**Exhibit 10.29**

 

 

 

AGREEMENT OF MERGER AND PLAN OF REORGANIZATION

 

 

dated February 24, 2006

 

Among

 

Granite Exchange Services, LLC

Lonnie Nielson

Rob Awalt

Justin Swift

 

**Sellers**

 

and

 

The Bank Holdings, through its Subsidiary, Granite Exchange, Inc.

 

**Purchaser**

 

 

 

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**TABLE OF CONTENTS**

 
| 1.     | DEFINITIONS                                                           | 5                                                                              |
|--------|-----------------------------------------------------------------------|--------------------------------------------------------------------------------|
|   |                                                                  |                                                                           |   |
| 2.     | THE MERGER                                                            | 9                                                                              |
|   |                                                                  |                                                                           |   |
|   | 2.1                                                                   | The Merger                                                                     | 9 |
|   | 2.2                                                                   | Effect of  Merger                                                              | 9 |
|   | 2.3                                                                   | Articles of  Incorporation                                                     | 9 |
|   | 2.4                                                                   | Merger  Consideration                                                          |   |
|   | 2.5                                                                   | Exchange  Procedures                                                           | 10 |
|   | 2.6                                                                   | Board of  Directors of Granite, Inc. following the Effective Date              | 10 |
|   |                                                                  |                                                                           |   |
| 3.     | REPRESENTATIONS  AND WARRANTIES OF GRANITE, LLC AND THE MEMBERS  |                                                                           |
|   |                                                                  |                                                                           | 10 |
|   | 3.1                                                                   | Organization;  Corporate Power: Etc.                                           | 10 |
|   | 3.2                                                                   | Licenses and  Permits                                                          | 10 |
|   | 3.3                                                                   | Subsidiaries                                                                   | 11 |
|   | 3.4                                                                   | Authorization  of Agreement; No Conflicts                                      | 11 |
|   | 3.5                                                                   | Membership  Structure                                                          | 11 |
|   | 3.6                                                                   | Granite, LLC  Filings                                                     | 12 |
|   | 3.7                                                                   | Accuracy of  Information Supplied                                         | 12 |
|   | 3.8                                                                   | Compliance  with Applicable Laws                                               | 13 |
|   | 3.9                                                                   | Legal  Proceedings                                                        | 13 |
|   | 3.10                                                                  | Insurance                                                                 | 14 |
|   | 3.11                                                                  | Title to  Assets other than Real Property                                 | 14 |
|   | 3.12                                                                  | Real  Property                                                            | 14 |
|   | 3.13                                                                  | Taxes                                                                     | 15 |
|   | 3.14                                                                  | Performance  of Obligations                                                    | 16 |
|   | 3.15                                                                  | Brokers and  Finders                                                           | 16 |
|   | 3.16                                                                  | Material  Contracts                                                            | 17 |
|   | 3.17                                                                  | Absence of  Material Adverse Effect                                            | 17 |
|   | 3.18                                                                  | Undisclosed  Liabilities                                                  | 17 |
|   | 3.19                                                                  | Employees; Employee  Benefit Plans; ERISA                                      | 17 |
|   | 3.20                                                                  | Powers of  Attorney                                                            | 20 |
|   | 3.21                                                                  | Hazardous  Materials                                                      | 20 |
|   | 3.22                                                                  | Regulatory  Approvals                                                     | 20 |
|   | 3.23                                                                  | Books and  Records                                                        | 20 |
|   | 3.24                                                                  | Vote  Requirement                                                         | 21 |
|   | 3.25                                                                  | Effective  Date of Representations, Warranties, Covenants and Agreements  | 21 |
|        |                                                                       |                                                                                |  |  |

 

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| 4.     | REPRESENTATIONS  AND WARRANTIES OF TBH  | 21                                                                       |
|--------|----------------------------------------------|--------------------------------------------------------------------------|
|   |                                         |                                                                     |   |
|   | 4.1                                          | Organization;  Corporate Power; Etc                                      | 21 |
|   | 4.2                                          | Authorization  of Agreement; No Conflicts                                | 21 |
|   | 4.3                                          | Accuracy of  Information Supplied                                   | 22 |
|   | 4.4                                          | Legal  Proceedings                                                  | 22 |
|   | 4.5                                          | Insurance                                                                | 23 |
|   | 4.6                                          | Taxes                                                               | 23 |
|   | 4.7                                          | Brokers and  Finders                                                     | 23 |
|   | 4.8                                          | Absence of  Material Adverse Effect                                 | 23 |
|   | 4.9                                          | Undisclosed  Liabilities                                                 | 24 |
|   | 4.10                                         | Compliance  with Applicable Laws                                    | 24 |
|   | 4.11                                         | Performance  of Obligations                                         | 24 |
|   | 4.12                                         | Regulatory  Approval                                                     | 24 |
|   | 4.13                                         | Vote  Requirement                                                        | 24 |
|   | 4.14                                         | Effective  Date of Representations, Warranties, Covenants and Agreements | 24 |
|   |                                         |                                                                     |   |
| 5.     | ADDITIONAL  AGREEMENTS                       | 24                                                                       |
|   |                                         |                                                                     |   |
|   | 5.1                                          | Access to Information,  Due Diligence, Etc.                              | 24 |
|   | 5.2                                          | Member  Approval                                                    | 25 |
|   | 5.3                                          | Taking of  Necessary Action                                         | 25 |
|   | 5.4                                          | Applications                                                        | 25 |
|   | 5.5                                          | Expenses                                                                 | 26 |
|   | 5.6                                          | Notification  of Certain Events                                          |  26 |
|   | 5.7                                          | Closing  Schedules                                                  | 26 |
|   | 5.8                                          | No Other  Representations                                           | 27 |
|   |                                         |                                                                     |   |
| 6.     | CONDUCT OF  BUSINESS                         | 27                                                                       |
|   |                                         |                                                                     |   |
|   | 6.1                                          | Affirmative  Conduct of Granite, LLC                                | 27 |
|   | 6.2                                          | Negative  Covenants of Granite, LLC                                 | 29 |
|   | 6.3                                          | Affirmative  Conduct of TBH                                         | 31 |
|   | 6.4                                          | Negative  Covenants of TBH                                          | 32 |
|   |                                         |                                                                     |   |
| 7.     | CONDITIONS  PRECEDENT TO CLOSING             | 33                                                                       |
|   |                                         |                                                                     |   |
|   | 7.1                                          | Conditions  to the Parties’ Obligations                        | 33 |
|   | 7.2                                          | Conditions  to TBH’s Obligations                                    |  34 |
|   | 7.3                                          | Conditions  to Granite, LLC’s Obligations                      | 35 |
|   |                                         |                                                                     |   |
| 8.     | TERMINATION,  AMENDMENTS AND WAIVERS    | 36                                                                       |
|   |                                         |                                                                     |   |
|   | 8.1                                          | Termination                                                              | 36 |
|   | 8.2                                          | Effect of  Termination; Survival                                    | 37 |
|   | 8.3                                          | Amendment                                                                | 37 |
|   | 8.4                                          | Waiver                                                                   | 37 |
|        |                                              |                                                                          |  |  |

 

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|   | 8.5                       | Liquidated  Damages; Cancellation Fee          | 37       |
|--------|---------------------------|------------------------------------------------|----------|
|   |                      |                                           |     |
| 9.     | GENERAL  PROVISIONS  | 37                                             |
|   |                      |                                           |     |
|   | 9.1                       | No Survival  of Representations and Warranties | 37       |
|   | 9.2                       | Notices                                   | 37       |
|   | 9.3                       | Counterparts                              | 38       |
|   | 9.4                       | Entire  Agreement/No Third Party Rights   | 38       |
|   | 9.5                       | Nondisclosure  of Agreement               | 38       |
|   | 9.6                       | Assignment                                | 38       |
|   | 9.7                       | Governing  Law                            | 39       |
|   | 9.8                       | Headings/Table  of Contents                    |  39 |
|   | 9.9                       | Enforcement  of Agreement                      | 39       |
|   | 9.10                      | Severability                              | 39       |
|   | 9.11                      | Arbitration                                    | 39       |

 

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**AGREEMENT OF MERGER AND PLAN OFREORGANIZATION**

 

**AGREEMENTOF MERGER AND PLAN OF REORGANIZATION**, made as ofFebruary 24, 2006, among Lonnie Nielson (“Nielson”), Rob Awalt (“Awalt”), andJustin Swift (“Swift”), (collectively hereinafter referred to as “Members”),Granite Exchange Services, LLC, (“Granite, LLC”), Granite Exchange, Inc., (“Granite,Inc.”), through its Parent, The Bank Holdings, and The Bank Holdings (“TBH”).

 

**W I T N E S S E T H:**

 

**WHEREAS**,TBH and Granite, Inc. desire to merge, and Granite, LLC and its Members desireto merge, the membership interests of Granite, LLC into Granite, Inc. upon theterms and conditions hereinafter set forth, and

 

**WHEREAS**,Members will exchange 100% of their membership interests in Granite, LLC for 100%of the common stock of Granite, Inc., and

 

**WHEREAS**,As a condition of this Agreement, the Members and TBH have entered into anAgreement of Sale of Common Stock of Granite, Inc. whereby, the Members haveagreed to purchase the Member’s shares of Granite, Inc., and

 

**WHEREAS**,for federal income tax purposes, it is intended that the Merger will qualify asa tax free exchange under Section 368 of the Internal Revenue Code of 1986, asamended (the “Code”), and

 

**WHEREAS**,TBH is the guarantor of all obligations of Granite, Inc. hereunder, and

 

**WHEREAS**,the parties desire to make certain representations, warranties and agreementsin connection with the Merger and also to prescribe certain conditions of theMerger, and

 

**WHEREAS**,the parties desire that the representations and warranties applicable toGranite, LLC also, and to the extent practicable, apply to All-Star ExchangeServices, LLC.

 

**NOW,THEREFORE**, in consideration of the representation,warranties and agreements hereafter set forth, and other valuable consideration,the receipt and sufficiency of which hereby are acknowledged, the partieshereto agree as follows:

 

**ARTICLE 1. DEFINITIONS**.

 

As used inthis Agreement, the following terms shall have the meanings set forth below:

 

“AcquisitionEvent” shall mean prior to the termination of this Agreement, TBH and Granite,Inc. shall have authorized, recommended, publicly proposed or publiclyannounced an intention to authorize, recommend or propose, or shall haveentered or announced an 

 

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intention toenter into a letter of intent, an agreement-in-principle or a definitiveagreement with any person (other than TBH, Granite, Inc. or its Affiliates) toeffect, an Acquisition Transaction.

 

“AcquisitionProposal” shall have the meaning given such term in Section 6.2.4

 

“AcquisitionTransaction” shall mean (i) a merger, consolidation or similar transactioninvolving, (ii) the disposition, by sale, lease, exchange, dissolution orliquidation, or otherwise, of all or substantially all of the assets of TBH,Granite, Inc. or Granite, LLC or any asset or assets of TBH, Granite, Inc. orGranite, LLC the disposition or lease of which would result in a materialchange in the business or business operation of TBH, Granite, Inc. or Granite,LLC; or (iii) the issuance, sale or other disposition of TBH, Granite, Inc., orGranite, LLC, (including, without limitation, by way of merger, consolidation,share exchange, or any similar transaction) of TBH, Granite, Inc. or Granite,LLC, or other Equity Securities, or the grant of any option, warrant or otherright to acquire shares of TBH, or Granite, Inc. or any membership interest inGranite, LLC;

 

“Affiliate” or“affiliate” shall mean, with respect to any other Person, any Person that,directly or indirectly, controls or is controlled by or is under common controlwith such Person.

 

“Agreement”means this Merger Agreement by and between TBH, Granite, Inc., Granite, LLC andMembers.

 

“Assets” meansall assets of Granite, LLC purchased by Granite, Inc. through its Parent TBH.

 

“Awalt” shallmean Rob Awalt

 

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

 

“Book Value”means, with respect to any Asset and any Liability Assumed, the dollar amountthereof stated on the Granite, LLC Financial Statement. The Book Value of anyitem shall be determined as of Closing after adjustments.

 

“Business Day”shall mean any day, other than a Saturday, Sunday, or any other day such as alegal holiday, on which Nevada and/or California state banks are open forsubstantially all their banking business.

 

“Closing”shall have the meaning given to such term in Section 2.1

 

“Closing Date”shall have the meaning given to such term in Section 2.1

 

“ClosingSchedules” shall mean all updates to the Granite, LLC Schedules through the dayprior to the Closing Date.

 

“Code” shallmean the Internal Revenue Code of 1986, as amended.

 

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“Commissioner”shall mean the Commissioner of Financial Institutions of the State of Nevada.

 

“Company RealEstate” shall mean the real property owned by Granite, LLC to be acquired byGranite, Inc. and specifically listed in Schedule 3.12.

 

“Default”shall mean, as to any party to this Agreement, a failure by such party to performin any material respect, any of the agreement or covenants of such partycontained in Articles 7 and 8.

 

“EffectiveDate” shall mean the date this Agreement is signed.

 

“EffectiveTime” shall mean the period between the Effective Date and the Closing Date.

 

“Equipment/PersonalProperty” shall mean all furniture, fixtures, equipment, software and any andall other equipment and personal property owned by Granite, LLC and to beacquired by Granite, Inc. at Book Value.

 

“FDIC” shallmean the Federal Deposit Insurance Corporation.

 

“FederalReserve Board” shall mean the Board of Governors of the Federal Reserve System.

 

“GAAP” shallmean Generally Accepted Accounting Principles.

 

“GovernmentalEntity” shall mean any court, federal, state, local or foreign government orany administrative agency or commission or other governmental authority orinstrumentality whatsoever.

 

“Granite, Inc.”shall mean Granite Exchange, Inc. a Nevada Corporation.

