| Exhibit 10.5 | |
| NON-COMPETE, NON-SOLICITATION | |
| AND CONFIDENTIALITY AGREEMENT | |
| THIS NON-COMPETE, NON-SOLICITATION AND CONFIDENTIALITY | |
| AGREEMENT (this “Agreement”) is entered into this 8th day of February, 2007, by and among Heritage | |
| Commerce Corp, a California Corporation (“Heritage”), Heritage Bank of | |
| Commerce, a California banking corporation (“HBC”) and James Mayer (“Shareholder”). | |
| WHEREAS, concurrently with the execution of this | |
| Agreement, Heritage, HBC and Diablo Valley Bank (“Diablo”) have entered | |
| into that certain Agreement and Plan of Merger (the “Merger Agreement”) | |
| dated as of February 8, 2007 whereby on the Effective Date (as defined in | |
| the Merger Agreement) Diablo will merge with and into HBC and HBC shall survive | |
| the merger (the “Merger”). | |
| WHEREAS, Shareholder is the President and Chief | |
| Executive Officer of Diablo and beneficially owns approximately 5.77% of the | |
| issued and outstanding shares of Diablo common stock; | |
| WHEREAS, Shareholder acknowledges that the execution | |
| and delivery of this Agreement by Shareholder is a condition precedent to the | |
| obligations of the parties entering into the Merger Agreement and the | |
| consummation of the Merger, and Shareholder acknowledges and agrees that | |
| Heritage, HBC and Diablo would not proceed forward and consummate the transactions | |
| contemplated under the Merger Agreement unless Shareholder enters into this | |
| Agreement; | |
| WHEREAS, Heritage, HBC and Shareholder acknowledge | |
| that the covenants and agreements of Shareholder contained in this Agreement | |
| are necessary to protect and preserve Diablo’s business for the benefit of | |
| Heritage and HBC after consummation of the transactions contemplated by the Merger | |
| Agreement; | |
| WHEREAS, Shareholder has significant knowledge and | |
| information concerning the business of Diablo and that such business is very | |
| competitive; | |
| WHEREAS, Shareholder will receive significant | |
| consideration for the Shareholder’s exchange of his Diablo common stock through | |
| the Merger; | |
| WHEREAS, HBC has agreed to provide Shareholder with a | |
| three year employment agreement pursuant to which Shareholder will become an | |
| Executive Vice President of HBC on the Effective Date (as defined herein); | |
| WHEREAS, this Agreement shall become effective at the | |
| Effective Time (as defined in the Merger Agreement) of the Merger (the “Effective | |
| Date”); | |
| NOW, THEREFORE, in consideration of the promises and | |
| covenants contained herein and for other good and valuable consideration, the | |
| receipt, sufficiency and adequacy of which are mutually acknowledged by each | |
| party, it is agreed as follows: | |
| 1. | |
| Definitions. | |
| Capitalized terms used in this Agreement not | |
| otherwise defined have the meaning given such term in the Merger Agreement. | |
| For purposes of this Agreement, the term “Business” | |
| means the business of banking (including, without limitation, the acceptance of | |
| deposits and the making of loans) as conducted by state chartered banks, | |
| nationally chartered banks or office of thrift supervision chartered | |
| institutions conducting business in the state of California (a) to be | |
| undertaken in the formation of a new banking organization or (b) engaged | |
| in by an existing banking organization with $1 billon or less of assets. | |
| 2. | |
| Purpose. | |
| Shareholder acknowledges and agrees that the | |
| market for the Business is very competitive within the Restrictive Territory | |
| (as defined herein), and one way that Diablo maintained its business and its | |
| competitive position in the marketplace prior to the Closing was by investing | |
| time and money in developing proprietary products, unique approaches to the | |
| business, banking systems and strong client, vendor, and employee | |
| relationships. | |
| Shareholder further | |
| acknowledges and agrees that proprietary and other information related to such | |
| 1 | |
| products, approaches and | |
| relationships are highly confidential, and maintaining that confidentiality is | |
| critical to Diablo’s success. | |
| Shareholder further acknowledges and agrees that Diablo has invested | |
| substantial time and resources into developing relationships, customer lists | |
| and business models and strategies and that disruption of such relationships or | |
| misuse of such lists, models, and strategies would damage Heritage and HBC. | |
| 3. | |
| Shareholder | |
| Covenants. | |
| (a) Non-Competition. | |
| Shareholder hereby covenants and agrees that | |
| from the Effective Date until the third (3rd) anniversary of the Effective Date (“Restricted Period”), | |
| Shareholder will not without the prior written consent of Heritage, engage or | |
| participate or have any interest, directly or indirectly, in any Business | |
| anywhere in the counties of Santa Clara, Alameda, Contra Costa, Marin, | |
