Document:

Exhibit 10-1

                    UNITED STATES DEPARTMENT OF THE TREASURY
                          1500 PENNSYLVANIA AVENUE, NW
                             WASHINGTON, D.C. 20220

Dear Ladies and Gentlemen:

         The company  set forth on the  signature  page  hereto (the  "Company")
intends to issue in a private  placement the number of shares of a series of its
preferred  stock set forth on Schedule A hereto (the  "Preferred  Shares") and a
warrant to purchase the number of shares of a series of its preferred  stock set
forth on Schedule A hereto  (the  "Warrant"  and,  together  with the  Preferred
Shares,  the  "Purchased  Securities")  and the United States  Department of the
Treasury  (the  "Investor")  intends to purchase  from the Company the Purchased
Securities.

         The  purpose  of this  letter  agreement  is to  confirm  the terms and
conditions of the purchase by the Investor of the Purchased  Securities.  Except
to the extent supplemented or superseded by the terms set forth herein or in the
Schedules hereto, the provisions  contained in the Securities Purchase Agreement
-  Standard  Terms  attached  hereto  as  Exhibit  A (the  "Securities  Purchase
Agreement") are incorporated by reference herein.  Terms that are defined in the
Securities  Purchase  Agreement are used in this letter agreement as so defined.
In the  event  of any  inconsistency  between  this  letter  agreement  and  the
Securities Purchase Agreement, the terms of this letter agreement shall govern.

         Each of the Company and the Investor hereby confirms its agreement with
the other party with  respect to the  issuance  by the Company of the  Purchased
Securities and the purchase by the Investor of the Purchased Securities pursuant
to this letter  agreement  and the  Securities  Purchase  Agreement on the terms
specified on Schedule A hereto.

         This letter agreement  (including the Schedules hereto), the Securities
Purchase Agreement (including the Annexes thereto), the Disclosure Schedules and
the Warrant  constitute  the entire  agreement,  and  supersede  all other prior
agreements,  understandings,  representations  and warranties,  both written and
oral,  between the parties,  with  respect to the subject  matter  hereof.  This
letter  agreement   constitutes  the  "Letter  Agreement"  referred  to  in  the
Securities Purchase Agreement.

         This  letter  agreement  may be  executed  in any  number  of  separate
counterparts,  each such counterpart being deemed to be an original  instrument,
and all such counterparts will together constitute the same agreement.  Executed
signature pages to this letter  agreement may be delivered by facsimile and such
facsimiles  will be deemed as sufficient as if actual  signature  pages had been
delivered.

                                      * * *

<PAGE>

         In witness  whereof,  this letter  agreement has been duly executed and
delivered by the duly authorized representatives of the parties hereto as of the
date written below.

                                   UNITED STATES DEPARTMENT OF THE
                                   TREASURY

                                   By:
                                       -----------------------------------------
                                            Name:
                                            Title:

                                   COMPANY: GrandSouth Bancorporation

                                   By:
                                       -----------------------------------------
                                            Name: Ronald K. Earnest
                                            Title:   President

Date: _________________________

<PAGE>

                                                                       EXHIBIT A

                          SECURITIES PURCHASE AGREEMENT

<PAGE>

                                                                       EXHIBIT A
                                    (Non-Exchange-Traded QFIs, excluding S Corps
                                                       and Mutual Organizations)

--------------------------------------------------------------------------------

                          SECURITIES PURCHASE AGREEMENT

                                 STANDARD TERMS

--------------------------------------------------------------------------------

<PAGE>

<TABLE>
<CAPTION>
                                                 TABLE OF CONTENTS
                                                                                                               Page
                                                     Article I

                                                 Purchase; Closing

<C>                                                                                                              <C>
1.1 Purchase......................................................................................................3
1.2 Closing.......................................................................................................3
1.3 Interpretation................................................................................................8

                                                    Article II

                                          Representations and Warranties

2.1 Disclosure ...................................................................................................9
2.2 Representations and Warranties of the Company................................................................11

                                                    Article III

                                                     Covenants

3.1 Commercially Reasonable Efforts .............................................................................29
3.2 Expenses ....................................................................................................30
3.3 Sufficiency of Authorized Warrant Preferred Stock; Exchange Listing .........................................30
3.4 Certain Notifications Until Closing .........................................................................30
3.5 Access, Information and Confidentiality .....................................................................31

                                                    Article IV

                                               Additional Agreements

4.1 Purchase for Investment......................................................................................34
4.2 Legends......................................................................................................35
4.3 Certain Transactions ........................................................................................39
4.4 Transfer of Purchased Securities and Warrant Shares; Restrictions on Exercise
of the Warrant ..................................................................................................39
4.5 Registration Rights..........................................................................................40
4.6 Depositary Shares ...........................................................................................68
4.7 Restriction on Dividends and Repurchases.....................................................................68
4.8 Executive Compensation ......................................................................................73
4.9 Related Party Transactions ..................................................................................74
4.10 Bank and Thrift Holding Company Status......................................................................74
4.11 Predominantly Financial ....................................................................................75

                                       -i-

<PAGE>

                                                     Article V

                                                   Miscellaneous

5.1 Termination..................................................................................................75
5.2 Survival of Representations and Warranties...................................................................77
5.3 Amendment....................................................................................................77
5.4 Waiver of Conditions.........................................................................................77
5.5 Governing Law: Submission to Jurisdiction, Etc. .............................................................78
5.6 Notices .....................................................................................................78
5.7 Definitions..................................................................................................79
5.8 Assignment ..................................................................................................80
5.9 Severability.................................................................................................81
5.10 No Third Party Beneficiaries................................................................................81
</TABLE>

                                      -ii-

<PAGE>

                                                  LIST OF ANNEXES

ANNEX A: FORM OF CERTIFICATE OF DESIGNATIONS FOR PREFERRED STOCK
ANNEX B: FORM OF CERTIFICATE OF DESIGNATIONS FOR WARRANT
                 PREFERRED STOCK
ANNEX C: FORM OF WAIVER
ANNEX D: FORM OF OPINION
ANNEX E: FORM OF WARRANT

                                      -iii-

<PAGE>

INDEX OF DEFINED TERMS

                                                                    Location of
Term                                                                Definition
-----------------------------------------------------------------   ------------
Affiliate                                                           5.7(b)
Agreement                                                           Recitals
Appropriate Federal Banking Agency                                  2.2(s)
Bank Holding Company                                                4.10
Bankruptcy Exceptions                                               5.8
business day                                                        1.3
Capitalization Date                                                 2.2(b)
Certificates of Designations                                        1.2(d)(iii)
Charter                                                             1.2(d)(iii)
Closing                                                             1.2(a)
Closing Date                                                        1.2(a)
Code                                                                2.2(n)
Common Stock                                                        2.2(b)
Company                                                             Recitals
Company Financial Statements                                        2.2(h)
Company Material Adverse Effect 2.1(b)
Company Reports                                                     2.2(i)(i)
Company Subsidiary; Company Subsidiaries                            2.2(e)(ii)
control; controlled by; under common control with                   5.7(b)
Controlled Group                                                    2.2(n)
CPP                                                                 Recitals
Disclosure Schedule                                                 2.1(a)
EESA                                                                1.2(d)(iv)
ERISA                                                               2.2(n)
Exchange Act                                                        4.4
Federal Reserve                                                     4.10
GAAP                                                                2.1(b)
Governmental Entities                                               1.2(c)
Holder                                                              4.5(l)(i)
Holders' Counsel                                                    4.5(l)(ii)
Indemnitee                                                          4.5(h)(i)
Information                                                         3.5(c)
Investor                                                            Recitals
Junior Stock                                                        4.7(f)
knowledge of the Company; Company's knowledge                       5.7(c)
Letter Agreement Recitals
officers                                                            5.7(c)
Parity Stock                                                        4.7(f)

                                      -iv-

<PAGE>

                                                                    Location of
Term                                                                Definition
-----------------------------------------------------------------   ------------
Pending Underwritten Offering                                       4.5(m)
Permitted Repurchases                                               4.7(c)
Piggyback Registration                                              4.5(b)(iv)
Plan                                                                2.2(n)
Preferred Shares                                                    Recitals
Preferred Stock                                                     Recitals
Previously Disclosed                                                2.1(c)
Proprietary Rights                                                  2.2(u)
Purchase                                                            Recitals
Purchase Price                                                      1.1
Purchased Securities                                                Recitals
register; registered; registration                                  4.5(l)(iii)
Registrable Securities                                              4.5(l)(iv)
Registration Expenses                                               4.5(l)(v)
Regulatory Agreement                                                2.2(s)
Rule 144; Rule 144A; Rule 159A; Rule 405; Rule 415                  4.5(l)(vi)
Savings and Loan Holding Company                                    4.10
Schedules                                                           Recitals
SEC                                                                 2.2(k)
Securities Act                                                      2.2(a)
Selling Expenses                                                    4.5(l)(vii)
Senior Executive Officers                                           4.8
Shelf Registration Statement                                        4.5(b)(ii)
Signing Date                                                        2.1(b)
Special Registration                                                4.5(j)
subsidiary                                                          5.7(a)
Tax; Taxes                                                          2.2(o)
Transfer                                                            4.4
Warrant                                                             Recitals
Warrant Preferred Stock                                             Recitals
Warrant Shares                                                      2.2(d)

                                       -v-

<PAGE>

                 SECURITIES PURCHASE AGREEMENT - STANDARD TERMS

                                    Recitals:

          WHEREAS, the United States Department of the Treasury (the "Investor")
may from time to time agree to purchase  shares of preferred  stock and warrants
from eligible financial  institutions which elect to participate in the Troubled
Asset Relief Program Capital Purchase Program ("CPP");

          WHEREAS, an eligible financial  institution electing to participate in
the  CPP and  issue  securities  to the  Investor  (referred  to  herein  as the
"Company") shall enter into a letter agreement (the "Letter Agreement") with the
Investor which incorporates this Securities Purchase Agreement - Standard Terms;

          WHEREAS,  the  Company  agrees  to  expand  the flow of credit to U.S.
consumers and  businesses on competitive  terms to promote the sustained  growth
and vitality of the U.S.
economy;

          WHEREAS,  the  Company  agrees  to  work  diligently,  under  existing
programs,  to modify  the  terms of  residential  mortgages  as  appropriate  to
strengthen the health of the U.S. housing market;

          WHEREAS,  the  Company  intends  to issue in a private  placement  the
number of shares of the series of its Preferred  Stock  ("Preferred  Stock") set
forth on  Schedule A to the Letter  Agreement  (the  "Preferred  Shares")  and a
warrant to purchase  the number of shares of the series of its  Preferred  Stock
("Warrant Preferred Stock") set forth on Schedule A to the Letter Agreement (the
"Warrant" and, together with the Preferred Shares,  the "Purchased  Securities")
and the  Investor  intends to  purchase  (the  "Purchase")  from the Company the
Purchased Securities; and

          WHEREAS,  the Purchase  will be governed by this  Securities  Purchase
Agreement - Standard  Terms and the Letter  Agreement,  including  the schedules
thereto (the  "Schedules"),  specifying  additional terms of the Purchase.  This
Securities  Purchase  Agreement - Standard Terms  (including the Annexes hereto)
and the Letter Agreement (including the Schedules thereto) are together referred
to as this "Agreement".  All references in this Securities  Purchase Agreement -
Standard  Terms to  "Schedules"  are to the  Schedules  attached  to the  Letter
Agreement.

          NOW,  THEREFORE,   in  consideration  of  the  premises,  and  of  the
representations,  warranties,  covenants and  agreements  set forth herein,  the
parties agree as follows:

                                    Article I
                                Purchase; Closing

          1.1 Purchase.  On the terms and subject to the conditions set forth in
this  Agreement,  the Company  agrees to sell to the Investor,  and the Investor
agrees to purchase from the Company,  at the Closing (as  hereinafter  defined),
the Purchased  Securities  for the price set forth on Schedule A (the  "Purchase
Price").

<PAGE>

          1.2 Closing.

          (a) On the  terms  and  subject  to the  conditions  set forth in this
Agreement,  the closing of the Purchase (the  "Closing")  will take place at the
location  specified  in  Schedule  A, at the time  and on the date set  forth in
Schedule A or as soon as practicable  thereafter,  or at such other place,  time
and date as shall be agreed  between the Company and the Investor.  The time and
date on which  the  Closing  occurs  is  referred  to in this  Agreement  as the
"Closing Date".

          (b)  Subject to the  fulfillment  or waiver of the  conditions  to the
Closing in this  Section  1.2,  at the  Closing  the  Company  will  deliver the
Preferred  Shares  and the  Warrant,  in each case as  evidenced  by one or more
certificates  dated  the  Closing  Date  and  bearing   appropriate  legends  as
hereinafter  provided for, in exchange for payment in full of the Purchase Price
by wire transfer of immediately  available United States funds to a bank account
designated by the Company on Schedule A.

          (c) The respective obligations of each of the Investor and the Company
to  consummate  the  Purchase are subject to the  fulfillment  (or waiver by the
Investor and the Company,  as applicable) prior to the Closing of the conditions
that  (i) any  approvals  or  authorizations  of all  United  States  and  other
governmental,  regulatory or judicial authorities  (collectively,  "Governmental
Entities")  required  for the  consummation  of the  Purchase  shall  have  been
obtained or made in form and substance reasonably satisfactory to each party and
shall be in full force and effect and all  waiting  periods  required  by United
States  and  other  applicable  law,  if any,  shall  have  expired  and (ii) no
provision  of any  applicable  United  States  or  other  law  and no  judgment,
injunction,  order or decree  of any  Governmental  Entity  shall  prohibit  the
purchase and sale of the Purchased Securities as contemplated by this Agreement.

