Exhibit 10.5

EMPLOYMENT AGREEMENT

This Agreement is made and entered into on May 11, 2001 by and among Heritage
Commerce Corp (HCC), a California bank holding company, and Kenneth A. Corsello
for the purposes set forth hereinafter (the "Agreement").

RECITALS

 

WHEREAS, Kenneth A. Corsello is currently the Executive Vice President and Chief
Credit Officer of Heritage Commerce Corp;

WHEREAS, it is the intention of the parties to enter into an employment
agreement for the purposes of assuring the continued services of Kenneth A.
Corsello as the Executive Vice President and Chief Credit Officer of Heritage
Commerce Corp;

WHEREAS, any reference in this Agreement to "Employer" shall mean Heritage
Commerce Corp unless otherwise expressly stated or the context otherwise
requires; and

WHEREAS, any reference in this Agreement to "Employee" shall mean Kenneth A.
Corsello.

NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein, the Employer and Employee agree as follows:

AGREEMENT

1. Term of Employment. Pursuant to this Agreement, Employer employs Employee and
Employee hereby accepts employment with Employer, upon the terms and conditions
hereinafter set forth, for a period of three (3) years from the date hereof.
Upon the occurrence of the third annual anniversary of the date of this
Agreement, 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 paragraph 16.

2. Duties and Obligations of Employee. Employee shall serve as the Executive
Vice President and Chief Credit Officer of Employer and shall perform the
customary duties of such office in the commercial banking industry as may from
time to time be reasonably requested of him by the Board of Directors of
Employer.

(a) Providing leadership in carrying out responsibilities of the position as
outlined in the job description subject to the direction of the Board of
Directors of Employer;

(b) Participating in community affairs which are beneficial to the Employer and;

(c) Maintaining a good relationship with Employer's Directors, management
officers and shareholders;

(d) Maintaining a good relationship with regulatory agencies and governmental
authorities having jurisdiction over Employer;

(e) Providing leadership in planning and implementing the conduct of business
and the affairs of the Employer; and

(f) Hiring and firing employees other than executive officers of the Employer,
subject at all times to the policies and directives set by the Employer's Board
of Directors.

3. Devotion to Employer's Business.

(a) Employee shall devote his full business time, ability, and attention to the
business of Employer during the term of this Agreement and shall not during the
term of this Agreement engage in any other business activities, duties, or
pursuits whatsoever, or directly or indirectly render any services of a
business, commercial, or professional nature to any other person or
organization, whether for compensation or otherwise, without the prior written
consent of the Board of Directors of Employer. However, the expenditure of
reasonable amounts of time for educational, charitable, or professional
activities shall not be deemed a breach of this Agreement if those activities do
not materially interfere with the services required of Employee under this
Agreement. Nothing in this Agreement shall be interpreted to prohibit Employee
from making passive personal investments. However, Employee shall not directly
or indirectly acquire, hold, or retain any interest in any business competing
with or similar in nature to the business of Employer except for passive
investments at a non-controlling level in publicly traded companies made without
benefit of non-public information.

(b) Employee agrees to conduct himself at all times with due regard to public
conventions and morals. Employee further agrees not to do or commit any act that
will reasonably tend to shock or offend the community and have an adverse effect
upon Employer.

(c) Employee hereby represents and agrees that the services to be performed
under the terms of this Agreement are of a special, unique, unusual,
extraordinary, and intellectual character that gives them a peculiar value, the
loss of which cannot be reasonably or adequately compensated in damages in an
action at law. Employee therefore expressly agrees that Employer, in addition to
any other rights or remedies that Employer may possess, shall be entitled to
injunctive and other equitable relief to prevent or remedy a breach of this
Agreement by Employee.

4. Noncompetition by Employee. Employee shall not, during the term of this
Agreement, directly or indirectly, either as an employee, employer, consultant,
agent, principal, stockholder, officer, director, or in any other individual or
representative capacity, engage or participate in any competitive banking or
financial services business without the prior written consent of Employer.
Following termination of this Agreement and during any period when Employee is
receiving severance payments from Employer pursuant to or related to this
Agreement, the Employee shall be subject to the foregoing noncompetition
restrictions only with respect to banking or financial services businesses which
conduct business or operations in Santa Clara County.

