Exhibit 99.1

SEVERANCE AGREEMENT

THIS SEVERANCE AGREEMENT (“Agreement”) is dated for reference purposes and entered into as of the last date signed, by Heritage Commerce Corp (the “Company”), HERITAGE BANK OF COMMERCE (“Employer”), and RICHARD HAGARTY (“Employee”).

1. RECITALS.

1.1 Employee was hired by Employer on July 16, 2002, and last held the position of EVP/Chief Credit Officer. On October 17, 2007, Employee entered into an Amended and Restated Employment Agreement with the Company and Employer (“Employment Agreement”). This Agreement supersedes the Employment Agreement and the Employment Agreement is terminated.

1.2 On September 5, 2008, Employee tendered his resignation to become effective September 17, 2008 (“Termination Date”).

1.3 Employer will pay Employee all accrued salary and accrued but unused vacation time through the Termination Date. Documented expense reimbursements incurred through the Termination Date will be paid only if submitted to Employer within ten (10) days of the Termination Date in accordance with Employer’s regular business practices.

1.4 Employer is willing to pay Employee an additional severance amount of $164,107.50 in consideration of Employee executing a full release of any and all claims that Employee has against Employer and for the other terms and conditions of this Agreement. The severance payment consists of the following: (i) nine (9) months of Employee’s annual base salary during the year the termination occurs ($122,025.00) and (ii) nine (9) months of the Highest Annual Bonus (as defined in the Employment Agreement), ($42,082.50).

1.5 To the extent provided by federal COBRA law or, if applicable, state insurance laws, and the Employer’s own current health insurance policies, Employee may be eligible to continue group health insurance coverage at Employee’s own expense after September 30, 2008. However, Employer shall pay the costs of Employee’s COBRA medical and dental insurance coverages for the period until the earlier of 9 months following the date of termination or the date upon which the Employee obtains such comparable insurance coverage from another employer or other source, provided that Employee follows the procedures and timelines set forth in the COBRA Notice and Election form previously provided by ADP COBRA Services. Conversion to an individual policy through the provider of the Employer’s health insurance may be available at a later time.

1.6 Employee will return to Employer all Employer and Company written, printed, or electronic documents (and all copies thereof) and other Employer property which was in Employee’s possession or control at any time, including but not limited to Employer and Company files, notes, drawings, records, business plans and forecasts, financial information, computer-recorded information, tangible property (including but not limited to computers), credit cards, entry cards, identification badges and

keys, and any materials of any kind that contain or embody any proprietary or confidential information of Company and Employer (and all copies thereof). Employer and Company agree that Employee make keep the Palm PDA including personal calendar and contact information.

NOW, THEREFORE, IN VIEW OF THE FOREGOING, IN CONSIDERATION FOR THE SEVERANCE OF CLAIM AND RELEASE CONTAINED HEREIN, AND FOR OTHER GOOD AND VALUABLE CONSIDERATION, THE RECEIPT AND SUFFICIENCY OF WHICH ARE ACKNOWLEDGED, EMPLOYEE AND EMPLOYER AGREE AS FOLLOWS:

2. SEVERANCE.

2.1 Incorporation of Recitals. The recitals set forth in Article 1 of this Agreement are incorporated into and form a part of this Agreement.

2.2 Severance Amount. In full and complete settlement of any and all claims against Employer and Company that Employee has, may have or may claim in the future to have as provided herein, Employer will pay to Employee the total gross amount of ONE HUNDRED SIXTY-FOUR THOUSAND, ONE HUNDRED SEVEN AND 50/100, ($164,107.50), less applicable withholdings.

2.3 Payment of Severance Amount. In accordance with the federal Older Workers Benefit Protection Act, which amends the Age Discrimination in Employment Act of 1967 (the “ADEA”), Employer has advised Employee of Employee’s right to receive the Severance Amount at such time that a period of at least seven (7) calendar days has elapsed from the date on which Employee has executed and delivered this Agreement to Employer and shall be payable in twelve (12) substantially equal installments on the first of each month commencing on October 1, 2008. Such installment payments will cease immediately upon any violation of this Agreement.

2.4 Litigation Consultation. Employee agrees to assist and make himself available for and fully cooperate with the Company and the Employer in the prosecution of the pending litigation against Boots Del Biaggio, Sand Hill Capital Partners III, LLC and Merriman Curhan Ford & Co., filed on May 30, 2008.

