PURCHASE
AND ASSUMPTION AGREEMENT








dated as
of








September
24, 2008








between








CAPITAL
BANK





and





OMNI
NATIONAL BANK





TABLE OF
CONTENTS




ARTICLE
      I – CERTAIN DEFINITIONS
            1SECTION
      1.01
            Certain
      Definitions
            1SECTION
      1.02
            Accounting
      Terms
            10SECTION
      1.03
            Construction
      of Terms
            10ARTICLE
      II – PURCHASE AND SALE
            11SECTION
      2.01
            Purchase
      and Sale of Assets; Assumption of Liabilities
            11SECTION
      2.02
            Purchase
      Price
            11SECTION
      2.03
            Adjustments
      to Purchase Price
            12SECTION
      2.04
            Allocation
      of Consideration
            13SECTION
      2.05
            Sale
      and Transfer of Servicing and Escrows
            13SECTION
      2.06
            Assumption
      of IRA Deposits
            14SECTION
      2.07
            Loan
      Accounts Secured by Deposit Accounts
            14SECTION
      2.08
            Loans
      Reviewed Prior to Signing; Review of Post-Signing Loans; Purchaser’s Right
      to Reject Loans
            14ARTICLE
      III – REPRESENTATON AND WARRANTIES OR SELLER
            17SECTION
      3.01
            Corporate
      Organization and Authority
            17SECTION
      3.02
            No
      Conflict; Licenses and Permits; Compliances with Laws and
      Regulations
            17SECTION
      3.03
            Approvals
      and Consents
            17SECTION
      3.04
            Title
      to Assets
            18SECTION
      3.05
            Condition
      of Assets
            18SECTION
      3.06
            Deposits
            18SECTION
      3.07
            Contracts
            18SECTION
      3.08
            Litigation
      and Liabilities
            18SECTION
      3.09
            Compliance
      with Laws
            19SECTION
      3.10
            Regulatory
      Matters
            19SECTION
      3.11
            Absence
      of Certain Changes, Etc.
            19SECTION
      3.12
            Employment
      Matters; Employee Relations
            19SECTION
      3.13
            Employee
      Benefit Plans
            20SECTION
      3.14
            Books
      and Records
            20SECTION
      3.15
            Fiduciary
      Obligations
            20SECTION
      3.16
            Loans
            20SECTION
      3.17
            Taxes
            21SECTION
      3.18
            Utilities
      Complete
            21SECTION
      3.19
            Insurance
            21SECTION
      3.20
            Brokers
            21SECTION
      3.21
            Disclosure
            21ARTICLE
      IV – REPRESENTATIONS AND WARRANTIES OF PURCHASER
            22SECTION
      4.01
            Corporate
      Organization and Authority
            22SECTION
      4.02
            No
      Conflict; Licenses and Permits; Compliance with Laws and
      Regulations
            22SECTION
      4.03
            Approvals
      and Consents
            22




- i
-


SECTION
      4.04
            Regulatory
      Matters
            22SECTION
      4.05
            Financing
      Available
            23SECTION
      4.06
            Litagation
      and Undisclosed Liabilities
            23SECTION
      4.07
            Brokers
            23SECTION
      4.08
            Disclosure
            23ARTICLE
      V – COVENANTS OF THE PARTIES
            23SECTION
      5.01
            Access
      and Confidentiality
            23SECTION
      5.02
            Activity
      in the Ordinary Course
            24SECTION
      5.03
            Maintenance
      of Records
            26SECTION
      5.04
            Insurance;
      Risk of Loss
            26SECTION
      5.05
            Negotiable
      Instruments
            26SECTION
      5.06
            Customeres
            26SECTION
      5.07
            Conversion
            27SECTION
      5.08
            Real
      Property Matters; Real Property Leases
            27SECTION
      5.09
            Regulatory
      Approvals
            29SECTION
      5.10
            Delivery
      of the Loan Documents
            29SECTION
      5.11
            Collateral
      Assignments and Filing
            30SECTION
      5.12
            Interest
      Reporting and Withholding
            30SECTION
      5.13
            Change
      of Name
            30SECTION
      5.14
            Credit
      Insurance
            31SECTION
      5.15
            Overdrafts
            31SECTION
      5.16
            Taxes
      and Fees; Proration of Certain Expenses
            31SECTION
      5.17
            Employees
      and Employee Benefits
            32SECTION
      5.18
            Non-Solicitation
            33SECTION
      5.19
            Further
      Assurances
            34ARTICLE
      VI – CLOSING
            34SECTION
      6.01
            Closign
      Date and Place
            34SECTION
      6.02
            Conditions
      to Obligations of Purchaser
            34SECTION
      6.03
            Conditions
      to Obligations of Seller
            37SECTION
      6.04
            Other
      Documents
            38ARTICLE
      VII – TERMINATION
            39SECTION
      7.01
            Termination
            39SECTION
      7.02
            Liability
      for Termination
            39SECTION
      7.03
            Procedure
      Upon Termination
            40ARTICLE
      VIII – INDEMNIFICATION
            40SECTION
      8.01
            Indemnification
            40SECTION
      8.02
            Calculation
      of Losses
            41SECTION
      8.03
            Threshhold
            41SECTION
      8.04
            Survival
      of Indemnification Obligations
            41SECTION
      8.05
            Terms
      and Conditions of Indemnification; Resolution of Conflicts
            42ARTICLE
      IX – MISCELLANEOUS
            43SECTION
      9.01
            Assignment
            43





- ii
-


SECTION
      9.02
            Binding
      Affect
            43SECTION
      9.03
            Public
      Notice
            43SECTION
      9.04
            Notices
            43SECTION
      9.05
            Governing
      Law
            44SECTION
      9.06
            Entire
      Agreement
            44SECTION
      9.07
            Counterparts
            44SECTION
      9.08
            Headings
            45SECTION
      9.09
            Waiver
      and Amendment
            45SECTION
      9.10
            Expenses
            45SECTION
      9.11
            Severability
            45Exhibit
      A – Loans Reviewed Prior to Signing


- iii
-


THIS PURCHASE AND ASSUMPTION AGREEMENT
is dated as of September 24, 2008, between CAPITAL BANK, a North Carolina
state-chartered bank (“Purchaser”),
and OMNI NATIONAL BANK, a bank chartered under the laws of the United States
(“Seller”).
 
 RECITALS
 
 WHEREAS, Seller maintains branches at
the following North Carolina locations:  (i) 225 Green Street,
Suite 101, Fayetteville, North Carolina; (ii) 929 South McPherson Church
Road, Fayetteville, North Carolina; (iii) 4841 Ramsey Street, Fayetteville,
North Carolina; and (iv) 88 North Fayetteville Street, Parkton, North
Carolina (the “Branches”); and
 
 WHEREAS, Purchaser desires to assume
and purchase from Seller, and Seller desires to assign and sell to Purchaser,
certain of Seller’s liabilities and assets, respectively, allocated by Seller to
the Branches.
 
 NOW, THEREFORE, in consideration of
their mutual promises and obligations and intending to be legally bound hereby,
the parties agree as follows:
 
 
 ARTICLE
I
 
 CERTAIN
DEFINITIONS
 
 SECTION 1.01  Certain
Definitions.  As used in this Agreement, the terms below shall
have the meanings set forth.
 
 “Accounting
Records” means Seller’s general ledger with respect to the Branches and
the subsidiary ledgers and supporting schedules that support the general ledger
balances.
 
 “Accrued
Expenses” means the accrued and unpaid expenses appearing as a Liability
on a Closing Statement or a Final Closing Statement.
 
 “Accrued
Interest” means, as of the referenced date and (i) with respect to
Deposits, interest which is accrued on such Deposits and not yet posted to the
related Deposit accounts or paid to the depositor as of such date and
(ii) with respect to Loans, interest which is accrued on such Loan and not
yet paid as of such date.
 
 “Affiliate”
of a person means any person directly or indirectly controlling or controlled by
or under direct or indirect common control with such person.
 
 “Agreement”
means this Purchase and Assumption Agreement, including all schedules, exhibits,
and addenda as modified, amended, or extended from time to time.
 
 “Allocation”
has the meaning specified in Section 2.04.
 
 “Applicable
Employees” has the meaning specified in Section 5.17(a).
  - 1
-
 “Assets”
means the (i) Furniture, Fixtures, and Equipment, (ii) Improvements,
(iii) Cash on Hand, (iv) Prepaid Expenses, (v) Real Property,
(vi) Records, (vii) Loans, the servicing rights thereto, any
guarantees thereof and Seller’s interest in any collateral for the Loans,
(viii) Seller’s benefits and rights under Safe Deposit Agreements, and
(ix) Seller’s benefits and rights under Assumed Contracts, and all of
Seller’s right, title and interest under the Real Property Leases; provided,
however, Assets do not include any deferred Tax assets, refunds for Taxes
relating to the period prior to the Closing Date, and prepaid Taxes; provided,
further, Assets do not include any credit card receivables or accounts, any
goodwill, or any right to the use of any trade name, trademark, or service mark,
if any, of Seller or any of its Affiliates.  The allocation provisions
of Section 5.16(c) shall apply for the purposes of determining to what extent
any Taxes, deferred Tax assets, and Tax refunds relate to the period prior to
the Closing Date.
 
 “Assumed
Contracts” means all service or similar contracts, including personal
property leases (but excluding the Real Property Leases), that are in effect as
of the Closing Date, are related to the Branches and the Assets, and are validly
assigned to Purchaser.
 
 “Assumed
Deposits” means all Deposits existing on the Closing Date, together with
all Accrued Interest thereon as of the Closing Date.
 
 “ATM”
means each automated teller machine owned or leased by Seller and located at the
Branches and the three (3) automated teller machines owned or leased by Seller
elsewhere in Cumberland County, North Carolina.
 
 “Bank
Merger Act” means Section 18(c) of the Federal Deposit Insurance
Act, as amended.
 
 “Benefit
Plan” means “employee benefit plan,” as defined in Section 3(3) of
ERISA, and any other employee benefit arrangement or payroll practice,
including, without limitation, any bonus plan, equity or equity-based
compensation, or deferred compensation arrangement, stock purchase, severance
pay, sick leave, vacation pay, paid time off, salary continuation for
disability, hospitalization, medical insurance, life insurance, scholarship
program, and any “employee pension plan”, as defined in Section 3(2) of
ERISA.
 
 “Bill of
Sale” has the meaning specified in Section 6.02(f).
 
 “Branches”
has the meaning specified in the recitals hereto.
 
 “Business
Day” means a day on which Seller and Purchaser are open for business in
the State of North Carolina which is not a Saturday or a Sunday.
 
 “Cash on
Hand” means, as of the referenced date, all petty cash, vault cash,
teller cash, and prepaid postage maintained at the Branches, including at
ATMs.
 - 2
-
 “Close of
Business” means 2:00 p.m. Eastern Time (or such other time as the parties
may agree to) on the Closing Date.
 
 “Closing”
has the meaning specified in Section 6.01.
 
 “Closing
Date” means the date on which the Closing occurs.
 
 “Closing
Statement” has the meaning specified in Section 2.02(b).
 
 “Code”
means the Internal Revenue Code of 1986, as amended.
 
 “Commissioner”
refers collectively to the North Carolina State Banking Commission and the North
Carolina Commissioner of Banks.
 
 “Conversion”
has the meaning specified in Section 5.07.
 
 “Conversion
Brochure” has the meaning specified in Section 5.07.
 
 “Delivery
Records” means all Records other than transaction tickets and records for
closed accounts, but may be copies of original Records.
 
 “Deposit
Premium” means six percent (6%).
 
 “Deposits” means,
as of any date, all deposit liabilities of Seller booked, maintained, or
primarily serviced at the Branches, which constitute “deposits” for purposes of
the Federal Deposit Insurance Act, 12 U.S.C. § 1813, including all
uncollected items included in depositors’ balances (including Overdrafts as
provided in Section 5.15), merchant accounts, any Accrued Interest, and any
Deposits in IRAs not excluded under Section 2.06(b), together with Seller’s
rights and responsibilities under any customer agreement evidencing or relating
thereto, but excluding (i) deposits in accounts that have been in an overdrawn
status for more than thirty (30) days at the Closing, (ii) deposits held in the
name of Seller or any of its Affiliates, (iii) Outpost Deposits, (iv) deposits
excluded under Section 2.06(b), and (v) deposits excluded under Section
2.07.  Seller and Purchaser shall use commercially reasonable efforts
to identify deposits excluded from Deposits hereunder prior to the Closing
Date.
 
 “Employees”
means any employee employed by Seller on the Closing Date at the
Branches.
 
 “Encumbrances”
means all mortgages, deeds of trust, claims, options, rights of first refusal,
charges, liens, encumbrances, easements, limitations, restrictions, commitments,
security interests, pledges, or other similar charges, liabilities, or rights,
whether accrued, absolute, contingent, or otherwise.
 
 “Environmental
Laws” means: (i) all federal, state, and local statutes, regulations,
ordinances, orders, decrees, and similar provisions having the force or effect
of law relating to or imposing liability, responsibility, or standards of
conduct applicable to environmental, health, or
  - 3
-
 safety
conditions and/or Hazardous Materials affecting the Real Property and the Leased
Real Property (including, without limitation, the Comprehensive Environmental
Response, Compensation and Liability Act, the Superfund Amendment and
Reauthorization Act, the Federal Insecticide, Fungicide and Rodenticide Act, the
Hazardous Materials Transportation Act, the Resource Conservation and Recovery
Act, the Clean Water Act, the Clean Air Act, the Toxic Substances Control Act,
the Oil Pollution Act, the Coastal Zone Management Act, any “Superfund” or
“Superlien” law, the North Carolina Oil Pollution and Hazardous Substances
Control Act, the North Carolina Solid Waste Management Act, and the North
Carolina Water and Air Resources Act, including any amendments thereto from time
to time); and (ii) all common law concerning public health and safety, worker
health and safety, noise, odor, wetlands, indoor air, contamination,
pollution or protection of the environment, including without limitation all
standards of conduct and bases of obligations relating to the presence, use,
production, generation, handling, transportation, treatment, storage, disposal,
distribution, labeling, reporting, testing, processing, discharge, release,
threatened release, control, or clean-up of any Hazardous
Substances.
 
 “Environmental
Survey” has the meaning specified in Section 5.08(b).
 
 “ERISA”
means the Employee Retirement Income Security Act of 1974, as
amended.
 
 “Extension
of Credit” has the meaning specified in Section 2.08(b).
 
 “Extensions
of Credit To Be Repurchased” has the meaning specified in Section
2.08(i).
 
 “Federal
Funds Rate” on any day means the per annum rate of interest (rounded
upward to the nearest 1/100 of 1%) which is the weighted average of the rates on
overnight federal funds transactions arranged on such day or, if such day is not
a banking day, the previous banking day, by federal funds brokers computed and
released by the Federal Reserve Bank of Richmond (or any successor) in
substantially the same manner as such Federal Reserve Bank currently computes
and releases the weighted average it refers to as the “Federal Funds Effective
Rate” at the date of this Agreement.
 
 “FDIC”
means the Federal Deposit Insurance Corporation.
 
 “Final
Closing Statement” has the meaning specified in Section
2.03.
 
 “Final
Settlement Payment” has the meaning specified in
Section 2.03.
 
 “Furniture,
Fixtures, and Equipment” means all furniture, appliances, fixtures, and
equipment, including ATMs, trade fixtures, telephone systems, safe deposit boxes
(exclusive of contents), vaults, and supplies (excluding any items consumed or
disposed of, but including new items acquired or obtained in the ordinary course
of business, through the Closing Date) that are located at the Branches, but
excluding signage or other advertising or blank paper stock, forms, or supplies
bearing Seller’s corporate logos, trade names, or trademarks,
security
  - 4
-
 equipment,
computers and computer software, branch automation equipment, and branch
communications equipment.
 “GAAP”
means United States generally accepted accounting principles, as in effect from
time to time.
 
