Exhibit 10.1

 

EXCHANGE AGREEMENT

 

by and between

 

 

HERITAGE COMMERCE CORP

 

 

and

 

 

CASTLE CREEK CAPITAL PARTNERS IV, LP

 

Dated as of September 12, 2016

 

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This EXCHANGE AGREEMENT is made and entered into as of, September 12, 2016 (this
“Agreement”) by and between Heritage Commerce Corp, a California corporation
(the “Company”), and Castle Creek Capital Partners IV, LP, a Delaware limited
liability partnership (the “Investor”).

 

RECITALS

 

A.            The Investor is, as of the date hereof, the record and beneficial
owner of 12,960 shares of the Company’s preferred stock designated as Series C
Convertible Perpetual Preferred Stock having a liquidation preference of $1,000
per share and a conversion price of $3.75 per share (the “Preferred Shares”);

 

B.            The Company issued the Preferred Shares pursuant to that certain
Securities Purchase Agreement, dated June 18, 2010, between the Company and the
Investor (the “Securities Purchase Agreement”); and

 

C.            The Company and the Investor desire to exchange (the “Preferred
Exchange”) all of the Preferred Shares owned by the Investor for shares of the
Company’s common stock, no par value (the “Common Stock” and such shares of
Common Stock, the “Exchange Shares”), on the terms and subject to the conditions
set forth herein.

 

NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained in this Agreement, the receipt and sufficiency of which are hereby
acknowledged, and intending to be legally bound, the parties hereby agree as
follows:

 

ARTICLE I

 

THE CLOSING; CONDITIONS TO THE CLOSING

 

Section 1.1            The Closing.

 

(a)           The closing of the Preferred Exchange (the “Closing”) will take
place remotely via the electronic exchange of documents and signature pages, as
the parties may agree.  The Closing shall take place on September 12, 2016;
provided, however, that the conditions set forth in Sections 1.1(c) and
(d) shall have been satisfied or waived, or at such other place, time and date
as shall be agreed between the Company and the Investor.  The time and date on
which the Closing occurs is referred to in this Agreement as the “Closing Date.”

 

(b)           Subject to the fulfillment or waiver of the conditions to the
Closing in this Section 1.1, at the Closing (i) the Company will cause the
transfer agent for the Common Stock to register the Exchange Shares in the name
of the Investor and deliver reasonably satisfactory evidence of such
registration to the Investor and (ii) the Investor will deliver the
certificate(s) or book-entry shares representing the Preferred Shares to the
Company.

 

(c)           The respective obligations of each of the Investor and the Company
to consummate the Preferred Exchange are subject to the fulfillment (or waiver
by the Company and the Investor, as applicable) prior to the Closing of the
conditions that (i) any approvals, non-objections or authorizations of all
United States and other governmental, regulatory or judicial authorities
(collectively, “Governmental Entities”) required for the consummation of the
Preferred Exchange shall have been obtained or made in form and substance
reasonably satisfactory to each party and shall be in full force and effect and
all waiting periods required by United States and other applicable law, if any,
shall have expired, (ii) no provision of any applicable United States or other
law and no judgment, injunction, order or decree of any Governmental Entity
shall prohibit consummation of the Preferred Exchange as contemplated by this
Agreement or impose material limits on the ability of any party to this
Agreement to consummate the transactions contemplated by this Agreement, and
(iii) the Investor shall have received a non-control determination with respect
to the Company from the Board of Governors of the Federal Reserve System (or the
Federal Reserve Bank of San Francisco) and the California Department of Business
Oversight, Division of Financial Institutions, and the Investor shall provide
written evidence of the same to the Company on or prior to the Closing.

 

 

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(d)           The obligation of the Investor to consummate the Preferred
Exchange is also subject to the fulfillment (or waiver by the Investor) at or
prior to the Closing of each of the following conditions:

 

(i)            (A) the representations and warranties of the Company set forth
in Article III of this Agreement shall be true and correct in all material
respects as though made on and as of the date of this Agreement and as of the
Closing Date (other than representations and warranties that by their terms
speak as of another date, which representations and warranties shall be true and
correct in all material respects as of such other date) and (B) the Company
shall have performed in all material respects all obligations required to be
performed by it under this Agreement at or prior to the Closing;

 

(ii)           the Investor shall have received a certificate signed on behalf
of the Company by an executive officer certifying to the effect that the
conditions set forth in Section 1.1(d)(i) have been satisfied;

 

(iii)          the Company shall have delivered evidence in book-entry form,
evidencing the issuance of the Exchange Shares to the Investor;

 

(iv)          the Exchange Shares shall have been authorized for listing on The
NASDAQ Global Select Market (“NASDAQ”), subject to official notice of issuance;
and

 

(v)           the issuance of the Exchange Shares will not cause the number of
shares of Common Stock owned by the Investor, taking into account the Exchange
Shares, to exceed 13.3% of the issued and outstanding shares of Common Stock.

