Document:

Exhibit 10.1

 

EMPLOYMENT
AGREEMENT

 

This Employment Agreement
(the “Agreement”) is made and entered into as of January 8, 2009
(the “Effective Date”), by and between James H. Burgess (“Executive”)
and 1st Pacific Bancorp, a California corporation (“Bancorp”),
and 1st Pacific Bank of California, a California state-chartered
bank (“Bank”) (collectively, Bancorp and Bank are referred to as the “Employer”),
with regard to the following:

 

A.           Executive has served as the Executive Vice President
and Chief Financial Officer of the Bank under an Employment Agreement between
Executive and Bank dated November 17, 2006, as amended December 21,
2007 (the “Former Employment Agreement”).

 

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

 

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

 

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

 

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

 

1.                                       Definitions.

 

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

 

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

 

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

 

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

 

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

 

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“Benefits” means the types and amounts of
benefits provided under Paragraph 3.6, provided that if at the date
of reference the terms of any Employer insurance plan prohibit the continuance
or recommencement of insurance benefits that Executive formerly held, Employer
shall be obligated to pay to Executive in cash on a monthly basis an amount
equal to Employer’s former premium payments (pro rated on a monthly basis) for
the benefit of Executive under such plan, except that if Executive is entitled
to COBRA health insurance benefits the amount shall be increased to the amount
payable by Executive for such benefits if higher than Employer’s former premium
payments.

 

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

 

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

 

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

 

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

 

“Change of Control Severance Benefits” means (i) an
amount equal to the sum of (x) one and one-half (1.5) times Executive’s
base annual salary at the rate then in effect in accordance with Paragraph 3.1,
plus (y) the amount actually paid by the Employer to Executive under a
Plan for the immediately preceding year, if any, plus (z) the amount
actually paid by the Employer to Executive as discretionary bonuses outside of
the Plan as annual incentives for the immediately preceding year, if any; and (ii) continuation
of Benefits provided under Paragraph 3.6 or substitute equivalent
Benefits in the event that the particular Benefits (for instance, insurance
coverage) are not carried by the Employer under its programs following the
Change of Control Termination, for a period of eighteen (18) months.

 

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

 

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

 

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

 

“Employer” means Bancorp and Bank.

 

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

 

“Executive” means James H. Burgess, or if
deceased, his Beneficiary.

 

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“Expiration Date” means December 31, 2010.

 

“Good Cause” means:  (i) a reduction in Executive’s base
salary below the rate then in effect in accordance with Paragraph 3.1;
(ii) the Employer requiring that Executive be based at a location more
than twenty-five (25) miles from the Employer’s headquarters as of the
Effective Date (excluding travel for Employer business and other temporary
relocations of no more than thirty (30) days individually); (iii) a
reduction in his title; or (iv) the continuation after a Change of
Control, or imposition within six (6) months after a Change of Control, of
a material reduction in the duties or authority of Executive so that he is no
longer performing substantially all of the duties of a chief financial officer
of a community bank.

 

“Plan” means any then currently effective
Senior Executive Bonus Plan for Senior Management, or similar plan, approved by
the applicable Bancorp Board or Bank Board.

 

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

 

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

 

2.                                       Rights and Duties of Executive.

 

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

 

2.2                                 Termination of Former Employment
Agreement.  As of the Effective Date, and except as
otherwise provided in Paragraph 7.2, the Former Employment Agreement
shall terminate without further liability of the Employer or Executive
thereunder of any kind.

 

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

 

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of a resolution by the
Employer Board authorizing the specific change reflected in such writing and
authorizing the Chairperson of the Employer Board to sign such writing.
Executive should neither assume nor imply any promise of employment for any
specified period of time except through such a signed writing.  This Agreement shall terminate immediately
without further liability or obligation to Executive if (i) the Bank is
closed by any supervisory authority, or (ii) any supervisory authority
demands, by proposed consent agreement or by a prompt corrective action
directive, or pursuant to cease and desist powers, the removal of Executive
from his position as the Executive Vice President or Chief Financial Officer of
the Employer.  Should Executive remain
employed under this Agreement through the Expiration Date, Executive’s
employment with the Employer shall automatically terminate on that date and
this Agreement shall be of no force or effect on or after that date, subject to
Paragraphs 5.4 and 8.6.

 

2.4                                 Outside Activities. 
Executive shall not have other employment, consulting, charitable or
independent contractor work that materially interferes with the fulfillment of
Executive’s duties to the Employer. 
Executive shall not undertake expanded commitments to business or charitable
activities or engage in new such activities before consulting with the
President and Chief Executive Officer of the Employer.  Executive will not provide services to, hold
or make any investment in or loan to, or participate in the management or business
of, any bank, savings and loan, credit union, thrift and loan, industrial loan
or other entity engaged in the business of making loans or accepting deposits
or both without the consent of the Chief Executive Officer of the Employer;
provided that Executive may own less than 5% of the voting stock of any company
that files reports under the Securities Exchange Act of 1934.

