Document:

Exhibit 10.11

EXECUTIVE VICE PRESIDENT

EMPLOYMENT, CONFIDENTIALITY

AND NON-DISCLOSURE AGREEMENT

 

PART I

PARTIES TO AGREEMENT

 

Section 1.01 - Parties:  This Employment Agreement (hereinafter referred to as the “Agreement”) is entered into by and between Farmers & Merchants Bank of Central California, a California banking corporation (the “Bank”), its successors and assigns, and David M. Zitterow (hereinafter referred to as “Employee”).  The Bank and Employee are sometimes collectively referred to hereinafter as the “Parties” and individually as a “Party”.

 

PART II

EMPLOYMENT

 

Section 2.01 - Employment:  The Bank hereby agrees to continue employing Employee, and Employee hereby accepts such continued employment with the Bank, in accordance with the terms and conditions set forth herein.

Section 2.02 - Term of Employment:  This Agreement shall become effective on May 1, 2017.  This Agreement shall terminate on December 31, 2018 unless earlier terminated pursuant to the provisions of Part VII herein.  If this Agreement is not terminated pursuant to Part VII, and provided Employee enters into an effective general release of claims at that time in the form attached hereto as Exhibit A, the Agreement shall renew automatically for an additional two year term, and for successive additional two year terms thereafter, unless earlier terminated pursuant to the provisions of Part VII.

 

PART III

DUTIES OF EMPLOYEE

 

Section 3.01- General Duties:  During the term of this Agreement, Employee shall be employed as Executive Vice President and Wholesale Banking Division Manager under the direction of the Chairman, President and Chief Executive Officer and shall perform and discharge well and faithfully the duties that may be assigned to Employee from time to time by the Chairman, President and Chief Executive Officer in connection with the conduct of the Bank’s business.  Nothing herein shall preclude the Bank’s Board of Directors or Chief Executive Officer from changing Employee’s title or duties as long as the resulting title and duties are reasonably commensurate with the education, employment background and qualifications of the Employee and involve similar responsibilities and scope of duties.

 

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Section 3.02 - Outside Activities:  Employee agrees that, while employed by the Bank, Employee will refrain from any outside activities which actually or potentially are in direct conflict with the essential enterprise-related or reputational interest of the Bank, that would cause disruption of the Bank’s operations, or that would be in direct competition with the Bank or assist competitors of the Bank.  It shall not be a violation of this Agreement for Employee (A) to serve on corporate, civic or charitable boards or committees, or (B) to deliver lectures or fulfill speaking engagements, so long as such activities do not significantly interfere with the performance of Employee’s responsibilities as an employee of the Bank; provided, however, that Employee shall give the Bank’s Chief Executive Officer not less than fourteen (14) days’ notice of any actions contemplated by clauses (A) or (B), and will refrain from any such action to which the Chief Executive Officer in his/her sole discretion, objects.  It shall not be a violation of this Agreement for Employee to manage personal investments, so long as such activities do not represent a conflict with the Bank, as described in the Bank’s Employee Code of Conduct, and other pertinent policies and agreements.

 

PART IV

COMPENSATION

 

Section 4.01 - Salary:  Employee shall be paid an annual base salary of no less than $280,000 per year.  This base salary shall be paid to Employee in such intervals and at such times as other salaried executives of the Bank are paid.  The Bank’s Board of Directors reserves the right to set the timing and level of salary adjustments for all employees and any particular employee at its sole discretion.

 

Section 4.01- Section 4.02 - Incentive and Retention Programs:  Employee shall be eligible for an annual discretionary incentive bonus.  The amount of the bonus for a given year shall be determined by the Bank’s Board of Directors annually by March 31st of each following year and shall be paid no later than April 15th of each following year, provided Employee is still employed by the Bank on the payment date.  For the year 2017, said bonus shall be approximately       $200,000 and is contingent upon the Employee’s satisfactory job performance.

 

Employee shall be entitled to participate in the “Farmers & Merchants Bank of Central California Executive Retirement Plan – Equity Component”, and the “Farmers & Merchants Bank of Central California Executive Retirement Plan – Performance Component”, the terms and conditions of which are set forth in separate agreements so titled.

 

Section 4.03 – Sign-On Bonus in the amount of $25,000. It is payable as a contribution to the Executive Retirement Plan – Equity Component, after 120-days completed on the job.

 

PART V

BENEFITS

 

Section 5.01 - Benefits:  Employee shall be entitled to participate in whatever vacation, medical, dental, pension, sick leave, 401(k), profit sharing, disability insurance or other plans of general application, or other benefits which are in effect as to other officers of equivalent title of the Bank, or as may be in effect from time to time, in accordance with the rules established for individual participation in any such plan.

 

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Section 5.02 - Bank Automobile/Automobile Allowance:  The Bank shall provide Employee with an automobile allowance as per Bank policy.  However, at the sole discretion of the Board of Directors and/or the Bank’s Chief Executive Officer, the Bank reserves the right to change or eliminate this benefit at any time.

Section 5.03 - Membership Fees:  The Bank shall reimburse Employee for all appropriate and reasonable expenses incurred in performing Employee’s duties, including providing and paying for the dues and fees of membership in local service and civic clubs and/or organizations as the Bank deems appropriate and necessary for enhancement of its presence within the local business community.  In order to be eligible for reimbursement of these expenses, Employee must obtain pre-approval for such memberships from the Bank’s Chief Executive Officer and must provide the Bank with receipts and documented evidence as is required by federal and state laws and regulations.

Section 5.04 - Directors and Officers Liability Insurance Coverage:  To the extent commercially reasonable to do so under prevailing conditions in the insurance market, the Bank shall provide directors and officers liability insurance coverage for the protection of Employee on terms and conditions no less favorable to Employee than are in effect on the date that this Agreement shall become effective. Following any termination of Employee’s employment with the Bank, such coverage shall be continued under substantially the same terms and conditions as are in effect immediately prior to such termination of employment at no cost to Employee until all applicable statutes of limitation expire with respect to claims arising prior to such termination of employment.  Employee expressly acknowledges, however, that the Bank cannot and shall not guarantee the performance of the insurance company issuing such directors and officers liability insurance coverage pursuant to this Section.  In addition to the foregoing, the Bank shall also continue to make indemnification and advancement of litigation expense payments to Employee to the maximum extent and for the maximum period permitted by law; provided, however, that the obligation of the Bank to advance litigation expense payments shall be subject to Employee having executed and delivered to the Bank, in a form approved by the Bank, an undertaking to return such payments in the event that a court shall have determined that Employee is not entitled to indemnification under the applicable legal standards.

PART VI

EXPENSES

Section 6.01 - Travel and Entertainment Expenses:  During the term of this Agreement, the Bank shall reimburse Employee for reasonable out of pocket expenses incurred in connection with the Bank’s business, including travel expenses, food and lodging while away from Employee’s home, subject to such policies as the Bank may from time to time establish for other officers of equivalent title.  Employee shall keep records of Employee’s travel and entertainment expenses in a form suitable to the Internal Revenue Service and the Franchise Tax Board to qualify this reimbursement as a federal and state income tax deduction for the Bank.  In addition, Employee shall provide the Bank with receipts for all expenses for which Employee seeks reimbursement.

 

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PART VII

TERMINATION OF EMPLOYMENT

Section 7.01 - Termination at Option of the Bank:  The Bank may terminate this Agreement at any time and without “Cause” (as defined below) by giving Employee sixty (60) days written notice of the Bank’s intent to terminate this Agreement.  The 60th day after Notice of Termination shall be deemed Employee’s Separation Date.  In the event Employee’s employment is terminated by the Bank pursuant to this Section, Employee shall be paid all accrued salary, accrued but unused vacation, and reimbursement expenses for which expense reports have been provided to the Bank, or which are provided to the Bank prior to the Separation Date, in accordance with the Bank’s policies and this Agreement.  In addition to the foregoing amounts, if Employee is terminated by the Bank pursuant to this Section, and subject to (A) Employee’s continued employment through, and termination of employment on, the Separation Date; (B) Employee’s continued loyalty to the Bank, which includes, but is not limited to, Employee or any outside third party refraining from any announcements to anyone inside or outside the Bank that the Employee is leaving the Bank; and (C) Employee’s execution and non-revocation of a general release of all claims in the form attached hereto as Exhibit B, which release becomes irrevocable within 60 days following the Separation Date or such earlier deadline provided by the Bank, then Employee will be entitled to receipt of the following Severance Package:

	1.	
A Severance Payment equivalent to twelve (12) times the highest monthly base salary which Employee has earned during Employee’s employment with the Bank.  The Severance Payment shall be paid out in equal increments on regularly scheduled pay days for a period of 12 months following the Separation Date, provided that any payments delayed pending the effectiveness of the release shall be accumulated and paid in a lump sum on the next pay day following the effectiveness of the release, with any remaining payments due paid in accordance with the schedule otherwise provided herein.  Such payments will cease, however, if Employee fails to comply with the provisions of Part VIII of this Agreement.

	2.	
A Severance Bonus in an amount equal to the average of the Employee’s annual discretionary incentive bonus for the previous two years, prorated for the number of months between the Separation Date and the end of the Bank’s last fiscal year.  The Severance Bonus shall be paid in a lump sum on the Employee’s Separation Date.

	3.	
Payment of all awards of benefit plans and incentive and retention programs in accordance with the terms of those plans and programs, including applicable vesting and forfeiture provisions.  Any such payment or distribution from a nonqualified deferred compensation plan shall be governed by the terms of such plan relating to the timing of distributions.

Section 7.02- Termination for Cause:  The Bank may terminate Employee’s employment at any time for “Cause” upon written Notice of Termination to Employee, setting forth in reasonable detail the basis for the determination of “Cause.”  Termination for Cause shall be effective immediately upon receipt of the Notice of Termination by Employee, and the date on which the Notice of Termination is received shall be deemed to be the Separation Date.  If Employee is terminated pursuant to this Section 7.02, Employee shall be entitled only to accrued salary, vacation and reimbursement of expenses for which expense reports have been provided to the Bank, or which are provided to the Bank prior to the Separation Date, in accordance with the Bank’s policies and this Agreement.  Employee shall be entitled to no further compensation or severance payment of any nature; provided however, that Employee will also be entitled to payment of all awards of benefit plans and incentive and retention programs in accordance with the terms of those plans, including any applicable vesting and forfeiture provisions.  Any such payment or distribution from a nonqualified deferred compensation plan shall be governed by the terms of such plan relating to the timing of distributions.

 

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“Cause” for purposes of this Agreement shall be defined as follows:

A.         The death of the Employee;

B.          Conviction of a felony resulting in a material economic adverse effect on the Bank or its affiliates;

C.          Committing acts of dishonesty, theft, embezzlement or other acts of moral turpitude against the Bank or its affiliates;

D.          A material breach of, or intentional failure to perform any of the Employee’s duties which is not cured by Employee to the reasonable satisfaction of the Bank’s Chief Executive Officer within thirty (30) days, or within a deadline jointly defined by Employee and the Bank’s Chief Executive Officer after written notice is provided by the Bank’s Chief Executive Officer setting forth in reasonable detail the nature of the failure;

E.          An unauthorized, willful, knowing or reckless disclosure of any confidential information concerning the Bank or its affiliates or any of its directors, shareholders, customers or employees; or

F.          Any action that constitutes a material disruption of Bank personnel relationships, that damages the Bank’s reputation or the reputation of any of its directors, shareholders, customers or employees, or that materially adversely affects the professional or business operations or practices of the Bank.

