Exhibit 10.7

EMPLOYMENT AGREEMENT

THIS EMPLOYMENT AGREEMENT (“Agreement”) is made as of this 30th day of June,
2006, by and between Baylake Bank (“Bank”) and Robert J. Cera (“Employee”).

RECITALS

The Bank desires to employ Employee, and Employee desires to be employed by the
Bank, on the terms and conditions set forth herein.

The parties believe it is in their best interests to make provision for certain
aspects of their relationship during and after the period in which Employee is
employed by the Bank.

NOW, THEREFORE, in consideration of the mutual agreements and covenants
contained herein, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged by the Bank and Employee
(“Parties”), the Parties agree as follows:

ARTICLE I

EMPLOYMENT

1.1 Term of Employment. The Bank employs Employee, and Employee accepts
employment by the Bank, for the period commencing on the start date specified
and ending on June 30, 2007 (“Employment Term”), subject to earlier termination
as hereinafter set forth in Article III, below. Employee will start actively
working full time on August 21, 2006, but the effective date of this Agreement
shall be June 30, 2006; from June 30, 2006 through August 21, 2006, Employee
will not be entitled to any compensation. Following the expiration of the
Employment Term, this Agreement shall be automatically renewed for successive
one (1) year periods (collectively, “Renewal Terms”; individually, “Renewal
Term”) unless, at least 30 days prior to the expiration of the Employment Term
or the then current Renewal Term, either party provides the other with a written
notice of intention not to renew, in which case this Agreement shall terminate
as of the end of the Employment Term or said Renewal Term, as applicable. If
this Agreement is renewed, the terms of this Agreement during such Renewal Term
shall be the same as the terms in effect immediately prior to such renewal
(including, but not limited to, the early termination provisions set forth in
Article III, below), subject to any such changes or modifications as mutually
may be agreed between the Parties as evidenced in a written instrument signed by
both the Bank and Employee.

1.2 Position and Duties. Employee shall be employed in the position of President
and COO of the Bank, and shall be subject to the authority of, and shall report
to the CEO and the Board of Directors (Board) and/or other individual(s) as may
be specified by the Board from time to time. Employee’s duties and
responsibilities shall include all those customarily attendant to the position
of President of the Bank and such other duties and responsibilities as may be
assigned from time to time by the Board. Employee shall devote Employee’s entire
business time, attention and energies exclusively to the business interests of
the Bank while employed by the Bank except as otherwise specifically approved in
writing by or on behalf of the Board.

 

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ARTICLE II

COMPENSATION AND OTHER BENEFITS

2.1 Base Salary. The Bank shall pay Employee an annual salary of Two Hundred
Seventy-five Thousand Dollars ($275,000.00) (“Base Salary”), payable in
accordance with the normal payroll practices and schedule of the Bank.

2.2 Board Attendance. Employee will not receive additional compensation for
attendance at Board meetings or Board committee meetings.

2.3 Additional Compensation. Beginning with the 2007 calendar year, Employee may
be eligible to earn an annual (calendar year) performance-based bonus of up to
but not greater than One Hundred Thousand Dollars ($100,000.00) for each full
calendar year during which Employee is employed by the Bank (“Bonus Year”), the
terms and conditions of which, as well as Employee’s entitlement thereto, shall
be determined annually in the sole discretion of the Board (“Performance
Bonus”). Employee shall be eligible for a performance bonus for the balance of
the 2006 calendar year in an amount up to $33,000 under the same conditions as
described in the preceding sentence.

2.4 Benefit Plans. Employee will be eligible to participate in the Bank’s
retirement plans that are qualified under Section 401(a) of the Internal Revenue
Code of 1986, as amended, and in the Bank’s welfare benefit plans that are
generally applicable to all employees of the Bank, in accordance with the terms
and conditions thereof.

2.6 Vehicle. After August 21, 2006, the Bank will purchase an automobile for
Employee’s use (purchase price up to $40,000); personal miles being allocated
back to employee on no less than an annual basis.

