Exhibit 10.1

 

AMENDED AND RESTATED
SECURITIES PURCHASE AGREEMENT

 

EXECUTION VERSION

 

 

 

FIRST AMENDED AND RESTATED
SECURITIES PURCHASE AGREEMENT

 

By and between:

 

MACKINAC FINANCIAL CORPORATION,

a Michigan corporation

 

and

 

STEINHARDT CAPITAL INVESTORS, LLLP,

a Delaware limited liability limited partnership

 

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Dated as of May 23, 2012

 

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TABLE OF CONTENTS

 

ARTICLE I. PURCHASE; CLOSINGS

1

 

 

1.1

Purchase

1

1.2

Closing

2

 

 

 

ARTICLE II. REPRESENTATIONS AND WARRANTIES

5

 

 

2.1

Disclosure

5

2.2

Representations and Warranties of the Company

6

2.3

Representations and Warranties of the Investor

24

 

 

 

ARTICLE III. COVENANTS

28

 

 

 

3.1

Filings; Other Actions

28

3.2

Use of Proceeds; Expenses

30

3.3

Access, Information and Confidentiality

30

3.4

Transfer

31

3.5

Reasonable Efforts

31

3.6

Shareholder Litigation

32

3.7

Most Favored Nation

32

3.8

Notice of Certain Events

32

3.9

Conduct of the Business

32

 

 

 

ARTICLE IV. TERMINATION

34

 

 

 

4.1

Termination

34

4.2

Effects of Termination

35

 

 

 

ARTICLE V. ADDITIONAL AGREEMENTS

35

 

 

 

5.1

No Rights Agreement

35

5.2

Investor Standstill Agreements

35

5.3

Compliance with Laws

38

5.4

Legend

39

5.5

Certain Transactions

40

5.6

Indemnity

41

5.7

Registration Rights

42

5.8

Governance Matters

54

5.9

Anti-Takeover Matters

56

5.10

Additional Regulatory Matters

56

5.11

Form D and Blue Sky

58

5.12

Securities Laws Disclosure; Publicity

58

5.13

No Additional Issuances

58

5.14

Rights Offering

59

 

 

 

 

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ARTICLE VI. MISCELLANEOUS

60

 

 

 

6.1

Survival

60

6.2

Amendment

60

6.3

Waivers

60

6.4

Counterparts and Facsimile

60

6.5

Governing Law

60

6.6

Waiver of Jury Trial

61

6.7

Notices

61

6.8

Entire Agreement, etc.

62

6.9

Other Definitions

62

6.10

Captions

63

6.11

Severability

63

6.12

No Third-Party Beneficiaries

63

6.13

Time of Essence

64

6.14

Public Announcements

64

6.15

Specific Performance

64

 

 

 

LIST OF EXHIBITS

 

 

 

Exhibit A:

Form of Opinion of Company Counsel

 

Exhibit B:

Form of Officer’s Certificate of the Company

 

Exhibit C:

Form of Secretary’s Certificate of the Company

 

Exhibit D:

Form of Passivity Commitment

 

Exhibit E:

Form of Officer’s Certificate of Investor

 

 

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FIRST AMENDED AND RESTATED
SECURITIES PURCHASE AGREEMENT

 

THIS FIRST AMENDED AND RESTATED SECURITIES PURCHASE AGREEMENT (this
“Agreement”), dated as of May 23, 2012, is made by and between MACKINAC
FINANCIAL CORPORATION, a Michigan corporation, with its principal offices at 130
South Cedar Street, Manistique, MI 49854 (the “Company”) and STEINHARDT CAPITAL
INVESTORS, LLLP, a Delaware limited liability limited partnership, with its
principal offices at 650 Madison Avenue, 17th Floor, New York, NY 10022 (the
“Investor”).

 

RECITALS:

 

The Parties entered into that certain Securities Purchase Agreement dated as of
March 27, 2012 (the “Prior Agreement”).

 

The Parties desire to amend and restate the Prior Agreement in its entirety
pursuant to the terms and conditions of this Agreement.

 

The Company intends to sell to the Investor, and the Investor intends to
purchase from the Company, as an investment in the Company, the securities as
described herein.

 

The securities to be purchased at the Closing (as defined below) are such number
of shares of the Company’s common stock (the “Common Stock” or the “Common
Shares”) as Investor can purchase without the Investor owning more than nineteen
and nine-tenths percent (19.9%) of the total number of shares of the Common
Stock outstanding as of the Closing upon the Investor’s receipt of the
Regulatory Approvals.

 

The Company has engaged River Branch Capital, LLC as its financial advisor (the
“Financial Advisor”) in connection with the offering and sale of securities
pursuant to this Agreement.

 

As promptly as reasonably practicable following the date of this Agreement, the
Company will commence the Rights Offering to the holders of record of Common
Stock on the date of this Agreement, in which the Company will distribute to
such shareholders, at no charge, non-transferable subscription rights to
purchase shares of Common Stock as set forth in Section 5.14.

 

NOW, THEREFORE, in consideration of the premises, and of the representations,
warranties, covenants and agreements set forth herein, the parties agree as
follows:

 

ARTICLE I.
PURCHASE; CLOSING

 

1.1          PURCHASE.        On the terms and subject to the conditions set
forth herein, the Investor will purchase from the Company, and the Company will
sell to the Investor, a number of shares of Common Stock.

 

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1.2                               CLOSING.

 

(a)                                 Purchased Shares.

 

(1)           Unless this Agreement has been terminated pursuant to Article IV,
and subject to the satisfaction of the conditions to the closing set forth in
Section 1.2(b), the closing shall take place, on the date that is six
(6) business days following the day on which the conditions set forth in
Section 1.2(b) (other than those that by their nature are to be satisfied at
closing, but subject to the fulfillment or waiver of those conditions) are
satisfied or waived, with a target date of June 30, 2012, at the offices of the
Company located at 260 East Brown Street, Suite 300, Birmingham, MI 48009, or
such other location as agreed by the parties in writing (the “Closing”).  The
date of the Closing is referred to as the “Closing Date”.

 

(2)           Subject to the satisfaction of the conditions described in
Section 1.2(b), at the Closing, the Company will deliver to the Investor one or
more certificates representing such number of shares of Common Stock (the
“Purchased Shares”) that the Investor may purchase on the Closing Date
(including the Investor’s purchase of a portion of the Unsubscribed Shares)
without the Investor owning more than nineteen and nine-tenths percent (19.9%)
of the total number of shares of the Common Stock then issued and outstanding,
at five dollars and seventy-five cents ($5.75) per share (the “Per Share Common
Stock Purchase Price” and, as multiplied by the number of Purchased Shares, the
“Common Stock Purchase Price”), rounded down to the nearest whole share.

 

(3)           The Purchased Shares are sometimes referred to herein as the
“Securities”.

 

(b)                                 Closing Conditions.

 

(1)                                 The obligation of the Investor to consummate
the Closing is subject to the fulfillment (or written waiver by the Investor)
prior to or contemporaneously with the Closing of each of the following
conditions:

 

(i)            (A) no provision of any applicable law or regulation and no
judgment, injunction, order or decree shall prohibit the Closing or shall
prohibit or restrict the Investor or its Affiliates from owning or voting any
securities of the Company in accordance with the terms thereof, and (B) no
lawsuit shall have been commenced by any court, administrative agency or
commission or other governmental authority or instrumentality, whether federal,
state, local or foreign, or any applicable industry self-regulatory organization
(each, a “Governmental Entity”) seeking to effect any of the foregoing;

 

(ii)           the representations and warranties of the Company set forth in
this Agreement shall be true and correct in all material respects as of the date
hereof and as of the Closing (except to the extent such representations and
warranties are made as of a specified date, in which case, such representations
and warranties shall be true and correct in all material respects as of such
date);

 

(iii)         since the date hereof, there shall not have occurred any
circumstance, event, change, development or effect that, individually or in the
aggregate, has had

 

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or would reasonably be expected to have a Material Adverse Effect on the Company
or mBank, its wholly-owned banking subsidiary (the “Bank”);

 

(iv)          the Company shall have performed in all respects all obligations
required to be performed by it at or prior to or contemporaneously with the
Closing under this Agreement (except that with respect to obligations that are
qualified by materiality, the Company shall have performed such obligations, as
so qualified, in all respects);

 

(v)           each of the persons identified on Schedule 1.2(b)(v) shall have
entered into amended and restated employment agreements in forms reasonably
acceptable to the Investor and the Board of Directors;

 

(vi)          Honigman Miller Schwartz and Cohn LLP, counsel for the Company,
shall have delivered to the Investor a written opinion, dated as of the Closing
Date, as to the matters set forth on EXHIBIT A attached hereto, and otherwise in
form and substance reasonably satisfactory to the Investor;

 

(vii)        the Company and the Investor shall have obtained all third-party
consents and approvals necessary to consummate the transactions contemplated by
this Agreement and the Exhibits to this Agreement (collectively, the
“Transaction Documents”);

 

(viii)       (A) the Investor shall have received: (I) a written non-objection,
from the Board of Governors of the Federal Reserve System (the “Federal
Reserve”), to the notice it filed in connection with its purchase of Common
Shares pursuant to the Change in Bank Control Act of 1978, as amended (the
“CBCA”); and (II) written confirmation, satisfactory in its reasonable good
faith judgment, from the Federal Reserve; in either case, to the effect that the
purchase of the Common Shares and the consummation of the Closing and the
transactions contemplated by the Transaction Documents will not result in the
Investor or any of its Affiliates (a) being deemed in control of the Company for
purposes of the Bank Holding Company Act of 1956, as amended (the “BHC Act”), or
(b) otherwise being regulated as a bank holding company within the meaning of
the BHC Act (collectively, the “Federal Reserve Approval”); and (B) either:
(I) the Investor shall have received written confirmation, satisfactory in its
reasonable good faith judgment, from the Michigan Office of Financial and
Insurance Regulation (“OFIR”) to the effect that the purchase of the Common
Shares and the consummation of the Closing and the transactions contemplated by
the Transaction Documents will not result in the Investor or any of its
Affiliates (other than the Company and the Company Subsidiaries) being required
to file an acquisition of control application or become a bank holding company
under the Michigan Banking Code (the “Michigan Banking Code”); or (II) an
acquisition of control application shall have been approved by OFIR (the “OFIR
Approval”); and (C) the Company shall have received (I) approval of the Federal
Reserve of the appointment of the Board Representative to the Board of Directors
of the Company and (II) approval of the Federal Deposit Insurance Corporation
(the “FDIC”) of the appointment of the Board Representative to the board of
directors of the Bank (together with the Federal Reserve Approval and the OFIR
Approval, the “Regulatory Approvals”); and (D) otherwise the Company and the
Investor shall have obtained all applicable governmental or regulatory approvals
or authorizations of or, to the extent required by applicable law or regulation,
consents, approvals or exemptions from bank regulatory authorities required in
connection with the transactions contemplated by the Transaction Documents;

 

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(ix)          following the date hereof, the Company shall not have agreed to
enter into a transaction that resulted in, or would result in if consummated, a
Change in Control of the Company;

 

(x)           the Company shall have delivered to the Investor a duly executed
Officer’s Certificate in the form attached hereto as EXHIBIT B;

 

(xi)          the Company shall have delivered to the Investor a certificate of
the Secretary of the Company, in the form attached hereto as EXHIBIT C, dated as
of the Closing Date, (A) certifying the resolutions adopted by the Board of
Directors approving the transactions contemplated by this Agreement and the
other Transaction Documents and the issuance of the Purchased Shares,
(B) certifying the current versions of the Articles of Incorporation and Bylaws
of the Company and (C) certifying as to the signatures and authority of persons
signing the Transaction Documents and any related documents on behalf of the
Company;

 

(xii)        the Company shall have delivered to the Investor a Certificate of
Good Standing for the Company from the Michigan Department of Licensing and
Regulatory Affairs (“LARA”) as of the date immediately preceding the Closing
Date;

 

(xiii)       the Company shall have implemented, effective subject to the
occurrence of the Closing, the governance matters contemplated in Section 5.8
(to the extent applicable) with respect to the appointment of the Board
Representative;

 

(xiv)       the Company shall have caused the Common Shares issued to the
Investor under this Agreement to be approved for listing on the NASDAQ Stock
Market, subject to official notice of issuance;

 

(xv)         the Investor shall have received such other documents and
certificates as it may reasonably request or as may be required pursuant to this
Agreement;

 

(xvi)       the Company shall have closed the Rights Offering or the Rights
Offering shall have expired; and

 

(xvii)      since the date hereof, there shall not have been any action taken,
or any law enacted, entered, enforced or deemed applicable, by any Governmental
Entity, whether in connection with the consents of any Governmental Entity
specified in Section 1.2(b)(1)(ix) or otherwise, which imposes any new
restriction or condition on the Company or the Company Subsidiaries or the
Investor or any of its Affiliates (other than such restrictions as are described
in the passivity or anti-association commitments, if any, required to be entered
into by the Investor and/or any such Affiliate in connection with the
transaction contemplated hereby, provided that such commitments are not more
restrictive in any material respect than those contained in the form attached
hereto as EXHIBIT D (the “Passivity Commitments”)) which is materially and
unreasonably burdensome on the Company’s business following the Closing or on
the Investor (or any of its Affiliates) related to its investment in the
Securities, as applicable and as determined in the discretion of the party upon
which such restriction or condition is imposed, or would reduce the economic
benefits of the transactions contemplated by this Agreement to the Investor to
such a degree that the Investor would not have

 

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entered into this Agreement had such condition or restriction been known to it
on the date hereof (any such condition or restriction, a “Burdensome
Condition”).

 

(2)           The obligation of the Company to consummate the Closing is subject
to the fulfillment prior to the Closing of each of the following conditions:

 

(i)            the representations and warranties of the Investor set forth in
this Agreement shall be true and correct in all material respects (except to the
extent such representations and warranties are qualified by materiality, in
which case they shall be true and correct in all respects) as of the date hereof
and as of the Closing (except to the extent such representations and warranties
are made as of a specified date, in which case such representations and
warranties shall be true and correct, in all material respects, as applicable,
as of such date);

 

(ii)           no provision of any applicable law or regulation and no judgment,
injunction, order or decree shall prohibit the Closing and no lawsuit shall have
been commenced by any Governmental Entity seeking to effect the foregoing;

 

(iii)         the Investor shall have obtained all third party consents and
approvals necessary to consummate the transactions contemplated by the
Transaction Documents (except for such consents and approvals, the absence of
which would not reasonably be expected to have a Material Adverse Effect on the
Investor);

 

(iv)          the Investor shall have performed in all material respects all
obligations required to be performed by it at or prior to or contemporaneously
with the Closing under this Agreement (except that with respect to obligations
that are qualified by materiality, the Investor shall have performed such
obligations, as so qualified, in all respects);

 

(v)           the Investor shall have delivered to the Company a duly executed
General Partner’s Certificate in the form attached hereto as EXHIBIT E; and

 

(vi)          LARA shall have accepted the filing of the Certificate of
Designations.

 

ARTICLE II.
REPRESENTATIONS AND WARRANTIES

 

2.1                               DISCLOSURE.

 

(a)           On or prior to the date of this Agreement, the Company delivered
to the Investor a schedule (the “Disclosure Schedule”) setting forth, among
other things, certain items, the disclosure of which is necessary or appropriate
either in response to an express disclosure requirement contained in a provision
hereof or as an exception to one or more representations or warranties contained
in Section 2.2 or the covenants contained in Section 3.9; provided, however,
that notwithstanding anything in this Agreement to the contrary, the mere
inclusion of an item in the Disclosure Schedule shall not be deemed an admission
that such item represents a material exception or material fact, event, or
circumstance or that such item has had or would reasonably be expected to have a
Material Adverse Effect on the Company.

 

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(b)           “Material Adverse Effect” means, with respect to the Investor,
only clause (z) that follows, or, with respect to the Company, both clauses
(y) and (z) that follow, any circumstance, event, change, development or effect
that, individually or in the aggregate (y) is or would reasonably be expected to
be material and adverse to the financial position, results of operations,
business or condition (financial or otherwise) of the Company and its
subsidiaries taken as a whole, or (z) would materially impair the ability of
either the Investor or the Company, to perform their respective obligations
under this Agreement or otherwise materially threaten or materially impede the
consummation of the transactions contemplated by this Agreement; provided,
however, that in determining whether a Material Adverse Effect has occurred,
there shall be excluded any effect to the extent resulting from the following:

 

(1)           changes, after the date hereof, in U.S. generally accepted
accounting principles (“GAAP”) or regulatory accounting principles;

 

(2)           changes, after the date hereof, in applicable laws, rules and
regulations or interpretations thereof by any Governmental Entity;

 

(3)           actions or omissions of the Company expressly required by the
terms of this Agreement or taken with the prior written consent of the Investor;

 

(4)           general changes, after the date hereof, in the economy or the
industries in which the Company and the Company Subsidiaries operate;

 

(5)           changes, after the date hereof, in the market price or trading
volume of the Common Stock (but not excluding the underlying causes of such
changes, except to the extent related to the other exclusions in this
definition); and

 

(6)           changes, after the date hereof, in global or national political
conditions, including the outbreak or escalation of war or acts of terrorism;

 

except, with respect to clauses (1), (2), (4) and (6), to the extent that the
effects of such changes have a disproportionate effect on the Company and the
Company Subsidiaries, taken as a whole, relative to other banks, savings
associations and their holding companies generally.

 

(c)           “Previously Disclosed” means information set forth on the
Disclosure Schedule corresponding to the provision of this Agreement to which
such information relates; provided that when it is reasonably apparent that
information set forth on the Disclosure Schedule relates to another provision of
this Agreement, such information will also be deemed to be Previously Disclosed
with respect to such other provision and includes information publicly disclosed
by the Company in the Company Reports filed by the Company with, or furnished
to, the Securities and Exchange Commission (the “SEC”) from January 1, 2010,
through the date of this Agreement, and publicly available as of the date of
this Agreement, excluding any risk factor disclosures contained in such
documents under the heading “Risk Factors” and any disclosures of risks included
in any “forward looking statements” disclaimer or other statements that are
similarly non-specific and are predictive or forward-looking in nature.

 

2.2                               REPRESENTATIONS AND WARRANTIES OF THE
COMPANY.    Except as Previously Disclosed, the Company represents and warrants
as of the date of this Agreement and as of the

 

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Closing Date (except to the extent made only as of a different specified date,
in which case, as of such date) to the Investor that:

 

(a)           Organization and Authority.  The Company is a corporation duly
organized and validly existing under the laws of the State of Michigan, is duly
qualified to do business and is in good standing in all jurisdictions where its
ownership or leasing of property or the conduct of its business requires it to
be so qualified and where failure to be so qualified would reasonably be
expected to have a Material Adverse Effect on the Company.  The Company has
corporate power and authority to own its properties and assets and to carry on
its business as it is now being conducted.  The Company is duly registered as a
bank holding company under the BHC Act.  The Company has filed with the SEC
true, correct and complete copies of the Amended and Restated Articles of
Incorporation of the Company, as amended through the date of this Agreement (the
“Articles of Incorporation”), and the Bylaws of the Company, as amended through
the date of this Agreement (the “Bylaws”).  The Company is not in violation of
any of the provisions of the Articles of Incorporation or the Bylaws.

 

(b)           Company’s Subsidiaries.  The Company has Previously Disclosed a
true, complete and correct list of all of its subsidiaries as of the date of
this Agreement (each, a “Company Subsidiary” and, collectively, the “Company
Subsidiaries”), all shares of the outstanding capital stock of each of which are
owned directly or indirectly by the Company.  No equity security of any Company
Subsidiary is or may be required to be issued by reason of any option, warrant,
scrip, preemptive right, right to subscribe to, gross-up right, call or
commitment of any character whatsoever relating to, or security or right
convertible into, shares of any capital stock of such Company Subsidiary, and
there are no contracts, commitments, understandings or arrangements by which any
Company Subsidiary is bound to issue additional shares of its capital stock, or
any bonds, debentures, notes or other indebtedness having the right to vote on
any matters on which the shareholders of the Company Subsidiary may vote
(“Subsidiary Voting Debt”) of such Company Subsidiary, or any option, warrant or
right to purchase or acquire any additional shares of its capital stock or any
Subsidiary Voting Debt of such Company Subsidiary.  All of such shares so owned
by the Company are duly authorized and validly issued, fully paid and
nonassessable and are owned by it free and clear of any lien, adverse right or
claim, charge, option, pledge, covenant, title defect, security interest or
other encumbrances of any kind (“Liens”) with respect thereto.  Each Company
Subsidiary is an entity duly organized, validly existing, duly qualified to do
business and in good standing under the laws of its jurisdiction of organization
and in all jurisdictions where its ownership or leasing of property or the
conduct of its business requires it to be so qualified and where failure to be
so qualified would reasonably be expected to have a Material Adverse Effect. 
Each Company Subsidiary has corporate or other appropriate organizational power
and authority to own or lease its properties and assets and to carry on its
business as it is now being conducted.  Except in respect of the Company
Subsidiaries, the Company does not own beneficially, directly or indirectly,
more than five percent (5%) of any class of equity securities or similar
interests of any corporation, bank, business trust, association or similar
organization, and is not, directly or indirectly, a partner in any partnership
or party to any joint venture.  The Company’s principal depository institution
subsidiary, the Bank, is duly organized and validly existing as a Michigan
state-chartered commercial bank, and its deposit accounts are insured by the
FDIC to the fullest extent permitted by the Federal Deposit Insurance Act and
the rules and regulations of the FDIC thereunder, and all premiums and
assessments required to be paid in connection therewith have been paid when due,
and no proceedings for the

 

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termination of such insurance are pending or threatened.  The Company has
furnished or made available to the Investor, prior to the date hereof, true,
correct and complete copies of the charter and bylaws of the Bank, each as
amended through the date of this Agreement.  No Company Subsidiary is in
violation of any of the provisions of its articles of incorporation or bylaws.

 

(c)                                  Capitalization.

 

(1)           The authorized capital stock of the Company consists of eighteen
million (18,000,000) shares of Common Stock and five hundred thousand (500,000)
shares of preferred stock, no par value per share (the “Company Preferred
Stock”).  As of the date hereof, there are three million, four hundred nineteen
thousand, seven hundred thirty-six (3,419,736) shares of Common Stock
outstanding, and eleven thousand (11,000) shares of Company Preferred Stock
outstanding, all of which were issued to the U.S. Treasury as part of the CPP
under TARP.

 

(2)           From the date hereof through the Closing Date, except in
connection with the Transaction Documents and the transactions contemplated
hereby and thereby, the Company shall not have (i) issued or authorized the
issuance of any shares of Common Stock or Company Preferred Stock, or any
securities convertible into or exchangeable or exercisable for shares of Common
Stock or Company Preferred Stock (other than shares issued upon the exercise of
Company Stock Options outstanding on the date hereof), (ii) reserved for
issuance any shares of Common Stock or Company Preferred Stock or
(iii) repurchased or redeemed, or authorized the repurchase or redemption of,
any shares of Common Stock or Company Preferred Stock.

