Exhibit 10.26
 
 

BRANCH PURCHASE AND ASSUMPTION AGREEMENT

between

NBRS FINANCIAL BANK

and

HOWARD BANK

APRIL 24, 2014

 
 

--------------------------------------------------------------------------------

 

BRANCH PURCHASE AND ASSUMPTION AGREEMENT

This BRANCH PURCHASE AND ASSUMPTION AGREEMENT (this “Agreement”) is made and
executed as of the 24th day of April, 2014, by and between Howard Bank, a
Maryland trust company operating as a commercial bank with its main office
located in Ellicott City, Maryland (“Buyer”), and NBRS Financial Bank, a
Maryland chartered commercial bank with its main office located in Rising Sun,
Maryland (“Seller”).

RECITALS:

A.           Seller leases and operates a branch banking office at 800
Revolution Street, Havre de Grace, Maryland (the “Branch Office”); and

B.           Seller desires to sell to Buyer certain assets and have Buyer
assume certain liabilities associated with the Branch Office, subject to the
terms and conditions and Buyer’s representations, warranties and agreements all
contained herein; and

C.           Buyer desires to purchase from Seller certain assets and assume
from Buyer certain liabilities associated with the Branch Office, subject to the
terms and conditions and Seller’s representations, warranties and agreements all
contained herein

NOW, THEREFORE, in consideration of the premises and the mutual terms and
provisions set forth in this Agreement, the parties agree as follows:

ARTICLE ONE
PURCHASE AND SALE OF ASSETS AND ASSUMPTION OF LIABILITIES

Section 1.01.         Purchase of Assets.  Upon the terms and subject to the
conditions and representations set forth herein, Seller shall sell, convey,
assign and transfer to Buyer, and Buyer shall purchase and accept from Seller,
all right, title and interest of Seller in and to the following assets
(collectively, the “Assets”), as of the close of business on the Closing Date
(as defined in Section 2.02):

(a)           Books and Records.  All books, records and files currently used or
held for use at the Branch Office or relating to the Assets and the Assumed
Liabilities (as defined in Section 1.02) being transferred to and assumed by
Buyer hereunder (collectively, the “Records”), except that historical records
(including statements, transaction slips, electronic funds transfer records,
cancelled checks and images thereof) relating to pre-Closing transactions shall
be retained by Seller and retained in accordance with its document retention
policy, and access to such Records shall be provided to Buyer in accordance with
Section 9.04 hereof.

(b)           Leasehold.  A leasehold interest in the real property known as 800
Revolution Street, Havre de Grace, Maryland, together with the building and
improvements thereon and any permanently attached fixtures and equipment therein
or thereon (including but not limited to, any and all electrical, utilities,
mechanical, heating, ventilation, plumbing, and other utility fixtures and
equipment) and, rights, roads, alleys, ways, waters, privileges, easements and
appurtenances thereunto belonging to or in any manner appertaining thereto,
constituting the Branch Office, as more particularly described in Schedule
1.01(b) to this Agreement (the “Real Property”).

 
 

--------------------------------------------------------------------------------

 
 
(c)           Personal Property.  The furniture, fixtures, equipment,
improvements and other items of tangible personal property located at the Branch
Office as of the close of business on the Closing Date, together with sign
structures except signage that is not attached to Real Property, being
transferred to Buyer hereunder (collectively, the “Personal Property”), as set
forth on Schedule 1.01(c) to this Agreement.

(d)           Assumed Contracts.  All of Seller’s rights under, or created by,
the Assumed Contracts (as defined in Section 1.02(b)), including without
limitation any rights to lease Personal Property and any options to purchase
underlying Personal Property.

(e)           Cash on Hand.  All teller cash, petty cash, vault cash, cash and
coin in ATMs and prepaid postage located at the Branch Office as set forth on
Schedule 1.01(e) and as adjusted and brought current as of the close of business
on the Closing Date (the “Cash on Hand”).

(f)           Loans.  All of Seller’s right, title and interest (including all
collateral relating thereto) in the loans including any overdrafts made pursuant
to an overdraft protection plan or similar extensions of credit in connection
with a deposit account as listed in Schedule 1.01(f) (each a “Loan” and
collectively the “Loans”) and as adjusted and brought current as of the close of
business on the Closing Date.  As calculated as of the Closing Date, the Loans
shall not include, unless otherwise agreed to by the parties hereto, (i)
non-accruals; (ii) Loans thirty (30) calendar days or more past due; (iii) loans
upon which insurance has been force-placed; (iv) loans in connection with which
the borrower or any guarantor has filed a petition for relief under the United
States Bankruptcy Code prior to the Closing or for whom a receiver has been
appointed; or (v) loan loss reserves.  If prior to the Closing Date, any Loan:
(1) becomes thirty (30) days  or more past due; (2) for which insurance has been
forced placed; or (3) in connection with the borrower or any guarantor has filed
a petition for relief under the United States Bankruptcy Code or a receiver has
been appointed for the borrower or any guarantor, such loan will be deleted from
the Loans being transferred hereunder and Seller shall substitute another loan
that is acceptable to Buyer in Buyer's sole discretion.  The Face Value of the
Loans, as of the Closing Date, shall not be less than $15,800,000 unless waived
in writing by Buyer in Buyer’s sole discretion (“Minimum Face Value”).  The term
“Face Value” means the unpaid principal balance excluding any accrued but unpaid
interest. In order to satisfy the Minimum Face Value requirement for the Loans,
the Buyer may add to the Loans other loans meeting the standards set forth in
this Section 1.01(f) and acceptable to the Buyer in Buyer's sole discretion.

(g)         Licenses.  All franchises, permits, licenses or governmental
authorizations (collectively, “Licenses”), including applications therefore,
specifically utilized in the conduct of business at the Branch Office, including
but not limited to the Licenses listed on Schedule 1.01(g), but excluding
Seller’s banking charter.
 
 
 

--------------------------------------------------------------------------------

 
 
Section 1.02.         Assumption of Liabilities.  Upon the terms and subject to
the conditions set forth herein, Seller shall transfer and assign to Buyer, and
Buyer shall assume from Seller and agree to pay, perform and discharge, by
documentation reasonably satisfactory as to form and substance to Seller, as of
the close of business on the Closing Date, the following liabilities, and none
other (collectively, the “Assumed Liabilities”):

(a)           Deposit Liabilities.  All Deposit Liabilities maintained at the
Branch Office (except those Deposit Liabilities securing loans that are not
being transferred pursuant to this Agreement), in accordance with the terms of
the agreements pertaining to such deposits, as shown on the Records of Seller as
of the close of business on the Closing Date, including accrued but unpaid
interest thereon through the Closing Date (the “Deposits” or “Deposit
Liabilities”), which such Deposit Liabilities, as they existed on December 31,
2013, are identified on Schedule 1.02(a).  As used in this Agreement, the term
“Deposit Liabilities” shall include all of the deposits offered by Seller from
the Branch Office, including, without limitation, passbook accounts, statement
accounts, checking accounts, money market accounts and certificates of deposit
which are booked at the Branch Office on the Closing Date, including in each
case accrued but unpaid interest and both collected and uncollected funds but
excluding deposits held in Retirement Plan and Education Savings Trust Accounts
unless they are transferred in accordance with this Agreement. “Retirement Plan
and Education Savings Trust Accounts” means those non-discretionary individual
retirement accounts (IRA, SEP IRA, ROTH and KEOGH retirement plan deposit
accounts) and Education Savings Trust Accounts booked at the Branch for which
Seller acts as custodian or trustee.  On the Closing Date, the amount of
Deposits transferred hereunder will not be less than $17,500,000 unless waived
by Buyer in Buyer’s sole discretion.

Buyer shall pay a premium (the “Cash Premium”) for the deposits as provided
below:

 
(1)
5% for non-interest bearing demand deposit (“DD”) accounts except those accounts
that have had no customer initiated action in the last twelve (12) months
(“Dormant Accounts”).

 
(2)
4% for interest bearing DD accounts, money market accounts and savings accounts
except for Dormant Accounts

 
(3)
0% for certificates of deposit and IRA certificates of deposit and all Dormant
Accounts

(b)           Assumed Contracts.  The obligations and liabilities of Seller
arising from and after the Closing Date under any and all contracts and personal
property leases relating to the operation or maintenance of the Branch Office
that are assignable by Seller to Buyer, which contracts and leases as of the
date hereof are identified on Schedule 1.02(b) (collectively, the “Assumed
Contracts”).

(c)           Liabilities Not Assumed by Buyer.  Other than those liabilities
specifically assumed in Sections 1.02(a) and 1.02(b) of this Agreement, Buyer
does not and will not assume any liabilities of Seller, whether known or
unknown, disclosed or undisclosed, contingent or otherwise, which have arisen or
may arise or be established in connection with the conduct of business at the
Branch Office on or prior to the Closing Date or which are otherwise related to
Seller (the “Excluded Liabilities”).

 
 

--------------------------------------------------------------------------------

 
 
Section 1.03.   Names and Marks.  Seller is not selling, assigning, conveying,
transferring or delivering, nor shall Buyer acquire, any rights or interest in
or to:  (a) the names “NBRS Financial Bank,” or any derivation thereof, or (b)
any logos, service marks or trademarks, advertising materials or slogans or any
similar items used by Seller in connection with its business, whether or not
such is or was copyrighted or registered.  Preceding the Closing Date, Seller
shall begin the removal from the Branch Office of signs, logos and other
insignia identifying or identified with Seller and such removal shall be
concluded on or before the Closing Date.  No signs, logos or insignia
identifying or identified with Buyer may be installed in or affixed to the
premises until after the close of business on the last business day preceding
the Closing.  On and after the Closing Date, Buyer shall not use the name or
service mark of Seller in any manner in connection with the operation of the
Branch Office, except in accordance with the provisions of Section 9.01
hereof.  No activity conducted by Buyer on or after the Closing Date shall state
or imply that Seller is in any way involved as a partner, joint venturer or
otherwise in the business of Buyer.

Section 1.04.  Transfers.  At the Closing, Seller shall transfer the Assets to
Buyer pursuant to a Bill of Sale in substantially the form of Exhibit 3, an
Assignment and Assumption of Deposit Liabilities Agreement in substantially the
form of Exhibit 1, an Assignment and Assumption of Assumed Contracts and Loans
Agreement in substantially the form of Exhibit 2, an Assignment and Assumption
of Lease in substantially the form of Exhibit 5, and such other documents and
instruments as Buyer or its counsel may reasonably request from time to time
after the Closing Date to transfer the Assets to Buyer including but not limited
to assignments of mortgages and deeds of trust and resignations of
trustees.  Buyer shall be responsible for any filing costs relating to Assets
and Liabilities; provided that Seller shall be responsible for any costs related
to satisfying a deed of trust, order, lien, or other encumbrance related to the
Real Property, Assets or Liabilities, if any.

Section 1.05.  Transition Services Agreement. Contemporaneously with execution
of this Agreement, Buyer and Seller shall execute a Transition Services
Agreement in the form attached hereto as Exhibit 6.

ARTICLE TWO
CLOSING, CALCULATION OF PURCHASE PRICE AND CLOSING DELIVERIES

Section 2.01.  The Closing.  The closing of the transactions contemplated by
this Agreement (the “Closing”) shall take place at the main office of Buyer,
6011 University Boulevard, Suite 370, Ellicott City, Maryland, at 3:00 p.m.
Eastern Time on the Closing Date described in Section 2.02 of this Agreement or
at such other time or location as the parties may agree.

Section 2.02.  The Closing Date.  The Closing shall take place on the date that
is no later than twenty (20) calendar days after receipt of all approvals from
any regulatory authorities having jurisdiction over the transactions
contemplated hereby and the satisfaction of all conditions and the lapse of all
applicable waiting periods associated therewith, or such earlier or later date
following receipt of such approvals, expiration of such waiting periods and
satisfaction of such conditions agreed to in writing by Seller and Buyer. The
transactions contemplated by this Agreement shall become effective at the close
of business on the day of the Closing (the “Closing Date”).

 
 

--------------------------------------------------------------------------------

 
 
Section 2.03.   Calculation of Payments.  The calculation of payments to be made
hereunder shall be made as follows:

(a)     Seller shall pay to Buyer an amount of cash (the “Cash Payment”), in
addition to the transfer of Cash on Hand, equal to:

 
(i)
the aggregate amount of principal and accrued interest of the Deposit
Liabilities being transferred to Buyer; plus

 
(ii)
the net amount of any prorated items required by Section 2.05 hereof owed by
Seller to Buyer; minus

 
(iii)
the Cash Premium, calculated in accordance with Section 1.02(a), as of the close
of business on the Closing Date; minus

 
(iv)
the Acquisition Value (defined herein) of the Assets (exclusive of the Cash on
Hand); minus

 
(v)
the amount of Cash on Hand; minus

 
(vi)
the net amount of any prorated items required by Section 2.05 hereof owed by
Buyer to Seller.

(b)           On the Closing Date, Seller shall transfer to Buyer, by wire
transfer in immediately available funds to an account designated by Buyer, an
amount which Seller estimates to be the amount of the Cash Payment, which
estimated amount shall be based upon the Deposit Liabilities being transferred
to Buyer, the Cash Premium, the net amounts of the prorated items required by
Section  2.05, the Acquisition Value and the Cash on Hand as of the close of
business on the third business day prior to the Closing Date (the “Estimated
Cash Payment”).

(c)           On the thirtieth (30th) calendar day after the Closing Date or
such earlier date as may be agreed to in writing by the parties (the “Adjustment
Payment Date”), an adjustment payment (the “Adjustment Payment”) shall be made
either by Seller to Buyer or by Buyer to Seller, as appropriate, so as to
correct any discrepancy between the amount of the Estimated Cash Payment paid
under the preceding paragraph and the Cash Payment calculated in accordance with
this Section 2.03.  Buyer shall calculate the Cash Payment and provide Seller
with a closing statement which reflects the calculation of the Adjustment
Payment relative to the Estimated Cash Payment.  Seller shall provide Buyer with
any and all Records and financial documentation requested by Buyer to assist it
in calculating the Adjustment Payment.

(d)           If any Loan becomes thirty (30) days past due or otherwise goes
into default pursuant to the relevant loan documentation at any time during the
period sixty (60) days after the Closing Date, Seller shall have the obligation
to repurchase such loan at the then existing Face Value plus any accrued but
unpaid interest and other charges or fees as provided in the loan documentation
for such Loan within five (5) business days after notification by Buyer that
such loan has become thirty (30) days past due or has otherwise gone into
default.
 
 
 

--------------------------------------------------------------------------------

 
 
(e)           From time to time during the one hundred eighty (180) day period
following the Closing, Seller shall make and remit to Buyer such post-Closing
refunds of the amount of the Cash Premium paid in respect of Deposit Liabilities
assumed by Buyer which (a) Buyer shall be required to pay during such period to
a person other than the Deposit account holder as a result of garnishments,
seizures, foreclosures, liens or other legal process of which Seller had
knowledge prior to the Closing Date but which was not resolved prior to the
Closing Date, or as a result of the foreclosure of a loan secured by Pledged
Deposits as of the Closing, or (b) Buyer is required to return as a result of a
provisional credit subsequently disallowed, or checks which are subsequently
returned for forged endorsements or other such matters.

 (f)           For purposes of this Agreement, the “Acquisition Value” of the
Assets shall be the sum of the following:
 
 

 
(i)
the net depreciated book value of the Personal Property as of the month end
prior to the close of business on the Closing Date, and as determined in
accordance with generally accepted accounting principles, which amount as of
December 31, 2013 is specified in Schedule 1.01(c); plus

 
(ii)
the principal, accrued but unpaid interest, and any loan fees on the Loans as of
the month end prior to the close of business on the Closing Date, which amount
as of December 31, 2013 is specified in Schedule 1.01(f).

Section 2.04.  Allocation.  The Acquisition Value and Cash Premium, as adjusted
in accordance with Section 2.03(c), and the Assumed Liabilities and Deposit
Liabilities assumed by Buyer pursuant to Section 1.02 hereof shall be allocated
on an allocation schedule as determined by Buyer in good faith within forty-five
(45) days after the Closing Date and delivered to Seller in writing by such
date.  The allocation shall comply with the allocation method required by
Section 1060 of the Internal Revenue Code of 1986, as amended, and shall be
consistent with Section 2.03.  The parties shall (i) each report the federal,
state and local and other tax consequences of the purchase and assumption
contemplated hereby (including the filing of Internal Revenue Service Form 8594)
in a manner consistent with such allocation schedule and (ii) take no position
in any tax filing, return, proceeding, audit or otherwise which is inconsistent
with such allocation, except to the extent otherwise required by any
governmental or regulatory authority.

