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EMPLOYMENT AGREEMENT
This employment agreement (the "Agreement") is entered into effect as of July
16, 1998 (the "Effective Date"), by and between Heritage Commerce Corp (the
"Company" or "Bank") and its wholly owned subsidiary, Heritage Bank of Commerce
("HBC") a California banking corporation and ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ (▇▇▇▇▇▇▇▇) on
the following terms and conditions.
1. Position
▇▇. ▇▇▇▇▇▇▇▇ shall be the Executive Vice President and Chief Financial Officer
(CFO) of Heritage Commerce Corp. ▇▇. ▇▇▇▇▇▇▇▇ shall be subject to the direction
of the CEO of the Company and, by extension, the Board of Directors of the
Company.
The term "Bank" is intended to mean Company and/or any of its subsidiaries, as
applicable. The term "Management" is intended to mean the CEO and/or, as
applicable, those duly appointed management committees vested with
decision-making authority of the Company. The term "Board" shall, unless more
narrowly defined in the context of its immediate usage, mean any and all boards
of directors with purview over the matter at hand.
The Parties agree that during the term of this Agreement, ▇▇. ▇▇▇▇▇▇▇▇ may
serve as an executive level officer of the Company, HBC, or other subsidiaries
of Company yet to be formed. Although ▇▇. ▇▇▇▇▇▇▇▇'▇ specific job description
may change from time to time, the terms and conditions of the Agreement as
defined in Sections 2 through 23 will remain in full force and effect.
The CFO will set a high standard of conduct, courtesy and concern of
professional and personal discretion, responsibility, forthrightness and hard
work. The CFO shall comply with all pertinent financial and accounting
regulatory standards as may affect the Company.
The CFO during normal working hours shall devote his entire productive time,
attention and energy to the business of the Company and shall perform in a
manner and with such results as are consistent with his compensation and
position. The CFO will, at all times, keep Bank Management informed of all
financial and operational data which is relevant to the proper management of
the Company and of his activities undertaken in the context of his role,
including his activities in the community. He will be diligent in developing
and maintaining useful contacts with members of industry, the legal,
accounting, banking and investment banking communities and with vendors to the
Bank of services relating to these areas.
The CFO will be responsible for contributing appropriately to the achievement
of optimal profitability and for the safety and soundness of the Company.
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In addition to the above, ▇▇. ▇▇▇▇▇▇▇▇'▇ duties and responsibilities require
that he shall:
(a) perform his duties as CFO in accordance with the directives of
management and in accordance with the objectives and/or policies of
the Board;
(b) exercise diligence with respect to the control of the costs of
operation and other expenses directly or indirectly involving
interests of the Company;
(c) be responsible for budgeting, finance, accounting, planning and for
forming and developing the accounting staff under his purview in a
manner consistent with the Company's immediate needs and strategic
goals;
(d) Manage the Company's liquidity position and investment portfolio;
(e) be responsible for the day-to-day financial and accounting position of
the Company; and
(f) be responsible for providing timely and accurate financial reporting
to management and to all appropriate regulatory agencies and outside
auditors.
2. Term.
The Term of this Agreement will be three years from the Effective Date hereof.
At maturity, and annually thereafter, unless otherwise amended or terminated,
this Agreement shall automatically renew for a term of one year. Upon the
termination of ▇▇. ▇▇▇▇▇▇▇▇'▇ employment, neither he nor the Company shall have
any further obligation to the other, except as set forth in Paragraphs 5, 10,
13, 16, 18, and 24 herein.
3. Base Salary.
For the Term of this Agreement while he is an employee, the Company shall pay
$125,000 per year ("Base Salary"), in accordance with the Company's normal
payroll procedures, less appropriate withholdings, taxes and similar deductions.
The Base Salary will be reviewed annually by the CEO and, at the CEO's
discretion, the Personnel and Planning Committee of the Company. The Base
Salary, as adjusted, shall be pro-rated for any partial year.