 

(3)           As of the date hereof, there are (i) outstanding stock options
(each, a “Company Stock Option”) to purchase an aggregate of three hundred
ninety-two thousand, one hundred fifty-two (392,152) shares of the Common Stock
issued under the Company’s 2000 Stock Incentive Plan or the Company’s Amended
and Restated Director Stock Plan, in each case as amended or supplemented
(collectively, the “Company Stock Plans”), (ii) no shares of restricted stock
outstanding under the Company Stock Plans and (iii) no shares of the Common
Stock reserved for issuance under the Company Stock Plans, the Company Stock
Plans having expired.

 

(4)           Other than in respect of awards outstanding under or pursuant to
the Company Stock Plans, and three hundred seventy-nine thousand, three hundred
ten (379,310) shares of Common Stock reserved for potential issuance under the
Warrant dated April 24, 2009, issued to the U.S. Treasury under the CPP (the
“Treasury Warrant”), no shares of Common Stock or Company Preferred Stock are
reserved for issuance.  All of the issued and outstanding shares of Common Stock
have been duly authorized and validly issued and are fully paid, nonassessable
and free of preemptive rights, with no personal liability attaching to the
ownership thereof.

 

(5)           Neither the Company nor any of its officers, directors, or
employees is a party to any right of first refusal, right of first offer, proxy,
voting agreement, voting trust, registration rights agreement, or shareholders
agreement with respect to the sale or voting of any securities of the Company. 
No bond, debenture, note or other indebtedness having the right to vote on any
matters on which the shareholders of the Company may vote (“Voting Debt”) is
issued and outstanding.  Except as set forth elsewhere in this Section 2.2(c),
the Company does not have and is not bound by any outstanding subscriptions,
options, warrants, calls, repurchase rights, commitments or agreements of any
character calling for the purchase or issuance of, or securities

 

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or rights convertible into or exchangeable or exercisable for, any shares of
Common Stock or Company Preferred Stock or any other equity securities of the
Company or Voting Debt or any securities representing the right to purchase or
otherwise receive any shares of capital stock of the Company (including any
rights plan or agreement).  The Company has Previously Disclosed all shares of
Company capital stock that have been purchased, redeemed or otherwise acquired,
directly or indirectly, by the Company or any Company Subsidiary since
December 30, 2010, and through the date hereof, and all dividends or other
distributions that have been declared, set aside, made or paid to the
shareholders of the Company since that date and through the date hereof.

 

(d)                                 Authorization.

 

(1)                                 The Company has the corporate power and
authority to enter into or issue this Agreement and the other Transaction
Documents and to carry out its obligations hereunder and thereunder.  The
execution, delivery and performance of this Agreement and the other Transaction
Documents by the Company and the consummation of the transactions contemplated
hereby and thereby, including the issuance of the Common Stock, have been duly
authorized by the affirmative vote of at least a majority of the Company’s Board
of Directors (the “Board of Directors”).  This Agreement and the other
Transaction Documents have been duly and validly executed and delivered by the
Company and, assuming due authorization, execution and delivery of this
Agreement by the Investor, are valid and binding obligations of the Company,
enforceable against the Company in accordance with their respective terms,
except as such enforceability may be limited by bankruptcy, insolvency,
moratorium, reorganizations, fraudulent transfer or similar laws relating to or
affecting creditors generally or by general equitable principles (whether
applied in equity or at law).  No other corporate proceedings or shareholder
actions are necessary for the execution and delivery by the Company of this
Agreement and the other Transaction Documents, the performance by the Company of
its obligations hereunder and thereunder or the consummation by the Company of
the transactions contemplated hereby and thereby.

 

(2)                                 When issued and sold against receipt of the
consideration therefor as provided in this Agreement and the other Transaction
Documents, the Common Shares to be issued pursuant to this Agreement will be
validly issued, fully paid and nonassessable, and such issuance will not subject
the holders thereof to personal liability and will not be subject to preemptive
rights of any other shareholder of the Company.  When issued, the Purchased
Shares will be validly issued, fully paid and nonassessable, and such issuance
will not subject the holders thereof to personal liability and will not be
subject to preemptive rights of any other shareholder of the Company.

 

(3)                                 Neither the execution, delivery and
performance by the Company of this Agreement or the other Transaction Documents,
nor the consummation of the transactions contemplated hereby and thereby, nor
compliance by the Company with any of the provisions of any of the foregoing,
will:

 

(i)            violate, conflict with, or result in a breach of any provision
of, or constitute a default (or an event which, with notice or lapse of time or
both, would constitute a default) under, or result in the termination of, or
accelerate the performance required by, or result in a right of termination or
acceleration of, or result in the creation of, any Lien, upon any of the

 

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properties or assets of the Company or any Company Subsidiary under any of the
terms, conditions or provisions of: (A) the Company’s Articles of Incorporation
or Bylaws (or similar governing documents); or (B) any note, bond, mortgage,
indenture, deed of trust, license, lease, agreement or other instrument or
obligation to which the Company or any Company Subsidiary is a party or by which
it may be bound, or to which the Company or any Company Subsidiary or any of the
properties or assets of the Company or any Company Subsidiary may be subject; or

 

(ii)           subject to compliance with the statutes and regulations referred
to in the next paragraph, violate any ordinance, permit, concession, grant,
franchise, law, statute, rule or regulation or any judgment, ruling, order,
writ, injunction or decree applicable to the Company or any Company Subsidiary
or any of their respective properties.

 

(4)           Other than the securities or blue sky laws of the various states,
and except as otherwise provided in this Agreement, no material notice to,
registration, declaration or filing with, exemption or review by, or
authorization, order, consent or approval of, any Governmental Entity, or
expiration or termination of any statutory waiting period, is necessary for the
consummation by the Company of the transactions contemplated by this Agreement
or the other Transaction Documents.

 

(e)           Knowledge as to Conditions.  As of the date of this Agreement, the
Company knows of no reason why any Regulatory Approvals and, to the extent
necessary, any other approvals, authorizations, filings, registrations and
notices required or otherwise a condition to the consummation of the
transactions contemplated by the Transaction Documents will not be obtained.

 

(f)            Financial Statements.  The (i) consolidated balance sheets of the
Company as of December 31, 2011, and 2010 and related consolidated statements of
income, shareholders’ equity and cash flows for the three (3) years ended
December 31, 2011, together with the notes thereto, audited by Plante & Moran,
PLLC and included in the Company’s Annual Report on Form 10-K for the year ended
December 31, 2011, as filed with the SEC (the “Audited Financial Statements”)
and (ii) (x) the unaudited consolidated balance sheets of the Company as of
March 31, 2012, and related consolidated statements of income, shareholders’
equity and cash flows for the three (3) month period then ended, together with
the notes thereto, and included in the Company’s Quarterly Report on Form 10-Q
for the period ended March 31, 2012, as filed with the SEC (the “Unaudited
Financial Statements” and, together with the Audited Financial Statements, the
“Company Financial Statements”), (1) have been prepared from, and are in
accordance with, the books and records of the Company and the Company
Subsidiaries, (2) complied, as of their respective dates of filing with the SEC,
with applicable accounting requirements and with the published rules and
regulations of the SEC with respect thereto, (3) have been prepared in
accordance with GAAP applied on a consistent basis and (4) present fairly the
consolidated financial positions of the Company and the Company Subsidiaries at
the dates set forth therein and the consolidated results of operations, changes
in shareholders’ equity and cash flows of the Company and the Company
Subsidiaries for the periods stated therein (subject to the absence of notes and
normal year-end audit adjustments in the case of interim unaudited statements).

 

10

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(g)           Reports.

 

(1)           Since December 31, 2008, the Company and each Company Subsidiary
have filed all reports, registrations, documents, filings, statements and
submissions, together with any required amendments thereto, that the Company and
each Company Subsidiary was required to file with any Governmental Entity (the
foregoing, collectively, the “Company Reports”), and have paid all fees and
assessments due and payable in connection therewith.  As of their respective
filing dates, the Company Reports complied with all statutes and applicable
rules and regulations of the applicable Governmental Entities, as the case may
be.  To the knowledge of the Company, as of the date of this Agreement, there
are no outstanding comments from the SEC or any other Governmental Entity with
respect to any Company Report.  Each Company Report, including the documents
incorporated by reference therein, contained all of the information required to
be included in such Company Report and, when such Company Report was filed, and
as of the date such Company Report was filed with or furnished to the SEC, such
Company Report did not, as of its date or if amended prior to the date of this
Agreement, as of the date of such amendment, contain an untrue statement of a
material fact or omit to state a material fact necessary in order to make the
statements made in such Company Report, in light of the circumstances under
which they were made, not misleading and complied with the applicable
requirements of the Securities Act of 1933, as amended, or any successor statute
(the “Securities Act”), and the Securities Exchange Act of 1934, as amended, or
any successor statute (the “Exchange Act”).  No executive officer of the Company
has failed in any respect to make the certifications required of him or her
under Section 302 or 906 of the Sarbanes-Oxley Act of 2002.  To the knowledge of
the Company, there are no facts or circumstances that would prevent the
Company’s principal executive officer and principal financial officer from
giving the certifications and attestations required pursuant to Rules 13a-14 and
15d-14 under the Exchange Act, without qualification, when next due.

 

(2)           The records, systems, controls, data and information of the
Company and the Company Subsidiaries are recorded, stored, maintained and
operated under means (including any electronic, mechanical or photographic
process, whether computerized or not) that are under the exclusive ownership and
direct control of the Company or the Company Subsidiaries or their accountants
(including all means of access thereto and therefrom), except for any
nonexclusive ownership and nondirect control that would not, individually or in
the aggregate, reasonably be expected to have a material adverse effect on the
system of internal accounting controls described below in this Section 2.2(g). 
The Company:

 

(i)            has implemented and maintains disclosure controls and procedures
(as defined in Rule 13a-15(e) of the Exchange Act) to ensure that material
information relating to the Company, including its consolidated subsidiaries, is
made known to the principal executive officer and the principal financial
officer of the Company by others within those entities;

 

(ii)           has implemented and maintains internal control over financial
reporting (as defined in Rule 13a-15(f) of the Exchange Act); and

 

(iii)         has disclosed, based on its most recent evaluation prior to the
date of this Agreement, to the Company’s outside auditors and the audit
committee of the Board of Directors, (y) any significant deficiencies and
material weaknesses in the design or operation of internal control over
financial reporting that are reasonably likely to adversely affect the Company’s
ability to record, process, summarize and report financial information and
(z) any

 

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fraud, whether or not material, that involves management or other employees who
have a significant role in the Company’s internal control over financial
reporting.

 

The Company has no knowledge of any reason that its outside auditors and its
principal executive officer and principal financial officer will not be able to
give the certifications and attestations required pursuant to the rules and
regulations adopted pursuant to Section 404 of the Sarbanes-Oxley Act of 2002,
without qualification, when next due.  Since December 31, 2008, (aa) neither the
Company nor any Company Subsidiary nor, to the knowledge of the Company, any
director, officer, employee, auditor, accountant or representative of the
Company or any Company Subsidiary has received or otherwise had or obtained
knowledge of any complaint, allegation, assertion or claim, whether written or
oral, regarding the accounting or auditing practices, procedures, methodologies
or methods of the Company or any Company Subsidiary or their respective internal
accounting controls, including any complaint, allegation, assertion or claim
that the Company or any Company Subsidiary has engaged in questionable
accounting or auditing practices, and (bb) no attorney representing the Company
or any Company Subsidiary, whether or not employed by the Company or any Company
Subsidiary, has reported evidence of a violation of securities laws, breach of
fiduciary duty or similar violation by the Company or any of its officers,
directors, employees or agents to the Board of Directors or any committee
thereof or to any director or officer of the Company.

 

(h)           Properties and Leases.  Except for any Permitted Liens, the
Company and each Company Subsidiary have good title free and clear of any Liens
to all the real and personal property reflected in the Company’s Financial
Statements, and all real and personal property acquired since September 30,
2011, except such real and personal property as has been disposed of in the
ordinary course of business.  For purposes of this Agreement, “Permitted Liens”
means (1) Liens for taxes and other governmental charges and assessments arising
in the ordinary course of business which are not yet due and payable, (2) Liens
of landlords and Liens of carriers, warehousemen, mechanics and materialmen and
other like Liens arising in the ordinary course of business for sums not yet due
and payable and that would not have a Material Adverse Effect and (3) other
Liens or imperfections on property which are not material in amount or do not
materially detract from the value of or materially impair the existing use of
the property affected by such Lien or imperfection.  All leases of real property
and all other leases pursuant to which the Company or any Company Subsidiary, as
lessee, leases real or personal property are valid and effective in accordance
with their respective terms and there is not, under any such lease, any existing
default by the Company or any such Company Subsidiary or any event which, with
notice or lapse of time or both, would constitute such a default.

 

(i)            Taxes.  Each of the Company and the Company Subsidiaries has
timely filed (including pursuant to applicable extensions granted without
penalty) all federal, state, county, local and foreign Tax Returns, including
information Tax Returns, required to be filed by it, and all such filed Tax
Returns are true, complete and correct in all respects, and paid all Taxes owed
by it and no Taxes owed by it or assessments received by it are delinquent. 
With respect to Taxes not yet due, the Company has made adequate provision in
the financial statements of the Company (in accordance with GAAP).  The federal
income Tax Returns of the Company and the Company Subsidiaries for the fiscal
year ended December 31, 2006, and for all fiscal years prior thereto, are, for
the purposes of routine audit by the Internal Revenue Service (the “IRS”),
closed because of the statute of limitations, and no claims by the IRS for
additional Taxes for such fiscal

 

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years are pending.  Neither the Company nor any Company Subsidiary has waived
any statute of limitations with respect to Taxes or agreed to any extension of
time with respect to a Tax assessment or deficiency, in each case that is still
in effect, or has pending a request for any such extension or waiver.  Neither
the Company nor any Company Subsidiary is a party to any pending action or
proceeding, nor to the Company’s knowledge is any such action or proceeding
threatened by any Governmental Entity for the assessment or collection of Taxes,
interest, penalties, assessments or deficiencies, and no issue has been raised
by any federal, state, local or foreign taxing authority in connection with an
audit or examination of the Tax Returns, business or properties of the Company
or any Company Subsidiary which has not been settled, resolved and fully
satisfied, or adequately reserved for in accordance with GAAP.  Each of the
Company and the Company Subsidiaries has withheld and paid all Taxes that it is
required to withhold from amounts owing to employees, creditors or other third
parties.  Neither the Company nor any Company Subsidiary is a party to, is bound
by or has any obligation under, any Tax sharing or Tax indemnity agreement or
similar contract or arrangement other than any contract or agreement between or
among the Company and any Company Subsidiary.  Neither the Company nor any
Company Subsidiary has participated in any “reportable transaction” within the
meaning of Treasury Regulations Section 1.6011-4, or any other transaction
requiring disclosure under analogous provisions of state, local or foreign law. 
Neither the Company nor any Company Subsidiary has liability for the Taxes of
any person other than the Company or any Company Subsidiary under Treasury
Regulations Section 1.1502-6 (or any similar provision of applicable state,
local or foreign law).  The Company has not been a “distributing corporation” or
a “controlled corporation” in any distribution in which the parties to such
distribution treated the distribution as one to which Section 355 of the
Internal Revenue Code of 1986, as amended (the “Code”), is applicable.  The
Company has not been a United States real property holding corporation within
the meaning of Section 897 of the Code during the applicable period specified in
Section 897(c)(1)(A)(ii) of the Code.  Neither the Company nor any Company
Subsidiary is a party to any agreement, contract or plan that has resulted, or
could result from the transactions contemplated by the Transaction Documents,
separately or in the aggregate, in the payment of (i) any “excess parachute
payment” within the meaning of Section 280G of the Code (or any corresponding
provision of applicable state, local or foreign Tax law), and (ii) any amount
that will not be fully deductible as a result of Section 162(m) of the Code (or
any corresponding provision of applicable state, local or foreign Tax law).  For
the purpose of this Agreement, the term “Tax” (including, with correlative
meaning, the term “Taxes”) shall mean any and all domestic or foreign, federal,
state, local or other taxes of any kind (together with any and all interest,
penalties, additions to tax and additional amounts imposed with respect thereto)
imposed by any Governmental Entity, including taxes on or with respect to
income, franchises, windfall or other profits, gross receipts, property, sales,
use, capital stock, payroll, employment, unemployment, social security, workers’
compensation or net worth, and taxes in the nature of excise, withholding, ad
valorem or value added or similar taxes, and the term “Tax Return” means any
return, report, information return or other document (including any related or
supporting information and attachments and exhibits) required to be filed with
respect to Taxes, including all information returns relating to Taxes of third
parties, any claims for refunds of Taxes and any amendment or supplements to any
of the foregoing.

 

(j)            Absence of Certain Changes.  Since December 31, 2010, (1) there
have been no events, occurrences or developments that have had or would
reasonably be expected to have, either individually or in the aggregate, a
Material Adverse Effect on the Company; (2) the

 

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Company has not incurred any liabilities (contingent or otherwise) other than
(i) trade payables, accrued expenses and other liabilities incurred in the
ordinary course of business consistent with past practice and (ii) liabilities
not required to be reflected in the Company’s financial statements pursuant to
GAAP or required to be disclosed in filings made with the SEC; (3) the Company
has not altered its method of accounting or the manner in which it keeps its
accounting books and records; (4) the Company has not declared or made any
dividend or distribution of cash or other property to its shareholders or
purchased, redeemed or made any agreements to purchase or redeem any shares of
its capital stock (other than in connection with repurchases of unvested stock
issued to employees of the Company); (5) the Company has not issued any equity
securities to any officer, director or Affiliate, except Common Stock issued
pursuant to existing Company stock options or stock purchase plans or executive
and director arrangements disclosed in the Company Reports; (6) there has not
been any material change or amendment to, or any waiver of any material right by
the Company under, any material contract under which the Company or any Company
Subsidiary is bound or subject; (7)  there has not been an increase in the
aggregate dollar amount of (i) the Bank’s nonperforming loans (including
nonaccrual loans and loans ninety (90) days or more past due and still accruing
interest) or (ii) the reserves or allowances established on the Company’s or the
Bank’s financial statements with respect thereto; and (8) neither the Company
nor any Company Subsidiary has committed to any of the foregoing.  Except for
the transactions contemplated by this Agreement, no event, liability or
development has occurred or exists with respect to the Company or any Company
Subsidiary or their respective business, properties, operations or financial
condition that would be required to be disclosed by the Company under applicable
securities laws as of the time this representation is made that has not been
publicly disclosed at least one (1) trading day prior to the date as of which
this representation is made.

 

(k)           Commitments and Contracts.  The Company has Previously Disclosed
or made available to the Investor or its representatives, prior to the date
hereof, true, correct and complete copies of, and listed on Section 2.2(k) of
the Disclosure Schedule, each of the following, to which the Company or any
Company Subsidiary is a party or subject (whether written or oral, express or
implied) (each, a “Company Significant Agreement”):

 

(1)           any contract containing covenants that limit the ability of the
Company or any Company Subsidiary to compete in any line of business or with any
person or which involve any restriction of the geographical area in which, or
method by which or with whom, the Company or any Company Subsidiary may carry on
its business (other than as may be required by law or applicable regulatory
authorities), and any contract that could require the disposition of any assets
or line of business of the Company or any Company Subsidiary;

 

(2)           any joint venture, partnership, strategic alliance or other
similar contract (including any franchising agreement, but excluding introducing
broker agreements), and any contract relating to the acquisition or disposition
of any business or assets (whether by merger, sale of stock or assets or
otherwise), which acquisition or disposition is not yet complete or where such
contract contains continuing obligations or contains continuing indemnity
obligations of the Company or any of the Company Subsidiaries;

 

(3)           any real property lease and any other lease with aggregate annual
rental payments of fifty thousand dollars ($50,000) or more;

 

14

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(4)           other than with respect to loans, any contract providing for, or
reasonably likely to result in, the receipt or expenditure of more than fifty
thousand dollars ($50,000) on an annual basis, including the payment or receipt
of royalties or other amounts calculated based upon revenues or income;

 

(5)           any contract or arrangement under which the Company or any of the
Company Subsidiaries is licensed or otherwise permitted by a third party to use
any Intellectual Property that is material to its business (except for any
“shrinkwrap” or “click through” license agreements or other agreements for
software that is generally available to the public and has not been customized
for the Company or the Company Subsidiaries) or under which a third party is
licensed or otherwise permitted to use any Intellectual Property owned by the
Company or any of the Company Subsidiaries;

 

(6)           any contract that by its terms limits the payment of dividends or
other distributions by the Company or any Company Subsidiary;

 

(7)           any standstill or similar agreement pursuant to which any party
has agreed not to acquire assets or securities of another person;

 

(8)           any contract that would reasonably be expected to prevent, delay
or impede the Company’s ability to consummate the transactions contemplated by
this Agreement and the other Transaction Documents;

 

(9)           any contract providing for indemnification by the Company or any
Company Subsidiary of any person, except for immaterial contracts entered into
in the ordinary course of business consistent with past practice;

 

(10)         any contract that contains a put, call or similar right pursuant to
which the Company or any Company Subsidiary could be required to purchase or
sell, as applicable, any equity interests or assets that have a fair market
value or purchase price of more than fifty thousand dollars ($50,000); and

 

(11)         any other contract or agreement which is a “material contract”
within the meaning of Item 601(b)(10) of Regulation S-K.

 

Each of the Company Significant Agreements is valid and binding on the Company
and the Company Subsidiaries, as applicable, and in full force and effect.  The
Company and each of the Company Subsidiaries, as applicable, are in compliance
with and have performed all obligations required to be performed by them to date
under each Company Significant Agreement, except where the failure to be in
compliance or perform would not reasonably be expected to result in a Material
Adverse Effect on the Company.  Neither the Company nor any of the Company
Subsidiaries knows of, or has received notice of, any violation or default (or
any condition which with the passage of time or the giving of notice would cause
such a violation of or a default) by any party under any Company Significant
Agreement.  No party to a Company Significant Agreement has provided notice to
the Company or any Company Subsidiary that it intends to terminate a Company
Significant Agreement or not renew such agreement at the expiration of the
current term.  Consummation of the transactions contemplated by this Agreement
and the other Transaction Documents will not violate, conflict with or result in
a breach of any provision of, or

 

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constitute a default (or an event which, with notice or lapse of time or both,
would constitute a default) under, or result in the termination of, or
accelerate the performance required by, or result in a right of termination or
acceleration of, any such agreement of the Company or any Company Subsidiary. 
To the Company’s knowledge, other than those contemplated hereby, there are no
material transactions or series of related transactions, agreements,
arrangements or understandings, nor are there any currently proposed material
transactions, or series of related transactions between the Company or any
Company Subsidiaries, on the one hand, and the Company, any current or former
director or executive officer of the Company or any Company Subsidiaries or any
person who Beneficially Owns five percent (5%) or more of the Common Shares (or
any of such person’s immediate family members or Affiliates) (other than Company
Subsidiaries), on the other hand.

