Exhibit 10.4

 

STOCK WARRANT AGREEMENT

 

This Stock Warrant Agreement (“Agreement”) is executed as of this 24th day of
November, 2008 by Heritage Bank, N.A., a national banking association (“Bank”),
in favor of the persons listed on Exhibit A (each, an “Initial Holder”), in
accordance with the terms and subject to the conditions set forth in this
Agreement.

 

WHEREAS, the organizers of the Bank have undertaken substantial financial risk
in connection with the organization of the Bank through direct cash advances
made to, or for the benefit of, the Bank, which amounts form a portion of the
subscription funds utilized by the organizers to capitalize the Bank;

 

WHEREAS, under the FDIC’s Policy Statement on Applications for Deposit
Insurance, because those amounts contributed during the organizational stage are
at a complete risk of loss in the event that the Bank does not open, the
organizers of the Bank are entitled to receive as a unit one share of Bank stock
and one warrant to acquire an additional share of Bank stock for every $10 of
cash funds advanced to, or for the benefit of, the Bank during its organization;
and

 

WHEREAS, consistent therewith and in recognition of the financial risks
undertaken by the organizers of the Bank in funding the organization of the
Bank, the Bank desires to issue to each organizer warrants to purchase shares of
common stock of the Bank (each, a “Warrant” and, collectively, the “Warrants”)
in the amounts set forth herein simultaneously with the issuance of the shares
of common stock representing the amounts advanced by the organizers to which
these warrants relate on the date that the Bank has received all required
regulatory approvals to first open for business.

 

NOW, THEREFORE, in consideration of the foregoing and the agreements hereinafter
set forth, the receipt and sufficiency of which are hereby acknowledged, the
Bank and, by acceptance of a Warrant, each Holder (as defined herein) agree as
follows:

 

1.                                       Grant of Warrants. Subject to the
terms, restrictions, limitations and conditions stated in this Agreement, the
receipt and sufficiency of which are hereby acknowledged, the Bank hereby grants
to Initial Holder the number of Warrants set forth beside his name on Exhibit A.
Each Warrant initially shall be exercisable for one fully paid and nonassessable
share of common stock, par value $1.00 per share, of the Bank (“Share”), subject
to adjustment as provided in Sections 11 and 12 of this Agreement. The Initial
Holders and all subsequent registered holders of the Warrants (each, a “Holder”
and, collectively, the “Holders”) shall have the rights and obligations set
forth in this Agreement.

 

2.                                       Warrant Certificates. Each Warrant
shall be evidenced by a warrant certificate, which shall be substantially in the
form attached to this Agreement as Exhibit B (“Warrant Certificate”). Each
Warrant Certificate shall have such marks of identification or designation and
such legends or endorsements thereon as the Bank deems appropriate, so long as
they are not inconsistent with the provisions of this Agreement, or as are
required to comply with any law, rule or regulation applicable to the Bank or
the Shares. The Warrant Certificates shall be executed on behalf of the Bank by
the manual, facsimile or imprinted signature of its Chairman of the Board, its
President or any senior vice president and shall be attested by the manual,
facsimile or imprinted signature its Secretary or Cashier, or any assistant
secretary or assistant cashier.

 

3.                                  Term of Warrants.

 

(a)                                  The term for the exercise of the Warrants
shall begin at 9:00 a.m., New York City, New York time on the date of this
Agreement. The term for the exercise of the Warrants shall

 

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expire at 2:00 p.m., New York City, New York time on the earlier to occur of
(i) November 24, 2018, or (ii) the date provided in Section 3(b) of this
Agreement (the “Expiration Time”).

 

(b)                                                                                   
Notwithstanding any provision of this Agreement or any Warrant Certificate to
the contrary, the Warrants shall expire, to the extent not exercised, within 45
days following the receipt of notice from the Bank’s primary federal regulator
(“Regulator”) that (i) the Bank has not maintained its minimum capital
requirements (as determined by the Regulator) or the Regulator has determined
that the existence of outstanding Warrants is impairing the Bank’s ability to
raise capital; and (ii) the Regulator is requiring termination or forfeiture of
warrants. Upon receipt of such notice from the Regulator, the Bank shall
promptly notify each Holder that he must exercise the Warrants granted to him
prior to the end of the 45-day period or such earlier period as may be specified
by the Regulator or forfeit such Warrant(s). In case of forfeiture, no Holder
shall have any cause of action, of any kind or nature, against the Bank or any
of its officers or directors with respect to the forfeiture. In addition, the
Bank shall not be liable to any Holder due to the failure or inability of the
Bank to provide adequate notice to Holder.

