Document:

exv10w1

Exhibit 10.1

SECURITIES PURCHASE AGREEMENT

     This Securities Purchase Agreement (this “Agreement”) is dated as of April 23, 2010, by and
among Oriental Financial Group Inc., a financial holding company and corporation organized in the
Commonwealth of Puerto Rico (the “Company”), and each purchaser identified on the signature pages
hereto (each, including its successors and assigns, a “Purchaser” and collectively, the
“Purchasers”).

RECITALS

     A. The Company and each Purchaser is executing and delivering this Agreement in reliance upon
the exemption from securities registration afforded by Section 4(2) of the Securities Act of 1933,
as amended (the “Securities Act”), and Rule 506 of Regulation D (“Regulation D”) as promulgated by
the United States Securities and Exchange Commission (the “Commission”) under the Securities Act.

     B. Each Purchaser, severally and not jointly, wishes to purchase, and the Company wishes to
sell, upon the terms and conditions stated in this Agreement, that aggregate number of shares of
the Company’s mandatorily convertible non-cumulative non-voting perpetual preferred stock, $1,000
liquidation preference per share (the “Preferred Stock”), set forth below such Purchaser’s name on
the signature page of this Agreement (which aggregate amount for all Purchasers together shall be
200,000 shares of Preferred Stock and shall be collectively referred to herein as the “Preferred
Shares”). When purchased, the Preferred Stock will have the terms set forth in a certificate of
designations for the Preferred Stock in the form attached as Exhibit A hereto (the
“Certificate of Designations”) made a part of the Company’s Certificate of Incorporation, as
amended, by the filing of the Certificate of Designations with the Secretary of State of the
Commonwealth of Puerto Rico (the “Secretary of State”). The Preferred Stock will be convertible
into shares of common stock, par value $1.00 per share (the “Common Stock”), of the Company (the
“Underlying Shares” and, together with the Preferred Shares, the “Securities”), subject to and in
accordance with the terms and conditions of the Certificate of Designations.

     C. The Company has engaged Keefe, Bruyette & Woods, Inc. as its exclusive placement agent (the
“Placement Agent”) for the offering of the Securities.

     D. Contemporaneously with the execution and delivery of this Agreement, the parties hereto are
executing and delivering a Registration Rights Agreement, substantially in the form attached hereto
as Exhibit B (the “Registration Rights Agreement”), pursuant to which, among other things,
the Company will agree to provide certain registration rights with respect to the Securities under
the Securities Act and the rules and regulations promulgated thereunder and applicable state
securities laws.

     NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in this Agreement, and for
other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged,
the Company and the Purchasers hereby agree as follows:

 

 

ARTICLE 1:

DEFINITIONS

     1.1 Definitions. In addition to the terms defined elsewhere in this Agreement, for all
purposes of this Agreement, the following terms shall have the meanings indicated in this Section
1.1:

     “Action” means any action, suit, inquiry, notice of violation, proceeding
(including any partial proceeding such as a deposition) or investigation pending or, to the
Company’s Knowledge, threatened in writing against the Company, any Subsidiary or any of their
respective properties or any officer, director or employee of the Company or any Subsidiary acting
in his or her capacity as an officer, director or employee before or by any federal, state, county,
local or foreign court, arbitrator, governmental or administrative agency, regulatory authority,
stock market, stock exchange or trading facility.

     “Affiliate” means, with respect to any Person, any other Person that, directly or indirectly
through one or more intermediaries, Controls, is controlled by or is under common control with such
Person, as such terms are used in and construed under Rule 405 under the Securities Act.

     “Agreement” shall have the meaning ascribed to such term in the Preamble.

     “AST” has the meaning set forth in Section 2.1(b).

     “AST Escrow Agreement” has the meaning set forth in Section 2.1(b).

     “Bank” has the meaning set forth in Section 6.17.

     “BHCA” has the meaning set forth in Section 3.1(b).

     “Business Day” means a day, other than a Saturday or Sunday, on which banks in New York City
are open for the general transaction of business.

     “Certificate of Designations” has the meaning set forth in the Recitals.

     “Certificate of Incorporation” means the Certificate of Incorporation of the Company and all
amendments and certificates of determination thereto, as the same may be amended from time to time.

     “Closing” means the closing of the purchase and sale of the Preferred Shares pursuant to this
Agreement.

     “Closing Date” means the Trading Day when all of the Transaction Documents have been executed
and delivered by the applicable parties thereto, and all of the conditions set forth in Sections
2.1, 2.2, 5.1 and 5.2 hereof are satisfied, or such other date as the parties may agree.

     “Code” means the Internal Revenue Code of 1986, as amended, including the regulations and
published interpretations thereunder.

     “Commission” has the meaning set forth in the Recitals.

     “Common Stock” has the meaning set forth in the Recitals, and also includes any securities
into which the Common Stock may hereafter be reclassified or changed.

     “Company Deliverables” has the meaning set forth in Section 2.2(a).

2

 

     “Company Puerto Rican Counsel” means McConnell Valdes LLC.

     “Company Reports” has the meaning set forth in Section 3.1(kk).

     “Company U.S. Counsel” means Skadden, Arps, Slate, Meagher & Flom LLP.

     “Company’s Knowledge” means with respect to any statement made to the knowledge of the
Company, that the statement is based upon the actual knowledge of the executive officers of the
Company having responsibility for the matter or matters that are the subject of the statement after
reasonable investigation.

     “Control” (including the terms “controlling”, “controlled by” or “under common control with”)
means the possession, direct or indirect, of the power to direct or cause the direction of the
management and policies of a Person, whether through the ownership of voting securities, by
contract or otherwise.

     “Custodian” has the meaning set forth in Section 2.1(b).

     “Custodian Agreement” has the meaning set forth in Section 2.1(b).

     “DTC” means The Depository Trust Company.

     “Effectiveness Date” has the meaning set forth in Section 6.16.

     “Environmental Laws” has the meaning set forth in Section 3.1(l).

     “ERISA” means the Employee Retirement Income Security Act of 1974, as amended, including the
regulations and published interpretations thereunder.

     “ERISA Affiliate”, as applied to the Company, means any Person under common control with the
Company, who together with the Company, is treated as a single employer within the meaning of
Section 414(b), (c), (m) or (o) of the Code.

     “Escrow Agent” has the meaning set forth in Section 2.1(b).

     “Escrow Agreement” has the meaning set forth in Section 2.1(b).

     “Exchange Act” means the Securities Exchange Act of 1934, as amended, or any successor
statute, and the rules and regulations promulgated thereunder.

     “Failed Bank” has the meaning set forth in Section 6.17.

     “FDIC” means the Federal Deposit Insurance Corporation.

     “FRB” means the Board of Governors of the Federal Reserve System.

     “GAAP” means U.S. generally accepted accounting principles, as applied by the Company.

     “Indemnified Person” has the meaning set forth in Section 4.8(b).

     “Intellectual Property” has the meaning set forth in Section 3.1(r).

     “Lien” means any lien, charge, claim, encumbrance, security interest, right of first refusal,
preemptive right or other restrictions of any kind.

     “Material Adverse Effect” means any of (i) a material and adverse effect on the legality,
validity or enforceability of this Agreement, the Registration Rights Agreement, the Certificate of
Designations or the Escrow Agreement, (ii) a material and adverse effect on the results of
operations, assets, properties, business, condition (financial or otherwise) of the Company and the

3

 

Subsidiaries, taken as a whole, or (iii) any adverse impairment to the Company’s ability to perform
in any material respect on a timely basis its obligations under this Agreement, the Registration
Rights Agreement, the Certificate of Designations or the Escrow Agreement; provided, that in
determining whether a Material Adverse Effect has occurred, there shall be excluded any effect to
the extent resulting from the following: (A) changes, after the date hereof, in U.S. GAAP or
regulatory accounting principles generally applicable to banks, savings associations or their
holding companies, (B) changes, after the date hereof, in applicable laws, rules and regulations or
interpretations thereof by any court, administrative agency or other governmental authority,
whether federal, state, local or foreign, or any applicable industry self-regulatory organization,
(C) actions or omissions of the Company expressly required by the terms of this Agreement or taken
with the prior
written consent of an affected Purchaser, (D) changes, after the date hereof, in general economic,
monetary or financial conditions, (E) changes in the market price or trading volumes of the Common
Stock (but not the underlying causes of such changes), (F) changes in global or national political
conditions, including the outbreak or escalation of war or acts of terrorism and (G) the public
disclosure of this Agreement or the transactions contemplated hereby; except, with respect to
clauses (A), (B), (D) and (F), to the extent that the effects of such changes have a
disproportionate effect on the Company and the Subsidiaries, taken as a whole, relative to other
similarly situated banks, savings associations or their holding companies generally.

     “Material Contract” means any contract of the Company that was filed as an exhibit to the SEC
Reports pursuant to Item 601 of Regulation S-K.

     “Material Permits” has the meaning set forth in Section 3.1(p).

     “Multiemployer Plan” means a “multiemployer plan” as defined in Section 4001(a)(3) of ERISA to
which the Company or any ERISA Affiliate is making, or is accruing an obligation to make,
contributions or has made, or been obligated to make, contributions within the preceding six (6)
years.

     “New York Court” means the courts of the State of New York and the United States District
Courts located in the city of New York.

     “NYSE” means the New York Stock Exchange.

     “OCFI” means the Office of the Commissioner of Financial Institutions of Puerto Rico.

     “P&A Agreement” has the meaning set forth in Section 6.17.

     “P&A Closing” has the meaning set forth in Section 6.17.

     “Pension Plan” means any employee pension benefit plan within the meaning of Section 3(2) of
ERISA, other than a Multiemployer Plan, which is subject to the provisions of Title IV of ERISA or
Section 412 of the Code or Section 302 of ERISA and which (i) is maintained for employees of the
Company or any of its ERISA Affiliates or (ii) has at any time during the last six (6) years been
maintained for the employees of the Company or any current or former ERISA Affiliate.

     “Person” means an individual, corporation, partnership, limited liability company, trust,
business trust, association, joint stock company, joint venture, sole proprietorship,
unincorporated organization or governmental authority.

     “Placement Agent” has the meaning set forth in the Recitals.

     “Preferred Shares” has the meaning set forth in the Recitals.

4

 

     “Preferred Stock” has the meaning set forth in the Recitals.

     “Principal Trading Market” means the Trading Market on which the Common Stock is primarily
listed on and quoted for trading, which, as of the date of this Agreement and the Closing Date,
shall be the NYSE.

     “Proceeding” means an action, claim, suit, investigation or proceeding (including, without
limitation, an investigation or partial proceeding, such as a deposition), whether commenced or
threatened.

     “Purchase Price” means $1,000 per Preferred Share.

     “Purchaser Deliverables” has the meaning set forth in Section 2.2(b).

     “Purchaser Party” has the meaning set forth in Section 4.8(a).

     “Registration Rights Agreement” has the meaning set forth in the Recitals.

     “Registration Statement” means a registration statement meeting the requirements set forth in
the Registration Rights Agreement and covering the resale by the Purchasers of the Registrable
Securities (as defined in the Registration Rights Agreement).

     “Regulation D” has the meaning set forth in the Recitals.

     “Regulatory Agreement” has the meaning set forth in Section 3.1(mm).

     “Required Approvals” has the meaning set forth in Section 3.1(e).

     “Rule 144” means Rule 144 promulgated by the Commission pursuant to the Securities Act, as
such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by
the Commission having substantially the same effect as such Rule.

     “Scheduled Date” has the meaning set forth in Section 6.16.

     “SEC Reports” has the meaning set forth in Section 3.1(h).

     “Secretary of State” has the meaning set forth in the Recitals.

     “Section 2.1(c)(iii) Purchaser” has the meaning set forth in Section 2.1(c)(iii).

     “Secretary’s Certificate” has the meaning set forth in Section 2.2(a)(v).

     “Securities” has the meaning set forth in the Recitals.

     “Securities Act” has the meaning set forth in the Recitals.

     “Stockholder Approvals” has the meaning set forth in Section 4.11.

     “Stockholder Proposals” has the meaning set forth in Section 4.11.

     “Subscription Amount” means with respect to each Purchaser, the aggregate amount to be paid
for the Preferred Shares purchased hereunder as indicated on such Purchaser’s signature page to
this Agreement next to the heading “Aggregate Purchase Price (Subscription Amount)”.

     “Subsidiary” means any entity in which the Company, directly or indirectly, owns sufficient
capital stock or holds a sufficient equity or similar interest such that it is consolidated with
the Company in the financial statements of the Company.

     “Trading Day” means (i) a day on which the Common Stock is listed or quoted and traded on its
Principal Trading Market (other than the OTC Bulletin Board), or (ii) if the Common Stock is

5

 

not listed on a Trading Market (other than the OTC Bulletin Board), a day on which the Common Stock is
traded in the over-the-counter market, as reported by the OTC Bulletin Board, or (iii) if the
Common Stock is not quoted on any Trading Market, a day on which the Common Stock is quoted in the
over-the-counter market as reported in the “pink sheets” by Pink Sheets LLC (or any similar
organization or agency succeeding to its functions of reporting prices); provided , that in the
event that the Common Stock is not listed or quoted as set forth in (i), (ii) and (iii) hereof,
then Trading Day shall mean a Business Day.

     “Trading Market” means whichever of the NYSE, the NYSE Amex, the NASDAQ Global Select Market,
the NASDAQ Global Market, the NASDAQ Capital Market or the OTC Bulletin Board on which the Common
Stock is listed or quoted for trading on the date in question.

     “Transaction Documents” means this Agreement, the schedules and exhibits attached hereto, the
Registration Rights Agreement, the Certificate of Designations, the Escrow Agreement and any other
documents or agreements executed in connection with the transactions contemplated hereunder.

     “Transfer Agent” means The Registrar and Trust Company, or any successor transfer agent for
the Company.

     “Underlying Shares” has the meaning set forth in the Recitals.

ARTICLE 2:

PURCHASE AND SALE

     2.1 Closing.

          (a) Purchase of Preferred Shares. Subject to the terms and conditions set forth in
this Agreement, at the Closing the Company shall issue and sell to each Purchaser, and each
Purchaser shall, severally and not jointly, purchase from the Company, the number of Preferred
Shares set forth below such Purchaser’s name on the signature page of this Agreement at a per
Preferred Share price equal to the Purchase Price.

          (b) Escrow. Unless Purchaser is a Section 2.1(c)(iii) Purchaser, concurrent with the
signing hereof, (i) each Purchaser has (A) deposited the Subscription Amount with American Stock
Transfer & Trust Company, LLC, as Escrow Agent (“AST” and, collectively with any Custodians, the
"Escrow Agent”), pursuant to that certain Escrow Agreement (in the form attached hereto as
Exhibit I) between the Company and AST (as it may be amended or otherwise modified from
time to time, the “AST Escrow Agreement”, and collectively with any Custodian Agreements, the
"Escrow Agreement”) or (B) segregated cash equal to the Subscription Amount in an account with a
custodian (a “Custodian”) of funds held on behalf of an “investment company” under the Investment
Company Act of 1940, as amended, pursuant to binding escrow instructions (“Custodian Agreements”)
for release of such funds by such Custodian to the Company, at the direction of the Company, upon
the satisfaction of conditions set forth in the AST Escrow Agreement, and (ii) the Company has
issued instructions to the Transfer Agent authorizing the issuance, in book-entry form, of the
number of Preferred Shares specified on such Purchaser’s signature page hereto (or, if the Company
and such Purchaser shall have agreed, as indicated on such Purchaser’s signature page hereto, that
such Purchaser will receive Preferred Shares in certificated form, then the Company shall instead
instruct the Transfer Agent to issue such specified Preferred Shares in certificated form (the
"Stock Certificates”), or as otherwise set forth on the

6

 

Stock Certificate Questionnaire included as
Exhibit C-2 hereto) concurrent with the Escrow Agent’s release of the Subscription Amount
to the Company pursuant to the Escrow Agreement.

          (c) Closing.

               (i) The Closing of the purchase and sale of the Preferred Shares shall take place at 10:00
a.m., New York City time, at the offices of Skadden, Arps, Slate, Meagher & Flom LLP, on the
Closing Date or at such other locations or remotely by facsimile transmission or other electronic
means as the parties may mutually agree. The “Closing Date” shall be April 30, 2010, unless the
FDIC shall have notified the Company that the P&A Closing will not occur on April 30, 2010. In the
event that the FDIC notifies the Company that the P&A Closing will not occur on April 30, 2010 (or
any other Scheduled Date as contemplated by this paragraph), the
Company will provide each Purchaser notice thereof. Upon notice from the FDIC of a different
Scheduled Date for the P&A Closing, the Company shall promptly provide each Purchaser notice
thereof. Unless the FDIC shall have notified the Company that the P&A Closing will not occur on a
particular Scheduled Date, then the “Closing Date” shall mean such Scheduled Date. The “Closing”
means the release of funds and issuance of Preferred Shares as contemplated hereby.

               (ii) Unless Purchaser is a Section 2.1(c)(iii) Purchaser, pursuant to the terms of the Escrow
Agreement, on the Closing Date, the Escrow Agent shall release the Subscription Amount to the
Company and the Transfer Agent shall issue the Preferred Shares to each Purchaser as provided in
the instructions referred to in paragraph (b) above. If Purchaser and the Company have previously
agreed (as indicated on such Purchaser’s signature page hereto) that such Purchaser may rely on
Section 2.1(c)(iii) instead of on Sections 2.1 (c)(i) and (ii), such Purchaser is a “Section
2.1(c)(iii) Purchaser”.

               (iii) If Purchaser is prohibited by the terms of its organizational or constituent documents
to enter into an escrow agreement and has provided the Company with documented evidence of such
prohibition (any such Purchaser, a “Section 2.1(c)(iii) Purchaser”), then with respect to
such Purchaser Section 2.1(c)(ii) shall not apply and shall have no force and effect, and this
Section 2.1(c)(iii) shall apply instead. This Section 2.1(c)(iii) shall not apply and shall have no
force or effect for any Purchaser that is not a Section 2.1(c)(iii) Purchaser. If a Purchaser is a
Section 2.1(c)(iii) Purchaser, then at 9:00 a.m., New York City time, on the Closing Date (i)
Purchaser shall pay the Subscription Amount by wire transfer of immediately available funds to an
account designated by the Company and (ii) the Company shall issue instructions to the Transfer
Agent to issue in book-entry form the number of Preferred Shares specified on such Purchaser’s
signature page hereto (or, if the Company and such Purchaser shall have agreed, as indicated on
such Purchaser’s signature page hereto, that such Purchaser will receive Preferred Shares in
certificated form, then the Company shall instead instruct the Transfer Agent to issue such
specified Preferred Shares in Stock Certificates, or as otherwise set forth on the Stock
Certificate Questionnaire included as Exhibit C-2 hereto) concurrent with such Purchaser’s
payment of the Subscription Amount to the Company.

     2.2 Closing Deliveries.

          (a) On or prior to the Closing, the Company shall issue, deliver or cause to be delivered to
each Purchaser the following (the “Company Deliverables”):

7

 

               (i) this Agreement, duly executed by the Company;

               (ii) as the Company and such Purchaser agree, the Company shall cause the Transfer Agent to
issue, in book-entry form the number of Preferred Shares specified on such Purchaser’s signature
page hereto (or, if the Company and such Purchaser shall have agreed, as indicated on such
Purchaser’s signature pages hereto, that such Purchaser will receive Stock Certificates for their
Preferred Shares, then the Company shall instead instruct the Transfer Agent to issue such
specified Stock Certificates registered in the name of such Purchaser or as otherwise set forth on
the Stock Certificate Questionnaire);

               (iii) a legal opinion of Company Puerto Rican Counsel, dated as of the Closing Date and in the
form attached hereto as Exhibit D, executed by such counsel and addressed to the
Purchasers;

               (iv) a legal opinion of Company U.S. Counsel, dated as of the Closing Date and in the form
attached hereto as Exhibit E, executed by such counsel and addressed to the Purchasers;

               (v) the Registration Rights Agreement, duly executed by the Company (which shall be delivered
on the date hereof);

               (vi) the AST Escrow Agreement, duly executed by the Company and AST (which shall be delivered
on the date hereof);

               (vii) a certificate of the Secretary of the Company, in the form attached hereto as
Exhibit F (the “Secretary’s Certificate”), dated as of the Closing Date, (a) certifying the
resolutions adopted by the Board of Directors of the Company or a duly authorized committee thereof
approving the transactions contemplated by this Agreement and the other Transaction Documents and
the issuance of the Securities, (b) certifying the current versions of the Certificate of
Incorporation, as amended, and by-laws, as amended, of the Company and (c) certifying as to the
signatures and authority of persons signing the Transaction Documents and related documents on
behalf of the Company; and

               (viii) the Compliance Certificate referred to in Section 5.1(f).

          (b) Each Purchaser shall deliver or cause to be delivered to the Company or the Escrow Agent,
as applicable, the following (the “Purchaser Deliverables”):

               (i) On or prior to the date hereof:

                    a) this Agreement, duly executed by such Purchaser;

                    b) the Registration Rights Agreement, duly executed by such Purchaser;

                    c) a Custodian Agreement, if applicable, duly executed by such Purchaser;

8

 

                    d) a fully completed and duly executed Accredited Investor Questionnaire, reasonably
satisfactory to the Company, and the Stock Certificate Questionnaire in the forms attached hereto
as Exhibits C-1 and C-2 , respectively; and

                    e) if such Purchaser is not a Section 2.1(c)(iii) Purchaser, its Subscription Amount, in
United States dollars and in immediately available funds, in the amount indicated below such
Purchaser’s name on the applicable signature page hereto under the heading “Aggregate Purchase
Price (Subscription Amount)” by wire transfer to the Escrow Account in accordance with the Escrow
Agent’s written instructions.

               (ii) On or prior to the Closing Date:

                    a) if such Purchaser is a Section 2.1(c)(iii) Purchaser, then such Purchaser shall deliver or
cause to be delivered to the Company on or prior to the Closing Date, its Subscription Amount, in
United States dollars and in immediately available funds, in the amount indicated below such
Purchaser’s name on the applicable signature page hereto under the heading
“Aggregate Purchase Price (Subscription Amount)” by wire transfer in accordance with the
Company’s written instructions.

ARTICLE 3:

REPRESENTATIONS AND WARRANTIES

     3.1 Representations and Warranties of the Company. The Company hereby represents and
warrants as of the date hereof and the Closing Date (except for the representations and warranties
that speak as of a specific date, which shall be made as of such date), to each of the Purchasers
that:

          (a) Subsidiaries. The Company has no direct or indirect Subsidiaries other than as set
forth in Exhibit H. The Company owns, directly or indirectly, all of the capital stock or
comparable equity interests of each Subsidiary free and clear of any and all Liens, and all the
issued and outstanding shares of capital stock or comparable equity interest of each Subsidiary are
validly issued and are fully paid, non-assessable and free of preemptive and similar rights to
subscribe for or purchase securities.

          (b) Organization and Qualification. The Company and each of its “Significant
Subsidiaries” (as defined in Rule 1-02 of Regulation S-X) is an entity duly incorporated or
otherwise organized, validly existing and in good standing under the laws of the jurisdiction of
its incorporation or organization (as applicable), with the requisite power and authority to own or
lease and use its properties and assets and to carry on its business as currently conducted.
Neither the Company nor any Significant Subsidiary is in violation of any of the provisions of its
respective articles or certificate of incorporation, bylaws or other organizational or charter
documents. The Company and each of its Subsidiaries is duly qualified to conduct business and is in
good standing as a foreign corporation or other entity in each jurisdiction in which the nature of
the business conducted or property owned by it makes such qualification necessary, except where the
failure to be so qualified or in good standing, as the case may be, would not in the reasonable
judgment of the Company be expected to have a Material Adverse Effect. The Company is duly
registered as a bank holding company under the Bank Holding Company Act of 1956, as amended (the
“BHCA”), and a financial holding company under the Gramm-Leach-Bliley Act of 1999, as amended. The

9

 

Company’s depository institution Subsidiary’s deposit accounts are insured up to applicable limits
by the FDIC. The Company has conducted its business in compliance with all applicable federal,
state and foreign laws, orders, judgments, decrees, rules, regulations and applicable stock
exchange requirements, including all laws and regulations restricting activities of bank holding
companies and banking organizations, except for any noncompliance that, individually or in the
aggregate, has not had and would not be reasonably expected to have a Material Adverse Effect.

          (c) Authorization; Enforcement; Validity. The Company has the requisite corporate
power and authority to enter into and to consummate the transactions contemplated by each of the
Transaction Documents to which it is a party and otherwise to carry out its obligations hereunder
and thereunder, including, without limitation, to issue the Preferred Shares in accordance with the
terms hereof and, subject to the Stockholder Approvals, to issue the Underlying Shares in
accordance with the Certificate of Designations. The Company’s execution and delivery of each of
the Transaction Documents to which it is a party and the consummation by it of the transactions
contemplated hereby and thereby (including, but not limited to, the sale and delivery of the
Preferred Shares and the Underlying Shares) have been duly authorized by all necessary corporate
action on the part of the Company, and no further corporate action is required by the Company, its
Board of Directors or its stockholders in connection therewith other than in connection with
the Required Approvals. Each of the Transaction Documents to which it is a party has been (or upon
delivery will have been) duly executed by the Company and is, or when delivered in accordance with
the terms hereof, will constitute the legal, valid and binding obligation of the Company
enforceable against the Company in accordance with its terms, except (i) as such enforceability may
be limited by applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or similar
laws relating to, or affecting generally the enforcement of, creditors’ rights and remedies or by
other equitable principles of general application, (ii) as limited by laws relating to the
availability of specific performance, injunctive relief or other equitable remedies and (iii)
insofar as indemnification and contribution provisions may be limited by applicable law. Except for
Material Contracts, there are no stockholder agreements, voting agreements, or other similar
arrangements with respect to the Company’s capital stock to which the Company is a party or, to the
Company’s Knowledge, between or among any of the Company’s stockholders.

          (d) No Conflicts. The execution, delivery and performance by the Company of the
Transaction Documents to which it is a party and the consummation by the Company of the
transactions contemplated hereby or thereby (including, without limitation, the issuance of the
Preferred Shares and the Underlying Shares) do not and will not (i) conflict with or violate any
provisions of the Company’s or any Subsidiary’s articles or certificate of incorporation, bylaws or
otherwise result in a violation of the organizational documents of the Company or any Subsidiary,
(ii) conflict with, or constitute a default (or an event that with notice or lapse of time or both
would result in a default) under, result in the creation of any Lien upon any of the properties or
assets of the Company or give to others any rights of termination, amendment, acceleration or
cancellation (with or without notice, lapse of time or both) of, any Material Contract, or (iii)
subject to the Required Approvals, conflict with or result in a violation of any law, rule,
regulation, order, judgment, injunction, decree or other restriction of any court or governmental
authority to which the Company is subject (including federal and state securities laws and
regulations and the rules and regulations, assuming the correctness of the representations and
warranties made by the Purchasers herein, of any self-regulatory organization to which the Company
or its securities are subject, including all applicable Trading Markets), or by which any property
or asset of the Company is

10

 

bound or affected, except in the case of clauses (ii) and (iii) such as
would not have or reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect.

          (e) Filings, Consents and Approvals. Neither the Company nor any of its Subsidiaries
is required to obtain any consent, waiver, authorization or order of, give any notice to, or make
any filing or registration with, any court or other federal, state, local or other governmental
authority or other Person in connection with the execution, delivery and performance by the Company
of the Transaction Documents (including, without limitation, the issuance of the Preferred Shares
and the Underlying Shares), other than (i) obtaining the Stockholder Approvals to issue the
Underlying Shares in accordance with the terms of the Certificate of Designations, (ii) the filing
of the Certificate of Designations with the Secretary of State, (iii) the filing with the
Commission of one or more Registration Statements in accordance with the requirements of the
Registration Rights Agreement, (iv) filings required by applicable state securities laws, (v) the
filing of a Notice of Sale of Securities on Form D with the Commission under Regulation D of the
Securities Act, (vi) the filing of any requisite notices and/or application(s) to the Principal
Trading Market for the issuance and sale of the Underlying Shares and the listing of the Underlying
Shares for trading or quotation, as the case may be, thereon in the time and manner required
thereby, (vii) the filings required in
accordance with Section 4.6 of this Agreement and (viii) those that have been made or obtained
prior to the date of this Agreement (collectively, the “Required Approvals”).

          (f) Issuance of the Preferred Shares. The issuance of the Preferred Shares has been
duly authorized and the Preferred Shares, when issued and paid for in accordance with the terms of
the Transaction Documents, will be duly and validly issued, fully paid and non-assessable and free
and clear of all Liens, other than restrictions on transfer provided for in the Transaction
Documents or imposed by applicable securities laws, and shall not be subject to preemptive or
similar rights. The issuance of the Underlying Shares has been duly authorized and the Underlying
Shares, when issued in accordance with the terms of the Certificate of Designations, will be duly
and validly issued, fully paid and non-assessable and free and clear of all Liens, other than
restrictions on transfer provided for in the Transaction Documents or imposed by applicable
securities laws, and shall not be subject to preemptive or similar rights. Assuming the accuracy
of the representations and warranties of the Purchasers in this Agreement, the Securities will be
issued in compliance with all applicable federal and state securities laws.

          (g) Capitalization. The number of shares and type of all authorized, issued and
outstanding capital stock, options and other securities of the Company (whether or not presently
convertible into or exercisable or exchangeable for shares of capital stock of the Company) has
been set forth in the SEC Reports and has changed since the date of such SEC Reports only due to
(i) the sale and issuance of 8,740,000 shares of Common Stock in March 2010, and (ii) stock grants
or other equity awards or stock option and warrant exercises that do not, individually or in the
aggregate, have a material effect on the issued and outstanding capital stock, options and other
securities. All of the outstanding shares of capital stock of the Company are duly authorized,
validly issued, fully paid and non-assessable, have been issued in compliance in all material
respects with all applicable federal and state securities laws, and none of such outstanding shares
was issued in violation of any preemptive rights or similar rights to subscribe for or purchase any
capital stock of the Company. Except as specified in the SEC Reports: (i) no shares of the
Company’s outstanding capital stock are subject to preemptive rights or any other similar rights;
(ii) there are no outstanding options, warrants, scrip, rights to subscribe to, calls or
commitments of any character whatsoever

11

 

relating to, or securities or rights convertible into, or
exercisable or exchangeable for, any shares of capital stock of the Company, or contracts,
commitments, understandings or arrangements by which the Company is or may become bound to issue
additional shares of capital stock of the Company or options, warrants, scrip, rights to subscribe
to, calls or commitments of any character whatsoever relating to, or securities or rights
convertible into, or exercisable or exchangeable for, any shares of capital stock of the Company,
other than those issued or granted pursuant to Material Contracts or equity or incentive plans or
arrangements described in the SEC Reports; (iii) there are no material outstanding debt securities,
notes, credit agreements, credit facilities or other agreements, documents or instruments
evidencing indebtedness of the Company or by which the Company is bound; (iv) except for the
Registration Rights Agreement, there are no agreements or arrangements under which the Company is
obligated to register the sale of any of its securities under the Securities Act; (v) there are no
outstanding securities or instruments of the Company that contain any redemption or similar
provisions, and there are no contracts, commitments, understandings or arrangements by which the
Company is or may become bound to redeem a security of the Company; (vi) the Company does not have
any stock appreciation rights or “phantom stock” plans or agreements or any similar plan or
agreement; and (vii) the Company has no liabilities or obligations required to be disclosed in the
SEC Reports but not so disclosed in the SEC Reports, which, individually or in the aggregate, will
have or would reasonably be expected to have a
Material Adverse Effect. There are no securities or instruments containing anti-dilution or
similar provisions that will be triggered by the issuance of the Securities.

          (h) SEC Reports. The Company has filed all reports, schedules, forms, statements and
other documents required to be filed by it under the Exchange Act, including pursuant to Section
13(a) or 15(d) thereof, since January 1, 2009 (the foregoing materials, including the exhibits
thereto and documents incorporated by reference therein, being collectively referred to herein as
the “SEC Reports”), on a timely basis or has received a valid extension of such time of filing and
has filed any such SEC Reports prior to the expiration of any such extension. As of their
respective filing dates, the SEC Reports complied in all material respects with the requirements of
the Securities Act and the Exchange Act and the rules and regulations of the Commission promulgated
thereunder, and none of the SEC Reports, when filed, contained any untrue statement of a material
fact or omitted to state a material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they were made, not
misleading. On March 19, 2010, the Company issued 8,740,000 shares of Common Stock pursuant to a
prospectus supplement and an accompanying prospectus, each filed with the Commission pursuant to
Rule 424(b); such prospectus supplement and the accompanying prospectus contain important
information about the Company’s Common Stock and certain other material information about the
Company. The Company advises any Purchaser to read such prospectus supplement and accompanying
prospectus, in particular the sections entitled “Risk Factors,” “Description of Capital Stock” and
“Material United States Federal Income Tax Consideration.”

          (i) Financial Statements. The financial statements of the Company and its Subsidiaries
included in the SEC Reports comply in all material respects with applicable accounting requirements
and the rules and regulations of the Commission with respect thereto as in effect at the time of
filing. Such financial statements have been prepared in accordance with GAAP applied on a
consistent basis during the periods involved, except as may be otherwise specified in such
financial statements or the notes thereto and except that unaudited financial statements may not
contain all footnotes required by GAAP, and fairly present in all material respects the balance
sheet of the

12

 

Company and its consolidated Subsidiaries taken as a whole as of and for the dates
thereof and the results of operations and cash flows for the periods then ended, subject, in the
case of unaudited statements, to normal, year-end audit adjustments, which would not be material,
either individually or in the aggregate.

          (j) Tax Matters. The Company and each of its Subsidiaries has (i) filed all material
foreign, U.S. federal, Puerto Rico and local tax returns, information returns and similar reports
that are required to be filed, and all such tax returns are true, correct and complete in all
material respects, and (ii) paid all material taxes required to be paid by it and any other
material assessment, fine or penalty levied against it other than taxes (x) currently payable
without penalty or interest, or (y) being contested in good faith by appropriate proceedings.

          (k) Material Changes. Since the date of the latest audited financial statements
included within the SEC Reports, except as disclosed in subsequent SEC Reports filed prior to the
date hereof, (i) there have been no events, occurrences or developments that have had or would
reasonably be expected to have, either individually or in the aggregate, a Material Adverse Effect,
(ii) the Company has not incurred any material liabilities (contingent or otherwise) other than (A)
trade payables, accrued expenses and other liabilities incurred in the ordinary course of business
consistent with past practice and (B) liabilities not required to be reflected in the Company’s
financial statements pursuant to GAAP or required to be disclosed in filings made with the
Commission, (iii) the Company has not altered materially its method of accounting or the
manner in which it keeps its accounting books and records, (iv) the Company has not declared or
made any dividend or distribution of cash or other property to its stockholders or purchased,
redeemed or made any agreements to purchase or redeem any shares of its capital stock (other than
in connection with repurchases of unvested stock issued to employees of the Company and a quarterly
cash dividend of $0.04 per share of Common Stock on April 15, 2010), (v) the Company has not issued
any equity securities to any officer, director or Affiliate, except (A) Common Stock issued
pursuant to existing Company option plans or equity based plans disclosed in the SEC Reports and
(B) 8,740,000 shares of Common Stock issued in March 2010, and (vi) there has not been any material
change or amendment to, or any waiver of any material right by the Company under, any Material
Contract under which the Company or any of its Subsidiaries is bound or subject. Except for the
transactions contemplated by this Agreement (including, for the avoidance of doubt, the execution
of any P&A Agreement and the consummation of any of the transactions contemplated thereunder,
including any purchase of the Failed Bank or portion thereof), no event, liability or development
has occurred or exists with respect to the Company or its Subsidiaries or their respective
business, properties, operations or financial condition that would be required to be disclosed by
the Company under applicable securities laws at the time this representation is made that has not
been publicly disclosed at least one Trading Day prior to the date that this representation is
made.

          (l) Environmental Matters. Except as disclosed in the SEC Reports, neither the Company
nor any of its Subsidiaries (i) is in violation of any statute, rule, regulation, decision or order
of any governmental agency or body or any court, domestic or foreign, relating to the use, disposal
or release of hazardous or toxic substances or relating to the protection or restoration of the
environment or human exposure to hazardous or toxic substances (collectively, “Environmental
Laws”), (ii) is liable for any off-site disposal or contamination pursuant to any Environmental
Laws, or (iii) is subject to any claim relating to any Environmental Laws; in each case, which
violation, contamination, liability or claim has had or would reasonably be expected to have,
individually or in

13

 

the aggregate, a Material Adverse Effect; and, to the Company’s Knowledge, there
is no pending or threatened investigation that might lead to such a claim.

          (m) Litigation. There is no Action which (i) adversely affects or challenges the
legality, validity or enforceability of any of the Transaction Documents or the issuance of the
Preferred Shares or (ii) except as disclosed in the SEC Reports, is reasonably likely to have a
Material Adverse Effect, individually or in the aggregate, if there were an unfavorable decision.
Neither the Company nor any Subsidiary, nor any director or officer thereof, is or has been the
subject of any Action involving a claim of violation of or liability under federal or state
securities laws or a claim of breach of fiduciary duty. There has not been, and to the Company’s
knowledge there is not pending or contemplated, any investigation by the Commission involving the
Company or any current or former director or officer of the Company.

          (n) Employment Matters. No material labor dispute exists or, to the Company’s
Knowledge, is imminent with respect to any of the employees of the Company which would have or
reasonably be expected to have a Material Adverse Effect. To the Company’s Knowledge, no executive
officer is, or is now expected to be, in violation of any material term of any employment contract,
confidentiality, disclosure or proprietary information agreement or non-competition agreement, or
any other contract or agreement or any restrictive covenant in favor of a third party, and to the
Company’s Knowledge, the continued employment of each such executive officer does not subject the
Company or any Subsidiary to any liability with respect to any of the foregoing matters. The
Company is in compliance with all U.S. federal, state, local and foreign laws and
regulations relating to employment and employment practices, terms and conditions of
employment and wages and hours, except where the failure to be in compliance would not have or
reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.

          (o) Compliance. Neither the Company nor any of its Subsidiaries (i) is in default
under or in violation of (and no event has occurred that has not been waived that, with notice or
lapse of time or both, would result in a default by the Company or any of its Subsidiaries under),
nor has the Company or any of its Subsidiaries received written notice of a claim that it is in
default under or that it is in violation of, any Material Contract (whether or not such default or
violation has been waived), (ii) is in violation of any order of which the Company has been made
aware in writing of any court, arbitrator or governmental body having jurisdiction over the Company
or its properties or assets, or (iii) is in violation of, or in receipt of written notice that it
is in violation of, any statute, rule or regulation of any governmental authority applicable to the
Company, or which would have the effect of revoking or limiting FDIC deposit insurance, except in
each case as would not have or reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect.

          (p) Regulatory Permits. The Company and each of its Subsidiaries possess or have
applied for all certificates, authorizations, consents and permits issued by the appropriate
federal, state, local or foreign regulatory authorities necessary to conduct their respective
businesses as currently conducted and as described in the SEC Reports, except where the failure to
possess such permits, individually or in the aggregate, has not and would not reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect (“Material Permits”),
and (i) neither the Company nor any of its Subsidiaries has received any notice in writing of
proceedings relating to the revocation or material adverse modification of any such Material
Permits

14

 

and (ii) the Company is unaware of any facts or circumstances that would give rise to the
revocation or material adverse modification of any Material Permits.

          (q) Title to Assets. The Company and its Subsidiaries have good and marketable title
to all real property and tangible personal property owned by them which is material to the business
of the Company and its Subsidiaries, taken as a whole, in each case free and clear of all Liens
except such as do not materially affect the value of such property or do not interfere with the use
made and proposed to be made of such property by the Company and any of its Subsidiaries. Any real
property and facilities held under lease by the Company and any of its Subsidiaries are held by
them under valid, subsisting and enforceable leases with such exceptions as are not material and do
not interfere with the use made and proposed to be made of such property and buildings by the
Company and its Subsidiaries.

          (r) Patents and Trademarks. The Company and its Subsidiaries own, possess, license, or
can acquire on reasonable terms, or have other rights to use all foreign and domestic patents,
patent applications, trade and service marks, trade and service mark registrations, trade names,
copyrights, inventions, trade secrets, technology, Internet domain names, know-how and other
intellectual property (collectively, the “Intellectual Property”) necessary for the conduct of
their respective businesses as now conducted, except where the failure to own, possess, license or
have such rights would not have or reasonably be expected to have a Material Adverse Effect. Except
as set forth in the SEC Reports and except where such violations or infringements would not have or
reasonably be expected to have, either individually or in the aggregate, a Material Adverse Effect,
(a) there are no rights of third parties to any such Intellectual Property; (b) there is no
infringement by third parties of any such Intellectual Property; (c) there is no pending or
threatened
action, suit, proceeding or claim by others challenging the Company’s and its Subsidiaries’
rights in or to any such Intellectual Property; (d) there is no pending or threatened action, suit,
proceeding or claim by others challenging the validity or scope of any such Intellectual Property;
and (e) there is no Proceeding by others that the Company and/or any Subsidiary infringes or
otherwise violates any patent, trademark, copyright, trade secret or other proprietary rights of
others.

          (s) Insurance. The Company and each of the Subsidiaries are insured by insurers of
recognized financial responsibility against such losses and risks and in such amounts as the
Company believes to be prudent and customary in the businesses and locations in which the Company
and the Subsidiaries are engaged. Neither the Company nor any of its Subsidiaries has received any
notice of cancellation of any such insurance, nor, to the Company’s Knowledge, will it or any
Subsidiary be unable to renew their respective existing insurance coverage as and when such
coverage expires or to obtain similar coverage from similar insurers as may be necessary to
continue its business at a cost that would not have a Material Adverse Effect.

          (t) Transactions With Affiliates and Employees. Except as set forth in the SEC Reports
and other than the grant of stock options or other equity awards that are not individually or in
the aggregate material in amount, none of the officers or directors of the Company and, to the
Company’s Knowledge, none of the employees of the Company, is presently a party to any transaction
with the Company or to a presently contemplated transaction (other than for services as employees,
officers and directors) that would be required to be disclosed pursuant to Item 404 of Regulation
S-K promulgated under the Securities Act.

15

 

          (u) Internal Control Over Financial Reporting. Except as set forth in the SEC Reports,
the Company maintains internal control over financial reporting (as such term is defined in Rule
13a-15(f) under the Exchange Act) designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles and such internal control over
financial reporting was effective as of the date of the most recent SEC Report.

          (v) Sarbanes-Oxley; Disclosure Controls. The Company is in compliance in all material
respects with all of the provisions of the Sarbanes-Oxley Act of 2002 which are applicable to it.
Except as disclosed in the SEC Reports, the Company maintains disclosure controls and procedures
(as such term is defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act), and such
disclosure controls and procedures are effective.

          (w) Certain Fees. No person or entity will have, as a result of the transactions
contemplated by this Agreement, any valid right, interest or claim against or upon the Company or a
Purchaser for any commission, fee or other compensation pursuant to any agreement, arrangement or
understanding entered into by or on behalf of the Company, other than the Placement Agent with
respect to the offer and sale of the Preferred Shares (which placement agent fees are being paid by
the Company). The Company shall indemnify, pay, and hold each Purchaser harmless against, any
liability, loss or expense (including, without limitation, attorneys’ fees and out-of-pocket
expenses) arising in connection with any such right, interest or claim.

          (x) Private Placement. Assuming the accuracy of the Purchasers’ representations and
warranties set forth in Section 3.2 of this Agreement and the accuracy of the information disclosed
in the Accredited Investor Questionnaires, no registration under the Securities Act is required for
the offer and sale of the Securities by the Company to the Purchasers under the
Transaction Documents. The issuance and sale of the Preferred Shares hereunder does not
contravene the rules and regulations of the Principal Trading Market and, upon the receipt of the
Stockholder Approvals, the issuance of the Underlying Shares in accordance with the Certificate of
Designations will not contravene the rules and regulations of the Principal Trading Market.

          (y) Registration Rights. Other than each of the Purchasers, no Person has any right to
cause the Company to effect the registration under the Securities Act of any securities of the
Company other than those securities which are currently registered on an effective registration
statement on file with the Commission.

          (z) Listing and Maintenance Requirements. The Company’s Common Stock is registered
pursuant to Section 12(b) of the Exchange Act, and the Company has taken no action designed to
terminate the registration of the Common Stock under the Exchange Act nor has the Company received
any notification that the Commission is contemplating terminating such registration. The Company
has not, in the 12 months preceding the date hereof, received written notice from any Trading
Market on which the Common Stock is listed or quoted to the effect that the Company is not in
compliance with the listing or maintenance requirements of such Trading Market. The Company is, and
has no reason to believe that it will not in the foreseeable future continue to be, in compliance
in all material respects with the listing and maintenance requirements for continued trading of the
Common Stock on the Principal Trading Market.

16

 

          (aa) Investment Company. Neither the Company nor any of its Subsidiaries is required
to be registered as, and immediately following the Closing will not be required to register as, an
“investment company” within the meaning of the Investment Company Act of 1940, as amended.

          (bb) Unlawful Payments. Neither the Company nor any of its Subsidiaries, nor to the
Company’s Knowledge, any directors, officers, employees, agents or other Persons acting at the
direction of or on behalf of the Company or any of its Subsidiaries has, in the course of its
actions for, or on behalf of, the Company: (a) directly or indirectly, used any corporate funds for
unlawful contributions, gifts, entertainment or other unlawful expenses relating to foreign or
domestic political activity; (b) made any direct or indirect unlawful payments to any foreign or
domestic governmental officials or employees or to any foreign or domestic political parties or
campaigns from corporate funds; (c) violated any provision of the Foreign Corrupt Practices Act of
1977, as amended, or (d) made any other unlawful bribe, rebate, payoff, influence payment, kickback
or other material unlawful payment to any foreign or domestic government official or employee.

          (cc) Application of Takeover Protections; Rights Agreements. The Company has not
adopted any stockholder rights plan or similar arrangement relating to accumulations of beneficial
ownership of Common Stock or a change in control of the Company. The Company and its Board of
Directors have taken all necessary action, if any, in order to render inapplicable any control
share acquisition, business combination, poison pill (including any distribution under a rights
agreement) or other similar anti-takeover provision under the Company’s Certificate of
Incorporation or other organizational documents or the laws of the jurisdiction of its
incorporation or otherwise which is or could become applicable to any Purchaser solely as a result
of the transactions contemplated by this Agreement, including, without limitation, the Company’s
issuance of the Securities and any Purchaser’s ownership of the Securities.

          (dd) Disclosure. The Company confirms that neither it nor, to the Company’s Knowledge,
any of its officers or directors nor any other Person acting on its or their behalf has provided,
including the Placement Agent to provide, any Purchaser or its respective agents or counsel with
any information that it believes constitutes or could reasonably be expected to constitute
material, non-public information except insofar as the existence, provisions and terms of the
Transaction Documents and the proposed transactions hereunder may constitute such information, all
of which will be disclosed by the Company in the Press Release as contemplated by Section 4.6
hereof. The Company understands and confirms that each of the Purchasers will rely on the
representations in this Section 3.1(dd) in effecting transactions in securities of the Company. No
event or circumstance has occurred or information exists with respect to the Company or any of its
Subsidiaries or its or their business, properties, operations or financial conditions, which, under
applicable law, rule or regulation, requires public disclosure or announcement by the Company but
which has not been so publicly announced or disclosed, except for the announcement of this
Agreement and related transactions and as may be disclosed on the Form 8-K filed pursuant to
Section 4.6.

          (ee) Off Balance Sheet Arrangements. There is no transaction, arrangement, or other
relationship between the Company (or any Subsidiary) and an unconsolidated or other off balance
sheet entity that is required to be disclosed by the Company in its Exchange Act filings and is not
so disclosed and would have or reasonably be expected to have a Material Adverse Effect.

17

 

          (ff) Acknowledgment Regarding Purchasers’ Purchase of Preferred Shares. The Company
acknowledges and agrees that each of the Purchasers is acting solely in the capacity of an arm’s
length purchaser with respect to the Transaction Documents and the transactions contemplated hereby
and thereby. The Company further acknowledges that no Purchaser is acting as a financial advisor
or fiduciary of the Company (or in any similar capacity) with respect to the Transaction Documents
and the transactions contemplated thereby and any advice given by any of the Purchasers or any of
their respective representatives or agents in connection with the Transaction Documents and the
transactions contemplated thereby is merely incidental to the Purchasers’ purchase of the Preferred
Shares.

          (gg) Absence of Manipulation. The Company has not, and to the Company’s Knowledge no
one acting on its behalf has, taken, directly or indirectly, any action designed to cause or to
result in the stabilization or manipulation of the price of any security of the Company to
facilitate the sale or resale of any of the Securities.

          (hh) OFAC. Neither the Company nor any Subsidiary nor, to the Company’s Knowledge, any
director, officer, agent, employee, Affiliate or Person acting on behalf of the Company or any
Subsidiary is currently subject to any U.S. sanctions administered by the Office of Foreign Assets
Control of the U.S. Treasury Department (“OFAC”); and the Company will not knowingly use the
proceeds of the sale of the Preferred Shares, towards any sales or operations in Cuba, Iran, Syria,
Sudan, Myanmar or any other country sanctioned by OFAC or for the purpose of financing the
activities of any Person currently subject to any U.S. sanctions administered by OFAC.

          (ii) Money Laundering Laws. The operations of each of the Company and any Subsidiary
are in compliance in all material respects with the money laundering statutes of applicable
jurisdictions, the rules and regulations thereunder and any related or similar rules, regulations
or guidelines, issued, administered or enforced by any applicable governmental agency
(collectively, the “Money Laundering Laws”) and to the Company’s Knowledge, no action, suit or
proceeding by or before any court or governmental agency, authority or body or any arbitrator
involving the Company and/or any Subsidiary with respect to the Money Laundering Laws is pending or
threatened.

          (jj) Reports, Registrations and Statements. Since December 31, 2008, the Company and
each Subsidiary have filed all material reports, registrations and statements, together with any
required amendments thereto, that it was required to file with the FRB, the FDIC, the OCFI and any
other applicable federal or state securities or banking authorities, except where the failure to
file any such report, registration or statement would not have or reasonably be expected to have a
Material Adverse Effect. All such reports and statements filed with any such regulatory body or
authority are collectively referred to herein as the “Company Reports.” As of their respective
dates, the Company Reports complied as to form in all material respects with all the rules and
regulations promulgated by the FRB, the FDIC, the OCFI and any other applicable foreign, federal or
state securities or banking authorities, as the case may be.

          (kk) Adequate Capitalization. As of December 31, 2009, the Company’s Subsidiary
insured depository institutions meet or exceed the standards necessary to be considered

18

 

“adequately capitalized” under the Federal Deposit Insurance Company’s regulatory framework for prompt
corrective action.

          (ll) Agreements with Regulatory Agencies; Compliance with Certain Banking Regulations.
Neither the Company nor any Subsidiary is subject to any cease-and-desist or other similar order
or enforcement action issued by, or is a party to any written agreement, consent agreement or
memorandum of understanding with, or is a party to any commitment letter or similar undertaking to,
or is subject to any capital directive by, or since December 31, 2007, has adopted any board
resolutions at the request of, any governmental entity that currently restricts in any material
respect the conduct of its business or that in any material manner relates to its capital adequacy,
its liquidity and funding policies and practices, its ability to pay dividends, its credit, risk
management or compliance policies, its internal controls, its management or its operations or
business (each item in this sentence, a “Regulatory Agreement”), nor has the Company or any
Subsidiary been advised since December 31, 2008 by any governmental entity that it intends to
issue, initiate, order, or request any such Regulatory Agreement.

          The Company has no knowledge of any facts and circumstances, and has no knowledge of any facts
or circumstances exist, that would cause its Subsidiary banking institutions: (i) to be operating
in violation, in any material respect, of the Bank Secrecy Act, the Patriot Act, any order issued
with respect to anti-money laundering by OFAC, or any other anti-money laundering statute, rule or
regulation; or (ii) not to be in satisfactory compliance, in any material respect, with all
applicable privacy of customer information requirements contained in any applicable federal and
state privacy laws and regulations as well as the provisions of all information security programs
adopted by the Subsidiary.

          (mm) No General Solicitation or General Advertising. Neither the Company nor, to the
Company’s Knowledge, any Person acting on its behalf has engaged or will engage in any form of
general solicitation or general advertising (within the meaning of Regulation D under the
Securities Act) in connection with any offer or sale of the Preferred Shares.

          (nn) Risk Management Instruments. Except as has not had or would not reasonably be
expected to have a Material Adverse Effect, since January 1, 2009, all material derivative
instruments, including, swaps, caps, floors and option agreements, whether entered into for the
Company’s own account, or for the account of one or more of the Company Subsidiaries, were entered
into (1) only in the ordinary course of business, (2) in accordance with prudent practices and in
all material respects with all applicable laws, rules, regulations and regulatory policies, and (3)
with counterparties believed to be financially responsible at the time; and each of them
constitutes the valid and legally binding obligation of the Company or one of the Subsidiaries,
enforceable in accordance with its terms. Neither the Company or the Subsidiaries, nor, to the
knowledge of the Company, any other party thereto, is in breach of any of its material obligations
under any such agreement or arrangement.

          (oo) ERISA. The Company and each ERISA Affiliate is in compliance in all material
respects with all presently applicable provisions of ERISA; no “reportable event” described in
Section 4043 of ERISA (other than an event for which the 30-day notice requirement has been waived
by applicable regulation) has occurred with respect to any Pension Plan for which the Company would
have any liability that would reasonably be expected to have a Material Adverse

19

 

Effect; the Company
has not incurred and does not expect to incur liability under (i) Title IV of ERISA with respect to
termination of, or withdrawal from, any Pension Plan; or (ii) Sections 412 or 4971 of the Code that
would reasonably be expected to have a Material Adverse Effect; and each Pension Plan for which the
Company would have liability that is intended to be qualified under Section 401(a) of the Code is
so qualified in all material respects and nothing has occurred, whether by action or by failure to
act, which would cause the loss of such qualification.

          (pp) Reservation of Underlying Shares. Assuming the Stockholder Approvals have been
obtained, the Company will reserve, free of any preemptive or similar rights of stockholders of the
Company, a number of unissued shares of Common Stock, sufficient to issue and deliver the
Underlying Shares into which the Preferred Shares are convertible.

          (qq) Shell Company Status. The Company is not, and has never been, an issuer
identified in Rule 144(i)(1).

          (rr) Registration Eligibility. The Company is eligible to register the resale of the
Securities by the Purchasers using Form S-3 promulgated under the Securities Act.

          (ss) FDIC Policy Statement. The Company and the Bank are not subject to, and do not
expect that, as a result of the issuance of Preferred Shares provided herein or otherwise arising
in connection with the Bank’s acquisition of the Failed Bank, they will become subject to, the FDIC
Statement of Policy on Qualifications for Failed Bank Acquisitions (as in effect and interpreted on
the date hereof) (the “FDIC Policy Statement”).

          (tt) No Additional Agreements. The Company has no other agreements or understandings
(including, without limitation, side letters) with any Purchaser to purchase Preferred Shares on
terms that are different from those set forth herein.

     3.2 Representations and Warranties of the Purchasers. Each Purchaser hereby, for
itself and for no other Purchaser, represents and warrants as of the date hereof and as of the
Closing Date to the Company as follows:

          (a) Organization; Authority. If such Purchaser is an entity, it is duly organized,
validly existing and in good standing under the laws of the jurisdiction of its organization with
the requisite corporate or partnership power and authority to enter into and to consummate the
transactions contemplated by the applicable Transaction Documents and otherwise to carry out its
obligations hereunder and thereunder. If such Purchaser is an entity, the execution, delivery and
performance by such Purchaser of the transactions contemplated by this Agreement have been duly
authorized by all necessary corporate or, if such Purchaser is not a corporation, such partnership,
limited liability company or other applicable like action, on the part of such Purchaser. If such
Purchaser is an entity, each of this Agreement, the Registration Rights Agreement and the Escrow
Agreement has been duly executed by such Purchaser, and when delivered by such Purchaser in
accordance with the terms hereof, will constitute the valid and legally binding obligation of such
Purchaser, enforceable against it in accordance with its terms, except as such enforceability may
be limited by applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or similar
laws relating to, or affecting generally the enforcement of, creditors’ rights and remedies or by
other equitable principles of general application.

20

 

          (b) No Conflicts. The execution, delivery and performance by such Purchaser of this
Agreement, the Registration Rights Agreement and the Escrow Agreement and the consummation by such
Purchaser of the transactions contemplated hereby and thereby will not (i) result in a violation of
the organizational documents of such Purchaser (if such Purchaser is an entity), (ii) conflict
with, or constitute a default (or an event which with notice or lapse of time or both would become
a default) under, or give to others any rights of termination, amendment, acceleration or
cancellation of, any agreement, indenture or instrument to which such Purchaser is a party, or
(iii) result in a violation of any law, rule, regulation, order, judgment or decree (including
federal and state securities laws) applicable to such Purchaser, except in the case of clauses (ii)
and (iii) above, for such conflicts, defaults, rights or violations which would not, individually
or in the aggregate, reasonably be expected to have a material adverse effect on the ability of
such Purchaser to perform its obligations hereunder.

          (c) Investment Intent. Such Purchaser understands that the Preferred Shares are
“restricted securities” and have not been registered under the Securities Act or any applicable
state securities law and is acquiring the Preferred Shares as principal for its own account and not
with a view to, or for distributing or reselling such Preferred Shares or any part thereof in
violation of the Securities Act or any applicable state securities laws, provided, that by making
the representations herein, other than as set forth herein, such Purchaser does not agree to hold
any of the Preferred Shares for any minimum period of time and reserves the right at all times to
sell or otherwise dispose of all or any part of such Preferred Shares pursuant to an effective
registration statement under the Securities Act or under an exemption from such registration and in
compliance with applicable federal and state securities laws. Such Purchaser is acquiring the
Preferred Shares hereunder in the ordinary course of its business. Such Purchaser does not
presently have any agreement, plan or understanding, directly or indirectly, with any Person to
distribute or effect any distribution of any of the Securities (or any securities which are
derivatives thereof) to or through any Person or entity.

          (d) Purchaser Status. At the time such Purchaser was offered the Preferred Shares, it
was, and at the date hereof it is, an “accredited investor” as defined in Rule 501(a) under the
Securities Act. Such Purchaser has provided the information in the Accredited Investor
Questionnaire attached hereto as Exhibit C-1.

          (e) Reliance. The Company and the Placement Agent (on behalf of its client) will be
entitled to rely upon this Agreement and are irrevocably authorized to produce this Agreement or a
copy hereof to (A) any regulatory authority having jurisdiction over the Company and its affiliates
and (B) any interested party in any administrative or legal proceeding or official inquiry with
respect to the matters covered hereby, in each case, to the extent required by any court or
governmental authority to which the Company is subject, provided that the Company provides the
Purchaser with prior written notice of such disclosure.

          (f) General Solicitation. Purchaser: (i) became aware of the offering of the
Preferred Shares, and the Preferred Shares were offered to Purchaser, solely by direct contact
between Purchaser and the Company or Placement Agent, and not by any other means, including any
form of “general solicitation” or “general advertising” (as such terms are used in Regulation D
promulgated under the Securities Act and interpreted by the Commission); (ii) reached its decision
to invest in the Company independently from any other Purchaser; (iii) has entered into no

21

 

agreements with stockholders of the Company or other subscribers for the purpose of controlling the
Company or any of its subsidiaries; and (iv) has entered into no agreements with stockholders of
the Company or other subscribers regarding voting or transferring Purchaser’s interest in the
Company.

          (g) Direct Purchase. Purchaser is purchasing Preferred Shares directly from the
Company and not from the Placement Agent. The Placement Agent did not make any representations,
declarations or warranties to Purchaser, express or implied, regarding the Preferred Shares, the
Company or the Company’s offering of the Preferred Shares, and the Placement Agent did not offer to
sell, or solicit an offer to buy, any of the Preferred Shares that Purchaser proposes to acquire
from the Company hereunder.

          (h) Experience of Such Purchaser. Such Purchaser, either alone or together with its
representatives, has such knowledge, sophistication and experience in business and financial
matters so as to be capable of evaluating the merits and risks of the prospective investment in the
Preferred Shares, and has so evaluated the merits and risks of such investment. Such Purchaser is
able to bear the economic risk of an investment in the Preferred Shares and, at the present time,
is able to afford a complete loss of such investment.

          (i) Access to Information. Such Purchaser acknowledges that it has been afforded (i)
the opportunity to ask such questions as it has deemed necessary of, and to receive answers from,
representatives of the Company concerning the terms and conditions of the offering of the Preferred
Shares and the merits and risks of investing in the Preferred Shares; (ii) access to information
about the Company and the Subsidiaries and their respective financial condition, results of
operations, business, properties, management and prospects sufficient to enable it to evaluate its
investment; (iii) the opportunity to obtain such additional information that the Company possesses
or can acquire without unreasonable effort or expense that is necessary to make an informed
investment decision with respect to the investment; and (iv) the opportunity to ask questions of
management. Neither such inquiries nor any other investigation conducted by or on behalf of such
Purchaser or its representatives or counsel shall modify, amend or affect such Purchaser’s right to
rely on the truth, accuracy and completeness of the Company’s representations and warranties
contained in the Transaction Documents. Such Purchaser has sought such accounting, legal and tax
advice as it has considered necessary to make an informed decision with respect to its acquisition
of the Preferred Shares. Purchaser acknowledges that neither the Company nor the Placement Agent
has made any representation, express or implied, with respect to the accuracy, completeness or
adequacy of any available information except, with respect to the Company, as expressly set
forth in the SEC Reports or to the extent such information is covered by the representations and
warranties of the Company contained in Section 3.1.

          (j) Brokers and Finders. Other than the Placement Agent with respect to the Company,
no Person will have, as a result of the transactions contemplated by the Transaction Documents, any
valid right, interest or claim against or upon the Company or any Purchaser for any commission, fee
or other compensation pursuant to any agreement, arrangement or understanding entered into by or on
behalf of the Purchaser.

          (k) Independent Investment Decision. Such Purchaser has independently evaluated the
merits of its decision to purchase Preferred Shares pursuant to the Transaction

22

 

Documents, and such
Purchaser confirms that it has not relied on the advice of any other Purchaser’s business and/or
legal counsel in making such decision. Such Purchaser understands that nothing in this Agreement or
any other materials presented by or on behalf of the Company to the Purchaser in connection with
the purchase of the Preferred Shares constitutes legal, regulatory, tax or investment advice. Such
Purchaser has consulted such legal, tax and investment advisors as it, in its sole discretion, has
deemed necessary or appropriate in connection with its purchase of the Preferred Shares. Such
Purchaser understands that the Placement Agent has acted solely as the agent of the Company in this
placement of the Securities and such Purchaser has not relied on any statement, representation or
warranty including any business or legal advice of the Placement Agent or any of its agents,
counsel or Affiliates in making its investment decision hereunder, and confirms that none of such
Persons has made any representations or warranties to such Purchaser in connection with the
transactions contemplated by the Transaction Documents.

          (l) Acquisition. The Board of Directors of the Company will control the entry into
the P&A Agreement with respect to any acquisition of the Failed Bank or any portion thereof and
stockholders of the Company will have no opportunity to affect the investment decision regarding
the potential acquisition.

          (m) ERISA. (i) If Purchaser is, or is acting on behalf of, an ERISA Entity (as
defined below), Purchaser represents and warrants that on the date hereof;

                    (A) The decision to invest assets of the ERISA Entity in the Preferred Shares was made by
fiduciaries independent of the Company or its affiliates, which fiduciaries are duly authorized to
make such investment decisions and who have not relied on any advice or recommendations of the
Company or its affiliates;

                    (B) Neither the Company nor any of its agents, representatives or affiliates have exercised
any discretionary authority or control with respect to the ERISA Entity’s investment in the
Preferred Shares;

                    (C) The purchase and holding of the Preferred Shares will not constitute a nonexempt
prohibited transaction under ERISA or Section 4975 of the Code or a similar violation under any
applicable similar laws; and

                    (D) The terms of the Documents comply with the instruments and applicable laws governing such
ERISA Entity.

(ii) For the purpose of this paragraph, the term “ERISA Entity” will mean (A) an “employee benefit
plan” within the meaning of Section 3(3) of ERISA subject to Title I of ERISA, (B) a “plan” within
the meaning of Section 4975(e)(1) of the Code and (C) any person whose assets are deemed to be
“plan assets” within the meaning of ERISA Section 3(42) and 29 C.F.R. § 2510.3-101 or otherwise
under ERISA.

          (n) Reliance on Exemptions. Such Purchaser understands that the Securities being
offered and sold to it in reliance on specific exemptions from the registration requirements of
U.S. federal and state securities laws and that the Company is relying in part upon the truth and
accuracy of, and such Purchaser’s compliance with, the representations, warranties, agreements,

23

 

acknowledgements and understandings of such Purchaser set forth herein in order to determine the
availability of such exemptions and the eligibility of such Purchaser to acquire the Preferred
Shares.

          (o) No Governmental Review. Such Purchaser understands that no U.S. federal or state
agency or any other government or governmental agency has passed on or made any recommendation or
endorsement of the Securities or the fairness or suitability of the investment in the Securities
nor have such authorities passed upon or endorsed the merits of the offering of the Securities.
Purchaser understands that the Securities are not savings accounts, deposits or other obligations
of any bank and are not insured by the FDIC, including the FDIC’s Deposit Insurance Fund, or any
other governmental agency.

          (p) Antitrust. No approval, consent, exemption, authorization, or other action by, or
notice to, or filing with, any governmental entity or authority or any other person or entity in
respect of any law or regulation, including the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended, and the rules and regulations thereunder, is necessary or required, and no lapse
of a waiting period under law applicable to such Purchaser is necessary or required, in each case
in connection with the execution, delivery or performance by such Purchaser of this Agreement or
the purchase of the Preferred Shares contemplated hereby.

          (q) Residency. Such Purchaser’s residence (if an individual) or office in which its
investment decision with respect to the Preferred Shares was made (if an entity) are located at the
address immediately below such Purchaser’s name on its signature page hereto.

          (r) Regulatory Matters. Purchaser understands and acknowledges that: (i) the Company
is a registered bank holding company under the BHCA, and is subject to regulation by the FRB; (ii)
acquisitions of interests in bank holding companies are subject to the BHCA and the Change in Bank
Control Act (the “CIBCA”) and may be reviewed by the FRB to determine the circumstances under which
such acquisitions of interests will result in Purchaser becoming subject to the BHCA or subject to
the prior notice requirements of the CIBCA. Assuming the accuracy of the representations and
warranties of the Company contained herein, Purchaser represents that neither it nor its Affiliates
will, as a result of the transactions contemplated herein, be deemed to (i) own or control 10% or
more of any class of voting securities of the Company or (ii) otherwise control the Company for
purposes of the BHCA or CIBCA. Purchaser is not participating and has not participated with any
other investor in the offering of the Preferred Shares in any joint activity or parallel action
towards a common goal between or among such investors of acquiring control of the Company.

