EXECUTION VERSION 

EXCHANGE AGREEMENT 

by and between 

MONARCH COMMUNITY BANCORP, INC. 

and 

THE UNITED STATES DEPARTMENT OF THE TREASURY 

Dated as of October 30, 2013 
-iTABLE OF CONTENTS 

Page 

ARTICLE I 

THE CLOSING; CONDITIONS TO THE CLOSING

Section 1.1 The Closing ........................................................................................................2

Section 1.2 Interpretation ......................................................................................................5

ARTICLE II 

EXCHANGE

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

Section 2.2 Exchange Documentation ..................................................................................6

Section 2.3 Status of Preferred Shares after Closing ............................................................6

ARTICLE III 

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

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

Section 3.2 Authorization and Enforceability .......................................................................7

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

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

Section 3.5 Anti-Takeover Provisions and Rights Plan ........................................................9

Section 3.6 No Company Material Adverse Effect ..............................................................9

Section 3.7 Offering of Securities .........................................................................................9

Section 3.8 Brokers and Finders ...........................................................................................9

ARTICLE IV 

COVENANTS

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

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

Section 4.3 Intentionally Omitted .......................................................................................10

Section 4.4 Access, Information and Confidentiality .........................................................10

Section 4.5 Executive Compensation .................................................................................11

Section 4.6 Certain Notifications Until Closing .................................................................12

Section 4.7 Monthly Lending Reports ................................................................................12

Section 4.8 Status Reports ..................................................................................................12

Section 4.9 Amendment of Subscription Agreements ........................................................12

Section 4.10 Remaining Certification and Disclosure Requirements ...................................13

Section 4.11 Transferability Restrictions Related to Long-Term Restricted Stock ..............13
-iiARTICLE V 

ADDITIONAL AGREEMENTS

Section 5.1 Unregistered Exchange Shares ........................................................................13

Section 5.2 Legend..............................................................................................................14

Section 5.3 Certain Transactions ........................................................................................14

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

Section 5.5 Registration Rights...........................................................................................15

Section 5.6 Voting Matters .................................................................................................15

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

Section 5.8 Intentionally Omitted .......................................................................................17

Section 5.9 Bank Holding Company Status ........................................................................17

Section 5.10 Compliance with Employ American Workers Act ..........................................17

Section 5.11 Observer to the Board of Directors ..................................................................17

ARTICLE VI 

MISCELLANEOUS

Section 6.1 Termination ......................................................................................................18

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

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

Section 6.4 Waiver of Conditions .......................................................................................19

Section 6.5 Governing Law; Submission to Jurisdiction, etc. ............................................19

Section 6.6 Notices .............................................................................................................19

Section 6.7 Definitions........................................................................................................20

Section 6.8 Assignment ......................................................................................................22

Section 6.9 Severability ......................................................................................................23

Section 6.10 No Third-Party Beneficiaries ...........................................................................23

Section 6.11 Entire Agreement, etc. .....................................................................................23

Section 6.12 Counterparts and Facsimile ..............................................................................23

Section 6.13 Specific Performance .......................................................................................23

LIST OF ANNEXES 

ANNEX A: FORM OF OPINION 

ANNEX B: FORM OF WAIVER 

ANNEX C: FORM OF COMMON STOCK SPA 

LIST OF SCHEDULES 

SCHEDULE A: CAPITALIZATION 
-iiiTerm Section 

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

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

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

Benefit Plans .......................................................................................... 1.1(d)(viii) 

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

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

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

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

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

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

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

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

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

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

Compensation Regulations .................................................................... 1.1(d)(viii) 

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

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

EESA...................................................................................................... 1.1(d)(viii) 

Exchange ................................................................................................ Recitals 

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(h) 

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

Parity Stock ............................................................................................ 6.7(i) 

Permitted Repurchases ........................................................................... 5.7(a)(ii) 

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

Preferred Stock....................................................................................... 6.7(j) 

Primary Investor Consideration ............................................................. 6.7(k) 

Primary Investor Transactions ............................................................... Recitals 

Regulatory Event ................................................................................... 6.7(l) 

Relevant Period ...................................................................................... 1.1(d)(viii) 

Secondary Investor Consideration ......................................................... Recitals 

Secondary Investor Transactions ........................................................... Recitals 

Secondary Investors ............................................................................... Recitals 

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

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

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

Subscription Agreements ....................................................................... Recitals 

subsidiary ............................................................................................... 6.7(a) 

Transaction Documents ......................................................................... 6.7(n) 

Transfer .................................................................................................. 5.4 
EXCHANGE AGREEMENT, dated as of October 30, 2013 (this “Agreement”) 

by and between Monarch Community Bancorp, Inc., 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 (i) 

6,785 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”) and (ii) a ten-year warrant (the “Warrant”) to purchase up to 52,192.40 shares of the 

Company’s common stock, $0.05 par value (the “Common Stock”); 

WHEREAS, the Company issued the Preferred Shares and the Warrant pursuant 

to that certain Securities Purchase Agreement – Standard Terms incorporated into a Letter 

Agreement, dated as of February 6, 2009 (the “Securities Purchase Agreement”); 

WHEREAS, prior to the Closing, the Company intends to enter into subscription 

agreements (the “Subscription Agreements”) with third parties, pursuant to which the third 

parties will purchase shares of Common Stock, at a purchase price per share equal to $2.00, from 

the Company in an amount of no less than the Primary Investor Consideration (collectively, the 

“Primary Investor Transactions”); 

WHEREAS, the Company and the Investor desire, in connection with and subject 

to the completion of the Primary Investor Transactions, to exchange (the “Exchange”) the 

Warrant and all of the Preferred Shares beneficially owned and held by the Investor, including all 

accrued or accumulated and unpaid dividends on the Preferred Shares, for the Exchange Shares; 

WHEREAS, prior to the Closing, the Investor intends to enter into separate 

securities purchase agreements, in substantially the form attached hereto as Annex C (each, a 

“Common Stock SPA”), pursuant to which the Investor will sell all of the Exchange Shares to 

third party purchasers (collectively, the “Secondary Investors”) at the Closing for an aggregate 

purchase price equal to the dollar amount obtained by multiplying the Exchange Shares by $2.00 

(the “Secondary Investor Consideration”) (collectively, the “Secondary Investor Transactions”); 

and 

WHEREAS, in connection with the Secondary Investor Transactions, the 

Company shall enter into agreements pursuant to which the Company will provide to each 

Secondary Investor customary representations, warranties and indemnification with respect to 

the Company, the Exchange Shares and the applicable Secondary Investor Transaction. 

