Execution Version

EXCHANGE AGREEMENT

by and between

HARBOR BANKSHARES CORPORATION

and

THE UNITED STATES DEPARTMENT OF THE TREASURY

Dated as of July 13, 2018
-iTABLE OF CONTENTS

Page

ARTICLE I

THE CLOSING; CONDITIONS TO THE CLOSING

Section 1.1 The Closing........................................................................................................1

Section 1.2 Interpretation......................................................................................................4

ARTICLE II

EXCHANGE

Section 2.1 Preferred Exchange............................................................................................5

Section 2.2 Exchange Documentation ..................................................................................5

Section 2.3 Status of Preferred Shares after Closing ............................................................5

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

Section 3.1 Existence and Power..........................................................................................6

Section 3.2 Authorization and Enforceability.......................................................................6

Section 3.3 Exchange Shares................................................................................................7

Section 3.4 Non-Contravention ............................................................................................7

Section 3.5 Anti-Takeover Provisions and Rights Plan........................................................8

Section 3.6 No Company Material Adverse Effect ..............................................................8

Section 3.7 Offering of Securities.........................................................................................8

Section 3.8 Brokers and Finders...........................................................................................8

ARTICLE IV

COVENANTS

Section 4.1 Commercially Reasonable Efforts.....................................................................9

Section 4.2 Expenses ............................................................................................................9

Section 4.3 Intentionally Omitted.........................................................................................9

Section 4.4 Access, Information and Confidentiality ...........................................................9

Section 4.5 Executive Compensation .................................................................................10

Section 4.6 Certain Notifications Until Closing .................................................................11

Section 4.7 Monthly Lending Reports................................................................................11

Section 4.8 Intentionally Omitted.......................................................................................12

Section 4.9 Intentionally Omitted.......................................................................................12

Section 4.10 Remaining Certification and Disclosure Requirements...................................12

Section 4.11 Transferability Restrictions Related to Long-Term Restricted Stock..............12
-iiARTICLE V

ADDITIONAL AGREEMENTS

Section 5.1 Unregistered Exchange Shares ........................................................................12

Section 5.2 Legend..............................................................................................................13

Section 5.3 Certain Transactions ........................................................................................13

Section 5.4 Transfer of Exchange Shares...........................................................................14

Section 5.5 Registration Rights...........................................................................................14

Section 5.6 Voting Matters.................................................................................................14

Section 5.7 Restriction on Dividends and Repurchases......................................................15

Section 5.8 Intentionally Omitted.......................................................................................16

Section 5.9 Bank Holding Company Status........................................................................16

Section 5.10 Compliance with Employ American Workers Act ..........................................16

Section 5.11 Observer to the Board of Directors..................................................................16

ARTICLE VI

MISCELLANEOUS

Section 6.1 Termination......................................................................................................17

Section 6.2 Survival of Representations and Warranties....................................................18

Section 6.3 Amendment......................................................................................................18

Section 6.4 Waiver of Conditions.......................................................................................18

Section 6.5 Governing Law; Submission to Jurisdiction, etc. ............................................18

Section 6.6 Notices .............................................................................................................18

Section 6.7 Definitions........................................................................................................19

Section 6.8 Assignment ......................................................................................................21

Section 6.9 Severability ......................................................................................................22

Section 6.10 No Third-Party Beneficiaries...........................................................................22

Section 6.11 Entire Agreement, etc. .....................................................................................22

Section 6.12 Counterparts and Facsimile..............................................................................22

Section 6.13 Specific Performance .......................................................................................22

LIST OF ANNEXES

ANNEX A: FORM OF OPINION

ANNEX B: FORM OF WAIVER

LIST OF SCHEDULES

SCHEDULE A: CAPITALIZATION
-iTerm Section

Affiliate .................................................................................................. 6.7(b)

Agreement.............................................................................................. Preamble

Bank ....................................................................................................... 3.1(a)

Benefit Plans.......................................................................................... 1.1(d)(v)

Business Combination ........................................................................... 6.7(c)

Capitalization Date................................................................................. 3.1(b)

Cash Consideration ............................................................................... Recitals

Closing ................................................................................................... 1.1(a)

Closing Date........................................................................................... 1.1(a)

Code ....................................................................................................... 3.4(c)

Common Stock....................................................................................... Recitals

Company................................................................................................ Preamble

Company Material Adverse Effect ........................................................ 6.7(d)

Company Subsidiaries ........................................................................... 4.4(a)

Compensation Regulations .................................................................... 1.1(d)(v)

Designated Matters ................................................................................ 6.7(e)

EAWA.................................................................................................... 6.7(f)

EESA...................................................................................................... 1.1(d)(v)

Exchange Act......................................................................................... 5.3(b)

Exchange Shares.................................................................................... 6.7(g)

Governmental Entities ........................................................................... 1.1(c)

Information ............................................................................................ 4.4(c)

Investor .................................................................................................. Preamble

Junior Stock ........................................................................................... 6.7(g)

Observer................................................................................................. 5.11

Parity Stock............................................................................................ 6.7(h)

Permitted Repurchases........................................................................... 5.7(a)(iii)

Preferred Shares..................................................................................... Recitals

Preferred Stock....................................................................................... 6.7(i)

Regulatory Event ................................................................................... 6.7(j)

Relevant Period...................................................................................... 1.1(d)(v)

Section 4.5 Employee ............................................................................ 4.5(b)

Securities Act......................................................................................... 3.1(a)

Securities Purchase Agreement.............................................................. Recitals

Senior Executive Officers...................................................................... 1.1(d)(v)

Series A Preferred Shares ...................................................................... Recitals

Subsidiary .............................................................................................. 6.7(a)

Transfer.................................................................................................. 5.4
EXCHANGE AGREEMENT

THIS EXCHANGE AGREEMENT, dated as of July 13, 2018 (this 

“Agreement”), is made by and between Harbor Bankshares Corporation, a Maryland corporation 

(the “Company”), and the United States Department of the Treasury (the “Investor”). All 

capitalized terms used herein and not otherwise defined shall have the respective meanings 

ascribed to them in the Securities Purchase Agreement.

BACKGROUND

WHEREAS, the Investor is, as of the date hereof, the beneficial owner of 6,800

shares of the Company’s preferred stock designated as “Fixed Rate Cumulative Perpetual 

Preferred Stock, Series A”, having a liquidation amount of $1,000 per share (the “Preferred 

Shares”);

WHEREAS, the Company issued the Preferred Shares pursuant to that certain 

Securities Purchase Agreement – Standard Terms incorporated into a Letter Agreement, dated as 

of July 17, 2009 (the “Securities Purchase Agreement”);

WHEREAS, the Company and the Investor desire, to exchange all of the 

Preferred Shares and all accrued and unpaid dividends payable on the Preferred Shares 

beneficially owned and held by the Investor for 5,491,843 shares (the “Exchange Shares”) of the 

Company’s common stock, par value $0.01 per share (the “Common Stock”) and a cash payment 

of two million two hundred and seventy-two thousand six hundred seventeen U.S. dollars

($2,272,617) (the “Cash Consideration”);

NOW, THEREFORE, in consideration of the mutual covenants and agreements 

contained in this Agreement, the receipt and sufficiency of which are hereby acknowledged, and 

intending to be legally bound, the parties hereby agree as follows: 

ARTICLE I

THE CLOSING; CONDITIONS TO THE CLOSING

Section 1.1 The Closing.

(a) The closing of the Exchange (the “Closing”) will take place at the offices of 

Cadwalader, Wickersham & Taft LLP, 200 Liberty Street, New York, New York 10281, or 

remotely via the electronic or other exchange of documents and signature pages, as the 

parties may agree. The Closing shall take place at such other place, time and date as shall

be agreed between the Company and the Investor. The time and date on which the Closing 

occurs is referred to in this Agreement as the “Closing Date”.

(b) Subject to the fulfillment or waiver of the conditions to the Closing in this 

Section 1.1, at the Closing (i) the Company will deliver (a) the Exchange Shares to the 

Investor, as evidenced by one or more certificates dated the Closing Date and registered in 
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the name of the Investor or its designee(s) (or if shares of Common Stock are 

uncertificated, cause the transfer agent for the Common Stock to register the Exchange 

Shares in the name of the Investor and deliver reasonably satisfactory evidence of such 

registration to the Investor) and (b) the Cash Consideration and (ii) the Investor will deliver 

the certificates representing the Preferred Shares to the Company.

