Exhibit 10.1

EXECUTION VERSION

 

 

AGREEMENT AND PLAN OF MERGER

among

GREEN BANCORP, INC.,

SEARCHLIGHT MERGER SUB CORP.

and

SP BANCORP, INC.

Dated as of May 5, 2014

 

 

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TABLE OF CONTENTS

 

          Page   Article I    THE MERGER   

Section 1.1

  

The Merger

     2   

Section 1.2

  

Closing

     2   

Section 1.3

  

Effective Time

     2   

Section 1.4

  

Effects of the Merger

     2   

Section 1.5

  

Articles of Incorporation; Bylaws

     2   

Section 1.6

  

Directors; Officers

     3   

Section 1.7

  

Reservation of Right to Revise Structure

     3    Article II   

EFFECT ON THE CAPITAL STOCK OF THE CONSTITUENT CORPORATIONS;

DELIVERY OF MERGER CONSIDERATION

  

  

Section 2.1

  

Conversion of Capital Stock

     3   

Section 2.2

  

Determination of Per Share Merger Consideration

     4   

Section 2.3

  

Company Stock Options and Company Restricted Shares

     7   

Section 2.4

  

Exchange and Payment

     8   

Section 2.5

  

Withholding Rights

     10    Article III    REPRESENTATIONS AND WARRANTIES OF THE COMPANY   

Section 3.1

  

Organization, Standing and Power

     11   

Section 3.2

  

Capital Stock

     12   

Section 3.3

  

Subsidiaries

     13   

Section 3.4

  

Authority

     13   

Section 3.5

  

No Conflict; Consents and Approvals

     14   

Section 3.6

  

Financial Statements

     15   

Section 3.7

  

No Undisclosed Liabilities

     16   

Section 3.8

  

Certain Information

     17   

Section 3.9

  

Absence of Certain Changes or Events

     17   

Section 3.10

  

Litigation

     17   

Section 3.11

  

Compliance with Laws

     18   

Section 3.12

  

Reports

     19   

Section 3.13

  

Benefit Plans

     19   

Section 3.14

  

Labor Matters

     22   

Section 3.15

  

Taxes

     22   

Section 3.16

  

Contracts

     24   

 

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Section 3.17

  

Loan Portfolio

     26   

Section 3.18

  

Insurance

     28   

Section 3.19

  

Properties

     29   

Section 3.20

  

Intellectual Property

     29   

Section 3.21

  

State Takeover Statutes

     30   

Section 3.22

  

No Rights Plan

     30   

Section 3.23

  

Affiliate Transactions

     30   

Section 3.24

  

Brokers

     30   

Section 3.25

  

Opinion of Financial Advisor

     30   

Section 3.26

  

Environmental Matters

     31   

Section 3.27

  

Derivatives

     31   

Section 3.28

  

Agreements with Regulatory Agencies

     31   

Section 3.29

  

No Dissenter’s or Appraisal Rights

     32   

Section 3.30

  

No Other Representations or Warranties

     32    Article IV    REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
  

Section 4.1

  

Organization, Standing and Power

     32   

Section 4.2

  

Authority

     33   

Section 4.3

  

No Conflict; Consents and Approvals

     33   

Section 4.4

  

Certain Information

     34   

Section 4.5

  

Brokers

     34   

Section 4.6

  

Merger Sub

     34   

Section 4.7

  

Financing

     34   

Section 4.8

  

Litigation; Regulatory Matters

     34   

Section 4.9

  

No Other Representations or Warranties

     35    Article V    COVENANTS   

Section 5.1

  

Conduct of Business

     35   

Section 5.2

  

No Solicitation

     39   

Section 5.3

  

Preparation of Proxy Statement; Company Stockholders Meeting

     42   

Section 5.4

  

Access to Information; Confidentiality

     43   

Section 5.5

  

Reasonable Best Efforts; Regulatory Applications

     44   

Section 5.6

  

Takeover Laws

     45   

Section 5.7

  

Notification of Certain Matters

     45   

Section 5.8

  

Public Announcements

     45   

Section 5.9

  

Financial Statements and Other Current Information

     46   

Section 5.10

  

Stockholder Litigation

     46   

Section 5.11

  

Exemption from Liability Under Section 16(b)

     46   

Section 5.12

  

Maintenance of Insurance

     46   

Section 5.13

  

Director and Officer Insurance

     46   

Section 5.14

  

Indemnification by Parent

     47   

 

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Section 5.15

  

Employee Matters

     47   

Section 5.16

  

Transition Cooperation; Transition Implementation Plan

     49   

Section 5.17

  

Bank Merger

     50   

Section 5.18

  

Stock Exchange Delisting

     50   

Section 5.19

  

Cooperation in Parent Offerings

     50    Article VI    CONDITIONS PRECEDENT   

Section 6.1

  

Conditions to Each Party’s Obligation to Effect the Merger

     51   

Section 6.2

  

Conditions to the Obligations of Parent and Merger Sub

     52   

Section 6.3

  

Conditions to the Obligations of the Company

     53    Article VII    TERMINATION, AMENDMENT AND WAIVER   

Section 7.1

  

Termination

     54   

Section 7.2

  

Effect of Termination

     56   

Section 7.3

  

Fees and Expenses

     56   

Section 7.4

  

Amendment or Supplement

     57   

Section 7.5

  

Extension of Time; Waiver

     57    Article VIII    GENERAL PROVISIONS   

Section 8.1

  

Nonsurvival of Representations and Warranties

     58   

Section 8.2

  

Notices

     58   

Section 8.3

  

Certain Definitions

     59   

Section 8.4

  

Interpretation

     59   

Section 8.5

  

Entire Agreement

     60   

Section 8.6

  

No Third Party Beneficiaries

     60   

Section 8.7

  

Governing Law

     60   

Section 8.8

  

Submission to Jurisdiction

     60   

Section 8.9

  

Assignment; Successors

     60   

Section 8.10

  

Enforcement

     61   

Section 8.11

  

Currency

     61   

Section 8.12

  

Severability

     61   

Section 8.13

  

Waiver of Jury Trial

     61   

Section 8.14

  

Counterparts

     62   

Section 8.15

  

No Presumption Against Drafting Party

     62   

 

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INDEX OF DEFINED TERMS

 

Definition

  

Location

Acquisition Proposal

   Section 5.2(h)(1)

Action

   Section 3.10

Adjusted TBV

   Section 2.2(b)

Adverse Recommendation Change

   Section 5.2(b)

Affiliate

   Section 8.3(a)

Agency

   Section 3.17(h)(1)

Aggregate Merger Consideration

   Section 2.2(a)(2)

Agreement

   Preamble

Alternative Acquisition Agreement

   Section 5.2(b)

Articles of Merger

   Section 1.3

Balance Sheet

   Section 3.6(a)

Bank

   Recitals

Bank Bylaws

   Section 3.1(b)

Bank Charter

   Section 3.1(b)

Bank Merger

   Recitals

Book Value

   Section 2.2(b)

Book-Entry Shares

   Section 2.1(a)

Business Day

   Section 8.3(b)

Cashed-Out Company Stock Options

   Section 2.3(a)

Certificate

   Section 2.1(a)

Closing

   Section 1.2

Closing Date

   Section 1.2

Code

   Section 2.5

Company

   Preamble

Company 401(k) Plans

   Section 5.15(d)

Company Board

   Recitals

Company Bylaws

   Section 3.1(b)

Company Charter

   Section 3.1(b)

Company Disclosure Letter

   Article III

Company Employee

   Section 5.15(a)

Company Intellectual Property

   Section 3.20

Company Plan

   Section 3.13(a)

Company Reports

   Section 3.12

Company Restricted Share

   Section 2.3(b)

Company Stock Awards

   Section 3.2(b)

Company Stock Option

   Section 2.3(a)

Company Stock Plans

   Section 2.3(a)

Company Stockholders Meeting

   Section 5.3(b)

Confidentiality Agreement

   Section 5.4

Contract

   Section 3.5(a)

control

   Section 8.3(c)

Derivative Contract

   Section 3.27

 

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Effective Time

   Section 1.3

Environmental Laws

   Section 3.26

ERISA

   Section 3.13(a)

ESOP

   Section 3.2(a)

ESOP Determination Letter

   Section 5.15(e)

ESOP Loans

   Section 3.13(f)

Exchange Act

   Section 3.6(b)

FDIC

   Section 3.1(c)

Federal Reserve

   Section 3.5(b)

Final Adjusted TBV

   Section 2.2(d)

Final Closing Statement

   Section 2.2(d)

GAAP

   Section 2.2(b)

Governmental Entity

   Section 3.5(b)

Green Bank

   Recitals

Indebtedness

   Section 5.1(g)

Indemnified Party

   Section 5.14

Initial Resolution Period

   Section 2.2(g)

Insurer

   Section 3.17(h)(3)

Interim Closing Statement

   Section 2.2(c)

In-The-Money Company Stock Option

   Section 2.3(a)

IRS

   Section 3.13(a)

knowledge

   Section 8.3(d)

Law

   Section 3.5(a)

Lease/Consent Costs

   Section 5.5(d)

Liens

   Section 3.2(a)

Loan Investor

   Section 3.17(h)(2)

Loans

   Section 3.17(a)

Maryland SDAT

   Section 1.3

Material Adverse Effect

   Section 3.1(a)

Material Contract

   Section 3.16(a)(14)

Merger

   Recitals

Merger Sub

   Preamble

MGCL

   Recitals

NASDAQ

   Section 3.12

Neutral Auditor

   Section 2.2(g)

Objection Notice

   Section 2.2(f)

OCC

   Section 3.5(b)

Options/Restricted Stock Costs

   Section 2.2(b)

Out-Of-The-Money Company Stock Option

   Section 2.3(a)

Outside Date

   Section 7.1(b)(1)

Owned Real Property

   Section 3.19

Parent

   Preamble

Parent Offering

   Section 5.19(a)

Parent Plans

   Section 5.15(a)

Paying Agent

   Section 2.4(a)

Paying Agent Agreement

   Section 2.4(a)

 

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Payment Fund

   Section 2.4(a)

Per Share Merger Consideration

   Section 2.2(a)(1)

Permits

   Section 3.11(a)

Permitted Liens

   Section 3.19

Person

   Section 8.3(e)

Preliminary Closing Statement

   Section 2.2(b)

Proxy Statement

   Section 3.8

Regulations

   Section 3.15(l)(1)

Regulatory Agreement

   Section 3.28

Representatives

   Section 5.2

Required Information

   Section 5.19(a)

Requisite Regulatory Approvals

   Section 6.1(b)

SEC

   Section 3.5(b)

Shares

   Section 1.7

Stockholder Approval

   Section 3.4(a)

Subsidiary

   Section 8.3(f)

Superior Proposal

   Section 5.2(h)(2)

Surviving Corporation

   Recitals

Takeover Laws

   Section 3.21

Tangible Book Value

   Section 2.2(b)

Tax

   Section 3.15(l)(2)

Tax Authority

   Section 3.15(l)(3)

Tax Law

   Section 3.15(l)(4)

Tax Return

   Section 3.15(l)(5)

Termination Fee

   Section 7.3(b)(2)

Texas DOB

   Section 3.5(b)

Transaction Expenses

   Section 2.2(b)

Voting Agreements

   Recitals

Schedules and Exhibits

Company Disclosure Letter

 

Schedule 2.2(b)    Preliminary Closing Statement Schedule 6.2(b)   

 

 

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AGREEMENT AND PLAN OF MERGER

AGREEMENT AND PLAN OF MERGER (this “Agreement”), dated as of May 5, 2014, among
GREEN BANCORP, INC., a Texas corporation (“Parent”), SEARCHLIGHT MERGER SUB
CORP., a Maryland corporation and a wholly owned Subsidiary of Parent (“Merger
Sub”), and SP BANCORP, INC., a Maryland corporation (the “Company”).

RECITALS

WHEREAS, upon the terms and subject to the conditions of this Agreement and in
accordance with the Maryland General Corporation Law (the “MGCL”), Merger Sub
will merge with and into the Company (the “Merger”), with the Company as the
surviving corporation in the Merger (sometimes referred to in such capacity as
the “Surviving Corporation”);

WHEREAS, the Board of Directors of the Company (the “Company Board”) has
unanimously determined that this Agreement and the transactions contemplated
hereby are advisable and in the best interests of the Company’s stockholders,
and has approved this Agreement and the transactions contemplated hereby,
including the Merger, all upon the terms and subject to the conditions set forth
herein;

WHEREAS, the Boards of Directors of Parent and Merger Sub have each unanimously
determined that this Agreement and the transactions contemplated hereby are
advisable and in the best interests of their respective stockholders, and have
approved this Agreement and the transactions contemplated hereby, including the
Merger, and Parent, as the sole stockholder of Merger Sub, has approved the
Merger, all upon the terms and subject to the conditions set forth herein;

WHEREAS, concurrently with the execution and delivery of this Agreement, and as
a condition and inducement to Parent’s willingness to enter into this Agreement,
certain stockholders of the Company are entering into voting agreements with
Parent (collectively, the “Voting Agreements”) pursuant to which each such
Person has agreed, among other things, to vote the Shares held by such Person in
favor of the Merger, subject to the terms of the Voting Agreements;

WHEREAS, it is contemplated that, immediately following the consummation of the
Merger, SharePlus Bank, a Texas state chartered bank and wholly owned Subsidiary
of the Company (the “Bank”), will be merged with and into Green Bank, N.A.
(“Green Bank”), a national banking association and a wholly owned Subsidiary of
Parent (such merger, the “Bank Merger”), with Green Bank as the surviving entity
in the Bank Merger; and

WHEREAS, the Company, Parent and Merger Sub desire to make certain
representations, warranties, covenants and agreements in connection with the
Merger and also to prescribe certain conditions to the Merger as specified
herein.

NOW, THEREFORE, in consideration of the premises, and of the representations,
warranties, covenants and agreements contained herein, and for other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, and intending to be legally bound hereby, the Company, Parent and
Merger Sub hereby agree as follows:

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ARTICLE I

THE MERGER

Section 1.1 The Merger. Upon the terms and subject to the conditions set forth
in this Agreement and in accordance with the MGCL, at the Effective Time, Merger
Sub shall be merged with and into the Company. Following the Merger, the
separate corporate existence of Merger Sub shall cease, and the Company shall
continue as the Surviving Corporation in the Merger and a wholly owned
Subsidiary of Parent.

Section 1.2 Closing. The closing of the Merger (the “Closing”) shall take place
at 10:00 a.m., local time, on the fifth Business Day following the satisfaction
or, to the extent permitted by applicable Law, waiver of the conditions set
forth in Article VI (other than those conditions that by their terms are to be
satisfied at the Closing, but subject to the satisfaction or, to the extent
permitted by applicable Law, waiver of those conditions), at the offices of
Skadden, Arps, Slate, Meagher & Flom LLP, Four Times Square, New York, New York
10036, unless another date, time or place is agreed to in writing by Parent and
the Company. The date on which the Closing occurs is referred to in this
Agreement as the “Closing Date.”

Section 1.3 Effective Time. Upon the terms and subject to the provisions of this
Agreement, as soon as practicable on the Closing Date, the parties shall file
articles of merger, in such appropriate form as determined by the parties (the
“Articles of Merger”), with the Maryland State Department of Assessments and
Taxation (the “Maryland SDAT”), executed in accordance with the relevant
provisions of the MGCL, and, as soon as practicable on or after the Closing
Date, shall make any and all other filings or recordings required under the
MGCL. The Merger shall become effective at such time as the Articles of Merger
are accepted by the Maryland SDAT or at such other date or time as Parent and
the Company shall agree in writing and shall specify in the Articles of Merger
(the time the Merger becomes effective being the “Effective Time”).

Section 1.4 Effects of the Merger. The Merger shall have the effects set forth
in this Agreement and in the relevant provisions of the MGCL. Without limiting
the generality of the foregoing, and subject thereto, at the Effective Time, all
the property, rights, privileges, powers and franchises of the Company and
Merger Sub shall vest in the Surviving Corporation, and all claims, obligations,
debts, liabilities and duties of the Company and Merger Sub shall become the
claims, obligations, debts, liabilities and duties of the Surviving Corporation.

Section 1.5 Articles of Incorporation; Bylaws.

(a) At the Effective Time, the articles of incorporation of Merger Sub shall be
the articles of incorporation of the Surviving Corporation until thereafter
amended in accordance with their terms and as provided by applicable Law.

(b) At the Effective Time, the bylaws of Merger Sub shall be the bylaws of the
Surviving Corporation until thereafter amended in accordance with their terms,
the articles of incorporation of the Surviving Corporation and as provided by
applicable Law.

 

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Section 1.6 Directors; Officers.

(a) The directors of Merger Sub immediately prior to the Effective Time shall be
the directors of the Surviving Corporation until the earlier of their death,
resignation or removal or until their respective successors are duly elected and
qualified.

(b) The officers of Merger Sub immediately prior to the Effective Time shall be
the officers of the Surviving Corporation until the earlier of their death,
resignation or removal or until their respective successors are duly appointed
and qualified.

Section 1.7 Reservation of Right to Revise Structure. Parent may at any time
change the method of effecting the business combination contemplated by this
Agreement if and to the extent that it deems such a change to be desirable;
provided, however, that no such change shall (i) alter or change the amount or
kind of the consideration to be issued to holders of the shares of common stock
of the Company, par value $0.01 per share (such common stock being referred to
herein as the “Shares”) as merger consideration, (ii) materially impede or delay
consummation of the business combination contemplated hereby or (iii) result in
holders of the Shares incurring any liability or obligation except as
contemplated hereby or expose the Company or its Subsidiaries or any of their
respective directors, officers or employees to any additional liability or
obligation. In the event Parent elects to make such a change, the parties agree
to execute appropriate documents to reflect the change.

ARTICLE II

EFFECT ON THE CAPITAL STOCK OF THE CONSTITUENT CORPORATIONS; DELIVERY OF MERGER
CONSIDERATION

Section 2.1 Conversion of Capital Stock. At the Effective Time, by virtue of the
Merger and without any action on the part of the Company, Parent, Merger Sub or
the holders of any shares of capital stock of the Company, Parent or Merger Sub:

(a) Each Share issued and outstanding immediately prior to the Effective Time
(other than Shares to be canceled in accordance with Section 2.1(b)) shall
thereupon be converted automatically into and shall thereafter represent the
right to receive only the Per Share Merger Consideration (as defined below) in
cash, without interest, subject to deduction for any required withholding Tax
(as defined below). As of the Effective Time, all Shares shall no longer be
outstanding and shall automatically be canceled and shall cease to exist, and
each holder of a certificate representing any such Shares (each, a
“Certificate”) or Shares held in book-entry form (“Book-Entry Shares”) shall
cease to have any rights with respect thereto, except the right to receive, in
accordance with this Section 2.1(a), the Per Share Merger Consideration upon
surrender of such Certificate or Book-Entry Shares, without interest, subject to
deduction for any required withholding Tax.

 

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(b) Each Share held in the treasury of the Company or owned, directly or
indirectly, by Parent, Merger Sub or the Company (other than (i) Shares held in
trust accounts, managed accounts, mutual funds and the like, or otherwise held
in a fiduciary or agency capacity, that are beneficially owned by third parties
not affiliated with Parent, Merger Sub or the Company and (ii) Shares held,
directly or indirectly, by Parent, Merger Sub, the Company or their respective
Affiliates and acquired upon exercise of rights in respect of debt arrangements
in effect prior to the date hereof) immediately prior to the Effective Time
shall automatically be canceled and shall cease to exist, and no consideration
shall be delivered in exchange therefor.

(c) Each share of common stock of Merger Sub, par value $0.01 per share, issued
and outstanding immediately prior to the Effective Time shall be converted into
and become one validly issued, fully paid and non-assessable share of common
stock of the Surviving Corporation.

(d) If at any time during the period between the date of this Agreement and the
Effective Time, any change in the outstanding shares of capital stock of the
Company, or securities convertible into or exchangeable into or exercisable for
shares of such capital stock, shall occur solely as a result of any
reclassification, recapitalization, stock split (including a reverse stock
split) or subdivision or combination, exchange or readjustment of shares, or any
stock dividend or stock distribution with a record date during such period,
merger or other similar transaction that, in each case, is made on a pro rata
basis to all holders of capital stock of the Company, the Per Share Merger
Consideration shall be equitably adjusted, without duplication, to reflect such
change and preserve the relative economic benefit to the parties; provided that
nothing in this Section 2.1(d) shall be construed to permit the Company to take
any action with respect to its securities that is prohibited by the terms of
this Agreement.

Section 2.2 Determination of Per Share Merger Consideration.

(a) For purposes of this Agreement:

(1) “Per Share Merger Consideration” shall be equal to the quotient of the
Aggregate Merger Consideration (as defined below), divided by the aggregate
number of Shares (excluding unvested Company Restricted Shares as of the date
hereof) issued and outstanding as of the date hereof. The Per Share Merger
Consideration shall be rounded to the nearest four decimal points.

(2) “Aggregate Merger Consideration” shall be equal to forty six million two
hundred thousand U.S. dollars ($46,200,000); provided that the Aggregate Merger
Consideration shall be adjusted downward on a dollar for dollar basis to the
extent that the Final Adjusted TBV (as defined below) is less than twenty nine
million five hundred thousand U.S. dollars ($29,500,000).

(b) Schedule 2.2(b) sets forth a summary consolidated balance sheet of the
Company and its Subsidiaries as of December 31, 2013 (the “Preliminary Closing
Statement”), which is derived from the Balance Sheet described in Section 3.6(a)
and prepared, with respect to the calculation of Book Value (as defined below)
and Tangible Book Value (as defined below), in accordance with United States
generally accepted accounting principles

 

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(“GAAP”) consistently applied. The Preliminary Closing Statement shall set forth
(1) the consolidated stockholders’ equity of the Company and its Subsidiaries
(for a given date, the “Book Value”) as of December 31, 2013, (2) as of
December 31, 2013, the consolidated tangible stockholders’ equity of the Company
and its Subsidiaries (the “Tangible Book Value”), which for a given date shall
be equal to the Book Value as of such date, less goodwill and other customary
intangible deductions (if any), (3) to the extent not already reflected in the
Tangible Book Value, the sum of (x) all financial advisory and opinion fees,
costs and expenses, legal fees and expenses, fees in connection with the
preparation and filing of the Proxy Statement (as defined below), fees, costs
and expenses related to the Company Stockholders Meeting (as defined below)
(including printing costs, solicitation expenses and meeting expenses) and any
other out-of-pocket costs, fees or expenses, in each case, incurred or expected
to be incurred by the Company or its Subsidiaries in connection with this
Agreement, the Merger and the other transactions contemplated hereby (but, for
the avoidance of doubt, excluding any out-of-pocket costs, fees or expenses
incurred by Parent or Merger Sub, including but not limited to the costs of
obtaining the Requisite Regulatory Approvals and any amounts payable under the
Paying Agent Agreement), (y) amounts in respect of the matters set forth in
Section 2.2(b)(3)(y) of the Company Disclosure Letter (as defined below) and
(z) fifty percent (50%) of the fees, expenses and other costs of the Neutral
Auditor as contemplated by Section 2.2(g) below (if any), in the case of each of
clauses (x), (y) and (z) on an after-tax basis and, for the avoidance of doubt,
without duplication (collectively, the “Transaction Expenses”), (4) amounts
payable in respect of the In-The-Money Company Stock Options (outstanding as of
the date hereof) pursuant to Section 2.3(a) and the Company Restricted Stock
(outstanding as of the date hereof) pursuant to Section 2.3(b) (collectively,
the “Options/Restricted Stock Costs”) on a pre-tax basis, and (5) as of
December 31, 2013 the “Adjusted TBV”, which, for a given date, shall equal
(i) the Tangible Book Value as of such date, minus (ii) the Transaction Expenses
incurred as of such date and/or anticipated to be incurred through the Closing
Date, and minus (iii) the Options/Restricted Stock Costs.

