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

1st FINANCIAL SERVICES CORPORATION

UNITED STATES DEPARTMENT OF THE
TREASURY

By:
Name: Timothy G. Massad
Title: Assistant Secretary for Financial
Stability

[Signature Page to Securities Purchase Agreement]


Section 6.02 and Sections 7.03, 7.04, 7.05 and 7.06 shall survive any termination of this
Agreement.

ARTICLE VII
MISCELLANEOUS

Section 7.01 Waiver: Amendment. Any provision of this Agreement may be
(A) waived in writing by the party benefiting by the provision, or (B) amended or modified at
any time by an agreement in writing signed by each of the parties hereto. Neither any failure nor
any delay by any party in exercising any right, power or privilege under this Agreement or any of
the documents referred to in this Agreement will operate as a waiver of such right, power or
privilege, and no single or partial exercise of any such right, power or privilege will preclude any
other or further exercise of such right, power or privilege.

Section 7.02 Counterparts. This Agreement may be executed by facsimile or
other electronic means and in counterparts, all of which shall be considered an original and one
and the same agreement and shall become effective when counterparts have been signed by each
of the parties and delivered to the other parties, it being understood that all parties need not sign
the same counterpart.

Section 7.03 Governing Law; Choice of Forum: Waiver_of Jury Trial.
(A) This Agreement and any claim, controversy or dispute arising under or related to this
Agreement, the relationship of the parties, and/or the interpretation and enforcement of the rights
and duties of the parties shall be enforced, governed, and construed in all respects (whether in
contract or in tort) in accordance with the federal law of the United States if and to the extent
such law is applicable, and otherwise in accordance with the laws of the State of New York
applicable to contracts made and to be performed entirely within such State. Each of the parties
hereto agrees (a) to submit to the exclusive jurisdictions and venue of the United States District
Court of the District of Columbia and the United States Court of Federal Claims for any and all
civil actions, suits or proceedings arising out of or relating to this Agreement or the transactions
contemplated hereby, and (b) that notice may be served upon (i) the Purchaser at the address and
in the manner set forth for notices to the Purchaser in Section 7.05, (ii) the Company at the
address and in the manner set forth for notices to the Company in Section 7.05 and (iii) the Seller
at the address and in the manner set forth for notices to the Seller in Section 7.05, but otherwise
in accordance with federal law.

(B) To the extent permitted by applicable Law, each of the parties hereto
hereby unconditionally waives trial by jury in any civil legal action or proceeding relating
to this Agreement or the transactions contemplated hereby.

Section 7.04 Expenses. If requested by the Seller, the Purchaser shall pay all
reasonable out of pocket and documented costs and expenses associated with this Agreement and
the transactions contemplated by this Agreement, including, but not limited to, the reasonable
fees, disbursements and other charges of the Seller’s legal counsel and financial advisors.

-ll-


common control with”) when used with respect to any person, means the possession, directly or
indirectly, of the power to cause the direction of management and/or policies of such person,
whether through the ownership of voting securities by contract or otherwise.

“

Agreement” has the meaning set forth in the introductory paragraph of this
agreement.

“Business Day” means any day that is not a Saturday, a Sunday or other day on
which banking organizations in the State of North Carolina are required or authorized by Law to
be closed.

“Closing” has the meaning set forth in Section 2.02(A).
“Closing Date” has the meaning set forth in Section 2.02(A).

“Company” has the meaning set forth in the introductory paragraph to this
Agreement.

“Company Common Stock” means the common stock, par value $5.00 per share,
of the Company.

“Company Material Adverse Effect” means a material adverse effect on the
business, results of operations or financial condition of the Company and its consolidated
Subsidiaries taken as a whole; provided, however, that Company Material Adverse Effect shall
not be deemed to include the effects of (i) changes after the date hereof in general business,
economic or market conditions (including changes generally in prevailing interest rates, credit
availability and liquidity, currency exchange rates and price levels or trading volumes in the
United States or foreign securities or credit markets), or any outbreak or escalation of hostilities,
declared or undeclared acts of war or terrorism, in each case generally affecting the industries in
which the Company and its Subsidiaries operate, (ii) changes or proposed changes after the date
hereof in United States generally accepted accounting principles or regulatory accounting
requirements, or authoritative interpretations thereof, (iii) changes or proposed changes after the
date hereof in securities, banking and other Laws of general applicability or related policies or
interpretations of Governmental Entities (in the case of each of these clauses (i), (ii) and (iii),
other than changes or occurrences to the extent that such changes or occurrences have or would
reasonably be expected to have a materially disproportionate adverse effect on the Company and
its consolidated Subsidiaries taken as a whole relative to comparable United States banking or
financial services organizations), or (iv) changes in the market price or trading volume of the
Company Common Stock or any other equity, equity-related or debt securities of the Company
or its consolidated Subsidiaries (it being understood and agreed that the exception set forth in
this clause (iv) does not apply to the underlying reason giving rise to or contributing to any such
change).