(c) The respective obligations of each of the Investor and the Company to 

consummate the Exchange are subject to the fulfillment (or waiver by the Company and the 

Investor, as applicable) prior to the Closing of the conditions that (i) any approvals or 

authorizations of all United States and other governmental, regulatory or judicial 

authorities (collectively, “Governmental Entities”) required for the consummation of the 

Exchange shall have been obtained or made in form and substance reasonably satisfactory 

to each party and shall be in full force and effect and all waiting periods required by United 

States and other applicable law, if any, shall have expired and (ii) no provision of any 

applicable United States or other law and no judgment, injunction, order or decree of any 

Governmental Entity shall prohibit consummation of the Exchange as contemplated by this 

Agreement.

(d) The obligation of the Investor to consummate the Exchange is also subject 

to the fulfillment (or waiver by the Investor) at or prior to the Closing of each of the 

following conditions:

(i) (A) the representations and warranties of the Company set forth in 

Article III of this Agreement shall be true and correct in all respects as though 

made on and as of the Closing Date (other than representations and warranties 

that by their terms speak as of another date, which representations and 

warranties shall be true and correct in all respects as of such other date) and 

(B) the Company shall have performed in all material respects all obligations 

required to be performed by it under this Agreement at or prior to the Closing;

(ii) the Investor shall have received a certificate signed on behalf of 

the Company by a senior executive officer certifying to the effect that the 

conditions set forth in this Section 1.1(d) have been satisfied;

(iii) the Company shall have delivered certificates in proper form or, 

with the prior consent of the Investor, evidence in book entry form, evidencing 

the Exchange Shares to the Investor or its designee(s);

(iv) the Company shall have delivered to the Investor a written opinion 

from counsel to the Company, addressed to the Investor and dated as of the 

Closing Date, in substantially the form attached hereto as Annex A; and

(v) (A) the Company shall have effected such changes to its 

compensation, bonus, incentive and other benefit plans, arrangements and 

agreements (including golden parachute, severance and employment 

agreements) (collectively, “Benefit Plans”) with respect to its Senior Executive 

Officers and any other employees of the Company or its Affiliates subject to 
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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 (“EESA”), as implemented by any guidance, rule or regulation 

thereunder, as the same shall be in effect from time to time (collectively, the 

“Compensation Regulations”) (and to the extent necessary for such changes to 

be legally enforceable, each of its Senior Executive Officers and other 

employees shall have duly consented in writing to such changes), as may be 

necessary, during the period in which any obligation of the Company arising 

from financial assistance under the Troubled Asset Relief Program remains 

outstanding (such period, as it may be further described in the Compensation 

Regulations, the “Relevant Period”), in order to comply with Section 111 of 

EESA or the Compensation Regulations and (B) the Investor shall have 

received a certificate signed on behalf of the Company by a Senior Executive 

Officer certifying to the effect that the condition set forth in Section 

1.1(d)(v)(A) has been satisfied; “Senior Executive Officers” means the 

Company’s “senior executive officers” as defined in Section 111 of the EESA 

and the Compensation Regulations; and

(vi) none of the following shall have occurred with respect to the 

Company or any Company Subsidiary:

(A) the Company or any Company Subsidiary shall have (1) 

dissolved (other than pursuant to a consolidation, amalgamation or 

merger); (2) 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; (3) made a general assignment, arrangement or 

composition with or for the benefit of its creditors; (4) 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; (5) had a resolution passed for 

its winding-up, official management or liquidation (other than pursuant 

to a consolidation, amalgamation or merger); (6) 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; (7) 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; 

(8) caused or shall have been subject to any event with respect to it 

which, under the applicable laws of any jurisdiction, had an analogous 

effect to any of the events specified in clauses (1) to (7) (inclusive); or 
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(9) taken any action in furtherance of, or indicating its consent to, 

approval of, or acquiescence in, any of the foregoing acts;

(B) a Governmental Entity in any jurisdiction shall have (1) 

commenced an action or proceeding against the Company or any 

Company Subsidiary; or (2) issued or entered a temporary restraining 

order, preliminary or permanent injunction or other order applicable to 

the Company or any Company Subsidiary, which in the case of (1) and 

(2) shall have had or shall be reasonably expected to have a Company 

Material Adverse Effect;

(C) 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

(D) any Regulatory Event not otherwise existing on the date 

hereof.

Section 1.2 Interpretation. When a reference is made in this 

Agreement to “Recitals,” “Articles,” “Sections,” “Annexes” or “Schedules” such reference shall 

be to a Recital, Article or Section of, or Annex or Schedule to, this Agreement, unless otherwise 

indicated. The terms defined in the singular have a comparable meaning when used in the plural, 

and vice versa. References to “herein”, “hereof”, “hereunder” and the like refer to this 

Agreement as a whole and not to any particular section or provision, unless the context requires 

otherwise. The table of contents and headings contained in this Agreement are for reference 

purposes only and are not part of this Agreement. Whenever the words “include,” “includes” or 

“including” are used in this Agreement, they shall be deemed followed by the words “without 

limitation.” No rule of construction against the draftsperson shall be applied in connection with 

the interpretation or enforcement of this Agreement, as this Agreement is the product of 

negotiation between sophisticated parties advised by counsel. All references to “$” or “dollars” 

mean the lawful currency of the United States of America. Except as expressly stated in this 

Agreement, all references to any statute, rule or regulation are to the statute, rule or regulation as 

amended, modified, supplemented or replaced from time to time (and, in the case of statutes, 

include any rules and regulations promulgated under the statute) and to any section of any 

statute, rule or regulation include any successor to the section. References to a “business day” 

shall mean any day except Saturday, Sunday and any day on which banking institutions in the 

State of New York or the State of Maryland generally are authorized or required by law or other 

governmental actions to close.
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ARTICLE II

EXCHANGE

Section 2.1 Preferred Exchange. 

(a) On the terms and subject to the conditions set forth in this Agreement, upon 

the Closing (i) the Company agrees to issue and deliver to the Investor, in exchange for the 

Preferred Shares (including all accrued and unpaid dividends payable on the Preferred 

Shares through and including the Closing Date), the Exchange Shares and the Cash 

Consideration and (ii) the Investor agrees to deliver to the Company the Preferred Shares in 

exchange for the Exchange Shares and the Cash Consideration. 

(b) Following consummation of the Exchange, the Preferred Shares will no 

longer be outstanding, the Investor will have no rights with respect thereto and no accrued 

and unpaid dividends shall be payable and no future dividends shall accrue or be payable in 

respect of the Preferred Shares outstanding immediately prior to the Closing Date.

(c) In the event the Company at any time or from time to time prior to the 

Closing effects a stock dividend, stock split, reverse stock split, combination, 

reclassification or similar transaction, concurrently with the effectiveness of such stock 

dividend, stock split, reverse stock split, combination, reclassification or other similar 

transaction, the number of Exchange Shares shall be proportionally adjusted; provided that 

nothing in this Section 2.1(c) shall be construed to permit the Company to take any action 

otherwise prohibited or restricted by this Agreement.

Section 2.2 Exchange Documentation. Settlement of the Exchange 

will take place on the Closing Date, at which time the Investor will cause delivery of the 

Preferred Shares to the Company or its designated agent and the Company will cause delivery of 

the Exchange Shares and the Cash Consideration to the Investor or its designated agent.

Section 2.3 Status of Preferred Shares after Closing. The Preferred 

Shares exchanged for the Exchange Shares and the Cash Consideration pursuant to this Article II 

are being reacquired by the Company and, upon Closing, shall have the status of authorized but 

unissued shares of Preferred Stock of the Company undesignated as to series and may be 

designated or redesignated and issued or reissued, as the case may be, as part of any series of 

preferred stock of the Company; provided that such shares shall not be reissued as Preferred 

Shares.

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

The Company represents and warrants to the Investor as of the date hereof and as of the 

Closing Date that:
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Section 3.1 Existence and Power.

