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EMPLOYMENT AGREEMENT
XXXXXXX X. XXXXXXXXXX
This employment agreement (the "Agreement") is entered into as of April 16, 1998
(the "Effective Date"), by and between Heritage Bank of Commerce, a California
banking corporation (the "Bank"), and Xxxxxxx X. Xxxxxxxxxx on the following
terms and conditions.
1. Position. Xxxxxxxxxx shall be the Executive Vice President and Chief
Operating Officer ("COO") of Heritage Bank East Bay (in organization) ("HBEB").
In that role, Xxxxxxxxxx shall be subject to the direction of the CEO and the
Board of Directors of HBEB (the "Board"). The parties acknowledge that so long
as Heritage Bank East Bay is in organization, Xxxxxxxxxx shall be an Executive
Vice President of Bank and subject to the direction of the CEO and Board of
Directors of Bank. Xxxxxxxxxx shall also be nominated to serve on the initial
Board of Directors of HBEB. For purposes of this Agreement, the parties
acknowledge that "Bank" and "HBEB" are interchangeable, subject to approval of
the de novo application of Heritage Bank East Bay.
The COO will set a high standard of conduct courtesy and concern, of
professional and personal discretion and responsibility, forthrightness, thrift,
modesty and hard work. In light of this role with the Bank and the Bank's
position in the industry, the COO will serve as model for all employees of the
Bank. Given Xxxxxxxxxx'x role with the Bank and Xxxxxxxxxx'x responsibility
relative to the Bank's presence and stature in the community, Xxxxxxxxxx will,
at all times, emulate this high standard of conduct in order to develop and
enhance the Bank's reputation and image.
The COO shall comply with all pertinent regulatory standards as may affect the
Bank.
The COO shall devote his entire productive time, attention and energy to the
business of the Bank. In a manner and with such results as are consistent with
his compensation and position, Xxxxxxxxxx will service the Bank's existing
relationships and cultivate and xxxxxx new relationships for the Bank. Such new
relationships shall be consistent with the Bank's mission and shall generally
improve the Bank's share of market, volume of business, profitability and return
of assets.
The COO will at all times keep the Board and appropriate members of the Bank's
management informed of his activities in the community. He will introduce his
customers and potential customers and other business and civic contacts to
appropriate members of the Bank's management and to appropriate Board members
and to other employees of the Bank in order to enhance and solidify the Bank's
prospects and position.
The COO will exercise diligence with respect to the control of the direct and
indirect costs of his activities on behalf of the Bank.
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In Addition to the above, Xxxxxxxxxx shall:
(b) be responsible for the operation of the Bank, its properties and
related interest in accordance with the direction of the CEO, the management
philosophy of the Board, the basic objectives of the Board and policy as
established by the various Board committees;
(c) be responsible to the CEO and the Board for operating the Bank on a
profitable basis and for the attainment of profit goals established by the
Board;
(d) exercise diligence with respect to the control of the costs of
operation and other expenses directly or indirectly involving interests of the
Bank;
(e) be responsible for achieving the broad objectives of business
development, including growth of both loans and deposits as well as fee or
deposit compensated products of the Bank;
(f) be responsible for the loan portfolio, for budgeting, finance and
accounting, and for strategic planning of the bank; and
(g) be responsible for forming and developing the staff in a manner
consistent with the Bank's immediate needs and strategic goals.
2. Term. The Term of this Agreement shall be three years from the
Effective Date hereof. Upon the termination of his employment, neither
Xxxxxxxxxx nor the Bank shall have any further obligation to the other, except
as set forth in paragraph 5, and 18.
3. Base Salary. For the Term of this Agreement while he is an employee,
the Bank shall pay Xxxxxxxxxx per year ("Base Salary") at a rate of $3,958.33
per bi-monthly pay period, in accordance with the Bank's normal payroll
procedures, less appropriate withholdings, taxes and similar deductions. On the
first day of the seventh month following Xxxxxxxxxx'x first day of employment,
Xxxxxxxxxx will be paid a one time amount equal to $5,000.00, as additional
base. Xxxxxxxxxx'x Base Salary will be reviewed annually by the CEO and Board of
Directors, consistent with the schedule applied to the annual review of all
executive officers.
