Document:

FY2001 10K Exhibit 4.7

 

 

 

AMENDED AND RESTATED DECLARATION

OF TRUST

by and among

STATE STREET BANK AND TRUST COMPANY

OF CONNECTICUT, NATIONAL ASSOCIATION,

as Institutional Trustee,

HERITAGE COMMERCE CORP, 

as Sponsor,

and

LAWRENCE D. MCGOVERN, MAY WONG, and

RICHARD L. CONNIFF

as Administrators,

Dated as of July 31, 2001

 

 

 

TABLE OF CONTENTS

	
Page

	
ARTICLE I INTERPRETATION AND DEFINITIONS*

Section 1.1.Definitions.*

ARTICLE II ORGANIZATION*
Section 2.1.Name.*

Section 2.2.Office.*

Section 2.3.Purpose.*

Section 2.4.Authority.*

Section 2.5.Title to Property of the Trust.*

Section 2.6.Powers and Duties of the Institutional
Trustee and the Administrators.*

Section 2.7.Prohibition of Actions by the Trust and
the Institutional Trustee.*

Section 2.8.Powers and Duties of the Institutional
Trustee.*

Section 2.9.Certain Duties and Responsibilities of the
Institutional Trustee and Administrators.*

Section 2.10.Certain Rights of Institutional
Trustee.*

Section 2.11.Execution of Documents.*

Section 2.12.Not Responsible for Recitals or Issuance
of Securities.*

Section 2.13.Duration of Trust.*

Section 2.14.Mergers.*

ARTICLE III SPONSOR*
Section 3.1.Sponsor's Purchase of Common
Securities.*

Section 3.2.Responsibilities of the Sponsor.*

Section 3.3.Expenses.*

Section 3.4.Right to Proceed.*

ARTICLE IV INSTITUTIONAL TRUSTEE AND ADMINISTRATORS*
Section 4.1.Institutional Trustee;
Eligibility.*

Section 4.2.Administrators.*

Section 4.3.Appointment, Removal and Resignation of
Institutional Trustee and Administrators.*

Section 4.4.Institutional Trustee Vacancies.
*

Section 4.5.Effect of Vacancies.*

Section 4.6.Meetings of the Institutional Trustee and
the Administrators.*

Section 4.7.Delegation of Power.*

Section 4.8.Conversion, Consolidation or Succession to
Business.*

ARTICLE V DISTRIBUTIONS*
Section 5.1.Distributions.*

ARTICLE VI ISSUANCE OF SECURITIES*
Section 6.1.General Provisions Regarding
Securities.*

Section 6.2.Paying Agent, Transfer Agent and
Registrar.*

Section 6.3.Form and Dating.*

Section 6.4.Mutilated, Destroyed, Lost or Stolen
Certificates.*

Section 6.5.Temporary Securities.*

Section 6.6.Cancellation.*

Section 6.7.Rights of Holders; Waivers of Past
Defaults.*

ARTICLE VII DISSOLUTION AND TERMINATION OF TRUST*
Section 7.1.Dissolution and Termination of
Trust.*

ARTICLE VIII TRANSFER OF INTERESTS*
Section 8.1.General.*

Section 8.2.Transfer Procedures and
Restrictions.*

Section 8.3.Deemed Security Holders.*

ARTICLE IX LIMITATION OF LIABILITY OF HOLDERS OF SECURITIES,
INSTITUTIONAL TRUSTEE OR OTHERS*
Section 9.1.Liability.*

Section 9.2.Exculpation.*

Section 9.3.Fiduciary Duty.*

Section 9.4.Indemnification.*

Section 9.5.Outside Businesses.*

Section 9.6.Compensation; Fee.*

ARTICLE X ACCOUNTING*
Section 10.1.Fiscal Year.*

Section 10.2.Certain Accounting Matters.*

Section 10.3.Banking.*

Section 10.4.Withholding.*

ARTICLE XI AMENDMENTS AND MEETINGS*
Section 11.1.Amendments.*

Section 11.2.Meetings of the Holders of Securities;
Action by Written Consent.*

ARTICLE XII REPRESENTATIONS OF INSTITUTIONAL TRUSTEE*
Section 12.1.Representations and Warranties of
Institutional Trustee.*

ARTICLE XIII MISCELLANEOUS*
Section 13.1.Notices.*

Section 13.2.Governing Law.*

Section 13.3.Intention of the Parties.*

Section 13.4.Headings.*

Section 13.5.Successors and Assigns.*

Section 13.6.Partial Enforceability.*

Section 13.7.Counterparts.*

 

 

 

 

Annex ITerms of Securities

Exhibit A-IForm of Capital Security Certificate

Exhibit A-2Form of Common Security Certificate

Exhibit BSpecimen of Initial Debenture

Exhibit CPlacement Agreement

AMENDED AND RESTATED

DECLARATION OF TRUST

OF

HERITAGE STATUTORY TRUST II

July 31, 2001

AMENDED AND RESTATED DECLARATION OF TRUST
("Declaration") dated and effective as of July 31, 2001, by the
Institutional Trustee (as defined herein), the Administrators (as defined
herein), the Sponsor (as defined herein) and by the holders, from time to time,
of undivided beneficial interests in the Trust (as defined herein) to be issued
pursuant to this Declaration;

WHEREAS, the Institutional Trustee, the Administrators and
the Sponsor established Heritage Statutory Trust II (the "Trust"), a
statutory trust under the Connecticut Statutory Trust Act pursuant to a
Declaration of Trust dated as of July 3, 2001 (the "Original
Declaration"), and a Certificate of Trust filed with the Secretary of State
of the State of Connecticut on July 5, 2001, for the sole purpose of issuing and
selling certain securities representing undivided beneficial interests in the
assets of the Trust and investing the proceeds thereof in certain debentures of
the Debenture Issuer (as defined herein);

WHEREAS, as of the date hereof, no interests in the Trust
have been issued; and

WHEREAS, the Institutional Trustee, the Administrators and
the Sponsor, by this Declaration, amend and restate each and every term and
provision of the Original Declaration;

NOW, THEREFORE, it being the intention of the parties hereto
to continue the Trust as a statutory trust under the Statutory Trust Act (as
defined herein) and that this Declaration constitutes the governing instrument
of such statutory trust, the Institutional Trustee declares that all assets
contributed to the Trust will be held in trust for the benefit of the holders,
from time to time, of the securities representing undivided beneficial interests
in the assets of the Trust issued hereunder, subject to the provisions of this
Declaration. The parties hereto hereby agree as follows:

	

INTERPRETATION AND DEFINITIONS

	Definitions.  

Unless the context otherwise requires:

	  Capitalized terms used in this Declaration
but not defined in the preamble above have the respective meanings assigned to
them in this Section 1.1;

	  a term defined anywhere in this Declaration
has the same meaning throughout;

	  all references to "the Declaration" or "this
Declaration" are to this Declaration as modified, supplemented or amended from
time to time;

	  all references in this Declaration to
Articles and Sections and Annexes and Exhibits are to Articles and Sections of
and Annexes and Exhibits to this Declaration unless otherwise specified;
and

	  a reference to the singular includes the
plural and vice versa.

"Additional Interest" has the meaning set forth in the
Indenture.

"Administrative Action" has the meaning set forth in
paragraph 4(a) of Annex I.

"Administrators" means each of Lawrence D. McGovern,
May Wong and Richard L. Conniff, solely in such Person's capacity as
Administrator of the Trust created and continued hereunder and not in such
Person's individual capacity, or such Administrator's successor in interest in
such capacity, or any successor appointed as herein provided.

"Affiliate" has the same meaning as given to that term
in Rule 405 of the Securities Act or any successor rule thereunder.

"Authorized Officer" of a Person means any Person that
is authorized to bind such Person.

"Bankruptcy Event" means, with respect to any
Person:

(a)a court having jurisdiction in the premises shall
enter a decree or order for relief in respect of such Person in an involuntary
case under any applicable bankruptcy, insolvency or other similar law now or
hereafter in effect, or appointing a receiver, liquidator, assignee, custodian,
trustee, sequestrator (or similar official) of such Person or for any
substantial part of its property, or ordering the winding-up or liquidation of
its affairs and such decree or order shall remain unstayed and in effect for a
period of 90 consecutive days; or

(b)such Person shall commence a voluntary case under any
applicable bankruptcy, insolvency or other similar law now or hereafter in
effect, shall consent to the entry of an order for relief in an involuntary case
under any such law, or shall consent to the appointment of or taking possession
by a receiver, liquidator, assignee, trustee, custodian, sequestrator (or other
similar official) of such Person of any substantial part of its property, or
shall make any general assignment for the benefit of creditors, or shall fail
generally to pay its debts as they become due.

"Business Day" means any day other than Saturday,
Sunday or any other day on which banking institutions in New York City or
Hartford, Connecticut are permitted or required by any applicable law to
close.

"Capital Securities" has the meaning set forth in
paragraph 1(a) of Annex I.

"Capital Security Certificate" means a definitive
Certificate in fully registered form representing a Capital Security
substantially in the form of Exhibit A-1.

"Capital Treatment Event" has the meaning set forth in
paragraph 4(a) of Annex I.

"Certificate" means any certificate evidencing
Securities.

"Closing Date" has the meaning set forth in the
Placement Agreement.

"Code" means the Internal Revenue Code of 1986, as
amended from time to time, or any successor legislation.

"Commission" means the Securities and Exchange
Commission.

"Common Securities" has the meaning set forth in
paragraph 1(b) of Annex I.

"Common Security Certificate" means a definitive
Certificate in fully registered form representing a Common Security
substantially in the form of Exhibit A-2.

"Company Indemnified Person" means (a) any
Administrator; (b) any Affiliate of any Administrator; (c) any
officers, directors, shareholders, members, partners, employees, representatives
or agents of any Administrator; or (d) any officer, employee or agent of
the Trust or its Affiliates.

"Corporate Trust Office" means the office of the
Institutional Trustee at which the corporate trust business of the Institutional
Trustee shall, at any particular time, be principally administered, which office
at the date of execution of this Declaration is located at 225 Asylum
Street, Goodwin Square, Hartford, Connecticut.

"Coupon Rate" has the meaning set forth in
paragraph 2(a) of Annex I.

"Covered Person" means: (a) any Administrator,
officer, director, shareholder, partner, member, representative, employee or
agent of (i) the Trust or (ii) any of the Trust's Affiliates; and
(b) any Holder of Securities.

"Creditor" has the meaning set forth in
Section 3.3.

"Debenture Issuer" means Heritage Commerce Corp, a
California corporation, in its capacity as issuer of the Debentures under the
Indenture.

"Debenture Trustee" means State Street Bank and Trust
Company of Connecticut, National Association, as trustee under the Indenture
until a successor is appointed thereunder, and thereafter means such successor
trustee.

"Debentures" means the Floating Rate Junior
Subordinated Deferrable Interest Debentures due 2031 to be issued by the
Debenture Issuer under the Indenture.

"Defaulted Interest" has the meaning set forth in the
Indenture.

"Determination Date" has the meaning set forth in
paragraph 4(a) of Annex I.

"Direct Action" has the meaning set forth in Section
2.8(d).

"Distribution" means a distribution payable to Holders
of Securities in accordance with Section 5.1.

"Distribution Payment Date" has the meaning set forth
in paragraph 2(b) of Annex I.

"Distribution Period" has the meaning set forth in
paragraph 2(a) of Annex I.

"Distribution Rate" means, for the period beginning on
(and including) the date of original issuance and ending on (but excluding)
October 31, 2001, 7.29% and for the period beginning on (and including) October
31, 2001 and thereafter, the Coupon Rate.

"Event of Default" means any one of the following
events (whatever the reason for such event and whether it shall be voluntary or
involuntary or be effected by operation of law or pursuant to any judgment,
decree or order of any court or any order, rule or regulation of any
administrative or governmental body):

(a)the occurrence of an Indenture Event of Default;
or

(b)default by the Trust in the payment of any Redemption
Price of any Security when it becomes due and payable; or

(c)default in the performance, or breach, in any material
respect, of any covenant or warranty of the Institutional Trustee in this
Declaration (other than those specified in clause (a) or (b) above) and
continuation of such default or breach for a period of 60 days after there
has been given, by registered or certified mail to the Institutional Trustee and
to the Sponsor by the Holders of at least 25% in aggregate liquidation amount of
the outstanding Capital Securities a written notice specifying such default or
breach and requiring it to be remedied and stating that such notice is a "Notice
of Default" hereunder; or

(d)the occurrence of a Bankruptcy Event with respect to
the Institutional Trustee if a successor Institutional Trustee has not been
appointed within 90 days thereof.

"Exchange Act" means the Securities Exchange Act of
1934, as amended from time to time, or any successor legislation.

"Extension Period" has the meaning set forth in
paragraph 2(b) of Annex I.

"Federal Reserve" has the meaning set forth in
paragraph 3 of Annex I.

"Fiduciary Indemnified Person" shall mean the
Institutional Trustee, any Affiliate of the Institutional Trustee and any
officers, directors, shareholders, members, partners, employees,
representatives, custodians, nominees or agents of the Institutional
Trustee.

"Fiscal Year" has the meaning set forth in Section
10.1.

"Guarantee" means the guarantee agreement to be dated
as of the Closing Date, of the Sponsor in respect of the Capital Securities.

"Holder" means a Person in whose name a Certificate
representing a Security is registered, such Person being a beneficial owner
within the meaning of the Statutory Trust Act.

"Indemnified Person" means a Company Indemnified
Person or a Fiduciary Indemnified Person.

"Indenture" means the Indenture dated as of the
Closing Date, between the Debenture Issuer and the Debenture Trustee, and any
indenture supplemental thereto pursuant to which the Debentures are to be
issued, as such Indenture and any supplemental indenture may be amended,
supplemented or otherwise modified from time to time.

"Indenture Event of Default" means an "Event of
Default" as defined in the Indenture.

"Institutional Trustee" means the Trustee meeting the
eligibility requirements set forth in Section 4.1.

"Interest" means any interest due on the Debentures
including any Additional Interest and Defaulted Interest.

"Investment Company" means an investment company as
defined in the Investment Company Act.

"Investment Company Act" means the Investment Company
Act of 1940, as amended from time to time, or any successor legislation.

"Investment Company Event" has the meaning set forth
in paragraph 4(a) of Annex I.

"Legal Action" has the meaning set forth in Section
2.8(d).

"Liquidation" has the meaning set forth in
paragraph 3 of Annex I.

"Liquidation Distribution" has the meaning set forth
in paragraph 3 of Annex I.

"Majority in liquidation amount of the Securities"
means Holder(s) of outstanding Securities voting together as a single class or,
as the context may require, Holders of outstanding Capital Securities or Holders
of outstanding Common Securities voting separately as a class, who are the
record owners of more than 50% of the aggregate liquidation amount (including
the stated amount that would be paid on redemption, liquidation or otherwise,
plus accrued and unpaid Distributions to the date upon which the voting
percentages are determined) of all outstanding Securities of the relevant
class.

"Maturity Date" has the meaning set forth in paragraph
4(a) of Annex I.

"Officers' Certificates" means, with respect to any
Person, a certificate signed by two Authorized Officers of such Person. Any
Officers' Certificate delivered with respect to compliance with a condition or
covenant providing for it in this Declaration shall include:

(a)a statement that each officer signing the Certificate
has read the covenant or condition and the definitions relating thereto;

(b)a brief statement of the nature and scope of the
examination or investigation undertaken by each officer in rendering the
Certificate;

(c)a statement that each such officer has made such
examination or investigation as, in such officer's opinion, is necessary to
enable such officer to express an informed opinion as to whether or not such
covenant or condition has been complied with; and

(d)a statement as to whether, in the opinion of each such
officer, such condition or covenant has been complied with.

"OTS" has the meaning set forth in paragraph 3 of
Annex I.

"Paying Agent" has the meaning specified in Section
6.2.

"Payment Amount" has the meaning set forth in Section
5.1.

"Person" means a legal person, including any
individual, corporation, estate, partnership, joint venture, association, joint
stock company, limited liability company, trust, unincorporated association, or
government or any agency or political subdivision thereof, or any other entity
of whatever nature.

"Placement Agreement" means the Placement Agreement
relating to the offering and sale of Capital Securities in the form of
Exhibit C.

"Property Account" has the meaning set forth in
Section 2.8(c).

"Pro Rata" has the meaning set forth in
paragraph 8 of Annex I.

"Quorum" means a majority of the Administrators or, if
there are only two Administrators, both of them.

"Redemption Date" has the meaning set forth in
paragraph 4(a) of Annex I.

"Redemption/Distribution Notice" has the meaning set
forth in paragraph 4(e) of Annex I.

"Redemption Price" has the meaning set forth in
paragraph 4(a) of Annex I.

"Registrar" has the meaning set forth in Section
6.2.

"Responsible Officer" means, with respect to the
Institutional Trustee, any officer within the Corporate Trust Office of the
Institutional Trustee, including any vice-president, any assistant vice-
president, any assistant secretary, the treasurer, any assistant treasurer, any
trust officer or other officer of the Corporate Trust Office of the
Institutional Trustee customarily performing functions similar to those
performed by any of the above designated officers and also means, with respect
to a particular corporate trust matter, any other officer to whom such matter is
referred because of that officer's knowledge of and familiarity with the
particular subject.

"Restricted Securities Legend" has the meaning set
forth in Section 8.2(b).

"Rule 3a-5" means Rule 3a-5 under the
Investment Company Act.

"Rule 3a-7" means Rule 3a-7 under the
Investment Company Act.

"Securities" means the Common Securities and the
Capital Securities.

"Securities Act" means the Securities Act of 1933, as
amended from time to time, or any successor legislation.

"Special Event" has the meaning set forth in
paragraph 4(a) of Annex I.

"Special Redemption Date" has the meaning set forth in
paragraph 4(a) of Annex I.

"Special Redemption Price" has the meaning set forth
in paragraph 4(a) of Annex I.

"Sponsor" means Heritage Commerce Corp a California
corporation, or any successor entity in a merger, consolidation or amalgamation,
in its capacity as sponsor of the Trust.

"Statutory Trust Act" means Chapter 615 of Title 34 of
the Connecticut General Statutes, Sections 500, et seq. as may be amended from
time to time.

"Successor Entity" has the meaning set forth in
Section 2.14(b).

"Successor Institutional Trustee" has the meaning set
forth in Section 4.3(a).

"Successor Securities" has the meaning set forth in
Section 2.14(b).

"Super Majority" has the meaning set forth in
paragraph 5(b) of Annex I.

"Tax Event" has the meaning set forth in
paragraph 4(a) of Annex I.

"10% in liquidation amount of the Securities" means
Holder(s) of outstanding Securities voting together as a single class or, as the
context may require, Holders of outstanding Capital Securities or Holders of
outstanding Common Securities voting separately as a class, who are the record
owners of 10% or more of the aggregate liquidation amount (including the stated
amount that would be paid on redemption, liquidation or otherwise, plus accrued
and unpaid Distributions to the date upon which the voting percentages are
determined) of all outstanding Securities of the relevant class.

"3-Month LIBOR" has the meaning set forth in
paragraph 4(a) of Annex I.

"Transfer Agent" has the meaning set forth in Section
6.2.

"Treasury Regulations" means the income tax
regulations, including temporary and proposed regulations, promulgated under the
Code by the United States Treasury, as such regulations may be amended from time
to time (including corresponding provisions of succeeding regulations).

"Trust Property" means (a) the Debentures,
(b) any cash on deposit in, or owing to, the Property Account and
(c) all proceeds and rights in respect of the foregoing and any other
property and assets for the time being held or deemed to be held by the
Institutional Trustee pursuant to the trusts of this Declaration.

"U.S. Person" means a United States Person as defined
in Section 7701(a)(30) of the Code.

	

ORGANIZATION

	
Name.  

The Trust is named Heritage Statutory Trust II," as such
name may be modified from time to time by the Administrators following written
notice to the Holders of the Securities. The Trust's activities may be conducted
under the name of the Trust or any other name deemed advisable by the
Administrators.

	
Office.  

The address of the principal office of the Trust is c/o
State Street Bank and Trust Company of Connecticut, National Association,
225 Asylum Street, Goodwin Square, Hartford, Connecticut 06103. On at least
10 Business Days written notice to the Holders of the Securities, the
Administrators may designate another principal office, which shall be in a state
of the United States or in the District of Columbia.

	
Purpose.  

The exclusive purposes and functions of the Trust are
(a) to issue and sell the Securities representing undivided beneficial
interests in the assets of the Trust, (b) to invest the gross proceeds from
such sale to acquire the Debentures, (c) to facilitate direct investment in
the assets of the Trust through issuance of the Common Securities and the
Capital Securities and (d) except as otherwise limited herein, to engage in
only those other activities necessary or incidental thereto. The Trust shall not
borrow money, issue debt or reinvest proceeds derived from investments, pledge
any of its assets, or otherwise undertake (or permit to be undertaken) any
activity that would cause the Trust not to be classified for United States
federal income tax purposes as a grantor trust.

	Authority.  

Except as specifically provided in this Declaration, the
Institutional Trustee shall have exclusive and complete authority to carry out
the purposes of the Trust. An action taken by the Institutional Trustee in
accordance with its powers shall constitute the act of and serve to bind the
Trust. In dealing with the Institutional Trustee acting on behalf of the Trust,
no Person shall be required to inquire into the authority of the Institutional
Trustee to bind the Trust. Persons dealing with the Trust are entitled to rely
conclusively on the power and authority of the Institutional Trustee as set
forth in this Declaration. The Administrators shall have only those ministerial
duties set forth herein with respect to accomplishing the purposes of the Trust
and are not intended to be trustees or fiduciaries with respect to the Trust or
the Holders. The Institutional Trustee shall have the right, but shall not be
obligated except as provided in Section 2.6, to perform those duties assigned to
the Administrators.

	
Title to Property of the
Trust.  

Except as provided in Section 2.8 with respect to the
Debentures and the Property Account or as otherwise provided in this
Declaration, legal title to all assets of the Trust shall be vested in the
Trust. The Holders shall not have legal title to any part of the assets of the
Trust, but shall have an undivided beneficial interest in the assets of the
Trust.

	Powers and Duties of the Institutional Trustee and
the Administrators.

	  The
Institutional Trustee and the Administrators shall conduct the affairs of the
Trust in accordance with the terms of this Declaration. Subject to the
limitations set forth in paragraph (b) of this Section, and in accordance
with the following provisions (i) and (ii), the Institutional Trustee and
the Administrators shall have the authority to enter into all transactions and
agreements determined by the Institutional Trustee to be appropriate in
exercising the authority, express or implied, otherwise granted to the
Institutional Trustee or the Administrators, as the case may be, under this
Declaration, and to perform all acts in furtherance thereof, including without
limitation, the following:

	

Each Administrator shall have the power and authority to act
on behalf of the Trust with respect to the following matters:

	

the issuance and sale of the Securities;

	  

to cause the Trust to enter into, and to execute and deliver
on behalf of the Trust, such agreements as may be necessary or desirable in
connection with the purposes and function of the Trust, including agreements
with the Paying Agent;

	  

ensuring compliance with the Securities Act, applicable state
securities or blue sky laws;

	  

the sending of notices (other than notices of default), and
other information regarding the Securities and the Debentures to the Holders in
accordance with this Declaration;

	  

the consent to the appointment of a Paying Agent, Transfer
Agent and Registrar in accordance with this Declaration, which consent shall not
be unreasonably withheld or delayed;

	  

execution and delivery of the Securities in accordance with
this Declaration;

	  

execution and delivery of closing certificates pursuant to
the Placement Agreement and the application for a taxpayer identification
number;

	  

unless otherwise determined by the Holders of a Majority in
liquidation amount of the Securities or as otherwise required by the Statutory
Trust Act, to execute on behalf of the Trust (either acting alone or together
with any or all of the Administrators) any documents that the Administrators
have the power to execute pursuant to this Declaration;

	  

the taking of any action incidental to the foregoing as the
Institutional Trustee may from time to time determine is necessary or advisable
to give effect to the terms of this Declaration for the benefit of the Holders
(without consideration of the effect of any such action on any particular
Holder);

	  

to establish a record date with respect to all actions to be
taken hereunder that require a record date be established, including
Distributions, voting rights, redemptions and exchanges, and to issue relevant
notices to the Holders of Capital Securities and Holders of Common Securities as
to such actions and applicable record dates; and

	  

to duly prepare and file all applicable tax returns and tax
information reports that are required to be filed with respect to the Trust on
behalf of the Trust.

	  

As among the Institutional Trustee and the Administrators,
the Institutional Trustee shall have the power, duty and authority to act on
behalf of the Trust with respect to the following matters:

	  

the establishment of the Property Account;

	  

the receipt of the Debentures;

	  

the collection of interest, principal and any other payments
made in respect of the Debentures in the Property Account;

	  

the distribution through the Paying Agent of amounts owed to
the Holders in respect of the Securities;

	  

the exercise of all of the rights, powers and privileges of a
holder of the Debentures;

	  

the sending of notices of default and other information
regarding the Securities and the Debentures to the Holders in accordance with
this Declaration;

	  

the distribution of the Trust Property in accordance with the
terms of this Declaration;

	  

to the extent provided in this Declaration, the winding up of
the affairs of and liquidation of the Trust and the preparation, execution and
filing of the certificate of cancellation with the Secretary of State of the
State of Connecticut;

	  

after any Event of Default (provided that such Event
of Default is not by or with respect to the Institutional Trustee) the taking of
any action incidental to the foregoing as the Institutional Trustee may from
time to time determine is necessary or advisable to give effect to the terms of
this Declaration and protect and conserve the Trust Property for the benefit of
the Holders (without consideration of the effect of any such action on any
particular Holder); and

	  

to take all action that may be necessary for the preservation
and the continuation of the Trust's valid existence, rights, franchises and
privileges as a statutory trust under the laws of the State of Connecticut and
of each other jurisdiction in which such existence is necessary to protect the
limited liability of the Holders of the Capital Securities or to enable the
Trust to effect the purposes for which the Trust was created.

	  

The Institutional Trustee shall have the power and authority
to act on behalf of the Trust with respect to any of the duties, liabilities,
powers or the authority of the Administrators set forth in
Section 2.6(a)(i)(D), (E) and (F) herein but shall not have a duty to do
any such act unless specifically requested to do so in writing by the Sponsor,
and shall then be fully protected in acting pursuant to such written request;
and in the event of a conflict between the action of the Administrators and the
action of the Institutional Trustee, the action of the Institutional Trustee
shall prevail.

	  So long as this Declaration remains in
effect, the Trust (or the Institutional Trustee or Administrators acting on
behalf of the Trust) shall not undertake any business, activities or transaction
except as expressly provided herein or contemplated hereby. In particular,
neither the Institutional Trustee nor the Administrators may cause the Trust to
(i) acquire any investments or engage in any activities not authorized by
this Declaration, (ii) sell, assign, transfer, exchange, mortgage, pledge,
set-off or otherwise dispose of any of the Trust Property or interests therein,
including to Holders, except as expressly provided herein, (iii) take any
action that would reasonably be expected (x) to cause the Trust to fail or cease
to qualify as a "grantor trust" for United States federal income tax purposes or
(y) to require the trust to register as an Investment Company under the
Investment Company Act, (iv) incur any indebtedness for borrowed money or
issue any other debt or (v) take or consent to any action that would result
in the placement of a lien on any of the Trust Property. The Institutional
Trustee shall, at the sole cost and expense of the Trust, defend all claims and
demands of all Persons at any time claiming any lien on any of the Trust
Property adverse to the interest of the Trust or the Holders in their capacity
as Holders.

	  In connection with the issuance and sale of
the Capital Securities, the Sponsor shall have the right and responsibility to
assist the Trust with respect to, or effect on behalf of the Trust, the
following (and any actions taken by the Sponsor in furtherance of the following
prior to the date of this Declaration are hereby ratified and confirmed in all
respects):

	

the taking of any action necessary to obtain an exemption
from the Securities Act;

	  

the determination of the States in which to take appropriate
action to qualify or register for sale all or part of the Capital Securities and
the determination of any and all such acts, other than actions which must be
taken by or on behalf of the Trust, and the advice to the Administrators of
actions they must take on behalf of the Trust, and the preparation for execution
and filing of any documents to be executed and filed by the Trust or on behalf
of the Trust, as the Sponsor deems necessary or advisable in order to comply
with the applicable laws of any such States in connection with the sale of the
Capital Securities;

	  

the negotiation of the terms of, and the execution and
delivery of, the Placement Agreement providing for the sale of the Capital
Securities; and

	  

the taking of any other actions necessary or desirable to
carry out any of the foregoing activities.

	  Notwithstanding anything herein to the
contrary, the Administrators and the Holders of a Majority in liquidation amount
of the Common Securities are authorized and directed to conduct the affairs of
the Trust and to operate the Trust so that the Trust will not (i) be deemed to
be an Investment Company required to be registered under the Investment Company
Act, and (ii) fail to be classified as a "grantor trust" for United States
federal income tax purposes. The Administrators and the Holders of a Majority in
liquidation amount of the Common Securities shall not take any action
inconsistent with the treatment of the Debentures as indebtedness of the
Debenture Issuer for United States federal income tax purposes. In this
connection, the Administrators and the Holders of a Majority in liquidation
amount of the Common Securities are authorized to take any action, not
inconsistent with applicable laws, the Certificate of Trust or this Declaration,
as amended from time to time, that each of the Administrators and the Holders of
a Majority in liquidation amount of the Common Securities determines in their
discretion to be necessary or desirable for such purposes.

	  All expenses incurred by the Administrators
or the Institutional Trustee pursuant to this Section 2.6 shall be reimbursed by
the Sponsor, and the Institutional Trustee shall have no obligations with
respect to such expenses.

	  The assets of the Trust shall consist of the
Trust Property.

	  Legal title to all Trust Property shall be
vested at all times in the Institutional Trustee (in its capacity as such) and
shall be held and administered by the Institutional Trustee for the benefit of
the Trust in accordance with this Declaration.

	Prohibition of Actions by
the Trust and the Institutional Trustee.

	  The Trust shall not, and the
Institutional Trustee shall cause the Trust not to, engage in any activity other
than as required or authorized by this Declaration. In particular, the Trust
shall not and the Institutional Trustee shall cause the Trust not to:

	  

invest any proceeds received by the Trust from holding the
Debentures, but shall distribute all such proceeds to Holders of the Securities
pursuant to the terms of this Declaration and of the Securities;

	  

acquire any assets other than as expressly provided
herein;

	  

possess Trust Property for other than a Trust purpose;

	  

make any loans or incur any indebtedness other than loans
represented by the Debentures;

	  

possess any power or otherwise act in such a way as to vary
the Trust assets or the terms of the Securities in any way whatsoever other than
as expressly provided herein;

	  

issue any securities or other evidences of beneficial
ownership of, or beneficial interest in, the Trust other than the
Securities;

	  

carry on any "trade or business" as that phrase is used in
the Code; or

	  

other than as provided in this Declaration (including
Annex I), (A) direct the time, method and place of exercising any
trust or power conferred upon the Debenture Trustee with respect to the
Debentures, (B) waive any past default that is waivable under the
Indenture, (C) exercise any right to rescind or annul any declaration that
the principal of all the Debentures shall be due and payable, or
(D) consent to any amendment, modification or termination of the Indenture
or the Debentures where such consent shall be required unless the Trust shall
have received an opinion of counsel to the effect that such modification will
not cause the Trust to cease to be classified as a "grantor trust" for United
States federal income tax purposes.

	Powers and Duties of the Institutional
Trustee.

	  The legal title to the Debentures shall
be owned by and held of record in the name of the Institutional Trustee in trust
for the benefit of the Trust and the Holders of the Securities. The right, title
and interest of the Institutional Trustee to the Debentures shall vest
automatically in each Person who may hereafter be appointed as Institutional
Trustee in accordance with Section 4.3. Such vesting and cessation of title
shall be effective whether or not conveyancing documents with regard to the
Debentures have been executed and delivered.

	  The Institutional Trustee shall not transfer
its right, title and interest in the Debentures to the Administrators.

	  The Institutional Trustee shall:

	  

establish and maintain a segregated non-interest bearing
trust account (the "Property Account") in the name of and under the
exclusive control of the Institutional Trustee, and maintained in the
Institutional Trustee's trust department, on behalf of the Holders of the
Securities and, upon the receipt of payments of funds made in respect of the
Debentures held by the Institutional Trustee, deposit such funds into the
Property Account and make payments, or cause the Paying Agent to make payments,
to the Holders of the Capital Securities and Holders of the Common Securities
from the Property Account in accordance with Section 5.1. Funds in the Property
Account shall be held uninvested until disbursed in accordance with this
Declaration;

	  

engage in such ministerial activities as shall be necessary
or appropriate to effect the redemption of the Capital Securities and the Common
Securities to the extent the Debentures are redeemed or mature; and

	  

upon written notice of distribution issued by the
Administrators in accordance with the terms of the Securities, engage in such
ministerial activities as shall be necessary or appropriate to effect the
distribution of the Debentures to Holders of Securities upon the occurrence of
certain circumstances pursuant to the terms of the Securities.

	  

The Institutional Trustee may bring or defend, pay, collect,
compromise, arbitrate, resort to legal action with respect to, or otherwise
adjust claims or demands of or against, the Trust ("Legal Action") which
arises out of or in connection with an Event of Default of which a Responsible
Officer of the Institutional Trustee has actual knowledge or arises out of the
Institutional Trustee's duties and obligations under this Declaration;
provided, however, that if an Event of Default has occurred and is
continuing and such event is attributable to the failure of the Debenture Issuer
to pay interest or principal on the Debentures on the date such interest or
principal is otherwise payable (or in the case of redemption, on the redemption
date), then a Holder of the Capital Securities may directly institute a
proceeding for enforcement of payment to such Holder of the principal of or
interest on the Debentures having a principal amount equal to the aggregate
liquidation amount of the Capital Securities of such Holder (a "Direct
Action") on or after the respective due date specified in the Debentures. In
connection with such Direct Action, the rights of the Holders of the Common
Securities will be subrogated to the rights of such Holder of the Capital
Securities to the extent of any payment made by the Debenture Issuer to such
Holder of the Capital Securities in such Direct Action; provided,
however, that no Holder of the Common Securities may exercise such right
of subrogation so long as an Event of Default with respect to the Capital
Securities has occurred and is continuing.

	  The Institutional
Trustee shall continue to serve as a Trustee until either:

	  

the Trust has been completely liquidated and the proceeds of
the liquidation distributed to the Holders of the Securities pursuant to the
terms of the Securities and this Declaration; or

	  

a Successor Institutional Trustee has been appointed and has
accepted that appointment in accordance with Section 4.3.

	  The Institutional Trustee shall have the
legal power to exercise all of the rights, powers and privileges of a Holder of
the Debentures under the Indenture and, if an Event of Default occurs and is
continuing, the Institutional Trustee may, for the benefit of Holders of the
Securities, enforce its rights as holder of the Debentures subject to the rights
of the Holders pursuant to this Declaration (including Annex I) and the
terms of the Securities.

The Institutional Trustee must exercise the powers set forth
in this Section 2.8 in a manner that is consistent with the purposes and
functions of the Trust set out in Section 2.3, and the Institutional Trustee
shall not take any action that is inconsistent with the purposes and functions
of the Trust set out in Section 2.3.

	Certain Duties and Responsibilities of the
Institutional Trustee and Administrators.

	  The Institutional Trustee, before the
occurrence of any Event of Default and after the curing or waiving of all such
Events of Default that may have occurred, shall undertake to perform only such
duties as are specifically set forth in this Declaration and no implied
covenants shall be read into this Declaration against the Institutional Trustee.
In case an Event of Default has occurred (that has not been cured or waived
pursuant to Section 6.7), the Institutional Trustee shall exercise such of the
rights and powers vested in it by this Declaration, and use the same degree of
care and skill in their exercise, as a prudent person would exercise or use
under the circumstances in the conduct of his or her own affairs.

	  The duties and
responsibilities of the Institutional Trustee and the Administrators shall be as
provided by this Declaration. Notwithstanding the foregoing, no provision of
this Declaration shall require the Institutional Trustee or Administrators to
expend or risk their own funds or otherwise incur any financial liability in the
performance of any of their duties hereunder, or in the exercise of any of their
rights or powers if it shall have reasonable grounds to believe that repayment
of such funds or adequate protection against such risk of liability is not
reasonably assured to it. Whether or not therein expressly so provided, every
provision of this Declaration relating to the conduct or affecting the liability
of or affording protection to the Institutional Trustee or Administrators shall
be subject to the provisions of this Article. Nothing in this Declaration shall
be construed to relieve an Administrator or the Institutional Trustee from
liability for its own negligent failure to act, or its own willful misconduct.
To the extent that, at law or in equity, the Institutional Trustee or an
Administrator has duties and liabilities relating to the Trust or to the
Holders, the Institutional Trustee or such Administrator shall not be liable to
the Trust or to any Holder for the Institutional Trustee's or such
Administrator's good faith reliance on the provisions of this Declaration. The
provisions of this Declaration, to the extent that they restrict the duties and
liabilities of the Administrators or the Institutional Trustee otherwise
existing at law or in equity, are agreed by the Sponsor and the Holders to
replace such other duties and liabilities of the Administrators or the
Institutional Trustee.

	  All payments made
by the Institutional Trustee or a Paying Agent in respect of the Securities
shall be made only from the revenue and proceeds from the Trust Property and
only to the extent that there shall be sufficient revenue or proceeds from the
Trust Property to enable the Institutional Trustee or a Paying Agent to make
payments in accordance with the terms hereof. Each Holder, by its acceptance of
a Security, agrees that it will look solely to the revenue and proceeds from the
Trust Property to the extent legally available for distribution to it as herein
provided and that the Institutional Trustee and the Administrators are not
personally liable to it for any amount distributable in respect of any Security
or for any other liability in respect of any Security. This Section 2.9(c) does
not limit the liability of the Institutional Trustee expressly set forth
elsewhere in this Declaration.

	  The Institutional Trustee shall not be liable
for its own acts or omissions hereunder except as a result of its own negligent
action, its own negligent failure to act, or its own willful misconduct, except
that:

	  

the Institutional Trustee shall not be liable for any error
of judgment made in good faith by an Authorized Officer of the Institutional
Trustee, unless it shall be proved that the Institutional Trustee was negligent
in ascertaining the pertinent facts;

	  

the Institutional Trustee shall not be liable with respect to
any action taken or omitted to be taken by it in good faith in accordance with
the direction of the Holders of not less than a Majority in liquidation amount
of the Capital Securities or the Common Securities, as applicable, relating to
the time, method and place of conducting any proceeding for any remedy available
to the Institutional Trustee, or exercising any trust or power conferred upon
the Institutional Trustee under this Declaration;

	  

the Institutional Trustee's sole duty with respect to the
custody, safekeeping and physical preservation of the Debentures and the
Property Account shall be to deal with such property in a similar manner as the
Institutional Trustee deals with similar property for its fiduciary accounts
generally, subject to the protections and limitations on liability afforded to
the Institutional Trustee under this Declaration;

	  

the Institutional Trustee shall not be liable for any
interest on any money received by it except as it may otherwise agree in writing
with the Sponsor; and money held by the Institutional Trustee need not be
segregated from other funds held by it except in relation to the Property
Account maintained by the Institutional Trustee pursuant to Section 2.8(c)(i)
and except to the extent otherwise required by law; and

	  

the Institutional Trustee shall not be responsible for
monitoring the compliance by the Administrators or the Sponsor with their
respective duties under this Declaration, nor shall the Institutional Trustee be
liable for any default or misconduct of the Administrators or the Sponsor.

	Certain Rights of
Institutional Trustee.  