 

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

 

3.1                                 Salary.  The Employer
shall pay Executive a minimum annual base salary of One Hundred Sixty-Six
Thousand Four Hundred Dollars ($166,400) for the period from January 1,
2009 until the Expiration Date.  The base
salary shall be evaluated on an annual basis by the Bancorp Board, at the
Bancorp Board’s discretion or the request of Executive, and may be adjusted
upward by the Bancorp Board in its sole discretion.

 

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

 

3.3                                 Executive Incentive Compensation. 
In general, the Employer believes that superior performance of Executive
should be rewarded and encouraged by incentive compensation.  The Employer Board has adopted or intends to
adopt a Plan pursuant to which Executive may be entitled to incentive
compensation provided that the performance goals of the Employer as set forth
in the Plan are achieved and the terms and conditions of the Plan are
satisfied. The performance goals contained in the Plan will be evaluated
annually by the Employer Board in consultation with Executive no later than the
first month of the calendar year. 

 

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In addition, Executive
shall be entitled to other incentive compensation and bonuses as the Employer
Board may determine in its sole discretion.

 

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

 

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

 

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

 

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

 

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

 

4.                                       Termination.

 

4.1                                 Employer Right to Terminate Employment. 
Nothing in this Agreement shall adversely affect the right of the
Employer Board to terminate Executive. 
The Employer Board has the right to terminate the employment of Executive
with the Employer at will, with or without cause, upon delivery of written
notice to Executive thirty (30) days in advance of such termination (except in
the case of death of Executive or pursuant to Paragraph 4.1.3, in which
event termination shall automatically occur at the date of death or upon the
event described in Paragraph 4.1.3), and including, but not limited to,
for any of the following grounds:

 

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

 

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

 

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

 

4.1.4                        Disability or death;

 

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

 

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

 

4.3                                 Termination Upon Expiration. 
If Executive and the Employer have not entered into an amendment of this
Agreement extending its term or another written agreement replacing this
Agreement on or prior to the Expiration Date, at that date his employment will
automatically terminate as a result of expiration of this Agreement at the
Expiration Date.  Nothing in this
paragraph shall prejudice the at-will status of Executive or require the
Employer to negotiate with Executive.

 

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

 

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

 

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

 

5.1                                 Termination Resulting from Breach. 
In the event the employment of Executive is terminated under Paragraphs 4.1.1,
4.1.2 or 4.1.3, the Employer shall provide Executive only the
base salary, Benefits, and a payout of all accrued but unused vacation days
under Paragraph 3.8, if any, then-provided, on the terms then-provided,
due him through the date of termination and shall not be obligated to provide
any other compensation or Benefits.

 

5.2                                 Other Terminations.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

(a)                                  continued salary at the rate then in
effect under Paragraph 3.1 and the automobile allowance then provided
under Paragraph 3.4 for a period of nine (9) months from the date
notice of termination is delivered to the Executive, or at the option of the
Employer a lump sum payment of such amount, all subject to withholding;

 

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

 

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

 

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

 

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

 

5.3                                 Change of Control.

 

5.3.1                        Payment Following Certain Terminations
Related to Change of Control.  Subject to
Executive first entering into the Separation and Consulting Agreement and such
agreement being fully effective, in respect of any Change of Control
Termination the Employer shall pay to Executive the Change of Control Severance
Benefits in a lump sum (except for the Benefits under Paragraph 3.6,
which shall be continued) within five (5) days following the date the
Separation and Consulting Agreement is fully effective.

 

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

 

5.3.3                        The terms of this Paragraph 5.3.3
override and control any and all other terms of this Agreement to the extent
inconsistent with this Paragraph 5.3.3.  This Paragraph 5.3.3 shall apply
to the extent that the aggregate present value of any or all payments and
benefits in the nature of compensation to (or for the benefit of) Executive
provided under this Agreement or otherwise provided to Executive by or on
behalf of the Bank or any affiliate, parent or controlling entity of the Bank,
constitute a “parachute payment” under the provisions of Section 280G of
the Code, and the regulations thereunder (the “Total Payments”).  In the event that the Total Payments would
exceed an amount equal to 299% of Executive’s “base amount” as that term is
defined in Section 280G of the Code, as determined by the independent
public accountants for the Bank, Executive and the Bank agree that the payments
or benefits provided to Executive under this Agreement shall be reduced (or the
parties shall agree to a reduction in other payments or benefits included in
the Total Payments to the extent legally and contractually permissible) so that
the present value of the total amount received by Executive that would
constitute a “parachute payment” will be one dollar ($1.00) less than three (3) times
Executive’s base amount (as defined in Section 280G of the Code) and so
that no portion of the payment or benefits received by Executive would be
subject to the excise tax imposed by Section 4999 of the Code.