Section 2.05.  Prorations.  The parties intend that Seller shall operate for its
own account the business conducted at the Branch Office until the close of
business on the Closing Date, and that the Buyer shall operate such business for
its own account on and after the Closing Date.  Thus, except as otherwise
specifically provided in this Agreement, items of expense directly attributable
to the operation of the Branch Office (which shall not include any general
overhead expenses of Seller) shall be prorated as of the close of business on
the Closing Date, whether or not such adjustment would normally be made as of
such time, including, without limitation, (i) telephone, electric, gas, water,
and other utility services (to the extent it is not possible to transfer such
services into the name of Buyer as of the Closing Date), (ii) taxes associated
with the leasehold interest in the Real Property and Personal Property, (iii)
assessments (including, without limitation, assessments attributable to the
leasehold interest in the Real Property and FDIC deposit insurance premium,
except for any FDIC special assessment deposit insurance premium which shall
borne by the Seller), (iv) payments due on Assumed Contracts, and (v) similar
expenses related to the Assets transferred hereunder.  To the extent any such
item has been prepaid by Seller for a period extending beyond the Closing Date,
there shall be a proportionate adjustment in favor of Seller.
 
 
 

--------------------------------------------------------------------------------

 
 
Section 2.06.   Closing Deliveries.

(a)           At the Closing, in addition to the Estimated Cash Payment, Seller
shall deliver to Buyer:
 
(i)
Certificate or Certificates signed by an appropriate officer of Seller stating
that (A) each of the representations and warranties contained in Article Three
is true and correct in all material respects at the time of the Closing with the
same force and effect as if such representations and warranties had been made at
Closing except with respect to those representations and warranties that speak
of a specific date, and (B) all of the conditions set forth in Sections 7.02(b),
(d), (f) and (g), but, with respect to Section 7.02(d), only insofar as Section
7.02(d) pertains to approvals required to be obtained by Seller, have been
satisfied or waived as provided therein;

 
(ii)
a certified copy of the resolutions of the Board of Directors of Seller,
authorizing the execution of this Agreement and the consummation of the
transactions contemplated hereby;

 
(iii)
evidence of payment to Buyer, by wire transfer in immediately available funds to
an account designated by Buyer, of the Estimated Cash Payment;

 
(iv)
an executed Assignment and Assumption of Deposit Liabilities Agreement in
substantially the form set forth in Exhibit 1;

 
(v)
an executed Assignment and Assumption of Assumed Contracts  and Loans Agreement
in substantially the form set forth in   Exhibit 2 along with all original notes
and loan documents;

 
(vi)
an executed Bill of Sale in substantially the form set forth in Exhibit 3;

 
(vii)
an assignment of the leasehold interest in the Real Property, in form and
substance reasonably satisfactory to Buyer and any required consents related
thereto;

 
(viii)
such other bills of sale, assignments, and other instruments and documents as
counsel for Buyer may reasonably require as necessary or desirable for
transferring, assigning and conveying to Buyer good, marketable and insurable
title to the Assets, including without limitation the leasehold interest in the
Real Property;

 
 

--------------------------------------------------------------------------------

 
 
 
(ix)
listings of the Deposit Liabilities being transferred to Buyer as of the close
of business on the business day prior to the Closing Date (the “Deposit
Listings”) on magnetic tape or utilizing such other method of information
transfer as the parties may mutually agree, which Deposit Listings shall
include, for each account, the account number, outstanding principal balance and
accrued interest;

 
(x)
a Security Release Certification in the form set forth in Exhibit 7 executed by
any Person as requested by Buyer, if any of the Mortgage Loans has been subject
to any security interest, pledge or hypothecation for the benefit of such
Person; and

 
(xi)
the Records, including any Records recorded, stored or maintained by its third
party data processor.

(b)           At the Closing, Buyer shall deliver to Seller:
 
 

 
(i)
a Certificate or Certificates signed by an appropriate officer of Buyer stating
that (A) each of the representations and warranties contained in Article Four is
true and correct in all material respects at the time of the Closing with the
same force and effect as if such representations and warranties had been made at
Closing, except with respect to those representations and warranties that speak
of a specific date and (B) all of the conditions set forth in Sections 7.01(b)
and 7.01(d), insofar as Section 7.01(d) pertains to approvals required to be
obtained by Buyer, have been satisfied or waived as provided therein;

 
(ii)
a certified copy of the resolutions of the Board of Directors of Buyer
authorizing the execution of this Agreement and the consummation of the
transactions contemplated hereby;

 
(iii)
an executed Assignment and Assumption of Deposit Liabilities Agreement in
substantially the form set forth in Exhibit 1; and

 
(iv)
an executed Assignment and Assumption of Assumed Contracts and Loans Agreement
in substantially the form set forth in   Exhibit 2.

ARTICLE THREE
REPRESENTATIONS AND WARRANTIES OF SELLER

Seller hereby makes the following representations and warranties:

Section 3.01.  Organization.  Seller is a Maryland-chartered commercial bank
duly organized, validly existing and in good standing under the laws of the
State of Maryland, and has the corporate power to carry on its business as the
same is being conducted at the Branch Office, to own, use and lease the Assets
and to effect the transactions contemplated herein.  Seller is and will remain
in compliance with the laws of each state in which any property serving as
collateral for the Loans is located to the extent necessary to ensure the
enforceability of each Loan and the servicing of each Loan between the date
hereof and the Closing Date in accordance with the terms of this Agreement.
 
 
 

--------------------------------------------------------------------------------

 
 
Section 3.02.  Authorization.  Seller has full corporate power and authority to
execute and deliver this Agreement and any and all agreements, certificates or
other documents related to or required by this Agreement (collectively, the
“Related Agreements”), to perform its obligations hereunder and thereunder and
to consummate the transactions contemplated hereby and thereby, including
without limitation to sell the Assets and transfer the Assumed Liabilities and
the Deposit Liabilities pursuant to this Agreement.  All necessary corporate
actions have been or will be taken as of the Closing Date to duly and validly
authorize the execution and delivery of this Agreement and the Related
Agreements on Seller’s behalf by Seller’s duly authorized officers and the
performance by Seller of its obligations hereunder.  Each of this Agreement and
the Related Agreements has been, or will be as of the Closing Date, duly and
validly executed and delivered by Seller and each constitutes, or will
constitute as of the Closing Date, a legal, valid and binding obligation of
Seller, enforceable against Seller in accordance with its terms, subject to
bankruptcy, insolvency, reorganization or other similar laws affecting the
enforcement of creditors’ rights generally and to general principles of equity,
whether considered in a proceeding at law or in equity.

Section 3.03.  Non-Contravention.  The execution and delivery of this Agreement
and/or any of the Related Agreements by Seller do not, and, subject to the
receipt of all required approvals and consents, including but not limited to
regulatory approvals, the performance by Seller of each of its obligations under
this Agreement and the Related Agreements and the consummation of the
transactions contemplated by this Agreement and the Related Agreements will not:

(a)    conflict with or result in a violation or breach of the articles of
incorporation or by-laws (or other comparable corporate charter documents) of
Seller.

(b)    subject to obtaining the consents, approvals and actions, making the
filings and giving the notices disclosed on Schedule 3.03, conflict with or
result in a violation or breach of any term or provision of any law, statute,
rule, regulation, ordinance or order (collectively “Laws”) of the United States
or any state, county, city or other political subdivision or any court,
tribunal, arbitrator, authority, agency, commission or other instrumentality of
any of the foregoing (collectively “Governmental Authority”) applicable to
Seller or any of its Assets or require any consent, approval, action, filing or
notice with any Governmental Authority.

(c)    except as disclosed on Schedule 3.03, (i) conflict with or result in a
violation or breach of, (ii) constitute (with or without notice or lapse of time
or both) a default under, or (iii) require Seller to obtain any consent,
approval or action of, make any filing with or give any notice to any natural
Person, corporation, partnership, proprietorship, other business organization,
trust, union, association, Governmental Authority or other entity (“Person”) as
a result or under the terms of, any contract, agreement, indenture or instrument
(collectively, “Contracts”), or License to which Seller is a party or by which
any of the Assets are bound except for such defaults, conflicts, violations or
breaches that individually or in the aggregate will not result in a Material
Adverse Change (as defined in Section 7.02(g) below) to the Seller.
 
 
 

--------------------------------------------------------------------------------

 
 
Section 3.04.  Compliance with Law.  Seller and the Branch Office are in
compliance in all material respects with any laws, rules and
regulations applicable to the Branch Office, the Assets or Seller’s business at
the Branch Office.  Seller has all Licenses that are legally required to enable
it to conduct its business at the Branch Office as presently conducted in all
material respects.

Section 3.05.  Regulatory Enforcement Actions.  Except as set forth on
Schedule 3.05, Seller is not subject to, and has not received any notice or
advice that it may be subject to, any order, agreement, memorandum of
understanding or other regulatory enforcement action or proceeding with or by
any federal or state agency charged with the supervision or regulation of banks
or engaged in the insurance of deposits of banks or any other Governmental
Authority having supervisory or regulatory authority with respect to Seller
which could have an adverse effect on the operation of the Branch Office or the
ability of Seller to consummate the transactions described herein.

Section 3.06.  Litigation.  There is no litigation, claim or other proceeding
pending or, to the knowledge of Seller, threatened against, relating to or
affecting Seller, arising out of or with respect to the Branch Office, the
business conducted at the Branch Office or Seller’s operation of the Branch
Office, or materially affecting any of the Assets or Assumed Liabilities, or
materially affecting the ability of Seller to carry out this Agreement or any of
the transactions contemplated hereby.

Section 3.07.   Loans.

(a)           Seller has good and marketable title to each Loan, free and clear
of any liens, and each is a valid loan made in compliance, in all material
respects, with Seller’s loan policies, including underwriting, in effect at such
time and in compliance, in all material respects, with applicable laws and
regulation;

(b)           The principal balance for each Loan shown on the records is true
and correct as of the last date shown thereon;

(c)           to the best of Seller’s knowledge, all signatures on and
executions of any documents by Seller in connection with the Loans are genuine;

(d)           with respect to each Loan that is secured, Seller has a valid and
enforceable security interest in or lien on the collateral described in the
documents relating to such Loan, and such lien has the priority described in
Seller’s loan files relating to such Loan (subject to bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect
relating to creditor’s rights generally and that the remedy by specific
performance and injunctive relief or other forms of equitable relief may by
subject to equitable defenses and to the discretion of the court before which
any proceeding therefor may be brought); and
 
 
 

--------------------------------------------------------------------------------

 
 
(e)           all of the Loans to be transferred pursuant to this Agreement have
been made for good, valuable and adequate consideration in the ordinary course
of business of Seller, and are evidenced by notes or other evidences of
indebtedness that are true and genuine. Such documentation is sufficient to
enforce such Loans against the obligors and any guarantors thereof in accordance
with the terms of such Loans, subject to bankruptcy, insolvency, reorganization,
moratorium or other similar laws now or hereafter in effect relating to
creditor’s rights generally and that the remedy by specific performance and
injunctive relief or other forms of equitable relief may by subject to equitable
defenses and to the discretion of the court before which any proceeding
therefore may be brought. There are no uncured violations of federal Regulation
Z with respect to the Loans to be transferred pursuant to this Agreement. No
material provision of a Loan has been waived or restructured, unless approved by
the Seller in writing and in its files. Each Loan complies in all material
respects with all requirements of applicable federal, state and local laws and
regulations. Each Loan that is secured by collateral is secured by a perfected
mortgage or security interest in the collateral in favor of Seller as mortgagee
or secured party. No collateral has been released from the interest granted to
Seller, unless approved by Seller in writing and documented in its files which
Seller has provided to Buyer.  No governmental approval or approval from the
Fannie Mae or Freddie Mac is required by Seller to transfer the Loans to Buyer
on/or Buyer to purchase Loans from Seller or for Buyer to service any of the
Loans.

           Section 3.08.        Real Property.

(a)    Seller has a leasehold interest in the Real Property, free and clear of
all liens, encumbrances, charges, defaults or equitable interests, except for
such imperfections of title, easements and encumbrances, if any, as are not
material in character, amount or extent.  Seller has not granted any person or
entity any presently existing right or option to acquire, lease or occupy all or
any portion of the Real Property.

(b)    To the knowledge of the Seller, the Real Property, including the
structures and improvements thereon, are not in violation of, or in conflict
with, any applicable zoning, environmental or health regulations or ordinance or
any other similar law.  There are no operating contracts which affect the Real
Property that are not cancelable on thirty (30) days’ notice.
 
(c)    There is no pending, or to Seller’s knowledge, threatened proceeding or
governmental action to modify the zoning classification of, or to condemn or
take by the power of eminent domain (or to purchase in lieu thereof), or to
classify as a landmark, or to impose special assessments on, or otherwise to
take or restrict in any way the right to use, develop or alter, all or any part
of the Real Property.
 
(d)    Seller has delivered to Buyer true and complete copies of all leases, and
surveys (if any) for the Real Property, together with copies of all reports (if
any) of any engineers, environmental consultants or other consultants related to
the Real Property and in Seller’s possession.  The lease for the Real Property
is in full force and effect and enforceable pursuant to the terms
thereof.  Seller has received no notice of termination or default from the owner
of the Real Property.  All amounts due under the lease for the Real Property
have been fully and timely paid.
 
 
 

--------------------------------------------------------------------------------

 
 
(e)    Seller has not received any written notice from any insurance company,
board of fire underwriters or rating organization (or other body exercising
similar functions) (i) claiming any defects or deficiencies in the Real Property
which have not been addressed and fully cured or corrected, (ii) requesting the
performance of any repairs, alterations or other work which have not been
performed, or (iii) claiming any default which, if not corrected, would result
in a cancellation of insurance coverage.
 
(f)     To the knowledge of the Seller, the Real Property has adequate water
supply, storm and sanitary sewer facilities, access to telephone, gas and
electrical connections, fire protection, drainage and other public utilities,
and has adequate parking facilities that meet all requirements imposed by
applicable laws.  To the knowledge of Seller, the Real Property is not subject
to any lien, easement, right-of-way, building or use restriction, exception,
variance, reservation or limitation as might in any material respect interfere
with or impair the present and continued use thereof in the usual and normal
conduct of business and operations.
 
(g)    Fire, Loss, Damage or Other Destruction.
 
(i)           If prior to the Closing there shall be any loss, damage or
destruction to the Real Property by fire or other casualty, Seller shall give
prompt notice thereof to Buyer.  Buyer shall inspect the Real Property promptly
after receipt of such notice.  If in Buyer’s reasonable estimation the loss,
damage or destruction (collectively, the “Loss”) cannot, on or before the
Closing Date, be restored substantially to the condition that existed as of the
date of this Agreement so that all Branch Office activities conducted prior to
the Loss may be conducted without limitation subsequent to the Loss, or if the
owner of the Real Property will not or cannot so substantiality restore the Real
Property on or before the Closing Date as described in this Section, then Buyer
may, at its option, elect to terminate this Agreement by giving Seller written
notice to that effect and thereafter, except for those obligations herein which
are specifically stated to survive the termination of this Agreement, neither
party shall have any further rights or obligations hereunder.

                (ii)           If there shall be any loss, damage or destruction
to the Real Property by fire or other casualty, and this Agreement is not
terminated as provided in Section 3.08(g)(i), then, subject to Buyer’s
reasonable approval of the manner of repair and restoration, Seller shall settle
with the insurance company and apply the insurance proceeds to promptly and
diligently repair and restore, or commence to repair and restore, the Real
Property to its condition and character immediately prior to the loss, damage or
destruction.  If such settlement or repair and restoration is not completed by
Closing, then at Closing, Seller shall pay over to Buyer the amount of the
insurance proceeds collected to the extent such proceeds have not yet been
applied to the repair and restoration of the Real Property (together with any
applicable deductible) (and if any such proceeds have not been collected, Seller
shall assign to Buyer all its right, title and interest in and to the same).
 
 
 

--------------------------------------------------------------------------------

 
 
           (h)           Condemnation.
 
(i)           If prior to the Closing condemnation or eminent domain proceedings
are commenced against all or any part of the Real Property and the Seller is
provided notice, Seller shall give prompt notice thereof to Buyer.  If Buyer
determines in good faith that such condemnation would result in a Material
Adverse Change on the value of the Real Property or Buyer’s intended use of the
Real Property, Buyer may elect to terminate this Agreement by giving notice to
Seller to that effect within fifteen (15) days after receipt by Buyer of the
notice of condemnation, and thereafter, except for those obligations herein
which are specifically stated to survive the termination of this Agreement,
neither party shall have any further rights or obligations hereunder.

