EMPLOYMENT AGREEMENT
This employment agreement (the "Agreement") is entered into as of January 1,
1999, (the "Effective Date"), by and between Heritage Commerce Corp ("HCC")
and its wholly owned subsidiary, Heritage Bank of Commerce ("HBC") a
California banking corporation and Mr. John E. Rossell on the following terms
and conditions:
1. Position.
Mr. Rossell has been duly elected to the Board of Directors of HCC ("HCC
Board"). During the term of this Agreement, the HCC Board will continue to
present Mr. Rossell on the HCC slate of individuals nominated for election by
shareholders to the post of Director. Mr. Rossell will serve as President
and CEO of HCC and President and CEO of HBC. Mr. Rossell will be subject to
the direction of the Board of Directors of HCC and HBC.
As employed hereunder, the term "Bank" is intended to mean HCC and/or any of
its subsidiaries, as applicable. The term "Management" is intended to mean
the CEO of HCC and/or, as applicable, those duly appointed management
committees vested with decision-making authority. The term "Board" will,
unless more narrowly defined in the context of its immediate usage, mean any
and all boards of directors with purview over the matter at hand.
Mr. Rossell will set a high standard of conduct, courtesy and concern, of
professional and personal discretion, responsibility, forthrightness and hard
work. In light of his role with the Bank and of the Bank's position in the
industry, Mr. Rossell will serve as a model for all employees of the Bank and
will strive at all times to develop and enhance the Bank's reputation in the
community. Mr. Rossell will devote his productive business time, attention
and energy to the business of the Bank.
Mr. Rossell will comply with all pertinent regulatory standards as may affect
the Bank.
Mr. Rossell will at all times keep the Board informed of the performance of
all units under his supervision and of his activities undertaken in the
context of his role, including his civic activities.
In addition to the above, Mr. Rossell will:
(a) be responsible for the operation of the Bank, its properties and
related interests in accordance with the objectives and policies of
the Board;
(b) exercise diligence with respect to the control of the costs of
operation and other expenses directly or indirectly involving
interests of the Bank;
(c) be responsible for achieving the broad objectives of the Bank for
profitability and business development;
(d) be responsible for the quality of the loan portfolio; and
(e) be responsible for overseeing those administrative functions which are
in his purview and for forming and developing his staff in a manner
consistent with the Bank's immediate needs and strategic goals.
2. Term.
Subject to Paragraph 12 below, the Term of this Agreement will be three years
from the Effective Date hereof. At maturity, and annually thereafter, unless
otherwise amended or terminated, this Agreement will automatically renew for
a term of one year. Upon the termination of Mr. Rossell's employment,
neither he nor the Bank will have any further obligation to the other, except
as set forth in Paragraphs 5, 9, 12, 13, 14, 15, 17, 18, and 24 herein.
3. Base Salary.
For the Term of this Agreement while he is an employee, the Bank will pay Mr.
Rossell $175,000 per year ("Base Salary"), in accordance with the Bank's
normal payroll procedures, less appropriate withholdings, taxes and similar
deductions. The Base Salary will be reviewed annually by the Personnel and
Planning Committee of the HCC Board and is subject to alteration only at the
direction of that Committee.
4. Performance Bonuses.
From time to time, but not less than annually, subject to the discretion of
the Board, the Bank will undertake, in good faith, to pay performance bonuses
during the Term of this Agreement. The Bank will not be obligated to pay any
specific amount pursuant to this Paragraph. Mr. Rossell will be eligible for
Performance Bonuses and the Bank will, in good faith, pay Performance Bonuses
in amounts that it deems reasonable. If Performance Bonuses are paid, the
amounts of such generally will be comparable to those for similarly placed
executives at similarly situated financial institutions, and will be based
on Mr. Rossell's overall performance and that of the Bank, including such
factors as growth, profitability, loan quality, adequacy of the loan loss
reserve and the satisfactory nature of regulatory examinations.
5. Incentive Stock Options.
The Board of HCC has granted to Mr. Rossell incentive stock options to
acquire shares of HCC's common stock, pursuant to the Heritage Commerce Corp
1994 Tandem Stock Option Plan and to those three certain stock option
agreements by and between HCC and Mr. Rossell, dated 6/8/94, 7/1/97, and
9/17/98. The Board, in its discretion, may grant such additional options, as
it deems appropriate in order to recognize performance for the preceding year
and in order to provide Mr. Rossell with the incentive to sustain and enhance
the operational performance of the Bank for the future.
