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Exhibit 10.3
 
EXECUTION VERSION

 
 

 

 

 

 

 

 
SECURITIES PURCHASE AGREEMENT
 
dated as of April 14, 2014
 
by and among
 
HIGHLANDS BANKSHARES, INC.
 
and
 
[                             ]
 

 
 

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TABLE OF CONTENTS

 

   Page
ARTICLE I  PURCHASE; CLOSING 
  2  
1.1.
Issuance, Sale and Purchase
  2          
1.2.
Closing; Deliverables for Closing; Conditions of Closing
  2    
ARTICLE II REPRESENTATIONS AND WARRANTIES
  5  
2.1.
Certain Terms
  5          
2.2.
Representations and Warranties of the Company
  6          
2.3.
Representations and Warranties of the Investor 21
  21    
ARTICLE III COVENANTS
  24  
3.1.
Access; Reports; Confidentiality
  24          
3.2.
[RESERVED]
  25          
3.3.
[RESERVED]
  25          
3.4.
Avoidance of Control
  25          
3.5.
Notice of Certain Events
  26          
3.6.
Commercially Reasonable Efforts
  26          
3.7.
Conduct of the Business
  26          
3.8.
Preemptive Rights
  27          
3.9.
[RESERVED]
  29          
3.10.
Legend
  29          
3.11.
Registration Rights
  30          
3.12.
Articles of Amendment
  45          
3.13.
Rights Offering
  45          
3.14.
Form D and Blue Sky
  46          
3.15.
No Integration
  46          
3.16.
Acknowledgment of Dilution
  47          
3.17.
Company Forbearances
  47    
ARTICLE IV TERMINATION
  49  
4.1.
Termination
  49          
4.2.
Effects of Termination
  49    
ARTICLE V INDEMNITY
  50  
5.1.
Indemnification by the Company
  50          
5.2.
Indemnification by the
Investor                                                      
  50          
5.3.
Exclusive Remedies
  51

 
 
 

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ARTICLE VI
MISCELLANEOUS                                                                 
  51  
6.1.
Survival                      
  51          
6.2.
Expenses
  51          
6.3.
Other Definitions                                
  51          
6.4.
Amendment and Waivers
  56          
6.5.
Counterparts and Facsimile
  56          
6.6.
Governing Law
  56          
6.7.
Jurisdiction
  56          
6.8.
WAIVER OF JURY TRIAL
  57          
6.9.
Notices
  57          
6.10.
Entire Agreement                                
  58          
6.11.
Successors and Assigns
  58          
6.12.
Captions                      
  58          
6.13.
Severability
  58          
6.14.
Third Party Beneficiaries
  58          
6.15.
Public Announcements
  59          
6.16.
Specific Performance
  59          
6.17.
No Recourse
  59           6.18. Independent Nature of Investor's Obligations   59          
6.19. Adjustments in Stock Numbers and Prices   59    
LIST OF EXHIBITS
       
Exhibit A – Preferred Stock Articles of Amendment
Exhibit B – Form of Legal Opinion
       

 
 

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SECURITIES PURCHASE AGREEMENT, dated as of April 14, 2014 (this “Agreement”), by
and among Highlands Bankshares, Inc., a Virginia corporation (the “Company”) and
[                                              ] (the “Investor”).

RECITALS:

A.           The Investment. The Company intends to issue and sell to the
Investor, and the Investor intends to purchase from the Company, as an
investment in the Company, shares of common stock, par value $0.625 per share,
of the Company (the “Common Stock”).  The number of shares of Common Stock (the
“Purchased Shares”) to be purchased by the Investor hereunder are set forth on
the signature page hereto.  The purchase of the Purchased Shares shall not cause
the Investor, together with any other person with whom the Investor’s ownership
of Company securities would be aggregated for purposes of any bank regulation or
law, to collectively own, control or have the power to vote, as of the Closing
Date (as defined in Section 1.2), more than 4.9% of the Common Stock.

B.           Other Private Placements. The Company intends to effect one or more
private placement transactions of Common Stock and a newly issued series of
Series A Convertible Perpetual Preferred Stock, par value $2.00 per share, of
the Company (the “Preferred Shares” and, together with the Common Stock, the
“Securities”) to accredited investors (the “Additional Investors”) under
separate securities purchase agreements (the “Additional Agreements”), with the
closing of such transactions to occur simultaneously with the closing of this
transaction (the “Other Private Placements”).

C.           Placement Agent.  The Company has engaged McKinnon & Company, Inc.
as its exclusive placement agent (the “Placement Agent”) for the offering of
securities pursuant to this Agreement and the Additional Agreements.

D.           The Rights Offering. Following the execution of this Agreement, the
Company will commence a rights offering providing holders of record of the
Common Stock on the day prior to the Closing Date with the right to invest in
Common Stock at the same price per share paid by the Investor and the Additional
Investors. The rights will be non-transferable and will provide for the purchase
of up to $3.75 million of Common Stock by such existing shareholders, as
determined by the Company.

NOW, THEREFORE, in consideration of the foregoing mutual covenants contained in
this Agreement, and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the Company and the Investor, hereby
agree as follows:

 
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ARTICLE I
PURCHASE; CLOSING

1.1.           Issuance, Sale and Purchase.  On the terms and subject to the
conditions set forth herein, the Investor will purchase from the Company, and
the Company will sell to the Investor, the Purchased Shares at the Closing as
set forth herein.  Notwithstanding the above, the Investor shall not be
obligated to purchase any Purchased Shares to the extent such purchase would
cause the Investor, together with its Affiliates and any other Persons with
which it is acting in concert or whose holdings would otherwise be required to
be aggregated with the Investor’s holdings for purposes of the Bank Holding
Company Act of 1956, as amended (the "BHC Act") or the Change in Bank Control
Act (the "CIBCA"), to, directly or indirectly, collectively own, control or have
the power to vote in excess of 4.9% of the Common Stock issued and outstanding.

1.2.   Closing; Deliverables for Closing; Conditions of Closing.

(a)           Closing. The closing of the purchase of the Purchased Shares by
the Investor (the “Closing”) shall occur, simultaneously with the closing of the
Other Private Placements, as soon as practicable after the date hereof at the
offices of Williams Mullen, counsel to the Company, located at 200 South 10th
Street, Richmond, VA 23219, or such other date or location as agreed in writing
by the parties. The date of the Closing is referred to as the “Closing Date.”
Subject to the satisfaction or waiver of the conditions described in Section
1.2(b), at the Closing, the Company will deliver to the Investor the Purchased
Shares in certificated form or in uncertificated book-entry form (pursuant to
written instructions provided by the Investor to the Company at least three
Business Days in advance of the Closing Date) against payment by the Investor of
$[                       ] (the “Purchase Price”) by wire transfer of
immediately available funds to a bank account designated by the Company.

(b)   Closing Conditions.

(1)           The obligation of the Investor to consummate the Closing is
subject to the satisfaction (in the Investor’s reasonable discretion) or written
waiver by the Investor of the following conditions prior to the Closing:

(A)           No provision of any Law shall prohibit the Closing or the
consummation of the transactions contemplated by the Transaction Documents or
shall prohibit or restrict the Investor or any of its Affiliates from owning or
voting any securities of the Company in accordance with the terms thereof;

(B)           The representations and warranties of the Company set forth in
this Agreement shall be true and correct in all material respects on and as of
the date hereof and on and as of the Closing Date as though made on and as of
the Closing Date, except for any representations or warranties qualified as to
materiality or Material Adverse Effect, which shall be true and correct in all
respects (and except that representations and warranties made as of a specified
date shall be true and correct as of such date);

 
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(C)           The Company shall have performed and complied with in all material
respects all agreements, covenants and conditions required by the Transaction
Documents to be performed by it on or prior to the Closing Date (except that
with respect to agreements, covenants and conditions that are qualified by
materiality or Material Adverse Effect, the Company shall have performed and
complied with such agreements, covenants and conditions, as so qualified, in all
respects);

(D)           Since the date hereof, a Material Adverse Effect shall not have
occurred and no change or other event shall have occurred that, either
individually or in the aggregate, would reasonably be likely to have a Material
Adverse Effect;

(E)           The Company shall have received (or shall receive concurrently
with the Closing) gross proceeds from the sale of Purchased Shares at the
Purchase Price set forth herein and from the Other Private Placements, in each
case at a price per share of $3.50, in an aggregate amount of not less than
$16.5 million;;

(F)           The Company shall have filed with the Virginia State Corporation
Commission (the “VSCC”) (and the VSCC shall have issued a certificate of
amendment evidencing the effectiveness of) articles of amendment to the
Company’s Articles of Incorporation, substantially in the form attached hereto
as Exhibit A (the “Preferred Stock Articles of Amendment”), setting forth the
terms of the Preferred Stock;

(G)           The Investor shall have received a certificate, dated as of the
Closing Date, signed on behalf of the Company by a senior executive officer
certifying to the effect that the conditions set forth in Section 1.2(b)(1)(B),
Section 1.2(b)(1)(C) and Section 1.2(b)(1)(D) have been satisfied on and as of
the Closing Date;

(H)           The Investor shall have received a certificate signed on behalf of
the Company by a senior executive of the Company, dated as of the Closing Date,
certifying (a) the resolutions adopted by the Board of Directors or a duly
authorized committee thereof approving the transactions contemplated by the
Transaction Documents and the issuance of the securities in the Other Private
Placements, (b) the current versions of the Articles of Incorporation, as
amended, and Bylaws, as amended, of the Company and (c) as to the signatures and
authority of the individuals signing this Agreement and related documents on
behalf of the Company;

(I)           The Company shall have delivered to the Investor a certificate
evidencing the incorporation and good standing of the Company and each of the
Company Subsidiaries as of a date within one (1) Business Day before the Closing
Date;

(J)           The Investor and the Company shall have obtained in a timely
fashion any and all consents, permits, approvals, registrations and waivers
necessary for consummation of the purchase and sale of the Common Shares and the
Preferred Shares, all of which shall be and remain so long as necessary in full
force and effect, and which consents, permits, approvals, registrations and
waivers shall not contain any Burdensome Condition;

 
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(K)           A legal opinion of counsel to the Company, dated as of the Closing
Date and in the form attached hereto as Exhibit B, executed by such counsel and
addressed to the Investor;

(L)           [RESERVED];

(M)           Since the date of this Agreement, there shall not be any action
taken, or any law, regulation or ruling enacted, entered, enforced or deemed
applicable to the Company or any of its Subsidiaries, the Investor or the
transactions contemplated hereby, by any Governmental Entity, which imposes any
restriction or condition on the Company or the Company Subsidiaries or the
Investor (other than such restrictions as are described in any passivity or
anti-association commitments agreed by the Investor) which the Investor
determines, in its reasonable good faith judgment, is a Burdensome Condition;

(N)           The total amount of Non-Performing Assets of the Company and its
Subsidiaries, on a consolidated basis, shall not exceed $20 million;

(O)           Since December 31, 2013, there shall not have been a material
change in the Company’s and the Company Subsidiaries’ need for, sources of or
access to liquidity;

(P)           The aggregate principal amount of all certificates of deposit
issued by the Bank shall not exceed 45% of the Bank’s total deposits; and

(Q)           The aggregate amount of loans of the Company and its Subsidiaries,
on a consolidated basis, that are rated “substandard”, “doubtful” or “loss”
shall not exceed $30 million.

(2)           The obligation of the Company hereunder to consummate the Closing
is subject to the satisfaction (in the Company’s reasonable discretion) or
written waiver by the Company of the following conditions prior to the Closing:

(A)           No provision of any Law shall prohibit the Closing or the
consummation of the transactions contemplated by the Transaction Documents or
shall prohibit or restrict the Investor or any of its Affiliates from owning or
voting any securities of the Company in accordance with the terms thereof;

(B)           The representations and warranties of the Investor set forth in
this Agreement shall be true and correct in all respects on and as of the date
hereof and on and as of the Closing Date as though made on and as of the Closing
Date except where the failure to be true and correct (without regard to any
materiality qualifications contained therein) would not materially adversely
affect the ability of the Investor to perform its obligations hereunder (and
except that representations and warranties made as of a specified date shall be
true and correct as of such date);

 
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(C)           The Investor shall have performed and complied with in all
material respects all agreements, covenants and conditions required by the
Transaction Documents to be performed by it on or prior to the Closing Date
(except that with respect to agreements, covenants and conditions that are
qualified by materiality, the Investor shall have performed and complied with
such agreements, covenants and conditions, as so qualified, in all respects).

(D)           The VSCC shall have accepted the filing of the Preferred Stock
Articles of Amendment and issued a certificate of amendment evidencing the
effectiveness thereof;

(E)           The Company shall have received a certificate, dated as of the
Closing Date, from the Investor signed on behalf of the Investor by an
authorized signatory of the Investor certifying to the effect that the
conditions set forth in Section 1.2(b)(2)(B) and Section 1.2(b)(2)(C) have been
satisfied on and as of the Closing Date; and

(F)           The Investor and the Company shall have obtained in a timely
fashion any and all consents, permits, approvals, registrations and waivers
necessary for consummation of the purchase and sale of the Purchased Shares, all
of which shall be and remain so long as necessary in full force and effect, and
which consents, permits, approvals, registrations and waivers shall not contain
any Burdensome Condition.

ARTICLE II
REPRESENTATIONS AND WARRANTIES

2.1.   Certain Terms.

As used in this Agreement, the term “Material Adverse Effect” means any
circumstance, event, change, development or effect that, individually or in the
aggregate, would reasonably be expected to (i) result in a material adverse
effect on the assets, liabilities, business, management, condition (financial or
otherwise) or results of operations of the Company and its Subsidiaries, taken
as a whole, (ii) materially impair or delay the ability of the Company or any of
the Company Subsidiaries to perform its or their obligations under the
Transaction Documents or (iii) result in a material adverse effect on the
legality, validity or enforceability of any Transaction Document; provided,
however, that in determining whether a Material Adverse Effect has occurred,
there shall be excluded any effect to the extent resulting from (A) changes in
general economic, monetary or financial conditions, (B) changes affecting
generally the industries or markets in which the Company operates, (C) changes
in global national or political conditions, including the outbreak or escalation
of war or acts of terrorism, (D) any changes in applicable Laws or accounting
rules or principles, including changes in GAAP, and (E) the announcement or
pendency of the transactions contemplated by the Transaction Documents; provided
further, however, that any circumstance, event, change, development or effect
referred to in clauses (A), (B), (C) or (D) above shall be taken into account in
determining whether a Material Adverse Effect has occurred or would reasonably
be expected to occur to the extent that such circumstance, event, change,
development or effect has a disproportionate effect on the

 
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Company and its Subsidiaries, taken as a whole, compared to other participants
in the industries or markets in which the Company operates.

2.2.   Representations and Warranties of the Company.

The Company hereby represents and warrants to the Investor, as of the date
hereof and as of the Closing Date (except for the representations and warranties
that are as of a specific date, which shall be made as of that date), that:

(a)           Organization and Authority. Each of the Company and the Company
Subsidiaries is a corporation or limited liability company duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation or organization, is duly qualified to do business and is in good
standing in all jurisdictions where its ownership or leasing of property or the
conduct of its business requires it to be so qualified and where failure to be
so qualified would have, individually or in the aggregate, a Material Adverse
Effect, and has the requisite power and authority to own its properties and
assets and to carry on its business as it is now being conducted.  The Company
has filed with the SEC true, correct and complete copies of its articles of
incorporation and bylaws as amended through the date of this Agreement. The
Company is duly registered as a bank holding company under the BHC Act.
 
(b)           Company Subsidiaries. Set forth on Schedule 2.2(b) is a true,
complete and correct list, as of the date of this Agreement, of each entity in
which the Company, directly or indirectly, owns sufficient capital stock or
holds a sufficient equity or similar interest such that it is consolidated with
the Company in the financial statements of the Company (each, a “Company
Subsidiary”, and, collectively, the “Company Subsidiaries”).  Except for the
Company Subsidiaries and except as set forth on Schedule 2.2(b), the Company
does not own beneficially, directly or indirectly, more than 5% of any class of
equity securities or similar interests of any corporation, bank, business trust,
association or similar organization, and is not, directly or indirectly, a
partner in any partnership or party to any joint venture.  Except as set forth
on Schedule 2.2(b), the Company owns, directly or indirectly, all of its
interests in each Company Subsidiary free and clear of any and all Liens, and
all the issued and outstanding shares of Capital Stock or comparable equity
interest of each Company Subsidiary are validly issued and are fully paid,
non-assessable and free of preemptive and similar rights to subscribe for or
purchase securities.  There are no outstanding options, warrants, scrip, rights
to subscribe to, calls or commitments of any character whatsoever relating to,
or securities or rights convertible into or exercisable or exchangeable for, any
shares of Capital Stock of any Company Subsidiary or any bonds, debentures,
notes or other indebtedness having the right to vote on any matters on which the
shareholders of any Company Subsidiary may vote, or contracts, commitments,
understandings or arrangements by which any Company Subsidiary is or may become
bound to issue additional shares of Capital Stock of such Company Subsidiary or
options, warrants, scrip, rights to subscribe to, calls or commitments of any
character whatsoever relating to, or securities or rights convertible into, or
exercisable or exchangeable for, any shares of Capital Stock of any Company
Subsidiary.  The deposit accounts of Highlands Union Bank (the “Bank”) are
insured by the Federal Deposit Insurance Corporation (“FDIC”) to the fullest
extent permitted by the Federal Deposit Insurance Act (“FDI Act”) and the rules
and regulations of the FDIC thereunder,

 
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and all premiums and assessments required to be paid in connection therewith
have been paid when due.

(c)           Capitalization. The authorized Capital Stock of the Company
consists of (i) 40,000,000 shares of Common Stock and (ii)10,000,000 shares of
preferred stock, of which 2,500,00 were designated as Preferred Shares.  As of
the date hereof, there were 5,011,152 shares of Common Stock outstanding and no
shares of preferred stock outstanding.  As of the date hereof, other than in
respect of the Preferred Shares and awards outstanding under or pursuant to the
Benefit Plans in respect of which an aggregate of 319,000 shares of Common Stock
have been reserved for issuance, no shares of Common Stock or preferred stock
were reserved for issuance.  All of the issued and outstanding shares of Common
Stock  have been duly authorized and validly issued and are fully paid,
nonassessable and free of preemptive rights, with no personal liability
attaching to the ownership thereof, and none of such outstanding shares was
issued in violation of any preemptive rights or similar rights to subscribe for
or purchase any Capital Stock of the Company.  Each Company Stock Option (i) was
granted in compliance with all applicable laws and all of the terms and
conditions of the Company Stock Option Plans pursuant to which it was issued,
(ii) has an exercise price per share of Common Stock equal to or greater than
the fair market value of a share of Common Stock on the date of such grant and
is otherwise exempt from Section 409A of the Code and (iii) has a grant date
identical to the date on which the Board of Directors or compensation committee
of the Board of Directors actually awarded such Company Stock Option.  Other
than the Company Stock Options, neither the Company nor any Company Subsidiary
has any outstanding equity-based compensation awards or commitments.  No bonds,
debentures, notes or other indebtedness having the right to vote on any matters
on which the shareholders of the Company may vote (“Voting Debt”) are issued and
outstanding.  As of the date of this Agreement, except for those issued or
granted pursuant to the Company’s equity or incentive plans, the Company does
not have and is not bound by any outstanding subscriptions, options, warrants,
scrip, calls, commitments or agreements of any character relating to, or
securities or rights convertible into or exchangeable or exercisable for, any
shares of Common Stock or preferred stock or any other equity securities of the
Company or Voting Debt or any securities representing the right to purchase or
otherwise receive any shares of Capital Stock of the Company (including any
rights plan or agreement).  There are no securities or instruments containing
anti-dilution or similar provisions that will be triggered by the issuance of
Purchased Shares pursuant to the transactions contemplated by the Transaction
Documents.

(d)   Authorization; Compliance with Other Instruments; Other Contracts.

(1)           The Company has the corporate power and authority to execute and
deliver this Agreement and the other Transaction Documents and to perform its
obligations hereunder and thereunder.  The execution, delivery and performance
of the Transaction Documents by the Company and the consummation of the
transactions contemplated hereby and thereby have been authorized by all
necessary corporate action on the part of the Company and no further approval or
authorization is required on the part of the Company.  No other corporate
proceedings are necessary for the execution and delivery by the Company of the
Transaction Documents, the performance by it of its obligations hereunder or
thereunder or the consummation by it of the transactions

 
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contemplated hereby or thereby.  This Agreement has been and the other
Transaction Documents will have been at the Closing duly and validly executed
and delivered by the Company and, assuming due authorization, execution and
delivery by the Investor and the other parties thereto, are, or in the case of
documents executed after the date hereof, will be, upon execution, the valid and
binding obligations of the Company enforceable against the Company in accordance
with their terms (except as enforcement may be limited by applicable insolvency,
reorganization, moratorium, fraudulent transfer and similar laws of general
applicability relating to or affecting creditors’ rights or by general equity
principles).  There are no shareholders agreements, voting agreements, or other
similar arrangements with respect to the Company’s Capital Stock to which the
Company is a party or between or among any of the Company’s shareholders.

