Document:

Exhibit 10.1

 

EMPLOYMENT AGREEMENT

 

THIS EMPLOYMENT AGREEMENT
(the “Agreement”) is made and entered into as of this 3rd day of September 2008
(the “Effective Date”), by and between 1st Century Bancshares, Inc.,
a Delaware corporation (the “Bancshares”) and Alan Rothenberg (the “Executive”).

 

WHEREAS, the parties hereto
wish to enter into an employment agreement to employ Executive as Chairman of
the Board and Chief Executive Officer of Bancshares and to set forth certain
additional agreements between Executive and Bancshares.

 

NOW, THEREFORE, in
consideration of the mutual covenants and representations contained herein, the
parties hereto agree as follows:

 

1.             Term.  Bancshares
will employ Executive, and Executive will serve Bancshares, under the terms of
this Agreement for an initial term of three (3) years (the “Initial
Term”), commencing  on the Effective Date.  The Initial Term of this Agreement shall
automatically be extended for an additional one (1) year period  unless, not later than sixty (60) days prior to the
expiration of the Initial Term, either party hereto shall have given notice to
the other that the Initial Term shall not be so extended.  Notwithstanding the foregoing, Executive’s
employment hereunder may be earlier terminated, as provided in Section 4
hereof.  The term of this Agreement, as
in effect from time to time in accordance with the foregoing, shall be referred
to herein as the “Term.”  The
period of time between the Effective Date and the termination of Executive’s
employment hereunder shall be referred to herein as the “Employment Period.”

 

2.             Position; Authority and Duties.

 

(a)           Positions and Reporting. 
Executive shall serve as Chairman of the Board of Directors (the “Board”)
and Chief Executive Officer of Bancshares. 
During the Employment Period, Executive shall report directly to the
Board.

 

(b)           Authority and Duties. 
During the Employment Period, Executive shall devote substantial time,
ability and attention to the business and affairs of Bancshares and its
subsidiaries. Executive shall exercise such authority, perform such executive
duties and functions and discharge such responsibilities as are reasonably associated with
Executive’s position as Chairman and Chief Executive Officer of Bancshares
consistent with this Agreement and the Bylaws of Bancshares.  Executive shall have general supervision of
all property of Bancshares and all of its departments and business units and
shall have full authority over all officers and employees of Bancshares. In
addition, Executive shall serve in such positions and shall exercise such
authority, perform
such duties and functions and discharge such responsibilities in Executive’s
role as an employee and/or officer of any subsidiary of Bancshares as shall be
assigned to Executive from time-to-time by the Board and/or the board of
directors of such subsidiary without any additional compensation owing to
Executive in connection therewith.

 

3.             Compensation and Benefits.

 

(a)           Salary.  During the
Employment Period, Bancshares shall pay to Executive, as compensation for the
performance of his duties and obligations under this 

 

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Agreement, a base salary
at the rate of $18,750.00 per month, payable in arrears semi-monthly in
accordance with the normal payroll practices of Bancshares (the “Base Salary”).  Such Base Salary shall be subject to review
within sixty (60) days after each calendar year during the Employment Period,
for possible increases by the Board based on factors including, but not limited
to, market conditions and performance of Executive and Bancshares, in its sole
discretion, but shall in no event be decreased from the levels set forth above
or from its then-existing level during the Employment Period.

 

(b)           Bonus.

 

(i)            Annual Bonus.  An annual bonus,
if any, shall be determined by the Board in its sole discretion as it deems
appropriate.  The annual bonus, if any,
shall be paid in the form of a lump-sum cash payment at such time as other
executive bonuses are paid.  The Board
retains the discretion, but shall have no obligation, to determine whether a
pro-rata bonus is appropriate if Executive is terminated or leaves the employ
of Bancshares prior to the annual determination of bonuses.

 

(c)           Other Benefits. 
During the Employment Period, Executive shall receive such life
insurance, disability insurance and health, dental and vision and other
insurance benefits, holiday, vacation, 401(k) plan participation, and
other benefits which Bancshares extends, as a matter of policy, to all of its
executive employees, except as otherwise provided herein, and shall be entitled
to participate in all deferred compensation and other incentive plans of
Bancshares, on the same basis as other executive employees of Bancshares.  Without limiting the generality of the
foregoing, Executive shall be entitled to twenty-five (25) days of vacation per
year during the Employment Period, which shall be scheduled in Executive’s
discretion, subject to and taking into account applicable banking laws and
regulations and business needs.

 

(d)           Business Expenses. 
During the Employment Period, Bancshares shall promptly reimburse
Executive for all documented reasonable business expenses in accordance with
Bancshares’s expense reimbursement policy.

 

(e)           Ongoing Equity Grants.

 

(i)            Bancshares may, but is in no way obligated to, grant
from time to time to Executive shares of restricted stock, pursuant to a Notice
of Grant and Restricted Stock Agreement, under and subject to the terms and
conditions of the 1st Century Bancshares, Inc. Amended 2005 Equity
Incentive Plan, or such other plan that at such time Bancshares is actively
granting to its executives shares of restricted stock (“the Plan”).  The number of shares to be granted, if any,
shall be determined in the sole and absolute discretion of the Board or a
committee thereof and shall vest in accordance with the terms and conditions of
the Plan and the Notice of Grant and Restricted Stock Agreement. The vesting of
shares shall be subject to Executive’s continued employment with Bancshares on
the relevant vesting dates, unless Executive is terminated without Cause (as
defined in Section 4(a) of this Agreement) or Executive terminates
his employment for Good Reason (as defined in Section 4(b) of this
Agreement) pursuant to Section 5(a) hereof.

 

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(ii)           In the event of any termination of employment for any
reason, Executive hereby grants to Bancshares the right and option, for a
period of thirty (30) days after the effective date of such termination, to
purchase any shares of restricted stock owned by him on the effective date of
such termination that have been released from or are not otherwise subject to
any restriction on resale under the Plan at a price equal to 100% of the volume
weighted average closing price of Bancshares’ common stock for the twenty (20)
trading days immediately prior to the effective date of termination of
employment as reported on any quotation service or exchange on which Bancshares’
common stock is then quoted or traded. 
This provision is limited to subsequent grants of restricted stock
pursuant to this Agreement, and it does not include shares acquired by
Executive using personal funds, upon the exercise of stock options under the
Plan otherwise than pursuant to this Agreement, or otherwise.

 

4.             Termination of Employment.

 

(a)           Termination for Cause. 
The Board may terminate Executive’s employment hereunder for Cause or
without Cause.  For purposes of this
Agreement termination for “Cause” shall mean termination because (i) Executive:
(A) committed a significant act of dishonesty, deceit or breach of
fiduciary duty in the performance of his duties as an employee of Bancshares or
any of its subsidiaries; (B) grossly neglected or willfully failed in any
way to perform substantially the duties of such employment after a written
demand for performance is given to Executive by the Board, which demand
specifically identifies the manner in which the Board believes Executive has
failed to perform his duties; (C) has committed a material breach of any
provision of this Agreement; (D) willfully acted or failed to act in any
other way that materially and adversely affects Bancshares or any of its
subsidiaries; (E) is removed and/or permanently prohibited from
participating in the conduct of Bancshares or any of its subsidiaries affairs
by an order issued under Section 8(e)(3) or 8(g)(1) of the
Federal Deposit Insurance Act (12 U.S.C. Section 1818(e)(3) or
(g)(1)); or (F) the Executive’s violation of any applicable statutes,
regulations or rules of any appropriate Federal banking agency and/or
state bank supervisor, as defined in the FDI Act Section 3, 12 U.S.C.
1813, which violation materially and adversely affects Bancshares or its
subsidiaries; or (ii) Bancshares or any of its subsidiaries has received a final
cease-and-desist order that requires in substance that Bancshares or any of its
subsidiaries retain a qualified chief executive officer acceptable to bank
regulators with the experience, skill and other qualifications required to
ensure compliance with such order and Bancshares or any of its subsidiaries
regulators have determined that Executive does not meet these qualifications.

 

Termination under this Paragraph shall not prejudice
any remedy that Bancshares may have at law, in equity, or under this Agreement.

 

(b)           Termination for Good Reason. 
Executive shall have the right at any time to terminate his employment
with Bancshares for any reason.  For
purposes of this Agreement, and subject to Bancshares’s opportunity to cure as provided
in Section 4(c) hereof, Executive shall have “Good Reason” to
terminate his employment hereunder if such termination shall be the result of:

 

(i)            a material diminution during the Employment Period in
Executive’s authority, duties or responsibilities as set forth in Section 2
hereof, unless such 

 

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events follow any of the
circumstances described in Section 4(a) regarding termination for
Cause;

 

(ii)           a material diminution in Executive’s Salary;

 

(iii)          a material breach by Bancshares of any material terms
of this Agreement; or

 

(iv)          the relocation of Executive’s principal place of
employment to any location more than 50 miles from Bancshares’s headquarters at
the Effective Date.

 

(c)           Notice and Opportunity to Cure. 
Notwithstanding the foregoing, it shall be a condition precedent to
Bancshares’s right to terminate Executive’s employment for Cause, and Executive’s
right to terminate his employment for Good Reason that (1) the party
seeking the termination shall first have given the other party written notice
stating with specificity the reason for the termination (“Breach”) no
later than ninety (90) days following the initial existence of the condition
giving rise to the Breach, and (2) if such Breach is susceptible of cure
or remedy, a period of thirty (30) days from and after the giving of such
notice to cure the Breach.  With respect
to terminations because of a willful violation of any law, rule or
regulation or issuance of a final cease-and-desist order, or because of
Executive’s personal dishonesty or breach of fiduciary duty involving personal
profit, Bancshares will not be required to provide a cure period.

 

(d)           Termination Upon Death or Permanent
Disability.  The Employment Period shall automatically be
terminated by the death of Executive. 
The Employment Period may be terminated by Bancshares if Executive shall
be subject to a “permanent disability” as such term is defined in the
disability insurance provided by Bancshares, or if such insurance is not
provided by Bancshares, the term shall mean that Executive has been unable to
perform his duties under this Agreement for a period of at least ninety (90)
consecutive days or one-hundred twenty (120) days in any one-hundred eighty
(180) day period, and it is not reasonable to believe that he would ever be
able to resume his duties on a full time basis.

 

(e)           Termination Upon a Change in Control.  In the event this Agreement or Executive’s
employment is terminated without Cause by Bancshares or for Good Reason by
Executive within twelve (12) months after the occurrence of a Change in
Control, (as defined below), Executive shall be entitled to the separation pay
as described in Paragraph 5(a) below.

