EMPLOYMENT AGREEMENT

such activities do not significantly interfere with the performance of the Executive’s responsibilities as an employee of the Company and the Bank in accordance with this Agreement.  Nothing in this Agreement shall be interpreted to prohibit the Executive from making passive personal investments.  However, the Executive shall not directly or indirectly acquire, hold, or retain any interest in any business competing with or similar in nature to the business of the Bank and the Company, except as permitted by Company policies or authorized by the Chief Executive Officer of the Company.

1.3                                 Standard .  The Executive will set a high standard of professional conduct given his role with the Company and the Bank and his responsibility relative to the Bank’s presence and stature in the community.  The Executive will, at all times, emulate this high professional standard of conduct in order to develop and enhance the Company’s and the Bank’s reputation and image.  The Executive’s and his family’s eligibility and all other terms and conditions of the Executive’s participation in the Bank’s or Company’s benefit, insurance and disability plans and programs will be governed by the official plan documents which may change from year-to-year.  Notwithstanding the foregoing, at a minimum the Executive shall be entitled to the same benefits as all other executives in comparable positions with the Company and the Bank.  The Executive will comply with all applicable rules, policies and procedures of the Bank and any of its subsidiaries and all pertinent regulatory standards as may affect the Company and the Bank and the Company.

1.4                                 Location .  The Executive shall provide services for the Company and the Bank at the Company’s principal executive offices located in San Jose California.  The Executive agrees that the Executive will be regularly present at the Company’s principal executive offices and that the Executive may be required to travel from time to time in the course of performing the Executive’s duties for the Company and the Bank.

1.5                                 No Breach of Contract .   The Executive hereby represents to the Company and the Bank that:  (i) the execution and delivery of this Agreement by the Executive and the performance by the Executive of the Executive’s duties hereunder shall not constitute a breach of, or otherwise contravene, the terms of any other agreement or policy to which the Executive is a party or by which he is otherwise bound; (ii) that the Executive has no information (including, without limitation, confidential information or trade secrets) of any other person or entity which the Executive is not legally and contractually free to disclose the Company and the Bank; and (iii) that the Executive is not bound by any confidentiality, trade secret or similar agreement (other than this Agreement) with any other person or entity.

2.                                        Term .  The term of this Agreement shall be a period of one (1) year from the Effective Date, subject to the termination provisions of Section 6.  Upon the occurrence of the first annual anniversary of the Effective Date, and on each anniversary date thereafter, the term of this Agreement shall be deemed automatically extended for an additional one (1) year term, subject to the termination provisions of Section 6.

3.                                        Compensation .

3.1                                 Salary .  The Executive shall receive a salary at an annual rate of $240,000 which will be paid in accordance with the Bank’s normal payroll procedures including applicable

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adjustments for withholding taxes.  The Executive shall receive such annual increases in salary, if any, as may be determined by the Company’s Board of Directors annual review of the Executive’s compensation each year during the term of this Agreement.  Participation in deferred compensation, discretionary or performance bonus, retirement, stock option and other employee benefit plans and in fringe benefits shall not reduce the annual rate.

3.2                                 Incentive Compensation .  The Executive shall be entitled to receive an annual incentive compensation payment pursuant to the terms of the Heritage Commerce Corp Management Incentive Compensation Plan in effect at the date of this Agreement and as amended at any future date or pursuant to any successor incentive plan or arrangement adopted by the Bank or the Company for its officers (the “ Incentive Plan ”).  Notwithstanding any terms of the Incentive Plan to the contrary, an annual payment under the Incentive Plan for a fiscal year shall be paid to the Executive no later than the 15th day of the third month following the end of the calendar year in which the annual incentive compensation payment is no longer subject to a substantial risk of forfeiture.  Except as set forth in the Incentive Plan or this Agreement, or in any successor incentive plan or arrangement, no incentive compensation payments shall be prorated for a partial year during the year Executive terminates his employment and the Executive shall not be entitled to receive incentive compensation payments for any year during the term of this Agreement in which Executive was not employed by the Bank or the Company for the full fiscal year (not including his initial year of employment).

3.3                                 2004 Equity Plan .  The Executive will receive a nonqualified Stock Option grant of 25,000 shares of Common Stock pursuant to the terms of the Company’s Amended and Restated 2004 Equity Plan (the “ 2004 Plan ”).  The exercise price will be the Fair Market Value for the Company’s Common Stock on the date of grant as defined in the 2004 Plan.  The Executive’s options will vest in daily increments of 1/1460th from the date of grant until fully vested and shall expire ten years from the date of grant.  All such options shall be subject to the terms and conditions of the 2004 Plan and shall be conditioned upon the Executive’s execution of an option agreement with the Company in a form specified by the Company.