(2)           None of the execution, delivery or performance by the Company of
the Transaction Documents, nor the consummation of the transactions contemplated
hereby or thereby, nor compliance by the Company with any of the provisions
hereof or thereof, does or will, in any material respect (other than with
respect to clause (A)(i) below, for which no materiality qualifier shall apply)
(A) violate, conflict with, or result in a breach of any provision of, or
constitute a default (or an event which, with notice or lapse of time or both,
would constitute a default) under, or result in the termination of, or result in
the loss of any benefit or creation of any right on the part of any third party
under, or accelerate the performance required by, or result in a right of
termination, amendment, cancellation or acceleration of, or result in the
creation of any Liens upon any of the properties or assets of the Company or any
Company Subsidiary, under any of the terms, conditions or provisions of (i) the
articles of incorporation or bylaws (or similar governing documents) of the
Company or any Company Subsidiary or (ii) any note, bond, mortgage, indenture,
deed of trust, license, lease, agreement or other instrument or obligation to
which the Company or any of the Company Subsidiaries is a party or by which it
may be bound, or to which the Company or any of the Company Subsidiaries, or any
of the properties or assets of the Company or any of the Company Subsidiaries,
may be subject (collectively, “Contracts”), or (B) violate any Law applicable to
the Company or any of the Company Subsidiaries or any of their respective
properties or assets.  

(3)           Other than (i) in connection with Sections 3.11 through 3.13, (ii)
the filing of a Notice of Sale of Securities on Form D with the SEC under
Regulation D of the Securities Act and (iii) under the securities or blue sky
laws of the various states or rules of the Financial Industry Regulatory
Authority (“FINRA”) that may be applicable to the Placement Agent, and assuming
the accuracy of the representations and warranties of the Investor and the
performance of the covenants and agreements of the Investor contained herein and
the accuracy of the representations and warranties of the Additional Investors
and the performance of the covenants and agreements of the Additional Investors
in the Additional Agreements, no material notice to, registration, declaration
or filing with, exception or review by, or authorization, order, consent, waiver
or approval of, any Governmental Entity or other Person, or expiration or
termination of any statutory waiting period, is necessary for the execution,
delivery or performance by the Company

 
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of this Agreement and the other Transaction Documents or the consummation of the
transactions contemplated hereby and thereby.

(e)           Litigation and Other Proceedings. Except as set forth on Schedule
2.2(e), there is no pending or, to the Knowledge of the Company, threatened,
claim, action, suit, inquiry, notice of violation, arbitration, complaint,
charge or investigation or proceeding (each an “Action”) against the Company or
any Company Subsidiary or any of its assets, rights or properties, any Benefit
Plan (or the fiduciary of any Benefit Plan) or any officer, director or employee
of the Company or any Company Subsidiary acting in his or her capacity as an
officer, director or employee, nor is the Company or any Company Subsidiary a
party or named as subject to the provisions of any order, writ, injunction,
settlement, judgment or decree of any arbitrator or Governmental Entity, which
(i) adversely affects or challenges the legality, validity or enforceability of
any of the Transaction Documents or the Securities or, individually or in the
aggregate, has prevented or materially impaired, or would reasonably be expected
to prevent or materially impair, the ability of the Company to consummate the
transactions contemplated hereby or by the other Transaction Documents, or (ii)
involves a claim that is or that could be, if adversely determined, for damages
in excess of $250,000 or that seeks injunctive relief that could be material to
the Company and its Subsidiaries.  Except as set forth on Schedule 2.2(e), there
is no Action by the Company or any Company Subsidiary pending or which the
Company or any Company Subsidiary intends to initiate (other than collection
claims in the ordinary course of business).  Neither the Company nor any Company
Subsidiary, nor any director or officer of the Company or any Company
Subsidiary, is or has been the subject of any Action involving a claim of
violation of or liability under federal or state securities laws or a claim of
breach of fiduciary duty.  There has not been, and to the Company’s Knowledge,
there is not pending or contemplated, any investigation by the SEC involving the
Company or any Company Subsidiary, or any current or former director or officer
of the Company or any Company Subsidiary.  The SEC has not issued any stop order
or other order suspending the effectiveness of any registration statement filed
by the Company or any Company Subsidiary under the Exchange Act or the
Securities Act.

(f)           Financial Statements. Each of the consolidated balance sheets of
the Company and the Company Subsidiaries and the related consolidated statements
of income, operations, changes in shareholders’ equity and cash flows, together
with the notes thereto, included in any Company Report filed with the SEC prior
to the date of this Agreement (the “Company Financial Statements”), (1) have
been prepared from, and are in accordance with, the books and records of the
Company and the Company Subsidiaries, (2) to the extent filed with the SEC,
complied, as of their respective date of such filing, in all material respects
with applicable accounting requirements and with the published rules and
regulations of the SEC with respect thereto, (3) have been prepared in
accordance with GAAP applied on a consistent basis and (4) present fairly in all
material respects the consolidated financial position of the Company and the
Company Subsidiaries at the dates and the consolidated results of operations,
changes in shareholders’ equity and cash flows of the Company and the Company

 
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Subsidiaries for the periods stated therein (subject to the absence of notes and
normal and recurring year-end audit adjustments not material to the financial
condition of the Company and the Company Subsidiaries in the case of unaudited
quarterly financial statements).

(g)           Reports. Since December 31, 2010, the Company and each Company
Subsidiary have filed all material reports, registrations, documents, filings,
statements and submissions, together with any required amendments thereto, that
it was required to file with any Governmental Entity (the foregoing,
collectively, the “Company Reports”) and have paid all fees and assessments due
and payable in connection therewith.  As of their respective filing dates, the
Company Reports complied in all material respects with all statutes and
applicable rules and regulations of the applicable Governmental Entities, as the
case may be.  Except for the comment letter from the SEC dated November 25,
2013, there are no outstanding comments from the SEC or any other Governmental
Entity with respect to any Company Report that were enumerated within such
report or otherwise were the subject of written correspondence with respect
thereto.  Except as set forth on Schedule 2.2(g), the Company Reports, including
the documents incorporated by reference in each of them, each contained all the
information required to be included in it and, when it was filed and, as of the
date of each such Company Report filed with or furnished to the SEC, or if
amended prior to the date of this Agreement, as of the date of such amendment,
did not 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, in light of
the circumstances under which they were made, not misleading and complied as to
form in all material respects with the applicable requirements of the Securities
Act of 1933, as amended (the “Securities Act”) and the Securities Exchange Act
of 1934, as amended (the “Exchange Act”).  No executive officer of the Company
has failed in any respect to make the certifications required of him or her
under Section 302 or 906 of the Sarbanes-Oxley Act of 2002.  Copies of all of
the Company Reports not otherwise publicly filed have, to the extent allowed by
applicable Law, been made available to the Investor by the Company.

(h)           Internal Accounting and Disclosure Controls. Except as set forth
on Schedule 2.2(h), the records, systems, controls, data and information of the
Company and the Company Subsidiaries are recorded, stored, maintained and
operated under means (including any electronic, mechanical or photographic
process, whether computerized or not) that are under the exclusive ownership and
direct control of the Company or the Company Subsidiaries or its or their
accountants (including all means of access thereto and therefrom).  The Company
(A) has implemented and maintains disclosure controls and procedures (as defined
in Rule 13a-15(e) of the Exchange Act) to ensure that material information
relating to the Company, including its consolidated Subsidiaries, is made known
to the chief executive officer and the chief financial officer of the Company by
others within those entities, and (B) has disclosed, based on its most recent
evaluation prior to the date of this Agreement, to the Company’s outside
auditors and the audit committee of the Board of Directors (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, the

 
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Company has no Knowledge of any reason why its outside auditors and its chief
executive officer and chief financial officer shall not be able to give the
certifications required pursuant to the rules and regulations adopted pursuant
to Section 404 of the Sarbanes-Oxley Act of 2002, without qualification, when
next due.  Since December 31, 2007, (i) neither the Company nor any Company
Subsidiary nor, to the Company’s Knowledge, any director, officer, employee,
auditor, accountant or representative of the Company or any Company Subsidiary
has received or otherwise had or obtained knowledge of any 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 Company Subsidiary or their respective internal accounting
controls, including any material complaint, allegation, assertion or claim that
the Company or any Company Subsidiary has engaged in questionable accounting or
auditing practices, and (ii) no attorney representing the Company or any Company
Subsidiary, whether or not employed by the Company or any Company Subsidiary,
has reported evidence of a violation of securities laws, breach of fiduciary
duty or similar violation by the Company or any Company Subsidiary or any of
their respective officers, directors, employees or agents to the Board of
Directors or any committee thereof or to any director or officer of the Company
or any Company Subsidiary.

(i)           No Undisclosed Liabilities. Except as set forth on Schedule
2.2(i), there are no material liabilities or obligations of the Company or any
of the Company Subsidiaries of any kind whatsoever, whether accrued, contingent,
absolute, determined, determinable or otherwise, except for (i) liabilities
appropriately reflected or reserved against in accordance with GAAP in the
Company’s audited balance sheet for the year ended December 31, 2013, and
(ii) liabilities that have arisen in the ordinary and usual course of business
and consistent with past practice since December 31, 2013.

(j)           Off Balance Sheet Arrangements. There is no transaction,
arrangement, or other relationship between the Company or any of the Company
Subsidiaries and an unconsolidated or other Affiliated entity that is not
reflected on the Company Financial Statements.

(k)           Risk Management; Derivatives.

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

(2)           All derivative instruments, including swaps, caps, floors and
option agreements, whether entered into for the Company’s own account, or for
the account of one or more of the Company Subsidiaries or their customers, were
entered into (i) only for purposes of mitigating identified risk and in the
ordinary course of business, (ii) in accordance with prudent practices and in
material compliance with all applicable laws, rules, regulations and regulatory
policies, and (iii) with counterparties believed by the Company to be
financially responsible at the time; and each of them constitutes the valid and
legally binding obligation of the Company or one of the Company Subsidiaries,

 
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enforceable in accordance with its terms.  Neither the Company nor the Company
Subsidiaries, nor, to the Knowledge of the Company, any other party thereto, is
in breach of any of its obligations under any such agreement or arrangement.

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

(1)           is, except as set forth on Schedule 2.2(l), in compliance in all
material respects with, and the condition and use of its properties does not
violate or infringe in any material respect, (i) applicable material domestic
(federal, state or local) or foreign laws, statutes, ordinances, licenses,
rules, regulations, judgments, demands, writs, injunctions, orders or decrees
applicable thereto or to employees conducting its business (each, a “Law”),
including the Sarbanes-Oxley Act of 2002, the Equal Credit Opportunity Act, the
Fair Housing Act, the Community Reinvestment Act, the Home Mortgage Disclosure
Act, the Uniting and Strengthening America by Providing Appropriate Tools
Required to Intercept and Obstruct Terrorism (USA PATRIOT) Act of 2001, any Law
the violation of which would have the effect of revoking or limiting FDIC
deposit insurance, all other applicable fair lending Laws or other Laws relating
to discrimination and the Bank Secrecy Act and the applicable privacy and
customer information requirements contained in any federal and state privacy
Law, and (ii) all Material Contracts (whether or not any default or violation
has been waived);

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

(3)           is complying in all material respects with and, to the Knowledge
of the Company, is not under investigation with respect to, and has not received
any written notification or written communication from any Governmental Entity,
and, otherwise, to the Knowledge of the Company, has not been threatened by any
Governmental Entity to be charged with or given notice of any material violation
of, all applicable Laws;

(4)           has, except for statutory or regulatory restrictions of general
application and except as set forth on Schedule 2.2(l), not been placed under
any material restriction by a Governmental Entity on its business or properties,
and except for routine examinations by applicable Governmental Entities, as of
the date of this Agreement, received no notification or communication from any
Governmental Entity that an investigation by any Governmental Entity with
respect to the Company or any of the Company Subsidiaries is pending or
threatened;

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

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

(7)           is presently insured, and during each of the past two calendar
years has been insured, for reasonable amounts with financially sound and
reputable insurance companies against such risks as companies engaged in a
similar business would, in accordance with industry practice, customarily be
insured; and, except as set forth on Schedule 2.2(l), neither the Company nor
any Company Subsidiaries has received any written notice of cancellation of any
such insurance, nor, to the Company’s Knowledge, will it or any Company
Subsidiary be unable to renew their respective existing insurance coverage as
and when such coverage expires or to obtain similar coverage from similar
insurers as may be necessary to continue its business at a cost that would not
have a Material Adverse Effect.

(m)           Absence of Certain Changes. Since December 31, 2013, (1) the
Company and the Company Subsidiaries have conducted their respective businesses
in all material respects in the ordinary and usual course of business and
consistent with prior practice, (2) none of the Company or any Company
Subsidiary has issued any securities or incurred any liability or obligation,
direct or contingent, for borrowed money, except borrowings in the ordinary
course of business, (3) except for ordinary dividends on the Common Stock
publicly disclosed prior to the date hereof, none of the Company nor any Company
Subsidiary has not made or declared any distribution in cash or in kind to its
shareholders or issued or repurchased any shares of its Capital Stock, (4) no
fact, event, change, condition, development, circumstance or effect has occurred
that has had or would reasonably be expected to have a Material Adverse Effect,
(5) except as set forth on Schedule 2.2(m), no material default (or event which,
with notice or lapse of time, or both, would constitute a material default)
exists on the part of the Company or any Company Subsidiary or, to the Knowledge
of the Company, on the part of any other party, in the due performance and
observance of any term, covenant or condition of any agreement to which the
Company or any Company Subsidiary is a party, (6) there has been no material
damage, destruction or other casualty loss with respect to any material asset or
property owned, leased or otherwise used by the Company or any Company
Subsidiary and (7) except as set forth on Schedule 2.2(m), there has been no
change in any method of accounting or accounting policies by the Company.

 
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(n)           Agreements with Regulatory Agencies. Other than the written
agreement with the Federal Reserve Bank of Richmond (the “Federal Reserve”)
effective as of October 13, 2013, the Company and the Company Subsidiaries
(i) are not subject to any cease-and-desist or other similar order or
enforcement action issued by, (ii) are not a party to any written agreement,
consent agreement or memorandum of understanding with, (iii) are not a party to
any commitment letter or similar undertaking to, (iv) are not subject to any
capital directive by, and (v) have not adopted any board resolutions at the
request of, any Governmental Entity that currently restricts the conduct of its
business or that relates to its capital adequacy, its liquidity and funding
policies and practices, its ability to pay dividends, its credit, risk
management or compliance policies, its internal controls, its management or its
operations or business (each item in this sentence, a “Regulatory Agreement”),
nor has the Company or any of the Company Subsidiaries been advised since
December 31, 2013 by any Governmental Entity that it is considering issuing,
initiating, ordering, or requesting any such Regulatory Agreement.  Except as
set forth on Schedule 2.2(n), the Company and each Company Subsidiary is in
compliance with each Regulatory Agreement to which it is a party or
subject.  Neither the Company nor any Company Subsidiary has received any notice
from any Governmental Entity indicating that either the Company or any Company
Subsidiary is not in compliance with any such Regulatory Agreement.

(o)           Insurance. The Company and the Company Subsidiaries are, and will
remain following consummation of the transactions contemplated by the
Transaction Documents, insured by insurers of recognized financial
responsibility against such losses and risks and in such amounts as management
of the Company reasonably believes to be prudent and that are of the type
customary in the businesses and location in which the Company and the Company
Subsidiaries are engaged. The Company and the Company Subsidiaries have not been
refused any insurance coverage sought or applied for, and the Company and the
Company Subsidiaries do not have any reason to believe that they will not be
able to renew their existing insurance coverage as and when such coverage
expires or to obtain similar coverage from similar insurers as may be necessary
to continue their business at a cost that would not have a Material Adverse
Effect.  The Company (i) maintains directors’ and officers’ liability insurance
and fiduciary liability insurance with financially sound and reputable insurance
companies with benefits and levels of coverage as disclosed in Schedule 2.2(o),
(ii) has timely paid all premiums on such policies and (iii) there has been no
lapse in coverage during the term of such policies.

(p)           Title. Except as set forth on Schedule 2.2(p), the Company and the
Company Subsidiaries have good and marketable title in fee simple to all real
property owned by them and good and valid title to all personal property owned
by them, in each case free and clear of all Liens, except for Liens which do not
materially affect the value of such property and do not interfere with the use
made and proposed to be made of such property by the Company and the Company
Subsidiaries.  Any real property and facilities held under lease by the Company
or any of the Company Subsidiaries are valid, subsisting and enforceable leases
with such exceptions that are not material and do not interfere with the use
made and proposed to be made of such property and buildings by the Company and
the Company Subsidiaries.

 
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(q)           Intellectual Property Rights.

(1)           The Company and the Company Subsidiaries own, possess, license or
have other rights to use all foreign and domestic patents, patent applications,
trade and service marks, trade and service mark registrations, trade names,
copyrights, inventions, trade secrets, technology, Internet domain names,
know-how and other intellectual property (collectively, the “Intellectual
Property”) necessary for the conduct of their respective businesses.

(2)           Neither the Company nor any Company Subsidiary has received any
notice of infringement or misappropriation of, or any conflict with, the rights
of others with respect to any Intellectual Property, and no reasonable basis
exists for any such claim.  To the Company’s Knowledge, no third party has
infringed, misappropriated or otherwise violated the Intellectual Property
rights of the Company or any Company Subsidiary.  There is no litigation,
opposition, cancellation, proceeding, objection or claim pending, asserted, or,
to the Company’s Knowledge, threatened against the Company or any Company
Subsidiary concerning the ownership, validity, registerability, enforceability,
infringement or use of, or licensed right to use, any Intellectual Property.  To
the Company’s Knowledge, none of the Company or any Company Subsidiary is using
or enforcing any Intellectual Property owned by or licensed to the Company or
any Company Subsidiary in a manner that would be expected to result in the
abandonment, cancellation or unenforceability of such Intellectual
Property.  The Company and each Company Subsidiary has taken all reasonable
measures to protect the Intellectual Property owned by or licensed to the
Company or any Company Subsidiary.  No current or former Affiliate (other than
the Company Subsidiaries), partner, director, shareholder, officer or employee
of the Company will, after giving effect to the transactions contemplated
hereby, own or retain any rights to use any of the Intellectual Property owned,
used or held for use by the Company in the conduct of the business.

(3)           The computers, computer software, firmware, middleware, servers,
workstations, routers, hubs, switches, data communications lines, and all other
information technology equipment, and all associated documentation used in the
business of the Company and the Company Subsidiaries (the “IT Assets”) operate
and perform in all material respects in accordance with their documentation and
functional specifications and otherwise as required in connection with the
conduct of the business of the Company and the Company Subsidiaries.  To the
Company’s Knowledge, no person has gained unauthorized access to the IT
Assets.  The Company and the Company Subsidiaries have implemented reasonable
backup and disaster recovery technology for the IT Assets consistent with
industry practices.  The Company and the Company Subsidiaries take reasonable
measures to ensure the confidentiality, privacy and security of customer,
employee and other personally identifiable information, and are in compliance
with all laws and their own policies and procedures in connection therewith, and
to the Company’s Knowledge there has been no unauthorized access to or use of
such information.  The Company and the Company Subsidiaries have complied with
all internet domain name registration and other requirements of internet domain
registrars concerning internet domain names that are used in the business.

 
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(r)           Employee Benefits. Each Benefit Plan has been established,
maintained and administered in compliance in all material respects with its
terms and all applicable Laws, including the Code and the Employee Retirement
Income Security Act of 1974, as amended (“ERISA”); no “reportable event”
described in Section 4043 of ERISA has occurred with respect to any Benefit Plan
for which the Company or any ERISA Affiliate would have any liability; no
Benefit Plan is subject to Sections 412 or 430 of the Code of Section 302 of
ERISA; neither the Company nor any ERISA Affiliate has ever incurred liability
under (i) Title IV of ERISA or (ii) Sections 412 or 4971 of the Code; each
Benefit Plan for which the Company would have liability that is intended to be
qualified under Section 401(a) of the Code is so qualified and has received a
favorable determination or opinion letter on which it is currently entitled to
rely, and nothing has occurred, whether by action or by failure to act, which
could reasonably be expected to cause the loss of such qualification; each
Benefit Plan that is intended to be an employee stock ownership plan within the
meaning of Section 4975(e)(7) of the Code is not and never has been a leveraged
employee stock ownership plan; no Benefit Plan provides, and neither the Company
nor any Company Subsidiary has any obligation to provide, health or welfare
benefits to any individual following the termination of such individual’s
employment or service with the Company or a Company Subsidiary (other than as
required under any the Consolidated Omnibus Budget Reconciliation Act of 1986,
as amended, or any similar state law); and no Benefit Plan is subject to any
Laws other than those of the United States or any state, city, county or other
municipality in the United States.  “ERISA Affiliate” means any entity that is
treated under Section 414 of the Code as a single employer with the Company or
any Company Subsidiary.  “Benefit Plan” means all plans, programs, agreements,
contracts, policies, practices or other arrangements providing benefits to any
current or former employee, officer, director, independent contractor or
consultant of the Company or any Company Subsidiary or any beneficiary or
dependent thereof that is sponsored or maintained by the Company, any Company
Subsidiary or any ERISA Affiliate, or to which the Company, any Company
Subsidiary or any ERISA Affiliate contributes or is obligated to contribute, has
any actual or potential liability or is party, whether or not written, including
any “employee welfare benefit plan” within the meaning of Section 3(3) of ERISA,
any “employee pension benefit plan” within the meaning of Section 3(2) of ERISA
(whether or not such plan is subject to ERISA) and any bonus, incentive,
deferred compensation, vacation, stock purchase, stock appreciation right, stock
option or equity award, equity-based severance, employment, independent
contractor, change of control, consulting or fringe benefit plan, program,
agreement or policy.