3. MUTUAL RELEASES.

3.1 Release by Employee. Employee, for and on behalf of Employee, Employee’s heirs, executors, administrators, successors, assigns, attorneys, insurers and agents of each of the foregoing, and the respective predecessors, successors, assigns, heirs, executors, and administrators of each of the foregoing (collectively, “Employee Releasing Parties”), does hereby covenant not to sue or contest, by litigation, arbitration or otherwise, and fully and forever remises, releases, discharges and acquits Employer and Company, their present and former employees, affiliates, parent and subsidiary corporations, companies and divisions, the respective present and former directors, stockholders, officers, employees, attorneys and agents of each of the foregoing, and the respective predecessors, successors and assigns of each of the foregoing (each, an “Employer Party” and collectively the “Employer Parties”) for, of, from and against any and all claims for wages (except for payment of the

Severance Amount pursuant to Sections 2.2 and 2.3 hereunder), benefits, covenants, suits, actions, demands, obligations, liabilities, indebtedness, accounts, judgments, breaches of contract, breaches of duty or any relationship, acts, omissions, misfeasance, malfeasance, cause or causes of action of every type, nature and kind or description, debts, amounts of money, accounts, compensations, contracts, controversies, promises, damages, costs, losses and expenses, of every type, kind, nature, description or character, whether known or unknown, suspected or unsuspected, liquidated or unliquidated, committed or omitted prior to this Agreement, each as though fully set forth herein at length that in any way arise out of, are connected with, or relate to (i) Employee’s employment by Employer or any Employer Party; (ii) the cessation of Employee’s employment; (iii) Employer’s violation of any law, statute or regulation pertaining to Employee’s employment including, but not limited to, Title VII of the Civil Rights Act of 1964, the federal Fair Labor Standards Act, Age Discrimination in Employment Act, California Labor Code, any California Wage Orders, California Fair Employment and Housing Act, any regulations under the foregoing, and any and all subsequent amendments to any of the foregoing; (iv) Employer’s or any Employer Party’s breach of contract (except for a breach of this Agreement), including without limitation the employment agreements, or other violation of rules pertaining to Employee’s employment including, but not limited to, severance pay, sick leave, holiday pay, vacation pay, life insurance, group medical insurance or any other fringe benefit of the Employer or any Employer Party or workers’ compensation or disability claims; and (v) any other claim, loss, damages or injury, known or unknown, suspected or unsuspected, liquidated or unliquidated, which arises from or related in any way to any conduct of the Employer or any Employer Party during the time of employment of Employee irrespective of the nature of the conduct (collectively “Employee Released Claims”). Notwithstanding the foregoing, the claims released and discharged under Section 3.1 shall in no event include any claims by Employee for indemnification as a director, officer, employee or agent of Employer to the fullest extent permissible under contract law, by-laws, or other charter provisions.

3.2 Release by Employer. Company and Employer, for and on behalf of Company and Employer and each Employer Party, does hereby covenant not to sue or contest, by litigation, arbitration or otherwise, and fully and forever remises, releases, discharges and acquits Employee, and any Employee Releasing Party, for, of, from and against any and all claims, wages, benefits, covenants, suits, actions, demands, obligations, liabilities, indebtedness, accounts, judgments, breaches of contract, breaches of duty or any relationship, acts, omissions, misfeasance, malfeasance, cause or causes of action of every type, nature and kind or description, debts, amounts of money, accounts, compensations, contracts, controversies, promises, damages, costs, losses and expenses, of every type, kind, nature, description or character, whether known or unknown, suspected or unsuspected, liquidated or unliquidated, committed or omitted prior to this Agreement, each as though fully set forth herein at length that in any way arise out of, are connected with, or relate to (i) Employee’s employment by Employer or any Employer Party; (ii) the cessation of Employee’s employment; (iii) Employee’s breach of contract (except for a breach of this Agreement), including without limitation the Employment Agreements, or other violation of rules pertaining to Employee’s employment and (iv) any other claim, loss, damages or injury, known or unknown, suspected or unsuspected, liquidated or unliquidated, which arises from or related in any way to any conduct of the Employee during the time of employment by Employer or any Employer Party irrespective of the nature of the conduct, but expressly excluding claims, liability, damages, penalties, levies, fines, costs or expenses suffered or

incurred by Employer or Company or any Employer party due to the reckless or intentional violation by Employee of any state or federal law, rule or regulation applicable to Employer or any Employer Party during the term of employee’s employment (collectively “Employer Released Claims”). The Employee Released Claims and the Employer Released Claims are collectively referred to as the “Released Claims”.

