Document:

EXHIBIT 10.1

 

AMENDED AND RESTATED EMPLOYMENT AGREEMENT

 

This Amended and Restated Employment Agreement (this “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 WALTER KACZMAREK, an individual (the “Executive”) as of October 17, 2007 (the “Effective Date”). This Agreement amends and restates the
Employment Agreement dated March 17, 2005 (the “Original
Agreement”) by and between the Company and the Executive to modify
the terms of employment, makes changes to comply with Section 409A of the
Internal Revenue Code of 1986, as amended, and make other changes.

 

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, Executive is currently the Chief Executive Officer
of the Company and the President of the Bank pursuant to the terms of the
Original Agreement:

 

NOW, THEREFORE, in consideration of the promises and
mutual covenants and agreements herein contained and intending to be legally
bound hereby, the Company, Bank and the Executive hereby agree as follows:

 

AGREEMENT

 

1.                                       Employment.

 

1.1                                 Title.
Pursuant to this Agreement, Bank and Company employ the Executive and the
Executive hereby accepts employment with the Company and the Bank, upon the
terms and conditions hereinafter set forth. The Executive shall serve as the Chief
Executive Officer of the Company and the President of the Bank and shall
perform the customary duties of such officers in the commercial banking
industry and such duties and responsibilities as may be designated to him by
the Company’s Board of Directors and in accordance with the objectives or
policies of the Board of Directors of the Company, from time to time, in
connection with the business activities of the Company and the Bank.

 

1.2                                 Devotion
to Company and Bank Business. The Executive shall devote his full business
time, ability, and attention to the business of the Company and the Bank during
the term of this Agreement and shall not during the term of this Agreement
engage in any other business

 

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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 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 Company and
the Bank 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.

 

1.3                                 Standard.
The Executive will set a high standard of professional conduct given his role
with the Company and the Bank and his responsibility relative to the Company’s
and Bank’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 reputation and image of the Company and Bank. The Executive’s
and his 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 Company and the Bank. The Executive will comply
with all applicable rules, policies and procedures of the Company and the 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 Company and the Bank at the
Company’s principal executive offices located in San Jose California. The
Executive agrees that the Executive will be regularly present at the Company’s
principal executive offices and that the Executive may be required to travel
from time to time in the course of performing the Executive’s duties for the Company
and the Bank.

 

1.5                                 No
Breach of Contract. The Executive hereby represents to the Company and 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 Company or 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 3 years from the Effective
Date; provided, however, that commencing on the first day of the month next
following the Effective Date, and on the first day of each month thereafter
(the most recent of such dates referred to as the “Renewal Date”), the term of
this Agreement shall be automatically extended to terminate 3 years from the Renewal
Date.

 

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3.                                       Compensation.

 

3.1                                 Salary.
The Executive shall receive a salary at an annual rate of $324,000 which will
be paid in accordance with the Company’s and 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 Commerce
Corp Management Incentive Compensation 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 Company for its officers (the “Incentive Plan”). The percentage of Executive’s then current
salary that may be awarded as an award under the Incentive Plan as a result of
achievement of performance incentive targets shall be the greater of (a) 100%,
or (b) the maximum percentage permitted under 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 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.

 

3.3                                 Stock
Options. The Executive acknowledges having received grants of stock options
pursuant to the Heritage Commerce Corp 2004 Stock Option Plan (together with
any successor equity incentive plan, the “Stock Option Plans”).
Any future grant of stock options to the Executive pursuant to the Stock Option
Plans shall be determined by and in the sole discretion of the Company’s
Compensation Committee and the Company’s Board of Directors. Any such future
stock option grant shall be evidenced by a stock option agreement in the form
required by the Stock Option Plans. Notwithstanding any provision in the 2004
Plan or Stock Option Agreement to the contrary, 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 Terminating Event (as defined in the 2004 Plan) such
options shall become immediately exercisable subject to terms of the 2004 Plan.

 

3.4                                 Restricted
Stock. The Executive acknowledges receipt of 51,000 restricted shares of Heritage
Commerce Corp common stock pursuant to the terms of the Restricted Stock
Agreement dated March 17, 2005 by and between the Company and the
Executive (“Restricted Stock Agreement”). Under the terms of the Restricted
Stock Agreement, the Executive’s restricted stock shall vest as follows:  25% on March 17, 2008, 25% on March 17,
2009, 25% on March 17, 2010 and 25% on March 17, 2011; provided,
however, that should a Change of

 

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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 unvested
restricted shares shall become immediately fully vested.

 

3.5                                 Other
Benefits. The Executive shall be entitled to those benefits adopted by the
Bank and the Company for all officers of the Company, 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 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 in accordance with the Company’s policy.

 

(b)                                 Automobile
Allowance And Insurance. The Bank or the Company will pay to the Executive
an automobile allowance in the amount of $1,000 per month during the term of
this Agreement. The Bank or the Company shall reimburse the Executive for
gasoline and maintenance expenditures related to use of the automobile acquired
or used by the Executive upon presentation and approval of receipts, invoices
or other appropriate evidence of such expense in accordance with the policies
of the Bank or the Company. The Executive shall acquire or otherwise make
available for his business and personal use an automobile suitable to his
position and maintain it in good condition and repair. The Executive shall
obtain and maintain public liability insurance and property damage insurance
policies with insurer(s) acceptable to the Bank and the Company and with such
coverages in such amounts as may be acceptable to the Bank and the Company from
time to time. The Bank or the Company may elect to provide and pay for such
insurance policies in lieu of the Executive maintaining such policies.

 

(c)                                  Insurance.
The Bank or the Company shall provide during the term of this Agreement at no cost
to the Executive group life, health (including medical, dental, vision and
hospitalization), accident and disability insurance coverage for the Executive
and his 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 Company  and the Bank, provided, however, that the
following minimum insurance coverage shall be provided for the Executive:

 

(i)                                     Life
Insurance. The Company or the Bank will provide the Executive with life
insurance coverage in the amount of two times the Executive’s then current salary
up to a maximum of $700,000, provided, however, that the Executive meets
insurability standards. This coverage will be provided through a whole life
insurance policy owned by the

 

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Company with the premium
paid by the Company or the Bank; the Executive shall designate the beneficiary
of the life insurance provided by this Section 3.5(c)(i).

 

(ii)                                  Disability
Insurance. The Executive shall participate in the standard group short and
long term disability coverage offered by the Company or the Bank.

 

(iii)                               Long
Term Care Insurance. The Company or the Bank will provide the Executive
with long term care insurance which will provide an annual benefit of up to
$72,000.

 

(d)                                 Supplemental
Compensation. The Bank and the Executive acknowledge that they have entered
into a Supplemental Executive Retirement Plan Agreement (“SERP”)
with an eligibility date of March 17, 2005, which provides supplemental
compensation benefits to the Executive payable upon retirement or as otherwise
set forth in the SERP. Subject to the terms and conditions set forth in the
SERP and Section 7, 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. If, however, the Executive is terminated by
the Company or the Bank without Cause or Executive terminates this Agreement
and his employment for Good Reason (and, in either case, not associated with a
Change of Control), the Executive shall be credited with an additional two
years of service for purposes of the Applicable Percentage (as defined in the
SERP). All terms and conditions of the Executive’s participation in the SERP
(including in the case of a Change in Control) will be governed by the SERP
plan documents.

 

(e)                                  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.

 

(f)                                    Employee
Stock Ownership Plan. The Executive will be eligible to participate in the
Company’s Employee Stock Ownership Plan (“ESOP”), subject
to the terms and conditions of the ESOP.

 

(g)                                 Reimbursement
for Tax Preparation. The Company or the Bank will reimburse the Executive
for up to $1,200 of expense incurred by the Executive for tax consultation and
preparation of tax returns, upon presentation and approval of receipts,
invoices or other appropriate evidence of such expense in accordance with
policies of the Bank or the Company.

 

(h)                                 Annual
Physical Exam. The Company or the Bank shall pay or reimburse the Executive
of the cost, if any, in excess of applicable insurance coverage specified in
Section 3.5(c) for an annual physical examination conducted by a licensed
physician(s) selected by the Executive, the results of which examination shall not
be required to be disclosed to the Company or the Bank. Any such reimbursement
shall be made upon presentation and approval of receipts, invoices or other
appropriate evidence of such expense in accordance with policies of the Company
and the Bank.

 

3.6                                 Business
Expenses; Memberships. The Executive shall be entitled to incur and be
reimbursed for all reasonable business expenses. The Company agrees that the
Company or the

 

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Bank 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 and 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 policies
of the Company. The Bank or the Company shall reimburse Executive for the
monthly dues for The Capital Club, and for the monthly dues at one country
club of Executive’s choice.

 

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 of the Company to the same extent the Bank and the
Company indemnifies and holds harmless other executive officers and directors
of the Bank and 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
decides to terminate the Executive’s employment for Cause, the Bank 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 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

 

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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

 

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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 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 his 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 for Cause, the Date of Termination is
the date on which the Company or Bank gives notice to the Executive of such
termination; (iv) if the Executive’s employment is terminated by the Company or
Bank 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 Company 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
his duties for an indefinite period of not less than 180 days.

 

5.9                                 “Good Reason” shall mean:

 

(a)                                  any
adverse change in the salary, incentive compensation, benefits, status,
responsibilities, authority, and duties (including offices held, titles and
reporting requirements) of the Executive, as contemplated by Section 1 of this
Agreement;

 

(b)                                 any
failure by the Company or Bank to comply with any of the provisions of Sections
3 or 4 of this Agreement, other than an isolated, insubstantial and inadvertent
failure not occurring in bad faith and which is remedied by the Company or Bank
promptly after receipt of notice thereof given by the Executive;

 

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(c)                                  the
Company’s requiring the Executive to be based at any office or location other
than as provided in Section 1.4 of this Agreement;

 

(d)                                 any
purported termination by the Company or the Bank of the Executive’s employment
otherwise than as expressly permitted by this Agreement; or

 

(e)                                  any
failure by the Company or the Bank to comply with and satisfy Section 9 of this
Agreement.