                        (ii)           If there shall be any such proposed
condemnation or eminent domain proceedings, and if Buyer elects not to terminate
this Agreement, there shall be no abatement of the Cash Payment on account of
such condemnation, and at the Closing Seller shall (i) pay over to Buyer the
amount of the condemnation award, if any, collected by or on behalf of Seller
and (ii) assign, transfer and set over to Buyer by instrument in form and
substance reasonably satisfactory to Buyer, all of Seller’s right, title and
interest in and to any condemnation awards that are uncollected and that may be
paid in respect of any such taking.

Section 3.09.   Personal Property.

(a)    Seller is in possession of and has good and marketable title to, or has
valid leasehold interests in or valid rights under the Assumed Contracts to use,
all the Personal Property.  All the Personal Property is free and clear of all
liens, claims, mortgages, pledges, assessments, security interests, levies,
charges or other encumbrances of any kind or any conditional sale or similar
agreement (collectively “Liens”) and is in good working order and condition,
ordinary wear and tear excepted, and its use complies in all material respects
with all applicable Laws.

(b)    In the event of any loss, damage or destruction of the Personal Property,
all such Personal Property, prior to the Closing Date, shall be repaired to the
condition substantially that existed as of the date of this Agreement or
replaced with Personal Property of equivalent character.  If such Personal
Property is not so repaired and/or replaced, Buyer, at its option, may elect to
terminate this Agreement by giving Seller written notice to that effect and
therefor, except for those obligations herein which are specifically stated to
survive the termination of this Agreement neither party shall have any further
rights or obligations hereunder.

Section 3.10.  Assumed Contracts.   Schedule 1.02(b) contains a true and
complete list of each of the Assumed Contracts.  Each Assumed Contract is in
full force and effect and constitutes a legal, valid and binding agreement,
enforceable in accordance with its terms, of each party thereto; and Seller is
not and has not received notice that it is, in violation or breach of or default
under any such Assumed Contract (or with notice or lapse of time or both, would
be in violation or breach of or default under any such Assumed Contract) in any
material respect.  The execution, delivery and performance by Seller of this
Agreement and the Related Agreements to which each is a party, and the
consummation of the transactions contemplated hereby and thereby, will not (a)
result in or give to any Person any right of termination, cancellation,
acceleration or modification in or with respect to any Assumed Contract, (b)
result in or give to any Person any additional rights or entitlement to
increased, additional, accelerated or guaranteed payments under any Assumed
Contract, or (c) result in the creation or imposition of any Lien upon Seller,
the Branch Office or any of the Assets.
 
 
 

--------------------------------------------------------------------------------

 
 
Section 3.11.  Deposit Liabilities.  Except as set forth on Schedule 1.02(a),
the Deposit Liabilities being transferred to Buyer are not subject to any Lien,
including without limitation any Liens in favor of Seller and are not, as of the
close of business on the Closing Date, subject to court order, legal restraint,
automatic stay in bankruptcy, other legal process or stop payment orders.

(a)           All of the Deposit Liabilities accounts have been administered and
originated, in compliance in all material respects with the documents governing
the relevant type of Deposit account and all applicable laws.
 
(b)           The Deposit Liabilities accounts are insured by the FDIC through
the Deposit Insurance Fund to the fullest extent permitted by law, and all
premiums and assessments required to be paid in connection therewith have been
paid when due.
 
(c)           The Deposit Liabilities were opened, extended or made, and have
been maintained, in accordance with all applicable federal and state laws,
regulations, rules and orders, including the Bank Secrecy Act and the USA
PATRIOT Act, and the Branch Office has been operated in compliance with Seller’s
policies and procedures and all applicable federal and state laws, regulations,
rules and orders, except for such instances of noncompliance that do not have,
and are not reasonably likely to have, a Material Adverse Change to Seller.
 
(d)           Seller has properly accrued interest on the Deposit Liabilities
accounts and the Records respecting the Deposit Liabilities accounts accurately
reflect such accruals of interest.
 
(e)           Seller has made available to Buyer a true and complete copy of
each of the documents governing the Deposit Liabilities accounts for each of the
types of Deposit Liabilities accounts offered at the Branch Office which are
being transferred by Seller.
 
(f)           No Deposits are maintained by a “money service business” within
the meaning of regulations promulgated under the USA PATRIOT Act.
 
(g)           None of the Deposit Liabilities are “brokered deposits” within the
meaning of the rules and regulations of the FDIC; none of the Deposits were
obtained through the Certificate of Deposit Account Registry Service or similar
reciprocal placement network or through an internet listing service.  None of
the Deposit Liabilities are held by Federal, State, county or other municipal
governments or governmental or quasi-governmental agencies or are subject to
escheat.
 
(h)           None of the Deposit Liabilities account holders are on the list of
Specially Designated Nationals or Blocked Persons of the Office of Foreign
Assets Control.
 
(i)           With respect to the Deposit Liabilities, Seller is in compliance
with the law and IRS regulations relating to (i) obtaining from depositors of
the Deposit Liabilities executed IRS Forms W-8 and W-9 when appropriate and (ii)
reporting of interest. With respect to the Deposit Liabilities opened after
December 31, 1983, Seller has either obtained a properly completed Form W-8 or
W-9 when appropriate (and renewals of such forms, where required) or is back-up
withholding on such account.
 
 
 

--------------------------------------------------------------------------------

 
 
Section 3.12.  Licenses.  Schedule 1.01(g) contains a true and complete list of
all Licenses used or held for use in connection with the Branch Office (and all
pending applications for any such Licenses), setting forth the grantor, the
grantee, the function and the expiration and renewal date of each.  Prior to the
execution of this Agreement, Seller has delivered to Buyer true and complete
copies of all such Licenses.  Seller owns or validly holds all Licenses that are
material, individually or in the aggregate, to the business conducted at the
Branch Office.

Each License is valid, binding and in full force and effect.  Seller is not, nor
has it received any notice that it is, in default (or with the giving of notice
or lapse of time or both, would be in default) under any License.  The
execution, delivery and performance by Seller of this Agreement and the Related
Agreements to which it is a party, and the consummation of the transactions
contemplated hereby and thereby, will not (a) result in or give in to any Person
any right of termination, cancellation, acceleration or modification in or with
respect to, (b) result in or give any Person any additional rights or
entitlement to increased, additional, accelerated or guaranteed payments under,
or (c) result in the creation or imposition of any Lien upon Seller or any of
its Assets under, any License.

Section 3.13.   Environmental Matters

(a)           To the Seller’s knowledge, (i) the Real Property does not violate
any Environmental Laws (as hereinafter defined); and (ii) no Hazardous
Substances (as hereinafter defined) have been stored or generated at, released
or discharged from or are present upon the Real Property in amounts that would
require that remediation under Environmental Laws.  As used herein, “Hazardous
Substances” means all hazardous or toxic materials, substances, pollutants,
contaminants, or wastes currently identified as a hazardous substance or waste
in the Comprehensive Environmental Response, Compensation and Liability Act of
1980 (commonly known as “CERCLA”), as amended, the Superfund Amendments and
Reauthorization Act (commonly known as “SARA”), the Resource Conservation and
Recovery Act (commonly known as “RCRA”), or any other federal, state or local
legislation or ordinances applicable to the Land or the Improvements.  As used
herein, the term “Environmental Laws” shall mean all federal, state and local
environmental laws, rules, statutes, directives, binding written
interpretations, binding written policies, ordinances and regulations issued by
any governmental authority and in effect as of the date of this Agreement with
respect to or which otherwise pertain to or affect the Real Property, or any
portion thereof, the use, ownership, occupancy or operation of the Real
Property, or any portion thereof, or any owner of the Real Property, and as same
have been amended, modified or supplemented from time to time prior to the date
of this Agreement, including but not limited to CERCLA, the Hazardous Substances
Transportation Act (49 U.S.C. § 1802 et seq.), RCRA, the Water Pollution Control
Act (33 U.S.C. § 1251 et seq.), the Safe Drinking Water Act (42 U.S.C. § 300f et
seq.), the Clean Air Act (42 U.S.C. § 7401 et seq.), the Solid Waste Disposal
Act (42 U.S.C. § 6901 et seq.), the Toxic Substances Control Act (15 U.S.C. §
2601 et seq.), the Emergency Planning and Community Right-to-Know Act of 1986
(42 U.S.C. § 11001 et seq.), the Radon and Indoor Air Quality Research Act (42
U.S.C. § 7401 note, et seq.), SARA, comparable state and local laws, and any and
all rules and regulations which have become effective prior to the date of this
Agreement under any and all of the aforementioned laws.  To the knowledge of
Seller, there are no unremediated asbestos products present at the Branch
Office.
 
 
 

--------------------------------------------------------------------------------

 
 
(b)           To the Seller’s knowledge, there are no pending claims under any
Environmental Laws related to the Branch Office, and Seller has not received
notice of any such pending claims, and to the actual knowledge of Seller, there
are no conditions or facts existing which might reasonably be expected to result
in legal, administrative, arbitral or other proceedings asserting any such
claims or other claims, causes of action or governmental investigations of any
nature seeking to impose, or that could result in the imposition of, any
liability arising under any Environmental Laws upon (i) Seller, (ii) any person
or entity whose liability for any claim under any Environmental Laws Seller has
or may have retained or assumed, either contractually or by operation of law,
(iii) any real or personal property owned or leased by Seller, or any real or
personal property which Seller has or is judged to have managed or supervised or
participated in the management of.  Seller is not subject to any agreement,
order, judgment, decree or memorandum by or with any court, governmental
authority, regulatory agency or third party imposing any liability under any
Environmental Laws with respect to the Branch Office.

               (c)           Except for such reports as have been provided to
Buyer, there have been no environmental investigations, audits or other analyses
conducted by, for or that are in the possession of Seller in relation to the
Real Property.

Section 3.14.  Records.  All of the Records are recorded, stored, maintained,
operated or otherwise wholly or partly dependent upon or held by any means
(including any electronic, mechanical or photographic process, whether
computerized or not and including all means of access thereto and therefrom)
under either the exclusive ownership and direct control of Seller or of Seller’s
third party data processing provider.  Seller will cause any Records recorded,
stored or maintained by Seller’s third party data processing provider to be
promptly delivered to Buyer at Buyer’s request but not before the conditions to
the consummation of the transaction contemplated hereby are satisfied or waived.
Seller has full power and right to cause such delivery to Buyer to occur.

Section 3.15.  Brokerage.  There are no existing claims or agreements for
brokerage commissions, finders’ fees, or similar compensation against Seller in
connection with the transactions contemplated by this Agreement other than The
Kafafian Group, Inc., and The Kafafian Group, Inc. has no claim or potential
claim against Buyer under such agreement.

Section 3.16.  Community Reinvestment Act.  Seller is in compliance in all
material respects with the Community Reinvestment Act and its implementing
regulations, and Seller has no knowledge of threatened or pending actions,
proceedings or obligations by any person or regulatory agency which may cause
any applicable regulatory authority to deny any application required to be filed
pursuant to this Agreement. In addition, Seller has not been advised of any
supervisory concerns regarding its compliance with the Community Reinvestment
Act.

Section 3.17.  Disclosure.  No representation or warranty contained in this
Agreement or any of the Related Agreements, and no statement contained in any
schedule to this Agreement or any Related Agreement or in any certificate, list
or other writing furnished to Buyer pursuant to any provision of this Agreement
or any Related Agreement, contains any untrue statement of a material fact or
omits to state a material fact necessary in order to make the statements herein
or therein, in the light of the circumstances under which they were made, not
misleading.
 
 
 

--------------------------------------------------------------------------------

 
 
Section 3.18.  Branch Employees.  No employee at the Branch Office as of the
date hereof is or as of the Closing Date will be (each, a “Branch Employee” and
collectively, the “Branch Employees”) a party to any collective bargaining,
employment, severance, termination, or change of control agreement or is
represented by a labor organization of any type other than Seller’s established
terms of employment and severance policies.  Seller is unaware of any efforts
during the past three years to unionize or organize the employees of the Branch
Office.  Seller has not adopted and is not subject to any obligations under any
affirmative action plan or similar programs or arrangements with respect to any
Branch Employee.  Except to the extent a Branch Employee has not executed an
Employee Consent (as defined in Section 6.04(c)), Seller has disclosed, or shall
disclose, to Buyer any Branch Employee who is subject to any probation,
performance plan or similar disciplinary action and the circumstances
thereof.  Schedule 3.18 hereto contains a complete and accurate list of all
Branch Employees and includes: (i) the amounts of all accrued leave (including
vacation and sick leave) and such amounts expected to be accrued as of the
Closing Date; (ii) the date of hire, position, present salary or level of
compensation, and announced termination date (if any) for each Branch Employee;
and (iii) each lending, insurance and other license currently in effect for each
Branch Employee and its expiration date.

Section 3.19   FDIC Insurance.  Seller is authorized to hold Deposit Liabilities
that are insured by the FDIC to the extent permitted by law, and all premiums
and assessments required to be paid in connection therewith have been paid when
due.

ARTICLE FOUR
REPRESENTATIONS AND WARRANTIES OF BUYER

Buyer hereby makes the following representations and warranties:

Section 4.01.  Organization.  Buyer is a Maryland-chartered trust company
operating as a commercial bank duly organized, validly existing and in good
standing under the laws of the State of Maryland, and has the corporate power to
carry on its business as the same is being conducted and to effect the
transactions contemplated herein.

Section 4.02.  Authorization.  Buyer has full corporate power and authority to
execute and deliver this Agreement and any and all of the Related Agreements, to
perform its obligations hereunder and thereunder and to consummate the
transactions contemplated hereby and thereby.  All necessary corporate actions
have been taken to duly and validly authorize the execution and delivery of this
Agreement and the Related Agreements on Buyer’s behalf by Buyer’s duly
authorized officers and the performance by Buyer of its obligations
hereunder.  Each of this Agreement and the Related Agreements has been, or will
be as of the Closing Date, duly and validly executed and delivered by Buyer and
constitutes, or will constitute as of the Closing Date, a legal, valid and
binding obligation of Buyer, enforceable against Buyer in accordance with its
terms, subject to bankruptcy, insolvency, reorganization or other similar laws
affecting the enforcement of creditors’ rights generally and to general
principles of equity, whether considered in a proceeding at law or in equity.
 
 
 

--------------------------------------------------------------------------------

 
 
Section 4.03.  Non-Contravention.  The execution and delivery of this Agreement
and/or any of the Related Agreements by Buyer do not, and, subject to the
receipt of all required approvals and consents, including but not limited to
regulatory approvals, the performance by Buyer of each of its obligations under
this Agreement and the Related Agreements and the consummation of the
transactions contemplated by this Agreement and the Related Agreements will not:

(a)    conflict with or result in a violation or breach of the articles of
incorporation or by-laws (or other comparable corporate charter documents) of
Buyer.

(b)    subject to obtaining the consents, approvals and actions, making the
filings and giving the notices disclosed on Schedule 4.03, conflict with or
result in a violation or breach of any term or provision of any Laws of any
Governmental Authority applicable to Buyer or any of its Assets or require any
consent, approval, action, filing or notice with any Governmental Authority.

(c)    except as disclosed on Schedule 4.03, (i) conflict with or result in a
violation or breach of, (ii) constitute (with or without notice or lapse of time
or both) a default under, or (iii) require Buyer to obtain any consent, approval
or action of, make any filing with or give any notice to any party as a result
or under the terms of, any Contract to which Buyer is a party or by which any of
the Assets are bound except for such defaults, conflicts, violations or breaches
that individually or in the aggregate will not have a Material Adverse Change to
the Seller.

Section 4.04.  Community Reinvestment Act.  Buyer has no knowledge of threatened
or pending actions, proceedings or allegations by any Person or regulatory
agency which may cause any applicable regulatory authority to deny any
application required to be filed pursuant to this Agreement.  In addition, Buyer
has not been advised of any supervisory concerns regarding its compliance with
the Community Reinvestment Act and its latest CRA rating is “satisfactory”.

Section 4.05.  Brokerage.  There are no existing claims or agreements for
brokerage commissions, finders’ fees, or similar compensation against Buyer in
connection with the transactions contemplated by this Agreement other than
Griffin Financial Group (“GFG”), and GFG has no claim or potential claim against
Seller under such agreement.

Section 4.06.  Disclosure.  No representation or warranty contained in this
Agreement or any of the Related Agreements, and no statement contained in any
schedule to this Agreement or any Related Agreement or in any certificate, list
or other writing furnished to Seller pursuant to any provision of this Agreement
or any Related Agreement, contains any untrue statement of a material fact or
omits to state a material fact necessary in order to make the statements herein
or therein, in the light of the circumstances under which they were made, not
misleading.
 
 
 

--------------------------------------------------------------------------------

 

ARTICLE FIVE
AGREEMENTS OF THE SELLER

Section 5.01.   Business in Ordinary Course.

