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Exhibit
10.1
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT (the "
Agreement ") is entered into as of March 17, 2005 (the
" Effective Date "), by and between HERITAGE COMMERCE CORP,
a California corporation (the " Company ") and Walter
Kaczmarek, an individual (the " Executive ").
RECITALS
WHEREAS, the Compensation Committee of the Board
of Directors of the Company 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.
AGREEMENT
NOW, THEREFORE, in consideration of the promises
and mutual covenants and agreements herein contained and intending
to be legally bound hereby, the Company and the Executive hereby
agree as follows:
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- Employment .
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- Title . The Executive is employed as President and Chief
Executive Officer. In this capacity, the Executive shall have such
duties and responsibilities as may be designated to him by the
Board of Directors of the Company (the " Board ") from time
to time that are not inconsistent with the Executive's position as
Chief Executive Officer.
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- Full-Time Employment . During the Term (as defined in
Section 2), and excluding any period of vacation and sick leave to
which the Executive is entitled, the Executive agrees to devote his
full attention and time during normal business hours to the
business and affairs of the Company in a manner and with such
results as are consistent with his position and compensation and to
use the Executive's best efforts to perform such responsibilities.
During the Term 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 Company in accordance with this
Agreement.
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- Standard . The Executive will set a high standard of
professional conduct given his role with the Company and his
responsibility relative to 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 Company's reputation and image. The Executive will comply with
all pertinent regulatory standards as may affect the Company.
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- Location . The Executive shall
provide services for the Company at its principal executive offices
located in San Jose California or at any office or location less
than 10 miles from San Jose California.
- Term . Subject to the provisions of
Section 6 below, the Company hereby agrees to employ and
continue in its employ the Executive, and the Executive hereby
accepts such employment and agrees to remain in the employ of the
Company, for the period commencing on the date of this Agreement
and ending on the third anniversary of such date (the "Term");
provided that commencing on the first day of the month next
following the Effective Date hereof, and on the first day of each
month thereafter (the most recent of such dates is hereinafter
referred to as the "Renewal Date"), the Term shall be automatically
extended so as to terminate three years from such Renewal
Date.
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- Compensation .
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- Salary . Subject to the further provisions of this
Agreement, the Company shall pay the Executive a salary at an
annual rate equal to $300,000, with potential increases reviewable
annually by the Board. Such salary shall be payable by the Company
to the Executive not less frequently than monthly. 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.
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- Bonus . The Executive shall be awarded, for each
calendar year ending during the Term of this Agreement (prorated
for partial years), an annual bonus (the " Annual Bonu s")
under the Company's Annual Performance Incentive Plan (the " API
Plan ") subject to the terms, conditions and limitations of the
API Plan. The Compensation Committee or any successor committee
designated by the Board to perform similar functions (the "
Compensation Committee ") shall establish in its discretion
the terms, conditions and limitations of the API Plan including a
percentage of Base Salary that may be awarded as an award under the
API Plan as a result of achievement of a performance incentive
targets which percentage shall be up to the greater of: (i) 100% of
the Executive's Base Salary; or (ii) the maximum percentage
permitted by the API Plan.
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- Participation in Employee Benefit
Plans . During the Term of this Agreement, the Executive and/or
the Executive's family, as the case may be, shall be eligible to
participate in and shall receive all benefits (pension, thrift,
profit sharing, life insurance, medical coverage, education, or
other retirement or employee benefits) under employee benefit
plans, practices, policies and programs provided by the Company to
the extent applicable generally to other executives in comparable
positions with the Company.
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- 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
enroll in the 401(k) plan, and shall receive a matching
contribution in accordance with the terms of the 401(k) plan from
the Company in an amount no less than the lesser of 50% of the
Executive's contribution or $1,500 per year.
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- Medical . The Executive shall have the option to
participate in either of the Company's standard group HMO or PPO
plans. The Executive shall also receive a company- provided annual
physical.
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- Dental . The Executive shall have the option to
participate in the Company's standard group dental plan which,
subject to any deductible, provides for reimbursement for out of
pocket dental expenses up to an annual level of $1,500.
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- Vision . The Executive shall have the option to
participate in the Company's standard group vision plan which,
subject to any deductible, provides for reimbursement for out of
pocket vision expenses up to an annual maximum of $300 per employee
or $700 per family.
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- Employee Stock Ownership Plan . The Executive shall have
the option to participate in the Company's Employee Stock Ownership
Plan on the same basis as other executives in comparable positions
with the Company.
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- Other . The Executive's eligibility and all other terms
and conditions of the Executive's participation in the Company's
benefit plans 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 Company.
- 2004 Stock Option Plan . The Executive will receive an
Incentive Stock Option grant of 50,000 shares of Common Stock
pursuant to the terms of the Company's 2004 Stock Option Plan (the
"2004 Plan"). The grant date of the options will be the Effective
Date. 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 of the 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 Compensation Committee. In the event
that the Executive's employment is terminated by the Company
without Cause (as hereinafter defined) or by the Executive for Good
Reason (as hereinafter defined), any options not exercisable on the
Date of Termination (as hereinafter defined), shall become
immediately exercisable subject to expiration or termination as set
forth in the 2004 Plan. Upon a Terminating Event (as defined in the
2004 Plan) such options shall become immediately exercisable
subject to terms of the 2004 Plan.