“Compensation Regulations” means any guidance, rule or regulation, as the same
shall be in effect from time to time, promulgated pursuant to or implementing Section 111 of the
Emergency Economic Stabilization Act of 2008, as amended by the American Recovery and
Reinvestment Act of 2009, or otherwise from time to time.

2-


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

1st FINANCIAL SERVICES CORPORATION

By;
ame: Michael G. Mayer
Title: Chief Executive Officer

FIRST-CITIZENS BANK & TRUST
COMPANY

By:

Name: Glenn D. McCoy

Title: Executive Vice President and
Chief Financial Officer

UNITED STATES DEPARTMENT OF THE
TREASURY

By:

Name: Timothy G. Massad

Title: Assistant Secretary for Financial
Stability

[Signature Page to Securities Purchase Agreement]


ARTICLE IV
COVENANTS

Section 4.01 Forbearances of the Seller. From the date hereof until the Closing,
without the prior written consent of the Purchaser, the Seller will not:

(A) — directly or indirectly transfer, sell, assign, distribute, exchange, pledge.
hypothecate, mortgage, encumber or otherwise dispose of or engage in or enter into any hedging
transactions with respect to, any of the Shares, the Warrant or any portion thereof or interest
therein (other than pursuant to the Securities Purchase);

(B) _ exercise the Warrant, in whole or in part; or

(C) agree, commit to or enter into any agreement to take any of the actions
referred to in Section 4.01(A) or Section 4.01(B).

Notwithstanding the foregoing, the Seller may undertake any of the actions set
forth in Section 4.01(A) with an Affiliate of the Seller so long as this Agreement is assigned to
such Affiliate in accordance with Section 7.07 of this Agreement. For the avoidance of doubt,
until the Closing, except as expressly set forth in this Section 4.01, the Seller shall continue to be
able to exercise all rights and privileges with respect to the Shares and the Warrant.

Section 4.02 Further Action. The Seller, the Purchaser and the Company
(A) shall each execute and deliver, or shall cause to be executed and delivered, such documents
and other instruments and shall take, or shall cause to be taken, such further action as may be
reasonably necessary to carry out the provisions of this Agreement and give effect to the
transactions contemplated by this Agreement and (B) shall refrain from taking any actions that
could reasonably be expected to impair, delay or impede the Closing or the consummation of the
transactions contemplated by this Agreement (except as expressly permitted by the Merger
Agreement).

Section 4.03 Merger Agreement. The Purchaser will not agree to any
amendment, modification or waiver of any provision of the Merger Agreement (other than
corrections of obvious errors, if any, appropriate changes in the terms thereof to reflect the terms
of this Agreement and Purchaser’s purchase of the Shares and Warrant from the Seller prior to
completion of the Merger, or other ministerial amendments) to the extent such amendment,
modification or waiver would adversely affect the Seller, without the prior written consent of the
Seller.

Section 4.04 Merger. The Purchaser shall (i) keep the Seller reasonably
apprised of its progress in obtaining necessary regulatory approvals for the Merger, (ii) deliver to
the Seller copies of any written notices the Purchaser and the Company deliver to one another
under the Merger Agreement to the extent such notices relate to such approvals, the failure to
obtain any such approvals or the termination of the Merger Agreement and (iii) provide at least
seven (7) days’ prior written notice of the anticipated Closing Date to the Seller. The Company
shall give the Seller prompt written notice of the approval of the Merger by the holders of the
Company Common Stock.


performing similar functions with respect to such entity is directly or indirectly owned by such
person and/or one or more subsidiaries thereof.

“Warrant” has the meaning set forth in the recitals to this Agreement.