(c) Not later than ten (10) days after each month-end during the period from the
date of this Agreement until the Effective Time, the Company shall prepare in
good faith and deliver to Parent an updated Preliminary Closing Statement as of
such month-end (each such statement, an “Interim Closing Statement”). Each such
Interim Closing Statement shall be prepared in a manner consistent with the
Preliminary Closing Statement and each earlier Interim Closing Statement and
shall set forth the Company’s estimate of the Book Value and the Tangible Book
Value as of such month-end, a breakdown of the Transaction Expenses incurred as
of such month-end and/or anticipated to be incurred through the Closing Date and
the Adjusted TBV resulting therefrom. In the event Parent disputes any part of
any Interim Closing Statement (including the Adjusted TBV stated therein), it
shall give prompt notice to the Company of such disputed item or items and the
Company and Parent shall cooperate in good faith to resolve such dispute as
promptly as possible.

(d) Not later than three (3) Business Days prior to the anticipated Closing
Date, the Company shall prepare in good faith and deliver to Parent an updated
Preliminary Closing Statement as of the month-end immediately preceding the
anticipated Closing Date (such statement, the “Final Closing Statement”);
provided, however, that if the Closing Date is anticipated to occur in the first
ten (10) days of a calendar month, then the Final Closing Statement shall be
prepared as of the month-end of the earlier preceding month (i.e., if

 

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the Closing Date is anticipated to occur on August 1, then the Final Closing
Statement shall be prepared as of June 30). Such Final Closing Statement shall
be prepared in a manner consistent with the Preliminary Closing Statement and
the Interim Closing Statements and shall set forth the Book Value and the
Tangible Book Value as of the month-end immediately preceding the anticipated
Closing Date (or the prior month-end, if applicable), a breakdown of the
Transaction Expenses incurred as of such month-end and/or anticipated to be
incurred through the Closing Date and the Adjusted TBV resulting therefrom (such
Adjusted TBV, the “Final Adjusted TBV”).

(e) Subject to applicable Law, Parent shall have the right to review, and shall
have reasonable access to, all relevant work papers, schedules, memoranda and
other documents prepared by the Company or the Bank or their respective
accountants in connection with the Company’s preparation of the Preliminary
Closing Statement, the Interim Closing Statements and the Final Closing
Statement, as well as to executive, finance and accounting personnel of the
Company and the Bank and any other information which Parent may reasonably
request in connection with its review of the Preliminary Closing Statement, the
Interim Closing Statements and the Final Closing Statement; provided that the
Company and its Subsidiaries shall not be required to provide Parent access to
or to disclose information where such access or disclosure would reasonably be
expected to waive the protection of any privilege or the work product doctrine.
The parties will make appropriate substitute disclosure arrangements under
circumstances in which the restrictions of the preceding sentence apply.

(f) In the event Parent disputes the Final Closing Statement (including the
Final Adjusted TBV), Parent shall, within five (5) Business Days following the
delivery of the Final Closing Statement, give the Company written notice of its
objections thereto (the “Objection Notice”), describing the nature of the
dispute in reasonable detail and specifying those items and amounts as to which
Parent disagrees and, based on the information at its disposal, specifying
Parent’s good faith proposed calculation of Final Adjusted TBV. If Parent does
not timely deliver an Objection Notice within such five (5) Business Day period,
the Final Adjusted TBV set forth in the Final Closing Statement delivered by the
Company shall be utilized for the calculation of the Aggregate Merger
Consideration pursuant to Section 2.2(a) above and, absent fraud, shall be final
and binding on all the parties. Any items or amounts set forth in the Final
Closing Statement as to which Parent does not specifically and timely disagree
in the manner set forth above shall be final and binding on all the parties,
absent fraud.

(g) If Parent timely delivers an Objection Notice, Parent and the Company shall
cooperate in good faith to resolve such dispute; provided, however, that if
Parent and the Company cannot resolve the dispute within five (5) Business Days
after the date of the Objection Notice (the “Initial Resolution Period”), Parent
and the Company shall appoint KPMG LLP, or if KPMG LLP is unwilling or unable to
serve in such capacity, such other mutually acceptable independent accounting
firm of national or regional reputation (the “Neutral Auditor”) to arbitrate the
dispute under the rules the Neutral Auditor imposes. The Neutral Auditor shall
be limited to addressing only the particular disputes referred to in the
Objection Notice, and the Neutral Auditor’s resolution of any disputed item
shall be no greater than the higher amount, and no less than the lower amount,
calculated or proposed by the Company and Parent with respect to such disputed
item, as the case may be. Upon reaching its determination of the Final Adjusted
TBV, the Neutral Auditor shall deliver a copy of its calculation of the Final
Adjusted TBV to

 

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Parent and the Company. The determination of the Neutral Auditor shall be made
within twenty (20) days after its engagement (which engagement shall be made no
later than five (5) days after the end of the Initial Resolution Period) and,
absent fraud, shall be final and binding on all the parties. No party or its
Affiliates shall seek further recourse to courts, other tribunals or otherwise,
other than to enforce the final decision of the Neutral Auditor as to the
determination of the Final Adjusted TBV. Fifty percent (50%) of the aggregate
fees, expenses and costs of the Neutral Auditor shall be borne by Parent, and
the other fifty percent (50%) of such fees, expenses and costs shall be
reflected in Transaction Expenses as contemplated by Section 2.2(b). For the
avoidance of doubt, the dispute resolution process contemplated by
Section 2.2(f) and (g) shall be only to determine the disputed items reflected
on the Final Closing Statement and necessary to the calculation of the Final
Adjusted TBV as of the applicable month-end, regardless of the date on which the
Neutral Auditor delivers its calculation.

Section 2.3 Company Stock Options and Company Restricted Shares.

(a) At the Effective Time, each outstanding option to purchase Shares (each, a
“Company Stock Option”) granted under those plans set forth in Section 2.3(a) of
the Company Disclosure Letter (collectively, the “Company Stock Plans”), whether
vested or unvested as of the Effective Time, that is unexpired, unexercised and
outstanding immediately prior to the Effective Time (collectively, the
“Cashed-Out Company Stock Options”) shall, automatically and without any
required action on the part of the holder thereof, be cancelled and converted
into only the right to receive an amount in cash (subject to deduction for any
required withholding Taxes) equal to the product of (i) the positive difference,
if any, of the Per Share Merger Consideration minus the exercise price per share
of such Company Stock Option, multiplied by (ii) the number of Shares subject to
such Company Stock Option as of immediately prior to the Effective Time. To the
extent that no positive difference, as referred to in clause (i) above, shall
exist with respect to a particular Cashed-Out Company Stock Option under the
above formula (any such Company Stock Option, an “Out-Of-The-Money Company Stock
Option”), the holder thereof shall not be entitled to any consideration in
connection with such termination of such Out-Of-The-Money Company Stock Option.
To the extent that any positive difference, as referred to in clause (i) above,
shall exist with respect to a particular Cashed-Out Company Stock Option under
the above formula (any such Company Stock Option, an “In-The-Money Company Stock
Option”), the Surviving Corporation or Parent shall pay to each holder thereof
such excess at the Effective Time or as soon thereafter as reasonably
practicable (and in any event within ten days thereafter). It is understood and
agreed that the number of In-The-Money Company Stock Options and the amount of
the Per Share Merger Consideration shall be determined on an iterative basis,
initially taking into account the aggregate number of Shares as to which all
Cashed-Out Company Stock Options are exercisable at the Effective Time and then
excluding from the calculation any Out-Of-The-Money Company Stock Options
resulting therefrom, until a final number of In-The-Money Company Stock Options
and final amount of the Per Share Merger Consideration is determined.

(b) At the Effective Time, each unvested restricted Share then outstanding and
granted pursuant to any Company Stock Plans (each such Share, a “Company
Restricted Share”) shall vest in full at the Effective Time and automatically
and without any required action on the part of the holder thereof, be cancelled
and converted into only the right to receive an amount in cash (subject to
deduction for any required withholding Taxes) equal to the

 

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Per Share Merger Consideration which shall be payable by the Surviving
Corporation at the Effective Time or as soon thereafter as reasonably
practicable (and in any event within ten days thereafter).

(c) Copies of the Company Stock Plans (and all relevant forms of agreements
related thereto) governing all Company Restricted Shares and Company Stock
Options and the vesting thereof have been made available to Parent. The Company
Board (or, if appropriate, any committee thereof administering the Company Stock
Plans) shall pass resolutions and the Company shall take all necessary steps (as
determined by the Company in its reasonable discretion) to effect the foregoing
provisions of this Section 2.3 and to terminate the Company Stock Plans
effective as of the Effective Time.

Section 2.4 Exchange and Payment.

(a) On or prior to the Closing Date, Parent shall deposit (or cause to be
deposited) with a bank or trust company designated by Parent and reasonably
acceptable to the Company (the “Paying Agent”), pursuant to an agreement in a
form reasonably acceptable to the Company entered into prior to the Closing (the
“Paying Agent Agreement”), in trust for the benefit of holders of Shares, cash
in an amount equal to the Aggregate Merger Consideration in accordance with
Section 2.1(a) and the Company shall deposit an amount (for the avoidance of
doubt, such amount shall not be reflected as a deduction in calculating Adjusted
TBV) equal to the aggregate Per Share Merger Consideration attributable to any
Company Stock Options that are exercised after the date hereof or any Company
Restricted Shares that vest after the date hereof and are not otherwise paid out
pursuant to Section 2.3(a) or Section 2.3(b) above (such cash being hereinafter
referred to as the “Payment Fund”). The Payment Fund shall not be used for any
purpose other than to fund payments due pursuant to Section 2.1(a), except as
provided in this Agreement.

(b) Promptly after the Effective Time (and in any event within three
(3) Business Days thereafter), Parent and the Surviving Corporation shall cause
the Paying Agent to mail to each person who was, at the Effective Time, a holder
of record of a Certificate entitled to receive the Per Share Merger
Consideration pursuant to Section 2.1(a) (i) a letter of transmittal (which
shall be in customary form and shall specify that delivery shall be effected,
and risk of loss and title to Certificate(s) shall pass, only upon delivery of
Certificate(s) (or affidavits of loss in lieu of such Certificates) to the
Paying Agent and contain such other provisions as Parent or the Paying Agent may
reasonably specify) and (ii) instructions for use in effecting the surrender of
Certificates pursuant to such letter of transmittal in exchange for the Per
Share Merger Consideration. Upon surrender to the Paying Agent of a Certificate
for cancellation, together with such letter of transmittal, duly completed and
validly executed in accordance with the instructions thereto, and such other
documents as may be reasonably required pursuant to such instructions, the
holder of such Certificate shall be entitled to receive in exchange therefor
cash in the amount of the Per Share Merger Consideration multiplied by the
number of Shares formerly represented by such Certificate, and the Certificate
so surrendered shall forthwith be cancelled. Any holder of Book-Entry Shares
shall not be required to deliver a Certificate or an executed letter of
transmittal to the Paying Agent to receive the Per Share Merger Consideration.
In lieu thereof, upon receipt of an “agent’s message” by the Paying Agent (or
such other evidence, if any, of transfer as the Paying Agent may reasonably
request), each holder of one or

 

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more Book-Entry Shares shall automatically upon the Effective Time be entitled
to receive, and the Paying Agent shall promptly after the Effective Time (and in
any event within three (3) Business Days thereafter) pay to the holder, the
amount of the Per Share Merger Consideration multiplied by the number of Shares
formerly represented by such Book-Entry Shares. No interest will be paid or
accrued for the benefit of holders of Certificates or Book-Entry Shares on the
Per Share Merger Consideration payable in respect of Certificates or Book-Entry
Shares.

(c) If payment of the Per Share Merger Consideration is to be made to a Person
other than the Person in whose name the surrendered Certificate or Book-Entry
Share is registered, it shall be a condition of payment that such Certificate so
surrendered shall be properly endorsed or shall be otherwise in proper form for
transfer or such Book-Entry Share shall be properly transferred and that the
Person requesting such payment shall have paid any transfer and other Taxes
required by reason of the payment of the Per Share Merger Consideration to a
Person other than the registered holder of the Certificate or Book-Entry Share
surrendered or shall have established to the reasonable satisfaction of Parent
that such Tax either has been paid or is not applicable.

(d) Until surrendered as contemplated by this Section 2.4, each Certificate or
Book-Entry Share shall be deemed at any time after the Effective Time to
represent only the right to receive the Per Share Merger Consideration payable
in respect of Shares theretofore represented by such Certificate or Book-Entry
Shares, as applicable, pursuant to Section 2.1(a), without any interest thereon.
From and after the Effective Time, holders of Certificates and Book-Entry Shares
shall cease to have any rights as stockholders of the Company, except as
provided herein or by applicable Law.

(e) All cash paid upon the surrender for exchange of Certificates or Book-Entry
Shares in accordance with the terms of this Article II shall be deemed to have
been paid in full satisfaction of all rights pertaining to the Shares formerly
represented by such Certificates or Book-Entry Shares. At the Effective Time,
the stock transfer books of the Company shall be closed and there shall be no
further registration of transfers on the stock transfer books of the Surviving
Corporation of the Shares that were outstanding immediately prior to the
Effective Time. If, after the Effective Time, Certificates are presented to the
Surviving Corporation or the Paying Agent for transfer or transfer is sought for
Book-Entry Shares, such Certificates or Book-Entry Shares shall be canceled and
exchanged as provided in this Article II.

(f) The Paying Agent shall invest any cash included in the Payment Fund as
directed by Parent, on a daily basis; provided, however, that any investment of
such cash shall in all events be limited to direct short-term obligations of, or
short-term obligations fully guaranteed as to principal and interest by, the
U.S. government and that no such investment or loss thereon shall affect the
amounts payable to holders of Certificates or Book-Entry Shares pursuant to this
Article II. Any interest or other income resulting from such investments shall
be paid to Parent, upon demand.

(g) Any portion of the Payment Fund (and any interest or other income earned
thereon) that remains undistributed to the holders of Certificates or Book-Entry
Shares one (1) year after the Effective Time shall be delivered to the Surviving
Corporation, upon

 

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demand of Parent, and any holders of Certificates or Book-Entry Shares who have
not theretofore complied with this Article II shall thereafter look only to the
Surviving Corporation (subject to abandoned property, escheat or other similar
Laws), as general creditors thereof, for payment of the Per Share Merger
Consideration with respect to Shares formerly represented by such Certificate or
Book-Entry Share, without interest.

(h) None of Parent, the Surviving Corporation, the Paying Agent or any other
Person shall be liable to any Person in respect of cash from the Payment Fund
properly delivered to a public official pursuant to any applicable abandoned
property, escheat or similar Law.

(i) If any Certificate shall have been lost, stolen or destroyed, upon the
making of an affidavit, in form and substance reasonably acceptable to Parent,
of that fact by the Person claiming such Certificate to be lost, stolen or
destroyed and, if required by Parent or the Paying Agent, the posting by such
Person of a bond in such amount as Parent or the Paying Agent may determine is
reasonably necessary as indemnity against any claim that may be made against it
or the Surviving Corporation with respect to such Certificate, the Paying Agent
will deliver in exchange for such lost, stolen or destroyed Certificate the Per
Share Merger Consideration payable in respect thereof pursuant to Section 2.1(a)
of this Agreement.

(j) Subject to the terms of the Paying Agent Agreement, Parent, in the exercise
of its reasonable discretion, shall have the right to make all determinations,
not inconsistent with the terms of this Agreement, governing (i) the validity of
any letter of transmittal and compliance by any Company stockholder with the
procedures and instructions set forth herein and therein and (ii) the method of
payment of the Per Share Merger Consideration.

Section 2.5 Withholding Rights. Parent, the Surviving Corporation and the Paying
Agent shall be entitled to deduct and withhold from the consideration otherwise
payable to any holder of Shares, Company Stock Options or Company Restricted
Shares or otherwise pursuant to this Agreement such amounts as Parent, the
Surviving Corporation or the Paying Agent, in its reasonable discretion,
determines it is required to deduct and withhold with respect to the making of
such payment under the Internal Revenue Code of 1986, as amended (the “Code”),
or any provision of state, local or foreign Tax Law (as defined below). To the
extent that amounts are so withheld and timely paid over to the appropriate Tax
Authority (as defined below) by Parent, the Surviving Corporation or the Paying
Agent, such withheld amounts shall be treated for all purposes of this Agreement
as having been paid to the Person in respect of which such deduction and
withholding was made.

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

Except as (i) set forth in the corresponding section or subsection of the
disclosure letter delivered by the Company to Parent concurrently with the
execution of this Agreement (the “Company Disclosure Letter”) (it being agreed
that (x) disclosure of any information in a particular section or subsection of
the Company Disclosure Letter shall be deemed disclosure with respect to any
other section or subsection of this Agreement to which the relevance of such

 

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information is readily apparent on its face and (y) the mere inclusion of an
item in the Company Disclosure Letter shall not be deemed an admission by the
Company that such item represents a material exception or fact, event or
circumstance or that such item is reasonably likely to result in a Material
Adverse Effect) or (ii) disclosed in any report, schedule, form or other
document filed with or furnished to the SEC (including the exhibits and other
information incorporated therein) by the Company after January 1, 2012 and prior
to the execution of this Agreement (other than any disclosures set forth under
the heading “Risk Factors” and other similarly cautionary or predictive
statements therein), the Company represents and warrants to Parent and Merger
Sub as follows:

Section 3.1 Organization, Standing and Power.

(a) Each of the Company and its Subsidiaries (i) is an entity duly organized,
validly existing and in good standing under the Laws of the jurisdiction of its
organization, (ii) has all requisite corporate or similar power and authority to
own, lease and operate its properties and to carry on its business as now being
conducted and (iii) is duly qualified or licensed to do business and is in good
standing in each jurisdiction in which the nature of its business or the
ownership, leasing or operation of its properties makes such qualification or
licensing necessary, except in the case of clause (iii), where the failure to be
so qualified or licensed or in good standing, individually or in the aggregate,
has not had and would not reasonably be expected to have a Material Adverse
Effect. The Company is registered as a bank holding company under the Bank
Holding Company Act of 1956, as amended, and meets the applicable requirements
for qualification as such. For purposes of this Agreement, “Material Adverse
Effect” means, with respect to any party, a material adverse effect on (i) the
financial condition, results of operations, assets, liabilities or business of
such party and its Subsidiaries taken as a whole (provided, however, that, with
respect to this clause (i), a “Material Adverse Effect” shall not be deemed to
include effects to the extent arising out of, relating to or resulting from
(A) changes after the date hereof in applicable GAAP or regulatory accounting
requirements, (B) changes after the date hereof in Laws of general applicability
to banks or savings associations or their holding companies, (C) changes after
the date hereof in global, national or regional political conditions or general
economic or market conditions affecting other banks or savings associations or
their holding companies, (D) any outbreak or escalation of hostilities, declared
or undeclared acts of war or terrorism, (E) actions or omissions taken with the
prior written consent of the other party or expressly required by this
Agreement, (F) any failure, in and of itself, by such party to meet internal or
other estimates, projections or forecasts (it being understood that the facts or
circumstances giving rise or contributing to the failure to meet estimates,
projections or forecasts may be taken into account in determining whether there
has been a Material Adverse Effect, except to the extent such facts or
circumstances are themselves excepted from the definition of Material Adverse
Effect pursuant to any other clause of this definition) or (G) the execution or
public disclosure of this Agreement or the transactions contemplated hereby or
the consummation thereof, including the impacts thereof on relationships with
customers and employees except, with respect to clauses (A), (B), (C) or (D), to
the extent that the effects of any such change or event are disproportionately
adverse to the financial condition, results of operations, assets, liabilities
or business of such party and its Subsidiaries, taken as a whole, as compared to
other banks or savings associations or their holding companies (in which case
only the incrementally disproportionate effect may be taken into account in
determining whether there has been a Material Adverse Effect)) or (ii) the
ability of such party to timely consummate the transactions contemplated by this
Agreement.

 

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(b) The Company has previously made available to Parent true and complete copies
of the Company’s articles of incorporation (the “Company Charter”) and bylaws
(the “Company Bylaws”) and the Bank’s articles of incorporation (the “Bank
Charter”) and bylaws (the “Bank Bylaws”), in each case as amended to the date of
this Agreement, and each as so delivered is in full force and effect. Neither
the Company nor the Bank is in violation of any provision of the Company
Charter, Company Bylaws, Bank Charter or Bank Bylaws.

(c) The deposit accounts of the Bank are insured by the Federal Deposit
Insurance Corporation (the “FDIC”) through the Deposit Insurance Fund to the
fullest extent permitted by Law, and all premiums and assessments required in
connection therewith have been paid when due. No proceedings for the revocation
or termination of such deposit insurance are pending or, to the Company’s
knowledge, threatened.

Section 3.2 Capital Stock.