 

(f)            Definition of
Change in Control.  A “Change
in Control” shall be deemed to have taken place if:

 

(i)            there shall be
consummated any consolidation or merger of Bancshares
in which Bancshares is not the
continuing or surviving corporation or pursuant to which shares of Bancshares’s capital stock are converted into
cash, securities or other property (other than a consolidation or merger of Bancshares in which the holders of Bancshares’s voting stock immediately prior to
the consolidation or merger shall, upon consummation of the consolidation or
merger, own at least 50% of the voting stock) or any sale, lease, exchange or
other transfer (in one transaction or a series of transactions contemplated or
arranged by any party as a single plan) of all or substantially all of the
assets of Bancshares; or

 

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(ii)           any person (as
such term is used in Sections 13(d) and 14(d)(2) of the
Securities Exchange Act of 1934, as amended (the “Exchange Act”)) shall,
after the date hereof, become the beneficial owner (as defined in Rules 13d-3
and 13d-5 under the Exchange Act), directly or indirectly, of securities of Bancshares representing 25% or more of the
voting power of all of the then outstanding securities of Bancshares having the right under ordinary
circumstances to vote in an election of the Board (including, without
limitation, any securities of Bancshares
that any such person has the right to acquire pursuant to any agreement, or
upon exercise of conversion rights, warrants or options, or otherwise, shall be
deemed beneficially owned by such person); or

 

(iii)          individuals who
as of the Effective Date constitute the entire Board and any new directors
whose election by Bancshares’
shareholders, or whose nomination for election by the Board, shall have been
approved by a vote of at least a majority of the directors then in office who
either were directors at the date hereof or whose election or nomination for
election shall have been so approved shall cease for any reason to constitute a
majority of the members of the Board.

 

5.             Consequences of Termination. 
The following are the separation pay and benefits to which Executive is
entitled upon termination of employment by Bancshares without Cause or by
Executive with Good Reason or due to death or permanent disability in all
positions with Bancshares and any of its
subsidiaries, and such payments and benefits shall be the exclusive
payments and benefits to which Executive is entitled upon such
termination.  Except in the case of
termination of employment due to death, the post-termination payments and
benefits shall only be provided if Executive first enters into a form of
release agreement reasonably satisfactory to Bancshares
releasing Bancshares from any and all
claims, known and unknown, related to Executive’s employment with Bancshares or any other claims Executive may have against Bancshares.

 

(a)           Termination Without Cause or for Good
Reason. In the
event Bancshares terminates Executive’s
employment hereunder without Cause (other than upon death or permanent
disability) or Executive terminates his employment for Good Reason, Executive
shall become immediately vested in any of the remaining unvested shares of
restricted stock and/or options granted to him under any existing or future
award agreements.  In addition:

 

(i)            Executive will be entitled to separation pay in a lump
sum amount equal to:

 

(A)          200% of the highest amount
of Executive’s annual Base Salary and the highest annual bonus paid to
Executive within the three-year period preceding the termination plus a
prorated bonus for the number of months worked for the year of termination.

 

(ii)           Continuation for 12 months (the “Separation Period”)
of coverage under the group medical care, disability and life insurance benefit
plans or arrangements in which Executive is participating at the time of
termination, with Bancshares continuing to pay its share of premiums and
associated costs as if Executive continued in the employ of Bancshares;
provided, however, that Bancshares’ obligation to provide such coverage shall
be terminated if Executive obtains comparable substitute coverage from another
employer at any time during the 

 

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Separation Period.  Executive shall advise Bancshares immediately
if such comparable substitute coverage is obtained from another employer.  Executive shall be entitled, at the
expiration of the Separation Period, to elect continued coverage under
Bancshares’ medical benefit plans pursuant to the terms of the Consolidated Omnibus Budget Reconciliation
Act.

 

(b)           Termination Upon Disability. 
In the event of termination of Executive’s employment hereunder by
Bancshares on account of permanent disability, Executive shall be entitled to
the following separation pay and benefits:

 

(i)            Separation payments in the form of continuation of
Executive’s Base Salary as in effect immediately prior to such termination for
the Separation Period in equal installments on Bancshares’s regularly schedule
payroll dates following the first date of disability; and

 

(ii)           The same benefits as provided in Section 5(a)(ii) above,
to be provided during the Employment Period while Executive is suffering from a
permanent disability and for a period of six (6) months following the
effective date of termination of employment by reason of permanent disability.

 

(iii)          Executive shall become immediately vested in any of
the remaining unvested shares of restricted stock and/or options granted to him
under any existing or future award agreements,

 

(c)           Termination Upon Death. 
In the event of termination of Executive’s employment hereunder on
account of Executive’s death, Bancshares shall pay to Executive’s beneficiary
or beneficiaries or his estate, as the case may be, the accrued Base Salary and
accrued and unused paid time off (PTO) earned through the date of death.  Such payment shall be made no later than
sixty (60) days after the date of death. 
In addition, Executive’s beneficiary(ies) or his estate shall be
entitled to the payment of benefits pursuant to any life insurance policy of
Executive, as provided for in Section 3(c) above.  Executive’s beneficiary or estate shall not
be required to remit to Bancshares any payments received pursuant to any life
insurance policy purchased pursuant to Section 3(c) above.  Executive shall become immediately vested in
any of the remaining unvested shares of restricted stock and/or options granted
to him under any existing or future award agreements.

 

(d)           Accrued Rights. 
Notwithstanding the foregoing provisions of this Section 5, in the
event of termination of Executive’s employment hereunder for any reason,
Executive shall be entitled to (i) payment of any unpaid portion of his
Base Salary through the effective date of termination, (ii) payment of any
un-reimbursed reasonable business expenses incurred pursuant to Section 3(d) above,
and (iii) payment of any accrued but unpaid benefits solely in accordance
with the terms of any employee benefit plan or program of Bancshares
(remuneration under any other bonus plan is not guaranteed).

 

(e)           Termination for Cause.  In
the event the employment of Executive is terminated by Bancshares for Cause,
Bancshares shall provide Executive only Base Salary and PTO earned and
un-reimbursed business expenses incurred through the date of termination.  No separation payment or benefit shall be
provided in such instance.

 

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(f)            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 Section 5.  The terms of
this Section 5(f) shall not affect the interpretation of any
provision of this Agreement.

 

(g)           Regulatory Restrictions. 
The parties understand and agree that at the time any payment would
otherwise be made or benefit provided under Sections 5 or 18, depending on
the facts and circumstances existing at such time, the satisfaction of such
obligations by Bancshares 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 Bancshares.  Among
other things, the regulations at 12 C.F.R. Part 30, Appendix A
and at 12 C.F.R. Part 359 promulgated pursuant to Sections 18(k) and
39(a) of the Federal Deposit Insurance Act, respectively, or similar
regulations or regulatory action following similar principles may apply at such
time.  The parties understand,
acknowledge and agree that, notwithstanding any other provision of this
Agreement, Bancshares shall not be obligated to make any payment or provide any
benefit, and any such obligation of Bancshares to do so under Sections 5
or 18 shall be extinguished if an appropriate regulatory authority disapproves
or does not acquiesce, if required, and the regulatory authority’s disapproval
or non-acquiescence is documented in a writing from the regulatory authority, a
copy of which is actually provided by the regulatory authority or Bancshares to
Executive.

 

(h)           Conditions to Separation Benefits. 
Bancshares shall have the right to seek repayment of the separation
payments and benefits or to terminate payments or benefits provided by this Section 5
in the event that Executive fails to honor, in accordance with their terms, the
provisions of Sections 6 or 9 hereof.

 

(i)            Suspension and Removal Orders. 
If Executive is suspended and/or temporarily prohibited from
participating in the conduct of Bancshares’ or any of its subsidiaries’ affairs
by notice served under Section 8(e)(3) or 8(g)(1) of the Federal
Deposit Insurance Act (12 U.S.C. Section 1818(e)(3) and (g)(1))
or successor provisions, Bancshares’s obligations under this Agreement shall be
suspended as of the date of service, unless stayed by appropriate
proceedings.  If the charges in the
notice are dismissed, Bancshares may in its discretion: (i) pay Executive
all or part of the compensation withheld while its obligations under this
Agreement were suspended; and (ii) reinstate (in whole or in part) any of
its obligations which were suspended.  If
Executive is removed and/or permanently prohibited from participating in the
conduct of Bancshares’ or any of its subsidiaries’ affairs by an order issued
under Section 8(e)(3) or 8(g)(1) of the Federal Deposit
Insurance Act (12 U.S.C. Section 1818(e)(3) or (g)(1)), all
obligations of Bancshares under this Agreement shall terminate as of the
effective date of the order, but vested rights of the parties shall not be
affected.

 

(j)            Termination by Default. 
If Bancshares is in default (as defined in Section 3(x)(1) of
the Federal Deposit Insurance Act (12 U.S.C. Section 1813(x)(1)), all
obligations under this Agreement shall terminate as of the date of default, but
vested rights of the parties shall not be affected.

 

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(k)           Supervisory Assistance or Merger. 
All obligations under this Agreement shall be terminated, except to the
extent that it is determined that continuation of the Agreement is necessary
for the continued operation of 1st Century Bank, N.A. (the “Bank”) (or any bank
subsidiary of Bancshares):  (i) by
the Comptroller of the Currency (the “Comptroller”) or his or her
designee, at the time that the Federal Deposit Insurance Corporation enters
into an agreement to provide assistance to or on behalf of the Bank under the
authority contained in Section 11 of the Federal Deposit Insurance Act (12
U.S.C. Section 1821); or (ii) by the Comptroller or his or her
designee, at the time that the Comptroller or his or her designee approves a supervisory
merger to resolve problems related to the operation of the Bank or when the
Bank is in an unsafe or unsound condition. 
All rights of the parties that have already vested, however, shall not
be affected by such action.

 

6.             Confidentiality. 
Executive agrees that he will not at any time during the Employment
Period or at any time thereafter for any reason, in any fashion, form or
manner, either directly or indirectly, divulge, disclose or communicate to any
person, firm, corporation or other business entity, in any manner whatsoever,
any confidential information or trade secrets concerning the business of
Bancshares and any of its subsidiaries, including, without limiting the
generality of the foregoing, the techniques, methods or systems of its operation
or management, any information regarding its financial matters, or any other
material information concerning the business of Bancshares and any of its
subsidiaries (including customer lists), any of its customers, governmental
relations, customer contacts, underwriting methodology, loan program
configuration and qualification strategies, marketing strategies and proposals,
its manner of operation, its plans or other material data, or any other
information concerning the business of Bancshares, its subsidiaries or
affiliates, and Bancshares’s good will (the “Business”).  The provisions of this Section 6 shall
not apply to (i) information disclosed in the performance of Executive’s
duties to Bancshares and any of its subsidiaries based on his good faith belief
that such a disclosure is in the best interests of Bancshares or any of its
subsidiaries, as applicable; (ii) information that is, at the time of the
disclosure, public knowledge; (iii) information disseminated by Bancshares
or any of its subsidiaries to third parties in the ordinary course of business;
(iv) information lawfully received by Executive from a third party who,
based upon inquiry by Executive, is not bound by a confidential relationship to
Bancshares and any of its subsidiaries or otherwise improperly received the
information; or (v) information disclosed under a requirement of law or as
directed by applicable legal authority having jurisdiction over Executive.