5. Indemnification.

(a) Employee shall indemnify and hold Employer harmless from all liability for
loss, damage, or injury to persons or property resulting from the gross
negligence or intentional misconduct of the Employee.

(b) To the extent permitted by law, Employer shall indemnify Employee if he was
or is a party or is threatened to be made a party in any action brought by a
third party against Employee (whether or not Employer is joined as a party
defendant) against expenses, judgments, fines, settlements and other amounts
actually and reasonably incurred in connection with said action if Employee
acted in good faith and in a manner Employee reasonably believed to be in the
best interest of Employer (and with respect to a criminal proceeding if Employee
had no reasonable cause to believe his conduct was unlawful), provided that the
alleged conduct of Employee arose out of and was within the course and scope of
his employment as an officer or employee of Employer.

6. Disclosure of Information. Employee shall not, either before or after
termination of this Agreement, without the prior written consent of the Board of
Directors of Employer or except as required by law to comply with legal process
including, without limitation, by oral questions, interrogatories, requests for
information or documents, subpoena, civil investigative demand or similar
process, disclose to anyone any of Employer's financial information, trade or
business secrets, customer lists, computer software or other information not
otherwise publicly available concerning the business or operations of Employer
or one or all of Employer's subsidiaries. Employee further recognizes and
acknowledges that any financial information concerning any customers of
Employer, or Employer's other subsidiaries, as it may exist from time to time,
is strictly confidential and is a valuable, special and unique asset of
Employer's and Employer's business. Employee shall not, either before or after
termination of this Agreement, without such consent or except as required by
law, disclose to anyone said financial information or any part thereof, for any
reason or purpose whatsoever. In the event Employee is required by law to
disclose such information described in this paragraph 6, Employee will provide
Employer and its respective counsel with immediate notice of such request so
that they may consider seeking a protective order. If in the absence of a
protective order or the receipt of a waiver hereunder Employee is nonetheless,
in the written opinion of knowledgeable counsel, compelled to disclose any of
such information to any tribunal or any other party or else stand liable for
contempt or suffer other material censure or material penalty, then Employee may
disclose (on an "as needed" basis only) such information to such tribunal or
other party without liability hereunder. Employee agrees to execute such form of
confidentiality agreement from time to time during the term of this Agreement as
the Boards of Directors of Employer and its subsidiaries may require to be
executed by executive officers of Employer. Any conflict between this paragraph
6 and such confidentiality agreement shall be resolved in favor of the
provisions of the confidentiality agreement.

7. Written, Printed or Electronic Material. All written, printed or electronic
material, notebooks and records including, without limitation, computer disks
used by Employee in performing duties for Employer, other than Employee's
personal notes and diaries, are and shall remain the sole property of Employer.
Upon termination of employment, Employee shall promptly return all such material
(including all copies, extracts and summaries thereof) to Employer.

8. Surety Bond. Employee agrees that he will furnish all information and take
any other steps necessary from time to time to enable Employer to obtain or
maintain a fidelity bond conditional on the rendering of a true account by
Employee of all monies, goods, or other property which may come into the
custody, charge, or possession of Employee during the term of his employment.
The surety company issuing the bond and the amount of the bond must be
acceptable to Employer. All premiums on the bond shall be paid by Employer.
Employer shall have no obligation to pay severance benefits to Employee in
accordance with paragraph 16 (d) of this Agreement in the event that the
Employee's employment is terminated in connection with the Employee's failure to
qualify for a surety bond at any time during the term of this Agreement and such
failure to qualify results from an occurrence described in paragraph 16(a) (5),
(7), (8), (9), (10) or (11, to the extent of an Employee breach).