          (s) Trading. Purchaser acknowledges that there is no trading market for the Preferred
Stock, and no such market is expected to develop.

          (t) OFAC and Anti-Money Laundering. The Purchaser understands, acknowledges,
represents and agrees that (i) the Purchaser is not the target of any sanction, regulation, or law
promulgated by the Office of Foreign Assets Control, the Financial Crimes Enforcement Network or
any other U.S. governmental entity (“U.S. Sanctions Laws”); (ii) the Purchaser is not owned by,
controlled by, under common control with, or acting on behalf of any person that is the target of
U.S. Sanctions Laws; (iii) the Purchaser is not a “foreign shell bank” and is not acting on behalf
of a “foreign shell bank” under applicable anti-money laundering laws and regulations; (iv) the
Purchaser’s entry into this Agreement or consummation of the transactions

24

 

contemplated hereby will
not contravene U.S. Sanctions Laws or applicable anti-money laundering laws or regulations; (v) the
Purchaser will promptly provide to the Company or any regulatory or law enforcement authority such
information or documentation as may be required to comply with U.S. Sanctions Laws or applicable
anti-money laundering laws or regulations; and (vi) the Company may provide to any regulatory or
law enforcement authority information or documentation regarding, or provided by, the Purchaser for
the purposes of complying with U.S. Sanctions Laws or applicable anti-money laundering laws or
regulations.

          (u) Purchaser has not discussed the Offering with any other party or potential investors
(other than the Company, Placement Agent, any other Purchaser and Purchaser’s authorized
representatives), except as expressly permitted under the terms of this Agreement.

          (v) Knowledge as to Conditions. Purchaser does not know of any reason why any
regulatory approvals and, to the extent necessary, any other approvals, authorizations, filings,
registrations, and notices required or otherwise a condition to the consummation by it of the
transactions contemplated by this Agreement will not be obtained.

     The Company and each of the Purchasers acknowledge and agree that no party to this Agreement
has made or makes any representations or warranties with respect to the transactions contemplated
hereby other than those specifically set forth in this Article 3 and the Transaction Documents.

ARTICLE 4:

OTHER AGREEMENTS OF THE PARTIES

     4.1 Transfer Restrictions.

     (a) Compliance with Laws. Notwithstanding any other provision of this Article 4, each
Purchaser covenants that the Securities may be disposed of only pursuant to an effective
registration statement under, and in compliance with the requirements of, the Securities Act, or
pursuant to an available exemption from, or in a transaction not subject to, the registration
requirements of the Securities Act, and in compliance with any applicable state, federal or foreign
securities laws. In connection with any transfer of the Securities other than (i) pursuant to an
effective registration statement, (ii) to the Company or (iii) pursuant to Rule 144 (provided that
the transferor provides the Company with reasonable assurances (in the form of seller and broker
representation letters) that such securities may be sold pursuant to such rule), the Company may
require the transferor thereof to provide to the Company and the Transfer Agent, at the
transferor’s expense, an opinion of counsel selected by the transferor and reasonably acceptable to
the Company and the Transfer
Agent, the form and substance of which opinion shall be reasonably satisfactory to the Company
and the Transfer Agent, to the effect that such transfer does not require registration of such
transferred Securities under the Securities Act. As a condition of transfer (other than pursuant
to clauses (i), (ii) or (iii) of the preceding sentence), any such transferee shall agree in
writing to be bound by the terms of this Agreement and shall have the rights of a Purchaser under
this Agreement and the Registration Rights Agreement with respect to such transferred Securities.

     (b) Legends. Certificates evidencing the Securities shall bear any legend as required
by the “blue sky” laws of any state and a restrictive legend in substantially the following form
(and,

25

 

with respect to Securities held in book-entry form, the Transfer Agent will record such a
legend on the share register), until such time as they are not required under Section 4.1(c) or
applicable law:

	 	 	 	THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE “SECURITIES ACT”), OR APPLICABLE STATE SECURITIES
LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR
ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR
THE SECURITIES UNDER THE SECURITIES ACT OR (B) AN AVAILABLE EXEMPTION
FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF
THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS
OR BLUE SKY LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL REASONABLY
SATISFACTORY TO THE COMPANY AND ITS TRANSFER AGENT OR (II) UNLESS SOLD
PURSUANT TO RULE 144 UNDER SAID ACT (PROVIDED THAT THE TRANSFEROR PROVIDES
THE COMPANY WITH REASONABLE ASSURANCES (IN THE FORM OF SELLER AND BROKER
REPRESENTATION LETTERS) THAT THE SECURITIES MAY BE SOLD PURSUANT TO SUCH
RULE). NO REPRESENTATION IS MADE BY THE ISSUER AS TO THE AVAILABILITY OF
THE EXEMPTION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT FOR RESALES OF
THESE SECURITIES.

     (c) Removal of Legends. The restrictive legend set forth in Section 4.1(b) above shall
be removed and the Company shall issue a certificate without such restrictive legend or any other
restrictive legend to the holder of the applicable Securities upon which it is stamped or issue to
such holder by electronic delivery at the applicable balance account at DTC, if (i) such Securities
are sold or transferred pursuant to Rule 144 (if the transferor is not an Affiliate of the
Company), or (ii) such Securities are eligible for sale under Rule 144, without the requirement for
the Company to be in compliance with the current public information required under Rule 144(c)(1)
(or Rule 144(i)(2), if applicable) as to such securities and without volume or manner-of-sale
restrictions. Following the earlier of (i) the Effective Date (as defined in the Registration
Rights Agreement) or (ii) Rule 144 becoming available for the resale of Securities, without the
requirement for the Company to be in compliance with the current public information required under
144(c)(1) (or Rule 144(i)(2), if applicable) as to the Securities and without volume or
manner-of-sale restrictions, the Company shall instruct the Transfer Agent to remove the legend
from the Securities and shall cause its counsel to issue any legend removal opinion required by the
Transfer Agent. Any fees (with respect to the Transfer Agent, Company counsel or otherwise)
associated with the issuance of such opinion or the removal of such legend shall be borne by the
Company. If a legend is no longer required pursuant to the foregoing, the Company will no later
than three (3) Trading Days following the delivery by a Purchaser to the Company or the Transfer
Agent (with notice to the Company) of a legended certificate or instrument representing such
Securities (endorsed or with stock powers attached, signatures guaranteed, and otherwise in form
necessary to affect the reissuance and/or transfer) and a representation letter to the extent
required by Section 4.1(a), (such third Trading

26

 

Day, the “Legend Removal Date”) deliver or cause to
be delivered to such Purchaser a certificate or
instrument (as the case may be) representing such Securities that is free from all restrictive
legends. The Company may not make any notation on its records or give instructions to the Transfer
Agent that enlarge the restrictions on transfer set forth in this Section 4.1(c). Certificates for
Securities free from all restrictive legends may be transmitted by the Transfer Agent to the
Purchasers by crediting the account of the Purchaser’s prime broker with DTC as directed by such
Purchaser.

     (d) Acknowledgement. Each Purchaser hereunder acknowledges its primary
responsibilities under the Securities Act and accordingly will not sell or otherwise transfer the
Securities or any interest therein without complying with the requirements of the Securities
Act            and the rules and regulations promulgated thereunder. Except as otherwise provided
below, while the above-referenced registration statement remains effective, each Purchaser
hereunder may sell the Securities in accordance with the plan of distribution contained in the
registration statement and if it does so it will comply therewith and with the related prospectus
delivery requirements unless an exemption therefrom is available or unless the Securities are sold
pursuant to Rule 144. Each Purchaser, severally and not jointly with the other Purchasers, agrees
that if it is notified by the Company in writing at any time that the registration statement
registering the resale of the Securities is not effective or that the prospectus included in such
registration statement no longer complies with the requirements of Section 10 of the Securities
Act, such Purchaser will refrain from selling such Securities until such time as such Purchaser is
notified by the Company that such registration statement is effective or such prospectus is
compliant with Section 10 of the Exchange Act, unless such Purchaser is able to, and does, sell
such Securities pursuant to an available exemption from the registration requirements of Section 5
of the Securities Act.

     4.2 Acknowledgment of Dilution. The Company acknowledges that the issuance of the
Securities may result in dilution of the outstanding shares of Common Stock. The Company further
acknowledges that its obligations under the Transaction Documents, including without limitation its
obligation to issue the Securities pursuant to the Transaction Documents, are unconditional and
absolute and not subject to any right of set off, counterclaim, delay or reduction, regardless of
the effect of any such dilution or any claim the Company may have against any Purchaser and
regardless of the dilutive effect that such issuance may have on the ownership of the other
stockholders of the Company.

     4.3 Furnishing of Information. In order to enable the Purchasers to sell the
Securities under Rule 144 of the Securities Act, for a period of one year from the Closing, the
Company shall maintain the registration of the Common Stock under Section 12(b) or 12(g) of the
Exchange Act and to timely file (or obtain extensions in respect thereof and file within the
applicable grace period) all reports required to be filed by the Company after the date hereof
pursuant to the Exchange Act. During such one year period, if the Company is not required to file
reports pursuant to such laws, it will prepare and furnish to the Purchasers and make publicly
available the information described in Rule 144(c)(2), if the provision of such information will
allow resales of the Securities pursuant to Rule 144.

     4.4 Form D and Blue Sky. The Company agrees to timely file a Form D with respect to
the Preferred Shares as required under Regulation D. The Company, on or before the Closing Date,
shall take such action as the Company shall reasonably determine is necessary in order to obtain an
exemption for or to qualify the Preferred Shares for sale to the Purchasers at the Closing pursuant
to

27

 

this Agreement under applicable securities or “Blue Sky” laws of the states of the United States
(or to obtain an exemption from such qualification). The Company shall make all filings and
reports relating to the offer and sale of the Preferred Shares required under applicable securities
or “Blue Sky” laws of the states of the United States following the Closing Date.

     4.5 No Integration. The Company shall not, and shall use its commercially reasonable
efforts to ensure that no Affiliate of the Company shall, sell, offer for sale or solicit offers to
buy or otherwise negotiate in respect of any security (as defined in Section 2 of the Securities
Act) that will be integrated with the offer or sale of the Securities in a manner that would
require the registration under the Securities Act of the sale of the Securities to the Purchasers.

     4.6 Securities Laws Disclosure; Publicity. On or before 7:30 p.m., New York City time,
on the Closing Date, the Company shall issue one or more press releases (collectively, the “Press
Release”) disclosing the material terms of the transactions contemplated hereby, including, without
limitation, the issuance of the Preferred Shares and the acquisition of the Failed Bank. On or
before 5:30 p.m., New York City time, on the fourth Trading Day immediately following the Closing
Date, the Company will file a Current Report on Form 8-K with the Commission describing the terms
of the Transaction Documents and the P&A Agreement (and including as exhibits to such Current
Report on Form 8-K the material Transaction Documents (including, without limitation, this
Agreement, the Registration Rights Agreement and the Certificate of Designations) and the P&A
Agreement (unless the FDIC objects)). Notwithstanding the foregoing, the Company shall not publicly
disclose the name of any Purchaser or any Affiliate or investment adviser of any Purchaser, or
include the name of any Purchaser or any Affiliate or investment adviser of any Purchaser in any
press release or filing with the Commission (other than the Registration Statement) or Trading
Market, without the prior written consent of such Purchaser, except (i) as required by federal
securities law in connection with (A) any registration statement contemplated by the Registration
Rights Agreement and (B) the filing of final Transaction Documents with the Commission, (ii) to the
extent such disclosure is required by law, at the request of the Staff of the Commission or Trading
Market regulations, in which case the Company shall provide the Purchasers with prior written
notice of such disclosure permitted under this subclause (ii). Notwithstanding the foregoing, the
Company may disclose the name of any Purchaser or any Affiliate or investment adviser of any
Purchaser to the FDIC in connection with its bid for the Failed Bank. From and after the issuance
of the Press Release, no Purchaser shall be in possession of any material, non-public information
received from the Company, any Subsidiary or any of their respective officers, directors or
employees, that is not disclosed in the Press Release. Each Purchaser, severally and not jointly
with the other Purchasers, covenants that until such time as the transactions contemplated by this
Agreement are publicly disclosed by the Company as described in this Section 4.6, such Purchaser
will maintain the confidentiality of all disclosures made to it in connection with this transaction
(including the existence and terms of this transaction).

     4.7 Non-Public Information. Except with the express written consent of such Purchaser
and unless prior thereto such Purchaser shall have executed a written agreement regarding the
confidentiality and use of such information, the Company shall not, and shall cause each Subsidiary
and each of their respective officers, directors, employees and agents, not to, and each Purchaser
shall not directly solicit the Company, any of its Subsidiaries or any of their respective
officers, directors, employees or agents to provide any Purchaser with any material, non-public
information regarding the Company or any of its Subsidiaries from and after the filing of the Press
Release.

28

 

     4.8 Indemnification.

          (a) Indemnification of Purchasers. In addition to the indemnity provided in the
Registration Rights Agreement, the Company will indemnify and hold each Purchaser and its
directors, officers, stockholders, members, partners, employees and agents (and any other Persons
with a functionally equivalent role of a Person holding such titles notwithstanding a lack of such
title or any other title), each Person who controls such Purchaser (within the meaning of Section
15 of the Securities Act and Section 20 of the Exchange Act), and the directors, officers,
stockholders, agents, members, partners or employees (and any other Persons with a functionally
equivalent role of a Person holding such titles notwithstanding a lack of such title or any other
title) of such controlling person (each, a “Purchaser Party”) harmless from any and all losses,
liabilities, obligations, claims, contingencies, damages, costs and expenses, including all
judgments, amounts paid in settlements, court costs and reasonable attorneys’ fees and costs of
investigation that any such Purchaser Party may suffer or incur as a result of (i) any breach of
any of the representations, warranties, covenants or agreements made by the Company in this
Agreement or in the other Transaction Documents or (ii) any action instituted against a Purchaser
Party in any capacity, or any of them or their respective affiliates, by any stockholder of the
Company who is not an affiliate of such Purchaser Party, with respect to any of the transactions
contemplated by this Agreement. The Company will not be liable to any Purchaser Party under this
Agreement to the extent, but only to the extent that a loss, claim, damage or liability is
attributable to any Purchaser Party’s breach of any of the representations, warranties, covenants
or agreements made by such Purchaser Party in this Agreement or in the other Transaction Documents
or attributable to the gross negligence or willful misconduct on the part of such Purchaser Party.

          (b) Conduct of Indemnification Proceedings. Promptly after receipt by any Person (the
"Indemnified Person”) of notice of any demand, claim or circumstances which would or might give
rise to a claim or the commencement of any action, proceeding or investigation in respect of which
indemnity may be sought pursuant to Section 4.8(a), such Indemnified Person shall promptly notify
the Company in writing and the Company shall assume the defense thereof, including the employment
of counsel reasonably satisfactory to such Indemnified Person, and shall assume the payment of all
fees and expenses; provided, that the failure of any Indemnified Person so to notify the Company
shall not relieve the Company of its obligations hereunder except to the extent that the Company is
actually and materially and adversely prejudiced by such failure to notify. In any such proceeding,
any Indemnified Person shall have the right to retain its own counsel, but the fees and expenses of
such counsel shall be at the expense of such Indemnified Person unless: (i) the Company and the
Indemnified Person shall have mutually agreed to the retention of such counsel; (ii) the Company
shall have failed promptly to assume the defense of such proceeding and to employ counsel
reasonably satisfactory to such Indemnified Person in such proceeding; or (iii) in the reasonable
judgment of counsel to such Indemnified Person, representation of both parties by the same counsel
would be inappropriate due to actual or potential differing interests between them; provided, that
the Indemnifying Party shall not be liable for the fees and expenses of more than one separate firm
of attorneys at any time for all Indemnified Parties. The Company shall not be liable for any
settlement of any proceeding effected without its written consent, which consent shall not be
unreasonably withheld, delayed or conditioned. Without the prior written consent of the Indemnified
Person, which consent shall not be unreasonably withheld, delayed or conditioned, the Company shall
not effect any settlement of any pending or threatened proceeding in respect of which any
Indemnified Person is or could have been a party and

29

 

indemnity could have been sought hereunder by such Indemnified Party, unless such settlement
includes an unconditional release of such Indemnified Person from all liability arising out of such
proceeding.

     4.9 Listing of Common Stock. The Company will use its reasonable best efforts to list
the Underlying Shares for quotation on the NYSE and maintain the listing of the Common Stock on the
NYSE.

     4.10 Use of Proceeds. The Company intends to use the net proceeds from the sale of the
Preferred Shares hereunder for the purpose of acquiring certain assets and liabilities of the
Failed Bank from the FDIC and related transaction fees and expenses and general corporate purposes.

     4.11 Stockholders Meeting. The Company shall call a special meeting of its
stockholders, to be held as promptly as practicable following the Closing, but in no event later
than 75 days after the Closing, to vote on proposals (the “Stockholder Proposals”) to (i) approve
the conversion of the Preferred Shares into Common Stock for purposes of Rule 312.03 of the NYSE
Listed Company Manual, and (ii) if necessary, amend the Certificate of Incorporation to increase
the number of authorized shares of Common Stock to at least such number as shall be sufficient to
permit the full conversion of the Preferred Shares (such approval of the Stockholder Proposals,
"Stockholder Approvals”). The Board of Directors of the Company shall recommend to the Company’s
stockholders that such stockholders vote in favor of the Stockholder Proposals. In connection with
such meeting, the Company shall promptly prepare and file (but in no event more than 15 Business
Days after the Closing Date) with the Commission a preliminary proxy statement, shall use its
reasonable best efforts to respond to any comments of the Commission or its staff and to cause a
definitive proxy statement related to such stockholders’ meeting to be mailed to the Company’s
stockholders not more than 10 Business Days after clearance thereof by the Commission, and shall
use its reasonable best efforts to solicit proxies for such Stockholder Approvals. If at any time
prior to such stockholders’ meeting there shall occur any event that is required to be set forth in
an amendment or supplement to the proxy statement, the Company shall as promptly as practicable
prepare and mail to its stockholders such an amendment or supplement. In the event that
Stockholder Approvals are not obtained at such special stockholders meeting, the Company shall
include a proposal to approve (and the Board of Directors shall recommend approval of) such
proposal at a meeting of its stockholders to be held no less than once in each subsequent six-month
period beginning on the date of such special stockholders meeting until such approval is obtained.

     4.12 Limitation on Beneficial Ownership. No Purchaser (and its Affiliates or any
other Persons with which it is acting in concert) will be entitled to purchase a number of
Preferred Shares that would result in such Purchaser becoming, directly or indirectly, the
beneficial owner (as determined under Rule 13d-3 under the Exchange Act) of more than 9.9% of the
number of shares of Common Stock issued and outstanding.

ARTICLE 5:

CONDITIONS PRECEDENT TO CLOSING

     5.1 Conditions Precedent to the Obligations of the Purchasers to Purchase Preferred
Shares. The obligation of each Purchaser to acquire Preferred Shares at the Closing is subject
to the fulfillment, on or prior to the Closing Date, of each of the following conditions, any of
which may be waived by such Purchaser (as to itself only):

30

 

          (a) Representations and Warranties. The representations and warranties of the Company
contained herein shall be true and correct in all material respects (except for those
representations and warranties that are qualified by materiality, which shall be true and correct
in all respects) as of the date hereof and as of the Closing Date, as though made on and as of such
date, except for such representations and warranties that speak as of a specific date.

          (b) Performance. The Company shall have performed, satisfied and complied in all
material respects with all covenants, agreements and conditions required by the Transaction
Documents to be performed, satisfied or complied with by it at or prior to the Closing.

          (c) No Injunction. No statute, rule, regulation, executive order, decree, ruling or
injunction shall have been enacted, entered, promulgated or endorsed by any court or governmental
authority of competent jurisdiction that prohibits the consummation of any of the transactions
contemplated by the Transaction Documents.

          (d) Consents. Other than the Required Approvals contemplated in Section 3.1(e)(i),
(iii), (v) and (vi) above, the Company shall have obtained in a timely fashion any and all
consents, permits, approvals, registrations and waivers necessary for consummation of the purchase
and sale of the Preferred Shares, all of which shall be and remain so long as necessary in full
force and effect.

          (e) Company Deliverables. The Company shall have delivered the Company Deliverables in
accordance with Section 2.2(a).

          (f) Compliance Certificate. The Company shall have delivered to each Purchaser a
certificate, dated as of the Closing Date and signed by its Chief Executive Officer or its Chief
Financial Officer, dated as of the Closing Date, certifying to the fulfillment of the conditions
specified in Sections 5.1(a) and (b) in the form attached hereto as Exhibit F.

          (g) Certificate of Designations. The Company shall have filed the Certificate of
Designations with the Secretary of State.

          (h) Termination. This Agreement shall not have been terminated as to such Purchaser in
accordance with Sections 6.16 or 6.17 herein.

          (i) Acquisition. (i) The FDIC shall have accepted the bid from the Bank for the Failed
Bank, (ii) the Bank shall have executed the P&A Agreement with the FDIC with respect to the Failed
Bank and (iii) the closing under the P&A Agreement shall be imminent.

          (j) Minimum Gross Proceeds. The Company shall simultaneously issue and deliver at the
Closing to the Purchasers hereunder in the aggregate at least sufficient Preferred Shares against
payment of aggregate Subscription Amounts of at least $175.0 million.

     5.2 Conditions Precedent to the Obligations of the Company to sell Preferred Shares.
The Company’s obligation to sell and issue the Preferred Shares at the Closing is subject to the
fulfillment, on or prior to the Closing Date, of the following conditions, any of which may be
waived by the Company:

31

 

          (a) Representations and Warranties. The representations and warranties made by each
Purchaser in Section 3.2 hereof shall be true and correct in all material respects (except for
those representations and warranties that are qualified by materiality, which shall be true and
correct in all respects) as of the date hereof and as of the Closing Date as though made on and as
of such date, except for representations and warranties that speak as of a specific date.

          (b) Performance. Such Purchaser shall have performed, satisfied and complied in all
material respects with all covenants, agreements and conditions required by the Transaction
Documents to be performed, satisfied or complied with by such Purchaser at or prior to the Closing
Date.

          (c) No Injunction. No statute, rule, regulation, executive order, decree, ruling or
injunction shall have been enacted, entered, promulgated or endorsed by any court or governmental
authority of competent jurisdiction that prohibits the consummation of any of the transactions
contemplated by the Transaction Documents.

          (d) Consents. Other than the Required Approvals contemplated in Section 3.1(e)(i),
(iii), (v) and (vi) above, the Company shall have obtained in a timely fashion any and all
consents, permits, approvals, registrations and waivers necessary for consummation of the purchase
and sale of the Preferred Shares, all of which shall be and remain so long as necessary in full
force and effect.

          (e) Purchasers Deliverables. Such Purchaser shall have delivered its Purchaser
Deliverables in accordance with Section 2.2(b).

          (f) Termination. This Agreement shall not have been terminated as to such Purchaser in
accordance with Sections 6.16 or 6.17 herein.

ARTICLE 6:

MISCELLANEOUS

     6.1 Fees and Expenses. The parties hereto shall be responsible for the payment of all
expenses incurred by them in connection with the preparation and negotiation of the Transaction
Documents and the consummation of the transactions contemplated hereby. The Company shall pay all
amounts owed to the Placement Agent relating to or arising out of the transactions contemplated
hereby. The Company shall pay all Transfer Agent fees, stamp taxes and other taxes and duties
levied in connection with the sale and issuance of the Securities to the Purchasers.

     6.2 Entire Agreement. The Transaction Documents, together with the Exhibits and
Schedules thereto, contain the entire understanding of the parties with respect to the subject
matter hereof and supersede all prior agreements, understandings, discussions and representations,
oral or written, with respect to such matters, which the parties acknowledge have been merged into
such documents, exhibits and schedules. At or after the Closing, and without further consideration,
the Company and the Purchasers will execute and deliver to the other such further documents as may
be reasonably requested in order to give practical effect to the intention of the parties under the
Transaction Documents.

32

 

     6.3 Notices. Any and all notices or other communications or deliveries required or
permitted to be provided hereunder shall be in writing and shall be deemed given and effective on
the earliest of (a) the date of transmission, if such notice or communication is delivered via
facsimile (provided the sender receives a machine-generated confirmation of successful
transmission) at the facsimile number specified in this Section prior to 5:00 p.m., New York City
time, on a Trading Day, (b) the next Trading Day after the date of transmission, if such notice or
communication is delivered via facsimile at the facsimile number specified in this Section on a day
that is not a Trading Day or later than 5:00 p.m., New York City time, on any Trading Day, (c) the
Trading Day following the date of mailing, if sent by U.S. nationally recognized overnight courier
service with next day delivery specified, or (d) upon actual receipt by the party to whom such
notice is required to be given. The address for such notices and communications shall be as
follows:

	 	If to the Company:  	 	Oriental Financial Group Inc.

997 San Roberto Street

San Juan, Puerto Rico 00926

Attention: General Counsel

Telephone: (787) 993-4206

Fax: (787) 771-6896
	 
	 	With a copy to: 	 	 Skadden, Arps, Slate, Meagher & Flom LLP

300 S. Grand Ave, 34th Floor

Los Angeles, CA 90017

Attention: Gregg Noel

Telephone: (213) 687-5000

Fax: (213) 687-5600
	 
	 	If to a Purchaser:  	 	To the address set forth under such Purchaser’s name on the
signature page hereof;

     or such other address as may be designated in writing hereafter, in the same manner, by such
Person.

     6.4 Amendments; Waivers; No Additional Consideration. No amendment or waiver of any
provision of this Agreement will be effective with respect to any party unless made in writing and
signed by an officer or a duly authorized representative of such party. No consideration shall be
offered or paid to any Purchaser to amend or consent to a waiver or modification of any provision
of any Transaction Document unless the same consideration is also offered to all Purchasers who
then hold Preferred Shares.

     6.5 Construction. The headings herein are for convenience only, do not constitute a
part of this Agreement and shall not be deemed to limit or affect any of the provisions hereof. The
language used in this Agreement will be deemed to be the language chosen by the parties to express
their mutual intent, and no rules of strict construction will be applied against any party. This
Agreement shall be construed as if drafted jointly by the parties, and no presumption or burden of
proof shall arise favoring or disfavoring any party by virtue of the authorship of any provisions
of this Agreement or any of the Transaction Documents.

33

 

     6.6 Successors and Assigns. The provisions of this Agreement shall inure to the
benefit of and be binding upon the parties and their successors and permitted assigns. This
Agreement, or any rights or obligations hereunder, may not be assigned by the Company without the
prior written consent of the Purchasers. Any Purchaser may assign its rights hereunder in whole or
in part to any Person to whom such Purchaser assigns or transfers any Securities in compliance with
the Transaction Documents and applicable law, provided such transferee shall agree in writing to be
bound, with respect to the transferred Securities, by the terms and conditions of this Agreement
that apply to the “Purchasers”.

     6.7 No Third-Party Beneficiaries. This Agreement is intended for the benefit of the
parties hereto and their respective successors and permitted assigns and is not for the benefit of,
nor may any provision hereof be enforced by, any other Person, other than, solely with respect to
the provisions of Section 4.8, the Indemnified Persons.

     6.8 Governing Law. This Agreement will be governed by and construed in accordance with
the laws of the State of New York applicable to contracts made and to be performed entirely within
such State. Each party agrees that all Proceedings concerning the interpretations, enforcement and
defense of the transactions contemplated by this Agreement and any other Transaction Documents
(whether brought against a party hereto or its respective Affiliates, employees or agents) may be
commenced on a non-exclusive basis in the New York Courts. Each party hereto hereby irrevocably
submits to the non-exclusive jurisdiction of the New York Courts for the adjudication of any
dispute hereunder or in connection herewith or with any transaction contemplated hereby or
discussed herein (including with respect to the enforcement of any of the Transaction Documents),
and hereby irrevocably waives, and agrees not to assert in any Proceeding, any claim that it is not
personally subject to the jurisdiction of any such New York Court, or that such Proceeding has been
commenced in an improper or inconvenient forum. Each party hereto hereby irrevocably waives
personal service of process and consents to process being served in any such Proceeding by mailing
a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery)
to such party at the address in effect for notices to it under this Agreement and agrees that such
service shall constitute good and sufficient service of process and notice thereof. Nothing
contained herein shall be deemed to limit in any way any right to serve process in any manner
permitted by law. EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY
APPLICABLE LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.

     6.9 Survival. Subject to applicable statute of limitations, the representations,
warranties, agreements and covenants contained herein shall survive the Closing and the delivery of
the Preferred Shares; provided, that the representations and warranties of the Company shall
survive the Closing and the delivery of Preferred Shares for a period of one year.

     6.10 Execution. This Agreement may be executed in two or more counterparts, all of
which when taken together shall be considered one and the same agreement and shall become

34

 

effective when counterparts have been signed by each party and delivered to the other party,
it being understood that the parties need not sign the same counterpart. In the event that any
signature is delivered by facsimile transmission, or by e-mail delivery of a “.pdf” format data
file, such signature shall create a valid and binding obligation of the party executing (or on
whose behalf such signature is executed) with the same force and effect as if such facsimile
signature page were an original thereof.

     6.11 Severability. If any provision of this Agreement is held to be invalid or
unenforceable in any respect, the validity and enforceability of the remaining terms and provisions
of this Agreement shall not in any way be affected or impaired thereby and the parties will attempt
to agree upon a valid and enforceable provision that is a reasonable substitute therefor, and upon
so agreeing, shall incorporate such substitute provision in this Agreement.

     6.12 Replacement of Preferred Shares. If any certificate or instrument evidencing any
Preferred Shares is mutilated, lost, stolen or destroyed, the Company shall issue or cause to be
issued in exchange and substitution for and upon cancellation thereof, or in lieu of and
substitution therefor, a new certificate or instrument, but only upon receipt of evidence
reasonably satisfactory to the Company and the Transfer Agent of such loss, theft or destruction
and the execution by the holder thereof of a customary lost certificate affidavit of that fact and
an agreement to indemnify and hold harmless the Company and the Transfer Agent for any losses in
connection therewith or, if required by the Transfer Agent, a bond in such form and amount as is
required by the Transfer Agent. The applicants for a new certificate or instrument under such
circumstances shall also pay any reasonable third-party costs associated with the issuance of such
replacement Preferred Shares. If a replacement certificate or instrument evidencing any Preferred
Shares is requested due to a mutilation thereof, the Company may require delivery of such mutilated
certificate or instrument as a condition precedent to any issuance of a replacement.

     6.13 Remedies. In addition to being entitled to exercise all rights provided herein or
granted by law, including recovery of damages, each of the Purchasers and the Company may be
entitled to specific performance under the Transaction Documents. The parties agree that monetary
damages may not be adequate compensation for any loss incurred by reason of any breach of
obligations described in the foregoing sentence and hereby agree to waive in any action for
specific performance of any such obligation (other than in connection with any action for a
temporary restraining order) the defense that a remedy at law would be adequate.

     6.14 Payment Set Aside. To the extent that the Company makes a payment or payments to
any Purchaser pursuant to any Transaction Document or a Purchaser enforces or exercises its rights
thereunder, and such payment or payments or the proceeds of such enforcement or exercise or any
part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside,
recovered from, disgorged by or are required to be refunded, repaid or otherwise restored to the
Company, a trustee, receiver or any other person under any law (including, without limitation, any
bankruptcy law, state or federal law, common law or equitable cause of action), then to the extent
of any such restoration the obligation or part thereof originally intended to be satisfied shall be
revived

35

 

and continued in full force and effect as if such payment had not been made or such
enforcement or setoff had not occurred.

     6.15 Independent Nature of Purchasers’ Obligations and Rights. The obligations of each
Purchaser under any Transaction Document are several and not joint with the obligations of any
other Purchaser, and no Purchaser shall be responsible in any way for the performance of the
obligations of any other Purchaser under any Transaction Document. The decision of each Purchaser
to purchase Preferred Shares pursuant to the Transaction Documents has been made by such Purchaser
independently of any other Purchaser and independently of any information, materials, statements or
opinions as to the business, affairs, operations, assets, properties, liabilities, results of
operations, condition (financial or otherwise) or prospects of the Company or any Subsidiary which
may have been made or given by any other Purchaser or by any agent or employee of any other
Purchaser, and no Purchaser and any of its agents or employees shall have any liability to any
other Purchaser (or any other Person) relating to or arising from any such information, materials,
statement or opinions. Nothing contained herein or in any Transaction Document, and no action
taken by any Purchaser pursuant thereto, shall be deemed to constitute the Purchasers as a
partnership, an association, a joint venture or any other kind of entity, or create a presumption
that the Purchasers are in any way acting in concert or as a group with respect to such obligations
or the transactions contemplated by the Transaction Documents. Each Purchaser acknowledges that no
other Purchaser has acted as agent for such Purchaser in connection with making its investment
hereunder and that no Purchaser will be acting as agent of such Purchaser in connection with
monitoring its investment in the Securities or enforcing its rights under the Transaction
Documents. Each Purchaser shall be entitled to independently protect and enforce its rights,
including without limitation the rights arising out of this Agreement or out of the other
Transaction Documents, and it shall not be necessary for any other Purchaser to be joined as an
additional party in any proceeding for such purpose.

     6.16 Effectiveness. Sections 6.1 through 6.8, Section 6.10, Section 6.11 and this
Section 6.16 shall be effective upon the execution of this Agreement by the parties hereto. All
other provisions of this Agreement shall become automatically effective, without further action of
the parties, upon the later of the date (such date, the “Effectiveness Date”) (i) that is two
business days prior to the date (the “Scheduled Date”) on which the FDIC is scheduled to be
appointed receiver for the Failed Bank and will enter into the P&A Agreement with the Bank relating
to the Bank’s purchase of certain assets and assumption of deposits (and certain other specified
liabilities) of the Failed Bank and (ii) that the Company notifies the Purchasers of the Scheduled
Date. The Company will provide notification to each Purchaser of (i) the Scheduled Date upon the
notification to the Company by the FDIC that the Bank is the winning bidder for the Failed Bank and
(ii) any changes to the Scheduled Date by the FDIC following the initial determination of the
Scheduled Date by the FDIC. If (i) the FDIC notifies the Company that the Bank will not be
permitted to enter a bid for the Failed Bank, (ii) the FDIC has notified the Company that the
scheduled due date for bids with respect to the Failed Bank has been modified, changed or set to a
date later than June 1, 2010, or such other date as the parties mutually agree, or that the FDIC
intends not to schedule or re-schedule a bid date for the Failed Bank on or before June 1, 2010, or
such other date as the parties mutually agree, (iii) the Bank fails to submit a bid for the Failed
Bank by the deadline for such submission established by the FDIC, (iv) the FDIC has notified the
Company that the Bank is not the winning bidder for the Failed Bank, (v) no bid by the Bank for the
Failed Bank has been

36

 

accepted by the FDIC by June 1, 2010 or (vi) if the Bank has been selected as the winning
bidder for the Failed Bank, the P&A Closing has not occurred by June 30, 2010, then, in each case,
this Agreement shall terminate, other than Sections 6.1 through 6.8, Section 6.10, Section 6.11 and
this Section 6.16, which shall survive such termination. The Company shall promptly notify
Purchaser upon receipt of any notification described in the two preceding sentences from the FDIC.
Prior to such termination, neither party may revoke its acceptance of this Agreement.

     6.17 Termination, Rescission.

          (a) In the event that, following the Effectiveness Date, the Purchase and Assumption Agreement
with the FDIC relating to the purchase by Oriental Bank and Trust, a wholly owned Subsidiary of the
Company (the “Bank”), of certain assets, and the assumption by the Bank of deposits (and certain
other specified liabilities), of Eurobank, San Juan, Puerto Rico (“Failed Bank”) (the “P&A
Agreement”), is not entered into on or before June 1, 2010, or is entered into prior to such date
but the consummation of the transfer of the assets and liabilities of the Failed Bank to the Bank
pursuant to the P&A Agreement (such transfer, the “P&A Closing”) does not occur by June 30, 2010,
then either the Company, upon written notice to the Purchasers, or any Purchaser, solely with
respect to itself and not with respect to any other Purchaser, upon written notice to the Company,
may terminate this Agreement.

          (b) Promptly following the termination of this Agreement pursuant to Section 6.16 or Section
6.17(a), the Company shall provide written notice to the Escrow Agent notifying the Escrow Agent
that this Agreement has been terminated. Pursuant to the terms of the Escrow Agreement, the Escrow
Agent shall (A) distribute to each Purchaser that is not a Section 2.1(c)(iii) Purchaser such
Purchaser’s Subscription Amount and (B) advise the Transfer Agent that the share issuance
instructions with respect to such Purchaser shall be null and void.

          (c) In the event that following the Closing, the P&A Agreement is not entered into on or
before June 1, 2010 or the P&A Agreement is terminated prior to the P&A Closing, or the P&A Closing
does not occur by June 30, 2010, then the Company shall promptly notify Purchaser of such event and
either (i) the Company, upon written notice to the Purchasers, may redeem the Securities purchased
hereunder or (ii) any Purchaser, solely with respect to itself and not with respect to any other
Purchaser, upon written notice to the Company, require the Company to repurchase the Securities
purchased hereunder as specified on such Purchaser’s signature page hereto. Promptly following
either such notice, (i) the Company and Purchaser shall provide written notice to the Transfer
Agent notifying the Transfer Agent that such Securities have been redeemed or repurchased, as the
case may be (unless Purchaser is a Certificate Purchaser, in which case Purchaser shall return to
the Company for cancellation the certificates for its Preferred Shares concurrently with the
Company returning Purchaser’s Subscription Amount pursuant to the following clause (ii)) and (ii)
the Company shall promptly return to Purchaser by wire transfer of immediately available funds to a
bank account designated by Purchaser, its Subscription Amount.

          (d) Notwithstanding anything to the contrary contained in (and without limiting any similar
provisions of) the Transaction Documents, whenever any Purchaser exercises a right, election,
demand or option under a Transaction Document and the Company does not timely perform its related
obligations within the periods therein provided, then such Purchaser may rescind or withdraw, in
its sole discretion from time to time upon written notice to the Company, any
relevant notice, demand or election in whole or in part without prejudice to its future
actions and rights.

37

 

     IN WITNESS WHEREOF, the parties hereto have caused this Securities Purchase Agreement to be
duly executed by their respective authorized signatories as of the date first indicated above.

	 	 	 	 	 
	 	ORIENTAL FINANCIAL GROUP INC.

 	 
	 	By:  	/s/ José Rafael Fernández
 	 
	 	 	Name:  	José Rafael Fernández 	 
	 	 	Title:  	President, Chief Executive Officer and

Vice Chairman of the Board 	 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

[SIGNATURE PAGES FOR PURCHASERS FOLLOW]

 

	 	 	 	 	 
	 	PURCHASER: Bay Pond Partners, L.P.

 	 
	 	By:  	         Wellington Management Company, LLP, 

as investment adviser
 	 
	 
	 	By:  	         /s/  Robert J. Toner
 	 
	 	 	Name:  	Robert J. Toner 	 
	 	 	Title:  	Vice President and Counsel 	 
	 

	 	 	 
	 
	 	Aggregate Purchase Price
(Subscription Amount): $16,640,000.00
	 
	 	 
	 
	 	Number of Preferred Shares to be
Acquired: 16,640
	 
	 	 
	 
	 	Tax ID No.:  04-3217743
	 
	 	 
	 
	 	Address for Notice:
	 
	 	c/o Wellington Management Company, LLP
	 
	 	          75 State Street, Boston, MA 02109

	 	 	 	 	 

	 
	 	Telephone No.:	 	617.790.7770
	 
	 	 	 	 
	 
	 	Facsimile No.:	 	617.289.5699
	 
	 	 	 	 
	 
	 	E-mail Address:	 	seclaw@wellington.com
	 
	 	 	 	 
	 
	 	Attention:	 	Legal and Compliance
	 
	 	 	 	 
	 	 	o Purchaser is prohibited by the terms of its
organizational or constituent documents to enter into an
escrow agreement and has provided the Company with documented
evidence of such prohibition. Purchaser meets the
requirements of a Section 2.1(c)(iii) Purchaser.

Delivery Instructions:

(if different than above)

c/o See
settlement spreadsheet

Street:  

City/State/Zip:  

Attention:  

Telephone No.:  

[Signature Page to Stock Purchase Agreement]

 

 

	 	 	 	 	 
	 	PURCHASER: Bay Pond Investors (Bermuda), L.P.

 	 
	 	By:  	      Wellington Management Company, LLP, 

as investment adviser
 	 
	 
	 	By:  	      /s/  Robert J. Toner
 	 
	 	 	Name:  	Robert J. Toner 	 
	 	 	Title:  	Vice President and Counsel 	 

	 	 	 
	 
	 	Aggregate Purchase Price
(Subscription Amount): $7,903,000.00
	 
	 	 
	 
	 	Number of Preferred Shares to be
Acquired: 7,903
	 
	 	 
	 
	 	Tax ID No.:  98-0218500
	 
	 	 
	 
	 	Address for Notice:
	 
	 	c/o Wellington Management Company, LLP
	 
	 	             75 State Street, Boston, MA 02109

	 	 	 	 	 

	 
	 	Telephone No.:	 	617.790.7770
	 
	 
	 	Facsimile No.:	 	617.289.5699
	 
	 
	 	E-mail Address:	 	seclaw@wellington.com
	 
	 
	 	Attention:	 	Legal and Compliance
	 	 	 	 	 
	 	 	o Purchaser is prohibited by the terms of its
organizational or constituent documents to enter into an
escrow agreement and has provided the Company with documented
evidence of such prohibition. Purchaser meets the
requirements of a Section 2.1(c)(iii) Purchaser.

Delivery Instructions:

(if different than above)

c/o See settlement spreadsheet

Street:  

City/State/Zip:  

Attention:  

Telephone No.:  

[Signature Page to Stock Purchase Agreement]

 

 

	 	 	 	 	 
	 	PURCHASER: Ithan Creek Master Investment Partnership

(Cayman) II, L.P.

 	 
	 	By:  	Wellington Management Company, LLP, 

as investment adviser
 	 
	 
	 	By:  	                /s/  Robert J. Toner
 	 
	 	 	Name:  	Robert J. Toner 	 
	 	 	Title:  	Vice President and Counsel 	 

	 	 	 
	 
	 	Aggregate Purchase Price
(Subscription Amount): $991,000.00
	 
	 	 
	 
	 	Number of Preferred Shares to be
Acquired: 991
	 
	 	 
	 
	 	Tax ID No.:  98-0643603
	 
	 	 
	 
	 	Address for Notice:
	 
	 	c/o Wellington Management Company, LLP
	 
	 	              75 State Street, Boston, MA 02109

	 	 	 	 	 

	 
	 	Telephone No.:	 	617.790.7770
	 
	 	 	 	 
	 
	 	Facsimile No.:	 	617.289.5699
	 
	 	 	 	 
	 
	 	E-mail Address:	 	seclaw@wellington.com
	 
	 	 	 	 
	 
	 	Attention:	 	Legal and Compliance
	 
	 	 	 	 
	 	 	o Purchaser is prohibited by the terms of its
organizational or constituent documents to enter into an
escrow agreement and has provided the Company with documented
evidence of such prohibition. Purchaser meets the
requirements of a Section 2.1(c)(iii) Purchaser.

Delivery Instructions:

(if different than above)

c/o See settlement spreadsheet

Street:  

City/State/Zip:  

Attention:  

Telephone No.:  

[Signature Page to Stock Purchase Agreement]

 

 

	 	 	 	 	 
	 	PURCHASER: Ithan Creek Master Investors (Cayman) L.P.

 	 
	 	By:  	Wellington Management Company, LLP, 
as investment adviser
 	 
	 
	 	By:  	                /s/  Robert J. Toner
 	 
	 	 	Name:  	Robert J. Toner 	 
	 	 	Title:  	Vice President and Counsel 	 

	 	 	 
	 
	 	Aggregate Purchase Price
(Subscription Amount): $9,670,000.00
	 
	 	 
	 
	 	Number of Preferred Shares to be
Acquired: 9,670
	 
	 	 
	 
	 	Tax ID No.:  98-0580385
	 
	 	 
	 
	 	Address for Notice:
	 
	 	c/o Wellington Management Company, LLP
	 
	 	              75 State Street, Boston, MA 02109

	 	 	 	 	 
	 
	 	Telephone No.:	 	617.790.7770
	 
	 	 	 	 
	 
	 	Facsimile No.:	 	617.289.5699
	 
	 	 	 	 
	 
	 	E-mail Address:	 	seclaw@wellington.com
	 
	 	 	 	 
	 
	 	Attention:	 	Legal and Compliance
	 
	 	 	 	 
	 	 	o Purchaser is prohibited by the terms of its
organizational or constituent documents to enter into an
escrow agreement and has provided the Company with documented
evidence of such prohibition. Purchaser meets the
requirements of a Section 2.1(c)(iii) Purchaser.

Delivery Instructions:

(if different than above)

c/o See settlement spreadsheet

Street:  

City/State/Zip:  

Attention:  

Telephone No.:  

[Signature Page to Stock Purchase Agreement]

 

 

	 	 	 	 	 
	 	PURCHASER: Wolf Creek Investors (Bermuda) L.P.

 	 
	 	By:  	Wellington Management Company, LLP, 
as investment adviser
 	 
	 	 	 
	 	By:  	                        /s/  Robert J. Toner
 	 
	 	 	Name:  	Robert J. Toner 	 
	 	 	Title:  	Vice President and Counsel 	 

	 	 	 

	 
	 	Aggregate Purchase Price
(Subscription Amount): $2,680,000.00
	 
	 	 
	 
	 	Number of Preferred Shares
to be Acquired: 2,680
	 
	 	 
	 
	 	Tax ID No.:  98-0346053
	 
	 	 
	 
	 	Address for Notice:
	 
	 	c/o Wellington Management Company, LLP
	 
	 	75 State Street, Boston, MA 02109

	 	 	 	 	 

	 
	 	Telephone No.:	 	617.790.7770
	 
	 	 	 	 
	 
	 	Facsimile No.:	 	617.289.5699
	 
	 	 	 	 
	 
	 	E-mail Address:	 	seclaw@wellington.com
	 
	 	 	 	 
	 
	 	Attention:	 	Legal and Compliance

	 	 	 

	 

	 	o Purchaser is prohibited by the terms of its
organizational or constituent documents to enter into an
escrow agreement and has provided the Company with documented
evidence of such prohibition. Purchaser meets the
requirements of a Section 2.1(c)(iii) Purchaser.

Delivery Instructions:

(if different than above)

c/o See settlement spreadsheet

Street: 

City/State/Zip:  

Attention: 

Telephone No.:  

[Signature Page to Stock Purchase Agreement]

 

 

	 	 	 	 	 
	 	PURCHASER: Wolf Creek Partners, L.P.

 	 
	 	By:  	Wellington Management Company, LLP, 
as investment adviser
 	 
	 	 	 
	 	By:  	         /s/  Robert J. Toner
 	 
	 	 	Name:  	Robert J. Toner 	 
	 	 	Title:  	Vice President and Counsel 	 

	 	 	 

	 
	 	Aggregate Purchase Price
(Subscription Amount): $1,116,000.00
	 
	 	 
	 
	 	Number of Preferred Shares
to be Acquired: 1,116
	 
	 	 
	 
	 	Tax ID No.: 04-3539573
	 
	 	 
	 
	 	Address for Notice:
	 
	 	c/o Wellington Management Company, LLP
	 
	 	75 State Street, Boston, MA 02109

	 	 	 	 	 

	 
	 	Telephone No.:	 	617.790.7770
	 
	 	 	 	 
	 
	 	Facsimile No.:	 	617.289.5699
	 
	 	 	 	 
	 
	 	E-mail Address:	 	seclaw@wellington.com
	 
	 	 	 	 
	 
	 	Attention:	 	Legal and Compliance

	 	 	 

	 

	 	o Purchaser is prohibited by the terms of its
organizational or constituent documents to enter into an
escrow agreement and has provided the Company with documented
evidence of such prohibition. Purchaser meets the
requirements of a Section 2.1(c)(iii) Purchaser.

Delivery Instructions:

(if different than above)

c/o See settlement spreadsheet

Street: 

City/State/Zip: 

Attention: 

Telephone No.:  

[Signature Page to Stock Purchase Agreement]

 

 

	 	 	 	 	 
	 	PURCHASER: Burnham Financial Industries Fund

 	 
	 	By:  	/s/  Michael E. Barna
 	 
	 	 	Name:  	Michael E. Barna 	 
	 	 	Title:  	EVP/CFO 	 

	 	 	 

	 
	 	Aggregate Purchase Price
(Subscription Amount): $2,500,000.00
	 
	 	 
	 
	 	Number of Preferred Shares
to be Acquired: 2,500
	 
	 	 
	 
	 	Tax ID No.:  57-1199020
	 
	 	 
	 
	 	Address for Notice:
	 
	 	Mendon Capital Advisors
	 
	 	150 Allens Creek Rd
	 
	 	Rochester, NY 14618

	 	 	 	 	 

	 
	 	Telephone No.:	 	1.585.770.1770
	 
	 	 	 	 
	 
	 	Facsimile No.:	 	1.585.770.1779
	 
	 	 	 	 
	 
	 	E-mail Address:	 	asullivan@mendoncapital.com
	 
	 	 	 	 
	 
	 	Attention:	 	Amy Sullivan

	 	 	 

	 

	 	o Purchaser is prohibited by the terms of its
organizational or constituent documents to enter into an
escrow agreement and has provided the Company with documented
evidence of such prohibition. Purchaser meets the
requirements of a Section 2.1(c)(iii) Purchaser.

Delivery Instructions:

(if different than above)

c/o Brown Brothers Harriman

Street: 140 Broadway

 

 

	 	 	 	 	 
	 	PURCHASER: Burnham Financial Services Fund

 	 
	 	By:  	/s/  Michael E. Barna
 	 
	 	 	Name:  	Michael E. Barna 	 
	 	 	Title:  	EVP/CFO 	 

	 	 	 

	 
	 	Aggregate Purchase Price
(Subscription Amount): $500,000.00
	 
	 	 
	 
	 	Number of Preferred Shares to be
Acquired: 500
	 
	 	 
	 
	 	Tax ID No.:  134052634
	 
	 	 
	 
	 	Address for Notice:
	 
	 	Mendon Capital Advisors Corp
	 
	 	150 Allens Creek Road
	 
	 	Rochester, NY 14618

	 	 	 	 	 

	 
	 	Telephone No.:	 	585.770.1770
	 
	 	 	 	 
	 
	 	Facsimile No.:	 	585.770.1779
	 
	 	 	 	 
	 
	 	E-mail Address:	 	asullivan@mendoncapital.com
	 
	 	 	 	 
	 
	 	Attention:	 	Amy Sullivan

	 	 	 

	 

	 	o Purchaser is prohibited by the terms of its
organizational or constituent documents to enter into an
escrow agreement and has provided the Company with documented
evidence of such prohibition. Purchaser meets the
requirements of a Section 2.1(c)(iii) Purchaser.

Delivery Instructions:

(if different than above)

c/o Brown Brothers Harriman

Street: 140 Broadway

City/State/Zip: New York, NY 10005

 

 

	 	 	 	 	 
	 	PURCHASER: Moors and Mendon Master Fund LP

 	 
	 	By:  	/s/  Anton V. Schutz
 	 
	 	 	Name:  	Anton V. Schutz 	 
	 	 	Title:  	Director, Moors and Mendon Capital LTD, GP to the
Moors and Mendon Master Fund LP 	 

	 	 	 

	 
	 	Aggregate Purchase Price
(Subscription Amount): $1,500,000.00
	 
	 	 
	 
	 	Number of Preferred Shares to be
Acquired: 1,500
	 
	 	 
	 
	 	Tax ID No.:  98-0401323
	 
	 	 
	 
	 	Address for Notice:
	 
	 	Mendon Capital Advisors
	 
	 	150 Allens Creek Road
	 
	 	Rochester, NY 14618

	 	 	 	 	 

	 
	 	Telephone No.:	 	585.770.1770
	 
	 	Facsimile No.:	 	585.770.1779
	 
	 	E-mail Address:	 	asullivan@mendoncapital.com
	 
	 	Attention:	 	Amy Sullivan

	 	 	 	 	 	 	 

	 	 	Wire instructions for return of escrowed funds:
	 

	 	 
 

	 	 	 	 
	 

	 	 
 

	 	 	 	 
	 

	 	 
 

	 	 	 	 

	 	 	 

	 

	 	o Purchaser is prohibited by the terms of its
organizational or constituent documents to enter into an
escrow agreement and has provided the Company with documented
evidence of such prohibition. Purchaser meets the
requirements of a Section 2.1(c)(iii) Purchaser.
	 
	 	 
	 

	 	o Purchaser has entered into a Custodian Agreement.

Delivery Instructions:

(if different than above)

c/o Jake Tisinger/Jefferies and Co.

Street: 520 Madison Avenue, 12th Floor

 

 

	 	 	 	 	 
	 	PURCHASER: Northaven Offshore, Ltd.

 	 
	 	By:  	/s/  Paul Burke
 	 
	 	 	Name:  	Paul Burke 	 
	 	 	Title:  	Director 	 

	 	 	 

	 
	 	Aggregate Purchase Price
(Subscription Amount): $375,000
	 
	 	 
	 
	 	Number of Preferred Shares to be
Acquired: 375 shares
	 
	 	 
	 
	 	Tax ID No.:  None
	 
	 	 
	 
	 	Address for Notice:
	 
	 	c/o Northaven Management, Inc.
	 
	 	375 Park Avenue, Suite 2709
	 
	 	New York, NY 10152

	 	 	 	 	 

	 
	 	Telephone No.:	 	212.798.0304
	 
	 	Facsimile No.:	 	212.798.0310
	 
	 	E-mail Address:	 	paul.burke@northavenmgt.com
	 
	 	Attention:	 	Paul Burke

	 	 	 	 	 	 	 

	 	 	Wire instructions for return of escrowed funds:
	 

	 	 
 

	 	 	 	 
	 

	 	See Attached
 

	 	 	 	 
	 

	 	 
 

	 	 	 	 

	 	 	 

	 

	 	o Purchaser is prohibited by the terms of its
organizational or constituent documents to enter into an
escrow agreement and has provided the Company with documented
evidence of such prohibition. Purchaser meets the
requirements of a Section 2.1(c)(iii) Purchaser.
	 
	 	 
	 

	 	o Purchaser has entered into a Custodian Agreement.

Delivery Instructions:

(if different than above)

c/o  

Street: 

City/State/Zip: 

Attention: 

Telephone No.:  

[Signature Page to Securities Purchase Agreement]

 

 

Northaven Offshore, Ltd.

Wire Instructions

Please wire to:

UBS AG

ABA #026-007-993

For Credit to:

UBS Securities LLC — HFS

Account # 101WA797414000

For Further Credit to:

Northaven Offshore, Ltd.

Account # 483-80145

 

 

	 	 	 	 	 
	 	PURCHASER: Northaven Partners II, L.P.

 	 
	 	By:  	/s/  Paul Burke
 	 
	 	 	Name:  	Paul Burke 	 
	 	 	Title:  	Member of the GP 	 
	 
	 	Aggregate Purchase Price (Subscription Amount):
$200,000

Number of Preferred Shares to be Acquired:
200 shares

Tax ID No.: 13-3880614

Address for Notice:

375 Park Avenue, Suite 2709

New York, NY 10152

 	 

	 	 	 	 	 	 	 	 	 

	 
	 	Telephone No.:	 	212.798.0304	 	 	 	 
	 
	 	Facsimile No.:	 	212.798.0310	 	 	 	 
	 
	 	E-mail Address:	 	paul.burke@northavenmgt.com	 	 	 	 
	 
	 	Attention:	 	Paul Burke	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	Wire instructions for return of escrowed funds:
	 
	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 	 	See Attached
	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	o Purchaser is prohibited by the terms of its
organizational or constituent documents to enter into an
escrow agreement and has provided the Company with documented
evidence of such prohibition. Purchaser meets the
requirements of a Section 2.1(c)(iii) Purchaser.
	 
	 	 	 	 	 	 	 	 
	 	 	o Purchaser has entered into a Custodian Agreement.

Delivery Instructions:

(if different than above)

c/o
 

Street:  

City/State/Zip:
 

Attention:  

Telephone No.:
 

[Signature Page to Securities Purchase Agreement]

 

 

Northaven Partners II, L.P.

Wire Instructions

Please wire to:

UBS AG

ABA #026-007-993

For Credit to:

UBS Securities LLC — HFS

Account # 101WA797414000

For Further Credit to:

Northaven Partners II, L.P.

Account # 483-90655

 

 

	 	 	 	 	 
	 	PURCHASER: Northaven Partners, L.P.

 	 
	 	By:  	/s/  Paul Burke
 	 
	 	 	Name:  	Paul Burke 	 
	 	 	Title:  	Member of the GP 	 
	 
	 	Aggregate Purchase Price (Subscription Amount):
$2,425,000

Number of Preferred Shares to be Acquired:
2,425

Tax ID No.: 13-3818682

Address for Notice:

375 Park Avenue, Suite 2709

New York, NY 10152
 	 

	 	 	 	 	 	 	 	 	 

	 
	 	Telephone No.:	 	212.798.0304	 	 	 	 
	 
	 	Facsimile No.:	 	212.798.0310	 	 	 	 
	 
	 	E-mail Address:	 	paul.burke@northavenmgt.com	 	 	 	 
	 
	 	Attention:	 	Paul Burke	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	Wire instructions for return of escrowed funds:
	 
	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 	 	See Attached
	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	o Purchaser is prohibited by the terms of its
organizational or constituent documents to enter into an
escrow agreement and has provided the Company with documented
evidence of such prohibition. Purchaser meets the
requirements of a Section 2.1(c)(iii) Purchaser.
	 
	 	 	 	 	 	 	 	 
	 	 	o Purchaser has entered into a Custodian Agreement.

Delivery Instructions:

(if different than above)

c/o
 

Street:  

City/State/Zip:  

Attention:  

Telephone No.:  

[Signature Page to Securities Purchase Agreement]

 

 

	 	 	 	 	 
	 	PURCHASER: Fidelity Northstar Fund

 	 
	 	By:  	/s/  Paul Murphy
 	 
	 	 	Name:  	Paul Murphy 	 
	 	 	Title:  	Assistant Treasurer 	 
	 
	 	Aggregate Purchase Price (Subscription Amount):
$1,500,000.00

Number of Preferred Shares to be Acquired:
1,500

Tax ID No.: ______________

Address for Notice:

82 Devonshire Street V13H

Boston, MA 02109
 	 

	 	 	 	 	 	 	 	 	 

	 
	 	Telephone No.:	 	617.563.5144	 	 	 	 
	 
	 	Facsimile No.:	 	617.392.1605	 	 	 	 
	 
	 	E-mail Address:	 	andrew.boyd@fmr.com	 	 	 	 
	 
	 	Attention:	 	Andrew Boyd	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	Wire instructions for return of escrowed funds:
	 
	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	þ Purchaser is prohibited by the terms of its
organizational or constituent documents to enter into an
escrow agreement and has provided the Company with documented
evidence of such prohibition. Purchaser meets the
requirements of a Section 2.1(c)(iii) Purchaser.
	 
	 	 	 	 	 	 	 	 
	 	 	o Purchaser has entered into a Custodian Agreement.

Delivery Instructions:

(if different than above)

c/o See attached

Street:  

City/State/Zip:  

Attention:  

Telephone No.:  

[Signature Page to Securities Purchase Agreement]

 

 

	 	 	 	 	 
	 	PURCHASER: Fidelity Puritan Trust: Fidelity Low-Priced

Stock Fund

 	 
	 	By:  	/s/  Paul Murphy
 	 
	 	 	Name:  	Paul Murphy 	 
	 	 	Title:  	Assistant Treasurer 	 
	 
	 	Aggregate Purchase Price (Subscription Amount):
$16,885,000.00

Number of Preferred Shares to be Acquired:
16,885

Tax ID No.: 04-3070917

Address for Notice:

82 Devonshire Street V13H

Boston, MA 02109
 	 

	 	 	 	 	 	 	 	 	 

	 
	 	Telephone No.:	 	617.563.5144	 	 	 	 
	 
	 	Facsimile No.:	 	617.392.1605	 	 	 	 
	 
	 	E-mail Address:	 	andrew.boyd@fmr.com	 	 	 	 
	 
	 	Attention:	 	Andrew Boyd	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	Wire instructions for return of escrowed funds:
	 
	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	þ Purchaser is prohibited by the terms of its
organizational or constituent documents to enter into an
escrow agreement and has provided the Company with documented
evidence of such prohibition. Purchaser meets the
requirements of a Section 2.1(c)(iii) Purchaser.
	 
	 	 	 	 	 	 	 	 
	 	 	o Purchaser has entered into a Custodian Agreement.

Delivery Instructions:

(if different than above)

c/o See attached

Street:  

City/State/Zip:  

Attention:  

Telephone No.:  

[Signature Page to Securities Purchase Agreement]

 

 

	 	 	 	 	 
	 	PURCHASER: Fidelity Select Portfolios: Banking

Portfolio

 	 
	 	By:  	/s/  Paul Murphy
 	 
	 	 	Name:  	Paul Murphy 	 
	 	 	Title:  	Assistant Treasurer 	 
	 
	 	Aggregate Purchase Price (Subscription Amount):
$297,000.00

Number of Preferred Shares to be Acquired:
297

Tax ID No.: 04-2959666

Address for Notice:

82 Devonshire Street V13H

Boston, MA 02109
 	 

	 	 	 	 	 

	 
	 	Telephone No.:	 	617.563.5144
	 
	 	Facsimile No.:	 	617.392.1605
	 
	 	E-mail Address:	 	andrew.boyd@fmr.com
	 
	 	Attention:	 	Andrew Boyd

	 	 	 	 	 	 	 	 	 

	 	 	Wire instructions for return of escrowed funds:
	 
	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	þ Purchaser is prohibited by the terms of its
organizational or constituent documents to enter into an
escrow agreement and has provided the Company with documented
evidence of such prohibition. Purchaser meets the
requirements of a Section 2.1(c)(iii) Purchaser.
	 
	 	 	 	 	 	 	 	 
	 	 	o Purchaser has entered into a Custodian Agreement.

Delivery Instructions:

(if different than above)

c/o See attached

Street:  

City/State/Zip:  

Attention:  

Telephone No.:  

[Signature Page to Securities Purchase Agreement]

 

 

	 	 	 	 	 
	 	PURCHASER: Fidelity Commonwealth Trust: Fidelity

Mid-Cap Stock Fund

 	 
	 	By:  	/s/  Paul Murphy
 	 
	 	 	Name:  	Paul Murphy 	 
	 	 	Title:  	Assistant Treasurer 	 
	 
	 	Aggregate Purchase Price (Subscription Amount):
$4,597,000.00

Number of Preferred Shares to be Acquired:
4,597

Tax ID No.: 04-3216044

Address for Notice:

82 Devonshire Street V13H

Boston, MA 02109
 	 

	 	 	 	 	 

	 
	 	Telephone No.:	 	617.563.5144
	 
	 	Facsimile No.:	 	617.392.1605
	 
	 	E-mail Address:	 	andrew.boyd@fmr.com
	 
	 	Attention:	 	Andrew Boyd

	 	 	 	 	 	 	 	 	 

	 	 	Wire instructions for return of escrowed funds:
	 
	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	þ Purchaser is prohibited by the terms of its
organizational or constituent documents to enter into an
escrow agreement and has provided the Company with documented
evidence of such prohibition. Purchaser meets the
requirements of a Section 2.1(c)(iii) Purchaser.
	 
	 	 	 	 	 	 	 	 
	 	 	o Purchaser has entered into a Custodian Agreement.

Delivery Instructions:

(if different than above)

c/o See attached

Street:  

City/State/Zip:  

Attention:  

Telephone No.:  

[Signature Page to Securities Purchase Agreement]

 

 

	 	 	 	 	 
	 	PURCHASER: Fidelity Destiny Portfolios: Fidelity

Advisor Capital Development Fund

 	 
	 	By:  	/s/  Paul Murphy
 	 
	 	 	Name:  	Paul Murphy 	 
	 	 	Title:  	Assistant Treasurer 	 
	 
	 	Aggregate Purchase Price (Subscription Amount):
$1,721,000.00

Number of Preferred Shares to be Acquired:
1,721

Tax ID No.: 04-6538289

Address for Notice:

82 Devonshire Street V13H

Boston, MA 02109
 	 

	 	 	 	 	 

	 
	 	Telephone No.:	 	617.563.5144
	 
	 	Facsimile No.:	 	617.392.1605
	 
	 	E-mail Address:	 	andrew.boyd@fmr.com
	 
	 	Attention:	 	Andrew Boyd

	 	 	 	 	 	 	 	 	 

	 	 	Wire instructions for return of escrowed funds:
	 
	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	þ Purchaser is prohibited by the terms of its
organizational or constituent documents to enter into an
escrow agreement and has provided the Company with documented
evidence of such prohibition. Purchaser meets the
requirements of a Section 2.1(c)(iii) Purchaser.
	 
	 	 	 	 	 	 	 	 
	 	 	o Purchaser has entered into a Custodian Agreement.

Delivery Instructions:

(if different than above)

c/o See attached

Street: _______________________________________________

City/State/Zip: _________________________________________

Attention: _____________________________________________

Telephone No.: _________________________________________

[Signature Page to Securities Purchase Agreement]

 

 

	 	 	 	 	 
	 	PURCHASER: Integrated Core Strategies (US) LLC*

 	 
	 	  	* By: Integrated Holding Group LP, its Managing Member
 	 
	 	 	 
	 	  	By: Millennium Management LLC, its General Partner
 	 
	 	 	 
	 	By:  	                        /s/  Larry Statsky
 	 
	 	 	Name:  	Larry Statsky 	 
	 	 	Title:  	Chief Administrative Officer 	 
	 
	 	Aggregate Purchase Price (Subscription Amount):
$10,000,000 (Ten Million)

Number of Preferred Shares to be Acquired:
10,000 (Ten Thousand)

Tax ID No.: 20-2196675
 	 

	 	 	 	 	 

	 	 	Address for Notice:
	 	 	c/o Millennium Management LLC
	 	 	666 Fifth Avenue, 8th Floor
	 	 	New York, NY 10103
	 
	 	Telephone No.:	 	212.841.4100
	 
	 	Facsimile No.:	 	212.841.4141
	 
	 	E-mail Address:	 	General.Counsel@mlp.com
	 
	 	Attention:	 	General Counsel

	 	 	 

	 
	 	Wire instructions for return of escrowed funds:
	 
	 	Bank Name:  CHASE MANHATTAN BANK, N.A.
	 
	 	City/State:  NEW YORK, N.Y.
	 
	 	Bank ABA # 021-000-021
	 
	 	Bnf Account #: 066-024390
	 
	 	Bnf Name: MERRILL LYNCH PROFESSIONAL CLEARING CORP.
	 
	 	Sub-Account #:  359-42315-D5
	 
	 	Sub A/c Name:  Millennium Partners
	 
	 	 
	 
	 	o Purchaser is prohibited by the terms of its organizational or constituent documents to enter into an
escrow agreement and has provided the Company with documented
evidence of such prohibition.  Purchaser meets the requirements of a Section 2.1(c)(iii) Purchaser.
	 