Section 1.02 Interpretation. The words “hereof,” “herein” and “hereunder” and
words of similar import when used in this Agreement shall refer to this Agreement as a whole
and not to any particular provision of this Agreement, and Section references are to this
Agreement unless otherwise specified. Whenever the words “include,” “includes” or
“including” are used in this Agreement, they shall be deemed to be followed by the words
“without limitation.” The term “person” as used in this Agreement shall mean any individual,
corporation, limited liability company, limited or general partnership, joint venture, government
or any agency or political subdivision thereof, or any other entity or any group (as defined in
Section 13(d)(3) of the Exchange Act) comprised of two or more of the foregoing. The table of
contents and headings contained in this Agreement are for reference purposes only and shall not
affect in any way the meaning or interpretation of this Agreement. In this Agreement, all
references to “dollars” or “$” are to United States dollars. This Agreement and any documents
or instruments delivered pursuant hereto or in connection herewith shall be construed without
regard to the identity of the person who drafted the various provisions of the same. Each and
every provision of this Agreement and such other documents and instruments shall be construed
as though all of the parties participated equally in the drafting of the same. Consequently, the
parties acknowledge and agree that any rule of construction that a document is to be construed
against the drafting party shall not be applicable either to this Agreement or such other
documents and instruments.

ARTICLE II
THE SECURITIES PURCHASE

Section 2.01 Purchase and Sale of the Shares and the Warrant. Subject to, and
on the terms and conditions of, this Agreement, effective at the Closing, the Purchaser will
purchase from the Seller, and the Seller will sell, transfer, convey, assign and deliver to the
Purchaser, all of the Shares and the Warrant, free and clear of all Liens. The aggregate purchase
price for the Shares, including all accrued and unpaid dividends on the Shares through and
including the Closing Date, and the Warrant shall be an amount in cash equal to Eight Million
Dollars ($8,000,000) ( the “Purchase Price”).

Section 2.02 Closing of the Securities Purchase. (A) Subject to Article V, the
closing of the Securities Purchase (the “Closing”) shall be held (1) immediately prior to the filing
of the articles of merger with the State of North Carolina pursuant to which the Merger will be
consummated or (2) at such other time or date that is agreed to in writing by the Seller and the
Purchaser (the date on which the Closing occurs, the “Closing Date”). The Closing shall be held
at such place as the Seller and the Purchaser shall mutually agree in writing.

-4-


“Exchange Act” means the U.S. Securities Exchange Act of 1934, as amended.

“Governmental Entity” means any court, administrative agency or commission or
other governmental or regulatory authority or instrumentality or self-regulatory organization.

“Law” means any law, statute, code, ordinance, rule, regulation, judgment, order,
award, writ, decree or injunction issued, promulgated or entered into by or with any
Governmental Entity.

“Liens” means any liens, licenses, pledges, charges, encumbrances, adverse rights
or claims and security interests whatsoever.

“Merger” has the meaning set forth in the recitals to this Agreement.

‘Merger Agreement” has the meaning set forth in the recitals to this Agreement.
“Purchase Price” has the meaning set forth in Section 2.01.

“Purchaser” has the meaning set forth in the introductory paragraph to this
Agreement.

“Regulatory Event” means, with respect to the Company, that (i) the Federal
Deposit Insurance Corporation or any other applicable Governmental Entity shall have been
appointed as conservator or receiver for the Company or any Subsidiary; (ii) the Company or any
Subsidiary shall have been considered in “troubled condition” for the purposes of 12 U.S.C. Sec.
1831i or any regulation promulgated thereunder; (iii) the Company or any Subsidiary shall
qualify as “Undercapitalized,” “Significantly Undercapitalized,” or “Critically Undercapitalized”
as those terms are defined in 12 U.S.C. Sec. 18310 or other applicable Law; or (iv) the Company
or any Subsidiary shall have become subject to any formal or informal regulatory action
requiring the Company or any Subsidiary to materially improve its capital, liquidity or safety and
soundness.

“Relevant Period” means the period in which any obligation of the Company
arising from financial assistance under the Troubled Asset Relief Program remains outstanding,
as it may be further described in the Compensation Regulations.

“Securities Purchase” has the meaning set forth in the recitals in this Agreement.

“Seller” has the meaning set forth in the introductory paragraph to this
Agreement.

“Shares” has the meaning set forth in the recitals to this Agreement.

