other Compensation stated in either Section 7.3 or 8.2 above, if Executive’s
employment is terminated either “Without
Cause” or “For Good
Reason” as set forth in either Section 7.1 or 8.1 above:

     

    (a) Insurance.
Following the date of termination, Executive shall be entitled to participate in
all Commerce medical, disability, hospitalization and life insurance benefits
for a period of three (3) years: 

     

    (i) Exception. If Executive
accepts subsequent employment during the three-year period following the date of
termination, then continuation of any medical, disability, hospitalization and
life insurance benefits will be offset by coverages provided through Executive’s
subsequent employer.

     

    (b) Vesting of
Incentive Compensation Awards. Any outstanding incentive compensation
awards held by Executive, including deferred compensation and equity awards
related to Commerce stock (e.g., options, stock appreciation rights, restricted
stock or restricted stock units) shall vest as of the date of termination of
Executive’s employment.

     

    11.2
Plans and Program
Rights. Nothing in this Agreement shall affect or have any bearing on
Executive’s entitlement to other benefits under any plan or program providing
benefits by reason of termination of employment.

    


    
      
        
        

      

      
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    11.3
Reimbursements and In-Kind
Benefits.  All reimbursements and in-kind benefits provided
under this Agreement shall be made or provided in accordance with the
requirements of Section 409A of the Code, including, where applicable, the
requirement that:

    


    (a) Any
reimbursement shall be for expenses incurred during Executive’s lifetime (or
during a shorter period of time specified in this Agreement);

     

    (b) 
The amount of expenses eligible for reimbursement, or in-kind benefits provided,
during a calendar year may not affect the expenses eligible for reimbursement,
or in-kind benefits to be provided, in any other calendar year;

     

    (c) The
reimbursement of an eligible expense will be made on or before the last day of
the calendar year following the year in which the expense is
incurred;

     

    (d) The
right to in-kind benefits shall not extend beyond the last day of Executive’s
second taxable year following his termination of employment; and

     

    (e) The
right to reimbursement or in-kind benefits is not subject to liquidation or
exchange for another benefit.

     

    11.4
No Mitigation by
Executive. Executive shall not be required, under any circumstance
including provision in this Agreement, to mitigate the amount of any
compensation or payment provided for in this Agreement by seeking other
employment.

     

    
      	
               
      

            	
              12.
      Source of Payment and
      Timing.

            


    

     

    12.1
Source.  All
payments provided under this Agreement shall be paid in cash from the general
funds of Commerce.

     

    (a) No
special or separate fund shall be required to be established and Executive shall
have no right, title or interest whatsoever in or to any investment which
Commerce may make to aid Commerce in meeting its obligations hereunder except to
the extent that Commerce shall, in its sole and absolute discretion, choose to
designate any of its rights it may have under one or more life insurance
policies it may obtain to cover any of its obligations under this
Agreement.

     

    (b) Nothing
contained in this Agreement, and no action taken pursuant to its provisions,
shall create or be construed to create a trust of any kind or fiduciary
relationship between Commerce and Executive or any other Person.

     

    12.2
Time.  All
payments due under Sections 5.2, 6.3, 7.3 or 8.2 above shall be made not later
than the thirtieth (30th) day
following the date of termination of employment.

     

    12.3
Effect of Section
409A.    If the termination of employment giving rise
to the severance benefits described in Sections 7.3, 8.2 or 11.1 is not a
"separation from 

     

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    

    service"
within the meaning of Treasury Regulation § 1.409A-1(h)(1), then to the extent
necessary to avoid the imposition of any accelerated or additional tax under
Section 409A of the Code, such benefits will be deferred without interest until
Executive experiences a separation from service.  In addition, if
necessary to prevent any accelerated or additional tax under Section 409A of the
Code on amounts payable to Executive upon his separation from service, Commerce
will postpone such payments (without any reduction in such payments or benefits
ultimately paid or provided to Executive) until the first payroll date that
occurs after the date that is six months following Executive's "separation of
service" with Commerce or RFB.  The accumulated postponed amount will
be paid in a lump sum payment within ten days after the end of the six-month
period.  If Executive dies during the postponement period and prior to
the payment of postponed amount, the amounts postponed on account of Section
409A shall be paid to the personal representative of Executive's estate within
60 days after the date of his death.

     

    13. Interest.  In the
event any benefits due to Executive are not paid when due hereunder, Executive
shall be entitled (in addition to his other rights and remedies) to interest on
the past due amounts at a rate equal to two percentage points above the prime
rate charged from time to time by RFB, such interest to commence on the date a
benefit was due hereunder.