2.7 Country Club. The Bank shall obtain for Employee a country club membership
in Employee’s name at a Green Bay or Door County, Wisconsin golf club in 2007.

2.8 Relocation Assistance. The Bank shall provide relocation benefits for the
Employee’s moving expenses, customary and reasonable realtor fees and closing
costs (excluding real estate taxes) on sale of Employee’s residence in Pewaukee
Wisconsin, and all customary and reasonable closing costs associated with
Employee’s purchase of a primary residence in the area from Green Bay, Wisconsin
to Sister Bay, Wisconsin. The move shall be before June 30, 2008.

2.9 Expenses. The Bank shall reimburse Employee for all reasonable and necessary
expenses incurred in the course of the performance of Employee’s duties and
responsibilities pursuant to this Agreement and consistent with the Bank’s
policies with respect to travel, entertainment and miscellaneous expenses, and
the requirements with respect to the reporting of such expenses.

2.10 Vacation. For the remainder of the 2006 calendar year, the Employee shall
be entitled to a maximum of three (3) weeks of paid vacation; provided, however,
that such vacation time may not be carried over from year to year and that any
vacation time that is unused at the conclusion of 2006 is forfeited by Employee.
If Employee’s employment is terminated for whatever reason during 2006, Employee
forfeits any vacation time that is unused as of Employee’s last date of
employment. Beginning on January 1, 2007, the Employee will be eligible for an
amount of vacation set forth in the Bank’s vacation policy, which is applicable
to all management employees, in accordance with the terms and conditions of such
policy.

 

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2.11 Equity Plans or Programs. Employee may, during the term of this Agreement,
be eligible to participate in stock option, phantom stock, restricted stock or
other similar equity-incentive plans or programs which the Bank may establish
from time to time. The Board at its sole discretion shall establish the terms of
any such plans or programs, and Employee’s eligibility to participate in them.
Employee will present a proposal to the Board for its consideration regarding
the potential of annual eligibility of not less than 10,000 shares of Baylake
Corp stock. Bank is also willing to give consideration to a Rabbi Trust, SERP,
or etc., the amount varying dependent on the size of the program established, to
cover part or all of Employee’s compensation that does not qualify for Bank’s
401k plan. Bank will give due consideration to the compensation study from State
Financial Services Corporation, which is in Employee’s possession, if and when
establishing any proposed plan and other long-term compensation benefits.

ARTICLE III

TERMINATION

3.1 Right to Terminate; Automatic Termination.

(a) Termination Without Cause. Subject to Section 3.2, the Bank may terminate
Employee’s employment and all of the Bank’s obligations under this Agreement at
any time and for any reason.

(b) Termination For Cause. Subject to Section 3.2, the Bank may terminate
Employee’s employment and all of the Bank’s obligations under this Agreement at
any time for Cause (as defined below) by giving notice to Employee stating the
basis for such termination, effective immediately upon giving such notice or at
such other time thereafter as the Bank may designate. “Cause” shall mean any of
the following: (i) Employee has breached this Agreement or any other agreement
to which Employee and the Bank are parties or has breached any other obligation
or duty owed to the Bank; (ii) Employee has, as determined solely by the Bank,
participated in or been responsible (in whole or in part) for any violation of
or default regarding any investment agreement or bank covenants to which the
Bank is a party; (iii) Employee has committed negligence, misconduct or any
violation of law in the performance of Employee’s duties for the Bank;
(iv) Employee has taken any action likely to result in discredit to or loss of
business, reputation or goodwill of the Bank; (v) Employee has failed to follow
reasonable instructions from the Board, officer, body or other entity or
individual to whom Employee reports concerning the operations or business of the
Bank; (vi) Employee has committed a crime the circumstances of which
substantially relate to Employee’s employment duties with the Bank;
(vii) Employee has misappropriated funds or property of the Bank;
(viii) Employee has attempted to obtain a personal profit from any transaction
in which the Bank has an interest, and which constitutes a corporate opportunity
of the Bank, or which is adverse to the interests of the Bank, unless the
transaction was approved in writing by the Bank’s Board after full disclosure of
all details relating to such transaction.