 

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

 

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

 

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

 

5.4.2                        if within ten (10) business days
following the Expiration Date, Executive does not enter into the Separation and
Consulting Agreement and that agreement is not fully effective, the Employer
has the option to pay Executive his base monthly salary at the rate 

 

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in effect at the date of
termination under Paragraph 3.1 for a period of six (6) months
from the date of termination, with the first payment to be paid on the one
month anniversary of such date, and if the Employer provides the first such
payment, regardless of whether Executive has executed and entered into the
Separation and Consulting Agreement with the Employer, Executive shall be
deemed bound by such agreement in the form attached hereto in exchange for the
consideration provided in this Paragraph, as if executed and delivered by him
and fully effective, other than with respect to releases of claims and
consideration for those releases;

 

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

 

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

 

5.4.5                        continuation of other non-medical
Benefits, if any, then provided under Paragraph 3.6, for a period of six
(6) months from the date of termination; and

 

5.4.6                        payment of certain incentive compensation
under the applicable Plan, subject to the terms and conditions of the
applicable Plan that are not contrary to this Paragraph 5.4.

 

5.5                                 Consideration for Payments and Remedies. 
Except as where Executive’s termination is caused by his death, and
without limiting any other remedies available to the Employer, the payments to
be made under Paragraphs 5.2, 5.3 or 5.4 (subject to
the exceptions stated therein) after the date of termination of Executive’s
employment shall be subject to Executive’s execution of the Separation and
Consulting Agreement, and Executive’s continued compliance with the Separation
and Consulting Agreement and the terms of this Agreement that are effective
after termination of Executive’s employment, through the making of the last
such payment.

 

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

 

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

 

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

 

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

 

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

 

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

 

6.                                       Additional Covenants.

 

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

 

11

 

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

 

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

 

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

 

6.5                                 Confidentiality.

 

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

 

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

 

6.5.3                        Nonsolicitation of Business. 
Without limiting Paragraph 6.5.2, Executive agrees that for a
period of twelve (12) months following the termination of his employment with
the Employer, Executive will not, directly or indirectly, solicit, attempt to
solicit, divert, or attempt to divert any customers of the Employer or any
business the Employer or a subsidiary or affiliate had enjoyed or solicited
from its customers, borrowers, depositors or investors by using any trade
secrets and other proprietary and confidential information.

 

6.6                                 Business Protection Covenants.

 

6.6.1                        Covenant Not to Compete. 
Executive agrees that he will not, during the course of employment, or
during any period following the termination of his employment during which he
is receiving compensation or benefits under Paragraphs 5.2, 5.3
or 5.4, voluntarily or involuntarily, directly or indirectly, (i) engage
in any banking or financial 

 

12

 

products or service
business, loan origination or deposit-taking business or any other business
competitive with that of the Employer, its subsidiaries or affiliates (“Competitive
Business”) within the county of San Diego (the “Market Area”), (ii) directly
or indirectly own, manage, operate, control, be employed by, or provide
management or consulting services in any capacity to any firm, corporation, or
other entity (other than the Employer or its subsidiaries or affiliates)
engaged in any Competitive Business in the Market Area, or (iii) directly or
indirectly solicit or otherwise intentionally cause any employee, officer, or
member of the Employer Board or any of its subsidiaries or affiliates to engage
in any action prohibited under (i) or (ii) of this Paragraph 6.6.1.

 

6.6.2                        Inducing Employees To Leave The Employer;
Employment of Employees.  Any attempt on the part of
Executive to induce others to leave the Employer’s employ, or the employ of any
of its subsidiaries or affiliates, or any effort by Executive to interfere with
the Employer’s relationship with its other employees would be harmful and
damaging to the Employer.  Executive
agrees that during the term of employment and during any period following the
termination of his employment during which he is receiving compensation or
Benefits under Paragraphs 5.2, 5.3 or 5.4, Executive
will not in any way, directly or indirectly (i) induce or attempt to
induce any employee of the Employer or any of its subsidiaries of affiliates to
quit employment with the Employer or the relevant subsidiary or affiliate; (ii) otherwise
interferes with or disrupt the relationships between the Employer and its
subsidiaries and affiliates and their respective employees; (iii) solicit,
entice, or hire away any employee of the Employer or any of its subsidiaries or
affiliates, or (iv) hire or engage any employee of the Employer or any
subsidiary or affiliate or any former employee of the Employer or any
subsidiary or affiliate whose employment with the Employer or the relevant
subsidiary or affiliate ceased after the date of termination of Executive’s
employment with the Employer.

