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Exhibit 10.1
EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement" ) is entered
into by and between HERITAGE COMMERCE CORP, a California bank
holding company (the "Company" ), HERITAGE BANK OF COMMERCE,
a California banking corporation (the "Bank" ), and JANET R.
WALWORTH, an individual (the "Executive" ) as of December
15, 2008 (the "Effective Date" ).
RECITALS
WHEREAS, the Company is a California corporation and a bank
holding Company registered under the Bank Holding Company Act of
1956, as amended, subject to the supervision and regulation of the
Board of Governors of the Federal Reserve System,
WHEREAS, the Company is the parent holding company for the Bank,
which is a California banking association, subject to the
supervision and regulation of the California Department of
Financial Institution and the Federal Reserve Board,
WHEREAS, the Board of Directors of the Company and the Bank has
approved and authorized the entry into this Agreement with the
Executive; and
WHEREAS, the parties desire to enter into this Agreement to set
forth the terms and conditions for the employment relationship of
the Executive with the Company and the Bank.
AGREEMENT
NOW, THEREFORE, in consideration of the promises and mutual
covenants and agreements herein contained and intending to be
legally bound hereby, the Company, the Bank and the Executive
hereby agree as follows:
1.
Employment.
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1.1
Title. The Executive is employed as Sr. Vice
President/General Counsel of the Bank and the Company. In
this capacity, the Executive shall have such duties and
responsibilities as may be designated to her by the President of
the Bank and in accordance with the objectives or policies of the
Board of Directors, from time to time, in connection with the
business activities of the Bank and the Company.
1.2
Devotion to Bank and Company Business. The Executive shall
devote her full business time, ability, and attention to the
business of the Bank and the Company during the term of this
Agreement and shall not during the term of this Agreement 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 Board of Directors of the Bank and the
Company. It shall not be a violation of this Agreement for
the Executive to (A) serve on corporate, civic or charitable boards
or committees, (B) deliver lectures, fulfill speaking engagements
or teach at educational institutions and (C) manage personal
investments, so long as such activities do not significantly
interfere with the performance of the Executive’s
responsibilities as an employee of the Bank and the Company in
accordance with this Agreement. Nothing in this Agreement
shall be interpreted to prohibit the Executive from making passive
personal investments. However, the Executive shall not
directly or indirectly acquire, hold, or retain any interest in any
business competing with or similar in nature to the business of the
Bank and the Company, except as permitted by Company policies or
authorized by the Chief Executive Officer of the Company.
1.3
Standard. The Executive will set a high standard of
professional conduct given her role with the Bank and the Company
and her responsibility relative to the Bank’s and the
Company’s presence and stature in the community. The
Executive will, at all times, emulate this high professional
standard of conduct in order to develop and enhance the
Bank’s and the Company’s reputation and image.
The Executive’s and her family’s eligibility and all
other terms and conditions of the Executive’s participation
in the Bank’s or Company’s benefit, insurance and
disability plans and programs will be governed by the official plan
documents which may change from year-to-year. Notwithstanding
the foregoing, at a minimum the Executive shall be entitled to the
same benefits as all other executives in comparable positions with
the Bank or the Company. The Executive will comply with all
applicable rules, policies and procedures of the Company and Bank
and any of its subsidiaries and all pertinent regulatory standards
as may affect the Bank and the Company.
1.4
Location. The Executive shall provide services for the Bank
and the Company at their principal executive offices located in San
Jose, California. The Executive agrees that the Executive
will be regularly present at that location and that the Executive
may be required to travel from time to time in the course of
performing the Executive’s duties for the Bank and the
Company.
1.5
No Breach of Contract. The Executive hereby represents
to the Company and the Bank that: (i) the execution and
delivery of this Agreement by the Executive and the performance by
the Executive of the Executive’s duties hereunder shall not
constitute a breach of, or otherwise contravene, the terms of any
other agreement or policy to which the Executive is a party or by
which he is otherwise bound; (ii) that the Executive has no
information (including, without limitation, confidential
information or trade secrets) of any other person or entity which
the Executive is not legally and contractually free to disclose the
Bank; and (iii) that the Executive is not bound by any
confidentiality, trade secret or similar agreement (other than this
Agreement) with any other person or entity.