(a) Organization, Authority and Significant Subsidiaries. The Company is duly 

organized, validly existing and in good standing under the laws of the State of Maryland 

and has all necessary power and authority to own, operate and lease its properties and to 

carry on its business in all material respects as it is being currently conducted, and except 

as has not, individually or in the aggregate, had and would not reasonably be expected to 

have a Company Material Adverse Effect, has been duly qualified as a foreign corporation 

for the transaction of business and is in good standing under the laws of each other 

jurisdiction in which it owns or leases properties or conducts any business so as to require 

such qualification; each subsidiary of the Company that is a “significant subsidiary” within 

the meaning of Rule 1-02(w) of Regulation S-X under the Securities Act of 1933, as 

amended (the “Securities Act”), including, without limitation, The Harbor Bank of 

Maryland (the “Bank”), has been duly organized and is validly existing in good standing 

under the laws of its jurisdiction of organization. The charter and bylaws of the Company, 

copies of which have been provided to the Investor prior to the date hereof, are true, 

complete and correct copies of such documents as in full force and effect as of the date 

hereof.

(b) Capitalization. The authorized capital stock of the Company and the 

outstanding capital stock of the Company (including securities convertible into, or 

exercisable or exchangeable for, capital stock of the Company) as of July 1, 2018 (the 

“Capitalization Date”) is set forth on Schedule A. The outstanding shares of capital stock 

of the Company have been duly authorized and are validly issued and outstanding, fully 

paid and nonassessable, and subject to no preemptive rights (and were not issued in 

violation of any preemptive rights). As of the date hereof, the Company does not have 

outstanding any securities or other obligations providing the holder the right to acquire 

Common Stock that is not reserved for issuance as specified on Schedule A, and the 

Company has not made any other commitment to authorize, issue or sell any Common 

Stock except pursuant to this Agreement. Since the Capitalization Date, except pursuant to 

this Agreement, the Company has not issued any shares of Common Stock other than (i) 

shares issued upon the exercise of stock options or delivered under other equity-based 

awards or other convertible securities or warrants which were issued and outstanding on the 

Capitalization Date and disclosed on Schedule A and (ii) shares disclosed on Schedule A.

Section 3.2 Authorization and Enforceability.

(a) The Company has the corporate power and authority to execute and deliver 

this Agreement and to carry out its obligations hereunder and thereunder (which includes 

the issuance of the Exchange Shares).

(b) The execution, delivery and performance by the Company of this 

Agreement and the consummation of the transactions contemplated hereby have been duly 

authorized by all necessary corporate action on the part of the Company and its 

stockholders, and no further approval or authorization is required on the part of the 

Company or its stockholders. This Agreement is a valid and binding obligation of the 

Company enforceable against the Company in accordance with its terms, except as 
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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.

Section 3.3 Exchange Shares. The Exchange Shares have been duly 

and validly authorized by all necessary action, and, when issued and delivered pursuant to this 

Agreement, such Exchange Shares will be duly and validly issued and fully paid and 

nonassessable, will not be issued in violation of any preemptive rights, and will not subject the 

holder thereof to personal liability.

Section 3.4 Non-Contravention.

(a) The execution, delivery and performance by the Company of this 

Agreement and the consummation of the transactions contemplated hereby, and compliance 

by the Company with the provisions hereof, will not (A) violate, conflict with, or result in a 

breach of any provision of, or constitute a default (or an event which, with notice or lapse 

of time or both, would constitute a default) under, or result in the termination of, or 

accelerate the performance required by, or result in a right of termination or acceleration of, 

or result in the creation of, any lien, security interest, charge or encumbrance upon any of 

the properties or assets of the Company or any Company Subsidiary under any of the 

terms, conditions or provisions of (i) its organizational documents or (ii) any note, bond, 

mortgage, indenture, deed of trust, license, lease, agreement or other instrument or 

obligation to which the Company or any Company Subsidiary is a party or by which it or 

any Company Subsidiary may be bound, or to which the Company or any Company 

Subsidiary or any of the properties or assets of the Company or any Company Subsidiary 

may be subject, or (B) subject to compliance with the statutes and regulations referred to in 

the next paragraph, violate any statute, rule or regulation or any judgment, ruling, order, 

writ, injunction or decree applicable to the Company or any Company Subsidiary or any of 

their respective properties or assets except, in the case of clauses (A)(ii) and (B), for those 

occurrences that, individually or in the aggregate, have not had and would not reasonably 

be expected to have a Company Material Adverse Effect and as disclosed on Schedule A.

(b) Other than such filings and approvals as are required to be made or obtained 

under any state “blue sky” laws, and such filings, consents and approvals that have been 

made or obtained (or will be made or obtained prior to Closing), no notice to, filing with or 

review by, or authorization, consent or approval of, any Governmental Entity is required to 

be made or obtained by the Company in connection with the consummation by the 

Company of the Exchange except for any such notices, filings, reviews, authorizations, 

consents and approvals the failure of which to make or obtain would not, individually or in 

the aggregate, reasonably be expected to have a Company Material Adverse Effect.

(c) Except as would not, individually or in the aggregate, reasonably be 

expected to have a Company Material Adverse Effect and as disclosed on Schedule A, (A) 

the execution, delivery and performance by the Company of this Agreement and the 

consummation of the transactions contemplated hereby (including for this purpose the 

consummation of the Exchange) and compliance by the Company with the provisions 

hereof will not (1) result in any payment (including any severance payment, payment of 
-8-

unemployment compensation, “excess parachute payment” (within the meaning of the 

Internal Revenue Code of 1986, as amended (the “Code”)), “golden parachute payment” 

(as defined in the EESA, as implemented by the Compensation Regulations) or forgiveness 

of indebtedness or otherwise) becoming due to any current or former employee, officer or 

director of the Company or any Company Subsidiary from the Company or any Company 

Subsidiary under any benefit plan or otherwise, (2) increase any benefits otherwise payable 

under any benefit plan, (3) result in any acceleration of the time of payment or vesting of 

any such benefits, (4) require the funding or increase in the funding of any such benefits or 

(5) result in any limitation on the right of the Company or any Company Subsidiary to 

amend, merge, terminate or receive a reversion of assets from any benefit plan or related 

trust and (B) neither the Company nor any Company Subsidiary has taken, or permitted to 

be taken, any action that required, and no circumstances exist that will require the funding, 

or increase in the funding, of any benefits or resulted, or will result, in any limitation on the 

right of the Company or any Company Subsidiary to amend, merge, terminate or receive a 

reversion of assets from any benefit plan or related trust.

Section 3.5 Anti-Takeover Provisions and Rights Plan. The Board 

of Directors has taken all necessary action to ensure that the transactions contemplated by this 

Agreement and the consummation of the transactions contemplated hereby will be exempt from 

any anti-takeover or similar provisions of the Company’s charter and bylaws, and any other 

provisions of any applicable “moratorium”, “control share”, “fair price”, “interested stockholder” 

or other anti-takeover laws and regulations of any applicable jurisdiction. The Company has 

taken all actions necessary to render any stockholders’ rights plan of the Company inapplicable 

to this Agreement, the Exchange Shares and the consummation of the transactions contemplated 

hereby.

Section 3.6 No Company Material Adverse Effect. Since December 

31, 2017, no fact, circumstance, event, change, occurrence, condition or development has 

occurred that, individually or in the aggregate, has had or would reasonably be likely to have a 

Company Material Adverse Effect.

Section 3.7 Offering of Securities. Neither the Company nor any 

person acting on its behalf has taken any action (including any offering of any securities of the 

Company under circumstances which would require the integration of such offering with the 

offering of the Exchange Shares under the Securities Act and the rules and regulations of the 

Securities and Exchange Commission promulgated thereunder), which might subject the 

offering, issuance or sale of the Exchange Shares to the Investor pursuant to this Agreement to 

the registration requirements of the Securities Act.

Section 3.8 Brokers and Finders. No broker, finder or investment 

banker is entitled to any financial advisory, brokerage, finder’s or other fee or commission in 

connection with this Agreement or the transactions contemplated hereby based upon 

arrangements made by or on behalf of the Company or any Company Subsidiary for which the 

Investor could have any liability.
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ARTICLE IV

COVENANTS

Section 4.1 Commercially Reasonable Efforts. Subject to the terms 

and conditions of this Agreement, each of the parties will use its commercially reasonable efforts 

in good faith to take, or cause to be taken, all actions, and to do, or cause to be done, all things 

necessary, proper or desirable, or advisable under applicable laws, so as to permit consummation 

of the Exchange as promptly as practicable and otherwise to enable consummation of the 

transactions contemplated hereby and thereby and shall use commercially reasonable efforts to 

cooperate with the other party to that end.