(a) The authorized capital stock of the Company consists of 100,000,000 Shares
and 50,000,000 shares of preferred stock. As of the date hereof, (i) 1,602,313
Shares (excluding treasury shares but including 39,050 Company Restricted
Shares) were issued and outstanding (of which 136,838 Shares were held by the
SharePlus Bank Employee Stock Ownership Plan (the “ESOP”)), (ii) 0 Shares were
held by the Company in its treasury, (iii) no shares of preferred stock were
issued and outstanding and (iv) 235,050 Shares were reserved for issuance
pursuant to Company Stock Plans (of which 148,875 Shares were reserved for
issuance in connection with outstanding Company Stock Options). All the
outstanding shares of capital stock of the Company are, and all Shares reserved
for issuance pursuant to Company Stock Plans will be, when issued in accordance
with the terms thereof, duly authorized, validly issued, fully paid and
nonassessable and not subject to any preemptive rights. No shares of capital
stock of the Company are owned by any Subsidiary of the Company. All the
outstanding shares of capital stock or other voting securities or equity
interests of each Subsidiary of the Company have been duly authorized and
validly issued, are fully paid, nonassessable and not subject to any preemptive
rights. All of the shares of capital stock or other voting securities or equity
interests of each such Subsidiary are owned, directly or indirectly, by the
Company, free and clear of all pledges, claims, liens, charges, options, rights
of first refusal, encumbrances and security interests of any kind or nature
whatsoever (including any limitation on voting, sale, transfer or other
disposition or exercise of any other attribute of ownership) (collectively,
“Liens”). Neither the Company nor any of its Subsidiaries has outstanding any
bonds, debentures, notes or other obligations having the right to vote (or
convertible into, or exchangeable or exercisable for, securities having the
right to vote) with the stockholders of the Company or such Subsidiary on any
matter. Except as set forth above in this Section 3.2(a) and except for changes
after the date hereof resulting from the exercise of Company Stock Options
outstanding as of the date hereof, there are no outstanding (A) shares of
capital stock or other voting securities or equity interests of the Company,
(B) securities of the Company or any of its Subsidiaries convertible into or
exchangeable or exercisable for shares of capital stock of the Company or other
voting securities or equity interests of the Company or any of its Subsidiaries,
(C) stock appreciation rights, “phantom” stock rights, performance units,
interests in or rights to

 

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the ownership or earnings of the Company or any of its Subsidiaries or other
equity equivalent or equity-based award or right, (D) subscriptions, options,
warrants, calls, commitments, Contracts or other rights to acquire from the
Company or any of its Subsidiaries, or obligations of the Company or any of its
Subsidiaries to issue, any shares of capital stock of the Company or any of its
Subsidiaries, voting securities, equity interests or securities convertible into
or exchangeable or exercisable for capital stock or other voting securities or
equity interests of the Company or any of its Subsidiaries or rights or
interests described in clause (C), or (E) obligations of the Company or any of
its Subsidiaries to repurchase, redeem or otherwise acquire any such securities
or to issue, grant, deliver or sell, or cause to be issued, granted, delivered
or sold, any such securities. There are no stockholder agreements, voting trusts
or other agreements or understandings to which the Company or any of its
Subsidiaries is a party with respect to the holding, voting, registration,
redemption, repurchase or disposition of, or that restricts the transfer of, any
capital stock or other equity interest of the Company or any of its
Subsidiaries.

(b) Section 3.2(b) of the Company Disclosure Letter sets forth a true and
complete list of all holders, as of the date hereof, of outstanding Company
Stock Options, Company Restricted Shares or other rights to purchase or receive
Shares or similar rights granted under the Company Stock Plans or otherwise
(collectively, “Company Stock Awards”), indicating as applicable, with respect
to each Company Stock Award then outstanding, the type of award granted, the
number of Shares subject to such Company Stock Award, as applicable, the name of
the plan under which such Company Stock Award was granted, the date of grant,
exercise or purchase price, vesting schedule, payment schedule (if different
from the vesting schedule) and expiration thereof. The Company has not knowingly
granted, and there is no and has been no Company policy or practice to grant,
Company Stock Awards prior to the release of material information regarding the
Company or its Subsidiaries.

Section 3.3 Subsidiaries. Section 3.3 of the Company Disclosure Letter sets
forth a true and complete list of each Subsidiary of the Company, including its
respective jurisdiction of incorporation or formation. Each of the Subsidiaries
of the Company is directly or indirectly wholly owned by the Company. Except for
the capital stock of, or other equity or voting interests in, its Subsidiaries,
and marketable securities, the Company does not own, directly or indirectly, any
equity, membership interest, partnership interest, joint venture interest, or
other equity or voting interest in, or any interest convertible into,
exercisable or exchangeable for any of the foregoing, nor is it under any
current or prospective obligation to form or participate in, make any capital
contribution, or other equity investment in, or assume any liability or
obligation of, any Person.

Section 3.4 Authority.

(a) The Company has all necessary corporate power and authority to execute,
deliver and perform its obligations under this Agreement and, subject to receipt
of the Stockholder Approval, to consummate the transactions contemplated hereby.
The execution, delivery and performance of this Agreement by the Company and the
consummation by the Company of the transactions contemplated hereby have been
duly authorized by all necessary corporate action on the part of the Company and
no other corporate proceedings on the part of the Company are necessary to
approve this Agreement or to consummate the transactions contemplated hereby,
subject, in the case of the consummation of the Merger, to the approval of

 

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the Merger by the holders of at least a majority of the outstanding Shares (the
“Stockholder Approval”), and, in the case of the consummation of the Bank
Merger, to the adoption and approval of an agreement and plan of merger in
respect thereof by the Bank and by the Company as its sole stockholder. This
Agreement has been duly executed and delivered by the Company and, assuming the
due authorization, execution and delivery by Parent and Merger Sub, constitutes
a valid and binding obligation of the Company, enforceable against the Company
in accordance with its terms (except to the extent that enforceability may be
limited by applicable bankruptcy, insolvency, fraudulent conveyance, moratorium,
reorganization or similar Laws affecting the enforcement of creditors’ rights
generally or by general principles of equity).

(b) The Company Board, at a meeting duly called and held at which all directors
of the Company were present, duly and unanimously adopted resolutions
(i) determining that the terms of this Agreement, the Merger and the other
transactions contemplated hereby are fair to and in the best interests of the
Company’s stockholders, (ii) approving and declaring advisable this Agreement
and the transactions contemplated hereby, including the Merger, (iii) directing
that the Merger be submitted to the stockholders of the Company for approval and
(iv) resolving to recommend that the Company’s stockholders vote in favor of the
approval of the Merger, which resolutions have not been subsequently rescinded,
modified or withdrawn in any way.

(c) The Stockholder Approval is the only affirmative vote of the holders of any
class or series of the Company’s capital stock or other securities required by
applicable Law in connection with the consummation of the Merger. No affirmative
vote of the holders of any class or series of the Company’s capital stock or
other securities is required in connection with the consummation of any of the
transactions contemplated hereby to be consummated by the Company other than the
Merger.

Section 3.5 No Conflict; Consents and Approvals.

(a) The execution, delivery and performance of this Agreement by the Company
does not, and the consummation of the Merger and the other transactions
contemplated hereby and compliance by the Company with the provisions hereof
will not, conflict with, or result in any violation or breach of, or default
(with or without notice or lapse of time, or both) under, or give rise to a
right of, or result in, termination, cancellation, modification or acceleration
of any obligation or to the loss of a benefit under, or result in the creation
of any Lien in or upon any of the properties, assets or rights of the Company or
any of its Subsidiaries under, or give rise to any increased, additional,
accelerated or guaranteed rights or entitlements under, or require any consent,
waiver or approval of any Person pursuant to, any provision of (i) the Company
Charter or Company Bylaws, or the articles of incorporation or bylaws (or
similar organizational documents) of any Subsidiary of the Company, (ii) any
bond, debenture, note, mortgage, indenture, guarantee, license, lease, purchase
or sale order or other contract, commitment, agreement, instrument, obligation,
arrangement, understanding, undertaking, permit, concession or franchise,
whether oral or written (each, including all amendments thereto, a “Contract”)
to which the Company or any of its Subsidiaries is a party or by which the
Company or any of its Subsidiaries or any of their respective properties or
assets may be bound or (iii) subject to the governmental filings and other
matters referred to in Section 3.5(b), any federal, state, local or foreign law
(including common law), statute, ordinance, rule, code,

 

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regulation, order, judgment, injunction, decree or other legally enforceable
requirement (“Law”) applicable to the Company or any of its Subsidiaries or by
which the Company or any of its Subsidiaries or any of their respective
properties or assets may be bound, except, in the case of clauses (ii) and
(iii), as individually or in the aggregate, has not had and would not reasonably
be expected to have a Material Adverse Effect on the Company.

(b) No consent, approval, order or authorization of, or registration,
declaration, filing with or notice to, any federal, state, local or foreign
government or subdivision thereof or any other governmental, administrative,
judicial, arbitral, legislative, executive, regulatory or self-regulatory
authority, instrumentality, agency, commission, body or any court or other
governmental authority or instrumentality (each, a “Governmental Entity”) is
required by or with respect to the Company or any of its Subsidiaries in
connection with the execution, delivery and performance of this Agreement by the
Company or the consummation of the Merger and the other transactions
contemplated hereby (including the Bank Merger) or compliance with the
provisions hereof, except for (i) such filings and reports as are required
pursuant to the applicable requirements of state or federal securities, takeover
and “blue sky” Laws, including the filing with the Securities and Exchange
Commission (the “SEC”) of the Proxy Statement in definitive form, (ii) the
filing of the Articles of Merger with the Maryland SDAT as required by the MGCL
and (iii) the filing of applications and notices with, and receipt of consents,
authorizations, approvals, exemptions or nonobjections from, the Board of
Governors of the Federal Reserve System (the “Federal Reserve”), the FDIC, the
Office of the Comptroller of the Currency (the “OCC”) and the Texas Department
of Banking (the “Texas DOB”) and (iv) such other consents, approvals, orders,
authorizations, registrations, declarations, filings or notices set forth in
Section 3.5(b) of the Company Disclosure Letter.

Section 3.6 Financial Statements.

(a) Each of the financial statements of the Company and its Subsidiaries
included (or incorporated by reference) in the Company Reports (as defined
below) filed with or furnished to the SEC (including the related notes, where
applicable), including the audited consolidated balance sheet of the Company and
its Subsidiaries as of December 31, 2013 (the “Balance Sheet”), (i) has been
prepared based on the books and records of the Company and its Subsidiaries,
(ii) has been prepared in accordance with GAAP applied on a consistent basis
throughout the periods indicated (except as may be indicated in the notes
thereto or, in the case of interim statements, where information and footnotes
contained in such statements are not required to be in compliance with GAAP),
(iii) complied as to form in all material respects with applicable accounting
requirements and with the published rules and regulations of the SEC with
respect thereto and (iv) fairly presents, in all material respects, the
consolidated financial position, results of operations, cash flows and changes
in stockholders’ equity of the Company and its Subsidiaries as of the respective
dates thereof and for the respective periods indicated therein (subject to
normal year end audit adjustments and the absence of footnotes in the case of
any unaudited interim statements). The books and records of the Company and its
Subsidiaries in all material respects have been, and are being, maintained in
accordance with applicable legal and accounting requirements and reflect only
actual transactions. The Company’s independent auditor has not resigned or been
dismissed as independent public accountants of the Company as a result of or in
connection with any disagreements with the Company on a matter of accounting
principles or practices, financial statement disclosure or auditing scope or
procedure.

 

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(b) Since January 1, 2012, the Company and each of its Subsidiaries has had in
place “disclosure controls and procedures” (as defined in Rules 13a-15(e) and
15d-15(e) promulgated under the Securities Act or the Securities Exchange Act of
1934, as amended (the “Exchange Act”)) reasonably designed and maintained to
ensure that all information (both financial and non-financial) required to be
disclosed by the Company in the reports that it files or submits under the
Exchange Act is recorded, processed, summarized and reported within the time
periods specified in the rules and forms of the SEC, and that such information
is accumulated and communicated to the Company’s management as appropriate to
allow timely decisions regarding required disclosure and to make the
certifications of the Chief Executive Officer and Chief Financial Officer of the
Company required under the Exchange Act with respect to such reports. The
Company has disclosed, based on its most recent evaluation, to the Company’s
outside auditors and the audit committee of the Company Board (x) any
significant deficiencies and material weaknesses in the design or operation of
internal control over financial reporting (as defined in Rule 13a-15(f) of the
Exchange Act) that are reasonably likely to adversely affect the Company’s
ability to record, process, summarize and report financial information, and
(y) any fraud, whether or not material, that involves management or other
employees who have a significant role in the Company’s internal controls over
financial reporting. As of the date of this Agreement, 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. The Company
has no knowledge of any reason that its outside auditors and its Chief Executive
Officer and Chief Financial Officer shall 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 January 1, 2012, (i) neither the Company nor any of its
Subsidiaries nor, to the knowledge of the Company, any director, officer,
employee, auditor, accountant or representative of the Company or any of its
Subsidiaries has received or otherwise had or obtained knowledge of any material
complaint, allegation, assertion or claim, whether written or oral, regarding
the accounting or auditing practices, procedures, methodologies or methods of
the Company or any of its Subsidiaries or their respective internal accounting
controls, including any material complaint, allegation, assertion or claim that
the Company or any of its Subsidiaries has engaged in questionable accounting or
auditing practices, and (ii) no attorney representing the Company or any of its
Subsidiaries, whether or not employed by the Company or any of its Subsidiaries,
has reported evidence of a material 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 Company Board or any committee thereof or,
to the knowledge of the Company, to any director or officer of the Company.

Section 3.7 No Undisclosed Liabilities. Neither the Company nor any of its
Subsidiaries has any liabilities or obligations, whether accrued or fixed,
absolute or contingent, matured or unmatured or determined or determinable, of a
nature required to be reflected on a balance sheet prepared in accordance with
GAAP, except for liabilities and obligations (a) reflected or reserved against
on the Balance Sheet (including in the notes thereto), (b) incurred in the
ordinary course of business consistent with past practice since the date of the
Balance Sheet or in connection with the transactions contemplated by this
Agreement or (c) that have not had, and would not reasonably be expected to
have, individually or in the aggregate, a Material Adverse Effect on the
Company.

 

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Section 3.8 Certain Information. The Proxy Statement will not, at the time it is
first mailed to the Company’s stockholders, at the time of any amendments or
supplements thereto and at the time of the Company Stockholders Meeting, contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they are made, not misleading. The Proxy
Statement will comply as to form in all material respects with the requirements
of the Exchange Act and the rules and regulations thereunder. Notwithstanding
the foregoing, the Company makes no representation or warranty with respect to
statements included or incorporated by reference in the Proxy Statement based on
information supplied by or on behalf of Parent or Merger Sub specifically for
inclusion or incorporation by reference therein. For purposes of this Agreement,
the letter to stockholders, notice of meeting, proxy statement and form of proxy
and any other soliciting material to be distributed to stockholders in
connection with the Merger (including any amendments or supplements) are
collectively referred to as the “Proxy Statement.”

Section 3.9 Absence of Certain Changes or Events.

(a) Since the date of the Balance Sheet: (i) the Company and its Subsidiaries
have conducted their businesses, in all material respects, only in the ordinary
course consistent with past practice; (ii) there has not been any fact, event,
change, occurrence, condition, development, circumstance or effect that,
individually or in the aggregate, has had or would reasonably be expected to
have a Material Adverse Effect on the Company; and (iii) as of the date hereof,
other than in connection with the negotiation and execution of this Agreement,
none of the Company or any of its Subsidiaries has taken any action that, if
taken after the date of this Agreement, would constitute a breach of any of the
covenants set forth in Section 5.1(a)-(aa).

(b) The Bank’s allowance for loan and lease losses as of the month-end as of
which the Final Closing Statement shall have been prepared shall be adequate to
absorb losses in the Bank’s loan portfolio as calculated in accordance with GAAP
and pursuant to the Bank’s historical practices consistently applied.

Section 3.10 Litigation. Except as, individually or in the aggregate, has not
had and would not reasonably be expected to have a Material Adverse Effect on
the Company, there is no material action, suit, claim, arbitration,
investigation, inquiry, grievance or other proceeding (each, an “Action”)
pending or, to the knowledge of the Company, threatened against or affecting the
Company or any of its Subsidiaries, any of their respective properties or any of
their respective assets. Neither the Company nor any of its Subsidiaries nor any
of their respective properties or assets is subject to any material outstanding
judgment, order, injunction, rule or decree of any Governmental Entity. Since
January 1, 2012 (i) there have been no subpoenas, written demands, or document
requests received by the Company or any Affiliate of the Company from any
Governmental Entity, except such as are received by the Company or any Affiliate
of the Company in the ordinary course of business or as are not, individually or
in the aggregate, material to the Company taken as a whole, and (ii) no
Governmental Entity has requested that the Company or any of its Subsidiaries
enter into a settlement negotiation or tolling agreement with respect to any
matter related to any such subpoena, written demand, or document request
described in clause (i).

 

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Section 3.11 Compliance with Laws.

(a) Except as, individually or in the aggregate, has not had and would not
reasonably be expected to have a Material Adverse Effect on the Company, the
Company and each of its Subsidiaries have in effect all material permits,
licenses, variances, exemptions, authorizations, operating certificates,
franchises, orders and approvals of all Governmental Entities (collectively,
“Permits”) necessary for them to own, lease or operate their properties and
assets and to carry on their businesses and operations as now conducted and all
such Permits are in full force and effect. Except as, individually or in the
aggregate, has not had and would not reasonably be expected to have a Material
Adverse Effect on the Company, the Company and its Subsidiaries have complied in
all material respects with, and are not in default or violation in any material
respect of, (i) any applicable Law, including all Laws related to data
protection or privacy, the USA PATRIOT Act, the Bank Secrecy Act, the Equal
Credit Opportunity Act, the Fair Housing Act, the Community Reinvestment Act,
the Fair Credit Reporting Act, the Truth in Lending Act, the Home Mortgage
Disclosure Act, the Fair Debt Collection Practices Act, the Electronic Fund
Transfer Act and any other Law relating to discriminatory lending, financing or
leasing practices, money laundering prevention, Sections 23A and 23B of the
Federal Reserve Act, the Sarbanes-Oxley Act and all applicable Laws relating to
broker-dealers, investment advisors and insurance brokers, and (ii) any posted
or internal privacy policies relating to data protection or privacy, including
the protection of personal information, and the Company does not know of, and it
and its Subsidiaries have not received since January 1, 2012, written notice of,
any material defaults or material violations of any applicable Law. Except for
statutory or regulatory restrictions of general application, no Governmental
Entity has placed any material restriction on the business or properties of the
Company or any of its Subsidiaries that remains in effect. Since January 1,
2012, neither the Company nor any of its Subsidiaries has received any written
notification or communication from any Governmental Entity (i) asserting that
the Company or any of its Subsidiaries is not in material compliance with any
Laws or (ii) threatening to revoke any Permit.

(b) The Company and its Subsidiaries have properly administered in all material
respects all accounts for which they act as fiduciaries, including accounts for
which they serve as trustees, agents, custodians, personal representatives,
guardians, conservators or investment advisors, in accordance with the terms of
the governing documents and applicable Law. Neither the Company or any of its
Subsidiaries nor, to the knowledge of the Company, any director, officer or
employee of the Company or any of its Subsidiaries has committed any breach of
trust or fiduciary duty with respect to any such fiduciary account that,
individually or in the aggregate, has had or would reasonably be expected to
have a Material Adverse Effect on the Company, and the accountings for each such
fiduciary account are true and correct in all material respects and accurately
reflect in all material respects the assets of such fiduciary account.

(c) The most recent regulatory rating given to the Bank as to compliance with
the Community Reinvestment Act is no less than “satisfactory.” To the knowledge
of the Company, since the last regulatory examination of the Bank with respect
to Community Reinvestment Act compliance, the Bank has not received any
indication from the regulatory agency performing such examination that would
cause it to reasonably expect that such rating will be lowered.

 

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Section 3.12 Reports. Since January 1, 2012, each of the Company and its
Subsidiaries has filed all material reports, registrations, documents, filings,
statements and submissions together with any required amendments thereto, that
it was required to file with the Federal Reserve, the FDIC, the OCC, the Texas
DOB, the SEC and the NASDAQ Capital Market (“NASDAQ”), any state consumer
finance or mortgage banking regulatory authority or any other Governmental
Entity (the foregoing, collectively, the “Company Reports”), and has paid all
fees and assessments due and payable in connection therewith. As of their
respective filing dates, the Company Reports complied in all material respects
with all statutes and applicable rules and regulations of the applicable
Governmental Entities, as the case may be. The Company Reports, including the
documents incorporated by reference in each of them, each contained all of the
material information required to be included in it, and each 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
it not misleading. As of the date of this Agreement, there are no outstanding
comments from the SEC or any other Governmental Entity with respect to any such
Company Report. Except for normal examinations conducted by a Governmental
Entity in the regular course of the business or as would not be material to the
Company and its Subsidiaries, taken as a whole, no Governmental Entity has
initiated any proceeding or, to the knowledge of the Company, investigation into
the business or operations of the Company or any of its Subsidiaries since
January 1, 2012. There are no material unresolved violations set forth in any
report relating to any examinations or inspections by any Governmental Entity of
the Company or any of its Subsidiaries. The Company and its Subsidiaries have
fully resolved or are in the process of resolving all “matters requiring
attention,” “matters requiring immediate attention” or similar items as
identified by any such Governmental Entity.

Section 3.13 Benefit Plans.

(a) Section 3.13(a) of the Company Disclosure Letter contains a true and
complete list of each material Company Plan. For purposes of this Agreement,
“Company Plan” means each “employee benefit plan” (within the meaning of
Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended
(“ERISA”)), stock purchase, stock option, severance, employment,
change-in-control, fringe benefit, bonus, incentive, deferred compensation,
employee loan or other employee benefit plan, agreement, program, policy or
other arrangement, whether or not subject to ERISA (including any funding
mechanism therefor now in effect or required in the future as a result of the
transactions contemplated by this Agreement or otherwise), whether written or
unwritten, in each case (i) maintained by the Company or any of its Subsidiaries
for current or former directors, employees or consultants of the Company or
(ii) under which (A) any employee, director or consultant or former employee,
director or consultant of the Company or any of its Subsidiaries has any present
or future right to benefits and (B) the Company or any of its Subsidiaries has
had or has any present or future liability or obligation to contribute. With
respect to each material Company Plan, the Company has furnished or made
available to Parent a current, accurate and complete copy thereof, including any
amendments, and, to the extent applicable: (i) any related trust agreement or
other funding instrument, (ii) the most recent determination, opinion or
advisory letter of the Internal Revenue Service (the “IRS”), if applicable,
(iii) any summary plan description or other material written communications by
the Company or its Subsidiaries to their employees concerning the extent of the
benefits provided under a Company Plan and (iv) the most recent (A) Form 5500
and attached schedules, (B) audited financial statements, and (C) actuarial
valuation reports.

