Exhibit 10.1


April 30, 2009


 


Heritage
Bank of Commerce


150
Almaden Boulevard


San
Jose, CA 95113


 


James
Mayer


2596
Danville Boulevard


Alamo,
CA 94501


 


Gentlemen:


 


Reference is made to that
certain Employment Agreement entered into as of February 8, 2007, as
amended December 29, 2008 (“Employment Agreement”)
by and between Heritage Bank of Commerce, a California banking corporation (the
“Bank”) and James Mayer, an individual (“Executive”) as modified by the Modification Letter Agreement
dated December 11, 2008 by and between the Bank and Executive (“Modification”).  Bank
and Executive desire to make certain modifications to the Employment Agreement
and Modification in accordance with the terms of this Letter Agreement.


 


Section 6(e)(iii) of
the Employment Agreement provides in full as follows:


 


If Executive gives written notice to the Bank during
the 18th full calendar month following the Effective
Date of his desire to terminate this Agreement and his employment with an
effective date 30 days following the date of delivery of such notice, then the
Bank shall accept the notice of termination and pay Executive $300,000, payable
$16,666.66 per month for 18 months commencing on the first full calendar month
following Executive’s termination date, provided however, that Executive does
not breach any of his remaining obligations under this Agreement or the Non-Compete
Non Solicitation and Confidentiality Agreement with HCC [Heritage Commerce
Corp] and the Bank dated the date hereof.


 


Pursuant to the Modification,
Bank and Executive modified Section 6(e)(iii) of the Employment
Agreement.  A copy of the Modification is
attached hereto as Exhibit “A”.


 


Pursuant to the U.S.
Treasury Capital Purchase Program authorized by the Troubled Asset Recovery
Program (“TARP”) provisions of the Emergency
Economic Stabilization Act of 2008 (“EESA”), on November 21,
2008, the Heritage Commerce Corp (parent of the Bank) entered into a Letter
Agreement (“Treasury Letter Agreement”) and related
Securities Purchase Agreement—Standard Terms with the United States Department
of the Treasury, pursuant to which the Company issued and sold (i) 40,000
shares of the Company’s Fixed Rate Cumulative Perpetual Preferred Stock, Series A,
and (ii) a warrant to purchase 462,963 shares of the Company’s common
stock, no par value.


 


The Company has agreed that,
until such time as United States Department of the Treasury ceases to own any
debt or equity securities of the Company acquired pursuant to the Treasury Letter
Agreement, the Company will take all necessary action to ensure that its
benefit 


 


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plans
with respect to its senior executive officers comply with Section 111(b) of
the EESA as implemented by any guidance or regulation under the EESA that has been
issued and is in effect as of the date of issuance of the series A preferred stock
and the warrant, and has agreed to not adopt any benefit plans with respect to,
or which covers, its senior executive officers that do not comply with the
EESA, and the applicable executives have consented to the foregoing.  Executive consented to the provisions of Section 111(b) at
the request of the Company.


 


The American Reinvestment
and Recovery Act of 2009 (“ARRA”) became
effective February 17, 2009.  ARRA
amends Section 111 of EESA to delete old Section 111 in its entirety
and to add new Section 111 executive compensation requirements for Capital
Purchase Program participants.  ARRA also
includes provisions directing the Secretary of the U.S. Treasury to impose additional
limits on compensation of executives of companies that participate in the
Capital Purchase Program as long as the U.S. Treasury owns the preferred stock
of such companies issued under the Capital Purchase Program.


 


ARRA directs the U.S.
Treasury to implement standards for companies to comply with these expanded
restrictions.  Until then, the Company is
complying with these provisions to the extent it believes reasonably
appropriate.  As of the date of this
Letter Agreement, the U.S. Treasury has not yet established definitive
standards required under ARRA or otherwise issued guidance regarding compliance
with ARRA for several of the other expanded requirements.  Therefore, the Company cannot determine at
this time the extent of any effect these regulations will have on the Company’s
compensation policies, programs or practices.


 


In view of the uncertainty
of the application of ARRA and any rules or regulations promulgated
thereunder to the payments agreed to by the Bank and the Executive under the
Modification, Bank and Executive have agreed to the following:


 


1.             At such time as the Bank is
permitted under ARRA to make the payments to the Executive under the Modification
(such date being the “Initial Payment Date”),
the Bank shall remit to Executive: (a) within fifteen (15) business days the
aggregate amount of payments that would have been paid to Executive as of the
Initial Payment Date if the payments required under the Modification had been
made commencing June 1, 2009 and up to the Initial Payment Date and accrued
interest from June 1, 2009 to the Initial Payment Date, and (b) any
remaining monthly payments when due under the Modification from and after the
Initial Payment Date, if any.  Accrued
interest shall be at an annual rate equal to the prime rate as published by the
Wall Street Journal on December 31 of the immediately preceding year in
which the payment is made.  For purposes
of example only:  if the Bank is
permitted to make the payments under ARRA on June 1, 2010, the Bank would
pay Executive within fifteen (15) business days the aggregate amount of $199,999.92
[12 months times $16,666.66], plus accrued interest, and the Bank would
continue to pay $16,666.66, per month thereafter for each of the next following
six months.  If, on the other hand, Bank
is not permitted to make the payments under ARRA until June 1, 2011, the
Bank would pay the executive $300,000, plus accrued interest, because by such
date all 18 month payments would have been paid to Executive had the payments
commenced on June 1, 2009.


 


2.             Bank agrees that it shall accrue
the funds payable to Executive under this Letter Agreement in accordance with
its general accounting practices for such type of payments.