9. Base Salary. In consideration for the services to be performed hereunder,
Employee shall receive a salary at the rate of One Hundred Twenty- Eight
Thousand Dollars ($128,000) per annum, payable in installments during the term
of this Agreement of approximately Five Thousand Three Hundred Thirty-Three
Dollars and Thirty-Three Cents ($5,333.33) on the fifteenth and last day of each
month, subject to applicable adjustments for withholding taxes, prorations for
any partial employment period and such other applicable payroll procedures of
Employer. Employee shall receive such annual adjustments in salary, if any, as
may be determined by Employer's Board of Directors, in its sole discretion,
resulting from the Board of Directors annual review of Employee's compensation
each year during the term of this Agreement.

10. Salary Continuation During Disability. If Employee for any reason (except as
expressly provided below) becomes temporarily or permanently disabled so that he
is unable to perform the duties under this Agreement, Employer agrees to pay
Employee the base salary otherwise payable to Employee pursuant to paragraph 9
of this Agreement, reduced by the amounts received by Employee from state
disability insurance, or worker's compensation or other similar insurance
benefits through policies provided by Employer, for a period of six (6) months
from the date of disability.

For purposes of this paragraph 10, "disability" shall be defined as provided in
Employer's disability insurance program. Notwithstanding anything herein to the
contrary, Employer shall have no obligation to make payments for a disability
resulting from the deliberate, intentional actions of Employee, such as, but not
limited to, attempted suicide or chemical dependence of Employee.

11. Incentive Compensation. Employee shall be entitled to participate in the HCC
Incentive Compensation Plan (the "Bonus Plan") and the HCC Employee Stock
Ownership Plan ("ESOP"). Under the Bonus Plan, Employee will be entitled to
receive annual cash bonus payments, subject to the terms and conditions of the
Bonus Plan as in effect for a given year including achievement of the budgeted
net income target for a given year. Under the ESOP, annual contributions may be
made for the benefit of the Employee, subject to the terms and conditions of the
ESOP and in the sole discretion of the Board of Directors of HCC. Under no
circumstance shall a right to receive bonus compensation other than pursuant to
the Bonus Plan and/or contributions other than pursuant to the ESOP, exist in
favor of or accrue to or for the benefit of Employee.

12. Stock Options/Employment Rights. Any future grant of stock options to
Employee pursuant to Employer's 1994 Tandem Stock Option Plan ("1994 Plan"),
shall be determined by and in the sole discretion of the Board of Directors of
Employer. Any such stock option grant shall be evidenced by a stock option
agreement in the form required by the 1994 Plan. Notwithstanding any provision
of the 1994 Plan or any such stock option agreement to the contrary, no rights
of employment shall be conferred upon Employee or result from the 1994 Plan or
any such stock option agreement. Any employment rights and corresponding duties
of Employee pursuant to his employment by Employer shall be limited to and
interpreted solely in accordance with the terms and provisions of this
Agreement.

13. Other Benefits. Employee shall be entitled to those employee benefits
adopted by Employer for all employees of Employer, subject to applicable
qualification requirements and regulatory approval requirements, if any.
Employee shall be further entitled to the following additional benefits that
shall supplement or replace, to the extent duplicative of any part or all of the
general employee benefits, the benefits otherwise provided to Employee:

(a) Vacation. Employee shall be entitled to twenty-two (22) days of annual
vacation leave at his then existing rate of full salary each year during the
term of this Agreement. Employee may be absent from his employment for vacation
as long as such leave is reasonable and does not jeopardize his responsibilities
and duties specified in this Agreement. The length of vacation should not exceed
two (2) weeks without the approval of Employer's Executive Committee of the
Board of Directors. Vacation time will accrue in accordance with Employer's
personnel policies.

(b) Automobile Allowance and Insurance. Employer will pay to Employee an
automobile allowance in the amount of Four Hundred Seventy-Five Dollars ($475)
per month during the term of this Agreement. Employer shall reimburse Employee
for gasoline expenditures related to business use of the automobile acquired or
used by Employee. Employee 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. Employee shall obtain and maintain public
liability insurance and property damage insurance policies with insurer(s)
acceptable to Employer and with such coverages in such amounts as may be
acceptable to Employer from time to time.