Section 4.2 Expenses. If requested by the Investor, the Company shall 

pay all reasonable out of pocket and documented costs and expenses associated with the 

Exchange, including, but not limited to, the reasonable fees, disbursements and other charges of 

the Investor’s legal counsel and financial advisors.

Section 4.3 Intentionally Omitted.

Section 4.4 Access, Information and Confidentiality.

(a) From the date hereof until the date when the Investor no longer holds any 

debt or equity securities of the Company or an Affiliate of the Company, the Company will 

permit the Investor and its agents, consultants, contractors and advisors (i) acting through 

the Company’s Appropriate Federal Banking Agency, to examine the corporate books and 

make copies thereof and to discuss the affairs, finances and accounts of the Company and 

the subsidiaries of the Company (the “Company Subsidiaries”) with the principal officers 

of the Company, all upon reasonable notice and at such reasonable times and as often as the 

Investor may reasonably request and (ii) to review any information material to the 

Investor’s investment in the Company provided by the Company to its Appropriate Federal 

Banking Agency.

(b) From the date hereof until the date when the Investor no longer holds any 

debt or equity securities of the Company or an Affiliate of the Company acquired pursuant 

to this Agreement, the Company shall permit, and shall cause each of the Company’s 

Subsidiaries to permit (i) the Investor and its agents, consultants, contractors, (ii) the 

Special Inspector General of the Troubled Asset Relief Program, and (iii) the Comptroller 

General of the United States, access to personnel and any books, papers, records or other 

data, in each case, to the extent relevant to ascertaining compliance with the financing 

terms and conditions; provided that prior to disclosing any information pursuant to clause 

(ii) or (iii), the Special Inspector General of the Troubled Asset Relief Program and the 

Comptroller General of the United States shall have agreed, with respect to documents 

obtained under this Agreement in furtherance of its function, to follow applicable law and 

regulation (and the applicable customary policies and procedures) regarding the 

dissemination of confidential materials, including redacting confidential information from 

the public version of its reports and soliciting the input from the Company as to 

information that should be afforded confidentiality, as appropriate.
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(c) The Investor will use reasonable best efforts to hold, and will use reasonable 

best efforts to cause its agents, consultants, contractors, advisors, and United States 

executive branch officials and employees, to hold, in confidence all non-public records, 

books, contracts, instruments, computer data and other data and information (collectively, 

“Information”) concerning the Company furnished or made available to it by the Company 

or its representatives in connection with the negotiation of or 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 without violation of any other confidentiality obligation)); provided that 

nothing herein shall prevent the Investor from disclosing any Information to the extent 

required by applicable laws or regulations or by any subpoena or similar legal process. The 

Investor understands that the Information may contain commercially sensitive confidential 

information entitled to an exception from a Freedom of Information Act request.

(d) Nothing in this Section shall be construed to limit the authority that the 

Special Inspector General of the Troubled Asset Relief Program, the Comptroller General 

of the United States or any other applicable regulatory authority has under law.

Section 4.5 Executive Compensation.

(a) Benefit Plans. During the Relevant Period, the Company shall take all 

necessary action to ensure that the Benefit Plans of the Company and its Affiliates comply 

in all respects with, and shall take all other actions necessary to comply with, Section 111 

of the EESA, as implemented by the Compensation Regulations, and neither the Company 

nor any Affiliate shall adopt any new Benefit Plan (i) that does not comply therewith or (ii) 

that does not expressly state and require that such Benefit Plan and any compensation 

thereunder shall be subject to any relevant Compensation Regulations adopted, issued or 

released on or after the date any such Benefit Plan is adopted. To the extent that EESA 

and/or the Compensation Regulations are amended or otherwise change during the 

Relevant Period in a manner that requires changes to then-existing Benefit Plans, or that 

requires other actions, the Company and its Affiliates shall effect such changes to its or 

their Benefit Plans, and take such other actions, as promptly as practicable after it has

actual knowledge of such amendments or changes in order to be in compliance with this 

Section 4.5(a) (and shall be deemed to be in compliance for a reasonable period to effect 

such changes). In addition, the Company and its Affiliates shall take all necessary action, 

other than to the extent prohibited by applicable law or regulation applicable outside of the 

United States, to ensure that the consummation of the transactions contemplated by this 

Agreement will not accelerate the vesting, payment or distribution of any equity-based 

awards, deferred cash awards or any nonqualified deferred compensation payable by the 

Company or any of its Affiliates.

(b) Additional Waivers. After the Closing Date and until the end of the 

Relevant Period, in connection with the hiring or promotion of a Section 4.5 Employee 

and/or the promulgation of applicable Compensation Regulations or otherwise, to the 

extent any Section 4.5 Employee shall not have executed a waiver with respect to the 

application to such Section 4.5 Employee of the Compensation Regulations, the Company 
-11-

shall use its best efforts to (i) obtain from such Section 4.5 Employee a waiver in 

substantially the form attached hereto as Annex B and (ii) deliver such waiver to the 

Investor as promptly as possible, in each case, within sixty days of the Closing Date or, if 

later, within sixty days of such Section 4.5 Employee becoming subject to the requirements 

of this Section. “Section 4.5 Employee” means (A) each Senior Executive Officer and (B) 

any other employee of the Company or its Affiliates determined at any time to be subject to 

Section 111 of EESA and the Compensation Regulations.

(c) Clawback. In the event that any Section 4.5 Employee receives a payment 

in contravention of the provisions of this Section 4.5, the Company shall promptly provide 

such individual with written notice that the amount of such payment must be repaid to the 

Company in full within fifteen business days following receipt of such notice or such 

earlier time as may be required by the Compensation Regulations and shall promptly 

inform the Investor (i) upon discovering that a payment in contravention of this Section 4.5 

has been made and (ii) following the repayment to the Company of such amount and shall 

take such other actions as may be necessary to comply with the Compensation Regulations.

(d) Limitation on Deductions. During the Relevant Period, the Company agrees 

that it shall not claim a deduction for remuneration for federal income tax purposes in 

excess of $500,000 for each Senior Executive Officer that would not be deductible if 

Section 162(m)(5) of the Code applied to the Company.

(e) Amendment to Prior Agreement. The parties agree that, effective as of the 

date hereof, Section 4.8 of the Securities Purchase Agreement shall be amended in its 

entirety by replacing such Section 4.8 with the provisions set forth in this Section 4.5 and 

any terms included in this Section 4.5 that are not otherwise defined in the Securities 

Purchase Agreement shall have the meanings ascribed to such terms in this Agreement.

Section 4.6 Certain Notifications Until Closing. From the date hereof 

until the Closing, the Company shall promptly notify the Investor of (i) any fact, event or 

circumstance of which it is aware and which would reasonably be likely to cause any 

representation or warranty of the Company contained in this Agreement to be untrue or 

inaccurate in any material respect or to cause any covenant or agreement of the Company 

contained in this Agreement not to be complied with or satisfied in any material respect and (ii) 

any fact, circumstance, event, change, occurrence, condition or development of which the 

Company is aware and which, individually or in the aggregate, has had or would reasonably be 

likely to have a Company Material Adverse Effect; provided, however, that delivery of any 

notice pursuant to this Section 4.6 shall not limit or affect any rights of or remedies available to 

the Investor; provided, further, that a failure to comply with this Section 4.6 shall not constitute a 

breach of this Agreement or the failure of any condition set forth in Section 1.1 to be satisfied 

unless the underlying Company Material Adverse Effect or material breach would independently 

result in the failure of a condition set forth in Section 1.1 to be satisfied.

Section 4.7 Monthly Lending Reports. During the Relevant Period, 

the Company will detail in monthly reports submitted to the Investor the information required by 

the CPP Monthly Lending Reports, as published on www.financialstability.gov from time to 

time.
-12-

Section 4.8 Intentionally Omitted. 