 

“Granite, LLC”shall mean Granite Exchange Services, LLC, a California Limited LiabilityCompany, and, unless otherwise provided, its 97% owned subsidiary, All StarExchange Services, LLC.

 

“Granite, LLCFinancial Statement” shall mean the December 31 Statement of Assets,Liabilities, Owners Equity, Income and Expenses for the years ended 2005, 2004and 2003 for Granite, LLC.

 

“Granite, LLCSchedules” shall mean all schedules required to be provided by Granite, LLC perthis Agreement.

 

“Knowledge”shall mean, with respect to any representation or warranty contained in thisAgreement; the actual knowledge, after reasonable inquiry, of any director orexecutive officer of TBH or Granite, Inc., or the Members of Granite, LLC.

 

“LastRegulatory Approval” shall mean the final Requisite Regulatory Approvalrequired, from any Governmental Entity under applicable federal laws of theUnited States and laws of any state having jurisdiction, to permit the partiesto consummate the Agreement.

 

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“LiabilityAssumed” shall have the meaning given such term in Section 2.2.

 

“Lien” meansany mortgage, lien, pledge, charge, assignment for security purposes, securityinterest, or encumbrances of any kind with respect to an Asset, including anyconditional sale agreement or capital lease or other title retention agreementrelating to such Asset.

 

“LiquidatedDamages” shall have the meaning given such term in Section 8.5.

 

“MaterialAdverse Effect” shall mean a material adverse effect: (i) on the business,assets, results of operations, financial condition or prospects of a Personand/or its subsidiaries, if any, taken as a whole (unless specificallyindicated otherwise): or (ii) on the ability of a Person that is a party tothis Agreement to perform its obligations under this Agreement or to consummatethe transactions contemplated by this Agreement.

 

“Members”shall mean the interest holders of Granite, LLC which consist of LonnieNielson, Rob Awalt, and Justin Swift.

 

“MemberAgreement” shall mean the Member Agreement of Granite, LLC.

 

“Merger Consideration”shall have the meaning given to such term in Section 2.4

 

“NevadaRevised Statutes” shall mean the General Corporation Law of the State ofNevada.

 

“Nielson”shall mean Lonnie Nielson

 

“Persons” or “persons”shall mean an individual, corporation, partnership, limited liability company,joint venture, trust or unincorporated organization, Governmental Entity or anyother legal entity whatsoever.

 

“RegulatoryAuthority” shall mean any Governmental Entity, the approval of which is legallyrequire for consummation of the Merger.

 

“RequisiteRegulatory Approvals” shall have the meaning given such term in Section 7.1.2.

 

“Returns”shall mean all returns, declarations, reports, statements, declarations ofestimate taxes, claims or refunds, and other documents required to be filedwith respect to federal, state, local and foreign Taxes including any scheduleor attachment thereto and any amendment thereof, and the term “Return” meansany one of the foregoing Returns.

 

“SurvivingCorporation” shall mean Granite Exchange Services, Inc., a Nevada Corporation.

 

“SuperiorProposal” shall mean any proposal with any term more favorable to Granite, LLC,Nielson, Awalt, or Swift than the terms of the Acquisition Proposal.

 

“Swift” shallmean Justin Swift

 

“Taxes” shallmean all federal, state, local and foreign net income, gross income, grossreceipts, sales, use, ad valorem, transfer, franchise, profits, license, lease,service, service 

 

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use,withholding, payroll, employment, excise severance, stamp, occupation, premium,property, windfall profits, customs, duties, or other taxes, together with anyinterest and any penalties, additions to tax, or additional amounts withrespect thereto, and the term “Tax” means any one of the foregoing Taxes.

 

“TBH” shallmean The Bank Holdings, a Nevada Corporation.

 

“VotingSecurities” or “Voting Stock” shall mean the stock or other securities or anyother interest entitling the holders thereof to vote in the election of thedirectors, trustees or Persons performing similar functions of the Person inquestion, including, without limitation, nonvoting securities that areconvertible or exchangeable into voting securities, but shall not include anystock or other interests entitling the holders thereof to vote only upon thehappening of a contingency (other than a conversion) or exchange thereof intovoting securities), whether or not such contingency has occurred.

 

**ARTICLE 2. THE MERGER**

 

Section 2.1  The Merger. Subjectto the terms and conditions of this Agreement, as promptly as practicablefollowing the receipt of the Last Regulatory Approval and the expiration of allapplicable waiting periods, Granite, LLC will merge with and into Granite,Inc., with Granite, Inc. the Surviving Corporation pursuant to this Agreementof Merger (“Agreement”) to be entered into by and between Granite, LLC and TBH.The Merger shall be in accordance with the applicable provisions of theCalifornia Corporations Code and the Nevada Revised Statutes. The closing ofthe Merger (the “Closing”) shall take place at a location and time and BusinessDay to be designated by TBH and reasonably concurred to by Granite, LLC (the “ClosingDate”) which shall not, however, be later than the first business day as is reasonablypracticable following the satisfaction of all of the conditions set forth inArticle 7. The Merger shall be effective when the Articles of Merger (togetherwith any other documents required by law to effectuate the Merger) shall havebeen filed with the Secretary of State of the State of Nevada and a Certificateof Merger shall have been filed with the California Secretary of State.

 

Section 2.2  Effect of Merger.By virtue of the Merger and at the Effective Time, all of the rights,privileges, powers and franchises and all property and assets of every kind anddescription of Granite, LLC shall be vested in and be held and enjoyed byGranite, Inc. (the “Surviving Corporation”), without further act or deed, andall the estates and interests of every kind of Granite, LLC, including alldebts due to it, shall be as effectively the property of the SurvivingCorporation as they were of Granite, LLC immediately prior to the EffectiveTime, and the title to any real estate vested by deed or otherwise in Granite,LLC shall not revert or be in any way impaired by reason of the Merger; and allrights of creditors and liens upon any property of Granite, LLC shall bepreserved unimpaired and all debts, liabilities and duties of Granite, LLCshall be debts, liabilities and duties of the Surviving Corporation (“LiabilitiesAssumed”) and may be enforced against it to the same extent as if such debts,liabilities and duties had been incurred or contracted by it, and none of suchdebts, liabilities or duties shall be expanded, increased, broadened orenlarged by reason of the Merger.

 

Section 2.3  Articles ofIncorporation. The Articles of Incorporation of Granite, Inc. in effectimmediately prior to the Effective Time shall be the Articles of Incorporationof the Surviving Corporation and the name of the Surviving Corporation shall be“Granite Exchange, Inc.” 

 

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TBH will cause Granite, Inc. to have filed the proper foreigncorporation status with the State of California prior to the Closing Date.

 

Section 2.4  MergerConsideration. Each membership interest in Granite, LLC shall be convertedat the Effective Time of the Merger into and become the right to receive sharesof common stock of Granite, Inc. (“Merger Consideration”) with Nielsonreceiving 34% of the common stock of Granite, Inc., Awalt receiving 46% of thecommon stock of Granite, Inc., and Swift receiving 20% of the common stock ofGranite, Inc.

 

Section 2.5  ExchangeProcedures. On or as soon as practicable after the Effective Date of theMerger, TBH and/or Granite, Inc. will deliver to each of the Members theirapplicable Merger Consideration.

 

Section 2.6  Board ofDirectors of Granite, Inc. following the Effective Date. At the EffectiveDate, Rob Awalt and Justin Swift will be appointed to the board of directors ofGranite, Inc. The board will initially consist of six members with each memberhaving one vote on the board as provided in, and subject to, the provisions ofthe Bylaws of Granite, Inc.

 

**ARTICLE 3. REPRESENTATIONS AND WARRANTIES OFGRANITE, LLC AND THE MEMBERS**

 

Granite, LLC and the Members, both individually and collectivelyrepresent and warrant to TBH and Granite, Inc. as follows:

 

Section 3.1  Organization;Corporate Power; Etc. Granite, LLC is a limited liability company dulyorganized, validly existing and in good standing under the laws of the state ofCalifornia and has all requisite power and authority to own, lease and operateits properties and assets and to carry on its business substantially as it isbeing conducted on the date of this Agreement. Granite, LLC has all requisitepower and authority to enter into this Agreement and, subject to obtaining allRequisite Regulatory Approvals and approvals of Nielson, Awalt, and Swift ofthe outstanding membership interests, Granite, LLC will have the requisitepower and authority to perform its obligations hereunder with respect to theconsummation of the transactions contemplated hereby. Granite, LLC maintainsand operates offices only in the State of California. Neither the scope of thebusiness of Granite, LLC, nor the location of any of its properties, requiresthat Granite, LLC be licensed or qualified to conduct business in anyjurisdiction other than the State of California, where the failure to be solicensed and qualified would have a Material Adverse Effect on Granite, LLCtaken as a whole.

 

Section 3.2  Licenses andPermits. Except as disclosed on Schedule 3.2, Granite, LLC has all materiallicenses, certificates, franchises, rights and permits that are necessary forthe conduct of its business, and such licenses are in full force and effect,except for any failure to be in full force and effect that would not,individually or in the aggregate, have a Material Adverse Effect on Granite, LLCor on the ability of Granite, LLC to consummate the transactions contemplatedby this Agreement. The properties, assets, operations and businesses ofGranite, LLC are and have been maintained and conducted, in all materialrespects, in compliance with all applicable licenses, certificates, franchises,rights and permits.

 

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Section 3.3  Subsidiaries.Other than as set forth on Schedule 3.3, there is no corporation, partnership,joint venture or other entity in which Granite, LLC owns, directly orindirectly (except as pledge pursuant to loans or stock or other interest heldas the result of or in lieu of foreclosure pursuant to pledge or other securityarrangement) any equity or other voting interest or position.

 

Section 3.4  Authorization ofAgreement; No Conflicts.

 

3.4.1  The execution and deliveryof this Agreement by Granite, LLC, and the consummation of the transactionscontemplated hereby and thereby, have been duly authorized by all necessaryaction on the part of Granite, LLC, subject only to the approval of thisAgreement by Granite, LLC members. This Agreement, upon the receipt of allRequisite Regulatory Approvals and the due execution and filing of suchAgreement in accordance with the applicable provisions of the Nevada RevisedStatutes and the California Corporations Code, has been duly executed anddelivered by Granite, LLC and will constitute a legal, valid and bindingobligation of Granite, LLC, enforceable in accordance with its terms, except asthe enforceability thereof may be limited by bankruptcy, insolvency, moratoriumor other similar laws affecting the rights of creditors generally and bygeneral equitable principles.

 

3.4.2  Except as disclosed onSchedule 3.4, the execution and delivery of this Agreement, and theconsummation of the transactions contemplated hereby and thereby, do not andwill not conflict with, or result in any violation of or default or loss of amaterial benefit under, any provision of the Member Agreement or OperatingAgreement of Granite, LLC, or except for the necessity of obtaining RequisiteRegulatory Approvals and approval of the members of Granite, LLC, any materialmortgage, indenture, lease, agreement or other material instrument or anypermit, concession, grant, franchise, license, judgment, order, decree,statute, law, ordinance, rule or regulation applicable to Granite, LLC or anyof its assets or properties, other than any such conflict, violation, defaultor loss which (i) will not have a Material Adverse Effect on Granite, LLC,following consummation of the Merger; or (ii) will be cured or waived prior tothe Effective Time. No material consent, approval, order or authorization of,or registration, declaration or filing with, any Governmental Entity is requiredin connection with the execution and delivery of this Agreement by Granite, LLCor the performance by Granite, LLC of its obligations hereunder and thereunder, except for (a) filings required in order to obtain the RequisiteRegulatory Approvals; (b) the filing and approval of the Merger Agreement; and(c) Tax Filings.

 

3.4.3  No consent or approval of,notice to or filing with any Governmental Entity having jurisdiction over anyaspect of the business or assets of Granite, LLC, and except as set forth inSchedule 3.4, no consent or approval of or notice to any other person or entityis required in connection with the execution and delivery by Granite, LLC ofthis Agreement or the consummation by Granite, LLC of the transactionscontemplated hereunder, except for the necessity of obtaining RequisiteRegulatory Approvals and approval of the members of Granite, LLC.

 

Section 3.5  MembershipStructure. The membership structure of Granite, LLC at the Effective dateis 34% owned by Lonnie Nielson, 46% owned by Rob Awalt, and 20% owned by JustinSwift. All Membership Interests are fully paid and non-assessable, have notbeen assigned, pledged or hypothecated, and are free of all liens, claims andencumbrances.

 

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Section 3.6  Granite, LLCFilings.

 

3.6.1  Since inception, Granite,LLC has filed all reports, registrations and statements, together with anyamendments required to be made with respect thereto, that were required to befiled with any applicable federal, state or local governmental or regulatoryauthority. All such reports, registrations and filings, and all reports sent toGranite, LLC’s members during the three-year period ended December 31, 2005(whether or not filed with any Regulatory Authority), are collectively referredto as the “Granite, LLC Filings”. Copies of the Granite, LLC Filings have beenmade available to TBH. As of their respective filing or mailing dates, each ofthe past Granite, LLC Filings (a) was true and complete in all materialrespects (or was amended so as to be so promptly following discovery of anydiscrepancy); and (b) complied in all material respects with all of thestatutes, rules and regulations enforced or promulgated by the governmental orregulatory authority with which it was filed (or was amended so as to be sopromptly following discovery of any such noncompliance) and none contained anyuntrue statement of a material fact or omitted to state a material factrequired to be stated therein or necessary to make the statements therein, inlight of the circumstances under which they were made, not misleading. TheGranite, LLC Financial Statements, together with the financial statementscontained in the Granite, LLC Filings have been prepared on the cash basis ofaccounting, applied on a consistent basis during the periods involved (exceptas may be indicated in the notes thereto) and fairly present (subject, in thecase of the unaudited statements, to recurring adjustments normal in nature andamount) the financial position of Granite, LLC as of the dates thereof and theresults of its operations, cash flows and changes in shareholders’ equity forthe periods then ended.

