DIRECTOR COMPENSATION BENEFITS AGREEMENT
Exhibit 10.24
This
Agreement is made and entered into effective as of May 24, 2007 by and
between Heritage Commerce Corporation ("the Bank"), and Xxxx X. Xxxxxx, an
individual residing in the State of California (the "Director").
R E C I T A L
S
WHEREAS,
the Director is a member of the Board of Directors of the Bank (hereinafter the
"Board") and has served in such capacity since September 2004;
WHEREAS,
the Bank desires to establish a compensation benefit program for directors who
are not also officers or employees of the Bank in order to attract and retain
individuals with extensive and valuable experience as directors;
and
WHEREAS,
the Director and the Bank wish to specify in writing the terms and conditions
upon which this additional compensatory incentive will be provided to the
Director;
NOW,
THEREFORE, in consideration of 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 Bank 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 as
defined in subparagraph 1.9 below, 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 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 schedule:
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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%
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1.3 Change in
Control. For the purposes of this Agreement, the term "Change
in Control" shall be defined as follows:
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(A)
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The
acquisition of more than fifty percent (50%) o£ the value or voting power
of the Bank's stock by a person or
group;
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|
(B)
|
The
acquisition in a period of twelve (12) months or less of at least
thirty-five
percent (35°/0) of the Bank's stock by a person or
group;
|
|
(C)
|
The
replacement of a majority of the Bank's board in a period of twelve (12)
months or less by Directors who were not endorsed by a majority of the
current board members; or
|
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(D)
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The
acquisition in a period of twelve (12) months or less of forty percent
(40%) or more of the Bank's assets by an unrelated
entity.
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For the
purpose of this Agreement, transfers made on account of deaths or gifts,
transfers between family members or transfers to a qualified retirement plan
maintained by the Bank shall not be considered in determining whether there has
been a Change in Control.
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 the 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). The
Director Benefit shall continue to increase as each Year of Service is
completed. In addition, the annual amount of Director Benefits payable under
this Agreement shall be increased at the rate o£ 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 as a Director, and shall
be determined according to the circumstances giving rise to the Separation from
Service and the relevant Applicable Percentage schedule. Furthermore, the
benefit 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 Disability/Disabled. For
the purposes o£ this Agreement, a Director 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 which 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
which 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 directors of the
Bank.
|
1.7 Early
Retirement. The term "Early Retirement" shall mean. the
Director's Separation from Service as a member of the Board of Directors for any
reason other than a Removal for Cause, as a result of a Disability or Pursuant
to a Change in Control, and a date which occurs prior to the Director attaining
sixty-two (62) years of age, but after the Director has attained fifty-five (55)
years of age.
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 as a member of the Board of Directors for any
reason other than a Removal for Cause, as a result of a Disability or Pursuant
to a Change in Control, and a date on or after which Director attains 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 Sank 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
|
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(D)
|
The
Director's willful and intentional disclosure, without authority, o£ 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.
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1.13 Separates
From Service or Termination of Service. The terms "Separates
from Service" or a "Termination" of service shall refer to the Director ceasing
to serve as a member of the Board of Directors for any reason.
1.14 Termination
Pursuant to a Change in Control. A Termination shall be deemed
to be "Pursuant to a Change in Control" it; within two (2) years following the
occurrence of a Change in Control, the Director is remove from the Board for
reasons other than a Removal for Cause.
1.15 Termination
Without Cause. A Termination shall be deemed to be "Without
Cause" if, prior Normal Retirement Age, the Director is terminated by the Bank
for reasons other than a Termination for Cause, a Disability, or Pursuant to a
Change in Control.
1.16 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.
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. Payments
Upon Early or Normal Retirement. In the event the Director
continues to serve as a member of the Board o£ Directors until qualifying for
Early or Normal Retirement pursuant to the terms of Paragraphs 1.7 and 1.10
above, then (excluding a termination under the provisions of paragraph 4 or
5.4 herein), upon a Separation from Service, Director shall be entitled to be
paid the Applicable Percentage of the Director Benefit based on his Years of
Service. Payments shall be made in substantially equal monthly
installments on the first day of each month, commencing the later of the
Director's attainment of Age Sixty-Two (62) or the month following the month in
which the Director Separates from Service and shall continue monthly until
Director's death.
4. Payments
in the Event of Disability. In the event the Director becomes
Disabled at any time after the Effective Date of this Agreement and while
serving as a Director, then the Applicable Percentage of the Director Benefits
shall be One Hundred Percent (100%). The Director Benefit shall be paid in
substantially equal monthly installments on the first day of each month,
commencing the later of the Director's attainment of Age Sixty-Two (62) or the
month following the month in which the Director Separates from
Service. Payments shall then continue monthly until Director's
death.
