Exhibit
10.7


 


FIRST AMENDED AND RESTATED


HERITAGE COMMERCE CORP


DEFERRED FEE AGREEMENT


 


RECITAL


 


This First Amended and
Restated Deferred Fee Agreement (hereinafter “Agreement”) is made and entered
into effective as of January 1, 2005, by and between HERITAGE COMMERCE CORP, a bank holding
company organized and existing under the laws of the state of California
(hereinafter the “Company”) and JAMES BLAIR,
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 original of Commerce Deferred
Fee Agreement, effective as of June 30, 1997, as amended, (hereinafter
“Original Agreement”), and further agree that this 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 continue to provide the Director with a deferred fee opportunity;


 


WHEREAS, it is the intent of
the parties hereto that this Agreement be considered an unfunded arrangement
maintained primarily to provide supplemental retirement benefits for the
Director; 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.


 


For the purposes of this
Agreement, the following terms shall have the meanings indicated, unless the
context clearly indicates otherwise:


 


1.1          Administrator.  The
Compensation and Benefits Committee of the Board of Directors of Heritage
Commerce Corp shall be the “Administrator” and, solely for the purposes of
ERISA (as defined below), the “fiduciary” of this Agreement to the extent a
fiduciary is required by ERISA.


 


1.2          Beneficiary.  The
term “Beneficiary(ies)” shall refer to the person, persons or entity designated
in writing by the Director on forms provided by the Administrator


 


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(“Beneficiary Designation
Form”) to receive the benefits payable under this Agreement in the event of
Director’s death. A Director may change his Beneficiary from time to time, so
long as permissible, by filing a new written Beneficiary Designation Form with
the Administrator, and such designation shall be effective upon receipt by the
Administrator.  If Director has not
validly designated a beneficiary, or if a designated Beneficiary predeceases
the Director, then any benefit owed a beneficiary pursuant to this Agreement
shall be made to Director’s estate.


 


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


 


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


 


1.5          Company.  For
the purpose of this Agreement, the term “Company” shall include both Heritage
Bank of Commerce and Heritage Commerce Corp, when possible and not prohibited
by alternate provisions of this Agreement.


 


1.6          Deferral Amount.  The
term “Deferral Amount” shall mean 100% of Participant’s Director’s Fees.


 


1.7          Deferred Compensation Account.  The
term “Deferred Compensation Account” shall reflect the amounts Participant has
elected to defer over time. The Deferred Compensation Account shall be a
bookkeeping entry only and shall be utilized solely as a device for the
measurement and determination of the amounts to be paid to, or in respect of, a
Participant pursuant to this Agreement. 
The Deferred Compensation Account shall be equal to the sum of (i) all
amounts deferred under this Agreement, including all amounts deferred
previously under the Original Agreement and (ii) interest thereon credited
in accordance with the applicable interest crediting provisions of this
Agreement, net of all distributions from such account. Amounts deferred
pursuant to the Original Agreement and this Agreement shall be credited to the
Deferred Compensation Account, along with the specified interest thereon.


 


1.8          Director Benefit.  The
term “Director Benefit” shall mean the benefit determined pursuant to this
Agreement, forfeited, reduced or adjusted to the extent:  (a)  required by reason of the lawful
order of any regulatory agency or body having jurisdiction over the Company; or
(b) required in order for the Company to comply with any and all
applicable state and federal laws, including, but not limited to, income,
employment and disability income tax laws (eg., FICA, FUTA, SDI).


 


1.9          Director’s Fees.  The
term “Director’s Fees” shall mean the annual cash compensation paid by the Company
to Director for services rendered during a given Plan Year, including annual
retainer fees, chair retainer fees, meeting fees, committee fees, and special
meeting fees (if applicable).


 


1.10        Distribution Election Form.  The
term “Distribution Election Form” shall refer to the form established by the
Company that a Participant completes, signs and returns to the Administrator to
make an election regarding the form and/or timing of a distribution under this
Agreement. Any changes to the Distribution Election Form must be made in
compliance with the restrictions and limitations imposed by IRC 409A.


 


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


 


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


 


1.13        IRC 409A.  The
term “IRC 409A” shall refer to Code section 409A, the final regulations
issued by the IRS and the Treasury Department under Code section 409A, and
all related guidance and notices thereon.


 


1.14        Plan.  The
“Plan” shall mean this Agreement, any Beneficiary Designation Form, and any
Distribution Election Form.


 


1.15        Plan Year.  The
term “Plan Year” shall mean the calendar year (January 1 through December 31
of any given year).


