STOCK PURCHASE AGREEMENT

(a)  

On the Closing Date, an amount equal to the Initial Purchase Price, minus $1,000,000.00 (the “Carve-Out Funds”), shall be paid by the Buyer to the Lender in immediately available funds.  On the Closing Date, an amount equal to the Carve-Out Funds shall be paid by the Buyer to the Seller in immediately available funds.

(b)  

On or before December 15, 2011, an amount equal to the Additional Purchase Price, if the conditions set forth in Article 10 are satisfied, shall be paid by the Buyer to the Lender in immediately available funds.

(a)  

Except as provided in Schedule 4.6, neither the execution and delivery by the Seller of this Agreement nor the consummation of the transactions contemplated hereby nor compliance by the Seller with any of the provisions hereof will:

(i)  

violate or conflict with any provision of the Articles of Incorporation or the Bylaws of the Seller, or violate or conflict with any provision of the Articles of Association or the Bylaws of the Bank;

(ii)  

violate or constitute a default under or give rise to any right of termination, cancellation or acceleration under any of the terms, conditions or provisions of any agreement or instrument to which the Seller or the Bank is a party or by which any of them or any of their properties or assets is bound, except as has been duly and validly waived, consented to or approved by the other parties to such agreement or instrument;

(iii)  

result in the creation or imposition of any security interest, Lien or other encumbrance upon any assets of the Seller or the Bank under any agreement or commitment to which the Seller or the Bank is a party or by which the Seller or the Bank is bound or to which any of the Seller’s or the Bank’s assets is subject; or

(iv)  

violate any statute or law or any judgment, order, decree, regulation or rule of any court or Governmental Authority (as defined in Section 6.1(a)) applicable to the Seller or the Bank or any of their assets;

(b)  

For purposes of this Agreement, “Material Adverse Effect” means, with respect to the Seller or the Bank, as the case may be, a condition, event, change or occurrence that has a material adverse effect upon (i) the financial condition, results of operations, loans, securities, deposit accounts, business or properties of the Seller or the Bank (other than any condition, event, change or occurrence resulting from (A) changes in laws or regulations or accounting rules of general applicability or interpretations thereof; (B) the effect of the public announcement, pendency or consummation of the transactions contemplated hereby (including the incurrence of expenses incurred in connection with this Agreement and the transactions contemplated hereby); (C) any change resulting from the compliance by the Seller or the Bank with the terms of, or the taking of any action by the Seller or the Bank contemplated or permitted by, this Agreement; (D) changes affecting the financial services industry generally; (E) changes in general economic, financial or securities market conditions in the United States or elsewhere; (F) changes in market interest rates, real estate markets or other market conditions applicable to California banks or thrift institutions generally; or (G) any outbreak of major hostilities in which the United States is involved or any act or insurrection, sabotage, or terrorism within the United States or directed against its facilities or citizens wherever located), or (ii) the ability of the Seller or the Bank to perform its obligations under, and to consummate the transactions contemplated by, this Agreement.

(a)  

The following financial statements of the Bank have been or will be delivered to the Buyer and are incorporated by reference herein:  the reports of condition and income of the Bank as of and for the year ended December 31, 2007 and the nine months ended September 30, 2008 and the 2009 Financial Statements (collectively, the “Bank Financial Statements”).

(b)  

Each of the Bank Financial Statements is true and correct in all material respects, and each of the Bank Financial Statements has been prepared in accordance with the Accounting Standards during the periods involved, and presents fairly in all material respects the financial position of  the Bank at the date thereof and the results of operations, changes in stockholders’ equity and cash flows, as applicable, of the Bank for the period stated therein.

(a)  

all material federal and state taxes due and assessable against or measured by the earnings or income of the Bank for the calendar year ended December 31, 2007, and all prior calendar years, have been paid in full, except for those taxes being contested in good faith;

(b)  

for calendar year 2008, and for calendar year 2009 up through the Determination Date, the Bank has and will have maintained adequate monthly accruals and reserves for any and all projected taxes assessable against or measured by the earnings or income of the Bank to date;

(c)  

the Bank has filed all federal and state income tax returns and all other returns with respect to any taxes, either federal, state or local, which are required to be filed and (i) said returns have been correctly and accurately prepared in all material respects, (ii) all taxes reflected thereon have been paid, (iii) no notice of any deficiency, assessments or additions to tax has been received by the Bank, and the Bank has not waived any statute of limitations with respect to any taxes reflected on said returns, and (iv) deferred taxes have been properly reflected on the Bank Financial Statements.

