Document:

Exhibit  10.1

MONACO
COACH CORPORATION

2007
EMPLOYEE STOCK PURCHASE PLAN

The following
constitute the provisions of the Employee Stock Purchase Plan of Monaco Coach
Corporation.

1.         Purpose.  The purpose of the Plan is to provide
employees of the Company and its Designated Subsidiaries with an opportunity to
purchase Common Stock of the Company through accumulated payroll
deductions.  It is the intention of the
Company to have the Plan qualify as an “Employee Stock Purchase Plan” under
Section 423 of the Internal Revenue Code of 1986, as amended.  The provisions of the Plan, accordingly,
shall be construed so as to extend and limit participation in a manner
consistent with the requirements of that section of the Code.

2.         Definitions.

(a)           “Board” shall mean the Board of
Directors of the Company or its committee that has been appointed to administer
the Plan, as applicable.

(b)           “Code” shall mean the Internal
Revenue Code of 1986, as amended.

(c)           “Common Stock” shall mean the Common
Stock of the Company.

(d)           “Company” shall mean Monaco Coach
Corporation.

(e)           “Compensation” shall mean all base
straight time gross earnings, including commissions, but excluding all payments
for overtime, shift premium, incentive compensation, incentive payments,
bonuses and other compensation.

(f)            “Designated Subsidiaries” shall mean
the Subsidiaries which have been designated by the Board from time to time in
its sole discretion as eligible to participate in the Plan.

(g)           “Employee” shall mean any individual
who is an Employee of the Company or any Designated Subsidiary for tax purposes
whose customary employment with the Company or any Designated Subsidiary is at
least twenty (20) hours per week and more than five (5) months in any
calendar year.  For purposes of the Plan,
the employment relationship shall be treated as continuing intact while the
individual is on sick leave or other leave of absence approved by the
Company.  Where the period of leave
exceeds 90 days and the individual’s right to reemployment is not guaranteed
either by statute or by contract, the employment relationship will be deemed to
have terminated on the 91st day of such leave.

(h)           “Enrollment Date” shall mean the
first day of each Offering Period.

(i)            “Exercise Date” shall mean the last
day of each Offering Period.

(j)            “Fair Market Value” shall mean, as
of any date, the value of Common Stock determined as follows:

(i)            If the Common Stock is listed on any
established stock exchange or a national market system, including without
limitation the New York Stock Exchange, its Fair Market Value will be the
closing sales price for the Common Stock (or the closing bid, if no sales were
reported) as quoted on such exchange or system on the date of determination, as
reported in The Wall Street Journal or such other
source as the Board deems reliable, or;

(ii)           If the Common Stock is regularly quoted by a
recognized securities dealer but selling prices are not reported, its Fair
Market Value will be the mean of the closing bid and asked prices for the
Common Stock on the date of determination, as reported in The Wall
Street Journal or such other source as the Board deems reliable, or;

(iii)          In the absence of an established market for
the Common Stock, its Fair Market Value will be determined in good faith by the
Board.

(k)           “Offering Period” shall mean a period
of approximately six (6) months, commencing on the first Trading Day on or
after July 15 and January 15 of each year and terminating on the last Trading
Day in the period ending six months later, during which an option granted
pursuant to the Plan may be exercised; provided, however, that the first
Offering Period under the Plan shall be an Offering Period of approximately
twelve (12) months, commencing on July 16, 2007 and ending on the last Trading
Day in the period ending twelve (12) months later.  The second Offering Period under the Plan
shall commence on the first Trading Day on or after July 15, 2008 and shall end
on the last Trading Day in the period ending six months later.  The duration of Offering Periods may be changed
pursuant to Section 4 of this Plan.

(l)            “Plan” shall mean this 2007 Employee
Stock Purchase Plan.

(m)          “Purchase Price” shall mean an amount
equal to 85% of the Fair Market Value of a share of Common Stock on the
Enrollment Date or on the Exercise Date, whichever is lower.

(n)           “Reserves” shall mean the number of
shares of Common Stock covered by each option under the Plan which have not yet
been exercised and the number of shares of Common Stock which have been
authorized for issuance under the Plan but not yet placed under option.

(o)           “Share” shall mean a share of Common
Stock, subject to adjustment as set forth in Section 18(a).

(p)           “Subsidiary” shall mean a
corporation, domestic or foreign, of which not less than 50% of the voting
shares are held by the Company or a Subsidiary, whether or not such corporation
now exists or is hereafter organized or acquired by the Company or a
Subsidiary.

(q)           “Trading Day” shall mean a day on
which the U.S. national stock exchanges and the New York Stock Exchange are
open for trading.

3.         Eligibility.

(a)           Any Employee who shall be employed by the
Company or a Designated Subsidiary on a given Enrollment Date shall be eligible
to participate in the Plan.