 

(l)            Offering of Securities.  Neither the Company nor any person
acting on its behalf has taken any action (including any offering of any
securities of the Company under circumstances which would require the
integration of such offering with the offering of any of the Securities to be
issued pursuant to this Agreement or any other Transaction Document under the
Securities Act and the rules and regulations of the SEC promulgated thereunder)
which would subject the offering, issuance or sale of any of such Securities to
be issued pursuant to the registration requirements of the Securities Act. 
Neither the Company nor any person acting on its behalf has engaged or will
engage in any form of general solicitation or general advertising (within the
meaning of Regulation D under the Securities Act) in connection with any offer
or sale of the Securities.  Assuming the accuracy of the Investor’s
representations and warranties set forth in Section 2.3, no registration under
the Securities Act is required for the offer and sale of the Securities by the
Company to the Investor under this Agreement.

 

(m)          Litigation and Other Proceedings; No Undisclosed Liabilities.

 

(1)           There is no pending or, to the knowledge of the Company,
threatened, claim, action, suit, arbitration, mediation, demand, hearing,
investigation or proceeding against the Company or any Company Subsidiary, nor
is the Company or any Company Subsidiary subject to any order, judgment or
decree.

 

(2)           Neither the Company nor any of the Company Subsidiaries has any
liabilities or obligations of any nature (absolute, accrued, contingent or
otherwise) which are not appropriately reflected or reserved against in the
Company Financial Statements to the extent required to be so reflected or
reserved against in accordance with GAAP, except for liabilities that have
arisen since December 31, 2010, in the ordinary course of business consistent
with past practice.

 

(n)           Compliance with Laws and Other Matters; Insurance.  The Company
and each Company Subsidiary:

 

(1)           in the conduct of its business is in compliance with all, and the
condition and use of its properties does not violate or infringe in any respect
any, applicable domestic (federal, state or local) or foreign laws, statutes,
ordinances, licenses, rules, regulations, judgments, demands, writs,
injunctions, orders or decrees applicable thereto or to employees conducting its
business, including TARP, the Sarbanes-Oxley Act of 2002, the Equal Credit

 

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Opportunity Act, the Fair Housing Act, the Community Reinvestment Act, the Home
Mortgage Disclosure Act, the Uniting and Strengthening America by Providing
Appropriate Tools Required to Intercept and Obstruct Terrorism (USA PATRIOT) Act
of 2001, all other applicable fair lending laws or other laws relating to
discrimination, the Bank Secrecy Act (31 U.S.C. Section 5311 et seq.) and its
implementing regulations (collectively, the “Bank Secrecy Act”) and the
applicable privacy and customer information requirements contained in any
federal and state privacy law or regulations;

 

(2)           has all permits, licenses, franchises, authorizations, orders and
approvals of, and has made all filings, applications and registrations with,
Governmental Entities that are required in order to permit it to own or lease
its properties and assets and to carry on its business as presently conducted;
and all such permits, licenses, certificates of authority, orders and approvals
are in full force and effect, and all such filings, applications and
registrations are current, and, to the knowledge of the Company, no suspension
or cancellation of any of them is threatened;

 

(3)           currently is complying with and, to the knowledge of the Company,
is not under investigation with respect to, and has not received any written
notification or written communication from any Governmental Entity and
otherwise, to the knowledge of the Company, has not been threatened by any
Governmental Entity indicating it will be charged with or given notice of, any
violation of all applicable federal, state, local or foreign laws, regulations,
rules, judgments, injunctions or decrees;

 

(4)           has, except for statutory or regulatory restrictions of general
application, not been placed under any restriction by a Governmental Entity on
its business or properties, and except for routine examinations by applicable
Governmental Entities, as of the date of this Agreement, received no
notification or communication from any Governmental Entity that an investigation
by any Governmental Entity with respect to the Company or any of the Company
Subsidiaries is pending or threatened;

 

(5)           has not, since January 1, 2008, nor to its knowledge has any other
person on behalf of the Company or any Company Subsidiary that qualifies as a
“financial institution” under the U.S. anti-money laundering laws, knowingly
acted, by itself or in conjunction with another, in any act in connection with
the concealment of any currency, securities or other proprietary interest that
is the result of a felony as defined in the U.S. anti-money laundering laws
(“Unlawful Gains”), nor knowingly accepted, transported, stored, dealt in or
brokered any sale, purchase or any transaction of other nature for Unlawful
Gains;

 

(6)           to the extent it qualifies as a “financial institution” under the
U.S. anti-money laundering laws, has implemented such anti-money laundering
mechanisms and kept and filed all reports and other necessary documents as
required by, and otherwise complied in all respects with, the U.S. anti-money
laundering laws and the rules and regulations thereunder; and

 

(7)           is presently insured, and during each of the past two (2) calendar
years (or during such lesser period of time as the Company has owned such
Company Subsidiary) has been insured, for reasonable amounts with, to the
knowledge of the Company, financially sound and reputable insurance companies
against such risks as companies engaged in a similar business would, in
accordance with industry practice, customarily be insured; and neither the

 

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Company nor any Company Subsidiary has received any notice of cancellation of
any such insurance, nor, to the Company’s knowledge, will it or any Company
Subsidiary be unable to renew its respective existing insurance coverage as and
when such coverage expires or to obtain similar coverage from similar insurers
as may be necessary to continue its business at a cost that would not have a
Material Adverse Effect.

 

(o)           Labor.  Employees of the Company and the Company Subsidiaries are
not and have never been represented by any labor union nor are any collective
bargaining agreements otherwise in effect with respect to such employees.  No
labor organization or group of employees of the Company or any Company
Subsidiary has made a pending demand for recognition or certification, and there
are no representation or certification proceedings or petitions seeking a
representation proceeding presently pending or, to the Company’s knowledge,
threatened to be brought or filed with the National Labor Relations Board or any
other labor relations tribunal or authority.  There are no organizing
activities, strikes, work stoppages, slowdowns, lockouts, material arbitrations
or grievances, or other labor disputes pending or, to the knowledge of the
Company, threatened against or involving the Company or any Company Subsidiary. 
The Company and the Company Subsidiaries are in compliance with all applicable
laws respecting employment and employment practices, terms and conditions of
employment and wages and hours.  To the Company’s knowledge, no executive
officer is, or is now expected to be, in violation of any term of any employment
contract, confidentiality, disclosure or proprietary information agreement or
non-competition agreement or any other contract or agreement or any restrictive
covenant in favor of a third party, and, to the Company’s knowledge, the
continued employment of each such executive officer does not subject the Company
or any Company Subsidiary to any liability with respect to any of the foregoing
matters.

 

(p)           Company Benefit Plans.

 

(1)           “Benefit Plan” means all employee benefit plans, programs,
agreements, contracts, policies, practices or other arrangements providing
benefits to any current or former employee, officer, director or consultant of
the Company or any Company Subsidiary or any beneficiary or dependent thereof
that is sponsored or maintained by the Company or any Company Subsidiary or to
which the Company or any Company Subsidiary contributes or is obligated to
contribute or is party, whether or not written, including any “employee welfare
benefit plan” within the meaning of Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended (“ERISA”), any “employee pension benefit
plan” within the meaning of Section 3(2) of ERISA (whether or not such plan is
subject to ERISA) and any bonus, incentive, deferred compensation, vacation,
stock purchase, stock option or equity award, equity-based severance,
employment, change of control, consulting or fringe benefit plan, program,
agreement or policy.  Each Benefit Plan is listed on Section 2.2(p)(1) of the
Company’s Disclosure Schedule. True and complete copies of all Benefit Plans
listed on Section 2.2(p)(1) of the Company’s Disclosure Schedule have been made
available to the Investor prior to the date hereof or have been filed with a
Company Report.

 

(2)           With respect to each Benefit Plan, (i) the Company and the Company
Subsidiaries have complied, and are now in compliance with, the applicable
provisions of ERISA and the Code and all other laws and regulations applicable
to such Benefit Plan and (ii) each Benefit Plan has been maintained, funded and
administered in accordance with its terms. 

 

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None of the Company or the Company Subsidiaries or any of their respective ERISA
Affiliates has incurred any withdrawal liability as a result of a complete or
partial withdrawal from a multiemployer plan, as those terms are defined in Part
I of Subtitle E of Title IV of ERISA, that has not been satisfied in full. 
“ERISA Affiliate” means any entity, trade or business, whether or not
incorporated, which, together with the Company and the Company Subsidiaries,
would be deemed a “single employer” within the meaning of Section 4001 of ERISA
or Sections 414(b), (c), (m) or (o) of the Code.

 

(3)           With respect to each Benefit Plan, all required reports and
descriptions (including Form 5500 annual reports, summary annual reports and
summary plan descriptions) have been timely filed and distributed in accordance
with the applicable requirements of ERISA and the Code with respect to each such
Benefit Plan. The requirements of COBRA have been met with respect to each such
Benefit Plan and each Benefit Plan maintained by an ERISA Affiliate that is an
employee welfare benefit plan subject to COBRA.

 

(4)           With respect to each Benefit Plan, all contributions (including
all employer contributions and employee salary reduction contributions) that are
due have been made within the time periods prescribed by ERISA and the Code to
each such Benefit Plan that is an employee pension benefit plan, and all
contributions for any period ending on or before the Closing Date that are not
yet due have been made to each such employee pension benefit plan or accrued in
accordance with the past custom and practice of the Company. All premiums or
other payments for all periods ending on or before the Closing Date have been
paid with respect to each such Benefit Plan that is an employee welfare benefit
plan.

 

(5)           Each Benefit Plan that is intended to meet the requirements of a
“qualified plan” under Section 401(a) of the Code has received a determination
from the Internal Revenue Service that such Employee Benefit Plan is so
qualified, and nothing has occurred since the date of such determination that
could adversely affect the qualified status of any such Benefit Plan.

 

(6)           Neither the Company nor any of the Company Subsidiaries, nor any
ERISA Affiliate contributes to, has any obligation to contribute to, or has any
liability under or with respect to, any employee pension benefit plan that is a
“defined benefit plan” (as defined in Section 3(35) of ERISA). No asset of the
Company or any of the Company Subsidiaries is subject to any Lien under ERISA or
the Code.

 

(q)           Investment Company.  Neither the Company nor any of the Company
Subsidiaries is an “investment company” as defined under the Investment Company
Act of 1940, as amended, and neither the Company nor any of the Company
Subsidiaries sponsors any person that is such an investment company.

 

(r)           Risk Management; Derivatives.

 

(1)           The Company and the Company Subsidiaries have in place risk
management policies and procedures sufficient in scope and operation to protect
against risks of the type and in amounts reasonably expected to be incurred by
companies of similar size and in similar lines of business as the Company and
the Company Subsidiaries.

 

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(2)           All derivative instruments, including swaps, caps, floors and
option agreements, whether entered into for the Company’s own account, or for
the account of one or more of the Company Subsidiaries or their customers, were
entered into (i) only for purposes of mitigating identified risk and in the
ordinary course of business, (ii) in accordance with prudent practices and in
material compliance with all applicable laws, rules, regulations and regulatory
policies and (iii) with counterparties believed by the Company to be financially
responsible at the time; and each of them constitutes the valid and legally
binding obligation of the Company or one of the Company Subsidiaries,
enforceable in accordance with its terms.  Neither the Company, nor the Company
Subsidiaries, nor, to the knowledge of the Company, any other party thereto is
in breach of any of its obligations under any such agreement or arrangement.

 

(s)            Environmental Liability.  Neither the Company nor any Company
Subsidiary (1) is in violation of any statute, rule, regulation, decision or
order of any governmental agency or body or any court, domestic or foreign,
relating to the use, disposal or release of hazardous or toxic substances or
relating to the protection or restoration of the environment or human exposure
to hazardous or toxic substances (collectively, “Environmental Laws”), (2) owns
or operates any real property contaminated with any substance that is in
violation of any Environmental Laws, (3) is liable for any off-site disposal or
contamination pursuant to any Environmental Laws or (4) is subject to any legal,
administrative or other proceeding, claim or action of any nature relating to
any Environmental Laws and, to the Company’s knowledge, there is no pending or
threatened investigation that might lead to such a proceeding, claim or action
or any reasonable basis for any such proceeding, claim or action.

 

(t)            Anti-Takeover Provisions.

 

(1)           The Company has not adopted any stockholder rights plan or similar
arrangement relating to accumulations of beneficial ownership of Common Stock or
a change in control of the Company.  The Company and its Board of Directors have
taken all necessary action, if any, in order to render inapplicable any control
share acquisition, business combination, poison pill (including any distribution
under a rights agreement), any other similar “moratorium,” “control share,”
“fair price,” “takeover” or “interested stockholder” law (each a “Takeover Law”)
or other similar anti-takeover provision under the Company’s articles of
incorporation or other organizational documents or the laws of the jurisdiction
of its incorporation or otherwise which is or could become applicable to the
Investor solely as a result of the transactions contemplated by this Agreement,
including, without limitation, the Company’s issuance of the Securities and the
Investor’s ownership of the Securities.

 

(2)           The Board of Directors has duly adopted an irrevocable resolution
as follows (the “Business Combination Exemption Resolution”):

 

“RESOLVED, that pursuant to Section 782 of the Michigan Business Corporation
Act, as amended (the “MBCA”), the Board of Directors of the Corporation, for the
specific purpose of establishing an irrevocable exemption from Section 780 of
the MBCA, hereby approves thereunder (i) the entering into, and all of the
transactions relating to and contemplated or permitted by, that certain
securities purchase agreement (the “Securities Purchase Agreement”), between the
Corporation and Steinhardt Capital Investors, LLLP, including, without

 

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limitation, (A) the assignment of any rights thereunder, (B) any person or
entity becoming an “interested shareholder” as defined in Section 778 of the
MBCA including, without limitation, Steinhardt Capital Investors, LLLP, Michael
Steinhardt, David R. Steinhardt, the estate of Michael Steinhardt or David R.
Steinhardt, any trust Michael Steinhardt or David R. Steinhardt has or may
establish and/or any of their affiliates (whether individually or in another
capacity) (collectively, the “Covered Persons”), and (C) the transfer of any
shares of common stock or other securities of the Corporation in accordance with
the terms and conditions of the Securities Purchase Agreement; (ii) any
transaction in which any Covered Person becomes an “interested shareholder” as
defined in Section 778 of the MBCA or acquires additional shares of common stock
or other securities of the Corporation thereafter; and (iii) any “business
combination” as defined in Section 776 of the MBCA involving any Covered
Person.”

 

(3)           The Business Combination Exemption Resolution adopted by the
Company is a valid action of the Board of Directors, binding on the Company, and
constitutes a valid and irrevocable exemption by the Company from Section 780 of
the Michigan Business Corporation Act as to any transaction, person or entity
described in such resolution.

 

(u)           Intellectual Property.  (1) The Company and the Company
Subsidiaries own (free and clear of any claims, Liens, encumbrances, exclusive
licenses or non-exclusive licenses not granted in the ordinary course of
business) or have a valid license to use all Intellectual Property used in or
necessary to carry on their business as currently conducted and (2) such
Intellectual Property referenced in clause (1) above is valid, subsisting and
enforceable and is not subject to any outstanding order, judgment, decree or
agreement adversely affecting the Company’s or the Company Subsidiaries’ use of,
or rights to, such Intellectual Property.  The Company and the Company
Subsidiaries have sufficient rights to use all Intellectual Property used in
their business as presently conducted, all of which rights shall survive
unchanged the consummation of the transactions contemplated by this Agreement
and the other Transaction Documents.  Neither the Company nor any Company
Subsidiary has received any notice of infringement or misappropriation of, or
any conflict with, the rights of others with respect to any Intellectual
Property, and no reasonable basis exists for any such claim.  To the Company’s
knowledge, no third party has infringed, misappropriated or otherwise violated
the Intellectual Property rights of the Company or the Company Subsidiaries. 
There is no litigation, opposition, cancellation, proceeding, objection or claim
pending, asserted or, to the Company’s knowledge, threatened against the Company
or any Company Subsidiary concerning the ownership, validity, registerability,
enforceability, infringement or use of, or licensed right to use, any
Intellectual Property.  None of the Company or any of the Company Subsidiaries
is using or enforcing any Intellectual Property owned by or licensed to the
Company or any of the Company Subsidiaries in a manner that would be expected to
result in the abandonment, cancellation or unenforceability of such Intellectual
Property.  The Company and each of the Company Subsidiaries have taken all
reasonable measures to protect the Intellectual Property owned by or licensed to
the Company or any of the Company Subsidiaries.  For the purpose of this
Agreement, “Intellectual Property” shall mean: trademarks, service marks, brand
names, domain names, certification marks, trade dress and other indications of
origin, the goodwill associated with the foregoing and registrations in any
jurisdiction of, and applications in any jurisdiction to register, the
foregoing, including any extension, modification or renewal of any such
registration or application; inventions, discoveries

 

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and ideas, whether patentable or not, in any jurisdiction; patents, applications
for patents (including divisions, continuations, continuations in part and
renewal applications) and any renewals, extensions or reissues thereof, in any
jurisdiction; nonpublic information, trade secrets and confidential information
and rights in any jurisdiction to limit the use or disclosure thereof by any
person; writings and other works, whether copyrightable or not, in any
jurisdiction; and registrations or applications for registration of copyrights
in any jurisdiction, and any renewals or extensions thereof; and any similar
intellectual property or proprietary rights.

 

(v)           Agreements with Regulatory Agencies.  Neither the Company nor any
Company Subsidiary is subject to any cease-and-desist or other similar order or
enforcement action issued by, or is a party to any written agreement, consent
agreement or memorandum of understanding with, or is a party to any commitment
letter or similar undertaking to, or is subject to any capital directive by, or
since December 31, 2010, has adopted any board resolutions at the request of,
any Governmental Entity that currently restricts in any material respect the
conduct of its business or that in any material respect relates to its capital
adequacy, its liquidity and funding policies and practices, its ability to pay
dividends, its credit, risk management or compliance policies, its internal
controls, its management or its operations or business (each item in this
sentence, a “Regulatory Agreement”) nor has the Company or any Company
Subsidiary been advised since December 31, 2010, by any Governmental Entity that
it is considering issuing, initiating, ordering or requesting any such
Regulatory Agreement.  The Company and each Company Subsidiary is in compliance
with each Regulatory Agreement to which it is party or subject, and neither the
Company nor any Company Subsidiary has received any notice from any Governmental
Entity indicating that either the Company or any Company Subsidiary is not in
compliance with any such Regulatory Agreement.

 

(w)          Loan Portfolio.

 

(1)           The Company and each Company Subsidiary has complied with, and all
documentation in connection with the origination, processing, underwriting and
credit approval of any loan, lease or other extension of credit or commitment to
extend credit (“Loans”) originated, purchased or serviced by the Company or any
Company Subsidiary has satisfied, (i) all applicable laws with respect to the
origination, insuring, purchase, sale, pooling, servicing, subservicing or
filing of claims in connection with Loans, including all laws relating to real
estate settlement procedures, consumer credit protection, truth in lending laws,
usury limitations, fair housing, transfers of servicing, collection practices,
equal credit opportunity and adjustable rate mortgages, (ii) the
responsibilities and obligations relating to Loans set forth in any contract
between the Company or any Company Subsidiary and any Agency, Loan Investor or
Insurer, (iii) the applicable rules, regulations, guidelines, handbooks and
other requirements of any Agency, Loan Investor or Insurer and (iv) the terms
and provisions of any mortgage or other collateral documents and other Loan
documents with respect to each Loan.

 

(2)           No Agency, Loan Investor or Insurer has (i) claimed in writing
that the Company or any Company Subsidiary has violated or has not complied with
the applicable underwriting standards with respect to Loans sold by the Company
or any Company Subsidiary to a Loan Investor or Agency, or with respect to any
sale of Loan servicing rights to a Loan Investor, (ii) imposed in writing
restrictions on the activities (including commitment authority) of the Company
or any Company Subsidiary or (iii) indicated in writing to the Company or any

 

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Company Subsidiary that it has terminated or intends to terminate its
relationship with the Company or any Company Subsidiary for poor performance,
poor Loan quality or concern with respect to the Company’s or any Company
Subsidiary’s compliance with laws.

 

(3)           To the knowledge of the Company, the characteristics of the loan
portfolio of the Company have not changed from the characteristics of the loan
portfolio of the Company as of December 31, 2010, in a manner that could
reasonably be expected to result in a Material Adverse Effect with respect to
the Company.

 

(4)           For purposes of this Section 2.2(w):

 

(i)            “Agency” means the Federal Housing Administration, the Federal
Home Loan Mortgage Corporation, the Farmers Home Administration (now known as
Rural Housing and Community Development Services), the Federal National Mortgage
Association, the United States Department of Veterans’ Affairs, the Rural
Housing Service of the U.S. Department of Agriculture or any other federal or
state agency with authority to (A) determine any investment, origination,
lending or servicing requirements with regard to Loans originated, purchased or
serviced by the Company or any Company Subsidiary or (B) originate, purchase or
service Loans, or otherwise promote lending, including state and local housing
finance authorities;

 

(ii)           “Loan Investor” means any person (including an Agency) having a
beneficial interest in any Loan originated, purchased or serviced by the Company
or any Company Subsidiary or a security backed by or representing an interest in
any such Loan; and

 

(iii)         “Insurer” means a person who insures or guarantees for the benefit
of the Loan holder all or any portion of the risk of loss upon borrower default
on any of the Loans originated, purchased or serviced by the Company or any
Company Subsidiary, including the Federal Housing Administration, the United
States Department of Veterans’ Affairs, the Rural Housing Service of the U.S.
Department of Agriculture and any private mortgage insurer and providers of
hazard, title or other insurance with respect to such Loans or the related
collateral.

 

(x)           Directors’ and Officers’ Insurance.  The Company (1) maintains
directors’ and officers’ liability insurance and fiduciary liability insurance
with, to the knowledge of the Company, financially sound and reputable insurance
companies with benefits and levels of coverage that have been Previously
Disclosed, (2) has timely paid all premiums on such policies and (3) there has
been no lapse in coverage during the term of such policies.

 

(y)           Section 16.  The Board of Directors has approved the issuance and
sale of the Common Stock to be issued under this Agreement as exempt from
Section 16(b) of the Exchange Act pursuant to Rule 16b-3 thereunder.

 

(z)           Adequate Capitalization.  As of December 31, 2011, the Bank met or
exceeded the standards necessary to be considered “well capitalized” under the
FDIC’s regulatory framework for prompt corrective action.

 

(aa)         Change in Control.  The consummation of the transactions
contemplated by this Agreement and the other Transaction Documents will not
trigger any rights under any

 

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“change of control” provision in any of the agreements to which the Company or
any Company Subsidiary is a party, including any employment, “change in
control,” severance or other compensatory agreements and any benefit plan which
results in payments to the counterparty or the acceleration of vesting of
benefits.

