Exhibit 10.14


 


FIRST
AMENDED AND RESTATED


DIRECTOR
COMPENSATION BENEFITS AGREEMENT


(Previously
entitled Director Indexed Compensation Benefits Agreement)


 


This
First Amended and Restated Director Compensation Benefits Agreement
(hereinafter “Agreement”) is made and entered into effective as of December 29,
2008 by and between HERITAGE BANK OF COMMERCE,
a bank organized and existing under the laws of the state of California
(hereinafter the “Bank”) and, Humphrey P. Polanen,
a Director of the Company (hereinafter “Director” or “Participant”);


 


WHEREAS it is the parties’ intent to comply
with the final regulations under Internal Revenue Code Section 409A,
issued on April 10, 2007 by the Internal Revenue Service (IRS) and the
Treasury Department;


 


WHEREFORE, the Company and Director hereby
agree to amend and restate the prior Director Indexed Compensation Benefits
Agreement, effective as of June 19, 1997 (hereinafter “Original Agreement”,
and as amended), and further agree that this Heritage Bank of Commerce First
Amended and Restated Director Compensation Benefits Agreement shall amend,
supersede and replace the Original Agreement in its entirety;


 


WHEREAS, to encourage the Director to remain
a member of the Company’s Board of Directors, the Company is willing to provide
the Director with a deferred fee opportunity.


 


WHEREAS, it is the intent of the parties
hereto that this plan (evidenced by this Agreement) be considered an unfunded
arrangement maintained primarily to provide supplemental retirement benefits
for the Director, and be considered a non-qualified benefit plan for the
purposes of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”);
and


 


NOW, THEREFORE, in consideration of the past
service and the services to be performed by the Director in the future, as well
as the mutual promises and covenants contained herein, the Director and the
Company agree as follows:


 


A G R E E
M E N T


 


1.                                      Terms
and Definitions.


 


1.1                               Administrator.  The Bank shall be the “Administrator” and,
solely for the purposes of ERISA, the Named Fiduciary of this Agreement where a
fiduciary is required by ERISA.


 


1.2                               Applicable
Percentage.  The term “Applicable
Percentage” shall mean the percentage adjacent to the period of time in which
Director Separates From Service as a member of the Board of Directors of the
Bank, and shall be used to calculate the annual Director Benefit amount. As of
the date of this Agreement, Director has already attained an Applicable
Percentage of One Hundred Percent (100%).


 


1.3                               Board
of Directors.  The term “Board of
Directors” or “Board” shall mean the Board of Directors of Heritage Bank of
Commerce.


 


1

















 


1.4                               The
Code.  The “Code” shall mean the
Internal Revenue Code of 1986, as amended (the “Code”).


 


1.5                               Director
Benefit.  The term “Director
Benefit” shall mean the annual benefit paid out to Director pursuant to this
Agreement. Unless specified otherwise by the terms of this Agreement and
according to the circumstances giving rise to the Separation from Service, the
Director Benefit shall be calculated by multiplying the following:  (Director’s Years of Service) X (One Thousand
Dollars) X (Applicable Percentage of 100%). The Director Benefit shall continue
to increase with each Year of Service. In addition, the annual amount of
Director Benefits payable under this Agreement shall be increased at the rate
of two percent (2%) each year from the date of commencement of payments until
the death of the Director.


 


As previously stated, the actual amount of the
Director Benefit to be paid shall be determined at the time Director Separates
from Service and shall be reduced to the extent: (i) required under the
other provisions of this Agreement; (ii) required by reason of the lawful
order of any regulatory agency or body having jurisdiction over the Bank; or (iii) required
in order for the Bank to properly comply with any and all applicable state and
federal laws, including, but not limited to, income, employment and disability
income tax laws (e.g., FICA, FUTA, SDI).


 


1.6                               Early
Retirement and Early Retirement Age. 
The terms “Early Retirement” and/or “Early Retirement Age” shall refer
to the date which satisfies the following: (a) it shall be a date on or
after Director has attained the Early Retirement Age of Fifty-Five (55) , but
before he attains the Normal Retirement Age, and (b) it shall be the date
on which Director Separates From Service (for any reason other than a removal
for).