(b)           Any provisions of the Plan to the contrary
notwithstanding, no Employee shall be granted an option under the Plan
(i) to the extent, immediately after the grant, such Employee (or any
other person whose stock would be attributed to such Employee pursuant to
Section 424(d) of the Code) would own capital stock of the Company and/or
hold outstanding options to purchase such stock possessing five 

percent (5%) or more of the total combined voting power or value
of all classes of the capital stock of the Company or of any Subsidiary, or
(ii) to the extent his or her rights to purchase stock under all employee
stock purchase plans of the Company and its subsidiaries to accrue at a rate
which exceeds Twenty Five Thousand Dollars ($25,000) worth of stock
(determined at the fair market value of the shares at the time such option is
granted) for each calendar year in which such option is outstanding at any
time.

4.         Offering Periods.  The Plan shall be implemented by consecutive
Offering Periods with the first Offering Period commencing on July 16, 2007 and
ending on the last Trading Day in the period ending twelve (12) months
later.  The second Offering Period under
the Plan shall commence on the first Trading Day on or after July 15, 2008 and
shall end on the last Trading Day in the period ending six months later.  The Plan shall continue with six month
Offering Periods thereafter until terminated in accordance with Section 19
hereof.  The Board shall have the power
to change the duration of Offering Periods (including the commencement dates
thereof) with respect to future offerings without shareholder approval if such
change is announced prior to the scheduled beginning of the first Offering
Period to be affected thereafter.

5.         Participation.  An Employee who is eligible to participate in
the Plan may become a participant by (i) submitting to the Company’s payroll
office (or its designee), on or before a date prescribed by the Company prior
to an applicable Enrollment Date, a properly completed subscription agreement
authorizing payroll deductions in the form provided by the Company for such
purpose, or (ii) following an electronic or other enrollment procedure
prescribed by the Company.

6.         Payroll Deductions.

(a)           At the time a participant files his or her
subscription agreement, he or she shall elect to have payroll deductions made
on each pay day during the Offering Period in an amount not exceeding ten
percent (10%) of the Compensation which he or she receives on each pay day
during the Offering Period, and the aggregate of such payroll deductions during
the Offering Period shall not exceed ten percent (10%) of the participant’s
Compensation during said Offering Period.

(b)           Payroll deductions for a participant shall
commence on the first payroll following the Enrollment Date and shall end on
the last payroll in the Offering Period to which such authorization is
applicable, unless sooner terminated by the participant as provided in Section 10
hereof.

(c)           All payroll deductions made for a
participant shall be credited to his or her account under the Plan and will be
withheld in whole percentages only.  A
participant may not make any additional payments into such account.

(d)           A participant may discontinue his or her
participation in the Plan as provided in Section 10, or may increase or
decrease the rate of his or her payroll deductions during the Offering Period
by (i) properly completing and submitting to the Company’s payroll office (or
its designee), on or before a date prescribed by the Company prior to an
applicable Exercise Date, a new subscription agreement authorizing the change
in payroll deduction rate in the form provided by the Company for such purpose,
or (ii) following an electronic or other procedure prescribed by the
Company.  If a participant has not
followed such procedures to change the rate of payroll deductions, the rate of
his or her payroll deductions will continue at the originally elected rate
throughout the Offering Period and future Offering Periods (unless terminated
as provided in Section 10).  The Board
may, in its sole discretion, limit the nature and/or number of payroll
deduction rate changes that may be made by participants during any Offering
Period.  Any change in payroll deduction
rate made pursuant to this Section 6(d) will be effective as of the first full
payroll period following five (5) business days after the date on which the
change is made by the participant (unless the Company, in its sole discretion,
elects to process a given change in payroll deduction rate more quickly).

(e)           Notwithstanding the foregoing, to the extent
necessary to comply with Section 423(b)(8) of the Code and
Section 3(b) hereof, a participant’s payroll deductions may be decreased
to 0% at such time during any Offering Period which is scheduled to end during
the current calendar year (the “Current Offering Period”) that the aggregate of
all payroll deductions which were previously used to purchase stock under the
Plan in a prior Offering Period which ended during that calendar year plus all
payroll deductions accumulated with respect to the Current Offering Period
equal $21,250.  Payroll deductions shall
recommence at the rate provided in such participant’s subscription agreement at
the beginning of the first Offering Period which is scheduled to end in the
following calendar year, unless terminated by the participant as provided in
Section 10 hereof.

(f)            At the time the option is exercised, in
whole or in part, or at the time some or all of the Company’s Common Stock
issued under the Plan is disposed of, the participant must make adequate
provision for the Company’s federal, state, or other tax withholding
obligations, if any, which arise upon the exercise of the option or the
disposition of the Common Stock.  At any
time, the Company may, but will not be obligated to, withhold from the participant’s
compensation the amount necessary for the Company to meet applicable
withholding obligations, including any withholding required to make available
to the Company any tax deductions or benefits attributable to sale or early
disposition of Common Stock by the Employee.