	 	 
	 
	 	o Purchaser has entered into a Custodian Agreement.

Delivery Instructions:

(if different than above)

c/o
 

Street:  

City/State/Zip:  

Attention:  

Telephone No.:  

[Signature Page to Securities Purchase Agreement]

 

 

	 	 	 	 	 
	 	PURCHASER: Marshall Wace North America LP, in its

capacity as Discretionary Investment Adviser

 	 
	 	By:  	/s/  S. Goodman
 	 
	 	 	Name:  	S. Goodman 	 
	 	 	Title:  	Partner, Marshall Wace LLC for and on behalf of
Marshall Wace North America LP 	 
	 
	 	Aggregate Purchase Price (Subscription Amount):
$5,000,000

Number of Preferred Shares to be Acquired:
5,000

Tax ID No.: 47-0943020

Address for Notice:

Harborside, 3 River Road

Greenwich, CT 06807-2717
 	 

	 	 	 	 	 

	 
	 	Telephone No.:	 	203.625.3200
	 
	 	Facsimile No.:	 	203.625.3299
	 
	 	E-mail Address:	 	m.sargent@mwam.com
	 
	 	Attention:	 	Michael Sargent

	 	 	 	 	 	 	 	 	 

	 	 	Wire instructions for return of escrowed funds:
	 
	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	To Follow
	 
	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	o Purchaser is prohibited by the terms of its
organizational or constituent documents to enter into an
escrow agreement and has provided the Company with documented
evidence of such prohibition. Purchaser meets the
requirements of a Section 2.1(c)(iii) Purchaser.
	 
	 	 	 	 	 	 	 	 
	 	 	o Purchaser has entered into a Custodian Agreement.

Delivery Instructions: 
(if different than above)

c/o
 

Street:  

City/State/Zip:  

Attention:  

Telephone No.:  

[Signature Page to Securities Purchase Agreement]

 

 

	 	 	 	 	 
	 	PURCHASER: Front Point Financial Horizons Fund, L.P.

 	 
	 	By:  	            Front Point Financial Horizons Fund GP, LLC
 	 
	 
	 	By:  	            /s/  T.A. McKinney
 	 
	 	 	Name:  	T.A. McKinney 	 
	 	 	Title:  	Authorized Signatory 	 
	 
	 	Aggregate Purchase Price (Subscription Amount): $2,086,000

Number of Preferred Shares to be Acquired: 2,086

Tax ID No.: 68-0618363

Address for Notice:

Front Point Financial Horizons Fund GP, LLC

Two Greenwich Plaza, 4th Floor

Greenwich, CT 06830
 	 

	 	 	 	 	 	 	 

	 

	 	Telephone No.:
	 	203.622.5200	 
	 

	 	Facsimile No.:
	 	203.622.5230	 
	 

	 	E-mail Address:
	 	ops@fppartners.com

	 

	 	Attention:
	 	Operations Department

	 	 	 

	 

	 	Wire instructions for return of escrowed funds:
	 

	 	ABA: 021000021
	 

	 	Bank: JP Morgan Chase, New York
	 

	 	A/C #: 9301011483
	 

	 	Entity Name: Goldman Sachs & Co., New York
	 

	 	a/c #: 002396224
	 
	 	 
	 

	 	o Purchaser is prohibited by the terms of its
organizational or constituent documents to enter into an
escrow agreement and has provided the Company with documented
evidence of such prohibition. Purchaser meets the
requirements of a Section 2.1(c)(iii) Purchaser.
	 
	 	 
	 

	 	o Purchaser has entered into a Custodian Agreement.

Delivery Instructions:

(if different than above)

c/o
 

Street:  

City/State/Zip:  

Attention:  

Telephone No.:  

[Signature Page to Securities Purchase Agreement]

 

	 	 	 	 	 
	 	PURCHASER: Front Point Financial Services Fund, L.P.

 	 
	 	By:  	Front Point Financial Services Fund GP, LLC
 	 
	 	 	 
	 	By:  	 /s/  T.A. McKinney
 	 
	 	 	Name:  	T.A. McKinney 	 
	 	 	Title:  	Authorized Signatory 	 
	 
	 	Aggregate Purchase Price (Subscription Amount): $7,914,000

Number of Preferred Shares to be Acquired: 7,914

Tax ID No.: 98-0503297

Address for Notice:

Front Point Financial Services Fund GP, LLC

Two Greenwich Plaza, 4th Floor

Greenwich, CT 06830
 	 

	 	 	 	 	 

	 
	 	Telephone No.:	 	203.622.5200
	 
	 	Facsimile No.:	 	203.622.5230
	 
	 	E-mail Address:	 	ops@fppartners.com
	 
	 	Attention:	 	Operations Department

	 	 	 

	 

	 	Wire instructions for return of escrowed funds:
	 

	 	ABA: 021000021
	 

	 	Bank: JP Morgan Chase, New York
	 

	 	A/C #: 9301011483
	 

	 	Entity Name: Goldman Sachs & Co., New York
	 

	 	a/c #: 00236630
	 
	 	 
	 

	 	o Purchaser is prohibited by the terms of its
organizational or constituent documents to enter into an
escrow agreement and has provided the Company with documented
evidence of such prohibition. Purchaser meets the
requirements of a Section 2.1(c)(iii) Purchaser.
	 
	 	 
	 

	 	o Purchaser has entered into a Custodian Agreement.

Delivery Instructions:

(if different than above)

c/o
 

Street:  

City/State/Zip:  

Attention:  

Telephone No.:  

[Signature Page to Securities Purchase Agreement]

 

	 	 	 	 	 
	 	PURCHASER: Zweig-DiMenna Partners, L.P.

 	 
	 	By:  	/s/  Kevin Cannon
 	 
	 	 	Name:  	Kevin Cannon 	 
	 	 	Title:  	CEO of Managing General Partner 	 
	 
	 	Aggregate Purchase Price (Subscription Amount): $7,158,000

Number of Preferred Shares to be Acquired: 7,158 shares

Tax ID No.: 13-3185100

Address for Notice:

900 Third Ave., 31st Floor

New York, N.Y. 10022
 	 

	 	 	 	 	 	 	 

	 

	 	Telephone No.:
	 	212.451.1100	 
	 

	 	Facsimile No.:
	 	212.451.1408	 
	 

	 	E-mail Address:
	 	ops@Zweig-DiMenna.com

	 

	 	Attention:
	 	Jeannine Lanese

	 	 	 

	 

	 	Wire instructions for return of escrowed funds:
	 

	 	Citibank / NYC
	 

	 	ABA: 021-000089
	 

	 	Morgan Stanley A/C #: 388-90774
	 

	 	F/F/C: Zweig-DiMenna Partners, LP
	 

	 	A/C #: 038-00056
	 
	 	 
	 

	 	o Purchaser is prohibited by the terms of its
organizational or constituent documents to enter into an
escrow agreement and has provided the Company with documented
evidence of such prohibition. Purchaser meets the
requirements of a Section 2.1(c)(iii) Purchaser.
	 
	 	 
	 

	 	o Purchaser has entered into a Custodian Agreement.

Delivery Instructions:

(if different than above)

c/o
 

Street:  

City/State/Zip:  

Attention: 

Telephone No.:  

[Signature Page to Securities Purchase Agreement]

 

	 	 	 	 	 
	 	PURCHASER: Zweig-DiMenna International, Ltd.

 	 
	 	By:  	/s/  Kevin Cannon
 	 
	 	 	Name:  	Kevin Cannon 	 
	 	 	Title:  	CEO of Investment Manager 	 
	 
	 	Aggregate Purchase Price (Subscription Amount):
$11,758,000

Number of Preferred Shares to be Acquired:
11,758 shares

Tax ID No.: N/A

Address for Notice:

900 Third Ave., 31st Floor

New York, N.Y. 10022
 	 

	 	 	 	 	 	 	 

	 

	 	Telephone No.:
	 	212.451.1100	 
	 

	 	Facsimile No.:
	 	212.451.1408	 
	 

	 	E-mail Address:
	 	ops@Zweig-DiMenna.com

	 

	 	Attention:
	 	Jeannine Lanese

	 	 	 

	 

	 	Wire instructions for return of escrowed funds:
	 

	 	Citibank / NYC
	 

	 	ABA: 021-000089
	 

	 	Morgan Stanley a/c #: 388-90774
	 

	 	F/F/C: Zweig-DiMenna International Ltd.
	 

	 	a/c #: 038-00856
	 
	 	 
	 

	 	o Purchaser is prohibited by the terms of its
organizational or constituent documents to enter into an
escrow agreement and has provided the Company with documented
evidence of such prohibition. Purchaser meets the
requirements of a Section 2.1(c)(iii) Purchaser.
	 
	 	 
	 

	 	o Purchaser has entered into a Custodian Agreement.

Delivery Instructions:

(if different than above)

c/o
 

Street:  

City/State/Zip:  

Attention:  

Telephone No.:  

 [Signature Page to Securities Purchase Agreement]

 

	 	 	 	 	 
	 	PURCHASER: Zweig-DiMenna Investors, L.P.

 	 
	 	By:  	/s/  Kevin Cannon
 	 
	 	 	Name:  	Kevin Cannon 	 
	 	 	Title:  	CEO of Managing General Partner 	 
	 
	 	Aggregate Purchase Price (Subscription Amount): $267,000

Number of Preferred Shares to be Acquired: 267 shares

Tax ID No.: 13-3997890

Address for Notice:

900 Third Ave., 31st Floor

New York, N.Y. 10022
 	 

	 	 	 	 	 	 	 

	 

	 	Telephone No.:
	 	212.451.1100	 
	 

	 	Facsimile No.:
	 	212.451.1408	 
	 

	 	E-mail Address:
	 	ops@Zweig-DiMenna.com

	 

	 	Attention:
	 	Jeannine Lanese

	 	 	 

	 

	 	Wire instructions for return of escrowed funds:
	 

	 	Citibank / NYC
	 

	 	ABA: 021-000089
	 

	 	Morgan Stanley a/c #: 388-90774
	 

	 	F/F/C: Zweig-DiMenna Investors, LP
	 

	 	a/c #: 038-5601
	 
	 	 
	 

	 	o Purchaser is prohibited by the terms of its
organizational or constituent documents to enter into an
escrow agreement and has provided the Company with documented
evidence of such prohibition. Purchaser meets the
requirements of a Section 2.1(c)(iii) Purchaser.
	 
	 	 
	 

	 	o Purchaser has entered into a Custodian Agreement.

Delivery Instructions:

(if different than above)

c/o
 

Street:  

City/State/Zip:  

Attention:  

Telephone No.:  

[Signature Page to Securities Purchase Agreement]

 

	 	 	 	 	 
	 	PURCHASER: Zweig-DiMenna Market Neutral, LP

 	 
	 	By:  	/s/  Kevin Cannon
 	 
	 	 	Name:  	Kevin Cannon 	 
	 	 	Title:  	CEO of Managing General Partner 	 
	 
	 	Aggregate Purchase Price (Subscription Amount): $817,000

Number of Preferred Shares to be Acquired: 817 shares

Tax ID No.: 13-4197164

Address for Notice:

900 Third Ave., 31st Floor

New York, N.Y. 10022
 	 

	 	 	 	 	 	 	 

	 

	 	Telephone No.:
	 	212.451.1100	 
	 

	 	Facsimile No.:
	 	212.451.1408	 
	 

	 	E-mail Address:
	 	ops@Zweig-DiMenna.com

	 

	 	Attention:
	 	Jeannine Lanese

	 	 	 

	 

	 	Wire instructions for return of escrowed funds:
	 

	 	Citibank / NYC
	 

	 	ABA: 021-000089
	 

	 	Morgan Stanley A/C #: 388-90774
	 

	 	F/F/C: Zweig-DiMenna Market Neutral L.P.
	 

	 	a/c #: 038-56071
	 
	 	 
	 

	 	o Purchaser is prohibited by the terms of its
organizational or constituent documents to enter into an
escrow agreement and has provided the Company with documented
evidence of such prohibition. Purchaser meets the
requirements of a Section 2.1(c)(iii) Purchaser.
	 
	 	 
	 

	 	o Purchaser has entered into a Custodian Agreement.

Delivery Instructions:

(if different than above)

c/o
 

Street:  

City/State/Zip:  

Attention:  

Telephone No.:  

[Signature Page to Securities Purchase Agreement]

 

	 	 	 	 	 
	 	PURCHASER: Samlyn Onshore Fund, L.P.

 	 
	 	By:  	/s/  Aaron Foxbruner
 	 
	 	 	Name:  	Aaron Foxbruner 	 
	 	 	Title:  	Authorized Signatory 	 
	 
	 	Aggregate Purchase Price (Subscription Amount):
$6,120,000

Number of Preferred Shares to be Acquired:
6,120

Tax ID No.: 20-8210651

Address for Notice:

500 Park Ave., 2nd Floor

New York, NY 10022
 	 

	 	 	 	 	 	 	 

	 

	 	Telephone No.:
	 	212.848.0500	 
	 

	 	Facsimile No.:
	 	212.848.0501	 
	 

	 	E-mail Address:
	 	afoxbruner@samlyncapital.com

	 

	 	Attention:
	 	Aaron Foxbruner

	 	 	 

	 

	 	Wire instructions for return of escrowed funds:
	 

	 	Citibank, N.A.      Subaccount #: 038C79392
	 

	 	ABA: 021000089  Sub acct: Samlyn Onshore Fund, LP
	 

	 	Acct: 38890774
	 

	 	Name: Morgan Stanly & Co.
	 
	 	 
	 

	 	o Purchaser is prohibited by the terms of its
organizational or constituent documents to enter into an
escrow agreement and has provided the Company with documented
evidence of such prohibition. Purchaser meets the
requirements of a Section 2.1(c)(iii) Purchaser.
	 
	 	 
	 

	 	o Purchaser has entered into a Custodian Agreement.

Delivery Instructions:

(if different than above)

c/o N/A

Street:  

City/State/Zip:  

Attention: Book Entry

Telephone No.:  

[Signature Page to Securities Purchase Agreement]

 

	 	 	 	 	 
	 	PURCHASER: Samlyn Offshore Master Fund, Ltd.

 	 
	 	By:  	/s/  Aaron Foxbruner
 	 
	 	 	Name:  	Aaron Foxbruner 	 
	 	 	Title:  	Authorized Signatory 	 

	 	 	 

	 

	 	Aggregate Purchase Price (Subscription Amount): $8,880,000
	 
	 	 
	 

	 	Number of Preferred Shares to be Acquired: 8,880
	 
	 	 
	 

	 	Tax ID No.: 98-0603351
	 
	 	 
	 

	 	Address for Notice:
	 

	 	c/o Samlyn Capital, LLC
	 

	 	 500 Park Ave., 2nd Floor
	 

	 	New York, NY 10022
	 
	 	 
	 

	 	Telephone No.:       212.848.0500
	 

	 	Facsimile No.:         212.848.0501
	 

	 	E-mail Address:      afoxbruner@samlyncapital.com
	 

	 	Attention:                Aaron Foxbruner
	 
	 	 
	 

	 	Wire instructions for return of escrowed funds:
	 

	 	Citibank,
N.A.                                 Subaccount #: 038C79384
	 

	 	ABA: 021000089
          
                 Subacct name: Samlyn
	 

	 	Acct: 38890774                               Offshore Master Fund, Ltd.
	 

	 	Name: Morgan Stanly & Co.
	 
	 	 
	 

	 	o Purchaser is prohibited by the terms of its
organizational or constituent documents to enter into an
escrow agreement and has provided the Company with documented
evidence of such prohibition. Purchaser meets the
requirements of a Section 2.1(c)(iii) Purchaser.
	 
	 	 
	 

	 	o Purchaser has entered into a Custodian Agreement.

Delivery Instructions:

(if different than above)

c/o N/A

Street: 

City/State/Zip: 

Attention: Book Entry 

Telephone No.: 

[Signature Page to Securities Purchase Agreement]

 

 

	 	 	 	 	 
	 	PURCHASER: Endeavour Financial Restoration Fund, L.P.

 	 
	 	By:  	/s/  Mitchell J. Kate
 	 
	 	 	Name:  	Mitchell J. Kate 	 
	 	 	Title:  	General Partner 	 

	 	 	 

	 

	 	Aggregate Purchase Price (Subscription Amount): $8,500,000
	 
	 	 
	 

	 	Number of Preferred Shares to be Acquired: 8,500
	 
	 	 
	 

	 	Tax ID No.: 30-0597740
	 
	 	 
	 

	 	Address for Notice:
	 

	 	Endeavour Capital
	 

	 	 289 Greenwich Ave., 2nd Floor
	 

	 	Greenwich, CT 06830
	 
	 	 
	 

	 	Telephone No.:     203.618.0101
	 

	 	Facsimile No.:       203.618.0106
	 

	 	E-mail Address:   gh@endcap.com
	 

	 	Attention:             Glenn Hofsess
	 
	 	 
	 

	 	Wire instructions for return of escrowed funds:

	 	 	 	 	 

	 

	 	See Attached	 	 
	 

	 	 

	 	 
	 
	 	 	 	 
	 

	 	 

	 	 
	 
	 	 	 	 
	 

	 	 

	 	 

	 	 	 

	 

	 	o Purchaser is prohibited by the terms of its
organizational or constituent documents to enter into an
escrow agreement and has provided the Company with documented
evidence of such prohibition. Purchaser meets the
requirements of a Section 2.1(c)(iii) Purchaser.
	 
	 	 
	 

	 	o Purchaser has entered into a Custodian Agreement.

Delivery Instructions:

(if different than above)

c/o BNP Paribas Prime Brokerage

Street: 787 7th Avenue, 8th Floor

City/State/Zip: New York, NY 10019

Attention: John O’Neill

Telephone No.: 212.471.6827

[Signature Page to Securities Purchase Agreement]

 

 

BNP PARIBAS

Prime Brokerage

WIRE INSTRUCTIONS

	 	 	 	 	 

	•

	 	Beneficiary Bank:
	 	BNP Paribas, NA
	 

	 	 	 	787 7th Avenue, 7th Floor
	 

	 	 	 	New York, NY 10019
	 
	 	 	 	 
	•

	 	ABA Number:
	 	026 007 689
	 
	 	 	 	 
	•

	 	Beneficiary:
	 	BNP Paribas Prime Brokerage, Inc.
	 

	 	 	 	787 7th Avenue, 8th Floor
	 

	 	 	 	New York, NY 10019
	 
	 	 	 	 
	•

	 	Account Number:
	 	61661700177
	 
	 	 	 	 
	•

	 	For Further Credit:
	 	Endeavour Financial Restoration Fund LP
	 
	•

	 	Account Number
	 	118-03321

 

 

	 	 	 

	 

	 	PURCHASER: Financial Stocks Capital Partners V L.P.
	 
	 

	 	By: Finstocks Capital Management V, LLC, its: General Partner

	 	 	 	 	 
	 	By:  	                         /s/  John M. Stein
 	 
	 	 	Name:  	John M. Stein 	 
	 	 	Title:  	President 	 
	 

	 	 	 

	 

	 	Aggregate Purchase Price (Subscription Amount): $11,000,000
	 
	 	 
	 

	 	Number of Preferred Shares to be Acquired: 11,000
	 
	 	 
	 

	 	Tax ID No.: 26-0270069
	 
	 	 
	 

	 	Address for Notice:
	 

	 	 441 Vine Street, Suite 1300
	 

	 	Cincinnati, OH 45202
	 
	 	 
	 

	 	Telephone No.:      513.746.2200
	 

	 	Facsimile No.:         513.746.2201
	 

	 	E-mail Address:
     jstein@fsig.com; sstein@fsig.com
	 

	 	Attention:                John M. Stein
	 
	 	 
	 

	 	Wire instructions for return of escrowed funds:

	 	 	 	 	 

	 

	 	 

	 	 
	 
	 	 	 	 
	 

	 	 

	 	 
	 
	 	 	 	 
	 

	 	 

	 	 

	 	 	 

	 

	 	o Purchaser is prohibited by the terms of its
organizational or constituent documents to enter into an
escrow agreement and has provided the Company with documented
evidence of such prohibition. Purchaser meets the
requirements of a Section 2.1(c)(iii) Purchaser.
	 
	 	 
	 

	 	o Purchaser has entered into a Custodian Agreement.

Delivery Instructions:

(if different than above)

c/o Fifth Third Bank, Attn.: Ms. Arica Ratliff

Street: 5001 Kingsley Drive, Mail Drop 1MOB2J

City/State/Zip: Cincinnati, OH 45227

Attention: Acct. # 010034293486

Telephone No.: 513.358.5972

[Signature Page to Securities Purchase Agreement]

 

 

	 	 	 

	 

	 	PURCHASER: PM Manager Fund, SPC, on behalf of and for
the account of Segregated Portfolio 23
	 
	 

	 	By: Elbrook Holdings LLC, its: Subadviser

	 	 	 	 	 
	 	By:  	               /s/  John M. Stein
 	 
	 	 	Name:  	John M. Stein 	 
	 	 	Title:  	President 	 

	 	 	 
	 

	 	Aggregate Purchase Price (Subscription Amount): $4,000,000
	 
	 	 
	 

	 	Number of Preferred Shares to be Acquired: 4,000
	 
	 	 
	 

	 	Tax ID No.: _______________
	 
	 	 
	 

	 	Address for Notice:
	 

	 	c/o Elbrook Holdings, LLC
	 

	 	 441 Vine Street, Suite 1300
	 

	 	Cincinnati, OH 45202
	 
	 	 
	 

	 	Telephone No.:      513.746.2200
	 

	 	Facsimile No.:         513.746.2201
	 

	 	E-mail Address:      jstein@fsig.com
	 

	 	Attention:                John M. Stein
	 
	 

	 	Wire instructions for return of escrowed funds:

	 	 	 	 	 

	 

	 	 

	 	 
	 

	 	 

	 	 
	 

	 	 

	 	 

	 	 	 

	 

	 	o Purchaser is prohibited by the terms of its
organizational or constituent documents to enter into an
escrow agreement and has provided the Company with documented
evidence of such prohibition. Purchaser meets the
requirements of a Section 2.1(c)(iii) Purchaser.
	 
	 	 
	 

	 	o Purchaser has entered into a Custodian Agreement.

Delivery Instructions:

(if different than above)

c/o Morgan Stanley / ISG Operations

Street: 901 South Bond Street, 6th Floor

City/State/Zip: Baltimore, MD 21231

Attention: Deborah Mullin

Telephone No.: 410.534.1480

   [Signature Page to Securities Purchase Agreement]

 

 

	 	 	 	 	 
	 	PURCHASER: American Funds Insurance
Series - Global
Small Capitalization Fund

 	 
	 	By:  	

/s/  Michael J. Downer
 	 
	 	 	Name:  	Michael J. Downer 	 
	 	 	Title:  	Senior Vice President and Secretary 	 

	 	 	 
	 

	 	Aggregate Purchase Price (Subscription Amount): $4,470,000
	 
	 	 
	 

	 	Number of Preferred Shares to be Acquired: 4,470 shares
	 
	 	 
	 

	 	Tax ID No.: 95-4672504
	 
	 	 
	 

	 	Address for Notice:
	 

	 	c/o Capital Research and Management Company
	 

	 	 333 South Hope Street, 55th Floor
	 

	 	Los Angeles, CA 90071
	 
	 	 
	 

	 	Telephone No.:      213.486.9200
	 

	 	Facsimile No.:         213.615.0431
	 

	 	E-mail Address:      wrb@capgroup.com
	 

	 	Attention:                Walt R. Burkley
	 
	 	 
	 

	 	Wire instructions for return of escrowed funds:
	 

	 	State Street Bank and Trust Company
	 

	 	P.O. Box 1713
	 

	 	Boston, MA 02105
	 

	 	Attn.: Robert Mendez
	 
	 	 
	 

	 	o Purchaser is prohibited by the terms of its
organizational or constituent documents to enter into an
escrow agreement and has provided the Company with documented
evidence of such prohibition. Purchaser meets the
requirements of a Section 2.1(c)(iii) Purchaser.
	 
	 	 
	 

	 	þ Purchaser has entered into a Custodian Agreement.

Delivery Instructions:

(if different than above)

c/o 

Street: 

City/State/Zip: 

Attention: 

Telephone
No.: 

[Signature
Page to Securities Purchase Agreement]

 

 

	 	 	 	 	 
	 	PURCHASER: SmallCap World Fund, Inc.

 	 
	 	By:  	/s/  Michael J. Downer
 	 
	 	 	Name:  	Michael J. Downer 	 
	 	 	Title:  	Senior Vice President and Secretary 	 

	 	 	 
	 

	 	Aggregate Purchase Price (Subscription Amount): $25,530,000
	 
	 	 
	 

	 	Number of Preferred Shares to be Acquired: 25,530 shares
	 
	 	 
	 

	 	Tax ID No.: 95-4523845
	 
	 	 
	 

	 	Address for Notice:
	 

	 	c/o Capital Research and Management Company
	 

	 	 333 South Hope Street, 55th Floor
	 

	 	Los Angeles, CA 90071
	 
	 	 
	 

	 	Telephone No.:      213.486.9200
	 

	 	Facsimile No.:         213.615.0431
	 

	 	E-mail Address:      wrb@capgroup.com
	 

	 	Attention:                Walt R. Burkley
	 
	 	 
	 

	 	Wire instructions for return of escrowed funds:
	 

	 	State Street Bank and Trust Company
	 

	 	P.O. Box 1713
	 

	 	Boston, MA 02105
	 

	 	Attn.: Robert Mendez
	 
	 	 
	 

	 	o Purchaser is prohibited by the terms of its
organizational or constituent documents to enter into an
escrow agreement and has provided the Company with documented
evidence of such prohibition. Purchaser meets the
requirements of a Section 2.1(c)(iii) Purchaser.
	 
	 	 
	 

	 	þ Purchaser has entered into a Custodian Agreement.

Delivery Instructions:

(if different than above)

c/o 

Street: 

City/State/Zip: 

Attention: 

Telephone No.: 

[Signature Page to Securities Purchase Agreement]

 

 

	 	 	 	 	 
	 	PURCHASER: JAM Partners, L.P.

 	 
	 	By:  	/s/  Sy Jacobs
 	 
	 	 	Name:  	Sy Jacobs 	 
	 	 	Title:  	Managing Partner of General Partner 	 

	 	 	 

	 
	 	Aggregate Purchase Price (Subscription Amount): $8,000,000
	 
	 	 
	 
	 	Number of Preferred Shares to be Acquired: 8,000
	 
	 	 
	 
	 	Tax ID No.:  13-3810784
	 
	 	 
	 
	 	Address for Notice:
	 
	 	One Fifth Avenue
	 
	 	New York, NY 10003

	 	 	 	 	 

	 
	 	Telephone No.:	 	212.271.5526
	 
	 	Facsimile No.:	 	212.271.5525
	 
	 	E-mail Address:	 	sy@JamPartners.com
	 
	 	Attention:	 	Sy Jacobs

	 	 	 	 	 

	 

	 	Wire instructions for return of escrowed funds:	 	 
	 
	 	 	 	 
	 

	 	 

	 	 
	 

	 	See attached	 	 
	 

	 	 

	 	 
	 
	 	 	 	 
	 

	 	 

	 	 
	 
	 	 	 	 
	 	 	o Purchaser is prohibited by the terms of its
organizational or constituent documents to enter into an
escrow agreement and has provided the Company with documented
evidence of such prohibition. Purchaser meets the
requirements of a Section 2.1(c)(iii) Purchaser.
	 
	 	 	 	 
	 	 	þ Purchaser has entered into a Custodian Agreement.

Delivery Instructions:

(if different than above)

c/o N/A

Street: 

City/State/Zip: 

Attention: 

Telephone No.: 

[Signature Page to Securities Purchase Agreement]

 

 

Updated 6/2009

BNP Paribas Prime Brokerage Wire Instructions

	 	 	 

	Beneficiary Bank:
	 	BNP Paribas, NA
	 
	 	787 Seventh Avenue, 7th Floor
	 
	 	New York, NY 10019
	 
	 	 
	ABA Number:
	 	026 007 689
	 
	 	 
	Beneficiary:
	 	BNP Paribas Prime Brokerage Inc.
	 
	 	787 7th Avenue, 8th Floor
	 
	 	New York, NY 10019
	 
	 	 
	Account Number:
	 	61661700177
	 
	 	 
	For Further Credit:
	 	JAM Partners, L.P.
	 
	 	 
	Sub AIC Number:
	 	118-11032-25

 

 

	 	 	 	 	 
	 	PURCHASER: JAM Special Opportunities Fund II, L.P.

 	 
	 	By:  	/s/  Sy Jacobs
 	 
	 	 	Name:  	Sy Jacobs 	 
	 	 	Title:  	Managing Partner of General Partner 	 

	 	 	 

	 
	 	Aggregate Purchase Price (Subscription Amount): $3,150,000
	 
	 	 
	 
	 	Number of Preferred Shares to be Acquired: 3,150
	 
	 	 
	 
	 	Tax ID No.:  26-3154903
	 
	 	 
	 
	 	Address for Notice:
	 
	 	One Fifth Avenue
	 
	 	New York, NY 10003

	 	 	 	 	 

	 
	 	Telephone No.:	 	212.271.5526
	 
	 	Facsimile No.:	 	212.271.5525
	 
	 	E-mail Address:	 	sy@JamPartners.com
	 
	 	Attention:	 	Sy Jacobs

	 	 	 	 	 

	 

	 	Wire instructions for return of escrowed funds:	 	 
	 
	 	 	 	 
	 

	 	 

	 	 
	 

	 	See attached	 	 
	 

	 	 

	 	 
	 
	 	 	 	 
	 

	 	 

	 	 
	 
	 	 	 	 
	 	 	o Purchaser is prohibited by the terms of its
organizational or constituent documents to enter into an
escrow agreement and has provided the Company with documented
evidence of such prohibition. Purchaser meets the
requirements of a Section 2.1(c)(iii) Purchaser.
	 
	 	 	 	 
	 	 	þ Purchaser has entered into a Custodian Agreement.

Delivery Instructions:

(if different than above)

c/o                     N/A

Street: 

City/State/Zip: 

Attention: 

Telephone No.: 

[Signature Page to Securities Purchase Agreement]

 

 

Updated 6/2009

BNP Paribas Prime Brokerage Wire Instructions

	 	 	 

	Beneficiary Bank:
	 	BNP Paribas, NA
	 
	 	787 Seventh Avenue, 7th Floor
	 
	 	New York, NY 10019
	ABA Number:
	 	026 007 689
	 
	 	 
	Beneficiary:
	 	BNP Paribas Prime Brokerage Inc.
	 
	 	787 7th Avenue, 8th Floor
	 
	 	New York, NY 10019
	 
	 	 
	Account Number:
	 	61661700177
	 
	 	 
	For Further Credit:
	 	JAM Special Opportunities Fund II, L.P.
	 
	 	 
	Sub AIC Number:
	 	118-03129-26

 

 

	 	 	 	 	 
	 	PURCHASER: JAM Recovery Fund, L.P.

 	 
	 	By:  	/s/  Sy Jacobs
 	 
	 	 	Name:  	Sy Jacobs 	 
	 	 	Title:  	Managing Member of General Partner 	 

	 	 	 

	 
	 	Aggregate Purchase Price (Subscription Amount): $3,850,000
	 
	 	 
	 
	 	Number of Preferred Shares to be Acquired: 3,850
	 
	 	 
	 
	 	Tax ID No.:  27-1375266
	 
	 	 
	 
	 	Address for Notice:
	 
	 	One Fifth Avenue
	 
	 	New York, NY 10003

	 	 	 	 	 

	 
	 	Telephone No.:	 	212.271.5526
	 
	 	Facsimile No.:	 	212.271.5525
	 
	 	E-mail Address:	 	sy@JamPartners.com
	 
	 	Attention:	 	Sy Jacobs

	 	 	 	 	 

	 

	 	Wire instructions for return of escrowed funds:	 	 
	 
	 	 	 	 
	 

	 	 

	 	 
	 

	 	See attached	 	 
	 

	 	 

	 	 
	 
	 	 	 	 
	 

	 	 

	 	 
	 
	 	 	 	 
	 	 	o Purchaser is prohibited by the terms of its
organizational or constituent documents to enter into an
escrow agreement and has provided the Company with documented
evidence of such prohibition. Purchaser meets the
requirements of a Section 2.1(c)(iii) Purchaser.
	 
	 	 	 	 
	 	 	þ Purchaser has entered into a Custodian Agreement.

Delivery Instructions:

(if different than above)

c/o N/A

Street: 

City/State/Zip: 

Attention: 

Telephone No.: 

[Signature Page to Securities Purchase Agreement]

 

 

BNP PARIBAS

Prime Brokerage

WIRE INSTRUCTIONS

EFFECTIVE 06/22/2009

	 	 	 	 	 

	•

	 	Beneficiary Bank:
	 	BNP Paribas, NA
	 

	 	 	 	 787 7th Avenue, 7th Floor
	 

	 	 	 	New York, NY 10019
	 
	 	 	 	 
	•

	 	ABA Number:
	 	 026 007 689
	 
	 	 	 	 
	•

	 	Beneficiary:
	 	BNP Paribas Prime Brokerage, Inc.
	 

	 	 	 	 787 7th Avenue, 8th Floor
	 

	 	 	 	New York, NY 10019
	 
	 	 	 	 
	•

	 	Account Number:
	 	 61661700177
	 
	 	 	 	 
	•

	 	For Further Credit:
	 	Client Account Name JAM RECOVERY FUND, LP
	 
	 	 	 	 
	 

	 	FFC/AC#:
	 	Client Account # 118-03313-14

 

 

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	Common Shares upon	 	 	 	 	 	 	 	 	 	 	Common Stock	 	 	 	 
	Acct Id	 	LEGAL NM	 	Preferred Shares	 	 	conversion	 	 	Price	 	 	Registration Name	 	US Delivery Instructions	 	Currently held	 	 	Tax Id	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	Goldman, Sachs & Co.	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	200 West Street 3rd Floor	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	Ithan Creek Master	 	New York, NY 10282	 	 	 	 	 	 	 	 
	3P28
	 	Ithan Creek Master Investment Partnership (Cayman) II L.P.	 	 	 	 	 	 	 	 	 	 	 	 	 	Investment Partnership	 	Attn: Jon Scalzo	 	 	 	 	 	 	 	 
	 
	 	 	 	991	 	 	 	66,000	 	 	$	991,000.00	 	 	(Cayman) II L.P.	 	Ph: 212-934-3941	 	 	45,300	 	 	 	98-0643603	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	Morgan Stanley	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	Custody/Trasnsfer	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	901 South Bond Street	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	Baltimore, MD 21231	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	Attn: Alicia Alvez / Deborah Mullin	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	Phone: 410-534-1582	 	 	 	 	 	 	 	 
	1939
	 	Bay Pond Partners, L.P.	 	 	16,640	 	 	 	1,108,225	 	 	$	16,640,000.00	 	 	Bay Pond Partners, L.P.	 	FFC: 038-03056	 	 	700,134	 	 	 	04-3217743	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	Morgan Stanley	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	Custody/Trasnsfer	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	901 South Bond Street	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	Baltimore, MD 21231	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	Attn: Alicia Alvez / Deborah Mullin	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	Bay Pond Investors	 	Phone: 410-534-1582	 	 	 	 	 	 	 	 
	3287
	 	Bay Pond Investors (Bermuda) L.P.	 	 	7,903	 	 	 	526,340	 	 	$	7,903,000.00	 	 	(Bermuda) L.P.	 	FFC: 038-03056	 	 	313,400	 	 	 	98-0218500	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	Goldman, Sachs & Co.	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	200 West Street 3rd Floor	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	New York, NY 10282	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	Ithan Creek Master	 	Attn: Jon Scalzo	 	 	 	 	 	 	 	 
	38D3
	 	Ithan Creek Master Investors (Cayman) L.P.	 	 	9,670	 	 	 	644,022	 	 	$	9,670,000.00	 	 	Investors (Cayman) L.P.	 	Ph: 212-934-3941	 	 	440,400	 	 	 	98-0580385	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	Goldman, Sachs & Co.	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	200 West Street 3rd Floor	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	New York, NY 10282	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	Attn: Jon Scalzo	 	 	 	 	 	 	 	 
	6153
	 	Wolf Creek Partners, L.P.	 	 	1,116	 	 	 	74,325	 	 	$	1,116,000.00	 	 	Wolf Creek Partners, L.P.	 	Ph: 212-934-3941	 	 	115,226	 	 	 	04-3539573	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	Goldman, Sachs & Co.	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	200 West Street 3rd Floor	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	New York, NY 10282	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	Wolf Creek Investors	 	Attn: Jon Scalzo	 	 	 	 	 	 	 	 
	6331
	 	Wolf Creek Investors (Bermuda) L.P.	 	 	2,680	 	 	 	178,488	 	 	$	2,680,000.00	 	 	(Bermuda) L.P.	 	Ph: 212-934-3941	 	 	119,200	 	 	 	98-0346053	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	Total
	 	 	39,000	 	 	 	2,597,400	 	 	$	39,000,000.00	 	 	 	 	 	 	 	1,733,660	 	 	 	 	 

 

 

EXHIBITS

	 	 	 

	A:

	 	Form of Certificate of Designations
	 
	B:

	 	Form of Registration Rights Agreement
	 
	C-1:

	 	Accredited Investor Questionnaire
	 
	C-2:

	 	Stock Certificate Questionnaire
	 
	D:

	 	Form of Opinion of Company Puerto Rican Counsel
	 
	E:

	 	Form of Opinion of Company U.S. Counsel
	 
	F:

	 	Form of Secretary’s Certificate
	 
	G:

	 	Form of Officer’s Certificate
	 
	H:

	 	Subsidiaries of the Company
	 
	I:

	 	Form of Escrow Agreement

 

 

EXHIBIT A

Form of Certificate of Designations

CERTIFICATE OF DESIGNATIONS

OF

MANDATORILY CONVERTIBLE NON-CUMULATIVE NON-VOTING PERPETUAL

PREFERRED STOCK, SERIES C

OF

ORIENTAL FINANCIAL GROUP INC.

Pursuant to Section 5.01 of the

General Corporation Law

of the Commonwealth of Puerto Rico

     Pursuant to Article 5.01 of the General Corporation Law of the Commonwealth of Puerto Rico,
the undersigned, Carlos O. Souffront, as Secretary of the Board of Directors of Oriental Financial
Group Inc., a financial holding company and corporation organized in the Commonwealth of Puerto
Rico (the “Corporation”), HEREBY CERTIFIES that, pursuant to the authority conferred upon the Board
of Directors (the “Board of Directors”) by the Corporation’s Certificate of Incorporation, as
amended, and resolutions duly adopted by the Board of Directors on April 21, 2010, creating a
committee thereof known as the “Preferred Stock Pricing Committee,” the Preferred Stock Pricing
Committee on April 23, 2010, duly adopted the following resolutions creating a series of 200,000
shares of Preferred Stock designated as the “Mandatorily Convertible Non-Cumulative Non-Voting
Perpetual Preferred Stock, Series C, ” and that such resolutions have not been modified or
rescinded and remain in full force and effect:

     RESOLVED, that pursuant to the authority expressly granted to and vested in the Board of
Directors of the Corporation and delegated to the Preferred Stock Pricing Committee in accordance
with the provisions of the Corporation’s Certificate of Incorporation, as amended, a series of
Series C Preferred Stock of the Corporation be and it hereby is created;

     FURTHER RESOLVED, that the Preferred Stock Pricing Committee designated by the Board of
Directors has determined that the preferences and relative, participating, optional or other
special rights of the shares of such series of Series C Preferred Stock, and the qualifications,
limitations or restrictions thereof, as stated and expressed herein, are under the circumstances
prevailing on the date hereof fair and equitable to all the existing stockholders of the
Corporation; and

     FURTHER RESOLVED, that the designation and amount of such series and the voting powers,
preferences and relative, participating, optional or other special rights of the shares of such
series of Series C Preferred Stock, and the qualifications, limitations or restrictions thereof are
as follows:

 

 

RIGHTS AND PREFERENCES

          Section 1. Designation. There is hereby created out of the authorized and unissued shares of
preferred stock of the Corporation a series of preferred stock designated as the “Mandatorily
Convertible Non-Cumulative Non-Voting Perpetual Preferred Stock, Series C” (the “Series C
Preferred Stock”). The number of shares constituting such series initially shall be 200,000.
The par value of the Series C Preferred Stock shall be $1.00 per share, and the liquidation
preference shall be $1,000 per share.

          Section 2. Ranking. The Series C Preferred Stock will, with respect to dividend rights and
rights on liquidation, winding up and dissolution, rank (i) on a parity with the Corporation’s
7.125% Non-Cumulative Monthly Income Preferred Stock, Series A, 7.0% Non-Cumulative Monthly Income
Preferred Stock, Series B and with each other class or series of equity securities of the
Corporation the terms of which do not expressly provide that such class or series will rank senior
or junior to the Series C Preferred Stock as to dividend rights and rights on liquidation,
winding-up and dissolution of the Corporation (collectively referred to as “Parity
Securities”), and (ii) senior to the Corporation’s common stock, par value $1.00 per share (the
“Common Stock”), and each other class or series of capital stock of the Corporation
outstanding or established after the Effective Date by the Corporation the terms of which do not
expressly provide that it ranks on a parity with or senior to the Series C Preferred Stock as to
dividend rights and rights on liquidation, winding-up and dissolution of the Corporation
(collectively referred to as “Junior Securities”). The Corporation has the power to
authorize and/or issue additional shares or classes or series of Junior Securities or Parity
Securities without the consent of the Holders.

          Section 3. Definitions. The following initially capitalized terms shall have the following
meanings, whether used in the singular or the plural:

          (a) “Affiliate” of any specified Person means any other Person directly or indirectly
controlling or controlled by or under common control with such specified Person. For the purposes
of this definition, “control” when used with respect to any specified Person means the power to
direct the management and policies of such Person, directly or indirectly, whether through the
ownership of voting securities, by contract or otherwise; and the terms “controlling” and
“controlled” have meanings correlative to the foregoing.

          (b) “Applicable Conversion Price” means the Conversion Price in effect at any given
time.

          (c) “BHC Act” means the Bank Holding Company Act of 1956, as amended.

          (d) “Business Day” means any day that is not Saturday or Sunday and that, in New York
City, is not a day on which banking institutions generally are authorized or obligated by law or
executive order to be closed.

          (e) “Certificate of Designations” means this Certificate of Designations of the
Corporation.

          (f) “Certificate of Incorporation” means the Certificate of Incorporation of the
Corporation, as amended.

2

 

          (g) “Closing Price” of the Common Stock (or other relevant capital stock or equity
interest) on any date of determination means the closing sale price or, if no closing sale price is
reported, the last reported sale price of the shares of the Common Stock (or other relevant capital
stock or equity interest) on the New York Stock Exchange on such date. If the Common Stock (or
other relevant capital stock or equity interest) is not traded on the New York Stock Exchange on
any date of determination, the Closing Price of the Common Stock (or other relevant capital stock
or equity interest) on such date of determination means the closing sale price as reported in the
composite transactions for the principal U.S. national or regional securities exchange on which the
Common Stock (or other relevant capital stock or equity interest) is so listed or quoted, or, if no
closing sale price is reported, the last reported sale price on the principal U.S. national or
regional securities exchange on which the Common Stock (or other relevant capital stock or equity
interest) is so listed or quoted, or if the Common Stock (or other relevant capital stock or equity
interest) is not so listed or quoted on a U.S. national or regional securities exchange, the last
quoted bid price for the Common Stock (or other relevant capital stock or equity interest) in the
over-the-counter market as reported by Pink OTC Markets Inc. or similar organization, or, if that
bid price is not available, the market price of the Common Stock (or other relevant capital stock
or equity interest) on that date as determined by a nationally recognized independent investment
banking firm retained by the Corporation for this purpose.

          For purposes of this Certificate of Designations, all references herein to the “Closing
Price” and “last reported sale price” of the Common Stock (or other relevant capital
stock or equity interest) on the New York Stock Exchange shall be such closing sale price and last
reported sale price as reflected on the website of the New York Stock Exchange
(http://www.nyse.com) and as reported by Bloomberg Professional Service; provided that in the event
that there is a discrepancy between the closing sale price or last reported sale price as reflected
on the website of the New York Stock Exchange and as reported by Bloomberg Professional Service,
the closing sale price and last reported sale price on the website of the New York Stock Exchange
shall govern.

          (h) “Common Stock” has the meaning set forth in Section 2.

          (i) “Corporation” means Oriental Financial Group Inc., a financial holding company and
corporation organized in the Commonwealth of Puerto Rico.

          (j) “Conversion Price” means for each share of Series C Preferred Stock, $15.015
provided that the foregoing shall be subject to adjustment or limitation as set forth herein.

          (k) “Current Market Price” means, on any date, the average of the daily Closing Price
per share of the Common Stock or other securities on each of the five consecutive Trading Days
preceding the earlier of the day before the date in question and the day before the Ex-Date with
respect to the issuance or distribution giving rise to an adjustment to the Conversion Price
pursuant to Section 10.

          (l) “Effective Date” means the date on which shares of the Series C Preferred Stock
are first issued.

          (m) “Exchange Property” has the meaning set forth in Section 11(a).

3

 

          (n) “Ex-Date”, when used with respect to any issuance or distribution, means the first
date on which the Common Stock or other securities trade without the right to receive the issuance
or distribution giving rise to an adjustment to the Conversion Price pursuant to Section 10.

          (o) “Holder” means the Person in whose name the shares of the Series C Preferred Stock
are registered, which may be treated by the Corporation as the absolute owner of the shares of
Series C Preferred Stock for the purpose of making payment and settling the related conversions and
for all other purposes.

          (p) “Junior Securities” has the meaning set forth in Section 2.

          (q) “Liquidation Preference” means, as to the Series C Preferred Stock, $1,000 per
share (as adjusted for any split, subdivision, combination, consolidation, recapitalization or
similar event with respect to the Series C Preferred Stock).

          (r) “Mandatory Conversion Date” means, with respect to the shares of Series C
Preferred Stock of any Holder, the fifth Business Day after which the Corporation has received the
Stockholder Approvals (or if a Reorganization Event has theretofore been consummated, the date of
consummation of such Reorganization Event), provided, however, that if a Mandatory Conversion Date
would otherwise occur on or after an Ex-Date for an issuance or distribution that results in an
adjustment of the Conversion Price pursuant to Section 10 and on or before the Record Date for such
issuance or distribution, such Mandatory Conversion Date shall instead occur on the first calendar
day after the Record Date for such issuance or distribution.

          (s) “Notice of Mandatory Conversion” has the meaning set forth in Section 9(a).

          (t) “Parity Securities” has the meaning set forth in Section 2.

          (u) “Person” means a legal person, including any individual, corporation, estate,
partnership, joint venture, association, joint-stock company, limited liability company or trust.

          (v) “Record Date” has the meaning set forth in Section 4(d).

          (w) “Reorganization Event” has the meaning set forth in Section 11(a).

          (x) “Section 4(c) Dividend Payment Date” has the meaning set forth in Section 4(c).

          (y) “Section 4(c) Dividend Period” has the meaning set forth in Section 4(c).

          (z) “Special Dividend” has the meaning set forth in Section 4(c).

          (aa) “Special Dividend Rate” means, with respect to any Section 4(c) Dividend Period,
14% per annum.

          (bb) “Securities Purchase Agreement” means the Securities Purchase Agreement,
effective as provided in Section 6.16 therein, as may be amended from time to time, between the
Corporation and a Holder.

          (cc) “Series C Preferred Stock” has the meaning set forth in Section 1.

4

 

          (dd) “Stockholder Approvals” means the stockholder approvals necessary to (i) approve
the conversion of the Series C Preferred Stock into Common Stock for purposes of Rule 312.03 of the
NYSE Listed Company Manual, and (ii) if necessary, amend the Certificate of Incorporation to
increase the number of authorized shares of Common Stock to at least such number as shall be
sufficient to permit the full conversion of the Series C Preferred Stock into Common Stock.

          (ee) “Trading Day” means a day on which the shares of Common Stock:

     (i) are not suspended from trading on any national or regional securities exchange or
association or over-the-counter market at the close of business; and

     (ii) have traded at least once on the national or regional securities exchange or
association or over-the-counter market that is the primary market for the trading of the
Common Stock.

          (ff) “Violation” means a violation of the stockholder approval requirements of Rule
312.03 of the NYSE Listed Company Manual.

          (gg) “Voting Stock” has the meaning set forth in BHC Act and any rules or regulations
promulgated thereunder.

          Section 4. Dividends. (a) From and after the Effective Date, the Holders shall be entitled to
receive, when, as and if declared by the Board of Directors or a duly authorized committee of the
Board of Directors, out of funds legally available therefor, non-cumulative dividends of the type
and in the amounts determined as set forth in Section 4(b) and Section 4(c), and no more.

          (b) Subject to Section 4(a), if the Board of Directors or a duly authorized committee of the
Board of Directors declares and pays a cash dividend in respect of Common Stock, then the Board of
Directors or such duly authorized committee of the Board of Directors shall declare and pay to the
Holders of the Series C Preferred Stock, on the same dates on which such cash dividend is declared
or paid, as applicable, on the Common Stock, a cash dividend in an amount per share of Series C
Preferred Stock equal to the product of (i) the per share dividend declared and paid in respect of
each share of Common Stock and (ii) the number of shares of Common Stock into which such share of
Series C Preferred Stock is then convertible, assuming receipt of the Stockholder Approvals.

          (c) In the event Stockholder Approvals have not been obtained and the Series C Preferred Stock
has not been converted into Common Stock in full by September 15, 2010, in addition to dividends
payable under Section 4(b), dividends shall be payable semi-annually in arrears, when, as and if
declared by the Board of Directors or a duly authorized committee of the Board of Directors, on
April 15 and September 15 of each year, or, if any such day is not a Business Day, the next
Business Day, commencing April 15, 2011 (each, a “Section 4(c) Dividend Payment Date”) for
each outstanding share of Series C Preferred Stock, payable in cash at an annual rate on the
Liquidation Preference equal to the Special Dividend Rate (such dividend, the “Special
Dividend”). Dividends payable pursuant to this Section 4(c), including for the first Section
4(c) Dividend Period and any Section 4(c) Dividend Period that is shorter than a semi-annually
Section 4(c) Dividend Period, will be computed on the basis of a 360-day year of twelve 30-day
months. No interest or sum of money in lieu of interest will be paid on any

5

 

dividend payment on a share of Series C Preferred Stock paid later than the scheduled Section
4(c) Dividend Payment Date. The period from September 15, 2010 to but excluding April 15, 2011 and
each period from and including a Section 4(c) Dividend Payment Date to but excluding the following
Section 4(c) Dividend Payment Date is herein referred to as a “Section 4(c) Dividend
Period.” To the extent declared and payable, such dividends will accumulate during each
dividend period from and including the immediately preceding dividend payment date (in the case of
the initial dividend period, if applicable, September 15, 2010) to but excluding the immediately
succeeding dividend payment date.

          (d) Each dividend will be payable to Holders of record as they appear in the records of the
Corporation at the close of business on the same record date, which (i) with respect to dividends
payable pursuant to Section 4(b), shall be the same day as the record date for the payment of the
corresponding dividends to the holders of shares of Common Stock and (ii) with respect to dividends
payable pursuant to Section 4(c), shall be on the first Business Day of the month in which the
relevant Section 4(c) Dividend Payment Date occurs (each, a “Record Date”).

          (e) Special Dividends are non-cumulative. If the Board of Directors does not declare a Special
Dividend on the Series C Preferred Stock in respect of any Section 4(c) Dividend Period, the
Holders will have no right to receive any Special Dividend for such Section 4(c) Dividend Period,
and the Corporation will have no obligation to pay a Special Dividend for such Section 4(c)
Dividend Period, whether or not Special Dividends are declared and paid for any future Section 4(c)
Dividend Period.

          (f) If full dividends payable pursuant to Section 4(b) or Section 4(c) on all outstanding
shares of the Series C Preferred Stock for the current dividend period have not been declared and
paid, or declared and a sum sufficient for the payment of those dividends been set aside, the
Corporation may not: (i) declare and pay or set aside for payment or declare and make or set aside
for payment any distribution of assets on any Junior Securities (other than a dividend payable
solely in Junior Securities); (ii) repurchase, redeem, or otherwise acquire for consideration,
directly or indirectly, any Junior Securities (other than as a result of a reclassification of
Junior Securities for or into other Junior Securities, or the exchange or conversion of one Junior
Security for or into another Junior Security, and other than through the use of the proceeds of a
substantially contemporaneous sale of other Junior Securities), nor shall any monies be paid to or
made available for a sinking fund for the redemption of any Junior Securities by the Corporation;
or (iii) repurchase, redeem, or otherwise acquire for consideration any Parity Securities otherwise
than pursuant to pro rata offers to purchase all, or a pro rata portion, of the Series C Preferred
Stock and such Parity Securities except by conversion into or exchange for Junior Securities. The
foregoing limitations do not apply to purchases or acquisitions of Junior Securities pursuant to
any employee or director incentive or benefit plan or arrangement (including any of the
Corporation’s employment, severance, or consulting agreements) of the Corporation or of any of its
subsidiaries adopted before or after the Effective Date.

          (g) If full dividends payable pursuant to Section 4(b) or Section 4(c) on all outstanding
shares of the Series C Preferred Stock have not been declared and paid, or declared and a sum
sufficient for the payment of those dividends been set aside, the Corporation may not declare, pay,
or set aside for payment dividends on any Parity Securities for any period;

6

 

provided, however, that to the extent that the Corporation declares dividends on the Series C
Preferred Stock and on any Parity Securities but does not make full payment of such declared
dividends, the Corporation will allocate the dividend payments on a pro rata basis among the
Holders and the holders of any Parity Securities. For purposes of calculating the pro rata
allocation of partial dividend payments, the Corporation will allocate dividend payments based on
the ratio between the then-current dividend payments due on the shares of Series C Preferred Stock
and the aggregate of the current and accrued dividends due on any Parity Securities, which shall
not include any accumulation for any prior dividend periods if such Parity Securities does not have
a cumulative dividend.

          (h) If the Mandatory Conversion Date with respect to any share of Series C Preferred Stock is
prior to any Record Date, the Holder of such share of Series C Preferred Stock will not have the
right to receive any dividends on the Series C Preferred Stock with respect to such Record Date. If
the Mandatory Conversion Date with respect to any share of Series C Preferred Stock is after the
Record Date for any declared dividend and prior to the payment date for that dividend, the Holder
thereof shall receive that dividend on the relevant payment date if such Holder was the Holder of
record on the Record Date for that dividend.

          Section 5. Liquidation. (a) In the event the Corporation voluntarily or involuntarily
liquidates, dissolves or winds up, the Holders at the time shall be entitled to receive liquidating
distributions in an amount equal to the greater of (i) the Liquidation Preference per share of
Series C Preferred Stock, plus an amount equal to any accrued but unpaid dividends, whether or not
declared, thereon to and including the date of such liquidation and (ii) 110% of the payment or
distribution to which such Holders would be entitled if the Series C Preferred Stock were converted
into Common Stock immediately before such liquidation, dissolution or winding-up, out of assets
legally available for distribution to the Corporation’s stockholders, before any distribution of
assets is made to the holders of the Common Stock or any other Junior Securities. After payment of
the full amount of such liquidation distribution, the Holders shall not be entitled to any further
participation in any distribution of assets by the Corporation.

          (b) In the event the assets of the Corporation available for distribution to stockholders upon
any liquidation, dissolution or winding-up of the affairs of the Corporation, whether voluntary or
involuntary, shall be insufficient to pay in full the amounts payable with respect to all
outstanding shares of the Series C Preferred Stock and the corresponding amounts payable on any
Parity Securities, Holders and the holders of such Parity Securities shall share ratably in any
distribution of assets of the Corporation in proportion to the full respective liquidating
distributions to which they would otherwise be respectively entitled.

          (c) The Corporation’s consolidation or merger with or into any other entity, the consolidation
or merger of any other entity with or into the Corporation, or the sale of all or substantially all
of the Corporation’s property or business will not constitute its liquidation, dissolution or
winding up.

          Section 6. Maturity. The Series C Preferred Stock shall be perpetual unless converted or
redeemed in accordance with this Certificate of Designations.

7

 

          Section 7. Redemptions by the Corporation.

          (a) Optional Redemption. Except as provided in Section 7(f) below, the Series C Preferred
Stock may not be redeemed by the Corporation prior to June 30, 2015. After June 30, 2015, the
Corporation, at its option, may redeem in whole or in part at any time the shares of Series C
Preferred Stock at the time outstanding, upon notice given as provided in Section 7(c) below, at a
redemption price per share payable in cash equal to the greater of (i) 125.0% of the sum of (A) the
Liquidation Preference, plus (B) all declared and unpaid dividends up to, but excluding, the date
fixed for redemption and (ii) 110% of (A) the number of shares of Common Stock into which a share
of Series C Preferred Stock would be convertible on the Trading Day immediately prior to the date
fixed for redemption (assuming receipt of Stockholder Approvals) multiplied by (B) the Closing
Price of Common Stock on such Trading Day; provided that in no event shall such redemption price
exceed the amount determined in accordance with clause (i) above when replacing 125.0% with 150.0%.
The redemption price for any shares of Series C Preferred Stock shall be payable on the redemption
date to the Holder of such shares against surrender of the certificate(s) evidencing such shares to
the Corporation or its agent. Any declared but unpaid dividends payable on a redemption date that
occurs subsequent to a Record Date shall not be paid to the Holder entitled to receive the
redemption price on the redemption date, but rather shall be paid to the holder of record of the
redeemed shares on such Record Date.

          (b) No Sinking Fund. The Series C Preferred Stock will not be subject to any mandatory
redemption, sinking fund or other similar provisions. Holders of Series C Preferred Stock will have
no right to require redemption of any shares of Series C Preferred Stock.

          (c) Notice of Redemption. Notice of every redemption of shares of Series C Preferred Stock
shall be given by first class mail, postage prepaid, addressed to the Holders of the shares to be
redeemed at their respective last addresses appearing on the books of the Corporation. Such mailing
shall be at least 30 days and not more than 60 days before the date fixed for redemption; provided,
that failure to give such notice by mail, or any defect in such notice or in the mailing thereof,
to any Holder of shares of Series C Preferred Stock designated for redemption shall not affect the
validity of the proceedings for the redemption of any other shares of Series C Preferred Stock to
be so redeemed except as to the Holder to whom the Corporation has failed to give such notice or
except as to the Holder to whom notice was defective. Notwithstanding the foregoing, if the Series
C Preferred Stock or any depositary shares representing interests in the Series C Preferred Stock
are issued in book-entry form through The Depository Trust Company or any other similar facility,
notice of redemption may be given to the Holders of Series C Preferred Stock at such time and in
any manner permitted by such facility. Each such notice given to a Holder shall state: (1) the
redemption date; (2) the number of shares of Series C Preferred Stock to be redeemed and, if less
than all the shares held by such Holder are to be redeemed, the number of such shares to be
redeemed from such Holder; (3) the redemption price (or manner of determination of the redemption
price); and (4) the place or places where certificates for such shares are to be surrendered for
payment of the redemption price.

          (d) Partial Redemption. In case of any redemption of only part of the shares of Series C
Preferred Stock at the time outstanding, the shares to be redeemed shall be selected on a pro rata
basis or such other method as the depositary shall require that approximates a pro rata basis. If
fewer than all the shares represented by any certificate are redeemed, a new certificate shall be
issued representing the unredeemed shares without charge to the Holder thereof.

8

 

          (e) Effectiveness of Redemption. If notice of redemption has been duly given as provided in
Section 7(c) and if on or before the redemption date specified in the notice all funds necessary
for the redemption have been set aside by the Corporation, separate and apart from its other funds,
in trust for the pro rata benefit of the Holders of the shares called for redemption, so as to be
and continue to be available therefor, then, notwithstanding that any certificate for any share so
called for redemption has not been surrendered for cancellation, on and after the redemption date
unless the Corporation defaults in the payment of the redemption price, in which case such rights
shall continue until the redemption price is paid, dividends shall cease to accrue on all shares so
called for redemption, all shares so called for redemption shall no longer be deemed outstanding
and all rights with respect to such shares shall forthwith on such redemption date cease and
terminate, except only the right of the Holders thereof to receive the amount payable on such
redemption, without interest. Any funds unclaimed at the end of two years from the redemption date
shall, to the extent permitted by law, be released to the Corporation, after which time the Holders
of the shares so called for redemption shall look only to the Corporation for payment of the
redemption price of such shares. Shares of outstanding Series C Preferred Stock that are redeemed,
purchased or otherwise acquired by the Corporation, or converted into another series of the
Corporation’s preferred stock, shall be cancelled and shall revert to authorized but unissued
shares of the Corporation’s preferred stock undesignated as to series.

          (f) Redemption Upon the Failure to Acquire Failed Bank. If the Company fails to consummate
the transactions contemplated under that certain Purchase and Assumption Agreement, dated as of
April 30, 2010 (the “P&A Agreement”), by and among the Company and the Federal Deposit
Insurance Corporation by June 30, 2010 or, if the P&A Agreement shall be terminated for any reason
whatsoever, the Company may redeem all outstanding shares of Series C Preferred Stock at a
redemption price per share payable in cash equal to the Liquidation Preference.

          Section 8. Mandatory Conversion. Effective as of the close of business on the Mandatory
Conversion Date with respect to the shares of Series C Preferred Stock of a Holder, all such
Holder’s shares of Series C Preferred Stock shall automatically convert into shares of Common Stock
as set forth below. The number of shares of Common Stock into which a share of Series C Preferred
Stock shall be convertible shall be determined by dividing (i) the Liquidation Preference, plus all
accrued and unpaid dividends, whether or not declared, with respect to any Section 4(c) Dividend
Period completed prior to the Mandatory Conversion Date (but not with respect to the Section 4(c)
Dividend Period in which the Mandatory Conversion Date occurs), by (ii) the Applicable Conversion
Price (subject to the conversion procedures of Section 9 hereof); provided that, notwithstanding
anything to the contrary contained in this Certificate of Designations, the number of Common Shares
to be issued to any Holder pursuant to this Certificate of Designations shall be issued to the
extent (but only to the extent) that issuance of such Common Shares would not (i) cause or result
in such Holder and its Affiliates, collectively, being deemed to own, control or have the power to
vote securities which (assuming, for this purpose only, full conversion and/or exercise of such
securities) would represent 10.0% or more of the Voting Stock of the Corporation outstanding at
such time, (ii) otherwise cause such Holder or any of its Affiliates to violate any banking law or
regulation or (iii) require such Holder or any of its Affiliates to obtain the prior approval or
non-objection of any bank regulator (collectively, the “Ownership Limit”); provided, further,
however, that any Common Shares that would otherwise be issued to the Holder upon conversion of
shares of Series C Preferred Stock held by

9

 

such Holder, but cannot be issued to such Holder at the time of conversion as a result of the
Ownership Limit, shall thereafter be issued to such Holder on the first date on which such issuance
would not cause or result in a violation of the Ownership Limit. Upon conversion, Holders shall
receive cash in lieu of fractional shares in accordance with Section 13 hereof.

          Section 9. Conversion Procedures.

          (a) Upon receipt by the Corporation of Stockholder Approvals, within two (2) Business Days
thereafter, the Corporation shall provide notice of mandatory conversion to each Holder (such
notice a “Notice of Mandatory Conversion”). In addition to any information required by
applicable law or regulation, the Notice of Mandatory Conversion with respect to such Holder shall
state, as appropriate:

     (i) the Mandatory Conversion Date;

     (ii) the number of shares of Common Stock to be issued upon conversion of each share of
Series C Preferred Stock held of record by such Holder and subject to such mandatory
conversion; and

     (iii) if certificates are to be issued, the place or places where certificates for shares
of Series C Preferred Stock held of record by such Holder are to be surrendered for issuance
of certificates representing shares of Common Stock.

          (b) Effective immediately prior to the close of business on the Mandatory Conversion Date with
respect to any shares of Series C Preferred Stock dividends shall no longer be declared on any such
shares of Series C Preferred Stock and such shares of Series C Preferred Stock shall cease to be
outstanding, in each case, subject to the right of the Holder to receive (i) shares of Common Stock
issuable upon such mandatory conversion, (ii) any declared and unpaid dividends on such share to
the extent provided in Section 4(h) and (iii) any other payments to which such Holder is otherwise
entitled pursuant to Section 8, Section 11 or Section 13 hereof, as applicable.

          (c) No allowance or adjustment, except pursuant to Section 10, shall be made in respect of
dividends payable to holders of the Common Stock of record as of any date prior to the close of
business on the Mandatory Conversion Date with respect to any share of Series C Preferred Stock.
Prior to the close of business on the Mandatory Conversion Date with respect to any share of Series
C Preferred Stock, shares of Common Stock issuable upon conversion thereof, or other securities
issuable upon conversion of, such share of Series C Preferred Stock shall not be deemed outstanding
for any purpose, and the Holder thereof shall have no rights with respect to the Common Stock or
other securities issuable upon conversion (including voting rights, rights to respond to tender
offers for the Common Stock or other securities issuable upon conversion and rights to receive any
dividends or other distributions on the Common Stock or other securities issuable upon conversion)
by virtue of holding such share of Series C Preferred Stock.

          (d) Shares of Series C Preferred Stock duly converted in accordance with this Certificate of
Designations, or otherwise reacquired by the Corporation, will resume the status of authorized and
unissued shares of the Corporation’s preferred stock, undesignated as to series and available for
future issuance. The Corporation may from time-to-time take such appropriate action as may be
necessary to reduce the authorized number of shares of Series C Preferred

10

 

Stock; provided, that the Corporation shall not take any such action if such action would
reduce the authorized number of shares of Series C Preferred Stock below the number of shares of
Series C Preferred Stock then outstanding.

          (e) The Person or Persons entitled to receive the Common Stock and/or cash, securities or
other property issuable upon conversion of Series C Preferred Stock shall be treated for all
purposes as the record holder(s) of such shares of Common Stock and/or securities as of the close
of business on the Mandatory Conversion Date with respect thereto. In the event that a Holder shall
not by written notice designate the name in which shares of Common Stock and/or cash, securities or
other property (including payments of cash in lieu of fractional shares) to be issued or paid upon
conversion of shares of Series C Preferred Stock should be registered or paid or the manner in
which such shares should be delivered, the Corporation shall be entitled to register and deliver
such shares, and make such payment, in the name of the Holder and in the manner shown on the
records of the Corporation.

          (f) On the Mandatory Conversion Date with respect to any share of Series C Preferred Stock,
certificates representing shares of Common Stock shall be issued and delivered to the Holder
thereof or such Holder’s designee (or, at the Corporation’s option such shares shall be registered
in book-entry form) upon presentation and surrender of the certificate evidencing the Series C
Preferred Stock to the Corporation and, if required, the furnishing of appropriate endorsements and
transfer documents and the payment of all transfer and similar taxes.

          Section 10. Anti-Dilution Adjustments.