Subject to the provisions of Section 2.9:

	  the Institutional Trustee may conclusively
rely and shall fully be protected in acting or refraining from acting in good
faith upon any resolution, opinion of counsel, certificate, written
representation of a Holder or transferee, certificate of auditors or any other
certificate, statement, instrument, opinion, report, notice, request, direction,
consent, order, appraisal, bond, debenture, note, other evidence of indebtedness
or other paper or document believed by it to be genuine and to have been signed,
sent or presented by the proper party or parties;

	  if (i) in performing its duties under
this Declaration, the Institutional Trustee is required to decide between
alternative courses of action, (ii) in construing any of the provisions of
this Declaration, the Institutional Trustee finds the same ambiguous or
inconsistent with any other provisions contained herein, or (iii) the
Institutional Trustee is unsure of the application of any provision of this
Declaration, then, except as to any matter as to which the Holders of Capital
Securities are entitled to vote under the terms of this Declaration, the
Institutional Trustee may deliver a notice to the Sponsor requesting the
Sponsor's written instructions as to the course of action to be taken and the
Institutional Trustee shall take such action, or refrain from taking such
action, as the Institutional Trustee shall be instructed in writing, in which
event the Institutional Trustee shall have no liability except for its own
negligence or willful misconduct;

	  any direction or act of the Sponsor or the
Administrators contemplated by this Declaration shall be sufficiently evidenced
by an Officers' Certificate;

	  whenever in the administration of this
Declaration, the Institutional Trustee shall deem it desirable that a matter be
proved or established before undertaking, suffering or omitting any action
hereunder, the Institutional Trustee (unless other evidence is herein
specifically prescribed) may request and conclusively rely upon an Officers'
Certificate as to factual matters which, upon receipt of such request, shall be
promptly delivered by the Sponsor or the Administrators;

	  the Institutional Trustee shall have no duty
to see to any recording, filing or registration of any instrument (including any
financing or continuation statement or any filing under tax or securities laws)
or any rerecording, refiling or reregistration thereof;

	  the Institutional Trustee may consult with
counsel of its selection (which counsel may be counsel to the Sponsor or any of
its Affiliates) and the advice of such counsel shall be full and complete
authorization and protection in respect of any action taken, suffered or omitted
by it hereunder in good faith and in reliance thereon and in accordance with
such advice; the Institutional Trustee shall have the right at any time to seek
instructions concerning the administration of this Declaration from any court of
competent jurisdiction;

	  the Institutional
Trustee shall be under no obligation to exercise any of the rights or powers
vested in it by this Declaration at the request or direction of any of the
Holders pursuant to this Declaration, unless such Holders shall have offered to
the Institutional Trustee security or indemnity reasonably satisfactory to it
against the costs, expenses and liabilities which might be incurred by it in
compliance with such request or direction; provided, that nothing
contained in this Section 2.10(g) shall be taken to relieve the Institutional
Trustee, subject to Section 2.9(b), upon the occurrence of an Event of Default,
to exercise such of the rights and powers vested in it by this Declaration, and
use the same degree of care and skill in their exercise, as a prudent person
would exercise or use under the circumstances in the conduct of his or her own
affairs;

	  the Institutional Trustee shall not be bound
to make any investigation into the facts or matters stated in any resolution,
certificate, statement, instrument, opinion, report, notice, request, consent,
order, approval, bond, debenture, note or other evidence of indebtedness or
other paper or document, unless requested in writing to do so by one or more
Holders, but the Institutional Trustee may make such further inquiry or
investigation into such facts or matters as it may see fit;

	  the Institutional Trustee may execute any of
the trusts or powers hereunder or perform any duties hereunder either directly
or by or through its agents or attorneys and the Institutional Trustee shall not
be responsible for any misconduct or negligence on the part of or for the
supervision of, any such agent or attorney appointed with due care by it
hereunder;

	  whenever in the administration of this
Declaration the Institutional Trustee shall deem it desirable to receive
instructions with respect to enforcing any remedy or right or taking any other
action hereunder the Institutional Trustee (i) may request instructions
from the Holders of the Capital Securities which instructions may only be given
by the Holders of the same proportion in liquidation amount of the Capital
Securities as would be entitled to direct the Institutional Trustee under the
terms of the Capital Securities in respect of such remedy, right or action,
(ii) may refrain from enforcing such remedy or right or taking such other
action until such instructions are received, and (iii) shall be fully
protected in acting in accordance with such instructions;

	  except as otherwise expressly provided in
this Declaration, the Institutional Trustee shall not be under any obligation to
take any action that is discretionary under the provisions of this
Declaration;

	  when the Institutional Trustee incurs
expenses or renders services in connection with a Bankruptcy Event, such
expenses (including the fees and expenses of its counsel) and the compensation
for such services are intended to constitute expenses of administration under
any bankruptcy law or law relating to creditors rights generally;

	  the Institutional Trustee shall not be
charged with knowledge of an Event of Default unless a Responsible Officer of
the Institutional Trustee obtains actual knowledge of such event or the
Institutional Trustee receives written notice of such event from any Holder, the
Sponsor or the Debenture Trustee;

	  any action taken by the Institutional Trustee
or its agents hereunder shall bind the Trust and the Holders of the Securities,
and the signature of the Institutional Trustee or its agents alone shall be
sufficient and effective to perform any such action and no third party shall be
required to inquire as to the authority of the Institutional Trustee to so act
or as to its compliance with any of the terms and provisions of this
Declaration, both of which shall be conclusively evidenced by the Institutional
Trustee's or its agent's taking such action; and

	  no provision of this Declaration shall be
deemed to impose any duty or obligation on the Institutional Trustee to perform
any act or acts or exercise any right, power, duty or obligation conferred or
imposed on it, in any jurisdiction in which it shall be illegal, or in which the
Institutional Trustee shall be unqualified or incompetent in accordance with
applicable law, to perform any such act or acts, or to exercise any such right,
power, duty or obligation. No permissive power or authority available to the
Institutional Trustee shall be construed to be a duty.

	Execution of
Documents.  

Unless otherwise determined in writing by the
Institutional Trustee, and except as otherwise required by the Statutory Trust
Act, the Institutional Trustee, or any one or more of the Administrators, as the
case may be, is authorized to execute on behalf of the Trust any documents that
the Institutional Trustee or the Administrators, as the case may be, have the
power and authority to execute pursuant to Section 2.6.

	Not Responsible for
Recitals or Issuance of Securities.  

The recitals contained in this Declaration and the
Securities shall be taken as the statements of the Sponsor, and the
Institutional Trustee does not assume any responsibility for their correctness.
The Institutional Trustee makes no representations as to the value or condition
of the property of the Trust or any part thereof. The Institutional Trustee
makes no representations as to the validity or sufficiency of this Declaration,
the Debentures or the Securities.

	Duration of
Trust.  

The Trust, unless earlier dissolved pursuant to the
provisions of Article VII hereof, shall be in existence for 35 years from
the Closing Date.

	Mergers.

	  The Trust may not consolidate,
amalgamate, merge with or into, or be replaced by, or convey, transfer or lease
its properties and assets substantially as an entirety to any corporation or
other body, except as described in this Section 2.14(b) and (c).

	  The Trust may,
with the consent of the Institutional Trustee and without the consent of the
Holders of the Capital Securities, consolidate, amalgamate, merge with or into,
or be replaced by a trust organized as such under the laws of any state;
provided that:

	  

if the Trust is not the surviving entity, such successor
entity (the "Successor Entity") either:

	  

expressly assumes all of the obligations of the Trust under
the Securities; or

	  

substitutes for the Securities other securities having
substantially the same terms as the Securities (the "Successor
Securities") so that the Successor Securities rank the same as the
Securities rank with respect to Distributions and payments upon Liquidation,
redemption and otherwise;

	  

the Sponsor expressly appoints a trustee of the Successor
Entity that possesses the same powers and duties as the Institutional Trustee as
the Holder of the Debentures;

	  

such merger, consolidation, amalgamation or replacement does
not adversely affect the rights, preferences and privileges of the Holders of
the Securities (including any Successor Securities) in any material respect
(other than with respect to any dilution of such Holders' interests in the
Successor Entity as a result of such merger, consolidation, amalgamation or
replacement);

	  

the Institutional Trustee receives written confirmation from
Moody's Investor Services, Inc. or any other nationally recognized statistical
rating organization that rates securities issued by the initial purchaser of the
Capital Securities that it will not reduce or withdraw the rating of any such
securities because of such merger, conversion, consolidation, amalgamation or
replacement;

	  

such Successor Entity has a purpose substantially identical
to that of the Trust;

	  

prior to such merger, consolidation, amalgamation or
replacement, the Trust has received an opinion of a nationally recognized
independent counsel to the Trust experienced in such matters to the effect
that:

	  

such merger, consolidation, amalgamation or replacement does
not adversely affect the rights, preferences and privileges of the Holders of
the Securities (including any Successor Securities) in any material respect
(other than with respect to any dilution of the Holders' interest in the
Successor Entity);

	  

following such merger, consolidation, amalgamation or
replacement, neither the Trust nor the Successor Entity will be required to
register as an Investment Company; and

	  

following such merger, consolidation, amalgamation or
replacement, the Trust (or the Successor Entity) will continue to be classified
as a "grantor trust" for United States federal income tax purposes;

	  

the Sponsor guarantees the obligations of such Successor
Entity under the Successor Securities at least to the extent provided by the
Guarantee;

	  

the Sponsor owns 100% of the common securities of any
Successor Entity; and

	  

prior to such merger, consolidation, amalgamation or
replacement, the Institutional Trustee shall have received an Officers'
Certificate of the Administrators and an opinion of counsel, each to the effect
that all conditions precedent under this Section 2.14(b) to such transaction
have been satisfied.

	  Notwithstanding
Section 2.14(b), the Trust shall not, except with the consent of Holders of 100%
in aggregate liquidation amount of the Securities, consolidate, amalgamate,
merge with or into, or be replaced by any other entity or permit any other
entity to consolidate, amalgamate, merge with or into, or replace it if such
consolidation, amalgamation, merger or replacement would cause the Trust or
Successor Entity to be classified as other than a grantor trust for United
States federal income tax purposes.

	

SPONSOR

	Sponsor's Purchase of Common
Securities.  

On the Closing Date, the Sponsor will purchase all of the
Common Securities issued by the Trust in an amount at least equal to 3% of the
capital of the Trust, at the same time as the Capital Securities are sold.

	Responsibilities of the
Sponsor.  

In connection with the issue and sale of the Capital
Securities, the Sponsor shall have the exclusive right and responsibility to
engage in, or direct the Administrators to engage in, the following
activities:

	  to determine the States in which to take
appropriate action to qualify or register for sale all or part of the Capital
Securities and to do any and all such acts, other than actions which must be
taken by the Trust, and advise the Trust of actions it must take, and prepare
for execution and filing any documents to be executed and filed by the Trust, as
the Sponsor deems necessary or advisable in order to comply with the applicable
laws of any such States; and

	  to negotiate the terms of and/or execute on
behalf of the Trust, the Placement Agreement and other related agreements
providing for the sale of the Capital Securities.

	Expenses.  

In connection with the offering, sale and issuance of the
Debentures to the Institutional Trustee and in connection with the sale of the
Securities by the Trust, the Sponsor, in its capacity as Debenture Issuer,
shall:

	  pay all reasonable costs and expenses
relating to the offering, sale and issuance of the Debentures, including
compensation of the Debenture Trustee under the Indenture in accordance with the
provisions of the Indenture;

	  be responsible for and shall pay all debts
and obligations (other than with respect to the Securities) and all costs and
expenses of the Trust (including, but not limited to, costs and expenses
relating to the organization, maintenance and dissolution of the Trust), the
offering, sale and issuance of the Securities (including fees to the placement
agents in connection therewith), the fees and expenses (including reasonable
counsel fees and expenses) of the Institutional Trustee and the Administrators,
the costs and expenses relating to the operation of the Trust, including,
without limitation, costs and expenses of accountants, attorneys, statistical or
bookkeeping services, expenses for printing and engraving and computing or
accounting equipment, Paying Agents, Registrars, Transfer Agents, duplicating,
travel and telephone and other telecommunications expenses and costs and
expenses incurred in connection with the acquisition, financing, and disposition
of Trust assets and the enforcement by the Institutional Trustee of the rights
of the Holders; and

	  to pay any and all taxes (other than United
States withholding taxes attributable to the Trust or its assets) and all
liabilities, costs and expenses with respect to such taxes of the
Trust.

The Sponsor's obligations under this Section 3.3 shall
be for the benefit of, and shall be enforceable by, any Person to whom such
debts, obligations, costs, expenses and taxes are owed (a "Creditor")
whether or not such Creditor has received notice hereof. Any such Creditor may
enforce the Sponsor's obligations under this Section 3.3 directly against
the Sponsor and the Sponsor irrevocably waives any right or remedy to require
that any such Creditor take any action against the Trust or any other Person
before proceeding against the Sponsor. The Sponsor agrees to execute such
additional agreements as may be necessary or desirable in order to give full
effect to the provisions of this Section 3.3.

	Right to
Proceed.  

The Sponsor acknowledges the rights of Holders to institute a
Direct Action as set forth in Section 2.8(d)hereto.

	

INSTITUTIONAL TRUSTEE AND ADMINISTRATORS

	Institutional Trustee; Eligibility.

	  There shall
at all times be one Institutional Trustee which shall:

	  

not be an Affiliate of the Sponsor;

	  

not offer or provide credit or credit enhancement to the
Trust; and

	  

be a banking corporation or trust company organized and doing
business under the laws of the United States of America or any state thereof or
the District of Columbia, authorized under such laws to exercise corporate trust
powers, having a combined capital and surplus of at least 50 million U.S.
dollars ($50,000,000.00), and subject to supervision or examination by Federal,
state, or District of Columbia authority. If such corporation publishes reports
of condition at least annually, pursuant to law or to the requirements of the
supervising or examining authority referred to above, then for the purposes of
this Section 4.1(a)(iii), the combined capital and surplus of such corporation
shall be deemed to be its combined capital and surplus as set forth in its most
recent report of condition so published.

	  If at any time the Institutional Trustee
shall cease to be eligible to so act under Section 4.1(a), the Institutional
Trustee shall immediately resign in the manner and with the effect set forth in
Section 4.3(a).

	  The initial Institutional Trustee shall be
State Street Bank and Trust Company of Connecticut, National
Association.

	

Administrators.  

Each Administrator shall be a U.S. Person, 21 years of
age or older and authorized to bind the Sponsor. The initial Administrators
shall be Lawrence D. McGovern, May Wong and Richard L. Conniff. There shall at
all times be at least one Administrator. Except where a requirement for action
by a specific number of Administrators is expressly set forth in this
Declaration and except with respect to any action the taking of which is the
subject of a meeting of the Administrators, any action required or permitted to
be taken by the Administrators may be taken by, and any power of the
Administrators may be exercised by, or with the consent of, any one such
Administrator.

	
Appointment, Removal and Resignation of Institutional
Trustee and Administrators.  

	
  Notwithstanding anything to the
contrary in this Declaration, no resignation or removal of the Institutional
Trustee and no appointment of a Successor Institutional Trustee pursuant to this
Article shall become effective until the acceptance of appointment by the
Successor Institutional Trustee in accordance with the applicable requirements
of this Section 4.3.

Subject to the immediately preceding paragraph, the
Institutional Trustee may resign at any time by giving written notice thereof to
the Holders of the Securities and by appointing a Successor Institutional
Trustee. Upon the resignation of the Institutional Trustee, the Institutional
Trustee shall appoint a successor by requesting from at least three Persons
meeting the eligibility requirements, its expenses and charges to serve as the
successor Institutional Trustee on a form provided by the Administrators, and
selecting the Person who agrees to the lowest expense and charges (the
"Successor Institutional Trustee"). If the instrument of acceptance by
the Successor Institutional Trustee required by this Section 4.3 shall not have
been delivered to the Institutional Trustee within 60 days after the giving
of such notice of resignation or delivery of the instrument of removal, the
Institutional Trustee may petition, at the expense of the Trust, any Federal,
state or District of Columbia court of competent jurisdiction for the
appointment of a Successor Institutional Trustee. Such court may thereupon,
after prescribing such notice, if any, as it may deem proper, appoint a
Successor Institutional Trustee. The Institutional Trustee shall have no
liability for the selection of such successor pursuant to this Section 4.3.

The Institutional Trustee may be removed by the act of the
Holders of a Majority in liquidation amount of the Capital Securities, delivered
to the Institutional Trustee (in its individual capacity and on behalf of the
Trust) if an Event of Default shall have occurred and be continuing. If the
Institutional Trustee shall be so removed, the Holders of Capital Securities, by
act of the Holders of a Majority in liquidation amount of the Capital Securities
then outstanding delivered to the Institutional Trustee, shall promptly appoint
a Successor Institutional Trustee, and such Successor Institutional Trustee
shall comply with the applicable requirements of this Section 4.3. If no
Successor Institutional Trustee shall have been so appointed by the Holders of a
Majority in liquidation amount of the Capital Securities and accepted
appointment in the manner required by this Section 4.3, within 30 days
after delivery of an instrument of removal, any Holder who has been a Holder of
the Securities for at least 6 months may, on behalf of himself and all
others similarly situated, petition any Federal, state or District of Columbia
court of competent jurisdiction for the appointment of the Successor
Institutional Trustee. Such court may thereupon, after prescribing such notice,
if any, as it may deem proper, appoint a Successor Institutional Trustee.

The Institutional Trustee shall give notice of its
resignation and removal and each appointment of a Successor Institutional
Trustee to all Holders in the manner provided in Section 13.1(d) and shall
give notice to the Sponsor. Each notice shall include the name of the Successor
Institutional Trustee and the address of its Corporate Trust Office.

	  In case of the
appointment hereunder of a Successor Institutional Trustee, the retiring
Institutional Trustee and the Successor Institutional Trustee shall execute and
deliver an amendment hereto wherein the Successor Institutional Trustee shall
accept such appointment and which (i) shall contain such provisions as
shall be necessary or desirable to transfer and confirm to, and to vest in, the
Successor Institutional Trustee all the rights, powers, trusts and duties of the
retiring Institutional Trustee with respect to the Securities and the Trust and
(ii) shall add to or change any of the provisions of this Declaration as
shall be necessary to provide for or facilitate the administration of the Trust
by more than one Institutional Trustee, it being understood that nothing herein
or in such amendment shall constitute such Institutional Trustees co-trustees
and upon the execution and delivery of such amendment the resignation or removal
of the retiring Institutional Trustee shall become effective to the extent
provided therein and each Successor Institutional Trustee, without any further
act, deed or conveyance, shall become vested with all the rights, powers, trusts
and duties of the retiring Institutional Trustee; but, on request of the Trust
of any Successor Institutional Trustee such retiring Institutional Trustee shall
duly assign, transfer and deliver to such Successor Institutional Trustee all
Trust Property, all proceeds thereof and money held by such retiring
Institutional Trustee hereunder with respect to the Securities and the
Trust.

	  No Institutional Trustee shall be liable for
the acts or omissions to act of any Successor Institutional Trustee.

	  The Holders of the Capital Securities will
have no right to vote to appoint, remove or replace the Administrators, which
voting rights are vested exclusively in the Holder of the Common
Securities.

	Institutional Trustee
Vacancies.  

If the Institutional Trustee ceases to hold office for any
reason a vacancy shall occur. A resolution certifying the existence of such
vacancy by the Institutional Trustee shall be conclusive evidence of the
existence of such vacancy. The vacancy shall be filled with a trustee appointed
in accordance with Section 4.3.

	Effect of
Vacancies.  

The death, resignation, retirement, removal, bankruptcy,
dissolution, liquidation, incompetence or incapacity to perform the duties of
the Institutional Trustee shall not operate to dissolve, terminate or annul the
Trust or terminate this Declaration.

	Meetings of the
Institutional Trustee and the Administrators.  

Meetings of the Administrators shall be held from time to
time upon the call of an Administrator. Regular meetings of the Administrators
may be held in person in the United States or by telephone, at a place (if
applicable) and time fixed by resolution of the Administrators. Notice of any
in-person meetings of the Institutional Trustee with the Administrators or
meetings of the Administrators shall be hand delivered or otherwise delivered in
writing (including by facsimile, with a hard copy by overnight courier) not less
than 48 hours before such meeting. Notice of any telephonic meetings of the
Institutional Trustee with the Administrators or meetings of the Administrators
or any committee thereof shall be hand delivered or otherwise delivered in
writing (including by facsimile, with a hard copy by overnight courier) not less
than 24 hours before a meeting. Notices shall contain a brief statement of
the time, place and anticipated purposes of the meeting. The presence (whether
in person or by telephone) of the Institutional Trustee or an Administrator, as
the case may be, at a meeting shall constitute a waiver of notice of such
meeting except where the Institutional Trustee or an Administrator, as the case
may be, attends a meeting for the express purpose of objecting to the
transaction of any activity on the grounds that the meeting has not been
lawfully called or convened. Unless provided otherwise in this Declaration, any
action of the Institutional Trustee or the Administrators, as the case may be,
may be taken at a meeting by vote of the Institutional Trustee or a majority
vote of the Administrators present (whether in person or by telephone) and
eligible to vote with respect to such matter, provided that a Quorum is present,
or without a meeting by the unanimous written consent of the Institutional
Trustee or the Administrators. Meetings of the Institutional Trustee and the
Administrators together shall be held from time to time upon the call of the
Institutional Trustee or an Administrator.

	Delegation of
Power.

	  Any Administrator may, by power of
attorney consistent with applicable law, delegate to any other natural person
over the age of 21 that is a U.S. Person his or her power for the purpose of
executing any documents contemplated in Section 2.6; and

	  the Administrators shall have power to
delegate from time to time to such of their number the doing of such things and
the execution of such instruments either in the name of the Trust or the names
of the Administrators or otherwise as the Administrators may deem expedient, to
the extent such delegation is not prohibited by applicable law or contrary to
the provisions of the Trust, as set forth herein.

	Conversion, Consolidation
or Succession to Business.  

Any Person into which the Institutional Trustee may be
merged or converted or with which it may be consolidated, or any Person
resulting from any merger, conversion or consolidation to which the
Institutional Trustee shall be a party, or any Person succeeding to all or
substantially all the corporate trust business of the Institutional Trustee
shall be the successor of the Institutional Trustee hereunder, provided such
Person shall be otherwise qualified and eligible under this Article, without the
execution or filing of any paper or any further act on the part of any of the
parties hereto.

	

DISTRIBUTIONS

	
Distributions.  

Holders shall receive Distributions in accordance with
the applicable terms of the relevant Holder's Securities. Distributions shall be
made on the Capital Securities and the Common Securities in accordance with the
preferences set forth in their respective terms. If and to the extent that the
Debenture Issuer makes a payment of Interest (or any principal on the Debentures
held by the Institutional Trustee) (the amount of any such payment being a
"Payment Amount"), the Institutional Trustee shall and is directed, to
the extent funds are available for that purpose, to make a distribution (a
"Distribution") of the Payment Amount to Holders.

	

ISSUANCE OF SECURITIES

	
General Provisions Regarding
Securities.

	  The
Administrators shall, on behalf of the Trust, issue one series of capital
securities substantially in the form of Exhibit A-1 representing undivided
beneficial interests in the assets of the Trust having such terms as are set
forth in Annex I and one series of common securities representing undivided
beneficial interests in the assets of the Trust having such terms as are set
forth in Annex I. The Trust shall issue no securities or other interests in
the assets of the Trust other than the Capital Securities and the Common
Securities. The Capital Securities rank pari passu to, and payment
thereon shall be made Pro Rata with, the Common Securities except that, where an
Event of Default has occurred and is continuing, the rights of Holders of the
Common Securities to payment in respect of Distributions and payments upon
liquidation, redemption and otherwise are subordinated to the rights to payment
of the Holders of the Capital Securities as set forth in Annex I.

	  The Certificates shall be signed on behalf of
the Trust by one or more Administrators. Such signature shall be the facsimile
or manual signature of any Administrator. In case any Administrator of the Trust
who shall have signed any of the Securities shall cease to be such Administrator
before the Certificates so signed shall be delivered by the Trust, such
Certificates nevertheless may be delivered as though the person who signed such
Certificates had not ceased to be such Administrator, and any Certificate may be
signed on behalf of the Trust by such persons who, at the actual date of
execution of such Security, shall be an Administrator of the Trust, although at
the date of the execution and delivery of the Declaration any such person was
not such an Administrator. A Capital Security shall not be valid until
authenticated by the facsimile or manual signature of an Authorized Officer of
the Institutional Trustee. Such signature shall be conclusive evidence that the
Capital Security has been authenticated under this Declaration. Upon written
order of the Trust signed by one Administrator, the Institutional Trustee shall
authenticate the Capital Securities for original issue. The Institutional
Trustee may appoint an authenticating agent that is a U.S. Person acceptable to
the Trust to authenticate the Capital Securities. A Common Security need not be
so authenticated.

	  The consideration received by the Trust for
the issuance of the Securities shall constitute a contribution to the capital of
the Trust and shall not constitute a loan to the Trust.

	  Upon issuance of the Securities as provided
in this Declaration, the Securities so issued shall be deemed to be validly
issued, fully paid and non-assessable.

	  Every Person, by virtue of having become a
Holder in accordance with the terms of this Declaration, shall be deemed to have
expressly assented and agreed to the terms of, and shall be bound by, this
Declaration and the Guarantee.

	
Paying Agent, Transfer Agent and
Registrar.  

The Trust shall maintain in Hartford, Connecticut, an
office or agency where the Capital Securities may be presented for payment
("Paying Agent"), and an office or agency where Securities may be
presented for registration of transfer (the "Transfer Agent"). The Trust
shall keep or cause to be kept at such office or agency a register for the
purpose of registering Securities, transfers and exchanges of Securities, such
register to be held by a registrar (the "Registrar"). The Administrators
may appoint the Paying Agent, the Registrar, the Transfer Agent and may appoint
one or more additional Paying Agents or one or more co-Registrars, or one or
more co-Transfer Agents in such other locations as it shall determine. The term
"Paying Agent" includes any additional paying agent, the term
"Registrar" includes any additional registrar or co-Registrar and the
term "Transfer Agent" includes any additional transfer agent. The
Administrators may change any Paying Agent without prior notice to any Holder.
The Administrators shall notify the Institutional Trustee of the name and
address of any Paying Agent, Transfer Agent and Registrar not a party to this
Declaration. The Administrators hereby appoint the Institutional Trustee to act
as Paying Agent, Transfer Agent and Registrar for the Capital Securities and the
Common Securities. The Institutional Trustee or any of its Affiliates in the
United States may act as Paying Agent, Transfer Agent or Registrar.

	Form and Dating.  

The Capital Securities and the Institutional Trustee's
certificate of authentication thereon shall be substantially in the form of
Exhibit A-1, and the Common Securities shall be substantially in the form
of Exhibit A-2, each of which is hereby incorporated in and expressly made
a part of this Declaration. Certificates may be typed, printed, lithographed or
engraved or may be produced in any other manner as is reasonably acceptable to
the Administrators, as conclusively evidenced by their execution thereof. The
Securities may have letters, numbers, notations or other marks of identification
or designation and such legends or endorsements required by law, stock exchange
rule, agreements to which the Trust is subject if any, or usage (provided that
any such notation, legend or endorsement is in a form acceptable to the
Sponsor). The Trust at the direction of the Sponsor shall furnish any such
legend not contained in Exhibit A-1 to the Institutional Trustee in
writing. Each Capital Security shall be dated on or before the date of its
authentication. The terms and provisions of the Securities set forth in Annex I
and the forms of Securities set forth in Exhibits A-1 and A-2 are part of
the terms of this Declaration and to the extent applicable, the Institutional
Trustee, the Administrators and the Sponsor, by their execution and delivery of
this Declaration, expressly agree to such terms and provisions and to be bound
thereby. Capital Securities will be issued only in blocks having a stated
liquidation amount of not less than $500,000.00 and any multiple of $1,000.00 in
excess thereof.

The Capital Securities are being offered and sold by the
Trust pursuant to the Placement Agreement in definitive, registered form without
coupons with the Restricted Securities Legend.

	
Mutilated, Destroyed, Lost or Stolen
Certificates.

If:

	  any mutilated Certificates should be
surrendered to the Registrar, or if the Registrar shall receive evidence to its
satisfaction of the destruction, loss or theft of any Certificate; and

	  there shall be delivered to the Registrar,
the Administrators and the Institutional Trustee such security or indemnity as
may be required by them to keep each of them harmless;

then, in the absence of notice that such Certificate shall
have been acquired by a protected purchaser, an Administrator on behalf of the
Trust shall execute (and in the case of a Capital Security Certificate, the
Institutional Trustee shall authenticate) and deliver, in exchange for or in
lieu of any such mutilated, destroyed, lost or stolen Certificate, a new
Certificate of like denomination. In connection with the issuance of any new
Certificate under this Section 6.4, the Registrar or the Administrators may
require the payment of a sum sufficient to cover any tax or other governmental
charge that may be imposed in connection therewith. Any duplicate Certificate
issued pursuant to this Section shall constitute conclusive evidence of an
ownership interest in the relevant Securities, as if originally issued, whether
or not the lost, stolen or destroyed Certificate shall be found at any time.

	Temporary
Securities.  

Until definitive Securities are ready for delivery, the
Administrators may prepare and, in the case of the Capital Securities, the
Institutional Trustee shall authenticate, temporary Securities. Temporary
Securities shall be substantially in the form of definitive Securities but may
have variations that the Administrators consider appropriate for temporary
Securities. Without unreasonable delay, the Administrators shall prepare and, in
the case of the Capital Securities, the Institutional Trustee shall
authenticate, definitive Securities in exchange for temporary Securities.

	Cancellation.  

The Administrators at any time may deliver Securities to
the Institutional Trustee for cancellation. The Registrar shall forward to the
Institutional Trustee any Securities surrendered to it for registration of
transfer, redemption or payment. The Institutional Trustee shall promptly cancel
all Securities surrendered for registration of transfer, payment replacement or
cancellation and shall dispose of such canceled Securities as the Administrators
direct. The Administrators may not issue new Securities to replace Securities
that have been paid or that have been delivered to the Institutional Trustee for
cancellation.

	Rights of Holders; Waivers of Past
Defaults.

	  The legal title to the Trust Property is
vested exclusively in the Institutional Trustee (in its capacity as such) in
accordance with Section 2.5, and the Holders shall not have any right or title
therein other than the undivided beneficial interest in the assets of the Trust
conferred by their Securities and they shall have no right to call for any
partition or division of property, profits or rights of the Trust except as
described below. The Securities shall be personal property giving only the
rights specifically set forth therein and in this Declaration. The Securities
shall have no preemptive or similar rights.

	  For so long as any Capital Securities remain
outstanding, if upon an Indenture Event of Default, the Debenture Trustee fails
or the holders of not less than 25% in principal amount of the outstanding
Debentures fail to declare the principal of all of the Debentures to be
immediately due and payable, the Holders of a Majority in liquidation amount of
the Capital Securities then outstanding shall have the right to make such
declaration by a notice in writing to the Institutional Trustee, the Sponsor and
the Debenture Trustee.

At any time after a declaration of acceleration with respect
to the Debentures has been made and before a judgment or decree for payment of
the money due has been obtained by the Debenture Trustee as provided in the
Indenture, if the Institutional Trustee fails to annul any such declaration and
waive such default, the Holders of a Majority in liquidation amount of the
Capital Securities, by written notice to the Institutional Trustee, the Sponsor
and the Debenture Trustee, may rescind and annul such declaration and its
consequences if:

	  

the Debenture Issuer has paid or deposited with the Debenture
Trustee a sum sufficient to pay

	  

all overdue installments of interest on all of the
Debentures,

	  

any accrued Additional Interest on all of the Debentures,

	  

the principal of (and premium, if any, on) any Debentures
that have become due otherwise than by such declaration of acceleration and
interest and Additional Interest thereon at the rate borne by the Debentures,
and

	  

all sums paid or advanced by the Debenture Trustee under the
Indenture and the reasonable compensation, expenses, disbursements and advances
of the Debenture Trustee and the Institutional Trustee, their agents and
counsel; and

	  

all Events of Default with respect to the Debentures, other
than the non-payment of the principal of the Debentures that has become due
solely by such acceleration, have been cured or waived as provided in
Section 5.7 of the Indenture.

The Holders of at least a majority in liquidation amount of
the Capital Securities may, on behalf of the Holders of all the Capital
Securities, waive any past default or Event of Default under the Indenture,
except a default or Event of Default in the payment of principal or interest
(unless such default or Event of Default has been cured and a sum sufficient to
pay all matured installments of interest and principal due otherwise than by
acceleration has been deposited with the Debenture Trustee) or a default or
Event of Default in respect of a covenant or provision that under the Indenture
cannot be modified or amended without the consent of the holder of each
outstanding Debenture. No such rescission shall affect any subsequent default or
impair any right consequent thereon.

Upon receipt by the Institutional Trustee of written notice
declaring such an acceleration, or rescission and annulment thereof, by Holders
of any part of the Capital Securities, a record date shall be established for
determining Holders of outstanding Capital Securities entitled to join in such
notice, which record date shall be at the close of business on the day the
Institutional Trustee receives such notice. The Holders on such record date, or
their duly designated proxies, and only such Persons, shall be entitled to join
in such notice, whether or not such Holders remain Holders after such record
date; provided, that unless such declaration of acceleration, or
rescission and annulment, as the case may be, shall have become effective by
virtue of the requisite percentage having joined in such notice prior to the day
that is 90 days after such record date, such notice of declaration of
acceleration, or rescission and annulment, as the case may be, shall
automatically and without further action by any Holder be canceled and of no
further effect. Nothing in this paragraph shall prevent a Holder, or a proxy of
a Holder, from giving, after expiration of such 90-day period, a new written
notice of declaration of acceleration, or rescission and annulment thereof, as
the case may be, that is identical to a written notice that has been canceled
pursuant to the proviso to the preceding sentence, in which event a new record
date shall be established pursuant to the provisions of this Section 6.7.

	  Except as otherwise provided in
paragraphs (a) and (b) of this Section 6.7, the Holders of at least a
majority in liquidation amount of the Capital Securities may, on behalf of the
Holders of all the Capital Securities, waive any past default or Event of
Default and its consequences. Upon such waiver, any such default or Event of
Default shall cease to exist, and any default or Event of Default arising
therefrom shall be deemed to have been cured, for every purpose of this
Declaration, but no such waiver shall extend to any subsequent or other default
or Event of Default or impair any right consequent thereon.

	

DISSOLUTION AND TERMINATION OF TRUST

	Dissolution and Termination of
Trust.

	  The Trust
shall dissolve on the first to occur of:

	  

unless earlier dissolved, on July 31, 2036, the expiration of
the term of the Trust;

	  

upon a Bankruptcy Event with respect to the Sponsor, the
Trust or the Debenture Issuer;

	  

(other than in connection with a merger, consolidation or
similar transaction not prohibited by the Indenture, this Declaration or the
Guarantee, as the case may be) upon the filing of a certificate of dissolution
or its equivalent with respect to the Sponsor, upon the consent of Holders of a
Majority in liquidation amount of the Securities voting together as a single
class to file a certificate of cancellation with respect to the Trust or upon
the revocation of the charter of the Sponsor and the expiration of 90 days
after the date of revocation without a reinstatement thereof;

	  

upon the distribution of the Debentures to the Holders of the
Securities;

	  

upon exercise of the right of the Holder of all of the
outstanding Common Securities to dissolve the Trust as provided in Annex I
hereto;

	  

upon the entry of a decree of judicial dissolution of the
Holder of the Common Securities, the Sponsor, the Trust or the Debenture
Issuer;

	  

when all of the Securities shall have been called for
redemption and the amounts necessary for redemption thereof shall have been paid
to the Holders in accordance with the terms of the Securities; or

	  

before the issuance of any Securities, with the consent of
the Institutional Trustee and the Sponsor.

	  As soon as is practicable after the
occurrence of an event referred to in Section 7.1(a), and after satisfaction of
liabilities to creditors of the Trust as required by applicable law, including
of the Statutory Trust Act, and subject to the terms set forth in Annex I,
the Institutional Trustee shall terminate the Trust by filing a certificate of
cancellation with the Secretary of State of the State of Connecticut.

	  The provisions of Section 2.9 and
Article IX shall survive the termination of the Trust.

	

TRANSFER OF INTERESTS

	General.

	  Subject to Section 8.1(c), where Capital
Securities are presented to the Registrar or a co-registrar with a request to
register a transfer or to exchange them for an equal number of Capital
Securities represented by different certificates, the Registrar shall register
the transfer or make the exchange if its requirements for such transactions are
met. To permit registrations of transfer and exchanges, the Trust shall issue
and the Institutional Trustee shall authenticate Capital Securities at the
Registrar's request.

	  Upon issuance of the Common Securities, the
Sponsor shall acquire and retain beneficial and record ownership of the Common
Securities and for so long as the Securities remain outstanding, the Sponsor
shall maintain 100% ownership of the Common Securities; provided,
however, that any permitted successor of the Sponsor, in its capacity as
Debenture Issuer, under the Indenture that is a U.S. Person may succeed to the
Sponsor's ownership of the Common Securities.

	  Capital
Securities may only be transferred, in whole or in part, in accordance with the
terms and conditions set forth in this Declaration and in the terms of the
Securities. To the fullest extent permitted by applicable law, any transfer or
purported transfer of any Security not made in accordance with this Declaration
shall be null and void and will be deemed to be of no legal effect whatsoever
and any such transferee shall be deemed not to be the holder of such Capital
Securities for any purpose, including but not limited to the receipt of
Distributions on such Capital Securities, and such transferee shall be deemed to
have no interest whatsoever in such Capital Securities.

	  The Registrar shall provide for the
registration of Securities and of transfers of Securities, which will be
effected without charge but only upon payment (with such indemnity as the
Registrar may require) in respect of any tax or other governmental charges that
may be imposed in relation to it. Upon surrender for registration of transfer of
any Securities, the Registrar shall cause one or more new Securities of the same
tenor to be issued in the name of the designated transferee or transferees.
Every Security surrendered for registration of transfer shall be accompanied by
a written instrument of transfer in form satisfactory to the Registrar duly
executed by the Holder or such Holder's attorney duly authorized in writing.
Each Security surrendered for registration of transfer shall be canceled by the
Institutional Trustee pursuant to Section 6.6. A transferee of a Security shall
be entitled to the rights and subject to the obligations of a Holder hereunder
upon the receipt by such transferee of a Security. By acceptance of a Security,
each transferee shall be deemed to have agreed to be bound by this
Declaration.

	  The Trust shall not be required (i) to
issue, register the transfer of, or exchange any Securities during a period
beginning at the opening of business 15 days before the day of any
selection of Securities for redemption and ending at the close of business on
the earliest date on which the relevant notice of redemption is deemed to have
been given to all Holders of the Securities to be redeemed, or (ii) to
register the transfer or exchange of any Security so selected for redemption in
whole or in part, except the unredeemed portion of any Security being redeemed
in part.

	Transfer Procedures and
Restrictions.

	  The Capital Securities shall bear the
Restricted Securities Legend, which shall not be removed unless there is
delivered to the Trust such satisfactory evidence, which may include an opinion
of counsel licensed to practice law in the State of Connecticut, as may be
reasonably required by the Trust, that neither the legend nor the restrictions
on transfer set forth therein are required to ensure that transfers thereof
comply with the provisions of the Securities Act. Upon provision of such
satisfactory evidence, the Institutional Trustee, at the written direction of
the Trust, shall authenticate and deliver Capital Securities that do not bear
the legend.

	  Except as
permitted by Section 8.2(a), each Capital Security shall bear a legend (the
"Restricted Securities Legend") in substantially the following form and a
Capital Security shall not be transferred except in compliance with such legend,
unless otherwise determined by the Sponsor, upon the advice of counsel expert in
securities law, in accordance with applicable law:

THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), ANY STATE SECURITIES LAWS OR ANY
OTHER APPLICABLE SECURITIES LAW. NEITHER THIS SECURITY NOR ANY INTEREST OR
PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED,
ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR
UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT. THE HOLDER OF THIS SECURITY BY ITS
ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR OTHERWISE TRANSFER THIS SECURITY ONLY
(A) TO THE SPONSOR OR THE TRUST, (B) PURSUANT TO A REGISTRATION
STATEMENT THAT HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT (C) TO
A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER
IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A SO LONG AS THIS
SECURITY IS ELIGIBLE FOR RESALE PURSUANT TO RULE 144A IN ACCORDANCE WITH
RULE 144A, (D) TO A NON-U.S. PERSON IN AN OFFSHORE TRANSACTION IN
ACCORDANCE WITH RULE 903 OR RULE 904 (AS APPLICABLE) OF
REGULATION S UNDER THE SECURITIES ACT, (E) TO AN INSTITUTIONAL
"ACCREDITED INVESTOR" WITHIN THE MEANING OF SUBPARAGRAPH (A) OF
RULE 501 UNDER THE SECURITIES ACT THAT IS ACQUIRING THIS CAPITAL SECURITY
FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL ACCREDITED
INVESTOR, FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE
IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, OR
(F) PURSUANT TO ANY OTHER AVAILABLE EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE SPONSOR'S AND THE TRUST'S
RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER TO REQUIRE THE DELIVERY OF AN
OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH
OF THEM IN ACCORDANCE WITH THE DECLARATION OF TRUST, A COPY OF WHICH MAY BE
OBTAINED FROM THE SPONSOR OR THE TRUST. HEDGING TRANSACTIONS INVOLVING THIS
SECURITY MAY NOT BE CONDUCTED UNLESS IN COMPLIANCE WITH THE SECURITIES ACT.

THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF ALSO
AGREES, REPRESENTS AND WARRANTS THAT IT IS NOT AN EMPLOYEE BENEFIT, INDIVIDUAL
RETIREMENT ACCOUNT OR OTHER PLAN OR ARRANGEMENT SUBJECT TO TITLE I OF THE
EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA"), OR
SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE") (EACH
A "PLAN"), OR AN ENTITY WHOSE UNDERLYING ASSETS INCLUDE "PLAN ASSETS" BY REASON
OF ANY PLAN'S INVESTMENT IN THE ENTITY, AND NO PERSON INVESTING "PLAN ASSETS" OF
ANY PLAN MAY ACQUIRE OR HOLD THE SECURITIES OR ANY INTEREST THEREIN, UNLESS SUCH
PURCHASER OR HOLDER IS ELIGIBLE FOR EXEMPTIVE RELIEF AVAILABLE UNDER U.S.
DEPARTMENT OF LABOR PROHIBITED TRANSACTION CLASS EXEMPTION 96-23, 95-60, 91-38,
90-1 OR 84-14 OR ANOTHER APPLICABLE EXEMPTION OR ITS PURCHASE AND HOLDING OF
THIS SECURITY IS NOT PROHIBITED BY SECTION 406 OF ERISA OR SECTION 4975 OF THE
CODE WITH RESPECT TO SUCH PURCHASE OR HOLDING. ANY PURCHASER OR HOLDER OF THE
SECURITIES OR ANY INTEREST THEREIN WILL BE DEEMED TO HAVE REPRESENTED BY ITS
PURCHASE AND HOLDING THEREOF THAT EITHER (i) IT IS NOT AN EMPLOYEE BENEFIT PLAN
WITHIN THE MEANING OF SECTION 3(3) OF ERISA, OR A PLAN TO WHICH SECTION 4975 OF
THE CODE IS APPLICABLE, A TRUSTEE OR OTHER PERSON ACTING ON BEHALF OF AN
EMPLOYEE BENEFIT PLAN OR PLAN, OR ANY OTHER PERSON OR ENTITY USING THE ASSETS OF
ANY EMPLOYEE BENEFIT PLAN OR PLAN TO FINANCE SUCH PURCHASE, OR (ii) SUCH
PURCHASE WILL NOT RESULT IN A PROHIBITED TRANSACTION UNDER SECTION 406 OF ERISA
OR SECTION 4975 OF THE CODE FOR WHICH THERE IS NO APPLICABLE STATUTORY OR
ADMINISTRATIVE EXEMPTION.