7.         Grant of Option.  On the Enrollment Date of each Offering
Period, each eligible Employee participating in such Offering Period shall be
granted an option to purchase on the Exercise Date of such Offering Period (at
the applicable Purchase Price) up to a number of shares of the Company’s Common
Stock determined by dividing such Employee’s payroll deductions accumulated
prior to such Exercise Date and retained in the participant’s account as of the
Exercise Date by the applicable Purchase Price; provided that in no event shall
an Employee be permitted to purchase more than 10,000 Shares during each
Offering Period, and provided further that such purchase shall be subject to
the limitations set forth in Sections 3(b) and 12 hereof.  The Employee may accept the grant of such
option with respect to any Offering Period under the Plan, by electing to
participate in the Plan in accordance with the requirements of Section 5.  The Board may, for future
Offering Periods, increase or decrease, in its absolute discretion, the maximum
number of Shares that a participant may purchase during each Offering
Period.   Exercise of the option shall
occur as provided in Section 8 hereof, unless the participant has
withdrawn pursuant to Section 10 hereof, and shall expire on the last day
of the Offering Period.

8.         Exercise of Option.

(a)           Unless a participant withdraws from the Plan
as provided in Section 10 hereof, his or her option for the purchase of
shares will be exercised automatically on the Exercise Date, and the maximum
number of full shares subject to option shall be purchased for such participant
at the applicable Purchase Price with the accumulated payroll deductions in his
or her account.  No fractional shares
will be purchased; any payroll deductions accumulated in a participant’s account
which are not sufficient to purchase a full share shall be retained in the
participant’s account for the subsequent Offering Period, subject to earlier
withdrawal by the participant as provided in Section 10 hereof.  Any other monies left over in a participant’s
account after the Exercise Date shall be returned to the participant.  During a participant’s lifetime, a
participant’s option to purchase shares hereunder is exercisable only by him or
her.

(b)           Notwithstanding any contrary Plan provision,
if the Company determines that, on a given Exercise Date, the number of Shares
with respect to which options are to be exercised may exceed (i) the number of
Shares that were available for sale under the Plan on the Enrollment Date of
the applicable Offering Period, or (ii) the number of Shares available for sale
under the Plan on such Exercise Date, the Board may in its sole discretion (x)
provide that the Company will make a pro rata allocation of the Shares
available for purchase on such Enrollment Date or Exercise Date, as applicable,
in as uniform a manner as will be practicable and as it will determine in its
sole discretion to be equitable among all participants 

exercising options to purchase Shares on such Exercise Date, and either
(x) continue any Offering Period then in effect, or (y) terminate any
Offering Period then in effect pursuant to Section 19.  The Company may make pro rata allocation of
the shares of Common Stock available on the Enrollment Date of any applicable
Offering Period pursuant to the preceding sentence, notwithstanding any
authorization of additional
Shares for issuance under the Plan by the Company’s stockholders
subsequent to such Enrollment Date.

9.         Transfer.  As soon as administratively practicable after
each Exercise Date on which a purchase of Shares occurs, the Company will
arrange the delivery to each participant, as appropriate, the shares purchased
upon exercise of his or her option in a form determined by the Company (in its
sole discretion) and pursuant to rules established by the Company.  No participant will have any voting,
dividend, or other stockholder rights with respect to Shares subject to any
option granted under the Plan until such shares have been purchased and
delivered to the participant as provided in this Section 9.

10.       Withdrawal; Termination
of Employment.

(a)           Under procedures established by the Company,
a participant may withdraw all but not less than all the payroll deductions
credited to his or her account and not yet used to exercise his or her option
under the Plan at any time by (i) submitting to the Company’s payroll office
(or its designee) a written notice of withdrawal in the form prescribed by the
Company for such purpose, or (ii) following an electronic or other withdrawal
procedure prescribed by the Company. All of the participant’s payroll
deductions credited to his or her account will be paid to such participant as
promptly as practicable after the effective date of his or her withdrawal and
such participant’s option for the Offering Period will be automatically
terminated, and no further payroll deductions for the purchase of shares will
be made for such Offering Period.  If a
participant withdraws from an Offering Period, payroll deductions will not resume
at the beginning of the succeeding Offering Period unless the participant
delivers to the Company a new subscription agreement.

(b)           Upon a participant’s ceasing to be an
Employee (as defined in Section 2(g) hereof), for any reason, including by
virtue of him or her having failed to remain customarily employed by the
Company for at least twenty (20) hours per week during an Offering Period
in which the Employee is a participant, he or she will be deemed to have
elected to withdraw from the Plan and the payroll deductions credited to such
participant’s account during the Offering Period but not yet used to exercise
the option will be returned to such participant or, in the case of his or her
death, to the person or persons entitled thereto under Section 14 hereof,
and such participant’s option will be automatically terminated.

