EMPLOYMENT AGREEMENT THIS EMPLOYMENT AGREEMENT (the "Agreement") is made and entered into as of day of [_], 2018 (the "Effective Date"), by and among Curt A. Christianssen (thethis"Executive"), on the one hand, and Pacific Mercantile Bank, a Califomia...
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is made and entered into as of
day of [_], 2018 (the "Effective Date"), by and among ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇▇▇ (thethis"Executive"), on the one hand, and Pacific Mercantile Bank, a Califomia banking corporation (the"Bank"), on the other hand (Executive and the Bank collectively, the "Parties").
RECITALS
WHEREAS, Pacific Mercantile Bancorp ("PMB") is a bank holding company registered
under the Bank Holding Company Act of 1956, as amended, subject to the primary supervision
and regulation ofthe Board ofGovemors ofthe Federal Reserve System ("FRB").
WHEREAS, the Bank is a Califomia chartered commercial bank and wholly-owned
subsidiary ofPMB, subject to the primary supervision and regulation ofthe Califomia Department
ofBusiness Oversight ("CDBQ") and the FRB by virtue ofits membership in the Federal Reserve
Bank of San Francisco.
WHEREAS, it is the intention ofthe Parties to enter into an employment agreement for the
purposes of assuring the services of Executive as the Executive Vice President, Chief Financial
Officer ofthe Bank and PMB on the terms and subject to the conditions set forth in this Agreement.
NOW, THEREFORE, based on the foregoing premises and in consideration ofthe mutual
covenants and representations contained herein, the Parties hereto agree as follows:
1. Term. The Bank (the "Em^▇▇▇▇▇") hereby employs Executive, and Executive
hereby accepts employment with Employer, under the terms ofthis Agreement. The term ofthis
Agreement shall be for a period of three (3) years (the "Initial Term") commencing as of the
Effective Date, subject to the termination provisions ofparagraph 4. The term ofthis Agreement,
as in effect from time to time in accordance with the foregoing, shall be referred to herein as the
"Term". The period oftime between the Effective Date and the termination ofthe Executive's
employment hereunder shall be referred to herein as the "Employment Period."
2. Employment.
(a) Positions and Reporting. Executive shall be employed as the Executive
Vice President, Chief Financial Officer of the Bank. During the Employment Period, Executive
shall report directly to the ChiefExecutive Officer ofthe Bank.
(b) Authoritv and Duties. Executive shall exercise such authority, perform such
executive duties and functions and discharge such responsibilities as are reasonably associated
with Executive's position as Executive Vice President, Chief Financial Officer, commensurate
with the authority vested in Executive pursuant to this Agreement and consistent with the bylaws
ofthe Bank and ofPMB. During the Employment Period, Executive shall devote his full business
time, skill and efforts to the business of Employer and shall not during the Employment Period
engage in any other business activities, duties, or pursuits whatsoever, or directly or indirectly
render any services of a business, commercial, or professional nature to any other person or
organization, whether for compensation or otherwise, without the prior written consent of the
SMRH:485126413.3 1
Board ofDirectors ofEmployer (the "Board"). Notwithstanding the foregoing. Executive may (i)
serve in any capacity with any civic, educational or charitable organization, or any trade
association, without seeking or obtaining approval by the Board, provided such activities and
service do not materially interfere or conflict with the performance ofhis duties hereunder and (ii)
with the approval ofthe Board serve on the boards ofdirectors ofother corporations that are not
involved in commercial banking or similar business activities; provided, however, Executive shall
not directly or indirectly acquire, hold, or retain any beneficial interest in any business competing
with or similar in nature to the business of Employer except passive shareholder investments in
other financial institutions and their respective affiliates which do not exceed three percent (3%)
of the outstanding voting securities in the aggregate in any single financial institution and its
affiliates on a consolidated basis.
(c) Notwithstanding provisions of Section 2(b) to the contrary, following
approval ofthis Agreement by the Compensation Committee ofthe Board ofDirectors, the Bank
consents to the provision ofservices by the Executive to ▇▇▇▇▇▇▇▇▇ & Company and its subsidiaries
and affiliates as described in and pursuant to the terms ofthat certain Reimbursement Agreement
dated January 1, 2015 by and between the Bank and ▇▇▇▇▇▇▇▇▇ & Company.
(d) Executive hereby represents and agrees that the services to be performed
hereunder are of a special, unique, unusual, extraordinary, and intellectual character that gives
them a peculiar value, the loss of which cannot be reasonably or adequately compensated in
damages in an action at law. Executive therefore expressly agrees that Employer, in addition to
any other rights or remedies that Employer may possess, shall be entitled to injunctive and other
equitable reliefto prevent or remedy a breach ofthis Agreement by Executive.
3. Compensation and Benefits.
(a) Salary. During the Initial Term Executive shall receive an annual base
salary of $300,000 payable in equal semimonthly payments (the "Base Salary"). Such Base Salary
shall be subject to review in the eleventh (llth) month after the Effective Date, and at each
anniversary of the Effective Date thereafter, or during Executive's normal officer review period,
for possible adjustment by the Chief Executive Offlcer in concurrence with the Compensation
Committee ofthe Bank based on various factors including, but not limited to, market conditions,
the consolidated results ofoperations ofthe Bank and PMB and the performance ofExecutive, but
shall in no event be decreased from the level set forth above during the Initial Term. All payments
ofBase Salary shall be subject to applicable adjustments for withholding taxes, pro-rations for any
partial payment periods and such other applicable payroll procedures ofthe Bank.