 

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(b) Except as disclosed in Section 3.13(b) of the Company Disclosure Letter and
except as, individually or in the aggregate, has not had, and would not
reasonably be expected to have, a Material Adverse Effect on the Company, with
respect to the Company Plans:

(1) each Company Plan has been established and administered in accordance with
its terms and in compliance with the applicable provisions of ERISA, the Code
and all other applicable Laws, and in the six years preceding the date hereof no
reportable event, as defined in Section 4043 of ERISA, no prohibited
transaction, as described in Section 406 of ERISA or Section 4975 of the Code,
or failure to satisfy the minimum funding standards, within the meaning of
Section 302 of ERISA and 412 of the Code, has occurred with respect to any
Company Plan, and all contributions required to be made under the terms of any
Company Plan have been timely made;

(2) each Company Plan intended to be qualified under Section 401(a) of the Code
(A) has received a favorable determination, advisory and/or opinion letter, as
applicable, from the IRS that it is so qualified, (B) the trust maintained
thereunder has been determined to be exempt from taxation under Section 501(a)
of the Code and (C) to the Company’s knowledge, nothing has occurred since the
date of such letter that could reasonably be expected to cause the loss of such
qualified status of such Company Plan;

(3) there is no Action (including any investigation, audit or other
administrative proceeding) by the Department of Labor, the Pension Benefit
Guaranty Corporation, the IRS or any other Governmental Entity or by any plan
participant or beneficiary pending, or to the knowledge of the Company,
threatened, relating to the Company Plans, any fiduciaries thereof to which the
Company could have an indemnification obligation with respect to their duties to
the Company Plans or the assets of any of the trusts under any of the Company
Plans (other than routine claims for benefits) nor, to the knowledge of the
Company, are there facts or circumstances that exist that could reasonably be
expect to give rise to any such Actions;

(4) no Company Plan is or, within the preceding six years, has been subject to
Title IV of ERISA or subject to Section 412 of the Code and neither the Company
nor any Person that is a member of a “controlled group of corporations” with, or
is under “common control” with, or is a member of the same “affiliated service
group” with the Company, in each case, as defined in Sections 414(b), (c),
(m) or (o) of the Code, maintains or contributes to (or has in the past six
years maintained or contributed to) a multiemployer plan as defined in
Section 3(37) of ERISA or a Title IV Plan;

(5) the Company and its Subsidiaries are not subject to any material liability,
including additional contributions, fine, penalties or loss of Tax Deductions as
a result of the administration or operation of any Company Plan that is a “group
health plan” (as such term is defined in Section 5000(b)(1) of the Code);

 

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(6) no Company Plan provides welfare benefits, including death or medical
benefits (whether or not insured) beyond retirement or termination of service,
other than coverage mandated solely by applicable Law;

(7) none of the Company Plans provides for payment of an amount or provision of
a benefit, the increase of a payment or benefit, the payment of a contingent
amount or provision of a contingent benefit, or the acceleration of the payment,
funding or vesting of an amount or benefit determined or occasioned, in whole or
in part, by reason of the execution of this Agreement or the consummation of the
transactions contemplated hereby whether alone or together with any other event;
and

(8) no amounts payable under the Company Plans will fail to be deductible for
federal income tax purposes by virtue of Section 280G of the Code as a result of
the occurrence of the transactions contemplated by this Agreement, either alone
or in combination with another event.

(c) The Company and its Subsidiaries have not entered into any employment or
employment-related agreements (including change in control agreements and offer
letters) to which a named individual is a party, other than those set forth on
Section 3.13(a) of the Company Disclosure Letter.

(d) Each Company Plan that is a “nonqualified deferred compensation plan” within
the meaning of Section 409A of the Code and related Treasury Department guidance
has (i) been operated between January 1, 2005 and December 31, 2008, in good
faith compliance with Section 409A of the Code and Notice 2005-01 and (ii) since
January 1, 2009 (or such later date permitted under applicable guidance), been
operated in compliance, and is in documentary compliance, in all material
respects, with the requirements of Section 409A of the Code.

(e) Neither the Company nor any Subsidiary has a binding commitment to create
any additional material Company Plan, or any plan, agreement or arrangement that
would be a material Company Plan if adopted, or to modify or terminate any
existing material Company Plan, except as required by applicable Law.

(f) The ESOP is an “employee stock ownership plan” within the meaning of
Section 4975(e)(7) of the Code. Neither the Company nor the ESOP has, within the
three year period immediately preceding the date of this Agreement, received any
inquiry or notice from the IRS or any other governmental agency the effect of
which is to question the qualification or status of the ESOP or any transaction
entered into by the ESOP or the Company (with respect to the ESOP). The ESOP and
the Company have filed all reports, returns or other documents in respect of the
ESOP which are required to be filed pursuant to the applicable provisions of the
Code and ERISA and the regulations thereunder. All loans entered into by the
ESOP (the “ESOP Loans”) constitute “exempt loans” under Treasury Regulation
Section 54.4975-7(b)(1)(iii). The securities held by the ESOP constitute
“employer securities” under ERISA Section 407(d)(1) and Section 409(l) of the
Code and “qualifying employer securities” under ERISA Section 407(d)(5) and
Section 4975(e)(8) of the Code.

 

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Section 3.14 Labor Matters. The Company and its Subsidiaries are and have been
in material compliance with all applicable Laws relating to labor and
employment, including those relating to wages, hours, collective bargaining,
unemployment compensation, worker’s compensation, equal employment opportunity,
age and disability discrimination, immigration control, employee classification,
information privacy and security, payment and withholding of Taxes and
continuation coverage with respect to group health plans. Since January 1, 2012,
there has not been, and there is not pending or, to the knowledge of the
Company, threatened, any material labor dispute, work stoppage, labor strike or
lockout against the Company or any of its Subsidiaries by any employees. No
employee of the Company or any of its Subsidiaries is covered by an effective or
pending collective bargaining agreement or similar labor agreement. To the
knowledge of the Company, there has not been any activity on behalf of any labor
organization or employee group to organize any such employees. The Company and
its Subsidiaries are in compliance in all material respects with all notice and
other requirements under the Worker Adjustment and Retraining Notification Act
of 1988 and any other similar applicable foreign, state, or local Laws relating
to facility closings and layoffs.

Section 3.15 Taxes.

(a) The Company and each of its Subsidiaries (and any affiliated, consolidated,
combined, unitary or aggregate group for Tax purposes of which the Company or
any such Subsidiary is or has been a member) (i) have properly completed and
timely filed (or had timely filed on its behalf) with the appropriate Tax
Authority all income and other material Tax Returns (as both terms are defined
below) and all material elections required to be filed by it and all such Tax
Returns are true, correct and complete in all material respects, (ii) have
complied with all material applicable information reporting requirements
relating to material Taxes, (iii) have timely paid (or will timely pay) to the
appropriate Tax Authority all material Taxes required to be paid by it prior to
the Closing Date or, in the case of any such Taxes not yet due and payable, have
established in the Balance Sheet an adequate accrual or reserve in accordance
with GAAP for the payment of such Taxes, (iv) have not incurred, since the date
of the Balance Sheet, any material liability for Taxes other than in the
ordinary course of business, and (iv) have no material liability for Taxes in
excess of the amount of accruals or reserves so established in the Balance
Sheet.

(b) Neither the Company nor any of its Subsidiaries has received any written
notification from any Tax Authority regarding any issues that (i) are currently
pending before any Tax Authority regarding the Company or any of its
Subsidiaries, or (ii) have been raised in writing by any Tax Authority and not
yet finally resolved.

(c) No material Liens relating to a material amount of Taxes are currently in
effect against any of the assets of the Company or any of its Subsidiaries other
than Permitted Liens.

(d) No material deficiencies for Taxes with respect to the Company or any of its
Subsidiaries have been claimed, proposed or assessed, in each case in writing,
by any Tax Authority that has not been finally resolved with all amounts due
either paid or accrued as a liability in the Balance Sheet to the extent
required by GAAP. No material federal, state, local or foreign audit,
examination, contest, administrative or judicial tax proceeding is presently
pending

 

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with regard to any material Taxes or material Tax Returns of the Company and its
Subsidiaries and no such audit, examination, contest, administrative or judicial
tax proceeding has been threatened in writing.

(e) There are no outstanding requests, agreements, consents or waivers regarding
the application of the statute of limitations applicable to the assessment of
any material amounts of Taxes or deficiencies against the Company or any of its
Subsidiaries, and no power of attorney granted by the Company or any of its
Subsidiaries with respect to any Taxes is currently in force.

(f) Neither the Company nor any of its Subsidiaries has (i) been a member of an
affiliated group (within the meaning of Section 1504 of the Code) or an
affiliated, consolidated, combined, unitary, aggregate, or any similar group for
U.S. federal, state, local or foreign Tax purposes, other than the group of
which the Company or any of its Subsidiaries is the common parent or (ii) any
liability for or in respect of the Taxes of, or determined by reference to the
Tax liability of, another Person (other than the Company or any of its
Subsidiaries) under Section 1.1502-6 of the Regulations (or any similar
provision of state, local or foreign Tax Law).

(g) Neither the Company nor any of its Subsidiaries is a party to, is bound by
or has any material obligation under any Tax sharing, Tax indemnity, or Tax
allocation agreement or similar contract or agreement (other than any such
agreement or similar contract between or among the Company or any of its
Subsidiaries).

(h) No material claim has been made against the Company or any of its
Subsidiaries by a Tax Authority in a jurisdiction where the Company or its
Subsidiaries do not file Tax Returns that any one of them is or may be subject
to a material amount Tax by that jurisdiction.

(i) The Company and its Subsidiaries have withheld and paid all material Taxes
required to have been withheld and paid in connection with material amounts paid
or owing to any employee, independent contractor, creditor, stockholder or other
third party.

(j) Neither the Company nor any of its Subsidiaries has participated in, or is
currently participating in, a “listed transaction” within the meaning of
Section 1.6011-4(b)(2) of the Regulations or similar provision of state, local
or foreign Tax Law.

(k) Neither the Company nor any of its Subsidiaries has constituted either a
“distributing corporation” or a “controlled corporation” in a distribution of
stock qualifying under Section 355 of the Code (i) in the two years prior to the
date hereof or (ii) in a distribution that could otherwise constitute part of a
“plan” or “series of related transactions” (within the meaning of Section 355(e)
of the Code) in conjunction with the Merger.

(l) As used in this Agreement:

(1) “Regulations” means the Treasury Regulations (including Temporary
Regulations) promulgated by the Treasury with respect to the Code or other
United States federal Tax statutes.

 

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(2) “Tax” (and, with correlative meaning, “Taxes”) means (i) any net income,
capital gains, alternative or add-on minimum tax, estimated, gross income, gross
receipts, sales, use, ad valorem, transfer, franchise, profits, license,
withholding, payroll, employment, excise, severance, stamp, occupation, premium,
property, environmental or windfall profit tax, custom duty or other tax,
governmental fee or other like assessment or charge of any kind whatsoever,
(ii) any liability pursuant to Section 1.1502-6 of the Regulations or comparable
provisions of state, local or foreign Tax Law, any obligations under any
Contract with any Person with respect to the liability for, or sharing of, Taxes
(including pursuant to Section 1.1502-6 of the Regulations or comparable
provisions of state, local or foreign Tax Law) and any liability for Taxes as a
transferee or successor, by Contract, indemnity or otherwise and (iii) all
interest, penalties, fines, additions to Tax, deficiency assessments or
additional amounts imposed by any Tax Authority or other Governmental Authority
in connection with any item described in clauses (i) and (ii).

(3) “Tax Authority” means any Governmental Entity charged with the
administration of any Tax Law.

(4) “Tax Law” means any applicable Law relating to Taxes.

(5) “Tax Return” means any returns, declarations, reports, estimates,
information returns and statements in respect of any Taxes (including any
schedules or attachments thereto or amendments thereof).

Section 3.16 Contracts.

(a) Section 3.16 of the Company Disclosure Letter lists each of the following
types of Contracts to which the Company or any of its Subsidiaries is a party or
by which any of their respective properties or assets is bound as of the date
hereof:

(1) any Contract required to be filed by the Company as a “material contract”
pursuant to Item 601(b)(10) of Regulation S-K under the Securities Act of 1933,
as amended;

(2) any Contract that limits in any material respect the ability of the Company
or any of its Subsidiaries (or following the consummation of the transactions
contemplated hereby, Parent and its Subsidiaries) to compete in any line of
business or with any Person or in any geographic area;

(3) any Contract that obligates the Company or its Subsidiaries (or, following
the consummation of the transactions contemplated hereby, Parent and its
Subsidiaries) to conduct business with any third party on an exclusive or
preferential basis, or that grants any Person other than the Company or any of
its Subsidiaries “most favored nation” status or similar rights;

(4) any Contract to which any Affiliate, officer, director, employee or
consultant of the Company is a party or beneficiary (except with respect to
loans to, or deposits from, directors, officers and employees entered into in
the ordinary course of business and in accordance with all applicable regulatory
requirements with respect to it);

 

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(5) any Contract that limits the payment of dividends by the Company or any of
its Subsidiaries;

(6) any Contract with respect to the formation, creation, operation, management
or control of a joint venture, partnership, limited liability company or other
similar agreement or arrangement;

(7) any Contract relating to Indebtedness (other than deposit liabilities, trade
payables, federal funds purchased, advances and loans from the Federal Home Loan
Bank and securities sold under repurchase agreements, in each case incurred in
the ordinary course of business);

(8) any Contract that by its terms calls for aggregate payments or receipt by
the Company and its Subsidiaries under such Contract of more than $250,000 over
the remaining term of such Contract (other than pursuant to Loans originated or
purchased by the Company or any of its Subsidiaries in the ordinary course of
business consistent with past practice);

(9) any Contract that provides for potential indemnification payments by the
Company or any of its Subsidiaries or the potential obligation of the Company or
any of its Subsidiaries to repurchase Loans;

(10) any Contract that provides any rights to investors in the Company,
including registration, preemptive or anti-dilution rights or rights to
designate members of or observers to the Company Board;

(11) any Contract that is a consulting agreement or data processing, software
programming or licensing contract involving the payment of more than $100,000
per annum (other than any such contracts which are terminable by the Company or
its Subsidiaries on 60 days or less notice without any required payment or other
conditions (other than the condition of notice));

(12) any Contract that requires a consent to or otherwise contains a provision
relating to a “change of control,” that would be implicated by the Merger, or
that would or would reasonably be expected to prevent, materially delay or
impair the consummation of the transactions contemplated by this Agreement;

(13) any Contract in respect of any (i) Owned Real Property or (ii) leased
premises with respect to which the Company or any of its Subsidiaries is either
a landlord or tenant (or subtenant); or

(14) any Contract not of the type described in clauses (1) through (13) above
and which involved the payments by, or to, the Company or any of its
Subsidiaries in the fiscal year ended December 31, 2013, or which could
reasonably be expected to involve such payments during the fiscal year ending
December 31, 2014, of

 

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more than $100,000 (other than pursuant to Loans originated or purchased by the
Company or any of its Subsidiaries in the ordinary course of business consistent
with past practice).

Each Contract of the type described in clauses (1) through (14) is referred to
herein as a “Material Contract.” A true and complete copy of each Material
Contract has been made available to Parent prior to the date hereof (it being
understood that documents publicly filed in their entirety (without redaction or
omission of any portion thereof) with the SEC shall be deemed to have been made
available for purposes of this representation).

(b) (i) Each Material Contract is valid and binding on the Company and any of
its Subsidiaries to the extent such Subsidiary is a party thereto, as
applicable, and to the knowledge of the Company, each other party thereto, and
is in full force and effect and enforceable in accordance with its terms, except
where the failure to be valid, binding, enforceable and in full force and
effect, individually or in the aggregate, has not had and would not reasonably
be expected to have a Material Adverse Effect on the Company; (ii) the Company
and each of its Subsidiaries, and, to the knowledge of the Company, each other
party thereto, has performed all obligations required to be performed by it
under each Material Contract, except where any noncompliance, individually or in
the aggregate, has not had and would not reasonably be expected to have a
Material Adverse Effect on the Company; and (iii) there is no default under any
Material Contract by the Company or any of its Subsidiaries or, to the knowledge
of the Company, any other party thereto, and no event or condition has occurred
that constitutes, or, after notice or lapse of time or both, would constitute, a
default on the part of the Company or any of its Subsidiaries or, to the
knowledge of the Company, any other party thereto under any such Material
Contract, except where any such default, event or condition, individually or in
the aggregate, has not had and would not reasonably be expected to have a
Material Adverse Effect on the Company.

Section 3.17 Loan Portfolio.

(a) Except as set forth in Section 3.17(a)(i) of the Company Disclosure Letter,
as of the date hereof, neither the Company nor any of its Subsidiaries is a
party to any written or oral loan, loan agreement, note or borrowing arrangement
(including leases, credit enhancements, commitments, guarantees and
interest-bearing assets) (collectively, “Loans”) with any director, executive
officer or principal stockholder (as such terms are defined in Regulation O of
the Federal Reserve (12 C.F.R. Part 215)) of the Company or any of its
Subsidiaries. Section 3.17(a)(ii) of the Company Disclosure Letter sets forth
(x) all of the Loans of the Company or its Subsidiaries that as of March 31,
2014 were (A) in default or contractually past due ninety (90) days or more with
respect to the payment or principal or interest or on non-accrual status or
(B) classified by the Company or any of its Subsidiaries or any regulatory
examiner as “Other Loans Specially Mentioned,” “Special Mention,” “Substandard,”
“Doubtful,” “Loss,” “Classified,” “Criticized,” “Credit Risk Assets,” “Concerned
Loans,” “Watch List” or words of similar import, together with the principal
amount of and accrued and unpaid interest on each such Loan as of the date
hereof and the identity of the borrower thereunder, (y) by category of loan
(i.e., commercial, consumer, etc.), all other Loans of the Company and its
Subsidiaries that as of the date hereof were classified as provided in clause
(x)(B), together with the aggregate principal amount of any accrued and unpaid
interest on such Loans by category as of March 31, 2014 and (z) each asset of
the Company and its Subsidiaries that as of March 31, 2014 was classified as
“Other Real Estate Owned” and the book value thereof.

 

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(b) Except as has not had, and would not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on the Company, each
Loan of the Company and any of the Subsidiaries (i) is evidenced by notes,
agreements or other evidences of indebtedness that are true, genuine and what
they purport to be, (ii) to the extent secured or purported to be secured, has
been secured by valid Liens which have been perfected, (iii) is the legal, valid
and binding obligation of the obligor named therein, enforceable in accordance
with its terms, subject to bankruptcy, insolvency, fraudulent conveyance,
moratorium, reorganization and other Laws of general applicability relating to
or affecting creditors’ rights and to general equity principles and (iv) to the
extent secured or purported to be secured, the collateral securing each Loan of
the Company and any of its Subsidiaries is free and clear of all Liens (other
than Permitted Liens).

(c) Except as set forth in Section 3.17(c) of the Company Disclosure Letter,
(i) none of the agreements pursuant to which the Company has sold Loans or pools
of Loans or participations in Loans or pools of Loans contains any obligation to
repurchase such Loans or interests therein and (ii) no demand or request has
been made to repurchase any Loan.

(d) Except as has not had, and would not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on the Company, the
Company has complied with, and all documentation in connection with the
origination, processing, underwriting and credit approval of any mortgage loan
originated, purchased or serviced by the Company satisfied, (i) the Company’s
underwriting standards (and, in the case of Loans held for resale to investors,
the underwriting standards, if any, of the applicable investors), (ii) all
applicable requirements of federal, state and local Laws, (iii) the
responsibilities and obligations relating to mortgage loans set forth in any
agreement between the Company or any of its Subsidiaries, on the one hand, and
any Agency, Loan Investor or Insurer, on the other hand, (iv) the applicable
rules, regulations, guidelines, handbooks and other requirements of any Agency,
Loan Investor or Insurer, and (v) the terms and provisions of any mortgage or
other collateral documents and other loan documents with respect to each
mortgage loan. Since January 1, 2012, no Agency, Loan Investor or Insurer has
(A) claimed in writing that the Company or any of its Subsidiaries has violated
or has not complied with the applicable underwriting standards with respect to
mortgage loans sold by the Bank to a Loan Investor or Agency, or with respect to
any sale of mortgage servicing rights to a Loan Investor, (B) imposed in writing
restrictions on the activities (including commitment authority) of the Company
or any of its Subsidiaries, or (C) indicated in writing to the Company or any of
its Subsidiaries that it has terminated or intends to terminate its relationship
with the Company or any of its Subsidiaries for poor performance, poor loan
quality or concern with respect to the Company’s or any of its Subsidiaries’
compliance with Laws.

(e) Each outstanding Loan (including Loans held for resale to investors) has
been solicited and originated and is administered and serviced (to the extent
administered and serviced by the Company or any of its Subsidiaries), and the
relevant Loan files are being maintained, in all material respects in accordance
with the relevant loan documents, the Company’s underwriting standards (and, in
the case of Loans held for resale to investors, the underwriting standards, if
any, of the applicable investors) and with all applicable requirements of
federal, state and local Laws.

 

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(f) The aggregate book value of the Company’s and its Subsidiaries’
non-performing assets as of the date hereof is set forth in Section 3.17(f) of
the Company Disclosure Letter.

(g) The Company’s allowance for loan losses is in compliance with the Company’s
(or the Bank’s) existing methodology for determining the adequacy of its
allowance for loan losses as well as the Regulatory Agreements (as defined
below) and the standards established by applicable Governmental Entities and the
Financial Accounting Standards Board and is adequate under all such standards.

(h) For purposes of this Section 3.17:

(1) “Agency” shall mean the Federal Housing Administration, the Federal Home
Loan Mortgage Corporation, the Federal National Mortgage Association, the
Government National Mortgage Association, or any other federal or state agency
with authority to (A) determine any investment, origination, lending or
servicing requirements with regard to mortgage loans originated, purchased or
serviced by the Company or any of its Subsidiaries or (B) originate, purchase,
or service mortgage loans, or otherwise promote mortgage lending, including,
without limitation, state and local housing finance authorities;

(2) “Loan Investor” shall mean any person (including an Agency) having a
beneficial interest in any mortgage loan originated, purchased or serviced by
the Company or any of its Subsidiaries or a security backed by or representing
an interest in any such mortgage loan; and

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

Section 3.18 Insurance. Except as has not had, and would not reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect on
the Company, the Company and its Subsidiaries are insured with reputable
insurers against such risks and in such amounts as the management of the Company
and its Subsidiaries reasonably has determined to be prudent and consistent with
industry practice. The Company and its Subsidiaries are in compliance in all
material respects with their insurance policies and are not in default under any
of the terms thereof, each such policy is outstanding and in full force and
effect and, except for policies insuring against potential liabilities of
officers, directors and employees of the Company and its Subsidiaries, the
Company and its Subsidiaries are the sole beneficiary of such policies, and all
premiums and other payments due under any such policy have been paid, and all
claims thereunder have been filed in due and timely fashion.