 


1.7                               Effective
Date.  The term “Effective Date”
shall mean the date first written above.


 


1.8                               ERISA.  The term “ERISA” shall mean the Employee
Retirement Income Security Act of 1974, as amended.


 


1.9                               Normal
Retirement Date and Normal Retirement Age.  The terms “Normal Retirement” and/or “Normal
Retirement Date” shall refer to the date which the Director Separates from
Service for any reason other than a Removal for Cause, and a date on or after
which Director has attained the age of Sixty-Two (62) (the “Normal Retirement
Age”).


 


1.10                        Plan
Year.  The term “Plan Year” shall
mean the Bank’s fiscal year.


 


1.11                        Removal
for Cause.  The term “Removal for
Cause” or “Removed for Cause” shall mean termination of the Director’s service
as a member of the Board of Directors of the Bank by reason of any of the
following:


 


(A)                              The
willful, intentional and material breach or the habitual and continued neglect
by the Director of his duties;


 


(B)                                The
Director’s willful and intentional violation of (i) any State or Federal
banking or securities laws, or of the Bylaws, rules, policies or resolutions 


 


2

















 


of Bank, or the rules or regulations of the California
Commissioner of Financial Institutions, Board of Governors or the Federal
Reserve System, Federal Deposit Insurance Corporation, or other regulatory
agency or governmental authority having jurisdiction over the Bank, which has a
material adverse effect upon the Bank;


 


(C)                                The
Director’s conviction of (i) any felony or (ii) a crime involving
moral turpitude, or the Director’s willful and intentional commission a
fraudulent or dishonest act; or


 


(D)                               The
Director’s willful and intentional disclosure, without authority, of any secret
or confidential information concerning Bank or taking any action which the Bank’s
Board of Directors determines, in its sole discretion and subject to good
faith, fair dealing and reasonableness, constitutes unfair competition with or
induces any customer to breach any contract with the Bank.


 


1.12                        Separates
From Service or Termination of Service. The term “Separation from Service”
or “Termination of Service” shall be read and interpreted consistent with Code Section 409A
and any future notices or guidance related thereto. As the term applies herein
to individuals who are serving on the Board of Directors, but who are not also
acting as employees of the Bank, the term “Separation from Service” shall means
the expiration of all contracts or terms of service under which the Director is
performing services as a member of the Board of Directors, and where expiration
constitutes a good faith and complete termination of the service relationship.


 


If an individual
provides services both as an employee of a service recipient and a member of
the board of directors of a corporate service recipient (or an analogous
position with respect to a non-corporate service recipient), the services
provided as an employee are not taken into account in determining whether the
service provider has a separation from service as a director for purposes of a
nonqualified deferred compensation plan in which the service provider
participates as a director that is not aggregated with any plan in which the
service provider participates as an employee under paragraph (c)(2)(ii) of
Code section 409A.


 


1.13                        Years
of Service.  The term “Years of Service” shall mean the twelve (12)
consecutive month period beginning on the date on which Director becomes a
member of the Board of Directors of the Bank, and any twelve (12) month
anniversary thereof, during which time Director has consecutively served on the
Board.  Director shall receive credit for
a full Year of Service for any partial year of service after Director has
completed one full Year of Service.


 


3

















 


2.                                      Scope,
Purpose and Effect.


 


2.1                               Contract
of Employment.  Although this
Agreement is intended to provide the Director with an additional incentive to
continue to serve as a member of the Board of Directors, this Agreement shall
not be deemed to constitute a contract of employment between the Director and
the Bank nor shall any provision of this Agreement restrict the right of the
Bank to remove or cause the removal of the Director including, without
limitation, by (i) refusal to nominate the Director for election for any
successive term of office as a member of the Board of Directors of the Bank, or
(ii) complying with an order or other directive from a court of competent
jurisdiction or any regulatory authority having jurisdiction over the Bank
which requires the Bank to take action to remove the Director.


 


2.2                               Fringe
Benefit.  The benefits provided
by this Agreement are granted by the Bank as a fringe benefit to the Director
and are not a part of any salary reduction plan or any arrangement deferring a
bonus or a salary increase.  The Director
has no option to take any current payments or bonus in lieu of the benefits
provided by this Agreement.