 

For purposes of this
Section 5.9, any reasonable good faith determination of “Good Reason” made by
the Executive shall be conclusive.

 

5.10                           “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 Company may give the Executive
a notice of termination. In such event, the Executive’s employment  with the Company and the Bank and this Agreement
shall terminate without further act of the parties effective on the 90th day
after receipt of such notice by the Executive (the “Disability
Effective Date”) provided, however, that within the 90 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 Company, the Executive shall immediately cease
performing and discharging the duties and responsibilities of his positions and
remove himself and his 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 his positions and remove himself
and his 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.

 

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(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 his positions and remove himself and his
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) below, and any other remedy which the Executive may have at law, in
equity or under this Agreement, which remedy accrued prior to such termination.

 

(e)                                  Voluntary
Termination By Executive. The Executive may terminate his employment and
this Agreement at any time and for any reason or no reason, upon 30 days prior
written notice to the Bank and the Company. 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
his positions and remove himself and his 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.

 

(f)                                    Termination
by the Executive for Good Reason. The Executive may terminate his
employment and this Agreement at any time for Good Reason upon 30 days prior
written notice to the Bank and the Company. 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
his positions and remove himself and his 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.

 

6.2                                 Certain
Benefits upon Termination.

 

(a)                                  Termination
without Cause/Termination for Good Reason. In the event this Agreement is
terminated based on Section 6.1(d) (termination without cause) or
Section 6.1(f) (termination for Good Reason), then in such case, the Executive
shall receive the Accrued Obligations on the Date of Termination, and severance
benefits constituting of:

 

(i)                                     cash
payment in the amount equal to 2 times the Executive’s (A) Base Salary and
(B) the Highest Annual Bonus, payable in a lump sum within 30 days of the Date
of Termination, and

 

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(ii)                                  continuation
of group insurance coverages specified in Section 3.5(c) of this Agreement
on terms at least equal to those if the Executive’s employment had not been
terminated, but not less favorable than that provided to other executives in
comparable positions with the Company and the Bank, for a period of 36 months
from the Date of Termination with one hundred percent (100%) of premiums for
the insurance coverages payable by the Bank or the Company monthly to the
Executive for a period of 36 months from the Date of Termination, (including for
the first 18 months of such 36 month period continuation of medical coverage
for the Executive and his dependents pursuant to The Consolidated Omnibus
Budget Reconciliation Act of 1985 (“COBRA”), or
under applicable California law pursuant to Assembly Bill No 1401 (“Cal COBRA”)). After expiration of the 36 months, the
Executive and his dependents shall have such rights to continue to participate
under the Bank’s or the Company’s group insurance coverages specified in
Section 3.5(c) of this Agreement at the Executive’s expense to the extent
available under the terms of the plan or benefit. The Executive agrees to notify
the Bank or the Company as soon as practicable, but not less than 10 business
days in advance of the commencement of comparable insurance coverages with
another employer. The Company’s and the Bank’s obligation for the 36 month
period specified herein with respect to the foregoing benefits shall be limited
to the extent that the Executive obtains any such benefits pursuant to a
subsequent employer’s benefit plans, in which case the Bank may reduce the
coverage of any benefits it is required to provide the Executive hereunder so
long as the aggregate coverages and benefits of the combined benefit plans of
the new employer are not substantially less favorable to the Executive than the
coverages and benefits required to be provided hereunder.

 

(iii)                               The
Company shall at its sole expense, as incurred, reimburse Executive up to
$5,000 for bona-fide, professional out-placement services upon presentation of
receipts, invoices or other appropriate evidence of such expense in accordance
with policies of the Company.

 

Notwithstanding the foregoing or any other provision
of this Agreement, if any part or all of the severance benefits is subject to
taxation under Section 409A of the Code, as determined by the Bank or the
Company, with the advice of its independent accounting firm or other tax
advisors, then the severance benefits shall be subject to modification as set
forth in Section 7 of this Agreement.

 

Notwithstanding the foregoing, when the Executive is
entitled to the severance benefits provided in Section 6.2(b), then Executive
shall not be entitled to the severance benefits pursuant to this Section 6.2(a).

 

The Executive acknowledges and agrees that severance
benefits pursuant to this Section 6.2(a) are in lieu of all damages,
payments and liabilities on account of the early termination of this Agreement
and are the sole and exclusive remedy for the Executive for a termination
specified in Section 6.1(d) or Section 6.1(f).

 

(b)                                 Termination
And Change In Control. In the event of a Change in Control and at any time during
the Change of Control Period (x) the Executive’s employment is terminated,
or (y) Executive voluntarily terminates his employment and this Agreement for
Good

 

11

 

Reason, then the
Executive shall receive the Accrued Obligations on the Date of Termination, and
the severance benefits consisting of:

 

(i)                                     a
cash payment in an amount equal to 2.75 times the Executive’s (A) Base Salary
and (B) Highest Annual Bonus, payable in lump sum within 30 days following
such termination; and

 

(ii)                                  continuation
of group insurance coverages specified in Section 3.5 (c) of this
Agreement on terms at least equal to those if the Executive’s employment had
not been terminated, but not less favorable than that provided to other executives
in comparable positions with the Company and the Bank, for a period of 36
months from the Date of Termination with one hundred percent (100%) of premiums
for the insurance coverages payable by the Bank or the Company monthly to the
Executive for a period of 36 months from the Date of Termination, (including for
the first 18 months of such 36 month period continuation of medical coverage
for the Executive and his dependents pursuant to COBRA or under Cal COBRA). After
expiration of the 36 month period, the Executive and his dependents shall have
such rights to continue to participate under the Bank’s or the Company’s group
health benefits plan or the group health plan benefits of any successor to the
Bank or the Company that results from the Change of Control at the Executive’s
expense. The Executive agrees to notify the Bank and the Company as soon as
practicable, but not less than 10 business days in advance of the commencement
of comparable insurance coverages with another employer. The obligation of the
Company and the Bank for the 36 month period specified herein with respect to
the foregoing benefits shall be limited to the extent that the Executive
obtains any such benefits pursuant to a subsequent employer’s benefit plans, in
which case the Company and the Bank may reduce the coverage of any benefits it
is required to provide the Executive hereunder so long as the aggregate
coverages and benefits of the combined benefit plans of the new employer are
not substantially less favorable to the Executive than the coverages and
benefits required to be provided hereunder.

 

(iii)                               The
Company shall at its sole expense, as incurred, reimburse Executive up to
$5,000 for bona-fide, professional out-placement services upon presentation of
receipts, invoices or other appropriate evidence of such expense in accordance
with policies of the Company.

 

Notwithstanding the foregoing or any other provision
of this Agreement, if any part or all of the severance benefits is subject to
taxation under Section 409A of the Code, as determined by the Bank or the
Company, with the advice of its independent accounting firm or other tax
advisors, then the severance payment shall be subject to modification as set
forth hereafter in Section 7 of this Agreement.

 

The Executive acknowledges and agrees that severance
benefits pursuant to this Section 6.2(b) are in lieu of all damages,
payments and liabilities on account of the events described above for which
such severance benefits may be due the Executive under Section 6.2(b) of
this Agreement. This Section 6.2(b) shall be binding upon and inure to the
benefit of the Bank and the Company and their respective successors and assigns.

 

12

 

Notwithstanding the foregoing, the Executive shall not
be entitled to receive severance benefits pursuant to this Section 6.2(b) in
the event his termination of employment results from an occurrence described in
Sections 6.1(a), 6.1(b) or 6.1(c).

 

(c)                                  Death.
If the Executive’s employment terminates by reason of the Executive’s death, this
Agreement shall terminate without further obligations to the Executive’s legal
representatives under this Agreement, other than for payment of Accrued
Obligations and any incentive compensation for the year in which the death
occurred prorated through the Date of Termination. Accrued Obligations shall be
paid to the Executive’s estate or beneficiary, as applicable, in a lump sum in
cash within 30 days of the Date of Termination; provided, however, that payment
may be deferred until the Executive’s executor or personal representative has
been appointed and qualified pursuant to the laws in effect in the Executive’s
jurisdiction of residence at the time of the Executive’s death. The Executive’s
estate and/or beneficiaries shall be entitled to receive, benefits at least
equal to the most favorable benefits provided by the Company and the Bank to
the estate and beneficiaries of other executives in comparable positions with
the Company and the Bank under such plans, programs, practices and policies
relating to death benefits, if any as in effect on the date of the Executive’s
death.

 

(d)                                 Disability.
If the Executive’s employment terminates by reason of the Executive’s
Disability, this Agreement shall terminate without further obligations to the
Executive under this Agreement, other than for payment of Accrued Obligations,
and any incentive compensation for the year in which the termination occurs prorated
through the Date of Termination and any benefits under such plans, programs,
practices and policies relating to disability benefits, if any, as in effect on
the Date of Termination.

 

(e)                                  Cause/Voluntary
Termination. If the Executive’s employment terminates for Cause, this
Agreement shall terminate without further obligations to the Executive other
than the obligation to pay to the Executive the Accrued Obligations. If the
Executive’s employment terminates due to the Executive’s voluntarily
termination pursuant to Section 6.1(e), this Agreement shall terminate
without further obligations to the Executive other than the obligation to pay
to the Executive the Accrued Obligations.