2.
Term. The term of this Agreement shall be a period of one (1)
year from the Effective Date, subject to the termination provisions
of Section 6. Upon the occurrence of the first annual
anniversary of the Effective Date, and on each anniversary date
thereafter, the term of this Agreement shall be
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deemed automatically extended for an additional one (1) year
term, subject to the termination provisions of Section 6.
3.
Compensation.
3.1
Salary. The Executive shall receive a salary at an annual
rate of $180,000 which will be paid in accordance with the
Bank’s normal payroll procedures including applicable
adjustments for withholding taxes. The Executive shall
receive such annual increases in salary, if any, as may be
determined by the Company’s Board of Directors annual review
of the Executive’s compensation each year during the term of
this Agreement. Participation in deferred compensation,
discretionary or performance bonus, retirement, stock option and
other employee benefit plans and in fringe benefits shall not
reduce the annual rate.
3.2
Incentive Compensation. The Executive shall be entitled to
receive an annual incentive compensation payment pursuant to the
terms of the Heritage Bank of Commerce Administrative Bonus Plan in
effect at the date of this Agreement and as amended at any future
date or pursuant to any successor incentive plan or arrangement
adopted by the Bank or the Company for its officers (the
"Incentive Plan" ). Notwithstanding any terms of the
Incentive Plan to the contrary, an annual payment under the
Incentive Plan for a fiscal year shall be paid to the Executive no
later than the 15th day of the third month following the end of the
calendar year in which the annual incentive compensation payment is
no longer subject to a substantial risk of forfeiture. Except
as set forth in the Incentive Plan or this Agreement, or in any
successor incentive plan or arrangement, no incentive compensation
payments shall be prorated for a partial year during the year
Executive terminates her employment and the Executive shall not be
entitled to receive incentive compensation payments for any year
during the term of this Agreement in which Executive was not
employed by the Bank or the Company for the full fiscal year (not
including her initial year of employment).
3.3
2004 Stock Option Plan. The Executive will receive a
nonqualified Stock Option grant of 12,000 shares of Common Stock
pursuant to the terms of the Company’s 2004 Stock Option Plan
(the "2004 Plan"). The exercise price will be the Fair Market
Value for the Company’s Common Stock on the date of grant as
defined in the 2004 Plan. The Executive’s options will
vest in daily increments of 1/1460th from the date of grant until
fully vested and shall expire ten years from the date of
grant. All such options shall be subject to the terms and
conditions of the 2004 Plan and shall be conditioned upon the
Executive’s execution of an option agreement with the Company
in a form specified by the Company.
3.4
Other Benefits. The Executive shall be entitled to those
benefits adopted by the Bank and the Company for all officers of
the Bank, subject to applicable qualification requirements and
regulatory approval requirements, if any. To the extent that
the level of such benefits is based on seniority or compensation
levels, the Company and the Bank shall make appropriate and
proportionate adjustments to the Executive’s benefits.
The Executive shall be further entitled to the following additional
benefits which shall supplement or replace, to the extent
duplicative of any part or all of the general officer benefits, the
benefits otherwise provided to the Executive:
(a)
Vacation. The Executive shall be entitled to paid vacation in
accordance with the most favorable plans, policies, programs and
practices of the Bank as in effect for the Executive or for other
executives in comparable positions with the Bank; provided,
however, that the Executive shall be entitled to earn paid vacation
at the rate of not less than 22 days vacation days for each
calendar year (reduced pro rata for any partial year), of which at
least 10 days (reduced pro rata for any partial year) must be taken
consecutively. Vacation may be accrued in accordance with the
Company’s policy. The date or dates of vacation shall
be determined by the Executive and the Bank’s President, and
will be
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subject to the Bank’s and the Company’s business
requirements.