(c) Personal Insurance. Employer will provide medical, life, and disability
insurance for Employee and his dependents with options and coverage consistent
with those of Employer's group medical plan as in effect from time to time and
with insurer's selected by Employer in its sole discretion.

(d) Supplemental Compensation. Employer and Employee acknowledge that they have
entered into an agreement that provides supplemental compensation benefits to
Employee payable upon retirement or as otherwise set forth in such agreement.

14. Annual Physical Examination. Employer shall pay or reimburse Employee for
the cost of an annual physical examination conducted by a California licensed
physician selected by Employee and reasonably acceptable to Employer.

15. Business Expenses. Employee shall be reimbursed for all ordinary and
necessary expenses incurred by Employee in connection with his employment.
Employee shall also be reimbursed for reasonable expenses incurred in activities
associated with promoting the business of Employer, including expenses for
entertainment, travel, conventions, educational programs, club memberships and
similar items. Employer will pay for or will reimburse Employee for such
expenses upon presentation by Employee from time to time of receipts or other
appropriate evidence of such expenditures.

16. Termination of Agreement.

(a) Automatic Termination. This Agreement shall terminate automatically without
further act of the parties and immediately upon the occurrence of any one of the
following events, subject to either party's right, without any obligation
whatsoever, to waive an event reasonably susceptible of waiver, and the
obligation of Employer to pay the amounts which would otherwise be payable to
Employee under this Agreement through the end of the month in which the event
occurs shall cease, except that only in the event of termination based upon
subparagraphs (1), (4) or (11, to the extent of Employer's breach) below shall
Employee be entitled to receive severance payments based upon automatic
termination pursuant to paragraph 16 (d) of this Agreement:

(1) The occurrence of circumstances that make it impossible or impractical for
Employer to conduct or continue its business.

(2) The death of Employee.

(3) The loss by Employee of legal capacity.

(4) The loss by Employer of legal capacity to contract.

(5) The willful, intentional and material breach or the habitual and continued
neglect by the Employee of his employment responsibilities and duties.

(6) The continuous mental or physical incapacity of the Employee, subject to
disability rights under this Agreement.

(7) The Employee's willful and intentional violation of any state or federal
banking or securities laws, or of the Bylaws, rules, policies or resolutions of
Employer, or the rules or regulations of the California Commissioner of
Financial Institutions, Board of Governors of the Federal Reserve System,
Federal Deposit Insurance Corporation, or other regulatory agency or
governmental authority having jurisdiction over the Employer, which has a
material adverse effect upon the Employer.

(8) The written determination by a state or federal banking agency or
governmental authority having jurisdiction over the Employer that Employee is
not suitable to act in the capacity for which he is employed by Employer.

(9) The Employee's conviction of (i) any felony or (ii) a crime involving moral
turpitude, or the Employee's willful and intentional commission of a fraudulent
or dishonest act.

(10) The Employee's willful and intentional disclosure, without authority, of
any secret or confidential information concerning Employer or taking any action
which the Employer'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
Employer.

(11) Either party materially breaches the terms or provisions of this Agreement.

(b) Termination by Employer. Employer may, at its election and in its sole
discretion, terminate this Agreement for any reason, or for no reason, without
prejudice to any other remedy to which Employer may be entitled either at law,
in equity or under this Agreement. Upon such termination, Employee shall
immediately cease performing and discharging the duties and responsibilities of
his position and remove himself and his personal belongings from the Employer's
premises. All rights and obligations accruing to Employee under this Agreement
shall cease at such termination, except that such termination shall not
prejudice Employee's rights regarding employment benefits which shall have
accrued prior to such termination, including the right to receive the severance
pay specified in paragraph 16 (d) below, and any other remedy which Employee may
have at law, in equity or under this Agreement, which remedy accrued prior to
such termination.

(c) Termination by Employee. This Agreement may be terminated by Employee for
any reason, or no reason. Upon such termination, all rights and obligations
accruing to Employee under this Agreement shall cease, except that such
termination shall not prejudice Employee's rights regarding employment benefits
which shall have accrued prior to such termination and any other remedy which
Employee may have at law, in equity or under this Agreement, which remedy
accrued prior to such termination.