     

    14. Reimbursement of Enforcement
Expenses.  Executive shall be entitled to full reimbursement
from Commerce for all costs and expenses (including reasonable attorneys’ fees,
costs, and interest as stated in Section 13) incurred by Executive in enforcing
his rights under this Agreement if the following exist: 

     

    14.1
Failure to Pay. Commerce
fails to pay or provide Executive any of the amounts due him under this
Agreement; or 

     

    14.2
Failure to Provide.
Commerce fails to provide Executive with any of the other benefits due him under
this Agreement; and 

     

    14.3
Further Conditions for
Reimbursement. Provided
that:

     

    (a) Commerce
does not cure any such failure within thirty (30) days after having received
written notice from Executive of such failure; and 

     

    (b) There
is an adjudication that Executive’s action in enforcing his rights are not
frivolous.

     

    
      15. Confidential Information and
Non-Competition.

    

     

    15.1
Confidentiality. 

    


    (a) Company
Information Definition. “Company
Information” means all data relating to Commerce’s business that is not
generally published or available to the public, including writings, equipment,
processes, drawings, strategic plans, reports, manuals, inventions, records,
financial information, business plans, customer lists, the identity of and other
facts concerning prospective customers, inventory lists, arrangements with
suppliers and customers, 

     

    
      
        
        

      

      
        14

        
          

        

      

      
        
        

      

    

    computer
programs, or other materials embodying trade secrets, customer product
information, or technical or business information of Commerce.

     

    (b) Non-Disclosure
and Non-Use.
During the Term or any later time, except with the prior written consent
of Commerce’s Board, Executive shall not, directly or
indirectly: 

     

    (i) Non-Disclosure. Disclose,
communicate or divulge Company Information to any Person other than authorized
Commerce personnel;  

     

    (ii) Non-Use. Use Company
Information for the benefit of himself or any other Person, other than
authorized Commerce personnel.  

     

    15.2
Commerce’s Interests.
Executive will not, during the Term, except with the express prior written
consent of Commerce’s Board, directly or indirectly, in any capacity (including
but not limited to employee, owner, partner, consultant, agent, director,
officer, shareholder or in any other capacity) engage in or assist any Person to
engage in any act or action which he, acting reasonably, believes or should
believe would be harmful or inimical to the interests of Commerce.

     

    15.3
Non-Competition and Time of
Restrictions.

     

    (a) Non-Competition.
During his employment pursuant to this Agreement and following termination of
Executive’s employment for any reason , Executive will not, except with the
express prior written consent of Commerce’s Board, in any capacity (including,
but not limited to, owner, partner, shareholder, consultant, agent, employee,
officer, director or otherwise), directly or indirectly, for his own account or
for the benefit of any Person:

     

    (i) Business and Geographic
Restriction. Establish, engage or participate in or otherwise be
connected with any business which is in competition with Commerce or any of its
subsidiaries, including being engaged in commercial banking, mortgage banking,
leasing, or the taking of deposits and which conducts business in any geographic
area in which Commerce and its subsidiaries is then conducting such business.
 

    


    (ii)
Exception. The
foregoing shall not prohibit Executive from continuing to serve as chairman of
the board of directors of First Bank of Delaware and owning as a shareholder
less than 5% of the outstanding voting stock of an issuer engaged in the
commercial banking business.

     

    (b) Time of
Restrictions. The non-competition restrictions in Section 15.3 shall
start on the effective date of this Agreement and end eighteen (18) months
  following the
effective date of termination of Executive’s employment under this
Agreement.

    


    15.4
Remedies. Any breach by
Executive of any of the terms in this Section 15 will result in irreparable
injury to Commerce for which money damages could not adequately compensate
Commerce; and, thus, in the event of any such breach, Commerce shall be entitled
(in addition to any other rights and remedies which it may have at law or in
equity) to 

     

    
      
        
        

      

      
        15

        
          

        

      

      
        
        

      

    

    have an
injunction issued by any competent court enjoining and restraining Executive
and/or any other Person involved from continuing such breach. 

     

    (a) No Defense or
Bar. The existence of any claim or cause of action which Executive may
have against Commerce or any other Person (other than a claim for Commerce’s
breach of this Agreement for failure to make payments) shall not constitute a
defense or bar to the enforcement of the terms in this Section 15.

     

    (b) Payments After
Breach. In the event of any alleged breach by Executive of any of the
terms in this Section 15, Commerce shall continue any and all of the payments
due Executive under this Agreement until such time as a Court shall enter a
final and unappealable order finding such a breach. 

     

    (i) Exception. The foregoing
shall not preclude a Court from ordering Executive to repay such payments made
to him for the period after the breach is determined to have occurred or from
ordering that payments under this Agreement be permanently terminated in the
event of a material and willful breach.