 

4.                                       Exercise of Warrants. The purchase
price per Share to be paid by a Holder for Shares subject to the Warrants shall
be $10.00, subject to adjustment as set forth in Sections 11 and 12 of this
Agreement (“Exercise Price”). A Holder may exercise Warrants evidenced by a
Warrant Certificate in whole or in part at any time prior to the Expiration Time
by delivering to the secretary of the Bank (i) the Warrant Certificate; (ii) a
written notice to the Bank specifying the number of Shares with respect to which
Warrants are being exercised; and (iii) a check for the full amount of the
aggregate Exercise Price of the Shares being acquired; provided, that if at the
time of exercise, the Holder exercising Warrants (“Exercising Holder”) owns or
controls Excess Shares, such Exercising Holder may only exercise its Warrants if
the Shares acquired by the exercise of such Warrants are immediately upon
acquisition: (w) repurchased by the Bank; (x) sold in a widely dispersed public
offering; (y) sold pursuant to Rule 144 under the Securities Act of 1933 or in a
private placement in which no purchaser acquires from the Exercising Holder more
than 2% of the then-outstanding Shares; or (z) sold to a third-party that either
owns more than 50% of the then-outstanding Shares or simultaneously purchases
Shares from shareholders other than the Exercising Holder such that upon
consummation of such purchases, such third-party will own more than 50% of the
then-outstanding Shares.

 

For purposes of this Section 4, “Excess Shares” means at any time for any
Holder, any Shares (assuming that all of such Holder’s Warrants shall have been
exercised) then owned or controlled by such Holder in excess of 14.9% of the
then-outstanding Shares (assuming that all of such Holder’s Warrants shall have
been exercised), provided, that for the purpose of calculating Excess Shares,
any Shares and/or Warrants owned or controlled by any affiliate of a Holder
shall count as Shares and/or Warrants held by such Holder. For the purposes of
this definition, the term “affiliate” means, with respect to any person, any
other person directly or indirectly controlling, controlled by or under common
control with such person, and the term “control” means, as used with respect to
any person, the possession, directly or indirectly, of the power to direct or
cause the direction of the management and policies of such person, whether
through the ownership of voting securities, by contract or otherwise.

 

5.                                       Delivery of Shares; Partial Exercise.
Upon receipt of the items set forth in Section 4, and subject to the terms of
this Agreement, (i) the Holder shall be deemed to be the holder of record of the
Shares subject to the exercise of the Warrant, notwithstanding that the stock
transfer books of the Bank shall then be closed or that certificates
representing such Shares shall not then be actually delivered to the Holder, and
(ii) the Bank shall promptly deliver to, and register in the name of, the Holder
a certificate or certificates representing the number of Shares acquired by
exercise of a Warrant. In the event of a partial exercise of Warrant(s), a new
Warrant Certificate evidencing the number of Shares that remain subject to the
Warrant shall be issued by the Bank to such Holder or to his duly authorized
assigns.

 

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6.                                       Registration of Transfer and Exchange.

 

(a)                                  The Bank shall keep, or cause to be kept,
at its principal place of business or at such other location designated by the
Bank, a register or registers in which, subject to such reasonable regulations
as the Bank may prescribe, the registrar and transfer agent (“Securities
Registrar”) shall register the Warrant Certificates and the transfers thereof as
provided herein (“Securities Register”). The initial Securities Registrar shall
be the secretary or cashier of the Bank, and thereafter, the Securities
Registrar may be removed and/or appointed as authorized by the Bank.

 

(b)                                 Upon surrender for registration of transfer
of any Warrant Certificate, the Bank shall issue and deliver to the Holder or
his duly authorized assigns, one or more new Warrant Certificates of like tenor
and in like aggregate amount.

 

(c)                                  At the option of the Holder, Warrant
Certificates may be exchanged for other Warrant Certificates of like tenor and
in like aggregate amount upon surrender of the Warrant Certificates to be
exchanged. Upon such surrender, the Bank shall issue and deliver to the Holder
or his duly authorized assigns, one or more new Warrant Certificates of like
tenor and in like aggregate amount.

 

(d)                                 Every Warrant Certificate presented or
surrendered for registration of transfer or exchange shall be accompanied (if so
required by the Bank or the Securities Registrar) by a written instrument or
instruments of transfer, in form satisfactory to the Bank or the Securities
Registrar, duly executed by the registered Holder or by such Holder’s duly
authorized attorney in writing.

 

7.                                       Replacement of Warrant Certificates.

 

(a)                                  Upon receipt of evidence reasonably
satisfactory to the Bank of the loss, theft, destruction or mutilation of a
Warrant Certificate and, in the case of loss, theft or destruction, on delivery
of an indemnity agreement reasonably satisfactory in form and amount to the Bank
or, in the case of mutilation, surrender and cancellation of such Warrant
Certificate, the Bank shall issue and deliver to the Holder or his duly
authorized assigns, one or more new Warrant Certificates of like tenor and in
like aggregate amount.

