Document:

Exhibit 10.1

 

SECURITIES PURCHASE AGREEMENT

 

This
Securities Purchase Agreement (this “Agreement”)
is dated as of June 18, 2010, by and among Heritage Commerce Corp, a
California corporation (the “Company”),
and each purchaser identified on the signature pages hereto (each,
including its successors and assigns, a “Purchaser”
and collectively, the “Purchasers”).

 

RECITALS

 

A.                                   The Company and
each Purchaser are executing and delivering this Agreement in reliance upon the
exemption from securities registration afforded by Section 4(2) of
the Securities Act of 1933, as amended (the “Securities Act”), and Rule 506 of Regulation
D (“Regulation D”)
as promulgated by the United States Securities and Exchange Commission (the “Commission”) under the
Securities Act.

 

B.                                     Each Purchaser,
severally and not jointly, wishes to purchase, and the Company wishes to sell,
upon the terms and conditions stated in this Agreement, that aggregate number
of shares of the Company’s Series B mandatorily convertible cumulative
perpetual preferred stock, $1,000 liquidation preference per share (the “Series B Preferred Shares”),
set forth below such Purchaser’s name on the signature page of this
Agreement. When purchased, the Series B Preferred Shares will have the
terms set forth in a certificate of determination for the Series B
Preferred Shares in the form attached as Exhibit A hereto (the “Series B Certificate of Determination”)
made a part of the Company’s Articles of Incorporation, as amended, by the
filing of the Series B Certificate of Determination with the California
Secretary of State (the “California
Secretary”). 
Except as otherwise provided herein, the Series B Preferred Shares
will convert into shares (the “Underlying
Shares” and, together with the Series B Preferred
Shares and the Series C Preferred Shares, the “Securities”) of the common stock, no par value
per share, of the Company (the “Common Stock”),
subject to and in accordance with the terms and conditions of the Series B
Certificate of Determination.

 

C.                                     Castle Creek Capital
Partners IV, LP (“Castle Creek”)
is purchasing 4,815 shares of the Series B Preferred Shares and 12,960
shares of the Company’s Series C convertible perpetual preferred stock,
$1,000 liquidation preference per share (“Series C
Preferred Shares”). 
The Series C Preferred Shares will convert into Common Stock as
provided in the Series C Certificate of Determination (as defined below),
only upon a subsequent transfer to a non-affiliate of Castle Creek, and such
shares of Common Stock shall be included herein as “Underlying Shares.”  When purchased, the Series C Preferred
Shares will have the terms set forth in a certificate of determination for the
Series C Preferred Shares in the form attached as Exhibit B
hereto (the “Series C Certificate
of Determination”) made a part of the Company’s Articles
of Incorporation, as amended, by the filing of the Series C Certificate of
Determination with the California Secretary. 
The Series B Preferred Shares and the Series C Preferred
Shares are collectively referred to as the “Preferred Shares.”

 

D.                                    Patriot
Financial Partners, L.P. and Patriot Financial Partners Parallel, L.P.
(collectively “Patriot”) are purchasing in the aggregate 9,731.25 shares of the
Series B Preferred Shares and 8,043.75 shares of the Company’s Series C
Preferred Shares.  The Series C
Preferred Shares will convert into Common Stock as provided in the Series C
Certificate of Determination only upon a subsequent transfer to a non-affiliate
of Patriot and such shares of Common Stock shall be included herein as “Underlying
Shares.”

 

E.                                      The amount
raised from the Series B Preferred Shares and the Series C Preferred
Stock shall aggregate at least $75 million.

 

F.                                      Contemporaneously
with the execution and delivery of this Agreement, the parties hereto are executing
and delivering a Registration Rights Agreement, in the form attached hereto as Exhibit C
(the “Registration Rights
Agreement”), pursuant to which, among other things, the
Company will agree to provide certain registration rights with respect to the
Securities under the Securities Act and the rules and regulations
promulgated thereunder and applicable state securities laws.

 

G.                                     The Company has
engaged Sandler O’Neill & Partners, L.P. as its exclusive placement
agents (the “Placement Agent”)
for the offering of the Preferred Shares.

 

1

 

NOW,
THEREFORE, IN CONSIDERATION of the mutual covenants contained in this
Agreement, and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the Company and the Purchasers
hereby agree as follows:

 

ARTICLE I

DEFINITIONS

 

1.1                                 Definitions.  In addition to the terms defined elsewhere in
this Agreement, for all purposes of this Agreement, the following terms shall
have the meanings indicated in this Article I:

 

“Action” means any action, suit,
inquiry, notice of violation, proceeding (including any partial proceeding such
as a deposition) or investigation pending or, to the Company’s Knowledge,
threatened in writing against the Company, any Subsidiary or any of their
respective properties or any officer, director or employee of the Company or
any Subsidiary acting in his or her capacity as an officer, director or
employee before or by any federal, state, county, local or foreign court,
arbitrator, governmental or administrative agency, regulatory authority, stock
market, stock exchange or trading facility.

 

“Affiliate” means, with
respect to any Person, any other Person that, directly or indirectly through
one or more intermediaries, Controls, is controlled by or is under common
control with such Person, as such terms are used in and construed under Rule 405
under the Securities Act.

 

“Agency” has the meaning set forth
in Section 3.1(oo).

 

“Agreement” shall have the
meaning ascribed to such term in the Preamble.

 

“Articles of Incorporation” means the
Articles of Incorporation of the Company and all amendments and certificates of
determination thereto, as the same may be amended from time to time.

 

“Bank” means the Company’s wholly owned
subsidiary, Heritage Bank of Commerce, a California banking corporation.

 

“Bank Board” has the
meaning set forth in Section 4.15.

 

“Bank Board Observer” has the meaning
set forth in Section 4.15.

 

“Bank Board Representative” has the
meaning set forth in Section 4.15.

 

“BHC Act” means the Bank Holding
Company Act of 1956, as amended.

 

“Board of Directors” has the
meaning set forth in Section 2.2(v).

 

“Business Day” means a day,
other than a Saturday or Sunday, on which banks in New York City and
California are open for the general transaction of business.

 

“Buy-In” has the meaning set forth
in Section 4.1(e).

 

“Buy-In Price” has the
meaning set forth in Section 4.1(e).

 

“California Courts” means the
state and federal courts sitting in the State of California.

 

“California Secretary” has the
meaning set forth in the Recitals.

 

“Castle Creek” has the
meaning set forth in the Recitals.

 

“CIBCA” means the Change in Bank
Control Act.

 

2

 

“Closing” means the initial closing
of the purchase and sale of the Preferred Shares pursuant to this Agreement.

 

“Closing Bid Price” means, for any
security as of any date, the last closing price for such security on the
Principal Trading Market, as reported by Bloomberg, or, if the Principal
Trading Market begins to operate on an extended hours basis and does not
designate the closing bid price then the last bid price of such security prior
to 4:00 p.m., New York City Time, as reported by Bloomberg, or, if the
Principal Trading Market is not the principal securities exchange or trading
market for such security, the last closing price of such security on the
principal securities exchange or trading market where such security is listed
or traded as reported by Bloomberg, or if the foregoing do not apply, the last
closing price of such security in the over-the-counter market on the electronic
bulletin board for such security as reported by Bloomberg, or, if no closing
bid price is reported for such security by Bloomberg, the average of the bid
prices of any market makers for such security as reported in the “pink sheets”
by Pink Sheets LLC (formerly the National Quotation Bureau, Inc.). If the
Closing Bid Price cannot be calculated for a security on a particular date on
any of the foregoing bases, the Closing Bid Price of such security on such date
shall be the fair market value as mutually determined by the Company and the
holder. If the Company and the holder are unable to agree upon the fair market
value of such security, then the Company shall, within two Business Days submit
via facsimile (a) the disputed determination to an independent, reputable
investment bank selected by the Company and approved by the holder or (b) the
disputed arithmetic calculation to the Company’s independent, outside
accountant. The Company shall cause at its expense the investment bank or the
accountant, as the case may be, to perform the determinations or calculations
and notify the Company and the holder of the results no later than ten Business
Days from the time it receives the disputed determinations or calculations.
Such investment bank’s or accountant’s determination or calculation, as the
case may be, shall be binding upon all parties absent demonstrable error. All
such determinations shall be appropriately adjusted for any stock dividend,
stock split, stock combination or other similar transaction during the
applicable calculation period.

 

“Closing Date” means the
Trading Day when all of the Transaction Documents have been executed and
delivered by the applicable parties thereto, and all of the conditions set
forth in Sections 2.1, 2.2, 5.1 and 5.2 hereof are satisfied, or such other
date as the parties may mutually agree.

 

“Code” has the meaning set forth
in Section 3.1(qq).

 

“Controlled Group” has the
meaning set forth in Section 3.1(qq).

 

“Commission” has the
meaning set forth in the Recitals.

 

“Common Stock” has the
meaning set forth in the Recitals, and also includes any securities into which
the Common Stock may hereafter be reclassified or changed.

 

“Company Counsel” means
Buchalter Nemer, a professional corporation.

 

“Company Deliverables” has the
meaning set forth in Section 2.2(a).

 

“Company Reports” has the
meaning set forth in Section 3.1(kk).

 

“Company’s Knowledge” means with
respect to any statement made to the knowledge of the Company, that the
statement is based upon the actual knowledge of the executive officers of the
Company having responsibility for the matter or matters that are the subject of
the statement after reasonable investigation.

 

“Control” (including the terms “controlling”,
“controlled by” or “under common control with”) means the possession, direct or
indirect, of the power to direct or cause the direction of the management and
policies of a Person, whether through the ownership of voting securities, by
contract or otherwise.

 

“Deadline Date” has the
meaning set forth in Section 4.1(e).

 

“DFI” means the California
Department of Financial Institutions.

 

3

 

“Disclosure Materials” has the
meaning set forth in Section 3.1(h).

 

“DTC” means The Depository Trust
Company.

 

“Effective Date” means the date
on which the initial Registration Statement required by the terms hereof is
first declared effective by the Commission.

 

“Environmental Laws” has the
meaning set forth in Section 3.1(l).

 

“ERISA” has the meaning set forth
in Section 3.1(qq).

 

“ERISA Entity” has the meaning
set forth in Section 3.2(p)(ii).

 

“Exchange Act” means the
Securities Exchange Act of 1934, as amended, or any successor statute, and the rules and
regulations promulgated thereunder.

 

“Expedited Insurance” has the
meaning set forth in Section 4.20(e).

 

“FDIC” means the Federal Deposit
Insurance Corporation.

 

“Federal Reserve” has the
meaning set forth in Section 3.1(kk).

 

“Follow-up Special Meeting” has the
meaning set forth in Section 4.11(b).

 

“GAAP” means U.S. generally
accepted accounting principles, as applied by the Company.

 

“Indemnified Person” has the
meaning set forth in Section 4.8(b).

 

“Institutional Inventor” has the
meaning set forth in Section 4.15.

 

“Insurer” has the meaning set forth
in Section 3.1(oo).

 

“Intellectual Property” has the
meaning set forth in Section 3.1(r).

 

“Legend Removal Date” has the
meaning set forth in Section 4.1(c).

 

“Lien” means any lien, charge,
claim, encumbrance, security interest, right of first refusal, preemptive right
or other restrictions of any kind.

 

“Loan Investor” has the meaning set forth
in Section 3.1(oo).

 

“Material Adverse Effect” means any
circumstance, effect, event, change or development that individually or in the
aggregate that has, or is reasonably expected to have, (i) a material and
adverse effect on the legality, validity or enforceability of any Transaction
Document, (ii) any material and adverse effect on the results of
operations, assets, properties, business, or financial condition, of the
Company and its Subsidiaries, taken as a whole, or (iii) any adverse
impairment to the Company’s ability to perform its obligations under any
Transaction Document; provided, however, in determining whether a Material
Adverse Effect has occurred, there shall be excluded any effect to the extent
resulting from the following: (A) changes, after the date hereof, in
generally accepted accounting principles or regulatory accounting requirements
applicable to financial institutions or their holding companies, except to the
extent such change has a disproportionate adverse effect on the Company and its
Subsidiaries, taken as a whole, (B) changes, after the date hereof, in
laws of general applicability or interpretations thereof by courts or
governmental authorities, except to the extent such change has a
disproportionate adverse effect on the Company and its Subsidiaries, taken as a
whole, (C) actions or omissions by any party taken with the prior written
permission of the other party or required under this Agreement,
(D) changes in the market price or trading volumes of the Common Stock
(but not the underlying causes of such changes), (E)  the imposition and 

 

4

 

announcement
of any regulatory enforcement action by the FDIC or DFI as to the Bank and by
the Federal Reserve as to the Company to the extent such matters were as
disclosed on Schedule 3.1(mm) as of the date of this Agreement,
(F) the public disclosure of this Agreement or the transactions
contemplated hereby, or (G) changes, after the date hereof, in global or
national or regional political conditions (including the outbreak of war or
acts of terrorism) or in general or regional economic or market conditions
affecting financial institutions or their holding companies generally except to
the extent that any such changes in general or regional economic or market
conditions have a disproportionate adverse effect the Company and its
Subsidiaries, taken as a whole.

 

“Material Contract” means any
contract of the Company that was filed as an exhibit to the SEC Reports on file
as of the date of this Agreement pursuant to Item 601 of Regulation S-K.

 

“Material Permits” has the meaning
set forth in Section 3.1(p).

 

“Money Laundering Laws” has the
meaning set forth in Section 3.1(ii).

 

“New Security” has the meaning
set forth in Section 4.20(a).

 

“Non-Public Information” has the
meaning set forth in Section 4.6.

 

“Observer” has the meaning set forth
in Section 4.15.

 

“OFAC” has the meaning set forth
in Section 3.1(hh).

 

“Outside Date” means the
thirtieth day following the date of this Agreement; provided that if such day
is not a Business Day, the first day following such day that is a Business Day.

 

“Pension Plan” has the meaning
set forth in Section 3.1(qq).

 

“Permitted Rights Offering” means an
offering of up to $10 million of aggregate offering price of Common Stock
pursuant to subscription rights distributed pro rata to the then existing
holders of record of Common Stock at a price per share of Common Stock of not
less than $3.75, and the associated declaration, issuance and exercise of the
subscription rights with respect to such offering and shares of Common Stock
issuable in connection with the exercise of any such rights.

 

“Person” means an individual,
corporation, partnership, limited liability company, trust, business trust,
association, joint stock company, joint venture, sole proprietorship,
unincorporated organization, governmental authority or any other form of entity
not specifically listed herein.

 

“Placement Agent” has the
meaning set forth in the Recitals.

 

“Preferred Shares” has the
meaning set forth in the Recitals.

 

“Press Release” has the
meaning set forth in Section 4.6.

 

“Principal Trading Market” means the
Trading Market on which the Common Stock is primarily listed on and quoted for
trading, which, as of the date of this Agreement and the Closing Date, shall be
the NASDAQ Global Select Market.

 

“Proceeding” means an
action, claim, suit, investigation or proceeding (including, without
limitation, an investigation or partial proceeding, such as a deposition),
whether commenced or threatened.

 

“Prospectus” means the
prospectus included in any Registration Statement, as amended or supplemented
by any prospectus supplement with respect to the terms of the offering of any
portion of the Registrable Securities covered by such Registration Statement or
any other amendments and supplements to such prospectus, including 

 

5

 

without
limitation any preliminary prospectus, any pre-effective or post-effective
amendment and all material incorporated by reference in any prospectus.

 

“Public Offering” has the
meaning set forth in Section 4.20(b).

 

“Purchase Price” means
$1,000.00 per Preferred Share.

 

“Purchaser Deliverables” has the
meaning set forth in Section 2.2(b).

 

“Purchaser Party” has the
meaning set forth in Section 4.8(a).

 

“Registration Rights Agreement” has the
meaning set forth in the Recitals.

 

“Registration Statement” means a
registration statement meeting the requirements set forth in the Registration
Rights Agreement and covering the resale by the Purchasers of the Registrable
Securities (as defined in the Registration Rights Agreement).

 

“Regulation D” has the
meaning set forth in the Recitals.

 

“Regulatory Agreement” has the
meaning set forth in Section 3.1(mm).

 

“Required Approvals” has the
meaning set forth in Section 3.1(e).

 

“Reserve Bank” means the
Federal Reserve Bank of San Francisco.

 

“Rule 144” means Rule 144
promulgated by the Commission pursuant to the Securities Act, as such Rule may
be amended from time to time, or any similar rule or regulation hereafter
adopted by the Commission having substantially the same effect as such Rule.

 

“SBA” has the meaning set forth
in Section 3.1(yy).

 

“SBA Act” has the meaning set forth
in Section 3.1(yy).

 

“SBA Standard Operating Procedures and Official
Notices” means Public Law 85-536, as amended; those Rules and
Regulations, as defined in 13 C.F.R. Part 120, “Business Loans” and 13
C.F.R. Part 121, “Size Standards”; Standard Operating Procedures, (SOP)
50-10 for loan processing, 50-50 for loan liquidation as may be published and
or amended from time to time by the SBA.

 

“Schedules” means the
schedules to this Agreement.

 

“SEC Reports” has the
meaning set forth in Section 3.1(h).

 

“Secretary’s Certificate” has the
meaning set forth in Section 2.2(a)(iv).

 

“Securities” has the
meaning set forth in the Recitals.

 

“Securities Act” has the
meaning set forth in the Recitals.

 

“Series B Certificate of Determination” has the
meaning set forth in the Recitals.

 

“Series B Preferred Shares” has the
meaning set forth in the Recitals.

 

“Series C Certificate of Determination” has the
meaning set forth in the Recitals.

 

“Series C Preferred Shares” has the
meaning set forth in the Recitals.

 

6

 

“Shareholder Approval” has the
meaning set forth in Section 4.11.

 

“Stock Certificates” has the
meaning set forth in Section 2.2(a)(ii).

 

“Shareholder Approval” has the
meaning set forth in Section 4.11.

 

“Shareholder Proposals” has the
meaning set forth in Section 4.11.

 

“Subscription Amount” means with
respect to each Purchaser, the aggregate amount to be paid for the Preferred
Shares purchased hereunder as indicated on such Purchaser’s signature page to
this Agreement next to the heading “Aggregate Purchase Price (Subscription
Amount)”.

 

“Subsidiary” means any
entity in which the Company, directly or indirectly, owns sufficient capital
stock or holds a sufficient equity or similar interest such that it is
consolidated with the Company in the financial statements of the Company.

 

“Trading Day” means (i) a
day on which the Common Stock is listed or quoted and traded on its Principal
Trading Market (other than the OTC Bulletin Board), or (ii) if the Common
Stock is not listed on a Trading Market (other than the OTC Bulletin Board), a
day on which the Common Stock is traded in the over-the-counter market, as reported
by the OTC Bulletin Board, or (iii) if the Common Stock is not quoted on
any Trading Market, a day on which the Common Stock is quoted in the
over-the-counter market as reported in the “pink sheets” by Pink Sheets LLC (or
any similar organization or agency succeeding to its functions of reporting
prices); provided , that in the event that the Common Stock is not listed or
quoted as set forth in (i), (ii) and (iii) hereof, then Trading Day
shall mean a Business Day.

 

“Trading Market” means
whichever of the New York Stock Exchange, the NYSE Amex, the NASDAQ Global
Select Market, the NASDAQ Global Market, the NASDAQ Capital Market or the OTC
Bulletin Board on which the Common Stock is listed or quoted for trading on the
date in question.

 

“Transaction Documents” means this
Agreement, the Schedules and Exhibits attached hereto, the Registration Rights
Agreement, the Series B Certificate of Determination, the Series C
Certificate of Determination and any other documents or agreements executed in
connection with the transactions contemplated hereunder.

 

“Transfer Agent” means Wells
Fargo Shareholder Services, or any successor transfer agent for the Company.

 

“Underlying Shares” has the
meaning set forth in the Recitals.

 

“U.S. Sanctions Laws” has the
meaning set forth in Section 3.2(t).

 

“VCOC Agreement” has the
meaning set forth in Section 4.19.

 

“Written Agreement” means that
certain Written Agreement, dated February 17, 2010, by and among the
Company, the Bank, the Reserve Bank and the DFI.

 

ARTICLE II

PURCHASE AND SALE

 

2.1                                 Closing.

 

(a)                                  Purchase of
Preferred Shares.  Subject to
the terms and conditions set forth in this Agreement, at the Closing the
Company shall issue and sell to each Purchaser, and each Purchaser shall,
severally and not jointly, purchase from the Company, the number of Preferred
Shares set forth below such Purchaser’s name on the signature page of this
Agreement at a per Preferred Share price equal to the Purchase Price.

 

7

 

(b)                                 Closing.  The Closing of the purchase and sale of the
Preferred Shares shall take place at the offices of the Company,
150 Almaden Boulevard, San Jose, CA 95113, on the Closing Date or at such
other locations or remotely by facsimile transmission or other electronic means
as the parties may mutually agree and shall occur no later than the fifth
Business Day following the date on which the conditions to closing set forth in
Article V are satisfied (other than those conditions that by their nature
are to be satisfied at Closing but subject to the fulfillment or waiver of
those conditions).

 

(c)                                  Delivery and
Payment.  At the Closing, the Company
shall deliver to each of the respective Purchasers a certificate or
certificates, in such reasonable denominations as the Purchaser may have
designated in writing not less than two Business Days before the Closing, and
registered in the name of the Purchaser (or its designee or nominee),
representing the number of Preferred Shares the Purchaser is acquiring in the
transaction. At the Closing, the Purchaser shall deliver the purchase price of
his respective Subscription Amount in immediately available funds by wire
transfer to the Escrow Account:

 

	
  ABA
  Routing Number:

  	
   

  	
  121142287

  
	
  Bank:

  	
   

  	
  Heritage
  Bank of Commerce

  
	
  Acct
  #:

  	
   

  	
  1545680

  
	
  Acct
  Name:

  	
   

  	
  Heritage
  Commerce Corp

  
	
  Attn:

  	
   

  	
  May Wong

  

 

2.2                                 Closing
Deliveries.

 

(a)                                  On or prior to
the Closing, the Company shall issue, deliver or cause to be delivered to each
Purchaser the following (the “Company
Deliverables”):

 

(i)                                     this Agreement, duly executed
by the Company;

 

(ii)                                  one or more stock
certificates (if physical certificates are required by the Purchaser to be held
immediately prior to Closing; if not, then facsimile or “.pdf” copies of such
certificates shall suffice for purposes of Closing with the original stock
certificates to be delivered within three Business Days of the Closing Date),
evidencing the Preferred Shares subscribed for by Purchaser hereunder,
registered in the name of such Purchaser or as otherwise set forth on the
Investor Questionnaire included as Exhibit D, hereto, (the “Stock Certificates”) (or, if
the Company and such Purchaser agree, the Company shall cause to be made a
book-entry record through the facilities of DTC representing the Preferred
Shares registered in the name of such Purchaser or as otherwise set forth on
the Investor Questionnaire);

 

(iii)                               a legal opinion of Company
Counsel, dated as of the Closing Date and in the form attached hereto as Exhibit E,
executed by such counsel and addressed to the Purchasers;

 

(iv)                              the Registration Rights
Agreement duly executed by the Company;

 

(v)                                 a certificate of the
Secretary of the Company, in the form attached hereto as Exhibit F
(the “Secretary’s Certificate”), dated as
of the Closing Date, (a) certifying the resolutions adopted by the Board
of Directors of the Company (“Board of Directors”)
or a duly authorized committee thereof approving the transactions contemplated
by this Agreement and the other Transaction Documents and the issuance of the
Securities, (b) certifying the current versions of the articles of
incorporation, as amended, and bylaws, as amended, of the Company and (c) certifying
as to the signatures and authority of persons signing the Transaction Documents
and related documents on behalf of the Company;

 

(vi)                              the Compliance Certificate
referred to in Section 5.1(g);

 

(vii)                           a Certificate of Good
Standing for the Company from the California Secretary of State, as of a recent
date; and

 

(viii)                        a Certificate of Good
Standing for the Bank from the DFI, as of a recent date.

 

8

 

(b)                                 On or prior to
the Closing, each Purchaser shall deliver or cause to be delivered to the
Company the following (the “Purchaser
Deliverables”):

 

(i)                                     this Agreement, duly
executed by such Purchaser;

 

(ii)                                  its Subscription Amount, in
U.S. dollars and in immediately available funds, in the amount indicated below
such Purchaser’s name on the applicable signature page hereto under the
heading “Aggregate Purchase Price (Subscription Amount)” by wire transfer in
accordance with the Company’s written instructions;

 

(iii)                               the Registration Rights
Agreement, duly executed by such Purchaser; and

 

(iv)                              a fully completed and duly
executed Investor Questionnaire, reasonably satisfactory to the Company in the
form attached hereto as Exhibit D.

 

ARTICLE III

REPRESENTATIONS AND WARRANTIES

 

3.1                                 Representations
and Warranties of the Company.  The Company hereby represents and warrants as
of the date hereof and the Closing Date (except for the representations and warranties
that reference a specific date, which shall be made as of such date), to each
of the Purchasers that:

 

(a)                                  Subsidiaries.  The Company has no direct or indirect
Subsidiaries other than those listed in Schedule 3.1(a) hereto.
Except as disclosed in Schedule 3.1(a) hereto, the Company
owns, directly or indirectly, all of the capital stock or comparable equity
interests of each Subsidiary free and clear of any and all Liens, and all the
issued and outstanding shares of capital stock or comparable equity interest of
each Subsidiary are validly issued and are fully paid, non-assessable and free
of preemptive and similar rights to subscribe for or purchase securities.