 


1.16        Rate of Interest The Rate of Interest shall refer to the
percentage used to calculate earnings on the deferred amounts in the Deferred
Compensation Account.  The earnings shall
be accrued and credited annually to the Deferred Compensation Account. Prior to
December 31, 2004, the Rate of Interest shall be eight percent (8%), the
rate designated in the Original Agreement. Thereafter, the Rate of Interest
shall be determined, in accordance with IRC 409A, and it shall be a reasonable
rate of interest.  The Rate of Interest for the years
after December 31, 2004 and prior to January 1, 2009 shall be eight
percent (8%).  Following December 31,
2008, the Rate of Interest shall be the Wall Street Journal prime rate of
interest on December 31 of each year (or if there is no such rate a
comparable rate set annually by the Board of Directors on or before December 31st
of each year) and shall remain in effect for the following calendar year.


 


1.17        Separation from Service.  The
term “Separation from Service” shall be read and interpreted consistent with
IRC 409A and any future notices or guidance related thereto.  The term “Separation from Service” shall mean
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.


 


2.                   Scope, Purpose And Effect.


 


2.1          Not an Independent Contractor or
Other Agreement.  Although this Agreement is intended to
provide the Director with an additional incentive to remain an active member of
the Board of Directors of the Company, this Agreement shall not be deemed to
constitute an independent contractor or other agreement between the Director
and the Company nor shall any provision of this Agreement restrict or expand
the right of the shareholders of the Company or the Board to remove Director
for any reason.  This Agreement shall
have no impact or effect upon any separate written agreement which the Director
may have with the Company, it being the parties’ intention and agreement that
unless this Agreement is specifically referenced in said agreement (or any
modification thereto), this Agreement (and the Company’s obligations hereunder)
shall stand separate and apart and shall have no effect on or be affected by,
the terms and provisions of said agreement.


 


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3.                   Compliance With IRC 409A.


 


3.1          Compliance With IRC 409A.  In
the event of any ambiguity in terms, or in the event further clarification of
any term or provision is necessary, all interpretations and payouts of benefits
based thereon shall be in accordance with IRC 409A.


 


3.2          Changes In Time Or Form Of
Payment.  Participant may modify the time or form of
benefit payment if the following requirements are satisfied (i) the
election may not take effect until at least twelve (12) months after the date
on which the election is made (i.e. if a distribution event occurs in the
interim, the original distribution method must be followed); (ii) other
than payments relating to death, any election to delay a distribution must
delay the distribution at least five (5) years from the date such payment
would otherwise have been made (or in the case of a life annuity or installment
payments treated as a single payment, five years from the date the first amount
was scheduled to be paid); and (iii) any payment made pursuant to a fixed
time or scheduled series of distributions must be made at least twelve (12)
months in advance of the first such scheduled payment.


 


4.                   Deferred Compensation
Account.


 


4.1          Credits To Deferred Compensation
Account.  The Company shall establish the Deferred
Compensation Account.  This Deferred
Compensation Account shall be credited on the dates Director’s Fees would
otherwise have been paid.


 


4.2          Interest On The Deferred
Compensation Account.  The Deferred Compensation Account shall be
credited annually with an amount equal to the Rate of Interest earned.  Interest earned shall be calculated by
multiplying the balance of the Deferred Compensation Account by the specified
Rate of Interest. Such amount shall be credited on December thirty-first
(31st) of each year until such time as the benefits under this Agreement have
been paid in full.


 


4.3          Nature Of The Deferred Compensation
Account.  The Deferred Compensation Account shall be
utilized solely as a device for the measurement and determination of the amount
of deferred compensation to be paid to the Participant at the times hereinafter
specified, and the Company shall not segregate any of its assets in order to
satisfy any obligations under this Agreement. 
The Deferred Compensation Account shall not constitute or be treated as
a trust fund of any kind.  On the
contrary, it is understood that all amounts credited to the Deferred
Compensation Account shall be for the sole purpose of bookkeeping and remain
the sole property of the Company, and that the Participant shall have no
ownership rights of any nature with respect thereto.  The Participant’s rights are limited to the
rights to receive payments as hereinafter provided and the Participant’s
position with respect thereto is that of a general unsecured creditor of the
Company.


 


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5.                   Payment of Deferred
Compensation Account.