 

(e)           The obligation of the Company to consummate the Preferred Exchange
is also subject to the satisfaction or waiver, at or prior to the Closing, of
the following conditions:

 

(i)            The representations and warranties of Investor set forth in
Article IV of this Agreement shall be true and correct in all material respects
as though made on and as of the date of this Agreement and as of the Closing
Date (other than representations and warranties that by their terms speak as of
another date, which representations and warranties shall be true and correct in
all material respects as of such other date); and

 

(ii)           The covenants and obligations of Investor to be performed or
observed on or before the Closing Date under this Agreement will have been
performed or observed in all material respects.

 

Section 1.2            Interpretation.  When a reference is made in this
Agreement to “Recitals,” “Articles,” “Sections,” “Schedules” such reference
shall be to a Recital, Article or Section of, or Schedule to, this Agreement,
unless otherwise indicated.  The terms defined in the singular have a comparable
meaning when used in the plural, and vice versa.  References to “herein,”
“hereof,” “hereunder” and the like refer to this Agreement as a whole and not to
any particular section or provision, unless the context requires otherwise.  The
headings contained in this Agreement are for reference purposes only and are not
part of this Agreement.  Whenever the words “include,” “includes” or “including”
are used in this Agreement, they shall be deemed followed by the words “without
limitation.” No rule of construction against the draftsperson shall be applied
in connection with the interpretation or enforcement of this Agreement, as this
Agreement is the product of negotiation between sophisticated parties advised by
counsel.  All references to “$” or “dollars” mean the lawful currency of the
United States of America.  Except as expressly stated in this Agreement, all
references to any statute, rule or regulation are to the statute, rule or
regulation as amended, modified, supplemented or replaced from time to time
(and, in the case of statutes, include any rules and regulations promulgated
under the statute) and to any section of any statute, rule or regulation include
any successor to the section.  References to a “business day” shall mean any day
except Saturday, Sunday and any day on which banking institutions in the State
of California generally are authorized or required by law or other governmental
actions to close.

 

 

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ARTICLE II

 

PREFERRED EXCHANGE

 

Section 2.1            Preferred Exchange.  On the terms and subject to the
conditions set forth in this Agreement, upon the Closing (i) the Company agrees
to issue to the Investor, in exchange for its 12,960 Preferred Shares, 3,456,000
Exchange Shares, and (ii) the Investor agrees to deliver to the Company
certificate(s) or book-entry shares representing the Preferred Shares in
exchange for such number of Exchange Shares.

 

Section 2.2            Exchange Documentation.  Settlement of the Preferred
Exchange will take place on the Closing Date, at which time the Investor will
cause delivery of the Preferred Shares to the Company or its designated agent
and the Company will cause delivery of the Exchange Shares to the Investor.

 

Section 2.3            Status of Preferred Shares after Closing.  The Preferred
Shares exchanged for the Exchange Shares pursuant to this Article II are being
reacquired by the Company and shall have the status of authorized but unissued
shares of preferred stock of the Company undesignated as to series and may be
designated or re-designated and issued or reissued, as the case may be, as part
of any series of preferred stock of the Company.

 

ARTICLE III

 

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

 

The Company represents and warrants to the Investor as of the date hereof and as
of the Closing Date:

 

Section 3.1            Existence and Power.