 

(b)                                 Organization
and Qualification.  The Company
and each of its Subsidiaries is an entity duly incorporated or otherwise
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation or organization (as applicable), with the
requisite power and authority to own or lease and use its properties and assets
and to carry on its business as currently conducted.   Neither the Company nor any Subsidiary is in
violation of any of the provisions of its respective certificate or articles of
incorporation, bylaws or other organizational or charter documents.  The Company and each of its Subsidiaries is
duly qualified to conduct business and is in good standing as a foreign
corporation or other entity in each jurisdiction in which the nature of the
business conducted or property owned by it makes such qualification necessary,
except where the failure to be so qualified or in good standing, as the case
may be, would not have a Material Adverse Effect.  The Company is duly registered as a bank
holding company under the BHC Act.  The
Bank’s deposit accounts are insured up to applicable limits by the FDIC, and
all premiums and assessments required to be paid in connection therewith have
been paid when due. The Company has conducted its business in compliance with
all applicable federal, state and foreign laws, orders, judgments, decrees,
rules, regulations and applicable stock exchange requirements, including all
laws and regulations restricting activities of bank holding companies and
banking organizations, except for any noncompliance that, individually or in
the aggregate, has not had and would not be reasonably expected to have a
Material Adverse Effect.  The Company has
furnished or made available to each of the Purchasers, prior to the date
hereof, true, correct and complete copies of the Company’s and each Subsidiary’s
articles of incorporation and bylaws (or similar governing documents).

 

(c)                                  Authorization;
Enforcement; Validity.  The
Company has the requisite corporate power and authority to enter into and to
consummate the transactions contemplated by each of the Transaction Documents
to which it is a party and otherwise to carry out its obligations hereunder and
thereunder, including, without limitation, to issue the Preferred Shares, in
accordance with the terms hereof and, subject to the Shareholder Approval, to
issue the Underlying Shares in accordance with the terms of the Series B
Certificate of Determination and Series C Certificate of Determination.
The Company’s execution and delivery of each of the Transaction Documents to
which it is a party and the consummation by it of the transactions contemplated
hereby and thereby (including, but not limited to, the sale and delivery of the
Preferred Shares and the Underlying Shares) have been 

 

9

 

duly authorized by all necessary corporate action on
the part of the Company, and no further corporate action is required by the
Company, its Board of Directors or its shareholders in connection therewith
other than in connection with the Required Approvals. Each of the Transaction
Documents to which it is a party has been (or upon delivery will have been)
duly executed by the Company and is, or when delivered in accordance with the
terms hereof, will constitute the legal, valid and binding obligation of the
Company enforceable against the Company in accordance with its terms, except (i) as
such enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating to, or
affecting generally the enforcement of, creditors’ rights and remedies or by
other equitable principles of general application, (ii) as limited by laws
relating to the availability of specific performance, injunctive relief or
other equitable remedies and (iii) insofar as indemnification and contribution
provisions may be limited by applicable law. There are no shareholders
agreements, voting agreements, or other similar arrangements with respect to
the Company’s capital stock to which the Company is a party or, to the Company’s
Knowledge, between or among any of the Company’s shareholders.

 

(d)                                 No Conflicts.  The execution, delivery and performance by
the Company of the Transaction Documents to which it is a party and the
consummation by the Company of the transactions contemplated hereby or thereby
(including, without limitation, (x) the issuance of the Preferred Shares,
(y) the issuance of the Underlying Shares and (z) the payment of
dividends in accordance with the terms of the Series B Certificate of
Determination and the Series C Certificate of Determination) do not and
will not (i) conflict with or violate any provisions of the Company’s or
any Subsidiary’s certificate or articles of incorporation, bylaws or otherwise
result in a violation of the organizational documents of the Company or any
Subsidiary, (ii)  conflict with, or constitute a default (or an event that
with notice or lapse of time or both would result in a default) under, result
in the creation of any Lien upon any of the properties or assets of the Company
or any Subsidiary or give to others any rights of termination, amendment,
acceleration or cancellation (with or without notice, lapse of time or both)
of, any Material Contract, or (iii) subject to receipt of the Required
Approvals, conflict with or result in a violation of any law, rule, regulation,
order, judgment, injunction, decree or other restriction of any court or
governmental authority to which the Company is subject (including federal and
state securities laws and regulations and the rules and regulations,
assuming the correctness of the representations and warranties made by the
Purchasers herein, of any self-regulatory organization to which the Company or
its securities are subject, including the Trading Market), or by which any
property or asset of the Company is bound or affected, except in the case of
clauses (ii) and (iii) such as would not have or reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect.

 

(e)                                  Filings,
Consents and Approvals. 
Neither the Company nor any of its Subsidiaries is required to obtain
any consent, waiver, authorization or order of, give any notice to, or make any
filing or registration with, any court or other federal, state, local or other
governmental authority, self-regulatory organization (including the Trading
Market) or other Person in connection with the execution, delivery and
performance by the Company of the Transaction Documents (including, without
limitation, (x) the issuance of the Preferred Shares, (y) the
issuance and reservation for issuance of the Underlying Shares and (z) the
payment of dividends in accordance with the terms of the Series B
Certificate of Determination and the Series C Certificate of
Determination), other than (s) prior to Closing (x) the filing of the
Series B Certificate of Determination and Series C Certificate of
Determination with the California Secretary, (y) filings required by
applicable state securities laws, (z) the filing of any requisite notices
and/or application(s) to the Trading Market for the issuance and sale of
the Underlying Shares and the listing of the Underlying Shares for trading or
quotation, as the case may be, thereon in the time and manner required thereby,
and (ii) after the Closing, obtaining the Shareholder Approval required to
authorize and issue the Underlying Shares in accordance with the terms of the Series B
Certificate of Determination and the Series C Certificate of
Determination, (v) the filing with the Commission of one or more
Registration Statements in accordance with the requirements of the Registration
Rights Agreement, (w) the filing of a Notice of Sale of Securities on Form D
with the Commission under Regulation D of the Securities Act, (x) the
filings required in accordance with Section 4.6 of this Agreement, (y) obtaining
the prior written approval of the Reserve Bank and the Director of the Division
of Banking Supervision and Regulation of the Federal Reserve  and the DFI under the Written Agreement to
pay dividends and to make any distributions of interest, principal or other
sums on subordinated debt or trust preferred securities; (z) removing the
limitation on payment of dividends contained in the Indenture dated September 7,
2000 (Heritage Statutory Trust I), the Indenture dated July 31, 2001
(Heritage Statutory Trust II), the Indenture dated September 26, 2002
(Heritage Statutory Trust III) and the Indenture dated March 23, 2000
(Heritage Capital  Trust I) by the
payment of all deferred interest outstanding on such securities; and (iii) those
that have been made or obtained prior to the date of this Agreement
(collectively, the “Required Approvals”).  The Company is unaware of any facts or
circumstances relating to the Company or its Subsidiaries 

 

10

 

which would be likely to prevent the Company from
obtaining or effecting any of the foregoing, subject in the case of items (y) and
(z) to the Company’s receipt of gross proceeds at the Closing in the
minimum amount stated in Section 5.1(i).

 

(f)                                    Issuance of the
Shares.  The issuance of the Preferred
Shares has been duly authorized and the Preferred Shares, when issued and paid
for in accordance with the terms of the Transaction Documents, will be duly and
validly issued, fully paid and non-assessable and free and clear of all Liens,
other than restrictions on transfer provided for in the Transaction Documents
or imposed by applicable securities laws, and shall not be subject to
preemptive or similar rights.  The
issuance of the Underlying Shares has been duly authorized and the Underlying Shares,
when issued in accordance with the terms of the Series B Certificate of
Determination and the Series C Certificate of Determination, will be duly
and validly issued, fully paid and non-assessable and free and clear of all
Liens, other than restrictions on transfer provided for in the Transaction
Documents or imposed by applicable securities laws, and shall not be subject to
preemptive or similar rights.  Assuming
the accuracy of the representations and warranties of the Purchasers in this
Agreement, the Securities will be issued in compliance with all applicable
federal and state securities laws.

 

(g)                                 Capitalization.  The number of shares and type of all
authorized, issued and outstanding capital stock, options and other securities
of the Company (whether or not presently convertible into or exercisable or
exchangeable for shares of capital stock of the Company) is set forth in Schedule 3.1(g).  All of the outstanding shares of capital
stock of the Company are duly authorized, validly issued, fully paid and
non-assessable, have been issued in compliance in all material respects with
all applicable federal and state securities laws, and none of such outstanding
shares was issued in violation of any preemptive rights or similar rights to
subscribe for or purchase any capital stock of the Company.  Except as set forth in the SEC Reports on
file as of the date of this Agreement, (i) no shares of the Company’s
outstanding capital stock are subject to preemptive rights or any other similar
rights; (ii) there are no outstanding options, warrants, scrip, rights to
subscribe to, calls or commitments of any character whatsoever relating to, or
securities or rights convertible into, or exercisable or exchangeable for, any
shares of capital stock of the Company, or contracts, commitments,
understandings or arrangements by which the Company is or may become bound to
issue additional shares of capital stock of the Company or options, warrants,
scrip, rights to subscribe to, calls or commitments of any character whatsoever
relating to, or securities or rights convertible into, or exercisable or
exchangeable for, any shares of capital stock of the Company; (iii) there
are no material outstanding debt securities, notes,  credit agreements, credit facilities or other
agreements, documents or instruments evidencing indebtedness of the Company or
by which the Company is bound; (iv) there are no outstanding securities or
instruments of the Company that contain any redemption or similar provisions,
and there are no contracts, commitments, understandings or arrangements by
which the Company is or may become bound to redeem a security of the Company or
any of its Subsidiaries; (v) the Company does not have any stock
appreciation rights or “phantom stock” plans or agreements or any similar plan
or agreement; (vi) there are no securities or instruments containing
anti-dilution or similar provisions that will be triggered by the issuance of
the Securities (vii) there are no outstanding equity securities that will
be senior to the Preferred Shares upon issuance; and (viii) neither the
Company nor any of its Subsidiaries have any liabilities or obligations
required to be disclosed in the SEC Reports but not so disclosed in the SEC
Reports.  The Company will not be
required to amend its articles of incorporation to increase the number of
authorized shares of Common Stock for purposes of the issuance of Common Stock
on the conversion of the Preferred Shares.

 

(h)                                 SEC Reports;
Disclosure Materials.  The Company
has filed all reports, schedules, forms, statements and other documents
required to be filed by it under the Exchange Act, including pursuant to
Section 13(a) or 15(d) thereof, since December 31, 2008
(the foregoing materials, including the exhibits thereto and documents
incorporated by reference therein, being collectively referred to herein as the
“SEC Reports”
and together with this Agreement and the Exhibits and Schedules to this
Agreement, the “Disclosure Materials”),
on a timely basis or has received a valid extension of such time of filing and
has filed any such SEC Reports prior to the expiration of any such extension.
As of their respective filing dates, the SEC Reports complied in all material
respects with the requirements of the Securities Act and the Exchange Act and
the rules and regulations of the Commission promulgated thereunder, and
none of the SEC Reports, when filed, contained any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading.

 

11

 

(i)                                     Financial
Statements.  The
financial statements of the Company included in the SEC Reports comply in all
material respects with applicable accounting requirements and the rules and
regulations of the Commission with respect thereto as in effect at the time of
filing. Such financial statements have been prepared in accordance with GAAP
applied on a consistent basis during the periods involved, except as may be
otherwise specified in such financial statements or the notes thereto and
except that unaudited financial statements may not contain all footnotes
required by GAAP, and fairly present in all material respects the balance sheet
of the Company and its consolidated Subsidiaries taken as a whole as of and for
the dates thereof and the results of operations and cash flows for the periods
then ended, subject, in the case of unaudited statements, to normal, year-end
audit adjustments, which would not be material, either individually or in the
aggregate.

 

(j)                                     Tax Matters.  The Company (i) has prepared and filed
all foreign, federal and state income and all other tax returns, reports and
declarations required by any jurisdiction to which it is subject, (ii) has
paid all taxes and other governmental assessments and charges that are material
in amount, shown or determined to be due on such returns, reports and
declarations, except those being contested in good faith, with respect to which
adequate reserves have been set aside on the books of the Company and (iii) has
set aside on its books provisions reasonably adequate for the payment of all
taxes for periods subsequent to the periods to which such returns, reports or
declarations apply, except, in the case of clauses (i) and (ii) above,
where the failure to so pay or file any such tax, assessment, charge or return
would not have or reasonably be expected to have a Material Adverse
Effect.  There are no transfer taxes that
are required to be paid by the Company in connection with the issuance of the
Preferred Shares.

 

(k)                                  Material
Changes.  Since the date of the latest
audited financial statements included within the SEC Reports filed prior to the
date of this Agreement, except as disclosed in subsequent SEC Reports filed
prior to the date of this Agreement, the businesses of the Company and its
Subsidiaries have been conducted only in the ordinary course, in substantially
the same manner as theretofore conducted, and there has not occurred since
December 31, 2008, any event that has had a Material Adverse Effect.

 

(l)                                     Environmental
Matters.  Neither the Company nor any of
its Subsidiaries (i) is in violation of any statute, rule, regulation,
decision or order of any governmental agency or body or any court, domestic or
foreign, relating to the use, disposal or release of hazardous or toxic
substances or relating to the protection or restoration of the environment or
human exposure to hazardous or toxic substances (collectively, “Environmental Laws”), (ii) owns
or operates any real property contaminated with any substance that is in
violation of any Environmental Laws, (iii) is liable for any off-site
disposal or contamination pursuant to any Environmental Laws, or (iv) is
subject to any claim relating to any Environmental Laws; in each case, which
violation, contamination, liability or claim has had or would reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect;
and, to the Company’s Knowledge, there is no pending or threatened
investigation that might lead to such a claim.

 

(m)                               Litigation.  There is no Action which (i) adversely affects
or challenges the legality, validity or enforceability of any of the
Transaction Documents or the Preferred Shares or the Underlying Shares or (ii) except
as disclosed in the SEC Reports on file as of the date of this Agreement, is
reasonably likely to have a Material Adverse Effect, individually or in the
aggregate, if there were an unfavorable decision. Neither the Company nor any
Subsidiary, nor any director or officer thereof, is or has been the subject of
any Action involving a claim of violation of or liability under federal or
state securities laws and/or a claim of breach of fiduciary duty.  There has not been, and to the Company’s
Knowledge there is not pending or contemplated, any investigation by the
Commission involving the Company or any current or former director or officer
of the Company.  There are no outstanding
orders, injunctions, judgments against the Company.  The Commission has not issued any stop order
or other order suspending the effectiveness of any registration statement filed
by the Company or any of its Subsidiaries under the Exchange Act or the
Securities Act.

 

(n)                                 Employment
Matters.  No material labor dispute
exists or, to the Company’s Knowledge, is imminent with respect to any of the
employees of the Company or any of its Subsidiaries which would have or
reasonably be expected to have a Material Adverse Effect. None of the Company’s
or Subsidiaries’ employees is a member of a union that relates to such employee’s
relationship with the Company or Subsidiary, and neither the Company nor any of
its Subsidiaries is a party to a collective bargaining agreement, and the
Company and each Subsidiary believes that its relationship with its employees
is good.  To the Company’s Knowledge, no
executive 

 

12

 

officer of the Company or any Subsidiary is, or is
now expected to be, in violation of any material term of any employment
contract, confidentiality, disclosure or proprietary information agreement or
non-competition agreement, or any other contract or agreement or any
restrictive covenant in favor of a third party, and to the Company’s Knowledge,
the continued employment of each such executive officer does not subject the
Company or any Subsidiary to any liability with respect to any of the foregoing
matters.  The Company and each of its
Subsidiaries is in compliance with all U.S. federal, state, local and foreign
laws and regulations relating to employment and employment practices, terms and
conditions of employment and wages and hours, except where the failure to be in
compliance would not have or reasonably be expected to have, individually or in
the aggregate, a Material Adverse Effect.

 

(o)                                 Compliance.  Neither the Company nor any of its
Subsidiaries (i) is in default under or in violation of (and no event has
occurred that has not been waived that, with notice or lapse of time or both,
would result in a default by the Company or any of its Subsidiaries under), nor
has the Company or any of its Subsidiaries received written notice of a claim
that it is in default under or that it is in violation of, any Material
Contract (whether or not such default or violation has been waived), (ii) is
in violation of any order of any court, arbitrator or governmental body having
jurisdiction over the Company or its properties or assets, or (iii) except
for the matters covered by Section 3.1(mm), is in violation of, or in
receipt of written notice that it is in violation of, any statute, rule,
regulation, policy or guidelines or order of any governmental authority, self
regulatory organization (including the Trading Market) applicable to the
Company or any of its Subsidiaries, or which would have the effect of revoking
or limiting FDIC deposit insurance, except in each case set forth in (i), (ii) and
(iii) of this paragraph as would not have or reasonably be expected to
have, individually or in the aggregate, a Material Adverse Effect.

 

(p)                                 Regulatory
Permits.  The Company and each of its
Subsidiaries possess or have applied for all certificates, authorizations and
permits issued by the appropriate federal, state, local or foreign regulatory
authorities necessary to conduct their respective businesses as conducted and
as described in the SEC Reports on file as of the date of this Agreement, except
where the failure to possess such permits, individually or in the aggregate,
has not and would not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect (“Material
Permits”), and (i) neither the Company nor any of its
Subsidiaries has received any notice in writing of proceedings relating to the
revocation or material adverse modification of any such Material Permits and (ii) the
Company is unaware of any facts or circumstances that would give rise to the
revocation or material adverse modification of any Material Permits.

 

(q)                                 Title to Assets.  The Company and its Subsidiaries have good
and marketable title to all real property and tangible personal property owned
by them which is material to the business of the Company and its Subsidiaries,
taken as a whole, in each case free and clear of all Liens except such as do
not materially affect the value of such property or do not interfere with the
use made and proposed to be made of such property by the Company and any of its
Subsidiaries. Any real property and facilities held under lease by the Company
and any of its Subsidiaries are held by them under valid, subsisting and
enforceable leases with such exceptions as are not material and do not
interfere with the use made and proposed to be made of such property and
buildings by the Company and its Subsidiaries.

 

(r)                                    Patents and
Trademarks.  The Company
and its Subsidiaries own, possess, license or have other rights to use all
foreign and domestic patents, patent applications, trade and service marks,
trade and service mark registrations, trade names, copyrights, inventions,
trade secrets, technology, Internet domain names, know-how and other
intellectual property (collectively, the “Intellectual
Property”) necessary for the conduct of their respective
businesses as now conducted or as proposed to be conducted as disclosed in the
SEC Reports on file as of the date of this Agreement except where the failure
to own, possess, license or have such rights would not have or reasonably be
expected to have a Material Adverse Effect. 
Except as set forth in the SEC Reports on file as of the date of this
Agreement and except where such violations or infringements would not have or
reasonably be expected to have, either individually or in the aggregate, a
Material Adverse Effect, (i) there are no rights of third parties to any
such Intellectual Property; (ii) there is no infringement by third parties
of any such Intellectual Property; (iii) there is no pending or to the
Company’s Knowledge threatened action, suit, proceeding or claim by others
challenging the Company’s and its Subsidiaries’ rights in or to any such
Intellectual Property; (iv) there is no pending or to the Company’s
Knowledge threatened action, suit, proceeding or claim by others challenging
the validity or scope of any such Intellectual Property; and (v) there is
no pending or to the Company’s Knowledge 

 

13

 

threatened action, suit, proceeding or claim by
others that the Company and/or any Subsidiary infringes or otherwise violates
any patent, trademark, copyright, trade secret or other proprietary rights of
others.

 

(s)                                  Insurance.  The Company and each of the Subsidiaries are
insured by insurers of recognized financial responsibility against such losses
and risks and in such amounts as the Company believes to be prudent and
customary in the businesses and locations in which the Company and the
Subsidiaries are engaged.  Neither the
Company nor any of its Subsidiaries has received any notice of cancellation of
any such insurance, nor, to the Company’s Knowledge, will it or any Subsidiary
be unable to renew their respective existing insurance coverage as and when
such coverage expires or to obtain similar coverage from similar insurers as
may be necessary to continue their respective business at a cost that would not
have a Material Adverse Effect.

 

(t)                                    Transactions
With Affiliates and Employees.  Except as set forth in the SEC Reports on
file as of the date of this Agreement, none of the officers or directors of the
Company and, to the Company’s Knowledge, none of the employees of the Company,
is presently a party to any transaction with the Company or to a presently
contemplated transaction (other than for services as employees, officers and
directors) that would be required to be disclosed pursuant to Item 404 of
Regulation S-K promulgated under the Securities Act.  Neither the Company nor any of its
Subsidiaries has outstanding “extensions of credit” to directors or executive
officers of the Company or any of its Subsidiaries within the meaning of Section 402
of the Sarbanes-Oxley Act of 2002.

 

(u)                                 Internal
Control Over Financial Reporting.  Except as set forth in the SEC Reports on
file as of the date of this Agreement, the Company maintains internal control
over financial reporting (as such term is defined in Rule 13a-15(f) under
the Exchange Act) designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting principles
and such internal control over financial reporting is effective.  Neither the Company nor, to the Company’s
Knowledge, the Company’s independent registered public accounting firm, has
identified or been made aware of “significant deficiencies” or “material
weaknesses” (as defined by the Public Company Accounting Oversight Board) in
the design or operation of the Company’s internal controls and procedures which
could reasonably adversely affect the Company’s ability to record, process,
summarize and report financial data, in each case which has not been
subsequently remediated.

 

(v)                                 Sarbanes-Oxley;
Disclosure Controls.  The Company
is in compliance in all material respects with all of the provisions of the
Sarbanes-Oxley Act of 2002 which are applicable to it. Except as disclosed in
the SEC Reports on file as of the date hereof, the Company maintains disclosure
controls and procedures (as such term is defined in Rule 13a-15(e) and
15d-15(e) under the Exchange Act), and such disclosure controls and procedures
are effective.

 

(w)                               Certain Fees.  Except as set forth in Section 6.1 with
respect to the Placement Agent, no person or entity will have, as a result of
the transactions contemplated by this Agreement, any valid right, interest or
claim against or upon the Company or a Purchaser for any commission, fee or
other compensation pursuant to any agreement, arrangement or understanding
entered into by or on behalf of the Company, other than the Placement Agent
with respect to the offer and sale of the Preferred Shares (which placement
agent fees are being paid by the Company). The Company shall indemnify, pay,
and hold each Purchaser harmless against, any liability, loss or expense (including,
without limitation, attorneys’ fees and out-of-pocket expenses) arising in
connection with any such right, interest or claim.

 

(x)                                   Private
Placement.  Assuming
the accuracy of the Purchasers’ representations and warranties set forth in
Section 3.2 of this Agreement and the accuracy of the information
disclosed in the Investor Questionnaires, no registration under the Securities
Act is required for the offer and sale of the Preferred Shares by the Company
to the Purchasers under the Transaction Documents.  The issuance and sale of the Preferred Shares
hereunder does not contravene the rules and regulations of the Principal
Trading Market and, upon Shareholder Approval, the issuance of the Underlying
Shares in accordance with the Series B Certificate of Determination and
the Series C Certificate of Determination, as applicable, will not
contravene the rules and regulations of the Principal Trading Market.

 

(y)                                 Registration
Rights.  Other than each of the
Purchasers, except as set forth on Schedule 3.1(y), no Person has
any right to cause the Company to effect the registration under the Securities
Act of 

 

14

 

any securities of the Company other than those
securities which are currently registered on an effective registration
statement on file with the Commission.

 

(z)                                   No Integrated
Offering.  Assuming
the accuracy of the Purchasers’ representations and warranties set forth in
Section 3.2, none of the Company, its Subsidiaries nor, to the Company’s  Knowledge, any of its Affiliates or any
Person acting on its behalf has, directly or indirectly, at any time within the
past six months, made any offers or sales of any Company security or solicited
any offers to buy any security under circumstances that would eliminate the
availability of the exemption from registration under Regulation D under the
Securities Act in connection with the offer and sale by the Company of the
Preferred Shares as contemplated hereby.

 

(aa)                            Listing and
Maintenance Requirements.  The
Company’s Common Stock is registered pursuant to Section 12(b) of the
Exchange Act, and the Company has taken no action designed to terminate the
registration of the Common Stock under the Exchange Act nor has the Company
received any notification that the Commission is contemplating terminating such
registration. The Company has not, in the 12 months preceding the date hereof,
received written notice from any Trading Market on which the Common Stock is
listed or quoted to the effect that the Company is not in compliance with the
listing or maintenance requirements of such Trading Market. The Company is, and
has no reason  to believe that it will
not in the foreseeable future continue to be, in compliance in all material respects
with the listing and maintenance requirements for continued trading of the
Common Stock on the Principal Trading Market.

 

(bb)                          Investment
Company.  Neither the Company nor any of
its Subsidiaries is required to be registered as, and is not an Affiliate of,
and immediately following the Closing will not be required to register as, an “investment
company” within the meaning of the Investment Company Act of 1940, as amended.

 

(cc)                            Questionable
Payments.  Neither the
Company nor any of its Subsidiaries, nor any directors, officers, nor to the
Company’s Knowledge, employees, agents or other Persons acting at the direction
of or on behalf of the Company or any of its Subsidiaries has, in the course of
its actions for, or on behalf of, the Company: (a) directly or indirectly,
used any corporate funds for unlawful contributions, gifts, entertainment or
other unlawful expenses relating to foreign or domestic political activity; (b) made
any direct or indirect unlawful payments to any foreign or domestic
governmental officials or employees or to any foreign or domestic political
parties or campaigns from corporate funds; (c) violated any provision of
the Foreign Corrupt Practices Act of 1977, as amended, or (d) made any
other unlawful bribe, rebate, payoff, influence payment, kickback or other
material unlawful payment to any foreign or domestic government official or
employee.