(a)  

Any event or occurrence that would have a Material Adverse Effect on the Bank;

(b)  

Any increase (other than those in the ordinary course of business) in the wages, salaries, compensation, pension or other benefits payable or to become payable by the  Bank to any of their respective officers, employees or agents;

(c)  

Any incurrence by the Bank of any obligations or liabilities, whether absolute, accrued, contingent or otherwise (including, without limitation, liabilities as guarantor or otherwise with respect to obligations of others), other than obligations and liabilities incurred in the ordinary course of business;

(d)  

Any issuance or agreement to issue any Equity Securities of the Bank;

(e)  

Any discharge or satisfaction of any Lien or encumbrance or payment of any obligation or liability by the Bank other than current liabilities shown or reflected on the Financial Statements or current liabilities incurred since that date in the ordinary course of business;

(f)  

The mortgage, pledge or subjection to Lien, security interest or any other encumbrance of any of the Bank’s assets, real or personal, tangible or intangible, other than in the ordinary course of business;

(g)  

The sale or transfer of any of the Bank’s tangible assets, or the cancellation or release of any debts or claims owing to the Bank, except, in each case, cancellation or release of debts pursuant to the workout of a non-performing loan or otherwise in the ordinary course of the Bank’s business;

(h)  

Entry by the Bank into any other transaction other than in the ordinary course of business;

(i)  

The sale, assignment, transfer or encumbrance by the Bank of any trademarks, trade names or other intangible assets; or

(j)  

Any decrease in the core deposits of the Bank of five percent (5%) or more.

(a)  

Except as described in Schedule 4.19, the Bank has good and marketable title to all of its properties (real and personal, tangible and intangible) and assets reflected in the  Bank Financial Statements or otherwise represented as being owned by it, free and clear of all mortgages, pledges, Liens, conditional sales agreements or other encumbrances of any kind or nature except those reflected as liabilities on the Bank Financial Statements and except for Permitted Liens.

(b)  

For purposes of this Agreement, “Permitted Liens” means any of the following (i) Liens for taxes that (A) are not yet due or delinquent or (B) are being contested in good faith by appropriate proceedings in accordance with applicable laws, (ii) statutory Liens of landlords and Liens of carriers, warehousemen, mechanics, materialmen and other Liens imposed by law, in each case, for amounts not yet due or amounts being contested in good faith by appropriate proceedings in accordance with applicable laws, (iii) Liens incurred or deposits made in the ordinary course of business in connection with workers’ compensation, unemployment insurance or other types of social security, (iv) leases or subleases granted to other persons that do not materially interfere with the conduct of the business of the Bank, (v) Liens in favor of a customer of the business arising in the ordinary course of business, (vi) with respect to any of the properties underlying the real property leases, any Lien affecting the interest of the landlord thereunder, (vii) rights of the third party owners or licensors of software that is licensed from such third parties for use in the business and (viii) Liens reflected as liabilities on the Bank Financial Statements.

(a)  

A list of each parcel of real property owned by the Bank (other than real property acquired in foreclosure or in lieu of foreclosure in the course of the collection of loans and being held by the Bank for disposition as required by law) is set forth in Schedule 4.20(a) under the heading “Owned Real Property” (such real property being herein referred to as the “Owned Real Property”).  A list of each parcel of real property leased by the Bank is also set forth in Schedule 4.20(a) under the heading “Leased Real Property” (such real property being herein referred to as the “Leased Real Property”), which list also identifies each piece of Leased Real Property whose lease contains change in control terms which will be triggered by the transaction contemplated by this Agreement.  Collectively, the Owned Real Property and the Leased Real Property are herein referred to as the “Real Property.”

(b)  

There is no pending action involving the Bank as to the title of or the right to use any of the Real Property.

(c)  

Schedule 4.20(c) contains a list of all real property acquired by the Bank in foreclosure or in lieu of foreclosure and being held for disposition as required by law and property held by the Bank in its capacity as trustee.

(d)  

None of the buildings, structures or improvements located on the Real Property is the subject of any official complaint or notice by any Governmental Authority of violation of any applicable zoning ordinance or building code, and there is no zoning ordinance, building code, use or occupancy restriction or, to Knowledge of Seller, condemnation action or proceeding pending or, threatened, with respect to any such building, structure or improvement which will or reasonably could materially interfere with the use of any of the Real Property.  The Real Property is in generally good condition for its intended purpose, ordinary wear and tear excepted, and has been maintained in accordance with reasonable and prudent business practices applicable to like facilities.

(e)  

To the Knowledge of the Seller, the Bank has not caused the use, generation, treatment, storage, disposal or release at any Real Property of any Toxic Substance, except in accordance in all material respects with all applicable federal, state and local laws and regulations.  “Toxic Substance” means any hazardous, toxic or dangerous substance, pollutant, waste, gas or material, including, without limitation, petroleum and petroleum products, metals, liquids, semi-solids or solids, that are regulated under any federal, state or local statute, ordinance, rule, regulation or other law pertaining to environmental protection, contamination, quality, waste management or cleanup.  There are no underground storage tanks located on, in or under any Owned Real Property or, to the Knowledge of the Seller, the Leased Real Property.