THIS SECURITY WILL BE ISSUED AND MAY BE TRANSFERRED ONLY IN
BLOCKS HAVING A LIQUIDATION AMOUNT OF NOT LESS THAN $500,000.00 (500 SECURITIES)
AND MULTIPLES OF $1,000.00 IN EXCESS THEREOF. ANY ATTEMPTED TRANSFER OF
SECURITIES IN A BLOCK HAVING A LIQUIDATION AMOUNT OF LESS THAN $500,000.00 SHALL
BE DEEMED TO BE VOID AND OF NO LEGAL EFFECT WHATSOEVER.

THE HOLDER OF THIS SECURITY AGREES THAT IT WILL COMPLY WITH
THE FOREGOING RESTRICTIONS.

	  To permit registrations of transfers and
exchanges, the Trust shall execute and the Institutional Trustee shall
authenticate Capital Securities at the Registrar's request.

	  Registrations of transfers or exchanges will
be effected without charge, but only upon payment (with such indemnity as the
Registrar or the Sponsor may require) in respect of any tax or other
governmental charge that may be imposed in relation to it.

	  All Capital Securities issued upon any
registration of transfer or exchange pursuant to the terms of this Declaration
shall evidence the same security and shall be entitled to the same benefits
under this Declaration as the Capital Securities surrendered upon such
registration of transfer or exchange.

	Deemed Security
Holders.  

The Trust, the Administrators, the Institutional Trustee,
the Paying Agent, the Transfer Agent or the Registrar may treat the Person in
whose name any Certificate shall be registered on the books and records of the
Trust as the sole holder of such Certificate and of the Securities represented
by such Certificate for purposes of receiving Distributions and for all other
purposes whatsoever and, accordingly, shall not be bound to recognize any
equitable or other claim to or interest in such Certificate or in the Securities
represented by such Certificate on the part of any Person, whether or not the
Trust, the Administrators, the Institutional Trustee, the Paying Agent, the
Transfer Agent or the Registrar shall have actual or other notice thereof

	

LIMITATION OF LIABILITY OF

HOLDERS OF SECURITIES, INSTITUTIONAL TRUSTEE OR OTHERS

	Liability.

	  Except as expressly set forth in this
Declaration, the Guarantee and the terms of the Securities, the Sponsor shall
not be:

	  

personally liable for the return of any portion of the
capital contributions (or any return thereon) of the Holders of the Securities
which shall be made solely from assets of the Trust; or

	  

required to pay to the Trust or to any Holder of the
Securities any deficit upon dissolution of the Trust or otherwise.

	  The Holder of the Common Securities shall be
liable for all of the debts and obligations of the Trust (other than with
respect to the Securities) to the extent not satisfied out of the Trust's
assets.

	  Pursuant to the Statutory Trust Act, the
Holders of the Capital Securities shall be entitled to the same limitation of
personal liability extended to stockholders of private corporations for profit
organized under the General Corporation Law of the State of
Connecticut.

	Exculpation.

	  No Indemnified Person shall be liable,
responsible or accountable in damages or otherwise to the Trust or any Covered
Person for any loss, damage or claim incurred by reason of any act or omission
performed or omitted by such Indemnified Person in good faith on behalf of the
Trust and in a manner such Indemnified Person reasonably believed to be within
the scope of the authority conferred on such Indemnified Person by this
Declaration or by law, except that an Indemnified Person shall be liable for any
such loss, damage or claim incurred by reason of such Indemnified Person's
negligence or willful misconduct with respect to such acts or
omissions.

	  An Indemnified Person shall be fully
protected in relying in good faith upon the records of the Trust and upon such
information, opinions, reports or statements presented to the Trust by any
Person as to matters the Indemnified Person reasonably believes are within such
other Person's professional or expert competence and, if selected by such
Indemnified Person, has been selected by such Indemnified Person with reasonable
care by or on behalf of the Trust, including information, opinions, reports or
statements as to the value and amount of the assets, liabilities, profits,
losses, or any other facts pertinent to the existence and amount of assets from
which Distributions to Holders of Securities might properly be
paid.

	Fiduciary
Duty.

	  To the extent that, at law or in equity,
an Indemnified Person has duties (including fiduciary duties) and liabilities
relating thereto to the Trust or to any other Covered Person, an Indemnified
Person acting under this Declaration shall not be liable to the Trust or to any
other Covered Person for its good faith reliance on the provisions of this
Declaration. The provisions of this Declaration, to the extent that they
restrict the duties and liabilities of an Indemnified Person otherwise existing
at law or in equity, are agreed by the parties hereto to replace such other
duties and liabilities of the Indemnified Person.

	  Whenever in this Declaration an Indemnified
Person is permitted or required to make a decision:

	  

in its "discretion" or under a grant of similar authority,
the Indemnified Person shall be entitled to consider such interests and factors
as it desires, including its own interests, and shall have no duty or obligation
to give any consideration to any interest of or factors affecting the Trust or
any other Person; or

	  

in its "good faith" or under another express standard, the
Indemnified Person shall act under such express standard and shall not be
subject to any other or different standard imposed by this Declaration or by
applicable law.

	Indemnification.

	  The Sponsor shall indemnify, to the full
extent permitted by law, any Indemnified Person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the Trust) arising out of or in
connection with the acceptance or administration of this Declaration by reason
of the fact that he is or was an Indemnified Person against expenses (including
reasonable attorneys' fees and expenses), judgments, fines and amounts paid in
settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the Trust,
and, with respect to any criminal action or proceeding, had no reasonable cause
to believe his conduct was unlawful. The termination of any action, suit or
proceeding by judgment, order, settlement, conviction, or upon a plea of nolo
contendere or its equivalent, shall not, of itself, create a presumption
that the Indemnified Person did not act in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interests of the Trust,
and, with respect to any criminal action or proceeding, had reasonable cause to
believe that his conduct was unlawful.

	  The Sponsor shall indemnify, to the full
extent permitted by law, any Indemnified Person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the Trust to procure a judgment in its favor arising
out of or in connection with the acceptance or administration of this
Declaration by reason of the fact that he is or was an Indemnified Person
against expenses (including reasonable attorneys' fees and expenses) actually
and reasonably incurred by him in connection with the defense or settlement of
such action or suit if he acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interests of the Trust;
provided, however, that no such indemnification shall be made in
respect of any claim, issue or matter as to which such Indemnified Person shall
have been adjudged to be liable to the Trust unless and only to the extent that
the court in which such action or suit was brought shall determine upon
application that, despite the adjudication of liability but in view of all the
circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which such court shall deem proper.

	  To the extent that an Indemnified Person
shall be successful on the merits or otherwise (including dismissal of an action
without prejudice or the settlement of an action without admission of liability)
in defense of any action, suit or proceeding referred to in paragraphs (a)
and (b) of this Section 9.4, or in defense of any claim, issue or matter
therein, he shall be indemnified, to the full extent permitted by law, against
expenses (including attorneys' fees and expenses) actually and reasonably
incurred by him in connection therewith.

	  Any indemnification of an Administrator under
paragraphs (a) and (b) of this Section 9.4 (unless ordered by a court)
shall be made by the Sponsor only as authorized in the specific case upon a
determination that indemnification of the Indemnified Person is proper in the
circumstances because he has met the applicable standard of conduct set forth in
paragraphs (a) and (b). Such determination shall be made (i) by the
Administrators by a majority vote of a Quorum consisting of such Administrators
who were not parties to such action, suit or proceeding, (ii) if such a
Quorum is not obtainable, or, even if obtainable, if a Quorum of disinterested
Administrators so directs, by independent legal counsel in a written opinion, or
(iii) by the Common Security Holder of the Trust.

	  To the fullest extent permitted by law,
expenses (including reasonable attorneys' fees and expenses) incurred by an
Indemnified Person in defending a civil, criminal, administrative or
investigative action, suit or proceeding referred to in paragraphs (a) and
(b) of this Section 9.4 shall be paid by the Sponsor in advance of the final
disposition of such action, suit or proceeding upon receipt of an undertaking by
or on behalf of such Indemnified Person to repay such amount if it shall
ultimately be determined that he is not entitled to be indemnified by the
Sponsor as authorized in this Section 9.4. Notwithstanding the foregoing, no
advance shall be made by the Sponsor if a determination is reasonably and
promptly made (i) by the Administrators by a majority vote of a Quorum of
disinterested Administrators, (ii) if such a Quorum is not obtainable, or,
even if obtainable, if a quorum of disinterested Administrators so directs, by
independent legal counsel in a written opinion or (iii) by the Common
Security Holder of the Trust, that, based upon the facts known to the
Administrators, counsel or the Common Security Holder at the time such
determination is made, such Indemnified Person acted in bad faith or in a manner
that such Indemnified Person did not believe to be in the best interests of the
Trust, or, with respect to any criminal proceeding, that such Indemnified Person
believed or had reasonable cause to believe his conduct was unlawful. In no
event shall any advance be made in instances where the Administrators,
independent legal counsel or the Common Security Holder reasonably determine
that such Indemnified Person deliberately breached his duty to the Trust or its
Common or Capital Security Holders.

	  The Institutional Trustee, at the sole cost
and expense of the Sponsor, retains the right to representation by counsel of
its own choosing in any action, suit or any other proceeding for which it is
indemnified under paragraphs (a) and (b) of this Section 9.4, without
affecting its right to indemnification hereunder or waiving any rights afforded
to it under this Declaration or applicable law.

	  The indemnification and advancement of
expenses provided by, or granted pursuant to, the other paragraphs of this
Section 9.4 shall not be deemed exclusive of any other rights to which those
seeking indemnification and advancement of expenses may be entitled under any
agreement, vote of stockholders or disinterested directors of the Sponsor or
Capital Security Holders of the Trust or otherwise, both as to action in his
official capacity and as to action in another capacity while holding such
office. All rights to indemnification under this Section 9.4 shall be
deemed to be provided by a contract between the Sponsor and each Indemnified
Person who serves in such capacity at any time while this Section 9.4 is in
effect. Any repeal or modification of this Section 9.4 shall not affect any
rights or obligations then existing.

	  The Sponsor or the Trust may purchase and
maintain insurance on behalf of any Person who is or was an Indemnified Person
against any liability asserted against him and incurred by him in any such
capacity, or arising out of his status as such, whether or not the Sponsor would
have the power to indemnify him against such liability under the provisions of
this Section 9.4.

	  For purposes of this Section 9.4, references
to "the Trust" shall include, in addition to the resulting or surviving entity,
any constituent entity (including any constituent of a constituent) absorbed in
a consolidation or merger, so that any Person who is or was a director, trustee,
officer or employee of such constituent entity, or is or was serving at the
request of such constituent entity as a director, trustee, officer, employee or
agent of another entity, shall stand in the same position under the provisions
of this Section 9.4 with respect to the resulting or surviving entity as he
would have with respect to such constituent entity if its separate existence had
continued.

	  The indemnification and advancement of
expenses provided by, or granted pursuant to, this Section 9.4 shall, unless
otherwise provided when authorized or ratified, (i) continue as to a Person
who has ceased to be an Indemnified Person and shall inure to the benefit of the
heirs, executors and administrators of such a Person; and (ii) survive the
termination or expiration of this Declaration or the earlier removal or
resignation of an Indemnified Person.

	Outside
Businesses.  

Any Covered Person, the Sponsor and the Institutional
Trustee may engage in or possess an interest in other business ventures of any
nature or description, independently or with others, similar or dissimilar to
the business of the Trust, and the Trust and the Holders of Securities shall
have no rights by virtue of this Declaration in and to such independent ventures
or the income or profits derived therefrom, and the pursuit of any such venture,
even if competitive with the business of the Trust, shall not be deemed wrongful
or improper. None of any Covered Person, the Sponsor or the Institutional
Trustee shall be obligated to present any particular investment or other
opportunity to the Trust even if such opportunity is of a character that, if
presented to the Trust, could be taken by the Trust, and any Covered Person, the
Sponsor and the Institutional Trustee shall have the right to take for its own
account (individually or as a partner or fiduciary) or to recommend to others
any such particular investment or other opportunity. Any Covered Person and the
Institutional Trustee may engage or be interested in any financial or other
transaction with the Sponsor or any Affiliate of the Sponsor, or may act as
depositary for, trustee or agent for, or act on any committee or body of holders
of, securities or other obligations of the Sponsor or its Affiliates.

	Compensation; Fee.  

The Sponsor agrees:

	  to pay to the Institutional Trustee from time
to time such compensation for all services rendered by it hereunder as the
parties shall agree from time to time (which compensation shall not be limited
by any provision of law in regard to the compensation of a trustee of an express
trust); and

	  except as otherwise expressly provided
herein, to reimburse the Institutional Trustee upon request for all reasonable
expenses, disbursements and advances incurred or made by the Institutional
Trustee in accordance with any provision of this Declaration (including the
reasonable compensation and the expenses and disbursements of their respective
agents and counsel), except any such expense, disbursement or advance as may be
attributable to its negligence, bad faith or willful misconduct.

The provisions of this Section 9.6 shall survive the
dissolution of the Trust and the termination of this Declaration and the removal
or resignation of the Institutional Trustee.

No Trustee may claim any lien or charge on any property of
the Trust as a result of any amount due pursuant to this Section 9.6.

	

ACCOUNTING

	Fiscal
Year.  

The fiscal year ("Fiscal Year") of the Trust shall
be the calendar year, or such other year as is required by the Code.

	Certain Accounting
Matters.  

	  At all times during the existence of the
Trust, the Administrators shall keep, or cause to be kept at the principal
office of the Trust in the United States, as defined for purposes of Treasury
regulations section 301.7701-7, full books of account, records and supporting
documents, which shall reflect in reasonable detail each transaction of the
Trust. The books of account shall be maintained, at the Sponsor's expense, in
accordance with generally accepted accounting principles, consistently applied.
The books of account and the records of the Trust shall be examined by and
reported upon as of the end of each Fiscal Year of the Trust by a firm of
independent certified public accountants selected by the
Administrators.

	  The Administrators shall cause to be duly
prepared and delivered to each of the Holders of Securities Form 1099 or such
other annual United States federal income tax information statement required by
the Code, containing such information with regard to the Securities held by each
Holder as is required by the Code and the Treasury Regulations. Notwithstanding
any right under the Code to deliver any such statement at a later date, the
Administrators shall endeavor to deliver all such statements within 30 days
after the end of each Fiscal Year of the Trust.

	  The Administrators, at the Sponsor's expense,
shall cause to be duly prepared at the principal office of the Trust in the
United States, as defined for purposes of Treasury regulations section 301.7701-
7, and filed an annual United States federal income tax return on a
Form 1041 or such other form required by United States federal income tax
law, and any other annual income tax returns required to be filed by the
Administrators on behalf of the Trust with any state or local taxing
authority.

	Banking.  

The Trust shall maintain in the United States, as defined
for purposes of Treasury regulations section 301.7701-7, one or more bank
accounts in the name and for the sole benefit of the Trust; provided,
however, that all payments of funds in respect of the Debentures held by
the Institutional Trustee shall be made directly to the Property Account and no
other funds of the Trust shall be deposited in the Property Account. The sole
signatories for such accounts (including the Property Account) shall be
designated by the Institutional Trustee.

	Withholding.  

The Institutional Trustee or any Paying Agent and the
Administrators shall comply with all withholding requirements under United
States federal, state and local law. The Institutional Trustee or any Paying
Agent shall request, and each Holder shall provide to the Institutional Trustee
or any Paying Agent, such forms or certificates as are necessary to establish an
exemption from withholding with respect to the Holder, and any representations
and forms as shall reasonably be requested by the Institutional Trustee or any
Paying Agent to assist it in determining the extent of, and in fulfilling, its
withholding obligations. The Administrators shall file required forms with
applicable jurisdictions and, unless an exemption from withholding is properly
established by a Holder, shall remit amounts withheld with respect to the Holder
to applicable jurisdictions. To the extent that the Institutional Trustee or any
Paying Agent is required to withhold and pay over any amounts to any authority
with respect to distributions or allocations to any Holder, the amount withheld
shall be deemed to be a Distribution in the amount of the withholding to the
Holder. In the event of any claimed overwithholding, Holders shall be limited to
an action against the applicable jurisdiction. If the amount required to be
withheld was not withheld from actual Distributions made, the Institutional
Trustee or any Paying Agent may reduce subsequent Distributions by the amount of
such withholding.

	

AMENDMENTS AND MEETINGS

	Amendments.

	  Except as otherwise provided in this
Declaration or by any applicable terms of the Securities, this Declaration may
only be amended by a written instrument approved and executed by the
Institutional Trustee.

	  Notwithstanding any other provision of this
Article XI, no amendment shall be made, and any such purported amendment
shall be void and ineffective:

	  

unless the Institutional Trustee shall have first
received

	  

an Officers' Certificate from each of the Trust and the
Sponsor that such amendment is permitted by, and conforms to, the terms of this
Declaration (including the terms of the Securities); and

	  

an opinion of counsel (who may be counsel to the Sponsor or
the Trust) that such amendment is permitted by, and conforms to, the terms of
this Declaration (including the terms of the Securities); and

	  

if the result of such amendment would be to

	  

cause the Trust to cease to be classified for purposes of
United States federal income taxation as a grantor trust; or

	  

cause the Trust to be deemed to be an Investment Company
required to be registered under the Investment Company Act.

	  Except as provided in Section 11.1(d), (e) or
(h), no amendment shall be made, and any such purported amendment shall be void
and ineffective unless the Holders of a Majority in liquidation amount of the
Capital Securities shall have consented to such amendment.

	  In addition to and notwithstanding any other
provision in this Declaration, without the consent of each affected Holder, this
Declaration may not be amended to (i) change the amount or timing of any
Distribution on the Securities or otherwise adversely affect the amount of any
Distribution required to be made in respect of the Securities as of a specified
date or change any conversion or exchange provisions or (ii) restrict the
right of a Holder to institute suit for the enforcement of any such payment on
or after such date.

	  Section 8.1 (b) and 8.1(c) and this Section
11.1 shall not be amended without the consent of all of the Holders of the
Securities.

	  Article III shall not be amended without
the consent of the Holders of a Majority in liquidation amount of the Common
Securities.

	  The rights of the Holders of the Capital
Securities under Article IV to appoint and remove the Institutional Trustee
shall not be amended without the consent of the Holders of a Majority in
liquidation amount of the Capital Securities.

	  

This Declaration may be amended by the Institutional Trustee
and the Holders of a Majority in liquidation amount of the Common Securities
without the consent of the Holders of the Capital Securities to:

	  

cure any ambiguity;

	  

correct or supplement any provision in this Declaration that
may be defective or inconsistent with any other provision of this
Declaration;

	  

add to the covenants, restrictions or obligations of the
Sponsor; or

	  

modify, eliminate or add to any provision of this Declaration
to such extent as may be necessary to ensure that the Trust will be classified
for United States federal income tax purposes at all times as a grantor trust
and will not be required to register as an "investment company" under the
Investment Company Act (including without limitation to conform to any change in
Rule 3a-5, Rule 3a-7 or any other applicable rule under the Investment
Company Act or written change in interpretation or application thereof by any
legislative body, court, government agency or regulatory authority) which
amendment does not have a material adverse effect on the rights, preferences or
privileges of the Holders of Securities;

provided, however, that no such modification,
elimination or addition referred to in clauses (i), (ii) or (iii) shall
adversely affect in any material respect the powers, preferences or special
rights of Holders of Capital Securities.

	Meetings of the Holders of
Securities; Action by Written Consent.

	  Meetings of the Holders of any class of
Securities may be called at any time by the Administrators (or as provided in
the terms of the Securities) to consider and act on any matter on which Holders
of such class of Securities are entitled to act under the terms of this
Declaration or the terms of the Securities. The Administrators shall call a
meeting of the Holders of such class if directed to do so by the Holders of at
least 10% in liquidation amount of such class of Securities. Such direction
shall be given by delivering to the Administrators one or more calls in a
writing stating that the signing Holders of the Securities wish to call a
meeting and indicating the general or specific purpose for which the meeting is
to be called. Any Holders of the Securities calling a meeting shall specify in
writing the Certificates held by the Holders of the Securities exercising the
right to call a meeting and only those Securities represented by such
Certificates shall be counted for purposes of determining whether the required
percentage set forth in the second sentence of this paragraph has been
met.

	  Except to the
extent otherwise provided in the terms of the Securities, the following
provisions shall apply to meetings of Holders of the Securities:

	  

notice of any such meeting shall be given to all the Holders
of the Securities having a right to vote thereat at least 7 days and not
more than 60 days before the date of such meeting. Whenever a vote, consent
or approval of the Holders of the Securities is permitted or required under this
Declaration, such vote, consent or approval may be given at a meeting of the
Holders of the Securities. Any action that may be taken at a meeting of the
Holders of the Securities may be taken without a meeting if a consent in writing
setting forth the action so taken is signed by the Holders of the Securities
owning not less than the minimum amount of Securities in liquidation amount that
would be necessary to authorize or take such action at a meeting at which all
Holders of the Securities having a right to vote thereon were present and
voting. Prompt notice of the taking of action without a meeting shall be given
to the Holders of the Securities entitled to vote who have not consented in
writing. The Administrators may specify that any written ballot submitted to the
Holders of the Securities for the purpose of taking any action without a meeting
shall be returned to the Trust within the time specified by the
Administrators;

	  

each Holder of a Security may authorize any Person to act for
it by proxy on all matters in which a Holder of Securities is entitled to
participate, including waiving notice of any meeting, or voting or participating
at a meeting. No proxy shall be valid after the expiration of 11 months
from the date thereof unless otherwise provided in the proxy. Every proxy shall
be revocable at the pleasure of the Holder of the Securities executing it.
Except as otherwise provided herein, all matters relating to the giving, voting
or validity of proxies shall be governed by the General Corporation Law of the
State of Connecticut relating to proxies, and judicial interpretations
thereunder, as if the Trust were a Connecticut corporation and the Holders of
the Securities were stockholders of a Connecticut corporation; each meeting of
the Holders of the Securities shall be conducted by the Administrators or by
such other Person that the Administrators may designate; and

	  

unless the Statutory Trust Act, this Declaration, or the
terms of the Securities otherwise provides, the Administrators, in their sole
discretion, shall establish all other provisions relating to meetings of Holders
of Securities, including notice of the time, place or purpose of any meeting at
which any matter is to be voted on by any Holders of the Securities, waiver of
any such notice, action by consent without a meeting, the establishment of a
record date, quorum requirements, voting in person or by proxy or any other
matter with respect to the exercise of any such right to vote; provided,
however, that each meeting shall be conducted in the United States (as
that term is defined in Treasury regulations section 301.7701-7).

	

REPRESENTATIONS OF INSTITUTIONAL TRUSTEE

	Representations and Warranties
of Institutional Trustee.  

The initial Institutional Trustee represents and warrants
to the Trust and to the Sponsor at the date of this Declaration, and each
Successor Institutional Trustee represents and warrants to the Trust and the
Sponsor at the time of the Successor Institutional Trustee's acceptance of its
appointment as Institutional Trustee, that:

	  the Institutional Trustee is a national
banking association with trust powers, duly organized and validly existing under
the laws of the United States of America with trust power and authority to
execute and deliver, and to carry out and perform its obligations under the
terms of, this Declaration;

	  the execution, delivery and performance by
the Institutional Trustee of this Declaration has been duly authorized by all
necessary corporate action on the part of the Institutional Trustee. This
Declaration has been duly executed and delivered by the Institutional Trustee,
and it constitutes a legal, valid and binding obligation of the Institutional
Trustee, enforceable against it in accordance with its terms, subject to
applicable bankruptcy, reorganization, moratorium, insolvency, and other similar
laws affecting creditors' rights generally and to general principles of equity
(regardless of whether considered in a proceeding in equity or at law);

	  the execution, delivery and performance of
this Declaration by the Institutional Trustee does not conflict with or
constitute a breach of the charter or by-laws of the Institutional Trustee;
and

	  no consent, approval or authorization of, or
registration with or notice to, any state or federal banking authority is
required for the execution, delivery or performance by the Institutional Trustee
of this Declaration.

	

MISCELLANEOUS

	Notices.  

All notices provided for in this Declaration shall be in
writing, duly signed by the party giving such notice, and shall be delivered,
telecopied (which telecopy shall be followed by notice delivered or mailed by
first class mail) or mailed by first class mail, as follows:

	  if given to the Trust in care of the
Administrators at the Trust's mailing address set forth below (or such other
address as the Trust may give notice of to the Holders of the
Securities):

Heritage Commerce Corp

150 Almaden Boulevard

San Jose, California 95113

Attention: Lawrence D. McGovern

Telecopy: 408-494-4562

	  if given to the Institutional Trustee, at the
Institutional Trustee's mailing address set forth below (or such other address
as the Institutional Trustee may give notice of to the Holders of the
Securities):

State Street Bank and Trust Company of Connecticut, National
Association

225 Asylum Street, Goodwin Square

Hartford, Connecticut 06103

Attention: Vice President, Corporate Trust Department

Telecopy: 860-244-1889

With a copy to:

State Street Bank and Trust Company

P.O. Box 778

Boston, Massachusetts 02102-0778

Attention: Paul D. Allen, Corporate Trust Department

Telecopy: 617-662-1462 

	  if given to the Holder of the Common
Securities, at the mailing address of the Sponsor set forth below (or such other
address as the Holder of the Common Securities may give notice of to the
Trust):

Heritage Commerce Corp

150 Almaden Boulevard

San Jose, California 95113

Attention: Lawrence D. McGovern

Telecopy: 408-494-4562

	  if given to any other Holder, at the address
set forth on the books and records of the Trust.

All such notices shall be deemed to have been given when
received in person, telecopied with receipt confirmed, or mailed by first class
mail, postage prepaid except that if a notice or other document is refused
delivery or cannot be delivered because of a changed address of which no notice
was given, such notice or other document shall be deemed to have been delivered
on the date of such refusal or inability to deliver.

	Governing
Law.  

This Declaration and the rights of the parties hereunder
shall be governed by and interpreted in accordance with the law of the State of
Connecticut and all rights and remedies shall be governed by such laws without
regard to the principles of conflict of laws of the State of Connecticut or any
other jurisdiction that would call for the application of the law of any
jurisdiction other than the State of Connecticut; provided,
however, that there shall not be applicable to the Trust, the
Institutional Trustee or this Declaration any provision of the laws (statutory
or common) of the State of Connecticut pertaining to trusts that relate to or
regulate, in a manner inconsistent with the terms hereof (a) the filing
with any court or governmental body or agency of trustee accounts or schedules
of trustee fees and charges, (b) affirmative requirements to post bonds for
trustees, officers, agents or employees of a trust, (c) the necessity for
obtaining court or other governmental approval concerning the acquisition,
holding or disposition of real or personal property, (d) fees or other sums
payable to trustees, officers, agents or employees of a trust, (e) the
allocation of receipts and expenditures to income or principal, or
(f) restrictions or limitations on the permissible nature, amount or
concentration of trust investments or requirements relating to the titling,
storage or other manner of holding or investing trust assets.

	Intention of the
Parties.  

It is the intention of the parties hereto that the Trust
be classified for United States federal income tax purposes as a grantor trust.
The provisions of this Declaration shall be interpreted to further this
intention of the parties.

	Headings.  

Headings contained in this Declaration are inserted for
convenience of reference only and do not affect the interpretation of this
Declaration or any provision hereof.

	Successors and
Assigns.  

Whenever in this Declaration any of the parties hereto is
named or referred to, the successors and assigns of such party shall be deemed
to be included, and all covenants and agreements in this Declaration by the
Sponsor and the Institutional Trustee shall bind and inure to the benefit of
their respective successors and assigns, whether or not so expressed.

	Partial
Enforceability.  

If any provision of this Declaration, or the application
of such provision to any Person or circumstance, shall be held invalid, the
remainder of this Declaration, or the application of such provision to persons
or circumstances other than those to which it is held invalid, shall not be
affected thereby.

	Counterparts.  

This Declaration may contain more than one counterpart of
the signature page and this Declaration may be executed by the affixing of the
signature of each of the Institutional Trustee and Administrators to any of such
counterpart signature pages. All of such counterpart signature pages shall be
read as though one, and they shall have the same force and effect as though all
of the signers had signed a single signature page.

Signatures appear on the following page

IN WITNESS WHEREOF, the undersigned have caused these
presents to be executed as of the day and year first above written.

STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL
ASSOCIATION,

as Institutional Trustee

 

By: /s/ Paul D. Allen 

Name: Paul D. Allen 

Title: Vice President 

 

HERITAGE COMMERCE CORP, as Sponsor

 

By: /s/ Lawrence D. McGovern 

Name: Lawrence D. McGovern 

Title: Chief Financial Officer 

 

HERITAGE STATUTORY TRUST II

 

By: /s/ Lawrence D. McGovern 

Administrator

 

By: /s/ May Wong 

Administrator

 

By: /s/ Richard L. Conniff 

Administrator

ANNEX I

TERMS OF SECURITIES

Pursuant to Section 6.1 of the Amended and Restated
Declaration of Trust, dated as of July 31, 2001 (as amended from time to time,
the "Declaration"), the designation, rights, privileges, restrictions,
preferences and other terms and provisions of the Capital Securities and the
Common Securities are set out below (each capitalized term used but not defined
herein has the meaning set forth in the Declaration):

	Designation and Number.

	5,000 Floating Rate Capital Securities of Heritage
Statutory Trust II (the "Trust"), with an aggregate stated liquidation amount
with respect to the assets of the Trust of Five Million Dollars ($5,000,000) and
a stated liquidation amount with respect to the assets of the Trust of $1,000.00
per Capital Security, are hereby designated for the purposes of identification
only as the "Capital Securities". The Capital Security Certificates
evidencing the Capital Securities shall be substantially in the form of
Exhibit A-1 to the Declaration, with such changes and additions thereto or
deletions therefrom as may be required by ordinary usage, custom or
practice.

	155 Floating Rate Common Securities of the Trust (the
"Common Securities") will be evidenced by Common Security Certificates
substantially in the form of Exhibit A-2 to the Declaration, with such
changes and additions thereto or deletions therefrom as may be required by
ordinary usage, custom or practice.

	Distributions.

	Distributions will be payable on
each Security for the period beginning on (and including) the date of original
issuance and ending on (but excluding) October 31, 2001 at a rate per annum of
7.29% and shall bear interest for each successive period beginning on (and
including) October 31, 2001, and each succeeding Distribution Payment Date, and
ending on (but excluding) the next succeeding Distribution Payment Date (each, a
"Distribution Period") at a rate per annum equal to the 3-Month LIBOR,
determined as described below, plus 3.58%; provided, however, that
prior to July 31, 2011, such annual rate shall not exceed 12.50% (the "Coupon
Rate") applied to the stated liquidation amount thereof, such rate being the
rate of interest payable on the Debentures to be held by the Institutional
Trustee. Distributions in arrears for more than one quarterly period will bear
interest thereon compounded quarterly at the applicable Distribution Rate (to
the extent permitted by law). A Distribution is payable only to the extent that
payments are made in respect of the Debentures held by the Institutional Trustee
and to the extent the Institutional Trustee has funds available therefor. The
amount of Distributions payable for any period will be computed for any full
quarterly period on the basis of the actual number of days in the Distribution
Period concerned divided by 360. In the event that any date on which a
Distribution is payable on the Securities is not a Business Day, then payment of
interest payable on such date shall be made on the next succeeding day which is
a Business Day (and without any interest or other payment in respect of any such
delay), except that, if such Business Day is in the next succeeding calendar
year, such payment shall be made on the immediately preceding Business Day, in
each case with the same force and effect as if made on the date such payment was
originally payable. The amount of interest payable for the Distribution Period
commencing on October 31, 2001 and each succeeding Distribution Period will be
calculated by applying the Coupon Rate to the principal amount outstanding at
the commencement of the Distribution Period and multiplying each such amount by
the actual number of days in the Distribution Period concerned divided by 360.
All percentages resulting from any calculations on the Capital Securities will
be rounded, if necessary, to the nearest one hundred-thousandth of a percentage
point, with five one-millionths of a percentage point rounded upward (e.g.,
9.876545% or .09876545) being rounded to 9.87655% (or .0987655), and all dollar
amounts used in or resulting from such calculation will be rounded to the
nearest cent (with one-half cent being rounded upward).

	Distributions on the Securities
will be cumulative, will accrue from the date of original issuance, and will be
payable, subject to extension of distribution payment periods as described
herein, quarterly in arrears on October 31, January 31, April 30 and July 31, of
each year, commencing on October 31, 2001 (each a "Distribution Payment
Date") when, as and if available for payment. The Debenture Issuer has the
right under the Indenture to defer payments of interest on the Debentures, so
long as no Indenture Event of Default has occurred and is continuing, by
deferring the payment of interest on the Debentures for up to 20 consecutive
quarterly periods (each an "Extension Period") at any time and from time
to time, subject to the conditions described below, although such interest would
continue to accrue on the Debentures at the Distribution Rate compounded
quarterly (to the extent permitted by law) during any Extension Period. No
Extension Period may end on a date other than a Distribution Payment Date. At
the end of any such Extension Period the Debenture Issuer shall pay all interest
then accrued and unpaid on the Debentures (together with Additional Interest
thereon); provided, however, that no Extension Period may extend
beyond the Maturity Date and provided further, however,
during any such Extension Period, the Debenture Issuer and its Affiliates shall
not (i) declare or pay any dividends or distributions on, or redeem,
purchase, acquire, or make a liquidation payment with respect to, any of the
Debenture Issuer's or its Affiliates' capital stock (other than payments of
dividends or distributions to the Debenture Issuer) or make any guarantee
payments with respect to the foregoing, or (ii) make any payment of
principal of or interest or premium, if any, on or repay, repurchase or redeem
any debt securities of the Debenture Issuer or any Affiliate that rank
pari passu in all respects with or junior in interest to the
Debentures (other than, with respect to clauses (i) and (ii) above,
(a) repurchases, redemptions or other acquisitions of shares of capital
stock of the Debenture Issuer in connection with any employment contract,
benefit plan or other similar arrangement with or for the benefit of one or more
employees, officers, directors or consultants, in connection with a dividend
reinvestment or stockholder stock purchase plan or in connection with the
issuance of capital stock of the Debenture Issuer (or securities convertible
into or exercisable for such capital stock) as consideration in an acquisition
transaction entered into prior to the applicable Extension Period, (b) as a
result of any exchange or conversion of any class or series of the Debenture
Issuer's capital stock (or any capital stock of a subsidiary of the Debenture
Issuer) for any class or series of the Debenture Issuer's capital stock or of
any class or series of the Debenture Issuer's indebtedness for any class or
series of the Debenture Issuer's capital stock, (c) the purchase of
fractional interests in shares of the Debenture Issuer's capital stock pursuant
to the conversion or exchange provisions of such capital stock or the security
being converted or exchanged, (d) any declaration of a dividend in
connection with any stockholder's rights plan, or the issuance of rights, stock
or other property under any stockholder's rights plan, or the redemption or
repurchase of rights pursuant thereto, (e) any dividend in the form of
stock, warrants, options or other rights where the dividend stock or the stock
issuable upon exercise of such warrants, options or other rights is the same
stock as that on which the dividend is being paid or ranks pari passu
with or junior to such stock and any cash payments in lieu of fractional shares
issued in connection therewith, or (f) payments under the Capital
Securities Guarantee). Prior to the termination of any Extension Period, the
Debenture Issuer may further extend such period, provided that such period
together with all such previous and further consecutive extensions thereof shall
not exceed 20 consecutive quarterly periods, or extend beyond the Maturity Date.
Upon the termination of any Extension Period and upon the payment of all accrued
and unpaid interest and Additional Interest, the Debenture Issuer may commence a
new Extension Period, subject to the foregoing requirements. No interest or
Additional Interest shall be due and payable during an Extension Period, except
at the end thereof, but each installment of interest that would otherwise have
been due and payable during such Extension Period shall bear Additional
Interest. If Distributions are deferred, the Distributions due shall be paid on
the date that the related Extension Period terminates, to Holders of the
Securities as they appear on the books and records of the Trust on the record
date immediately preceding such date. Distributions on the Securities must be
paid on the dates payable (after giving effect to any Extension Period) to the
extent that the Trust has funds available for the payment of such distributions
in the Property Account of the Trust. The Trust's funds available for
Distribution to the Holders of the Securities will be limited to payments
received from the Debenture Issuer. The payment of Distributions out of moneys
held by the Trust is guaranteed by the Guarantor pursuant to the
Guarantee.

	Distributions on the Securities will be payable to the
Holders thereof as they appear on the books and records of the Trust on the
relevant record dates. The relevant record dates shall be 15 days before the
relevant Distribution Payment Date. Distributions payable on any Securities that
are not punctually paid on any Distribution Payment Date, as a result of the
Debenture Issuer having failed to make a payment under the Debentures, as the
case may be, when due (taking into account any Extension Period), will cease to
be payable to the Person in whose name such Securities are registered on the
relevant record date, and such defaulted Distribution will instead be payable to
the Person in whose name such Securities are registered on the special record
date or other specified date determined in accordance with the Indenture. If any
date on which Distributions are payable on the Securities is not a Business Day,
then payment of the Distribution payable on such date will be made on the next
succeeding day that is a Business Day (and without any interest or other payment
in respect of any such delay) except that, if such Business Day is in the next
succeeding calendar year, such payment shall be made on the immediately
preceding Business Day, in each case with the same force and effect as if made
on such payment date.

	In the event that there is any money or other property
held by or for the Trust that is not accounted for hereunder, such property
shall be distributed Pro Rata (as defined herein) among the Holders of the
Securities.

	Liquidation Distribution Upon Dissolution. In the
event of the voluntary or involuntary liquidation, dissolution, winding-up or
termination of the Trust (each a "Liquidation") other than in connection
with a redemption of the Debentures, the Holders of the Securities will be
entitled to receive out of the assets of the Trust available for distribution to
Holders of the Securities, after satisfaction of liabilities to creditors of the
Trust (to the extent not satisfied by the Debenture Issuer), distributions equal
to the lesser of (i) the aggregate of the stated liquidation amount of $
1,000.00 per Security plus accrued and unpaid Distributions thereon to the date
of payment, to the extent the Trust shall have funds available therefor, and
(ii) the amount of assets of the Trust remaining available for distribution
to Holders in liquidation of the Trust (such amount being, in either case, the
"Liquidation Distribution"), unless in connection with such Liquidation,
the Debentures in aggregate stated principal amount equal to the aggregate
stated liquidation amount of such Securities, with an interest rate equal to the
Distribution Rate of, and bearing accrued and unpaid interest in an amount equal
to the accrued and unpaid Distributions on, and having the same record date as,
such Securities, after paying or making reasonable provision to pay all claims
and obligations of the Trust in accordance with the Statutory Trust Act, shall
be distributed on a Pro Rata basis to the Holders of the Securities in exchange
for such Securities.

The Sponsor, as the Holder of all of the Common Securities,
has the right at any time to dissolve the Trust (including, without limitation,
upon the occurrence of a Special Event), subject to the receipt by the Debenture
Issuer of prior approval from the Board of Governors of the Federal Reserve
System and any successor federal agency that is primarily responsible for
regulating the activities of Company (the "Federal Reserve"), if the
Company is a bank holding company, or from the Office of Thrift Supervision and
any successor federal agency that is primarily responsible for regulating the
activities of Company, (the "OTS") if the company is a savings and loan
holding company, in either case if then required under applicable capital
guidelines or policies of the Federal Reserve or OTS, as applicable, and, after
satisfaction of liabilities to creditors of the Trust, cause the Debentures to
be distributed to the Holders of the Securities on a Pro Rata basis in
accordance with the aggregate stated liquidation amount thereof.

If a Liquidation of the Trust occurs as described in
clause (i), (ii), (iii) or (v) in Section 7.1(a) of the Declaration, the
Trust shall be liquidated by the Institutional Trustee as expeditiously as it
determines to be possible by distributing, after satisfaction of liabilities to
creditors of the Trust, to the Holders of the Securities, the Debentures on a
Pro Rata basis to the extent not satisfied by the Debenture Issuer, unless such
distribution is determined by the Institutional Trustee not to be practical, in
which event such Holders will be entitled to receive out of the assets of the
Trust available for distribution to the Holders, after satisfaction of
liabilities of creditors of the Trust to the extent not satisfied by the
Debenture Issuer, an amount equal to the Liquidation Distribution. An early
Liquidation of the Trust pursuant to clause (iv) of Section 7.1(a) of the
Declaration shall occur if the Institutional Trustee determines that such
Liquidation is possible by distributing, after satisfaction of liabilities to
creditors of Trust, to the Holders of the Securities on a Pro Rata basis, the
Debentures, and such distribution occurs.