          (d) The  obligation of the Investor to consummate the Purchase is also
subject  to the  fulfillment  (or  waiver  by the  Investor)  at or prior to the
Closing of each of the following conditions:

                  (i) (A) the  representations and warranties of the Company set
         forth in (x) Section 2.2(g) of this Agreement shall be true and correct
         in all  respects  as though  made on and as of the  Closing  Date,  (y)
         Sections  2.2(a)  through (f) shall be true and correct in all material
         respects  as though  made on and as of the  Closing  Date  (other  than
         representations  and warranties that by their terms speak as of another
         date, which representations and warranties shall be true and correct in
         all material  respects as of such other date) and (z)  Sections  2.2(h)
         through (v) (disregarding  all  qualifications or limitations set forth
         in such  representations  and warranties as to "materiality",  "Company
         Material Adverse Effect" and words of similar import) shall be true and
         correct  as  though  made on and as of the  Closing  Date  (other  than
         representations  and warranties that by their terms speak as of another
         date, which representations and warranties shall be true and correct as
         of such  other  date),  except to the extent  that the  failure of such
         representations   and   warranties   referred   to  in   this   Section
         1.2(d)(i)(A)(z)  to be so  true  and  correct,  individually  or in the
         aggregate, does not have and would not reasonably be expected to have a

                                       -2-

<PAGE>

          Company  Material  Adverse  Effect  and  (B)  the  Company  shall have
          performed  in all  material  respects  all  obligations required to be
          performed by it under this Agreement at or prior to the Closing;

                   (ii) the Investor shall have received a certificate signed on
          behalf of the Company by a senior executive officer  certifying to the
          effect that the  conditions  set forth in Section  1.2(d)(i) have been
          satisfied;

                   (iii) the Company  shall have duly adopted and filed with the
          Secretary  of  State  of its  jurisdiction  of  organization  or other
          applicable  Governmental  Entity the amendments to its  certificate or
          articles  of  incorporation,   articles  of  association,  or  similar
          organizational   document   ("Charter")  in  substantially  the  forms
          attached  hereto  as  Annex  A  and  Annex  B  (the  "Certificates  of
          Designations") and such filing shall have been accepted;

                   (iv) (A) the Company  shall have effected such changes to its
          compensation,  bonus, incentive and other benefit plans,  arrangements
          and agreements  (including golden parachute,  severance and employment
          agreements) (collectively, "Benefit Plans") with respect to its Senior
          Executive Officers (and to the extent necessary for such changes to be
          legally enforceable,  each of its Senior Executive Officers shall have
          duly  consented  in writing  to such  changes),  as may be  necessary,
          during the period that the Investor owns any debt or equity securities
          of the Company acquired pursuant to this Agreement or the Warrant,  in
          order  to  comply  with  Section  111(b)  of  the  Emergency  Economic
          Stabilization  Act of 2008  ("EESA")  as  implemented  by  guidance or
          regulation  thereunder that has been issued and is in effect as of the
          Closing Date,  and (B) the Investor  shall have received a certificate
          signed  on  behalf  of  the  Company  by a  senior  executive  officer
          certifying  to the  effect  that the  condition  set forth in  Section
          1.2(d)(iv)(A) has been satisfied;

                   (v) each of the Company's  Senior  Executive  Officers  shall
          have  delivered to the Investor a written  waiver in the form attached
          hereto as Annex C  releasing  the  Investor  from any claims that such
          Senior  Executive  Officers  may  otherwise  have as a  result  of the
          issuance,  on or prior to the Closing Date, of any  regulations  which
          require  the  modification  of,  and  the  agreement  of  the  Company
          hereunder  to modify,  the terms of any Benefit  Plans with respect to
          its Senior  Executive  Officers to eliminate  any  provisions  of such
          Benefit Plans that would not be in compliance with the requirements of
          Section  111(b) of the EESA as  implemented  by guidance or regulation
          thereunder  that has been  issued  and is in effect as of the  Closing
          Date;

                   (vi) the  Company  shall  have  delivered  to the  Investor a
          written  opinion  from  counsel to the Company  (which may be internal
          counsel),  addressed to the Investor and dated as of the Closing Date,
          in substantially the form attached hereto as Annex D;

                   (vii) the Company shall have delivered certificates in proper
          form or, with the prior consent of the Investor, evidence of shares in
          book-entry  form,  evidencing the Preferred  Shares to Investor or its
          designee(s); and

                                       -3-

<PAGE>

                  (viii) the  Company  shall have duly  executed  the Warrant in
          substantially  the form attached  hereto as Annex E and delivered such
          executed Warrant to the Investor or its designee(s).

         1.3  Interpretation.  When a  reference  is made in this  Agreement  to
"Recitals,"  "Articles,"  "Sections," or "Annexes" such reference  shall be to a
Recital,  Article or Section of, or Annex to, this Securities Purchase Agreement
- Standard Terms,  and a reference to "Schedules"  shall be to a Schedule to the
Letter Agreement, in each case, unless otherwise indicated. The terms defined in
the singular have a comparable  meaning when used in the plural, and vice versa.
References  to  "herein",  "hereof",  "hereunder"  and the  like  refer  to this
Agreement as a whole and not to any particular section or provision,  unless the
context requires otherwise. The table of contents and headings contained in this
Agreement  are for reference  purposes only and are not part of this  Agreement.
Whenever  the  words  "include,"  "includes"  or  "including"  are  used in this
Agreement,  they shall be deemed followed by the words "without  limitation." No
rule of  construction  against the  draftsperson  shall be applied in connection
with the  interpretation or enforcement of this Agreement,  as this Agreement is
the product of negotiation between sophisticated parties advised by counsel. All
references to "$" or "dollars" mean the lawful  currency of the United States of
America.  Except as expressly  stated in this  Agreement,  all references to any
statute,  rule or regulation are to the statute,  rule or regulation as amended,
modified,  supplemented  or  replaced  from  time to time  (and,  in the case of
statutes,  include any rules and regulations  promulgated under the statute) and
to any section of any statute,  rule or regulation  include any successor to the
section.  References  to a  "business  day" shall mean any day except  Saturday,
Sunday  and any day on  which  banking  institutions  in the  State  of New York
generally  are  authorized or required by law or other  governmental  actions to
close.

                                   Article II
                         Representations and Warranties

         2.1 Disclosure.

         (a) On or prior to the  Signing  Date,  the  Company  delivered  to the
Investor a schedule  ("Disclosure  Schedule") setting forth, among other things,
items the disclosure of which is necessary or appropriate  either in response to
an express  disclosure  requirement  contained  in a  provision  hereof or as an
exception to one or more representations or warranties contained in Section 2.2.

         (b) "Company  Material  Adverse Effect" means a material adverse effect
on (i) the business,  results of operation or financial condition of the Company
and its consolidated  subsidiaries  taken as a whole;  provided,  however,  that
Company  Material  Adverse  Effect shall not be deemed to include the effects of
(A)  changes  after the date of the Letter  Agreement  (the  "Signing  Date") in
general business,  economic or market conditions (including changes generally in
prevailing interest rates, credit availability and liquidity,  currency exchange
rates and price  levels or  trading  volumes  in the  United  States or  foreign
securities or credit  markets),  or any outbreak or  escalation of  hostilities,
declared  or  undeclared  acts  of war or  terrorism,  in  each  case  generally

                                       -4-

<PAGE>

affecting the industries in which the Company and its subsidiaries  operate, (B)
changes  or  proposed  changes  after the  Signing  Date in  generally  accepted
accounting  principles  in the United States  ("GAAP") or regulatory  accounting
requirements,  or  authoritative  interpretations  thereof,  or (C)  changes  or
proposed changes after the Signing Date in securities, banking and other laws of
general  applicability  or related policies or  interpretations  of Governmental
Entities  (in the case of each of these  clauses  (A),  (B) and (C),  other than
changes or occurrences  to the extent that such changes or  occurrences  have or
would  reasonably  be expected  to have a  materially  disproportionate  adverse
effect  on the  Company  and  its  consolidated  subsidiaries  taken  as a whole
relative to comparable U.S.  banking or financial  services  organizations);  or
(ii)  the  ability  of  the  Company  to  consummate   the  Purchase  and  other
transactions  contemplated  by this  Agreement  and the  Warrant and perform its
obligations hereunder or thereunder on a timely basis.

         (c)  "Previously   Disclosed"  means   information  set  forth  on  the
Disclosure Schedule,  provided,  however, that disclosure in any section of such
Disclosure  Schedule shall apply only to the indicated section of this Agreement
except  to the  extent  that it is  reasonably  apparent  from  the face of such
disclosure  that  such  disclosure  is  relevant  to  another  section  of  this
Agreement.

         2.2 Representations and Warranties of the Company. Except as Previously
Disclosed,  the Company  represents  and warrants to the Investor that as of the
Signing Date and as of the Closing Date (or such other date specified herein):

         (a) Organization,  Authority and Significant Subsidiaries.  The Company
has been duly  incorporated  and is validly  existing and in good standing under
the laws of its  jurisdiction  of  organization,  with the  necessary  power and
authority  to own its  properties  and  conduct  its  business  in all  material
respects as currently conducted,  and except as has not,  individually or in the
aggregate,  had and would not reasonably be expected to have a Company  Material
Adverse  Effect,  has been  duly  qualified  as a  foreign  corporation  for the
transaction  of business  and is in good  standing  under the laws of each other
jurisdiction  in which it owns or leases  properties or conducts any business so
as to require such  qualification;  each subsidiary of the Company that would be
considered  a  "significant  subsidiary"  within the meaning of Rule  1-02(w) of
Regulation S-X under the Securities Act of 1933 (the "Securities Act"), has been
duly  organized and is validly  existing in good standing  under the laws of its
jurisdiction of organization.  The Charter and bylaws of the Company,  copies of
which have been provided to the Investor  prior to the Signing  Date,  are true,
complete and correct  copies of such documents as in full force and effect as of
the Signing Date.

         (b)  Capitalization.  The authorized capital stock of the Company,  and
the outstanding capital stock of the Company (including  securities  convertible
into, or exercisable or  exchangeable  for,  capital stock of the Company) as of
the most recent fiscal month-end preceding the Signing Date (the "Capitalization
Date") is set forth on Schedule B. The  outstanding  shares of capital  stock of
the Company have been duly  authorized and are validly  issued and  outstanding,
fully paid and nonassessable,  and subject to no preemptive rights (and were not
issued in violation  of any  preemptive  rights).  As of the Signing  Date,  the
Company does not have outstanding any securities or other obligations  providing
the holder the right to acquire its Common  Stock  ("Common  Stock") that is not

                                       -5-

<PAGE>

reserved  for  issuance as specified on Schedule B, and the Company has not made
any other  commitment  to authorize,  issue or sell any Common Stock.  Since the
Capitalization  Date,  the  Company  has not issued any shares of Common  Stock,
other than (i) shares  issued upon the  exercise of stock  options or  delivered
under other  equity-based  awards or other  convertible  securities  or warrants
which were issued and  outstanding on the  Capitalization  Date and disclosed on
Schedule B and (ii) shares disclosed on Schedule B. Each holder of 5% or more of
any class of capital stock of the Company and such holder's  primary address are
set forth on Schedule B.

         (c) Preferred  Shares.  The Preferred Shares have been duly and validly
authorized,  and, when issued and  delivered  pursuant to this  Agreement,  such
Preferred   Shares  will  be  duly  and  validly   issued  and  fully  paid  and
non-assessable,  will not be issued in violation of any preemptive  rights,  and
will rank pari passu with or senior to all other  series or classes of Preferred
Stock,  whether or not issued or  outstanding,  with  respect to the  payment of
dividends  and the  distribution  of  assets  in the  event of any  dissolution,
liquidation or winding up of the Company.

         (d)  The  Warrant  and  Warrant  Shares.  The  Warrant  has  been  duly
authorized  and,  when  executed and  delivered  as  contemplated  hereby,  will
constitute a valid and legally  binding  obligation  of the Company  enforceable
against  the  Company in  accordance  with its terms,  except as the same may be
limited by  applicable  bankruptcy,  insolvency,  reorganization,  moratorium or
similar laws  affecting  the  enforcement  of  creditors'  rights  generally and
general  equitable  principles,  regardless  of whether such  enforceability  is
considered in a proceeding at law or in equity  ("Bankruptcy  Exceptions").  The
shares of Warrant  Preferred  Stock  issuable  upon exercise of the Warrant (the
"Warrant  Shares")  have been duly  authorized  and reserved  for issuance  upon
exercise of the Warrant and when so issued in  accordance  with the terms of the
Warrant will be validly  issued,  fully paid and  non-assessable,  and will rank
pari passu with or senior to all other  series or  classes of  Preferred  Stock,
whether or not issued or  outstanding,  with respect to the payment of dividends
and the distribution of assets in the event of any  dissolution,  liquidation or
winding up of the Company.

         (e) Authorization, Enforceability.

                   (i) The  Company has the  corporate  power and  authority  to
          execute and deliver  this  Agreement  and the Warrant and to carry out
          its obligations  hereunder and thereunder (which includes the issuance
          of the Preferred Shares,  Warrant and Warrant Shares).  The execution,
          delivery  and  performance  by the Company of this  Agreement  and the
          Warrant and the consummation of the transactions  contemplated  hereby
          and  thereby  have been duly  authorized  by all  necessary  corporate
          action on the part of the Company and its stockholders, and no further
          approval or authorization is required on the part of the Company. This
          Agreement is a valid and binding obligation of the Company enforceable
          against  the  Company in  accordance  with its  terms,  subject to the
          Bankruptcy Exceptions.