 

(dd)                          Application of
Takeover Protections; Rights Agreements.  The Company has not adopted any stockholder
rights plan or similar arrangement relating to accumulations of beneficial
ownership of Common Stock or a change in control of the Company.  The Board of Directors has taken all
necessary action to ensure that the transactions contemplated by the
Transaction Documents and the consummation of the transactions contemplated hereby
and thereby will be exempt from any anti-takeover or similar provisions of the
Company’s articles of incorporation and bylaws and any other provisions of any
applicable “moratorium”, “control share”, “fair price”, “interested stockholder”
or other applicable anti-takeover laws and regulations of any jurisdiction.

 

(ee)                            Off Balance
Sheet Arrangements.  There is no
transaction, arrangement, or other relationship between the Company (or any
Subsidiary) and an unconsolidated or other off balance sheet entity that is
required to be disclosed by the Company in its SEC Reports and is not so
disclosed and would have or reasonably be expected to have a Material Adverse
Effect.

 

(ff)                                Acknowledgment
Regarding Purchasers’ Purchase of Preferred Shares.  The Company acknowledges and agrees that each
of the Purchasers is acting solely in the capacity of an arm’s length purchaser
with respect to the Transaction Documents and the transactions contemplated
hereby and thereby.  The Company further
acknowledges that no Purchaser is acting as a financial advisor or fiduciary of
the Company (or in any similar capacity) with respect to the Transaction
Documents and the transactions contemplated thereby and any advice given by any
Purchaser or any of their respective representatives or agents in connection
with the Transaction Documents and the transactions contemplated thereby is
merely incidental to the Purchasers’ purchase of the Preferred Shares.

 

15

 

(gg)                          Absence of
Manipulation.  The Company
has not, and to the Company’s Knowledge no one acting on its behalf has, taken,
directly or indirectly, any action designed to cause or to result in the
stabilization or manipulation of the price of any security of the Company to
facilitate the sale or resale of any of the Securities.

 

(hh)                          OFAC.  Neither the Company nor any Subsidiary nor,
to the Company’s Knowledge, any director, officer, agent, employee, Affiliate
or Person acting on behalf of the Company or any Subsidiary is currently subject
to any U.S. sanctions administered by the Office of Foreign Assets Control of
the U.S. Treasury Department (“OFAC”);
and the Company will not knowingly, directly or indirectly, use the proceeds of
the sale of the Preferred Shares, or lend, contribute or otherwise make
available such proceeds to any Subsidiary, joint venture partner or other
Person or entity, towards any sales or operations in Cuba, Iran, Syria,
Sudan, Myanmar or any other country sanctioned by OFAC or for the purpose of
financing the activities of any Person currently subject to any U.S. sanctions
administered by OFAC.

 

(ii)                                  Money
Laundering Laws.  The
operations of each of the Company and any Subsidiary are and have been
conducted at all times in compliance with the money laundering statutes of
applicable jurisdictions, the rules and regulations thereunder and any
related or similar rules, regulations or guidelines, issued, administered or
enforced by any applicable governmental agency (collectively, the “Money Laundering Laws”) and
no action, suit or proceeding by or before any court or governmental agency,
authority or body or any arbitrator involving the Company and/or any Subsidiary
with respect to the Money Laundering Laws is pending or to the Company’s
Knowledge threatened, except as would not reasonably be expected to have a
Material Adverse Effect.

 

(jj)                                  No Additional
Agreements.  The Company
does not have any agreement or understanding with any Purchaser with respect to
the transactions contemplated by the Transaction Documents other than as
specified in the Transaction Documents.

 

(kk)                            Reports,
Registrations and Statements.  Since January 1, 2008, the Company and
each Subsidiary have filed all material reports, registrations and statements,
together with any required amendments thereto, that it was required to file
with the Board of Governors of the Federal Reserve System (the “Federal Reserve”), the FDIC,
the DFI, and any other applicable federal or state securities or banking
authorities, except where the failure to file any such report, registration or
statement would not have or reasonably be expected to have a Material Adverse
Effect. All such reports and statements filed with any such regulatory body or
authority are collectively referred to herein as the “Company
Reports.” As of their respective dates, the Company Reports
complied as to form in all material respects with all the rules and
regulations promulgated by the Federal Reserve, the FDIC, the DFI and any other
applicable foreign, federal or state securities or banking authorities, as the
case may be.

 

(ll)                                  Adequate
Capitalization.  As of
March 31, 2010, the Company’s Subsidiary insured depository institution
meets or exceeds the standards necessary to be considered “well capitalized”
under the FDIC’s regulatory framework for prompt corrective action.

 

(mm)                      Agreements with
Regulatory Agencies; Compliance with Certain Banking Regulations.  Except as disclosed in Schedule 3.1(mm),
neither the Company nor any Subsidiary is subject to any cease-and-desist or
other similar order or enforcement action issued by, or is a party to any
written agreement, consent agreement or memorandum of understanding with, or is
a party to any commitment letter or similar undertaking to, or is subject to
any capital directive by, or since December 31, 2008, has adopted any
board resolutions at the request of, any governmental entity that currently
restricts in any material respect the conduct of its business or that in any
material manner relates to its capital adequacy, its liquidity and funding
policies and practices, its ability to pay dividends, its credit, risk
management or compliance policies, its internal controls, its management or its
operations or business (each item in this sentence, a “Regulatory
Agreement”), nor has the Company or any Subsidiary been advised
since December 31, 2008 by any governmental entity that it is considering
issuing, initiating, ordering, or requesting any such Regulatory
Agreement.  With respect to any matters
requiring Board action prior to the date of this Agreement or Closing, as
applicable, that were set forth in writing by any of the Federal Reserve, the
Reserve Bank, the FDIC or the DFI, the Company and its Subsidiaries have
addressed such matters in all material respects.

 

The
Company has no knowledge of any facts and circumstances, and has no reason to
believe that any facts or circumstances exist, that would cause the Bank: (i) to
be deemed not to be in satisfactory compliance with the 

 

16

 

Community
Reinvestment Act and the regulations promulgated thereunder or to be assigned a
CRA rating by federal or state banking regulators of lower than “satisfactory”;
(ii) to be deemed to be operating in violation of, in any material
respect, the Bank Secrecy Act, the Patriot Act, any order issued with respect
to anti-money laundering by the OFAC, or any other anti-money laundering
statute, rule or regulation; or (iii) to be deemed not to be in
satisfactory compliance, in any material respect, with all applicable privacy
of customer information requirements contained in any federal and state privacy
laws and regulations as well as the provisions of all information security
programs adopted by the Subsidiaries.

 

Except
as would not reasonably be expected to have, individually or in the aggregate,
a Material Adverse Effect, each of the Company and each Subsidiary has properly
administered all accounts for which it acts as a fiduciary, including accounts
for which it serves as a trustee, agent, custodian, personal representative,
guardian, conservator or investment advisor, in accordance with the terms of
the governing documents, applicable federal and state law and regulation and
common law.  None of the Company, any Subsidiary or any director,
officer or employee of the Company or any Subsidiary has committed any breach
of trust or fiduciary duty with respect to any such fiduciary account that
would reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect and, except as would not reasonably be expected to
have, individually or in the aggregate, a Material Adverse Effect, the
accountings for each such fiduciary account are true and correct and accurately
reflect the assets of such fiduciary account.

 

(nn)                          No General
Solicitation or General Advertising.  Neither the Company nor any person acting on
its behalf has engaged or will engage in any form of general solicitation or
general advertising (within the meaning of Regulation D under the Securities
Act) in connection with any offer or sale of the Preferred Shares.

 

(oo)                          Mortgage
Banking Business.  Except as
has not had and would not reasonably be expected to have a Material Adverse
Effect:

 

(i)                                     The Company and each of its
Subsidiaries has complied with, and all documentation in connection with the
origination, processing, underwriting and credit approval of any mortgage loan
originated, purchased or serviced by the Company or any of its Subsidiaries
satisfied, (A) all applicable federal, state and local laws, rules and
regulations with respect to the origination, insuring, purchase, sale, pooling,
servicing, subservicing, or filing of claims in connection with mortgage loans,
including all laws relating to real estate settlement procedures, consumer
credit protection, truth in lending laws, usury limitations, fair housing,
transfers of servicing, collection practices, equal credit opportunity and
adjustable rate mortgages, (B) the responsibilities and obligations
relating to mortgage loans set forth in any agreement between the Company or
any of its Subsidiaries and any Agency, Loan Investor or Insurer, (C) the
applicable rules, regulations, guidelines, handbooks and other requirements of
any Agency, Loan Investor or Insurer and (D) the terms and provisions of
any mortgage or other collateral documents and other loan documents with
respect to each mortgage loan; and

 

(ii)                                  No Agency, Loan Investor or
Insurer has (A) claimed in writing that the Company or any of its
Subsidiaries has violated or has not complied with the applicable underwriting
standards with respect to mortgage loans sold by the Company or any of its
Subsidiaries to a Loan Investor or Agency, or with respect to any sale of
mortgage servicing rights to a Loan Investor, (B) imposed in writing
restrictions on the activities (including commitment authority) of the Company
or any of its Subsidiaries or (C) indicated in writing to the Company or
any of its Subsidiaries that it has terminated or intends to terminate its
relationship with the Company or any of its Subsidiaries for poor performance,
poor loan quality or concern with respect to the Company’s or any of its
Subsidiaries’ compliance with laws.

 

For
purposes of this Section 3.1(oo):  (A) “Agency” means the Federal Housing Administration, the
Federal Home Loan Mortgage Corporation, the Farmers Home Administration (now
known as Rural Housing and Community Development Services), the Federal
National Mortgage Association, the U.S. Department of Veterans’ Affairs, the
Rural Housing Service of the U.S. Department of Agriculture or any other
federal or state agency with authority to (i) determine any investment,
origination, lending or servicing requirements with regard to mortgage loans
originated, purchased or serviced by the Company or any of its Subsidiaries or (ii) originate,
purchase, or service mortgage loans, or otherwise promote mortgage lending,
including state and local housing finance authorities; (B) “Loan Investor” means any person (including an Agency)
having a beneficial interest in any mortgage loan originated, purchased or serviced
by the Company or any of its Subsidiaries or a security backed by 

 

17

 

or
representing an interest in any such mortgage loan; and (C) “Insurer” means a person who insures or guarantees for the
benefit of the mortgagee all or any portion of the risk of loss upon borrower
default on any of the mortgage loans originated, purchased or serviced by the
Company or any of its Subsidiaries, including the Federal Housing
Administration, the United States Department of Veterans’ Affairs, the Rural
Housing Service of the U.S. Department of Agriculture and any private mortgage
insurer, and providers of hazard, title or other insurance with respect to such
mortgage loans or the related collateral.

 

(pp)                          Risk Management
Instruments.  Except as
has not had or would not reasonably be expected to have a Material Adverse
Effect, since January 1, 2008, all material derivative instruments,
including, swaps, caps, floors and option agreements, whether entered into for
the Company’s own account, or for the account of one or more of the Company
Subsidiaries, were entered into (1) only in the ordinary course of
business, (2) in accordance with prudent practices and in all material
respects with all applicable laws, rules, regulations and regulatory policies
and (3) with counterparties believed to be financially responsible at the
time; and each of them constitutes the valid and legally binding obligation of
the Company or one of the Company Subsidiaries, enforceable in accordance with
its terms.  Neither the Company or the
Company Subsidiaries, nor, to the Company’s Knowledge, any other party thereto,
is in breach of any of its material obligations under any such agreement or
arrangement.

 

(qq)                          ERISA.  The Company and each “employee benefit plan”
within the meaning of Section 3(3) of ERISA (defined below) for which
the Company or any member of its Controlled Group (defined as any organization
which is a member of a controlled group of corporations within the meaning of Section 414
of the Code) would have any liability (each, a “Pension Plan”) is in compliance
in all material respects with all presently applicable provisions of the Code
(as defined below) and the Employee Retirement Income Security Act of 1974, as
amended, including the regulations and published interpretations thereunder
(herein called “ERISA”); no “reportable event”
(as defined in ERISA) has occurred with respect to any Pension Plan for which
the Company or any member of its Controlled Group would have any liability; no
Pension Plan has failed to satisfy the minimum funding standards within the
meaning of Sections 412 or 430 of the Code or Section 302 of ERISA,
whether or not waived; the Company has not incurred and does not reasonably
expect to incur liability under (i) Title IV of ERISA with respect to the
termination of, or withdrawal from, any “pension plan”; or (ii) Sections
412 or 4971 of the Internal Revenue Code of 1986, as amended, including the
regulations and published interpretations thereunder (the “Code”); and each
Pension Plan for which the Company would have liability that is intended to be
qualified under Section 401(a) of the Code is so qualified in all
material respects and nothing has occurred, whether by action or by failure to
act, which would cause the loss of such qualification.

 

(rr)                                Shell Company
Status.  The Company is not, and has
never been, an issuer identified in Rule 144(i)(1).

 

(ss)                            Reservation of
Underlying Shares.  The Company
has reserved, and will continue to reserve, free of any preemptive or similar
rights of shareholders of the Company, a number of unissued shares of Common
Stock, sufficient to issue and deliver the Underlying Shares into which the
Preferred Shares are convertible, assuming Shareholder Approval has been
obtained.

 

(tt)                                Regulatory
Capital Levels.  At the
Closing Date, taking into account the proceeds of the capital raise
contemplated as part of this Transaction and assuming the net proceeds of this
capital raise are contributed by Company to the Bank in accordance with
Section 4.10 hereof, the Company and the Bank will each have a leverage
ratio of not less than 11.0% and a total risk-based capital ratio of not less
than 13.0%.

 

(uu)                          Loan Loss
Reserves.  As of the
date hereof and as of the Closing Date, the Company’s management has concluded
that the loan loss reserves of the Bank are adequate.

 

(vv)                          Change in
Control.  Except as disclosed on Schedule 3.1(vv),
the issuance of the Preferred Shares to the Purchasers as contemplated by this
Agreement will not trigger any rights under any “change of control” provision
in any of the agreements to which the Company or any of its Subsidiaries is a
party, including any employment, “change in control,” severance or other
compensatory agreements and any benefit plan, which results in payments to the
counterparty or the acceleration of vesting of benefits.

 

18

 

(ww)                      Material
Contracts.  Except for
such agreements that have expired or terminated in accordance with their terms
prior to the date hereof, each Material Contract to which the Company and its
Subsidiaries is a party, is in full force and effect and is binding on the
Company and/or its Subsidiaries, as applicable, and, to the Company’s
Knowledge, is binding upon such other parties, in each case in accordance with
its terms, and neither the Company, any of its Subsidiaries nor, to the Company’s
knowledge, any other party thereto, is in breach of or default under any such
agreement, which breach or default would reasonably be expected to have a
Material Adverse Effect. Neither the Company, nor any of its Subsidiaries, has
received any written notice regarding the termination of any such agreements.

 

(xx)                              Section 382
Compliance.  As of the
date of this Agreement and as of the Closing Date (giving effect to the
issuance of the Series B Preferred Stock and Series C Preferred Stock
and the issuance of Common Stock upon conversion of the Series B Preferred
Stock and Series C Preferred Stock), to the Company’s Knowledge (after due
inquiry with the Company’s accountants), no ownership change has occurred or
will occur prior to the Closing Date for purposes of Section 382 of the
Code.

 

(yy)                          SBA Lending.  The Bank is duly licensed as a preferred
lender under the Small Business Administration (“SBA”) Preferred Lender Program
in the districts set forth in Schedule 3.1(yy). 
To the Company’s Knowledge, the Company and each of its Subsidiaries has
complied with, and all documentation in connection with the origination,
purchase, processing, underwriting, sale and credit approval of any SBA loan
originated, purchased, sold or serviced by the Company and any of its
Subsidiaries satisfied all applicable federal, state and local laws, rules and
regulations with respect to the origination, sale or servicing of SBA loans
including but not limited to the Small Business Act of 1953, as amended (“SBA
Act”), all rules and regulations promulgated under the SBA Act and the SBA
Standard Operating Procedures and Official Notices.

 

3.2                                 Representations
and Warranties of the Purchasers.  Each Purchaser hereby, for itself and for no
other Purchaser, represents and warrants as of the date hereof and as of the
Closing Date to the Company as follows:

 

(a)                                  Organization;
Authority.  If such
Purchaser is an entity, it is duly organized, validly existing and in good
standing under the laws of the jurisdiction of its organization with the
requisite corporate or partnership power and authority to enter into and to
consummate the transactions contemplated by the applicable Transaction
Documents and otherwise to carry out its obligations hereunder and thereunder.
If such Purchaser is an entity, the execution, delivery and performance by such
Purchaser of the transactions contemplated by this Agreement and the
Registration Rights Agreement have been duly authorized by all necessary
corporate or, if such Purchaser is not a corporation, such partnership, limited
liability company or other applicable like action, on the part of such
Purchaser. If such Purchaser is an entity, each of this Agreement and the
Registration Rights Agreement has been duly executed by such Purchaser, and
when delivered by such Purchaser in accordance with the terms hereof, will
constitute the valid and legally binding obligation of such Purchaser,
enforceable against it in accordance with its terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating to, or
affecting generally the enforcement of, creditors’ rights and remedies or by
other equitable principles of general application.

 

(b)                                 No Conflicts.  The execution, delivery and performance by
such Purchaser of this Agreement and the Registration Rights Agreement and the
consummation by such Purchaser of the transactions contemplated hereby will not
(i) result in a violation of the organizational documents of such
Purchaser (if such Purchaser is an entity), (ii) conflict with, or
constitute a default (or an event which with notice or lapse of time or both
would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, any agreement, indenture or
instrument to which such Purchaser is a party, or (iii) result in a
violation of any law, rule, regulation, order, judgment or decree (including
federal and state securities laws) applicable to such Purchaser, except in the
case of clauses (ii) and (iii) above, for such conflicts, defaults,
rights or violations which would not, individually or in the aggregate,
reasonably be expected to have a material adverse effect on the ability of such
Purchaser to perform its obligations hereunder.

 

(c)                                  Investment
Intent.  Such Purchaser understands
that the Preferred Shares are “restricted securities” and have not been
registered under the Securities Act or any applicable state securities law and
is acquiring the Preferred Shares as principal for its own account and not with
a view to, or for distributing or reselling such Preferred Shares or any part
thereof in violation of the Securities Act or any applicable state securities
laws, 

 

19

 

provided, however, that by making the
representations herein, such Purchaser does not agree to hold any of the
Preferred Shares for any minimum period of time and reserves the right at all
times to sell or otherwise dispose of all or any part of such  Preferred Shares pursuant to an effective
registration statement under the Securities Act or under an exemption from such
registration and in compliance with applicable federal and state securities
laws.  Such Purchaser does not presently
have any agreement, plan or understanding, directly or indirectly, with any
Person to distribute or effect any distribution of  any of the Securities (or any securities
which are derivatives thereof) to or through any person or entity.

 

(d)                                 Purchaser
Status.  At the time such Purchaser was
offered the Preferred Shares, it was, and at the date hereof it is, an “accredited
investor” as defined in Rule 501(a) under the Securities Act.

 

(e)                                  General
Solicitation.  Such
Purchaser is not purchasing the Preferred Shares as a result of the
post-effective registration statement on Form S-1 to the Company’s Form S-3
filed by the Company on April 23, 2010, and withdrawn on April 28,
2010, any advertisement, article, notice or other communication regarding the
Preferred Shares published in any newspaper, magazine or similar media or
broadcast over television or radio or presented at any seminar or any other
general advertisement.

 

(f)                                    Experience of
Such Purchaser.  Such
Purchaser, either alone or together with its representatives, has such
knowledge, sophistication and experience in business and financial matters so
as to be capable of evaluating the merits and risks of the prospective investment
in the Preferred Shares, and has so evaluated the merits and risks of such
investment. Such Purchaser is able to bear the economic risk of an investment
in the Preferred Shares and, at the present time, is able to afford a complete
loss of such investment.

 

(g)                                 Access to
Information.  Such
Purchaser acknowledges that it has received and reviewed the Disclosure
Materials and has been afforded (i) the opportunity to ask such questions
as it has deemed necessary of, and to receive answers from, representatives of
the Company concerning the terms and conditions of the offering of the
Preferred Shares and the merits and risks of investing in the Preferred Shares;
(ii) access to information about the Company and the Subsidiaries and
their respective financial condition, results of operations, business,
properties, management and prospects sufficient to enable it to evaluate its
investment; and (iii) the opportunity to obtain such additional
information that the Company possesses or can acquire without unreasonable
effort or expense that is necessary to make an informed investment decision
with respect to the investment. Neither such inquiries nor any other
investigation conducted by or on behalf of such Purchaser or its
representatives or counsel shall modify, amend or affect such Purchaser’s right
to rely on the truth, accuracy and completeness of the Disclosure Materials and
the Company’s representations and warranties contained in the Transaction
Documents. Such Purchaser has sought such accounting, legal and tax advice as
it has considered necessary to make an informed decision with respect to its
acquisition of the Preferred Shares.

 

(h)                                 Brokers and
Finders.  Other than the Placement Agent
with respect to the Company, no Person will have, as a result of the transactions
contemplated by this Agreement, any valid right, interest or claim against or
upon the Company or any Purchaser for any commission, fee or other compensation
pursuant to any agreement, arrangement or understanding entered into by or on
behalf of the Purchaser.  Purchaser
acknowledges that it is purchasing the Preferred Shares directly from the
Company and not from the Placement Agent.

 

(i)                                     Independent
Investment Decision.  Such
Purchaser has independently evaluated the merits of its decision to purchase
Preferred Shares pursuant to the Transaction Documents, and such Purchaser
confirms that it has not relied on the advice of any other Purchaser’s business
and/or legal counsel in making such decision. Such Purchaser understands that
nothing in this Agreement or any other materials presented by or on behalf of
the Company to the Purchaser in connection with the purchase of the Preferred
Shares constitutes legal, tax or investment advice. Such Purchaser has
consulted such legal, tax and investment advisors as it, in its sole
discretion, has deemed necessary or appropriate in connection with its purchase
of the Preferred Shares. Such Purchaser understands that the Placement Agent
has acted solely as the agent of the Company in this placement of the Preferred
Shares and such Purchaser has not relied on the business or legal advice of the
Placement Agent or any of its agents, counsel or Affiliates in making its
investment decision hereunder, and confirms that none of such Persons has made
any representations or warranties to such Purchaser in connection with the
transactions contemplated by the Transaction Documents.

 

20

 

(j)                                     Reliance on
Exemptions.  Such
Purchaser understands that the Preferred Shares being offered and sold to it in
reliance on specific exemptions from the registration requirements of U.S.
federal and state securities laws and that the Company is relying in part upon
the truth and accuracy of, and such Purchaser’s compliance with, the representations,
warranties, agreements, acknowledgements and understandings of such Purchaser
set forth herein in order to determine the availability of such exemptions and
the eligibility of such Purchaser to acquire the Preferred Shares.

 

(k)                                  No Governmental
Review.  Such Purchaser understands
that no U.S. federal or state agency or any other government or governmental
agency has passed on or made any recommendation or endorsement of the Preferred
Shares or the fairness or suitability of the investment in the Preferred Shares
nor have such authorities passed upon or endorsed the merits of the offering of
the Preferred Shares.

 

(l)                                     Residency.  Such Purchaser’s residence (if an individual)
or office in which its investment decision with respect to the Preferred Shares
was made (if an entity) are located at the address immediately below such
Purchaser’s name on its signature page hereto.

 

(m)                               Trading.  Purchaser acknowledges that there is no
trading market for the Preferred Shares, and no such market is expected to develop.

 

(n)                                 Knowledge as to
Conditions.  As of the
date of this Agreement, Purchaser has no reasonable basis to believe why any
regulatory approvals, consents or statements of non-objection required or
otherwise a condition to the consummation by it of the transactions
contemplated by this Agreement will not be obtained.

 

(o)                                 No Stockholder
Agreements.  Except with
respect to an Affiliate thereof, Purchaser reached its decision to invest in
the Company independently from any other Purchaser; has entered into no
agreements with stockholders of the Company or other Purchasers for the purpose
of controlling the Company or any of its Subsidiaries; and has entered into no
agreements with stockholders of the Company or other Purchasers regarding
voting or transferring such Purchaser’s interest in the Company.

 

(p)                                 ERISA.  (i)                                        If Purchaser is, or is
acting on behalf of, an ERISA Entity (as defined below), such Purchaser
represents and warrants that on the date hereof:

 

(A)                              The decision to
invest assets of the ERISA Entity in the Preferred Shares was made by
fiduciaries independent of the Company or its affiliates, which fiduciaries are
duly authorized to make such investment decisions and who have not relied on
any advice or recommendations of the Company or its affiliates;

 

(B)                                Neither the
Company nor any of its agents, representatives or Affiliates have exercised any
discretionary authority or control with respect to the ERISA Entity’s
investment in the Preferred Shares;

 

(C)                                The purchase
and holding of the Preferred Shares will not constitute a nonexempt prohibited
transaction under ERISA or Section 4975 of the Code or a similar violation
under any applicable similar laws; and

 

(D)                               The terms of
the Transaction Documents comply with the instruments and applicable laws
governing such ERISA Entity.

 

(ii)                                  For the purpose
of this paragraph, the term “ERISA Entity”
means (A) an “employee benefit plan” within the meaning of Section 3(3) of
ERISA subject to Title I of ERISA, (B) a “plan” within the meaning of and
subject to Section 4975 of the Code and (C) any person whose assets
are deemed to be “plan assets” of any “benefit plan investor” (each within the
meaning of ERISA Section 3(42)).