 

(f)                                    Single
Trigger Event. The provisions for payments contained in this Section 6.2
may be triggered only once during the term of this Agreement, so that, for
example, should the Executive be terminated because of a Disability and should
there thereafter be a Change of Control, then the Executive would be entitled
to be paid only under Section 6.2(d) and not under Section 6.2(b), as well. In
addition, the Executive shall not be entitled to receive severance benefits of
any kind from any parent, wholly owned subsidiary or other affiliated entity of
the Bank or the Company if in connection with the same event of series of
events the payments provided for in this Section 6.2 have been triggered.

 

7.                                       Section
409A Limitation. It is the intention of the Bank, the Company and the
Executive that the severance benefits payable to the Executive under Section 6.2
either be exempt from, or otherwise comply with, Section 409A (“Section 409A”) of the Code.

 

Notwithstanding any other term or provision of this
Agreement, to the extent that any provision of this Agreement is determined by
the Bank or the Company, with the advice of its

 

13

 

independent accounting
firm or other tax advisors, to be subject to and not in compliance with Section
409A, including, without limitation, the definition of Change in Control or the
timing of commencement and completion of severance benefits and/or other
benefit payments to the Executive hereunder, or the amount of any such
payments, such provisions shall be interpreted in the manner required to exempt
the benefits from or to comply with Section 409A. The Company, the Bank and the
Executive acknowledge and agree that such interpretation could, among other
matters, (i) limit the circumstances or events that constitute a “change
in control;” (ii) delay for a period of 6 months or more, or otherwise
modify the commencement of severance and/or other benefit payments; (iii)
modify the completion date of severance and/or other benefit payments; and/or
(iv) reduce the amount of the benefit otherwise provided.

 

The Company, Bank and the Executive further
acknowledge and agree that if, in the judgment of the Bank or the Company, with
the advice of its independent accounting firm or other tax advisors, amendment
of this Agreement is necessary to exempt the benefits from or to comply with
Section 409A, the Bank, the Company and the Executive will negotiate reasonably
and in good faith to amend the terms of this Agreement to the extent necessary
so that it exempts the benefits from or to comply with Section 409A (with
the most limited possible economic effect on the Bank, the Company and the
Executive). For example, if this Agreement is subject to Section 409A and Section 409A
requires that severance and/or other benefit payments must be delayed until at
least 6 months after the Executive terminates employment, then the Bank, the
Company and the Executive shall delay payments and/or promptly seek a written
amendment to this Agreement that would, if permissible under Section 409A,
eliminate any such payments otherwise payable during the first 6 months
following the Executive’s termination of employment and substitute therefore a
lump sum payment or an initial installment payment, as applicable, at the
beginning of the 7th month following the Executive’s termination of employment
which, in the case of an initial installment payment, would be equal in the
aggregate to the amount of all such payments thus eliminated. Notwithstanding
the foregoing, (a) the Executive and his dependents shall not be denied access
to and participation in any health or medical insurance coverage and benefits
for any period of time the Executive and his dependants are otherwise eligible,
and (b) the Executive acknowledges and agrees that the Company or the Bank
shall have the exclusive authority to determine whether the Executive is a “specified
employee” within the meaning of Section 409A(a)(2)(B)(i).

 

8.                                       Gross
Up Of Section 280G And 409A Tax. If all or any portion of the amounts
payable to the Executive under this Agreement, either alone or together with
other payments or benefits which the Executive has the right to receive from
the Bank or the Company, constitute “excess parachute payments” within the
meaning of Section 280G of the Code, that are subject to the excise tax imposed
by Section 4999 of the Code (or similar tax and/or assessment) , or any tax is
imposed on the Executive under Section 409A, the Bank or the Company (and its
successor) shall increase the amounts payable under this Agreement to the
extent necessary to afford the Executive substantially the same economic
benefit under this Agreement as the Executive would have received had no such
excise tax under Section 280G or tax under Section 409A been imposed on the
payments due the Executive under this Agreement. The determination of the
amount of any such taxes shall be made by the independent accounting firm
employed by the Bank or the Company, immediately prior to the Change in Control,
or such other independent accounting firm or advisor as may be mutually
agreeable to the Bank or the Company (and their respective successor), and the
Executive in the exercise of their reasonable good faith judgment.

 

14

 

If, at a later date, it
is determined (pursuant to final regulations or published rulings of the
Internal Revenue Service, final judgment of a court of competent jurisdiction, or
otherwise) that the amount of any such taxes payable to the Executive is
greater than the amount initially so determined, then the Bank or the Company (or
its successor) shall pay to the Executive an amount equal to the sum of such
additional taxes and any interest, fines and penalties resulting from such
underpayment, plus an amount necessary to reimburse the Executive substantially
for any income, excise or other taxes payable by the Executive with respect to
such amounts. All gross-up payments made hereunder, shall be paid within the
period specified by Treasury Regulation Section 1.409A-3(i)(1)(v) so that
the gross-up payment shall qualify as providing for payment at a specified time
or on a fixed schedule.

 

9.                                       Assignment.
This Agreement will inure to the benefit of and be binding upon the Bank and Company
any of their respective successors and assigns. In view of the personal nature
of the services to be performed under this Agreement by the Executive, the
Executive will not have the right to assign or transfer any of his rights,
obligations or benefits under this Agreement. The Bank and the Company will
require any successor (whether direct or indirect, by purchase, merger,
consolidation or otherwise) to all or substantially all of the business and/or
assets of the Bank or the Company to assume expressly and agree to perform this
Agreement in the same manner and to the same extent that the Bank and the
Company would be required to perform it if no such succession had taken place. As
used in this Agreement, “Bank” or “the Company” shall mean the Bank or the
Company, as applicable, as hereinbefore defined and any successor to the
Company’s or Bank’s  business and/or
assets as aforesaid which assumes and agrees to perform this Agreement by
operation of law, or otherwise.

 

10.                                 Specific
Performance. The Executive hereby represents and agrees that the services
to be performed under the terms of this Agreement are of a special, unique,
unusual, extraordinary, and intellectual character that gives them a peculiar
value, the loss of which cannot be reasonably or adequately compensated in
damages in an action at law. The Executive therefore expressly agrees that the
Bank and the Company, in addition to any other rights or remedies that the Bank
and the Company may possess, shall be entitled to injunctive and other
equitable relief to prevent or remedy a breach of this Agreement by the
Executive.

 

11.                                 Noncompetition,
No solicitation And Nondisclosure By The Executive 

 

(a)                                  Definitions.
The term “Trade Secrets” shall be given its broadest possible interpretation
and shall mean any information, including formulas, patterns, compilations,
reports, records, programs, devices, methods, know-how, negative know-how,
techniques, raw material properties and specifications, formulations,
discoveries, ideas, concepts, designs, technical information, drawings, data,
customer and supplier lists, information regarding customers, buyers and
suppliers, distribution techniques, production processes, research and
development projects, marketing plans, general financial information and
financial information concerning customers, the Company’s or the Bank’s legal,
business and financial structure and operations, and other confidential and
proprietary information or processes which (i) derive independent economic
value, actual or potential, from not being generally known to the public or to
other persons who can obtain economic value from its disclosure or use and (ii)
are the subject of efforts that are reasonable under the circumstances to
maintain its secrecy.

 

15

 

The term “Proprietary Information” shall also be given
its broadest possible interpretation and shall mean any and all information
disclosed or made available by the Bank to Executive including, without
limitation, any information which is not publicly known or available and upon
which the Bank’s business or success depends.

 

(b)                                 The
Executive shall not, during the term of this Agreement, directly or indirectly,
either as an employee, employer, consultant, agent, principal, stockholder
(except as permitted in Section 1.2  of this
Agreement), officer, director, or in any other individual or representative
capacity, engage or participate in any competitive banking or financial
services business without the prior written consent of the Board of Directors
of the Bank or the Company.

 

(c)                                  Following
termination of this Agreement and the Executive’s employment hereunder, the
Executive shall not use any Trade Secret or Proprietary Information of the Bank
or the Company or their affiliates and subsidiaries to solicit, encourage or
assist, directly, indirectly or in any manner whatsoever, (i) any
employees of the Bank, the Company or their affiliates and subsidiaries
(including any former employees who voluntarily terminated employment with the
Bank or the Company within a 12 month period prior to the Executive’s
termination of employment) to resign or to apply for or accept employment with
any other competitive banking or financial services business within the
counties in California in which the Bank has located its headquarters or branch
offices; or (ii) any customer, person or entity that has a business
relationship with the Bank or during the 12 month period prior to the Executive’s
termination of employment with the Bank was engaged in a business relationship
with the Bank, to terminate such business relationship and engage in a business
relationship with any other competitive banking or financial services business
within the counties in California in which the Bank has located its headquarters
or branch offices.

 

(d)                                 In
addition and not as any limitation on the provisions of this Section 11,
following termination of this Agreement and the Executive’s employment
hereunder and for 12 months thereafter, the Executive shall not directly or
indirectly, individually or as a consultant to, or as an employee, officer,
stockholder, director or other owner of or participant in any business entity
that engages in or seeks to engage in any banking or financial services
business, solicit (or assist in soliciting) any person who is, or at any time
within 1 month prior to the Executive’s termination of employment was, an
employee of the Company or the Bank who earned $25,000 on an annual rate or
more as an employee of the Company or the Bank to work for (as an employee,
consultant or otherwise) any business, individual, partnership, firm,
corporation, or other entity whether or not engaged in competitive business
with the Bank or the Company.