 

(b)                                 All Warrants shall be held and owned under
the express condition that the provisions of this Section are exclusive with
respect to the replacement or payment of mutilated, destroyed, lost or stolen
Warrant Certificates and shall preclude (to the extent lawful) all other rights
and remedies, notwithstanding any law or statute existing or hereafter enacted
to the contrary with respect to the replacement or payment of negotiable
instruments or other securities without their surrender.

 

(c)                                  Upon the issuance of any new Warrant
Certificate under this Section, the Bank may require the payment of a sum
sufficient to cover any tax or other governmental charge that may be imposed in
relation thereto and any other expenses (including the fees and expenses of the
Bank and its agents and counsel) connected therewith.

 

(d)                                 Every new Warrant Certificate issued
pursuant to this Section shall constitute an additional contractual obligation
of the Bank, whether or not the mutilated, destroyed, lost or stolen Warrant
Certificate shall be at any time enforceable by anyone, and shall be entitled to
all the benefits of this Agreement equally and proportionately with any and all
other Warrant Certificates duly issued hereunder.

 

8.                                 Persons Deemed Holders. Prior to the due
presentment of a Warrant Certificate for registration of transfer or exchange,
the Bank, any Securities Registrar and any other agent of the Bank

 

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may treat the person in whose name such Warrant Certificate is registered in the
Securities Register as the sole Holder of such Warrant Certificate and of the
Warrant represented by such Warrant Certificate for all purposes whatsoever, and
shall not be bound to recognize any equitable or other claim to or interest in
such Warrant Certificate or in the Warrant represented by such Warrant
Certificate on the part of any person and shall be unaffected by any notice to
the contrary.

 

9.                                           Cancellation. All Warrant
Certificates surrendered for the purpose of exercise, exchange or registration
of transfer shall be cancelled by the Securities Registrar, and no Warrant
Certificates shall be issued in lieu thereof, except as expressly permitted by
the provisions of this Agreement.

 

10.                                     Fractional Shares. The Bank shall not be
required to issue Warrant Certificates exercisable for fractional Shares or to
issue fractional Shares upon the exercise of Warrants. No fractional shares or
scrip representing fractional shares shall be issued upon the exercise of a
Warrant and in lieu of delivery of any such fractional share upon any exercise
hereof, the Bank shall pay to the Holder an amount in cash equal to such
fraction multiplied by the Current Market Price Per Share (as defined in
Section 11(f)) at the date of such exercise.

 

11.                                 Stock Dividends, Splits, Etc.

 

(a)                                       In case the Bank shall at any time
after the date hereof (i) declare a dividend or make a distribution on Shares
payable in Shares, (ii) subdivide or split the outstanding Shares, (iii) combine
or reclassify the outstanding Shares into a smaller number of shares or
(iv) issue any shares of its capital stock in a reclassification of Shares
(including any such reclassification in connection with a consolidation or
merger in which the Bank is the continuing corporation), the Exercise Price in
effect at the time of the record date for such dividend or distribution or of
the effective date of such subdivision, split, combination or reclassification
shall be proportionately adjusted so that, giving effect to Section 11(i), the
exercise of a Warrant after such time shall entitle the holder to receive the
aggregate number of Shares or other securities of the Bank (or shares of any
security into which such Shares have been reclassified pursuant to clause
11(a)(iii) or 11(a)(iv) above) which, if such Warrant had been exercised
immediately prior to such time, such holder would have owned upon such exercise
and been entitled to receive by virtue of such dividend, distribution,
subdivision, split, combination or reclassification. Such adjustment shall be
made successively whenever any event listed above shall occur.

 

(b)                                      In case the Bank shall issue or sell
any Shares (other than Shares issued (i) upon exercise of the Warrants,
(ii) pursuant to the Bank’s 2008 Stock Incentive Plan or pursuant to any similar
Share-related employee compensation plan of the Bank approved by the board of
directors of the Bank or (iii) upon exercise or conversion of any security the
issuance of which caused an adjustment under Sections 11(c) or 11(d) hereof)
without consideration or for a consideration per share less than the Current
Market Price Per Share, the Exercise Price to be in effect after such issuance
or sale shall be determined by multiplying the Exercise Price in effect
immediately prior to such issuance or sale by a fraction, the numerator of which
shall be the sum of (x) the number of Shares outstanding immediately prior to
the time of such issuance or sale multiplied by the Current Market Price Per
Share immediately prior to such issuance or sale and (y) the aggregate
consideration, if any, to be received by the Bank upon such issuance or sale,
and the denominator of which shall be the product of the aggregate number of
Shares outstanding immediately after such issuance or sale and the Current
Market Price Per Share immediately prior to such issuance or sale. In case any
portion of the consideration to be received by the Bank shall be in a form other
than cash, the fair market value of such noncash consideration shall be utilized
in the foregoing computation. Such fair market value shall be determined by the
board of directors of the Bank; provided that if the Holder shall object to any
such determination, the board of directors of the Bank shall retain an
independent appraiser reasonably satisfactory to the Holder to determine such
fair market value. The Holder shall be notified promptly of any consideration
other than cash to be received by the Bank and

 

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furnished with a description of the consideration and the fair market value
thereof, as determined by the board of directors of the Bank.