 

Section 3.7  Accuracy ofInformation Supplied.

 

3.7.1  No representation orwarranty of Granite, LLC contained herein or any statement, schedule, exhibitor certificate given or to be given by or on behalf of Granite, LLC, to TBH inconnection herewith and none of the information supplied or to be supplied byGranite, LLC to TBH hereunder contains or will contain any untrue statement ofmaterial fact or omits to state any material fact required to be stated thereinor necessary in order to make the statements therein, in light of thecircumstances under which they are made, not misleading.

 

3.7.2  None of the informationsupplied or to be supplied by Granite, LLC or relating to Granite, LLC which isincluded or incorporation by reference in the applications and forms to befiled with securities or “blue sky” authorities, self regulatory authorities,or any Governmental Entity in connection with the Merger, or any RequisiteRegulatory Approvals will in connection with the Merger, at the time filed orat the time they become effective, contain any untrue statement of a materialfact or omit to state any material fact required to be stated therein ornecessary to make the statements therein, in light of the circumstances underwhich they were made, not misleading.

 

3.7.3  Granite, LLC has deliveredto TBH copies of the balance sheets of Granite, LLC as of December 31, 2005,2004 and 2003 and the related statements of income and changes in shareholders’equity (the “Granite, LLC Financial Statements”), and Granite, LLC deliver toTBH copies of additional financial statements of Granite, LLC as provided inSections 6.1.10 and 7.2.4. The Granite, LLC Financial Statements have beenprepared (and all of said additional financial statements will be prepared) onthe cash basis of accounting, applied on a consistent basis during the periodsinvolved (except as may be indicated in the notes thereto) consistentlyfollowed throughout the periods covered by such statements, and present (and,when prepared, will present) fairly the financial position of Granite, LLC asof the respective dates indicated and the results of 

 

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operations, cash flows and changes in members’ equity at the respectivedates and for the respective periods covered by such financial statements(subject, in the case of the unaudited statements, to recurring adjustmentsnormal in nature and amount.

 

Section 3.8  Compliance withApplicable Laws. Except as disclosed on Schedule 3.8, to the best ofGranite, LLC’s Knowledge, the respective businesses of Granite, LLC is notbeing conducted in violation of any law, ordinance or regulation, except forviolations which individually or in the aggregate would not have a MaterialAdverse Effect on Granite, LLC, Granite, Inc. or TBH at or following theEffective Time. Except as set forth in Schedule 3.8, no investigation or reviewby any Governmental Entity with respect to Granite, LLC is pending or, to theKnowledge of Granite, LLC threatened, nor has any Governmental Entity indicatedto Granite, LLC an intention to conduct the same.

 

Section 3.9  Legal Proceedings.

 

3.9.1  Except as set forth inSchedule 3.9 there is no private or governmental suit, claim, action,arbitration or proceeding pending, nor any private or governmental suit, claim,action, arbitration or proceeding or to Granite, LLC’s knowledge threatened, nordoes Granite, LLC know of any facts or circumstances which would form a basisfor any such suit, claim, action, arbitration or proceeding against Granite,LLC or against any of Granite, LLC’s members, contingent workers or employeesrelating to the performance of their duties in such capacities, or against oraffecting any properties of Granite, LLC which individually, or in theaggregate, could have a material Adverse Effect on this Agreement. As usedherein and throughout this Agreement, “Contingent Worker” means any individualwho performs services for Granite, LLC and (i) whose services are performedunder an agreement, contract, or other arrangement pursuant to which theindividual is characterized or classified by Granite, LLC as an independent contractor(or as an employee of an independent contractor; (ii) the payments for whoseservices have not been treated by Granite, LLC as subject to wage withholdingunder the Code and Applicable Law; (iii) whom Granite, LLC has not classifiedas its common law employee; (iv) whom Granite, LLC initially classified as aleased employee (as defined in Section 414(n) of the Code); or (v) whomGranite, LLC has leased from an entity that is the individual’s employer ofrecord. An individual shall, for example, be deemed to be a contingent workerif he or she was engaged from a temporary help service, an employee leasingagency, a technical services firm, or an outsourcing, managed services, ormaster vendor firm. Except as set forth in Schedule 3.9, there are no judgments,decrees, stipulations or orders against Granite, LLC enjoining Granite, LLC orany of its respective members, contingent workers or employees in respect of,or the effect of which is to prohibit, any business practice or the acquisitionof any property or the conduct of business in any area. Schedule 3.9 contains(i) a true, correct and complete list, including identification of theapplicable insurance policy covering such litigation, if any, the applicabledeductible and the amount of any reserve therefore, of all pending litigationin which Granite, LLC or any of Granite, LLC’s members, contingent workers oremployees relating to the performance of their duties in such capacities, is anamed party, and except as set forth in Schedule 3.9 all of the litigationlisted on such schedule is adequately covered by insurance in force, except forapplicable deductibles, or has been adequately reserved for in accordance withGranite, LLC prior business practice; and (ii) summary reports of counselrepresenting Granite, LLC on all pending litigation to which Granite, LLC orany Granite, LLC’s respective members, contingent workers or employees relatingto the performance of their duties in such capacities, is a party and whichnames Granite, LLC or any of such members, contingent workers or employees as adefendant or cross-defendant.

 

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3.9.2  Granite, LLC is not partyto, or otherwise subject to, any agreement or memorandum of understanding withor order of any federal, state or foreign governmental or regulatory authoritycharged with the supervision or regulation of bank holding companies ornational banks or engaged in the insurance of bank deposits, that restricts theconduct of their respective businesses, or in any manner relates to capitaladequacy, credit or investment policies or management.

 

Section 3.10  Insurance. Exceptas set forth in Schedule 3.10 Granite, LLC has and at all times since January1, 1998 had in full force and effect policies of insurance and bonds withrespect to its assets and business and against casualties and contingencieswhich in the judgment of Granite, LLC are adequate and appropriate to cover itsassets and business. Set forth in Schedule 3.10 is a schedule of all current policiesof insurance carried and owned by Granite, LLC, showing the name of theinsurance, a summary of the coverage, the amounts, the deductible features, theannual premiums and the expiration dates. If any such policy is changed,terminated or modified following the date of this Agreement, such termination,change or modification shall be promptly disclosed to TBH in writing. Granite,LLC is not in default under any such policy of insurance such that it could becanceled, and all material claims thereunder have been filed in timely fashion.Granite, LLC has filed claims with or given notice of claim to their insurerswith respect to all material matters and occurrences for which either believesit has coverage.

 

Section 3.11  Title to Assetsother than Real Property. Granite, LLC has good and marketable title to allits properties and assets as set forth in Schedule 3.11 (other than realproperty which is the subject to Section 3.12), owned or leased by Granite,LLC, free and clear of all mortgages, liens, encumbrances, pledges or chargesof any kind or nature except as disclosed on Schedule 3.12 and except for: (a)encumbrances as set forth in the Granite, LLC Financial Statements; (b) liensfor current Taxes not yet due which have been fully reserved for; and (c)encumbrances, if any, that are not substantial in character, amount or extentand do not detract materially from the value, or interfere with present use orthe sale or other disposition of the property subject thereto or affectedthereby. All such properties and assets are, and require only routinemaintenance to keep them, in good working condition, normal wear and tearexcepted.

 

Section 3.12  Real Property.Schedule 3.12 is an accurate list and general description of all real propertyowned or leased by Granite, LLC. Granite, LLC has good and marketable title tothe real properties that it owns, as described in such Schedule, free and clearof all mortgages, covenants, conditions, restrictions, easements, liens,security interests, charges, claims, assessments and encumbrances, except for(a) rights of lessors, lessees or sublessees in such matters as are reflectedin a written lease; (b) current Taxes (including assessments collected withTaxes) not yet due and payable; (c) encumbrances, if any, that are notsubstantial in character, amount or extent and do not materially detract fromthe value, or interfere with present use, or the ability of Granite, LLC todispose, of the property subject thereto or affected thereby; and (d) othermatters as described in Schedule 3.12. Granite, LLC has valid leaseholdinterests in the leaseholds it respectively holds, free and clear of allmortgages, liens, security interest, charges, claims, assessments andencumbrances, except for (a) claims of lessors, co-lessees or sublessees insuch matters as are reflected in a written lease; (b) title exceptionsaffecting the fee estate of the lessor under such leases; and (c) other mattersas described in Schedule 3.12. To the best of Granite, LLC’s Knowledge, theactivities of Granite, LLC with respect to all real property owned or leased byit for use in connection with its operations are in all material respectspermitted and authorized by applicable zoning laws, ordinances and regulationsand all laws and regulations of any Governmental Entity. Except as set forth inSchedule 3.12, Granite, LLC enjoys quiet possession 

 

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under all material leases to which it is the lessee and all of suchleases are valid and in full force and effect, except as the enforceabilitythereof may be limited by bankruptcy, insolvency, moratorium or other similarlaws affecting the rights of creditors generally and by general equitableprinciples. The buildings and improvements on real properties owned or leasedby Granite, LLC are in good condition and repair, and do not require more thannormal and routine maintenance, to keep them in such condition, normal wear andtear excepted.

 

Section 3.13  Taxes.

 

3.13.1  Filing of Returns.Except as set forth on Schedule 3.13, Granite, LLC has duly prepared and filedfederal, state, and local Returns (for Tax or informational purposes) whichwere required to be filed by or in respect of Granite, LLC, or any of itsproperties, income and/or operations on or prior to the Closing Date. As of thetime they were filed, the foregoing Returns accurately reflected the materialfacts regarding the income, business, asset, operations, activities, status,and any other information required to be shown thereon. No extension of timewithin which Granite, LLC may file any Return is currently in force.

 

3.13.2  Payment of Taxes. Exceptas disclosed on Schedule 3.13 with respect to all amounts in respect of Taxesimposed on Granite, LLC or for which Granite, LLC is or could be liable,whether to taxing authorities (as, for example, under law) or to other Persons(as, for example, under Tax allocation agreements), with respect to all taxableperiods or portions of periods ending on or before the Closing Date, allapplicable tax laws and agreements have been or will be fully complied with inall material respects, and all such amounts required to be paid by or on behalfof Granite, LLC to taxing authorities or others on or before the date hereofhave been paid.

 

3.13.3  Audit History. Exceptas disclosed on Schedule 3.13, there is no review or audit by any taxingauthority of any Tax liability of Granite, LLC currently in progress. Except asdisclosed on Schedule 3.13, Granite, LLC has not received any written noticeswithin the three years preceding the Closing Date of any pending or threatenedaudit, by the Internal Revenue Service or any state, local or foreign agency,for any Returns or Tax liability of Granite, LLC for any period. Granite, LLCcurrently has no unpaid deficiencies assessed by the Internal Revenue Serviceor any state, local or foreign taxing authority arising out of any examinationof any of the Returns of Granite, LLC filed for fiscal years ended on or afterDecember 31, 1998 through the Closing Date, nor to the Knowledge of Granite,LLC is there reason to believe that any material deficiency will be assessed.

 

3.13.4  Statute of Limitations.Except as disclosed on Schedule 3.13, no agreements are in force or arecurrently being negotiated by or on behalf of Granite, LLC for any waiver orfor the extension of any statute of limitations governing the time ofassessments or collection of any Tax. No closing agreements or compromisesconcerning Taxes of Granite, LLC are currently pending.

 

3.13.5  Withholding Obligations.Granite, LLC has withheld from each payment made to any of their respectiveofficers, directors and employees, the amount of all applicable Taxes,including, but not limited to, income tax, social security contributions,unemployment contributions, backup withholding and other deductions required tobe withheld therefrom by any Tax law and have paid the same to the propertaxing authorities within the time required under any applicable Tax law.

 

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3.13.6  Tax Liens. Thereare no Tax liens, whether imposed by any federal, state, local or foreigntaxing authority, outstanding against any assets owned by Granite, LLC, exceptfor liens for Taxes that are not yet due and payable.

 

3.13.7  Tax Reserves. Granite,LLC has made full and adequate provision and reserve for all federal, state,local or foreign Taxes for the current period for which Tax and informationreturns are not yet required to be filed. The Granite, LLC Financial Statementscontain fair and sufficient accruals for the payment of all Taxes for theperiods covered by the Granite, LLC Financial Statements and all periods priorthereto.

 

3.13.8  Tax Elections. Nonew elections with respect to Taxes or any changes in current elections withrespect to Taxes affecting the assets owned by Granite, LLC shall be made afterthe date of this Agreement without the prior written consent of TBH, whichshall not be unreasonably withheld. TBH shall be deemed to have consented inwriting to any election Granite, LLC shall desire to make if: (i) the electingPerson shall have notified the Chief Executive Officer of TBH in writing of itsdesire to make such election, including in such notice a reasonably completesummary of the election it desires to make and the reasons it desires to makesuch election at least 20 Business Days prior to the due date (includingextensions thereof) for filing such election; and (ii) TBH shall not haveresponded in writing to such notice by the fifth Business Day prior to the duedate (including extensions thereof) for filing such election.

 

3.13.9  IRC Section 382Applicability. Granite, LLC, including any party joining in anyconsolidated return to which Granite, LLC is a member, underwent an “ownershipchange” as defined in IRC Section 382 within the “testing period” (as definedin IRC Section 382) ending immediately before the Effective Time, and nottaking into account any transactions contemplated by this Agreement.

 

3.13.10  DisclosureInformation. Within 45 days of the date of this Agreement, Granite, LLCwill deliver to TBH a schedule setting forth the following information withrespect to Granite, LLC and as of the most recent practicable date (as well ason an estimated pro forma basis as of the Closing giving effect to theconsummation of the transactions contemplated hereby): (a) Granite, LLC’s bookand tax basis in its assets with a listing of its liabilities and contingentliabilities for which Granite, LLC or its Members have Knowledge; (b) theamount of any net operating loss, net capital loss, unused investment or othercredit, unused foreign tax, or excess charitable contribution allocable toGranite, LLC; and (c) the amount of any deferred gain or loss allocable toGranite, LLC and arising out of any deferred intercompany transactions.