 

12.                                 Disclosure
Of Information. The Executive shall not, at any time or in any manner,
directly or indirectly, either before or after termination of this Agreement,
without the prior written consent of the Board of Directors of the Company or
except as required by law to comply with legal process including, without
limitation, by oral questions, interrogatories, requests for information or
documents, subpoena, civil investigative demand or similar process, use for his
own benefit or the benefit of any other person or entity, or otherwise disclose
or communicate to any person or entity including, without limitation, the media
or by way of the World Wide Web, any information concerning any Trade Secret or
Proprietary Information of the Company or the Bank. The Executive further recognizes
and acknowledges that any Trade Secrets concerning any customers of the Bank or
the Company and their respective affiliates and subsidiaries, as it

 

16

 

may exist from time to
time, is strictly confidential and is a valuable, special and unique asset of
Bank’s and the Company’s business. In the event the Executive is required by
law to disclose Trade Secrets or Proprietary Information, the Executive will
provide the Bank and the Company, and their counsel with immediate notice of
such request so that they may consider seeking a protective order. If, in the
absence of a protective order or the receipt of a waiver hereunder, the
Executive is nonetheless, in the written opinion of knowledgeable counsel,
compelled to disclose Trade Secrets or Proprietary Information to any tribunal
or any other party or else stand liable for contempt or suffer other material
censure or material penalty, then the Executive may disclose (on an “as needed”
basis only) such information to such tribunal or other party without liability
hereunder. Notwithstanding the foregoing, the Executive may disclose Trade
Secrets or Proprietary Information as may be required by any regulatory agency
having jurisdiction over the operations of the Bank or the Company in
connection with an examination of the Bank or the Company or other proceeding
conducted by such regulatory agency.

 

13.                                 Written,
Printed or Electronic Material. All written, printed or electronic
material, notebooks and records including, without limitation, computer disks,
blackberry (or similar devices), or lap top used by the Executive in performing
duties for the Bank or the Company, other than the Executive’s personal address
lists, telephone lists, notes and diaries, are and shall remain the sole
property of the Bank and the Company. Upon termination of employment, the
Executive shall promptly return all such material (including all copies,
extracts and summaries thereof) to the Company.

 

14.                                 Miscellaneous.

 

14.1                           Notice.
For the purpose of this Agreement, notices and all other communications
provided for in this Agreement shall be in writing and shall be deemed to have
been duly given when personally delivered or 3 days after the date of mailing by
United States mail, certified or registered, return receipt requested, postage
prepaid, addressed to the respective addresses set forth below, or to such
other addresses as either party may have furnished to the other in writing in
accordance herewith, except that notice of a change of address shall be
effective only upon actual receipt:

 

	
  Company:

  	
  HERITAGE COMMERCE CORP

  
	
   

  	
  150 Almaden Blvd.

  
	
   

  	
  San Jose, CA 95113

  
	
   

  	
  Attn: Chief Executive Officer

  
	
   

  	
   

  
	
  Bank:

  	
  HERITAGE BANK OF COMMERCE

  
	
   

  	
  150 Almaden Blvd.

  
	
   

  	
  San Jose, CA 95113

  
	
   

  	
  Attn: President

  
	
   

  	
   

  
	
  with a copy to:

  	
  Buchalter Nemer

  
	
   

  	
  1000 Wilshire Boulevard, Suite 1500

  
	
   

  	
  Los Angeles, CA 90017-2457

  
	
   

  	
  Attn: Mark A. Bonenfant, Esq.

  

 

17

 

	
  Executive:

  	
  Walter Kaczmarek

  
	
   

  	
  150 Almaden Blvd.

  
	
   

  	
  San Jose, CA 95113

  

 

14.2                           Amendments
or Additions. No amendment, modification or additions to this Agreement
shall be binding unless in writing and signed by the parties hereto.

 

14.3                           Section
Headings. The section headings used in this Agreement are included solely
for convenience and shall not affect, or be used in connection with, the
interpretation of this Agreement.

 

14.4                           Severability.
The provisions of this Agreement shall be deemed severable and the invalidity
or unenforceability of any provision shall not affect the validity or
enforceability of the other provisions hereof.

 

14.5                           Counterparts.
This Agreement may be executed in counterparts, each of which shall be deemed
to be an original, but both of which together will constitute one and the same
instrument.

 

14.6                           Mediation.
Prior to engaging in any legal or equitable litigation or other dispute
resolution process, regarding any of the terms and conditions of this Agreement
between the parties, or concerning the subject matter of the Agreement between
the parties, each party specifically agrees to engage in good faith, in a
mediation process at the expense of the Company, complying with the procedures
provided for under California Evidence Code Sections 1115 through and including
1125, as then currently in effect. The parties further and specifically agree
to use their best efforts to reach a mutually agreeable resolution of the
matter. The parties understand and specifically agree that should any party to
this Agreement refuse to participate in mediation for any reason, the other
party will be entitled to seek a court order to enforce this provision in any
court of appropriate jurisdiction requiring the dissenting party to attend,
participate, and to make a good faith effort in the mediation process to reach
a mutually agreeable resolution of the matter.

 

14.7                           Arbitration.
To the extent not resolved through mediation as provided in Section 14.6, all
claims, disputes and other matters in question arising out of or relating to this
Agreement, any termination of the Executive’s employment, the enforcement or
interpretation of this Agreement, or because of an alleged breach, default, or
misrepresentation in connection with any of the provisions of this Agreement,
including (without limitation) any state or federal statutory claims, shall be resolved
by binding arbitration in Santa Clara County, California, before a sole
arbitrator (the “Arbitrator”) mutually selected by
the parties from Judicial Arbitration and Mediation Services, Inc. (“JAMS”) in accordance with the rules and procedures of JAMS then
in effect. If JAMS is no longer able to supply the arbitrator, such arbitrator
shall be mutually selected from the American Arbitration Association (“AAA”). The obligation of the parties to arbitrate pursuant
to this clause shall be specifically enforced in accordance with, and shall be
conducted consistently with, the provisions of Title 9 of Part 3 of
the California Code of Civil Procedure as the exclusive remedy of such dispute;
provided, however, that provisional injunctive relief may, but need not, be
sought in a court of law while arbitration proceedings are pending, and any
provisional injunctive relief granted by such court shall remain effective
until

 

18

 

the matter is finally
determined by the Arbitrator. Final resolution of any dispute through
arbitration may include any remedy or relief that the Arbitrator deems just and
equitable, including any and all remedies provided by applicable state or
federal statutes. At the conclusion of the arbitration, the Arbitrator shall
issue a written decision that sets forth the essential findings and conclusions
upon which the Arbitrator’s award or decision is based. Any award or relief
granted by the Arbitrator hereunder shall be final and binding on the parties
hereto and may be enforced by any court of competent jurisdiction.

 

14.8                           Attorneys
Fees. In the event of litigation, arbitration or any other action or
proceeding between the parties to interpret or enforce this Agreement or any part
thereof or otherwise arising out of or relating to this Agreement, the
prevailing party shall be entitled to recover its costs related to such action
or proceeding and its reasonable fees of attorneys, accountants and expert
witnesses incurred by such party in connection with any such action or
proceedings. The prevailing party shall be deemed to be the party which obtains
substantially the relief sought by final resolution, compromise or settlement,
or as may otherwise be determined by order of a court of competent jurisdiction
in the event of litigation, an award or decision of an arbitrator in the event
of arbitration.

 

14.9                           Entire
Agreement. This Agreement supersedes any and all other agreements, either
oral or in writing, between the parties with respect to the employment of the
Executive by the Bank and the Company and contains all of the covenants and
agreements between the parties with respect to the employment of the Executive
by the Bank and the Company; provided, however, that, this Agreement does not
supersede or replace the rights and benefits under (i) the SERP specified
in Section 3.4(d) of this Agreement, (ii) the Restricted Stock
Agreement, or (iii) except as provided in Section 3.3, any stock
option agreement between the Company and the Executive, or (iv) any split
dollar life insurance agreement or endorsement executed by the Executive. Each
party to this Agreement acknowledges that no other representations,
inducements, promises, or agreements, oral or otherwise, have been made by any
party, or anyone acting on behalf of any party, which are not set forth herein,
and that no other agreement, statement, or promise not contained in this
Agreement shall be valid or binding on either party

 

14.10                     Waiver.
The failure of a party to insist on strict compliance with any of the terms,
provisions, covenants, or conditions of this Agreement by another party shall
not be deemed a waiver of any term, provision, covenant, or condition,
individually or in the aggregate, unless such waiver is in writing, nor shall
any waiver or relinquishment of any right or power at any one time or times be
deemed a waiver or relinquishment of that right or power for all or any other
times.

 

14.11                     Severability.
If any provision in this Agreement is held by a court of competent jurisdiction
or arbitrator to be invalid, void, or unenforceable, the remaining provisions
shall nevertheless continue in full force and effect without being impaired or
invalidated in any way. 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.

 

14.12                     Interpretation.
This Agreement shall be construed without regard to the party responsible for
the preparation of the Agreement and shall be deemed to have been prepared
jointly by the parties. Any ambiguity or uncertainty existing in this Agreement
shall not be

 

19

 

interpreted against any party,
but according to the application of other rules of contract interpretation, if
an ambiguity or uncertainty exists.

 

14.13                     Governing
Law And Venue. The laws of the State of California, other than those laws
denominated choice of law rules, shall govern the validity, construction and
effect of this Agreement. Any action which in any way involves the rights,
duties and obligations of the parties hereunder and is not resolved by binding
arbitration shall be brought in the courts of the State of California and venue
for any action or proceeding shall be in Santa Clara County or in the United
States District Court for the Northern District of California, and the parties
hereby submit to the personal jurisdiction of said courts.

