Item 1.01. Entry into a Material Definitive Agreement.
On September 12, 2016, Heritage Commerce Corp (HCC), the holding company for Heritage Bank of Commerce, entered into Exchange Agreements with Castle Creek Capital Partners IV, LP (Castle Creek), Patriot Financial Partners, L.P. (Patriot Financial) and Patriot Financial Partners Parallel, L.P. (Patriot Parallel) (collectively Preferred Stockholders) providing for the exchange of 21,003.75 shares of HCC Series C convertible perpetual preferred stock, no par value, (Preferred Stock) for 5,601,000 shares of HCC common stock, no par value. The Exchange Agreements contain customary representations, warranties and covenants made by the Preferred Stockholders, on the one hand, and HCC, on the other hand.
The Preferred Stock was originally issued to the Preferred Stockholders in a private placement transaction that was completed on June 18, 2010 (Private Placement) and was issued to enable the equity ownership of the Preferred Stockholders to comply with applicable banking laws and regulations. The Preferred Stockholders have received all regulatory approvals for the exchange transaction.
The exchange ratio is equal to the equivalent number of shares the Preferred Stockholders would have received upon conversion of the Preferred Stock. The exchange transaction was effected because the Preferred Stock could only be converted at the time of a transfer or sale of the Preferred Stock that satisfied certain conditions set forth in the terms of the Preferred Stock. The common stock issued upon exchange of the Preferred Stock was offered and exchanged in reliance on exemptions from registration provided by Sections 3(a)(9) and 18(b)(4) of the Securities Act of 1933, as amended (Securities Act).
As a result of the exchange transaction, the Company will have 37,908,022 shares of common stock issued and outstanding. Castle Creek will own 3,763,225 shares, or 9.9% of the issued and outstanding shares; and Patriot Financial and Patriot Parallel will own together 4,437,204 shares, or 11.7% of the issued and outstanding shares.
HCC agreed in the Exchange Agreements to file, as soon as practicable, and in any event within 30 days of the consummation of the exchange transaction, a registration statement on Form S-3 under the Securities Act covering the resale by the Preferred Stockholders of all of the shares of the HCC common stock received in the exchange, and to cause such shares to be authorized for listing on The NASDAQ Global Select Market.
HCC also agree to register certain other shares of HCC common stock held by Preferred Stockholders.
The forms of the Exchange Agreements are attached as Exhibits 10.1, 10.2 and 10.3 to this Current Report on Form 8-K and are incorporated herein by reference. The foregoing description of the Exchange Agreements is a summary, does not purport to be complete and is qualified in its entirety by reference to the forms of the Exchange Agreements.