(d) Severance Pay - Termination by Employer. In the event of termination by
Employer pursuant to paragraph 16 (b) or automatic termination based upon
paragraph 16 (a) (1), (4) or (11, to the extent of Employer's breach) of this
Agreement, Employee shall be entitled to receive severance pay (in addition to
salary, incentive compensation, or other payments, if any, due Employee) equal
to one-half of Employee's aggregate annual compensation (including an amount
equal to the average annual incentive compensation for the two most recent
complete years) includable in Employee's gross income for federal income tax
purposes during the year the termination occurs, payable in lump sum within
thirty (30) days following such termination. In addition, employee shall be
reimbursed the amount of COBRA premiums paid for the continuation of health
insurance benefits equivalent to those in place at the time of termination for a
period of up to six months after the termination date.

Notwithstanding the foregoing, in the event of a "change in control" as defined
in subparagraph (e) below, Employee shall not be entitled to severance pay
pursuant to this subparagraph (d) and any rights of Employee to severance pay
shall be limited to such rights as are specified in paragraph 16 (e) below.

Employee acknowledges and agrees that severance pay pursuant to this
subparagraph (d) is in lieu of all damages, payments and liabilities on account
of the early termination of this Agreement and the sole and exclusive remedy for
Employee terminated at the will of Employer pursuant to paragraph 16 (b) or
pursuant to certain provisions of paragraph 16 (a) described herein.

(e) Severance Pay - Change in Control. If, in the event of a "change in control"
as defined herein and within a period of two (2) years following consummation of
such a change in control, (i) Employee's employment is terminated; or (ii)
without Employee's consent there occurs (A) any material adverse change in the
nature and scope of Employee's position, responsibilities, duties, or a change
of twenty-five (25) miles or more in the Employee's location of employment, and
any material reduction in salary or benefits, or (B) any event which reasonably
constitutes a demotion, significant diminution or constructive termination (by
resignation or otherwise) of Employee's employment, then Employee shall be
entitled to receive severance pay (in addition to salary, incentive
compensation, or other payments, if any, due Employee). Any such severance pay
due Employee shall be in an amount equal to one times Employee's aggregate
annual compensation (including an amount equal to the average annual incentive
compensation for the two most recent complete years) includable in Employee's
gross income for federal income tax purposes during the year the termination
occurs, payable in lump sum within thirty (30) days following such termination.
In addition, employee shall be reimbursed the amount of COBRA premiums paid for
the continutation of health insurance benefits equivalent to those in place at
the time of termination for a period of up to one-year after the termination
date.

If all or any portion of the amounts payable to the Employee under this
Agreement, either alone or together with other payments which the Employee has
the right to receive from the Employer, 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), such amounts payable hereunder
shall be reduced to the extent necessary so as to cause a reduction of any
excise tax pursuant to Section 4999 of the Code to equal "zero". The
determination of the amount of any such excise taxes shall be made by the
independent accounting firm employed by the Employer immediately prior to the
change in control.

Any such severance shall be payable in lump sum within thirty (30) days
following such termination. Such severance payment, if any, shall be in lieu of
all damages, payments and liabilities on account of the events described above
for which such severance payment, if any, may be due Employee and any severance
payment rights of Employee under paragraph 16 (d) of this Agreement. This
paragraph 16 (e) shall be binding upon and inure to the benefit of the parties
and any successors or assigns of Employer or any "person" as defined herein.

Notwithstanding the foregoing, Employee shall not be entitled to receive nor
shall Employer, its successors, assigns or any "person" as defined herein be
obligated to pay severance payments pursuant to this paragraph 16 (e) in the
event of an occurrence described in paragraph 16 (a), subparagraphs (5), (7),
(8), (9), (10) or (11, to the extent of an Employee breach), or in the event
Employee terminates employment in accordance with paragraph 16 (c) and the
termination is not a result of or based upon the occurrence of any event
described in paragraph 16 (e) (ii) above.