 

Section 3.14  Performance ofObligations. Granite, LLC has performed all material obligations requiredto be performed by it to date and is not in default under or in breach of anyterm or provision of any covenant, contract, lease, indenture or any otheragreement, written or oral, to which any is a party, is subject or is otherwisebound, and no event has occurred that, with the giving of notice or the passageof time or both, would constitute such a default or breach, where such defaultor breach or failure to perform would have a Material Adverse Effect onGranite, LLC. To Granite, LLC’s Knowledge, no party with whom Granite, LLC hasan agreement that is of material importance to the businesses of Granite, LLCis in default thereunder.

 

Section 3.15  Brokers andFinders. Except as set forth on Schedule 3.15, Granite, LLC is not a partyto or obligated under any agreement with any broker or finder relating to thetransactions contemplated hereby, and neither the execution of this Agreementnor the 

 

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consummation of the transactions provided for herein, will result inany liability to any broker or finder. Granite, LLC agrees to indemnify andhold harmless TBH and its affiliates, and to defend with counsel selected byTBH and reasonably satisfactory to Granite, LLC, from and against anyliability, cost or expense, including attorneys’ fees, incurred in connectionwith a breach of this Section.

 

Section 3.16  MaterialContracts. Schedule 3.16 to this Agreement contains a complete and accuratewritten list of all material agreements, obligations or understandings, writtenand oral, to which Granite, LLC is a party as of the date of this Agreement,except for loans and other extensions of credit made by Granite, LLC in theordinary course of its business and those items specifically disclosed in theGranite, LLC Financial Statements. The contracts are in full force and effectand without any Default by Granite, LLC thereunder.

 

Section 3.17  Absence ofMaterial Adverse Effect. Since January 1, 1998, the business of Granite,LLC has been conducted only in the ordinary course, in the same manner astheretofore conducted, and no event or circumstance has occurred or is expectedto occur which has had or which, with the passage of time or otherwise, couldreasonably be expected to have a Material Adverse Effect on Granite, LLC.

 

Section 3.18  UndisclosedLiabilities. Except as disclosed on Schedule 3.18, Granite, LLC does nothave any liabilities or obligations, either accrued, contingent or otherwise,that are material to Granite, LLC and that have not been: (a) reflected ordisclosed in the Granite, LLC Financial Statements; or (b) incurred subsequentto December 31, 2005 in the ordinary course of business. Granite, LLC has noKnowledge of any basis for the assertion against Granite, LLC, of anyliability, obligation or claim (including without limitation that of anyGovernmental Entity) that will have or cause, or could reasonably be expectedto have or cause, a Material Adverse Effect on Granite, LLC that is not fullyand fairly reflected and disclosed in the Granite, LLC Financial Statements oron Schedule 3.18.

 

Section 3.19  Employees;Employee Benefit Plans; ERISA.

 

3.19.1  All material obligationsof Granite, LLC for payment to trusts or other funds or to any GovernmentalEntity or to any individual, director, officer, employee or agent (or his orher heirs, legatees or legal representatives) with respect to unemploymentcompensation benefits, profit-sharing, pension or retirement benefits or socialsecurity benefits, whether arising by operation of law, by contract or by pastcustom, have been properly accrued for the periods covered thereby on theGranite, LLC Financial Statements and paid when due. All material obligationsof Granite, LLC, whether arising by operation of law, by contract or by pastcustom for vacation or holiday pay, bonuses and other forms of compensationwhich are payable to their respective directors, officers, employees or agentshave been properly accrued on the Granite, LLC Financial Statements for theperiods covered thereby and paid when due. Except as set forth on Schedule3.19, there are no unfair labor practice complaints, strikes, slowdowns,stoppages or other controversies pending or, to the Knowledge of Granite, LLC,attempts to unionize or controversies threatened or relating to, any ofGranite, LLC’s employees that are likely to have a Material Adverse Effect onGranite, LLC. Granite, LLC is not a party to any collective bargainingagreement with respect to any of their employees and, except as set forth onSchedule 3.19, Granite, LLC is not a party to a written employment contractwith any employees and there are no understandings with respect to theemployment of any officer or employee of Granite, LLC which are not terminableby Granite, LLC without liability. Except as disclosed in the Granite, LLC 

 

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Financial Statements for the periods covered thereby, all material sumsdue for director, officer, contingent worker, and employee compensation havebeen paid and all employer contributions for employee benefits, includingdeferred compensation obligations, and all material benefit obligations underany Employee Plan or any Benefit Arrangement have been duly and adequately paidor provided for in accordance with plan documents. Except as set forth onSchedule 3.19, no director, officer, contingent worker or employee of Granite,LLC is entitled to receive any payment of any amount under any existingagreement, severance plan or other benefit plan as a result of the consummationof any transaction contemplated by this Agreement or the Merger Agreements. Granite,LLC has materially complied with all applicable federal and state statutes andregulations relating to employment, including, but not limited to, all civilrights laws, Presidential Executive Order 1124, the Fair Labor Standards Act of1938, as amended, and the Americans with Disabilities Act.

 

3.19.2  Granite, LLC hasdelivered as Schedule 3.19 a complete list of:

 

(a)           All Granite, LLCEmployee Plans and Granite, LLC Benefit Arrangements, including all plans orpractices providing for compensation, benefits or accruals for active orretired directors, officers, employees or contingent workers, including, butnot limited to, all benefit plans, all pension, profit-sharing, retirement,bonus, stock option, incentive, deferred compensation, severance, long-termdisability, medical, dental, health, hospitalization, life insurance or otherinsurance plans or related benefits.

 

(b)           All currentemployees and contingent workers of Granite, LLC together with each person’stenure with Granite, LLC, title or job classification, and the current annualrate of compensation anticipated to be paid to each such employee or contingentworker; and

 

(c)           All Granite, LLCEmployee Plans and Granite, LLC Benefit Arrangements, including all plans orpractices providing for compensation, benefits or accruals for active orretired directors, officers, employees or contingent workers, including but notlimited to, all benefit plans, all pension, profit-sharing, retirement, bonus,stock option, incentive, deferred compensation, severance, long-termdisability, medical, dental, health, hospitalization, life insurance or otherinsurance plans or related benefits.

 

(d)           Except as disclosedon Schedule 3.19 Granite, LLC does not maintain, administer or otherwisecontribute to any employee benefit plan or arrangement (including withoutlimitation any “employee benefit plan,” as defined in Section 3(3) of theEmployee Retirement Income Security Act of 1974 (‘ERISA”)) which covers anydirector, officer, employee or contingent worker, whether active or retired, ofGranite, LLC (any such plan being herein referred to as a “Granite, LLCEmployee Plan”. True and complete copies of each such Granite, LLC employeePlan, including amendments thereto, have been previously delivered to TBH,together with (i) all agreements regarding plan assets with respect to suchGranite, LLC Employee Plans, (ii) a true and complete copy of the annualreports for the most recent three years (Form 5500 Series including, ifapplicable, Schedules A and B thereto) prepared in connection with any suchGranite, LLC Employee Plan, (iii) a true and complete copy of the actuarialvaluation reports for the most recent three years, if any, prepared inconnection with any such Granite, LLC Employee Plan, (iv) a copy of the mostrecent summary plan description of each such Granite, LLC Employee Plan,together with any modifications thereto, and (v) a copy of the most recentfavorable determination letter (if applicable) from the Internal RevenueService for each Granite, LLC Employee Plan. Granite, LLC Employee Plans arenot a “multiemployer plan” as defined in 

 

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Section 3(37) of ERISA or a “multiple employer plan” as covered inSection 412(c) of the Code, and Granite, LLC has not been obligated to make acontribution to any such multiemployer or multiple employer plan within thepast five years. Granite, LLC Employee Plans are, or for the last five yearshave been, subject to Title IV of ERISA. Each Granite, LLC Employee Plan whichis intended to be qualified under Section 401(a) of the IRC is so qualified andeach trust maintained pursuant thereto is exempt from income tax under Section501(a) of the IRC, and Granite, LLC is not aware of any fact which has occurredwhich would cause the loss of such qualification or exemption.

 

(e)           Except as disclosedin Schedule 3.19, Granite, LLC does not maintain (other than base salary andbase wages) any form of current or deferred compensation, bonus, severance pay,salary continuation, retirement or incentive plan or arrangement for thebenefit of any member, contingent worker or employee, whether active orretired, of Granite, LLC or for any class or classes of such member, contingentworkers or employees. Except as disclosed in Schedule 3.19, Granite, LLC doesnot maintain any group or individual health insurance, welfare or similar planor arrangement for the benefit of any member, contingent worker or employee ofGranite, LLC, whether active or retired, or for any class or classes of suchmember, contingent workers or employees. Any such plan or arrangement describedin this Section 2.32, copies of which are attached as Schedule 3.19.

 

(f)            All Granite, LLCEmployee Plans and Granite, LLC Benefit Arrangements are operated in compliancewith the requirements of prescribed Applicable Law, including but not limitedto ERISA and the Code and any published authorities and regulations thereunder,applicable thereto, and plan documents relating to any such plans orarrangements, comply with or will be amended to comply with Applicable Law. No “prohibitedtransaction” (as defined in Section 406 of ERISA and Section 4975 of the Code)with respect to any Granite, LLC Employee Plan, or Granite, LLC BenefitArrangement have occurred; each “plan official” within the meaning of Section412 of ERISA of each Granite, LLC Employee Plan is bonded to the extentrequired by such Section 412; with respect to each Granite, LLC Employee Plan,to Granite, LLC’s Knowledge, no employee of Granite, LLC, nor any fiduciary ofany Granite, LLC Employee Plan, Granite, LLC Benefit Arrangement, has engagedin any breach of fiduciary duty as defined in part 4 of Subtitle B of title Iof ERISA which could subject Granite, LLC to liability if Granite, LLC isobligated to indemnify such person against liability. Except as disclosed inSchedule 3.19, Granite, LLC has not failed to make any material contribution orpay any amount due and owning as required by Applicable Law or the terms of anyGranite, LLC Employee Plan or Granite, LLC Benefit Arrangement.

 

(g)           Except as set forthon Schedule 3.19, no Granite, LLC Employee Plan or Granite, LLC BenefitArrangement has any material liability of any nature, accrued or contingent,including, without limitation, liabilities for federal, state, local or foreigntaxes, interest or penalty other than liability for claims arising in thecourse of the administration of each such respective Granite, LLC Employee Planor Granite, LLC Benefit Arrangement. Except as set forth on Schedule 3.19,there is no pending, or to Granite, LLC’s Knowledge, threatened, legal action,proceeding or investigation against any Granite, LLC Employee Plan or Granite,LLC Benefit Arrangement of Granite, LLC which could result in liability to suchGranite, LLC Employee Plan or Granite, LLC Benefit Arrangement or Granite, LLC,other than routine claims for benefits, and Granite, LLC is not aware of anybasis for any such legal action, proceeding or investigation.

 

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(h)           Each Granite, LLCBenefit Arrangement which is a group health plan (within the meaning of suchterm under Section 4980B(g)(2) of the Code) materially complies and hasmaterially complied with the requirements of Section 601 through 608 of ERISAor Section 4980B of the Code governing continuation coverage requirements for employee-providedgroup health plans. Each Granite, LLC Benefit Arrangement does not providecoverage to retired or former Granite, LLC employees, except as required by theaforementioned continuation coverage requirements.

 

(i)            Except as disclosedin Schedule 3.19, Granite, LLC has not maintained any Granite, LLC EmployeePlan or Granite, LLC Benefit Arrangement pursuant to which any benefit or otherpayment will be required to be made by Granite, LLC or pursuant to which anyother benefit will accrue or vest in any member, contingent worker or employeeof Granite, LLC as a result of the consummation of the transactionscontemplated by this Agreement.

 

(j)            Except as disclosedin Schedule 3.19, each of the Granite, LLC Employee Plans and Granite, LLCBenefit Arrangements can be terminated by Granite, LLC without liability or anyadditional contribution to such Granite, LLC Employee Plan or Granite, LLCBenefit Arrangement or the payment of any additional compensation or amount orthe additional vesting or acceleration of any benefits.

 

Section 3.20  Powers ofAttorney. No power of attorney or similar authorization given by Granite,LLC thereof is presently in effect or outstanding other than powers of attorneygiven in the ordinary course of business with respect to routine matters.

 

Section 3.21  HazardousMaterials. Except as set forth on Schedule 3.21 and except for ordinary andnecessary quantities of cleaning, pest control and office supplies, and othersmall quantities of Hazardous Substances that are used in the ordinary courseof the business of Granite, LLC and in compliance with applicable EnvironmentalLaws.

 

Section 3.22  RegulatoryApprovals. To the best Knowledge of Granite, LLC there are no facts, eventsor conditions applicable to Granite, LLC which will or reasonably could affectthe likelihood of securing the regulators approvals or consents of anyGovernmental Entity to the Merger and transactions completed by this Agreement.

 

Section 3.23  Books andRecords.

 

3.23.1 Granite, LLC has records which accurately and validly reflect,in all material respects, its transactions and each has accounting controlssufficient to insure that such transactions are (i) in all material respects,executed in accordance with management’s general or specific authorization, and(ii) recorded on a cash basis. Such records, to the extent they containimportant information pertaining to Granite, LLC which is not easily andreadily available elsewhere have been duplicated, and such duplicates arestored safely and securely pursuant to procedures and techniques reasonablyadequate for companies of the size of Granite, LLC and in the business in whichGranite, LLC is engaged; and the data processing equipment, data transmissionequipment, related peripheral equipment and software used by Granite, LLC inthe operation of its respective businesses (including any disaster recoveryfacility) to generate and retrieve such records are reasonably adequate forcompanies of the size of Granite, LLC and in the business in which Granite, LLCis engaged.