Section 4.9 Intentionally Omitted. 

Section 4.10 Remaining Certification and Disclosure Requirements. 

The Company acknowledges and agrees to continue 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). For this purpose, the Relevant Period will 

not end so long as the Investor holds Common Stock.

Section 4.11 Transferability Restrictions Related to Long-Term 

Restricted Stock. The Company acknowledges 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, (a) aggregate financial 

assistance received (for purposes of the definition of long-term restricted stock) continues to 

include the full original liquidation amount with respect to 6,800 Series A Preferred Shares 

regardless of the value of the Common Stock on the date of the conversion, and (b) repayments 

(as defined in Section 30.1 of the Compensation Regulations) include the net proceeds received 

by the Investor upon the sale of the Common Stock (see FAQ-15 in the Frequently Asked 

Questions to the Compensation Regulations, available at www.financialstability.gov). Following 

the Relevant Period, in the event that any long-term restricted stock awarded by the Company 

will not become transferable, or payable in the case of a restricted stock unit, under the terms of 

the Compensation Regulations, the Company shall cancel such long-term restricted stock and/or 

restricted stock units.

ARTICLE V

ADDITIONAL AGREEMENTS

Section 5.1 Unregistered Exchange Shares. The Investor 

acknowledges that the Exchange Shares have not been registered under the Securities Act or 

under any state securities laws. The Investor (a) is acquiring the Exchange Shares pursuant to an 

exemption from registration under the Securities Act solely for investment with no present 

intention to distribute them to any person in violation of the Securities Act or any applicable U.S. 

state securities laws, (b) will not sell or otherwise dispose of any of the Exchange Shares, except 

in compliance with the registration requirements or exemption provisions of the Securities Act 

and any applicable U.S. state securities laws, and (c) has such knowledge and experience in 

financial and business matters and in investments of this type that it is capable of evaluating the 

merits and risks of the Exchange and of making an informed investment decision.
-13-

Section 5.2 Legend.

(a) The Investor agrees that all certificates or other instruments representing the 

Exchange Shares will bear a legend substantially to the following effect:

“THE SECURITIES REPRESENTED BY THIS INSTRUMENT HAVE NOT BEEN 

REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE 

SECURITIES LAWS OF ANY STATE AND MAY NOT BE TRANSFERRED, SOLD OR 

OTHERWISE DISPOSED OF EXCEPT WHILE A REGISTRATION STATEMENT 

RELATING THERETO IS IN EFFECT UNDER SUCH ACT AND APPLICABLE STATE 

SECURITIES LAWS OR PURSUANT TO AN EXEMPTION FROM REGISTRATION 

UNDER SUCH ACT OR SUCH LAWS.”

(b) In the event that any Exchange Shares (i) become registered under the 

Securities Act or (ii) are eligible to be transferred without restriction in accordance with 

Rule 144 or another exemption from registration under the Securities Act (other than Rule 

144A), the Company shall issue new certificates or other instruments representing such 

Exchange Shares, which shall not contain the applicable legend in Section 5.2(a) above; 

provided that the Investor surrenders to the Company the previously issued certificates or 

other instruments.

Section 5.3 Certain Transactions.

(a) The Company will not merge or consolidate with, or sell, transfer or lease 

all or substantially all of its property or assets to, any other party unless the successor, 

transferee or lessee party (or its ultimate parent entity), as the case may be (if not the 

Company), expressly assumes the due and punctual performance and observance of each 

and every covenant, agreement and condition of this Agreement to be performed and 

observed by the Company. The Company will not, without the prior written consent of the 

Investor, until such time as the Investor shall cease to own any securities of the Company 

acquired pursuant to this Agreement (including, for the avoidance of doubt, the Exchange 

Shares), issue or sell any shares of its capital stock, including any Common Stock, 

Preferred Stock, Parity Stock or Junior Stock, or any securities convertible or exercisable 

for any such shares.

(b) Without the prior written consent of the Investor, until such time as the 

Investor shall cease to own any securities of the Company acquired pursuant to this 

Agreement (including, for the avoidance of doubt, the Exchange Shares), the Company 

shall not permit any of its “significant subsidiaries” (as such term is defined in Rule 12b-2 

promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange 

Act”)) to (i) engage in any merger, consolidation, statutory share exchange or similar 

transaction following the consummation of which such significant subsidiary is not whollyowned by the Company, (ii) dissolve or sell all or substantially all of its assets or property 

other than in connection with an internal reorganization or consolidation involving whollyowned subsidiaries of the Company or (iii) issue or sell any shares of its capital stock or 

any securities convertible or exercisable for any such shares, other than issuances or sales 
-14-

in connection with an internal reorganization or consolidation involving wholly-owned 

subsidiaries of the Company.

Section 5.4 Transfer of Exchange Shares. Subject to compliance 

with applicable securities laws, the Investor shall be permitted to transfer, sell, assign or 

otherwise dispose of (“Transfer”) all or a portion of the Exchange Shares at any time and the 

Company shall take all steps as may be reasonably requested by the Investor to facilitate the 

Transfer of the Exchange Shares; provided that the Investor shall not Transfer any Exchange 

Shares if such Transfer would require the Company to be subject to the periodic reporting 

requirements of Section 13 or 15(d) of the Exchange Act.

Section 5.5 Registration Rights. The Exchange Shares (and all

securities beneficially owned by the Investor and its Affiliates that are convertible into or

exchangeable or exercisable for Common Stock without regard to any limits on conversion

contained in the terms thereof) shall be Registrable Securities under the Securities Purchase

Agreement and, upon their issuance, the provisions of Section 4.5 of the Securities Purchase

Agreement shall be applicable to them, including with the benefit, to the extent available, of the

tacking of any holding period from the date of issuance of the Preferred Shares.

Section 5.6 Voting Matters.

(a) The Investor agrees that it will vote, or cause to be voted, or exercise its 

right to consent (or cause its right to consent to be exercised) with respect to, all Exchange 

Shares beneficially owned by it and its controlled Affiliates (and which are entitled to vote 

on such matter) with respect to each matter on which holders of Common Stock are entitled 

to vote or consent, other than a Designated Matter, in the same proportion (for, against or 

abstain) as all other shares of the Common Stock (other than those shares held by holders 

of greater than 20% of the Common Stock, as the case may be) are voted or consents are 

given with respect to each such matter. The Investor agrees to attend all meetings of the 

Company’s stockholders in person or by proxy for purposes of obtaining a quorum. In 

order to effectuate the foregoing agreements, to the maximum extent permitted by 

applicable law, the Investor hereby grants a proxy appointing each of the Chief Executive 

Officer and Chief Financial Officer of the Company attorney-in-fact and proxy for it and its 

controlled Affiliates with full power of substitution, for and in the name of it and its 

controlled Affiliates, to vote, express consent or dissent, or otherwise to utilize such voting 

power in the manner and solely on the terms provided by this Section 5.6 with respect to 

the Exchange Shares and the Investor hereby revokes any and all previous proxies granted 

with respect to the Exchange Shares for purposes of the matters contemplated in this 

Section 5.6; provided that such proxy may only be exercised if the Investor fails to comply 

with the terms of this Section 5.6. The proxy granted hereby is irrevocable prior to the 

termination of this Agreement, is coupled with an interest and is granted in consideration of 

the Company entering into this Agreement and issuing the Exchange Shares to the Investor.

(b) The Investor shall retain the right to vote in its sole discretion all Exchange 

Shares beneficially owned by it and its controlled Affiliates (and which are entitled to vote 

on such matter) on any Designated Matter.
-15-

Section 5.7 Restriction on Dividends and Repurchases.