 

(a)           Organization, Authority and Significant Subsidiaries.  The Company
is duly organized, validly existing and in good standing under the laws of the
State of California and has all necessary power and authority to own, operate
and lease its properties and to carry on its business in all material respects
as it is being currently conducted, and except as has not, individually or in
the aggregate, had and would not reasonably be expected to have a Company
Material Adverse Effect, has been duly qualified as a foreign corporation for
the transaction of business and is in good standing under the laws of each other
jurisdiction in which it owns or leases properties or conducts any business so
as to require such qualification; each subsidiary of the Company that is a
“significant subsidiary” within the meaning of Rule 1-02(w) of Regulation S-X
under the Securities Act, including, without limitation, Heritage Bank of
Commerce, has been duly organized and is validly existing in good standing under
the laws of its jurisdiction of organization.  The articles of incorporation and
bylaws of the Company, copies of which have been provided to the Investor prior
to the date hereof, are true, complete and correct copies of such documents as
in full force and effect as of the date hereof.

 

(b)           Capitalization.  The authorized capital stock of the Company and
the outstanding capital stock of the Company (including securities convertible
into, or exercisable or exchangeable for, capital stock of the Company) as of
the date hereof (the “Capitalization Date”) is set forth on Schedule A.  The
outstanding shares of capital stock of the Company have been duly authorized and
are validly issued and outstanding, fully paid and non-assessable, and subject
to no preemptive rights (and were not issued in violation of any preemptive
rights), and have been issued in compliance with applicable securities laws.  As
of the date hereof, the Company does not have outstanding any securities or
other obligations providing the holder the right to acquire Common Stock that is
not reserved for issuance as specified on Schedule A, and the Company has not
made any other commitment to authorize, issue or sell any Common Stock except
pursuant to this Agreement.  Since the Capitalization Date, except pursuant to
this Agreement and its agreements with Patriot Financial Partners, L.P. and
Patriot Financial Partners Parallel, L.P. dated the date hereof, the Company has
not issued any shares of Common Stock other than (i) shares issued upon the
exercise of stock options or delivered under other equity-based awards or other
convertible securities or warrants which were issued and outstanding on the
Capitalization Date and disclosed on Schedule A and (ii) shares disclosed on
Schedule A.

 

 

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Section 3.2            Authorization and Enforceability.

 

(a)           The Company has the corporate power and authority to execute and
deliver this Agreement and to carry out its obligations hereunder, which
includes the issuance of the Exchange Shares.

 

(b)           The execution, delivery and performance by the Company of this
Agreement and the consummation of the transactions contemplated hereby have been
duly authorized by all necessary corporate action on the part of the Company,
and no further approval or authorization is required on the part of the
Company.  This Agreement is a valid and binding obligation of the Company
enforceable against the Company in accordance with its terms, subject to subject
to applicable bankruptcy, insolvency, reorganization, moratorium and similar
laws affecting creditors’ rights and remedies generally, and subject, as to
enforceability, to general principles of equity, including principles of
commercial reasonableness, good faith and fair dealing (regardless of whether
enforcement is sought in a proceeding at law or in equity) (the “Bankruptcy
Exceptions”).

 

Section 3.3            Exchange Shares.  The Exchange Shares have been duly and
validly authorized by all necessary action, and, when issued and delivered
pursuant to this Agreement, such Exchange Shares will be duly and validly issued
and fully paid and non-assessable free and clear of any liens or encumbrances,
will not be issued in violation of any preemptive rights, and will not subject
the holder thereof to personal liability.

 

Section 3.4            Non-Contravention.

 

(a)           The execution, delivery and performance by the Company of this
Agreement and the consummation of the transactions contemplated hereby, and
compliance by the Company with the provisions hereof, will not (i) violate,
conflict with, or result in a breach of any provision of, or constitute a
default (or an event which, with notice or lapse of time or both, would
constitute a default) under, or result in the termination of, or accelerate the
performance required by, or result in a right of termination or acceleration of,
or result in the creation of, any lien, security interest, charge or encumbrance
upon any of the properties or assets of the Company or any Company Subsidiary
under any of the terms, conditions or provisions of (A) its organizational
documents or (B) any note, bond, mortgage, indenture, deed of trust, license,
lease, agreement or other instrument or obligation to which the Company or any
Company Subsidiary is a party or by which it or any Company Subsidiary may be
bound, or to which the Company or any Company Subsidiary or any of the
properties or assets of the Company or any Company Subsidiary may be subject, or
(ii) subject to compliance with the statutes and regulations referred to in the
next paragraph, violate any statute, rule or regulation or any judgment, ruling,
order, writ, injunction or decree applicable to the Company or any Company
Subsidiary or any of their respective properties or assets except, in the case
of clauses (i)(B) and (ii), for those occurrences that, individually or in the
aggregate, have not had and would not reasonably be expected to have a Company
Material Adverse Effect.