 


3.0                               Director
Benefit Payment


 


3.1                               Early
or Normal Retirement.  In the
event the Director Separates From Service pursuant to the terms of Paragraphs
1.6 or 1.9 relating to Early or Normal Retirement, then (excluding a
termination under the provisions of paragraph 4 below), then, upon such
Separation from Service, Director shall be entitled to be paid an annual
Director Benefit equal to the Applicable Percentage of the Director Benefit
based on Years of Service [i.e. AP% X ($1,000 X Years of Service)]. Payment of
this annual amount shall be made in twelve (12) substantially equal monthly
installments on the first day of each month, with payments commencing the month
following the month in which Director Separates from Service, continuing
monthly thereafter until Director’s death (with 2% annual increase).


 


3.2                               Separation
From Service Prior to Early Retirement. 
In the event the Director Separates From Service prior to Early Retirement
and for any reason other than a Removal for Cause (as addressed below in
Paragraph 4 below) then Director shall be entitled to be paid an annual
Director Benefit equal to the Applicable Percentage of the Director Benefit
based on Years of Service [i.e. AP% X ($1,000 X Years of Service)]. Payment of
this annual amount shall be made in twelve (12) substantially equal monthly
installments on the first day of each month, with payments commencing the month
following the month in which Director attains the Early Retirement Age and
continuing monthly thereafter until Director’s death (with 2% annual increase).


 


4.                                      Removal
for Cause.  The Director agrees
that if the Director’s service as a member of the Board of Directors of the
Bank is terminated as a result of a “Removal for Cause”, as defined in
subparagraph 1.11 of this Agreement, the Director shall forfeit any and all
rights and benefits the Director may have under the terms of this Agreement and
shall have no right to be paid any of the amounts which would otherwise be due
or paid to the Director by the Bank pursuant to the terms of this Agreement.


 


5.                                      Section 280G
Benefits Reduction.  If all or
any portion of the amounts payable to the Director under this Agreement, either
alone or together with other payments which the Director has the right to
receive from the Bank, constitute “excess parachute payments” within the
meaning of Section 280G of the Internal Revenue Code of 1986, as amended
(the “Code”), that are subject to the excise tax imposed by Section 4999
of the Code (or similar tax and/or assessment), Director shall be responsible
for the payment of such excise tax and Bank (and its successor) shall be
responsible for any loss of deductibility related thereto; provided, however,
that Bank and Director shall cooperate with each other and use all reasonable
efforts to minimize 


 


4

















 


to the fullest extent possible the amount of excise tax imposed by Section 4999
of the Code.  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 excise taxes payable by the Director is greater
than the amount initially so determined, then the Director shall pay an amount
equal to the sum of such additional excise taxes and any interest, fines and
penalties resulting from such underpayment. 
The determination of the amount of any such excise taxes shall be made
by the independent accounting firm employed by the Bank immediately prior to
the change in control or such other independent accounting firm or advisor as
may be mutually agreeable to Bank and Director in the exercise of their
reasonable good faith judgment


 


6.                                      Right
To Determine Funding Methods. 
The Bank reserves the right to determine, in its sole and absolute
discretion, whether, to what extent and by what method, if any, to provide for
the payment of the amounts which may be payable to the Director under the terms
of this Agreement.  In the event that the
Bank elects to fund this Agreement, in whole or in part, through the use of
life insurance or annuities, or both, the Bank shall determine the ownership
and beneficial interests of any such policy of life insurance or annuity.  The Bank further reserves the right, in its
sole and absolute discretion, to terminate any such policy, and any other
device used to fund its obligations under this Agreement, at any time, in whole
or in part.  Consistent with Paragraph 8
below, the Director shall have no right, title or interest in or to any funding
source or amount utilized by the Bank pursuant to this Agreement, and any such
funding source or amount shall not constitute security for the performance of
the Bank’s obligations pursuant to this Agreement. In connection with the
foregoing, the Director agrees to execute such documents and undergo such
medical examinations or tests which the Bank may request and which may be
reasonably necessary to facilitate any funding for this Agreement including,
without limitation, the Bank’s acquisition of any policy of insurance or
annuity.  Furthermore, a refusal by the
Director to consent to, participate in and undergo any such medical
examinations or tests shall result in the immediate termination of this
Agreement and the immediate forfeiture by the Director of any and all rights to
payment hereunder.