(a) Until the earlier of (i) July 17, 2019 or (ii) such time as the Investor ceases 

to own any debt or equity securities of the Company or an Affiliate of the Company 

acquired pursuant to this Agreement, neither the Company nor any Company Subsidiary 

shall, without the consent of the Investor: 

(i) (A) pay any per share dividend or distribution on capital stock or 

other equity securities of any kind of the Company at a per annum rate that is in 

excess of 103% of the aggregate per share dividends and distributions for the 

immediately prior fiscal year (other than regular dividends on shares of 

preferred stock in accordance with the terms thereof and which are permitted 

under the terms of the Preferred Shares); provided that no increase in the 

aggregate amount of dividends or distributions on Common Stock shall be 

permitted as a result of any dividends or distributions paid in shares of 

Common Stock, any stock split or any similar transaction or (B) pay aggregate 

dividends or distributions on capital stock or other equity securities of any kind 

of any Company Subsidiary that is in excess of 103% of the aggregate 

dividends and distributions paid for the immediately prior fiscal year (other 

than in the case of this clause (B), (1) regular dividends on shares of preferred 

stock in accordance with the terms thereof, (2) dividends or distributions by 

any wholly-owned Company Subsidiary, (3) dividends or distributions by any 

Company Subsidiary required pursuant to binding contractual agreements 

entered into prior to November 17, 2008 or (4) dividends or distributions on 

newly issued shares of capital stock for cash or other property); or

(ii) redeem, purchase or acquire any shares of Common Stock or other 

capital stock or other equity securities of any kind of the Company, or any trust 

preferred securities issued by the Company or any Affiliate of the Company, 

other than (A) redemptions, purchases or other acquisitions of the Common 

Stock, (B) in connection with the administration of any employee benefit plan 

in the ordinary course of business and consistent with past practice, (C) the 

acquisition by the Company or any of the Company Subsidiaries of record 

ownership in Junior Stock or Parity Stock for the beneficial ownership of any 

other persons (other than the Company or any other Company Subsidiary), 

including as trustees or custodians, (D) the exchange or conversion of Junior 

Stock for or into other Junior Stock or of Parity Stock or trust preferred 

securities for or into other Parity Stock (with the same or lesser aggregate 

liquidation amount) or Junior Stock, in each case set forth in this clause (D), 

solely to the extent required pursuant to binding contractual agreements entered 

into prior to July 17, 2009 or any subsequent agreement for the accelerated 

exercise, settlement or exchange thereof for Common Stock (clauses (B) and 

(C), collectively, the “Permitted Repurchases”), (E) redemptions of securities 

held by the Company or any wholly-owned Company Subsidiary or (F) 

redemptions, purchases or other acquisitions of the Common Stock or other 

equity securities of any kind of any Company Subsidiary required pursuant to 

binding contractual agreements entered into prior to November 17, 2008.
-16-

(b) Until such time as the Investor ceases to own any debt or equity securities of 

the Company or an Affiliate of the Company acquired pursuant to this Agreement, neither 

the Company nor any Company Subsidiary shall repurchase any Common Stock from any 

holder thereof, whether by means of open market purchase, negotiated transaction, or 

otherwise, other than Permitted Repurchases, unless it offers to repurchase a ratable portion 

of Common Stock then held by the Investor on the same terms and conditions.

(c) If Investor owns any debt or equity securities of the Company or an Affiliate 

of the Company acquired pursuant to this Agreement on July 17, 2019, then during the 

period beginning on July 17, 2019 and ending on such time as the Investor ceases to own 

any debt or equity securities of the Company or an Affiliate of the Company acquired 

pursuant to this Agreement, neither the Company nor any Company Subsidiary shall, 

without the consent of the Investor, (i) declare or pay any dividend or make any 

distribution on Common Stock or other equity securities of any kind of the Company or 

any Company Subsidiary; or (ii) redeem, purchase or acquire any shares of Common Stock 

or other capital stock or other equity securities of any kind of the Company or any 

Company Subsidiary, or any trust preferred securities issued by the Company or any 

Affiliate of the Company, other than (A) redemptions, purchases or other acquisitions of 

the Common Stock, (B) regular dividends on shares of preferred stock in accordance with 

the terms thereof, or (C) dividends or distributions by any wholly-owned Company 

Subsidiary.

(d) The parties agree that, effective as of the date hereof, Section 4.7 of the 

Securities Purchase Agreement shall be amended in its entirety by replacing such 

Section 4.7 with the provisions set forth in this Section 5.7 and any terms included in this 

Section 5.7 that are not otherwise defined in the Securities Purchase Agreement shall have 

the meanings ascribed to such terms in this Agreement.

Section 5.8 Intentionally Omitted. 

Section 5.9 Bank Holding Company Status. The Company shall 

maintain its status as a Bank Holding Company for as long as the Investor owns any debt or 

equity securities of the Company or an Affiliate of the Company acquired pursuant to this 

Agreement. 

Section 5.10 Compliance with Employ American Workers Act. Until 

the Company is no longer deemed a recipient of funding under Title I of EESA or Section 13 of 

the Federal Reserve Act for purposes of the EAWA, as the same may be determined pursuant to 

any regulations or other legally binding guidance promulgated under EAWA, the Company shall 

comply, and the Company shall take all necessary action to ensure that its subsidiaries comply, 

in all respects with the provisions of the EAWA and any regulations or other legally binding 

guidance promulgated under the EAWA.

Section 5.11 Observer to the Board of Directors. So long as the 

Investor and its Affiliates beneficially own at least 5% of the issued and outstanding Common 

Stock (treating all securities beneficially owned by the Investor and its Affiliates that are 

convertible into or exchangeable or exercisable for Common Stock as converted, exchanged or 
-17-

exercised without regard to any limits on conversion contained in the terms thereof), the Investor 

shall be entitled to designate one individual to serve as an observer (the “Observer”) to the Board 

of Directors of the Company, which designation may be changed from time to time in the sole 

discretion of the Investor. The Observer shall be entitled to (i) attend all meetings of the Board 

of Directors of the Company and the board of directors of each subsidiary of the Company, 

including any committee meetings of such boards of directors, (ii) receive notices of such 

meetings concurrently with the members of the Board of Directors of the Company or such 

boards of directors or committees thereof and (iii) receive all information provided to members 

of the Board of Directors of the Company or such boards of directors or committees thereof at 

such meetings. 

The Observer shall have no voting rights and his or her presence shall not be required for 

determining a quorum at any meeting he or she is entitled to attend pursuant to this Section 5.11.

ARTICLE VI

MISCELLANEOUS

Section 6.1 Termination. This Agreement may be terminated at any 

time prior to the Closing:

(a) by either the Investor or the Company if the Closing shall not have occurred 

by July 13, 2018; provided, however, that in the event the Closing has not occurred by such 

date, the parties will consult in good faith to determine whether to extend the term of this 

Agreement, it being understood that the parties shall be required to consult only until the 

fifth day after such date and not be under any obligation to extend the term of this 

Agreement thereafter; provided, further, that the right to terminate this Agreement under 

this Section 6.1(a) shall not be available to any party whose breach of any representation or 

warranty or failure to perform any obligation under this Agreement shall have caused or 

resulted in the failure of the Closing to occur on or prior to such date;

(b) by the Investor, upon written notice to the Company, if the Company has not 

yet not received any required approval of the transactions contemplated by this Agreement 

from the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance 

Corporation and the Office of the Comptroller of the Currency on or before July 13, 2018; 

or 

(c) by either the Investor or the Company in the event that any Governmental 

Entity shall have issued an order, decree or ruling or taken any other action restraining, 

enjoining or otherwise prohibiting the transactions contemplated by this Agreement and 

such order, decree, ruling or other action shall have become final and nonappealable; or

(d) by the mutual written consent of the Investor and the Company.

In the event of termination of this Agreement as provided in this Section 6.1, this 

Agreement shall forthwith become void and there shall be no liability on the part of either party 
-18-

hereto except that nothing herein shall relieve either party from liability for any breach of this 

Agreement.

Section 6.2 Survival of Representations and Warranties. The 

representations and warranties of the Company made herein or in any certificates delivered in 

connection with the Closing shall survive the Closing without limitation.

Section 6.3 Amendment. No amendment of any provision of this 

Agreement will be effective unless made in writing and signed by an officer or a duly authorized 

representative of each of the Company and the Investor; provided that the Investor may 

unilaterally amend any provision of this Agreement to the extent required to comply with any 

changes after the date hereof in applicable federal statutes. No failure or delay by any party in 

exercising any right, power or privilege hereunder shall operate as a waiver thereof nor shall any 

single or partial exercise thereof preclude any other or further exercise of any other right, power 

or privilege. The rights and remedies herein provided shall be cumulative of any rights or 

remedies provided by law.