 

(b)           Other than the filing of any current report on Form 8-K required
to be filed with the Securities and Exchange Commission (“SEC”), such filings
and approvals as are required to be made or obtained under any state “blue sky”
laws, and such consents and approvals that have been made or obtained, no notice
to, filing with or review by, or authorization, consent or approval of, any
Governmental Entity is required to be made or obtained by the Company in
connection with the consummation by the Company of the Preferred Exchange except
for any such notices, filings, reviews, authorizations, consents and approvals
the failure of which to make or obtain would not, individually or in the
aggregate, would not reasonably be expected to have a Company Material Adverse
Effect.

 

Section 3.5            Anti-Takeover Provisions.  The Board of Directors has
taken all necessary action to ensure that the transactions contemplated by this
Agreement and the consummation of the transactions contemplated hereby, will be
exempt from any anti-takeover or similar provisions of the Company’s articles of
incorporation and bylaws, and any other provisions of any applicable
“moratorium,” “control share,” “fair price,” “interested stockholder” or other
anti-takeover laws and regulations of any jurisdiction.

 

Section 3.6            No Company Material Adverse Effect.  Since December 31,
2015, no fact, circumstance, event, change, occurrence, condition or development
has occurred that, individually or in the aggregate, has had or would reasonably
be expected to have a Company Material Adverse Effect.

 

 

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Section 3.7            Offering of Securities.  Neither the Company nor any
person acting on its behalf has taken any action (including any offering of any
securities of the Company under circumstances which would require the
integration of such offering with the offering of the Exchange Shares under the
Securities Act and the rules and regulations of the SEC promulgated thereunder),
which might subject the offering, issuance or sale of the Exchange Shares to the
Investor pursuant to this Agreement to the registration requirements of the
Securities Act.

 

Section 3.8            Brokers and Finders.  No broker, finder or investment
banker is entitled to any financial advisory, brokerage, finder’s or other fee
or commission in connection with this Agreement or the transactions contemplated
hereby based upon arrangements made by or on behalf of the Company or any
Company Subsidiary for which the Investor could have any liability.

 

ARTICLE IV

 

REPRESENTATIONS AND WARRANTIES OF INVESTOR

 

The Investor represents and warrants to the Company as of the date hereof and as
of the Closing Date:

 

Section 4.1            Organization; Authority. Investor is an entity, duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization with the requisite power and authority to enter
into and to consummate the transactions contemplated by this Agreement and
otherwise to carry out its obligations hereunder.  The execution, delivery and
performance by Investor of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all necessary
action on the part of Investor, and no further approval of authorization is
required on the part of Investor.  This Agreement has been duly and validly
executed and delivered by Investor.  Assuming due authorization, execution and
delivery by Company, this Agreement constitutes the legal, valid and binding
obligation of Investor, enforceable against Investor in accordance with its
terms and conditions, except as enforceability may be limited by the Bankruptcy
Exception.

 

Section 4.2            Non Contravention.  The execution, delivery and
performance by the Investor of this Agreement and the consummation of the
transactions contemplated hereby, and compliance by the Investor with the
provisions hereof, will not (i) violate, conflict with, or result in a breach of
any provision of, or constitute a default (or an event which, with notice or
lapse of time or both, would constitute a default) under, or result in the
termination of, or accelerate the performance required by, or result in a right
of termination or acceleration of, or result in the creation of, any lien,
security interest, charge or encumbrance upon any of the properties or assets of
the Investor under any of the terms, conditions or provisions of (A) its
organizational documents or (B) any note, bond, mortgage, indenture, deed of
trust, license, lease, agreement or other instrument or obligation to which the
Investor is a party or by which it may be bound, or to which the Investor or any
of the properties or assets of the Investor may be subject, or (ii)  violate any
statute, rule or regulation or any judgment, ruling, order, writ, injunction or
decree applicable to the Investor or any of its properties or assets except, in
the case of clauses (i)(B) and (ii), for those occurrences that, individually or
in the aggregate, have not had and would not reasonably be expected to have a
material adverse effect on the ability of the Investor to consummate the
transactions contemplated by this Agreement.