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: 
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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, One World Financial Center, New York, 

New York, 10218, or remotely via the electronic or other exchange of documents and 

signature pages, as the parties may agree. The Closing shall take place contemporaneous 

with or immediately following the closing of the Primary Investor Transactions, assuming 

all of the other conditions set forth in Section 1.1(c) and (d) shall have been satisfied or 

waived, or 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 the Exchange Shares to the 

Investor, as evidenced by one or more certificates dated the Closing Date and registered in 

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 (ii) the Investor will deliver the Warrant and the certificate 

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 
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(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 Primary Investor Transactions shall have been completed 

and shall have resulted in a minimum aggregate amount of not less than the 

Primary Investor Consideration in gross cash proceeds to the Company; 

(iii) each of the Common Stock SPAs shall be in full force and 

effect; 

(iv) the conditions to closing contained in each of the Common Stock 

SPAs (other than the condition relating to the Closing hereunder) shall have 

been satisfied (or waived by the Investor) and the Secondary Investor 

Consideration shall have been deposited by the Secondary Investors in the 

amounts set forth in their respective Common Stock SPA (such deposits to be 

irrevocable except in the case of termination of this Agreement as provided in 

Section 6.1) with an escrow agent acceptable to the Investor pursuant to an 

escrow agreement acceptable to the Investor, and all conditions to the release of 

such amounts from escrow shall have been satisfied or waived; 

(v) 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; 

(vi) 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); 

(vii) the Company shall have delivered to the Investor written 

opinions 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 

(viii) (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 

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 
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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)(viii)(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; 

(ix) 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 

(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; 
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(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 Michigan generally are authorized or required by law or other 

governmental actions to close. 

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 to the Investor, in exchange for the Warrant 

and its 6,785 Preferred Shares, the Exchange Shares and (ii) the Investor agrees to deliver 

to the Company the Warrant and the Preferred Shares in exchange for the Exchange 

Shares. 

(b) Following consummation of the Exchange, no further cash dividends shall 

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, 
-6- 

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

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

transaction, each per share amount and per share price set forth in the Transaction 

Documents (including with respect to the number of shares of Common Stock being 

purchased or exchanged hereunder or under any other Transaction Document and 

including the $2.00 per share purchase or exchange price set forth hereunder or in any of 

the Transaction Documents) 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 any of the Transaction Documents. 

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 Warrant 

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

delivery of the Exchange Shares to the Investor or its designated agent. 

Section 2.3 Status of Preferred Shares after Closing. The Preferred 

Shares exchanged for the Exchange Shares pursuant to this Article II are being reacquired by the 

Company and 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:

Section 3.1 Existence and Power. 

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

organized, validly existing and in good standing as a corporation 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 the State of Michigan and 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, including, without limitation, Monarch 

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

standing under the laws of its jurisdiction of organization. The articles of incorporation 

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. 
-7- 

(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 the most recent fiscal 

month-end preceding the date hereof (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 and the Subscription Agreements. Since the Capitalization Date, except 

pursuant to this Agreement and the Primary Investor Transactions, 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 

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 thereby, 

and compliance by the Company with the provisions hereof and thereof, 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, 
-8- 

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. 

(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, (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 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. 
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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 articles of incorporation 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 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, 2012, 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. 

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, the Primary Investor Transactions and the Secondary Investor Transactions, 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. 
-10- 

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 acquired pursuant 

to this Agreement, 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. 

(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 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 nonconfidential 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. 
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(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 

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 
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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 4.10 of the Securities Purchase Agreement shall be amended in its 

entirety by replacing such Section 4.10 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. 

Section 4.8 Status Reports. Until all of the Primary Investor 

Transactions have been consummated (or the Subscription Agreements have been terminated in 

accordance with their terms), the Company shall provide the Investor with a reasonably detailed 

written report regarding the status of each of the Primary Investor Transactions at least once 

every two weeks and more frequently if reasonably requested by the Investor. 

Section 4.9 Amendment of Subscription Agreements. At least three 

(3) Business Days prior to entering into any of the Subscription Agreements, the Company will 

deliver to the Investor a copy of the Subscription Agreement in substantially final form. The 

Company will not, without the prior written consent of the Investor, (i) enter into any agreements 

relating to the Primary Investor Transactions or (ii) agree to any amendment, waiver or 

modification of the Subscription Agreements (other than corrections of obvious errors, if any, or 
-13- 

other ministerial amendments), in each case, to the extent such amendment, waiver, modification 

or agreement is adverse to the Investor’s interests under this Agreement. 

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 6,785 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. 
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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. 

(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 

wholly-owned 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 wholly-owned 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 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, including 
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in the Secondary Investor Transactions, and the Company shall take all steps as may be 

reasonably requested by the Investor to facilitate the Transfer of the Exchange Shares. 

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. 

Section 5.7 Restriction on Dividends and Repurchases. 

(a) 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, without the consent of the 

Investor: 
-16- 

(i) declare or pay any dividend or make any distribution on the 

Common Stock (other than (A) regular quarterly cash dividends of not more 

than the amount of the last quarterly cash dividend per share declared or, if 

lower, publicly announced an intention to declare, on the Common Stock prior 

to October 14, 2008, as adjusted for any stock split, stock dividend, reverse 

stock split, reclassification or similar transaction, (B) dividends payable solely 

in shares of Common Stock and (C) dividends or distributions of rights or 

Junior Stock in connection with a stockholders’ rights plan); 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 shares 

of Common Stock (which purchase shall be made on a pro rata basis as 

provided in Section 5.7(b)), (B) redemptions, purchases or other acquisitions of 

shares of Common Stock or other Junior Stock, in each case in this clause 

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

ordinary course of business (including purchases to offset the Share Dilution 

Amount (as defined below) pursuant to a publicly announced repurchase plan) 

and consistent with past practice; provided that any purchases to offset the 

Share Dilution Amount shall in no event exceed the Share Dilution Amount, 

(C) purchases or other acquisitions by a broker-dealer subsidiary of the 

Company solely for the purpose of market-making, stabilization or customer 

facilitation transactions in trust preferred securities of the Company or an 

Affiliate of the Company, Junior Stock or Parity Stock in the ordinary course of 

its business, (D) purchases by a broker-dealer subsidiary of the Company of 

trust preferred securities or capital stock of the Company or an Affiliate of the 