 “Green
Street Branch” means Seller’s Branch at 225 Green Street, Suite 101,
Fayetteville, North Carolina.
 
 “Hazardous
Substance” means any materials, substances, wastes, chemical substances,
or mixtures presently listed, defined, designated, or classified as hazardous,
toxic, or dangerous, or otherwise regulated, under any Environmental Law,
whether by type or quantity.
 
 “Identified
Loan” means any loan listed for review, other than a Jointly Underwritten
Extension of Credit, that is subject to any of the following
defects:
 
 (i)           loan
documents material to the enforceability of the loan are missing;
 
 (ii)           the
loan was not originated or has not been administered in compliance in all
material respects with applicable laws;
 
 (iii)           loan
documents relating to the loan are not legal, valid, and binding;
 
 (iv)           Seller’s
rights in any collateral securing a loan are not perfected or enforceable, or
the priority of such rights are not as reflected in the books and records of
Seller, and the absence of any such right of Seller in the collateral securing
the loan would have a material impact on Purchaser’s ability, in the event of
default, to realize upon such collateral the value ascribed
thereto;
 
 (v)           the
loan is in non-accrual status on Seller’s books, the collateral securing the
loan has been repossessed, or collection efforts have been instituted or claim
and delivery, or foreclosure proceedings have been filed, or insurance on the
loan collateral has been force-placed; or
 
 (vi)           Purchaser,
in its reasonable discretion, reasonably considers the loan to be inconsistent
with its credit policies or procedures.
 
 “Improvements”
means all improvements to the Real Property associated with the Branches and
with the Leased Real Property which shall have been purchased, installed, or
constructed, and used in connection with the ownership, operation, or
maintenance of the Branches or such real property.
 
 “Indemnified
Parties” has the meaning specified in Section 8.01(b).
 - 5
-
 “Indemnifying
Party” has the meaning specified in Section 8.05(a).
 
 “Initial
Review Period” has the meaning specified in
Section 2.08(b).
 
 “Intrusive
Testing” has the meaning specified in Section 5.08(b).
 
 “IRA”
means an “individual retirement account” or similar Deposit account established
in accordance with the provisions of Section 408 of the Code for which
Seller acts as custodian or trustee, but as to which (i) Seller may not exercise
investment discretion and (ii) Seller’s customer for whom the IRA is established
may not direct securities investment while Seller acts as custodian or
trustee.
 
 “IRS”
means the Internal Revenue Service.
 
 “Information”
has the meaning specified in Section 5.01(b).
 
 “Jointly
Underwritten Extension of Credit” has the meaning specified in Section
2.08(h).
 
 “Knowledge”
means, with respect to any particular fact or other matter and (i) with
respect to any individual, (a) that such individual is actually aware of
such fact or matter or (b) that a prudent individual could be expected to
discover or otherwise become aware of such fact or matter in the course of
conducting a reasonable investigation regarding the accuracy of any
representation or warranty contained in this Agreement, and (ii) with
respect to any entity, that any individual who is serving as a director or
officer of such entity (or in any similar executive capacity) has Knowledge of
such fact or other matter (as set forth in (i) above).
 
 “Leased
Real Property” means (i) the real property at the Parkton Branch and (ii)
the real property at the Green Street Branch.
 
 “Liabilities”
means, except as otherwise specifically provided herein, (i) the Assumed
Deposits and all terms and agreements relating to the Assumed Deposits,
(ii) Seller’s obligations with respect to the Loans, the servicing of the
Loans, and the collateral for the Loans, (iii) Seller’s obligations under
the Assumed Contracts and the Property Leases (to the extent assumed by
Purchaser), (iv) Seller’s obligations under the Safe Deposit Agreements,
(v) Seller’s obligations to provide customer services from and after the
Closing Date in connection with the Assets and the Assumed Deposits, (vi) any
fee or expense adjustment required to be shown as a Liability in accordance with
Section 5.16(b), and all liabilities from the Purchaser’s operations of the
Branches after the Closing Date; provided, however, that Liabilities shall not
include (a) any liability in respect of letters of credit, travelers’ checks,
money orders, cashier’s checks, official checks, or consignment of U.S.
government bonds or (b) any liability for Taxes for any period prior to the
Closing Date.  The allocation provisions of Section 5.16(c) shall
apply for purposes of determining to what extent a liability for Taxes exists
with respect to a period prior to the Closing Date.
 
 “Litigation
Conditions” has the meaning specified in Section
8.05(b).
  - 6
-
 “Loan
Documents” means all Records with respect to a Loan, including, without
limitation, applications, notes, security agreements, deeds of trust, mortgages,
loan agreements, including building and loan agreements, guarantees, sureties
and insurance policies (including title insurance policies), flood hazard
certifications, and all modifications, waivers, and consents relating to any of
the foregoing.
 
 “Loans”
means, subject to Sections 2.08(f) and (g), all loans (including Overdraft Loans
and loan commitments, but excluding the interest of any participants in such
Loans) which are listed as “Loans that Purchaser Intends to Purchase (subject to
the terms and conditions of the Agreement)” in Exhibit A to this Agreement, as
updated to reflect loans to be acquired by Purchaser as of the Closing Date as
provided in Section 2.08.
 
 “Loan
Value” means, as of the referenced date, (i) with respect to any Loan
other than a Jointly Underwritten Extension of Credit, (a) the outstanding
principal balance of such Loan as of such date, net of any participant’s
interest therein, less (b) two percent (2%) of the greater of (x) the amount
described in clause (a) and (y) the aggregate loan commitment with respect to
such Loan as of such date (whether or not drawn), net of any participant’s
interest therein, and (ii) with respect to any Jointly Underwritten Extension of
Credit, the outstanding principal balance of such Extension of Credit as of such
date, net of any participant’s interest therein.  For the avoidance of
doubt, late charges and fees shall not constitute principal, interest, or
commitment for the purposes of this definition.
 
 “Losses”
means losses, liabilities, damages, expenses, costs, and reasonable legal fees
and disbursements, collectively.
 
 “Material
Adverse Effect” means a material adverse effect on the condition,
financial or otherwise, or results of operation of the Branches, the validity of
this Agreement or the transactions contemplated in it, or on the ability of
Seller or Purchaser to consummate timely the transactions contemplated
hereby.
  “Material
Defect” means (i) the existence of any Encumbrance (other than a
Permitted Lien), title imperfection, or title irregularity with respect to the
Real Property, its access, or any appurtenances, easements of rights, or the
existence of any fact or condition that constitutes a breach of Seller’s
representations and warranties contained in Section 3.04, in any such case
that will materially affect Purchaser’s use of the Real Property for the purpose
of the operation of a branch bank or materially affects the value or
marketability of the Real Property, (ii) the encroachment by an improvement on
the Real Property onto other property or onto any easement, a violation of any
setback requirement, the encroachment of an improvement on any other property
onto the Real Property, or the existence of a zoning or other land use
restriction that in each such case does not permit use of the Real Property as a
branch banking facility as a permitted use without grandfathering or variance
and without site plan review or the construction of any additional improvements,
(iii) the existence of any structural defect or state of disrepair in the
improvements on the Real Property of the Branches and the Leased Real Property
(including any equipment, fixtures, or other components related thereto) that
Purchaser reasonably believes would cost greater than Twenty-Five Thousand
Dollars ($25,000) to repair or correct, or (iv) the
  - 7
-
 existence
of facts or circumstances relating to the Branches reflecting that (a) there
likely has been a discharge, disposal, release, threatened release, or emission
by any person of any Hazardous Substance on, from, under, at, or relating to the
Real Property and the Leased Real Property, or (b) that any action has been
taken or not taken, or a condition or event likely has occurred or exists, with
respect to the Real Property and the Leased Real Property, which constitutes or
would constitute a material violation of any Environmental Law, as to which
Purchaser reasonably believes, in either case (a) or (b), based on the advice of
legal counsel or other consultants expert in the area on which they are
expressing an opinion, that Purchaser could potentially become responsible or
liable for assessment, removal, remediation, monetary damages, or civil,
criminal, or administrative penalties or other corrective action and in
connection with which the amount of expense or liability which it would likely
incur or for which it would likely become responsible or liable at any time
following consummation of the transactions contemplated by this Agreement would
be likely to exceed Twenty-Five Thousand Dollars ($25,000).
 “New
Employee” has the meaning specified in Section 5.17(a).
 
 “Outpost
Deposit” means, as of any date, each deposit liability of Seller booked,
maintained, or primarily serviced at the Branches, which constitutes a “deposit”
for purposes of the Federal Deposit Insurance Act, 12 U.S.C. § 1813,
including the items enumerated in the definition of “Deposits”, to a customer
(i) that maintains a deposit account booked, maintained, or primarily serviced
at a branch of Seller other than the Branches, and (ii) whose chief executive
office or primary place of business is not located in a market served by one of
the Branches.
 
 “Overdraft”
means the amount by which any Deposit account at the Branches is overdrawn as of
the Closing Date on account of checks, drafts, or other items that have been
presented against such account for payment against insufficient funds and that,
under applicable rules of the Federal Reserve Bank or other check collection
rules or procedures, cannot be returned and charged back to the presenting or
collecting bank as a matter of right.
 
 “Overdraft
Loans” means unsecured overdraft Loans, including negotiable order of
withdrawal line of credit accounts, relating to the Assumed Deposits, as of the
Close of Business, plus Accrued Interest, which do not exceed the applicable
credit limit and are linked to an open account.
 
 “Parkton
Branch” means Seller’s Branch at 88 North Fayetteville Street, Parkton,
North Carolina.
 
 “Permitted
Liens” means Encumbrances (i) securing any Liability, (ii) properly
recorded in any title reports, opinions, or insurance binders delivered or made
available to Purchaser prior to the execution of this Agreement, (iii) for Taxes
or assessments, special or otherwise, either not due and payable or being
contested in good faith and subject to escrow or reserves, or (iv) consisting of
easements, rights of way, restrictions, covenants of record, matters that would
be shown on an accurate survey, claims and covenants not shown on record, and
any other defect or exception to title or Encumbrance which do not individually
or in the aggregate impair or interfere with the present and continued use and
operation of the affected property.
 - 8
-
 “Policies”
has the meaning specified in Section 3.19.
 
 “Post-Closing
Review Period” has the meaning specified in
Section 2.08(i).
 
 “Prepaid
Expenses” means the prepaid expenses appearing as an Asset in respect of
the Branches on a Closing Statement or a Final Closing Statement, as the case
may be, that (i) have been recorded in accordance with GAAP, (ii) are
not intercompany or interoffice accounts, and (iii) provide future benefit
to the business conducted at the Branches by the Purchaser.
 
 “Property
Examination” has the meaning specified in Section 5.08(b).
 
 “Purchase
Price” has the meaning specified in Section 2.02(a).
 
 “Purchaser”
has the meaning specified in the first paragraph of this Agreement.
 
 “Purchaser
Indemnified Parties” has the meaning specified in Section
8.01(a).
 
 “Real
Property” means the real property at the Branches, including any
Improvements thereon, but excluding the Leased Real Property.
 
 “Real
Property Lease Examination” has the meaning specified in Section
5.08(e).
 
 “Real
Property Leases” means (i) that certain lease agreement for the Parkton
Branch, dated January 1, 2003, among Berline Bodenheimer, Dorothy Bodenheimer
and Seller, as amended through the date hereof, and (ii) that certain commercial
lease agreement for the Green Street Branch, dated as of March 3, 2008, between
Allison Holdings, LLC, and Seller, as amended through the date
hereof.
 
 “Records”
means all records and original documents in Seller’s possession (including
records maintained electronically) which pertain to and are utilized by Seller
to administer, reflect, monitor, evidence, or record information respecting the
business or conduct of the Branches (including transaction tickets through the
Closing Date and all records of closed accounts located in the Branches) and all
such records and original documents respecting (i) the Assumed Contracts,
(ii) the Assets, (iii) the Assumed Deposits, (iv) the Liabilities, and
(v) the Loans, the servicing rights to the Loans, and the collateral for
the Loans (including the Loan Documents).
 “Regulatory
Approvals” means all approvals, permits, authorizations, waivers, or
consents of governmental or regulatory agencies or authorities necessary or
appropriate to permit consummation of the transactions contemplated herein and
includes, without limitation, the following: (i) approval of regulatory
agencies required under the Bank Merger Act; (ii) approvals of the
Commissioner under applicable law; and (iii) expiration of the waiting
period provided for in the Bank Merger Act without commencement of any action
challenging Purchaser’s
  - 9
-
 acquisition
of the Branches hereunder by the United States Department of Justice or any
other person.
  “Retained
Liabilities” has the meaning specified in Section 2.01(b).
 
 “Safe
Deposit Agreements” means any agreements, including rental agreements,
related to the safe deposit boxes, if any, located in the Branches.
 
 “Seller”
has the meaning specified in the first paragraph of this Agreement.
 
 “Seller
Indemnified Parties” has the meaning specified in Section
8.01(b).
 
 “Settlement
Payment” has the meaning specified in Section 2.02(c).
 
 “Study
Period” has the meaning specified in Section 5.08(b).
 
 “Supplemental
Review Period” has the meaning specified in Section 2.08(c).
 
 “Tax”
or “Taxes”
refers to all federal, state, local, or foreign taxes including, without
limitation, income, gross receipts, windfall profits, severance, property,
production, sales, use, excise, transfer, license, franchise, employment,
withholding, or similar taxes or amounts required to be withheld and paid over
to any government in respect of any tax or governmental fee or charge, including
any interest, penalties, or additions to tax on the foregoing.
 
 “Threshold”
has the meaning specified in Section 8.03.


SECTION
1.02  Accounting
Terms.  To the extent that any accounting terms used in this
Agreement are not defined in Section 1.01 or elsewhere herein, they shall
be defined under GAAP.
  SECTION
1.03  Construction of
Terms.  In using and applying the various terms, provisions and
conditions in this Agreement, the following rules of construction shall apply
except where the context clearly indicates that a different meaning is intended:
(a) the terms “hereby”, “hereof”, “herein”, “hereunder”, and any similar words,
refer to this Agreement; (b) as the context requires, words in the masculine
gender mean and include correlative words of the feminine and neuter genders,
and words importing the singular number include the plural number, and vice
versa; (c) words importing persons include firms, companies, associations,
general partnerships, limited partnerships, limited liability partnerships,
limited liability limited partnerships, limited liability companies, trusts,
business trusts, corporations, and other legal organizations, including public
and quasi-public bodies, as well as individuals; (d) the use of the terms
“including” or “included in”, or the use of examples generally, are not intended
to be limiting, but shall mean, without limitation, the examples provided and
other terms included within the description for which examples are given that
are not listed, whether similar or dissimilar; (e) the phrase “costs and
expenses”, or variations thereof, shall include, without limitation, reasonable
attorneys’ fees and fees of legal assistants, and reasonable fees
of
  - 10
-
 accountants,
engineers, surveyors, appraisers, and other professionals or experts, and all
references to attorneys’ fees or fees of legal assistants, or fees of
accountants, engineers, surveyors, appraisers, or other professionals or experts
shall mean reasonable fees; (f) as the context requires, the word “and” may have
a joint meaning or a several meaning and the word “or” may have an inclusive
meaning or an exclusive meaning; (g) any reference contained in this Agreement
to specific statutes or laws shall include any successor statutes or laws, as
the case may be; and (h) this Agreement shall not be applied, interpreted, and
construed more strictly against a person because that person or that person’s
attorney drafted this Agreement in whole or in part.
 ARTICLE
II
 
 PURCHASE
AND SALE
 
 SECTION
2.01  Purchase and Sale of Assets;
Assumption of Liabilities.  (a) Subject to the terms and
conditions set forth in this Agreement, at the Closing, Purchaser shall
(i) purchase the Assets and (ii) assume the Liabilities, and Seller
shall sell, assign, transfer, convey, and deliver to Purchaser, free and clear
of all Encumbrances, except for Permitted Liens, all of Seller’s right, title,
and interest in and to, and obligations with respect to, the Assets and the
Liabilities.
 