If, upon any such Liquidation the Liquidation Distribution
can be paid only in part because the Trust has insufficient assets available to
pay in full the aggregate Liquidation Distribution, then the amounts payable
directly by the Trust on such Capital Securities shall be paid to the Holders of
the Trust Securities on a Pro Rata basis, except that if an Event of Default has
occurred and is continuing, the Capital Securities shall have a preference over
the Common Securities with regard to such distributions.

After the date for any distribution of the Debentures upon
dissolution of the Trust (i) the Securities of the Trust will be deemed to
be no longer outstanding, (ii) the Holders of the Capital Securities will
receive certificates representing the Debentures to be delivered upon such
distribution, and (iii) any certificates representing the Capital
Securities still outstanding will be deemed to represent undivided beneficial
interests in such of the Debentures as have an aggregate principal amount equal
to the aggregate stated liquidation amount with an interest rate identical to
the distribution rate of, and bearing accrued and unpaid interest equal to
accrued and unpaid distributions on, the Securities until such certificates are
presented to the Debenture Issuer or its agent for transfer or reissuance.

	Redemption and Distribution.

	The Debentures will mature on
July 31, 2031. The Debentures may be redeemed by the Debenture Issuer, in whole
or in part at any time and from time to time on or after July 31. 2006, at the
Redemption Price. In addition, the Debentures may be redeemed by the Debenture
Issuer at the Special Redemption Price, in whole but not in part, at any
Distribution Payment Date, upon the occurrence and continuation of a Special
Event within 120 days following the occurrence of such Special Event at the
Special Redemption Price, upon not less than 30 nor more than 60 days'
notice to holders of such Debentures so long as such Special Event is
continuing. In each case, the right of the Debenture Issuer to redeem the
Debentures is subject to the Debenture Issuer having received prior approval
from the Federal Reserve (if the Debenture Issuer is a bank holding company) or
prior approval from the OTS (if the Debenture Issuer is a savings and loan
holding company), in each case if then required under applicable capital
guidelines or policies of the applicable federal agency.

"Tax Event" means the receipt by the Debenture Issuer
and the Trust of an opinion of counsel experienced in such matters to the effect
that, as a result of any amendment to or change (including any announced
prospective change) in the laws or any regulations thereunder of the United
States or any political subdivision or taxing authority thereof or therein, or
as a result of any official administrative pronouncement (including any private
letter ruling, technical advice memorandum, field service advice, regulatory
procedure, notice or announcement including any notice or announcement of intent
to adopt such procedures or regulations (an "Administrative Action")) or
judicial decision interpreting or applying such laws or regulations, regardless
of whether such Administrative Action or judicial decision is issued to or in
connection with a proceeding involving the Debenture Issuer or the Trust and
whether or not subject to review or appeal, which amendment, clarification,
change, Administrative Action or decision is enacted, promulgated or announced,
in each case on or after the date of issuance of the Debentures, there is more
than an insubstantial risk that: (i) the Trust is, or will be within 90
days of the date of such opinion, subject to United States federal income tax
with respect to income received or accrued on the Debentures; (ii) interest
payable by the Debenture Issuer on the Debentures is not, or within 90 days of
the date of such opinion, will not be, deductible by the Debenture Issuer, in
whole or in part, for United States federal income tax purposes; or
(iii) the Trust is, or will be within 90 days of the date of such opinion,
subject to more than a de minimis amount of other taxes, duties or other
governmental charges.

"Investment Company Event" means the receipt by the
Debenture Issuer and the Trust of an opinion of counsel experienced in such
matters to the effect that, as a result of the occurrence of a change in law or
regulation or written change (including any announced prospective change) in
interpretation or application of law or regulation by any legislative body,
court, governmental agency or regulatory authority, there is more than an
insubstantial risk that the Trust is or will be considered an Investment Company
that is required to be registered under the Investment Company Act which change
or prospective change becomes effective or would become effective, as the case
may be, on or after the date of the issuance of the Debentures.

"Capital Treatment Event" means the receipt by the
Debenture Issuer and the Trust of an opinion of counsel that, as a result of the
occurrence of any amendment to, or change (including any announced prospective
change) in, the laws of the United States or any political subdivision thereof
or therein, or as the result of any official or administrative pronouncement or
action or decision interpreting or applying such laws, rules or regulations,
which amendment or change is effective or which pronouncement, action or
decision is announced on or after the date of issuance of the Debentures, there
is more than an insubstantial risk that the Sponsor will not be entitled to
treat an amount equal to the aggregate liquidation amount of the Debentures as
"Tier 1 Capital" (or its then equivalent) for purposes of the capital
adequacy guidelines of the Federal Reserve, as then in effect and applicable to
the Sponsor (or if the Sponsor is not a bank holding company, such guidelines
applied to the Company as if the Company were subject to such guidelines);
provided, however, that the inability of the Sponsor to treat all
or any portion of the liquidation amount of the Debentures as Tier l
Capital shall not constitute the basis for a Capital Treatment Event, if such
inability results from the Sponsor having cumulative preferred stock, minority
interests in consolidated subsidiaries, or any other class of security or
interest which the Federal Reserve or OTS, as applicable, may now or hereafter
accord Tier 1 Capital treatment in excess of the amount which may qualify
for treatment as Tier 1 Capital under applicable capital adequacy
guidelines; provided further, however, that the
distribution of Debentures in connection with the Liquidation of the Trust shall
not in and of itself constitute a Capital Treatment Event unless such
Liquidation shall have occurred in connection with a Tax Event or an Investment
Company Event.

"Special Event" means a Tax Event, an Investment
Company Event or a Capital Treatment Event.

"Redemption Price" means the price set forth in the
following table for any Redemption Date that occurs within the twelve-month
period beginning in the relevant year indicated below, expressed as the
percentage of the principal amount of the Debentures being redeemed:

	
Year Beginning on
	
Percentage

	July 31, 2006

	107.5%

	July 31, 2007

	106.0%

	July 31, 2008

	104.5%

	July 31, 2009

	103.0%

	July 31, 2010

	101.5%

	July 31, 2011 and after

	100.0%

plus accrued and unpaid interest on such Debentures to the
Redemption Date.

"Special Redemption Date" means a Redemption Date on
which a Special Event redemption occurs.

"Special Redemption Price" means (i) if the
Special Redemption Date is before July 31, 2006, an amount in cash equal to
107.5% of the principal amount of the Debentures to be prepaid, plus accrued and
unpaid interest on such Debentures to such Special Redemption Date, or
(ii) if the Special Redemption Date is on or after July 31, 2006, the price
for the Debentures set forth in the above Redemption Price table for such
Special Redemption Date, plus accrued and unpaid interest on such Debentures to
such Special Redemption Date.

"Redemption Date" shall mean the date fixed for the
redemption of Capital Securities, which shall be October 31, January 31, April
30 or July 31 commencing October 31, 2006.

"3-Month LIBOR" means the London interbank offered
rate for three-month, Eurodollar deposits determined by the Debenture Trustee in
the following order of priority:
(1)the rate (expressed as a percentage per annum) for
Eurodollar deposits having a three-month maturity that appears on Telerate
Page 3750 as of 11:00 a.m. (London time) on the particular
Determination Date (as defined below). "Telerate Page 3750" means the
display designated as "Page 3750" on the Dow Jones Telerate Service or such
other page as may replace Page 3750 on that service or such other service
or services as may be nominated by the British Bankers' Association as the
information vendor for the purpose of displaying London interbank offered rates
for U.S. dollars deposits;

(2)if such rate does not appear on Telerate
Page 3750 as of 11:00 a.m. (London time) on the Determination Date, 3-
Month LIBOR will be the arithmetic mean of the rates (expressed as percentages
per annum) for Eurodollar deposits having a three-month maturity that appear on
Reuters Monitor Money Rates Page LIBO ("Reuters Page LIBO") as of
11:00 a.m. (London time) on such Determination Date;

(3)if such rate does not appear on Reuters Page LIBO as
of 11:00 a.m. (London time) on the related Determination Date, the
Debenture Trustee will request the principal London offices of four leading
banks in the London interbank market to provide such banks' offered quotations
(expressed as percentages per annum) to prime banks in the London interbank
market for Eurodollar deposits having a three-month maturity as of
11:00 a.m. (London time) on such Determination Date. If at least two
quotations are provided, 3-Month LIBOR will be the arithmetic mean of such
quotations;

(4)if fewer than two such quotations are provided as
requested in clause (3) above, the Debenture Trustee will request four
major New York City banks to provide such banks' offered quotations (expressed
as percentages per annum) to leading European banks for loans in Eurodollars as
of 11:00 a.m. (London time) on such Determination Date. If at least two
such quotations are provided, 3-Month LIBOR will be the arithmetic mean of such
quotations; and

(5)if fewer than two such quotations are provided as
requested in clause (4) above, 3-Month LIBOR will be a 3-Month LIBOR
determined with respect to the Distribution Period immediately preceding such
current Distribution Period. If the rate for Eurodollar deposits having a three-
month maturity that initially appears on Telerate Page 3750 or Reuters Page
LIBO, as the case may be, as of 11:00 a.m. (London time) on the related
Determination Date is superseded on the Telerate page 3750 or Reuters Page
LIBO, as the case may be, by a corrected rate by 12:00 noon (London time)
on such Determination Date, then the corrected rate as so substituted on the
applicable page will be the applicable 3-Month LIBOR for such Determination
Date.

(6)The Coupon Rate for any Distribution Period will at no
time be higher than the maximum rate then permitted by New York law as the same
may be modified by United States law.

"Determination Date" means the date that is two London
Banking Days (i.e., a day in which dealings in deposits in U.S. dollars are
transacted in the London interbank market) preceding the particular Distribution
Period for which a Coupon Rate is being determined.

"Maturity Date" means July 31, 2031.

	Upon the repayment in full at
maturity or redemption in whole or in part of the Debentures (other than
following the distribution of the Debentures to the Holders of the Securities),
the proceeds from such repayment or payment shall concurrently be applied to
redeem Pro Rata at the applicable Redemption Price or Special Redemption Price,
as applicable, Securities having an aggregate liquidation amount equal to the
aggregate principal amount of the Debentures so repaid or redeemed;
provided, however, that holders of such Securities shall be given
not less than 30 nor more than 60 days' notice of such redemption (other than at
the scheduled maturity of the Debentures).

	If fewer than all the outstanding
Securities are to be so redeemed, the Common Securities and the Capital
Securities will be redeemed Pro Rata and the Capital Securities to be redeemed
will be redeemed Pro Rata from each Holder of Capital Securities.

	The Trust may not redeem fewer than all the outstanding
Capital Securities unless all accrued and unpaid Distributions have been paid on
all Capital Securities for all quarterly Distribution periods terminating on or
before the date of redemption.

	Redemption or Distribution
Procedures.

	Notice of any redemption of or
notice of distribution of the Debentures in exchange for, the Securities (a
"Redemption/Distribution Notice") will be given by the Trust by mail to
each Holder of Securities to be redeemed or exchanged not fewer than 30 nor more
than 60 days before the date fixed for redemption or exchange thereof which, in
the case of a redemption, will be the date fixed for redemption of the
Debentures. For purposes of the calculation of the date of redemption or
exchange and the dates on which notices are given pursuant to this
paragraph 4(e)(i), a Redemption/Distribution Notice shall be deemed to be
given on the day such notice is first mailed by first-class mail, postage
prepaid, to Holders of such Securities. Each Redemption/Distribution Notice
shall be addressed to the Holders of such Securities at the address of each such
Holder appearing on the books and records of the Trust. No defect in the
Redemption/Distribution Notice or in the mailing thereof with respect to any
Holder shall affect the validity of the redemption or exchange proceedings with
respect to any other Holder.

	If the Securities are to be redeemed and the Trust gives
a Redemption/ Distribution Notice, which notice may only be issued if the
Debentures are redeemed as set out in this paragraph 4 (which notice will
be irrevocable), then, provided that the Institutional Trustee has a
sufficient amount of cash in connection with the related redemption or maturity
of the Debentures, the Institutional Trustee will pay the relevant Redemption
Price or Special Redemption Price, as applicable, to the Holders of such
Securities by check mailed to the address of each such Holder appearing on the
books and records of the Trust on the redemption date. If a
Redemption/Distribution Notice shall have been given and funds deposited as
required then immediately prior to the close of business on the date of such
deposit Distributions will cease to accrue on the Securities so called for
redemption and all rights of Holders of such Securities so called for redemption
will cease, except the right of the Holders of such Securities to receive the
applicable Redemption Price or Special Redemption Price specified in
paragraph 4(a), but without interest on such Redemption Price or Special
Redemption Price. If any date fixed for redemption of Securities is not a
Business Day, then payment of any such Redemption Price or Special Redemption
Price payable on such date will be made on the next succeeding day that is a
Business Day (and without any interest or other payment in respect of any such
delay) except that, if such Business Day falls in the next calendar year, such
payment will be made on the immediately preceding Business Day, in each case
with the same force and effect as if made on such date fixed for redemption. If
payment of the Redemption Price or Special Redemption Price in respect of any
Securities is improperly withheld or refused and not paid either by the Trust or
by the Debenture Issuer as guarantor pursuant to the Guarantee, Distributions on
such Securities will continue to accrue at the Distribution Rate from the
original redemption date to the actual date of payment, in which case the actual
payment date will be considered the date fixed for redemption for purposes of
calculating the Redemption Price or Special Redemption Price. In the event of
any redemption of the Capital Securities issued by the Trust in part, the Trust
shall not be required to (i) issue, register the transfer of or exchange
any Security during a period beginning at the opening of business 15 days before
any selection for redemption of the Capital Securities and ending at the close
of business on the earliest date on which the relevant notice of redemption is
deemed to have been given to all Holders of the Capital Securities to be so
redeemed or (ii) register the transfer of or exchange any Capital
Securities so selected for redemption, in whole or in part except for the
unredeemed portion of any Capital Securities being redeemed in part.

	Redemption/Distribution Notices shall be sent by the
Administrators on behalf of the Trust to (A) in respect of the Capital
Securities, the Holders thereof and (B) in respect of the Common
Securities, the Holder thereof.

	Voting Rights - Capital Securities.

	Except as provided under paragraphs 5(b) and 7 and
as otherwise required by law and the Declaration, the Holders of the Capital
Securities will have no voting rights. The Administrators are required to call a
meeting of the Holders of the Capital Securities if directed to do so by Holders
of at least 10% in liquidation amount of the Capital Securities.

	Subject to the requirements of
obtaining a tax opinion by the Institutional Trustee in certain circumstances
set forth in the last sentence of this paragraph, the Holders of a Majority in
liquidation amount of the Capital Securities, voting separately as a class, have
the right to direct the time, method, and place of conducting any proceeding for
any remedy available to the Institutional Trustee, or exercising any trust or
power conferred upon the Institutional Trustee under the Declaration, including
the right to direct the Institutional Trustee, as holder of the Debentures, to
(i) exercise the remedies available under the Indenture as the holder of
the Debentures, (ii) waive any past default that is waivable under the
Indenture, (iii) exercise any right to rescind or annul a declaration that
the principal of all the Debentures shall be due and payable or
(iv) consent on behalf of all the Holders of the Capital Securities to any
amendment, modification or termination of the Indenture or the Debentures where
such consent shall be required; provided, however, that, where a
consent or action under the Indenture would require the consent or act of the
holders of greater than a simple majority in aggregate principal amount of
Debentures (a "Super Majority") affected thereby, the Institutional
Trustee may only give such consent or take such action at the written direction
of the Holders of at least the proportion in liquidation amount of the Capital
Securities outstanding which the relevant Super Majority represents of the
aggregate principal amount of the Debentures outstanding. If the Institutional
Trustee fails to enforce its rights under the Debentures after the Holders of a
Majority in liquidation amount of such Capital Securities have so directed the
Institutional Trustee, to the fullest extent permitted by law, a Holder of the
Capital Securities may institute a legal proceeding directly against the
Debenture Issuer to enforce the Institutional Trustee's rights under the
Debentures without first instituting any legal proceeding against the
Institutional Trustee or any other person or entity. Notwithstanding the
foregoing, if an Event of Default has occurred and is continuing and such event
is attributable to the failure of the Debenture Issuer to pay interest or
principal on the Debentures on the date the interest or principal is payable (or
in the case of redemption, the redemption date), then a Holder of record of the
Capital Securities may directly institute a proceeding for enforcement of
payment on or after the respective due dates specified in the Debentures, to
such Holder directly of the principal of or interest on the Debentures having an
aggregate principal amount equal to the aggregate liquidation amount of the
Capital Securities of such Holder. The Institutional Trustee shall notify all
Holders of the Capital Securities of any default actually known to the
Institutional Trustee with respect to the Debentures unless (x) such
default has been cured prior to the giving of such notice or (y) the
Institutional Trustee determines in good faith that the withholding of such
notice is in the interest of the Holders of such Capital Securities, except
where the default relates to the payment of principal of or interest on any of
the Debentures. Such notice shall state that such Indenture Event of Default
also constitutes an Event of Default hereunder. Except with respect to directing
the time, method and place of conducting a proceeding for a remedy, the
Institutional Trustee shall not take any of the actions described in
clauses (i), (ii) or (iii) above unless the Institutional Trustee has
obtained an opinion of tax counsel to the effect that, as a result of such
action, the Trust will not be classified as other than a grantor trust for
United States federal income tax purposes.

In the event the consent of the Institutional Trustee, as the
holder of the Debentures is required under the Indenture with respect to any
amendment, modification or termination of the Indenture, the Institutional
Trustee shall request the direction of the Holders of the Securities with
respect to such amendment modification or termination and shall vote with
respect to such amendment, modification or termination as directed by a Majority
in liquidation amount of the Securities voting together as a single class;
provided, however, that where a consent under the Indenture would
require the consent of a Super-Majority, the Institutional Trustee may only give
such consent at the direction of the Holders of at least the proportion in
liquidation amount of the Securities outstanding which the relevant Super-
Majority represents of the aggregate principal amount of the Debentures
outstanding. The Institutional Trustee shall not take any such action in
accordance with the directions of the Holders of the Securities unless the
Institutional Trustee has obtained an opinion of tax counsel to the effect that,
as a result of such action, the Trust will not be classified as other than a
grantor trust for United States federal income tax purposes.

A waiver of an Indenture Event of Default will constitute a
waiver of the corresponding Event of Default hereunder. Any required approval or
direction of Holders of the Capital Securities may be given at a separate
meeting of Holders of the Capital Securities convened for such purpose, at a
meeting of all of the Holders of the Securities in the Trust or pursuant to
written consent. The Institutional Trustee will cause a notice of any meeting at
which Holders of the Capital Securities are entitled to vote, or of any matter
upon which action by written consent of such Holders is to be taken, to be
mailed to each Holder of record of the Capital Securities. Each such notice will
include a statement setting forth the following information (i) the date of
such meeting or the date by which such action is to be taken, (ii) a
description of any resolution proposed for adoption at such meeting on which
such Holders are entitled to vote or of such matter upon which written consent
is sought and (iii) instructions for the delivery of proxies or consents.
No vote or consent of the Holders of the Capital Securities will be required for
the Trust to redeem and cancel Capital Securities or to distribute the
Debentures in accordance with the Declaration and the terms of the
Securities.

Notwithstanding that Holders of the Capital Securities are
entitled to vote or consent under any of the circumstances described above, any
of the Capital Securities that are owned by the Sponsor or any Affiliate of the
Sponsor shall not entitle the Holder thereof to vote or consent and shall, for
purposes of such vote or consent, be treated as if such Capital Securities were
not outstanding.

In no event will Holders of the Capital Securities have the
right to vote to appoint, remove or replace the Administrators, which voting
rights are vested exclusively in the Sponsor as the Holder of all of the Common
Securities of the Trust. Under certain circumstances as more fully described in
the Declaration, Holders of Capital Securities have the right to vote to
appoint, remove or replace the Institutional Trustee.

	Voting Rights - Common Securities.

	Except as provided under paragraphs 6(b), 6(c) and 7
and as otherwise required by law and the Declaration, the Common Securities will
have no voting rights.

	The Holders of the Common Securities are entitled, in
accordance with Article IV of the Declaration, to vote to appoint, remove
or replace any Administrators.

	Subject to Section 6.7 of the Declaration and only after
each Event of Default (if any) with respect to the Capital Securities has been
cured, waived, or otherwise eliminated and subject to the requirements of the
second to last sentence of this paragraph, the Holders of a Majority in
liquidation amount of the Common Securities, voting separately as a class, may
direct the time, method, and place of conducting any proceeding for any remedy
available to the Institutional Trustee, or exercising any trust or power
conferred upon the Institutional Trustee under the Declaration, including
(i) directing the time, method, place of conducting any proceeding for any
remedy available to the Debenture Trustee, or exercising any trust or power
conferred on the Debenture Trustee with respect to the Debentures,
(ii) waive any past default and its consequences that is waivable under the
Indenture, or (iii) exercise any right to rescind or annul a declaration
that the principal of all the Debentures shall be due and payable;
provided, however, that, where a consent or action under the
Indenture would require a Super Majority, the Institutional Trustee may only
give such consent or take such action at the written direction of the Holders of
at least the proportion in liquidation amount of the Common Securities which the
relevant Super Majority represents of the aggregate principal amount of the
Debentures outstanding. Notwithstanding this paragraph 6(c), the
Institutional Trustee shall not revoke any action previously authorized or
approved by a vote or consent of the Holders of the Capital Securities. Other
than with respect to directing the time, method and place of conducting any
proceeding for any remedy available to the Institutional Trustee or the
Debenture Trustee as set forth above, the Institutional Trustee shall not take
any action described in (i), (ii) or (iii) above, unless the Institutional
Trustee has obtained an opinion of tax counsel to the effect that for the
purposes of United States federal income tax the Trust will not be classified as
other than a grantor trust on account of such action. If the Institutional
Trustee fails to enforce its rights under the Declaration to the fullest extent
permitted by law, any Holder of the Common Securities may institute a legal
proceeding directly against any Person to enforce the Institutional Trustee's
rights under the Declaration, without first instituting a legal proceeding
against the Institutional Trustee or any other Person.

Any approval or direction of Holders of the Common Securities
may be given at a separate meeting of Holders of the Common Securities convened
for such purpose, at a meeting of all of the Holders of the Securities in the
Trust or pursuant to written consent. The Administrators will cause a notice of
any meeting at which Holders of the Common Securities are entitled to vote, or
of any matter upon which action by written consent of such Holders is to be
taken, to be mailed to each Holder of the Common Securities. Each such notice
will include a statement setting forth (i) the date of such meeting or the
date by which such action is to be taken, (ii) a description of any
resolution proposed for adoption at such meeting on which such Holders are
entitled to vote or of such matter upon which written consent is sought and
(iii) instructions for the delivery of proxies or consents.

No vote or consent of the Holders of the Common Securities
will be required for the Trust to redeem and cancel Common Securities or to
distribute the Debentures in accordance with the Declaration and the terms of
the Securities.

	Amendments to Declaration and Indenture.

	In addition to any requirements under Section 11.1
of the Declaration, if any proposed amendment to the Declaration provides for,
or the Institutional Trustee, Sponsor or Administrators otherwise propose to
effect, (i) any action that would adversely affect the powers, preferences
or special rights of the Securities, whether by way of amendment to the
Declaration or otherwise, or (ii) the Liquidation of the Trust, other than
as described in Section 7.1 of the Declaration, then the Holders of outstanding
Securities, voting together as a single class, will be entitled to vote on such
amendment or proposal and such amendment or proposal shall not be effective
except with the approval of the Holders of at least a Majority in liquidation
amount of the Securities, affected thereby; provided, however, if
any amendment or proposal referred to in clause (i) above would adversely
affect only the Capital Securities or only the Common Securities, then only the
affected class will be entitled to vote on such amendment or proposal and such
amendment or proposal shall not be effective except with the approval of a
Majority in liquidation amount of such class of Securities.

	In the event the consent of the Institutional Trustee as
the holder of the Debentures is required under the Indenture with respect to any
amendment, modification or termination of the Indenture or the Debentures, the
Institutional Trustee shall request the written direction of the Holders of the
Securities with respect to such amendment, modification or termination and shall
vote with respect to such amendment, modification, or termination as directed by
a Majority in liquidation amount of the Securities voting together as a single
class; provided, however, that where a consent under the Indenture
would require a Super Majority, the Institutional Trustee may only give such
consent at the direction of the Holders of at least the proportion in
liquidation amount of the Securities which the relevant Super Majority
represents of the aggregate principal amount of the Debentures
outstanding.

	Notwithstanding the foregoing, no amendment or
modification may be made to the Declaration if such amendment or modification
would (i) cause the Trust to be classified for purposes of United States
federal income taxation as other than a grantor trust, (ii) reduce or
otherwise adversely affect the powers of the Institutional Trustee or
(iii) cause the Trust to be deemed an Investment Company which is required
to be registered under the Investment Company Act.

	Notwithstanding any provision of the Declaration, the
right of any Holder of the Capital Securities to receive payment of
distributions and other payments upon redemption or otherwise, on or after their
respective due dates, or to institute a suit for the enforcement of any such
payment on or after such respective dates, shall not be impaired or affected
without the consent of such Holder. For the protection and enforcement of the
foregoing provision, each and every Holder of the Capital Securities shall be
entitled to such relief as can be given either at law or equity.

	Pro Rata. A reference in these terms of the
Securities to any payment, distribution or treatment as being "Pro Rata"
shall mean pro rata to each Holder of the Securities according to the aggregate
liquidation amount of the Securities held by the relevant Holder in relation to
the aggregate liquidation amount of all Securities then outstanding unless, in
relation to a payment, an Event of Default has occurred and is continuing, in
which case any funds available to make such payment shall be paid first to each
Holder of the Capital Securities Pro Rata according to the aggregate liquidation
amount of the Capital Securities held by the relevant Holder relative to the
aggregate liquidation amount of all Capital Securities outstanding, and only
after satisfaction of all amounts owed to the Holders of the Capital Securities,
to each Holder of the Common Securities Pro Rata according to the aggregate
liquidation amount of the Common Securities held by the relevant Holder relative
to the aggregate liquidation amount of all Common Securities
outstanding.

	Ranking. The Capital Securities rank pari
passu with and payment thereon shall be made Pro Rata with the Common
Securities except that, where an Event of Default has occurred and is
continuing, the rights of Holders of the Common Securities to receive payment of
Distributions and payments upon liquidation, redemption and otherwise are
subordinated to the rights of the Holders of the Capital Securities with the
result that no payment of any Distribution on, or Redemption Price of, any
Common Security, and no other payment on account of redemption, liquidation or
other acquisition of Common Securities, shall be made unless payment in full in
cash of all accumulated and unpaid Distributions on all outstanding Capital
Securities for all distribution periods terminating on or prior thereto, or in
the case of payment of the Redemption Price the full amount of such Redemption
Price on all outstanding Capital Securities then called for redemption, shall
have been made or provided for, and all funds immediately available to the
Institutional Trustee shall first be applied to the payment in full in cash of
all Distributions on, or the Redemption Price of, the Capital Securities then
due and payable.

	Acceptance of Guarantee and Indenture. Each Holder
of the Capital Securities and the Common Securities, by the acceptance of such
Securities, agrees to the provisions of the Guarantee, including the
subordination provisions therein and to the provisions of the
Indenture.

	No Preemptive Rights. The Holders of the
Securities shall have no preemptive or similar rights to subscribe for any
additional securities.

	Miscellaneous. These terms constitute a part of
the Declaration. The Sponsor will provide a copy of the Declaration, the
Guarantee, and the Indenture to a Holder without charge on written request to
the Sponsor at its principal place of business.

EXHIBIT A-1

FORM OF CAPITAL SECURITY CERTIFICATE

[FORM OF FACE OF SECURITY]

THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), ANY STATE SECURITIES LAWS OR ANY
OTHER APPLICABLE SECURITIES LAW. NEITHER THIS SECURITY NOR ANY INTEREST OR
PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED,
ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR
UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAW. THE
HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR
OTHERWISE TRANSFER THIS SECURITY ONLY (A) TO THE SPONSOR OR THE TRUST,
(B) PURSUANT TO A REGISTRATION STATEMENT THAT HAS BEEN DECLARED EFFECTIVE
UNDER THE SECURITIES ACT (C) TO A PERSON WHOM THE SELLER REASONABLY
BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 144A SO LONG AS THIS SECURITY IS ELIGIBLE FOR RESALE
PURSUANT TO RULE 144A IN ACCORDANCE WITH RULE 144A, (D) TO A NON-U.S. PERSON IN
AN OFFSHORE TRANSACTION IN ACCORDANCE WITH RULE 903 OR
RULE 904 (AS APPLICABLE) OF REGULATION S UNDER THE SECURITIES ACT,
(E) TO AN INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE MEANING OF
SUBPARAGRAPH (A) OF RULE 501 UNDER THE SECURITIES ACT THAT IS
ACQUIRING THIS CAPITAL SECURITY FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH
AN INSTITUTIONAL ACCREDITED INVESTOR, FOR INVESTMENT PURPOSES AND NOT WITH A
VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION
OF THE SECURITIES ACT, OR (F) PURSUANT TO ANY OTHER AVAILABLE EXEMPTION
FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE
SPONSOR'S AND THE TRUST'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER TO
REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER
INFORMATION SATISFACTORY TO EACH OF THEM IN ACCORDANCE WITH THE DECLARATION OF
TRUST, A COPY OF WHICH MAY BE OBTAINED FROM THE SPONSOR OR THE TRUST. HEDGING
TRANSACTIONS INVOLVING THIS SECURITY MAY NOT BE CONDUCTED UNLESS IN COMPLIANCE
WITH THE SECURITIES ACT.

THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF ALSO
AGREES, REPRESENTS AND WARRANTS THAT IT IS NOT AN EMPLOYEE BENEFIT, INDIVIDUAL
RETIREMENT ACCOUNT OR OTHER PLAN OR ARRANGEMENT SUBJECT TO TITLE I OF THE
EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA"), OR
SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE") (EACH
A "PLAN"), OR AN ENTITY WHOSE UNDERLYING ASSETS INCLUDE "PLAN ASSETS" BY REASON
OF ANY PLAN'S INVESTMENT IN THE ENTITY, AND NO PERSON INVESTING "PLAN ASSETS" OF
ANY PLAN MAY ACQUIRE OR HOLD THE SECURITIES OR ANY INTEREST THEREIN, UNLESS SUCH
PURCHASER OR HOLDER IS ELIGIBLE FOR EXEMPTIVE RELIEF AVAILABLE UNDER U.S.
DEPARTMENT OF LABOR PROHIBITED TRANSACTION CLASS EXEMPTION 96-23, 95-60, 91-38,
90-1 OR 84-14 OR ANOTHER APPLICABLE EXEMPTION OR ITS PURCHASE AND HOLDING OF
THIS SECURITY IS NOT PROHIBITED BY SECTION 406 OF ERISA OR SECTION 4975 OF THE
CODE WITH RESPECT TO SUCH PURCHASE OR HOLDING. ANY PURCHASER OR HOLDER OF THE
SECURITIES OR ANY INTEREST THEREIN WILL BE DEEMED TO HAVE REPRESENTED BY ITS
PURCHASE AND HOLDING THEREOF THAT EITHER (i) IT IS NOT AN EMPLOYEE BENEFIT PLAN
WITHIN THE MEANING OF SECTION 3(3) OF ERISA, OR A PLAN TO WHICH SECTION 4975 OF
THE CODE IS APPLICABLE, A TRUSTEE OR OTHER PERSON ACTING ON BEHALF OF AN
EMPLOYEE BENEFIT PLAN OR PLAN, OR ANY OTHER PERSON OR ENTITY USING THE ASSETS OF
ANY EMPLOYEE BENEFIT PLAN OR PLAN TO FINANCE SUCH PURCHASE, OR (ii) SUCH
PURCHASE WILL NOT RESULT IN A PROHIBITED TRANSACTION UNDER SECTION 406 OF ERISA
OR SECTION 4975 OF THE CODE FOR WHICH THERE IS NO APPLICABLE STATUTORY OR
ADMINISTRATIVE EXEMPTION.

THIS SECURITY WILL BE ISSUED AND MAY BE TRANSFERRED ONLY IN
BLOCKS HAVING A LIQUIDATION AMOUNT OF NOT LESS THAN $500,000.00 (500 SECURITIES)
AND MULTIPLES OF $1,000.00 IN EXCESS THEREOF. ANY ATTEMPTED TRANSFER OF
SECURITIES IN A BLOCK HAVING A LIQUIDATION AMOUNT OF LESS THAN $500,000.00 SHALL
BE DEEMED TO BE VOID AND OF NO LEGAL EFFECT WHATSOEVER.

THE HOLDER OF THIS SECURITY AGREES THAT IT WILL COMPLY WITH
THE FOREGOING RESTRICTIONS.

IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO
THE REGISTRAR AND TRANSFER AGENT SUCH CERTIFICATE AND OTHER INFORMATION AS MAY
BE REQUIRED BY THE DECLARATION TO CONFIRM THAT THE TRANSFER COMPLIES WITH THE
FOREGOING RESTRICTIONS.

P-15,000

July 31, 2001

Certificate Evidencing Floating Rate Capital Securities

of

Heritage Statutory Trust II

(liquidation amount $1,000.00 per Capital Security)

Heritage Statutory Trust II, a statutory trust created under
the laws of the State of Connecticut (the "Trust"), hereby certifies that The
Chase Manhattan Bank, as indenture trustee under the Indenture dated as of July
31, 2001 among Preferred Term Securities III, Ltd., Preferred Term Securities
III, Inc. and The Chase Manhattan Bank (the "Holder") is the registered owner of
securities of the Trust representing undivided beneficial interests in the
assets of the Trust, (liquidation amount $1,000.00 per capital security) (the
"Capital Securities"). Subject to the Declaration (as defined below), the
Capital Securities are transferable on the books and records of the Trust in
person or by a duly authorized attorney, upon surrender of this Certificate duly
endorsed and in proper form for transfer. The designation, rights, privileges,
restrictions, preferences and other terms and provisions of the Capital
Securities represented hereby are issued pursuant to, and shall in all respects
be subject to, the provisions of the Amended and Restated Declaration of Trust
of the Trust dated as of July 31, 2001, among Lawrence D. McGovern, May Wong and
Richard L. Conniff as Administrators, State Street Bank and Trust Company of
Connecticut, National Association, as Institutional Trustee, Heritage Commerce
Corp, as Sponsor, and the holders from time to time of undivided beneficial
interests in the assets of the Trust, including the designation of the terms of
the Capital Securities as set forth in Annex I to such amended and restated
declaration as the same may be amended from time to time (the "Declaration").
Capitalized terms used herein but not defined shall have the meaning given them
in the Declaration. The Holder is entitled to the benefits of the Guarantee to
the extent provided therein. The Sponsor will provide a copy of the Declaration,
the Guarantee, and the Indenture to the Holder without charge upon written
request to the Trust at its principal place of business. 

Upon receipt of this Security, the Holder is bound by the
Declaration and is entitled to the benefits thereunder.

By acceptance of this Security, the Holder agrees to treat,
for United States federal income tax purposes, the Debentures as indebtedness
and the Capital Securities as evidence of beneficial ownership in the
Debentures.

This Capital Security is governed by, and construed in
accordance with, the laws of the State of Connecticut, without regard to
principles of conflict of laws.

IN WITNESS WHEREOF, the Trust has duly executed this
certificate.
HERITAGE STATUTORY TRUST II

 

 

By:
Name:

Title: Administrator

 

CERTIFICATE OF AUTHENTICATION

This is one of the Capital Securities referred to in the
within-mentioned Declaration.

 
STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL
ASSOCIATION,

as the Institutional Trustee

 

By:

Authorized Officer

 

[FORM OF REVERSE OF SECURITY]

Distributions payable on each Capital Security will be
payable at an annual rate equal to 7.29% beginning on (and including) the date
of original issuance and ending on (but excluding) October 31, 2001 and at an
annual rate for each successive period beginning on (and including) October 31,
2001, and each succeeding Distribution Payment Date, and ending on (but
excluding) the next succeeding Distribution Payment Date (each a "Distribution
Period"), equal to 3-Month LIBOR, determined as described below, plus 3.58%;
provided, however, that prior to July 31, 2011, such annual rate
shall not exceed 12.50% (the "Coupon Rate") applied to the stated liquidation
amount of $1,000.00 per Capital Security, such rate being the rate of interest
payable on the Debentures to be held by the Institutional Trustee. Distributions
in arrears for more than a quarterly period will bear interest thereon
compounded quarterly at the Distribution Rate (to the extent permitted by
applicable law). The term "Distributions" as used herein includes interest
payments (including Additional Interest and principal on the Debentures held by
the Institutional Trustee) and any such compounded interest payable on the
Debentures unless otherwise stated. A Distribution is payable only to the extent
that payments are made in respect of the Debentures held by the Institutional
Trustee and to the extent the Institutional Trustee has funds available
therefor. As used herein, "Determination Date" means the date that is two London
Banking Days (i.e., a day in which dealings in deposits in U.S. dollars are
transacted in the London interbank market) preceding the commencement of the
relevant Distribution Period. The amount of Distributions payable for any period
will be computed for any full quarterly Distribution period on the basis of the
actual number of days in the Distribution Period concerned divided by 360. In
the event that any date on which a distribution is payable on this Capital
Security is not a Business Day, then a payment of the distribution payable on
such date will be made on the next succeeding day which is a Business Day (and
without any distribution or other payment in respect of any such delay), except
that, if such Business Day is in the next succeeding calendar year, such payment
shall be made on the immediately preceding Business Day, in each case with the
same force and effect as if made on the date the payment was originally payable.
The amount of interest payable for the Distribution Period commencing October
31, 2001 and each succeeding Distribution Period will be calculated by applying
the Coupon Rate to the principal amount outstanding at the commencement of the
Distribution Period and multiplying each such amount by the actual number of
days in the Distribution Period concerned divided by 360.

"3-Month LIBOR" as used herein, means the London interbank
offered rate for three-month Eurodollar deposits determined by the Debenture
Trustee in the following order of priority: (i) the rate (expressed as a
percentage per annum) for Eurodollar deposits having a three-month maturity that
appears on Telerate Page 3750 as of 11:00 a.m. (London time) on the particular
Determination Date ("Telerate Page 3750" means the display designated as "Page
3750" on the Dow Jones Telerate Service or such other page as may replace Page
3750 on that service or such other service or services as may be nominated by
the British Bankers' Association as the information vendor for the purpose of
displaying London interbank offered rates for U.S. dollars deposits); (ii) if
such rate does not appear on Telerate Page 3750 as of 11:00 a.m. (London time)
on the Determination Date, 3-Month LIBOR will be the arithmetic mean of the
rates (expressed as percentages per annum) for Eurodollar deposits having a
three-month maturity that appear on Reuters Monitor Money Rates Page LIBO
("Reuters Page LIBO") as of 11:00 a.m. (London time) on such Determination Date;
(iii) if such rate does not appear on Reuters Page LIBO as of 11:00 a.m. (London
time) on the related Determination Date, the Debenture Trustee will request the
principal London offices of four leading banks in the London interbank market to
provide such banks' offered quotations (expressed as percentages per annum) to
prime banks in the London interbank market for Eurodollar deposits having a
three-month maturity as of 11:00 a.m. (London time) on such Determination Date.
If at least two quotations are provided, 3-Month LIBOR will be the arithmetic
mean of such quotations; (iv) if fewer than two such quotations are provided as
requested in clause (iii) above, the Debenture Trustee will request four major
New York City banks to provide such banks' offered quotations (expressed as
percentages per annum) to leading European banks for loans in Eurodollars as of
11:00 a.m. (London time) on such Determination Date. If at least two such
quotations are provided, 3-Month LIBOR will be the arithmetic mean of such
quotations; and (v) if fewer than two such quotations are provided as requested
in clause (iv) above, 3-Month LIBOR will be a 3-Month LIBOR determined with
respect to the Distribution Period immediately preceding such current
Distribution Period. If the rate for Eurodollar deposits having a three-month
maturity that initially appears on Telerate Page 3750 or Reuters Page LIBO, as
the case may be, as of 11:00 a.m. (London time) on the related Determination
Date is superseded on the Telerate Page 3750 or Reuters Page LIBO, as the case
may be, by a corrected rate by 12:00 noon (London time) on such Determination
Date, then the corrected rate as so substituted on the applicable page will be
the applicable 3-Month LIBOR for such Determination Date.

The Coupon Rate for any Distribution Period will at no time
be higher than the maximum rate then permitted by New York law as the same may
be modified by United States law.

All percentages resulting from any calculations on the
Capital Securities will be rounded, if necessary, to the nearest one hundred-
thousandth of a percentage point, with five one-millionths of a percentage point
rounded upward (e.g., 9.876545% or .09876545) being rounded to 9.87655% (or
..0987655), and all dollar amounts used in or resulting from such calculation
will be rounded to the nearest cent (with one-half cent being rounded
upward).