 

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Section 3.19 Properties. Except in any such case as, individually or in the
aggregate, has not had and would not reasonably be expected to have a Material
Adverse Effect on the Company, with respect to the real property owned by the
Company or its Subsidiaries (the “Owned Real Property”), (1) the Company or one
of its Subsidiaries, as applicable, has good and marketable title to the Owned
Real Property, free and clear of any Liens, other than (A) statutory Liens
securing payments not yet due or being contested in good faith by appropriate
proceedings, (B) Liens for current Taxes and assessments not yet past due or the
amount or validity of which is being contested in good faith by appropriate
proceedings, (C) mechanics’, workmen’s, repairmen’s, warehousemen’s and
carriers’ Liens arising in the ordinary course of business of the Company or
such Subsidiary consistent with past practice and (D) easements, rights of way
and any such matters of record, Liens and other imperfections of title that do
not, individually or in the aggregate, materially impair the continued
ownership, use and operation of the assets to which they relate in the business
of the Company and its Subsidiaries as currently conducted (“Permitted Liens”)
and (2) there are no outstanding options or rights of first refusal to purchase
the Owned Real Property, or any portion of the Owned Real Property or interest
therein. With respect to the real property leased or subleased to the Company or
its Subsidiaries, the lease or sublease for such property is valid, legally
binding, enforceable and in full force and effect, and neither the Company nor
any of its Subsidiaries is in breach of or default under such lease or sublease,
and no event has occurred which, with notice, lapse of time or both, would
constitute a breach or default by any of the Company or its Subsidiaries or
permit termination, modification or acceleration by any third party thereunder,
or prevent, materially delay or materially impair the consummation of the
transactions contemplated by this Agreement except in each case, for such
invalidity, failure to be binding, unenforceability, ineffectiveness, breaches,
defaults, terminations, modifications, accelerations or repudiations that,
individually or in the aggregate, have not had and would not reasonably be
expected to have a Material Adverse Effect on the Company. Section 3.19 of the
Company Disclosure Letter contains a true and complete list, as of the date
hereof, of all Owned Real Property (together with all land, buildings,
structures, fixtures and improvements located thereon) and leased premises, as
well as (x) a description of the principal functions conducted as of the date
hereof at each parcel of Owned Real Property or leased premise and (y) a correct
street address and such other information as is reasonably necessary to identify
each parcel of Owned Real Property.

Section 3.20 Intellectual Property. Except as, individually or in the aggregate,
has not had and would not reasonably be expected to have a Material Adverse
Effect on the Company, either the Company or a Subsidiary of the Company owns,
or is licensed or otherwise possesses adequate rights to use (in the manner and
to the extent it has used the same), all trademarks or servicemarks (whether
registered or unregistered), trade names, domain names, copyrights (whether
registered or unregistered), patents, trade secrets or other intellectual
property of any kind used in their respective businesses as currently conducted
(collectively, the “Company Intellectual Property”). Except as, individually or
in the aggregate, has not had and would not reasonably be expected to have a
Material Adverse Effect on the Company, (a) there are no pending or, to the
knowledge of the Company, threatened claims by any Person alleging infringement,
misappropriation or dilution by the Company or any of its Subsidiaries of the
intellectual property rights of any Person; (b) to the knowledge of the Company,
the conduct of

 

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the businesses of the Company and its Subsidiaries has not infringed,
misappropriated or diluted, and does not infringe, misappropriate or dilute, any
intellectual property rights of any Person; (c) neither the Company nor any of
its Subsidiaries has made any claim of infringement, misappropriation or other
violation by others of its rights to or in connection with the Company
Intellectual Property; (d) to the knowledge of the Company, no Person is
infringing, misappropriating or diluting any Company Intellectual Property;
(e) the Company and its Subsidiaries have taken reasonable steps to protect the
confidentiality of their trade secrets and the security of their computer
systems and networks; and (f) the consummation of the transactions contemplated
by this Agreement will not result in the loss of, or give rise to any right of
any third party to terminate any of the Company’s or any Subsidiaries’ rights or
obligations under, any agreement under which the Company or any of its
Subsidiaries grants to any Person, or any Person grants to the Company or any of
its Subsidiaries, a license or right under or with respect to any Company
Intellectual Property.

Section 3.21 State Takeover Statutes. No “moratorium,” “fair price,” “business
combination,” “control share acquisition,” “interested stockholder”, or similar
provision of any state anti-takeover Law (collectively, “Takeover Laws”) is
applicable to this Agreement, the Merger or any of the other transactions
contemplated hereby under Maryland or federal Law.

Section 3.22 No Rights Plan. There is no stockholder rights plan, “poison pill”
anti-takeover plan or other similar device in effect to which the Company is a
party or is otherwise bound.

Section 3.23 Affiliate Transactions. Except for (i) compensation that would be
required to be disclosed pursuant to Item 402 of the SEC’s Regulation S-K,
(ii) ordinary course bank deposit, trust and asset management services on arms’
length terms and (iii) other transactions or arrangements of a type available to
employees of the Company or its Subsidiaries generally, no executive officer or
director of the Company or any of its Subsidiaries is a party to any Material
Contract with or binding upon the Company or any of its Subsidiaries or any of
their respective properties or assets or has any material interest in any
material property owned by the Company or any of its Subsidiaries or has engaged
in any material transaction with any of the foregoing within the last three
years.

Section 3.24 Brokers. No broker, investment banker, financial advisor or other
Person, other than Commerce Street Capital, LLC and Mercer Capital Management,
Inc., the engagement letters (and related documentation) of which have been
provided to Parent and the fees and expenses of which are detailed in
Section 3.24 of the Company Disclosure Letter, is entitled to any broker’s,
finder’s, financial advisor’s or other similar fee or commission in connection
with the transactions contemplated by this Agreement based upon arrangements
made by or on behalf of the Company or any of its Subsidiaries.

Section 3.25 Opinion of Financial Advisor. Mercer Capital Management, Inc. has
delivered to the Company Board its written opinion, dated as of the date of this
Agreement, to the effect that, as of such date, subject to the assumptions,
qualifications, limitations and other matters stated therein, the Per Share
Merger Consideration is fair, from a financial point of view, to the holders of
Shares. A copy of such opinion has been delivered to Parent, it being agreed
that Parent and its Affiliates have no right to rely on such opinion.

 

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Section 3.26 Environmental Matters. Except as, individually or in the aggregate,
has not had and would not reasonably be expected to have a Material Adverse
Effect on the Company, (a) the Company and its Subsidiaries have complied with
all federal, state or local Laws relating to: (i) the protection or restoration
of the environment, health, safety or natural resources; (ii) the handling, use,
presence, disposal, release or threatened release of, or exposure to, any
hazardous substance; and (iii) noise, odor, wetlands, indoor air, pollution,
contamination or any injury or threat of injury to persons or property involving
any hazardous substance (collectively, “Environmental Laws”); (b) there are no
proceedings, claims, actions, or investigations of any kind, pending or, to the
Company’s knowledge, threatened, by any person, court, agency, or other
Governmental Entity, against the Company or its Subsidiaries relating to any
Environmental Law and, to the Company’s knowledge, there is no reasonable basis
for any such proceeding, claim, action or investigation; (c) there are no
agreements, orders, judgments, indemnities or decrees by or with any person,
court, regulatory agency or other Governmental Entity, that could impose any
liabilities or obligations under or in respect of any Environmental Law; (d) to
the Company’s knowledge, there are, and since January 1, 2012 (or since such
time as the Company or any of its Subsidiaries have owned or used the property,
if shorter) have been, no hazardous substances or other environmental conditions
at any property (currently or formerly owned, operated, or otherwise used by the
Company or any of its Subsidiaries) under circumstances which could reasonably
be expected to result in liability to or claims against the Company or any of
its Subsidiaries relating to any Environmental Law; and (e) to the Company’s
knowledge, there are no reasonably anticipated future events, conditions,
circumstances, practices, plans, or legal requirements that could give rise to
obligations or liabilities under any Environmental Law.

Section 3.27 Derivatives. Except as, individually or in the aggregate, has not
had and would not reasonably be expected to have a Material Adverse Effect on
the Company, all swaps, caps, floors, option agreements, futures and forward
contracts and other similar derivative transactions (each, a “Derivative
Contract”), whether entered into for the Company’s and its Subsidiaries’ own
accounts, or for the account of one or more of its customers, were entered into
(i) in accordance with prudent business practices and all applicable Laws and
(ii) with counterparties believed to be financially responsible at the time; and
each Derivative Contract constitutes the valid and legally binding obligation of
the Company or its Subsidiaries, enforceable in accordance with its terms
(except to the extent that enforceability may be limited by applicable
bankruptcy, insolvency, fraudulent conveyance, moratorium, reorganization or
similar Laws affecting the enforcement of creditors’ rights generally or by
general principles of equity), and are in full force and effect. Except as,
individually or in the aggregate, has not had and would not reasonably be
expected to have a Material Adverse Effect on the Company, neither the Company
nor its Subsidiaries, nor to the Company’s knowledge any other party thereto, is
in breach of any of its obligations under any Derivative Contract. The financial
position of the Company and its Subsidiaries on a consolidated basis under or
with respect to each such Derivative Contract has been reflected in the books
and records of the Company and such Subsidiaries in accordance with GAAP
consistently applied.

Section 3.28 Agreements with Regulatory Agencies. Neither the Company nor any of
its Subsidiaries 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

 

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to any capital directive by, or since January 1, 2012, 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 materially 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”). The Company and its Subsidiaries
are in compliance in all material respects with each Regulatory Agreement to
which it is a party or subject. The Company and its Subsidiaries have not
received any notice from any Governmental Entity indicating that the Company or
its Subsidiaries is not in compliance in any material respect with any
Regulatory Agreement. To the Company’s knowledge, no other Regulatory Agreement
is pending or threatened.

Section 3.29 No Dissenter’s or Appraisal Rights. To the fullest extent permitted
under the MGCL, no holder of the capital stock of the Company is entitled to
exercise any rights of an objecting stockholder provided for under Title 3
Subtitle 2 of the MGCL or any successor statute, or any similar dissenter’s or
appraisal rights.

Section 3.30 No Other Representations or Warranties. Except for the
representations and warranties in this Article III, neither the Company nor any
other Person makes any express or implied representation or warranty with
respect to the Company and its Subsidiaries, or their respective businesses,
operations, assets, liabilities, conditions (financial or otherwise) or
prospects, and the Company hereby disclaims any such other representations or
warranties, including with respect to any financial projection, forecast,
estimate, budget or prospective information relating to the Company, any of its
Subsidiaries or their respective businesses or any oral or written information
presented to Parent or any of Parent’s Affiliates or representatives in the
course of their due diligence investigation of the Company, the negotiation of
this Agreement or in the course of the transactions contemplated hereby. The
Company acknowledges and agrees that none of Parent, Merger Sub or any other
Person has made or is making any express or implied representation or warranty
other than those contained in Article IV.

ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB

Parent and the Merger Sub jointly and severally represent and warrant to the
Company as follows:

Section 4.1 Organization, Standing and Power. Each of Parent and Merger Sub
(a) is an entity duly organized, validly existing and in good standing under the
Laws of the jurisdiction of its organization, (b) has all requisite corporate or
similar power and authority to own, lease and operate its properties and to
carry on its business as now being conducted, and (c) is duly qualified or
licensed to do business and is in good standing in each jurisdiction in which
the nature of its business or the ownership, leasing or operation of its
properties makes such qualification or licensing necessary, except in the case
of clause (c) as, individually or in the aggregate, has not had and would not
reasonably be expected to have a Material Adverse Effect on Parent.

 

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Section 4.2 Authority. Each of Parent and Merger Sub has all necessary corporate
or similar power and authority to execute, deliver and perform its obligations
under this Agreement and to consummate the transactions contemplated hereby. The
execution, delivery and performance of this Agreement by Parent and Merger Sub
and the consummation by Parent and Merger Sub of the transactions contemplated
hereby have been duly authorized by all necessary corporate or similar action on
the part of Parent and Merger Sub and no other corporate or similar proceedings
on the part of Parent or Merger Sub are necessary to approve this Agreement or
to consummate the transactions contemplated hereby, subject, in the case of the
consummation of the Bank Merger, to the adoption and approval of an agreement
and plan of merger in respect thereof by Green Bank and by Parent as its sole
stockholder. This Agreement has been duly executed and delivered by Parent and
Merger Sub and, assuming the due authorization, execution and delivery by the
Company, constitutes a valid and binding obligation of each of Parent and Merger
Sub, enforceable against each of Parent and Merger Sub in accordance with its
terms (except to the extent that enforceability may be limited by applicable
bankruptcy, insolvency, fraudulent conveyance, moratorium, reorganization or
similar Laws affecting the enforcement of creditors’ rights generally or by
general principles of equity). The Boards of Directors of Parent and Merger Sub,
at meetings duly called and held, duly adopted resolutions (i) determining that
the terms of this Agreement, the Merger and the other transactions contemplated
hereby are fair to and in the best interests of their stockholders and
(ii) approving and declaring advisable this Agreement and the transactions
contemplated hereby, including the Merger, and Parent, as the sole stockholder
of Merger Sub, has approved the Merger. No vote of the holders of any class or
series of Parent’s capital stock or other securities is required by applicable
Law in connection with the approval of this Agreement or the consummation of the
transactions contemplated hereby, including the Merger, that has not been
obtained prior to the date of this Agreement.

Section 4.3 No Conflict; Consents and Approvals.

(a) The execution, delivery and performance of this Agreement by each of Parent
and Merger Sub does not, and the consummation of the Merger and the other
transactions contemplated hereby and compliance by each of Parent and Merger Sub
with the provisions hereof will not, conflict with, or result in any violation
or breach of, or default (with or without notice or lapse of time, or both)
under, or give rise to a right of, or result in, termination, cancellation,
modification or acceleration of any obligation or to the loss of a benefit
under, or result in the creation of any Lien in or upon any of the properties,
assets or rights of Parent or Merger Sub under, or give rise to any increased,
additional, accelerated or guaranteed rights or entitlements under, or require
any consent, waiver or approval of any Person pursuant to, any provision of
(i) the articles of incorporation or bylaws (or similar organizational
documents) of Parent or Merger Sub, (ii) any Contract to which Parent or Merger
Sub is a party or by which Parent, Merger Sub or any of their respective
properties or assets may be bound or (iii) subject to the governmental filings
and other matters referred to in Section 4.3(b), any Law applicable to Parent or
Merger Sub or by which Parent, Merger Sub or any of their respective properties
or assets may be bound, except as, in the case of clauses (ii) and (iii),
individually or in the aggregate, has not had and would not reasonably be
expected to have a Material Adverse Effect on Parent.

 

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(b) No consent, approval, order or authorization of, or registration,
declaration, filing with or notice to, any Governmental Entity is required by or
with respect to Parent or Merger Sub in connection with the execution, delivery
and performance of this Agreement by Parent and Merger Sub or the consummation
of the Merger and the other transactions contemplated hereby (including the Bank
Merger) or compliance with the provisions hereof, except for (i) such filings
and reports as required pursuant to the applicable requirements of state or
federal securities, takeover and “blue sky” Laws, (ii) the filing of the
Articles of Merger with the Maryland SDAT as required by the MGCL, (iii) the
filing of applications and notices with, and receipt of consents,
authorizations, approvals, exemptions or nonobjections from the Federal Reserve,
the FDIC, the OCC and the Texas DOB and (iv) such other consents, approvals,
orders, authorizations, registrations, declarations, filings or notices the
failure of which to be obtained or made, individually or in the aggregate, has
not had and would not reasonably be expected to have a Material Adverse Effect
on Parent.

Section 4.4 Certain Information. None of the information supplied or to be
supplied by or on behalf of Parent or Merger Sub specifically for inclusion or
incorporation by reference in the Proxy Statement will, at the time it is first
mailed to the Company’s stockholders, at the time of any amendments or
supplements thereto and at the time of the Company Stockholders Meeting, contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they are made, not misleading.
Notwithstanding the foregoing, neither Parent nor Merger Sub makes any
representation or warranty with respect to statements included or incorporated
by reference in the Proxy Statement based on information supplied by or on
behalf of Company or any of its Subsidiaries.

Section 4.5 Brokers. No broker, investment banker, financial advisor or other
Person is entitled to any broker’s, finder’s, financial advisor’s or other
similar fee or commission in connection with the transactions contemplated by
this Agreement based upon arrangements made by or on behalf of Parent or Merger
Sub.

Section 4.6 Merger Sub. Merger Sub was formed solely for the purpose of engaging
in the transactions contemplated hereby and has engaged in no business other
than in connection with the transactions contemplated by this Agreement. All of
the issued and outstanding capital stock of Merger Sub is owned directly or
indirectly by Parent.

Section 4.7 Financing. Parent has or will have at the Closing sufficient funds
to consummate the Merger and the other transactions contemplated hereby on the
terms and subject to the conditions contemplated hereby.

Section 4.8 Litigation; Regulatory Matters. As of the date hereof, there is no
Action, judgment, order, injunction, rule or governmental decree or Regulatory
Agreement to which Parent or any of its Subsidiaries is subject, or pending or,
to the knowledge of Parent, threatened against or affecting Parent or any of its
Subsidiaries, that would reasonably be expected to have a material adverse
effect on the ability of Parent to timely consummate the transactions
contemplated by this Agreement, and neither Parent nor any of its Subsidiaries
has received any demand or communication from any Governmental Entity requiring
or requesting it to maintain any capital ratio in excess of the level necessary
to remain well capitalized under generally applicable regulatory capital
guidelines.

 

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Section 4.9 No Other Representations or Warranties. Except for the
representations and warranties in this Article IV, none of Parent, Merger Sub or
any other Person makes any express or implied representation or warranty with
respect to Parent, Merger Sub, or their respective businesses, operations,
assets, liabilities, conditions (financial or otherwise) or prospects, and
Parent and Merger Sub hereby disclaim any such other representations or
warranties. Parent and Merger Sub acknowledge and agree that neither the Company
nor any other Person has made or is making any express or implied representation
or warranty other than those contained in Article III.

ARTICLE V

COVENANTS

Section 5.1 Conduct of Business. During the period from the date of this
Agreement to the Effective Time, except as consented to in writing in advance by
Parent (such consent not to be unreasonably withheld, conditioned or delayed) or
as otherwise specifically required or permitted by this Agreement, the Company
shall, and shall cause each of its Subsidiaries to, carry on its business in all
material respects in the ordinary course consistent with past practice and use
reasonable best efforts to preserve intact its business organization, preserve
its assets, rights and properties in good repair and condition, keep available
the services of its current officers, employees and consultants and preserve its
goodwill and its relationships with customers, suppliers, licensors, licensees,
distributors and others having business dealings with it. In addition to and
without limiting the generality of the foregoing, during the period from the
date of this Agreement to the Effective Time, except as set forth in Section 5.1
of the Company Disclosure Letter or as specifically required or permitted by
this Agreement or as required by Law, without Parent’s prior written consent
(such consent not to be unreasonably withheld, conditioned or delayed), the
Company shall not, and shall not permit any of its Subsidiaries to:

(a) (i) declare, set aside or pay any dividends on, or make any other
distributions (whether in cash, stock or property) in respect of, any of its
capital stock or other equity interests, except for dividends by a wholly owned
Subsidiary of the Company to the Company or any of its wholly owned
Subsidiaries, (ii) purchase, redeem or otherwise acquire shares of capital stock
or other equity interests of the Company or its Subsidiaries or any options,
warrants, or rights to acquire any such shares or other equity interests, other
than in connection with the exercise of Company Stock Options or the vesting or
forfeiture of Company Restricted Shares, in each case that are outstanding on
the date hereof in accordance with the terms of this Agreement or (iii) split,
combine, reclassify or otherwise amend the terms of any of its capital stock or
other equity interests or issue or authorize the issuance of any other
securities in respect of, in lieu of or in substitution for shares of its
capital stock or other equity interests;

(b) issue, deliver, sell, grant, pledge or otherwise encumber or subject to any
Lien any shares of its capital stock or other equity interests or any securities
convertible into, or exchangeable for, or any rights, warrants or options to
acquire, any such shares or other

 

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equity interests, or any stock appreciation rights, “phantom” stock rights,
performance units, rights to receive shares of capital stock of the Company on a
deferred basis or other rights linked to the value of Shares, including pursuant
to Contracts as in effect on the date hereof (other than the issuance of Shares
upon the exercise of Company Stock Options outstanding on the date hereof in
accordance with the terms of this Agreement);

(c) amend, authorize or propose to amend its articles of incorporation or bylaws
(or similar organizational documents);

(d) directly or indirectly acquire or agree to acquire (i) by merging or
consolidating with, purchasing a substantial equity interest in or a substantial
portion of the assets of, making an investment in or loan or capital
contribution to or in any other manner, any corporation, partnership,
association or other business organization or division thereof or (ii) any
assets that are otherwise material to the Company and its Subsidiaries, other
than in each case in the ordinary course of business consistent with past
practice;

(e) directly or indirectly sell, lease, license, sell and leaseback, abandon,
mortgage or otherwise encumber or subject to any Lien (other than Permitted
Liens) or otherwise dispose in whole or in part of any of its material
properties, assets or rights or any material interest therein, except in the
ordinary course of business consistent with past practice or as expressly
required by the terms of any Contracts in force as of, and provided to Parent
prior to, the date of this Agreement;

(f) adopt or enter into a plan of complete or partial liquidation, dissolution,
restructuring, recapitalization or other reorganization;

(g) incur, create, assume or otherwise become liable for, or repay or prepay,
any indebtedness for borrowed money, any obligations under conditional or
installment sale Contracts or other retention Contracts relating to purchased
property, any capital lease obligations or any guarantee or any such
indebtedness of any other Person, issue or sell any debt securities, options,
warrants, calls or other rights to acquire any debt securities of the Company or
any of its Subsidiaries, guarantee any debt securities of any other Person,
enter into any “keepwell” or other agreement to maintain any financial statement
condition of any other Person or enter into any arrangement having the economic
effect of any of the foregoing, in each case other than (i) deposits,
(ii) federal funds borrowings and (iii) borrowings from the Federal Home Loan
Bank of Dallas (provided that, in the case of (ii) and (iii) above, the maturity
of any such borrowings does not exceed thirty (30) days) (collectively,
“Indebtedness”), or amend, modify or refinance any Indebtedness;

(h) incur or commit to incur any capital expenditure or authorization or
commitment with respect thereto that in the aggregate is in excess of $50,000;

(i) (i) pay, discharge, settle or satisfy any material claims, liabilities or
obligations (whether absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge or satisfaction in the ordinary
course of business consistent with past practice or as required by their terms
as in effect on the date of this Agreement of claims, liabilities or obligations
reflected or reserved against on the Balance Sheet (for amounts not in

 

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excess of such reserves) or incurred since the date of the Balance Sheet in the
ordinary course of business consistent with past practice or (ii) waive,
release, grant or transfer any right of material value to the Company or its
Subsidiaries other than in the ordinary course of business consistent with past
practice;

(j) (i) modify, amend, terminate, cancel or extend any Material Contract or
(ii) enter into any Contract that if in effect on the date hereof would be a
Material Contract;

(k) commence any Action (other than an Action as a result of an Action commenced
against the Company or any of its Subsidiaries), or except as otherwise
permitted by Section 5.10, compromise, settle or agree to settle any Action
(including any Action relating to this Agreement or the transactions
contemplated hereby) other than compromises, settlements or agreements in the
ordinary course of business consistent with past practice that (i) involve only
the payment of money damages not in excess of $50,000 individually or $200,000
in the aggregate, in any case (i) without the imposition of any equitable relief
on, or the admission of wrongdoing by, the Company and (ii) that would not
create adverse precedent for claims that are reasonably likely to be material to
the Company or any of its Subsidiaries;

(l) change its financial accounting methods, principles or practices, or revalue
any of its material assets except, in each case, insofar as is required by a
change in GAAP, applicable Law or regulatory accounting policies;