                                       -6-

<PAGE>

                  (ii) The execution, delivery and performance by the Company of
          this   Agreement  and  the  Warrant  and  the   consummation   of  the
          transactions  contemplated  hereby and thereby and  compliance  by the
          Company with the provisions hereof and thereof,  will not (A) violate,
          conflict  with,  or  result  in a  breach  of  any  provision  of,  or
          constitute a default (or an event which,  with notice or lapse of time
          or  both,  would  constitute  a  default)  under,  or  result  in  the
          termination of, or accelerate the  performance  required by, or result
          in a right  of  termination  or  acceleration  of,  or  result  in the
          creation of, any lien,  security interest,  charge or encumbrance upon
          any of the  properties  or assets of the Company or any  subsidiary of
          the  Company  (each a  "Company  Subsidiary"  and,  collectively,  the
          "Company   Subsidiaries")  under  any  of  the  terms,  conditions  or
          provisions of (i) its organizational documents or (ii) any note, bond,
          mortgage, indenture, deed of trust, license, lease, agreement or other
          instrument   or  obligation  to  which  the  Company  or  any  Company
          Subsidiary is a party or by which it or any Company  Subsidiary may be
          bound, or to which the Company or any Company Subsidiary or any of the
          properties or assets of the Company or any Company  Subsidiary  may be
          subject,   or  (B)  subject  to  compliance   with  the  statutes  and
          regulations  referred to in the next  paragraph,  violate any statute,
          rule or regulation or any judgment, ruling, order, writ, injunction or
          decree  applicable to the Company or any Company  Subsidiary or any of
          their respective  properties or assets except,  in the case of clauses
          (A)(ii) and (B), for those  occurrences  that,  individually or in the
          aggregate, have not had and would not reasonably be expected to have a
          Company Material Adverse Effect.

                  (iii)   Other   than  the  filing  of  the   Certificates   of
          Designations  with  the  Secretary  of State  of its  jurisdiction  of
          organization or other applicable Governmental Entity, such filings and
          approvals as are required to be made or obtained under any state "blue
          sky" laws and such as have been made or obtained, no notice to, filing
          with,  exemption or review by, or  authorization,  consent or approval
          of, any Governmental  Entity is required to be made or obtained by the
          Company in  connection  with the  consummation  by the  Company of the
          Purchase except for any such notices,  filings,  exemptions,  reviews,
          authorizations, consents and approvals the failure of which to make or
          obtain would not,  individually  or in the  aggregate,  reasonably  be
          expected to have a Company Material Adverse Effect.

         (f) Anti-takeover Provisions and Rights Plan. The Board of Directors of
the Company (the "Board of Directors") has taken all necessary  action to ensure
that the  transactions  contemplated  by this  Agreement and the Warrant and the
consummation of the transactions contemplated hereby and thereby,  including the
exercise of the Warrant in  accordance  with its terms,  will be exempt from any
anti-takeover or similar provisions of the Company's Charter and bylaws, and any
other provisions of any applicable "moratorium",  "control share", "fair price",
"interested  stockholder"  or other  anti-takeover  laws and  regulations of any
jurisdiction.

         (g) No Company Material Adverse Effect.  Since the last day of the last
completed  fiscal  period for which  financial  statements  are  included in the
Company Financial Statements (as defined below), no fact,  circumstance,  event,
change, occurrence,  condition or development has occurred that, individually or

                                       -7-
<PAGE>

in the  aggregate,  has had or would  reasonably  be  expected to have a Company
Material Adverse Effect.

         (h) Company Financial Statements.  The Company has Previously Disclosed
each  of  the  consolidated   financial   statements  of  the  Company  and  its
consolidated  subsidiaries  for each of the last three completed fiscal years of
the Company (which shall be audited to the extent audited  financial  statements
are available  prior to the Signing Date) and each  completed  quarterly  period
since the last  completed  fiscal  year  (collectively  the  "Company  Financial
Statements").  The Company Financial  Statements  present fairly in all material
respects the consolidated financial position of the Company and its consolidated
subsidiaries as of the dates indicated  therein and the consolidated  results of
their  operations  for the  periods  specified  therein;  and  except  as stated
therein,  such financial  statements  (A) were prepared in conformity  with GAAP
applied on a consistent basis (except as may be noted therein) and (B) have been
prepared from, and are in accordance  with, the books and records of the Company
and the Company Subsidiaries.

         (i) Reports.

                  (i) Since  December  31,  2006,  the Company and each  Company
          Subsidiary has filed all reports,  registrations,  documents, filings,
          statements and submissions, together with any amendments thereto, that
          it was required to file with any  Governmental  Entity (the foregoing,
          collectively,  the  "Company  Reports")  and has  paid  all  fees  and
          assessments due and payable in connection  therewith,  except, in each
          case, as would not,  individually  or in the aggregate,  reasonably be
          expected  to have a  Company  Material  Adverse  Effect.  As of  their
          respective  dates of  filing,  the  Company  Reports  complied  in all
          material   respects  with  all  statutes  and  applicable   rules  and
          regulations of the applicable Governmental Entities.

                (ii) The records, systems, controls, data and information of the
          Company and the Company Subsidiaries are recorded,  stored, maintained
          and operated  under means  (including  any  electronic,  mechanical or
          photographic process,  whether computerized or not) that are under the
          exclusive  ownership and direct  control of the Company or the Company
          Subsidiaries  or their  accountants  (including  all  means of  access
          thereto and  therefrom),  except for any  non-exclusive  ownership and
          non-direct  control  that would not  reasonably  be expected to have a
          material adverse effect on the system of internal  accounting controls
          described  below  in this  Section  2.2(i)(ii).  The  Company  (A) has
          implemented and maintains adequate  disclosure controls and procedures
          to ensure that material information relating to the Company, including
          the  consolidated  Company  Subsidiaries,  is made  known to the chief
          executive  officer and the chief  financial  officer of the Company by
          others within those entities, and (B) has disclosed, based on its most
          recent  evaluation prior to the Signing Date, to the Company's outside
          auditors and the audit  committee  of the Board of  Directors  (x) any
          significant  deficiencies  and  material  weaknesses  in the design or
          operation of internal controls that are reasonably likely to adversely
          affect the Company's ability to record, process,  summarize and report
          financial information and (y) any fraud, whether or not material, that

                                       -8-
<PAGE>

          involves  management or other employees who have a significant role in
          the Company's internal controls over financial reporting.

         (j) No  Undisclosed  Liabilities.  Neither  the  Company nor any of the
Company Subsidiaries has any liabilities or obligations of any nature (absolute,
accrued,  contingent or otherwise) which are not properly  reflected or reserved
against in the  Company  Financial  Statements  to the extent  required to be so
reflected  or  reserved  against  in  accordance  with  GAAP,   except  for  (A)
liabilities  that have arisen since the last fiscal year end in the ordinary and
usual course of business and consistent  with past practice and (B)  liabilities
that, individually or in the aggregate, have not had and would not reasonably be
expected to have a Company Material Adverse Effect.

         (k) Offering of  Securities.  Neither the Company nor any person acting
on its behalf has taken any action  (including any offering of any securities of
the Company  under  circumstances  which would require the  integration  of such
offering  with  the  offering  of any  of the  Purchased  Securities  under  the
Securities  Act, and the rules and  regulations  of the  Securities and Exchange
Commission  (the  "SEC")  promulgated  thereunder),   which  might  subject  the
offering,  issuance  or  sale of any of the  Purchased  Securities  to  Investor
pursuant to this Agreement to the  registration  requirements  of the Securities
Act.

         (l)  Litigation  and  Other  Proceedings.  Except  (i) as set  forth on
Schedule C or (ii) as would not, individually or in the aggregate, reasonably be
expected to have a Company Material Adverse Effect,  there is no (A) pending or,
to the knowledge of the Company, threatened,  claim, action, suit, investigation
or proceeding,  against the Company or any Company Subsidiary or to which any of
their assets are subject nor is the Company or any Company Subsidiary subject to
any  order,  judgment  or  decree  or (B)  unresolved  violation,  criticism  or
exception by any  Governmental  Entity with respect to any report or relating to
any examinations or inspections of the Company or any Company Subsidiaries.

         (m) Compliance with Laws.  Except as would not,  individually or in the
aggregate, reasonably be expected to have a Company Material Adverse Effect, the
Company and the Company  Subsidiaries  have all permits,  licenses,  franchises,
authorizations, orders and approvals of, and have made all filings, applications
and  registrations  with,  Governmental  Entities  that are required in order to
permit  them to own or lease their  properties  and assets and to carry on their
business as  presently  conducted  and that are  material to the business of the
Company  or such  Company  Subsidiary.  Except as set forth on  Schedule  D, the
Company and the Company  Subsidiaries  have complied in all respects and are not
in  default  or  violation  of,  and none of them is,  to the  knowledge  of the
Company,  under  investigation  with  respect  to or,  to the  knowledge  of the
Company,  have  been  threatened  to be  charged  with or  given  notice  of any
violation of, any applicable domestic (federal,  state or local) or foreign law,
statute,  ordinance,  license,  rule,  regulation,  policy or guideline,  order,
demand, writ,  injunction,  decree or judgment of any Governmental Entity, other
than such noncompliance,  defaults or violations that would not, individually or
in the  aggregate,  reasonably  be expected to have a Company  Material  Adverse
Effect.  Except for statutory or regulatory  restrictions of general application
or as set forth on Schedule D, no Governmental Entity has placed any restriction
on the  business or  properties  of the Company or any Company  Subsidiary  that

                                       -9-
<PAGE>

would,  individually  or in the  aggregate,  reasonably  be  expected  to have a
Company Material Adverse Effect.

         (n)  Employee  Benefit  Matters.  Except  as would  not  reasonably  be
expected to have,  either  individually or in the aggregate,  a Company Material
Adverse Effect:  (A) each "employee benefit plan" (within the meaning of Section
3(3)  of the  Employee  Retirement  Income  Security  Act of  1974,  as  amended
("ERISA"))  providing  benefits  to any current or former  employee,  officer or
director of the Company or any member of its "Controlled  Group" (defined as any
organization which is a member of a controlled group of corporations  within the
meaning of Section 414 of the  Internal  Revenue  Code of 1986,  as amended (the
"Code")) that is sponsored,  maintained or  contributed to by the Company or any
member of its  Controlled  Group and for which the  Company or any member of its
Controlled Group would have any liability, whether actual or contingent (each, a
"Plan")  has  been  maintained  in  compliance  with  its  terms  and  with  the
requirements of all applicable statutes, rules and regulations,  including ERISA
and the  Code;  (B)  with  respect  to each  Plan  subject  to Title IV of ERISA
(including,  for  purposes of this clause (B),  any plan  subject to Title IV of
ERISA  that  the  Company  or any  member  of its  Controlled  Group  previously
maintained or contributed to in the six years prior to the Signing Date), (1) no
"reportable event" (within the meaning of Section 4043(c) of ERISA),  other than
a reportable event for which the notice period referred to in Section 4043(c) of
ERISA has been waived, has occurred in the three years prior to the Signing Date
or is reasonably  expected to occur,  (2) no  "accumulated  funding  deficiency"
(within the meaning of Section 302 of ERISA or Section 412 of the Code), whether
or not waived,  has  occurred in the three years prior to the Signing Date or is
reasonably expected to occur, (3) the fair market value of the assets under each
Plan  exceeds  the  present  value  of all  benefits  accrued  under  such  Plan
(determined based on the assumptions used to fund such Plan) and (4) neither the
Company  nor any member of its  Controlled  Group has  incurred in the six years
prior to the Signing Date, or reasonably  expects to incur,  any liability under
Title IV of ERISA (other than  contributions to the Plan or premiums to the PBGC
in the ordinary course and without  default) in respect of a Plan (including any
Plan that is a "multiemployer plan", within the meaning of Section 4001(c)(3) of
ERISA);  and (C) each Plan that is intended to be qualified under Section 401(a)
of the Code has  received a favorable  determination  letter  from the  Internal
Revenue Service with respect to its qualified  status that has not been revoked,
or such a  determination  letter has been timely applied for but not received by
the Signing Date,  and nothing has occurred,  whether by action or by failure to
act, which could reasonably be expected to cause the loss,  revocation or denial
of such qualified status or favorable determination letter.

         (o)  Taxes.  Except as would  not,  individually  or in the  aggregate,
reasonably  be  expected  to have a Company  Material  Adverse  Effect,  (i) the
Company and the Company  Subsidiaries have filed all federal,  state,  local and
foreign  income and  franchise  Tax  returns  required  to be filed  through the
Signing  Date,  subject  to  permitted  extensions,  and have paid all Taxes due
thereon, and (ii) no Tax deficiency has been determined adversely to the Company
or any of the Company  Subsidiaries,  nor does the Company have any knowledge of
any Tax  deficiencies.  "Tax" or  "Taxes"  means any  federal,  state,  local or
foreign  income,  gross  receipts,   property,   sales,  use,  license,  excise,
franchise,  employment, payroll, withholding,  alternative or add on minimum, ad
valorem,  transfer or excise tax, or any other tax, custom,  duty,  governmental

                                      -10-
<PAGE>

fee or other like assessment or charge of any kind whatsoever, together with any
interest or penalty, imposed by any Governmental Entity.