 

ARTICLE V

 

COVENANTS

 

Section 5.1            Commercially Reasonable Efforts.  Subject to the terms
and conditions of this Agreement, each of the parties will use its commercially
reasonable efforts in good faith to take, or cause to be taken, all actions, and
to do, or cause to be done, all things necessary, proper or desirable, or
advisable under applicable laws, so as to permit consummation of the Preferred
Exchange, as promptly as practicable and otherwise to enable consummation of the
transactions contemplated hereby and shall use commercially reasonable efforts
to cooperate with the other party to that end.

 

 

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Section 5.2            Exchange Listing.  On or prior to the Closing, the
Company shall, at its expense, cause the Exchange Shares to be listed on the
NASDAQ, subject to official notice of issuance, and shall maintain such listing
for so long as any Common Stock is listed on such exchange.

 

Section 5.3            Access, Information and Confidentiality.  Each party will
use reasonable best efforts to hold, and will use reasonable best efforts to
cause its agents, consultants, contractors, advisors, and employees, to hold, in
confidence all non-public records, books, contracts, instruments, computer data
and other data and information (collectively, “Information”) concerning the
other party furnished or made available to it by the other party or its
representatives pursuant to this Agreement (except to the extent that such
information can be shown to have been (a) previously known by such party on a
non-confidential basis, (b) in the public domain through no fault of such party
or (c) later lawfully acquired from other sources by the party to which it was
furnished (and without violation of any other confidentiality obligation));
provided, however, that nothing herein shall prevent any party from disclosing
any Information to the extent required by applicable laws or regulations or by
any subpoena or similar legal process.  Each party understands that the
Information may contain commercially sensitive confidential information entitled
to an exception from a Freedom of Information Act request.

 

Section 5.4            Certain Notifications Until Closing.  From the date
hereof until the Closing, the Company shall promptly notify the Investor of
(a) any fact, event or circumstance of which it is aware and which would
reasonably be likely to cause any representation or warranty of the Company
contained in this Agreement to be untrue or inaccurate in any material respect
or to cause any covenant or agreement of the Company contained in this Agreement
not to be complied with or satisfied in any material respect, (b) action or
proceeding pending or, to the knowledge of such party, threatened against such
party that questions or might question the validity of this Agreement or seeks
to enjoin or otherwise restrain the transactions contemplated hereby, and
(c) any fact, circumstance, event, change, occurrence, condition or development
of which the Company is aware and which, individually or in the aggregate, has
had or would reasonably be expected to have a Company Material Adverse Effect;
provided, however, that delivery of any notice pursuant to this Section 5.4
shall not limit or affect any rights of or remedies available to the Investor;
provided, further, that a failure to comply with this Section 5.4 shall not
constitute a breach of this Agreement or the failure of any condition set forth
in Section 1.1 to be satisfied unless the underlying Company Material Adverse
Effect, action, proceeding or material breach would independently result in the
failure of a condition set forth in Section 1.1 to be satisfied.

 

ARTICLE VI

 

ADDITIONAL AGREEMENTS

 

Section 6.1            Unregistered Exchange Shares.  The Investor acknowledges
that the Exchange Shares have not been registered under the Securities Act or
under any state securities laws.  The Investor (a) is acquiring the Exchange
Shares pursuant to an exemption from registration under the Securities Act
solely for investment with no present intention to distribute them to any person
in violation of the Securities Act or any applicable U.S. state securities laws,
(b) will not sell or otherwise dispose of any of the Exchange Shares, except in
compliance with the registration requirements or exemption provisions of the
Securities Act and any applicable U.S. state securities laws, and (c) has such
knowledge and experience in financial and business matters and in investments of
this type that it is capable of evaluating the merits and risks of the Preferred
Exchange and of making an informed investment decision.

 

Section 6.2            Legend.

 

(a)           The Investor agrees that all certificates or other instruments
representing the Exchange Shares will bear a legend substantially to the
following effect:

 

“THE SECURITIES REPRESENTED BY THIS INSTRUMENT HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND
MAY NOT BE TRANSFERRED, SOLD OR OTHERWISE DISPOSED OF EXCEPT WHILE A
REGISTRATION STATEMENT RELATING THERETO IS IN EFFECT UNDER SUCH ACT AND
APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AN EXEMPTION FROM REGISTRATION.”