          (a) The Conversion Price shall be subject to the following adjustments:

     (i) Stock Dividends and Distributions. If the Corporation pays dividends or other
distributions on the Common Stock in shares of Common Stock, then the Conversion Price in
effect immediately prior to the Ex-Date for such dividend or distribution will be multiplied
by the following fraction:

	 	 	 	 	 

	 
	 	OS0	 	 
	 
	 
	 	 

OS1
	 	 

Where,

	 	 	 

	OS0 =

	 	the number of shares of Common Stock outstanding
immediately prior to Ex-Date for such dividend or
distribution.
	 
	OS1 =

	 	the sum of the number of shares of Common Stock
outstanding immediately prior to the Ex-Date for such
dividend or distribution plus the total number of shares
of Common Stock constituting such dividend or
distribution.

For the purposes of this clause (i), the number of shares of Common Stock at the time
outstanding shall not include shares acquired by the Corporation. If any dividend or
distribution described in this clause (i) is declared but not so paid or made, the Conversion
Price shall be readjusted, effective as of the date the Board of Directors publicly announces

11

 

its decision not to make such dividend or distribution, to such Conversion Price that would be
in effect if such dividend or distribution had not been declared.

     (ii)
Subdivisions, Splits and Combination of the Common Stock. If the Corporation
subdivides, splits or combines the shares of Common Stock, then the Conversion Price in effect
immediately prior to the effective date of such share subdivision, split or combination will
be multiplied by the following fraction:

	 	 	 	 	 

	 
	 	OS0	 	 
	 	 	 	 	 
	 
	 	 

OS1
	 	 

Where,

	 	 	 

	OS0 =

	 	the number of shares of Common Stock outstanding
immediately prior to the effective date of such share
subdivision, split or combination.
	 
	 	 
	OS1 =

	 	the number of shares of Common Stock outstanding
immediately after the opening of business on the
effective date of such share subdivision, split or
combination.

For the purposes of this clause (ii), the number of shares of Common Stock at the time
outstanding shall not include shares acquired by the Corporation. If any subdivision, split or
combination described in this clause (ii) is announced but the outstanding shares of Common
Stock are not subdivided, split or combined, the Conversion Price shall be readjusted,
effective as of the date the Board of Directors publicly announces
its decision not to subdivide, split or combine the outstanding shares of Common Stock, to such Conversion Price
that would be in effect if such subdivision, split or combination had not been announced.

     (iii) Issuance of Stock Purchase Rights. If the Corporation issues to all holders
of the shares of Common Stock rights or warrants (other than rights or warrants issued
pursuant to a stockholders’ rights plan, a dividend reinvestment plan or share purchase plan
or other similar plans) entitling them, for a period of up to 45 days from the date of
issuance of such rights or warrants, to subscribe for or purchase the shares of Common Stock
at less than the Current Market Price on the date fixed for the determination of stockholders
entitled to receive such rights or warrants, then the Conversion Price in effect immediately
prior to the Ex-Date for such distribution will be multiplied by the following fraction:

	 	 	 	 	 

	 
	 	OS0 + Y	 	 
	 
	 	
	 	 
	
 
	 	 

OS0 + X	 	 

Where,

12

 

	 	OS0	 = 	the number of shares of Common Stock outstanding
immediately prior to the Ex-Date for such
distribution.
	 
	 	X	 = 	the total number of shares of Common Stock issuable pursuant to such
rights or warrants.
	 
	 	Y	 = 	the number of shares of Common Stock equal to the aggregate price
payable to exercise such rights or warrants divided by the Current
Market Price on the date fixed for the determination of stockholders
entitled to receive such rights or warrants.

For the purposes of this clause (iii), the number of shares of Common Stock at the time
outstanding shall not include shares acquired by the Corporation. The Corporation shall not
issue any such rights or warrants in respect of shares of the Common Stock acquired by the
Corporation. In the event that such rights or warrants described in this clause (iii) are not
so issued, the Conversion Price shall be readjusted, effective as of the date the Board of
Directors publicly announces its decision not to issue such rights or warrants, to the
Conversion Price that would then be in effect if such issuance had not been declared. To the
extent that such rights or warrants are not exercised prior to their expiration or shares of
Common Stock are otherwise not delivered pursuant to such rights or warrants upon the exercise
of such rights or warrants, the Conversion Price shall be readjusted to such Conversion Price
(but giving effect to any other adjustments that may have been made with respect to the
Conversion Price pursuant to the terms of this Certificate of Designations) that would then be
in effect had the adjustment made upon the issuance of such rights or warrants been made on
the basis of the delivery of only the number of shares of Common Stock actually delivered. In
determining the aggregate offering price payable for such shares of Common Stock, there shall
be taken into account any consideration received for such rights or warrants and the value of
such consideration (if other than cash, to be determined in a reasonable manner by the Board
of Directors).

     (iv) Debt or Asset Distributions. If the Corporation distributes to all holders
of shares of Common Stock evidences of indebtedness, shares of capital stock, securities, cash
or other assets (excluding any dividend or distribution referred to in clause (i) above, any
rights or warrants referred to in clause (iii) above, any dividend or distribution paid
exclusively in cash, any consideration payable in connection with a tender or exchange offer
made by the Corporation or any of its applicable subsidiaries, and any dividend of shares of
capital stock of any class or series, or similar equity interests, of or relating to a
subsidiary or other business unit in the case of certain spin-off transactions as described
below), then the Conversion Price in effect immediately prior to the Ex-Date for such
distribution will be multiplied by the following fraction:

	 	 	 	 	 

	 
	 	SP0 — FMV
	 	 
	 	 	 	 	 
	  
	 	 

SP0
	 	  

13

 

Where,

	 	SP0	 = 	the Current Market Price per share of Common Stock on such date.
	 
	 	FMV	 = 	the fair market value of the portion of the distribution applicable
to one share of Common Stock on such date as determined in good
faith by the Board of Directors.

In a “spin-off”, where the Corporation makes a distribution to all holders of shares of Common
Stock consisting of capital stock of any class or series, or similar equity interests of, or
relating to, a subsidiary or other business unit, the Conversion Price will be adjusted on the
fifteenth Trading Day after the effective date of the distribution by multiplying such
Conversion Price in effect immediately prior to such fifteenth Trading Day by the following
fraction:

	 	 	 	 	 

	 
	 	MP0
	 	 
	 	 	 	 	 
	  
	 	 

MP0 + MPs
	 	  

Where,

	 	MP0	 = 	the average of the Closing Prices of the Common Stock over the first
ten Trading Days commencing on and including the fifth Trading Day
following the effective date of such distribution.
	 
	 	MPs	 = 	the average of the Closing Prices of the capital stock or equity
interests representing the portion of the distribution applicable to
one share of Common Stock over the first ten Trading Days commencing
on and including the fifth Trading Day following the effective date
of such distribution, or, if not traded on a national or regional
securities exchange or over-the-counter market, the fair market
value of the capital stock or equity interests representing the
portion of the distribution applicable to one share of Common Stock
on such date as determined in good faith by the Board of Directors.

In the event that such distribution described in this clause (iv) is not so paid or made, the
Conversion Price shall be readjusted, effective as of the date the Board of Directors publicly
announces its decision not to pay or make such dividend or distribution, to the Conversion
Price that would then be in effect if such dividend or distribution had not been declared.

     (v) Cash Distributions. If the Corporation makes a distribution consisting
exclusively of cash to all holders of the Common Stock, excluding, (a) any cash dividend on
the Common Stock to the extent a corresponding cash dividend is paid on the Series C
Preferred Stock pursuant to Section 4 (b), (b) any cash that is distributed in a

14

 

Reorganization Event or as part of a “spin-off” referred to in clause (iv) above, (c) any
dividend or distribution in connection with the Corporation’s liquidation, dissolution or
winding up, and (d) any consideration payable in connection with a tender or exchange offer
made by the Corporation or any of its subsidiaries, then in each event, the Conversion Price
in effect immediately prior to the Ex-Date for such distribution will be multiplied by the
following fraction:

	 	 	 	 	 

	 
	 	SP0 – DIV
	 	 
	 	 	 	 	 
	  
	 	 

SP0
	 	  

Where,

	 	SP0	 = 	the Closing Price per share of Common Stock on the
Trading Day immediately preceding the Ex-Date.
	 
	 	DIV	 = 	the amount per share of Common Stock of the cash
distribution, as determined pursuant to the introduction
to this clause (v).

In the event that any distribution described in this clause (v) is not so made, the Conversion
Price shall be readjusted, effective as of the date the Board of Directors publicly announces
its decision not to pay such distribution, to the Conversion Price which would then be in
effect if such distribution had not been declared.

     (vi) Self Tender Offers and Exchange Offers. If the Corporation or any of its
subsidiaries successfully completes a tender or exchange offer for the Common Stock where the
cash and the value of any other consideration included in the payment per share of the Common
Stock exceeds the Closing Price per share of the Common Stock on the Trading Day immediately
succeeding the expiration of the tender or exchange offer, then the Conversion Price in effect
at the close of business on such immediately succeeding Trading Day will be multiplied by the
following fraction:

	 	 	 	 	 

	 
	 	OS0 × SP0
	 	 
	 	 	 	 	 
	  
	 	 

AC + (SP0 × OS1)
	 	  

Where,

	 	SP0	 = 	the Closing Price per share of Common Stock on the
Trading Day immediately succeeding the expiration of the
tender or exchange offer.
	 
	 	OS0	 = 	the number of shares of Common Stock outstanding
immediately prior to the expiration of the tender or
exchange offer, including any shares validly tendered and
not withdrawn.

15

 

	 	OS1	 = 	the number of shares of Common Stock outstanding
immediately after the expiration of the tender or
exchange offer, giving effect to consummation of the
acquisition of all shares validly tendered or exchanged
(and not withdrawn) in connection with such tender or
exchange.
	 
	 	AC	 = 	the aggregate cash and fair market value of the other
consideration payable in the tender or exchange offer, as
determined in good faith by the Board of Directors.

In the event that the Corporation, or one of its subsidiaries, is obligated to purchase shares
of Common Stock pursuant to any such tender offer or exchange offer, but the Corporation, or
such subsidiary, is permanently prevented by applicable law from effecting any such purchases,
or all such purchases are rescinded, then the Conversion Price shall be readjusted to be such
Conversion Price that would then be in effect if such tender offer or exchange offer had not
been made.

     (vi) Rights Plans. To the extent that the Corporation has a rights plan in effect
with respect to the Common Stock on the Mandatory Conversion Date, upon conversion of any
            shares of the Series C Preferred Stock, Holders will receive, in addition to the shares of
Common Stock, the rights under the rights plan, unless, prior to the Mandatory Conversion
Date, the rights have separated from the shares of Common Stock, in which case the Conversion
Price will be adjusted at the time of separation as if the Corporation had made a distribution
to all holders of the Common Stock as described in clause (iv) above, subject to readjustment
in the event of the expiration, termination or redemption of such rights.

          (b) Subject to the limitations set forth in the provisos to the first paragraph of Section
10(a), the Corporation may make such decreases in the Conversion Price, in addition to any other
decreases required by this Section 10, if the Board of Directors deems it advisable to avoid or
diminish any income tax to holders of the Common Stock resulting from any dividend or distribution
of shares of Common Stock (or issuance of rights or warrants to acquire shares of Common Stock) or
from any event treated as such for income tax purposes or for any other reason.

          (c) (i) All adjustments to the Conversion Price shall be calculated to the nearest 
1/10 of a cent. No adjustment in the Conversion Price shall be required if such adjustment
would be less than $0.01; provided, that any adjustments which by reason of this subparagraph are
not required to be made shall be carried forward and taken into account in any subsequent
adjustment; provided further that on the Mandatory Conversion Date adjustments to the Conversion
Price will be made with respect to any such adjustment carried forward and which has not been taken
into account before such date.

     (ii) No adjustment to the Conversion Price shall be made if Holders may participate in
the transaction that would otherwise give rise to an adjustment, as a result of holding the
Series C Preferred Stock (including without limitation pursuant to Section 4 hereof), without
having to convert the Series C Preferred Stock, as if they held the full number of
shares of Common Stock into which a share of the Series C Preferred Stock may then be
converted.

     (iii) The Applicable Conversion Price shall not be adjusted:

16

 

     (A) upon the issuance of any shares of Common Stock pursuant to any present or
future plan providing for the reinvestment of dividends or interest payable on the
Corporation’s securities and the investment of additional optional amounts in shares of
Common Stock under any such plan;

     (B) upon the issuance of any shares of Common Stock or rights or warrants to
purchase those shares pursuant to any present or future employee, director or consultant
benefit plan or program of or assumed by the Corporation or any of its subsidiaries;

     (C) upon the issuance of any shares of Common Stock pursuant to any option, warrant,
right or exercisable, exchangeable or convertible security outstanding as of the date shares of the Series C Preferred Stock were first issued and not substantially amended
thereafter;

     (D) for a change in the par value or no par value of Common Stock; or

     (E) for accrued but unpaid dividends on the Series C Preferred Stock.

          (d) Whenever the Conversion Price is to be adjusted in accordance with Section 10(a) or
Section 10(b), the Corporation shall: (i) compute the Conversion Price in accordance with Section
10(a) or Section 10(b), taking into account the $0.01 threshold set forth in Section 10(c) hereof;
(ii) as soon as practicable following the occurrence of an event that requires an adjustment to the
Conversion Price pursuant to Section 10(a) or Section 10(b), taking into account the $0.01
threshold set forth in Section 10(c) hereof (or if the Corporation is not aware of such occurrence,
as soon as practicable after becoming so aware), provide, or cause to be provided, a written notice
to the Holders of the occurrence of such event; and (iii) as soon as practicable following the
determination of the revised Conversion Price in accordance with Section 10(a) or Section 10(b)
hereof, provide, or cause to be provided, a written notice to the Holders setting forth in
reasonable detail the method by which the adjustment to the Conversion Price was determined and
setting forth the revised Conversion Price.

          Section 11. Reorganization Events. (a) In the event that for so long as any shares of Series C
Preferred Stock remains outstanding there occurs:

     (i) any consolidation, merger or other similar business combination of the Corporation
with or into another Person, in each case pursuant to which the Common Stock will be converted
into cash, securities or other property of the Corporation or another Person;

     (ii) any sale, transfer, lease or conveyance to another Person of all or substantially
all of the property and assets of the Corporation, in each case pursuant to which the Common
Stock will be converted into cash, securities or other property of the Corporation or another
Person;

     (iii) any reclassification of the Common Stock into securities including securities other
than the Common Stock; or

     (iv) any statutory exchange of the outstanding shares of Common Stock for securities of
another Person (other than in connection with a merger or acquisition);

(any such event specified in this Section 11(a), a “Reorganization Event”); then each share
of such Holder’s Series C Preferred Stock outstanding immediately prior to such Reorganization
Event shall remain outstanding but shall automatically convert, effective as of the close of

17

 

business on the Mandatory Conversion Date with respect to the shares of Series C Preferred Stock of
such Holder, into the type and amount of securities, cash and other property receivable in such
Reorganization Event by the holder (excluding the counterparty to the Reorganization Event or an
Affiliate of such counterparty) of the number of shares of Common Stock obtained by dividing (x)
the Liquidation Preference, plus all accrued but unpaid dividends, whether or not declared, up to,
but excluding such date, by (y) the Applicable Conversion Price as of such date (such securities,
cash and other property, the “Exchange Property”). In the event that a Reorganization Event
referenced in Section 11(a) involves common stock as all or part of the consideration being offered
in a fixed exchange ratio transaction, the fair market value per share of such common stock shall
be determined by reference to the average of the closing prices of such common stock for the ten
Trading Day period ending immediately prior to the consummation of such Reorganization Event.

          (b) In the event that holders of the shares of Common Stock have the opportunity to elect the
form of consideration to be received in such transaction, the consideration that the Holders are
entitled to receive shall be deemed to be the types and amounts of consideration received by the
majority of the holders of the shares of Common Stock that affirmatively make an election.

          (c) The above provisions of this Section 11 shall similarly apply to successive Reorganization
Events and the provisions of Section 10 shall apply to any shares of capital stock of the
Corporation (or any successor) received by the holders of the Common Stock in any such
Reorganization Event.

          (d) The Corporation (or any successor) shall, within seven days of the consummation of any
Reorganization Event, provide written notice to the Holders of such consummation of such event and
of the kind and amount of the cash, securities or other property that constitutes the Exchange
Property. Failure to deliver such notice shall not affect the operation of this Section 11.

          (e) The Corporation shall not enter into any agreement for a transaction constituting a
Reorganization Event unless such agreement provides for or does not interfere with or prevent (as
applicable) conversion of the Series C Preferred Stock into the Exchange Property in a manner that
is consistent with and gives effect to this Section 11.

          Section 12. Voting Rights. (a) Holders will not have any voting rights, including the right to
elect any directors, except (i) voting rights, if any, required by law, and (ii) voting rights, if
any, described in this Section 12.

          (b) So long as any shares of Series C Preferred Stock are outstanding, the vote or consent of
the Holders of a majority of the shares of Series C Preferred Stock at the time outstanding, voting
as a single class, given in person or by proxy, either in writing without a meeting or by vote at
any meeting called for the purpose, will be necessary for effecting or validating any of the
following actions, whether or not such approval is required by Puerto Rico law:

     (i) any amendment, alteration or repeal (including by means of a merger, consolidation or
otherwise) of any provision of the Certificate of Incorporation (including this Certificate

18

 

of Designations) or the Corporation’s bylaws that would significantly and adversely affect the
rights or preference of the Series C Preferred Stock;

     (ii) any amendment or alteration (including by means of a merger, consolidation or
otherwise) of the Corporation’s Certificate of Incorporation to authorize, or create, or
increase the authorized amount of, any shares of, or any securities convertible into shares
of, any class or series of the Corporation’s capital stock ranking senior to the Series C
Preferred Stock in the payment of dividends or in the distribution of assets on any
liquidation, dissolution or winding up of the Corporation; or

     (iii) the consummation of a binding share exchange or reclassification involving the
Series C Preferred Stock or a merger or consolidation of the Corporation with another entity,
except that the Holders will have no right to vote under this provision or under Puerto Rico
law if in each case (x) the Series C Preferred Stock remains outstanding or, in the case of
any such merger or consolidation with respect to which the Corporation is not the surviving or
resulting entity, is converted into or exchanged for preference securities of the surviving or
resulting entity or its ultimate parent, that is an entity organized and existing under the
laws of the United States of America, any state thereof, the District of Columbia or the
Commonwealth of Puerto Rico, and (y) such Series C Preferred Stock remaining outstanding or
such preference securities, as the case may be, have such rights, preferences, privileges and
voting powers, taken as a whole, as are not materially less favorable to the Holders thereof
than the rights, preferences, privileges and voting powers of the Series C Preferred Stock,
taken as a whole.

provided, however, that any increase in the amount of the authorized preferred stock of the
Corporation or any securities convertible into the preferred stock of the Corporation or the
creation and issuance, or an increase in the authorized or issued amount, of any series of
preferred stock of the Corporation or any securities convertible into preferred stock of the
Corporation ranking equally with and/or junior to the Series C Preferred Stock with respect to the
payment of dividends (whether such dividends are cumulative or non-cumulative) and/or the
distribution of assets upon the Corporation’s liquidation, dissolution or winding up will not, in
and of itself, be deemed to significantly and adversely affect the rights or preference of the
Series C Preferred Stock and, notwithstanding any provision of Puerto Rico law, Holders will have
no right to vote solely by reason of such an increase, creation or issuance. For the avoidance of
doubt, stockholder approval to amend the Corporation’s Certificate of Incorporation to increase the
authorized preferred stock of the Corporation in the amount currently contemplated in the
Corporation’s definitive proxy statement will not be deemed to adversely affect the rights of the
Series C Preferred Stock, and Holders will have no right to vote solely by reason of such increase.

          (c) Notwithstanding the foregoing, Holders shall not have any voting rights if, at or prior to
the effective time of the act with respect to which such vote would otherwise be required, all
outstanding shares of Series C Preferred Stock shall have been converted into shares of Common
Stock.

          Section 13. Fractional Shares.

          (a) No fractional shares of Common Stock will be issued as a result of any conversion of
shares of Series C Preferred Stock.

19

 

          (b) In lieu of any fractional share of Common Stock otherwise issuable in respect of any
mandatory conversion pursuant to Section 8 hereof, the Corporation shall pay an amount in cash
(computed to the nearest cent) equal to the same fraction of the Closing Price of the Common Stock
determined as of the second Trading Day immediately preceding the Mandatory Conversion Date.

          (c) If more than one share of the Series C Preferred Stock is surrendered for conversion at
one time by or for the same Holder, the number of full shares of Common Stock issuable upon
conversion thereof shall be computed on the basis of the aggregate number of shares of the Series C
Preferred Stock so surrendered.

          Section 14. Reservation of Common Stock.

          (a) Following the receipt of the Stockholder Approvals, the Corporation shall at all times
reserve and keep available out of its authorized and unissued Common Stock or shares acquired by
the Corporation, solely for issuance upon the conversion of shares of Series C Preferred Stock as
provided in this Certificate of Designations free from any preemptive or other similar rights, such
number of shares of Common Stock as shall from time to time be issuable upon the conversion of all
the shares of Series C Preferred Stock then outstanding. For purposes of this Section 14(a), the
number of shares of Common Stock that shall be deliverable upon the conversion of all outstanding
shares of Series C Preferred Stock shall be computed as if at the time of computation all such
outstanding shares were held by a single Holder.

          (b) Notwithstanding the foregoing, the Corporation shall be entitled to deliver upon
conversion of shares of Series C Preferred Stock, as herein provided, shares of Common Stock
acquired by the Corporation (in lieu of the issuance of authorized and unissued shares of Common
Stock), so long as any such acquired shares are free and clear of all liens, charges, security
interests or encumbrances.

          (c) All shares of Common Stock delivered upon conversion of the Series C Preferred Stock shall
be duly authorized, validly issued, fully paid and non-assessable, free and clear of all liens,
claims, security interests and other encumbrances.

          (d) Prior to the delivery of any securities that the Corporation shall be obligated to deliver
upon conversion of the Series C Preferred Stock, the Corporation shall use its reasonable best
efforts to comply with all federal and state laws and regulations thereunder requiring the
registration of such securities with, or any approval of or consent to the delivery thereof by, any
governmental authority.

          (e) The Corporation hereby covenants and agrees that, if at any time the Common Stock shall be
listed on the New York Stock Exchange or any other national securities exchange or automated
quotation system, the Corporation will, if permitted by the rules of such exchange or automated
quotation system, list and keep listed, so long as the Common Stock shall be so listed on such
exchange or automated quotation system, all the Common Stock issuable upon conversion of the Series
C Preferred Stock.

          Section 15. Replacement Certificates.

          (a) The Corporation shall replace any mutilated certificate at the Holder’s expense upon
surrender of that certificate to the Corporation. The Corporation shall replace certificates

20

 

that become destroyed, stolen or lost at the Holder’s expense upon delivery to the Corporation of
satisfactory evidence that the certificate has been destroyed, stolen or lost, together with any
indemnity that may be required by the Corporation.

          (b) The Corporation shall not be required to issue any certificates representing the Series C
Preferred Stock on or after the Mandatory Conversion Date. In place of the delivery of a
replacement certificate following the Mandatory Conversion Date, the Corporation, upon delivery of
the evidence and indemnity described in clause (a) above, shall deliver the shares of Common Stock
pursuant to the terms of the Series C Preferred Stock formerly evidenced by the certificate.

          Section 16. Miscellaneous.

          (a) All notices referred to herein shall be in writing, and, unless otherwise specified
herein, all notices hereunder shall be deemed to have been given upon the earlier of receipt
thereof or three Business Days after the mailing thereof if sent by registered or certified mail
(unless first-class mail shall be specifically permitted for such notice under the terms of this
Certificate of Designations) with postage prepaid, addressed: (i) if to the Corporation, to its
office at 997 San Roberto Street, San Juan, Puerto Rico, 00926, Attention: General Counsel, or (ii)
if to any Holder, to such Holder at the address of such Holder as listed in the stock record books
of the Corporation, or (iii) to such other address as the Corporation or any such Holder, as the
case may be, shall have designated by notice similarly given.

          (b) The Corporation shall pay any and all stock transfer and documentary stamp taxes that may
be payable in respect of any issuance or delivery of shares of Series C Preferred Stock or shares
of Common Stock or other securities issued on account of Series C Preferred Stock pursuant hereto
or certificates representing such shares or securities. The Corporation shall not, however, be
required to pay any such tax that may be payable in respect of any transfer involved in the
issuance or delivery of shares of Series C Preferred Stock or Common Stock or other securities in a
name other than that in which the shares of Series C Preferred Stock with respect to which such
shares or other securities are issued or delivered were registered, or in respect of any payment to
any Person other than a payment to the registered holder thereof, and shall not be required to make
any such issuance, delivery or payment unless and until the Person otherwise entitled to such
issuance, delivery or payment has paid to the Corporation the amount of any such tax or has
established, to the satisfaction of the Corporation, that such tax has been paid or is not payable.

          (c) All payments on the shares of Series C Preferred Stock shall be subject to withholding and
backup withholding of tax to the extent required by applicable law, subject to applicable
exemptions, and amounts withheld, if any, shall be treated as received by the holders thereof.

          (d) No share of Series C Preferred Stock shall have any rights of preemption whatsoever under
this Certificate of Designations as to any securities of the Corporation, or any warrants, rights
or options issued or granted with respect thereto, regardless of how such securities, or such
warrants, rights or options, may be designated issued or granted.

          (e) The shares of Series C Preferred Stock shall not have any voting powers, preferences or
relative, participating, optional or other special rights, or qualifications,

21

 

limitations or restrictions thereof, other than as set forth herein or in the Certificate of Incorporation or as
provided by applicable law.

          (f) The Corporation covenants (1) not to treat the Series C Preferred Stock as preferred stock
for purposes of Section 305 of the Internal Revenue Code of 1986, as amended, except as otherwise
required by applicable law.

          RESOLVED, that all actions taken by the officers and directors of the Corporation or any of
them in connection with the foregoing resolutions through the date hereof be, and they hereby are,
ratified and approved.

          IN WITNESS WHEREOF, Oriental Financial Group Inc. has caused this Certificate of Designations
to be signed by Carlos O. Souffront its Secretary of the Board of Directors this 29th day of April,
2010.

	 	 	 	 	 
	 	ORIENTAL FINANCIAL GROUP INC.

 	 
	 	By:  	 	 
	 	 	Name:  	Carlos O. Souffront 	 
	 	 	Title:  	Secretary of the Board of Directors 	 
	 

22

 

EXHIBIT B

Form of Registration Rights Agreement

REGISTRATION RIGHTS AGREEMENT

     This Registration Rights Agreement (this “Agreement”) is made and entered into as of
April 23, 2010, by and among Oriental Financial Group Inc., a financial holding company and
corporation organized in the Commonwealth of Puerto Rico (the “Company”), and the several
purchasers signatory hereto (each a “Purchaser” and collectively, the “Purchasers”).

     This Agreement is made pursuant to the Securities Purchase Agreement, dated as of the date
hereof between the Company and each Purchaser (the “Purchase Agreement”).

     NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in this Agreement, and for
other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged,
the Company and each of the Purchasers agree as follows:

     1. Definitions. Capitalized terms used and not otherwise defined herein that are
defined in the Purchase Agreement shall have the meanings given such terms in the Purchase
Agreement. As used in this Agreement, the following terms shall have the following meanings:

          “Advice” shall have the meaning set forth in Section 6(d).

          “Affiliate” means, with respect to any person, any other person which directly or indirectly
controls, is controlled by, or is under common control with, such person.

          “Agreement” shall have the meaning set forth in the Preamble.

          “Business Day” means a day, other than a Saturday or Sunday, on which banks in New York City
are open for the general transaction of business.

          “Closing” has the meaning set forth in the Purchase Agreement.

          “Closing Date” has the meaning set forth in the Purchase Agreement.

          “Commission” means the Securities and Exchange Commission.

          “Common Stock” means the common stock of the Company, $1.00 par value per share, and any
securities into which such shares of common stock may hereinafter be reclassified.

          “Company” shall have the meaning set forth in the Preamble.

          “Effective Date” means the date that the Registration Statement filed pursuant to Section 2(a)
is first declared effective by the Commission.

 

 

          “Effectiveness Deadline” means, with respect to the Initial Registration Statement or the New
Registration Statement, the earlier of (i) the 120th calendar day following the Closing Date (or
the 155th calendar day following the Closing Date in the event that such registration statement is
subject to review by the Commission) and (ii) the 5th Trading Day after the date the
Company is notified (orally or in writing, whichever is earlier) by the Commission that such
Registration Statement will not be “reviewed” or will not be subject to further review; provided,
that if the Effectiveness Deadline falls on a Saturday, Sunday or other day that the Commission is
closed for business, the Effectiveness Deadline shall be extended to the next Business Day on which
the Commission is open for business.

     “Effectiveness Period” shall have the meaning set forth in Section 2(b).

     “Event” shall have the meaning set forth in Section 2(c).

     “Event Date” shall have the meaning set forth in Section 2(c).

          “Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and
regulations promulgated thereunder.

     “Filing Deadline” means, with respect to the Initial Registration Statement required to be
filed pursuant to Section 2(a), the 90th calendar day following the Closing Date, provided, that if
the Filing Deadline falls on a Saturday, Sunday or other day that the Commission is closed for
business, the Filing Deadline shall be extended to the next business day on which the Commission is
open for business.

     “Holder” or “Holders” means the holder or holders, as the case may be, from time to time of
Registrable Securities.

          “Indemnified Party” shall have the meaning set forth in Section 5(c).

          “Indemnifying Party” shall have the meaning set forth in Section 5(c).

          “Initial Registration Statement” means the initial Registration Statement filed pursuant to
Section 2(a) of this Agreement.

          “Liquidated Damages” shall have the meaning set forth in Section 2(c).

          “Losses” shall have the meaning set forth in Section 5(a).

          “New Registration Statement” shall have the meaning set forth in Section 2(a).

          “Person” means an individual or corporation, partnership, trust, incorporated or
unincorporated association, joint venture, limited liability company, joint stock company,
government (or an agency or subdivision thereof) or other entity of any kind.

     “Principal Market” means the Trading Market on which the Common Stock is primarily listed on
and quoted for trading, which, as of the Closing Date, shall be the New York Stock Exchange.

2

 

     “Proceeding” means an action, claim, suit, investigation or proceeding (including, without
limitation, an investigation or partial proceeding, such as a deposition), whether commenced or
threatened.

     “Prospectus” means the prospectus included in a Registration Statement (including, without
limitation, a prospectus that includes any information previously omitted from a prospectus filed
as part of an effective registration statement in reliance upon Rule 430A promulgated under the
Securities Act), as amended or supplemented by any prospectus supplement, with respect to the terms
of the offering of any portion of the Registrable Securities covered by a Registration Statement,
and all other amendments and supplements to the Prospectus, including post-effective amendments,
and all material incorporated by reference or deemed to be incorporated by reference in such
Prospectus.

     “Purchase Agreement” shall have the meaning set forth in the Recitals.

     “Purchaser” or “Purchasers” shall have the meaning set forth in the Preamble.

     “Registrable Securities” means all of the Preferred Shares and the Underlying Shares and any
securities issued or issuable upon any stock split, dividend or other distribution,
recapitalization or similar event with respect to the Preferred Shares and the Underlying Shares,
provided, that the Holder has completed and delivered to the Company a Selling Stockholder
Questionnaire; and provided, further, that Preferred Shares or Underlying Shares shall cease to be
Registrable Securities upon the earliest to occur of the following: (A) a sale pursuant to a
Registration Statement or Rule 144 under the Securities Act (in which case, only such security sold
shall cease to be a Registrable Security); (B) becoming eligible for sale without the requirement
for the Company to be in compliance with the current public information required under Rule
144(c)(1) (or Rule 144(i)(2), if applicable) and without volume or manner of sale restrictions by
Holders who are not Affiliates of the Company; (C) if such Preferred Shares or Underlying Shares
have ceased to be outstanding; or (D) if such Preferred Shares or Underlying Shares have been sold
in a private transaction in which the Holder’s rights under this Agreement have not been assigned
to the transferee.

     “Registration Statements” means any one or more registration statements of the Company filed
under the Securities Act that covers the resale of any of the Registrable Securities pursuant to
the provisions of this Agreement (including without limitation the Initial Registration Statement,
the New Registration Statement and any Remainder Registration Statements), amendments and
supplements to such Registration Statements, including post-effective amendments, all exhibits and
all material incorporated by reference or deemed to be incorporated by reference in such
Registration Statements.

     “Remainder Registration Statement” shall have the meaning set forth in Section 2(a).

     “Rule 144” means Rule 144 promulgated by the Commission pursuant to the Securities Act, as
such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by
the Commission having substantially the same effect as such Rule.

3

 

     “Rule 415” means Rule 415 promulgated by the Commission pursuant to the Securities Act, as
such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by
the Commission having substantially the same effect as such Rule.

     “Rule 424” means Rule 424 promulgated by the Commission pursuant to the Securities Act, as
such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by
the Commission having substantially the same effect as such Rule.

          “SEC Guidance” means (i) any publicly-available written or oral guidance, comments,
requirements or requests of the Commission staff and (ii) the Securities Act.

          “Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations
promulgated thereunder.

          “Selling Stockholder Questionnaire” means a questionnaire in the form attached as
Annex B hereto, or such other form of questionnaire as may reasonably be adopted by the
Company from time to time.

          “Trading Day” means (i) a day on which the Common Stock is listed or quoted and traded on its
Principal Market (other than the OTC Bulletin Board), or (ii) if the Common Stock is not listed on
a Trading Market (other than the OTC Bulletin Board), a day on which the Common Stock is traded in
the over-the-counter market, as reported by the OTC Bulletin Board, or (iii) if the Common Stock is
not quoted on any Trading Market, a day on which the Common Stock is quoted in the over-the-counter
market as reported in the “pink sheets” by Pink Sheets LLC (or any similar organization or agency
succeeding to its functions of reporting prices); provided, that in the event that the Common Stock
is not listed or quoted as set forth in (i), (ii) and (iii) hereof, then Trading Day shall mean a
Business Day.

          “Trading Market” means whichever of the New York Stock Exchange, the NYSE Amex, the NASDAQ
Global Select Market, the NASDAQ Global Market, the NASDAQ Capital Market or OTC Bulletin Board on
which the Common Stock is listed or quoted for trading on the date in question.

     2. Registration.

          (a) On or prior to the Filing Deadline, the Company shall prepare and file with the
Commission a Registration Statement covering the resale of all of the Registrable Securities not
already covered by an existing and effective Registration Statement for an offering to be made on a
continuous basis pursuant to Rule 415 or, if Rule 415 is not available for offers and sales of the
Registrable Securities, by such other means of distribution of Registrable Securities as the
Company may reasonably determine (the “Initial Registration Statement”). The Initial Registration
Statement shall be on Form S-3 (except if the Company is then ineligible to register for resale of
the Registrable Securities on Form S-3, in which case such registration shall be on such other form
available to the Company to register for resale of the Registrable Securities as a secondary
offering) subject to the provisions of Section 2(f) and shall contain (except if otherwise required
pursuant to written comments received from the Commission upon a review of such Registration
Statement) the “Plan of Distribution” section substantially in the form attached hereto as
Annex A. Notwithstanding the registration obligations set forth in this Section 2, in the
event the Commission informs the Company that all of the Registrable Securities cannot, as a result
of the application of Rule 415, be registered for resale as a

4

 

secondary offering on a single registration statement, the Company agrees to promptly (i) inform each of the
Holders thereof and use its commercially reasonable efforts to file amendments to the Initial
Registration Statement as required by the Commission and/or (ii) withdraw the Initial Registration
Statement and file a new registration statement (a “New Registration Statement”), in either case
covering the maximum number of Registrable Securities permitted to be registered by the Commission,
on Form S-3 or such other form available to the Company to register for resale the Registrable
Securities as a secondary offering; provided, that prior to filing such amendment or New
Registration Statement, the Company shall be obligated to use its commercially reasonable efforts
to advocate with the Commission for the registration of all of the Registrable Securities in
accordance with the SEC Guidance, including without limitation, Compliance and Disclosure
Interpretation 612.09. Notwithstanding any other provision of this Agreement and subject to the
payment of Liquidated Damages in Section 2(c), if any SEC Guidance sets forth a limitation of the
number of Registrable Securities or other shares of Common Stock permitted to be registered on a
particular Registration Statement as a secondary offering (and notwithstanding that the Company
used diligent efforts to advocate with the Commission for the registration of all or a greater
number of Registrable Securities), the number of Registrable Securities or other shares of Common
Stock to be registered on such Registration Statement will be reduced on a pro rata basis. In the
event the Company amends the Initial Registration Statement or files a New Registration Statement,
as the case may be, under clauses (i) or (ii) above, the Company will use its commercially
reasonable efforts to file with the Commission, as promptly as allowed by Commission or SEC
Guidance provided to the Company or to registrants of securities in general, one or more
registration statements on Form S-3 or such other form available to the Company to register for
resale those Registrable Securities that were not registered for resale on the Initial Registration
Statement, as amended, or the New Registration Statement (the “Remainder Registration Statements”).
No Holder shall be named as an “underwriter” in any Registration Statement without such Holder’s
prior written consent.

          (b) The Company shall use its commercially reasonable efforts to cause each Registration
Statement to be declared effective by the Commission as soon as practicable and, with respect to
the Initial Registration Statement or the New Registration Statement, as applicable, no later than
the Effectiveness Deadline, and shall use its commercially reasonable efforts to keep each
Registration Statement continuously effective under the Securities Act until the earlier of (i)
such time as all of the Registrable Securities covered by such Registration Statement have been
publicly sold by the Holders or (ii) the date that all Registrable Securities covered by such
Registration Statement may be sold by non-affiliates without volume or manner of sale restrictions
under Rule 144, without the requirement for the Company to be in compliance with the current public
information requirements under Rule 144(c)(1) (or Rule 144(i)(2), if applicable), as determined by
counsel to the Company pursuant to a written opinion letter to such effect, addressed and
reasonably acceptable to the Company’s transfer agent and the effected Holders (the “Effectiveness
Period”). The Company shall request effectiveness of a Registration Statement as of 5:00 p.m. New
York City time on a Trading Day. The Company shall promptly notify the Holders via facsimile or
electronic mail of a “.pdf” format data file of the effectiveness of a Registration Statement
within one (1) Business Day of the Effective Date. The Company shall, by 9:30 a.m. New York City
time on the first Trading Day after the Effective Date, file a final Prospectus with the
Commission, as required by Rule 424(b).

5

 

          (c) If: (i) the Initial Registration Statement is not filed with the Commission on or
prior to the Filing Deadline, (ii) the Initial Registration Statement or the New Registration
Statement, as applicable, is not declared effective by the Commission (or otherwise does not become
effective) for any reason on or prior to the Effectiveness Deadline, other than as a result of any
open issues arising out of any routine Commission review of Exchange Act filings in effect as of
the date hereof, or (iii) after its Effective Date, (A) such Registration Statement ceases for any
reason (including without limitation by reason of a stop order, or the Company’s failure to update
the Registration Statement), to remain continuously effective as to all Registrable Securities for
which it is required to be effective or (B) the Holders are not permitted to utilize the Prospectus
therein to resell such Registrable Securities, in the case of (A) and (B) (other than during an
Allowable Grace Period (as defined in Section 2(e) of this Agreement)), (iv) a Grace Period (as
defined in Section 2(e) of this Agreement) exceeds the length of an Allowable Grace Period, or (v)
after the date six months following the Closing Date, and only in the event a Registration
Statement is not effective or available to sell all Registrable Securities, the Company fails to
file with the SEC any required reports under Section 13 or 15(d) of the 1934 Act such that it is
not in compliance with Rule 144(c)(1) (or Rule 144(i)(2), if applicable), as a result of which the
Holders who are not affiliates are unable to sell Registrable Securities without restriction under
Rule 144 (or any successor thereto) (any such failure or breach in clauses (i) through (v) above
being referred to as an “Event,” and, for purposes of clauses (i), (ii), (iii) or (v), the date on
which such Event occurs, or for purposes of clause (iv) the date on which such Allowable Grace
Period is exceeded, being referred to as an “Event Date”), then in addition to any other rights the
Holders may have hereunder or under applicable law, on each such Event Date and on each monthly
anniversary of each such Event Date (if the applicable Event shall not have been cured by such
date) until the applicable Event is cured, the Company shall pay to each Holder an amount in cash,
as liquidated damages and not as a penalty (“Liquidated Damages”), equal to 0.5% of the aggregate
purchase price paid by such Holder pursuant to the Purchase Agreement for any Registrable
Securities held by such Holder on the Event Date. The parties agree that notwithstanding anything
to the contrary herein or in the Purchase Agreement, no Liquidated Damages shall be payable (i) if
as of the relevant Event Date, the Registrable Securities may be sold by non-affiliates without
volume or manner of sale restrictions under Rule 144 and the Company is in compliance with the
current public information requirements under Rule 144(c)(1) (or Rule 144(i)(2), if applicable), as
determined by counsel to the Company pursuant to a written opinion letter to such effect, addressed
and reasonably acceptable to the Company’s transfer agent and (ii) with respect to any period after
the expiration of the Effectiveness Period (it being understood that this sentence shall not
relieve the Company of any Liquidated Damages accruing prior to the Effectiveness Period). If the
Company fails to pay any Liquidated Damages pursuant to this Section 2(c) in full within five (5)
Business Days after the date payable, the Company will pay interest thereon at a rate of 1.0% per
month (or such lesser maximum amount that is permitted to be paid by applicable law) to the Holder,
accruing daily from the date such Liquidated Damages are due until such amounts, plus all such
interest thereon, are paid in full. The Liquidated Damages pursuant to the terms hereof shall
apply on a daily pro-rata basis for any portion of a month prior to the cure of an Event, except in
the case of the first Event Date. The Effectiveness Deadline for a Registration Statement shall be
extended without default or Liquidated Damages hereunder in the event that the Company’s failure to
obtain the effectiveness of the Registration Statement on a timely basis results from the failure
of a Purchaser to timely provide the Company with information requested by the Company and

6

 

necessary to complete the Registration Statement in accordance with the requirements of the
Securities Act (in which case the Effectiveness Deadline would be extended with respect to
Registrable Securities held by such Purchaser).

          (d) Each Holder agrees to furnish to the Company a completed Selling Stockholder
Questionnaire not more than ten (10) Trading Days following the date of this Agreement. At least
five (5) Trading Days prior to the first anticipated filing date of a Registration Statement for
any registration under this Agreement, the Company will notify each Holder of the information the
Company requires from that Holder other than the information contained in the Selling Stockholder
Questionnaire, if any, which shall be completed and delivered to the Company promptly upon request
and, in any event, within two (2) Trading Days prior to the applicable anticipated filing date.
Each Holder further agrees that it shall not be entitled to be named as a selling securityholder in
the Registration Statement or use the Prospectus for offers and resales of Registrable Securities
at any time, unless such Holder has returned to the Company a completed and signed Selling
Stockholder Questionnaire and a response to any requests for further information as described in
the previous sentence. If a Holder of Registrable Securities returns a Selling Stockholder
Questionnaire or a request for further information, in either case, after its respective deadline,
the Company shall use its commercially reasonable efforts at the expense of the Holder who failed
to return the Selling Stockholder Questionnaire or to respond for further information to take such
actions as are required to name such Holder as a selling security holder in the Registration
Statement or any pre-effective or post-effective amendment thereto and to include (to the extent
not theretofore included) in the Registration Statement the Registrable Securities identified in
such late Selling Stockholder Questionnaire or request for further information. Each Holder
acknowledges and agrees that the information in the Selling Stockholder Questionnaire or request
for further information as described in this Section 2(d) will be used by the Company in the
preparation of the Registration Statement and hereby consents to the inclusion of such information
in the Registration Statement.

          (e) Notwithstanding anything to the contrary herein, at any time after the Registration
Statement has been declared effective by the Commission, the Company may delay the disclosure of
material non-public information concerning the Company if the disclosure of such information at the
time is not, in the good faith judgment of the Company, in the best interests of the Company (a
“Grace Period”); provided, the Company shall promptly (i) notify the Holders in writing of the
existence of material non-public information giving rise to a Grace Period (provided that the
Company shall not disclose the content of such material non-public information to the Holders) or
the need to file a post-effective amendment, as applicable, and the date on which such Grace Period
will begin, (ii) use reasonable best efforts to terminate a Grace Period as promptly as practicable
and (iii) notify the Holders in writing of the date on which the Grace Period ends; provided,
further, that no single Grace Period shall exceed thirty (30) consecutive days, and during any
three hundred sixty-five (365) day period, the aggregate of all Grace Periods shall not exceed an
aggregate of sixty (60) days (each Grace Period complying with this provision being an “Allowable
Grace Period”). For purposes of determining the length of a Grace Period, the Grace Period shall
be deemed to begin on and include the date the Holders receive the notice referred to in clause (i)
above and shall end on and include the later of the date the Holders receive the notice referred to
in clause (iii) above and the date referred to in such notice; provided, that no Grace Period shall
be longer than an Allowable Grace Period.

7

 

Notwithstanding anything to the contrary, the Company shall cause the Transfer Agent to
deliver unlegended Common Stock to a transferee of a Holder in accordance with the terms of the
Purchase Agreement in connection with any sale of Registrable Securities with respect to which a
Holder has entered into a contract for sale prior to the Holder’s receipt of the notice of a Grace
Period and for which the Holder has not yet settled.

          (f) In the event that Form S-3 is not available for the registration of the resale of
Registrable Securities hereunder, the Company shall (i) register the resale of the Registrable
Securities on another appropriate form and (ii) undertake to register the Registrable Securities on
Form S-3 promptly after such form is available, provided that the Company shall maintain the
effectiveness of the Registration Statement then in effect until such time as a Registration
Statement on Form S-3 covering the Registrable Securities has been declared effective by the
Commission.

     3. Registration Procedures

     In connection with the Company’s registration obligations hereunder:

          (a) the Company shall not less than three (3) Trading Days prior to the filing of a
Registration Statement and not less than one (1) Trading Day prior to the filing of any related
Prospectus or any amendment or supplement thereto (except for Annual Reports on Form 10-K,
Quarterly Reports on Form 10-Q and Current Reports on Form 8-K and any similar or successor
reports), the Company shall, furnish to the Holder copies of such Registration Statement,
Prospectus or amendment or supplement thereto, as proposed to be filed, which documents will be
subject to the review of such Holder (it being acknowledged and agreed that if a Holder does not
object to or comment on the aforementioned documents within such three (3) Trading Day or one (1)
Trading Day period, as the case may be, then the Holder shall be deemed to have consented to and
approved the use of such documents). The Company shall not file any Registration Statement or
amendment or supplement thereto in a form to which a Holder reasonably objects in good faith,
provided that, the Company is notified of such objection in writing within the three (3) Trading
Day or one (1) Trading Day period described above, as applicable.

          (b) (i) the Company shall prepare and file with the Commission such amendments (including
post-effective amendments) and supplements, to each Registration Statement and the Prospectus used
in connection therewith as may be necessary to keep such Registration Statement continuously
effective as to the applicable Registrable Securities for its Effectiveness Period (except during
an Allowable Grace Period); (ii) the Company shall cause the related Prospectus to be amended or
supplemented by any required Prospectus supplement (subject to the terms of this Agreement), and,
as so supplemented or amended, to be filed pursuant to Rule 424 (except during an Allowable Grace
Period); (iii) the Company shall respond as promptly as reasonably practicable to any comments
received from the Commission with respect to each Registration Statement or any amendment thereto
and, as promptly as reasonably possible, provide the Holders true and complete copies of all
correspondence from and to the Commission relating to such Registration Statement that pertains to
the Holders as “Selling Stockholders” but not any comments that would result in the disclosure to
the Holders of material and non-public information concerning the Company; and (iv) the Company
shall

8

 

comply with the provisions of the Securities Act and the Exchange Act with respect to the
disposition of all Registrable Securities covered by a Registration Statement until such time as
all of such Registrable Securities shall have been disposed of (subject to the terms of this
Agreement) in accordance with the intended methods of disposition by the Holders thereof as set
forth in such Registration Statement as so amended or in such Prospectus as so supplemented;
provided, that each Purchaser shall be responsible for the delivery of the Prospectus to the
Persons to whom such Purchaser sells any of the Registrable Securities (including in accordance
with Rule 172 under the Securities Act), and each Purchaser agrees to dispose of Registrable
Securities in compliance with the plan of distribution described in the Registration Statement and
otherwise in compliance with applicable federal and state securities laws. In the case of
amendments and supplements to a Registration Statement which are required to be filed pursuant to
this Agreement (including pursuant to this Section 3(b)) by reason of the Company filing a report
on Form 10-K, Form 10-Q or Form 8-K or any analogous report under the Exchange Act, the Company
shall have incorporated such report by reference into such Registration Statement, if applicable,
or shall file such amendments or supplements with the Commission on the same day on which the
Exchange Act report which created the requirement for the Company to amend or supplement such
Registration Statement was filed.

          (c) the Company shall notify the Holders (which notice shall, pursuant to clauses (iii)
through (v) hereof, be accompanied by an instruction to suspend the use of the Prospectus until the
requisite changes have been made) as promptly as reasonably practicable (and, in the case of (i)(A)
below, not less than two Trading Days prior to such filing, in the case of (iii) and (iv) below,
not more than one Trading Day after such issuance or receipt, and in the case of (v) below, not
more than one Trading Day after the occurrence or existence of such development) and (if requested
by any such Person) confirm such notice in writing no later than one Trading Day following the day
(i)(A) when a Prospectus or any Prospectus supplement or post-effective amendment to a Registration
Statement is proposed to be filed; (B) when the Commission notifies the Company whether there will
be a “review” of such Registration Statement and whenever the Commission comments in writing on any
Registration Statement (in which case the Company shall provide to each of the Holders true and
complete copies of all comments that pertain to the Holders as a “Selling Stockholder” or to the
“Plan of Distribution” and all written responses thereto, but not information that the Company
believes would constitute material and non-public information); and (C) with respect to each
Registration Statement or any post-effective amendment, when the same has become effective; (ii) of
any request by the Commission or any other Federal or state governmental authority for amendments
or supplements to a Registration Statement or Prospectus or for additional information that
pertains to the Holders as “Selling Stockholders” or the “Plan of Distribution”; (iii) of the
issuance by the Commission or any other federal or state governmental authority of any stop order
suspending the effectiveness of a Registration Statement covering any or all of the Registrable
Securities or the initiation of any Proceedings for that purpose; (iv) of the receipt by the
Company of any notification with respect to the suspension of the qualification or exemption from
qualification of any of the Registrable Securities for sale in any jurisdiction, or the initiation
or threatening of any Proceeding for such purpose; and (v) of the occurrence of any event or
passage of time that makes the financial statements included in a Registration Statement ineligible
for inclusion therein or any statement made in such Registration Statement or Prospectus or any
document incorporated or deemed to be incorporated therein by reference untrue in any material
respect or that requires any revisions to such Registration Statement, Prospectus or other
documents so that,

9

 

in the case of such Registration Statement or the Prospectus, as the case may be, it will not
contain any untrue statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein (in the case of any Prospectus, form of
prospectus or supplement thereto, in light of the circumstances under which they were made), not
misleading.

          (d) the Company shall use commercially reasonable efforts to avoid the issuance of, or, if
issued, obtain the withdrawal of (i) any order suspending the effectiveness of a Registration
Statement, or (ii) any suspension of the qualification (or exemption from qualification) of any of
the Registrable Securities for sale in any jurisdiction, as soon as practicable.

          (e) the Company shall, if requested by a Holder, furnish to such Holder, without charge,
at least one conformed copy of each Registration Statement and each amendment thereto and all
exhibits to the extent requested by such Person (including those previously furnished or
incorporated by reference) promptly after the filing of such documents with the Commission;
provided, that the Company shall have no obligation to provide any document pursuant to this clause
that is available on the Commission’s EDGAR system.

          (f) the Company shall, prior to any resale of Registrable Securities by a Holder, use its
commercially reasonable efforts to register or qualify or cooperate with the selling Holders in
connection with the registration or qualification (or exemption from the registration or
qualification) of such Registrable Securities for the resale by the Holder under the securities or
Blue Sky laws of such jurisdictions within the United States as any Holder reasonably requests in
writing, to keep each registration or qualification (or exemption therefrom) effective during the
Effectiveness Period and to do any and all other acts or things reasonably necessary to enable the
disposition in such jurisdictions of the Registrable Securities covered by each Registration
Statement; provided, that the Company shall not be required to qualify generally to do business in
any jurisdiction where it is not then so qualified, subject the Company to any material tax in any
such jurisdiction where it is not then so subject or file a general consent to service of process
in any such jurisdiction.

          (g) the Company shall, cooperate with the Holders to facilitate the timely preparation and
delivery of certificates representing Registrable Securities to be delivered to a transferee
pursuant to the Registration Statement, which certificates shall be free, to the extent permitted
by the Purchase Agreement and under law, of all restrictive legends, and to enable such Registrable
Securities to be in such denominations and registered in such names as any such Holders may
reasonably request. Certificates for Registrable Securities free from all restrictive legends may
be transmitted by the transfer agent to a Holder by crediting the account of such Holder’s prime
broker with DTC as directed by such Holder.

          (h) the Company shall following the occurrence of any event contemplated by Section
3(c)(iii)-(v), as promptly as reasonably practicable (taking into account the Company’s good faith
assessment of any adverse consequences to the Company and its stockholders of the premature
disclosure of such event), prepare and file a supplement or amendment, including a post-effective
amendment, to the affected Registration Statements or a supplement to the related Prospectus or any
document incorporated or deemed to be incorporated therein by reference, and

10

 

file any other required document so that, as thereafter delivered, no Registration Statement
nor any Prospectus will contain an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein (in the case of any
Prospectus, form of prospectus or supplement thereto, in light of the circumstances under which
they were made), not misleading.

          (i) the Company may require each selling Holder to furnish to the Company a certified
statement as to (i) the number of shares of Common Stock beneficially owned by such Holder and any
Affiliate thereof, (ii) any Financial Industry Regulatory Authority (“FINRA”) affiliations, (iii)
any natural persons who have the power to vote or dispose of the Common Stock and (iv) any other
information as may be requested by the Commission, FINRA or any state securities commission. During
any periods that the Company is unable to meet its obligations hereunder with respect to the
registration of Registrable Securities because any Holder fails to furnish such information within
three Trading Days of the Company’s request, any Liquidated Damages that are accruing at such time
as to such Holder only shall be tolled and any Event that may otherwise occur solely because of
such delay shall be suspended as to such Holder only, until such information is delivered to the
Company.

          (j) the Company shall cooperate with any registered broker through which a Holder proposes
to resell its Registrable Securities in effecting a filing with FINRA pursuant to FINRA Rule 5110
as requested by any such Holder and the Company shall pay the filing fee required for the first
such filing within two (2) Business Days of the request therefore.

          (k) the Company shall use its commercially reasonable efforts to maintain eligibility for
use of Form S-3 (or any successor form thereto) for the registration of the resale of Registrable
Securities.

          (l) if requested by a Holder, the Company shall (i) promptly incorporate in a Prospectus
supplement or post-effective amendment to the Registration Statement such information as the
Company reasonably agrees should be included therein and (ii) make all required filings of such
Prospectus supplement or such post-effective amendment as soon as reasonably practicable after the
Company has received notification of the matters to be incorporated in such Prospectus supplement
or post-effective amendment.

          (m) the Company shall otherwise use commercially reasonable efforts to comply with all
applicable rules and regulations of the Commission under the Securities Act and the Exchange Act,
including Rule 172, notify the Holders promptly if the Company no longer satisfies the conditions
of Rule 172 and take such other actions as may be reasonably necessary to facilitate the
registration of the Registrable Securities hereunder; and make available to its security holders,
as soon as reasonably practicable, but not later than the Availability Date (as defined below), an
earnings statement covering a period of at least twelve (12) months, beginning after the effective
date of each Registration Statement, which earning statement shall satisfy the provisions of
Section 11(a) of the Securities Act, including Rule 158 promulgated thereunder (for the purpose of
this Section 3, “Availability Date” means the 45th day following the end of the fourth fiscal
quarter that includes the effective date of such Registration Statement, except that, if such
fourth fiscal quarter is the last quarter of the Company’s fiscal year,

11

 

“Availability Date” means the 90th day after the end of such fourth fiscal quarter), in each
case subject to extensions permissible under applicable law.

     4. Registration Expenses. All fees and expenses incident to the Company’s
performance of or compliance with its obligations under this Agreement (excluding any underwriting
discounts and selling commissions and all legal fees and expenses of legal counsel for any Holder)
shall be borne by the Company whether or not any Registrable Securities are sold pursuant to a
Registration Statement. The fees and expenses referred to in the foregoing sentence shall include,
without limitation, (i) all registration and filing fees (including, without limitation, fees and
expenses (A) with respect to filings required to be made with any Trading Market on which the
Common Stock is then listed for trading, (B) with respect to compliance with applicable state
securities or Blue Sky laws (including, without limitation, fees and disbursements of counsel for
the Company in connection with Blue Sky qualifications or exemptions of the Registrable Securities
and determination of the eligibility of the Registrable Securities for investment under the laws of
such jurisdictions as requested by the Holders) and (C) if not previously paid by the Company in
connection with an Issuer Filing, with respect to any filing that may be required to be made by any
broker through which a Holder intends to make sales of Registrable Securities with FINRA pursuant
to FINRA Rule 5110, so long as the broker is receiving no more than a customary brokerage
commission in connection with such sale, (ii) printing expenses (including, without limitation,
expenses of printing certificates for Registrable Securities and of printing prospectuses if the
printing of prospectuses is reasonably requested by the Holders of a majority of the Registrable
Securities included in the Registration Statement), (iii) messenger, telephone and delivery
expenses of the Company, (iv) fees and disbursements of counsel for the Company, (v) Securities Act
liability insurance, if the Company so desires such insurance, and (vi) fees and expenses of all
other Persons retained by the Company in connection with the consummation of the transactions
contemplated by this Agreement. In addition, the Company shall be responsible for all of its
internal expenses incurred in connection with the consummation of the transactions contemplated by
this Agreement (including, without limitation, all salaries and expenses of its officers and
employees performing legal or accounting duties), the expense of any annual audit and the fees and
expenses incurred in connection with the listing of the Registrable Securities on any securities
exchange as required hereunder. In no event shall the Company be responsible for any underwriting,
broker or similar fees or commissions of any Holder or, except to the extent provided for in the
Transaction Documents, any legal fees or other costs of the Holders.

     5. Indemnification.

          (a) Indemnification by the Company. The Company shall, notwithstanding any
termination of this Agreement, indemnify, defend and hold harmless each Holder, the officers,
directors, agents, general partners, managing members, managers, Affiliates and employees of each
of them, each Person who controls any such Holder (within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act) and the officers, directors, general partners,
managing members, managers, agents and employees of each such controlling Person, to the fullest
extent permitted by applicable law, from and against any and all losses, claims, damages,
liabilities, costs (including, without limitation, reasonable costs of preparation and
investigation and reasonable attorneys’ fees) and expenses (collectively, “Losses”), as

12

 

incurred, that arise out of or are based upon any untrue or alleged untrue statement of a material fact
contained in any Registration Statement, any Prospectus or any form of prospectus or in any
amendment or supplement thereto or in any preliminary prospectus, or arising out of or relating to
any omission or alleged omission to state a material fact required to be stated therein or
necessary to make the statements therein (in the case of any Prospectus or form of prospectus or
supplement thereto, in light of the circumstances under which they were made) not misleading,
except to the extent, but only to the extent, that (A) such untrue statements, alleged untrue
statements, omissions or alleged omissions are based solely upon information regarding such Holder
furnished in writing to the Company by such Holder expressly for use therein, or to the extent that
such information relates to such Holder or such Holder’s proposed method of distribution of
Registrable Securities and was reviewed and approved by such Holder expressly for use in the
Registration Statement, such Prospectus or such form of Prospectus or in any amendment or
supplement thereto (it being understood that each Holder has approved Annex A hereto for
this purpose), or (B) in the case of an occurrence of an event of the type specified in Section
3(c)(iii)-(v), related to the use by a Holder of an outdated or defective Prospectus after the
Company has notified such Holder in writing that the Prospectus is outdated or defective and prior
to the receipt by such Holder of the Advice contemplated and defined in Section 6(d) below, but
only if and to the extent that following the receipt of the Advice the misstatement or omission
giving rise to such Loss would have been corrected. The Company shall notify the Holders promptly
of the institution, threat or assertion of any Proceeding arising from or in connection with the
transactions contemplated by this Agreement of which the Company is aware. Such indemnity shall
remain in full force and effect regardless of any investigation made by or on behalf of an
Indemnified Party (as defined in Section 5(c)) and shall survive the transfer of the Registrable
Securities by the Holders.

          (b) Indemnification by Holders. Each Holder shall, severally and not jointly,
indemnify and hold harmless the Company, its directors, officers, agents and employees, each Person
who controls the Company (within the meaning of Section 15 of the Securities Act and Section 20 of
the Exchange Act), and the directors, officers, agents or employees of such controlling Persons, to
the fullest extent permitted by applicable law, from and against all Losses, as incurred, arising
out of or are based upon any untrue or alleged untrue statement of a material fact contained in any
Registration Statement, any Prospectus, or any form of prospectus, or in any amendment or
supplement thereto or in any preliminary prospectus, or arising out of or relating to any omission
or alleged omission of a material fact required to be stated therein or necessary to make the
statements therein (in the case of any Prospectus, or any form of prospectus or supplement thereto,
in light of the circumstances under which they were made) not misleading (i) to the extent, but
only to the extent, that such untrue statements or omissions are based solely upon information
regarding such Holder furnished in writing to the Company by such Holder expressly for use therein
or (ii) to the extent, but only to the extent, that such information relates to such Holder or such
Holder’s proposed method of distribution of Registrable Securities and was reviewed and approved by
such Holder expressly for use in a Registration Statement (it being understood that the Holder has
approved Annex A hereto for this purpose), such Prospectus or such form of Prospectus or in
any amendment or supplement thereto or (iii) in the case of an occurrence of an event of the type
specified in Section 3(c)(iii)-(v), to the extent, but only to the extent, related to the use by
such Holder of an outdated or defective Prospectus after the Company has notified such Holder in
writing that the Prospectus is outdated or defective and prior to the receipt by such Holder of the
Advice contemplated in

13

 

Section 6(d), but only if and to the extent that following the receipt of the Advice the
misstatement or omission giving rise to such Loss would have been corrected. In no event shall the
liability of any selling Holder hereunder be greater in amount than the dollar amount of the net
proceeds received by such Holder upon the sale of the Registrable Securities giving rise to such
indemnification obligation.

          (c) Conduct of Indemnification Proceedings. If any Proceeding shall be brought or
asserted against any Person entitled to indemnity hereunder (an “Indemnified Party”), such
Indemnified Party shall promptly notify the Person from whom indemnity is sought (the “Indemnifying
Party”) in writing, and the Indemnifying Party shall have the right to assume the defense thereof,
including the employment of counsel reasonably satisfactory to the Indemnified Party and the
payment of all reasonable fees and expenses incurred in connection with defense thereof; provided,
that the failure of any Indemnified Party to give such notice shall not relieve the Indemnifying
Party of its obligations or liabilities pursuant to this Agreement, except (and only) to the extent
that it shall be finally determined by a court of competent jurisdiction (which determination is
not subject to appeal or further review) that such failure shall have materially and adversely
prejudiced the Indemnifying Party.

     An Indemnified Party shall have the right to employ separate counsel in any such Proceeding
and to participate in the defense thereof, but the fees and expenses of such counsel shall be at
the expense of such Indemnified Party or Parties unless: (1) the Indemnifying Party has agreed in
writing to pay such fees and expenses; (2) the Indemnifying Party shall have failed promptly to
assume the defense of such Proceeding and to employ counsel reasonably satisfactory to such
Indemnified Party in any such Proceeding; or (3) the named parties to any such Proceeding
(including any impleaded parties) include both such Indemnified Party and the Indemnifying Party,
and such Indemnified Party shall have been advised by counsel that a conflict of interest exists if
the same counsel were to represent such Indemnified Party and the Indemnifying Party; provided,
that the Indemnifying Party shall not be liable for the fees and expenses of more than one separate
firm of attorneys at any time for all Indemnified Parties. The Indemnifying Party shall not be
liable for any settlement of any such Proceeding effected without its written consent, which
consent shall not be unreasonably withheld, delayed or conditioned. No Indemnifying Party shall,
without the prior written consent of the Indemnified Party, effect any settlement of any pending
Proceeding in respect of which any Indemnified Party is a party, unless such settlement includes an
unconditional release of such Indemnified Party from all liability on claims that are the subject
matter of such Proceeding.

     Subject to the terms of this Agreement, all fees and expenses of the Indemnified Party
(including reasonable fees and expenses to the extent incurred in connection with investigating or
preparing to defend such Proceeding in a manner not inconsistent with this Section 5(c)) shall be
paid to the Indemnified Party, as incurred, within twenty Trading Days of written notice thereof to
the Indemnifying Party; provided, that the Indemnified Party shall promptly reimburse the
Indemnifying Party for that portion of such fees and expenses applicable to such actions for which
such Indemnified Party is finally judicially determined to not be entitled to indemnification
hereunder). The failure to deliver written notice to the Indemnifying Party within a reasonable
time of the commencement of any such action shall not relieve such Indemnifying Party of any
liability to the Indemnified Party under this Section 5, except to the

14

 

extent that the Indemnifying Party is materially and adversely prejudiced in its ability to
defend such action.

          (d) Contribution. If a claim for indemnification under Section 5(a) or 5(b) is
unavailable to an Indemnified Party or insufficient to hold an Indemnified Party harmless for any
Losses, then each Indemnifying Party, in lieu of indemnifying such Indemnified Party, shall
contribute to the amount paid or payable by such Indemnified Party as a result of such Losses, in
such proportion as is appropriate to reflect the relative fault of the Indemnifying Party and
Indemnified Party in connection with the actions, statements or omissions that resulted in such
Losses as well as any other relevant equitable considerations. The relative fault of such
Indemnifying Party and Indemnified Party shall be determined by reference to, among other things,
whether any action in question, including any untrue or alleged untrue statement of a material fact
or omission or alleged omission of a material fact, has been taken or made by, or relates to
information supplied by, such Indemnifying Party or Indemnified Party, and the parties’ relative
intent, knowledge, access to information and opportunity to correct or prevent such action,
statement or omission. The amount paid or payable by a party as a result of any Losses shall be
deemed to include, subject to the limitations set forth in this Agreement, any reasonable
attorneys’ or other reasonable fees or expenses incurred by such party in connection with any
Proceeding to the extent such party would have been indemnified for such fees or expenses if the
indemnification provided for in this Section 5(d) was available to such party in accordance with
its terms.

     The parties hereto agree that it would not be just and equitable if contribution pursuant to
this Section 5(d) were determined by pro rata allocation or by any other method of allocation that
does not take into account the equitable considerations referred to in the immediately preceding
paragraph. Notwithstanding the provisions of this Section 5(d), no Holder shall be required to
contribute, in the aggregate, any amount in excess of the amount by which the net proceeds actually
received by such Holder from the sale of the Registrable Securities subject to the Proceeding
exceeds the amount of any damages that such Holder has otherwise been required to pay by reason of
such untrue or alleged untrue statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be
entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation.