Except as otherwise described below, Distributions on the
Capital Securities will be cumulative, will accrue from the date of original
issuance and will be payable quarterly in arrears on October 31, January 31,
April 30 and July 31 of each year, commencing on October 31, 2001. The Debenture
Issuer has the right under the Indenture to defer payments of interest on the
Debentures by extending the interest payment period for up to 20 consecutive
quarterly periods (each an "Extension Period") on the Debentures, subject to the
conditions described below, although such interest would continue to accrue on
the Debentures at an annual rate equal to the Distribution Rate compounded
quarterly to the extent permitted by law during any Extension Period. No
Extension Period may end on a date other than an interest Payment Date. At the
end of any such Extension Period the Sponsor shall pay all interest then accrued
and unpaid on the Debentures (together with Additional Interest thereon);
provided, however, that no Extension Period may extend beyond the
Maturity Date. Prior to the termination of any Extension Period, the Sponsor may
further extend such period, provided that such period together with all such
previous and further consecutive extensions thereof shall not exceed 20
consecutive quarterly periods, or extend beyond the Maturity Date. Upon the
termination of any Extension Period and upon the payment of all accrued and
unpaid interest and Additional Interest, the Sponsor may commence a new
Extension Period, subject to the foregoing requirements. No interest or
Additional Interest shall be due and payable during an Extension Period, except
at the end thereof, but each installment of interest that would otherwise have
been due and payable during such Extension Period shall bear Additional
Interest. If Distributions are deferred, the Distributions due shall be paid on
the date that the related Extension Period terminates, to Holders of the
Securities as they appear on the books and records of the Trust on the record
date immediately preceding such date. Distributions on the Securities must be
paid on the dates payable (after giving effect to any Extension Period) to the
extent that the Trust has funds available for the payment of such distributions
in the Property Account of the Trust. The Trust's funds available for
Distribution to the Holders of the Securities will be limited to payments
received from the Debenture Issuer. The payment of Distributions out of moneys
held by the Trust is guaranteed by the Guarantor pursuant to the Guarantee.

The Capital Securities shall be redeemable as provided in the
Declaration.

ASSIGNMENT

FOR VALUE RECEIVED, the undersigned assigns and transfers
this Capital Security Certificate to:

(Insert assignee's social security or tax identification
number) 

(Insert address and zip code of assignee) and irrevocably
appoints

agent to transfer this Capital Security Certificate on
the books of the Trust. The agent may substitute another to act for him or
her.

Date:

Signature:

(Sign exactly as your name appears on the other
side of this Capital Security Certificate)

Signature Guarantee:

EXHIBIT A-2

FORM OF COMMON SECURITY CERTIFICATE

THIS COMMON SECURITY HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE OFFERED, SOLD, PLEDGED OR
OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EXEMPTION FROM REGISTRATION.

THIS CERTIFICATE IS NOT TRANSFERABLE EXCEPT IN COMPLIANCE
WITH SECTION 8.1 OF THE DECLARATION.

C-1 155

July 31, 2001

Certificate Evidencing Floating Rate Common Securities

of

Heritage Statutory Trust II

Heritage Statutory Trust II, a statutory trust created under
the laws of the State of Connecticut (the "Trust"), hereby certifies that
Heritage Commerce Corp (the "Holder") is the registered owner of common
securities of the Trust representing undivided beneficial interests in the
assets of the Trust (the "Common Securities"). The designation, rights,
privileges, restrictions, preferences and other terms and provisions of the
Common Securities represented hereby are issued pursuant to, and shall in all
respects be subject to, the provisions of the Amended and Restated Declaration
of Trust of the Trust dated as of July 31, 2001, among Lawrence D. McGovern, May
Wong and Richard L. Conniff, as Administrators, State Street Bank and Trust
Company of Connecticut, National Association, as Institutional Trustee, Heritage
Commerce Corp, as Sponsor, and the holders from time to time of undivided
beneficial interest in the assets of the Trust including the designation of the
terms of the Common Securities as set forth in Annex I to such amended and
restated declaration, as the same may be amended from time to time (the
"Declaration"). Capitalized terms used herein but not defined shall have the
meaning given them in the Declaration. The Holder is entitled to the benefits of
the Guarantee to the extent provided therein. The Sponsor will provide a copy of
the Declaration, the Guarantee and the Indenture to the Holder without charge
upon written request to the Sponsor at its principal place of business.

As set forth in the Declaration, where an Event of Default
has occurred and is continuing, the rights of Holders of Common Securities to
payment in respect of Distributions and payments upon Liquidation, redemption or
otherwise are subordinated to the rights of payment of Holders of the Capital
Securities.

Upon receipt of this Certificate, the Holder is bound by the
Declaration and is entitled to the benefits thereunder.

By acceptance of this Certificate, the Holder agrees to
treat, for United States federal income tax purposes, the Debentures as
indebtedness and the Common Securities as evidence of undivided beneficial
ownership in the Debentures.

This Common Security is governed by, and construed in
accordance with, the laws of the State of Connecticut, without regard to
principles of conflict of laws.

IN WITNESS WHEREOF, the Trust has duly executed this
certificate.
HERITAGE STATUTORY TRUST II

 

By:
Name:

Title: Administrator

[FORM OF REVERSE OF SECURITY]

Distributions payable on each Common Security will be
identical in amount to the Distributions payable on each Capital Security, which
is at an annual rate equal to 7.29% beginning on (and including) the date of
original issuance and ending on (but excluding) October 31, 2001 and at an
annual rate for each successive period beginning on (and including) October 31,
2001, and each succeeding Distribution Payment Date, and ending on (but
excluding) the next succeeding Distribution Payment Date (each a "Distribution
Period"), equal to 3-Month LIBOR, determined as described below, plus 3.58%;
provided, however, that prior to July 31, 2011, such annual rate
shall not exceed 12.50% (the "Coupon Rate") applied to the stated liquidation
amount of $1,000.00 per Common Security, such rate being the rate of interest
payable on the Debentures to be held by the Institutional Trustee. Distributions
in arrears for more than one period will bear interest thereon compounded at the
Distribution Rate (to the extent permitted by applicable law). The term
"Distributions" as used herein includes interest payments (including Additional
Interest and principal on the Debentures held by the Institutional Trustee) and
any such compounded interest payable on the Debentures unless otherwise stated.
A Distribution is payable only to the extent that payments are made in respect
of the Debentures held by the Institutional Trustee and to the extent the
Institutional Trustee has funds available therefor. As used herein,
"Determination Date" means the date that is two London Banking Days (i.e., a day
in which dealings in deposits in U.S. dollars are transacted in the London
interbank market) preceding the commencement of the relevant Distribution
Period. The amount of Distributions payable for any period will be computed for
any full quarterly Distribution period on the basis of the actual number of days
in the Distribution Period concerned divided by 360. In the event that any date
on which a distribution is payable on this Common Security is not a Business
Day, then a payment of the distribution payable on such date will be made on the
next succeeding day which is a Business Day (and without any distribution or
other payment in respect of any such delay), except that, if such Business Day
is in the next succeeding calendar year, such payment shall be made on the
immediately preceding Business Day, in each case with the same force and effect
as if made on the date the payment was originally payable. The amount of
interest payable for the Distribution Period commencing October 31, 2001 and
each succeeding Distribution Period will be calculated by applying the Coupon
Rate to the principal amount outstanding at the commencement of the Distribution
Period and multiplying each such amount by the actual number of days in the
Distribution Period concerned divided by 360.

"3-Month LIBOR" as used herein, means the London interbank
offered rate for three-month Eurodollar deposits determined by the Debenture
Trustee in the following order of priority: (i) the rate (expressed as a
percentage per annum) for Eurodollar deposits having a three-month maturity that
appears on Telerate Page 3750 as of 11:00 a.m. (London time) on the particular
Determination Date ("Telerate Page 3750" means the display designated as "Page
3750" on the Dow Jones Telerate Service or such other page as may replace Page
3750 on that service or such other service or services as may be nominated by
the British Bankers' Association as the information vendor for the purpose of
displaying London interbank offered rates for U.S. dollars deposits); (ii) if
such rate does not appear on Telerate Page 3750 as of 11:00 a.m. (London time)
on the Determination Date, 3-Month LIBOR will be the arithmetic mean of the
rates (expressed as percentages per annum) for Eurodollar deposits having a
three-month maturity that appear on Reuters Monitor Money Rates Page LIBO
("Reuters Page LIBO") as of 11:00 a.m. (London time) on such Determination Date;
(iii) if such rate does not appear on Reuters Page LIBO as of 11:00 a.m. (London
time) on the related Determination Date, the Debenture Trustee will request the
principal London offices of four leading banks in the London interbank market to
provide such banks' offered quotations (expressed as percentages per annum) to
prime banks in the London interbank market for Eurodollar deposits having a
three-month maturity as of 11:00 a.m. (London time) on such Determination Date.
If at least two quotations are provided, 3-Month LIBOR will be the arithmetic
mean of such quotations; (iv) if fewer than two such quotations are provided as
requested in clause (iii) above, the Debenture Trustee will request four major
New York City banks to provide such banks' offered quotations (expressed as
percentages per annum) to leading European banks for loans in Eurodollars as of
11:00 a.m. (London time) on such Determination Date. If at least two such
quotations are provided, 3-Month LIBOR will be the arithmetic mean of such
quotations; and (v) if fewer than two such quotations are provided as requested
in clause (iv) above, 3 -Month LIBOR will be a 3-Month LIBOR determined
with respect to the Distribution Period immediately preceding such current
Distribution Period. If the rate for Eurodollar deposits having a three-month
maturity that initially appears on Telerate Page 3750 or Reuters Page LIBO, as
the case may be, as of 11:00 a.m. (London time) on the related Determination
Date is superseded on the Telerate Page 3750 or Reuters Page LIBO, as the case
may be, by a corrected rate by 12:00 noon (London time) on such Determination
Date, then the corrected rate as so substituted on the applicable page will be
the applicable 3-Month LIBOR for such Determination Date.

The Coupon Rate for any Distribution Period will at no time
be higher than the maximum rate then permitted by New York law as the same may
be modified by United States law.

All percentages resulting from any calculations on the Common
Securities will be rounded, if necessary, to the nearest one hundred-thousandth
of a percentage point, with five one-millionths of a percentage point rounded
upward (e.g., 9.876545% or .09876545) being rounded to 9.87655% (or .0987655),
and all dollar amounts used in or resulting from such calculation will be
rounded to the nearest cent (with one-half cent being rounded upward).

Except as otherwise described below, Distributions on the
Common Securities will be cumulative, will accrue from the date of original
issuance and will be payable quarterly in arrears on October 31, January 31,
April 30 and July 31 of each year, commencing on October 31, 2001. The Debenture
Issuer has the right under the Indenture to defer payments of interest on the
Debentures by extending the interest payment period for up to
20 consecutive quarterly periods (each an "Extension Period") on the
Debentures, subject to the conditions described below, although such interest
would continue to accrue on the Debentures at an annual rate equal to the
Distribution Rate compounded quarterly to the extent permitted by law during any
Extension Period. No Extension Period may end on a date other than an Interest
Payment Date. At the end of any such Extension Period the Sponsor shall pay all
interest then accrued and unpaid on the Debentures (together with Additional
Interest thereon); provided, however, that no Extension Period may
extend beyond the Maturity Date. Prior to the termination of any Extension
Period, the Sponsor may further extend such period, provided that such period
together with all such previous and further consecutive extensions thereof shall
not exceed 20 consecutive quarterly periods, or extend beyond the Maturity Date.
Upon the termination of any Extension Period and upon the payment of all accrued
and unpaid interest and Additional Interest, the Sponsor may commence a new
Extension Period, subject to the foregoing requirements. No interest or
Additional Interest shall be due and payable during an Extension Period, except
at the end thereof, but each installment of interest that would otherwise have
been due and payable during such Extension Period shall bear Additional
Interest. If Distributions are deferred, the Distributions due shall be paid on
the date that the related Extension Period terminates, to Holders of the
Securities as they appear on the books and records of the Trust on the record
date immediately preceding such date. Distributions on the Securities must be
paid on the dates payable (after giving effect to any Extension Period) to the
extent that the Trust has funds available for the payment of such distributions
in the Property Account of the Trust. The Trust's funds available for
Distribution to the Holders of the Securities will be limited to payments
received from the Debenture Issuer. The payment of Distributions out of moneys
held by the Trust is guaranteed by the Guarantor pursuant to the Guarantee.

The Common Securities shall be redeemable as provided in the
Declaration.

ASSIGNMENT

FOR VALUE RECEIVED, the undersigned assigns and transfers
this Common Security Certificate to:

(Insert assignee's social security or tax identification
number)

(Insert address and zip code of assignee) and irrevocably
appoints

 agent to transfer
this Common Security Certificate on the books of the Trust. The agent may
substitute another to act for him or her.

Date:

Signature:
(Sign exactly as your name appears on the other side of
this Common Security Certificate)

Signature:
(Sign exactly as your name appears on the other side of
this common Security Certificate)

Signature Guarantee

 

EXHIBIT B

SPECIMEN OF INITIAL DEBENTURE

 

EXHIBIT C

PLACEMENT AGREEMENT

HERITAGE COMMERCE CORP

5,000 Capital Securities

 

Floating Rate Capital Securities

(Liquidation Amount $1,000.00 per Capital Security)

 

PLACEMENT AGREEMENT

____________________

July 20, 2001

 

 

First Tennessee Capital Markets

845 Crossover Lane, Suite 150

Memphis, Tennessee 38117

Keefe, Bruyette & Woods, Inc.

Two World Trade Center

New York, New York 10048

Ladies and Gentlemen:

Heritage Commerce Corp, a California corporation (the
"Company"), and its financing subsidiary, Heritage Statutory Trust II, a
Connecticut statutory trust (the "Trust," and hereinafter together with the
Company, the "Offerors"), hereby confirm their agreement with you as placement
agents (the "Placement Agents"), as follows:

	Issuance and Sale of Securities.

	Introduction.  

The Offerors propose to issue and sell at the Closing (as
defined in Section 2.3.1 hereof) 5,000 of the Trust's Floating Rate Capital
Securities, with a liquidation amount of $1,000.00 per capital security (the
"Capital Securities"), to Preferred Term Securities III, Ltd., a company with
limited liability established under the laws of the Cayman Islands (the
"Purchaser") pursuant to the terms of a Subscription Agreement entered into, or
to be entered into on or prior to the Closing Date, between the Offerors and the
Purchaser (the "Subscription Agreement"), the form of which is attached hereto
as Exhibit A and incorporated herein by this reference.

	Operative
Agreements.  

The Capital Securities shall be fully and unconditionally
guaranteed on a subordinated basis by the Company with respect to distributions
and amounts payable upon liquidation, redemption or repayment (the "Guarantee")
pursuant and subject to the Guarantee Agreement (the "Guarantee Agreement"), to
be dated as of the Closing Date and executed and delivered by the Company and
State Street Bank and Trust Company of Connecticut, National Association ("State
Street"), as trustee (the "Guarantee Trustee"), for the benefit from time to
time of the holders of the Capital Securities. The entire proceeds from the sale
by the Trust to the holders of the Capital Securities shall be combined with the
entire proceeds from the sale by the Trust to the Company of its common
securities (the "Common Securities"), and shall be used by the Trust to purchase
$5,155,000 in principal amount of the Floating Rate Junior Subordinated
Deferrable Interest Debentures (the "Debentures") of the Company. The Capital
Securities and the Common Securities for the Trust shall be issued pursuant to
an Amended and Restated Declaration of Trust among State Street, as
institutional trustee (the "Institutional Trustee"), the Administrators named
therein, and the Company, to be dated as of the Closing Date and in
substantially the form heretofore delivered to the Placement Agents (the "Trust
Agreement"). The Debentures shall be issued pursuant to an Indenture (the
"Indenture"), to be dated as of the Closing Date, between the Company and State
Street, as indenture trustee (the "Indenture Trustee"). The documents identified
in this Section 1.2 and in Section 1.1 are referred to herein as the
"Operative Documents."

	Rights of Purchaser.  

The Capital Securities shall be offered and sold by the
Trust directly to the Purchaser without registration of any of the Capital
Securities, the Debentures or the Guarantee under the Securities Act of 1933, as
amended (the "Securities Act"), or any other applicable securities laws in
reliance upon exemptions from the registration requirements of the Securities
Act and other applicable securities laws. The Offerors agree that this Agreement
shall be incorporated by reference into the Subscription Agreement and the
Purchaser shall be entitled to each of the benefits of the Placement Agents and
the Purchaser under this Agreement and shall be entitled to enforce obligations
of the Offerors under this Agreement as fully as if the Purchaser were a party
to this Agreement. The Offerors and the Placement Agents have entered into this
Agreement to set forth their understanding as to their relationship and their
respective rights, duties and obligations.

	Legends.  

Upon original issuance thereof, and until such time as
the same is no longer required under the applicable requirements of the
Securities Act, the Capital Securities and Debentures certificates shall each
contain a legend as required pursuant to any of the Operative Documents.

	Purchase of Capital Securities.

	Exclusive Rights; Purchase
Price.  

From the date hereof until the Closing Date (which date
may be extended by mutual agreement of the Offerors and the Placement Agents),
the Offerors hereby grant to the Placement Agents the exclusive right to arrange
for the sale of the Capital Securities to the Purchaser at a purchase price of
$1,000.00 per Capital Security.

	Subscription Agreement.  

The Offerors hereby agree to evidence their acceptance of
the subscription by countersigning a copy of the Subscription Agreement and
returning the same to the Placement Agents.

	Closing and Delivery of
Payment.

	Closing; Closing
Date.  

The sale and purchase of the Capital Securities by the
Offerors to the Purchaser shall take place at a closing (the "Closing") at the
offices of Lewis, Rice & Fingersh, L.C., at 10:00 a.m.
(St. Louis time) on July 31, 2001, or such other business day as may be
agreed upon by the Offerors and the Placement Agents (the "Closing Date");
provided, however, that in no event shall the Closing Date occur
later than August 7, 2001 unless consented to by the Purchaser. Payment by the
Purchaser shall be payable in the manner set forth in the Subscription Agreement
and shall be made prior to or on the Closing Date. 

	Delivery.  

The certificate for the Capital Securities shall be in
definitive form, registered in the name of the Purchaser and in the aggregate
amount of the Capital Securities purchased by the Purchaser.

	Transfer Agent.  

The Offerors shall deposit the certificate representing
the Capital Securities with the Institutional Trustee or other appropriate party
prior to the Closing Date.

	Placement Agents' Fees and
Expenses.

	Placement Agents'
Compensation.  

Because the proceeds from the sale of the Capital
Securities shall be used to purchase the Debentures from the Company, the
Company shall pay an aggregate of $30.00 for each $1,000.00 of principal amount
of Debentures sold to the Trust (excluding the Debentures related to the Common
Securities purchased by the Company). Of this amount, $15.00 for each $1,000.00
of principal amount of Debentures shall be payable to First Tennessee Capital
Markets and $15.00 for each $1,000.00 of principal amount of Debentures shall be
payable to Keefe, Bruyette & Woods, Inc. Such amount shall be delivered
to the Trustee or such other person designated by the Placement Agents on the
Closing Date and shall be allocated between and paid to the respective Placement
Agents as directed by the Placement Agents.

	Costs and
Expenses.  

Whether or not this Agreement is terminated or the sale
of the Capital Securities is consummated, the Company hereby covenants and
agrees that it shall pay or cause to be paid (directly or by reimbursement) all
reasonable costs and expenses incident to the performance of the obligations of
the Offerors under this Agreement, including all fees, expenses and
disbursements of counsel and accountants for the Offerors; the reasonable costs
and charges of any trustee, transfer agent or registrar and the fees and
disbursements of counsel to any trustee, transfer agent or registrar
attributable to the Debentures and the Capital Securities; all reasonable
expenses incurred by the Offerors incident to the preparation, execution and
delivery of the Trust Agreement, the Indenture, and the Guarantee; and all other
reasonable costs and expenses incident to the performance of the obligations of
the Company hereunder and under the Trust Agreement.

	Failure to
Close.  

If any of the conditions to the Closing specified in this
Agreement shall not have been fulfilled to the satisfaction of the Placement
Agents or if the Closing shall not have occurred on or before 10:00 a.m.
(St. Louis time) on August 7, 2001, then each party hereto, notwithstanding
anything to the contrary in this Agreement, shall be relieved of all further
obligations under this Agreement without thereby waiving any rights it may have
by reason of such nonfulfillment or failure; provided, however,
that the obligations of the parties under Sections 2.4.2 and 9 shall not be
so relieved and shall continue in full force and effect.

	Closing Conditions.  

The obligations of the Purchaser and the Placement Agents
on the Closing Date shall be subject to the accuracy, at and as of the Closing
Date, of the representations and warranties of the Offerors contained in this
Agreement, to the accuracy, at and as of the Closing Date, of the statements of
the Offerors made in any certificates pursuant to this Agreement, to the
performance by the Offerors of their respective obligations under this
Agreement, to compliance, at and as of the Closing Date, by the Offerors with
their respective agreements herein contained, and to the following further
conditions:

	Opinions of Counsel.  

On the Closing Date, the Placement Agents shall have
received the following favorable opinions, each dated as of the Closing Date:
(a) from McCutcheon, Doyle, Brown & Enersen, LLP, counsel for the
Offerors and addressed to the Purchaser and the Placement Agents in
substantially the form set forth on Exhibit B-1 attached hereto and
incorporated herein by this reference, (b) from Bingham Dana LLP, special
Connecticut counsel to the Offerors and addressed to the Purchaser, the
Placement Agents and the Offerors, in substantially the form set forth on
Exhibit B-2 attached hereto and incorporated herein by this
reference and (c) from Lewis, Rice & Fingersh, L.C., special tax
counsel to the Offerors, and addressed to the Placement Agents and the Offerors,
in substantially the form set forth on Exhibit B-3 attached hereto
and incorporated herein by this reference, subject to the receipt by Lewis, Rice
& Fingersh, L.C. of a representation letter from the Company in the form set
forth in Exhibit B-3 completed in a manner reasonably satisfactory
to Lewis, Rice & Fingersh, L.C. (collectively, the "Offerors' Counsel
Opinions"). In rendering the Offerors' Counsel Opinions, counsel to the Offerors
may rely as to factual matters upon certificates or other documents furnished by
officers, directors and trustees of the Offerors (copies of which shall be
delivered to the Placement Agents and the Purchaser) and by government
officials, and upon such other documents as counsel to the Offerors may, in
their reasonable opinion, deem appropriate as a basis for the Offerors' Counsel
Opinions. Counsel to the Offerors may specify the jurisdictions in which they
are admitted to practice and that they are not admitted to practice in any other
jurisdiction and are not experts in the law of any other jurisdiction. If
the Offerors' counsel is not admitted to practice in the State of New York, the
opinion of Offerors' counsel may assume, for purposes of the opinion, that the
laws of the State of New York are identical, in all respects material to the
opinion, to the internal laws of the state in which such counsel is admitted to
practice.

	Officer's
Certificate.  

At the Closing Date, the Purchaser and the Placement
Agents shall have received certificates from the Chief Executive Officer of the
Company, dated as of the Closing Date, stating that (i) the representations
and warranties of the Offerors set forth in Section 5 hereof are true and
correct as of the Closing Date and that the Offerors have complied with all
agreements and satisfied all conditions on their part to be performed or
satisfied at or prior to the Closing Date, (ii) since the date of this
Agreement the Offerors have not incurred any liability or obligation, direct or
contingent, or entered into any material transactions, other than in the
ordinary course of business, which is material to the Offerors, and
(iii) covering such other matters as the Placement Agents may reasonably
request. 

	Administrator's
Certificate.  

At the Closing Date, the Purchaser and the Placement
Agents shall have received a certificate of one or more Administrators of the
Trust, dated as of the Closing Date, stating that the representations and
warranties of the Trust set forth in Section 5 are true and correct as of
the Closing Date and that the Trust has complied with all agreements and
satisfied all conditions on its part to be performed or satisfied at or prior to
the Closing Date.

	Purchase Permitted by Applicable Laws; Legal
Investment.  

The purchase of and payment for the Capital Securities
shall (a) not be prohibited by any applicable law or governmental
regulation, (b) not subject the Purchaser or the Placement Agents to any
penalty or, in the reasonable judgment of the Purchaser and the Placement
Agents, other onerous condition under or pursuant to any applicable law or
governmental regulation, and (c) be permitted by the laws and regulations
of the jurisdictions to which the Purchaser and the Placement Agents are
subject.

	Consents and
Permits.  

The Company and the Trust shall have received all
consents, permits and other authorizations, and made all such filings and
declarations, as may be required from any person or entity pursuant to any law,
statute, regulation or rule (federal, state, local and foreign), or pursuant to
any agreement, order or decree to which the Company or the Trust is a party or
to which it is subject, in connection with the transactions contemplated by this
Agreement.

	Sale of Purchaser
Securities.  

The Purchaser shall have sold securities issued by the
Purchaser in an amount such that the net proceeds of such sale shall be
(i) available on the Closing Date and (ii) in an amount sufficient to
purchase the Capital Securities and all other capital securities contemplated in
agreements similar to this Agreement and the Subscription Agreement.

	Information.  

Prior to or on the Closing Date, the Offerors shall have
furnished to the Placement Agents such further information, certificates,
opinions and documents addressed to the Purchaser and the Placement Agents,
which the Placement Agents may reasonably request, including, without
limitation, a complete set of the Operative Documents or any other documents or
certificates required by this Section 3; and all proceedings taken by the
Offerors in connection with the issuance, offer and sale of the Capital
Securities as herein contemplated shall be reasonably satisfactory in form and
substance to the Placement Agents.

If any condition specified in this Section 3 shall not
have been fulfilled when and as required in this Agreement, or if any of the
opinions or certificates mentioned above or elsewhere in this Agreement shall
not be reasonably satisfactory in form and substance to the Placement Agents,
this Agreement may be terminated by the Placement Agents by notice to the
Offerors at any time at or prior to the Closing Date. Notice of such termination
shall be given to the Offerors in writing or by telephone or facsimile confirmed
in writing.

	Conditions to the Offerors'
Obligations.  

The obligations of the Offerors to sell the Capital
Securities to the Purchaser and consummate the transactions contemplated by this
Agreement shall be subject to the accuracy, at and as of the Closing Date, of
the representations and warranties of the Placement Agents contained in this
Agreement and to the following further conditions:

	Executed
Agreement.  

The Offerors shall have received from the Placement
Agents an executed copy of this Agreement.

	Fulfillment of Other
Obligations.  

The Placement Agents shall have fulfilled all of their
other obligations and duties required to be fulfilled under this Agreement prior
to or at the Closing.

	Representations and Warranties of the
Offerors.  

The Offerors jointly and severally represent and warrant
to the Placement Agents and the Purchaser as follows:

	Securities Law Matters.

	  Neither the Company nor the Trust, nor
any of their "Affiliates" (as defined in Rule 501(b) of Regulation D
under the Securities Act ("Regulation D")), nor any person acting on its or
their behalf has, directly or indirectly, made offers or sales of any security,
or solicited offers to buy any security, under circumstances that would require
the registration of any of the Capital Securities, the Guarantee and the
Debentures or any other securities to be issued or which may be issued by the
Purchaser (collectively, the "Securities") under the Securities Act.

	  Neither the Company nor the Trust, nor any of
their Affiliates, nor any person acting on its or their behalf has
(i) other than the Placement Agents, offered for sale or solicited offers
to purchase the Securities, (ii) engaged or will engage, in any "directed
selling efforts" within the meaning of Regulation S under the Securities
Act ("Regulation S") with respect to the Securities, or (iii) engaged in
any form of offering, general solicitation or general advertising (within the
meaning of Regulation D) in connection with any offer or sale of any of the
Securities.

	  The Securities satisfy the eligibility
requirements of Rule 144A(d)(3) under the Securities Act.

	  Neither the Company nor the Trust is an
"investment company" or an entity "controlled" by an "investment company," in
each case within the meaning of Section 3(a) of the Investment Company Act
of 1940, as amended (the "Investment Company Act") without regard to
Section 3(c) of the Investment Company Act.

	 Neither the Company nor the Trust has paid or
agreed to pay to any person or entity (other than the Placement Agents) any
compensation for soliciting another to purchase any of the
Securities.

	Organization, Standing and Qualification of the
Trust.  

The Trust has been duly created and is validly existing
in good standing as a statutory trust under the Connecticut Statutory Trust Act
(the "Statutory Trust Act") with the power and authority to own property and to
conduct the business it transacts and proposes to transact and to enter into and
perform its obligations under the Operative Documents. The Trust is duly
qualified to transact business as a foreign entity and is in good standing in
each jurisdiction in which such qualification is necessary, except where the
failure to so qualify or be in good standing would not have a material adverse
effect on the Trust. The Trust is not a party to or otherwise bound by any
agreement other than the Operative Documents. The Trust is and will, under
current law, be classified for federal income tax purposes as a grantor trust
and not as an association taxable as a corporation.

	Trust Agreement.  

The Trust Agreement has been duly authorized by the
Company and, on the Closing Date, will have been duly executed and delivered by
the Company and the Administrators of the Trust, and, assuming due
authorization, execution and delivery by the Institutional Trustee, will be a
valid and binding obligation of the Company and such Administrators, enforceable
against them in accordance with its terms, subject to (a) applicable
bankruptcy, insolvency, moratorium, receivership, reorganization, liquidation
and other laws relating to or affecting creditors' rights generally, and
(b) general principles of equity (regardless of whether considered and
applied in a proceeding in equity or at law) ("Bankruptcy and Equity"). Each of
the Administrators of the Trust is an employee of the Company or a financial
institution subsidiary of the Company and has been duly authorized by the
Company to execute and deliver the Trust Agreement.

	Guarantee Agreement and the
Indenture.  

Each of the Guarantee and the Indenture has been duly
authorized by the Company and, on the Closing Date will have been duly executed
and delivered by the Company, and, assuming due authorization, execution and
delivery by the Guarantee Trustee, in the case of the Guarantee, and by the
Indenture Trustee, in the case of the Indenture, will be a valid and binding
obligation of the Company enforceable against it in accordance with its terms,
subject to Bankruptcy and Equity.

	Capital Securities and Common
Securities.  

The Capital Securities and the Common Securities have
been duly authorized by the Trust Agreement and, when issued and delivered
against payment therefor on the Closing Date to the Purchaser, in the case of
the Capital Securities, and to the Company, in the case of the Common
Securities, will be validly issued and represent undivided beneficial interests
in the assets of the Trust. None of the Capital Securities or the Common
Securities is subject to preemptive or other similar rights. On the Closing
Date, all of the issued and outstanding Common Securities will be directly owned
by the Company free and clear of any pledge, security interest, claim, lien or
other encumbrance.

	Debentures.  

The Debentures have been duly authorized by the Company
and, at the Closing Date, will have been duly executed and delivered to the
Indenture Trustee for authentication in accordance with the Indenture, and, when
authenticated in the manner provided for in the Indenture and delivered against
payment therefor by the Trust, will constitute valid and binding obligations of
the Company entitled to the benefits of the Indenture enforceable against the
Company in accordance with their terms, subject to Bankruptcy and Equity.

	Power and Authority.  

This Agreement has been duly authorized, executed and
delivered by the Company and the Trust and constitutes the valid and binding
obligation of the Company and the Trust, enforceable against the Company and the
Trust in accordance with its terms, subject to Bankruptcy and Equity.

	No Defaults.  

The Trust is not in violation of the Trust Agreement or,
to the knowledge of the Administrators, any provision of the Statutory Trust
Act. The execution, delivery and performance by the Company or the Trust of the
Operative Documents to which it is a party, and the consummation of the
transactions contemplated herein or therein, will not conflict with or
constitute a breach of, or a default under, or result in the creation or
imposition of any lien, charge or other encumbrance upon any property or assets
of the Trust, the Company or any of the Company's subsidiaries pursuant to any
contract, indenture, mortgage, loan agreement, note, lease or other instrument
to which the Trust, the Company or any of its subsidiaries is a party or by
which it or any of them may be bound, or to which any of the property or assets
of any of them is subject, except for a conflict, breach, default, lien, charge
or encumbrance which could not reasonably be expected to have an adverse effect
on the consummation of the transactions contemplated herein or therein or an
adverse effect on the condition (financial or otherwise), earnings, affairs,
business, prospects or results of operations of the Company and its subsidiaries
taken as whole, whether or not occurring in the ordinary course of business (a
"Material Adverse Effect"), nor will such action result in any violation of the
Trust Agreement or the Statutory Trust Act or require the consent, approval,
authorization or order of any court or governmental agency or body.

	Organization, Standing and Qualification of the
Company  

The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of California, with
all requisite corporate power and authority to own its properties and conduct
the business it transacts and proposes to transact, and is duly qualified to
transact business and is in good standing as a foreign corporation in each
jurisdiction where the nature of its activities requires such qualification,
except where the failure of the Company to be so qualified would not, singly or
in the aggregate, have a Material Adverse Effect.

	Subsidiaries of the
Company.  

Each of the Company's significant subsidiaries (as
defined in Section 1-02 of Regulation S-X to the Securities Act (the
"Significant Subsidiaries")) is listed in Exhibit C attached hereto
and incorporated herein by this reference. Each Significant Subsidiary has been
duly organized and is validly existing and in good standing under the laws of
the jurisdiction in which it is chartered or organized, with all requisite power
and authority to own its properties and conduct the business it transacts and
proposes to transact, and is duly qualified to transact business and is in good
standing as a foreign entity in each jurisdiction where the nature of its
activities requires such qualification, except where the failure of any such
Significant Subsidiaries to be so qualified would not, singly or in the
aggregate, have a Material Adverse Effect.

	Permits.  

The Company and each of its Significant Subsidiaries have
all requisite power and authority, and all necessary material authorizations,
approvals, orders, licenses, certificates and permits of and from regulatory or
governmental officials, bodies and tribunals, to own or lease their respective
properties and to conduct their respective businesses as now being conducted,
except such authorizations, approvals, orders, licenses, certificates and
permits which, if not obtained and maintained, would not have a Material Adverse
Effect, and neither the Company nor any of the Significant Subsidiaries has
received any notice of proceedings relating to the revocation or modification of
any such authorizations, approvals, orders, licenses, certificates or permits
which, singly or in the aggregate, if the failure to be so licensed or approved
is the subject of an unfavorable decision, ruling or finding, would have a
Material Adverse Effect; and the Company and its Significant Subsidiaries are in
compliance with all applicable laws, rules, regulations and orders and consents,
the violation of which would have a Material Adverse Effect.

	Conflicts, Authorizations and
Approvals.  

Except as previously disclosed to the Placement Agents in
writing, neither the Company nor any of the Significant Subsidiaries is in
violation of its respective charter or by-laws or similar organizational
documents or in default in the performance or observance of any obligation,
agreement, covenant or condition contained in any contract, indenture, mortgage,
loan agreement, note, lease or other agreement or instrument to which either the
Company or any of the Significant Subsidiaries is a party, or by which it or any
of them may be bound or to which any of the property or assets of the Company or
any of the Significant Subsidiaries is subject, the effect of which violation or
default in performance or observance would have a Material Adverse Effect.

	Holding Company Registration and Deposit
Insurance.  

The Company is duly registered (i) as a bank holding
company or financial holding company under the Bank Holding Company Act of 1956,
as amended, and the regulations of the Board of Governors of the Federal Reserve
System or (ii) as a savings and loan holding company under the Home Owners'
Loan Act of 1933, as amended, and the regulations of the Office of Thrift
Supervision, and the deposit accounts of the Company's subsidiary depository
institutions are insured by the Federal Deposit Insurance Corporation ("FDIC")
to the fullest extent permitted by law and the rules and regulations of the
FDIC, and no proceedings for the termination of such insurance are pending or
threatened.

	Financial Statements.

	 The consolidated balance sheets of the Company and
all of its subsidiaries as of December 31, 2000 and December 31, 1999 and
related consolidated income statements and statements of changes in
shareholders' equity for the 3 years ended December 31, 2000 together with the
notes thereto, and the consolidated balance sheets of the Company and all of its
subsidiaries as of March 31, 2001 and the related consolidated income statements
and statements of changes in shareholders' equity for the 3 months then ended,
copies of each of which have been provided to the Placement Agents (together,
the "Financial Statements"), have been prepared in accordance with generally
accepted accounting principles applied on a consistent basis (except as may be
disclosed therein) and fairly present in all material respects the financial
position and the results of operations and changes in shareholders' equity of
the Company and all of its subsidiaries as of the dates and for the periods
indicated (subject, in the case of interim financial statements, to normal
recurring year-end adjustments, none of which shall be material). The books and
records of the Company and all of its subsidiaries have been, and are being,
maintained in all material respect in accordance with generally accepted
accounting principles and any other applicable legal and accounting requirements
and reflect only actual transactions.

	 The Company's report on FRY-9C dated March 31, 2001
(the "FRY-9C") previously provided to the Placement Agents is the most recent
available such report and the information therein fairly presents in all
material respects the financial position of the Company and all of its
subsidiaries.

	 Since the respective dates of the Financial
Statements and the FRY-9C, there has been no material adverse change or
development with respect to the financial condition or earnings of the Company
and all of its subsidiaries, taken as a whole.

(d)  The accountants of the Company who
certified the Financial Statements are independent public accountants of the
Company and its subsidiaries within the meaning of the Securities Act and the
rules and regulations thereunder.

	Regulatory Enforcement
Matters.  

Except as previously disclosed to the Placement Agents in
writing, neither the Company nor any of its subsidiaries is subject or is party
to, or has received any notice or advice that any of them may become subject or
party to, any investigation with respect to, any cease-and-desist order,
agreement, consent agreement, memorandum of understanding or other regulatory
enforcement action, proceeding or order with or by, or is a party to any
commitment letter or similar undertaking to, or is subject to any directive by,
or has been since January 1, 1999, a recipient of any supervisory letter
from, or since January 1, 1999, has adopted any board resolutions at the
request of, any Regulatory Agency (as defined below) that currently restricts in
any material respect the conduct of their business or that in any material
manner relates to their capital adequacy, their credit policies, their
management or their business (each, a "Regulatory Agreement"), nor has the
Company or any of its subsidiaries been advised since January 1, 1999, by
any Regulatory Agency that it is considering issuing or requesting any such
Regulatory Agreement. There is no material unresolved violation, criticism or
exception by any Regulatory Agency with respect to any report or statement
relating to any examinations of the Company or any of its subsidiaries. As used
herein, the term "Regulatory Agency" means any federal or state agency charged
with the supervision or regulation of depository institutions, bank, financial
or savings and loan holding companies, or engaged in the insurance of depository
institution deposits, or any court, administrative agency or commission or other
governmental agency, authority or instrumentality having supervisory or
regulatory authority with respect to the Company or any of its Significant
Subsidiaries.

	No Material Change.  

Except as previously disclosed to the Placement Agents in
writing, since December 31, 2000, there has been no material adverse change
or development with respect to the condition (financial or otherwise), earnings,
affairs, business, prospects or results of operations of the Offerors on a
consolidated basis.

	No Undisclosed
Liabilities.  

Neither the Company nor any of its subsidiaries has any
material liability, whether known or unknown, whether asserted or unasserted,
whether absolute or contingent, whether accrued or unaccrued, whether liquidated
or unliquidated, and whether due or to become due, including any liability for
taxes (and there is no past or present fact, situation, circumstance, condition
or other basis for any present or future action, suit, proceeding, hearing,
charge, complaint, claim or demand against the Company or its subsidiaries
giving rise to any such liability), except (i) for liabilities set forth in
the Financial Statements, (ii) normal fluctuation in the amount of the
liabilities referred to in clause (i) above occurring in the ordinary
course of business of the Company and all of its subsidiaries since the date of
the most recent balance sheet included in the Financial Statements, and
(iii) as may be specifically disclosed in writing to the Placement
Agents.

	Litigation.  

Except as previously disclosed to the Placement Agents in
writing, no charge, investigation, action, suit or proceeding is pending or, to
the knowledge of the Offerors, threatened, against or affecting the Offerors or
any of their respective properties before or by any courts or any regulatory,
administrative or governmental official, commission, board, agency or other
authority or body, or any arbitrator, wherein an unfavorable decision, ruling or
finding could have a Material Adverse Effect or an adverse effect on the
consummation of this Agreement or the transactions contemplated herein.

	Deferral of Interest Payments on
Debentures.  

The Company has no present intention to exercise its
option to defer payments of interest on the Debentures as provided in the
Indenture. The Company believes that the likelihood that it would exercise its
right to defer payments of interest on the Debentures as provided in the
Indenture at any time during which the Debentures are outstanding is remote
because of the restrictions that would be imposed on the Company's ability to
declare or pay dividends or distributions on, or to redeem, purchase, acquire or
make a liquidation payment with respect to, any of the Company's capital stock
and on the Company's ability to make any payments of principal, interest or
premium on, or repay, repurchase or redeem, any of its debt securities that rank
pari passu in all respects with, or junior in interest to, the
Debentures.

	Representations and Warranties of the Placement
Agents.  

Each Placement Agent represents and warrants to the
Offerors as to itself (but not as to the other Placement Agent) as follows:

	Organization, Standing and
Qualification.