 


7.                                      Claims
Procedure.


 


7.1                               Named
Fiduciary and Plan Administrator. The “Named Fiduciary and Plan
Administrator” of this Director Plan shall be Heritage Bank of Commerce until
its resignation or removal by the Board. 
As Named Fiduciary and Plan Administrator, the Bank shall be responsible
for the management, control and administration of the Director Plan.  The Named Fiduciary may delegate to others
certain aspects of the management and operation responsibilities of the
Director Plan including the employment of advisors and the delegation of
ministerial duties to qualified individuals.


 


7.2                               Claim.            In the event a dispute
arises over the benefits under this Director plan and benefits are not paid to
the Director (or to the Director’s beneficiary[ies], if applicable) and such
claimants feel they are entitled to receive such benefits, then a written claim
must be made to the Named Fiduciary and Plan Administrator named above in
accordance with the following procedures:


 


A.                                   Written
Claim.  The claimant may file a
written request for such benefit to the Plan Administrator.


 


B.                                     Claim
Decision.  Upon receipt of such claim, the Plan
Administrator shall respond to such claimant within ninety (90) days after
receiving the claim.  If the Plan
Administrator determines that special circumstances require additional time for
processing the claim, the Plan Administrator can extend the response period by
an additional ninety (90) days for 


 


5

















 


reasonable
cause by notifying the claimant in writing, prior to the end of the initial
ninety (90) day period, that an additional period is required. The notice of
extension must set forth the special circumstances and the date by which the
Plan Administrator expects to render its decision.


 


If the claim is denied in whole or in part,
the Plan Administrator shall notify the claimant in writing of such denial. The
Plan Administrator shall write the notification in a manner calculated to be
understood by the claimant.  The
notification shall set forth:


 


(i)                                     The
specific reasons for the denial;


(ii)                                  The
specific reference to pertinent provisions of the Agreement on which the denial
is based;


(iii)                               A
description of any additional information or material necessary for the
claimant to perfect the claim and an explanation of why such material or
information is necessary;


(iv)                              Appropriate
information as to the steps to be taken if the claimant wishes to submit the
claim for review and the time limits applicable to such procedures; and


(v)                                 A
statement of the claimant’s right to bring a civil action under ERISA Section 502(a) following
an adverse benefit determination on review.


 


C.                                     Request
for Review.  Within sixty (60) days
after receiving notice from the Plan Administrator that a claim has been denied
(in part or all of the claim), then claimant (or their duly authorized
representative) may file with the Plan Administrator, a written request for a
review of the denial of the claim.


 


 The
claimant (or his duly authorized representative) shall then have the
opportunity to submit written comments, documents, records and other
information relating to the claim.  The
Plan Administrator shall also provide the claimant, upon request and free of
charge, reasonable access to, and copies of, all documents, records and other
information relevant (as defined in applicable ERISA regulations) to the
claimant’s claim for benefits.


 


D.                                    Decision
on Review.  The Plan Administrator
shall respond in writing to such claimant within sixty (60) days after
receiving the request for review.  If the
Plan Administrator determines that special circumstances require an extension
of time for processing the claim, written notice of the extension shall be
furnished to the claimant prior to the termination of the initial sixty (60)
day period. In no event shall such extension exceed a period of sixty (60) days
from the end of the initial period. The notice of extension must set forth the
special circumstances requiring an extension of time and the date by which the
Plan Administrator expects to render its decision.


 


In considering the review, the Plan
Administrator shall take into account all materials and information the
claimant submits relating to the claim, without regard to whether such
information was submitted or considered in the initial benefit determination.


 


The Plan Administrator shall notify the
claimant in writing of its decision on review. 
The Plan Administrator shall write the notification in a manner
calculated to be understood by the claimant. 
The notification shall set forth:


 


6

















 


(i)                                     The
specific reasons for the denial;


(ii)                                  A
reference to the specific provisions of the Agreement on which the denial is
based;


(iii)                               A
statement that the claimant is entitled to receive, upon request and free of
charge, reasonable access to, and copies of, all documents, records and other
information relevant (as defined in applicable ERISA regulations) to the
claimant’s claim for benefits; and


(iv)                              A
statement of the claimant’s right to bring a civil action under ERISA Section 502(a).