(a)  

Except for the contracts and leases required to be listed on Schedule 4.21 and the loans required to be listed on Schedule 4.9, and except as otherwise listed on Schedule 4.23(a), the Bank is not a party to or bound by any:

(i)  

agreement, contract, arrangement, understanding or commitment with any labor union;

(ii)  

material franchise or license agreement, excluding software license agreements entered into in the ordinary course of business;

(iii)  

written employment, severance, termination pay, agency, consulting or similar agreement or commitment in respect of personal services;

(iv)  

agreement, indenture or other instrument not disclosed in the Bank Financial Statements relating to the borrowing of money by the Bank or the guarantee by the Bank of any such obligation;

(v)  

contract containing covenants which limit the ability of the Bank to compete in any line of business or with any Person (as defined below)  or which involves any restrictions on the geographical area in which, or method by which, the Bank may carry on its respective business (other than as may be required by law or any applicable regulatory authority);

(vi)  

data processing, item processing or ATM contracts or agreements;

(vii)  

loans or other obligations payable or owing to any officer, director or employee of the Bank except (A) salaries, wages and directors’ fees or other compensation incurred and accrued in the ordinary course of business and (B) obligations due in respect of any depository accounts maintained by any of the foregoing with the Bank in the ordinary course of business; or

(viii)  

other agreement, contract, arrangement, understanding or commitment involving an obligation by the Bank of more than $50,000 extending beyond six months from the date hereof that cannot be canceled without cost or penalty upon notice of 30 days or less, other than contracts entered into in respect of deposits, loan agreements and commitments, notes, security agreements, repurchase and reverse repurchase agreements, Treasury, tax and loan notes, bankers’ acceptances, outstanding letters of credit and commitments to issue letters of credit, participation agreements and other documents relating to transactions entered into by the Bank in the ordinary course of business and not involving extensions of credit with respect to any one entity or related group of entities.  For purposes of this Agreement, “Person” shall be broadly interpreted and includes an individual, body corporate, partnership, joint venture, trust, association, unincorporated organization, any Governmental Authority, the executors, administrators or other legal representatives of an individual or any other entity recognized by law and pronouns having a similarly extended meaning.

(b)  

The Bank carries property, liability, director and officer, errors and omissions and other insurance coverage as set forth in Schedule 4.23(b) under the heading “Insurance.”

(c)  

True, correct, and complete copies of the agreements, contracts and other documents referred to in Section 4.23(a) have been included with Schedule 4.23(a) hereto or otherwise delivered to the Buyer.  True, correct and complete copies of the agreements, contracts, insurance policies and other documents referred to in Schedules 4.23(a) and 4.23(b) have been or shall be furnished or made available to the Buyer.

(d)  

Each of the agreements, contracts, insurance policies and other documents referred to in Schedules 4.23(a) and 4.23(b) is a valid, binding and enforceable obligation of the parties sought to be bound thereby, except as the enforceability thereof against the parties thereto (other than the Bank) may be limited by bankruptcy, insolvency, reorganization, moratorium and other laws now or hereafter in effect relating to the enforcement of creditors’ rights generally, and except that equitable principles may limit the right to obtain specific performance or other equitable remedies.

(e)  

Schedule 4.23(e) contains a true, correct and complete listing by account as of October 31, 2008, of all loans of the Bank that have been internally classified as

 

“watch,” “special mention,” “substandard,” “doubtful” or “loss” and any other Bank loan that is over ninety (90) days past due as of October 31, 2008.

(a)  

Schedule 4.24(a) lists all pension, retirement, supplemental retirement, stock option, stock purchase, stock ownership, savings, stock appreciation right, profit sharing, deferred compensation, consulting, bonus, medical, disability, workers’ compensation, vacation, group insurance, severance and other employee benefit, incentive and welfare policies, contracts, plans and arrangements, and all trust agreements related thereto, maintained by or contributed to by the Seller or the Bank as of the date hereof in respect of any of the present or former directors, officers, or other employees of and/or consultants to the Seller or the Bank and which would be required to be continued by the Bank after Closing (collectively “Bank Employee Plans”).  The Seller has furnished the Buyer with the following documents with respect to each Bank Employee Plan:  (i) a true and complete copy of all written documents comprising such Bank Employee Plan (including amendments and individual agreements relating thereto) or, if there is no such written document, an accurate and complete description of the Bank Employee Plan; (ii) the most recently filed Form 5500 or Form 5500-C/R (including all schedules thereto), if applicable; (iii) the most recent financial statements and actuarial reports, if any; (iv) the summary plan description currently in effect and all material modifications thereof, if any; and (v) the most recent determination letter from the Internal Revenue Service (“IRS”), if any.