(c)           A participant’s withdrawal from an Offering
Period will not have any effect upon his or her eligibility to participate in
any similar plan which may hereafter be adopted by the Company or in succeeding
Offering Periods which commence after the termination of the Offering Period
from which the participant withdraws.

11.       Interest.  No interest shall accrue on the payroll
deductions of a participant in the Plan.

12.       Stock.

(a)           The maximum number of shares of the Company’s
Common Stock which shall be made available for sale under the Plan shall be
four hundred thousand (400,000) Shares, subject to adjustment upon changes in
capitalization of the Company as provided in Section 18 hereof.  If on a given Exercise Date the number of
shares with respect to which options are to be exercised exceeds the number of
shares then available under the Plan, the Company shall make a pro rata
allocation of the shares remaining available for purchase in as uniform a
manner as shall be practicable and as it shall determine to be equitable.

(b)           The participant will have no interest or
voting right in shares covered by his option until such option has been
exercised.

13.       Administration.  The Board or a committee of members of the
Board who will be appointed from time to time by, and will serve at the
pleasure of, the Board, will administer the Plan.  The Board will have full and exclusive
discretionary authority to construe, interpret and apply the terms of the Plan,
to determine eligibility, to adjudicate all disputed claims filed under the
Plan and to establish such procedures
that it deems necessary for administration of the Plan (including, without
limitation, to adopt such procedures and sub-plans as are necessary or
appropriate to permit the participation in the Plan by employees who are
foreign nationals or employed outside the United States).  The Board, in its sole discretion and on such
terms and conditions as it may provide, may delegate to one or more individuals
all or any part of its authority and powers under the Plan.  Every finding, decision and determination
made by the Board (or its designee) will, to the full extent permitted by law,
be final and binding upon all parties.

14.       Designation of
Beneficiary.

(a)           A participant may file a written designation
of a beneficiary who is to receive any shares and cash, if any, from the
participant’s account under the Plan in the event of such participant’s death
subsequent to an Exercise Date on which the option is exercised but prior to
the electronic transfer to UBS (or such other broker as is used by the Company
in connection with the Plan) of such shares and prior to delivery of such cash
to the participant.  In addition, a
participant may file a written designation of a beneficiary who is to receive
any cash from the participant’s account under the Plan in the event of such
participant’s death prior to exercise of the option.  If a participant is married and the
designated beneficiary is not the spouse, spousal consent shall be required for
such designation to be effective.

(b)           Such designation of beneficiary may be
changed by the participant at any time by written notice.  In the event of the death of a participant
and in the absence of a beneficiary validly designated under the Plan who is
living at the time of such participant’s death, the Company shall deliver such
shares and/or cash to the executor or administrator of the estate of the
participant, or if no such executor or administrator has been appointed (to the
knowledge of the Company), the Company, in its discretion, may deliver such
shares and/or cash to the spouse or to any one or more dependents or relatives
of the participant, or if no spouse, dependent or relative is known to the
Company, then to such other person as the Company may designate.

15.       Transferability.  Neither payroll deductions credited to a
participant’s account nor any rights with regard to the exercise of an option
or to receive shares under the Plan may be assigned, transferred, pledged or
otherwise disposed of in any way (other than by will, the laws of descent and
distribution or as provided in Section 14 hereof) by the participant.  Any such attempt at assignment, transfer,
pledge or other disposition shall be without effect, except that the Company
may treat such act as an election to withdraw funds from an Offering Period in
accordance with Section 10 hereof.

16.       Use of Funds.  All payroll deductions received or held by
the Company under the Plan may be used by the Company for any corporate
purpose, and the Company shall not be obligated to segregate such payroll
deductions.

17.       Reports.  Individual accounts will be maintained for
each participant in the Plan.  Statements
of account will be given to participating Employees at least annually, which
statements will set forth the amounts of payroll deductions, the Purchase
Price, the number of shares purchased and the remaining cash balance, if any.

18.       Adjustments Upon Changes
in Capitalization.

(a)           Changes in Capitalization.  Subject to any required action by the
shareholders of the Company, the Reserves as well as the price per share of
Common Stock covered by each option under the Plan which has not yet been
exercised shall be proportionately adjusted for any increase or decrease in the
number of issued shares of Common Stock resulting from a stock split, reverse
stock split, stock dividend, combination or reclassification of the Common
Stock, or any other increase or decrease in the number of shares of Common
Stock effected without receipt of consideration by the Company; provided,
however, that conversion of any convertible securities of the Company shall not
be deemed to have been “effected without receipt of consideration.”  Such adjustment shall be made by the Board,
whose determination in that respect shall be final, binding and
conclusive.  Except as expressly provided
herein, no issuance by the Company of shares of stock of any class, or
securities convertible into shares of stock of any class, shall affect, and no
adjustment by reason thereof shall be made with respect to, the number or price
of shares of Common Stock subject to an option.