 


Payment
of the Deferred Compensation Account shall be in accordance with the following:


 


5.1          Payment of Benefit in the Event
Participant Separates from Service.  In the event of Participant’s
Separation from Service for any reason, including his death, the Participant
(or his Beneficiary in the case of his death), shall receive the balance in his
Deferred Compensation Account as of the date of his Separation from Service.
The Deferred Compensation Account Balance shall be paid to the Participant (or
his Beneficiary in the case of his death) in accordance with the Distribution
Election Form attached hereto.


 


6.                   Witholdings.


 


6.1          Withholding.  The
Company shall withhold from payments made hereunder any taxes required to be
withheld under federal, state or local law.


 


6.2          Effect of Payment. 
Payment of the forgoing benefits shall fully and completely discharge
the Company from all further obligations under this Agreement with respect to a
Participant and the Participant’s Beneficiary(ies).


 


7.                   Beneficiary Designations.


 


7.1          Beneficiary Designation.  Each
Participant shall have the right, at any time, to designate any person or
persons as his Beneficiary(ies) to whom benefits under this Agreement shall be
paid in the event of his death prior to complete distribution to the Director
of the benefits due under the Agreement. 
Each Beneficiary designation shall be in a written form prescribed by
the Administrator, and will be effective only when filed with the Administrator
during the Participant’s lifetime and when accepted and acknowledged in writing
by the Administrator or its designated agent.


 


7.2          Amendments to Beneficiary
Designation.  Any Beneficiary designation may be changed by
Director without the consent of any designated Beneficiary by the filing of a
new Beneficiary designation with the Administrator.  The filing of a new Beneficiary designation
form will cancel all Beneficiary designations previously filed.  If a Director’s compensation is community
property, any Beneficiary designation shall be valid or effective only as
permitted under applicable law.


 


7.3          No Participant Designation.  In
the absence of an effective Beneficiary designation, or if all designated
Beneficiaries predecease the Director or die prior to complete distribution of
the Director’s benefits, then the Director’s designated Beneficiary shall be
deemed to be the Director’s estate.


 


7.4          Doubt as to Beneficiary.  If
the Administrator has any doubt as to the proper Beneficiary to receive
payments pursuant to this Agreement, the Administrator shall have the right to
withhold such payments until this matter is resolved (so long as such payments
are made in a timely fashion and in compliance with IRC 409A).


 


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7.5          Payment to Guardian.  If a
benefit is payable to a minor or a person declared incompetent or to a person
incapable of handling the disposition of his property, the Administrator may
direct payment of such benefit to the guardian, legal representative or such
person having the care and custody of such minor, incompetent or person.  The Administrator may require proof of
incompetency, minority, incapacity or guardianship as it may deem appropriate
prior to distribution of the benefit. 
Such distribution shall completely discharge the Administrator and the
Company from all liability with respect to such benefit.


 


7.6          Effect of Payment to the
Beneficiary.  Payment to the deemed Beneficiary shall fully
and completely discharge the Company and the Administrator from all further
obligations under this Agreement.


 


8.                   Administration And Claims.


 


8.1          Named Fiduciary and Plan
Administrator.  The “Named Fiduciary” and “Plan
Administrator” of this Plan shall be the Compensation and Benefits Committee of
the Board of Directors.  As Named
Fiduciary and Plan Administrator, the Compensation Committee shall be
responsible for the management, control and administration of this Plan.  The Named Fiduciary may delegate to others
certain aspects of the management and operation responsibilities of the Plan,
including employment of advisors and the delegation of ministerial duties to
qualified individuals.


 


8.2          Claim.  The
Administrator shall, but only to the extent necessary to comply with ERISA, be
designated as the named fiduciary under this Agreement and shall have authority
to control and manage the operation and administration of this Agreement.  Consistent therewith, the Company shall make
all determinations as to the rights to benefits under this Agreement.  Any decision by the Administrator denying a
claim by the Participant, the Participant’s spouse, or the Participant’s
Beneficiary for benefits under this Agreement shall be stated in writing and
delivered or mailed, via registered or certified mail, to the Participant, the
Participant’s spouse or the Participant’s Beneficiary, as the case may be.  Such decision shall set forth the specific
reasons for the denial of a claim.  In
addition, the Company shall provide the Participant, the Participant’s spouse
or the Participant’s Beneficiary with a reasonable opportunity for a full and
fair review of the decision denying such claim.


 


8.3          Arbitration of Disputes.  All
unresolved 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 Administrator in its sole and
absolute discretion, 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
Jose, 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 Jose, 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 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


 


6

















 


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, beneficiaries, 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.                   Dispute Resolution.


