Exhibit
10.16


 


FIRST
AMENDED AND RESTATED


DIRECTOR
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, Ranson W. Webster, 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 Compensation
Benefits Agreement, effective as of May 27, 2004 (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 that percentage which corresponds
with number of “Years of Service” completed as of the date the Director
Separates from Service, or it shall be One Hundred Percent (100%), as
stipulated herein for certain described events, including but not limited to: (i) a
Termination Pursuant to a 


 


1

















 


Change in Control (as defined herein), provided
payments have not yet begun hereunder or (ii) upon the Director becoming
Disabled while serving on the Board.


 


The Applicable Percentage
shall remain in effect until an adjustment occurs upon the completion of each
Year of Service (as defined herein), and until Director has reached the maximum
Applicable Percentage of One-Hundred Percent (100%) after Nine (9) Years
of Service. Subject to the forgoing, the Applicable Percentage shall be determined
in accordance with the following:


 


	
  Completed Years of Service

  	
   

  	
  Applicable Percentage

  	
   

  
	
  Less Than One

  	
   

  	
  10%

  	
   

  
	
  One

  	
   

  	
  20%

  	
   

  
	
  Two

  	
   

  	
  30%

  	
   

  
	
  Three

  	
   

  	
  40%

  	
   

  
	
  Four

  	
   

  	
  50%

  	
   

  
	
  Five

  	
   

  	
  60%

  	
   

  
	
  Six

  	
   

  	
  70%

  	
   

  
	
  Seven

  	
   

  	
  80%

  	
   

  
	
  Eight

  	
   

  	
  90%

  	
   

  
	
  Nine

  	
   

  	
  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          Change in Control.   A Change in Control shall be deemed to have
occurred upon any of the following events (as such terms are defined in Section 409A):


 


A.            A Change in the
Ownership of a Corporation. A change in the ownership of a corporation
occurs on the date that any one person or persons acting as a group (as defined
in Section 409A), acquires ownership of stock of the corporation that,
together with stock held by such person or group, constitutes more than fifty
percent (50%) of the total fair market value or total voting power of the stock
of such corporation. The acquisition of additional stock by the same person or
group is not considered to cause a change in the ownership of the corporation.


 


B.            Change in the
Effective Control of a Corporation. A change in the effective control of
the corporation shall be deemed to occur on either of the following dates:


 


(i)            The date any one
person, or persons acting as a group acquires (or has acquired during the
twelve (12) month period ending on the date of the most recent acquisition by
such person or group) ownership of stock of the corporation possessing thirty
percent (30%) or more of the total voting power of the stock of such
corporation; or


 


(ii)           The date a majority of
members of the corporation’s board of directors is replaced during any twelve
(12) month period by directors whose appointment or election is not endorsed by
a majority of the members of the corporation’s board of directors before the
date of the appointment or election.


 


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C.            Change in the
Ownership of a Substantial Portion of a Corporation’s Assets.  A change in the ownership of a substantial
portion of a corporation’s assets shall be deemed to occur on the date that any
one person or group acquires (or has acquired during the twelve (12) month
period ending on the date of the most recent acquisition by such person or
persons) assets from the corporation that have a total gross fair market value
equal to or more than forty percent (40%) of the total gross fair market value
of all of the assets of the corporation immediately before such acquisition or
acquisitions. No Change in Control shall result if the assets are transferred
to certain entities controlled directly or indirectly by the shareholders of
the transferring corporation.


 


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


 


1.6          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).


 


1.7          Disability/Disabled. 
For the purposes of this Agreement, the term “Disability”
shall be interpreted in accordance with IRC 409A. Pursuant to IRC 409A, a
Participant will be considered Disabled if:


 


A.            He is unable to engage
in any substantial gainful activity by reason of any medically determinable
physical or mental impairment that can be expected to result in death or can be
expected to last for a continuous period of not less than twelve (12) months;
or


 


B.            He is, by reason of
any medically determinable physical or mental impairment that can be expected
to result in death or can be expected to last for a continuous period of not
less than twelve (12) months, receiving income replacement benefits for a
period of not less than three (3) months under an accident and health plan
covering employees of participant’s employer.


 


The determination of whether a
Participant is Disabled shall be determined by a physician mutually agreed upon
by the Company and the Participant (and shall be in accordance with the 


 


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provisions of IRC 409A).


 


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


 


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


 


1.10        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”).


 


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


 


1.12        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 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.


 


1.13        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 


 


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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.


 


1.14        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 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 1.10 relating to Normal Retirement,
then (excluding a termination under the provisions of paragraphs 3.2 or 4
below), 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).


 


5

















 


Upon
Disability and Change in Control.  Upon Director’s Disability or upon a Change
in Control, the Applicable Percentage shall be advanced to One Hundred Percent
(100%).


 


In the event of Director’s
Disability, then Director shall be entitled to be paid an annual Director
Benefit equal to a One Hundred Percent (100%) Applicable Percentage of the
Director Benefit based on Years of Service [i.e. AP% X ($1,000 X Years of
Service)]. Payment of the 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 becomes
Disabled and continuing monthly thereafter until Director’s death (with 2%
annual increase).


 


In the event of a Change
in Control, then Director shall be entitled to be paid an annual Director
Benefit equal to a One Hundred Percent (100%) Applicable Percentage of the
Director Benefit based on Years of Service [i.e. AP% X ($1,000 X Years of
Service)]. Payment of the 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 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 1.12 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 advisor as
may be mutually agreeable to Bank and Director in the exercise of their
reasonable good faith judgment


 


6
















 


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 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 


 


7

















 


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 


 


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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.


 


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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, 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


 


10

















 


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 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.


 


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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.


 


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 


 


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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/ Ranson Webster

  	
   

  	
  Date:

  	
  December 29, 2008

  
	
  Director

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Witness

  	
   

  	
   

  	
  Witness

  



 


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