(a)    Except as may be required to obtain regulatory approvals or as otherwise
may be required by any Governmental Authority, after the date of this Agreement,
Seller shall conduct the business of the Branch Office in substantially the same
manner as previously conducted and shall use its best efforts to preserve its
business operation as presently conducted at the Branch Office, to preserve for
Buyer the good will of Seller’s customers and others doing business with the
Branch Office, and shall cooperate with and assist Buyer in assuring the orderly
transition of such business from Seller to Buyer.  Seller shall not, without the
prior written consent of Buyer, which consent shall not be unreasonably
withheld:

 
(i)
cause or permit the Branch Office to engage or participate in any material
transaction or incur or sustain any material obligation  except in the ordinary
course of business ("material transactions" and "material obligations" are
defined as transactions and/or obligations totaling in the aggregate $20,000 or
more);

 
(ii)
cause the Branch Office to transfer any Deposit Liabilities except pursuant to
the unsolicited request of a depositor in the ordinary course of business or
where the Deposit Liabilities secure loans that are not being transferred to
Buyer;

 
(iii)
permit the Branch Office to transfer to Seller’s other operations any of the
Assets to be transferred to Buyer on the Closing Date except for (A) equipment
and supplies, if any, which have unique functions to Seller’s business and would
not be useful to Buyer (i.e., signs which include Seller’s name), (B) cash and
other normal interbank transfers which may be transferred in the ordinary course
of business in accordance with normal banking procedures, and (C) such assets as
Buyer has indicated to Seller in writing that it does not desire to purchase;

 
(iv)
transfer, assign, encumber or otherwise dispose of or enter into any contract,
agreement or understanding to transfer, assign, encumber or otherwise dispose of
any of the Assets to be transferred to Buyer on the Closing Date, except
transfers described in clauses (A) through (C) of the preceding subparagraph
(iii);

 
(v)
accept any deposits at rates in excess of those being paid generally at other
branches of Seller or change the fees applicable to such deposit accounts other
than in accordance with changes to such fees applicable to similar accounts at
other branch offices of Seller, or;

 
(vi)
purchase Personal Property on behalf of the Branch Office, except for
commitments made on or before the date hereof and disclosed to Buyer on Schedule
5.01 in writing and for replacement of furniture, furnishings and equipment and
normal maintenance in the ordinary course of the Branch Office’s business;

 
 
 

--------------------------------------------------------------------------------

 
 
 
(vii)
enter into or amend any Contract relating to the Branch Office which is required
to be assumed by Buyer on the Closing Date which cannot be terminated without
cause and without payment of any amount as a penalty, bonus, premium or other
compensation for termination and which is not made in the ordinary course of the
Branch Office’s business;

 
(viii)
undertake any actions which are inconsistent with a program to use all
reasonable efforts to maintain good relations with employees employed at, and
customers of, the Branch Office, unless such actions are required or permitted
by this Agreement or required by any regulatory authority;

 
(ix)
effect any special marketing or advertising campaigns targeted to the Branch
Office or the market in which the Branch Office is located, provided however,
that this shall not prohibit Seller from (A) engaging in its customary
advertisements by means of radio, television or in newspapers or other
periodicals which have a general circulation or audience in markets other than
that in which the Branch Office is located, or (B) from including statement
stuffers in periodic mailings to customers of the Branch Office where such
statement stuffers are in the same form as are being concurrently included in
mailings to customers of other branches of Seller;

 
(x)
accelerate the payment of fees for safe deposit box rental, or except for new
rentals or renewals in the ordinary course consistent with past practice,
provide any incentive to customers to make prepayments on future rental
payments; or

 
(xi)
make any loans secured by Deposit Liabilities at the Branch Office except those
representing overdrafts made pursuant to an overdraft protection plan or similar
extensions of credit in connection with a deposit account.

(b)    Seller shall not, without the prior written consent of Buyer, knowingly
engage in any transaction or take any action that would render untrue in any
material respect any of the representations and warranties of Seller contained
in Article Three of this Agreement, as if such representations and warranties
were given as of the date of such transaction or action.

(c)    Seller shall promptly notify Buyer in writing of the occurrence of any
matter or event known to and directly involving Seller, which, has resulted in a
Material Adverse Change in the business, operations, properties, assets, or
condition (financial or otherwise) of the Branch Office.

Section 5.02.  Breaches.  Seller shall, in the event it has knowledge of the
occurrence, or impending or threatened occurrence, of any event or condition
which would cause or constitute a breach (or would have caused or constituted a
breach had such event occurred or been known prior to the date hereof) of any of
its representations, warranties or agreements contained or referred to herein,
give prompt written notice thereof to Buyer and use its best efforts to prevent
or promptly remedy the same.
 
 
 

--------------------------------------------------------------------------------

 
 
Section 5.03.  Regulatory and Other Approvals.  Seller will (a) proceed
diligently and in good faith and use its best efforts, as promptly as
practicable, to obtain all consents, approvals or actions of, to make all
filings with and to give all notices to Governmental Authorities or any other
Person required of Seller, including without limitation any consents required
with respect to Seller’s interests in Assumed Contracts, to consummate the
transactions contemplated hereby and by the Related Agreements, (b) provide such
other information and communications to such Governmental Authorities or other
Persons as Buyer or such Governmental Authorities or other Persons may
reasonably request in connection therewith and (c) cooperate with Buyer as
promptly as practicable in obtaining all consents, approvals or actions of,
making all filings with and giving all notices to Governmental Authorities or
other Persons required of Buyer to consummate the transactions contemplated
hereby and by the Related Agreements.  Seller will provide prompt notification
to Buyer when any such consent, approval, action, filing or notice referred to
in clause (a) above is obtained, taken, made or given, as applicable, and will
advise Buyer of any communications (and, unless precluded by Law, provide copies
of any such communications that are in writing) with any Governmental Authority
or other Person regarding any of the transactions contemplated by this Agreement
or any of the Related Agreements.  Seller knows of no reason relating to Seller
why the approvals, consents or waivers of governmental authorities required to
complete the transactions contemplated hereby will not be obtained in a timely
manner.

Section 5.04.  Consummation of Agreement.  Seller shall use its best efforts to
perform and fulfill all conditions and obligations on its part to be performed
or fulfilled under this Agreement and to effect the purchase and assumption
transaction contemplated by this Agreement in accordance with the terms and
provisions hereof.  Seller shall furnish to Buyer in a timely manner all
information, data and documents in the possession of Seller requested by the
Buyer as may be required to obtain any necessary regulatory or other approvals
of the purchase and assumption transaction contemplated by this Agreement and
shall otherwise cooperate fully with Buyer to carry out the purpose and intent
of this Agreement.

Section 5.05.  Access to Information.  To the extent permitted by applicable
law, Seller shall permit Buyer and its officers, directors, employees, agents,
counsel, accountants, financial advisors, consultants and other representatives
(collectively “Representatives”) with full access, in a manner which will avoid
undue disruption or interference with Seller’s normal operations, to the Branch
Office and to Seller’s Representatives with knowledge or responsibility with
respect to the business conducted at the Branch Office, and shall disclose and
make available to Buyer at the main office of Seller all books, documents,
papers and records relating to the Branch Office, its assets, operations,
obligations and liabilities, including, but not limited to, all books of account
(including the general ledger), tax records, material contracts and agreements,
customer files, filings with any regulatory authority, litigation files, debit
card and safe deposit box account holder information, and any other business
activities or prospects in which Buyer may have a reasonable and legitimate
interest in furtherance of the transactions contemplated by this Agreement,
subject to any restrictions that may be imposed by applicable law and
regulation.  Buyer will hold any such information in accordance with the
provisions of Section 11.01 hereof.
 
 
 

--------------------------------------------------------------------------------

 
 
Section 5.06.   Retirement Plan and Education Savings Trust Accounts.

(a)    On or before the Closing Date, to the extent that such accounts will
transfer to Buyer, Seller shall: (i) resign as of the close of business on the
Closing Date as the trustee or custodian, as applicable, of the Retirement Plan
and Education Savings Trust Accounts; (ii) to the extent permitted by the
documentation governing each such Retirement Plan Account and applicable law,
appoint Buyer as successor trustee or custodian, as applicable, of each such
Retirement Plan Account, and Buyer hereby accepts each such trusteeship or
custodianship under the terms and conditions of Buyer’s plan documents for its
Retirement Plan and Education Savings Trust Accounts, and assumes all fiduciary
and custodial obligations with respect thereto as of the close of business on
the Closing Date; and (iii) deliver to the IRA or ROTH IRA grantor or Keogh Plan
named fiduciary, of each such Retirement Plan Account or grantor of each
Education Savings Trust Account such notice of the foregoing as is required by
the documentation governing such Retirement Plan or Education Savings Trust
Account or applicable law so that the notice period required under such
Retirement Plan or Education Savings Trust Account would have expired prior to
the Closing Date so that Buyer shall become the successor trustee or custodian
as of the Closing unless such grantor or beneficiary shall have elected another
successor trustee or custodian during the notice period.  If, pursuant to the
terms of the documentation governing any such Retirement Plan or Education
Savings Trust Account or applicable law; (x) Seller is not permitted to appoint
Buyer as successor trustee or custodian, or the IRA or ROTH IRA grantor or Keogh
Plan or named fiduciary or Education Savings Trust grantor objects in writing to
such designation, or is entitled to, and does, in fact, name a successor trustee
or custodian other than Buyer; or (y) such IRA, ROTH IRA or Keogh Plan or
Education Savings Trust Account includes assets that are not Deposit Liabilities
and are not being transferred to Buyer or the assumption of such Deposit
Liabilities included in such Retirement Plan Accounts or would result in a loss
of qualification of such IRA, ROTH IRA or Keogh Plan or Education Savings Trust
Account under the Code, all Deposit Liabilities of Seller held under such
Retirement Plan and Education Savings Trust Accounts shall be excluded from the
Deposit Liabilities. Upon appointment as a successor custodian for such IRAs or
ROTH IRAs or as a successor trustee for such Keogh Plans or Education Savings
Trust Accounts, Buyer shall perform the services and carry out the duties and
obligations required of it under the applicable plans, the Code and applicable
federal and state laws and regulations.

(b)    To the extent the Deposit Liabilities include certain Retirement Plan
Accounts that are required to make certain periodic distributions to the IRA or
ROTH IRA account owner or Keogh Plan participant (or beneficiary) either at the
account owner’s or participant’s request or because the account owner or
participant has attained age 70-1/2, effective as of the Closing Date, Buyer
agrees to continue to make such periodic distributions in accordance with the
reasonable distribution instructions forwarded by Seller to Buyer. Buyer hereby
assumes the obligation to pay each minimum distribution required by federal law
by December 31 of the calendar year in which the Closing occurs and, in
consideration thereof, Seller agrees not to withhold the amount of such
distributions from the aggregate amount of the Deposit Liabilities.
 
 
 

--------------------------------------------------------------------------------

 
 
(c)    Seller shall provide to Buyer copies of all plan documents and
beneficiary designation forms in Seller’s possession with respect to the
Retirement Plan and Education Savings Trust Accounts at any time upon request of
Buyer, subject to any restrictions imposed by applicable law and regulation.

Section 5.07.  Covenant Not to Compete.

(a)    Covenants.  Seller agrees on its behalf and on the behalf of its
affiliated companies (each, a “Restricted Company” and collectively, the
“Restricted Companies”) as follows:
 
(i)           Non-Competition.  For eighteen (18) months from the Closing Date,
none of the Restricted Companies will, within the Maryland county of Harford
(the “Area”), either directly or indirectly, on its own behalf or in the service
or on behalf of others: (A) compete with or otherwise engage in the sale of any
products or the performance of any services which are comparable to, or which
are intended to substitute for, the products or services offered by Buyer except
from Seller’s existing branches in the Area or (B) establish a new office or a
facility from which checking accounts, savings accounts, certificates of deposit
or loans are offered to the general public, or operate automated teller machines
wholly-owned by the Restricted Company other than those ATMs in operation in the
Area as of the date hereof; provided, however, that this Section 5.07(a)(i)
shall not (A) preclude the Restricted Companies from participating in a shared
automated teller machine network where the Restricted Companies do not own or
operate any automated teller machine within the Area identified as a Restricted
Company machine, or (B) prohibit a depository institution that may acquire
Seller from maintaining offices of itself or Seller  in the Area that existed or
was authorized by the appropriate regulatory authorities as of the closing date
of such acquisition.

(ii)           Non-Solicitation of Customers.  Except for the certain
relationships related to the Loans and relevant customers set forth in Schedule
5.07(a)(ii) (the “Shared Customers”), for eighteen (18) months from the Closing
Date, none of the Restricted Companies will, within the Area, on its own behalf
or in the service or on behalf of others, solicit, divert or appropriate or
attempt to solicit, divert or appropriate, directly or by assisting others, any
business from any of the customers of the Branch Office as exist on the Closing
Date, provided, however, that this Section 5.07(a)(ii)  shall not apply to
customers whose loans are not purchased and/or deposits are not assumed by Buyer
pursuant to this Agreement.  The word “solicit” as used in this Agreement does
not include use of statewide or regional media or mail advertising.  Concerning
the Shared Customers, for eighteen (18) months from the Closing Date, none of
the Restricted Companies may directly or indirectly or on behalf of others, take
any action that would result in a reduction of the Shared Customers’ Deposit
Liabilities transferred or Loans purchased hereunder.  The Restricted Companies
may communicate with the Shared Customers regarding the Shared Customers’
deposits and loans not transferred hereunder and regarding new deposits and
loans, but not refinancings of any of the Loans or a reduction of the Deposit
Liabilities. Nothing contained in this Agreement shall prohibit or restrict
Buyer from communicating with the Shared Customers regarding any matter.
 
 
 

--------------------------------------------------------------------------------

 
 
(iii)           Non-Solicitation of Employees.  For eighteen (18) months from
the Closing Date, none of the Restricted Companies will, on its own behalf or in
the service or on behalf of others, solicit, recruit or hire away or attempt to
solicit, recruit or hire away, directly or by assisting others (other than
general solicitation for employees not directed at a certain employee), any
employee of Buyer, whether or not such employee is a full-time, part-time or
temporary employee of Buyer.

(iv)           Nothing herein shall restrict Seller from servicing or
communicating with customers who maintain deposit or loan accounts at other
branches of Seller or general mass mailings, telemarketing calls, statement
stuffers or similar communications directed to the general public in Seller’s
market areas or newspaper, radio or television advertisements of a general
nature or otherwise.

(b)    Reasonableness of Restrictions; Severability; Modification.  Seller, on
its behalf and on behalf of its affiliated companies, acknowledges that the
restrictions in Section 5.07 are fair and reasonable and are reasonably required
for the protection of Buyer.  The parties agree that the provisions and
covenants contained in Section 5.07, and within that Section itself, are
intended to be separate and divisible provisions and covenants and if, for any
reason, any one or more of them shall be held to be invalid or unenforceable, in
whole or in part, by a court of competent jurisdiction, then (i) the same shall
not be held to affect the validity of any other provision or covenant contained
in Section 5.07 and (ii) the same shall be deemed to be modified to the minimum
extent necessary for it to be legally enforceable.  The parties hereby expressly
request any court of competent jurisdiction to enforce any such provision or
covenant or to modify any provision thereof so that it shall be enforced by such
court to the fullest extent permitted by applicable law.  Seller agrees that any
violation by it or any of its affiliated companies of the covenants applicable
to them contained in Section 5.07 is likely to cause damage to Buyer which may
not be adequately compensated by money damages and may be restrained by process
issued out of a court of competent jurisdiction, in addition to any other
remedies provided by law.

ARTICLE SIX
AGREEMENTS OF THE BUYER

Section 6.01.  Regulatory Approvals.  Buyer will use all reasonable efforts to
file, within ten (10) business days after the date of this Agreement, all
regulatory applications required in order to consummate the transactions
contemplated by this Agreement, including but not limited to the necessary
applications for the prior approval of the Maryland Commissioner of Financial
Regulation and the Federal Deposit Insurance Corporation (collectively, the
“Regulators”) and, during such period, will provide a draft copy of such
applications for Seller’s review and comment prior to the submission of such
applications to the Regulators. Seller agrees to promptly provide to Buyer all
information pertaining to Seller required for the Regulators applications and to
sign Buyer’s application if required by the Regulators.  Buyer shall promptly
provide to Seller a copy of such applications and correspondence pertaining
thereto and any subsequent filings and correspondence contemporaneously with the
filing or receipt of same.  Seller will hold any such information which is
nonpublic in confidence in accordance with the provisions of Section 11.01
hereof.  Buyer shall timely file all documents required to obtain all necessary
permits and approvals required to carry out the transactions contemplated by
this Agreement, shall pay all expenses incident thereto and shall use its best
efforts to obtain such permits and approvals on a timely basis.
 