 


9.1          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, (a) each
party shall pay his own attorneys’ arbitration fees incurred (pursuant to the
terms of this Agreement); (b) the prevailing party shall be entitled to
recover from the other party reasonable expenses, attorneys’ fees and costs
incurred in the enforcement or collection of any judgment or award rendered.
The “prevailing party” means any party (one party or both parties, as the case
may be) determined by the arbitrator(s) or court to be entitled to money
payments from the other, not necessarily the party in whose favor a judgment is
rendered.


 


10.                Status as an Unsecured
General Creditor.


 


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


 


Assets set aside in trust by
the Company to meet its obligations under this Agreement shall not be placed in
a foreign trust located outside the United States.


 


10.2        Corporate Assets. 
Payments to Director or his Beneficiary(ies) shall be made from assets
which shall continue, for all purposes, to be a part of the general,
unrestricted assets of the Company. No person shall have nor acquire any interest
in any such assets by virtue of the provisions of this Agreement.


 


The Company may, in its sole
discretion, purchase assets to secure all or any part of its obligations
undertaken through this Agreement. If the Company elects to secure its promise
under this Agreement, in whole or in part, through the purchase of life
insurance, mutual funds, disability policies, annuities or other assets, then
Company may, at any time dispose of such


 


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assets in whole or in part.
In no event shall Director or Beneficiary(ies) be deemed to have a lien, right,
title, or interest in any specific investment or asset of Company.


 


If Company decided to
purchase a life insurance, disability or annuity policy upon the life or health
of the Director, then Director will cooperate by furnishing any and all
information requested by the Company and by taking such physical examinations
or other action as may be requested by the Company in order to obtain such
insurance or annuity.


 


11.                Miscellaneous.


 


11.1        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 Company 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 himself or herself, and his or her heirs,
beneficiaries, legal representatives, agents, successor and assign to claim or
assert liability on the part of the Company related to the matters described
above in this paragraph.   The Director
further acknowledges 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.


 


11.2        Notice.  Any
notice required or permitted of either the Director or the Company 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 Company:

  	
  Heritage
  Commerce Corp

  	 

	
   

  	
  150
  Almaden Blvd.

  	 

	
   

  	
  San
  Jose, CA 95113

  	 

	
   

  	
  Attn.:

  	
  Lawrence D. McGovern

  
	
   

  	
   

  	
  Executive Vice
  President/Chief Financial Officer

  
	
   

  	
   

  	 

	
  If
  to the Director:

  	
  James
  Blair

  	 

	
   

  	
  1645
  The Alameda

  	 

	
   

  	
  San Jose, CA 95126

  	 

				



 


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11.3        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
event of bankruptcy, insolvency or otherwise. Any such attempted assignment or
transfer shall be void. In the event the Director or any beneficiary attempts
assignment, communication, hypothecation, transfer or disposal of the benefits
hereunder, any such attempted transfer or assignment shall be void.


 


11.4        IRC Section 280G Issues.  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 Company,
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 Company (and its successor) shall be responsible for any loss of
deductibility related thereto; provided, however, that Company and Director shall
cooperate with each other and use all reasonable efforts to minimize to the
fullest extent possible the amount of excise tax imposed by Section 4999
of the Code, as long as such efforts are in accordance with IRC 409A.  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 Company immediately prior to the
change in control or such other independent accounting firm or advisor as may
be mutually agreeable to Company and Director in the exercise of their
reasonable good faith judgment.


 


11.5        Binding Effect/Merger or
Reorganization. 
This Agreement shall be binding upon and inure to the benefit of the
Director and the Company.  The term “Company”
as used in this Agreement shall be deemed to refer to any surviving or
successor firm, person, entity or corporation, or holding company, as the case
may be.


 


11.6        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.


 


11.7        Partial Invalidity.  If any terms, 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.


 


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11.8        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.


 


11.9        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.


 


11.10      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.


 


11.11      Governing Law.  The laws of the State of California, other
than those laws denominated choice of law rules, shall govern the validity,
interpretation, construction and effect of this Agreement.


 


11.12      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.


 


11.13      Amendment.  Any amendment to this Agreement shall be
effective only if it is in writing and signed by each party or such party’s
authorized representative, and only to the extent that it is compliant with all
applicable codes and statutes, including but not limited to IRC 409A. In
addition, no amendment shall be effective to decrease a Participant’s Deferred
Compensation Account balance calculated as though the Participant had
experienced a Separation from Service as of the effective date of such
amendment or modification.