(s)           Environmental Laws. Each of the Company and the Company
Subsidiaries (i) is in compliance with any and all Environmental Laws, (ii) has
received all permits, licenses or other approvals required of it under
applicable Environmental Laws to conduct its business, (iii) is in compliance
with all terms and conditions of any such permit, license or approval, (iv) does
not own or operate any real property contaminated with any substance that is in
violation of any Environmental Laws, (v) is not liable for any off-site disposal
or contamination pursuant to any Environmental Laws and (vi) is not subject to
any claim relating to any Environmental Laws; except where, in each of the
foregoing clauses, the failure to so comply could not be reasonably expected to
have, individually or in the aggregate, a Material Adverse Effect; and, to the
Knowledge of the Company, there is no pending or threatened investigation that
might lead to any of the foregoing clauses not being true.  The Company has made
available to the Investor copies of all environmental reports, studies,
assessments, and memoranda in its possession relating to the Company or any
Company Subsidiary or any of their current or former properties or operations.

 
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(t)           Taxes.

(1)           All material Tax Returns required to be filed by, or on behalf of,
Company or the Company Subsidiaries have been timely filed, or will be timely
filed, in accordance with all Laws, and all such Tax Returns are, or shall be at
the time of filing, complete and correct in all material respects. The Company
and the Company’s Subsidiaries have timely paid all material Taxes due and
payable (whether or not shown on such Tax Returns), or, where payment is not yet
due, have made adequate provisions in accordance with GAAP. There are no Liens
with respect to Taxes upon any of the assets or properties of either the Company
or the Company’s Subsidiaries other than with respect to Taxes not yet due and
payable.

(2)           No deficiencies for any Taxes have been proposed or assessed in
writing against or with respect to any Taxes due by or Tax Returns of the
Company or the Company’s Subsidiaries, and there is no outstanding audit,
assessment, dispute or claim concerning any Tax liability of the Company or the
Company’s Subsidiaries. No written claim has ever been made by any Governmental
Entity in a jurisdiction where neither the Company nor any of the Company’s
Subsidiaries files Tax Returns that are or may be subject to taxation by that
jurisdiction.

(3)           Neither the Company nor the Company’s Subsidiaries (A) are or have
ever been a member of an affiliated group (other than a group the common parent
of which is the Company) filing a consolidated federal income Tax Return or
(B) have any liability for Taxes of any Person arising from the application of
Treasury Regulation section 1.1502-6 or any analogous provision of state, local
or foreign Law, or as a transferee or successor, by contract, or otherwise.

(4)           Except as set forth on Schedule 2.2(t), none of the Company nor
the Company’s Subsidiaries are party to, is bound by or has any obligation under
any Tax sharing or Tax indemnity agreement or similar contract or arrangement.

(5)           None of the Company or the Company Subsidiaries have been either a
“distributing corporation” or a “controlled corporation” in a distribution
occurring during the last five years in which the parties to such distribution
treated the distribution as one to which Section 355 of the Code is applicable.

(6)           All Taxes required to be withheld, collected or deposited by or
with respect to the Company or the Company’s Subsidiaries have been timely
withheld, collected or deposited as the case may be, and to the extent required,
have been paid to the relevant taxing authority. The Company and the Company’s
Subsidiaries have fully complied with all applicable information reporting
requirements.

 
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(7)           No closing agreement pursuant to section 7121 of the Code (or any
similar provision of state, local or foreign Law) has been entered into by or
with respect to the Company or the Company’s Subsidiaries. Neither the Company
nor the Company’s Subsidiaries has granted any waiver of any federal, state,
local or foreign statute of limitations with respect to, or any extension of a
period for the assessment of, any Tax.

(8)           Neither the Company nor the Company’s Subsidiaries has engaged in
any transaction that could give rise to (i) a registration obligation with
respect to any Person under Section 6111 of the Code or the regulations
thereunder, (ii) a list maintenance obligation with respect to any Person under
Section 6112 of the Code or the regulations thereunder, or (iii) a disclosure
obligation as a “listed transaction” under Section 6011 of the Code and the
regulations.

(u)           Labor. None of the employees of the Company or any Company
Subsidiary is or has ever been represented by any labor union, and no collective
bargaining agreement is in effect with respect to any such employees.  No labor
organization or group of employees of the Company or any Company Subsidiary has
made a pending demand for recognition or certification, and there are no
representation or certification proceedings or petitions seeking a
representation proceeding presently pending or, to the Company’s Knowledge,
threatened to be brought or filed with the National Labor Relations Board or any
other labor relations tribunal or authority.  There are no organizing
activities, strikes, work stoppages, slowdowns, lockouts, material arbitrations
or material grievances, or other material labor disputes pending or, to the
Knowledge of the Company, threatened against or involving the Company or any
Company Subsidiary, and the Company and each Company Subsidiary believes that
its relationship with its employees is good.  Each of the Company and the
Company Subsidiaries is in compliance in all material respects with all Laws
relating to employment and employment practices, terms and conditions of
employment, and wages and hours, including any such Laws regarding
discrimination, civil rights, immigration, tax withholding, safety and health,
workers’ compensation and worker classification.  To the Company’s Knowledge,
and except as set forth on Schedule 2.2(u), (i) each of the officers of the
Company and each Company Subsidiary has executed and remains subject to valid
intellectual property assignment, nondisclosure, noncompetition, nonsolicitation
and confidentiality agreements, (ii) the employment of the officers of the
Company and each Company Subsidiary does not violate, and no such officer is or
is expected to be in violation of, any material term of any employment contract,
confidentiality, nondisclosure or proprietary information agreement or
non-competition agreement, or any other contract or agreement or any restrictive
covenant, in favor of a third party and (iii) the continued employment of each
such officer does not subject the Company or any Company Subsidiary to any
liability with respect to any of the foregoing matters.

(v)           Brokers and Finders. Except for the Placement Agent and the fees
payable thereto, (i) neither the Company nor any Company Affiliate, nor any of
its or their respective officers, directors, employees or agents, has employed
any broker or finder or incurred any liability for any financial advisory fees,
brokerage fees, commissions or finder’s fees, (ii) no broker or finder has acted
directly or indirectly for the Company or any Company Affiliate in connection
with the Transaction Documents or the transactions contemplated thereby and
(iii) no Person will have, as a result of the transactions contemplated by the
Transaction Documents, any

 
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valid right, interest or claim against or upon the Company or the Investor for
any such fee or other compensation pursuant to any agreement, arrangement or
understanding entered into by or on behalf of the Company or any Company
Subsidiary.  The Company shall indemnify, pay and hold the Investor harmless
against any liability, loss or expense (including, without limitation,
attorneys’ fees and out-of-pocket expenses) arising in connection with any such
right, interest or claim relating to such fees, commissions or compensation.

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

(x)           Investment Company Status. The Company and each Company Subsidiary
is not, and upon consummation of the transactions contemplated by the
Transaction Documents will not be, an “investment company,” a company controlled
by an “investment company” or an “affiliated Person” of, or “promoter” or
“principal underwriter” of, an “investment company,” as such terms are defined
in the Investment Company Act of 1940, as amended.

(y)           Additional Investors. To the extent any Additional Agreements or
additional agreements or modifications to Transaction Documents have been
entered into on or prior to the date hereof, the Company has provided the
Investor with true and accurate copies of such Additional Agreements, other
additional agreements or modified Transaction Documents into which it has
entered with each of the Additional Investors.

(z)           Anti-takeover Provisions Not Applicable. The Company has not
adopted any shareholder rights plan or similar arrangement relating to
accumulations of beneficial ownership of Common Stock or a change in control of
the Company.  The Board of Directors has taken all necessary action to ensure
that the transactions contemplated by the Transaction Documents and the
consummation of the transactions contemplated hereby and thereby will be exempt
from any anti-takeover or similar provisions of the Company’s Articles of
Incorporation and Bylaws, and any other provisions of any applicable
“moratorium”, “control share”, “fair price”, “interested shareholder” or other
anti-takeover Laws and regulations of any jurisdiction.

(aa)           Issuance of the Securities. The issuance of the Securities in
connection with the transactions contemplated by the Transaction Documents
(including, but not limited to, the shares of Common Stock into which the
Preferred Shares shall be convertible) has been duly authorized and such
Securities, when issued and paid for in accordance with the terms of the

 
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Transaction Documents, will be duly and validly issued, fully paid and
non-assessable and free and clear of all Liens, other than restrictions on
transfer provided for in the Transaction Documents or imposed by applicable
securities laws, and shall not be subject to preemptive or similar
rights.  There are sufficient authorized shares of Common Stock for the issuance
of the Purchased Shares, the shares of Common Stock into which the Preferred
Shares shall be convertible and any other shares of Common Stock issuable
pursuant to outstanding options and warrants.  The Company has reserved, and
will continue to reserve, free of any preemptive or similar rights of
shareholders of the Company, a number of unissued shares of Common Stock
sufficient to issue and deliver the shares of Common Stock into which the
Preferred Shares shall be convertible.  Assuming the accuracy of the
representations and warranties of the Investor in this Agreement, the Securities
will be issued in compliance with all applicable federal and state securities
Laws.

(bb)           Absence of Manipulation. The Company and each Company Subsidiary
has not, and to the Company’s Knowledge no one acting on its or any Company
Subsidiary’s behalf has, taken, directly or indirectly, any action designed to
cause or to result in the stabilization or manipulation of the price of any
security of the Company to facilitate the sale or resale of any of the Purchased
Shares.

(cc)           Shell Company Status. The Company is not, and has never been, an
issuer identified in Rule 144(i)(1) of the Securities Act.

(dd)           Transactions With Affiliates and Employees.  Except as set forth
on Schedule 2.2(dd), no (A) affiliate, (B) insider or related interest of an
insider, (C) shareholder owning 5% or more of the Common Stock or related
interest of such a shareholder,  (D) officer or director of the Company or (E)
to the Company’s Knowledge, employee of the Company, is presently a party to any
transaction with the Company or to a presently contemplated transaction (other
than, with respect to employees, officers and directors, for services as
employees, officers and directors or loans in the ordinary course of the Bank’s
business).  For purposes of the preceding sentence, the term “affiliate” shall
have the meaning assigned in Regulation W issued by the Federal Reserve, as
amended, and the terms “insider,” “related interest,” and “executive officer”
shall have the meanings assigned in the Federal Reserve’s Regulation O, as
amended.  The Bank is in compliance with, and has since December 31, 2007,
complied with, Sections 23A and 23B of the Federal Reserve Act, its implementing
regulations, and the Federal Reserve’s Regulation O.

(ee)           Registration Rights.  Other than the Investor and any Additional
Investors pursuant to Additional Agreements, no Person has any right to cause
the Company to effect the registration under the Securities Act of any
securities of the Company.

(ff)           Foreign Corrupt Practices and International Trade
Sanctions.  Neither the Company nor any Company Subsidiary, nor any of its or
their respective directors, officers, agents, employees or any other Persons
acting on its or their behalf, (i) has violated the Foreign Corrupt Practices
Act, 15 U.S.C. § 78dd-1 et seq., as amended, or any other similar applicable
Law, (ii) has made or provided, or caused to be made or provided, directly or
indirectly, any payment or thing of value to a foreign official, foreign
political party, candidate for office or any

 
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other Person knowing that the Person will pay or offer to pay the foreign
official, party or candidate, for the purpose of influencing a decision,
inducing an official to violate their lawful duty, securing any improper
advantage, or inducing a foreign official to use their influence to affect a
governmental decision, (iii) has paid, accepted or received any unlawful
contributions, payments, expenditures or gifts, (iv) has violated or operated in
noncompliance with any export restrictions, money laundering Law, anti-terrorism
Law, anti-boycott regulations or embargo Law, or (v) is currently subject to any
United States sanctions administered by the Office of Foreign Assets Control of
the United States Treasury Department.

(gg)           Material Contracts.  The Company has disclosed in Schedule
2.2(gg) and provided to the Investor or its representatives, prior to the date
hereof, true, correct, and complete copies of each Material Contract.

(hh)           Knowledge as to Conditions.  As of the date of this Agreement,
the Company knows of no reason why any regulatory approvals, consents or
statements of non-objection required or otherwise a condition to the
consummation by it of the transactions contemplated by the Transaction Documents
will not be obtained.

(ii)           No Material Misstatement or Omission.  None of the
representations or warranties made by the Company in this Agreement, or in any
certificate furnished by the Company pursuant to this Agreement, when all such
documents are read together in their entirety, contains or will contain at the
Closing Date any untrue statement of a material fact, or omits or will omit at
the Closing Date any material fact necessary in order to make the statements
contained herein or therein, in the light of the circumstances under which made,
not misleading.

(jj)           Asset Quality.  The total amount of Non-Performing Assets of the
Company and its Subsidiaries, on a consolidated basis, shall not exceed $20
million.

(kk)           Liquidity.  Since December 31, 2013, there shall not have been a
material change in the Company’s and the Company Subsidiaries’ need for, sources
of or access to liquidity.

(ll)           The aggregate principal amount of all certificates of deposit
issued by the Bank shall not exceed 45% of the Bank’s total deposits.

(mm)           Classified Assets.  The aggregate amount of loans of the Company
and its Subsidiaries, on a consolidated basis, that are rated “substandard”,
“doubtful” or “loss” shall not exceed $30 million.

2.3.           Representations and Warranties of the Investor. The Investor
hereby represents and warrants to the Company, as of the date hereof and as of
the Closing Date (except for the representations and warranties that are as of a
specific date, which shall be made as of that date), that:

(a)           Organization and Authority. The Investor is duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
organization, is duly qualified to do business and is in good standing in all
jurisdictions where its ownership or leasing of property or

 
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the conduct of its business requires it to be so qualified and where failure to
be so qualified would be reasonably expected to materially and adversely impair
or delay the Investor’s ability to perform its obligations under the Transaction
Documents or to consummate the transactions contemplated hereby and thereby.

(b)           Authorization; Compliance with Other Instruments.

(1)           The Investor has the necessary power and authority to execute and
deliver the Transaction Documents to which the Investor is a party and to
perform its respective obligations hereunder and thereunder.  The execution,
delivery and performance of the Transaction Documents to which the Investor is a
party and the consummation of the transactions contemplated hereby and thereby
have been duly authorized by the Investor’s respective board of directors,
general partner or managing members, investment committee, investment adviser or
other authorized person, as the case may be, and no further approval or
authorization by any of its shareholders, partners or other equity owners, as
the case may be, is required.  This Agreement has been and the other Transaction
Documents to which the Investor is a party will have been at the Closing duly
and validly executed and delivered by the Investor and, assuming due
authorization, execution and delivery by the Company and the other parties
thereto, are, or in the case of documents executed hereafter, will be, upon
execution, the valid and binding obligations of the Investor enforceable against
the Investor in accordance with their terms (except as enforcement may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium,
fraudulent transfer and similar laws of general applicability relating to or
affecting creditors’ rights or by general equity principles).

(2)           Neither the execution, delivery or performance by the Investor of
the Transaction Documents, nor the consummation of the transactions contemplated
hereby or thereby, nor compliance by the Investor with any of the provisions
hereof or thereof, does or will (A) violate, conflict with, or result in a
breach of any provision of, or constitute a default (or an event which, with
notice or lapse of time or both, would constitute a default) under, or result in
the termination of, or accelerate the performance required by, or result in a
right of termination, amendment, cancellation or acceleration of, or result in
the creation of any Liens upon any of the properties or assets of the Investor
under any of the terms, conditions or provisions of (i) the Investor’s articles
of incorporation or bylaws, its certificate of limited partnership or
partnership agreement or its similar governing documents or (ii) any note, bond,
mortgage, indenture, deed of trust, license, lease, agreement or other
instrument or obligation to which the Investor is a party or by which the
Investor may be bound, or to which the Investor or any of the properties or
assets of the Investor may be subject, or (B) subject to compliance with the
statutes and regulations referred to in the next paragraph (and assuming the
correctness of the representations and warranties of the Company and the other
parties to the Transaction Documents), violate any Law applicable to the
Investor or any of its properties or assets except in the case of clauses
(A)(ii) and (B) for such violations, conflicts and breaches as would not
reasonably be expected to materially adversely affect the Investor’s ability to
perform its obligations under the Transaction Documents or consummate the
transactions contemplated hereby or thereby on a timely basis.

 
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(c)           Governmental Consents. Assuming the correctness of the
representations and warranties of the Company and the other parties to the
Transaction Documents, no material notice to, registration, declaration or
filing with, exception or review by, or authorization, order, consent, waiver or
approval of, any Governmental Entity or other Person, or expiration or
termination of any statutory waiting period, is necessary to be obtained by the
Investor for the execution, delivery or performance by the Investor of this
Agreement and the other Transaction Documents to which the Investor is a party
or the consummation of the transactions contemplated hereby and thereby by the
Investor.

(d)           Purchase for Investment. The Investor acknowledges that the
Purchased Shares have not been registered under the Securities Act or under any
state securities laws.  The Investor (1) is acquiring the Purchased Shares
pursuant to an exemption from registration under the Securities Act and other
applicable securities laws solely for investment with no present intention to
distribute any of the Purchased Shares to any Person, (2) will not sell or
otherwise dispose of any of the Purchased Shares, except in compliance with the
registration requirements or exemption provisions of the Securities Act and any
other applicable securities laws, (3) has such knowledge and experience in
financial and business matters and in investments of this type that it is
capable of evaluating the merits and risks of its investment in the Purchased
Shares and of making an informed investment decision and (4) is an “accredited
investor” (as that term is defined by Rule 501 of the Securities Act).

(e)           Brokers and Finders. Neither the Investor nor its respective
Affiliates nor any of their respective officers or directors has employed any
broker or finder or incurred any liability for any financial advisory fees,
brokerage fees, commissions or finder’s fees, and no broker or finder has acted
directly or indirectly for the Investor in connection with this Agreement or the
transactions contemplated hereby.  The Investor acknowledges that it is
purchasing the Purchased Shares directly from the Company and not from the
Placement Agent.

(f)           Investment Decision. The Investor has made an independent
investment decision with respect to the transactions contemplated under the
Transaction Documents and there are no agreements or understandings between the
Investor or any of its Affiliates and (i) to the knowledge of the Investor, any
of the Additional Investors or any of their respective Affiliates with respect
to the Company or its Affiliates, (ii) the Company or (iii) the Company
Subsidiaries.  The Investor understands that the Placement Agent has acted
solely as the agent of the Company in this placement of the Purchased Shares and
the Investor has not relied on any statement, representation or warranty
(including any business or legal advice) of the Placement Agent or any of its
agents, counselors or Affiliates in making its investment decision hereunder,
and confirms that none of such Persons has made any representations or
warranties to such Investor in connection with the transactions contemplated by
the Transaction Documents.

(g)           Financial Capability. At the Closing, the Investor shall have
available funds necessary to consummate the Closing on the terms and conditions
contemplated by this Agreement.

 
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(h)           Access to Information. The Investor acknowledges that it has been
afforded (i) the opportunity to ask such questions as it has deemed necessary
of, and to receive answers from, representatives of the Company concerning the
terms and conditions of the offering of the Purchased Shares and the merits and
risks of investing in the Purchased Shares; (ii) access to information about the
Company and the Company Subsidiaries and their respective financial condition,
results of operations, business, properties, management and prospects sufficient
to enable it to evaluate its investment; and (iii) the opportunity to obtain
such additional information that the Company possesses or can acquire without
unreasonable effort or expense that is necessary to make an informed investment
decision with respect to the investment.  Neither such inquiries nor any other
investigation conducted by or on behalf of the Investor or its representatives
or counsel shall modify, amend or affect the Investor’s right to rely on the
truth, accuracy and completeness of the Company’s representations and warranties
contained in the Transaction Documents.

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

(j)           No General Solicitation. The Investor: (i) became aware of the
offering of the Securities, and the Purchased Shares were offered to Investor,
solely by direct contact between Investor and the Company or the Placement
Agent, and not by any other means, including any form of “general solicitation”
or “general advertising” (as such terms are used in Regulation D promulgated
under the Securities Act and interpreted by the SEC); (ii) reached its decision
to invest in the Company independently from any Additional Investor; (iii) has
entered into no agreements with shareholders of the Company or Additional
Investors for the purpose of controlling the Company or any of its subsidiaries;
and (iv) has entered into no agreements with shareholders of the Company or the
Additional Investors regarding voting or transferring the Investor’s interest in
the Company.

(k)           No Outside Discussion of Offering. As of the date of this
Agreement, the Investor has not discussed the offering with any other party or
potential investors (other than the Company, the Placement Agent, and Investor’s
authorized representatives, advisors and counsel, and in joint meetings
organized and approved by the Placement Agent), except as expressly permitted
under the terms of this Agreement.

ARTICLE III
COVENANTS

3.1.   Access; Reports; Confidentiality.

(a)           From the date of this Agreement until the date when the Investor
no longer owns in aggregate with its Affiliates at least 4.0% or more of all of
the outstanding shares of Common

 
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Stock (the “Qualifying Ownership Interest”), the Company and the Company
Subsidiaries will afford to the Investor and its representatives (including
employees of the Investor, and counsel, accountants, financial and investment
banking advisors and other professionals retained by the Investor) (i) such
access during normal business hours to its books, records, properties and
personnel and to such other information as the Investor may reasonably request
and (ii) reasonable opportunities to routinely consult with the management of
the Company and the Company Subsidiaries on matters relating to the operation of
the Company.  Notwithstanding anything in this Agreement to the contrary, at no
time will the Company provide to the Investor any material non-public
information unless the Investor shall have specifically requested such
disclosure in writing from the Company.