 
 

--------------------------------------------------------------------------------

 
 
Section 6.02.  Breaches.  Buyer shall, in the event it has knowledge of the
occurrence, or impending or threatened occurrence, of any event or condition
which would cause or constitute a breach (or would have caused or constituted a
breach had such event occurred or been known prior to the date hereof) of any of
its representations or agreements contained or referred to herein, give prompt
written notice thereof to Seller and use its best efforts to prevent or promptly
remedy the same.

Section 6.03.  Consummation of Agreement.  Buyer shall use its best efforts to
perform and fulfill all conditions and obligations on its part to be performed
or fulfilled under this Agreement and to effect the transactions contemplated by
this Agreement in accordance with the terms and conditions hereof.

Section 6.04.   Branch Employees.

(a)    Solicitation of Branch Employees.  Buyer expects to hire, effective as of
the Closing Date, all Branch Employees.  However, this Agreement does not create
an offer of employment, any assurance of a specific job title or position, nor
the creation of any third party beneficiary rights in such Branch
Employees.  Subsequent to execution of this Agreement but prior to the Closing
Date, Buyer may, at its option and with Seller’s prior consent, conduct
interviews with Branch Employees to assess the Branch Employees’ abilities and
interest in working at Buyer.

(b)    Terms of Employment.   Any offer of employment to a Branch Employee from
Buyer shall: (i) be subject to any application policies and practices of Buyer
and any Branch Employee who is offered and accepts employment with Buyer (each,
a “Transferred Employee” and collectively, “Transferred Employees”) shall be
subject to all of Buyer’s employee policies and procedures, (ii) contemplate
employment (A) that is substantially comparable to such Transferred Employee’s
job with the Branch Office immediately prior to the Effective Time, (B) at the
base salary, wages or commission or sales incentive award level comparable to
those provided by Buyer on the Closing Date but subject to determination by
Buyer in its sole discretion provided such compensation shall be no less than
that being paid to such Employee by Seller as of the date hereof, and (C) with
employee benefits comparable to those provided by Buyer on the Closing Date to
similarly situated employees of Buyer to the extent the provisions, rules, and
regulations of or applicable to such benefits make the Transferred Employee
eligible for participation therein; provided, however, that for purposes of
Buyer’s vacation time and personal day accrual policies, each Transferred
Employee would be treated as if he or she has been an employee of Buyer since
the date he or she most recently began active employment with Seller.  Buyer
does not guarantee the adoption or continuance of any particular employee
benefit plan or program during the term of the Transferred Employees’
employment, and their participation in any benefit plan or program shall be
subject to the provisions, rules and regulations applicable thereto.

 
 

--------------------------------------------------------------------------------

 
 
(c)    Termination of Branch Employees.  Effective as of the Closing, Seller
shall terminate the employment of each Branch Employee who is to become a
Transferred Employee.

Section 6.05.  Compliance with Capital Adequacy.  Buyer, on the Closing Date and
on a pro forma basis as of such date reflecting the transactions contemplated
hereby, shall meet or exceed all well-capitalized capital levels and other
applicable capital adequacy regulatory standards.  Buyer knows of no reason why
the approvals, consents or waivers of governmental authorities required to
complete the transactions contemplated hereby will not be obtained in a timely
manner.

ARTICLE SEVEN
CONDITIONS PRECEDENT TO THE BRANCH PURCHASE AND ASSUMPTION

Section 7.01.  Conditions to Seller’s Obligations.  Seller’s obligations to
effect the transactions contemplated by this Agreement shall be subject to the
satisfaction (or waiver by Seller) prior to or on the Closing Date of the
following conditions:

(a)    The representations and warranties made by Buyer in this Agreement shall
be true in all material respects on and as of the Closing Date with the same
effect as though such representations and warranties had been made or given on
the Closing Date except with respect to those representations and warranties
which speak as of a specific date;

(b)    Buyer shall have performed and complied in all material respects with all
of its obligations and agreements required to be performed prior to the Closing
Date under this Agreement;

(c)    No temporary restraining order, preliminary or permanent injunction or
other order issued by any court of competent jurisdiction or other legal
restraint or prohibition preventing the consummation of the transactions
contemplated by this Agreement shall be in effect nor shall any proceeding by
any bank regulatory authority or other Governmental Authority seeking any of the
foregoing be pending.  There shall not be any action taken, or any statute,
rule, regulation or order enacted, entered, enforced or deemed applicable to the
transactions contemplated by this Agreement which makes the consummation of such
transaction illegal;

(d)    All necessary regulatory approvals, consents, authorizations and other
approvals required by law for consummation of the transactions contemplated by
this Agreement shall have been obtained in a manner and form reasonably
satisfactory to Seller, and all waiting periods required by law shall have
expired; and

(e)    Seller shall have received all documents required to be received from
Buyer on or prior to the Closing Date, all in form and substance reasonably
satisfactory to Seller.
 
 
 

--------------------------------------------------------------------------------

 
 
Section 7.02.  Conditions to Buyer’s Obligations.  Buyer’s obligations to effect
the transactions contemplated by this Agreement shall be subject to the
satisfaction (or waiver by Buyer) prior to or on the Closing Date of the
following conditions:

(a)    The representations and warranties made by Seller in this Agreement or in
any certificate delivered pursuant hereto  shall be true in all material
respects on and as of the Closing Date with the same effect as though such
representations and warranties had been made or given on and as of the Closing
Date;

(b)    Seller shall have performed and complied in all material respects with
all of its obligations and agreements required to be performed prior to the
Closing Date under this Agreement;

(c)    No temporary restraining order, preliminary or permanent injunction or
other order issued by any court of competent jurisdiction or other legal
restraint or prohibition preventing the consummation of the transactions
contemplated by this Agreement shall be in effect, nor shall any proceeding by
any bank regulatory authority or other Governmental Authority seeking any of the
foregoing be pending.  Seller shall not have received any order, directive or
other formal communication from any bank regulatory agency that prohibits or
limits in any manner the closing of the transactions described in this
Agreement.  There shall not be any action taken, or any statute, rule,
regulation or order enacted, entered, enforced or deemed applicable to the
transactions contemplated by this Agreement which makes the consummation of such
transaction illegal;

(d)    All necessary regulatory approvals, consents, authorizations and other
approvals required by law or Contract for consummation of the transactions
contemplated by this Agreement shall have been obtained on terms reasonably
acceptable to Buyer, and all waiting periods required by law shall have expired;

(e)    Buyer shall have received a written consent from the owner of the Real
Property consenting to an assignment of the lease of the Real Property to Buyer
with such written consent being in a form and substance as reasonably
satisfactory to Buyer;

(f)     Buyer shall have received all documents required to be received from
Seller on or prior to the Closing Date, all in form and substance reasonably
satisfactory to Buyer;

(g)    There shall not have been a Material Adverse Change in the business,
operations, properties, assets, including the Assets or condition (financial or
otherwise) of the Branch Office.  For purposes herein, a “Material Adverse
Change” shall mean, with respect to the Branch Office or the Assets, any effect
or change that is material and adverse to the business, operations, properties,
assets or condition (financial or otherwise) of the Branch Office; provided,
however, that changes in general economic conditions and/or conditions that
affect the banking industry generally, and changes attributable to the
transactions contemplated in this Agreement shall not constitute a “Material
Adverse Change; ” and

(h)    The Transition Services Agreement attached as Exhibit 6 hereto remains in
effect and enforceable pursuant to the terms thereof.
 
 
 

--------------------------------------------------------------------------------

 

ARTICLE EIGHT
TERMINATION OR ABANDONMENT

Section 8.01.   Mutual Agreement.  This Agreement may be terminated by the
mutual written agreement of the parties at any time prior to the Closing Date.

Section 8.02.   Breach of Representations or Agreements.  In the event that
there is a material breach in any of the representations and warranties or
agreements of Seller or Buyer, which breach is not cured within fifteen (15)
days after written notice to cure such breach is given to the breaching party by
the non-breaching party, then the non-breaching party may terminate and cancel
this Agreement by providing written notice of such action to the other party
hereto.

Section 8.03.   Failure of Conditions.  In the event that any of the conditions
to the obligations of either party are not satisfied or waived on or prior to
the Closing Date and if any applicable cure period provided in Section 8.02
hereof has lapsed, then such party may terminate and cancel this Agreement by
delivery of written notice of such action to the other party on such date.

Section 8.04.  Application Denial.  If any regulatory application filed pursuant
to Section 6.01 hereof should be finally denied or disapproved by the Regulators
or other applicable regulatory authority, then this Agreement thereupon shall be
deemed terminated and canceled; provided, however, that a request for additional
information from, or undertakings by, the applicant, as a condition for
approval, shall not be deemed to be a denial or disapproval so long as the
applicant diligently provides the requested information or agrees to the
requested undertaking.  If any regulatory agency requests that an application be
withdrawn and the applicant, in consultation with the other party to this
Agreement, is unable to resolve the concern or objections of such agency on
terms reasonably acceptable to the applicant, the applicant shall be deemed to
have failed to obtain regulatory approval.  In the event an application is
denied, but is subject to an appeal, petition for review, or similar such act on
the part of the applicant (hereinafter referred to as the “Appeal”) then the
application will be deemed denied unless the applicant and the other party to
this Agreement agree in writing to appeal the denial and the applicant prepares
and timely files such Appeal and continues the appellate process for purposes of
obtaining the necessary approval, provided, however, that either party shall
have the right, at its election, to terminate this Agreement if such Appeal
remains unresolved for a period exceeding sixty (60) days.

Section 8.05.  Automatic Termination.  If the Closing Date does not occur on or
prior to October 31, 2014, then either Buyer or Seller shall have the option to
terminate this Agreement. Buyer and Seller agree to take all necessary actions
to close the transaction contemplated hereunder as so on as practically
possible.
 
 
 

--------------------------------------------------------------------------------

 

ARTICLE NINE
TRANSITIONAL AND POST-CLOSING MATTERS

Section 9.01.   Notification to Branch Office Customers.  Buyer shall:

(a)    jointly with Seller, after the execution and delivery of this Agreement,
regulatory applications filed pursuant to Section 6.01 hereof are deemed
complete by the applicable regulators and in compliance with applicable law,
prepare and mail to each depositor whose Deposit is to be assumed by Buyer, a
letter, in a form and manner to be mutually agreed upon by the parties in a
timely manner, informing such depositor of the nature of such transaction and
the continuing availability of services to be provided by the Buyer in the
Branch Office on and after the Closing Date;

(b)    at its own cost and expense, cause to be printed deposit tickets, checks,
withdrawal orders and all other requisite banking transactional forms for each
account which constitutes a Deposit and mail such deposit tickets, checks,
withdrawal orders and other forms to each customer having such an account so as
to be received by such customer on or about the Closing Date, each such document
to be encoded with Buyer’s identification numbers and to be accompanied by
Buyer’s letter, in form and substance satisfactory to Seller, advising that,
from and after the Closing Date, such newly issued deposit tickets, checks,
withdrawal orders and other forms are to be used instead of the corresponding
existing documents of Seller with respect to the customer’s Deposit account
maintained at the Branch Office and that any such existing documents of Seller
are to be destroyed; and

(c)    take any other actions required by law or regulation or by any court or
regulatory authority to notify customers or depositors of the Branch Office or
residents of the community in which the Branch Office is located of the
transfers and assumptions occurring pursuant to this Agreement.  The
out-of-pocket cost of the mailings required by subsections (a) and (b) of this
section shall be borne by Buyer.

Section 9.02.  Transition Procedures.  Following the Closing, Buyer and Seller
shall follow the transitional procedures set forth in Exhibit 4 hereto with
respect to the matters covered thereby, and such other operating procedures as
may be agreed to by the parties.

Section 9.03.  Statements.  Seller shall issue statements to its customers which
include all transactions with respect to the Deposits through the close of
business on the Closing Date, and Buyer shall issue statements for all
transactions with respect to the Deposits thereafter.

Section 9.04.  Access to Records.  Seller and Buyer mutually agree to maintain
all records and other documents relating to the Assets and Assumed Liabilities
for such periods as provided in Seller and Buyer’s respective record retention
policies and required by applicable law, and to examine, inspect, copy and
reproduce such records and other documents relating to such Assets and Assumed
Liabilities as may be reasonably requested by the other party.  Any charges for
such examination and photocopying shall be at a rate not greater than the
examining party’s customary rates for similar requests by its customers.  Not in
limitation of the foregoing, Seller agrees that following the Closing it shall
respond to information requests by customers of the Branch Office with respect
to pre-Closing records that are not transferred to Buyer, or assist Buyer in
responding to such requests, including requests relating to disputes, through
its customer care center, at no cost to Buyer.
 
 
 

--------------------------------------------------------------------------------

 
 
Section 9.05.  Information Reporting.  With respect to the Deposits purchased
and assumed by Buyer pursuant to this Agreement, Seller shall be responsible for
reporting to the customer and to the Internal Revenue Service (and any states or
local taxing authority as required) all interest paid or earned prior to the
Closing Date and Buyer shall be responsible for reporting to the customer and to
the Internal Revenue Service (and any state or local taxing authority as
required) all interest paid or earned after the Closing Date.

Section 9.06.  Transition.  From and after the date of this Agreement, Seller
and Buyer agree to fully cooperate with and assist one another in connection
with the transition and conversion of all customer accounts, files (including
data processing files) and other information which are being purchased and
assumed by Buyer pursuant to the terms hereof.  Additionally, each of the Buyer
and Seller agree to provide each other, upon reasonable prior notice, with such
information and data as is necessary to allow the Seller and Buyer to comply
with all tax, regulatory reporting, audit or other compliance obligations
relating to the customers, employees and operations of the Branch Office, and
each of Seller and Buyer agree to timely take any and all action as required by
law to comply with such tax, regulatory and/or reporting obligations.

Section 9.07.  Information Returns. At the closing or as soon thereafter as is
practicable, Seller shall provide Buyer with a list of all Deposits on which
Seller is processing back up withholding as of the Closing Date.

ARTICLE TEN
INDEMNIFICATION

Section 10.01.  Indemnification of Buyer.  Seller shall indemnify, hold harmless
and defend Buyer (and each of Buyer’s directors, officers, employees,
subsidiaries, successors and assigns, and affiliates) (collectively, the
“Buyer’s Indemnified Parties”) from and against any and all damage, loss,
liability, cost, claim, fine, penalty or expense (including reasonable legal
fees and expenses) incurred or suffered by Buyer’s Indemnified Parties arising
out of, or resulting from or based upon (i) the breach or inaccuracy of or
failure to comply with any representation, warranty or covenant made by the
Seller in this Agreement or the Related Agreements which survives the Closing
Date as specified in Section 11.07; (ii) any Excluded Liabilities or any of the
debts, liabilities or obligations of Seller, whether accrued, absolute
contingent, known, unknown or otherwise, other than Assumed Liabilities; (iii)
Seller’s operation of the Branch Office on or prior to the Closing Date, or
(iv) the failure by Seller to deliver title (or, to the extent provided for
herein, leases or licenses) to the Assets, free and clear of all Liens.

Section 10.02.   Indemnification of Seller.  Buyer shall indemnify, hold
harmless and defend Seller (and Seller’s directors, officers, employees,
subsidiaries, successors and assigns, and affiliates) (collectively the
“Seller’s Indemnified Parties”) from and against any and all damage, loss,
liability, cost, claim, fine, penalty or expense (including reasonable legal
fees and expenses) incurred or suffered by Seller’s Indemnified Parties arising
out of, resulting from or based upon (i) any failure of the Buyer to pay, honor,
perform or otherwise discharge the liabilities assumed pursuant to Sections
1.02(a) and 1.02(b) hereof on or after the Closing Date; or (ii) the Buyer’s
operation of the Branch Office after the Closing Date.

 
 

--------------------------------------------------------------------------------

 
 
Section 10.03.  Procedure and Limitations. An indemnified party shall give the
indemnitor prompt notice of any claim hereunder; provided, the failure to give
such notice shall not affect the right to indemnification hereunder unless the
indemnitor was materially prejudiced by such failure.  The indemnitor shall have
the right to defend at its own expense any claim for which the indemnitor is
liable hereunder (with counsel reasonably satisfactory to the indemnified
party), upon prompt written notice to the indemnified party, but no settlement
or compromise of such claim may be effected which materially affects the
indemnified party without its consent thereto, which shall not be unreasonably
withheld.  The indemnified party shall cooperate with the indemnitor in the
defense of any such claims and may participate therein with its own counsel at
its own expense.