(b)
Insurance. The Bank or the Company shall provide during the
term of this Agreement group life, health (including medical,
dental, vision and hospitalization), accident
and
disability insurance coverage for the Executive and her dependents
through a policy or policies provided by the insurer(s) selected by
the Bank or the Company in their sole discretion on the same basis
as all other executives in comparable positions with the Bank.
(c)
401(k). The Company maintains a 401(k) plan for its eligible
employees. Subject to the terms and conditions set forth in
the official plan documents, the Executive will be eligible to
participate in the 401(k) plan, and shall receive a matching
contribution in accordance with the terms of the 401(k) plan from
the Company.
3.5
Business Expenses. The Executive shall be entitled to incur
and be reimbursed for all reasonable business expenses. The
Bank agrees that it will reimburse the Executive for all such
expenses upon the presentation by the Executive, from time to time,
of an itemized account of such expenditures setting forth the date,
the purposes for which incurred, and the amounts thereof, together
with such receipts showing payments in conformity with the
Bank’s established policies. Reimbursement shall be
made within a reasonable period after the Executive’s
submission of an itemized account in accordance with the
Bank’s policies.
4.
Indemnity. The Bank and the Company shall indemnify and hold
the Executive harmless from any cost, expense or liability arising
out of or relating to any acts or decisions made by the Executive
on behalf of or in the course of performing services for the Bank
and the Company to the same extent the Bank and the Company
indemnifies and holds harmless other executive officers and
directors of the Bank and the Company and in accordance with the
articles of incorporation, bylaws and established policies of the
Bank and the Company.
5.
Certain Terms Defined. For purposes of this Agreement:
5.1
"Accrued Obligations" means the sum of the Executive’s
Base Salary and accrued vacation through the Date of Termination to
the extent not theretofore paid, outstanding expense reimbursements
and any compensation previously deferred by the Executive to the
extent not theretofore paid.
5.2
"Base Salary" means, as of any Date of Termination of
employment, the highest average salary of the Executive for any
consecutive 12 months of the last 36 months preceding such Date of
Termination.
5.3
"Cause" shall mean (i) the Executive willfully breaches or
habitually neglects the duties which the Executive is required to
perform under this Agreement; (ii) the Executive commits an
intentional act of moral turpitude that has a material detrimental
effect on the reputation or business of the Bank or the Company;
(iii) the Executive is convicted of a felony or commits any
material and actionable act of dishonesty, fraud, or intentional
material misrepresentation in the performance of the
Executive’s duties under this Agreement; (iv) the Executive
engages in an unauthorized disclosure or use of inside information,
trade secrets or other confidential information; or (v) the
Executive willfully breaches a fiduciary duty, or violates any law,
rule or regulation, which breach or violation results in a material
adverse effect on the Company and the Bank (taken as a
whole). If the Bank or the Company decides to terminate the
Executive’s employment for Cause, the Bank or the Company
will provide the Executive with notice specifying the grounds for
termination, accompanied by a brief written statement stating the
relevant facts supporting such grounds.