         (p) Properties and Leases.  Except as would not, individually or in the
aggregate, reasonably be expected to have a Company Material Adverse Effect, the
Company and the Company  Subsidiaries have good and marketable title to all real
properties and all other  properties and assets owned by them, in each case free
from liens, encumbrances, claims and defects that would affect the value thereof
or interfere  with the use made or to be made  thereof by them.  Except as would
not, individually or in the aggregate,  reasonably be expected to have a Company
Material  Adverse  Effect,  the Company and the  Company  Subsidiaries  hold all
leased real or personal  property  under  valid and  enforceable  leases with no
exceptions that would interfere with the use made or to be made thereof by them.

         (q) Environmental  Liability.  Except as would not,  individually or in
the aggregate, reasonably be expected to have a Company Material Adverse Effect:

                  (i) there is no legal,  administrative,  or other  proceeding,
         claim  or  action  of any  nature  seeking  to  impose,  or that  would
         reasonably be expected to result in the  imposition  of, on the Company
         or any Company  Subsidiary,  any  liability  relating to the release of
         hazardous  substances  as  defined  under any  local,  state or federal
         environmental   statute,   regulation  or   ordinance,   including  the
         Comprehensive Environmental Response, Compensation and Liability Act of
         1980,  pending or, to the Company's  knowledge,  threatened against the
         Company or any Company Subsidiary;

                  (ii) to the Company's knowledge,  there is no reasonable basis
         for any such proceeding, claim or action; and

                  (iii)  neither  the  Company  nor any  Company  Subsidiary  is
         subject  to any  agreement,  order,  judgment  or decree by or with any
         court,   Governmental   Entity  or  third  party   imposing   any  such
         environmental liability.

         (r) Risk Management  Instruments.  Except as would not, individually or
in the  aggregate,  reasonably  be expected to have a Company  Material  Adverse
Effect, all 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  or its or their  customers,
were  entered  into  (i)  only  in the  ordinary  course  of  business,  (ii) in
accordance  with  prudent  practices  and  in all  material  respects  with  all
applicable  laws,  rules,  regulations  and  regulatory  policies and (iii) with
counterparties  believed to be financially  responsible at the time; and each of
such  instruments  constitutes the valid and legally  binding  obligation of the
Company or one of the Company  Subsidiaries,  enforceable in accordance with its
terms,  except as may be  limited  by the  Bankruptcy  Exceptions.  Neither  the
Company or the Company  Subsidiaries,  nor, to the knowledge of the Company, any
other  party  thereto,  is in  breach of any of its  obligations  under any such
agreement or arrangement  other than such breaches that would not,  individually
or in the aggregate,  reasonably be expected to have a Company  Material Adverse
Effect.

                                      -11-
<PAGE>

         (s)  Agreements  with  Regulatory  Agencies.  Except  as set  forth  on
Schedule E,  neither the  Company nor any Company  Subsidiary  is subject to any
material  cease-and-desist  or other similar order or enforcement  action issued
by,  or is a party to any  material  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,  2006,  has adopted any board  resolutions  at the request of, any
Governmental  Entity (other than the Appropriate  Federal Banking  Agencies with
jurisdiction  over the  Company  and the Company  Subsidiaries)  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 or  procedures,  its internal  controls,  its
management  or its  operations  or  business  (each  item  in this  sentence,  a
"Regulatory  Agreement"),  nor has the  Company or any Company  Subsidiary  been
advised  since  December  31,  2006 by any such  Governmental  Entity that it is
considering  issuing,  initiating,  ordering,  or requesting any such Regulatory
Agreement.  The Company and each Company  Subsidiary  are in  compliance  in all
material  respects  with  each  Regulatory  Agreement  to  which  it is party or
subject,  and neither the Company nor any Company  Subsidiary  has  received any
notice from any  Governmental  Entity  indicating that either the Company or any
Company  Subsidiary is not in compliance in all material  respects with any such
Regulatory   Agreement.   "Appropriate   Federal   Banking   Agency"  means  the
"appropriate Federal banking agency" with respect to the Company or such Company
Subsidiaries,  as applicable,  as defined in Section 3(q) of the Federal Deposit
Insurance Act (12 U.S.C. Section 1813(q)).

         (t)  Insurance.  The Company and the Company  Subsidiaries  are insured
with reputable insurers against such risks and in such amounts as the management
of the Company  reasonably  has  determined  to be prudent and  consistent  with
industry  practice.  The Company and the  Company  Subsidiaries  are in material
compliance with their insurance policies and are not in default under any of the
material  terms thereof,  each such policy is outstanding  and in full force and
effect,  all premiums and other payments due under any material policy have been
paid,  and all claims  thereunder  have been  filed in due and  timely  fashion,
except, in each case, as would not, individually or in the aggregate, reasonably
be expected to have a Company Material Adverse Effect.

         (u) Intellectual Property.  Except as would not, individually or in the
aggregate, reasonably be expected to have a Company Material Adverse Effect, (i)
the Company and each Company  Subsidiary owns or otherwise has the right to use,
all intellectual property rights,  including all trademarks,  trade dress, trade
names,  service  marks,  domain  names,  patents,   inventions,  trade  secrets,
know-how,  works of  authorship  and  copyrights  therein,  that are used in the
conduct  of their  existing  businesses  and all rights  relating  to the plans,
design and specifications of any of its branch facilities ("Proprietary Rights")
free and clear of all liens and any  claims of  ownership  by  current or former
employees, contractors, designers or others and (ii) neither the Company nor any
of the Company Subsidiaries is materially infringing, diluting, misappropriating
or violating,  nor has the Company or any or the Company  Subsidiaries  received
any written (or, to the knowledge of the Company, oral) communications  alleging
that any of them has materially infringed, diluted, misappropriated or violated,
any of the  Proprietary  Rights owned by any other person.  Except as would not,
individually  or in the  aggregate,  reasonably  be  expected  to have a Company

                                      -12-
<PAGE>

Material  Adverse  Effect,  to the  Company's  knowledge,  no  other  person  is
infringing, diluting,  misappropriating or violating, nor has the Company or any
or the Company  Subsidiaries  sent any written  communications  since January 1,
2006  alleging  that any  person  has  infringed,  diluted,  misappropriated  or
violated,  any of the  Proprietary  Rights  owned by the Company and the Company
Subsidiaries.

         (v) Brokers and  Finders.  No broker,  finder or  investment  banker is
entitled  to  any  financial  advisory,  brokerage,  finder's  or  other  fee or
commission in connection with this Agreement or the Warrant or the  transactions
contemplated  hereby or thereby based upon  arrangements made by or on behalf of
the  Company or any Company  Subsidiary  for which the  Investor  could have any
liability.

                                   Article III
                                    Covenants

         3.1  Commercially   Reasonable  Efforts.   Subject  to  the  terms  and
conditions  of this  Agreement,  each of the parties  will use its  commercially
reasonable efforts in good faith to take, or cause to be taken, all actions, and
to do,  or cause to be done,  all  things  necessary,  proper or  desirable,  or
advisable under applicable laws, so as to permit consummation of the Purchase as
promptly as practicable and otherwise to enable consummation of the transactions
contemplated  hereby and shall use commercially  reasonable efforts to cooperate
with the other party to that end.

         3.2  Expenses.  Unless  otherwise  provided  in this  Agreement  or the
Warrant,  each of the parties  hereto  will bear and pay all costs and  expenses
incurred by it or on its behalf in connection with the transactions contemplated
under this  Agreement  and the Warrant,  including  fees and expenses of its own
financial or other consultants, investment bankers, accountants and counsel.

         3.3  Sufficiency  of  Authorized  Warrant  Preferred  Stock;   Exchange
Listing.

         (a) During the period from the Closing Date until the date on which the
Warrant has been fully  exercised,  the Company shall at all times have reserved
for  issuance,  free of  preemptive or similar  rights,  a sufficient  number of
authorized and unissued Warrant Shares to effectuate such exercise.

         (b) If the Company  lists its Common Stock on any  national  securities
exchange,  the Company  shall,  if requested by the  Investor,  promptly use its
reasonable  best efforts to cause the Preferred  Shares and Warrant Shares to be
approved  for  listing  on  a  national   securities  exchange  as  promptly  as
practicable following such request.

         3.4 Certain  Notifications  Until Closing.  From the Signing Date until
the Closing,  the Company  shall  promptly  notify the Investor of (i) any fact,
event or  circumstance  of  which it is aware  and  which  would  reasonably  be
expected to cause any  representation  or warranty of the Company  contained  in
this  Agreement to be untrue or inaccurate  in any material  respect or to cause

                                      -13-
<PAGE>

any covenant or agreement of the Company  contained in this  Agreement not to be
complied with or satisfied in any material respect and (ii) except as Previously
Disclosed,  any fact,  circumstance,  event,  change,  occurrence,  condition or
development  of which the  Company  is aware and which,  individually  or in the
aggregate,  has had or would  reasonably be expected to have a Company  Material
Adverse Effect; provided,  however, that delivery of any notice pursuant to this
Section 3.4 shall not limit or affect any rights of or remedies available to the
Investor;  provided,  further,  that a failure to comply  with this  Section 3.4
shall not  constitute a breach of this Agreement or the failure of any condition
set forth in Section 1.2 to be satisfied unless the underlying  Company Material
Adverse Effect or material breach would independently result in the failure of a
condition set forth in Section 1.2 to be satisfied.

         3.5 Access, Information and Confidentiality.

         (a) From the  Signing  Date until the date when the  Investor  holds an
amount of Preferred  Shares having an aggregate  liquidation  value of less than
10% of the Purchase Price,  the Company will permit the Investor and its agents,
consultants, contractors and advisors (x) acting through the Appropriate Federal
Banking Agency,  or otherwise to the extent  necessary to evaluate,  manage,  or
transfer its investment in the Company,  to examine the corporate books and make
copies thereof and to discuss the affairs,  finances and accounts of the Company
and the Company  Subsidiaries  with the principal  officers of the Company,  all
upon reasonable notice and at such reasonable times and as often as the Investor
may  reasonably  request  and (y) to  review  any  information  material  to the
Investor's  investment in the Company provided by the Company to its Appropriate
Federal Banking Agency. Any investigation  pursuant to this Section 3.5 shall be
conducted  during normal  business  hours and in such manner as not to interfere
unreasonably with the conduct of the business of the Company, and nothing herein
shall require the Company or any Company  Subsidiary to disclose any information
to the Investor to the extent (i) prohibited by applicable law or regulation, or
(ii) that such disclosure  would  reasonably be expected to cause a violation of
any agreement to which the Company or any Company Subsidiary is a party or would
cause a risk of a loss of  privilege  to the Company or any  Company  Subsidiary
(provided  that the Company shall use  commercially  reasonable  efforts to make
appropriate  substitute  disclosure  arrangements under  circumstances where the
restrictions in this clause (ii) apply).

         (b) From the Signing Date until the date on which all of the  Preferred
Shares and Warrant Shares have been redeemed in whole, the Company will deliver,
or will cause to be delivered, to the Investor:

                  (i) as soon as available  after the end of each fiscal year of
         the Company, and in any event within 90 days thereafter, a consolidated
         balance  sheet of the  Company as of the end of such fiscal  year,  and
         consolidated  statements of income, retained earnings and cash flows of
         the Company for such year,  in each case  prepared in  accordance  with
         GAAP and setting forth in each case in comparative form the figures for
         the previous fiscal year of the Company,  and which shall be audited to
         the extent audited financial statements are available; and

                                      -14-

<PAGE>

                  (ii) as soon as available  after the end of the first,  second
          and third quarterly periods in each fiscal year of the Company, a copy
          of any quarterly reports provided to other stockholders of the Company
          or Company management.

         (c) The Investor will use reasonable best efforts to hold, and will use
reasonable  best  efforts  to cause its  agents,  consultants,  contractors  and
advisors  to hold,  in  confidence  all  nonpublic  records,  books,  contracts,
instruments,  computer  data  and  other  data  and  information  (collectively,
"Information")  concerning the Company  furnished or made available to it by the
Company or its representatives  pursuant to this Agreement (except to the extent
that such  information  can be shown to have been (i)  previously  known by such
party on a non-confidential basis, (ii) in the public domain through no fault of
such party or (iii) later  lawfully  acquired from other sources by the party to
which it was  furnished  (and  without  violation  of any other  confidentiality
obligation));  provided  that  nothing  herein shall  prevent the Investor  from
disclosing  any  Information  to the  extent  required  by  applicable  laws  or
regulations or by any subpoena or similar legal process.

         (d) The Investor's information rights pursuant to Section 3.5(b) may be
assigned by the Investor to a transferee or assignee of the Purchased Securities
or the Warrant  Shares or with a liquidation  preference  or, in the case of the
Warrant,  the  liquidation  preference  of  the  underlying  shares  of  Warrant
Preferred  Stock,  no less than an amount  equal to 2% of the initial  aggregate
liquidation preference of the Preferred Shares.

                                   Article IV
                              Additional Agreements

         4.1  Purchase  for  Investment.  The  Investor  acknowledges  that  the
Purchased  Securities and the Warrant Shares have not been registered  under the
Securities Act or under any state securities laws. The Investor (a) is acquiring
the Purchased  Securities  pursuant to an exemption from registration  under the
Securities  Act solely for  investment  with no present  intention to distribute
them to any person in violation of the  Securities  Act or any  applicable  U.S.
state  securities  laws,  (b) will not sell or  otherwise  dispose of any of the
Purchased  Securities  or the  Warrant  Shares,  except in  compliance  with the
registration  requirements or exemption provisions of the Securities Act and any
applicable U.S. state securities laws, and (c) has such knowledge and experience
in financial  and business  matters and in  investments  of this type that it is
capable of  evaluating  the merits  and risks of the  Purchase  and of making an
informed investment decision.