ARTICLE ELEVEN
GENERAL

Section 11.01.  Confidential Information.  The parties acknowledge the
confidential and proprietary nature of the “Information” (as herein described)
that has heretofore been exchanged and that will be received from each other
hereunder and agree to hold and keep, and to instruct their respective agents,
representatives, shareholders’ affiliates, employees and consultants to hold and
keep, such Information confidential, except that after the Closing, Buyer shall
not be subject to this obligation with respect to information relevant to its
operation of  the bank branch at the previous location of the Branch
Office.  Such Information will include any and all financial, technical,
commercial, marketing, customer or other information concerning the business,
operations and affairs of a party that may be provided to the other,
irrespective of the form of the communications, by such party’s employees or
agents.  Such Information shall not include information that is or becomes
generally available to the public other than as a result of a disclosure by a
party or its representatives in violation of this Agreement.  The parties agree
that the Information will be used solely for the purposes contemplated by this
Agreement and that such Information will not be disclosed to any Person other
than employees and agents of a party who are directly involved in evaluating
and/or performing this transaction.  The Information shall not be used in any
way detrimental to a party, including use directly or indirectly in the conduct
of the other party’s business or any business or enterprise in which such party
may have an interest, now or in the future, and whether or not now in
competition with such other party.

Section 11.02.   Publicity.  Buyer and Seller shall cooperate with each other in
the development and distribution of all news releases and other public
disclosures concerning this Agreement and the transaction contemplated herein
and shall not issue any news release or make any other public disclosure without
the prior consent of the other party, unless such is required by law upon the
written advice of counsel or is in response to published newspaper or other mass
media reports regarding the transaction contemplated hereby, in which latter
event the parties shall consult with each other regarding such responsive public
disclosure.

Section 11.03.   Return of Documents.  Upon termination of this Agreement
without the purchase and assumption transaction contemplated by this Agreement
becoming effective, each party (a) shall deliver to the other originals and all
copies of all Information made available to such party, and, except as may
otherwise be required by law or to protect the interests of either party, (b)
will not retain any copies, extracts or other reproductions in whole or in part
of such information, and (c) will destroy all memoranda, notes and other
writings prepared by either party based on the Information.
 
 
 

--------------------------------------------------------------------------------

 

 
Section 11.04.    Notices.  Any notice or other communication shall be in
writing and shall be deemed to have been given or made on the date of delivery,
in the case of hand delivery, or three (3) business days after deposit in the
United States Registered Mail, postage prepaid, or upon receipt if transmitted
by facsimile telecopy or any other means, addressed (in any case) as follows:

(a)           if to Seller:

NBRS Financial Bank
6 Pearl Street
Rising Sun, MD 21911
Attention, Hugh J. Garchinsky, President
Facsimile:

With copy to:

Philip R. Bevan
Silver, Freedman, Taff & Tiernan, LLP
3299 K Street, NW
Suite 100
Washington, DC, 20007

(b)           if to Buyer:

Howard Bank
6011 University Blvd., Suite 370
Ellicott City, Maryland  21043
Attention:  Mary Ann Scully, President and CEO
Facsimile:

With copy to:

Frank C. Bonaventure, Esquire
Ober, Kaler, Grimes & Shriver, P.C.
100 Light Street
Baltimore, Maryland 21202

or to such other address as any party may from time to time designate by notice
to the others.

Section 11.05.  Expenses.  Except as otherwise specifically provided herein,
Seller and Buyer each shall pay all of their own out-of-pocket expenses incurred
in connection with this Agreement, including, without limitation, appraisals,
accounting and legal fees, and data processing charges, if any, whether or not
the transactions contemplated by this Agreement are consummated.  Seller shall
pay any fees necessary to obtain consents under the Assumed Contracts. Buyer and
Seller shall equally pay any charges in connection with the assignment of the
leasehold interest in the Real Property. All sales taxes (if any) with respect
to the Personal Property shall be paid by the Buyer.
 
 
 

--------------------------------------------------------------------------------

 
 
Section 11.06.  Liabilities.  Except as otherwise specifically recorded herein,
in the event that this Agreement is terminated pursuant to the provisions of
Article Eight hereof, no party hereto shall have any liability to any other
party for costs, expenses, damages or otherwise; notwithstanding the foregoing,
in the event that this Agreement is terminated pursuant to Section 8.02 hereof
on account of a willful breach of any of the representations and warranties set
forth herein, or any breach of any of the agreements set forth herein, then the
non-breaching party shall be entitled to recover its damages from the breaching
party.  In the event that either Seller or Buyer fails or refuses, for any
reason whatsoever to perform its obligations hereunder, then the other party
hereto shall have and may pursue an action for specific performance and for
injunctive relief.

Section 11.07.  Survival of Representations, Warranties and Agreements. The
representations, warranties and/or agreements (as applicable) set forth herein
shall not survive the Closing Date except Sections 3.08 and 3.13 and Article Ten
herein which shall survive the Closing Date for a period of one year thereafter.

Section 11.08.  Entire Agreement.  This Agreement and the Related Agreements
constitute the entire agreement between the parties and supersede any and all
prior discussions, negotiations, undertakings, agreements in principle and other
agreements between the parties relating to the subject matter hereof.

Section 11.09.  Headings and Captions.  The captions of Articles and Sections
hereof are for convenience only and shall not control or affect the meaning or
construction of any of the provisions of this Agreement.

Section 11.11.  Waiver, Amendment or Modification.  The conditions of this
Agreement that may be waived may be waived only by written instrument expressly
stating an intention to waive, duly executed by the party for which the
condition(s) is intended to benefit.  The failure of any party at any time or
times to require performance of any provision hereof shall in no manner affect
the right of such party at a later time to insist upon performance of the
same.  This Agreement may not be amended or modified except by a written
instrument expressly stating an intention to amend or modify this Agreement,
duly executed by the parties hereto.

Section 11.12.  Rules of Construction.  Unless the context otherwise requires:
(a) a term has the meaning assigned to it; (b) “or” is not exclusive; and (c)
words in the singular may include the plural and in the plural include the
singular.

Section 11.13.  Counterparts.  This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original and all of which shall
be deemed one and the same instrument.
 
 
 

--------------------------------------------------------------------------------

 
 
Section 11.14.  Successors and Assigns.  This Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective successors
and permitted assigns.  There shall be no third-party beneficiaries hereof.

Section 11.15. Governing Law; Assignment.  This Agreement shall be governed by
the laws of the State of Maryland and applicable federal laws and regulations
without application of conflict of law principles.  Neither this Agreement, nor
any of the rights, interests or obligations hereunder, shall be assigned by
either of the parties hereto without the prior written consent of the other.

Section 11.16.  Time of Essence.  The parties hereto agree that time is of the
essence with respect to the performance of the obligations hereunder.

Section 11.17.Waiver of Jury Trial.  BUYER AND SELLER HEREBY KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVE THE RIGHT THEY MAY HAVE TO A TRIAL BY JURY
IN RESPECT OF ANY LITIGATION BASED UPON THIS AGREEMENT, OR ARISING OUT OF,
UNDER, OR IN CONNECTION WITH THIS AGREEMENT AND ANY AGREEMENT CONTEMPLATED TO BE
EXECUTED IN CONJUNCTION HEREWITH, OR ANY COURSE OF CONDUCT, COURSE OF DEALING,
STATEMENTS OR ACTIONS OF THE PARTIES.  THIS PROVISION IS A MATERIAL INDUCEMENT
FOR THE PARTIES ENTERING INTO THIS AGREEMENT

Section 11.18.  Risk of Loss.  Notwithstanding anything else contained in this
Agreement, prior to the Closing, the risk of loss of damage to, or destruction
of, any and all of the Branch Assets shall remain with Seller.

[Signature Page Follows]
 
 
 
 
 
 

--------------------------------------------------------------------------------

 
 
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed as of
the date first set forth above.
 
 

ATTEST:                      [SEAL]  
NBRS FINANCIAL BANK
            __________________________________    By: ______________________ 
Name:  _____________________________  
Name: Hugh J. Garchinsky
Title:    _____________________________  
Title:  President and CEO
                  ATTEST:                      [SEAL]   HOWARD BANK            
__________________________________    By: ______________________ 
Name:  _____________________________   Name: George C. Coffman Title:   
_____________________________   Title: Executive Vice President and CFO

 
 
 
 

--------------------------------------------------------------------------------

 
 
Exhibit 1
 
BRANCH PURCHASE AND ASSUMPTION AGREEMENT
BETWEEN
NBRS FINANCIAL BANK
AND
HOWARD BANK

ASSIGNMENT AND ASSUMPTION OF DEPOSIT LIABILITIES AGREEMENT

This ASSIGNMENT AND ASSUMPTION OF DEPOSIT LIABILITIES AGREEMENT is dated this
_____ day of _______________, 2014, by and between NBRS FINANCIAL BANK, a
Maryland chartered commercial bank (“Seller”), and HOWARD BANK, a Maryland trust
company operating as a commercial bank (“Buyer”).  Capitalized terms not
otherwise defined herein shall have the same meaning as specified in the
Agreement (as defined below).

Seller and Buyer have entered into a Branch Purchase and Assumption Agreement,
dated as of ________, 2014 (the “Agreement”), which provides for the assignment
by Seller of all of its rights and interest in and to certain deposit accounts
related to the Seller’s office located at 800 Revolution Street, Havre de Grace,
Maryland  (the “Branch Office”), and the assumption by Buyer of such deposit
accounts, all as set forth in the Agreement.

For good and valuable consideration, receipt of which is hereby acknowledged by
Seller and Buyer, Seller hereby assigns, transfers and sets over to Buyer all of
Seller’s rights and interest in and to, and Buyer does hereby assume all of
Seller’s liabilities and obligations with respect to, all Deposit Liabilities
maintained at the Branch Office, as shown on the books and records of Seller as
of the close of business on the Closing Date, as further specified in the
Agreement.

This Assignment and Assumption of Deposit Liabilities Agreement shall be binding
upon and shall inure to the benefit of Seller, Buyer and each of their
respective successors and assigns, and shall be subject to the terms and
conditions of the Agreement.  In the event of a conflict between any of the
terms and provisions hereof and the Agreement, the Agreement shall be deemed to
control.

This Assignment and Assumption of Deposit Liabilities Agreement, and the rights
and obligations of the parties hereunder, shall be governed by and construed in
accordance with the laws of the State of Maryland and applicable federal laws
and regulations.

The parties have caused this Assignment and Assumption of Deposit Liabilities
Agreement to be executed as of the date first written above.
 

NBRS FINANCIAL  BANK   HOWARD BANK             By:      
_____________________________    By: _______________________________ 
Name:  _____________________________   Name:  _____________________________
Title:    _____________________________   Title:   
_____________________________

 
 
 

--------------------------------------------------------------------------------

 
 
Exhibit 2
 
BRANCH PURCHASE AND ASSUMPTION AGREEMENT
BETWEEN
NBRS FINANCIAL  BANK
AND
HOWARD BANK

ASSIGNMENT AND ASSUMPTION OF ASSUMED CONTRACTS AND LOANS AGREEMENT

This ASSIGNMENT AND ASSUMPTION OF ASSUMED CONTRACTS AND LOANS AGREEMENT is dated
this _____ day of _______________, 2014, by and NBRS FINANCIAL BANK, a Maryland
chartered commercial bank (“Seller”), and HOWARD BANK, a Maryland trust company
operating as a commercial bank (“Buyer”).  Capitalized terms not otherwise
defined herein shall have the same meaning as specified in the Agreement (as
defined below).

Seller and Buyer have entered into a Branch Purchase and Assumption Agreement,
dated as of _________, 2014 (the “Agreement”), which provides for the assignment
by Seller of all of its rights and interest in and to certain contracts related
to the Seller’s office located at 800 Revolution Street, Havre de Grace,
Maryland (the “Branch Office”), and the assumption by Buyer of such contract
liabilities and obligations, all as set forth in the Agreement.

For good and valuable consideration, receipt of which is hereby acknowledged by
Seller and Buyer, Seller hereby assigns, transfers and sets over to Buyer all of
Seller’s rights and interest in and to, and Buyer does hereby assume all of
Seller’s liabilities and obligations arising at and after the date hereof with
respect to, the following:

(a) All of the Loans set forth in Appendix I hereto, and the collateral
documents and agreements which secure such Loans, including security agreements,
assignments, pledges, guaranty agreements, deposit pledges or hypothecations,
mortgages, deeds of trust, financing statements whether filed or unfilled and
all of Seller’s rights as secured party thereunder; and

(b) All contracts and personal property and equipment leases relating to the
operation or maintenance of the Branch Office, as further specified in the
Agreement.

This Assignment and Assumption of Assumed Contracts and Loans Agreement shall be
binding upon and shall inure to the benefit of Seller, Buyer and each of their
respective successors and assigns, and shall be subject to the terms and
conditions of the Agreement.  In the event of a conflict between any of the
terms and provisions hereof and the Agreement, the Agreement shall be deemed to
control.

 
 

--------------------------------------------------------------------------------

 

This Assignment and Assumption of Contracts and Loans Agreement, and the rights
and obligations of the parties hereunder, shall be governed by and construed in
accordance with the laws of the State of Maryland and applicable federal laws
and regulations.

The parties have caused this Assignment and Assumption of Contracts and Loans
Agreement to be executed as of the date first written above.
 
 

 
NBRS FINANCIAL BANK
     
By:                                                                    
 
Name:                                                                
 
Title:                                                                 
     
HOWARD BANK
     
By:                                                                    
 
Name:                                                                
 
Title:                                                                 

 
 
 

--------------------------------------------------------------------------------

 
                                          
Exhibit 3
 
BRANCH PURCHASE AND ASSUMPTION AGREEMENT
BETWEEN
NBRS FINANCIAL BANK
AND
HOWARD BANK

BILL OF SALE

This BILL OF SALE is dated this _____ day of _______________, 2014, by NBRS
FINANCIAL  BANK, a Maryland chartered commercial bank (“Seller”).  Capitalized
terms not otherwise defined herein shall have the same meaning as specified in
the Agreement (as defined below).

Seller and HOWARD BANK, a Maryland chartered trust company operating as a
commercial bank (“Buyer”), have entered into a Branch Purchase and Assumption
Agreement, dated as of _______, 2014 (the “Agreement”), which provides for the
sale by Seller to Buyer of the Personal Property, Loans,, Records and Cash on
Hand related to the Seller’s office located at 800 Revolution Street, Havre de
Grace, Maryland (the “Branch Office”), all as set forth in the Agreement.

Seller, for good and valuable consideration, receipt of which is hereby
acknowledged, does hereby grant, bargain, sell, assign, set over, convey and
transfer to Buyer all of its right, title and interest in and to the following
assets (the “Assets”):

(a) All of Seller’s Loans set forth in Appendix I hereto;

(b) The furniture, fixtures, equipment, improvements and other items of tangible
Personal property located at the Branch Office as of the close of business on
the Closing Date, together with sign structures being transferred to Buyer, as
more specifically described in the Agreement;

(c) All of Seller’s Records; and

(d) All of Seller’s Cash on Hand.

Seller does hereby covenant and agree to and with Buyer that it (i) is seized
of, and has the right to convey to Buyer, good and marketable title to all
assets comprising the Assets, (ii) will warrant and defend said title to the
Assets in the manner provided in the Agreement, and (iii) shall, from time to
time, at the request of Buyer, execute, acknowledge and deliver to Buyer any and
all further instruments, documents, endorsements, assignments, information,
materials and other papers as may be reasonably required to transfer the Assets
to Buyer and to give full force and effect to the full intent and purposes of
this Bill of Sale.

 
 

--------------------------------------------------------------------------------

 
 
This Bill of Sale, and the rights and obligations of the parties hereunder,
shall be governed by and construed in accordance with the laws of the State of
Maryland and applicable federal laws and regulations.

 
Seller has caused this Bill of Sale to be duly executed as of the date first
written above.
 

 
NBRS FINANCIAL BANK
     
By:                                                                    
 
Name:                                                                
 
Title:                                                                 
 

 
 
 

--------------------------------------------------------------------------------

 

Exhibit 4
 
PROCEDURES GOVERNING TRANSITIONAL MATTERS

(a)           Buyer agrees to pay in accordance with law, up to the collected
amount on deposit (and any other funds available by reason of any agreement
between the depositor and Buyer), all properly drawn and presented checks,
drafts, electronic debits and credits and withdrawal orders presented to Buyer
by mail, over its counters, through the check clearing system,  Automated
Clearing House and other electronic clearing systems, by depositors of the
accounts assumed, whether drawn on the checks, withdrawal or draft forms
provided by Seller, or by Buyer, and all other respects to discharge, in the
usual course of the banking business, the duties and obligations of Seller with
respect to the balances due and owing to the depositors whose accounts are
assumed by Buyer.  Subject to Buyer’s obligations under Section 10.02, Buyer’s
obligation under this Section (a) of this Exhibit 4 to honor checks, withdrawal,
draft forms and electronic debits and credits provided by Seller and carrying
its imprint shall expire at the close of business sixty (60) days following the
Closing Date or a date mutually agreeable to both parties.