3.4                                 Other Benefits .  The Executive shall be entitled to those benefits adopted by the Bank and the Company for all officers of the Bank, subject to applicable qualification requirements and regulatory approval requirements, if any.  To the extent that the level of such benefits is based on seniority or compensation levels, the Company and the Bank shall make appropriate and proportionate adjustments to the Executive’s benefits.  The Executive shall be further entitled to the following additional benefits which shall supplement or replace, to the extent duplicative of any part or all of the general officer benefits, the benefits otherwise provided to the Executive:

(a)                                   Vacation .  The Executive shall be entitled to paid vacation in accordance with the most favorable plans, policies, programs and practices of the Company and the Bank as in effect for the Executive or for other executives in comparable positions with the Company and the Bank; provided, however, that the Executive shall be entitled to earn paid vacation at the rate of not less than 25 days vacation days for each calendar year (reduced pro rata for any partial year), of which at least 10 days (reduced pro rata for any partial year) must be taken consecutively.  Vacation may be accrued in accordance with the Company’s policy.  The

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date or dates of vacation shall be determined by the Executive and the Company’s Chief Executive Officer, and will be subject to the Company and the Bank’s business requirements.

(b)                                  Automobile Allowance and Insurance .  The Bank or the Company will pay to the Executive an automobile allowance in the amount of $700 per month during the term of this Agreement.  The Bank or the Company shall also reimburse the Executive for gasoline expenditures and up to $2,400 per year for automobile maintenance and repairs related to use of the automobile acquired or used by the Executive upon presentation and approval of receipts, invoices or other appropriate evidence of such expense in accordance with the policies of the Bank or the Company.  The Executive shall acquire or otherwise make available for his business and personal use an automobile suitable to his position and maintain it in good condition and repair.  The Executive shall obtain and maintain public liability insurance and property damage insurance policies with insurer(s) acceptable to the Bank and the Company and with such coverages in such amounts as may be acceptable to the Bank and the Company from time to time.  The Bank or the Company may elect to provide and pay for such insurance policies in lieu of the Executive maintaining such policies.

(c)                                   Insurance .  The Bank or the Company shall provide during the term of this Agreement at no cost to the Executive group life, health (including medical, dental, vision and hospitalization), accident and disability insurance coverage for the Executive and his dependents through a policy or policies provided by the insurer(s) selected by the Bank or the Company in their sole discretion on the same basis as all other executives in comparable positions with the Bank.

(d)                                  401(k) .  The Company maintains a 401(k) plan for its eligible employees.  Subject to the terms and conditions set forth in the official plan documents, the Executive will be eligible to participate in the 401(k) plan, and shall receive a matching contribution in accordance with the terms of the 401(k) plan from the Company.

(e)                                   Employee Stock Ownership Plan .  The Executive will be eligible to participate in the Company’s Employee Stock Ownership Plan (“ ESOP ”), subject to the terms and conditions of the ESOP.

3.5                                 Business Expenses; Memberships .  The Executive shall be entitled to incur and be reimbursed for all reasonable business expenses.  The Company and the Bank agree that they will reimburse the Executive for all such expenses upon the presentation by the Executive, from time to time, of an itemized account of such expenditures setting forth the date, the purposes for which incurred, and the amounts thereof, together with such receipts showing payments in conformity with the Bank’s established policies.  Reimbursement shall be made within a reasonable period after the Executive’s submission of an itemized account in accordance with the Company’s and the Bank’s policies.

4.                                        Indemnity .  The Bank and the Company shall indemnify and hold the Executive harmless from any cost, expense or liability arising out of or relating to any acts or decisions made by the Executive on behalf of or in the course of performing services for the Company and the Bank to the same extent the Bank and the Company indemnifies and holds harmless other

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executive officers and directors of the Company and the Bank and in accordance with the articles of incorporation, bylaws and established policies of the Bank and the Company.

5.                                        Certain Terms Defined .  For purposes of this Agreement:

5.1                                 “ Accrued Obligations ” means the sum of the Executive’s Base Salary and accrued vacation through the Date of Termination to the extent not theretofore paid, outstanding expense reimbursements and any compensation previously deferred by the Executive to the extent not theretofore paid.

5.2                                 “ Base Salary ” means, as of any Date of Termination of employment, the highest average salary of the Executive for any consecutive 12 months of the last 36 months preceding such Date of Termination.

5.3                                 “ Cause ” shall mean (i) the Executive willfully breaches or habitually neglects the duties which the Executive is required to perform under this Agreement; (ii) the Executive commits an intentional act of moral turpitude that has a material detrimental effect on the reputation or business of the Bank or the Company; (iii) the Executive is convicted of a felony or commits any material and actionable act of dishonesty, fraud, or intentional material misrepresentation in the performance of the Executive’s duties under this Agreement; (iv) the Executive engages in an unauthorized disclosure or use of inside information, trade secrets or other confidential information; or (v) the Executive willfully breaches a fiduciary duty, or violates any law, rule or regulation, which breach or violation results in a material adverse effect on the Company and the Bank (taken as a whole).  If the Bank decides to terminate the Executive’s employment for Cause, the Bank will provide the Executive with notice specifying the grounds for termination, accompanied by a brief written statement stating the relevant facts supporting such grounds.