 

(q)                                 Securities Not Insured.  Purchaser understands that the Securities are
not savings accounts, deposits or other obligations of any bank and are not
insured by the FDIC, including the FDIC’s Deposit Insurance Fund, or any other
governmental agency.

 

21

 

(r)            Antitrust.  No approval, consent, exemption,
authorization, or other action by, or notice to, or filing with, any
governmental entity or authority or any other Person in respect of any law or
regulation, including the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended, and the rules and regulations thereunder, is necessary or
required, and no lapse of a waiting period under law applicable to such
Purchaser is necessary or required, in each case in connection with the
execution, delivery or performance by such Purchaser of this Agreement or the
purchase of the Preferred Shares contemplated hereby.

 

(s)            Regulatory
Matters.  Purchaser understands and
acknowledges that:  (i) the Company
is a registered bank holding company under the BHC Act, and is subject to
regulation by the Federal Reserve; (ii) acquisitions of interests in bank
holding companies are subject to the BHC Act and the CIBCA and may be reviewed
by the Federal Reserve to determine the circumstances under which such
acquisitions of interests will result in Purchaser becoming subject to the BHC
Act or subject to the prior notice requirements of the CIBCA.  Assuming the accuracy of the representations
and warranties of the Company contained herein, such Purchaser represents that
neither it nor its Affiliates will, as a result of the transactions
contemplated herein, be deemed to (i) own or control 10% or more of any
class of voting securities of the Company or (ii) otherwise control the
Company for purposes of the BHC Act or the CIBCA.  Purchaser is not participating and has not
participated with any other investor in the offering of the Preferred Shares in
any joint activity or parallel action towards a common goal between or among
such investors of acquiring control of the Company.  Purchaser’s consummation of the transactions
contemplated herein will not cause any depository institution that is a
subsidiary of the Company to become subject to potential cross-guaranty
liability under 12 U.S.C. 1815(e) or any successor law with respect to the
failure of any depository institution that is not a subsidiary of the Company.

 

(t)            OFAC
and Anti-Money Laundering.  Purchaser
understands, acknowledges, represents and agrees that (i) such Purchaser
is not the target of any sanction, regulation, or law promulgated by the OFAC,
the Financial Crimes Enforcement Network or any other U.S. governmental entity
(“U.S. Sanctions Laws”); (ii) such
Purchaser is not owned by, controlled by, under common control with, or acting
on behalf of any person that is the target of U.S. Sanctions Laws; (iii) such
Purchaser is not a “foreign shell bank” and is not acting on behalf of a “foreign
shell bank” under applicable anti-money laundering laws and regulations; (iv) such
Purchaser’s entry into this Agreement or consummation of the transactions
contemplated hereby will not contravene U.S. Sanctions Laws or applicable
anti-money laundering laws or regulations; (v) such Purchaser will
promptly provide to the Company or any regulatory or law enforcement authority
such information or documentation as may be required to comply with U.S.
Sanctions Laws or applicable anti-money laundering laws or regulations (except
for information deemed in good faith to be confidential or proprietary); and (vi) the
Company may provide to any regulatory or law enforcement authority information
or documentation regarding, or provided by, such Purchaser for the purposes of
complying with U.S. Sanctions Laws or applicable anti-money laundering laws or
regulations.

 

3.3          No Other Representations.  The Company and each of the Purchasers
acknowledge and agree that no party to this Agreement has made or makes any
representations or warranties with respect to the transactions contemplated
hereby other than those specifically set forth in this Article III.

 

ARTICLE IV

OTHER AGREEMENTS OF THE PARTIES

 

4.1          Transfer Restrictions.

 

(a)           Compliance with Laws.  Notwithstanding any other provision of this
Article IV, each Purchaser covenants that the Securities may be disposed
of only pursuant to an effective registration statement under, and in
compliance with the requirements of, the Securities Act, or pursuant to an
available exemption from, or in a transaction not subject to, the registration
requirements of the Securities Act, and in compliance with any applicable
state, federal or foreign securities laws. 
In connection with any transfer of the Securities other than
(i) pursuant to an effective registration statement, (ii) to the
Company or (iii) pursuant to Rule 144 (provided that the transferor
provides the Company with reasonable assurances (in the form of seller and
broker representation letters) that such securities may be sold pursuant to
such rule), the Company may require the transferor thereof to provide to the
Company and the Transfer Agent, at the transferor’s expense, an opinion of
counsel selected by the transferor and reasonably acceptable to the Company and
the Transfer Agent (it being agreed that in-house counsel for Purchaser shall
be reasonably acceptable to Company), the form and substance of which opinion
shall be reasonably 

 

22

 

satisfactory to the Company and the Transfer Agent,
to the effect that such transfer does not require registration of such
transferred Securities under the Securities Act.  As a condition of transfer (other than
pursuant to clauses (i), (ii) or (iii) of the preceding sentence),
any such transferee shall agree in writing to be bound by the terms of this
Agreement and the Registration Rights Agreement with respect to such
transferred Securities.

 

(b)           Legends. 
Certificates evidencing the Securities shall bear any legend as required
by the “blue sky” laws of any state and a restrictive legend in substantially
the following form (and, with respect to Securities held in book-entry form,
the Transfer Agent will record such a legend on the share register), until such
time as they are not required under Section 4.1(c) or applicable law:

 

THESE
SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE “SECURITIES ACT”), OR APPLICABLE STATE SECURITIES LAWS.  THE SECURITIES MAY NOT BE OFFERED FOR
SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN
EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OR
(B) AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH
APPLICABLE STATE SECURITIES LAWS OR BLUE SKY LAWS AS EVIDENCED BY A LEGAL
OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY AND ITS TRANSFER
AGENT OR (II) UNLESS SOLD PURSUANT TO RULE 144 UNDER SAID ACT (PROVIDED
THAT THE TRANSFEROR PROVIDES THE COMPANY WITH REASONABLE ASSURANCES (IN THE FORM OF
SELLER AND BROKER REPRESENTATION LETTERS) THAT THE SECURITIES MAY BE SOLD
PURSUANT TO SUCH RULE).  NO
REPRESENTATION IS MADE BY THE ISSUER AS TO THE AVAILABILITY OF THE EXEMPTION
PROVIDED BY RULE 144 UNDER THE SECURITIES ACT FOR RESALES OF THESE SECURITIES.

 

(c)           Removal of Legends. 
The restrictive legend set forth in Section 4.1(b) above shall
be removed and the Company shall issue a certificate without such restrictive
legend or any other restrictive legend to the holder of the applicable
Securities upon which it is stamped or issue to such holder by electronic
delivery at the applicable balance account at DTC, if (i) such Securities
are registered for resale under the Securities Act, (ii) such Securities
are sold or transferred pursuant to Rule 144 (if the transferor is not an
Affiliate of the Company), or (iii) such Securities are eligible for sale
under Rule 144, without the requirement for the Company to be in
compliance with the current public information required under Rule 144(c)(1) (or
Rule 144(i)(2), if applicable) as to such securities and without volume or
manner-of-sale restrictions.  Following
the earlier of (i) the Effective Date or (ii) Rule 144 becoming
available for the resale of Securities, without the requirement for the Company
to be in compliance with the current public information required under 144(c)(1) (or
Rule 144(i)(2), if applicable) as to the Securities and without volume or
manner-of-sale restrictions, the Company shall instruct the Transfer Agent to
remove the legend from the Securities and shall cause its counsel to issue any
legend removal opinion required by the Transfer Agent.

 

Any
fees (with respect to the Transfer Agent, Company counsel or otherwise)
associated with the issuance of such opinion or the removal of such legend
shall be borne by the Company.  If a
legend is no longer required pursuant to the foregoing, the Company will no
later than three (3) Trading Days following the delivery by a Purchaser to
the Company or the Transfer Agent (with notice to the Company) of a legended
certificate or instrument representing such Securities (endorsed or with stock
powers attached, signatures guaranteed, and otherwise in form necessary to
affect the reissuance and/or transfer) and a representation letter to the
extent required by Section 4.1(a), (such third Trading Day, the “Legend Removal Date”) deliver
or cause to be delivered to such Purchaser a certificate or instrument (as the
case may be) representing such Securities that is free from all restrictive
legends.  The Company may not make any
notation on its records or give instructions to the Transfer Agent that enlarge
the restrictions on transfer set forth in this Section 4.1(c).  Certificates for Securities free from all
restrictive legends may be transmitted by the Transfer Agent to the Purchasers
by crediting the account of the Purchaser’s prime broker with DTC as directed
by such Purchaser.

 

(d)           Acknowledgement. 
Each Purchaser hereunder acknowledges its primary responsibilities under
the Securities Act and accordingly will not sell or otherwise transfer the
Securities or any interest therein without complying with the requirements of
the Securities Act. Except as otherwise provided below, while the Registration
Statement remains effective, each Purchaser hereunder may sell the Securities
in accordance with the 

 

23

 

plan of distribution contained in the registration
statement and if it does so it will comply therewith and with the related
prospectus delivery requirements unless an exemption therefrom is available or
unless the Securities are sold pursuant to Rule 144.  Each Purchaser, severally and not jointly
with the other Purchasers, agrees that if it is notified by the Company in
writing at any time that the Registration Statement registering the resale of
the Securities is not effective or that the prospectus included in such
Registration Statement no longer complies with the requirements of
Section 10 of the Securities Act, the Purchaser will refrain from selling
such Securities until such time as the Purchaser is notified by the Company that
such Registration Statement is effective or such prospectus is compliant with
Section 10 of the Exchange Act, unless such Purchaser is able to, and
does, sell such Securities pursuant to an available exemption from the
registration requirements of Section 5 of the Securities Act.

 

(e)           Buy-In. If the Company shall fail for any reason or
for no reason to issue to a Purchaser unlegended certificates within three (3) Trading
Days of receipt of all documents necessary for the removal of the legend set
forth above (the “Deadline Date”),
then, in addition to all other remedies available to such Purchaser, if on or
after the Trading Day immediately following such three (3) Trading Day
period, such Purchaser purchases (in an open market transaction or otherwise)
Securities (or a broker or trading counterparty through which the Purchaser has
agreed to sell shares makes such purchase) to deliver in satisfaction of a sale
by the holder of Securities that such Purchaser anticipated receiving from the
Company without any restrictive legend (a “Buy-In”),
then the Company shall, within three (3) Trading Days after such Purchaser’s
request and in such Purchaser’s sole discretion, either (i) pay cash to
the Purchaser in an amount equal to such Purchaser’s total purchase price
(including brokerage commissions, if any) for the Securities so purchased (the “Buy-In Price”), at which
point the Company’s obligation to deliver such certificate (and to issue such
Securities) shall terminate, or (ii) promptly honor its obligation to
deliver to such Purchaser a certificate or certificates representing such
Securities and pay cash to the Purchaser in an amount equal to the excess (if
any) of the Buy-In Price over the product of (a) such number of
Securities, times (b) the Closing Bid Price of such security on the
Deadline Date.

 

4.2          Acknowledgment of Dilution.  The Company acknowledges that the issuance of
the Securities may result in dilution of the outstanding shares of Common
Stock.  The Company further acknowledges
that its obligations under the Transaction Documents, including without
limitation its obligation to issue the Securities pursuant to the Transaction
Documents, are unconditional and absolute and not subject to any right of set
off, counterclaim, delay or reduction, regardless of the effect of any such
dilution or any claim the Company may have against any Purchaser and regardless
of the dilutive effect that such issuance may have on the ownership of the
other shareholders of the Company.

 

4.3          Furnishing of Information.  In order to enable the Purchasers to sell the
Securities under Rule 144 of the Securities Act, for a period of one year
from the Closing, the Company shall maintain the registration of the Common
Stock under Section 12(b) or 12(g) of the Exchange Act and to
timely file (or obtain extensions in respect thereof and file within the
applicable grace period) all reports required to be filed by the Company after
the date hereof pursuant to the Exchange Act, and none of the reports, when
filed, will contain any untrue statement of material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading.  During such one year
period, if the Company is not required to file reports pursuant to such laws,
it will prepare and furnish to the Purchasers and make publicly available the
information described in Rule 144(c)(2), if the provision of such
information will allow resales of the Securities pursuant to Rule 144.

 

4.4          Form D and Blue Sky.  The Company agrees to timely file a Form D
with respect to the Preferred Shares as required under Regulation D.  The Company, on or before the Closing Date,
shall take such action as the Company shall reasonably determine is necessary
in order to obtain an exemption for or to qualify the Preferred Shares for sale
to the Purchasers at the Closing pursuant to this Agreement under applicable
securities or “Blue Sky” laws of the states of the United States (or to obtain an
exemption from such qualification). The Company shall make all filings and
reports relating to the offer and sale of the Preferred Shares required under
applicable securities or “Blue Sky” laws of the states of the United States
following the Closing Date.

 

4.5          No Integration. 
The Company shall not, and shall use its commercially reasonable efforts
to ensure that no Affiliate of the Company shall, sell, offer for sale or
solicit offers to buy or otherwise negotiate in respect of any security (as
defined in Section 2 of the Securities Act) that will be integrated with
the offer or sale of 

 

24

 

the Preferred Shares in a manner that would require
the registration under the Securities Act of the sale of the Preferred Shares
to the Purchasers.

 

4.6          Securities Laws Disclosure; Publicity.  Before 9:00 a.m., New York City time, on
the first Business Day following the Closing Date, the Company shall issue one
or more press releases (collectively, the “Press
Release”) reasonably acceptable to the Purchasers
disclosing all material terms of the transactions contemplated hereby.  On or before 9:00 a.m., New York City
time, on the fourth Business Day immediately following the execution of this
Agreement, the Company will file a Current Report on Form 8-K with the
Commission describing the terms of the Transaction Documents (and including as
exhibits to such Current Report on Form 8-K the material Transaction
Documents (including, without limitation, this Agreement, the Registration
Rights Agreement, the Series B Certificate of Determination and the Series C
Certificate of Determination)). 
Notwithstanding the foregoing, the Company shall not publicly disclose
the name of any Purchaser or any Affiliate or investment adviser of any
Purchaser, or include the name of any Purchaser or any Affiliate or investment
adviser of any Purchaser in any press release or filing with the Commission
(other than the Registration Statement) or Trading Market, without the prior
written consent of such Purchaser, except (i) as required by federal
securities law in connection with (A) any Registration Statement
contemplated by the Registration Rights Agreement and (B) the filing of
final Transaction Documents with the Commission and (ii) to the extent
such disclosure is required by law, at the request of the staff of the
Commission or Trading Market regulations, in which case the Company shall
provide the Purchasers with prior written notice of such disclosure permitted
under this subclause (ii).  Each
Purchaser, severally and not jointly with the other Purchasers, covenants that
until such time as the transactions contemplated by this Agreement are publicly
disclosed by the Company as described in this Section 4.6, such Purchaser
will maintain the confidentiality of all disclosures made to it in connection
with this transaction (including the existence and terms of this Agreement and
the transactions contemplated hereby), provided, however, that each Purchaser
is permitted to disclose such information (i) to its Affiliates, partners,
members, directors, officers, employees, agents, consultants, and advisors for
the purposes of evaluating and consummating the transactions contemplated in
the Transaction Documents who agree to be bound by the terms of this Section 4.6
(or restrictions at least as restrictive as herein contained) and (ii) after
providing sufficient prior notice to the Company permitting the Company to
reasonably object, to the extent such disclosure is required by law, regulation
or judicial or administrative process, and (iii) as otherwise previously
agreed to by a Purchaser and the Company.

 

4.7          Non-Public Information.  Except with the express written consent of
such Purchaser and unless prior thereto such Purchaser shall have executed a
written agreement regarding the confidentiality and use of such information,
the Company shall not, and shall cause each Subsidiary and each of their
respective officers, directors, employees and agents not to, provide any
Purchaser with any material, non-public information regarding the Company or
any of its Subsidiaries from and after the filing of the Press Release.

 

4.8          Indemnification.

 

(a)           Indemnification of Purchasers.  In addition to the indemnity provided in the
Registration Rights Agreement, except as prohibited by applicable law or
regulation, including 12 U.S.C. 1828(k) and its implementing regulations
at 12 C.F.R. Part 359, the Company will indemnify and hold each Purchaser
and its directors, officers, stockholders, members, partners, employees and
agents (and any other Persons with a functionally equivalent role of a Person
holding such titles notwithstanding a lack of such title or any other title),
each Person who controls such Purchaser (within the meaning of Section 15
of the Securities Act and Section 20 of the Exchange Act), and the
directors, officers, stockholders, agents, members, partners or employees (and
any other Persons with a functionally equivalent role of a Person holding such
titles notwithstanding a lack of such title or any other title) of such
controlling person (each, a “Purchaser
Party”) harmless from any and all losses, liabilities,
obligations, claims, contingencies, damages, costs and expenses, including all
judgments, amounts paid in settlements, court costs and reasonable attorneys’
fees and costs of investigation that any such Purchaser Party may suffer or
incur as a result of (i) any material breach of any of the
representations, warranties, covenants or agreements made by the Company in
this Agreement or in the other Transaction Documents or (ii) any action
instituted against a Purchaser Party in any capacity, or any of them or their
respective affiliates, by any shareholder of the Company who is not an
Affiliate of such Purchaser Party, with respect to any of the transactions
contemplated by this Agreement.  The
Company will not be liable to any Purchaser Party under this Agreement to the
extent, but only to the extent that a loss, claim, damage or liability is
attributable to any Purchaser Party’s breach of any of the 

 

25

 

representations, warranties, covenants or agreements
made by such Purchaser Party in this Agreement or in the other Transaction
Documents.

 

(b)           Conduct of Indemnification Proceedings.  Promptly after receipt by any Person (the “Indemnified Person”) of
notice of any demand, claim or circumstances which would or might give rise to
a claim or the commencement of any action, proceeding or investigation in
respect of which indemnity may be sought pursuant to Section 4.8(a), such
Indemnified Person shall promptly notify the Company in writing and the Company
shall assume the defense thereof, including the employment of counsel
reasonably satisfactory to such Indemnified Person, and shall assume the payment
of all fees and expenses; provided, however, that the failure of any
Indemnified Person so to notify the Company shall not relieve the Company of
its obligations hereunder except to the extent that the Company is actually and
materially and adversely prejudiced by such failure to notify. In any such
proceeding, any Indemnified Person shall have the right to retain its own
counsel, but the fees and expenses of such counsel shall be at the expense of
such Indemnified Person unless: (i) the Company and the Indemnified Person
shall have mutually agreed to the retention of such counsel; (ii)  the
Company shall have failed promptly to assume the defense of such proceeding and
to employ counsel reasonably satisfactory to such Indemnified Person in such
proceeding; or (iii) in the reasonable judgment of counsel to such
Indemnified Person, representation of both parties by the same counsel would be
inappropriate due to actual or potential differing interests between them
including if the potential defendants in, or targets of, any such action
include both the Company and the Indemnified Person, and the Indemnified Person
shall have reasonably concluded that there may be legal defenses available to
the Indemnified Person which are different from or additional to those available
to the Company (in which case the Company shall not have the right to assume
the defense of such action on the Indemnified Person’s behalf). The Company
shall not be liable for any settlement of any proceeding effected without its
written consent, which consent shall not be unreasonably withheld, delayed or
conditioned. Without the prior written consent of the Indemnified Person, which
consent shall not be unreasonably withheld, delayed or conditioned, the Company
shall not effect any settlement of any pending or threatened proceeding in
respect of which any Indemnified Person is or could have been a party and
indemnity could have been sought hereunder by such Indemnified Party, unless
such settlement includes an unconditional release of such Indemnified Person
from all liability arising out of such proceeding.

 

4.9          Listing of Common Stock.  The Company will use its reasonable best
efforts to list the Underlying Shares for quotation on the NASDAQ Global Select
and maintain the listing of the Common Stock on the NASDAQ Global Select
Market.

 

4.10        Use of Proceeds. 
Except for a minimum of $15 million and up to a maximum of
$30 million of the net proceeds (subject to any applicable regulatory
requirements) which may be retained by the Company, the net proceeds not
retained by the Company of the capital raised through the transactions
contemplated by this Agreement will be contributed to the Bank in the form of a
cash contribution or purchase of additional common equity.

 

4.11        Shareholders Meeting

 

(a)           The Company shall call a meeting of its shareholders (the “Initial Shareholders Meeting”),
as promptly as practicable following the Closing, but in no event later than
November 30, 2010, for holders of Common Stock, the Series B
Preferred Shares and the Series C Preferred Shares to vote  (each voting as a separate class) on
proposals (the “Shareholder Proposals”)
to approve the issuance of Common Stock upon conversion of the Series B
Preferred Shares and the Series C Preferred Shares for purposes of Rule 5635
of the NASDAQ Stock Market Rules (such approvals of the Shareholder
Proposals, “Shareholder Approval”). The
Board of Directors shall recommend to the Company’s shareholders that such
shareholders approve the Shareholder Proposals (the “Board
Recommendation”), and shall not modify or withdraw such Board
Recommendation. In connection with the Initial Shareholders Meeting, the
Company shall promptly prepare (and the Purchasers will reasonably cooperate
with the Company to prepare) and file (but in no event more than thirty (30)
days following the Closing Date) with the Commission a preliminary proxy
statement, shall use its reasonable best efforts to respond to any comments of
the Commission or its staff and to cause a definitive proxy statement related
to the Initial Shareholders Meeting to be mailed to the Company’s shareholders
not more than ten (10) calendar days after clearance thereof by the
Commission, and shall use its reasonable best efforts to solicit proxies in
favor of the Shareholder Approval, including, without limitation, engaging a
proxy solicitation firm, as necessary, to assist in obtaining the Shareholder
Approval. The Company shall notify the Purchasers promptly of the receipt of
any comments from the Commission or its staff with respect to the proxy
statement and of any request by the 

 

26

 

Commission or its staff for amendments or
supplements to such proxy statement or for additional information (but the
Company shall not provide any Purchaser with any material, nonpublic
information, unless requested by such Purchaser and pursuant to a written
agreement regarding the confidentiality and use of such information). If at any
time prior to the Initial Shareholders Meeting there shall occur any event that
is required to be set forth in an amendment or supplement to the proxy
statement, the Company shall as promptly as practicable prepare and mail to its
shareholders such an amendment or supplement. In addition, each Purchaser and
the Company agrees to promptly correct any information provided by it or on its
behalf for use in the proxy statement if and to the extent that such
information shall have knowingly become false or misleading in any material
respect, and the Company shall as promptly as practicable prepare and mail to
its shareholders an amendment or supplement to correct such information to the
extent required by applicable laws and regulations. The Company shall consult
with the Purchasers prior to mailing any proxy statement, or any amendment or
supplement thereto, and provide the Purchasers with reasonable opportunity to
comment thereon (it being acknowledged and agreed that if a Purchaser does not
object to or comment on the aforementioned documents within three (3) Business
Days, then the Purchaser shall be deemed to have consented to and approved the
use of such documents).

 

(b)           In the event that the Shareholder Approval is not obtained
at the Initial Shareholders Meeting in accordance with the requirements of
NASDAQ Stock Market Rules and the Corporations Code of the State of
California, the Company shall include a proposal to approve (and the Board
shall recommend approval of) such Shareholder Proposal(s) at a subsequent
special meeting of its shareholders to be held no later than ninety (90) days
from the date of the Initial Shareholders Meeting (the “Follow-up Special Meeting”).  In the event that Shareholder Approval is not
obtained at the Initial Shareholders Meeting or the Follow-up Special Meeting,
the Company shall include a proposal to approve (and the Board of Directors
shall recommend approval of) such proposal at a meeting of its shareholders to
be held no less than once in each subsequent six month period beginning on the
date of the Follow-up Special Meeting until such approval is obtained.

 

4.12        Section 382. 
Prior to January 1, 2011, without the prior written consent of the
Company, which consent will not be unreasonably withheld, no Purchaser shall
take any action, including the exercise of any right granted under Section 4.20
of this Agreement or purchase of additional shares of the Company’s Common
Stock from and after the Closing Date, if to its knowledge taking such actions
would increase such Purchaser’s economic interest in excess of the greater of (i) 4.9%,
or (ii) the economic interest such Purchaser held in the Company
immediately following the Closing.  If
the Company withholds its consent, it shall provide the Purchaser with its
analysis of the actions proposed to be taken by the Purchaser and the
application of the provisions of Section 382 of the Code thereto.

 

4.13        No Change of Control. 
The Company shall obtain all necessary irrevocable waivers, adopt any
required amendments and make all appropriate determinations so that the
issuance of the Preferred Shares to the Purchasers will not trigger a “change
of control” or other similar provision in any of the agreements to which the
Company or any of its Subsidiaries is a party, including without limitation any
employment, “change in control,” severance or other agreements and any benefit
plan, which results in payments to the counterparty or the acceleration of
vesting of benefits.

 

4.14        No Additional Issuances.  Between the date of this Agreement and the
Closing Date, except for the issuance of shares of Common Stock under the
Company’s Amended and Restated 2004 Equity Plan and the Preferred Shares being
issued pursuant to this Agreement, the Company shall not issue or agree to
issue any additional shares of Common Stock or other securities which provide
the holder thereof the right to convert such securities into shares of Common
Stock.