(b)  

All  Bank Employee Plans have been maintained and operated in all material respects in accordance with their terms and the requirements of all applicable statutes, orders, rules and final regulations, including, without limitation, to the extent applicable, the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), and the Internal Revenue Code of 1986, as amended (the “Code”).  All contributions required to be made to the Bank Employee Plans by the Bank have been made or reserved.

(c)  

With respect to each of the Bank Employee Plans which is a pension plan (as defined in Section 3(2) of ERISA) (the “Pension Plans”): (i) each Pension Plan which is intended to be “qualified” within the meaning of Section 401(a) of the Code has been determined to be so qualified by the IRS and such determination letter may still be relied upon, and each related trust is exempt from taxation under Section 501(a) of the Code; (ii) the present value of all benefits vested and all benefits accrued under each Pension Plan which is subject to Title IV of ERISA did not, in each case, as of the last applicable annual valuation date, exceed the value of the assets of the Pension Plan allocable to such vested or accrued benefits; (iii) there has been no “prohibited transaction,” as such term is defined in Section 4975 of the Code or Section 406 of ERISA, which could subject any Pension Plan or associated trust, or the Seller or the Bank, to any material tax or penalty; (iv) no defined benefit Pension Plan or any trust created thereunder has been terminated, nor have there been any “reportable events” with respect to any Pension Plan, as that term is defined in Section 4043 of ERISA since January 1, 2003; and (v) no Pension Plan or any trust created thereunder has incurred any “accumulated funding deficiency,” as such term is defined in Section 302 of ERISA (whether or not waived).  No Pension Plan is a “multiemployer plan,” as that term is defined in Section 3(37) of ERISA.

(d)  

Except as disclosed in Schedule 4.24(d) or as reflected on the Bank Financial Statements or the notes thereto, the Bank has no liability for any post-retirement health, medical or similar benefit of any kind whatsoever, except as required by statute or regulation.

(e)  

The Bank has no material liability under ERISA or the Code as a result of its being a member of a group described in Sections 414(b), (c), (m) or (o) of the Code.

(f)  

Except as disclosed in Schedule 4.24(f), neither the execution nor delivery of this Agreement, nor the consummation of any of the transactions contemplated hereby, will (i) result in any payment (including, without limitation, severance, unemployment compensation or golden parachute payment) becoming due to any director or employee of the Bank, (ii) increase any benefit otherwise payable under any of the Bank Employee Plans or (iii) result in the acceleration of the time of payment of any such benefit.  The Seller shall use its best efforts to insure that no amounts paid or payable by the Bank or the Buyer to or with respect to any employee or former employee of the Seller or the Bank will fail to be deductible for federal income tax purposes by reason of Section 280G of the Code.

(g)  

The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby do not and will not (i) violate the terms of any of the Pension Plans; (ii) violate any provision of ERISA or the Code; or (iii) cause any Pension Plan to cease to be “qualified” within the meaning of Section 401(a) of the Code.

(a)  

The Seller and the Bank have all permits, licenses, authorizations, orders and approvals of, and have made all filings, applications and registrations with, all regulatory authorities that are required in order to permit them to own or lease their respective properties and assets and to carry on their respective businesses as presently conducted; all such permits, licenses, certificates of authority, orders and approvals are in full force and effect and, no suspension or cancellation of any of them is threatened; and all such filings, applications and registrations are current in each case, except where failure to have such permits, licenses, authorizations, orders and approvals would not have, either individually or in the aggregate, a Material Adverse Effect on the Seller and the Bank, considered as a whole.

(b)  

(i) The Bank has complied in all material respects with all laws, regulations and orders (including, without limitation, zoning ordinances, building codes, ERISA, the Americans with Disabilities Act, and securities, tax, environmental, civil rights, and occupational health and safety laws and regulations including, without limitation, in the case of the Bank, all statutes, rules, regulations and policy statements pertaining to the conduct of a banking, deposit-taking, lending or related business, or to the exercise of trust powers) and governing instruments applicable to it and to the conduct of its business, and (ii) the Bank is not in default under, and no event has occurred which, with the lapse of time or notice or both, could result in the default under, the terms of any judgment, order, writ, decree, permit, or license of any regulatory authority or court, whether federal, state, municipal or local, and whether at law or in equity, except where such failure to comply or such default, in either case, would not have, either individually or in the aggregate, a Material Adverse Effect on the Bank.