 

Executive agrees that all
manuals, documents, files, reports, studies or other materials used and/or
developed by Executive for Bancshares and any of its subsidiaries during the
Term of this Agreement are solely the property of Bancshares, and that
Executive has no right, title or interest therein.  Upon termination of Executive’s employment,
Executive or Executive’s representative shall promptly deliver possession of
all such materials (including any copies thereof) to Bancshares.

 

7.             Keyman Life Insurance. Bancshares shall have the right to
obtain and hold a “keyman” life insurance policy on the life of Executive with
Bancshares as beneficiary of the policy. 
Executive agrees to provide any information required for the issuance of
such policy and submit himself to any physical examination required for such
policy.

 

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8.             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 Bancshares and any of its subsidiaries under the provisions of this
Agreement.  No assets of Bancshares and
any of its subsidiaries 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 Bancshares under this Agreement.  All of Bancshares’ and any of its
subsidiaries assets shall be and remain the general, unpledged, unrestricted
assets of Bancshares and any of its subsidiaries, as applicable. Bancshares’
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.

 

9.             Business Protection Covenants.

 

(a)           Covenant Not to Compete. 
Executive agrees that he will not, during the Employment Period,
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
Bancshares, its subsidiaries or affiliates (“Competitive Business”), (ii) directly
or indirectly own any interest in (other than less than 3% of any publicly
traded company or mutual fund), manage, operate, control, be employed by, or
provide management or consulting services in any capacity to any firm,
corporation, or other entity (other than Bancshares or its subsidiaries or
affiliates) engaged in any Competitive Business, or (iii) directly or
indirectly solicit or otherwise intentionally cause any employee, officer, or
member of the Board or any of its subsidiaries or affiliates to engage in any
action prohibited under (i) or (ii) of this Section 9(a).

 

(b)           Inducing Employees To Leave Bancshares;
Employment of Employees.  Any attempt on the part of
Executive to induce others to leave Bancshares’s employ, or the employ of any
of its subsidiaries or affiliates, or any effort by Executive to interfere with
Bancshares’ and any of its subsidiaries relationship with its other employees
would be harmful and damaging to Bancshares. 
Executive agrees that during the Employment Period and for a period of
twelve (12) months thereafter, Executive will not in any way, directly or
indirectly: (i) induce or attempt to induce any employee of Bancshares or
any of its subsidiaries of affiliates to quit employment with Bancshares or the
relevant subsidiary or affiliate; (ii) otherwise interfere with or disrupt
the relationships between Bancshares and its subsidiaries and affiliates and
their respective employees; (iii) solicit, entice, or hire away any
employee of Bancshares or any of its subsidiaries or affiliates; or (iv) hire
or engage any employee of Bancshares or any subsidiary or affiliate, or any
former employee of Bancshares or any subsidiary or affiliate whose employment
with Bancshares or the relevant subsidiary or affiliate ceased less than one (1) year
before the date of such hiring or engagement.

 

(c)           Nonsolicitation of Business. 
For a period of twelve (12) months from the date of termination of
employment, Executive will not utilize the confidential proprietary or trade
secret information to divert or attempt to divert from Bancshares or any of its
subsidiaries or affiliates, any business Bancshares or a subsidiary or
affiliate had enjoyed or solicited from its customers, borrowers, depositors or
investors during the twelve (12) months prior to termination of his
employment.

 

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(d)           Bancshares’ Ownership of Intellectual
Property.  To the extent that Executive has intellectual
property rights of any kind in any pre-existing works which are subsequently
incorporated in any work or work product produced in rendering services to
Bancshares and any of its subsidiaries, Executive hereby grants Bancshares a
royalty-free, irrevocable, world-wide, perpetual non-exclusive license (with
the right to sublicense), to make, have made, copy, modify, use, sell, license,
disclose, publish or otherwise disseminate or transfer such subject
matter.  Similarly, Executive agrees that
all inventions, discoveries, improvements, trade secrets, original works of
authorship, developments, formulae, techniques, processes, and know-how,
whether or not patentable, and whether or not reduced to practice, that are
conceived, developed or reduced to practice during Executive’s employment with
Bancshares, either alone or jointly with others, if on Bancshares’ time, using
Bancshares’ or any of its subsidiaries facilities, or relating to Bancshares
shall be owned exclusively by Bancshares, and Executive hereby assigns to
Bancshares all of Executive’s right, title and interest throughout the world in
all such intellectual property.  Executive
agrees that Bancshares shall be the sole owner of all domestic and foreign
patents or other rights pertaining thereto, and further agrees to execute all
documents that Bancshares reasonably determines to be necessary or convenient
for use in applying for, prosecuting, perfecting, or enforcing patents or other
intellectual property rights, including the execution of any assignments,
patent applications, or other documents that Bancshares may reasonably
request.  This provision is intended to
apply to the extent permitted by applicable law and is expressly limited by Section 2870
of the California Labor Code, which is set forth in its entirety in Exhibit A
to this Agreement.  By signing this
Agreement, Executive acknowledges that this paragraph shall constitute written
notice of the provisions of Section 2870.

 

(e)           Bancshares’ Ownership of Copyrights. 
Executive agrees that all original works of authorship not otherwise
within the scope of Paragraph (d) above that are conceived or developed
during Executive’s employment with Bancshares and any of its subsidiaries,
either alone or jointly with others, if on Bancshares’ and any of its
subsidiaries time, using Bancshares or any of its subsidiaries facilities, or
relating to Bancshares, are “works for hire” to the greatest extent permitted
by law and shall be owned exclusively by Bancshares, and Executive hereby
assigns to Bancshares all of Executive’s right, title, and interest in all such
original works of authorship.  Executive
agrees that Bancshares shall be the sole owner of all rights pertaining
thereto, and further agrees to execute all documents that Bancshares reasonably
determines to be necessary or convenient for establishing in Bancshares’ name
the copyright to any such original works of authorship.

 

10.           No Breach of Prior Agreement. 
Executive represents that his performance of all the terms of this
Agreement and his duties as an executive of Bancshares will not breach any
agreement with any former employer or other party.  Executive represents that he will not bring
with him to Bancshares or use in the performance of his duties for Bancshares
any documents or materials of a former employer that are not generally
available to the public or have not been legally transferred to Bancshares.

 

11.           Resignations. 
Executive agrees that upon termination of employment, for any reason, he
will submit his resignations from all offices and directorships with Bancshares
and all of its subsidiaries.

 

10

 

12.           Other Agreements. 
The parties further agree that to the extent of any inconsistency
between this Agreement and any employee manual or policy of Bancshares, that
the terms of this Agreement shall supersede the terms of such employee manual
or policy.

 

13.           Notice.  For the
purposes of this Agreement, notices, demands and all other communications
provided for in this Agreement shall be in writing and shall be personally
delivered or (unless otherwise specified) mailed by United States certified or
registered mail, return receipt requested, postage prepaid, or sent by
facsimile, provided that the facsimile cover sheet contains a notation of the
date and time of transmission, and shall be deemed received:  (i) if personally delivered, 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 Section 13, 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 Section 13 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 addressed as
follows:

 

If to Bancshares:

 

1st Century Bancshares, Inc.

1875 Century Park East

Suite 1400

Los Angeles, CA  90067

Attn:  Chairman of the Board and
President/COO

 

With a copy to:

 

Manatt, Phelps & Phillips, LLP

11355 West Olympic Avenue

Los Angeles, CA 90064

Attn: Gordon M. Bava, Esq.

 

If to Executive, to:

 

Alan Rothenberg

9466 Rembert Lane

Beverly Hills, CA 90210

 

or to such other respective
addresses as the parties hereto shall designate to the other by like notice,
provided that notice of a change of address shall be effective only upon
receipt thereof.

 

14.           Arbitration. 
Any dispute or controversy arising under or in connection with this
Agreement, the inception or termination of Executive’s employment, or any
alleged discrimination or tort claim related to such employment, including
issues raised regarding the Agreement’s formation, interpretation or breach,
shall be settled exclusively by binding arbitration in accordance with the
National Rules for the Resolution of Employment Disputes of the American
Arbitration Association (“AAA”). Without limiting the foregoing, the
following potential claims by Executive would be subject to arbitration under
the Arbitration Agreement:  claims for
wages or other compensation due; claims for breach of any contract or covenant 

 

11

 

(express or implied)
under which Executive believes he would be entitled to compensation or
benefits; tort claims related to such employment; 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 or other
procedure different from this one); and claims for violation of any public
policy, federal, state or other governmental law, statute, regulation or
ordinance.  The arbitration will be
conducted in Los Angeles County.  The
arbitration shall provide for written discovery and depositions adequate to
give the parties access to documents and witnesses that are essential to the
dispute.  The arbitrator shall have no
authority to add to or to modify this Agreement, shall apply all applicable
law, and shall have no lesser and no greater remedial authority than would a
court of law resolving the same claim or controversy.  The arbitrator shall issue a written decision
that includes the essential findings and conclusions upon which the decision is
based, which shall be signed and dated. 
Executive and Bancshares shall each bear his or its own costs and
attorneys’ fees incurred in conducting the arbitration and, except in such
disputes where Executive asserts a claim otherwise under a state or federal
statute prohibiting discrimination in employment (a “Statutory Claim”), or
unless required otherwise by applicable law, shall split equally the fees and
administrative costs charged by the arbitrator and AAA.  For such disputes that do not involve
Statutory Claims, if Executive is determined to be the prevailing party, the
arbitrator shall have the discretion to order Bancshares to reimburse Executive for his portion of the arbitrator’s fees
and administrative costs of AAA charged to the parties as a result of the
arbitration, as well as his reasonable attorney’s fees and costs.  In disputes where Executive asserts a
Statutory Claim against Bancshares or where otherwise required by law,
Executive shall be required to pay only the AAA filing fee to the extent such
filing fee does not exceed the fee to file a complaint in state or federal
court.  Bancshares shall pay the balance
of the arbitrator’s fees and administrative costs.  If any party prevails on a Statutory Claim
that affords the prevailing party attorneys’ fees, the arbitrator may award
attorneys’ fees to the prevailing party, consistent with applicable law.  Judgment may be entered on the arbitrator’s
award in any court having jurisdiction.