Company for resale pursuant to an offering by the Company of such trust 

preferred securities or capital stock underwritten by such broker-dealer 

subsidiary, (E) any redemption or repurchase of rights pursuant to any 

stockholders’ rights plan, (F) the acquisition by the Company or any of the 

Company Subsidiaries of record ownership in Junior Stock, Parity Stock or 

trust preferred securities of the Company or an Affiliate of the Company for the 

beneficial ownership of any other persons (other than the Company or any 

other Company Subsidiary), including as trustees or custodians, and (G) the 

exchange or conversion of Junior Stock for or into other Junior Stock or of 

Parity Stock or of trust preferred securities of the Company or an Affiliate of 

the Company 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 (G), 

solely to the extent required pursuant to binding contractual agreements entered 

into prior to the date hereof or any subsequent agreement for the accelerated 

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

(F), collectively, the “Permitted Repurchases”). “Share Dilution Amount” 

means the increase in the number of diluted shares outstanding (determined in 

accordance with United States generally accepted accounting principles 

(“GAAP”), and as measured from the date of the Company’s most recently 

filed consolidated financial statements prior to the Closing Date) resulting from 
-17- 

the grant, vesting or exercise of equity-based compensation to employees and 

equitably adjusted for any stock split, stock dividend, reverse stock split, 

reclassification or similar transaction. 

(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) 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 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 

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. 
-18- 

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 December 31, 2013; 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 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 

(c) 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 

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. 
-19- 

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 Company 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. 

If to the Company: 

Monarch Community Bancorp, Inc. 

375 North Willowbrook Road 

Coldwater, Michigan 49036 

Attention: Richard J. DeVries, President & CEO 

Telephone: 517.279.3978 

Facsimile: 517.279.0221 
-20- 

With a copy to: 

Howard & Howard Attorneys PLLC 

200 South Michigan Avenue, Suite 1100 

Chicago, Illinois 60604 

Attention: Joseph B. Hemker, Esq. 

Telephone: 312.456.3444 

Facsimile: 312.939.5617 

If to the Investor: 

United States Department of the Treasury 

1500 Pennsylvania Avenue, NW 

Washington, DC 20220 

Attention: Chief Counsel Office of Financial Stability 

Facsimile: (202) 927-9225 

Email: OFSChiefCounselNotices@do.treas.gov 

With a copy to: 

Cadwalader, Wickersham & Taft LLP 

One World Financial Center 

New York, NY 10281 

Attention: William P. Mills 

Telephone: (212) 504-6000 

Facsimile: (212) 504-6666 

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. 

(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. 
-21- 

(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) “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 articles of incorporation 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. 

(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 “Exchange Shares” means shares of Common Stock equal to the 

number obtained by dividing (i) the sum of three million fifty three thousand two hundred 

fifty dollars ($3,053,250) plus all accrued or accumulated and unpaid dividends on the 
-22- 

Preferred Shares through the Closing Date by (ii) $2.00. In lieu of any fractional shares of 

Common Stock, any such fractions shall be rounded up to the nearest whole share and 

such whole share shall be included in the Exchange Shares. 

(h) 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. 

(i) 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). 

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

the Company. 

(k) The term “Primary Investor Consideration” means the amount equal to no 

less than the difference of (i) sixteen million five hundred thousand dollars ($16,500,000) 

minus (ii) the Secondary Investor Consideration. 

(l) 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. 

(m) The term “Transaction Documents” means this Agreement, the 

Subscription Agreements and the Common Stock SPAs. 

(n) 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 Section 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(n) 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 
-23- 

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 

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 
-24- 

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 has been duly formed and is validly existing as a corporation and is in 

good standing under the laws of the jurisdiction of its organization. The Company has all 

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

carry on its business as it is being conducted. 

b) The Bank has been duly formed and is validly existing as a national association and is in 

good standing under the laws of the jurisdiction of its organization. The Bank has all 

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

carry on its business as it is being conducted. 

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

Agreement and to carry out its obligations thereunder (which includes the issuance of the 

Exchange Shares). 

d) The Agreement is a valid and binding obligation of the Company enforceable against the 

Company in accordance with its terms, except as the same may be limited by applicable 

bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the 

enforcement of creditors’ rights generally and general equitable principles, regardless of 

whether such enforceability is considered in a proceeding at law or in equity. 

e) 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 its stockholders, 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. 

f) The Exchange Shares have been duly and validly authorized, and, when executed and 

delivered pursuant to the Agreement, the Exchange Shares will be duly and validly 

issued, fully paid and nonassessable, and will not be issued in violation of any preemptive 

rights. 

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

consummation by the Company of the transactions contemplated thereby, and 

compliance by the Company with the provisions thereof, will not (A) violate, conflict 

with, or result in a breach of any provision of the Company’s certificate of incorporation 

or bylaws or (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 
Annex A-2 

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

conditions or provisions of its organizational documents or any agreement, contract, 

indenture, lease, mortgage, power of attorney, evidence of indebtedness, letter of credit, 

license, instrument, obligation, purchase or sales order, or other commitment, whether 

oral or written, to which the Company or Company Subsidiary is a party or by which the 

Company or any Company Subsidiary is bound or to which any of the property or assets 

of the Company or any Company Subsidiary is subject, or (C) subject to compliance with 

the statute and regulations referred to in Section 3.4(b) of the Agreement 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 known to us except, in the case of clause (C), 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. 

h) Other than such filings and approvals as are required to be made or obtained under any 

state “blue sky” laws and other than such filings and approvals that have been made or 

obtained, no notice to, filing with, exemption 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. 

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

pursuant to the Agreement and the other issuances of Common Stock pursuant to the 

Primary Investor Transactions, will not be on 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 MONARCH 

COMMUNITY BANCORP, INC. (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 ____________, 2013, 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: 
Annex C-1 

ANNEX C 

FORM OF COMMON STOCK SPA 
USActive 28435766.5 

FORM OF 

SECURITIES PURCHASE AGREEMENT 

by and among 

THE UNITED STATES DEPARTMENT OF THE TREASURY, 

[] 

and, for the purposes of Section 4.02, Section 7.01 and Section 7.04 of this Agreement, 

MONARCH COMMUNITY BANCORP, INC. 