 

 

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(b)           When the Exchange Shares (i) become registered under the
Securities Act or (ii) are eligible to be transferred without restriction in
accordance with Rule 144 or another exemption from registration under the
Securities Act (other than Rule 144A), the Company shall issue new certificates
or other instruments representing such Exchange Shares, which shall not contain
the applicable legend in Section 6.2(a) above.

 

Section 6.3            Certain Transactions.  The Company will not merge or
consolidate with, or sell, transfer or lease all or substantially all of its
property or assets to, any other party unless the successor, transferee or
lessee party (or its ultimate parent entity), as the case may be (if not the
Company), expressly assumes the due and punctual performance and observance of
each and every covenant, agreement and condition of this Agreement to be
performed and observed by the Company.

 

Section 6.4            Transfer of Exchange Shares.  Subject to compliance with
applicable securities laws, the Investor shall be permitted to transfer, sell,
assign or otherwise dispose of (“Transfer”) all or a portion of the Exchange
Shares at any time, and the Company shall take all steps as may be reasonably
requested by the Investor to facilitate the Transfer of the Exchange Shares.

 

Section 6.5            Registration Rights.  The Company shall use commercially
reasonable efforts to file as soon as practicable, and in any event within 30
days of the Closing, a registration statement on Form S-3 under the Securities
Act covering the resale by the Investor of all of the Exchange Shares, and
thereafter use commercially reasonable efforts to have the registration
statement declared effective by the SEC and thereafter keep the registration
statement current and effective.

 

ARTICLE VII

 

MISCELLANEOUS

 

Section 7.1            Termination.  This Agreement may be terminated at any
time prior to the Closing:

 

(a)           by either the Investor or the Company if the Closing shall not
have occurred by December 31, 2016; provided, however, that in the event the
Closing has not occurred by such date, the parties will consult in good faith to
determine whether to extend the term of this Agreement, it being understood that
the parties shall be required to consult only until the fifth day after such
date and not be under any obligation to extend the term of this Agreement
thereafter; provided, further, that the right to terminate this Agreement under
this Section 7.1(a) shall not be available to any party whose breach of any
representation or warranty or failure to perform any obligation under this
Agreement shall have caused or resulted in the failure of the Closing to occur
on or prior to such date;

 

(b)           by either the Investor or the Company in the event that any
Governmental Entity shall have issued an order, decree or ruling or taken any
other action restraining, enjoining or otherwise prohibiting the transactions
contemplated by this Agreement (or if any such Governmental Entity informs the
Investor or the Company that it intends to disapprove any notice or application
required to be filed by such party in order to consummate the transactions
contemplated by this Agreement) and such order, decree, ruling or other action
shall have become final and non-appealable; or

 

(c)           by the mutual written consent of the Investor and the Company.

 

In the event of termination of this Agreement as provided in this Section 7.1,
this Agreement shall forthwith become void and there shall be no liability on
the part of either party hereto except that nothing herein shall relieve either
party from liability for any breach of this Agreement.

 

Section 7.2            Survival of Representations and Warranties.  The
representations and warranties of the Company and the Investor made herein or in
any certificates delivered in connection with the Closing shall survive the
Closing without limitation.

 

 

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Section 7.3            Amendment.  No amendment of any provision of this
Agreement will be effective unless made in writing and signed by an officer or a
duly authorized representative of each of the Company and the Investor.  No
failure or delay by any party in exercising any right, power or privilege
hereunder shall operate as a waiver thereof nor shall any single or partial
exercise thereof preclude any other or further exercise of any other right,
power or privilege.  The rights and remedies herein provided shall be cumulative
of any rights or remedies provided by law.

 

Section 7.4            Waiver of Conditions.  The conditions to each party’s
obligation to consummate the Preferred Exchange are for the sole benefit of such
party and may be waived by such party in whole or in part to the extent
permitted by applicable law.  No waiver will be effective unless it is in a
writing signed by a duly authorized officer of the waiving party that makes
express reference to the provision or provisions subject to such waiver.