 

15.           Waiver of Breach. 
Any waiver of any breach of this Agreement shall not be construed to be
a continuing waiver or consent to any subsequent breach on the part either of
Executive or of Bancshares.  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 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.

 

16.           Non-Assignment; Successors. 
Neither party hereto may assign his or its rights or delegate his or its
duties under this Agreement without the prior written consent of the other
party; provided, however, that: (i) this Agreement shall inure to the
benefit of and be binding upon the successors and assigns of Bancshares upon
any sale of all or substantially all of Bancshares’s assets, or upon any
merger, consolidation or reorganization of Bancshares with or into any other
corporation, all as though such successors and assigns of Bancshares and their
respective successors and assigns were Bancshares; and (ii) this Agreement
shall inure to the benefit of and be binding upon the heirs, assigns or
designees of Executive to the extent of any 

 

12

 

payments due to them
hereunder.  As used in this Agreement,
the term “Bancshares” shall be deemed to refer to any such successor or assign
of Bancshares referred to in the preceding sentence.

 

17.           Withholding of Taxes. All payments required to be made by
Bancshares to Executive under this Agreement shall be subject to the
withholding and deduction of such amounts, if any, relating to tax, and other
payroll deductions as Bancshares may reasonably determine it should withhold
and/or deduct pursuant to any applicable law or regulation (including, but not
limited to, Executive’s portion of social security payments and income tax
withholding) now in effect or which may become effective any time during the
term of this Agreement.

 

18.           Excise Tax Provision.

 

(a)           Anything
in this Agreement to the contrary notwithstanding and except as set forth below,
in the event it shall be determined that any payment or distribution by
Bancshares to or for the benefit of the Executive (whether paid or payable or
distributed or distributable pursuant to the terms of this Agreement or
otherwise, but determined without regard to any additional payments required
under this Section ) (a “Payment”) would be subject to the excise tax
imposed by Section 4999 of the Code or any interest or penalties are
incurred by the Executive with respect to such excise tax (such excise tax,
together with any such interest and penalties, are hereinafter collectively
referred to as the “Excise Tax”), then the Executive shall be entitled to
receive an additional payment (a “Gross-Up Payment”) in an amount such that
after payment by the Executive of all taxes (including any interest or
penalties imposed with respect to such taxes), including, without limitation,
any income taxes (and any interest and penalties imposed with respect thereto)
and Excise tax imposed upon the Gross-Up Payment, the Executive retains an
amount of the Gross-Up Payment equal to the Excise Tax imposed upon the
Payments. Notwithstanding the foregoing provisions of this Section, if it shall
be determined that the Executive is entitled to a Gross-Up Payment, but that the
Payments do not exceed 110% of the greatest amount (the “Reduced Amount”) that
could be paid to the Executive such that the receipt of Payments would not give
rise to any Excise Tax, then no Gross-Up Payment shall be made to the Executive
and the Payments, in the aggregate, shall be reduced to the Reduced Amount.

 

(b)           

 

Subject
to the provisions of Section 17(a), all determinations required to be made
under this Section 17(a), including whether and when a Gross-Up Payment is
required and the amount of such Gross-Up Payment and the assumptions to be
utilized in arriving at such determination, shall be made by Perry-Smith, LLP
or another certified public accounting firm as may be designated by the
Executive (the “Accounting Firm”) which shall provide detailed supporting
calculations both to Bancshares and the Executive within 15 business days of
the receipt of notice from the Executive that there has been a Payment, or such
earlier time as is requested by Bancshares. In the event that the Accounting
Firm is serving as accountant or auditor for the individual, entity or group
effecting the Change of Control, the Executive shall appoint another recognized
accounting firm to make the determinations required hereunder (which accounting
firm shall then be referred to as the Accounting Firm hereunder). All fees and
expenses of the 

 

13

 

Accounting
Firm shall be borne solely by Bancshares. Any Gross-Up Payment, as determined
pursuant to this Section 17(a), shall be paid by Bancshares to the
Executive within five days of the receipt of the Accounting Firm’s
determination. Any determination by the Accounting Firm shall be binding upon
Bancshares and the Executive. 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 hereunder, it is possible that Gross-Up Payments which will
not have been made by Bancshares should have been made (“Underpayment”),
consistent with the calculations required to be made hereunder. In the event
that Bancshares exhausts its remedies pursuant to Section 17 and the
Executive thereafter is required to make a payment of any Excise Tax, the
Accounting Firm shall determine the amount of the Underpayment that has occurred
and any such Underpayment shall be promptly paid by Bancshares to or for the
benefit of the Executive.

 

(c) The
Executive shall notify Bancshares in writing of any claim by the Internal
Revenue Service that, if successful, would require the payment by Bancshares of
the Gross-Up Payment. Such notification shall be given as soon as practicable
but no later than ten business days after the Executive is informed in writing
of such claim and shall apprise Bancshares of the nature of such claim and the
date on which such claim is requested to be paid. The Executive shall not pay
such claim prior to the expiration of the 30-day period following the date on
which it gives such notice to Bancshares (or such shorter period ending on the
date that any payment of taxes with respect to such claim is due). If
Bancshares notifies the Executive in writing prior to the expiration of such
period that it desires to contest such claim, the Executive shall:

 

               
(i)            give
Bancshares any information reasonably requested by Bancshares relating to such
claim,

 

               
(ii)           take such
action in connection with contesting such claim as Bancshares shall reasonably
request in writing from time to time, including, without limitation, accepting
legal representation with respect to such claim by an attorney reasonably
selected by Bancshares.

 

               
(iii)          cooperate with
Bancshares in good faith in order effectively to contest such claim, and

 

               
(iv)          permit Bancshares to
participate in any proceedings relating to such claim;

 

provided,
however, that Bancshares 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 the 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. Without limitation on the foregoing provisions of this Section 17
(c), Bancshares 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, 

 

14

 

hearings
and conferences with the taxing authority in respect of such claim and may, at
its sole option, either direct the Executive to pay the tax claimed and sue for
a refund or contest the claim in any permissible manner, and the 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 Bancshares shall determine; provided, however, that if Bancshares
directs the Executive to pay such claim and sue for a refund, Bancshares shall
advance the amount of such payment to the Executive, on an interest-free basis
and shall indemnify and hold the Executive harmless, on an after-tax basis,
from any Excise Tax or income tax (including interest or penalties with respect
thereto) imposed with respect to such advance or with respect to any imputed
income with respect to such advance; and further provided that any extension of
the statute of limitations relating to payment of taxes for the taxable year of
the Executive with respect to which such contested amount is claimed to be due
is limited solely to such contested amount. Furthermore, Bancshares’s control
of the contest shall be limited to issues with respect to which a Gross-Up
Payment would be payable hereunder and the 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.

 

               
(d)           If, after the
receipt by the Executive of an amount advanced by Bancshares pursuant to Section 17
(c), the Executive becomes entitled to receive any refund with respect to such
claim, the Executive shall (subject Bancshares’s complying with the
requirements of Section 17 (c) promptly pay to Bancshares the amount
of such refund (together with any interest paid or credited thereon after taxes
applicable thereto). If, after the receipt by the Executive of an amount
advanced by Bancshares pursuant to Section 17 (c), a determination is made
that the Executive shall not be entitled to any refund with respect to such
claim and Bancshares does not notify the Executive in writing of its intent to
contest such denial of refund prior to the expiration of 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, to the
extent thereof, the amount of Gross-Up Payment required to be paid.

 

19.           Indemnification. 
To the fullest extent permitted by law, regulation, and Bancshares’s
Articles of Incorporation and Bylaws, Bancshares shall pay as and when incurred
all expenses, including legal and attorney costs, incurred by, or shall satisfy
as and when entered or levied a judgment or fine rendered or levied against,
Executive in an action brought by a third party against Executive (whether or
not Bancshares is joined as a party defendant) to impose a liability or penalty
on Executive for an act alleged to have been committed by Executive while an
officer of Bancshares, provided that Executive was acting in good faith, within
what Executive reasonably believed to be the scope of Executive’s employment or
authority and for a purpose which Executive reasonably believed to be in the
best interests of Bancshares or Bancshares’s shareholders, and in the case of a
criminal proceeding, that Executive had no reasonable cause to believe that
Executive’s conduct was unlawful. 
Payments authorized hereunder include amounts paid and expenses incurred
in settling any such action or threatened action.  All rights hereunder are limited by any
applicable state or Federal laws.

 

20.           Severability. 
To the extent any provision of this Agreement or portion thereof shall
be invalid or unenforceable, it shall be considered deleted therefrom (but only
for so long as such provision or portion thereof shall be invalid or
unenforceable) and the remainder of such provision and of this Agreement shall
be unaffected and shall continue in full force and effect to 

 

15

 

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).

 

21.           Payment.  All amounts
payable by Bancshares to Executive under this Agreement shall be paid promptly
on the dates required for such payment in this Agreement without notice or
demand.

 

22.           Authority.  Each of the
parties hereto hereby represents that each has taken all actions necessary in
order to execute and deliver this Agreement.

 

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

 

24.           Governing Law. 
This Agreement shall be construed, interpreted and enforced in
accordance with the laws of the State of California, without giving effect to
the choice of law principles thereof.

 

25.           Entire Agreement. 
This Agreement and written agreements, if any, entered into concurrently
herewith constitute the entire agreement by Bancshares and Executive with
respect to the subject matter hereof and merges and supersedes any and all
prior discussions, negotiations, agreements or understandings between Executive
and Bancshares with respect to the subject matter hereof, whether written or
oral.  This Agreement may be amended or
modified only by a written instrument executed by Executive and Bancshares.
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.

 

26.           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.

 

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

 

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

 

29.           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.

 

16

 

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

 

	
   

  	
  1st Century Bancshares, Inc.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/Jason DiNapoli

  
	
   

  	
   

  	
  Jason DiNapoli

  
	
   

  	
   

  	
  President and Chief
  Operating Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  EXECUTIVE:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/Alan Rothenberg

  
	
   

  	
   Alan
  Rothenberg

  

 

17Exhibit 10.2

 

EMPLOYMENT AGREEMENT

 

THIS EMPLOYMENT AGREEMENT
(the “Agreement”) is made and entered into as of this 3rd day of September 2008
(the “Effective Date”), by and between 1st Century Bancshares, Inc.,
a Delaware corporation (the “Bancshares”) and Jason DiNapoli (the “Executive”).