         4.2 Legends.

         (a) The  Investor  agrees that all  certificates  or other  instruments
representing  the  Warrant  will bear a legend  substantially  to the  following
effect:

          "THE   SECURITIES   REPRESENTED  BY  THIS  INSTRUMENT  HAVE  NOT  BEEN
          REGISTERED  UNDER  THE  SECURITIES  ACT OF 1933,  AS  AMENDED,  OR THE
          SECURITIES  LAWS OF ANY  STATE  AND MAY  NOT BE  TRANSFERRED,  SOLD OR

                                      -15-
<PAGE>

          OTHERWISE  DISPOSED OF EXCEPT WHILE A REGISTRATION  STATEMENT RELATING
          THERETO IS IN EFFECT UNDER SUCH ACT AND  APPLICABLE  STATE  SECURITIES
          LAWS OR PURSUANT TO AN EXEMPTION FROM  REGISTRATION  UNDER SUCH ACT OR
          SUCH LAWS.  THIS  INSTRUMENT IS ISSUED SUBJECT TO THE  RESTRICTIONS ON
          TRANSFER  AND OTHER  PROVISIONS  OF A  SECURITIES  PURCHASE  AGREEMENT
          BETWEEN THE ISSUER OF THESE  SECURITIES  AND THE INVESTOR  REFERRED TO
          THEREIN,  A COPY OF WHICH IS ON FILE WITH THE ISSUER.  THE  SECURITIES
          REPRESENTED   BY  THIS   INSTRUMENT  MAY  NOT  BE  SOLD  OR  OTHERWISE
          TRANSFERRED  EXCEPT IN  COMPLIANCE  WITH SAID  AGREEMENT.  ANY SALE OR
          OTHER TRANSFER NOT IN COMPLIANCE WITH SAID AGREEMENT WILL BE VOID."

         (b) In addition,  the Investor  agrees that all  certificates  or other
instruments representing the Preferred Shares and the Warrant Shares will bear a
legend substantially to the following effect:

          "THE  SECURITIES  REPRESENTED  BY  THIS  INSTRUMENT  ARE  NOT  SAVINGS
          ACCOUNTS,  DEPOSITS OR OTHER OBLIGATIONS OF A BANK AND ARE NOT INSURED
          BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENTAL
          AGENCY.

          THE SECURITIES REPRESENTED BY THIS INSTRUMENT HAVE NOT BEEN REGISTERED
          UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE  "SECURITIES  ACT"),
          OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE  TRANSFERRED,  SOLD
          OR  OTHERWISE  DISPOSED  OF  EXCEPT  WHILE  A  REGISTRATION  STATEMENT
          RELATING  THERETO  IS IN EFFECT  UNDER SUCH ACT AND  APPLICABLE  STATE
          SECURITIES  LAWS OR PURSUANT TO AN EXEMPTION FROM  REGISTRATION  UNDER
          SUCH ACT OR SUCH LAWS. EACH PURCHASER OF THE SECURITIES REPRESENTED BY
          THIS  INSTRUMENT  IS  NOTIFIED  THAT THE  SELLER MAY BE RELYING ON THE
          EXEMPTION  FROM SECTION 5 OF THE  SECURITIES ACT PROVIDED BY RULE 144A
          THEREUNDER.  ANY  TRANSFEREE  OF THE  SECURITIES  REPRESENTED  BY THIS
          INSTRUMENT  BY ITS  ACCEPTANCE  HEREOF  (1)  REPRESENTS  THAT  IT IS A
          "QUALIFIED  INSTITUTIONAL  BUYER"  (AS  DEFINED IN RULE 144A UNDER THE
          SECURITIES ACT), (2) AGREES THAT IT WILL NOT OFFER,  SELL OR OTHERWISE
          TRANSFER THE  SECURITIES  REPRESENTED  BY THIS  INSTRUMENT  EXCEPT (A)
          PURSUANT TO A REGISTRATION STATEMENT WHICH IS THEN EFFECTIVE UNDER THE
          SECURITIES ACT, (B) FOR SO LONG AS THE SECURITIES  REPRESENTED BY THIS
          INSTRUMENT ARE ELIGIBLE FOR RESALE  PURSUANT TO RULE 144A, TO A PERSON
          IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED
          IN RULE  144A  UNDER THE  SECURITIES  ACT THAT  PURCHASES  FOR ITS OWN
          ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED  INSTITUTIONAL BUYER TO WHOM

                                      -16-

<PAGE>

          NOTICE IS GIVEN THAT THE  TRANSFER  IS BEING MADE IN  RELIANCE ON RULE
          144A,  (C) TO  THE  ISSUER  OR (D)  PURSUANT  TO ANY  OTHER  AVAILABLE
          EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND
          (3)  AGREES  THAT IT WILL GIVE TO EACH  PERSON TO WHOM THE  SECURITIES
          REPRESENTED BY THIS INSTRUMENT ARE TRANSFERRED A NOTICE  SUBSTANTIALLY
          TO THE EFFECT OF THIS LEGEND.

          THIS INSTRUMENT IS ISSUED SUBJECT TO THE  RESTRICTIONS ON TRANSFER AND
          OTHER PROVISIONS OF A SECURITIES PURCHASE AGREEMENT BETWEEN THE ISSUER
          OF THESE  SECURITIES AND THE INVESTOR  REFERRED TO THEREIN,  A COPY OF
          WHICH IS ON FILE WITH THE ISSUER.  THE SECURITIES  REPRESENTED BY THIS
          INSTRUMENT  MAY  NOT  BE  SOLD  OR  OTHERWISE  TRANSFERRED  EXCEPT  IN
          COMPLIANCE  WITH SAID  AGREEMENT.  ANY SALE OR OTHER  TRANSFER  NOT IN
          COMPLIANCE WITH SAID AGREEMENT WILL BE VOID."

         (c) In the event that any Purchased  Securities  or Warrant  Shares (i)
become  registered  under  the  Securities  Act  or  (ii)  are  eligible  to  be
transferred without restriction in accordance with Rule 144 or another exemption
from  registration  under the Securities Act (other than Rule 144A), the Company
shall issue new certificates or other  instruments  representing  such Purchased
Securities or Warrant Shares,  which shall not contain the applicable legends in
Sections  4.2(a) and (b) above;  provided  that the Investor  surrenders  to the
Company the previously issued certificates or other instruments.

         4.3 Certain  Transactions.  The Company  will not merge or  consolidate
with,  or sell,  transfer or lease all or  substantially  all of its property or
assets to, any other party unless the successor,  transferee or lessee party (or
its ultimate parent entity), as the case may be (if not the Company),  expressly
assumes  the due and  punctual  performance  and  observance  of each and  every
covenant, agreement and condition of this Agreement to be performed and observed
by the Company.

         4.4 Transfer of Purchased  Securities and Warrant Shares;  Restrictions
on Exercise of the Warrant.  Subject to compliance  with  applicable  securities
laws,  the Investor  shall be permitted to transfer,  sell,  assign or otherwise
dispose of ("Transfer") all or a portion of the Purchased  Securities or Warrant
Shares at any time,  and the Company  shall take all steps as may be  reasonably
requested by the Investor to facilitate the Transfer of the Purchased Securities
and the Warrant  Shares;  provided  that the  Investor  shall not  Transfer  any
Purchased  Securities  or Warrant  Shares if such  transfer  would  require  the
Company to be subject to the periodic  reporting  requirements  of Section 13 or
15(d)  of  the  Securities  Exchange  Act  of  1934  (the  "Exchange  Act").  In
furtherance of the foregoing,  the Company shall provide reasonable  cooperation
to  facilitate  any Transfers of the  Purchased  Securities  or Warrant  Shares,
including,  as  is  reasonable  under  the  circumstances,  by  furnishing  such
information concerning the Company and its business as a proposed transferee may
reasonably request (including such information as is required by Section 4.5(k))
and  making  management  of the  Company  reasonably  available  to  respond  to

                                      -17-

<PAGE>

questions  of a proposed  transferee  in  accordance  with  customary  practice,
subject  in all  cases  to  the  proposed  transferee  agreeing  to a  customary
confidentiality agreement.

         4.5 Registration Rights.

         (a)  Unless and until the  Company  becomes  subject  to the  reporting
requirements  of Section 13 or 15(d) of the Exchange Act, the Company shall have
no  obligation  to comply with the  provisions  of this  Section 4.5 (other than
Section 4.5(b)(iv)-(vi)); provided that the Company covenants and agrees that it
shall comply with this Section 4.5 as soon as practicable after the date that it
becomes subject to such reporting requirements.

         (b) Registration.

                  (i) Subject to the terms and conditions of this Agreement, the
         Company  covenants and agrees that as promptly as practicable after the
         date that the Company becomes subject to the reporting  requirements of
         Section 13 or 15(d) of the Exchange Act (and in any event no later than
         30 days thereafter),  the Company shall prepare and file with the SEC a
         Shelf Registration  Statement  covering all Registrable  Securities (or
         otherwise designate an existing Shelf Registration Statement filed with
         the SEC to cover the  Registrable  Securities),  and, to the extent the
         Shelf   Registration   Statement  has  not  theretofore  been  declared
         effective  or is not  automatically  effective  upon such  filing,  the
         Company  shall  use  reasonable   best  efforts  to  cause  such  Shelf
         Registration  Statement to be declared or become  effective and to keep
         such  Shelf  Registration   Statement  continuously  effective  and  in
         compliance  with the  Securities  Act and  usable  for  resale  of such
         Registrable  Securities  for a  period  from  the  date of its  initial
         effectiveness  until such time as there are no  Registrable  Securities
         remaining (including by refiling such Shelf Registration  Statement (or
         a new Shelf  Registration  Statement) if the initial Shelf Registration
         Statement expires).  Notwithstanding  the foregoing,  if the Company is
         not eligible to file a  registration  statement  on Form S-3,  then the
         Company shall not be obligated to file a Shelf  Registration  Statement
         unless and until requested to do so in writing by the Investor.

                  (ii) Any registration  pursuant to Section  4.5(b)(i) shall be
         effected by means of a shelf  registration on an appropriate form under
         Rule 415 under the Securities Act (a "Shelf  Registration  Statement").
         If  the  Investor  or  any  other  Holder  intends  to  distribute  any
         Registrable  Securities by means of an  underwritten  offering it shall
         promptly  so  advise  the  Company  and  the  Company  shall  take  all
         reasonable steps to facilitate such distribution, including the actions
         required  pursuant to Section  4.5(d);  provided that the Company shall
         not be required to facilitate an  underwritten  offering of Registrable
         Securities unless the expected gross proceeds from such offering exceed
         (i) 2% of the initial aggregate liquidation preference of the Preferred
         Shares if such initial aggregate liquidation preference is less than $2
         billion  and (ii) $200  million if the  initial  aggregate  liquidation
         preference  of the  Preferred  Shares  is equal to or  greater  than $2
         billion.  The  lead  underwriters  in any  such  distribution  shall be
         selected by the Holders of a majority of the Registrable  Securities to

                                      -18-
<PAGE>

         be distributed;  provided that to the extent  appropriate and permitted
         under applicable law, such Holders shall consider the qualifications of
         any  broker-dealer  Affiliate  of the  Company  in  selecting  the lead
         underwriters in any such distribution.

                  (iii)  The   Company   shall  not  be  required  to  effect  a
         registration  (including  a resale of  Registrable  Securities  from an
         effective Shelf  Registration  Statement) or an  underwritten  offering
         pursuant to Section 4.5(b): (A) with respect to securities that are not
         Registrable Securities; or (B) if the Company has notified the Investor
         and all other  Holders that in the good faith  judgment of the Board of
         Directors,  it would be  materially  detrimental  to the Company or its
         securityholders  for such  registration or underwritten  offering to be
         effected at such time,  in which event the Company shall have the right
         to defer such  registration for a period of not more than 45 days after
         receipt of the request of the  Investor or any other  Holder;  provided
         that such right to delay a registration or underwritten  offering shall
         be  exercised  by the Company  (1) only if the  Company  has  generally
         exercised (or is  concurrently  exercising)  similar  black-out  rights
         against holders of similar securities that have registration rights and
         (2) not more than three times in any 12-month  period and not more than
         90 days in the  aggregate  in any 12-month  period.  (iv) If during any
         period when an effective Shelf Registration Statement is not available,
         the Company  proposes to register any of its equity  securities,  other
         than  a  registration  pursuant  to  Section  4.5(b)(i)  or  a  Special
         Registration, and the registration form to be filed may be used for the
         registration   or   qualification   for   distribution  of  Registrable
         Securities, the Company will give prompt written notice to the Investor
         and all other  Holders of its  intention to effect such a  registration
         (but in no event  less than ten days  prior to the  anticipated  filing
         date) and will include in such registration all Registrable  Securities
         with  respect to which the Company has  received  written  requests for
         inclusion  therein  within  ten  business  days  after  the date of the
         Company's notice (a "Piggyback Registration"). Any such person that has
         made such a written  request may  withdraw its  Registrable  Securities
         from  such  Piggyback  Registration  by  giving  written  notice to the
         Company and the  managing  underwriter,  if any, on or before the fifth
         business  day prior to the  planned  effective  date of such  Piggyback
         Registration.  The Company may  terminate or withdraw any  registration
         under  this  Section  4.5(b)(iv)  prior  to the  effectiveness  of such
         registration, whether or not Investor or any other Holders have elected
         to include Registrable Securities in such registration.