 

(bb)         Brokers and Finders.  Except for the Financial Advisor (the fees of
which are disclosed in Section 2.2(bb) of the Disclosure Schedule), neither the
Company, nor any Company Subsidiary, nor any of their respective officers,
directors or employees has employed any broker or finder or incurred any
liability for any financial advisory fees, brokerage fees, commissions or
finder’s fees, and no broker or finder has acted directly or indirectly for the
Company or any Company Subsidiary in connection with this Agreement, the other
Transaction Documents or the transactions contemplated hereby and thereby.

 

2.3          REPRESENTATIONS AND WARRANTIES OF THE INVESTOR. The Investor hereby
represents and warrants as of the date of this Agreement (except to the extent
made only as of a different specified date, in which case, as of such date),
solely with respect to itself and, where expressly indicated, its Affiliates, to
the Company that:

 

(a)           Organization and Authority.  The Investor is duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
organization, is duly qualified to do business and is in good standing in all
jurisdictions where its ownership or leasing of property or the conduct of its
business requires it to be so qualified and failure to be so qualified would
have a Material Adverse Effect on the Investor, and has the requisite corporate,
partnership, limited liability company or other power and authority to own its
properties and assets and to carry on its business as it is now being conducted.

 

(b)           Authorization.

 

(1)           The Investor has the requisite corporate, partnership, limited
liability company or other power and authority to enter into this Agreement and
to carry out its obligations hereunder.  The execution, delivery and performance
of this Agreement by the Investor and the consummation of the transactions
contemplated hereby have been duly authorized by the Investor’s board of
directors, general partner, managing members, investment committee or other
authorized persons, as the case may be (if such authorization is required), and
no further approval or authorization by any of such persons, as the case may be,
is required.  Subject to such approvals of Governmental Entities as may be
required by statute or regulation, this Agreement is a valid and binding
obligation of the Investor enforceable against the Investor in accordance with
its terms, except as such enforceability may be limited by bankruptcy,
insolvency, moratorium, reorganizations, fraudulent transfer or similar laws
affecting creditors generally or by general equitable principles (whether
applied in equity or at law).  No other corporate, partnership, limited
liability company or other proceedings are necessary for the execution and
delivery by the Investor of this Agreement, the performance by the Investor of
its obligations hereunder or the consummation by the Investor of the
transactions contemplated hereby.

 

(2)           Neither the execution, delivery and performance by the Investor of
this Agreement, nor the consummation of the transactions contemplated hereby,
nor compliance by the Investor with any of the provisions hereof, will:

 

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(i)                                    violate, conflict with or result in a
breach of any provision of, or constitute a default (or an event which, with
notice or lapse of time or both, would constitute a default) under, or result in
the termination of, or accelerate the performance required by, or result in a
right of termination or acceleration of, or result in the creation of, any Lien
upon any of the properties or assets of such Investor under any of the terms,
conditions or provisions of (A) its applicable governing documents, or (B) any
note, bond, mortgage, indenture, deed of trust, license, lease, agreement or
other instrument or obligation to which the Investor is a party or by which it
may be bound, or to which the Investor or any of the properties or assets of the
Investor may be subject; or

 

(ii)                                subject to compliance with the statutes and
regulations referred to in the next paragraph, violate any statute, rule or
regulation or any judgment, ruling, order, writ, injunction or decree applicable
to the Investor or any of its respective properties or assets, except in the
case of clauses (i)(B) and this clause (ii) for such violations, conflicts and
breaches as would not reasonably be expected to have a Material Adverse Effect
on the Investor.

 

(3)                                 Other than the securities or blue sky laws
of the various states and except as otherwise provided in this Agreement, and
assuming the accuracy of the representations and warranties of the Company and
the performance of the covenants and agreements of the Company contained herein,
no material notice to, registration, declaration or filing with, exemption or
review by, or authorization, order, consent or approval of, any Governmental
Entity, or expiration or termination of any statutory waiting period, is
necessary for the consummation by the Investor of the transactions set forth in
this Agreement.

 

(c)                                  Purchase for Investment.  The Investor
acknowledges that the Securities have not been registered under the Securities
Act or under any state securities laws.  The Investor:

 

(1)                                 is acquiring the Securities pursuant to an
exemption from registration under the Securities Act for its own account solely
for investment with no present intention or plan to distribute any of the
Securities to any person, nor with a view to or for sale in connection with any
distribution thereof;

 

(2)                                 will not sell or otherwise dispose of any of
the Securities, except in compliance with the registration requirements or
exemption provisions of the Securities Act and any other applicable securities
laws;

 

(3)                                 has such knowledge and experience in
financial and business matters and in investments of this type that it is
capable of evaluating the merits and risks of its investment in the Securities
and of making an informed investment decision and has so evaluated the merits
and risks of such investment;

 

(4)                                 is able to bear the economic risk of an
investment in the Securities and, at the present time, is able to afford a
complete loss of such investment; and

 

(5)                                 is an “accredited investor” (as that term is
defined by Rule 501 under the Securities Act);

 

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provided, however, that by making the representations herein, the Investor does
not agree to hold any of the Securities for any minimum period of time and
reserves the right at all times to sell or otherwise dispose of all or any part
of such Securities pursuant to an effective registration statement under the
Securities Act or under an exemption from such registration in compliance with
applicable federal and state securities laws.  Without limiting any of the
foregoing, neither the Investor nor any of its Affiliates has taken, and the
Investor will not, and will cause its Affiliates not to, take any action that
would otherwise cause the Securities to be subject to the registration
requirements of the Securities Act.

 

(d)                                 Access to Information.  The Investor
acknowledges that it has been afforded (1) the opportunity to ask such questions
as it has deemed necessary of, and to receive answers from, representatives of
the Company concerning the terms and conditions of the offering of the
Securities and the merits and risks of investing in the Securities; (2) access
to information about the Company and the Company Subsidiaries and their
respective financial condition, results of operations, business, properties,
management and prospects sufficient to enable it to evaluate its investment; and
(3) the opportunity to obtain such additional information that the Company
possesses or can acquire without unreasonable effort or expense that is
necessary to make an informed investment decision with respect to the
investment.

 

(e)                                  Independent Investment Decision.  The
Investor has independently evaluated the merits of its decision to purchase the
Securities pursuant to this Agreement.  The Investor understands that nothing in
this Agreement or any other materials presented by or on behalf of the Company
to the Investor in connection with the purchase of the Securities constitutes
legal, tax or investment advice.  The Investor has consulted such legal, tax and
investment advisors as it, in its sole discretion, has deemed necessary or
appropriate in connection with its purchase of the Securities.

 

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

 

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

 

(h)                                 Residency.  The Investor’s office in which
its investment decision with respect to the Purchased Shares was made (if an
entity) is located at the address set forth for the Investor in Section 6.7.

 

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(i)                                    Financial Capability.  The Investor has
immediately available funds necessary to consummate the Closing, as of the date
of the Closing, on the terms and conditions contemplated by this Agreement.

 

(j)                                    Knowledge as to Conditions.  As of the
date of this Agreement, the Investor knows of no reason why any Regulatory
Approvals and, to the extent necessary, any other approvals, authorizations,
filings, registrations and notices required or otherwise a condition to the
consummation of the transactions contemplated by this Agreement and the other
Transaction Documents cannot, or should not, be obtained.

 

(k)                                 No General Solicitation.  The Investor
acknowledges that the Securities were not offered to the Investor by means of
any form of general or public solicitation or general advertising, or publicly
disseminated advertisements or sales literature, including (1) any
advertisement, article, notice or other communication published in any
newspaper, magazine, website or similar media, or broadcast over television or
radio, or (2) any seminar or meeting to which such Purchaser was invited by any
of the foregoing means of communication.

 

(l)                                    The Company is a Bank Holding Company.
The Investor understands and acknowledges that: (1) the Company is a registered
bank holding company under the BHC Act, and as such the Company is subject to
regulation by the Federal Reserve; (2) acquisitions of interests in bank holding
companies are subject to the BHC Act and the CBCA and may be reviewed by the
Federal Reserve to determine the circumstances under which such acquisitions of
interests will result in the Investor becoming subject to the BHC Act or subject
to the notice filing requirements of the CBCA; and (3) the Federal Reserve may
require extensive commitments from the Investor including the Passivity
Commitments that are designed to ensure that the Investor will not exercise a
controlling influence over the Company. In the event the Investor is required by
the Federal Reserve to make the Passivity Commitments for such purpose, the
Investor agrees to make any such additional commitments to the Federal Reserve
that it may reasonably require, including commitments of the type referred to as
passivity commitments and, if required to seek an affirmative written
determination from the Federal Reserve that neither the Investor nor any of its
Affiliates will be deemed to “control” the Company, as “control” is defined in
12 C.F.R. Part 303, Subpart E, or 12 C.F.R. Section 225.2 or 225.41 (for all
purposes under this Agreement, “Control”).

 

(m)                             No Prohibited Purchaser.  To the knowledge of
the Investor, none of (i) the Investor or any person or entity controlling,
controlled by or under common control with the Investor, (ii) any person or
entity having a beneficial interest in the Investor or (iii) any other person or
entity on whose behalf the Investor is acting: (1) is a person or entity listed
in the annex to Executive Order No. 13224 (2001) issued by the President of the
United States (Executive Order Blocking Property and Prohibiting Transactions
with Persons Who Commit, Threaten to Commit, or Support Terrorism); (2) is named
on the List of Specially Designated Nationals and Blocked Persons maintained by
the U.S. Office of Foreign Assets Control; (3) is a Designated National as
defined in the Cuban Assets Control Regulations, 31 C.F.R. Part 515; (4) is a
non-U.S. shell bank or is providing banking services indirectly to a non-U.S.
shell bank; (5) is a senior non-U.S. political figure or an immediate family
member or close associate of such figure or an entity owned or controlled by
such a figure; or (6) is otherwise prohibited from investing in the Company
pursuant to applicable U.S. anti-money laundering, antiterrorist and asset
control

 

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laws, regulations, rules or orders (a person in any such category being referred
to herein as a “Prohibited Purchaser”). The Investor agrees to provide the
Company, promptly upon request, all information that the Company reasonably
deems necessary or appropriate to comply with applicable U.S. anti-money
laundering, antiterrorist and asset control laws, regulations, rules and orders.
The Investor hereby consents to the disclosure to regulators and law enforcement
authorities by the Company and its Affiliates and agents of such information
about the Investor as the Company reasonably deems necessary or appropriate to
comply with applicable U.S. anti-money laundering, antiterrorist and asset
control laws, regulations, rules and orders. If a Purchaser is a financial
institution that is subject to the Bank Secrecy Act, the Investor represents
that the Investor has met and will continue to meet all of its obligations under
the Bank Secrecy Act. The Investor acknowledges that if, following the
investment in the Securities by the Investor, the Company reasonably believes
that the Investor is a Prohibited Purchaser or is otherwise engaged in illegal
activity or refuses to provide promptly information that the Company requests to
dispel such beliefs, the Company has the right or may be obligated to prohibit
additional investments, segregate the assets constituting and/or withhold or
suspend distributions to the Investor in respect of, the investment in
accordance with applicable regulations or immediately require the Investor to
transfer the Securities. The Investor further acknowledges that the Investor
will not have any claim against the Company or any of its Affiliates or agents
for any form of damages as a result of any of the foregoing actions taken in
good faith and in accordance with applicable laws and regulations by the Company
or any of its Affiliates or agents.

 

(n)                                 No Intent to Control.  The Investor: (1) has
no present intention of acquiring control of the Company and (2) will not
acquire control in the future without the prior approval of all applicable
federal, state and/or local government entities.

 

(o)                                 Brokers and Finders.  Neither the Investor
or its Affiliates, nor any of their respective officers, directors or employees,
has employed any broker or finder or incurred any liability for any financial
advisory fees, brokerage fees, commissions or finder’s fees, and no broker or
finder has acted directly or indirectly for the Investor in connection with the
Transaction Documents or the transactions contemplated hereby and thereby.  The
Investor acknowledges that it is purchasing the Securities directly from the
Company and not from the Financial Advisor.

 

ARTICLE III.
COVENANTS

 

3.1                               FILINGS; OTHER ACTIONS.

 

(a)                                 The Investor and the Company will cooperate
and consult with each other and use commercially reasonable efforts to prepare
and file all necessary and customary documentation, to effect all necessary and
customary applications, notices, petitions, filings and other documents and to
obtain all necessary and customary permits, consents, orders, approvals and
authorizations of, or any exemption by, all third parties and Governmental
Entities, and to comply with any expiration or termination requirements of any
applicable waiting periods, (1) necessary or advisable to consummate the
transactions contemplated by this Agreement, and to perform the covenants
contemplated by this Agreement, and (2) with respect to the Investor, to the
extent typically provided by the Investor to such third parties or Governmental
Entities, as

 

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applicable, under the Investor’s policies consistently applied and subject to
such confidentiality requests as the Investor may reasonably seek.  Each party
shall execute and deliver both before and after the Closing such further
certificates, agreements and other documents and take such other actions as the
other party may reasonably request to consummate or implement such transactions
or to evidence such events or matters, subject, in each case, to clauses (1) and
(2) of the first sentence of this Section 3.1(a).  In particular, the Company
will use its commercially reasonable efforts to help the Investor promptly
obtain or submit, as the case may be, as promptly as practicable, the approvals
and authorizations of, filings and registrations with, and notifications to, or
expiration or termination of any applicable waiting period, all notices to and,
to the extent required by applicable law or regulation, consents, approvals or
exemptions from bank regulatory authorities, for the transactions contemplated
by this Agreement.  The Investor shall use, and cause its Affiliates to use,
commercially reasonable efforts to obtain regulatory non-objection to the change
in control notice as promptly as reasonably possible, including responding fully
to all requests for additional information from the Federal Reserve and entering
into one or more passivity agreements not more restrictive in any material
respect than the Passivity Commitments.  The Company shall use, and cause its
Affiliates to use, commercially reasonable efforts to obtain all approvals
required to be obtained by the Company in connection with the transactions
contemplated by the Transaction Documents, including responding fully to all
requests for additional information from the Federal Reserve, the FDIC and
OFIR.  The Investor and the Company will each have the right to review in
advance, and to the extent practicable, each will consult with the other, in
each case subject to applicable laws relating to the exchange of information,
all the information (other than confidential information) relating to such other
party, and any of their respective Affiliates, which appears in any filing made
with, or written materials submitted to, any third party or any Governmental
Entity in connection with the transactions contemplated by this Agreement.  In
exercising the foregoing right, each of the parties hereto agrees to act
reasonably and as promptly as practicable.  Each party hereto agrees to keep the
other party apprised of the status of matters relating to completion of the
transactions contemplated hereby.  The Investor and the Company shall promptly
furnish each other to the extent permitted by applicable laws with copies of
written communications received by them or their subsidiaries from, or delivered
by any of the foregoing to, any Governmental Entity in respect of the
transactions contemplated by this Agreement.  Notwithstanding anything in this
Section 3.1 or elsewhere in this Agreement to the contrary, the Investor shall
not be required to provide to the Company any of its, its Affiliates’, its or
their investment advisors’ or its or their control persons’ or equity holders’
nonpublic, proprietary, personal or otherwise confidential information,
including the identities of limited partners, shareholders or members of the
Investor or its Affiliates or their investment advisors (collectively, the
“Investor Confidential Information”).

 

(b)                                 Each party agrees, upon request, to furnish
the other party with all information (other than Investor Confidential
Information) concerning itself, its subsidiaries, Affiliates, directors,
officers, partners and shareholders and such other matters as may be reasonably
necessary or advisable in connection with any statement, filing, notice or
application made by or on behalf of such other party or any of its subsidiaries
to any Governmental Entity in connection with this Agreement.  Notwithstanding
anything in this Section 3.1 or elsewhere in this Agreement to the contrary,
(1) the Investor shall not be required to provide any materials to the Company
that it deems private or confidential and (2) the Investor shall provide
information only to the extent typically provided by the Investor to such
Governmental Entities under the Investor’s

 

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policies consistently applied and subject to such confidentiality requests as
the Investor may reasonably seek.

 

(c)                                  From the date of this Agreement until the
Closing, the Company shall not, directly or indirectly, amend, modify or waive,
and the Board of Directors shall not recommend approval of, any proposal to the
Company’s shareholders having the effect of amending, modifying or waiving any
provision in the Articles of Incorporation or Bylaws of the Company in any
manner adverse to the Investor.

 

(d)                                 The Company shall take all actions necessary
to ensure that neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will constitute a “change
in control” or “change of control” within the meaning of any Benefit Plan.

 

3.2                               USE OF PROCEEDS; EXPENSES.

 

(a)                                 The proceeds from the sale of the Securities
to the Investor and the Rights Offering, after the payment of expenses related
to the transactions contemplated by this Agreement, will be used by the Company
for general corporate purposes or as otherwise contemplated by this Agreement.

 

(b)                                 The Company shall pay (1) the reasonable
legal fees and expenses of the Investor’s counsel and (2) all other reasonable
and documented costs and expenses incurred by the Investor (other than any legal
fees) in connection with the transactions contemplated by this Agreement and the
other Transaction Documents; provided, however, in no event shall such fees,
costs and expenses exceed one hundred twenty-five thousand dollars ($125,000) in
the aggregate.  Other than as set forth in the preceding sentence and in
Section 5.7(b), each of the Company and the Investor will bear and pay all costs
and expenses incurred by it or on its behalf in connection with the transactions
contemplated under this Agreement.

 

3.3                               ACCESS, INFORMATION AND CONFIDENTIALITY.

 

(a)                                 From the date of this Agreement until the
date when the Common Shares owned by the Investor and its Affiliates in the
aggregate represent less than two percent (2%) of all of the outstanding Common
Shares (provided that, in making such calculation, all Common Shares issued by
the Company after the Closing Date other than in connection with an issuance in
which the Investor (or a permitted assignee under Section 6.8) was offered the
right to purchase the Unsubscribed Shares in accordance with Section 5.14 and
1.2(a) shall be excluded from the denominator), the Company will ensure that
upon reasonable notice, and in such a manner as not to interfere unreasonably
with the conduct of the business of the Company, the Company and its
subsidiaries will afford to the Investor and its representatives (including
employees of the Investor and counsel, accountants, financial and investment
banking advisors and other professionals retained by the Investor) (1) such
access during normal business hours to its books, records, properties and
personnel and to such other information as the Investor may reasonably request
and (2) reasonable opportunities to routinely consult with the management of the
Company and its subsidiaries, which shall not be more frequently than once per
calendar quarter, on matters relating to the operation of the Company.  The
Company agrees to consider, in good faith, the

 

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recommendations of the Investor or its designated representative in connection
with the matters on which it is consulted as described above, recognizing that
the ultimate discretion with respect to all such matters shall be retained by
the Company.  Notwithstanding anything in this Agreement to the contrary, at no
time will the Company provide to the Investor any material non-public
information (other than as disclosed to the Board Representative or the Board
Observer, as the case may be and as applicable) unless the Investor shall have
specifically requested such disclosure in writing from the Company.

 

(b)                                 Each party to this Agreement will hold, and
will cause its respective subsidiaries and their directors, officers, employees,
agents, consultants and advisors to hold, in strict confidence, unless
disclosure to a Governmental Entity is necessary or appropriate in connection
with any necessary regulatory approval or request for information or similar
process, or unless compelled to disclose by judicial or administrative process
or, in the written opinion of its counsel, by other requirement of law or the
applicable requirements of any Governmental Entity (in which case, the party
permitted to disclose such information shall, to the extent legally permissible
and reasonably practicable, provide the other party with prior written notice of
such permitted disclosure), all nonpublic records, books, contracts,
instruments, computer data and other data and information (collectively,
“Information”) concerning the other party hereto furnished to it by such other
party or its representatives pursuant to this Agreement, including but not
limited to as set forth in Section 3.3(a) (except to the extent that such
information can be shown to have been (1) previously known by such party on a
nonconfidential basis, (2) in the public domain through no fault of such party
or (3) later lawfully acquired from other sources by the party to which it was
furnished), and neither party hereto shall release or disclose such Information
to any other person, except its auditors, attorneys, financial advisors, other
consultants and advisors with the express understanding that such parties will
maintain the confidentiality of the Information and, to the extent permitted
above, to bank regulatory authorities.

 

3.4                               TRANSFER.  The Company shall cooperate, in
accordance with reasonable and customary business practices, with any and all
transfers, whether by direct or indirect sale, assignment, award, confirmation,
distribution, bequest, donation, trust, pledge, encumbrance, hypothecation or
other transfer or disposition, for consideration or otherwise, whether
voluntarily or involuntarily, by operation of law or otherwise, by the Investor
or any of its successors and assigns of the Securities and other shares of
Common Stock such party may beneficially own prior to or subsequent to the date
hereof.

 

3.5                               REASONABLE BEST EFFORTS.  The Company agrees
to use its reasonable best efforts to take, or cause to be taken, all actions,
and to do, or cause to be done, and to assist and cooperate with the Investor in
doing, all things necessary, proper or advisable to consummate and make
effective, in the most expeditious manner practicable, the transactions
contemplated by this Agreement and the other Transaction Documents, including
using reasonable best efforts to accomplish the following: (a) the doing of all
acts necessary to cause the conditions to Closing to be satisfied; (b) the
obtaining of all necessary actions or nonactions, waivers, consents and
approvals from Governmental Entities and the making of all necessary
registrations and filings and the taking of all steps necessary to obtain an
approval or waiver from, or to avoid an action or proceeding by, any
Governmental Entity; (c) the obtaining of all necessary consents, approvals or
waivers from third parties; and (d) the execution and delivery of any additional
instruments necessary to consummate the transactions contemplated by, and to
fully carry out the purposes of,

 

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this Agreement and the other Transaction Documents.

 

3.6          SHAREHOLDER LITIGATION.  The Company shall promptly inform Investor
of any claim, action, suit, arbitration, mediation, demand, hearing,
investigation or proceeding (“Shareholder Litigation”) against the Company, any
Company Subsidiary or any of the past or present executive officers or directors
of the Company or any Company Subsidiary that is threatened or initiated by or
on behalf of any shareholder of the Company in connection with or relating to
the transactions contemplated hereby or by the other Transaction Documents.  The
Company shall consult with the Investor and keep the Investor informed of all
filings and developments relating to any such Shareholder Litigation.

 

3.7          MOST FAVORED NATION.  During the period from the date hereof though
the Closing, neither the Company nor any of the Company Subsidiaries shall enter
into any additional, or modify any existing, agreements with any existing or
future investors in the Company or any of the Company Subsidiaries that have the
effect of establishing rights or otherwise benefiting such investor in a manner
more favorable in any respect to such investor than the rights and benefits
established in favor of the Investor by the Transaction Documents, unless, in
any such case, the Investor has been offered such rights and benefits.