     

    15.5
Enforceability. If any
portion of the terms in this Section 15, or their application, is construed to
be invalid or unenforceable, then the other portions of such terms or their
application shall not be affected and shall be given full force and effect
without regard to the invalid or unenforceable portions to the fullest extent
possible. 

     

    (a) If
any term in this Section 15 is held to be unenforceable because of the area
covered, duration, or scope, then Executive and Commerce expressly and
intentionally authorize the court making such determination to reduce the area
and/or duration and/or limit the scope to an enforceable term, so that the term
shall then be enforceable in its reduced form.

     

    15.6
Commerce Definition. For
this Section 15, the term “Commerce”
means Commerce, any successor of Commerce under Section 16 below, and all
present and future direct and indirect subsidiaries and affiliates of Commerce
including, but not limited to, RFB.

    


    16. Successions.

     

    16.1
Successors and
Assigns.  This Agreement shall inure to the benefit of and be
binding upon:

    


    (a) The
parties hereto and their respective heirs, executors, administrators, successors
and assigns; and

    


    (b) Any
corporate or other successor of Commerce which will acquire, directly or
indirectly, by merger, consolidation, purchase, or otherwise, all or
substantially all of the assets of Commerce.

     

    
      
        
        

      

      
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    16.2
Death.  Upon
the death of Executive, except as Executive may have designated pursuant to
Section 5.4, any payments or benefits otherwise due Executive hereunder shall be
paid to or be for the benefit of Executive’s legal representatives.

     

    16.3
Combination.  Nothing
in the Agreement shall preclude Commerce from consolidating or merging into or
with or transferring all or substantially all of its assets to another Person (a
“Combination”).

     

    (a) In
the event of a Combination, such other Person shall assume this Agreement and
all obligations of Commerce in this Agreement.

     

    (b) Upon
a Combination, the term "Commerce," as used in this Agreement, shall mean such
other Person and this Agreement shall continue in full force and
effect.

     


    
      
         


      

      
        17

        
          

        

      

      
         


      

    


    17. Notices.

     

    17.1
Form of
Notice.  All notices, requests, demands and other
communications hereunder shall be in writing and shall be deemed to have been
duly given if delivered by hand or mailed, certified or registered mail, return
receipt requested, with postage prepaid.

     

    17.2
Place of
Notice.  Any notice shall be delivered to the following
addresses or to such other address as either party may designate by like
notice:

     

    If to
Commerce, to:

     

    Commerce
Bank/Harrisburg

    3801
Paxton Street

    Harrisburg,
PA 17111

    Attn:
Chairman, Compensation Committee of the Board of Directors

    


    If to
Executive:

     

    Harry D.
Madonna

    1320
North Avignon Drive

    Gladwyne,
PA 19035

     

    and to
such other or additional person or persons as either party shall have designated
to the other party in writing by like notice.

    


    
      	
               
      

            	
              18.
      General
      Provisions.

            


    

     

    18.1
Entire
Agreement.  This Agreement constitutes the entire agreement
between the parties concerning its subject matter, and supersedes and replaces
all prior agreements between the parties and expressly supersedes and replaces
the Republic First Employment Agreement.

     

    18.2
Amendment, Waiver and
Termination.

     

    (a) General.  No
amendment, waiver or termination of any of the provisions of this Agreement
shall be effective unless in writing and signed by the party against whom it is
sought to be enforced. Any written amendment, waiver or termination hereof
executed by Commerce and Executive (or his legal representatives) shall be
binding upon them and upon all other Persons, without the necessity of securing
the consent of any other Person including, but not limited to, Executive’s
spouse, and no Person shall be deemed to be a third party beneficiary under this
Agreement except to the extent provided under Section 16 above.

     

    (b) Compliance with
Requirements of Troubled Assets Relief Program
(TARP).  Notwithstanding Section 18.2 (a), in the event
Commerce is a participant in TARP, during such time as the U. S. Treasury
Department (“Treasury”) holds an equity or debt position 

     

    
      
        
        

      

      
        18

        
          

        

      

      
        
        

      

    

    in
Commerce, Executive agrees to modify the terms of this Agreement to comply with
any executive compensation requirements of such Program, including (i) an
agreement to relinquish to Commerce any bonus or incentive compensation
paid that is based on statements of earnings, gains, or other criteria that are
later proven to be materially inaccurate; and (ii) a reduction, if necessary, in
any compensation so as not to receive any “golden parachute” payments (based on
the applicable Code provision).  Executive also agrees to waive any
claims he may have against Commerce or Treasury as a result of any amendments to
this Agreement required by TARP.

     

    18.3
Alternate
Payments.  RFB or any other subsidiary of Commerce may make
payments to Executive thereunder in lieu of payments to be made by Commerce, and
to the extent such payments are so made, Commerce shall be released of its
obligations to make such payments.