 

WHEREAS, the parties hereto
wish to enter into an employment agreement to employ Executive as President and
Chief Operating Officer of Bancshares and to set forth certain additional
agreements between Executive and Bancshares.

 

NOW, THEREFORE, in
consideration of the mutual covenants and representations contained herein, the
parties hereto agree as follows:

 

1.             Term.  Bancshares
will employ Executive, and Executive will serve Bancshares, under the terms of
this Agreement for an initial term of three (3) years (the “Initial
Term”), commencing  on the Effective Date.  The Initial Term of this Agreement shall
automatically be extended for an additional one (1) year period  unless, not later than sixty (60) days prior to the expiration
of the Initial Term, either party hereto shall have given notice to the other
that the Initial Term shall not be so extended. 
Notwithstanding the foregoing, Executive’s employment hereunder may be
earlier terminated, as provided in Section 4 hereof.  The term of this Agreement, as in effect from
time to time in accordance with the foregoing, shall be referred to herein as
the “Term.”  The period of time
between the Effective Date and the termination of Executive’s employment
hereunder shall be referred to herein as the “Employment Period.”

 

2.             Position; Authority and Duties.

 

(a)           Positions and Reporting. 
Executive shall serve as President and Chief Operating Officer of
Bancshares.  During the Employment
Period, Executive shall report directly to the Board of Directors of Bancshares
(the “Board”).

 

(b)           Authority and Duties. 
During the Employment Period, Executive shall devote all his productive
time, ability and attention to the business and affairs of Bancshares and its
subsidiaries. Executive shall exercise such authority, perform such executive
duties and functions and discharge such responsibilities as are reasonably
associated with Executive’s position as President and Chief Operating Officer
of Bancshares consistent with this Agreement and the Bylaws of Bancshares.  Executive’s powers shall be to supervise,
control and be responsible for all aspects of the business and affairs of
Bancshares. In addition, Executive shall serve in such positions and shall
exercise such authority, perform such duties and functions and discharge such
responsibilities in Executive’s role as an employee and/or officer of any
subsidiary of Bancshares as shall be assigned to Executive from time-to-time by
the Board and/or the board of directors of such subsidiary without any
additional compensation owing to Executive in connection therewith.

 

3.             Compensation and Benefits.

 

(a)           Salary.  During the
Employment Period, Bancshares shall pay to Executive, as compensation for the
performance of his duties and obligations under this 

 

1

 

Agreement, a base salary
at the rate of $20,833.33 per month, payable in arrears semi-monthly in
accordance with the normal payroll practices of Bancshares (the “Base Salary”).  Such Base Salary shall be subject to review
within sixty (60) days after each calendar year during the Employment Period,
for possible increases by the Board based on factors including, but not limited
to, market conditions and performance of Executive and Bancshares, in its sole
discretion, but shall in no event be decreased from the levels set forth above
or from its then-existing level during the Employment Period.

 

(b)           Bonus.

 

(i)            Annual Bonus.  Executive
shall participate in the 2008 Incentive Compensation Plan, as amended and
approved by the Board.  The annual bonus
(the “Annual Bonus”) shall be based on the level of attainment by the Executive
of the target goals established and approved by the Board.  The target goals shall be based on the annual
business plan as approved by the Board . 
It is anticipated that increased levels of achievement will correlate to
increased levels of Annual Bonus.  The
Annual Bonus shall be paid in the form of a lump-sum cash payment at such time
as other executive bonuses are paid.  The
Board retains the discretion, but shall have no obligation, to determine
whether a pro-rata bonus is appropriate if Executive is terminated or leaves
the employ of Bancshares prior to the annual determination of bonuses.

 

(c)           Other Benefits. 
During the Employment Period, Executive shall receive such life
insurance, disability insurance and health, dental and vision and other
insurance benefits, holiday, vacation, 401(k) plan participation, and
other benefits which Bancshares extends, as a matter of policy, to all of its
executive employees, except as otherwise provided herein, and shall be entitled
to participate in all deferred compensation and other incentive plans of
Bancshares, on the same basis as other executive employees of Bancshares.  Without limiting the generality of the
foregoing, Executive shall be entitled to twenty-five (25) days of vacation per
year during the Employment Period, which shall be scheduled in Executive’s
discretion, subject to and taking into account applicable banking laws and regulations
and business needs.

 

(d)           Business Expenses. 
During the Employment Period, Bancshares shall promptly reimburse
Executive for all documented reasonable business expenses in accordance with
Bancshares’s expense reimbursement policy.

 

(e)           Ongoing Equity Grants.

 

(i)            Bancshares may, but is in no way obligated to, grant
from time to time to Executive shares of restricted stock, pursuant to a Notice
of Grant and Restricted Stock Agreement, under and subject to the terms and
conditions of the 1st Century Bancshares, Inc. Amended 2005 Equity
Incentive Plan, or such other plan that at such time Bancshares is actively
granting to its executives shares of restricted stock (“the Plan”).  The number of shares to be granted, if any,
shall be determined in the sole and absolute discretion of the Board or a
committee thereof and shall vest in accordance with the terms and conditions of
the Plan and the Notice of Grant and Restricted Stock Agreement. The vesting of
shares shall be subject to Executive’s continued employment with Bancshares on
the relevant vesting dates, unless Executive is terminated without Cause (as
defined in Section 4(a) of this Agreement) or 

 

2

 

Executive terminates his
employment for Good Reason (as defined in Section 4(b) of this
Agreement) pursuant to Section 5(a) hereof.

 

(ii)           In the event of any termination of employment for any
reason, Executive hereby grants to Bancshares the right and option, for a
period of thirty (30) days after the effective date of such termination, to
purchase any shares of restricted stock owned by him on the effective date of
such termination that have been released from or are not otherwise subject to
any restriction on resale under the Plan at a price equal to 100% of the volume
weighted average closing price of Bancshares’ common stock for the twenty (20)
trading days immediately prior to the effective date of termination of
employment as reported on any quotation service or exchange on which Bancshares’
common stock is then quoted or traded. 
This provision is limited to subsequent grants of restricted stock
pursuant to this Agreement, and it does not include shares acquired by
Executive using personal funds, upon the exercise of stock options under the
Plan otherwise than pursuant to this Agreement, or otherwise.

 

4.             Termination of Employment.

 

(a)           Termination for Cause. 
The Board may terminate Executive’s employment hereunder for Cause or
without Cause.  For purposes of this
Agreement termination for “Cause” shall mean termination because (i) Executive:
(A) committed a significant act of dishonesty, deceit or breach of
fiduciary duty in the performance of his duties as an employee of Bancshares or
any of its subsidiaries; (B) grossly neglected or willfully failed in any
way to perform substantially the duties of such employment after a written
demand for performance is given to Executive by the Board, which demand
specifically identifies the manner in which the Board believes Executive has
failed to perform his duties; (C) has committed a material breach of any
provision of this Agreement; (D) willfully acted or failed to act in any
other way that materially and adversely affects Bancshares or any of its
subsidiaries; (E) is removed and/or permanently prohibited from
participating in the conduct of Bancshares or any of its subsidiaries affairs
by an order issued under Section 8(e)(3) or 8(g)(1) of the
Federal Deposit Insurance Act (12 U.S.C. Section 1818(e)(3) or
(g)(1)); or (F) the Executive’s violation of any applicable statutes,
regulations or rules of any appropriate Federal banking agency and/or
state bank supervisor, as defined in the FDI Act Section 3, 12 U.S.C.
1813, which violation materially and adversely affects Bancshares or its
subsidiaries; or (ii) Bancshares or any of its subsidiaries has received a final
cease-and-desist order that requires in substance that Bancshares or any of its
subsidiaries retain a qualified chief executive officer acceptable to bank
regulators with the experience, skill and other qualifications required to
ensure compliance with such order and Bancshares or any of its subsidiaries
regulators have determined that Executive does not meet these qualifications.

 

Termination under this Paragraph shall not prejudice
any remedy that Bancshares may have at law, in equity, or under this Agreement.

 

(b)           Termination for Good Reason. 
Executive shall have the right at any time to terminate his employment
with Bancshares for any reason.  For
purposes of this Agreement, and subject to Bancshares’s opportunity to cure as
provided in Section 4(c) hereof, Executive shall have “Good Reason”
to terminate his employment hereunder if such termination shall be the result
of:

 

3

 

(i)            a material diminution during the Employment Period in
Executive’s authority, duties or responsibilities as set forth in Section 2
hereof, unless such events follow any of the circumstances described in Section 4(a) regarding
termination for Cause;

 

(ii)           a material diminution in Executive’s Salary;

 

(iii)          a material breach by Bancshares of any material terms
of this Agreement; or

 

(iv)          the relocation of Executive’s principal place of
employment to any location more than 50 miles from Bancshares’s headquarters at
the Effective Date.

 

(c)           Notice and Opportunity to Cure. 
Notwithstanding the foregoing, it shall be a condition precedent to
Bancshares’s right to terminate Executive’s employment for Cause, and Executive’s
right to terminate his employment for Good Reason that (1) the party
seeking the termination shall first have given the other party written notice
stating with specificity the reason for the termination (“Breach”) no
later than ninety (90) days following the initial existence of the condition
giving rise to the Breach, and (2) if such Breach is susceptible of cure
or remedy, a period of thirty (30) days from and after the giving of such
notice to cure the Breach.  With respect
to terminations because of a willful violation of any law, rule or
regulation or issuance of a final cease-and-desist order, or because of
Executive’s personal dishonesty or breach of fiduciary duty involving personal
profit, Bancshares will not be required to provide a cure period.

 

(d)           Termination Upon Death or Permanent
Disability.  The Employment Period shall automatically be
terminated by the death of Executive. 
The Employment Period may be terminated by Bancshares if Executive shall
be subject to a “permanent disability” as such term is defined in the
disability insurance provided by Bancshares, or if such insurance is not
provided by Bancshares, the term shall mean that Executive has been unable to
perform his duties under this Agreement for a period of at least ninety (90)
consecutive days or one-hundred twenty (120) days in any one-hundred eighty
(180) day period, and it is not reasonable to believe that he would ever be
able to resume his duties on a full time basis.

 

(e)           Termination Upon a Change in Control.  In the event this Agreement or Executive’s
employment is terminated without Cause by Bancshares or for Good Reason by
Executive within twelve (12) months after the occurrence of a Change in
Control, (as defined below), Executive shall be entitled to the separation pay
as described in Paragraph 5(a) below.