     The indemnity and contribution agreements contained in this Section 5 are in addition to any
liability that the Indemnifying Parties may have to the Indemnified Parties and are not in
diminution or limitation of the indemnification provisions under the Purchase Agreement.

     6. Miscellaneous.

          (a) Remedies. In the event of a breach by the Company or by a Holder of any of
their obligations under this Agreement, each Holder or the Company, as the case may be, in addition
to being entitled to exercise all rights granted by law and under this Agreement, including
recovery of damages, will be entitled to specific performance of its rights under this Agreement.
The Company and each Holder agree that monetary damages would not provide adequate compensation for
any losses incurred by reason of a breach by it of any of the provisions of this Agreement and
hereby further agrees that, in the event of any action for

15

 

specific performance in respect of such breach, it shall waive the defense that a remedy at
law would be adequate.

          (b) No Piggyback on Registrations; Prohibition on Filing Other Registration
Statements. Neither the Company nor any of its security holders may include securities of the
Company in a Registration Statement hereunder and the Company shall not prior to the Effective Date
enter into any agreement providing any such right to any of its security holders. The Company shall
not, from the date hereof until the date that is 30 days after the Effective Date of the Initial
Registration Statement, prepare and file with the Commission a registration statement relating to
an offering for its own account under the Securities Act of any of its equity securities, other
than (i) a registration statement on Form S-8, (ii) in connection with an acquisition, on Form S-4
or (iii) a registration statement to register for resale securities issued by the Company pursuant
to acquisitions or strategic transactions approved by a majority of the disinterested directors of
the Company, provided that any such issuance shall only be to a Person which is, itself or through
its subsidiaries, an operating company in a business synergistic with the business of the Company
and in which the Company receives benefits in addition to the investment of funds, but shall not
include a transaction in which the Company is issuing securities primarily for the purpose of
raising capital or to an entity whose primary business is investing in securities. For the
avoidance of doubt, the Company shall not be prohibited from preparing and filing with the
Commission a registration statement relating to an offering of Common Stock by existing
stockholders of the Company under the Securities Act pursuant to the terms of registration rights
held by such stockholder or from filing amendments to registration statements filed prior to the
date of this Agreement.

          (c) Compliance. Each Holder covenants and agrees that it will comply with the
prospectus delivery requirements of the Securities Act as applicable to it (unless an exemption
therefrom is available) in connection with sales of Registrable Securities pursuant to the
Registration Statement and shall sell the Registrable Securities only in accordance with a method
of distribution described in the Registration Statement

          (d) Discontinued Disposition. By its acquisition of Registrable Securities, each
Holder agrees that, upon receipt of a notice from the Company of the occurrence of any event of the
kind described in Section 3(c)(iii)-(v), such Holder will forthwith discontinue disposition of such
Registrable Securities under a Registration Statement until it is advised in writing (the “Advice”)
by the Company that the use of the applicable Prospectus (as it may have been supplemented or
amended) may be resumed. The Company may provide appropriate stop orders to enforce the
provisions of this paragraph.

          (e) No Inconsistent Agreements. Neither the Company nor any of its Subsidiaries
has entered, as of the date hereof, nor shall the Company or any of its Subsidiaries, on or after
the date hereof, enter into any agreement with respect to its securities, that would have the
effect of impairing the rights granted to the Holders in this Agreement or otherwise conflicts with
the provisions hereof.

          (f) Amendments and Waivers. The provisions of this Agreement, including the
provisions of this sentence, may not be amended, modified or supplemented, or waived unless the
same shall be in writing and signed by the Company and Holders holding at least two-

16

 

thirds of the then outstanding Registrable Securities, provided that any party may give a waiver as
to itself. Notwithstanding the foregoing, a waiver or consent to depart from the provisions
hereof with respect to a matter that relates exclusively to the rights of Holders and that does not
directly or indirectly affect the rights of other Holders may be given by Holders of all of the
Registrable Securities to which such waiver or consent relates; provided, that the provisions of
this sentence may not be amended, modified, or supplemented except in accordance with the
provisions of the immediately preceding sentence. Notwithstanding the foregoing, if any such
amendment, modification or waiver would adversely affect in any material respect any Holder or
group of Holders who have comparable rights under this Agreement disproportionately to the other
Holders having such comparable rights, such amendment, modification, or waiver shall also require
the written consent of the Holder(s) so adversely affected.

          (g) Notices. Any and all notices or other communications or deliveries required
or permitted to be provided hereunder shall be delivered as set forth in the Purchase Agreement;
provided that the Company may deliver to each Holder the documents required to be delivered to such
Holder under Section 3(a) of this Agreement by e-mail to the e-mail addresses provided by such
Holder to the Company solely for such specific purpose.

          (h) Successors and Assigns. This Agreement shall inure to the benefit of and be
binding upon the successors and permitted assigns of each of the parties and shall inure to the
benefit of each Holder. Nothing in this Agreement, express or implied, is intended to confer upon
any party other than the parties hereto or their respective successors and assigns any rights,
remedies, obligations, or liabilities under or by reason of this Agreement, except as expressly
provided in this Agreement. The Company may not assign its rights (except by merger or in
connection with another entity acquiring all or substantially all of the Company’s assets) or
obligations hereunder without the prior written consent of all the Holders of the then outstanding
Registrable Securities. Each Holder may assign its respective rights hereunder in the manner and
to the Persons as permitted under the Purchase Agreement.

          (i) Execution and Counterparts. This Agreement may be executed in two or more
counterparts, each of which when so executed shall be deemed to be an original and, all of which
taken together shall constitute one and the same Agreement and shall become effective when
counterparts have been signed by each party and delivered to the other party, it being understood
that both parties need not sign the same counterpart. In the event that any signature is delivered
by facsimile transmission or by e-mail delivery of a “.pdf” format data file, such signature shall
create a valid and binding obligation of the party executing (or on whose behalf such signature is
executed) with the same force and effect as if such facsimile or “.pdf” signature were the original
thereof.

          (j) Governing Law. All questions concerning the construction, validity,
enforcement and interpretation of this Agreement shall be determined in accordance with the
provisions of the Purchase Agreement.

          (k) Cumulative Remedies. Except as provided in Section 2(c) with respect to
Liquidated Damages, the remedies provided herein are cumulative and not exclusive of any other
remedies provided by law.

17

 

          (l) Severability. If any term, provision, covenant or restriction of this
Agreement is held by a court of competent jurisdiction to be invalid, illegal, void or
unenforceable, the remainder of the terms, provisions, covenants and restrictions set forth herein
shall remain in full force and effect and shall in no way be affected, impaired or invalidated, and
the parties hereto shall use their good faith reasonable efforts to find and employ an alternative
means to achieve the same or substantially the same result as that contemplated by such term,
provision, covenant or restriction. It is hereby stipulated and declared to be the intention of
the parties that they would have executed the remaining terms, provisions, covenants and
restrictions without including any of such that may be hereafter declared invalid, illegal, void or
unenforceable.

          (m) Headings. The headings in this Agreement are for convenience only and shall
not limit or otherwise affect the meaning hereof.

          (n) Independent Nature of Purchasers’ Obligations and Rights. The obligations of
each Purchaser under this Agreement are several and not joint with the obligations of any other
Purchaser hereunder, and no Purchaser shall be responsible in any way for the performance of the
obligations of any other Purchaser hereunder. The decision of each Purchaser to purchase the
Preferred Shares pursuant to the Transaction Documents has been made independently of any other
Purchaser. Nothing contained herein or in any other agreement or document delivered at any closing,
and no action taken by any Purchaser pursuant hereto or thereto, shall be deemed to constitute the
Purchasers as a partnership, an association, a joint venture or any other kind of entity, or create
a presumption that the Purchasers are in any way acting in concert with respect to such obligations
or the transactions contemplated by this Agreement. Each Purchaser acknowledges that no other
Purchaser has acted as agent for such Purchaser in connection with making its investment hereunder
and that no Purchaser will be acting as agent of such Purchaser in connection with monitoring its
investment in the Preferred Shares or enforcing its rights under the Transaction Documents. Each
Purchaser shall be entitled to protect and enforce its rights, including, without limitation, the
rights arising out of this Agreement, and it shall not be necessary for any other Purchaser to be
joined as an additional party in any Proceeding for such purpose. The Company acknowledges that
each of the Purchasers has been provided with the same Registration Rights Agreement for the
purpose of closing a transaction with multiple Purchasers and not because it was required or
requested to do so by any Purchaser.

18

 

     IN WITNESS WHEREOF, the parties have executed this Registration Rights Agreement as of the
date first written above.

	 	 	 	 	 
	 	ORIENTAL FINANCIAL GROUP INC.

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK,

SIGNATURE PAGES OF HOLDERS TO FOLLOW]

 

 

          IN WITNESS WHEREOF, the parties have executed this Registration Rights Agreement as of
the date first written above.

	 	 	 	 	 
	 	NAME OF INVESTING ENTITY

	 
	 	 	 
	 	AUTHORIZED SIGNATORY	 
	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 
	 	ADDRESS FOR NOTICE	 

	 	 	 	 	 
	 	 	 
	 	c/o:  	
 	 

	 	 	 	 	 
	 	 	 
	 	Street:  	
 	 

	 	 	 	 	 
	 	 	 
	 	City/State/Zip:	 	
 	 

	 	 	 	 	 
	 	 	 
	 	Attention:	 	
 	 

	 	 	 	 	 
	 	 	 
	 	Tel:  	
 	 

	 	 	 	 	 
	 	 	 
	 	Fax:  	
 	 

	 	 	 	 	 
	 	 	 
	 	Email:  	
 	 

 

 

Annex A

PLAN OF DISTRIBUTION

     We are registering the Securities issued to the selling stockholder to permit the resale of
these Securities by the holders of the Securities from time to time after the date of this
prospectus. We will not receive any of the proceeds from the sale by the selling stockholders of
the Securities. We will bear all fees and expenses incident to our obligation to register the
Securities.

     The selling stockholders may sell all or a portion of the Securities beneficially owned
by them and offered hereby from time to time directly or through one or more underwriters,
broker-dealers or agents. If the Securities are sold through underwriters or broker-dealers, the
selling stockholders will be responsible for underwriting discounts or commissions or agent’s
commissions. The Securities may be sold on any national securities exchange or quotation service
on which the securities may be listed or quoted at the time of sale, in the over-the-counter market
or in transactions otherwise than on these exchanges or systems or in the over-the-counter market
and in one or more transactions at fixed prices, at prevailing market prices at the time of the
sale, at varying prices determined at the time of sale, or at negotiated prices. These sales may be
effected in transactions, which may involve crosses or block transactions. The selling
stockholders may use any one or more of the following methods when selling Securities:

	 	•	 	ordinary brokerage transactions and transactions in which the broker-dealer
solicits purchasers;
	 
	 	•	 	block trades in which the broker-dealer will attempt to sell the shares as agent but
may position and resell a portion of the block as principal to facilitate the
transaction;
	 
	 	•	 	purchases by a broker-dealer as principal and resale by the broker-dealer for its
account;
	 
	 	•	 	an exchange distribution in accordance with the rules of the applicable exchange;
	 
	 	•	 	privately negotiated transactions;
	 
	 	•	 	settlement of short sales entered into after the effective date of the registration
statement of which this prospectus is a part;
	 
	 	•	 	broker-dealers may agree with the selling stockholders to sell a specified number of
such securities at a stipulated price per share;
	 
	 	•	 	through the writing or settlement of options or other hedging transactions, whether
such options are listed on an options exchange or otherwise;
	 
	 	•	 	a combination of any such methods of sale; and
	 
	 	•	 	any other method permitted pursuant to applicable law.

     The selling stockholders also may resell all or a portion of the Securities in open market
transactions in reliance upon Rule 144 under the Securities Act, as permitted by that rule, or
Section 4(1) under the Securities Act, if available, rather than under this prospectus, provided
that they meet the criteria and conform to the requirements of those provisions.

 

 

     Broker-dealers engaged by the selling stockholders may arrange for other broker-dealers to
participate in sales. If the selling stockholders effect such transactions by selling Securities to
or through underwriters, broker-dealers or agents, such underwriters, broker-dealers or agents may
receive commissions in the form of discounts, concessions or commissions from the selling
stockholders or commissions from purchasers of the Securities for whom they may act as agent or to
whom they may sell as principal. Such commissions will be in amounts to be negotiated, but, except
as set forth in a supplement to this prospectus, in the case of an agency transaction will not be
in excess of a customary brokerage commission in compliance with NASD Rule 2440; and in the case of
a principal transaction a markup or markdown in compliance with NASD IM-2440.

     In connection with sales of the Securities or otherwise, the selling stockholders may enter
into hedging transactions with broker-dealers or other financial institutions, which may in turn
engage in short sales of the Securities in the course of hedging in positions they assume. The
selling stockholders may also sell Securities short and if such short sale shall take place after
the date that this Registration Statement is declared effective by the Commission, the selling
stockholders may deliver Securities covered by this prospectus to close out short positions and to
return borrowed shares in connection with such short sales. The selling stockholders may also loan
or pledge Securities to broker-dealers that in turn may sell such shares, to the extent permitted
by applicable law. The selling stockholders may also enter into option or other transactions with
broker-dealers or other financial institutions or the creation of one or more derivative securities
which require the delivery to such broker-dealer or other financial institution of shares offered
by this prospectus, which shares such broker-dealer or other financial institution may resell
pursuant to this prospectus (as supplemented or amended to reflect such transaction).
Notwithstanding the foregoing, the selling stockholders have been advised that they may not use
shares registered on this registration statement to cover short sales of our Securities made prior
to the date the registration statement, of which this prospectus forms a part, has been declared
effective by the SEC.

     The selling stockholders may, from time to time, pledge or grant a security interest in some
or all of the Securities owned by them and, if they default in the performance of their secured
obligations, the pledgees or secured parties may offer and sell the Securities from time to time
pursuant to this prospectus or any amendment to this prospectus under Rule 424(b)(3) or other
applicable provision of the Securities Act of 1933, as amended, amending, if necessary, the list of
selling stockholders to include the pledgee, transferee or other successors in interest as selling
stockholders under this prospectus. The selling stockholders also may transfer and donate the
Securities in other circumstances in which case the transferees, donees, pledgees or other
successors in interest will be the selling beneficial owners for purposes of this prospectus.

     The selling stockholders and any broker-dealer or agents participating in the
distribution of the Securities may be deemed to be “underwriters” within the meaning of Section
2(11) of the Securities Act in connection with such sales. In such event, any commissions paid, or
any discounts or concessions allowed to, any such broker-dealer or agent and any profit on the
resale of the shares purchased by them may be deemed to be underwriting commissions or discounts
under the Securities Act. Selling Stockholders who are “underwriters” within the meaning of Section
2(11) of the Securities Act will be subject to the applicable prospectus delivery requirements of
the Securities Act and may be subject to certain statutory liabilities of, including but not
limited to, Sections 11, 12 and 17 of the Securities Act and Rule 10b-5 under the Securities
Exchange Act of 1934, as amended, or the Exchange Act.

 

 

     Each selling stockholder has informed the Company that it is not a registered broker-dealer
and does not have any written or oral agreement or understanding, directly or indirectly, with any
person to distribute the Securities. Upon the Company being notified in writing by a selling
stockholder that any material arrangement has been entered into with a broker-dealer for the sale
of Securities through a block trade, special offering, exchange distribution or secondary
distribution or a purchase by a broker or dealer, a supplement to this prospectus will be filed, if
required, pursuant to Rule 424(b) under the Securities Act, disclosing (i) the name of each such
selling stockholder and of the participating broker-dealer(s), (ii) the number of shares involved,
(iii) the price at which such the Securities were sold, (iv) the commissions paid or discounts or
concessions allowed to such broker-dealer(s), where applicable, (v) that such broker-dealer(s) did
not conduct any investigation to verify the information set out or incorporated by reference in
this prospectus, and (vi) other facts material to the transaction. In no event shall any
broker-dealer receive fees, commissions and markups, which, in the aggregate, would exceed eight
percent (8%).

     Under the securities laws of some states, the Common Stock may be sold in such states
only through registered or licensed brokers or dealers. In addition, in some states the Common
Stock may not be sold unless such shares have been registered or qualified for sale in such state
or an exemption from registration or qualification is available and is complied with.

     There can be no assurance that any selling stockholder will sell any or all of the Securities
registered pursuant to the shelf registration statement, of which this prospectus forms a part.

     Each selling stockholder and any other person participating in such distribution will be
subject to applicable provisions of the Securities Exchange Act of 1934, as amended, and the rules
and regulations thereunder, including, without limitation, to the extent applicable, Regulation M
of the Exchange Act, which may limit the timing of purchases and sales of any of the Securities by
the selling stockholder and any other participating person. To the extent applicable, Regulation M
may also restrict the ability of any person engaged in the distribution of the Securities to engage
in market-making activities with respect to the Securities. All of the foregoing may affect the
marketability of the Securities and the ability of any person or entity to engage in market-making
activities with respect to the Securities.

     We will pay all expenses of the registration of the Securities pursuant to the registration
rights agreement, including, without limitation, Securities and Exchange Commission filing fees and
expenses of compliance with state securities or “blue sky” laws; provided, that each selling
stockholder will pay all underwriting discounts and selling commissions, if any and any related
legal expenses incurred by it. We will indemnify the selling stockholders against certain
liabilities, including some liabilities under the Securities Act, in accordance with the
registration rights agreement, or the selling stockholders will be entitled to contribution. We
may be indemnified by the selling stockholders against civil liabilities, including liabilities
under the Securities Act, that may arise from any written information furnished to us by the
selling stockholders specifically for use in this prospectus, in accordance with the related
registration rights agreements, or we may be entitled to contribution.

 

 

Annex B

ORIENTAL FINANCIAL GROUP INC.

SELLING STOCKHOLDER NOTICE AND QUESTIONNAIRE

     The undersigned holder of securities of Oriental Financial Group Inc., a financial holding
company and corporation organized in the Commonwealth of Puerto Rico (the “Company”), issued
pursuant to a certain Securities Purchase Agreement by and among the Company and the Purchasers
named therein, dated as of April 23, 2010, understands that the Company intends to file with the
Securities and Exchange Commission a registration statement on Form S-3 (the “Resale Registration
Statement”) for the registration and the resale under Rule 415 of the Securities Act of 1933, as
amended (the “Securities Act”), of the Registrable Securities in accordance with the terms of a
certain Registration Rights Agreement by and among the Company and the Purchasers named therein,
dated as of April 23, 2010 (the “Agreement”). All capitalized terms not otherwise defined herein
shall have the meanings ascribed thereto in the Agreement.

     In order to sell or otherwise dispose of any Registrable Securities pursuant to the Resale
Registration Statement, a holder of Registrable Securities generally will be required to be named
as a selling stockholder in the related prospectus or a supplement thereto (as so supplemented, the
“Prospectus”), deliver the Prospectus to purchasers of Registrable Securities (including pursuant
to Rule 172 under the Securities Act) and be bound by the provisions of the Agreement (including
certain indemnification provisions, as described below). Holders must complete and deliver this
Notice and Questionnaire in order to be named as selling stockholders in the Prospectus. Holders
of Registrable Securities who do not complete, execute and return this Notice and Questionnaire
within ten (10) Trading Days following the date of the Agreement (1) will not be named as selling
stockholders in the Resale Registration Statement or the Prospectus and (2) may not use the
Prospectus for resales of Registrable Securities.

     Certain legal consequences arise from being named as a selling stockholder in the Resale
Registration Statement and the Prospectus. Holders of Registrable Securities are advised to
consult their own securities law counsel regarding the consequences of being named or not named as
a selling stockholder in the Resale Registration Statement and the Prospectus.

NOTICE

     The undersigned holder (the “Selling Stockholder”) of Registrable Securities hereby gives
notice to the Company of its intention to sell or otherwise dispose of Registrable Securities owned
by it and listed below in Item (3), unless otherwise specified in Item (3), pursuant to the Resale
Registration Statement. The undersigned, by signing and returning this Notice and Questionnaire,
understands and agrees that it will be bound by the terms and conditions of this Notice and
Questionnaire and the Agreement.

     The undersigned hereby provides the following information to the Company and represents and
warrants that such information is accurate and complete:

 

 

QUESTIONNAIRE

	1.	 	Name.

	 	 	 	 	 

	 

	 	(a)
	 	Full Legal Name of Selling Stockholder:
	 
	 	 	 	 
	 
	 	 	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	 

	 	(b)
	 	Full Legal Name of Registered Holder (if not the same as (a) above) through
which Registrable Securities Listed in Item 3 below are held:
	 
	 	 	 	 
	 
	 	 	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	 

	 	(c)
	 	Full Legal Name of Natural Control Person (which means a natural person who
directly or indirectly alone or with others has power to vote or dispose of the
securities covered by the questionnaire):
	 
	 	 	 	 
	 
	 	 	 	 
	 

	 	 	 	 

	2.	 	Address for Notices to Selling Stockholder:

 

 

 

Telephone: 

Fax: 

Contact Person: 

E-mail address of Contact Person: 

3. Beneficial Ownership of Registrable Securities Issuable Pursuant to the Purchase
Agreement:

	 	 	 	 	 

	 

	 	(a)
	 	Type and Number of Registrable Securities beneficially owned and issued
pursuant to the Agreement:
	 
	 	 	 	 
	 
	 	 	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	 

	 	(b)
	 	Number of Securities to be registered pursuant to this Notice for resale:
	 
	 	 	 	 
	 
	 	 	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	 

	 	 	 	 

 

 

4. Broker-Dealer Status:

	 	 	 	 	 

	 

	 	(a)
	 	Are you a broker-dealer?
	 
	 	 	 	 
	 

	 	 	 	Yes o           No o
	 
	 	 	 	 
	 

	 	(b)
	 	If “yes” to Section 4(a), did you receive your Registrable Securities as compensation
for investment banking services to the Company?
	 
	 	 	 	 
	 

	 	 	 	Yes o           No o

			
	Note:	 	If no, the Commission’s staff has indicated that you should be
identified as an underwriter in the Registration Statement.

	 	 	 	 	 

	 

	 	(c)
	 	Are you an affiliate of a broker-dealer?
	 
	 	 	 	 
	 

	 	 	 	Yes o          No o
	 
	 	 	 	 
	 

	 	Note:
	 	If yes, provide a narrative explanation below:
	 
	 	 	 	 
	 
	 	 	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	 

	 	(c)
	 	If you are an affiliate of a broker-dealer, do you certify that you bought the
Registrable Securities in the ordinary course of business, and at the time of the
purchase of the Registrable Securities to be resold, you had no agreements or
understandings, directly or indirectly, with any person to distribute the Registrable
Securities?
	 
	 	 	 	 
	 

	 	 	 	Yes o      No o
	 
	 	 	 	 
	 

	 	Note:
	 	If no, the Commission’s staff has indicated that you should be
identified as an underwriter in the Registration Statement.

	5.	 	Beneficial Ownership of Other Securities of the Company Owned by the Selling Stockholder.

	 	 	 

	 

	 	Except as set forth below in this Item 5, the undersigned is not the beneficial or
registered owner of any securities of the Company other than the Registrable Securities
listed above in Item 3.
	 
	 	 
	 

	 	Type and amount of other securities beneficially owned:
	 
	 	 	 	 
	 
	 	 
	 

	 	 
	 
	 	 
	 

	 	             —
	 
	 	 
	 

	 	 
	 
	 	 
	 

	 	             —

 

 

6. Relationships with the Company:

	 	 	 

	 

	 	Except as set forth below, neither the undersigned nor any of its affiliates, officers,
directors or principal equity holders (owners of 5% of more of the equity securities of the
undersigned) has held any position or office or has had any other material relationship with
the Company (or its predecessors or affiliates) during the past three years.
	 
	 	 
	 

	 	State any exceptions here:
	 
	 	 
	 
	 	 
	 

	 	 
	 
	 	 
	 

	 	 

	7.	 	Plan of Distribution:

	 	 	 

	 

	 	The undersigned has reviewed the form of Plan of Distribution attached as Annex A to the
Registration Rights Agreement, and hereby confirms that, except as set forth below, the
information contained therein regarding the undersigned and its plan of distribution is
correct and complete.
	 
	 	 
	 

	 	State any exceptions here:
	 
	 	 
	 
	 	 
	 

	 	 
	 
	 	 
	 

	 	 

***********

By signing below, the undersigned consents to the disclosure of the information contained herein in
its answers to Items (1) through (7) above and the inclusion of such information in the Resale
Registration Statement and the Prospectus. The undersigned understands that such information will
be relied upon by the Company in connection with the preparation or amendment of any such
Registration Statement and the Prospectus.

By signing below, the undersigned acknowledges that it understands its obligation to comply,
and agrees that it will comply, with the provisions of the Exchange Act and the rules and
regulations thereunder, particularly Regulation M in connection with any offering of Registrable
Securities pursuant to the Resale Registration Statement. The undersigned also acknowledges that
it understands that the answers to this Questionnaire are furnished for use in connection with
Registration Statements filed pursuant to the Registration Rights Agreement and any amendments or
supplements thereto filed with the Commission pursuant to the Securities Act.

 

 

I confirm that, to the best of my knowledge and belief, the foregoing statements (including
without limitation the answers to this Questionnaire) are correct.

IN WITNESS WHEREOF the undersigned, by authority duly given, has caused this Questionnaire to be
executed and delivered either in person or by its duly authorized agent.

	 	 	 	 	 	 	 	 
	Dated: 	 	 	Beneficial Owner:
 	 	 
	 	 	 	
	 	 	 	By:  	 	 
	 	 	 	 	Name:  	 	 	
	 	 	 	 	Title:  	 	 	
	 	 	 	

 

 

EXHIBIT C-1

ACCREDITED INVESTOR QUESTIONNAIRE

(ALL INFORMATION WILL BE TREATED CONFIDENTIALLY)

	 	 	 
	To:	 	Oriental Financial Group Inc.

This Investor Questionnaire (“Questionnaire”) must be completed by each potential investor
in connection with the offer and sale of shares of mandatorily convertible non-cumulative
non-voting perpetual preferred stock, $1,000 liquidation preference per share (the “Preferred
Shares”), of Oriental Financial Group Inc., a financial holding company and corporation
organized in the Commonwealth of Puerto Rico (the “Corporation”). The Preferred Shares are
being offered and sold by the Corporation without registration under the Securities Act of 1933, as
amended (the “Securities Act”), and the securities laws of certain states, in reliance on
the exemptions contained in Section 4(2) of the Securities Act and on Regulation D promulgated
thereunder and in reliance on similar exemptions under applicable state laws. The Corporation must
determine that a potential investor meets certain suitability requirements before offering or
selling Preferred Shares to such investor. The purpose of this Questionnaire is to assure the
Corporation that each investor will meet the applicable suitability requirements. The information
supplied by you will be used in determining whether you meet such criteria, and reliance upon the
private offering exemptions from registration is based in part on the information herein supplied.

This Questionnaire does not constitute an offer to sell or a solicitation of an offer to buy any
security. Your answers will be kept strictly confidential. However, by signing this
Questionnaire, you will be authorizing the Corporation to provide a completed copy of this
Questionnaire to such parties as the Corporation deems appropriate in order to ensure that the
offer and sale of the Preferred Shares will not result in a violation of the Securities Act or the
securities laws of any state and that you otherwise satisfy the suitability standards applicable to
purchasers of the Preferred Shares. All potential investors must answer all applicable questions
and complete, date and sign this Questionnaire. Please print or type your responses and attach
additional sheets of paper if necessary to complete your answers to any item.

			
	PART A.	 	BACKGROUND INFORMATION

Name of Beneficial Owner of the Preferred Shares: 

Business Address: 

(Number and Street)

	 	 	 	 	 

	 
	(City)

	 	(State)
	 	(Zip Code)

Telephone Number: (        ) 

 

 

If a corporation, partnership, limited liability company, trust or other entity:

Type of entity: 

Were you formed for the purpose of investing in the securities being offered?

     Yes o                    No o          

If an individual:

Residence Address: 

(Number and Street)

	 	 	 	 	 

	 
	(City)

	 	(State)
	 	(Zip Code)

Telephone Number: (        ) 

	 	 	 	 	 	 	 	 	 	 	 

	Age:

	 	 

	 	Citizenship:
	 	 

	 	Where registered to vote:
	 	 

Set forth in the space provided below the state(s), if any, in the United States in which you
maintained your residence during the past two years and the dates during which you resided in each
state:

Are you a director or executive officer of the Corporation?

     Yes o                No o          

Social Security or Taxpayer Identification No. 

			
	PART B.	 	ACCREDITED INVESTOR QUESTIONNAIRE

     In order for the Company to offer and sell the Preferred Shares in conformance with state and
federal securities laws, the following information must be obtained regarding your investor status.
Please initial each category applicable to you as a Purchaser of Preferred Shares.

	 	       (1)	 	A bank as defined in Section 3(a)(2) of the Securities Act,
or any savings and loan association or other institution as defined in Section
3(a)(5)(A) of the Securities Act whether acting in its individual or fiduciary
capacity;
	 
	 	       (2)	 	A broker or dealer registered pursuant to Section 15 of the
Securities Exchange Act of 1934;
	 
	 	       (3)	 	An insurance company as defined in Section 2(13) of the
Securities Act;

 

 

	 	     	(4)  	An investment company registered under the Investment
Company Act of 1940 or a business development company as defined in Section
2(a)(48) of that act;
	 
	 	     	(5)  	A Small Business Investment Company licensed by the U.S.
Small Business Administration under Section 301(c) or (d) of the Small Business
Investment Act of 1958;
	 
	 	     	(6)  	A plan established and maintained by a state, its political
subdivisions, or any agency or instrumentality of a state or its political
subdivisions, for the benefit of its employees, if such plan has total assets
in excess of $5,000,000;
	 
	 	     	(7)  	An employee benefit plan within the meaning of the Employee
Retirement Income Security Act of 1974, if the investment decision is made by a
plan fiduciary, as defined in Section 3(21) of such act, which is either a
bank, savings and loan association, insurance company, or registered investment
adviser, or if the employee benefit plan has total assets in excess of
$5,000,000 or, if a self-directed plan, with investment decisions made solely
by persons that are accredited investors;
	 
	 	     	(8)  	A private business development company as defined in
Section 202(a)(22) of the Investment Advisers Act of 1940;
	 
	 	     	(9)  	An organization described in Section 501(c)(3) of the
Internal Revenue Code, a corporation, Massachusetts or similar business trust,
or partnership, not formed for the specific purpose of acquiring the Preferred
Shares, with total assets in excess of $5,000,000;
	 
	 	     	(10)  	A trust, with total assets in excess of $5,000,000, not
formed for the specific purpose of acquiring the Preferred Shares, whose
purchase is directed by a sophisticated person who has such knowledge and
experience in financial and business matters that such person is capable of
evaluating the merits and risks of investing in the Company;
	 
	 	     	(11)  	A natural person whose individual net worth, or joint net worth with that
person’s spouse, at the time of his purchase exceeds $1,000,000;
	 
	 	     	(12)  	A natural person who had an individual income in excess of $200,000 in each
of the two most recent years, or joint income with that person’s spouse in
excess of $300,000, in each of those years, and has a reasonable expectation of
reaching the same income level in the current year;
	 
	 	     	(13)  	An executive officer or director of the Corporation;

 

 

	 	     (14)	 	An entity in which all of the equity owners qualify under any of the above
subparagraphs. If the undersigned belongs to this investor category only, list
the equity owners of the undersigned, and the investor category which each such
equity owner satisfies.

	 	 	 	 	 	 	 	 	 	 	 	 	 

	A.	 	FOR EXECUTION BY AN INDIVIDUAL:	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 

	 	 
 

	 	 	 	By
	 	 

	 	  	 	 
	 

	 	Date	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	Print Name:
	 	 

	 	 

	 	 	 	 	 	 	 	 	 	 	 

	B.	 	FOR EXECUTION BY AN ENTITY:	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	Entity Name:	 	 	 	 
	 

	 	 	 	 	 	 	 	 

	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 

	 	 

	 	 	 	By
	 	 

	 	 
	 

	 	Date	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	Print Name:	 	 	 	 
	 

	 	 	 	 	 	 	 	 

	 	 
	 

	 	 	 	 	 	Title:	 	 	 	 
	 

	 	 	 	 	 	 	 	 

	 	 

	 	 	 	 	 	 	 	 	 	 	 

	C.	 	ADDITIONAL SIGNATURES (if required by partnership, corporation or trust document):
	 
	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	Entity Name:	 	 	 	 
	 

	 	 	 	 	 	 	 	 

	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 

	 	 

	 	 	 	By
	 	 

	 	 
	 

	 	Date	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	Print Name:	 	 	 	 
	 

	 	 	 	 	 	 	 	 

	 	 
	 

	 	 	 	 	 	Title:	 	 	 	 
	 

	 	 	 	 	 	 	 	 

	 	 

											

	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	Entity Name:	 	 	 	 
	 

	 	 	 	 	 	 	 	 

	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 

	 	 

	 	 	 	By
	 	 

	 	 
	 

	 	Date	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	Print Name:	 	 	 	 
	 

	 	 	 	 	 	 	 	 

	 	 
	 

	 	 	 	 	 	Title:	 	 	 	 
	 

	 	 	 	 	 	 	 	 

	 	 

 

 

EXHIBIT C-2

Stock Certificate Questionnaire

Pursuant to Section 2.2(b) of the Agreement, please provide us with the following information:

	 	 	 	 	 	 	 

	 

	 	 	 	 	 	 
	1.

	 	The exact name that the Preferred Shares are to be registered in (this
is the name that will appear on the stock certificate(s) and
warrant(s)). You may use a nominee name if appropriate:	 	 	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	2.

	 	The relationship between the Purchaser of the Preferred Shares and the
Registered Holder listed in response to Item 1 above:	 	 	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	3.

	 	The mailing address, telephone and telecopy number of the Registered
Holder listed in response to Item 1 above:	 	 	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	4.

	 	The Tax Identification Number (or, if an individual, the Social
Security Number) of the Registered Holder listed in response to Item 1
above:	 	 	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 

 

 

EXHIBIT D

Form of Opinion of Company Puerto Rican Counsel*

	1.	 	The Company is duly registered as a bank holding company under the Bank Holding Company Act
of 1956, as amended, and a financial holding company under the Gramm-Leach-Bliley Act of 1999,
as amended, and has been duly incorporated and is validly existing as a corporation in good
standing under the laws of the Commonwealth of Puerto Rico.

	2.	 	The Company has the corporate power and authority to execute and deliver and to perform its
obligations under the Transaction Documents, including, without limitation, to issue the
Preferred Shares and, upon obtaining the Stockholder Approvals, the Underlying Shares.

	3.	 	Each of the Transaction Documents has been duly authorized, executed and delivered by the
Company and, assuming due authorization, execution and delivery by the Purchasers (to the
extent they are a party), each of the Transaction Documents constitutes a valid and binding
agreement of the Company, enforceable against the Company in accordance with its terms.

	4.	 	The execution and delivery by the Company of each of the Transaction Documents and the
performance by the Company of its obligations under such agreements, including its issuance
and sale of the Preferred Shares and, upon obtaining the Stockholder Approvals, the Underlying
Shares, do not and will not: (a) result in any violation of the Certificate of Incorporation
or Bylaws of the Company, (b) require any consent, approval, license or exemption by, order or
authorization of, or filing, recording or registration by the Company with any Puerto Rican
governmental authority, except for the filing of the Certificate of Designations with the
Puerto Rico Department of State, (c) violate any court order, judgment or decree, if any, or
(d) result in a breach of, or constitute a default under, any Material Contract.

	5.	 	The Preferred Shares being delivered to the Purchasers pursuant to the Securities Purchase
Agreement have been duly and validly authorized and, when issued, delivered and paid for as
contemplated in the Securities Purchase Agreement, will be duly and validly issued, fully paid
and non-assessable, and free of any preemptive right or similar rights contained in the
Company’s Certificate of Incorporation or Bylaws. The Underlying Shares, when issued in
accordance with the Certificate of Designations, will be duly and validly issued, fully paid
and non-assessable, and free of any preemptive right or similar rights contained in the
Company’s Certificate of Incorporation or Bylaws.

 

			
	*	 	The opinion letter of Company Counsel will be subject to customary limitations and carveouts.

 

 

EXHIBIT E

Form of Opinion of Company U.S. Counsel*

	1.	 	Each of the Transaction Documents has been duly executed and delivered to the extent
such execution and delivery are governed by the laws of the State of New York by the
Company, and assuming due authorization, execution and delivery by the Purchasers, each of
the Transaction Documents constitutes a valid and binding agreement of the Company,
enforceable against the Company in accordance with its terms.

	2.	 	The execution and delivery by the Company of each of the Transaction Documents and the
consummation by the Company of the transaction contemplated thereby, including the issuance
and sale of the Preferred Shares and the Underlying Shares, will not (i) constitute a
violation of, or breach or default under, the terms of any Applicable Contract or (ii)
violate or conflict with, or result in any contravention of, any Applicable Law or
Applicable Orders. We do not express any opinion, however, as to whether the execution,
delivery or performance by the Company of the Transaction Documents will constitute a
violation of, or default under, any covenant, restriction or provision with respect to
financial ratios or tests or any aspect of the financial condition or results of operations
of the Company or any of its subsidiaries.

	3.	 	No Governmental Approval, which has not been obtained or taken and is not in full force
and effect, is required to authorize, or is required for, the execution or delivery of the
Transaction Documents by the Company or the consummation by the Company of the transactions
contemplated thereby.

	4.	 	Assuming (i) the accuracy of the representations and warranties of the Company set
forth in Section 3.1 of the Securities Purchase Agreement and of you in Section 3.2 of the
Securities Purchase Agreement, and (ii) the accuracy of the representations and warranties
made in the Accredited Investor Questionnaire, the offer, sale and delivery of the
Preferred Shares to you in the manner contemplated by the Securities Purchase Agreement, do
not require registration under the Securities Act, and the Underlying Shares issuable to
the holders of the Preferred Shares in accordance with the Certificate of Designations may
be delivered to such holders without registration under the Securities Act provided that no
commission or other remuneration is paid or given directly or indirectly for soliciting
such conversion.

 

			
	*	 	The opinion letter of Company Counsel will be subject to customary limitations and carveouts.

 

 

EXHIBIT F

Form of Secretary’s Certificate

The undersigned hereby certifies that he is the duly elected, qualified and acting Secretary of
Oriental Financial Group Inc., a financial holding company and corporation organized in the
Commonwealth of Puerto Rico (the “Company”), and that as such he is authorized to execute and
deliver this certificate in the name and on behalf of the Company and in connection with the
Securities Purchase Agreement, dated as of April 23, 2010, by and among the Company and the
investors party thereto (the “Securities Purchase Agreement”), and further certifies in his
official capacity, in the name and on behalf of the Company, the items set forth below.
Capitalized terms used but not otherwise defined herein shall have the meaning set forth in the
Securities Purchase Agreement.

	1.	 	Attached hereto as Exhibit A is a true, correct and complete copy of the resolutions
duly adopted by the Board of Directors of the Company at a meeting held on [_______], 2010.
Such resolutions have not in any way been amended, modified, revoked or rescinded, have been
in full force and effect since their adoption to and including the date hereof and are now in
full force and effect.

	2.	 	The Company’s Certificate of Incorporation, as amended, were filed as an Exhibit to the Form
S-3 on April 2, 1999; its Bylaws were filed as an exhibit to the 8-K filed with the SEC on
June 23, 2008. Such Certificate of Incorporation, as amended, and Bylaws, constitute true,
correct and complete copies of the Certificate of Incorporation, as amended, and Bylaws as in
effect on the date hereof.

	3.	 	Each person listed below has been duly elected or appointed to the position(s) indicated
opposite his name and is duly authorized to sign the Securities Purchase Agreement and each of
the Transaction Documents on behalf of the Company, and the signature appearing opposite such
person’s name below is such person’s genuine signature.

	 	 	 	 	 
	Name	 	Position	 	Signature
	 
	 	 	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	 

	 	 	 	 

 

 

IN WITNESS WHEREOF, the undersigned has hereunto set his hand as of this ___ day of [____], 2010.

                                                            

[_____________]

Secretary

I, [_____________], [Chief Financial Officer], hereby certify that [_____________] is the duly
elected, qualified and acting Secretary of the Company and that the signature set forth above is
his true signature.

                                                            

[______________]

[Chief Financial Officer]

 

 

EXHIBIT A

Resolutions

ORIENTAL FINANCIAL GROUP INC.

Authorization of Preferred Stock Private Placement and

Creation of Preferred Stock Pricing Committee

     WHEREAS, Oriental Financial Group Inc. (hereinafter referred to as the “Corporation”) wants to
authorize the issuance and private sale of up to $200,000,000 in aggregate initial offering price
of one or more series of the Corporation’s preferred stock, $1.00 par value per share (hereinafter
referred to as the “Preferred Stock”).

     NOW, THEREFORE, BE IT RESOLVED, that the Corporation is hereby authorized to issue and sell
the Preferred Stock in one or more private transactions exempt from registration under applicable
laws; provided, however, that the Preferred Stock shall have an aggregate initial offering price
not exceeding the sum of Two Hundred Million United States Dollars (US$200,000,000) or, if
applicable, the equivalent thereof in any other currency or currencies.

Authorized Officers; Registration Exemptions

     FURTHER RESOLVED, that José Rafael Fernández, President, Chief Executive Officer and Vice
Chairman of the Board, Julio Micheo, Senior Executive Vice President, Treasurer and Chief
Investment Officer, and Norberto González, Executive Vice President and Chief Financial Officer
(hereinafter collectively referred to as the “Authorized Officers”), each acting singly be, and
hereby are, authorized, empowered and directed, in the name and on behalf of the Corporation, to
take any and all actions which they may deem necessary or desirable in order to effect the
registration exemptions of the Preferred Stock for offering and sale under the United States
federal securities laws, and the Blue Sky or securities laws of the Commonwealth of Puerto Rico and
any of the States of the United States of America and, in connection therewith, to execute,
acknowledge, verify, deliver, file or cause to be established, in any case on behalf of the
Corporation, any applications, reports, consents to service of process, appointments of attorneys
to receive service of process, and other papers, documents and instruments as may be required under
such laws and to take any and all further action as they deem necessary or advisable in order to
maintain any such registration exemption for as long as they deem necessary or advisable or as may
be required by law.

Transfer Agent

     FURTHER RESOLVED, that American Stock Transfer and Trust Company, be and hereby is appointed
as Transfer Agent and Registrar of the Preferred Stock and said Transfer Agent and Registrar shall
be vested with all powers and duties with respect to the Preferred Stock as are presently vested or
charged in its capacities as Transfer Agent and Registrar with respect to the currently outstanding
shares of common stock and serial preferred stock of the Corporation.

 

 

Net Proceeds

     FURTHER RESOLVED, that the net proceeds from the sale of the Preferred Stock be used for the
purpose of acquiring certain assets and liabilities of a failed bank from the Federal Deposit
Insurance Corporation and related transaction fees and expenses.

Indemnification

     FURTHER RESOLVED, that to the extent permitted by applicable law and not prohibited by the
Corporation’s Certificate of Incorporation, as amended, the Corporation (i) shall indemnify and
hold harmless each and every past and present director and officer of the Corporation, and each
attorney-in-fact of such director or officer, against any and all losses, claims, damages or
liabilities to which such person may become subject under the Securities Act of 1933, as amended
(hereinafter referred to as the “Securities Act”), the Securities Exchange Act of 1934, as amended,
any insurance, Blue Sky or securities laws of the Commonwealth of Puerto Rico or of any State of
the United States of America or any comparable or similar laws of any other jurisdiction, or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof)
arise in connection with the offering and sale of the Preferred Stock as contemplated herein or in
connection with any filing under such laws, or any amendments thereto; and (ii) shall reimburse
each such person for any legal or other expenses reasonably incurred by him or her in connection
with investigating or defending any such action or claim.

Form and Execution of Preferred Stock

     FURTHER RESOLVED, that the Authorized Officers be, and each of them acting singly hereby is,
authorized, empowered and directed, in the name and on behalf of the Corporation, to execute, seal
(or cause the Treasurer or Secretary, or any Assistant Treasurer or Assistant Secretary, of the
Corporation to seal) with the seal of the Corporation (or facsimile thereof), and deliver, or cause
to be delivered, any certificates representing the shares of Preferred Stock as authorized herein
in such form as may be approved by any of the Authorized Officers, which approval shall be
conclusively evidenced by the execution by any such Authorized Officer of an Officer’s Certificate
with such form or forms of Preferred Stock set forth therein or annexed thereto; and that the
signatures of any of the foregoing officers on the shares of Preferred Stock may be manual or
facsimile.

Restrictive Legends

     FURTHER RESOLVED, that any such certificates representing the shares of Preferred Stock as
authorized herein shall contain any and all required legends evidencing that the Preferred Stock
has not been registered under the Securities Act and the Blue Sky or securities laws of the
Commonwealth of Puerto Rico or of any State of the United States of America, or any comparable or
similar laws of any other jurisdiction, and setting forth or referring to the restrictions on
transferability and sale of the Preferred Stock.

 

 

General Enabling

     FURTHER RESOLVED, that the Authorized Officers be, and each of them acting singly hereby is,
authorized, empowered and directed, in the name and on behalf of the Corporation to take, or cause
to be taken, any and all action which each such officer may deem necessary or desirable in order to
carry out the purpose and intent of the foregoing resolutions or in order to perform, or cause to
be performed, the obligations of the Corporation under any agreement referred to herein, and, in
connection therewith, to make, execute and deliver, or cause to be made, executed and delivered,
all agreements, undertakings, documents, certificates, orders, requests or instruments in the name
and on behalf of the Corporation as each such officer may deem necessary or desirable and any such
action which they may have taken is hereby authorized and ratified.

Preferred Stock Pricing Committee

     FURTHER RESOLVED, that the Preferred Stock Pricing Committee be and hereby is authorized and
empowered, in the name and on behalf of the Corporation, to determine the number of shares to be
offered and sold hereunder, the offering price or prices thereof, the fees to be paid to any
placement agent or agents, and the designations, preferences, rights, qualifications, limitations,
restrictions and other terms of the Preferred Stock in accordance herewith.

     FURTHER RESOLVED, that for the sale of the Preferred Stock, the Preferred Stock Pricing
Committee be and hereby is authorized, empowered and directed, in the name and on behalf of the
Corporation, to approve and cause to be executed one or more private placement agreements,
registration rights agreements, and any other agreement or agreements that the Preferred Stock
Pricing Committee may deem necessary or appropriate in connection with the arrangements for the
sale and purchase of the Preferred Stock, and that the Authorized Officers be, and each of them
acting singly hereby is, authorized to execute and deliver in the name and on behalf of the
Corporation any such agreement or agreements in substantially the form approved by the Preferred
Stock Pricing Committee with such changes therein, additions thereto, and deletions therefrom as
the Authorized Officer executing the same may approve, as conclusively evidenced by the execution
and delivery thereof.

     FURTHER RESOLVED, that José Rafael Fernández, Vice Chairman of the Board, be and hereby is
appointed as the sole member of the Preferred Stock Pricing Committee, and shall be authorized to
exercise such corporate power and authority with respect to the issuance of the Preferred Stock as
was delegated to the Preferred Stock Pricing Committee in the foregoing resolutions.

     FURTHER RESOLVED, that José J. Gil Lamadrid, Chairman of the Board, be and hereby is appointed
as the alternate member of the Preferred Stock Pricing Committee, who may act in place of Mr.
Fernández but only if Mr. Fernández is absent or otherwise not able to discharge the powers
delegated to the Preferred Stock Pricing Committee with respect to the issuance of the Preferred
Stock.

 

 

     IN WITNESS WHEREOF, the members of the Board of Directors of the Corporation hereby approve,
execute and deliver this Resolution by unanimous consent in lieu of meeting as of April 21, 2010.

	 	 	 
	SIGNATURE	 	TITLE
	 
	 	 
	/s/ José J. Gil de Lamadrid
 

José J. Gil de Lamadrid

	 	Chairman 
	 
	 	 
	/s/ José Rafael Fernández
 

José Rafael Fernández

	 	President,
Chief Executive Officer
and Vice Chairman
	 
	 	 
	/s/ Juan Carlos Aguayo
 

Juan Carlos Aguayo

	 	Director 
	 
	 	 
	/s/ Pablo I. Altieri
 

Pablo I. Altieri

	 	Director 
	 
	 	 
	/s/ Maricarmen Aponte
 

Maricarmen Aponte

	 	Director 
	 
	 	 
	/s/ Francisco Arriví
 

Francisco Arriví

	 	Director 
	 
	 	 
	/s/ Nelson García
 

Nelson García

	 	Director 
	 
	 	 
	/s/ Julian S. Inclán
 

Julian S. Inclán

	 	Director 
	 
	 	 
	/s/ Rafael Machargo-Chardón
 

Rafael Machargo-Chardón

	 	Director 

 

 

	 	 	 
	SIGNATURE	 	TITLE
	 
	 	 
	/s/ Pedro Morazzani
 

Pedro Morazzani

	 	Director 
	 
	 	 
	/s/ Josen Rossi
 

Josen Rossi

	 	Director 

 

 

EXHIBIT B

Certificate of Incorporation

AMENDED AND RESTATED CERTIFICATE OF INCORPORATION

OF

ORIENTAL FINANCIAL GROUP INC

     FIRST: The name of the corporation (hereinafter called the Corporation) is “Oriental
Financial Group Inc.”

     SECOND: The principal office of the Corporation in the Commonwealth of Puerto Rico is located
at Hato Rey Tower, 268 Muñoz Rivera Avenue, Suite 501, Hato Rey, Puerto Rico in the Municipality of
San Juan, Puerto Rico. The name of the resident agent of the Corporation is CT Corporation System
and its address is 361 San Francisco Street, 4th Floor, San Juan, Puerto Rico 00901.

     THIRD: The purpose of the Corporation is to engage, for profit, in any lawful act or activity
for which a corporation may be organized under the General Corporation Law of the Commonwealth of
Puerto Rico.

     FOURTH: The authorized capital of the Corporation shall be FORTY FIVE MILLION DOLLARS
($45,000,000) represented by FORTY MILLION (40,000,000) shares of common stock, $1.00 par value per
share, and FIVE MILLION (5,000,000) shares of preferred stock, $1.00 par value per share. The
shares may be issued by the Corporation from time to time as authorized by the Board of Directors
without the further approval of shareholders, except to the extent that such approval is required
by governing law, rule or regulation.

     The Board of Directors is expressly authorized to provide, when it deems necessary, for the
issuance of shares of preferred stock in one or more series, with such voting powers, full or
limited, but not to exceed one vote per share, or without voting powers; and with such
designations, preferences, rights, qualifications, limitations or restrictions thereof, as shall be
expressed in the resolution or resolutions of the Board of Directors, authorizing such issuance,
including (but without limiting the generality of the foregoing) the following:

     (a) the designation of such series, the number of shares to constitute such series and the
stated value thereof if different from the par value thereof;

     (b) the dividend rate of such series, the conditions and dates upon which the dividends shall
be payable, the preference or relation which such dividends shall bear to the dividends payable on
any other class or classes of capital stock of the Corporation, and whether such dividends shall be
cumulative or non-cumulative;

 

 

     (c) whether the shares of such series shall be subject to redemption by Corporation, and if
made subject to such redemption, the terms and conditions of such redemption;

     (d) the terms and amount of any sinking fund provided for the purchase or redemption of the
shares of such series;

     (e) whether the shares of such series shall be convertible and if provision be made for
conversion, the terms of such conversion;

     (f) the extent, if any, to which the holders of such shares shall be entitled to vote;
provided, however, that in no event, shall any holder of any series of preferred stock be entitled
to more than one vote for each such share;

     (g) the restrictions and conditions, if any, upon the issue or re-issue of any additional
preferred stock ranking on a parity with or prior to such shares as to dividends or upon
dissolution;

     (h) the rights of the holders of such shares upon dissolution of, or upon distribution of
assets of the Corporation, which rights may be different in the case of a voluntary dissolution;
and

     (i) any other powers, preferences and relative, participating, optional and other special
rights, and any qualifications, limitations and restrictions thereof.

     The powers, preferences and relative, participating, optional and other special rights, of
each series of preferred stock, and the qualifications, limitations or restrictions thereof, if
any, may differ from those of any and all other series at any time outstanding. All shares of any
one series of preferred stock shall be identical in all respects with all other shares of such
series, except that shares of any one series issued at different times may differ as to the dates
from which dividends thereon shall accrue and/or be cumulative.

     FIFTH: No holder of the capital stock of the Corporation shall be entitled as such, as a
matter of right, to subscribe for or purchase any part of any new or additional issue of stock of
any class whatsoever of the Corporation, or of securities convertible into stock of any class
whatsoever, whether now or hereafter authorized, or whether issued for cash or other consideration
or by way of a dividend.

     SIXTH: The name, place of residence and postal address of the sole incorporator are as
follows:

 

 

	 	 	 	 	 
	Name	Place of Residence and Postal Address
	Pedro Maldonado

	 	Carretera 971
	 

	 	Kilómetro 12.2
	 

	 	Barrio Sonadora
	 

	 	Naguabo, Puerto Rico
	 
	 	 	 	 
	 

	 	P.O. Box 364225
	 

	 	San Juan, Puerto Rico 00936-4225

     SEVENTH: The Corporation is to have perpetual existence.

     EIGHTH: For the management of the business and for the conduct of the affairs of the
Corporation, and in further creation, definition, limitation and regulation of the powers of the
Corporation and of its directors and stockholders, it is further provided:

     1. Directors and Number of Directors. The business and affairs of the Corporation shall be
managed by or under the direction of a Board of Directors. The number of directors of the
Corporation shall be fixed by, or in the manner provided in, the by-laws. The directors of the
Corporation need not be stockholders.

     2. Classification and Term. The Board of Directors, other than those who may be elected by
the holders of any class or series of stock having preference over the Common Stock as to dividends
or upon liquidation, shall be divided into three classes as nearly equal in number as possible,
with one class to be elected annually. The term of office of the initial directors shall be as
follows: the term of directors of the first class shall expire at the first annual meeting of
stockholders after the effective date of this Certificate of Incorporation; the term of office of
the directors of the second class shall expire at the second annual meeting of stockholders after
the effective date of this Certificate of Incorporation; and the term of office of the third class
shall expire at the third annual meeting of stockholders after the effective date of this
Certificate of Incorporation; and, as to directors of each class, when their respective successors
are elected and qualified. At each annual meeting of stockholders, directors elected to succeed
those whose terms are expiring shall be elected for a term of office to expire at the third
succeeding annual meeting of stockholders and when their respective successors are elected and
qualified.

     3. Cumulative Voting. At each annual meeting of stockholders in which more than one director
is being elected, every stockholder entitled to vote at such election shall have the right to vote,
in person or by proxy, the number of shares owned by the stockholder for as many persons as there
are directors to be elected and for whose election the stockholder has a right to vote, or to
cumulate the votes by giving one candidate as many votes as the number of such directors to be
elected multiplied by the number of his shares shall equal, or by distributing such votes on the
same principle among any number of candidates.

 

 

     4. Vacancies. Except as otherwise fixed pursuant to the provisions of Article FOURTH hereof
relating to the rights of the holders of any class or series of stock having a preference over the
Common Stock as to dividends or upon liquidation to elect directors, any vacancy occurring in the
Board of Directors, including any vacancy created by reason of an increase in the number of
directors, may be filled by a majority vote of the directors then in office, whether or not a
quorum is present, or by a sole remaining director, and any director so chosen shall hold office
for the remainder of the term to which the director has been selected and until such director’s
successor shall have been elected and qualified. When the number of directors is changed, the
Board of Directors shall determine the class or classes to which the increased or decreased number
of directors shall be apportioned; provided that no decrease in the number of directors shall
shorten the term of any incumbent director.

     5. Removal. Subject to the rights of any class or series of stock having preference over the
Common Stock as to dividends or upon liquidation to elect directors, any director (including
persons elected by directors to fill vacancies in the Board of Directors) may be removed from
office only with cause by an affirmative vote of not less than a majority of the votes eligible to
be cast by stockholders at a duly constituted meeting of stockholders called expressly for such
purpose.

     6. By-Laws. The Board of Directors is expressly authorized and empowered to make, alter and
repeal the by-laws of the Corporation, subject to the power of the stockholders to alter or repeal
the by-laws made by the Board of Directors. Such action by the Board of Directors shall require
the affirmative vote of a majority of the directors then in office at any regular or special
meeting of the Board of Directors. Such action by the stockholders shall require the affirmative
vote of the holders of a majority of the shares of the Corporation entitled to vote generally in an
election of directors, voting together as a single class, as well as such additional vote of the
preferred stock as may be required by the provisions of any series thereof.

     NINTH: The personal liability of the directors and officers of the Corporation for monetary
damages shall be eliminated to the fullest extent permitted by the General Corporation Law of the
Commonwealth of Puerto Rico as it exists on the effective date of this Certificate of Incorporation
or as such law may be thereafter in effect. No amendment, modification or repeal of this Article
NINTH shall adversely affect the rights provided hereby with respect to any claim, issue or matter
in any proceeding that is based in any respect on any alleged action or failure to act prior to
such amendment, modification or repeal.

     TENTH: The affirmative vote of the holders of not less than seventy-five percent (75%) of the
total number of outstanding shares of the Corporation shall be required to amend this Article TENTH
to the extent that such amendment is not approved by eighty percent (80%) of the Corporation’s
Board of Directors then in office; to approve any Business Combination for which stockholder
approval is required by applicable law to the extent that such Business Combination is not approved
by eighty percent (80%) of the Corporation’s Board of Directors then in office; or to approve the
voluntary dissolution of the Corporation to the extent that such dissolution is not approved by
eighty percent (80%) of the Corporation’s Board of Directors then in office, notwithstanding that
applicable law would otherwise permit any of the above with the approval of fewer shares or without
the approval of any shares.

 

 

     For purposes of this Article TENTH, the term “Business Combination” shall mean:

     (a) a merger, reorganization, or consolidation in which the Corporation is a constituent
corporation; or

     (b) the sale, lease, or hypothecation of substantially all the assets of the Corporation.

 

 

EXHIBIT C

Bylaws

BY-LAWS OF

ORIENTAL FINANCIAL GROUP INC.

ARTICLE I.

STOCKHOLDERS

     SECTION 1. Place of Meetings. All annual and special meetings of stockholders shall
be held at the principal office of the Corporation or at such other place as the Board of Directors
may determine.

     SECTION 2. Annual Meeting. A meeting of the stockholders of the Corporation for the
election of directors and for the transaction of any other business of the Corporation shall be
held annually after the end of the Corporation’s fiscal year at such date and time as the Board of
Directors may determine in accordance with applicable laws and regulations.

     SECTION 3. Special Meeting. Special meetings of stockholders, for any purpose(s),
may be called at any time by the Chairman, the Vice Chairman, the President or by the Board of
Directors, and shall be called by the Chairman or the Vice Chairman of the Board, the President or
the Secretary upon the written request of the holders of not less than twenty percent (20%) of the
paid-in capital of the Corporation entitled to vote at the meeting. The written request specified
above shall state the purpose(s) of the meeting and shall be delivered at the principal office of
the Corporation addressed to the Chairman or the Vice Chairman of the Board, the President or the
Secretary.

     SECTION 4. Conduct of Meetings. The Board of Directors shall designate, when present,
the Chairman of the Board or, if he or she is not present, the Vice Chairman of the Board, to
preside at any and all stockholders’ meetings.

     SECTION 5. Notice of Meetings. Notice of all meetings of stockholders shall be
mailed to each stockholder of the Corporation at least ten (10) days, but not more than sixty (60)
days, prior to the date for each such meeting.

     SECTION 6. Fixing of Record Date. For the purpose of determining stockholders
entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or
stockholders entitled to receive payment of any dividend, or in order to make a determination of
stockholders for any other proper purpose, the Board of Directors shall fix in advance a date as
the record date for any such determination of stockholders. Such date in any case shall be not
more than sixty (60) days nor less than ten (10) days prior to the date on which the particular
action, requiring such determination of stockholders, is to be taken. When a determination of

 

 

stockholders entitled to vote at any meeting of stockholders has been made as provided in this
Section 6, such determination shall apply to any adjournment thereof.

     SECTION 7. Voting Lists. At least ten (10) days before each meeting of the
stockholders, the officer or agent having charge of the stock transfer books for shares of the
Corporation shall make a complete list of the stockholders entitled to vote at such meeting, or any
adjournment thereof, arranged in alphabetical order, with the address of and the number of shares
held by each. This list of stockholders shall be kept on file at the principal office of the
Corporation and shall be subject to inspection by any stockholder at any time during normal
business hours for a period of ten (10) days prior to such meeting. Such list shall also be
produced and kept open at the time and place of the meeting and shall be subject to the inspection
of any stockholder during the entire time of the meeting. The original stock transfer book shall
constitute prima facie evidence of the stockholders entitled to examine such list or transfer books
or to vote at any meeting of stockholders.

     SECTION 8. Quorum; Manner of Acting. A majority of the outstanding shares of the
Corporation entitled to vote, represented in person or by proxy, shall constitute a quorum at a
meeting of stockholders. If less than a majority of the outstanding shares is represented at a
meeting, a majority of the shares so represented may adjourn the meeting from time to time without
further notice; provided that the date of the adjourned meeting shall not be more than thirty (30)
days after the date for which the first meeting was called. At such adjourned meeting at which a
quorum shall be present or represented, any business may be transacted which might have been at the
meeting as originally notified. The stockholders present at a duly organized meeting may continue
to transact business until adjournment, notwithstanding the withdrawal of enough stockholders to
leave less than a quorum.

     Except as otherwise provided in the Corporation’s Certificate of Incorporation or under
applicable law, in all matters other than the election of directors, the affirmative vote of the
majority of shares present in person or represented by proxy at the meeting and entitled to vote on
the subject matter shall be the act of the stockholders. Directors shall be elected by a plurality
of the votes of the shares present in person or represented by proxy at the meeting and entitled to
vote on the election of directors (which number shall take into account the cumulation as votes as
provided in the Corporation s Certificate of Incorporation and Article I, Section 11 of these
By-laws). If, at any meeting of the stockholders, due to a vacancy or vacancies or otherwise,
directors of more than one class of the Board of Directors are to be elected, each class of
directors to be elected at the meeting shall be elected in a separate election by a plurality vote.

     SECTION 9. Proxies. At all meetings of stockholders, a stockholder may vote by
proxy executed in writing by the stockholder or by his or her duly authorized attorney in fact.
Proxies solicited on behalf of the management shall be voted as directed by the stockholder or, in
the absence of such direction, as determined by a majority of the Board of Directors. Proxies must
be filed with the Secretary of the Corporation.

     SECTION 10. Voting of Shares by Certain Holders. Shares standing in the name of
another corporation may be voted by any officer, agent or proxy as the by-laws of such corporation
may prescribe, or, in the absence of such provision, as the board of directors of such

 

 

corporation may determine. Shares held by an administrator, executor, guardian or conservator may
be voted by him or her, either in person or by proxy, without a transfer of such shares into his or
her name. Shares standing in the name of a trustee may be voted by him or her, either in person or
by proxy, but no trustee shall be entitled to vote shares held by him or her without a transfer of
such shares into his or her name. Shares standing in the name of a receiver may be voted by such
receiver, and shares held by or under the control of a receiver may be voted by such receiver
without the transfer thereof into his or her name if authority to do so is contained in an
appropriate order of the court or other public authority by which such receiver was appointed.

          A stockholder whose shares are pledged shall be entitled to vote such shares until the shares
have been transferred into the name of the pledgee, and thereafter the pledgee shall be entitled to
vote the shares so transferred.

     SECTION 11. Cumulative Voting. At each annual meeting of stockholders in which more
than one director is being elected, every stockholder entitled to vote at such election shall have
the right to vote, in person or by proxy, the number of shares owned by the stockholder for as many
persons as there are directors to be elected and for whose election the stockholder has a right to
vote, or to cumulate the votes by giving one candidate as many votes as the number of such
directors to be elected multiplied by the number of his or her shares shall equal, or by
distributing such votes on the same principle among any number of candidates.

     SECTION 12. Inspector of Election. In advance of any meeting of stockholders, the
Chairman of the Board of Directors may appoint any person(s) other than nominees for office as
inspectors of election to act at such meeting or any adjournment thereof. Any such appointment
shall not be altered at the meeting. If the inspector(s) of election is (are) not so appointed,
the Chairman of the Board or, if he or she is not present at the meeting, the Vice Chairman of the
Board, may, and at the request of not fewer than ten percent (10%) of the votes represented at the
meeting shall, make such appointment at the meeting. In case any person(s) appointed as
inspector(s) fail(s) to appear or fail(s) or refuse(s) to act, the vacancy may be filled by
appointment by the Chairman of the Board in advance of the meeting or at the meeting, or, if he or
she is not present at the meeting, by the Vice Chairman of the Board.

          The duties of such inspectors shall include: determining the number of shares of stock and
the voting power of each share, the shares of stock represented at the meeting, the existence of a
quorum, the authenticity, validity and effect of proxies; receiving votes, ballots or consents;
hearing and determining all challenges and questions in any way arising in connection with the
right to vote; counting and tabulating all votes or consents; determining the result; and such acts
as may be proper to conduct the election or vote with fairness to all stockholders.

     SECTION 13. Nominations for Directors. The Corporate Governance and Nominating
Committee (the “Nominating Committee”) of the Board of Directors shall recommend to the Board of
Directors the selection of management nominees for election as directors. Except in the case of a
nominee substituted as a result of the death or other incapacity of a management nominee, the
Board of Directors, upon the recommendation of the Nominating Committee, shall deliver written
nominations to the Secretary of the Corporation at least twenty (20) days prior to the date of the
annual meeting. No nominations for directors, except those made by the Board of

 

 

Directors upon the recommendation of the Nominating Committee, shall be voted upon at the annual
meeting unless other nominations by stockholders are made in writing, together with the nominee’s
qualifications for service and evidence of his or her willingness to serve on the Board of
Directors, and delivered to the Secretary of the Corporation at least one hundred and twenty (120)
days prior to the anniversary date of the mailing of proxy materials by the Corporation in
connection with the immediately preceding annual meeting. Ballots bearing the names of all the
persons nominated by the Board of Directors and by stockholders shall be provided for use at the
annual meeting. However, if the Board of Directors or the Nominating Committee shall fail or
refuse to act at least twenty (20) days prior to the annual meeting, nominations for directors may
be made at the annual meeting by any stockholder entitled to vote and shall be voted upon.