| San Francisco and San Mateo located in the State of California (“Restricted | |
| Territory”) (all such entities shall be referred to each as “Competitor” or | |
| collectively as “Competitors,”), with respect to the following acts: (i) own any equity interest in any | |
| Competitor; (ii) operate, join, control, advise, become a founder or | |
| otherwise participate in any Competitor; (iii) lend credit or money for the | |
| purpose of assisting another to establish or operate any Competitor; (iv) | |
| request or advise any customer, strategic partner or vendor of Diablo that | |
| becomes a present or future customer, strategic partner or vendor of Heritage, | |
| HBC or their subsidiaries now and hereinafter existing (collectively, the “Affiliated | |
| Companies”) to withdraw, curtail or cancel its business with Heritage, HBC | |
| or the Affiliated Companies anywhere in the Restricted Territory; | |
| (v) induce or influence (or attempt to induce or influence) any person or | |
| entity who is engaged (as an employee, agent, independent contractor or | |
| otherwise) by Heritage, HBC or the Affiliated Companies to terminate his, her | |
| or its employment or engagement for the purpose of obtaining employment with a | |
| Competitor; (vi) solicit any employee of Heritage, HBC or the Affiliated | |
| Companies to leave employment and become affiliated with any Competitor; (vii) | |
| solicit any actual or “prospective customer” (as hereinafter defined), which | |
| was served by Diablo in connection with any business of Diablo, or (viii) | |
| solicit, influence or attempt to influence any customer which is or was served | |
| by Diablo to discontinue its business or service available from Heritage, HBC | |
| or the Affiliated Companies; provided, that, Shareholder may own | |
| and hold as an investment of up to 1% of any corporation within the Restricted | |
| Territory that is listed on a national stock exchange and that is engaged in a | |
| business that is competitive with Heritage, HBC or an Affiliated Company, but | |
| Shareholder may not otherwise participate (whether in management or otherwise) | |
| in such corporation. | |
| A “prospective | |
| customer” shall mean a company, person or other entity with which | |
| Shareholder knows, or reasonably should know, that Diablo has had actual | |
| contact with or has begun formulating a targeted strategy for contact at any | |
| time during the term of this Agreement in connection with the operation of the | |
| Business. | |
| “Engaged in business” | |
| shall include, without limitation, establishment of goodwill or business | |
| reputation, maintenance of business assets and properties, and dealings with | |
| customers, strategic partners, prospective customers, suppliers, or vendors. | |
| (b) Confidentiality. | |
| Shareholder acknowledges and agrees that the | |
| Shareholder has occupied a position of trust and confidence with Diablo prior | |
| to the date hereof and has had access to and has become familiar with the | |
| following, any and all of which constitutes confidential information of Diablo | |
| (collectively “Confidential Information”) (a) any and all proprietary intellectual | |
| property or trade secrets concerning the business and affairs of Diablo, | |
| product specifications, data, know-how, formulae, compositions, processes, | |
| designs, graphs, drawings, samples, inventions and ideas, past, current and | |
| planned research and development, customer lists, current and anticipated | |
| customer requirements, price lists, market studies, business plans, computer | |
| software and programs (including object code and source code), database | |
| technologies, systems, structures, architectures, processes, improvements, | |
| devices, know-how, discoveries, concepts, methods, information of Diablo and | |
| any other information, however documented, of Diablo that is a trade secret | |
| within the meaning of any applicable law; (b) any and all proprietary non-public | |
| information concerning the business and affairs of Diablo (which includes any | |
| historical financial statements, financial projections, and budgets, historical | |
| and projected sales, capital spending budgets and plans, the names and | |
| backgrounds of key personnel, contractors, agents, suppliers, personnel | |
| training, techniques and materials, manufacturing methods, designs and | |
| techniques, purchasing methods and techniques, however documented; and | |
| (c) any and all notes, analyses, compilations, studies, summaries and | |
| other material prepared by or for Diablo containing or based, in whole or part, | |
| upon any information included in the foregoing. | |
| Shareholder acknowledges and agrees that the | |
| protection of the Confidential Information is necessary to protect and preserve | |
| the value of Diablo’s business and proprietary properties being acquired by | |
| Heritage and HBC. | |
| Therefore, Shareholder | |