 

(c)                                  In case the Bank shall fix a record date
for the issuance of rights, options or warrants to the holders of Shares or
other securities entitling such holders to subscribe for or purchase for a
period expiring within 60 days of such record date Shares (or securities
convertible into Shares) at a price per Share (or having a conversion price per
Share, if a security convertible into Shares) less than the Current Market Price
Per Share on such record date, the maximum number of Shares issuable upon
exercise of such rights, options or warrants (or conversion of such convertible
securities) shall be deemed to have been issued and outstanding as of such
record date and the Exercise Price shall be adjusted pursuant to
Section 11(b) hereof, as though such maximum number of Shares had been so issued
for an aggregate consideration payable by the holders of such rights, options,
warrants or convertible securities prior to their receipt of such Shares. In
case any portion of such consideration shall be in a form other than cash, the
fair market value of such noncash consideration shall be determined as set forth
in Section 11(b) hereof. Such adjustment shall be made successively whenever
such record date is fixed; and in the event that such rights, options or
warrants are not so issued or expire unexercised, or in the event of a change in
the number of Shares to which the holders of such rights, options or warrants
are entitled (other than pursuant to adjustment provisions therein comparable to
those contained in this Section 11), the Exercise Price shall again be adjusted
to be the Exercise Price which would then be in effect if such record date had
not been fixed, in the former event, or the Exercise Price which would then be
in effect if such holder had initially been entitled to such changed number of
Shares, in the latter event.

 

(d)                                 In case the Bank shall issue rights, options
(other than options issued pursuant to a plan described in clause 11(b)(ii)) or
warrants entitling the holders thereof to subscribe for or purchase Shares (or
securities convertible into Shares) or shall issue convertible securities, and
the price per Share of such rights, options, warrants or convertible securities
(in the case of rights, options or warrants, the price at which they may be
exercised) is less than the Current Market Price Per Share, the maximum number
of Shares issuable upon exercise of such rights, options or warrants or upon
conversion of such convertible securities shall be deemed to have been issued
and outstanding as of the date of such sale or issuance, and the Exercise Price
shall be adjusted pursuant to Section 1l(b) hereof as though such maximum number
of Shares had been so issued for an aggregate consideration equal to the
aggregate consideration paid for such rights, options, warrants or convertible
securities and the aggregate consideration payable by the holders of such
rights, options, warrants or convertible securities prior to their receipt of
such Shares. In case any portion of such consideration shall be in a form other
than cash, the fair market value of such noncash consideration shall be
determined as set forth in Section 11(b) hereof. Such adjustment shall be made
successively whenever such rights, options, warrants or convertible securities
are issued; and in the event that such rights, options or warrants expire
unexercised, or in the event of a change in the number of Shares to which the
holders of such rights, options, warrants or convertible securities are entitled
(other than pursuant to adjustment provisions therein comparable to those
contained in this Section 11), the Exercise Price shall again be adjusted to be
the Exercise Price which would then be in effect if such rights, options,
warrants or convertible securities had not been issued, in the former event, or
the Exercise Price which would then be in effect if such holders had initially
been entitled to such changed number of Shares, in the latter event. No
adjustment of the Exercise Price shall be made pursuant to this Section 11(d) to
the extent that the Exercise Price shall have been adjusted pursuant to
Section 11(c) upon the setting of any record date relating to such rights,
options, warrants or convertible securities and such adjustment fully reflects
the number of Shares to which the holders of such rights, options, warrants or
convertible securities are entitled and the price payable therefor.

 

(e)                                  In case the Bank shall fix a record date
for the making of a distribution to holders of Shares (including any such
distribution made in connection with a consolidation or merger in which

 

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the Bank is the continuing corporation) of evidences of indebtedness, assets or
other property (other than dividends payable in Shares or rights, options or
warrants referred to in, and for which an adjustment is made pursuant to,
Section 11(c) hereof), the Exercise Price to be in effect after such record date
shall be determined by multiplying the Exercise Price in effect immediately
prior to such record date by a fraction, the numerator of which shall be the
Current Market Price Per Share on such record date, less the fair market value
(determined as set forth in Section 11(b) hereof) of the portion of the assets,
other property or evidence of indebtedness so to be distributed which is
applicable to one Share, and the denominator of which shall be such Current
Market Price Per Share. Such adjustments shall be made successively whenever
such a record date is fixed; and in the event that such distribution is not so
made, the Exercise Price shall again be adjusted to be the Exercise Price which
would then be in effect if such record date had not been fixed.