4. Performance Bonuses.
From time to time, but not less than annually, subject to the discretion of the
Board, the Company shall undertake, in good faith, to pay performance bonuses
during the Term of this Agreement. The Company shall not be obligated to pay any
specific amount pursuant to this paragraph. ▇▇. ▇▇▇▇▇▇▇▇ will be eligible for
Performance Bonuses and the Company will, in good faith, pay Performance Bonuses
in amounts that it deems reasonable on the basis of the criteria outlined
herein. If Performance Bonuses are paid,
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the amounts of such shall be based on ▇▇. ▇▇▇▇▇▇▇▇'▇ overall performance and
that of the Company, including such factors as profitability, deposit base, loan
portfolio size and quality, adequacy of the loan loss reserve, the capital
position of the Company and the satisfactory nature of regulatory examinations.
5. Incentive Stock Options.
The Board of the Company has granted to ▇▇. ▇▇▇▇▇▇▇▇, incentive stock options to
acquire 30,000 shares of the Company's common stock pursuant to the Heritage
Commerce Corp 1994 Tandem Stock Option Plan. The Board, in its discretion, may
grant such additional options, as it deems appropriate in order to recognize
performance and in order to provide ▇▇. ▇▇▇▇▇▇▇▇ with the incentive to sustain
and enhance the operational performance of the Company in the future.
6. Automobile Allowance.
During the Term of this Agreement, the Company shall pay ▇▇. ▇▇▇▇▇▇▇▇ a $350.00
monthly auto allowance.
7. Medical Insurance.
The Company shall provide medical insurance to ▇▇. ▇▇▇▇▇▇▇▇ and his family with
options and coverage consistent with those of the Company's group medical plan
as in effect from time to time.
8. Life Insurance.
The Company shall provide ▇▇. ▇▇▇▇▇▇▇▇ life insurance to the same extent the
Company provides life insurance to its executive officers, which shall be not
less than the amount provided upon ▇▇. ▇▇▇▇▇▇▇▇'▇ initial employment. He shall
be entitled to designate the beneficiary of the life insurance provided by this
section.
9. Disability Insurance.
The Company shall provide ▇▇. ▇▇▇▇▇▇▇▇ long-term disability insurance to the
same extent the Company provides such disability insurance to its executive
officers.
10. Indemnification by the Company.
The Company and Company will indemnify and hold ▇▇. ▇▇▇▇▇▇▇▇ harmless pursuant
to the certain Indemnification Agreement dated October 7 1998, and executed by
▇▇. ▇▇▇▇▇▇▇▇ and the Company and also to the extent provided in the Company's
by-laws for officers and directors.
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11. Monthly Expenses Account.
Subject to the Company's Expense Reimbursement Policy, ▇▇. ▇▇▇▇▇▇▇▇ shall be
reimbursed by the Company for his reasonable and necessary business expenses
incurred in furthering the Company's interests, including automobile fuel used
in the performance of this agreement. He will prepare and submit expense
reports promptly.
12. Vacation.
During the period of this Agreement, ▇▇. ▇▇▇▇▇▇▇▇ shall accrue vacation
consistent with the personnel policy of the Company, but in no event at a rate
of less than four weeks per year. In the event that while he is an employee, he
receives any compensation in lieu of accrued vacation, such payment shall be
considered cash compensation in addition to Base Salary and will not be
included in severance calculations call for in Section 13.1, Termination
without Cause, or in Section 13.2, Change of Control, hereunder.
13. Termination and Severance.
Each party has the right to terminate ▇▇. ▇▇▇▇▇▇▇▇'▇ employment with the
Company prior to the end of the Term specified in paragraph 2 with or without
cause at any time. For purposes of this Agreement, cause shall arise if (i) he
willfully breaches or habitually neglect the duties which he is required to
perform under this Agreement, (ii) commits an intentional act that has a
material detrimental effect on the reputation or business of the Company, or
(iii) he is convicted of a felony or commits any such act of dishonesty, fraud,
intentional misrepresentation or moral turpitude as would prevent effective
performance of his duties under this Agreement. If the Company decides to
terminate ▇▇. ▇▇▇▇▇▇▇▇'▇ employment for cause, the Company shall provide him
with notice specifying the grounds for termination, accompanied by a written
statement stating the relevant facts supporting such grounds. Upon termination
of his employment for cause, he shall not be entitled to any further amounts
except for the Base Salary accrued and unpaid vacation pay and any rights under
the stock option plan earned through his last day of employment.