6. Automobile Allowance.
During the Term of this Agreement, the Bank will pay to Mr. Rossell an
automobile allowance and reimbursement for automobile expenses (collectively
"Auto Allowance"), which is consistent with that paid to executive officers
generally, which Auto Allowance however will not be reduced by the terms of
this Agreement from any such benefits already in effect on the effective date
of this Agreement.
7. Medical Insurance.
The Bank will provide medical insurance to Mr. Rossell and his family with
options and coverage consistent with those of the Bank's group medical plan
as in effect from time to time.
8. Life Insurance, Disability Insurance and Supplemental Retirement Plan.
The Bank will provide Mr. Rossell life insurance and disability insurance to
the same extent the Bank provides such insurance (collectively "Insurance
Benefits") to its executive officers, which insurance benefits however will
not be reduced by the terms of this Agreement, from any such benefits already
in effect on the effective date of this Agreement. Mr. Rossell will be
entitled to designate the beneficiary of the life insurance provided by this
Paragraph.
The Bank will provide Mr. Rossell with a Supplemental Executive Retirement
Plan (SERP). The terms and conditions of the SERP are set forth in a
separate agreement dated 6/19/97, by and between Mr. Rossell and the Bank.
The Board, in its discretion, may from time to time grant to Mr. Rossell
additional or improved life insurance, disability insurance, and/or SERP
benefits as it deems appropriate to his position and/or performance.
9. Indemnification by the Bank.
The Bank will indemnify and hold Mr. Rossell harmless pursuant to those
certain Indemnification Agreements dated October 5, 1998 and executed by Mr.
Rossell and the Bank and also to the extent provided for in the Bank's bylaws
as to officers and/or directors of the Bank and HCC.
10. Monthly Expense Account.
Subject to the Bank's Expense Reimbursement Policy, the Bank will reimburse
Mr. Rossell for his reasonable and necessary business expenses incurred in
furthering the Bank's interests.
11. Vacation.
During the period of this Agreement, Mr. Rossell will accrue vacation
consistent with the personnel policy of the Bank, but in no event at a rate
of less than four weeks per year. In the event that while he is an employee,
he receives any compensation in lieu of accrued vacation, such payment will
not be included in severance calculations called for in Paragraph 12.1,
Termination without Cause, or in Paragraph 12.2, Change of Control, hereunder.
12. Termination and Severance.
Each party has the right to terminate Mr. Rossell's employment with the Bank
prior to the end of the Term specified in Paragraph 2 with or without cause
at any time. For purposes of this Agreement, cause will arise if (i) he
willfully breaches or habitually neglects the duties which he is required to
perform under this Agreement, (ii) he commits an intentional act that has a
material detrimental effect on the reputation or business of the Bank, or
(iii) he is convicted of a felony or commits any material and actionable act
of dishonesty, fraud, or intentional material misrepresentation in the
performance of his duties under this Agreement. If the Bank decides to
terminate Mr. Rossell's employment for cause, the Bank will provide him with
notice specifying the grounds for termination, accompanied by a brief written
statement stating the relevant facts supporting such grounds. Upon
termination of his employment for cause, Mr. Rossell will not be entitled
to any further amounts under this Agreement, except for the Base Salary
accrued and unpaid vacation pay and any rights under the stock option plan
earned through his last day of employment.
12.1 Termination Without Cause.
If the Bank terminates Mr. Rossell's employment without cause, the Bank will
provide him the following, as his full and final severance: (i) a lump sum
payment within 10 days after termination date, equal to his annual Base
Salary, annual auto allowance and Average Annual Performance Bonus paid (as
defined below), if any, less withholding deductions; and (ii) if he is
covered under the Bank's standard group medical and dental plan at the time
of his termination, the Bank will continue to provide equivalent coverage to
Mr. Rossell, through C.O.B.R.A., for up to 12 months, as needed, after the
date of his termination, at no cost to Mr. Rossell; and (iii) with regard to
any group life insurance and/or any group disability benefits enjoyed by Mr.
Rossell immediately prior to his severance, except as provided hereunder, the
Bank will continue to provide such benefits for 12 months at no cost to Mr.
Rossell; and (iv) except as provided hereunder, the Bank will continue to pay
for 12 months the premiums on any discreet supplemental life insurance and/or
disability insurance policies carried by the Bank for Mr. Rossell's benefit,
in amounts and with coverage equivalent to coverage provided immediately
prior to Mr. Rossell's last day of employment, at no cost to Mr. Rossell
(thereafter, the Bank will freely assign such policies to Mr. Rossell, and he
will be responsible for all premium payments, if he so chooses); and (v) the
Bank will reimburse Mr. Rossell for bona fide, professional out-placement
services, not to exceed $5,000.