 

(f)                                    For the purpose of any computation under
Sections 10, 11(b), 11(c), 11(d) or 11(e) hereof, “Current Market Price Per
Share” shall, subject to the penultimate sentence of this paragraph, be deemed
to be the average (weighted by daily trading volume) of the Daily Prices (as
defined below) per Share for the 20 consecutive trading days immediately prior
to such date. “Daily Price” means (1) if the Shares then are listed and traded
on the New York Stock Exchange, Inc. (“NYSE”), the closing price on such day as
reported on the NYSE Composite Transactions Tape; (2) if the Shares then are not
listed and traded on the NYSE, the closing price on such day as reported by the
principal national securities exchange on which the Shares are listed and
traded; (3) if the Shares then are not listed and traded on any such securities
exchange, the last reported sale price on such day on The NASDAQ Stock
Market, Inc. (“NASDAQ”); or (4) if the Shares then are not traded on NASDAQ, the
average of the highest reported bid and lowest reported asked price on such day
as reported by NASDAQ. If on any determination date the Shares are not quoted by
any such organization, the Current Market Price Per Share shall be the fair
market value of such Shares on such determination date as determined by the
board of directors of the Bank. If the Holder shall object to any determination
by the board of directors of the Bank of the Current Market Price Per Share, the
Current Market Price Per Share shall be the fair market value per Share as
determined by an independent appraiser retained by the Bank at its expense and
reasonably acceptable to the Holder. For purposes of any computation under this
paragraph, the number of Shares outstanding at any given time shall not include
Shares owned or held by or for the account of the Bank, other than (i) Shares
held, directly or indirectly, in trust accounts, managed accounts and the like
or otherwise held in a fiduciary capacity that are beneficially owned by third
parties and (ii) Shares held in respect of a debt previously contracted.

 

(g)                                 No adjustment in the Exercise Price shall be
required unless such adjustment would require an increase or decrease of at
least one percent in such price; provided that any adjustments which by reason
of this Section 11(g) are not required to be made shall be carried forward and
taken into account in any subsequent adjustment. All calculations under this
Section 11 shall be made to the nearest one tenth of a cent or to the nearest
hundredth of a share, as the case may be.

 

(h)                                 In the event that, at any time as a result
of the provisions of this Section 11, the holder of a Warrant upon subsequent
exercise shall become entitled to receive any shares of capital stock of the
Bank other than Shares, the number of such other shares so receivable upon
exercise of a Warrant shall thereafter be subject to adjustment from time to
time in a manner and on terms as nearly equivalent as practicable to the
provisions contained herein.

 

(i)                                     Upon each adjustment of the Exercise
Price as a result of the calculations made in Sections 11(a), 11(b), 11(c),
11(d) or 11(e) hereof, the number of shares for which a Warrant is exercisable
immediately prior to the making of such adjustment shall thereafter evidence the
right to purchase, at the adjusted Exercise Price, that number of Shares
obtained by (i) multiplying the number of shares covered by a Warrant
immediately prior to this adjustment of the number of shares by the Exercise

 

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Price in effect immediately prior to such adjustment of the Exercise Price and
(ii) dividing the product so obtained by the Exercise Price in effect
immediately after such adjustment of the Exercise Price.

 

12.                                 Reorganization, Reclassifications,
Consolidation or Merger.

 

(a)                                  If, prior to the Expiration Time, there
shall be a reorganization or reclassification of the Shares (other than as
provided in Section 11 of this Agreement), or any consolidation or merger of the
Bank with another entity, or any sale or transfer of all or substantially all of
the assets of the Bank or of the entity formed by such consolidation or
resulting from such merger or which acquires such assets, as the case may be,
the Holder shall be entitled to receive, during the remainder of the term of
this Agreement and upon payment of the Exercise Price, the number of shares of
stock or other securities or property of the Bank or of the successor entity (or
its parent company) resulting from such consolidation, merger, sale or transfer,
as the case may be, to which a holder of Shares, deliverable upon the exercise
of a Warrant, would have been entitled upon such reorganization,
reclassification, consolidation, merger, sale or transfer.

 

(b)                                 In the event of such reorganization,
reclassification, consolidation, merger, sale or transfer, and subject to
Section 14(h), the Bank shall make appropriate adjustments (as determined by the
board of directors of the Bank in its sole discretion) in the application of the
provisions with respect to the rights and interests of the Holders so that the
provisions set forth in this Agreement (including the adjustment to the Exercise
Price and the number of Shares issuable upon exercise of the Warrants) shall be
applicable, as nearly as may be practicable, to any shares or other property
thereafter deliverable upon the exercise of this Warrant. Adjustments for events
subsequent to the effective date of such a consolidation, merger and sale of
assets shall be as nearly equivalent as may be practicable to the adjustments
provided for in this Agreement. In any such event, effective provisions shall be
made in the certificate or articles of incorporation of the resulting or
surviving corporation, in any contract of sale, conveyance, lease or transfer,
or otherwise so that the provisions set forth herein for the protection of the
rights of the Holder shall thereafter continue to be applicable; and any such
resulting or surviving corporation shall expressly assume the obligation to
deliver, upon exercise, such shares of stock, other securities, cash and
property. The provisions of this Section 12 shall similarly apply to successive
consolidations, mergers, sales, leases or transfers.