Section 7.03- Termination at Option of Employee:  This Agreement may be terminated by Employee at Employee’s sole discretion by giving one hundred twenty (120) days written Notice of Resignation to the Bank.  If Employee terminates his/her employment pursuant to this Section 7.03, and subject to Employee’s continued satisfactory performance of such tasks and duties that may be assigned to Employee through the Separation Date, and Employee’s continued loyalty to the Bank through the Separation Date (which includes, but is not limited to, refraining from any announcements by Employee or any outside third party to anyone inside or outside the Bank that the Employee is leaving the Bank), Employee shall receive accrued salary and payment for accrued but unused vacation through the Separation Date.  Employee shall also be entitled to payment of all awards of benefit plans and incentive and retention programs, in accordance with the terms of those plans, including applicable vesting and forfeiture provisions.  Any such payment or distribution from a nonqualified deferred compensation plan shall be governed by the terms of such plan relating to the timing of distributions.  Alternatively, the Bank may, at its option, at any time after Employee gives written Notice of Resignation as herein provided, pay Employee’s accrued salary up to and including the effective Separation Date set forth in Employee’s Notice of Resignation, and thereupon immediately release and terminate Employee’s employment.  Notwithstanding the foregoing, if the Bank determines at any time during the120-day notice period that Employee materially breaches the obligations imposed by the provisions of this Section 7.03 and Part VIII of this Agreement, the Bank may shorten the notice period and accelerate the Separation Date, thereby reducing the compensation otherwise payable to Employee pursuant to this Section.

 

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Section 7.04 - Option to Terminate on Permanent Disability of Employee:  The Bank may terminate this Agreement if, during the term of this Agreement, Employee shall become “Permanently Disabled”, as that term is defined herein.  A termination pursuant to this Section 7.04 shall be deemed a termination without “Cause,” and shall be governed by the procedures, and shall entitle Employee to the Severance Package specified in Section 7.01. For purposes of this Agreement, Employee shall be deemed to have become Permanently Disabled if Employee is unable to engage in any substantial gainful activity, with or without reasonable accommodation, for an aggregate of 120 working days over a six month period, by reason of any medically determinable physical or mental impairment.  The Bank may issue its Notice of Termination to Employee on or after the 90th working day of Permanent Disability, as defined herein.

The Notice of Termination shall be deemed withdrawn and the Agreement shall remain in effect after a Notice of Termination has been given to Employee under the following circumstances.

	A.	
Within thirty (30) days of the Notice of Termination being given to Employee, Employee returns to the full performance of Employee’s duties and provides medical certification that Employee can perform the essential functions of Employee’s duties with or without reasonable accommodation.

	B.	
Within thirty (30) days of the Notice of Termination being given to Employee, Employee requests a reasonable accommodation from the Bank which would permit Employee to perform the essential functions of Employee’s duties and such reasonable accommodation can be provided by the Bank without an undue hardship.

Section 7.05 - Change of Control:  If the Employee is involuntarily terminated without “Cause” within 12 months after a Change of Control of the Bank or Farmers & Merchants Bancorp (the “Bancorp”), and upon the execution by Employee and non-revocation of a general release of all claims provided by the Bank within 60 days following the Separation Date (or such shorter period as the Bank may require), the Bank will provide Employee with a Change of Control Compensation Package equal to (A) twelve times the highest monthly base salary which Employee has earned during Employee’s employment with the Bank; (B) an amount equal to Employee’s previous year’s (i) annual discretionary incentive bonus, to the extent paid before the termination; (C) Employee’s monthly premium for continuation coverage under COBRA (as defined in Section 7.07), determined as of the Separation Date, multiplied by twelve (12) months, whether or not such continuation coverage is elected by Employee; and (D) a gross-up payment as defined and set forth herein in Section 7.05.2.  In addition, Employee will be entitled to payment of all awards of benefit plans and incentive and retention programs in accordance with the terms of those plans and programs, including applicable vesting and forfeiture provisions.  Subject to the provisions of this Section 7.05, Employee shall receive disbursement of payments due Employee under this Section (except for payments or distributions from or pursuant to any nonqualified deferred compensation plan), in one lump sum payment following the Separation Date, subject to Section 10.02 below, less any withholding required by state, federal or local law.  Any payment or distribution from or pursuant to any nonqualified deferred compensation plan shall be governed by the terms of such plan.  If Employee becomes entitled to payment under this Section 7.05, Employee shall not be entitled to the Severance Package under Sections 7.01 or 7.04, notwithstanding Employee’s subsequent termination of employment pursuant to those Sections.

 

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	1.	
Change of Control means a change of control of Bancorp. Such a Change of Control  will be deemed to have occurred immediately before any of the following occur: (i) individuals, who were members of the Board of Directors of Bancorp immediately prior to a meeting of the shareholders of Bancorp which meeting involved a contest for the election of directors, do not constitute a majority of the Board of Directors of Bancorp following such election or meeting, (ii) an acquisition, directly or indirectly, of more than 30% of the outstanding shares of any class of voting securities of Bancorp by any Person, (iii) a merger, consolidation or sale of all, or substantially all, of the assets of Bancorp, wherein its shareholders immediately before such transaction shall own of record (immediately after such transaction) equity securities, other than any warrant or right to purchase such equity securities, of Bancorp or an acquiring entity or any parent entity thereof, possessing less than 70% of the voting power of Bancorp or such acquiring entity or any parent entity thereof; in making the determination of ownership of such equity securities immediately after such transaction, equity securities owned by shareholders of Bancorp immediately prior to the transaction as shareholders to another party to the transaction shall be disregarded, or (iv) there is a change, during any period of one year, of a majority of the Board of Directors of Bancorp as constituted as of the beginning of such period, unless the election of each director who is not a director at the beginning of such period was approved by a vote of at least a majority of the directors then in office who were directors at the beginning of such period.  If the events or circumstances described in (i)-(iv), above, shall occur to or be applicable to the Bank, then such Change of Control shall be deemed for all purposes of this Agreement to also be a “Change of Control” of Bancorp.  For purposes of this Agreement, the term “Person” shall mean and include any individual, corporation, partnership, group, association or other “person”, as such term is used in Section 14(d) of the Securities Exchange Act of 1934, other than Bancorp, the Bank, any other wholly owned subsidiary of Bancorp or any employee benefit plan(s) sponsored by Bancorp, Bank or other subsidiary of Bancorp.  Notwithstanding the foregoing, a Change of Control shall not be deemed to have occurred unless the change also constitutes the occurrence of a "change in control event,” as defined in Treasury Regulation Section 1.409A-3(i)(5), with respect to the Employee.

 

	2.	
Gross-Up Payment:  Employee shall be entitled to a “Gross-Up Payment” under the terms and conditions set forth herein, and such payment shall include the Excise Tax reimbursement due pursuant to Section 7.05.2.a and any federal and state tax reimbursements due pursuant to Section 7.05.2.b.

 

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		a.	
In the event that any payment or benefit (as those terms are defined within the meaning of Internal Revenue Code Section 280G(b)(2)) paid, payable, distributed or distributable to the Employee (hereinafter referred to as “Payments”) pursuant to the terms of this Agreement or otherwise in connection with or arising out of Employee’s employment with the Bank or a change of control would be subject to the Excise Tax imposed by Section 4999 of the Internal Revenue code or any interest or penalties are incurred by Employee with respect to such Excise Tax, then Employee will be entitled to receive an additional payment (“Gross-Up Payment”) in an amount equal to the total Excise Tax, interest and penalties imposed on Employee as a result of the payment and the Excise Taxes on any federal and state tax reimbursements as set forth in Section 7.05.2.b.

		b.	
If the Bank is obligated to pay Employee pursuant to Section 7.05.2.a, the Bank shall also pay Employee an amount equal to the “total presumed federal and state taxes” that could be imposed on Employee with respect to the Excise Tax reimbursements due to Employee pursuant to Section 7.05.2.a and the federal and state tax reimbursements due to Employee pursuant to this section.  For purposes of the preceding sentence, the “total presumed federal and state taxes” that could be imposed on Employee shall be conclusively calculated using a combined tax rate equal to the sum of the (a) the highest individual income tax rate in effect under Federal tax law applicable to Employee and (ii) the tax laws of the state in which Employee will be subject to tax on the payment and (b) the hospital insurance portion of FICA.

		c.	
No adjustments will be made in this combined rate for the deduction of state taxes on the federal return, the loss of itemized deductions or exemptions, or for any other purpose for paying the actual taxes.

It is further intended that in the event that any payments would be subject to other “penalty” taxes (in addition to the Excise Tax in section 7.05.2.a) imposed applicable federal tax law, that these taxes would also be included in the calculation of the Gross-Up Payment, including any federal and state tax reimbursements pursuant to section 7.05.2.b.

	3.	
Determination of Eligibility for and Amount of Gross-Up Payment:  An initial determination as to whether a Gross-Up Payment is required pursuant to this Agreement and the amount of such Gross-Up Payment shall be made at the Bank’s expense by an accounting firm appointed by the Bank prior to any Change of Control.  The accounting firm shall provide its determination, together with detailed supporting calculations and documentation to the Bank and Employee prior to submission of the proposed Change of Control to the Bank’s or Bancorp’s shareholders, Board of Directors or appropriate regulators for approval.  If the accounting firm determines that no Excise Tax is payable by Employee with respect to a Payment or Payments, it shall furnish Employee with an opinion reasonably acceptable to Employee that no Excise Tax will be imposed with respect to any such Payment or Payments.  Within ten (10) days of the delivery of the determination to Employee, Employee shall have the right to dispute the determination.  The existence of the dispute shall not in any way affect Employee’s right to receive the Gross-Up Payment in accordance with the determination.  Upon the final resolution of a dispute, the Bank or its successor shall promptly pay to Employee any additional amount required by such resolution.  If there is no dispute, the determination shall be binding, final and conclusive upon the Bank and Employee, except to the extent that any taxing authority subsequently makes a determination that the Excise Tax or additional Excise Tax is due and owing on the payments made to Employee.  If any taxing authority determines that the Excise Tax or additional Excise Tax is due and owing, the Bank or the entity acquiring control of the Bank shall pay the Excise Tax and any penalties assessed by such taxing authority.

 

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	4.	
Excise Tax Withholding:  Notwithstanding anything contained in this Agreement to the contrary, in the event that according to the determination, an Excise Tax will be imposed on any Payment or Payments, the Bank or its successor shall pay to the applicable government taxing authorities as Excise Tax withholding, the amount of the Excise Tax that the Bank has actually withheld from the Payment or Payments.

Section 7.06 – Non-Renewal of Agreement.  For the avoidance of doubt, if this Agreement is not renewed automatically by reason of Employee’s failure to execute an effective general release pursuant to Section 2.02, Employee will not be entitled to the Severance Package specified in Section 7.01.

Section 7.07 - Continuation of Medical Benefits:  In the event Employee’s employment is terminated Employee shall be afforded the right to continue his/her medical benefits to the extent provided in the Consolidated Omnibus Budget Reconciliation Act (“COBRA”), at his/her expense.  The Bank shall provide Employee with the appropriate COBRA notification within the time required by the law from the Separation Date.