5. Payments
in the Event Service is Terminated Prior to Retirement. As
indicated in subparagraph 2.1 above, the Bank reserves the right to remove
or cause the removal of the Director under certain circumstances, at any time
prior to the Director's Retirement. In the event that the service of
the Director shall be Terminated, other than by reason of death, Disability or
Retirement, prior to the Director qualifying for Early or Normal Retirement,
then this Agreement shall terminate upon the date of such termination; provided,
however, that the Director shall be entitled to the following benefits as may be
applicable depending upon the circumstances surrounding the Director's
termination:
5.1 Termination
Without Cause. If the Director is Terminated Without Cause at
any time, then he shall be entitled to be paid the Applicable Percentage of the
Director Benefits, in substantially equal monthly installments on the first day
of each month, commencing the later of the Director's attainment of Age
Sixty-Two (62) or the month following the month in which the Director
Terminates. Payments shall then continue until Director's
death.
5.2 Voluntary
Termination by the Director. If the Director's service is
terminated by voluntary resignation and such resignation is not subject to the
provisions of subparagraph 5.4 below, the Director shall be entitled to be
paid the Applicable Percentage of the Director Benefits, in substantially equal
monthly installments on the first day of each month, commencing the later of the
Director's attainment of Age Sixty-Two (62) or the month following the month in
which the Director terminates. Payments shall then continue until
Director's death.
5.3 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.
5.4 Termination
Pursuant to a Change in Control. In the event the Director's
service as a member of the Board of Directors f the Bank is Terminated Pursuant
to a Change in Control, then the Director shall be entitled to be paid a One
Hundred Percent (100%) Applicable Percentage of the Director Benefits, in
substantially equal monthly installments on the first day of each month,
commencing the later of the Director's attainment of Age Sixty-Two (62) or the
month following the month in which the Director terminates. Payments
shall then continue until Director's death.
6. Section
280G Benefits Redaction. 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.
7. 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 9 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.
8. Claims
Procedure. The Bank 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. In the event a dispute arises over benefits under
this Agreement and benefits are not paid to the Director and Director feels he
is entitled to receive such benefits, then a written claim must be made to the
Named Fiduciary and Plan Administrator named above within forty-five (45) days
from the date payments are refused. The Named Fiduciary and Plan
Administrator shall review the written claim and if the claim is denied, in
whole or in part, they shall provide in writing within forty-five (45) days of
receipt of such claim the specific reasons for such denial, reference to the
provisions of this Agreement upon which the denial is based and any additional
material or information necessary to perfect the claim. Such written notice
shall further indicate the additional steps to be taken by claimants if a
further review of the claim denial is desired. A claim shall be
deemed denied if the Named Fiduciary and Plan Administrator fail to take any
action within the aforesaid forty-five (45) day period.
If
claimants desire a second review they shall notify the Named Fiduciary and Plan
Administrator in writing within forty-five (45) days of the first claim
denial. Claimants may review this Agreement or any documents relating
thereto and submit any written issues and comments it may feel
appropriate. In their sole discretion, the Named Fiduciary and Plan
Administrator shall then review the second claim and provide a written decision
within forty-five (45) days of receipt of such claim. This decision
shall likewise state the specific reasons for the decision and shall include
reference to specific provisions of the Agreement upon which the decision is
based.
9. 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 tithes as specified in this Agreement.
10. Miscellaneous.
10.1 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.
10.2 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
maybe 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.
10.3 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.
10.4 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
000 Xxxxxxx
Xxxxxxxxx
Xxx Xxxx,
Xxxxxxxxxx 00000
Attn: President
If to the
Director: ____________________
___________________
___________________
10.5 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.
10.6 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.
10.7 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.
10.8 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.
10.9 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 parry, 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.
10.10 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.
10.11 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.
10.12 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.
10.13 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.
10.14 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.
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 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 2006, such amendment or
election may not act as to accelerate any payments or cause any payment to be
made in 2006 that would not otherwise be payable in
2006. Furthermore, and in accordance with IRS Notice 2006-79,
this restriction also applies to payments following a separation from service,
and similarly applies to elections/amendments and payments made and to be made
in 2007. In the event of any modification or amendment in 2006 (or
2007) regarding a payment to be made in 2006 (or 2007), such payment shall not
be made or commence until January 1, 2007 (or January 1, 2008, as
applicable).
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.
12. 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 Directors 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.
IN
WITNESS WHEREOF, the Director and a duty authorized Bank officer have signed
this Agreement as of the written date.
HERITAGE
COMMERCE CORPORATION
______________________________________
Date:_________________________
By:
Xxxxxxxx X. XxXxxxxx
Executive
Vice President & CFO
______________________________________
Date:_________________________
Director
______________________________________ _____________________________
Witness Witness