Dated as of [], 2013 
i 

Table of Contents 

Page 

I DEFINITIONS. ....................................................................................................................1

1.01. Definitions of Certain Terms ...................................................................................1

1.02. Interpretation ............................................................................................................3

1.03. Changes Affecting the Shares ..................................................................................4

II THE SECURITIES PURCHASE. .......................................................................................4

2.01. Purchase and Sale of the Shares ...............................................................................4

2.02. Closing of the Securities Purchase. ..........................................................................4

III REPRESENTATIONS AND WARRANTIES. ...................................................................5

3.01. Representations and Warranties of the Purchaser ....................................................5

IV COVENANTS. ....................................................................................................................8

4.01. Forbearances of the Seller ........................................................................................8

4.02. Further Action ..........................................................................................................8

4.03. Subscription Agreement ...........................................................................................8

V CONDITIONS TO THE CLOSING. ...................................................................................8

5.01. Conditions to Each Party’s Obligations ...................................................................8

5.02. Condition to Obligations of the Seller .....................................................................9

VI TERMINATION. ...............................................................................................................10

6.01. Termination Events ................................................................................................10

6.02. Effect of Termination .............................................................................................10

VII MISCELLANEOUS. .........................................................................................................11

7.01. Waiver; Amendment ..............................................................................................11

7.02. Counterparts ...........................................................................................................11

7.03. Governing Law; Choice of Forum; Waiver of Jury Trial. .....................................11

7.04. Expenses ................................................................................................................11

7.05. Notices ...................................................................................................................12

7.06. Entire Understanding; No Third Party Beneficiaries .............................................13

7.07. Assignment ............................................................................................................13

7.08. Severability ............................................................................................................13
SECURITIES PURCHASE AGREEMENT 

THIS SECURITIES PURCHASE AGREEMENT (as amended, supplemented or 

otherwise modified from time to time, this “Agreement”) is dated as of [], 2013 by and among 

the United States Department of the Treasury (the “Seller”), [], a [] (the “Purchaser”), and, 

for the purposes of Section 4.02, Section 7.01 and Section 7.04 of this Agreement, Monarch 

Community Bancorp, Inc., a Maryland corporation (the “Company”). 

RECITALS 

WHEREAS, the Company and the Seller entered into an exchange agreement (the 

“Exchange Agreement”), pursuant to which the Company will issue to the Seller shares of 

Common Stock (the “Shares”), in exchange for the Seller’s (i) 6,785 shares of the Company’s 

preferred stock designated as Fixed Rate Cumulative Perpetual Preferred Stock, Series A, and 

(ii) a ten-year warrant to purchase up to 52,192.40 shares of Common Stock (the “Exchange”); 

WHEREAS, concurrently herewith, the Company is entering into a subscription 

agreement with the Purchaser (the “Subscription Agreement”) pursuant to which, among other 

things, the Company will provide to the Purchaser customary disclosures with respect to the 

Company, the Purchased Shares (as defined below) and the Securities Purchase (as defined 

below); and 

WHEREAS, conditioned upon the closing of the Exchange, the Company and the Seller 

desire that the Seller sell to the Purchaser, and the Purchaser desires to purchase from the Seller, 

subject to the terms and conditions contained in this Agreement, [] Shares at a purchase price 

of $2.00 per Share (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 

I DEFINITIONS. 

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 

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. 
 2 

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

“BHCA” shall mean the Bank Holding Company Act of 1956, as amended. 

“Business Day” means any day that is not a Saturday, a Sunday or other day on which 

banking organizations in the State of New York or the State of Michigan 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). 

“Common Stock” means the Company’s common stock, par value $0.05 per share. 

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

“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 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 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 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). 

“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. 
 3 

“Prohibited Investor” has the meaning set forth in Section 3.01(E)(8). 

“Purchase Price” has the meaning set forth in Section 2.01. 

“Purchased Shares” 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. 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. 

“Rule 144” means Rule 144 under the Securities Act. 

“Securities Act” means the U.S. Securities Act of 1933, as amended. 

“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. 

“Subscription Agreement” has the meaning set forth in the recitals in 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 performing similar 

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

more subsidiaries thereof. 

“Transaction Documents” has the meaning given such term in the Exchange Agreement. 

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 
 4 

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. 

1.03. Changes Affecting the Shares. 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, each per 

share amount and per share price set forth in the Transaction Documents (including with respect 

to the number of Shares being purchased hereunder or under any other Transaction Document 

and including the $2.00 per share purchase or exchange price set forth in any of the Transaction 

Documents) shall be proportionally adjusted; provided that nothing in this Section 1.03 shall be 

construed to permit the Company to take any action otherwise prohibited or restricted by any of 

the Transaction Documents. 

II THE SECURITIES PURCHASE. 

2.01. Purchase and Sale of the Shares. 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, [] Shares at a purchase 

price of $2.00 per Share (the “Purchased Shares”), free and clear of all Liens. The aggregate 

purchase price for the Purchased Shares shall be an amount in cash equal to $[] (the “Purchase 

Price”). 

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 following the closing of the Exchange 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 the same location 

as the closing of the Exchange or at such other place as the Seller and the Purchaser shall 

mutually agree in writing. 

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

(1) the Seller will cause to be delivered to the Purchaser certificates 

for the Purchased Shares, duly endorsed in blank or accompanied by stock powers 

duly endorsed in blank or other required instruments of transfer; and 
 5 

(2) the Purchaser will cause to be paid the aggregate Purchase Price to 

the Seller, by wire transfer in immediately available funds, to an escrow account 

designated in writing by the Seller to the Purchaser, such designation to be made 

not later than two Business Days prior to the Closing Date. 

III REPRESENTATIONS AND WARRANTIES. 

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 [] under the laws of [] 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 Purchaser of the transactions contemplated hereby, have been duly 

and validly approved by all necessary corporate or other applicable action of the 

Purchaser, and no other corporate, shareholder or other 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) 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. 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 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, except for such filings, consents and approvals that 

have been made or obtained or will be made or obtained prior to Closing. 

(E) Securities Matters. 

(1) The Purchaser is either (i) an “accredited investor” as defined in 

Rule 501 under the Securities Act with total assets in excess of $25,000,000 or 

(ii) a “qualified institutional buyer” within the meaning of Rule 144A under the 
 6 

Securities Act. The Purchased Shares are being acquired by the Purchaser for its 

own account and without a view to the public distribution or sale of such Shares. 

(2) The Purchaser understands that (i) the Purchased Shares are being 

sold in a transaction not involving any public offering within the meaning of the 

Securities Act, and accordingly, such Shares are “restricted securities” within the 

meaning of Rule 144; (ii) such Shares have not been and will not be registered 

under the Securities Act; (iii) if, prior to the expiration of the holding period 

specified in Rule 144, it decides to offer, resell, pledge or otherwise transfer such 

Shares, such Shares may be offered, resold, pledged or transferred only (a) in 

compliance with Rule 144 or otherwise pursuant to an exemption from 

registration under the Securities Act or (b) to the Company or one of its 

Subsidiaries, in each case in accordance with any applicable securities laws of any 

state of the United States; and (iv) the Purchaser will, and each subsequent holder 

is required to, provide the Company and its transfer agent with such certificates 

and other information as they may reasonably require to confirm that the transfer 

complies with the foregoing restrictions. 