 

4.15        Governance Matters. 
Within ten Business Days subsequent to the Closing Date, the Company and
the Bank will request the non-objection or approval of the Federal Reserve, the
FDIC, and the DFI, to the extent required, for the appointment of the Board
Representative (as defined below).  The
Company further covenants and agrees that within five days of receipt of the
non-objection or approval of the Federal Reserve, the FDIC and/or the DFI, the
Board of Directors shall cause one person nominated by each of Castle Creek and
Patriot (each an “Institutional Investor”)  (a “Board
Representative”) to be elected or appointed to the Board
of Directors, subject to satisfaction of the legal and governance requirements
regarding service as a director of the Company and to the reasonable approval
of the Nominating and Governance Committee of the Board of Directors (such
approval not to be unreasonably withheld or delayed).  After such appointment or election of a Board
Representative, so long as the 

 

27

 

Institutional Investor beneficially owns (as
determined in accordance with Rule 13d-3 under the Exchange Act) 4.9% of
the outstanding shares of Common Stock whether acquired upon conversion of the
Preferred Shares or otherwise (and treating each share of Preferred Shares that
is not a share of Common Stock as if it had converted into Common Stock), the
Company will be required to recommend to its shareholders the election of the
Board Representative at the Company’s annual meeting, subject to satisfaction
of the legal and governance requirements regarding service as a director of the
Company and to the reasonable approval of the Nominating and Governance Committee
of the Board of Directors (such approval not to be unreasonably withheld or
delayed).  If such Institutional Investor
no longer beneficially owns (as determined in accordance with Rule 13d-3
under the Exchange Act) the minimum number of shares of the Preferred Shares or
the Common Stock specified in the prior sentence, Institutional Investor  will have no further rights under this Section 4.15,
and, at the written request of the Board of Directors, shall use its reasonable
best efforts to cause its Board Representative to resign from the Board of
Directors as promptly as possible thereafter.

 

Any
Board Representative (including any successor nominee) duly selected in
accordance with Section 4.15 shall, subject to applicable law, be the
Company’s and the Company’s Nominating and Governance Committee’s nominee to
serve on the Board of Directors.  The
Company shall use all reasonable best efforts to have the Board Representative
elected as a director of the Company and the Company shall solicit proxies for
each such person to the same extent as it does for any of its other nominees to
the Board of Directors.

 

For
only so long as any Institutional Investor has the right to nominate a Board
Representative pursuant to Section 4.15, such Institutional Investor shall
have the power to designate the Board Representative’s replacement upon the
death, resignation, retirement, disqualification or removal from office of such
director.  The Board of Directors will
use its reasonable best efforts to take all action required to fill the vacancy
resulting therefrom with such person (including such person, subject to
applicable law, being the Company’s and the Nominating and Governance Committee’s
nominee to serve on the Board of Directors, using all reasonable best efforts
to have such person elected as director of the Company and the Company
soliciting proxies for such person to the same extent as it does for any of its
other nominees to the Board of Directors).

 

Any
Board Representative shall be entitled to the same compensation and same
indemnification in connection with his or her role as a director as the other
members of the Board of Directors, and each Board Representative shall be
entitled to reimbursement for documented, reasonable out-of-pocket expenses
incurred in attending meetings of the Board of Directors or any committees
thereof, to the same extent as the other members of the Board of
Directors.  The Company shall notify each
Board Representative of all regular and special meetings of the Board of
Directors and shall notify each Board Representative of all regular and special
meetings of any committee of the Board of Directors of which the Board
Representative is a member in accordance with the Company’s bylaws as then in
effect.  The Company shall provide each
Board Representative with copies of all notices, minutes, consents and other
materials provided to all other members of the Board of Directors concurrently
as such materials are provided to the other members.  A Board Representative shall not serve on the
Audit Committee of the Board of Directors.

 

At
all times when any Institutional Investor has the right to a Board
Representative as provided in Section 4.15, upon the written request of
such Institutional Investor and so long as such Institutional Investor does not
have a Board Representative currently serving on the Board of Directors (or has
a Board Representative whose appointment is pending approval), such
Institutional Investor may appoint one individual to attend all meetings of the
Board of Directors and no more than two (2) committees thereof (the “Observer”) and
pursuant to the paragraph below the board of directors of the Bank and no more
than two (2) committees thereof, which individual shall be reasonably
acceptable to the Board of Directors (such approval not to be unreasonably
withheld or delayed).  The Observer shall
be entitled to attend such meetings only in the event such Institutional
Investor does not have a Board Representative currently serving on the Board of
Directors.  The Observer shall not have
any right to vote on any matter presented to the Board of Directors or any
committee thereof.  The Company shall
give the Observer written notice of each meeting thereof at the same time and
in the same manner as the members of the Board of Directors, shall provide the
Observer with all written materials and other information given to members of
the Board of Directors at the same time such materials and information are
given to the members of the Board of Directors and shall permit the Observer to
attend as an observer at all meetings thereof, and in the event the Company
proposes to take any action by written consent in lieu of a meeting, the
Company shall give written notice thereof to the Observer prior to the
effective date of such consent describing the nature and substance of such
action and including 

 

28

 

the
proposed text of such written consents; provided,
however, that (A) the
Observer may be excluded from executive sessions comprised solely of
independent directors by the lead or presiding independent director if, in his
good faith judgment, such exclusion is to facilitate candid discussion of
particularly sensitive matters (it being understood that it is not expected
that the Observer would be excluded from routine executive sessions), (B) the
Company or the Board of Directors shall have the right to withhold any
information and to exclude the Observer from any meeting or portion thereof (1) if
doing so is, in the reasonable good faith judgment of the Company, after
consultation with counsel, advisable or necessary to protect the
attorney-client privilege between the Company and counsel, violates applicable
law or guidance from bank regulators or (2) if the Board of Directors
reasonably determines in good faith, after consultation with counsel, that
attendance by the Observer would conflict with fiduciary requirements under
applicable law and (C) such Institutional Investor holds and shall cause
its Observer to hold all such information obtained as provided in the prior
sentence in confidence pursuant to the Non-Disclosure Agreement entered into
between the Company and such Institutional Inventor.

 

So
long as any Institutional Investor has the right to appoint a Board
Representative pursuant to this Section, such Institutional Investor shall have
the right to either nominate one person (the “Bank Board  Representative”)
to be elected or appointed as director to the board of directors of the Bank
(the “Bank Board”) or
to appoint one person to attend all meetings of the Bank Board and no more than
two (2) committees thereof as an observer (the “Bank Board Observer”); provided that the appointment by an
Institutional Investor of a Bank Board Observer shall not prevent such
Institutional Investor from nominating a Bank Board Representative in lieu of a
Bank Board Observer at a future time. The obligations of the Company otherwise
with respect to, and the conditions on the appointment and, if applicable,
directorship of, the Bank Board Representative and the Bank Board Observer
shall be substantially the same as those with respect to or applicable to the
Board Representative and Observer, respectively.

 

The
rights provided by this Section 4.15 are personal to each Institutional
Investor and in no event shall such rights be assignable.

 

4.16        No Rights Agreement. 
The Company shall not enter into any poison pill agreement, stockholders’
rights plan or similar agreement that shall limit the rights of a Purchaser to
acquire Common Stock unless such poison pill agreement, stockholders’ rights
plan or similar agreement grants an exemption or waiver to the Purchaser
immediately effective upon execution of such plan or agreement that would allow
the Purchaser to acquire such Common Stock.

 

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

 

4.18        Rights Offering for Shareholders.  The Company may at its option commence a
Permitted Rights Offering to its Common Stock shareholders of record one
Business Day before the Initial Shareholders Meeting; provided that, if the
Company pursues a Permitted Rights Offering, it will use its best efforts to
ensure that such rights offering, including exercise of such right, is
completed as soon as practicable, and in any event no later than six months
from the Closing Date.  The Purchasers
will not be afforded the opportunity to participate in the Permitted Rights
Offering unless the Purchasers own Common Stock on the record date for the
Permitted Rights Offering (which record date may be prior to the Initial
Shareholders Meeting but will be after the Closing Date).

 

4.19        VCOC Agreement; No Other Agreements.  As of the date of this Agreement, the Company
shall enter into a customary “Venture Capital Operating Company” agreement with
each of Castle Creek and Patriot in the form of Exhibit G attached
to and made part of this Agreement (the “VCOC Agreement”).  Other than the VCOC Agreement and the Transaction
Documents, there are no other agreements or arrangements between any Purchaser
and the Company related to the transactions contemplated by the Transaction
Documents.

 

4.20        Gross-Up Rights.

 

(a)           Sale of New Securities.  For so long as a
Purchaser, together with its Affiliates, owns 4% or more of all of the
outstanding shares of Common Stock (counting for such purposes all shares of
Common Stock 

 

29

 

into or for which any securities owned by the
Purchaser are directly or indirectly convertible or exercisable and, for the
avoidance of doubt, including as shares owned and outstanding all shares of
Common Stock issued by the Company after the Closing) (before giving effect to
any issuances triggering provisions of this Section), if at any time after the
date hereof the Company makes any public or non public offering or sale of
Common Stock, or securities convertible into Common Stock (any such security, a
“New Security”)
(other than (i) any Common Stock or other securities issuable upon the
exercise or conversion of any securities of the Company issued or agreed or
contemplated to be issued as of the date hereof; (ii) pursuant to the
granting or exercise of employee stock options, restricted stock or other stock
incentives pursuant to the Company’s stock incentive plans approved by the
Board of Directors or the issuance of stock pursuant to the Company’s employee
stock purchase plan approved by the Board of Directors or similar plan where
stock is being issued or offered to a trust, other entity or otherwise, for the
benefit of any employees, officers or directors of the Company, in each case in
the ordinary course of providing incentive compensation; (iii) issuances
of capital stock as full or partial consideration for a merger, acquisition,
joint venture, strategic alliance, license agreement or other similar
nonfinancing transaction; (iv) issuance of Common Stock upon exercise of
warrants outstanding as of the date hereof; or (v) a Permitted Rights
Offering pursuant to Section 4.18 hereof), then such Purchaser shall be
afforded the opportunity to acquire from the Company for the same price (net of
any underwriting discounts or sales commissions) and on the same terms as such
securities are proposed to be offered to others, up to the amount of New
Securities in the aggregate required to enable it to maintain its proportionate
Common Stock-equivalent interest in the Company immediately prior to any such
issuance of New Securities.  The amount of New Securities that the
Purchaser shall be entitled to purchase in the aggregate shall be determined by
multiplying (x) the total number or principal amount of such offered New
Securities by (y) a fraction, the numerator of which is the sum of
(i) the number of shares of Common Stock held by the Purchaser, if any,
and (ii) the number of shares of Common Stock represented by the Preferred
Shares held by the Purchaser on an as-converted basis as of such date, if any,
and the denominator of which is the sum of (i) the number of shares of
Common Stock then outstanding, (ii) the number of shares of Common Stock
represented by the Preferred Shares on an as-converted basis as of such
date.  Notwithstanding anything herein to the contrary, in no event shall
the Purchaser have the right to purchase securities hereunder to the extent
such purchase would result in such Purchaser, together with its Affiliates,
owning a greater percentage interest in the Company than such Purchaser held
immediately prior to the issuance of the New Securities (counting for such
purposes all shares of Common Stock into or for which any securities owned by
the Purchaser are directly or indirectly convertible or exercisable).

 

(b)           Notice.  In the event the Company proposes to
offer or sell New Securities, it shall give the Purchaser written notice of its
intention, describing the price (or range of prices), anticipated amount of
securities, timing, and other terms upon which the Company proposes to offer
the same no later than ten Business Days after the commencement of marketing
with respect to a Rule 144A offering, after the filing of a registration
statement, or a prospectus supplement in connection with a shelf registration
(whichever is later) for a Public Offering, or after the Company proposes to
pursue any other offering.  The Purchaser
shall have ten Business Days (three Business Days in the case of a Public
Offering) from the date of receipt of such a notice to notify the Company in
writing that it intends to exercise its rights provided in this Section 4.20
and as to the amount of New Securities the Purchaser desires to purchase, up to
the maximum amount calculated pursuant to this Section 4.20(a).  Such
notice shall constitute a nonbinding indication of interest of the Purchaser to
purchase the amount of New Securities so specified at the terms set forth in
the Company’s notice to it.  The failure of the Purchaser to respond
within such ten Business Day period or three Business Day period, as
applicable, shall be deemed to be a waiver of such Purchaser’s rights under
this Section 4.20 only with respect to the offering described in the
applicable notice.  A “Public Offering” means an
underwritten offering registered with the SEC.

 

(c)           Purchase Mechanism.  Subject to
Section 4.20(e), if the Purchaser exercises its rights provided in this
Section 4.20, the closing of the purchase of the New Securities with
respect to which such right has been exercised shall take place within 30
calendar days after the giving of notice of such exercise, which period of time
shall be extended, except for a Public Offering, for a maximum of 180 days in
order to comply with applicable laws and regulations (including receipt of any
applicable regulatory or shareholder approvals).  Each of the Company and the Purchaser agrees
to use its commercially reasonable efforts to secure any regulatory or
shareholder approvals or other consents, and to comply with any law or
regulation necessary in connection with the offer, sale and purchase of, such
New Securities.

 

(d)           Failure of Purchase.   In the event the Purchaser fails to exercise
its rights provided in this Section 4.20 or, if so exercised, the
Purchaser is unable to consummate such purchase within the time period 

 

30

 

specified in Section 4.20(c) above because
of its failure to obtain any required regulatory or shareholder consent or
approval, the Company shall thereafter be entitled (during the period of 60
days following the conclusion of the applicable period) to sell or enter into
an agreement (pursuant to which the sale of the New Securities covered thereby
shall be consummated, if at all, within 90 days from the date of said
agreement) to sell the New Securities not elected to be purchased pursuant to
this Section 4.20 by the Purchaser or which the Purchaser is unable to
purchase because of such failure to obtain any such consent or approval, upon
terms no more favorable in the aggregate to the purchasers of such securities
than were specified in the Company’s notice to the Purchaser.  In the event the Company has not sold the New
Securities or entered into an agreement to sell the New Securities within said
60-day period (or sold and issued New Securities in accordance with the
foregoing within 90 days from the date of said agreement (as such period may be
extended in the manner described above for a period not to exceed 180 days from
the date of said agreement)), the Company shall not thereafter offer, issue or
sell such New Securities without first offering such securities to the Purchaser
in the manner provided above. 
Notwithstanding the foregoing and except in a Public Offering, if such
sale of the New Securities by the Company is subject to the receipt of any
regulatory or shareholder approval or consent or the expiration of any waiting
period, the time period during which such sale may be consummated shall be
extended until the expiration of five Business Days after all such approvals or
consents have been obtained or waiting periods expired, but in no event shall
such time period exceed 180 days from the date of the applicable agreement with
respect to such sale.

 

(e)           Expedited Issuance; Regulatory Directive.  Notwithstanding the foregoing provisions of
this Section 4.20, if a majority of the directors of the Board of
Directors determine that the Company must issue equity or debt securities on an
expedited basis, then the Company may consummate the proposed issuance or sale
of such securities (“Expedited Issuance”) and then comply with the provisions
of this Section 4.20(e) provided that (i) the purchaser(s) of
such New Securities has consented in writing to the issuance of additional New
Securities in accordance with the provisions of this Section 4.20, and (ii) the
sale of any such additional New Securities under this Section 4.20(e) to
one or more Purchasers pursuant to this Section 4.20 shall be consummated
as promptly as is practicable but in any event no later than ninety (90) days
subsequent to the date on which the Company consummates the Expedited Issuance
under this Section 4.20(e). 
Notwithstanding anything to the contrary herein in Section 4.20,
the provisions of Section 4.20 (other than as provided in subclause (ii) of
this Section 4.20(e)) shall not be applicable and the consent of the
purchasers of such New Securities shall not be required in connection with any
Expedited Issuance undertaken at the written direction of the applicable
federal regulator of the Company or the Bank.

 

(f)            Non-Cash Consideration.  In the case of the
offering of securities for a consideration in whole or in part other than cash,
including securities acquired in exchange therefor (other than securities by
their terms so exchangeable), the consideration other than cash shall be deemed
to be the fair value thereof as determined by the Board of Directors; provided, however, that such fair value as determined by the Board of
Directors shall not exceed the aggregate market price of the securities being
offered as of the date the Board of Directors authorizes the offering of such
securities.

 

(g)           Termination. 
Purchaser’s rights hereunder shall expire at such time that the
Purchaser, together with its Affiliates, owns less than 4% of all of the
outstanding shares of Common Stock (counting for such purposes all shares of
Common Stock into or for which any securities owned by the Purchaser are
directly or indirectly convertible or exercisable and, for the avoidance of
doubt, including as shares owned and outstanding all shares of Common Stock
issued by the Company after the Closing) (before giving effect to any issuances
triggering provisions of this Section 4.20).

 

(h)           Cooperation.  The Company and the Purchaser
shall cooperate in good faith to facilitate the exercise of the Purchaser’s
rights under this Section 4.20, including to secure any required approvals
or consents.

 

(i)            No Assignment of Rights.  The rights of Purchaser described herein
shall be personal to Purchaser and the transfer, assignment and/or conveyance
of said rights from Purchaser to any other person and/or entity is prohibited
and shall be void and of no force or effect, provided the Purchaser may
transfer to an Affiliate.

 

31

 

ARTICLE V

CONDITIONS PRECEDENT TO CLOSING

 

5.1          Conditions Precedent to the Obligations of the
Purchasers to Purchase Preferred Shares. 
The obligation of each Purchaser (on its own behalf and not on behalf of
any other Purchaser) to acquire Preferred Shares at the Closing is subject to
the fulfillment to such Purchaser’s satisfaction, on or prior to the Closing
Date, of each of the following conditions, any of which may be waived by such
Purchaser (as to itself only):

 

(a)           Representations and Warranties.  The representations and warranties of the
Company contained herein shall be true and correct as of the date when made and
as of the Closing Date, as though made on and as of such date, except for such
representations and warranties that speak as of a specific date.

 

(b)           Performance. 
The Company shall have performed, satisfied and complied in all material
respects with all covenants, agreements and conditions required by the
Transaction Documents to be performed, satisfied or complied with by it at or
prior to the Closing.

 

(c)           No Injunction. 
No statute, rule, regulation, executive order, decree, ruling or
injunction shall have been enacted, entered, promulgated or endorsed by any
court or governmental authority of competent jurisdiction that prohibits the consummation
of any of the transactions contemplated by the Transaction Documents.

 

(d)           Consents. 
The Company shall have obtained in a timely fashion any and all
consents, permits, approvals, registrations and waivers necessary for
consummation of the purchase and sale of the Preferred Shares, all of which
shall be and remain so long as necessary in full force and effect.

 

(e)           No Suspensions of Trading in Common Stock; Listing.  The Common Stock (i) shall be designated
for quotation or listed on the Principal Trading Market and (ii) shall not
have been suspended, as of the Closing Date, by the Commission or the Principal
Trading Market from trading on the Principal Trading Market nor shall
suspension by the Commission or the Principal Trading Market have been
threatened, as of the Closing Date, either (A) in writing by the
Commission or the Principal Trading Market or (B) by falling below the
minimum listing maintenance requirements of the Principal Trading Market.  The Company shall have obtained approval of
the Principal Trading Market to list the Underlying Shares.

 

(f)            Company Deliverables.  The Company shall have delivered the Company
Deliverables in accordance with Section 2.2(a).

 

(g)           Compliance Certificate.  The Company shall have delivered to each Purchaser
a certificate, dated as of the Closing Date and signed by its Chief Executive
Officer and its Chief Financial Officer, certifying to the fulfillment of the
conditions specified in Sections 5.1(a) and (b).

 

(h)           Certificate of Determination.  The Company shall have duly filed the
Series B Certificate of Determination and the Series C Certificate of
Determination with the California Secretary.

 

(i)            Minimum Gross Proceeds.  The Company shall simultaneously issue and
deliver at such Closing to the Purchasers hereunder in the aggregate at least
sufficient shares of the Preferred Stock against payment of an aggregate
Purchase Price of at least $75 million.

 

(j)            Termination. 
This Agreement shall not have been terminated as to such Purchaser in
accordance with Section 6.16 herein.

 

(k)           Bank Regulatory Issues. The purchase of such
Preferred Shares shall not cause such Purchaser or any of its Affiliates to
violate any bank regulation.

 

5.2          Conditions Precedent to the Obligations of the Company
to sell Preferred Shares.  The
Company’s obligation to sell and issue the Preferred Shares at the Closing is
subject to the fulfillment to the satisfaction of the Company on or prior to
the Closing Date of the following conditions, any of which may be waived by the
Company:

 

32

 

(a)           Representations and Warranties.  The representations and warranties made by
the Purchaser in Section 3.2 hereof shall be true and correct as of the
date when made, and as of the Closing Date as though made on and as of such
date, except for representations and warranties that speak as of a specific
date.

 

(b)           Performance. 
Such Purchaser shall have performed, satisfied and complied in all
material respects with all covenants, agreements and conditions required by the
Transaction Documents to be performed, satisfied or complied with by such
Purchaser at or prior to the Closing Date.

 

(c)           No Injunction. 
No statute, rule, regulation, executive order, decree, ruling or
injunction shall have been enacted, entered, promulgated or endorsed by any
court or governmental authority of competent jurisdiction that prohibits the
consummation of any of the transactions contemplated by the Transaction
Documents.

 

(d)           Consents. 
The Company shall have obtained in a timely fashion any and all
consents, permits, approvals, registrations and waivers necessary for
consummation of the purchase and sale of the Preferred Shares, all of which
shall be and remain so long as necessary in full force and effect.

 

(e)           Purchasers Deliverables.  Such Purchaser shall have delivered its
Purchaser Deliverables in accordance with Section 2.2(b).

 

(f)            Termination. 
This Agreement shall not have been terminated as to such Purchaser in
accordance with Section 6.16 herein.

 

ARTICLE VI

MISCELLANEOUS

 

6.1          Fees and Expenses. 
Other than as set forth in this Section 6.1, the parties hereto
shall be responsible for the payment of all expenses incurred by them in
connection with the preparation and negotiation of the Transaction Documents
and the consummation of the transactions contemplated hereby.  The Company shall pay all amounts owed to the
Placement Agent relating to or arising out of the transactions contemplated
hereby.  The Company shall pay all
Transfer Agent fees, stamp taxes and other taxes and duties levied in
connection with the sale and issuance of the Securities to the Purchasers.  The Company shall compensate Castle Creek for
all expenses in connection with due diligence efforts, the negotiation and
preparation of the Transaction Documents and undertaking of the transactions
contemplated by the Transaction Documents (including out-of-pocket due
diligence expenses and professional fees incurred by or on behalf of Castle
Creek or its Affiliates in connection with the transactions, but excluding the
purchase price for any of the Securities) in an amount not to exceed
$60,000.  In addition, the Company shall
compensate Patriot for all expenses in connection with due diligence efforts,
the negotiation and preparation of the Transaction Documents and undertaking of
the transactions contemplated by the Transactions Documents (including
out-of-pocket due diligence expenses and professional fees incurred by or on
behalf of Patriot or its Affiliates in connection with the transactions, but excluding
the purchase price for any of the Securities) in an amount not to exceed
$50,000.

 

6.2          Entire Agreement. 
The Transaction Documents, together with the Exhibits and Schedules
thereto, contain the entire understanding of the parties with respect to the
subject matter hereof and supersede all prior agreements, understandings,
discussions and representations, oral or written, with respect to such matters,
which the parties acknowledge have been merged into such documents, exhibits
and schedules. At or after the Closing, and without further consideration, the
Company and the Purchasers will execute and deliver to the other such further
documents as may be reasonably requested in order to give practical effect to
the intention of the parties under the Transaction Documents.

 

6.3          Notices.  Any
and all notices or other communications or deliveries required or permitted to
be provided hereunder shall be in writing and shall be deemed given and
effective on the earliest of (a) the date of transmission, if such notice
or communication is delivered via facsimile (provided the sender receives a
machine-generated confirmation of successful transmission) at the facsimile
number specified in this Section prior to 5:00 p.m., New York City
time, on a Trading Day, (b) the next Trading Day after the date of  transmission, if such notice or communication
is delivered via facsimile at the facsimile number specified in this
Section on a day that is not a 

 

33

 

Trading Day or later than 5:00 p.m., New York
City time, on any Trading Day, (c) the Trading Day following the date of
mailing, if sent by U.S. nationally recognized overnight courier service with
next day delivery specified, or (d) upon actual receipt by the party to
whom such notice is required to be given. The address for such notices and
communications shall be as follows:

 

	
  If to the Company:

  	
  Heritage
  Commerce Corp

  
	
   

  	
  150
  Almaden Boulevard

  
	
   

  	
  San
  Jose, CA 95113

  
	
   

  	
  Attn:
  Chief Executive Officer

  
	
   

  	
  Tel:
  (408) 497-6900

  
	
   

  	
  Fax:
  (408) 947-6910

  
	
   

  	
   

  
	
  With a copy to:

  	
  Buchalter
  Nemer

  
	
   

  	
  A
  Professional Corporation

  
	
   

  	
  1000
  Wilshire Blvd., Suite 1500

  
	
   

  	
  Los Angeles, CA 90017

  
	
   

  	
  Attn: Mark Bonenfant, Esq.

  
	
   

  	
  Tel:
  (213) 891-5020

  
	
   

  	
  Fax:
  (213) 630-5664

  
	
   

  	
   

  
	
  If to Purchaser:

  	
  To
  address set forth under such Purchaser’s name on the signature
  page hereof

  

 

or
such other address as may be designated in writing hereafter, in the same
manner, by such Person.

 

6.4          Amendments; Waivers; No Additional Consideration.  No provision of this Agreement may be waived
or amended except in a written instrument signed, in the case of an amendment,
by the Company and each of the Purchasers affected by such amendment or, in the
case of a waiver, by the party against whom enforcement of any such waiver is
sought. No waiver of any default with respect to any provision, condition or
requirement of this Agreement shall be deemed to be a continuing waiver in the
future or a waiver of any subsequent default or a waiver of any other
provision, condition or requirement hereof, nor shall any delay or omission of
either party to exercise any right hereunder in any manner impair the exercise
of any such right. No consideration shall be offered or paid to any Purchaser
to amend or consent to a waiver or modification of any provision of any
Transaction Document unless the same consideration is also offered to all
Purchasers who then hold Preferred Shares.