 

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Section3.24  Vote Requirement. Theaffirmative vote of 100% of the membership interests of Granite, LLC entitledto vote on the Merger is the only vote necessary to approve the Agreement, andthe transactions contemplated herein.

 

Section 3.25  Effective Dateof Representations, Warranties, Covenants and Agreements. Eachrepresentation, warranty, covenant and agreement of Granite, LLC set forth inthis Agreement shall be deemed to be made on and as of the date hereof and asof the Closing Date.

 

**ARTICLE 4. REPRESENTATIONS AND WARRANTIES OFTBH**

 

TBH and Granite, Inc. represent and warrant to Granite, LLC and theMembers that:

 

Section 4.1  Organization;Corporate Power; Etc. TBH and Granite, Inc. are Nevada corporations dulyorganized, validly existing and in good standing under the laws of the State ofNevada and have all requisite corporate power and authority to own, lease andoperate its respective properties and assets and to carry on its respectivebusiness substantially as it is being conducted on the date of this Agreement. TBHand Granite, Inc. have all requisite corporate power and authority to enterinto this Agreement and, subject to obtaining all Requisite RegulatoryApprovals, TBH will have the requisite corporate power and authority to performits respective obligations hereunder with respect to the consummation of thetransactions contemplated hereby. TBH is the sole shareholder of Granite, Inc..Neither the scope of business of TBH, nor the location of any of its respectiveproperties, requires that TBH be licensed to conduct business in anyjurisdiction other than those jurisdictions in which they are licensed orqualified to do business as a foreign corporation, where the failure to be solicensed or qualified would, individually or in the aggregate, have a MaterialAdverse Effect on TBH taken as a whole.

 

Section 4.2  Authorization ofAgreement; No Conflicts.

 

4.2.1 The execution and delivery of this Agreement and the consummationof the transactions contemplated hereby have been duly authorized by allnecessary corporate action on the parts of TBH and Granite, Inc.. This, uponthe receipt of all Requisite Regulatory Approvals and the due execution andfiling of such Agreement in accordance with the applicable provisions of theNevada Revised Statutes and the California Corporations Code, has been dulyexecuted and delivered by TBH and Granite, Inc. and will constitute a legal,valid and binding obligation of TBH and Granite, Inc., enforceable inaccordance with its terms, except as the enforceability thereof may be limitedby bankruptcy, insolvency, moratorium or other similar laws affecting therights of creditors generally or by general equitable principles.

 

4.2.2 Except as discussed on Schedule 4.2, the execution and deliveryof this Agreement and the consummation of the transactions contemplated herebydoes not and will not conflict with, or result in any violation of or defaultor loss of a material benefit under, any provision of the Articles ofIncorporation or Bylaws of TBH or Granite, Inc., or except for the necessity ofobtaining the Requisite Regulatory Approvals, any material mortgage, indenture,lease, agreement or other material instrument, or any permit, concession,grant, franchise, license, judgment, order, decree, statute, law, ordinance,rule or regulation applicable to TBH or Granite, Inc. or any of their assets orproperties, other than any such conflict, violation, default or loss which (i)will not have a Material Adverse Effect on TBH or Granite, Inc. taken as awhole; or (ii) will be cured or waived prior to the Effective Time. No materialconsent, approval, order or authorization of, or registration, declaration orfiling with, any Governmental Entity is required in connection 

 

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with the execution and delivery of this Agreement by TBH or Granite,Inc. or the performance by TBH and Granite, Inc. of their obligationshereunder, except for (a) filings required in order to obtain RequisiteRegulatory Approvals; (b) the filing and approval of the Merger Agreement withthe State of Nevada; (c) any approvals required to be obtained pursuant to theBank Holding Company Act of 1956 as amended (“BHCA”) or any other requiredgovernmental approval for the execution and delivery of this Agreement by TBHor the consummation of the Merger; and (e) any consents, authorizations,approvals, filings or exemptions required to be made or obtained under thesecurities or “blue sky” laws of various jurisdictions in connection with theissuance of shares of Granite, Inc. Common Stock.

 

4.2.3  No consent or approval of,notice to or filing with any Governmental Entity having jurisdiction over anyaspect of the business or assets of TBH and Granite, Inc., and except as setforth in Schedule 4.2.3, no consent or approval of or notice to any otherperson or entity is required in connection with the execution and delivery byTBH and Granite, Inc. of this Agreement or the consummation by TBH and Granite,Inc. of the transactions contemplated hereunder, except for the necessity ofobtaining Requisite Regulatory Approvals and approval of the directors of TBHand Granite, Inc.

 

Section 4.3  Accuracy ofInformation Supplied.

 

4.3.1  No representation orwarranty of TBH or Granite, Inc. contained herein or any statement, schedule,exhibit or certificate given or to be given by or on behalf of TBH or Granite,Inc., to Granite, LLC in connection herewith and none of the informationsupplied or to be supplied by TBH or Granite, Inc., to Granite, LLC hereunder containsor will contain any untrue statement of material fact or omit to state anymaterial fact required to be stated therein or necessary in order to make thestatements therein, in light of the circumstances under which they are made,not misleading.

 

4.3.2  None of the informationsupplied or to be supplied by TBH or relating to TBH or Granite, Inc. which isincluded or incorporated by reference the applications and forms to be filedwith securities or “blue sky” authorities, self regulatory authorities, or anyGovernmental Entity in connection with the Merger, or any Requisite RegulatoryApprovals in connection with the Merger will, at the time filed or at the timethey become effective, contain any untrue statement of a material fact or omitto state any material fact required to be stated therein or necessary to makethe statements therein, in light of the circumstances under which they weremade, not misleading.

 

Section 4.4  Legal Proceedings.

 

4.4.1  Except as set forth inSchedule 4.4 there is no private or governmental suit, claim, action,arbitration or proceeding pending, nor any private or governmental suit, claim,action, arbitration or proceeding or to TBH or Granite, Inc.’s Knowledgethreatened, nor does TBH or Granite, Inc. know of any facts or circumstanceswhich would form a basis for any such suit, claim, action, arbitration orproceeding against TBH or Granite, Inc. or against any of TBH or Granite, Inc.’sdirectors, officers, contingent workers or employees relating to theperformance of their duties in such capacities, or against or affecting anyproperties of TBH or Granite, Inc. which individually, or in the aggregate,could have a material Adverse Effect on this Agreement.

 

4.4.2 TBH and/or Granite, Inc. is not a party to, or otherwise subjectto, any agreement or memorandum of understanding with or order of any federal,state or foreign 

 

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governmental or regulatory authority charged with the supervision orregulation of bank holding companies or banks engaged in the insurance of bankdeposits, that restricts the conduct of their respective businesses, or in anymanner relates to capital adequacy, credit or investment policies ormanagement.

 

Section 4.5  Insurance. Exceptas set forth in Schedule 4.5 TBH and Granite, Inc. has and at all times sinceinception had in full force and effect policies of insurance and bonds(including without limitation bankers’ blanket bond, fidelity coverage,director and officer liability, fire, third party liability, use and occupancy)with respect to its assets and business and against casualties andcontingencies which in the judgment of TBH and Granite, Inc. are adequate andappropriate to cover their assets and business. Set forth in Schedule 4.5 is aschedule of all current policies of insurance and bonds (other than title orcredit insurance) carried and owned by TBH and Granite, Inc., showing the nameof the insurance or bonding company, a summary of the coverage, the amounts,the deductible features, the annual premiums and the expiration dates. If anysuch policy or bond is changed, terminated or modified following the date ofthis Agreement, such termination, change or modification shall be promptlydisclosed to Granite, LLC in writing. TBH and Granite, Inc. are not in defaultunder any such policy of insurance or bond such that it could be canceled, andall material claims thereunder have been filed in timely fashion. TBH andGranite, Inc. has filed claims with or given notice of claim to their insurersor bonding companies with respect to all material matters and occurrences forwhich either believes it has coverage.

 

Section 4.6  Taxes.

 

4.6.1  Filing of Returns. Granite,Inc. is a newly created subsidiary of TBH, and, therefore, has not been obligatedto file any federal, state, and local Returns (for Tax or informationalpurposes) which were required to be filed by or in respect of Granite, Inc., orany of its properties, income and/or operations on or prior to the ClosingDate.

 

4.6.2  Tax Elections. Nonew elections with respect to Taxes or any changes in current elections withrespect to Taxes affecting the assets owned by Granite, Inc. shall be madeafter the date of this Agreement without the prior written consent of Granite,LLC and its members, which shall not be unreasonably withheld.

 

Section 4.7  Brokers andFinders. Except as set forth on Schedule 4.7, TBH and Granite, Inc. is nota party to or obligated under any agreement with any broker or finder relatingto the transactions contemplated hereby, and neither the execution of thisAgreement, nor the consummation of the transactions provided for herein, willresult in any liability to any broker or finder. TBH and Granite, Inc. agreesto indemnify and hold harmless Granite, LLC, and to defend with counselselected by Granite, LLC and reasonably satisfactory to TBH and Granite, Inc.,from and against any liability, cost or expense, including attorneys’ fees,incurred in connection with a breach of this Section 4.7.

 

Section 4.8  Absence ofMaterial Adverse Effect. Since inception, the business of TBH and Granite,Inc. has been conducted only in the ordinary course, in the same manner astheretofore conducted, and no event or circumstance has occurred or is expectedto occur which has had or which, with the passage of time or otherwise, couldreasonably be expected to have a Material Adverse Effect on TBH and Granite,Inc.

 

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Section 4.9  UndisclosedLiabilities. Except as disclosed on Schedule 4.9, TBH and Granite, Inc. donot have any liabilities or obligations, either accrued, contingent orotherwise, that are material to TBH and Granite, Inc. and that have not been:(a) reflected or disclosed to Granite, LLC; or (b) incurred subsequent to December31, 2005 in the ordinary course of business. TBH and Granite, Inc. have noKnowledge of any basis for the assertion against TBH and Granite, Inc., of anyliability, obligation or claim (including without limitation that of anyGovernmental Entity) that will have or cause, or could reasonably be expectedto have or cause, a Material Adverse Effect on TBH and Granite, Inc. that isnot fully and fairly reflected and disclosed to Granite, LLC or onSchedule 4.9.

 

Section 4.10  Compliance withApplicable Laws. Except as disclosed on Schedule 4.10, to the best of TBH’sKnowledge, the respective businesses of TBH and its Subsidiaries are not beingconducted in violation of any law, ordinance or regulation, except forviolations which individually or in the aggregate would not have a MaterialAdverse Effect on TBH and its Subsidiaries, taken as a whole. No investigationor review by any Governmental Entity with respect to TBH is pending or, to theKnowledge of TBH threatened, nor has any Governmental Entity indicated to TBHan intention to conduct the same, other than those the outcome of which, as faras can be reasonably foreseen, will not have a Material Adverse Effect on TBHand its Subsidiaries, taken as a whole.

 

Section 4.11  Performance ofObligations. TBH and its Subsidiaries have performed all materialobligations required to be performed by them to date and none of TBH is indefault under or in breach of any term or provision of any covenant, contract,lease, indenture or any other agreement, written or oral, to which any is aparty, is subject or is otherwise bound, and no event has occurred that, withthe giving of notice or the passage of time or both, would constitute such adefault or breach, where such default or breach or failure to perform wouldhave a Material Adverse Effect on TBH, taken as a whole. To TBH’s Knowledge,and except as disclosed on Schedule 4.11, no party with whom TBH has anagreement that is of material importance to the business of TBH, taken as awhole, is in default thereunder.

 

Section 4.12  RegulatoryApproval. Neither TBH nor Granite, Inc. is subject to any regulatoryenforcement agreement. To the best knowledge of TBH there is no fact, event orcondition applicable to TBH which will, or reasonably could be expected to, adverselyaffect the likelihood of securing the required approval or consent of anyGovernmental Entity to the Mergers and transaction completed by this Agreement.

 

Section 4.13  Vote Requirement.At the Closing, TBH will deliver certified copies of resolutions duly adoptedby the Board of Directors of TBH and the Board of Directors and Shareholders ofGranite, Inc. authorizing the purchase of Granite, LLC.

 

Section 4.14  Effective Dateof Representations, Warranties, Covenants and Agreements. Each representation,warranty, covenant and agreement of TBH and Granite, Inc. set forth in thisAgreement shall be deemed to be made on and as of the date hereof and as of theClosing Date.

 

**ARTICLE 5. ADDITIONAL AGREEMENTS**

 

Section 5.1  Access toInformation, Due Diligence, Etc.

 

5.1.1  TBH agrees that TBH hashad full access to sufficient information of Granite, LLC such that TBH is ableto reasonably assess the strengths and weaknesses of the terms and conditions 

 

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of this Agreement and that TBH has had the opportunity to conductsufficient due diligence such that TBH is entering into this Agreement havingsufficient Knowledge of the operations and financial condition of Granite, LLC.

 

Section 5.2  Member Approval.

 

5.2.1  Granite, LLC will prepareand provide to TBH on the Closing Date, confirmation of the vote of the Membersof Granite, LLC approving the terms and conditions of this Agreement.

 

Section 5.3  Taking ofNecessary Action.