(b) Salary Continuation During Disability. IfExecutive for any reason (except
as expressly provided below) becomes temporarily or permanently disabled so that he is unable to
perform the duties under this Agreement, Executive shall be paid the Base Salary otherwise
payable to Executive pursuant to subparagraph 3(a) ofthis Agreement, reduced by the amounts
received by Executive from state disability insurance, or worker's compensation or other similar
insurance benefits through policies provided by Employer, for a period of six (6) months from the
date ofdisability. For purposes ofthis paragraph 3(b), "disability" shall be defined as provided in
the Employer's disability insurance program.
SMRH:485126413.3
(c) Cash Incentive Payments. Executive shall be eligible to participate in the
Management Annual Incentive Plan. Executive's bonus, if any, shall be paid in one lump sum to
Executive at such time as other executive bonuses are paid. The Chief Executive Officer retains
the discretion to determine whether a pro-rata bonus is appropriate ifthe Executive is terminated
or leaves the employ ofthe Bank prior to the annual determination ofbonuses. All cash incentive
payments shall be subject to applicable adjustments for applicable withholding and payroll taxes.
Notwithstanding any provision of any incentive plan or arrangement, no right of continued
employment or any modification ofthe "at will" nature ofExecutive's employment with Employer
shall be conferred upon Executive thereunder or result therefrom.
(d) Insurance Benefits.
such group
During the Employment Period, Executive shall
and health (including medical, dental, vision andreceive life, disability,
hospitalization), accident and disability insurance coverage and other beneflts which Employer
extends, as a matter of policy, to all of its executive employees, except as otherwise provided
herein, and shall be entitled to participate in all benefit and other incentive plans ofthe Employer,
on the same basis as other like employees ofEmployer.
(e) Vacation. Executive shall be entitled to four (4) weeks ofannual vacation
during the Employment Period at his then existing rate of Base Salary, which shall be scheduled
in Executive's discretion, subject to and taking into account applicable banking laws and
regulations and business needs. Vacation will accrue in accordance with the Bank's personnel
policies.
(f) Business Expenses. During the Employment Period, Employer shall
promptly reimburse the Executive for all documented ordinary and necessary business expenses
incurred by Executive in the performance ofhis duties under this Agreement. Executive shall also
be reimbursed for reasonable expenses incurred in activities associated with promoting the
business ofEmployer, including expenses for entertainment, travel, conventions, and educational
programs. All such expenses described above will be subject to compliance with applicable
policies of Employer. All such reimbursements shall be made upon presentation and approval of
receipts, invoices or other appropriate evidence of such expense in accordance with the policies
Employer in effect from time to time.
(g) Professional License Expenses. During the Employment Period, Employer
shall reimburse the Executive for all documented ordinary and necessary expenses incurred by
Executive in maintaining professional business licenses and certifications that he possesses as of
the date ofthis Agreement. All such expenses described above will be subject to compliance with
applicable policies of Employer. All such reimbursements shall be made upon presentation and
approval of receipts, invoices or other appropriate evidence of such expense in accordance with
the policies Employer in effect from time to time.
(h) Car Allowance. The Bank shall provide the Executive with a monthly
automobile allowance of $950.00 per month during the Employment Period. Executive shall (A)
obtain and maintain public liability insurance and property damage insurance policies with
insurer(s) acceptable to Employer and with such coverage in such amounts as may be reasonably
acceptable to Employer, and (B) provide copies of such policies, endorsements or other evidence
ofinsurance acceptable to Employer.
SMRH:485126413.3
4. Termination ofEmployment.
(a) Termination for Cause. The Board of Bank may terminate Executive's
employment hereunder for "Cause" or without "Cause." For purposes of this Agreement
termination for "Cause" shall mean (i) conviction of a crime directly related to his employment
hereunder, (ii) conviction of a crime involving moral turpitude, (iii) willful and gross
mismanagement of the business and affairs of Employer, (iv) willful and intentional violation of
any state or federal banking or securities laws, or of the bylaws, rules, policies or resolutions of
Bank, or the rules or regulations ofor any final order issued by the FRB, the CDBO, or the Federal
Deposit Insurance Corporation (the "FDIC"), (v) any violation of the Employer's policy against
harassment, equal employment opportunity policy, drug and alcohol policy and/or the
confldentiality agreement that shall Employee shall execute at the commencement of his
employment and (vi) breach of any material provision of this Agreement. For purposes of this
Agreement, no act, or the failure to act, on Executive's part shall be considered "willful" unless
done, or omitted to be done, not in good faith and without reasonable belief that the action or
omission was in the best interests of Employer. Executive shall not be deemed to have been
terminated for Cause unless and until there shall have been delivered to him a notice oftermination.