 (b)           Notwithstanding
anything in this Agreement to the contrary, except as  expressly
provided in (a) above, Purchaser shall not assume or have any liability for, and
Purchaser does not undertake to assume or discharge, any liability or obligation
of Seller of any kind, character or description, whether known or unknown,
absolute or contingent, accrued or unaccrued, disputed or undisputed, liquidated
or unliquidated, secured or unsecured, joint or several, due or to become due,
vested or unvested, executory, determined, determinable or otherwise, and
whether or not the same is required to be accrued in the financial statements of
Seller (the “Retained
Liabilities”), and Seller shall retain all such Retained
Liabilities.
 
 (c)           The
sales, purchases, transfers, assumptions, leases, and other acts made or taken
at the Closing will be made or taken to be effective as of the Close of
Business, notwithstanding the time of the Settlement Payment.  Seller
shall be responsible for the Branches and the operation thereof until the Close
of Business.  The Close of Business shall be the relevant cutoff time
for purposes of the proration described in Section 5.16(b), and any amounts
to be paid in accordance with Section 5.16(b)shall be paid
contemporaneously with the Final Settlement Payment.
 
 SECTION
2.02  Purchase
Price.  (a) The purchase price for the Assets shall be an
amount (the “Purchase
Price”) computed
as follows:
 
 (i)           an
amount equal to the Deposit Premium multiplied by the average daily balance of
the Deposits for the period of ten (10) consecutive Business Days ending on the
third (3rd) Business Day prior to the Closing Date; plus
 - 11
-
 (ii)           the
aggregate amount of Cash on Hand as of the Closing Date; plus
 
 (iii)           the
Accrued Interest on the Loans as of the Closing Date; plus
 
 (iv)           the
net book value of the Real Property as of the Closing Date; plus
 
 (v)           the
aggregate Loan Value of the Loans as of the Closing Date; plus
 
 (vi)           the
aggregate net book value of the Assets, excluding those items listed in (ii)
through (v), as reflected on the books of Seller as of the Closing
Date.
 
 (b)           On
the Closing Date, Seller shall deliver to Purchaser a closing statement prepared
by Seller in accordance with its customary accounting principles, policies and
methods and estimating the computation of the Purchase Price for the Branches as
of the Closing based on the Assets and Liabilities as of a time no earlier than
the end of the third (3rd) Business Day prior to the Closing Date (the “Closing
Statement”).
 
 (c)           On
the first (1st) Business Day following the Closing Date and based on the
preliminary computations set forth in the Closing Statement, Seller shall
transfer to Purchaser cash in an amount (each, a “Settlement
Payment”) equal
to the amount of (i) the sum of the Assumed Deposits plus Accrued Expenses minus
(ii) the Purchase Price.
 
 SECTION
2.03  Adjustments to Purchase
Price.  Within sixty (60) days after the Closing, Seller
shall examine its books and records and determine the accuracy of the
information set forth in the Closing Statement and deliver to Purchaser an
updated closing statement setting forth the actual computation of the Purchase
Price for the Branches (the “Final
Closing Statement”).  Without
limiting the generality of the foregoing, the Final Closing Statement shall
include an update to address any Extensions of Credit To Be
Repurchased.  The Final Closing Statement shall become final and
binding on Purchaser and Seller unless Purchaser gives written notice to Seller
of its actual or potential disagreement with respect to any item included in
such Final Closing Statement before 5:00 p.m. on the tenth (10th) Business
Day after its delivery to Purchaser.  Seller and Purchaser shall use
their reasonable best efforts to resolve the disagreement or concern during the
ten (10) Business Day period following receipt by Seller of such
notice.  If the disagreement or concern is not resolved during such
ten (10) Business Day period, then the dispute shall be referred to an
independent accounting firm of nationally recognized standing proposed by Seller
(and approved by Purchaser unless good cause exists for disapproval) that has
not represented any of the parties hereto within the preceding two (2) years,
and such Final Closing Statement shall be modified, if required, by the
independent accounting firm, and thereupon, such Final Closing Statement shall
become final and binding.  The cost of the independent accounting firm
shall be shared and paid by Purchaser and/or Seller, each of whom will pay an
amount equal to the aggregate amount of such accounting firm’s fees and expenses
multiplied by a fraction, the numerator of which is the portion of all contested
amounts not awarded to such party and the denominator of which is the aggregate
of all contested amounts, each as determined by such accounting
firm.  Once the Final Closing Statement has become final and binding,
and in the event that such Final Closing Statement differs from
the
  - 12
-
 Closing
Statement, the consideration hereunder shall be adjusted in accordance with such
Final Closing Statement as follows: (a) if the sum of the Purchase Price and the
Settlement Payment for the Branches exceeds the Assumed Deposits set forth in
the Final Closing Statement for the Branches, Purchaser shall pay Seller an
amount equal to such difference; or (b) if the Assumed Deposits set forth in the
Final Closing Statement for the Branches exceed the sum of the Purchase Price
and the Settlement Payment for the Branches, Seller shall pay Purchaser an
amount equal to such difference (a “Final
Settlement Payment”).  In either
case, interest at the Federal Funds Rate from the Closing Date to, but excluding
the date of the Final Settlement Payment, shall be included in the Final
Settlement Payment.  Any Final Settlement Payment shall be paid within
ten (10) Business Days after the Final Closing Statement has become final and
binding.  The Final Settlement Payment shall be made in cash by wire
transfer of immediately available funds on or before 4:00 p.m. local time on the
date of payment to an account specified by the receiving party.  The
Final Settlement Payment shall, for all purposes, be considered an adjustment to
the Purchase Price.
 
 SECTION
2.04  Allocation of
Consideration.  Purchaser and Seller agree that the
consideration payable hereunder at the Closing shall be allocated among the
Assets, tangible and intangible, on the basis of an allocation to be mutually
agreed by Purchaser and Seller (the “Allocation”).  Purchaser and
Seller agree (a) to timely file a mutually acceptable IRS Form 8594 or
other appropriate IRS form in accordance with the Allocation (and an amended IRS
Form 8594 or other appropriate IRS form, to the extent required to reflect the
Final Closing Statement) and (b) that the Allocation shall be binding on
Purchaser and Seller for all Tax reporting purposes, except that either party
may change any such report in the event of a dispute with any taxing authority
or take any other step to settle or resolve such a dispute; provided, however,
that a party shall not make any such change without first obtaining the consent
of the other party, which consent shall not be delayed or withheld
unreasonably.
 
 SECTION
2.05  Sale
and Transfer of Servicing and Escrows.  (a) The Loans
shall be sold on a servicing released basis:  (i) as of the Closing
Date, all rights, obligations, liabilities, and responsibilities with respect to
the servicing of the Loans will be assumed by Purchaser; and (ii) Seller shall
be discharged and indemnified by Purchaser from all liability with respect to
servicing of the Loans on and after the Closing Date.
 
 (b)           As
of the Closing Date, Purchaser will assume, and agrees to undertake and
discharge, any and all obligations of the holder and servicer of any Loans that
are mortgage Loans as such obligations may relate to the escrow, maintenance of
escrow, and payments from escrow of moneys paid by or on account of the
applicable mortgagor.  As soon as reasonably practicable after the
Closing Date, and in any event on or before the tenth (10th) Business Day
after the Closing Date, Seller shall remit by wire transfer of immediately
available funds to Purchaser any and all funds held in escrow that were
collected and received pursuant to a mortgage Loan for the payment of taxes,
assessments, hazard insurance premiums, primary mortgage insurance policy
premiums, if applicable, or comparable items prior to the Closing Date plus any
Accrued Interest.  Seller makes no warranties or representations of
any kind or nature as to the sufficiency of such sum to discharge any
obligations with respect to mortgage Loans.
 - 13
-
 SECTION
2.06  Assumption of IRA
Deposits.  (a) With respect to Assumed Deposits in IRAs,
Seller will use commercially reasonable efforts, and will cooperate with
Purchaser in taking any action reasonably necessary or appropriate, to
accomplish or accompany the appointment of Purchaser as successor custodian or
trustee or the delegation to Purchaser of Seller’s authority and responsibility
as custodian of all such Assumed Deposits in IRAs, including, but not limited
to, sending to the depositors thereof appropriate notices, cooperating with
Purchaser in soliciting consents from such depositors, executing assignments
reasonably satisfactory to Purchaser, and filing any appropriate applications
with applicable regulatory authorities.  If any such delegation is
made to Purchaser, Purchaser will perform all of the duties so delegated and
comply with the terms of Seller’s agreement with the depositor of the Assumed
Deposits affected thereby.
 
 (b)           If,
notwithstanding the foregoing, as of the Closing Date, Purchaser shall be unable
to retain deposit liabilities in respect of an IRA or the account holder has
notified Seller or Purchaser of the account holder’s objection to Purchaser
acting as custodian or trustee of such IRA, such deposit liabilities will not be
Deposits for purposes of this Agreement.
 
 SECTION
2.07  Loan
Accounts Secured by Deposit Accounts.  In the event that a loan
account at one of the Branches is secured by a deposit account that is allocated
by Seller to another of Seller’s branches that is not a Branch, or where a
Deposit account at a Branch secures a loan account assigned by Seller to another
of Seller’s branches that is not a Branch, Seller either will cause both
accounts to be assigned to the Branch or will assign the account at the Branch
to another of Seller’s branches that is not a Branch.  If an account
is reassigned from a Branch under this Section, it will not be a Deposit or a
Loan for purposes of this Agreement.  Reassignment of an account to or
from a Branch will be done only upon the approval of Purchaser, which shall not
be unreasonably withheld.  Seller shall make the adjustments described
in this Section no later than thirty (30) days prior to the Closing
Date.  In the event that Seller fails to make a reassignment called
for in this Section prior to the Closing Date, Seller and Purchaser will enter
into appropriate agreements under which the holder of any such deposit or
Deposit securing such a loan owned by the other will undertake appropriate
measures to protect the security interest of the other.
 
 SECTION
2.08  Loans
Reviewed Prior to Signing; Review of Post-Signing Loans; Purchaser’s Right to
Reject Loans.  (a) Exhibit A hereto
(i) lists all loans made by Seller (and guarantees related thereto) on or
prior to June 30, 2008 that have been reviewed by Purchaser and
(ii) categorizes such loans in one (1) of the following three (3)
classes:  (A) loans that Purchaser intends to purchase (subject
to the terms and conditions of this Agreement); (B) Identified Loans; and
(C) loans that Purchaser will not purchase.
 
 (b)           On
or prior to October 15, 2008, Seller shall deliver to Purchaser a listing of (i)
loans (and any guarantees related thereto) and (ii) any renewals of or
modifications to any loans previously reviewed by Purchaser (each such loan,
renewal or modification, an “Extension
of Credit”), in each case that were made or entered into after June 30,
2008 and on or prior to September 30, 2008.  During the period
beginning on the date Purchaser receives such listing and ending on the tenth
(10th) Business Day after such date (the “Initial
Review Period”),
Seller shall afford to the officers and authorized representatives of Purchaser,
subject to Seller’s normal
  - 14
-
 security
requirements, access to all documents relating to such Extensions of Credit
necessary for Purchaser to make a reasonable investigation of such Extensions of
Credit and any collateral therefor.  Purchaser shall notify Seller in
writing of the existence of any additional Identified Loans no later than ten
(10) Business Days following the expiration of the Initial Review
Period.  Promptly following such notification, Purchaser will update
(and deliver to Seller a copy of) Exhibit A to reflect
the appropriate categorization of the loans reviewed by Purchaser during the
Initial Review Period.
 
 (c)           On
or prior to November 5, 2008, Seller shall deliver to Purchaser a listing of all
Extensions of Credit that were made or entered into after September 30, 2008 and
on or prior to October 31, 2008.  During the ten (10) Business Day
period beginning on the date Purchaser receives the listing of Extensions of
Credit pursuant to the immediately preceding sentence (the “Supplemental
Review Period”),
Seller shall afford to the officers and authorized representatives of Purchaser,
subject to Seller’s normal security requirements, access to all documents
relating to such Extensions of Credit necessary for Purchaser to make a
reasonable investigation of such Extensions of Credit and any collateral
therefor.  Purchaser shall notify Seller in writing of the existence
of any additional Identified Loans no later than ten (10) Business Days
following the expiration of the Supplemental Review Period.  Promptly
following such notification, Purchaser will update (and deliver to Seller a copy
of) Exhibit A
to reflect the appropriate categorization of the loans reviewed by Purchaser
during the Supplemental Review Period.
 
 (d)           Each
listing of Extensions of Credit delivered by Seller to Purchaser pursuant to
subsections (b) and (c) above shall specify, with respect to each Extension of
Credit listed, whether such Extension of Credit is (i) a renewal of or
modification to a loan previously reviewed by Purchaser, (ii) a new loan made to
a Person with whom one of the Branches has an existing lending relationship,
i.e. the borrower under another loan previously reviewed by Purchaser, or (iii)
a new loan made to a Person with whom none of the Branches has an existing
lending relationship, i.e. a borrower not previously reviewed by
Purchaser.
 
 (e)           Notwithstanding
subsections (b) and (c) above, Seller shall not be required to provide access to
or to disclose information where such access or disclosure would violate or
prejudice the legal rights of any customer or employee or attorney-client
privilege, or would be contrary to law, rule, regulation, or any legal or
regulatory order or process or any fiduciary duty or binding agreement entered
into prior to the date of this Agreement.
 
 (f)           At
any time prior to the date for notification to customers of the assignment of
the Loans pursuant to applicable law, Seller may, in its sole discretion,
attempt to cure to Purchaser’s reasonable satisfaction any defect identified by
Purchaser with respect to an Identified Loan.  If Seller cures to
Purchaser’s reasonable satisfaction each defect so identified by Purchaser with
respect to any Identified Loan, such Identified Loan shall subsequently be
listed on Exhibit
A as a Loan to be purchased by Purchaser and shall be purchased by
Purchaser.  If Seller does not cure to Purchaser’s reasonable
satisfaction each defect so identified by Purchaser with respect to any
Identified Loan, such Identified Loan shall not subsequently be listed on Exhibit A as other
than an Identified Loan, shall not be purchased by Purchaser, and shall not
constitute a Loan for purposes of this Agreement.
 - 15
-
 (g)           Notwithstanding
anything to the contrary in this Agreement, the Purchaser shall not purchase any
loan (other than a Jointly Underwritten Extension of Credit) (i) ninety
(90) days or more past due as to principal or interest as of the Closing Date,
(ii) in connection with which the obligor has filed a petition for relief under
the United States Bankruptcy Code, or otherwise has indicated an inability or
refusal to pay the loan as it becomes due, prior to the Closing, (iii) to a
borrower that to Seller’s Knowledge is deceased, as reflected in Records
relating to such loan, (iv) in which Seller participates with another lender as
of the Closing Date, except as specifically offered by Seller and accepted by
Purchaser, or (v) excluded pursuant to Section 2.07.  No loan
described in the immediately preceding sentence shall constitute a Loan for
purposes of this Agreement.
 
 (h)           During
the period beginning on November 1, 2008, and ending on the Closing Date or the
earlier termination of this Agreement, Seller shall promptly notify Purchaser of
each Extension of Credit proposed to be made or entered into after such date and
booked at a Branch.  If Purchaser notifies Seller that Purchaser has
approved such proposed Extension of Credit, the parties shall cooperate in order
to jointly underwrite such proposed Extension of Credit, and Seller shall use
commercially reasonable efforts to make or enter into such proposed Extension of
Credit prior to the Closing Date on the terms approved by
Purchaser.  Each such proposed Extension of Credit made or entered
into prior to the Closing Date on the terms approved by Purchaser shall be a
“Jointly
Underwritten Extension of Credit”.
 