(b)           Each party to this Agreement will hold, and will cause its
respective subsidiaries and their directors, officers, employees, agents,
consultants, and advisors to hold, in strict confidence, unless (and solely to
the extent) disclosure to a Governmental Entity is necessary or appropriate in
connection with any necessary regulatory approval, or request for information or
similar process, or unless (and solely to the extent) compelled to disclose by
judicial or administrative process or, in the written opinion of its counsel, by
other requirement of law or the applicable requirements of any Governmental
Entity (in which case, the party permitted to disclose such information shall,
to the extent legally permissible and reasonably practicable, provide the other
party with prior written notice of such permitted disclosure), all nonpublic
records, books, contracts, instruments, computer data and other data and
information (collectively, “Information”) concerning the other party hereto
furnished to it by such other party or its representatives in connection with
the Transaction Documents or the transactions contemplated thereby, including
but not limited to as set forth in Section 3.1(a) (except to the extent that
such information can be shown to have been (1) previously known by such party on
a nonconfidential basis, (2) in the public domain through no fault of such
party, or (3) later lawfully acquired from other sources by the party to which
it was furnished), and neither party hereto shall release or disclose such
Information to any other person, except its Affiliates and its and its
Affiliates’ auditors, attorneys, financial advisors, other consultants, and
advisors with the express understanding that such parties will maintain the
confidentiality of the Information and, to the extent permitted above, to bank
regulatory authorities.

3.2.    [RESERVED]

3.3.   [RESERVED]

3.4.           Avoidance of Control. Notwithstanding anything to the contrary in
the Transaction Documents, neither the Company nor any Company Subsidiary shall
take any action (including any redemption, repurchase, or recapitalization of
Common Stock, or securities or rights, options or warrants to purchase Common
Stock, or securities of any type whatsoever that are, or may become, convertible
into or exchangeable into or exercisable for Common Stock in each case, where
the Investor is not given the right to participate in such redemption,
repurchase or recapitalization to the extent of the Investor’s pro rata
proportion), that would cause the Investor’s or any other Person’s ownership of
voting securities of the Company (together with the ownership by the Investor’s
or other Person’s Affiliates (as such term is used under the BHC Act) of voting
securities of the Company) to increase above 4.9%, without the prior written

 
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consent of the Investor, or to increase to an amount that would constitute
“control” under the BHC Act, or otherwise cause the Investor to “control” the
Company under and for purposes of the BHC Act.

3.5.           Notice of Certain Events. Each party hereto shall promptly notify
the other party hereto of (a) any event, condition, fact, circumstance,
occurrence, transaction or other item of which such party becomes aware prior to
the Closing that would constitute a violation or breach of the Transaction
Documents (or a breach of any representation or warranty contained herein or
therein) or, if the same were to continue to exist as of the Closing Date, would
constitute the non-satisfaction of any of the conditions set forth in
Section 1.2 hereof, and (b) any event, condition, fact, circumstance,
occurrence, transaction or other item of which such party becomes aware which
would have been required to have been disclosed pursuant to the terms of the
Transaction Documents had such event, condition, fact, circumstance, occurrence,
transaction or other item existed as of the date hereof; provided, that delivery
of any notice pursuant to this Section 3.5 shall not modify the representatives,
warranties, covenants, agreements or obligations of the parties (or remedies
with respect thereto) or the conditions to the obligations of the parties under
this Agreement.  The Company shall promptly notify the Investor of any Action
that is threatened or initiated by or on behalf of any shareholder of the
Company in connection with or relating to the transactions contemplated hereby,
in which case the Company shall consult with the Investor and keep the Investor
informed of all material filings and developments relating to any such
Action.  Notwithstanding the foregoing, neither party shall be required to take
any action that would jeopardize such party’s attorney-client privilege.

3.6.           Commercially Reasonable Efforts. Except as otherwise provided in
the Transaction Documents and subject to the other terms and conditions hereof,
each of the parties hereto agrees to use its commercially reasonable efforts to
take or cause to be taken all action, to do or cause to be done and to assist
and cooperate with the other parties hereto in doing all things necessary,
proper or advisable under Laws to consummate and make effective the transactions
contemplated hereby, including but not limited to: (i) the satisfaction of the
conditions precedent to the obligations of the parties hereto; (ii) the
obtaining of applicable Governmental Consents, and consents, waivers and
approvals of any third parties (including Governmental Entities); and (iii) the
execution and delivery of such instruments, and the taking of such other actions
as the other parties hereto may reasonably request in order to carry out the
intent of the Transaction Documents.

3.7.           Conduct of the Business.  From the date hereof until the earlier
of the Closing Date or the termination of this Agreement in accordance with its
terms, except as contemplated by this Agreement, the Company will, and will
cause the Company Subsidiaries to, operate their business in the ordinary course
consistent with past practice, preserve intact the current business organization
of the Company, use commercially reasonable efforts to retain the services of
their officers, employees, consultants and agents, preserve its rights and
permits issued by Governmental Entities, preserve the current relationships of
the Company and the Company Subsidiaries with material customers and suppliers
and other Persons with whom the Company and the Company Subsidiaries have and
intend to maintain significant relations and maintain all of its operating
assets in their current condition (normal wear and tear excepted), and not take
any action that would reasonably be expected to have a Material Adverse Effect.

 
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3.8.   Preemptive Rights.

(a)           Sale of New Securities. After the Closing, for so long as the
Investor owns securities representing the Qualifying Ownership Interest (before
giving effect to any issuances triggering provisions of this Section 3.8), at
any time that the Company proposes to make any public or nonpublic offering or
sale of any equity (including Common Stock, preferred stock or restricted
stock), or any securities, options or debt that is convertible or exchangeable
into equity or that includes an equity component (such as, an “equity” kicker)
(including any hybrid security) (any such security, a “New Security”) (other
than the issuance and sale of securities (i) in connection with the Rights
Offering; (ii) to employees, officers, directors or consultants of the Company
pursuant to employee benefit plans or compensatory arrangements approved by the
Board of Directors (including upon the exercise of employee stock options
granted pursuant to any such plans or arrangements); or (iii) as consideration
in connection with any bona fide, arm’s-length direct or indirect merger,
acquisition or similar transaction), the Investor shall first be afforded the
opportunity to acquire from the Company for the same price (net of any
underwriting discounts or sales commissions) and on the same terms (except that,
to the extent permitted by Law and the Articles of Incorporation and Bylaws of
the Company, the Investor may elect to receive such securities in nonvoting
form, convertible into voting securities in a widely dispersed offering) as such
securities are proposed to be offered to others, up to the amount of such New
Securities to be offered in the aggregate required to enable it to maintain its
proportionate Common Stock-equivalent interest in the Company immediately prior
to any such issuance of New Securities.  The amount of New Securities that the
Investor shall be entitled to purchase in the aggregate shall be determined by
multiplying (x) the total number or principal amount of such offered New
Securities by (y) a fraction, the numerator of which is the number of shares of
Common Stock held by the Investor and its Affiliates (assuming full conversion
or exercise of any securities convertible into or exercisable for Common Stock)
and the denominator of which is the number of shares of Common Stock then
outstanding (assuming full conversion or exercise of any securities convertible
into or exercisable for Common Stock).  Notwithstanding anything herein to the
contrary, in no event shall the Investor have the right to purchase securities
hereunder to the extent that such purchase would result in the Investor
exceeding the ownership limitations of the Investor set forth in Section 3.4.

(b)           Notice. In the event the Company proposes to offer or sell New
Securities that are subject to the Investor’s rights under Section 3.8(a), it
shall give the Investor written notice of its intention, specifying the price
(or range of prices), anticipated amount of securities, timing and other terms
upon which the Company proposes to offer the same (including, in the case of a
registered public offering and to the extent possible, a copy of the prospectus
included in the registration statement filed with respect to such offering), no
later than ten (10) Business Days, as the case may be, after the initial filing
of a registration statement with the SEC with respect to an underwritten public
offering or after the commencement of marketing with respect to a Rule 144A
offering or an offering pursuant to Section 4(a)(2) of the Securities Act or
Regulation D promulgated thereunder.  The Investor shall have ten (10) Business
Days from the date of receipt of such a notice to notify the Company in writing
that it intends to exercise its rights provided in this Section 3.8 and as to
the amount of New Securities the Investor desires to purchase, up to the maximum
amount calculated pursuant to this Section 3.8.  The failure of the Investor to
respond

 
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within such ten (10) Business Day period shall be deemed to be a waiver of the
Investor’s rights under this Section 3.8 only with respect to the offering
described in the applicable notice.  Notwithstanding anything herein to the
contrary, to the extent that the Investor exercises its right to purchase the
full amount of New Securities it is entitled to purchase pursuant to this
Section 3.8, the Investor shall have an additional option to over-subscribe and
purchase all or any part of the balance of any such remaining unsubscribed New
Securities.  The Company shall notify the Investor of its over-subscription
rights hereunder, and the Investor shall thereafter have five Business Days
following delivery of such notice to subscribe for any additional shares of New
Securities on a pro-rata basis amongst any Additional Investors that also
exercised a right to purchase the full amount of New Securities such Additional
Investor was entitled to purchase, and on such additional terms and conditions
as shall be determined by the Company in its reasonable discretion.

(c)           Purchase Mechanism. If the Investor exercises its rights provided
in this Section 3.8, the closing of the purchase of the New Securities with
respect to which such right has been exercised shall take place within sixty
(60) days after the giving of notice of such exercise, provided that, if such
issuance is subject to regulatory approval, such sixty (60)-day period shall be
extended until the expiration of ten (10) Business Days after all such approvals
have been received, but in no event later than 180 days from the date of the
Company’s initial notice pursuant to Section 3.8(b). Each of the Company and the
Investor agrees to use its commercially reasonable efforts to secure any
regulatory or shareholder approvals or other consents, and to comply with any
Law necessary in connection with the offer, sale and purchase of, such New
Securities.

(d)           Failure of Purchase. In the event the Investor fails to exercise
its rights provided in this Section 3.8 within the ten-day period described in
Section 3.8(b) or, if so exercised, the Investor is unable to consummate such
purchase within the time period specified in Section 3.8(c) above because of its
failure to obtain any required regulatory or shareholder consent or approval,
the Company shall thereafter be entitled during the period of 90 days following
the conclusion of the applicable period to sell or enter into an agreement
(pursuant to which the sale of the Common Stock covered thereby shall be
consummated, if at all, within 30 days from the date of such agreement) to sell
the Common Stock not elected to be purchased pursuant to this Section 3.8 or
which the Investor is unable to purchase because of such failure to obtain any
such consent or approval, at a price and upon other terms that, taken in the
aggregate, are not more favorable to the purchasers of such securities than were
specified in the Company’s notice to the Investor.  Notwithstanding the
foregoing, if such sale is subject to the receipt of any regulatory or
shareholder approval or consent or the expiration of any waiting period, the
time period during which such sale may be consummated shall be extended until
the expiration of five (5) Business Days after all such approvals or consents
have been obtained or waiting periods expired, but in no event shall such time
period exceed 90 days from the date of the applicable agreement with respect to
such sale.  In the event the Company has not sold the Common Stock or entered
into an agreement to sell the Common Stock within such 90-day period (or sold
and issued Common Stock in accordance with the foregoing within 30 days from the
date of said agreement (as such period may be extended in the manner described
above for a period not to exceed 90 days from the date of such agreement)), the
Company shall not thereafter offer, issue

 
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or sell such Common Stock without first offering such securities to the Investor
in the manner provided above.

(e)           Non-Cash Consideration. In the case of the offering of securities
for consideration in whole or in part other than cash, including securities
acquired in exchange therefor (other than securities by their terms so
exchangeable), the consideration other than cash shall be deemed to be the fair
value thereof as determined by the Board of Directors; provided, however, that
such fair value as reasonably determined by the Board of Directors shall not
exceed the aggregate market price of the securities being offered as of the date
the Board of Directors authorizes the offering of such securities.

(f)           Cooperation. The Company and the Investor shall cooperate in good
faith to facilitate the exercise of the Investor’s rights under this
Section 3.8, including securing any required approvals or consents.

3.9.         [RESERVED]

3.10.  Legend.

(a)           The Investor agrees that all certificates or other instruments
representing the Purchased Shares shall bear a legend substantially to the
following effect (and, with respect to Purchased Shares held in book-entry form,
the Company’s transfer agent will record such a legend on the share register),
until such time as they are not required under Section 3.10(b) or applicable
Law:

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

(b)           Following the earlier of (i) the effective date of a resale
registration statement covering such Purchased Shares or (ii) Rule 144 becoming
available for the resale of the Purchased Shares, without the requirement for
the Company to be in compliance with the current public information required
under Rule 144(c)(1) (or Rule 144(i)(2), if applicable) as to the Purchased
Shares and without volume or manner-of-sale restrictions, the Company shall
issue the Investor a certificate without the legend set forth in Section 3.10(a)
or any other legend or instruct the Company’s transfer agent to remove such
legend and shall cause its counsel to issue any legend removal opinion required
by the transfer agent.  If a legend is no longer required pursuant to the
foregoing, the Company will no later than three (3) Business Days following the
delivery by the Investor to the Company or the transfer agent (with notice to
the Company) of a legended certificate or instrument representing such Purchased
Shares (endorsed or with stock powers attached, signatures guaranteed, and
otherwise in form necessary to affect the reissuance

 
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and/or transfer) and any required representation letter, deliver or cause to be
delivered to the Investor a certificate or instrument (as the case may be)
representing such Purchased Shares that is free from all restrictive
legends.  The Company may not make any notation on its records or give
instructions to its transfer agent that enlarge the restrictions on transfer set
forth in this Section 3.10(b).  Certificates for Purchased Shares free from all
restrictive legends may be transmitted by the transfer agent to the Investor by
crediting the account of the Investor’s prime broker with the Depository Trust
Company as directed by the Investor.  The Investor acknowledges that the
securities have not been registered under the Securities Act or under any state
securities laws and agrees that it shall not sell or otherwise dispose of any of
the securities, except in compliance with the registration requirements or
exemption provisions of the Securities Act and any other applicable securities
laws.  Any fees (with respect to the transfer agent, Company counsel or
otherwise) associated with the issuance of such opinion or the removal of such
legend shall be borne by the Company.

3.11.   Registration Rights.

(a)   Registration.

(1)           (A) Subject to the terms and conditions of the Transaction
Documents, and for so long as the Investor owns securities representing the
Qualifying Ownership Interest, the Company covenants and agrees that as promptly
as practicable following the receipt of a written notice (the “Demand Notice”)
from the Investor (and in any event no later than the applicable Registration
Deadline), the Company shall prepare and file with the SEC one or more Shelf
Registration Statements covering the resale of all of the Registrable Securities
(or, if permitted by the rules of the SEC, otherwise designate an existing Shelf
Registration Statement filed with the SEC to cover such Registrable Securities),
and, to the extent the Shelf Registration Statement has not theretofore been
declared effective, the Company shall use reasonable best efforts to cause such
Shelf Registration Statement to be declared or become effective as soon as
practicable (and in any event no later than the Effectiveness Deadline) and to
keep such Shelf Registration Statement continuously effective and in compliance
with the Securities Act and usable for resale of such Registrable Securities for
a period from the date of its initial effectiveness until such time as there are
no such Registrable Securities remaining (including by refiling such Shelf
Registration Statement (or a new Shelf Registration Statement) if the initial
Shelf Registration Statement expires) (the “Effectiveness Period”); provided,
however, that the Investor’s rights under this Section 3.11(a) shall not
terminate if the Investor ceases to own securities representing the Qualifying
Ownership Interest solely as the result of (i) the offering or sale of any
equity security by the Company in a transaction to which Section 3.8(a) does not
apply or (ii) the conversion or exercise of securities of the Company for Common
Stock.  If, at any time after having requested the Company to file a
Registration Statement pursuant to this Section 3.11(a)(1)(A), the Investor
shall determine for any reason to withdraw such registration, the Investor may,
at its election, give notice of such determination to the Company.  On receipt
of such notice the Company shall be relieved of its obligation to effect such
registration.

 
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(B) Notwithstanding the registration obligations set forth in
Section 3.11(a)(1)(A), in the event the SEC informs the Company that all of the
Registrable Securities cannot, as a result of the application of Rule 415, be
registered for resale as a secondary offering on a single Registration
Statement, the Company agrees to promptly (i) inform each of the Holders thereof
and use its reasonable best efforts to file amendments to the initial Shelf
Registration Statement as required by the SEC and/or (ii) withdraw the initial
Shelf Registration Statement and file a new Shelf Registration Statement, in
either case covering the maximum number of Registrable Securities permitted to
be registered by the SEC, on such form available to the Company to register for
resale the Registrable Securities as a secondary offering; provided, however,
that prior to filing such amendment or new Shelf Registration Statement, the
Company shall be obligated to use its reasonable best efforts to advocate with
the SEC for the registration of all of the Registrable Securities in accordance
with the SEC Guidance, including without limitation, Compliance and Disclosure
Interpretation 612.09.

 
(C) Notwithstanding any other provision of this Agreement, if any SEC Guidance
sets forth a limitation of the number of Registrable Securities or other shares
of Common Stock permitted to be registered on a particular Shelf Registration
Statement as a secondary offering (and notwithstanding that the Company used
reasonable best efforts to advocate with the SEC for the registration of all or
a greater number of Registrable Securities), the number of Registrable
Securities or other shares of Common Stock to be registered on such Shelf
Registration Statement will be reduced as follows:  first, the Company shall
reduce or eliminate the shares of Common Stock to be included by any Person
other than a Holder; second, the Company shall reduce or eliminate any shares of
Common Stock to be included by any Affiliate (which shall not include the
Investor or its Affiliates) of the Company; and third, the Company shall reduce
the number of Registrable Securities to be included by all Holders on a pro rata
basis based on the total number of unregistered Registrable Securities held by
such Holders, subject to a determination by the SEC that certain Holders must be
reduced before other Holders based on the number of Registrable Securities held
by such Holders.  For purposes of the preceding sentence concerning
apportionment, for any selling Holder of Registrable Securities which is a
partnership or corporation, the partners, retired partners and shareholders of
such Holder, or the estates and family members of any such partners and retired
partners and any trusts for the benefit of any of the foregoing Persons shall be
deemed to be a single “selling Holder” and any pro rata reduction with respect
to such “selling Holder” shall be based upon the aggregate amount of shares
carrying registration rights owned by all entities and individuals included in
such “selling Holder,” as defined in this sentence.  In the event the Company
amends the initial Shelf Registration Statement or files a new Shelf
Registration Statement, as the case may be, under clauses (i) or (ii) above, the
Company will use its reasonable best efforts to file with the SEC, as promptly
as allowed by the SEC or SEC Guidance provided to the Company or to registrants
of securities in general, one or more Registration Statements on such form
available to the Company to register for resale those Registrable Securities
that were not registered for resale on the initial Shelf Registration Statement,
as amended, or the new Shelf Registration Statement.  No Holder shall be named
as an “underwriter” in any Registration Statement without such Holder’s prior
written consent.

 
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(2)           Any registration pursuant to this Section 3.11(a) shall be
effected by means of a shelf registration under the Securities Act on Form S-1
(or, if the Company is then eligible, on Form S-3 (a “Shelf Registration
Statement”)) in accordance with the methods and distribution set forth in the
Shelf Registration Statement and Rule 415.  If the Investor or any other holder
of Registrable Securities to whom the registration rights conferred by the
Transaction Documents have been transferred in compliance with the Transaction
Documents intends to distribute any Registrable Securities by means of an
underwritten offering it shall promptly so advise the Company and the Company
shall use reasonable best efforts to facilitate such distribution, including the
actions required pursuant to Section 3.11(c).  The lead underwriters in any such
distribution shall be selected by the holders of a majority of the Registrable
Securities to be distributed and be reasonably acceptable to the Company.

(3)           The Company shall not be required to effect a registration
(including a resale of Registrable Securities from an effective Shelf
Registration Statement) or an underwritten offering pursuant to this
Section 3.11(a):  (i) with respect to securities that are not Registrable
Securities; (ii) during any Scheduled Blackout Period; or (iii) if the Company
has notified the Investor and all other Holders in writing that in the good
faith judgment of the Board of Directors, it would be seriously detrimental to
the Company and its security holders for such registration or underwritten
offering to be effected at such time, in which event the Company shall have the
right to defer such registration or underwritten offering for a period of not
more than 45 days after receipt of the request of the Investor or any other
Holder; provided, that such right to delay a registration or underwritten
offering shall be exercised by the Company (A) only if the Company has generally
exercised (or is concurrently exercising) similar blackout rights against all
holders of similar securities that have registration rights, (B) not more than
once in any 12-month period and (C) so long as the total number of days of any
delays hereunder and the total number of days of any suspension under
Section 3.11(d) do not exceed, in the aggregate, 90 days in any 12-month
period.  The Company shall provide the Investor written notice of any Scheduled
Blackout Period, if applicable to such Investor, no later than seven Business
Days prior to the commencement of such Scheduled Blackout Period.