 


12.                               Termination
or Modification of Agreement by Reason of Changes in the Law, Rules or
Regulations.


 


The Company is
entering into this Agreement upon the assumption that certain existing tax
laws, the Code, rules and regulations will continue in effect in their
current form. If any said assumptions should change and said change has a
detrimental effect on this Agreement, then the Company reserves the right to
terminate or modify this Agreement accordingly.


 


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IN WITNESS
WHEREOF, the Company and the Director have executed this Agreement effective as
of the date first above-written in the City of San Jose, California.


 


	
  HERITAGE COMMERCE CORP

  	
   

  	
  DIRECTOR

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ Lawrence
  D. McGovern

  	
   

  	
  /s/ James
  Blair

  
	
   

  	
  Lawrence D.
  McGovern-Executive

  	
   

  	
  James Blair

  
	
   

  	
  Vice
  President/Chief Financial Officer

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Date:

  	
  December 29,
  2008

  	
   

  	
  Date:

  	
  December 29,
  2008

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Witness

  	
   

  	
  Witness

  
						



 


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DISTRIBUTION
ELECTION FORM – Director


 


Participant:          JAMES BLAIR


 


	
  Social Security Number:

  	
   

  



 


The following
designates my election with respect to the manner in which I elect to receive
payments and/or distributions pursuant to my participation in the First Amended
and Restated Heritage Commerce Corp Deferred Fee Agreement:


 


FORM OF BENEFIT


 


You may choose
only one of the below options, and please designate your choice by initialing.


 


o            Upon my Separation from Service, I elect to have my
Director Benefit paid to me in one lump sum on the first day of the first month
immediately following my Separation from Service.


 


o            Upon my Separation from Service, I elect to have my
Director Benefit paid to me in Thirty-Six (36) substantially equal monthly
installment payments. Payments shall commence on the first day of the first
month immediately following my Separation from Service and continue monthly
thereafter for the designated period. The exact amount of each payment shall be
determined by dividing the balance of my Deferred Compensation Account by the
number of installments remaining, with the final installment to be the entire
remaining balance in my Deferred Compensation Account.


 


o            Upon my Separation from Service, I elect to have my Director
Benefit paid to me in Sixty (60) substantially equal monthly installment
payments. Payments shall commence on the first day of the first month
immediately following my Separation from Service and continue monthly
thereafter for the designated period. The exact amount of each payment shall be
determined by dividing the balance of my Deferred Compensation Account by the
number of installments remaining, with the final installment to be the entire
remaining balance in my Deferred Compensation Account.


 


o            Upon my Separation from Service, I elect to have my
Director Benefit paid to me in One Hundred and Twenty (120) substantially equal
monthly installment payments. Payments shall commence on the first day of the
first month immediately following my Separation from Service and continue
monthly thereafter for the designated period. The exact amount of each payment
shall be determined by dividing the balance of my Deferred Compensation Account
by the number of installments remaining, with the final installment to be the
entire remaining balance in my Deferred Compensation Account.


 


o            Upon my Separation from Service, I elect to have my
Director Benefit paid to me in One Hundred and Eighty (180) substantially equal
monthly installment payments. Payments shall commence on the first day of the
first month immediately following my Separation from Service and continue
monthly thereafter for the designated period. The exact 


 


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amount of each
payment shall be determined by dividing the balance of my Deferred Compensation
Account by the number of installments remaining, with the final installment to
be the entire remaining balance in my Deferred Compensation Account.


 


In addition to
the forgoing, I understand that any modification to the time and/or form of
distribution of amounts previously deferred must comply with the following
restrictions: (1) any modifying election must be made at least twelve (12)
months before it becomes effective; (2) a subsequent election must provide
for a deferral of the required payments for at least five additional (5) years;
and (3) deferral elections with respect to a specified time or fixed
schedule may not be made less than twelve (12) months before payments are
scheduled to be made.


 


	
   

  	
   

  	
   

  
	
  Director

  	
   

  	
  Date

  



 


2

















 


Beneficiary Designation Form For the
First Amended and Restated


Heritage Commerce Corp Deferred Fee Agreement


 


I.              PRIMARY DESIGNATION


 


(You may
refer to the beneficiary designation information prior to completion of this
form.)


 


A.            Person(s) as a Primary Designation:


 


(Please
indicate the percentage for each beneficiary.)