     SECTION 14. Proposals. At an annual meeting of the stockholders, only such business
shall be conducted as shall have been properly brought before the meeting. To be properly brought
before an annual meeting, business must be (a) specified in the notice of meeting (or any
supplement thereto) given by or at the direction of the Board of Directors, or (b) otherwise
properly brought before the meeting by a stockholder. For business to be properly brought before
an annual meeting by a stockholder, the stockholder must have given timely notice thereof in
writing to the Secretary of the Corporation. To be timely a stockholder’s notice must be delivered
to or mailed and received at the principal executive offices of the Corporation not later than one
hundred twenty days (120) prior to the anniversary date of the mailing of proxy materials by the
Corporation in connection with the immediately preceding annual meeting of stockholders of the
Corporation. A stockholder’s notice to the Secretary shall set forth as to each matter the
stockholder proposes to bring before the annual meeting (i) a brief description of the business
desired to be brought before the annual meeting, (ii) the name and address, as they appear on the
Corporation’s books, of the stockholder proposing such business, (iii) the class and number of
shares of the Corporation which are beneficially owned by the stockholder, and (iv) any material
interest of the stockholder in such business. The chairman of an annual meeting shall, if the
facts warrant, determine and declare to the meeting that business was not properly brought before
the meeting in accordance with the provisions of this Article I, Section 14, and if he or she
should so determine, he or she shall so declare to the meeting and any such business not properly
brought before the meeting shall not be transacted. This provision is not a limitation on any
other applicable laws and regulations.

ARTICLE II.

BOARD OF DIRECTORS

     SECTION 1. General Powers. The business and affairs of the Corporation shall be
under the direction of the Board of Directors which shall annually elect a Chairman and a Vice
Chairman from among its members and shall designate, when present, the Chairman or, if he or she is
not present, the Vice Chairman to preside at its meetings. The Chairman of the Board shall have
such other duties as set forth in these By-laws or as may from time to time be assigned by the
Board of Directors. The Vice Chairman of the Board shall assist the Chairman of the Board in the
performance of his or her duties and shall have such other duties as set forth in these By-laws or
as may from time to time be assigned by the Board of Directors or the Chairman of the Board.

 

 

     SECTION 2. Classification and Term. The Board of Directors shall be divided into
three classes as nearly equal in number as possible. The term of office of the initial directors
shall be as follows: the term of directors of the first class shall expire at the first annual
meeting of stockholders after the effective date of the Corporation’s Certificate of Incorporation;
the term of office of the directors of the second class shall expire at the second annual meeting
of stockholders after the effective date of the Corporation’s Certificate of Incorporation; and the
term of office of the third class shall expire at the third annual meeting of stockholders after
the effective date of the Corporation’s Certificate of Incorporation; and as to directors of each
class, when their respective successors are elected and qualified. At each annual meeting of
stockholders, directors elected to succeed those whose terms are expiring shall be elected for a
term of office to expire at the third succeeding annual meeting of stockholders and when their
respective successors are elected and qualified. No director shall be elected, re-elected or
nominated for election or re-election, as the case may be, after attaining the age of seventy-one
(71). Also, the term of a director shall end upon attaining the age of seventy-one (71). In such
case, the Board of Directors shall elect a replacement to serve the remainder of his or her term as
director.

     SECTION 3. Number of Directors. The Board of Directors shall consist of such number
of directors as established from time to time by a vote of a majority of the Board of Directors,
provided that no decrease in the number of directors shall have the effect of shortening the term
of any incumbent director.

     SECTION 4. Meetings. All meetings of the Board of Directors may be held in or
outside Puerto Rico.

     SECTION 5. Special Meetings. Special meetings of the Board of Directors may be
called by or at the request of the Chairman or the Vice Chairman of the Board, the President, or
one-third of the members of the Board. Such meetings shall be held at such place as the person(s)
calling the meeting shall designate.

     SECTION 6. Notice. Written notice of any special meeting shall be given to each
director at least two (2) days previous thereto if delivered personally or by fax or electronic
mail, or at least five (5) days previous thereto if delivered by postal mail at the address at
which the director is most likely to be reached. Such notice shall be deemed to be delivered when
deposited in the U.S. postal mail so addressed, with postage thereon prepaid if mailed or when
delivered if sent by fax or electronic mail. Any director may waive notice of any meeting by a
writing filed with the Secretary. The attendance of a director at a meeting shall constitute a
waiver of notice of such meeting, except where a director attends a meeting for the express purpose
of objecting to the transaction of any business because the meeting is not lawfully called or
convened. Neither the business to be transacted at, nor the purpose of, any meeting of the Board
of Directors need be specified in the notice or waiver of notice of such meeting.

     SECTION 7. Quorum. A majority of the directors shall constitute a quorum for the
transaction of business at any meeting of the Board of Directors, but if less than such majority is
present at a meeting, a majority of the directors present may adjourn the meeting from time to

 

 

time. Notice of any adjourned meeting shall be given in the same manner as prescribed by Section 6
of this Article II.

     SECTION 8. Manner of Acting. The act of the majority of the directors present at a
meeting at which a quorum is present shall be the act of the Board of Directors, unless a greater
number is prescribed by applicable laws or regulations or by these By-laws.

     SECTION 9. Resignation. Any director may resign at any time by sending a written
notice of such resignation to the principal office of the Corporation addressed to the Chairman or
the Vice Chairman of the Board. Unless otherwise specified therein, such resignation shall take
effect upon receipt thereof by the Chairman or the Vice Chairman of the Board.

     SECTION 10. Vacancies. All vacancies in the Board of Directors shall be filled in
the manner provided in the Corporation’s Certificate of Incorporation.

     SECTION 11. Removal of Directors. Directors may be removed in the manner provided in
the Corporation’s Certificate of Incorporation.

     SECTION 12. Action by Directors Without a Meeting. Any action required or which may
be taken at a meeting of the directors, or of a committee thereof, may be taken without a meeting
if a consent in writing, setting forth the action so taken or to be taken, shall be signed by all
of the directors, or all of the members of the committee, as the case may be, and such consents are
filed with the minutes of proceedings of the Board of Directors or committee, as the case may be.
Such consent shall have the same effect as a unanimous vote.

     SECTION 13. Action by Directors by Communications Equipment. Any action required or
which may be taken at a meeting of directors, or of a committee thereof, may be taken by means of a
conference telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other at the same time.

     SECTION 14. Compensation. The Board of Directors may fix, from time to time, a
reasonable fee to be paid to each director for his or her services in attending meetings of the
Board of Directors or of any authorized committee. The Board of Directors may also provide that
such compensation as it deems reasonable shall be paid to any or all of its members for services
rendered to the Corporation other than attendance at meetings of the Board of Directors or its
committees.

ARTICLE III.

EXECUTIVE AND OTHER COMMITTEES

     SECTION 1. Appointment. The Board of Directors, by resolution adopted by a majority
of the full Board, may, from time to time appoint, any number of committees, composed of one (1) or
more directors as the Board may determine.

 

 

     SECTION 2. Authority. These committees shall and may exercise those powers that the
Board of Directors may so delegate and shall have the name or names that from time to time the
Board of Directors may determine by resolution.

     SECTION 3. Minutes, Reports. Minutes shall be kept of all meetings of the
committees. The minutes of each meeting, together with such reports in writing as may be required
to fully explain any business or transactions, shall be submitted for information purposes to the
Board of Directors at the next regular meeting of the Board of Directors. The Board of Directors
shall record such action in the minutes of such meeting.

     SECTION 4. Appointment, Term of Office. Members of the committees shall be appointed
by the Board for such term as the Board may determine, and all members of the committees shall
serve at the pleasure of the Board.

     SECTION 5. Quorum. A majority of the members of any committee shall constitute a
quorum. A majority of the votes cast shall decide every question or matter submitted to a
committee.

ARTICLE IV.

OFFICERS

     SECTION 1. Positions. The officers of the Corporation shall be a President, one or
more Vice Presidents, a Secretary, an Assistant Secretary, and a Treasurer, each of whom shall be
elected by the Board of Directors. The Board of Directors may designate one or more Vice
Presidents as Executive Vice President or Senior Vice President. The Board of Directors may also
elect or authorize the appointment of such other officers as the business of the Corporation may
require. The officers shall have such authority and perform such duties as the Board of Directors
may from time to time authorize or determine. In the absence of action by the Board of Directors,
the officers shall have such powers and duties as generally pertain to their respective offices.

     SECTION 2. Election and Term of Office. The officers of the Corporation shall be
elected annually at the first meeting of the Board of Directors held after the annual meeting of
the stockholders.

          If the election of officers is not held at such meeting, such election shall be held as soon
thereafter as possible. Each officer shall hold office until a successor has been duly elected and
qualified or until the officer’s death, resignation or removal in the manner hereinafter provided.
Election or appointment of an officer, employee or agent shall not of itself create contractual
rights. The Board of Directors may authorize the Corporation to enter into an employment contract
with any officer in accordance with regulations of the Board, but no such contract shall impair the
right of the Board of Directors to remove any officer at any time in accordance with Section 3 of
this Article IV.

 

 

     SECTION 3. Removal. Any officer may be removed by the Board of Directors whenever, in
its judgment, the best interests of the Corporation will be served thereby, but such removal, other
than for cause, shall be without prejudice to the contractual rights, if any, of the person so
removed.

     SECTION 4. Vacancies. A vacancy in any office because of death, resignation,
removal, disqualification or otherwise, may be filled by the Board of Directors for the unexpired
portion of the term.

     SECTION 5. Remuneration. The remuneration of the officers shall be fixed from time
to time by the Board of Directors.

ARTICLE V.

CONTRACTS, LOANS, CHECKS AND DEPOSITS

     SECTION 1. Contracts. To the extent permitted by applicable laws and regulations,
and except as otherwise prescribed by these By-laws with respect to certificates for shares, the
Board of Directors may authorize any officer, employee or agent of the Corporation to enter into
any contract or execute and deliver any instrument in the name and on behalf of the Corporation.
Such authority may be general or confined to specific instances.

     SECTION 2. Loans. No loans shall be contracted on behalf of the Corporation and no
evidence of indebtedness shall be issued unless authorized by the Board of Directors. Such
authority may be general or confined to specific instances.

     SECTION 3. Checks, Drafts. All checks, drafts or other orders for the payment of
money, notes and other evidences of indebtedness issued in the name of the Corporation shall be
signed by one or more officers, employees or agents of the Corporation in such manner as shall from
time to time be determined by the Board of Directors.

     SECTION 4. Deposits. All funds of the Corporation not otherwise employed shall be
deposited from time to time to the credit of the Corporation in any one of its authorized
depositories as the Board of Directors select.

ARTICLE VI.

STOCK AND STOCK CERTIFICATES

     SECTION 1. Transfer. Shares of stock shall be transferable on the books of the
Corporation, and a transfer book shall be kept in which all transfer of stock shall be recorded.
Every person becoming a stockholder by such transfer shall, in proportion to his or her shares,
succeed to all rights and liabilities of the prior holder of such shares.

     SECTION 2. Stock Certificates. Certificates of stock shall bear the signature of the
Chairman or the Vice Chairman of the Board, the President or any Vice President (which may be

 

 

engraved, printed or impressed), and shall be signed manually or by facsimile process by the
Secretary or an Assistant Secretary, or any other officer appointed by the Board of Directors for
that purpose, to be known as an Authorized Officer, and the seal of the Corporation shall be
engraved thereon.

     SECTION 3. Owner of Record, Attachment, Pledge. Shares of stock are transferable by
all means recognized by law, if there is no attachment levied against them under competent
authority, but as long as the transfer is not signed and recorded in the transfer books the
Corporation shall be entitled to consider as owner thereof the party who appears as such in said
books.

     SECTION 4. Lost or Destroyed Stock Certificates. In the event any certificate of
stock shall be lost or destroyed the Board may order a new certificate to be issued in its place
upon receiving such proof of loss and such bond of indemnity therefore as may be satisfactory to
the Board of Directors. New certificates may be issued without requiring any bond when in the
judgment of the Board it is proper to do so.

     SECTION 5. Transfer Agent. The Board of Directors may designate any person, whether
or not an officer of the Corporation, as stock transfer agent or registrar of the Corporation with
respect to Stock Certificates or other securities issued by the Corporation.

ARTICLE VII.

INDEMNIFICATION, ETC., OF DIRECTORS,

OFFICERS, EMPLOYEES AND AGENTS

     SECTION 1. Indemnification.

          (a) The Corporation shall indemnify, to the fullest extent authorized by the General
Corporation Law of the Commonwealth of Puerto Rico, any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative (other than an action by or in the right
of the Corporation) by reason of the fact that he or she is or was a director, officer, employee,
or agent of the Corporation, or is or was serving at the written request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint venture, trust or
other enterprise, against expenses (including attorneys’ fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by him or her in connection with such action, suit
or proceeding if he or she acted in good faith and in a matter he or she reasonably believed to be
in or not opposed to the best interests of the Corporation, and, with respect to any criminal
action or proceeding, had no reasonable cause to believe his or her conduct was unlawful, provided
that the Corporation shall not be liable for any amounts which may be due to any person in
connection with a settlement of any action, suit or proceeding effected without its prior written
consent or any action, suit or proceeding initiated by any person seeking indemnification hereunder
without its prior written consent. The termination of any action, suit or proceeding by judgment,
order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of
itself, create a presumption that the person did not act

 

 

in good faith and in a manner which he or she reasonably believed to be in or not opposed to the
best interests of the Corporation and, with respect to any criminal action or proceeding, had
reasonable cause to believe that his or her conduct was unlawful.

          (b) The Corporation shall indemnify any person who was or is a party or is threatened to
be made a party to any threatened, pending or completed action or suit by or in the right of the
Corporation to procure a judgment in its favor by reason of the fact that he or she is or was a
director, officer, employee, or agent of the Corporation, or is or was serving at the written
request of the Corporation as a director, officer, employee, or agent of another corporation,
partnership, joint venture, trust or other enterprise against expenses (including attorneys’ fees)
actually and reasonably incurred by him or her in connection with the defense or settlement of such
action or suit if he or she acted in good faith and in a manner he reasonably believed to be in or
not opposed to the best interests of the Corporation, except that no indemnification shall be made
in respect of any claim, issue or matter as to which such person shall have been adjudged to be
liable for negligence or misconduct in the performance of his or her duty to the Corporation unless
and only to the extent that the court in which such action or suit was brought shall determine upon
application that, despite the adjudication of liability but in view of all the circumstances of the
case, such person is fairly and reasonably entitled to indemnity for such expense which such court
shall deem proper.

          (c) To the extent that a director, officer, employee, or agent of the Corporation has been
successful on the merits or otherwise in defense of any action, suit or proceeding referred to in
Section 1(a) or Section 1(b) of this Article VII, or in defense of any claim, issue or matter
therein, he or she shall be indemnified against expenses (including attorneys’ fees) actually and
reasonably incurred by him or her in connection therewith.

          (d) Any indemnification under Section 1(a) or Section 1(b) of this Article VII (unless
ordered by a court) shall be made by the Corporation only as authorized in the specific case upon a
determination that indemnification of the director, officer, employee or agent is proper in the
circumstances because he or she has met the applicable standard of conduct set forth therein. Such
determination shall be made (a) by the Board of Directors by a majority vote of a quorum consisting
of directors who were not parties to such action, suit or proceeding, or (b) if such a quorum is
not obtainable, or, even if obtainable a quorum of disinterested directors so directs, by
independent legal counsel in a written opinion, or (c) by the stockholders.

          (e) The Corporation shall not be liable for any amounts which may be due to any person in
connection with a settlement of any action, suit or proceeding initiated by any person seeking
indemnification under this Article VII without its prior written consent.

     SECTION 2. Advancement of Expenses. Reasonable expenses (including attorneys’ fees)
incurred in defending a civil or criminal action, suit or proceeding described in Section 1 of this
Article VII may be paid by the Corporation in advance of the final disposition of such action, suit
or proceeding as authorized by the Board of Directors in the specific case upon receipt of an
undertaking by or on behalf of the director or officer to repay such amount unless it shall
ultimately be determined that he or she is entitled to be indemnified by the Corporation as
authorized in this Article VII.

 

 

     SECTION 3. Other Rights and Remedies. The indemnification and advancement of
expenses provided by, or granted pursuant to, this Article VII shall not be deemed exclusive of any
other rights to which those seeking indemnification or advancement of expenses may be entitled
under any statute, by-law, agreement, vote of stockholders or disinterested directors or otherwise,
both as to actions in their official capacity and as to actions in another capacity while holding
such office, and shall continue as to a person who has ceased to be a director, officer, employee,
or agent and shall inure to the benefit of the heirs, executors and administrators of such a
person.

     SECTION 4. Insurance. By action of its Board of Directors, notwithstanding any
interest of the directors in the action, the Corporation may purchase and maintain insurance, in
such amounts as the Board of Directors deems appropriate, on behalf of any person who is or was a
director, officer, employee or agent of the Corporation, or is or was serving at the written
request of the Corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against any liability asserted against him
or her and incurred by him or her in any such capacity, or arising out of his or her status as
such, whether or not the Corporation would have the power or would be required to indemnify him or
her against such liability under the provisions of this Article VII or of the General Corporation
Law of the Commonwealth of Puerto Rico, or of the laws of any other State or political dependency
of the United States or foreign country as may be applicable.

     SECTION 5. Modification. The duties of the Corporation to indemnify and to advance
expenses to a director, officer, employee or agent provided in this Article VII shall be in the
nature of a contract between the Corporation and each such person, and no amendment or repeal of
any provision of this Article VII shall alter, to the detriment of such person, the right of such
person to the advance of expenses or indemnification related to a claim based on an act or failure
to act which took place prior to such amendment or repeal.

ARTICLE VIII.

CORPORATE SEAL

     The corporate seal of the Corporation shall be in such form and bear such inscription as may
be adopted by resolution of the Board of Directors, or by usage of the officers on behalf of the
Corporation.

ARTICLE IX.

MISCELLANEOUS PROVISIONS

     SECTION 1. Fiscal Year. The fiscal year of the Corporation shall be from January 1
to December 31 of each year.

 

 

     SECTION 2. Dividends. The Board of Directors may from time to time declare, and the
Corporation may pay dividends in cash or in shares of the capital stock of the Corporation, in the
manner and upon the terms and conditions provided by applicable laws and regulations.

     SECTION 3. Conflict with New Laws. The provisions of these By-laws in conflict with
any and all new statutes shall become revoked without affecting the validity of the remaining
provisions hereof.

     SECTION 4. Books and Records. The Corporation shall keep correct and complete books
and records of account and shall keep minutes and proceedings of its stockholders and Board of
Directors (including committees thereof). Any books, records and minutes may be in written form or
any other form capable of being converted to written form within a reasonable time.

 

 

EXHIBIT G

Form of Officer’s Certificate

The undersigned, the [Chief Financial Officer] [Chief Executive Officer] of Oriental Financial
Group Inc., a financial holding company and corporation organized in the Commonwealth of Puerto
Rico (the “Company”), pursuant to Section 5.1(g) of the Securities Purchase Agreement, dated as of
April 23, 2010 by and among the Company and the investors signatory thereto (the “Securities
Purchase Agreement”), hereby represents, warrants and certifies as follows (capitalized terms used
but not otherwise defined herein shall have the meaning set forth in the Securities Purchase
Agreement):

	 	1.	 	The representations and warranties of the Company contained
in the Securities Purchase Agreement are true and correct as of the date when
made and as of the Closing Date, as though made on and as of such date, except
for such representations and warranties that speak as of a specific date.

	 	2.	 	The Company has performed, satisfied and complied in all
material respects with all covenants, agreements and conditions required by the
Transaction Documents to be performed, satisfied or complied with by it at or
prior to the Closing.

          IN WITNESS WHEREOF, the undersigned has executed this certificate this ___ day of [_______],
2010.

	 	 	 	 	 
	 	 	 
	 	  	
 	 
	 	 	[__________] 	 
	 	 	[Chief Financial Officer] [Chief Executive Officer] 	 

 

 

	 	 	 	 	 

EXHIBIT H

Subsidiaries

Oriental Bank and Trust

Oriental International Bank Inc.

Oriental Mortgage Corporation

Oriental Financial Services Corp.

Oriental Insurance, Inc.

Caribbean Pension Consultants, Inc.

Oriental Financial (PR) Statutory Trust II

 

 

EXHIBIT I

Form of Escrow Agreement

ESCROW AGREEMENT

by and among

ORIENTAL FINANCIAL GROUP INC.

and

AMERICAN STOCK TRANSFER & TRUST COMPANY, LLC

Dated as of

April 23, 2010

 

 

ESCROW AGREEMENT

     This ESCROW AGREEMENT, dated as of this 23rd day of April 2010 (this “Agreement”), is
by and between Oriental Financial Group Inc., a financial holding company and corporation organized
in the Commonwealth of Puerto Rico (the “Company”), and American Stock Transfer & Trust
Company, LLC, a New York banking association organized under the laws of the State of New York, as
escrow agent (the “Agent”).

W I T N E S S E T H:

     WHEREAS, the Company is conducting a private placement (the “Private Placement”) of
its mandatorily convertible non-cumulative non-voting perpetual preferred stock, Series C, $1,000
liquidation preference per share (the “Preferred Shares”), to certain investors
(individually and not including any Excluded Purchasers (as defined below), an “Investor,”
and collectively and not including any Excluded Purchasers, the “Investors”) pursuant to
Section 4(2) of the Securities Act of 1933, as amended (the “1933 Act”) and Rule 506 of
Regulation D, as promulgated by the United States Securities and Exchange Commission (the
“Commission”) under the 1933 Act;

     WHEREAS, the Company proposes to engage the Agent for the purpose of receiving, depositing and
holding in a segregated interest-bearing account all funds (the “Proceeds”) received from
the Investors in connection with the sale of the Preferred Shares by the Company until such time as
such funds are to be released to the Company or returned to the Investors in accordance with the
terms of this Agreement; and

     WHEREAS, the Agent has agreed to serve as the escrow agent in connection with the proposed
purchase and sale of the Preferred Shares.

     NOW, THEREFORE, in consideration of the mutual promises herein contained and intending to be
legally bound, the parties hereby agree as follows:

     Appointment of Agent.

     1. The Company hereby appoints the Agent as the escrow agent in accordance with the
terms and conditions set forth herein, and the Agent hereby accepts such appointment.

     Establishment of Escrow Account; Deposits.

          (a) The Agent shall promptly cause to be opened a fully segregated interest-bearing escrow
account, which escrow account shall be entitled Oriental Financial Group Inc. Escrow Account (the
“Escrow Account”), for the purpose of holding in trust all Proceeds from Investors in the
Private Placement. The Proceeds will be segregated, and account balances kept, on an individual
Investor basis. In accordance with, and subject to the terms and conditions of the Securities
Purchase Agreement entered into by and between the Company and each Investor (the “Securities
Purchase Agreement”), each Investor shall remit the amount to be deposited by such Investor to
the Escrow Account, as provided in the applicable signature page of such

 

 

Investor to the Securities Purchase Agreement (each, a “Signature Page” and
collectively, the “Signature Pages”), in the form of wire transfers to the Agent. All such
wire transfers forwarded to the Agent shall be accompanied by a copy of such Investor’s Signature
Page, which will contain written information identifying such Investor, the Investor’s full legal
name, social security or tax identification number, and current street address and will also
include wire transfer instructions pursuant to which the Agent may return escrowed funds, if
applicable. All Signature Pages shall be mailed by the Company directly to the Agent, or
transmitted by facsimile at (718) 765-8758, Attention: Alan Finn. Wire transfers to the Escrow
Account shall be made in federal funds transferred as follows:

JP Morgan Chase

2. New York, NY

3. Account Name: American Stock Transfer & Trust Company, LLC

4. For further credit to Oriental Financial Group Inc. Escrow Account

ABA: 021000021

A/C: 323-890121

     5. All Proceeds received by the Agent are subject to clearance time, and the funds
represented thereby cannot be drawn until such time as the same constitutes good and
collected funds. The Agent will provide an executed receipt, in substantially the form
attached hereto as Exhibit A, upon the request of any Investor. If requested by an
Investor, the Agent will deliver such receipt on the same day the Proceeds are received by
the Agent from such Investor.

          (a) All Proceeds received by the Agent pursuant to the terms of this Agreement shall be
invested by the Agent in the Evergreen Institutional Treasury Money Market Fund # 397, unless
otherwise directed in writing by the Company; provided, however, that the Proceeds attributable to
any Investor shall not be invested other than in money market mutual funds investing in treasuries
or government-backed securities unless the Company presents to the Agent such Investor’s consent in
writing to such alternative investment.

     Procedure for Disbursement from the Escrow Account.

          (b) The Proceeds held in the Escrow Account, plus all earnings, interest and income thereon
(the “Escrow Earnings”), shall be subject to, and distributed in accordance with, the
provisions below. Until such time as the Proceeds and Escrow Earnings are distributed to the
Company in accordance with Section 3.3 below, the Company shall not be entitled to, nor shall the
Company have any rights, interest or claims to, any of the Proceeds or Escrow Earnings held in the
Escrow Account.

          (c) The Company may accept the Proceeds attributable to the Investors in a closing (with
respect to such Investor, the “Closing”) in accordance with Section 3.3 and the Securities
Purchase Agreement. The time of the Closing shall be 10:00 a.m., Eastern Time (or such later time
agreed to by the Company and such Investor), on the date determined in accordance with Section
2.1(c)(i) of the Securities Purchase Agreement (the “Closing Date”).

2

 

          (d) On the Closing Date, the Company shall provide written instructions to the Agent, with,
upon the request of an Investor, a copy to such Investor: (i) confirming that the conditions to the
Closing set forth in the Securities Purchase Agreement have been satisfied or waived; and (ii)
instructing the Agent to remit to the Company in immediately available funds the Proceeds related
to the Closing (as determined in accordance with the Securities Purchase Agreement), after the
payment of fees and expenses due and payable to certain third parties as designated and approved by
the Company, including the Agent’s compensation as set forth in Exhibit B hereto. Upon
receipt of such written instruction from the Company, the Agent shall remit to the Company in
immediately available funds such Proceeds and Escrow Earnings related to the Closing, after the
payment of the fees and expenses due and payable to the third parties referenced in the preceding
sentence; such written instructions from the Company shall include wire instructions for, and the
amount of the fees and expenses payable to, such third parties. The Agent will make the deliveries
on the Closing Date. The Agent will notify the Company and Keefe, Bruyette & Woods, Inc., the
Company’s placement agent (the “Placement Agent”), in writing, of any problems with such
delivery.

          (e) Upon the receipt by the Company of the written demand of any Investor, pursuant to Section
6.17(a) of the Securities Purchase Agreement, that the Company return all or any portion of such
Investor’s Proceeds and the Escrow Earnings thereon, the Company shall, if required pursuant to
Section 6.17(b) of the Securities Purchase Agreement, instruct in writing (with, upon the written
request of an Investor, a copy to such Investor) the Agent to return by wire transfer to such
Investor such Proceeds and Escrow Earnings. The instructions provided by the Company to the Agent
pursuant to the preceding sentence shall state the amount of Escrow Earnings to be received by the
Investor, as calculated by the Company. The Agent shall notify the Company and the Placement Agent
in writing of the distribution of such funds to such Investor. Provided that the information has
been provided to the Agent pursuant to Section 3.9 hereto, the Agent shall return to such Investor
the Proceeds and the Escrow Earnings thereon as set forth in the Company’s instructions no later
than the second business day after receipt of such instructions. No Investor shall demand the
return of any Proceeds unless entitled to a return of such Proceeds pursuant to the terms of the
Securities Purchase Agreement.

          (f) As soon as practicable after the date upon which the Company gives notice to the Agent
that the Securities Purchase Agreement has been terminated (the “Termination Date”), the
Agent shall return by wire transfer to each Investor the amount of the Proceeds that were received
by the Agent from such Investor, plus all Escrow Earnings thereon. The Agent shall notify the
Company and the Placement Agent in writing of the distribution of such funds to the Investors.
Provided that the information has been provided to the Agent pursuant to Section 3.9 hereto, the
Agent shall return the Proceeds to the Investor no later than the second business day after the
Termination Date.

          (g) Any payments by the Agent to the Investors, or to persons (other than the Company)
pursuant to the terms of this Agreement shall be made by wire transfer in accordance with the wire
instructions in the Signature Pages.

          (h) Any payments by the Agent to the Company pursuant to the terms of this Agreement shall be
made by wire transfer in accordance with wire instructions delivered by the Company to the Agent.

3

 

          (i) All amounts referred to herein are expressed in United States dollars and all payments by
the Agent shall be made in United States dollars.

          (j) Any payments of income from the Escrow Account shall be subject to withholding regulations
then in force with respect to United States taxes. The Company or the Placement Agent will provide
the Agent with appropriate W-9 forms for the Investors or W-8 forms for nonresident alien
certifications. It is understood that the Agent shall be responsible for income reporting only
with respect to income earned on investment of funds that are a part of the Escrow Account balance
and is not responsible for any other reporting.

     Exculpation and Indemnification of Agent.

          (k) The Agent does not have any interest in the Proceeds deposited hereunder, but is serving
as escrow holder only and having only possession of the Proceeds, plus all Escrow Earnings thereon,
in its capacity as such. The Agent shall have no duties or responsibilities other than those
expressly set forth herein. The Agent shall have no duty to enforce any obligation of any person
to make any payment or delivery, or to direct or cause any payment or delivery to be made, or to
enforce any obligation of any person to perform any other act. The Agent shall be under no
liability to the Company or any other party by reason of any failure on the part of any party
hereto or any maker, guarantor, endorser or other signatory of any document or any other person to
perform such person’s obligations under any such document.

          (l) The Agent shall not be liable to the Company or to any other party for any action taken or
omitted by it, or any action suffered by it to be taken or omitted, in good faith and in the
exercise of its own best judgment except where it has been grossly negligent or has engaged in bad
faith or willful misconduct. The Agent shall be entitled to rely conclusively and shall be
protected in acting upon any order, notice, demand, certificate, opinion or advice of counsel
(including counsel chosen by the Agent), statement, instrument, report or other paper or document
(not only as to its due execution and the validity and effectiveness of its provisions, but also as
to the truth and acceptability of any information therein contained), which is reasonably believed
by the Agent to be genuine and to be signed or presented by the proper person or persons. The
Agent shall not be bound by any notice or demand, or any waiver, modification, termination or
rescission of this Agreement or any of the terms thereof, unless evidenced by a writing delivered
to the Agent signed by the proper party or parties and, if the duties or rights of the Agent are
affected, unless it shall give its prior written consent thereto. If the Agent is unsure as to any
course of action to be taken hereunder, it may request instructions from the Company; the Agent
shall not be liable to any person and shall be held harmless and indemnified by the Company in
relying on such instructions; in the event the Agent receives conflicting instructions, or no
instructions after a request therefor, the Agent shall be fully protected in refraining from acting
until such conflict is resolved or instructions provided to the satisfaction of the Agent.

          (m) The Agent shall not be responsible for the sufficiency or accuracy of the form of, or the
execution, validity, value or genuineness of, any document or property received, held or delivered
by it hereunder, or of any signature or endorsement thereon, or for any lack of endorsement
thereon, or for any description therein; nor shall the Agent be responsible or liable to the
Company or to anyone else in any respect on account of the identity, authority or rights of

4

 

the persons executing or delivering or purporting to execute or deliver any document or
property pursuant to this Agreement. Provided that the Agent complies with Section 2.2 hereof, the
Agent shall have no responsibility with respect to the use or application of any Proceeds or other
property paid or delivered by the Agent pursuant to the provisions hereof.

          (n) In the event of any dispute with respect to the Proceeds held in escrow by the Agent, the
Agent shall be entitled to refuse to act until such conflicting or adverse claims or demands shall
have been determined by a final order, judgment or decree of a court of competent jurisdiction,
which order, judgment or decree is not subject to appeal, or settled by agreement between the
conflicting parties as evidenced in a writing satisfactory to the Agent.

          (o) The Agent shall be entitled to consult with legal counsel at the expense of the Company in
the event that a question or dispute arises with regard to the construction of any of the
provisions hereof, and shall incur no liability and shall be fully protected in acting in
accordance with the advice or opinion of such counsel. The Agent shall not be required to take any
action which, in the Agent’s sole and absolute judgment, could involve it in expense or liability
in excess of its fees and reimbursable expenses hereunder unless furnished with security and
indemnity that it deems, in its sole and absolute discretion, to be satisfactory.

          (p) The Agent shall, if applicable, withhold from any payment of monies held by it hereunder
such amount as the Agent estimates to be sufficient to provide for the payment of any applicable
taxes not yet paid, and may use the sum withheld for that purpose. The Agent shall be indemnified
and held harmless against any liability for taxes, and for any penalties or interest in respect of
taxes, on such investment income or payments in the manner provided in Section 4.7.

          (q) The Company shall indemnify and hold the Agent harmless from and against Expenses (as
defined in Section 4.8), including reasonable counsel fees and disbursements, of any kind and
nature whatsoever suffered by the Agent in connection with any action, suit or other proceeding
involving any claim, or in connection with any claim or demand, which in any way, directly or
indirectly, arises out of or relates to this Agreement, the services of the Agent hereunder or the
monies or other property held by it hereunder; provided, however, that such indemnification shall
not extend to acts of gross negligence, willful misconduct or bad faith by the Agent. Promptly
after the receipt by the Agent of notice of any demand or claim or the commencement of any action,
suit or proceeding, the Agent shall, if a claim in respect thereof is to be made against the
Company, notify the Company thereof in writing, but the failure by the Agent to give such notice
shall not relieve the Company from any liability which the Company may have to the Agent hereunder.
The terms of this Section 4.7 shall survive the termination of this Agreement and the resignation
or removal of the Agent.

          (r) For the purposes hereof, the term “Expenses” shall include any and all amounts
assessed, paid or payable to satisfy any claim, action, suit, cost, loss, demand or liability, or
in settlement of any claim, demand, action, suit or proceeding settled with the express written
consent of the Agent, and all costs and expenses, including, but not limited to, reasonable counsel
fees and disbursements, paid or incurred in investigating or defending against any such claim,
demand, action, suit or proceeding.

5

 

          (s) The Agent shall not incur any liability for not performing any act or fulfilling any duty,
obligation or responsibility hereunder by reason of any occurrence beyond the control of Agent
(including but not limited to any act or provision of any present or future law or regulation or
governmental authority, any act of God or war, or the unavailability of the Federal Reserve Bank
wire or telex or other wire or communication facility).

     Termination of Agreement and Resignation or Removal of Agent.

          (t) This Agreement shall terminate on the release of all Proceeds, including the Escrow
Earnings, held in escrow hereunder, provided that the rights of the Agent and the obligations of
the other parties hereto under Sections 3.9, 4 and 6 shall survive the termination hereof.

          (u) The Agent may resign at any time by giving the Company at least 30 days’ notice thereof,
and upon the effectiveness of such resignation the Agent shall be discharged from its duties as
Agent hereunder. The Company may remove the Agent at any time by giving the Agent at least 30
days’ notice thereof, and upon the effectiveness of such removal the Agent shall be discharged from
its duties as Agent hereunder. As soon as practicable after its resignation or removal, the Agent
shall turn over to a successor escrow agent appointed by the Company all monies and property held
hereunder (less such amount as the Agent is entitled to retain pursuant to Section 6) upon
presentation of the document appointing the new escrow agent and its acceptance thereof. If no new
Agent is so appointed within the 30-day period following such notice of resignation or removal, the
Agent may deposit the aforesaid monies and property with any court it deems appropriate. Section
3.9 shall survive the resignation or removal of the Agent.

     Compensation of Agent.

     6. For services rendered, the Agent shall receive the compensation set forth in
Exhibit B hereto. The Agent shall also be entitled to reimbursement from the
Company for all reasonable Expenses paid or incurred by it in the administration of its
duties hereunder, including, but not limited to, all reasonable counsel and advisors’ fees
and disbursements and all reasonable taxes or other governmental charges. Such compensation
and reimbursement to the Agent by the Company shall be paid only from funds properly drawn
by the Company pursuant to Section 3.3, or by funds otherwise available to the Company.

     Notices.

     7. All notices, requests, demands and other communications provided for herein shall be
in writing, shall be delivered by overnight courier providing a receipt of delivery or by
facsimile, certified or registered mail, shall be deemed given when received and shall be
addressed to the parties hereto at their respective addresses listed below or to such other
persons or addresses as the relevant party shall designate as to itself from time to time in
writing delivered in like manner.

6

 

     If to the Company:

Oriental Financial Group Inc.

997 San Roberto Street

San Juan, Puerto Rico 00926

Telephone: (787) 993-4206

Facsimile: (787) 771-6896

Attention: General Counsel

     with copies (for informational purposes only) to:

Skadden, Arps, Slate, Meagher & Flom LLP

300 South Grand Avenue, Suite 3400

Los Angeles, California 90071

Telephone: (213) 687-5000

Facsimile: (213) 687-5600

Attention: Gregg A. Noel, Esq.

     If to the Agent:

American Stock Transfer & Trust Company, LLC

6201 15th Avenue

New York, New York 11219

Telephone: (718) 765-8758

Facsimile: afinn@amstock.com

Attention: Alan G. Finn

     Further Assurances.

     8. From time to time on and after the date hereof, the Company shall deliver or cause
to be delivered to the Agent such further documents and instruments and shall do and cause
to be done such further acts as the Agent shall reasonably request (it being understood that
the Agent shall have no obligation to make any such request) to carry out more effectively
the provisions and purposes of this Agreement, to evidence compliance herewith or to assure
itself that it is protected in acting hereunder.

     Governing Law and Consent to Service of Process.

     9. This Agreement shall be interpreted, construed, enforced and administered in
accordance with the laws of the State of New York. Each of the Company and the Agent hereby
irrevocably consents to the jurisdiction of the courts of the State of New York and of any
federal court located in such State in connection with any action, suit or other proceeding
arising out of or relating to this Agreement or any action taken or omitted hereunder, and
waives personal service of any summons, complaint or other process and agrees that the
service thereof may be made by certified or registered mail directed to each of the parties
at its address for purposes of notices hereunder, and such service shall be deemed completed
ten (10) calendar days after the same is so mailed.

7

 

     Miscellaneous.

          (a) This Agreement shall be construed without regard to any presumption or other rule
requiring construction against the party causing such instrument to be drafted. The terms
“hereby,” “hereof,” “hereto,” “hereunder” and any similar terms, as used in this Agreement, refer
to the Agreement in its entirety and not only to the particular portion of this Agreement where the
term is used. The word “person” shall mean any natural person, partnership, company, government
and any other form of business or legal entity. All words or terms used in this Agreement,
regardless of the number or gender in which they are used, shall be deemed to include any other
number and any other gender as the context may require. This Agreement shall not be admissible in
evidence to construe the provisions of any prior agreement. The rule of ejusdem generis shall not
be applicable herein to limit a general statement, which is followed by or referable to an
enumeration of specific matters, to matters similar to the matters specifically mentioned.

          (b) This Agreement and the rights and obligations hereunder of the Company may be assigned by
the Company only to a successor to the Company’s entire business. This Agreement and the rights
and obligations hereunder of the Agent may be assigned by the Agent only to a successor to its
entire business. This Agreement shall be binding upon and inure to the benefit of each party’s
respective successors and permitted assigns. This Agreement is intended to be for the sole benefit
of the parties hereto, and no other person shall acquire or have any rights under or by virtue of
this Agreement; provided, however, that the Investors shall be third party
beneficiaries of the parties’ obligations hereunder. This Agreement may not be changed orally or
modified, amended or supplemented without an express written agreement executed by the Agent or the
Company, and, to the extent such change, modification, amendment or supplement would adversely
affect any Investor’s Proceeds or any Escrow Earnings thereon, the consent of such Investor, which
consent will not be unreasonably withheld.

          (c) The headings in this Agreement are for purposes of reference only and shall not limit or
otherwise affect any of the terms hereof.

          (d) “Excluded Purchasers” means any Section 2.1(c)(iii) Purchasers (as defined in the
Securities Purchase Agreement) and any Purchasers (as defined in the Securities Purchase Agreement)
that have entered into Custodian Agreements (as defined in the Securities Purchase Agreement).

     Execution in Counterparts.

     10. This Agreement may be executed in any number of counterparts, each of which shall
be deemed to be an original as against any party whose signature appears thereon, and all of
which shall together constitute one and the same instrument. This Agreement shall become
binding when one or more counterparts hereof, individually or taken together, shall bear the
signature of all of the parties reflected hereon as the signatures.

     11.

8

 

     IN WITNESS WHEREOF, the parties have executed and delivered this Agreement on the day and year
first above written.

	 	 	 	 	 
	 	ORIENTAL FINANCIAL GROUP INC.

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 

	 	 	 	 	 
	 	AMERICAN STOCK TRANSFER & TRUST COMPANY, LLC

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 

[Escrow Agreement]

 

 

Exhibit A

RECEIPT

     American Stock Transfer & Trust Company, LLC, as Escrow Agent (the “Agent”), for
Oriental Financial Group Inc. (the “Company”), hereby acknowledges receipt by wire transfer
of U.S. $__________________, in immediately available funds, from _________________, representing
the escrow deposit to be held in escrow by the Agent, pursuant to the Escrow Agreement (the
“Escrow Agreement”), dated April 23, 2010, by and between the Company and the Agent. All
capitalized terms used herein and not otherwise defined shall have the same respective meanings as
set forth in the Escrow Agreement.

_________ __, 2010

	 	 	 	 	 
	 	American Stock Transfer & Trust Company, LLC, as the

Agent

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 

A-1

 

	 	 	 	 	 

Exhibit B

American Stock Transfer & Trust Company, LLC

ESCROW AGENT SERVICES

FEE PROPOSAL

ORIENTAL FINANCIAL GROUP INC.

Acceptance fee: $2,500.00

Annual administration fee: $7,500.00

B-1ex107124securityagrmntdoaks.htm

EX-10.71.24

 

Prepared by, and after recording

return to:

James J. Schwert, Esquire

Oppenheimer Wolff & Donnelly LLP

Plaza VII, Suite 3300

45 S. Seventh Street

Minneapolis, MN 55402

 

MULTIFAMILY DEED OF TRUST,

ASSIGNMENT OF RENTS

AND SECURITY AGREEMENT AND FIXTURE FILING

(TEXAS)

Statutory Privacy Notice:

NOTICE OF CONFIDENTIALITY RIGHTS: IF YOU ARE A NATURAL PERSON, YOU MAY REMOVE OR STRIKE ANY OR ALL OF THE FOLLOWING INFORMATION FROM ANY INSTRUMENT THAT TRANSFERS AN INTEREST IN REAL PROPERTY BEFORE IT IS FILED FOR RECORD IN THE PUBLIC RECORDS: YOUR SOCIAL SECURITY NUMBER OR YOUR DRIVER’S LICENSE NUMBER.

FANNIE MAE MULTIFAMILY SECURITY INSTRUMENT - TEXAS Form 4044 06/09

  

  

  

           TABLE OF CONTENTS

 PAGE

 

	
1

	
DEFINITIONS.

	
2

	
2

	
UNIFORM COMMERCIAL CODE SECURITY AGREEMENT.

	
7

	
3

	
ASSIGNMENT OF RENTS; APPOINTMENT OF RECEIVER; LENDER IN POSSESSION.

	
8

	
4

	
ASSIGNMENT OF LEASES; LEASES AFFECTING THE MORTGAGED PROPERTY.

	
10

	
5

	
PAYMENT OF INDEBTEDNESS; PERFORMANCE UNDER LOAN DOCUMENTS; PREPAYMENT PREMIUM.

	
12

	
6

	
EXCULPATION.

	
12

	
7

	
DEPOSITS FOR TAXES, INSURANCE AND OTHER CHARGES.

	
13

	
8

	
COLLATERAL AGREEMENTS.

	
14

	
9

	
APPLICATION OF PAYMENTS.

	
14

	
10

	
COMPLIANCE WITH LAWS.

	
14

	
11

	
USE OF PROPERTY.

	
15

	
12

	
PROTECTION OF LENDER'S SECURITY.

	
15

	
13

	
INSPECTION.

	
15

FANNIE MAE MULTIFAMILY SECURITY INSTRUMENT - TEXAS Form 4044 06/09

  

Page - i

  

	
14

	
BOOKS AND RECORDS; FINANCIAL REPORTING.

	
16

	
15

	
TAXES; OPERATING EXPENSES.

	
18

	
16

	
LIENS; ENCUMBRANCES.

	
18

	
17

	
PRESERVATION, MANAGEMENT AND MAINTENANCE OF MORTGAGED PROPERTY.

	
19

	
18

	
ENVIRONMENTAL HAZARDS.

	
20

	
19

	
PROPERTY AND LIABILITY INSURANCE.

	
25

	
20

	
CONDEMNATION.

	
27

	
21

	
TRANSFERS OF THE MORTGAGED PROPERTY OR INTERESTS IN BORROWER.

	
27

	
22

	
EVENTS OF DEFAULT.

	
33

	
23

	
REMEDIES CUMULATIVE.

	
34

	
24

	
FORBEARANCE.

	
34

	
25

	
[INTENTIONALLY DELETED].

	
34

	
26

	
WAIVER OF STATUTE OF LIMITATIONS.

	
34

	
27

	
WAIVER OF MARSHALLING.

	
35

	
28

	
FURTHER ASSURANCES.

	
35

FANNIE MAE MULTIFAMILY SECURITY INSTRUMENT - TEXAS Form 4044 06/09

  

Page - ii

  

	
29

	
ESTOPPEL CERTIFICATE.

	
35

	
30

	
GOVERNING LAW; CONSENT TO JURISDICTION AND VENUE.

	
35

	
31

	
NOTICE.

	
36

	
32

	
SALE OF NOTE; CHANGE IN SERVICER.

	
36

	
33

	
SINGLE ASSET BORROWER.

	
36

	
34

	
SUCCESSORS AND ASSIGNS BOUND.

	
37

	
35

	
JOINT AND SEVERAL LIABILITY.

	
37

	
36

	
RELATIONSHIP OF PARTIES; NO THIRD PARTY BENEFICIARY.

	
37

	
37

	
SEVERABILITY; AMENDMENTS.

	
37

	
38

	
CONSTRUCTION.

	
37

	
39

	
LOAN SERVICING.

	
38

	
40

	
DISCLOSURE OF INFORMATION.

	
38

	
41

	
NO CHANGE IN FACTS OR CIRCUMSTANCES.

	
38

	
42

	
SUBROGATION.

	
38

	
43

	
ACCELERATION; REMEDIES.

	
39

	
44

	
RELEASE.

	
42

FANNIE MAE MULTIFAMILY SECURITY INSTRUMENT - TEXAS Form 4044 06/09

  

Page - iii

  

	
45

	
TRUSTEE.

	
42

	
46

	
VENDOR'S LIEN; RENEWAL AND EXTENSION.

	
43

	
47

	
NO FIDUCIARY DUTY.

	
43

	
48

	
FIXTURE FILING.

	
43

	
49

	
ADDITIONAL PROVISIONS REGARDING ASSIGNMENT OF RENTS.

	
43

	
50

	
LOAN CHARGES.

	
44

	
51

	
PROPERTY AND LIABILITY INSURANCE - DELIVERY OF POLICY TO LENDER.

	
45

	
52

	
ENTIRE AGREEMENT.

	
45

	
53

	
WAIVER OF TRIAL BY JURY.

	
46

FANNIE MAE MULTIFAMILY SECURITY INSTRUMENT - TEXAS Form 4044 06/09

  

Page - iv

  

MULTIFAMILY DEED OF TRUST,

ASSIGNMENT OF RENTS

SECURITY AGREEMENT AND FIXTURE FILING

 

 

THIS MULTIFAMILY DEED OF TRUST, ASSIGNMENT OF RENTS AND SECURITY AGREEMENT (the “Instrument”) is dated as of the 1st day of November, 2010, by EMERITOL DOWLEN OAKS LLC, a limited liability company organized and existing under the laws of Delaware, whose address is c/o Emeritus Senior Living, 3131 Elliott Avenue, #500, Seattle, Washington 98121,  as trustor (“Borrower”), to REBECCA CONRAD, as trustee (“Trustee”), for the benefit of KEYCORP REAL ESTATE CAPITAL MARKETS, INC., a corporation organized and existing under the laws of Ohio, whose address is 911 Main Street, Suite 1500, Kansas City, Missouri 64105, as beneficiary (“Lender”).

Borrower, in consideration of the Indebtedness and the trust created by this Instrument, irrevocably grants, conveys and assigns to Trustee, in trust, with power of sale, the Mortgaged Property, including the Land located in Jefferson County, State of Texas and described in Exhibit A attached to this Instrument.  To have and to hold the Mortgaged Property unto Trustee, Trustee’s successor in trust and Trustee’s assigns forever.

TO SECURE TO LENDER the repayment of the Indebtedness evidenced by Borrower’s Multifamily Note payable to Lender, dated as of the date of this Instrument, and maturing on November 1, 2020, in the principal amount of Four Million Four Hundred Seventy-Five Thousand and No/100 Dollars ($4,475,000.00), and all renewals, extensions and modifications of the Indebtedness, and the performance of the covenants and agreements of Borrower contained in the Loan Documents.

Borrower warrants and represents that Borrower is lawfully seized of the Mortgaged Property and has the right, power and authority to grant, convey and assign the Mortgaged Property, and that the Mortgaged Property is unencumbered.  Borrower covenants that Borrower will warrant and defend generally the title to the Mortgaged Property against all claims and demands, subject to any easements and restrictions listed in a schedule of exceptions to coverage in any title insurance policy issued to Lender contemporaneously with the execution and recordation of this Instrument and insuring Lender’s interest in the Mortgaged Property.

Covenants.  Borrower and Lender covenant and agree as follows:

FANNIE MAE MULTIFAMILY SECURITY INSTRUMENT - TEXAS Form 4044 06/09

  

Page - 1

  

1.           DEFINITIONS.

The following terms, when used in this Instrument (including when used in the above recitals), shall have the following meanings:

(a)           "Borrower" means all persons or entities identified as "Borrower" in the first paragraph of this Instrument, together with their successors and assigns.

(b)           "Collateral Agreement" means any separate agreement between Borrower and Lender for the purpose of establishing replacement reserves for the Mortgaged Property, establishing a fund to assure completion of repairs or improvements specified in that agreement, or assuring reduction of the outstanding principal balance of the Indebtedness if the occupancy of or income from the Mortgaged Property does not increase to a level specified in that agreement, or any other agreement or agreements between Borrower and Lender which provide for the establishment of any other fund, reserve or account.

(c)           "Environmental Permit" means any permit, license, or other authorization issued under any Hazardous Materials Law with respect to any activities or businesses conducted on or in relation to the Mortgaged Property.

(d)           "Event of Default" means the occurrence of any event listed in Section 22.

(e)           "Fixtures" means all property which is so attached to the Land or the Improvements as to constitute a fixture under applicable law, including: machinery, equipment, engines, boilers, incinerators, installed building materials; systems and equipment for the purpose of supplying or distributing heating, cooling, electricity, gas, water, air, or light; antennas, cable, wiring and conduits used in connection with radio, television, security, fire prevention, or fire detection or otherwise used to carry electronic signals; telephone systems and equipment; elevators and related machinery and equipment; fire detection, prevention and extinguishing systems and apparatus; security and access control systems and apparatus; plumbing systems; water heaters, ranges, stoves, microwave ovens, refrigerators, dishwashers, garbage disposers, washers, dryers and other appliances; light fixtures, awnings, storm windows and storm doors; pictures, screens, blinds, shades, curtains and curtain rods; mirrors; cabinets, paneling, rugs and floor and wall coverings; fences, trees and plants; swimming pools; and exercise equipment.

(f)           "Governmental Authority" means any board, commission, department or body of any municipal, county, state or federal governmental unit, or any subdivision of any of them, that has or acquires jurisdiction over the Mortgaged Property or the use, operation or improvement of the Mortgaged Property.

(g)           "Hazardous Materials" means petroleum and petroleum products and compounds containing them, including gasoline, diesel fuel and oil; explosives; flammable materials; radioactive materials; polychlorinated biphenyls ("PCBs") and compounds containing them; lead

FANNIE MAE MULTIFAMILY SECURITY INSTRUMENT - TEXAS Form 4044 06/09

  

Page - 2

  

and lead-based paint; asbestos or asbestos-containing materials in any form that is or could become friable; underground or above-ground storage tanks, whether empty or containing any substance; any substance the presence of which on the Mortgaged Property is prohibited by any federal, state or local authority; any substance that requires special handling; and any other material or substance now or in the future defined as a "hazardous substance," "hazardous material," "hazardous waste," "toxic substance," "toxic pollutant," "contaminant," or "pollutant" within the meaning of any Hazardous Materials Law.

               (h)           "Hazardous Materials Laws" means all federal, state, and local laws, ordinances and regulations and standards, rules, policies and other governmental requirements, administrative rulings and court judgments and decrees in effect now or in the future and including all amendments, that relate to Hazardous Materials and apply to Borrower or to the Mortgaged Property. Hazardous Materials Laws include, but are not limited to, the Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C. Section 9601, et seq., the Resource Conservation and Recovery Act, 42 U.S.C. Section 6901, et seq., the Toxic Substance Control Act, 15 U.S.C. Section 2601, et seq., the Clean Water Act, 33 U.S.C. Section 1251, et seq., and the Hazardous Materials Transportation Act, 49 U.S.C. Section 5101, et seq., and their state analogs.

(i)           "Impositions" and "Imposition Deposits" are defined in Section 7(a).

(j)           "Improvements" means the buildings, structures, improvements, and alterations now constructed or at any time in the future constructed or placed upon the Land, including any future replacements and additions.

(k)           "Indebtedness" means the principal of, interest on, and all other amounts due at any time under, the Note, this Instrument or any other Loan Document, including prepayment premiums, late charges, default interest, and advances as provided in Section 12 to protect the security of this Instrument.

(l)           [Intentionally omitted]

(m)           “Key Principal” means (A) the natural person(s) or entity identified as such at the foot of this Instrument; (B) the natural person or entity who signed either the Acknowledgement and Agreement of Key Principal to Personal Liability for Exceptions to Non-Recourse Liability or the Exceptions to Non-Recourse Guaranty (or is otherwise a guarantor on the Indebtedness); and (C) any person or entity who becomes a Key Principal after the date of this Instrument and is identified as such in an assumption agreement, or another amendment or supplement to this Instrument or who otherwise signs either the Acknowledgement and Agreement of Key Principal to Personal Liability for Exceptions to Non-Recourse Liability or Exceptions to Non-Recourse Guaranty (or any other guaranty of the Indebtedness).

(n)           "Land" means the land described in Exhibit A.

FANNIE MAE MULTIFAMILY SECURITY INSTRUMENT - TEXAS Form 4044 06/09

  

Page - 3

  

(o)           "Leases" means all present and future leases, subleases, licenses, concessions or grants or other possessory interests now or hereafter in force, whether oral or written, covering or affecting the Mortgaged Property, or any portion of the Mortgaged Property (including proprietary leases or occupancy agreements if Borrower is a cooperative housing corporation), and all modifications, extensions or renewals.

(p)           "Lender" means the entity identified as "Lender" in the first paragraph of this Instrument and its successors and assigns, or any subsequent holder of the Note.

(q)           "Loan Documents" means the Note, this Instrument, all guaranties, all indemnity agreements, all Collateral Agreements, O&M Programs, and any other documents now or in the future executed by Borrower, Key Principal, any guarantor or any other person in connection with the loan evidenced by the Note, as such documents may be amended from time to time.

(r)           "Loan Servicer" means the entity that from time to time is designated by Lender to collect payments and deposits and receive notices under the Note, this Instrument and any other Loan Document, and otherwise to service the loan evidenced by the Note for the benefit of Lender.  Unless Borrower receives notice to the contrary, the Loan Servicer is the entity identified as "Lender" in the first paragraph of this Instrument.

(s)           "Mortgaged Property" means all of Borrower's present and future right, title and interest in and to all of the following:

	
  

	
(1)

	
the Land;

	
  

	
(2)

	
the Improvements;

	
  

	
(3)

	
the Fixtures;

	
  

	
(4)

	
the Personalty;

	
  

	
(5)

	
all current and future rights, including air rights, development rights, zoning rights and other similar rights or interests, easements, tenements, rights-of-way, strips and gores of land, streets, alleys, roads, sewer rights, waters, watercourses, and appurtenances related to or benefitting the Land or the Improvements, or both, and all rights-of-way, streets, alleys and roads which may have been or may in the future be vacated;

	
  

	
(6)

	
all proceeds paid or to be paid by any insurer of the Land, the Improvements, the Fixtures, the Personalty or any other part of the Mortgaged Property, whether or not Borrower obtained the insurance pursuant to Lender's requirement;

FANNIE MAE MULTIFAMILY SECURITY INSTRUMENT - TEXAS Form 4044 06/09

  

Page - 4

  

	
  

	
(7)

	
all awards, payments and other compensation made or to be made by any municipal, state or federal authority with respect to the Land, the Improvements, the Fixtures, the Personalty or any other part of the Mortgaged Property, including any awards or settlements resulting from condemnation proceedings or the total or partial taking of the Land, the Improvements, the Fixtures, the Personalty or any other part of the Mortgaged Property under the power of eminent domain or otherwise and including any conveyance in lieu thereof;

	
  

	
(8)

	
all contracts, options and other agreements for the sale of the Land, the Improvements, the Fixtures, the Personalty or any other part of the Mortgaged Property entered into by Borrower now or in the future, including cash or securities deposited to secure performance by parties of their obligations;

	
  

	
(9)

	
all proceeds from the conversion, voluntary or involuntary, of any of the above into cash or liquidated claims, and the right to collect such proceeds;

	
  

	
(10)

	
all Rents and Leases;

	
  

	
(11)

	
all earnings, royalties, accounts receivable, issues and profits from the Land, the Improvements or any other part of the Mortgaged Property, and all undisbursed proceeds of the loan secured by this Instrument and, if Borrower is a cooperative housing corporation, maintenance charges or assessments payable by shareholders or residents;

	
  

	
(12)

	
all Imposition Deposits;

	
  

	
(13)

	
all refunds or rebates of Impositions by any municipal, state or federal authority or insurance company (other than refunds applicable to periods before the real property tax year in which this Instrument is dated);

	
  

	
(14)

	
all tenant security deposits which have not been forfeited by any tenant under any Lease; and

	
  

	
(15)

	
all names under or by which any of the above Mortgaged Property may be operated or known, and all trademarks, trade names, and goodwill relating to any of the Mortgaged Property.

(t)           "Note" means the Multifamily Note described on page 1 of this Instrument, including the Acknowledgment and Agreement of Key Principal to Personal Liability for

FANNIE MAE MULTIFAMILY SECURITY INSTRUMENT - TEXAS Form 4044 06/09

  

Page - 5

  

Exceptions to Non-Recourse Liability (if any), and all schedules, riders, allonges and addenda, as such Multifamily Note may be amended from time to time.

(u)           "O&M Program" is defined in Section 18(a).

(v)           "Personalty" means all equipment, inventory, general intangibles which are used now or in the future in connection with the ownership, management or operation of the Land or the Improvements or are located on the Land or in the Improvements, including furniture, furnishings, machinery, building materials, appliances, goods, supplies, tools, books, records (whether in written or electronic form), computer equipment (hardware and software) and other tangible personal property (other than Fixtures) which are used now or in the future in connection with the ownership, management or operation of the Land or the Improvements or are located on the Land or in the Improvements, and any operating agreements relating to the Land or the Improvements, and any surveys, plans and specifications and contracts for architectural, engineering and construction services relating to the Land or the Improvements and all other intangible property and rights relating to the operation of, or used in connection with, the Land or the Improvements, including all governmental permits relating to any activities on the Land.

(w)           "Property Jurisdiction" is defined in Section 30(a).

(x)           "Rents" means all rents (whether from residential or non-residential space), revenues and other income of the Land or the Improvements, including subsidy payments received from any sources (including, but not limited to payments under any Housing Assistance Payments Contract), parking fees, laundry and vending machine income and fees and charges for food, health care and other services provided at the Mortgaged Property, whether now due, past due, or to become due, and deposits forfeited by tenants.

(y)           "Taxes" means all taxes, assessments, vault rentals and other charges, if any, general, special or otherwise, including all assessments for schools, public betterments and general or local improvements, which are levied, assessed or imposed by any public authority or quasi-public authority, and which, if not paid, will become a lien, on the Land or the Improvements.

(z)           “Transfer” means (A) a sale, assignment, transfer, or other disposition (whether voluntary, involuntary or by operation of law); (B) the grant, creation, or attachment of a lien, encumbrance, or security interest (whether voluntary, involuntary or by operation of law); (C) the issuance or other creation of a direct or indirect ownership interest; or  (D) the withdrawal, retirement, removal or involuntary resignation of any owner or manager of a legal entity.

(aa)           "Bankruptcy Event" means any one or more of the following: (i) the commencement of a voluntary case under one or more of the Insolvency Laws by the Borrower; (ii) the acknowledgment in writing by the Borrower that it is unable to pay its debts generally as they mature; (iii) the making of a general assignment for the benefit of creditors by the Borrower; (iv) an involuntary case under one or more Insolvency Laws against the Borrower; (v) the

FANNIE MAE MULTIFAMILY SECURITY INSTRUMENT - TEXAS Form 4044 06/09

  

Page - 6

  

appointment of a receiver, liquidator, custodian, sequestrator, trustee or other similar officer who exercises control over the Borrower or any substantial part of the assets of the Borrower provided that any proceeding or case under (iv) or (v) above is not dismissed within 90 days after filing.

(bb)           "Borrower Affiliate" means, as to either Borrower or Key Principal, (i) any entity that directly or indirectly owns, controls, or holds with power to vote, 20 percent or more of the outstanding voting securities of Borrower or of Key Principal, (ii) any corporation 20 percent or more of whose outstanding voting securities are directly or indirectly owned, controlled or held with power to vote by Borrower or by Key Principal, (iii) any partner, shareholder or, if a limited liability company, member of Borrower or Key Principal, or (iv) any other entity that is related (to the third degree of consanguinity) by blood or marriage to Borrower or Key Principal.

(cc)           "Insolvency Laws" means the United States Bankruptcy Code, 11 U.S.C. § 101, et seq., together with any other federal or state law affecting debtor and creditor rights or relating to the bankruptcy, insolvency, reorganization, arrangement, readjustment of debt, dissolution, liquidation or similar proceeding, as amended from time to time, to the extent applicable to the Borrower.

2.           UNIFORM COMMERCIAL CODE SECURITY AGREEMENT.

This Instrument is also a security agreement under the Uniform Commercial Code for any of the Mortgaged Property which, under applicable law, may be subject to a security interest under the Uniform Commercial Code, whether acquired now or in the future, and all products and cash and non-cash proceeds thereof (collectively, "UCC Collateral"), and Borrower hereby grants to Lender a security interest in the UCC Collateral.  Borrower hereby authorizes Lender to file financing statements, continuation statements and financing statement amendments in such form as Lender may require to perfect or continue the perfection of this security interest and Borrower agrees, if Lender so requests, to execute and deliver to Lender such financing statements, continuation statements and amendments.  Borrower shall pay all filing costs and all costs and expenses of any record searches for financing statements that Lender may require.  Without the prior written consent of Lender, Borrower shall not create or permit to exist any other lien or security interest in any of the UCC Collateral.  If an Event of Default has occurred and is continuing, Lender shall have the remedies of a secured party under the Uniform Commercial Code, in addition to all remedies provided by this Instrument or existing under applicable law.  In exercising any remedies, Lender may exercise its remedies against the UCC Collateral separately or together, and in any order, without in any way affecting the availability of Lender's other remedies.  This Instrument constitutes a financing statement with respect to any part of the Mortgaged Property which is or may become a Fixture.

FANNIE MAE MULTIFAMILY SECURITY INSTRUMENT - TEXAS Form 4044 06/09

  

Page - 7

  

3.           ASSIGNMENT OF RENTS; APPOINTMENT OF RECEIVER; LENDER IN POSSESSION.

(a)           As part of the consideration for the Indebtedness, Borrower absolutely and unconditionally assigns and transfers to Lender all Rents. It is the intention of Borrower to establish a present, absolute and irrevocable transfer and assignment to Lender of all Rents and to authorize and empower Lender to collect and receive all Rents without the necessity of further action on the part of Borrower.  Promptly upon request by Lender, Borrower agrees to execute and deliver such further assignments as Lender may from time to time require.  Borrower and Lender intend this assignment of Rents to be immediately effective and to constitute an absolute present assignment and not an assignment for additional security only.  For purposes of giving effect to this absolute assignment of Rents, and for no other purpose, Rents shall not be deemed to be a part of the "Mortgaged Property," as that term is defined in Section 1(s).  However, if this present, absolute and unconditional assignment of Rents is not enforceable by its terms under the laws of the Property Jurisdiction, then the Rents shall be included as a part of the Mortgaged Property and it is the intention of the Borrower that in this circumstance this Instrument create and perfect a lien on Rents in favor of Lender, which lien shall be effective as of the date of this Instrument.

                (b)           After the occurrence of an Event of Default, Borrower authorizes Lender to collect, sue for and compromise Rents and directs each tenant of the Mortgaged Property to pay all Rents to, or as directed by, Lender, and Borrower shall, upon Borrower's receipt of any Rents from any sources (including, but not limited to subsidy payments under any Housing Assistance Payments Contract), pay the total amount of such receipts to the Lender.  However, until the occurrence of an Event of Default, Lender hereby grants to Borrower a revocable license to collect and receive all Rents, to hold all Rents in trust for the benefit of Lender and to apply all Rents to pay the installments of interest and principal then due and payable under the Note and the other amounts then due and payable under the other Loan Documents, including Imposition Deposits, and to pay the current costs and expenses of managing, operating and maintaining the Mortgaged Property, including utilities, Taxes and insurance premiums (to the extent not included in Imposition Deposits), tenant improvements and other capital expenditures.  So long as no Event of Default has occurred and is continuing, the Rents remaining after application pursuant to the preceding sentence may be retained by Borrower free and clear of, and released from, Lender's rights with respect to Rents under this Instrument.  From and after the occurrence of an Event of Default, and without the necessity of Lender entering upon and taking and maintaining control of the Mortgaged Property directly, or by a receiver, Borrower's license to collect Rents shall automatically terminate and Lender shall without notice be entitled to all Rents as they become due and payable, including Rents then due and unpaid.  Borrower shall pay to Lender upon demand all Rents to which Lender is entitled.  At any time after the occurrence of an Event of Default, Lender may give, and Borrower hereby irrevocably authorizes Lender to give, notice to all tenants of the Mortgaged Property instructing them to pay all Rents to Lender; provided, however, that the giving of any such notice by Lender shall not affect, in any way, Lender’s entitlement to the Rents as of the date on which the

FANNIE MAE MULTIFAMILY SECURITY INSTRUMENT - TEXAS Form 4044 06/09

  

Page - 8

  

Event of Default occurs.  No tenant shall be obligated to inquire further as to the occurrence or continuance of an Event of Default, and no tenant shall be obligated to pay to Borrower any amounts which are actually paid to Lender in response to such a notice.  Any such notice by Lender shall be delivered to each tenant personally, by mail or by delivering such demand to each rental unit.  Borrower shall not interfere with and shall cooperate with Lender's collection of such Rents.

(c)           Borrower represents and warrants to Lender that Borrower has not executed any prior assignment of Rents (other than an assignment of Rents securing indebtedness that will be paid off and discharged with the proceeds of the loan evidenced by the Note), that Borrower has not performed, and Borrower covenants and agrees that it will not perform, any acts and has not executed, and shall not execute, any instrument which would prevent Lender from exercising its rights under this Section 3, and that at the time of execution of this Instrument there has been no anticipation or prepayment of any Rents for more than two months prior to the due dates of such Rents.  Borrower shall not collect or accept payment of any Rents more than two months prior to the due dates of such Rents.