4. CONFIDENTIALITY AND NONDEFAMATION.

4.1 Confidentiality. Employee agrees that the terms and conditions of this Agreement shall remain confidential as between the parties, and Employee shall not disclose them to any other person except to Employee’s spouse, attorneys, or as required by law or as necessary to enforce the Agreement. Without limiting the generality of the foregoing, Employee will not respond to or in any way participate in or contribute to any public discussion, notice or other publicity concerning, or in any way relating to, the execution of this Agreement or the events (including negotiations) which led to its execution. Without limiting the generality of the foregoing, Employee specifically agrees not to disclose information regarding this Agreement to any current or former employee of Employer, except appropriate officers, directors or managers in the Company’s or Employer’s organization. The Employee and Employer and Company hereby agree that the sections of this Agreement are severable and that disclosure by Employee of any of the terms and conditions of the Agreement in violation of the foregoing shall constitute a breach of this section of the Agreement and shall not constitute a breach of the entire Agreement which shall survive and be enforceable by its terms. The exclusive remedy for a breach of this section of the Agreement shall be civil damages arising from the aforesaid breach.

4.2 Nondefamation. Company and Employer on the one hand, and Employee on the other, agree not to defame the other party, and the other party’s officers, directors, employees, shareholders, attorneys and agents, in any manner likely to be harmful to them or their business, business reputation or personal reputation; provided that Company, Employer and Employee will respond accurately and fully to any question, inquiry or request for information when required by law or legal process.

4.3 Noncompetition, No solicitation And Nondisclosure By The Employee

(a) Definitions. The term “Trade Secrets” shall be given its broadest possible interpretation and shall mean any information, including formulas, patterns, compilations, reports, records, programs, devices, methods, know-how, negative know-how, techniques, raw material properties and specifications, formulations, discoveries, ideas, concepts, designs, technical information, drawings, data, customer and supplier lists, information regarding customers, buyers and suppliers, distribution techniques, production processes, research and development projects, marketing plans, general financial information and financial information concerning customers, Company’s or Employer’s legal, business and financial structure and operations, and other confidential and proprietary information or processes which (i) derive independent economic value, actual or potential, from not being generally known to the public or to other persons who can obtain economic value from its disclosure or use and (ii) are the subject of efforts that are reasonable under the circumstances to maintain its secrecy.

The term “Proprietary Information” shall also be given its broadest possible interpretation and shall mean any and all information disclosed or made available by the Company or the Employer to Employee including, without limitation, any information which is not publicly known or available and upon which the Company or the Employer’s business or success depends.

(b) In consideration for the payments made to Employee under this Agreement, the Employee shall not use any Trade Secret or Proprietary Information of the Employer or the Company or their affiliates and subsidiaries to solicit, encourage or assist, directly, indirectly or in any manner whatsoever, (i) any employees of the Employer, the Company or their affiliates and subsidiaries (including any former employees who voluntarily terminated employment with the Employer or the Company within a 12 month period prior to the Employee’s termination of employment) to resign or to apply for or accept employment with any other competitive banking or financial services business within the counties in California in which the Employer has located its headquarters or branch offices; or (ii) any customer, person or entity that has a business relationship with the Employer or during the 12 month period prior to the date of this Agreement was engaged in a business relationship with the Employer, to terminate such business relationship and engage in a business relationship with any other competitive banking or financial services business within the counties in California in which the Employer has located its headquarters or branch offices.

(c) In addition and not as any limitation on the provisions of this Section 4.3, for a period of 12 months from and after the date of this Agreement, the Employee shall not directly or indirectly, individually or as a consultant to, or as an employee, officer, stockholder, director or other owner of or participant in any business entity that engages in or seeks to engage in any banking or financial services business, solicit (or assist in soliciting) any person who is, or at any time within 1 month prior to the date of this Agreement was, an employee of the Company or the Employer who earned $25,000 on an annual rate or more as an employee of the Company or the Employer to work for (as an employee, consultant or otherwise) any business, individual, partnership, firm, corporation, or other entity whether or not engaged in competitive business with the Employer or the Company.

4.4 Disclosure Of Information. The Employee shall not, at any time or in any manner, directly or indirectly, either before or after termination of this Agreement, without the prior written consent of the Board of Directors of the Company 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, use for his own benefit or the benefit of any other person or entity, or otherwise disclose or communicate to any person or entity including, without limitation, the media or by way of the World Wide Web, any information concerning any Trade Secret or Proprietary Information of the Company or the Employer. The Employee further recognizes and acknowledges that any Trade Secrets concerning any customers of the Employer or the Company and their respective affiliates and subsidiaries, as it may exist from time to time, is strictly confidential and is a valuable, special and unique asset of Employer’s and the Company’s business. In the event the Employee is required by law to disclose Trade Secrets or Proprietary Information, the Employee will provide the Employer and the Company, and their 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, the Employee is nonetheless, in the written opinion of knowledgeable counsel,

compelled to disclose Trade Secrets or Proprietary Information to any tribunal or any other party or else stand liable for contempt or suffer other material censure or material penalty, then the Employee may disclose (on an “as needed” basis only) such information to such tribunal or other party without liability hereunder. Notwithstanding the foregoing, the Employee may disclose Trade Secrets or Proprietary Information as may be required by any regulatory agency having jurisdiction over the operations of the Employer or the Company in connection with an examination of the Employer or the Company or other proceeding conducted by such regulatory agency.