A "change in control" of Employer for purposes of this Agreement and paragraph
16 (e) shall mean the occurrence of any of the following events with respect to
Employer (with the term "Employer" being defined for such a change in control to
include Employer and any of its subsidiaries ): (i) a change in control of a
nature that would be required to be reported in response to Item 6(e) of
Schedule 14A of Regulation 14A promulgated under the Securities Exchange Act of
1934, as amended (the "Exchange Act"), or in response to any other form or
report to the regulatory agencies or governmental authorities having
jurisdiction over the Employer or any stock exchange on which the Employer's
shares are listed which requires the reporting of a change in control; (ii) any
merger, consolidation or reorganization of the Employer in which the Employer
does not survive; (iii) any sale, lease, exchange, mortgage, pledge, transfer or
other disposition (in one transaction or a series of transactions) of any assets
of the Employer having an aggregate fair market value of fifty percent (50%) of
the total value of the assets of the Employer, reflected in the most recent
balance sheet of the Employer; (iv) a transaction whereby any "person" (as such
term is used in the Exchange Act) or any individual, corporation, partnership,
trust or any other entity is or becomes the beneficial owner, directly or
indirectly, of securities of the Employer representing twenty-five percent (25%)
or more of the combined voting power of the Employer's then outstanding
securities; (v) a situation where, in any one-year period, individuals who at
the beginning of such period constitute the Board of Directors of the Employer
cease for any reason to constitute at least a majority thereof, unless the
election, or the nomination for election by the Employer's shareholders, of each
new director is approved by a vote of at least three-quarters (3/4) of the
directors then still in office who were directors at the beginning of the
period; or (vi) the shareholders of the Employer approve the sale or transfer of
substantially all of the Employer's assets to parties that are not within a
"controlled group of corporations" (as that term is defined in section 1563 of
the Code) in which the Employer is a member.

17. Notices. Any notices to be given hereunder by either party to the other
shall be in writing and may be transmitted by personal delivery or by U.S. mail,
registered or certified, postage prepaid with return receipt requested. Mailed
notices shall be addressed to the parties at the addresses listed as follows:

Employer: Heritage Commerce Corp
150 Almaden Blvd.
San Jose, CA 95113

Employee: At the address listed in Employee's personnel file

Each party may change the address for receipt of notices by written notice in
accordance with this paragraph 17. Notices delivered personally shall be deemed
communicated as of the date of actual receipt; mailed notices shall be deemed
communicated as of three (3) days after the date of mailing.

18. Arbitration. 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 Employer 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"), presently located in
San Francisco, California, in accordance with the rules and procedures of JAMS
then in effect. In the event JAMS is unable or unwilling to conduct such
arbitration, 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"), presently located in San Francisco,
California, shall conduct such binding arbitration in accordance with the rules
and procedures of the AAA then in effect. 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. Any award rendered by JAMS or AAA shall be final and
binding upon the parties, and as applicable, their respective heirs,
beneficiaries, 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 Jose, California, unless otherwise agreed to
by the parties.

19. Attorneys' Fees and Costs. In the event of litigation, arbitration or any
other action or proceeding between the parties to interpret or enforce this
Agreement or any part thereof or otherwise arising out of or relating to this
Agreement, the prevailing party shall be entitled to recover its costs related
to any such action or proceeding and its reasonable fees of attorneys,
accountants and expert witnesses incurred by such party in connection with any
such action or proceeding. The prevailing party shall be deemed to be the party
which obtains substantially the relief sought by final resolution, compromise or
settlement, or as may otherwise be determined by order of a court of competent
jurisdiction in the event of litigation, an award or decision of one or more
arbitrators in the event of arbitration, or a decision of a comparable official
in the event of any other action or proceeding. Every obligation to indemnify
under this Agreement includes the obligation to pay reasonable fees of
attorneys, accountants and expert witnesses incurred by the indemnified party in
connection with matters subject to indemnification.

20. Entire Agreement. This Agreement supersedes any and all other agreements,
either oral or in writing, between the parties with respect to the employment of
Employee by Employer and contains all of the covenants and agreements between
the parties with respect to the employment of Employee by Employer. 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.