 

6.6.3                        Equitable Relief. 
Executive acknowledges and agrees that irreparable injury will result to
the Employer in the event of a breach of any of the provisions of this Paragraph 6
(the “Designated Provisions”) and that the Employer will have no
adequate remedy at law with respect thereto. 
Accordingly, in the event of a material breach of any Designated
Provision, and in addition to any other legal or equitable remedy the Employer
or its subsidiaries or affiliates may have, the Employer and any relevant
subsidiary or affiliate shall be entitled to the entry of a preliminary and
permanent injunction (including, without limitation, specific performance) to
restrain the violation or breach thereof by Executive or any affiliates,
agents, or any other persons acting for or with Executive in any capacity
whatsoever, and Executive submits to the jurisdiction of such court in any such
action.  Any such remedy shall be granted
pursuant to the dispute resolution procedures applicable under Paragraph 6.3.

 

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

 

13

 

court or arbitrator shall
be empowered to substitute, to the extent enforceable, provisions similar
hereto or other provisions so as to provide to the Employer, to the fullest
extent permitted by applicable law, the benefits intended by this Paragraph 6.

 

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

 

7.                                       Other Agreements.

 

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

 

7.2                                 Outstanding Stock Options. 
The provisions of this Agreement are not and shall not be interpreted to
change the terms of any outstanding stock options previously granted by the
Employer to Executive.  Without limiting
the foregoing, the provisions regarding the grant of options to Executive set
forth in Paragraph 4.4 of the Employment Agreement between Executive and the
Bank dated November 17, 2003, as amended on November 17, 2004 (“2003
Agreement”) are not amended by this Agreement and shall be deemed included
in this Agreement, and the references in that paragraph to other provisions of
the 2003 Agreement are hereby incorporated by reference for the limited purpose
of continuing to effectuate the agreement of the parties set forth in Paragraph
4.4 of the 2003 Agreement.  The parties
intend that this Agreement be considered as establishing an “extended term” for
purposes of that provision.

 

8.                                       General Provisions.

 

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

 

14

 

accordance with the
provisions of this paragraph, two (2) business days after the date placed
in the United States mail, (iii) if mailed other than in accordance with
the provisions of this paragraph or mailed from outside the United States,
upon the date of delivery to the address of the person to receive such notice,
or (iv) if given by facsimile, when sent. 
Notices shall be given at the following addresses:

 

If to Executive:

 

James H. Burgess

C/O 1st Pacific Bank of California

9333 Genesee, Suite 300

San Diego, CA  92121

Fax:  (858) 875-2020

 

If to the
Employer:

 

Chief Executive Officer

1st Pacific Bank of California

9333 Genesee, Suite 300

San Diego, CA  92121

Fax:  (858) 875-2020

 

With a copy to:

 

Kurt L. Kicklighter, Esq.

Luce, Forward, Hamilton & Scripps LLP

601 West Broadway, Suite 2600

San Diego, CA  92101

Fax:  619-645-5339

 

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

 

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

 

15

 

specifically designated
by the Employer Board.  With regard to
such amendments, alterations, or modifications, facsimile signatures shall be
effective as original signatures.  Any
amendment, alteration, or modification requiring the signature of more than one
party may be signed in counterparts. 
Notwithstanding any of the foregoing, this Agreement shall be subject
to, as modified by, any written agreement signed by Employer and Executive with
regards to compliance with Section 101(a) of the Emergency Economic
Stabilization Act of 2008, Div. A of Pub. Law No. 110-343 and the
Department of the Treasury’s Troubled Assets Relief Program, whether entered
into before or after this Agreement.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

16

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

[The remainder of this page intentionally left
blank.]

 

17

 

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

 

	
   

  	
  /s/ JB James Burgess

  
	
   

  	
  James H. Burgess

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  1st PACIFIC BANCORP, a

  
	
   

  	
  California corporation

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
    /s/ Ronald Carlson

  
	
   

  	
   

  	
  Ronald Carlson, Acting Chief Executive Officer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  1st PACIFIC BANK OF CALIFORNIA, a

  
	
   

  	
  California state-chartered bank

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
    /s/ Ronald Carlson

  
	
   

  	
   

  	
  Ronald Carlson, Acting Chief Executive Officer

  

 

 

EXHIBIT A

 

SEPARATION
AND CONSULTING AGREEMENT

AND

GENERAL
RELEASE OF CLAIMS

 

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

 

RECITALS

 

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

 

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

 

AGREEMENT

 

1.               Separation Pay/Consideration. 
In consideration of the covenants and releases set forth herein, the
Bank agrees to pay Employee the amount payable to him and the non-monetary
consideration (if any) due him, pursuant to and in accordance with,
Paragraphs 5.2, 5.3 or 5.4, as the case may be, of the Employment
Agreement dated
                  
    , 2008, by and between the Employer and Employee (the “Employment
Agreement”), less all applicable state and federal deductions (in each
case, the “Payment”), $2,000 of which shall be consideration for
Employee’s release of ADEA claims as set forth in Section 5, below;
provided that no such Payment shall be made until at least eight (8) days
have past since Employee’s execution of this Agreement.  The check representing the Payment shall be
mailed to Employee at his/her home address at
                                                                                    .