For purposes of this Agreement, a termination resulting from Mr. Rossell's
death or disability (as defined hereunder) will be considered Termination
Without Cause. Disability will be effective hereunder if it causes Mr.
Rossell's absence from work for 90 days out of any consecutive 6 month period.
12.2 Change of Control.
If Mr. Rossell's employment is terminated without cause or terminates at Mr.
Rossell's election as a result of a material change in his compensation,
benefits, title, responsibility or location, and such termination occurs
within 60 days before, or 12 months following, a Change of Control (as
hereafter defined), Mr. Rossell will be entitled to the following benefits
and compensation: (i) a lump sum payment within 10 days after termination
date, equal to twice the aggregate of his annual Base Salary, annual auto
allowance and Average Annual Performance Bonus paid (as defined below), if
any, less withholding deductions; and (ii) if he is covered under the Bank's
standard group medical and dental plan at the time of his termination, the
Bank will continue to provide equivalent coverage to Mr. Rossell, through
C.O.B.R.A., for up to 18 months, as needed, after the date of his termination,
at no cost to Mr. Rossell; and (iii) with regard to any group life insurance
and/or any group disability benefits enjoyed by Mr. Rossell immediately prior
to his severance, except as provided hereunder, the Bank will continue to
provide such benefits for 18 months at no cost to Mr. Rossell; and (iv)
except as provided hereunder, the Bank will continue to pay for 18 months the
premiums on any discrete supplemental life insurance and/or disability
insurance policies carried by the Bank for Mr. Rossell's benefit, in amounts
and with coverage equivalent to coverage provided immediately prior to Mr.
Rossell's last day of employment, at no cost to Mr. Rossell (thereafter, the
Bank will freely assign such policies to Mr. Rossell, and he will be
responsible for all premium payments, if he so chooses); and (v) the Bank
will reimburse Mr. Rossell for bona-fide, professional out-placement services,
not to exceed $5,000.
The term "Change of Control" will mean the occurrence of any of the following
events with respect to the Employer (with the term "Employer" being defined
for purposes of determining whether a "Change of Control" has occurred to
mean HCC, HBC or any parent bank holding company organized at the direction
of HCC or HBC to own 100% of the outstanding common stock of HCC or HBC): (i)
a change in control of a nature that would be required to be reported in
response to Item 6(e) of Schedule 14A of Regulation 14A promulgated under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), or in
response to any other form or report to the regulatory agencies or
governmental authorities having jurisdiction over the Employer or any stock
exchange on which the Employer's shares are listed which requires the
reporting of a change in control; (ii) any merger, consolidation or
reorganization of the Employer in which the Employer does not survive; (iii)
any sale, lease, exchange, mortgage, pledge, transfer or other disposition
(in one transaction or a series of transactions) of any assets of the Employer
having an aggregate fair market value of fifty percent (50%) of the total
value of the assets of the Employer, reflected in the most recent balance
sheet of the Employer; (iv) a transaction whereby any "person" (as such term
is used in the Exchange Act) or any individual, corporation, partnership,
trust or any other entity becomes the beneficial owner, directly or
indirectly, of securities of the Employer representing twenty-five (25%) or
more of the combined voting power of the Employer's then outstanding
securities; or (v) a situation where, in any one-year period, individuals who
at the beginning of such period constitute the Board of Directors of the
Employer cease for any reason to constitute at least a majority thereof,
unless the election, or the nomination for election by the Employer's
shareholders, of each new director is approved by a vote of at least
three-quarters (3/4) of the directors then still in office who were directors
at the beginning of the period. Notwithstanding the foregoing or anything
else contained herein to the contrary, there will not be a "Change of
Control" for purposes of the Agreement if the event which would otherwise
come within the meaning of the term: "Change of Control" involves (i) a
reorganization at the direction of the Employer solely to form a parent bank
holding company which owns 100% of the Employer's common stock following the
reorganization, or (ii) an Employee Stock Ownership Plan sponsored by the
Employer or its parent holding company which is the party that acquires
"control," as described above.