(d)           If an Event of Default has occurred and is continuing, Lender may, regardless of the adequacy of Lender's security or the solvency of Borrower and even in the absence of waste, enter upon and take and maintain full control of the Mortgaged Property in order to perform all acts that Lender in its discretion determines to be necessary or desirable for the operation and maintenance of the Mortgaged Property, including the execution, cancellation or modification of Leases, the collection of all Rents, the making of repairs to the Mortgaged Property and the execution or termination of contracts providing for the management, operation or maintenance of the Mortgaged Property, for the purposes of enforcing the assignment of Rents pursuant to Section 3(a), protecting the Mortgaged Property or the security of this Instrument, or for such other purposes as Lender in its discretion may deem necessary or desirable.  Alternatively, if an Event of Default has occurred and is continuing, regardless of the adequacy of Lender's security, without regard to Borrower's solvency and without the necessity of giving prior notice (oral or written) to Borrower, Lender may apply to any court having jurisdiction for the appointment of a receiver for the Mortgaged Property to take any or all of the actions set forth in the preceding sentence.  If Lender elects to seek the appointment of a receiver for the Mortgaged Property at any time after an Event of Default has occurred and is continuing, Borrower, by its execution of this Instrument, expressly consents to the appointment of such receiver, including the appointment of a receiver ex parte if permitted by applicable law.  Lender or the receiver, as the case may be, shall be entitled to receive a reasonable fee for managing the Mortgaged Property.  Immediately upon appointment of a receiver or immediately upon the Lender's entering upon and taking possession and control of the Mortgaged Property, Borrower shall surrender possession of the Mortgaged Property to Lender or the receiver, as the case may be, and shall deliver to Lender or the receiver, as the case may be, all documents, records (including records on electronic or magnetic media), accounts, surveys, plans, and specifications relating to the Mortgaged Property and all security deposits and prepaid Rents.  In the event Lender takes possession and control of the Mortgaged Property, Lender may exclude Borrower and its representatives from the Mortgaged Property.  Borrower acknowledges and agrees that the exercise by Lender of any of the rights conferred under this Section 3 shall not be construed

FANNIE MAE MULTIFAMILY SECURITY INSTRUMENT - TEXAS Form 4044 06/09

  

Page - 9

  

to make Lender a mortgagee-in-possession of the Mortgaged Property so long as Lender has not itself entered into actual possession of the Land and Improvements.

(e)           If Lender enters the Mortgaged Property, Lender shall be liable to account only to Borrower and only for those Rents actually received.  Lender shall not be liable to Borrower, anyone claiming under or through Borrower or anyone having an interest in the Mortgaged Property, by reason of any act or omission of Lender under this Section 3, and Borrower hereby releases and discharges Lender from any such liability to the fullest extent permitted by law.

(f)           If the Rents are not sufficient to meet the costs of taking control of and managing the Mortgaged Property and collecting the Rents, any funds expended by Lender for such purposes shall become an additional part of the Indebtedness as provided in Section 12.

(g)           Any entering upon and taking of control of the Mortgaged Property by Lender or the receiver, as the case may be, and any application of Rents as provided in this Instrument shall not cure or waive any Event of Default or invalidate any other right or remedy of Lender under applicable law or provided for in this Instrument.

4.           ASSIGNMENT OF LEASES; LEASES AFFECTING THE MORTGAGED PROPERTY.

(a)           As part of the consideration for the Indebtedness, Borrower absolutely and unconditionally assigns and transfers to Lender all of Borrower's right, title and interest in, to and under the Leases, including Borrower's right, power and authority to modify the terms of any such Lease, or extend or terminate any such Lease.   It is the intention of Borrower to establish a present, absolute and irrevocable transfer and assignment to Lender of all of Borrower's right, title and interest in, to and under the Leases.  Borrower and Lender intend this assignment of the Leases to be immediately effective and to constitute an absolute present assignment and not an assignment for additional security only.  For purposes of giving effect to this absolute assignment of the Leases, and for no other purpose, the Leases shall not be deemed to be a part of the "Mortgaged Property," as that term is defined in Section 1(s).  However, if this present, absolute and unconditional assignment of the Leases is not enforceable by its terms under the laws of the Property Jurisdiction, then the Leases shall be included as a part of the Mortgaged Property and it is the intention of the Borrower that in this circumstance this Instrument create and perfect a lien on the Leases in favor of Lender, which lien shall be effective as of the date of this Instrument.

(b)           Until the occurrence of an Event of Default, Borrower shall have all rights, power and authority granted to Borrower under any Lease (except as otherwise limited by this Section or any other provision of this Instrument), including the right, power and authority to modify the terms of any Lease or extend or terminate any Lease.  Upon the occurrence of an Event of Default, the permission given to Borrower pursuant to the preceding sentence to exercise all rights, power and authority under Leases shall automatically terminate.  Borrower shall comply with and observe

FANNIE MAE MULTIFAMILY SECURITY INSTRUMENT - TEXAS Form 4044 06/09

  

Page - 10

  

Borrower's obligations under all Leases, including Borrower's obligations pertaining to the maintenance and disposition of tenant security deposits.

(c)           Borrower acknowledges and agrees that the exercise by Lender, either directly or by a receiver, of any of the rights conferred under this Section 4 shall not be construed to make Lender a mortgagee-in-possession of the Mortgaged Property so long as Lender has not itself entered into actual possession of the Land and the Improvements.  The acceptance by Lender of the assignment of the Leases pursuant to Section 4(a) shall not at any time or in any event obligate Lender to take any action under this Instrument or to expend any money or to incur any expenses.  Lender shall not be liable in any way for any injury or damage to person or property sustained by any person or persons, firm or corporation in or about the Mortgaged Property.  Prior to Lender's actual entry into and taking possession of the Mortgaged Property, Lender shall not (i) be obligated to perform any of the terms, covenants and conditions contained in any Lease (or otherwise have any obligation with respect to any Lease); (ii) be obligated to appear in or defend any action or proceeding relating to the Lease or the Mortgaged Property; or (iii) be responsible for the operation, control, care, management or repair of the Mortgaged Property or any portion of the Mortgaged Property.  The execution of this Instrument by Borrower shall constitute conclusive evidence that all responsibility for the operation, control, care, management and repair of the Mortgaged Property is and shall be that of Borrower, prior to such actual entry and taking of possession.

(d)           From and after the occurrence of an Event of Default, and without the necessity of Lender entering upon and taking and maintaining control of the Mortgaged Property directly, by a receiver, or by any other manner or proceeding permitted by the laws of the Property Jurisdiction, Lender immediately shall have all rights, powers and authority granted to Borrower under any Lease, including the right, power and authority to modify the terms of any such Lease, or extend or terminate any such Lease.

(e)           Borrower shall, promptly upon Lender's request, deliver to Lender an executed copy of each residential Lease then in effect. All Leases for residential dwelling units shall be on forms approved by Lender, shall be for initial terms of at least six months and not more than two years, and shall not include options to purchase.  If customary in the applicable market, residential Leases with terms of less than six months may be permitted with Lender's prior written consent.

(f)           Borrower shall not lease any portion of the Mortgaged Property for non-residential use except with the prior written consent of Lender and Lender's prior written approval of the Lease agreement.  Borrower shall not modify the terms of, or extend or terminate, any Lease for non-residential use (including any Lease in existence on the date of this Instrument) without the prior written consent of Lender.  Borrower shall, without request by Lender, deliver an executed copy of each non-residential Lease to Lender promptly after such Lease is signed.  All non-residential Leases, including renewals or extensions of existing Leases, shall specifically provide that (1) such Leases are subordinate to the lien of this Instrument (unless waived in writing by Lender); (2) the tenant shall attorn to Lender and any purchaser at a foreclosure sale, such attornment to be self-executing and effective upon acquisition of title to the Mortgaged Property by any purchaser at a

FANNIE MAE MULTIFAMILY SECURITY INSTRUMENT - TEXAS Form 4044 06/09

  

Page - 11

  

foreclosure sale or by Lender in any manner; (3) the tenant agrees to execute such further evidences of attornment as Lender or any purchaser at a foreclosure sale may from time to time request; (4) the Lease shall not be terminated by foreclosure or any other transfer of the Mortgaged Property; (5) after a foreclosure sale of the Mortgaged Property, Lender or any other purchaser at such foreclosure sale may, at Lender's or such purchaser's option, accept or terminate such Lease; and (6) the tenant shall, upon receipt after the occurrence of an Event of Default of a written request from Lender, pay all Rents payable under the Lease to Lender.

(g)           Borrower shall not receive or accept Rent under any Lease (whether residential or non-residential) for more than two months in advance.

5.           PAYMENT OF INDEBTEDNESS; PERFORMANCE UNDER LOAN DOCUMENTS; PREPAYMENT PREMIUM.

Borrower shall pay the Indebtedness when due in accordance with the terms of the Note and the other Loan Documents and shall perform, observe and comply with all other provisions of the Note and the other Loan Documents.  Borrower shall pay a prepayment premium in connection with certain prepayments of the Indebtedness, including a payment made after Lender's exercise of any right of acceleration of the Indebtedness, as provided in the Note.

6.           EXCULPATION.

Borrower's personal liability for payment of the Indebtedness and for performance of the other obligations to be performed by it under this Instrument is limited in the manner, and to the extent, provided in the Note.

FANNIE MAE MULTIFAMILY SECURITY INSTRUMENT - TEXAS Form 4044 06/09

  

Page - 12

  

7.           DEPOSITS FOR TAXES, INSURANCE AND OTHER CHARGES.

(a)           Borrower shall deposit with Lender on the day monthly installments of principal or interest, or both, are due under the Note (or on another day designated in writing by Lender), until the Indebtedness is paid in full, an additional amount sufficient to accumulate with Lender the entire sum required to pay, when due (1) any water and sewer charges which, if not paid, may result in a lien on all or any part of the Mortgaged Property, (2) the premiums for fire and other hazard insurance, rent loss insurance and such other insurance as Lender may require under Section 19, (3) Taxes, and (4) amounts for other charges and expenses which Lender at any time reasonably deems necessary to protect the Mortgaged Property, to prevent the imposition of liens on the Mortgaged Property, or otherwise to protect Lender's interests, all as reasonably estimated from time to time by Lender.  The amounts deposited under the preceding sentence are collectively referred to in this Instrument as the "Imposition Deposits".  The obligations of Borrower for which the Imposition Deposits are required are collectively referred to in this Instrument as "Impositions".  The amount of the Imposition Deposits shall be sufficient to enable Lender to pay each Imposition before the last date upon which such payment may be made without any penalty or interest charge being added.  Lender shall maintain records indicating how much of the monthly Imposition Deposits and how much of the aggregate Imposition Deposits held by Lender are held for the purpose of paying Taxes, insurance premiums and each other obligation of Borrower for which Imposition Deposits are required.  Any waiver by Lender of the requirement that Borrower remit Imposition Deposits to Lender may be revoked by Lender, in Lender's discretion, at any time upon notice to Borrower.

(b)           Imposition Deposits shall be held in an institution (which may be Lender, if Lender is such an institution) whose deposits or accounts are insured or guaranteed by a federal agency.  Lender shall not be obligated to open additional accounts or deposit Imposition Deposits in additional institutions when the amount of the Imposition Deposits exceeds the maximum amount of the federal deposit insurance or guaranty.  Lender shall apply the Imposition Deposits to pay Impositions so long as no Event of Default has occurred and is continuing.  Unless applicable law requires, Lender shall not be required to pay Borrower any interest, earnings or profits on the Imposition Deposits.  Borrower hereby pledges and grants to Lender a security interest in the Imposition Deposits as additional security for all of Borrower's obligations under this Instrument and the other Loan Documents.  Any amounts deposited with Lender under this Section 7 shall not be trust funds, nor shall they operate to reduce the Indebtedness, unless applied by Lender for that purpose under Section 7(e).

(c)           If Lender receives a bill or invoice for an Imposition, Lender shall pay the Imposition from the Imposition Deposits held by Lender.  Lender shall have no obligation to pay any Imposition to the extent it exceeds Imposition Deposits then held by Lender.  Lender may pay an Imposition according to any bill, statement or estimate from the appropriate public office or insurance company without inquiring into the accuracy of the bill, statement or estimate or into the validity of the Imposition.

FANNIE MAE MULTIFAMILY SECURITY INSTRUMENT - TEXAS Form 4044 06/09

  

Page - 13

  

(d)           If at any time the amount of the Imposition Deposits held by Lender for payment of a specific Imposition exceeds the amount reasonably deemed necessary by Lender, the excess shall be credited against future installments of Imposition Deposits.  If at any time the amount of the Imposition Deposits held by Lender for payment of a specific Imposition is less than the amount reasonably estimated by Lender to be necessary, Borrower shall pay to Lender the amount of the deficiency within 15 days after notice from Lender.

(e)           If an Event of Default has occurred and is continuing, Lender may apply any Imposition Deposits, in any amounts and in any order as Lender determines, in Lender's discretion, to pay any Impositions or as a credit against the Indebtedness. Upon payment in full of the Indebtedness, Lender shall refund to Borrower any Imposition Deposits held by Lender.

8.           COLLATERAL AGREEMENTS.

Borrower shall deposit with Lender such amounts as may be required by any Collateral Agreement and shall perform all other obligations of Borrower under each Collateral Agreement.

9.           APPLICATION OF PAYMENTS.

If at any time Lender receives, from Borrower or otherwise, any amount applicable to the Indebtedness which is less than all amounts due and payable at such time, then Lender may apply that payment to amounts then due and payable in any manner and in any order determined by Lender, in Lender's discretion.  Neither Lender's acceptance of an amount which is less than all amounts then due and payable nor Lender's application of such payment in the manner authorized shall constitute or be deemed to constitute either a waiver of the unpaid amounts or an accord and satisfaction.  Notwithstanding the application of any such amount to the Indebtedness,  Borrower's obligations under this Instrument and the Note shall remain unchanged.

10.           COMPLIANCE WITH LAWS.

Borrower shall comply with all laws, ordinances, regulations and requirements of any Governmental Authority and all recorded lawful covenants and agreements relating to or affecting the Mortgaged Property, including all laws, ordinances, regulations, requirements and covenants pertaining to health and safety, construction of improvements on the Mortgaged Property, fair housing, zoning and land use, and Leases.  Borrower also shall comply with all applicable laws that pertain to the maintenance and disposition of tenant security deposits.  Borrower shall at all times maintain records sufficient to demonstrate  compliance with the provisions of this Section 10.  Borrower shall take appropriate measures to prevent, and shall not engage in or knowingly permit, any illegal activities at the Mortgaged Property that could endanger tenants or visitors, result in damage to the Mortgaged Property, result in forfeiture of the Mortgaged Property, or otherwise materially impair the lien created by this Instrument or Lender's interest in the Mortgaged Property.  Borrower represents and warrants to Lender that no portion of the Mortgaged Property has been or will be purchased with the proceeds of any illegal activity.

FANNIE MAE MULTIFAMILY SECURITY INSTRUMENT - TEXAS Form 4044 06/09

  

Page - 14

  

11.           USE OF PROPERTY.

Unless required by applicable law, Borrower shall not (a) except for any change in use approved by Lender, allow changes in the use for which all or any part of the Mortgaged Property is being used at the time this Instrument was executed, (b) convert any individual dwelling units or common areas to commercial use, (c) initiate or acquiesce in a change in the zoning classification of the Mortgaged Property, or (d) establish any condominium or cooperative regime with respect to the Mortgaged Property.

12.           PROTECTION OF LENDER'S SECURITY.

(a)           If Borrower fails to perform any of its obligations under this Instrument or any other Loan Document, or if any action or proceeding (including a Bankruptcy Event) is commenced which purports to affect the Mortgaged Property, Lender's security or Lender's rights under this Instrument, including eminent domain, insolvency, code enforcement, civil or criminal forfeiture, enforcement of Hazardous Materials Laws, fraudulent conveyance or reorganizations or proceedings involving a bankrupt or decedent, then Lender at Lender's option may make such appearances, disburse such sums and take such actions as Lender reasonably deems necessary to perform such obligations of Borrower and to protect Lender's interest, including (1) payment of fees and out-of-pocket expenses of attorneys, accountants, inspectors and consultants, (2) entry upon the Mortgaged Property to make repairs or secure the Mortgaged Property, (3) procurement of the insurance required by Section 19, and (4) payment of amounts which Borrower has failed to pay under Sections 15 and 17.

(b)           Any amounts disbursed by Lender under this Section 12, or under any other provision of this Instrument that treats such disbursement as being made under this Section 12, shall be added to, and become part of, the principal component of the Indebtedness, shall be immediately due and payable and shall bear interest from the date of disbursement until paid at the "Default Rate", as defined in the Note.

(c)           Nothing in this Section 12 shall require Lender to incur any expense or take any action.

13.           INSPECTION.

Lender, its agents, representatives, and designees may make or cause to be made entries upon and inspections of the Mortgaged Property (including environmental inspections and tests) during normal business hours, or at any other reasonable time.

FANNIE MAE MULTIFAMILY SECURITY INSTRUMENT - TEXAS Form 4044 06/09

  

Page - 15

  

14.           BOOKS AND RECORDS; FINANCIAL REPORTING.

(a)           Borrower shall keep and maintain at all times at the Mortgaged Property or the management agent's offices, and upon Lender's request shall make available at the Mortgaged Property, complete and accurate books of account and records (including copies of supporting bills and invoices) adequate to reflect correctly the operation of the Mortgaged Property, and copies of all written contracts, Leases, and other instruments which affect the Mortgaged Property.  The books, records, contracts, Leases and other instruments shall be subject to examination and inspection at any reasonable time by Lender.

(b)           Borrower shall furnish to Lender:

	
  

	
(1)

	
(i) except as provided in clause (ii) below, within 45 days after the end of each fiscal quarter of Borrower, a statement of income and expenses for Borrower's operation of the Mortgaged Property on a year-to-date basis as of the end of each fiscal quarter, (ii) within 120 days after the end of each fiscal year of Borrower, (A) a statement of income and expenses for Borrower's operation of the Mortgaged Property for such fiscal year, (B) a statement of changes in financial position of Borrower relating to the Mortgaged Property for such fiscal year, and (C) when requested by Lender, a balance sheet showing all assets and liabilities of Borrower relating to the Mortgaged Property as of the end of such fiscal year; and (iii) any of the foregoing at any other time upon Lender’s request;

	
  

	
(2)

	
(i) except as provided in clause (ii) below, within 45 days after the end of each fiscal quarter of Borrower, and (ii) within 120 days after the end of each fiscal year of Borrower, and at any other time upon Lender's request, a rent schedule for the Mortgaged Property showing the name of each tenant, and for each tenant, the space occupied, the lease expiration date, the rent payable for the current month, the date through which rent has been paid, and any related information requested by Lender;

	
  

	
(3)

	
within 120 days after the end of each fiscal year of Borrower, and at any other time upon Lender's request, an accounting of all security deposits held pursuant to all Leases, including the name of the institution (if any) and the names and identification numbers of the accounts (if any) in which such security deposits are held and the name of the person to contact at such financial institution, along with any authority or release necessary for Lender to access information regarding such accounts;

FANNIE MAE MULTIFAMILY SECURITY INSTRUMENT - TEXAS Form 4044 06/09

  

Page - 16

  

	
  

	
(4)

	
within 120 days after the end of each fiscal year of Borrower, and at any other time upon Lender's request, a statement that identifies all owners of any interest in Borrower and the interest held by each, if Borrower is a corporation, all officers and directors of Borrower, and if Borrower is a limited liability company, all managers who are not members;

	
  

	
(5)

	
upon Lender's request, a monthly property management report for the Mortgaged Property, showing the number of inquiries made and rental applications received from tenants or prospective tenants and deposits received from tenants and any other information requested by Lender;

	
  

	
(6)

	
upon Lender's request, a balance sheet, a statement of income and expenses for Borrower and a statement of changes in financial position of Borrower for Borrower's most recent fiscal year; and

	
  

	
(7)

	
if required by Lender, within 30 days of the end of each calendar month, a monthly statement of income and expenses for such calendar month on a year-to-date basis for Borrower's operation of the Mortgaged Property.

(c)           Each of the statements, schedules and reports required by Section 14(b) shall be certified to be complete and accurate by an individual having authority to bind Borrower, and shall be in such form and contain such detail as Lender may reasonably require.  Lender also may require that any statements, schedules or reports be audited at Borrower's expense by independent certified public accountants acceptable to Lender.

(d)           If Borrower fails to provide in a timely manner the statements, schedules and reports required by Section 14(b), Lender shall have the right to have Borrower's books and records audited, at Borrower's expense, by independent certified public accountants selected by Lender in order to obtain such statements, schedules and reports, and all related costs and expenses of Lender shall become immediately due and payable and shall become an additional part of the Indebtedness as provided in Section 12.

(e)           If an Event of Default has occurred and is continuing, Borrower shall deliver to Lender upon written demand all books and records relating to the Mortgaged Property or its operation.

(f)           Borrower authorizes Lender to obtain a credit report on Borrower at any time.

15.           TAXES; OPERATING EXPENSES.

(a)           Subject to the provisions of Section 15(c) and Section 15(d), Borrower shall pay, or cause to be paid, all Taxes when due and before the addition of any interest, fine, penalty  or cost for nonpayment.

FANNIE MAE MULTIFAMILY SECURITY INSTRUMENT - TEXAS Form 4044 06/09

  

Page - 17

  

(b)           Subject to the provisions of Section 15(c), Borrower shall pay the expenses of operating, managing, maintaining and repairing the Mortgaged Property (including insurance premiums, utilities, repairs and replacements) before the last date upon which each such payment may be made without any penalty or interest charge being added.

(c)           As long as no Event of Default exists and Borrower has timely delivered to Lender any bills or premium notices that it has received, Borrower shall not be obligated to pay Taxes, insurance premiums or any other individual Imposition to the extent that sufficient Imposition Deposits are held by Lender for the purpose of paying that specific Imposition.  If an Event of Default exists, Lender may exercise any rights Lender may have with respect to Imposition Deposits without regard to whether Impositions are then due and payable.  Lender shall have no liability to Borrower for failing to pay any Impositions to the extent that any Event of Default has occurred and is continuing, insufficient Imposition Deposits are held by Lender at the time an Imposition becomes due and payable or Borrower has failed to provide Lender with bills and premium notices as provided above.

(d)           Borrower, at its own expense, may contest by appropriate legal proceedings, conducted diligently and in good faith, the amount or validity of any Imposition other than insurance premiums, if (1) Borrower notifies Lender of the commencement or expected commencement of such proceedings, (2) the Mortgaged Property is not in danger of being sold or forfeited, (3) Borrower deposits with Lender reserves sufficient to pay the contested Imposition, if requested by Lender, and (4) Borrower furnishes whatever additional security is required in the proceedings or is reasonably requested by Lender, which may include the delivery to Lender of the reserves established by Borrower to pay the contested Imposition.

(e)           Borrower shall promptly deliver to Lender a copy of all notices of, and invoices for, Impositions, and if Borrower pays any Imposition directly, Borrower shall promptly furnish to Lender receipts evidencing such payments.

16.           LIENS; ENCUMBRANCES.

Borrower acknowledges that, to the extent provided in Section 21, the grant, creation or existence of any mortgage, deed of trust, deed to secure debt, security interest or other lien or encumbrance (a "Lien") on the Mortgaged Property (other than the lien of this Instrument) or on certain ownership interests in Borrower, whether voluntary, involuntary or by operation of law, and whether or not such Lien has priority over the lien of this Instrument, is a "Transfer" which constitutes an Event of Default.

FANNIE MAE MULTIFAMILY SECURITY INSTRUMENT - TEXAS Form 4044 06/09

  

Page - 18

  

17.           PRESERVATION, MANAGEMENT AND MAINTENANCE OF MORTGAGED PROPERTY.

(a) Borrower (1) shall not commit waste or permit impairment or deterioration of the Mortgaged Property, (2) shall not abandon the Mortgaged Property, (3) shall restore or repair promptly, in a good and workmanlike manner, any damaged part of the Mortgaged Property to the equivalent of its original condition, or such other condition as Lender may approve in writing, whether or not insurance proceeds or condemnation awards are available to cover any costs of such restoration or repair, (4) shall keep the Mortgaged Property in good repair, including the replacement of Personalty and Fixtures with items of equal or better function and quality, (5) shall provide for professional management of the Mortgaged Property by a residential rental property manager satisfactory to Lender under a contract approved by Lender in writing, and (6) shall give notice to Lender of and, unless otherwise directed in writing by Lender, shall appear in and defend any action or proceeding purporting to affect the Mortgaged Property, Lender's security or Lender's rights under this Instrument.  Borrower shall not (and shall not permit any tenant or other person to) remove, demolish or alter the Mortgaged Property or any part of the Mortgaged Property except in connection with the replacement of tangible Personalty.

(b)           If, in connection with the making of the loan evidenced by the Note or at any later date, Lender waives in writing the requirement of Section 17(a)(5) above that Borrower enter into a written contract for management of the Mortgaged Property and if, after the date of this Instrument, Borrower intends to change the management of the Mortgaged Property, Lender shall have the right to approve such new property manager and the written contract for the management of the Mortgaged Property and require that Borrower and such new property manager enter into an Assignment of Management Agreement on a form approved by Lender.  If required by Lender (whether before or after an Event of Default), Borrower will cause any Affiliate of Borrower to whom fees are payable for the management of the Mortgaged Property to enter into an agreement with Lender, in a form approved by Lender, providing for subordination of those fees and such other provisions as Lender may require.  "Affiliate of Borrower" means any corporation, partnership, joint venture, limited liability company, limited liability partnership, trust or individual controlled by, under common control with, or which controls Borrower (the term "control" for these purposes shall mean the ability, whether by the ownership of shares or other equity interests, by contract or otherwise, to elect a majority of the directors of a corporation, to make management decisions on behalf of, or independently to select the managing partner of, a partnership, or otherwise to have the power independently to remove and then select a majority of those individuals exercising managerial authority over an entity, and control shall be conclusively presumed in the case of the ownership of 50% or more of the equity interests).

18.           ENVIRONMENTAL HAZARDS.

(a)           Except for matters covered by a written program of operations and maintenance approved in writing by Lender (an "O&M Program") or matters described in Section 18(b), Borrower shall not cause or permit any of the following:

FANNIE MAE MULTIFAMILY SECURITY INSTRUMENT - TEXAS Form 4044 06/09

  

Page - 19

  

	
  

	
(1)

	
the presence, use, generation, release, treatment, processing, storage (including storage in above ground and underground storage tanks), handling, or disposal of any Hazardous Materials on or under the Mortgaged Property or any other  property of Borrower that is adjacent to the Mortgaged Property;

	
  

	
(2)

	
the transportation of any Hazardous Materials to, from, or across the Mortgaged Property;

	
  

	
(3)

	
any occurrence or condition on the Mortgaged Property or any other property of Borrower that is adjacent to the Mortgaged Property, which occurrence or condition is or may be in violation of Hazardous Materials Laws; or

	
  

	
(4)

	
any violation of or noncompliance with the terms of any Environmental Permit with respect to the Mortgaged Property or any  property of Borrower that is adjacent to the Mortgaged Property.

The matters described in clauses (1) through (4) above are referred to collectively in this Section 18 as "Prohibited Activities or Conditions".

(b)           Prohibited Activities and Conditions shall not include the safe and lawful use and storage of quantities of (1) pre-packaged supplies, cleaning materials and petroleum products customarily used in the operation and maintenance of comparable multifamily properties, (2) cleaning materials, personal grooming items and other items sold in pre-packaged containers for consumer use and used by tenants and occupants of residential dwelling units in the Mortgaged Property; and (3) petroleum products used in the operation and maintenance of motor vehicles from time to time located on the Mortgaged Property's parking areas, so long as all of the foregoing are used, stored, handled, transported and disposed of in compliance with Hazardous Materials Laws.

(c)           Borrower shall take all commercially reasonable actions (including the inclusion of appropriate provisions in any Leases executed after the date of this Instrument) to prevent its employees, agents, and contractors, and all tenants and other occupants from causing or permitting any Prohibited Activities or Conditions.  Borrower shall not lease or allow the sublease or use of all or any portion of the Mortgaged Property to any tenant or subtenant for nonresidential use by any user that, in the ordinary course of its business, would cause or permit any Prohibited Activity or Condition.

(d)           If an O&M Program has been established with respect to Hazardous Materials, Borrower shall comply in a timely manner with, and cause all employees, agents, and contractors of Borrower and any other persons present on the Mortgaged Property to comply with the O&M Program.  All costs of performance of Borrower's obligations under any O&M Program shall be

FANNIE MAE MULTIFAMILY SECURITY INSTRUMENT - TEXAS Form 4044 06/09

  

Page - 20

  

paid by Borrower, and Lender's out-of-pocket costs incurred in connection with the monitoring and review of the O&M Program and Borrower's performance shall be paid by Borrower upon demand by Lender.  Any such out-of-pocket costs of Lender which Borrower fails to pay promptly shall become an additional part of the Indebtedness as provided in Section 12.

(e)           Borrower represents and warrants to Lender that, except as previously disclosed by Borrower to Lender in writing:

	
  

	
(1)

	
Borrower has not at any time engaged in, caused or permitted any Prohibited Activities or Conditions;

	
  

	
(2)

	
to the best of Borrower's knowledge after reasonable and diligent inquiry, no Prohibited Activities or Conditions exist or have existed;

	
  

	
(3)

	
except to the extent previously disclosed by Borrower to Lender in writing, the Mortgaged Property does not now contain any underground storage tanks, and, to the best of Borrower's knowledge after reasonable and diligent inquiry, the Mortgaged Property has not contained any underground storage tanks in the past.  If there is an underground storage tank located on the Property which has been previously disclosed by Borrower to Lender in writing, that tank complies with all requirements of Hazardous Materials Laws;

	
  

	
(4)

	
Borrower has complied with all Hazardous Materials Laws, including all requirements for notification regarding releases of Hazardous Materials.  Without limiting the generality of the foregoing, Borrower has obtained all Environmental Permits required for the operation of the Mortgaged Property in accordance with Hazardous Materials Laws now in effect and all such Environmental Permits are in full force and effect;

	
  

	
(5)

	
no event has occurred with respect to the Mortgaged Property that constitutes, or with the passing of time or the giving of notice would constitute, noncompliance with the terms of any Environmental Permit;

	
  

	
(6)

	
there are no actions, suits, claims or proceedings pending or, to the best of Borrower's knowledge after reasonable and diligent inquiry, threatened  that involve the Mortgaged Property and allege, arise out of, or relate to any Prohibited Activity or Condition; and

	
  

	
(7)

	
Borrower has not received any complaint, order, notice of violation or other communication from any Governmental Authority with regard to air emissions, water discharges, noise emissions or Hazardous Materials, or any other environmental, health or safety matters affecting the Mortgaged

FANNIE MAE MULTIFAMILY SECURITY INSTRUMENT - TEXAS Form 4044 06/09

  

Page - 21

  

Property or any other property of Borrower that is adjacent to the Mortgaged Property.

The representations and warranties in this Section 18 shall be continuing representations and warranties that shall be deemed to be made by Borrower throughout the term of the loan evidenced by the Note, until the Indebtedness has been paid in full.

(f)           Borrower shall promptly notify Lender in writing upon the occurrence of any of  the following events:

	
  

	
(1)

	
Borrower's discovery of any Prohibited Activity or Condition;

	
  

	
(2)

	
Borrower's receipt of or knowledge of any complaint, order, notice of violation or other communication from any Governmental Authority or other person with regard to present or future alleged Prohibited Activities or Conditions or any other environmental, health or safety matters affecting the Mortgaged Property or any other property of Borrower that is adjacent to the Mortgaged Property; and

	
  

	
(3)

	
any representation or warranty in this Section 18 becomes untrue after the date of this Agreement.

Any such notice given by Borrower shall not relieve Borrower of, or result in a waiver of, any obligation under this Instrument, the Note, or any other Loan Document.

(g)           Borrower shall pay promptly the costs of any environmental inspections, tests or audits ("Environmental Inspections") required by Lender in connection with any foreclosure or deed in lieu of foreclosure, or as a condition of Lender's consent to any Transfer under Section 21, or required by Lender following a reasonable determination by Lender that Prohibited Activities or Conditions may exist.  Any such costs incurred by Lender (including the fees and out-of-pocket costs of attorneys and technical consultants whether incurred in connection with any judicial or administrative process or otherwise) which Borrower fails to pay promptly shall become an additional part of the Indebtedness as provided in Section 12.  The results of all Environmental Inspections made by Lender shall at all times remain the property of Lender and Lender shall have no obligation to disclose or otherwise make available to Borrower or any other party such results or any other information obtained by Lender in connection with its Environmental Inspections.  Lender hereby reserves the right, and Borrower hereby expressly authorizes Lender, to make available to any party, including any prospective bidder at a foreclosure sale of the Mortgaged Property, the results of any Environmental Inspections made by Lender with respect to the Mortgaged Property.  Borrower consents to Lender notifying any party (either as part of a notice of sale or otherwise) of the results of any of Lender's Environmental Inspections.  Borrower acknowledges that Lender cannot control or otherwise assure the truthfulness or accuracy of the results of any of its Environmental Inspections and that the release of such results to prospective

FANNIE MAE MULTIFAMILY SECURITY INSTRUMENT - TEXAS Form 4044 06/09

  

Page - 22

  

bidders at a foreclosure sale of the Mortgaged Property may have a material and adverse effect upon the amount which a party may bid at such sale.  Borrower agrees that Lender shall have no liability whatsoever as a result of delivering the results of any of its Environmental Inspections to any third party, and Borrower hereby releases and forever discharges Lender from any and all claims, damages, or causes of action, arising out of, connected with or incidental to the results of, the delivery of any of Lender's Environmental Inspections.

(h)           If any investigation, site monitoring, containment, clean-up, restoration or other remedial work ("Remedial Work") is necessary to comply with any Hazardous Materials Law or order of any Governmental Authority that has or acquires jurisdiction over the Mortgaged Property  or the use, operation or improvement of the Mortgaged Property under any Hazardous Materials Law, Borrower shall, by the earlier of (1) the applicable deadline required by Hazardous Materials Law or (2) 30 days after notice from Lender demanding such action, begin performing the Remedial Work, and thereafter diligently prosecute it to completion, and shall in any event complete the work by the time required by applicable Hazardous Materials Law.  If Borrower fails to begin on a timely basis or diligently prosecute any required Remedial Work, Lender may, at its option, cause the Remedial Work to be completed, in which case Borrower shall reimburse Lender on demand for the cost of doing so.  Any reimbursement due from Borrower to Lender shall become part of the Indebtedness as provided in Section 12.

(i)           Borrower shall cooperate with any inquiry by any Governmental Authority and shall comply with any governmental or judicial order which arises from any alleged Prohibited Activity or Condition.

(j)           Borrower shall indemnify, hold harmless and defend (i) Lender, (ii) any prior owner or holder of the Note, (iii) the Loan Servicer, (iv) any prior Loan Servicer, (v) the officers, directors, shareholders, partners, employees and trustees of any of the foregoing, and (vi) the heirs, legal representatives, successors and assigns of each of the foregoing (collectively, the "Indemnitees") from and against all proceedings, claims, damages, penalties and costs (whether initiated or sought by Governmental Authorities or private parties), including fees and out-of-pocket expenses of attorneys and expert witnesses, investigatory fees, and remediation costs, whether incurred in connection with any judicial or administrative process or otherwise, arising directly or indirectly from any of the following:

	
  

	
(1)

	
any breach of any representation or warranty of Borrower in this Section 18;

	
  

	
(2)

	
any failure by Borrower to perform any of its obligations under this Section 18;

	
  

	
(3)

	
the existence or alleged existence of any Prohibited Activity or Condition;

FANNIE MAE MULTIFAMILY SECURITY INSTRUMENT - TEXAS Form 4044 06/09

  

Page - 23

  

	
  

	
(4)

	
the presence or alleged presence of Hazardous Materials on or under the Mortgaged Property or any property of Borrower that is adjacent to the Mortgaged Property; and

	
  

	
(5)

	
the actual or alleged violation of any Hazardous Materials Law.

(k)           Counsel selected by Borrower to defend Indemnitees shall be subject to the  approval of those Indemnitees.  However, any Indemnitee may elect to defend any claim or legal or administrative proceeding at the Borrower's expense.

(l)           Borrower shall not, without the prior written consent of those Indemnitees who are named as parties to a claim or legal or administrative proceeding (a "Claim"), settle or compromise the Claim if the settlement (1) results in the entry of any judgment that does not include as an unconditional term the delivery by the claimant or plaintiff to Lender of a written release of those Indemnitees, satisfactory in form and substance to Lender; or (2) may materially and adversely affect Lender, as determined by Lender in its discretion.

(m)           Lender agrees that the indemnity under this Section 18 shall be limited to the assets of Borrower and Lender shall not seek to recover any deficiency from any natural persons who are general partners of Borrower.

(n)           Borrower shall, at its own cost and expense, do all of the following:

	
  

	
(1)

	
pay or satisfy any judgment or decree that may be entered against any Indemnitee or Indemnitees in any legal or administrative proceeding incident to any matters against which Indemnitees are entitled to be indemnified under this Section 18;

	
  

	
(2)

	
reimburse Indemnitees for any expenses paid or incurred in connection with any matters against which Indemnitees are entitled to be indemnified under this Section 18; and

	
  

	
(3)

	
reimburse Indemnitees for any and all expenses, including fees and out-of-pocket expenses of attorneys and expert witnesses, paid or incurred in connection with the enforcement by Indemnitees of their rights under this Section 18, or in monitoring and participating in any legal or administrative proceeding.

(o)           In any circumstances in which the indemnity under this Section 18 applies, Lender may employ its own legal counsel and consultants to prosecute, defend or negotiate any claim or legal or administrative proceeding and Lender, with the prior written consent of Borrower (which shall not be unreasonably withheld, delayed or conditioned), may settle or compromise any action or legal or administrative proceeding.  Borrower shall reimburse Lender upon demand for all costs

FANNIE MAE MULTIFAMILY SECURITY INSTRUMENT - TEXAS Form 4044 06/09

  

Page - 24

  

and expenses incurred by Lender, including all costs of settlements entered into in good faith, and the fees and out-of-pocket expenses of such attorneys and consultants.

(p)           The provisions of this Section 18 shall be in addition to any and all other obligations and liabilities that Borrower may have  under applicable law or under other Loan Documents, and each Indemnitee shall be entitled to indemnification under this Section 18 without regard to whether Lender or that Indemnitee has exercised any rights against the Mortgaged Property or any other security, pursued any rights against any guarantor, or pursued any other rights available under the Loan Documents or applicable law. If Borrower consists of more than one person or entity, the obligation of those persons or entities to indemnify the Indemnitees under this Section 18 shall be joint and several. The obligation of Borrower to indemnify the Indemnitees under this Section 18 shall survive any repayment or discharge of the Indebtedness, any foreclosure proceeding, any foreclosure sale, any delivery of any deed in lieu of foreclosure, and any release of record of the lien of this Instrument.

19.           PROPERTY AND LIABILITY INSURANCE.

(a)           Borrower shall keep the Improvements insured at all times against such hazards as Lender may from time to time require, which insurance shall include but not be limited to coverage against loss by fire and allied perils, general boiler and machinery coverage, and business income coverage.  Lender's insurance requirements may change from time to time throughout the term of the Indebtedness.  If Lender so requires, such insurance shall also include sinkhole insurance, mine subsidence insurance, earthquake insurance, and, if the Mortgaged Property does not conform to applicable zoning or land use laws, building ordinance or law coverage.  If any of the Improvements is located in an area identified by the Federal Emergency Management Agency (or any successor to that agency) as an area having special flood hazards, and if flood insurance is available in that area, Borrower shall insure such Improvements against loss by flood.

(b)           All premiums on insurance policies required under Section 19(a) shall be paid in the manner provided in Section 7, unless Lender has designated in writing another method of payment.  All such policies shall also be in a form approved by Lender.  All policies of property damage insurance shall include a non-contributing, non-reporting mortgage clause in favor of, and in a form approved by, Lender.  Lender shall have the right to hold the original policies or duplicate original policies of all insurance required by Section 19(a).  Borrower shall promptly deliver to Lender a copy of all renewal and other notices received by Borrower with respect to the policies and all receipts for paid premiums.  At least 30 days prior to the expiration date of a policy, Borrower shall deliver to Lender the original (or a duplicate original) of a renewal policy in form satisfactory to Lender.

(c)           Borrower shall maintain at all times commercial general liability insurance, workers' compensation insurance and such other liability, errors and omissions and fidelity insurance coverages as Lender may from time to time require.

FANNIE MAE MULTIFAMILY SECURITY INSTRUMENT - TEXAS Form 4044 06/09

  

Page - 25

  

(d)           All insurance policies and renewals of insurance policies required by this Section 19 shall be in such amounts and for such periods as Lender may from time to time require, and shall be issued by insurance companies satisfactory to Lender.

(e)           Borrower shall comply with all insurance requirements and shall not permit any condition to exist on the Mortgaged Property that would invalidate any part of any insurance coverage that this Instrument requires Borrower to maintain.

(f)           In the event of loss, Borrower shall give immediate written notice to the insurance carrier and to Lender.  Borrower hereby authorizes and appoints Lender as attorney-in-fact for Borrower to make proof of loss, to adjust and compromise any claims under policies of property damage insurance, to appear in and prosecute any action arising from such property damage insurance policies, to collect and receive the proceeds of property damage insurance, and to deduct from such proceeds Lender's expenses incurred in the collection of such proceeds.  This power of attorney is coupled with an interest and therefore is irrevocable.  However, nothing contained in this Section 19 shall require Lender to incur any expense or take any action.  Lender may, at Lender's option, (1) hold the balance of such proceeds to be used to reimburse Borrower for the cost of restoring and repairing the Mortgaged Property to the equivalent of its original condition or to a condition approved by Lender (the "Restoration"), or (2) apply the balance of such proceeds to the payment of the Indebtedness, whether or not then due. To the extent Lender determines to apply insurance proceeds to Restoration, Lender shall do so in accordance with Lender's then-current policies relating to the restoration of casualty damage on similar multifamily properties.

(g)           Lender shall not exercise its option to apply insurance proceeds to the payment of the Indebtedness if all of the following conditions are met:  (1) no Event of Default (or any event which, with the giving of notice or the passage of time, or both, would constitute an Event of Default) has occurred and is continuing; (2) Lender determines, in its discretion, that there will be sufficient funds to complete the Restoration; (3) Lender determines, in its discretion, that the net operating income generated by the Mortgaged Property after completion of the Restoration will be sufficient to support a debt service coverage ratio not less than the greater of (A) the debt service coverage ratio as of the date of this Instrument (based on the final underwriting of the Mortgaged Property) or (B) the debt service coverage ratio immediately prior to the loss (in each case, Lender’s determination shall include all operating costs and other expenses, Imposition Deposits, deposits to reserves and loan repayment obligations relating to the Mortgaged Property); (4) Lender determines, in its discretion, that the Restoration will be completed before the earlier of (A) one year before the maturity date of the Note or (B) one year after the date of the loss or casualty; and (5) upon Lender's request, Borrower provides Lender evidence of the availability during and after the Restoration of the insurance required to be maintained by Borrower pursuant to this Section 19.

(h)           If the Mortgaged Property is sold at a foreclosure sale or Lender acquires title to the Mortgaged Property, Lender shall automatically succeed to all rights of Borrower in and to any insurance policies and unearned insurance premiums and in and to the proceeds resulting from any damage to the Mortgaged Property prior to such sale or acquisition.

FANNIE MAE MULTIFAMILY SECURITY INSTRUMENT - TEXAS Form 4044 06/09

  

Page - 26

  

20.           CONDEMNATION.

(a)           Borrower shall promptly notify Lender of any action or proceeding relating to any condemnation or other taking, or conveyance in lieu thereof, of all or any part of the Mortgaged Property, whether direct or indirect (a "Condemnation").  Borrower shall appear in and prosecute or defend any action or proceeding relating to any Condemnation unless otherwise directed by Lender in writing.  Borrower authorizes and appoints Lender as attorney-in-fact for Borrower to commence, appear in and prosecute, in Lender's or Borrower's name, any action or proceeding relating to any Condemnation and to settle or compromise any claim in connection with any Condemnation.  This power of attorney is coupled with an interest and therefore is irrevocable.  However, nothing contained in this Section 20 shall require Lender to incur any expense or take any action.  Borrower hereby transfers and assigns to Lender all right, title and interest of Borrower in and to any award or payment with respect to (i) any Condemnation, or any conveyance in lieu of Condemnation, and (ii) any damage to the Mortgaged Property caused by governmental action that does not result in a Condemnation.

(b)           Lender may apply such awards or proceeds, after the deduction of Lender's expenses incurred in the collection of such amounts, at Lender's option, to the restoration or repair of the Mortgaged Property or to the payment of the Indebtedness, with the balance, if any, to Borrower.  Unless Lender otherwise agrees in writing, any application of any awards or proceeds to the Indebtedness shall not extend or postpone the due date of any monthly installments referred to in the Note, Section 7 of this Instrument or any Collateral Agreement, or change the amount of such installments.  Borrower agrees to execute such further evidence of assignment of any awards or proceeds as Lender may require.

21.           TRANSFERS OF THE MORTGAGED PROPERTY OR INTERESTS IN BORROWER.

(a)           The occurrence of any of the following events shall constitute an Event of Default under this Instrument:

	
(1)

	
a Transfer of all or any part of the Mortgaged Property or any interest in the Mortgaged Property;

	
(2)

	
a Transfer of a Controlling Interest in Borrower;

	
(3)

	
a Transfer of a Controlling Interest in any entity which owns, directly or indirectly through one or more intermediate entities, a Controlling Interest in Borrower;

	
(4)

	
a Transfer of all or any part of a Key Principal's ownership interests in Borrower, or in any other entity which owns, directly or indirectly through one or more intermediate entities, an ownership interest in Borrower (other than a Transfer of an

FANNIE MAE MULTIFAMILY SECURITY INSTRUMENT - TEXAS Form 4044 06/09

  

Page - 27

  

aggregate beneficial ownership interest in the Borrower of 49% or less of such Key Principal’s original ownership interest in the Borrower and which does not otherwise result in a Transfer of the Key Principal’s Controlling Interest in such intermediate entities or in the Borrower);

	
(5)

	
if Key Principal is an entity, (A) a Transfer of a Controlling Interest in Key Principal, or (B) a Transfer of a Controlling Interest in any entity which owns, directly or indirectly through one or more intermediate entities, a Controlling Interest in Key Principal;

	
(6)

	
if Borrower or Key Principal is a trust, the termination or revocation of such trust; unless the trust is terminated as a result of the death of an individual trustor, in which event Lender must be notified and such Borrower or Key Principal must be replaced with an individual or entity acceptable to Lender, in accordance with the provisions of Section 21(c) hereof, within 90 days of such death (provided however that no property inspection shall be required and a 1% transfer fee will not be charged);

	
(7)

	
if Key Principal is a natural person, the death of such individual; unless the Lender is notified and such individual is replaced with an individual or entity acceptable to Lender, in accordance with the provisions of Section 21(c) hereof, within 90 days of such death (provided however that no property inspection shall be required and a 1% transfer fee will not be charged);

	
(8)

	
the merger, dissolution, liquidation, or consolidation of (i) Borrower, (ii) any Key Principal that is a legal entity, or (iii) any legal entity holding, directly or indirectly, a Controlling Interest in the Borrower or in any Key Principal that is an entity;

 

	
(9)

	
a conversion of Borrower from one type of legal entity into another type of legal entity (including the conversion of a general partnership into a limited partnership and the conversion of a limited partnership into a limited liability company), whether or not there is a Transfer; if such conversion results in a change in any assets, liabilities, legal rights or obligations of Borrower (or of Key Principal, guarantor, or any general partner of Borrower, as applicable), by operation of law or otherwise; and

  

	
(10)

	
a Transfer of the economic benefits or right to cash flows attributable to the ownership interests in Borrower and/or, if Key Principal is an entity, Key Principal, separate from the Transfer of the underlying ownership interests, unless the Transfer of the underlying ownership interests would otherwise not be prohibited by this Agreement

	
  

	
Lender shall not be required to demonstrate any actual impairment of its security or any increased risk of default in order to exercise any of its remedies with respect to an Event of Default under this Section 21.

FANNIE MAE MULTIFAMILY SECURITY INSTRUMENT - TEXAS Form 4044 06/09

  

Page - 28

  

(b)           The occurrence of any of the following events shall not constitute an Event of Default under this Instrument, notwithstanding any provision of Section 21(a) to the contrary:

	
(1)

	
a Transfer to which Lender has consented;

	
(2)

	
except as provided in Section 21(a)(6) and (7), a Transfer that occurs by devise, descent, pursuant to the provisions of a trust, or by operation of law upon the death of a natural person;

	
(3)

	
the grant of a leasehold interest in an individual dwelling unit for a term of two years or less not containing an option to purchase;

	
(4)

	
a Transfer of obsolete or worn out Personalty or Fixtures that are contemporaneously replaced by items of equal or better function and quality, which are free of liens, encumbrances and security interests other than those created by the Loan Documents or consented to by Lender;

	
(5)

	
the grant of an easement, servitude, or restrictive covenant if, before the grant, Lender determines that the easement, servitude, or restrictive covenant will not materially affect the operation or value of the Mortgaged Property or Lender's interest in the Mortgaged Property, and Borrower pays to Lender, upon demand, all costs and expenses incurred by Lender in connection with reviewing Borrower's request;

	
(6)

	
the creation of a tax lien or a mechanic's, materialman's, or judgment lien against the Mortgaged Property which is bonded off, released of record, or otherwise remedied to Lender's satisfaction within 45 days after Borrower has actual or constructive notice of the existence of such lien; and

	
(7)

	
the conveyance of the Mortgaged Property at a judicial or non-judicial foreclosure sale under this Instrument.

(c)           Lender shall consent to a Transfer that would otherwise violate this Section 21 if, prior to the Transfer, Borrower has satisfied each of the following requirements:

	
(1)

	
the submission to Lender of all information required by Lender to make the determination required by this Section 21(c);

	
(2)

	
the absence of any Event of Default;

	
(3)

	
the transferee meets all of the eligibility, credit, management, and other standards (including any standards with respect to previous relationships between Lender and the transferee and the organization of the transferee) customarily applied by Lender at the time of the proposed Transfer to the approval of borrowers in connection with the

FANNIE MAE MULTIFAMILY SECURITY INSTRUMENT - TEXAS Form 4044 06/09

  

Page - 29

  

origination or purchase of similar mortgage finance structures on similar multifamily properties, unless partially waived by Lender in exchange for such additional conditions as Lender may require;

	
(4)

	
the Mortgaged Property, at the time of the proposed Transfer, meets all standards as to its physical condition that are customarily applied by Lender at the time of the proposed Transfer to the approval of properties in connection with the origination or purchase of similar mortgage finance structures on similar multifamily properties, unless partially waived by Lender in exchange for such additional conditions as Lender may require;

	
(5)

	
if transferor or any other person has obligations under any Loan Document, the execution by the transferee or one or more individuals or entities acceptable to Lender of an assumption agreement (including, if applicable, an Acknowledgement and Agreement of Key Principal to Personal Liability for Exceptions to Non-Recourse Liability) that is acceptable to Lender and that, among other things, requires the transferee to perform all obligations of transferor or such person set forth in such Loan Document, and may require that the transferee comply with any provisions of this Instrument or any other Loan Document which previously may have been waived by Lender;

	
(6)

	
if a guaranty has been executed and delivered in connection with the Note, this Instrument or any of the other Loan Documents, the Borrower causes one or more individuals or entities acceptable to Lender to execute and deliver to Lender a substitute guaranty in a form acceptable to Lender;

	
(7)

	
Lender's receipt of all of the following:

	
  

	
(A)

	
a non-refundable review fee in the amount of $3,000 and a transfer fee equal to 1 percent of the outstanding Indebtedness immediately prior to the Transfer; and

	
  

	
(B)

	
Borrower’s reimbursement of all of Lender's out-of-pocket costs (including reasonable attorneys' fees) incurred in reviewing the Transfer request, to the extent such expenses exceed $3,000; and

	
(8)

	
Borrower has agreed to Lender’s conditions to approve such Transfer, which may include, but are not limited to (A) providing additional collateral, guaranties, or other credit support to mitigate any risks concerning the proposed transferee or the performance or condition of the Mortgaged Property, and (B) amending the Loan Documents to (i) delete any specially negotiated terms or provisions previously granted for the exclusive benefit of transferor and (ii) restore to original provisions of the standard Fannie Mae form multifamily loan documents, to the extent such provisions were previously modified.

FANNIE MAE MULTIFAMILY SECURITY INSTRUMENT - TEXAS Form 4044 06/09

  

Page - 30

  

(d)           For purposes of this Section, the following terms shall have the meanings set forth below:

	
(1)

	
"Initial Owners" means, with respect to Borrower or any other entity, the persons or entities who on the date of the Note, directly or indirectly, own in the aggregate 100% of the ownership interests in Borrower or that entity.

	
(2)

	
A Transfer of a "Controlling Interest" shall mean:

	
(A)

	
with respect to any entity, the following:

	 

	
  

	
(i)

	
if such entity is a general partnership or a joint venture, a Transfer of any general partnership interest or joint venture interest which would cause the Initial Owners to own less than 51% of all general partnership or joint venture interests in such entity;

	
  

	
(ii)

	
if such entity is a limited partnership, (A) a Transfer of any general partnership interest, or (B) a Transfer of any partnership interests which would cause the Initial Owners to own less than 51% of all limited partnership interests in such entity;

	
  

	
(iii)

	
if such entity is a limited liability company or a limited liability partnership, (A) a Transfer of any membership or other ownership interest which would cause the Initial Owners to own less than 51% of all membership or other ownership interests in such entity, (B) a Transfer of any membership, or other interest of a manager, in such entity that results in a change of manager, or (C) a change of the non-member manager;

	
  

	
(iv)

	
if such entity is a corporation (other than a Publicly-Held Corporation) with only one class of voting stock, a Transfer of any voting stock which would cause the Initial Owners to own less than 51% of voting stock in such corporation;

	
  

	
(v)

	
if such entity is a corporation (other than a Publicly-Held Corporation) with more than one class of voting stock, a Transfer of any voting stock which would cause the Initial Owners to own less than a sufficient number of shares of voting stock having the power to elect the majority of directors of such corporation; and

	
  

	
(vi)

	
if such entity is a trust (other than a Publicly-Held Trust), the removal, appointment or substitution of a trustee of such trust other than (A) in the case of a land trust, or (B) if the trustee of such trust after such

FANNIE MAE MULTIFAMILY SECURITY INSTRUMENT - TEXAS Form 4044 06/09

  

Page - 31

  

removal, appointment, or substitution is a trustee identified in the trust agreement approved by Lender; and/or

	
  

	
(B)

	
any agreement (including provisions contained in the organizational and/or governing documents of Borrower or Key Principal) or Transfer not specified in clause (A), the effect of which, either immediately or after the passage of time or occurrence of a specified event or condition, including the failure of a specified event or condition to occur or be satisfied, would (i) cause a change in or replacement of the Person that controls the management and operations of the Borrower or Key Principal or (ii) limit or otherwise modify the extent of such Person’s control over the management and operations of Borrower or Key Principal.

	
(3)

	
"Publicly-Held Corporation" shall mean a corporation the outstanding voting stock of which is registered under Section 12(b) or 12(g) of the Securities and Exchange Act of 1934, as amended.

	
(4)

	
“Publicly-Held Trust” shall mean a real estate investment trust the outstanding voting shares or beneficial interests of which are registered under Section 12 (b) or 12 (g) of the Securities Exchange Act of 1934, as amended.

(e)           Lender shall be provided with written notice of all Transfers under this Section 21, whether or not such Transfers are permitted under Section 21(b) or approved by Lender under Section 21(c), no later than 10 days prior to the date of the Transfer.”

22.           EVENTS OF DEFAULT.

The occurrence of any one or more of the following shall constitute an Event of Default under this Instrument:

(a)           any failure by Borrower to pay or deposit when due any amount required by the Note, this Instrument or any other Loan Document;

(b)           any failure by Borrower to maintain the insurance coverage required by Section 19;

(c)           any failure by Borrower to comply with the provisions of Section 33;

(d)           fraud or material misrepresentation or material omission by Borrower, or any of its officers, directors, trustees, general partners or managers, Key Principal or any guarantor in connection with (A) the application for or creation of the Indebtedness, (B) any financial statement, rent roll, or other report or information provided to Lender during the term of the Indebtedness, or (C) any request for Lender's consent to any proposed action, including a request for disbursement of funds under any Collateral Agreement;

FANNIE MAE MULTIFAMILY SECURITY INSTRUMENT - TEXAS Form 4044 06/09

  

Page - 32

  

(e)           any (i) Event of Default under Section 21 and/or (ii) occurrence of a Bankruptcy Event;

(f)           the commencement of a forfeiture action or proceeding, whether civil or criminal, which, in Lender's reasonable judgment, could result in a forfeiture of the Mortgaged Property or otherwise materially impair the lien created by this Instrument or Lender's interest in the Mortgaged Property;

(g)           any failure by Borrower to perform any of its obligations under this Instrument (other than those specified in Sections 22(a) through (f)), as and when required, which continues for a period of 30 days after notice of such failure by Lender to Borrower, but no such notice or grace period shall apply in the case of any such failure which could, in Lender's judgment, absent immediate exercise by Lender of a right or remedy under this Instrument, result in harm to Lender, impairment of the Note or this Instrument or any other security given under any other Loan Document;

(h)           any failure by Borrower to perform any of its obligations as and when required under any Loan Document other than this Instrument which continues beyond the applicable cure period, if any, specified in that Loan Document; and

(i)           any exercise by the holder of any other debt instrument secured by a mortgage, deed of trust or deed to secure debt on the Mortgaged Property of a right to declare all amounts due under that debt instrument immediately due and payable.

23.           REMEDIES CUMULATIVE.

Each right and remedy provided in this Instrument is distinct from all other rights or remedies under this Instrument or any other Loan Document or afforded by applicable law, and each shall be cumulative and may be exercised concurrently, independently, or successively, in any order.

24.           FORBEARANCE.

(a)           Lender may (but shall not be obligated to) agree with Borrower, from time to time, and without giving notice to, or obtaining the consent of, or having any effect upon the obligations of, any guarantor or other third party obligor, to take any of the following actions:  extend the time for payment of all or any part of the Indebtedness; reduce the payments due under this Instrument, the Note, or any other Loan Document; release anyone liable for the payment of any amounts under this Instrument, the Note, or any other Loan Document; accept a renewal of the Note; modify the terms and time of payment of the Indebtedness; join in any extension or subordination agreement; release any Mortgaged Property; take or release other or additional security; modify the rate of interest or period of amortization of the Note or change the amount of the monthly installments

FANNIE MAE MULTIFAMILY SECURITY INSTRUMENT - TEXAS Form 4044 06/09

  

Page - 33

  

payable under the Note; and otherwise modify this Instrument, the Note, or any other Loan Document.

(b)           Any forbearance by Lender in exercising any right or remedy under the Note, this Instrument, or any other Loan Document or otherwise afforded by applicable law, shall not be a waiver of or preclude the exercise of any other right or remedy.  The acceptance by Lender of payment of all or any part of the Indebtedness after the due date of such payment, or in an amount which is less than the required payment, shall not be a waiver of Lender's right to require prompt payment when due of all other payments on account of the Indebtedness or to exercise any remedies for any failure to make prompt payment. Enforcement by Lender of any security for the Indebtedness shall not constitute an election by Lender of remedies so as to preclude the exercise of any other right available to Lender.  Lender's receipt of any awards or proceeds under Sections 19 and 20 shall not operate to cure or waive any Event of Default.

25.           [INTENTIONALLY DELETED].

See Section 50.

26.           WAIVER OF STATUTE OF LIMITATIONS.

Borrower hereby waives the right to assert any statute of limitations as a bar to the enforcement of the lien of this Instrument or to any action brought to enforce any Loan Document.

27.           WAIVER OF MARSHALLING.

Notwithstanding the existence of any other security interests in the Mortgaged Property held by Lender or by any other party, Lender shall have the right to determine the order in which any or all of the Mortgaged Property shall be subjected to the remedies provided in this Instrument, the Note, any other Loan Document or applicable law.  Lender shall have the right to determine the order in which any or all portions of the Indebtedness are satisfied from the proceeds realized upon the exercise of such remedies.  Borrower and any party who now or in the future acquires a security interest in the Mortgaged Property and who has actual or constructive notice of this Instrument waives any and all right to require the marshalling of assets or to require that any of the Mortgaged Property be sold in the inverse order of alienation or that any of the Mortgaged Property be sold in parcels or as an entirety in connection with the exercise of any of the remedies permitted by applicable law or provided in this Instrument.

28.           FURTHER ASSURANCES.

Borrower shall execute, acknowledge, and deliver, at its sole cost and expense, all further acts, deeds, conveyances, assignments, estoppel certificates, financing statements, transfers and assurances as Lender may require from time to time in order to better assure, grant, and convey to

FANNIE MAE MULTIFAMILY SECURITY INSTRUMENT - TEXAS Form 4044 06/09

  

Page - 34

  

Lender the rights intended to be granted, now or in the future, to Lender under this Instrument and the Loan Documents.

29.           ESTOPPEL CERTIFICATE.

Within 10 days after a request from Lender, Borrower shall deliver to Lender a written statement, signed and acknowledged by Borrower, certifying to Lender or any person designated by Lender, as of the date of such statement, (i) that the Loan Documents are unmodified and in full force and effect  (or, if there have been modifications, that the Loan Documents are in full force and effect as modified and setting forth such modifications); (ii) the unpaid principal balance of the Note; (iii) the date to which interest under the Note has been paid; (iv) that Borrower is not in default in paying the Indebtedness or in performing or observing any of the covenants or agreements contained in this Instrument or any of the other Loan Documents (or, if the Borrower is in default, describing such default in reasonable detail); (v) whether or not there are then existing any setoffs or defenses known to Borrower against the enforcement of any right or remedy of Lender under the Loan Documents; and (vi) any additional facts requested by Lender.

30.           GOVERNING LAW; CONSENT TO JURISDICTION AND VENUE.

(a)           This Instrument, and any Loan Document which does not itself expressly identify the law that is to apply to it, shall be governed by the laws of the jurisdiction in which the Land is located (the "Property Jurisdiction").

(b)           Borrower agrees that any controversy arising under or in relation to the Note, this Instrument, or any other Loan Document shall be litigated exclusively in the Property Jurisdiction.  The state and federal courts and authorities with jurisdiction in the Property Jurisdiction shall have exclusive jurisdiction over all controversies which shall arise under or in relation to the Note, any security for the Indebtedness, or any other Loan Document.  Borrower irrevocably consents to service, jurisdiction, and venue of such courts for any such litigation and waives any other venue to which it might be entitled by virtue of domicile, habitual residence or otherwise.

31.           NOTICE.

(a)           All notices, demands and other communications ("notice") under or concerning this Instrument shall be in writing.  Each notice shall be addressed to the intended recipient at its address set forth in this Instrument, and shall be deemed given on the earliest to occur of (1) the date when the notice is received by the addressee; (2) the first Business Day after the notice is delivered to a recognized overnight courier service, with arrangements made for payment of charges for next Business Day delivery; or (3) the third Business Day after the notice is deposited in the United States mail with postage prepaid, certified mail, return receipt requested.  As used in this Section 31, the term "Business Day" means any day other than a Saturday, a Sunday or any other day on which Lender is not open for business.

FANNIE MAE MULTIFAMILY SECURITY INSTRUMENT - TEXAS Form 4044 06/09

  

Page - 35

  

(b)           Any party to this Instrument may change the address to which notices intended for it are to be directed by means of notice given to the other party in accordance with this Section 31.  Each party agrees that it will not refuse or reject delivery of any notice given in accordance with this Section 31, that it will acknowledge, in writing, the receipt of any notice upon request by the other party and that any notice rejected or refused by it shall be deemed for purposes of this Section 31 to have been received by the rejecting party on the date so refused or rejected, as conclusively established by the records of the U.S. Postal Service or the courier service.

(c)           Any notice under the Note and any other Loan Document which does not specify how notices are to be given shall be given in accordance with this Section 31.

32.           SALE OF NOTE; CHANGE IN SERVICER.

The Note or a partial interest in the Note (together with this Instrument and the other Loan Documents) may be sold one or more times without prior notice to Borrower.  A sale may result in a change of the Loan Servicer.  There also may be one or more changes of the Loan Servicer unrelated to a sale of the Note.  If there is a change of the Loan Servicer, Borrower will be given notice of the change.

33.           SINGLE ASSET BORROWER.

Until the Indebtedness is paid in full, Borrower (a) shall not acquire any real or personal property other than the Mortgaged Property and personal property related to the operation and maintenance of the Mortgaged Property;  (b) shall not operate any business other than the management and operation of the Mortgaged Property; and (c) shall not maintain its assets in a way difficult to segregate and identify.

34.           SUCCESSORS AND ASSIGNS BOUND.

This Instrument shall bind, and the rights granted by this Instrument shall inure to, the respective successors and assigns of Lender and Borrower.  However, a Transfer not permitted by Section 21 shall be an Event of Default.

35.           JOINT AND SEVERAL LIABILITY.

If more than one person or entity signs this Instrument as Borrower, the obligations of such persons and entities shall be joint and several.

36.           RELATIONSHIP OF PARTIES; NO THIRD PARTY BENEFICIARY.

FANNIE MAE MULTIFAMILY SECURITY INSTRUMENT - TEXAS Form 4044 06/09

  

Page - 36

  

(a)           The relationship between Lender and Borrower shall be solely that of creditor and debtor, respectively, and nothing contained in this Instrument shall create any other relationship between Lender and Borrower.

(b)           No creditor of any party to this Instrument and no other person shall be a third party beneficiary of this Instrument or any other Loan Document.  Without limiting the generality of the preceding sentence, (1) any arrangement (a "Servicing Arrangement") between the Lender and any Loan Servicer for loss sharing or interim advancement of funds shall constitute a contractual obligation of such Loan Servicer that is independent of the obligation of Borrower for the payment of the Indebtedness, (2) Borrower shall not be a third party beneficiary of any Servicing Arrangement, and (3) no payment by the Loan Servicer under any Servicing Arrangement will reduce the amount of the Indebtedness.

37.           SEVERABILITY; AMENDMENTS.

The invalidity or unenforceability of any provision of this Instrument shall not affect the validity or enforceability of any other provision, and all other provisions shall remain in full force and effect.  This Instrument contains the entire agreement among the parties as to the rights granted and the obligations assumed in this Instrument.  This Instrument may not be amended or modified except by a writing signed by the party against whom enforcement is sought.