 

3.8          NOTICE OF CERTAIN EVENTS.  Each party hereto shall promptly notify
the other party hereto of (a) any event, condition, fact, circumstance,
occurrence, transaction or other item of which such party becomes aware prior to
the Closing that would constitute a violation or breach of this Agreement or the
other Transaction Documents (or a breach of any representation or warranty
contained herein or therein) or, if the same were to continue to exist as of the
Closing Date, would constitute the non-satisfaction of any of the conditions set
forth in Section 1.2, and (b) any event, condition, fact, circumstance,
occurrence, transaction or other item of which such party becomes aware which
would have been required to have been disclosed pursuant to the terms of this
Agreement or the other Transaction Documents had such event, condition, fact,
circumstance, occurrence, transaction or other item existed as of the date
hereof.  Notwithstanding the foregoing, neither party shall be required to take
any action that would jeopardize such party’s attorney-client privilege.

 

3.9          CONDUCT OF THE BUSINESS.  Prior to the earlier of the Closing Date
and the termination of this Agreement pursuant to Article IV, the Company shall,
and shall cause each Company Subsidiary to:

 

(a)           carry on its business in the ordinary course of business and
maintain and preserve its and such Company Subsidiary’s business (including its
organization, assets, properties, goodwill and insurance coverage) and preserve
business relationships with customers, vendors, strategic partners and others
having business dealings with it; provided that nothing in this clause (a) shall
limit or require any actions that the Board of Directors may, in good faith,
determine to be inconsistent with their duties or the Company’s obligations
under applicable law or imposed by any Governmental Entity;

 

(b)           unless otherwise contemplated by this Agreement, refrain from:

 

(1)           declaring, setting aside or paying any distributions or dividends
on,

 

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or making any other distributions (whether in cash, securities or other
property) in respect of, any of its capital stock;

 

(2)           splitting, combining or reclassifying any of its capital stock or
issuing or authorizing the issuance of any other securities in respect of, in
lieu of or in substitution for capital stock or any of its other securities;

 

(3)           purchasing, redeeming or otherwise acquiring any capital stock or
any of its other securities or any rights, warrants or options to acquire any
such capital stock or other securities;

 

(4)           issuing, delivering, selling, granting, pledging or otherwise
disposing of or encumbering any capital stock, any other Voting Securities or
any securities convertible into or exchangeable for, or any rights, warrants or
options to acquire, any such capital stock, Voting Securities or convertible or
exchangeable securities, other than any issuance of Common Stock on exercise of
any compensatory stock options outstanding on the date of this Agreement; or

 

(5)           entering into any contract with respect to, or otherwise agreeing
or committing to do, any for the foregoing; and

 

(c)           to the extent reasonably practicable, shall consult with the
Investor prior to taking any actions outside of the ordinary course of business;
provided that the Company shall not consult with the Investor with respect to
such actions or provide any material non-public information to the Investor
unless the Company first seeks and obtains the Investor’s prior consent to be so
consulted or to receive such information.

 

Additionally, except as required pursuant to existing written, binding
agreements in effect prior to the date hereof and set forth in Section 3.9 of
the Disclosure Schedule, and with respect to clauses (u) and (v) except in the
ordinary course of business consistent with past practice related to employees
who are not executive officers of the Company, the Company shall and shall cause
the Company Subsidiaries not to take any of the following actions: (u) grant or
provide any severance or termination payments or benefits to any director,
officer or employee of the Company or any of the Company Subsidiaries;
(v) increase the compensation, bonus or pension, welfare, severance or other
benefits of, pay any bonus to or make any new equity awards to any director,
officer or employee of the Company or any of the Company Subsidiaries;
(w) establish, adopt, amend or terminate any Benefit Plan or amend the terms of
any outstanding equity-based awards; (x) take any action to accelerate the
vesting or payment of or fund or in any other way secure the payment of
compensation or benefits under any Benefit Plan, to the extent not already
provided in any such Benefit Plan; (y) change any actuarial or other assumptions
used to calculate funding obligations with respect to any Benefit Plan or change
the manner in which contributions to such plans are made or the basis on which
such contributions are determined, except as may be required by GAAP; or
(z) forgive any loans to directors, officers or employees of the Company or any
of the Company Subsidiaries; provided that in no event shall any increase of any
payment in the ordinary course of business under clause (v) increase such
person’s compensation by more than five percent (5%) in the aggregate except as
set forth in Section 3.9 of the Disclosure Schedule.

 

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ARTICLE IV.
TERMINATION

 

4.1          TERMINATION.  This Agreement may be terminated prior to the
Closing:

 

(a)           by mutual written agreement of the Company and the Investor;

 

(b)           by any party, upon written notice to the other party, in the event
that the Closing does not occur on or before September 30, 2012; provided,
however, that the right to terminate this Agreement pursuant to this
Section 4.1(b) shall not be available to any party whose failure to fulfill any
obligation under this Agreement shall have been the cause of, or shall have
resulted in, the failure of the Closing to occur on or prior to such date;

 

(c)           by the Investor, upon written notice to the Company, if (1) there
has been a breach of any representation, warranty, covenant or agreement made by
the Company in this Agreement, or any such representation and warranty shall
have become untrue after the date of this Agreement, such that
Section 1.2(b)(1)(ii) or Section 1.2(b)(1)(iv) would not be satisfied and
(2) such breach or condition is not curable or, if curable, is not cured prior
to the date that would otherwise be the Closing Date in the absence of such
breach or condition; provided that this Section 4.1(c) shall only apply if the
Investor is not in material breach of any of the terms of this Agreement;

 

(d)           by the Company, upon written notice to the Investor, if (1) there
has been a breach of any representation, warranty, covenant or agreement made by
the Investor in this Agreement, or any such representation and warranty shall
have become untrue after the date of this Agreement, such that
Section 1.2(b)(2)(i) or Section 1.2(b)(2)(iv) would not be satisfied and
(2) such breach or condition is not curable or, if curable, is not cured prior
to the date that would otherwise be the Closing Date in the absence of such
breach or condition; provided that this Section 4.1(d) shall only apply if the
Company is not in material breach of any of the terms of this Agreement;

 

(e)           by any party, upon written notice to the other party, in the event
that any Governmental Entity shall have issued any order, decree or injunction
or taken any other action restraining, enjoining or prohibiting any of the
transactions contemplated by this Agreement, and such order, decree, injunction
or other action shall have become final and nonappealable;

 

(f)            by the Investor, upon written notice to the Company, if the
Investor or any of its Affiliates receives written notice from or is otherwise
advised by, the Federal Reserve, OFIR or the FDIC that the Federal Reserve, OFIR
or the FDIC, as applicable, will not grant (or intends to rescind or revoke if
previously granted) any of the written confirmations or determinations referred
to in Section 1.2(b)(1)(ix); or

 

(g)           by the Company, upon written notice to the Investor, if the
Company receives written notice from or is otherwise advised by the Federal
Reserve, OFIR or the FDIC that the Federal Reserve, OFIR or the FDIC, as
applicable, will not grant (or intends to rescind or revoke if previously
granted) any approvals required to be obtained to consummate the transactions
contemplated by this Agreement and the other Transaction Documents.

 

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4.2          EFFECTS OF TERMINATION.  In the event of any termination of this
Agreement as provided in Section 4.1, this Agreement (other than Section 3.2(b),
Section 3.3(b) (except, in respect of any party, in connection with litigation
against it by the other party or its Affiliates), this Section 4.2, Section 5.6
and Article VI, which shall remain in full force and effect) shall forthwith
become wholly void and of no further force and effect; provided that nothing
herein shall relieve any party from liability for willful breach of this
Agreement.

 

ARTICLE V.
ADDITIONAL AGREEMENTS

 

5.1          NO RIGHTS AGREEMENT.  From the date hereof through such time during
which the Investor, together with its Affiliates, and, for purposes of this
Section 5.1, persons who share a common discretionary investment advisor with
the Investor, in the aggregate own five percent (5%) or more of all of the
outstanding Common Shares (provided that, in making such calculation, all Common
Shares issued by the Company after the Closing Date other than in connection
with an issuance in which the Investor (or a permitted assignee under
Section 6.8) was offered the right to purchase the Unsubscribed Shares in
accordance with Section 5.14 shall be excluded from the denominator) (the
“Qualifying Ownership Interest”), the Company shall not enter into any poison
pill agreement, shareholders’ rights plan or similar agreement that shall limit
the rights of the Investor and its Affiliates and associates to hold any shares
of Common Stock or acquire additional securities of the Company unless such
poison pill agreement, shareholders’ rights plan or similar agreement grants an
exemption or waiver to the Investor and its Affiliates and associates and any
group in which the Investor may become a member, immediately effective upon
execution of such plan or agreement, that would allow the Investor and its
Affiliates and associates to acquire such additional securities of the Company.

 

5.2          INVESTOR STANDSTILL AGREEMENTS.  The Investor agrees that until the
earlier of the fourth (4th) anniversary of the Closing Date and such time as the
Investor and its Affiliates no longer own a Qualifying Ownership Interest,
without the prior written consent of the Company, neither it nor any of its
controlled Affiliates, or any Affiliate owned, controlled or influenced by David
R. Steinhardt or Michael Steinhardt (each, a “Standstill Affiliate”) will,
directly or indirectly:

 

(a)           in any way acquire, offer or propose to acquire or agree to
acquire, other than as specifically contemplated in this Agreement or the other
Transaction Documents, Beneficial Ownership of any Voting Securities if such
acquisition would result in the Investor or its Affiliates having Beneficial
Ownership of more than twenty-four and nine-tenths percent (24.9%) of the
outstanding shares of a class of voting securities (within the meaning of the
BHC Act and Regulation Y promulgated thereunder) or Common Stock of the Company
(for the avoidance of doubt, for purposes of calculating the Beneficial
Ownership of the Investor and its Affiliates hereunder, (x) any security that is
convertible into, or exercisable for, any such voting securities or Common Stock
that is Beneficially Owned by the Investor or its Affiliates shall be treated as
fully converted or exercised in accordance with its terms, as the case may be,
into the underlying voting securities or Common Stock, and (y) any security
convertible into, or exercisable for, the Common Stock that is Beneficially
Owned by any person other than the Investor or any of its Affiliates shall not
be taken into account);

 

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(b)           make, or in any way participate in, any “solicitation” of
“proxies” (as such terms are defined under Regulation 14A under the Exchange
Act, disregarding clause (iv) of Rule 14a-1(l)(2) and including any otherwise
exempt solicitation pursuant to Rule 14a-2(b)) to vote, or seek to advise or
influence any person or entity with respect to the voting of, any Voting
Securities of the Company (except as may be permitted under the terms of any
passivity or anti-association commitment, as such commitment may be amended from
time to time, given by the Investor to the Federal Reserve in connection with
the Investor’s purchase of the Common Shares);

 

(c)           call or seek to call a meeting of the shareholders of the Company
or initiate any shareholder proposal for action by shareholders of the Company,
form, join or in any way participate in a “group” (within the meaning of
Section 13(d)(3) of the Exchange Act and the rules and regulations promulgated
thereunder) with respect to any Voting Securities, or seek, propose or otherwise
act alone or in concert with others, to influence or control the management,
Board of Directors or policies of the Company (except as may be permitted under
the terms of any passivity or anti-association commitment, as such commitment
may be amended from time to time, given by the Investor to the Federal Reserve
in connection with the Investor’s purchase of the Common Shares); provided that
the Investor and its Standstill Affiliates shall not be considered a “group” for
the purposes of this Section 5.2(c);

 

(d)           bring any action or otherwise act to contest the validity of this
Section 5.2 (provided that neither the Investor nor any of its Standstill
Affiliates shall be restricted from contesting the applicability of this
Section 5.2 to the Investor or any of its Standstill Affiliates under any
particular circumstance) or seek a release of the restrictions contained herein
or make a request to amend or waive any provision of this Section 5.2;

 

(e)           enter into or agree, offer, propose or seek (whether publicly or
otherwise) to enter into any acquisition transaction, merger or other business
combination relating to all or part of the Company or any of the Company
Subsidiaries or any acquisition transaction for all or part of the assets of the
Company or any Company Subsidiary or any of their respective businesses; or

 

(f)            publicly disclose any intention, plan or arrangement inconsistent
with any of the foregoing or take any action that would reasonably be expected
to require the Company to make a public announcement regarding the possibility
of any of the events described in clauses (a) through (e) above;

 

provided nothing in this Section 5.2 shall prevent the Investor or its
Standstill Affiliates from (y) voting any Voting Securities then Beneficially
Owned by the Investor or its Standstill Affiliates in any manner or (z) having
private conversations with members of management or the Board of Directors of
the Company regarding the policies, affairs or strategy of the Company or any
Company Subsidiary; provided, further, that nothing in clauses (b), (c) or
(e) of this Section 5.2 shall apply to the Board Representative or the Board
Observer solely in his or her capacity as a director or observer (as applicable)
of the Company or the Bank.

 

For purposes of this Agreement, “Voting Securities” shall mean at any time
shares of any class of capital stock of the Company that are then entitled to
vote generally in the election of directors.

 

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Notwithstanding the foregoing, the parties hereto agree that nothing in this
Section 5.2 shall apply to any portfolio company with respect to which the
Investor is not the party exercising control over the decision to purchase
Voting Securities or to vote such Voting Securities; provided that the Investor
does not provide to such entity any nonpublic information concerning the Company
or any Company Subsidiary and such portfolio company is not acting at the
request or direction of or in coordination with the Investor; and provided,
further, that ownership of such shares is not attributed to the Investor under
the BHC Act and the rules and regulations promulgated thereunder or any written
interpretation of the foregoing by the staff of the Federal Reserve that has not
been rescinded.

 

Notwithstanding the foregoing restrictions, if, at any time, there occurs a
Change in Control or any person (other than an Investor or any of its Standstill
Affiliates) shall have commenced and not withdrawn a bona fide  public tender or
exchange offer which if consummated would result in a Change in Control, then
the limitations set forth in this Section 5.2 (other than in Section 5.2(a))
shall not be applicable to the Investor for so long as the conditions described
in this paragraph continue.

 

For purposes of this Agreement, “Change in Control” means, with respect to the
Company, the occurrence of any one of the following events:

 

(1)           any person is or becomes a Beneficial Owner (other than the
Investor and its Affiliates), directly or indirectly, of fifty percent (50%) or
more of the aggregate number of the Voting Securities; provided, however, that
the event described in this clause (1) will not be deemed a Change in Control by
virtue of any holdings or acquisitions: (i) by the Company or any Company
Subsidiary, (ii) by any employee benefit plan (or related trust) sponsored or
maintained by the Company or any Company Subsidiary; provided that such holdings
or acquisitions by any such plan (other than any plan maintained under 401(k) of
the Code) do not exceed fifty percent (50%) of the then outstanding Voting
Securities, (iii) by any underwriter temporarily holding securities pursuant to
an offering of such securities or (iv) pursuant to a Non-Qualifying Transaction;

 

(2)           the event described in clause (1) above in this definition of
“Change in Control” (substituting all references to fifty percent (50%) in such
clause with “twenty-four and nine-tenths percent (24.9%)”), and in connection
with such event, individuals who, on the date of this Agreement, constitute the
Board of Directors (the “Incumbent Directors”) cease for any reason to
constitute at least a majority of the Board of Directors; provided, that any
person becoming a director subsequent to the date of this Agreement whose
election or nomination for election was approved by a vote of at least
two-thirds (2/3) of the Incumbent Directors then on the Board of Directors
(either by a specific vote or by approval of the proxy statement of the relevant
party in which such person is named as a nominee for director, without written
objection to such nomination) shall be an Incumbent Director (except that no
individuals who were not directors at the time any agreement or understanding
with respect to any Business Combination or contested election is reached shall
be treated as Incumbent Directors for the purposes of clause (3) below with
respect to such Business Combination or this paragraph in the case of a
contested election); provided, further, that each Board Representative appointed
under any of the Transaction Documents will be treated as an Incumbent Director
even if the person designated to be such Board Representative should change;

 

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(3)           the consummation of a merger, consolidation, statutory share
exchange or similar transaction that requires adoption by the Company’s
shareholders (a “Business Combination”), unless immediately following such
Business Combination: (i) more than fifty percent (50%) of the total voting
power of the corporation resulting from such Business Combination (the
“Surviving Corporation”), or, if applicable, the ultimate parent corporation
that directly or indirectly has Beneficial Ownership of one hundred percent
(100%) of the voting securities eligible to elect directors of the Surviving
Corporation (the “Parent Corporation”), is represented by Voting Securities that
were outstanding immediately before such Business Combination (or, if
applicable, is represented by shares into which such Voting Securities were
converted pursuant to such Business Combination), and (ii) at least a majority
of the members of the board of directors of the Parent Corporation (or, if there
is no Parent Corporation, the Surviving Corporation) following the consummation
of the Business Combination were Incumbent Directors at the time the Board of
Directors approved the execution of the initial agreement providing for such
Business Combination (any Business Combination which satisfies all of the
criteria specified in (i) and (ii) above will be deemed a “Non-Qualifying
Transaction”);

 

(4)           the shareholders of the Company approve a plan of liquidation or
dissolution of the Company or a sale of all or substantially all of the
Company’s assets; or

 

(5)           the Company has entered into a definitive agreement, the
consummation of which would result in the occurrence of any of the events
described in clauses (1) through (4) of this definition above.

 

5.3          COMPLIANCE WITH LAWS.  Notwithstanding any other provision of this
Article V, the Investor covenants that the Securities may be disposed of only
pursuant to an effective registration statement under, and in compliance with
the requirements of, the Securities Act, or pursuant to an available exemption
from, or in a transaction not subject to, the registration requirements of the
Securities Act, and in compliance with any applicable state, federal or foreign
securities laws.  In connection with any transfer of the Purchased Shares other
than (a) pursuant to an effective registration statement, (b) to the Company or
(c) pursuant to Rule 144 promulgated under the Securities Act (provided that the
transferor provides the Company with reasonable assurances (in the form of a
customary seller representation letter and, if applicable, a customary broker
representation letter) that such securities may be sold pursuant to such rule),
the Company may require the transferor thereof to provide to the Company and the
Company’s transfer agent, at the transferor’s expense, an opinion of counsel
selected by the transferor and reasonably acceptable to the Company and the
Company’s transfer agent, the form and substance of which opinion shall be
reasonably satisfactory to the Company and such transfer agent, to the effect
that such transfer does not require registration of such Securities under the
Securities Act.  As a condition of transfer (other than pursuant to clauses (a),
(b) or (c) of the preceding sentence), any such transferee shall agree in
writing to be bound by the terms of this Agreement and, except as otherwise set
forth in this Agreement, shall have the rights of the Investor under this
Agreement with respect to such transferred Securities.

 

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5.4          LEGEND.

 

(a)           The Investor agrees that all certificates or other instruments
representing the Securities will bear a legend substantially to the following
effect:

 

“THE SECURITIES REPRESENTED BY THIS INSTRUMENT HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR SECURITIES LAWS OF ANY STATE AND
MAY NOT BE TRANSFERRED, SOLD OR OTHERWISE DISPOSED OF EXCEPT WHILE A
REGISTRATION STATEMENT RELATING THERETO IS IN EFFECT UNDER SUCH ACT AND
APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AN EXEMPTION FROM REGISTRATION
UNDER SUCH ACT OR SUCH LAWS.”

 

(b)           The legend set forth in Section 5.4(a) above shall be removed and
the Company shall issue to the Investor a certificate without such legend or any
other legend, or by electronic delivery at the applicable balance account at the
Depository Trust Company (“DTC”), if (1) such Securities are registered for
resale under the Securities Act (provided that, if the Investor is selling
pursuant to an effective registration statement filed by the Company in
accordance with Section 5.7, the Investor agrees to sell such Securities only
during such time that such registration statement is effective and not withdrawn
or suspended, and only as permitted by such registration statement), (2) such
Securities are sold or transferred pursuant to Rule 144 (if the transferor is
not an Affiliate of the Company) or (3) such Securities are eligible for sale
under Rule 144, without the requirement for the Company to be in compliance with
the current public information requirement under Rule 144(c)(1) (or
Rule 144(i)(2), if applicable) as to such Securities and without volume or
manner-of-sale restrictions.  Following the earlier of (y) the effective date of
the Shelf Registration Statement (the “Effective Date”) or (z) Rule 144 becoming
available for the resale of Securities, without the requirement for the Company
to be in compliance with the current public information requirement under
Rule 144(c)(1) (or Rule 144(i)(2), if applicable) as to such Securities and
without volume or manner-of-sale restrictions, the Company shall deliver to its
transfer agent irrevocable instructions that such transfer agent shall reissue a
certificate representing the applicable Securities without legend upon receipt
by such transfer agent of the legended certificates for such Securities.  Any
fees (with respect to the transfer agent or otherwise) associated with the
removal of such legend shall be borne by the Company.  Following the Effective
Date, or at such earlier time as a legend is no longer required for any
Securities, the Company will, no later than three (3) trading days following the
delivery by the Investor to the Company or its transfer agent (with notice to
the Company) of a legended certificate representing such Securities (endorsed or
with stock powers attached, signatures guaranteed and otherwise in form
necessary to effect the reissuance and/or transfer) and a representation letter
to the extent required by Section 5.3 (such third (3rd) trading day, the “Legend
Removal Date”), deliver or cause to be delivered to the Investor a certificate
representing such Securities that is free from all restrictive and other
legends.  The Company may not make any notation on its records or give
instructions to the transfer agent that enlarge the restrictions on transfer set
forth in this Section.

 

Certificates for Securities subject to legend removal hereunder may be
transmitted by the transfer agent to the Investor by crediting the account of
the Investor’s prime broker with DTC as directed by the Investor.

 

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(c)           If the Company shall fail for any reason or for no reason to issue
to the Investor unlegended certificates by the Legend Removal Date, then, in
addition to all other remedies available to the Investor, if on or after the
trading day immediately following such three (3) trading day period, the
Investor purchases, or a broker through whom the Investor has sold Common Shares
(a “Buy-In Broker”) purchases (in an open market transaction or otherwise)
Common Shares to deliver in satisfaction of such sale in lieu of Common Shares
the Investor anticipated receiving from the Company without any restrictive
legend (a “Buy-In”), then the Company shall, within three (3) business days
after the Investor’s request, honor its obligation to deliver to the Investor a
certificate or certificates without restrictive legends representing such Common
Shares and pay cash to the Investor in an amount equal to the excess (if any) of
the Investor’s or Buy-In Broker’s total purchase price (including brokerage
commissions, if any) for the Common Shares so purchased over the product of
(1) such number of Common Shares times (2) the closing bid price on the Legend
Removal Date.