 

14.14                     Payments
Due Deceased Executive. If the Executive dies prior to the expiration of
the term of his employment (except termination resulting from such death), any
payments that may be due the Executive from the Bank or the Company under this
Agreement as of the date of death shall be paid to the Executives heirs,
beneficiaries, successors, permitted assigns or transferees, executors,
administrators, trustees, or any other legal or personal representatives.

 

14.15                     Effect Of
Termination On Certain Provisions. Upon the termination of this Agreement,
the obligations of the Bank, the Company and the Executive hereunder shall
cease except to the extent of the Bank’s or the Company’s obligation to make
payments, if any, to or for the benefit of the Executive following termination,
and provided that Sections 3.3, 3.4 and 3.5(d) (and as provided under
existing agreements related to those sections) and Sections 4, 6.2, 7, 8, 9,
10, 11, 12, 13, 14.3, 14.4, 14.6, 14.7, 14.8, 14.9, 14.10, 14.11, 14.12, 14.13,
4.14 and 14.15 shall remain in full force and effect.

 

[Remainder of page intentionally left blank]

 

20

 

14.16                     Advice Of
Counsel And Advisors. The Executive acknowledges and agrees that he has
read and understands the terms and provisions of this Agreement and prior to
signing this Agreement, he has had the advice of counsel and/or such other
advisors as he deemed appropriate in connection with his review and analysis of
such terms and provisions of this Agreement.

 

IN WITNESS WHEREOF, each of the parties hereto has
executed this Agreement on the date first indicated above.

 

	
   

  	
  “COMPANY”

  
	
   

  	
   

  
	
   

  	
  HERITAGE
  COMMERCE CORP,

  
	
   

  	
  a California
  bank holding company

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Jack W. Conner

  	
   

  
	
   

  	
   

  	
  Jack W. Conner,

  
	
   

  	
   

  	
  Chairman of the Board

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  “BANK”

  
	
   

  	
   

  
	
   

  	
  HERITAGE
  BANK OF COMMERCE,

  
	
   

  	
  a California
  banking corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Jack W. Conner

  	
   

  
	
   

  	
   

  	
  Jack W. Conner,

  
	
   

  	
   

  	
  Chairman of the Board

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  “EXECUTIVE”

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ Walter T.
  Kaczmarek

  	
   

  
	
   

  	
  WALTER T.
  KACZMAREK

  

 

21EXHIBIT 10.2

 

AMENDED AND RESTATED EMPLOYMENT AGREEMENT

 

This Amended and Restated Employment Agreement (this “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 LAWRENCE McGOVERN, an individual (the “Executive”) as of October 17, 2007 (the “Effective Date”). This Agreement amends and restates the
Employment Agreement dated July 16, 1998 (the “Original
Agreement”) by and between the Company and the Executive to modify
the terms of employment, makes changes to comply with Section 409A of the
Internal Revenue Code of 1986, as amended, and make other changes.

 

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, Executive is currently the Executive Vice
President/Chief Financial Officer of the Company and the Bank pursuant to the
terms of the Original Agreement:

 

NOW, THEREFORE, in consideration of the promises and
mutual covenants and agreements herein contained and intending to be legally
bound hereby, the Company, Bank and the Executive hereby agree as follows:

 

AGREEMENT

 

1.                                       Employment.

 

1.1                                 Title.
Pursuant to this Agreement, Bank and Company employ the Executive and the
Executive hereby accepts employment with the Company and the Bank, upon the
terms and conditions hereinafter set forth. The Executive shall serve as the Executive
Vice President/Chief Financial Officer of the Company and the Bank and shall
perform the customary duties of such office in the commercial banking industry
and such duties and responsibilities as may be designated to him by the Chief
Executive Officer of the Company and in accordance with the objectives or
policies of the Board of Directors of the Company, from time to time, in
connection with the business activities of the Company and the Bank. In
addition and not as a limitation on the foregoing, Executive’s duties and
responsibility require that he shall manage:

 

(a)                                  control
of the costs of operation and other expenses directly or indirectly involving
interests of the Company and the Bank;

 

1

 

(b)                                 budgeting,
finance, accounting, and financial planning;

 

(c)                                  the
Company’s and Bank’s liquidity position and investment portfolio;

 

(d)                                 the
day-to-day financial and accounting position of the Company and the Bank;

 

(e)                                  timely
and accurate financial reporting to management and to all appropriate
regulatory agencies and outside auditors; and

 

(f)                                    design
and review internal accounting controls.

 

1.2                                 Devotion
to Company and Bank Business. The Executive shall devote his full business
time, ability, and attention to the business of the Company and the Bank 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 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 Company and the Bank 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.

 

1.3                                 Standard.
The Executive will set a high standard of professional conduct given his role
with the Company and the Bank and his responsibility relative to the Company’s
and Bank’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 reputation and image of the Company and Bank. The Executive’s and
his 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 Company and the Bank. The Executive will comply
with all applicable rules, policies and procedures of the Company and the 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 Company and the Bank at the
Company’s principal executive offices located in San Jose California. The
Executive agrees that the Executive will be regularly present at the Company’s
principal executive offices and that the Executive may be required to travel
from time to time in the course of performing the Executive’s duties for the Company
and the Bank.

 

2

 

1.5                                 No
Breach of Contract. The Executive hereby represents to the Company and 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 Company or 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 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 $215,000 which will
be paid in accordance with the Company’s and 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 Chief Executive Officer and 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 Commerce
Corp Management Incentive Compensation 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 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 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.

 

3.3                                 Stock
Options. The Executive acknowledges having received grants of stock options
pursuant to the Heritage Commerce Corp 1994 Tandem Stock Option Plan and the
Heritage Commerce Corp 2004 Stock Option Plan (together with any successor
equity incentive plan, the “Stock Option Plans”).
Any future grant of stock options to the Executive pursuant to the Stock Option
Plans shall be determined by and in the sole discretion of the Company’s
Compensation Committee and the Company’s Board of Directors. Any such future stock
option

 

3

 

grant shall be evidenced
by a stock option agreement in the form required by the Stock Option Plans.

 

3.4                                 Other
Benefits. The Executive shall be entitled to those benefits adopted by the
Bank and the Company for all officers of the Company, 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 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 30 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 Company’s Chief Executive Officer, and will
be subject to the Company’s business requirements.

 

(b)                                 Automobile
Allowance And Insurance. The Bank or the Company will pay to the Executive
an automobile allowance in the amount of $500.00 per month during the term of
this Agreement. The Bank or the Company shall reimburse the Executive for
gasoline expenditures related to use of the automobile acquired or used by the
Executive upon presentation and approval of receipts, invoices or other
appropriate evidence of such expense in accordance with the policies of the
Bank or the Company. The Executive shall acquire or otherwise make available
for his business and personal use an automobile suitable to his position and
maintain it in good condition and repair. The Executive shall obtain and
maintain public liability insurance and property damage insurance policies with
insurer(s) acceptable to the Bank and the Company and with such coverages in
such amounts as may be acceptable to the Bank and the Company from time to time.
The Bank or the Company may elect to provide and pay for such insurance
policies in lieu of the Executive maintaining such policies.

 

(c)                                  Insurance.
The Bank or the Company shall provide during the term of this Agreement at no
cost to the Executive group life, health (including medical, dental, vision and
hospitalization), accident and disability insurance coverage for the Executive
and his 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 Company and the Bank.

 

(d)                                 Supplemental
Compensation. The Bank and the Executive acknowledge that they have entered
into a Supplemental Executive Retirement Plan Agreement (“SERP”)
with eligibility date of February 23, 1999, which provides supplemental
compensation benefits to the Executive payable upon retirement or as otherwise
set forth in the SERP. Subject to the terms and conditions set forth in the
SERP and Section 7, the Executive will be eligible to

 

4

 

receive an annual benefit
as set forth in the SERP payable monthly commencing one month after the
Executive’s sixty-second birthday. All terms and conditions of the Executive’s
participation in the SERP will be governed by the SERP plan documents.

 

(e)                                  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.

 

(f)                                    Employee
Stock Ownership Plan. The Executive will be eligible to participate in the
Company’s Employee Stock Ownership Plan (“ESOP”), subject
to the terms and conditions of the ESOP.

 

3.5                                 Business
Expenses. The Executive shall be entitled to incur and be reimbursed for
all reasonable business expenses. The Company agrees that the Company or the
Bank 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 and 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 policies of the Company.

 

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 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

 

5

 

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 decides to terminate the
Executive’s employment for Cause, the Bank 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 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

 

6

 

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 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 his 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 for Cause, the Date of Termination is
the date on which the Company or Bank gives notice to the Executive of such
termination; (iv) if the Executive’s employment is terminated by the Company or
Bank 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 Company or its insurers and acceptable to the Executive
or the Executive’s legal representative, and, in the

 

7

 

written opinion of such
physician, the condition will render the Executive unable to return to his
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 Company may give the Executive
a notice of termination. In such event, the Executive’s employment  with the Company and the Bank 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 Company, the Executive shall
immediately cease performing and discharging the duties and responsibilities of
his positions and remove himself and his 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 his positions and remove himself
and his 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 his positions and

 

8

 

remove himself and his
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) below, and any other remedy which the Executive
may have at law, in equity or under this Agreement, which remedy accrued prior
to such termination.

 

(e)                                  Voluntary
Termination By Executive. The Executive may terminate his employment and
this Agreement at any time and for any reason or no reason, upon 30 days prior
written notice to the Bank and the Company. 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
his positions and remove himself and his 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.