“Subsidiary” means, with respect to any person, any bank, corporation,
partnership, joint venture, limited liability company or other organization, whether incorporated
or unincorporated, (i) of which such person or a subsidiary of such person is a general partner or
managing member or (ii) at least a majority of the securities or other interests of which having by
their terms ordinary voting power to elect a majority of the board of directors or persons


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

lst FINANCIAL SERVICES CORPORATION

By:
Name: Michael G. Mayer
Title: Chief Executive Officer

FIRST-CITIZENS BANK & TRUST
COMPANY

By

Name: Glenn D. MbCoy } —
Title: Executive Vici ‘Sident and
Chief Financial Officer

UNITED STATES DEPARTMENT OF THE
TREASURY

By:

Name: Timothy G. Massad

Title: Assistant Secretary for Financial
Stability

[Signature Page to Securities Purchase Agreement]


with any other third party by and on behalf of the Purchaser are necessary in connection with the
execution and delivery by the Purchaser of this Agreement and the consummation by the
Purchaser of the transactions contemplated hereby.

(E) Securities Matters. The Shares and the Warrant are being acquired by the
Purchaser for its own account and without a view to the public distribution or sale of the Shares
or the Warrant.

(F) Availability of Funds. The Purchaser has, and will have as of the Closing,
sufficient funds available to consummate the transactions contemplated hereunder.

Section 3.02 Representations and Warranties of the Company. The Company
hereby represents and warrants to the Seller and the Purchaser as follows:

(A) — Existence _and Power. The Company is duly organized and validly
existing as a corporation under the Laws of the State of North Carolina and has all requisite
power and authority to execute and deliver this Agreement and to consummate the transactions
contemplated by this Agreement.

(B) Authorization. The execution and delivery of this Agreement, and the
consummation by the Company of the transactions contemplated hereby, have been duly and
validly approved by all necessary corporate action of the Company, and no other corporate or
shareholder proceedings on the part of the Company are necessary to approve this Agreement or
to consummate the transactions contemplated hereby. This Agreement has been duly and validly
executed and delivered by the Company, and (assuming the due authorization, execution and
delivery of this Agreement by the Seller and the Purchaser) this Agreement constitutes a valid
and binding obligation of the Company, enforceable against the Company in accordance with its
terms, except as enforcement may be limited by general principles of equity whether applied in a
court of law or a court of equity and by bankruptcy, insolvency and similar Laws affecting
creditors’ rights and remedies generally.

(C) Non-Contravention. Neither the execution and delivery of this Agreement
nor the consummation by the Company of the transactions contemplated hereby, will violate any
provision of the charter or bylaws or similar governing documents of the Company or, assuming
that the consents, approvals, filings and registrations referred to in Section 3.02(D) are received
or made (as applicable), applicable Law.

(D) Consents and Approvals. Except for any consents, approvals, filings or
registrations required in connection with the transactions contemplated by the Merger
Agreement, no consents or approvals of, or filings or registrations with, any Governmental Entity
or of or with any other third party by and on behalf of the Company are necessary in connection
with the execution and delivery by the Company of this Agreement and the consummation by the
Company of the transactions contemplated hereby.


EXECUTION VERSION

SECURITIES PURCHASE AGREEMENT

by and among

THE UNITED STATES DEPARTMENT OF THE TREASURY,

FIRST-CITIZENS BANK & TRUST COMPANY

and

1ST FINANCIAL SERVICES CORPORATION

Dated as of October 15, 2013



(C) No Injunctions or Restraints; Illegality. No order, injunction or decree
issued by any court or agency of competent jurisdiction or other legal restraint or prohibition
preventing the consummation of the Securities Purchase shall be in effect. No Law shall have
been enacted, entered, promulgated or enforced by any Governmental Entity which prohibits or
makes illegal the consummation of the Securities Purchase.

Section 5.02 Conditions to Obligations of the Seller. The obligation of the
Seller to consummate the Securities Purchase is also subject to the fulfillment, or written waiver
by the Seller, prior to the Closing, of the following conditions:

(A) Other Events. None of the following shall have occurred since the date
hereof:

qd) the Company or any of its Subsidiaries shall have (a) dissolved (other than
pursuant to a consolidation, amalgamation or merger); (b) become insolvent or unable to
pay its debts or failed or admitted in writing its inability generally to pay its debts as they
become due; (c) made a general assignment, arrangement or composition with or for the
benefit of its creditors; (d) instituted or have instituted against it a proceeding seeking a
judgment of insolvency or bankruptcy or any other relief under any bankruptcy or
insolvency law or other similar law affecting creditors’ rights, or a petition shall have
been presented for its winding-up or liquidation, and, in the case of any such proceeding
or petition instituted or presented against it, such proceeding or petition shall have
resulted in a judgment of insolvency or bankruptcy or the entry of an order for relief or
the making of an order for its winding-up or liquidation; (e) had a resolution passed for
its winding-up, official management or liquidation (other than pursuant to a
consolidation, amalgamation or merger); (f) sought or shall have become subject to the
appointment of an administrator, provisional liquidator, conservator, receiver, trustee,
custodian or other similar official for it or for all or substantially all its assets; (g) had a
secured party take possession of all or substantially all its assets or had a distress,
execution, attachment, sequestration or other legal process levied, enforced or sued on or
against all or substantially all its assets; (h) caused or shall have been subject to any event
with respect to which, under the applicable laws of any jurisdiction, had an analogous
effect to any of the events specified in clauses (a) to (g) (inclusive); or (i) taken any
action in furtherance of, or indicating its consent to, approval of, or acquiescence in, any
of the foregoing acts;

(2) a Governmental Entity in any jurisdiction shall have (a) commenced an
action or proceeding against the Company or any of its Subsidiaries; or (b) issued or
entered a temporary restraining order, preliminary or permanent injunction or other order
binding upon the Company or any of its Subsidiaries, which in the case of (a) and (b)
shall have had or shall be reasonably expected to have a Company Material Adverse
Effect;

(3) any fact, circumstance, event, change, occurrence, condition or

development shall have occurred that, individually or in the aggregate, shall have had or
shall be reasonably likely to have a Company Material Adverse Effect; or

-9-


Section 4.05 Remaining Certification and Disclosure Requirements. The
Company and the Purchaser acknowledge, the Company agrees to comply with, and following
the Closing, the Purchaser agrees to cause the Company and its successors to comply with, the
certification and disclosure requirements set forth in the Compensation Regulations, including
without limitation those submissions that are required with respect to the final portion of the
Relevant Period (see, for example, Sections 30.7(c) and (d), Sections 30.11(b) and (c) and
Section 30.15(a)(3) of the Compensation Regulations and FAQ-14 in the Frequently Asked
Questions to the Compensation Regulations, available at www. financialstability.gov).

Section 4.06 Transferability Restrictions Related_to Long-Term Restricted
Stock. The Company and the Purchaser acknowledge that any long-term restricted stock (as
defined in Section 30.1 of the Compensation Regulations) awarded by the Company that has
otherwise vested may not become transferable, or payable in the case of a restricted stock unit, at
any time earlier than as permitted under the schedule set forth in the definition of long-term
restricted stock in Section 30.1 of the Compensation Regulations. For this purpose, aggregate
financial assistance received (for purposes of the definition of long-term restricted stock)
includes the full original liquidation amount with respect to 16,369 Shares (see FAQ-15 in the
Frequently Asked Questions to the Compensation Regulations, available at
www.financialstability.gov). Upon the sale of the Shares to the Purchaser, in the event that any
long-term restricted stock awarded by the Company is not permitted to become transferable, or
payable in the case of a restricted stock unit, under the schedule set forth in the definition of
long-term restricted stock in Section 30.1 of the Compensation Regulations, the Company shall
cancel such long-term restricted stock and/or restricted stock units.

Section 4.07 Executive Compensation. Neither the Company nor the Purchaser
shall take any action that will result in, nor will the Company or the Purchaser permit, directly or
indirectly, the acceleration, vesting, enhancement or increase in the payments or benefits that
would otherwise become due as a result of the consummation of the Merger to any current or
former executive officers of the Company.

ARTICLE V

CONDITIONS TO THE CLOSING

Section 5.01 Conditions to Each Party’s Obligations. The respective obligations
of each of the Purchaser and the Seller to consummate the Securities Purchase are subject to the
fulfillment, or written waiver by the Purchaser and the Seller, prior to the Closing, of each of the
following conditions:

(A) — Satisfaction of Conditions Precedent_to the Merger. All conditions
precedent to the Merger set forth in the Merger Agreement (other than those conditions that by
their nature are to be satisfied at the closing of the Merger) shall have been satisfied or waived.

(B) Regulatory Approvals. All regulatory approvals required to consummate
the Securities Purchase shall have been obtained and shall remain in full force and effect and all
statutory waiting periods in respect thereof shall have expired or been terminated.