5.4                                 “ Change of Control ” shall mean, subject to the limitations of Section 409A of the Code, set forth in Section 7 of this Agreement, the earliest occurrence of one of the following events:

(a)                                   the acquisition (or acquisition during the 12 month period ending on the date of the most recent acquisition) by any individual, entity, or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (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 the 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 (“ 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 the Bank or any corporation controlled by the Company or the Bank 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 5.4; or

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(b)                                  individuals who, as of the Effective Date, constitute the Board of Directors of the Company (the “ Incumbent Board ”) cease for any reason other than resignation, death or disability to constitute at least a majority of the Company’s Board of Directors during any 12 month period; 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 Company’s Board of Directors; or

(c)                                   consummation of a reorganization, merger or consolidation of the Company or the Bank, or sale or other disposition (in one transaction or a series of transactions) of any assets of the Bank or the Company having a total fair market value equal to, or more than, 40% of the total gross fair market value of all of the assets of the Bank or the Company immediately prior to such acquisition or acquisitions (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 Common Stock and Outstanding 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 all or substantially all of the Company’s or Bank’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 Common Stock and Outstanding 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 the Bank 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 Company’s Board of Directors at the time of the execution of the initial agreement, or of the action of the Company’s Board of Directors, providing for such Business Combination; or

(d)                                  approval by the shareholders of the Company of a complete liquidation or dissolution of the Company.

5.5                                 “ Code ” means the Internal Revenue Code of 1986, as amended and any successor provisions to such sections.

5.6                                 “ Change of Control Period ” shall mean the period of time (a) commencing on the earlier of (i) 120 days before the date the Change of Control occurs, or if

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earlier, 120 days before a definitive agreement is executed by the Company or the Bank for a transaction described in Section 5.4(c) (provided, however, that in the event of this subsection (a)(i) the Executive reasonably demonstrates that his termination of employment should it occur was either (x) at the request of a third party who has taken steps reasonably calculated to effect a change in control, or (y) otherwise arose in connection with a Change in Control), or (ii) the date the Change of Control occurs, and (b) ending on the last day of the 24th calendar month immediately following the month the Change of Control occurred.

5.7                                 “ Date of Termination ” means (i) if the Executive’s employment is terminated due to the Executive’s death, the Date of Termination shall be the date of death; (ii) if the Executive’s employment is terminated due to Disability, the Date of Termination is the Disability Effective Date; (iii) if the Executive’s employment is terminated by the Bank or the Company for Cause, the Date of Termination is the date on which the Bank or the Company gives notice to the Executive of such termination; (iv) if the Executive’s employment is terminated by the Bank or the Company without Cause or voluntarily by the Executive, the Date of Termination shall be the date specified in the notice of termination; and (v) if the Executive’s employment terminates for any other reason, the Date of Termination shall be the Executive’s final date of employment.

5.8                                 “ 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 the Bank or their insurers and acceptable to the Executive or the Executive’s legal representative, and, in the written opinion of such physician, the condition will render the Executive unable to return to his duties for an indefinite period of not less than 180 days.

5.9                                 “ Highest Annual Bonus ” shall mean the highest bonus or incentive compensation amount paid to (or earned by) the Executive in any of the three (3) fiscal years (or in any shorter number of years if the length of employment of the Executive is less than three (3) years) immediately preceding the termination.

6.                                        Termination .

6.1                                 This Agreement may be terminated for the following reasons:

(a)                                   Death .  This Agreement shall terminate automatically upon the Executive’s death.

(b)                                  Disability .  In the event of the Executive’s Disability, the Company or Bank may give the Executive a notice of termination.  In such event, the Executive’s employment  with the Company and the Bank and this Agreement shall terminate without further act of the parties effective on the 30th day after receipt of such notice by the Executive (the “ Disability Effective Date ”) provided, however, that within the 30 days after such receipt, the Executive shall not have returned to full-time performance of the Executive’ duties.  Unless otherwise agreed in writing between the Executive, the Bank and the Company, the Executive shall immediately cease performing and discharging the duties and responsibilities of his positions and remove himself and his personal belongings from the Bank’s and the Company’s premises.  All rights and obligations accruing to the Executive under this Agreement shall cease

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at such termination, except that such termination shall not prejudice the Executive’s rights regarding employment benefits which shall have accrued prior to such termination, and any other remedy which the Executive may have at law, in equity or under this Agreement, which remedy accrued prior to such termination.

(c)                                   Cause .  The Bank or the Company may terminate the Executive’s employment and this Agreement for Cause.  Unless otherwise agreed in writing between the Executive, the Bank and the Company, the Executive shall immediately cease performing and discharging the duties and responsibilities of his positions and remove himself and his personal belongings from the Bank’s and the Company’s premises.  All rights and obligations accruing to the Executive under this Agreement shall cease at such termination, except that such termination shall not prejudice the Executive’s rights regarding employment benefits which shall have accrued prior to such termination, and any other remedy which the Executive may have at law, in equity or under this Agreement, which remedy accrued prior to such termination.

(d)                                  Termination by Bank or the Company without Cause .  The Bank or the Company may, at its election and in its sole discretion, terminate the Executive’s employment and this Agreement at any time and for any reason or for no reason, upon