PART VIII

COVENANTS

Section 8.01 - Confidential Nature of Relationship.  Employee acknowledges (i) the highly competitive nature of the business and the industry in which the Bank competes; (ii) that as a key executive of the Bank he/she has participated in and will continue to participate in the service of current customers and/or the solicitation of prospective customers, through which, among other things, Employee has obtained and will continue to obtain knowledge of the “know-how” and business practices of the Bank, in which matters the Bank has a substantial proprietary interest; (iii) that his/her employment hereunder renders the performance of services which are special, unique, extraordinary and intellectual in character, and his/her position with the Bank placed and places him/her in a position of confidence and trust with the customers and employees of the Bank; and (iv) that his/her rendering of services to the customers of the Bank necessarily requires the disclosure to Employee of Trade and Business Secrets, Proprietary and Confidential Information, and Bank Materials (as defined in Section 8.03 below) of the Bank.  In the course of Employee’s employment with the Bank, Employee has and will continue to develop a personal relationship with the customers and prospective customers (defined for purposes of this Agreement as customers that the Bank is either actively soliciting or in the process of making a proposal for services to as of Employee’s Separation Date) of the Bank and a knowledge of those customers’ and prospective customers’ affairs and requirements, and the relationship of the Bank with its established clientele has been, and will continue to be, placed in Employee’s hands in confidence and trust.   Employee consequently agrees that it is a legitimate interest of the Bank, and reasonable and necessary for the protection of the confidential information, goodwill and business of the Bank, which is valuable to the Bank, that Employee make the covenants contained herein.

 

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Employee Initials ____

Section 8.02 - Restrictions:  Accordingly, Employee agrees that during the period that he/she is employed by the Bank, unless in the normal course of business, he/she shall not, as an individual, employee, consultant, independent contractor, partner, shareholder, or in association with any other person, business or enterprise, directly or indirectly, and regardless of the reason for him/her ceasing to be employed by the Bank, engage in the following:

	A.	
Disclosure of Proprietary Information or Materials.  Employee agrees that he/she will not directly or indirectly reveal, report, publish or disclose to any person, firm, or corporation not expressly authorized in writing by the Bank’s Board of Directors to receive any Trade and Business Secret, Proprietary and Confidential Information or Bank Materials (as defined in Section 8.03 below).  Employee further agrees that he/she will not use any Trade and Business Secret, Proprietary and Confidential Information and/or Bank Materials for any purpose except to perform his/her employment duties for the Bank and such Trade and Business Secret, Proprietary and Confidential Information and/or Bank Materials may not be used or disclosed by Employee for his/her own benefit or purpose or for the benefit or purpose of a subsequent employer.  These agreements will continue to apply after Employee is no longer employed by the Bank so long as such Trade and Business Secrets, Proprietary and Confidential Information and Bank Materials are not nor have become, by legitimate means, generally known to the public.

	B.	
Solicitation of Employees.  Employee recognizes that he/she possesses and will possess confidential information about other employees of the Bank and its affiliates relating to their education, experience, skills, abilities, compensation and benefits, and inter-personal relationships with customer(s) of the Bank and its affiliates.  Employee recognizes that the information he/she possesses and will possess about these other employees is not generally known, is of substantial value to the Bank and its affiliates in developing their business and in securing and retaining customers, and in managing general daily operations of the Bank, and has been and will be acquired by Employee because of his/her business position with the Bank and its affiliates.  Employee agrees that at all times during his/her employment with the Bank and for a period of twelve (12) months thereafter, Employee will not, directly or indirectly, solicit or recruit any employee of the Bank or its affiliates for the purpose of being employed by, or serving as a consultant or information resource to, the Employee, or any competitor of the Bank or its affiliates on whose behalf Employee is acting as an agent, representative or employee, and that Employee will not convey such confidential information or trade secrets about other employees of the Bank and its affiliates to any other Person or legal entity.  In view of the nature of Employee’s employment with the Bank, Employee likewise agrees that the Bank and its affiliates would be irreparably harmed by any such solicitation or recruitment in violation of the terms of this paragraph and that the Bank and its affiliates shall therefore be entitled to preliminary and/or permanent injunctive relief prohibiting the Employee from engaging in any activity or threatened activity in violation of the terms of this paragraph and to any other relief, including financial compensation commensurate with damages caused, available to them.

 

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	C.	
Solicitation of Customers.  During the Employee’s employment by the Bank and its affiliates and for a period of twelve (12) months after such employment ceases, the Employee shall not, directly or indirectly (whether as an officer, director, owner, employee, partner, consultant or other participant), use any Trade and Business Secret, Proprietary and Confidential information, or Bank Materials to identify, solicit or entice any Customer or Prospective Customer of the Bank or its affiliates to make any changes whatsoever in their current or prospective relationships with the Bank or its affiliates, and will not assist any other Person or entity to interfere with or dispute such current or prospective relationships.  If Employee leaves the Bank and goes to work for a new employer that is a competitor of the Bank, and if that new employer already has an existing relationship with a Customer or Prospective Customer of the Bank or its affiliates, this paragraph does not preclude Employee from making contact with such Customer or Prospective Customer on the new employer’s behalf, so long as such contact otherwise complies with the provisions of this paragraph.  In view of the nature of the Employee’s employment with the Bank, the Employee likewise agrees that the Bank and its affiliates would be irreparably harmed by any such interference or competitive actions in violation of the terms of this paragraph and that the Bank and its affiliates shall therefore be entitled to preliminary and/or permanent injunctive relief prohibiting the Employee from engaging in any activity or threatened activity in violation of the terms of this paragraph, in addition to any other relief, including financial compensation commensurate with damages caused, available to them.

Employee initials _____

Section 8.03 – Definitions:

A.            TRADE AND BUSINESS SECRETS means information, including a formula, pattern, compilation, program, device, method, technique or process that derives independent economic value, actual or potential from not being generally known to the public or to other persons who can obtain economic value from its disclosure or use, and is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.

B.             PROPRIETARY AND CONFIDENTIAL INFORMATION means trade secrets, computer programs, designs, technology, ideas, know-how, processes, formulas, compositions, data, techniques, improvements, inventions (whether patentable or not), works of authorship, or other information concerning the Bank’s:

 

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(i) Business Activities, including but not limited to: actual or anticipated strategic plans and initiatives; marketing plans, advertising and collateral materials; new product development plans; competitor analyses; analyses of internal financial performance; financial forecasts and budgets; customer and prospect strategies and lists; proprietary designs of facilities and other delivery systems and processes; and any similar information to which Employee has access by virtue of performing his/her duties for the Bank.

(ii) Customers, including but not limited to: information about  the Bank’s customers or prospective customers, such as the customer’s or prospect’s key decision-makers; customer preferences; customer strategies; terms of any contractual arrangements with the Bank; business considerations; loan, deposit and other product and service pricing, terms and conditions, repayment structures, fee arrangements, structure of guarantees from other entities; and any similar information to which Employee has access by virtue of performing his/her duties for the Bank.

(iii) Employees, including but not limited to: names of and contact information for the Bank’s employees; their compensation, incentive plans, retirement plans, terms of employment, areas of expertise, projects, and experience; and any similar information to which Employee has access by virtue of performing his/her duties for the Bank.

“Proprietary and Confidential Information” includes any information, in whatever form or format, including that which has not been memorialized in writing.

C.             BANK MATERIALS means documents or other media or tangible items that contain or embody PROPRIETARY AND CONFIDENTIAL INFORMATION or any other information concerning the business, operations or plans of the Bank and its customers and prospective customers, whether such documents have been prepared by Employee or by others.  BANK MATERIALS include, but are not limited to blueprints, drawings, photographs, charts, graphs, notebooks, customer lists, computer disks, photographs of proprietary information or documents on cell phones, iPads or other electronic devices, photocopies of proprietary information or documents, emails, text messages, tapes or printouts, sound recordings and other printed, typewritten, handwritten or computer generated documents, as well as samples, prototypes, product collateral materials, advertising materials, models, products and the like.

 

Employee Initials ____

Section 8.04 - Return of the Bank’s Property:  Upon termination of his/her employment with the Bank for any reason, Employee will promptly deliver to the Bank, without copying or summarizing, all Trade and Business Secrets, Proprietary and Confidential Information, and Bank Materials that are in Employee’s possession or under Employee’s control, including, without limitation, all physical property, keys, documents, lists, electronic storage media, cell phones, iPads, manuals, letters, notes, reports, including all originals, reproductions, recordings, disks, or other media.

 

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Employee acknowledges that Employee has been apprised of the provisions of Labor Code Section 2860 which provides:  “Everything which an Employee acquires by virtue of his employment, except the compensation which is due him from his Employer, belongs to the Employer, whether acquired lawfully or unlawfully, or during or after the expiration of the term of his employment.” Employee understands that any work that Employee created or helped create at the request of the Bank, including user manuals, training materials, sales materials, customer and prospective customer information and business data, process manuals, and other written and visual works, are works made for hire in which the Bank owns the copyright.  Employee may not reproduce or publish these copyrighted works, except in the pursuit of his/her employment duties with the Bank.

Employee Initials ____

Section 8.05 - Separate Covenants:  The covenants of Part VIII of this Agreement shall be construed as separate covenants covering their particular subject matter.  In the event that any covenant shall be found to be judicially unenforceable, said covenant shall not affect the enforceability or validity of any other part of this Agreement.

Employee Initials ____

 

Section 8.06 - Continuing Obligation:  Employee’s obligations set forth in Part VIII of this Agreement shall expressly continue in effect beyond Employee’s employment period in accordance with their terms and such obligations shall be binding on Employee’s assigns, executors, administrators and other legal representatives.

Employee Initials ____

PART IX

ARBITRATION

Section 9.01 - Dispute Resolution:  The Parties agree that arbitration shall be the sole and exclusive remedy to redress any dispute, claim, or controversy (“Grievance”) involving the interpretation of this Agreement, the terms and conditions of this Agreement, or any other claims arising out of Employee's employment with the Bank or the termination thereof.  It is the intention of the Parties that the arbitration decision will be final and binding and that any and all Grievances shall be disposed of as described herein.

Section 9.02 - Process.

A.            Grievance.  Any and all Grievances must be submitted in writing by the aggrieved Party.  A Grievance from Employee shall be submitted to the Bank’s Chief Executive Officer.  Within Thirty (30) days following the submission of the written Grievance, the Party to whom the Grievance is submitted shall respond in writing.  If no written response is submitted within Thirty (30) days, the Grievance shall be deemed denied.

B.             Mediation.  If the Grievance is denied, and before invoking the arbitration procedure described below, the parties shall first participate in mediation.  The mediator shall be selected by mutual agreement of the parties, and shall be conducted in San Joaquin County, California, or such other location as is mutually agreed.  The mediation cost (other than attorney fees) shall be borne by the Bank.

 

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C.             Arbitration.  Unless otherwise prohibited by law or specified below, if the Grievance is denied and mediation is unsuccessful, either Party may, within Thirty (30) days of such denial, and prior to the expiration of any applicable statute of limitations, refer the Grievance to arbitration before a single arbitrator pursuant to the California Code of Civil Procedure, including Section 1283.05 permitting discovery.

The arbitrator shall be chosen by mutual agreement from a panel of arbitrators provided by JAMS or, if no agreement is reached, under the rules for Employment Dispute Resolution promulgated by JAMS.

The arbitrator’s award shall be in the form of a written opinion sufficient to allow for appropriate judicial review, shall be a final and binding determination of the dispute, and shall be fully enforceable as an arbitration award by the California courts in accordance with California law.