 

5.5          CERTAIN TRANSACTIONS.

 

(a)           Prior to the Closing, notwithstanding anything in this Agreement
to the contrary, the Company shall not directly or indirectly effect or cause to
be effected any transaction with a third party that would reasonably be expected
to result in a Change in Control unless such third party shall have provided
prior assurance in writing to the Company (in a form that is reasonably
satisfactory to the Company) that the terms of this Agreement shall be fully
performed (1) by the Company or (2) by such third party if it is the successor
of the Company or if the Company is its direct or indirect subsidiary, and the
Company agrees to promptly provide copies of such assurances to the Investor. 
For the avoidance of doubt, it is understood and agreed that, in the event that
a Change in Control occurs on or prior to the Closing, the Investor shall
maintain the right under this Agreement to acquire, pursuant to the terms and
conditions of this Agreement, the Securities (or such other securities or
property (including cash) into which the Securities may have become exchangeable
as a result of such Change in Control), as if the Closing had occurred
immediately prior to such Change in Control.  For the avoidance of doubt,
nothing in this Section 5.5(a) is intended to or shall limit in any way the
Investor closing conditions contained in Section 1.2(b).

 

(b)           In the event that, at or prior to Closing, (1) the number of
Common Shares or securities convertible or exchangeable into or exercisable for
Common Shares issued and outstanding is changed as a result of any
reclassification, stock split (including reverse split), stock dividend or
distribution (including any dividend or distribution of securities convertible
or exchangeable into or exercisable for Common Shares), merger, tender or
exchange offer or other similar transaction, or (2) the Company fixes a record
date that is at or prior to the applicable Closing Date for the payment of any
non-stock dividend or distribution on the Common Stock, then the number of
Common Shares to be issued to the Investor at the Closing under this Agreement,
together with the applicable implied per share price for the Common Shares to be
issued to Investor at the Closing under this Agreement shall be equitably
substituted with shares of other stock or securities or property (including
cash), in each case to provide the Investor with substantially the same economic
benefit from this Agreement as the Investor had prior to the applicable
transaction.  Notwithstanding anything in this Agreement to the contrary, in no
event shall the Purchase Price or any component thereof, or the aggregate
percentage of shares to be purchased by the Investor or any other person be
changed by the foregoing.

 

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(c)           Notwithstanding anything in the foregoing Sections 5.5(a) and (b),
the provisions of Section 5.5(b) shall not be triggered by the transactions
contemplated by this Agreement or the other Transaction Documents.

 

5.6          INDEMNITY.

 

(a)           The Company agrees to indemnify and hold harmless the Investor and
its Affiliates and each of their respective officers, directors, direct or
indirect partners or members, employees and agents and each person who controls
the Investor within the meaning of the Exchange Act and the rules and
regulations promulgated thereunder, to the fullest extent lawful, from and
against any and all actions, suits, claims, proceedings, costs, losses,
liabilities, damages, expenses (including attorneys’ fees and disbursements),
amounts paid in settlement and other costs (collectively, “Losses”) arising out
of or resulting from (1) any inaccuracy in or breach of the Company’s
representations or warranties contained in this Agreement, (2) the Company’s
breach of agreements or covenants made by the Company in this Agreement or
(3) any Losses arising out of or resulting from any legal, administrative or
other proceedings instituted by any Governmental Entity, shareholder of the
Company or any other person (other than the Investor and its Affiliates and the
Company and the Company Subsidiaries) arising out of the transactions
contemplated by this Agreement and the terms of the Securities (other than any
Losses attributable to any negligent acts or omissions on the part of the
Investor).

 

(b)           A party entitled to indemnification hereunder (each, an
“Indemnified Party”) shall give written notice to the party indemnifying it (the
“Indemnifying Party”) of any claim with respect to which it seeks
indemnification promptly after the discovery by such Indemnified Party of any
matters giving rise to a claim for indemnification; provided that the failure of
any Indemnified Party to give notice as provided herein shall not relieve the
Indemnifying Party of its obligations under this Section 5.6 unless and to the
extent that the Indemnifying Party shall have been actually prejudiced by the
failure of such Indemnified Party to so notify such party.  Such notice shall
describe in reasonable detail such claim to the extent known by the Indemnified
Party.  In case any such action, suit, claim or proceeding is brought against an
Indemnified Party, the Indemnified Party shall be entitled to hire counsel, at
the cost and expense of the Indemnifying Party, and to conduct the defense
thereof; provided, however, that the Indemnifying Party shall only be liable for
the legal fees and expenses of one (1) law firm for all Indemnified Parties,
taken together with regard to any single action or group of related actions,
upon agreement by the Indemnified Parties and the Indemnifying Parties.  If the
Indemnifying Party assumes the defense of any claim, all Indemnified Parties
shall thereafter deliver to the Indemnifying Party copies of all notices and
documents (including court papers) received by the Indemnified Parties relating
to the claim, and any Indemnified Party shall cooperate in the defense or
prosecution of such claim.  Such cooperation shall include the retention and
(upon the Indemnifying Party’s request) the provision to the Indemnifying Party
of records and information that are reasonably relevant to such claim, making
employees available on a mutually convenient basis to provide additional
information and explanation of any material provided hereunder.  The
Indemnifying Party shall not be liable for any settlement of any action, suit,
claim or proceeding effected without its written consent; provided, however,
that the Indemnifying Party shall not unreasonably withhold, delay or condition
its consent.  The Indemnifying Party further agrees that it will not, without
the Indemnified Party’s prior written consent, settle or compromise any claim or
consent to entry of any judgment in respect thereof in any pending or threatened
action, suit,

 

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claim or proceeding in respect of which indemnification has been sought
hereunder unless such settlement or compromise (1) includes an unconditional
release of such Indemnified Party from all liability arising out of such action,
suit, claim or proceeding, (2) provides solely for the payment of money damages
and not any injunctive or equitable relief or criminal penalties and (3) does
not create any financial or other obligation on the part of an Indemnified Party
which would not be indemnified in full by the Indemnifying Party.

 

(c)           Subject to Section 5.6(d), the Company shall not be liable for any
Losses with respect to claims asserted pursuant to Section 5.6(a)(1) unless and
until the aggregate amount of all such Losses exceeds three-quarters of one
percent (0.75%) of the Purchase Price (the “Threshold Amount”), at which point
the Company shall be liable for the total amount of such Losses incurred without
regard to the Threshold Amount.  For further clarity, the Threshold Amount shall
not be applicable to any Losses with respect to claims asserted pursuant to
Sections 5.6(a)(2) or (3).

 

(d)           Notwithstanding anything to the contrary in Section 5.6(c), the
Threshold Amount shall not apply to claims arising out of or relating to the
representations and warranties set forth in the following subsections of
Section 2.2:  (a) (Organization and Authority); (b) (Subsidiaries);
(c) (Capitalization); (d) (Authorization); (i) (Taxes); (o) (Labor);
(p) (Company Benefit Plans); (s) (Environmental Liability); (t) (Anti-Takeover
Provisions); and (bb) (Brokers and Finders) (collectively, the “Special
Representations and Warranties”).

 

(e)           The indemnity provided for in this Section 5.6 shall be the sole
and exclusive monetary remedy of the Indemnified Parties after the Closing for
any inaccuracy of any of the representations and warranties contained in this
Agreement or any other breach of any covenant or agreement contained in this
Agreement; provided that nothing herein shall limit in any way any such parties’
remedies in respect of fraud, intentional misrepresentation or omission or
intentional misconduct by the other party in connection with the transactions
contemplated hereby.  No party to this Agreement (or any of its Affiliates)
shall, in any event, be liable or otherwise responsible to any other party (or
any of its Affiliates) for any consequential or punitive damages of such other
party (or any of its Affiliates) arising out of or relating to this Agreement or
the performance or breach hereof.  The indemnification rights contained in this
Section 5.6 are not limited or deemed waived by any investigation or knowledge
by the Indemnified Party prior to or after the date hereof.

 

(f)            Any indemnification payments pursuant to this Section 5.6 shall
be treated as an adjustment to the Purchase Price for the Securities for U.S.
federal income and applicable state and local Tax purposes, unless a different
treatment is required by applicable law.

 

5.7          REGISTRATION RIGHTS.

 

(a)           Registration.  Subject to the terms and conditions of this
Agreement, the Company covenants and agrees that as promptly as practicable
after the Closing Date (and in any event no later than the Registration
Deadline), the Company shall have prepared and filed with the SEC a Shelf
Registration Statement covering the resale of all Registrable Securities (or, if
permitted by the rules of the SEC, otherwise designated an existing Shelf
Registration Statement filed with the SEC to cover the Registrable Securities),
and, to the extent the Shelf Registration

 

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Statement has not theretofore been declared effective, the Company shall use
commercially reasonable efforts to cause such Shelf Registration Statement to be
declared or become effective not later than the Effectiveness Deadline and to
keep such Shelf Registration Statement continuously effective and in compliance
with the Securities Act and usable for resale of such Registrable Securities for
a period from the date of its initial effectiveness until such time as there are
no Registrable Securities remaining (including by re-filing such Shelf
Registration Statement (or a new Shelf Registration Statement) if the initial
Shelf Registration Statement expires) (the “Effectiveness Period”). 
Notwithstanding the registration obligations set forth in this Section 5.7(a),
in the event that all of the Registrable Securities cannot, as a result of the
application of Rule 415, be registered for resale as a secondary offering on a
single registration statement, the Company agrees to promptly (1) inform each of
the Holders thereof and use its commercially reasonable efforts to file
amendments to the initial Shelf Registration Statement as required by the SEC
and/or (2) withdraw the initial Shelf Registration Statement and file a new
Shelf Registration Statement, in either case covering the maximum number of
Registrable Securities permitted to be registered by the SEC, on such form
available to the Company to register for resale the Registrable Securities as a
secondary offering; provided, however, that prior to filing such amendment or
new Shelf Registration Statement, the Company shall be obligated to use its
commercially reasonable efforts to advocate with the SEC for the registration of
all of the Registrable Securities in accordance with the SEC Guidance, including
Compliance and Disclosure Interpretation 612.09.  Notwithstanding any other
provision of this Agreement and subject to the payment of Liquidated Damages in
Section 5.7(k), if any SEC Guidance sets forth a limitation of the number of
Registrable Securities or other securities permitted to be registered on a
particular Shelf Registration Statement as a secondary offering (and
notwithstanding that the Company used commercially reasonable efforts to
advocate with the SEC for the registration of all or a greater number of
Registrable Securities), the number of Registrable Securities or securities to
be registered on such Shelf Registration Statement will be reduced as follows:
first, the Company shall reduce or eliminate the securities to be included by
any person other than a Holder; second, the Company shall reduce or eliminate
any securities to be included by any Affiliate (which shall not include the
Investor or its Affiliates) of the Company; and third, the Company shall reduce
the number of Registrable Securities to be included by all Holders on a pro rata
basis based on the total number of unregistered Registrable Securities held by
such Holders, subject to a determination by the SEC that certain Holders must be
reduced before other Holders based on the number of Registrable Securities held
by such Holders.  In the event the Company amends the initial Shelf Registration
Statement or files a new Shelf Registration Statement, as the case may be, under
clauses (1) or (2) above, the Company will use its commercially reasonable
efforts to file with the SEC, as promptly as allowed by the SEC or SEC Guidance
provided to the Company or to registrants of securities in general, one (1) or
more registration statements on such form available to the Company to register
for resale those Registrable Securities that were not registered for resale on
the initial Shelf Registration Statement, as amended, or the new Shelf
Registration Statement.

 

No Holder shall be named as an “underwriter” in any Registration Statement
without such Holder’s prior written consent.

 

(1)           Any registration pursuant to this Section 5.7(a) shall be effected
by means of a shelf registration under the Securities Act on Form S-1 (or, if
the Company is then eligible, on Form S-3) (a “Shelf Registration Statement”) in
accordance with the methods and distribution set forth in the Shelf Registration
Statement and Rule 415.  If the Investor or any other

 

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Holder of Registrable Securities to whom the registration rights conferred by
this Agreement have been transferred in compliance with this Agreement intends
to distribute any Registrable Securities by means of an underwritten offering,
it shall promptly so advise the Company, and the Company shall take all
reasonable steps to facilitate such distribution, including the actions required
pursuant to Section 5.7(c); provided that the Company shall not be required to
facilitate an underwritten offering of Registrable Securities unless the
expected gross proceeds from such offering exceed one million dollars
($1,000,000).  The lead underwriters in any such distribution shall be selected
by the holders of a majority of the Registrable Securities to be distributed and
shall be reasonably acceptable to the Company.

 

(2)           The Company shall not be required to effect a registration
(including a resale of Registrable Securities from an effective Shelf
Registration Statement) or an underwritten offering pursuant to this
Section 5.7(a):

 

(i)            with respect to securities that are not Registrable Securities;

 

(ii)           during any Scheduled Black-out Period, with respect to any resale
of Registrable Securities from an effective Shelf Registration Statement by the
Investor who, at such time, has appointed a Board Representative or Board
Observer pursuant to Section 5.8; or

 

(iii)         if the Company has notified the Investor and all other Holders
that in the good faith judgment of the Board of Directors, it would be
materially detrimental to the Company or its security holders for such
registration or underwritten offering to be effected at such time, in which
event the Company shall have the right to defer such registration or
underwritten offering for a period of not more than forty-five (45) days after
receipt of the request of the Investor or any other Holder; provided that such
right to delay a registration or underwritten offering shall be exercised by the
Company (A) only if the Company has generally exercised (or is concurrently
exercising) similar black-out rights against all holders of similar securities
that have registration rights, (B) not more than once in any twelve (12) month
period and (C) so long as the total number of days of any delays hereunder and
the total number of days of any suspension under Section 5.7(d) do not exceed,
in the aggregate, sixty (60) days in any twelve (12) month period.

 

The Company shall provide the Investor written notice of any Scheduled Black-out
Period, if applicable to such Investor, no later than seven (7) business days
prior to the commencement of such Scheduled Black-out Period.

 

(3)           After the Closing Date, whenever the Company proposes to register
any of its equity securities, other than a registration pursuant to
Section 5.7(a)(1), a Special Registration or securities registered pursuant to
Section 5.14, and the registration form to be filed may be used for the
registration or qualification for distribution of Registrable Securities, the
Company will give prompt written notice to the Investor and all other Holders of
its intention to effect such a registration (but in no event less than fifteen
(15) days prior to the anticipated filing date) and (subject to clause
(5) below) will include in such registration all Registrable Securities with
respect to which the Company has received written requests for inclusion therein
within ten (10) business days after the date of the Company’s notice (a
“Piggyback Registration”).  Any such

 

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person that has made such a written request may withdraw its Registrable
Securities from such Piggyback Registration by giving written notice to the
Company and the managing underwriter, if any, on or before the fifth (5th) day
prior to the planned effective date of such Piggyback Registration.  The Company
may terminate or withdraw any registration under this Section 5.7(a)(3) prior to
the effectiveness of such registration, whether or not the Investor or any other
Holders have elected to include Registrable Securities in such registration. 
“Special Registration” means the registration of (i) equity securities and/or
options or other rights in respect thereof solely registered on Form S-4 or
Form S-8 (or any successor form) or (ii) shares of equity securities and/or
options or other rights in respect thereof to be offered to directors, members
of management, employees, consultants, customers, lenders or vendors of the
Company or Company Subsidiaries or in connection with dividend reinvestment
plans.

 

(4)           If the registration referred to in Section 5.7(a)(3) is proposed
to be underwritten, the Company will so advise the Investor and all other
Holders as a part of the written notice given pursuant to Section 5.7(a)(3).  In
such event, the right of the Investor and all other Holders to registration
pursuant to this Section 5.7(a) will be conditioned upon such persons’
participation in such underwriting and the inclusion of such persons’
Registrable Securities in the underwriting, and each such person will (together
with the Company and the other persons distributing their securities through
such underwriting) enter into an underwriting agreement in customary form with
the underwriter or underwriters selected for such underwriting by the Company. 
If any participating person disapproves of the terms of the underwriting, such
person may elect to withdraw therefrom by written notice to the Company, the
managing underwriter and the Investor.

 

(5)           Except for certain registration rights granted to the U.S.
Treasury in connection with the Treasury’s investment in the Company under the
CPP, the Company represents and warrants that it has not granted to any holder
of its securities and agrees that it shall not grant “piggyback” registration
rights to one or more third parties to include their securities in the Shelf
Registration Statement or in an underwritten offering under the Shelf
Registration Statement pursuant to Section 5.7(a)(1).  If a Piggyback
Registration under Section 5.7(a)(3) relates to an underwritten primary offering
on behalf of the Company, and in either case the managing underwriters advise
the Company that in their reasonable opinion the number of securities requested
to be included in such offering exceeds the number which can be sold without
adversely affecting the marketability of such offering (including an adverse
effect on the per share offering price), the Company will include in such
registration or prospectus only such number of securities that in the reasonable
opinion of such underwriters can be sold without adversely affecting the
marketability of the offering (including an adverse effect on the per share
offering price), which securities will be so included in the following order of
priority: (i) first, in the case of a Piggyback Registration under
Section 5.7(a)(3), the securities the Company proposes to sell; (ii) second,
Registrable Securities of the Investor and all other Holders who have requested
registration of Registrable Securities pursuant to Section 5.7(a)(1) or
5.7(a)(3), as applicable, pro rata on the basis of the aggregate number of such
securities or shares owned by each such person; and (iii) third, any other
securities of the Company that have been requested to be so included, subject to
the terms of this Agreement.

 

(6)           In the event that Form S-3 is not available for the registration
of the resale of Registrable Securities under Section 5.7(a)(1), the Company
shall (i) register the resale of

 

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the Registrable Securities on another appropriate form, including Form S-1 and
(ii) undertake to register the Registrable Securities on Form S-3 promptly after
such form is available, provided that the Company shall maintain the
effectiveness of the Shelf Registration Statement then in effect until such time
as a Shelf Registration Statement on Form S-3 covering the Registrable
Securities has been declared effective by the SEC.

 

(b)           Expenses of Registration.  All Registration Expenses incurred in
connection with any registration, qualification or compliance hereunder shall be
borne by the Company.  Without limiting the foregoing, the Company shall bear
its internal expenses (including all salaries and expenses of its officers and
employees performing legal, accounting or other duties) and expenses of any
person, including special experts, retained by the Company.  The Company shall
also reimburse the Investor for the reasonable fees and disbursements of
Holders’ Counsel in an amount not to exceed thirty thousand dollars ($30,000)
per registration.  All Selling Expenses incurred in connection with any
registrations hereunder shall be borne by the Holders of the securities so
registered pro rata on the basis of the aggregate offering or sale price of the
securities so registered.

 

(c)           Obligations of the Company.  In addition, whenever required to
effect the registration of any Registrable Securities or facilitate the
distribution of Registrable Securities pursuant to an effective Shelf
Registration Statement, the Company shall, as expeditiously as reasonably
practicable:

 

(1)           By 9:30 a.m., New York City time, on the first (1st) business day
after the Effective Date of a Shelf Registration Statement, file a final
prospectus with the SEC as required by Rule 424(b) under the Securities Act.

 

(2)           Provide to each Holder a copy of any disclosure regarding the plan
of distribution or the selling Holder, in each case, with respect to such
Holder, at least three (3) business days in advance of any filing with the SEC
of any registration statement or any amendment or supplement thereto that amends
such information.

 

(3)           Prepare and file with the SEC a prospectus supplement with respect
to a proposed offering of Registrable Securities pursuant to an effective
registration statement, subject to this Section 5.7(c), and keep such
registration statement effective or such prospectus supplement current until the
securities described therein are no longer Registrable Securities.

 

(4)           Prepare and file with the SEC such amendments and supplements to
the applicable registration statement and the prospectus or prospectus
supplement used in connection with such registration statement as may be
necessary to comply with the provisions of the Securities Act with respect to
the disposition of all securities covered by such registration statement.

 

(5)           Furnish to the Holders and any underwriters such number of copies
of the applicable registration statement and each such amendment and supplement
thereto (including in each case all exhibits) and of a prospectus, including a
preliminary prospectus, in conformity with the requirements of the Securities
Act, and such other documents as they may reasonably request in order to
facilitate the disposition of Registrable Securities owned or to be

 

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distributed by them.

 

(6)           Use its commercially reasonable efforts to register and qualify
the securities covered by such registration statement under such other
securities or blue sky laws of such jurisdictions as shall be reasonably
requested by the Holders or any managing underwriter(s), to keep such
registration or qualification in effect for so long as such registration
statement remains in effect, and to take any other action which may be
reasonably necessary to enable any such Holder to consummate the disposition in
such jurisdictions of the securities owned by such Holder; provided that the
Company shall not be required in connection therewith or as a condition thereto
to qualify to do business or to file a general consent to service of process in
any such states or jurisdictions.

 

(7)           Notify each Holder of Registrable Securities at any time when a
prospectus relating thereto is required to be delivered under the Securities Act
of the happening of any event which causes the applicable prospectus, as then in
effect, to include an untrue statement of a material fact or to omit to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading in light of the circumstances then existing (which notice
shall not contain any material non-public information).

 

(8)           Within three (3) business days after any of the following events,
give written notice to the Holders (which notice shall not contain any material
non-public information):

 

(i)            when any registration statement filed pursuant to
Section 5.7(a) or any amendment thereto has been filed with the SEC (except for
any amendment effected by the filing of a document with the SEC pursuant to the
Exchange Act) and when such registration statement or any post-effective
amendment thereto has become effective;

 

(ii)           upon notification of any request by the SEC for amendments or
supplements to any registration statement or the prospectus included therein or
for additional information;

 

(iii)         upon notification of the issuance by the SEC of any stop order
suspending the effectiveness of any registration statement or the initiation of
any proceedings for that purpose;

 

(iv)          upon receipt by the Company or its legal counsel of any
notification with respect to the suspension of the qualification of the Common
Stock for sale in any jurisdiction or the initiation or threatening of any
proceeding for such purpose; and

 

(v)           upon notification of the happening of any event that requires the
Company to make changes in any effective registration statement or the
prospectus related to the registration statement in order to make the statements
therein not misleading (which notice shall be accompanied by an instruction to
suspend the use of the prospectus until the requisite changes have been made).

 

(9)           Use its commercially reasonable efforts to prevent the issuance or
obtain the withdrawal of any order suspending the effectiveness of any
registration statement

 

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referred to in Section 5.7(c)(8)(iii) at the earliest practicable time.

 

(10)         Upon the occurrence of any event contemplated by
Section 5.7(c)(7) or 5.7(c)(8)(v), promptly prepare a post-effective amendment
to such registration statement or a supplement to the related prospectus or file
any other required document so that, as thereafter delivered to the Holders and
any underwriters, the prospectus will not contain an untrue statement of a
material fact or omit to state any material fact necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading.

 

(11)         Use commercially reasonable efforts to procure the cooperation of
the Company’s transfer agent in settling any offering or sale of Registrable
Securities, including with respect to the transfer of physical stock
certificates into book-entry form in accordance with any procedures reasonably
requested by the Holders or any managing underwriter(s).