 

13.                           Certificate as to Adjustments; Issuance of New
Warrant Certificates. Within thirty (30) days following any adjustment provided
for in Section 11 or 12 of this Agreement, the Bank shall give written notice of
the adjustment to the Holders as provided in Section 14(a) of this Agreement.
The notice shall state the Exercise Price as adjusted and the increased or
decreased number of shares purchasable upon the exercise of the Warrant(s) and
shall set forth in reasonable detail the method of calculation for each.
 Notwithstanding anything to the contrary set forth herein or in the Warrant
Certificates, the Bank may, at its option, issue new Warrant Certificates
evidencing the Warrants, in such form as may be approved by the Bank, to reflect
any adjustment or change in the Exercise Price and the number or kind of stock
or other securities or property purchasable upon exercise of the Warrants.

 

14.                                 Miscellaneous.

 

(a)                             Any notice or other communication required or
permitted to be made hereunder shall be in writing, duly signed by the party
giving such notice or communication and shall be deemed delivered and effective
when given personally or mailed by first-class registered or certified mail,
postage prepaid as follows (or at such other address for a party as shall be
specified by like notice): (i) if given to the Bank, at its principal place of
business; and (ii) if given to a Holder, at the address set forth for the Holder
on the books and records of the Bank. A notice given to the Bank by a Holder
with respect to the exercise of a Warrant shall not be effective until received
by the Bank.

 

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(b)                                 The Bank shall, at all times, reserve and
keep available out of its authorized and unissued Shares or out of any Shares
held in treasury that number of Shares that will from time to time be sufficient
to permit the exercise in full of all outstanding Warrants. The Bank shall take
all such action as may be necessary to ensure that all Shares delivered upon
exercise of any Warrants shall, at the time of delivery of the Warrant
Certificates for such Shares, be duly authorized, validly issued, fully paid and
nonassessable, free and clear of all liens, security interests, charges and
other encumbrances or restrictions on sale and free and clear of all statutory
preemptive rights.

 

(c)                                  The Bank shall pay when due and payable any
and all federal and state transfer taxes and charges (other than any applicable
income taxes) that may be payable in respect of the issuance and delivery of
Warrant Certificates or of certificates for Shares receivable upon the exercise
of any Warrants; provided, however, that the Bank shall not be required to pay
any tax that may be payable in respect of the issuance and delivery (i) of any
Warrant Certificate or stock certificate registered in a name other than that of
the Holder of the Warrant Certificate that has been surrendered, or (ii) of any
Warrant Certificate under Section 7.

 

(d)                                 No Holder, in his capacity as such, shall be
entitled to vote or receive dividends or shall be deemed for any other purpose
the holder of the Shares or other securities which may at any time be issuable
upon the exercise of such Warrant. Nothing contained herein or in any Warrant
Certificate shall be construed to confer upon any Holder, in his capacity as
such, any of the rights of a shareholder of the Bank, including any right to
vote for the election of directors or upon any matter submitted to shareholders
of the Bank at any meeting thereof, to give or withhold consent to any corporate
action, or to receive notices of meeting or other actions affecting
shareholders.

 

(e)                                  Each Holder, by accepting a Warrant
Certificate, accepts and agrees to the terms of this Agreement. The terms of
this Agreement shall be binding upon the Bank and the Holders and their
respective heirs, successors, representatives and permitted assigns. Nothing
expressed or referred to herein is intended or will be construed to give any
person other than the Bank or the Holders any legal or equitable right, remedy
or claim under or in respect of this Agreement, or any provision herein
contained, it being the intention of the Bank and the Holders that this
Agreement, the assumption of obligations and statements of responsibilities
hereunder, and all other conditions and provisions hereof are for the sole
benefit of the Bank and the Holders and for the benefit of no other person.

 

(f)                                    This Agreement constitutes the full
understanding of the Bank and the Holders, a complete allocation of risks
between them and a complete and exclusive statement of the terms and conditions
of their agreement relating to the subject matter hereof and supersedes any and
all prior agreements, whether written or oral, that may exist between the Bank
and any Holder with respect thereto. Except as otherwise specifically provided
in this Agreement, no conditions, usage of trade, course of dealing or
performance, understanding or agreement purporting to modify, vary, explain or
supplement the terms or conditions of this Agreement will be binding unless
hereafter or contemporaneously herewith made in writing and signed by the party
to be bound, and no modification will be effected by the acknowledgment or
acceptance of documents containing terms or conditions at variance with or in
addition to those set forth in this Agreement.