 


8.                                      Status
as an Unsecured General Creditor. 
Notwithstanding anything contained herein to the contrary:  (i) Director shall have no legal or
equitable rights, interests or claims in or to any specific property or assets
of the Bank as a result of this Agreement; (ii) none of the Bank’s assets
shall be held in or under any trust for the benefit of the Director or held in
any way as security for the fulfillment of the obligations of the Bank under
this Agreement; (iii) all of the Bank’s assets shall be and remain the
general unpledged and unrestricted assets of the Bank; (iv) the Bank’s
obligation under this Agreement shall be that of an unfunded and unsecured
promise by the Bank to pay money in the future; and (v) the Director shall
be unsecured general creditors with respect to any benefits which may be
payable under the terms of this Agreement.


 


Notwithstanding subparagraphs (i) through (v) above, the Bank
and the Director acknowledge and agree that upon request of the Director at any
time during the term of this Agreement, a Rabbi Trust (the “Trust”) shall be
established upon such terms and conditions as may be mutually agreeable between
the Bank and the Director in order to permit the Bank to make contributions
and/or transfer assets to the Trust to discharge its obligations pursuant to
this Agreement.  The principal of the
Trust and any earnings thereon shall be held separate and apart from other
funds of the Bank to be used exclusively for discharge of the Bank’s
obligations pursuant to this Agreement and shall continue to be subject to the
claims of the Bank’s general creditors until paid to the Director in such
manner and at such times as specified in this Agreement.


 


9.                                      Miscellaneous.


 


9.1                               Opportunity
To Consult With Independent Advisors. 
The Director acknowledges that he has been afforded the opportunity to
consult with independent advisors of his choosing including, without
limitation, accountants or tax advisors and counsel regarding both the benefits
granted to him under the terms of this Agreement and the (i) terms and
conditions which may affect the Director’s right to these benefits and (ii) personal
tax effects of such benefits including, without limitation, the effects of any
federal or state taxes, Section 280G of the Code, and any other taxes,
costs, expenses or liabilities whatsoever related to such benefits, which in
any of the foregoing instances the Director acknowledges and agrees shall be
the sole responsibility of the Director notwithstanding any other term or
provision of this Agreement.  The
Director further acknowledges and agrees that the Bank shall have no liability
whatsoever related to any such personal tax effects or other personal costs,
expenses, or liabilities applicable to the Director and further specifically
waives any right for the Director, himself, and his heirs, legal
representatives, agents, successors, and assigns to claim or assert liability
on the part of the Bank related to the matters described above in this
subparagraph 10.1.  The Director further
acknowledges and agrees that he has read, understands and consents to all of
the terms and conditions of this Agreement, and that he enters into this
Agreement with a full understanding of its terms and conditions.


 


9.2                               Arbitration
of Disputes.  All claims,
disputes and other matters in question arising out of or relating to this
Agreement or the breach or interpretation thereof, other than those matters
which are to be determined by the Bank in its sole and absolute discretion, 


 


7

















 


shall be resolved by binding arbitration before a representative
member, selected by the mutual agreement of the parties, of the Judicial
Arbitration and Mediation Services, Inc. (“JAMS”), located in San
Francisco, California.  In the event JAMS
is unable or unwilling to conduct the arbitration provided for under the terms
of this Paragraph, or has discontinued its business, the parties agree that a
representative member, selected by the mutual agreement of the parties, of the
American Arbitration Association (“AAA”), located in San Francisco, California,
shall conduct the binding arbitration referred to in this Paragraph.  Notice of the demand for arbitration shall be
filed in writing with the other party to this Agreement and with JAMS (or AAA,
if necessary).  In no event shall the
demand for arbitration be made after the date when institution of legal or
equitable proceedings based on such claim, dispute or other matter in question
would be barred by the applicable statute of limitations.  The arbitration shall be subject to such rules of
procedure used or established by JAMS, or if there are none, the rules of
procedure used or established by AAA. 
Any award rendered by JAMS or AAA shall be final and binding upon the
parties, and as applicable, their respective heirs, legal representatives,
agents, successors and assigns, and may be entered in any court having
jurisdiction thereof.  The obligation of
the parties to arbitrate pursuant to this clause shall be specifically
enforceable in accordance with, and shall be conducted consistently with, the
provisions of Title 9 of Part 3 of the California Code of Civil
Procedure.  Any arbitration hereunder
shall be conducted in San Jose, California, unless otherwise agreed to by the
parties.


