Exhibit 10.13


 


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, Jack L. Peckham, 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 


 


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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.


 


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


 


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


 


1.8                               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”).


 


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


 


1.10                        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;


 


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(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 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.


 


1.11                        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.


 


1.12                        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.


 


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 


 


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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.                                      Director
Benefit Payment- Normal Retirement. 
In the event the Director Separates From Service pursuant to the terms
of Paragraph 1.8 relating to 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).


 


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 1.10 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 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 


 


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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 


 


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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.


 


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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:


 


(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 


 


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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,
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.


 


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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 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.


 


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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.


 


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.


 


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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/ Jack L. Peckham

  	
   

  	
  Date:

  	
  December 29, 2008

  
	
  Director

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Witness

  	
  Witness

  
					



 


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