 

6.2                                 Certain
Benefits upon Termination.

 

(a)                                  Termination
without Cause. In the event this Agreement is terminated based on
Section 6.1(d) (termination without cause), then in such case, the Executive
shall receive the Accrued Obligations on the Date of Termination, and severance
benefits constituting of:

 

(i)                                     cash
payment in the amount equal to one (1) times the Executive’s (A) Base
Salary, (B) the Highest Annual Bonus and (C) annual automobile allowance (as
provided in Section 3.4(b) of this Agreement), payable in a lump sum
within 30 days of the Date of Termination, and

 

(ii)                                  continuation
of group insurance coverages specified in Section 3.4(c) of this Agreement
on terms at least equal to those if the Executive’s employment had not been
terminated, but not less favorable than that provided to other executives in
comparable positions with the Company and the Bank, for a period of 12 months
from the Date of Termination, including, continuation of medical coverage for
the Executive and his dependents pursuant to The Consolidated Omnibus Budget
Reconciliation Act of 1985 (“COBRA”), or
under applicable California law pursuant to Assembly Bill No 1401 (“Cal COBRA”), with one hundred percent (100%) of premiums for
the insurance coverages payable by the Bank or the Company monthly to the
Executive for a period of 12 months from the Date of Termination. After
expiration of the 12 month period, the Executive and his dependents shall have
such rights to continue to participate under the Bank’s or the Company’s group insurance
coverages specified in Section 3.4(c) of this Agreement at the Executive’s
expense to the extent available under the terms of the plan or benefit. The
Executive agrees to notify the Bank and the Company as soon as practicable, but
not less than 10 business days in advance of the commencement of comparable
insurance coverages with another employer. The Company’s and the Bank’s
obligation for the 12 month period specified herein with respect to the
foregoing

 

9

 

benefits shall be limited
to the extent that the Executive obtains any such benefits pursuant to a
subsequent employer’s benefit plans, in which case the Bank may reduce the
coverage of any benefits it is required to provide the Executive hereunder so
long as the aggregate coverages and benefits of the combined benefit plans of
the new employer are not substantially less favorable to the Executive than the
coverages and benefits required to be provided hereunder.

 

Notwithstanding the foregoing or any other provision
of this Agreement, if any part or all of the severance benefits is subject to
taxation under Section 409A of the Code, as determined by the Bank or the
Company, with the advice of its independent accounting firm or other tax
advisors, then the severance benefits shall be subject to modification as set
forth in Section 7 of this Agreement.

 

Notwithstanding the foregoing, when the Executive is
entitled to the severance benefits provided in Section 6.2(b), then Executive
shall not be entitled to the severance benefits pursuant to this Section 6.2(a).

 

The Executive acknowledges and agrees that severance
benefits pursuant to this Section 6.2(a) are in lieu of all damages,
payments and liabilities on account of the early termination of this Agreement
and are the sole and exclusive remedy for the Executive for a termination
specified in Section 6.1(d).

 

(b)                                 Termination
And Change In Control. In the event of a Change in Control and at any time during
the Change of Control Period (x) the Executive’s employment is terminated,
or (y) without Executive’s written consent there occurs any material adverse
change in the nature and scope of the Executive’s position, responsibilities,
duties, or a change of 10 miles or more in the Executive’s location of
employment, or any material reduction in Executive’s compensation or benefits
and Executive voluntarily terminates his employment, then the Executive shall receive
the Accrued Obligations on the Date of Termination, and the severence benefits
consisting of:

 

(i)                                     a
cash payment in an amount equal to 1.5 times the Executive’s (A) Base Salary,
(B) Highest Annual Bonus and (C) annual automobile allowance (as
provided in Section 3.4(b) of this Agreement), payable in lump sum within 30
days following such termination; and

 

(ii)                                  continuation
of group insurance coverages specified in Section 3.4 (c) of this
Agreement on terms at least equal to those if the Executive’s employment had
not been terminated, but not less favorable than that provided to other executives
in comparable positions with the Company and the Bank, for a period of 12
months from the Date of Termination, including continuation of medical coverage
for the Executive and his dependents pursuant to COBRA, or under Cal COBRA,
with one hundred percent (100%) of premiums for the insurance coverages payable
by the Bank or the Company monthly to the Executive for a period of 12 months
from the date of termination. After such expiration of the 12 month period, the
Executive and his dependents shall have such rights to continue to participate
under the Bank’s or the Company’s group health benefits plan or the group
health plan benefits of any successor to the Bank or the Company that results
from the Change of Control at the Executive’s expense. The Executive agrees to
notify the Bank and the Company as soon as practicable, but

 

10

 

not less than 10 business
days in advance of the commencement of comparable insurance coverages with
another employer. The obligation of the Company and the Bank for the 12 month
period specified herein with respect to the foregoing benefits shall be limited
to the extent that the Executive obtains any such benefits pursuant to a
subsequent employer’s benefit plans, in which case the Company and the Bank may
reduce the coverage of any benefits it is required to provide the Executive
hereunder so long as the aggregate coverages and benefits of the combined
benefit plans of the new employer are not substantially less favorable to the
Executive than the coverages and benefits required to be provided hereunder.

 

Notwithstanding the foregoing or any other provision
of this Agreement, if any part or all of the severance benefits is subject to
taxation under Section 409A of the Code, as determined by the Bank or the
Company, with the advice of its independent accounting firm or other tax
advisors, then the severance payment shall be subject to modification as set
forth hereafter in Section 7 of this Agreement.

 

The Executive acknowledges and agrees that severance
benefits pursuant to this Section 6.2(b) are in lieu of all damages,
payments and liabilities on account of the events described above for which
such severance benefits may be due the Executive under Section 6.2(b) of
this Agreement. This Section 6.2(b) shall be binding upon and inure to the
benefit of the Bank and the Company and their respective successors and assigns.

 

Notwithstanding the foregoing, the Executive shall not
be entitled to receive severance benefits pursuant to this Section 6.2(b) in
the event his termination of employment results from an occurrence described in
Sections 6.1(a), 6.1(b) or 6.1(c).

 

(c)                                  Death.
If the Executive’s employment terminates by reason of the Executive’s death, this
Agreement shall terminate without further obligations to the Executive’s legal
representatives under this Agreement, other than for payment of Accrued
Obligations and any incentive compensation for the year in which the death
occurred prorated through the Date of Termination. Accrued Obligations shall be
paid to the Executive’s estate or beneficiary, as applicable, in a lump sum in
cash within 30 days of the Date of Termination; provided, however, that payment
may be deferred until the Executive’s executor or personal representative has
been appointed and qualified pursuant to the laws in effect in the Executive’s
jurisdiction of residence at the time of the Executive’s death. The Executive’s
estate and/or beneficiaries shall be entitled to receive, benefits at least
equal to the most favorable benefits provided by the Company and the Bank to
the estate and beneficiaries of other executives in comparable positions with
the Company and the Bank under such plans, programs, practices and policies
relating to death benefits, if any as in effect on the date of the Executive’s
death.

 

(d)                                 Disability.
If the Executive’s employment terminates by reason of the Executive’s
Disability, this Agreement shall terminate without further obligations to the
Executive under this Agreement, other than for payment of Accrued Obligations,
and any incentive compensation for the year in which the termination occurs prorated
through the Date of Termination and any benefits under such plans, programs,
practices and policies relating to disability benefits, if any, as in effect on
the Date of Termination.

 

11

 

(e)                                  Cause/Voluntary
Termination. If the Executive’s employment terminates for Cause, this
Agreement shall terminate without further obligations to the Executive other
than the obligation to pay to the Executive the Accrued Obligations. If the
Executive’s employment terminates due to the Executive’s voluntarily
termination, except as provided in clause (y) of the first paragraph of Section 6.2(b),
this Agreement shall terminate without further obligations to the Executive
other than the obligation to pay to the Executive the Accrued Obligations.

 

(f)                                    Single
Trigger Event. The provisions for payments contained in this Section 6.2
may be triggered only once during the term of this Agreement, so that, for
example, should the Executive be terminated because of a Disability and should
there thereafter be a Change of Control, then the Executive would be entitled
to be paid only under Section 6.2(d) and not under Section 6.2(b), as well. In
addition, the Executive shall not be entitled to receive severance benefits of
any kind from any parent, wholly owned subsidiary or other affiliated entity of
the Bank or the Company if in connection with the same event of series of
events the payments provided for in this Section 6.2 have been triggered.

 

7.                                       Section
409A Limitation. It is the intention of the Bank, the Company and the
Executive that the severance benefits payable to the Executive under Section 6.2
either be exempt from, or otherwise comply with, Section 409A (“Section 409A”) of the Code.

 

Notwithstanding any other term or provision of this
Agreement, to the extent that any provision of this Agreement is determined by
the Bank or the Company, with the advice of its independent accounting firm or
other tax advisors, to be subject to and not in compliance with Section 409A,
including, without limitation, the definition of Change in Control or the
timing of commencement and completion of severance benefits and/or other
benefit payments to the Executive hereunder, or the amount of any such
payments, such provisions shall be interpreted in the manner required to exempt
the benefits from or to comply with Section 409A. The Company, the Bank and the
Executive acknowledge and agree that such interpretation could, among other
matters, (i) limit the circumstances or events that constitute a “change
in control;” (ii) delay for a period of 6 months or more, or otherwise
modify the commencement of severance and/or other benefit payments; (iii)
modify the completion date of severance and/or other benefit payments; and/or
(iv) reduce the amount of the benefit otherwise provided.