| hereby agrees not to, at any time, disclose to any unauthorized Persons or use | |
| for his or its own account or for the benefit of any third party any | |
| Confidential Information, whether or not such information is | |
| 2 | |
| embodied in writing or other physical form or is | |
| retained in the memory of Shareholder, without Heritage’s written consent, | |
| unless and to the extent that the Confidential Information is or becomes | |
| generally known to and available for use by the public other than as a result | |
| of Shareholder’s fault or the fault of any other Person bound by a duty of | |
| confidentiality to Heritage, HBC or the Affiliated Companies. | |
| Shareholder | |
| agrees to deliver to Heritage at the Effective Date, and at any other time | |
| Heritage may request, all documents, memoranda, notes, plans, records, reports | |
| and other documentation, models, components, devices or computer software, | |
| whether embodied in a disk or in other form (and all copies of all of the | |
| foregoing), that contain Confidential Information and any other Confidential | |
| Information that Shareholder may then possess or have under Shareholder’s | |
| control. | |
| (c) Breach. | |
| Shareholder, Heritage and HBC each recognize | |
| and acknowledge that the Confidential Information and other knowledge | |
| Shareholder has about Diablo and has and will obtain from Heritage, HBC or the | |
| Affiliated Companies is special and unique, and any violation of the covenants | |
| contained in this Agreement is likely to cause irreparable damage to Heritage, | |
| HBC or the Affiliated Companies. | |
| Therefore, the parties agree that, upon any breach of any covenant | |
| contained in this Section 3 by Shareholder, Heritage and HBC shall be | |
| entitled to an appropriate injunction for a violation of such covenant, | |
| threatened or actual, of such covenant, in addition to all other relief | |
| available under applicable law. | |
| If a court | |
| or arbitrator has determined that Shareholder has committed a breach by | |
| Shareholder of any covenant set forth in Section 3 of this Agreement, the Restricted | |
| Period will be extended by the period of the duration of such breach. | |
| (d) Acknowledgment. | |
| Shareholder acknowledges and agrees that the | |
| restrictions set forth in this Section 3 are reasonable in scope and | |
| essential to the preservation of Diablo’s business and proprietary properties | |
| and that enforcement of these restrictions will not cause Shareholder any | |
| hardship, and because of Shareholder’s background and experience, will not in | |
| any manner preclude Shareholder from becoming gainfully employed in such a | |
| manner and to such an extent as will provide a standard of living for | |
| Shareholder and the members of Shareholder’s family of at least the sort and | |
| fashion to which they have become accustomed. | |
| Each of Heritage, HBC and Shareholder acknowledges and agrees that the | |
| covenants and agreements contained in this Section 3 have been negotiated | |
| in good faith by each of them. | |
| Each of | |
| Heritage, HBC and Shareholder further acknowledges that (i) the goodwill | |
| associated with the existing vendors, customers, assets and employees of Diablo | |
| prior to the transactions contemplated herein is an integral component of the | |
| value of Diablo to Heritage and HBC and is reflected in the consideration to be | |
| received by Diablo shareholders, including the Shareholder pursuant to this | |
| Agreement, and (ii) the covenants and agreements contained in this | |
| Section 3 are necessary to preserve the value of Diablo’s business and | |
| proprietary properties for Heritage and HBC following the transaction. | |
| Each of Heritage, HBC and Shareholder | |
| acknowledges that the limitations of time, geography and scope of activity | |
| agreed to in Section 3 are reasonable because, among other things: (A) Heritage, HBC and Diablo are engaged | |
| in a highly competitive industry and have their operations in the Restricted | |
| Territory, (B) Shareholder had unique access to, and will continue to have | |
| access to, Confidential Information, including trade secrets, and know-how of Diablo | |
| and its business and proprietary properties, (C) Shareholder is receiving | |
| significant consideration in connection with the transactions contemplated by | |
| the Merger Agreement and this Agreement, and (D) this Agreement provides | |
| no more protection than is necessary to protect Heritage’s and HBC’s interest | |
| in the goodwill of Diablo and its business and proprietary properties, | |
| Confidential Information and Diablo, Heritage and HBC trade secrets. | |
| (e) No Disparagement. | |
| Shareholder will not, directly or indirectly, | |
| disparage Heritage and HBC, the business formerly conducted by Diablo, the | |
| business conducted by Heritage and HBC or any shareholder, director, officer, | |