 

6.5          Construction. 
The headings herein are for convenience only, do not constitute a part
of this Agreement and shall not be deemed to limit or affect any of the
provisions hereof.  The language used in
this Agreement will be deemed to be the language chosen by the parties to
express their mutual intent, and no rules of strict construction will be
applied against any party. This Agreement shall be construed as if drafted
jointly by the parties, and no presumption or burden of proof shall arise
favoring or disfavoring any party by virtue of the authorship of any provisions
of this Agreement or any of the Transaction Documents.

 

6.6          Successors and Assigns.  The provisions of this Agreement shall inure
to the benefit of and be binding upon the parties and their successors and
permitted assigns. This Agreement, or any rights or obligations hereunder, may
not be assigned by the Company without the prior written consent of the
Purchasers. Any Purchaser may assign its rights hereunder in whole or in part
to any Person to whom such Purchaser assigns or transfers any Securities in
compliance with the Transaction Documents and applicable law, provided such
transferee shall agree in writing to be bound, with respect to the transferred
Securities, by the terms and conditions of this Agreement that apply to the “Purchasers”.

 

6.7          No Third-Party Beneficiaries.  This Agreement is intended for the benefit of
the parties hereto and their respective successors and permitted assigns and is
not for the benefit of, nor may any provision hereof be enforced by, any other
Person, other than Indemnified Persons.

 

6.8          Governing Law. 
All questions concerning the construction, validity, enforcement and
interpretation of this Agreement shall be governed by and construed and
enforced in accordance with the internal 

 

34

 

laws of the State of California, without regard to
the principles of conflicts of law thereof. Each party agrees that all
Proceedings concerning the interpretations, enforcement and defense of the
transactions contemplated by this Agreement and any other Transaction Documents
(whether brought against a party hereto or its respective Affiliates, employees
or agents) may be commenced on a non-exclusive basis in the California Courts.
Each party hereto hereby irrevocably submits to the non-exclusive jurisdiction
of the California Courts for the adjudication of any dispute hereunder or in
connection herewith or with any transaction contemplated hereby or discussed
herein (including with respect to the enforcement of any of the Transaction
Documents), and hereby irrevocably waives, and agrees not to assert in any Proceeding,
any claim that it is not personally subject to the jurisdiction of any such
California Court, or that such Proceeding has been commenced in an improper or
inconvenient forum. Each party hereto hereby irrevocably waives personal
service of process and consents to process being served in any such Proceeding
by mailing a copy thereof via registered or certified mail or overnight
delivery (with evidence of delivery) to such party at the address in effect for
notices to it under this Agreement and agrees that such service shall
constitute good and sufficient service of process and notice thereof. Nothing
contained herein shall be deemed to limit in any way any right to serve process
in any manner permitted by law. EACH PARTY HERETO HEREBY
IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND
ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING
TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.

 

6.9          Survival. 
Subject to applicable statute of limitations, the representations,
warranties, agreements and covenants contained herein shall survive the Closing
and the delivery of the Preferred Shares.

 

6.10        Execution.  This
Agreement may be executed in two or more counterparts, all of which when taken
together shall be considered one and the same agreement and shall become
effective when counterparts have been signed by each party and delivered to the
other party, it being understood that both parties need not sign the same
counterpart. In the event that any signature is delivered by facsimile
transmission, or by e-mail delivery of a “.pdf” format data file, such
signature shall create a valid and binding obligation of the party executing
(or on whose behalf such signature is executed) with the same force and effect
as if such facsimile signature page were an original thereof.

 

6.11        Severability. 
If any provision of this Agreement is held to be invalid or
unenforceable in any respect, the validity and enforceability of the remaining
terms and provisions of this Agreement shall not in any way be affected or
impaired thereby and the parties will attempt to agree upon a valid and
enforceable provision that is a reasonable substitute therefor, and upon so
agreeing, shall incorporate such substitute provision in this Agreement.

 

6.12        Replacement of Shares. 
If any certificate or instrument evidencing any Preferred Shares is
mutilated, lost, stolen or destroyed, the Company shall issue or cause to be
issued in exchange and substitution for and upon cancellation thereof, or in
lieu of and substitution therefor, a new certificate or instrument, but only
upon receipt of evidence reasonably satisfactory to the Company and the
Transfer Agent of such loss, theft or destruction and the execution by the
holder thereof of a customary lost certificate affidavit of that fact and an
agreement to indemnify and hold harmless the Company and the Transfer Agent for
any losses in connection therewith or, if required by the Transfer Agent, a
bond in such form and amount as is required by the Transfer Agent. The
applicants for a new certificate or instrument under such circumstances shall
also pay any reasonable third-party costs associated with the issuance of such
replacement Shares. If a replacement certificate or instrument evidencing any
Preferred Shares is requested due to a mutilation thereof, the Company may
require delivery of such mutilated certificate or instrument as a condition
precedent to any issuance of a replacement.

 

6.13        Remedies.  In
addition to being entitled to exercise all rights provided herein or granted by
law, including recovery of damages, each of the Purchasers and the Company will
be entitled to specific performance under the Transaction Documents. The
parties agree that monetary damages may not be adequate compensation for any
loss incurred by reason of any breach of obligations described in the foregoing
sentence and hereby agree to waive in any action for specific performance of
any such obligation (other than in connection with any action for a temporary restraining
order) the defense that a remedy at law would be adequate.

 

6.14        Payment Set Aside. 
To the extent that the Company makes a payment or payments to any
Purchaser pursuant to any Transaction Document or a Purchaser enforces or
exercises its rights thereunder, and such payment or payments or the proceeds
of such enforcement or exercise or any part thereof are subsequently 

 

35

 

invalidated, declared to be fraudulent or
preferential, set aside, recovered from, disgorged by or are required to be
refunded, repaid or otherwise restored to the Company, a trustee, receiver or
any other person under any law (including, without limitation, any bankruptcy
law, state or federal law, common law or equitable cause of action), then to
the extent of any such restoration the obligation or part thereof originally
intended to be satisfied shall be revived and continued in full force and
effect as if such payment had not been made or such enforcement or setoff had
not occurred.

 

6.15        Independent Nature of Purchasers’ Obligations and Rights.  The obligations of each Purchaser under any
Transaction Document are several and not joint with the obligations of any
other Purchaser, and no Purchaser shall be responsible in any way for the
performance of the obligations of any other Purchaser under any Transaction
Document.  The decision of each Purchaser
to purchase Preferred Shares pursuant to the Transaction Documents has been
made by such Purchaser independently of any other Purchaser and independently
of any information, materials, statements or opinions as to the business,
affairs, operations, assets, properties, liabilities, results of operations,
condition (financial or otherwise) or prospects of the Company or any Subsidiary
which may have been made or given by any other Purchaser or by any agent or
employee of any other Purchaser, and no Purchaser and any of its agents or
employees shall have any liability to any other Purchaser (or any other Person)
relating to or arising from any such information, materials, statement or
opinions.  Nothing contained herein or in
any Transaction Document, and no action taken by any Purchaser pursuant
thereto, shall be deemed to constitute the Purchasers as a partnership, an
association, a joint venture or any other kind of entity, or create a
presumption that the Purchasers are in any way acting in concert or as a group
with respect to such obligations or the transactions contemplated by the
Transaction Documents.  Each Purchaser
acknowledges that no other Purchaser has acted as agent for such Purchaser in
connection with making its investment hereunder and that no Purchaser will be
acting as agent of such Purchaser in connection with monitoring its investment
in the Preferred Shares or enforcing its rights under the Transaction
Documents.  Each Purchaser shall be
entitled to independently protect and enforce its rights, including without
limitation the rights arising out of this Agreement or out of the other
Transaction Documents, and it shall not be necessary for any other Purchaser to
be joined as an additional party in any proceeding for such purpose.

 

6.16        Termination. 
This Agreement may be terminated and the sale and purchase of the
Preferred Shares abandoned at any time prior to the Closing by either the
Company or any Purchaser (with respect to itself only) upon written notice to
the other, if the Closing has not been consummated on or prior to
5:00 p.m., New York City time, on the Outside Date; provided, however,
that the right to terminate this Agreement under this Section 6.16 shall
not be available to any Person whose failure to comply with its obligations
under this Agreement has been the cause of or resulted in the failure of the
Closing to occur on or before such time. 
The Company shall give prompt notice of any such termination to each
other Purchaser, and, if necessary, work in good faith to restructure the
transaction to allow each Purchaser that does not exercise a termination right
to purchase the full number of securities set forth below such Purchaser’s name
on the signature page of this Agreement while remaining in compliance with
Section 5.1(k).  Nothing in this
Section 6.16 shall be deemed to release any party from any liability for
any breach by such party of the terms and provisions of this Agreement or the
other Transaction Documents or to impair the right of any party to compel
specific performance by any other party of its obligations under this Agreement
or the other Transaction Documents. In the event of a termination pursuant to
this Section, the Company shall promptly notify all non-terminating Purchasers.
Upon a termination in accordance with this Section, the Company and the
terminating Purchaser(s) shall not have any further obligation or
liability (including arising from such termination) to the other, and no
Purchaser will have any liability to any other Purchaser under the Transaction
Documents as a result therefrom.

 

6.17        Rescission and Withdrawal Right.  Notwithstanding anything to the contrary
contained in (and without limiting any similar provisions of) the Transaction
Documents, whenever any Purchaser exercises a right, election, demand or option
under a Transaction Document and the Company does not timely perform its
related obligations within the periods therein provided, then such Purchaser
may rescind or withdraw, in its sole discretion from time to time upon written
notice to the Company, any relevant notice, demand or election in whole or in
part without prejudice to its future actions and rights.

 

6.18        Adjustments in Stock Numbers and Prices.  In the event of any stock split, subdivision,
dividend or distribution payable in shares of Common Stock (or other securities
or rights convertible into, or entitling the holder thereof to receive directly
or indirectly shares of Common Stock), combination or other similar 

 

36

 

recapitalization or event occurring after the date
hereof and prior to Closing, each reference in any Transaction Document to a
number of shares or a price per share shall be deemed to be amended to
appropriately account for such event.

 

6.19        Avoidance of Control. 
Notwithstanding anything to the contrary in the Transaction Documents,
the Company shall not  knowingly take any
action to  repurchase Common Stock, or
securities or rights, options or warrants to purchase Common Stock, or
securities of any type whatsoever that are, or may become, convertible into or
exchangeable into or exercisable for Common Stock in each case, where each of
Castle Creek and Patriot or any other Purchaser are not given the right to
participate in such repurchase of its respective pro rata proportion, that
would cause Castle Creek’s or Patriot’s or such other Purchaser’s ownership of
voting securities of the Company (together with the ownership by the respective
Affiliates (as such term is used under the BHC Act) of voting securities of the
Company) to increase above 4.9% in the case of Castle Creek and 9.9% in the
case of Patriot or such other Purchaser, without the prior written consent of
each of Castle Creek, Patriot, or such other Purchaser, as applicable, or to
otherwise cause Castle Creek, Patriot or such other Purchaser to “control” the
Company under and for purposes of the BHC Act.

 

6.20        Adjustment
of Terms.  In the event that the
Company provides for more favorable terms with respect to the transactions
contemplated hereby, through amendment(s) to this Agreement, letter
agreement or otherwise, to one or more of the Purchasers of Preferred Shares
than the terms applicable to the remaining Purchasers in the offering
contemplated hereby who are not parties to such revised terms, the Company will
offer the remaining Purchasers the same terms with respect to the purchase of
the Preferred Shares proposed to be purchased by them and this Agreement will
be amended accordingly to reflect such adjusted terms.

 

6.21        Voting
Agreement.  Subject to any applicable
law or regulation to the contrary, each Purchaser hereby severally and solely
on its own behalf and as further consideration to the Company for its agreement
to sell to the Purchaser the Preferred Shares agrees to vote all of the
Preferred Shares held by the Purchaser and to cause any Affiliate to vote in
favor of the Shareholder Proposals at the Initial Shareholder Meeting, the
Follow-up Special Meeting (if required) or any subsequent shareholder meeting
as required and held in accordance with Section 4.11(b) to approve
the Shareholder Proposals. For purposes of this Section 6.21, Purchasers
for Series B Preferred Shares shall only vote with respect to the
Shareholder Proposals related to the Series B Preferred Shares and
Purchasers of the Series C Preferred Shares shall only vote with respect
to the Shareholder Proposals related to the Series C Preferred
Shares.  No Purchaser shall enter into
any agreement or understanding with any Person to vote or give instructions or
grant a proxy in any manner inconsistent with this Section 6.21. Purchaser
agrees that as a condition of transfer of shares of Preferred Shares, whether
by operation of law or otherwise, Purchaser shall require the transferee of
such Preferred Shares to agree to vote in favor of the Shareholder Proposals at
the Initial Shareholder Meeting, the Follow-up Special Meeting (if required) or
any subsequent shareholder meeting as required and held in accordance with Section 4.11(b) to
approve the Shareholder Proposals. The obligations of each Purchaser under this
Section 6.21 shall terminate upon the approval of the Shareholder
Proposals.  Nothing contained in this Section 6.21
and no action taken in performance of the obligations under this Section 6.21
shall create any inference that or be deemed to constitute that the Purchasers
are in any way “acting in concert” or as a “group” under applicable law or
regulations.

 

37

 

IN
WITNESS WHEREOF, the parties hereto have caused this Securities Purchase
Agreement to be duly executed by their respective authorized signatories as of
the date first indicated above.

 

	
   

  	
  HERITAGE
  COMMERCE CORP

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Walter T. Kaczmarek

  
	
   

  	
   

  	
  Chief Executive Office and President

  

 

 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

[SIGNATURE PAGES FOR PURCHASERS FOLLOW]

 

Securities
Purchase Agreement

 

S-1

 

	
   

  	
  NAME
  OF PURCHASER:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Its:

  	
   

  
	
   

  	
   

  	
   

  
	
  Aggregate
  Purchase Price (Subscription Amount):

  	
   

  	
  $

  
	
   

  	
   

  	
   

  
	
  Number
  of Series B Preferred Shares to be Acquired:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Number
  of Series C Preferred Shares to be Acquired:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Tax
  ID No.:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Address
  for Notice:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Attention:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Telephone
  No.:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Fax
  No.:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Email
  Address:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Delivery
  Instructions, if different from above

  	
   

  	
  c/o

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Street

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  City/State/Zip:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Attention:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Telephone
  No.:

  

 

Securities Purchase Agreement

 

S-2

 

Exhibit A

 

Series B Certificate of Determination

 

A-1

 

Exhibit B

 

Series C Certificate of Determination

 

B-1

 

Exhibit C

 

Registration Rights Agreement

 

C-1

 

Exhibit D

 

Investor Questionnaire

 

D-1

 

Exhibit E

 

Legal Opinion of Company Counsel

 

E-1

 

Exhibit F

 

Secretary’s Certificate

 

F-1

 

Schedule 3.1(a)

 

List of Subsidiaries

 

1

 

Schedule 3.1(g).

 

Capitalization

 

1

 

Schedule 3.1(y)

 

Registration Rights

 

1

 

Schedule 3.1(mm)

 

Agreements with Regulatory Agencies; Compliance

 

1

 

Schedule 3.1(vv)

 

Change of Control

 

1Exhibit 10.2

 

REGISTRATION RIGHTS AGREEMENT

 

This
Registration Rights Agreement (this “Agreement”)
is made and entered into as of June 18, 2010, by and among Heritage
Commerce Corp, a California corporation (the “Company”), and the several purchasers signatory
hereto (each a “Purchaser”
and collectively, the “Purchasers”).

 

This
Agreement is made pursuant to the Securities Purchase Agreement, dated as of
the date hereof between the Company and each Purchaser (the “Purchase Agreement”).

 

NOW,
THEREFORE, IN CONSIDERATION of the mutual covenants contained in this
Agreement, and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the Company and each of the
Purchasers agree as follows:

 

1.                                       Definitions.  Capitalized terms used and not otherwise
defined herein that are defined in the Purchase Agreement shall have the
meanings given such terms in the Purchase Agreement.  As used in this Agreement, the following
terms shall have the following meanings:

 

“Advice” shall have the meaning set
forth in Section 6(d).

 

“Affiliate” means, with
respect to any person, any other person which directly or indirectly controls,
is controlled by, or is under common control with, such person.

 

“Agreement” shall have the
meaning set forth in the Preamble.

 

“Availability Date” has the
meaning set forth in Section 3(n).

 

“Allowable Grace Period” shall have the
meaning set forth in Section 2(e).

 

“Business Day” means a day,
other than a Saturday or Sunday, on which banks in New York City are open for
the general transaction of business.

 

“Closing” has the meaning set forth
in the Purchase Agreement.

 

“Closing Date” has the
meaning set forth in the Purchase Agreement.

 

“Commission” means the
Securities and Exchange Commission.

 

“Common Stock” means the
common stock of the Company, no par value per share, and any securities into
which such shares of common stock may hereinafter be reclassified.

 

“Company” shall have the meaning set
forth in the Preamble.

 

“Contractual Securities” means collectively,
(i) securities issued to the U.S. Treasury Department on November 21, 2008
in connection with the TARP Capital Purchase Program and (ii) Registrable
Securities.

 

“Contractual Securityholder” means all
Persons that hold Contractual Securities.

 

“Effective Date” means the date
that the Registration Statement filed pursuant to Section 2(a) is first
declared effective by the Commission.

 

“Effectiveness Deadline” means, with
respect to the Initial Registration Statement or the New Registration
Statement, the earlier of (i) the 90th calendar day following the Closing Date
(or the 120th calendar day following the Closing Date in the event that such
registration statement is subject to review by the Commission) and (ii) the 5th
Trading Day after the date the Company is notified (orally or in writing,
whichever is earlier) by the 

 

1

 

Commission
that such Registration Statement will not be “reviewed”
or will not be subject to further review; provided, that if the Effectiveness
Deadline falls on a Saturday, Sunday or other day that the Commission is closed
for business, the Effectiveness Deadline shall be extended to the next Business
Day on which the Commission is open for business.

 

“Effectiveness Period” shall have the
meaning set forth in Section 2(b).

 

“Event” shall have the meaning set
forth in Section 2(c).

 

“Event Date” shall have the
meaning set forth in Section 2(c).

 

“Exchange Act” means the
Securities Exchange Act of 1934, as amended, and the rules and regulations
promulgated thereunder.

 

“Filing Deadline” means, with
respect to the Initial Registration Statement required to be filed pursuant to
Section 2(a), the 30th calendar day following the Closing Date, provided,
however, that if the Filing Deadline falls on a Saturday, Sunday or other day
that the Commission is closed for business, the Filing Deadline shall be
extended to the next business day on which the Commission is open for business.

 

“FINRA” shall have the meaning set
forth in Section 3(j).

 

“Grace Period” shall have the meaning set
forth in Section 2(e).

 

“Holder” or “Holders” means the holder or holders, as the case
may be, from time to time of Registrable Securities.

 

“Indemnified Party” shall have the
meaning set forth in Section 5(c).

 

“Indemnifying Party” shall have the
meaning set forth in Section 5(c).

 

“Initial Registration Statement” means the
initial Registration Statement filed pursuant to Section 2(a) of this
Agreement.

 

“Liquidated Damages” shall have the
meaning set forth in Section 2(c).

 

“Losses” shall have the meaning set
forth in Section 5(a).

 

“New Registration Statement” shall have the
meaning set forth in Section 2(a).

 

“Person” means an individual or
corporation, partnership, trust, incorporated or unincorporated association, joint
venture, limited liability company, joint stock company, government (or an
agency or subdivision thereof) or other entity of any kind.

 

“Preferred Shares” has the
meaning set forth in the Purchase Agreement.

 

“Principal Market” means the
Trading Market on which the Common Stock is primarily listed on and quoted for
trading, which, as of the Closing Date, shall be the NASDAQ Global Select
Market.

 

“Proceeding” means an
action, claim, suit, investigation or proceeding (including, without
limitation, an investigation or partial proceeding, such as a deposition),
whether commenced or threatened.

 

“Prospectus” means the
prospectus included in a Registration Statement (including, without limitation,
a prospectus that includes any information previously omitted from a prospectus
filed as part of an effective registration statement in reliance upon Rule 430A
promulgated under the Securities Act), as amended or supplemented by any
prospectus supplement, with respect to the terms of the offering of any portion
of the 

 

2

 

Registrable
Securities covered by a Registration Statement, and all other amendments and
supplements to the Prospectus, including post-effective amendments, and all
material incorporated by reference or deemed to be incorporated by reference in
such Prospectus.

 

“Purchase Agreement” shall have the
meaning set forth in the Recitals.

 

“Purchaser” or “Purchasers” shall have the
meaning set forth in the Preamble.

 

“Registrable Securities” means all of
the Preferred Shares and the Underlying Shares and any securities issued or
issuable upon any stock split, dividend or other distribution, recapitalization
or similar event with respect to the Preferred Shares and the Underlying
Shares, provided, that the Holder has completed and delivered to the Company a
Selling Stockholder Questionnaire; and provided, further, that the Preferred
Shares and the Underlying Shares shall cease to be Registrable Securities upon
becoming eligible for sale without restriction under Rule 144.

 

“Registration Statements” means any one
or more registration statements of the Company filed under the Securities Act
that covers the resale of any of the Registrable Securities pursuant to the
provisions of this Agreement (including without limitation the Initial
Registration Statement, the New Registration Statement and any Remainder
Registration Statement), amendments and supplements to such Registration
Statements, including post-effective amendments, all exhibits and all material
incorporated by reference or deemed to be incorporated by reference in such
Registration Statements.

 

“Remainder Registration Statement” shall have the
meaning set forth in Section 2(a).

 

“Rule 144” means Rule 144 promulgated
by the Commission pursuant to the Securities Act, as such Rule may be amended
from time to time, or any similar rule or regulation hereafter adopted by the
Commission having substantially the same effect as such Rule.

 

“Rule 415”  means Rule 415
promulgated by the Commission pursuant to the Securities Act, as such Rule may
be amended from time to time, or any similar rule or regulation hereafter
adopted by the Commission having substantially the same effect as such Rule.

 

“Rule 424” means Rule 424 promulgated
by the Commission pursuant to the Securities Act, as such Rule may be amended
from time to time, or any similar rule or regulation hereafter adopted by the
Commission having substantially the same effect as such Rule.

 

“SEC Guidance” means (i) any
publicly-available written or oral (given directly to the Company or its legal
counsel) guidance, comments, requirements or requests of the Commission staff
and (ii) the Securities Act.

 

“Securities” has the
meaning set forth in the Purchase Agreement.

 

“Securities Act” means the
Securities Act of 1933, as amended, and the rules and regulations promulgated
thereunder.

 

“Selling Shareholder Questionnaire” means a
questionnaire in the form attached as Annex B hereto, or such other
form of questionnaire as may reasonably be adopted by the Company from time to
time.

 

“Trading Day” means (i) a
day on which the Common Stock is listed or quoted and traded on its Principal
Market (other than the OTC Bulletin Board), or (ii) if the Common Stock is not
listed on a Trading Market (other than the OTC Bulletin Board), a day on which
the Common Stock is traded in the over-the-counter market, as reported by the
OTC Bulletin Board, or (iii) if the Common Stock is not quoted on any Trading
Market or over-the-counter market, a day on which the Common Stock is quoted in
the over-the-counter market as reported in the “pink sheets”
by Pink Sheets LLC (or any similar organization or agency succeeding to its
functions of reporting prices); 

 

3

 

provided,
that in the event that the Common Stock is not listed or quoted as set forth in
(i), (ii) and (iii) hereof, then Trading Day shall mean a Business Day.

 

“Trading Market” means
whichever of the New York Stock Exchange, the NYSE Amex, the NASDAQ Global
Select Market, the NASDAQ Global Market, the NASDAQ Capital Market or OTC
Bulletin Board on which the Common Stock is listed or quoted for trading on the
date in question.

 

“Underlying Shares” has the
meaning set forth in the Purchase Agreement.