(b)           Dissolution or Liquidation.  In the event of the proposed dissolution or
liquidation of the Company, the Offering Period will terminate immediately
prior to the consummation of such proposed action, unless otherwise provided by
the Board.

(c)           Merger or Asset Sale.  In the event of a proposed sale of all or
substantially all of the assets of the Company, or the merger of the Company
with or into another corporation, each option under the Plan shall be assumed
or an equivalent option shall be substituted by such successor corporation or a
parent or subsidiary of such successor corporation, unless the Board
determines, in the exercise of its sole discretion and in lieu of such
assumption or substitution, to shorten the Offering Period then in progress by
setting a new Exercise Date (the “New Exercise Date”) or to cancel each
outstanding right to purchase and refund all sums collected from participants
during the Offering Period then in progress. 
If the Board shortens the Offering Period then in progress in lieu of
assumption or substitution in the event of a merger or sale of assets, the
Board shall notify each participant in writing, at least ten (10) business
days prior to the New Exercise Date, that the Exercise Date for his option has
been changed to the New Exercise Date and that his option will be exercised
automatically on the New Exercise Date, unless prior to such date he has
withdrawn from the Offering Period as provided in Section 10 hereof.  For purposes of this paragraph, an option
granted under the Plan shall be deemed to be assumed if, following the sale of
assets or merger, the option confers the right to purchase, for each share of
option stock subject to the option immediately prior to the sale of assets or
merger, the consideration (whether stock, cash or other securities or property)
received in the sale of assets or merger by holders of Common Stock for each
share of Common Stock held on the effective date of the transaction (and if
such holders were offered a choice of consideration, the type of consideration
chosen by the holders of a majority of the outstanding shares of Common Stock);
provided, however, that if such consideration received in the sale of assets or
merger was not solely common stock of the successor corporation or its parent
(as defined in Section 424(e) of the Code), the Board may, with the
consent of the successor corporation and the participant, provide for the
consideration to be received upon exercise of the option to be solely common
stock of the successor corporation or its parent equal in fair market value to
the per share consideration received by holders of Common Stock and the sale of
assets or merger.

The Board may, if
it so determines in the exercise of its sole discretion, also make provision
for adjusting the Reserves, as well as the price per share of Common Stock
covered by each outstanding option, in the event the Company effects one or
more reorganizations, recapitalization, rights offerings or other increases or
reductions of shares of its outstanding Common Stock, and in the event of the
Company being consolidated with or merged into any other corporation.

19.       Amendment
or Termination.

(a)           The Board may at any time and for any reason
terminate or amend the Plan.  Except as
provided in Section 18 and this Section 19, no such termination can affect
options previously granted under the Plan, provided that an Offering Period may
be terminated by the Board on any Exercise Date if the Board determines that
the termination or suspension of the Plan is in the best interests of the
Company and its stockholders.  Except as
provided in Section 18 and this Section 19, no amendment may make any change in
any option theretofore granted which adversely affects the rights of any
participant.  To the extent necessary to
comply with Section 423 of the Code (or any successor rule or provision or any
other applicable law, regulation or stock exchange rule), the Company will
obtain stockholder approval in such a manner and to such a degree as required.

(b)           Without stockholder consent and without
regard to whether any participant rights may be considered to have been “adversely
affected,” the Board will be entitled to change the Offering Periods, limit the
frequency and/or number of changes in the amount withheld during an Offering
Period, establish the exchange ratio applicable to amounts withheld in a
currency other than U.S. dollars, permit payroll withholding in excess of the
amount designated by a participant in order to adjust for delays or mistakes in
the Company’s processing of properly completed withholding elections, establish
reasonable waiting and adjustment periods and/or accounting and crediting
procedures to ensure that amounts applied toward the purchase of Common Stock
for each participant properly correspond with amounts withheld from the
participant’s Compensation, and establish such other limitations or procedures
as the Board determines in its sole discretion advisable which are consistent
with the Plan.

(c)           In the event the Board determines that the
ongoing operation of the Plan may result in unfavorable financial accounting
consequences, the Board may, in its discretion and, to the extent necessary or
desirable, modify, amend or terminate the Plan to reduce or eliminate such
accounting consequence including, but not limited to:

(i)            amending the Plan to conform with the safe
harbor definition under Statement of Financial Accounting Standards 123R,
including with respect to an Offering Period underway at the time;

(ii)           altering the Purchase Price for any Offering
Period including an Offering Period underway at the time of the change in
Purchase Price;

(iii)          shortening any Offering Period so that such
Offering Period ends on a new Exercise Date, including an Offering Period
underway at the time of the Board action;

(iv)          reducing the maximum percentage of
Compensation a participant may elect to set aside as payroll deductions; and

(v)           reducing the maximum number of Shares a
participant may purchase during any Offering Period.