(c)  

Except as set forth on Schedule 4.25(c), the Bank is not subject to or shall incur a material liability as a result of its ownership, operation, or use of any Property (as defined below) (whether directly or, as a consequence of such Property being acquired in foreclosure or in lieu of foreclosure or being part of the investment portfolio of the Bank) (A) that is contaminated by or contains any Toxic Substance (as defined in Section 4.20(e)), including, without limitation, petroleum and petroleum products, asbestos, PCBs, pesticides, herbicides and any other substance or waste that is hazardous to human health or the environment and regulated by federal, state or local law, or (B) on which any Toxic Substance has been stored, disposed of, placed or used at the Property or in the construction of structures thereon.  “Property” shall include all property (real or personal, tangible or intangible) owned or controlled by the Bank, including, without limitation, property acquired under foreclosure or in lieu of foreclosure, property in which any venture capital or similar unit of the Bank has an ownership interest, and, to the Knowledge of the Seller, property held by the Bank in its capacity as a trustee.  No claim, action, suit or proceeding is pending against the Bank or, to the Knowledge of the Seller, threatened against the Bank, and no claim has been asserted against the Bank, relating to Property of the Bank and Toxic Substances, pollution or the environment, before any court or other regulatory authority or arbitration tribunal, , and there is no outstanding judgment, order, writ, injunction, decree or award against or affecting the Bank with respect to the same.

(d)  

Except as set forth on Schedule 4.25(d), the Bank has not received any notification or communication that has not been finally resolved from any regulatory authority (i) asserting that the Bank or any Property is not in substantial compliance with any of the statutes, regulations or ordinances that such regulatory authority enforces, (ii) threatening to revoke any license, franchise, permit or governmental authorization that reasonably could be expected to have a material adverse effect on the Bank, taken as a whole, including, without limitation, the Bank’s status as an insured depository institution under the Federal Deposit Insurance Act, or (iii) requiring or threatening to require the Bank, or indicating that the Bank may be required, to enter into a cease and desist order, agreement or memorandum of understanding or any other agreement restricting or limiting or purporting to direct, restrict or limit in any manner the operations of the Bank, including, without limitation, any restriction on the payment of dividends.  Except as set forth on Schedule 4.25(d), no such cease and desist order, agreement or memorandum of understanding or other agreement is currently in effect.

(a)  

Each of the Buyer, the Seller and the Bank shall cooperate and use their respective commercially reasonable efforts (i) to, as soon as practicable after the execution of this Agreement, prepare all documentation to effect all filings, to obtain all permits, consents, approvals and authorizations of any federal, state or local court, administrative agency or commission or other governmental authority or instrumentality (collectively “Governmental Authorities”) necessary to consummate the transactions contemplated by this Agreement, including, without limitation, the filing by the Buyer of an application (the “Application”) with the Federal Reserve Bank of San Francisco pursuant to Section 3 of the Act, (ii) to comply with the terms and conditions of such permits, consents, approvals and authorizations and (iii) to cause the transactions contemplated hereby to be consummated as expeditiously as practicable (including by avoiding or setting aside any preliminary or permanent injunction or other order of any United States federal or state court of competent jurisdiction or any other Governmental Authority).  The Buyer and the Seller will furnish each other and each other’s counsel with all information concerning themselves, their subsidiaries, directors, trustees, officers and shareholders and such other matters as may be necessary or advisable in connection with the Application or any other application, petition or any other statement or application made by or on behalf of the Buyer or the Seller to any Governmental Authority in connection with the transactions contemplated by this Agreement.  Each party hereto shall have the right to review and approve in advance all characterizations of the information relating to such party that appear in any filing made in connection with the transactions contemplated by this Agreement with any Governmental Authority.  In addition, the Buyer and the Seller shall each furnish to the other for review a copy of each such filing made in connection with the transactions contemplated by this Agreement with any Governmental Authority prior to its filing; provided that the Buyer shall not be required to give the Seller copies of any information concerning the Buyer that is considered confidential information of the Buyer as determined by the Buyer in its sole discretion.

(b)  

The Seller will notify the Buyer promptly and shall promptly furnish Buyer with copies of notices or other communications received by the Seller or the Bank of (i) any communication from any Person alleging that the consent of such Person (or another Person) is or may be required in connection with the transactions contemplated by this Agreement (and the response thereto from the Seller, the Bank or its representatives), (ii) subject to applicable Laws and the instructions of any Governmental Authority, any communication from any Governmental Authority in connection with the transactions contemplated by this Agreement (and the response thereto from the Seller, the Bank or its representatives) and (iii) any legal actions threatened or commenced against or otherwise affecting the Seller or the Bank that are related to the transactions contemplated hereby (and the response thereto from the Seller, the Bank or its representatives).

(c)  

The Buyer will notify the Seller promptly and shall promptly furnish the Seller with copies of notices or other communications received by the Buyer of (i) any communication from any Person alleging that the consent of such Person (or other Person) is or may be required in connection with the transactions contemplated by this Agreement (and the response thereto from the Buyer or its representatives), (ii) subject to applicable Laws and the instructions of any Governmental Authority, any communication from any Governmental Authority in connection with the transactions contemplated by this Agreement (and the portion of the response thereto from the Buyer or its representatives that does not include confidential information of the Buyer as determined by the Buyer in its sole discretion), and (iii) any legal actions threatened or commenced against or otherwise affecting the Buyer that are related to the transactions contemplated by this Agreement (and the response thereto from the Buyer or its representatives).