 (i)           On
the Closing Date, Seller shall update (and deliver to Purchaser a copy of) Exhibit A to list and
categorize each Jointly Underwritten Extension of Credit as a loan that
Purchaser intends to purchase (it being understood that such categorization
shall be subject to subsequent change to the extent provided in clause (C)(x)
below).  During the ten (10) Business Days following the Closing Date
(the “Post-Closing
Review Period”), Seller shall afford to the officers and authorized
representatives of Purchaser, subject to Seller’s normal security requirements,
access to all documents relating to the Jointly Underwritten Extensions of
Credit necessary for Purchaser to make a reasonable investigation thereof and
any collateral therefor.  No later than ten (10) Business Days
following the expiration of the Post-Closing Review Period, Purchaser shall (A)
notify Seller of any Jointly Underwritten Extension of Credit with respect to
which Purchaser has identified a defect described in clause (i), (ii), (iii) or
(iv) of the definition of “Identified Loan”, (B) notify Seller of any loan
(other than a Jointly Underwritten Extension of Credit) described in subsection
(g) above (the Jointly Underwritten Extensions of Credit and the loans referred
to in preceding clauses (A) and (B), collectively, the “Extensions of Credit To Be
Repurchased”) and (C) update (and deliver to Seller a copy of) Exhibit A reflecting
the categorization of (x) each Jointly Underwritten Extension of Credit reviewed
by Purchaser during the Post-Closing Review Period as either (1) a Jointly
Underwritten Extension of Credit that Purchaser will purchase or (2) a Jointly
Underwritten Extension of Credit that Purchaser will not purchase (based solely
on its status as an Extension of Credit To Be Repurchased) and (y) each other
loan previously categorized as a loan that Purchaser intends to purchase as
either (1) the same or (2) a loan that Purchaser will not purchase (based solely
on its status as an Extension of Credit To Be Repurchased).
  - 16
-
 (j)           Promptly
following its receipt from Purchaser of the notices and updated copy of Exhibit A required
pursuant to subsection (i) above, Seller shall repurchase each Extension of
Credit To Be Repurchased for an amount equal to the Loan Value thereof plus
Accrued Interest thereon as of the date of repurchase.


ARTICLE
III
 
 REPRESENTATIONS
AND WARRANTIES OF SELLER
 
 Seller
represents and warrants as follows:
 
 SECTION
3.01  Corporate Organization and
Authority.  Seller is a bank duly organized, validly existing,
and in good standing under the laws of the United States and has the requisite
power and authority to conduct the business now being conducted at the Branches,
to accept and maintain the Assumed Deposits, and to own the
Assets.  Seller has the requisite corporate power and authority and
has taken all corporate action necessary in order to execute and deliver this
Agreement and to consummate the transactions contemplated
hereby.  This Agreement is a valid and binding agreement of Seller
enforceable in accordance with its terms, subject to bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium, and similar laws of general
applicability relating to or affecting creditors’ rights, and to general equity
principles.
 
 SECTION
3.02  No
Conflict; Licenses and Permits; Compliance with Laws and
Regulations.  The execution, delivery, and performance of this
Agreement by Seller does not, and will not, violate any provision of its charter
or by-laws or, subject to the receipt of the Regulatory Approvals, violate or
constitute a breach of, or default under, any law, rule, regulation, judgment,
decree, ruling, or order of any court, government, or governmental agency to
which Seller is subject.  The execution, delivery, and performance of
this Agreement by Seller does not, and will not, violate or constitute a breach
of, or default under, any agreement or instrument of Seller, or to which Seller
is subject or is a party or by which Seller is otherwise bound, or to which the
Branch is subject or to which the Assets, Assumed Deposits, or Assumed Contracts
(except for any required consents under Assumed Contracts in respect of the
transactions herein contemplated) are subject, which violation, breach, or
default, individually or in the aggregate, could reasonably be expected to
result in a Material Adverse Effect.  Seller has all material
licenses, franchises, permits, certificates of public convenience, orders, and
other authorizations of all foreign, federal, state, and local governments and
governmental authorities necessary for the lawful conduct of its business at the
Branches as now conducted, and all such authorizations are valid and in good
standing and are not subject to any proceedings for suspension, modification, or
revocation.
 
 SECTION
3.03  Approvals and
Consents.  Except as required to obtain the Regulatory
Approvals, no notices, reports, or other filings are required to be made by
Seller with, nor are any consents, registrations, approvals, permits, or
authorizations required to be obtained by Seller from, any governmental or
regulatory authorities in connection with the execution and delivery of this
Agreement by Seller and the consummation of the transactions contemplated hereby
by Seller.
 - 17
-
 SECTION
3.04  Title
to Assets.  As of the Closing, Seller will have good, valid and
marketable title to, or the legal right to use, each of the Assets, except for
Assets that are leases under which Seller is the lessee, in each case subject to
no Encumbrance or restriction on transfer, except for Permitted
Liens.  With respect to Assets that are leases under which Seller is
the lessee, including the Real Property Leases, as of the Closing, Seller will
have a valid and assignable leasehold interest in the property covered by the
leases and, with respect to the Real Property Leases, insurable leasehold title
to the Parkton Branch and the Green Street Branch.
 
 SECTION
3.05  Condition of
Assets.  All of the Furniture, Fixtures, and Equipment,
including, without limitation, the Branches’ ATMs, included in the Assets are in
good operating or working condition and good repair (normal wear and tear
excepted) and free from any material defect.  All of the Branches’
buildings, structures, fixtures and improvements are structurally sound, in good
repair (normal wear and tear excepted), and usable and adequate for their
intended purpose and to conduct the business of the Branches as it is now being
conducted.
 
 SECTION
3.06  Deposits.  Seller
is an “insured institution” as defined in the Federal Deposit Insurance Act and
applicable regulations thereunder.  The Deposits of each depositor at
the Branches are insured by the FDIC to the maximum amount provided by law, all
deposit insurance premiums due from Seller to the FDIC have been paid in full in
a timely fashion, and, to the Knowledge of Seller, no proceedings have been
commenced or are contemplated by the FDIC or otherwise to terminate such
insurance.  The Deposits (a) are genuine and enforceable obligations
of Seller and have been acquired and maintained in compliance with all
applicable laws, including, without limitation, the Truth in Savings Act and
regulations promulgated thereunder; (b) were acquired in the ordinary course of
Seller’s business; and (c) are not subject to any Encumbrances that are superior
to the rights of persons shown on the records delivered to Purchaser indicating
the owners of such Deposits, other than claims against such Deposit owners, such
as state and federal tax liens, garnishments, and other judgment claims, which
have matured or may mature into claims against the respective
Deposits.  Seller has provided Purchaser with a list setting forth the
name, address, telephone number (if available), account number, and account
balance of each Deposit account holder at the Branches as of the date
hereof.
 
 SECTION
3.07  Contracts.  Each
Assumed Contract constitutes a valid and binding obligation of Seller (subject
to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium, and
similar laws of general applicability relating to or affecting creditors’
rights, and to general equity principles), and there does not exist, with
respect to Seller’s obligations thereunder, any default, or event or condition
which constitutes, or after notice or passage of time or both would constitute,
a default on the part of Seller under any Assumed Contract.  Each
lease relating to Furniture, Fixtures, and Equipment used in the Branches is
current, and all rents, expenses, and charges payable by Seller have been paid
or accrued in accordance with the terms thereof.  No consent is
required from any party to an Assumed Contract for Seller’s assumption thereof,
except as listed in Schedule 3.07.
 
 SECTION
3.08  Litigation and
Liabilities.  There are no actions, suits, or proceedings
pending or, to Seller’s Knowledge, threatened, against Seller, or obligations or
liabilities
  - 18
-
 (whether
accrued, contingent, or otherwise), or facts or circumstances that could
reasonably be expected to result in any claims against or obligations or
liabilities of Seller that, individually or in the aggregate, could reasonably
be expected to have a Material Adverse Effect.
 
 SECTION
3.09  Compliance With
Laws.  To Seller’s Knowledge, Seller’s business at the Branches
has been conducted in material compliance with all federal, state, and local
laws, regulations and ordinances applicable thereto, including, without
limitation, informational reporting, truth in lending, truth in savings,
consumer credit laws and regulations, currency transaction reporting, and
Environmental Laws.
 
 SECTION
3.10  Regulatory
Matters.  There are no pending, or, to the Knowledge of Seller,
threatened, disputes or controversies between Seller and any federal, state, or
local governmental authority, except for such disputes and controversies as
could not reasonably be expected to result in a Material Adverse
Effect.  To Seller’s Knowledge, there is nothing related to Seller,
its Affiliates or their respective operations that would prevent the obtainment
of the Regulatory Approvals and any other approvals or authorizations necessary
to consummate the transaction described herein.
 
 SECTION
3.11  Absence of Certain Changes,
Etc.  Except in connection with the transactions contemplated
hereby, since December 31, 2006, Seller’s business at the Branches has been
conducted only in the ordinary and usual course, and there has not been any
material adverse change in the condition (financial or otherwise), properties,
business, or results of operations of the Branches, or any development or
combination of developments which, individually or in the aggregate, could
reasonably be expected to result in any such change.
 
 SECTION
3.12  Employment Matters; Employee
Relations.  (a) Seller has delivered to Purchaser a true,
complete and accurate list of all persons employed by Seller at each Branch as
of the date of this Agreement, including those on leave of absence (medical,
family, military, personal or other), disability, layoff and vacation, together
with title, date of hire, compensation of each and, for purposes of Benefit Plan
accrual calculations, date of birth.
 
 (b)           Seller
(i) has paid in full to or accrued on behalf of all of its employees at the
Branches all wages, salaries, commissions, bonuses, fees and other direct
compensation for all labor or services rendered, including all wages, salaries,
commissions, bonuses, fees and other direct compensation for all labor or
services performed by them and all vacation pay, sick pay, severance pay and
other amounts promised to the extent required by law or its existing policies or
practices, and (ii) is in compliance in all material respects with all
applicable federal, state and local laws, statutes, rules and regulations with
regard to employment and employment practices, terms and conditions, and wages
and hours and other compensation matters; and no person has, to the Knowledge of
Seller, asserted that Seller is liable in any amount for any arrearages in wages
or employment taxes or for any penalties for failure to comply with any of the
foregoing.
 
 (c)           There
is no action, suit or proceeding by any person pending or, to the Knowledge of
Seller, threatened against Seller (or its employees), involving employment
discrimination, harassment, wrongful discharge or similar claims relating in any
way to the Branches or any of Seller’s employees at the
Branches.  Seller is not a party to or bound by any
  - 19
-
 collective
bargaining agreement with any of the employees of the Branches, any labor union
or any other collective bargaining unit or organization.  There is no
pending or, to Seller’s Knowledge,  threatened labor dispute, work
stoppage or strike involving a Branch or any of Seller’s employees at a Branch,
or any pending or, to Seller’s Knowledge, threatened proceeding in which it is
asserted that Seller has committed an unfair labor practice, and, to Seller’s
Knowledge, there is no activity involving it or any of the employees of the
Branches seeking to certify a collective bargaining unit or engaging in any
other labor organization activity.
 
 SECTION
3.13  Employee Benefit
Plans.  There is no Encumbrance outstanding upon any of the
Assets pursuant to Section 412(n) of the Code in favor of any Benefit
Plan.  There is no Encumbrance outstanding upon any of the Assets
pursuant to Section 4068 of ERISA in favor of the Pension Benefit Guaranty
Corporation.  None of the Assets has been provided as security for any
Benefit Plan maintained or contributed to by Seller or its Affiliates pursuant
to Section 401(a)(29) of the Code.  Seller and its Affiliates have
never had any past, present or future obligation or liability to contribute to
any “multiemployer plan,” as defined in Section 3(37) of ERISA.
 
 SECTION
3.14  Books
and Records.  The books and records of Seller relating to the
Branches, the Assets and the Liabilities, including the Accounting Records
related to the Branches, are complete and correct in all respects and have been
maintained in accordance in all respects with good business
practices.  The Accounting Records have been prepared in accordance
with all applicable laws and GAAP consistently applied throughout the periods
involved.  The Accounting Records fairly present in all material
respects the financial position of Seller related to the Branches, the Assets
and the Liabilities as of the date thereof, and the results of operations
related to the Branches, the Assets and the Liabilities for the periods referred
to therein.  Seller does not have any material liabilities, whether
absolute or contingent, direct or indirect, that relate to the Branches, the
Assets or the Liabilities and are not reflected or provided for in the
Accounting Records.
 
 SECTION
3.15  Fiduciary
Obligations.  Other than with respect to IRAs, Seller has no
trust or fiduciary relationship or obligations in respect of any of the Assumed
Deposits or in respect of any other Assets or Liabilities.
 
 SECTION
3.16  Loans.  With
respect to each Loan:  (a) such Loan was solicited and originated in
compliance with all applicable requirements of federal, state, and local laws
and regulations in effect at the time of such solicitation and origination, and
there was no fraud on the part of Seller with respect to the origination of any
Loan; (b) each note evidencing a Loan and any related security instrument
(including, without limitation, any guaranty or similar instrument) constitutes
a valid and legally binding obligation of the obligor or guarantor thereunder,
enforceable in accordance with its terms, subject to bankruptcy, insolvency,
fraudulent transfers, reorganization, moratorium, and similar laws of general
applicability relating to or affecting creditors’ rights, and to general equity
principles; and (c) no claims, counterclaims, set-off rights, or other rights
exist, nor do the grounds for any such claim, counterclaim, set-off rights, or
other rights exist, with respect to such Loan which could impair the
collectibility thereof.
 - 20
-
 SECTION
3.17  Taxes.  With
respect to the Assumed Deposits, Seller is in compliance with the law and IRS
regulations relative to (a) obtaining from depositors of the Assumed
Deposits, executed IRS Forms W-8 and W-9 and (b) reporting of
interest.  There are no liens for Taxes allocated to or imposed on
Seller on any of the Assets, and, to the Knowledge of Seller, there is no basis
for the assertion of any such liens.  Seller has paid when due all
Taxes in respect of the Assets.
 
 SECTION
3.18  Utilities
Complete.  Reasonable and adequate utility services, including
sewer, water, gas, electric power, and telephone service, as applicable, are
available to the Branches.
 
 SECTION
3.19  Insurance.  Seller
has in effect with respect to each Branch a “financial institutions bond” and
policies of general liability, casualty, employee fidelity, errors and omissions
and other property and liability insurance (the “Policies”).  Seller
has delivered to Buyer true, correct and complete copies of the
Policies.  The Policies provide coverage in such amounts and against
such liabilities, casualties, losses or risks as is required by applicable law
or regulation; and, in the judgment of management of Seller, the insurance
coverage provided under the Policies is reasonable and adequate in all respects
for the Branches.  Each of the Policies is in full force and effect
and is valid and enforceable in accordance with its terms, and is underwritten
by an insurer of recognized financial responsibility that is qualified to
transact business in North Carolina; and Seller has taken all requisite actions
(including the giving of required notices) under each such Policy to preserve
all rights thereunder with respect to all matters.  Seller is not in
default under the provisions of, has not received notice of cancellation or
nonrenewal of or any premium increase on, and has no Knowledge of any failure to
pay any premium on or any inaccuracy in any application for, any
Policy.  There are no pending claims with respect to the Branches or
any Assets under any Policy, and Seller has no Knowledge of any facts or of the
occurrence of any event that is reasonably likely to result in any such
claim.  Seller has not made any claims on its employee fidelity bonds
with respect to the Branches during the three (3) years preceding the date of
this Agreement.
 
 SECTION
3.20  Brokers.  Seller
has not employed any broker or agent in connection with the transactions
contemplated by this Agreement, except Sandler O’Neill & Partners,
L.P.
 