 

5.3.1  Subject to the terms andconditions of this Agreement, each of the parties hereto agrees, subject toapplicable laws and the fiduciary duties of Granite, LLC’s members, or TBH’sand Granite, Inc.’s Boards of Directors, as advised in writing by theirrespective counsel, to use all reasonable efforts promptly to take or cause tobe taken all action and promptly to do or cause to be done all thingsnecessary, proper or advisable under applicable laws and regulations toconsummate and make effective the transactions contemplated by this Agreement,including, without limitation, the delivery of any certificate or otherdocument reasonably requested by counsel to a party to this Agreement. Withoutlimiting the foregoing, TBH, Granite, Inc. and Granite, LLC will use theirreasonable efforts to obtain all consents of third parties and GovernmentEntities necessary or, in the reasonable opinion of TBH, Granite, Inc. orGranite, LLC advisable for the consummation of the transactions contemplated bythis Agreement. Without limiting the foregoing, TBH shall cause Granite, Inc.to take all actions necessary to execute and file this Agreement and to effectall transactions contemplated by this Agreement and Granite, LLC shall take allactions necessary to effect all transactions contemplated by this Agreement. Incase at any time after the Effective Time, any further action is necessary ordesirable to carry out the purposes of this Agreement, or to vest the SurvivingCorporation with full title to all properties, assets, rights, approvals,immunities and franchises of Granite, LLC, the proper officers or directors ofTBH or Members of Granite, LLC, as the case may be, shall take all suchnecessary action.

 

5.3.2  The obligations ofGranite, LLC contained in Section 6.2.4 of this Agreement shall continue to bein full force and effect despite any Default thereof by reason of receipt of aSuperior Proposal and any Default thereof by the defaulting party shall entitleTBH and Granite, Inc. to such legal or equitable remedies as may be provided inthis Agreement or by law notwithstanding that any action or inaction of theMembers of Granite, LLC which is required to enable such party to fulfill suchobligations may be excused based on the continuing fiduciary obligations of theMembers of Granite, LLC.

 

Section 5.4  Applications.

 

5.4.1  TBH and Granite, Inc. willprepare and file as promptly as practicable the statements, applications,correspondence or forms to be filed with appropriate State securities lawregulatory authorities, and the statements, correspondence or applications tobe filed to obtain the Requisite Regulatory Approvals to consummate thetransactions contemplated by this Agreement.

 

5.4.2  Each party shall provideto the other at the request of the other party: (i) immediately prior to thefiling thereof, copies of all material statements, applications, correspondenceor forms to be filed with state securities law regulatory authorities, andother 

 

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appropriate regulatory authorities to obtain the Requisite RegulatoryApprovals to consummate the transactions contemplated by this Agreement; and(ii) promptly after delivery to, or receipt from, such regulatory authoritiesall written communications, letters, reports or other documents relating to thetransactions contemplated by this Agreement.

 

Section 5.5  Expenses.

 

5.5.1 TBH and Granite, LLC will share equally the costs of drafting andreviewing the Merger Agreement, and the Stock Purchase Agreement. Theseagreements will be drafted by Randy C. Renfro and will be reviewed by TBH’sattorney.

 

5.5.2 Whether or not the Mergers are consummated, all other costs andexpenses incurred in connection with this Agreement and the transactionscontemplated hereby, besides the drafting of the Merger Agreement and thedrafting of the Stock Purchase Agreement, shall be paid by the party incurringthe same.

 

5.5.3  Granite, LLC shall use itsbest efforts to ensure that their attorneys, accountants, financial advisors,investment bankers and other consultants engaged by it in connection with thetransaction contemplated by this Agreement submit full and final bills on orbefore the Closing Date and that all such expenses are paid or properly accruedprior to the Closing Date.

 

Section 5.6  Notification of CertainEvents.

 

5.6.1  Granite, LLC shall provideto TBH, as soon as practicable, written notice (sent via facsimile andovernight mail or courier) of the occurrence or failure to occur of any of theevents, circumstances or conditions that are the subject of Sections 6.1 and6.2, which notice shall provide reasonable detail as to the subject matterthereof.

 

5.6.2  TBH shall provide toGranite, LLC, as soon as practicable, written notice (sent via facsimile andovernight mail or courier) of the occurrence or failure to occur of any of theevents, circumstances or conditions that are the subject of Section 6.3 and6.4, which notice shall provide reasonable detail as to the subject matterthereof.

 

5.6.3 Each party shall promptly advise the others in writing of anychange or event which could reasonably be expected to have a Material AdverseEffect on the business, properties, assets, financial condition, results ofoperations, liabilities or personnel of such party or on its ability toconsummate the transactions contemplated by this Agreement.

 

Section 5.7  Closing Schedules.Granite, LLC has delivered to TBH on or before the date of this Agreement allof the Schedules to this Agreement which Granite, LLC are required to deliverto TBH hereunder (the “Granite, LLC Schedules”). Immediately prior to theClosing Date, Granite, LLC shall have prepared updates of the Granite, LLCSchedules provided for in this Agreement and shall deliver to TBH revisedschedules containing the updated information (or a certificate signed byGranite, LLC’s Managing Member stating that there have been no changes on theapplicable schedules). Such updated schedules shall sometimes be referred tocollectively, as the “Closing Schedules.” The Closing Schedules shall be dated as of the day prior to the ClosingDate and shall contain information as of the day prior to the Closing Date oras of such earlier date as is practicable under the circumstances. In the eventthe Closing Schedules disclose an event, 

 

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occurrence or circumstance that has had or could reasonably be expectedto have a Material Adverse Effect on Granite, LLC, or on consummation of thetransactions contemplated by this Agreement, that was not disclosed in thepreviously delivered Schedules hereto, shall so notify TBH in the letter oftransmittal for such Closing Schedules, the Closing Date shall be delayed forseven (7) Business Days and TBH shall be entitled to terminate this Agreementwithin five (5) Business Days after receiving such Closing Schedules thatdisclose such event, occurrence or circumstance. In the event of any suchtermination, TBH shall have no liability for such termination. The affectedparty shall have no liability to the terminating party in such an event unless(i) as a result of the existence of such event, occurrence or circumstance sodisclosed in the Closing Schedules any of the representations or warranties ofthe affected party contained in this Agreement are found to have been untrue inany material respect as of the date of this Agreement, or (ii) the event,occurrence or circumstance could have been prevented in the exercise ofreasonable diligence by any officers or directors of the affected party, ineither of which cases the affected party shall be liable to the terminatingparty for Liquidated Damages as provided in Section 8.5 hereof.

 

Section 5.8  No OtherRepresentations. TBH and Granite, Inc. acknowledge that neither Granite,LLC nor its Members nor any representative or agent of Granite, LLC or itsMembers have made any representation or warranty (expressed or implied)regarding Granite, LLC, or any matter or thing affecting or relating to thisAgreement, except as specifically set forth in this Agreement. Neither Granite,LLC nor its Members shall be liable or bound in any manner by any oral orwritten statement representation, warranty, agreement or information pertainingto Granite, LLC or this Agreement furnished by any broker, agent or otherperson, unless specifically set forth in this Agreement.

 

**ARTICLE 6. CONDUCT OF BUSINESS**

 

Section 6.1  AffirmativeConduct of Granite, LLC. During the period from the date of execution ofthis Agreement through the Effective Time, Granite, LLC shall carry on theirbusiness, and in the ordinary course in substantially the manner in whichheretofore conducted, and use all commercially reasonable efforts to preserveintact its business organization, and to maintain and preserve its relationshipand goodwill with customers, employees, contingent workers, and others havingbusiness relationships with it, keep available the services of its officers andemployees, (other than terminations in the ordinary course of business) andpreserve its relationships with customers, suppliers and others having businessdealings with it; and, to these ends, shall fulfill each of the following:

 

6.1.1 Use its commercially reasonable efforts, or cooperate withothers, to expeditiously bring about the satisfaction of the conditionsspecified in Article 7 hereof;

 

6.1.2 Advise TBH promptly in writing of any change that would have aMaterial Adverse Effect on its capital structure, financial condition, assets,results of operations, business or prospects or of any matter which would makethe representations and warranties set forth in Article 3 hereof not true andcorrect in any material respect as of the effective date of the RegistrationStatement and at the Effective Time;

 

6.1.3 Keep in full force and effect all of its existing materialpermits and licenses;

 

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6.1.4  Use its commerciallyreasonable efforts to maintain insurance or bonding coverage on all materialproperties for which it is responsible and on its business operations, andcarry not less than the same coverage for fidelity, public liability, personalinjury, property damage and other risks equal to that which is in effect as ofthe date of this Agreement; and notify TBH in writing promptly of any facts orcircumstances which could affect its ability to maintain such insurance orbonding coverage;

 

6.1.5  Perform its contractualobligations and not breach or come into default on any of such obligations, andnot amend, modify, or, except as they may be terminated in accordance withtheir terms, terminate any material contract, agreement, understanding,commitment, or offer, whether written or oral, (collectively referred to as an “Understanding”)or materially default in the performance of any of its obligations under anyUnderstanding where such default would have a Material Adverse Effect onGranite, LLC;

 

6.1.6  Duly observe and conformto all legal requirements applicable to its business, except for any failure toso observe and conform that would not, individually or in the aggregate, and,in the future will not, have a Material Adverse Effect on Granite, LLC;

 

6.1.7 Duly and timely file as and when due all reports and Returnsrequired to be filed with any Governmental Entity;

 

6.1.8 Maintain its assets and properties in good condition and repair,normal wear and tear excepted;

 

6.1.9 Promptly advise TBH in writing of any event or any othertransaction within the Knowledge of Granite, LLC, whereby any Person or relatedgroup of Persons acquires, after the date of this Agreement, directly orindirectly, record or beneficial ownership (as defined in Rule 13d-3promulgated by the SEC pursuant to the Exchange Act) or control of 5% or moreof the outstanding membership interest of Granite, LLC;

 

6.1.10  Furnish to TBH, as soonas practicable, and in any event within fifteen days after it is prepared (ii)copies of all material reports, renewals, filings, certificates, statements,correspondence and other documents specific to Granite, LLC or filed with orreceived from any Governmental Entity; (iii) monthly unaudited balance sheets,statements of income and changes in shareholders’ equity for Granite, LLC andquarterly unaudited balance sheets, statements of income and changes inshareholders’ equity for Granite, LLC, in each case prepared on a basisconsistent with past practice; and (iv) such other reports as TBH mayreasonably request (which are otherwise deliverable under this Section 6.1.11)relating to Granite, LLC. Each of the financial statements of Granite, LLCdelivered pursuant to this Section 6.1.10 shall be accompanied by a certificateof the Managing Member of Granite, LLC to the effect that such financialstatements fairly present the financial information presented therein ofGranite, LLC, for the periods covered, subject to recurring adjustments normal innature and amount, necessary for a fair presentation and are prepared on abasis consistent with past practice;

 

6.1.11  Granite, LLC agrees thatthrough the Effective Time, as of their respect dates, (i) each Granite, LLCFiling will be true and complete in all material respects; and (ii) eachGranite, LLC Filing will comply in all material respects with all of thestatutes, rules and regulations enforced or promulgated by the GovernmentalEntity with which it will be filed and none will contain any untrue statementof a material fact or omit to state a material fact required to 

 

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be stated therein or necessary to make the statements therein, in lightof the circumstances under which they will be made, not misleading. Anyfinancial statement contained in any of such Granite, LLC Filings that isintended to present the financial position of Granite, LLC during the periodsinvolved to which it relates will fairly present in all material respects thefinancial position of Granite, LLC and will be prepared on a cash basis ofaccounting;

 

6.1.12 Maintain reserves for contingent liabilities in accordance withapplicable accounting principles and consistent with past practices;

 

6.1.13  Promptly notify TBH ofthe filing, or threatened filing, of any litigation, or the filing orthreatened filing of any government or regulatory action, including aninvestigation or notice of investigation, or similar proceeding or notice ofany material claims against Granite, LLC or any of their assets;

 

Section 6.2  NegativeCovenants of Granite, LLC. During the period from the date of execution ofthis Agreement through the Effective Time, Granite, LLC agrees that without TBH’sprior written consent, it shall not:

 

6.2.1 Other than as provided for in this Agreement:  (a) make any other distribution in respectof, any of its membership interests; (b) combine or reclassify any of itsmembership interests or issue or authorize the issuance of any other interestsin respect of, in lieu of or in substitution for its interests; or (c)repurchase or otherwise acquire any of its membership interests;

 

6.2.2 Take any action that would or might result in any of therepresentations and warranties of Granite, LLC set forth in the Agreement becominguntrue in any material respect or any of the conditions to the Merger set forthin Article 7 not being satisfied, except to the extent such actions arerequired to be undertaken by applicable law, regulation or at the direction ofany Regulatory Authority;

 

6.2.3 Amend Operating Agreement, except as required by the terms ofthis Agreement;

 

6.2.4  Authorize or knowinglypermit any of its representatives, directly or indirectly, to solicit orencourage any Acquisition Proposal (as hereinafter defined) or participate inany discussions or negotiations with, or provide any nonpublic information to,any Person or group of persons (other than TBH, and their representatives)concerning any such solicited Acquisition Proposal. Granite, LLC shall notifyTBH immediately if any inquiry regarding an Acquisition Proposal is received byGranite, LLC, including the terms thereof. For purposes of this Section 6.2.5, “AcquisitionProposal” shall mean any (a) proposal pursuant to which any Person other thanTBH would acquire or participate in a merger or other business combination orreorganization involving Granite, LLC; (b) proposal by which any Person orgroup, other than TBH, would acquire the right to vote five percent (5%) ormore of the membership interests of Granite, LLC entitled to vote for theelection of directors; (c) acquisition of the assets of Granite, LLC other thanin the ordinary course of business; or (d) acquisition in excess of fivepercent (5%) of the outstanding membership interests of Granite, LLC, otherthan as contemplated by this Agreement. Notwithstanding the foregoing, nothingcontained in this Agreement shall prevent Granite, LLC’s Members from (i)furnishing nonpublic information to, or entering into discussions ornegotiations with, any person or entity in connection with an unsolicited bonafide written Acquisition Proposal by such person or entity, or recommending anunsolicited bona fide written Acquisition Proposal to 

 