(3) The Purchaser understands that none of the Seller or the Company 

is making any representation as to the availability of Rule 144 or Rule 144A 

under the Securities Act for the offer, resale, pledge or transfer of any Shares, or 

that any Shares purchased by the Purchaser will ever be able to be sold. 

(4) The Purchaser understands that the Purchased Shares will, until the 

expiration of the applicable holding period set forth in Rule 144, unless sold in 

compliance with Rule 144, bear a legend to substantially the following effect: 

“THE SECURITIES REPRESENTED BY THIS INSTRUMENT HAVE NOT 

BEEN REGISTERED UNDER THE SECURITIES LAWS OF ANY STATE 

AND MAY NOT BE TRANSFERRED, SOLD, OFFERED, PLEDGED 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.” 

(5) The Purchaser acknowledges and agrees that it (i) is a sophisticated 

investor; (ii) does not require the assistance of an investment advisor or other 

purchaser representative to purchase the Purchased Shares; (iii) has such 

knowledge and experience in financial and business matters as to be capable of 

evaluating the merits and risks of its prospective investment in the Purchased 

Shares; (iv) has the ability to bear the economic risks of its prospective 

investment for an indefinite period of time; (v) can afford the complete loss of 

such investment; and (vi) recognizes that the investment in the Purchased Shares 

involves substantial risk. 
 7 

(6) The Purchaser understands that the Seller may have access to 

information about the Company that is not generally available to the public, and 

acknowledges and agrees that, to the extent the Seller has any such information, 

such information need not (and shall not) be provided to the Purchaser by the 

Seller. The Purchaser further understands that the Seller is a federal agency and 

that the Purchaser’s ability to bring a claim against the Seller under the federal 

securities laws may be limited. 

(7) The Purchaser acknowledges that it is not relying on any advice or 

recommendation from the Seller or the Company, or any investigation or 

examination that the Seller may have conducted, with respect to the Shares or the 

Company, and the Seller has not made any representation, warranty or covenant, 

express or implied, to it with respect thereto and the Seller shall not have any 

liability to it with respect thereto. 

(8) Neither the Purchaser nor any person or entity controlling, 

controlled by or under common control with it, nor any person or entity having a 

beneficial interest in it, nor, to the knowledge of the Purchaser, any director, 

officer, agent, employee or Affiliate thereof: (i) is a person or entity listed in the 

annex to Executive Order No. 13224 (2001) issued by the President of the United 

States (Executive Order Blocking Property and Prohibiting Transactions with 

Persons Who Commit, Threaten to Commit, or Support Terrorism); (ii) is named 

on the List of Specially Designated Nationals and Blocked Persons maintained by 

the U.S. Office of Foreign Assets Control (OFAC); (iii) is a Designated National 

other than an “unblocked national” as defined in the Cuban Assets Control 

Regulations, 31 C.F.R. Part 515; (iv) is a non-U.S. shell bank (as set forth in 

Section 313 of the Uniting and Strengthening America by Providing Appropriate 

Tools Required to Intercept and Obstruct Terrorism Act of 2001 (USA PATRIOT 

Act)) or is providing banking services indirectly to a non-U.S. shell bank; (v) is a 

senior non-U.S. political figure or an immediate family member or close associate 

of such figure or an entity owned or controlled by such a figure; (vi) is a person 

with whom a U.S. citizen or entity is prohibited from transacting business, 

whether such prohibition arises under U.S. law, regulation, executive order, antimoney laundering, antiterrorist, financial institution and asset control laws, 

regulations, rules or orders, or as a result of any list published by the U.S. 

Department of Commerce, the U.S. Department of Treasury, or the U.S. 

Department of State, including any agency or office thereof; (vii) is a person who 

has funded or supported terrorism or a suspected terrorist organization or who has 

engaged in, or derived funds from, activities that relate to the laundering of the 

proceeds of illegal activity; or (viii) is a person or entity that would cause the 

Company to violate any Law (including bank or other financial institution 

regulatory laws, regulations or orders) to which the Company is subject by reason 

of such person’s or entity’s purchase of the Purchased Shares (categories (i) 

through (viii), each, a “Prohibited Investor”). 
 8 

(9) The Purchaser has met and will continue to meet all of its 

obligations under the Bank Secrecy Act, as amended (31 U.S.C. Section 5311 et 

seq.) and its implementing regulations, if applicable. 

(10) The funds used to purchase the Purchased Shares were legally 

derived from legitimate sources and not from any Prohibited Investor. 

(F) Availability of Funds. Purchaser has, and will have as of the Closing, 

sufficient funds available to consummate the transactions contemplated hereunder. 

IV COVENANTS. 

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 Purchased Shares or any portion thereof 

or interest therein (other than pursuant to the Securities Purchase); or 

(B) agree, commit to or enter into any agreement to take any of the actions 

referred to in Section 4.01(A). 

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 Purchased Shares. 

4.02. Further Action. Each of 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. 

4.03. Subscription Agreement. The Purchaser will not agree to any amendment, waiver 

or modification of the Subscription Agreement (other than corrections of obvious errors, if any, 

or other ministerial amendments) without the prior written consent of the Seller, in each case to 

the extent such amendment, waiver or modification is adverse to the Seller’s interests under this 

Agreement. 

V CONDITIONS TO THE CLOSING. 

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 
 9 

written waiver by the Purchaser and the Seller, prior to the Closing, of each of the following 

conditions: 

(A) Closing of the Exchange. The closing of the Exchange shall have 

occurred prior to the Closing. 

(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. 

(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. 

5.02. Condition 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 with respect to 

the Company or any of its Subsidiaries: 

(1) 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 it 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; 
 10 

(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 applicable to 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 

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

(B) Representations and Warranties of the Purchaser. The representations and 

warranties set forth in Article III of this Agreement shall be true and correct in all 

material respects as though made on and as of the Closing Date. 

(C) Performance Obligations. The Purchaser shall have performed in all 

respects all obligations required to be performed by it under this Agreement at or prior to 

the Closing. 

(D) Closing Certificate. The Purchaser shall deliver to the Seller a certificate, 

dated the Closing Date, signed on behalf of the Purchaser by a senior executive officer 

thereof certifying to the effect that the conditions precedent to the Closing set forth in 

Section 5.01 and Section 5.02 have been satisfied. 

VI TERMINATION. 