 

(f)            Definition of
Change in Control.  A “Change
in Control” shall be deemed to have taken place if:

 

(i)            there shall be
consummated any consolidation or merger of Bancshares
in which Bancshares is not the
continuing or surviving corporation or pursuant to which shares of Bancshares’s capital stock are converted into
cash, securities or other property (other than a consolidation or merger of Bancshares in which the holders of Bancshares’s voting stock immediately prior to
the consolidation or merger shall, upon consummation of the 

 

4

 

consolidation or merger, own
at least 50% of the voting stock) or any sale, lease, exchange or other
transfer (in one transaction or a series of transactions contemplated or
arranged by any party as a single plan) of all or substantially all of the
assets of Bancshares; or

 

(ii)           any person (as
such term is used in Sections 13(d) and 14(d)(2) of the
Securities Exchange Act of 1934, as amended (the “Exchange Act”)) shall,
after the date hereof, become the beneficial owner (as defined in Rules 13d-3
and 13d-5 under the Exchange Act), directly or indirectly, of securities of Bancshares representing 25% or more of the
voting power of all of the then outstanding securities of Bancshares having the right under ordinary circumstances
to vote in an election of the Board (including, without limitation, any
securities of Bancshares that any such
person has the right to acquire pursuant to any agreement, or upon exercise of
conversion rights, warrants or options, or otherwise, shall be deemed
beneficially owned by such person); or

 

(iii)          individuals who
as of the Effective Date constitute the entire Board and any new directors
whose election by Bancshares’
shareholders, or whose nomination for election by the Board, shall have been
approved by a vote of at least a majority of the directors then in office who
either were directors at the date hereof or whose election or nomination for
election shall have been so approved shall cease for any reason to constitute a
majority of the members of the Board.

 

5.             Consequences of Termination. 
The following are the separation pay and benefits to which Executive is
entitled upon termination of employment by Bancshares without Cause or by
Executive with Good Reason or due to death or permanent disability in all
positions with Bancshares and any of its
subsidiaries, and such payments and benefits shall be the exclusive
payments and benefits to which Executive is entitled upon such
termination.  Except in the case of
termination of employment due to death, the post-termination payments and
benefits shall only be provided if Executive first enters into a form of
release agreement reasonably satisfactory to Bancshares
releasing Bancshares from any and all
claims, known and unknown, related to Executive’s employment with Bancshares or any other claims Executive may have against Bancshares.

 

(a)           Termination Without Cause or for Good
Reason. In the
event Bancshares terminates Executive’s
employment hereunder without Cause (other than upon death or permanent
disability) or Executive terminates his employment for Good Reason, Executive
shall become immediately vested in any of the remaining unvested shares of
restricted stock and/or options granted to him under any existing or future
award agreements.  In addition:

 

(i)            Executive will be entitled to separation pay in a lump
sum amount equal to:

 

(A)          200% of the highest amount
of Executive’s annual Base Salary and the highest Annual Bonus paid to
Executive within the three-year period preceding the termination plus a
prorated bonus for the number of months worked for the year of termination.

 

5

 

(ii)           Continuation for 12 months (the “Separation Period”)
of coverage under the group medical care, disability and life insurance benefit
plans or arrangements in which Executive is participating at the time of
termination, with Bancshares continuing to pay its share of premiums and
associated costs as if Executive continued in the employ of Bancshares;
provided, however, that Bancshares’ obligation to provide such coverage shall
be terminated if Executive obtains comparable substitute coverage from another
employer at any time during the Separation Period.  Executive shall advise Bancshares immediately
if such comparable substitute coverage is obtained from another employer.  Executive shall be entitled, at the
expiration of the Separation Period, to elect continued coverage under
Bancshares’ medical benefit plans pursuant to the terms of the Consolidated Omnibus Budget Reconciliation
Act.

 

(b)           Termination Upon Disability. 
In the event of termination of Executive’s employment hereunder by
Bancshares on account of permanent disability, Executive shall be entitled to
the following separation pay and benefits:

 

(i)            Separation payments in the form of continuation of
Executive’s Base Salary as in effect immediately prior to such termination for
the Separation Period in equal installments on Bancshares’s regularly schedule
payroll dates following the first date of disability; and

 

(ii)           The same benefits as provided in Section 5(a)(ii) above,
to be provided during the Employment Period while Executive is suffering from a
permanent disability and for a period of six (6) months following the
effective date of termination of employment by reason of permanent disability.

 

(iii)          Executive shall become immediately vested in any of
the remaining unvested shares of restricted stock and/or options granted to him
under any existing or future award agreements,

 

(c)           Termination Upon Death. 
In the event of termination of Executive’s employment hereunder on
account of Executive’s death, Bancshares shall pay to Executive’s beneficiary
or beneficiaries or his estate, as the case may be, the accrued Base Salary and
accrued and unused PTO earned through the date of death.  Such payment shall be made no later than
sixty (60) days after the date of death. 
In addition, Executive’s beneficiary(ies) or his estate shall be
entitled to the payment of benefits pursuant to any life insurance policy of
Executive, as provided for in Section 3(c) above.  Executive’s beneficiary or estate shall not
be required to remit to Bancshares any payments received pursuant to any life
insurance policy purchased pursuant to Section 3(c) above.  Executive shall become immediately vested in
any of the remaining unvested shares of restricted stock and/or options granted
to him under any existing or future award agreements.

 

(d)           Accrued Rights. 
Notwithstanding the foregoing provisions of this Section 5, in the
event of termination of Executive’s employment hereunder for any reason,
Executive shall be entitled to (i) payment of any unpaid portion of his
Base Salary through the effective date of termination, (ii) payment of any
un-reimbursed reasonable business expenses incurred pursuant to Section 3(d) above,
and (iii) payment of any accrued but unpaid benefits 

 

6

 

solely in accordance with
the terms of any employee benefit plan or program of Bancshares (remuneration
under any other bonus plan is not guaranteed).

 

(e)           Termination for Cause. 
In the event the employment of Executive is terminated by Bancshares for
Cause, Bancshares shall provide Executive only Base Salary and PTO earned and
un-reimbursed business expenses incurred through the date of termination.  No separation payment or benefit shall be
provided in such instance.

 

(f)            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 Section 5.  The terms of
this Section 5(f) shall not affect the interpretation of any
provision of this Agreement.

 

(g)           Regulatory Restrictions. 
The parties understand and agree that at the time any payment would
otherwise be made or benefit provided under Sections 5 or 18, depending on
the facts and circumstances existing at such time, the satisfaction of such
obligations by Bancshares 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 Bancshares.  Among
other things, the regulations at 12 C.F.R. Part 30, Appendix A
and at 12 C.F.R. Part 359 promulgated pursuant to Sections 18(k) and
39(a) of the Federal Deposit Insurance Act, respectively, or similar
regulations or regulatory action following similar principles may apply at such
time.  The parties understand,
acknowledge and agree that, notwithstanding any other provision of this
Agreement, Bancshares shall not be obligated to make any payment or provide any
benefit, and any such obligation of Bancshares to do so under Sections 5
or 18 shall be extinguished if an appropriate regulatory authority disapproves
or does not acquiesce, if required, and the regulatory authority’s disapproval
or non-acquiescence is documented in a writing from the regulatory authority, a
copy of which is actually provided by the regulatory authority or Bancshares to
Executive.

 

(h)           Conditions to Separation Benefits. 
Bancshares shall have the right to seek repayment of the separation
payments and benefits or to terminate payments or benefits provided by this Section 5
in the event that Executive fails to honor, in accordance with their terms, the
provisions of Sections 6 or 9 hereof.

 

(i)            Suspension and Removal Orders. 
If Executive is suspended and/or temporarily prohibited from
participating in the conduct of Bancshares’ or any of its subsidiaries’ affairs
by notice served under Section 8(e)(3) or 8(g)(1) of the Federal
Deposit Insurance Act (12 U.S.C. Section 1818(e)(3) and (g)(1))
or successor provisions, Bancshares’s obligations under this Agreement shall be
suspended as of the date of service, unless stayed by appropriate proceedings.  If the charges in the notice are dismissed,
Bancshares may in its discretion: (i) pay Executive all or part of the
compensation withheld while its obligations under this Agreement were
suspended; and (ii) reinstate (in whole or in part) any of its obligations
which were suspended.  If Executive is
removed and/or permanently prohibited from participating in the conduct of
Bancshares’ or any of its subsidiaries’ affairs by an order issued under Section 8(e)(3) or
8(g)(1) of the Federal Deposit Insurance Act (12 U.S.C. Section 

 

7

 

1818(e)(3) or
(g)(1)), all obligations of Bancshares under this Agreement shall terminate as
of the effective date of the order, but vested rights of the parties shall not
be affected.

 

(j)            Termination by Default. 
If Bancshares is in default (as defined in Section 3(x)(1) of
the Federal Deposit Insurance Act (12 U.S.C. Section 1813(x)(1)), all
obligations under this Agreement shall terminate as of the date of default, but
vested rights of the parties shall not be affected.

 

(k)           Supervisory Assistance or Merger. 
All obligations under this Agreement shall be terminated, except to the
extent that it is determined that continuation of the Agreement is necessary
for the continued operation of 1st Century Bank, N.A. (the “Bank”) (or any bank
subsidiary of Bancshares):  (i) by
the Comptroller of the Currency (the “Comptroller”) or his or her
designee, at the time that the Federal Deposit Insurance Corporation enters
into an agreement to provide assistance to or on behalf of the Bank under the
authority contained in Section 11 of the Federal Deposit Insurance Act (12
U.S.C. Section 1821); or (ii) by the Comptroller or his or her
designee, at the time that the Comptroller or his or her designee approves a
supervisory merger to resolve problems related to the operation of the Bank or
when the Bank is in an unsafe or unsound condition.  All rights of the parties that have already
vested, however, shall not be affected by such action.