21. Modifications. Any modification of this Agreement will be effective only if
it is in writing and signed by a party or its authorized representative.

22. Waiver. The failure of either party to insist on strict compliance with any
of the terms, provisions, covenants, or conditions of this Agreement by the
other party shall not be deemed a waiver of any term, provision, covenant, or
condition, individually or in the aggregate, unless such waiver is in writing,
nor shall any waiver or relinquishment of any right or power at any one time or
times be deemed a waiver or relinquishment of that right or power for all or any
other times.

23. Partial Invalidity. If any provision in this Agreement is held by a court of
competent jurisdiction to be invalid, void, or unenforceable, the remaining
provisions shall nevertheless continue in full force and effect without being
impaired or invalidated in any way.

24. Interpretation. This Agreement shall be construed without regard to the
party responsible for the preparation of the Agreement and shall be deemed to
have been prepared jointly by the parties. Any ambiguity or uncertainty existing
in this Agreement shall not be interpreted against either party, but according
to the application of other rules of contract interpretation, if an ambiguity or
uncertainty exists.

25. Governing Law and Venue. The laws of the State of California, other than
those laws denominated choice of law rules, shall govern the validity,
construction and effect of this Agreement. Any action which in any way involves
the rights, duties and obligations of the parties hereunder shall be brought in
the courts of the State of California and venue for any action or proceeding
shall be in Santa Clara County or in the United States District Court for the
Northern District of California, and the parties hereby submit to the personal
jurisdiction of said courts.

26. Payments Due Deceased Employee. If Employee dies prior to the expiration of
the term of his employment, any payments that may be due Employee from Employer
under this Agreement as of the date of death shall be paid to Employee's heirs,
beneficiaries, successors, permitted assigns or transferees, executors,
administrators, trustees, or any other legal or personal representatives.

27. Assignment/Binding Effect. Except as specifically set forth in this
Agreement, the Employee may not assign, delegate or otherwise transfer any of
the Employee's rights, benefits, duties or obligations under this Agreement
without the prior written consent of the Employer. This Agreement shall inure to
the benefit of and be binding upon the Employer and its successors and assigns,
and the Employee and the Employee's heirs, beneficiaries, successors, permitted
assigns or transferees, executors, administrators, trustees, and any other legal
or personal representatives.

28. Effect of Termination on Certain Provisions. Upon the termination of this
Agreement, the obligations of the Employer and Employee hereunder shall cease
except to the extent of Employer's obligation to make payments, if any, to or
for the benefit of Employee following termination, and provided that paragraphs
4, 5, 6, 7, 18, 19, 20, 23, 24, 25, 26, and 27 shall remain in full force and
effect.

29. Advice of Counsel and Advisors. Employee acknowledges and agrees that he has
read and understands the terms and provisions of this Agreement and prior to
signing this Agreement, he has read and had the advice of counsel and/or such
other advisors as he deemed appropriate in connection with his review and
analysis of such terms and provisions of this Agreement.

IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written in the City of San Jose, County of Santa Clara, State of
California.

EMPLOYER:

HERITAGE COMMERCE CORP

EMPLOYEE:

By:

______________________________
Richard L. Conniff
President and Chief Operating Officer

__________________________
Kenneth A. Corsello

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AMENDMENT NO. 1

TO

EMPLOYMENT AGREEMENT

This Amendment No. 1 to the Employment Agreement by and between Heritage
Commerce Corp (the "Employer") and Kenneth A. Corsello (the "Employee"), dated
May 11, 2001, (the "Agreement"), is entered into on May 11, 2004 for the
purposes stated hereinafter.

WHEREAS, the Employer is a California corporation and bank holding company
registered under the Bank Holding Company Act of 1956, as amended ("HCC");

WHEREAS, the Employer and Employee entered into the Agreement for the purposes
set forth in the Agreement; and

WHEREAS, the Employer and Employee believe it to be in their respective best
interests to amend the Agreement as set forth hereinafter to clarify the
interpretation of and intention of the parties.