 

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(c) Termination by Death or Disability. Subject to Section 3.2, Employee’s
employment and the Bank’s obligations under this Agreement shall terminate
automatically, effective immediately and without any notice being necessary,
upon Employee’s death or a determination of Disability of Employee. For purposes
of this Agreement, “Disability” means the inability of Employee, due to a
physical or mental impairment, to perform the essential functions or job-related
responsibilities of Employee’s job with the Bank, with or without a reasonable
accommodation. A determination of Disability shall be made by the Bank, which
may, at its sole discretion, consult with a physician or physicians satisfactory
to the Bank, and Employee shall cooperate with any efforts to make such
determination. Any such determination shall be conclusive and binding on the
parties. Any determination of Disability under this Section 3.1(c) is not
intended to alter any benefits any party may be entitled to receive under any
long-term disability insurance policy carried by either the Bank or Employee
with respect to Employee, which benefits shall be governed solely by the terms
of any such insurance policy.

(d) Termination by Resignation. Subject to Section 3.2, Employee’s employment
and the Bank’s obligations under this Agreement shall terminate automatically,
effective immediately upon Employee’s provision of written notice to the Bank of
Employee’s resignation from employment with the Bank or at such other time as
may be mutually agreed between the Parties following the provision of such
notice.

(e) Termination Arising From Bank Insolvency. Subject to Section 3.2, the Bank
may terminate Employee’s employment and all of the Bank’s obligations under this
Agreement at any time as a result of (i) the Bank becoming insolvent or
adjudicated bankrupt, (ii) the commencement or maintenance of proceedings
related to the bankruptcy, liquidation or dissolution of the Bank, or (iii) the
Bank’s violation of or default regarding any investment agreement or bank
covenants to which the Bank is a party by giving notice to Employee stating the
basis for such termination, effective immediately upon giving such notice or at
such other time thereafter as the Bank may designate.

(f) Termination For Good Reason. Subject to Section 3.2, the Employee may
terminate Employee’s employment and all of the Bank’s obligations under this
Agreement at any time for Good Reason (as defined below) by giving notice to the
Bank stating the basis for such termination, effective immediately upon giving
such notice. “Good Reason” shall mean (i) any material breach of this Agreement
by the Bank; (ii) other than for Cause, any material reduction in the nature or
scope of Executive’s title, authority, powers, functions, duties, reporting
requirements or responsibilities as the President of the Bank; provided,
however, that Good Reason shall not exist unless Employee first provides the
Board with notice of the facts alleged to constitute Good Reason and the
provision of this Section 3.1(f) which Employee alleges applies, and until such
breach, reduction or requirement remains uncured for 30 business days following
the Board’s receipt of such written notice from Employee.

3.2 Rights Upon Termination.

(a) Section 3.1(a) and (f) Terminations. If Employee’s employment is terminated
pursuant to Section 3.1(a) or (f) hereof, Employee shall have no further rights
against the Bank hereunder, except for the right to receive (i) any unpaid Base
Salary with

 

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respect to the period prior to the effective date of termination, (ii) a
Severance Payment (defined below), the payment of which is contingent upon
Employee’s execution of a written severance agreement (in a form satisfactory to
the Bank) containing, among other things, a general release of claims against
the Bank, and (iii) reimbursement of expenses to which Employee is entitled
under Section 2.5, above. For purposes of this Agreement, “Severance Payment”
means three (3) months of Base Salary payable following termination in
accordance with the normal payroll practices and schedule of the Bank.

(b) Sections 1.1 and 3.1(b), (c), (d) and (e) Terminations. If Employee’s
employment is terminated pursuant to Sections 3.1(b), (c) or (e), if Employee
resigns pursuant to Section 3.1(d), or if either the Bank or Employee fails to
renew this Agreement pursuant to Section 1.1, Employee or Employee’s estate
shall have no further rights against the Bank hereunder, except for the right to
receive (i) any unpaid Base Salary with respect to the period prior to the
effective date of termination and (ii) reimbursement of expenses to which
Employee is entitled under Section 2.5, above.