 

2.               Consulting Services.  The Employer will retain Employee as a
consultant and Employee will provide consulting services to the Employer, under
the direction of the Chief Executive Officer of the Bank or his delegee, for a
period of six months (the “Consulting Term”), in order to assist in the
maintenance of Bank’s customer, investor and employee relationships, including
without limitation services of the following types: (a) provision of
specific information regarding the service requirements of specific customers
and their business and financial practices; (b) identification of and
introduction to prospective customers of Bank; (c) advice regarding
specific Bank employee relations and issues; (d) assistance in development
of marketing plans; (e) assistance in fostering continued relationships
with customers of Bank to whom Employee provided services or as to which he was
their primary contact at Bank; (f) assisting in litigation or arbitration
matters involving Bancorp or Bank, including appearing for depositions; (g) assisting
in regulatory relations and (h) performance of special projects as yet undetermined.
It is specifically understood that if Executive is not subject to Section 409A
the Consulting Term shall be extended for an additional six months.

 

 

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

 

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

 

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

 

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

 

a.               In consideration of the payment and other benefits
described in Section 1, which Employee would otherwise not be
entitled to except for signing this Agreement, Employee does hereby
unconditionally, irrevocably and absolutely release and discharge the Employer
and any related holding, parent, sister or subsidiary entities and all of their
respective boards of directors, officers, employees, agents, volunteers,
attorneys, insurers, divisions, successors and assigns from any and all loss,
liability, claims, demands, causes of action or suits of any type, whether in
law and/or in equity, related directly or indirectly, or in any way connected
with any transaction, affairs or occurrences between them to date, including,
but not limited to, Employee’s employment with the Employer and the termination
of said employment.  This Agreement
specifically applies, without limitation, to any and all contract or tort
claims, claims for wrongful termination, wage claims, and claims arising under
Title VII of the Civil Rights Act of 1991, the Americans with Disabilities Act,
the Equal Pay Act, the California Fair Employment and Housing Act, the Fair
Labor Standards Act, the Family and Medical Leave Act, the California Family
Rights Act, the California Labor Code, and any and all federal or state
statutes or provisions governing the employment relationship or discrimination
in employment except the federal statute specifically excluded hereafter.  This release specifically excludes any and
all loss, liability, claims, demands, causes of action or suits of any type
arising under the ADEA.  Employee’s
release of ADEA claims will be addressed separately in Section 5 of
this Agreement.

 

b.              Employee irrevocably and absolutely agrees that he/she
will not prosecute nor allow to be prosecuted on his/her behalf, in any
administrative agency, whether federal or state, or in any court, whether
federal or state, any claim or demand of any type related to the matters released
above, it being the intention of the parties that with the execution by
Employee of this release, the Employer and any related holding, parent, sister
or subsidiary corporations or entities and all of their respective boards of
directors, officers, employees, agents, volunteers, attorneys, insurers,
divisions, successors and assigns will be absolutely, unconditionally and
forever discharged of and from all obligations to or on behalf of Employee
related in any way to the matters discharged herein.

 

 

5.               Release of All ADEA Claims.

 

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

 

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

 

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

 

d.              In consideration of the separation payment and other
benefits made to Employee described in Section 1 of this Agreement,
which Employee would otherwise not be entitled to except for signing this
Agreement, Employee does hereby unconditionally, irrevocably and absolutely
release and discharge the Employer and any related holding, parent, sister or
subsidiary entities and all of their respective boards of directors, officers,
employees, agents, volunteers, attorneys, insurers, divisions, successors and
assigns from any and all loss, liability, claims, demands, causes of action or
suits of any type arising under the ADEA and related directly or indirectly to
Employee’s employment with the Employer and the termination of said employment.

 

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

 

A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT
KNOW OF OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE RELEASE,
WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH THE
DEBTOR.

 

 

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

 

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

 

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

 

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

 

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

 

11.         Trade Secret/Proprietary Information. 
Employee hereby reaffirms his obligations under his Employment Agreement
with the Employer to which this Agreement relates, which shall remain in effect
to the extent provided in the Employment Agreement.  Employee further agrees that he shall not
disclose to any person(s) or entity(ies) at any time or in any manner,
directly or indirectly, any information relating to the operations of the
Employer which has not already been disclosed to the general public.  Employee agrees that this provision includes,
but is not limited to, the following information: proprietary information
and/or trade secrets; secret formulae; customer lists and/or names; product and
service prices; customer charges; contracts; contract negotiations and employee
relations matters.  Employee understands
and agrees that this list is not all-inclusive.

