Exhibit 10.3

June 20, 2007

Mr. John J. Hounslow

2860 W. Bayshore Road
Palo Alto, CA 94303

Re:                               Board of Directors

Dear John:

We welcome you to the Board of Directors of Heritage Commerce Corp (“Heritage”)
and look forward to a wonderful working relationship as we work toward building
Heritage and Heritage Bank of Commerce into a successful financial institution
for its shareholders, employees and bank customers.

We have provided you with our Board package that contains general information
about Heritage and specific policies applicable to Board members.

This letter will set forth the various compensation and benefits being made
available to you so long as you are a member of the Board of Directors.

You will receive a monthly retainer of $2,000 per month.  In addition, you will
receive $800 per committee meeting attended in person and $400 for each
committee meeting attended by telephone.  The Corporate Governance and
Nominating Committee makes all committee assignments and I am informed that the
Committee has appointed you to the Strategic Planning and Finance Committee. 
You will be entitled to bi-annual grants of 6,000 to 8,000 stock options as
determined by the Compensation Committee and approved by the Board of
Directors.  The options will be granted pursuant to the Heritage 2004 Stock
Option Plan.  You may defer your fees through the Directors Deferred
Compensation Program.

You will be reimbursed for all of your Heritage related business expenses in
accordance with Heritage’s general expense reimbursement policy.  Heritage will
pay $280.00 per month toward your Country Club dues through December 31, 2009,
provided you are a member of the Board of Directors during such period.  You
will have the use of your current office at the premises formerly maintained by
Diablo Valley Bank through December 31, 2009, provided you are a member of the
Board of Directors during such period.  Heritage will continue to honor the
current automobile lease entered into by Diablo Valley Bank for your use of a
automobile, and reimburse you for fuel, maintenance and automobile insurance,
through September 8, 2009, provided you are a member of the Board of Directors
during such period.

  

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If you are agreeable to the forgoing, please execute this letter below in the
space provided.  Again, we are pleased to have you with us

Very truly yours,

/s/ Jack Conner

Jack Conner,
Chairman of the Board

AGREED:

 

 

/s/ John J. Hounslow

 

John J. Hounslow

 

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