(4)           If the Company proposes to register any of its securities, whether
or not for its own account, other than a registration pursuant to
Section 3.11(a)(1), a Special Registration or securities registered pursuant to
the Rights Offering, and the registration form to be filed may be used for the
registration or qualification for distribution of Registrable Securities, the
Company shall give prompt written notice to the Investor and all other Holders
of its intention to effect such a registration (but in no event less than ten
(10) Business Days prior to the anticipated filing date) and shall include in
such registration all Registrable Securities with respect to which the Company
has received written requests for inclusion therein within twenty (20) Business
Days after the date of the Company’s notice (a “Piggyback Registration”).  Any
such Person that has made such a written request may withdraw its Registrable
Securities from such Piggyback Registration by giving written notice to the
Company and the managing underwriter, if

 
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any, on or before the fifth Business Day prior to the planned effective date of
such Piggyback Registration.  The Company may terminate or withdraw any
registration under this Section 3.11(a)(4) prior to the effectiveness of such
registration, whether or not the Investor or any other Holders have elected to
include Registrable Securities in such registration.

(5)           If the registration referred to in Section 3.11(a)(4) is proposed
to be underwritten, the Company shall so advise the Investor and all other
Holders as a part of the written notice given pursuant to
Section 3.11(a)(4).  In such event, the right of the Investor and all other
Holders to registration pursuant to this Section 3.11(a) shall be conditioned
upon such Persons’ participation in such underwriting and the inclusion of such
Persons’ Registrable Securities in the underwriting, and each such Person shall
(together with the Company and the other Persons distributing their securities
through such underwriting) enter into an underwriting agreement in customary
form with the underwriter or underwriters selected for such underwriting by the
Company.  If any participating Person disapproves of the terms of the
underwriting, such Person may elect to withdraw therefrom by written notice to
the Company, the managing underwriter and the Investor.

(6)           In the event (x) that any of the Additional Investors exercises
“piggyback” registration rights under the Additional Agreements in connection
with the Investor’s exercise of its registration rights pursuant to
Section 3.11(a)(1), (y) that the Company grants “piggyback” registration rights
to one or more third parties to include their securities in an underwritten
offering under the Shelf Registration Statement pursuant to Section 3.11(a)(1)
or (z) that a Piggyback Registration under Section 3.11(a)(4) relates to an
underwritten offering, and in any such case the managing underwriters advise the
Company in writing that in their reasonable opinion the number of securities
requested to be included in such offering exceeds the number which can be sold
without adversely affecting the marketability of such offering (including an
adverse effect on the per share offering price), the Company shall include in
such Registration Statement or Prospectus only such number of securities that in
the reasonable opinion of such underwriters can be sold without adversely
affecting the marketability of the offering (including an adverse effect on the
per share offering price), which securities shall be so included in the
following order of priority:  (i) first, solely in the case of a Piggyback
Registration under Section 3.11(a)(4) relating to a primary offering on behalf
of the Company, any securities the Company proposes to sell for its own account,
(ii) second, Registrable Securities of the Investor and all other Holders who
have requested registration of Registrable Securities pursuant to the Additional
Agreements, Section 3.11(a)(1) or Section 3.11(a)(4), as applicable, pro rata on
the basis of the aggregate number of such securities or shares owned by each
such person and (iii) third, any other securities of the Company that have been
requested to be so included, subject to the terms of the Transaction Documents.

(7)           In the event that Form S-3 is not available for the registration
of the resale of Registrable Securities under Section 3.11(a)(1), the Company
shall use reasonable best efforts to (i) register the resale of the Registrable
Securities on another appropriate form,

 
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including, without limitation, Form S-1 and (ii) undertake to register the
Registrable Securities on Form S-3 promptly after such form is available,
provided, that the Company shall maintain the effectiveness of the Shelf
Registration Statement then in effect until such time as a Shelf Registration
Statement on Form S-3 covering the Registrable Securities has been declared
effective by the SEC.

(b)           Expenses of Registration. All Registration Expenses incurred in
connection with any registration, qualification or compliance hereunder shall be
borne by the Company.  All Selling Expenses incurred in connection with any
registrations hereunder shall be borne by the Holders selling in such
registration pro rata on the basis of the aggregate number of securities or
shares being sold.

(c)           Obligations of the Company. The Company shall use its reasonable
best efforts for so long as there are Registrable Securities outstanding, to
take such actions as are under its control to not become an ineligible issuer
(as defined in Rule 405 under the Securities Act).  In addition, whenever
required to effect the registration of any Registrable Securities or facilitate
the distribution of Registrable Securities pursuant to an effective Registration
Statement (including a Shelf Registration Statement), the Company shall, as
expeditiously as reasonably practicable:

(1)           By 9:30 a.m. New York City time on the first Business Day after
the effective date of a Shelf Registration Statement, file a final Prospectus
with the SEC, as required by Rule 424(b) under the Securities Act.

(2)           Provide to each Holder a copy of any disclosure regarding the plan
of distribution or the selling Holders, in each case, with respect to such
Holder, at least three (3) Business Days in advance of any filing with the SEC
of any Registration Statement or any amendment or supplement thereto that
includes such information, and provide initial copies to each Holder of all
documents proposed to be filed with an opportunity for Holders’ Counsel (and
separate counsel for the Investor, if any) to review and comment on such
documents and filing.

(3)           Prepare and file with the SEC a Prospectus supplement with respect
to a proposed offering of Registrable Securities pursuant to an effective
Registration Statement, subject to Section 3.11(c), and keep such Registration
Statement effective or such Prospectus supplement current until the securities
described therein are no longer Registrable Securities.

(4)           Prepare and file with the SEC such amendments, post-effective
amendments and supplements to the applicable Registration Statement and the
Prospectus or Prospectus supplement used in connection with such Registration
Statement as may be necessary to comply with the provisions of the Securities
Act with respect to the disposition of all securities covered by such
Registration Statement and cause the related Prospectus to be supplemented by
any Prospectus supplement, Issuer Free Writing Prospectus or “sticker”
supplement as may be necessary to comply with the provisions of the Securities
Act with respect to the disposition of the securities covered by such

 
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Registration Statement, and as so supplemented to be filed pursuant to Rule 424
(or any similar provision then in force) under the Securities Act.

(5)           Furnish without charge to each Holder and each underwriter, if
any, of the securities being sold by such Holder such number of conformed copies
of such Registration Statement and of each amendment, post-effective amendment
and supplement thereto, including financial statements (in each case including
all exhibits), such number of copies of the Prospectus contained in such
Registration Statement (including each preliminary Prospectus), such number of
copies of any and all transmittal letters or other correspondence with the SEC
or any other Governmental Entity relating to such offering and such other
documents as such Holder or underwriter, if any, may reasonably request.

(6)           Prior to any offering of Registrable Securities, use its
reasonable best efforts to register and qualify the securities covered by such
Registration Statement under such other securities or blue sky laws of such
jurisdictions as shall be reasonably requested by the Holders or any managing
underwriter(s), to keep such registration or qualification (or exemption
therefrom) in effect for so long as such Registration Statement is required to
remain in effect, and to take any other action which may be necessary or
advisable to enable such Holder to consummate the disposition in such
jurisdictions of the Registrable Securities owned by such Holder; provided, that
the Company shall not be required in connection therewith or as a condition
thereto to qualify to do business or to file a general consent to service of
process in any such states or jurisdictions unless the Company is already
subject to service in such jurisdiction and except as may be required by the
Securities Act.

(7)           Upon the occurrence of any event described in Section
3.11(c)(8)(B) or (E), (i) promptly prepare a supplement or post-effective
amendment to the Registration Statement or a supplement to the related
Prospectus or any document incorporated or deemed to be incorporated therein by
reference or an Issuer Free Writing Prospectus related thereto, or file any
other required document, as requested by the SEC or other Governmental Entity
(in the case of an occurrence of an event described in Section 3.11(c)(8)(B)) or
so that, as thereafter delivered to the selling Holders, such Registration
Statement, Prospectus or Issuer Free Writing Prospectus will not contain an
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading (in the case of an
occurrence of an event described in Section 3.11(c)(8)(E)) and (ii) furnish and
deliver to each Holder of Registrable Securities covered by such Registration
Statement a reasonable number of copies of such supplement or post-effective
amendment to the Registration Statement or a supplement to the related
Prospectus or any document incorporated or deemed to be incorporated therein by
reference or an Issuer Free Writing Prospectus related thereto so that, as
thereafter delivered to the purchasers of such Registrable Shares, such
Prospectus shall not include an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading.

 
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(8)           As promptly as practicable (and in any event within one Business
Day) after such event, give written notice to the Holders and the underwriters,
if any (which notice shall not contain any material non-public information):

(A)           when any Registration Statement filed pursuant to Section 3.11(a)
or any amendment thereto, the related Prospectus or any Prospectus supplement
related thereto, or any Issuer Free Writing Prospectus has been filed with the
SEC (except for any amendment effected by the filing of a document with the SEC
pursuant to the Exchange Act) and, with respect to such Registration Statement
or any post-effective amendment thereto, when the same has become effective;

(B)           of any request by the SEC or any other Governmental Entity for
amendments or supplements to any Registration Statement or the Prospectus
included therein, to any Issuer Free Writing Prospectus or for additional
information;

(C)           of the issuance by the SEC of any stop order suspending the
effectiveness of any Registration Statement or the initiation of any proceedings
by any Person for that purpose;

(D)           of the receipt by the Company or its legal counsel of any
notification with respect to the suspension of the qualification or exception
from qualification of the Common Stock for sale in any jurisdiction or the
initiation or threat of any proceeding for such purpose;

(E)           of the happening of any event that makes any statement made in any
effective Registration Statement or related Prospectus or any document
incorporated or deemed to be incorporated therein by reference or any Issuer
Free Writing Prospectus related thereto untrue in any material respect or that
requires the making of any changes in such Registration Statement, Prospectus,
documents or Issuer Free Writing Prospectus so that, in the case of the
Registration Statement, it will not 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, not misleading, and that in the case
of any Prospectus or Issuer Free Writing Prospectus, it will not contain any
untrue statement of a material fact or omit to state any material fact necessary
in order to make the statements therein, in light of the circumstances under
which they were made, not misleading (which notice shall be accompanied by an
instruction to suspend the use of such document until the requisite changes have
been made); and

(F)           if at any time the representations and warranties of the Company
contained in any underwriting agreement contemplated by Section 3.11(c)(12)
cease to be true and correct.

(9)           Use its reasonable best efforts to prevent the issuance or obtain
the withdrawal of any order suspending the effectiveness of any Registration
Statement

 
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referred to in Section 3.11(c)(8)(C), or the lifting of any suspension of the
qualification (or exemption from qualification) of any of the Registrable
Securities for sale in any jurisdiction, in each case at the earliest
practicable time.
 
 
(10)           [INTENTIONALLY OMITTED.]

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

(12)           In the event of an underwritten offering pursuant to
Section 3.11(a)(1), enter such customary agreements (including underwriting and
lock-up agreements in customary form, scope and substance) and take all such
other actions reasonably requested by the Holders of a majority of the
Registrable Securities being sold in connection therewith or by the managing
underwriter(s), if any, to expedite or facilitate the underwritten disposition
of such Registrable Securities, and in connection therewith in any underwritten
offering (including making members of management and executives of the Company
available to participate in “road shows,” similar sales events and other
marketing activities), (i) make such representations and warranties to the
Holders that are selling shareholders and the managing underwriter(s), if any,
with respect to the business of the Company and the Company Subsidiaries, and
the Registration Statement, Prospectus and documents, if any, incorporated or
deemed to be incorporated by reference therein, in each case, in customary form,
substance and scope, and, if true, confirm the same if and when requested,
(ii) use its reasonable best efforts to furnish the underwriters with 10b-5
statements and opinions of counsel to the Company and updates thereof, addressed
to the managing underwriter(s), if any, covering the matters customarily covered
by 10b-5 statements and in opinions requested in underwritten offerings, as the
case may be, (iii) use its reasonable best efforts to obtain “cold comfort”
letters and updates thereof from the independent certified public accountants of
the Company (and, if necessary, any other independent certified public
accountants of any business acquired by the Company for which financial
statements and financial data are included in the applicable Registration
Statement) who have certified the financial statements included in such
Registration Statement, addressed to each selling Holder (unless such
accountants shall be prohibited from so addressing such letters by applicable
standards of the accounting profession, in which case an “agreed-upon
procedures” letter may be required) and each of the managing underwriter(s), if
any, such letters to be in customary form and covering matters of the type
customarily covered in “cold comfort” letters in connection with underwritten
offerings, (iv) if an underwriting agreement is entered into, the same shall
contain indemnification provisions and procedures substantially to the effect
set forth in Section 3.11(g) with respect to all parties to be indemnified
pursuant to such Section, except as otherwise agreed by the Holders of a
majority of the Registrable Securities being sold in connection therewith and
the managing underwriter(s), if any, and (v) deliver such documents and
certificates as may be reasonably requested by the Holders of a majority of the
Registrable Securities being

 
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sold in connection therewith, their counsel and the managing underwriter(s), if
any, to evidence the continued validity of the representations and warranties
made pursuant to clause (i) above and to evidence compliance with any customary
conditions contained in the underwriting agreement or other agreement entered
into by the Company.   The above clauses (i) through (v) shall be done at each
closing under such underwriting agreement.

(13)           Make available for inspection by a representative of Holders that
are selling shareholders, the managing underwriter(s), if any, and any attorneys
or accountants retained by such Holders or managing underwriter(s), at the
offices where normally kept, during reasonable business hours, financial and
other records, pertinent corporate documents and properties of the Company, and
cause the officers, directors and employees of the Company to supply all
information, in each case, reasonably requested by any such representative,
managing underwriter(s), attorney or accountant in connection with such
Registration Statement.

(14)           If requested by Holders of a majority of the Registrable
Securities being registered and/or sold in connection therewith, or the managing
underwriter(s), if any, promptly include in a Prospectus supplement,
post-effective amendment or Issuer Free Writing Prospectus such information as
the Holders of a majority of the Registrable Securities being registered and/or
sold in connection therewith or managing underwriter(s), if any, may reasonably
request in order to permit the intended method of distribution of such
securities and make all required filings of such Prospectus supplement,
post-effective amendment or Issuer Free Writing Prospectus as soon as
practicable after the Company has received such request.

(15)           Timely provide to its security holders earning statements
satisfying the provisions of Section 11(a) of the Securities Act and Rule 158
thereunder.

(16)           cooperate with the Holders and the managing underwriter(s), if
any, to facilitate the timely preparation and delivery of certificates (which
shall not bear any restrictive legends) representing Registrable Securities to
be sold under any Registration Statement, and enable such Registrable Securities
to be in such denominations and registered in such names as the managing
underwriter(s) or selling Holders may request and keep available and make
available to the Company’s transfer agent prior to the effectiveness of such
Registration Statement a supply of such certificates.

(17)           Cause all such Registrable Securities registered pursuant
hereunder to be listed on each securities exchange on which similar securities
issued by the Company are then listed.

(18)           Provide a transfer agent and registrar for all Registrable
Securities registered pursuant hereunder and a CUSIP number for all such
Registrable Securities, in each case not later than the effective date of such
registration.

 
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(d)           Suspension of Sales. During any Scheduled Blackout Period and upon
receipt of written notice from the Company that a Registration Statement,
Prospectus, Prospectus supplement, Issuer Free Writing Prospectus or other
document contains or may contain an untrue statement of a material fact or omits
or may omit to state a material fact required to be stated therein or necessary
to make the statements therein not misleading or that circumstances exist that
make inadvisable use of such Registration Statement, Prospectus, Prospectus
supplement, Issuer Free Writing Prospectus or other document, each Holder of
Registrable Securities shall forthwith discontinue disposition of Registrable
Securities under the Registration Statement, Prospectus, Prospectus supplement,
Issuer Free Writing Prospectus or other document until termination of such
Scheduled Blackout Period or until such Holder has received copies of a
supplemented or amended Registration Statement, Prospectus, Prospectus
supplement, Issuer Free Writing Prospectus or other document, as applicable, or
until such Holder is advised in writing by the Company that the use of the
applicable document may be resumed, and, if so directed by the Company, such
Holder shall deliver to the Company (at the Company’s expense) all copies, other
than permanent file copies then in such Holder’s possession, of the applicable
document covering such Registrable Securities current at the time of receipt of
such notice.  Excluding Scheduled Blackout Periods, the total number of days of
any delays under Section 3.11(a)(3) and the total number of days of any
suspensions under this Section 3.11(d) shall not exceed, in the aggregate, 90
days in any 12-month period (the “Allowable Suspension Period”).

(e)           Termination of Registration Rights. A Holder’s registration rights
as to any securities held by such Holder (and its Affiliates, partners, members
and former members) shall only cease to be available when all such securities
have ceased to be Registrable Securities.

(f)           Furnishing Information.

(1)           Neither the Investor nor any Holder shall use any free writing
prospectus (as defined in Rule 405) in connection with the sale of Registrable
Securities without the prior written consent of the Company.

(2)           It shall be a condition precedent to the obligations of the
Company to take any action pursuant to Section 3.11(a) or 3.11(c) as to a
selling Holder that such selling Holder, and the underwriters, if any, shall
furnish to the Company such information regarding themselves, the Registrable
Securities held by them and the intended method of disposition of such
securities as shall be required to effect the registered offering of the
Holder’s Registrable Securities.

(g)   Indemnification.

(1)           The Company agrees to indemnify each Holder and, if a Holder is a
Person other than an individual, such Holder’s officers, directors, partners,
employees, agents, representatives and Affiliates, any underwriter (as defined
in the Securities Act) for such Holder and each Person, if any, that controls
such Holder or underwriter within the meaning of the Securities Act or the
Exchange Act (each, a “Holder Indemnitee”), against any and all Losses, joint or
several, arising out of or based upon any of the following statements, omissions
or violations (collectively, “Company Violations”):  (A)

 
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any untrue statement or alleged untrue statement of material fact contained in
any Registration Statement, including any preliminary Prospectus or final
Prospectus contained therein or any amendments or supplements thereto or any
documents incorporated therein by reference or contained in any free writing
prospectus (as such term is defined in Rule 405) prepared by the Company or
authorized by it in writing for use by such Holder (or any amendment or
supplement thereto); or any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading; or (B) any violation or alleged violation by the Company of the
Securities Act, the Exchange Act, any state securities law or any rule or
regulation promulgated under the Securities Act, the Exchange Act or any state
securities law; provided, that the Company shall not be liable to such Holder
Indemnitee in any such case to the extent that any such Loss is based solely
upon any of the following statements, omissions or violations (collectively,
“Holder Violations”):  (i) an untrue statement or omission made in such
Registration Statement, including any such preliminary Prospectus or final
Prospectus contained therein or any such amendments or supplements thereto or
contained in any free writing prospectus (as such term is defined in Rule 405)
prepared by the Company or authorized by it in writing for use by such Holder
(or any amendment or supplement thereto), in reliance upon and in conformity
with information regarding such Holder Indemnitee or its plan of distribution or
ownership interests which was furnished in writing to the Company by such Holder
Indemnitee expressly for use in connection with such Registration Statement,
including any such preliminary Prospectus or final Prospectus contained therein
or any such amendments or supplements thereto, or (ii) offers or sales effected
by or on behalf such Holder Indemnitee “by means of” (as defined in Rule 159A) a
“free writing prospectus” (as defined in Rule 405) that was not authorized in
writing by the Company.

(2)           In connection with any Registration Statement in which the
Investor (or a Holder who assumes the obligations of the Investor in accordance
with Section 3.11(h)) is participating, the Investor (or such Holder) agrees to
indemnify the Company and its officers, directors, employees, agents,
representatives and Affiliates (each, a “Company Indemnitee”), against any and
all Losses, joint or several, arising out of or based upon any Holder Violation
to the extent any such Loss is based solely upon solely upon such Holder
Violation; provided, that each Holder’s indemnification obligation hereunder
shall, to the extent more than one Holder is subject to the same indemnification
obligation, be apportioned between each Holder based upon the net amount
received by each Holder from the sale of the Registrable Securities, as compared
to the total net amount received by all of the Holders holding Registrable
Securities sold pursuant to such Registration Statement.  Notwithstanding the
foregoing, no Holder shall be liable to the Company for amounts in excess of the
lesser of (x) such apportionment and (y) the amount received by such Holder in
the offering giving rise to such liability.

(3)           If the indemnification provided for in Section 3.11(g)(1) or
3.11(g)(2) is held by a court of competent jurisdiction to be unavailable to a
Holder Indemnitee or Company Indemnitee (each, an “Indemnitee”), respectively,
with respect to any Loss, then the indemnifying party, in lieu of indemnifying
such Indemnitee hereunder, shall

 
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contribute to the amount paid or payable by such Indemnitee as a result of such
Loss in such proportion as is appropriate to reflect the relative fault of the
Indemnitee, on the one hand, and the indemnifying party, on the other hand, in
connection with the statements, omissions or violations which resulted in such
Loss as well as any other relevant equitable considerations; provided, that in
no event shall any contribution by a Holder under this Section 3.11(g)(3) exceed
the net proceeds from the offering received by such Holder.  The relative fault
of the indemnifying party, on the one hand, and of the Indemnitee, on the other
hand, shall be determined by reference to, among other factors, whether the
untrue or alleged untrue statement of a material fact or omission or alleged
omission to state a material fact relates to information supplied by the
indemnifying party or by the Indemnitee and the parties’ relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission; the Company and each Holder agree that it would not be
just and equitable if contribution pursuant to this Section 3.11(g)(3) were
determined by pro rata allocation or by any other method of allocation that does
not take account of the equitable considerations referred to in
Section 3.11(g)(1) and 3.11(g)(2).  No Indemnitee guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from the indemnifying party if the
indemnifying party was not guilty of such fraudulent misrepresentation.