In the event employment ofExecutive is terminated pursuant to this subparagraph 4(a), Employer
shall have no further liability to Executive other than for compensation accrued and for
reimbursement ofbusiness expenses incurred through the date oftermination but not yet paid.
Termination under this subparagraph 4(a) shall not prejudice any remedy that the Employer
may have at law, in equity, or under this Agreement.
(b) Termination by Employer Without Cause or by Executive for Good Reason.
Employer may tenninate the employment of Executive without "Cause" (as defined in
subparagraph 4(a)) at any time during the Employment Period by giving written notice to
Executive specifying therein the effective date of termination. Executive shall have the right at
any time to terminate his employment with the Bank for any reason or for no reason. For purposes
of this Agreement, and subject to Employer's opportunity to cure as provided in Section 4(c)
hereof, Executive shall have "Good Reason" to terminate his employment hereunder if such
termination shall be the result of:
(i) a material diminution during the Employment Period in the
Executive's title, duties or responsibilities as set forth in Section 2 hereof without Executive's
consent;
(ii) a material breach by Employer of the compensation and benefits
provisions set forth in Section 3 hereof;
Agreement; or
(iii) a material breach by Employer of any material terms of this
(iv) the relocation of Executive's principal place of employment to any
location more than 50 miles from the Bank's headquarters at the Effective Date.
(c) Notice and Opportunity to Cure. Notwithstanding the foregoing, it shall be
a condition precedent to Employer's right to terminate this Agreement under subparagraph 4(a)(iv)
SMRH:485126413.3 4
and Executive's right to terminate his employment for "Good Reason" that (1) the party alleging a
breach shall first have given the other party written notice stating with specificity the reason for
the termination ("breach") and (2) ifsuch breach is susceptible ofcure or remedy, a period of30
days from and after the giving of such notice to cure the breach. Ifthe breach cannot reasonably
be cured or remedied within 30 days, the period for remedy or cure shall be extended for a
reasonable time (not to exceed 30 days), provided the party against whom a breach is alleged has
made and continues to make a diligent effort to effect such remedy or cure.
(d) Termination Upon Death or Permanent Disability. This Agreement shall
terminate automatically upon: (i) the death of Executive, and (ii) the "permanent disability" of
Executive as such term is defined in the disability insurance provided by Employer, or if such
insurance is not provided by Employer, the term shall mean that Executive has been deemed by a
medical care provider to indefinitely be unable to perform the essential functions of Executive's
position with or without accommodation. If the Employment Period is terminated by reason of
the permanent disability ofthe Executive, Employer shall give 30-days' advance written notice to
that effect to the Executive or his representative. Employer and Employee shall comply with any
obligations they may respectively have, under state or federal law, to interact regarding reasonable
accommodations.
5. Consequences of Termination. The following are the benefits to which Executive
is entitled upon termination ofemployment in all positions with Employer, and such payments and
benefits shall be the exclusive payments and benefits to which Executive is entitled upon such
termination. Except in the case oftermination ofemployment by Employer for Cause, or due to
death, the post-termination payments (other than those required by law) and benefits shall only be
provided if the Executive first enters into a form of general release agreement reasonably
satisfactory to Employer releasing Employer from any and all claims, known and unknown, related
to the Executive's employment with the Bank.
(a) Termination Without Cause or for Good Reason. In the event oftermination
ofExecutive's employment (i) by Employer without "Cause" (other than upon death or permanent
disability), or (ii) by Executive for "Good Reason", Executive shall be entitled to the following
severance pay:
(i) Severance Pay - a lump sum amount equal to twelve (12) months of
the Executive's annual Base Salary.
(b) Termination Upon Disability. In the event of termination of Executive's
employment hereunder by Employer on account of permanent disability, Employer shall pay to
Executive the accrued Base Salary and accrued and unused vacation eamed through the date of
disability. Such payment shall be made no later than sixty (60) days after the date ofdisability.
(c) Termination Upon Death. In the event of termination of Executive's
employment hereunder on account of Executive's death. Employer shall pay to Executive's
beneflciary or beneficiaries or his estate, as the case may be, the accrued Base Salary and accrued
and unused vacation eamed through the date of death. Such payment shall be made no later than
sixty (60) days after the date of death. In addition, Executive's beneficiary(ies) or his estate shall
be entitled to the payment of benefits pursuant to any life insurance policy of Executive, as
SMRH:485126413.3
provided for in Section 3(c) above. Executive's beneficiary or estate shall not be required to remit
to Employer any payments received pursuant to any life insurance policy purchased pursuant to
Section 3(c) above.
(d) Termination for Cause or Due to End of the Term. In the event the
employment ofExecutive is terminated by Employer for Cause, no severance payment or benefit
shall be provided. In the event the employment of Executive is terminated as a result of the
expiration ofthe Term, Executive shall be entitled to no severance payment or benefit ofany kind
notwithstanding any provision to the contrary in the Employer's employee manual or policies then
in effect, except as to matters such as coverage under The Consolidated Omnibus Budget
Reconciliation Act of 1985 ("COBRA") and unused vacation required by law without reference to
such manual or policies.