Such modifications or
amendments will not require stockholder approval or the consent of any Plan
participants.

20.       Notices.  All notices or other communications by a
participant to the Company under or in connection with the Plan shall be deemed
to have been duly given when received in the form specified by the Company at
the location, or by the person, designated by the Company for the receipt
thereof.

21.       Conditions Upon Transfer
of Shares.  Shares shall not be
transferred with respect to an option unless the exercise of such option and
the electronic transfer of such shares pursuant thereto shall comply with 

all applicable provisions
of law, domestic or foreign, including, without limitation, the Securities Act
of 1933, as amended, the Securities Exchange Act of 1934, as amended, the rules
and regulations promulgated thereunder, and the requirements of any stock
exchange upon which the shares may then be listed, and shall be further subject
to the approval of counsel for the Company with respect to such compliance.

As a condition to
the exercise of an option, the Company may require the person exercising such
option to represent and warrant at the time of any such exercise that the
shares are being purchased only for investment and without any present
intention to sell or distribute such shares if, in the opinion of counsel for
the Company, such a representation is required by any of the aforementioned
applicable provisions of law.

22.       Term of Plan.  The Plan shall become effective upon the
earlier to occur of its adoption by the Board of Directors or its approval by
the shareholders of the Company.  It
shall continue in effect for a term of thirty (30) years unless sooner
terminated under Section 19 hereof.Exhibit 10.1

CONSULTING AGREEMENT

This CONSULTING AGREEMENT (this “Agreement”)
is entered into as of February 8, 2007, by and between HERITAGE BANK OF
COMMERCE, a California banking corporation (the “Bank”),
and John Hounslow, an individual (the “Consultant”).  This Agreement shall become effective on the
Effective Date as defined herein.

BACKGROUND

A.            WHEREAS, the Bank has
entered into an Agreement and Plan of Merger dated February 8, 2007 by and
among the Bank, Heritage Commerce Corp., a California corporation and bank
holding company under the Bank Holding Company Act of 1956, as amended and
Diablo Valley Bank, a California state chartered banking association (the “Merger
Agreement”).

B.            WHEREAS, upon the
Effective Date (as defined in the Merger Agreement) the Bank desires to retain
Consultant to provide certain services and to assist the Bank with the
post-Merger transition.

C.            WHEREAS, the Bank and
Consultant are willing to enter into this Agreement by which Consultant shall
provide services to the Bank and shall agree not to disclose Confidential
Information on the terms and conditions hereinafter set forth.

AGREEMENT

In consideration of the mutual covenants and
agreements contained herein, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, and upon and subject
to the terms and the conditions hereinafter set forth, the parties do hereby
agree as follows:

1.             Engagement.

(a)           Services.  At the Effective Date, the Bank does hereby
engage Consultant, as an independent contractor, to consult regarding the
post-Merger transition, including retention and transition of employees and
customers post-Merger, marketing the “Heritage” brand name and such other
services as may be assigned to him from time to time by the President of the
Bank, and assist with the conversion of the Diablo Valley Bank (“Diablo”)
systems with those of the Bank (the “Services”).  The Consultant shall primarily perform the
Services at the Danville, California office formerly maintained by Diablo,
provided that the Consultant may be required to perform such Services at such
other locations from time to time as the Bank reasonably deems necessary upon
reasonable notice.  Consultant does
hereby accept and agree to such engagement and shall perform the Services for
the Bank in conformity with the provisions of this Agreement.

(b)           Performance.  Consultant represents to the Bank that
Consultant has the qualifications and ability to perform the Services in a
professional manner,  and will use its
best efforts, skills and abilities to perform the Services.  Consultant shall perform Services under the
general direction of the President of the Bank; provided, however,
that Consultant, in its sole discretion, will determine the method, details and
means of performing the Services. 
Consultant 

 1
 

has complied, or will
comply, with all federal, state and local laws requiring business permits,
certificates or licenses required to carry out the Services.

(c)           Time Requirement.  During the Term (as defined in Section 2),
Consultant shall devote sufficient time, energy and skill to the performance of
his engagement with the Bank.

(d)           Determination of
Services.  Both Bank and Consultant
agree to negotiate in good faith with respect to scope and due date targets for
all Services provided pursuant to this Agreement.

(e)           Representations and
Warranties.  Consultant hereby
represents to the Bank the following: 
(i) that Consultant has legal capacity to enter into, and perform the
duties and obligations of, this Agreement; (ii) that the execution and delivery
of this Agreement by Consultant and the performance by Consultant of the
Services and Consultant’s duties hereunder (A) constitutes the valid and
binding obligation of Consultant, enforceable in accordance with its terms, and
(B) shall not constitute a breach of, or otherwise contravene, the terms of any
other agreement to which Consultant is a party or otherwise bound (including
without limitation any non-competition or confidentiality agreements Consultant
may have with other parties).