(b)           If any of such depositors, instead of accepting the obligation of
Buyer to pay the Deposit Liabilities assumed, shall demand payment from Seller
for all or any part of any such assumed Deposit Liabilities, Seller shall not be
liable or responsible for making such payment.  Instead, Seller may, at its
discretion, assume custody of the check or other item presented for payment,
including electronic items, on an account which has been transferred with the
Branch Office, batch such items and make them available to Buyer for pick-up at
Seller’s office at 10:00 a.m. on the next banking day after receipt thereof by
Seller. Seller shall not, at any time, be liable or responsible for making
payment on such items by reason of its obtaining custody of them for transmittal
to Buyer.

(c)           In order to reduce the continuing charges to Seller through the
check clearing system of the banking industry which will result from check forms
of Seller being used after the Closing Date by the depositors whose accounts are
assumed, Buyer agrees, at its cost and expense, to notify depositors of Buyer’s
assumption of Deposit Liabilities and, at its sole cost and expense and without
cost to depositors, to furnish each depositor of an assumed account with not
less than fifty (50) checks on the forms of Buyer, with instructions to utilize
Buyer’s checks and to destroy unused checks of Seller as of the Closing
Date.  Seller hereby agrees that after the sixty (60) day period described in
Section (a) of this Exhibit 4, it shall, with respect to any check or other item
presented to it for payment on an account which has been transferred with the
Branches, at its sole option, either:  (i) return such check or other item with
reference to the maker thereof, or (ii) assume custody thereof, batch the same
and make it available to Buyer for pick-up in the manner aforesaid and telephone
Buyer of the availability of the same for pick-up prior to 10:00 a.m. of the
next banking day after receipt thereof by Seller.

(d)           Buyer agrees, no later than the start of the second business day
after demand by Seller, to pay Seller an amount equivalent to the amount of any
uncollected item included in a depositor’s balance on the Closing Date which is
returned after the Closing Date as not collected.  Buyer shall be required to
make such payment for an item only up to the amount on deposit with Buyer at the
time Seller makes the demand aforesaid; provided, however, if prior to the
Closing Date, Seller had placed a “hold” or other similar protective measure on
the depositor’s account with respect to such item and subsequent to the Closing
Date, Buyer removes such hold or
protective measure (other than by normal expiration), then Buyer will be
obligated to pay Seller in full on account of such uncollected item.

 
 

--------------------------------------------------------------------------------

 
 
(e)           Cash Letters.  Seller understands that not all depositors will
immediately use the new supply of checks provided by Buyer pursuant to the
Agreement and that checks written on Seller’s check forms on the accounts
assumed on or prior to the Closing Date (“Seller’s Checks”) will thereafter be
presented to Seller for payment. After the Closing Date, Seller shall make
available to Buyer any items received by Seller that are drawn on any of the
accounts assumed by Buyer. Seller will provide items via electronic settlement.
Paper documents will be delivered to Buyer’s nearest location at Buyer’s
expense.  Seller agrees to process notification of change on direct deposit and
ACH debits. Buyer will pick up at Seller’s office at 9:00 a.m. on each weekday
banking day after the Closing Date those items that are to be posted to accounts
purchased by Buyer together with any return items (uncollected items) that are
to be charged back to the accounts now owned by Buyer. Buyer will settle with
Seller with respect to those items which are to be posted to the assumed
accounts on the day they are received, such settlement to be made by the wire
transfer of funds to Seller’s Federal Reserve account (account number to be
provided to Buyer by Seller) in accordance with Section (h) of this Exhibit
4.  Settlement of any return items will be made without entries and by wire
transfer in accordance with Section (h).

(f)           Uncollected Items.  Buyer and Seller understand that the balances
in the accounts assumed may consist in whole or in part of the provisional
settlement given by Seller for items deposited at Seller on or prior to the
Closing Date which are drawn on other financial institutions or drawees and
which have not, as of the Closing Date, been presented for payment and finally
paid (“Uncollected Items”). In the event that any Uncollected Item is returned
unpaid for any reason, Seller shall assume the duties of a collecting bank with
respect to the Uncollected Item and shall, by 2:00 p.m. of that day, notify
Buyer by telephone of all returned items. Seller shall return the item or items
unpaid without entry to Buyer at such location as agreed by the parties.  Buyer
shall attempt to charge-back the item(s) to the account of the depositor as
follows: (i) if sufficient funds exist to permit the charge-back in full, Buyer
shall charge the depositor’s account and settle with Seller for the Uncollected
Item by wire transfer in accordance with Section (h) of this Exhibit 4 for the
amount of the Uncollected Item(s) and send it to Seller’s office at such
location as agreed by the parties; (ii) if insufficient funds exist to permit
the charge-back in full but a portion of the provisional settlement is still in
the depositor’s account, Buyer shall debit the depositor’s account for the
remaining portion of the provisional settlement and return the Uncollected
Item(s) and wire to Seller an amount equal to the portion of the provisional
settlement still in the depositor’s account without entry to Seller within two
(2) banking days of receipt of the Uncollected Item, such wire transfer to be
done in accordance with Section (h) of this Exhibit 4; and (iii) if insufficient
funds exist to permit the charge-back at all, Buyer shall return the Uncollected
Item without entry to Seller within two (2) banking days of receipt of the
Uncollected Item.

(g)           Buyer and Seller have agreed that items deposited on or prior to
the Closing Date into the accounts assumed by Buyer and which thereafter are
returned to Seller or Buyer accompanied by a claim of MICR fraud, fraudulent
item or breach of presentment warranty (“Fraudulent Items”) are to be handled as
“Uncollected Items” described above and Seller shall indemnify Buyer from all
liability in connection therewith in accordance with Section 10.01 of the
Agreement; provided, however, that if with respect to such Fraudulent Items
there are insufficient funds in the customer’s account to permit Buyer to
charge-back the item in full, Seller will buy back such Fraudulent Item at the
face amount thereof; provided, further however, if prior to the Closing Date,
Seller had placed a “hold” or other similar protective measure on the
depositor’s account with respect to such item and subsequent to the Closing
Date, Buyer removes such hold or protective measure in a situation where leaving
the hold or protective measure in place would have avoided the loss, then Seller
will be responsible to Buyer only for the excess of the amount of the item over
the amount Buyer is able to recover with respect to such item by charging back
the item against the Customer’s account.
 
(h)           All settlement amounts pursuant to this Exhibit 4 shall be
aggregated, and a net settlement shall be wired to Seller’s Federal Reserve
account on each weekday banking day.
 
 
 

--------------------------------------------------------------------------------

 
 
Exhibit 5
 
ASSIGNMENT AND ASSUMPTION OF LEASE

NBRS Financial Bank, (“Assignor”), hereby transfers, assigns and sets over unto
Howard Bank (“Assignee”) all of its right, title and interest as tenant in, to
and under that certain lease agreement and the leasehold interest created
thereunder dated December 31, 2008 and the First Modification to Lease Agreement
2009 dated February ____, 2009 (“collectively, the “Lease”) by and between BR-MD
Properties, LP as landlord and Assignor as tenant.

TO HAVE AND TO HOLD the Lease, unto Assignee, its successors and assigns
FOREVER.

Assignee agrees to accept the foregoing assignment and assume the obligations of
the tenant under the Lease arising or accruing after the date hereof.

Assignor represents that it has obtained all consents required to assign the
Lease.

IN WITNESS WHEREOF, the parties hereto have executed this Assignment this  _____
day of ___________________, 2014.
 
 

WITNESS:    NBRS FINANCIAL BANK                
________________________________________   By:
________________________________________       Name:  Hugh J. Garchinsky      
Title:  President         WITNESS:    HOWARD BANK                
________________________________________   By:
________________________________________      
Name:  Mary Ann Scully
     
Title:  President

 
 
 

--------------------------------------------------------------------------------

 
 
Exhibit 6
 
TRANSITION SERVICES AGREEMENT
 
This TRANSITION SERVICES AGREEMENT (this “Agreement”) is entered into as of
April 24, 2014, by and between Howard Bank (“Howard”) and NBRS Financial Bank
(“NBRS”).

WHEREAS on April 24, 2014, Howard and NBRS entered into a Branch Purchase and
Assumption Agreement (the “Branch Purchase Agreement”) under which Howard agreed
to purchase certain NBRS assets and assume certain NBRS deposit liabilities (the
“Transaction”) with such assets and liabilities being located at the NBRS branch
in Havre de Grace, Maryland (the “Branch”);

WHEREAS the parties to the Branch Purchase Agreement desire to close such
transaction as soon as possible after receipt of regulatory approvals but such
closing may be delayed by the third party data processor of Howard and/or NBRS
not being able to convert such Branch information to Howard’s data processing
system; and

WHEREAS in the event that the third party data processor of Howard and/or NBRS
is not able to convert Branch information to Howard’s data processing system at
the time the Transaction closes and in order to close the Branch Purchase
Transaction as soon as possible after receipt of regulatory approvals, Howard
desires and NBRS agrees that NBRS will provide certain services to Howard as
described herein and in accordance with the terms and conditions that are more
specifically set forth herein so that the Transaction may close as soon as
possible after receipt of regulatory approvals.

NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:

ARTICLE I
DEFINITIONS
1.1           “Services” shall mean the services and support described in
Exhibit A. “Service” shall mean any one service and support described in Exhibit
A.
 
ARTICLE II
PROVISION OF SERVICES
 
2.1           Upon notice by Howard to NBRS that Howard desires NBRS to provide
the Services, NBRS shall provide the Services to Howard in a commercially
reasonable manner that is consistent with the level, character, quantity and
quality of care with which such Services are provided to NBRS by its data
processor. Howard also expressly acknowledges and agrees that the obligation of
NBRS to provide the Services is limited to the Services expressly set forth
herein or as the parties shall otherwise agree in writing.  In the event that
Howard requests additional services, NBRS shall only be obligated to perform
such additional services as mutually agreed upon by the parties in writing.
 
 
 

--------------------------------------------------------------------------------

 
 
2.2           Notwithstanding anything to the contrary contained in this
Agreement, in order to provide any Service or fulfill any other obligation
hereunder NBRS shall not be required to (i) maintain the employment of any
specific employee, (ii) purchase, lease or license any additional equipment,
software or intellectual property, (iii) incur any un-reimbursed expense of a
type or in an amount not customarily incurred by NBRS, (iv) assume any
liabilities of Howard, (v) provide any Service if the performance of such
Service could, in NBRS’s reasonable judgment, result in a violation by NBRS (or
any affiliate) of any applicable laws, rules or regulations, or a breach of any
license or other applicable agreement to which NBRS is a party, (vi) provide any
Service beyond type or level that such Service is provided to NBRS by its data
processor or (vii) provide any Service if NBRS reasonably determines at any time
during the term of this Agreement that the provision of such Service would
materially disrupt or impair NBRS’s (or any affiliate’s) ordinary course of
business or operations.  Howard acknowledges and agrees that the provision of
Services hereunder may require NBRS to obtain certain contractual rights,
permissions or licenses from third parties.  NBRS’s obligation to deliver any
Service described in this Agreement is conditional upon NBRS obtaining the
consent, where necessary, of any relevant third party provider and NBRS agrees
to take reasonable action (at no expense to NBRS) to obtain any such
consents.  If such consent cannot be obtained, the parties shall use their
respective reasonable efforts to arrange for alternative methods of delivering
such Service, subject to and in accordance with this Article II.

2.3.           The performance of the Services shall not constitute a grant of
any license to or any permission or other authorization for Howard to use any
NBRS-proprietary or third party software licensed and used by NBRS in the
operation of its business prior to the closing date.  Upon termination of this
Agreement for any reason, Howard shall uninstall and cease all use of any such
software, destroy or return all copies of such software and certify in writing
that it has complied with this requirement.

2.4           The parties acknowledge and agree that all Services to be rendered
by NBRS hereunder are solely to temporarily provide support to the Branch
operations until such time as Howard’s data processor is able to provide such
Services to Howard, and NBRS  is not subject to any supervision, approval or
control of or from Howard.  NBRS expressly retains full control over and
ultimate responsibility for all decisions with regard to the operation of NBRS
including, but not limited to: (i) policy decisions regarding operation and
maintenance of NBRS and its business, (ii) payment of all financial obligations
and operating expenses of NBRS, (iii) hiring, supervision and dismissal of all
employees of NBRS, (iv) handling of all of NBRS customer issues and complaints,
and (v) compliance with all legal, regulatory and other obligations with respect
to NBRS.  Nothing in this Agreement shall be considered to transfer de facto or
de jure control of the Branch or any portion of its business to NBRS and Howard
and NBRS expressly disclaim any such control.  NBRS and Howard shall each obtain
and maintain employer’s liability, worker’s compensation, property damage,
general liability and such other insurance containing provisions and in amounts
reasonably necessary for the operation of their respective businesses.
 
 
 

--------------------------------------------------------------------------------

 

ARTICLE III
PRICING, BILLING AND PAYMENT

3.1           NBRS shall monitor its total costs  incurred to its data processor
arising out of its provision of the Services to Howard (the “Servicing
Costs”).  As soon as practical after the end of each calendar month, NBRS shall
render a bill to Howard for the Servicing Costs.  NBRS shall request from its
data processor a break down of the cost of the Services performed for Howard
under this Agreement. In the event NBRS is unable to obtain from its data
processor a break down of the cost of the Services performed for Howard under
this Agreement, NBRS and Howard shall mutually determine the Servicing Costs.

3.2           The Servicing Costs shall be billed monthly by NBRS in arrears and
shall be paid by Howard in full on or before the fifteenth (15th) day following
Howard’s receipt of an invoice for such Services.  NBRS reserves the right to
charge interest on any amount which is past due for more than thirty (30) days
at a rate equal to the lower of one and one half percent (1.5%) per month or the
highest rate allowed by applicable law.

ARTICLE IV
WARRANTY, LIABILITY AND INDEMNITY

4.1           Except as provided in the first sentence of Section 2.1 above,
NBRS MAKES NO WARRANTIES OR REPRESENTATIONS OF ANY KIND, EXPRESS OR IMPLIED,
WITH REGARD TO ANY OF THE SERVICES INCLUDING, WITHOUT LIMITATION, ANY WARRANTIES
OF NONINFRINGEMENT, IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE.  HOWARD ACKNOWLEDGES AND AGREES THAT IT HAS NOT ENTERED INTO
THIS SERVICES AGREEMENT IN RELIANCE ON ANY SUCH WARRANTY OR REPRESENTATION.

4.2           Except for gross negligence or intentional violation of this
Agreement, NBRS’s maximum liability to, and the sole remedy of, Howard for
breach of this Agreement or otherwise with respect to the Services is a refund
of the price paid for the particular Service or, at the option of Howard, a
redelivery (or delivery) of the Service. In the event of gross negligence or an
intentional breach, NBRS shall be liable to Howard for actual damages suffered
by Howard.

4.3           Except as provided in Section 4.2, in no event shall NBRS be
liable to Howard or any other person for any lost profits, loss of use,
interruption of business, indirect, consequential, incidental, special or
punitive damages, of any kind or nature, whether based on breach of contract,
tort (including negligence), or any other legal theory, in connection with or
arising out of the Services or this Agreement.

4.4           Howard shall defend, indemnify and hold harmless NBRS and its
respective directors, officers, shareholders, and employees and their respective
heirs, successors and assigns (collectively, the “NBRS Indemnified Parties”)
from and against any and all judgments, fines, claims, damages, assessments,
obligations, liabilities, costs and expenses (including, without limitation,
reasonable attorney’s fees and expenses and the cost of enforcing this
indemnity) (collectively, the “Costs”) that are imposed on or incurred by the
NBRS Indemnified Parties in connection with or arising out of any third-party
claim regarding this Agreement except where the Costs are due to the gross
negligence of NBRS.
 
 
 

--------------------------------------------------------------------------------

 

ARTICLE V
TERM AND TERMINATION
 
5.1           NBRS shall provide the Services for up to 180 days  commencing on
the closing date of the Transaction (the, “Term”).  Howard may terminate this
Agreement or any one or more of the Services upon 30 days prior written notice
to NBRS.  Prior to the end of the Term, Howard may extend this Agreement for an
additional 90 days in one or more periods by giving written notice to NBRS
subject to Howard not being in default hereunder at the time such notice is
given. In the event Howard terminates one or more of the Services but not this
Agreement, Howard’s payment obligations will be reduced accordingly.  All
accrued and unpaid charges for Services shall be due and payable upon
termination of this Agreement with respect to such Services.
 