 

6.             Confidentiality. 
Executive agrees that he will not at any time during the Employment
Period or at any time thereafter for any reason, in any fashion, form or
manner, either directly or indirectly, divulge, disclose or communicate to any
person, firm, corporation or other business entity, in any manner whatsoever,
any confidential information or trade secrets concerning the business of
Bancshares and any of its subsidiaries, including, without limiting the
generality of the foregoing, the techniques, methods or systems of its
operation or management, any information regarding its financial matters, or
any other material information concerning the business of Bancshares and any of
its subsidiaries (including customer lists), any of its customers, governmental
relations, customer contacts, underwriting methodology, loan program
configuration and qualification strategies, marketing strategies and proposals,
its manner of operation, its plans or other material data, or any other
information concerning the business of Bancshares, its subsidiaries or
affiliates, and Bancshares’s good will (the “Business”).  The provisions of this Section 6 shall
not apply to (i) information disclosed in the performance of Executive’s
duties to Bancshares and any of its subsidiaries based on his good faith belief
that such a disclosure is in the best interests of Bancshares or any of its
subsidiaries, as applicable; (ii) information that is, at the time of the
disclosure, public knowledge; (iii) information disseminated by Bancshares
or any of its subsidiaries to third parties in the ordinary course of business;
(iv) information lawfully received by Executive from a third party who,
based upon inquiry by Executive, is not bound by a confidential relationship to
Bancshares and any of its subsidiaries or otherwise improperly received the
information; or (v) information disclosed under a requirement of law or as
directed by applicable legal authority having jurisdiction over Executive.

 

Executive agrees that all
manuals, documents, files, reports, studies or other materials used and/or
developed by Executive for Bancshares and any of its subsidiaries during the
Term of this Agreement are solely the property of Bancshares, and that
Executive has no right, title or interest therein.  Upon termination of Executive’s employment,
Executive or Executive’s 

 

8

 

representative
shall promptly deliver possession of all such materials (including any copies
thereof) to Bancshares.

 

7.             Keyman Life Insurance. Bancshares shall have the right to
obtain and hold a “keyman” life insurance policy on the life of Executive with
Bancshares as beneficiary of the policy. 
Executive agrees to provide any information required for the issuance of
such policy and submit himself to any physical examination required for such
policy.

 

8.             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 Bancshares and any of its subsidiaries under the provisions of this
Agreement.  No assets of Bancshares and
any of its subsidiaries 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 Bancshares under this Agreement.  All of Bancshares’ and any of its
subsidiaries assets shall be and remain the general, unpledged, unrestricted
assets of Bancshares and any of its subsidiaries, as applicable. Bancshares’
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.

 

9.             Business Protection Covenants.

 

(a)           Covenant Not to Compete. 
Executive agrees that he will not, during the Employment Period,
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
Bancshares, its subsidiaries or affiliates (“Competitive Business”), (ii) directly
or indirectly own any interest in (other than less than 3% of any publicly
traded company or mutual fund), manage, operate, control, be employed by, or
provide management or consulting services in any capacity to any firm,
corporation, or other entity (other than Bancshares or its subsidiaries or
affiliates) engaged in any Competitive Business, or (iii) directly or
indirectly solicit or otherwise intentionally cause any employee, officer, or
member of the Board or any of its subsidiaries or affiliates to engage in any
action prohibited under (i) or (ii) of this Section 9(a).

 

(b)           Inducing Employees To Leave Bancshares;
Employment of Employees.  Any attempt on the part of
Executive to induce others to leave Bancshares’s employ, or the employ
of any of its subsidiaries or affiliates, or any effort by Executive to
interfere with Bancshares’ and any of its subsidiaries relationship with
its other employees would be harmful and damaging to Bancshares.  Executive agrees that during the Employment
Period and for a period of twelve (12) months thereafter, Executive will not in
any way, directly or indirectly: (i) induce or attempt to induce any
employee of Bancshares or any of its subsidiaries of affiliates to quit
employment with Bancshares or the relevant subsidiary or affiliate; (ii) otherwise
interfere with or disrupt the relationships between Bancshares and its
subsidiaries and affiliates and their respective employees; (iii) solicit,
entice, or hire away any employee of Bancshares or any of its
subsidiaries or affiliates; or (iv) hire or engage any employee of Bancshares
or any subsidiary or affiliate, or any former employee of Bancshares or
any subsidiary or affiliate whose 

 

9

 

employment with Bancshares
or the relevant subsidiary or affiliate ceased less than one (1) year
before the date of such hiring or engagement.

 

(c)           Nonsolicitation of Business. 
For a period of twelve (12) months from the date of termination of
employment, Executive will not utilize the confidential proprietary or trade
secret information to divert or attempt to divert from Bancshares or any
of its subsidiaries or affiliates, any business Bancshares or a
subsidiary or affiliate had enjoyed or solicited from its customers, borrowers,
depositors or investors during the twelve (12) months prior to termination
of his employment.

 

(d)           Bancshares’ Ownership of Intellectual
Property.  To the extent that Executive has intellectual
property rights of any kind in any pre-existing works which are subsequently
incorporated in any work or work product produced in rendering services to Bancshares
and any of its subsidiaries, Executive hereby grants Bancshares a royalty-free,
irrevocable, world-wide, perpetual non-exclusive license (with the right to
sublicense), to make, have made, copy, modify, use, sell, license, disclose,
publish or otherwise disseminate or transfer such subject matter.  Similarly, Executive agrees that all
inventions, discoveries, improvements, trade secrets, original works of
authorship, developments, formulae, techniques, processes, and know-how,
whether or not patentable, and whether or not reduced to practice, that are
conceived, developed or reduced to practice during Executive’s employment with Bancshares,
either alone or jointly with others, if on Bancshares’ time, using Bancshares’
or any of its subsidiaries facilities, or relating to Bancshares shall
be owned exclusively by Bancshares, and Executive hereby assigns to Bancshares
all of Executive’s right, title and interest throughout the world in all such
intellectual property.  Executive agrees
that Bancshares shall be the sole owner of all domestic and foreign
patents or other rights pertaining thereto, and further agrees to execute all
documents that Bancshares reasonably determines to be necessary or
convenient for use in applying for, prosecuting, perfecting, or enforcing
patents or other intellectual property rights, including the execution of any
assignments, patent applications, or other documents that Bancshares may
reasonably request.  This provision is
intended to apply to the extent permitted by applicable law and is expressly
limited by Section 2870 of the California Labor Code, which is set forth
in its entirety in Exhibit A to this Agreement.  By signing this Agreement, Executive
acknowledges that this paragraph shall constitute written notice of the
provisions of Section 2870.

 

(e)           Bancshares’ Ownership of Copyrights. 
Executive agrees that all original works of authorship not otherwise
within the scope of Paragraph (d) above that are conceived or developed during
Executive’s employment with Bancshares and any of its subsidiaries,
either alone or jointly with others, if on Bancshares’ and any of its
subsidiaries time, using Bancshares or any of its subsidiaries facilities, or
relating to Bancshares, are “works for hire” to the greatest extent
permitted by law and shall be owned exclusively by Bancshares, and
Executive hereby assigns to Bancshares all of Executive’s right, title,
and interest in all such original works of authorship.  Executive agrees that Bancshares shall
be the sole owner of all rights pertaining thereto, and further agrees to
execute all documents that Bancshares reasonably determines to be
necessary or convenient for establishing in Bancshares’ name the
copyright to any such original works of authorship.

 

10

 

10.           No Breach of Prior Agreement. 
Executive represents that his performance of all the terms of this
Agreement and his duties as an executive of Bancshares will not breach
any agreement with any former employer or other party.  Executive represents that he will not bring
with him to Bancshares or use in the performance of his duties for Bancshares
any documents or materials of a former employer that are not generally
available to the public or have not been legally transferred to Bancshares.

 

11.           Resignations. 
Executive agrees that upon termination of employment, for any reason, he
will submit his resignations from all offices and directorships with Bancshares
and all of its subsidiaries.

 

12.           Other Agreements. 
The parties further agree that to the extent of any inconsistency
between this Agreement and any employee manual or policy of Bancshares,
that the terms of this Agreement shall supersede the terms of such employee
manual or policy.

 

13.           Notice.  For the
purposes of this Agreement, notices, demands and all other communications
provided for in this Agreement shall be in writing and shall be personally
delivered or (unless otherwise specified) mailed by United States certified or
registered mail, return receipt requested, postage prepaid, or sent by facsimile,
provided that the facsimile cover sheet contains a notation of the date and
time of transmission, and shall be deemed received:  (i) if personally delivered, 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 Section 13, 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 Section 13 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 addressed as
follows:

 

If to Bancshares:

 

1st Century Bancshares, Inc.

1875 Century Park East

Suite 1400

Los Angeles, CA  90067

Attn:  Chairman of the Board and
President/COO

 

With a copy to:

 

Manatt, Phelps & Phillips, LLP

11355 West Olympic Avenue

Los Angeles, CA 90064

Attn: Gordon M. Bava, Esq.

 

If to Executive, to:

 

Jason DiNapoli

443 South Saltair Ave.

Los Angeles, CA 90049

 

11

 

or to such other respective
addresses as the parties hereto shall designate to the other by like notice,
provided that notice of a change of address shall be effective only upon
receipt thereof.

 

14.           Arbitration. 
Any dispute or controversy arising under or in connection with this
Agreement, the inception or termination of Executive’s employment, or any
alleged discrimination or tort claim related to such employment, including
issues raised regarding the Agreement’s formation, interpretation or breach,
shall be settled exclusively by binding arbitration in accordance with the
National Rules for the Resolution of Employment Disputes of the American
Arbitration Association (“AAA”). Without limiting the foregoing, the
following potential claims by Executive would be subject to arbitration under
the Arbitration Agreement:  claims for
wages or other compensation due; claims for breach of any contract or covenant
(express or implied) under which Executive believes he would be entitled to
compensation or benefits; tort claims related to such employment; 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 or
other procedure different from this one); and claims for violation of any
public policy, federal, state or other governmental law, statute, regulation or
ordinance.  The arbitration will be
conducted in Los Angeles County.  The
arbitration shall provide for written discovery and depositions adequate to
give the parties access to documents and witnesses that are essential to the
dispute.  The arbitrator shall have no
authority to add to or to modify this Agreement, shall apply all applicable
law, and shall have no lesser and no greater remedial authority than would a
court of law resolving the same claim or controversy.  The arbitrator shall issue a written decision
that includes the essential findings and conclusions upon which the decision is
based, which shall be signed and dated. 
Executive and Bancshares shall each bear his or its own costs and
attorneys’ fees incurred in conducting the arbitration and, except in such
disputes where Executive asserts a claim otherwise under a state or federal
statute prohibiting discrimination in employment (a “Statutory Claim”), or
unless required otherwise by applicable law, shall split equally the fees and
administrative costs charged by the arbitrator and AAA.  For such disputes that do not involve
Statutory Claims, if Executive is determined to be the prevailing party, the
arbitrator shall have the discretion to order Bancshares to reimburse Executive for his portion of the arbitrator’s fees
and administrative costs of AAA charged to the parties as a result of the
arbitration, as well as his reasonable attorney’s fees and costs.  In disputes where Executive asserts a
Statutory Claim against Bancshares or where otherwise required by law,
Executive shall be required to pay only the AAA filing fee to the extent such
filing fee does not exceed the fee to file a complaint in state or federal
court.  Bancshares shall pay the
balance of the arbitrator’s fees and administrative costs.  If any party prevails on a Statutory Claim
that affords the prevailing party attorneys’ fees, the arbitrator may award
attorneys’ fees to the prevailing party, consistent with applicable law.  Judgment may be entered on the arbitrator’s
award in any court having jurisdiction.