 

Section 7.5            Governing Law; Submission to Jurisdiction, etc.  This
Agreement and any claim, controversy or dispute arising under or related to this
Agreement, the relationship of the parties, and/or the interpretation and
enforcement of the rights and duties of the parties shall be enforced, governed,
and construed in all respects (whether in contract or in tort) in accordance
with the federal law of the United States if and to the extent such law is
applicable, and otherwise in accordance with the laws of the State of California
applicable to contracts made and to be performed entirely within such State. 
Each of the parties hereto agrees (a) to submit to the exclusive jurisdiction
and venue of the United States District Court for the Central District of
California for any and all civil actions, suits or proceedings arising out of or
relating to this Agreement or the Preferred Exchange contemplated hereby and
(b) that notice may be served upon (i) the Company at the address and in the
manner set forth for notices to the Company in Section 7.6 and (ii) the Investor
at the address and in the manner set forth for notices to the Company in
Section 7.6, but otherwise in accordance with federal law.

 

Section 7.6            Notices.  Any notice, request, instruction or other
document to be given hereunder by any party to the other will be in writing and
will be deemed to have been duly given (a) on the date of delivery if delivered
personally, or by electronic mail or facsimile, upon confirmation of receipt, or
(b) on the first business day following the date of dispatch if delivered by a
recognized next day courier service.  All notices hereunder shall be delivered
as set forth below or pursuant to such other instructions as may be designated
in writing by the party to receive such notice.

 

If to the Company:

 

Heritage Commerce Corp

150 Almaden Boulevard

San Jose, California 95113

Attention:  Walter T. Kaczmarek

Chief Executive Officer

Telephone:  (408) 947-6900

Electronic Mail:  Walt.Kaczmarek@herbank.com

 

With a copy to:

 

Buchalter Nemer, a Professional Corporation

1000 Wilshire Boulevard, Suite 1500

Los Angeles, California 90017

Attention:  Mark A. Bonenfant, Esq.

Telephone:  (213) 891-5020

Facsimile:  (213) 630-5664

Electronic Mail:  mbonenfant@buchalter.com

 

 

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If to the Investor:

 

Castle Creek Capital Partners IV, LP

c/o Castle Creek Capital LLC

6051 El Tordo

Rancho Santa Fe, California 92067

Attention:  John Eggemeyer

Managing Principal

Telephone:  (888) 756-8300

Facsimile:  (858) 756-8301

Electronic Mail:  jeggemeyer@castlecreek.com

 

With a copy to:

 

Sidley Austin LLP

1999 Avenue of the Stars, 17th Floor

Los Angeles, CA  90067

Attention:  Vijay S. Sekhon, Esq.

Telephone:  (310) 595-9507

Facsimile:  (310) 595-9501

Electronic Mail:  vsekhon@sidley.com

 

Section 7.7            Definitions.

 

(a)           When a reference is made in this Agreement to a subsidiary of a
person, the term “subsidiary” means any corporation, partnership, joint venture,
limited liability company or other entity (x) of which such person or a
subsidiary of such person is a general partner or (y) of which a majority of the
voting securities or other voting interests, or a majority of the securities or
other interests of which having by their terms ordinary voting power to elect a
majority of the board of directors or persons performing similar functions with
respect to such entity, is directly or indirectly owned by such person and/or
one or more subsidiaries thereof.

 

(b)           The term “Affiliate” means, with respect to any person, any person
directly or indirectly controlling, controlled by or under common control with,
such other person.  For purposes of this definition, “control” (including, with
correlative meanings, the terms “controlled by” and “under common control with”)
when used with respect to any person, means the possession, directly or
indirectly, of the power to cause the direction of management and/or policies of
such person, whether through the ownership of voting securities by contract or
otherwise.

 

(c)           The term “Business Combination” means a merger, consolidation,
statutory share exchange or similar transaction that requires the approval of
the Company’s stockholders.

 

(d)           The term “Company Material Adverse Effect” means any event,
circumstance, change or occurrence that has had or would reasonably be expected
to have a material adverse effect on the (1) the ability of the Company to
consummate the Preferred Exchange and the other transactions contemplated by
this Agreement and perform its obligations hereunder on a timely basis, and
(2) business, results of operation, assets, liabilities or condition (financial
or otherwise) of the Company and its consolidated subsidiaries taken as a whole;
provided, however, that clause (2) above shall not be deemed to include: (i) the
effects of (A) changes after the date hereof in general business, economic or
market conditions (including changes generally in prevailing interest rates,
credit availability and liquidity, currency exchange rates and price levels or
trading volumes in the United States or foreign securities or credit markets),
or any outbreak or escalation of hostilities, declared or undeclared acts of war
or terrorism, in each case generally affecting the industries or geographic
areas in which the Company and its subsidiaries operate, (B) changes or proposed
changes after the date hereof in GAAP or regulatory accounting requirements, or
authoritative interpretations thereof, (C) changes or proposed changes after the
date hereof in securities, banking and other laws of general applicability or
related policies or interpretations of Governmental Entities (in the case of
each of these clauses (A), (B) and (C), other than changes or occurrences to the
extent that such changes or occurrences have or would reasonably be expected to
have a disproportionate adverse effect on the