(e) Accrued Rights. Notwithstanding the foregoing provisions of this Section
5, in the event oftermination ofExecutive's employment hereunder for any reason or for no reason,
Executive shall be entitled to payment of any unpaid portion of his Base Salary through the
effective date oftermination, payment ofany unreimbursed expenses incurred pursuant to Sections
3(f) or 3(g) above, and payment ofany accrued but unpaid benefits solely in accordance with the
terms ofany incentive bonus or employee beneflt plan or program ofEmployer.
(f) Non-assignability. Neither Executive nor any other person or entity acting
on his behalf or as his representative shall have any power or right to transfer, assign, anticipate,
hypothecate, mortgage, commute, modify, or otherwise encumber in advance any ofthe rights or
benefits of Executive under this Section 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 Section 5(f) shall not affect the
interpretation ofany other provision ofthis Agreement.
(g) Regulatory Restrictions. Notwithstanding anything to the contrary
contained in this Agreement:
(i) If Executive is removed and/or permanently prohibited from
participating in the conduct of Employer's affairs by an order issued under Section 8(e)(4) or
8(g)(l) ofthe Federal Deposit Insurance Act ("FDIA") (12 U.S.C. 1818(e)(4) and (g)(l)), all
obligations of Employer under this Agreement shall terminate, as of the effective date of such
order, except for the payment of Base Salary due and owing on the effective date of said order,
reimbursement of business expenses incurred as of the effective date of termination and such
matters required by law.
(ii) If Executive is suspended and/or temporarily prohibited from
participating in the conduct of Employer's affairs by a notice served under Section 8(e)(3) or
8(g)(l) ofthe FDIA (12 U.S.C. 1818(e)(3) and (g)(l)), all obligations ofEmployer under this
Agreement shall be suspended as ofthe date ofservice, unless stayed by appropriate proceedings.
If the charges in the notice are dismissed, Employer shall (i) pay Executive all or part of the
compensation withheld while its contract obligations were suspended and (ii) reinstate (in whole
or in part) any ofits obligations which were suspended.
SMRH:485126413.3
(iii) If Bank is in default (as defmed in Section 3(x)(l) ofthe FDIA), all
obligations under this Agreement shall terminate as ofthe date ofdefault, but the vested rights of
the parties shall not be affected.
(iv) All obligations under this Agreement shall be terminated, except to
the extent a determination is made that continuation ofthe contract is necessary for the continued
operation ofEmployer (i) by the director ofthe FDIC or his or her designee (the "Director"), at the
time the FDIC enters into an agreement to provide assistance to or on behalf of Employer under
the authority contained in 13(c) ofthe FDIA; or (ii) by the Director, at the time the Director
approves a supervisory merger to resolve problems related to operation of Employer when the
Employer is determined by the Director to be in an unsafe and unsound condition. Any rights of
the Executive that have already vested, however, shall not be affected by such action.
(v) No payments shall be made pursuant to this paragraph 5 or any other
provision herein in violation of the requirements of Section 18(k) of the FDIA (12 U.S.C.
§1828(k)).
(h) IRC Section 280G. In no event shall the payment(s) described in this
paragraph 5 exceed the amount pennitted by Section 280G ofthe Intemal Revenue Code of 1986,
as amended f"Section 280G"). Therefore, ifthe aggregate present value (determined as ofthe date
ofthe change ofcontrol in accordance with the provisions ofSection 280G) ofboth the severance
payment and all other payments to Executive in the nature of compensation which are contingent
on a change in ownership or effective control ofBank or PMB or in the ownership ofa substantial
portion of the assets of the Bank (the "Aggresate Severance") would result in a "parachute
payment," as defined under Section 280G, then the Aggregate Severance shall not be greater than
an amount equal to 2.99 multiplied by Executive's "base amount" for the "base period," as those
terms are deflned under Section 280G. In the event the Aggregate Severance is required to be
reduced pursuant to this subparagraph 5(h), the last payments in time shall be reduced first.
(i) Conditions to Severance Benefits. The Bank shall have the right to seek
repayment ofthe severance payments and benefits or to terminate payments or benefits provided
by this paragraph 5 (i) in the event that the Executive fails to honor, in accordance with their
terms, the provisions ofparagraphs 6 or 9 hereofor (ii) to the extent such payments or benefits
would violate Section 18(k) ofthe FDIA (12 U.S.C. §1828(k)).
6. Confidentialitv. Executive agrees that he will not at any time during the
Employment Period or at any time thereafter for any reason, in any fashion, form or manner, except
as required by law to comply with legal process, either directly or indirectly, divulge, disclose or
communicate to any person, firm, corporation or other business entity, in any manner whatsoever,
any financial information or trade or business secrets, including, without limiting the generality of
the foregoing, the techniques, methods or systems ofits operation or management, any information
regarding its financial matters, customer lists, computer software, or any other information
conceming the business or operations of Employer, its subsidiaries, affiliates and any of its
customers, govemmental relations, customer contacts, underwriting methodology, loan program
configuration and qualiflcation strategies, marketing strategies and proposals, its manner of
operation, its plans or other material data, or any other information conceming the business ofthe
Employer, its subsidiaries or affiliates, and the Employer's goodwill (the "Busmess"). The
SMRH:485126413.3 7
provisions of this Section 6 shall not apply to (i) information disclosed in the performance of
Executive's duties to Employer based on his good faith beliefthat such a disclosure is in the best
interests ofEmployer; (ii) information that is, at the time ofthe disclosure, public knowledge; (iii)
information disseminated by Employer to third parties in the ordinary course of business; (iv)
information lawfully received by Executive from a third party who, based upon inquiry by
Executive, is not bound by a confidential relationship to Employer or otherwise improperly
received the information; or (v) information disclosed under a requirement of law or as directed
by applicable legal authority havingjurisdiction over Executive. In the event Executive is required
by law to disclose such information described above, Executive will provide Employer and their
counsel with immediate notice ofsuch request so that they may consider seeking a protective order.