(m) make or change any material Tax election except as required by applicable
Law, settle, compromise or enter into any closing agreement with any Tax
Authority with respect to any material Tax claim, audit or assessment, surrender
any right to claim a material refund of Taxes, consent to any extension or
waiver of the limitation period applicable to any Tax claim, audit or
assessment, or change any annual Tax accounting period or method of Tax
accounting, in each case except in the ordinary course of business consistent
with past practice;

(n) change its fiscal or Tax year;

(o) except as required by applicable Law or the terms of a Company Plan as in
effect on the date hereof, (i) grant any current or former director, officer,
employee or independent contractor any increase in compensation, bonus or other
benefits, other than increases in annual base salaries or wage rates in the
ordinary course of business consistent with past practice that do not exceed 3%
for any individual, or pay any bonus of any kind or amount to any current or
former director, officer, employee or independent contractor, (ii) grant or pay
any current or former director, officer, employee or independent contractor any
severance, change in control or termination pay, or modifications thereto or
increases therein, (iii) grant or amend any equity or equity-based award,
(iv) adopt or enter into any collective bargaining agreement or other labor
union contract, (v) take any action to accelerate the vesting or payment of any
compensation or benefit under any Company Plan or other Contract, (vi) adopt any
new employee benefit plan or arrangement that would be a Company Plan or amend,
modify or terminate any existing Company Plan or (vii) hire or terminate, other
than for cause, the employment of any officer holding the position of senior
vice president or above or any employee with base salary in excess of $100,000,
except as contemplated by Section 2.2(b)(3)(y) of the Company Disclosure Letter;

 

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(p) fail to keep in force insurance policies or replacement or revised
provisions regarding insurance coverage with respect to the assets, operations
and activities of the Company and its Subsidiaries as currently in effect;

(q) renew or enter into any non-compete, exclusivity, non-solicitation or
similar agreement that would restrict or limit, in any material respect, the
operations of the Company or any of its Subsidiaries;

(r) except as permitted by Section 5.2, waive any material benefits of, or agree
to modify in any adverse respect, or fail to enforce, or consent to any matter
with respect to which its consent is required under, any confidentiality,
standstill or similar agreement to which the Company or any of its Subsidiaries
is a party;

(s) enter into any new line of business outside of its existing business;

(t) enter into any new lease of real property, other than renewals in the
ordinary course of business consistent with past practice, or materially amend
the terms of any existing lease of real property;

(u) change, in any material respect, the credit, loan pricing, loan risk rating,
underwriting, recognition of charge-offs or other material policies of the
Company or any of its Subsidiaries except as required by Law or by rules or
policies imposed by a Governmental Entity;

(v) make any new, or renew, restructure or enter into any material modification
of any existing, Loans with an unpaid principal balance in excess of $250,000
(other than any conforming real estate mortgage loan originated in the ordinary
course of business and consistent with past practice with an approved take-out
commitment from an existing correspondent bank relationship) or manage its Loan
portfolio in a manner that is outside of the ordinary course of business or
inconsistent with past practice;

(w) pay or offer to pay interest rates on any deposits, including new and
renewed time deposits, that are materially inconsistent with prevailing market
rates for such deposits or solicit or accept any brokered deposits, including
brokered certificates of deposit;

(x) sell or transfer any existing investment securities or otherwise manage its
investment securities portfolio or its derivatives portfolio in a manner that in
either case is outside of the ordinary course of business or inconsistent with
past practice; provided that the Company shall not purchase any fixed income
securities other than those issued, insured or guaranteed by the U.S. Treasury,
a U.S. government agency or U.S. government sponsored enterprise with a final
maturity of three (3) years or less;

(y) make application for the opening, relocation or closing of any, or open,
relocate or close any, branch office, loan production office or other
significant office or operations facility;

 

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(z) engage in (or modify in a manner adverse to the Company or its Subsidiaries)
any transactions (except for any ordinary course banking relationships permitted
under applicable law) with any Affiliate or any director or officer (senior vice
president or above) thereof (or any Affiliate or immediate family member of any
such person or any Affiliate of such person’s immediate family members); or

(aa) authorize any of, or commit, resolve or agree to take any of, the foregoing
actions.

Section 5.2 No Solicitation. (a) Except as provided in this Section 5.2(a), the
Company shall not, and shall not permit or authorize any of its Subsidiaries or
any director, officer, employee, investment banker, financial advisor, attorney,
accountant or other advisor, agent or representative (collectively,
“Representatives”) of the Company or any of its Subsidiaries, directly or
indirectly, to (i) solicit, initiate, endorse, or knowingly encourage or
facilitate any inquiry, proposal or offer with respect to, or the making or
completion of, any Acquisition Proposal, or any inquiry, proposal or offer that
is reasonably likely to lead to any Acquisition Proposal, (ii) enter into,
continue or otherwise participate in any discussions or negotiations regarding,
or furnish to any Person any non-public information or data with respect to, or
otherwise cooperate in any way with, any Acquisition Proposal, (iii) subject to
Section 5.2(b), approve, recommend, agree to or accept, or publicly propose to
approve, recommend, agree to or accept, any Acquisition Proposal or
(iv) resolve, publicly propose or agree to do any of the foregoing. The Company
shall, and shall cause each of its Subsidiaries and the Representatives of the
Company and its Subsidiaries to, (A) immediately cease and cause to be
terminated all existing discussions or negotiations with any Person conducted
heretofore with respect to any Acquisition Proposal, (B) request and confirm the
prompt return or destruction of all confidential information previously
furnished with respect to any Acquisition Proposal and (C) not terminate, waive,
amend, release or modify any provision of any confidentiality or standstill
agreement to which it or any of its Affiliates or Representatives is a party
with respect to any Acquisition Proposal, and shall enforce the provisions of
any such agreement. Notwithstanding the foregoing, if at any time following the
date of this Agreement and prior to obtaining the Stockholder Approval, (1) the
Company receives a written Acquisition Proposal that the Company Board believes
in good faith to be bona fide, (2) such Acquisition Proposal was unsolicited and
did not otherwise result from a breach of this Section 5.2, (3) the Company
Board determines in good faith that such Acquisition Proposal constitutes or is
reasonably likely to result in a Superior Proposal and (4) the Company Board
determines in good faith (and after consultation with outside counsel) that the
failure to take the actions referred to in clause (x) or (y) would be reasonably
likely to constitute a breach of its fiduciary duties to the stockholders of the
Company under applicable Law, then the Company may (x) furnish information with
respect to the Company and its Subsidiaries to the Person making such
Acquisition Proposal; provided that prior to furnishing any such information the
Company shall have first received from the Person making such Acquisition
Proposal an executed confidentiality agreement containing terms substantially
similar to, and not materially less favorable to the Company than, those set
forth in the Confidentiality Agreement (as defined below); provided that any
non-public information provided to any Person given such access shall have been
previously provided to Parent or shall be provided to Parent prior to or
concurrently with the time it is provided to such Person and (y) participate in
discussions or negotiations with the Person making such Acquisition Proposal
regarding such Acquisition Proposal or take the actions specified in clause
(C) of the preceding sentence.

 

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(b) Except as provided in this Section 5.2(b), neither the Company Board nor any
committee thereof shall (i) (A) withdraw (or modify or qualify in any manner
adverse to Parent or Merger Sub) the approval, recommendation or declaration of
advisability by the Company Board or any such committee of this Agreement, the
Merger or any of the other transactions contemplated hereby, (B) adopt, approve,
recommend, endorse or otherwise declare advisable the adoption of any
Acquisition Proposal, (C) resolve, agree or publicly propose to take any such
actions or (D) submit this Agreement to its stockholders without recommendation
(each such action set forth in this Section 5.2(b)(i) being referred to herein
as an “Adverse Recommendation Change”) or (ii) (A) cause or permit the Company
to enter into any letter of intent, memorandum of understanding, agreement in
principle, acquisition agreement, merger agreement, option agreement, joint
venture agreement, partnership agreement or other Contract (other than a
confidentiality agreement pursuant to and consistent with the terms of
Section 5.2(a)) (each, an “Alternative Acquisition Agreement”) constituting or
related to, or which is intended to or is reasonably likely to lead to, any
Acquisition Proposal or (B) resolve, agree or publicly propose to take any such
actions. Notwithstanding the foregoing, if at any time following the date of
this Agreement and prior to obtaining the Stockholder Approval, (1) the Company
receives a written Acquisition Proposal that has not been withdrawn that the
Company Board believes in good faith to be bona fide, (2) such Acquisition
Proposal was unsolicited and did not otherwise result from a breach of this
Section 5.2, (3) the Company Board determines in good faith (after consultation
with outside counsel and its financial advisor) that such Acquisition Proposal
constitutes a Superior Proposal and (4) the Company Board determines in good
faith (after consultation with outside counsel) that the failure to take the
actions referred to in clause (x) or (y) would be reasonably likely to
constitute a breach of its fiduciary duties to the stockholders of the Company
under applicable Law, the Company Board may (x) effect an Adverse Recommendation
Change or (y) terminate this Agreement pursuant to Section 7.1(d)(2) in order to
enter into a definitive binding agreement with respect to such Superior
Proposal; provided, however, that the Company may not take either of the actions
described in clause (x) or (y) above unless (I) the Company promptly notifies
Parent in writing at least five Business Days before taking that action of its
intention to do so, and specifying the reasons therefor, including the terms and
conditions of, and the identity of any Person making, such Superior Proposal,
and contemporaneously furnishing a copy of the relevant Alternative Acquisition
Agreement and any other relevant transaction documents (it being understood and
agreed that any amendment to the financial terms or any other material term of
such Superior Proposal shall require a new written notice by the Company and a
new five Business Day period) and (II) prior to the expiration of such five
Business Day period, Parent does not make a proposal to adjust the terms and
conditions of this Agreement that the Company Board determines in good faith
(after consultation with outside counsel and its financial advisor) that the
failure to take such action is no longer reasonably likely to constitute a
breach of its fiduciary duties to the stockholders of the Company under
applicable Law. During the five Business Day period prior to its effecting an
Adverse Recommendation Change or terminating this Agreement as referred to
above, the Company shall, and shall cause its financial and legal advisors to,
negotiate with Parent in good faith (to the extent Parent seeks to negotiate)
regarding any revisions to the terms of the transactions contemplated by this
Agreement proposed by Parent.

 

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(c) In addition to the obligations of the Company set forth in Section 5.2(a)
and (b), the Company promptly, and in any event within 24 hours of receipt,
shall advise Parent in writing in the event the Company or any of its
Subsidiaries or Representatives receives (i) any Acquisition Proposal or
indication by any Person that it is considering making an Acquisition Proposal,
(ii) any request for information, discussion or negotiation that is reasonably
likely to lead to or that contemplates an Acquisition Proposal or (iii) any
inquiry, proposal or offer that is reasonably likely to lead to an Acquisition
Proposal, in each case together with the terms and conditions of such
Acquisition Proposal, request, inquiry, proposal or offer and the identity of
the Person making any such Acquisition Proposal, request, inquiry, proposal or
offer, and shall furnish Parent with a copy of such Acquisition Proposal (or,
where such Acquisition Proposal is not in writing, with a description of the
material terms and conditions thereof). The Company shall keep Parent informed
in all material respects on a timely basis of the status and details (including,
within 24 hours after the occurrence of any material amendment, modification,
development, discussion or negotiation) of any such Acquisition Proposal,
request, inquiry, proposal or offer, including furnishing copies of any written
inquiries, correspondence and draft documentation. Without limiting any of the
foregoing, the Company shall promptly (and in any event within 24 hours) notify
Parent orally and in writing if it determines to begin providing non-public
information or to engage in discussions or negotiations concerning an
Acquisition Proposal pursuant to Section 5.2(a) or (b) and shall in no event
begin providing such information or engaging in such discussions or negotiations
prior to providing such notice.

(d) The Company agrees that any material violation of the restrictions set forth
in this Section 5.2 by any Representative of the Company or any of its
Subsidiaries, whether or not such Person is purporting to act on behalf of the
Company or any of its Subsidiaries or otherwise, shall be deemed to be a
material breach of this Agreement by the Company.

(e) The Company shall not, and shall cause its Subsidiaries not to, enter into
any confidentiality agreement with any Person subsequent to the date of this
Agreement that would restrict the Company’s ability to comply with any of the
terms of this Section 5.2, and represents that neither it nor any of its
Subsidiaries is a party to any such agreement.

(f) Except in connection with effecting an Adverse Recommendation Change
pursuant to Section 5.2(b), the Company shall not take any action to exempt any
Person (other than Parent, Merger Sub and their respective Affiliates) from the
restrictions on “business combinations” or any similar provision contained in
any Takeover Law or otherwise cause such restrictions not to apply, or agree to
do any of the foregoing.

(g) Notwithstanding anything herein to the contrary, the Company and the Company
Board shall be permitted to comply with Rule 14d–9 and Rule 14e–2 promulgated
under the Exchange Act; provided, however, that compliance with such rules will
in no way limit or modify the effect that any action pursuant to such rules
would otherwise have under this Agreement (it being understood, however, that a
customary “stop, look and listen” communication by the Company Board or any
committee thereof pursuant to Rule 14d-9(f) under the Exchange Act shall not
constitute an Adverse Recommendation Change).

 

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(h) For purposes of this Agreement:

(1) “Acquisition Proposal” means any inquiry, proposal or offer from any Person
or group of Persons (other than Parent and its Affiliates) (whether or not
acting in concert) relating to, or that is reasonably likely to lead to, any
direct or indirect acquisition or purchase, in one transaction or a series of
transactions, including any merger, reorganization, consolidation, tender offer,
self-tender, exchange offer, stock acquisition, asset acquisition, binding share
exchange, business combination, recapitalization, primary investment,
liquidation, dissolution, joint venture or similar transaction, (A) of assets or
businesses of the Company and its Subsidiaries that generate 20% or more of the
net revenues or net income or that represent 20% or more of the total assets
(based on fair market value), of the Company and its Subsidiaries, taken as a
whole, immediately prior to such transaction or (B) of 20% or more of any class
of capital stock, other equity security or voting power of the Company or any
resulting parent company of the Company, in each case other than the
transactions contemplated by this Agreement.

(2) “Superior Proposal” means any unsolicited bona fide binding written
Acquisition Proposal that (A) the Company Board reasonably determines in good
faith (after consultation with outside counsel and its financial advisor),
taking into account all legal, financial, regulatory and other aspects of the
proposal and the Person or Persons making the proposal, (x) is more favorable to
the stockholders of the Company from a financial point of view than the
transactions contemplated by this Agreement (including any adjustment to the
terms and conditions proposed by Parent in response to such proposal pursuant to
Section 5.2(b) or otherwise, and including any break-up fees and expense
reimbursement provisions), and (y) is reasonably likely to be completed on the
terms proposed on a timely basis and (B) is not subject to any due diligence
investigation or financing condition; provided that, for purposes of this
definition of “Superior Proposal,” references in the term “Acquisition Proposal”
to “20%” shall be deemed to be references to “a majority.”

Section 5.3 Preparation of Proxy Statement; Company Stockholders Meeting.

(a) As promptly as practicable after the date of this Agreement (and in any
event within fifteen (15) Business Days after the date hereof), the Company
shall prepare and cause to be filed with the SEC the Proxy Statement. Parent
shall cooperate with the Company in the preparation of the Proxy Statement and
any amendment or supplement thereto. Without limiting the foregoing, Parent
shall, and shall cause its Affiliates to, provide such information as may be
reasonably necessary or appropriate in connection with the preparation of the
Proxy Statement. The Company shall promptly (i) notify Parent of the receipt of
any comments from the SEC with respect to the Proxy Statement and of any request
by the SEC for amendments of, or supplements to, the Proxy Statement, and
(ii) provide Parent with copies of all written correspondence between the
Company and the SEC with respect to the Proxy Statement. Each of the Company and
Parent shall use its reasonable best efforts to resolve all comments from the
SEC with respect to the Proxy Statement as promptly as practicable. No filing
of, or amendment or supplement to, the Proxy Statement shall be made by the
Company without providing Parent and its counsel a reasonable opportunity to
review and comment thereon.

 

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(b) As promptly as reasonably practicable after the Proxy Statement shall have
been cleared by the SEC, the Company shall establish a record date for, duly
call and give notice of a meeting of its stockholders (the “Company Stockholders
Meeting”) for the purpose of obtaining the Stockholder Approval, and the Company
shall convene and hold the Company Stockholders Meeting as promptly as
practicable after the date of this Agreement. In addition to seeking the
Stockholder Approval, the Company may include as matters to be acted upon at the
Company Stockholders Meeting such matters as are customarily acted upon at the
Company’s annual meeting of stockholders, and may include in the Proxy Statement
such disclosures and proposals as are customarily included in its annual meeting
proxy statement. Subject to Section 5.2(b), the Company, through the Company
Board, shall (i) recommend to its stockholders that they approve the Merger and
(ii) include such recommendation in the Proxy Statement. Without limiting the
generality of the foregoing, the Company agrees that its obligations pursuant to
the first sentence of this Section 5.3(b) to convene and hold the Company
Stockholders Meeting shall not be affected by the commencement, public proposal,
public disclosure or communication to the Company or any other Person of any
Acquisition Proposal, unless this Agreement is terminated in accordance with its
terms. Notwithstanding any Adverse Recommendation Change or anything else to the
contrary in this Agreement, unless this Agreement is terminated in accordance
with its terms, the Company shall nevertheless submit the Merger to a vote of
its stockholders. The Company agrees that, prior to the termination of this
Agreement in accordance with its terms, it shall not submit to the vote of its
stockholders any Acquisition Proposal (whether or not a Superior Proposal) or
propose to do so.

Section 5.4 Access to Information; Confidentiality. The Company shall, and shall
cause each of its Subsidiaries to, afford to Parent, Merger Sub and their
respective Representatives reasonable access during normal business hours,
during the period prior to the Effective Time or the termination of this
Agreement in accordance with its terms, to all their respective properties,
assets, books, contracts, commitments, personnel and records and, during such
period, the Company shall, and shall cause each of its Subsidiaries to, furnish
promptly to Parent: (a) a copy of each report, schedule, registration statement
and other document filed or received by it during such period pursuant to the
requirements of federal or state securities Laws and (b) all other information
concerning its business, properties and personnel as Parent or Merger Sub may
reasonably request (including Tax Returns filed and those in preparation and the
workpapers of its auditors); provided, however, that the foregoing shall not
require the Company to disclose any information to the extent such disclosure
would contravene applicable Law. None of the Company or its Subsidiaries shall
be required to provide access to or to disclose information where such access or
disclosure would reasonably be expected to violate a Contract or obligation of
confidentiality owing to a third party, or waive the protection of an
attorney-client privilege, work product doctrine or other legal privilege. The
parties will make appropriate substitute disclosure arrangements under
circumstances in which the restrictions of the preceding sentence apply. All
such information shall be held confidential in accordance with the terms of the
letter agreement between the Company and Parent, dated February 28, 2014 (the
“Confidentiality Agreement”). No investigation pursuant to this Section 5.4 or
information provided, made available or delivered to Parent pursuant to this
Agreement shall affect any of the representations, warranties, covenants, rights
or remedies, or the conditions to the obligations of, the parties hereunder.

 

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Section 5.5 Reasonable Best Efforts; Regulatory Applications.

(a) Upon the terms and subject to the conditions set forth in this Agreement,
each of the parties agrees to use reasonable best efforts to take, or cause to
be taken, all actions that are necessary, proper or advisable to consummate and
make effective, in the most expeditious manner practicable, the Merger and the
other transactions contemplated by this Agreement (including the Bank Merger),
including using reasonable best efforts to accomplish the following as promptly
as practicable: (i) obtain all required consents, approvals or waivers from, or
participation in other discussions or negotiations with, third parties,
including as required under any Material Contract, (ii) obtain all necessary
actions or nonactions, waivers, consents, approvals, orders and authorizations
from Governmental Entities, make all necessary registrations, declarations and
filings and take all steps as may be necessary to obtain an approval or waiver
from, or to avoid any Action by, any Governmental Entity (and, with respect to
any Requisite Regulatory Approvals, Parent shall submit or make any necessary
applications, notices or other filings within fifteen (15) Business Days after
the date hereof), (iii) vigorously resist and contest any Action, including
administrative or judicial Action, and seek to have vacated, lifted, reversed or
overturned any decree, judgment, injunction or other order (whether temporary,
preliminary or permanent) that is in effect and that could restrict, prevent or
prohibit consummation of the transactions contemplated hereby, including,
without limitation, by vigorously pursuing all avenues of administrative and
judicial appeal and (iv) execute and deliver any additional instruments
necessary to consummate the transactions contemplated hereby and fully to carry
out the purposes of this Agreement; provided, however, that neither the Company
nor any of its Subsidiaries shall commit to the payment of any fee, penalty or
other consideration or make any other concession, waiver or amendment under any
Contract in connection with obtaining any consent without the prior written
consent of Parent (not to be unreasonably withheld, conditioned or delayed).

(b) Subject to applicable Law and the guidance of any Governmental Entity, each
of Parent and the Company shall (i) consult with and keep the other party
apprised of the status of matters that may have a material effect on timely
completion of the transactions contemplated hereby; (ii) to the extent
practicable, provide the other party an opportunity to review in advance and
comment on any material written communication provided to any Governmental
Entity in connection with the transactions contemplated hereby, which
communication may be redacted to address reasonable privilege or confidentiality
concerns; and (iii) promptly furnish the other party with copies of written
communications received from any Governmental Entity that may have a material
impact on timely completion of the transactions contemplated hereby, which
communications may be redacted to address reasonable privilege or
confidentiality concerns.

(c) Notwithstanding anything to the contrary in this Agreement, Parent, Merger
Sub and their Affiliates shall not be required to take any action if the taking
of such action or the obtaining of or compliance with any permits, consents,
approvals or authorizations is reasonably likely to result in a restriction,
requirement or condition having an effect of the type referred to in
Section 6.2(b).

 

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(d) Notwithstanding anything to the contrary in this Agreement, the Company
shall use its reasonable best efforts to obtain (i) the consent (in respect of
transactions contemplated by this Agreement) of any counterparties to those
agreements set forth on Section 3.5(d) of the Company Disclosure Letter and
(ii) an extension through December 31, 2015 (or later) of any lease set forth on
Section 3.19 of the Company Disclosure Letter that expires on or before
December 31, 2014 on terms and in a form reasonably satisfactory to Parent (any
fees, costs, expenses or other consideration incurred solely in connection with
obtaining the foregoing consents or extensions, the “Lease/Consent Costs”), it
being understood and agreed that if any such consent or extension is not
obtained notwithstanding the use of the Company’s reasonable best efforts, the
Company shall have no further obligation under this Agreement with respect to
the matters set forth in this Section 5.5(d).