 

 

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Company and its consolidated subsidiaries taken as a whole relative to
comparable U.S. banking or financial services organizations), (D) changes in the
market price or trading volume of the Common Stock or any other equity,
equity-related or debt securities of the Company or its consolidated
subsidiaries (it being understood and agreed that the exception set forth in
this clause (D) does not apply to the underlying reason giving rise to or
contributing to any such change), (E) actions or omissions of the Company or any
Company Subsidiary expressly required by the terms of the Preferred Exchange.

 

Section 7.8            Assignment.  Neither this Agreement nor any right,
remedy, obligation nor liability arising hereunder or by reason hereof shall be
assignable by any party hereto without the prior written consent of each other
party, and any attempt to assign any right, remedy, obligation or liability
hereunder without such consent shall be void, except an assignment, in the case
of a Business Combination where such party is not the surviving entity, or a
sale of substantially all of its assets, to the entity which is the survivor of
such Business Combination or the purchaser in such sale subject to compliance
with Section 6.3.

 

Section 7.9            Severability.  If any provision of this Agreement, or the
application thereof to any person or circumstance, is determined by a court of
competent jurisdiction to be invalid, void or unenforceable, the remaining
provisions hereof, or the application of such provision to persons or
circumstances other than those as to which it has been held invalid or
unenforceable, will remain in full force and effect and shall in no way be
affected, impaired or invalidated thereby, so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
materially adverse to any party.  Upon such determination, the parties shall
negotiate in good faith in an effort to agree upon a suitable and equitable
substitute provision to effect the original intent of the parties.

 

Section 7.10         No Third-Party Beneficiaries.  Nothing contained in this
Agreement, expressed or implied, is intended to confer upon any person or entity
other than the Company and the Investor any benefit, right or remedies.

 

Section 7.11         Entire Agreement, etc.  This Agreement (including the
Schedules hereto) constitutes the entire agreement, and supersedes all other
prior agreements, understandings, representations and warranties, both written
and oral, between the parties, with respect to the subject matter hereof.  For
the avoidance of doubt, the Securities Purchase Agreement shall remain in full
force and effect, but shall be deemed amended hereby, and any provisions in this
Agreement that supplement, duplicate or contradict any provision of the
Securities Purchase Agreement shall be deemed to supersede the corresponding
provision of the Securities Purchase Agreement from and after the effective date
hereof.

 

Section 7.12         Counterparts and Facsimile.  For the convenience of the
parties hereto, this Agreement may be executed in any number of separate
counterparts, each such counterpart being deemed to be an original instrument,
and all such counterparts will together constitute the same agreement.  Executed
signature pages to this Agreement may be delivered by electronic transmission or
facsimile and such electronic transmissions and facsimiles will be deemed as
sufficient as if actual signature pages had been delivered.

 

Section 7.13         Specific Performance.  The parties agree that irreparable
damage would occur in the event that any of the provisions of this Agreement
were not performed in accordance with their specific terms.  It is accordingly
agreed that the parties shall be entitled (without the necessity of posting a
bond) to specific performance of the terms hereof, this being in addition to any
other remedies to which they are entitled at law or equity.

 

[Remainder of Page Intentionally Left Blank]

 

 

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed by their respective authorized officers as of the day and year first
above written.

 

 

HERITAGE COMMERCE CORP

 

 

 

 

 

 

By:

/s/ Lawrence D. McGovern

 

 

Name:

Lawrence D. McGovern

 

Title:

Executive Vice President

 

 

and Chief Financial Officer

 

 

 

CASTLE CREEK CAPITAL PARTNERS IV, LP

 

 

 

 

 

 

By:

/s/ John Eggemeyer

 

 

Name:

John Eggemeyer

 

Title:

Managing Principal

 

 

[Signature Page to Exchange Agreement]

 

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