13.1 Termination Without Cause.
If the Company terminates ▇▇. ▇▇▇▇▇▇▇▇'▇ employment without cause, the Company
will provide him as his full and final severance the following: (i) a lump sum
payment within 10 days after termination date, equal to the annual Base Salary,
annual auto allowance and Average Annual Performance Bonus, (as defined below)
paid less normal payroll deductions, (ii) if he is covered under the Company's
standard group medical and dental plan at the time of his termination, the
Company will continue to provide equivalent coverage under C.O.B.R.A. for 12
months after the date of termination at no cost to ▇▇. ▇▇▇▇▇▇▇▇; (iii) the
Company will continue to provide life insurance (in amounts and with coverage
equivalent to coverage provided immediately prior to his last day of
employment) for one year at no cost to ▇▇. ▇▇▇▇▇▇▇▇ (thereafter, ▇▇. ▇▇▇▇▇▇▇▇
shall be responsible for such payments if he so chooses; and (iv) the Company
will continue to provide disability insurance (in amounts and with coverage
equivalent to coverage provided immediately prior to his last day of
employment) for 12 months at no cost to Mr.
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▇▇▇▇▇▇▇▇ (thereafter, ▇▇. ▇▇▇▇▇▇▇▇ shall be responsible for such payments if he
so chooses); (v) the Company will reimburse ▇▇. ▇▇▇▇▇▇▇▇ for bona fide
professional out-placement services, not to exceed $5,000.
13.2 Change of Control
In the event of a Change of Control, as hereafter defined, which results in ▇▇.
▇▇▇▇▇▇▇▇'▇ termination or in a material change in ▇▇. ▇▇▇▇▇▇▇▇'▇ compensation,
benefits,title, responsibility or principal location, ▇▇. ▇▇▇▇▇▇▇▇ will be
considered terminated without cause and will be entitled to the benefits and
compensation described in section 13.1, Termination Without Cause, except that
the amount payable under Section 13.1 (i) will be as follows: a lump sum payment
within 10 days after termination date,equal to one and half times the aggregate
of his annual Base Salary, annual auto allowance and Average Annual Performance
Bonus paid, if any, less normal payroll deductions. A change of location shall
be considered material only if it exceeds a change of more than 10 miles from
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇., ▇▇▇ ▇▇▇▇, ▇▇.
The term "Change in Control" shall mean the occurrence of any of the following
events with respect to the Employer (with the term "Employer" being defined for
purposes of determining whether a "Change in Control" has occurred to mean the
Company, HBC or any parent bank holding company organized at the direction of
the Company or HBC to own 100% of the outstanding common stock of the Company or
HBC): (i) a change in control of a nature that would be required to be reported
in response to Item 6(e) of Schedule 14A of Regulation 14A promulgated under
thee Securities Exchange Act of 1934, as amended (the "Exchange Act"), or in
response to any other form or report to the regulatory agencies or governmental
authorities having jurisdiction over the Employer or any stock exchange on which
the Employer's shares are listed which requires the reporting of a change in
control; (ii) any merger, consolidation or reorganization of the Employer in
which the Employer does not survive; (iii) any sale, lease, exchange,mortgage,
pledge, transfer or other disposition (in one transaction or a series of
transactions) of any assets of the Employer having an aggregate fair market
value of fifty percent (50%) of the total value of the assets of the Employer,
reflected in the most recent balance sheet of the Employer; (iv) a transaction
whereby any "person" (as such term is used in the Exchange Act) or any
individual, corporation, partnership, trust or any other entity becomes the
beneficial owner, directly or indirectly, of securities of the Employer
representing twenty-five (25%) or more of the combined voting power of the
Employer's then outstanding securities; or (v) a situation where, in any
one-year period, individuals who at the beginning of such period constitute the
Board of Directors of the Employer cease for any reason to constitute at least a
majority thereof, unless the election, or the nomination for election by the
Employer's shareholders, of each new director is approved by a vote of at least
three-quarters (3/4) of the directors then still in office who were directors at
the beginning of the period. Notwithstanding the foregoing or anything else
contained herein to the contrary, there shall not be a "Change of Control" for
purposes of the Agreement if the event which would otherwise come within the
meaning of the term: "Change of Control" involves (i) a reorganization at the
direction of the Employer solely to form a parent bank holding company which
owns 100% of the Employer's common stock
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following the reorganization, or (ii) an Employee Stock Ownership Plan
sponsored by the Employer or its parent holding company which is the party that
acquires "control", as described above.