Section 6.4 Waiver of Conditions. The conditions to each party’s 

obligation to consummate the Exchange are for the sole benefit of such party and may be waived 

by such party in whole or in part to the extent permitted by applicable law. No waiver will be 

effective unless it is in a writing signed by a duly authorized officer of the waiving party that 

makes express reference to the provision or provisions subject to such waiver.

Section 6.5 Governing Law; Submission to Jurisdiction, etc. 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 jurisdiction and venue of the United States District Court for 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 Exchange contemplated 

hereby and (b) that notice may be served upon (i) the Company at the address and in the manner 

set forth for notices to the Company in Section 6.6 and (ii) the Investor at the address and in the 

manner set forth for notices to the Investor in Section 6.6, but otherwise in accordance with 

federal law. 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 Exchange contemplated hereby.

Section 6.6 Notices. Any notice, request, instruction or other 

document to be given hereunder by any party to the other will be in writing and will be deemed 

to have been duly given (a) on the date of delivery if delivered personally, or by facsimile, upon 

confirmation of receipt, or (b) on the second business day following the date of dispatch if 

delivered by a recognized next day courier service. 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.
-19- 

If to the Company: 

With a copy to: 

If to the Investor: 

With a copy to: 

Section 6.7 Definitions.

(a) When a reference is made in this Agreement to a subsidiary of a person, the 

term “subsidiary” means any corporation, partnership, joint venture, limited liability 

company or other entity (x) of which such person or a subsidiary of such person is a 

general partner or (y) of which a majority of the voting securities or other voting interests, 

or a majority of the securities or other interests of which having by their terms ordinary 

voting power to elect a majority of the board of directors or persons performing similar 

functions with respect to such entity, is directly or indirectly owned by such person and/or 

one or more subsidiaries thereof. 
-20-

(b) The term “Affiliate” means, with respect to any person, any person directly 

or indirectly controlling, controlled by or under common control with, such other person. 

For purposes of this definition, “control” (including, with correlative meanings, the terms 

“controlled by” and “under common control with”) when used with respect to any person, 

means the possession, directly or indirectly, of the power to cause the direction of 

management and/or policies of such person, whether through the ownership of voting 

securities by contract or otherwise.

(c) The term “Business Combination” means a merger, consolidation, statutory 

share exchange or similar transaction that requires the approval of the Company’s 

stockholders.

(d) The term “Company Material Adverse Effect” means a material adverse 

effect on the business, results of operation 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: (i) the effects of (A) 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 or geographic areas in which the Company and 

its subsidiaries operate, (B) changes or proposed changes after the date hereof in United 

States generally accepted accounting principles or regulatory accounting requirements, or 

authoritative interpretations thereof, (C) 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 (A), (B) and 

(C), 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 U.S. 

banking or financial services organizations), (D) changes in the market price or trading 

volume of the 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 (D) does not apply to the underlying reason giving rise to or 

contributing to any such change); (E) actions or omissions of the Company or any 

Company Subsidiary expressly required by the terms of the Exchange; or (ii) the ability of 

the Company to consummate the Exchange and the other transactions contemplated by this 

Agreement and perform its obligations hereunder on a timely basis.

(e) The term “Designated Matters” means (i) the election and removal of 

directors, (ii) the approval of any Business Combination, (iii) the approval of a sale of all or 

substantially all of the assets or property of the Company, (iv) the approval of a dissolution 

of the Company, (v) the approval of any issuance of any securities of the Company on 

which holders of Common Stock are entitled to vote, (vi) the approval of any amendment 

to the charter or bylaws of the Company on which holders of Common Stock are entitled to 

vote and (vii) the approval of any other matters reasonably incidental to the foregoing 

subclauses (i) through (vi) as determined by the Investor.
-21-

(f) The term “EAWA” means the Employ American Workers Act 

(Section 1611 of Division A, Title XVI of the American Recovery and Reinvestment Act 

of 2009), Public Law No. 111-5, effective as of February 17, 2009, as may be amended and 

in effect from time to time.

(g) The term “Junior Stock” means the Common Stock and any other class or 

series of stock of the Company the terms of which expressly provide that it ranks junior to 

the Exchange Shares as to dividend rights and/or as to rights on liquidation, dissolution or 

winding up of the Company.

(h) The term “Parity Stock” means any class or series of stock of the Company 

the terms of which do not expressly provide that such class or series will rank senior or 

junior to the Exchange Shares as to dividend rights and/or as to rights on liquidation, 

dissolution or winding up of the Company (in each case without regard to whether 

dividends accrue cumulatively or non-cumulatively).

(i) The term “Preferred Stock” means any and all series of preferred stock of 

the Company.

(j) The term “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. 1831o 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.

(k) To the extent any securities issued pursuant to this Agreement or the 

transactions contemplated hereby are registered in the name of a designee of the Investor 

pursuant to Sections 1.1 or 6.8 or transferred to an Affiliate of the Investor, all references 

herein to the Investor holding or owning any debt or equity securities of the Company, 

Exchange Shares or Registrable Securities (and any like variations thereof) shall be deemed 

to refer to the Investor, together with such designees and/or Affiliates, holding or owning 

any debt or equity securities, Exchange Shares or Registrable Securities (and any like 

variations thereof), as applicable. For the avoidance of doubt, this Section 6.7(l) shall not 

apply to designees or transferees who are Secondary Investors.

Section 6.8 Assignment. Neither this Agreement nor any right, 

remedy, obligation nor liability arising hereunder or by reason hereof shall be assignable by any 

party hereto without the prior written consent of each other party, and any attempt to assign any 

right, remedy, obligation or liability hereunder without such consent shall be void, except (a) an 

assignment, in the case of a Business Combination where such party is not the surviving entity, 

or a sale of substantially all of its assets, to the entity which is the survivor of such Business 

Combination or the purchaser in such sale, (b) as provided in Sections 5.4 and 5.5 and (c) an 
-22-

assignment by the Investor of this Agreement to an Affiliate of the Investor; provided that if the 

Investor assigns this Agreement to an Affiliate, the Investor shall be relieved of its obligations 

under this Agreement but (i) all rights, remedies and obligations of the Investor hereunder shall 

continue and be enforceable and exercisable by such Affiliate, and (ii) the Company’s 

obligations and liabilities hereunder shall continue to be outstanding.

Section 6.9 Severability. If any provision of this Agreement, or the 

application thereof to any person or circumstance, is determined by a court of competent 

jurisdiction to be invalid, void or unenforceable, the remaining provisions hereof, or the 

application of such provision to persons or circumstances other than those as to which it has been 

held invalid or unenforceable, will remain in full force and effect and shall in no way be affected, 

impaired or invalidated thereby, so long as the economic or legal substance of the transactions 

contemplated hereby is not affected in any manner materially adverse to any party. Upon such 

determination, the parties shall negotiate in good faith in an effort to agree upon a suitable and 

equitable substitute provision to effect the original intent of the parties.

Section 6.10 No Third-Party Beneficiaries. Nothing contained in this 

Agreement, expressed or implied, is intended to confer upon any person or entity other than the 

Company and the Investor any benefit, right or remedies, except that (i) the provisions of Section 

4.4 shall inure to the benefit of the persons referred to in that Section and (ii) the provisions of 

Section 5.5 shall inure to the benefit of the persons holding Exchange Shares during any tacked 

holding period, as contemplated by that Section. 

Section 6.11 Entire Agreement, etc. This Agreement (including the 

Annexes and Schedules hereto) constitutes the entire agreement, and supersedes all other prior 

agreements, understandings, representations and warranties, both written and oral, between the 

parties, with respect to the subject matter hereof. For the avoidance of doubt, the Securities 

Purchase Agreement shall remain in full force and effect, but shall be deemed amended hereby, 

and any provisions in this Agreement that supplement, duplicate or contradict any provision of 

the Securities Purchase Agreement shall be deemed to supersede the corresponding provision of 

the Securities Purchase Agreement from and after the effective date hereof.

Section 6.12 Counterparts and Facsimile. For the convenience of the 

parties hereto, this Agreement may be executed in any number of separate counterparts, each 

such counterpart being deemed to be an original instrument, and all such counterparts will 

together constitute the same agreement. Executed signature pages to this Agreement may be 

delivered by facsimile and such facsimiles will be deemed as sufficient as if actual signature 

pages had been delivered.