(4)           The indemnity and contribution agreements contained in this
Section 3.11(g) are in addition to any liability that the Company may have to
the Indemnitees and are not in diminution or limitation of the indemnification
provisions under Article V of this Agreement.

(5)           Promptly after receipt by an Indemnitee under this Section 3.11(g)
of notice of the commencement of any action (including any governmental action),
such Indemnitee will, if a claim in respect thereof is to be made against any
indemnifying party under this Section 3.11(g), deliver to the indemnifying party
a written notice of the commencement thereof and the indemnifying party shall
have the right to participate in, and, to the extent the indemnifying party so
desires, jointly with any other indemnifying party similarly noticed, to assume
the defense thereof with counsel mutually satisfactory to the parties; provided,
however, that an Indemnitee (together with all other Indemnitee which may be
represented without conflict by one counsel) shall have the right to retain one
separate counsel, with the reasonable fees and expenses to be paid by the
indemnifying party, if representation of such Indemnitee by the counsel retained
by the indemnifying party would be inappropriate due to actual or potential
differing interests between such Indemnitee and any other party represented by
such counsel in such proceeding.  The failure to deliver written notice to the
indemnifying party within a reasonable time of the commencement of any such
action shall relieve such indemnifying party of liability to the Indemnitee
under this Section 3.11(g) only to the extent such liability is caused by a
failure to give such notice, but the omission so to deliver written notice to
the indemnifying party will not relieve it of any liability that it may have to
any Indemnitee otherwise than under this Section 3.11(g).

 
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(6)           The obligations of the Company and Holders under this Section
3.11(g) shall survive the completion of any offering of Registrable Securities
in a Registration Statement under this Section 3.11.

(h)           Assignment of Registration Rights. The rights of the Investor to
registration of Registrable Securities pursuant to Section 3.11 may be assigned
by the Investor to a transferee or assignee of Registrable Securities to which
(i) there is transferred to such transferee no less than the lesser of (x)
$1,000,000 in Registrable Securities and (y) Registrable Securities representing
33.33% of the Purchase Price and (ii) such transfer is not prohibited under the
terms hereof; provided, however, that the transferor shall, within a reasonable
time after such transfer, furnish to the Company written notice of the name and
address of such transferee or assignee and the number and type of Registrable
Securities that are being assigned.
 
(i)           Holdback. With respect to any underwritten offering of Registrable
Securities by the Investor or other Holders pursuant to this Section 3.11, the
Company agrees not to effect (other than in connection with the Rights Offering,
pursuant to such registration or pursuant to a Special Registration) any public
sale or distribution, or to file any Registration Statement (other than such
registration or a Special Registration) covering any of its equity securities,
or any securities convertible into or exchangeable or exercisable for such
securities, during the period not to exceed ten days prior and 60 days following
the effective date of such offering or such longer period up to 90 days as may
be requested by the managing underwriter.  The Company also agrees to cause each
of its directors and senior executive officers to execute and deliver customary
lockup agreements in such form and for such time period up to 90 days as may be
requested by the managing underwriter.  “Special Registration” means the
registration of (i) equity securities and/or options or other rights in respect
thereof solely registered on Form S-4 or Form S-8 (or successor form) or
(ii) shares of equity securities and/or options or other rights in respect
thereof to be offered to directors, members of management, employees,
consultants, customers, lenders or vendors of the Company or the Company
Subsidiaries or in connection with dividend reinvestment plans.

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

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

(2)           so long the Investor or a Holder owns any Registrable Securities,
furnish to the Investor or such Holder forthwith upon request: (x) a written
statement by the Company as to its compliance with the reporting requirements of
Rule 144, the Securities Act and the Exchange Act; (y) a copy of the most recent
annual or quarterly report of the Company and such other reports and documents
so filed by the Company; and (z) such other reports and documents as the
Investor or Holder may reasonably request in availing

 
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itself of any rule or regulation of the SEC allowing it to sell any such
securities without registration;

(3)           file with the SEC in a timely manner all reports and other
documents required of the Company under the Securities Act and the Exchange Act;
and

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

(k)           As used in this Section 3.11, the following terms shall have the
following respective meanings:

(1)           “Effectiveness Deadline” means, with respect to a Shelf
Registration Statement required to be filed pursuant to Section 3.11(a)(1), the
earlier of (i) the 120th calendar day following the receipt of a Demand
Notice  and (ii) the 5th Business Day after the date the Company is notified
(orally or in writing, whichever is earlier) by the SEC that such Shelf
Registration Statement will not be “reviewed” or will not be subject to further
review; provided, that if the Effectiveness Deadline falls on a Saturday, Sunday
or other day that the SEC is closed for business, the Effectiveness Deadline
shall be extended to the next Business Day on which the SEC is open for
business.

(2)           “Holder” means the Investor and any other holder of Registrable
Securities to whom the registration rights conferred by the Transaction
Documents have been transferred in compliance with Section 3.11(h) hereof.

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

(4)           “Issuer Free Writing Prospectus” means an Issuer Free Writing
Prospectus, as defined in Rule 433 under the Securities Act, relating to an
offer of the Registrable Securities.

(5)           “Prospectus” means the prospectus included in any Registration
Statement (including a prospectus that discloses information previously omitted
from a prospectus filed as part of an effective Registration Statement in
reliance upon Rule 430A promulgated under the Securities Act), as amended or
supplemented by any prospectus supplement with respect to the terms of the
offering of any portion of the Registrable Shares covered by such Registration
Statement, any Issuer Free Writing Prospectus related thereto, and all other
amendments and supplements to such prospectus, including post-effective
amendments, and all material incorporated by reference or deemed to be
incorporated by reference in such prospectus.

(6)           “Register,” “registered” and “registration” shall refer to a
registration effected by preparing and (a) filing a Registration Statement in
compliance with the Securities Act and applicable rules and regulations
thereunder, and the declaration or ordering of effectiveness of such
Registration Statement or (b) filing a Prospectus and/or Prospectus supplement
in respect of an appropriate effective Registration Statement.

 
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(7)           “Registrable Securities” means (A) all Purchased Shares acquired
by the Investor hereunder and (B) any equity securities issued or issuable
directly or indirectly with respect to the securities referred to in the
foregoing clause (A) by way of conversion, exercise or exchange thereof or stock
dividend or stock split or in connection with a combination of shares,
recapitalization, reclassification, merger, amalgamation, arrangement,
consolidation or other reorganization, provided, that, once issued, such
securities shall not be Registrable Securities when (i) they are sold pursuant
to an effective Registration Statement under the Securities Act, (ii) they may
be immediately sold by the Investor pursuant to Rule 144 without limitation
thereunder on volume or manner of sale and without the requirement for the
Company to be in compliance with the current public information required under
Rule 144(c)(1) (or Rule 144(i)(2), if applicable), (iii) they shall have ceased
to be outstanding or (iv) they have been sold in a private transaction in which
the transferor’s rights under the Transaction Documents are not assigned to the
transferee of the securities.

(8)           “Registration Deadline” means, with respect to a Shelf
Registration Statement required to be filed pursuant to Section 3.11(a), 60 days
following the receipt of a Demand Notice.

(9)           “Registration Expenses” means all expenses incurred by the Company
in effecting any registration pursuant to this Agreement (whether or not any
registration or Prospectus becomes effective or final) or otherwise complying
with its obligations under this Section 3.11, including, without limitation, all
registration, filing, qualification and listing fees, printing expenses, fees
and disbursements of counsel for the Company, the reasonable fees and
disbursements of Holders’ Counsel, blue sky fees and expenses, expenses incurred
in connection with any “road show,” and expenses of the Company’s independent
accountants in connection with any regular or special reviews or audits incident
to or required by any such registration, but shall not include Selling Expenses
and the compensation of regular employees of the Company, which shall be paid in
any event by the Company.

(10)           “Registration Statement” means any registration statement of the
Company under the Securities Act which permits the public offering of any of the
Registrable Securities pursuant to the provisions of this Agreement, including a
Prospectus, amendments and supplements to such registration statement, including
post-effective amendments, all exhibits and all material incorporated by
reference or deemed to be incorporated by reference in such registration
statement.

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

(12)           “Scheduled Blackout Period” means the period from and including
the last day of a fiscal quarter of the Company to and including the Business
Day on which the Company publicly releases its financial results for such fiscal
quarter.

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

(14)           “Selling Expenses” means all underwriting discounts, selling
commissions and stock transfer taxes applicable to the sale of Registrable
Securities and fees and disbursements of counsel for any Holder (other than the
fees and disbursements of Holders’ Counsel included in Registration Expenses).

(l)           At any time, any holder of Registrable Securities (including any
Holder) may elect to forfeit its rights set forth in this Section 3.11 from that
date forward; provided, that no such forfeiture shall terminate a Holder’s
rights or obligations under Section 3.11(g) with respect to any prior
registration or Pending Underwritten Offering.  “Pending Underwritten Offering”
means, with respect to any Holder forfeiting its rights pursuant to this
Section 3.11(l), any underwritten offering of Registrable Securities in which
such Holder has advised the Company of its intent to register its Registrable
Securities either pursuant to Section 3.11(a)(2) or 3.11(a)(4) prior to the date
of such Holder’s forfeiture.

(m)           Limitations on Subsequent Registration Rights.  Other than
pursuant to the Transaction Documents, from and after the date of this
Agreement, the Company shall not, without the prior written consent of the
Holders of a majority of the outstanding Registrable Securities, enter into any
agreement with any holder or prospective holder of any securities of the Company
which would allow such holder or prospective holder to include such securities
in any registration filed under Section 3.11(a)(1)(A), unless under the terms of
such agreement, such holder or prospective holder may include such securities in
any such registration only to the extent that the inclusion of such holder’s or
prospective holder’s Securities will not reduce the amount of the Registrable
Securities of the Holders which is included.

3.12.   Articles of Amendment. In connection with the Closing, the Company shall
file the Preferred Stock Articles of Amendment, and such Articles of Amendment
shall continue to be in full force and effect as of the Closing Date with
respect to the Other Private Placements.

3.13.   Rights Offering.

(a)           Following the date of this Agreement, and subject to compliance
with all applicable Law, including the Securities Act, the Company shall
distribute to each holder of record of Common Stock other than directors and
executive officers of the Company (each, a “Legacy Shareholder”), as of the
close of business on the Business Day immediately preceding the Closing Date,
non-transferable rights (the “Rights”) to purchase from the Company, within a
time period to be determined by the Company (which period shall be between 30
and 45 days following a Legacy Shareholder’s receipt of such Rights), the number
of shares of Common Stock calculated pursuant to Section 3.13(b) at a per share
purchase price of $3.50 (“Rights Purchase Price”).  The transactions described
in this Section 3.13(a) and Sections 3.13(b) and (c), including the purchase and
sale of Common Stock upon the exercise of Rights and any commitments to purchase
unsubscribed Common Stock in Section 3.13(c), shall be referred to in this
Agreement as the “Rights Offering.”  The registration statement relating to the
Rights Offering shall be filed within 90 days after the date of this Agreement.

 
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(b)           Each Right shall entitle a Legacy Shareholder to purchase any
whole number of shares of Common Stock, provided, that (i) no Legacy Shareholder
shall thereby exceed, together with any other person with whom such Legacy
Shareholder may be aggregated under applicable Law, 4.9% beneficial ownership of
the Company’s equity securities and (ii) the gross proceeds from shares of
Common Stock purchased in the Rights Offering shall not exceed $3.75 million.

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

(d)           If the Investor owns securities representing the Qualifying
Ownership Interest immediately following the Closing, the Investor shall be
afforded the opportunity to acquire from the Company following the expiration of
the Rights and the closing of any share purchases as part of the Rights
Offering, at the Rights Purchase Price, a number of shares of Common Stock such
that the Investor, together with any other person with whom the Investor’s
ownership of Company securities would be aggregated for purposes of any bank
regulation or law, would collectively own, control or have the power to vote, up
to the same proportionate amount of the outstanding Common Stock of the Company
held by the Investor immediately following the Closing.  The Company shall give
the Investor written notice of the completion of the Rights Offering and the
results thereof no later than ten (10) Business Days after the completion of the
Rights Offering.  The Investor shall have ten (10) Business Days from the date
of receipt of such a notice to notify the Company in writing that it intends to
exercise its rights provided in this Section 3.13(d) and the amount of shares of
Common Stock the Investor desires to purchase, up to the maximum amount
calculated pursuant to this Section 3.13(d).  The failure of the Investor to
respond within such ten (10) Business Day period shall be deemed to be a waiver
of the Investor’s rights under this Section 3.13(d).  If the Investor so
notifies the Company in writing within such ten (10) Business Day period that it
intends to exercise such rights, the parties shall consummate the acquisition of
such Common Stock as soon as reasonably practicable thereafter.

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

3.15.           No Integration.  The Company shall not, and shall use its
commercially agrees to ensure that no Affiliate of the Company shall, sell,
offer for sale or solicit offers to buy or otherwise negotiate in respect of any
security (as defined in Section 2 of the Securities Act) that will be integrated
with the offer or sale of the Purchased Shares in a manner that would require
the registration under the Securities Act of the sale of the Purchased Shares to
the Investor.

 
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3.16.           Acknowledgment of Dilution.  The Company acknowledges that the
issuance of the Securities may result in dilution of the outstanding shares of
Common Stock.  The Company further acknowledges that its obligations under the
Transaction Documents, including without limitation its obligation to issue the
Securities pursuant to the Transaction Documents, are unconditional and absolute
and not subject to any right of set off, counterclaim, delay or reduction,
regardless of the effect of any such dilution or any claim the Company may have
against the Investor and regardless of the dilutive effect that such issuance
may have on the ownership of the other shareholders of the Company.

3.17.           Company Forbearances.  From the date hereof until the earlier of
the Closing Date or the termination of this Agreement in accordance with its
terms, the Company shall not, and shall not permit any Company Subsidiary to:

(a)           (i) adjust, split, combine or reclassify any of its capital stock,
(ii) set any record or payment dates for the payment of any dividends or
distributions on its capital stock or make, declare or pay any dividend or make
any other distribution on, or directly or indirectly redeem, purchase or
otherwise acquire, any shares of its capital stock or any securities or
obligations convertible into or exercisable or exchangeable for any shares of
its capital stock or stock appreciation rights or grant any person any right to
acquire any shares of its capital stock; or (iii) issue or commit to issue any
additional shares of capital stock (except pursuant to the exercise of options
and restricted stock unit grants outstanding as of the date hereof and disclosed
in Schedule 3.17(a)), convertible debt or any securities convertible into or
exercisable or exchangeable for, or any rights, warrants or options to acquire,
any additional shares of capital stock (including options) or convertible debt;

(b)           (i) increase the compensation or benefits of any employee of the
Company or any Company Subsidiary (except (x) for increases in salary or wages
of employees of the Company or any Company Subsidiary in the ordinary course of
business consistent with past practice, provided that no such increase shall
result in an annual adjustment of more than 3% of the aggregate base salary and
wages payable by the Company and the Company Subsidiaries during 2013 and (y)
pursuant to the Company’s Benefit Plans as described in Schedule 3.17(b) as in
effect on the date of this Agreement and made available to the Investor prior to
the date of this Agreement (other than as amended to comply with Law)); (ii)
except as required by Law, grant any severance or termination pay to any
employee of the Company or any Company Subsidiary except pursuant to the terms
of any Benefit Plan in effect on the date of this Agreement and which was made
available to the Investor prior to the date of this Agreement and disclosed in
Schedule 3.17(b); (iii) loan or advance any money or other property to any
employees or directors of the Company or Company any Subsidiary other than in
the ordinary course of business consistent with past practice; (iv) (x)
establish, adopt, enter into, amend or terminate, or (y) grant (other than in
the ordinary course of business consistent with past practice), any waiver or
consent under any Benefit Plan or any plan, agreement, program, policy, trust,
fund or other arrangement that would be a Benefit Plan if it were in existence
as of the date of this Agreement; or (v) grant or amend or modify any equity or
equity-based awards (including options and restricted stock units);
 
 
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(c)           (i) incur any indebtedness for borrowed money, other than (x)
deposit liabilities, advances from the Federal Reserve discount window, Fed
funds purchases and reverse repurchase agreements, in each case entered into in
the ordinary course of business consistent with past practice and, in the case
of reverse repurchase agreements, with a final maturity of five years or less,
or (y) indebtedness incurred in the ordinary course of business consistent with
past practice in order to finance working capital (subject in the case of this
clause (y) to an aggregate maximum amount of $5,000,000), (ii) guarantee,
endorse or assume responsibility for, the obligations of any person other than
any wholly-owned subsidiary of the Company (other than the endorsement of checks
and other negotiable instruments in the normal process of collection) or (iii)
redeem, repurchase, prepay, defease, or cancel, or modify in any material
respect the terms of, indebtedness for borrowed money, other than (x) deposit
liabilities and reverse repurchase agreements in each case in the ordinary
course of business consistent with past practice or (y) in accordance with the
terms of the applicable instrument as in effect on the date hereof;

(d)           (i) settle any action involving claims against the Company or any
Company Subsidiary resulting in monetary damages or other payments in excess of
$100,000, or (ii) agree or consent to the issuance of any order restricting or
otherwise affecting its business or operations, or, in each case, that would
cause the Company or any Company Subsidiary to breach a representation, warranty
or covenant contained in this Agreement or would otherwise adversely affect the
rights of the Investor under this Agreement;

(e)           amend its certificate of incorporation, bylaws or similar
governing documents (other than for the purpose of effectuating the transactions
contemplated by the Transaction Documents), or enter into a plan of
consolidation, merger, share exchange, reorganization or complete or partial
liquidation with any Person (other than consolidations, mergers or
reorganizations solely among wholly-owned subsidiaries of the Company), or a
letter of intent or agreement in principle with respect thereto;

(f)           make any changes in its accounting methods or method of Tax
accounting, practices or policies, except as may be required under Law or GAAP,
in each case following consultation with the Company’s independent public
accountants;

(g)           except as required by Law, make or change any Tax election, file
any amended Tax Returns, settle or compromise any material Tax liability of the
Company or any Company Subsidiary, agree to an extension or waiver of the
statute of limitations with respect to the assessment or determination of Taxes
of the Company or any Company Subsidiary, enter into any closing agreement with
respect to any Tax or surrender any right to claim a Tax refund;

(h)           sell any assets in any one transaction or series of related
transactions where the aggregate sales price equals or exceeds $100,000 and
represents a discount of 10% or more from the aggregate book value of such
assets; or
 
 
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(i)           agree to, or make any commitment to, take any of the actions
prohibited by this Section 3.17 or that would otherwise materially adversely
affect or materially delay the consummation of the transactions contemplated
hereby.

ARTICLE IV
TERMINATION

4.1.           Termination. This Agreement (together with the other Transaction
Documents, as to the Investor) may be terminated prior to the Closing:
 
(a)   by mutual written agreement of the Company and the Investor;
 
(b)           by the Investor, upon written notice to the Company, if (i) there
has been a breach of any representation, warranty, covenant or agreement made by
the Company in this Agreement, or any such representation and warranty shall
have become untrue after the date of this Agreement, such that
Section 1.2(b)(1)(B) would not be satisfied and (ii) such breach or condition is
not curable or, if curable, is not cured prior to the date that would otherwise
be the Closing Date in absence of such breach or condition; provided, that this
Section 4.1(b) shall only apply if the Investor is not in material breach of any
of the terms of this Agreement;
 
(c)           by the Company, upon written notice to the Investor, if (i) there
has been a breach of any representation, warranty, covenant or agreement made by
the Investor in this Agreement, or any such representation and warranty shall
have become untrue after the date of this Agreement, such that
Section 1.2(b)(2)(B) would not be satisfied and (ii) such breach or condition is
not curable or, if curable, is not cured prior to the date that would otherwise
be the Closing Date in absence of such breach or condition; provided, that this
Section 4.1(c) shall only apply if the Company is not in material breach of any
of the terms of this Agreement;
 
(d)           by either party, upon written notice to the other party, in the
event that any Governmental Entity shall have issued any order, decree or
injunction or taken any other action restraining, enjoining or prohibiting any
of the transactions contemplated by this Agreement, and such order, decree,
injunction or other action shall have become final and nonappealable;
 
(e)           [RESERVED]; or
 
(f)           by either party, upon written notice to the other party, if the
Closing has not been consummated on or prior to 5:00 p.m., New York City time,
on April 30, 2014; provided, however, that the right to terminate this Agreement
under this Section 4.1(f) shall not be available to any party whose failure to
comply with its obligations under this Agreement has been the cause of or
resulted in the failure of the Closing to occur on or before such time.

4.2.           Effects of Termination. In the event of any termination of the
Transaction Documents as provided in Section 4.1, this Agreement (other than
Article VI of this Agreement, which shall remain in full force and effect) shall
forthwith become wholly void and of no further force and effect; provided, that
nothing herein shall relieve any party from liability for fraud or willful
breach of this Agreement.
 