 

(d)           Suspension of Sales.  During any Scheduled Black-out Period (other
than with respect to any resale of Registrable Securities from an effective
Shelf Registration Statement if the Investor, at such time, has not appointed a
Board Representative or Board Observer pursuant to this Agreement) and upon
receipt of written notice from the Company that a registration statement,
prospectus or prospectus supplement contains or may contain an untrue statement
of a material fact or omits or may omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading or
that circumstances exist that make inadvisable use of such registration
statement, prospectus or prospectus supplement, each Holder of Registrable
Securities shall forthwith discontinue disposition of Registrable Securities
until termination of such Scheduled Black-out Period (if applicable) or until
such Holder has received copies of a supplemented or amended prospectus or
prospectus supplement, or until such Holder is advised in writing by the Company
that the use of the prospectus and, if applicable, prospectus supplement may be
resumed, and, if so directed by the Company, such Holder shall deliver to the
Company (at the Company’s expense) all copies, other than permanent file copies
then in such Holder’s possession, of the prospectus and, if applicable,
prospectus supplement covering such Registrable Securities current at the time
of receipt of such notice.  Excluding, to the extent applicable to the Investor,
Scheduled Black-out Periods, the total number of days of any delays under
Section 5.7(a)(2) and the total number of days of any suspensions under this
Section 5.7(d) shall not exceed, in the aggregate, sixty (60) days in any twelve
(12) month period (an “Allowable Suspension Period”).

 

(e)           Termination of Registration Rights.  A Holder’s registration
rights as to any securities held by such Holder (and its Affiliates, partners,
members and former members) shall not be available unless such securities are
Registrable Securities.

 

(f)            Free Writing Prospectuses; Furnishing Information.

 

(1)           The Investor shall not use any “free writing prospectus” (as
defined in Rule 405) in connection with the sale of Registrable Securities
without the prior written consent of the Company.

 

(2)           It shall be a condition precedent to the obligations of the
Company with respect to the Investor and/or the selling Holders to take any
action pursuant to Section 5.7(c)

 

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that the Investor and/or the selling Holders and the underwriters, if any, shall
furnish to the Company such information regarding themselves, the Registrable
Securities held by them and the intended method of disposition of such
securities as shall be required to effect the registered offering of their
Registrable Securities.

 

(g)                                 Indemnification.

 

(1)                                 The Company agrees to indemnify each Holder
and, if a Holder is a person other than an individual, such Holder’s officers,
directors, partners, employees, agents, representatives and Affiliates, and each
person, if any, that controls a Holder within the meaning of the Securities Act
(each, a “Holder Indemnitee”), against any and all Losses, joint or several,
arising out of or based upon any untrue statement or alleged untrue statement of
material fact contained in any registration statement, including any preliminary
prospectus or final prospectus contained therein or any amendments or
supplements thereto or any documents incorporated therein by reference or
contained in any “free writing prospectus” (as such term is defined in Rule 405)
prepared by the Company or authorized by it in writing for use by such Holder
(or any amendment or supplement thereto); or any omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading; provided that the Company shall not be liable to such
Holder Indemnitee in any such case to the extent that any such Loss arises out
of or is based upon (i) an untrue statement or omission of material fact made in
such registration statement, including any such preliminary prospectus or final
prospectus contained therein or any such amendments or supplements thereto or
contained in any “free writing prospectus” (as such term is defined in Rule 405)
prepared by the Company or authorized by it in writing for use by such Holder
Indemnitee (or any amendment or supplement thereto), in reliance upon and in
conformity with information regarding such Holder Indemnitee or its plan of
distribution or ownership interests which was furnished in writing to the
Company by such Holder Indemnitee expressly for use in connection with such
registration statement, including any such preliminary prospectus or final
prospectus contained therein or any such amendments or supplements thereto, or
(ii) offers or sales effected by or on behalf of such Holder Indemnitee “by
means of” (as defined in Rule 159A) a “free writing prospectus” (as defined in
Rule 405) that was not authorized in writing by the Company.

 

(2)                                 In connection with any registration
statement in which the Investor (or a Holder who assumes the obligations of the
Investor in accordance with Section 5.7(h)) is participating, such Investor (or
such Holder) agrees to indemnify the Company and its officers, directors,
employees, agents, representatives and Affiliates (each, a “Company
Indemnitee”), against any and all Losses, joint or several, arising out of or
based upon (i) an untrue statement or omission of a material fact made in any
registration statement, including any such preliminary prospectus or final
prospectus contained therein or any such amendments or supplements thereto or
contained in any free writing prospectus (as such term is defined in Rule 405)
prepared by the Company or authorized by it in writing for use by the Investor
or such Holder (or any amendment or supplement thereto), in reliance upon and in
conformity with information regarding the Investor or such Holder or its plan of
distribution or ownership interests which was furnished in writing to the
Company by the Investor or such Holder expressly for use in connection with such
registration statement, including any such preliminary prospectus or final
prospectus contained therein or any such amendments or supplements thereto, or
(ii) offers or sales effected by or on behalf of the

 

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Investor or such Holder “by means of” (as defined in Rule 159A) a “free writing
prospectus” (as defined in Rule 405) that was not authorized in writing by the
Company; provided that the obligation to indemnify shall be individual, not
joint and several, for the Investor and each such Holder and shall be limited to
the net amount of proceeds received by the Investor or such Holder from the sale
of Registrable Securities pursuant to such registration statement.

 

(3)                                 If the indemnification provided for in
Section 5.7(g) is unavailable to a Holder Indemnitee or Company Indemnitee
(each, an “Indemnitee”), respectively, with respect to any Losses or is
insufficient to hold the Indemnitee harmless as contemplated therein, then the
indemnifying party, in lieu of indemnifying such Indemnitee, shall contribute to
the amount paid or payable by such Indemnitee as a result of such Losses in such
proportion as is appropriate to reflect the relative fault of the Indemnitee, on
the one hand, and the indemnifying party, on the other hand, in connection with
the statements or omissions which resulted in such Losses as well as any other
relevant equitable considerations.  The relative fault of the indemnifying
party, on the one hand, and of the Indemnitee, on the other hand, shall be
determined by reference to, among other factors, whether the untrue statement of
a material fact or omission to state a material fact relates to information
supplied by the indemnifying party or by the Indemnitee and the parties’
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission; the Company and each Holder agree that it
would not be just and equitable if contribution pursuant to this
Section 5.7(g)(3) were determined by pro rata allocation or by any other method
of allocation that does not take account of the equitable considerations
referred to in Section 5.7(g)(1) and 5.7(g)(2).  Notwithstanding the provisions
of this Section 5.7(g), no Holder shall be required to contribute, in the
aggregate, any amount in excess of the amount by which the net proceeds actually
received by such Holder from the sale of the Registrable Securities subject to
the proceeding exceeds the amount of any damages that such Holder has otherwise
been required to pay by reason of such untrue or alleged untrue statement or
omission or alleged omission.  No Indemnitee guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from the indemnifying party if the
indemnifying party was not guilty of such fraudulent misrepresentation.

 

(4)                                 The indemnity and contribution agreements
contained in this Section 5.7(g) are in addition to any liability that the
Company may have to the Indemnitees and are not in diminution or limitation of
the indemnification provisions under Section 5.6 of this Agreement.

 

(h)                                 Assignment of Registration Rights.  The
rights of the Investor to registration of Registrable Securities pursuant to
Section 5.7(a) may be assigned by the Investor to a transferee or assignee of
Registrable Securities to which (1) there is transferred no less than the lesser
of (i) one million dollars ($1,000,000) in Registrable Securities and (ii) all
Registrable Securities held by the Investor, and (2) such transfer or assignment
is permitted under the terms hereof; provided, however, that the transferee
shall have agreed in writing for the benefit of the Company to be bound by all
of the obligations of the Investor under Section 5.7 of this Agreement with
respect to the transferred or assigned Registrable Securities, and provided
further, that the transferor shall, within ten (10) days after such transfer,
furnish to the Company written notice of the name and address of such transferee
or assignee and the number and type of Registrable Securities that are being
transferred or assigned.

 

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(i)                                    Rule 144; Rule 144A Reporting.  With a
view to making available to the Investor and each Holder the benefits of certain
rules and regulations of the SEC which may permit the sale of the Registrable
Securities to the public without registration, the Company agrees to use its
commercially reasonable efforts to:

 

(1)                                 make and keep adequate and current public
information available, as those terms are understood and defined in
Rule 144(c)(1) or any similar or analogous rule promulgated under the Securities
Act, at all times after the effective date of this Agreement;

 

(2)                                 file with the SEC, in a timely manner, all
reports and other documents required of the Company under the Exchange Act, and
if at any time the Company is not required to file such reports, make available,
upon the request of any Holder, such information necessary to permit sales
pursuant to Rule 144A (including the information required by Rule 144A(d)(4) and
the Securities Act);

 

(3)                                 so long as the Investor or a Holder owns any
Registrable Securities, furnish to the Investor or such Holder forthwith upon
request: a written statement by the Company as to its compliance with the
reporting requirements of Rule 144 under the Securities Act and of the Exchange
Act; a copy of the most recent annual or quarterly report of the Company; and
such other reports and documents as the Investor or such Holder may reasonably
request in availing itself of any rule or regulation of the SEC allowing it to
sell any such securities without registration; and

 

(4)                                 take such further action as any Holder may
reasonably request, all to the extent required from time to time to enable such
Holder to sell Registrable Securities without registration under the Securities
Act.

 

(j)                                    As used in this Section 5.7, the
following terms shall have the following respective meanings:

 

(1)                                 “Effectiveness Deadline” means, with respect
to the initial Shelf Registration Statement required to be filed pursuant to
Section 5.7(a), the earlier of (i) the one hundred thirty-fifth (135th) calendar
day following the Closing Date (or, if the Registration Deadline is extended a
number of days beyond sixty (60) days by clause (ii) of the definition of
“Registration Deadline” below, then a number of days after the Closing Date
equal to one hundred thirty-five (135) plus such number of days by which the
Registration Deadline was extended beyond sixty (60)) and (ii) the fifth (5th)
business day after the date the Company is notified (orally or in writing,
whichever is earlier) by the SEC that such Shelf Registration Statement will not
be “reviewed” or will not be subject to further review; provided that if the
Effectiveness Deadline falls on a Saturday, Sunday or other day that the SEC is
closed for business, the Effectiveness Deadline shall be extended to the next
business day on which the SEC is open for business.

 

(2)                                 “Holder” means the Investor and any other
holder of Registrable Securities to whom the registration rights conferred by
this Agreement have been transferred in compliance with Section 5.7(h) hereof.

 

(3)                                 “Holders’ Counsel” means one (1) counsel for
the selling Holders chosen by those Holders holding a majority interest in the
Registrable Securities being registered.

 

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(4)                                 “Register”, “registered”, and “registration”
shall refer to a registration effected by preparing and (i) filing a
registration statement in compliance with the Securities Act and applicable
rules and regulations thereunder, and the declaration or ordering of
effectiveness of such registration statement or (ii) filing a prospectus and/or
prospectus supplement in respect of an appropriate effective registration
statement pursuant to Rule 415 under the Securities Act.

 

(5)                                 “Registrable Securities” means (i) all
Securities acquired by the Investor hereunder and (ii) any equity securities
issued or issuable directly or indirectly with respect to the Securities
referred to in the foregoing clause (i) by way of stock dividend or stock split
or in connection with a combination of shares, recapitalization,
reclassification, merger, amalgamation, arrangement, consolidation or other
reorganization, provided that, once issued, such securities will not be
Registrable Securities when (A) they are sold pursuant to an effective
registration statement under the Securities Act; (B) they shall have ceased to
be outstanding; (C) with respect to any transferee of the Registrable Securities
who is not an Affiliate of the Investor or a Holder, they shall be freely
transferable pursuant to Rule 144 under the Securities Act in the hand of such
transferee without any volume, holding period or other limitations (including no
requirement for the Company to be in compliance with the current public
information requirements under Rule 144(c)(1) (or Rule 144(i)(2), if
applicable); or (D) they have been sold in a private transaction in which the
transferor’s rights under this Agreement are not assigned to the transferee of
the securities.  No Registrable Securities may be registered under more than one
registration statement at one time.

 

(6)                                 “Registration Deadline” means, with respect
to the initial Shelf Registration Statement required to be filed pursuant to
Section 5.7(a), the later of (i) sixty (60) days after the Closing Date and
(ii) if audited financial statements for the year ended December 31, 2011, are
required to be included in the initial filing of the initial Shelf Registration
Statement pursuant to Rule 3-12 of Regulation S-X of the SEC, then two
(2) business days after such audited financial statements are first available.

 

(7)                                 “Registration Expenses” means all expenses
incurred by the Company in effecting any registration pursuant to this Agreement
(whether or not any registration or prospectus becomes effective or final) or
otherwise complying with its obligations under this Section 5.7, including all
registration, filing and listing fees (including filings made with the Financial
Industry Regulatory Authority), printing expenses (including printing of
prospectuses and certificates for the Registrable Securities), the Company’s
expenses for messenger and delivery services and telephone, fees and
disbursements of counsel for the Company, blue sky fees and expenses, expenses
incurred by the Company in connection with any “road show,” and expenses of the
Company’s independent accountants in connection with any regular or special
reviews or audits incident to or required by any such registration, but shall
not include the compensation of regular employees of the Company, which shall be
paid in any event by the Company, or Selling Expenses.

 

(8)                                 “Rule 144,” “Rule 144A,” “Rule 158,”
“Rule 159A,” “Rule 405” and “Rule 415” mean, in each case, such rule promulgated
under the Securities Act (or any successor provision), as the same shall be
amended from time to time.

 

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(9)                                 “Scheduled Black-out Period” means the
period from and including the last day of a fiscal quarter of the Company to and
including the business day after the day on which the Company publicly releases
its earnings for such fiscal quarter.

 

(10)                          “SEC Guidance” means (i) any publicly-available
written or oral guidance, comments, requirements or requests of the SEC staff
and (ii) the Securities Act.

 

(11)                          “Selling Expenses” means all discounts, selling
commissions and stock transfer taxes applicable to the sale of Registrable
Securities and fees and disbursements of counsel for any Holder, other than up
to thirty thousand dollars ($30,000) of fees and disbursements of Holders’
Counsel, which shall be reimbursed by the Company pursuant to Section 5.7(b).

 

(k)                                 If:

 

(1)                                 the initial Shelf Registration Statement is
not filed with the SEC on or prior to the Registration Deadline;

 

(2)                                 the initial Shelf Registration Statement or
any new Shelf Registration Statement required under Section 5.7(a) is not
declared effective by the SEC (or otherwise does not become effective) for any
reason on or prior to the Effectiveness Deadline;

 

(3)                                 after its Effective Date, (i) such Shelf
Registration Statement ceases for any reason (including by reason of a stop
order or the Company’s failure to update the Shelf Registration Statement), to
remain continuously effective as to all Registrable Securities for which it is
required to be effective or (ii) the Holders are not permitted to utilize the
Prospectus therein to resell such Registrable Securities (in each case of
(i) and (ii), other than during an Allowable Suspension Period);

 

(4)                                 a suspension period exceeds the length of an
Allowable Suspension Period; or

 

(5)                                 after the date six (6) months following the
Closing Date, and only in the event a Registration Statement is not effective or
available to sell all Registrable Securities, the Company fails to file with the
SEC any required reports under Section 13 or 15(d) of the Exchange Act such that
it is not in compliance with Rule 144(c)(1) (or Rule 144(i)(2), if applicable),
as a result of which the Holders who are not affiliates are unable to sell
Registrable Securities without restriction under Rule 144 (any such failure or
breach in clauses (1) through (5) above being referred to as an “Event”, and,
for purposes of clauses (1), (2), (3) or (5) the date on which such Event
occurs, or for purposes of clause (4) the date on which such Allowable
Suspension Period is exceeded, being referred to as an “Event Date” for purposes
of this Section 5.7(k)), then in addition to any other rights the Investor or
any other Holder may have hereunder or under applicable law, on each such Event
Date the Company shall pay to the Investor and each other Holder an amount in
cash, as partial liquidated damages and not as a penalty (“Liquidated Damages”),
equal to thirty-seven thousand, five hundred dollars ($37,500).  The parties
hereto agree that notwithstanding anything to the contrary in this Agreement, no
Liquidated Damages shall be payable to the Investor if as of the relevant Event
Date (x) the Investor has not appointed a Board Representative or Board
Observer, (y) the Registrable Securities may be sold by the

 

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Investor without volume or manner of sale restrictions under Rule 144 under the
Securities Act and (z) the Company is in compliance with the current public
information requirements under Rule 144(c)(1) (or Rule 144(i)(2), if
applicable), as reasonably determined by counsel to the Company.  The
Effectiveness Deadline for a Shelf Registration Statement shall be extended
without default or Liquidated Damages hereunder in the event that the Company’s
failure to obtain the effectiveness of the Shelf Registration Statement on a
timely basis results from the failure of the Investor to timely provide the
Company with information requested by the Company and necessary to complete the
Shelf Registration Statement in accordance with the requirements of the
Securities Act (in which case the Effectiveness Deadline would be extended with
respect to Registrable Securities held by the Investor or such other Holder, as
applicable).

 

5.8                               GOVERNANCE MATTERS.

 

(a)                                 The Company shall cause the Board
Representative to be elected or appointed, as the case may be, subject to all
legal and governance requirements and approvals regarding service and election
or appointment as a director of the Company (including any required approvals of
the Federal Reserve), and to the approval of the Company’s Nominating/Corporate
Governance Committee (the “Governance Committee”) (such approval not to be
unreasonably withheld, delayed or conditioned), to the Board of Directors, as
well as the board of directors of the Bank (the “Bank Board”) for as long as the
Investor, together with its Affiliates, has a Qualifying Ownership Interest. 
The Company will recommend the election of the Board Representative to the Board
of Directors and the Bank Board to its shareholders at the Company’s annual
meeting of shareholders, subject to satisfaction of all legal and governance
requirements regarding service as a director of the Company (including those of
the Federal Reserve) and to the approval of the Governance Committee (such
approval not to be unreasonably withheld, delayed or conditioned).  If the
Investor no longer has a Qualifying Ownership Interest, the Investor will have
no further rights under Sections 5.8(a) through 5.8(c) and, at the written
request of the Board of Directors, shall use all commercially reasonable efforts
to cause its Board Representative to resign from the Board of Directors and the
Bank Board as promptly as possible thereafter.  The Investor shall promptly
inform the Company if and when it ceases to hold a Qualifying Ownership Interest
in the Company.

 

(b)                                 The Board Representative shall, subject to
applicable law, be one of the Company’s and the Governance Committee’s nominees
to serve on the Board of Directors.  The Company shall use its commercially
reasonable efforts to have the Board Representative elected as a director of the
Company by the shareholders of the Company, and the Company shall solicit
proxies for the Board Representative to the same extent as it does for any of
its other Company nominees to the Board of Directors.  At the option of the
Board Representative, the Board of Directors shall cause such Board
Representative to be appointed to any of two (2) of the following three
(3) committees of the Board of Directors, and/or any equivalent committees of
the Bank, as agreed by the Company and the Investor prior to the Closing: the
Compensation Committee, the Governance Committee and the Risk Management
Committee, in each case so long as the Board Representative qualifies to serve
on such committees under the Company’s or the Bank’s corporate governance
guidelines and committee charters currently in effect, as applicable, and
rules applicable to the Company by any exchange on which the Common Shares are
then listed.  The Company shall ensure, and shall cause the Bank to ensure, that
each committee of the Board of Directors and any equivalent committees of the
Bank shall have at least four (4) members for so

 

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long as the Investor shall have the right to appoint a Board Representative. 
The Board Representative shall have the right to attend, as a nonvoting
observer, each meeting of each committee of the Board of Directors and the Bank
Board of which the Board Representative is not then a member.  The Investor
covenants and agrees to hold all such information obtained from its Board
Representative in confidence pursuant to the confidentiality and non-disclosure
provisions of Section 3.3(b) above.

 

(c)                                  Subject to Section 5.8(a), upon the death,
resignation, retirement, disqualification or removal from office as a member of
the Board of Directors or the Bank Board of the Board Representative, the
Investor shall have the right to designate the replacement for such Board
Representative, which replacement shall satisfy all legal and governance
requirements regarding service as a director of the Company and shall be
reasonably acceptable to the Company.  The Board of Directors and the Bank Board
shall use their respective commercially reasonable efforts to take all action
required to fill the vacancy resulting therefrom with such person (including
such person, subject to applicable law, being one of the Company’s and the
Governance Committee’s nominees to serve on the Board of Directors and the Bank
Board, using all commercially reasonable efforts to have such person elected as
director of the Company by the shareholders of the Company and the Company
soliciting proxies for such person to the same extent as it does for any of its
other nominees to the Board of Directors or the Bank Board, as the case may be).

 

(d)                                 The Company hereby agrees that, from and
after the Closing Date, for so long as the Investor and its Affiliates in the
aggregate have a Qualifying Ownership Interest and do not have a Board
Representative currently serving on the Board of Directors and the Bank Board
(or have a Board Representative whose appointment is subject to receipt of
regulatory approvals), the Company shall, subject to applicable law, invite a
person designated by the Investor and reasonably acceptable to the Company (the
“Board Observer”) to attend meetings of the Board of Directors and the Bank
Board (including any meetings of committees thereof) in a nonvoting observer
capacity.  The Board Observer shall be entitled to attend such meetings only in
the event the Investor does not have a Board Representative on the Board of
Directors and the Bank Board.  The Board Observer shall not have any right to
vote on any matter presented to the Board of Directors or the Bank Board or any
committee thereof.  The Company shall give the Board Observer written notice of
each meeting of the Board of Directors and the Bank Board at the same time and
in the same manner as the members of the Board of Directors or the Bank Board
(as the case may be), shall provide the Board Observer with all written
materials and other information given to members of the Board of Directors or
the Bank Board (as the case may be) at the same time such materials and
information are given to such members and shall permit the Board Observer to
attend as an observer at all meetings thereof, and in the event the Company
proposes to take any action by written consent in lieu of a meeting, the Company
shall give written notice thereof to the Board Observer prior to the effective
date of such consent describing the nature and substance of such action and
including the proposed text of such written consents; provided, however, that:
(1) the Board Observer may be excluded, from executive sessions comprised solely
of independent directors, by the Chairman of the Board (or, if applicable, the
lead or presiding independent director) if, in the written advice of counsel,
such exclusion is necessary in order for the Company to comply with applicable
law, regulation or stock exchange listing standards (it being understood that it
is not expected that the Board Observer would be excluded from routine executive
sessions); (2) the Company, the Board of Directors, the Bank and the Bank Board
shall

 

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have the right to withhold any information and to exclude the Board Observer
from any meeting or portion thereof if doing so is, in the written advice of
counsel, (i) necessary to protect the attorney-client privilege between such
party and counsel or (ii) necessary to avoid a violation of fiduciary
requirements under applicable law; and (3) the Investor shall cause the Board
Observer to agree to hold in confidence and trust and to act in a fiduciary
manner with respect to all information provided to the Board Observer.  The
Investor covenants and agrees to hold all such information obtained from the
Board Observer as provided in the prior sentence in confidence pursuant to the
confidentiality and non-disclosure provisions of Section 3.3(b) above.  If the
Investor and its Affiliates in the aggregate no longer have a Qualifying
Ownership Interest, the Investor will have no further rights under this
Section 5.8(d).