12.3 Voluntary Termination.
If Mr. Rossell decides of his own volition to terminate his employment under
this Agreement prior to the end of the Term he will provide the Bank with one
month's prior written notice; provided however, upon receiving such notice,
the Bank may terminate his employment immediately. Upon voluntary termination
of his employment, Mr. Rossell will not be entitled to any further amounts
under this Agreement, except for the Base Salary accrued and unpaid vacation
pay and any rights under the stock option plan earned through his last day of
employment.
12.4 Other Termination Matters.
As to the Bank's obligations under Paragraph 12, the term "as needed" refers
to Mr. Rossell's continuing respective status as otherwise uninsured. Should
he become employed, and become so insured as a result of his employment, the
Bank would, from that moment forward, be released from its related insurance
or insurance premium reimbursement obligations.
As to the Bank's obligations under 12.1 (iii), the Bank may, in the
alternative, in its sole discretion, elect to pay to Mr. Rossell in 12
consecutive monthly installments, as needed by Mr. Rossell, a monthly amount
equal to the Bank's monthly cost of providing such respective coverage during
Mr. Rossell's employment.
As to the Bank's obligations under 12.1 (iv), the Bank may, in the
alternative, in its sole discretion, elect to pay to Mr. Rossell in 12
consecutive monthly installments a monthly amount equal to the Bank's monthly
cost of providing such respective coverage during Mr. Rossell's employment.
Under no circumstances will the Bank be under obligation to assign to Mr.
Rossell policies, which it does not possess, or which are otherwise
non-assignable.
As to the Bank's obligations under 12.2 (iii), the Bank may, in the
alternative, in its sole discretion, elect to pay to Mr. Rossell in 18
consecutive monthly installments, as needed by Mr. Rossell, a monthly amount
equal to the Bank's monthly cost of providing such respective coverage during
Mr. Rossell's employment.
As to the Bank's obligations under 12.2 (iv), the Bank may, in the
alternative, in its sole discretion, elect to pay to Mr. Rossell in 18
consecutive monthly installments a monthly amount equal to the Bank's monthly
cost of providing such respective coverage during Mr. Rossell's employment.
Under no circumstances will the Bank be under obligation to assign to Mr.
Rossell policies, which it does not possess, or which are otherwise
non-assignable.
The term "Average Annual Performance Bonus," as used herein, will be
calculated as of Mr. Rossell's last date of employment and will mean the
higher of (i) Mr. Rossell's annual performance bonuses averaged from the date
of this Agreement, or (ii) the average of his three most recent annual
performance bonuses.
13. Confidential and Proprietary Information.
Mr. Rossell agrees that all Bank information, including but not limited to
that which is directly or indirectly related to the Bank's financial status,
profitability, deposit base, portfolio size and quality as well as its
customers and prospective customers is confidential and proprietary to the
Bank and that he will maintain such information as confidential at all times
during and after his employment. Mr. Rossell agrees that as a condition of
employment, he will execute such form of confidentiality agreement as the
Board may adopt from time to time for senior officers of the Bank, which
agreement must be consistent with and not exceed the provisions of this
Paragraph.
14. No Conflicting Agreements.
Mr. Rossell represents that his performance of all of the terms of this
Agreement and any service to be rendered as an employee of the Bank does not
and will not breach any fiduciary or other duty or any covenant, agreement or
understanding, including without limitation, any agreement relating to any
proprietary information, knowledge or data acquired by him in confidence,
trust or otherwise, prior to his employment by the Bank to which he is a
party or by the terms of which he may be bound. Mr. Rossell covenants and
agrees that he will not disclose to the Bank, or induce the Bank to use, any
proprietary information, knowledge or data, belonging to any previous
employer or others and that he will disclose to the Bank the term and
subject of any prior confidentiality agreement or agreements he has entered
into. Mr. Rossell further covenants and agrees not to enter into any
agreement or understanding, either written or oral, in conflict with the
provisions of this Agreement. Further, Mr. Rossell agrees that for a period
of one year after termination pursuant to Paragraph 12.0, Termination and
Severance, and also for a period of one year after payment of full and final
severance, pursuant either to Paragraph 12.1 (Termination Without Cause) or
Paragraph 12.2 (Change of Control), he will not (i) directly or indirectly
solicit the services of any employee of the Bank or directly or indirectly
encourage any employee to discontinue his or her employment with the Bank, or
(ii) directly or indirectly solicit or encourage any customer of the Bank to
curtail in any way the business that customer does with the Bank.