 

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

 

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

 

 

	
  Dated:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  [INSERT EMPLOYEE
  NAME]

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  1st Pacific Bank of California:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Dated:

  	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Its:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  1st Pacific Bancorp:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Dated:

  	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Its:

  	
   

  
						

 

 

EXHIBIT B

 

EXECUTIVE
ARBITRATION AGREEMENT

 

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

 

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

 

1.                                       Claims Covered By The Arbitration
Agreement.  Executive, Bank and Bancorp mutually consent
to the resolution by final and binding arbitration of all claims or
controversies (“claims”) that Bank and/or Bancorp may have against
Executive or that Executive may have against Bank, Bancorp or against either of
their officers, directors, partners, employees, agents, pension or benefit
plans, administrators, or fiduciaries, or any subsidiary or affiliated company
or corporation (collectively referred to as the “Employer”), relating
to, resulting from, or in any way arising out of Executive’s employment
relationship with the Employer, the Employment Agreement and/or the termination
of Executive’s employment relationship with the Employer, to the extent
permitted by law.  The claims covered by
this Arbitration Agreement include, but are not limited to, claims for wages or
other compensation due; claims for breach of any contract or covenant (express
or implied); tort claims; claims for discrimination and harassment (including,
but not limited to, race, sex, religion, national origin, age, marital status
or medical condition, disability, sexual orientation, or any other
characteristic protected by federal, state or local law); claims for benefits
(except where an employee benefit or pension plan specifies that its claims
procedure shall culminate in an arbitration procedure different from this one);
and claims for violation of any public policy, federal, state or other
governmental law, statute, regulation or ordinance.

 

2.                                       Required Notice Of Claims And Statute Of
Limitations.  Executive may initiate arbitration by serving
or mailing a written notice to the Board of Directors of Bancorp at Bancorp’s
administrative headquarters, care of the Corporate Secretary.  The Employer may initiate arbitration by
serving or mailing a written notice to Executive at his last known
address.  The written notice must specify
the claims asserted against the other party. 
Notice of any claim sought to be arbitrated must be served within the
limitations period established by applicable federal or state law.

 

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

 

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

 

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

 

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

 

 

	
  Dated:

  	
     1/8/09

  	
   

  	
  /s/ JB James Burgess

  
	
   

  	
   

  	
  James H. Burgess, Executive

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  1st PACIFIC BANK OF CALIFORNIA,

  	
   

  
	
   

  	
   

  	
  a California state-chartered bank

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Dated:

  	
      January 8, 2009

  	
   

  	
  By:

  	
    /s/ Ronald Carlson

  
	
   

  	
   

  	
   

  	
  Ronald Carlson, Acting Chief Executive Officer

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  1st PACIFIC BANCORP,

  	
   

  
	
   

  	
   

  	
  a California corporation

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Dated:

  	
      January 8, 2009

  	
   

  	
  By:

  	
    /s/ Ronald Carlson

  
	
   

  	
   

  	
   

  	
  Ronald Carlson, Acting Chief Executive OfficerExhibit 10.1

 

The following
performance-based deferred stock awards under the Adolor Corporation 2003 Stock
Based Incentive Compensation Plan, as amended and restated, were made on January 6,
2009 to the following Grantees (as defined) and in the following amounts:

 

	
   

  	
   

  	
  Deferred

  	
   

  
	
  Grantee

  	
   

  	
  Stock Awards

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Michael R. Dougherty

  	
   

  	
  40,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Eliseo O. Salinas

  	
   

  	
  40,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  John M. Limongelli

  	
   

  	
  25,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Stephen W. Webster

  	
   

  	
  25,000

  	
   

  

 

 

PERFORMANCE-BASED
DEFERRED STOCK AGREEMENT

 

January     ,
2009

 

[Name] (“Grantee”)

[Address]

[Address]

 

Dear                                 :

 

Adolor Corporation, a
Delaware corporation (the “Company”), and the Grantee hereby enter into this Deferred
Stock Agreement (the “Agreement”).  All
capitalized terms used but not defined herein shall have the meaning ascribed
to such terms in the Adolor Corporation 2003 Stock Based Incentive Compensation
Plan, as amended and restated (the “Plan”).

 

1.                                      Grant of Deferred Stock.

 

(a)                                  Subject to the terms and conditions set forth
herein and in the Plan, the Company hereby grants (“Grant”) to Grantee, as of January 6,
2009 (the “Date of Grant”), the right to receive from the Company                 
shares of the common stock, par value $.0001 per share, of the Company (the “Deferred
Stock”).  The Deferred Stock may not be transferred by Grantee or
subjected to any security interest until the restrictions have lapsed in
accordance with the terms of the Plan and the terms and conditions hereof.