5. DENIAL OF ANY VIOLATION.

5.1 No Admission by Employer or Employee. The acceptance of this Agreement by Employer shall not be deemed or construed as an admission of liability by Company, Employer or any other Employer Releasing Party or by Employee. Employee hereby acknowledges that Employer and Company and their employees expressly deny liability of any nature whatsoever arising from or related to the subject of this Agreement. Employer and Company also acknowledges that Employee expressly denies liability of any nature whatsoever arising from or related to the subject of this Agreement. Accordingly, this Agreement resolves all issues between Company, Employer and Employee relating to any claims Employee or Company or Employer may have regarding the termination of Employee.

5.2 Agreement Not Admissible. Neither this Agreement nor anything in this Agreement shall be construed to be or shall be admissible in any proceeding as evidence of or an admission by the Employer or Company of any violation of its policies, procedures, state or federal laws or regulations. This Agreement may be introduced, however, in any proceeding to enforce the Agreement or any provision contained herein. Such introduction shall be pursuant to an order protecting its confidentiality.

6. WAIVER.

6.1 In connection with the releases contained in Section 3, Employee, for Employee and for other Employee Releasing Parties, hereby agrees, represents, and warrants that the Released Claim(s) in this Agreement are not limited to matters that are known or disclosed, and Employee, for Employee and for other Employee Releasing Parties, hereby waives any and all rights and benefits that Employee now has, or in the future may have conferred upon Employee, by virtue of any provisions of law (including, but not limited to, the provisions of California Civil Code Section 1542, set forth below) stating that a general release does not extend to claims that a releasing party does not know or suspect to exist in its favor at the time of executing the general release, which if known by it must have materially affected its Severance with the party being released. Employee, for Employee and other Employee Releasing Parties, hereby acknowledges that Employee has been given the opportunity to consult legal counsel regarding such waiver and such waiver is made with full knowledge and understanding of its consequences and effects. Employee, for Employee and other Employee Releasing Parties, also hereby acknowledges that such waiver is made with the full knowledge and understanding that California Civil Code Section 1542 provides as follows:

“GENERAL RELEASE; EXTENT

A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN ITS FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY IT MUST HAVE MATERIALLY AFFECTED ITS SEVERANCE WITH THE DEBTOR.”

6.2 Employee, for Employee and other Employee Releasing Parties, hereby agrees, represents and warrants that Employee realizes and acknowledges that factual matters now unknown to Employee may have given or hereafter may give rise to causes of action, claims, demands, debts, controversies, damages, costs, losses and expenses that are presently unknown, unanticipated, and unsuspected; and Employee further agrees, represents, and warrants that this Release has been negotiated and agreed upon in light of that realization and that, nevertheless, Employee specifically and expressly intends for the release set forth above to extend to such unknown causes of action, claims, demands, debts, controversies, damages, costs, losses and expenses that are in any way set forth in or related to the matters identified hereinabove.

7. EMPLOYEE’S RIGHTS UNDER THE ADEA.

7.1 Consultation With an Attorney. Employee has the right and is encouraged to consult with an attorney regarding the meaning and legal effect of the provisions of this Agreement.

7.2 Review Period. Employee shall have not less than twenty-one (21) days from the date on which Employee receives a copy of this Agreement in which to consider the terms of this Agreement. However, Employee may waive such minimum review period by signing and delivering this Agreement to Employer in advance of the expiration of such 21-day period.

7.3 Waiver of Future Rights and Claims. Employee’s release and waivers contained in this Agreement shall not cover or relate to any Employee rights or claims that may arise or result from any transactions or relationship between Employer and Employee that occur after the date of this Agreement.

7.4 Right of Revocation. Employee shall have the right to revoke this Agreement at any time during the seven-day period beginning on the date Employee executes this Agreement.