 SECTION
3.21  Disclosure  (a) No
representation or warranty or other statement made by Seller in connection with
the transactions contemplated hereby contains any untrue statement or omits to
state a material fact necessary to make any of them, in light of the
circumstances in which it was made, not misleading.
 
 (b)           Seller
does not have Knowledge of any fact that has specific application to the Assets,
the Assumed Deposits or Seller (other than general economic or industry
conditions) and that may cause a Material Adverse Effect on the Branches, the
Assets or the Assumed Deposits that has not been set forth in this Agreement or
any schedule hereto.
 - 21
-
 ARTICLE
IV
 
 REPRESENTATIONS
AND WARRANTIES OF PURCHASER
 
 Purchaser
represents and warrants as follows:
 
 SECTION
4.01  Corporate Organization and
Authority.  Purchaser is a bank duly organized, validly
existing, and in good standing under the laws of North
Carolina.  Purchaser has the requisite corporate power and authority
and has taken all corporate action necessary in order to execute and deliver
this Agreement, to consummate the transactions contemplated hereby, to accept
and maintain the Assumed Deposits, to own the Assets, and to operate the
Branches.  This Agreement is a valid and binding agreement of
Purchaser enforceable in accordance with its terms, subject to bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium, and similar laws of
general applicability relating to or affecting creditors’ rights, and to general
equity principles.
 
 SECTION
4.02  No
Conflict; Licenses and Permits; Compliance with Laws and
Regulations.  The execution, delivery, and performance of this
Agreement by Purchaser does not, and will not, violate any provision of its
charter or by-laws or, subject to the receipt of the Regulatory Approvals,
violate or constitute a breach or contravention of, or default under, any law,
rule, regulation, order, judgment, decree, or filing of any government,
governmental authority, or court to which Purchaser is subject.  The
execution, delivery, and performance of this Agreement by Purchaser does not,
and will not, violate or constitute a breach of, or default under, any agreement
or instrument of Purchaser, or by which Purchaser is otherwise bound, which
violation, breach, or default, individually or in the aggregate, could
reasonably be expected to result in a Material Adverse Effect.  On the
Closing Date, Purchaser shall have all material licenses, franchises, permits,
certificates of public convenience, orders, and other authorizations of all
foreign, federal, state, and local governments and governmental authorities
necessary for the lawful conduct of its business at the Branches purchased by
Purchaser hereunder.
 
 SECTION
4.03  Approvals and
Consents.  Except as required to obtain the Regulatory
Approvals, no notices, reports, or other filings are required to be made by
Purchaser with, nor are any consents, registrations, approvals, permits, or
authorizations required to be obtained by Purchaser from, any governmental or
regulatory authorities in connection with the execution and delivery of this
Agreement by Purchaser and the consummation of the transactions contemplated
hereby by Purchaser.
 
 SECTION
4.04  Regulatory
Matters.  (a) There are no pending or, to the Knowledge of
Purchaser, threatened, disputes or controversies between Purchaser or any of its
Affiliates and any federal, state, or local governmental
authority.  To Purchaser’s Knowledge, there is no reason, other than
market concentration in the relevant markets of the Branches, why the Regulatory
Approvals and, to the extent necessary to consummate the transaction described
herein, any other approvals, authorizations, filings, registrations, and notices
might be delayed or might not be obtained.
 - 22
-
 (b)           Purchaser
has at least a “satisfactory” rating under the Community Reinvestment Act of
1977, and is (and on a pro forma basis giving effect to the transaction
contemplated by this Agreement will be) at least “adequately capitalized,” as
these quoted terms are defined for purposes of the Federal Deposit Insurance
Act.
 
 (c)           Purchaser
is not a party to any written order, decree, agreement, or memorandum of
understanding with, or commitment letter or similar submission to, any federal
or state governmental agency or authority charged with the supervision or
regulation of depository institutions or engaged in the insurance of deposits,
nor has Purchaser been advised by any such regulatory authority that such
authority is contemplating issuing or requesting (or is considering the
appropriateness of issuing or requesting) any such order, decree, agreement,
memorandum or understanding, commitment letter, or submission, in each case
which order, decree, agreement, memorandum of understanding, commitment letter,
or submission could reasonably be expected to result in a Material Adverse
Effect.
 
 SECTION
4.05  Financing
Available.  Not later than the Closing Date, Purchaser will
have available sufficient cash or other liquid assets or financing pursuant to
binding agreements or commitments which may be used to fund the transactions
contemplated by this Agreement, and Purchaser’s ability to consummate the
transactions contemplated by this Agreement is not contingent on raising any
equity capital, obtaining specific financing, consent of any lender, or any
other matter.
 
 SECTION
4.06  Litigation and Undisclosed
Liabilities.  There are no actions, suits, or proceedings
pending or, to Purchaser’s Knowledge, threatened, against Purchaser, or
obligations or liabilities (whether accrued, contingent, or otherwise), or facts
or circumstances that could reasonably be expected to result in any claims
against or obligations or liabilities of Purchaser that, individually or in the
aggregate, could reasonably be expected to have a Material Adverse
Effect.
 
 SECTION
4.07  Brokers.  Purchaser
has not employed any broker or agent in connection with the transactions
contemplated by this Agreement, except McColl Partners.
 
 SECTION
4.08  Disclosure.  No
representation or warranty or other statement made by Purchaser in connection
with the transactions contemplated hereby contains any untrue statement or omits
to state a material fact necessary to make any of them, in light of the
circumstances in which it was made, not misleading.
 
 
 ARTICLE
V
 
 COVENANTS
OF THE PARTIES
  SECTION
5.01  Access
and Confidentiality.  (a) Between the date of this
Agreement and the Closing Date, Seller shall afford to Purchaser and its
respective officers, employees, agents, and representatives full access to the
properties, books, records, contracts, documents, files (including Loan files),
and other information of or relating to the Branches, the Assets,
the
  - 23
-
 Liabilities,
the Assumed Contracts, and the Assumed Deposits upon reasonable advance notice
to the President of Seller during normal business hours; provided, however, that
any inspection shall be conducted in a manner that does not unreasonably
interfere with Seller’s normal business operations or its relations with its
customers.  Seller shall cause its personnel at the Branches and its
personnel having managerial responsibility for the Branches to be reasonably
available during normal business hours, to an extent not disruptive of ongoing
operations, to provide information and assistance in connection with Purchaser’s
investigation of matters relating to the Branches, the Assets, the Liabilities,
the Assumed Contracts, and the Assumed Deposits and to familiarize Purchaser
with basic policies and operational procedures of Seller relating to the
Branches.  Seller shall furnish Purchaser with such additional
financial and operating data and other information about its business operations
at the Branches as may be reasonably necessary for the orderly transfer of the
business operations of the Branches.
  (b)           Subject
to Section 9.03 hereof, each party to this Agreement shall hold, and shall
cause its respective directors, officers, employees, agents, consultants, and
advisors to hold, in strict confidence (unless disclosure to a bank regulatory
authority is necessary in connection with any Regulatory Approval or unless
compelled to disclose by judicial or administrative process or, in the written
opinion of its counsel, by other requirements of law or the applicable
requirements of any regulatory agency or relevant stock exchange) all
discussions and information related to the Branches (or, if required under a
contract with a third party, concerning such third party) and all non-public
records, books, contracts, instruments, computer data, system documentation, and
other data and information (collectively, “Information”) furnished pursuant to this
Agreement (except to the extent that such Information can be shown to have been
(i) previously known by such party on a non-confidential basis,
(ii) in the public domain through no fault of such party, or
(iii) later lawfully acquired from other sources by the party to which it
was furnished, and such other source is not subject to a confidentiality
restriction with regard to such Information), and neither party shall release or
disclose such Information to any other person, except, upon the same conditions
of confidentiality, to its auditors, attorneys, financial advisors, bankers,
other consultants and advisors, and as otherwise permitted under this
Agreement.
 
 (c)           This
Section shall not prohibit disclosure of Information required by applicable law
to be disclosed, but such additional disclosure shall be limited to that
actually required by law, and the party making disclosure shall give the other
party as much notice as is practicable of such obligation (except where
prohibited by applicable law) so that the other party may seek a protective
order or other similar or appropriate relief, and also shall undertake in good
faith to have the Information disclosed treated confidentially by the party to
whom the disclosure is made.
 
 SECTION
5.02  Activity in the Ordinary
Course.  (a) From the date hereof, and until the Closing
Date, Seller shall conduct the business of the Branches in the ordinary and
usual course consistent in all material respects with past practices and
standards, and Seller shall not, without the prior written consent of
Purchaser:
 - 24
-
 (i)           permit
any Branch to engage or participate in any material transaction or incur or
sustain any material obligation except in the ordinary course of such Branch’s
business;
 
 (ii)           offer
interest rates or terms on any category of deposits or loans at any Branch that
are not determined in a manner consistent with past practice and procedure and
that are not reasonable within the current financial environment in the market
area of the Branches;
 
 (iii)           except
as expressly provided in this Agreement, transfer to or from any Branch to or
from any of Seller’s other operations or branches, any Assets or Deposits,
except upon the unsolicited request of a depositor or customer in the ordinary
course of business or if any Deposit is pledged as security for a loan or
similar obligation that is not an Asset;
 
 (iv)           except
in the ordinary course of business, sell, transfer, assign, encumber, or
otherwise dispose of or enter into any contract, agreement, or understanding to
sell, transfer, assign, encumber, or dispose of any Asset;
 
 (v)           make
or agree to make any material improvements to the Branches or the Real Property,
except with respect to commitments for such made on or before the date of this
Agreement or normal maintenance purchased or made in the ordinary course of
business;
 
 (vi)           terminate,
renew, amend, extend or otherwise modify the Real Property Leases;
 
 (vii)           terminate
the operations of any Branch or file any application to relocate or close any
Branch;
 
 (viii)           enter
into any commitment, agreement, understanding, or other arrangements to
transfer, assign, encumber, or otherwise dispose of any Branch, except in a
manner consistent with Seller’s obligations under this Agreement;
or
 
 (ix)           solicit
any current employee of Seller at any Branch to transfer to or post for
positions at any other branch of Seller or grant any increase in the salary or
wages of any of the Employees other than normal increases at times and amounts
consistent with Seller’s past practices.
 
 (b)           Between
the date of this Agreement and the Closing Date, neither Seller nor Purchaser
shall, and each shall cause its respective officers, directors, agents, and
employees not to, take any action that is intended to induce, or is reasonably
likely to induce, the transfer of banking business from any Branch; provided,
however, that nothing in this paragraph shall limit the right of either party to
advertise or market its products in the ordinary course of
business.
 - 25
-
 SECTION
5.03  Maintenance of
Records.  Through the Closing Date, Seller will maintain the
Records in accordance with safe and sound banking practices and in a manner
consistent in all material respects with past practice, which is understood by
Seller to be generally in accordance with GAAP.  All Records, whether
held by Purchaser or Seller, shall be maintained by the applicable party for
such periods following the Closing as are required by law, unless the parties
shall, applicable law permitting, agree in writing to a different
period.  From and after the Closing Date (a) each of the parties
shall permit the other reasonable access to any applicable Records in its
possession relating to matters arising on or before the Closing Date, and
(b) Purchaser shall permit Seller reasonable access to any applicable
Records in its possession relating to matters arising after the Closing Date, in
either case, reasonably necessary in connection with any request for
information, claim, action, litigation, or other proceeding involving the party
requesting access to such Records or in connection with any legal obligation
owed by such party to any present or former depositor or other
customer.  The reasonable access permitted under this Section 5.03
shall include a party’s ability, upon reasonable notice, at its own expense and
during normal business hours, to make copies of and excerpts from the Records as
it may deem desirable.
 
 SECTION
5.04  Insurance; Risk of
Loss.  Seller shall maintain the Assets in customary repair,
order, and condition, reasonable wear and tear and damage by fire or other
casualty excepted.  Until the Close of Business, Seller shall maintain
insurance on the Assets in an amount sufficient to cover the replacement cost of
the Assets, and all risk of loss shall be on Seller.  Seller shall
remain in substantial compliance with any obligations it has under the Assumed
Contracts or otherwise relating to maintenance of and insurance upon the Assets
until the Close of Business.  From and after the Close of Business,
risk of loss of the Assets shall be on Purchaser.
 
 SECTION
5.05  Negotiable
Instruments.  Seller will destroy or remove any supply of
Seller’s money orders, official checks, gift checks, or any other negotiable
instruments, including travelers’ checks, located at the Branches on the Closing
Date.
 
 SECTION
5.06  Customers.  (a) Prior
to Closing, (i) Seller and Purchaser will join in notifying the customers
of each Branchof
the transactions contemplated hereby, and (ii)  Seller and Purchaser shall
join in providing all notices to such customers and other persons that Seller or
Purchaser is required to give by any regulatory authority having jurisdiction or
under applicable law, including ERISA and the Real Estate Settlement Procedures
Act of 1974, or the terms of any other agreement between Seller and any customer
in connection with the transactions contemplated hereby.  All costs
and expenses of any notice or communication sent or published under this
Agreement by Purchaser or Seller shall be shared equally by Seller and
Purchaser.  Seller and Purchaser will cooperate reasonably to effect
the notices described in this Section 5.06.
 
 (b)           Anything
herein to the contrary notwithstanding, neither Purchaser nor Seller shall
object to the use by depositors of the Assumed Deposits of checks and similar
instruments bearing Seller’s name or any proprietary mark of
Seller.
 - 26
-
 SECTION
5.07  Conversion.  Seller
and Purchaser shall cooperate with each other and use reasonable efforts to
agree, reasonably in advance of the Closing Date, on procedures and their
respective responsibilities (both prior to and after the Closing Date) with
respect to (a) the conversion of information maintained on Seller’s data
processing systems to Purchaser’s data processing systems and (b) the timely
transfer of information, funds, records and documents, in each case relating to
the Assumed Deposits, Loans, and Cash on Hand, pursuant to a conversion plan to
be developed and mutually agreed upon by Purchaser and Seller (the “Conversion”)
and outlined in a conversion brochure to be prepared by Purchaser and reasonably
agreed to by Seller (the “Conversion
Brochure”).  The Conversion Brochure shall address the
following matters, without limitation:
 
 (i)           use
of checks and similar instruments bearing Seller’s name or any proprietary mark
of Seller by the depositors of Assumed Deposits;
 
 (ii)           inactivation
by Seller and issuance by Purchaser of ATM cards and debit cards with respect to
Assumed Deposit accounts;
 
 (iii)           direct
deposit arrangements, direct debit arrangements, Overdrafts, and stop payment
orders relating to Assumed Deposit accounts and Loan accounts, as
applicable;
 
 (iv)           deposits
received after the Closing Date for credit to Assumed Deposit
accounts;
 
 (v)           returned
items received after the Closing Date with respect to Assumed Deposit
accounts;
  (vi)           charge-back
items received after the Closing Date with respect to merchant Assumed Deposit
accounts;
 
 (vii)           Automated
Clearing House items mistakenly routed or presented to Seller after the Closing
Date; and
 
 (viii)           notification
of Automated Clearing House originators.
 