 

The Company, Bank and the Executive further
acknowledge and agree that if, in the judgment of the Bank or the Company, with
the advice of its independent accounting firm or other tax advisors, amendment
of this Agreement is necessary to exempt the benefits from or to comply with
Section 409A, the Bank, the Company and the Executive will negotiate reasonably
and in good faith to amend the terms of this Agreement to the extent necessary
so that it exempt the benefits from or to comply with Section 409A (with
the most limited possible economic effect on the Bank, the Company and the
Executive). For example, if this Agreement is subject to Section 409A and Section 409A
requires that severance and/or other benefit payments must be delayed until at
least 6 months after the Executive terminates employment, then the Bank, the Company
and the Executive shall delay payments and/or promptly seek a written amendment
to this Agreement that would, if permissible under Section 409A, eliminate any
such payments otherwise payable during the first 6 months following the
Executive’s termination of employment and substitute therefore a lump sum
payment or an initial installment payment, as applicable, at the beginning of
the 7th month following the Executive’s termination of

 

12

 

employment which, in the
case of an initial installment payment, would be equal in the aggregate to the
amount of all such payments thus eliminated. Notwithstanding the foregoing, (a)
the Executive and his dependents shall not be denied access to and
participation in any health or medical insurance coverage and benefits for any
period of time the Executive and his dependants are otherwise eligible, and (b)
the Executive acknowledges and agrees that the Company or the Bank shall have
the exclusive authority to determine whether the executive is a “specified
employee” within the meaning of Section 409A(a)(2)(B)(i).

 

8.                                       Gross
Up Of Section 280G And 409A Tax. If all or any portion of the amounts
payable to the Executive under this Agreement, either alone or together with
other payments or benefits which the Executive has the right to receive from
the Bank or the Company, constitute “excess parachute payments” within the
meaning of Section 280G of the Code, that are subject to the excise tax imposed
by Section 4999 of the Code (or similar tax and/or assessment) , or any tax is
imposed on the Executive under Section 409A, the Bank or the Company (and its
successor) shall increase the amounts payable under this Agreement to the
extent necessary to afford the Executive substantially the same economic
benefit under this Agreement as the Executive would have received had no such
excise tax under Section 280G or tax under Section 409A been imposed on the
payments due the Executive under this Agreement. The determination of the
amount of any such taxes shall be made by the independent accounting firm
employed by the Bank or the Company, immediately prior to the Change in Control,
or such other independent accounting firm or advisor as may be mutually
agreeable to the Bank or the Company (and their respective successor), and the
Executive in the exercise of their reasonable good faith judgment. If, at a
later date, it is determined (pursuant to final regulations or published
rulings of the Internal Revenue Service, final judgment of a court of competent
jurisdiction, or otherwise) that the amount of any such taxes payable to the
Executive is greater than the amount initially so determined, then the Bank or the
Company (or its successor) shall pay to the Executive an amount equal to the
sum of such additional taxes and any interest, fines and penalties resulting
from such underpayment, plus an amount necessary to reimburse the Executive
substantially for any income, excise or other taxes payable by the Executive
with respect to such amounts. All gross-up payments made hereunder, shall be
paid within the period specified by Treasury Regulation Section
1.409A-3(i)(1)(v) so that the gross-up payment shall qualify as providing for
payment at a specified time or on a fixed schedule.

 

9.                                       Assignment.
This Agreement will inure to the benefit of and be binding upon the Bank and Company
any of their respective successors and assigns. In view of the personal nature
of the services to be performed under this Agreement by the Executive, the
Executive will not have the right to assign or transfer any of his rights,
obligations or benefits under this Agreement. The Bank and the Company will
require any successor (whether direct or indirect, by purchase, merger,
consolidation or otherwise) to all or substantially all of the business and/or
assets of the Bank or the Company to assume expressly and agree to perform this
Agreement in the same manner and to the same extent that the Bank and the
Company would be required to perform it if no such succession had taken place. As
used in this Agreement, “Bank” or “the Company” shall mean the Bank or the
Company, as applicable, as hereinbefore defined and any successor to the
Company’s or Bank’s  business and/or
assets as aforesaid which assumes and agrees to perform this Agreement by
operation of law, or otherwise.

 

13

 

10.                                 Specific
Performance. The Executive hereby represents and agrees that the services
to be performed under the terms of this Agreement are of a special, unique,
unusual, extraordinary, and intellectual character that gives them a peculiar
value, the loss of which cannot be reasonably or adequately compensated in
damages in an action at law. The Executive therefore expressly agrees that the
Bank and the Company, in addition to any other rights or remedies that the Bank
and the Company may possess, shall be entitled to injunctive and other
equitable relief to prevent or remedy a breach of this Agreement by the
Executive.

 

11.                                 Noncompetition,
No solicitation And Nondisclosure By The Executive 

 

(a)                                  Definitions.
The term “Trade Secrets” shall be given its broadest possible interpretation
and shall mean any information, including formulas, patterns, compilations,
reports, records, programs, devices, methods, know-how, negative know-how,
techniques, raw material properties and specifications, formulations,
discoveries, ideas, concepts, designs, technical information, drawings, data,
customer and supplier lists, information regarding customers, buyers and
suppliers, distribution techniques, production processes, research and
development projects, marketing plans, general financial information and
financial information concerning customers, the Company’s or the Bank’s legal,
business and financial structure and operations, and other confidential and
proprietary information or processes which (i) derive independent economic
value, actual or potential, from not being generally known to the public or to
other persons who can obtain economic value from its disclosure or use and (ii)
are the subject of efforts that are reasonable under the circumstances to
maintain its secrecy.

 

The term “Proprietary Information” shall also be given
its broadest possible interpretation and shall mean any and all information
disclosed or made available by the Bank to Executive including, without
limitation, any information which is not publicly known or available and upon
which the Bank’s business or success depends.

 

(b)                                 The
Executive shall not, during the term of this Agreement, directly or indirectly,
either as an employee, employer, consultant, agent, principal, stockholder
(except as permitted in Section 1.2  of this
Agreement), officer, director, or in any other individual or representative
capacity, engage or participate in any competitive banking or financial
services business without the prior written consent of the Board of Directors
of the Bank or the Company.

 

(c)                                  Following
termination of this Agreement and the Executive’s employment hereunder, the
Executive shall not use any Trade Secret or Proprietary Information of the Bank
or the Company or their affiliates and subsidiaries to solicit, encourage or
assist, directly, indirectly or in any manner whatsoever, (i) any
employees of the Bank, the Company or their affiliates and subsidiaries
(including any former employees who voluntarily terminated employment with the
Bank or the Company within a 12 month period prior to the Executive’s
termination of employment) to resign or to apply for or accept employment with
any other competitive banking or financial services business within the
counties in California in which the Bank has located its headquarters or branch
offices; or (ii) any customer, person or entity that has a business
relationship with the Bank or during the 12 month period prior to the Executive’s
termination of employment with the Bank was engaged in a business relationship
with the Bank, to terminate such business relationship and engage in a business
relationship with any other

 

14

 

competitive banking or
financial services business within the counties in California in which the Bank
has located its headquarters or branch offices.

 

(d)                                 In
addition and not as any limitation on the provisions of this Section 11,
following termination of this Agreement and the Executive’s employment
hereunder and for 12 months thereafter, the Executive shall not directly or
indirectly, individually or as a consultant to, or as an employee, officer,
stockholder, director or other owner of or participant in any business entity
that engages in or seeks to engage in any banking or financial services
business, solicit (or assist in soliciting) any person who is, or at any time
within 1 month prior to the Executive’s termination of employment was, an
employee of the Company or the Bank who earned $25,000 on an annual rate or
more as an employee of the Company or the Bank to work for (as an employee,
consultant or otherwise) any business, individual, partnership, firm,
corporation, or other entity whether or not engaged in competitive business
with the Bank or the Company.

 

12.                                 Disclosure
Of Information. The Executive shall not, at any time or in any manner,
directly or indirectly, either before or after termination of this Agreement,
without the prior written consent of the Board of Directors of the Company or
except as required by law to comply with legal process including, without
limitation, by oral questions, interrogatories, requests for information or
documents, subpoena, civil investigative demand or similar process, use for his
own benefit or the benefit of any other person or entity, or otherwise disclose
or communicate to any person or entity including, without limitation, the media
or by way of the World Wide Web, any information concerning any Trade Secret or
Proprietary Information of the Company or the Bank. The Executive further
recognizes and acknowledges that any Trade Secrets concerning any customers of
the Bank or the Company and their respective affiliates and subsidiaries, as it
may exist from time to time, is strictly confidential and is a valuable,
special and unique asset of Bank’s and the Company’s business. In the event the
Executive is required by law to disclose Trade Secrets or Proprietary
Information, the Executive will provide the Bank and the Company, and their
counsel with immediate notice of such request so that they may consider seeking
a protective order. If, in the absence of a protective order or the receipt of
a waiver hereunder, the Executive is nonetheless, in the written opinion of
knowledgeable counsel, compelled to disclose Trade Secrets or Proprietary
Information to any tribunal or any other party or else stand liable for
contempt or suffer other material censure or material penalty, then the
Executive may disclose (on an “as needed” basis only) such information to such
tribunal or other party without liability hereunder. Notwithstanding the
foregoing, the Executive may disclose Trade Secrets or Proprietary Information
as may be required by any regulatory agency having jurisdiction over the
operations of the Bank or the Company in connection with an examination of the
Bank or the Company or other proceeding conducted by such regulatory agency.

 

13.                                 Written,
Printed or Electronic Material. All written, printed or electronic material,
notebooks and records including, without limitation, computer disks, blackberry
(or similar devices), or lap top used by the Executive in performing duties for
the Bank or the Company, other than the Executive’s personal address lists,
telephone lists, notes and diaries, are and shall remain the sole property of
the Bank and the Company. Upon termination of employment, the Executive shall
promptly return all such material (including all copies, extracts and summaries
thereof) to the Company.