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- Restricted Stock . The Company shall award the Executive
51,000 restricted shares of Common Stock. The date of the award of
the restricted shares will be the Effective Date. The Executive's
restricted stock shall vest as follows: 25% on the third
anniversary of the Effective Date, 25% on the fourth anniversary of
the Effective Date, 25% on the fifth anniversary of the Effective
Date and 25% on the sixth anniversary of the Effective Date;
provided , however , that should a Change of Control
occur or if the Executive's employment with the Company is
terminated without Cause or for Good Reason or as a result of
Executive's death or Disability, the Executive shall be immediately
fully vested. Certificate(s) for such restricted shares shall be
held in escrow and shall contain legends, which indicate the shares
are subject to forfeiture and transfer restrictions. The grant of
restricted shares of Common Stock shall be conditioned upon the
Executive's execution of a Restricted Stock Agreement.
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- Supplemental Executive Retirement Plan . The Company
maintains a Supplemental Executive Retirement Plan (" SERP
") for its executive officers. Subject to the terms and conditions
set forth in the official plan documents, the Executive will be
eligible to receive an annual benefit of up to $250,000 payable
monthly commencing one month after the Executive's sixty-second
birthday. In the event that the Executive is terminated by the
Company without Cause or if the Executive terminates for Good
Reason, the Executive shall be credited with an additional two
years of service for purposes of the Applicable Percentage (as
defined in the SERP). All other terms and conditions of the
Executive's participation in the SERP will be governed by the
official plan documents.
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- Business Expenses . During the Term of this Agreement,
the Executive shall be entitled to incur and be reimbursed for all
reasonable business expenses. The Company 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 Company's established
policies. Reimbursement shall be made within a reasonable period
after the Executive's submission of an itemized account.
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- Fringe Benefits . During the Term of this Agreement
pursuant to this Agreement, the Executive shall be entitled to
receive the following fringe benefits:
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- a monthly auto allowance of $1,000 per month plus gasoline and
maintenance;
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- payment of the monthly dues at one country club of the
Executive's choice;
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- payment of the monthly dues at the Capital Club;
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- an annual allowance of $1,200 for tax preparation; and
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- such other fringe benefits, commensurate with those available
to other executives in comparable positions with the Company in
accordance with the policies of Company as in effect from time to
time. To the extent that the level of any such benefits is based
upon seniority or compensation levels, the Company shall make an
appropriate and proportionate adjustment to the Executive's
benefits.
- Vacations . During the Term of this Agreement, the
Executive shall be entitled to paid vacation in accordance with the
most favorable plans, policies, programs and practices of the
Company as in effect for the Executive or for other executives in
comparable positions with the Company; provided ,
however , that the Executive shall be entitled to earn paid
vacation at the rate of not less than 2.5 days vacation days for
each calendar month of employment. Vacation may be accrued up to a
maximum of 30 days of earned vacation. Once this maximum is
reached, the Executive shall cease to earn or accrue vacation
unless and until the Executive takes vacation and the Executive's
accrued vacation has dropped below the maximum accrual level, at
which time the Executive shall recommence to earn and accrue paid
vacation. The date or dates of vacation shall be determined by the
Executive and the Board, and will be subject to the Company's
business requirements.
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- Insurance . During the Term of
this Agreement, the Executive shall be entitled to the following
insurance coverages for his benefit; all premiums to be paid by the
Company:
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- Life Insurance . Provided the
Executive meets insurability standards, the Executive will receive
life insurance coverage in the amount of two times the Executive's
Base Salary up to a maximum of $700,000. This coverage will be
provided through a whole life insurance policy owned by the Company
with the premium paid by the Company; the Executive shall designate
the beneficiary of the life insurance provided by this
Subsection 3.10(a).
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- Disability Insurance . The Executive shall participate
in the Company's standard group short and long term disability
coverage. Short term coverage currently provides a monthly benefit
of not less than 66 2/3% of the Executive's Base Salary up to a
maximum of $3,461 per month and long-term disability coverage
currently provides a monthly benefit of not less than 66 2/3% of
the Executive's Base Salary up to a maximum of $15,000 per
month.
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- Long Term Care Insurance . The Company will provide the
Executive with long term care insurance which will provide an
annual benefit of up to $72,000.
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- Other . The Executive's eligibility and all other terms
and conditions of the Executive's under the Company insurance and
disability plans 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
Company.
- Indemnity . 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 Company to the same extent the Company indemnifies
and holds harmless other executive officers and directors of the
Company and in accordance with the Company's articles of
incorporation, bylaws and established policies. During the Term of
this Agreement, the Company agrees to maintain director and officer
liability insurance.
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- Certain Terms Defined . For purposes of this
Agreement:
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- " 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.
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- " Base Salary " means, as of any Date of Termination of
employment, the highest annual salary of the Executive in any of
the last three years preceding such Date of Termination.
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- " 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 Company; or (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. If the Company
decides to terminate the Executive's employment for Cause, 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. Upon
termination of the Executive's employment for Cause, the Executive
will not be entitled to any further amounts under this Agreement,
except for the Base Salary accrued and unpaid vacation pay and any
rights under the 2004 Plan earned through the last day of the
Executive's employment.
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- " Change of Control " shall
mean:
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- the 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 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 (the " Outstanding
Company Voting Securities "); provided , however
, that for purposes of this Subsection (a), the following
acquisitions shall not const
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