 Seller
and Purchaser shall each pay for their own expenses incurred in the Conversion
and comply in all material respects with the Conversion procedures and
responsibilities outlined in the Conversion Brochure.  Notwithstanding
the foregoing, in the event of any conflict between the provisions of this
Agreement and the provisions of the Conversion Brochure, the provisions of this
Agreement shall govern.  On or prior to the Closing Date, Seller shall
make available to Purchaser all Delivery Records as well as all of the data
which is reasonably necessary for the Conversion.  Purchaser and
Seller agree that all amounts required to be remitted by either party to the
other party from and after the Closing Date, including in connection with the
Conversion, shall be settled on a daily basis.
  SECTION
5.08  Real
Property Matters; Real Property Leases.  (a) Seller agrees
to deliver to Purchaser, as soon as reasonably possible after the execution of
this Agreement, not to exceed thirty (30) days from the date of this Agreement,
copies of all (i) title information in possession
  - 27
-
 of
Seller, including, but not limited to, title insurance policies, attorneys’
opinions on title, surveys, covenants, deeds, notes and mortgages, and easements
relating to the Real Property, and (ii) copies of reports, surveys,
assessments, analyses, remediation plans, notices, correspondence, or other
information that to Seller’s Knowledge relate to the environmental condition of
the Real Property, the presence of Hazardous Substances on the Real Property,
violations of Environmental Laws, or the structural and mechanical condition of
the Improvements.  Such delivery shall constitute no warranty by
Seller as to the accuracy or completeness thereof or that Purchaser is entitled
to rely thereon.
  (b)           At
its option and expense, Purchaser may, at its sole risk and expense, cause to be
conducted within sixty (60) calendar days after the date hereof (the “Study
Period”) (i) a title examination, physical survey, zoning compliance
review, and structural inspection of the Real Property and improvements thereon
(the “Property
Examination”)
and (ii) site inspections, historic reviews, regulatory analyses, and Phase
I environmental assessments of the Real Property, together with such other
studies, testing, and analyses as Purchaser shall deem necessary or desirable
(collectively, the “Environmental
Survey”);
provided, however, that, without prior written consent of Seller, Purchaser will
not conduct any ground water monitoring or install any test well or undertake
any investigation that requires a permit or license from, or the reporting of
the investigation or the results thereof to, a local or state environmental
regulatory authority or the U.S. Environmental Protection Agency (“Intrusive
Testing”).
 
 (c)           If
in the course of the initial Property Examination or Environmental Survey
Purchaser discovers a Material Defect with respect to the Real Property,
Purchaser will give prompt written notice thereof to Seller (but in any event
prior to 5:00 p.m. on the last day of the Study Period or, in the case of
an update, within five (5) Business Days following Purchaser’s discovery
thereof, and in any event prior to the Closing) describing the facts or
conditions constituting the Material Defect and the measures which Purchaser
reasonably believes are necessary to correct such Material
Defect.  Seller and Purchaser shall discuss and agree upon what
measures are necessary to remedy such defect, and, thereafter, Seller shall
respond to Purchaser’s notice within thirty (30) days after its receipt
advising Purchaser whether Seller elects to cure the Material
Defect.  Absent such a response, Seller shall be deemed to have
declined to cure such Material Defect.  If Seller elects to cure, then
Seller shall proceed with such cure and shall complete such cure within sixty
(60) days thereafter or within such additional period as shall be agreed upon by
Seller and Purchaser, provided that completion of the cure of such defect shall
be a condition to Purchaser’s obligation to close.  Subject to Section
7.01(c), the Closing shall be delayed for such period as shall be necessary to
accommodate Seller’s thirty (30)-day period within which to respond to
Purchaser’s notice and, in the event Seller elects to cure the Material Defect,
to accommodate the above sixty (60)-day (or longer, if agreed upon by Purchaser
and Seller) cure period (or such shorter period as is required for Seller to
cure the Material Defect).
 
 (d)           If
Seller elects not to cure or is not able to cure, or if Purchaser and Seller are
not able to agree on the steps necessary to cure, a Material Defect with respect
to the Real Property at the Branches (whether discovered during the initial or
updated Property Examination or Environmental Survey), or if Seller does not
consent to reasonable Intrusive Testing proposed to be conducted by Purchaser at
the applicable Branch, then Purchaser shall have the option
  - 28
-
 exercisable
upon written notice to Seller to (i) waive the Material Defect,
(ii) purchase the Assets (other than such Real Property) and assume the
Deposits associated with the applicable Branch, but lease such Real Property
with respect to such Branch from Seller for a period of up to twelve (12)
months, on a month-to-month basis, at a reasonable cost and with reasonable
terms to be agreed upon by Seller and Purchaser, in order to allow for the
relocation of the business at such Branch to another facility, or
(iii) terminate this Agreement in accordance with Section
7.01(f).  If Purchaser does not deliver such a notice on or prior to
the fifth (5th) Business Day following (x) if Seller has elected to cure, the
expiry of Seller’s sixty (60)-day cure period, or (y) otherwise, the expiry of
Seller’s thirty (30)-day response period, Purchaser shall be deemed to have
waived the Material Defect.
 
 (e)           Seller
agrees to deliver to Purchaser, as soon as reasonably possible after the
execution of this Agreement, a copy of the Real Property Leases and copies of
all reports, surveys, notices, correspondence, or other information known to
Seller and relating to the environmental condition of the Parkton Branch and the
Green Street Branch, and all other legal documents related
thereto.  At its option and expense, Purchaser may cause to be
conducted a due diligence examination of the Real Property Leases and the other
legal documents related thereto and the Parkton Branch and the Green Street
Branch (the “Real
Property Lease Examination”).  If in the
course of the Real Property Lease Examination Purchaser reasonably determines
not to accept an assignment of either or both Real Property Leases from Seller,
Purchaser will give prompt written notice thereof to Seller (but in any event
prior to 5:00 p.m. on the sixtieth (60th) calendar day following the date
of delivery of the Real Property Leases and other legal documents related
thereto), describing the reasons for declining to accept an assignment of such
Real Property Lease.  Thereafter, Purchaser shall have the option
exercisable upon written notice to Seller to purchase the Assets and assume the
Deposits associated with the Parkton Branch and/or the Green Street Branch, as
the case may be, but sublease from Seller the applicable Leased Real Property
for a period of up to twelve (12) months, on a month-by-month basis, subject to
landlord consent, as applicable, at a reasonable cost and with reasonable terms
to be agreed upon by Seller and Purchaser, in order to allow for relocation of
the business of each applicable Branch to another facility.
 
 SECTION
5.09  Regulatory
Approvals.  As soon as practicable and no later than fifteen
(15) days after the date of this Agreement, Purchaser shall prepare and file any
applications to federal or state regulatory authorities for approvals necessary,
including all Regulatory Approvals, to consummate the transactions contemplated
by this Agreement.  Seller shall cooperate fully and promptly with
Purchaser in connection with Purchaser’s applications, including joining in such
applications, and will prepare and file any such applications required by
regulators to be filed by Seller.  Purchaser shall use best efforts to
obtain each such approval as promptly as practicable, and to provide Seller with
copies of any applications relating thereto prior to filing and to keep Seller
informed of responses from the various regulatory agencies during the
application process.  Seller shall hold in strict confidence all
materials filed by Purchaser under a claim of confidentiality.
 
 SECTION
5.10  Delivery of the Loan
Documents.  (a) In connection with the sale hereunder, as
soon as reasonably practicable after the Closing Date, Seller shall deliver to
Purchaser or its designee the Loan Documents actually in the possession of
Seller, including
  - 29
-
 electronic
Records.  Seller shall have no responsibility or liability for the
Loan Documents from and after the time such files are delivered by Seller to its
designee for shipment to Purchaser.
 
 (b)           Promptly
upon the execution of this Agreement, Purchaser shall provide Seller the exact
name to which the Loans are to be endorsed, or whether any Loans should be
endorsed in blank.  Seller will use reasonable efforts to complete
such endorsements and deliver the Loan Documents within ninety (90) days after
Closing.
 
 SECTION
5.11  Collateral Assignments and
Filing.  As reasonably requested by Purchaser, Seller shall
assist Purchaser in obtaining the perfection of the same priority security
interest as is held by Seller in the collateral, if any, securing each Loan sold
on the Closing Date in favor of Purchaser or its designated assignee as secured
party.  This Section shall not impose on Seller any obligation to cure
defects identified with respect to Identified Loans pursuant to Section 2.08(f),
the decision to cure such defects being within the sole discretion of
Seller.
 
 SECTION
5.12  Interest Reporting and
Withholding.  (a) Seller will report to applicable taxing
authorities and holders of Assumed Deposits, with respect to the period from
January 1 of the year in which the Closing occurs through the Closing Date, all
interest credited to, withheld from, and any early withdrawal penalties imposed
upon the Assumed Deposits.  Purchaser will report to the applicable
taxing authorities and holders of Assumed Deposits, with respect to all periods
from the day after the Closing Date, all such interest credited to, withheld
from, and early withdrawal penalties imposed upon such Assumed
Deposits.  Any amounts required by any governmental agencies to be
withheld from any of the Assumed Deposits through the Closing Date will be
withheld by Seller in accordance with applicable law or appropriate notice from
any governmental agency and will be remitted by Seller to the appropriate agency
on or prior to the applicable due date.  Any such withholding required
to be made subsequent to the Closing Date shall be withheld by Purchaser in
accordance with applicable law or appropriate notice from any governmental
agency and will be remitted by Purchaser to the appropriate agency on or prior
to the applicable due date.
 
 (b)           Seller
will be responsible for delivering to payees all IRS notices with respect to
information reporting and tax identification numbers required to be delivered
for the period through the Closing Date which occurs with respect to the Assumed
Deposits.  Purchaser will be responsible for delivering to payees all
such IRS notices required to be delivered for the period from the day after the
Closing Date.
 
 (c)           Seller
will make all required reports to applicable Tax authorities and to obligors on
Loans purchased on the Closing Date, with respect to the period from January 1
of the year in which the Closing occurs through the Closing Date, concerning all
interest and points received by Seller.  Purchaser will make all
required reports to applicable Tax authorities and to obligors on Loans
purchased on the Closing Date, with respect to all periods from the day after
the Closing Date, concerning all such interest and points received.
 
 SECTION
5.13  Change
of Name.  Seller shall remove from each Branch all items that
are not being transferred to Purchaser under this Agreement, including, but not
limited to, signage that bears Seller’s logos, trade names, or trademarks, on or
prior to the Closing, at
  - 30
-
 Seller’s
own expense.  Seller shall have the option to remove and retain, or
provide to Purchaser, signage apparatus at each Branch that does not bear
Seller’s logos, trade names, or trademarks.
 
 SECTION
5.14  Credit
Insurance.  Seller will either remit all claim payments or
other proceeds it receives on account of credit insurance on the Loans to
Purchaser or, if received prior to the Closing Date, apply such payments or
proceeds to the outstanding principal balance of such Loans.  Seller
will use reasonable efforts to assign policies of credit insurance associated
with the Loans to Purchaser.  Purchaser will remit any insurance
premiums paid to it in connection with the Loans to the appropriate credit
insurance company.
 
 SECTION
5.15  Overdrafts.  All
overdrawn Deposit accounts will be assigned to Purchaser at Closing, and the
Overdrafts represented thereby will be included in the Assets purchased by
Purchaser at Closing.  Purchaser will use good faith efforts
consistent with its normal collection practices to collect the
Overdrafts.
 
 SECTION
5.16  Taxes
and Fees; Proration of Certain
Expenses.  (a) Notwithstanding anything herein to the
contrary, all sales Taxes that are payable or that arise as a result of the
consummation of the transactions contemplated by this Agreement will be borne by
Seller, and any recording or filing fees or transfer, documentary, stamp, or
similar Taxes with respect thereto will be borne by
Purchaser.  Purchaser shall not be responsible for any Tax liability
related to the business or operations of the Branches or the Assets and
Liabilities arising before the Close of Business, and Seller shall not be
responsible for any Tax liabilities related to the business or operations of the
Branches or the Assets and Liabilities arising after the Close of
Business.  After the Closing Date, each of Seller and Purchaser
shall:  (i) assist the other party in preparing any Tax Returns which
such other party is responsible for preparing and filing in connection with this
Agreement; (ii) cooperate fully in preparing for any audits of, or disputes with
taxing authorities regarding, any Tax returns or reports relating to the Assets,
the Liabilities, or the operation of the Branches; (iii) make available to the
other, and to any taxing authority as reasonably requested, all relevant
information, records, and documents relating to Taxes with respect to the
Assets, the Liabilities, or the operation of the Branches; and (iv) provide
timely notice to the other in writing of any pending or proposed Tax audits
(with copies of all relevant correspondence received from any taxing authority
in connection with any Tax audit or information request) or assessments with
respect to the Assets, the Liabilities, or the operation of any Branch for
taxable periods for which the other may have a liability under this
Agreement.  The party requesting assistance or cooperation shall bear
the other party’s out-of-pocket expenses in complying with such request to the
extent that those expenses are attributable to fees and other costs of
unaffiliated third-party service providers; provided that such other party shall
obtain a quotation from any such third-party service providers prior to
engagement and obtain approval thereof from the party requesting
assistance.
 
 (b)           Utility
payments, telephone charges, rent, salaries, FDIC assessments and deposit
insurance premiums, other ordinary operating expenses of the Branches, and other
expenses related to the Assets and Liabilities shall, except as provided in
subsection (c) below for Taxes, be prorated between the parties as of the Close
of Business.  To the extent any such item has been prepaid by Seller
for a period extending beyond the Close of Business, such expenses shall appear
as an Asset on the Closing Statement and the Final Closing Statement.  To
  - 31
-
 the
extent that expenses have been accrued and not paid by Seller prior to the
Closing Date, they shall appear as a Liability on the Closing Statement and the
Final Closing Statement.
 
 (c)           Whenever
it is necessary under this Agreement to allocate Taxes (including a liability
for Taxes, a Tax refund, or a prepaid Tax) between periods prior to and after
the Closing Date (or determine the amount of prepaid Taxes), such Taxes shall be
apportioned by assuming that the Branches had a taxable year or period which
ended at the Close of Business, except that any property Taxes or exemptions,
allowances, or deductions that are calculated on an annual basis shall be
apportioned based on time.  Appropriate payments shall be made between
Purchaser and Seller whenever necessary to effectuate the proper allocation of
any Tax liability, Tax refund, or prepaid Tax under this Agreement.
 
 SECTION
5.17  Employees and Employee
Benefits.  (a) Purchaser shall offer employment at will
(with no reduction in base salary or weekly or hourly rate of pay) to the
employee set forth on Schedule 5.17(a) and all other employees of Seller at each
Branch identified in the list provided by Purchaser pursuant to the provisions
of subsection (c) below(the “Applicable
Employees”).  Such offers shall be effective on the Closing
Date.  Each Applicable Employee who accepts Purchaser’s offer of
employment shall be a “New
Employee” for purposes of this Agreement effective upon the Closing
Date.  Each New Employee’s employment with Purchaser shall be on an
at-will basis, and nothing in this Agreement shall be deemed to constitute an
employment agreement with any such person or to obligate Purchaser to employ any
such person for any specific period of time or in any specific position or to
restrict Purchaser’s right to terminate the employment of any such person at any
time and for any reason.  Purchaser shall not assume any obligation or
liability of Seller under any employment or similar agreement with Seller’s
employees, all of which obligations and liabilities shall be retained by
Seller.
 
 (b)           Purchaser
shall not assume or be liable for any severance costs associated with
terminating the employment of, or any accrued vacation costs for, any employee
of Seller who is not an Applicable Employee or any Applicable Employee who
declines Purchaser’s offer of employment.  For a period of one (1)
year following the Closing Date, Purchaser will provide to any New Employee that
it terminates without cause severance pay in an amount equal to the product of
(i) an amount equal to the salary at termination of such terminated New Employee
for two (2) weeks and (ii) the terminated New Employee’s cumulative years of
service with Seller and Purchaser; provided that the minimum severance payment
shall not be less than four (4) weeks’ base salary.  Purchaser’s
determination of the presence or absence of cause under this Section shall be
conclusive absent bad faith, and its calculations of severance pay shall be
conclusive absent manifest error.
 