 

(b)                                 This Grant shall become null and void unless
Grantee shall accept these terms and conditions by executing this Agreement
below and returning it to Finance within thirty (30) days of the date hereof. 
By accepting the Grant, Grantee agrees to be bound by the terms of the Plan and
this Agreement and further agrees that all of the decisions and determinations
of the Committee (as defined in the Plan) with respect to the Deferred Stock
shall be final and binding.  The Company will not issue certificates for
any portion of the Deferred Stock until all of the restrictions on that portion
of the Deferred Stock have lapsed.

 

2.                                      Restrictions.

 

(a)                                  Vesting Period.  The restrictions on the Deferred
Stock (described in Section 2(b) below) shall lapse, and the Deferred
Stock shall no longer be forfeitable (as described in Section 3 below), at
such time as quarterly net sales of ENTEREG® (alvimopan) Capsules as measured through
the quarterly period ending June 30, 2010 and as reported in the Company’s
Form 10-Q and/or Form 10-K (as the case may be) filed with the U.S.
Securities and Exchange Commission (the “Public Filings”) are equal to or in
excess of $12.5 million for two consecutive fiscal quarterly periods  (the “Vesting Date”).  The period during which any portion of the Deferred
Stock actually remains subject to the restrictions of Paragraph 2(b) below
is referred to herein and in the Plan as the “Restriction Period” for such
portion of the Deferred Stock.

 

(b)                                 Restrictions on Transfer; Shares Subject to
Forfeiture.  Grantee
may not sell, assign, transfer, pledge or otherwise dispose of any portion of
the Deferred Stock at any time during the Restriction Period for such Deferred
Stock.  Any attempt to sell, assign, transfer, pledge or otherwise dispose
of the Deferred Stock contrary to the provisions hereof, and the levy of any
execution, attachment or similar process upon the Deferred Stock, shall be
null, void and without effect.

 

(c)                                  Certificates.  Unless the Deferred Stock is
forfeited pursuant to Paragraph 3 below, at the end of the Restriction Period
applicable to that portion of the Deferred Stock, Grantee will be entitled to
receive an unrestricted certificate representing that portion of the Deferred
Stock.

 

 

3.                                      Termination of Grant; Death
of Grantee.

 

(a)                                  Should Grantee’s employment or service with
the Company or one of its subsidiaries terminate for any reason other than by
reason of death during the Restriction Period, Grantee will forfeit all of the Deferred
Stock if the Restriction Period has not expired on or before the effective date
of such termination and this Grant shall be immediately cancelled, without any
action required by the Company, and with no compensation due to Grantee in
respect of the Grant..

 

(b)                                 If the conditions for vesting set forth in Section 2(a) above
shall have not been met on or prior to the date of the Company’s release of its
financial results in its Public Filings for the fiscal quarter ended June 30
2010, the Grantee will forfeit all of the Deferred Stock and this Grant shall
be immediately cancelled, without any action required by the Company, and with
no compensation due to Grantee in respect of the Grant.

 

(c)                                  Should Grantee die during the Restriction
Period, all restrictions imposed under Section 2(b) above with
respect to such Deferred Stock shall lapse and such shares shall become
transferable and nonforfeitable.

 

4.                                      Privilege of Stock Ownership.

 

Grantee shall not have, with
respect to any Deferred Stock, the right to vote the shares or the right to
receive any cash or other dividends declared thereon, until the Restriction
Period has expired.

 

5.                                      Certain Corporation
Transactions.

 

The
provisions of the Plan applicable to a Change of Control (as defined in the
Plan) shall apply to the Deferred Stock and, in the event of a Change of
Control, any remaining restrictions on the Deferred Stock (described in Section 2(b) above)
shall lapse, and the Deferred Stock shall no longer be forfeitable (as
described in Section 3 above).

 

6.                                      Withholding.

 

The
Grantee shall be required to pay to the Company, or make other arrangements
satisfactory to the Company to provide for the payment of, any federal, state,
local or other taxes that the Company is required to withhold with respect to
the grant or vesting of the Deferred Stock.  Grantee may make an election
to satisfy any income tax withholding obligation with respect to the Deferred
Stock by having shares withheld up to an amount that does not exceed Grantee’s
minimum applicable withholding tax rate for federal (including FICA), state and
local tax liabilities.  Such election must be in the form and manner
prescribed by the Committee.  If Grantee is a director or officer (within
the meaning of Rule 16a-1(f) promulgated under the Securities
Exchange Act of 1934, as amended), such election must be irrevocable and must
be made six months prior to the date on which all restrictions lapse with
respect to such Deferred Stock.