Notwithstanding the foregoing, Executive may disclose such information conceming the business
or operations of Employer and its subsidiaries and affiliates as may be required by the FRB,
CDBO, FDIC or other regulatory agency having jurisdiction over the operations of Employer in
connection with an examination ofBank or PMB or other proceeding conducted by such regulatory
agency.
Executive agrees that all written, printed or electronic material, notebooks and records
including, without limitation, computer disks, used and/or developed by Executive for Employer
during the Term of this Agreement, other than Executive's personal address lists, telephone lists,
notes and diaries, are solely the property of Employer, and that Executive has no right, title or
interest therein. Upon termination of Executive's employment, Executive or Executive's
representative shall promptly deliver possession of all such materials (including any copies
thereof) to the Bank.
7. Key-man Life Insurance. Employer shall have the right to obtain and hold a "key-
man" life insurance policy on the life of Executive with the Bank as beneficiary of the policy.
Executive agrees to provide any information required for the issuance of such policy and submit
himselfto any physical examination required for such policy.
8. Unsecured General Creditor. Neither Executive nor any other person or entity shall
have any legal right or equitable rights interests or claims in or to any property or assets of
Employer under the provisions ofthis Agreement. No assets ofEmployer shall be held under any
trust for the beneflt of Executive or any other person or entity or held in any way as security for
the fulfllling ofthe obligations ofEmployer under this Agreement. All ofEmployer's assets shall
be and remain the general, unpledged, unrestricted assets of Employer. Employer's obligations
under this Agreement are unfunded and unsecured promises, and to the extent such promises
involve the payment ofmoney, they are promises to pay money in the future. Executive and any
person or entity claiming through him shall be unsecured general creditors with respect to any
rights or benefits hereunder.
9. Business Protection Covenants.
(a) Covenant Not to Compete. Executive agrees that he will not, during the
Employment Period, voluntarily or involuntarily, directly or indirectly, (i) engage in any banking
or financial products or service business, loan origination or deposit-taking business or any other
business competitive with that ofthe Bank or its subsidiaries or affiliates ("Competitive Business")
within Orange County, Los Angeles County, San Diego County and San Bernardino County (the
SMRH:485126413.3
"Market Area"), (ii) directly or indirectly own any interest in (other than less than three percent
(3%) ofany publicly traded company or mutual fund), manage, operate, control, be employed by,
or provide management or consulting services in any capacity to any firm, corporation, or other
entity (other than 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, offlcer, or member ofthe Board or any ofits subsidiaries or affiliates to engage in any
action prohibited under (i) or (ii) ofthis paragraph 9(a).
(b) Inducing Employees To Leave The Bank: Employment ofEmployees. Any
attempt on the part of the Executive to induce others to leave Employer's employ, or the employ
of any of its subsidiaries or affiliates, or any effort by Executive to interfere with Employer's
relationship with its other employees would be harmful and damaging to Employer. Executive
agrees that during the Employment Period and for a period of twelve (12) months thereafter,
Executive will not in any way, directly or indirectly: (i) induce or attempt to induce any employee
of the Employer or any of its subsidiaries of affiliates to quit employment with Employer or the
relevant subsidiary or affiliate; (ii) otherwise interfere with or dismpt the relationships between
Employer and its subsidiaries and affiliates and their respective employees; (iii) solicit or recruit
any employee of Employer or any subsidiary or affiliate or any former employee of Employer or
any subsidiary or affiliate.
(c) Nonsolicitation ofBusiness. For a period oftwelve (12) months from the
date of termination of employment, Executive will not, using Employer's trade secrets or
confidential information, divert or attempt to divert from Employer or any of its subsidiaries or
affiliates, any business Employer or a relevant subsidiary or affiliate had enjoyed or solicited from
its customers, borrowers, depositors or investors during the twelve (12) months prior to termination
ofhis employment.