6.01. Termination Events. 

(A) This Agreement may be terminated at any time prior to the Closing: 

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

(2) by the Seller, upon written notice to the Purchaser, in the event that 

the Closing Date does not occur on or before December 31, 2013 or such later 

date, if any, as Seller shall agree to in writing; provided, however, that the right to 

terminate this Agreement pursuant to this Section 6.01(A)(2) shall not be 

available if Seller’s 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. 

(B) This Agreement shall automatically terminate upon the termination of the 

Exchange Agreement in accordance with its terms. 

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 Purchaser, any affiliates of the Purchaser or any officers or directors of the Purchaser 
 11 

or any of its affiliates shall have any liability of any nature whatsoever hereunder, or in 

connection with the transactions contemplated hereby, except that this Section 6.02 and Sections 

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

VII MISCELLANEOUS. 

7.01. Waiver; Amendment. Any provision of this Agreement may be waived, amended 

or modified at any time by an agreement in writing signed by each of the Seller, the Purchaser 

and the Company. 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. 

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. 

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 and (ii) 

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. 

7.04. Expenses. If requested by the Seller, the Company 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 Sellers’s legal counsel and financial advisors. 
 12 

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: 

[] 

[] 

[] 

Attention: [] 

Telephone: [] 

Fax: [] 

With a copy to: 

[] 

[] 

[] 

Attention: [] 

Telephone: [] 

Fax: [] 

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, NY 10281 

Attention: William P. Mills 

Telephone: (212) 504-6000 

Facsimile: (212) 504-6666 

If to the Company: 

Monarch Community Bancorp, Inc. 

375 North Willowbrook Road 
 13 

Coldwater, Michigan 49036 

Attention: Richard J. DeVries, President & CEO 

Telephone: (517) 279-3978 

Facsimile: (517) 279-0221 

With a copy to: 

Howard & Howard Attorneys PLLC 

200 South Michigan Avenue, Suite 1100 

Chicago, Illinois 60604 

Attention: Joseph B. Hemker, Esq. 

Telephone: (312) 456-3444 

Facsimile: (312) 939-5617 

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. 

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 party, 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 notice of 

any such assignment; provided, that the failure to provide such notice shall not void any such 

assignment. 

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 faith in an effort 

to agree upon a suitable and equitable substitute provision to effect the original intent of the 

parties. 
 14 

[Remainder of page intentionally left blank] 
[Signature Page to Securities Purchase Agreement] 

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. 

[] 

By: 

Name: 

Title: 

UNITED STATES DEPARTMENT OF THE 

TREASURY 

By: 

Name: Timothy G. Massad 

Title: Assistant Secretary for Financial Stability 
[Signature Page to Securities Purchase Agreement] 

For the purposes of Section 4.02, Section 7.01 and Section 7.04 of this Agreement: 

MONARCH COMMUNITY BANCORP, INC. 

By: 

 Name: Richard J. DeVries 

 Title: President & CEO 
USActive 28420630.6 

FORM OF 

SECURITIES PURCHASE AGREEMENT 

by and among 

THE UNITED STATES DEPARTMENT OF THE TREASURY, 

[] 

and, for the purposes of Section 4.02, Section 7.01 and Section 7.04 of this Agreement, 

MONARCH COMMUNITY BANCORP, INC. 

Dated as of [], 2013 
i 

Table of Contents 

Page 

I DEFINITIONS. ....................................................................................................................1

1.01. Definitions of Certain Terms ...................................................................................1

1.02. Interpretation ............................................................................................................3

1.03. Changes Affecting the Shares ..................................................................................4

II THE SECURITIES PURCHASE. .......................................................................................4

2.01. Purchase and Sale of the Shares ...............................................................................4

2.02. Closing of the Securities Purchase. ..........................................................................4

III REPRESENTATIONS AND WARRANTIES. ...................................................................5

3.01. Representations and Warranties of the Purchaser ....................................................5

IV COVENANTS. ....................................................................................................................7

4.01. Forbearances of the Seller ........................................................................................7

4.02. Further Action ..........................................................................................................8

4.03. Subscription Agreement ...........................................................................................8

V CONDITIONS TO THE CLOSING. ...................................................................................8

5.01. Conditions to Each Party’s Obligations ...................................................................8

5.02. Condition to Obligations of the Seller .....................................................................8

VI TERMINATION. ...............................................................................................................10

6.01. Termination Events ................................................................................................10

6.02. Effect of Termination .............................................................................................10

VII MISCELLANEOUS. .........................................................................................................10

7.01. Waiver; Amendment ..............................................................................................10

7.02. Counterparts ...........................................................................................................10

7.03. Governing Law; Choice of Forum; Waiver of Jury Trial. .....................................11

7.04. Expenses ................................................................................................................11

7.05. Notices ...................................................................................................................11

7.06. Entire Understanding; No Third Party Beneficiaries .............................................12

7.07. Assignment ............................................................................................................13

7.08. Severability ............................................................................................................13
SECURITIES PURCHASE AGREEMENT 

THIS SECURITIES PURCHASE AGREEMENT (as amended, supplemented or 

otherwise modified from time to time, this “Agreement”) is dated as of [], 2013 by and among 

the United States Department of the Treasury (the “Seller”), [] (the “Purchaser”), and, for the 

purposes of Section 4.02, Section 7.01 and Section 7.04 of this Agreement, Monarch Community 

Bancorp, Inc., a Maryland corporation (the “Company”). 

RECITALS 

WHEREAS, the Company and the Seller entered into an exchange agreement (the 

“Exchange Agreement”), pursuant to which the Company will issue to the Seller shares of 

Common Stock (the “Shares”), in exchange for the Seller’s (i) 6,785 shares of the Company’s 

preferred stock designated as Fixed Rate Cumulative Perpetual Preferred Stock, Series A, and 

(ii) a ten-year warrant to purchase up to 52,192.40 shares of Common Stock (the “Exchange”); 

WHEREAS, concurrently herewith, the Company is entering into a subscription 

agreement with the Purchaser (the “Subscription Agreement”) pursuant to which, among other 

things, the Company will provide to the Purchaser customary disclosures with respect to the 

Company, the Purchased Shares (as defined below) and the Securities Purchase (as defined 

below); and 

WHEREAS, conditioned upon the closing of the Exchange, the Company and the Seller 

desire that the Seller sell to the Purchaser, and the Purchaser desires to purchase from the Seller, 

subject to the terms and conditions contained in this Agreement, [] Shares at a purchase price 

of $2.00 per Share (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 

I DEFINITIONS. 

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 

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. 
 2 

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

“BHCA” shall mean the Bank Holding Company Act of 1956, as amended. 