Section 5.6 Takeover Laws. The Company and the Company Board shall (a) take no
action to cause any Takeover Law to become applicable to this Agreement, the
Merger or any of the other transactions contemplated hereby and (b) if any
Takeover Law is, becomes, or is reasonably likely to become applicable to this
Agreement, the Merger or any of the other transactions contemplated hereby, take
all action necessary to ensure that the Merger and the other transactions
contemplated hereby may be consummated as promptly as practicable on the terms
contemplated by this Agreement and otherwise to minimize the effect of such
Takeover Law with respect to this Agreement, the Merger and the other
transactions contemplated hereby.

Section 5.7 Notification of Certain Matters. The Company and Parent shall
promptly notify each other of (a) any notice or other communication received by
such party from any Governmental Entity in connection with the Merger or the
other transactions contemplated hereby or from any Person alleging that the
consent of such Person is or may be required in connection with the Merger or
the other transactions contemplated hereby, (b) any other notice or
communication from any Governmental Entity in connection with the transactions
contemplated hereby, (c) any Action commenced or, to such party’s knowledge,
threatened against, relating to or involving or otherwise affecting such party
or any of its Subsidiaries which relate to the Merger or the other transactions
contemplated hereby or (d) any change, condition or event (i) that renders or
would reasonably be expected to render any representation or warranty of such
party set forth in this Agreement (disregarding any materiality qualification
contained therein) to be untrue or inaccurate in any material respect or
(ii) that results or would reasonably be expected to result in any failure of
such party to comply with or satisfy in any material respect any covenant,
condition or agreement (including any condition set forth in Article VI) to be
complied with or satisfied hereunder; provided, however, that no such
notification shall affect any of the representations, warranties, covenants,
rights or remedies, or the conditions to the obligations of, the parties
hereunder.

Section 5.8 Public Announcements. Each of Parent and Merger Sub, on the one
hand, and the Company, on the other hand, shall, to the extent reasonably
practicable, consult with each other before issuing, and give each other a
reasonable opportunity to review and comment upon, any press release or other
public statements with respect to this Agreement, the Merger and the other
transactions contemplated hereby, and, except as may be required by applicable
Law, court process or by obligations pursuant to any listing agreement with any
national securities exchange or national securities quotation system, shall not
issue any such press release or make any public announcement without the prior
consent of the other party, which consent shall not be unreasonably withheld;
provided, that the foregoing shall not apply to any press release or public
statement in connection with the matters referred to in Section 5.2.

 

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Section 5.9 Financial Statements and Other Current Information. As soon as
reasonably practicable after they become available, but in no event more than
ten (10) days after the end of each calendar month ending after the date hereof,
the Company will furnish to Parent (a) consolidated financial statements
(including balance sheets, statements of operations and statements of
stockholders’ equity) of the Company (to the extent available) as of and for
such month then ended, (b) internal management reports showing actual financial
performance against plan and previous period, and (c) to the extent permitted by
applicable Law, any reports provided to the Company Board or any committee
thereof relating to the financial performance and risk management of the
Company.

Section 5.10 Stockholder Litigation. The Company shall give Parent the
opportunity to participate at its own expense in the defense or settlement of
any stockholder litigation against the Company and/or its directors or
Affiliates relating to the transactions contemplated by this Agreement, and no
such settlement shall be agreed to without Parent’s prior written consent (which
shall not be unreasonably withheld, conditioned or delayed).

Section 5.11 Exemption from Liability Under Section 16(b). Prior to the
Effective Time, Parent and the Company shall take all such steps as may be
necessary or appropriate to cause any disposition of Shares or conversion of any
derivative securities in respect of such Shares (if any) in connection with the
consummation of the transactions contemplated by this Agreement to be exempt
under Rule 16b-3 promulgated under the Exchange Act.

Section 5.12 Maintenance of Insurance. The Company and its Subsidiaries shall
use commercially reasonable efforts to maintain insurance (including directors’
and officers’ liability insurance) in such amounts as are reasonable to cover
such risks as are customary in relation to the character and location of its
properties and the nature of its business, with such coverage and in such
amounts per policy not less than that maintained by the Company and its
Subsidiaries as of the date of this Agreement. The Company will promptly inform
Parent if the Company or any of its Subsidiaries receives notice from an
insurance carrier that (i) an insurance policy will be canceled or that coverage
thereunder will be reduced or eliminated, or (ii) premium costs with respect to
any policy of insurance will be substantially increased.

Section 5.13 Director and Officer Insurance. Prior to the Effective Time, in
consultation with Parent and taking into account Parent’s reasonable views in
connection therewith, the Company shall purchase a directors’ and officers’
liability tail insurance policy and a fiduciary liability tail insurance policy
with respect to the Company’s existing directors’ and officers’ liability and
fiduciary liability insurance or with respect to coverage and amount that are no
less favorable to such directors and officers and fiduciaries than the Company’s
existing policies as of the date hereof, in either case, that, for a period of
six years following the Effective Time, will provide directors’ and officers’
and fiduciaries’ liability insurance that serves to reimburse the present and
former officers and directors and fiduciaries of the Company and the Company
Plans (determined as of the Effective Time) with respect to claims against such
directors and officers and fiduciaries arising from facts or events occurring at
or before the Effective Time (including the transactions contemplated by this
Agreement).

 

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Section 5.14 Indemnification by Parent. Following the Effective Time, Parent
shall indemnify, defend and hold harmless each present and former director and
officer of the Company (determined as of the Effective Time), and their heirs,
estate, executors and administrators (each, an “Indemnified Party”), against all
costs or expenses (including reasonable attorneys’ fees), judgments, fines,
losses, claims, damages or liabilities incurred in connection with any claim,
action, suit, proceeding or investigation, whether civil, criminal,
administrative or investigative, arising out of actions or omissions occurring
at or prior to the Effective Time which were committed by such directors or
officers in their capacity as such (including the transactions contemplated by
this Agreement) to the same extent that the applicable Indemnified Party would
be indemnified, defended and held harmless under the Company Charter or Company
Bylaws, each as in effect on the date hereof as if the claim arose on the date
hereof. Each Indemnified Party is intended to be a third-party beneficiary of
this Section 5.14 and the provisions of this Section 5.14 shall be enforceable
by each Indemnified Party and his or her heirs and representatives. If Parent or
any of its successors or assigns shall consolidate with or merge into any other
entity and shall not be the continuing or surviving entity of such consolidation
or merger or transfer all or substantially all of its assets to any other
entity, then and in each case, Parent shall cause the successors and assigns of
Parent to assume the obligations set forth in this Section 5.14.

Section 5.15 Employee Matters.

(a) Following the Closing Date, Parent shall maintain or cause to be maintained
employee benefit plans for the benefit of each employee employed by the Company
and its Subsidiaries on the Closing Date (a “Company Employee”) that provide
employee benefits which are substantially comparable to the employee benefits
that are provided to similarly situated employees of Parent and its Subsidiaries
(other than the Company and its Subsidiaries) (collectively, the “Parent
Plans”), as applicable; provided that (i) in no event shall any Company Employee
be eligible to participate in any closed or frozen Parent Plan; and (ii) until
such time as Parent shall cause Company Employees to participate in the Parent
Plans, a Company Employee’s continued participation in employee benefit plans of
the Company and its Subsidiaries shall be deemed to satisfy the foregoing
provisions of this sentence (it being understood that participation in the
Parent Plans may commence at different times with respect to each Parent Plan).
Notwithstanding the foregoing, with respect to any Company Employee (other than
a Company Employee who is party to an individual agreement that provides for
severance) whose employment is terminated by Parent for any reason other than
cause on or before the date that is six (6) months after the Closing Date,
Parent shall pay or cause to be paid to such Company Employee not less of an
amount of cash severance as calculated pursuant to the methodology described in
Section 5.15(a) of the Company Disclosure Letter, determined taking into
consideration the service crediting provisions set forth in Section 5.15(b) of
the Agreement.

(b) Parent shall, or shall cause the Surviving Corporation to, give each Company
Employee full credit for such Company Employee’s service with the Company and
its Subsidiaries for purposes of eligibility, vesting, determination of the
level of benefits, and benefit accruals (other than benefit accruals under a
defined benefit or post-retirement welfare plan),

 

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under any benefit plans maintained by Parent or the Surviving Corporation or
their respective Subsidiaries in which a Company Employee participates to the
same extent recognized by the Company or its Subsidiaries immediately prior to
the Effective Time; provided, however, that such service shall not be recognized
to the extent that such recognition would result in a duplication of benefits
with respect to the same period of service.

(c) Parent shall, or shall cause the Surviving Corporation to use commercially
reasonable efforts to, (i) waive any preexisting condition limitations otherwise
applicable to Company Employees and their eligible dependents under any plan of
Parent or its Subsidiaries that provides health benefits in which Company
Employees may be eligible to participate following the Closing, other than any
limitations that were in effect with respect to such employees as of the
Effective Time under the analogous Company Plan, (ii) honor any deductible,
co-payment and out-of-pocket maximums incurred by the Company Employees and
their eligible dependents under the health plans in which they participated
immediately prior to the Effective Time during the portion of the calendar year
prior to the Effective Time in satisfying any deductibles, co-payments or
out-of-pocket maximums under health plans of Parent, the Surviving Corporation
or their respective Subsidiaries in which they are eligible to participate after
the Effective Time in the same plan year in which such deductibles, co-payments
or out-of-pocket maximums were incurred and (iii) waive any waiting period
limitation or evidence of insurability requirement that would otherwise be
applicable to a Company Employee and his or her eligible dependents on or after
the Effective Time, in each case to the extent such Company Employee or eligible
dependent had satisfied any similar limitation or requirement under an analogous
Company Plan prior to the Effective Time.

(d) If requested by Parent at least ten (10) Business Days prior to the
Effective Time, the Company shall terminate, contingent upon the Closing, any
and all Company Plans intended to qualify under Section 401(a) of the Code that
include a cash or deferred arrangement intended to satisfy the provisions of
Section 401(k) of the Code (the “Company 401(k) Plans”), effective not later
than the day immediately preceding the Effective Time. In the event that Parent
requests that any Company 401(k) Plan be terminated, the Company shall provide
Parent with evidence that such Company 401(k) Plan(s) have been terminated
pursuant to resolution of the Company Board (the form and substance of which
shall be subject to review and approval by Parent) not later than the day
immediately preceding the Effective Time.

(e) The ESOP shall be terminated, contingent upon the Closing, effective not
later than the day immediately preceding the Effective Time. Prior to the
Effective Time, the Company shall adopt, contingent upon the Closing, such
resolutions and/or amendments (and take any other required action) to (i) amend
the ESOP to provide that (A) any cash remaining in the ESOP suspense account
upon repayment of the ESOP Loans in connection with the termination of the ESOP
be allocated to the accounts of the ESOP participants and their beneficiaries
who have account balances in the ESOP in proportion to each participant’s
relative amount of applicable compensation consistent with past practice and
(B) all distributions of ESOP account balances made following the termination of
the ESOP be in the form of cash only, (ii) terminate the ESOP, (iii) cause
(A) the aggregate Per Share Merger Consideration received by the ESOP trustee in
connection with the Merger with respect to the unallocated Shares held in the
ESOP trust to first be applied by the ESOP trustee to the full repayment of the
ESOP Loans and (B) any cash remaining in the ESOP suspense account after the
repayment of the ESOP

 

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Loans as described in clause (iii)(A) to be allocated to the accounts of the
ESOP participants and their beneficiaries who have account balances in the ESOP
in accordance with the applicable provisions of the ESOP, as amended as
described in clause (i)(A) and (iv) as soon as practicable following the receipt
by the Company of a favorable determination letter from the IRS regarding the
continued qualified status of the ESOP upon its termination (the “ESOP
Determination Letter”) distribute the account balances of all ESOP participants
and their beneficiaries in cash in accordance with the terms of the ESOP, as
amended as described in clause (i)(B). As soon as practicable following the
Effective Time, the Company shall file a request with the IRS for the ESOP
Determination Letter.

(f) No provision of this Agreement shall (i) create any right in any employee of
the Company or any of its Subsidiaries to continued employment by Parent, the
Surviving Corporation, the Company, or any respective Subsidiary or preclude the
ability of Parent, the Surviving Corporation, the Company, or any respective
Subsidiary to terminate the employment of any employee for any reason,
(ii) require Parent, the Surviving Corporation, the Company, or any respective
Subsidiary to continue any Company Plans or prevent the amendment, modification
or termination thereof after the Closing Date, (iii) confer upon any Company
Employee any rights or remedies under or by reason of this Agreement or (iv) be
treated as an amendment to any particular employee benefit plan of Parent, the
Surviving Corporation, the Company or any respective Subsidiary.

(g) Subject to applicable Law, during the period between the date of this
Agreement and the Effective Time, the Company shall and shall cause its
Subsidiaries to provide, after receiving reasonable advance notice from Parent,
Parent and its representatives reasonable access during normal business hours to
any of the employees of the Company and its Subsidiaries, including for the
purpose of conducting job interviews or otherwise communicating transition plans
and other matters to such employees. Without limiting the generality of the
foregoing, subject to applicable Law, Parent shall be permitted to provide
written materials to the employees of the Company and its Subsidiaries regarding
employee retention and transition planning matters relating to the Merger;
provided, however, that Parent shall provide any such materials to the Company
prior to providing such materials to any employees of the Company and its
Subsidiaries.

Section 5.16 Transition Cooperation; Transition Implementation Plan. Subject to
applicable Law, during the period between the date of this Agreement and the
Effective Time, the Company shall cooperate in good faith with Parent to
facilitate an orderly transition of the operations of the Company and its
Subsidiaries to Parent and Green Bank in connection with the Merger and the Bank
Merger, including facilitation of the transition of data processing and similar
services and systems that currently support the operations of the Company and
its Subsidiaries to the systems of Parent and Green Bank. In furtherance of the
foregoing and subject to applicable Law, the Company and Parent shall develop a
transition implementation plan as promptly as practicable following the date of
this Agreement, and the Company shall appoint a manager reasonably acceptable to
Parent who shall be the principal representative of the Company to manage the
implementation of such transition implementation plan. The transition
implementation plan shall address (a) the transition of facilities, information,
personnel, records, documents and other matters from the Company and its
Subsidiaries to Parent and Green Bank, (b) the conversion of data processing
operations to Green Bank’s

 

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systems, (c) the notification of depositors, and approval of the form of notice,
and of regulatory authorities, to the extent required, and (d) any other matters
relating to the transition of operations resulting from the Merger and the Bank
Merger.

Section 5.17 Bank Merger. Each of the Company and Parent shall take, and shall
respectively cause the Bank and Green Bank to take, all actions necessary for
the Bank and Green Bank to consummate the Bank Merger immediately following the
Effective Time, including entering into an agreement and plan of merger to be
effective immediately following the Effective Time in a form reasonably
acceptable to Parent and the Company and executing such other documents as may
be reasonably requested by Parent or the Company in connection with the Bank
Merger.

Section 5.18 Stock Exchange Delisting. Prior to the Closing Date, the Company
shall cooperate with Parent and use reasonable best efforts to take, or cause to
be taken, all actions, and do or cause to be done all things, reasonably
necessary, proper or advisable on its part under applicable Laws and rules and
policies of NASDAQ to enable the delisting by the Surviving Corporation of the
Shares from NASDAQ and the deregistration of the Shares under the Exchange Act
as promptly as practicable after the Effective Time, and in any event no more
than twelve (12) days after the Closing Date.

Section 5.19 Cooperation in Parent Offerings.

(a) Prior to the Closing Date, the Company and its Subsidiaries shall provide,
and shall use their reasonable best efforts to cause their Representatives to
provide, to Parent such customary cooperation reasonably requested by Parent in
connection with the arrangement, syndication (including marketing efforts in
connection therewith) and consummation of any financing, or sale or distribution
of any equity or debt securities (whether registered or otherwise), made by
Parent or any of its Affiliates (any such transaction, a “Parent Offering”),
provided, that such requested cooperation does not unreasonably interfere with
the ongoing operations of the Company or its Subsidiaries. Such cooperation
shall include reasonable best efforts to: (i) make available to Parent or its
Representatives such customary financial statements, information necessary for
Parent to prepare pro forma financial statements and business and other
financial data and information of the Company necessary for, or a condition of,
any such Parent Offering (the “Required Information”) and other pertinent and
customary information (including projections, provided that no such projections
will be disclosed without the Company’s prior written consent (not to be
unreasonably withheld, conditioned or delayed) unless required to be disclosed)
regarding the Company and its Subsidiaries as may be reasonably requested by
Parent to consummate any Parent Offering, to the extent reasonably available to
the Company, as applicable, as promptly as reasonably practicable following
Parent’s request; (ii) participate, upon reasonable notice, in a reasonable
number of meetings, presentations, road shows, due diligence sessions, drafting
sessions and sessions with rating agencies in connection with any Parent
Offering and otherwise cooperating in any marketing efforts; (iii) assist with
the preparation of customary materials for rating agency presentations,
marketing materials, bank information memoranda, offering documents,
registration statements, credit or other loan documents (including schedules
thereto), security agreements or documents (including schedules thereto),
perfection certificates or similar documents, and other documents necessary for
or that are a condition of any Parent Offering (provided, that any offering

 

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documents or other documents shall not be required to be issued by the Company
or any of its Subsidiaries); (iv) obtain accountant’s comfort letters (including
customary negative assurances), legal opinions, “10b-5” representation letters,
surveys, appraisals, title insurance and corporate and facility ratings, in each
case, as reasonably requested by Parent; (v) obtain customary accountants’
consents to the use of their reports in any material relating to any Parent
Offering as reasonably requested by Parent; (vi) cooperate reasonably with any
Parent Offering sources’ due diligence (subject to customary confidentiality
arrangements); and (vii) take all corporate actions reasonably requested by
Parent to permit the consummation of any Parent Offering; provided, that no
obligation of the Company or its Subsidiaries, or any Lien on any of their
respective assets, in connection with any Parent Offering shall be effective
until the Closing Date (other than any customary authorization letters) and
neither the Company, its Subsidiaries nor their Representatives shall be
required to pay any commitment or other fee or incur any other liability in
connection with any Parent Offering prior to the Closing Date; provided,
further, that Parent shall promptly reimburse the Company and its Subsidiaries
for any reasonable, documented out-of-pocket costs and expenses, and shall
provide customary indemnification to the Company and its Subsidiaries, in
connection with their compliance with the obligations set forth in this
Section 5.19; and provided, further, that in no event shall any cost or expense
incurred by the Company or its Subsidiaries (including for services of any of
their financial, accounting or legal advisors) in connection with actions taken
or cooperation provided under this Section 5.19 be included in Transaction
Expenses or deducted from Book Value or Tangible Book Value under Section 2.2(b)
hereof. Notwithstanding anything set forth in this Section 5.19(a), in no event
shall the completion of any Parent Offering be a condition to Parent’s
obligation to complete the Merger.

(b) The Company will use its reasonable best efforts to provide Parent with
updates to the Required Information so that, to the knowledge of the Company,
marketing materials used in any Parent Offering do not contain any untrue
statement of a material fact or omit to state a fact necessary to make the
statements contained therein not misleading, other than, in each case, with
respect to information supplied by or on behalf of Parent or any Person other
than the Company.

(c) Nothing in this Section 5.19 shall require such cooperation to the extent it
would require the Company to take any action that would conflict with or violate
the Company Charter or Company Bylaws or any Laws or result in the contravention
of, or would reasonably be expected to result in a violation of, or default
under, any Contract to which the Company is a party on the date of this
Agreement.

ARTICLE VI

CONDITIONS PRECEDENT

Section 6.1 Conditions to Each Party’s Obligation to Effect the Merger. The
obligation of each party to effect the Merger is subject to the satisfaction at
or prior to the Effective Time of the following conditions:

(a) Stockholder Approval. The Stockholder Approval shall have been obtained.

 

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(b) Regulatory Approvals. (i) All regulatory approvals, consents and
non-objections from the Federal Reserve, the FDIC, the OCC and the Texas DOB and
(ii) any other regulatory approvals, notices and filings set forth in
Section 3.5 and Section 4.3 the failure of which to obtain or make would have or
be reasonably expected to have a Material Adverse Effect on Parent or the
Company, in each case required to consummate the transactions contemplated by
this Agreement, including the Merger and the Bank Merger, shall have been
obtained or made and shall remain in full force and effect and all statutory
waiting periods in respect thereof shall have expired (all such approvals and
the expiration of all such waiting periods being referred to as the “Requisite
Regulatory Approvals”).

(c) No Injunctions or Legal Restraints; Illegality. No temporary restraining
order, preliminary or permanent injunction or other judgment, order or decree
issued by any court of competent jurisdiction or other legal restraint or
prohibition shall be in effect, and no Law shall have been enacted, entered,
promulgated, enforced or deemed applicable by any Governmental Entity that, in
any case, prohibits or makes illegal the consummation of the Merger or the Bank
Merger.

(d) Final Adjusted TBV. Either (i) Parent and the Company shall have agreed in
writing regarding the Final Adjusted TBV or (ii) the Neutral Auditor shall have
made its final and binding determination of the Final Adjusted TBV pursuant to
Section 2.2(g).

Section 6.2 Conditions to the Obligations of Parent and Merger Sub. The
obligation of Parent and Merger Sub to effect the Merger is also subject to the
satisfaction, or waiver by Parent, at or prior to the Effective Time of the
following conditions:

(a) Representations and Warranties. (i) Each of the representations and
warranties of the Company set forth in Section 3.2(a) (Capital Stock) after
giving effect to the lead-in to Article III, shall be true and correct, except
for such failures to be true and correct as are de minimis, as of the date of
this Agreement and as of the Closing Date as if made as of the Closing Date
(except to the extent such representations and warranties expressly relate to an
earlier date, in which case as of such earlier date); (ii) each of the
representations and warranties of the Company set forth in Section 3.4
(Authority), Section 3.5(a)(i) (No Conflict), Section 3.9(a)(ii), Section 3.21
(State Takeover Statutes), Section 3.22 (No Rights Plan), Section 3.24 (Brokers)
and Section 3.25 (Opinion of Financial Advisor), after giving effect to the
lead-in to Article III, shall be true and correct as of the date of this
Agreement and as of the Closing Date as if made as of the Closing Date (except
to the extent such representations and warranties expressly relate to an earlier
date, in which case as of such earlier date); (iii) each of the representations
and warranties of the Company set forth in Section 3.1 (Organization, Standing
and Power), Section 3.2(b) (Capital Stock), Section 3.3 (Subsidiaries); and
Section 3.9(b) (Absence of Certain Changes or Events), after giving effect to
the lead-in to Article III, shall be true and correct in all material respects
as of the date of this Agreement and as of the Closing Date as if made as of the
Closing Date (except to the extent such representations and warranties expressly
relate to an earlier date, in which case as of such earlier date); and (iv) each
of the remaining representations and warranties of the Company set forth in this
Agreement, after giving effect to the lead-in to Article III, shall be true and
correct (without regard to materiality or Material Adverse Effect qualifiers
contained therein) as of the date of this Agreement and as of the Closing Date
as if made as of the Closing Date (except to the extent such representations

 

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and warranties expressly relate to an earlier date, in which case as of such
earlier date), except where the failure of such representations and warranties
referenced in this clause (iv) to be so true and correct has not had and would
not reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect on the Company.