(d) Bank's Ownership of Inventions. To the extent that Executive has
intellectual property rights of any kind in any pre-existing works which are subsequently
incorporated in any work or work product produced in rendering services to Bank, PMB or any
their subsidiaries or affiliates, Executive hereby grants Bank a royalty-free, irrevocable, world-
wide, perpetual non-exclusive license (with the right to sublicense), to make, have made, copy,
modify, use, sell, license, disclose, publish or otherwise disseminate or transfer such subject
matter. Similarly, Executive agrees that all inventions, discoveries, improvements, trade secrets,
original works of authorship, developments, formulae, techniques, processes, and know-how,
whether or not patentable, and whether or not reduced to practice, that are conceived, developed
or reduced to practice during Executive's employment with Employer, either alone orjointly with
others, if on Employer's time, using Employer's facilities, or relating to Employer shall be owned
exclusively by the Bank, and Executive hereby assigns to the Bank all of Executive's right, title
and interest throughout the world in all such intellectual property. Executive agrees that the Bank
shall be the sole owner of all domestic and foreign patents or other rights pertaining thereto, and
further agrees to execute all documents that the Bank reasonably determines to be necessary or
convenient for use in applying for, prosecuting, perfecting, or enforcing patents or other
intellectual property rights, including the execution of any assignments, patent applications, or
other documents that the Bank may reasonably request. This provision is intended to apply to the
extent permitted by applicable law and is expressly limited by Section 2870 ofthe Califomia Labor
Code, which is set forth in its entirety in Exhibit A to this Agreement. By signing this Agreement,
SMRH:485126413.3
Executive acknowledges that this Paragraph shall constitute written notice of the provisions of
Section 2870.
(e) Bank's Ownership of Copvrights. Executive agrees that all original works
of authorship not otherwise within the scope of paragraph 9(d) above that are conceived or
developed during Executive's employment with Employer, either alone or jointly with others, if
on Employer's time, using Employer facilities, or relating to Employer, or its subsidiaries or
affiliates, are "works for hire" to the greatest extent permitted by law and shall be owned
exclusively by the Bank, and Executive hereby assigns to the Bank all of Executive's right, title,
and interest in all such original works of authorship. Executive agrees that the Bank shall be the
sole owner of all rights pertaining thereto, and further agrees to execute all documents that the
Bank reasonably determines to be necessary or convenient for establishing in the Bank's name the
copyright to any such original works of authorship.
10. Resignations. The Executive agrees that upon termination ofemployment, for any
reason, he will submit his resignations from all offices with the Bank and PMB and all of their
respective subsidiaries and affiliates.
11. Other Agreements. The Parties further agree that to the extent ofany inconsistency
between this Agreement and any employee manual or policy of Employer, that the terms of this
Agreement shall supersede the terms of such employee manual or policy.
12. Notice. For the purposes of this Agreement, notices, demands and all other
communications provided for in this Agreement shall be in writing and shall be personally
delivered or (unless otherwise specified) mailed by United States certified or registered mail,
retum receipt requested, postage prepaid, or sent by facsimile, provided that the facsimile cover
sheet contains a notation ofthe date and time oftransmission, and shall be deemed received: (i) if
personally delivered, upon the date ofdelivery to the address ofthe person to receive such notice,
(ii) ifmailed in accordance with the provisions ofthis Section 12, two (2) business days affcer the
date placed in the United States mail, (iii) if mailed other than in accordance with the provisions
ofthis Section 12 or mailed from outside the United States, upon the date ofdelivery to the address
of the person to receive such notice, or (iv) if given by facsimile, when sent. Notices shall be
addressed as follows:
IftotheEmployer:
Ifto the Executive, to:
Pacific Mercantile Bank
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇
Attn: ChiefExecutive Offlcer
▇▇. ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇▇▇
▇ ▇▇▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
or to such other respective addresses as the Parties hereto shall designate to the other by like notice,
provided that notice of a change of address shall be effective only upon receipt thereof.
SMRH:485126413.3 10
13. Arbitration. Any dispute or controversy arising under or in connection with this
Agreement, the inception or tennination of the Executive's employment, or any alleged
discrimination or tort claim related to such employment, including issues raised regarding the
Agreement's formation, interpretation or breach, shall be settled exclusively by binding arbitration.
The only exception to the requirement ofbinding arbitration shall be for claims arising under the
National Labor Relations Act which are brought before the National Labor Relations Board, claims
for medical and disability benefits under the Califomia Workers' Compensation Act, Employment
Development Department claims, or as may otherwise be required by state or federal law.
However, nothing herein shall prevent the Executive from filing and pursuing proceedings before
the Califomia Department of Fair Employment and Housing, or the United States Equal
Employment Opportunity Commission (although ifExecutive chooses to pursue a claim following
the exhaustion ofsuch administrative remedies, that claim would be subject to the provisions of
this Agreement). In addition to any other requirements imposed by law, the arbitrator selected
shall be a retired Califomia Superior Court Judge, or an othenvise qualified individual to whom
the parties mutually agree, and shall be subject to disqualiflcation on the same grounds as would
apply to ajudge ofsuch court. All rules ofpleading (including the right ofdemurrer), all rules of
evidence, all rights to resolution of the dispute by means of motions for summary judgment,
judgment on the pleadings, andjudgment under Code ofCivil Procedure Section 631.8 shall apply
and be observed. The arbitrator shall have the immunity ofajudicial officer from civil liability
when acting in the capacity of an arbitrator, which immunity supplements any other existing
immunity. Likewise, all communications during or in connection with the arbitration proceedings
are privileged in accordance with Cal. Civil Code Section 47(b). As reasonably required to allow
full use and benefit of this agreement's modifications to the Act's procedures, the arbitrator shall
extend the times set by the Act for the giving of notices and setting of hearings. Awards shall
include the arbitrator's written reasoned opinion. Resolution of all disputes shall be based solely
upon the law goveming the claims and defenses pleaded, and the arbitrator may not invoke any
basis (including but not limited to, notions of "just cause") other than such controlling law. By
this binding arbitration provision, both Executive and Employer give up their respective right to
trial by jury of any claim one may have against the other.