 

15.           Waiver of Breach. 
Any waiver of any breach of this Agreement shall not be construed to be
a continuing waiver or consent to any subsequent breach on the part either of
Executive or of Bancshares.  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 

 

12

 

thereafter to exercise
the same.  Any extension of time or other
indulgence 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.

 

16.           Non-Assignment; Successors. 
Neither party hereto may assign his or its rights or delegate his or its
duties under this Agreement without the prior written consent of the other
party; provided, however, that: (i) this Agreement shall inure to the
benefit of and be binding upon the successors and assigns of Bancshares
upon any sale of all or substantially all of Bancshares’s assets, or
upon any merger, consolidation or reorganization of Bancshares with or
into any other corporation, all as though such successors and assigns of Bancshares
and their respective successors and assigns were Bancshares; and (ii) this
Agreement shall inure to the benefit of and be binding upon the heirs, assigns
or designees of Executive to the extent of any payments due to them
hereunder.  As used in this Agreement,
the term “Bancshares” shall be deemed to refer to any such successor or assign
of Bancshares referred to in the preceding sentence.

 

17.           Withholding of Taxes. All payments required to be made by Bancshares
to Executive under this Agreement shall be subject to the withholding and
deduction of such amounts, if any, relating to tax, and other payroll
deductions as Bancshares may reasonably determine it should withhold
and/or deduct pursuant to any applicable law or regulation (including, but not
limited to, Executive’s portion of social security payments and income tax
withholding) now in effect or which may become effective any time during the
term of this Agreement.

 

18.           Excise Tax Provision.

 

(a)           Anything in this Agreement to the
contrary notwithstanding and except as set forth below, in the event it shall
be determined that any payment or distribution by Bancshares to or for
the benefit of the Executive (whether paid or payable or distributed or
distributable pursuant to the terms of this Agreement or otherwise, but
determined without regard to any additional payments required under this Section )
(a “Payment”) would be subject to the excise tax imposed by Section 4999
of the Code or any interest or penalties are incurred by the Executive with
respect to such excise tax (such excise tax, together with any such interest
and penalties, are hereinafter collectively referred to as the “Excise Tax”),
then the Executive shall be entitled to receive an additional payment (a “Gross-Up
Payment”) in an amount such that after payment by the Executive of all taxes
(including any interest or penalties imposed with respect to such taxes),
including, without limitation, any income taxes (and any interest and penalties
imposed with respect thereto) and Excise tax imposed upon the Gross-Up Payment,
the Executive retains an amount of the Gross-Up Payment equal to the Excise Tax
imposed upon the Payments. Notwithstanding the foregoing provisions of this
Section, if it shall be determined that the Executive is entitled to a Gross-Up
Payment, but that the Payments do not exceed 110% of the greatest amount (the “Reduced
Amount”) that could be paid to the Executive such that the receipt of Payments
would not give rise to any Excise Tax, then no Gross-Up Payment shall be made
to the Executive and the Payments, in the aggregate, shall be reduced to the
Reduced Amount.

 

13

 

(b)

 

Subject
to the provisions of Section 17(a), all determinations required to be made
under this Section 17(a), including whether and when a Gross-Up Payment is
required and the amount of such Gross-Up Payment and the assumptions to be
utilized in arriving at such determination, shall be made by Perry-Smith, LLP
or another certified public accounting firm as may be designated by the
Executive (the “Accounting Firm”) which shall provide detailed supporting calculations
both to Bancshares and the Executive within 15 business days of the receipt of
notice from the Executive that there has been a Payment, or such earlier time
as is requested by Bancshares. In the event that the Accounting Firm is serving
as accountant or auditor for the individual, entity or group effecting the
Change of Control, the Executive shall appoint another recognized accounting
firm to make the determinations required hereunder (which accounting firm shall
then be referred to as the Accounting Firm hereunder). All fees and expenses of
the Accounting Firm shall be borne solely by Bancshares. Any Gross-Up Payment,
as determined pursuant to this Section 17(a), shall be paid by Bancshares
to the Executive within five days of the receipt of the Accounting Firm’s
determination. Any determination by the Accounting Firm shall be binding upon
Bancshares and the Executive. 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 hereunder, it is possible that Gross-Up Payments which will
not have been made by Bancshares should have been made (“Underpayment”),
consistent with the calculations required to be made hereunder. In the event
that Bancshares exhausts its remedies pursuant to Section 17 and the
Executive thereafter is required to make a payment of any Excise Tax, the
Accounting Firm shall determine the amount of the Underpayment that has
occurred and any such Underpayment shall be promptly paid by Bancshares to or
for the benefit of the Executive.

 

(c) The
Executive shall notify Bancshares in writing of any claim by the Internal
Revenue Service that, if successful, would require the payment by Bancshares of
the Gross-Up Payment. Such notification shall be given as soon as practicable
but no later than ten business days after the Executive is informed in writing
of such claim and shall apprise Bancshares of the nature of such claim and the
date on which such claim is requested to be paid. The Executive shall not pay
such claim prior to the expiration of the 30-day period following the date on
which it gives such notice to Bancshares (or such shorter period ending on the
date that any payment of taxes with respect to such claim is due). If
Bancshares notifies the Executive in writing prior to the expiration of such
period that it desires to contest such claim, the Executive shall:

 

               
(i)            give
Bancshares any information reasonably requested by Bancshares relating to such
claim,

 

               
(ii)           take such
action in connection with contesting such claim as Bancshares shall reasonably
request in writing from time to time, including, without limitation, accepting
legal representation with respect to such claim by an attorney reasonably
selected by Bancshares.

 

14

 

               
(iii)          cooperate with
Bancshares in good faith in order effectively to contest such claim, and

 

               
(iv)          permit Bancshares to
participate in any proceedings relating to such claim;

 

provided,
however, that Bancshares 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 the 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. Without limitation on the foregoing provisions of this Section 17
(c), Bancshares 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, hearings and conferences with the taxing authority in
respect of such claim and may, at its sole option, either direct the Executive
to pay the tax claimed and sue for a refund or contest the claim in any
permissible manner, and the 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 Bancshares shall
determine; provided, however, that if Bancshares directs the Executive to pay
such claim and sue for a refund, Bancshares shall advance the amount of such
payment to the Executive, on an interest-free basis and shall indemnify and
hold the Executive harmless, on an after-tax basis, from any Excise Tax or
income tax (including interest or penalties with respect thereto) imposed with
respect to such advance or with respect to any imputed income with respect to
such advance; and further provided that any extension of the statute of
limitations relating to payment of taxes for the taxable year of the Executive
with respect to which such contested amount is claimed to be due is limited
solely to such contested amount. Furthermore, Bancshares’s control of the
contest shall be limited to issues with respect to which a Gross-Up Payment
would be payable hereunder and the 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.

 

               
(d)           If, after the
receipt by the Executive of an amount advanced by Bancshares pursuant to Section 17
(c), the Executive becomes entitled to receive any refund with respect to such
claim, the Executive shall (subject Bancshares’s complying with the
requirements of Section 17 (c) promptly pay to Bancshares the amount
of such refund (together with any interest paid or credited thereon after taxes
applicable thereto). If, after the receipt by the Executive of an amount
advanced by Bancshares pursuant to Section 17 (c), a determination is made
that the Executive shall not be entitled to any refund with respect to such claim
and Bancshares does not notify the Executive in writing of its intent to
contest such denial of refund prior to the expiration of 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, to the
extent thereof, the amount of Gross-Up Payment required to be paid.

 

19.           Indemnification. 
To the fullest extent permitted by law, regulation, and Bancshares’s
Articles of Incorporation and Bylaws, Bancshares shall pay as and when incurred
all expenses, including legal and attorney costs, incurred by, or shall satisfy
as and when entered or levied a judgment or fine rendered or levied against,
Executive in an action brought by a third party against Executive (whether or
not Bancshares is joined as a party defendant) to impose a liability or penalty
on Executive for an act alleged to have been committed by Executive while 

 

15

 

an officer of Bancshares,
provided that Executive was acting in good faith, within what Executive
reasonably believed to be the scope of Executive’s employment or authority and
for a purpose which Executive reasonably believed to be in the best interests
of Bancshares or Bancshares’s shareholders, and in the case of a criminal
proceeding, that Executive had no reasonable cause to believe that Executive’s
conduct was unlawful.  Payments
authorized hereunder include amounts paid and expenses incurred in settling any
such action or threatened action.  All rights
hereunder are limited by any applicable state or Federal laws.

 

20.           Severability. 
To the extent any provision of this Agreement or portion thereof shall
be invalid or unenforceable, it shall be considered deleted therefrom (but only
for so long as such provision or portion thereof shall be invalid or
unenforceable) and the remainder of such provision and of this Agreement shall
be unaffected and shall continue in full force and effect 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).

 

21.           Payment.  All amounts
payable by Bancshares to Executive under this Agreement shall be paid promptly
on the dates required for such payment in this Agreement without notice or
demand.

 

22.           Authority.  Each of the
parties hereto hereby represents that each has taken all actions necessary in
order to execute and deliver this Agreement.

 

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

 

24.           Governing Law. 
This Agreement shall be construed, interpreted and enforced in
accordance with the laws of the State of California, without giving effect to
the choice of law principles thereof.

 

25.           Entire Agreement. 
This Agreement and written agreements, if any, entered into concurrently
herewith constitute the entire agreement by Bancshares and Executive with
respect to the subject matter hereof and merges and supersedes any and all
prior discussions, negotiations, agreements or understandings between Executive
and Bancshares with respect to the subject matter hereof, whether written or
oral.  This Agreement may be amended or
modified only by a written instrument executed by Executive and Bancshares.
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.

 

26.           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.

 

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

 

16

 

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

 

29.           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.

 

17

 

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

 

	
   

  	
  1st Century Bancshares, Inc.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/Alan I. Rothenberg

  
	
   

  	
   

  	
  Alan I. Rothenberg

  
	
   

  	
   

  	
  Chairman of the Board

  
	
   

  	
   

  
	
   

  	
  EXECUTIVE:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/Jason DiNapoli

  
	
   

  	
   Jason DiNapoli

  

 

18

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