(B) At the Closing, or simultaneously therewith, the following shall occur:

qd) the Seller will deliver to the Purchaser certificates for the Shares and the
Warrant, duly endorsed in blank or accompanied by stock powers duly endorsed in blank
or other required instruments of transfer; and

(2) the Purchaser will pay the Purchase Price to the Seller, by wire transfer in
immediately available funds, to an account designated in writing by the Seller to the
Purchaser, such designation to be made not later than two (2) Business Days prior to the
Closing Date.

ARTICLE III

REPRESENTATIONS AND WARRANTIES

Section 3.01 Representations and Warranties of the Purchaser. The Purchaser
hereby represents and warrants to the Seller as follows:

(A) — Existence _and Power. The Purchaser is duly organized and validly
existing as a state-chartered bank under the Laws of the State of North Carolina and has all
requisite power and authority to execute and deliver this Agreement and, assuming that the
consents, approvals, filings and registrations referred to in Section 3.01(D) are received or made
(as applicable), to consummate the transactions contemplated by this Agreement.

(B) Authorization. The execution and delivery of this Agreement, and the
consummation by the Purchaser of the transactions contemplated hereby, have been duly and
validly approved by all necessary corporate action of the Purchaser, and no other corporate or
shareholder proceedings on the part of the Purchaser are necessary to approve this Agreement or
to consummate the transactions contemplated hereby. This Agreement has been duly and validly
executed and delivered by the Purchaser, and (assuming the due authorization, execution and
delivery of this Agreement by the Seller and the Company) this Agreement constitutes a valid
and binding obligation of the Purchaser, enforceable against the Purchaser in accordance with its
terms, except as enforcement may be limited by general principles of equity whether applied in a
court of law or a court of equity and by bankruptcy, insolvency and similar Laws affecting
creditors’ rights and remedies generally.

(C) Non-Contravention. Neither the execution and delivery of this Agreement
nor the consummation by the Purchaser of the transactions contemplated hereby, will violate any
provision of the charter or bylaws or similar governing documents of the Purchaser or, assuming
that the consents, approvals, filings and registrations referred to in Section 3.01(D) are received
or made (as applicable), applicable Law.

(D) Consents and Approvals. Except for any consents, approvals, filings or
registrations required in connection with the transactions contemplated by the Merger
Agreement, and required filings with and approvals of bank regulatory authorities, if any, under
applicable banking law and regulations for Purchaser’s purchase of the Shares and the Warrant,
no consents or approvals of, or filings or registrations with, any Governmental Entity or of or

-5-


SECURITIES PURCHASE AGREEMENT

THIS SECURITIES PURCHASE AGREEMENT (as amended, supplemented
or otherwise modified from time to time, this “Agreement”) is dated as of October 15, 2013, by
and among the United States Department of the Treasury (the “Seller”), First-Citizens Bank &
Trust Company, a state-chartered bank organized under the laws of the State of North Carolina
(the “Purchaser”) and 1st Financial Services Corporation, a North Carolina corporation (the

“Company”).
RECITALS

WHEREAS, the Seller is currently the owner of and holds (i) 16,369 shares of
Class B Preferred Stock, Series A, of the Company (the “Shares”) and (ii) a ten-year warrant to
purchase 276,815 shares of Company Common Stock (the “Warrant”);

WHEREAS, on August 28, 2013, the Purchaser, the Company and Mountain 1"
Bank & Trust Company entered into an Agreement and Plan of Merger (the “Merger
Agreement”), pursuant to which, among other things and subject to the terms and conditions set
forth therein, (i) the Company will merge with and into the Purchaser, with the Purchaser
continuing thereafter as the surviving corporation and (ii) each outstanding share of Common
Stock will convert into the right to receive the Merger Consideration (as defined in the Merger
Agreement) (collectively, the “Merger”); and

WHEREAS, the Seller desires to sell to the Purchaser, and the Purchaser desires
to purchase from the Seller, subject to the terms and conditions contained in this Agreement, all
of the Shares and the Warrant (the “Securities Purchase”).

