DIRECTOR COMPENSATION BENEFITS AGREEMENT
Exhibit 10.26
This
Agreement is made and entered into effective as of September 29, 2004 by
and between Heritage Commerce Corporation (“the Bank”), and Xxxxxx X.
Xxxxx, 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%) of the value or voting power
of the Bank’s stock by a person or
group;
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|
(B)
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The
acquisition in a period of twelve (12) months or less of at least thirty-
five percent (35%) 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 [he 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 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 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 of this Agreement, a Director will be considered Disabled
if:
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(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 Ate. 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 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 (1) 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.
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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” if, within two (2) years following the occurrence of a Change
in Control, the Director is removed 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 of 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, 5.3 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 Directors service as a member of the
Board of Directors of 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
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.
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 times 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 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 Xxxx. 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 Banks 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 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.
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 I,
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: (I) 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 Directors 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 duly 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