“Business Day” means any day that is not a Saturday, a Sunday or other day on which 

banking organizations in the State of New York or the State of Michigan 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). 

“Common Stock” means the Company’s common stock, par value $0.05 per share. 

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

“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 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 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 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). 

“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. 
 3 

“Prohibited Investor” has the meaning set forth in Section 3.01(E)(8). 

“Purchase Price” has the meaning set forth in Section 2.01. 

“Purchased Shares” 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. 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. 

“Rule 144” means Rule 144 under the Securities Act. 

“Securities Act” means the U.S. Securities Act of 1933, as amended. 

“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. 

“Subscription Agreement” has the meaning set forth in the recitals in 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 performing similar 

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

more subsidiaries thereof. 

“Transaction Documents” has the meaning given such term in the Exchange Agreement. 

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 
 4 

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. 

1.03. Changes Affecting the Shares. 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, each per 

share amount and per share price set forth in the Transaction Documents (including with respect 

to the number of Shares being purchased hereunder or under any other Transaction Document 

and including the $2.00 per share purchase or exchange price set forth in any of the Transaction 

Documents) shall be proportionally adjusted; provided that nothing in this Section 1.03 shall be 

construed to permit the Company to take any action otherwise prohibited or restricted by any of 

the Transaction Documents. 

II THE SECURITIES PURCHASE. 

2.01. Purchase and Sale of the Shares. 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, [] Shares at a purchase 

price of $2.00 per Share (the “Purchased Shares”), free and clear of all Liens. The aggregate 

purchase price for the Purchased Shares shall be an amount in cash equal to $[] (the “Purchase 

Price”). 

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 following the closing of the Exchange 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 the same location 

as the closing of the Exchange or at such other place as the Seller and the Purchaser shall 

mutually agree in writing. 

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

(1) the Seller will cause to be delivered to the Purchaser certificates 

for the Purchased Shares, duly endorsed in blank or accompanied by stock powers 

duly endorsed in blank or other required instruments of transfer; and 
 5 

(2) the Purchaser will cause to be paid the aggregate Purchase Price to 

the Seller, by wire transfer in immediately available funds, to an escrow account 

designated in writing by the Seller to the Purchaser, such designation to be made 

not later than two Business Days prior to the Closing Date. 

III REPRESENTATIONS AND WARRANTIES. 

3.01. Representations and Warranties of the Purchaser. The Purchaser hereby 

represents and warrants to the Seller as follows: 

(A) Citizenship and Power. The Purchaser is a director or officer of the 

Company and a citizen of the United States of America. The Purchaser has all requisite 

power and authority to execute and deliver this Agreement and to consummate the 

transactions contemplated by this Agreement. 

(B) Authorization. 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) 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, 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. 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 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, except for such filings, consents and approvals that 

have been made or obtained or will be made or obtained prior to Closing. 

(E) Securities Matters. 

(1) The Purchaser is an “accredited investor” as defined in Rule 501 

under the Securities Act. The Purchased Shares are being acquired by the 

Purchaser for the Purchaser’s own account and without a view to the public 

distribution or sale of such Shares. 

(2) The Purchaser understands that (i) the Purchased Shares are being 

sold in a transaction not involving any public offering within the meaning of the 

Securities Act, and accordingly, such Shares are “restricted securities” within the 

meaning of Rule 144; (ii) such Shares have not been and will not be registered 

under the Securities Act; (iii) if, prior to the expiration of the holding period 

specified in Rule 144, the Purchaser decides to offer, resell, pledge or otherwise 
 6 

transfer such Shares, such Shares may be offered, resold, pledged or transferred 

only (a) in compliance with Rule 144 or otherwise pursuant to an exemption from 

registration under the Securities Act or (b) to the Company or one of its 

Subsidiaries, in each case in accordance with any applicable securities laws of any 

state of the United States; and (iv) the Purchaser will, and each subsequent holder 

is required to, provide the Company and its transfer agent with such certificates 

and other information as they may reasonably require to confirm that the transfer 

complies with the foregoing restrictions. 

(3) The Purchaser understands that none of the Seller or the Company 

is making any representation as to the availability of Rule 144 or Rule 144A 

under the Securities Act for the offer, resale, pledge or transfer of any Shares, or 

that any Shares purchased by the Purchaser will ever be able to be sold. 

(4) The Purchaser understands that the Purchased Shares will, until the 

expiration of the applicable holding period set forth in Rule 144, unless sold in 

compliance with Rule 144, bear a legend to substantially the following effect: 

“THE SECURITIES REPRESENTED BY THIS INSTRUMENT HAVE NOT 

BEEN REGISTERED UNDER THE SECURITIES LAWS OF ANY STATE 

AND MAY NOT BE TRANSFERRED, SOLD, OFFERED, PLEDGED 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.” 

(5) The Purchaser acknowledges and agrees that the Purchaser (i) is a 

sophisticated investor; (ii) does not require the assistance of an investment advisor 

or other purchaser representative to purchase the Purchased Shares; (iii) has such 

knowledge and experience in financial and business matters as to be capable of 

evaluating the merits and risks of its prospective investment in the Purchased 

Shares; (iv) has the ability to bear the economic risks of its prospective 

investment for an indefinite period of time; (v) can afford the complete loss of 

such investment; and (vi) recognizes that the investment in the Purchased Shares 

involves substantial risk. 

(6) The Purchaser understands that the Seller may have access to 

information about the Company that is not generally available to the public, and 

acknowledges and agrees that, to the extent the Seller has any such information, 

such information need not (and shall not) be provided to the Purchaser by the 

Seller. The Purchaser further understands that the Seller is a federal agency and 

that the Purchaser’s ability to bring a claim against the Seller under the federal 

securities laws may be limited. 

(7) The Purchaser acknowledges that the Purchaser is not relying on 

any advice or recommendation from the Seller or the Company, or any 
 7 

investigation or examination that the Seller may have conducted, with respect to 

the Shares or the Company, and the Seller has not made any representation, 

warranty or covenant, express or implied, to it with respect thereto and the Seller 

shall not have any liability to it with respect thereto. 

(8) The Purchaser is not: (i) a person listed in the annex to Executive 

Order No. 13224 (2001) issued by the President of the United States (Executive 

Order Blocking Property and Prohibiting Transactions with Persons Who 

Commit, Threaten to Commit, or Support Terrorism); (ii) is named on the List of 

Specially Designated Nationals and Blocked Persons maintained by the U.S. 