(a)  

immediately available funds in the amount required in Section 2.1 hereof.

(a)  

certificates evidencing all of the Bank Shares being purchased and sold hereunder duly endorsed or otherwise accompanied by duly executed stock powers sufficient to transfer ownership of the said certificates and the shares of stock evidenced thereby to the Buyer;

(b)  

a release by the Lender of any Lien in, on or against the Bank Shares;

(c)  

resignations duly signed by such directors of the Bank as may be requested by the Buyer on or before the Closing Date and effective upon acceptance, pursuant to which such directors resign from their positions as officers and directors of the Bank;

(d)  

the Certificate (as that term is defined in Section 9.1 hereof);

(e)  

the 2009 Financial Statements three (3) days prior to the Closing Date;

(f)  

the Opinion of Counsel as required in Section 9.5, if applicable;

(g)  

Landlord Estoppel Certificates executed by each landlord for the Bank Building Leases in such form as reasonably acceptable to the Buyer;

(h)  

the Landlord Consents (as hereinafter defined); and

(i)  

evidence of the Requisite Approval having been obtained.

(a)  

fail to carry on its business in substantially the same manner as now being conducted;

(b)  

declare, pay or make any cash dividend, stock dividend or other distribution with respect to the Equity Securities of the Bank;

(c)  

issue or directly or indirectly sell, transfer or otherwise dispose of, or purchase, redeem, retire or otherwise acquire any Equity Securities of the Bank or any other Equity Securities, or agree to commit to do so;

(d)  

subdivide or in any way reclassify any of the Equity Securities of the Bank;

(e)  

grant any option or right to purchase or execute any agreement or otherwise commit to issue any Equity Securities of the Bank;

(f)  

sell, transfer, lease, mortgage, pledge or otherwise dispose of or encumber any of the Bank’s assets or cancel any of the Bank’s claims except in the ordinary course of business;

(g)  

fail to use its commercially reasonable efforts to preserve the Bank’s business, organization and goodwill and its existing relationships with its customers and others having business relationships with it;

(h)  

amend the Bank’s Articles of Association or Bylaws;

(i)  

incur any obligation or liability or enter into any transaction except in the ordinary course of the Bank’s business;

(j)  

fail to take any action necessary and appropriate to maintain in full force and effect the Bank’s corporate existence, rights, licenses and franchises;

(k)  

pay or commit to pay any salary, fee or other compensation at a rate in excess of that prevailing on September 30, 2008;

(l)  

fail to maintain all existing policies of insurance with respect to the Bank in their present form and with their present coverage or comparable substitute policies;

(m)  

enter into any employment, agency or other contract or agreement with respect to the performance of personal services which is not terminable by the Bank without liability, on thirty (30) days or less notice;

(n)  

pay or commit to pay any bonus or other incentive compensation or any severance payments to any of the Bank officers, directors or employees;

(o)  

sell any portion or all of the Bank’s loan or investment portfolios except in the ordinary course of business, or invest any of the Bank’s assets in any marketable securities, other than U.S. Treasury or U.S. Agency securities except in the ordinary course of business;

(p)  

make any capital expenditures or commitment for capital expenditures in the aggregate for the Bank in excess of $50,000 other than written commitments or obligations in existence as of the date of this Agreement and disclosed on Schedule 12.1(p);

(q)  

commit to make a loan or grant an extension of credit to any borrower (including any renewals of existing loans or additional advances on loans to existing borrowers of the Bank) which does not comply with the Bank’s loan policy and which is not consistent with the past lending practices of the Bank;

(r)  

fail to accrue income and expenses on the Bank’s books in the ordinary course of business and in accordance with generally accepted accounting principles;

(s)  

make loans to insiders as that term is defined in Section 4.9;

(t)  

take any action outside the ordinary course of business, which will decrease the Bank’s stockholders’ equity between the Determination Date and the Closing Date; or

(u)  

enter into or amend any other contract, agreement, understanding, arrangement or commitment not already described or addressed in this Section 12.1 involving an obligation by the Bank of more than $50,000, other than contracts entered into in respect of deposit agreements.

(a)  

The Buyer shall use its best efforts to satisfy the financing requirement set forth in Section 9.8, including, without limitation, promptly following the execution of this Agreement preparing a private placement memorandum and commencing a private placement stock offering (the “Stock Offering”) seeking subscriptions for shares of the Buyer’s stock.  When the Buyer has received subscriptions for at least $125,000,000.00 in the Stock Offering, the Buyer shall promptly provide the Seller and the Lender with written notification (the “Financing Notification”) that the financing requirement set forth in Section 9.8 has been satisfied.  The date on which the Seller sends the Financing Notification shall hereinafter be referred to as the “Financing Notification Date.”