5.4
"Change of Control" shall mean, subject to the limitations
of Section 409A of the Code, set
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forth in Section 7 of this Agreement, the earliest occurrence of
one of the following events:
(a)
the acquisition (or acquisition during the 12 month period ending
on the date of the most recent acquisition) by any individual,
entity, or group (within the meaning of Section 13(d)(3) or
14(d)(2) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act" ) (a "Person" ) of beneficial
ownership (within the meaning of Rule 13d-3 promulgated under the
Exchange Act) of 40% or more of either (i) the then outstanding
shares of common stock of the Company (the "Outstanding the
Company Common Stock" ) or (ii) the combined voting power of
the then outstanding voting securities of the Company entitled to
vote generally in the election of directors ( "Outstanding
Company Voting Securities" ); provided, however, that for
purposes of this subsection (a), the following acquisitions shall
not constitute a Change of Control; (i) any acquisition directly
from the Company, (ii) any acquisition by the Company that reduces
the number of shares issued and outstanding through a stock
repurchase program or otherwise, (iii) any acquisition by any
employee benefit plan (or related trust) sponsored or maintained by
the Company or the Bank or any corporation controlled by the
Company or the Bank or (iv) any acquisition by any corporation
pursuant to a transaction which complies with clauses (i), (ii) and
(iii) of subsection (c) of this Section 5.4; or
(b)
individuals who, as of the Effective Date, constitute the Board of
Directors of the Company (the "Incumbent Board" ) cease for
any reason other than resignation, death or disability to
constitute at least a majority of the Company’s Board of
Directors during any 12 month period; provided, however, that any
individual becoming a director subsequent to the Effective Date
whose election, or nomination for election by the Company’s
shareholders, was approved by a vote of at least a majority of the
directors then comprising the Incumbent Board shall be considered
as though such individual were a member of the Incumbent Board, but
excluding, for this purpose, any such individual whose initial
assumption of office occurs as a result of an actual or threatened
election contest with respect to the election or removal of
directors or other actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the Company’s
Board of Directors; or
(c)
consummation of a reorganization, merger or consolidation of the
Company or the Bank, or sale or other disposition (in one
transaction or a series of transactions) of any assets of the Bank
or the Company having a total fair market value equal to, or more
than, 40% of the total gross fair market value of all of the assets
of the Bank or the Company immediately prior to such acquisition or
acquisitions (a "Business Combination" ), in each case,
unless, following such Business Combination, (i) all or
substantially all of the individuals and entities who were the
beneficial owners, respectively, of the Outstanding Common Stock
and Outstanding Voting Securities immediately prior to such
Business Combination beneficially own, directly or indirectly, more
than 50% of, respectively, the then outstanding shares of common
stock and the combined voting power of the then outstanding voting
securities entitled to vote generally in the election of directors,
as the case may be, of the corporation resulting from such Business
Combination (including, without limitation, a corporation which as
a result of such transaction owns all or substantially all of the
Company’s or Bank’s assets either directly or through
one or more subsidiaries) in substantially the same proportions as
their ownership, immediately prior to such Business Combination of
the Outstanding Common Stock and Outstanding Voting Securities, as
the case may be, (ii) no Person (excluding any corporation
resulting from such Business Combination or any employee benefit
plan (or related trust) of the Company or the Bank or such
corporation resulting from such Business Combination) beneficially
owns, directly or indirectly, 20% or more of, respectively, the
then outstanding shares of common stock of the corporation
resulting from such Business Combination or the combined voting
power of the then outstanding voting securities of such corporation
except to the extent that such ownership existed prior to the
Business Combination, and (iii) at least a majority of the members
of the board of directors of the corporation resulting from
such
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Business Combination were members of the Company’s Board
of Directors at the time of the execution of the initial agreement,
or of the action of the Company’s Board of Directors,
providing for such Business Combination; or
(d)
approval by the shareholders of the Company of a complete
liquidation or dissolution of the Company.
5.5
"Code" means the Internal Revenue Code of 1986, as amended
and any successor provisions to such sections.
5.6
"Change of Control Period" shall mean the period of time (a)
commencing on the earlier of (i) 120 days before the date the
Change of Control occurs, or if earlier, 120 days before a
definitive agreement is executed by the Company or the Bank for a
transaction described in Section 5.4(c) (provided, however, that in
the event of this subsection (a)(i) the Executive reasonably
demonstrates that her termination of employment should it occur was
either (x) at the request of a third party who has taken steps
reasonably calculated to effect a change in control, or (y)
otherwise arose in connection with a Change in Control), or (ii)
the date the Change of Control occurs, and (b) ending on the last
day of the 24th calendar month immediately following the month the
Change of Control occurred.