                  (v) If the registration  referred to in Section  4.5(b)(iv) is
         proposed to be  underwritten,  the Company will so advise  Investor and
         all other  Holders as a part of the written  notice  given  pursuant to
         Section 4.5(b)(iv).  In such event, the right of Investor and all other
         Holders to registration  pursuant to Section 4.5(b) will be conditioned
         upon such persons' participation in such underwriting and the inclusion
         of such person's  Registrable  Securities in the  underwriting  if such
         securities  are of the same class of securities as the securities to be
         offered  in the  underwritten  offering,  and  each  such  person  will
         (together  with the Company and the other  persons  distributing  their
         securities  through  such  underwriting)  enter  into  an  underwriting
         agreement  in  customary  form  with the  underwriter  or  underwriters

                                      -19-
<PAGE>

         selected  for  such  underwriting  by the  Company;  provided  that the
         Investor  (as  opposed  to other  Holders)  shall  not be  required  to
         indemnify  any  person  in  connection  with any  registration.  If any
         participating person disapproves of the terms of the underwriting, such
         person  may  elect to  withdraw  therefrom  by  written  notice  to the
         Company, the managing underwriters and the Investor (if the Investor is
         participating in the underwriting).

                  (vi) If either (x) the Company grants "piggyback" registration
         rights to one or more third parties to include  their  securities in an
         underwritten  offering under the Shelf Registration  Statement pursuant
         to Section  4.5(b)(ii)  or (y) a Piggyback  Registration  under Section
         4.5(b)(iv)  relates  to an  underwritten  offering  on  behalf  of  the
         Company,  and in  either  case the  managing  underwriters  advise  the
         Company  that in their  reasonable  opinion  the  number of  securities
         requested to be included in such offering  exceeds the number which can
         be sold without adversely  affecting the marketability of such offering
         (including  an adverse  effect on the per share  offering  price),  the
         Company will include in such  offering  only such number of  securities
         that in the  reasonable  opinion of such managing  underwriters  can be
         sold without  adversely  affecting  the  marketability  of the offering
         (including an adverse  effect on the per share offering  price),  which
         securities will be so included in the following order of priority:  (A)
         first,  in  the  case  of  a  Piggyback   Registration   under  Section
         4.5(b)(iv),  the securities the Company  proposes to sell, (B) then the
         Registrable  Securities  of the Investor and all other Holders who have
         requested  inclusion  of  Registrable  Securities  pursuant  to Section
         4.5(b)(ii) or Section 4.5(b)(iv), as applicable,  pro rata on the basis
         of the aggregate number of such securities or shares owned by each such
         person and (C) lastly,  any other  securities  of the Company that have
         been  requested  to be so  included,  subject  to  the  terms  of  this
         Agreement;  provided,  however,  that if the Company has,  prior to the
         Signing Date,  entered into an agreement with respect to its securities
         that is  inconsistent  with the order of priority  contemplated  hereby
         then it shall apply the order of priority in such conflicting agreement
         to the extent  that it would  otherwise  result in a breach  under such
         agreement.

         (c) Expenses of  Registration.  All Registration  Expenses  incurred in
connection with any registration, qualification or compliance hereunder shall be
borne by the  Company.  All Selling  Expenses  incurred in  connection  with any
registrations  hereunder  shall be borne by the  holders  of the  securities  so
registered pro rata on the basis of the aggregate  offering or sale price of the
securities so registered.

         (d)  Obligations  of the  Company.  Whenever  required  to  effect  the
registration  of any  Registrable  Securities or facilitate the  distribution of
Registrable  Securities  pursuant to an effective Shelf Registration  Statement,
the Company shall, as expeditiously as reasonably practicable:

                  (i) Prepare and file with the SEC a prospectus  supplement  or
         post-effective  amendment  with  respect  to  a  proposed  offering  of
         Registrable Securities pursuant to an effective registration statement,
         subject to Section 4.5(d),  keep such registration  statement effective

                                      -20-
<PAGE>

         and keep  such  prospectus  supplement  current  until  the  securities
         described therein are no longer Registrable Securities.

                  (ii)  Prepare  and  file  with  the SEC  such  amendments  and
         supplements to the applicable registration statement and the prospectus
         or  prospectus  supplement  used in connection  with such  registration
         statement  as may be  necessary  to comply with the  provisions  of the
         Securities  Act  with  respect  to the  disposition  of all  securities
         covered by such registration statement.

                  (iii) Furnish to the Holders and any underwriters  such number
         of  copies  of the  applicable  registration  statement  and each  such
         amendment and supplement  thereto (including in each case all exhibits)
         and of a prospectus,  including a preliminary prospectus, in conformity
         with the  requirements  of the Securities Act, and such other documents
         as they may reasonably  request in order to facilitate the  disposition
         of Registrable Securities owned or to be distributed by them.

                  (iv) Use its  reasonable  best efforts to register and qualify
         the securities covered by such registration  statement under such other
         securities  or  Blue  Sky  laws  of  such  jurisdictions  as  shall  be
         reasonably requested by the Holders or any managing underwriter(s),  to
         keep such  registration or  qualification in effect for so long as such
         registration  statement remains in effect, and to take any other action
         which may be  reasonably  necessary to enable such seller to consummate
         the disposition in such  jurisdictions  of the securities owned by such
         Holder;  provided  that the Company shall not be required in connection
         therewith  or as a  condition  thereto to qualify to do  business or to
         file a general  consent to  service  of  process in any such  states or
         jurisdictions.

                  (v) Notify each Holder of  Registrable  Securities at any time
         when a prospectus  relating  thereto is required to be delivered  under
         the  Securities  Act of the happening of any event as a result of which
         the  applicable  prospectus,  as then in  effect,  includes  an  untrue
         statement of a material fact or omits to state a material fact required
         to be stated  therein or necessary to make the  statements  therein not
         misleading in light of the circumstances then existing.

                  (vi) Give written notice to the Holders:

                           (A) when any registration statement filed pursuant to
                  Section  4.5(a) or any  amendment  thereto has been filed with
                  the SEC (except for any amendment  effected by the filing of a
                  document  with the SEC pursuant to the Exchange  Act) and when
                  such registration  statement or any  post-effective  amendment
                  thereto has become effective;

                           (B) of any  request  by the  SEC  for  amendments  or
                  supplements  to any  registration  statement or the prospectus
                  included therein or for additional information;

                                      -21-

<PAGE>

                           (C) of the  issuance  by the  SEC of any  stop  order
                  suspending the effectiveness of any registration  statement or
                  the initiation of any proceedings for that purpose;

                           (D)  of  the  receipt  by the  Company  or its  legal
                  counsel of any notification  with respect to the suspension of
                  the qualification of the applicable Registrable Securities for
                  sale in any  jurisdiction  or the initiation or threatening of
                  any proceeding for such purpose;

                           (E) of the  happening of any event that  requires the
                  Company  to  make  changes  in  any   effective   registration
                  statement  or  the  prospectus  related  to  the  registration
                  statement  in  order  to  make  the  statements   therein  not
                  misleading   (which   notice  shall  be   accompanied   by  an
                  instruction  to suspend  the use of the  prospectus  until the
                  requisite changes have been made); and

                           (F) if at any time the representations and warranties
                  of  the  Company  contained  in  any  underwriting   agreement
                  contemplated  by  Section  4.5(d)(x)  cease  to  be  true  and
                  correct.

                  (vii) Use its reasonable  best efforts to prevent the issuance
         or obtain the withdrawal of any order  suspending the  effectiveness of
         any registration  statement referred to in Section 4.5(d)(vi)(C) at the
         earliest practicable time.

                  (viii)  Upon  the  occurrence  of any  event  contemplated  by
         Section 4.5(d)(v) or  4.5(d)(vi)(E),  promptly prepare a post-effective
         amendment to such registration statement or a supplement to the related
         prospectus or file any other  required  document so that, as thereafter
         delivered to the Holders and any underwriters,  the prospectus will not
         contain an untrue  statement  of a  material  fact or omit to state any
         material fact necessary to make the statements therein, in light of the
         circumstances  under  which  they were  made,  not  misleading.  If the
         Company  notifies the Holders in accordance with Section  4.5(d)(vi)(E)
         to suspend the use of the prospectus until the requisite changes to the
         prospectus have been made, then the Holders and any underwriters  shall
         suspend use of such prospectus and use their reasonable best efforts to
         return to the Company all copies of such  prospectus  (at the Company's
         expense)  other than  permanent  file copies  then in such  Holders' or
         underwriters'  possession.  The  total  number  of days  that  any such
         suspension may be in effect in any 12-month  period shall not exceed 90
         days.

                  (ix) Use reasonable best efforts to procure the cooperation of
         the  Company's  transfer  agent in  settling  any  offering  or sale of
         Registrable  Securities,  including  with  respect to the  transfer  of
         physical stock certificates into book-entry form in accordance with any
         procedures   reasonably  requested  by  the  Holders  or  any  managing
         underwriter(s).

                  (x) If an  underwritten  offering  is  requested  pursuant  to
         Section 4.5(b)(ii),  enter into an underwriting  agreement in customary
         form,  scope and substance  and take all such other actions  reasonably

                                      -22-

<PAGE>

         requested  by the Holders of a majority of the  Registrable  Securities
         being sold in connection  therewith or by the managing  underwriter(s),
         if any, to expedite or facilitate the underwritten  disposition of such
         Registrable Securities, and in connection therewith in any underwritten
         offering  (including making members of management and executives of the
         Company available to participate in "road shows",  similar sales events
         and other  marketing  activities),  (A) make such  representations  and
         warranties  to the  Holders  that  are  selling  stockholders  and  the
         managing  underwriter(s),  if any,  with respect to the business of the
         Company and its  subsidiaries,  and the Shelf  Registration  Statement,
         prospectus  and  documents,  if  any,  incorporated  or  deemed  to  be
         incorporated  by reference  therein,  in each case, in customary  form,
         substance  and  scope,  and,  if  true,  confirm  the  same if and when
         requested,   (B)  use  its  reasonable  best  efforts  to  furnish  the
         underwriters with opinions of counsel to the Company,  addressed to the
         managing  underwriter(s),  if any,  covering  the  matters  customarily
         covered in such opinions requested in underwritten  offerings,  (C) use
         its reasonable  best efforts to obtain "cold comfort"  letters from the
         independent  certified  public  accountants  of the  Company  (and,  if
         necessary,  any other independent  certified public  accountants of any
         business  acquired by the Company for which  financial  statements  and
         financial  data are included in the Shelf  Registration  Statement) who
         have  certified  the  financial   statements  included  in  such  Shelf
         Registration   Statement,   addressed   to   each   of   the   managing
         underwriter(s),  if any,  such  letters  to be in  customary  form  and
         covering  matters of the type  customarily  covered  in "cold  comfort"
         letters,  (D) if an  underwriting  agreement is entered into,  the same
         shall contain  indemnification  provisions and procedures  customary in
         underwritten  offerings  (provided  that  the  Investor  shall  not  be
         obligated to provide any indemnity), and (E) deliver such documents and
         certificates  as may  be  reasonably  requested  by  the  Holders  of a
         majority  of  the  Registrable  Securities  being  sold  in  connection
         therewith,  their counsel and the managing  underwriter(s),  if any, to
         evidence the continued validity of the  representations  and warranties
         made pursuant to clause (i) above and to evidence  compliance  with any
         customary conditions  contained in the underwriting  agreement or other
         agreement entered into by the Company.

                  (xi) Make  available  for  inspection by a  representative  of
         Holders that are selling stockholders, the managing underwriter(s),  if
         any,  and any  attorneys  or  accountants  retained by such  Holders or
         managing  underwriter(s),  at the offices where normally  kept,  during
         reasonable  business  hours,  financial  and other  records,  pertinent
         corporate  documents  and  properties  of the  Company,  and  cause the
         officers,  directors  and  employees  of  the  Company  to  supply  all
         information  in  each  case  reasonably  requested  (and  of  the  type
         customarily  provided in  connection  with due  diligence  conducted in
         connection with a registered public offering of securities) by any such
         representative,  managing  underwriter(s),  attorney or  accountant  in
         connection with such Shelf Registration Statement.

                  (xii)  Use   reasonable   best   efforts  to  cause  all  such
         Registrable  Securities  to  be  listed  on  each  national  securities
         exchange  on which  similar  securities  issued by the Company are then
         listed  or, if no similar  securities  issued by the  Company  are then
         listed on any national  securities  exchange,  use its reasonable  best

                                      -23-
<PAGE>

         efforts to cause all such  Registrable  Securities to be listed on such
         securities exchange as the Investor may designate.

                  (xiii)  If   requested   by  Holders  of  a  majority  of  the
         Registrable  Securities  being  registered  and/or  sold in  connection
         therewith, or the managing underwriter(s),  if any, promptly include in
         a prospectus supplement or amendment such information as the Holders of
         a majority of the Registrable  Securities being registered  and/or sold
         in  connection  therewith  or  managing  underwriter(s),  if  any,  may
         reasonably   request  in  order  to  permit  the  intended   method  of
         distribution of such  securities and make all required  filings of such
         prospectus  supplement or such amendment as soon as  practicable  after
         the Company has received such request.