 

2.                                       Registration.

 

(a)                                  On or prior to the Filing
Deadline, the Company shall prepare and file with the Commission a Registration
Statement covering the resale of all of the Registrable Securities not already
covered by an existing and effective Registration Statement for an offering to
be made on a continuous basis pursuant to Rule 415 or, if Rule 415 is not
available for offers and sales of the Registrable Securities, by such other
means of distribution of Registrable Securities as the Company may reasonably
determine (the “Initial Registration Statement”).  The Initial Registration Statement shall be
on Form S-3 (except if the Company is then ineligible to register for resale of
the Registrable Securities on Form S-3, in which case such registration shall
be on such other form available to the Company to register for resale of the
Registrable Securities as a secondary offering) subject to the provisions of
Section 2(f) and shall contain (except if otherwise required pursuant to
written comments received from the Commission upon a review of such Registration
Statement) the “Plan of Distribution”
section substantially in the form attached hereto as Annex A.  Notwithstanding the registration obligations
set forth in this Section 2, in the event the Commission informs the Company
that all of the Registrable Securities cannot, as a result of the application
of Rule 415, be registered for resale as a secondary offering on a single
registration statement, the Company agrees to promptly (i) inform each of the
Holders thereof and use its reasonable best efforts to file amendments to the
Initial Registration Statement as required by the Commission and/or (ii)
withdraw the Initial Registration Statement and file a new registration
statement (a “New Registration Statement”),
in either case covering the maximum number of Registrable Securities permitted
to be registered by the Commission, on Form S-3 or such other form available to
the Company to register for resale the Registrable Securities as a secondary
offering; provided, however, that prior to filing such amendment or New
Registration Statement, the Company shall be obligated to use its reasonable
best efforts to advocate with the Commission for the registration of all of the
Registrable Securities in accordance with the SEC Guidance, including without
limitation, Compliance and Disclosure Interpretation 612.09.  Notwithstanding any other provision of this
Agreement and subject to the payment of Liquidated Damages in Section 2(c), if
any SEC Guidance sets forth a limitation of the number of Registrable Securities
or other shares of Common Stock permitted to be registered on a particular
Registration Statement as a secondary offering (and notwithstanding that the
Company used diligent efforts to advocate with the Commission for the
registration of all or a greater number of Registrable Securities), the number
of Registrable Securities or other shares of Common Stock to be registered on
such Registration Statement will be reduced as follows: first, the Company
shall reduce or eliminate the shares of Common Stock to be included by any
person other than a Holder; second, the Company shall reduce or eliminate any
shares of Common Stock to be included by any Affiliate of the Company; and
third, the Company shall reduce the number of Registrable Securities to be included
by all other Holders on a pro rata basis based on the total number of
unregistered Registrable Securities held by such Holders, subject to a
determination by the Commission that certain Holders must be reduced before
other Holders based on the number of Registrable Securities held by such
Holders.  In the event the Company amends
the Initial Registration Statement or files a New Registration Statement, as
the case may be, under clauses (i) or (ii) above, the Company will use its
reasonable best efforts to file with the Commission, as promptly as allowed by
Commission or SEC Guidance provided to the Company or to registrants of
securities in general, one or more registration statements on Form S-3 or such
other form available to the Company to register for resale those Registrable
Securities that were not registered for resale on the Initial Registration
Statement, as amended, or the New Registration Statement (the “Remainder Registration Statement”).  No Holder shall be named as an “underwriter” in any Registration Statement without such
Holder’s prior written consent.

 

(b)                                 The Company shall use its
reasonable best efforts to cause each Registration Statement to be declared
effective by the Commission as soon as practicable and, with respect to the
Initial Registration Statement, and/or, if applicable, the New Registration
Statement no later than the Effectiveness Deadline, and shall use its
reasonable best efforts to keep each Registration Statement continuously
effective and in compliance with the 

 

4

 

Securities
Act until the earlier of (i) such time as all of the Registrable Securities
covered by such Registration Statement have been publicly sold by the Holders
or (ii) the date that all Registrable Securities covered by such Registration
Statement cease to be Registrable Securities, as determined by counsel for the
affected Holders pursuant to a written opinion letter to such effect, addressed
and reasonably acceptable to the Company’s transfer agent and the Company (the “Effectiveness Period”).  The Company shall request effectiveness of a
Registration Statement as of 5:00 p.m., New York City time, on a Trading
Day.  The Company shall promptly notify
the Holders via facsimile or electronic mail of a “.pdf” format data file of
the effectiveness of a Registration Statement within one (1) Business Day of
the Effective Date. The Company shall, by 9:30 a.m. New York City time on the
first Trading Day after the Effective Date, file a final Prospectus with the Commission,
as required by Rule 424(b).

 

(c)                                  If:  (i) the Initial Registration Statement is not
filed with the Commission on or prior to the Filing Deadline, (ii) the Initial
Registration Statement or the New Registration Statement, as applicable, is not
declared effective by the Commission (or otherwise does not become effective)
for any reason on or prior to the Effectiveness Deadline, or (iii) after its
Effective Date, (A) such Registration Statement ceases for any reason
(including without limitation by reason of a stop order, or the Company’s
failure to update the Registration Statement), to remain continuously effective
as to all Registrable Securities for which it is required to be effective
pursuant to Section 2(b) or (B) the Holders are not permitted to utilize
the Prospectus therein to resell such Registrable Securities, in the case of
(A) and (B) (other than during an Allowable Grace Period (as defined in Section
2(e) of this Agreement)), (iv) a Grace Period (as defined in Section 2(e) of
this Agreement) exceeds the length of an Allowable Grace Period, or (v) after
the date six months following the Closing Date, and only in the event a
Registration Statement is not effective or available to sell all Registrable
Securities, the Company fails to file with the Commission any required reports
under Section 13 or 15(d) of the 1934 Act such that it is not in compliance
with Rule 144(c)(1) (or Rule 144(i)(2), if applicable), as a result of which
the Holders who are not affiliates are unable to sell Registrable Securities
without restriction under Rule 144 (or any successor thereto) (any such failure
or breach in clauses (i) through (v) above being referred to as an “Event,” and, for purposes of
clauses (i), (ii), (iii) or (v), the date on which such Event occurs, or for
purposes of clause (iv) the date on which such Allowable Grace Period is
exceeded, being referred to as an “Event Date”),
then in addition to any other rights the Holders may have hereunder or under
applicable law, on each such Event Date and on each monthly anniversary of each
such Event Date (if the applicable Event shall not have been cured by such
date) until the applicable Event is cured, the Company shall pay to each Holder
an amount in cash, as liquidated damages and not as a penalty (“Liquidated Damages”), equal to 0.5%
of the aggregate purchase price paid by such Holder pursuant to the Purchase
Agreement for any Registrable Securities held by such Holder on the Event Date.  The parties agree
that notwithstanding anything to the contrary herein or in the Purchase
Agreement, no Liquidated Damages shall be payable (i) if as of the relevant
Event Date, the Registrable Securities may be sold by non-affiliates without
volume or manner of sale restrictions under Rule 144 and the Company is in compliance
with the current public information requirements under Rule 144(c)(1) (or Rule
144(i)(2), if applicable), as determined by counsel to the Company pursuant to
a written opinion letter to such effect, addressed and reasonably acceptable to
the Company’s transfer agent and the affected Holders and (ii) with respect to
any period after the expiration of the Effectiveness Period (it being
understood that this sentence shall not relieve the Company of any Liquidated
Damages accruing prior to the Effectiveness Period).  If the Company fails to pay any Liquidated
Damages pursuant to this Section 2(c) in full within five (5) Business Days
after the date payable, the Company will pay interest thereon at a rate of 1.0%
per month (or such lesser maximum amount that is permitted to be paid by
applicable law) to the Holder, accruing daily from the date such Liquidated
Damages are due until such amounts, plus all such interest thereon, are paid in
full.  The Liquidated Damages pursuant to
the terms hereof shall apply on a daily pro-rata basis for any portion of a
month prior to the cure of an Event, except in the case of the first Event
Date.  The Effectiveness Deadline for a
Registration Statement shall be extended without default or Liquidated Damages
hereunder in the event that the Company’s failure to obtain the effectiveness
of the Registration Statement on a timely basis results from the failure of a
Purchaser to timely provide the Company with information requested by the
Company and necessary to complete the Registration Statement in accordance with
the requirements of the Securities Act (in which case the Effectiveness
Deadline would be extended with respect to Registrable Securities held by such
Purchaser).

 

(d)                                 Each Holder agrees to
furnish to the Company a completed Selling Shareholder Questionnaire not more
than ten (10) Trading Days following the date of this Agreement.  At least five (5) Trading Days prior to the
first anticipated filing date of a Registration Statement for any registration
under this Agreement, the Company will notify each Holder of the information
the Company requires from that Holder other than the information contained in
the Selling Shareholder Questionnaire, if any, which shall be completed and
delivered to 

 

5

 

the
Company promptly upon request and, in any event, no later than two (2) Trading
Days prior to the applicable anticipated filing date.  Each Holder further agrees that it shall not
be entitled to be named as a selling securityholder in the Registration
Statement or use the Prospectus for offers and resales of Registrable
Securities at any time, unless such Holder has returned to the Company a
completed and signed Selling Shareholder Questionnaire and a response to any
requests for further information as described in the previous sentence. If a
Holder of Registrable Securities returns a Selling Shareholder Questionnaire or
a request for further information, in either case, after its respective
deadline, the Company shall use its reasonable best efforts at the expense of
the Holder who failed to return the Selling Shareholder Questionnaire or to
respond for further information to take such actions as are required to name
such Holder as a selling security holder in the Registration Statement or any
pre-effective or post-effective amendment thereto and to include (to the extent
not theretofore included) in the Registration Statement the Registrable
Securities identified in such late Selling Shareholder Questionnaire or request
for further information. Each Holder acknowledges and agrees that the
information in the Selling Shareholder Questionnaire or request for further
information as described in this Section 2(d) will be used by the Company in
the preparation of the Registration Statement and hereby consents to the
inclusion of such information in the Registration Statement.

 

(e)                                  Notwithstanding anything to
the contrary herein, at any time after the Registration Statement has been
declared effective by the Commission, the Company may delay the disclosure of
material non-public information concerning the Company if the disclosure of
such information at the time is not, in the good faith judgment of the Company,
in the best interests of the Company (a “Grace Period”);
provided, however, the Company shall promptly (i) notify the Holders in writing
of the existence of material non-public information giving rise to a Grace
Period (provided that the Company shall not disclose the content of such
material non-public information to the Holders) or the need to file a
post-effective amendment or an amendment or supplement to the Prospectus
pursuant to Rule 424, as applicable, and the date on which such Grace
Period will begin, (ii) use reasonable best efforts to terminate a Grace Period
as promptly as practicable and (iii) notify the Holders in writing of the date
on which the Grace Period ends; provided, further, that no single Grace Period
shall exceed thirty (30) consecutive days, and during any three hundred
sixty-five (365) day period, the aggregate of all Grace Periods shall not
exceed an aggregate of sixty (60) days (each Grace Period complying with this
provision being an “Allowable Grace Period”).  For purposes of determining the length of a
Grace Period, the Grace Period shall be deemed to begin on and include the date
the Holders receive the notice referred to in clause (i) above and shall end on
and include the later of the date the Holders receive the notice referred to in
clause (iii) above and the date referred to in such notice; provided, however,
that no Grace Period shall be longer than an Allowable Grace Period.  Notwithstanding anything to the contrary, the
Company shall cause the Transfer Agent to deliver unlegended Common Stock to a
transferee of a Holder in accordance with the terms of the Purchase Agreement
in connection with any sale of Registrable Securities with respect to which a
Holder has entered into a contract for sale prior to the Holder’s receipt of
the notice of a Grace Period and for which the Holder has not yet settled.

 

(f)                                    In the event that Form S-3
is not available for the registration of the resale of Registrable Securities
hereunder, the Company shall (i) register the resale of the Registrable
Securities on another appropriate form and (ii) undertake to register the
Registrable Securities on Form S-3 promptly after such form is available,
provided that the Company shall maintain the effectiveness of the Registration
Statement then in effect until such time as a Registration Statement on Form
S-3 covering the Registrable Securities has been declared effective by the
Commission.

 

3.                                       Registration
Procedures.

 

In
connection with the Company’s registration obligations hereunder:

 

(a)                                  the Company shall not less
than three (3) Trading Days prior to the filing of a Registration Statement and
not less than two (2) Trading Days prior to the filing of any related
Prospectus or any amendment or supplement thereto (except for Annual Reports on
Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K and
any similar or successor reports), the Company shall, furnish to the Holder
copies of such Registration Statement, Prospectus or amendment or supplement
thereto, as proposed to be filed, which documents will be subject to the review
of such Holder (it being acknowledged and agreed that if a Holder does not
object to or comment on the aforementioned documents within such three (3)
Trading Day or two (2) Trading Day period, as the case may be, then the Holder
shall be deemed to have consented to and approved the use of such documents).  The Company shall
not file any Registration Statement or amendment or supplement thereto in a
form 

 

6

 

to
which a Holder reasonably objects in good faith, provided that, the Company is
notified of such objection in writing within the three (3) Trading Day or two
(2) Trading Day period described above, as applicable.

 

(b)                                 (i)  the Company shall prepare and file with the
Commission such amendments (including post-effective amendments) and supplements,
to each Registration Statement and the Prospectus used in connection therewith
as may be necessary to keep such Registration Statement continuously effective
as to the applicable Registrable Securities for its Effectiveness Period
(except during an Allowable Grace Period); (ii) the Company shall cause the
related Prospectus to be amended or supplemented by any required Prospectus
supplement (subject to the terms of this Agreement), and, as so supplemented or
amended, to be filed pursuant to Rule 424 (except during an Allowable Grace
Period); (iii) the Company shall respond as promptly as reasonably practicable
to any comments received from the Commission with respect to each Registration
Statement or any amendment thereto and, as promptly as reasonably possible,
provide the Holders true and complete copies of all correspondence from and to
the Commission relating to such Registration Statement that pertains to the
Holders as “Selling Shareholders” but
not any comments that would result in the disclosure to the Holders of material
and non-public information concerning the Company; and (iv) the Company shall
comply with the provisions of the Securities Act and the Exchange Act with
respect to the disposition of all Registrable Securities covered by a Registration
Statement until such time as all of such Registrable Securities shall have been
disposed of (subject to the terms of this Agreement) in accordance with the
intended methods of disposition by the Holders thereof as set forth in such
Registration Statement as so amended or in such Prospectus as so supplemented;
provided, however, that each Purchaser shall be responsible for the delivery of
the Prospectus to the Persons to whom such Purchaser sells any of the
Registrable Securities (including in accordance with Rule 172 under the
Securities Act), and each Purchaser agrees to dispose of Registrable Securities
in compliance with the plan of distribution described in the Registration
Statement and otherwise in compliance with applicable federal and state
securities laws.  In the case of
amendments and supplements to a Registration Statement which are required to be
filed pursuant to this Agreement (including pursuant to this Section 3(b)) by
reason of the Company filing a report on Form 10-K, Form 10-Q or Form 8-K or
any analogous report under the Exchange Act, the Company shall have
incorporated such report by reference into such Registration Statement, if
applicable, or shall file such amendments or supplements with the Commission on
the same day on which the Exchange Act report which created the requirement for
the Company to amend or supplement such Registration Statement was filed.

 

(c)                                  the Company shall notify the
Holders (which notice shall, pursuant to clauses (iii) through (v) hereof, be
accompanied by an instruction to suspend the use of the Prospectus until the
requisite changes have been made) as promptly as reasonably practicable (and,
in the case of (i)(A) below, not less than two Trading Days prior to such
filing, in the case of (iii) and (iv) below, not more than one Trading Day
after such issuance or receipt, and in the case of (v) below, not more than one
Trading Day after the occurrence or existence of such development) and (if
requested by any such Person) confirm such notice in writing no later than one
Trading Day following the day (i)(A) when a Prospectus or any Prospectus
supplement or post-effective amendment to a Registration Statement is proposed
to be filed; (B) when the Commission notifies the Company whether there will be
a “review” of such Registration Statement and whenever the Commission comments
in writing on any Registration Statement (in which case the Company shall
provide to each of the Holders true and complete copies of all comments that
pertain to the Holders as a “Selling Shareholder”
or to the “Plan of Distribution” and
all written responses thereto, but not information that the Company believes
would constitute material and non-public information); and (C) with respect to
each Registration Statement or any post-effective amendment, when the same has
become effective; (ii) of any request by the Commission or any other Federal or
state governmental authority for amendments or supplements to a Registration
Statement or Prospectus or for additional information that pertains to the
Holders as “Selling Shareholders” or the
“Plan of Distribution”; (iii) of the
issuance by the Commission or any other federal or state governmental authority
of any stop order suspending the effectiveness of a Registration Statement
covering any or all of the Registrable Securities or the initiation of any
Proceedings for that purpose; (iv) of the receipt by the Company of any
notification with respect to the suspension of the qualification or exemption
from qualification of any of the Registrable Securities for sale in any
jurisdiction, or the initiation or threatening of any Proceeding for such
purpose; and (v) of the occurrence of any event or passage of time that makes
the financial statements included in a Registration Statement ineligible for
inclusion therein or any statement made in such Registration Statement or
Prospectus or any document incorporated or deemed to be incorporated therein by
reference untrue in any material respect or that requires any revisions to such
Registration Statement, Prospectus or other documents so that, in the case of
such Registration Statement or the Prospectus, as the case may be, it will not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or 

 

7

 

necessary
to make the statements therein (in the case of any Prospectus, form of
prospectus or supplement thereto, in light of the circumstances under which
they were made), not misleading.

 

(d)                                 the Company shall use its
reasonable best efforts to avoid the issuance of, or, if issued, obtain the
withdrawal of (i) any order suspending the effectiveness of a Registration
Statement, or (ii) any suspension of the qualification (or exemption from
qualification) of any of the Registrable Securities for sale in any
jurisdiction, as soon as practicable.

 

(e)                                  the Company shall, if
requested by a Holder, furnish to such Holder, without charge, at least one
conformed copy of each Registration Statement and each amendment thereto and
all exhibits to the extent requested by such Person (including those previously
furnished or incorporated by reference) promptly after the filing of such
documents with the Commission; provided, that the Company shall have no
obligation to provide any document pursuant to this clause that is available on
the Commission’s EDGAR system.

 

(f)                                    The Company agrees to
deliver to each Holder, without charge, as many copies of each Prospectus or
Prospectuses (including each form of prospectus) and each amendment or
supplement thereto as such Holders may reasonably request. The Company hereby
consents to the use of such Prospectus and each amendment or supplement thereto
by each of the selling Holders in connection with the offering and sale of the
Registrable Securities covered by such Prospectus and any amendment or
supplement thereto.

 

(g)                                 If  requested by a Holder in writing, the Company
shall, prior to any resale of Registrable Securities by a Holder, use its
reasonable best efforts to register or qualify or cooperate with the selling
Holders in connection with the registration or qualification (or exemption from
the registration or qualification) of such Registrable Securities for the
resale by the Holder under the securities or Blue Sky laws of such jurisdictions
within the United States as any Holder reasonably requests, to keep each
registration or qualification (or exemption therefrom) effective during the
Effectiveness Period and to do any and all other acts or things commercially
reasonable to enable the disposition in such jurisdictions of the Registrable
Securities covered by each Registration Statement; provided, that the Company
shall not be required to qualify generally to do business in any jurisdiction
where it is not then so qualified, subject the Company to any material tax in
any such jurisdiction where it is not then so subject or file a general consent
to service of process in any such jurisdiction.

 

(h)                                 the Company shall cooperate
with the Holders to facilitate the timely preparation and delivery of
certificates representing Registrable Securities to be delivered to a
transferee pursuant to the Registration Statement, which certificates shall be
free, to the extent permitted by the Purchase Agreement and under law, of all
restrictive legends, and to enable such Registrable Securities to be in such
denominations and registered in such names as any such Holders may reasonably
request.  Certificates for Registrable
Securities free from all restrictive legends may be transmitted by the transfer
agent to a Holder by crediting the account of such Holder’s prime broker with
DTC as directed by such Holder.

 

(i)                                     the Company shall following
the occurrence of any event contemplated by Section 3(c)(iii)-(v), as promptly
as reasonably practicable (taking into account the Company’s good faith
assessment of any adverse consequences to the Company and its shareholders of
the premature disclosure of such event), prepare and file a supplement or
amendment, including a post-effective amendment, to the affected Registration
Statements or a supplement to the related Prospectus or any document
incorporated or deemed to be incorporated therein by reference, and file any
other required document so that, as thereafter delivered, no Registration
Statement nor any Prospectus will contain an untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein (in the case of any Prospectus, form
of prospectus or supplement thereto, in light of the circumstances under which
they were made), not misleading.

 

(j)                                     the Company may require each
selling Holder to furnish to the Company a certified statement as to (i) the
number of shares of Common Stock beneficially owned by such Holder and any
Affiliate thereof, (ii) any Financial Industry Regulatory Authority (“FINRA”) affiliations, (iii) any
natural persons who have the power to vote or dispose of the Underlying Shares
and (iv) any other information as may be requested by the Commission, FINRA or
any state securities commission.  During any periods that the Company is unable
to meet its obligations under this Agreement with respect to the registration
of Registrable Securities because any Holder fails to furnish such information
within three Trading Days of the Company’s request, any Liquidated Damages that
are 

 

8

 

accruing
at such time as to such Holder only shall be tolled and any Event that may
otherwise occur solely because of such delay shall be suspended as to such
Holder only, until such information is delivered to the Company.

 

(k)                                  the Company shall cooperate
with any registered broker through which a Holder proposes to resell its
Registrable Securities in effecting a filing with FINRA pursuant to FINRA Rule
5110 as requested by any such Holder and the Company shall pay the filing fee
required for the first such filing within two (2) Business Days of the request
therefore.

 

(l)                                     provided the Company is
eligible to use Form S-3 as of the date of this Agreement or becomes eligible
to use Form S-3 during the term of this Agreement, the Company shall use its
reasonable best efforts to maintain eligibility for use of Form S-3 (or any
successor form thereto) for the registration of the resale of Registrable Securities.

 

(m)                               if requested by a Holder,
the Company shall (i) promptly as reasonably practical incorporate in a
Prospectus supplement or post-effective amendment to the Registration Statement
such information as the Company reasonably agrees should be included therein
and, if the Company agrees, which agreement will not be unreasonably withheld,
(ii) make all required filings of such Prospectus supplement or such
post-effective amendment as soon as reasonably practicable after the Company
has received and agreed to notification of the matters to be incorporated in
such Prospectus supplement or post-effective amendment.

 

(n)                                 the Company shall otherwise
use its reasonable best efforts to comply with all applicable rules and
regulations of the Commission under the Securities Act and the Exchange Act,
including Rule 172, notify the Holders promptly if the Company no longer
satisfies the conditions of Rule 172 and take such other actions as may be
reasonably necessary to facilitate the registration of the Registrable
Securities hereunder; and make available to its security holders, as soon as
reasonably practicable, but not later than the Availability Date (as defined
below), an earnings statement covering a period of at least twelve (12) months,
beginning after the effective date of each Registration Statement, which
earning statement shall satisfy the provisions of Section 11(a) of the
Securities Act, including Rule 158 promulgated thereunder (for the purpose of
this Section 3(n), “Availability Date” means the
45th day following the end of the fourth fiscal quarter that includes the
effective date of such Registration Statement, except that, if such fourth
fiscal quarter is the last quarter of the Company’s fiscal year, “Availability Date” means the 90th
day after the end of such fourth fiscal quarter).

 

4.                                       Registration
Expenses.  All fees and
expenses incident to the Company’s performance of or compliance with its
obligations under this Agreement (excluding any underwriting discounts and
selling commissions and all legal fees and expenses of legal counsel for any
Holder) shall be borne by the Company whether or not any Registrable Securities
are sold pursuant to a Registration Statement. 
The fees and expenses referred to in the foregoing sentence shall
include, without limitation, (i) all registration and filing fees (including,
without limitation, fees and expenses (A) with respect to filings required to
be made with any Trading Market on which the Common Stock is then listed for
trading, (B) with respect to compliance with applicable state securities or
Blue Sky laws (including, without limitation, fees and disbursements of counsel
for the Company in connection with Blue Sky qualifications or exemptions of the
Registrable Securities and determination of the eligibility of the Registrable
Securities for investment under the laws of such jurisdictions as requested by
the Holders) and (C) if not previously paid by the Company in connection with a
filing by the issuer, with respect to any filing that may be required to be
made by any broker through which a Holder intends to make sales of Registrable
Securities with FINRA pursuant to FINRA Rule 5110, so long as the broker is
receiving no more than a customary brokerage commission in connection with such
sale, (ii) printing expenses (including, without limitation, expenses of
printing certificates for Registrable Securities and of printing prospectuses
if the printing of prospectuses is reasonably requested by the Holders of a
majority of the Registrable Securities included in the Registration Statement),
(iii) messenger, telephone and delivery expenses, (iv) fees and disbursements
of counsel for the Company, (v) Securities Act liability insurance, if the
Company so desires such insurance, and (vi) fees and expenses of all other
Persons retained by the Company in connection with the consummation of the
transactions contemplated by this Agreement. 
In addition, the Company shall be responsible for all of its internal
expenses incurred in connection with the consummation of the transactions
contemplated by this Agreement (including, without limitation, all salaries and
expenses of its officers and employees performing legal or accounting duties),
the expense of any annual audit and the fees and expenses incurred in connection
with the listing of the Registrable Securities on any securities exchange as
required hereunder.  In no event shall
the Company be responsible for any underwriting, broker or similar fees or 

 

9

 

commissions
of any Holder or, except to the extent provided for in the Transaction
Documents, any legal fees or other costs of the Holders.

 

5.                                       Indemnification.

 

(a)                                  Indemnification by the
Company.  The Company shall,
notwithstanding any termination of this Agreement, indemnify, defend and hold
harmless each Holder, the officers, directors, agents, partners, members,
managers, stockholders, Affiliates and employees of each of them, each Person
who controls any such Holder (within the meaning of Section 15 of the Securities
Act or Section 20 of the Exchange Act) and the officers, directors, partners,
members, managers, stockholders, agents and employees of each such controlling
Person, to the fullest extent permitted by applicable law, from and against any
and all losses, claims, damages, liabilities, costs (including, without
limitation, reasonable costs of preparation and investigation and reasonable
attorneys’ fees) and expenses (collectively, “Losses”),
as incurred, that arise out of or are based upon any untrue or alleged untrue
statement of a material fact contained in any Registration Statement, any
Prospectus or any form of prospectus or in any amendment or supplement thereto
or in any preliminary prospectus, or arising out of or relating to any omission
or alleged omission to state a material fact required to be stated therein or
necessary to make the statements therein (in the case of any Prospectus or form
of prospectus or supplement thereto, in light of the circumstances under which
they were made) not misleading, except to the extent, but only to the extent,
that (A) such untrue statements, alleged untrue statements, omissions or
alleged omissions are based solely upon information regarding such Holder
furnished in writing to the Company by such Holder expressly for use therein,
or to the extent that such information relates to such Holder or such Holder’s
proposed method of distribution of Registrable Securities and was reviewed and
approved by such Holder expressly for use in the Registration Statement, such Prospectus
or such form of Prospectus or in any amendment or supplement thereto (it being
understood that each Holder has approved Annex A hereto for this
purpose), or (B) in the case of an occurrence of an event of the type specified
in Section 3(c)(iii)-(v), related to the use by a Holder of an outdated or
defective Prospectus after the Company has notified such Holder in writing that
the Prospectus is outdated or defective and prior to the receipt by such Holder
of the Advice contemplated and defined in Section 6(d) below, but only if and
to the extent that following the receipt of the Advice the misstatement or
omission giving rise to such Loss would have been corrected.  The Company shall notify the Holders promptly
of the institution, threat or assertion of any Proceeding arising from or in
connection with the transactions contemplated by this Agreement of which the
Company is aware.  Such indemnity shall
remain in full force and effect regardless of any investigation made by or on
behalf of an Indemnified Party (as defined in Section 5(c)) and shall survive
the transfer of the Registrable Securities by the Holders.