The term "Average Annual Performance Bonus," as used herein, shall mean the
higher of (i) ▇▇. ▇▇▇▇▇▇▇▇'▇ annual performance bonuses averaged from the date
of this Agreement or (ii) the average of his previous three annual performance
bonuses excluding any year a performance bonus wage was not paid.
13.3 Voluntary Termination.
If ▇▇. ▇▇▇▇▇▇▇▇ decides of his own volition to terminate his employment under
this Agreement prior to the end of the Term, the Company shall be entitled to,
and he shall provide the Company with, one month's prior written notice;
provided however, upon receiving such notice, the Company may terminate his
employment immediately and pay him for the one-month period that the notice
otherwise would have run, in addition to all other amounts then due and payable
under this Agreement.
14. Confidential and Proprietary Information.
▇▇. ▇▇▇▇▇▇▇▇ agrees that all information, including but not limited to that
which is directly or indirectly related to the Company's financial status,
profitability, deposit base, portfolio size and quality as well as its
customers and prospective customers is confidential and proprietary to the
Company and that he will maintain such information as confidential. ▇▇.
▇▇▇▇▇▇▇▇ agrees that as a condition of employment, he will execute such form
of confidentiality agreement as the Board may adopt from time to time for
senior officers of the Company to the extent such agreement is consistent with
Paragraph 14.
15. No Conflicting Agreements.
▇▇. ▇▇▇▇▇▇▇▇ represents that his performance of all of the terms of this
Agreement and any service to be rendered as an employee of the Company does not
and shall not breach any fiduciary or other duty or any covenant, agreement or
understanding, including without limitation, any agreement relating to any
proprietary information, knowledge or data acquired by him in confidence, trust
or otherwise, prior to his employment by the Company to which he is a party or
by the terms of which he may be bound. ▇▇. ▇▇▇▇▇▇▇▇ covenants and agrees that he
shall not disclose to the Company, or induce the Company to use, any proprietary
information, knowledge or data, belonging to any previous employer or others and
that he will disclose to the Company the term and subject of any prior
confidentiality agreement or agreements he has entered into. ▇▇. ▇▇▇▇▇▇▇▇
further covenants and agrees not to enter into any agreement or understanding,
either written or oral, in conflict with the provisions of this Agreement.
Further, ▇▇. ▇▇▇▇▇▇▇▇ agrees that for a period of one year after payment of full
and final severance, pursuant either to Section 13.1 (Termination Without Cause)
or Section 13.2 (Change of Control), he will not directly solicit the services
of any employee of the Company or directly encourage any employee to discontinue
his or her employment with the Company.
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16. Successors and Assigns.
This Agreement shall inure to the benefit of and be binding upon the Company
and any of its successors and assigns. In view of the personal nature of the
services to be performed under this Agreement by ▇▇. ▇▇▇▇▇▇▇▇, he shall not
have the right to assign or transfer any of his rights, obligations or benefits
under this Agreement, except as otherwise noted herein.
17. Governing Law.
This Agreement shall at all times and in all respects be governed by the laws
of the State of California applicable to transactions wholly performed in
California between California residents.