 


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3.             Notwithstanding Paragraph 1
above, if at the time the Executive has a separation from service, which shall
have the same meaning as provided in Treasury Regulation section 1.409A-1(h), and
the Executive is a “specified employee,” as defined under Treasury Regulation
section 1.409A-1(i), any and all amounts payable under this Agreement hereof in
connection with such separation from service that constitute deferred compensation
subject to section 409A of the Internal Revenue Code of 1986, as amended (“Section 409A”),
as determined by the Bank in its reasonable judgment, and that would (but for
this sentence) if paid within six (6) months following such separation
from service, cause a penalty tax to be imposed on such amounts under Section 409A,
such amounts shall instead be paid on the date that follows the date of such separation
from service by six (6) months or such longer time to avoid tax
liabilities under Section 409A.Each installment payment to be provided to
the Executive under this Agreement shall be a separate “payment” within the
meaning of Treasury Regulation section 1.409A-2(b)(2)(i).


 


4.             If the Executive is determined to
have a liability pursuant to Section 409A(a)(1)(B) (the “Liability”)
for a payment or payments as a result of this Letter Agreement, the Bank will
indemnify and hold Executive harmless from such Liability for six years after
the last payment under this Letter Agreement is made.  The Bank shall pay to Executive the amount
due for the Liability, if any, as soon as administratively practicable, but in
no event later than by end of the calendar year following the year in which
Executive remits the amount due for the Liability.  The Bank’s payment for the Liability during
one year may not affect its payment of the Liability in any other year.


 


5.             If any provision of this Agreement
is held invalid or unenforceable by any court of competent jurisdiction or
federal regulatory agency (including the U.S. Department of Treasury), the
other provisions of this Agreement will remain in full force and effect.  Any provision of this Agreement held invalid
or unenforceable only in part or degree will remain in full force and effect to
the extent not held invalid or unenforceable.


 


6.             This Letter Agreement shall be
governed by the laws of the State of California.


 


7.             Except as provided in this Letter
Agreement, the Employment Agreement shall remain in full force and effect
without further modifications or amendments.


 


The parties hereto have
executed this Letter Agreement on the date first indicated above.


 


	
   

  	
  HERITAGE
  BANK OF COMMERCE,

  
	
   

  	
  a
  California corporation

  
	
   

  	
   

  
	
   

  	
  By:
  

  	
   

  	
  Walter
  T. Kaczmarek

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Walter
  T. Kaczmarek

  
	
   

  	
   

  	
  President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  James
  Mayer

  
	
   

  	
   

  	
  James
  Mayer

  



 


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EXHIBIT “A”


 


December 11, 2008


 


Heritage
Commerce Corp


150
Almaden Boulevard


San
Jose, CA  95113


 


James
Mayer


2596
Danville Boulevard


Alamo,
CA  94501


 


Gentlemen:


 


Reference is made to that
certain Employment Agreement entered into as of February 8, 2007 (“Employment
Agreement”) by and between Heritage Bank of Commerce, a California banking
corporation (the “Bank”) and James Mayer, an individual (“Executive”).  Bank and Executive desire to make certain
modifications to the Employment Agreement in accordance with the terms of this
Letter Agreement.


 


Section 6(e)(iii) of
the Employment Agreement provides in full as follows:


 


“If Executive gives written
notice to the Bank during the 18th full calendar month following the Effective
Date of his desire to terminate this Agreement and his employment with an
effective date 30 days following the date of delivery of such notice, then the
Bank shall accept the notice of termination and pay Executive $300,000, payable
$16,666.66 per month for 18 months commencing on the first full calendar month
following Executive’s termination date, provided however, that Executive does
not breach any of his remaining obligations under this Agreement or the
Non-Compete Non Solicitation and Confidentiality Agreement with HCC [Heritage
Commerce Corp] and the Bank dated the date hereof.”


 


Bank and Executive desire to
modify Section 6(e)(iii) and hereby agree as follows:


 


1.             Executive hereby gives written notice to the Bank that
Executive desires to terminate his employment with such termination to be
effective May 1, 2009.  Executive
shall remain an employee of Bank and the Term of his employment (as defined in
the Employment Agreement) shall remain in force until May 1, 2009.


 


2.             Bank hereby accepts Executive’s notice of termination of
employment to be effective May 1, 2009 and agrees to pay to Executive
$300,000, payable $16,666.66 per month for 18 months commencing on June 1,
2009, provided, however, that Executive does not breach any of his remaining
obligations under the Employment Agreement which by their terms continue after
the Term of the Employment Agreement or the terms of that certain Non-Compete
Non-Solicitation and Confidentiality Agreement by and among Heritage Commerce
Corp, the Bank and the Executive dated February 8, 2007.


 


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3.             For purposes of Section 5.7 of the Employment
Agreement, the “Date of Termination” shall be May 1, 2009, provided,
however, that if Executive’s employment is terminated prior to May 1, 2009
under the terms of the Employment Agreement other than Section 6(e)(iii) or
this Letter Agreement, the “Date of Termination” shall be as provided in Section 5.7.


 


Except as provided in this
Letter Agreement, the Employment Agreement shall remain in full force and
effect without further modifications or amendments.


 


The parties hereto have
executed this Letter Agreement on the date first indicated above.


 


	
   

  	
  HERITAGE
  BANK OF COMMERCE,

  
	
   

  	
  a
  California banking corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:
  

  	
   

  	
  /s/
  / Walter T. Kaczmarek

  
	
   

  	
   

  	
  Walter
  T. Kaczmarek

  
	
   

  	
   

  	
  President

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/
  James Mayer

  
	
   

  	
  James
  Mayer

  



 


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