                  (xiv)  Timely   provide  to  its  security   holders   earning
         statements satisfying the provisions of Section 11(a) of the Securities
         Act and Rule 158 thereunder.

         (e)  Suspension  of Sales.  Upon  receipt  of written  notice  from the
Company that a  registration  statement,  prospectus  or  prospectus  supplement
contains or may contain an untrue  statement of a material  fact or omits or may
omit to state a material fact required to be stated therein or necessary to make
the  statements  therein not  misleading or that  circumstances  exist that make
inadvisable  use  of  such  registration  statement,  prospectus  or  prospectus
supplement,  the  Investor  and each  Holder  of  Registrable  Securities  shall
forthwith discontinue  disposition of Registrable  Securities until the Investor
and/or Holder has received  copies of a  supplemented  or amended  prospectus or
prospectus  supplement,  or until the Investor  and/or such Holder is advised in
writing  by the  Company  that the use of the  prospectus  and,  if  applicable,
prospectus  supplement may be resumed,  and, if so directed by the Company,  the
Investor  and/or such  Holder  shall  deliver to the  Company (at the  Company's
expense)  all copies,  other than  permanent  file  copies then in the  Investor
and/or  such  Holder's  possession,   of  the  prospectus  and,  if  applicable,
prospectus  supplement covering such Registrable  Securities current at the time
of receipt of such notice. The total number of days that any such suspension may
be in effect in any 12-month period shall not exceed 90 days.

         (f) Termination of Registration Rights. A Holder's  registration rights
as to any securities held by such Holder (and its Affiliates,  partners, members
and  former  members)  shall  not  be  available   unless  such  securities  are
Registrable Securities.

         (g) Furnishing Information.

                  (i) Neither  the  Investor  nor any Holder  shall use any free
         writing prospectus (as defined in Rule 405) in connection with the sale
         of  Registrable  Securities  without the prior  written  consent of the
         Company.

                  (ii) It shall be a condition  precedent to the  obligations of
         the Company to take any action pursuant to Section 4.5(d) that Investor
         and/or the selling Holders and the underwriters,  if any, shall furnish
         to the Company such information regarding  themselves,  the Registrable
         Securities  held by them and the intended method of disposition of such

                                      -24-

<PAGE>

         securities  as shall be required to effect the  registered  offering of
         their Registrable Securities.

         (h) Indemnification.

                  (i) The  Company  agrees to  indemnify  each  Holder and, if a
         Holder is a person other than an  individual,  such Holder's  officers,
         directors,  employees, agents, representatives and Affiliates, and each
         Person,  if any,  that  controls  a Holder  within  the  meaning of the
         Securities  Act (each,  an  "Indemnitee"),  against any and all losses,
         claims, damages,  actions,  liabilities,  costs and expenses (including
         reasonable  fees,  expenses and  disbursements  of attorneys  and other
         professionals  incurred in connection  with  investigating,  defending,
         settling,  compromising  or paying any such  losses,  claims,  damages,
         actions,  liabilities,  costs and expenses),  joint or several, arising
         out of or based upon any untrue  statement or alleged untrue  statement
         of material fact contained in any registration statement, including any
         preliminary  prospectus or final  prospectus  contained  therein or any
         amendments or supplements thereto or any documents incorporated therein
         by reference or contained in any free writing  prospectus (as such term
         is defined in Rule 405)  prepared by the Company or authorized by it in
         writing  for  use by  such  Holder  (or  any  amendment  or  supplement
         thereto);  or any omission to state therein a material fact required to
         be stated therein or necessary to make the statements therein, in light
         of the  circumstances  under  which  they were  made,  not  misleading;
         provided,  that the Company  shall not be liable to such  Indemnitee in
         any  such  case to the  extent  that  any  such  loss,  claim,  damage,
         liability  (or  action or  proceeding  in respect  thereof)  or expense
         arises out of or is based upon (A) an untrue statement or omission made
         in  such  registration   statement,   including  any  such  preliminary
         prospectus or final prospectus contained therein or any such amendments
         or supplements  thereto or contained in any free writing prospectus (as
         such term is defined in Rule 405) prepared by the Company or authorized
         by it in writing for use by such Holder (or any amendment or supplement
         thereto), in reliance upon and in conformity with information regarding
         such  Indemnitee  or its plan of  distribution  or ownership  interests
         which was  furnished in writing to the Company by such  Indemnitee  for
         use in connection with such registration statement,  including any such
         preliminary  prospectus or final  prospectus  contained  therein or any
         such amendments or supplements thereto, or (B) offers or sales effected
         by or on behalf of such  Indemnitee  "by means of" (as  defined in Rule
         159A) a "free writing prospectus" (as defined in Rule 405) that was not
         authorized in writing by the Company.

                  (ii) If the indemnification  provided for in Section 4.5(h)(i)
         is  unavailable  to an Indemnitee  with respect to any losses,  claims,
         damages, actions, liabilities, costs or expenses referred to therein or
         is  insufficient  to  hold  the  Indemnitee  harmless  as  contemplated
         therein,  then the Company,  in lieu of indemnifying  such  Indemnitee,
         shall  contribute to the amount paid or payable by such Indemnitee as a
         result of such losses, claims, damages, actions, liabilities,  costs or
         expenses in such  proportion as is  appropriate to reflect the relative
         fault of the Indemnitee, on the one hand, and the Company, on the other
         hand, in connection  with the statements or omissions which resulted in
         such losses, claims, damages, actions,  liabilities,  costs or expenses
         as well as any other relevant  equitable  considerations.  The relative

                                      -25-

<PAGE>

         fault of the Company,  on the one hand, and of the  Indemnitee,  on the
         other hand,  shall be determined by reference to, among other  factors,
         whether the untrue  statement of a material fact or omission to state a
         material fact relates to information  supplied by the Company or by the
         Indemnitee  and the  parties'  relative  intent,  knowledge,  access to
         information  and  opportunity  to correct or prevent such  statement or
         omission;  the Company and each Holder  agree that it would not be just
         and equitable if contribution  pursuant to this Section 4.5(h)(ii) were
         determined by pro rata  allocation or by any other method of allocation
         that does not take account of the equitable  considerations referred to
         in   Section   4.5(h)(i).    No   Indemnitee   guilty   of   fraudulent
         misrepresentation   (within  the  meaning  of  Section   11(f)  of  the
         Securities Act) shall be entitled to  contribution  from the Company if
         the Company was not guilty of such fraudulent misrepresentation.

         (i) Assignment of  Registration  Rights.  The rights of the Investor to
registration  of  Registrable  Securities  pursuant  to  Section  4.5(b)  may be
assigned by the Investor to a transferee or assignee of  Registrable  Securities
with a liquidation  preference or, in the case of the Warrant,  the  liquidation
preference of the underlying  shares of Warrant Preferred Stock, no less than an
amount equal to (i) 2% of the initial  aggregate  liquidation  preference of the
Preferred Shares if such initial aggregate  liquidation  preference is less than
$2 billion and (ii) $200 million if the initial aggregate liquidation preference
of the  Preferred  Shares  is equal to or  greater  than $2  billion;  provided,
however,  the transferor shall, within ten days after such transfer,  furnish to
the  Company  written  notice  of the name and  address  of such  transferee  or
assignee  and the  number  and type of  Registrable  Securities  that are  being
assigned.

         (j)  Clear  Market.  With  respect  to  any  underwritten  offering  of
Registrable Securities by the Investor or other Holders pursuant to this Section
4.5, the Company agrees not to effect (other than pursuant to such  registration
or pursuant to a Special  Registration)  any public sale or distribution,  or to
file any Shelf Registration Statement (other than such registration or a Special
Registration)  covering  any  preferred  stock of the Company or any  securities
convertible  into or  exchangeable  or  exercisable  for preferred  stock of the
Company,  during the  period not to exceed ten days prior and 60 days  following
the  effective  date of such offering or such longer period up to 90 days as may
be requested by the managing  underwriter for such  underwritten  offering.  The
Company also agrees to cause such of its directors and senior executive officers
to execute and deliver  customary  lock-up  agreements in such form and for such
time  period  up to 90 days as may be  requested  by the  managing  underwriter.
"Special  Registration"  means the registration of (A) equity  securities and/or
options or other rights in respect  thereof  solely  registered  on Form S- 4 or
Form S-8 (or successor form) or (B) shares of equity  securities  and/or options
or other  rights in  respect  thereof to be  offered  to  directors,  members of
management, employees, consultants, customers, lenders or vendors of the Company
or Company Subsidiaries or in connection with dividend reinvestment plans.

         (k)  Rule  144;  Rule  144A.  With a view to  making  available  to the
Investor and Holders the benefits of certain  rules and  regulations  of the SEC
which may permit the sale of the  Registrable  Securities to the public  without
registration, the Company agrees to use its reasonable best efforts to:

                                      -26-

<PAGE>

                  (i) make and keep public information available, as those terms
         are  understood  and  defined  in  Rule  144(c)(1)  or any  similar  or
         analogous rule promulgated under the Securities Act, at all times after
         the Signing Date;

                  (ii) (A) file with the SEC,  in a timely  manner,  all reports
         and other documents required of the Company under the Exchange Act, and
         (B) if at any time the Company is not  required  to file such  reports,
         make  available,  upon the  request  of any  Holder,  such  information
         necessary  to  permit  sales  pursuant  to  Rule  144A  (including  the
         information required by Rule 144A(d)(4) under the Securities Act);

                  (iii) so long as the Investor or a Holder owns any Registrable
         Securities,  furnish to the  Investor  or such  Holder  forthwith  upon
         request:  a written  statement by the Company as to its compliance with
         the reporting requirements of Rule 144 under the Securities Act, and of
         the Exchange Act; a copy of the most recent annual or quarterly  report
         of the Company; and such other reports and documents as the Investor or
         Holder  may  reasonably  request  in  availing  itself  of any  rule or
         regulation  of the SEC allowing it to sell any such  securities  to the
         public without registration; and

                  (iv) take such  further  action as any Holder  may  reasonably
         request,  all to the extent  required  from time to time to enable such
         Holder to sell Registrable  Securities  without  registration under the
         Securities Act.

         (l) As used in this  Section 4.5,  the  following  terms shall have the
         following respective meanings:

                  (i)  "Holder"  means  the  Investor  and any  other  holder of
         Registrable  Securities to whom the  registration  rights  conferred by
         this Agreement have been  transferred in compliance with Section 4.5(h)
         hereof.

                  (ii)  "Holders'  Counsel"  means one  counsel  for the selling
         Holders  chosen  by  Holders   holding  a  majority   interest  in  the
         Registrable Securities being registered.

                  (iii) "Register," "registered," and "registration" shall refer
         to a  registration  effected by preparing and (A) filing a registration
         statement or amendment  thereto in compliance  with the  Securities Act
         and applicable rules and regulations thereunder, and the declaration or
         ordering of effectiveness of such  registration  statement or amendment
         thereto or (B) filing a  prospectus  and/or  prospectus  supplement  in
         respect of an appropriate effective registration statement on Form S-3.

                  (iv) "Registrable  Securities" means (A) all Preferred Shares,
         (B) the  Warrant  (subject  to  Section  4.5(q))  and  (C)  any  equity
         securities  issued or issuable  directly or indirectly  with respect to
         the securities  referred to in the foregoing  clauses (A) or (B) by way
         of  conversion,  exercise or exchange  thereof,  including  the Warrant
         Shares,  or share  dividend  or share  split  or in  connection  with a
         combination  of  shares,  recapitalization,  reclassification,  merger,
         amalgamation,   arrangement,  consolidation  or  other  reorganization,

                                      -27-
<PAGE>

         provided that,  once issued,  such  securities  will not be Registrable
         Securities when (1) they are sold pursuant to an effective registration
         statement  under the  Securities  Act, (2) except as provided  below in
         Section  4.5(p),  they  may  be  sold  pursuant  to  Rule  144  without
         limitation  thereunder on volume or manner of sale, (3) they shall have
         ceased  to be  outstanding  or (4) they  have  been  sold in a  private
         transaction in which the  transferor's  rights under this Agreement are
         not  assigned  to the  transferee  of the  securities.  No  Registrable
         Securities may be registered under more than one registration statement
         at any one time.

                  (v) "Registration  Expenses" mean all expenses incurred by the
         Company  in  effecting  any  registration  pursuant  to this  Agreement
         (whether or not any  registration  or prospectus  becomes  effective or
         final) or otherwise  complying with its obligations  under this Section
         4.5,  including all  registration,  filing and listing  fees,  printing
         expenses,  fees and disbursements of counsel for the Company,  blue sky
         fees and  expenses,  expenses  incurred  in  connection  with any "road
         show", the reasonable fees and disbursements of Holders'  Counsel,  and
         expenses of the Company's  independent  accountants in connection  with
         any regular or special reviews or audits incident to or required by any
         such registration, but shall not include Selling Expenses.

                  (vi) "Rule 144",  "Rule  144A",  "Rule  159A",  "Rule 405" and
         "Rule  415"  mean,  in each  case,  such  rule  promulgated  under  the
         Securities  Act (or any  successor  provision),  as the  same  shall be
         amended from time to time.

                  (vii)  "Selling   Expenses"   mean  all   discounts,   selling
         commissions  and  stock  transfer  taxes  applicable  to  the  sale  of
         Registrable  Securities and fees and  disbursements  of counsel for any
         Holder  (other  than the fees and  disbursements  of  Holders'  Counsel
         included in Registration Expenses).