 

(g)                                 The headings contained in this Agreement are
for convenience of reference only and will not affect in any way the meaning or
interpretation of this Agreement. The words “hereof,” “herein” and “hereunder”
and words of similar import when used in this Agreement will refer to this
Agreement as a whole and not to any particular provision in this Agreement. Each
use herein of the masculine, neuter or feminine gender will be deemed to include
the other genders. Each use herein of the plural will include the singular and
vice versa, in each case as the context requires or as is otherwise appropriate.
The word “or” is used in the inclusive sense. References to a person arc also to
its permitted

 

8

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successors or assigns. No provision of this Agreement is to be construed to
require, directly or indirectly, any person to take any action, or omit to take
any action, which action or omission would violate applicable law (whether
statutory or common law), rule or regulation.

 

(h)                                 Notwithstanding Section 12(b), any provision
of this Agreement may be amended or waived if, and only if, such amendment or
waiver is in writing and signed, in the case of an amendment, by the Holder and
the Bank, or in the case of a waiver, by the party against whom the waiver is to
be effective. No failure or delay by either 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 thereof or the
exercise of any other right, power or privilege. The rights and remedies herein
provided shall be cumulative and not exclusive of any rights or remedies
provided by law.

 

(i)                                     This Agreement shall terminate upon the
earlier of (i) the Expiration Time, or (ii) the close of business on the date on
which all Warrants have been exercised.

 

(j)                                     THIS AGREEMENT, EACH WARRANT AND EACH
WARRANT CERTIFICATE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE
LAWS OF THE UNITED STATES APPLICABLE TO NATIONAL BANKS AND TO THE EXTENT NOT
INCONSISTENT THEREWITH, WITH THE LAWS OF STATE OF NEW YORK, WITHOUT REGARD TO
THE LAWS THAT MIGHT OTHERWISE GOVERN UNDER APPLICABLE PRINCIPLES OF CONFLICTS OF
LAWS. IN THE EVENT OF A DISPUTE INVOLVING THIS AGREEMENT, THE PARTIES
IRREVOCABLY AGREE THAT VENUE FOR SUCH DISPUTE SHALL LIE EXCLUSIVELY IN A COURT
OF COMPETENT JURISDICTION IN NEW YORK COUNTY, NEW YORK.

 

[Signature Page Follows]

 

9

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IN WITNESS WHEREOF, the Bank has caused this Agreement to be executed by a duly
authorized officer as of the date first above written.

 

 

 

HERITAGE BANK, N.A.,

 

a national banking association

 

 

 

 

 

By:

/s/ David Bagatelle

 

 

David Bagatelle

 

 

President & Chief Executive Officer

 

10

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EXHIBIT A

 

LIST OF INITIAL HOLDERS

 

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EXHIBIT B

FORM OF WARRANT CERTIFICATE

 

THE TRANSFER OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO THE
RESTRICTIONS SPECIFIED IN THAT CERTAIN WARRANT AGREEMENT DATED AS OF NOVEMBER
24, 2008, BY HERITAGE BANK, N.A., A NATIONAL BANKING ASSOCIATION (“BANK”), IN
FAVOR OF THE PERSONS LISTED ON EXHIBIT A THERETO, AS THE SAME MAY BE AMENDED
FROM TIME TO TIME (“AGREEMENT”). A COPY OF THE FORM OF THE AGREEMENT IS ON FILE
AND MAY BE INSPECTED AT THE PRINCIPAL EXECUTIVE OFFICE OF THE BANK DURING NORMAL
BUSINESS HOURS. THE HOLDER OF THIS CERTIFICATE, BY ACCEPTANCE OF THIS
CERTIFICATE, AGREES TO BE BOUND BY THE PROVISIONS OF THE AGREEMENT.

 

No. W-      

 

Number of Warrants:                

 

HERITAGE BANK, N.A.
WARRANT CERTIFICATE

 

This Warrant Certificate certifies
that                                                   , or registered assigns,
is the registered holder of a warrant to purchase the number of fully-paid and
non-assessable shares of common stock, $1.00 par value of the Bank (“Shares”)
set forth above, at the exercise price, subject to adjustment in certain events
(“Exercise Price”), of $10.00 per share (“Warrant”).

 

The Warrant evidenced by this Warrant Certificate is part of a duly authorized
issue of Warrants issued pursuant to the Agreement, which is hereby incorporated
by reference in and made a part of this instrument and is hereby referred to for
a description of the rights, limitation of rights, obligations, duties and
immunities thereunder of the Bank and the Holder. All terms used, but not
otherwise defined, in this Warrant Certificate shall have the meanings assigned
to them in the Agreement. If any provision of this Warrant Certificate conflicts
with a provision of the Agreement, the provision of the Agreement shall
supercede.

 

This Warrant may not be exercised after 2:00 p.m., New York City, New York time,
on the earlier to occur of (i) November 24, 2018, or (ii) the date provided in
Section 3(b) of the Agreement (the “Expiration Time”).