 

7.                                      Compliance with Laws and
Regulations.

 

(a)                                  The obligations of the Company to
deliver shares pursuant to the Deferred Stock shall be subject to the condition
that if at any time the Committee shall determine, in its discretion, that the
listing, registration or qualification of the shares upon any securities
exchange or under any state or federal law, or the consent or approval of any
governmental regulatory body is necessary or desirable as a condition of, or in
connection with, the issuance of such shares, the shares may not be issued in
whole or in part unless such listing, registration, qualification, consent or
approval shall have been effected or obtained free of any conditions not
acceptable to the Committee.  The issuance of shares to Grantee pursuant
to this Grant is subject to applicable taxes and other laws or regulations of
the United States or any state having jurisdiction thereof.

 

 

(b)                                 In connection with this Grant,
Grantee will execute and deliver to the Company such representations in writing
as may be requested by the Company so that it may comply with the applicable
requirements of federal and state securities laws.

 

(c)                                  Grantee agrees to be bound by the
Company’s policies regarding the transfer of shares of the Company’s common
stock and understands that there may be certain times during the year in which
Grantee will be prohibited from selling, transferring, pledging, donating,
assigning, mortgaging, hypothecating or encumbering shares after the applicable
restrictions have lapsed.

 

8.                                      No Employment Contract.

 

Nothing
herein or in the Plan confers upon Grantee any right to continue in the employ
or service of the Company (or any subsidiary) or interferes with or restricts
in any way the rights of the Company (or any subsidiary), which are hereby
expressly reserved, to discharge Grantee at any time for any reason or no
reason, with or without cause.  Except to the extent the terms of any employment
contract between the Company (or any subsidiary) and Grantee may expressly
provide otherwise, neither the Company nor any of its subsidiaries is under any
obligation to continue the employment of Grantee for any period of specified
duration.

 

9.                                      Notices.

 

Any
notice required to be given or delivered to the Company under the terms herein
will be in writing and addressed to the Company, Attention: Finance, at its
corporate office at 700 Pennsylvania Drive, Exton, Pennsylvania 19341. 
Any notice required to be given or delivered to Grantee will be in writing and
addressed to Grantee at the address provided above or such other address
provided in writing by Grantee to the Company.  All notices will be deemed
to have been given or delivered upon personal delivery or upon deposit in the
U.S. mail, postage prepaid and properly addressed to the party to be notified.

 

10.                               Assignment.

 

The
rights and protections of the Company hereunder shall extend to any successors
or assigns of the Company and to the Company’s parents, subsidiaries, and
affiliates.  This Grant may be assigned by the Company without Grantee’s
consent.

 

11.                               Applicable Law.

 

The
validity, construction, interpretation and effect of this instrument shall be
governed by and construed in accordance with the laws of the State of Delaware,
without giving effect to the conflicts of laws provisions hereof.

 

12.                               Construction.

 

(a)                                  These terms and conditions and the Grant
evidenced hereby are made and granted pursuant to the Plan and are in all
respects limited by and subject to the express terms and provisions of the
Plan, which terms are incorporated herein.

 

(b)                                 This Grant is subject to interpretations,
regulations and determinations concerning the Plan established from time to
time by the Committee in accordance with the provisions of the Plan, including,
but not limited to, provisions pertaining to (i) rights and obligations
with respect to withholding taxes, (ii) the registration, qualification or
listing of the shares, (iii) changes in capitalization of the Company, and
(iv) other requirements of applicable law.  The Committee shall have
authority to interpret and construe the Grant pursuant to the terms of the
Plan, and all decisions of the Committee with respect to any question or issue
arising under the Plan or these terms and conditions will be conclusive and
binding on all persons having an interest in this Grant.

 

 

13.                               Documents.

 

By
signing below, you agree to be bound by the applicable terms of the Plan and
acknowledge that the following documents have been made available to you via
the Adolor intranet (located within the “Finance” section):  the Plan, the Prospectus for the Adolor
Corporation 2003 Stock-Based Incentive Compensation Plan and Adolor Corporation
Annual Report on Form 10-K as most recently filed with the Securities and
Exchange Commission.

 

[SIGNATURE PAGE FOLLOWS]

 

 

IN WITNESS WHEREOF, Adolor Corporation
has caused this Agreement to be executed in duplicate on its behalf by its duly
authorized officer and the Grantee has also executed this Agreement in
duplicate.

 

	
   

  	
   

  	
  ADOLOR
  CORPORATION

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Date:        

  	
   

  	
   

  	
   

  

 

I hereby accept the Grant
described in this Agreement, and I agree to be bound by the terms of the Plan
and this Agreement.  I hereby further agree that all of the decisions and
determinations of the Committee shall be final and binding.

 

	
   

  	
  Grantee:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Address:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Date:

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