 

15

 

14.                                 Miscellaneous.

 

14.1                           Notice.
For the purpose of this Agreement, notices and all other communications
provided for in this Agreement shall be in writing and shall be deemed to have
been duly given when personally delivered or 3 days after the date of mailing by
United States mail, certified or registered, return receipt requested, postage
prepaid, addressed to the respective addresses set forth below, or to such
other addresses as either party may have furnished to the other in writing in
accordance herewith, except that notice of a change of address shall be
effective only upon actual receipt:

 

	
  Company:

  	
  HERITAGE COMMERCE CORP

  
	
   

  	
  150 Almaden Blvd.

  
	
   

  	
  San Jose, CA 95113

  
	
   

  	
  Attn: Chief Executive Officer

  
	
   

  	
   

  
	
  Bank:

  	
  HERITAGE BANK OF COMMERCE

  
	
   

  	
  150 Almaden Blvd.

  
	
   

  	
  San Jose, CA 95113

  
	
   

  	
  Attn: President

  
	
   

  	
   

  
	
  With a copy to:

  	
  Buchalter Nemer

  
	
   

  	
  1000 Wilshire Boulevard, Suite 1500

  
	
   

  	
  Los Angeles, CA 90017-2457

  
	
   

  	
  Attn: Mark A. Bonenfant, Esq.

  
	
   

  	
   

  
	
  Executive:

  	
  Lawrence McGovern

  
	
   

  	
  150 Almaden Blvd.

  
	
   

  	
  San Jose, CA 95113

  

 

14.2                           Amendments
or Additions. No amendment, modification or additions to this Agreement
shall be binding unless in writing and signed by the parties hereto.

 

14.3                           Section
Headings. The section headings used in this Agreement are included solely
for convenience and shall not affect, or be used in connection with, the
interpretation of this Agreement.

 

14.4                           Severability.
The provisions of this Agreement shall be deemed severable and the invalidity
or unenforceability of any provision shall not affect the validity or
enforceability of the other provisions hereof.

 

14.5                           Counterparts.
This Agreement may be executed in counterparts, each of which shall be deemed
to be an original, but both of which together will constitute one and the same
instrument.

 

14.6                           Mediation.
Prior to engaging in any legal or equitable litigation or other dispute
resolution process, regarding any of the terms and conditions of this Agreement
between the parties, or concerning the subject matter of the Agreement between
the parties, each party

 

16

 

specifically agrees to
engage in good faith, in a mediation process at the expense of the Company,
complying with the procedures provided for under California Evidence Code
Sections 1115 through and including 1125, as then currently in effect. The
parties further and specifically agree to use their best efforts to reach a
mutually agreeable resolution of the matter. The parties understand and
specifically agree that should any party to this Agreement refuse to
participate in mediation for any reason, the other party will be entitled to
seek a court order to enforce this provision in any court of appropriate
jurisdiction requiring the dissenting party to attend, participate, and to make
a good faith effort in the mediation process to reach a mutually agreeable
resolution of the matter.

 

14.7                           Arbitration.
To the extent not resolved through mediation as provided in Section 14.6, all
claims, disputes and other matters in question arising out of or relating to this
Agreement, any termination of the Executive’s employment, the enforcement or
interpretation of this Agreement, or because of an alleged breach, default, or
misrepresentation in connection with any of the provisions of this Agreement,
including (without limitation) any state or federal statutory claims, shall be resolved
by binding arbitration in Santa Clara County, California, before a sole
arbitrator (the “Arbitrator”) mutually selected by
the parties from Judicial Arbitration and Mediation Services, Inc. (“JAMS”) in accordance with the rules and procedures of JAMS then
in effect. If JAMS is no longer able to supply the arbitrator, such arbitrator
shall be mutually selected from the American Arbitration Association (“AAA”). The obligation of the parties to arbitrate pursuant
to this clause shall be specifically enforced in accordance with, and shall be
conducted consistently with, the provisions of Title 9 of Part 3 of
the California Code of Civil Procedure as the exclusive remedy of such dispute;
provided, however, that provisional injunctive relief may, but need not, be
sought in a court of law while arbitration proceedings are pending, and any
provisional injunctive relief granted by such court shall remain effective
until the matter is finally determined by the Arbitrator. Final resolution of
any dispute through arbitration may include any remedy or relief that the
Arbitrator deems just and equitable, including any and all remedies provided by
applicable state or federal statutes. At the conclusion of the arbitration, the
Arbitrator shall issue a written decision that sets forth the essential
findings and conclusions upon which the Arbitrator’s award or decision is based.
Any award or relief granted by the Arbitrator hereunder shall be final and
binding on the parties hereto and may be enforced by any court of competent
jurisdiction.

 

14.8                           Attorneys
Fees. In the event of litigation, arbitration or any other action or
proceeding between the parties to interpret or enforce this Agreement or any
part thereof or otherwise arising out of or relating to this Agreement, the
prevailing party shall be entitled to recover its costs related to such action
or proceeding and its reasonable fees of attorneys, accountants and expert
witnesses incurred by such party in connection with any such action or
proceedings. The prevailing party shall be deemed to be the party which obtains
substantially the relief sought by final resolution, compromise or settlement,
or as may otherwise be determined by order of a court of competent jurisdiction
in the event of litigation, an award or decision of an arbitrator in the event
of arbitration.

 

14.9                           Entire
Agreement. This Agreement supersedes any and all other agreements, either
oral or in writing, between the parties with respect to the employment of the
Executive by the Bank and the Company and contains all of the covenants and
agreements between the parties with respect to the employment of the Executive
by the Bank and the Company; provided,

 

17

 

however, that, this
Agreement does not supersede or replace the rights and benefits under (i) the
SERP specified in Section 3.4(d) of this Agreement or (ii) any stock
option agreement between the Company and the Executive as specified in Section 3.3
of this Agreement or (iii) any split dollar life insurance agreement or
endorsement executed by the Executive. Each party to this Agreement
acknowledges that no other representations, inducements, promises, or
agreements, oral or otherwise, have been made by any party, or anyone acting on
behalf of any party, which are not set forth herein, and that no other
agreement, statement, or promise not contained in this Agreement shall be valid
or binding on either party

 

14.10                     Waiver.
The failure of a party to insist on strict compliance with any of the terms,
provisions, covenants, or conditions of this Agreement by another party shall
not be deemed a waiver of any term, provision, covenant, or condition,
individually or in the aggregate, unless such waiver is in writing, nor shall
any waiver or relinquishment of any right or power at any one time or times be
deemed a waiver or relinquishment of that right or power for all or any other
times.

 

14.11                     Severability.
If any provision in this Agreement is held by a court of competent jurisdiction
or arbitrator to be invalid, void, or unenforceable, the remaining provisions
shall nevertheless continue in full force and effect without being impaired or
invalidated in any way. 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.

 

14.12                     Interpretation.
This Agreement shall be construed without regard to the party responsible for
the preparation of the Agreement and shall be deemed to have been prepared
jointly by the parties. Any ambiguity or uncertainty existing in this Agreement
shall not be interpreted against any party, but according to the application of
other rules of contract interpretation, if an ambiguity or uncertainty exists.

 

14.13                     Governing
Law And Venue. The laws of the State of California, other than those laws
denominated choice of law rules, shall govern the validity, construction and
effect of this Agreement. Any action which in any way involves the rights,
duties and obligations of the parties hereunder and is not resolved by binding
arbitration shall be brought in the courts of the State of California and venue
for any action or proceeding shall be in Santa Clara County or in the United
States District Court for the Northern District of California, and the parties
hereby submit to the personal jurisdiction of said courts.

 

14.14                     Payments
Due Deceased Executive. If the Executive dies prior to the expiration of
the term of his employment (except termination resulting from such death), any
payments that may be due the Executive from the Bank or the Company under this
Agreement as of the date of death shall be paid to the Executives heirs,
beneficiaries, successors, permitted assigns or transferees, executors,
administrators, trustees, or any other legal or personal representatives.

 

14.15                     Effect Of
Termination On Certain Provisions. Upon the termination of this Agreement,
the obligations of the Bank, the Company and the Executive hereunder shall
cease except to the extent of the Bank’s or the Company’s obligation to make
payments, if any, to or for the benefit of the Executive following termination,
and provided that Sections 3.3 and 3.4(d) (and as provided in existing
agreements relating to those sections) and Sections 4, 6.2, 7, 8, 9, 10,

 

18

 

11, 12, 13, 14.3, 14.4,
14.6, 14.7, 14.8, 14.9, 14.10, 14.11, 14.12, 14.13, 14.14 and 14.15 shall
remain in full force and effect.

 

[Remainder of page intentionally left blank]

 

19

 

14.16                     Advice Of
Counsel And Advisors. The Executive acknowledges and agrees that he has
read and understands the terms and provisions of this Agreement and prior to
signing this Agreement, he has had the advice of counsel and/or such other
advisors as he deemed appropriate in connection with his review and analysis of
such terms and provisions of this Agreement.

 

IN WITNESS WHEREOF, each of the parties hereto has
executed this Agreement on the date first indicated above.

 

 

	
   

  	
  “COMPANY”

  
	
   

  	
   

  
	
   

  	
  HERITAGE
  COMMERCE CORP,

  
	
   

  	
  a California
  bank holding company

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Walter Kaczmarek

  	
   

  
	
   

  	
   

  	
  Walter Kaczmarek,

  
	
   

  	
   

  	
  Chief Executive Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  “BANK”

  
	
   

  	
   

  
	
   

  	
  HERITAGE
  BANK OF COMMERCE,

  
	
   

  	
  a California
  banking corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Walter Kaczmarek

  	
   

  
	
   

  	
   

  	
  Walter Kaczmarek,

  
	
   

  	
   

  	
  President

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  “EXECUTIVE”

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ Lawrence
  McGovern

  	
   

  
	
   

  	
  LAWRENCE
  McGOVERN

  

 

20

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