38.           CONSTRUCTION.

The captions and headings of the sections of this Instrument are for convenience only and shall be disregarded in construing this Instrument.  Any reference in this Instrument to an "Exhibit" or a "Section" shall, unless otherwise explicitly provided, be construed as referring, respectively, to an Exhibit attached to this Instrument or to a Section of this Instrument.  All Exhibits attached to or referred to in this Instrument are incorporated by reference into this Instrument.  Any reference in this Instrument to a statute or regulation shall be construed as referring to that statute or regulation as amended from time to time.  Use of the singular in this Agreement includes the plural and use of the plural includes the singular.  As used in this Instrument, the term "including" means "including, but not limited to."

39.           LOAN SERVICING.

All actions regarding the servicing of the loan evidenced by the Note, including the collection of payments, the giving and receipt of notice, inspections of the Property, inspections of books and records, and the granting of consents and approvals, may be taken by the Loan Servicer unless Borrower receives notice to the contrary.  If Borrower receives conflicting notices regarding the identity of the Loan Servicer or any other subject, any such notice from Lender shall govern.

40.           DISCLOSURE OF INFORMATION.

FANNIE MAE MULTIFAMILY SECURITY INSTRUMENT - TEXAS Form 4044 06/09

  

Page - 37

  

Lender may furnish information regarding Borrower or the Mortgaged Property to third parties with an existing or prospective interest in the servicing, enforcement, evaluation, performance, purchase or securitization of the Indebtedness, including trustees, master servicers, special servicers, rating agencies, and organizations maintaining databases on the underwriting and performance of multifamily mortgage loans.  Borrower irrevocably waives any and all rights it may have under applicable law to prohibit such disclosure, including any right of privacy.

41.           NO CHANGE IN FACTS OR CIRCUMSTANCES.

All information in the application for the loan submitted to Lender (the "Loan Application") and in all financial statements, rent rolls, reports, certificates and other documents submitted in connection with the Loan Application are complete and accurate in all material respects.  There has been no material adverse change in any fact or circumstance that would make any such information incomplete or inaccurate.

42.           SUBROGATION.

If, and to the extent that, the proceeds of the loan evidenced by the Note are used to pay, satisfy or discharge any obligation of Borrower for the payment of money that is secured by a pre-existing mortgage, deed of trust or other lien encumbering the Mortgaged Property (a "Prior Lien"), such loan proceeds shall be deemed to have been advanced by Lender at Borrower's request, and Lender shall automatically, and without further action on its part, be subrogated to the rights, including lien priority, of the owner or holder of the obligation secured by the Prior Lien, whether or not the Prior Lien is released.

43.           ACCELERATION; REMEDIES.

At any time during the existence of an Event of Default, Lender, at Lender's option, may declare the Indebtedness to be immediately due and payable without further demand, and may invoke the power of sale and any other remedies permitted by Texas law or provided in this Instrument or in any other Loan Document.  Borrower acknowledges that the power of sale granted in this Instrument may be exercised by Lender without prior judicial hearing.  Lender shall be entitled to collect all costs and expenses incurred in pursuing such remedies, including attorneys' fees, costs of documentary evidence, abstracts and title reports.

If Lender invokes the power of sale, Lender may, by and through the Trustee, or otherwise, sell or offer for sale the Mortgaged Property in such portions, order and parcels as Lender may determine, with or without having first taken possession of the Mortgaged Property, to the highest bidder for cash at public auction.  Such sale shall be made at the courthouse door of the county in which all or any part of the Land to be sold is situated (whether the parts or parcel, if any, situated in different counties are contiguous or not, and without the necessity of having any Personalty present at such sale) on the first Tuesday of any month between the hours of 10:00 a.m. and 4:00 p.m., after advertising the time, place and terms of sale and that portion of the Mortgaged Property

FANNIE MAE MULTIFAMILY SECURITY INSTRUMENT - TEXAS Form 4044 06/09

  

Page - 38

  

to be sold by posting or causing to be posted written or printed notice of sale at least twenty-one (21) days before the date of the sale at the courthouse door of the county in which the sale is to be made and at the courthouse door of any other county in which a portion of the Land may be situated, and by filing such notice with the County Clerk(s) of the county(s) in which all or a portion of the Land may be situated, which notice may be posted and filed by the Trustee acting, or by any person acting for the Trustee, and Lender has, at least twenty-one (21) days before the date of the sale, served written or printed notice of the proposed sale by certified mail on each debtor obligated to pay the Indebtedness according to Lender’s records by the deposit of such notice, enclosed in a postpaid wrapper, properly addressed to such debtor at debtor’s most recent address as shown by Lender’s records, in a post office or official depository under the care and custody of the United States Postal Service.  The affidavit of any person having knowledge of the facts to the effect that such service was completed shall be prima facie evidence of the fact of service.

Trustee shall deliver to the purchaser at the sale, within a reasonable time after the sale, a deed conveying the Mortgaged Property so sold in fee simple with covenants of general warranty.  Borrower covenants and agrees to defend generally the purchaser’s title to the Mortgaged Property against all claims and demands.  The recitals in Trustee’s deed shall be prima facie evidence of the truth of the statements contained in those recitals.  Trustee shall apply the proceeds of the sale in the following order:  (a) to all reasonable costs and expenses of the sale, including reasonable Trustee’s fees and attorneys’ fees and costs of title evidence; (b) to the Indebtedness in such order as Lender, in Lender’s discretion, directs; and (c) the excess, if any, to the person or persons legally entitled to the excess.

If all or any part of the Mortgaged Property is sold pursuant to this Section 43, Borrower will be divested of any and all interest and claim to the Mortgaged Property, including any interest or claim to all insurance policies, utility deposits, bonds, loan commitments and other intangible property included as a part of the Mortgaged Property.  Additionally, after a sale of all or any part of the Land, Improvements, Fixtures and Personalty, Borrower will be considered a tenant at sufferance of the purchaser of the same, and the purchaser shall be entitled to immediate possession of such property.  If Borrower shall fail to vacate the Mortgaged Property immediately, the purchaser may and shall have the right, without further notice to Borrower, to go into any justice court in any precinct or county in which the Mortgaged Property is located and file an action in forcible entry and detainer, which action shall lie against Borrower or its assigns or legal representatives, as a tenant at sufferance.  This remedy is cumulative of any and all remedies the purchaser may have under this Instrument or otherwise.

In any action for a deficiency after a foreclosure under this Instrument, if any person against whom recovery is sought requests the court in which the action is pending to determine the fair market value of the Mortgaged Property, as of the date of the foreclosure sale, the following shall be the basis of the court’s determination of fair market value:

FANNIE MAE MULTIFAMILY SECURITY INSTRUMENT - TEXAS Form 4044 06/09

  

Page - 39

  

	
  

	
(a)

	
the Mortgaged Property shall be valued “as is” and in its condition as of the date of foreclosure, and no assumption of increased value because of post-foreclosure repairs, refurbishment, restorations or improvements shall be made;

	
  

	
(b)

	
any adverse effect on the marketability of title because of the foreclosure or because of any other title condition not existing as of the date of this Instrument shall be considered;

	
  

	
(c)

	
the valuation of the Mortgaged Property shall be based upon an assumption that the foreclosure purchaser desires a prompt resale of the Mortgaged Property for cash within a six month-period after foreclosure;

	
  

	
(d)

	
although the Mortgaged Property may be disposed of more quickly by the foreclosure purchaser, the gross valuation of the Mortgaged Property as of the date of foreclosure shall be discounted for a hypothetical reasonable holding period (not to exceed 6 months) at a monthly rate equal to the average monthly interest rate on the Note for the twelve months before the date of foreclosure;

	
  

	
(e)

	
the gross valuation of the Mortgaged Property as of the date of foreclosure shall be further discounted and reduced by reasonable estimated costs of disposition, including brokerage commissions, title policy premiums, environmental assessment and clean-up costs, tax and assessment, prorations, costs to comply with legal requirements and attorneys’ fees;

	
  

	
(f)

	
expert opinion testimony shall be considered only from a licensed appraiser certified by the State of Texas and, to the extent permitted under Texas law, a member of the Appraisal Institute, having at least five years’ experience in appraising property similar to the Mortgaged Property in the county where the Mortgaged Property is located, and who has conducted and prepared a complete written appraisal of the Mortgaged Property taking into considerations the factors set forth in this Instrument; no expert opinion testimony shall be considered without such written appraisal;

	
  

	
(g)

	
evidence of comparable sales shall be considered only if also included in the expert opinion testimony and written appraisal referred to in the preceding paragraph; and

	
  

	
(h)

	
an affidavit executed by Lender to the effect that the foreclosure bid accepted by Trustee was equal to or greater than the value of the Mortgaged Property determined by Lender based upon the factors and methods set forth in subparagraphs (a) through (g) above before the foreclosure shall constitute prima facie evidence that the foreclosure bid was equal to or greater than the fair market value of the Mortgaged Property on the foreclosure date.

FANNIE MAE MULTIFAMILY SECURITY INSTRUMENT - TEXAS Form 4044 06/09

  

Page - 40

  

Lender may, at Lender’s option, comply with these provisions in the manner permitted or required by Title 5, Section 51.002 of the Texas Property Code (relating to the sale of real estate) or by Chapter 9 of the Texas Business and Commerce Code (relating to the sale of collateral after default by a debtor), as those titles and chapters now exist or may be amended or succeeded in the future, or by any other present or future articles or enactments relating to same subject.  Unless expressly excluded, the Mortgaged Property shall include Rents collected before a foreclosure sale, but attributable to the period following the foreclosure sale, and Borrower shall pay such Rents to the purchaser at such sale.  At any such sale:

	
  

	
(a)

	
whether made under the power contained in this Instrument, Section 51.002, the Texas Business and Commerce Code, any other legal requirement or by virtue of any judicial proceedings or any other legal right, remedy or recourse, it shall not be necessary for Trustee to have physically present, or to have constructive possession of, the Mortgaged Property (Borrower shall deliver to Trustee any portion of the Mortgaged Property not actually or constructively possessed by Trustee immediately upon demand by Trustee) and the title to and right of possession of any such property shall pass to the purchaser as completely as if the property had been actually present and delivered to the purchaser at the sale;

	
  

	
(b)

	
each instrument of conveyance executed by Trustee shall contain a general warranty of title, binding upon Borrower;

	
  

	
(c)

	
the recitals contained in any instrument of conveyance made by Trustee shall conclusively establish the truth and accuracy of the matters recited in the Instrument, including nonpayment of the Indebtedness and the advertisement and conduct of the sale in the manner provided in this Instrument and otherwise by law and the appointment of any successor Trustee;

	
  

	
(d)

	
all prerequisites to the validity of the sale shall be conclusively presumed to have been satisfied;

	
  

	
(e)

	
the receipt of Trustee or of such other party or officer making the sale shall be sufficient to discharge to the purchaser or purchasers for such purchaser(s)’ purchase money, and no such purchaser or purchasers, or such purchaser(s)’ assigns or personal representatives, shall thereafter be obligated to see to the application of such purchase money or be in any way answerable for any loss, misapplication or nonapplication of such purchase money;

	
  

	
(f)

	
to the fullest extent permitted by law, Borrower shall be completely and irrevocably divested of all of Borrower’s right, title, interest, claim and demand whatsoever, either at law or in equity, in and to the property sold, and such sale shall be a perpetual bar to any claim to all or any part of the property sold, both at law and in

FANNIE MAE MULTIFAMILY SECURITY INSTRUMENT - TEXAS Form 4044 06/09

  

Page - 41

  

	
  

	
equity, against Borrower and against any person claiming by, through or under Borrower; and

	
  

	
(g)

	
to the extent and under such circumstances as are permitted by law, Lender may be a purchaser at any such sale.

44.           RELEASE.

Upon payment of the Indebtedness, Lender shall release this Instrument.  Borrower shall pay Lender’s reasonable costs incurred in releasing this Instrument.

45.           TRUSTEE.

	
  

	
(a)

	
Trustee may resign by giving of notice of such resignation in writing to Lender.  If Trustee shall die, resign or become disqualified from acting under this Instrument or shall fail or refuse to act in accordance with this Instrument when requested by Lender or if for any reason and without cause Lender shall prefer to appoint a substitute trustee to act instead of the original Trustee named in this Instrument or any prior successor or substitute trustee, Lender shall have full power to appoint a substitute trustee and, if preferred, several substitute trustees in succession who shall succeed to all the estate, rights, powers and duties of the original Trustee named in this Instrument.  Such appointment may be executed by an authorized officer, agent or attorney-in-fact of Lender (whether acting pursuant to a power of attorney or otherwise), and such appointment shall be conclusively presumed to be executed with authority and shall be valid and sufficient without proof of any action by Lender.

	
  

	
(b)

	
Any successor Trustee appointed pursuant to this Section shall, without any further act, deed or conveyance, become vested with all the estates, properties, rights, powers and trusts of the predecessor Trustee with like effect as if originally named as Trustee in this Instrument; but, nevertheless, upon the written request of Lender or such successor Trustee, the Trustee ceasing to act shall execute and deliver an instrument transferring to such successor Trustee, all the estates, properties, rights, powers and trusts of the Trustee so ceasing to act, and shall duly assign, transfer and deliver any of the property and monies held by the Trustee ceasing to act to the successor Trustee.

	
  

	
(c)

	
Trustee may authorize one or more parties to act on Trustee’s behalf to perform the ministerial functions required of Trustee under this Instrument, including the transmittal and posting of any notices.

46.           VENDOR’S LIEN; RENEWAL AND EXTENSION.

FANNIE MAE MULTIFAMILY SECURITY INSTRUMENT - TEXAS Form 4044 06/09

  

Page - 42

  

The Note is primarily secured by the Vendor’s Lien retained in the Deed, bearing the same date at this Instrument, conveying the Mortgaged Property to Borrower, which Vendor’s Lien has been assigned to Lender, this Instrument being additional security therefor.

47.           NO FIDUCIARY DUTY.

Lender owes no fiduciary or other special duty to Borrower.

48.           FIXTURE FILING.

This Instrument is also a fixture filing under the Uniform Commercial Code of Texas.

49.           ADDITIONAL PROVISIONS REGARDING ASSIGNMENT OF RENTS.

In no event shall the assignment of Rents or Leases in Section 3 and Section 4 cause the Indebtedness to be reduced by an amount greater than the Rents actually received by Lender and applied by Lender to the Indebtedness, whether before, during or after (i) an Event of Default, or (ii) a suspension or revocation of the license granted to Borrower in Section 3(c) with regard to the Rents.  Borrower and Lender specifically intend that the assignment of Rents and Leases in Section 3 and Section 4 is not intended to result in a pro tanto reduction of the Indebtedness.  The assignment of Rents and Leases in Section 3 and Section 4 is not intended to constitute a payment of, or with respect to, the Indebtedness and, therefore, Borrower and Lender specifically intend that the Indebtedness shall not be reduced by the value of the Rents and Leases assigned.  Such reduction shall occur only if, and to the extent that, Lender actually receives Rents pursuant to Section 3 and applies such Rents to the Indebtedness.  Borrower agrees that the value of the license granted with regard to the Rents equals the value of the absolute assignment of Rents to Lender.  The assignment of Rents contained in Section 3 shall terminate upon the release of this Instrument.

50.           LOAN CHARGES.

Borrower and Lender intend at all times to comply with the laws of the State of Texas governing the maximum rate or amount of interest payable on or in connection with the Indebtedness (or applicable United States federal law to the extent that it permits Lender to contract for, charge, take, reserve or receive a greater amount of interest than under Texas law).  If the applicable law is ever judicially interpreted so as to render usurious any amount payable under the Note, this Instrument or any other Loan Document, or contracted for, charged, taken, reserved or received with respect to the Indebtedness, or if acceleration of the maturity of the Indebtedness, or if any prepayment by Borrower results in Borrower having paid any interest in excess of that permitted by any applicable law, then Borrower and Lender expressly intend that all excess amounts collected by Lender shall be applied to reduce the unpaid principal balance of the Indebtedness (or, if the Indebtedness has been or would thereby be paid in full, shall be refunded to Borrower), and the provisions of the Note, this Instrument and the other Loan Documents immediately shall be deemed reformed and the amounts thereafter collectible under the Loan

FANNIE MAE MULTIFAMILY SECURITY INSTRUMENT - TEXAS Form 4044 06/09

  

Page - 43

  

Documents reduced, without the necessity of the execution of any new documents, so as to comply with any applicable law, but so as to permit the recovery of the fullest amount otherwise payable under the Loan Documents.  The right to accelerate the maturity of the Indebtedness does not include the right to accelerate any interest which has not otherwise accrued on the date of such acceleration, and Lender does not intend to collect any unearned interest in the event of acceleration.  All sums paid or agreed to be paid to Lender for the use, forbearance or detention of the Indebtedness shall, to the extent permitted by applicable law, be amortized, prorated, allocated and spread throughout the full term of the Indebtedness until payment in full so that the rate or amount of interest on account of the Indebtedness does not exceed the applicable usury ceiling.  Notwithstanding any provision contained in the Note, this Instrument or any other Loan Document that permits the compounding of interest, including any provision by which any accrued interest is added to the principal amount of the Indebtedness, the total amount of interest that Borrower is obligated to pay and Lender is entitled to receive with respect to the Indebtedness shall not exceed the amount calculated on a simple (i.e., noncompounded) interest basis at the maximum rate on principal amounts actually advanced to or for the account of Borrower, including all current and prior advances and any advances made pursuant to the Instrument or any other Loan Document (such as for the payment of Impositions and similar expenses or costs).

51.           PROPERTY AND LIABILITY INSURANCE — DELIVERY OF POLICY TO LENDER.

Notwithstanding the provisions of Section 19(b), Borrower shall not be required to deliver the original (or a duplicate original) of any renewal policy of insurance to Lender more than 15 days prior to the expiration date of the policy then held by Lender.

52.           ENTIRE AGREEMENT.

THIS INSTRUMENT, THE NOTE AND THE OTHER LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS.  THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.

FANNIE MAE MULTIFAMILY SECURITY INSTRUMENT - TEXAS Form 4044 06/09

  

Page - 44

  

53.           WAIVER OF TRIAL BY JURY.

BORROWER AND LENDER EACH (A) COVENANTS AND AGREES NOT TO ELECT A TRIAL BY JURY WITH RESPECT TO ANY ISSUE ARISING OUT OF THIS INSTRUMENT OR THE RELATIONSHIP BETWEEN THE PARTIES AS BORROWER AND LENDER THAT IS TRIABLE OF RIGHT BY A JURY AND (B) WAIVES ANY RIGHT TO TRIAL BY JURY WITH RESPECT TO SUCH ISSUE TO THE EXTENT THAT ANY SUCH RIGHT EXISTS NOW OR IN THE FUTURE.  THIS WAIVER OF RIGHT TO TRIAL BY JURY IS SEPARATELY GIVEN BY EACH PARTY, KNOWINGLY AND VOLUNTARILY WITH THE BENEFIT OF COMPETENT LEGAL COUNSEL.

ATTACHED EXHIBITS.  The following Exhibits are attached to this Instrument:

	
  

	
|X|

	
Exhibit A

	
Description of the Land (required).

	
  

	
|X|

	
Exhibit B

	
Modifications to Instrument (Seniors Housing)

	
  

	
|X|

	
Exhibit C

	
Modifications to Instrument

FANNIE MAE MULTIFAMILY SECURITY INSTRUMENT - TEXAS Form 4044 06/09

  

Page - 45

  

IN WITNESS WHEREOF, Borrower has signed and delivered this Instrument or has caused this Instrument to be signed and delivered by its duly authorized representative.

EMERITOL DOWLEN OAKS LLC, a Delaware limited liability company

	
  

	
By:

	
Batus, LLC, a Delaware limited liability company

	
  

	
Its:

	
Sole Member

	
  

	
By:

	
Summerville Senior Living, Inc., a Delaware corporation

	
  

	
Its:

	
Administrative Member

By:       /s/ Eric Mendelsohn

Name:  Eric Mendelsohn

Title:    Senior Vice President Corporate Development

 

 

 

STATE OF  Washington                    )

 

 

) ss

 

 

COUNTY OF  King            )

 

 

This instrument was acknowledged before me on October 15, 2010, by Eric Mendelsohn, the Senior Vice President Corporate Development of Summerville Senior Living, Inc., a Delaware corporation, the Administrative Member of Batus, LLC, a Delaware limited liability company, the Sole Member of EMERITOL DOWLEN OAKS LLC, a  Delaware limited liability company, on behalf of said limited liability company.

 

/s/ Melanie Jule Pennington

Notary Public

Printed Name: Melanie Jule Pennington

My Commission Expires:07/09/11

FANNIE MAE MULTIFAMILY SECURITY INSTRUMENT - TEXAS Form 4044 06/09

  

Page - 46

  

KEY PRINCIPAL

Key Principal

Name:                          Emeritus Corporation

Address:                      3131 Elliott Avenue, Suite 500

      Seattle, Washington 98121

Key Principal

Name:                          Daniel R. Baty

Address:                      3131 Elliott Avenue, Suite 500

      Seattle, Washington 98121

FANNIE MAE MULTIFAMILY SECURITY INSTRUMENT - TEXAS Form 4044 06/09

  

Page - 47

  

EXHIBIT A

DESCRIPTION OF THE LAND

 

Lot Number One (1), Block (2), of DOWLEN COMMERCIAL PLAZA, an addition to the City of Beaumont, Jefferson County, Texas, according to the map or plat thereof, of record in Volume 15, Page 286, of the Map Records of said County and State.

 

 

 

 

	
OPPENHEIMER: 2836220 v01 10/22/2010

 

FANNIE MAE MULTIFAMILY SECURITY INSTRUMENT - TEXAS Form 4044 06/09

  

Page - A - 1

  

EXHIBIT B

MODIFICATIONS TO INSTRUMENT

(Seniors Housing)

The following modifications are made to the text of the Instrument that precedes this Exhibit:

1.           Section 1 of the Instrument is hereby amended to add the following paragraphs at the end thereof:

	
  

	
"(aa)

	
"Accounts" means all money, funds, investment property, accounts, general intangibles, deposit accounts, chattel paper, documents, instruments, judgments, claims, settlements of claims, causes of action, refunds, rebates, reimbursements, reserves, deposits, subsidies, proceeds, products, rents and profits, now or hereafter arising, received or receivable, from or on account of the Borrower's  ownership and/or, if applicable, management and operation of the Mortgaged Property as a Seniors Housing Facility."

"(bb)           "Contract(s)" means any contract or other agreement for the provision of goods or services at or otherwise in connection with the operation, use or management of the Mortgaged Property, including cash deposited to secure performance by parties of their obligations."

"(cc)           "Inventory" means all right, title and interest of Borrower in and to inventory of every type and description, now owned and hereafter acquired, including, without limitation, raw materials, work in process, finished goods, goods returned or repossessed or stopped in transit, goods used for demonstration, promotion, marketing or similar purposes, property in, on or with which any of the foregoing may be stored or maintained, all materials and supplies usable or used or consumed at the Mortgaged Property, and all documents and documents of title relating to any of the foregoing, together with all present and future parts, additions, accessories, attachments, accessions, replacements, replacement parts and substitutions therefore or thereto in any form whatsoever."

"(dd)     "License(s)" means any operating licenses, certificates of occupancy, health department licenses, food service licenses, certificates of need, business licenses, permits, registrations, certificates, authorizations, approvals, and similar documents required by applicable laws and regulations for the operation of the Mortgaged Property as a Seniors Housing Facility, including replacements and additions thereto."

Seniors Housing Modifications to Instrument Form 4075 05-05 2000-2005 Fannie Mae

  

Page - B - 1

  

"(ee)           "Operating Lease" means any master lease, operating agreement, operating lease or similar document, preapproved by Lender, under which control of the occupancy, use, operation, maintenance and administration of the Mortgaged Property as a Seniors Housing Facility has been granted to any individual or entity other than the Borrower."

"(ff)           "Operator" means any qualified and licensed (if so required by the applicable laws of the Property Jurisdiction) individual or entity obligated under the terms of an Operating Lease with the Borrower."

"(gg)         "Seniors Housing Facility" means a residential housing facility which qualifies as "housing for older persons" under the Fair Housing Amendments Act of 1988 and the Housing for Older Persons Act of 1995 comprised of assisted living units and Alzheimer’s/dementia care units.”

"(hh)           "Third Party Payments" means all payments and the rights to receive such payments from Medicaid programs or similar federal, state or local programs, boards, bureaus or agencies, and from residents, private insurers or others."

2.           Section 1(g) of the Instrument is hereby amended to add the following sentence at the end thereof:

"The term "Hazardous Materials" shall also include any medical products or devices, including, but not limited to, those materials defined as "medical waste" or "biological waste" under relevant statutes or regulations pertaining to any Hazardous Materials Law."

3.            Section 1(o) of the Instrument is hereby amended to add the following sentence at the end thereof:

"The term "Leases" shall also include any residency, occupancy, admission and care agreements pertaining to residents of the Mortgaged Property and any Operating Lease."

	
4.  

	
Section 1(s) of the Instrument is hereby amended:

	
                         A)  

	
to revise subsection (14) to read as follows:

“(14)           all resident and tenant security deposits, entrance fees, application fees, processing fees, community fees and any other amounts or fees

Seniors Housing Modifications to Instrument Form 4075 05-05 2000-2005 Fannie Mae

  

Page - B - 2

  

deposited by any resident or tenant upon execution of a Lease which have not been forfeited by the resident or tenant; and”

and

 B)           to add the following subsections (16), (17), (18) and (19) at the end thereof

"(16)           all payments due, or received, from residents, second party charges added to base rental income, base and/or additional meal sales, commercial operations located on the Mortgaged Property or provided as a service to the residents of the Mortgaged Property, rental from guest suites, seasonal lease charges, furniture leases, and laundry services, and any and all other services provided to residents in connection with the Mortgaged Property, and any and all other personal property on the Mortgaged Property, excluding personal property belonging to residents of the Mortgaged Property (other than Personalty belonging to Borrower);"

"(17)           subject to applicable law and regulations, all Licenses and Contracts relating to the operation and authority to operate the Mortgaged Property as a Seniors Housing Facility;"

"(18)           all Third Party Payments arising from the operation of the Mortgaged Property as a Seniors Housing Facility, utility deposits, unearned premiums, accrued, accruing or to accrue under insurance policies now or hereafter obtained by the Borrower and all proceeds of any conversion of the Mortgaged Property or any part thereof including, without limitation, proceeds of hazard, property, flood and title insurance and all awards and compensation for the taking by eminent domain, condemnation or otherwise, of all or any part of the Mortgaged Property or any easement therein;" and

"(19)           all of Borrower's Accounts and Inventory."

5.   Section 1(v) of the Instrument is hereby amended to add the following

sentence at the end thereof:

"The term "Personalty" shall also include all personal property currently owned or acquired by Borrower after the date hereof used in connection with the ownership and operation of the Mortgaged Property as a Seniors Housing Facility, all kitchen or restaurant supplies and facilities, dining room supplies and facilities, medical supplies and facilities, leasehold improvements, or related furniture and equipment, together with all present and future parts, additions, accessories, replacements,

Seniors Housing Modifications to Instrument Form 4075 05-05 2000-2005 Fannie Mae

  

Page - B - 3

  

attachments, accessions, replacement parts and substitutions therefore, and the proceeds thereof (cash and non-cash including insurance proceeds) and any other equipment, supplies or furniture owned by Borrower and leased to any third party service provider or any Operator under any Operating Lease, use, occupancy, or lease agreements, as well as all Licenses, to the extent permitted by applicable law and regulations, including replacements and additions thereto."

 

6.            Section 1(x) of the Instrument is hereby amended to provide as follows:

"Rents" means all rents (whether from residential or non-residential space), revenues and other income of the Land or the Improvements, including rent paid under any Operating Lease, subsidy payments received from any sources (including but not limited to payments under any Housing Assistance Payments Contract), parking fees, laundry and vending machine income and fees and charges for food, healthcare, and other services provided at the Mortgaged Property, whether now due, past due, or to become due, security deposits, entrance fees, application fees, processing fees, community fees and any other amounts or fees forfeited by any resident or tenant, together with and including all proceeds from any private insurance for residents to cover rental charges and charges for services at or in connection with the Mortgaged Property, and the right to Third Party Payments due for the rents or services of residents at the Mortgaged Property.  Each of the foregoing shall be considered "Rents" for the purposes of the actions and rights set forth in Section 3 of this Instrument.

 

7.           Section 3(b) of the Instrument is hereby amended to add the following sentence at the end thereof:

"After an Event of Default, Lender is further authorized to give notice to all Third Party Payment payors (other than governmental entities) at Lender's option, instructing them to pay all Third Party Payments which would be otherwise paid to Borrower to Lender, to the extent permitted by law.  In the case of Third Party Payments from Third Party Payment payors which are governmental entities, including Medicaid, Lender and Borrower have executed a Depositary Agreement of even date herewith which establishes special procedures for the receipt and disposition of the Third Party Payments."

 

8.           Section 3(c) of the Instrument is hereby amended to add the following sentence at the end thereof:

“In order to induce Lender to lend funds hereunder, Borrower (together with on behalf of itself and any Operator or manager of the Mortgaged Property) hereby agrees upon the occurrence of an Event of Default and at the option of Lender,

 

Seniors Housing Modifications to Instrument Form 4075 05-05 2000-2005 Fannie Mae

  

Page - B - 4

  

that it shall provide, or shall cause the Operator to continue to provide all necessary services required under any Operating Lease or applicable licensing or regulatory requirements subject, however, to Lender reimbursing Operator from available revenues generated from the Mortgaged Property to the extent in Lender’s possession or under Lender’s control if and to the extent necessary to cover the actual out-of-pocket costs of such services (exclusive of fees to Operator) provided that Operator or Borrower submits evidence of payment of such costs for review by Lender in form and substance acceptable to Lender, and shall fully cooperate with Lender and any receiver as may be appointed by a court, in performing these services and agrees to arrange for an orderly transition to a replacement operator, manager or provider of the necessary services, and to execute promptly all applications, assignments, consents and documents requested by Lender to facilitate such transition.”

 

9.          The first sentence in Section 4(b) of the Instrument is hereby amended to add the following at the end thereof:

 

 

", with the exception of any Operating Lease."

 

10.          The last sentence in Section 4(e) of the Instrument is hereby amended to state as follows:

 

"If customary in the applicable market, residential Leases with a month-to-month term or with terms of less than six months shall be permitted with Lender's prior written consent."

 

11.          The first sentence in Section 4(f) of the Instrument is hereby amended to add the following at the end thereof:

"with the exception of any Operating Lease which has previously been approved by Lender."

 

	
12.  

	
Section 4 of the Instrument is hereby amended to add the following as Section 4(h):

"Any Operating Lease is and shall be subject and subordinate in all respects to the liens, terms, covenants and conditions of the Instrument and the other Loan Documents, and to all renewals, modifications, consolidations, replacements and extensions thereof, and to all advances heretofore made or which may hereafter be made pursuant to the Instrument (including all sums advanced for the purposes of (x) protecting or further securing the lien of the Instrument, curing defaults by

 

Seniors Housing Modifications to Instrument Form 4075 05-05 2000-2005 Fannie Mae

  

Page - B - 5

  

Borrower under the Loan Documents or for any other purposes expressly permitted by the Instrument or (y) constructing, renovating, repairing, furnishing, fixturing or equipping the Mortgaged Property."

 

	
13.  

	
Section 11 of the Instrument is hereby amended to add the following sentences at the end thereof:

“Borrower further covenants and agrees that it shall not permit more than 20% of its effective gross income to be derived from units relying on Medicaid payments.  If by reason of applicable law or regulation more than 20% of effective gross income becomes derived from units relying on Medicaid payments, the Borrower shall diligently and expeditiously take all reasonable steps necessary to bring the Mortgaged Property into compliance with the preceding sentence to the extent permissible by applicable law or regulation.  Borrower further covenants and agrees that it shall limit the use and occupancy of the Mortgaged Property to residents that meet the standards for independent living or assisted living, and that it shall not accept residents that require skilled nursing care or, permit residents requiring skilled nursing care to remain at the Mortgaged Property as a routine matter.”

 

14.         Section 12(a) of the Instrument is hereby amended to add the following at the end thereof:

"and, (5) payments for any required licensing fees, permits, or other expenses related to the operation of the Mortgaged Property as a Seniors Housing Facility by or on behalf of the Lender, any fines or penalties that may be assessed against the Mortgaged Property, any costs incurred to bring the Mortgaged Property into full compliance with applicable codes and regulatory requirements, and any fees or costs related to Lender's employment of any operator or service provider for the Mortgaged Property."

 

15.           Section 14(b) of the Instrument is hereby deleted in its entirety and replaced with the following:

 

"(b)            Subject to federal, state and local laws and regulations applicable to resident, and tenant privacy, including but not limited to the Health Insurance Portability and Accountability Act (“HIPAA”) (collectively the “Privacy Laws”), Borrower shall furnish or cause to be furnished to Lender all of the following:"

 

Seniors Housing Modifications to Instrument Form 4075 05-05 2000-2005 Fannie Mae

  

Page - B - 6

  

	
  

	
"(1)

	
within 30 45 days after the end of each fiscal quarter, a statement of income and expenses for Borrower's or any Operator's operation of the Mortgaged Property for that quarter, a statement of changes in financial position of Borrower relating to the Mortgaged Property for that quarter and a balance sheet showing all assets and liabilities of Borrower relating to the Mortgaged Property as of the end of that quarter;"

	
  

	
“(2)

	
within 90 days after the end of each twelve consecutive month fiscal year, a statement of income and expenses for Borrower’s or any Operator’s operation of the Mortgaged Property for that fiscal year, prepared in accordance with generally accepted accounting principles (“GAAP”), a statement of changes in financial position of Borrower relating to the Mortgaged Property for that fiscal year, and a balance sheet showing all assets and liabilities of Borrower relating to the Mortgaged Property as of the end of that fiscal year;”

	
  

	
“(3)

	
within 30 days after the end of each quarter of Borrower, and at any other time upon Lender's request, a rent schedule for the Mortgaged Property showing the name of each resident and tenant, and for each resident and tenant, the space occupied, the lease expiration date, the rent payable for the current month, the date through which rent has been paid, any income attributable to additional resident services, and any related information requested by Lender;"

	
  

	
"(4)

	
within 120 days after the end of each fiscal year of Borrower, and at any other time upon Lender's request, an accounting of all security deposits held pursuant to all Leases, including the name of the institution (if any) and the names and identification numbers of the accounts (if any) in which such security deposits are held and the name of the person to contact at such financial institution, along with any authority or release necessary for Lender to access information regarding such accounts;"

	
  

	
"(5)

	
within 120 days after the end of each fiscal year of Borrower, and at any other time upon Lender's request, a statement that identifies all owners of any interest in Borrower and the interest held by each, if Borrower is a corporation, all officers and directors of Borrower, and if Borrower is a limited liability company, all managers who are not members;"

Seniors Housing Modifications to Instrument Form 4075 05-05 2000-2005 Fannie Mae

  

Page - B - 7

  

	
  

	
"(6)

	
upon Lender's request, a monthly property management report for the Mortgaged Property, showing the number of inquiries made and rental applications received from residents or prospective residents and deposits received from residents and any other information requested by Lender;"

	
  

	
"(7)

	
if required by Lender, a statement of income and expense for the Mortgaged Property for the prior month or quarter;"

 

	
  

	
"(8)

	
within 10 days of Borrower's or Operator’s, as applicable, receipt, copies of all inspection reports, surveys, reviews, and certifications prepared by, for, or on behalf of any licensing or regulatory authority relating to the Mortgaged Property and any legal actions, orders, notices, or reports relating to the Mortgaged Property issued by the applicable regulatory or licensing authorities;"

 

	
  

	
"(9)

	
upon the request of Lender, copies of all reports relating to the services and operations of the Mortgaged Property, including, if applicable, Medicaid cost reports and records relating to account balances due to or from Medicaid or any private insurer; and"

 

	
  

	
“(10)

	
within 10 days of submission by Borrower, copies of all incident reports submitted to any liability insurance carrier or any elderly affairs, regulatory or licensing authority.”

 

	
  

	
16.

	
Section 17(a)(5) is hereby amended to state the following:

 

"shall provide for professional management of the Mortgaged Property as a Seniors Housing Facility either by Borrower, an Operator under an Operating Lease approved by Lender in writing, or a management company engaged either by the Borrower or any Operator under a Contract approved by Lender in writing."

 

 17.           Section 17(a) of the Instrument is hereby amended to add the following sentence at the end thereof:

 

"Borrower further covenants and agrees that it shall maintain and operate, or shall cause Operator to maintain and operate, the Mortgaged Property as a Seniors Housing Facility at all times in accordance with the standards required by any applicable Licenses and as required by any regulatory authority, that it shall maintain, or shall cause Operator to maintain, in good standing all Licenses, and that it shall renew and extend or shall cause Operator to renew and extend all such required Licenses, and shall not fail to take any action necessary to keep all such

Seniors Housing Modifications to Instrument Form 4075 05-05 2000-2005 Fannie Mae

  

Page - B - 8

  

Licenses in good standing and full force and effect.  Borrower will immediately provide Lender with any notice or order of a violation which may otherwise have an adverse impact on the Mortgaged Property, its operations or its compliance with licensing and regulatory requirements."

 

18.   Section 17 of the Instrument is hereby amended to add the following as subsection (c):

"Borrower and/or Operator has entered into the Contracts previously identified to Lender for the provision of goods or services, at or otherwise in connection with the ownership, operation, use or management of the Mortgaged Property.  Borrower and/or Operator may in the future enter into Contracts for the provision of additional goods or services at or otherwise in connection with the ownership, operation, use or management of the Mortgaged Property.  Until Lender gives written notice to Borrower of Lender's exercise of its rights under this Instrument, Borrower and/or Operator shall have all rights, power and authority granted to Borrower and/or Operator under any Contract (except as otherwise limited by this subsection or any other provision of this Instrument), including the right, power and authority to modify the terms of any Contract or extend or terminate any Contract, with the exception of any Operating Lease.  Upon the occurrence of an Event of Default and at the option of Lender, the permission given to Borrower and/or Operator pursuant to the preceding sentence to exercise all rights, power and authority under Contracts shall terminate.  Upon Lender's delivery of notice to Borrower of an Event of Default, Lender shall immediately have all rights, powers and authority granted to Borrower under any Contract, including the right, power and authority to modify the terms of, extend or terminate any such Contract.  Borrower hereby represents and warrants and agrees with Lender that:  (1) except as otherwise disclosed to Lender, the Contracts are assignable and no previous assignment of Borrower's interest in the Contracts has been made; (2) the Contracts are in full force and effect in accordance with their respective terms and there are no defaults thereunder; (3) Borrower shall fully perform all of its obligations under the Contracts, and Borrower agrees not to amend, modify, (A) assign, sell, pledge, transfer, mortgage or otherwise encumber its interests in any of the Contracts to anyone other than Lender so long as this Instrument is in effect, or (B)  amend or modify any Contract the average annual consideration of which, directly or indirectly, is at least $20,000.00 or consent to any transfer, assignment or other disposition thereof without the written approval of Lender; and (4) each Contract entered into by Borrower subsequent to the date hereof, the average annual consideration of which, directly or indirectly, is at least $20,000, shall provide:  (i) that it shall be terminable for cause; and (ii) that it shall be terminable, at Lender's option, upon the occurrence of an Event of Default.

Seniors Housing Modifications to Instrument Form 4075 05-05 2000-2005 Fannie Mae

  

Page - B - 9

  

 

19.           Section 18(b) of the Instrument is hereby amended to add the following sentence at the end thereof:

"Prohibited Activities and Conditions also shall not include the safe and lawful use and storage of medical products and devices customarily used in the operation of a Seniors Housing Facility."

20.           Section 19(c) is hereby amended to provide as follows:

 

"Borrower shall maintain or cause any Operator to maintain at all times commercial professional liability and general liability insurance, workers' compensation insurance, and such other insurance as Lender may require from time to time.”

 

21.           Section 21(a) of the Instrument is hereby amended to add the following Sections (8) and (9) at the end thereof:

"(8)    a Transfer or change in the holder of the Licenses authorizing the Mortgage Property to operate as a Seniors Housing Facility other than to Borrower or in connection with a Lender approved change in the Operator; and"

 

"(9)           a Transfer of the Borrower's or any Operator's respective interest(s) in any Operating Lease other than in favor of Lender as security for the obligations of Borrower under the loan secured by this Instrument."

 

22.           Section 22 of the Instrument is hereby amended to add the following as Sections 22 (g), (h), (i) and (j):

"(g)           any failure by Borrower, Operator or any manager (as applicable) to comply with the use and licensing requirements set forth in Sections 10 and 11”;

 

"(h)           any loss by Borrower, Operator or any manager (as applicable) of any License or other legal authority necessary to operate the Mortgaged Property as a Seniors Housing Facility, or any failure by Borrower, Operator or any manager (as applicable) to comply strictly with any consent order or decree or to correct, within the time deadlines set by any federal, state or local licensing agency, any deficiency where such failure results, or under applicable laws and regulations, is reasonably likely to result, in an action by such agency with respect to the Mortgaged Property that may have a material adverse effect on the income and operations of the Mortgaged Property or Borrower's interest in the Mortgaged

 

Seniors Housing Modifications to Instrument Form 4075 05-05 2000-2005 Fannie Mae

  

Page - B - 10

  

Property, including, without limitation, a termination, revocation or suspension of any applicable Licenses, necessary for the operation of the Mortgaged Property as a Seniors Housing Facility";

 

 

"(i)           if, without the consent of Lender, Borrower, Operator or any manager (as applicable):

 

	
 

	
“(i)

	
ceases to operate the Mortgaged Property as a Seniors Housing Facility;”

 

	
  

	
“(ii)

	
ceases to provide such kitchens, separate bathrooms, and areas for eating, sitting and sleeping in each independent living or assisted living unit or at a minimum, central bathing facilities for Alzheimer’s/dementia care, as are provided as of the date of this Instrument;”

 

	
  

	
“(iii)

	
ceases to provide other facilities and services normally associated with independent living or assisted living units, including, without limitation, (A) central dining services providing up to three meals per day, (B) periodic housekeeping, (C) laundry services, (D) customary transportation services, and (E) social activities;”

 

	
  

	
“(iv)

	
provides or contracts for skilled nursing care for any of the units;”

 

	
  

	
“(v)

	
leases or holds available for lease to commercial tenants non-residential space (i.e., space other than the units, dining areas, activity rooms, lobby, parlors, kitchen, mailroom, marketing/management offices) exceeding ten percent (10%) of the net rental area; or”

 

	
  

	
“(vi)

	
takes any action or permits to exist any condition that causes the Mortgaged Property to be no longer classified as housing for older persons pursuant to the Fair Housing Amendments Act of 1988 and the Housing for Older Persons Act of 1995”; and

 

“(j)           a default under any Operating Lease or under the Subordination, Assignment and Security Agreement executed by Borrower, Operator and Lender in connection with this Loan which continues beyond any applicable cure period, or the termination of any Operating Lease without Lender's prior written approval."

 

Seniors Housing Modifications to Instrument Form 4075 05-05 2000-2005 Fannie Mae

  

Page - B - 11

  

23.           The former Sections 22(g), (h) and (i) are hereby amended to be Sections 22 (k), (l) and (m), respectively and are amended to read as follows:

 

"(k)           any failure by Borrower to perform any of its obligations under this Instrument (other than those specified in Sections 22(a) through (j)), as and when required, which continues for a period of 30 days after notice of such failure by Lender to Borrower, but no such notice or grace period shall apply in the case of any such failure which could, in Lender's judgment, absent immediate exercise by Lender of a right or remedy under this Instrument, result in harm to Lender, impairment of the Note or this Instrument or any other security given under any other Loan Document;"

 

"(l)           any failure by Borrower to perform any of its obligations as and when required under any Loan Document other than this Instrument which continues beyond the applicable cure period, if any, specified in that Loan Document; and"

 

"(m)           any exercise by the holder of any other debt instrument secured by a mortgage, deed of trust or deed to secure debt on the Mortgaged Property of a right to declare all amounts due under that debt instrument immediately due and payable."

 

24.           Section 43 of the Instrument is hereby amended to add the following sentences at the end thereof:

"In addition to the remedies set forth herein and elsewhere in this Instrument, upon an Event of Default Lender shall be entitled to mandate the use of a lockbox bank account or other depositary account, to be maintained under the control and supervision of Lender, for all income of the Mortgaged Property, including, but not limited to, Rents, service charges, insurance payments and Third Party Payments.  Lender may, upon an Event of Default, cause the removal of Borrower, Operator or any manager (as applicable) from any Mortgaged Property operations.  Until such time as Lender has located a replacement operator, Borrower, the acting Operator or manager shall continue to provide all required services to maintain the Mortgaged Property in full compliance with all licensing and regulatory requirements as a Seniors Housing Facility, subject, however to Lender reimbursing Operator from available revenues generated from the Mortgaged Property to the extent in Lender’s possession or under Lender’s control if and to the extent necessary to cover the actual out-of-pocket costs of such services (exclusive of fees to Operator) provided that Operator or Borrower

 

Seniors Housing Modifications to Instrument Form 4075 05-05 2000-2005 Fannie Mae

  

Page - B - 12

  

submits evidence of payment of such costs for review by Lender in form and substance acceptable to Lender.  Borrower acknowledges that its failure to perform or to cause the performance of this service shall constitute a form of waste of the Mortgaged Property, causing irreparable harm to Lender and the Mortgaged Property, and shall constitute sufficient cause for the appointment of a receiver."

 

25.           The following new Section is added to the Instrument after the last numbered Section and there are no Sections appearing between the last numbered Section and the numbered Section appearing below:

"49.           BORROWER'S REPRESENTATIONS AND WARRANTIES.  In addition to any other representations and warranties contained in this Instrument, Borrower hereby represents and warrants to Lender as follows:"

“(a)           The Mortgaged Property is duly licensed as an Assisted Living Facility and Borrower or Operator is in all respects legally authorized to operate the Mortgaged Property as a Seniors Housing Facility, under the applicable laws of the Property Jurisdiction."

"(b)           Borrower or Operator (with respect to its operations at the Mortgaged Property), as applicable, and the Mortgaged Property (and the operation thereof) are in compliance in all material respects with the applicable provisions of all laws, statutes, regulations, ordinances, orders, standards, restrictions and rules of any federal, state or local government or quasi-government body, agency, board or authority having jurisdiction over the operation of the Mortgaged Property, including, without limitation: (i) health care and fire safety codes; (ii) design and construction requirements, (iii) laws regulating the handling and disposal of medical or biological waste; (iv) the applicable provisions of Seniors Housing Facility laws, rules, regulations and published interpretations thereof to which the Borrower or the Mortgaged Property is subject; (v) privacy, security and billing standards such as those set forth in HIPAA, and (vi) all criteria established to classify the Mortgaged Property as housing for older persons under the Fair Housing Amendments Act of 1988 and the Housing for Older Persons Act of 1995;"

 

"(c)           If required, Borrower or Operator (with respect to its operations at the Mortgaged Property) has a current provider agreement under any and all applicable federal, state and local laws for reimbursement: (a) to a Seniors Housing Facility; or (b) for other type of care provided at such facility.  There is no decision not to renew any provider agreement related to the Mortgaged

 

Seniors Housing Modifications to Instrument Form 4075 05-05 2000-2005 Fannie Mae

  

Page - B - 13

  

Property, nor is there any action pending or threatened to impose alternative, interim or final sanctions with respect to the Mortgaged Property;"

 

"(d)           Borrower or Operator (with respect to its operations at the Mortgaged Property), as applicable, and the Mortgaged Property are not subject to any proceeding, suit or investigation by any federal, state or local government or quasi-government body, agency, board authority or any other administrative or investigative body which may result in the imposition of a fine or an alternative, interim or final sanction, or which would have a material adverse effect on Borrower or the operation of the Mortgaged Property, or which would result in the appointment of a receiver or manager or would result in the revocation, transfer, surrender, suspension or other impairment of the Licenses for the Mortgaged Property to operate as a Seniors Housing Facility;"

 

"(e)           Upon Lender's request and subject to Privacy Laws, copies of resident care agreements and resident occupancy agreements shall be provided to Lender.  All resident records at the Mortgaged Property are true and correct in all material respects;"

 

"(f)           Neither the execution and delivery of the Note, the Instrument or the Loan Documents, Borrower's or Operator’s, as applicable, performance thereunder, nor the recordation of the Instrument will adversely affect the Licenses necessary for the operation of the Mortgaged Property as a Seniors Housing Facility in the Property Jurisdiction;"

 

"(g)           Neither Borrower nor Operator (with respect to its operations at the Mortgaged Property) is not a participant in any federal program whereby any federal, state or local, government or quasi-governmental body, agency, board or other authority may have the right to recover funds by reason of the advance of federal funds.  Borrower has received no notice, and is not aware of any violation by the Mortgaged Property or the operation thereof of applicable antitrust laws of any federal, state or local, government or quasi-government body, agency, board or other authority; and,"

 

"(h)           Except as otherwise specifically disclosed to the Lender in writing, as of the date hereof in the event any existing Operating Lease or management agreement is terminated or Lender acquires the Mortgaged Property through foreclosure or otherwise, neither Borrower, Lender, any subsequent operator or manager, nor any subsequent purchaser (through foreclosure or otherwise) must obtain a certificate of need from any applicable state health care regulatory

 

Seniors Housing Modifications to Instrument Form 4075 05-05 2000-2005 Fannie Mae

  

Page - B - 14

  

authority or agency (other than giving such notice required under the applicable state law or regulation) prior to applying for any applicable License necessary for the operation of the Mortgaged Property as a Seniors Housing Facility, provided that no service or unit complement is changed."

 

26.           “Upon the occurrence of a Transfer pursuant to the provisions of Section 21(c) of the Instrument (except with respect to the one-time Transfer to which Lender has consented as provided in Section 21(f) of the Instrument), the foregoing modifications to the text of the Senior Housing Modifications to Instrument in this Exhibit B as crossed out and underlined in Sections 1, 8, 15, 17, 18, 21, 24 and 25  of this Exhibit B shall be null and void and, with or without further execution by any party to the Senior Housing Modifications to Instrument, the original terms of the Senior Housing Modifications to Instrument without the foregoing modifications shall apply to any transferee.”

 

27.           All capitalized terms used in this Exhibit not specifically defined herein shall have the meanings set forth in the text of the Instrument that precedes this Exhibit.

Seniors Housing Modifications to Instrument Form 4075 05-05 2000-2005 Fannie Mae

  

Page - B - 15

  

Initial Page to Exhibit B Modifications to Instrument

BORROWER'S INITIALS: /s/ EM

Seniors Housing Modifications to Instrument Form 4075 05-05 2000-2005 Fannie Mae

  

Page - B - 16

  

EXHIBIT C

MODIFICATIONS TO INSTRUMENT

The following modifications are made to the text of the Instrument that precedes this Exhibit:

	
1.

	
Section 1(s)(15) is amended by adding the following to the end thereof:

“excluding the trademark and/or tradename “Emeritus” and any variation thereof”

	
2.

	
Section 4(e) is modified by adding the words “Subject to all applicable Privacy Laws (as hereinafter defined),” at the beginning of the first sentence.

3.           Section 4(f) is amended in its entirety to read as follows:

“Borrower shall not lease any portion of the Mortgaged Property for non-residential use except with the prior written consent of Lender and Lender’s prior written approval of the Lease agreement with the exception of any Operating Lease which has previously been approved by Lender; provided, however, that Lender’s prior written consent and prior written approval shall not be required with respect to commercial leases for hair salons, physical therapy spaces, or other leases covering floor space not exceeding 3,000 square feet, provided that the lessee and its business and non-residential use of a portion of the Mortgaged Property are consistent with similarly situated senior housing facilities (an “Immaterial Commercial Lease”).  Borrower shall not modify the terms of, or extend or terminate, any Lease for non residential use (including any lease in existence on the date of this Instrument) without the prior written consent of Lender; provided, however, no such consent shall be required with respect to any modification, extension or termination of any Immaterial Commercial Lease.  Borrower shall, without request by Lender, deliver an executed copy of each non residential Lease to Lender promptly after such Lease is signed.  All non residential Leases, including renewals or extension of existing Leases, but specifically excluding all Immaterial Commercial Leases, shall specifically provide that (1) such Leases are subordinate to the lien of this Instrument (unless waived in writing by Lender); (2) the tenant shall attorn to Lender and any purchaser at a foreclosure sale, such attornment to be self executing and effective upon acquisition of title to the Mortgaged Property by any purchaser at a foreclosure sale or by Lender in any manner; (3) the tenant agrees to execute such further evidences of attornment as Lender or any purchaser at a foreclosure sale may from time to time request; (4) the Lease shall not be terminated by foreclosure or any other transfer of the Mortgaged Property; (5) after a foreclosure sale of the Mortgaged Property, Lender or any other purchasers at such foreclosure sale may, at Lender’s or such purchaser’s option, accept or terminate such Lease; and (6) the tenant shall, upon receipt after the occurrence and during the continuance of an Event of Default of a written request from Lender, pay all Rents payable under the Lease to Lender.”

	
4.

	
Section 7(c) is modified by adding the following at the end thereof:

“Provided no Event of Default shall have occurred, any tax refunds received by Lender from any taxing authority shall be credited against any Imposition Deposits required to be made by Borrower with respect to such taxes.”

  

Page - C - 1

  

	
5.

	
Section 7 of the Instrument is hereby modified to add the following new subsection 7(f):

	
  

	
“(f)

	
Notwithstanding the foregoing provisions of this Section 7, Lender hereby conditionally waives the requirement of such Imposition Deposits for insurance premiums pursuant to Section 7(a)(2) above; provided, that:

 

 

	
(i)  

	
Lender and Fannie Mae are named in the insurance policy as loss payees;

	
(ii)  

	
Borrower renews all insurance coverages and pays all insurance premiums and costs when due and prior to any delinquency and Borrower provides Lender with proof of such renewal and payment (in the form of a paid invoice) no later than fifteen (15) days after such payment.  Further, Lender shall have the right to examine Borrower’s records relating to the payment of insurance and other expenses of the Mortgaged Property upon reasonable notice from Lender;

	
(iii)  

	
There is no expiration, reduction, cancellation or non-renewal of any insurance coverages or policies required by this Instrument;

	
(iv)  

	
The Lender’s annual property inspections show that the Mortgaged Property is in good condition;

	
(v)  

	
The Lender’s annual review of insurance coverages shows that such insurance conforms to the terms of this Instrument and Lender’s insurance requirements;

	
(vi)  

	
No change to, or replacement of, any insurance policy shall be made by Borrower without the express written consent of Lender; provided, however, that Borrower shall be permitted to change insurance carriers so long as the new insurance policy complies with all requirements of the Loan Documents, and the Lender is named as an additional insured;

	
(vii)  

	
Lender is the recipient of any notices of non-payment or policy cancellation;

	
(viii)  

	
In the event of any Event of Default, whether monetary or non-monetary, the suspension of the collection of monthly Imposition Deposits will automatically terminate and Borrower shall, on the first day of the month following notice by Lender, and throughout the remaining loan term resume and continue to pay Imposition Deposits;

	
(ix)  

	
If a Transfer of the Mortgaged Property or direct or indirect ownership interests in Borrower occur, Imposition Deposits will automatically and immediately be reinstated; and

	
(x)  

	
The Lender, in its sole discretion, retains the right to reinstate monthly Imposition Deposits at any time.  In the event Lender exercises this right to reinstate the collection of monthly Imposition Deposits, Borrower shall, on the first month following notice by Lender, and throughout the remaining loan term resume and continue to pay Imposition Deposits.”

	
6.

	
Section 10 is deleted in its entirety and replaced with the following:

  

Page - C - 2

  

	
  

	
“10.

	
COMPLIANCE WITH LAWS.  Borrower shall comply, or shall cause Operator to comply, with all laws, ordinances, regulations and requirements of any Governmental Authority and all recorded lawful covenants and agreements relating to or affecting the Mortgaged Property, including all laws, ordinances, regulations, requirements and covenants pertaining to health and safety, construction of improvements on the Mortgaged Property, fair housing, zoning and land use, and Leases.  Borrower also shall comply, or shall cause Operator to comply, with all applicable laws that pertain to the maintenance and disposition of tenant security deposits.  Borrower shall at all times maintain, or cause Operator to maintain, records sufficient to demonstrate compliance with the provisions of this Section 10.  Borrower shall take, or shall cause Operator to take, appropriate measures to prevent, and shall not engage in or knowingly permit, any illegal activities at the Mortgaged Property that could endanger tenants or visitors, result in damage to the Mortgaged Property, result in forfeiture of the Mortgaged Property, or otherwise materially impair the lien created by this Instrument or Lender’s interest in the Mortgaged Property.  Borrower represents and warrants to Lender that no portion of the Mortgaged Property has been or will be purchased with the proceeds of any illegal activity.”

	
7.

	
Section 11 is modified by adding after the words “Borrower shall not”, the words “nor shall Borrower permit Operator to:”.

	
8.

	
Section 13 is modified to add the following at the end thereof:

“; provided, however, any such inspections shall be conducted in a manner which complies with applicable Privacy Laws”

	
9.

	
Section 14(a) is deleted in its entirety and replaced with the following:

	
  

	
“(a)

	
Borrower shall, or shall cause Operator to, keep and maintain at all times at the Mortgaged Property or the Borrower’s or Operator’s offices, and upon Lender’s request shall make available or cause Operator to make available, complete and accurate books of account and records (including copies of supporting bills and invoices) adequate to reflect correctly the operation of the Mortgaged Property, and copies of all written contracts, Leases, and other instruments which affect the Mortgaged Property.  The books, records, contracts, Leases and other instruments shall be subject to examination and inspection at any reasonable time by Lender; provided, however, any such inspections shall be conducted in a manner which complies with applicable Privacy Laws.

	
10.

	
Section 14(d) is modified by:

	
  

	
(i)

	
adding after the words “If Borrower fails to provide”, the words “, or cause to be provided,”; and

	
  

	
(ii)

	
adding after the words “Lender shall have the right to have Borrower’s”, the words “and/or Operators, as applicable”.

	
11.

	
Section 14(e) is modified by adding after the words “Borrower shall deliver”, the words “, or cause to be delivered,”.

	
12.

	
Section 15(b) is modified by adding after the words “Borrower shall pay”, the words “, or cause to be paid,”.

  

Page - C - 3

  

	
13.

	
Section 15(c) is modified by:

	
  

	
(i)

	
adding after the words “Borrower has timely delivered”, the words “, or cause to be delivered,” in the first sentence; and

	
  

	
(ii)

	
adding after the words “any bills or premium notices that it”, the words “or the Operator” in the first sentence.

	
14.

	
Section 15(d) is amended by adding the words “or Operator” after each appearance of the word “Borrower”.

	
15.

	
Section 15(e) is deleted in its entirety and replaced with the following:

	
  

	
(e)

	
Borrower shall promptly deliver, or cause to be delivered, to Lender a copy of all notices of, and invoices for, Impositions, and if Borrower or Operator pays any Imposition directly, Borrower shall promptly furnish, or cause to be furnished, to Lender receipts evidencing such payments.”

	
16.

	
Section 17(a) is modified by:

	
  

	
(i)

	
adding after the words “(3) shall restore or repair”, the words “or cause Operator to restore or repair,” in the first sentence;

	
  

	
(ii)

	
adding after the words “restoration or repair, (4) shall”, the words “keep or cause the Operator to” in the first sentence; and

	
  

	
(iii)

	
adding the words “or in connection with any required repair or restoration of the Mortgaged Property” to the end of the last sentence.

	
17.

	
The second line of Section 18 entitled “Environmental Hazards”, subsection (e) is modified by deleting the colon at the end thereof and inserting the following:

“(or in any written reports delivered to or obtained by Lender prior to the date hereof):”

	
18.

	
Section 18(e)(3) is modified by adding the words “(or in any written reports delivered to or obtained by Lender prior to the date hereof)”, before the words “, the Mortgaged Property does not now contain”.

	
19.

	
Section 18(h) is deleted in its entirety and replaced with the following:

	
  

	
“(h)

	
If any investigation, site monitoring, containment, clean-up, restoration or other remedial work (“Remedial Work”) is necessary to comply with any Hazardous Materials Law or order of any Governmental Authority that has or acquires jurisdiction over the Mortgaged Property or the use, operation or improvement of the Mortgaged Property under any Hazardous Materials Law, Borrower shall, or shall cause the Operator to, by the earlier of (1) the applicable deadline required by Hazardous Materials Law or (2) 30 days after notice from Lender demanding such action, begin performing the Remedial Work, and thereafter diligently prosecute it to completion, and shall in any event complete or cause to be completed the work by the time required by applicable Hazardous Materials Law.  If Borrower fails to begin, or to cause Operator to begin, on a timely basis or

  

Page - C - 4

  

	
  

	
diligently prosecute any required Remedial Work, Lender may, at its option, cause the Remedial Work to be completed, in which case Borrower shall reimburse Lender on demand for the cost of doing so.  Any reimbursement due from Borrower to Lender shall become part of the Indebtedness as provided in Section 12.”

	
20.

	
Section 18 entitled “Environmental Hazards”, subsection (m) is modified by inserting a period after the words, “assets of Borrower” and deleting the rest of the sentence.

21.           Section 19 is modified by adding the following new subsection (i).

 

	
  

	
(i)

	
Collateral Protection Insurance. TEXAS FINANCE CODE SECTION 307.052 COLALTERAL PROTECTION INSURANCE NOTICE: (A) GRANTOR IS REQUIRED TO: (i) KEEP THE MORTGAGED PROPERTY INSURED AGAINST DAMAGE IN THE AMOUNT BENEFICIARY SPECIFIES; (ii) PURCHASE THE INSURANCE FROM AN INSURER THAT IS AUTHORIZED TO DO BUSINESS IN THE STATE OF TEXAS OR AN ELIGIBLE SURPLUS LINES INSURER; AND (iii) NAME BENEFICIARY AS THE PERSON TO BE PAID UNDER THE POLICY IN THE EVENT OF A LOSS; (B) GRANTOR MUST, IF REQUIRED BY BENEFICIARY, DELIVER TO BENEFICIARY A COPY OF THE POLICY AND PROOF OF THE PAYMENT OF PREMIUMS; AND (C) IF GRANTOR FAILS TO MEET ANY REQUIREMENT LISTED IN PARAPGRAPH (A) OR (B), BENEFICIARY MAY OBTAIN COLLATERAL PROTECTION INSURNACE ON BEHALF OF GRANTOR AT GRANTOR’S EXPENSE.”

 

	
22.

	
Section 21(b) is modified to delete the period at the end of Section 21(b)(7) and add new Sections 21(b)(8), (9), (10) and (11) as follows:

 

	
  

	
“(8)

	
Transfers of the stock of any Publicly-Held Corporation occurring through a public stock exchange or over the counter market, provided that no Change in Control or Company Transaction shall have occurred;

 

For purposes of this Section 21(b)(8), the following definitions shall apply:

 

“Change in Control” means (i) an acquisition of 50% or more of the outstanding common stock or the voting power of then outstanding voting securities, or (ii) a change in the composition of the Board of Directors during any two-year period such that individuals who, as of the beginning of such two-year period, constituted the Board cease to constitute at least a majority of the Board.

 

“Company Transaction” means (i) a merger or consolidation of Emeritus Corporation (“Emeritus”) with or into any other company or other entity; (ii) a sale in on transaction or a series of related transactions of at least 50% of Emeritus’ outstanding voting securities; or (iii) a sale, lease, exchange or other transfer in one transaction or a series of related transactions of all or substantially all of Emeritus’ assets.

 

	
(9)  

	
The creation of any purchase money security interests in Personalty used exclusively in operating the Mortgaged Property as a Senior Housing Facility that is acquired by Borrower or Operator after the date hereof, provided the value of the Personalty acquired after the date hereof that is subject to such liens does not, at any time, exceed $50,000.00 and

 

  

Page - C - 5

  

Borrower or Operator provide Lender written notice of the acquisition of such Personalty within thirty (30) days of such acquisition;

 

	
(10)  

	
The grant of a leasehold interest in an Immaterial Commercial Lease; and

 

	
(11)  

	
The acquisition by Summerville Senior Living, Inc., a Delaware corporation of Daniel R. Baty’s interest in Batus, LLC, a Delaware limited liability company. Upon such acquisition and provided Daniel R. Baty no longer retains any direct or indirect ownership or beneficial interest in Borrower or Batus, LLC, Lender shall release Daniel R. Baty from his obligations under the Exceptions to Non-Recourse Guaranty dated of even date herewith.”

 

	
23.

	
Section 21 is modified by adding the following new subsection (f).

	
  

	 

 

	
  

	
(f)

	
Borrower shall have a one-time right to pay a $10,000 processing fee in lieu of the review fee specified in 21(c)(6)(A) and a transfer fee equal to Zero Dollars ($0.00) in lieu of the 1% transfer fee specified in 21(c)(6)(A) in the event of a Transfer of a direct or indirect Controlling Interest in Borrower to a new entity provided that in all events Emeritus Corporation, a Washington corporation, shall then own directly or indirectly through one or more intermediaries a 100% ownership interest in such new entity.  Borrower, the transferor and transferee shall be required to comply with all the requirements of Section 21(c) in connection with any Transfer set forth in this subsection.  This subsection shall be used only to calculate the appropriate review fee and transfer fee and shall not be deemed to be a consent by Lender to any Transfer set forth above.

 

	
24.

	
Section 40 is modified by adding the words “Subject to any limitations imposed by applicable Privacy Laws” at the beginning of the Section.

	
25.

	
Section 48 is modified by adding the following to the end of the paragraph:

“This Instrument shall also be effective as a financing statement covering minerals or the like (including oil and gas) and as-extracted collateral subject to Section 9.301(4) of the Code. For the purposes of complying with Chapter 9, “Secured Transactions” of the Code: (i) the name of the debtor is Emeritol Dowlen Oaks LLC; (ii) the mailing address of Grantor, as debtor, is c/o Emeritus Senior Living, 3131 Elliott Avenue #500, Seattle, Washington 98121; (iii) Grantor, as debtor, is a limited liability company, Grantor’s jurisdiction of organization is Delaware, and Grantor’s organizational identification number is 4595692; (iv) the name of the secured party is KeyCorp Real Estate Capital Markets, Inc.; (v) the address of the secured party is 911 Main Street, Suite 1500, Kansas City, Missouri 64105; and (vi) the collateral covered hereby is the Mortgaged Property.”

	
26.

	
“Upon the occurrence of a Transfer pursuant to the provisions of Section 21(c) of the Instrument (except with respect to the one-time Transfer to which Lender has consented as provided in Section 21(f) of the Instrument), the foregoing modifications to the text of the Instrument in this Exhibit C shall be null and void and, with or without further execution by any party to the Instrument, the original terms of the Instrument without the foregoing modifications shall apply to any transferee.”

  

Page - C - 6

  

	
27.

	
All capitalized terms used in this Exhibit not specifically defined herein shall have the meanings set forth in the text of the Instrument that precedes this Exhibit.

(Initial Page Attached)

  

Page - C - 7

  

Initial Page to Exhibit C Modifications to Instrument

BORROWER’S INITIALS:/s/ EM

	
OPPENHEIMER: 2838800 v02 10/29/2010

  

Page - C - 8

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00180-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00180-of-00352.parquet"}]]