 

(e)           The Board Representative shall be entitled to compensation and
indemnification in connection with his or her role as a director to the same
extent as other directors on the Board of Directors or the Bank Board, as
applicable, and the Board Representative shall be entitled to reimbursement for
reasonable documented, out-of-pocket expenses incurred in attending meetings of
the Board of Directors and the Bank Board or any committee thereof in accordance
with Company policy.  The Company shall notify the Board Representative or the
Board Observer, as the case may be, of all regular meetings and special meetings
of the Board of Directors or the Bank Board and of all regular and special
meetings of any committee of the Board of Directors and any committee of the
Bank Board.  The Company shall provide the Board Representative or the Board
Observer, as the case may be, with copies of all notices, minutes, consents and
other material that it provides to all other members of the Board of Directors
or the Bank Board (as applicable) concurrently as such materials are provided to
the other members.

 

(f)            For purposes of this Agreement, “Board Representative” means such
person designated by the Investor to be elected or appointed to the Board of
Directors and the Bank Board in accordance with all legal and governance
requirements regarding service and election or appointment as a director of the
Company or any individual designated as a replacement Board Representative
pursuant to Section 5.8(c) hereof.

 

5.9          ANTI-TAKEOVER MATTERS.  If any Takeover Law may become, or may
purport to be, applicable to the transactions contemplated or permitted by this
Agreement or the other Transaction Documents, the Company and the Board of
Directors shall grant such approvals and take such actions as are necessary so
that the transactions contemplated or permitted by this Agreement and the other
Transaction Documents may be consummated, as promptly as practicable, on the
terms contemplated by this Agreement and the other Transaction Documents, as the
case may be, and otherwise act to eliminate or minimize the effects of any
Takeover Law on any of the transactions contemplated or permitted by this
Agreement and the other Transaction Documents.

 

5.10        ADDITIONAL REGULATORY MATTERS.

 

(a)           Each of the Company and the Investor agrees to cooperate and use
its commercially reasonable efforts to ensure, including by communicating with
each other with respect to the Investor’s purchase of the Common Shares, that
neither the Investor nor any of the Investor’s Affiliates will become or control
a “bank holding company” within the meaning of the BHC Act and the CBCA.

 

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(b)           Notwithstanding anything to the contrary in this Agreement,
neither the Company nor any Company Subsidiary shall knowingly take any action
(including any redemption, repurchase or recapitalization of Common Stock or
securities or rights, options or warrants to purchase Common Stock or securities
of any type whatsoever that are, or may become, convertible into or exchangeable
into or exercisable for Common Stock, in each case, where the Investor is not
given the right to participate in such redemption, repurchase or
recapitalization to the extent of the Investor’s pro rata proportion), that
would reasonably be expected to pose a substantial risk that (1) the Investor’s
equity of the Company (together with equity of the Company owned by the
Investor’s affiliates (as such term is used under the BHC Act)) would exceed
thirty-three and three-tenths percent (33.3%) of the Company’s total equity or
(2) the Investor’s ownership of any class of Voting Securities of the Company
(together with the ownership by the Investor’s affiliates (as such term is used
under the BHC Act) of Voting Securities of the Company) would exceed twenty-four
and nine-tenths percent (24.9%) of such class, in each case without the prior
written consent of the Investor or such person, or to increase to an amount that
would constitute “control” under the BHC Act, the CBCA or any rules or
regulations promulgated thereunder (or any successor provisions) or otherwise
cause the Investor to “control” the Company under and for purposes of the BHC
Act, the CBCA or any rules or regulations promulgated thereunder (or any
successor provisions).

 

(c)           Notwithstanding anything in this Agreement, in no event will the
Investor or any of its Affiliates be obligated to:

 

(1)           without limiting clause (2) below, (i) propose or accept any
divestiture of any of the Investor’s or any of its Affiliates’ assets,
(ii) accept any operational restriction on the Investor’s or any of its
Affiliates’ business or agree to take any action that limits the Investor’s or
its Affiliates’ commercial practices in any way (except as they relate to the
Company and the Company Subsidiaries) including by requiring the modification of
governance, fee or carried interest arrangements with respect to, or otherwise
by imposing any capital or other requirements on, the Investor or any of its
Affiliates, (iii) agree to provide capital to, or otherwise maintain or
contribute, directly or indirectly, to the capital of, the Company or any
Company Subsidiary (including the Bank) other than the aggregate amount of the
Purchase Price or (iv) register as a bank holding company, in each case in order
to obtain any consent, acceptance or approval of any Governmental Entity to
consummate the transactions contemplated by this Agreement and the other
Transaction Documents; or

 

(2)           propose or agree to accept any term or condition or otherwise
modify the terms of this Agreement or any other Transaction Document, including,
for the avoidance of doubt, the terms or the amount of the Securities to be
delivered by the Company under this Agreement, to obtain any consent, acceptance
or approval of any Governmental Entity to the consummation of the transactions
contemplated by this Agreement and the other Transaction Documents if such term,
condition, modification or confirmation would (i) materially adversely affect
(with respect to the Investor or its Affiliates) any material term of the
transactions or (ii) reasonably be expected to adversely affect (with respect to
the Investor or its Affiliates) any material financial term of the transactions
contemplated by this Agreement and the other Transaction Documents or the
anticipated benefits to the Investor and its Affiliates hereunder.

 

(d)           So long as the Investor holds any Securities, the Company will
not, without

 

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the consent of the Investor, take any action, directly or indirectly through its
subsidiaries or otherwise, that the Board of Directors of the Company believes
in good faith would reasonably be expected to cause the Investor to be subject
to transfer restrictions or other covenants of the FDIC Statement of Policy on
Qualifications for Failed Bank Acquisitions as in effect at the time of taking
such action.

 

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

 

5.12        SECURITIES LAWS DISCLOSURE; PUBLICITY.  By 9:00 a.m., New York City
time, on the first (1st) business day after the date of this Agreement, the
Company shall issue one or more press releases or Current Reports on Form 8-K
(collectively, the “Press Release”) reasonably acceptable to the Investor
disclosing all material terms of the transactions contemplated hereby and by the
other Transaction Documents and any other material non-public information that
the Company may have provided to the Investor at any time prior to the filing of
the Press Release.  On or before 9:00 a.m., New York City time, on the fourth
(4th) trading day immediately following the execution of this Agreement, the
Company will file a Current Report on Form 8-K with the SEC describing the
material terms of this Agreement and the other Transaction Documents (and
including as exhibits to such Current Report on Form 8-K the material
Transaction Documents).  If this Agreement terminates prior to Closing, by the
end of the first (1st) business day following the date of such termination, the
Company shall issue a press release disclosing such termination. 
Notwithstanding the foregoing, the Company shall not publicly disclose the name
of the Investor or any Affiliate or investment adviser of the Investor or
include the name of the Investor or any Affiliate or investment adviser of the
Investor in any press release or in any filing with the SEC (other than a
registration statement) or any regulatory agency or trading market, without the
prior written consent of the Investor, except (i) as required by the federal
securities laws in connection with (A) any registration statement contemplated
by Section 5.7 and (B) the filing of final Transaction Documents with the SEC
and (ii) to the extent such disclosure is required by law, at the request of the
staff of the SEC or regulatory agency or under trading market regulations, in
which case the Company shall provide the Investor with prior written notice of
such disclosure permitted under this subclause (ii).  Whenever any party
determines, based upon the advice of such party’s counsel, that a public
announcement or other disclosure is required by or advisable with respect to any
applicable law or regulation, the parties shall discuss the same with each other
in good faith prior to the making of such public announcement or other
disclosure.

 

5.13        NO ADDITIONAL ISSUANCES.  Between the date of this Agreement and the
Closing Date, except for the issuance of Common Shares issuable as of the date
hereof as set forth in Section 2.2(c), the Common Shares issued in connection
with the Rights Offering and the Securities being issued pursuant to this
Agreement and the other Transaction Documents, the Company shall not issue and
agree to issue any additional Common Shares or other securities which provide
the holder thereof the right to convert such securities into Common Shares.

 

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5.14        RIGHTS OFFERING.

 

(a)           As promptly as practicable following the execution of this
Agreement, and subject to compliance with all applicable laws and regulations,
including the Securities Act, the Company shall distribute to each holder of
record of Common Stock as of April 6, 2012 (each, a “Legacy Shareholder”),
non-transferable rights (the “Rights”) to purchase from the Company an amount of
Common Shares calculated pursuant to Section 5.14(b) at a purchase price of five
dollars and seventy-five cents ($5.75) per share (the “Rights Purchase Price”). 
The transactions described in this Section 5.14, including the purchase and sale
of Common Shares upon the exercise of Rights and the commitment to purchase
Unsubscribed Shares pursuant to Section 5.14(d) shall be referred to in this
Agreement as the “Rights Offering”.  The registration statement relating to the
Rights Offering shall be filed with the SEC within twelve (12) calendar days of
the execution of this Agreement; provided, however, if audited financial
statements for the year ended December 31, 2011, are required to be included in
the initial filing of the registration statement relating to the Rights Offering
pursuant to Rule 3-12 of Regulation S-X of the SEC, then the registration
statement related to the Rights Offering shall be filed with the SEC within two
(2) business days after such audited financial statements are first available. 
The Company shall use commercially reasonable efforts to cause the registration
statement relating to the Rights Offering to be declared effective as promptly
as practicable following the date of this Agreement, but in no event shall
effectiveness of the registration statement and distribution of the Rights be
delayed more than thirty (30) days following the date the Company is notified
(orally or in writing, whichever is earlier) by the SEC that the registration
statement relating to the Rights Offering will not be “reviewed” or will not be
subject to further review.

 

(b)           Each Right shall entitle a Legacy Shareholder to purchase any
whole number of Common Shares (including, for the avoidance of doubt, pursuant
to customary over-subscription privileges), provided that: (1) no Legacy
Shareholder shall thereby exceed, together with any other person with whom such
Legacy Shareholder may be aggregated under applicable law, nine and nine-tenths
percent (9.9%) Beneficial Ownership of the Company’s Common Shares; and (2) the
aggregate purchase price of all Common Shares purchased in the Rights Offering
shall not exceed seven million dollars ($7,000,000).

 

(c)           In the event the Rights Offering is over-subscribed, subscriptions
by Legacy Shareholders shall be reduced proportionally based on their pro rata
ownership of the Common Stock outstanding as of the close of business on the
trading day immediately preceding the Closing Date.

 

(d)           In the event the Company does not sell an aggregate amount of
Common Shares to the Legacy Shareholders equal to the maximum number permitted
by Section 5.14(b), the Investor hereby agrees to purchase the Unsubscribed
Shares in accordance with the terms and conditions set forth in Section 1.2(a). 
For purposes of this Agreement, “Unsubscribed Shares” means that number of
Common Shares determined as follows: (1) the maximum number of Common Shares
permitted to be sold under Section 5.14(b), minus (2) the number of Common
Shares actually subscribed for by the Legacy Shareholders.  The obligation of
the Investor described in this Section 5.14(d) shall be personal to the Investor
and the transfer, assignment and/or conveyance of said obligation from the
Investor to any other person and/or entity, other than to an Affiliate of the
Investor or a person that shares a common discretionary

 

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investment advisor with the Investor, but only if such transferee agrees in
writing for the benefit of the Company to be bound by the terms of this
Agreement to the same extent as the Investor (with a copy thereof to be
furnished to the Company) (any such transferee shall be included in the term
“Investor”), is prohibited and shall be void and of no force or effect.

 

ARTICLE VI.
MISCELLANEOUS

 

6.1          SURVIVAL.  Each of the representations and warranties set forth in
this Agreement shall survive the Closing under this Agreement but only for a
period of eighteen (18) months following the Closing Date (or until final
resolution of any claim or action arising from the breach of any such
representation and warranty, if notice of such breach was provided prior to the
end of such period) and thereafter shall expire and have no further force and
effect, except that the Special Representations and Warranties shall survive
until expiration of the statute of limitations applicable to the underlying
claim (or until final resolution of any claim or action arising from the breach
of any such Special Representations and Warranties, if notice of such breach was
provided prior to the end of such period).  Except as otherwise provided herein,
all covenants and agreements contained herein shall survive for the duration of
any statutes of limitations applicable thereto or until, by their respective
terms, they are no longer operative.

 

6.2          AMENDMENT.  No amendment or waiver of this Agreement will be
effective with respect to any party unless made in writing and signed by an
officer of a duly authorized representative of such party.

 

6.3          WAIVERS.  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.  The conditions
to each party’s obligation to consummate the Closing are for the sole benefit of
such party and may be waived by such party in whole or in part to the extent
permitted by applicable law.  No waiver of any party to this Agreement will be
effective unless it is in a writing signed by a duly authorized officer of the
waiving party that makes express reference to the provision or provisions
subject to such waiver.  The rights and remedies herein provided shall be
cumulative and not exclusive of any rights or remedies provided by law.

 

6.4          COUNTERPARTS AND FACSIMILE.  For the convenience of the parties
hereto, this Agreement may be executed in any number of separate counterparts,
each such counterpart being deemed to be an original instrument, and all such
counterparts will together constitute the same agreement.  Executed signature
pages to this Agreement may be delivered by facsimile transmission or by e-mail
delivery of a “.pdf” format data file and such signatures will be deemed as
sufficient as if actual signature pages had been delivered.

 

6.5          GOVERNING LAW.  This Agreement will be governed by and construed in
accordance with the laws of the State of Michigan applicable to contracts made
and to be performed entirely within the State of Michigan.  The parties hereto
irrevocably and unconditionally consent to submit to the exclusive jurisdiction
of the state and federal courts located in the State of Michigan for any
actions, suits or proceedings arising out of or relating to this Agreement and
the transactions contemplated hereby.

 

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6.6          WAIVER OF JURY TRIAL.  EACH OF THE PARTIES HERETO HEREBY
IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING
ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY.

 

6.7          NOTICES.  Any notice, request, instruction or other document to be
given hereunder by any party to the other will be in writing and will be deemed
to have been duly given (a) on the date of delivery if delivered personally or
by telecopy, facsimile or e-mail, upon confirmation of receipt, (b) on the first
(1st) business day following the date of dispatch if delivered by a recognized
next-day courier service or (c) on the third (3rd) business day following the
date of mailing if delivered by registered or certified mail, return receipt
requested, postage prepaid.  All notices hereunder shall be delivered as set
forth below or pursuant to such other instructions as may be designated in
writing by the party to receive such notice.

 

If to the Investor:

 

Steinhardt Capital Management, LLC

650 Madison Avenue, 17th Floor

New York, NY 10022

Attn: David R. Steinhardt

Telephone: (212) 610-2101

Facsimile: (646) 304-9686

Email: davids@woostercapital.com

 

with a copy to (which copy alone shall not constitute notice):

 

Bodman PLC

6th Floor at Ford Field

1901 St. Antoine Street

Detroit, MI 48226

Attn: Edwin J. Lukas

Telephone: (313) 393-7523

Facsimile: (313) 393-7579

Email: elukas@bodmanlaw.com

 

If to the Company:

 

Mackinac Financial Corporation

130 South Cedar Street

Manistique, MI 49854

Attn: Paul D. Tobias, Chief Executive Officer

Telephone: (248) 290-5901

Facsimile: (248) 290-5913

Email: ptobias@bankmbank.com

 

with a copy to (which copy alone shall not constitute notice):

 

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Honigman Miller Schwartz and Cohn LLP

350 East Michigan Avenue, Suite 300

Kalamazoo, MI 49007

Attn: Phillip D. Torrence, Esq.

Telephone: (269) 337-7702

Facsimile: (269) 337-7703

Email: ptorrence@honigman.com

 

6.8          ENTIRE AGREEMENT, ETC.  This Agreement (including the Exhibits,
Schedules and Disclosure Schedules hereto) constitutes the entire agreement and
supersedes all other prior agreements, understandings, representations and
warranties, both written and oral, between the parties with respect to the
subject matter hereof, including the Prior Agreement; the terms and conditions
of this Agreement shall inure to the benefit of and be binding upon the parties
hereto and their respective successors and, with respect to the Investor, its
permitted assigns; and this Agreement will not be assignable by operation of law
or otherwise (any attempted assignment in contravention hereof being null and
void), except that the Investor shall be permitted to assign its rights or
obligations hereunder (a) to any Affiliate entity or person that shares a common
discretionary investment advisor, but only if the transferee agrees in writing
for the benefit of the Company to be bound by the terms of this Agreement to the
same extent as the Investor (with a copy thereof to be furnished to the Company)
(any such transferee shall be included in the term “Investor”); provided,
further, that no such assignment shall relieve the Investor of any of its
obligations under this Agreement and (b) as and to the extent provided in
Section 5.6.

 

6.9          OTHER DEFINITIONS.  Wherever required by the context of this
Agreement, the singular shall include the plural and vice versa, and the
masculine gender shall include the feminine and neuter genders and vice versa,
and references to any agreement, document or instrument shall be deemed to refer
to such agreement, document or instrument as amended, supplemented or modified
from time to time.  All article, section, paragraph or clause references not
attributed to a particular document shall be references to such parts of this
Agreement, and all exhibit, annex and schedule references not attributed to a
particular document shall be references to such exhibits, annexes and schedules
to this Agreement.  When used herein:

 

(a)           the term “subsidiary” means those corporations, banks, savings
banks, associations and other persons of which such person owns or controls
fifty-one percent (51%) or more of the outstanding equity securities either
directly or indirectly through an unbroken chain of entities as to each of which
fifty-one percent (51%) or more of the outstanding equity securities is owned
directly or indirectly by its parent; provided, however, that there shall not be
included any such entity to the extent that the equity securities of such entity
were acquired in satisfaction of a debt previously contracted in good faith or
are owned or controlled in a bona fide fiduciary capacity;

 

(b)           the term “Affiliate” means, with respect to any person, any person
directly or indirectly controlling, controlled by or under common control with,
such other person.  For purposes of this definition, “control” (including, with
correlative meanings, the terms “controlled by” and “under common control with”)
when used with respect to any person, means the possession, directly or
indirectly, of the power to cause the direction of management and/or policies of
such person, whether through the ownership of voting securities, by contract or

 

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otherwise;

 

(c)           the word “or” is not exclusive;

 

(d)           the words “including”, “includes”, “included” and “include” are
deemed to be followed by the words “without limitation”;

 

(e)           the terms “herein”, “hereof” and “hereunder” and other words of
similar import refer to this Agreement as a whole and not to any particular
section, paragraph or subdivision;

 

(f)            “business day” means any day except Saturday, Sunday and any day
which shall be a legal holiday or a day on which banking institutions in the
State of New York or the State of Michigan generally are authorized or required
by law or other governmental actions to close;

 

(g)           “person” has the meaning given to it in Section 3(a)(9) of the
Exchange Act and as used in Sections 13(d)(3) and 14(d)(2) of the Exchange Act;

 

(h)           “Beneficially Own”, “Beneficial Owner” and “Beneficial Ownership”
are defined in Rules 13d-3 and 13d-5 of the Exchange Act;

 

(i)            “knowledge of the Company” or “Company’s knowledge” means the
actual knowledge of the following officers of the Company: Paul D. Tobias, Kelly
W. George and Ernie R. Krueger; and

 

(j)            “knowledge of the Investor” or “Investor’s knowledge” means the
actual knowledge of David R. Steinhardt.

 

6.10        CAPTIONS.  The article, section, paragraph and clause captions
herein are for convenience of reference only, do not constitute part of this
Agreement and will not be deemed to limit or otherwise affect any of the
provisions hereof.

 

6.11        SEVERABILITY.  If any provision of this Agreement or the application
thereof to any person (including the officers and directors of the Investor and
the Company) or circumstance is determined by a court of competent jurisdiction
to be invalid, void or unenforceable, the remaining provisions hereof, or the
application of such provision to persons or circumstances other than those as to
which it has been held invalid or unenforceable, will remain in full force and
effect and shall in no way be affected, impaired or invalidated thereby, so long
as the economic or legal substance of the transactions contemplated hereby is
not affected in any manner materially adverse to any party.  Upon such
determination, the parties shall negotiate in good faith in an effort to agree
upon a suitable and equitable substitute provision to effect the original intent
of the parties.

 

6.12        NO THIRD-PARTY BENEFICIARIES.  Nothing contained in this Agreement,
expressed or implied, is intended to confer or shall confer upon any person
other than the express parties hereto and the Financial Advisor, any benefit,
right or remedy, except that the provisions of Sections 3.4, 5.4, 5.6 and 5.7
shall inure to the benefit of the persons referred to in those Sections,
including any Holders.  The representations and warranties set forth in Article
II and the covenants set forth in Articles III and V have been made solely for
the benefit of the parties to this Agreement

 

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and (a) may be intended not as statements of fact, but rather as a way of
allocating the risk to one of the parties if those statements prove to be
inaccurate, (b) have been qualified by reference to the Disclosure Schedules,
each of which contains certain disclosures that are not reflected in the text of
this Agreement and (c) may apply standards of materiality in a way that is
different from what may be viewed as material by shareholders of, or other
investors in, the Company.

 

6.13        TIME OF ESSENCE.  Time is of the essence in the performance of each
and every term of this Agreement.

 

6.14        PUBLIC ANNOUNCEMENTS.  Subject to each party’s disclosure
obligations imposed by law or regulation, each of the parties hereto will
cooperate with each other in the development and distribution of all news
releases and other public information disclosures with respect to this Agreement
and any of the transactions contemplated by this Agreement or the other
Transaction Documents, and no party hereto will make any such news release or
public disclosure without first consulting with the other party hereto and
receiving its consent (which shall not be unreasonably withheld, conditioned or
delayed), and each party shall coordinate with the other with respect to any
such news release or public disclosure.

 

6.15        SPECIFIC PERFORMANCE.  The parties agree that irreparable damage
would occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms.  It is accordingly agreed
that the parties shall be entitled to seek specific performance of the terms
hereof, this being in addition to any other remedies to which they are entitled
at law or equity.

 

SIGNATURES ON THE FOLLOWING PAGE

 

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IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by the
duly authorized officers of the parties hereto as of the date first herein above
written.

 

THE COMPANY:

 

 

 

MACKINAC FINANCIAL CORPORATION

 

 

 

By:

/s/ Paul D. Tobias

 

Name:

Paul D. Tobias

 

Title:

Chairman and Chief Executive Officer

 

 

 

 

THE INVESTOR:

 

 

 

 

STEINHARDT CAPITAL INVESTORS, LLLP

 

 

 

 

BY:

STEINHARDT CAPITAL MANAGEMENT, LLC

 

 

ITS:

GENERAL PARTNER

 

 

 

 

By:

/s/ David R. Steinhardt

 

 

Name:

David R. Steinhardt

 

 

Title:

Manager

 

 

SIGNATURE PAGE TO FIRST AMENDED AND RESTATED

SECURITIES PURCHASE AGREEMENT

 

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