The arbitrator shall decide whether the conduct complained of violates the legal rights of the complaining party and, if so, shall determine and award the relief allowed by law.

Each party in such arbitration shall be responsible for its/his/her own attorneys’ fees, unless the arbitrator orders otherwise pursuant to applicable law.  The Bank shall pay the cost of the arbitration if Employee prevails as determined by the arbitrator; if the Bank prevails as determined by the arbitrator, Employee shall pay the cost of the arbitration only to the same extent as would be required had he/she prevailed in a civil suit under California Code of Civil Procedure Sections 1032, 1033 and 1033.5.

The arbitrator shall not have jurisdiction or authority to change, add to or subtract from any of the lawful provisions of this Agreement.

D.            Injunctive relief.  Notwithstanding anything to the contrary herein, nothing in this Part IX is intended to prevent either Party from obtaining injunctive relief in court to prevent irreparable harm pending the conclusion of any such arbitration.

E.             Waiver of jury and court trial.  THE BANK AND EMPLOYEE ACKNOWLEDGE AND AGREE THAT ARBITRATION SHALL BE THE SOLE FORUM FOR THE RESOLUTION OF ANY AND ALL DISPUTES, WHETHER IN AN INDIVIDUAL OR REPRESENTATIVE CAPACITY, OR AS PART OF A COLLECTIVE ACTION, ARISING OUT OF OR RELATING TO THE EMPLOYMENT RELATIONSHIP.  SUCH DISPUTES INCLUDE, BUT ARE NOT LIMITED TO, CLAIMS FOR DISCRIMINATION OR HARASSMENT (SUCH AS CLAIMS UNDER THE FAIR EMPLOYMENT AND HOUSING ACT, TITLE VII OF THE CIVIL RIGHTS ACT OF 1964, THE AMERICANS WITH DISABILITIES ACT, OR THE AGE DISCRIMINATION IN EMPLOYMENT ACT), RETALIATION, WRONGFUL TERMINATION, BREACH OF WAGE AND HOUR LAWS, BREACH OF CONTRACT, BREACH OF PUBLIC POLICY, FAILURE TO PROVIDE COMPENSATION OR BENEFITS, PHYSICAL OR MENTAL HARM OR DISTRESS, OR ANY OTHER CLAIMS OR DISPUTES, AND HEREBY WAIVES HIS/HER/ITS RIGHT TO PURSUE ANY CLAIM AGAINST THE OTHER PARTY IN ANY OTHER FORUM OR PROCEEDING, INCLUDING ANY RIGHT TO TRIAL BY JURY.

 

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Nothing herein shall prevent Employee from filing an administrative charge with the California Department of Fair Employment and Housing or the federal Equal Employment Opportunity Commission; however, the decision of the arbitrator shall be a complete defense to any suit, action or proceeding instituted in any federal, state or local court or before any administrative agency with respect to any dispute which is arbitrable as herein set forth.

Employee Initials ____

 

PART X

TAXES

Section 10.01 - Withholding:  All payments to be made to Employee under this Agreement will be subject to required withholding of federal, state and local income and employment taxes as applicable.

Section 10.02 - Section 409A:

A.            Notwithstanding any provision to the contrary in this Agreement, the Bank shall delay the commencement of payments or benefits coverage to which Employee would otherwise become entitled under the Agreement in connection with Employee’s termination of employment until the earlier of (i) the expiration of the six-month period measured from the date of Employee’s “separation from service” with the Bank (as such term is defined in Treasury Regulations issued under Section 409A of the Code (defined below)) or (ii) the date of Employee’s death, if the Bank in good faith determines that Employee is a “specified employee” within the meaning of that term under Code Section 409A at the time of such separation from service and that such delayed commencement is otherwise required in order to avoid a prohibited distribution under Section 409A(a)(2) of the Code.  Upon the expiration of the applicable Code Section 409A(a)(2) deferral period, all payments and benefits deferred pursuant to this Section10.02 (whether they would have otherwise been payable in a single sum or in installments in the absence of such deferral) shall be paid or reimbursed to Employee in a lump sum, and any remaining payments and benefits due under the Agreement shall be paid or provided in accordance with the normal payment dates specified for them herein.

B.             In addition, to the extent the Bank is required pursuant to this Agreement to reimburse expenses incurred by Employee, and such reimbursement obligation is subject to Section 409A of the Code, the Bank shall reimburse any such eligible expenses by the end of the calendar year next following the calendar year in which the expense was incurred, subject to any earlier required deadline for payment otherwise applicable under this Agreement; provided, however, that the following sentence shall apply to any tax gross-up payment and related expense reimbursement obligation, including any payment obligations described in Section 7.05, to the extent subject to Section 409A.  Any such tax gross-up payment will be made by the end of the calendar year next following the calendar year in which Employee remits the related taxes.

 

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C.             For purposes of the provisions of this Agreement which require commencement of payments or benefits subject to Section 409A upon a termination of employment, the terms “termination of employment” and “Separation Date” shall mean a “separation from service” with the Bank (as such term is defined in Treasury Regulations issued under Code Section 409A), notwithstanding anything in this Agreement to the contrary.

D.            In each case where this Agreement provides for the payment to the Employee of an amount that constitutes nonqualified deferred compensation under Section 409A and such payment is subject to the execution and non-revocation of a release of claims, (1) any payments delayed pending the effectiveness of the release shall be accumulated and paid in a lump sum following the effectiveness of the release, with any remaining payments due paid in accordance with the schedule otherwise provided herein, and (2) if the period between the Separation Date and the last day on which the release could become irrevocable assuming the Employee’s latest possible execution and delivery of the release spans two calendar years, then such deferred payments shall not be made before the second calendar year, even if the release becomes irrevocable in the first calendar year, if such payments constitute nonqualified deferred compensation under Section 409A.

E.             Any series of payments provided under this Agreement (excluding plans or agreements incorporated by reference) shall for all purposes of Code Section 409A be treated as a series of separate payments and not as single payments.

F.             The provisions of this Part X are intended to comply with Code Section 409A and shall be interpreted consistent with such section.

PART XI

GENERAL PROVISIONS

Section 11.01 - Notices:  Any notice to be given to the Bank under the terms of this Agreement, and any notice to be given to Employee, shall be addressed to such Party at the mailing address the Party may hereafter designate in writing to the other.  Any such notice shall be deemed to have been duly given four days after the same shall be enclosed in a properly sealed and addressed envelope, registered or certified, and deposited (postage or registry or certification fee prepaid) in a post office or branch post office regularly maintained by the United States Government or upon actual delivery to the Party by messenger or delivery service, with receipt acknowledged in writing by the Party to whom such notice is addressed.

Section 11.02 - Entire Agreement:  This Agreement and the agreement(s) incorporated by reference herein (“Farmers & Merchants Bank of Central California Executive Retirement Plan”) supersede any and all other agreements or understandings, whether oral, implied, or in writing, between the parties hereto with respect to the subject matter hereof and contain all of the covenants and agreements between the Parties with respect to such matters in their entirety.  Each Party to this Agreement acknowledges that no representations, inducements, promises or agreements, orally or otherwise, have been made by any Party, or anyone acting on behalf of any Party, which is not embodied herein, and that no other agreement, statement or promise not contained in this Agreement shall be valid or binding.  Any modification(s) to this Agreement will be effective only if in writing and signed by the Parties hereto.

 

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Section 11.03 - Notwithstanding any other provision of this Agreement, this Agreement and all rights and obligations of the Parties hereunder shall be subject to the provisions of the Federal Deposit Insurance Act and the regulations adopted thereunder, including without limitation 12 Code of Federal Regulations, Part 359.

Section 11.04 - Partial Invalidity:  If any provisions in this Agreement are held by a court of competent jurisdiction or an arbitrator to be invalid, void or unenforceable, the remaining provisions shall nevertheless continue in full force and effect without being impaired or invalidated in any way.

Section 11.05 - Continuing Obligations:  The obligations of the covenants contained in this Agreement shall survive the termination of the Agreement and any employment relationship between the Bank and Employee.  Accordingly, neither the Bank nor Employee shall be relieved of the continuing obligations of the covenants contained in this Agreement.

Section 11.06 - Employee’s Representations:  Employee represents and warrants that Employee is free to enter into this Agreement and to perform each of the terms and covenants in it.  Employee represents and warrants that Employee is not restricted or prohibited, contractually or otherwise, from entering into and performing this Agreement, and that Employee’s execution and performance of this Agreement is not a violation or breach of any other agreement or other legal obligation between Employee and any other person or entity.

Section 11.07 - Governing Law:  This Agreement (not including any plans or agreements incorporated by reference) shall be construed and enforced in accordance with, and the rights of the Parties shall be governed by, the laws of the State of California.

Section 11.08 - Full Settlement:  The Bank’s obligation to make the payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be not be affected by any set off, counterclaim, recoupment, defense or other claim, right or action which the Bank may have against Employee or others. In no event shall Employee be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to Employee under any of the provisions of this Agreement and such amount shall not be reduced whether or not Employee obtains other employment.

Section 11.09 - Successors:  This Agreement shall be binding upon and enforceable against any successors to the Bank. No duties provided for under this Agreement may be delegated by any of the parties hereto.  The Bank will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and assets of the Bank to assume expressly and agree to perform this Agreement in the same matter and to the same extent that the Bank would be required to perform it if no such succession had taken place. As used herein, the term “Bank” shall mean the Bank as hereinbefore defined and any successor to its business and assets as aforesaid which assumes and agrees to perform this Agreement by operation of law or otherwise. This Agreement shall inure to the benefit of and be enforceable by Employee’s legal representatives.

 

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Section 11.10 - No Waiver:  The failure of any of the Parties hereto to insist on strict compliance with any provision of this Agreement, or the failure to assert any right of any Party hereto may have hereunder, shall not be deemed to be a waiver of such provision or right or of any other provision or right contained in this Agreement.

Section 11.11 – Advice of Counsel:  Employee warrants that he/she has consulted with legal counsel of his/her choice to advise him/her with respect to the terms and conditions of this Agreement.

 

	
FARMERS & MERCHANTS BANK OF CENTRAL CALIFORNIA

	 	 
	 	 	 	 
	 	 	 	
Date:   April 11, 2017

	 	 	 	 
	By:	Stewart C. Adams, Jr.	 	 
	 	Stewart C. Adams, Jr.	 	 
	 	
Chairman of the Personnel Committee

	 	 
	 	 	 	 
	By:	/s/ Edward Corum, Jr.	 	 
	 	
Edward Corum Jr.

	 	 
	 	
Member of the Personnel Committee

	 	 
	 		 	 
	By:	/s/ Kevin Sanguinetti	 	 
	 	
Kevin Sanguinetti

	 	 
	 	
Member of the Personnel Committee

	 	 
	 		 	 
	By:	/s/ Kent A. Steinwert	 	 
	 	
Kent A. Steinwert

	 	 
	 	
Chairman, President and Chief Executive Officer

	 	 
	 		 	 
	 	
on behalf of FARMERS & MERCHANTS BANK OF CENTRAL CALIFORNIA

	 	 

 

	Employee:	
/s/ David M. Zitterow

	 	
Date:   April 11, 2017

	 	
David M. Zitterow

	 	 

 

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EXHIBIT A

 

GENERAL RELEASE

This General Release (“Release”) is entered into by and between David M. Zitterow (“Employee”) and Farmers & Merchants Bank of Central California, a California banking corporation (the “Bank”).  Employee and the Bank are sometimes collectively referred to hereinafter as the ‘Parties” and individually as a “Party.”