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the members of Granite, LLC, if and only to the extent that (A) themembers of Granite, LLC have determined and believe in good faith (afterconsultation with and the concurrence of its financial advisor) that suchAcquisition Proposal would, if consummated, result in a transaction materiallymore favorable, from a financial point of view, to Granite, LLC’s Members thanthe transaction contemplated by this Agreement (any such more favorableAcquisition Proposal being referred to in this Agreement as a “SuperiorProposal”) and Granite, LLC’s Members have determined in good faith, afterconsultation with and based on written advice from its outside legal counsel,that such action is necessary for Granite, LLC to comply with its fiduciaryduties to shareholders under applicable law, and (B) prior to furnishing suchnonpublic information to, or entering into discussions or negotiations with,such person or entity, Granite, LLC’s Members have received from such person orentity an executed confidentiality agreement, with terms no more favorable tosuch party than those contained in this Agreement between Granite, LLC,  and TBH, or (ii) complying with Rule 14e-2promulgated under the Exchange Act with regard to an Acquisition Proposal, ifsuch Rule is applicable thereto;

 

6.2.5  Acquire or agree toacquire by merging, consolidating with, or by purchasing all or a substantialportion of the assets of, or in any other manner, any business or any Person orotherwise acquire or agree to acquire any assets which are material to Granite,LLC, other than in the ordinary course of business consistent with priorpractice;

 

6.2.6  Sell, lease or otherwisedispose of any of its assets which are material, individually or in theaggregate, to Granite, LLC, except in the ordinary course of businessconsistent with prior practice;

 

6.2.7  Incur any indebtedness forborrowed money or guarantee any such indebtedness or issue or sell any debtsecurities of Granite, LLC or guarantee any debt securities of others otherthan in the ordinary course of business consistent with prior practice;

 

6.2.8  Enter into anyUnderstanding, except: (a) deposits incurred, and short-term debt securities(obligations maturing within one year) issued, in its ordinary course ofbusiness consistent with prior practice, and liabilities arising out of,incurred in connection with, or related to the consummation of this Agreement;(b) commitments to make loans or other extensions of credit in the ordinarycourse of business consistent with prior practice; and (c) loan sales in theordinary course of business, without any recourse, provided that no commitmentto sell loans shall extend beyond the Effective Time;

 

6.2.9  Make or enter into acommitment to make any loan or other extension of credit to any member oremployee of Granite, LLC, except in accordance with practice or policy inexistence on the date of this Agreement and in compliance with all applicablelaws and all applicable regulations and directives of any Governmental Entity;

 

6.2.10 Except in the ordinary course of business consistent with priorpractice or as required by an existing contract, and provided prior disclosurethereof has been made in Schedule 6.2.10, grant any general or uniform increasein the rates of pay of employees or employee benefits or any increase in salaryor employee benefits of any member, employee or agent or pay any bonus to anyPerson;

 

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6.2.11 Sell, transfer, mortgage, encumber or otherwise dispose of anyassets or other liabilities except in the ordinary course of businessconsistent with prior practice or as required by any existing contract;

 

6.2.12 Make any capital expenditures, or commitments with respectthereto, except those in the ordinary course of business which do not exceed$5,000 individually or $15,000 in the aggregate;

 

6.2.13  Renew, extend or amendany existing employment contract or agreement, enter into any new employmentcontract or agreement or make any bonus or any special or extraordinarypayments to any Person;

 

6.2.14  Except in the ordinarycourse of business consistent with prior practice and in compliance withapplicable laws and regulations, make any material investments, by purchase ofstock or securities, contributions of capital, property transfers, purchases ofany property or assets or otherwise, in any other individual, corporation orother entity;

 

6.2.15  Except as otherwiserequired to correct a prior filing, compromise or otherwise settle or adjustany assertion or claim of a deficiency in Taxes (or interest thereon orpenalties in connection therewith) or file any appeal from an asserteddeficiency except in a form previously approved by TBH, which approval will notbe unreasonably withheld, in writing, or file or amend any federal, foreign,state or local Tax Return or report or make any tax election or change anymethod or period of accounting unless required by applicable law and, then,only after submitting such Tax return or report or proposed Tax election orchange in any method or period of accounting, to TBH for its approval, which itshall not unreasonably withhold or delay;

 

6.2.16 except as contemplated in this Agreement, terminate any Granite,LLC Employee Plan or Granite, LLC Benefit Arrangement;

 

6.2.17  Change its fiscal year ormethods of accounting in effect at December 31, 2005, except as required bychanges in accounting principles as concurred to by Granite, LLC’s independentpublic accountants;

 

Section 6.3  AffirmativeConduct of TBH. During the period from the date of execution of this Agreementthrough the Effective Time, TBH agrees (except to the extent Granite, LLC shallotherwise consent in writing) to do the following:

 

6.3.1 Use its commercially reasonable efforts, or cooperate withothers, to expeditiously bring about the satisfaction of the conditionsspecified in Article 7 hereof;

 

6.3.2 Advise Granite, LLC promptly in writing of any change that wouldhave a Material Adverse Effect on its capital structure, consolidated financialcondition, consolidated assets, consolidated results of operations, business orprospects or of any matter which would make the representations and warrantiesset forth in Article 4 hereof not true and correct in any material respect asof the Effective Time;

 

6.3.3 Keep in full force and effect all of itsexisting material permits and licenses;

 

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6.3.4  Use its commerciallyreasonable efforts to maintain insurance or bonding coverage on all materialproperties for which it is responsible and on its business operations, andcarry not less than the same coverage for fidelity, public liability, personalinjury, property damage and other risks equal to that which is in effect as ofthe date of this Agreement; and notify Granite, LLC in writing promptly of any factsor circumstances which could affect its ability to maintain such insurance orbonding coverage;

 

6.3.5  Perform its contractualobligations and not breach or come into default on any of such obligations, andnot amend, modify, or, except as they may be terminated in accordance withtheir terms, terminate any material contract, agreement, understanding,commitment, or offer, whether written or oral, (collectively referred to as an “Understanding”)or materially default in the performance of any of its obligations under anyUnderstanding where such default would have a Material Adverse Effect on TBH orGranite, Inc.;

 

6.3.6  Duly observe and conformto all legal requirements applicable to its business, except for any failure toso observe and conform that would not, individually or in the aggregate, and,in the future will not, have a Material Adverse Effect on TBH or Granite, Inc.;

 

6.3.7 Duly and timely file as and when due all reports and Returnsrequired to be filed with any Governmental Entity;

 

6.3.8 Promptly advise Granite, LLC in writing of any event or any othertransaction within the Knowledge of Granite, LLC, whereby any Person or relatedgroup of Persons acquires, after the date of this Agreement, directly orindirectly, record or beneficial ownership (as defined in Rule 13d-3promulgated by the SEC pursuant to the Exchange Act) or control of 5% or moreof the outstanding stock of TBH or Granite, Inc.;

 

6.3.9 Maintain reserves for contingent liabilities consistent with pastpractices;

 

6.3.10  Promptly notify Granite,LLC of the filing, or threatened filing, of any litigation, or the filing orthreatened filing of any government or regulatory action, including aninvestigation or notice of investigation, or similar proceeding or notice ofany material claims against TBH or Granite, Inc. or any of their assets;

 

Section 6.4  NegativeCovenants of TBH. During the period from the date of execution of thisAgreement through the Effective Time, TBH agrees that without Granite, LLC’sprior written consent, it shall not:

 

6.4.1 Other than as provided for in this Agreement:  (a) make any other distribution in respect ofany of Granite, Inc.’s common stock; (b) combine or reclassify any of Granite,Inc.’s common stock or issue or authorize the issuance of any other interestsin respect of Granite, Inc., in lieu of or in substitution for its commonstock; or (c) repurchase or otherwise acquire any of its common stock;

 

6.4.2 Take any action that would or might result in any of therepresentations and warranties of TBH set forth in the Agreement becominguntrue in any material respect or any of the conditions to the Merger set forthin Article 7 not being satisfied, except to the extent such actions arerequired to be undertaken by applicable law, regulation or at the direction ofany Regulatory Authority;

 

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6.4.3 Incur any indebtedness for borrowed money or guarantee any suchindebtedness or issue or sell any debt securities of Granite, Inc. or guaranteeany debt securities of others other than in the ordinary course of businessconsistent with prior practice;

 

6.4.4  Enter into anyUnderstanding on behalf of Granite, Inc. except: (a) deposits incurred, andshort-term debt securities (obligations maturing within one year) issued, inits ordinary course of business consistent with prior practice, and liabilitiesarising out of, incurred in connection with, or related to the consummation ofthis Agreement; (b) commitments to make loans or other extensions of credit inthe ordinary course of business consistent with prior practice; and (c) loansales in the ordinary course of business, without any recourse, provided thatno commitment to sell loans shall extend beyond the Effective Time;

 

6.4.5  Make or enter into a commitmentto make any loan or other extension of credit to any shareholder or employee ofGranite, Inc., except in accordance with practice or policy in existence on thedate of this Agreement and in compliance with all applicable laws and allapplicable regulations and directives of any Governmental Entity;

 

6.4.6  Sell, transfer, mortgage,encumber or otherwise dispose of any assets or other liabilities of Granite,Inc. except in the ordinary course of business consistent with prior practiceor as required by any existing contract;

 

6.4.7  Make any capitalexpenditures on behalf of Granite, Inc., or commitments with respect thereto,except those in the ordinary course of business which do not exceed $5,000individually or $15,000 in the aggregate;

 

6.4.8  Renew, extend or amend anyexisting employment contract or agreement, enter into any new employmentcontract or agreement or make any bonus or any special or extraordinarypayments to any Person on behalf of Granite, Inc.;

 

6.4.9  Except in the ordinary courseof business consistent with prior practice and in compliance with applicablelaws and regulations, make any material investments, by purchase of stock orsecurities, contributions of capital, property transfers, purchases of anyproperty or assets or otherwise, in any other individual, corporation or otherentity on behalf of Granite, Inc.

 

**ARTICLE 7. CONDITIONS PRECEDENT TO CLOSING**

 

Section 7.1  Conditions to theParties’ Obligations. The obligations of all the parties to this Agreementto effect the Merger shall be subject to the fulfillment of the followingconditions:

 

7.1.1 This Agreement shall have been validly approved by the holders of100% of the membership interests of Granite, LLC and 100% of the membershipinterests of All-Star Exchange Services, LLC;

 

7.1.2  All permits, approvals andconsents required to be obtained, and all waiting periods required to expire,prior to the consummation of the Merger under applicable federal laws of theUnited States or applicable laws of any state having jurisdiction over thetransactions contemplated by this Agreement shall have been obtained orexpired, as the case may be (all such 

 

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permits, approvals and consents and the lapse of all such waiting periodsbeing referred to as the “Requisite Regulatory Approvals”), without theimposition of any condition which in the reasonable judgment of any party to beaffected by such condition is materially burdensome upon such party or itsrespective Affiliates or the Surviving Corporation;

 

7.1.3 There shall not be any action taken, or any statute, rule,regulation or order enacted, entered, enforced or deemed applicable to theMerger, by any Government Entity which: (i) makes the consummation of themerger illegal; (ii) requires the divestiture by TBH of any material asset orof a material portion of the business of TBH; or (iii) imposes any conditionupon TBH or its Subsidiaries which in the judgment of TBH would be materiallyburdensome;

 

7.1.4  No legal, administrative,arbitration, investigatory or other proceeding by any Governmental Entity orany other Person shall have been instituted and, at what otherwise would havebeen the Effective Time, remain pending by or before any Governmental Entity torestrain or prohibit the transactions contemplated hereby;

 

7.1.5  No action, suit orproceeding shall have been instituted or threatened before any court orgovernmental body seeking to challenge or restrain the transactionscontemplated by this Agreement which presents a substantial risk that suchtransactions will be restrained or that either party hereto may suffer materialdamages or other relief as a result of consummating such transactions.

 

Section 7.2  Conditions to TBH’sObligations. The obligations of TBH to effect the Merger shall be subjectto the fulfillment (or waiver, in writing, by TBH) of the following conditions:

 

7.2.1  Except as otherwiseprovided in this Section 7.2, (a) the representations and warranties ofGranite, LLC contained in Article 3 shall be true in all material respects asof the Effective Time as though made at the Effective Time, except to theextent they expressly refer to an earlier time and except where the failure tobe true, individually or in the aggregate, would not have or would not bereasonably likely to have, a Material Adverse Effect on Granite, LLC or theSurviving Corporation, or upon the consummation of the transactionscontemplated hereby; (b) Granite, LLC shall have duly performed and complied inall material respects with all agreements and covenants required by thisAgreement to be performed or complied with by it prior to or at the EffectiveTime, except where the failure to so perform and comply, individually or in theaggregate, would not have or would not be reasonably likely to have a MaterialAdverse Effect on Granite, LLC or the Surviving Corporation, or upon theconsummation of the transactions contemplated hereby; (c) none of the events orconditions entitling TBH to terminate this Agreement under Article 8 shall haveoccurred and be continuing; and (d) Granite, LLC shall have delivered to TBHcertificates dated the date of the Effective Time and signed by the Members tothe effect set forth in Subsections 7.2.1(a), (b) and (c);

 

7.2.2  There shall have been obtained,without the imposition of any material burden or restriction on any of theparties hereto not in existence on the date hereof, each consent to theconsummation of the Mergers required to be obtained from any Person under anyagreement, contract or license to which Granite, LLC is a party or by or underwhich it is bound or licensed, the withholding of which might have a MaterialAdverse Effect on Granite, LLC, the Surviving Corporation or TBH at orfollowing the Effective Time, or on the transactions contemplated by thisAgreement;

 

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7.2.3  Granite, LLC shall havedelivered its Closing Schedules to TBH on the day immediately preceding theClosing Date and none of such Closing Schedules shall reflect any item that wasnot on the Granite, LLC Schedules (or in the Granite, LLC Financial Statements)delivered on the date of execution of this Agreement that has had, would have,or could be reasonably likely to have, a Material Adverse Effect on Granite, LLC,the Surviving Corporation or TBH at or after the Effective Time, or on theconsummation of the transactions contemplated hereby;

 

7.2.4  Granite, LLC shall deliverthe Granite, LLC Financial Statement to TBH dated as of the Closing Date;

 

7.2.5  Nielson shall havedelivered to Granite, Inc. a Non-Competition Agreement in a form agreed upon bythe parties;

 

7.2.6  Between the date of thisAgreement and the Closing Date, no event or circumstance shall have occurredwhich has had or could reasonably be expected to have a Material Adverse Effecton Granite, LLC, and TBH shall have received a certificate signed on behalf ofGranite, LLC by the Members of Granite, LLC to such effect;

 

7.2.7  Counsel for TBH shall haveapproved, in the exercise of counsel’s reasonable discretion, the validity ofall transactions herein contemplated, as well as the form and substance of allopinions, certificates, instruments of transfer and other documents to bedelivered to TBH hereunder or that are reasonably requested by such counsel;

 

7.2.8  The issuance of theGranite, Inc. Common Stock shall have been qualified or registered with theappropriate State securities law or “blue sky” regulatory authorities of allStates in which qualification or registration is required under the Statesecurities laws, and such qualifications or registration shall not have beensuspended or revoked;

 

7.2.9  Granite, LLC shall not besubject to any memorandum of understanding, cease and desist order, or otheragreement with any Governmental Entity restricting the conduct of any of theirrespective businesses, prospects and operations, so as to have a MaterialAdverse Effect on TBH after the Effective Time;

 

7.2.10  The satisfactoryresolution of any pending or threatened litigation or claim against Granite,LLC or the establishment of a reserve prior to the Closing Date, satisfactoryto TBH, for any pending or threatened litigation or claim involving Granite,LLC.