     

    18.4
Benefits and
Insurance.  The benefits provided under this Agreement shall be
in addition to and shall not affect the proceeds payable to Executive’s
beneficiaries under group life insurance policies which Commerce may be carrying
on Executive’s Life.

     

    18.5
Release.  Notwithstanding
any other provision of this Agreement, any severance payments or benefits due
Executive under Sections 7 and 8 are conditioned on the Executive’s execution
and delivery to Commerce of an effective general release and non-disparagement
agreement in a form reasonably prescribed by Commerce and in a manner consistent
with the requirements of the Older Workers Benefit Protection Act and any
applicable state law.

     

    18.6
Definition of
Person.  "Person" as used in this Agreement means a natural
person, joint venture, corporation, sale proprietorship, trust, estate,
partnership, cooperative, association, non-profit organization or any other
legal entity.

     

    18.7
Counterparts.  This
Agreement may be executed in one or more counterparts, each of which shall be
deemed an original, but all of which taken together shall constitute one and the
same Agreement.

     

    l8.8
No
Waiver.  Except as otherwise expressly stated in this
Agreement, no failure on the part of any party to this Agreement to exercise and
no delay in exercising any right, power or remedy under this Agreement shall
operate as a waiver; nor shall any single or partial exercise of any right,
power or remedy hereunder preclude any other or further exercise thereof or the
exercise of any other right, power or remedy.

     

    18.9
Assignment.  Without
Commerce's prior written consent and approval, neither this Agreement nor any
rights to receive payments hereunder shall be voluntarily or
involuntarily:

     

    (a) Assigned,
transferred, alienated, encumbered or disposed of, in whole or in part;
or

     

    
      
        
        

      

      
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    (b) Subject
to anticipation, levy, execution, garnishment, attachment by, or interference or
control of, any creditor.

     


    
      
         


      

      
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    18.10
Jurisdiction.  Commerce
and Executive irrevocably consent to:

     

    (a) Commonwealth of Pennsylvania Courts.  The
exclusive jurisdiction of the courts of the Commonwealth of Pennsylvania and the
United States District Court for the Middle District of Pennsylvania in any and
all actions arising hereunder; and

     

    (b) Service of
Process.  Service of process as set forth in Section 17
above.

     

    18.11 Headings.  The
headings of the sections of this Agreement have been inserted for convenience of
reference only and shall in no way restrict or modify any of the terms or
provisions of this Agreement.

     

    18.12
Notice of Dispute and
Cure.  If Commerce or Executive has a dispute or claim under
this Agreement, then that dispute or claim shall be described with specificity
in writing; and, the party receiving such written notice shall have thirty (30)
business days to cure the dispute or claim

     

    18.13
Pennsylvania Law.  This
Agreement shall be governed and construed and the legal relationships of the
parties determined in accordance with the laws of the Commonwealth of
Pennsylvania applicable to contracts executed and to be performed solely in the
Commonwealth of Pennsylvania.

     

    18.14
Any Required
Approval.  This Agreement is contingent upon any required
approval of the Federal Deposit Insurance Corporation.

     

    18.15
Intent to Comply with Section
409A.  This Agreement is intended to comply with the
requirements of Section 409A of the Code or an exemption from Section 409A, and
shall in all respects be administered in accordance with Section 409A.
Executive’s termination of employment under this Agreement shall be interpreted
in a manner consistent with the separation from service rules under Section
409A.  For purposes of Section 409A of the Code, each payment made
under this Agreement shall be treated as a separate payment and the right to a
series of payments under this Agreement shall be treated as a right to a series
of separate payments.  In no event shall Executive, directly or
indirectly, designate the calendar year of a payment.

     

    [SIGNATURE
PAGE FOLLOWS]

     


    
      
         


      

      
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    IN
WITNESS WHEREOF, Commerce has caused this agreement to be executed by its duly
authorized officer and the Executive has hereunto set his hand and seal as of
the date first above written.

     

    

      
        
          
            
              
                
                  
                    
                      
                        
                          
                            	 
      	 
      	
                                    PENNSYLVANIA
      COMMERCE BANCORP, INC.

                                  
	 
      	 
      	 
      	 
      
	 
      	 
      	
                                    By:

                                  	 
      
	
                                    Attest

                                  	 
      	
                                     

                                  	

                                    Name:

                                  
	 
      	 
      	
                                     

                                  	

                                    Title:

                                  
	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      
	 
      	 
      	
                                    EXECUTIVE:

                                  
	 
      	 
      	 
      	 
      
	 
      	 
      	 
      
	
                                    Witness

                                  	 
      	
                                    Harry
      D.
Madonna

                                  


                          

                        

                      

                    

                  

                

              

            

          

        

      

    

     

     

     

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