EMPLOYMENT AGREEMENT

Exhibit 10.1

EMPLOYMENT AGREEMENT

This Employment Agreement (“Agreement”) is dated effective as of February 23, 2009, by and between PENNSYLVANIA COMMERCE BANCORP, INC ., a Pennsylvania corporation (“Commerce”), and COMMERCE BANK/HARRISBURG , a Pennsylvania bank and a wholly-owned subsidiary of Commerce (“COBH”), and Gary L. Nalbandian (“Executive”) .

BACKGROUND

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

1.1 Three-Year Term .  Commerce offers Executive employment, and Executive accepts such employment, subject to all the terms and conditions of this Agreement, for a term of three (3) years beginning on the date stated above.

1.2 Conditions to Term .  This three-year term is subject to:

(a)  Automatic Renewal and Extension.   On each Anniversary Date of this Agreement, this Agreement and Executive’s employment shall automatically be renewed and extended (upon the same terms and conditions) for a new three (3) year term unless written notice by either party is given pursuant to Section 1.2 (b) below.

(b)  Termination on Anniversary Date .  Either Commerce or Executive may terminate this Agreement on any Anniversary Date by giving to the other party written notice of termination no later than ninety (90) days before any such Anniversary Date.  If such notice is given to either party, the Term will have two (2) years remaining from the applicable Anniversary Date, subject to the terms and conditions of this Agreement.

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

1.3 “Term” Definition.  " Term" means the original three (3) year employment period, as well as any renewed or extended periods as provided for in this Agreement.

1.4 “Anniversary Date “ Definition.   “Anniversary Date” means March 1, 2010, as well as each annual March 1st thereafter if this Agreement is automatically renewed or extended.

2.1 Offices .  During the Term, Executive shall be employed as Chairman, President and Chief Executive Officer of Commerce and COBH.

2.2 Duties .  As the Chairman, President and Chief Executive Officer of Commerce and COBH, Executive shall have primary responsibility for all operations of Commerce and its subsidiaries and shall have such powers and duties as may from time to time be prescribed by the Boards of Directors of Commerce and COBH.

(a)  Full Time and Best Efforts .  Executive accepts such duties and agrees to his continued employment and to devote his full time and efforts to the business and affairs of Commerce, COBH and their subsidiaries, if any, and to use his best efforts to promote the interests of Commerce, COBH and their subsidiaries.

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

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

3.2 Base Salary .  For all positions held by him during the Term and for all services to be rendered by him under this Agreement, Commerce shall pay Executive “ base salary” at the initial rate of $495,000 per year, with an increase in base salary to $595,000 per year upon the closing (the “Closing”) of the merger transaction with Republic First Bancorp, Inc.

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

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

3.3 Plans and Programs .  During the Term, Executive shall be entitled to participate in any cash or other bonus programs, incentive compensation plans, stock option plans or similar benefit or compensation programs now or later in effect that are generally made available to executive officers of Commerce.  In addition to any incentive compensation that Executive may be entitled to pursuant to this Section, upon the Closing and subject to the provisions of the 2006 Employee Stock Option Plan, Executive shall be awarded options to acquire 100,000 shares of Commerce common stock.

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

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

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

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

4.1 Generally Available Benefits . Participate in all fringe benefits as then in effect that are generally available to Commerce’s executive officers including, without limitation, medical and hospitalization coverage, long-term care insurance, life insurance coverage and disability coverage.  In addition, Commerce shall provide medical insurance coverage for Executive and his dependents, if any, for the life of Executive.  If such coverage is not possible under the Commerce medical plan, Commerce shall reimburse Executive for the cost of such coverage.  It is provided, however, that this extended medical insurance coverage will be provided subject to the following conditions:  (i) the amount of medical insurance provided by Commerce or the reimbursement to Executive for medical insurance during any calendar year may not affect the coverage provided or the amount eligible for reimbursement in any other calendar year; (ii) the reimbursement of an eligible expense will be made on or before the last day of the calendar year following the year in which the expense is incurred; and (iii) the medical insurance coverage or the right to reimbursement for medical insurance is not subject to liquidation and cannot be exchanged for cash or any other benefit.

4.2 Other Benefits . Such other fringe benefits as the Board, or a Board-designated Committee, shall deem appropriate; provided that such benefits are consistent with those that Executive currently enjoys including, without limitation, use of an automobile, paid holidays, six (6) weeks’ vacation each calendar year and club memberships.  Regardless of the reason for termination of Executive’s employment, Executive will be provided use of the

automobile that he has at the time of his termination until the latest to occur of the end of the lease term on such automobile or the end of the Term of this Agreement.  It is provided, however, that Executive’s right to use of the automobile is not subject to liquidation and cannot be exchanged for cash or any other benefit.

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

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

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

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

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

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

Insurance Reductions .  Such payments shall be reduced each month by the amount of any disability payments made to Executive under any Commerce-sponsored disability insurance plan.  The amount of the reduction under the preceding sentence shall be computed as if Executive had elected to receive monthly payments of disability benefits (regardless of the actual payment frequency).

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

(b) “ Good Reason Severance Payment. ”  In lieu of any further Compensation payments to Executive after the date of termination,  a lump sum severance payment equal to three (3) times Executive’s Compensation then in effect.

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

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

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

(ii)  more than thirty (30%) percent of Commerce’s outstanding common shares. For this Section 9.1(b)(ii), unexercised warrants or options or unconverted nonvoting securities shall count as constituting beneficial owners