 (c)           At
least sixty (60) days prior to Closing, Seller shall deliver to Purchaser a
report listing each employee employed at each Branch as of the date the report
is prepared to include name, position, exempt or nonexempt status, date of hire,
total years of service, and present salary.  At least thirty (30) days
prior to Closing, Purchaser shall deliver to Seller a list of employees employed
at each Branch who will be offered employment with Purchaser in accordance with
subsection (a) above, stating the name, prospective position and salary of
each.  Seller and Purchaser agree that the employee set forth on
Schedule 5.17(c) will be retained as an
  - 32
-
 employee
of Seller following the Closing and will therefore not be included in the list
provided by Purchaser as described above.
 
 (d)           On
and after the Closing Date and for purposes of eligibility, vesting, and
vacation entitlement under any Benefit Plan, each New Employee shall receive
full credit from Purchaser for all prior service properly credited under a
comparable plan or arrangement of Seller.  Purchaser shall not be
required to credit any New Employee with prior service for purposes of benefit
accrual under any pension plan, profit sharing plan, savings plan, or other
deferred compensation plan.  The report referred to in subsection (c)
above shall list such service of each New Employee and may be conclusively
relied upon by Purchaser in crediting service in accordance with this
Section.
 
 (e)           Seller
shall retain responsibility for all claims incurred by Applicable Employees
under Seller’s Benefit Plans.  Purchaser shall assume responsibility
for payment of all claims incurred by New Employees under Purchaser’s Benefit
Plans.  Seller shall retain any obligation for payment of long or
short-term disability claims arising from disabilities of Applicable Employees
that occurred prior to the Closing Date.  Purchaser shall be
responsible for payment of long- and short-term disability claims that arise
from disabilities of Applicable Employees that occur on or after the date they
become New Employees.  For purposes of this paragraph, a claim shall
be deemed to have been incurred when the medical or other service giving rise to
the claim is performed, except that disability claims shall be deemed to have
been incurred on the date the employee becomes disabled.
 
 (f)           Purchaser
agrees to (i) provide coverage for active New Employees and their
beneficiaries under its medical, dental, and health and welfare plans as of the
later of the Closing Date or the date an Applicable Employee becomes a New
Employee, (ii) waive any waiting periods and preexisting condition
limitations or exclusions (other than those excluded under Seller’s health
insurance plan) under such plans, (iii) use its best efforts to cause such
plans to honor any expenses incurred by the New Employees and their
beneficiaries under similar plans of Seller during the portion of the calendar
year in which the Closing Date occurs for purposes of satisfying applicable
deductible, co-insurance, and maximum out-of-pocket expenses, and
(iv) permit New Employees to participate in Purchaser’s retirement or
401(k) plans immediately following the Closing Date.
 
 (g)           Purchaser
shall provide New Employees with credit under Purchaser’s vacation pay plan for
all vacation pay benefits earned under Seller’s vacation pay policy and not yet
used as of the Closing Date.
 
 (h)           For
a period of one (1) year from the Closing Date, Seller shall not directly or
indirectly solicit for employment any New Employee then employed by Purchaser;
provided that the foregoing shall not prohibit general solicitations to the
public or general advertising that is not targeted at New
Employees.
  SECTION
5.18  Non-Solicitation.  Seller
hereby agrees that for a period of one (1) year from the Closing Date, Seller
shall not specifically target and solicit customers of any Branch; provided,
however, that nothing in this Section shall (a) restrict general mass
mailings,
  - 33
-
 telemarketing
calls, statement stuffers, advertisements, or other similar communications
whether in print, on radio, television, or the internet, or by other means that
are directed to the general public or to a group of customers who may include
customers of any Branch, provided that such group is defined by criteria other
than primarily as customers of any Branch or (b) otherwise prevent Seller
from taking such actions as may be required to comply with applicable federal or
state laws, rules, or regulations or from servicing or communicating with the
then-current customers of Seller, including customers of Seller with whom Seller
maintains account relationships either centrally or at other
branches.
 SECTION
5.19  Further
Assurances.  Purchaser and Seller agree to use all reasonable
efforts to satisfy or cause to be satisfied as soon as practicable their
respective obligations hereunder and the conditions precedent to the
Closing.  Each of Seller and Purchaser will execute, acknowledge, and
deliver such instruments and take such other actions as the other party may
reasonably require in order to carry out the intent of this
Agreement.  Seller will duly execute and deliver such assignments,
bills of sale, deeds, acknowledgments, and other instruments of conveyance and
transfer as shall at any time be necessary or appropriate to vest in Purchaser
the full legal and equitable title to the Assets.  For a reasonable
period of time after the Closing Date, each party will promptly deliver to the
other all mail and other communications which are properly addressed or
delivered to the other as a consequence of the transactions pursuant to this
Agreement; and, without limitation of the foregoing, on and after the Closing
Date, Seller shall promptly forward any mail, communications, or other material
relating to the Assumed Deposits or the Assets, to such employees of Purchaser
at such addresses as may from time to time be specified by Purchaser in
writing.
 
 ARTICLE
VI
 
 CLOSING
 
 SECTION
6.01  Closing Date and
Place.  Unless earlier terminated pursuant to Section 7.01, the
closing of the transactions provided for herein (the “Closing”)
will be held at the offices of Smith, Anderson, Blount, Dorsett, Mitchell &
Jernigan, L.L.P., or at another place agreed to by the parties, on such date and
time as are agreed to by the parties.  The Closing shall be effective
as of the Close of Business.
  SECTION
6.02  Conditions to Obligations of
Purchaser.  Unless waived in writing by Purchaser, the
obligation of Purchaser to consummate the transactions contemplated by this
Agreement to be consummated at the Closing is conditioned upon fulfillment, at
or before the Closing, of each of the following conditions:
 
 (a)           All
consents, approvals, and authorizations required to be obtained prior to the
Closing from governmental and regulatory authorities in connection with the
performance and consummation of the transactions contemplated hereby, including
the Regulatory Approvals, shall have been made or obtained, and shall remain in
full force and effect, all waiting periods applicable to the consummation of the
transactions contemplated hereby shall have expired or been terminated, and all
required regulatory filings shall have been made.  Such
consents,
  - 34
-
 approvals,
permits, and authorizations, including Regulatory Approvals, shall not have
imposed any condition which is materially disadvantageous or burdensome to
Purchaser.
 
 (b)           No
court or governmental or regulatory authority of competent jurisdiction shall
have enacted, issued, promulgated, enforced, or entered any statute, rule,
regulation, judgment, decree, injunction, or other order (whether temporary,
preliminary, or permanent) which is in effect and which would result in a
Material Adverse Effect, and no proceeding seeking the enactment of such a
judgment, decree, injunction, or other order shall have been announced or
commenced.
 
 (c)           Each
of the representations and warranties of Seller contained in this Agreement or
in any schedule attached hereto that are qualified by reference to materiality
shall be true and correct, and the representations and warranties that are not
so qualified shall be true and correct in all material respects, on and as of
the date of this Agreement and on and as of the Closing Date as if made on the
Closing Date.
 
 (d)           Seller
shall have performed and complied in all material respects with all agreements,
undertakings and obligations that are required to be performed or complied with
by it at or prior to the Closing.
 
 (e)           No
Material Adverse Effect shall have occurred after the date of this
Agreement.
 
 (f)           Purchaser
shall have received each of the following documents, which shall be delivered in
a manner agreed to between Purchaser and Seller and shall be in form and
substance reasonably satisfactory to Purchaser:
 
 (i)           resolutions
of Seller’s Board of Directors, certified by its Secretary or Assistant
Secretary, authorizing the signing and delivery of this Agreement and all
related documents, and the consummation of the transactions contemplated hereby
and thereby;
 
 (ii)           a
certificate from the Secretary or Assistant Secretary of Seller as to the
incumbency and signatures of officers;
 
 (iii)           a
certificate signed by a duly authorized officer of Seller stating that the
conditions set forth in Sections 6.02(a), (b), (c), (d) and (e) have been
satisfied;
 
 (iv)           a
Bill of Sale and Instrument of Assignment and Assumption pursuant to which the
Assets shall be transferred to Purchaser “AS IS, WHERE IS” and with all faults,
except as provided in this Agreement (the “Bill of
Sale”), signed by Seller;
 
 (v)           (A)
special warranty deeds with documentary stamps affixed conveying the Real
Property to Purchaser, free and clear of all Encumbrances
  - 35
-
 other
than Permitted Liens, together with such other instruments and documents as may
be required for the issuance of appropriate title insurance covering the Real
Property, all in form and substance reasonably acceptable to Purchaser, and
Seller shall have filed or recorded any and all documents necessary to vest
legal and equitable title in the Real Property in Purchaser, all in form and
substance reasonably acceptable to Purchaser; and (B) with respect to each
Leased Real Property, (x) if Purchaser has notified Seller that it will exercise
its option to sublease such Leased Real Property pursuant to Section 5.08(e),
asublease
of such Leased Real Property and a landlord’s consent to the sublease, each in
form and substance reasonably acceptable to Purchaser,or (y) if
Purchaser has not so notified Seller, an assignment and assumption of the
related Real Property Lease in form and substance reasonably acceptable to
Purchaser, transferring the leasehold interest in such Leased Real Property to
Purchaser, together with such instruments and documents as may be reasonably
required for the issuance of appropriate leasehold title insurance with respect
to such Real Property Lease, and Seller shall have filed or recorded any and all
documents reasonably deemed necessary by Purchaser to vest the leasehold
interest in Purchaser, including a landlord’s consent to the assignment and a
landlord’s estoppel certificate, each in form and substance reasonably
acceptable to Purchaser;
 
 (vi)           the
Delivery Records;
 
 (vii)           an
original, fully executed counterpart of each written Assumed Contract in effect
on the Closing Date and such consents as shall be required pursuant to the terms
of any Assumed Contracts in connection with the assignments of such Assumed
Contracts to Purchaser;
 
 (viii)           a
complete set of keys for each Branch, including, but not limited to, keys for
all vaults and ATMs, appropriately tagged for identification, and manuals and/or
specifications with respect to vaults and ATMs;
 
 (ix)           the
Closing Statement in a form reasonably acceptable to Purchaser and signed by
Seller;
 
 (x)           Seller’s
resignation as trustee or custodian, as applicable, with respect to each IRA
included in the Assumed Deposits, and appointment of Purchaser as successor
trustee or custodian with respect thereto, subject to Section 2.06(a), in
form and substance reasonably acceptable to Purchaser;
 
 (xi)           all
documentation required to exempt Seller from the withholding requirement of
Section 1445 of the Code, including an affidavit from Seller to Purchaser
that Seller is not a foreign person and providing Seller’s U.S. taxpayer
identification number;
 
 (xii)           an
assignment in recordable form reflecting the transfer and assignment to
Purchaser of each deed of trust, mortgage, assignment of rents
and
  - 36
-
 profits,
and other real property related Loan Documents recorded in the real property
records in applicable public registries (e.g., real property records in the
offices of Registers of Deeds in North Carolina), in a form reasonably
acceptable to Purchaser;
 
 (xiii)           an
affidavit from Seller as to the absence of any mechanics’ or materialmen’s liens
and such other matters as may be reasonably requested by Purchaser or
Purchaser’s title insurance company, in form and substance reasonably acceptable
to Purchaser or Purchaser’s title insurance company; and
 
 (xiv)           such
other bills of sale, assignments of management, maintenance, service or
servicing contracts, security deposits under leases, guaranties, warranties,
utility security deposits, and such other instruments and documents as Purchaser
may reasonably require as necessary for transferring, assigning, and conveying
to Purchaser good, marketable, and insurable title to the Assets, free and clear
of all Encumbrances other than Permitted Liens, and permitting assumption of
Liabilities by Purchaser.
  SECTION
6.03  Conditions to Obligations of
Seller.  Unless waived in writing by Seller, the obligation of
Seller to consummate the transactions contemplated by this Agreement to be
consummated at the Closing is conditioned upon fulfillment, at or before the
Closing, of each of the following conditions:
 
 (a)           All
consents, approvals, permits, and authorizations required to be obtained prior
to the Closing from governmental and regulatory authorities in connection with
the performance and consummation of the transactions contemplated hereby,
including the Regulatory Approvals, shall have been made or obtained and shall
remain in full force and effect; and all waiting periods applicable to the
consummation of the transactions contemplated hereby shall have expired or been
terminated and all required regulatory filings shall have been
made.  Such consents, approvals, permits, and authorizations,
including Regulatory Approvals, shall not have imposed any condition which is
materially disadvantageous or burdensome to Seller.
 
 (b)           No
court or governmental or regulatory authority of competent jurisdiction shall
have enacted, issued, promulgated, enforced, or entered any statute, rule,
regulation, judgment, decree, injunction, or other order (whether temporary,
preliminary, or permanent) which is in effect and would result in a Material
Adverse Effect, and no proceeding seeking the enactment of such a judgment,
decree, injunction, or other order that would have a Material Adverse Effect
shall have been announced or commenced.
 
 (c)           Each
of the representations and warranties of Purchaser contained in this Agreement
or in any schedule attached hereto that are qualified by reference to
materiality shall be true and correct, and the representations and warranties
that are not so qualified shall be true and correct in all material respects, on
and as of the date of this Agreement and on and as of the Closing Date as if
made on the Closing Date.
 - 37
-
 (d)           Purchaser
shall have performed and complied in all material respects with all agreements,
undertakings and obligations that are required to be performed or complied with
by it at or prior to the Closing Date.
 
 (e)           Seller
shall have received each of the following documents, which shall be delivered in
a manner agreed to between Purchaser and Seller and shall be in form and
substance reasonably satisfactory to Seller:
 
 (i)           resolutions
of Purchaser’s Board of Directors or an authorized committee thereof, certified
by its Secretary or Assistant Secretary, authorizing the signing and delivery of
this Agreement and all related documents, and the consummation of the
transactions contemplated hereby and thereby;
 
 (ii)           a
certificate of the Secretary or Assistant Secretary of Purchaser as to the
incumbency and signatures of officers;
 
 (iii)           a
certificate signed by a duly authorized officer of Purchaser stating that the
conditions set forth in Sections 6.03(a), (b), (c) and (d) have been
fulfilled;
 
 (iv)           the
Bill of Sale signed by Purchaser;
 
 (v)           the
Closing Statement in a form reasonably acceptable to Seller and signed by
Purchaser;
 
 (vi)           Purchaser’s
acceptance of its appointment as successor trustee or custodian, as applicable,
of each IRA included in the Assumed Deposits and assumption of the fiduciary
obligations of the trustee or custodian with respect thereto, subject to
Section 2.06; and
 
 (vii)           such
other bills of sale, assignments of management, maintenance, service or
servicing contracts, security deposits under leases, guaranties, warranties,
utility security deposits, and such other instruments and documents as Seller
may reasonably require as necessary for transferring, assigning, and conveying
to Purchaser good, marketable, and insurable title to the Assets and permitting
assumption of Liabilities by Purchaser.
 