 


9.3                               Attorneys’
Fees.  In the event of any
arbitration or litigation concerning any controversy, claim or dispute between the
parties hereto, arising out of or relating to this Agreement or the breach
hereof, or the interpretation hereof, the prevailing party shall be entitled to
recover from the non-prevailing party reasonable expenses, attorneys’ fees and
costs incurred in connection therewith or in the enforcement or collection of
any judgment or award rendered therein. 
The “prevailing party” means the party determined by the arbitrator(s) or
court, as the case may be, to have most nearly prevailed, even if such party
did not prevail in all matters, not necessarily the one in whose favor a
judgment is rendered.


 


9.4                               Notice.  Any notice required or permitted of either
the Director or the Bank under this Agreement shall be deemed to have been duly
given, if by personal delivery, upon the date received by the party or its
authorized representative; if by facsimile, upon transmission to a telephone
number previously provided by the party to whom the facsimile is transmitted as
reflected in the records of the party transmitting the facsimile and upon
reasonable confirmation of such transmission; and if by mail, on the third day
after mailing via U.S. first class mail, registered or certified, postage
prepaid and return receipt requested, and addressed to the party at the address
given below for the receipt of notices, or such changed address as may be
requested in writing by a party.


 


	
  If to the Bank:

  	
   

  	
  Heritage Commerce Corp

  
	
   

  	
   

  	
  150 Almaden Boulevard

  
	
   

  	
   

  	
  San Jose, California 95113

  
	
   

  	
   

  	
  Attn: President

  
	
   

  	
   

  	
   

  
	
  If to the Director:

  	
   

  	
   

  



 


9.5                               Assignment.  The Director shall have no power or right to
transfer, assign, anticipate, hypothecate, modify, or otherwise encumber any
part or all of the amounts payable hereunder, nor, prior to payment in
accordance with the terms of this Agreement, shall any portion of such amounts
be: (i) subject to seizure by any creditor of the Director, by a
proceeding at law or in equity, for the payment of any debts, judgments,
alimony or separate maintenance obligations which may be owed by the Director;
or (ii) transferable by operation of law in the 


 


8

















 


event of bankruptcy, insolvency or otherwise.  Any such attempted assignment or transfer
shall be void and unenforceable without the prior written consent of the Bank.  The Bank’s consent, if any, to one or more
assignments or transfers shall not obligate the Bank to consent to or be
construed as the Bank’s consent to any other or subsequent assignment or
transfer.


 


9.6                               Binding
Effect/Merger or Reorganization.  This
Agreement shall be binding upon and inure to the benefit of the Director and
the Bank and, as applicable, their respective heirs, legal representatives,
agents, successors, and assigns. 
Accordingly, the Bank shall not merge or consolidate into or with another
corporation, or reorganize or sell substantially all of its assets to another
corporation, firm, or person, unless and until such succeeding or continuing
corporation, firm, or person agrees to assume and discharge the obligations of
the Bank under this Agreement.  Upon the
occurrence of such event, the term “Bank” as used in this Agreement shall be
deemed to refer to such surviving or successor firm, person, entity or
corporation.


 


9.7                               Nonwaiver.  The failure of either party to enforce at
any time or for any period of time any one or more of the terms or conditions
of this Agreement shall not be a waiver of such term(s) or condition(s) or
of that party’s right thereafter to enforce each and every term and condition
of this Agreement.