8. REPRESENTATIONS AND WARRANTIES.

8.1 Representations and Warranties by Employee. Employee, for Employee and other Employee Releasing Parties, hereby represents and warrants to Employer and Company that:

8.1.1 Employee has carefully read this Agreement, has been given the opportunity to consult legal counsel regarding this Agreement and understands the contents and legal effect of each provision of this Agreement;

8.1.2 Employee has carefully read and understands the provisions of Section 7, which describes Employee’s rights under the ADEA;

8.1.3 Employee has executed this Agreement voluntarily and without any duress or undue influence on the part of, or on behalf of, the parties hereto.

8.1.4 Employee has not previously assigned, encumbered, or in any manner transferred all or any portion of any Released Claim(s) covered by this Agreement; and

8.1.5 No representation, warranty, or promise whatsoever, express or implied, concerning the subject matter hereof and not contained herein, has been made by Company or Employer, or any other Employer Party, to induce Employee to enter into this Agreement, and Employee has not entered into this Agreement in reliance upon any such representation, warranty, or promise.

8.2 Representations and Warranties by Company and Employer. Each of Employer and Company, for themselves and other Employer Parties, hereby represents and warrants to Employee that:

8.2.1 It has carefully read this Agreement and understands the contents and legal effect of each provision of this Agreement;

8.2.2 It has executed this Agreement voluntarily and without any duress or undue influence on the part of, or on behalf of, the parties hereto;

8.2.3 It has not previously assigned, encumbered, or in any manner transferred all or any portion of any Released Claim(s) covered by this Agreement; and

8.2.4 No representation, warranty, or promise whatsoever, express or implied, concerning the subject matter hereof and not contained herein, has been made by Employee to induce Employer or Company to enter into this Agreement, and Employer or Company have not entered into this Agreement in reliance upon any such representation, warranty, or promise.

9. MISCELLANEOUS.

9.1 No Warranty of Tax Exempt Status. Employer makes no warranty or representation as to the tax effect or treatment of any consideration paid Employee pursuant to this Agreement. Employee shall be responsible to obtain independent tax advice to determine if the monies paid hereunder constitute taxable income.

9.2 Entire Agreement. This Agreement contains the entire agreement and understanding concerning the subject matter of this Agreement, supersedes and replaces all prior and contemporaneous negotiations and agreements between the parties hereto, whether written or oral, including the Employment Agreement, except for the 1994 Tandem Stock Option Plan, Heritage Commerce Corp Employee Stock Ownership Plan, Executive Indexed Compensation Benefits Agreement including Amendments 1, 2, 3 and 4 and Amended and Restated Life Insurance Endorsement Method Split Dollar Plan Agreement, which all continue in full force and effect. There are no other agreements, representations or warranties, written or oral, by any party hereto to any other party hereto concerning the subject matter of this Agreement. Any amendment, modification or change to this Agreement shall not be binding unless set forth in a writing duly executed by all parties to be bound or affected by such amendment, modification or change.

9.3 Jurisdiction. This Agreement shall be deemed to be an agreement made under the laws of the State of California and for all purposes shall be governed by and construed in accordance with such laws.

9.4 Headings. The headings contained in this Agreement are for ease of reference only, and may not be relied upon in construing or interpreting any provision hereof.

9.5 Attorneys’ Fees. In the event that any party hereto, or any of them, shall bring any action or proceeding against another party hereto, or any of them, with respect to a Released Claim(s) covered by this Agreement, then the prevailing party or parties in such action shall be entitled to recover all reasonable costs of litigation, including reasonable attorneys’ fees and costs, in such amount as may be determined by the court having jurisdiction, including matters on appeal.

9.6 Counterparts. This Agreement may be executed in one or more counterparts or duplicate originals, each of which shall be deemed an original and all of which together shall constitute but one and the same instrument.

9.7 Survival of Representations and Warranties. The representations and warranties contained herein shall survive the termination of this Agreement.

9.8 Severability. In case any provision of this Agreement shall be invalid, illegal or unenforceable, such provision shall be severable from the rest of this Agreement and the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby.

9.9 Modifications. This Agreement cannot be changed, modified or supplemented except in a writing signed by all of the parties hereto.

IN WITNESS WHEREOF, the undersigned has executed and delivered this Severance and Release Agreement as of the date first set forth hereinabove.


Dated: September 5, 2008	“EMPLOYEE”


	/s/ Richard Hagarty
			RICHARD HAGARTY


Dated: September 5, 2008	HERITAGE BANK OF COMMERCE


	By:	/s/ Walter T. Kaczmarek
			Walter T. Kaczmarek
			President


Dated: September 5, 2008	HERITAGE COMMERCE CORP


	By:	/s/ Walter T. Kaczmarek
			Walter T. Kaczmarek
			Chief Executive Officer