2.             Term.  The Bank will engage Consultant, and
Consultant will provide the Services to the Bank, under the terms of this
Agreement commencing on the Effective Date until December 31, 2007 (the “Term”).  With the
exception of the Bank’s duty to continue to pay Consultant the unpaid balance
of the Consulting Fee following the end of the Term, as set forth in Section
3(a) below, this Agreement shall terminate at the end of the Term.

3.             Compensation.

(a)           Consulting Fee.  The Bank shall pay Consultant a consulting
fee equal to the total of $400,000 (the “Consulting Fee”)
payable pro rata over thirty (30) months commencing on the first month
following the month in which the Effective Date occur.  (“Payment Period”).  Following the end of the Term the Bank shall
continue to make monthly payments of the Consulting Fee until such time as the
Consulting Fee has been paid in full.  If
Consultant dies prior to the time when the Consulting Fee has been paid in
full, then the remaining balance of the Consulting Fee shall be paid to
Consultant’s estate.

(b)           Expenses.  During the Term, the Bank shall reimburse
Consultant, at cost without markup, for all reasonable and documented expenses
with respect to program development, air travel, lodging, meals, home office
supplies and cell phone incurred by Consultant in the performance of the
Services.

(c)           Termination.  If the Bank terminates this Agreement “for
cause” (as hereinafter defined), the Consultant shall not be entitled to any
further compensation from the Bank. 
Termination “for cause” shall mean any act or omission of the Consultant
from one or more of the following categories: (a) a material breach of
Consultant’s covenants or obligations under this Agreement which is caused by
the gross negligence or willful misconduct of the Consultant; (b) embezzlement
and/or failure to properly apply the funds or property of the Bank; or (c)
conviction of a crime resulting in material injury to the business or property
of the Bank.

 2
 

4.             Consultant Is an
Independent Contractor.  Consultant
is, and shall at all times remain, an independent contractor and not an
employee, agent, joint venturer or partner of the Bank.  Nothing in this Agreement shall be
interpreted or construed as creating or establishing the relationship of
employer and employee between the Bank and Consultant or any employee or agent
of Consultant.  Contractor is not an
employee for state or federal tax purposes. 
Consultant is not an agent of the Bank and shall have no right or
authority to make any oral or written contract or commitment binding upon the Bank
or any of the Bank’s affiliates.

5.             Restrictions
Respecting Confidential Information.

(a)           Consultant acknowledges
and agrees that by virtue of the Consultant’s position and involvement with the
business and affairs of the Bank, the Consultant will develop substantial
expertise and knowledge with respect to all aspects of the Bank’s business,
affairs and operations and will have access to all significant aspects of the
business and operations of the Bank and to Confidential and Proprietary
Information (as defined below).

(b)           Consultant hereby
covenants and agrees that, during the Term and thereafter, unless otherwise
authorized by the Bank in writing, Consultant shall not, directly or
indirectly, under any circumstance: (i) disclose to any other person or entity
(other than in the regular course of business of the Bank) any Confidential and
Proprietary Information, other than pursuant to applicable law, regulation or
subpoena or with the prior written consent of the Bank; (ii) act or fail to act
so as to impair the confidential or proprietary nature of any Confidential and
Proprietary Information; (iii) use any Confidential and Proprietary Information
other than for the sole and exclusive benefit of the Bank; or (iv) offer or
agree to, or cause or assist in the inception or continuation of, any such
disclosure, impairment or use of any Confidential and Proprietary Information.
Following the Term, the Consultant shall return all documents, records and other
items containing any Confidential and Proprietary Information to the Bank
(regardless of the medium in which maintained or stored).

(c)           The parties agree that
nothing in this agreement shall be construed to limit or negate the common law
of torts, confidentiality, trade secrets, fiduciary duty and obligations where
such laws provide the Bank with any broader, further or other remedy or
protection than those provided herein.

(d)           Because the breach of
any of the provisions of this Section will result in immediate and irreparable
injury to the Bank for which the Bank will not have an adequate remedy at law,
the Bank shall be entitled, in addition to all other rights and remedies, to
seek a degree of specific performance of the restrictive covenants contained in
this Section and to a temporary and permanent injunction enjoining such breach,
without posting bond or furnishing similar security.

“Confidential and Proprietary Information” shall mean
any and all (i) confidential or proprietary information or material not in the
public domain about or relating to the business, operations, assets or
financial condition of the Bank or any affiliate of the Bank or any of the
Banks’ or any such affiliate’s trade secrets; and (ii) information,
documentation or material not in the public domain by virtue of any action by
or on the part of the Consultant, the knowledge of which gives or may give the
Bank or any affiliate of the Bank an advantage over any person not 

 3
 

possessing such
information. For purposes hereof, the term “Confidential and Proprietary
Information” shall not include any information or material (i) that is known to
the general public other than due to a breach of this Agreement by the
Consultant or (ii) was disclosed to the Consultant by a person who the Consultant
did not reasonably believe was bound to a confidentiality or similar agreement
with the Bank or its affiliates.