5.7
"Date of Termination" means (i) if the Executive’s
employment is terminated due to the Executive’s death, the
Date of Termination shall be the date of death; (ii) if the
Executive’s employment is terminated due to Disability, the
Date of Termination is the Disability Effective Date; (iii) if the
Executive’s employment is terminated by the Bank or the
Company for Cause, the Date of Termination is the date on which the
Bank or the Company gives notice to the Executive of such
termination; (iv) if the Executive’s employment is terminated
by the Bank or the Company without Cause or voluntarily by the
Executive, the Date of Termination shall be the date specified in
the notice of termination; and (v) if the Executive’s
employment terminates for any other reason, the Date of Termination
shall be the Executive’s final date of employment.
5.8
"Disability" shall mean a physical or mental condition of
the Executive which occurs and persists and which, in the written
opinion of a physician selected by the Bank or its insurers and
acceptable to the Executive or the Executive’s legal
representative, and, in the written opinion of such physician, the
condition will render the Executive unable to return to her duties
for an indefinite period of not less than 180 days.
5.9
"Highest Annual Bonus" shall mean the highest bonus or
incentive compensation amount paid to (or earned by) the Executive
in any of the three (3) fiscal years (or in any shorter number of
years if the length of employment of the Executive is less than
three (3) years) immediately preceding the termination.
6.
Termination.
6.1
This Agreement may be terminated for the following reasons:
(a)
Death. This Agreement shall terminate automatically upon the
Executive’s death.
(b)
Disability. In the event of the Executive’s Disability,
the Bank or the Company may give the Executive a notice of
termination. In such event, the Executive’s
employment with the Bank or the Company and this Agreement
shall terminate without further act of the parties effective on the
30th day after receipt of such notice by the Executive (the
"Disability Effective Date" ) provided, however, that within
the 30 days after such receipt, the Executive shall not have
returned to full-time performance of the Executive’
duties. Unless otherwise agreed in writing between the
Executive, the Bank and the
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Company, the Executive shall immediately cease performing and
discharging the duties and responsibilities of her positions and
remove herself and her personal belongings from the Bank’s
and the Company’s premises. All rights and obligations
accruing to the Executive under this Agreement shall cease at such
termination, except that such termination shall not prejudice the
Executive’s rights regarding employment benefits which shall
have accrued prior to such termination, and any other remedy which
the Executive may have at law, in equity or under this Agreement,
which remedy accrued prior to such termination.
(c)
Cause. The Bank or the Company may terminate the
Executive’s employment and this Agreement for Cause.
Unless otherwise agreed in writing between the Executive, the Bank
and the Company, the Executive shall immediately cease performing
and discharging the duties and responsibilities of her positions
and remove herself and her personal belongings from the
Bank’s and the Company’s premises. All rights and
obligations accruing to the Executive under this Agreement shall
cease at such termination, except that such termination shall not
prejudice the Executive’s rights regarding employment
benefits which shall have accrued prior to such termination, and
any other remedy which the Executive may have at law, in equity or
under this Agreement, which remedy accrued prior to such
termination.
(d)
Termination by Bank or the Company without Cause. The Bank or
the Company may, at its election and in its sole discretion,
terminate the Executive’s employment and this Agreement at
any time and for any reason or for no reason, upon 30 days prior
written notice to the Executive, without prejudice to any other
remedy to which the Bank or the Company may be entitled either at
law, in equity or under this Agreement. Unless otherwise
agreed in writing between the Executive, the Bank and the Company,
the Executive shall immediately cease performing and discharging
the duties and responsibilities of her positions and remove herself
and her personal belongings from the Bank’s and the
Company’s premises. All rights and obligations accruing
to the Executive under this Agreement shall cease at such
termination, except that such termination shall not prejudice the
Executive’s rights regarding employment benefits which shall
have accrued prior to such termination, including the right to
receive the severance benefits specified in Section 6.2(a) or
6.2(b) bel
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