NOW, THEREFORE, the Employee and the Employer agree as follows:

1. Section 16 (a) (1) through (11) is hereby deleted and replaced with the
following:

(1) The occurrence of circumstances that make it impossible or impractical for
Employer to conduct or continue its business.

(2) The death of Employee.

(3) The loss by Employee of legal capacity.

(4) The loss by Employer of legal capacity to contract.

(5) The willful, intentional and material breach or the habitual and continued
neglect by the Employee of his employment responsibilities and duties;

(6) The continuous mental or physical incapacity of the Employee, subject to
disability rights under this Agreement;

(7) The Employee's willful and intentional violation of any federal banking or
securities laws, or of the Bylaws, rules, policies or resolutions of Employer,
or the rules or regulations of the California Commissioner of Financial
Institutions, Board of Governors of the Federal Reserve System, Federal Deposit
Insurance Corporation, or other regulatory agency or governmental authority
having jurisdiction over the Employer, which in any of the foregoing
circumstances has a material adverse effect upon the Employer;

(8) The Employee's final conviction after exhaustion of all appeals of (i) any
felony or (ii) a crime involving moral turpitude, or the Employee's willful and
intentional commission of a fraudulent or dishonest act, which in any of the
foregoing circumstances has a material adverse effect upon the Employer; or

(9) Either party breaches the terms or provisions of this Agreement and such
breach has a material adverse effect upon the non-breaching party.

2. The last sentence of paragraph 8 is hereby amended to read as follows:

Employer shall have no obligation to pay severance benefits to Employee in
accordance with paragraph 16 (d) of this Agreement in the event that the
Employee's employment is terminated in connection with the Employee's failure to
qualify for a surety bond at any time during the term of this Agreement and such
failure to qualify results from an occurrence described in paragraph 16(a) (5),
(7), (8), or (9, to the extent of an Employee breach).

3. The first sentence of paragraph 16 (d) is hereby amended to read as follows:

In the event of termination by Employer pursuant to paragraph 16 (b) or
automatic termination based upon paragraph 16 (a) (1), (4) or (9, to the extent
of Employer's breach) of this Agreement, Employee shall be entitled to receive,
commencing immediately following the termination, (i) severance pay (in addition
to base salary, incentive compensation, or other payments, if any, due Employee)
equal to one (1) times Employee's aggregate annual compensation includable in
Employee's gross income for federal income tax purposes during the year the
termination occurs, payable in twenty-four (24) substantially equal installments
on the fifteenth and last day of each month, (ii) COBRA insurance coverage
rights as may be applicable; provided, that, Employer shall pay the costs of
Employee's COBRA medical and dental insurance coverages for the period until the
earlier of twelve (12) months following the date of termination or the date upon
which the Employee obtains such insurance coverages from another employer or
other source, and (iii) professional outplacement services from a firm mutually
agreeable to Employer and Employee at a cost payable by Employer up to five
thousand dollars ($5,000).

4. The fourth paragraph of 16 (e) is hereby amended to read as follows:

Notwithstanding the foregoing, Employee shall not be entitled to receive nor
shall Employer, its successors, assigns or any "person" as defined herein be
obligated to pay severance payments pursuant to this paragraph 16 (e) in the
event of an occurrence described in paragraph 16 (a), subparagraphs (5), (7),
(8), or (9, to the extent of an Employee breach), or in the event Employee
terminates employment in accordance with paragraph 16 (c) and the termination is
not a result of or based upon the occurrence of any event described in paragraph
16 (e) (ii) above or a voluntary termination within the twelve (12) month period
immediately following a change in control as described above.

5. Except as amended by this Amendment No. 1, all of the provisions of the
Agreement shall be unmodified and remain in full force and effect.

 

 

IN WITNESS WHEREOF, the Employee and the Employer have executed this Amendment
No. 1 to the Agreement, effective as of the date first above written.

EMPLOYER:

HERITAGE COMMERCE CORP

EMPLOYEE:

By:

______________________________
Richard L. Conniff
President and Chief Operating Officer

__________________________
Kenneth A. Corsello

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