WHEREAS, the Bank and Employee have mutually agreed to enter into a new employment agreement, the terms of which are memorialized in the Employment, Confidentiality and Non-disclosure Agreement effective May 1, 2017 (the “Agreement”); and

WHEREAS, as a condition precedent to that Agreement, the Parties wish to resolve any and all outstanding disagreements, disputes, or potential disputes between them, as set forth in this Release;

NOW, THEREFORE, the Parties hereby agree as follows:

	Section 1.	
Consideration.  In addition to the consideration exchanged by the Parties in the form of the mutual releases contained herein, the Bank hereby offers Employee ongoing employment pursuant to the terms of the Agreement, and Employee hereby accepts such employment, and agrees to provide services to the Bank as set forth therein.

	Section 2.	
Release of the Bank.  Employee, on behalf of himself/herself and his/her heirs, attorneys, executors, successors, administrators and assigns, does hereby release, acquit and forever discharge the Bank and its respective parents, predecessors, successors, assigns, subsidiaries, divisions, affiliated companies and benefit plans, and each of their respective present and former affiliates, directors, officers, fiduciaries, employees, agents, successors and assigns, from any and all liabilities, damages, causes of action and claims of any nature, kind or description whatsoever, whether accrued or to accrue, which Employee ever had, now has or hereafter may have against any of them, known or unknown, that are based on facts occurring the day of and prior to the day Employee executes this Agreement, including, but not limited to, any claims under any state or federal law or statute, including, but not limited to, the Age Discrimination in Employment Act (29 U.S.C. section 621 et. seq.), the Americans with Disabilities Act of 1990, the Civil Rights Acts of 1964 and 1991, the Equal Pay Act, the California Fair Employment and Housing Act, any claim based on tort, contract or otherwise, any claim for attorneys fees or costs, or any matter or action related to Employee’s employment and/or affiliation with the Bank and its affiliates.

This Agreement recognizes the rights and responsibilities of the Equal Employment Opportunity Commission (“EEOC”) and the California Department of Fair Employment and Housing (“DFEH”) to enforce the statutes which come under their jurisdiction.  This Agreement is not intended to prevent Employee from initiating or participating in any investigation or proceeding conducted by the EEOC or the DFEH; provided, however, that nothing in this section limits or affects the finality or the scope of the Release.  Employee has waived and released any claim that he/she may have for damages based on any alleged discrimination, harassment or retaliation, and may not recover damages in any proceeding conducted by the EEOC or the DFEH.

 

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	Section 3.	
No Release of Vested Benefits.  Notwithstanding anything in Section 2 hereof, Employee does not by this Agreement waive any rights he/she may have to vested benefits or account balances in any retirement plan, which vested benefits or account balances, as the case may be, shall be paid over to Employee at the appropriate time in accordance with the provisions of the respective plans, subject to any applicable forfeiture provisions set forth therein.

	Section 4.	
Release of Employee. The Bank, and its respective parents, predecessors, successors, assigns, subsidiaries, divisions, affiliated companies and benefit plans, and each of their respective present and former affiliates, directors, officers, fiduciaries, employees, agents, successors and assigns, does hereby release, acquit and forever discharge Employee from any and all liabilities, damages, causes of action and claims of any nature, kind or description whatsoever, whether accrued or to accrue, which the Bank ever had, now has or hereafter may have against Employee, known or unknown, that are based on facts occurring the day of and prior to the day Employee executes this Agreement, including, but not limited to, any claims under any state or federal law or statute, any claim based on tort, contract or otherwise, any claim for attorneys fees or costs, or any matter or action related to Employee’s employment and/or affiliation with the Bank and its affiliates.

	Section 5.	
Confidentiality of Release. The Parties represent and agree that they will keep all terms of this Release completely confidential, and that they will not disclose any information concerning this Release to any third party, including, but not limited to, any past, present or prospective employee of the Bank, except that Employee may disclose the terms of this Release to his/her spouse, attorney, tax account and financial advisor.

	Section 6.	
Non-Disparagement. Each Party agrees to refrain from any disparagement, defamation, libel or slander against the other Party.

Employee agrees not to act in any manner that might damage the business of the Bank.  Employee further agrees not to counsel or assist any attorneys or their clients in the presentation or prosecution of any disputes, differences, grievances, claims, charges, or complaints by any third party against the Bank and/or any officer, director, employee, agent, representative, shareholder or attorney of the Bank, unless under a subpoena or other court order to do so.

 

- 20 -

	Section 7.	
Acknowledgments.  Employee acknowledges, represents and agrees that:

		(a)	
Employee has been fully informed and is fully aware of his/her right to discuss any and all aspects of this matter with an attorney of his/her choice and is specifically advised that he/she should seek such advice;

		(b)	
Employee has carefully read and fully understands all of the provisions of this Agreement;

		(c)	
Employee has had up to and including a full twenty-one (21) days within which to consider this Agreement before executing it, unless by his/her own choice he/she has waived all or part of this period;

		(d)	
Employee has a full seven (7) days following the execution of this Agreement to revoke this Agreement, and has been and is hereby advised in writing that this Agreement shall not become effective or enforceable as to Employee’s rights under the federal Age Discrimination in Employment Act (29 U.S.C. section 621 et seq.) until the revocation period has expired (but shall be immediately effective as to all other claims).  Any revocation shall be made in writing and delivered to Bank’s President and CEO on or before the seventh day following Employee’s execution of this Agreement; and

		(e)	
Employee accepts the terms of this Agreement as fair and equitable under all the circumstances and voluntarily executes this Agreement.

	Section 8.	
Non-Admission.  Nothing in this Release shall be construed as an admission of liability by Employee or the Bank.

	Section 9.	
Governing Law.  This Release shall be governed by and construed in accordance with the laws of the State of California.

	Section 10.	
Savings Clause.  If any provision of this Release is invalid under applicable law, such provision shall be deemed to not be a part of this Release, but shall not invalidate any other provision hereby.

	Section 11.	
Integration Clause. This Release is intended by the parties to be their final agreement.  The statements, promises and agreements in this Release may not be contradicted by any prior understandings, agreements, promises or statements.  Employee states and promises that in signing this Release he/she has not relied on any statements or promises made by the Bank, other than the promises contained in this Release and the Agreement.  Any changes to this Release must be in writing and signed by both Parties.

THIS IS A RELEASE OF ALL CLAIMS – READ THOROUGHLY BEFORE SIGNING

	
Date: 

	
April 11, 2017

 

Employee: /s/ David M. Zitterow          Date:April 11, 2017

David M. Zitterow

By: /s/Stewart C. Adams, Jr.

 

Stewart C. Adams, Jr.   (Chairman of the Personnel Committee)

 

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EXHIBIT B

SEPARATION AGREEMENT AND GENERAL RELEASE

This Separation Agreement and General Release (“Agreement”) is entered into by and between David M. Zitterow (“Employee”) and Farmers & Merchants Bank of Central California, California banking corporation (the “Bank”).

WHEREAS, Employee employment with the Bank will terminate effective [DATE] (the “Separation Date”); and

WHEREAS, pursuant to Section 7.01/7.05 of the Parties’ Employment, Confidentiality and Non-disclosure Agreement (“Employment Agreement”), the Parties wish to memorialize the terms of Employee departure, and to resolve all issues or disputes arising out of or related to their employment relationship and the termination thereof;

NOW, THEREFORE, the Parties hereby agree as follows:

 

	Section 1.	
Severance Package.  Subject to the terms of this Agreement and Employee compliance with the provisions of Section 7.01 of the Employment Agreement, Employee shall receive the following Severance Package:

Severance Payment.

	1.	
A Severance Payment equivalent to twelve (12) times the highest monthly base salary which Employee has earned during Employee’s employment with the Bank.  The Severance Payment shall be paid out in equal increments on regularly scheduled pay days for a period of 12 months following the Separation Date, provided that any payments delayed pending the effectiveness of the release shall be accumulated and paid in a lump sum on the next pay day following the effectiveness of the release, with any remaining payments due paid in accordance with the schedule otherwise provided herein.  Such payments will cease, however, if Employee fails to comply with the provisions of Part VIII of this Agreement.

	2.	
A Severance Bonus in an amount equal to the average of the Employee’s annual discretionary incentive bonus for the previous two years, prorated for the number of months between the Separation Date and the end of the Bank’s last fiscal year.  The Severance Bonus shall be paid in a lump sum on the Employee’s Separation Date.

	3.	
Payment of all awards of benefit plans and incentive and retention programs in accordance with the terms of those plans and programs, including applicable vesting and forfeiture provisions.  Any such payment or distribution from a nonqualified deferred compensation plan shall be governed by the terms of such plan relating to the timing of distributions.

 

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Awards.  Payment of all awards of benefit plans and incentive and retention programs in accordance with the terms of those plans and programs, including applicable vesting and forfeiture provisions.  Any such payment or distribution from a nonqualified deferred compensation plan shall be governed by the terms of such plan relating to the timing of distributions.

Employee agrees that the Bank may withhold from any payment to him/her under this Agreement any amount that he/she owes the Bank, which may include, but is not limited to, amounts related to credit card variance or other amount(s).

The Severance Package set forth above is in consideration for (a) the covenants of Employee as set forth in this Agreement, and (b) the release of all claims, disputes and causes of action which Employee, Employee heirs, attorneys, executors, administrators or assigns have or may have against the Bank, its predecessors or any other related entity, as set forth in Section 2 below. This Agreement is not effective, nor will the Bank provide to Employee the Severance Package, until after the date for revocation set forth in Section 7(d) below.

	Section 2.	
Release of the Bank.  In consideration of receipt by Employee of the Severance Package, which Employee acknowledges is in addition to anything of value to which he/she is otherwise entitled, Employee, on behalf of himself/herself and his/her heirs, attorneys, executors, successors, administrators and assigns, does hereby release, acquit and forever discharge the Bank and its respective predecessors, successors, assigns, subsidiaries, divisions, holding companies, affiliated companies and benefit plans, and each of their respective present and former affiliates, directors, officers, fiduciaries, employees, agents, successors and assigns, from any and all liabilities, damages, causes of action and claims of any nature, kind or description whatsoever, whether accrued or to accrue, which Employee ever had, now has or hereafter may have against any of them, known or unknown, that are based on facts occurring the day of and prior to the day Employee executes this Agreement, including, but not limited to, any claims under any state or federal law or statute, including, but not limited to, the Age Discrimination in Employment Act of 1967 (29 U.S.C. section 621 et seq.), the Americans with Disabilities Act of 1990, the Civil Rights Acts of 1964 and 1991, the Equal Pay Act, any claim based on tort, contract or otherwise, any claim for attorneys fees or costs, or any matter or action related to Employee employment and/or affiliation with, or termination and separation from the Bank and its affiliates.

This Agreement recognizes the rights and responsibilities of the Equal Employment Opportunity Commission (“EEOC”) and the California Department of Fair Employment and Housing (“DFEH”) to enforce the statutes which come under their jurisdiction.  This Agreement is not intended to prevent Employee from initiating or participating in any investigation or proceeding conducted by the EEOC or the DFEH; provided, however, that nothing in this section limits or affects the finality or the scope of the Release.  Employee has waived and released any claim that he/she may have for damages based on any alleged discrimination, harassment or retaliation, and may not recover damages in any proceeding conducted by the EEOC or the DFEH.