 SECTION
6.04  Other
Documents.  The parties agree to execute and deliver such other
documents as the parties determine are reasonably necessary to consummate the
transactions contemplated by this Agreement.
 - 38
-
 ARTICLE
VII
 
 TERMINATION
 
 SECTION
7.01  Termination.  This
Agreement may be terminated at any time prior to the Closing Date:
 
 (a)           by
the mutual written consent of Purchaser and Seller;
 
 (b)           by
Seller or Purchaser, in the event of a material breach by the other of any
representation, warranty, or agreement contained herein which is not cured or
cannot be cured within thirty (30) days after written notice of such breach has
been delivered to the breaching party; provided, however, that (subject to
Section 7.02) termination pursuant to this Section shall not relieve the
breaching party of liability for such breach or otherwise;
 
 (c)           by
Seller or Purchaser, notwithstanding any other provision of this Agreement, in
the event that the Closing has not occurred within one hundred eighty (180) days
of the date of this Agreement unless the failure to so consummate by such time
is due to a breach of this Agreement by the party seeking to terminate, or the
failure to fulfill any condition to Closing set forth in Section 6.02 or Section
6.03 by the party seeking to terminate;
 
 (d)           by
Seller or Purchaser, notwithstanding any other provision of this Agreement, in
the event that the Regulatory Approvals have not been received within one
hundred eighty (180) days of the date of this Agreement, unless such non-receipt
was caused by the failure of the party seeking to terminate to act in a timely
manner with respect to such Regulatory Approvals or such party’s negligence or
willful misconduct or other breach of this Agreement with respect to the
Regulatory Approvals;
 
 (e)           by
Seller or Purchaser at any time after the final, nonappealable denial or
revocation of any Regulatory Approval, unless such denial or revocation was
caused by the failure of the party seeking to terminate to act in a timely
manner with respect to such Regulatory Approvals or such party’s negligence or
willful misconduct or other breach of this Agreement with respect to the
Regulatory Approvals; or
 
 (f)           by
Purchaser within the relevant period set forth in Section 5.08, if Seller fails
or declines to cure a Material Defect with respect to the Real
Property.
  SECTION
7.02  Liability for
Termination.  If this Agreement is terminated as permitted by
Section 7.01, except as provided in Section 7.01(b), such termination shall
be without liability of either party (or any shareholder, director, officer,
employee, agent, consultant or representative of such party) to the other party
to this Agreement, except as described below in this Section 7.02 and in Section
7.03.  If this Agreement is terminated as provided in Section 7.01(b)
or other than as permitted by Section 7.01, or if such termination pursuant
to Section 7.01 results from the willful failure of a party to fulfill a
condition to the performance of the obligations of the other party or to perform
a covenant of this Agreement, such party shall
  - 39
-
 pay to
the other party, concurrently with such termination, a termination fee of One
Hundred Fifty Thousand Dollars ($150,000) as the sole remedy for such
breach.
 SECTION
7.03  Procedure Upon
Termination.  In the event of termination pursuant to Section
7.01 hereof, written notice thereof shall be given promptly to the other party,
and this Agreement shall terminate and be null and void, except for any payment
obligations provided herein, upon receipt of such notice immediately unless an
extension is consented to by the party having the right to
terminate.  Without limiting the terms of Section 5.01, if this
Agreement is terminated as provided herein, each party will return to the party
furnishing the same all documents, work papers and other materials of the other
party relating to this transaction, whether obtained before or after the
execution hereof.The provisions of Sections 5.01(b) and (c)
and this Section 7.03 shall be deemed to survive the termination of this
Agreement.


ARTICLE
VIII
 
 INDEMNIFICATION
 
 SECTION
8.01  Indemnification.  (a) From
and after the Closing and subject to the limitations contained in this ARTICLE
VIII, Seller will indemnify Purchaser and its respective officers, directors and
Affiliates and their respective successors and assigns (collectively, the “Purchaser
Indemnified Parties”) and hold the Purchaser Indemnified Parties harmless
against any and all Losses that Purchaser Indemnified Parties have incurred on
or after the Closing Date by reason of:
 
 (i)           the
inaccuracy or breach of any representation or warranty of Seller contained in
this Agreement;
 
 (ii)           the
breach by Seller of any covenant of Seller contained in this
Agreement;
 
 (iii)           Seller’s
conduct of the business of each Branch or Seller’s ownership, operation or use
of the Assets on or prior to the Closing Date; or
 
 (iv)           Seller’s
failure to pay when due or to otherwise perform any of the Retained
Liabilities.
 
 (b)           From
and after the Closing and subject to the limitations contained in this ARTICLE
VIII, Purchaser will indemnify Seller and its respective officers, directors and
Affiliates and their respective successors and assigns (collectively, the “Seller
Indemnified Parties” and, together with the Purchaser Indemnified
Parties, collectively, the “Indemnified
Parties”) and hold the Seller Indemnified Parties harmless against Losses
that the Seller Indemnified Parties have incurred on or after the Closing Date
by reason of:
 
 (i)           the
inaccuracy or breach of any representation or warranty of Purchaser contained in
this Agreement;
 - 40
-
 (ii)           the
breach by Purchaser of any covenant of Purchaser contained in this
Agreement;
 
 (iii)           Purchaser’s
conduct of the business of each Branch or Purchaser’s ownership, operation or
use of the Assets after the Closing Date; or
 
 (iv)           Purchaser’s
failure to pay when due or to otherwise perform any of its liabilities and
obligations, including the Liabilities following Purchaser’s assumption
thereof.
 
 SECTION
8.02  Calculation of
Losses.  For the purpose of calculating Losses arising from any
breach or default of any of the representations, warranties, covenants and
agreements contained in this Agreement, the applicable provisions thereof shall
be read and interpreted as if any qualification therein with respect to
materiality or Material Adverse Effect was not contained therein.  All
calculations of Losses under this Agreement shall take into account and be
reduced by (a) any proceeds actually recovered under insurance policies (after
giving effect to any deductible, retention or equivalent loss rated premium
adjustment and any costs or expenses incurred in making such recovery) in
connection with the matter out of which such Losses shall arise, and (b) any Tax
benefits that the Indemnified Party may receive in connection
therewith.  In no event shall Seller or Purchaser be liable for any
punitive, special, consequential, exemplary or incidental Losses, except to the
extent an Indemnified Party is found by a court of competent jurisdiction, the
decision of which is final and binding and not subject to appeal, to be liable
to a third party (in no event an Affiliate of Seller or Purchaser, respectively)
for special, consequential, exemplary or incidental (but not punitive)
Losses.
 
 SECTION
8.03  Threshold.  Notwithstanding
anything contained herein to the contrary, neither party shall have any
liability under this Agreement (including under Section 8.01) in respect of
breaches of, or inaccuracies in, representations and warranties unless and until
the aggregate Losses for which indemnity by such party would otherwise be due
under this Agreement exceeds one-half percent (1/2%) of the Purchase Price (the
“Threshold”),
in which case such indemnifying party shall be responsible for the aggregate
amount of all Losses regardless of the Threshold.  Each of the parties
hereto acknowledges and agrees that the foregoing limitations contained in this
Section 8.03 do not apply to Losses (a) in respect of breaches of, or
inaccuracies in, the representations in Sections 3.01, 3.04, 3.12, 3.13, 3.17
and 4.01, and (b) for fraud.
 
 SECTION
8.04  Survival of Indemnification
Obligations.  The indemnification obligations of each party
under Section 8.01 in respect of breaches of, or inaccuracies in,
representations and warranties shall remain in full force and effect for
eighteen (18) months following the Closing Date; provided, however, that the
indemnification obligations with respect to the representations and warranties
contained in Sections 3.01, 3.04 and 4.01 and the indemnification obligations
with respect to fraud shall remain in full force and effect
indefinitely.  Notwithstanding the preceding sentence, indemnification
obligations under Section 8.01 shall survive the time at which they would
otherwise terminate pursuant to this Section with respect to Losses set forth in
a written notice, given to the party against whom indemnification is sought
prior to such time of termination, which notice shall state (a) the inaccuracy
or breach giving rise to such indemnification obligations, and (b) the aggregate
amount of Losses or an estimate
  - 41
-
 thereof,
in each case to the extent known or reasonably determinable at such time,
resulting from such inaccuracy or breach.
 
 SECTION
8.05  Terms
and Conditions of Indemnification; Resolution of
Conflicts.  (a) Any party seeking indemnification must
give the other party (the “Indemnifying
Party”) prompt written notice of the claim for Losses stating the
aggregate amount of the Losses or an estimate thereof, in each case to the
extent known or determinable at such time; provided that the failure to provide
such notice shall not relieve the Indemnifying Party of its indemnification
obligations hereunder except to the extent that the Indemnifying Party is
actually prejudiced by the failure to give such notice.
 
 (b)           The
respective obligations and liabilities of the parties to indemnify pursuant to
Section 8.01 in respect of any Losses arising from a claim by a third party
shall be subject to the following additional terms and conditions:
 
 (i)           The
Indemnifying Party shall have the right to undertake, by counsel or other
representatives of its own choosing reasonably satisfactory to the Indemnified
Party, the defense, compromise, and settlement of such claim if (A) the claim
involves (and continues to involve) solely monetary damages and the Indemnifying
Party’s assumption of the defense or settlement of such claim will not have a
material adverse effect on the Indemnified Party’s business, and (B) the
Indemnifying Party expressly agrees in writing to the Indemnified Party that, as
between the two, the Indemnifying Party is solely obligated to satisfy and
discharge the claim subject to the limitations on liability contained in this
ARTICLE VIII (the foregoing, collectively, the “Litigation
Conditions”).
 
 (ii)           In
the event that the Indemnifying Party shall elect not to undertake such defense,
or within thirty (30) days after written notice of any such claim from the
Indemnified Party shall fail to defend, or the Indemnifying Party is unable to
satisfy the Litigation Conditions, the Indemnified Party (upon further written
notice to the Indemnifying Party) shall have the right to undertake the defense,
compromise or settlement of such claim, by counsel or other representatives of
its own choosing, on behalf of, at the expense of and for the account and risk
of the Indemnifying Party.
 
 (c)           Notwithstanding
anything in this Section to the contrary, (i) the Indemnifying Party shall not,
without the Indemnified Party’s written consent, settle or compromise any claim
or consent to entry of any judgment which does not include as an unconditional
term thereof the giving by the claiming party or the plaintiff to the
Indemnified Party of a release from all liability in respect of such claim, and
(ii) in the event that the Indemnifying Party undertakes defense of any claim,
the Indemnified Party, by counsel or other representative of its own choosing
and at its sole cost and expense, shall have the right to consult with the
Indemnifying Party and its counsel or other representatives concerning such
claim, and the Indemnifying Party and the Indemnified Party and their respective
counsel or other representatives shall cooperate with respect to such claim,
subject to the execution and delivery of a mutually satisfactory joint defense
agreement.
  - 42
-
 ARTICLE
IX
 
 MISCELLANEOUS
 
 SECTION
9.01  Assignment.  Neither
this Agreement nor any of the rights, interests, or obligations of either party
hereunder may be assigned by either of the parties hereto without the prior
written consent of the other party.
 
 SECTION
9.02  Binding
Effect.  This Agreement and all of the provisions hereof shall
be binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns.  Except as expressly
provided in ARTICLE VIII, the parties hereto intend that nothing in this
Agreement, express or implied, is intended to or shall confer upon any other
person, including, without limitation, any employee or former employee of
Seller, any legal or equitable right, benefit, or remedy of any nature
whatsoever, including, without limitation, any rights of employment or benefits
for any specified period, under or by reason of this Agreement.
 
 SECTION
9.03  Public
Notice.  From and after the date hereof until the Closing Date,
neither Purchaser nor Seller shall, directly or indirectly, make, or cause to be
made, any press release for general circulation, public announcement, or
disclosure or issue any notice or communication generally to employees with
respect to any of the transactions contemplated hereby without the prior consent
of the other party, which consent shall not be unreasonably
withheld.  Consent shall be deemed granted by the party from which it
is sought unless such party objects within two (2) Business Days after receipt
of the proposed press release or other announcement from the party requesting
consent.  Seller and Purchaser shall cooperate reasonably to produce
public announcements to be released simultaneously within five (5) days after
the date of this Agreement.  Nothing herein shall limit the right of
Seller’s or Purchaser’s parent, after the initial press release regarding the
transaction, to refer to this transaction or to file a copy of this Agreement in
any document required to be filed with the Securities and Exchange Commission or
in its annual report to shareholders.  Nothing in this Agreement shall
limit the right of either party to make any disclosure required by law, subject
to the provisions of Section 5.01.
 
 SECTION
9.04  Notices.  All
notices, requests, demands, consents, and other communications given or required
to be given under this Agreement and under the related documents shall be in
writing and delivered to the applicable party at the address indicated
below:


If
      to Purchaser:
            
            Capital
      Bank
              Capital
      Bank Plaza
              333
      Fayetteville Street, Suite 700
              Raleigh,
      North Carolina 27601
              Attention:
      Michael Moore, Chief Financial Officer
              Facsimile
      No.: (919) 645-6353




- 43
-


With
      copies to:
            
            Smith,
      Anderson, Blount, Dorsett, Mitchell & Jernigan, L.L.P.
              2500
      Wachovia Capitol Center
              Raleigh,
      North Carolina 27601
              Attention:
      Geoffrey Adams
              Facsimile
      No.: (919) 821-6800If
      to Seller:
            
            Omni
      National Bank
              Six
      Concourse Parkway, Suite 2300
              Atlanta,
      Georgia 30328
              Attention:
      Stephen M. Klein, Chief Executive Officer
              Facsimile
      No.: (678) 244-6400With
      copies to:
            
            Powell
      Goldstein LLP
              One
      Atlantic Center
              1201
      West Peachtree Street, 14th Floor
              Atlanta, Georgia 30309
              Attention:
      Katherine M. Koops
              Facsmile
      No.: (404) 572-6999





or, as to
each party at such other address as shall be designated by such party in a
written notice to the other party complying as to delivery with the terms of
this Section.  Any notices shall be in writing, including telegraphic
or facsimile communication, and may be sent by registered or certified mail,
return receipt requested, postage prepaid, or by fax, or by overnight delivery
service.  Notice shall be effective upon actual receipt
thereof.
 
 SECTION
9.05  Governing
Law.  This Agreement and the legal relations between the
parties shall be governed by and interpreted in accordance with the laws of the
State of North Carolina applicable to contracts made and to be performed
entirely within the State of North Carolina.
 
 SECTION
9.06  Entire
Agreement.  This Agreement, including any exhibits or schedules
hereto, contains the entire understanding of and all agreements between the
parties hereto with respect to the subject matter hereof and supersedes any
prior or contemporaneous agreement or understanding, oral or written, pertaining
to any such matters, which agreement or understanding shall be of no force or
effect for any purpose.  The provisions of this Agreement shall
prevail if there is any inconsistency between this Agreement and any operating
agreement, conversion plan, or similar document relating to the methods of
consummating the transactions contemplated by this Agreement, even if such
document may be characterized as an agreement and dated after the date of this
Agreement.
 
 SECTION
9.07  Counterparts.  This
Agreement may be executed in any number of counterparts, each of which shall be
deemed an original, but all of which together shall constitute one and the same
instrument.
 - 44
-
 SECTION
9.08  Headings.  The
headings used in this Agreement are inserted for purposes of convenience of
reference only and shall not limit or define the meaning of any provisions of
this Agreement.
 
 SECTION
9.09  Waiver
and Amendment.  The waiver of any breach of any provision under
this Agreement by any party shall not be deemed to be a waiver of any preceding
or subsequent breach under this Agreement.  No such waiver shall be
effective unless it is in writing.  This Agreement may not be amended
or supplemented in any manner except by mutual agreement of the parties and as
set forth in a writing signed by the parties hereto or their respective
successors in interest.
 
 SECTION
9.10  Expenses.  Except
as specifically provided otherwise in this Agreement, each party shall bear and
pay all costs and expenses, including, without limitation, legal fees, which it
incurs, or which may be incurred on its behalf, in connection with the
preparation of this Agreement and consummation of the transactions described
herein, and the expenses, fees, and costs necessary for any approvals of the
appropriate regulatory authorities.
 
 SECTION
9.11  Severability.  If
any provision of this Agreement or the application of any such provision to any
person or circumstance shall be held invalid, illegal, or unenforceable in any
respect by a court of competent jurisdiction, such invalidity, illegality, or
unenforceability shall not affect any other provision hereof.


[The
remainder of this page intentionally left blank.]


- 45
-


[Signature
Page to Purchase and Assumption Agreement]





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





CAPITAL
BANKBy:  /s/Grant
      YarberName:         Grant
YarberTitle:           President








OMNI NATIONAL
      BANKBy:  /s/Constance E.
      PerrineName:         Constance E.
      PerrineTitle:           President





Exhibit
A





LOANS
REVIEWED PRIOR TO SIGNING





[attached]