14. Waiver of Breach. Any waiver of any breach of this Agreement shall not be
construed to be a continuing waiver or consent to any subsequent breach on the part either ofthe
Executive or of Employer. 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 speciflcally
waived.
15. Non-Assignment: Successors. Neither party hereto may assign his or its rights or
delegate his or its duties under this Agreement without the prior written consent ofthe other party;
provided, however, that: (i) this Agreement shall inure to the beneflt of and be binding upon the
successors and assigns of Employer upon any sale of all or substantially all of Employer's assets,
or upon any merger, consolidation or reorganization of Bank with or into any other corporation,
all as though such successors and assigns ofthe Bank and their respective successors and assigns
were the Bank; and (ii) this Agreement shall inure to the benefit ofand be binding upon the heirs,
assigns or designees of Executive to the extent of any payments due to them hereunder. As used
SMRH:485126413.3 11
in this Agreement, the term "Bank" or "Employer" shall be deemed to refer to any such successor
or assign ofthe Bank or Employer referred to in the preceding sentence.
16. Withholding of Taxes. All payments required to be made by Employer to the
Executive under this Agreement shall be subject to the withholding and deduction ofsuch amounts,
if any, relating to tax, and other payroll deductions as Employer may reasonably determine it
should withhold and/or deduct pursuant to any applicable law or regulation (including, but not
limited to, Executive's portion of social security payments and income tax withholding) now in
effect or which may become effective any time during the term ofthis Agreement.
17. Section 409A. IfExecutive determines, in good faith, that any compensation or
benefits provided by this Agreement may result in the application of Section 409A ofthe Intemal
Revenue Code of 1986, as amended (the "Code"). Executive shall provide written notice thereof
(describing in reasonable detail the basis therefor) to Employer, and Employer shall, in
consultation with Executive, modify this Agreement in the least restrictive manner necessary in
order to exclude such compensation from the definition of "deferred compensation" within the
meaning of such Section 409A of the Code or in order to comply with the provisions of Section
409A ofthe Code, other applicable provision(s) ofthe Code and/or any rules, regulations or other
regulatory guidance issued under such statutory provisions and without any diminution in the value
ofthe payments to Executive. Any payments that, under the terms ofthis Agreement, qualify for
the "short-term" deferral exception under Treasury Regulations Section 1.409A- l(b)(4), the
"separation pay" exception under Treasury Regulations Section 1.409A-l(b)(9)(iii) or another
exception under Section 409A of the Code will be paid under the applicable exceptions to the
greatest extent possible. Each payment under this Agreement shall be treated as a separate
payment for purposes of Section 409A ofthe Code. Anything in this Agreement to the contrary
notwithstanding, ifat the time ofExecutive's separation from service within the meaning ofSection
409A ofthe Code, Executive is considered a "specified employee" within the meaning ofSection
409A(a)(2)(B)(i) of the Code, and if any payment that Executive becomes entitled to under this
Agreement is considered deferred compensations subject to interest, penalties and additional tax
imposed pursuant to Section 409A of the Code as a result of the application of Section
409A(a)(2)(B)(i) of the Code, then no such payment shall be payable prior to the date that is the
earlier of (i) six months and one day Executive's separation from service or (ii) Executive's death.
In no event shall the date of termination of Executive's employment be deemed to occur until
Executive experiences a "separation from service" within the meaning of Section 409A of the
Code, and notwithstanding anything contained herein to the contrary, the date on which such
separation from service takes place shall be the Date ofTermination. All reimbursements provided
under this Agreement shall be provided in accordance with the requirements of Section 409A of
the Code, including, where applicable, the requirement that (A) the amount of expenses eligible
for reimbursement during one calendar year will not affect the amount of expenses eligible for
reimbursement in any other calendar year; (B) the reimbursement of an eligible expense will be
made no later than the last day of the calendar year following the calendar year in which the
expense is incurred; and (C) the right to any reimbursement will not be subject to liquidation or
exchange for another benefit. Notwithstanding the foregoing, Employer makes no representation
or covenant to ensure that the payments and beneflts under this Agreement are exempt from, or
compliant with, Section 409A ofthe Code.