ARTICLE IV

CONFIDENTIALITY; NON-COMPETITION

4.1. Confidentiality Obligations. During the term of Employee’s employment under
this Agreement, Employee will not directly or indirectly use or disclose any
Confidential Information or Trade Secrets except in the interest and for the
benefit of the Bank. After the termination, for whatever reason, of Employee’s
employment with the Bank, Employee will not directly or indirectly use or
disclose any Trade Secrets unless such information ceases to be deemed a Trade
Secret by means of one of the exceptions set forth in Section 4.4(c), below. For
a period of two (2) years following termination, for whatever reason, of
Employee’s employment with the Bank, Employee will not directly or indirectly
use or disclose any Confidential Information, unless such information ceases to
be deemed Confidential Information by means of one of the exceptions set forth
in Section 4.4(c), below.

4.2 Restrictions on Competition.

(a) During Employment. During the term of Employee’s employment with the Bank,
Employee shall not directly or indirectly compete against the Bank, or directly
or indirectly divert or attempt to divert Customers’ business from the Bank.

(b) Following Employment.

(i) Non-Solicitation. For eighteen (18) months following termination, for
whatever reason, of Employee’s employment with the Bank, Employee agrees not to
directly or indirectly solicit or attempt to solicit any business from any
Restricted Customer in any manner which competes with the services or products
offered by the Bank, or to directly or indirectly divert or attempt to divert
any Restricted Customer’s business from the Bank.

 

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(ii) Non-Competition. For eighteen (18) months following termination, for any
reason, of Employee’s employment with the Bank, Employee agrees not to provide
services which are substantially similar to the services Employee provided to
the Bank as an employee, agent, independent contractor or otherwise, to a
“Venture in Competition.” A “Venture in Competition” shall be defined as a bank,
credit union or other entity which is in the business of lending money to
individuals or businesses and which has a branch, office or place of business
within a 100-mile radius of Sturgeon Bay, Wisconsin.

4.3 Assignment of Business Ideas. Employee shall immediately disclose to the
Bank a list of all inventions, patents, applications for patent, copyrights, and
applications for copyright in which Employee currently holds an interest. The
Bank will own, and Employee hereby assigns to the Bank, all rights in all
Business Ideas. All Business Ideas which are or form the basis for copyrightable
works shall be considered “works for hire” as that term is defined by United
States copyright law. Any works that are not found to be “works for hire” are
hereby assigned to the Bank. While employed by the Bank and for one (1) year
thereafter, Employee will promptly disclose all Business Ideas to the Bank and
execute all documents which the Bank may reasonably require to perfect its
patent, copyright and other rights to such Business Ideas throughout the world.
After Employee’s employment with the Bank terminates, for whatever reason,
Employee will cooperate with the Bank to assist the Bank in perfecting its
rights to any Business Ideas including executing all documents which the Bank
may reasonably require.

4.4 Definitions.

(a) Trade Secret. The term “Trade Secret” shall have that meaning set forth
under applicable law. This term is deemed by the Bank to specifically include
all computer source code created by or for the Bank and any confidential
information received from a third party with whom the Bank has a binding
agreement restricting disclosure of such confidential information.

(b) Confidential Information. The term “Confidential Information” shall mean all
non-Trade Secret or proprietary information of the Bank which has value to the
Bank and which is not known to the public or the Bank’s competitors, generally,
including, but not limited to, new products, customer lists, pricing policies,
employment records and policies, operational methods, marketing plans and
strategies, product development techniques and plans, business acquisition
plans, rate information, loan information, financial information regarding the
Bank and its customers, technical processes, designs, inventions, research
programs and results, and computer source code.

