HERITAGE COMMERCE CORP RESTRICTED STOCK AGREEMENT

Exhibit 10.2

HERITAGE COMMERCE CORP
RESTRICTED STOCK AGREEMENT

This RESTRICTED STOCK AGREEMENT (the "Agreement" ) between HERITAGE COMMERCE CORP (the "Company" ) and WALTER KACZMAREK ( "Executive" ) is effective as of March 17, 2005 (the "Effective Date" ).

R E C I T A L S:

WHEREAS, the Compensation Committee of the Board of Directors of the Company has approved and authorized the Stock Award (as hereinafter defined) and the Company's entry into this Agreement with the Executive; and

WHEREAS, the parties desire to enter into this Agreement to set forth the terms and conditions of the Executive's Stock Award.

A G R E E M E N T:

NOW, THEREFORE, in consideration of the promises and mutual covenants and agreements herein contained and intending to be legally bound hereby, the Company and the Executive hereby agree as follows:

1. 1.  

   2. Definitions .

   3. 1.  

      2. "Affiliate" means (i) any entity that is controlled by the Company, whether directly or indirectly, and (ii) any entity in which the Company has a significant equity interest, as determined by the Committee.

      3.  

      4. "Beneficiary" means any person(s) designated by the Executive on a beneficiary designation form, or, if no form, any person(s) entitled to receive any amounts owing to the Executive upon his death by reason of having been named in the Executive's will or trust agreement or having qualified as a taker of the Executive's property under the laws of intestacy.

      5.  

      6. "Board" means the Board of Directors of Heritage Commerce Corp.

      7.  

      8. "Change of Control" shall mean:

      9. 1.  

         2. the acquisition by any individual, entity, or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act (a "Person" ) of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 40% or more of either (i) the then outstanding shares of common stock of the Company (the "Outstanding Company Common Stock" or (ii) the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the "Outstanding Company Voting Securities" ); provided, however, that for purposes of this Subsection (a), the following acquisitions shall not constitute a Change of Control; (i) any acquisition directly from the Company, (ii) any acquisition by the Company that reduces the number of shares issued and outstanding through a stock repurchase program or otherwise, (iii) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company or (iv) any acquisition by any corporation pursuant to a transaction which complies with clauses (i), (ii) and (iii) of Subsection (c) of this Section 1(d)(i); or

         3.  

         4. a majority of the individuals who, as of the Effective Date, constitute the Board (the "Incumbent Board" ) cease for any reason other than resignation, death or disability to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the Effective Date whose election, or nomination for election by the Company's shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board; or

         5.  

         6. consummation of a reorganization, merger or consolidation or sale or other disposition of all or substantially all of the assets of the Company (a "Business Combination" ), in each case, unless, following such Business Combination, (i) all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than 50% of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Business Combination (including, without limitation, a corporation which as a result of such transaction owns the Company or all or substantially all of the Company's assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership, immediately prior to such Business Combination of the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be, (ii) no Person (excluding any corporation resulting from such Business Combination or any employee benefit plan (or related trust) of the Company or such corporation resulting from such Business Combination) beneficially owns, directly or indirectly, 20% or more of, respectively, the then outstanding shares of common stock of the corporation resulting from such Business Combination or the combined voting power of the then outstanding voting securities of such corporation except to the extent that such ownership existed prior to the Business Combination, and (iii) at least a majority of the members of the board of directors of the corporation resulting from such Business Combination were members of the Incumbent Board at the time of the execution of this Agreement, or of the action of the Board, providing for such Business Combination; or

         7.  

         8. approval by the shareholders of the Company of a complete liquidation or dissolution of the Company.

          

      10. "Code" means the Internal Revenue Code of 1986, as amended and any successor provisions to such sections.

      11.  

      12. "Committee" means the Compensation Committee appointed by the Board.

      13.  

      14. "Disability" shall mean a physical or mental condition of the Executive which occurs and persists and which, in the written opinion of a physician selected by the Company or its insurers and acceptable to the Executive or the Executive's legal representative, and, in the written opinion of such physician, the condition will render Executive unable to return to his duties for an indefinite period of not less than 90 days.

      15.  

      16. " Employment Agreement " shall mean that certain Employment Agreement dated of even date herewith by and between the Executive and the Company.

      17.  

      18. "Exchange Act" means the Securities Exchange Act of 1934, as amended.

      19.  

      20. "Fair Market Value" means the closing price of a Share on the NASDAQ National Market as published in the Wall Street Journal; if, however, there is no trading of Shares on the date in question, then the closing price of the Shares as so reported, on the last preceding date on which there was trading shall instead be used to determine Fair Market Value. If Fair Market Value for any date in question cannot be determined as provided above, Fair Market Value shall be determined by the Committee by whatever method or means the members, in the good faith exercise of their discretion, at that time shall deem appropriate.

      21.  

      22. " Good Reason " shall have the meaning afforded in the Employment Agreement.

      23.  

      24. "Retirement" means retirement in accordance with the policies of the Company or Affiliate which employs the Executive.

      25.  

      26. "Shares" means shares of Common Stock, no par value, of the Company or such other securities as may be issued pursuant to an adjustment made under Section 2 of this Agreement.

      27.  

      28. "Tax Withholding Date" shall mean the earliest date the obligation to withhold tax with respect to a Stock Award arises.

       

   4. Award of Stock . Subject to the terms and conditions of this Agreement, the Company hereby awards the Executive fifty-one thousand (51,000) Shares (the "Stock Award" ). Subject to adjustment as provid