 

Section 7.3  Conditions toGranite, LLC’s Obligations. The obligations of Granite, LLC to effect theMerger shall be subject to the fulfillment (or waiver, in writing, by Granite,LLC) of the following conditions:

 

7.3.1  Except as otherwiseprovided in this Section 7.3, (a) the representations and warranties of TBHcontained in Article 4 shall be true in all material respects as of theEffective Time as though made at the Effective Time, except to the extent theyexpressly refer to an earlier time and except where the failure to be true,individually or in the aggregate, would not have or would not be reasonablylikely to have, a Material Adverse Effect on TBH, taken as a whole, or uponconsummation of the transactions contemplated hereby; (b) TBH shall have dulyperformed and complied in all material respects with all agreements and covenantsrequired by this Agreement to be performed or complied with it prior to or atthe Effective Time, except where the failure to so 

 

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perform and comply, individually or in the aggregate, would not have orwould not be reasonably likely to have a Material Adverse Effect on TBH, takenas a whole, or upon the consummation of the transactions contemplated hereby;(c) none of the events or conditions entitling Granite, LLC to terminate thisAgreement under Article 8 shall have occurred and be continuing; and (d) TBHshall have delivered to Granite, LLC certificates dated the date of theEffective Time and signed by a duly authorized officer to the effect set forthin Subsections 7.3.1(a), (b) and (c);

 

**ARTICLE 8. TERMINATION, AMENDMENTS ANDWAIVERS**

 

Section 8.1  Termination. ThisAgreement may be terminated at any time prior to the Closing Date;

 

8.1.1 By mutual consent of the Boards of Directors of TBH and theMembers of Granite, LLC;

 

8.1.2  By TBH or Granite, LLCupon the failure to satisfy any conditions specified in Section 7.1 if suchfailure is not caused by any action or inaction of the party requestingtermination of this Agreement;

 

8.1.3 By TBH or Granite, LLC if an Acquisition Event involving Granite,LLC shall have occurred;

 

8.1.4  By Granite, LLC if thereshall have been a material breach of any of the representations or warrantiesof TBH set forth in this Agreement, which breach, in the reasonable opinion ofGranite, LLC, by its nature cannot be cured or is not cured prior to theClosing and which breach would, in the reasonable opinion of Granite, LLC,individually or in the aggregate, have, or be reasonably likely to have, aMaterial Adverse Effect on TBH and its Subsidiaries, taken as a whole, or uponthe consummation of the transactions contemplated hereby;

 

8.1.5  By TBH if there shall havebeen a material breach of any of the representations or warranties of Granite,LLC set forth in this Agreement, which breach, in the reasonable opinion of TBH,by its nature cannot be cured or is not cured prior to the Closing and whichbreach would, in the reasonable opinion of TBH, individually or in theaggregate, have, or be reasonably likely to have, a Material Adverse Effect onGranite, LLC or upon the consummation of the transactions contemplated hereby;

 

8.1.6 By Granite, LLC after the occurrence of a Default by TBH and thecontinuance of such Default for a period of 10 Business Days after writtennotice of such Default, if such Default, in the reasonable opinion of Granite,LLC, cannot be cured prior to the Closing or, even though curable by theClosing, it is not cured prior to the Closing;

 

8.1.7 By TBH after the occurrence of a Default by Granite, LLC and thecontinuance of such Default for a period of 10 Business Days after writtennotice of such Default, if such Default, in the reasonable opinion of TBH,cannot be cured prior to the Closing or, even though curable by the Closing, itis not cured prior to the Closing;

 

8.1.8  By TBH if the Closing Schedulesdelivered by Granite, LLC disclose the occurrence of an event or the existenceof any facts or circumstances, not disclosed in the Schedules 

 

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or the Granite, LLC Financial Statements delivered to TBH on or beforethe date hereof, that has had or could reasonably be expected to have aMaterial Adverse Effect on Granite, LLC, or after the Effective Time, on TBH,or on the consummation of the transactions contemplated hereby (an “Granite,LLC Material Adverse Event”);

 

8.1.9  By Granite, LLC upon thefailure of any of the conditions specified in Section 7.3 to have beensatisfied prior to the Closing Date; or

 

8.1.10 By TBH upon the failure of any of the conditions specified inSection 7.2 to have been satisfied prior to the Closing Date;

 

Section 8.2  Effect ofTermination; Survival. Except as provided in Section 8.5, no termination ofthis Agreement as provided in Section 8.1 for any reason or in any manner shallrelease, or be construed as so releasing, any party hereto from its obligationspursuant to Sections 5.5, 8.5 or 9.5 hereof or from any liability or damage toany other party hereto arising out of, in connection with, or otherwiserelating to, directly or indirectly, said party’s material breach, Default orfailure in performance of any of its covenants, agreements, duties orobligations arising hereunder, or any breaches of any representation orwarranty contained herein arising prior to the date of termination of thisAgreement.

 

Section 8.3  Amendment. Noterm or provision of this Agreement other than regulatory approval or any otherprovision required by law, may be amended unless agreed to in writing by TBHand Granite, LLC.

 

Section 8.4  Waiver. Anyterm or provision of this Agreement other than regulatory approval or any otherprovision required by law, may be waived in writing at any time by the partywhich is, or whose shareholders are, entitled to the benefits thereof.

 

Section 8.5  LiquidatedDamages; Cancellation Fee. If either party Defaults under this Agreementthe non-defaulting party shall be entitled to declare this Agreement null andvoid and shall be entitled to collect $50,000 from the defaulting partyhereunder as liquidated damages, whereupon the Agreement shall terminate andneither party shall have any further claims against the other party. Both TBHand Granite, LLC acknowledge that the actual damages sustained from such aDefault are difficult, if not impossible, to ascertain.

 

**ARTICLE 9. GENERAL PROVISIONS**

 

Section 9.1  No Survival ofRepresentations and Warranties. Except as provided in Section 8.2, none ofthe representations, warranties, covenants and agreements in this Agreement orin any instrument delivered pursuant to this Agreement shall survive theEffective Time, except for those covenants and agreements contained herein andtherein which by their terms apply in whole or in part after the Effective Timeor to a termination of this Agreement.

 

Section 9.2  Notices. Allnotices and other communications hereunder shall be in writing and shall bedeemed given if delivered personally, mailed by registered or certified mail(return receipt requested), sent by confirmed overnight courier or telecopied(with electronic confirmation and verbal confirmation for the person to whomsuch telecopy is addressed), on the date such notice 

 

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is so delivered, mailed or sent, as the case may be, to the parties atthe following addresses (or any such other address for a party as shall bespecified by like notice):

 
| If to Granite, LLC at: | The Law Offices of Randy C. Renfro   |
|------------------------|--------------------------------------|
|                   | 650 University Avenue, Suite 110     |
|                   | Sacramento, CA 95825                 |
|                   |                                 |
| with a copy to:        | Granite Exchange, Inc.               |
|                   | 1400 Rocky Ridge Dr., Ste 280        |
|                   | Roseville, CA 95661                  |
|                   | Attention: Justin Swift              |
|                   |                                 |
| If to Purchaser:       | The Bank Holdings                    |
|                   | 9990 Double R Blvd.                  |
|                   | Reno, NV 89521                       |
|                   | Attention: Jack Buchold, CFO         |
|                   |                                 |
| with a copy to:        | Gary Steven Findley & Associates |
|                   | 1470 North Hundley Street            |
|                   | Anaheim, CA 92806                    |
|                   | Attention: Debra Barbin, Esq.        |

 

Section 9.3  Counterparts.This Agreement may be executed in one or more counterparts, all of which shallbe considered one and the same agreement, and shall become effective when oneor more counterparts have been signed by each of the parties and delivered tothe other parties, it being understood that all parties need not sign the samecounterpart.

 

Section 9.4  EntireAgreement/No Third Party Rights. This Agreement (including the documentsand instruments referred to herein): (a) constitutes the entire agreement forthe merger and supersedes all prior agreements and understandings, both writtenand oral, among the parties with respect to the subject matter hereof; (b)except as expressly set forth herein, is not intended to confer upon any personother than the parties hereto any rights or remedies hereunder; (c) subject tothe foregoing, shall be binding upon and shall inure to the benefit of theparties hereto and their successors and assigns.

 

Section 9.5  Nondisclosure ofAgreement. The parties hereto agree, except as required by law, so long asthis Agreement is in effect, not to issue any public notice, disclosure orpress release with respect to the transactions contemplated by this Agreementwithout seeking the consent of the other party, which consent shall not beunreasonably withheld.

 

Section 9.6  Assignment. Noneof the parties may assign their rights under this Agreement without priorwritten consent of the other parties hereto.

 

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Section 9.7  Governing Law. This Agreement shall begoverned and construed in accordance with the laws of the State of Nevada,without regard to any applicable conflicts of law. If any provisions of thisagreement shall be unenforceable or invalid, such unenforceability orinvalidity shall not affect the remaining provisions of this agreement.

 

Section9.8  Headings/Table of Contents. Thetable of contents and headings contained in this Agreement are for referencepurposes only and shall not affect in any way the meaning or interpretation ofthis Agreement. The Schedules annexed to this agreement are an integral part ofthis agreement, and where there is any reference to this agreement it shall bedeemed to include said Schedules.

 

Section 9.9  Enforcement ofAgreement. The parties hereto agree that irreparable damage will occur inthe event that any of the provisions of this Agreement are not performed inaccordance with its specific terms or is otherwise breached. It is accordinglyagreed that the parties shall be entitled to an injunction or injunctions toprevent breaches of this Agreement and to enforce specifically the terms andprovisions hereof in any court of the State of Nevada or any state havingjurisdiction, this being in addition to any remedy to which they are entitledat law or in equity.

 

Section 9.10  Severability.Any term or provision of this Agreement which is invalid or unenforceable inany jurisdiction shall, as to that jurisdiction, be ineffective to the extentof such invalidity or unenforceability without rendering invalid orunenforceable the remaining terms and provisions of this Agreement or affectingthe validity or enforceability of any of the terms or provisions of thisAgreement in any other jurisdiction. If any provision of this Agreement is sobroad as to be unenforceable, the provision shall be interpreted to be only sobroad as is enforceable.

 

Section9.11  Arbitration. Any dispute orcontroversy arising among the parties hereto regarding any term, covenant orcondition of this Agreement or the breach thereof shall, upon written demand ofany party hereto, be submitted to and determined by arbitration before theAmerican Arbitration Association, in Reno, Nevada, by a panel of threearbitrators, in accordance with the rules of the Association then in effect. Anyawarded rendered shall be made by means of a written opinion explaining thearbitrators’ reasons for the award. The arbitrators may not amend or vary anyprovision of this agreement. Judgment upon the award rendered by the arbitratorsmay be entered in any court of competent jurisdiction, which court shall havethe power to review such award for compliance with this agreement.

 

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IN WITNESS WHEREOF, the parties below, and/or their respective officersthereunto duly authorized, have caused this Agreement to be signed as of thedate first written above..

 

 
|   |  /s/ Justin Swift         |                    |
|--------|--------------------------------|-------------------------|
|   | Granite Exchange Services, LLC |                    |
|   |                           |                    |   |
|   | By:                            | Managing Member         |   |
|   |                           | Title                   |   |
|   |                           |                    |   |
|   |  /s/ Lonnie Nielson       |                    |
|   | Lonnie Nielson                 |                    |
|   |                           |                    |   |
|   |  /s/ Rob Awalt            |                    |
|   | Rob Awalt                      |                    |
|   |                           |                    |   |
|   |  /s/ Justin Swift         |                    |
|   | Justin Swift                   |                    |
|   |                           |                    |   |
|   |  /s/ Hal Giomi            |                    |
|   | The Bank Holdings              |                    |
|   |                           |                    |   |
|   | By:                            | Chief Executive Officer |   |
|   |                           | Title                   |   |
|   |                           |                    |   |
|   | /s/ Hal Giomi                  |                    |
|   | Granite Exchange, Inc.         |                    |
|   |                           |                    |   |
|   | By:                            | Chief Executive Officer |   |
|   | Title                          |                    |

 

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