NOW, THEREFORE, in consideration of the premises, and of the various
representations, warranties, covenants and other agreements and undertakings of the parties
hereto, and other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereby agree as follows:

AGREEMENT

ARTICLE I

DEFINITIONS

Section 1.01 Definitions of Certain Terms. For purposes of this Agreement, the
following terms are used with the meanings assigned below (such definitions to be equally
applicable to both the singular and plural forms of the terms herein defined):

“Affiliate” means, with respect to any person, any person directly or indirectly
controlling, controlled by or under common control with, such other person. For purposes of this
definition, “control” (including, with correlative meanings, the terms “controlled by” and “under


Section 7.05 Notices. All notices and other communications hereunder shall be
in writing and shall be deemed given on the date of delivery if delivered personally or telecopied
(upon telephonic confirmation of receipt), on the first Business Day following the date of
dispatch if delivered by a recognized next day courier service, or on the third Business Day
following the date of mailing if delivered by registered or certified mail, return receipt requested,
postage prepaid. All notices hereunder shall be delivered as set forth below or pursuant to such
other instructions as may be designated in writing by the party to receive such notice:

If to the Purchaser to:

First-Citizens Bank & Trust Company
4300 Six Forks Road
Raleigh, North Carolina 27609
Facsimile: (919) 716-7518
Attention: Barry P. Harris, 1V, Chief Legal Officer
Barry.Harris@firstcitizens.com
With a copy to:

Ward and Smith, P.A.

1001 College Court

New Bern, North Carolina 28562

Facsimile: (252) 672-5477

Attention: William R. Lathan, Jr.
wrl@wardandsmith.com

If to the Company to:

1st Financial Services Corporation

101 Jack Street

Hendersonville, North Carolina 28792

Facsimile: (828) 697-3091

Attention: Michael G. Mayer, Chief Executive Officer

With a copy to:

Brooks, Pierce, McLendon, Humphrey & Leonard, LLP
2000 Renaissance Plaza

230 North Elm Street

Greensboro, North Carolina 27401

Facsimile: (336) 232-9123

Attention: Robert A. Singer

-12-


faith in an effort to agree upon a suitable and equitable substitute provision to effect the original
intent of the parties.

[Remainder of page intentionally left blank]

-14-


Section 7.05
Section 7.06
Section 7.07
Section 7.08

Notices. .....cecee
Entire Understanding: No Third Party Beneficiaries.

-li-



ARTICLE I

Section 1.01
Section 1.02

ARTICLE II

Section 2.01
Section 2.02

ARTICLE IIL

Section 3.01
Section 3.02

ARTICLE IV

Section 4.01
Section 4.02
Section 4.03
Section 4.04
Section 4.05
Section 4.06
Section 4.07

ARTICLE V

Section 5.01
Section 5.02

ARTICLE VI

Section 6.01
Section 6.02

ARTICLE VII

Section 7.01
Section 7.02
Section 7.03
Section 7.04

TABLE OF CONTENTS

Definitions of Certain Terms. .........ccscccscessesseseeseeseeseeseesesessesnesneseseeseesesseeseeneaee 1
Interpretation... eceececseseeseseseesesesscsesescsnsrcacssscansncacsnsnsansecasansucacssacaesnsaeeeeneeeeney 4
THE SECURITIES PURCHASE ......c.ccccceceseseseseseseseseseseseseseseseseseseseseseseseseseaeees 4

Purchase and Sale of the Shares and the Warrant..
Closing of the Securities Purchase.

REPRESENTATIONS AND WARRANTIES. .....cccscssesssesessesseeseesesseeseessesesseenees

Representations and Warranties of the Purchaser.
Representations and Warranties of the Company..

COVENANTS ....ccsscssesseesessesseeseesessesssesesucsussnssecsecscseesessesssenssusenssessessessesseeseessenses 7

Forbearances of the Seller.
Further Action......
Merger Agreement
Merger.........++
Remaining Certification and Disclosure Requirements
Transferability Restrictions Related to Long-Term Restricted Stoc!
Executive Compensation. ..........ccsssesesessesessesessessseereseeesneaseeeneaeeneneees

CONDITIONS TO THE CLOSING .......cccecssesessssesseseseessessessseessseseessseesesseeeneeee 8

Conditions to Each Party’s Obligations.
Conditions to Obligations of the Seller.

TERMINATION. .....ccccccssessecseesecsessesseessssesssssescscsesseeseesesssessssesssensassecsnssessesseess 10

Termination Events.
Effect of Terminatio:

Waiver; Amendment.
Counterparts...
Governing Law; Choice of Forum; Waiver of Jury Trial.
EXPeMse. o..ececeeceseseeseseseseseseseseseseseseassesssessseasseasseessees

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(4) any Regulatory Event not otherwise existing on the date hereof.

(B) Representations and Warranties. The representations and warranties set
forth in Article III of this Agreement shall be true and correct as though made on and as of the
Closing Date.