(c) Exclusions. Notwithstanding the foregoing, the terms “Trade Secret” and
“Confidential Information” shall not include, and the obligations set forth in
this Agreement shall not apply to, any information which: (i) can be
demonstrated by Employee to have been known by Employee prior to Employee’s
employment by the Bank; (ii) is or becomes generally available to the public
through no act or omission of Employee; (iii) is obtained by Employee in good
faith from a third party who discloses such information to Employee on a
non-confidential basis without violating any obligation of confidentiality or
secrecy relating to the information disclosed; or (iv) is independently
developed by Employee outside the scope of Employee’s employment without use of
Confidential Information or Trade Secrets.

 

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(d) Business Ideas. The term “Business Ideas” as used in this Agreement means
all ideas, inventions, data, software, developments and copyrightable works,
whether or not patentable or registrable, which Employee originates, discovers
or develops, either alone or jointly with others while Employee is employed by
the Bank and for one (1) year thereafter and which are (i) related to any
business known by Employee to be engaged in or contemplated by the Bank,
(ii) originated, discovered or developed during Employee’s working hours, or
(iii) originated, discovered or developed in whole or in part using materials,
labor, facilities, Confidential Information, Trade Secrets, or equipment
furnished by the Bank.

(e) Customer. The term “Customer” shall mean any individual or entity for whom
the Bank has provided services or products or made a proposal to provide
services or products.

(f) Restricted Customer. The term “Restricted Customer” shall mean any
individual or entity for whom/which the Bank provided services or products and
with or about whom/which the Employee had direct contact on behalf of the Bank
or acquired confidential information or trade secrets on behalf of the Bank
during the two (2) years preceding termination, for whatever reason, of
Employee’s employment.

4.5 Return of Records. Upon termination, for whatever reason, of employment or
upon request by the Bank at any time, Employee shall immediately return to the
Bank all documents, records, and materials belonging and/or relating to the
Bank, and all copies of all such materials. Upon termination, for whatever
reason, of employment or upon request by the Bank at any time, Employee further
agrees to destroy such records maintained by Employee on Employee’s own computer
equipment.

4.6. Non-Solicitation of Employees. During the term of Employee’s employment
with the Bank and for one (1) year thereafter, Employee shall not directly or
indirectly encourage any Bank employee to terminate his/her employment with the
Bank or solicit such an individual for employment outside the Bank.

4.7 Employee Disclosures and Acknowledgments.

(a) Prior Obligations. There no are prior obligations (written and oral), such
as confidentiality agreements or covenants restricting future employment or
consulting, that Employee has entered into which may restrict Employee’s ability
to perform Employee’s duties as an Employee for the Bank.

(b) Confidential Information of Others. Employee certifies that Employee has
not, and will not, disclose or use during Employee’s time as an employee of the
Bank, any confidential information which Employee acquired as a result of any
previous employment or under a contractual obligation of confidentiality or
secrecy before Employee became an employee of the Bank.

(c) Scope of Restrictions. By entering into this Agreement, Employee
acknowledges the nature of the Bank’s business and the nature and scope of the
restrictions set forth in this Article IV, including specifically Wisconsin’s
Uniform Trade Secrets Act, presently Section 134.90(1)(c), Wis. Stats. Employee
acknowledges and represents that the scope of the restrictions are appropriate,

 

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necessary and reasonable for the protection of the Bank’s business, goodwill,
and property rights. Employee further acknowledges that the restrictions imposed
will not prevent Employee from earning a living in the event of, and after,
termination, for whatever reason, of Employee’s employment with the Bank.
Nothing herein shall be deemed to prevent Employee, after termination of
Employee’s employment with the Bank, from using general skills and knowledge
gained while employed by the Bank.

(d) Prospective Employers. Employee agrees, during the term of any restriction
contained in this Article IV, to disclose this Agreement to any future or
prospective employer. Employee further agrees that the Bank may send a copy of
this Agreement to, or otherwise make the provisions hereof known to, any such
employer.

4.8 Effect of Termination. Notwithstanding any termination of this Agreement,
the Employee, in consideration of his employment hereunder, shall remain bound
by the provisions of this Agreement which specifically relate to periods,
activities or obligations upon or subsequent to the termination, for whatever
reason, of the Employee’s employment.