 

- 23 -

	Section 3.	
No Release of Vested Benefits.  Notwithstanding anything in Section 2 hereof, Employee does not by this Agreement waive any rights he/she may have to vested benefits or account balances in any retirement plan, which vested benefits or account balances, as the case may be, shall be paid over to Employee in accordance with the provisions of the respective plans, subject to any applicable forfeiture provisions set forth therein.

	Section 4.	
Release of Employee. The Bank, and its respective parents, predecessors, successors, assigns, subsidiaries, divisions, affiliated companies and benefit plans, and each of their respective present and former affiliates, directors, officers, fiduciaries, employees, agents, successors and assigns, does hereby release, acquit and forever discharge  from any and all liabilities, damages, causes of action and claims of any nature, kind or description whatsoever, whether accrued or to accrue, which the Bank ever had, now has or hereafter may have against Employee, known or unknown, that are based on facts occurring the day of and prior to the day Employee executes this Agreement, including, but not limited to, any claims under any state or federal law or statute, any claim based on tort, contract or otherwise, any claim for attorneys fees or costs, or any matter or action related to Employee employment and/or affiliation with the Bank and its affiliates.

	Section 5.	
Confidentiality of Agreement. As a material of inducement to the Bank to enter into this Agreement, Employee represents and agrees that he/she will keep all terms of this Agreement completely confidential, and that he/she will not disclose any information concerning this Agreement to any person, including, but not limited to, any past, present or prospective employee of the Bank, except for her spouse, attorney, tax account and financial advisor.  Employee further agrees that disclosure by him/her of the terms and conditions of this Agreement in violation of this Section constitutes a material breach of the Agreement.

	Section 6.	
Confidentiality of Proprietary Information. Employee acknowledges and agrees that he/she has an obligation to continue to keep in confidence and not use for his/her own or any other person's or entity's benefit all proprietary and confidential information concerning the Bank, as defined in Part VIII of the Employment Agreement.

	Section 7.	
Non-Disparagement. Employee agrees to refrain from any disparagement, defamation, libel or slander of the Bank or Bank-affiliates or tortious interference with the contracts and relationships of the Bank.

Employee agrees not to act in any manner that might damage the business of the Bank.  Employee agrees not to counsel or assist any attorneys or their clients in the presentation or prosecution of any disputes, differences, grievances, claims, charges, or complaints by any third party against the Bank and/or any officer, director, employee, agent, representative, shareholder or attorney of the Bank, unless under a subpoena or other court order to do so.

 

- 24 -

	Section 8.	
Acknowledgments.  Employee acknowledges, represents and agrees, in compliance with the Older Workers’ Benefit Protection Act, that:

		(a)	
Employee has been fully informed and is fully aware of his/her right to discuss any and all aspects of this matter with an attorney of his/her choice and is specifically advised that he/she should seek such advice;

		(b)	
Employee has carefully read and fully understands all of the provisions of this Agreement;

		(c)	
Employee has had up to and including a full twenty-one (21) days within which to consider this Agreement before executing it, unless by his/her own choice he/she has waived all or part of this period;

		(d)	
Employee has a full seven (7) days following the execution of this Agreement to revoke this Agreement, and has been and is hereby advised in writing that this Agreement shall not become effective or enforceable as to Employee rights under the federal Age Discrimination in Employment Act (29 U.S.C. section 621 et seq.) until the revocation period has expired (but shall be immediately effective as to all other claims).  Any revocation shall be made in writing and delivered to Bank’s Chief Executive Officer on or before the seventh day following Employee execution of this Agreement; and

		(e)	
Employee accepts the terms of this Agreement as fair and equitable under all the circumstances and voluntarily executes this Agreement.

	Section 9.	
Non-Admission.  Nothing in this Agreement shall be construed as an admission of liability by the Bank, its past and present affiliates, officers, directors, owners, employees or agents, and the Bank specifically disclaims liability to or wrongful treatment of Employee on the part of itself, its past and present affiliates, officers, directors, owners, employees and agents.

	Section 10.	
Governing Law.  This Agreement shall be governed by and construed in accordance with the laws of the State of California.

	Section 11.	
Savings Clause.  If any provision of this Agreement is invalid under applicable law, such provision shall be deemed to not be a part of this Agreement, but shall not invalidate any other provision hereby.

	
Section 12.

	
Integration Clause. This Agreement is intended by the parties to be their final agreement.  The statements, promises and agreements in this Agreement may not be contradicted by any prior understandings, agreements, promises or statements.  Employee states and promises that in signing this Agreement he/she has not relied on any statements or promises made by the Bank, other than the promises contained in this Agreement.  Any changes to this Agreement must be in writing and signed by both Parties.

 

- 25 -

THIS IS A RELEASE OF ALL CLAIMS – READ THOROUGHLY BEFORE SIGNING

	
Date:

	
April 11, 2017

	
 

 

	
Employee:

	
/s/ David M. Zitterow

 

	
 

	
David M. Zitterow

 

	
Date:

	
April 11, 2017

	
 

 

FARMERS & MERCHANTS BANK OF CENTRAL CALIFORNIA

 

	
By:

	
/s/Stewart C. Adams, Jr.

	
 

	 	 	 
	 	
Stewart C. Adams, Jr.

	 
	 	
Chairman of the Personnel Committee

	 

 

 

- 26 -EX-10.1

 Exhibit 10.1 

EXCHANGE AGREEMENT 

EXCHANGE AGREEMENT (the “Agreement”) is made as of the second day of July, 2017, by and between, Delcath Systems,
Inc., a Delaware corporation (the “Company”) and the investor signatory hereto (the “Investor”). 

WHEREAS, reference is hereby made to that certain Securities Purchase Agreement, dated June 6, 2016, by and among the Company, the
Investor and certain other buyers signatory thereto (the “Securities Purchase Agreement”), pursuant to which the Investor and such other buyers acquired (i) certain senior secured convertible notes (the
“Notes”), convertible into shares of the Company’s common stock, par value $0.01 per share (the “Common Stock”) and (ii) warrants to acquire shares of the Common Stock. Capitalized terms not defined herein
shall have the meaning as set forth in the Securities Purchase Agreement. 
 WHEREAS, as of the date hereof the Investor holds such
aggregate principal amount of a Note as set forth on the signature page of the Investor hereto (the “Investor Note”). 

WHEREAS, the Company has authorized a new series of preferred stock of the Company designated as Series A Preferred Stock, $0.01 par
value, the terms of which are set forth in the certificate of designations for such series of Preferred Stock (the “Certificate of Designations”) in the form attached hereto as Exhibit A (together with any preferred
shares issued in replacement thereof in accordance with the terms thereof, the “Series A Preferred Stock”). 

WHEREAS, subject to the terms and conditions set forth herein, the Company and the Investor desire to exchange (the
“Exchange”) such aggregate principal amount of the Investor Note as set forth on the signature page of the investor hereto (the “Exchange Note”) for such aggregate number of shares of Series A Preferred Stock (the
“New Preferred Shares”) as set forth on the signature page of the Investor attached hereto, with the remaining aggregate principal amount of the Investor Note (the “Remaining Note”) remaining with the Investor after
the Closing Date. 
 WHEREAS, the Exchange is being made in reliance upon the exemption from registration provided by Rule 3(a)(9) of
the Securities Act of 1933, as amended (the “1933 Act”). 
 WHEREAS, concurrently herewith, the Company is entering
into agreements with holders of Notes (each, an “Other Investor” and together with the Investor, the “Investors”, and such agreements, each an “Other Agreement”) substantially in the form of this
Agreement (other than with respect to the identity of the Investor, any provision regarding the reimbursement of legal fees and proportional changes reflecting the different holdings of such Other Investors and provisions to document that each such
other Investor receives consideration thereunder in proportional economic value as provided to the Investor hereunder). 

 NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, and in consideration of the promises and the mutual agreements, representations and warranties, provisions and covenants contained herein, the parties hereto, intending to be legally bound hereby, agree as follows: 

1.    Exchange. On the date hereof (or such other date and time as is mutually agreed to in writing by the Company
and the Required Holders) (the “Closing Date”, and the Closing, the “Closing”), the Investor shall, and the Company shall pursuant to Rule 3(a)(9) of the 1933 Act, exchange the Exchange Note for the New Preferred
Shares As part of the Exchange, the following transactions shall occur: 
 (a)    Prior to the Closing Date, the Company
shall have filed the Certificate of Designations with the Delaware Secretary of State. As of the Closing Date, the Exchange Note shall be free and clear of all Liens. Upon receipt of the New Preferred Shares in accordance herewith, all of the
Investor’s rights under the Exchange Note shall be extinguished (including, without limitation, the rights to receive any accrued and unpaid interest thereon or any other shares of Common Stock with respect thereto). Immediately following the
consummation of the Exchange, the Exchange Note shall automatically be cancelled for no additional consideration. The Remaining Note shall remain outstanding after the Closing Date until such time as it shall be converted or redeemed in accordance
therewith. 
 (b)    On the Closing Date, the Investor shall be deemed for all corporate purposes to have become the
holder of record of the New Preferred Shares and shall be entitled to exercise all of its rights with respect to the New Preferred Shares, irrespective of the date the Company delivers the certificate(s) evidencing the New Preferred Shares to the
Investor. 
 (c)    The Company and the Investor shall execute and/or deliver such other documents and agreements as are
customary and reasonably necessary to effectuate the Exchange. 
 (d)    The Exchange shall take place at the offices of
Kelley Drye & Warren LLP, 101 Park Avenue, New York, NY 10178 on the Closing Date, or at such other time as the Company and the Required Holders mutually agree in writing, and may be undertaken remotely by electronic exchange of
documentation. 
 2.    Closing Conditions. 

2.1    Conditions to Investor’s Obligations. The obligation of the Investor to consummate the Closing is
subject to the fulfillment, to the Investor’s reasonable satisfaction, prior to or at Closing, of each of the following conditions, provided that these conditions are for the Investor’s sole benefit and may be waived by the Investor at any
time in its sole discretion by providing the Company with prior written notice thereof: 
 (a)    Representations and
Warranties. The representations and warranties of the Company contained in this Agreement shall be true and correct in all material respects (except 

  
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for those representations and warranties that are qualified by materiality or Material Adverse Effect, which are accurate in all respects) on the date hereof and on and as of the Closing Date as
if made on and as of such date (except for representations and warranties that speak as of a specific date, which are accurate in all material respects (except for those representations and warranties that are qualified by materiality or Material
Adverse Effect, which are accurate in all respects) as of such specified date). 
 (b)    Issuance of Securities.
Prior to the Closing Date, the Company shall have filed the Certificate of Designations with the Delaware Secretary of State, which shall have not been amended and shall be in full force and effect as of the Closing. At the Closing, the Company
shall issue the New Preferred Shares to the Investor in accordance herewith on the books and records of the Company. 