| employee or agent of Heritage or HBC; | |
| (f) Future Employer. | |
| Shareholder will, during the Restrictive | |
| Period, within ten days after accepting any employment, consulting engagement, | |
| engagement as an independent contractor, partnership or other association that | |
| might reasonably involve the Business, advise Heritage of the identity of the | |
| new employer, client, partner or other Person with whom Shareholder has become | |
| associated. | |
| Following receipt of such | |
| notice, if Heritage in its reasonable judgment determines that Shareholder’s | |
| proposed association involves a Person engaged in the Business, Heritage may | |
| serve notice upon each such Person that such Shareholder is bound by this | |
| Agreement and furnish each such Person with a copy of this Agreement or | |
| relevant portions thereof. | |
| (g) Separate Agreement. | |
| The covenants of Shareholder contained in | |
| this Section 3 shall each be construed independently of any other | |
| provision in this Agreement, and the existence of any claim or cause of | |
| 3 | |
| action of Shareholder | |
| against Heritage or HBC whether predicated on this Agreement or otherwise, | |
| shall not constitute a defense to the enforcement by Heritage or HBC of such | |
| covenants. | |
| (h) Survival of | |
| Covenants. | |
| The covenants contained | |
| in this Section 3 shall survive the termination of this Agreement by | |
| either party hereto in accordance with the provisions of this Section 3. | |
| 4. | |
| Conflict. | |
| Shareholder represents and warrants to | |
| Heritage and HBC that Shareholder has not executed any written agreement with | |
| any other person or entity that would prohibit Shareholder from entering into | |
| this Agreement. | |
| Further, Shareholder | |
| represents and warrants to Heritage and HBC that the execution of this | |
| Agreement by Shareholder will not conflict with any obligations or duties which | |
| Shareholder may have to prior employers or pursuant to any other agreement. | |
| 5. | |
| Non-Disclosure of | |
| Agreement. | |
| Shareholder shall not | |
| disclose the terms and provisions of this Agreement or any other document | |
| executed in connection herewith except to Shareholder’s lawyers, accountants, | |
| tax advisors and spouse or by law to any Person; provided that | |
| Shareholder may disclose the non-competition and confidentiality covenants | |
| contained in Section 3 of this Agreement to a prospective employer or | |
| business partner with the prior written consent of Heritage. | |
| 6. | |
| Successors and | |
| Assigns. | |
| This Agreement will be | |
| binding upon Heritage and HBC and Shareholder and will inure to the benefit of | |
| Heritage and HBC and its affiliates, successors and assigns. | |
| 7. | |
| Waiver. | |
| The rights and remedies of the parties to | |
| this Agreement are cumulative and not alternative. | |
| Neither the failure nor any | |
| delay by any party in exercising any right, power or privilege under this | |
| Agreement will operate as a waiver of such right, power or privilege, and no | |
| single or partial exercise of any such right, power or privilege will preclude | |
| any other or further exercise of such right, power or privilege or the exercise | |
| of any other right, power or privilege. | |
| To the maximum extent permitted by | |
| applicable law, (a) no claim or right arising out of this Agreement can be | |
| discharged, in whole or in part, by a waiver or renunciation of the claim or | |
| right except in writing; (b) no waiver that may be given by a party will be | |
| applicable except in the specific instance for which it is given; and (c) no | |
| notice to or demand on one party will be deemed to be a waiver of any | |
| obligation of such party, or of the right of the party giving such notice or | |
| demand to require the other party, to take further action without notice or | |
| demand as provided in this Agreement. | |
| 8. | |
| Governing Law. | |
| This Agreement will be governed by the laws | |
| applied by courts of California to contracts entered into within that state by | |
| parties residing within that state and having no connection to any other state. | |
| 9. | |
| Jurisdiction; | |
| Service of Process. | |
| Any proceeding | |
| arising out of or relating to this Agreement may be brought in the courts of | |
| the State of California, or, if it has or can acquire jurisdiction, in the | |
| United States District Court for the Northern District of California, and each | |
| of the parties irrevocably submits to the exclusive jurisdiction of each such | |
| court in any such proceeding, waives any objection it may now or hereafter have | |
| to venue or to convenience of forum, agrees that all claims in respect of the | |
| proceeding shall be heard and determined only in any such court and agrees not | |
| to bring any proceeding arising out of or relating to this Agreement in any | |
| other court. | |
| The parties agree that | |