4.9 Effect of Breach. In the event that Employee breaches any provision of this
Article IV, Employee agrees that the Bank may suspend all additional payments to
Employee under this Agreement, recover from Employee any damages suffered as a
result of such breach and recover from Employee any reasonable attorneys’ fees
or costs it incurs as a result of such breach. In addition, Employee agrees that
the Bank may seek injunctive or other equitable relief as a result of a breach
by Employee of any provision of this Article IV.

ARTICLE V

GENERAL PROVISIONS

5.1 Notices. Any and all notices, consents, documents or communications provided
for in this Agreement shall be given in writing and shall be personally
delivered, mailed by registered or certified mail (return receipt requested) or
sent by courier, confirmed by receipt, and addressed as follows (or to such
other address as the addressed party may have substituted by notice pursuant to
this Section 5.1):

(a) If to the Bank:

Chair of the Board of Directors

Baylake Bank

P O Box 9

Sturgeon Bay, WI 54235-0009

(b) If to Employee:

Robert J. Cera

___________________________

___________________________

___________________________

 

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Such notice, consent, document or communication shall be deemed given upon
personal delivery or receipt at the address of the party stated above or at any
other address specified by such party to the other party in writing, except that
if delivery is refused or cannot be made for any reason, then such notice shall
be deemed given on the third day after it is sent.

5.2 Entire Agreement. This Agreement contains the entire understanding and the
full and complete agreement of the parties and supersedes and replaces any prior
understandings and agreements among the parties, with respect to the subject
matter hereof.

5.3 Injunctive Relief. The parties agree that damages will be an inadequate
remedy for breaches of this Agreement and in addition to damages and any other
available relief, a court shall be empowered to grant injunctive relief.

5.4 Headings. The headings of sections and paragraphs of this Agreement are for
convenience of reference only and shall not control or affect the meaning or
construction of any of its provisions.

5.5 Consideration. Execution of this Agreement is a condition of Employee’s
employment with the Bank and Employee’s employment by the Bank, together with
the benefits provided to the Employee herein, constitutes the consideration for
Employee’s undertakings hereunder.

5.6 Amendment. This Agreement may be altered, amended or modified only in a
writing, signed by both of the parties hereto. Headings included in this
Agreement are for convenience only and are not intended to limit or expand the
rights of the parties hereto. References to Sections herein shall mean sections
of the text of this Agreement, unless otherwise indicated.

5.7 Assignability. This Agreement and the rights and duties set forth herein may
not be assigned by Employee, but may be assigned by the Bank, in whole or in
part. This Agreement shall be binding on and inure to the benefit of each party
and such party’s respective heirs, legal representatives, successors and
assigns.

5.8 Severability. If any court of competent jurisdiction determines that any
provision of this Agreement is invalid or unenforceable, then such invalidity or
unenforceability shall have no effect on the other provisions hereof, which
shall remain valid, binding and enforceable and in full force and effect, and
such invalid or unenforceable provision shall be construed in a manner so as to
give the maximum valid and enforceable effect to the intent of the parties
expressed therein. Nothing in this provision shall contemplate any
blue-penciling prohibited under Wis. Stat. Section 103.465. The parties agree
that paragraphs 4.1, 4.2(a), 4.2(b)(i), 4.2(b)(ii) and 4.3 contain separate
restrictions and that the invalidity of one shall have no effect on the other
restrictions.

5.9 Waiver of Breach. The waiver by either party of the breach of any provision
of this Agreement shall not operate or be construed as a waiver of any
subsequent breach by either party.

5.10 Governing Law; Construction. This Agreement shall be governed by the
internal laws of the State of Wisconsin, without regard to any rules of
construction concerning the draftsman hereof.

 

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IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and
year written above.

 

BAYLAKE BANK: By:   /s/ T.L. Herlache   T.L Herlache, Chief Executive Officer

 

/s/ Robert J. Cera Robert J. Cera

 

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