18. Mediation.
Prior to engaging in any legal or equitable litigation or other dispute
resolution process, regarding any of the terms and conditions of this agreement
between the parties, or concerning the subject matter of the agreement between
the parties, each party specifically agrees to engage, in good faith, in a
mediation process at the expense of the Company, complying with the procedures
provided for under California Evidence Code, Sections 1115 through and including
1125 as then currently in effect. The parties further and specifically agree to
use their best efforts to reach a mutually agreeable resolution of the matter.
The parties understand and specifically agree that should any party(ies) to
this Agreement refuse to participate in mediation for any reason, the other
party(ies) shall be entitled to seek a court order to enforce this provision in
any court of appropriate jurisdiction requiring the dissenting party to attend,
participate, and to make a good faith effort in the mediation process to reach
a mutually agreeable resolution of the matter. Parties to this Agreement agree
to use the American Arbitration Association model for any and all employment
mediation.
19. Advice to Seek Counsel.
▇▇. ▇▇▇▇▇▇▇▇ acknowledges that the Company has advised his that this Agreement
imposes legal obligations upon him and that he should consult with legal
counsel with regard to this Agreement. The Company will bear the cost of legal
review up to a maximum of $1000.
20. Notices. Any notice required to be given hereunder shall be sufficient if
in writing and sent by certified or registered mail, return receipt requested,
first class postage paid. The applicable address for the Company is at its
principal office in San ▇▇▇▇, attention to the CEO. ▇▇. ▇▇▇▇▇▇▇▇'▇ address shall
be shown on the Company's records. Notices shall be deemed given when actually
received, or three days after mailing, whichever is earlier.
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21. Entire Agreement.
Except as provided in paragraph 8 and paragraph 10, this Agreement and any
attachments hereto contain the entire agreement and understanding by and between
the Company and ▇▇. ▇▇▇▇▇▇▇▇ and with respect to the subject matter herein, and
no representation, promise, agreement or understanding, written or oral, not
herein contained shall be of any force or effect. No modification hereof shall
be valid or binding unless in writing and signed by the party intended to be
bound. No waiver of any provision of this Agreement shall be valid unless in
writing and signed by the party against whom such waiver is sought to be
enforced. No valid waiver of any provision of this Agreement at any time shall
be deemed a waiver of any other provision of this Agreement, or shall be deemed
a valid waiver of any of such provision at any other time.
If any provision of this Agreement is held by a court of competent jurisdiction
or an arbitration body to be invalid, void or unenforceable, the remaining
provisions of this Agreement shall, nonetheless, continue in full force without
being impaired or invalidated in any way.
22. Headings.
The headings and other captions in this Agreement are for convenience and
reference only and shall not be used in interpreting, construing or enforcing
any of the provisions of this Agreement.
23. Regulatory Approval.
In the event that any regulatory authority with jurisdiction over the Bank
shall disapprove any provision of this Agreement, then the parties hereto shall
use their best efforts, acting in good faith, to amend the Agreement in a
manner that will be acceptable to the parties and to the regulatory authorities.
24. Attorney's Fees Clause.
If any legal action or any arbitration or other proceeding is brought for the
enforcement of this Agreement or because of any dispute or alleged breach, the
fault or misrepresentation in connection with any of the provisions of this
agreement, the successful or prevailing party shall be entitled to recover
reasonable attorney fees and other costs incurred in that action or proceeding,
in addition to any other relief which they may be entitled to.
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IN WITNESS HEREOF, THE COMPANY AND ▇▇. ▇▇▇▇▇▇▇▇ HAVE DULY EXECUTED THIS
AGREEMENT AND IT IS EFFECTIVE AS OF THE DAY AND YEAR FIRST SET FORTH ABOVE.
HERITAGE BANK OF COMMERCE
By: /s/ [SIG] Date: 2-19-99
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Title: CEO
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HERITAGE COMMERCE CORPORATION
By: /s/ [SIG] Date: 2-19-99
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Title: CEO
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ACCEPTED BY:
/s/ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ Date: 2-19-99
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