(C) Consents and Approvals. All consents and approvals of, and filings and
registrations with, all Governmental Entities and of or with any other third party by and on
behalf of the Company and the Purchaser that are necessary in connection with the execution and
delivery by the Company and the Purchaser of this Agreement and the consummation by the
Company and the Purchaser of the transactions contemplated hereby shall have been obtained or
made, as applicable, and shall remain in full force and effect.

(D) Performance Obligations. The Purchaser shall have performed in all
material respects all obligations required to be performed by it under this Agreement at or prior
to the Closing.

(E) — Closing Certificate. The Purchaser shall deliver to the Seller a certificate,
signed on behalf of the Purchaser by a senior executive officer thereof, dated as of the Closing
Date, certifying to the effect that all conditions precedent to the Closing have been satisfied.

ARTICLE VI

TERMINATION

Section 6.01 Termination Events. This Agreement may be terminated at any
time prior to the Closing:

(A) _ by mutual written agreement of the Purchaser and the Seller; or

(B) _ by the Purchaser, upon written notice to the Seller, or by the Seller, upon
written notice to the Purchaser, in the event that the Closing Date does not occur on or before
April 30, 2014; provided, however, that the respective rights to terminate this Agreement
pursuant to this Section 6.01(B) shall not be available to any party whose failure to fulfill any
obligation under this Agreement shall have been the cause of, or shall have resulted in, the
failure of the Closing Date to occur on or prior to such date.

This Agreement shall automatically terminate upon the termination of the Merger
Agreement in accordance with its terms.

Section 6.02 Effect_of Termination. In the event of termination of this
Agreement as provided in Section 6.01, this Agreement shall forthwith become void and have no
effect, and none of the Seller, the Company, the Purchaser, any affiliates of the Seller, Company
or the Purchaser or any officers, directors or employees of the Seller, the Company or the
Purchaser or any of their respective affiliates shall have any liability of any nature whatsoever
hereunder, or in connection with the transactions contemplated hereby, except that this

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If to the Seller to:

United States Department of the Treasury

1500 Pennsylvania Avenue, NW

Washington, D.C. 20220

Facsimile: (202) 927-9225

Attention: Chief Counsel Office of Financial Stability

With a copy to:

Cadwalader, Wickersham & Taft LLP
One World Financial Center

New York, New York 10281
Facsimile: (212) 504-6666
Attention: William P. Mills

Section 7.06 Entire Understanding: No Third Party Beneficiaries. This
Agreement (together with the documents, agreements and instruments referred to herein)
represents the entire understanding of the parties with respect to the subject matter hereof and
supersedes any and all other oral or written agreements heretofore made with respect to the
subject matter hereof. Nothing in this Agreement, expressed or implied, is intended to confer
upon any person, other than the parties hereto, any rights or remedies hereunder.

Section 7.07 Assignment. Neither this Agreement nor any right, remedy,
obligation or liability arising hereunder or by reason hereof shall be assignable by any party
hereto without the prior written consent of the other parties, and any attempt to assign any right,
remedy, obligation or liability hereunder without such consent shall be null and void; provided,
however, that the Seller may assign this Agreement to an Affiliate of the Seller. If the Seller
assigns this Agreement to an Affiliate, the Seller shall be relieved of its obligations and liabilities
under this Agreement but (i) all rights, remedies, obligations and liabilities of the Seller
hereunder shall continue and be enforceable by and against and assumed by such Affiliate,
(ii) the Purchaser’s obligations and liabilities hereunder shall continue to be outstanding and
(iii) all references to the Seller herein shall be deemed to be references to such Affiliate. The
Seller will give the Purchaser and the Company notice of any such assignment; provided, that the
failure to provide such notice shall not void any such assignment.

Section 7.08 Severability. Any term or provision of this Agreement which is
determined by a court of competent jurisdiction to be invalid, illegal or unenforceable in any
jurisdiction shall, as to that jurisdiction, be ineffective to the extent of such invalidity or
unenforceability without rendering invalid, illegal or unenforceable the remaining terms and
provisions of this Agreement. or affecting the validity, legality or enforceability of any of the
terms or provisions of this Agreement in any other jurisdiction, and if any provision of this
Agreement is determined to be so broad as to be unenforceable, the provision shall be interpreted
to be only so broad as is enforceable, in all cases so long as neither the economic nor legal
substance of the transactions contemplated hereby is affected in any manner materially adverse
to any party or its shareholders. Upon any such determination, the parties shall negotiate in good

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