 


9.8                               Partial
Invalidity.  If any term,
provision, covenant, or condition of this Agreement is determined by an
arbitrator or a court, as the case may be, to be invalid, void, or
unenforceable, such determination shall not render any other term, provision,
covenant, or condition invalid, void or unenforceable, and the Agreement shall
remain in full force and effect notwithstanding such partial invalidity.


 


9.9                               Entire
Agreement.  This Agreement
supersedes any and all other agreements, either oral or in writing, between the
parties with respect to the subject matter of this Agreement and contains all
of the covenants and agreements between the parties with respect thereto.  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.


 


9.10                        Modifications.  Any modification of this Agreement shall be
effective only if it is in writing and signed by each party or such party’s
authorized representative.


 


9.11                        Paragraph
Headings.  The paragraph headings
used in this Agreement are included solely for the convenience of the parties
and shall not affect or be used in connection with the interpretation of this
Agreement.


 


9.12                        No
Strict Construction.  The
language used in this Agreement shall be deemed to be the language chosen by
the parties hereto to express their mutual intent, and no rule of strict
construction will be applied against any person.


 


9.13                        Governing
Law.  The laws of the State of
California, other than those laws denominated choice of law rules, and, where
applicable, the rules and regulations of the California Commissioner of
Financial Institutions and the Federal Deposit Insurance Corporation shall
govern the validity, interpretation, construction and effect of this Agreement.


 


9.14                        Gender.  Whenever
in this Agreement words are used in the masculine, feminine or neuter gender,
they shall be read and construed as in the masculine, feminine or neuter
gender, whenever they should so apply.


 


9

















 


10.                               Intentional
Act by Director which Precludes Recovery. Notwithstanding any other
provision in this Agreement or anything contained in this Agreement to the
contrary, in the event the Director takes any intentional action which prevents
the Bank from collecting the proceeds of any life insurance policy which the
Bank may happen to own at the time of the Director’s death and of which the
Bank is the designated beneficiary, then: (1) the Director’s estate or
designated beneficiary(ies) shall no longer be entitled to receive any of the
amounts payable under the terms of this Agreement, and (2) the Bank shall
have the right to recover from the Director’s estate all of the amounts paid to
the Director, the designated Beneficiary(ies) or to the Director’s estate (with
respect to amounts paid prior to the Director’s death or paid to the Director’s
estate) or designated beneficiary (with respect to amounts paid to the
designated beneficiary) pursuant to the terms of this Agreement prior to and
after the Director’s death.


 


11.                               Internal Revenue Code Section 409A
Compliance.   Notwithstanding any
provision existing in this Agreement or any amendment thereto, it is the intent
of the Bank and the Director that any payment or benefit provided pursuant to
this Agreement shall be made and paid in a manner, at a time and in a form
which complies with the applicable requirements of IRC Section 409A, in
order to avoid any unfavorable tax consequences resulting from any such failure
to comply. Furthermore, for the purposes of this Agreement, IRC Section 409A
shall be read to include any related or relevant IRS Notices (including but not
limited to Notice 2006-79 and 2007-86) and the currently proposed regulations.


 


In accordance with the current restrictions on payouts of deferred
compensation, and with respect to any plan amendment or election in 2008, such
amendment or election may not act as to accelerate any payments or cause any
payment to be made in 2008 that would not otherwise be payable in 2008, nor may
it delay any payment that would otherwise have been made in 2008.


 


The parties
reserve the right to amend this agreement as necessary in order to comply with
IRC Section 409A. Furthermore, this Agreement shall be administered in
compliance with IRC Section 409A and the related rules, regulations and
notices.  Any section of this Agreement
which violates IRC Section 409A and the related rules, regulations and
notices shall be void and without effect.


 


IN WITNESS WHEREOF, the Director and a duly authorized Bank officer
have signed this Agreement as of the written date.


 


HERITAGE COMMERCE CORPORATION


 


	
  /s/ Lawrence D. McGovern

  	
   

  	
  Date:

  	
  December 29, 2008

  
	
  By Lawrence D. McGovern

  	
   

  
	
  Executive Vice President & CFO

  	
   

  
	
   

  	
   

  
	
  /s/ Humphrey Polanen

  	
   

  	
  Date:

  	
  December 29, 2008

  
	
  Director

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Witness

  	
  Witness

  
					



 


10