Office of Foreign Assets Control (OFAC); (iii) is a Designated National other 

than an “unblocked national” as defined in the Cuban Assets Control Regulations, 

31 C.F.R. Part 515; (iv) is a senior non-U.S. political figure or an immediate 

family member or close associate of such figure; (v) is a person with whom a U.S. 

citizen or entity is prohibited from transacting business, whether such prohibition 

arises under U.S. law, regulation, executive order, anti-money laundering, 

antiterrorist, financial institution and asset control laws, regulations, rules or 

orders, or as a result of any list published by the U.S. Department of Commerce, 

the U.S. Department of Treasury, or the U.S. Department of State, including any 

agency or office thereof; (vi) is a person who has funded or supported terrorism or 

a suspected terrorist organization or who has engaged in, or derived funds from, 

activities that relate to the laundering of the proceeds of illegal activity; or (vii) is 

a person that would cause the Company to violate any Law (including bank or 

other financial institution regulatory laws, regulations or orders) to which the 

Company is subject by reason of such person’s or entity’s purchase of the 

Purchased Shares (categories (i) through (vii), each, a “Prohibited Investor”). 

(9) The Purchaser has met and will continue to meet all of its 

obligations under the Bank Secrecy Act, as amended (31 U.S.C. Section 5311 et 

seq.) and its implementing regulations, if applicable. 

(10) The funds used to purchase the Purchased Shares were legally 

derived from legitimate sources and not from any Prohibited Investor. 

(F) Availability of Funds. Purchaser has, and will have as of the Closing, 

sufficient funds available to consummate the transactions contemplated hereunder. 

IV COVENANTS. 

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 Purchased Shares or any portion thereof 

or interest therein (other than pursuant to the Securities Purchase); or 
 8 

(B) agree, commit to or enter into any agreement to take any of the actions 

referred to in Section 4.01(A). 

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 Purchased Shares. 

4.02. Further Action. Each of 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. 

4.03. Subscription Agreement. The Purchaser will not agree to any amendment, waiver 

or modification of the Subscription Agreement (other than corrections of obvious errors, if any, 

or other ministerial amendments) without the prior written consent of the Seller, in each case to 

the extent such amendment, waiver or modification is adverse to the Seller’s interests under this 

Agreement. 

V CONDITIONS TO THE CLOSING. 

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) Closing of the Exchange. The closing of the Exchange shall have 

occurred prior to the Closing. 

(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. 

(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. 

5.02. Condition 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: 
 9 

(A) Other Events. None of the following shall have occurred with respect to 

the Company or any of its Subsidiaries: 

(1) 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 it 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 applicable to 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 

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

(B) Representations and Warranties of the Purchaser. The representations and 

warranties set forth in Article III of this Agreement shall be true and correct in all 

material respects as though made on and as of the Closing Date. 
 10 

(C) Performance Obligations. The Purchaser shall have performed in all 

respects all obligations required to be performed by it under this Agreement at or prior to 

the Closing. 

(D) Closing Certificate. The Purchaser shall deliver to the Seller a certificate, 

dated the Closing Date, signed by the Purchaser certifying to the effect that the conditions 

precedent to the Closing set forth in Section 5.01 and Section 5.02 have been satisfied. 

VI TERMINATION. 

6.01. Termination Events. 

(A) This Agreement may be terminated at any time prior to the Closing: 

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

(2) by the Seller, upon written notice to the Purchaser, in the event that 

the Closing Date does not occur on or before December 31, 2013 or such later 

date, if any, as Seller shall agree to in writing; provided, however, that the right to 

terminate this Agreement pursuant to this Section 6.01(A)(2) shall not be 

available if Seller’s 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. 

(B) This Agreement shall automatically terminate upon the termination of the 

Exchange Agreement in accordance with its terms. 

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 neither the 

Seller nor the Purchaser shall have any liability of any nature whatsoever hereunder, or in 

connection with the transactions contemplated hereby, except that this Section 6.02 and Sections 

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

VII MISCELLANEOUS. 

7.01. Waiver; Amendment. Any provision of this Agreement may be waived, amended 

or modified at any time by an agreement in writing signed by each of the Seller, the Purchaser 

and the Company. 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. 

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. 
 11 

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 and (ii) 

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. 

7.04. Expenses. If requested by the Seller, the Company 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 Sellers’s legal counsel and financial advisors. 

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: 

[] 

[] 

[] 

Attention: [] 

Telephone: [] 

Fax: [] 

With a copy to: 
 12 

[] 

[] 

[] 

Attention: [] 

Telephone: [] 

Fax: [] 

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, NY 10281 

Attention: William P. Mills 

Telephone: (212) 504-6000 

Facsimile: (212) 504-6666 

If to the Company to: 

Monarch Community Bancorp, Inc. 

375 North Willowbrook Road 

Coldwater, Michigan 49036 

Attention: Richard J. DeVries, President & CEO 

Telephone: (517) 279-3978 

Facsimile: (517) 279-0221 

With a copy to: 

Howard & Howard Attorneys PLLC 

200 South Michigan Avenue, Suite 1100 

Chicago, Illinois 60604 

Attention: Joseph B. Hemker, Esq. 

Telephone: (312) 456-3444 

Facsimile: (312) 939-5617 

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. 
 13 

Nothing in this Agreement, expressed or implied, is intended to confer upon any person, other 

than the parties hereto, any rights or remedies hereunder. 

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 party, 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 notice of 

any such assignment; provided, that the failure to provide such notice shall not void any such 

assignment. 

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 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] 
[Signature Page to Securities Purchase Agreement] 

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. 

By: 

Name: 

Title: 

UNITED STATES DEPARTMENT OF THE 

TREASURY 

By: 

Name: Timothy G. Massad 

Title: Assistant Secretary for Financial Stability 
[Signature Page to Securities Purchase Agreement] 

For the purposes of Section 4.02, Section 7.01 and Section 7.04 of this Agreement: 

MONARCH COMMUNITY BANCORP, INC. 

By: 

 Name: Richard J. DeVries 

 Title: President & CEO 
Sch. A-1 

SCHEDULE A 

Capitalization 

Authorized Capital Stock of the Company (as of September 30, 2013) 

Common Stock: 20,000,000 shares 

Preferred Stock: 5,000,000 shares 

Outstanding Capital Stock of the Company (as of September 30, 2013) 

Common Stock: 410,147 shares 

Preferred Stock: 6,785 Series A Preferred Shares 

Outstanding Warrants of the Company (as of September 30, 2013): 

Warrant to purchase 52,192.40 shares of common stock. 

As of September 30, 2013, 11,967 shares of common stock have been reserved for issuance 

under any equity based benefit plans