	 First Tennessee Capital Markets is a division of
First Tennessee Bank, N.A., a national banking association duly organized,
validly existing and in good standing under the laws of the United States, with
full power and authority to own, lease and operate its properties and conduct
its business as currently being conducted. First Tennessee Capital Markets is
duly qualified to transact business as a foreign corporation and is in good
standing in each other jurisdiction in which it owns or leases property or
conducts its business so as to require such qualification and in which the
failure to so qualify would, individually or in the aggregate, have a material
adverse effect on the condition (financial or otherwise), earnings, business,
prospects or results of operations of First Tennessee Capital Markets.

	  Keefe, Bruyette & Woods, Inc. is a
corporation, validly existing and in good standing under the laws of the State
of New York, with full power and authority to own, lease and operate its
properties and conduct its business as currently being conducted. Keefe,
Bruyette & Woods, Inc. is duly qualified to transact business as a
foreign corporation and is in good standing in each other jurisdiction in which
it owns or leases property or conducts its business so as to require such
qualification and in which the failure to so qualify would, individually or in
the aggregate, have a material adverse effect on the condition (financial or
otherwise), earnings, business, prospects or results of operations of Keefe,
Bruyette & Woods, Inc.

	Power and Authority.  

The Placement Agent has all requisite power and authority
to enter into this Agreement, and this Agreement has been duly and validly
authorized, executed and delivered by the Placement Agent and constitutes the
legal, valid and binding agreement of the Placement Agent, enforceable against
the Placement Agent in accordance with its terms, except as the enforcement
thereof may be limited by general principles of equity and by bankruptcy or
other laws relating to or affecting creditors' rights generally and except as
any indemnification or contribution provisions thereof may be limited under
applicable securities laws. 

	General Solicitation.  

In the case of the offer and sale of the Capital
Securities, no form of general solicitation or general advertising was used by
the Placement Agent or its representatives including, but not limited to,
advertisements, articles, notices or other communications published in any
newspaper, magazine or similar medium or broadcast over television or radio or
any seminar or meeting whose attendees have been invited by any general
solicitation or general advertising. Neither the Placement Agent nor its
representatives have engaged or will engage in any "directed selling efforts"
within the meaning of Regulation S with respect to the Capital
Securities.

	Purchaser.  

The Placement Agent has made such reasonable inquiry as
is necessary to determine that the Purchaser is acquiring the Capital Securities
for its own account, that the Purchaser does not intend to distribute the
Capital Securities in contravention of the Securities Act or any other
applicable securities laws, and that the Purchaser is not a "U.S. person" as
that term is defined under Rule 902 of the Securities Act.

	Qualified Purchasers.  

The Placement Agent has not offered or sold and will not
arrange for the offer or sale of the Capital Securities except (i) in an
offshore transaction complying with Rule 903 of Regulation S, or
(ii) to those the Placement Agent reasonably believes are "accredited
investors" (as defined in Rule 501 of Regulation D), or (iii) in
any other manner that does not require registration of the Capital Securities
under the Securities Act. In connection with each such sale, the Placement Agent
has taken or will take reasonable steps to ensure that the Purchaser is aware
that such sale is being made in reliance on an exemption under the Securities
Act.

6.6.Offering
Circulars.  

Neither the Placement Agent nor its representatives will
include any non-public information about the Company, the Trust or any of their
affiliates in any registration statement, prospectus, offering circular or
private placement memorandum used in connection with any purchase of Capital
Securities without the prior written consent of the Trust and the Company.

	Covenants of the
Offerors.  

The Offerors covenant and agree with the Placement Agents
and the Purchaser as follows:

	Compliance with Representations and
Warranties.  

During the period from the date of this Agreement to the
Closing Date, the Offerors shall use their best efforts and take all action
necessary or appropriate to cause their representations and warranties contained
in Section 5 hereof to be true as of the Closing Date, after giving effect
to the transactions contemplated by this Agreement, as if made on and as of the
Closing Date.

	Sale and Registration of
Securities.  

The Offerors and their Affiliates shall not nor shall any
of them permit any person acting on their behalf (other than the Placement
Agents), to directly or indirectly (i) sell, offer for sale or solicit
offers to buy or otherwise negotiate in respect of any security (as defined in
the Securities Act) that would or could be integrated with the sale of the
Capital Securities in a manner that would require the registration under the
Securities Act of the Capital Securities, the Debentures or the Guarantee or
(ii) make offers or sales of any such security, or solicit offers to buy
any such security, under circumstances that would require the registration of
any of such securities under the Securities Act.

	Use of Proceeds.  

The Trust shall use the proceeds from the sale of the
Capital Securities to purchase the Debentures from the Company.

	Investment Company.  

The Offerors shall not engage, or permit any subsidiary
to engage, in any activity which would cause it or any subsidiary to be an
"investment company" under the provisions of the Investment Company Act.

	Reimbursement of Expenses.  

If the sale of the Capital Securities provided for herein
is not consummated because any condition set forth in Section 3 hereof is
not satisfied, or because of any refusal, inability or failure on the part of
the Company or the Trust to perform any agreement herein or comply with any
provision hereof other than by reason of a breach by the Placement Agents, the
Company shall reimburse the Placement Agents upon demand for all of their pro
rata share of out-of-pocket expenses (including reasonable fees and
disbursements of counsel) in an amount not to exceed $50,000.00 that shall have
been incurred by them in connection with the proposed purchase and sale of the
Capital Securities. Notwithstanding the foregoing, the Company shall have no
obligation to reimburse the Placement Agents for their out-of-pocket expenses if
the sale of the Capital Securities fails to occur because the condition set
forth in Section 3.6 is not satisfied or because either of the Placement
Agents fails to fulfill a condition set forth in Section 4.

	Directed Selling Efforts, Solicitation and
Advertising.  

In connection with any offer or sale of any of the
Securities, the Offerors shall not, nor shall either of them permit any of their
Affiliates or any person acting on their behalf to, (other than the Placement
Agents) (i) engage in any "directed selling efforts" within the meaning of
Regulation S, or (ii) engage in any form of general solicitation or
general advertising (as defined in Regulation D).

	Compliance with Rule 144A(d)(4) under the
Securities Act.  

So long as any of the Securities are outstanding and are
"restricted securities" within the meaning of Rule 144(a)(3) under the
Securities Act, the Offerors will, during any period in which they are not
subject to and in compliance with Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), or the Offerors are not
exempt from such reporting requirements pursuant to and in compliance with
Rule 12g3-2(b) under the Exchange Act, provide to each holder of such
restricted securities and to each prospective purchaser (as designated by such
holder) of such restricted securities, upon the request of such holder or
prospective purchaser, any information required to be provided by
Rule 144A(d)(4) under the Securities Act. This covenant is intended to be
for the benefit of the holders, and the prospective purchasers designated by
such holders, from time to time of such restricted securities. The information
provided by the Offerors pursuant to this Section 7.7 will not, at the date
thereof, contain any untrue statement of a material fact or omit to state any
material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.

	Quarterly
Reports.  

Within 50 days of the end of each calendar year
quarter and within 100 days of the end of each calendar year during which
the Debentures are issued and outstanding, the Offerors shall submit to The
Chase Manhattan Bank a completed quarterly report in the form attached hereto as
Exhibit D. The Offerors acknowledge and agree that The Chase
Manhattan Bank and its successors and assigns is a third party beneficiary of
this Section 7.8

	Covenants of the Placement
Agents.  

The Placement Agents covenant and agree with the Offerors
that, during the period from the date of this Agreement to the Closing Date, the
Placement Agents shall use their best efforts and take all action necessary or
appropriate to cause their representations and warranties contained in
Section 6 to be true as of Closing Date, after giving effect to the
transactions contemplated by this Agreement, as if made on and as of the Closing
Date. The Placement Agents further covenant and agree not to engage in hedging
transactions with respect to the Capital Securities unless such transactions are
conducted in compliance with the Securities Act.

	Indemnification.

	Indemnification
Obligation.  

The Offerors shall jointly and severally indemnify and
hold harmless the Placement Agents and the Purchaser and each of their
respective agents, employees, officers and directors and each person that
controls either of the Placement Agents or the Purchaser within the meaning of
Section 15 of the Securities Act or Section 20 of the Exchange Act,
and agents, employees, officers and directors or any such controlling person of
either of the Placement Agents or the Purchaser (each such person or entity, an
"Indemnified Party") from and against any and all losses, claims, damages,
judgments, liabilities or expenses, joint or several, to which such Indemnified
Party may become subject under the Securities Act, the Exchange Act or other
federal or state statutory law or regulation, or at common law or otherwise
(including in settlement of any litigation, if such settlement is effected with
the written consent of the Offerors), insofar as such losses, claims, damages,
judgments, liabilities or expenses (or actions in respect thereof) arise out of,
or are based upon, or relate to, in whole or in part, (a) any untrue
statement or alleged untrue statement of a material fact contained in any
information (whether written or oral) or documents executed in favor of,
furnished or made available to the Placement Agents or the Purchaser by the
Offerors, or (b) any omission or alleged omission to state in any
information (whether written or oral) or documents executed in favor of,
furnished or made available to the Placement Agents or the Purchaser by the
Offerors a material fact required to be stated therein or necessary to make the
statements therein not misleading, and shall reimburse each Indemnified Party
for any legal and other expenses as such expenses are reasonably incurred by
such Indemnified Party in connection with investigating, defending, settling,
compromising or paying any such loss, claim, damage, judgments, liability,
expense or action described in this Section 9.1. In addition to their other
obligations under this Section 9, the Offerors hereby agree that, as an
interim measure during the pendency of any claim, action, investigation, inquiry
or other proceeding arising out of, or based upon, or related to the matters
described above in this Section 9.1, they shall reimburse each Indemnified
Party on a quarterly basis for all reasonable legal or other expenses incurred
in connection with investigating or defending any such claim, action,
investigation, inquiry or other proceeding, notwithstanding the absence of a
judicial determination as to the propriety and enforceability of the possibility
that such payments might later be held to have been improper by a court of
competent jurisdiction. To the extent that any such interim reimbursement
payment is so held to have been improper, each Indemnified Party shall promptly
return such amounts to the Offerors together with interest, determined on the
basis of the prime rate (or other commercial lending rate for borrowers of the
highest credit standing) announced from time to time by First Tennessee Bank,
N.A. (the "Prime Rate"). Any such interim reimbursement payments which are not
made to an Indemnified Party within 30 days of a request for reimbursement,
shall bear interest at the Prime Rate from the date of such request.

	Conduct of Indemnification
Proceedings.  

Promptly after receipt by an Indemnified Party under this
Section 9 of notice of the commencement of any action, such Indemnified
Party shall, if a claim in respect thereof is to be made against the Offerors
under this Section 9, notify the Offerors in writing of the commencement
thereof; but the omission to so notify the Offerors shall not relieve them from
any liability which the Offerors may have to any Indemnified Party. In case any
such action is brought against any Indemnified Party and such Indemnified Party
seeks or intends to seek indemnity from the Offerors, the Offerors shall be
entitled to participate in, and, to the extent that they may wish, to assume the
defense thereof with counsel reasonably satisfactory to such Indemnified Party;
provided, however, if the defendants in any such action include
both the Indemnified Party and the Offerors and the Indemnified Party shall have
reasonably concluded that there may be a conflict between the positions of the
Offerors and the Indemnified Party in conducting the defense of any such action
or that there may be legal defenses available to it and/or other Indemnified
Parties which are different from or additional to those available to the
Offerors, the Indemnified Party shall have the right to select separate counsel
to assume such legal defenses and to otherwise participate in the defense of
such action on behalf of such Indemnified Party. Upon receipt of notice from the
Offerors to such Indemnified Party of their election to so assume the defense of
such action and approval by the Indemnified Party of counsel, the Offerors shall
not be liable to such Indemnified Party under this Section 9 for any legal
or other expenses subsequently incurred by such Indemnified Party in connection
with the defense thereof unless (i) the Indemnified Party shall have
employed such counsel in connection with the assumption of legal defenses in
accordance with the proviso in the preceding sentence (it being understood,
however, that the Offerors shall not be liable for the expenses of more than one
separate counsel representing the Indemnified Parties who are parties to such
action), or (ii) the Offerors shall not have employed counsel reasonably
satisfactory to the Indemnified Party to represent the Indemnified Party within
a reasonable time after notice of commencement of the action, in each of which
cases the fees and expenses of counsel of such Indemnified Party shall be at the
expense of the Offerors.

	Contribution.  

If the indemnification provided for in this
Section 9 is required by its terms, but is for any reason held to be
unavailable to or otherwise insufficient to hold harmless an Indemnified Party
under Section 9.1 in respect of any losses, claims, damages, liabilities or
expenses referred to herein or therein, then the Offerors shall contribute to
the amount paid or payable by such Indemnified Party as a result of any losses,
claims, damages, judgments, liabilities or expenses referred to herein
(i) in such proportion as is appropriate to reflect the relative benefits
received by the Offerors, on the one hand, and the Indemnified Party, on the
other hand, from the offering of such Capital Securities, or (ii) if the
allocation provided by clause (i) above is not permitted by applicable law,
in such proportion as is appropriate to reflect not only the relative benefits
referred to in clause (i) above but also the relative fault of the Offerors
and the Placement Agents in connection with the statements or omissions or
inaccuracies in the representations and warranties herein or other breaches
which resulted in such losses, claims, damages, judgments, liabilities or
expenses, as well as any other relevant equitable considerations. The respective
relative benefits received by the Offerors, on the one hand, and the Placement
Agents, on the other hand, shall be deemed to be in the same proportion, in the
case of the Offerors, as the total price paid to the Offerors for the Capital
Securities sold by the Offerors to the Purchaser (net of the compensation paid
to the Placement Agents hereunder, but before deducting expenses), and in the
case of the Placement Agents, as the compensation received by them, bears to the
total of such amounts paid to the Offerors and received by the Placement Agents
as compensation. The relative fault of the Offerors and the Placement Agents
shall be determined by reference to, among other things, whether the untrue
statement or alleged untrue statement of a material fact or the omission or
alleged omission of a material fact or the inaccurate or the alleged inaccurate
representation and/or warranty relates to information supplied by the Offerors
or the Placement Agents and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The provisions set forth in Section 9.2 with respect to notice of
commencement of any action shall apply if a claim for contribution is made under
this Section 9.3; provided, however, that no additional
notice shall be required with respect to any action for which notice has been
given under Section 9.2 for purposes of indemnification. The Offerors and
the Placement Agents agree that it would not be just and equitable if
contribution pursuant to this Section 9.3 were determined by pro rata
allocation or by any other method of allocation that does not take account of
the equitable considerations referred to in this Section 9.3. The amount
paid or payable by an Indemnified Party, as a result of the losses, claims,
damages, judgments, liabilities or expenses referred to in this Section 9.3
shall be deemed to include, subject to the limitations set forth above, any
legal or other expenses reasonably incurred by such Indemnified Party, in
connection with investigating or defending any such action or claim. In no event
shall the liability of the Placement Agents hereunder be greater in amount than
the dollar amount of the compensation (net of payment of all expenses) received
by the Placement Agents upon the sale of the Capital Securities giving rise to
such obligation. No person found guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not found guilty of such fraudulent
misrepresentation.

	Additional
Remedies.  

The indemnity and contribution agreements contained in
this Section 9 are in addition to any liability that the Offerors may
otherwise have to any Indemnified Party.

	Additional
Indemnification.  

The Company shall indemnify and hold harmless the Trust
against all loss, liability, claim, damage and expense whatsoever, as due from
the Trust under Sections 9.1 through 9.4 hereof.

	Rights and Responsibilities
of Placement Agents.

	Reliance.  

In performing their duties under this Agreement, the
Placement Agents shall be entitled to rely upon any notice, signature or writing
which they shall in good faith believe to be genuine and to be signed or
presented by a proper party or parties. The Placement Agents may rely upon any
opinions or certificates or other documents delivered by the Offerors or their
counsel or designees to either the Placement Agents or the Purchaser.

	Rights of Placement
Agents.  

In connection with the performance of their duties under
this Agreement, the Placement Agents shall not be liable for any error of
judgment or any action taken or omitted to be taken unless the Placement Agents
were grossly negligent or engaged in willful misconduct in connection with such
performance or non-performance. No provision of this Agreement shall require the
Placement Agents to expend or risk their own funds or otherwise incur any
financial liability on behalf of the Purchaser in connection with the
performance of any of their duties hereunder. The Placement Agents shall be
under no obligation to exercise any of the rights or powers vested in them by
this Agreement.

	Miscellaneous.

	Notices.  

Prior to the Closing, and thereafter with respect to
matters pertaining to this Agreement only, all notices and other communications
provided for or permitted hereunder shall be made in writing by hand-delivery,
first-class mail, telex, telecopier or overnight air courier guaranteeing next
day delivery:

if to the Placement Agents, to:

First Tennessee Capital Markets

845 Crossover Lane, Suite 150

Memphis, Tennessee 38117

Telecopier: (901) 435-4706

Telephone: (800) 456-5460

Attention: James D. Wingett

and

Keefe, Bruyette & Woods, Inc.

Two World Trade Center

New York, New York 10048

Telecopier: (212) 323-8404

Telephone: (800) 966-1559

Attention: Mitch Kleinman, Esq.

with a copy to:

Lewis, Rice & Fingersh, L.C.

500 North Broadway, Suite 2000

St. Louis, Missouri 63102

Telecopier: (314) 241-6056

Telephone: (314) 444-7600

Attention: Thomas C. Erb, Esq.

and

Sidley Austin Brown & Wood LLP

One World Trade Center

New York, New York 10048

Telecopier: (212) 839-5599

Telephone: (212) 839-5300

Attention: Renwick Martin, Esq.

if to the Offerors, to:

Heritage Commerce Corp

150 Almaden Boulevard

San Jose, California 95113

Telecopier: (408) 947-6919

Telephone: (408) 494-4562

Attention: Lawrence D. McGovern

with a copy to:

McCutcheon, Doyle, Brown & Enersen, LLP

Three Embarcadero Center

San Francisco, California 94111-4087

Telecopier: (415) 393-2286

Telephone: (415) 393-2180

Attention: Keith Ungles

All such notices and communications shall be deemed to have
been duly given (i) at the time delivered by hand, if personally delivered,
(ii) five business days after being deposited in the mail, postage prepaid,
if mailed, (iii) when answered back, if telexed, (iv) the next
business day after being telecopied, or (v) the next business day after
timely delivery to a courier, if sent by overnight air courier guaranteeing next
day delivery. From and after the Closing, the foregoing notice provisions shall
be superseded by any notice provisions of the Operative Documents under which
notice is given. The Placement Agents, the Company, and their respective
counsel, may change their respective notice addresses from time to time by
written notice to all of the foregoing persons.

	Parties in Interest,
Successors and Assigns.  

Except as expressly set forth herein, this Agreement is
made solely for the benefit of the Placement Agents, the Purchaser and the
Offerors and any person controlling the Placement Agents, the Purchaser or the
Offerors and their respective successors and assigns; and no other person shall
acquire or have any right under or by virtue of this Agreement. This Agreement
shall inure to the benefit of and be binding upon the successors and assigns of
each of the parties.

	Counterparts.  

This Agreement may be executed by the parties hereto in
separate counterparts, each of which when so executed shall be deemed to be an
original and all of which taken together shall constitute one and the same
agreement.

	Headings.  

The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.

	Governing
Law.  

THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE INTERNAL LAWS (AND NOT THE LAWS PERTAINING TO CONFLICTS OF
LAWS) OF THE STATE OF NEW YORK.

	Entire
Agreement.  

This Agreement, together with the other Operative
Documents and the other documents delivered in connection with the transactions
contemplated by this Agreement, is intended by the parties as a final expression
of their agreement and intended to be a complete and exclusive statement of the
agreement and understanding of the parties hereto in respect of the subject
matter contained herein and therein. There are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to herein and
therein. This Agreement, together with the other Operative Documents, supersedes
all prior agreements and understandings between the parties with respect to such
subject matter.

	Severability.  

In the event that any one or more of the provisions
contained herein, or the application thereof in any circumstances, is held
invalid, illegal or unenforceable in any respect for any reason, the validity,
legality and enforceability of any such provision in every other respect and of
the remaining provisions hereof shall not be in any way impaired or affected, it
being intended that all of the Placement Agents' and the Purchaser's rights and
privileges shall be enforceable to the fullest extent permitted by law.

	Survival.  

The Placement Agents and the Offerors, respectively,
agree that the representations, warranties and agreements made by each of them
in this Agreement and in any certificate or other instrument delivered pursuant
hereto shall remain in full force and effect and shall survive the delivery of,
and payment for, the Capital Securities.

signatures appear on the next page

If this Agreement is satisfactory to you, please so
indicate by signing the acceptance of this Agreement and deliver such
counterpart to the Offerors whereupon this Agreement will become binding between
us in accordance with its terms.

Very truly yours,

HERITAGE COMMERCE CORP

 

By: /s/ Lawrence D. McGovern 

Name: Lawrence D. McGovern 

Title: Chief Financial Officer 

 

HERITAGE STATUTORY TRUST II

 

By: /s/ Lawrence D. McGovern 

Name: Lawrence D. McGovern 

Title: Administrator

 

 

CONFIRMED AND ACCEPTED,

as of the date first set forth above

 

FIRST TENNESSEE CAPITAL MARKETS,

a division of First Tennessee Bank, N.A.,

as a Placement Agent

 

By: /s/ James D. Wingett 

Name: James D. Wingett 

Title: Senior Vice President 

 

KEEFE, BRUYETTE & WOODS, INC.

a New York corporation, as a Placement Agent

 

By: /s/ Peter J. Wirth 

Name: Peter J. Wirth 

Title: Managing Director 

EXHIBIT A

FORM OF SUBSCRIPTION AGREEMENT

 

HERITAGE STATUTORY TRUST II

HERITAGE COMMERCE CORP

 

SUBSCRIPTION AGREEMENT

July 31, 2001

THIS SUBSCRIPTION AGREEMENT (this
"Agreement") made among Heritage Statutory Trust II (the "Trust"), a statutory
trust created under the Connecticut Statutory Trust Act (Chapter 615 of
Title 34 of the Connecticut General Statutes, Section 500, et
seq.), Heritage Commerce Corp, a California corporation, with its principal
offices located at 150 Almaden Boulevard, San Jose, California 95113 (the
"Company" and, collectively with the Trust, the "Offerors"), and Preferred Term
Securities III, Ltd. (the "Purchaser").

RECITALS:

	The Trust desires to issue 5,000 of its Floating Rate
Capital Securities (the "Capital Securities"), liquidation amount $1,000.00 per
Capital Security, representing an undivided beneficial interest in the assets of
the Trust (the "Offering"), to be issued pursuant to an Amended and Restated
Declaration of Trust (the "Declaration") by and among the Company, State Street
Bank and Trust Company of Connecticut, National Association ("State Street"),
the administrators named therein, and the holders (as defined therein), which
Capital Securities are to be guaranteed by the Company with respect to
distributions and payments upon liquidation, redemption and otherwise pursuant
to the terms of a Guarantee Agreement between the Company and State Street, as
trustee (the "Guarantee"); and

	The proceeds from the sale of the Capital Securities will
be combined with the proceeds from the sale by the Trust to the Company of its
common securities, and will be used by the Trust to purchase an equivalent
amount of Floating Rate Junior Subordinated Deferrable Interest Debentures of
the Company (the "Debentures") to be issued by the Company pursuant to an
indenture to be executed by the Company and State Street, as trustee (the
"Indenture"); and

	In consideration of the premises and the mutual
representations and covenants hereinafter set forth, the parties hereto agree as
follows:

	PURCHASE AND SALE OF CAPITAL SECURITIES

	Upon the execution of this Subscription Agreement,
the Purchaser hereby agrees to purchase from the Trust 5,000 Capital Securities
at a price equal to $1,000.00 per Capital Security (the "Purchase Price") and
the Trust agrees to sell such Capital Securities to the Purchaser for said
Purchase Price. The rights and preferences of the Capital Securities are set
forth in the Declaration. The Purchase Price is payable in immediately available
funds on July 31, 2001, or such other business day as may be designated by the
Purchaser, but in no event later than August 7, 2001 (the "Closing Date"). The
Offerors shall provide the Purchaser wire transfer instructions no later than
1 day following the date hereof.

	The certificate for the Capital Securities shall be
delivered by the Trust on the Closing Date to the Purchaser or its
designee.

	The Placement Agreement, dated July 20, 2001 (the
"Placement Agreement"), among the Offerors and the Placement Agents identified
therein includes certain representations and warranties, covenants and
conditions to closing and certain other matters governing the Offering. The
Placement Agreement is hereby incorporated by reference into this Agreement and
the Purchaser shall be entitled to each of the benefits of the Placement Agents
and the Purchaser under the Placement Agreement and shall be entitled to enforce
the obligations of the Offerors under such Placement Agreement as fully as if
the Purchaser were a party to such Placement Agreement.

	REPRESENTATIONS AND WARRANTIES OF PURCHASER

	The Purchaser understands and acknowledges that
neither the Capital Securities, the Debentures nor the Guarantee have been
registered under the Securities Act of 1933, as amended (the "Securities Act"),
or any other applicable securities law, are being offered for sale by the Trust
in transactions not requiring registration under the Securities Act, and may not
be offered, sold, pledged or otherwise transferred by the Purchaser except in
compliance with the registration requirements of the Securities Act or any other
applicable securities laws, pursuant to an exemption therefrom or in a
transaction not subject thereto.

	The Purchaser represents, warrants and certifies that
(i) it is not a "U.S. person" as such term is defined in Rule 902
under the Securities Act, (ii) it is not acquiring the Capital Securities
for the account or benefit of any such U.S. person, (iii) the offer and
sale of Capital Securities to the Purchaser constitutes an "offshore
transaction" under Regulation S of the Securities Act, and (iv) it
will not engage in hedging transactions with regard to the Capital Securities
unless such transactions are conducted in compliance with the Securities
Act.

	The Purchaser represents and warrants that it is
purchasing the Capital Securities for its own account, for investment, and not
with a view to, or for offer or sale in connection with, any distribution
thereof in violation of the Securities Act or other applicable securities laws,
subject to any requirement of law that the disposition of its property be at all
times within its control and subject to its ability to resell such Capital
Securities pursuant to an effective registration statement under the Securities
Act or under Rule 144A or any other exemption from registration available
under the Securities Act or any other applicable Securities law.

	The Purchaser has full power and authority to execute and
deliver this Agreement, to make the representations and warranties specified
herein, and to consummate the transactions contemplated herein and it has full
right and power to subscribe for Capital Securities and perform its obligations
pursuant to this Agreement.

	The Purchaser is a Cayman Islands Company whose business
includes issuance of certain notes and acquiring the Capital Securities and it
has such knowledge and experience in financial and business matters that it is
capable of evaluating the merits and risks of purchasing the Capital Securities
and it is aware that it may be required to bear the economic risk of an
investment in the Capital Securities.

	MISCELLANEOUS

	Any notice or other communication given hereunder
shall be deemed sufficient if in writing and sent by registered or certified
mail, return receipt requested, international courier or delivered by hand
against written receipt therefor, or by facsimile transmission and confirmed by
telephone, to the following addresses, or such other address as may be furnished
to the other parties as herein provided:

To the Offerors:Heritage Commerce Corp

150 Almaden Boulevard

San Jose, California 95113

Attention: Lawrence D. McGovern

Fax: (408) 947-6919

To the Purchaser: Preferred Term Securities III, Ltd.

c/o QSPV, Limited

P.O. Box 1093 GT

Queensgate House

South Church Street

George Town, Grand Cayman

Grand Cayman Islands, British West Indies

Attention: The Directors/603694

Fax: (345) 945-7100

Unless otherwise expressly provided herein, notices
shall be deemed to have been given on the date of mailing, except notice of
change of address, which shall be deemed to have been given when received.

	This Agreement shall not be changed, modified or amended
except by a writing signed by the parties to be charged, and this Agreement may
not be discharged except by performance in accordance with its terms or by a
writing signed by the party to be charged.

	Upon the execution and delivery of this Agreement by the
Purchaser, this Agreement shall become a binding obligation of the Purchaser
with respect to the purchase of Capital Securities as herein provided.

	NOTWITHSTANDING THE PLACE WHERE THIS AGREEMENT MAY BE
EXECUTED BY ANY OF THE PARTIES HERETO, THE PARTIES EXPRESSLY AGREE THAT ALL THE
TERMS AND PROVISIONS HEREOF SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED
BY THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS
OF LAW.

	The parties agree to execute and deliver all such further
documents, agreements and instruments and take such other and further action as
may be necessary or appropriate to carry out the purposes and intent of this
Agreement.

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

Signatures appear on the following page

IN WITNESS WHEREOF, I have set my hand the day
and year first written above.

 

PREFERRED TERM SECURITIES III, LTD.

 

By:

Print Name: 

Title: 

IN WITNESS WHEREOF, this Subscription
Agreement is agreed to and accepted as of the day and year first written
above.

 

HERITAGE COMMERCE CORP

 

By:

Name:

Title:

 

HERITAGE STATUTORY TRUST II

 

By:

Name:

Title: Administrator

 

 

EXHIBIT B-1

FORM OF COMPANY COUNSEL OPINION

[Closing Date]

Preferred Term Securities III, Ltd.First
Tennessee Capital Markets

P. O. Box 1093 GT845 Crossover Lane,
Suite 150

Queensgate HouseMemphis, Tennessee
38117

South Church Street

George Town, Grand CaymanKeefe, Bruyette
& Woods, Inc.

Grand Cayman IslandsTwo World Trade
Center

British West IndiesNew York, New York
10048

Ladies and Gentlemen:

We have acted as counsel to Heritage Commerce Corp (the
"Company"), a California corporation in connection with a certain Placement
Agreement, dated July 20, 2001, (the "Placement Agreement"), between the Company
and Heritage Statutory Trust II (the "Trust"), on one hand, and First
Tennessee Capital Markets and Keefe, Bruyette & Woods, Inc. (the "Placement
Agents"), on the other hand. Pursuant to the Placement Agreement, and subject to
the terms and conditions stated therein, the Trust will issue and sell to
Preferred Term Securities III, Ltd. (the "Purchaser"), $5,000,000 aggregate
principal amount of Floating Rate Capital Securities (liquidation amount
$1,000.00 per capital security) (the "Capital Securities").

Capitalized terms used herein and not otherwise defined
shall have the same meaning ascribed to them in the Placement Agreement 

The law covered by the opinions expressed herein is
limited to the law of the United States of America and of the State of
California.

We have made such investigations of law as, in our
judgment, were necessary to render the following opinions. We have also reviewed
(a) the Company's Articles of Incorporation, as amended, and its By-Laws,
as amended; and (b) such corporate documents, records, information and
certificates of the Company and its subsidiaries, certificates of public
officials or government authorities and other documents as we have deemed
necessary or appropriate as a basis for the opinions hereinafter expressed. As
to certain facts material to our opinions, we have relied, with your permission,
upon statements, certificates or representations, including those delivered or
made in connection with the above-referenced transaction, of officers and other
representatives of the Company and its subsidiaries and the Trust.

Based upon and subject to the foregoing and the further
qualifications set forth below, we are of the opinion as of the date hereof
that:

1.The Company has been duly incorporated and is
validly existing under the laws of the State of California and is duly
registered as a bank holding company under the Bank Holding Company Act of 1956,
as amended or as a savings and loan holding company under the Home Owners' Loan
Act of 1933, as amended. Each of the Significant Subsidiaries is duly organized,
validly existing and in good standing under the laws of its jurisdiction of
organization. Each of the Company and the Significant Subsidiaries has full
corporate power and authority to own or lease its properties and to conduct its
business as such business is currently conducted in all material respects. To
the best of our knowledge, all outstanding shares of capital stock of the
Significant Subsidiaries have been duly authorized and validly issued, and are
fully paid and nonassessable except to the extent such shares may be deemed
assessable under 12 U.S.C. Section 1831o or 12 U.S.C. Section 55.

2.The issuance, sale and delivery of the Debentures
in accordance with the terms and conditions of the Placement Agreement and the
Operative Documents has been duly authorized by all necessary actions of the
Company. Other than for outstanding stock options and warrants issued by the
Company with respect to shares of common stock of the Company, there are no
preemptive or other rights to subscribe for or to purchase any shares of capital
stock or equity securities of the Company or the Significant Subsidiaries
pursuant to the corporate Articles of Incorporation or Charter, By-Laws or other
governing documents of the Company or the Significant Subsidiaries, or, to the
best of our knowledge, any agreement or other instrument to which either Company
or the Subsidiaries is a party or by which the Company or the Significant
Subsidiaries may be bound.

3.The Company has all requisite corporate power to
enter into and perform its obligations under the Placement Agreement and the
Subscription Agreement, and the Placement Agreement and the Subscription
Agreement have been duly and validly authorized, executed and delivered by the
Company and constitute the legal, valid and binding obligations of the Company
enforceable in accordance with their terms, except as the enforcement thereof
may be limited by general principles of equity and by bankruptcy or other laws
affecting creditors' rights generally, and except as the indemnification and
contribution provisions thereof may be limited under applicable laws and certain
remedies may not be available in the case of a non-material breach.

4.Each of the Indenture, the Trust Agreement and the
Guarantee Agreement has been duly authorized, executed and delivered by the
Company, and is a valid and legally binding obligation of the Company
enforceable in accordance with its terms, subject to the effect of bankruptcy,
insolvency, reorganization, receivership, moratorium and other laws affecting
the rights and remedies of creditors generally and of general principles of
equity.

5.The Debentures have been duly authorized, executed
and delivered by the Company, are entitled to the benefits of the Indenture and
are legal, valid and binding obligations of the Company enforceable against the
Company in accordance with their terms, subject to the effect of bankruptcy,
insolvency, reorganization, receivership, moratorium and other laws affecting
the rights and remedies of creditors generally and of general principles of
equity.

6.Neither the Company, the Trust, nor any other
subsidiaries of the Company is in breach or violation of, or default under, with
or without notice or lapse of time or both, its articles of Incorporation or
Charter, By-Laws or other governing documents (including without limitation, the
Trust Agreement). The execution, delivery and performance of the Placement
Agreement and the Operative Documents and the consummation of the transactions
contemplated by the Placement Agreement and the Operative Documents do not and
will not conflict with, result in the creation or imposition of any material
lien, claim, charge, encumbrance or restriction upon any property or assets of
the Company or its subsidiaries pursuant to, or constitute a material breach or
violation of, or constitute a material default under, with or without notice or
lapse of time or both, any of the terms, provisions or conditions of the
Articles of Incorporation or Charter, By-Laws or other governing documents of
the Company or its subsidiaries, or to the best of our knowledge, any material
contract, indenture, mortgage, deed of trust, loan or credit agreement, note,
lease, franchise, license or any other agreement or instrument to which the
Company or its subsidiaries is a party or by which any of them or any of their
respective properties may be bound or any order, decree, judgment, franchise,
license, permit, rule or regulation of any court, arbitrator, government, or
governmental agency or instrumentality, domestic or foreign, known to us having
jurisdiction over the Company or its subsidiaries or any of their respective
properties which, in each case, is material to the Company and its subsidiaries
on a consolidated basis.

7.Except for filings, registrations or qualifications
that may be required by applicable securities laws, no authorization, approval,
consent or order of, or filing, registration or qualification with, any person
(including, without limitation, any court, governmental body or authority) is
required under the laws of the State of California in connection with the
transactions contemplated by the Placement Agreement and the Operative Documents
in connection with the offer and sale of the Capital Securities as contemplated
by the Placement Agreement and the Operative Documents.

8.To the best of our knowledge (i) no action,
suit or proceeding at law or in equity is pending or threatened to which the
Offerors or its subsidiaries is or may be a party, and (ii) no action, suit
or proceeding is pending or threatened against or affecting the Offerors or its
subsidiaries or any of their properties, before or by any court or governmental
official, commission, board or other administrative agency, authority or body,
or any arbitrator, wherein an unfavorable decision, ruling or finding could
reasonably be expected to have a material adverse effect on the consummation of
the transactions contemplated by the Placement Agreement and the Operative
Documents or the issuance and sale of the Capital Securities as contemplated
therein or the condition (financial or otherwise), earnings, affairs, business,
or results of operations of the Offerors and its subsidiaries on a consolidated
basis.

9.It is not necessary in connection with the
offering, sale and delivery of the Capital Securities, the Debentures and the
Guarantee Agreement (or the Guarantee) to register the same under the Securities
Act of 1933, as amended, under the circumstances contemplated in the Placement
Agreement and the Subscription Agreement.

10.Neither the Company nor the Trust is an
"investment company" or an entity "controlled" by an "investment company," in
each case within the meaning of the Investment Company Act of 1940, as
amended.

The opinion expressed in the first two sentences of
numbered paragraph 1 of this Opinion Letter is based solely upon certain
certificates and confirmations issued by the applicable governmental officer or
authority with respect to each of the Company and the Subsidiaries.

With respect to the foregoing opinions, since no member
of this firm is actively engaged in the practice of law in the States of
Connecticut or New York, we do not express any opinions as to the laws of such
states and have (i) relied, with your approval, upon the opinion of Bingham
Dana LLP with respect to matters of Connecticut law and (ii) assumed, with
your approval and without rendering any opinion to such effect, that the laws of
the State of New York are substantively identical to the laws of the State of
California, without regard to conflict of law provisions.

This opinion is rendered to you solely pursuant to
Section 3.1(a) of the Placement Agreement. As such, it may be relied upon
by you only and may not be used or relied upon by any other person for any
purpose whatsoever without our prior written consent.

Very truly yours,

EXHIBIT B-2

FORM OF CONNECTICUT COUNSEL OPINION

TO THE PARTIES LISTED

ON SCHEDULE I HERETO

Ladies and Gentlemen:

We have acted as special counsel in the State of Connecticut
(the "State") for Heritage Statutory Trust II (the "Trust"), a Connecticut
statutory trust formed pursuant to the Amended and Restated Declaration of Trust
(the "Trust Agreement") dated as of the date hereof, among Heritage Commerce
Corp, a California corporation (the "Sponsor"), State Street Bank and Trust
Company of Connecticut, National Association, a national banking association
("State Street"), in its capacity as Institutional Trustee (the "Institutional
Trustee"), and Lawrence D. McGovern, May Wong and Richard L. Conniff, each, an
individual, (each, an "Administrator") in connection with the issuance by the
Trust to the Holders (as defined in the Trust Agreement) of its capital
securities (the "Capital Securities") pursuant to the Placement Agreement dated
as of July 20, 2001 (the "Placement Agreement"), the issuance by the Trust to
the Sponsor of its Common Securities, pursuant to the Trust Agreement and the
acquisition by the Trust from the Sponsor of Debentures, issued pursuant to the
Indenture dated as of the date hereof (the "Indenture").

The Institutional Trustee has requested that we deliver this
opinion to you in accordance with Section 3.1(b) of the Placement
Agreement. Capitalized terms not otherwise defined herein shall have the
meanings specified in, or defined by reference in or set forth in the Operative
Documents (as defined below).

Our representation of the Trust has been as special counsel
for the limited purposes stated above. As to all matters of fact (including
factual conclusions and characterizations and descriptions of purpose, intention
or other state of mind), we have relied, with your permission, entirely upon
(i) the representations and warranties of the parties set forth in the
Operative Documents and (ii) certificates delivered to us by the management
of State Street, and have assumed, with your permission, without independent
inquiry, the accuracy of those representations, warranties and certificates.

We have examined the following documents to which the Trust
is a party, each of which is dated the date hereof, unless otherwise
noted:
(i)the Trust Agreement;

(ii)the Placement Agreement;

(iii)the Subscription Agreement;

(iv)the Certificate of Common Securities;

(v)the Certificate of Capital Securities;

(vi)the Guarantee Agreement;

(vii)the Certificate of Trust; and

(vii)a Certificate of Legal Existence for the Trust
obtained from the Secretary of State of the State of Connecticut dated
[______________] (the "Certificate of Legal Existence").

The documents referenced in subparagraphs (i) through
(v) above are hereinafter referred to collectively as the "Operative
Documents."

We have also examined originals, or copies, certified or
otherwise identified to our satisfaction, of such other corporate and public
records and agreements, instruments, certificates and other documents as we have
deemed necessary or appropriate for the purposes of rendering this opinion. For
purposes of our opinion rendered in paragraph 1 below, with respect to the
legal existence of the Trust, our opinion relies entirely upon and is limited by
the Certificate of Legal Existence, which is attached hereto as
Exhibit A.

We have assumed, with your permission, the genuineness of all
signatures (other than those on behalf of State Street, the Guarantee Trustee,
Indenture Trustee, Institutional Trustee and the Trust), the conformity of the
originals of all documents reviewed by us as copies, the authenticity and
completeness of all original documents reviewed by us in original or copy form
and the legal competence of each individual executing any document (other than
those individuals executing documents on behalf of State Street, the Guarantee
Trustee, Indenture Trustee, Institutional Trustee and the Trust).

When an opinion set forth below is given to the best of our
knowledge, or to our knowledge, or with reference to matters of which we are
aware or which are known to use, or with another similar qualification, the
relevant knowledge or awareness is limited to the actual knowledge or awareness
of the individual lawyers in the firm who have participated directly and
substantively in the specific transactions to which this opinion relates and
without any special or additional investigation undertaken for the purposes of
this opinion except as indicated herein.

For the purposes of this opinion we have made such
examination of law as we have deemed necessary. The opinions expressed below are
limited solely to the internal substantive laws of the State (as applied by
courts located in the State without regard to choice of law) and we express no
opinion as to the laws of any other jurisdiction. To the extent to which this
opinion deals with matters governed by or relating to the laws of any other
state or jurisdiction, we have assumed, with your permission, that the Operative
Documents are governed by the internal substantive laws of the State.