| either or both of them may file a copy of this paragraph with any court as | |
| written evidence of the knowing, voluntary and bargained agreement between the | |
| parties irrevocably to waive any objections to venue or to convenience of | |
| forum. | |
| Process in any proceeding | |
| referred to in the first sentence of this section may be served on any party as | |
| required under California law. | |
| 10. | |
| Severability. | |
| Whenever possible, each provision and term of | |
| this Agreement will be interpreted in a manner to be effective and valid, but | |
| if any provision or term of this Agreement is held to be prohibited or invalid, | |
| then such provision or term will be ineffective only to the extent of such | |
| prohibition or invalidity, without invalidating or affecting in any manner | |
| whatsoever the remainder of such provision or term or the remaining provisions | |
| or terms of this Agreement. | |
| If any of the covenants set forth in Section 3 | |
| of this Agreement are held to be unreasonable, arbitrary or against public | |
| policy, such covenants will be considered divisible with respect to scope, time | |
| and geographic area, and in such lesser scope, time and geographic area, will | |
| be effective, binding and enforceable against Shareholder to the fullest extent | |
| under California law. | |
| 4 | |
| 11. | |
| Execution of | |
| Agreement. | |
| This Agreement may be | |
| executed in one or more counterparts, each of which will be deemed to be an | |
| original copy of this Agreement and all of which, when taken together, will be | |
| deemed to constitute one and the same agreement. | |
| The exchange of copies of this Agreement and | |
| of signature pages by facsimile transmission shall constitute effective | |
| execution and delivery of this Agreement as to the parties and may be used in | |
| lieu of the original Agreement for all purposes. | |
| Signatures of the parties transmitted by | |
| facsimile shall be deemed to be their original signatures for all purposes. | |
| 12. | |
| Section Headings, | |
| Construction. | |
| The headings of | |
| sections in this Agreement are provided for convenience only and will not | |
| affect its construction or interpretation. | |
| All references to “Section” or “Sections” | |
| refer to the corresponding Section or Sections of this Agreement unless | |
| otherwise specified. | |
| All words used in this Agreement will be construed to be | |
| of such gender or number as the circumstances require. | |
| Unless otherwise | |
| expressly provided, the word “Including” does not limit the preceding words or | |
| terms. | |
| 13. | |
| Notices. | |
| All notices, consents, waivers and other | |
| communications under this Agreement must be in writing and will be deemed to | |
| have been duly given when (a) delivered by hand (with written confirmation of | |
| receipt); (b) sent by facsimile (with written confirmation of receipt); or (c) | |
| when received by the addressee, if sent by a nationally recognized overnight | |
| delivery service (receipt requested), in each case to the appropriate addresses | |
| and facsimile numbers set forth below (or to such other addresses and facsimile | |
| numbers as a party may designate by notice to the other parties): | |
| Shareholder: James | |
| Mayer | |
| 2596 Danville Blvd. | |
| Alamo, CA 94501 | |
| with a copy to: Dylan | |
| W. Wiseman | |
| Littler Mendelson | |
| 2520 Venture Oaks Way, Suite 390 | |
| Sacramento, CA | |
| Facsimile: (916) 561-0828 | |
| Heritage and HBC: Heritage | |
| Commerce Corp | |
| 150 Almaden Blvd. | |
| San Jose, California 95113 | |
| Attn: Walter T. Kaczmek | |
| Facsimile: (408) 534-4940 | |
| With copy to: Buchalter | |
| Nemer | |
| 1000 Wilshire Boulevard | |
| Suite 1500 | |
| Los Angeles, CA 90017-2457 | |
| Attn: Mark A. Bonenfant, Esq. | |
| Facsimile: (213) 896-0400 | |
| 14. | |
| Recitals. | |
| The recitals are incorporated herein and made | |
| a part of this Agreement. | |
| 15. | |
| Entire Agreement. | |
| This Agreement constitutes the entire | |
| agreement between the parties with respect to the subject matter of this | |
| Agreement and supersedes all prior written and oral agreements and | |
| understandings between the parties with respect to the subject matter of this | |
| Agreement. | |
| This Agreement may not be | |
| amended except by a written agreement executed by the party to be charged with | |
| the amendment. | |
| [signature page follows] | |
| 5 | |
| IN WITNESS WHEREOF, the parties hereto have executed | |
| this Non-Compete, Non-Solicitation and Confidentiality Agreement on the date | |
| first set forth above. | |
| HERITAGE COMMERCE CORP | |
| By: | |
| /s/ Walter T. Kaczmarek | |
| Walter T. Kaczmarek | |
| Chief Executive Officer | |
| HERITAGE | |
| BANK OF COMMERCE | |
| By: | |
| /s/.Walter T. Kaczmarek | |
| Walter T. Kaczmarek | |
| President | |
| SHAREHOLDER | |
| /s/ James Mayer | |
| James Mayer | |
| 6 | |