(b)  

Within two (2) business days following the Financing Notification Date, the Buyer and the Seller shall agree on the method of the Seller’s disposition of the Bank Shares, which shall be one of the following:  (i) a purchase of the Bank Shares by the Buyer from the Seller subject to the approval of the shareholders of the Seller; (ii) a foreclosure by the Lender on the Bank Shares pursuant to the pledge and security agreement(s) between Lender and Seller (the “Pledge Agreement”); or (iii) a purchase of the Bank Shares by the Buyer in a chapter 11 bankruptcy case commenced by the Seller subject to and in accordance with a Bankruptcy Court Approval.  For purposes of this Agreement, a “Bankruptcy Court Approval” means a United States Bankruptcy Court of competent jurisdiction shall have entered an order substantially in the form attached hereto as Exhibit A approving the sale of the Bank Shares to the Buyer free and clear of claims, Liens, security interests and encumbrances, including the Liens of the Lender, in accordance with 11 U.S.C. § 363(b), (f) and (m) and such order shall not have been stayed pending appeal.

(c)  

If the Buyer and the Seller elect to transfer the Bank Shares pursuant to Section 12.5(b)(i), the Seller shall (i) as promptly as reasonably practicable following the Financing Notification Date, establish a record date for, duly call, give notice of, distribute proxy materials for, convene and hold a meeting of its shareholders, for the purpose of approving the sale of the Bank Shares to the Buyer (the “Special Meeting”); and (ii) subject to its ability to accept a Superior Proposal (as defined in Schedule 12.5), recommend to its shareholders the approval of the sale (such approval, the “Shareholder Approval”).

(d)  

If the Buyer and the Seller elect to transfer the Bank Shares pursuant to Section 12.5(a)(ii), the Seller shall, within ten (10) days after the Financing Notification Date, seek the consent of the Lender in connection with a foreclosure on the Bank Shares pursuant to the Pledge Agreement (such consent, the “Lender Consent”).  The Buyer and the Seller shall, within ten (10) days after the Financing Notification Date, take all such appropriate action to facilitate the foreclosure by the Lender on the Bank Shares pursuant to the Pledge Agreement as soon as practicable after the Financing Notification Date, resulting in a conveyance to the Buyer of title to the Bank Shares, free and clear of all Liens, including the Liens of the Lender.  The parties hereto agree to execute and deliver all such instruments, documents and certificates as may be reasonably necessary to effect such foreclosure and sale pursuant to the Pledge Agreement.

(e)  

If the Buyer and the Seller elect to transfer the Bank Shares pursuant to Section 12.5(b)(iii), the Seller shall: (i) within ten (10) days after the Financing Notification Date, file with a United States Bankruptcy Court of competent jurisdiction (the “Bankruptcy Court”) a voluntary petition for relief under chapter 11 of the United States Bankruptcy Code (the date of such filing being referred to herein as the “Petition Date”), and (ii) on the Petition Date, file a motion with the Bankruptcy Court (A) requesting approval of the sale of the Bank Shares to the Buyer or any Qualified Bidder pursuant to the bid process set forth in Schedule 12.5, free and clear of claims, Liens, security interests and encumbrances, including the Liens of the Lender, and (B) requesting approval of the bid procedures outlined on the attached Schedule 12.5 including, without limitation, scheduling a hearing to approve the sale of the Bank Shares to the Buyer or a Qualified Bidder, as applicable, in accordance with such procedures, as promptly as practicable, but in no event later than ten (10) days after the Petition Date, all in accordance with 11 U.S.C. § 363(b), (f) and (m).

(a)  

by mutual written consent of the Seller and the Buyer;

(b)  

by the Buyer or the Seller if the condition set forth in Section 9.8 shall not have been satisfied within one hundred five (105) days after execution of this Agreement;

(c)  

by the Seller (as one party) or by the Buyer (as another party) upon written notice thereof to the other party if:

(i)  

the purchase and sale contemplated hereby has not been consummated by a date seven (7) months after the date of this Agreement (the “Outside Date”), unless such purchase and sale has not been so consummated because of, or as a result of, any knowing or willful actions or failure to act on the part of the party seeking to terminate this Agreement pursuant to this Subsection (i);

(ii)  

if the representations or warranties of the other party set forth in this Agreement shall not be true or correct such that the conditions set forth in Section 8.1 or Section 9.1, as applicable, would be incapable of being satisfied by the Outside Date (provided that the terminating party is not then in material breach of any of its representations, warranties, agreements or covenants in this Agreement);