We express no opinion as to (i) the effect of suretyship
defenses, or defenses in the nature thereof, with respect to the obligations of
any applicable guarantor, joint obligor, surety, accommodation party, or other
secondary obligor or any provisions of the Trust Agreement with respect to
indemnification or contribution and (ii) the accuracy or completeness of
any exhibits or schedules to the Operative Documents. No opinion is given herein
as to the choice of law or internal substantive rules of law that any court or
other tribunal may apply to the transactions contemplated by the Operative
Documents. No opinion is expressed herein as to the application or effect of
federal securities laws or as to the securities or so-called "Blue Sky" laws of
Connecticut or of any other state or other jurisdiction.

Our opinion, with your permission, is further subject to the
following exceptions, qualifications and assumptions:
(a)We have assumed without any independent investigation
that (i) each party to the Operative Documents, other than State Street,
the Guarantee Trustee, Indenture Trustee, Institutional Trustee and the Trust,
as applicable, at all times relevant thereto, is validly existing and in good
standing under the laws of the jurisdiction in which it is organized, and is
qualified to do business and in good standing under the laws of each
jurisdiction where such qualification is required generally or necessary in
order for such party to enforce its rights under such Operative Documents,
(ii) each party to the Operative Documents, at all times relevant thereto,
had and has the full power, authority and legal right under its certificate of
incorporation, partnership agreement, by-laws, and other governing
organizational documents, and the applicable corporate, partnership, or other
enterprise legislation and other applicable laws, as the case may be (other than
State Street, the Guarantee Trustee, Indenture Trustee, Institutional Trustee or
the Trust) to execute, deliver and to perform its obligations under, the
Operative Documents, and (iii) each party to the Operative Documents other
than State Street, the Guarantee Trustee, Indenture Trustee, Institutional
Trustee or the Trust has duly executed and delivered each of such agreements and
instruments to which it is a party and that the execution and delivery of such
agreements and instruments and the transactions contemplated thereby have been
duly authorized by proper corporate or other organizational proceedings as to
each such party.

(b)We have assumed without any independent investigation
(i) that the Institutional Trustee, the Sponsor and the Administrators have
received the agreed to and stated consideration for the incurrence of the
obligations applicable to it under the Trust Agreement and each of the other
Operative Documents, (ii) that each of the Operative Documents (other than
the Trust Agreement) is a valid, binding and enforceable obligation of each
party thereto other than the Trust, State Street and the Institutional Trustee,
as applicable; and, for the purposes of this opinion letter, we herein also
assume that each of the Operative Documents (other than the Trust Agreement)
constitutes a valid, binding and enforceable obligation of State Street, the
Guarantee Trustee and the Indenture Trustee, as applicable under Connecticut and
federal law (as to which such matters we are delivering to you a separate
opinion letter on this date, which is subject to the assumptions, qualifications
and limitations set forth therein).

(c)The enforcement of any obligations of State Street,
the Sponsor and the Administrators, as applicable, under the Trust Agreement and
the obligations of the Trust under the other Operative Documents may be limited
by the receivership, conservatorship and supervisory powers of depository
institution regulatory agencies generally, as well as by bankruptcy, insolvency,
reorganization, moratorium, marshaling or other laws and rules of law affecting
the enforcement generally of creditors' rights and remedies (including such as
may deny giving effect to waivers of debtors' or guarantors' rights); and we
express no opinion as to the status under any fraudulent conveyance laws or
fraudulent transfer laws of any of the obligations of State Street, the Sponsor,
the Administrators or the Trust under any of the Operative Documents.

(d)We express no opinion as to the enforceability of any
particular provision of the Trust Agreement or the other Operative Documents
relating to remedies after default.

(e)We express no opinion as the availability of any
specific or equitable relief of any kind.

(f)The enforcement of any rights may in all cases be
subject to an implied duty of good faith and fair dealing and to general
principles of equity (regardless of whether such enforceability is considered in
a proceeding at law or in equity).

(g)We express no opinion as to the enforceability of any
particular provision of any of the Operative Documents relating to
(i) waivers of rights to object to jurisdiction or venue, or consents to
jurisdiction or venue, (ii) waivers of rights to (or methods of) service of
process, or rights to trial by jury, or other rights or benefits bestowed by
operation of law, (iii) waivers of any applicable defenses, setoffs,
recoupments, or counterclaims, (iv) waivers or variations of provisions
which are not capable of waiver or variation under Sections 1-102(3), 9-
501(3) or other provisions of the Uniform Commercial Code ("UCC") of the State,
(v) the grant of powers of attorney to any person or entity, or
(vi) exculpation or exoneration clauses, indemnity clauses, and clauses
relating to releases or waivers of unmatured claims or rights.

(h)We express no opinion as to the effect of events
occurring, circumstances arising, or changes of law becoming effective or
occurring, after the date hereof on the matters addressed in this opinion
letter, and we assume no responsibility to inform you of additional or changed
facts, or changes in law, of which we may become aware.

(i)We express no opinion as to any requirement that any
party to the Operative Documents (or any other persons or entities purportedly
entitled to the benefits thereof) qualify or register to do business in any
jurisdiction in order to be able to enforce its rights thereunder or obtain the
benefits thereof.

Based upon the foregoing and subject to the limitations and
qualifications set forth herein, we are of the opinion that:

	The Trust has been duly formed and is validly existing as
a statutory trust under the Connecticut Statutory Trust Act, Chapter 615 of
Title 34 of the Connecticut General Statutes, Section 500, et
seq. (the "Act").

	The Trust Agreement constitutes a valid and binding
obligation of State Street and the Institutional Trustee enforceable against
State Street and the Institutional Trustee in accordance with the terms
thereof.

	The Trust Agreement constitutes a valid and binding
obligation of the Sponsor and the Administrators, enforceable against the
Sponsor and the Administrators in accordance with its terms.

	The Trust has the requisite trust power and authority to
(a) execute and deliver, and to perform its obligations under, the
Operative Documents, and (b) perform its obligations under such Operative
Documents.

	Each of the Operative Documents to which the Trust is a
party constitutes a valid and binding obligation of the Trust, enforceable
against the Trust in accordance with the terms thereof.

	The Capital Securities have been duly authorized by the
Trust under the Trust Agreement, and the Capital Securities, when duly executed
and delivered to the Holders in accordance therewith, will be validly issued,
fully paid and nonassessable and will evidence undivided beneficial interests in
the assets of the Trust and will be entitled to the benefits of the Trust
Agreement.

	The Common Securities have been duly authorized by the
Trust Agreement, and the Common Securities, when duly executed and delivered to
the Company in accordance with the Trust Agreement, the Placement Agreement and
the Subscription Agreement and delivered and paid for in accordance therewith,
will be validly issued, fully paid and nonassessable and will evidence undivided
beneficial interests in the assets of the Trust and will be entitled to the
benefits of the Trust Agreement.

	Neither the execution, delivery or performance by the
Trust of the Operative Documents, the consummation by the Trust of the
transactions contemplated thereby, nor compliance by the Trust with any of the
terms and provisions thereof, (a) violates the Trust Agreement, or, to the
best of our knowledge, contravenes or will contravene any provision of, or
constitutes a default under, or results in any breach of, or results in the
creation of any lien (other than as permitted under the Operative Documents)
upon property of the Trust under, any indenture, mortgage, chattel mortgage,
deed of trust, conditional sales contract, bank loan or credit agreement,
license or other agreement or instrument, in each case known to us, to which it
is a party or by which it is bound or (b) violates any applicable
Connecticut law governing the Trust, or, to the best of our knowledge, any
judgment or order of any court or other tribunal, in each case known to us,
applicable to or binding on it.

	No consent, approval, order or authorization of, giving
of notice to, or registration with, or taking of any other action in respect of,
any Connecticut governmental authority regulating the Trust is required for the
execution, delivery, validity or performance of, or the carrying out by, the
Trust of any of the transactions contemplated by the Operative Documents, other
than any such consent, approval, order, authorization, registration, notice or
action as has been duly obtained, given or taken.

	The Holders, as the beneficial holders of the Capital
Securities, will be entitled to the same limitation of personal liability
extended to shareholders of domestic corporations organized under the laws of
the State.

	Under the Trust Agreement, the issuance of the Capital
Securities is not subject to preemptive rights.

	Assuming that the Trust will not be taxable as a
corporation for federal income tax purposes, but rather will be classified for
such purposes as a grantor trust, the Trust will not be subject to any tax, fee
or other government charge under the laws of the State of Connecticut or any
political subdivision thereof.

This opinion is rendered solely for the benefit of those
institutions listed on Schedule I hereto and their successors and
assigns in connection with the transactions contemplated by the Operative
Documents and may not be used or relied upon by any other person or for any
other purpose.

Very truly yours,

BINGHAM DANA LLP

SCHEDULE I

State Street Bank and Trust Company of Connecticut,
National Association

State Street Bank and Trust Company

First Tennessee Capital Markets

Keefe, Bruyette & Woods, Inc.

Preferred Term Securities III, Ltd.

Preferred Term Securities III, Inc.

Lewis, Rice & Fingersh, L.C.

Heritage Commerce Corp

McCutchen, Doyle, Brown & Enersen, LLP

EXHIBIT A TO EXHIBIT B-2

CERTIFICATE OF LEGAL EXISTENCE

See attached

EXHIBIT B-3

FORM OF TAX COUNSEL OPINION

 

Heritage Commerce Corp

150 Almaden Boulevard

San Jose, California 95113

Heritage Statutory Trust II

c/o Heritage Commerce Corp

150 Almaden Boulevard

San Jose, California 95113

First Tennessee Capital Markets

845 Crossover Lane, Suite 150

Memphis, Tennessee 38117

Keefe, Bruyette & Woods, Inc.

Two World Trade Center

New York, New York 10048

Ladies and Gentlemen:

We have acted as special tax counsel to Heritage Commerce
Corp and to Heritage Statutory Trust II in connection with the proposed issuance
of (i) Floating Rate Capital Securities, liquidation amount $1,000.00 per
Capital Security (the "Capital Securities") of Heritage Statutory Trust II, a
statutory business trust created under the laws of Connecticut (the "Trust"),
pursuant to the terms of the Amended and Restated Declaration of Trust dated as
of the date hereof by Heritage Commerce Corp, a California corporation (the
"Company"), State Street Bank and Trust Company of Connecticut, National
Association, as institutional trustee, and Lawrence D. McGovern, May Wong and
Richard L. Conniff, as Administrators (the "Trust Agreement"), (ii) Junior
Subordinated Deferrable Interest Debentures (the "Corresponding Debentures") of
the Company issued pursuant to the terms of an Indenture dated as of the date
hereof from the Company to State Street Bank and Trust Company of Connecticut,
National Association, as trustee (the "Indenture"), which Debentures are to be
sold by the Company to the Trust, and (iii) the Guarantee Agreement of the
Company with respect to the Capital Securities dated as of the date hereof (the
"Guarantee") between the Company and State Street Bank and Trust Company of
Connecticut, National Association, as guarantee trustee. The Capital Securities
and the Corresponding Debentures are to be issued as contemplated by the
Offering Circular (the "Offering Circular") dated July 20, 2001 prepared by
Preferred Term Securities III, Ltd., an entity formed under the Companies Law of
the Cayman Islands, and Preferred Term Securities III, Inc., a Delaware
corporation.

We have examined originals or copies, certified or otherwise
identified to our satisfaction, of documents, corporate records and other
instruments as we have deemed necessary or appropriate for purposes of this
opinion including (i) the Offering Circular, (ii) the Indenture,
(iii) the form of the Corresponding Debentures attached as an exhibit to
the Indenture, (iv) the Trust Agreement, (v) the Guarantee, and
(vi) the form of Capital Securities Certificate attached as an exhibit to
the Trust Agreement (collectively the "Documents"). Furthermore, we have relied
upon certain representations made by the Company and upon the opinion of Bingham
Dana LLP as to certain matters of Connecticut law. In such examination, we have
assumed the authenticity of all documents submitted to us as originals, the
conformity to original documents of all documents submitted to us as certified
or photostatic copies, the authenticity of the originals of such latter
documents, the genuineness of all signatures and the correctness of all
representations made therein. We have further assumed that there are no
agreements or understandings contemplated therein other than those contained in
the Documents.

Based upon the foregoing, and assuming (i) that the
final Documents will be substantially identical to the forms examined,
(ii) full compliance with all the terms of the final Documents, and
(iii) the accuracy of representations made by the Company and delivered to
us, we are of the opinion that:
(a)The Corresponding Debentures will be classified as
indebtedness for U.S. federal income tax purposes.

(b)The Trust will be characterized as a grantor trust and
not as an association taxable as a corporation for U.S. federal income tax
purposes.

The opinions expressed above are based on existing provisions
of the Internal Revenue Code of 1986, as amended (the "Code"), existing Treasury
regulations, published interpretations by the Internal Revenue Service of the
Code and such Treasury regulations, and existing court decisions, any of which
could be changed at any time. Any such changes may or may not be retroactively
applied, and may result in federal income tax consequences that differ from
those reflected in the opinions set forth above. We note that there is no
authority directly on point dealing with securities such as the Capital
Securities or with transactions of the type described herein, and that the
authorities on which this opinion is based are subject to various
interpretations. Further, you should be aware that opinions of counsel have no
official status and are not binding on the Internal Revenue Service or the
courts. Accordingly, we can provide no assurance that the interpretation of the
federal income tax laws set forth in our opinions will prevail if challenged by
the IRS in an administrative or judicial proceeding.

We have also assumed that each transaction contemplated
herein will be carried out strictly in accordance with the Documents. Any
variance in the facts may result in Federal income tax consequences that differ
from those reflected in the opinions set forth above.

Additionally, we undertake no obligation to update this
opinion in the event there is either a change in the legal authorities, in the
facts (including the taking of any action by any party to any of the
transactions described in the Documents relating to such transactions) or in the
Documents on which this opinion is based, or an inaccuracy in any of the
representations upon which we have relied in rendering this opinion.

We express no opinion with respect to any matter not
specifically addressed by the foregoing opinions, including state or local tax
consequences, or any federal, state, or local issue not specifically referred to
and discussed above including, without limitation, the effect on the matters
covered by this opinion of the laws of any other jurisdiction.

This letter is delivered for the benefit of the specified
addressees and may not be relied upon by any other person. No portion of this
letter may be quoted or otherwise referred to in any document or delivered to
any other person or entity without the express written consent of Lewis,
Rice & Fingersh, L.C. This opinion letter is rendered as of the date
set forth above.
Very truly yours,

LEWIS, RICE & FINGERSH, L.C.

Lewis, Rice & Fingersh, L.C.

500 N. Broadway, Suite 2000

St. Louis, Missouri 63102

Attention: Lawrence H. Weltman, Esq.

 
Re:Representations Concerning the Issuance of Floating
Rate Junior Subordinated Deferrable Interest Debentures (the "Debentures") to
Heritage Statutory Trust II (the "Trust") and Sale of Trust Securities (the
"Trust Securities") of the Trust

Ladies and Gentlemen:

In accordance with your request, Heritage Commerce Corp
(the "Company") hereby makes the following representations in connection with
the preparation of your opinion letter as to the United States federal income
tax consequences of the issuance by the Company of the Debentures to the Trust
and the sale of the Trust Securities.

Company hereby represents that:

	The sole assets of the Trust will be the Debentures,
proceeds of the Debentures, or both.

	The Company intends to use the net proceeds from the sale
of the Debentures for general corporate purposes.

	The Trust was not formed to conduct any trade or business
and is not authorized to conduct any trade or business. The Trust exists for the
exclusive purposes of (i) issuing and selling the Trust Securities, (ii) using
the proceeds from the sale of Trust Securities to acquire the Debentures, and
(iii) engaging only in activities necessary or incidental thereto.

	The Trust was formed to facilitate direct investment in
the assets of the Trust, and the existence of multiple classes of ownership is
incidental to that purpose. There is no intent to provide holders of such
interests in the Trust with diverse interests in the assets of the
Trust.

	The Company intends to create a debtor-creditor
relationship between the Company, as debtor, and the Trust, as a creditor, upon
the issuance and sale of the Debentures to the Trust by the Company. The Company
will (i) record and at all times continue to reflect the Debentures as
indebtedness on its separate books and records for financial accounting
purposes, and (ii) treat the Debentures as indebtedness for all United States
tax purposes.

	During each year, the Trust's income will consist solely
of payments made by the Company with respect to the Debentures. Such payments
will not be derived from the active conduct of a financial business by the
Trust. Both the Company's obligation to make such payments and the measurement
of the amounts payable by the Company are defined by the terms of the
Debentures. Neither the Company's obligation to make such payments nor the
measurement of the amounts payable by the Company is dependent on income or
profits of Company or any affiliate of the Company.

	The Company expects that it will be able to make, and
will make, timely payment of amounts identified by the Debentures as principal
and interest in accordance with the terms of the Debentures with available
capital or accumulated earnings.

	The Company presently has no intention to defer interest
payments on the Debentures, and it considers the likelihood of such a deferral
to be remote because, if it were to exercise its right to defer payments of
interest with respect to the Debentures, it would not be permitted to declare or
pay any dividends or distributions on, or redeem, purchase, acquire, or make a
liquidation payment with respect to, any capital stock of the Company or any
affiliate of the Company (other than payments of dividends or distributions to
the Company) or make any payment of principal of or interest or premium, if any,
on or repay, repurchase, or redeem any debt securities of the Company or any
affiliate of the Company that rank pari passu in all respects with or junior in
interest to the Debentures, in each case subject to limited exceptions stated in
Section 2.11 of the Indenture to be entered into in connection with the issuance
of the Debentures.

	Immediately after the issuance of the Debentures, the
debt-to-equity ratio of the Company (as determined for financial accounting
purposes, but excluding deposit liabilities from the Company's debt) will be
within standard depository institution industry norms and, in any event, will be
no higher than four to one (4 : 1).

	To the best of our knowledge, the Company is currently in
compliance with all federal, state, and local capital requirements, except to
the extent that failure to comply with any such requirements would not have a
material adverse effect on the Company and its affiliates.

	The Company will not issue any class of common stock or
preferred stock senior to the Debentures during their term.

	The Internal Revenue Service has not challenged the
interest deduction on any class of the Company's subordinated debt in the last
ten (10) years on the basis that such debt constitutes equity for federal income
tax purposes.

The above representations are accurate as of the date
below and will continue to be accurate through the issuance of the Trust
Securities, unless you are otherwise notified by us in writing. The undersigned
understands that you will rely on the foregoing in connection with rendering
certain legal opinions, and possesses the authority to make the representations
set forth in this letter on behalf of the Company.

Very truly yours,

HERITAGE COMMERCE CORP

 

Date: _______________
2001By:___________________________________

Title:______________________________
_____

EXHIBIT C

COMPANY SUBSIDIARIES

Heritage Bank South Valley

Heritage Bank East Bay

Heritage Bank of Commerce

Bank of Los Altos

EXHIBIT D

FORM OF QUARTERLY REPORT

Mr. Frederick Agu

Preferred Term Securities III, Ltd.

c/o The Chase Manhattan Bank

600 Travis Street

50th Floor

Houston, TX 77002

 

 

BANK HOLDING COMPANY

As of [March 31, June 30, September 30 or December 31],
20__

Tier 1 to Risk Weighted
Assets_________%

Ratio of Double
Leverage_________%

Non-Performing Assets to Loans and
OREO_________%

Ratio of Reserves to Non-Performing
Loans_________%

Ratio of Net Charge-Offs to
Loans_________%

Return on Average Assets
(annualized)**_________%

Net Interest Margin (annualized)**
_________%

Efficiency Ratio_________%

Ratio of Loans to
Assets_________%

Ratio of Loans to
Deposits_________%

Total Assets$________

Year to Date Income$________

___________________

*A table describing the quarterly report calculation
procedures is provided on page D-2

** To annualize Return on Average Assets and Net Interest
Margin do the following:

1st Quarter-multiply income statement item by 4,
then divide by balance sheet item(s)

2nd Quarter-multiply income statement item by
2,then divide by balance sheet item(s)

3rd Quarter-divide income statement item by 3,
then multiply by 4, then divide by balance sheet item(s)

4th Quarter-should already be an annual number

NO ADJUSTMENT SHOULD BE MADE TO BALANCE SHEET ITEMS

 

Financial Definitions

	
Report Item
	
Corresponding FRY-9C or LP Line Items with Line Item
corresponding Schedules
	
Description of Calculation

	
"Tier 1 Capital" to Risk Weighted Assets
	
BHCK7206 

Schedule HC-R
	
Tier 1 Risk Ratio: Core Capital (Tier 1)/ Risk-Adjusted
Assets

	
Ratio of Double Leverage
	
(BHCP3239+BHCP1273+BHCP0201)/(BHCP3210-BHCP3164-BHCP3165-BHCP3163-BHCP3238-BHCP4485-BHCP0087-BHCP0536-BHCP0202-BHCP0203)

Schedules PC & PC-A in the LP
	
Total equity investments (plus goodwill and intangibles) in
subsidiaries divided by the total equity capital. This field is calculated at
the parent company level. "Subsidiaries" include bank, bank holding company, and
nonbank subsidiaries.

	
Non-Performing Assets to Loans and OREO
	
(BHCK5525-BHCK3506+BHCK5526-
BHCK3507+BHCK2744)/(BHCK2122+BHCK2744) Schedules HC-C, HC-M & HC-
N
	
Total Nonperforming Assets (NPLs+Foreclosed Real Estate+Other
Nonaccrual & Repossessed Assets)/ Total Loans + Foreclosed Real
Estate

	
Ratio of Reserves to Non-Performing Loans
	
(BHCK3123+BHCK3128)/(BHCK5525-BHCK3506+BHCK5526-BHCK3507) 

Schedules HC & HC-N
	
Total Loan Loss and Allocated Transfer Risk Reserves/ Total
Nonperforming Loans (Nonaccrual + Restructured)

	
Ratio of Net Charge-Offs to Loans
	
(BHCK4635-BHCK4605)/(BHCK3516) 

Schedules HI-B & HC-K
	
Net charge offs for the period as a percentage of average
loans.

	
Return on Assets
	
(BHCK4340/BHCK3368)

Schedules HI & HC-K
	
Net Income as a percentage of Assets.

	
Net Interest Margin
	
(BHCK4519)/(BHCK3515+BHCK3365+BHCK3516+BHCK3401+BHCKB985) 

Schedules HI Memorandum and HC-K
	
(Net Interest Income Fully Taxable Equivalent, if available /
Average Earning Assets)

	
Efficiency Ratio
	
(BHCK4093)/(BHCK4519+BHCK4079) 

Schedule HI
	
(Noninterest Expense less Foreclosed Property Expense and
Amortization of Intangibles Expense)/ (Net Interest Income Fully Taxable
Equivalent, if available, plus Noninterest Income)

	
Ratio of Loans to Assets
	
(BHCKB529/BHCK2170)

Schedule HC
	
Total Loans & Leases (Net of Unearned Income & Gross of
Reserve)/ Total Assets

	
Ratio of Loans to Deposits
	
(BHCKB529)/(BHDM6631+BHDM6636+BHFN6631+BHFN6636)

Schedule HC
	
Total Loans & Leases (Net of Unearned Income & Gross of
Reserve)/ Total Deposits (Includes Domestic and Foreign Deposits)

	
Total Assets
	
(BHCK2170)

Schedule HC
	
The sum of total assets. Includes cash and balances due from
depository institutions; securities; federal funds sold and securities purchased
under agreements to resell; loans and lease financing receivables; trading
assets; premises and fixed assets; other real estate owned; investments in
unconsolidated subsidiaries and associated companies; customer's liability on
acceptances outstanding; intangible assets; and other assets.

	
Net Income
	
(BHCK4300)

Schedule HI
	
The sum of income (loss) before extraordinary items and other
adjustments and extraordinary items; and other adjustments, net of income taxes.

_________________________________________________

 

GUARANTEE AGREEMENT

by and between

HERITAGE COMMERCE CORP

and

STATE STREET BANK AND TRUST COMPANY

OF CONNECTICUT, NATIONAL ASSOCIATION

Dated as of July 31, 2001

 

 

 

_________________________________________________

GUARANTEE AGREEMENT

This GUARANTEE AGREEMENT (the "Guarantee"), dated
as of July 31, 2001, is executed and delivered by Heritage Commerce Corp, a
California corporation (the "Guarantor"), and State Street Bank and Trust
Company of Connecticut, National Association, a national banking association,
organized under the laws of the United States of America, as trustee (the
"Guarantee Trustee"), for the benefit of the Holders (as defined herein) from
time to time of the Capital Securities (as defined herein) of Heritage Statutory
Trust II, a Connecticut statutory trust (the "Issuer").

WHEREAS, pursuant to an Amended and Restated Declaration
of Trust (the "Declaration"), dated as of the date hereof among State Street
Bank and Trust Company of Connecticut, National Association, not in its
individual capacity but solely as institutional trustee, the administrators of
the Issuer named therein, the Guarantor, as sponsor, and the holders from time
to time of undivided beneficial interests in the assets of the Issuer, the
Issuer is issuing on the date hereof those undivided beneficial interests,
having an aggregate liquidation amount of $5,000,000, (the "Capital
Securities"); and

WHEREAS, as incentive for the Holders to purchase the Capital
Securities, the Guarantor desires irrevocably and unconditionally to agree, to
the extent set forth in this Guarantee, to pay to the Holders of Capital
Securities the Guarantee Payments (as defined herein) and to make certain other
payments on the terms and conditions set forth herein; 

NOW, THEREFORE, in consideration of the purchase by each
Holder of the Capital Securities, which purchase the Guarantor hereby agrees
shall benefit the Guarantor, the Guarantor executes and delivers this Guarantee
for the benefit of the Holders.

	

DEFINITIONS AND INTERPRETATION

	Definitions and
Interpretation.  

In this Guarantee, unless the context otherwise
requires:

	capitalized terms used in this Guarantee but not defined
in the preamble above have the respective meanings assigned to them in this
Section 1.1;

	a term defined anywhere in this Guarantee has the same
meaning throughout;

	all references to "the Guarantee" or "this Guarantee" are
to this Guarantee as modified, supplemented or amended from time to
time;

	all references in this Guarantee to "Articles" or
"Sections" are to Articles or Sections of this Guarantee, unless otherwise
specified;

	terms defined in the Declaration as at the date of
execution of this Guarantee have the same meanings when used in this Guarantee,
unless otherwise defined in this Guarantee or unless the context otherwise
requires; and

	a reference to the singular includes the plural and vice
versa.

"Affiliate" has the same meaning as given to that term
in Rule 405 of the Securities Act of 1933, as amended, or any successor
rule thereunder.

"Beneficiaries" means any Person to whom the Issuer is
or hereafter becomes indebted or liable.

"Capital Securities" has the meaning set forth in the
recitals to this Guarantee.

"Common Securities" means the common securities issued
by the Issuer to the Guarantor pursuant to the Declaration.

"Corporate Trust Office" means the office of the
Guarantee Trustee at which the corporate trust business of the Guarantee Trustee
shall, at any particular time, be principally administered, which office at the
date of execution of this Guarantee Agreement is located at 225 Asylum Street,
Goodwin Square, Hartford, Connecticut 06103.

"Covered Person" means any Holder of Capital
Securities.

"Debentures" means the debt securities of the
Guarantor designated the Floating Rate Junior Subordinated Deferrable Interest
Debentures due 2031 held by the Institutional Trustee (as defined in the
Declaration) of the Issuer.

"Declaration Event of Default" means an "Event of
Default" as defined in the Declaration.

"Event of Default" has the meaning set forth in
Section 2.4(a).

"Guarantee Payments" means the following payments or
distributions, without duplication, with respect to the Capital Securities, to
the extent not paid or made by the Issuer: (i) any accrued and unpaid
Distributions (as defined in the Declaration) which are required to be paid
on such Capital Securities to the extent the Issuer shall have funds available
therefor, (ii) the Redemption Price to the extent the Issuer has funds
available therefor, with respect to any Capital Securities called for redemption
by the Issuer, (iii) the Special Redemption Price to the extent the Issuer
has funds available therefor, with respect to Capital Securities redeemed upon
the occurrence of a Special Event, and (iv) upon a voluntary or involuntary
liquidation, dissolution, winding-up or termination of the Issuer (other than in
connection with the distribution of Debentures to the Holders of the Capital
Securities in exchange therefor as provided in the Declaration), the lesser of
(a) the aggregate of the liquidation amount and all accrued and unpaid
Distributions on the Capital Securities to the date of payment, to the extent
the Issuer shall have funds available therefor, and (b) the amount of
assets of the Issuer remaining available for distribution to Holders in
liquidation of the Issuer (in either case, the "Liquidation Distribution").

"Guarantee Trustee" means State Street Bank and Trust
Company of Connecticut, National Association, until a Successor Guarantee
Trustee has been appointed and has accepted such appointment pursuant to the
terms of this Guarantee and thereafter means each such Successor Guarantee
Trustee.

"Guarantor" means Heritage Commerce Corp and each of
its successors and assigns.

"Holder" means any holder, as registered on the books
and records of the Issuer, of any Capital Securities; provided,
however, that, in determining whether the Holders of the requisite
percentage of Capital Securities have given any request, notice, consent or
waiver hereunder, "Holder" shall not include the Guarantor or any Affiliate of
the Guarantor.

"Indemnified Person" means the Guarantee Trustee, any
Affiliate of the Guarantee Trustee, or any officers, directors, shareholders,
members, partners, employees, representatives, nominees, custodians or agents of
the Guarantee Trustee.

"Indenture" means the Indenture dated as of the date
hereof between the Guarantor and State Street Bank and Trust Company of
Connecticut, National Association, not in its individual capacity but solely as
trustee, and any indenture supplemental thereto pursuant to which the Debentures
are to be issued to the institutional trustee of the Issuer.

"Issuer" has the meaning set forth in the opening
paragraph to this Guarantee.

"Liquidation Distribution" has the meaning set forth
in the definition of "Guarantee Payments" herein.

"Majority in liquidation amount of the Capital
Securities" means Holder(s) of outstanding Capital Securities, voting
together as a class, but separately from the holders of Common Securities, of
more than 50% of the aggregate liquidation amount (including the stated amount
that would be paid on redemption, liquidation or otherwise, plus accrued and
unpaid Distributions to the date upon which the voting percentages are
determined) of all Capital Securities then outstanding.

"Obligations" means any costs, expenses or liabilities
(but not including liabilities related to taxes) of the Issuer other than
obligations of the Issuer to pay to holders of any Trust Securities the amounts
due such holders pursuant to the terms of the Trust Securities.

"Officer's Certificate" means, with respect to any
Person, a certificate signed by one Authorized Officer of such Person. Any
Officer's Certificate delivered with respect to compliance with a condition or
covenant provided for in this Guarantee shall include:

(a)a statement that each officer signing the Officer's
Certificate has read the covenant or condition and the definitions relating
thereto;

(b)a brief statement of the nature and scope of the
examination or investigation undertaken by each officer in rendering the
Officer's Certificate;

(c)a statement that each such officer has made such
examination or investigation as, in such officer's opinion, is necessary to
enable such officer to express an informed opinion as to whether or not such
covenant or condition has been complied with; and

(d)a statement as to whether, in the opinion of each such
officer, such condition or covenant has been complied with.

"Person" means a legal person, including any
individual, corporation, estate, partnership, joint venture, association, joint
stock company, limited liability company, trust, unincorporated association, or
government or any agency or political subdivision thereof, or any other entity
of whatever nature.

"Redemption Price" has the meaning set forth in the
Indenture.

"Responsible Officer" means, with respect to the
Guarantee Trustee, any officer within the Corporate Trust Office of the
Guarantee Trustee including any Vice President, Assistant Vice President,
Secretary, Assistant Secretary or any other officer of the Guarantee Trustee
customarily performing functions similar to those performed by any of the above
designated officers and also, with respect to a particular corporate trust
matter, any other officer to whom such matter is referred because of that
officer's knowledge of and familiarity with the particular subject.

"Special Event" has the meaning set forth in the
Indenture.

"Special Redemption Price" has the meaning set forth
in the Indenture.

"Successor Guarantee Trustee" means a successor
Guarantee Trustee possessing the qualifications to act as Guarantee Trustee
under Section 3.1.

"Trust Securities" means the Common Securities and the
Capital Securities.

	

POWERS, DUTIES AND RIGHTS OF

GUARANTEE TRUSTEE

	Powers and Duties of the Guarantee
Trustee.

	This Guarantee shall be held by the Guarantee Trustee
for the benefit of the Holders of the Capital Securities, and the Guarantee
Trustee shall not transfer this Guarantee to any Person except a Holder of
Capital Securities exercising his or her rights pursuant to Section 4.4(b) or to
a Successor Guarantee Trustee on acceptance by such Successor Guarantee Trustee
of its appointment to act as Successor Guarantee Trustee. The right, title and
interest of the Guarantee Trustee shall automatically vest in any Successor
Guarantee Trustee, and such vesting and cessation of title shall be effective
whether or not conveyancing documents have been executed and delivered pursuant
to the appointment of such Successor Guarantee Trustee.

	If an Event of Default actually known to a Responsible
Officer of the Guarantee Trustee has occurred and is continuing, the Guarantee
Trustee shall enforce this Guarantee for the benefit of the Holders of the
Capital Securities.

	The Guarantee Trustee, before the occurrence of any Event
of Default and after curing all Events of Default that may have occurred, shall
undertake to perform only such duties as are specifically set forth in this
Guarantee, and no implied covenants shall be read into this Guarantee against
the Guarantee Trustee. In case an Event of Default has occurred (that has not
been cured or waived pursuant to Section 2.4) and is actually known to a
Responsible Officer of the Guarantee Trustee, the Guarantee Trustee shall
exercise such of the rights and powers vested in it by this Guarantee, and use
the same degree of care and skill in its exercise thereof, as a prudent person
would exercise or use under the circumstances in the conduct of his or her own
affairs.

	No provision of this Guarantee shall be construed to
relieve the Guarantee Trustee from liability for its own negligent action, its
own negligent failure to act, or its own willful misconduct, except
that:

	prior to the occurrence of any Event of Default and after
the curing or waiving of all such Events of Default that may have
occurred:

	the duties and obligations of the Guarantee Trustee shall
be determined solely by the express provisions of this Guarantee, and the
Guarantee Trustee shall not be liable except for the performance of such duties
and obligations as are specifically set forth in this Guarantee, and no implied
covenants or obligations shall be read into this Guarantee against the Guarantee
Trustee; and

	in the absence of bad faith on the part of the Guarantee
Trustee, the Guarantee Trustee may conclusively rely, as to the truth of the
statements and the correctness of the opinions expressed therein, upon any
certificates or opinions furnished to the Guarantee Trustee and conforming to
the requirements of this Guarantee; but in the case of any such certificates or
opinions that by any provision hereof are specifically required to be furnished
to the Guarantee Trustee, the Guarantee Trustee shall be under a duty to examine
the same to determine whether or not they conform to the requirements of this
Guarantee;

	the Guarantee Trustee shall not be liable for any error
of judgment made in good faith by a Responsible Officer of the Guarantee
Trustee, unless it shall be proved that such Responsible Officer of the
Guarantee Trustee or the Guarantee Trustee was negligent in ascertaining the
pertinent facts upon which such judgment was made;

	the Guarantee Trustee shall not be liable with respect to
any action taken or omitted to be taken by it in good faith in accordance with
the direction of the Holders of not less than a Majority in liquidation amount
of the Capital Securities relating to the time, method and place of conducting
any proceeding for any remedy available to the Guarantee Trustee, or exercising
any trust or power conferred upon the Guarantee Trustee under this Guarantee;
and

	no provision of this Guarantee shall require the
Guarantee Trustee to expend or risk its own funds or otherwise incur personal
financial liability in the performance of any of its duties or in the exercise
of any of its rights or powers, if the Guarantee Trustee shall have reasonable
grounds for believing that the repayment of such funds is not reasonably assured
to it under the terms of this Guarantee or security and indemnity, reasonably
satisfactory to the Guarantee Trustee, against such risk or liability is not
reasonably assured to it.

	Certain Rights of Guarantee Trustee.

	Subject to the provisions of Section 2.1:

	The Guarantee Trustee may conclusively rely, and shall be
fully protected in acting or refraining from acting upon, any resolution,
certificate, statement, instrument, opinion, report, notice, request, direction,
consent, order, bond, debenture, note, other evidence of indebtedness or other
paper or document believed by it to be genuine and to have been signed, sent or
presented by the proper party or parties.

	Any direction or act of the Guarantor contemplated by
this Guarantee shall be sufficiently evidenced by an Officer's
Certificate.

	Whenever, in the administration of this Guarantee, the
Guarantee Trustee shall deem it desirable that a matter be proved or established
before taking, suffering or omitting any action hereunder, the Guarantee Trustee
(unless other evidence is herein specifically prescribed) may, in the absence of
bad faith on its part, request and conclusively rely upon an Officer's
Certificate of the Guarantor which, upon receipt of such request, shall be
promptly delivered by the Guarantor.

	The Guarantee Trustee shall have no duty to see to any
recording, filing or registration of any instrument (or any re-recording,
refiling or re-registration thereof).

	The Guarantee Trustee may consult with counsel of its
selection, and the advice or opinion of such counsel with respect to legal
matters shall be full and complete authorization and protection in respect of
any action taken, suffered or omitted by it hereunder in good faith and in
accordance with such advice or opinion. Such counsel may be counsel to the
Guarantor or any of its Affiliates and may include any of its employees. The
Guarantee Trustee shall have the right at any time to seek instructions
concerning the administration of this Guarantee from any court of competent
jurisdiction.

	The Guarantee Trustee shall be under no obligation to
exercise any of the rights or powers vested in it by this Guarantee at the
request or direction of any Holder, unless such Holder shall have provided to
the Guarantee Trustee such security and indemnity, reasonably satisfactory to
the Guarantee Trustee, against the costs, expenses (including attorneys' fees
and expenses and the expenses of the Guarantee Trustee's agents, nominees or
custodians) and liabilities that might be incurred by it in complying with such
request or direction, including such reasonable advances as may be requested by
the Guarantee Trustee; provided, however, that nothing contained
in this Section 2.2(a)(vi) shall relieve the Guarantee Trustee, upon the
occurrence of an Event of Default, of its obligation to exercise the rights and
powers vested in it by this Guarantee.

	The Guarantee Trustee shall not be bound to make any
investigation into the facts or matters stated in any resolution, certificate,
statement, instrument, opinion, report, notice, request, direction, consent,
order, bond, debenture, note, other evidence of indebtedness or other paper or
document, but the Guarantee Trustee, in its discretion, may make such further
inquiry or investigation into such facts or matters as it may see fit.

	The Guarantee Trustee may execute any of the trusts or
powers hereunder or perform any duties hereunder either directly or by or
through agents, nominees, custodians or attorneys, and the Guarantee Trustee
shall not be responsible for any misconduct or negligence on the part of any
agent or attorney appointed with due care by it hereunder.

	Any action taken by the Guarantee Trustee or its agents
hereunder shall bind the Holders of the Capital Securities, and the signature of
the Guarantee Trustee or its agents alone shall be sufficient and effective to
perform any such action. No third party shall be required to inquire as to the
authority of the Guarantee Trustee to so act or as to its compliance with any of
the terms and provisions of this Guarantee, both of which shall be conclusively
evidenced by the Guarantee Trustee's or its agent's taking such action.

	Whenever in the administration of this Guarantee the
Guarantee Trustee shall deem it desirable to receive instructions with respect
to enforcing any remedy or right or taking any other action hereunder, the
Guarantee Trustee (i) may request instructions from the Holders of a
Majority in liquidation amount of the Capital Securities, (ii) may refrain
from enforcing such remedy or right or taking such other action until such
instructions are received, and (iii) shall be protected in conclusively
relying on or acting in accordance with such instructions.

	The Guarantee Trustee shall not be liable for any action
taken, suffered, or omitted to be taken by it in good faith, without negligence,
and reasonably believed by it to be authorized or within the discretion or
rights or powers conferred upon it by this Guarantee.

	No provision of this Guarantee shall be deemed to impose
any duty or obligation on the Guarantee Trustee to perform any act or acts or
exercise any right, power, duty or obligation conferred or imposed on it, in any
jurisdiction in which it shall be illegal or in which the Guarantee Trustee
shall be unqualified or incompetent in accordance with applicable law to perform
any such act or acts or to exercise any such right, power, duty or obligation.
No permissive power or authority available to the Guarantee Trustee shall be
construed to be a duty.

	Not Responsible for Recitals or Issuance of
Guarantee.  

The recitals contained in this Guarantee shall be taken
as the statements of the Guarantor, and the Guarantee Trustee does not assume
any responsibility for their correctness. The Guarantee Trustee makes no
representation as to the validity or sufficiency of this Guarantee.

	Events of Default; Waiver.

	An Event of Default under this Guarantee will occur
upon the failure of the Guarantor to perform any of its payment or other
obligations hereunder.

	The Holders of a Majority in liquidation amount of the
Capital Securities may, voting or consenting as a class, on behalf of the
Holders of all of the Capital Securities, waive any past Event of Default and
its consequences. Upon such waiver, any such Event of Default shall cease to
exist, and shall be deemed to have been cured, for every purpose of this
Guarantee, but no such waiver shall extend to any subsequent or other default or
Event of Default or impair any right consequent thereon.