6.             Notices.  All notices, requests, consents and other
communications required or permitted hereunder will be in writing and will be deemed
given:  (i) when delivered if delivered
personally (including by courier); (ii) on the third day after mailing, if
mailed, postage prepaid, by registered or certified mail (return receipt
requested); (iii) on the day after mailing if sent by a nationally recognized
overnight delivery service which maintains records of the time, place, and
recipient of delivery; or (iv) upon receipt of a confirmed transmission, if
sent by telecopy or facsimile transmission, in each case to the parties at the
following addresses:

(a)                                  if
to Consultant, to:

John Hounslow

PO Box 839

Diablo, CA  94528

Facsimile No.: 
(925) 855-8542

(b)                                 if
to the Bank, to:

Heritage Bank of Commerce

150 Almaden Blvd.

San Jose, California  95113

Attn:  Walter T. Kaczmarek

Facsimile No.:  (408) 534-4940

with a copy to:

Buchalter Nemer

1000 Wilshire Boulevard, Suite 1500

Los Angeles, California 90017

Attention:  Mark Bonenfant, Esq.

Facsimile No.:  (213) 630-5664

or to such other person or address as a party may designate in writing.

7.             Severability.  In the event that a court of competent
jurisdiction determines that any portion of this Agreement is in violation of
any statute or public policy, then only the portions of this Agreement which
violate such statute or public policy shall be stricken, and all portions of
this Agreement which do not violate any statute or public policy shall continue
in full force and effect.  Furthermore,
any court order striking any portion of this Agreement shall modify the stricken
terms as narrowly as possible to give as much effect as possible to the
intentions of the parties under this Agreement.

 4
 

8.             Assignment.  This Agreement shall not be assignable by
Consultant without the prior written consent of the Bank.  This Agreement shall be binding upon and
shall inure to the benefit of each of the parties hereto and shall inure to the
benefit of their respective successors and assigns (in the case of Consultant,
to the extent that the transfer of this agreement to any such successor or
assign of Consultant has been consented to in writing by the Bank).

9.             Entire Agreement;
Amendments; Waivers.  This Agreement
contains the entire understanding of the parties with respect to, and
supersedes all prior agreements and understandings relating to, the subject
matter hereof.  This
Agreement may be modified only by a written instrument duly executed by each
party hereto.  No
breach of any covenant, agreement, warranty or representation shall be deemed
waived unless expressly waived in writing by the party who might assert such
breach.  No
waiver of any right hereunder shall operate as a waiver of any other right or
of the same or a similar right on another occasion.

10.           Construction.  This Agreement shall be construed and
enforced in accordance with and governed by the laws of the State of
California, without regard to principles of conflicts of laws.

11.           Venue.  The parties hereby agree that any action,
suit or other proceeding arising out of or related to this Agreement or the
relationship (a “Proceeding”) created hereby shall
be conducted only in Santa Clara County, California, and each party hereby
irrevocably consents and submits to the personal jurisdiction of and venue in
United States District Court for the Northern District of California and in the
Superior Court for Santa Clara County for any Proceeding.

12.           Further Assistance.  Consultant shall, upon reasonable notice,
furnish such information and assistance to the Bank and its affiliates as may
be reasonably required by the Bank or its affiliates in connection with any litigation
in which it or any of its affiliates is, or may become, a party; and Consultant
shall receive reimbursement of reasonable expenses incurred in connection with
such assistance.

13.           Attorneys’ Fees.  Consultant and the Bank agree that in any
dispute resolution proceedings arising out of this Agreement, the prevailing
party shall be entitled to its reasonable attorneys’ fees and costs incurred by
it or him in connection with resolution of the dispute in addition to any other
relief granted.

14.           Counterparts.  This Agreement may be executed by the parties
in separate counterparts, each of which when so executed and delivered shall be
an original, but all such counterparts shall together constitute but one and
the same instrument.

15.           Section Headings.  The headings of each Section, subsection or
other subdivision of this Agreement are for reference only and shall not limit
or control the meaning thereof.

 5
 

IN WITNESS WHEREOF, the
parties hereto have executed and delivered this Agreement as of the date first
written above.

	
  

  	
   

  	
  “Bank”

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  HERITAGE BANK OF
  COMMERCE,

  
	
   

  	
   

  	
  a California
  banking corporation

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Walter T.
  Kaczmarek

  	
   

  
	
   

  	
   

  	
   

  	
  Walter T.
  Kaczmarek, President

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  “Consultant”

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  /s/ John Hounslow

  	
   

  
	
   

  	
   

  	
  John Hounslow

  	
   

  

 

 6

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