(iii)  

there has been a failure by the other party to perform or comply with any material agreement, covenant or condition herein required to be performed or complied with by such other party within the time required and such failure has continued for thirty (30) days following written notice thereof to such other party; or

(iv)  

approval of any Governmental Authority required for consummation of the transactions contemplated hereby shall have been denied by such Governmental Authority or an application therefor shall have been permanently withdrawn at the request of a Governmental Authority;

(d)  

by the Seller, if the Board of Directors of the Seller has provided written notice to the Buyer that it has determined to accept a Superior Proposal in accordance with the terms of Schedule 12.5; or

(e)  

by the Buyer upon written notice to the Seller within five (5) days after the Buyer’s receipt of the Seller Disclosure Schedules, if the Buyer, in its reasonable discretion, determines that any information contained in or issue raised by the Seller Disclosure Schedules would have a Material Adverse Effect on the Bank.

(a)  

If to the Buyer:

(b)  

If to the Seller:

QUALIFIED BIDDER AND OVERBID REQUIREMENTS:

In order to become a qualified bidder (the “Qualified Bidder”), any party desiring to bid on the Bank Shares1 must:  (i)  have sufficient capital and management to obtain approval of the applicable banking regulatory authorities, as determined by the Seller in the Seller’s reasonable discretion; (ii)  deposit 10% of the purchase price bid by the Qualified Bidder (inclusive of any contingent purchase price component) in escrow as security for payment of the Break-Up Fee plus the Buyer’s Expenses and, to the extent the amount of such deposit exceeds the amount of the Break-Up Fee plus the Buyer’s Expenses, as partial payment of the purchase price for the Bank Shares; and (iii) sign a stock purchase agreement containing terms and conditions substantially the same or more favorable to the Seller as the terms and conditions set forth in this Agreement;  provided, however, that the purchase price in such stock purchase agreement (the “Increased Bid Price”) must include payment of an Initial Purchase Price equal to or greater than $11,000,000.00 and must include an agreement to pay the Additional Purchase Price on substantially the same or more favorable terms to the Seller as set forth in Article 2 of this Agreement, and such stock purchase agreement shall contain a provision requiring the payment to the Buyer of the Break-Up Fee plus the Buyer’s Expenses from the Initial Purchase Price of the Increased Bid Price proceeds.

DEADLINE TO BECOME A QUALIFIED BIDDER:

The deadline for any party to become a Qualified Bidder is eight (8) days after the Petition Date (the “Qualified Bid Deadline”).

AUCTION/SALE HEARING:

If one or more parties becomes a Qualified Bidder, then an auction of the Bank Shares shall be conducted in the offices of the Seller’s counsel at a date and time to be set by the Seller and the Buyer, which date shall be no later than nine (9) days after the Petition Date.  The only parties who may bid at the auction are: (i) the Buyer and (ii) any Qualified Bidders.  A hearing to approve the sale of the Bank Shares to the Buyer (or a Qualified Bidder, if applicable) shall be held as promptly as practicable after the completion of the auction or, if there are no Qualified Bidders, as promptly as practicable after the Qualified Bid Deadline and in no event later than ten (10) days after the Petition Date.

SUPERIOR PROPOSAL:

“Superior Proposal” shall mean any written proposal or offer from any Person or group (as defined under Section 13(d) of the Exchange Act) (other than the Buyer and its affiliates) relating to a proposed Acquisition Transaction which the board of directors of the Seller determines in good faith to be more favorable from a financial point of view to the Seller than the transactions contemplated by the Agreement, taking into account all of the terms and conditions of such proposal (including the likelihood and timing of consummation thereof), and the Agreement (including any changes to the terms of this Agreement committed to by the Buyer to the Seller in writing in response to such proposal or otherwise).

Prior to the exercise of the termination right described below, (i) the Seller must provide written notice (a “Notice of Superior Proposal”) to the Buyer that the Seller intends to take such action and describing the material terms and conditions of the Superior Proposal that is the basis of such action; (ii) during the five (5) business day period following the Buyer’s receipt of the Notice of Superior Proposal, the Seller shall, and shall cause it financial and legal advisors to, negotiate with the Buyer in good faith (to the extent that the Buyer desires to negotiate) to make such adjustments in the terms and conditions of the Agreement so that such Superior Proposal ceases to constitute a Superior Proposal, and (iii) following the end of such five (5) business day period, the board of directors of the Seller shall have determined in good faith, taking into account any changes to the terms of the Agreement proposed by the Buyer to the Seller in response to the Notice of Superior Proposal or otherwise, that the Superior Proposal giving rise to the Notice of Superior Proposal continues to constitute a Superior Proposal.

TERMINATION RIGHT:

Subject to compliance with the paragraph set forth immediately above, the Seller may terminate the Agreement under Section 14.1(d) of the Agreement if the Seller has provided written notice to the Buyer that it has determined to accept a Superior Proposal.