 
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ARTICLE V
INDEMNITY

5.1.   Indemnification by the Company.

(a)           The Company shall indemnify, defend and hold harmless to the
fullest extent permitted by Law the Investor and its Affiliates, and each of
their successors and assigns, officers, directors, partners, members, managers,
agents and employees, as applicable, (the “Investor Indemnified Parties”)
against, and reimburse any of the Investor Indemnified Parties for, all Losses
arising out of or resulting from:

(1)           the inaccuracy or breach of any representation or warranty made by
the Company in this Agreement or any certificate delivered pursuant hereto or
any breach or failure by the Company to perform any of its covenants or
agreements contained in this Agreement; or

(2)           any action, suit, claim, proceeding or investigation by any
shareholder of the Company or any other Person relating to this Agreement or the
other Transaction Documents or the transactions contemplated hereby or thereby.

(b)           The Company shall not be required to indemnify the Investor
Indemnified Parties pursuant to Section 5.1(a), (i) with respect to any claim
for indemnification if the amount of Losses with respect to such claim are less
than $25,000 (any claim involving Losses less than such amount being referred to
as a “De Minimis Claim”) and (ii) unless and until the aggregate amount of all
Losses incurred with respect to all claims (including De Minimis Claims)
pursuant to Section 5.1(a) exceed 1% of the Purchase Price (the “Threshold
Amount”), in which event the Company shall be responsible for the total amount
of such Losses incurred without regard to the Threshold Amount.

5.2.   Indemnification by the Investor.

(a)           The Investor shall indemnify, defend and hold harmless to the
fullest extent permitted by Law the Company against, and reimburse the Company
for, all Losses arising out of or resulting from (1)  the inaccuracy or breach
of any representation or warranty made by the Investor in this Agreement or (2) 
any breach or failure by the Investor to perform any of its covenants or
agreements contained in this Agreement.

(b)           The Investor shall not be required to indemnify the Company
pursuant to Section 5.2(a), (i) with respect to any De Minimis Claim and (ii)
unless and until the aggregate amount of all Losses incurred with respect to all
claims (including De Minimis Claims) pursuant to Section 5.2(a) exceeds the
Threshold Amount, in which event the Investor shall be responsible for the total
amount of such Losses incurred without regard to the Threshold Amount.

 
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5.3.           Exclusive Remedies. Except as set forth in this Agreement, the
other Transaction Documents and any other documents delivered in connection with
the Closing of the transactions contemplated by the Transaction Documents, the
Company and its representatives make no representation or warranty, expressed or
implied, at law or in equity, in respect of the Company or the Company’s
business or prospects; and any and all other representations and warranties made
by the Company or its representatives are deemed to have been superseded by this
Agreement and do not survive.  The Investor acknowledges and agrees that it is
relying solely on its own investigations and the representations and warranties
contained in this Agreement, the other Transaction Documents, and the other
documents delivered in connection with the Closing in deciding to enter into
this Agreement and consummate the Closing.  Without limiting the previous two
sentences, each party hereto acknowledges and agrees that following the Closing,
the indemnification provisions hereunder shall be the sole and exclusive
remedies of the parties hereto for monetary damages for any breach of the
representations, warranties or covenants contained in the this Agreement.  No
investigation of the Company by the Investor, or by the Company of the Investor,
whether prior to or after the date hereof, shall limit any Indemnified Party’s
exercise of any right hereunder or be deemed to be a waiver of any such
right.  The parties agree that any indemnification payment made pursuant to this
Agreement shall be treated as an adjustment to the Purchase Price for Tax
purposes, unless otherwise required by Law. Such payment shall not result in an
adjustment to the value of the original investment reported by the Company under
GAAP.
 
ARTICLE VI
MISCELLANEOUS

6.1.           Survival. The representations and warranties of the parties
hereto contained in this Agreement shall survive in full force and effect until
the date that is two (2) years after the Closing Date (or until final resolution
of any claim or action arising from the breach of any such representation and
warranty, if notice of such breach was provided prior to the end of such
period), at which time they shall expire and have on further force and effect;
provided that the representations and warranties in Sections 2.2(a), 2.2(b),
2.2(c), 2.2(d) and 2.3(d) shall survive indefinitely and the representations and
warranties in Sections 2.2(r), 2.2(s) and 2.2(t) shall survive until ninety (90)
days after the expiration of the applicable statutory periods of
limitations.  Except as otherwise provided herein, all covenants and agreements
set forth in this Agreement shall survive until the earliest of the duration of
any applicable statutory periods of limitations or until performed or no longer
operative in accordance with their respective terms.

6.2.           Expenses. Other than as set forth in this Section 6.2, each of
the Company and the Investor will bear and pay all costs and expenses incurred
by it or on its behalf in connection with the transactions contemplated by this
Agreement.  The Company shall pay all amounts owed to the Placement Agent
relating to or arising out of the transactions contemplated hereby.  The Company
shall pay all Transfer Agent fees, stamp taxes and other taxes and duties levied
in connection with the sale and issuance of the Purchased Shares to the
Investor.

6.3.           Other Definitions. Wherever required by the context of this
Agreement, the singular shall include the plural and vice versa, and the
masculine gender shall include the feminine and neuter genders and vice versa,
and references to any agreement, document or instrument shall be deemed to refer
to such agreement, document or instrument as amended, supplemented or modified
from time to time.

 
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(a)           the term “Affiliate” means, with respect to any Person, any Person
directly or indirectly controlling, controlled by or under common control with,
such other Person provided, that no security holder of the Company shall be
deemed to be an Affiliate of any other security holder or of the Company or any
of its Subsidiaries solely by reason of any investment in the Company.  For
purposes of this definition, “control” (including, with correlative meanings,
the terms “controlled by” and “under common control with”), when used with
respect to any Person, means the possession, directly or indirectly, of the
power to cause the direction of management or policies of such Person, whether
through the ownership of voting securities by contract or otherwise;

(b)           the term “Board of Directors” means the Board of Directors of the
Company;

(c)           the term “Burdensome Condition” shall mean any condition which is
materially and unreasonably burdensome on the Company’s business following the
Closing or on the Investor or would reduce the economic benefits of the
transactions contemplated by this Agreement to the Investor or the Company, as
the case may be, to such a degree that the Investor or the Company would not
have entered into this Agreement had such condition or restriction been known to
it at the date hereof and, for the avoidance of doubt, any requirements to
disclose the identities of direct or indirect limited partners, shareholders or
members of the Investor or any of its Affiliates or its or their investment
advisors, other than Affiliates of the Investor, shall be deemed a Burdensome
Condition unless otherwise determined by the Investor in its sole discretion;

(d)           the term “Business Day” means any day except Saturday, Sunday and
any day which shall be a legal holiday or a day on which banking institutions in
the State of New York or in the State of Virginia generally are authorized or
required by Law or other governmental actions to close;

(e)           the term “Capital Stock” means capital stock or other type of
equity interest in (as applicable) a Person;

(f)           the term “Code” means the Internal Revenue Code of 1986, as
amended;

(g)           the term “Company Stock Option” means any outstanding stock option
issued under any Company Stock Option Plan;

(h)           the term “Company Stock Option Plan” means each of the Company’s
1995 Stock Option Plan and 2006 Equity Compensation Plan;

(i)           The term “Environmental Laws” means all Laws relating to pollution
or protection of human health or the environment (including, without limitation,
ambient air, surface water, groundwater, land surface or subsurface strata),
including, without limitation, Laws relating to the use, disposal, emission,
discharge, release or threatened release of chemicals, pollutants, contaminants,
or toxic or hazardous substances or wastes, or to human exposure thereto, or to
the protection or restoration of the environment;

 
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(j)           the term “GAAP” means United States generally accepted accounting
principles and practices as in effect from time to time;

(k)           the term “Governmental Consent” means any notice to, registration,
declaration or filing with, exemption or review by, or authorization, order,
consent or approval of, any Governmental Entity, or the expiration or
termination of any statutory waiting periods, including the expiration or
termination of any applicable waiting period under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended, and the rules and regulations
promulgated thereunder;

(l)           the term “Governmental Entity” means any court, administrative
agency or commission or other governmental authority or instrumentality, whether
federal, state, local or foreign, and any applicable industry self-regulatory
organization or securities exchange;

(m)           the term “Knowledge” of the Company and words of similar import
mean, with respect to any statement made to the knowledge of the Company, that
the statement is based upon the actual knowledge of the officers of the Company
having responsibility for the matter or matters that are the subject of the
statement after due inquiry.

(n)           the term “Liens” means any liens, charges, adverse rights or
claims, pledges, covenants, title defects, security interests and other
encumbrances of any kind.

(o)           the term “Losses” means any and all losses, damages, costs,
expenses (including reasonable attorneys’ fees and disbursements), liabilities,
settlement payments, awards, actions, suits, proceedings, judgments, fines,
obligations, claims, and deficiencies of any kind;

(p)           the term “Material Contract” means any Contract which:

(1)           constitutes a collective bargaining or other arrangement with any
labor union;

(2)           grants any Person a right of first refusal, right of first offer
or similar right with respect to any material properties, assets or businesses
of the Company or any Company Subsidiary;

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

 
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(4)           involves any joint venture, partnership, strategic alliance, or
other similar arrangement (including any franchising agreement, but in any
event, excluding introducing broker agreements); or relates to the acquisition
or disposition of any material business or material assets (whether by merger,
sale of stock or assets, or otherwise), which acquisition or disposition is not
yet complete or where such contract contains continuing material obligations or
contains continuing indemnity obligations of the Company or any Company
Subsidiary;

(5)           involves the lease of real property or any other lease with annual
rental payments aggregating $50,000 or more;

(6)           other than with respect to loans, provides for, or is reasonably
likely to result in, the receipt or expenditure of more than $100,000 on an
annual basis or $100,000 in the aggregate, including the payment or receipt of
royalties or other amounts calculated based upon revenues or income;

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

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

(9)           contains or involves any standstill or similar agreement pursuant
to which the Company or any Company Subsidiary has agreed not to acquire assets
or securities or another person;

(10)           would prevent, delay or impede the Company’s ability to
consummate the transactions contemplated by the Transaction Documents;

(11)           provides for indemnification by the Company or any Company
Subsidiary of any Person, except for immaterial contracts entered into in the
ordinary course of business consistent with past practice;

(12)           other than contracts relating to the ordinary course management
of credit extensions, contains a put, call, or similar right pursuant to which
the Company or any Company Subsidiary could be required to purchase or sell, as
applicable, any equity interests or assets that have a fair market value or
purchase price of more than $100,000;

(13)           constitutes an employment or independent contractor contract or
understanding (including any understandings or obligations with respect to
severance or termination pay, liabilities or fringe benefits) with any present
or former director, officer, employee or consultant;

 
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(14)           constitutes a plan, contract or understanding providing for any
bonus, pension, option, deferred compensation, retirement payment, profit
sharing or similar arrangement with respect to any present or former director,
officer, employee or consultant;

(15)           is with any Governmental Entity and imposes any material
obligation or restriction on the Company or any Company Subsidiary; or

(16)           relates to indebtedness for borrowed money, letters of credit,
capital lease obligations, obligations secured by a Lien or interest rate or
currency hedging agreements (including guarantees in respect of any of the
foregoing, but in any event excluding trade payables, securities transactions
and brokerage agreements arising in the ordinary course of business consistent
with past practice, intercompany indebtedness and immaterial leases for office
equipment) in excess of $100,000, except for those issued in the ordinary course
of business.

(q)           the term “Non-Performing Assets” means non-performing loans plus
other real estate owned.

 
(r)           the term “Person” means any individual, firm, corporation,
partnership, trust, incorporated or unincorporated association, joint venture,
joint stock company, limited liability company, Governmental Entity or other
entity of any kind, and shall include any successor (by merger or otherwise) of
such entity;

 
(s)           the term “Subsidiary” means, with respect to any Person, any
corporation, partnership, joint venture, limited liability company or other
entity (x) of which such Person or a Subsidiary of such Person is a general
partner or (y) of which a majority of the voting securities or other voting
interests, or a majority of the securities or other interests of which having by
their terms ordinary voting power to elect a majority of the board of directors
or persons performing similar functions with respect to such entity, is directly
or indirectly owned by such Person and/or one or more Subsidiaries thereof;
 
(t)           the term “Tax” or “Taxes” means all United States federal, state,
local or foreign income, profits, estimated, gross receipts, windfall profits,
severance, property, intangible property, occupation, production, sales, use,
license, excise, emergency excise, franchise, capital gains, Capital Stock,
employment, withholding, transfer, stamp, payroll, goods and services, value
added, alternative or add-on minimum tax, or any other tax, custom, duty or
governmental fee, or other like assessment or charge of any kind whatsoever,
together with any interest, penalties, fines, related liabilities or additions
to tax that may become payable in respect thereof imposed by any Governmental
Entity, whether or not disputed;
 
(u)           the term “Tax Return” shall mean any return, declaration, report
or similar statement required to be filed with respect any Taxes (including any
attached schedules), including, without limitation, any information return,
claim or refund, amended return and declaration of estimated Tax;
 
 
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(v)           the term “Transaction Documents” means this Agreement, the
Additional Agreements, the Other Private Placement documents, and the Rights
Offering documents, as the same may be amended or modified from time to time;
 
(w)            the word “or” is not exclusive;
 
(x)           the words “including,” “includes,” “included” and “include” are
deemed to be followed by the words “without limitation”;
 
(y)           the terms “herein,” “hereof” and “hereunder” and other words of
similar import refer to this Agreement as a whole and not to any particular
section, paragraph or subdivision; and
 
(z)           all article, section, paragraph or clause references not
attributed to a particular document shall be references to such parts of this
Agreement, and all exhibit and schedule references not attributed to a
particular document shall be references to such exhibits and schedules to this
Agreement.

6.4.           Amendment and Waivers. The conditions to each party’s obligation
to consummate the Closing are for the sole benefit of such party and may be
waived by such party in whole or in part to the extent permitted by Law.  No
amendment or waiver of any provision of this Agreement will be effective against
any party hereto unless it is in a writing signed by a duly authorized officer
of such party that makes express reference to the provision or provisions
subject to such amendment or waiver.  No waiver of any default with respect to
any provision, condition or requirement of this Agreement shall be deemed to be
a continuing waiver in the future or a waiver of any subsequent default or a
waiver of any other provision, condition or requirement hereof, nor shall any
delay or omission of either party to exercise any right hereunder in any manner
impair the exercise of any such right.

6.5.           Counterparts and Facsimile. For the convenience of the parties
hereto, this Agreement may be executed in any number of separate counterparts,
each such counterpart being deemed to be an original instrument, and all such
counterparts will together constitute the same agreement.  Executed signature
pages to this Agreement may be delivered by facsimile or email with “PDF”
attachment, and such facsimiles and attachments will be deemed as sufficient as
if actual signature pages had been delivered.

6.6.           Governing Law. This Agreement will be governed by and construed
in accordance with the Laws of the State of New York applicable to contracts
made and to be performed entirely within such State.

6.7.           Jurisdiction. The parties hereby agree that 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 shall be brought in the United States District Court for the Southern
District of New York sitting in the borough of Manhattan, New York, New York, so
long as such court shall have subject matter jurisdiction over such suit, action
or
 
 
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proceeding or, if it does not have subject matter jurisdiction, in any New York
State court sitting in the borough of Manhattan, New York, New York, and each of
the parties hereby irrevocably consents to the jurisdiction of such courts (and
of the appropriate appellate courts therefrom) in any such suit, action or
proceeding and 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 which is brought in any such court has been brought in an
inconvenient forum. Process in any such suit, action or proceeding may be served
on any party anywhere in the world, whether within or without the jurisdiction
of any such court.  Without limiting the foregoing, each party agrees that
service of process on such party as provided in Section 6.9 shall be deemed
effective service of process on such party.  The parties hereby irrevocably and
unconditionally consent to submit to the exclusive jurisdiction of the state and
federal courts referred to above for any actions, suits or proceedings arising
out of or relating to this Agreement and the transactions contemplated hereby.

6.8.   WAIVER OF JURY TRIAL.

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

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

[                                               ]

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

[                                               ]

 
(b)
If to the Company:

Highlands Bankshares, Inc.
340 West Main Street
Abingdon, Virginia 24210
Attn: Samuel L. Neese
Telephone: (276) 628-9181
Fax: (276) 619-2102
E-mail: sneese@hubank.com

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

Williams Mullen
Williams Mullen Center
200 South 10th Street, Suite 1600
Richmond, Virginia 23219
Attn: Wayne A. Whitham, Jr.
Telephone: (804) 420-6473
Fax: (804) 420-6507
E-mail: wwhitham@williamsmullen.com

6.10.           Entire Agreement. This Agreement (including the Schedules and
Exhibits hereto) and the other Transaction Documents constitute the entire
agreement, and supersede all other prior agreements, understandings,
representations and warranties, inducements or conditions, both written and
oral, among the parties, with respect to the subject matter hereof and thereof.

6.11.           Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties and their respective successors and
permitted assigns, including any purchasers of the Purchased Shares.  The
Company shall not assign this Agreement or any rights or obligations hereunder
without the prior written consent of the Investor.  The Investor may assign some
or all of its rights hereunder or thereunder without the consent of the Company
(i) to any third party, if in compliance with the Transaction Documents and Law
or (ii) to any Affiliate of the Investor, and such assignee shall be deemed to
be the Investor hereunder with respect to such assigned rights and shall be
bound by the terms and conditions of this Agreement.

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

6.13.           Severability. If any provision of this Agreement or the
application thereof to any Person (including the officers and directors of the
Investor and the Company) or circumstance is determined by a court of competent
jurisdiction to be invalid, void or unenforceable, the remaining provisions
hereof, or the application of such provision to persons or circumstances other
than those as to which it has been held invalid or unenforceable, will remain in
full force and effect and shall in no way be affected, impaired or invalidated
thereby.  Upon such determination, the parties shall negotiate in good faith in
an effort to agree upon a suitable and equitable substitute provision to effect
the original intent of the parties.

6.14.           Third Party Beneficiaries. Nothing contained in this Agreement,
expressed or implied, is intended to confer upon any Person or entity
(including, but not limited to any Additional Investors) other than the parties
hereto, any benefit right or remedies, except that the provisions of Sections
3.11, 5.1 and 5.2 shall inure to the benefit of the persons referred to in such
Sections.

 
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6.15.           Public Announcements. Each of the parties hereto will cooperate
with each other in the development and distribution of all news releases and
other public information disclosures with respect to the Transaction Documents
and any of the transactions contemplated hereby and thereby, including any
communications to the employees and customers of the Company and its
Affiliates.  Without limiting the foregoing, except as otherwise permitted in
the next sentence, no party hereto will make (and each party will use its best
efforts to ensure that its Affiliates and representatives do not make) any such
news release or public disclosure without first consulting with the other
parties hereto and, in each case, also receiving each other party’s consent
(which shall not be unreasonably withheld or delayed).  In the event a party
hereto is advised by its legal counsel that a particular disclosure is required
by Law, such party shall be permitted to make such disclosure but shall be
obligated to use its reasonable best efforts to consult with the other party
hereto and take its comments into account with respect to the content of such
disclosure before issuing such disclosure.

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

6.17.           No Recourse. This Agreement may only be enforced against the
named parties hereto.  All claims or causes of action that may be based upon,
arise out of or relate to this Agreement, or the negotiation, execution or
performance of this Agreement, may be made only against the entities that are
expressly identified as parties hereto or that are subject to the terms hereof,
and no past, present or future director, officer, employee, incorporator,
member, manager, partner, shareholder, Affiliate, agent, attorney or
representative of the Investor or any other party hereto (including any person
negotiating or executing this Agreement on behalf of a party hereto) shall have
any liability or obligation with respect to this Agreement or with respect to
any claim or cause of action, whether in tort, contract or otherwise, that may
arise out of or relate to this Agreement, or the negotiation, execution or
performance of this Agreement and the transactions contemplated hereby.

6.18.           Independent Nature of Investor’s Obligations.  The obligations
of the Investor under any Transaction Document are several and not joint with
the obligations of any Additional Investor, and the Investor shall not be
responsible in any way for the performance of the obligations of any Additional
Investor under any Transaction Document.

6.19.           Adjustments in Stock Numbers and Prices.  In the event of any
stock split, subdivision, dividend or distribution payable in shares of Common
Stock (or other securities or rights convertible into, or entitling the holder
thereof to receive directly or indirectly shares of Common Stock), combination
or other similar recapitalization or event occurring after the date hereof and
prior to Closing, each reference in any Transaction Document to a number of
shares or a price per share shall be deemed to be amended to appropriately
account for such event.

[Signature page follows]
 

 
59

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

 
HIGHLANDS BANKSHARES, INC.
                 
By:
       
Samuel L. Neese
     
Executive Vice President and Chief
   
   Executive Officer
           
[                                                      ]
                 
By:
       
Name:
     
Title:
                   
Number of Purchased Shares
               

[Signature Page to Securities Purchase Agreement]
 
60

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Exhibit A

ARTICLES OF AMENDMENT
 
TO THE
 
ARTICLES OF INCORPORATION
 
OF
 
HIGHLANDS BANKSHARES, INC.
 

 
 
1.
The name of the Corporation is Highlands Bankshares, Inc.

 
 
2.
Article II of the Corporation’s Amended and Restated Articles of Incorporation
shall be amended by adding a new Paragraph E to fix the preferences, limitations
and relative rights of the Corporation’s Series A Convertible Perpetual
Preferred Stock (the “Series A Preferred Stock”), as set forth in Exhibit
A attached hereto.