5.2           Notwithstanding anything to the contrary contained herein, this
Agreement may be terminated, in whole or in part, at any time (i) by the mutual
consent of NBRS and Howard, (ii) by NBRS, ten (10) days following notice to
Howard, if Howard fails to pay any invoice for Services within thirty (30) days
of its due date, (iii) by Howard immediately without notice to NBRS if NBRS is
placed into: (a) receivership or  conservatorship; (b) commences a voluntary
dissolution or is subject an involuntary dissolution proceeding; (c) any similar
relief is sought under the rules and regulations of the Federal Deposit
Insurance Corporation; or (iv) by Howard, ten (10) days following notice to
NBRS.
 
5.3           In the event of any termination of this Agreement, this Agreement
(other than Articles IV and VI and as set forth in the following sentence) shall
be of no further force and effect with no liability on the part of either party
hereto.  No such termination shall relieve any party hereto from liability for
any breach of this Agreement prior to such termination, including, without
limitation, any failure to satisfy payment obligations with respect to any
Services.
 
5.4           Upon the expiration of the Term or any extensions thereof, or in
the event of any termination of this Agreement pursuant to Sections 5.2(i) or
5.2 (iii), NBRS or its successors or assigns will, upon Howard’s written
request, provide reasonable and customary assistance to facilitate Howard’s
conversion to an alternative data processing provider.
 

ARTICLE VI
MISCELLANEOUS PROVISIONS

6.1           No party shall be liable to any other party for any delay in
performing or for any failure to perform any of its obligations hereunder due to
an event of force majeure, including, without limitation, acts of God or public
enemy, war, government acts, regulations or orders, fire, flood, embargo,
quarantine, epidemic, labor stoppage or other disruptions, accident, unusually
severe weather or other cause similar or dissimilar, beyond the control of the
party whose performance is hindered thereby.

 
 

--------------------------------------------------------------------------------

 
 
6.2           Each party acknowledges that the others possess, and will continue
to possess, information that has been created, discovered or developed by them
and/or in which property rights have been assigned or otherwise conveyed to
them, which information has commercial value and is not in the public
domain.  The proprietary information of each party will be and remain the sole
property of such party and its assigns.  Each party shall use the same degree of
care that it normally uses to protect its own proprietary information to prevent
the disclosure to third parties of information that has been identified as
proprietary by written notice to such party from the other party.  No party
shall make any use of the information of the other which has been identified as
proprietary except as contemplated or required by the terms of this
Agreement.  Notwithstanding the foregoing, this Section 6.2 shall not apply to
any information that a party can demonstrate: (a) was, at the time of disclosure
to it, in the public domain through no fault of such party; (b) was received
after disclosure to it from a third party who had a lawful right to disclose
such information to it; (c) was independently developed by the receiving party,
or (d) was already the receiving party’s possession or known to the receiving
party prior to being disclosed or provided to the receiving party.  Nothing
contained herein shall prohibit or limit either party hereto from disclosing
proprietary information to regulatory agencies with jurisdiction over a
disclosing party.

6.3           Records maintained and produced for Howard by NBRS in connection
with the Services may be subject to examination by such federal governmental
regulatory agencies to the same extent as such records would be subject if
maintained by Howard on its own premises.  NBRS is authorized to give all
reports, summaries, or information contained in or derived from the data or
information in its possession relating to Howard to an authorized regulatory
agency when requested to do so. NBRS agrees to maintain Howard customers’
“nonpublic personal information,” (as defined under the Gramm-Leach-Bliley Act
(15 United States Code § 6801 et seq.)) using the same degree of care that it
normally uses to maintain the “nonpublic personal information” of its own
customers.

6.4           Nothing in this Agreement is to be construed as an assignment or
grant of any right, title or interest in any trademark, service mark, copyright,
design, patent right or other intellectual or industrial property right, and
neither party shall use any of the foregoing of the other party without the
other party’s prior written consent.

6.5           NBRS is an independent contractor under this Agreement.  Nothing
contained in this Agreement shall be construed as creating a partnership, joint
venture, agency, trust, single or joint employer relationship, employer-employee
relationship or other association of any kind, each party being individually
responsible only for its obligations as set forth herein.  Employees of Howard
involved in the receipt of the Services shall remain employees of Howard, and
Howard shall be solely responsible for the payment and provision of all wages,
bonuses, commissions and employee benefit plans, programs or arrangements
relating to such employees.  Employees of NBRS involved in the provision and
administration of the Services shall remain employees of NBRS, and NBRS shall be
solely responsible for the payment and provision of all wages, bonuses,
commissions and employee benefit plans, programs or arrangements relating to
such employees.  Howard acknowledges and agrees that no fiduciary relationship
arises by virtue of this Agreement or otherwise and that, accordingly, NBRS
incurs none of the obligations that arise in such a relationship as an incident
of its fulfilling its obligations hereunder.  Further, Howard acknowledges and
agrees that NBRS neither insures profits for Howard nor guarantees the success
of Howard’s business as a result of Howard’s receipt of Services under this
Agreement.  No party has the authority to, and each party agrees that it shall
not, directly or indirectly contract any obligations of any kind in the name of
or chargeable against any other party without such party’s prior written
consent.
 
 
 

--------------------------------------------------------------------------------

 
 
6.6           No party to this Agreement may assign any of its rights or
obligations under this Agreement without the prior written consent of the other
parties hereto.

6.7           All notices or other communications hereunder shall be deemed to
have been duly given and made if in writing and (a) if served by personal
delivery upon the party for whom it is intended, on the day so delivered; (b) if
mailed by registered or certified mail, return receipt requested, on the third
business day following such mailing; (c) if deposited for delivery by a
reputable courier service, on the business day following deposit with such
courier; or (d) if sent by electronic transmission, on the day the document is
transmitted electronically, or if not a business day, the next succeeding
business day  to the person at the address set forth below, or such other
address or electronic address as may be designated in writing hereafter, in the
same manner, by such person:

 
To NBRS:
NBRSBank

 
Attention:  Hugh J. Garchinsky, President
6 Pearl Street
P.O. Box 370
Rising Sun, MD 21911

 

 
With copy to: Philip R. Bevan, Esquire

 
Silver, Freedman, Taff and Tiernan, LLP
3299 K Street
Suite 100
Washington,DC20007
Rising Sun, MD 21911

 
 
To Howard:
HowardBank

 
6011 University Blvd., Suite 370
Ellicott City, Maryland  21043
Attention:  Mary Ann Scully, President and CEO

 
 
With copy to:
Frank C. Bonaventure, Jr. Esquire

 
Ober, Kaler, Grimes & Shriver, PC
100 Light Street
Baltimore, MD  21202

 
6.8           This Agreement, including any exhibits or schedules hereto,
contains the entire agreement between the parties with respect to the subject
matter hereof and supersedes all prior agreements and understandings, oral or
written, with respect to such matters.  In the event of an ambiguity or if a
question of intent or interpretation arises, 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.
 
 
 

--------------------------------------------------------------------------------

 
 
6.9           This Agreement shall inure to the benefit of and be binding upon
the parties and their respective successors and permitted assigns.  Nothing in
this Agreement, express or implied, is intended to confer upon any person other
than NBRS or Howard or their respective successors or permitted assigns any
rights or remedies under or by reason of this Agreement.
 
6.10           This Agreement shall in all respects be interpreted, enforced and
governed under the laws of the State of Maryland. NBRS AND HOWARD HEREBY
UNCONDITIONALLY WAIVE THEIR RIGHT TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF
ACTION DIRECTLY OR INDIRECTLY BASED UPON OR ARISING OUT OF THIS AGREEMENT, ANY
OF THE TRANSACTIONS CONTEMPLATED HEREBY, OR ANY DEALINGS BETWEEN NBRS AND HOWARD
RELATING TO THE SUBJECT MATTER HEREOF OR THEREOF.  THE SCOPE OF THIS WAIVER IS
INTENDED TO BE ALL ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY BE FILED IN ANY
COURT (INCLUDING, WITHOUT LIMITATION, CONTRACT CLAIMS, TORT CLAIMS, BREACH OF
DUTY CLAIMS, AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS).  THIS WAIVER IS
IRREVOCABLE MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING, AND
THE WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR
MODIFICATIONS TO THIS AGREEMENT.  IN THE EVENT OF LITIGATION, THIS AGREEMENT MAY
BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.
 
6.11           Any provision of this Agreement may be amended or waived if, and
only if, such amendment or waiver is in writing and signed, in the case of an
amendment, by all parties, or in the case of a waiver, by the party against whom
the waiver is to be effective.  No failure or delay by any party in exercising
any right, power or privilege hereunder shall operate as a waiver thereof nor
shall any single or partial exercise thereof preclude any other or further
exercise thereof or the exercise of any other right, power or privilege.
 
6.13           This Agreement may be executed simultaneously in counterparts,
each of which shall be deemed to be an original copy of this Agreement and all
of which together will be deemed to constitute one and the same agreement.  The
exchange of copies of this Agreement and of signature pages by electronic
transmission shall constitute effective execution and delivery of this Agreement
as to the parties and may be used in lieu of the original Agreement for all
purposes.  Signatures of the parties transmitted by electronic format shall be
deemed to be their original signatures for all purposes.
 
6.14  In the event any court shall determine that any provision of this
Agreement is invalid, such determination shall not affect the validity of any
other provision of this Agreement, which shall remain in full force and effect
and shall be construed so as to be valid under applicable law.

[SIGNATURES ON FOLLOWING PAGE]
 
 
 
 

--------------------------------------------------------------------------------

 
 
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
and delivered by their duly authorized officers as of the date first above
written.
 
 

    NBRS BANK                     By: ________________________________________  
    Hugh J. Garchinsky       President                     HOWARD BANK          
          By: ________________________________________      
George C. Coffman
Executive Vice President and CFO

 
 
 

--------------------------------------------------------------------------------

 
 
EXHIBIT A
 
SERVICES
 
 
●
In general, NBRS  will continue to provide account processing for the accounts
that are purchased by Howard but not yet systematically converted to Howard’s
data processing, item processing and associated systems in such a fashion as was
performed prior to purchase.

 
 
●
NBRS will maintain the current system and network connectivity between the
Branch, NBRS and NBRS’s account processing vendors such that the Branch staff
can continue to provide daily processing and access account information through
the systems in use at the Branch, including but not limited to teller
transactions, branch item processing including courier service, account access,
account maintenance and exception item processing.

 
 
●
Basic account processing for savings, certificates of deposit, demand accounts,
loan accounting, loan administration, general ledger, item entry system, and
central information files.  This processing also includes the posting of
financial transactions, proof of deposit and item processing, standard system
report preparation, and the related activities of generating special customized
reports, statement processing, audit confirmations, and year-end processing.

 
 
●
Deposit operation support services for commercial and consumer deposit accounts
associated with the Branch generally consistent with the support services that
have historically been performed by the deposit operations department, including
treasury management support, debit card and ATM management, branch and
documentation support, teller support and IRA support.

 
 
●
Service and support for the internet banking platform, including internet bill
payment services, telephone banking services and all other banking platforms,
products and services currently offered by NBRS.  Notwithstanding the foregoing:

 
 
●
No outgoing wire transfer requests will be accepted through NBRS banking offices
or NBRS operations or corporate center.

 
●
No cashiers checks will be issued through NBRS banking offices or NBRS
operations or corporate center.

 
●
No exceptions to overdraft limits will be granted through NBRS banking offices
or NBRS operations or corporate center.

 
●
No temporary debit card increases over the current available limit or $5,000
will be established through NBRS banking offices or NBRS operations or corporate
center.

 
●
No permanent debit card increases will be approved through NBRS banking offices
or NBRS operations or corporate center.

 
●
No account product changes will be accepted or processed through NBRS banking
offices or NBRS operations or corporate center.

 
 
 

--------------------------------------------------------------------------------

 
 
 
●
The specific Service and procedures that will be performed as part of the above
include, but are not limited to, the following:

 
Services performed by NBRS in the Loan Operations Function

 
●
Before conversion, process all payments and advances received.  After
conversion, forward all payments and advances requests received to Howard Bank.

 
●
Before conversion, continue to track and maintain exceptions. After conversion,
forward any documents/information received to Howard Bank.

 
●
Before conversion, continue to track and maintain insurance. After conversion,
forward any updated policies received to Howard Bank.

 
●
Provide support for Howard staff regarding specific questions related to the
loan system.

 
●
Before conversion, assist with release processing for Howard loans if necessary.

 
●
Before conversion, continue to service existing UCC’s to maintain proper lien
position.

 
●
Before conversion, continue to report existing SBA loans as necessary.

 
●
Provide look up services for historical items as necessary.

 
●
Forward any other customer communications to Howard Bank as necessary.

Services performed by NBRS in the Image Proof Function
 
 
●
Data Entry correction of non-machine-readable checks, deposit and other items
received from the branches.

 
 
●
Correct any out-of-balance transactions.

 
 
●
Import, data entry correction and balancing of incoming image cash letter from
Federal Reserve Bank.

 
 
●
Transfer all on-us transactions to CORE SYSTEM for posting.

 
 
●
Scan all transactions and intercept any duplicates before posting.

 
 
●
Prepare image cash letters for all not-on-us checks and send to Federal Reserve
Bank for collection.

 
Services performed by NBRS in the Item Processing Function
 
 
●
Correct all non-posted items, and resubmit for posting.

 
 
●
Prepare outgoing return item image cash letters for NSF items being returned,
submit customer account posting to CORE SYSTEM and send those return item cash
letters to the Federal Reserve Bank.

 
 
●
Import from the Federal Reserve Bank the incoming return item cash letters and
reclear or charge back to depositing customer’s account.

 
 
●
Resolve all adjustment requests received from the Federal Reserve Bank.

 
 
●
Complete all subpoenas or customer research requests.

 
 
●
ACH Processing

 
●
Import incoming ACH files from Federal Reserve Bank and pass them to CORE SYSTEM
for posting.

 
 
●
Prepare outgoing ACH returns, submit to Federal Reserve Bank and post to
customer’s account.

 
 
 

--------------------------------------------------------------------------------

 
 
 
●
Verify authorization of ACH origination files received from bank’s commercial
customers using e.origination service.

 
 
●
Send originated files to Federal Reserve Bank and validate posting offset to our
customer’s account.

 
●
Complete signature and endorsement review on official check accounts” to include
only the Official check accounts in place before sale.  All new official check
accounts opened as of the Closing Date are the sole responsibility of Howard.

 
●
Wire Transfer Processing

 
●
Verify customer name and account number match on all incoming wire transfers.

 
 
●
Balance daily wire transfer system activity posting file before sending to CORE
SYSTEM to post.

 
 
●
Monitor system to ensure Howard reviews and releases outbound wires on a timely
basis including OFAC queue, NSF queue, and all others.

 
Services performed by NBRS in the Loss Prevention Function
 
 
●
Review large item review, expedited bill payment review, bill pay activity on
new accounts and notify employees designated by Howard of action taken.

 
 
●
Process garnishments and levies received for Howard and email copies to an
employee designated by Howard.

 
 
●
Monitor money market and savings accounts for Reg D excess withdrawal activity
following current processes.

 
 
●
Monitor for OFAC suspects and the periodic full customer base scrub as currently
performed by NBRS’s Compliance Department.  Any suspected hits that are not
false positives will be reported to Howard’s BSA Officer for further action.

 
 
●
Monitor incoming ACH transactions within the SEC code IAT “International ACH
Transactions”. Any suspected hits that are not false positives will be reported
to Howard’s BSA Officer for further action.

 
 
●
Monitor compromised card alerts and take action to monitor activity, close card
or reissue as appropriate to the level of information compromised.

 
 
●
Handle requests to close or re-issue cards as requested by the customer due to
loss, theft, fraud or damaged card

 
 
●
Handle chargeback processing as they occur according to your procedures

 
Services performed by NBRS in the Information Technology Application and
Development Function
 
 
●
Provide application support to Howard staff for banking applications and
systems.

 
 
●
Coordinate, test, and implement application changes and software updates.

 
 
●
Manage application/system incident and problem efforts on behalf of Howard.

 
 
●
Support Howard Disaster Recovery plans for banking applications.

 
 
●
Support de-conversion needs.

 
 
 

--------------------------------------------------------------------------------

 
 
Services performed by NBRS in the IT Network Communications Function
 
 
●
Provide telecommunication, engineering and infrastructure support for Branch.

 
 
●
Support data communications equipment.

 
 
●
Support data circuits

 
 
Services performed by NBRS in the Information Technology Server/Infrastructure
Function
 
 
●
Support application server, router and switch