 


 


	
  Name

  	
   

  	
  Relationship

  	
   

  	
  /

  	
            

  	
  %

  
	
   

  
	
  Address:

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (Street)

  	
  (City)

  	
  (State)

  	
  (Zip)

  
										



 


 


	
  Name

  	
   

  	
  Relationship

  	
   

  	
  /

  	
            

  	
  %

  
	
   

  
	
  Address:

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (Street)

  	
  (City)

  	
  (State)

  	
  (Zip)

  
										



 


 


	
  Name

  	
   

  	
  Relationship

  	
   

  	
  /

  	
            

  	
  %

  
	
   

  
	
  Address:

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (Street)

  	
  (City)

  	
  (State)

  	
  (Zip)

  
										



 


B.            Estate as a Primary Designation:


 


My Primary
Beneficiary is The Estate of                                            
as set forth in the last will and testament dated the                        
day of                         ,
                         and
any codicils thereto.


 


C.            Trust as a Primary Designation:


 


	
  Name of the
  Trust:

  	
   

  
	
   

  
	
  Execution
  Date of the Trust: 

  	
                  

  	
  /

  	
                  

  	
  /

  	
   

  	
   

  
	
   

  
	
  Name of the
  Trustee:

  	
   

  
	
   

  
	
  Is this an
  Irrevocable Life Insurance Trust?

  	
    o 
  Yes  o No

  
										



 


(If yes
and this designation is for a Split Dollar agreement, an Assignment of Rights
form should be completed.)


 


1

















 


II.            SECONDARY
(CONTINGENT) DESIGNATION


 


(Please
indicate the percentage for each beneficiary.)


 


	
  Name

  	
   

  	
  Relationship

  	
   

  	
  /

  	
            

  	
  %

  
	
   

  
	
  Address:

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (Street)

  	
  (City)

  	
  (State)

  	
  (Zip)

  
										



 


 


	
  Name

  	
   

  	
  Relationship

  	
   

  	
  /

  	
            

  	
  %

  
	
   

  
	
  Address:

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (Street)

  	
  (City)

  	
  (State)

  	
  (Zip)

  
										



 


 


	
  Name

  	
   

  	
  Relationship

  	
   

  	
  /

  	
            

  	
  %

  
	
   

  
	
  Address:

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (Street)

  	
  (City)

  	
  (State)

  	
  (Zip)

  
										



 


B.            Estate
as a Secondary (Contingent) Designation:


 


My Secondary
Beneficiary is The Estate of                               as
set forth in the last will and testament dated the      
day of                      ,
                 and
any codicils thereto.


 


C.            Trust
as a Secondary (Contingent) Designation:


 


	
  Name of the
  Trust:

  	
   

  
	
   

  
	
  Execution
  Date of the Trust: 

  	
                  

  	
  /

  	
                  

  	
  /

  	
   

  	
   

  
	
   

  
	
  Name of the
  Trustee:

  	
   

  
									



 


All sums
payable under this First Amended and Restated Heritage Commerce Corp Deferred
Fee Agreement, by reason of my death shall be paid to the Primary
Beneficiary(ies), if he or she survives me, and if no Primary Beneficiary(ies)
shall survive me, then to the Secondary (Contingent) Beneficiary(ies).  This beneficiary designation is valid until
the Participant notifies the Company in writing.


 


	
   

  	
   

  	
   

  
	
  Participant

  	
   

  	
  Date

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Witness –
  Other than a Beneficiary

  	
   

  	
  Date

  



 


2

















 


NOTE***
IF YOU RESIDE IN A COMMUNITY PROPERTY STATE (ARIZONA, CALIFORNIA, IDAHO,
LOUISIANA, NEVADA, NEW MEXICO, TEXAS, WASHINGTON OR WISCONSIN), AND YOU ARE
DESIGNATING A BENEFICIARY OTHER THAN YOUR SPOUSE, THEN YOUR SPOUSE MUST ALSO
SIGN THE BENEFICIARY DESIGNATION FORM.


 


I am aware
that my spouse, the above named Participant has designated someone other than
me to be the beneficiary under this First Amended and Restated Heritage
Commerce Corp Deferred Fee Agreement, and I hereby waive any rights I may have
to the potential benefits thereunder and under applicable community property
laws. I understand that this consent and waiver supersedes any prior spousal
consent or waiver under this plan.


 


	
  Spouse
  Signature:

  	
   

  	
   

  
	
   

  	
   

  
	
  Date:

  	
   

  	
   

  
	
   

  	
   

  
	
  Witness
  (other than Participant):

  	
   

  	
   

  
					



 


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