(c)    No Actions. No action, proceeding, investigation, regulation or legislation shall have been instituted,
threatened or proposed before any court, governmental agency or authority or legislative body to enjoin, restrain, prohibit or obtain substantial damages in respect of, this Agreement or the consummation of the transactions contemplated by this
Agreement. 
 (d)    Proceedings and Documents. All proceedings in connection with the transactions contemplated
hereby and all documents and instruments incident to such transactions shall be satisfactory in substance and form to the Investor, and the Investor shall have received all such counterpart originals or certified or other copies of such documents as
they may reasonably request. 
 2.2    Conditions to the Company’s Obligations. The obligation of the
Company to consummate the Closing is subject to the fulfillment, to the Company’s reasonable satisfaction, prior to or at the Closing in question, of each of the following conditions, provided that these conditions are for the Company’s
sole benefit and may be waived by the Company at any time in its sole discretion by providing the Investor with prior written notice thereof: 

(a)    Representations and Warranties. The representations and warranties of the Investor contained in this
Agreement shall be true and correct in all material respects (except for those representations and warranties that are qualified by materiality or material adverse effect, which are accurate in all respects) on the date hereof and on and as of the
Closing Date as if made on and as of such date (except for representations and warranties that speak as of a specific date, which are accurate in all material respects (except for those representations and warranties that are qualified by
materiality or material adverse effect, which are accurate in all respects) as of such specified date). 
 (b)    No
Actions. No action, proceeding, investigation, regulation or legislation shall have been instituted, threatened or proposed before any court, governmental agency or authority or legislative body to enjoin, restrain, prohibit, or obtain
substantial damages in respect of, this Agreement or the consummation of the transactions contemplated by this Agreement. 

  
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 (c)    Proceedings and Documents. All proceedings in connection with
the transactions contemplated hereby and all documents and instruments incident to such transactions shall be satisfactory in substance and form to the Company and the Company shall have received all such counterpart originals or certified or other
copies of such documents as the Company may reasonably request. 
 3.    Representations and Warranties of the
Company. The Company hereby represents and warrants to Investor, as of the date hereof and as of the Closing Date, that: 

3.1    Organization, Good Standing and Qualification. The Company is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware. The Company is duly qualified to transact business and is in good standing in each jurisdiction in which the failure to so qualify would have a Material Adverse Effect (as defined below)
on its business or properties. As used in this Agreement, “Material Adverse Effect” means any material adverse effect on the business, properties, assets, liabilities, operations, results of operations, condition (financial or
otherwise) or prospects of the Company and its Subsidiaries, if any, individually or taken as a whole, or on the transactions contemplated hereby or on the Exchange Documents (as defined below) or by the agreements and instruments to be entered into
(or entered into) in connection herewith or therewith, or on the authority or ability of the Company to perform its obligations under this Agreement. The Certificate of Designations in the form attached hereto as Exhibit A has been
filed with the Delaware Secretary of State and is in full force and effect as of the Closing, enforceable against the Company in accordance with its terms and will not have been amended as of the Closing. 

3.2    Authorization. All corporate action on the part of the Company, its officers, directors and stockholders
necessary for the authorization, execution and delivery of this Agreement and the other Exchange Documents and the performance of all obligations of the Company hereunder and thereunder, and the authorization of all the transactions contemplated by
this Agreement, including, without limitation, the issuance of the New Preferred Shares, have been taken on or prior to the date hereof. 

3.3    Valid Issuance of the New Preferred Shares. The New Preferred Shares when issued and delivered in accordance
with the terms of this Agreement, for the consideration expressed herein, will be duly and validly issued, fully paid and non-assessable. The New Preferred Shares will be freely tradable and shall not be
required to bear, and shall not bear, any 1933 Act or other restrictive legend. 
 3.4    Offering. Neither the
Company, nor any of its affiliates, nor any Person acting on its or their behalf, has engaged in any form of general solicitation or general advertising (within the meaning of Regulation D) in connection with the offer or sale of the New Preferred
Shares. The Company shall be responsible for the payment of any placement agent’s fees, financial advisory fees, or brokers’ commissions (other than for persons engaged by the Investor or its investment advisor) relating to or arising out
of the transactions contemplated hereby). The Company shall pay, and hold the Investor harmless against, any liability, loss or expense (including, without limitation, attorney’s fees and out-of-pocket expenses) arising in 

  
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connection with any such claim. Neither the Company nor any of its Subsidiaries has engaged any placement agent or other agent in connection with the exchange and issuance of the New Preferred
Shares. The offer, exchange and issuance of the New Preferred Shares as contemplated by this Agreement are exempt from the registration requirements of the 1933 Act and the qualification or registration requirements of state securities laws or other
applicable blue sky laws. Neither the Company nor any authorized agent acting on its behalf will take any action hereafter that would cause the loss of such exemptions. 

3.5    Compliance With Laws. The Company has not violated any law or any governmental regulation or requirement
which violation has had or would reasonably be expected to have a Material Adverse Effect, and the Company has not received written notice of any such violation. 

3.6    Consents; Waivers. No consent, waiver, approval or authority of any nature, or other formal action, by any
Person, not already obtained, is required in connection with the execution and delivery of this Agreement by the Company or the consummation by the Company of the transactions provided for herein and therein. 

3.7    Acknowledgment Regarding Investor’s Purchase of New Preferred Shares. The Company acknowledges and
agrees that the Investor is acting solely in the capacity of arm’s length purchaser with respect to this Agreement and the Certificate of Designations (collectively, the “Exchange Documents”) and the transactions contemplated
hereby and thereby and that the Investor is not (i) an officer or director of the Company, (ii) an “affiliate” of the Company (as defined in Rule 144 promulgated under the 1933 Act), or (iii) to the knowledge of the Company,
a “beneficial owner” of more than 10% of the shares of Common Stock (as defined for purposes of Rule 13d-3 of the 1934 Act). The Company further acknowledges that the Investor is not acting as a
financial advisor or fiduciary of the Company (or in any similar capacity) with respect to the Exchange Documents and the transactions contemplated hereby and thereby, and any advice given by the Investor or any of its representatives or agents in
connection with the Exchange Documents and the transactions contemplated hereby and thereby is merely incidental to the Investor’s acceptance of the securities to be issued to the Investor pursuant to the terms and conditions set forth in this
Agreement. The Company further represents to the Investor that the Company’s decision to enter into the Exchange Documents has been based solely on the independent evaluation by the Company and its representatives. 

3.8    Absence of Litigation. Except as set forth in the reports, schedules, forms, statements and other documents
required to be filed by the Company with the SEC pursuant to the reporting requirements of the 1934 Act, there is no action, suit, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory
organization or body pending or, to the knowledge of the Company, threatened against or affecting the Company, the Common Stock, any securities of the Company or any of the Company’s officers or directors in their capacities as such. 

3.9    No Group. The Company acknowledges that, to the Company’s knowledge, the Investor is acting
independently in connection with this Agreement and the transactions contemplated hereby, and is not acting as part of a “group” as such term is defined under Section 13(d) of the 1933 Act and the rules and regulations promulgated
thereunder. 

  
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 3.10    Validity; Enforcement; No Conflicts. This Agreement and each
other Exchange Document to which the Company is a party have been duly and validly authorized, executed and delivered on behalf of the Company and shall constitute the legal, valid and binding obligations of the Company enforceable against the
Company in accordance with their respective terms, except as such enforceability may be limited by general principles of equity or to applicable bankruptcy, insolvency, reorganization, moratorium, liquidation and other similar laws relating to, or
affecting generally, the enforcement of applicable creditors’ rights and remedies. The execution, delivery and performance by the Company of this Agreement and each other Exchange Document to which the Company is a party and the consummation by
the Company of the transactions contemplated hereby and thereby will not (i) result in a violation of the organizational documents of the Company or (ii) conflict with, or constitute a default (or an event which with notice or lapse of
time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, indenture or instrument to which the Company is a party or by which it is bound, or (iii) result
in a violation of any law, rule, regulation, order, judgment or decree (including federal and state securities or “blue sky” laws) applicable to the Company, except in the case of clause (ii) above, for such conflicts, defaults or
rights which would not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect. 

3.11    Disclosure. Other than as set forth in the 8-K Filing (as defined
below), the Company confirms that neither it nor any other Person acting on its behalf has provided the Investor or its agents or counsel with any information that constitutes or could reasonably be expected to constitute material, nonpublic
information. The Company understands and confirms that the Investor will rely on the foregoing representations in effecting transactions in securities of the Company. 

3.12    Reaffirmation. The Company hereby: (x) reaffirms its Obligations (as defined in the Security
Agreement), (y) further ratifies and reaffirms the validity and enforceability of all of the Liens heretofore granted, pursuant to and in connection with the Security Agreement, each Guaranty and any other Security Document to Hudson Bay Master Fund
Ltd., in its capacity as collateral agent (in such capacity, the “Collateral Agent”) for the holders of the Notes and (z) acknowledges that all of such Liens and all Collateral (as defined in the Security Agreement) heretofore
pledged as security for such Obligations, continue to be and remain collateral for such Obligations from and after the date hereof. For the avoidance of doubt, each Transaction Document remains in full force and effect. The Company hereby
acknowledges that the New Preferred Shares are not in any way intended to impair or affect the Liens granted, pledged or assigned by the Company to the Collateral Agent for the holders of the Notes in accordance with the terms of the Security
Documents. 
 4.    Representations and Warranties of the Investor. The Investor hereby represents, warrants and
covenants that: 

  
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 4.1    Authorization. The Investor has full power and authority to
enter into this Agreement, to perform its obligations hereunder and to consummate the transactions contemplated hereby and has taken all action necessary to authorize the execution and delivery of this Agreement, the performance of its obligations
hereunder and the consummation of the transactions contemplated hereby. 
 4.2    Accredited Investor Status;
Investment Experience. The Investor is an “accredited investor” as that term is defined in Rule 501(a) of Regulation D. The Investor can bear the economic risk of its investment in the New Preferred Shares, and has such knowledge and
experience in financial and business matters that it is capable of evaluating the merits and risks of an investment in the New Preferred Shares. 

4.3    No Governmental Review. The Investor understands that no United States federal or state agency or any other
government or governmental agency has passed on or made any recommendation or endorsement of the New Preferred Shares or the fairness or suitability of the investment in the New Preferred Shares nor have such authorities passed upon or endorsed the
merits of the offering of the New Preferred Shares. 
 4.4    Validity; Enforcement; No Conflicts. This Agreement
has been duly and validly authorized, executed and delivered on behalf of the Investor and constitutes the legal, valid and binding obligations of the Investor enforceable against the Investor in accordance with their respective terms, except as
such enforceability may be limited by general principles of equity or to applicable bankruptcy, insolvency, reorganization, moratorium, liquidation and other similar laws relating to, or affecting generally, the enforcement of applicable
creditors’ rights and remedies. The execution, delivery and performance by the Investor of this Agreement and each other Exchange Document to which the Investor is a party and the consummation by the Investor of the transactions contemplated
hereby and thereby will not (i) result in a violation of the organizational documents of the Investor or (ii) conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or
give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, indenture or instrument to which the Investor is a party, or (iii) result in a violation of any law, rule, regulation, order, judgment or
decree (including federal and state securities or “blue sky” laws) applicable to the Investor, except in the case of clause (ii) above, for such conflicts, defaults or rights which would not, individually or in the aggregate,
reasonably be expected to have a material adverse effect on the ability of the Investor to perform its obligations hereunder. 

4.5    Ownership of Exchange Note. The Investor owns and holds, beneficially and of record, the entire right,
title, and interest in and to the Exchange Note free and clear of all rights and Liens (other than pledges or security interests (x) arising by operation of applicable securities laws and (y) that the Investor may have created in favor of
a prime broker under and in accordance with its prime brokerage agreement with such broker). The Investor has full power and authority to transfer and dispose of the Exchange Note to the Company free and clear of any right or Lien. 