(b) Regulatory Conditions. No Governmental Entity shall have taken any action or
made any determination in connection with the transactions contemplated in this
Agreement, which would reasonably be expected to restrict or burden Parent, the
Surviving Corporation or any of their respective Affiliates and which would,
individually or in the aggregate, have a Material Adverse Effect on Parent, the
Surviving Corporation or any of their respective Affiliates, in each case
measured on a scale relative to the Company (including any requirement to
maintain capital ratios greater than those set forth in Schedule 6.2(b)).

(c) Performance of Obligations of the Company. The Company shall have performed
in all material respects all obligations required to be performed by it under
this Agreement at or prior to the Effective Time.

(d) Officers’ Certificate. Parent shall have received a certificate signed by an
executive officer of the Company certifying as to the matters set forth in
Sections 6.2(a), 6.2(c), 6.2(e) and 6.2(f).

(e) Deposit Liabilities. The aggregate amount of core deposit liabilities of the
Bank (defined as demand, checking, savings, money-market and transactional
accounts and certificates of deposit, but excluding, for the avoidance of doubt,
brokered certificates of deposit, public funds and deposits acquired through a
listing service) shall be equal to at least two hundred thirty seven million
U.S. dollars ($237,000,000).

(f) Minimum Adjusted TBV. The Final Adjusted TBV shall be not less than twenty
six million U.S. dollars ($26,000,000).

Section 6.3 Conditions to the Obligations of the Company. The obligation of the
Company to effect the Merger is also subject to the satisfaction, or waiver by
the Company, at or prior to the Effective Time of the following conditions:

(a) Representations and Warranties. Each of the representations and warranties
of Parent and Merger Sub set forth in this Agreement shall be true and correct
(without regard to materiality or Material Adverse Effect qualifiers contained
therein) as of the date of this Agreement and as of the Closing Date as if made
as of the Closing Date (except to the extent such representations and warranties
expressly relate to an earlier date, in which case as of such earlier date),
except where the failure of such representations and warranties to be so true
and correct has not had and would not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on Parent.

(b) Performance of Obligations of Parent and Merger Sub. Parent and Merger Sub
shall have performed in all material respects all obligations required to be
performed by them under this Agreement at or prior to the Effective Time.

 

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(c) Officers’ Certificate. The Company shall have received a certificate signed
by an executive officer of Parent certifying as to the matters set forth in
Sections 6.3(a) and 6.3(b).

ARTICLE VII

TERMINATION, AMENDMENT AND WAIVER

Section 7.1 Termination. This Agreement may be terminated and the Merger may be
abandoned at any time prior to the Effective Time, whether before or after the
Stockholder Approval has been obtained (with any termination by Parent also
being an effective termination by Merger Sub):

(a) by mutual written consent of Parent and the Company;

(b) by either Parent or the Company:

(1) if the Merger shall not have been consummated on or before the date that is
nine (9) months after the date hereof (the “Outside Date”); provided that
neither party shall have the right to terminate this Agreement pursuant to this
Section 7.1(b)(1) if the failure of such party to perform or comply in all
material respects with the covenants and agreements of such party set forth in
this Agreement shall have been the direct cause of, or resulted directly in, the
failure of the Merger to be consummated by the Outside Date;

(2) (x) if any court of competent jurisdiction or other Governmental Entity
shall have issued a judgment, order, injunction, rule or decree, or taken any
other action restraining, enjoining or otherwise prohibiting any of the
transactions contemplated by this Agreement and such judgment, order,
injunction, rule, decree or other action shall have become final and
nonappealable, or (y) if either party receives written notice from or is
otherwise advised by a Governmental Entity that it will not grant (or intends to
rescind or revoke if previously approved) any Requisite Regulatory Approval or
receives written notice from or is otherwise advised by a Governmental Entity
that it will not grant such Requisite Regulatory Approval without imposing a
restriction, requirement or condition having an effect of the type referred to
in Section 6.2(b), unless the failure of the party seeking to terminate this
Agreement to perform or comply in all material respects with the covenants and
agreements of such party set forth in this Agreement shall have been the direct
cause of, or resulted directly in the issuance of such injunction or prohibition
or the failure to obtain such Requisite Regulatory Approval; or

(3) if the Stockholder Approval shall not have been obtained at the Company
Stockholders Meeting duly convened therefor or at any adjournment or
postponement thereof at which a vote on the approval of the Merger was taken;

 

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(c) by Parent:

(1) if the Company shall have breached or failed to perform any of its
representations, warranties, covenants or agreements set forth in this Agreement
(other than with respect to a breach of Section 5.2 or Section 5.3, as to which
Section 7.1(c)(2) will apply), which breach or failure to perform, either
individually or in the aggregate, if occurring or continuing at the Effective
Time (A) would result in the failure of any of the conditions set forth in
Section 6.2(a) or Section 6.2(c) and (B) cannot be or has not been cured by the
earlier of (1) the Outside Date and (2) thirty days after the giving of written
notice to the Company of such breach or failure; provided that Parent shall not
have the right to terminate this Agreement pursuant to this Section 7.1(c)(1) if
Parent or Merger Sub is then in material breach of any of its representations,
warranties, covenants or agreements set forth in this Agreement;

(2) if (A) the Company Board or any committee thereof shall have effected an
Adverse Recommendation Change; (B) the Company shall have materially breached
any of its obligations under Section 5.2 or Section 5.3; (C) at any time
following receipt of an Acquisition Proposal, the Company Board shall have
failed to reaffirm its approval or recommendation of the Merger as promptly as
practicable (but in any event prior to the earlier of (x) within three
(3) Business Days after receipt of any written request to do so from Parent and
(y) the date of the Company Stockholders Meeting); or (D) a tender offer or
exchange offer for the Shares shall have been publicly disclosed (other than by
Parent or an Affiliate of Parent) and, prior to the earlier of (x) the date
prior to the date of the Company Stockholder Meeting and (y) eleven Business
Days after the commencement of such tender or exchange offer pursuant to Rule
14d-2 under the Exchange Act, the Company Board fails to recommend unequivocally
against acceptance of such offer; or

(d) by the Company:

(1) if Parent or Merger Sub shall have breached or failed to perform any of its
representations, warranties, covenants or agreements set forth in this
Agreement, which breach or failure to perform, either individually or in the
aggregate, if occurring or continuing at the Effective Time (A) would result in
the failure of any of the conditions set forth in Section 6.3(a) or
Section 6.3(b) and (B) cannot be or has not been cured by the earlier of (1) the
Outside Date and (2) thirty days after the giving of written notice to Parent of
such breach or failure; provided that the Company shall not have the right to
terminate this Agreement pursuant to this Section 7.1(d)(1) if it is then in
material breach of any of its representations, warranties, covenants or
agreements set forth in this Agreement; or

(2) prior to the receipt of the Stockholder Approval, in order to enter into a
definitive agreement with respect to a transaction that the Company Board has
determined constitutes a Superior Proposal (which definitive agreement shall be
entered into concurrently with such termination), provided that (A) the Company
complies with all of the provisions of Section 5.2(b) with respect to such
Superior Proposal and (B) the Company pays to Parent the amount specified and
within the time period specified in Section 7.3.

 

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The party desiring to terminate this Agreement pursuant to this Section 7.1
(other than pursuant to Section 7.1(a)) shall give written notice of such
termination to the other party.

Section 7.2 Effect of Termination. In the event of termination of this Agreement
as provided in Section 7.1, this Agreement shall forthwith become void and have
no effect, without any liability or obligation on the part of Parent, Merger Sub
or the Company, except that the Confidentiality Agreement and the provisions of
Section 3.24 and Section 4.5 (Brokers), this Section 7.2 (Effect of
Termination), Section 7.3 (Fees and Expenses), Section 8.2 (Notices),
Section 8.5 (Entire Agreement), Section 8.6 (No Third Party Beneficiaries),
Section 8.7 (Governing Law), Section 8.8 (Submission to Jurisdiction),
Section 8.9 (Assignment; Successors), Section 8.10 (Enforcement), Section 8.12
(Severability), Section 8.13 (Waiver of Jury Trial) and Section 8.15 (No
Presumption Against Drafting Party) shall survive the termination hereof;
provided, however, that no such termination shall relieve any party hereto from
any liability or damages resulting from a willful and material breach prior to
such termination of any of its representations, warranties, covenants or
agreements set forth in this Agreement.

Section 7.3 Fees and Expenses.

(a) Except as otherwise provided in this Section 7.3 or as contemplated by
Section 2.2, all fees and expenses incurred in connection with this Agreement,
the Merger and the other transactions contemplated hereby shall be paid by the
party incurring such fees or expenses, whether or not the Merger is consummated.

(b) In the event that:

(1) (A) an Acquisition Proposal (whether or not conditional) or intention to
make an Acquisition Proposal (whether or not conditional) shall have been made
directly to the Company’s stockholders, otherwise publicly disclosed or
otherwise communicated to senior management of the Company or the Company Board
(or any committee thereof), (B) this Agreement is thereafter terminated by the
Company or Parent pursuant to Section 7.1(b)(1) or Section 7.1(b)(3) or by
Parent pursuant to Section 7.1(c)(1) and (C) within twelve (12) months after the
date of such termination, the Company enters into a definitive binding agreement
in respect of any Acquisition Proposal, or recommends or submits an Acquisition
Proposal to its stockholders for adoption, or a transaction in respect of an
Acquisition Proposal is consummated, which, in each case, need not be the same
Acquisition Proposal that shall have been made, publicly disclosed or
communicated prior to termination hereof (provided that for purposes of this
clause (C), each reference to “20%” in the definition of “Acquisition Proposal”
shall be deemed to be a reference to “a majority”);

(2) this Agreement is terminated by Parent pursuant to Section 7.1(c)(2); or

(3) this Agreement is terminated by the Company pursuant to Section 7.1(d)(2);

 

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then, in any such event, the Company shall pay to Parent a termination fee of
two million U.S. dollars ($2,000,000) (the “Termination Fee”), it being
understood that in no event shall the Company be required to pay the Termination
Fee on more than one occasion.

(c) Payment of the Termination Fee shall be made by wire transfer of same day
funds to the account or accounts designated by Parent (i) on the earliest of the
execution of a definitive agreement with respect to, recommendation or
submission to the stockholders of, or consummation of, any transaction
contemplated by an Acquisition Proposal, as applicable, in the case of a
Termination Fee payable pursuant to Section 7.3(b)(1), (ii) as promptly as
reasonably practicable after termination (and, in any event, within two Business
Days thereof), in the case of termination by Parent pursuant to
Section 7.1(c)(2), or (iii) simultaneously with, and as a condition to the
effectiveness of, termination, in the case of a termination by the Company
pursuant to Section 7.1(d)(2).

(d) The Company acknowledges that the agreements contained in this Section 7.3
are an integral part of the transactions contemplated by this Agreement, and
that, without these agreements, Parent and Merger Sub would not enter into this
Agreement; accordingly, if the Company fails promptly to pay any amounts due
pursuant to this Section 7.3, and, in order to obtain such payment, Parent
commences a suit that results in a judgment against the Company for the amounts
set forth in this Section 7.3, the Company shall pay to Parent its costs and
expenses (including reasonable attorneys’ fees and expenses) in connection with
such suit, together with interest on the amounts due pursuant to this
Section 7.3 from the date such payment was required to be made until the date of
payment at the prime lending rate as published in The Wall Street Journal in
effect on the date such payment was required to be made.

Section 7.4 Amendment or Supplement. This Agreement may be amended, modified or
supplemented in writing by the parties at any time prior to the Effective Time,
whether before or after the Stockholder Approval has been obtained; provided,
however, that after the Stockholder Approval has been obtained, no amendment
shall be made that pursuant to applicable Law requires further approval or
adoption by the stockholders of the Company without such further approval or
adoption. This Agreement may not be amended, modified or supplemented in any
manner, whether by course of conduct or otherwise, except by an instrument in
writing specifically designated as an amendment hereto, signed on behalf of each
of the parties in interest at the time of the amendment.

Section 7.5 Extension of Time; Waiver. At any time prior to the Effective Time,
the parties may, to the extent permitted by applicable Law, (a) extend the time
for the performance of any of the obligations or acts of the other parties,
(b) waive any inaccuracies in the representations and warranties of the other
parties set forth in this Agreement or any document delivered pursuant hereto or
(c) subject to applicable Law, waive compliance with any of the agreements or
conditions of the other parties contained herein; provided, however, that after
the Stockholder Approval has been obtained, no waiver may be made that pursuant
to applicable Law requires further approval or adoption by the stockholders of
the Company without such further approval or adoption. Any agreement on the part
of a party to any such waiver shall be valid only if set forth in a written
instrument executed and delivered by a duly authorized officer on behalf of such
party. No failure or delay of any party in exercising any right or remedy
hereunder shall operate as a waiver thereof, nor shall any single or partial

 

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exercise of any such right or power, or any abandonment or discontinuance of
steps to enforce such right or power, or any course of conduct, preclude any
other or further exercise thereof or the exercise of any other right or power.
The rights and remedies of the parties hereunder are cumulative and are not
exclusive of any rights or remedies which they would otherwise have hereunder.

ARTICLE VIII

GENERAL PROVISIONS

Section 8.1 Nonsurvival of Representations and Warranties. None of the
representations, warranties, covenants or agreements in this Agreement or in any
instrument delivered pursuant to this Agreement shall survive the Effective
Time, other than those covenants or agreements of the parties which by their
terms apply, or are to be performed in whole or in part, after the Effective
Time.

Section 8.2 Notices. All notices and other communications hereunder shall be in
writing and shall be deemed duly given (a) on the date of delivery if delivered
personally, or if by facsimile or email, upon written confirmation of receipt,
(b) on the first Business Day following the date of dispatch if delivered
utilizing a next-day service by a recognized next-day courier or (c) on the
earlier of confirmed receipt or the fifth 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 to the addresses set
forth below, or pursuant to such other instructions as may be designated in
writing by the party to receive such notice:

 

  (i) if to Parent, Merger Sub or the Surviving Corporation, to:

Green Bancorp, Inc.

4000 Greenbriar

Houston, Texas 77098

Attention: John P. Durie, Executive Vice President and Chief Financial Officer

Facsimile: (713) 275-8228

Email: JDurie@greenbank.com

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

Skadden, Arps, Slate, Meagher & Flom LLP

Four Times Square

New York, New York 10036

Attention: Sven G. Mickisch

Facsimile: (917) 777-3554

Email: Sven.Mickisch@skadden.com

 

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  (ii) if to the Company, to:

SP Bancorp, Inc.

5224 West Plano Parkway

Plano, Texas 75093

Attention: Jeffrey L. Weaver

Facsimile: (972) 354-2886

Email: Jeffweaver@shareplus.com

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

Wachtell, Lipton, Rosen & Katz

51 West 52nd Street

New York, New York 10019

Attention: Matthew M. Guest

Facsimile: (212) 403-2341

Email: MGuest@wlrk.com

Section 8.3 Certain Definitions. For purposes of this Agreement:

(a) “Affiliate” of any Person means any other Person that directly or
indirectly, through one or more intermediaries, controls, is controlled by, or
is under common control with, such first Person;

(b) “Business Day” means any day other than a Saturday, a Sunday or a day on
which banks in the State of Texas are authorized or required by applicable Law
to be closed;

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

(d) “knowledge” of any party means the knowledge of any executive officer of
such party after reasonable inquiry;

(e) “Person” means an individual, corporation, partnership, limited liability
company, association, trust or other entity or organization, including any
Governmental Entity; and

(f) “Subsidiary” means, with respect to any Person, any other Person of which
stock or other equity interests having ordinary voting power to elect more than
50% of the board of directors or other governing body are owned, directly or
indirectly, by such first Person.

Section 8.4 Interpretation. When a reference is made in this Agreement to a
Section, Article, Schedule or Exhibit such reference shall be to a Section,
Article, Schedule or Exhibit of this Agreement unless otherwise indicated. The
table of contents and headings contained in this Agreement or in any Schedule or
Exhibit are for convenience of reference purposes only and shall not affect in
any way the meaning or interpretation of this Agreement. All words used in this
Agreement will be construed to be of such gender or number as the

 

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circumstances require. Any capitalized terms used in any Schedule or Exhibit but
not otherwise defined therein shall have the meaning set forth in this
Agreement. All Schedules or Exhibits annexed hereto or referred to herein are
hereby incorporated in and made a part of this Agreement as if set forth herein.
The word “or” is not exclusive. The word “including” and words of similar import
when used in this Agreement will mean “including, without limitation,” unless
otherwise specified. References to the “date hereof” refer to the date of this
Agreement. Nothing contained in this Agreement shall give either party, directly
or indirectly, the right to control or direct the operations of the other party
prior to the Effective Time.

Section 8.5 Entire Agreement. This Agreement (including the Schedules and
Exhibits annexed hereto), the Company Disclosure Letter, Section 9 of the
Confidentiality Agreement and the Voting Agreements constitute the entire
agreement, and supersede all prior written agreements, arrangements,
communications and understandings and all prior and contemporaneous oral
agreements, arrangements, communications and understandings among the parties
with respect to the subject matter hereof and thereof.

Section 8.6 No Third Party Beneficiaries. Except (i) as expressly set forth in
Section 5.14 above and (ii) if the Effective Time occurs, the right of the
holders of Shares, Company Restricted Shares, and In-The-Money Company Stock
Options to receive the Per Share Merger Consideration and amounts payable
pursuant to this Agreement, nothing in this Agreement, express or implied, is
intended to or shall confer upon any Person other than the parties and their
respective successors and permitted assigns any legal or equitable right,
benefit or remedy of any nature under or by reason of this Agreement.

Section 8.7 Governing Law. Except to the extent that the MGCL is mandatorily
applicable to the Merger, this Agreement and all disputes or controversies
arising out of or relating to this Agreement or the transactions contemplated
hereby shall be governed by, and construed in accordance with, the internal Laws
of the State of Delaware, without regard to any applicable conflicts of law
principles.

Section 8.8 Submission to Jurisdiction. The parties hereto agree that any suit,
action or proceeding brought by either party to enforce any provision of, or
based on any matter arising out of or in connection with, this Agreement or the
transactions contemplated hereby shall be brought in any federal or state court
located in the State of Delaware. Each of the parties hereto submits to the
jurisdiction of any such court in any suit, action or proceeding seeking to
enforce any provision of, or based on any matter arising out of, or in
connection with, this Agreement or the transactions contemplated hereby, and
hereby irrevocably waives the benefit of jurisdiction derived from present or
future domicile or otherwise in such action or proceeding. Each party hereto
irrevocably waives, to the fullest extent permitted by Law, any objection that
it may now or hereafter have to the laying of the venue of any such suit, action
or proceeding in any such court or that any such suit, action or proceeding
brought in any such court has been brought in an inconvenient forum.

Section 8.9 Assignment; Successors. Neither this Agreement nor any of the
rights, interests or obligations under this Agreement may be assigned or
delegated, in whole or in part, by operation of Law or otherwise, by any party
without the prior written consent of the other parties, and any such assignment
without such prior written consent shall be null and void;

 

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provided, however, that Parent and Merger Sub may assign, in its sole
discretion, any or all of its rights and interests under this Agreement (a) to
Parent or any of its Affiliates at any time or (b) after the Effective Time, to
any Person; provided that any such assignment shall not relieve Parent or Merger
Sub of any of its obligations hereunder. Subject to the preceding sentence, this
Agreement will be binding upon, inure to the benefit of, and be enforceable by,
the parties and their respective successors and assigns.

Section 8.10 Enforcement. 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 or were otherwise breached. Accordingly,
each of the parties shall be entitled to specific performance of the terms
hereof, including an injunction or injunctions to prevent breaches of this
Agreement and to enforce specifically the terms and provisions of this Agreement
in any state or federal court located in the State of Delaware, this being in
addition to any other remedy to which such party is entitled at law or in
equity. Each of the parties hereby further waives (a) any defense in any action
for specific performance that a remedy at law would be adequate and (b) any
requirement under any law to post security as a prerequisite to obtaining
equitable relief.

Section 8.11 Currency. All references to “dollars” or “$” or “US$” in this
Agreement refer to United States dollars, which is the currency used for all
purposes in this Agreement.

Section 8.12 Severability. Whenever possible, each provision or portion of any
provision of this Agreement shall be interpreted in such manner as to be
effective and valid under applicable Law, but if any provision or portion of any
provision of this Agreement is held to be invalid, illegal or unenforceable in
any respect under any applicable Law or rule in any jurisdiction, such
invalidity, illegality or unenforceability shall not affect any other provision
or portion of any provision in such jurisdiction, and this Agreement shall be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision or portion of any provision had never been
contained herein.

Section 8.13 Waiver of Jury Trial. EACH PARTY HERETO ACKNOWLEDGES AND AGREES
THAT ANY CONTROVERSY THAT MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE
COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE EACH PARTY HEREBY IRREVOCABLY
AND UNCONDITIONALLY WAIVES ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN
RESPECT OF ANY LITIGATION, DIRECTLY OR INDIRECTLY, ARISING OUT OF, OR RELATING
TO, THIS AGREEMENT, OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT. EACH
PARTY CERTIFIES AND ACKNOWLEDGES THAT (A) NO REPRESENTATIVE, AGENT OR ATTORNEY
OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER
PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING
WAIVER, (B) EACH PARTY UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THIS
WAIVER, (C) EACH PARTY MAKES THIS WAIVER VOLUNTARILY, AND (D) EACH PARTY HAS
BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL
WAIVERS AND CERTIFICATIONS IN THIS SECTION 8.13.

 

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Section 8.14 Counterparts. This Agreement may be executed in two or more
counterparts (including by facsimile or other electronic means), all of which
shall be considered one and the same agreement and shall become effective when
counterparts have been signed by each of the parties and delivered to the other
party, it being understood that each party need not sign the same counterpart.

Section 8.15 No Presumption Against Drafting Party. Each of Parent, Merger Sub
and the Company acknowledges that each party to this Agreement has been
represented by counsel in connection with this Agreement and the transactions
contemplated by this Agreement. Accordingly, any rule of Law or any legal
decision that would require interpretation of any claimed ambiguities in this
Agreement against the drafting party has no application and is expressly waived.

[The remainder of this page is intentionally left blank.]

 

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

 

GREEN BANCORP, INC. By:  

/s/ John P. Durie

  Name:   John P. Durie   Title:   Executive Vice President SEARCHLIGHT MERGER
SUB CORP. By:  

/s/ John P. Durie

  Name:   John P. Durie   Title:   Executive Vice President SP BANCORP, INC. By:
 

/s/ Paul Zmigrosky

  Name:   Paul Zmigrosky   Title:   Chairman of the Board

[Signature Page to Agreement and Plan of Merger]