4. Performance Bonuses. From time to time, but not less than annually,
subject to the discretion of the Board, the Bank shall undertake, in good faith,
to pay performance bonuses during the Term of this Agreement while Xxxxxxxxxx is
an employee. The Bank shall not be obligated to pay any specific amount pursuant
to this section. Xxxxxxxxxx shall be eligible for Performance Bonuses and the
Bank shall, in good faith, pay Performance Bonuses in amounts that it deems
reasonable on the basis of the following criteria. If Performance Bonuses are
paid, the amounts of such generally will be comparable to similarly placed
executives at similarly performing financial institutions, and shall be based on
Xxxxxxxxxx'x overall performance and that of the Bank, including such
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factors as profitability, deposit base, loan portfolio size and quality,
adequacy of the loan loss reserve, the capital position of the Bank and the
satisfactory nature of regulatory examinations.
5. Incentive Stock Options. At its first meeting after Xxxxxxxxxx'x
first day of employment, the Board of the Holding Company shall grant to
Xxxxxxxxxx incentive stock options to acquire 15,000 shares of the Heritage
Commerce Corp's common stock at the then market price, as determined by the
Board. Xxxxxxxxxx'x right to exercise such options shall vest and be
exercisable monthly commencing the last day of the first calendar month
following the Effective Date of this Agreement ("Commencement Date"). The
number of options vesting on the Commencement date and daily thereafter shall
be 1/1460th of the total number of options granted to Xxxxxxx Xxxxxxxxxx hereby
except that in the event of a merger or acquisition of the Bank or in the
event of Xxxxxxxxxx'x death or disability, the vesting shall immediately
accelerate to a fully vested status.
From time to time, the Board will review the performance of Xxxxxxxxxx and may
grant, in its sole discretion, additional options under a stock option plan.
The Board may grant such additional options as it deems appropriate in order to
recognize performance for the preceding year and in order to provide the
incentive to sustain and enhance the operations performance of the Bank.
6. Termination and Severance. Each party has the right to terminate
Xxxxxxxxxx'x employment with the Bank 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) Xxxxxxxxxx willfully breach or habitually
neglect the duties which Xxxxxxxxxx is required to perform under this
Agreement, (ii) Xxxxxxxxxx commits an intentional act that has a material
detrimental effect on the reputation or business of the Bank, of (iii)
Xxxxxxxxxx is convicted of a felony or Xxxxxxxxxx commits any such act of
dishonesty, fraud, intentional misrepresentation or moral turpitude as would
prevent effective performance of Xxxxxxxxxx'x duties under this Agreement. If
the Bank decides to terminate Xxxxxxxxxx'x employment for cause, the Bank shall
provide Xxxxxxxxxx with notice specifying the grounds for termination,
accompanied by a written statement stating the relevant facts supporting such
grounds. Upon termination of Xxxxxxxxxx'x employment for cause, Xxxxxxxxxx
shall not be entitled to any further amounts except for the Base Salary earned
through Xxxxxxxxxx'x last day of employment.
If the Bank terminates Xxxxxxxxxx'x employment without cause, the Bank will
provide Xxxxxxxxxx, as Xxxxxxxxxx'x full and final severance, the following:
(i) a lump sum payment equal to one half of the sum of Xxxxxxxxxx'x average
annual Base Salary plus average annual bonuses, if any, paid for the term of
this agreement, less deductions, (ii) if Xxxxxxxxxx is insured under the Bank's
standard group medical plan at the time of Xxxxxxxxxx'x termination, the Bank
will pay the cost of the premiums for Xxxxxxxxxx'x health coverage under that
plan for six months, (iii) the cost of life insurance for six months, in
amounts and with coverage as applicable just prior to Xxxxxxxxxx'x last day of
employment, and (iv) the cost of disability insurance, in amounts and with
coverage as
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applicable just prior to his last day of employment for six months. Thereafter,
Xxxxxxxxxx shall be responsible for such payments if Xxxxxxxxxx so choose.
If Xxxxxxxxxx decides to terminate Xxxxxxxxxx'x employment under this Agreement
prior to the end of the Term, the Bank shall be entitled to, and Xxxxxxxxxx
shall provide the Bank with, one month's prior written notice; provided
however, upon receiving such notice, the Bank may terminate Xxxxxxxxxx'x
employment immediately and pay Xxxxxxxxxx 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.
7. Automobile Allowance. During the Term of this Agreement, the Bank
shall pay Xxxxxxxxxx a $450.00 monthly auto allowance plus the cost of fuel for
business auto use.
8. Medical Insurance. The Bank shall provide medical insurance to
Xxxxxxxxxx and Xxxxxxxxxx'x family with options and coverages consistent with
those of the Bank's group medical plan as in effect from time to time.
9. Life Insurance. The Bank shall provide Xxxxxxxxxx with life insurance
on Xxxxxxxxxx'x life, to the same extent the Bank provides life insurance to
its full time employees. Xxxxxxxxxx shall be entitled to designate the
beneficiary of the life insurance provided by this section.