  
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 4.6    Exemption; No Consideration. The Investor acknowledges and
agrees that the Exchange is being made in reliance upon the exemption from registration provided by Rule 3(a)(9) of the 1933 Act and the securities of the Company being issued to the Investor in the Exchange will be issued exclusively in the
Exchange for the surrender and cancellation of the Exchange Note and no other consideration has or will be paid to the Company for the New Preferred Shares to effect the Exchange hereunder. 

5.    Additional Covenants 

5.1    Disclosure. The Company shall, on or before 8:30 a.m., New York City time, on
[            ]1 issue a press release and Current Report on Form 8-K disclosing all material
terms of the transactions contemplated hereby and attaching the form of this Agreement and the Certificate of Designations as exhibits thereto to the extent not previously filed with the SEC (such Current Report on Form 8-K with all exhibits attached thereto, the “8-K Filing”). 

5.2    Blue Sky. The Company shall make all filings and reports relating to each Exchange required under applicable
securities or “Blue Sky” laws of the states of the United States following the date hereof, if any. 

5.3    Fees and Expenses. The Company shall reimburse the Investor for its legal fees and expenses in connection
with the preparation and negotiation of this Agreement and transactions contemplated thereby, in an amount not to exceed $15,000 (the “Investor Counsel Expense”). The Investor Counsel Expense shall be paid by the Company whether or
not the transactions contemplated by this Agreement are consummated.] Except as otherwise set forth above, each party to this Agreement shall pay the fees and expenses of its advisers, counsel, accountants and other experts, if any, and all other
expenses incurred by such party incident to the negotiation, preparation, execution, delivery and performance of this Agreement. 

6.    Miscellaneous 

6.1    Successors and Assigns. Except as otherwise provided herein, the terms and conditions of this Agreement
shall inure to the benefit of and be binding upon the parties hereto and the respective successors and assigns of the parties. Nothing in this Agreement, express or implied, is intended to confer upon any party, other than the parties hereto or
their respective successors and assigns, any rights, remedies, obligations or liabilities under or by reason of this Agreement, except as expressly provided in this Agreement. 

6.2    Governing Law; Jurisdiction; Jury Trial. All questions concerning the construction, validity, enforcement
and interpretation of this Agreement shall be governed by the internal laws of the State of New York, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of New York or any other jurisdictions) that
would cause the application of the laws of any jurisdictions other than the State of New York. Each 
  

	1 	 Insert date of the open of the Principal Market immediately following the time of signing of this Agreement

  
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party hereby irrevocably submits to the exclusive jurisdiction of the state or federal courts sitting in The City of New York, Borough of Manhattan, for the adjudication of any dispute hereunder
or in connection herewith or with any transaction contemplated hereby or discussed herein, and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of
any such court, that such suit, action or proceeding is brought in an inconvenient forum or that the venue of such suit, action or proceeding is improper. Each party hereby irrevocably waives personal service of process and consents to process being
served in any such suit, action or proceeding by mailing a copy thereof to such party at the address for such notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof.
Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF
ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY. 

6.3    Titles and Subtitles. The titles and subtitles used in this Agreement are used for convenience only and are
not to be considered in construing or interpreting this Agreement. 
 6.4    Notices. Any notices, consents,
waivers or other communications required or permitted to be given under the terms of this Agreement must be in writing and will be deemed to have been delivered: (i) upon receipt, when delivered personally; (ii) upon delivery, when sent by
facsimile (provided confirmation of transmission is mechanically or electronically generated and kept on file by the sending party) or by electronic mail; or (iii) one Business Day after deposit with an overnight courier service, in each case
properly addressed to the party to receive the same. The addresses, facsimile numbers and e-mail addresses for such communications shall be as set forth in the Securities Purchase Agreement or to such other
address, facsimile number and/or e-mail address and/or to the attention of such other Person as the recipient party has specified by written notice given to each other party five (5) days prior to the
effectiveness of such change. Written confirmation of receipt (A) given by the recipient of such notice, consent, waiver or other communication, (B) mechanically or electronically generated by the sender’s facsimile machine or e-mail containing the time, date, recipient facsimile number and an image of the first page of such transmission or (C) provided by an overnight courier service shall be rebuttable evidence of personal service,
receipt by facsimile or receipt from an overnight courier service in accordance with clause (i), (ii) or (iii) above, respectively. 

6.5    Finder’s Fees. Each party represents that it neither is nor will be obligated for any finders’ fee
or commission in connection with this transaction. The Company shall indemnify and hold harmless the Investor from any liability for any commission or compensation in the nature of a finders’ fee (and the costs and expenses of defending against
such liability or asserted liability) for which the Company or any of its officers, employees or representatives is responsible. 

  
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 6.6    Amendments and Waivers. Any term of this Agreement may be
amended and the observance of any term of this Agreement may be waived (either generally or in a particular instance and either retroactively or prospectively), only with the written consent of the Company and the Investor. Effective as of the
Closing Date, with respect to any Pre-Installment Conversion Shares (as defined in the Exchange Note) delivered to the Investor in excess of the related Post-Installment Conversion Shares (as defined in the
Exchange Note) for any given Installment Date (as defined in the Exchange Note) occurring prior to the date hereof, each party hereby waives the requirement in Section 8(b) of the Exchange Note to apply such remaining Pre-Installment Conversion Shares against the Installment Amount (as defined in the Exchange Note) due on a future Installment Date and the Investor shall instead be entitled to keep such excess Pre-Installment Conversion Shares as additional interest thereunder. 

6.7    Severability. If one or more provisions of this Agreement are held to be unenforceable under applicable law,
such provision shall be excluded from this Agreement and the balance of the Agreement shall be interpreted as if such provision were so excluded and shall be enforceable in accordance with its terms so long as this Agreement as so modified continues
to express, without material change, the original intentions of the parties as to the subject matter hereof and the prohibited nature, invalidity or unenforceability of the provision(s) in question does not substantially impair the respective
expectations or reciprocal obligations of the parties or the practical realization of the benefits that would otherwise be conferred upon the parties. The parties will endeavor in good faith negotiations to replace the prohibited, invalid or
unenforceable provision(s) with a valid provision(s), the effect of which comes as close as possible to that of the prohibited, invalid or unenforceable provision(s). 

6.8    Entire Agreement. This Agreement together with the other Exchange Documents, represents the entire agreement
and understandings between the parties concerning the Exchange and the other matters described herein and therein and supersedes and replaces any and all prior agreements and understandings solely with respect to the subject matter hereof and
thereof. Except as expressly set forth herein, nothing herein shall amend, modify or waive any term or condition of the other Exchange Documents. 

6.9    Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the same instrument. 
 6.10    Interpretation.
Unless the context of this Agreement clearly requires otherwise, (a) references to the plural include the singular, the singular the plural, the part the whole, (b) references to any gender include all genders, (c) “including”
has the inclusive meaning frequently identified with the phrase “but not limited to” and (d) references to “hereunder” or “herein” relate to this Agreement. 

6.11    No Third Party Beneficiaries. This Agreement is intended for the benefit of the parties hereto and their
respective permitted successors and assigns, and is not for the benefit of, nor may any provision hereof be enforced by, any other Person. 

  
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 6.12    Survival. The representations, warranties and covenants of the
Company and the Investor contained herein shall survive the Closing and delivery of the New Preferred Shares. 

6.13    Further Assurances. Each party shall do and perform, or cause to be done and performed, all such further
acts and things, and shall execute and deliver all such other agreements, certificates, instruments and documents, as any other party may reasonably request in order to carry out the intent and accomplish the purposes of this Agreement and the
consummation of the transactions contemplated hereby. 
 6.14    No Strict Construction. The language used in
this Agreement will be deemed to be the language chosen by the parties to express their mutual intent, and no rules of strict construction will be applied against any party. 

6.15    Independent Nature of Investor’s Obligations and Rights. The obligations of the Investor under this
Agreement are several and not joint with the obligations of any Other Investor, and the Investor shall not be responsible in any way for the performance of the obligations of any Other Investor under any Other Agreement. Nothing contained herein or
in any Other Agreement, and no action taken by the Investor pursuant hereto, shall be deemed to constitute the Investor and Other Investors as a partnership, an association, a joint venture or any other kind of entity, or create a presumption that
the Investor and Other Investors are in any way acting in concert or as a group with respect to such obligations or the transactions contemplated by this Agreement or any Other Agreement and the Company acknowledges that, to the best of its
knowledge, the Investor and the Other Investors are not acting in concert or as a group with respect to such obligations or the transactions contemplated by this Agreement or any Other Agreement. The Company and the Investor confirm that the
Investor has independently participated in the negotiation of the transactions contemplated hereby with the advice of its own counsel and advisors. The Investor shall be entitled to independently protect and enforce its rights, including, without
limitation, the rights arising out of this Agreement, and it shall not be necessary for any Other Investor to be joined as an additional party in any proceeding for such purpose. 

6.16    Equal Treatment Acknowledgement; Most Favored Nations. The parties hereto herby acknowledge and agree that,
in accordance with Section 9(e) of the Securities Purchase Agreement, the Company is obligated to present the terms of this offering to each Other Investor; provided that each Other Agreement shall be negotiated separately with each Other
Investor and shall not in any way be construed as the Investor or any Other Investor acting in concert or as a group with respect to the purchase, disposition or voting of securities of the Company or otherwise. The Company hereby represents and
warrants as of the date hereof and covenants and agrees that none of the terms offered to any Person with respect to the Exchange, including, without limitation with respect to any consent, release, amendment, settlement, or waiver relating to any
Exchange (each an “Settlement Document”), is or will be more favorable to such Person (other than any reimbursement of legal fees) than those of the Investor and this Agreement. If, and whenever on or after the date hereof, the
Company enters into a Settlement Document, then (i) the Company shall provide notice thereof to the Investor immediately 

  
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following the occurrence thereof and (ii) the terms and conditions of this Agreement shall be, without any further action by the Investor or the Company, automatically amended and modified
in an economically and legally equivalent manner such that the Investor shall receive the benefit of the more favorable terms and/or conditions (as the case may be) set forth in such Settlement Document, provided that upon written notice to the
Company at any time the Investor may elect not to accept the benefit of any such amended or modified term or condition, in which event the term or condition contained in this Agreement shall apply to the Investor as it was in effect immediately
prior to such amendment or modification as if such amendment or modification never occurred with respect to the Investor. The provisions of this Section 6.16 shall apply similarly and equally to each Settlement Document. 

[SIGNATURES ON THE FOLLOWING PAGE] 

  
 12 

 IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed and
delivered as of the date provided above. 
  

			
	 THE COMPANY

	
	 DELCATH SYSTEMS, INC.

		
	 By:
	 	  

		 	 Name:

		 	 Title:

 IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed and
delivered as of the date provided above. 
  

					
	INVESTOR:	 	
		
	  
	 	
		
	By:	 	  

		 	Name:	 	
		 	Title:	 	
		
	Aggregate Principal Amount of Investor Note:	 	
		
	  
	 	
		
	Aggregate Principal Amount of Exchange Note:	 	
		
	  
	 	
	
	Aggregate Number of New Preferred Shares:

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00272-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00272-of-00352.parquet"}]]