	Events of Default; Notice.

	The Guarantee Trustee shall, within 90 days after the
occurrence of an Event of Default, transmit by mail, first class postage
prepaid, to the Holders of the Capital Securities and the Guarantor, notices of
all Events of Default actually known to a Responsible Officer of the Guarantee
Trustee, unless such defaults have been cured before the giving of such notice,
provided, however, that the Guarantee Trustee shall be protected
in withholding such notice if and so long as a Responsible Officer of the
Guarantee Trustee in good faith determines that the withholding of such notice
is in the interests of the Holders of the Capital Securities.

	The Guarantee Trustee shall not be deemed to have
knowledge of any Event of Default unless the Guarantee Trustee shall have
received written notice from the Guarantor or a Holder of the Capital Securities
(except in the case of a payment default), or a Responsible Officer of the
Guarantee Trustee charged with the administration of this Guarantee shall have
obtained actual knowledge thereof.

	

GUARANTEE TRUSTEE

	Guarantee Trustee; Eligibility.

	There shall at all times be a Guarantee Trustee which
shall:

	not be an Affiliate of the Guarantor, and

	be a corporation organized and doing business under the
laws of the United States of America or any State or Territory thereof or of the
District of Columbia, or Person authorized under such laws to exercise corporate
trust powers, having a combined capital and surplus of at least 50 million
U.S. dollars ($50,000,000), and subject to supervision or examination by
Federal, State, Territorial or District of Columbia authority. If such
corporation publishes reports of condition at least annually, pursuant to law or
to the requirements of the supervising or examining authority referred to above,
then, for the purposes of this Section 3.1(a)(ii), the combined capital and
surplus of such corporation shall be deemed to be its combined capital and
surplus as set forth in its most recent report of condition so
published.

	If at any time the Guarantee Trustee shall cease to be
eligible to so act under Section 3.1(a), the Guarantee Trustee shall
immediately resign in the manner and with the effect set out in
Section 3.2(c).

	If the Guarantee Trustee has or shall acquire any
"conflicting interest" within the meaning of Section 310(b) of the Trust
Indenture Act, the Guarantee Trustee shall either eliminate such interest or
resign to the extent and in the manner provided by, and subject to this
Guarantee.

	Appointment, Removal and Resignation of Guarantee
Trustee.

	Subject to Section 3.2(b), the Guarantee Trustee may
be appointed or removed without cause at any time by the Guarantor except during
an Event of Default.

	The Guarantee Trustee shall not be removed in accordance
with Section 3.2(a) until a Successor Guarantee Trustee has been appointed and
has accepted such appointment by written instrument executed by such Successor
Guarantee Trustee and delivered to the Guarantor.

	The Guarantee Trustee appointed to office shall hold
office until a Successor Guarantee Trustee shall have been appointed or until
its removal or resignation. The Guarantee Trustee may resign from office
(without need for prior or subsequent accounting) by an instrument in writing
executed by the Guarantee Trustee and delivered to the Guarantor, which
resignation shall not take effect until a Successor Guarantee Trustee has been
appointed and has accepted such appointment by an instrument in writing executed
by such Successor Guarantee Trustee and delivered to the Guarantor and the
resigning Guarantee Trustee.

	If no Successor Guarantee Trustee shall have been
appointed and accepted appointment as provided in this Section 3.2 within
60 days after delivery of an instrument of removal or resignation, the
Guarantee Trustee resigning or being removed may petition any court of competent
jurisdiction for appointment of a Successor Guarantee Trustee. Such court may
thereupon, after prescribing such notice, if any, as it may deem proper, appoint
a Successor Guarantee Trustee.

	No Guarantee Trustee shall be liable for the acts or
omissions to act of any Successor Guarantee Trustee.

	Upon termination of this Guarantee or removal or
resignation of the Guarantee Trustee pursuant to this Section 3.2, the Guarantor
shall pay to the Guarantee Trustee all amounts owing to the Guarantee Trustee
under Sections 7.2 and 7.3 accrued to the date of such termination, removal
or resignation.

	

GUARANTEE

	Guarantee.

	The Guarantor irrevocably and unconditionally agrees
to pay in full to the Holders the Guarantee Payments (without duplication of
amounts theretofore paid by the Issuer), as and when due, regardless of any
defense (except the defense of payment by the Issuer), right of set-off or
counterclaim that the Issuer may have or assert. The Guarantor's obligation to
make a Guarantee Payment may be satisfied by direct payment of the required
amounts by the Guarantor to the Holders or by causing the Issuer to pay such
amounts to the Holders.

	The Guarantor hereby also agrees to assume any and all
Obligations of the Issuer and in the event any such Obligation is not so
assumed, subject to the terms and conditions hereof, the Guarantor hereby
irrevocably and unconditionally guarantees to each Beneficiary the full payment,
when and as due, of any and all Obligations to such Beneficiaries. This
Agreement is intended to be for the benefit of, and to be enforceable by, all
such Beneficiaries, whether or not such Beneficiaries have received notice
hereof.

	Waiver of Notice and
Demand.  

The Guarantor hereby waives notice of acceptance of this
Guarantee and of any liability to which it applies or may apply, presentment,
demand for payment, any right to require a proceeding first against the Issuer
or any other Person before proceeding against the Guarantor, protest, notice of
nonpayment, notice of dishonor, notice of redemption and all other notices and
demands.

	Obligations Not Affected.   

The obligations, covenants, agreements and duties of the
Guarantor under this Guarantee shall in no way be affected or impaired by reason
of the happening from time to time of any of the following:

	the release or waiver, by operation of law or otherwise,
of the performance or observance by the Issuer of any express or implied
agreement, covenant, term or condition relating to the Capital Securities to be
performed or observed by the Issuer;

	the extension of time for the payment by the Issuer of
all or any portion of the Distributions, Redemption Price, Special Redemption
Price, Liquidation Distribution or any other sums payable under the terms of the
Capital Securities or the extension of time for the performance of any other
obligation under, arising out of or in connection with, the Capital Securities
(other than an extension of time for payment of Distributions, Redemption Price,
Special Redemption Price, Liquidation Distribution or other sum payable that
results from the extension of any interest payment period on the Debentures or
any extension of the maturity date of the Debentures permitted by the
Indenture);

	any failure, omission, delay or lack of diligence on the
part of the Holders to enforce, assert or exercise any right, privilege, power
or remedy conferred on the Holders pursuant to the terms of the Capital
Securities, or any action on the part of the Issuer granting indulgence or
extension of any kind;

	the voluntary or involuntary liquidation, dissolution,
sale of any collateral, receivership, insolvency, bankruptcy, assignment for the
benefit of creditors, reorganization, arrangement, composition or readjustment
of debt of, or other similar proceedings affecting, the Issuer or any of the
assets of the Issuer;

	any invalidity of, or defect or deficiency in, the
Capital Securities;

	the settlement or compromise of any obligation guaranteed
hereby or hereby incurred; or

	any other circumstance whatsoever that might otherwise
constitute a legal or equitable discharge or defense of a guarantor, it being
the intent of this Section 4.3 that the obligations of the Guarantor
hereunder shall be absolute and unconditional under any and all
circumstances.

There shall be no obligation of the Holders to give notice
to, or obtain consent of, the Guarantor with respect to the happening of any of
the foregoing.

	Rights of Holders.

	The Holders of a Majority in liquidation amount of
the Capital Securities have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Guarantee Trustee in
respect of this Guarantee or to direct the exercise of any trust or power
conferred upon the Guarantee Trustee under this Guarantee; provided,
however, that (subject to Section 2.1) the Guarantee Trustee shall
have the right to decline to follow any such direction if the Guarantee Trustee
being advised by counsel determines that the action or proceeding so directed
may not lawfully be taken or if the Guarantee Trustee in good faith by its board
of directors or trustees, executive committees or a trust committee of directors
or trustees and/or Responsible Officers shall determine that the action or
proceedings so directed would involve the Guarantee Trustee in personal
liability.

	Any Holder of Capital Securities may institute a legal
proceeding directly against the Guarantor to enforce the Guarantee Trustee's
rights under this Guarantee, without first instituting a legal proceeding
against the Issuer, the Guarantee Trustee or any other Person. The Guarantor
waives any right or remedy to require that any such action be brought first
against the Issuer, the Guarantee Trustee or any other Person before so
proceeding directly against the Guarantor.

	Guarantee of Payment.  

This Guarantee creates a guarantee of payment and not of
collection.

	Subrogation.  

The Guarantor shall be subrogated to all (if any) rights
of the Holders of Capital Securities against the Issuer in respect of any
amounts paid to such Holders by the Guarantor under this Guarantee;
provided, however, that the Guarantor shall not (except to the
extent required by mandatory provisions of law) be entitled to enforce or
exercise any right that it may acquire by way of subrogation or any indemnity,
reimbursement or other agreement, in all cases as a result of payment under this
Guarantee, if, after giving effect to any such payment, any amounts are due and
unpaid under this Guarantee. If any amount shall be paid to the Guarantor in
violation of the preceding sentence, the Guarantor agrees to hold such amount in
trust for the Holders and to pay over such amount to the Holders.

	Independent Obligations.  

The Guarantor acknowledges that its obligations hereunder
are independent of the obligations of the Issuer with respect to the Capital
Securities and that the Guarantor shall be liable as principal and as debtor
hereunder to make Guarantee Payments pursuant to the terms of this Guarantee
notwithstanding the occurrence of any event referred to in subsections (a)
through (g), inclusive, of Section 4.3 hereof.

	Enforcement by a
Beneficiary.  

A Beneficiary may enforce the obligations of the
Guarantor contained in Section 4.1(b) directly against the Guarantor and the
Guarantor waives any right or remedy to require that any action be brought
against the Issuer or any other person or entity before proceeding against the
Guarantor. The Guarantor shall be subrogated to all rights (if any) of any
Beneficiary against the Issuer in respect of any amounts paid to the
Beneficiaries by the Guarantor under this Agreement; provided,
however, that the Guarantor shall not (except to the extent required by
mandatory provisions of law) be entitled to enforce or exercise any rights that
it may acquire by way of subrogation or any indemnity, reimbursement or other
agreement, in all cases as a result of payment under this Agreement, if at the
time of any such payment, and after giving effect to such payment, any amounts
are due and unpaid under this Agreement.

	

LIMITATION OF TRANSACTIONS; SUBORDINATION

	Limitation of Transactions.  

So long as any Capital Securities remain outstanding, if
(a) there shall have occurred and be continuing an Event of Default or a
Declaration Event of Default or (b) the Guarantor shall have selected an
Extension Period as provided in the Declaration and such period, or any
extension thereof, shall be continuing, then the Guarantor shall not and shall
not permit any Affiliate to (x) declare or pay any dividends or
distributions on, or redeem, purchase, acquire, or make a liquidation payment
with respect to, any of the Guarantor's or such Affiliate's capital stock (other
than payments of dividends or distributions to the Guarantor) or make any
guarantee payments with respect to the foregoing or (y) make any payment of
principal of or interest or premium, if any, on or repay, repurchase or redeem
any debt securities of the Guarantor or any Affiliate that rank pari passu
in all respects with or junior in interest to the Debentures (other than,
with respect to clauses (x) and (y) above, (i) repurchases, redemptions or
other acquisitions of shares of capital stock of the Guarantor in connection
with any employment contract, benefit plan or other similar arrangement with or
for the benefit of one or more employees, officers, directors or consultants, in
connection with a dividend reinvestment or stockholder stock purchase plan or in
connection with the issuance of capital stock of the Guarantor (or securities
convertible into or exercisable for such capital stock) as consideration in an
acquisition transaction entered into prior to the occurrence of the Event of
Default, Declaration Event of Default or Extension Period, as applicable,
(ii) as a result of any exchange or conversion of any class or series of
the Guarantor's capital stock (or any capital stock of a subsidiary of the
Guarantor) for any class or series of the Guarantor's capital stock or of any
class or series of the Guarantor's indebtedness for any class or series of the
Guarantor's capital stock, (iii) the purchase of fractional interests in
shares of the Guarantor's capital stock pursuant to the conversion or exchange
provisions of such capital stock or the security being converted or exchanged,
(iv) any declaration of a dividend in connection with any stockholder's
rights plan, or the issuance of rights, stock or other property under any
stockholder's rights plan, or the redemption or repurchase of rights pursuant
thereto, (v) any dividend in the form of stock, warrants, options or other
rights where the dividend stock or the stock issuable upon exercise of such
warrants, options or other rights is the same stock as that on which the
dividend is being paid or ranks pari passu with or junior to such stock
and any cash payments in lieu of fractional shares issued in connection
therewith, or (vi) payments under this Guarantee).

	Ranking.  

This Guarantee will constitute an unsecured obligation of
the Guarantor and will rank subordinate and junior in right of payment to all
present and future Senior Indebtedness (as defined in the Indenture) of the
Guarantor. By their acceptance thereof, each Holder of Capital Securities agrees
to the foregoing provisions of this Guarantee and the other terms set forth
herein.

The right of the Guarantor to participate in any distribution
of assets of any of its subsidiaries upon any such subsidiary's liquidation or
reorganization or otherwise is subject to the prior claims of creditors of that
subsidiary, except to the extent the Guarantor may itself be recognized as a
creditor of that subsidiary. Accordingly, the Guarantor's obligations under this
Guarantee will be effectively subordinated to all existing and future
liabilities of the Guarantor's subsidiaries, and claimants should look only to
the assets of the Guarantor for payments thereunder. This Guarantee does not
limit the incurrence or issuance of other secured or unsecured debt of the
Guarantor, including Senior Indebtedness of the Guarantor, under any indenture
that the Guarantor may enter into in the future or otherwise.

	

TERMINATION

	Termination.  

This Guarantee shall terminate as to the Capital
Securities (i) upon full payment of the Redemption Price or Special
Redemption Price of all Capital Securities, (ii) upon the distribution of
the Debentures to the Holders of all of the Capital Securities or
(iii) upon full payment of the amounts payable in accordance with the
Declaration upon dissolution of the Issuer. This Guarantee will continue to be
effective or will be reinstated, as the case may be, if at any time any Holder
of Capital Securities must restore payment of any sums paid under the Capital
Securities or under this Guarantee.

	

INDEMNIFICATION

	Exculpation.

	No Indemnified Person shall be liable, responsible or
accountable in damages or otherwise to the Guarantor or any Covered Person for
any loss, damage or claim incurred by reason of any act or omission performed or
omitted by such Indemnified Person in good faith in accordance with this
Guarantee and in a manner that such Indemnified Person reasonably believed to be
within the scope of the authority conferred on such Indemnified Person by this
Guarantee or by law, except that an Indemnified Person shall be liable for any
such loss, damage or claim incurred by reason of such Indemnified Person's
negligence or willful misconduct with respect to such acts or
omissions.

	An Indemnified Person shall be fully protected in relying
in good faith upon the records of the Issuer or the Guarantor and upon such
information, opinions, reports or statements presented to the Issuer or the
Guarantor by any Person as to matters the Indemnified Person reasonably believes
are within such other Person's professional or expert competence and who, if
selected by such Indemnified Person, has been selected with reasonable care by
such Indemnified Person, including information, opinions, reports or statements
as to the value and amount of the assets, liabilities, profits, losses, or any
other facts pertinent to the existence and amount of assets from which
Distributions to Holders of Capital Securities might properly be
paid.

	Indemnification.

	The Guarantor agrees to indemnify each Indemnified
Person for, and to hold each Indemnified Person harmless against, any and all
loss, liability, damage, claim or expense incurred without negligence or willful
misconduct on the part of the Indemnified Person, arising out of or in
connection with the acceptance or administration of the trust or trusts
hereunder, including the costs and expenses (including reasonable legal fees and
expenses) of the Indemnified Person defending itself against, or investigating,
any claim or liability in connection with the exercise or performance of any of
the Indemnified Person's powers or duties hereunder. The obligation to indemnify
as set forth in this Section 7.2 shall survive the resignation or removal
of the Guarantee Trustee and the termination of this Guarantee.

	Promptly after receipt by an Indemnified Person under
this Section 7.2 of notice of the commencement of any action, such
Indemnified Person will, if a claim in respect thereof is to be made against the
Guarantor under this Section 7.2, notify the Guarantor in writing of the
commencement thereof; but the failure so to notify the Guarantor (i) will
not relieve the Guarantor from liability under paragraph (a) above unless
and to the extent that the Guarantor did not otherwise learn of such action and
such failure results in the forfeiture by the Guarantor of substantial rights
and defenses and (ii) will not, in any event, relieve the Guarantor from
any obligations to any Indemnified Person other than the indemnification
obligation provided in paragraph (a) above. The Guarantor shall be entitled
to appoint counsel of the Guarantor's choice at the Guarantor's expense to
represent the Indemnified Person in any action for which indemnification is
sought (in which case the Guarantor shall not thereafter be responsible for the
fees and expenses of any separate counsel retained by the Indemnified Person or
Persons except as set forth below); provided, however, that such
counsel shall be reasonably satisfactory to the Indemnified Person.
Notwithstanding the Guarantor's election to appoint counsel to represent the
Guarantor in an action, the Indemnified Person shall have the right to employ
separate counsel (including local counsel), and the Guarantor shall bear the
reasonable fees, costs and expenses of such separate counsel if (i) the use
of counsel chosen by the Guarantor to represent the Indemnified Person would
present such counsel with a conflict of interest, (ii) the actual or
potential defendants in, or targets of, any such action include both the
Indemnified Person and the Guarantor and the Indemnified Person shall have
reasonably concluded that there may be legal defenses available to it and/or
other Indemnified Person(s) which are different from or additional to those
available to the Guarantor, (iii) the Guarantor shall not have employed
counsel satisfactory to the Indemnified Person to represent the Indemnified
Person within a reasonable time after notice of the institution of such action
or (iv) the Guarantor shall authorize the Indemnified Person to employ
separate counsel at the expense of the Guarantor. The Guarantor will not,
without the prior written consent of the Indemnified Persons, settle or
compromise or consent to the entry of any judgment with respect to any pending
or threatened claim, action, suit or proceeding in respect of which
indemnification or contribution may be sought hereunder (whether or not the
Indemnified Persons are actual or potential parties to such claim or action)
unless such settlement, compromise or consent includes an unconditional release
of each Indemnified Person from all liability arising out of such claim, action,
suit or proceeding.

	Compensation; Reimbursement of
Expenses.  

The Guarantor agrees:

	to pay to the Guarantee Trustee from time to time such
compensation for all services rendered by it hereunder as the parties shall
agree to from time to time (which compensation shall not be limited by any
provision of law in regard to the compensation of a trustee of an express
trust); and

	except as otherwise expressly provided herein, to
reimburse the Guarantee Trustee upon request for all reasonable expenses,
disbursements and advances incurred or made by it in accordance with any
provision of this Guarantee (including the reasonable compensation and the
expenses and disbursements of its agents and counsel), except any such expense,
disbursement or advance as may be attributable to its negligence or willful
misconduct.

The provisions of this Section 7.3 shall survive the
resignation or removal of the Guarantee Trustee and the termination of this
Guarantee.

	

MISCELLANEOUS

	Successors and Assigns.  

All guarantees and agreements contained in this Guarantee
shall bind the successors, assigns, receivers, trustees and representatives of
the Guarantor and shall inure to the benefit of the Holders of the Capital
Securities then outstanding. Except in connection with any merger or
consolidation of the Guarantor with or into another entity or any sale, transfer
or lease of the Guarantor's assets to another entity, in each case, to the
extent permitted under the Indenture, the Guarantor may not assign its rights or
delegate its obligations under this Guarantee without the prior approval of the
Holders of at least a Majority in liquidation amount of the Capital
Securities.

	Amendments.  

Except with respect to any changes that do not adversely
affect the rights of Holders of the Capital Securities in any material respect
(in which case no consent of Holders will be required), this Guarantee may be
amended only with the prior approval of the Holders of not less than a Majority
in liquidation amount of the Capital Securities. The provisions of the
Declaration with respect to amendments thereof apply to the giving of such
approval.

	Notices.  

All notices provided for in this Guarantee shall be in
writing, duly signed by the party giving such notice, and shall be delivered,
telecopied or mailed by first class mail, as follows:

	If given to the Guarantee Trustee, at the Guarantee
Trustee's mailing address set forth below (or such other address as the
Guarantee Trustee may give notice of to the Holders of the Capital Securities
and the Guarantor):

State Street Bank and Trust Company of Connecticut, National
Association

225 Asylum Street, Goodwin Square

Hartford, Connecticut 06103

Attention: Corporate Trust Department

Telecopy: (860) 244-1889

With a copy to:

State Street Bank and Trust Company

P.O.Box 778

Boston, Massachusetts 02102-0778

Attention: Paul D. Allen, Corporate Trust Department

Telecopy: (617) 662-1462 

	If given to the Guarantor, at the Guarantor's mailing
address set forth below (or such other address as the Guarantor may give notice
of to the Holders of the Capital Securities and to the Guarantee
Trustee):

Heritage Commerce Corp

150 Almaden Boulevard

San Jose, California 95113

Attention: Lawrence D. McGovern

Telecopy: (408) 947-6919

	If given to any Holder of the Capital Securities, at the
address set forth on the books and records of the Issuer.

All such notices shall be deemed to have been given when
received in person, telecopied with receipt confirmed, or mailed by first class
mail, postage prepaid, except that if a notice or other document is refused
delivery or cannot be delivered because of a changed address of which no notice
was given, such notice or other document shall be deemed to have been delivered
on the date of such refusal or inability to deliver.

	Benefit.  

This Guarantee is solely for the benefit of the Holders
of the Capital Securities and, subject to Section 2.1(a), is not separately
transferable from the Capital Securities.

	Governing Law.  

THIS GUARANTEE SHALL BE GOVERNED BY, AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK, WITHOUT REGARD
TO CONFLICT OF LAWS PRINCIPLES THEREOF (OTHER THAN SECTION 5-1401 OF THE NEW
YORK GENERAL OBLIGATIONS LAW).

	Counterparts.  

This Guarantee may be executed in one or more
counterparts, each of which shall be an original, but all of which taken
together shall constitute one and the same instrument.

Signatures appear on the following page

THIS GUARANTEE is executed as of the day and year first
above written.
HERITAGE COMMERCE CORP,

as Guarantor

By:/s/ Lawrence D. McGovern 

Name:Lawrence D. McGovern 

Title: Chief Financial Officer 

 

 

STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, as
Guarantee Trustee

By:/s/ Paul D. Allen 

Name:Paul D. Allen 

Title:Vice President 

 

HERITAGE STATUTORY TRUST II

HERITAGE COMMERCE CORP

 SUBSCRIPTION AGREEMENT

July 31, 2001

THIS SUBSCRIPTION AGREEMENT (this
"Agreement") made among Heritage Statutory Trust II (the "Trust"), a statutory
trust created under the Connecticut Statutory Trust Act (Chapter 615 of
Title 34 of the Connecticut General Statutes, Section 500, et
seq.), Heritage Commerce Corp, a California corporation, with its principal
offices located at 150 Almaden Boulevard, San Jose, California 95113 (the
"Company" and, collectively with the Trust, the "Offerors"), and Preferred Term
Securities III, Ltd. (the "Purchaser").

RECITALS:

	The Trust desires to issue 5,000 of its Floating Rate
Capital Securities (the "Capital Securities"), liquidation amount $1,000.00 per
Capital Security, representing an undivided beneficial interest in the assets of
the Trust (the "Offering"), to be issued pursuant to an Amended and Restated
Declaration of Trust (the "Declaration") by and among the Company, State Street
Bank and Trust Company of Connecticut, National Association ("State Street"),
the administrators named therein, and the holders (as defined therein), which
Capital Securities are to be guaranteed by the Company with respect to
distributions and payments upon liquidation, redemption and otherwise pursuant
to the terms of a Guarantee Agreement between the Company and State Street, as
trustee (the "Guarantee"); and

	The proceeds from the sale of the Capital Securities will
be combined with the proceeds from the sale by the Trust to the Company of its
common securities, and will be used by the Trust to purchase an equivalent
amount of Floating Rate Junior Subordinated Deferrable Interest Debentures of
the Company (the "Debentures") to be issued by the Company pursuant to an
indenture to be executed by the Company and State Street, as trustee (the
"Indenture"); and

	In consideration of the premises and the mutual
representations and covenants hereinafter set forth, the parties hereto agree as
follows:

	PURCHASE AND SALE OF CAPITAL SECURITIES

	Upon the execution of this Subscription Agreement,
the Purchaser hereby agrees to purchase from the Trust 5,000 Capital Securities
at a price equal to $1,000.00 per Capital Security (the "Purchase Price") and
the Trust agrees to sell such Capital Securities to the Purchaser for said
Purchase Price. The rights and preferences of the Capital Securities are
set

forth in the Declaration. The Purchase Price is payable in
immediately available funds on July 31, 2001, or such other business day as may
be designated by the Purchaser, but in no event later than August 7, 2001 (the
"Closing Date"). The Offerors shall provide the Purchaser wire transfer
instructions no later than 1 day following the date hereof.

	The certificate for the Capital Securities shall be
delivered by the Trust on the Closing Date to the Purchaser or its
designee.

	The Placement Agreement, dated July 20, 2001 (the
"Placement Agreement"), among the Offerors and the Placement Agents identified
therein includes certain representations and warranties, covenants and
conditions to closing and certain other matters governing the Offering. The
Placement Agreement is hereby incorporated by reference into this Agreement and
the Purchaser shall be entitled to each of the benefits of the Placement Agents
and the Purchaser under the Placement Agreement and shall be entitled to enforce
the obligations of the Offerors under such Placement Agreement as fully as if
the Purchaser were a party to such Placement Agreement.

	REPRESENTATIONS AND WARRANTIES OF PURCHASER

	The Purchaser understands and acknowledges that
neither the Capital Securities, the Debentures nor the Guarantee have been
registered under the Securities Act of 1933, as amended (the "Securities Act"),
or any other applicable securities law, are being offered for sale by the Trust
in transactions not requiring registration under the Securities Act, and may not
be offered, sold, pledged or otherwise transferred by the Purchaser except in
compliance with the registration requirements of the Securities Act or any other
applicable securities laws, pursuant to an exemption therefrom or in a
transaction not subject thereto.

	The Purchaser represents, warrants and certifies that
(i) it is not a "U.S. person" as such term is defined in Rule 902
under the Securities Act, (ii) it is not acquiring the Capital Securities
for the account or benefit of any such U.S. person, (iii) the offer and
sale of Capital Securities to the Purchaser constitutes an "offshore
transaction" under Regulation S of the Securities Act, and (iv) it
will not engage in hedging transactions with regard to the Capital Securities
unless such transactions are conducted in compliance with the Securities
Act.

	The Purchaser represents and warrants that it is
purchasing the Capital Securities for its own account, for investment, and not
with a view to, or for offer or sale in connection with, any distribution
thereof in violation of the Securities Act or other applicable securities laws,
subject to any requirement of law that the disposition of its property be at all
times within its control and subject to its ability to resell such Capital
Securities pursuant to an effective registration statement under the Securities
Act or under Rule 144A or any other exemption from registration available
under the Securities Act or any other applicable Securities law.

	The Purchaser has full power and authority to execute and
deliver this Agreement, to make the representations and warranties specified
herein, and to consummate the transactions contemplated herein and it has full
right and power to subscribe for Capital Securities and perform its obligations
pursuant to this Agreement.

	The Purchaser is a Cayman Islands Company whose business
includes issuance of certain notes and acquiring the Capital Securities and it
has such knowledge and experience in financial and business matters that it is
capable of evaluating the merits and risks of purchasing the Capital Securities
and it is aware that it may be required to bear the economic risk of an
investment in the Capital Securities.

	MISCELLANEOUS

	Any notice or other communication given hereunder
shall be deemed sufficient if in writing and sent by registered or certified
mail, return receipt requested, international courier or delivered by hand
against written receipt therefor, or by facsimile transmission and confirmed by
telephone, to the following addresses, or such other address as may be furnished
to the other parties as herein provided:

To the Offerors:Heritage Commerce Corp

150 Almaden Boulevard

San Jose, California 95113

Attention: Lawrence D. McGovern

Fax: (408) 947-6919

To the Purchaser: Preferred Term Securities III, Ltd.

c/o QSPV, Limited

P.O. Box 1093 GT

Queensgate House

South Church Street

George Town, Grand Cayman

Grand Cayman Islands, British West Indies

Attention: The Directors/603694

Fax: (345) 945-7100

Unless otherwise expressly provided herein, notices
shall be deemed to have been given on the date of mailing, except notice of
change of address, which shall be deemed to have been given when received.

	This Agreement shall not be changed, modified or amended
except by a writing signed by the parties to be charged, and this Agreement may
not be discharged except by performance in accordance with its terms or by a
writing signed by the party to be charged.

	Upon the execution and delivery of this Agreement by the
Purchaser, this Agreement shall become a binding obligation of the Purchaser
with respect to the purchase of Capital Securities as herein provided.

	NOTWITHSTANDING THE PLACE WHERE THIS AGREEMENT MAY BE
EXECUTED BY ANY OF THE PARTIES HERETO, THE PARTIES EXPRESSLY AGREE THAT ALL THE
TERMS AND PROVISIONS HEREOF SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED
BY THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS
OF LAW.

	The parties agree to execute and deliver all such further
documents, agreements and instruments and take such other and further action as
may be necessary or appropriate to carry out the purposes and intent of this
Agreement.

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

Signatures appear on the following page

IN WITNESS WHEREOF, I have set my hand the day
and year first written above.

 

PREFERRED TERM SECURITIES III, LTD.

 

By:/s/ Ryan Haylock 

Print Name:Ryan Haylock 

Title: Director 

IN WITNESS WHEREOF, this Subscription
Agreement is agreed to and accepted as of the day and year first written
above.

 

HERITAGE COMMERCE CORP

 

By:/s/ Lawrence D. McGovern 

Name:Lawrence D. McGovern 

Title:Chief Financial Officer 

 

HERITAGE STATUTORY TRUST II

 

By:/s/ May Wong 

Name:May Wong 

Title: AdministratorONE YEAR EMPLOYMENT AND

CHANGE OF CONTROL AGREEMENT

     THIS AGREEMENT (the "Agreement") is made and entered into as of this 12th day of February 2002 by and between Adams Golf Management Corp, a Delaware corporation, and the corporation's Chief Financial Officer, Russell Fleischer (the "Executive").  Adams Golf Management Corp. is sometimes referred to herein as the "Employer".

WITNESSETH

     WHEREAS, the Board of Directors of Management Corp. (the Board") has determined that it is in the best interests of Management Corp. and its group of affiliated entities, the ultimate parent of which is Adams Golf, Inc., a Delaware Corporation ("Adams Golf," collectively with the affiliated entities, the "Company") as well as the shareholders of Adams Golf, for Management Corp. to agree, for a period of one (1) year, to assure either employment or the equivalent benefits of employment to Executive, who is responsible for critical policy-making functions of the Company; and

     WHEREAS, the Board believes that if the Company is faced with changing its present size or nature within the next year, it is important to enable Executive, without being distracted by the uncertainties of his own employment situation, to perform his regular duties, and, where appropriate, to assess such changes and advise the Board and/or the Board of Directors of Adams Golf (the "Adams Board") as to the best interests of the Company and its shareholders and to take such other action regarding such changes as the Board and/or the Adams Board determines to be appropriate;

     NOW, THEREFORE, in consideration of the foregoing, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

AGREEMENT

	
Section
	
I
	
Definitions

	 	
(a)
	
"Base Salary" means the Executive's annual base salary in effect

	
on the day prior to a Sale (as defined below), Change of Control (as defined below), or at the time of execution of this Agreement, whichever is higher,

	 	
(b)
	
"Cause" means the following:

	 	 	
(i)
	
the Executive's admission or conviction of a felony,

	 	 	
(ii)
	
the Executive's commission of an act of dishonesty in the course of his duties,

	 	 	
(iii)
	
the Executive's repeated disregard of policy directives of the Employer,

	 	 	
(iv)
	
the Executive's repeated failure to satisfactorily perform assigned duties, or

	 	 	
(v)
	
the Executive's breach of his fiduciary responsibilities or fiduciary duties as an employee of the Employer.

	 	 	 	 
	 	
(c)
	
"Termination" means the following (without the Executive's 

	
express written consent) after written notice provided by the Executive and the failure of the Employer or its successors to remedy the following within thirty (30) days after receipt of such written notice:

	 	 	
(i)
	
a reduction in the Executive's Base Salary;

	 	 	
(ii)
	
a relocation of the Executive's principal place of business to any location which is not within the greater Dallas/Fort Worth metropolitan area;

	 	 	
(iii)
	
the assignment to the Executive of any duties inconsistent with and inferior to the position with the Employer that the Executive held immediately prior to the execution of the Agreement, or a significant adverse alteration in the nature or status of the Executive's responsibilities or the conditions of the Executive's employment from those in effect immediately prior to the execution of this Agreement;

	 	 	
(iv)
	
the failure by the Employer to continue in effect any compensation plan in which the Executive participates immediately prior to the execution of this Agreement that is material to the Executive's total compensation, including, but not limited to, Adams Golf Employee Stock Option Plan, or any additional or substitute plan adopted prior to the execution of this agreement, or the failure by the Employer to continue the Executive's participation in any compensation plan referred to above on a basis less favorable, both in terms of benefits provided and the level of the Executive's participation relative to other participants as existed at the time of execution of this Agreement;

	 	 	
(v)
	
failure by the Employer to continue to provide the Executive with benefits substantially similar at a substantially similar cost to those enjoyed by the Executive under any of the Employer's life insurance, medical, health and accident, or disability plans in which the Executive was participating at the execution of this Agreement, the taking of any action by the Employer which would directly or indirectly materially reduce any of such benefits or deprive the Executive of any material fringe benefit enjoyed by the Executive at the executive of this Agreement.

	 	 	
(vi)
	
firing or laying off the Executive.

	 	 	
(vii)
	
any material breach of this Agreement by the Employer or its successors.

	 	
(d)
	
"Sale Termination" means (1) within one year from the date this 

	
contract is entered into, the Executive is terminated (as defined above) without cause (as defined above); and (2) at the time of termination, the following is imminently anticipated or actually takes place:

	 	 	
(i)
	
a majority of the capital stock of Adams Golf is sold or transferred to an unaffiliated entity, or

	 	 	
(ii)
	
Substantially all of the assets of Adams Golf are sold or transferred to an unaffiliated entity, or

	 	
(e)
	
"Change of Control Termination" means (1) within one year from 

	
the date this contract is entered into, the Executive is terminated (as defined above) without cause (as defined above); and (2) at the time of termination, the following is imminently anticipated or actually takes place:

	 	 	
(i)
	
any person is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, or securities of Adams Golf, representing fifty-one (51%) percent or more of the combined voting power of Adams Golf's then outstanding securities;

	 	 	
(ii)
	
the stockholders of Adams golf approve a merger or consolidation, a sale or disposition of all or substantially all of Adams Golf's assets or a plan of liquidation or dissolution of Adams Golf;

	 	 	 	 
	
Section
	
2
	
Termination Resulting from Sale or Change of Control.

	
Upon a Sale or Change of Control Termination, the following shall apply:

	 	
(a)
	
within 30 days of the date of termination, all unpaid Base Salary 

	
(as defined below) accrued, and provide the Executive with all benefits and expense reimbursements to which the Executive would otherwise be entitled, through and including the date of termination, including, without limitation, compensation for vacation days accrued in the year of termination which are unused as of the termination date.

	 	
(b)
	
in exchange for a General Release in form and substance 

	
reasonably satisfactory to the Employer receive:

	 	 	
(i)
	
payments of Base Salary to the Executive for the 12 month period following the date of termination at such times as salary payments were made to management employees of Adams golf;

	 	 	
(ii)
	
continued substantially equal medical benefits for the 12 month period following the date of termination.

	 	 	
(iii)
	
the immediate vesting of any stock options granted under the Adams Golf Employee Stock Option Plan or any substituted or amended plan prior to the execution of the Agreement.  Executive shall have 120 days thereafter to exercise those stock options.

	 	
(c)
	
Any payments owed to the Executive pursuant to Section 2(b) 

	
shall be offset by any severance payments paid to the Executive by the Employer or its successor.

	 	 	 	 
	
Section
	
3
	
No Mitigation.  In the event of a Sale Termination, Change of 

	
Control Termination, or Restructuring Termination, the Executive shall not be required to mitigate the payments or benefits to be received by the Executive hereunder by securing other employment or otherwise.

	 	 	 	 
	
Section
	
4
	
Employment Terminable only For Goof Cause for a Period of 

	
One Year.  In addition to a change of control agreement, this Agreement shall also serve as a 

	
one-year contract of employment terminable only for cause (as defined above).  After the initial one year period from the date this contract is entered into, the employment status of Executive shall revert back to "at-will" and, from that point forward, Employer reserves all rights to cause the Executive's employment to be terminated at any time with or without cause.

	 	 	 	 
	
Section
	
5
	
Successors Bound.  The rights and obligations of the Employer 

	
hereunder shall inure to the benefit and are binding upon the successor of the Employer.

	 	 	 	 
	
Section
	
6
	
Notices and Other Documents.  All payments, requests, notices 

	
and the like may be made to the Executive by mailing the same to the Executive.  Notices, requests and the like sent by the Executive to Adams golf at Attn: Human Resources, Adams Golf, 2801 E. Plano Parkway, Plano, TX 75074, or to such other address as Adams Golf may furnish to the Executive for this purpose from time to time in writing.

	 	 	 	 
	
Section
	
7
	
Employment Taxes.  All payments made under this Agreement 

	
shall be subject to withholding tax, other employment taxes and other withholds and deductions as required by applicable law or regulation, as in effect from time to time.

	 	 	 	 
	
Section
	
8
	
Term.  The term of this agreement shall last for a period of one 

	
year from the date this contract is entered into.  If a Sale Termination, Change of Control Termination or Downsizing Termination or a Termination for Cause shall not have occurred within one year from the date this contract was entered into, this Agreement shall expire.  Executive shall, at that time, become an "at-will" employee and shall not have the employment or benefit rights as contemplated by this agreement.

	 	 	 	 
	 	 	 	 
	
MISCELLANEOUS PROVISIONS

	 	 	 	 
	
Section
	
9
	
Assignment.  This Agreement and the Executive's rights and 

	
obligations hereunder may not be assigned by the Executive.  The Employer may assign its right, together with its obligations hereunder (i) to any successor-in-interest, or (ii) to third parties in connection with any sale, transfer or other disposition of all or substantially all of the business or assets; in any event the obligations of the Employer hereunder shall be binding on its successor or permitted assign, whether by merger, consolidation or acquisition of all or substantially all of its businesses or assets.

	 	 	 	 
	
Section
	
10
	
Significance Of Headings.  Section headings contained herein 

	
are solely for the purpose of aiding in speedy location of subject matter and are not in any sense to be given weight in the construction of this Agreement.  Accordingly, in case of any question with respect to the construction of this Agreement, it is to be construed as though such section headings had been omitted.

	 	 	 	 
	
Section
	
11
	
Applicable Law, Venue.  This Agreement shall be governed and 

	
construed according to the laws of the State of Texas.  Any action brought by either party arising out of this agreement shall take place in Plano, Texas.

	 	 	 	 
	
Section
	
12
	
Entire Agreement.  The provisions of this Agreement are 

	
intended by the parties as a complete, conclusive and final expression of their agreement concerning the subject matter hereof.  This Agreement supersedes all prior agreements concerning the subject matter, and no other statement, representation, agreement or understanding, oral or written, made prior to or at the execution thereof, shall vary or modify the written terms hereof.  No amendments, modifications or releases from any provision hereof shall be effective unless in writing and signed by both parties.

	 	 	 	 
	
Section
	
13
	
Waiver.  Unless otherwise mutually agreed in writing, no 

	
departure from, waiver of, or omission to require compliance with any of the terms hereof by either party shall be deemed to authorize any prior or subsequent departure or waiver, or obligate either party to continue any departure or waiver.

	 	 	 	 
	
Section
	
14
	
Severability.  Any provision or part of this Agreement prohibited 

	
by applicable law shall be ineffective to the extent of such prohibition without invalidating the remaining provisions or parts hereof.

	 	 	 	 
	
Section
	
15
	
Arbitration.  In the event a dispute arises under this Agreement

	
which cannot be resolved, such dispute shall be submitted to arbitration and resolved by a panel of three arbitrators (who shall be lawyers), in a decision required by a majority of the arbitrators.  If the parties cannot agree upon the panel of three arbitrators, then each party may pick an arbitrator and the two chosen arbitrators shall choose upon the three arbitrator panel.  The arbitration shall be conducted in accordance with the Arbitration Rules of the American Arbitration Association.  Venue shall be Plano, Texas.  The award or decision rendered by the arbitration panel shall be final, binding and conclusive and judgment may be entered upon such award by any court of competent jurisdiction.

	 	 	 	 
	 	 	 	 

               IN WITNESS WHEREOF, this Agreement has been duly executed by each of the parties hereto as of the date first written above.

                                                                (Employee)

                                                                /s/ Russell Fleischer____

                                                                Russell Fleischer

                                                                Chief Financial Officer

                                                                ADAMS GOLF

                                                                /s/ O.G. Brewer________

                                                                Oliver G. (Chip) Brewer, III

                                                                CEO & President

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