10. Disability Insurance. The Bank shall provide Xxxxxxxxxx with long
term disability insurance to the same extent the Bank provides such disability
insurance to its full time employees.
11. Indemnification by the Bank. The Bank shall indemnify and hold
Xxxxxxxxxx harmless to the extent provided in the Bank's By-Laws for officers
and directors.
12. Monthly Expenses Account. Subject to the Bank's Expense Reimbursement
Policy, Xxxxxxxxxx shall be reimbursed by the Bank for Xxxxxxxxxx'x reasonable
and necessary business expenses incurred in furthering the Bank's interests.
Xxxxxxxxxx will prepare and submit expense reports promptly.
13. Vacation. During the period of this Agreement, Xxxxxxxxxx shall
accrue vacation consistent with the personnel policy of the Bank, but in no
event at less than four weeks per year. In the event that while Xxxxxxxxxx is
an employee, Xxxxxxxxxx receives any compensation in lieu of accrued vacation,
such payment shall be considered cash compensation in addition to Base Salary.
14. Confidential and Proprietary Information. Xxxxxxx Xxxxxxxxxx agrees
that all information, including but not limited to that which is directly or
indirectly related to the Bank's financial status, profitability, deposit base,
portfolio size and quality as well as
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its customers and prospective customers is confidential and proprietary to the
Bank and that he will maintain such information as confidential. Xxxxxxx
Xxxxxxxxxx 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 Bank.
15. No Conflicting Agreements. Xxxxxxx Xxxxxxxxxx represents that his
performance of all of the terms of this Agreement and any service to be
rendered as an employee of the Bank 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 Xxxxxxx Xxxxxxxxxx in confidence, trust or otherwise, prior to
Xxxxxxx Xxxxxxxxxx'x employment by the Bank to which Xxxxxxx Xxxxxxxxxx is a
party or by the terms of which Xxxxxxx Xxxxxxxxxx may be bound. Xxxxxxx
Xxxxxxxxxx covenants and agrees that he shall not disclose to the Bank, or
induce the Bank to use, any proprietary information, knowledge or data,
belonging to any previous employer or others and that Xxxxxxx Xxxxxxxxxx will
disclose to the Bank the term and subject of any prior confidentiality agreement
or agreements Xxxxxxx Xxxxxxxxxx has entered into. Xxxxxxx Xxxxxxxxxx further
covenants and agrees not to enter into any agreement or understanding, either
written or oral, in conflict with the provisions of this Agreement.
16. Successors and Assigns. This Agreement shall inure to the benefit of
and be binding upon the Bank and any of its successors and assigns. In view of
the personal nature of the services to be performed under this Agreement by
Xxxxxxx Xxxxxxxxxx, 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. Arbitration. Any controversy between Xxxxxxxxxx and Bank involving
the construction or application of any of the terms, provisions or conditions
of this Agreement, or of Xxxxxxxxxx'x employment by Bank, shall be fully and
finally resolved solely by binding arbitration conducted by American
Arbitration Association. Arbitration shall comply with, and be governed by, the
California Code of Civil Procedure arbitration provisions. Prior to
arbitration, the parties may seek mediation through a mutually agreeable
mediator.
19. Advice to Seek Counsel. Xxxxxxxxxx acknowledges that he has been
advised by the Bank that this Agreement imposes legal obligations upon
Xxxxxxxxxx to consult with legal counsel with regard to this Agreement.
Xxxxxxxxxx acknowledges that Xxxxxxxxxx has been afforded the opportunity to
obtain legal counseling with regard to this Agreement. The cost of such counsel
shall be at Xxxxxxxxxx'x expense.
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20. Notices. Any notice required to be given thereunder 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
Bank is at its principal office in Fremont, attention the CEO. Xxxxxxxxxx'x
applicable address shall be as shown on the Bank's records. Notices shall be
deemed given when actually received, or three days after mailing, whichever is
earlier.
21. Entire Agreement. This Agreement and any attachments hereto contain
the entire agreement and understanding by and between Xxxxxxxxxx and the Bank
and with respect to the subject matter herein, 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.
In witness whereof, the Bank and Xxxxxxx Xxxxxxxxxx have duly executed this
Agreement and it is effective as of the day and year first set forth above.
HERITAGE BANK OF COMMERCE ACCEPTED BY:
By: [sig] /s/ Xxxxxxx X. Xxxxxxxxxx
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Xxxxxxx X. Xxxxxxxxxx
Title: President, Fremont Office