 

(b)                                 Indemnification by Holders. Each Holder
shall, severally and not jointly, indemnify and hold harmless the Company, its
directors, officers, agents and employees, each Person who controls the Company
(within the meaning of Section 15 of the Securities Act and Section 20 of the
Exchange Act), and the directors, officers, agents or employees of such
controlling Persons, to the fullest extent permitted by applicable law, from
and against all Losses, as incurred, arising out of or are based upon any
untrue or alleged untrue statement of a material fact contained in any
Registration Statement, any Prospectus, or any form of prospectus, or in any amendment
or supplement thereto or in any preliminary prospectus, or arising out of or
relating to any omission or alleged omission of a material fact required to be
stated therein or necessary to make the statements therein (in the case of any
Prospectus, or any form of prospectus or supplement thereto, in light of the
circumstances under which they were made) not misleading (i) to the extent, but
only to the extent, that such untrue statements or omissions are based solely
upon information regarding such Holder furnished in writing to the Company by
such Holder expressly for use therein or (ii) to the extent, but only to the
extent, that such information relates to such Holder or such Holder’s proposed
method of distribution of Registrable Securities and was reviewed and approved
by such Holder expressly for use in a Registration Statement (it being
understood that the Holder has approved Annex A hereto for this
purpose), such Prospectus or such form of Prospectus or in any amendment or
supplement thereto or (iii) in the case of an occurrence of an event of the
type specified in Section 3(c)(iii)-(v), to the extent, but only to the extent,
related to the use by such Holder of an outdated or defective Prospectus after
the Company has notified such Holder in writing that the Prospectus is outdated
or defective and prior to the receipt by such Holder of the Advice contemplated
in Section 6(d), but only if and to the extent that following the receipt of
the Advice the misstatement or omission giving rise to such Loss would have
been corrected.  In no event shall the
liability of any selling Holder hereunder be greater in amount than the dollar
amount of the net proceeds received by such Holder upon the sale of the
Registrable Securities giving rise to such indemnification obligation.

 

10

 

(c)                                  Conduct of Indemnification
Proceedings. If any Proceeding shall be brought or asserted
against any Person entitled to indemnity hereunder (an “Indemnified Party”), such Indemnified Party shall
promptly notify the Person from whom indemnity is sought (the “Indemnifying Party”) in
writing, and the Indemnifying Party shall have the right to assume the defense
thereof, including the employment of counsel reasonably satisfactory to the
Indemnified Party and the payment of all reasonable fees and expenses incurred
in connection with defense thereof; provided, that the failure of any
Indemnified Party to give such notice shall not relieve the Indemnifying Party
of its obligations or liabilities pursuant to this Agreement, except (and only)
to the extent that it shall be finally determined by a court of competent
jurisdiction (which determination is not subject to appeal or further review)
that such failure shall have materially and adversely prejudiced the
Indemnifying Party.

 

An
Indemnified Party shall have the right to employ separate counsel in any such
Proceeding and to participate in the defense thereof, but the fees and expenses
of such counsel shall be at the expense of such Indemnified Party or Parties
unless:  (1) the Indemnifying Party
has agreed in writing to pay such fees and expenses; (2) the Indemnifying
Party shall have failed promptly to assume the defense of such Proceeding and
to employ counsel reasonably satisfactory to such Indemnified Party in any such
Proceeding; or (3) the named parties to any such Proceeding (including any
impleaded parties) include both such Indemnified Party and the Indemnifying
Party, and such Indemnified Party shall have been advised by counsel that a
conflict of interest exists if the same counsel were to represent such
Indemnified Party and the Indemnifying Party; provided, that the Indemnifying
Party shall not be liable for the fees and expenses of more than one separate
firm of attorneys at any time for all Indemnified Parties.  The Indemnifying Party shall not be liable
for any settlement of any such Proceeding effected without its written consent,
which consent shall not be unreasonably withheld, delayed or conditioned.  No Indemnifying Party shall, without the
prior written consent of the Indemnified Party, effect any settlement of any
pending Proceeding in respect of which any Indemnified Party is a party, unless
such settlement includes an unconditional release of such Indemnified Party
from all liability on claims that are the subject matter of such Proceeding.

 

Subject
to the terms of this Agreement, all fees and expenses of the Indemnified Party
(including reasonable fees and expenses to the extent incurred in connection
with investigating or preparing to defend such Proceeding in a manner not
inconsistent with this Section 5(c)) shall be paid to the Indemnified
Party, as incurred, within twenty Trading Days of written notice thereof to the
Indemnifying Party; provided, that the Indemnified Party shall promptly
reimburse the Indemnifying Party for that portion of such fees and expenses
applicable to such actions for which such Indemnified Party is finally
judicially determined to not be entitled to indemnification hereunder). The
failure to deliver written notice to the Indemnifying Party within a reasonable
time of the commencement of any such action shall not relieve such Indemnifying
Party of any liability to the Indemnified Party under this Section 5,
except to the extent that the Indemnifying Party is materially and adversely
prejudiced in its ability to defend such action.

 

(d)                                 Contribution.  If a claim for indemnification under Section 5(a) or
5(b) is unavailable to an Indemnified Party or insufficient to hold an
Indemnified Party harmless for any Losses, then each Indemnifying Party, in
lieu of indemnifying such Indemnified Party, shall contribute to the amount
paid or payable by such Indemnified Party as a result of such Losses, in such
proportion as is appropriate to reflect the relative fault of the Indemnifying
Party and Indemnified Party in connection with the actions, statements or
omissions that resulted in such Losses as well as any other relevant equitable
considerations.  The relative fault of
such Indemnifying Party and Indemnified Party shall be determined by reference
to, among other things, whether any action in question, including any untrue or
alleged untrue statement of a material fact or omission or alleged omission of
a material fact, has been taken or made by, or relates to information supplied
by, such Indemnifying Party or Indemnified Party, and the parties’ relative
intent, knowledge, access to information and opportunity to correct or prevent
such action, statement or omission.  The
amount paid or payable by a party as a result of any Losses shall be deemed to
include, subject to the limitations set forth in this Agreement, any reasonable
attorneys’ or other reasonable fees or expenses incurred by such party in
connection with any Proceeding to the extent such party would have been
indemnified for such fees or expenses if the indemnification provided for in
this Section 5(d) was available to such party in accordance with its
terms.

 

The
parties hereto agree that it would not be just and equitable if contribution
pursuant to this Section 5(d) were determined by pro rata allocation
or by any other method of allocation that does not take into account the
equitable considerations referred to in the immediately preceding
paragraph.  Notwithstanding the 

 

11

 

provisions
of this Section 5(d), no Holder shall be required to contribute, in the
aggregate, any amount in excess of the amount by which the net proceeds
actually received by such Holder from the sale of the Registrable Securities
subject to the Proceeding exceeds the amount of any damages that such Holder
has otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. No person 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
guilty of such fraudulent misrepresentation.

 

The
indemnity and contribution agreements contained in this Section 5 are in
addition to any liability that the Indemnifying Parties may have to the
Indemnified Parties and are not in diminution, limitation or in lieu of the
indemnification provisions under the Purchase Agreement.

 

The
indemnity and contribution agreements of the Company contained in this Section 5
are limited by the provisions of federal law (including the Federal Deposit
Insurance Act) and California law governing indemnification provisions to the
extent such provisions are applicable.

 

6.                                       Miscellaneous.

 

(a)                                  Remedies.  In the event of a breach by the Company or by
a Holder of any of their obligations under this Agreement, each Holder or the
Company, as the case may be, in addition to being entitled to exercise all
rights granted by law and under this Agreement, including recovery of damages,
will be entitled to specific performance of its rights under this
Agreement.  The Company and each Holder
agree that monetary damages would not provide adequate compensation for any
losses incurred by reason of a breach by it of any of the provisions of this
Agreement and hereby further agrees that, in the event of any action for
specific performance in respect of such breach, it shall waive the defense that
a remedy at law would be adequate.

 

(b)                                 No Piggyback on
Registrations; Prohibition on Filing Other Registration Statements.  Neither the Company nor any of its security
holders (other than the Contractual Securityholders) may include securities of
the Company in a Registration Statement hereunder other than the Contractual
Securities and the Company shall not prior to the Effective Date enter into any
agreement providing any such right to any of its security holders. The Company
shall not, from the date hereof until the date that is 60 days after the
Effective Date of the Initial Registration Statement, prepare and file with the
Commission a registration statement relating to an offering for its own account
under the Securities Act of any of its equity securities, other than (i) a
registration statement on Form S-8, (ii) a registration statement or
post-effective amendment to a registration statement for the resale of
Contractual Securities, (iii) in connection with an acquisition, on Form S-4
or (iv) a registration statement to register for resale securities issued
by the Company pursuant to acquisitions or strategic transactions approved by a
majority of the disinterested directors of the Company, provided that any such
issuance shall only be to a Person which is, itself or through its
subsidiaries, an operating company in a business synergistic with the business
of the Company and in which the Company receives benefits in addition to the
investment of funds, but shall not include a transaction in which the Company
is issuing securities primarily for the purpose of raising capital or to an
entity whose primary business is investing in securities.

 

(c)                                  Compliance.  Each Holder covenants and agrees that it will
comply with the prospectus delivery requirements of the Securities Act as
applicable to it (unless an exemption therefrom is available) in connection
with sales of Registrable Securities pursuant to the Registration Statement and
shall sell the Registrable Securities only in accordance with a plan of
distribution described in the Registration Statement.

 

(d)                                 Discontinued Disposition.  By its acquisition of Registrable Securities,
each Holder agrees that, upon receipt of a notice from the Company of the
occurrence of any event of the kind described in Section 3(c)(iii)-(v),
such Holder will forthwith discontinue disposition of such Registrable
Securities under a Registration Statement until it is advised in writing (the “Advice”) by the Company that
the use of the applicable Prospectus (as it may have been supplemented or
amended) may be resumed.  The Company may
provide appropriate stop orders to enforce the provisions of this paragraph.

 

(e)                                  No Inconsistent Agreements.  Neither the Company nor any of its
Subsidiaries has entered, as of the date hereof, nor shall the Company or any
of its Subsidiaries, on or after the date hereof, enter into 

 

12

 

any
agreement with respect to its securities, that would have the effect of
impairing the rights granted to the Holders in this Agreement or otherwise
conflicts with the provisions hereof.

 

(f)                                    Amendments and Waivers.  The provisions of this Agreement, including
the provisions of this sentence, may not be amended, modified or supplemented,
or waived unless the same shall be in writing and signed by the Company and
Holders holding at least two-thirds of the then outstanding Registrable
Securities, provided that any party may give a waiver as to itself.  Notwithstanding the foregoing,  a waiver or consent to depart from the
provisions hereof with respect to a matter that relates exclusively to the
rights of Holders and that does not directly or indirectly affect the rights of
other Holders may be given by Holders of all of the Registrable Securities to
which such waiver or consent relates; provided, however, that the provisions of
this sentence may not be amended, modified, or supplemented except in
accordance with the provisions of the immediately preceding sentence.
Notwithstanding the foregoing, if any such amendment, modification or waiver
would adversely affect in any material respect any Holder or group of Holders
who have comparable rights under this Agreement disproportionately to the other
Holders having such comparable rights, such amendment, modification, or waiver
shall also require the written consent of the Holder(s) so adversely
affected.

 

(g)                                 Notices.  Any and all notices or other communications
or deliveries required or permitted to be provided hereunder shall be delivered
as set forth in the Purchase Agreement; provided that the Company may deliver
to each Holder the documents required to be delivered to such Holder under Section 3(a) of
this Agreement by e-mail to the e-mail addresses provided by such Holder to the
Company solely for such specific purpose.

 

(h)                                 Successors and Assigns.  This Agreement shall inure to the benefit of
and be binding upon the successors and permitted assigns of each of the parties
and shall inure to the benefit of each Holder. 
Nothing in this Agreement, express or implied, is intended to confer
upon any party other than the parties hereto or their respective successors and
assigns any rights, remedies, obligations, or liabilities under or by reason of
this Agreement, except as expressly provided in this Agreement.  The Company may not assign its rights (except
by merger or in connection with another entity acquiring all or substantially
all of the Company’s assets) or obligations hereunder without the prior written
consent of all the Holders of the then outstanding Registrable Securities.  Each Holder may assign its respective rights
hereunder in the manner and to the Persons as permitted under the Purchase
Agreement.

 

(i)                                     Execution and Counterparts.  This Agreement may be executed in two or more
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
and shall become effective when counterparts have been signed by each party and
delivered to the other party, it being understood that both parties need not
sign the same counterpart.  In the event
that any signature is delivered by facsimile transmission or by e-mail delivery
of a “.pdf” format data file, such signature shall create a valid and binding
obligation of the party executing (or on whose behalf such signature is
executed) with the same force and effect as if such facsimile or “.pdf”
signature were the original thereof.

 

(j)                                     Governing Law.  All questions concerning the construction,
validity, enforcement and interpretation of this Agreement shall be determined
in accordance with the provisions of the Purchase Agreement.

 

(k)                                  Cumulative Remedies.  Except as provided in Section 2(c) with
respect to Liquidated Damages, the remedies provided herein are cumulative and
not exclusive of any other remedies provided by law.

 

(l)                                     Severability. If any term,
provision, covenant or restriction of this Agreement is held by a court of
competent jurisdiction to be invalid, illegal, void or unenforceable, the
remainder of the terms, provisions, covenants and restrictions set forth herein
shall remain in full force and effect and shall in no way be affected, impaired
or invalidated, and the parties hereto shall use their good faith reasonable
efforts to find and employ an alternative means to achieve the same or
substantially the same result as that contemplated by such term, provision,
covenant or restriction.  It is hereby
stipulated and declared to be the intention of the parties that they would have
executed the remaining terms, provisions, covenants and restrictions without
including any of such that may be hereafter declared invalid, illegal, void or
unenforceable.

 

13

 

(m)                               Headings.  The headings in this Agreement are for
convenience only and shall not limit or otherwise affect the meaning hereof.

 

(n)                                 Independent Nature of
Purchasers’ Obligations and Rights.  The obligations of each Purchaser under this
Agreement are several and not joint with the obligations of any other Purchaser
hereunder, and no Purchaser shall be responsible in any way for the performance
of the obligations of any other Purchaser hereunder.  The decision of each Purchaser to purchase
the Securities pursuant to the Transaction Documents has been made
independently of any other Purchaser. Nothing contained herein or in any other
agreement or document delivered at any closing, and no action taken by any
Purchaser pursuant hereto or thereto, shall be deemed to constitute the
Purchasers as a partnership, an association, a joint venture or any other kind
of entity, or create a presumption that the Purchasers are in any way acting in
concert with respect to such obligations or the transactions contemplated by
this Agreement.  Each Purchaser
acknowledges that no other Purchaser has acted as agent for such Purchaser in
connection with making its investment hereunder and that no Purchaser will be
acting as agent of such Purchaser in connection with monitoring its investment
in the Securities or enforcing its rights under the Transaction Documents. Each
Purchaser shall be entitled to protect and enforce its rights, including,
without limitation, the rights arising out of this Agreement, and it shall not
be necessary for any other Purchaser to be joined as an additional party in any
Proceeding for such purpose.  The Company
acknowledges that each of the Purchasers has been provided with the same
Registration Rights Agreement for the purpose of closing a transaction with
multiple Purchasers and not because it was required or requested to do so by
any Purchaser.

 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK,

SIGNATURE PAGES TO FOLLOW]

 

14

 

IN
WITNESS WHEREOF, the parties have executed this Registration Rights Agreement
as of the date first written above.

 

	
   

  	
  HERITAGE
  COMMERCE CORP

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Walter T. Kaczmarek

  
	
   

  	
   

  	
  Walter T. Kaczmarek

  
	
   

  	
   

  	
  Chief Executive Officer and President

  

 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK,

SIGNATURE PAGES OF HOLDERS TO FOLLOW]

 

Registration Rights Agreement

 

S-1

 

IN
WITNESS WHEREOF, the parties have executed this Registration Rights Agreement
as of the date first written above.

 

	
   

  	
  NAME
  OF PURCHASER

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  AUTHORIZED
  SIGNATORY

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:
  

  	
   

  
	
   

  	
  Its:
  

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  ADDRESS
  FOR NOTICE:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Attn:
  

  	
   

  
	
   

  	
   

  
	
   

  	
  Phone:
  

  	
   

  
	
   

  	
   

  
	
   

  	
  E-mail:
  

  	
   

  
				

 

Registration Rights Agreement

 

S-2

 

Annex
A

 

PLAN OF DISTRIBUTION

 

We
are registering the Securities issued to the selling shareholders to permit the
resale of these Securities by the holders of the Securities from time to time
after the date of this prospectus.  We
will not receive any of the proceeds from the sale by the selling shareholders
of the Securities.  We will bear all fees
and expenses incident to our obligation to register the Securities.

 

The
selling shareholders may sell all or a portion of the Securities beneficially
owned by them and offered hereby from time to time directly or through one or
more underwriters, broker-dealers or agents. 
If the Securities are sold through underwriters or broker-dealers, the
selling shareholders will be responsible for underwriting discounts or
commissions or agent’s commissions.  The
Securities may be sold on any national securities exchange or quotation service
on which the securities may be listed or quoted at the time of sale, in the
over-the-counter market or in transactions otherwise than on these exchanges or
systems or in the over-the-counter market and in one or more transactions at
fixed prices, at prevailing market prices at the time of the sale, at varying
prices determined at the time of sale, or at negotiated prices.  These sales may be effected in transactions,
which may involve crosses or block transactions.  The selling shareholders may use any one or
more of the following methods when selling Securities:

 

·                                          ordinary
brokerage transactions and transactions in which the broker-dealer solicits
purchasers;

 

·                                          block trades in
which the broker-dealer will attempt to sell the shares as agent but may
position and resell a portion of the block as principal to facilitate the
transaction;

 

·                                          purchases by a
broker-dealer as principal and resale by the broker-dealer for its account;

 

·                                          an exchange
distribution in accordance with the rules of the applicable exchange;

 

·                                          privately
negotiated transactions;

 

·                                          settlement of
short sales entered into after the effective date of the registration statement
of which this prospectus is a part;

 

·                                          broker-dealers
may agree with the selling shareholders to sell a specified number of such
securities at a stipulated price per share;

 

·                                          through the
writing or settlement of options or other hedging transactions, whether such
options are listed on an options exchange or otherwise;

 

·                                          a combination
of any such methods of sale; and

 

·                                          any other
method permitted pursuant to applicable law.

 

The
selling shareholders also may resell all or a portion of the Securities in open
market transactions in reliance upon Rule 144 under the Securities Act, as
permitted by that rule, or Section 4(1) under the Securities Act, if
available, rather than under this prospectus, provided that they meet the
criteria and conform to the requirements of those provisions.

 

Broker-dealers
engaged by the selling shareholders may arrange for other broker-dealers to
participate in sales.  If the selling
shareholders effect such transactions by selling Securities to or through
underwriters, broker-dealers or agents, such underwriters, broker-dealers or
agents may receive commissions in the form of discounts, concessions or
commissions from the selling shareholders or commissions from purchasers of the
Securities for whom they may act as agent or to whom they may sell as
principal. Such commissions will be in amounts to be 

 

A-1

 

negotiated,
but, except as set forth in a supplement to this prospectus, in the case of an
agency transaction will not be in excess of a customary brokerage commission in
compliance with NASD Rule 2440; and in the case of a principal transaction
a markup or markdown in compliance with NASD IM-2440.

 

In
connection with sales of the Securities or otherwise, the selling shareholders
may enter into hedging transactions with broker-dealers or other financial
institutions, which may in turn engage in short sales of the common stock in
the course of hedging in positions they assume. 
The selling shareholders may also sell Securities short and if such
short sale shall take place after the date that the registration statement of
which this prospectus is a part is declared effective by the Securities and
Exchange Commission (the “SEC”), the
selling shareholders may deliver Securities covered by this prospectus to close
out short positions and to return borrowed shares in connection with such short
sales.  The selling shareholders may also
loan or pledge common stock to broker-dealers that in turn may sell such
shares, to the extent permitted by applicable law.  The selling shareholders may also enter into
option or other transactions with broker-dealers or other financial
institutions or the creation of one or more derivative securities which require
the delivery to such broker-dealer or other financial institution of shares
offered by this prospectus, which shares such broker-dealer or other financial
institution may resell pursuant to this prospectus (as supplemented or amended
to reflect such transaction). 
Notwithstanding the foregoing, the selling shareholders have been
advised that they may not use shares registered on this registration statement
to cover short sales of our common stock made prior to the date the
registration statement, of which this prospectus forms a part, has been
declared effective by the SEC.

 

The
selling shareholders may, from time to time, pledge or grant a security
interest in some or all of the Securities owned by them and, if they default in
the performance of their secured obligations, the pledgees or secured parties
may offer and sell the Securities from time to time pursuant to this prospectus
or any amendment to this prospectus under Rule 424(b)(3) or other
applicable provision of the Securities Act, amending, if necessary, the list of
selling shareholders to include the pledgee, transferee or other successors in
interest as selling shareholders under this prospectus.  The selling shareholders also may transfer
and donate the Securities in other circumstances in which case the transferees,
donees, pledgees or other successors in interest will be the selling beneficial
owners for purposes of this prospectus.

 

The
selling shareholders and any broker-dealer or agents participating in the
distribution of the Securities may be deemed to be “underwriters” within the
meaning of Section 2(11) of the Securities Act in connection with such
sales.  In such event, any commissions
paid, or any discounts or concessions allowed to, any such broker-dealer or
agent and any profit on the resale of the shares purchased by them may be
deemed to be underwriting commissions or discounts under the Securities Act.
Selling shareholders who are “underwriters” within the meaning of Section 2(11)
of the Securities Act will be subject to the applicable prospectus delivery
requirements of the Securities Act and may be subject to certain statutory
liabilities of, including but not limited to, Sections 11, 12 and 17 of the
Securities Act and Rule 10b-5 under the Securities Exchange Act of 1934,
as amended (the “Exchange Act”).

 

Each
selling shareholder has informed us that it is not a registered broker-dealer
and does not have any written or oral agreement or understanding, directly or
indirectly, with any person to distribute the Securities.  Upon being notified in writing by a selling
shareholder that any material arrangement has been entered into with a
broker-dealer for the sale of Securities through a block trade, special
offering, exchange distribution or secondary distribution or a purchase by a
broker or dealer, we will file a supplement to this prospectus, if required,
pursuant to Rule 424(b) under the Securities Act, disclosing (1) the
name of each such selling shareholder and of the participating
broker-dealer(s), (2) the number of shares involved, (3) the price at
which such Securities were sold, (4) the commissions paid or discounts or
concessions allowed to such broker-dealer(s), where applicable, (5) that
such broker-dealer(s) did not conduct any investigation to verify the
information set out or incorporated by reference in this prospectus, and (6) other
facts material to the transaction.  In no
event shall any broker-dealer receive fees, commissions and markups, which, in
the aggregate, would exceed eight percent.

 

Under
the securities laws of some states, the Securities may be sold in such states
only through registered or licensed brokers or dealers.  In addition, in some states the Securities
may not be sold unless such shares have been registered or qualified for sale
in such state or an exemption from registration or qualification is available
and is complied with.

 

A-2

 

There
can be no assurance that any selling shareholder will sell any or all of the
Securities registered pursuant to the shelf registration statement, of which this
prospectus forms a part.

 

Each
selling shareholder and any other person participating in such distribution
will be subject to applicable provisions of the Exchange Act and the rules and
regulations thereunder, including, without limitation, to the extent
applicable, Regulation M of the Exchange Act, which may limit the timing of
purchases and sales of any of the Securities by the selling shareholder and any
other participating person.  To the
extent applicable, Regulation M may also restrict the ability of any person
engaged in the distribution of the Securities to engage in market-making
activities with respect to the common stock. 
All of the foregoing may affect the marketability of the Securities and
the ability of any person or entity to engage in market-making activities with
respect to the Securities.

 

We
will pay all expenses of the registration of the Securities pursuant to a
registration rights agreement, including, without limitation, SEC filing fees
and expenses of compliance with state securities or “blue sky” laws; provided,
however, that each selling shareholder will pay all underwriting discounts and
selling commissions, if any and any related legal expenses incurred by it. We
will indemnify the selling shareholders against certain liabilities, including
some liabilities under the Securities Act, in accordance with the registration
rights agreement, or the selling shareholders will be entitled to contribution.
We may be indemnified by the selling shareholders against civil liabilities, including
liabilities under the Securities Act, that may arise from any written
information furnished to us by the selling shareholders specifically for use in
this prospectus, in accordance with the related registration rights agreements,
or we may be entitled to contribution.

 

A-3

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00175-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00175-of-00352.parquet"}]]