SMRH:485126413.3 12
18. Indemnification. To the fullest extent permitted by law, regulation, and the Articles
oflncorporation and Bylaws ofBank and PMB, the Bank and/or PMB as appropriate shall pay as
and when incurred all expenses, including legal and attomey costs, incurred by, or shall satisfy as
and when entered or levied a judgment or fine rendered or levied against, Executive in an action
brought by a third party against Executive (whether or not the Bank isjoined as a party defendant)
to impose a liability or penalty on Executive for an act alleged to have been committed by
Executive while an officer ofthe Bank and/or PMB; provided, however, that Executive was acting
in good faith, within what Executive reasonably believed to be the scope of Executive's
employment or authority and for a purpose which the Executive reasonably believed to be in the
best interests of the Bank or the Bank's shareholders and the best interests of PMB or PMB's
shareholders, and in the case ofa criminal proceeding, that the Executive had no reasonable cause
to believe that Executive's conduct was unlawful. Payments authorized hereunder include amounts
paid and expenses incurred in settling any such action or threatened action. All rights hereunder
are limited by any applicable state or Federal laws. Anything herein to the contrary
notwithstanding, this Agreement is subject to the requirements and limitations set forth in state
and federal laws, rules, regulations or orders regarding the indemniflcation and prepayment of
legal expenses, including Section 18(k) of the FDIA and Part 359 of the FDIC's Rules and
Regulations or any successor regulation thereto. Further, and to the extent that there is any conflict
between state and federal law, federal law shall supersede and control.
19. Severabilitv. To the extent any provision ofthis Agreement or portion thereof shall
be invalid or unenforceable, it shall be considered deleted therefrom (but only for so long as such
provision or portion thereofshall be invalid or unenforceable) and the remainder ofsuch provision
and ofthis Agreement shall be unaffected and shall continue in full force and effect to the fullest
extent permitted by law ifenforcement would not frustrate the overall intent ofthe Parties (as such
intent is manifested by all provisions ofthe Agreement including such invalid, void, or otherwise
unenforceable portion).
20. Payment. All amounts payable by the Bank to Executive under this Agreement
shall be paid promptly on the dates required for such payment in this Agreement without notice or
demand. Any salary, benefits or other amounts paid or to be paid to Executive or provided to or
in respect of the Executive pursuant to this Agreement shall not be reduced by amounts owing
from Executive to Bank.
21. Expenses. Each party shall pay his or its own fees and expenses incurred by him
or it in the drafting, review and negotiation ofthis Agreement.
22. Authority. Each of the Parties hereto hereby represents that each has taken all
actions necessary in order to execute and deliver this Agreement.
23. Counterparts. This Agreement may be executed in one or more counterparts, each
of which shall be deemed to be an original but all of which together will constitute one and the
same instrument.
24. Goveming Law. This Agreement shall be construed, inteq^reted and enforced in
accordance with the laws of the State of Califomia, without giving effect to the choice of law
principles thereof.
SMRH:485126413.3 13
25. Entire Agreement: Amendments. This Agreement and written agreements, ifany,
entered into concurrently herewith constitute the entire agreement by Employer, on the one hand,
and Executive on the other hand with respect to the subject matter hereof and merges and
supersedes any and all prior discussions, negotiations, agreements or understandings between
Executive and Employer with respect to the subject matter hereof, whether written or oral. This
Agreement may be amended or modified only by a written instmment executed by Executive and
Employer. With regard to such amendments, alterations, or modifications, facsimile signatures
shall be effective as original signatures. Any amendment, alteration, or modiflcation requiring the
signature ofmore than one party may be signed in counterparts.
26. Further Actions. Each party agrees to perform any further acts and execute and
deliver any further documents reasonably necessary to carry out the provisions ofthis Agreement.
27. Time of Essence. Time is of the essence of each and every term, condition,
obligation and provision hereof.
28. No Third Party Beneficiaries. This Agreement and each and every provision hereof
is for the exclusive benefit ofthe Parties and not for the benefit ofany third party.
29. Headings. The headings in this Agreement are inserted only as a matter of
convenience, and in no way define, limit, or extend or interpret the scope ofthis Agreement or of
any particular provision hereof.
30. Regulatorv Approval ofthis Agreement. The Parties acknowledge and agree that
entry into this Agreement is and payment ofseverance under paragraph 5 may be subject to receipt
of approval from the FRB pursuant to Section 1828(k) and Part 359 of the FDIC Rules and
Regulations, the FDIC and the CDBO. If such approval is required but not obtained or if such
approval is conditioned upon modifications specified by the FRB, the FDIC or the CDBO the
Parties agree to negotiate in good faith to amend this Agreement to provide for substantially
equivalent terms consistent with regulatory requirements.
[signature page follows]
SMRH:485126413.3 14
IN WITNESS WHEREOF, the Parties have executed this Agreement as ofthe date first
written above.
PACIFIC MERCANTILE BANK
By:
Name: TITomasVertin
Title: President and ChiefExecutive Officer
EXECUT
SMRH:485126413.3 15
EXHIBIT A
California Labor Code §2870
Employment agreements; assignment of rights
(a) Any provision in an employment agreement which provides that an employee shall assign, or
offer to assign, any ofhis or her rights in an invention to his or her employer shall not apply to an
invention that the employee developed entirely on his or her own time without using the
employer's equipment, supplies, facilities, or trade secret information except for those inventions
that either:
(1) Relate at the time ofconception or reduction to practice ofthe invention to the employer's
business, or actual or demonstrably anticipated research or development ofthe employer; or
(2) Result from any work performed by the employee for the employer.
(b) To the extent a provision in an employment agreement purports to require an employee to
assign an invention otherwise excluded from being required to be assigned under subdivision (a),
the provision is against the public policy ofthis state and is unenforceable.
SMRH:485126413.3 16