15. Successors and Assigns.
This Agreement will inure to the benefit of and be binding upon the Bank and
any of its successors and assigns. In view of the personal nature of the
services to be performed under this Agreement by Mr. Rossell, he will not
have the right to assign or transfer any of his rights, obligations or
benefits under this Agreement, except as otherwise noted herein.
16. Governing Law.
This Agreement will at all times and in all respects be governed by the laws
of the State of California applicable to transactions wholly performed in
California between California residents.
17. 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 Bank, complying with
the procedures provided for under California Evidence Code, Sections 1115
through and including 1125 as then currently in effect. Using a mediator
selected by both parties, the parties further and specifically agree to use
their best efforts to reach a mutually agreeable resolution of the matter at
such mediation. The parties understand and specifically agree that should
any party(ies) to this Agreement refuse to participate in mediation for any
reason, the other party(ies) 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.
18. Arbitration
In the event of any dispute or claim relating to or arising out of Mr.
Rossell's employment with the Bank (or any of its subsidiaries), this
Agreement, or any termination of Mr. Rossell's employment (including, but not
limited to, any claims of breach of contract, wrongful termination, or age,
disability or other discrimination or harassment), which dispute cannot be
resolved by mediation pursuant to Paragraph 17, Mr. Rossell and the Bank
agree that all such disputes will be resolved exclusively by binding
arbitration conducted by the American Arbitration Association in Santa Clara
County, California. Mr. Rossell and the Bank hereby knowingly and willingly
waive their respective rights to have such disputes tried to a judge or jury.
This arbitration provision will not apply to a claim for injunctive relief by
either party to this Agreement.
19. Advice to Seek Counsel.
Mr. Rossell acknowledges that the Bank has advised him that this Agreement
imposes legal obligations upon him and that he should consult with legal
counsel with regard to this Agreement. The Bank will bear the cost of such
legal review up to a maximum of $1,500.
20. Notices.
Any notice required to be given hereunder will be sufficient if in writing
and sent by certified or registered mail, return receipt requested, first
class postage paid. The applicable address for the Bank is at its principal
office in San Jose, attention to the CEO. Mr. Rossell's address will be as
shown on the Bank's records. Notices will be deemed given when actually
received, or three days after mailing, whichever is earlier.
21. Entire Agreement.
Except as provided in Paragraphs 5, 6, 8, 9 and 13, this Agreement and any
attachments hereto contain the entire agreement and understanding by and
between the Bank and Mr. Rossell. With respect to the subject matter herein,
no representation, promise, agreement or understanding, written or oral, not
herein contained will be of any force or effect. No modification hereof will
be valid or binding unless in writing and signed by the party intended to be
bound. No waiver of any provision of this Agreement will be valid unless in
writing and signed by the party against whom such waiver is sought to be
enforced. No valid waiver of any provision of this Agreement at any time
will be deemed a waiver of any other provision of this Agreement, or will be
deemed a valid waiver of any of such provision at any other time.
If any provision of this Agreement is held by a court of competent
jurisdiction or an arbitration body to be invalid, void or unenforceable, the
remaining provisions of this Agreement will, nonetheless, continue in full
force without being impaired or invalidated in any way.
22. Headings.
The headings and other captions in this Agreement are for convenience and
reference only and will not be used in interpreting, construing or enforcing
any of the provisions of this Agreement.
23. Regulatory Approval.
In the event that any regulatory authority with jurisdiction over the Bank
will disapprove any provision of this Agreement, then the parties hereto will
use their best efforts, acting in good faith, to amend the Agreement in a
manner that will be acceptable to the parties and to the regulatory
authorities.
24. Other Attorney's Fees Clause.
If any legal action or any arbitration or other proceeding is brought for the
enforcement of this agreement or because of any dispute or alleged breach,
the successful or prevailing party will be entitled to recover reasonable
attorney fees and other costs incurred in that action or proceeding, in
addition to any other relief which they may be entitled to.
In witness hereof, the Bank and Mr. Rossell have duly executed this Agreement
and it is effective as of the day and year first set forth above.
HERITAGE BANK OF COMMERCE
By: /S/ Robert W. Peters Date:MARCH 18, 1999
Title: DIRECTOR OF THE BOARD & AUTHORIZED SIGNATORY
HERITAGE COMMERCE CORP
By: /S/ Robert W. Peters Date:MARCH 18, 1999
Title:CHAIRMAN, PERSONNEL & PLANNING
COMMITTEE & AUTHORIZED SIGNATORY
ACCEPTED BY:
/S/John E. Rossell Date:MARCH 18, 1999
John E. Rossell