 
 
3.
Pursuant to Section 13.1-639 of the Virginia Stock Corporation Act (the “Act”),
the Amended and Restated Articles of Incorporation permit the Corporation’s
Board of Directors to amend the Articles of Incorporation in order to establish
the preferences, limitations and relative rights of one or more series of the
Corporation’s authorized class of Preferred Stock without the approval of the
Corporation’s shareholders.  The foregoing amendment was adopted on February 12,
2014 by the Corporation’s Board of Directors without shareholder approval
pursuant to such section of the Act.  The Corporation has not issued any shares
of the Series A Preferred Stock as of the date hereof.

 
 
4.
The foregoing amendment shall become effective when the Virginia State
Corporation Commission issues the certificate of amendment for such amendment.

 
[Remainder of Page Intentionally Left Blank]
 

A-1

 
 

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IN WITNESS WHEREOF, Highlands Bankshares, Inc. has caused these Articles of
Amendment to be signed by Samuel L. Neese, its Executive Vice President and
Chief Executive Officer, this __ day of April, 2014.
 

 

 
HIGHLANDS BANKSHARES, INC.
         
By:
       
Samuel L. Neese
     
Executive Vice President and
   
   Chief Executive Officer

 

 

 

 

 

 

A-2

 
 

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Exhibit A
 
Paragraph E.  Series A Convertible Perpetual Preferred Stock
 
Section 1.  Designation.  There is hereby created out of the authorized and
unissued shares of preferred stock of the Corporation a series of preferred
stock designated as the “Series A Convertible Perpetual Preferred Stock” (the
“Series A Preferred Stock”). The number of shares constituting such series shall
be 2,500,000. The Series A Preferred Stock shall have par value of $2.00 per
share.
 
Section 2.  Ranking.  The Series A Preferred Stock will rank subordinate and
junior to all future issuances of preferred stock other than those which, by
their respective terms, rank pari passu with or junior to the Series A Preferred
Stock, and shall rank pari passu with the Common Stock with respect to all terms
(other than voting, as set forth herein), including, the payment of dividends or
distributions, and payments and rights upon liquidation, winding up and
dissolution.
 
Section 3.  Definitions.
 
The following initially capitalized terms shall have the following meanings,
whether used in the singular or the plural:
 
(a)           “Affiliate” means, with respect to any Person, any other Person
that, directly or indirectly through one or more intermediaries, Controls, is
controlled by or is under common control with such Person, as such terms are
used in and construed under Rule 405 under the Securities Act of 1933, as
amended.
 
(b)           “Articles of Amendment” means these Articles of Amendment relating
to the Series A Preferred Stock, dated April __, 2014.
 
(c)            “Board of Directors” means the board of directors of the
Corporation.
 
(d)           “Business Day” means a day, other than a Saturday or Sunday, on
which banks in New York City are open for the general transaction of business.
 
(e)            “Common Stock” means the Corporation’s shares of common stock,
par value $0.625 per share.
 
(f)           “Corporation” means Highlands Bankshares, Inc., a Virginia
corporation.
 
(g)           “Dividends” has the meaning set forth in Section 4.
 
(h)           “Holder” means the Person in whose name the shares of the Series A
Preferred Stock are registered, which may be treated by the Corporation as the
absolute owner of the shares of Series A Preferred Stock for the purpose of
making payment and settling the related conversions and for all other purposes.
 
(i)           “Mandatory Conversion” has the meaning set forth in Section 6.
 
(j)           “Mandatory Conversion Date” has the meaning set forth in Section
6.
 
A-3
 

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(k)           “Notice of Conversion” has the meaning set forth in Section 6.
 
(l)           “Permissible Transfer” means a transfer by the Holder (i) to an
Affiliate of the Holder or to the Corporation, (ii) in a widespread public
distribution of Common Stock or Series A Preferred Stock of the Corporation,
(iii) in which no transferee (or group of Affiliated transferees) would, after
giving effect to such transfer, own 2% or more of any class of voting securities
of the Corporation, or (iv) to a transferee that would control more than a
majority of the voting securities of the Corporation (not including voting
securities such person is acquiring from the transferor).
 
(m)            “Person” means a legal person, including any individual,
corporation, estate, partnership, joint venture, association, joint-stock
company, limited liability company or trust.
 
(n)           “Reorganization Event” means (i) any consolidation, merger or
other similar business combination of the Corporation with or into another
Person, in each case pursuant to which the Common Stock will be converted into
cash, securities or other property of the Corporation or another Person; (ii)
any sale, transfer, lease or conveyance to another Person of all or
substantially all of the property or assets of the Corporation, in each case
pursuant to which the Common Stock will be converted into cash, securities or
other property of the Corporation or another Person; or (iii) any change,
including by capital reorganization, reclassification or otherwise (other than a
transaction resulting in an adjustment pursuant to Section 4 below), of the
Common Stock into securities including securities other than Common Stock.
 
(o)           “Series A Preferred Stock” has the meaning set forth in Section 1.
 
Section 4.  Dividends and Distributions; Adjustments for Combinations and
Divisions of Common Stock
 
(a)           Holders of Series A Preferred Stock will be entitled to receive,
when, as and if declared by the Board of Directors or a duly authorized
committee of the Board of Directors, out of funds legally available therefor,
non-cumulative dividends (“Dividends”) in the same per share amount as the
Dividends paid on a share of Common Stock, and no more.  No Dividends will be
paid on the Common Stock or any other class or series of capital stock ranking
with respect to Dividends pari passu with the Common Stock unless an identical
Dividend is paid at the same time on the Series A Preferred Stock; provided,
however, that if a stock Dividend is paid on Common Stock in Common Stock, the
Holders will be paid an equivalent stock Dividend payable solely in shares of
Series A Preferred Stock.  Dividends that are payable on Series A Preferred
Stock will be payable to the Holders of record of Series A Preferred Stock as
they appear on the stock register of the Corporation on the applicable record
date, as determined by the Board of Directors, which record date will be the
same as the record date for the equivalent Dividend of the Common Stock.  In the
event that the Board of Directors does not declare or pay any Dividends with
respect to shares of Common Stock, then the Holders will have no right to
receive any Dividends.
 
(b)           Subject to Section 8 below, in the event that the Corporation at
any time or from time to time will effect a division of the Common Stock into a
greater number of shares (by stock split, reclassification or otherwise than by
payment of a Dividend in Common Stock or in any right to acquire
 
A-4
 

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the Common Stock), or in the event the outstanding Common Stock will be combined
or consolidated, by reclassification, reverse stock split or otherwise, into a
lesser number of shares of the Common Stock, then the Series A Preferred Stock
will, concurrently with the effectiveness of such event, be proportionately
split, reclassified, combined, consolidated, reverse-split or otherwise, as
appropriate, such that the number of shares of Common Stock and Series A
Preferred Stock outstanding immediately following such event shall bear the same
relationship to each other as did the number of shares of Common Stock and
Series A Preferred Stock outstanding immediately prior to such event.
 
Section 5.  Liquidation.
 
(a)           In the event the Corporation voluntarily or involuntarily
liquidates, dissolves or winds up, the Holders at the time shall be entitled to
receive liquidating distributions per share of Series A Preferred Stock in an
amount equal to the amount the holder of such share of Series A Preferred Stock
would receive in respect of such share if such share had been converted into
Common Stock immediately prior to such liquidation, dissolution, or winding up
(assuming the conversion of all shares of Series A Stock at such time, without
regard to any limitations on conversion of the Series A Preferred Stock), plus
an amount equal to any authorized and declared but unpaid dividends thereon, to
and including the date of such liquidation, out of assets legally available for
distribution to the Corporation’s shareholders.
 
(b)           The Corporation’s consolidation or merger with or into any other
entity, the consolidation or merger of any other entity with or into the
Corporation, or the sale of all or substantially all of the Corporation’s
property or business will not constitute its liquidation, dissolution or winding
up.
 
Section 6.  Mandatory Conversion.
 
(a)           On the date a Holder transfers any shares of Series A Preferred
Stock to a non-Affiliate of the Holder in a Permissible Transfer (the “Mandatory
Conversion Date”), each such transferred share of Series A Preferred Stock will
automatically convert, immediately following such transfer and without any
further action on the part of any Holder, into one share of Common Stock (a
“Mandatory Conversion”).
 
(b)           No later than three (3) business days following any Mandatory
Conversion, the Holder of the converted shares shall provide the Corporation a
written notice of such conversion (a “Notice of Conversion”).  In addition to
any information required by applicable law or regulation, the Notice of
Conversion shall state (i) the number of shares of Common Stock to be issued in
respect of such conversion, (ii) the name in which shares of Common Stock to be
issued upon such conversion should be registered, and (iii) the manner in which
certificates of Series A Preferred Stock held by such Holder are to be
surrendered for issuance of certificates representing shares of Common
Stock.  As promptly as practicable following delivery of the Notice of
Conversion, with respect to any shares of Series A Preferred Stock as to which a
Mandatory Conversion shall have occurred, the Corporation shall issue and
deliver certificates representing shares of Common Stock to the Holder thereof
or such Holder’s designee upon presentation and surrender of the certificate
evidencing such Series A Preferred Stock to the Corporation and, if required,
furnishing appropriate endorsements and transfer documents and
 
A-5
 

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

 
 
the payment of all transfer and similar taxes, and, in the event that such
conversion is with respect to some, but not all, of the shares of Series A
Preferred Stock represented by the certificate surrendered, the Corporation
shall issue and deliver a certificate or certificate(s) representing the number
of shares of Series A Preferred Stock that were not converted to Common Stock.
 
(c)           The Person or Persons entitled to receive the Common Stock
issuable upon conversion of Series A Preferred Stock shall be treated for all
purposes as the record holder(s) of such shares of Common Stock and/or
securities as of the close of business on the Mandatory Conversion Date with
respect thereto. Notwithstanding anything herein to the contrary, in the event
that a Holder shall not by written notice designate the name in which shares of
Common Stock to be issued or paid upon conversion of shares of Series A
Preferred Stock should be registered or paid or the manner in which such shares
should be delivered, the Corporation shall be entitled to withhold issuance of
the Common Stock until such time as the Holder provides the required
information.
 
(d)           Shares of Series A Preferred Stock converted in accordance with
this Section 6 will resume the status of authorized and unissued preferred
stock, undesignated as to series and available for future issuance.
 
(e)           Prior to the close of business on the Mandatory Conversion Date
with respect to any share of Series A Preferred Stock, shares of Common Stock
issuable upon conversion thereof shall not be deemed outstanding for any
purpose, and the Holder thereof shall have no rights with respect to the Common
Stock (including voting rights) by virtue of holding such share of Series A
Preferred Stock.
 
(f)           All shares of Common Stock delivered upon conversion of the Series
A Preferred Stock shall be duly authorized, validly issued, fully paid and
non-assessable, free and clear of all liens, claims, security interests, charges
and other encumbrances other than those established by the Holder thereto.
 
Section 7.  Voting Rights.
 
(a)           Holders will not have any voting rights, including the right to
elect any directors, except (i) voting rights, if any, required by law and (ii)
voting rights described in this Section 7.
 
(i)           So long as any shares of Series A Preferred Stock are outstanding,
and subject to Section 8 herein, the vote or consent of the Holders of a
majority of the shares of Series A Preferred Stock at the time outstanding,
voting as a single class, given in person or by proxy, either in writing without
a meeting or by vote at any meeting called for the purpose, will be necessary
for effecting or validating any amendment, alteration or repeal (including by
means of a merger, consolidation or otherwise) of any provision of the
Corporation’s Articles of Incorporation (including these Articles of Amendment)
that would alter or change the rights, preferences or privileges of the Series A
Preferred Stock so as to affect them adversely;
 
provided, however, that any increase in the amount of the authorized preferred
stock, common stock or any securities convertible into preferred stock or the
creation and issuance, or an increase in the authorized or issued amount, of any
series of preferred stock or any securities convertible into preferred stock
ranking senior to, equally with and/or junior to the Series A Preferred Stock
with respect to the payment of dividends (whether such dividends are cumulative
or non-cumulative) and/or the distribution of assets upon the Corporation’s
liquidation, dissolution or winding up will not, in and of itself, be deemed to
adversely affect rights, preferences or privileges of the Series A Preferred
Stock and, to the fullest extent permissible by Virginia law, Holders will have
no right to vote solely by reason of such an increase, creation or issuance, so
long as the Series A Preferred Stock remains pari passu with the Common Stock.
 
A-6
 

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(b)           Notwithstanding the foregoing, Holders shall not have any voting
rights if, at or prior to the effective time of the act with respect to which
such vote would otherwise be required, all outstanding shares of Series A
Preferred Stock shall have been converted into shares of Common Stock.
 
(c)           If the Board of Governors of the Federal Reserve determines that
the Series A Preferred Stock is classified as “voting stock” for the purposes of
the Bank Holding Company Act, the Holders and the Corporation will make such
reasonable modifications to the voting rights in this Section 7 so that the
Series A Preferred Stock is no longer considered “voting stock.”
 
Section 8.  Reorganization Events.
 
(a)           So long as any shares of Series A Preferred Stock are outstanding,
if there occurs a Reorganization Event, then a Holder shall, effective as of the
consummation of such Reorganization Event, automatically receive for such Series
A Preferred Stock the type and amount of securities, cash and other property
receivable in such Reorganization Event by a Holder of the number of shares of
Common Stock into which the number of shares of Series A Preferred Stock held by
such Holder would then be convertible; provided that if upon receipt of such
securities, cash and other property, such Holder, together with all Affiliates
of the Holder, would own or control in the aggregate more than the
Reorganization Threshold of any class of voting securities of the Person
surviving such Reorganization Event or the parent company of such Person, as the
case may be, then, in lieu of any securities that would cause the Reorganization
Threshold to be exceeded, such Holder shall instead receive substantially
identical preference securities to the Series A Preferred (with voting and
conversion provisions similar to those contained in these Articles of Amendment)
of the Person surviving such Reorganization Event or the parent company of such
Person, as the case may be.  For purposes of this Section 8(a), the
“Reorganization Threshold” means the lesser of the proportionate amount of the
outstanding Common Stock of the Company held by the Holder immediately prior to
the Reorganization Event and 9.99%.
 
(b)           In the event that holders of shares of Common Stock have the
opportunity to elect the form of consideration to be received in such
transaction, the Holders of Series A Preferred Stock shall be entitled to
participate in such elections as if they had converted all of their Series A
Preferred Stock into Common Stock immediately prior to the election deadline.
 
A-7
 

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Section 9.  Reservation of Shares Issuable upon Conversion.  The Corporation
will at all times reserve and keep available out of its authorized but unissued
Common Stock solely for the purpose of effecting the conversion of the Series A
Preferred Stock such number of shares of Common Stock as will from time to time
be sufficient to effect the conversion of all outstanding Series A Preferred
Stock.
 
Section 10.  Maturity; Redemption.  The Series A Preferred Stock shall be
perpetual, unless converted in accordance with these Articles of Amendment.  The
Series A Preferred Stock will not be redeemable at the option of the Corporation
or any Holder at any time.  Notwithstanding the foregoing, nothing contained
herein shall prohibit the Corporation from repurchasing or otherwise acquiring
shares of Series A Preferred Stock in voluntary transactions with the
Holders.  Any shares of Series A Preferred Stock repurchased or otherwise
acquired may be cancelled by the Corporation and thereafter be reissued as
shares of any series of preferred stock of the Corporation.
 
Section 11.  Replacement Certificates.
 
(a)           The Corporation shall replace any mutilated certificate at the
Holder’s expense upon surrender of that certificate to the Corporation. The
Corporation shall replace certificates that become destroyed, stolen or lost at
the Holder’s expense upon delivery to the Corporation of satisfactory evidence
that the certificate has been destroyed, stolen or lost, together with any
indemnity that may be required by the Corporation.
 
(b)           The Corporation shall not be required to issue any certificates
representing the Series A Preferred Stock on or after the Mandatory Conversion
Date. In place of the delivery of a replacement certificate following the
Mandatory Conversion Date, the Corporation, upon delivery of the evidence and
indemnity described in clause (a) above, shall deliver the shares of Common
Stock pursuant to the terms of the Series A Preferred Stock formerly evidenced
by the certificate.
 
Section 12.  Miscellaneous.
 
(a)           All notices referred to herein shall be in writing, and, unless
otherwise specified herein, all notices hereunder shall be deemed to have been
given upon the earlier of receipt thereof or five Business Days after the
mailing thereof if sent by registered or certified mail (unless first-class mail
shall be specifically permitted for such notice under the terms of these
Articles of Amendment) with postage prepaid, addressed: (i) if to the
Corporation, to its office at 340 West Main Street, Abingdon, Virginia 24210,
Attention: Chief Executive Officer, (ii) if to any Holder, to such Holder at the
address of such Holder as listed in the stock record books of the Corporation or
(iii) to such other address as the Corporation or any such Holder, as the case
may be, shall have designated by notice similarly given.
 
(b)           The Corporation shall pay any and all stock transfer and
documentary stamp taxes that may be payable in respect of any issuance or
delivery of shares of Series A Preferred Stock or shares of Common Stock or
other securities issued on account of Series A Preferred Stock pursuant hereto
or certificates representing such shares or securities. The Corporation shall
not, however, be required to pay any such tax that may be payable in respect of
any transfer involved in the issuance or delivery of shares of Series A
Preferred Stock or Common Stock or other securities in a name other than that in
which the shares of Series A Preferred Stock with respect
 
A-8
 

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

 
 
to which such shares or other securities are issued or delivered were
registered, or in respect of any payment to any Person other than a payment to
the registered holder thereof, and shall not be required to make any such
issuance, delivery or payment unless and until the Person otherwise entitled to
such issuance, delivery or payment has paid to the Corporation the amount of any
such tax or has established, to the satisfaction of the Corporation, that such
tax has been paid or is not payable.
 
(c)           All payments on the shares of Series A Preferred Stock shall be
subject to withholding and backup withholding of tax to the extent required by
applicable law, subject to applicable exemptions, and amounts withheld, if any,
shall be treated as received by the holders thereof.
 
(d)           No share of Series A Preferred Stock shall have any rights of
preemption whatsoever under this Certificate of Amendment as to any securities
of the Corporation, or any warrants, rights or options issued or granted with
respect thereto, regardless of how such securities, or such warrants, rights or
options, may be designated issued or granted.
 
(e)           The shares of Series A Preferred Stock shall not have any voting
powers, preferences or relative, participating, optional or other special
rights, or qualifications, limitations or restrictions thereof, other than as
set forth herein or in the Articles of Incorporation or as provided by
applicable law.
 

A-9
 
 

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Exhibit B

1.           The Company and each Company Subsidiary is an entity duly
incorporated, validly existing and in good standing under the laws of the
Commonwealth of Virginia.
 
2.           The Company is duly registered with the Board of Governors of the
Federal Reserve System as a bank holding company under Section 5 of the BHC Act.
 
3.           The Bank is an insured depositary institution under the provisions
of the FDI Act, and the Bank’s deposit accounts are insured up to applicable
limits by the FDIC.
 
4.           The Company has the corporate power and authority to execute and
deliver, and to perform its obligations under, the Transaction Documents,
including, without limitation, to issue the Securities.
 
5.           Each of the Transaction Documents has been duly authorized and
executed by the Company and, assuming the due authorization, execution and
delivery by the other parties thereto, each of the Transaction Documents
constitutes a valid and binding agreement of the Company, enforceable against
the Company in accordance with its terms, except as the enforceability thereof
may be limited by (a) bankruptcy, insolvency, reorganization, moratorium,
fraudulent or voluntary conveyance or similar laws affecting the enforcement of
creditors’ rights generally, (b) general principles of equity (regardless of
whether enforceability is considered in an action at law or a suit in equity),
including the availability of equitable remedies, (c) procedural requirements of
law applicable to the exercise of creditors’ remedies and (d) the effect of
public policy on the enforceability of provisions relating to indemnification or
contribution.
 
6.           The execution and delivery by the Company of each of the
Transaction Documents, and the performance by the Company of its obligations
thereunder, including the issuance and sale of the Purchased Shares and the
issuance and reservation for issuance of the other Securities, do not and will
not:  (a) require any consent, approval, license or exemption by, order or
authorization of, or filing, recording or registration by the Company with any
Governmental Entity, other than those contemplated by Section 2.2(d)(3) of the
Purchase Agreement, or (b) result in any violation of the Articles of
Incorporation, Bylaws, applicable laws of the Commonwealth of Virginia,
applicable federal laws of the United States or any Material Contract.
 
7.           The issuance of the Purchased Shares has been duly authorized and
the Purchased Shares, when issued and paid for in accordance with the terms of
the Agreement and the Articles of Incorporation, will be duly and validly
issued, fully paid and non-assessable.
 
8.           Assuming the accuracy of the representations and warranties made by
the Investor in the Purchase Agreement, it is not necessary to register the
Purchased Shares under the Securities Act in connection with the offer, sale and
delivery of the Purchased Shares by the Company to the Investor in accordance
with the Purchase Agreement.
 
B-1
 

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9.           The Company’s authorized equity capitalization consists of
40,000,000 shares of Common Stock, and 10,000,000 shares of preferred stock, par
value $2.00 per share.
 
10.           The sale and issuance of the Purchased Shares will not be subject
to any preemptive rights, rights of first offer or similar rights of any Person
under the Articles of Incorporation, the Bylaws or any Material Contract.
 
11.           The Company is not an “investment company” or an entity
“controlled” by an “investment company,” as such terms are defined in the
Investment Company Act of 1940, as amended.

B-2
 
 

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