Section 6.13 Specific Performance. The parties agree that irreparable 

damage would occur in the event that any of the provisions of this Agreement were not 

performed in accordance with their specific terms. It is accordingly agreed that the parties shall 

be entitled (without the necessity of posting a bond) to specific performance of the terms hereof, 

this being in addition to any other remedies to which they are entitled at law or equity.

[Remainder of Page Intentionally Left Blank]


Annex A-1

ANNEX A

FORM OF OPINION

Subject to customary limitations, qualifications, and exceptions to be set forth in the letter as 

delivered at Closing:

a) The Company is a corporation duly incorporated and validly existing under and by virtue 

of the laws of the State of Maryland and is in good standing with the SDAT. The 

Company has all necessary corporate power and authority to own, operate and lease its 

properties and to carry on its business in all material respects as described in paragraph 

14 and Exhibit E of the Officer’s Certificate.

b) The Bank is a corporation duly incorporated and validly existing under and by virtue of 

the laws of the State of Maryland and is in good standing with the SDAT. The Bank has 

all necessary corporate power and authority to own, operate and lease its properties and 

to carry on its business in all material respects as described in paragraph 14 and Exhibit E 

of the Officer’s Certificate

c) The Company has the requisite corporate power to execute and deliver the Exchange 

Agreement, and to perform its obligations thereunder (including the issuance of the 

Exchange Shares).

d) The Exchange Agreement constitutes the legal, valid and binding obligation of the 

Company, enforceable against the Company in accordance with its terms, except as 

enforceability may be limited (a) by bankruptcy, insolvency, reorganization, moratorium, 

fraudulent conveyance or other laws relating to or affecting the enforcement of creditors’ 

rights, generally, (b) by general equitable principles, whether applied in law or in equity, 

or (c) by the doctrine of commercial reasonableness.

e) The Company has duly executed and, so far as is known to us, delivered the Exchange 

Agreement.

f) The execution, delivery and performance by the Company of the Agreement and the 

consummation of the transactions contemplated thereby have been duly authorized by all 

necessary corporate action on the part of the Company, and no further approval or 

authorization is required on the part of the Company or its stockholders, including, 

without limitation, by any rule or requirement of any national stock exchange.

g) The issuance of the Exchange Shares has been duly authorized and, when and if issued in 

accordance with the Resolutions and the Exchange Agreement, the Exchange Shares will 

be validly issued, fully paid and nonassessable, and the issuance of Exchange Shares was 

not subject to preemptive or other similar rights under the Maryland General Corporation 

Law (the “MGCL”), the Company Charter or the Company Bylaws.

h) The execution, delivery and performance by the Company of the Exchange Agreement 

(including the issuance of the Exchange Shares) does not (a) conflict with the Company 
Annex A-2

Charter or the Company Bylaws, (b) constitute a default (or an event which, with notice 

or lapse of time or both, would constitute a default) under, or result in the termination of, 

or accelerate the performance required by, or result in a right of termination or 

acceleration of, or result in the creation of, any lien, security interest, charge or 

encumbrance upon any of the properties or assets of the Company or the Bank under any 

of the terms, conditions or provisions of the agreements identified on Exhibit A attached 

hereto, which Company has represented to us in the Officer’s Certificate to be a list of all 

material agreements to which the Company or the Bank is a party or by which the 

Company or the Bank are bound, or (c) violate any statute, rule or regulation of the 

United States of America or the State of Maryland to which the Company is subject.

i) No approval, authorization, consent or order of any governmental authority of the United 

States of America or the State of Maryland having jurisdiction over the Company is 

required in connection with the execution, delivery and performance by the Company of 

the Exchange Agreement (including the issuance of the Exchange Shares), other than 

those which have been obtained or waived.

j) The Company is not and, after giving effect to the issuance of the Exchange Shares 

pursuant to this Agreement will not be an “investment company” required to register 

under the Investment Company Act of 1940, as amended, and the rules and regulations 

promulgated thereunder.
Annex B-1

ANNEX B

FORM OF WAIVER

In consideration for the benefits I will receive as a result of the participation of Harbor 

Bankshares Corporation (together with its subsidiaries and affiliates, the “Company”), which is 

either my employer or the sole shareholder of my employer, in the United States Department of 

the Treasury’s (the “Treasury”) Capital Purchase Program and/or any other economic 

stabilization program implemented by the Treasury under the Emergency Economic Stabilization 

Act of 2008 (as amended, supplemented, or otherwise modified, the “EESA”) (any such 

program, including the Capital Purchase Program, a “Program”), I hereby voluntarily waive any 

claim against the United States (and each of its departments and agencies) or the Company or my 

employer, or any of their respective directors, officers, employees and agents for any changes to 

my compensation or benefits that are required to comply with the executive compensation and 

corporate governance requirements of Section 111 of the EESA, as implemented by any 

guidance or regulations issued and/or to be issued thereunder, including without limitation the 

provisions for the Capital Purchase Program, as implemented by any guidance or regulation 

thereunder, including the rules set forth in 31 C.F.R. Part 30, or any other guidance or 

regulations under the EESA and the applicable requirements of the Exchange Agreement, dated 

as of July 13, 2018, by and between the Company and the Treasury (such requirements, the 

“Limitations”).

I acknowledge that the Limitations may require modification or termination of the employment, 

compensation, bonus, incentive, severance, retention and other benefit plans, arrangements, 

policies and agreements (including so-called “golden parachute” agreements), whether or not in 

writing, that I may have with the Company or my employer or in which I may participate as they 

relate to the period the United States holds any equity or debt securities of the Company acquired 

through a Program or for any other period applicable under such Program or Limitations, as the 

case may be, and I hereby consent to all such modifications. 

This waiver includes all claims I may have under the laws of the United States or any other 

jurisdiction (whether or not in existence as of the date hereof) related to the requirements 

imposed by the Limitations, including without limitation a claim for any compensation or other 

payments or benefits I would otherwise receive, any challenge to the process by which the 

Limitations are or were adopted and any tort or constitutional claim about the effect of these 

Limitations on my employment relationship and I hereby agree that I will not at any time initiate, 

or cause or permit to be initiated on my behalf, any such claim against the United States, the 

Company, my employer or their respective directors, officers, employees or agents in or before 

any local, state, federal or other agency, court or body. 

I agree that, in the event and to the extent that the Compensation Committee of the Board of 

Directors of the Company or similar governing body (the “Committee”) reasonably determines 

that any compensatory payment and benefit provided to me, including any bonus or incentive 

compensation based on materially inaccurate financial statements or performance criteria, would 

cause the Company to fail to be in compliance with the Limitations (such payment or benefit, an 

“Excess Payment”), upon notification from the Company, I shall repay such Excess Payment to 
Annex B-2

the Company within 15 business days. In addition, I agree that the Company shall have the right 

to postpone any such payment or benefit for a reasonable period of time to enable the Committee 

to determine whether such payment or benefit would constitute an Excess Payment.

I understand that any determination by the Committee as to whether or not, including the manner 

in which, a payment or benefit needs to be modified, terminated or repaid in order for the 

Company to be in compliance with Section 111 of the EESA and/or the Limitations shall be a 

final and conclusive determination of the Committee which shall be binding upon me. I further 

understand that the Company is relying on this letter from me in connection with its participation 

in a Program.

IN WITNESS WHEREOF, I execute this waiver on my own behalf, thereby communicating my 

acceptance and acknowledgement to the provisions herein.

Respectfully, 

____________________________

Name:

Title:

Date:
Sch. A-1 

SCHEDULE A 

Section 3.1 (b) – Capitalization 

Capitalization as of the Capitalization Date 

 

 

 

 

 

 

As of the Capitalization Date there were 1,861 shares of common stock reserved for issuance 

under equity based benefit plans. 

Section 3.4 – Non-Contravention 

The Employment Agreement, dated as of July 1, 2000 (the “Employment Agreement”), by and 

among the Company, the Bank and Joseph Haskins, Jr. contains certain provisions entitling Mr. 

Haskins to severance payments if either he or the Company terminate his employment following 

a “Change of Control.” As defined in the Employment Agreement, the issuance of the Exchange 

Shares is a Change of Control.