 

The Holder may exercise the Warrant evidenced by this Warrant Certificate in
whole or in part at any time prior to the Expiration Time by delivering to the
secretary or the cashier of the Bank (i) the Warrant Certificate; (ii) a written
notice to the Bank specifying the number of Shares with respect to which
Warrants are being exercised; and (iii) a check for the full amount of the
aggregate Exercise Price of the Shares being acquired; provided, that if at the
time of exercise, the Holder exercising Warrants (“Exercising Holder”) owns or
controls Excess Shares, such Exercising Holder may only exercise its Warrants if
the Shares acquired by the exercise of such Warrants are immediately upon
acquisition: (w) repurchased by the Bank; (x) sold in a widely dispersed public
offering; (y) sold pursuant to Rule 144 under the Securities Act of 1933 or in a
private placement in which no purchaser acquires from the Exercising Holder more
than 2% of the then-outstanding Shares; or (z) sold to a third-party that either
owns more than 50% of the then-outstanding Shares or simultaneously purchases
Shares from shareholders other than the Exercising Holder such that upon
consummation of such purchases, such third-party will own more than 50% of the
then-outstanding Shares.

 

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Upon delivery and payment of the items set forth above, the Holder shall he
deemed to be the holder of record of the Shares subject to such exercise,
notwithstanding that the stock transfer books of the Bank shall then be closed
or that certificates representing such Shares shall not then be actually
delivered to the Holder.

 

Upon receipt of the items set forth above, and subject to the terms of the
Agreement, the Bank shall promptly deliver to, and register in the name of, the
Holder a certificate or certificates representing the number of Shares acquired
by exercise of this Warrant. In the event of a partial exercise of this Warrant,
a new Warrant Certificate evidencing the number of Shares that remain subject to
this Warrant shall be issued by the Bank to such Holder or to his duly
authorized assigns.

 

The Agreement provides that upon the occurrence of certain events the Exercise
Price and the type and/or number of the Bank’s securities issuable thereupon
may, subject to certain conditions, be adjusted. In such event, the Bank may, at
its option, issue a new Warrant Certificate evidencing the adjustment in the
Exercise Price and the number and/or type of securities issuable upon the
exercise of the Warrants.

 

Upon surrender for registration of transfer of this Warrant Certificate, subject
to the terms of the Agreement, the Bank shall issue and deliver to the Holder or
his duly authorized assigns, one or more new Warrant Certificates of like tenor
and in like aggregate amount.

 

Prior to the due presentment of this Warrant Certificate for registration of
transfer or exchange, the Bank, any Securities Registrar and any other agent of
the Bank may treat the person in whose name this Warrant Certificate is
registered in the Securities Register as the sole Holder of this Warrant
Certificate and of the Warrant represented by this Warrant Certificate for all
purposes whatsoever, and shall not be bound to recognize any equitable or other
claim to or interest in this Warrant Certificate or in the Warrant represented
by this Warrant Certificate on the part of any person and shall be unaffected by
any notice to the contrary.

 

The Holder, in his capacity as such, shall not be entitled to vote or receive
dividends or shall be deemed from any other purpose the holder of the Shares or
other securities which may at any time be issuable upon the exercise of this
Warrant. Nothing contained in this Warrant Certificate shall be construed to
confer upon the Holder, in his capacity as such, any of the rights of a
shareholder of the Bank, including any right to vote for the election of
directors or upon any matter submitted to shareholders of the Bank at any
meeting thereof, to give or withhold consent to any corporate action, or to
receive notices of meeting or other actions affecting shareholders.

 

Any notice or other communication required or permitted to be made by the Holder
to the Bank shall be in writing, duly signed by the Holder and shall be deemed
delivered and effective when given personally or mailed by first-class
registered or certified mail, postage prepaid to the Bank, at its principal
place of business (or such other address as designated in writing to the Holder
by the Bank). A notice given to the Bank by a Holder with respect to the
exercise of this Warrant shall not be effective until received by the Bank.

 

Notwithstanding Section 12(b) of the Agreement, any provision of this Warrant
Certificate or the Agreement may be amended or waived if, and only if, such
amendment or waiver is in writing and signed, in the case of an amendment, by
the Holder and the Bank, or in the case of a waiver, by the party against whom
the waiver is to be effective. No failure or delay by either 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 thereof or the exercise of any other right, power or privilege. The
rights and remedies herein provided shall be cumulative and not exclusive of any
rights or remedies provided by law.

 

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IN WITNESS WHEREOF, the Bank has caused this Warrant Certificate to be duly
executed under its corporate seal.

 

Dated as of                         , 2008.

 

 

 

 

HERITAGE BANK, N.A.,

 

a national banking association

 

 

 

 

 

By:

 

 

 

David Bagatelle, President & Chief Executive Officer

 

 

 

 

 

[SEAL]

 

 

 

Attest:

 

 

 

Name:

 

 

Title:

 

 

 

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