         (m) At any time,  any holder of Securities  (including  any Holder) may
elect to  forfeit  its  rights  set  forth in this  Section  4.5 from  that date
forward;  provided,  that a Holder  forfeiting such rights shall  nonetheless be
entitled  to  participate  under  Section  4.5(b)(iv)  -  (vi)  in  any  Pending
Underwritten  Offering  to the same  extent  that such  Holder  would  have been
entitled to if the holder had not withdrawn; and provided, further, that no such
forfeiture shall terminate a Holder's rights or obligations under Section 4.5(g)
with  respect  to any  prior  registration  or  Pending  Underwritten  Offering.
"Pending Underwritten Offering" means, with respect to any Holder forfeiting its
rights pursuant to this Section 4.5(m), any underwritten offering of Registrable
Securities  in which  such  Holder  has  advised  the  Company  of its intent to
register its Registrable  Securities  either  pursuant to Section  4.5(b)(ii) or
4.5(b)(iv) prior to the date of such Holder's forfeiture.

         (n) Specific  Performance.  The parties hereto  acknowledge  that there
would be no adequate  remedy at law if the  Company  fails to perform any of its
obligations  under this  Section 4.5 and that the  Investor and the Holders from
time to time may be  irreparably  harmed by any such  failure,  and  accordingly
agree that the  Investor  and such  Holders,  in addition to any other remedy to
which they may be entitled at law or in equity,  to the fullest extent permitted

                                      -28-

<PAGE>

and  enforceable  under  applicable  law shall be  entitled  to compel  specific
performance  of the  obligations  of  the  Company  under  this  Section  4.5 in
accordance with the terms and conditions of this Section 4.5.

         (o) No Inconsistent Agreements.  The Company shall not, on or after the
Signing Date,  enter into any agreement with respect to its securities  that may
impair the rights granted to the Investor and the Holders under this Section 4.5
or that otherwise  conflicts  with the provisions  hereof in any manner that may
impair the rights  granted to the  Investor  and the Holders  under this Section
4.5. In the event the Company has,  prior to the Signing Date,  entered into any
agreement with respect to its securities  that is  inconsistent  with the rights
granted to the  Investor  and the  Holders  under this  Section  4.5  (including
agreements  that are  inconsistent  with the order of priority  contemplated  by
Section  4.5(b)(vi)) or that may otherwise  conflict with the provisions hereof,
the Company shall use its  reasonable  best efforts to amend such  agreements to
ensure they are consistent with the provisions of this Section 4.5.

         (p) Certain  Offerings by the Investor.  In the case of any  securities
held by the Investor that cease to be Registrable Securities solely by reason of
clause (2) in the  definition of  "Registrable  Securities,"  the  provisions of
Sections 4.5(b)(ii), clauses (iv), (ix) and (x)-(xii) of Section 4.5(d), Section
4.5(h)  and  Section  4.5(j)  shall  continue  to apply  until  such  securities
otherwise   cease  to  be   Registrable   Securities.   In  any  such  case,  an
"underwritten"  offering or other  disposition shall include any distribution of
such  securities  on behalf of the  Investor by one or more  broker-dealers,  an
"underwriting  agreement" shall include any purchase  agreement  entered into by
such  broker-dealers,  and any  "registration  statement" or "prospectus"  shall
include any  offering  document  approved by the Company and used in  connection
with such distribution.

         (q)  Registered  Sales of the  Warrant.  The Holders  agree to sell the
Warrant or any  portion  thereof  under the Shelf  Registration  Statement  only
beginning  30 days after  notifying  the Company of any such sale,  during which
30-day period the Investor and all Holders of the Warrant shall take  reasonable
steps to agree to  revisions to the Warrant to permit a public  distribution  of
the  Warrant,  including  entering  into a warrant  agreement  and  appointing a
warrant agent.

         4.6  Depositary  Shares.  Upon  request  by the  Investor  at any  time
following the Closing Date,  the Company shall  promptly enter into a depositary
arrangement,  pursuant to customary  agreements  reasonably  satisfactory to the
Investor and with a depositary reasonably  acceptable to the Investor,  pursuant
to which the  Preferred  Shares  or the  Warrant  Shares  may be  deposited  and
depositary shares,  each representing a fraction of a Preferred Share or Warrant
Share,  as  applicable,  as specified by the Investor,  may be issued.  From and
after the execution of any such depositary  arrangement,  and the deposit of any
Preferred  Shares or  Warrant  Shares,  as  applicable,  pursuant  thereto,  the
depositary  shares issued pursuant thereto shall be deemed  "Preferred  Shares",
"Warrant  Shares" and, as applicable,  "Registrable  Securities" for purposes of
this Agreement.

         4.7 Restriction on Dividends and Repurchases.

                                      -29-

<PAGE>

          (a) Prior to the earlier of (x) the third  anniversary  of the Closing
Date and (y) the date on which all of the  Preferred  Shares and Warrant  Shares
have been redeemed in whole or the Investor has transferred all of the Preferred
Shares and  Warrant  Shares to third  parties  which are not  Affiliates  of the
Investor,  neither the Company nor any  Company  Subsidiary  shall,  without the
consent of the Investor, declare or pay any dividend or make any distribution on
capital  stock or other  equity  securities  of any kind of the  Company  or any
Company  Subsidiary (other than (i) regular quarterly cash dividends of not more
than the amount of the last  quarterly  cash dividend per share  declared or, if
lower,  announced to its holders of Common Stock an intention to declare, on the
Common Stock prior to November 17, 2008, as adjusted for any stock split,  stock
dividend,  reverse stock split,  reclassification or similar  transaction,  (ii)
dividends  payable solely in shares of Common Stock,  (iii) regular dividends on
shares of preferred  stock in  accordance  with the terms  thereof and which are
permitted under the terms of the Preferred  Shares and the Warrant Shares,  (iv)
dividends  or  distributions  by  any  wholly-owned  Company  Subsidiary  or (v)
dividends  or  distributions  by any  Company  Subsidiary  required  pursuant to
binding contractual agreements entered into prior to November 17, 2008).

         (b) During the period beginning on the third anniversary of the Closing
Date and ending on the earlier of (i) the tenth  anniversary of the Closing Date
and (ii) the date on which all of the Preferred  Shares and Warrant  Shares have
been  redeemed in whole or the Investor  has  transferred  all of the  Preferred
Shares and  Warrant  Shares to third  parties  which are not  Affiliates  of the
Investor,  neither the Company nor any  Company  Subsidiary  shall,  without the
consent of the  Investor,  (A) pay any per share  dividend  or  distribution  on
capital  stock or other  equity  securities  of any kind of the Company at a per
annum rate that is in excess of 103% of the  aggregate  per share  dividends and
distributions  for  the  immediately  prior  fiscal  year  (other  than  regular
dividends on shares of preferred  stock in accordance with the terms thereof and
which are  permitted  under the terms of the  Preferred  Shares and the  Warrant
Shares);  provided  that no increase in the  aggregate  amount of  dividends  or
distributions on Common Stock shall be permitted as a result of any dividends or
distributions  paid in shares of Common  Stock,  any stock  split or any similar
transaction or (B) pay aggregate  dividends or distributions on capital stock or
other equity securities of any kind of any Company  Subsidiary that is in excess
of 103% of the aggregate  dividends and  distributions  paid for the immediately
prior  fiscal  year  (other  than in the case of this  clause  (B),  (1) regular
dividends on shares of preferred  stock in accordance with the terms thereof and
which are  permitted  under the terms of the  Preferred  Shares and the  Warrant
Shares, (2) dividends or distributions by any wholly-owned  Company  Subsidiary,
(3) dividends or distributions by any Company  Subsidiary  required  pursuant to
binding  contractual  agreements entered into prior to November 17, 2008) or (4)
dividends or  distributions  on newly issued shares of capital stock for cash or
other property.

         (c) Prior to the  earlier of (x) the tenth  anniversary  of the Closing
Date and (y) the date on which all of the  Preferred  Shares and Warrant  Shares
have been redeemed in whole or the Investor has transferred all of the Preferred
Shares and  Warrant  Shares to third  parties  which are not  Affiliates  of the
Investor,  neither the Company nor any  Company  Subsidiary  shall,  without the
consent of the Investor,  redeem, purchase or acquire any shares of Common Stock
or other capital stock or other equity  securities of any kind of the Company or
any Company Subsidiary,  or any trust preferred securities issued by the Company
or any Affiliate of the Company, other than (i) redemptions,  purchases or other

                                      -30-
<PAGE>

acquisitions of the Preferred Shares and Warrant Shares, (ii) in connection with
the  administration  of any  employee  benefit  plan in the  ordinary  course of
business and consistent with past practice, (iii) the acquisition by the Company
or any of the Company Subsidiaries of record ownership in Junior Stock or Parity
Stock for the beneficial  ownership of any other persons (other than the Company
or any other Company Subsidiary),  including as trustees or custodians, (iv) the
exchange or  conversion  of Junior  Stock for or into other  Junior  Stock or of
Parity Stock or trust preferred  securities for or into other Parity Stock (with
the same or lesser aggregate  liquidation  amount) or Junior Stock, in each case
set forth in this clause (iv), solely to the extent required pursuant to binding
contractual  agreements entered into prior to the Signing Date or any subsequent
agreement  for the  accelerated  exercise,  settlement  or exchange  thereof for
Common   Stock   (clauses   (ii)  and  (iii),   collectively,   the   "Permitted
Repurchases"),  (v) redemptions of securities held by the Company or any wholly-
owned Company Subsidiary or (vi) redemptions, purchases or other acquisitions of
capital stock or other equity  securities of any kind of any Company  Subsidiary
required  pursuant  to  binding  contractual  agreements  entered  into prior to
November 17, 2008.

         (d) Until such time as the Investor ceases to own any Preferred  Shares
or Warrant  Shares,  the Company shall not  repurchase  any Preferred  Shares or
Warrant  Shares  from any  holder  thereof,  whether  by  means  of open  market
purchase,   negotiated   transaction,   or  otherwise,   other  than   Permitted
Repurchases,  unless it offers to repurchase a ratable  portion of the Preferred
Shares or Warrant  Shares,  as the case may be, then held by the Investor on the
same terms and conditions.

         (e) During the period beginning on the tenth anniversary of the Closing
and ending on the date on which all of the Preferred  Shares and Warrant  Shares
have been redeemed in whole or the Investor has transferred all of the Preferred
Shares and  Warrant  Shares to third  parties  which are not  Affiliates  of the
Investor,  neither the Company nor any  Company  Subsidiary  shall,  without the
consent  of  the  Investor,  (i)  declare  or  pay  any  dividend  or  make  any
distribution  on capital  stock or other  equity  securities  of any kind of the
Company or any  Company  Subsidiary;  or (ii)  redeem,  purchase  or acquire any
shares of Common Stock or other capital stock or other equity  securities of any
kind of the Company or any Company Subsidiary, or any trust preferred securities
issued  by the  Company  or  any  Affiliate  of  the  Company,  other  than  (A)
redemptions, purchases or other acquisitions of the Preferred Shares and Warrant
Shares,  (B) regular  dividends on shares of preferred  stock in accordance with
the  terms  thereof  and which are  permitted  under the terms of the  Preferred
Shares  and  the  Warrant  Shares,  or (C)  dividends  or  distributions  by any
wholly-owned Company Subsidiary.

         (f) "Junior  Stock" means Common Stock and any other class or series of
stock of the Company the terms of which  expressly  provide that it ranks junior
to  the  Preferred  Shares  as  to  dividend  rights  and/or  as  to  rights  on
liquidation,  dissolution or winding up of the Company. "Parity Stock" means any
class or series  of stock of the  Company  the  terms of which do not  expressly
provide  that such class or series will rank  senior or junior to the  Preferred
Shares as to dividend rights and/or as to rights on liquidation,  dissolution or
winding up of the  Company  (in each case  without  regard to whether  dividends
accrue cumulatively or non-cumulatively).

                                      -31-
<PAGE>

         4.8 Executive  Compensation.  Until such time as the Investor ceases to
own any debt or equity  securities  of the  Company  acquired  pursuant  to this
Agreement or the Warrant,  the Company shall take all necessary action to ensure
that its Benefit Plans with respect to its Senior  Executive  Officers comply in
all respects with Section  111(b) of the EESA as  implemented by any guidance or
regulation  thereunder  that has been  issued and is in effect as of the Closing
Date,  and shall  not adopt any new  Benefit  Plan with  respect  to its  Senior
Executive Officers that does not comply therewith.  "Senior Executive  Officers"
means the  Company's  "senior  executive  officers"  as  defined  in  subsection
111(b)(3) of the EESA and regulations issued thereunder, including the rules set
forth in 31 C.F.R. Part 30.

         4.9 Related Party Transactions.  Until such time as the Investor ceases
to own any Purchased  Securities or Warrant Shares,  the Company and the Company
Subsidiaries  shall not enter  into  transactions  with  Affiliates  or  related
persons  (within the meaning of Item 404 under the SEC's  Regulation S-K) unless
(i) such  transactions  are on terms no less  favorable  to the  Company and the
Company  Subsidiaries  than could be obtained from an unaffiliated  third party,
and (ii) have been approved by the audit  committee of the Board of Directors or
comparable body of independent directors of the Company.

         4.10 Bank and Thrift Holding Company  Status.  If the Company is a Bank
Holding  Company or a Savings and Loan Holding Company on the Signing Date, then
the Company shall  maintain its status as a Bank Holding  Company or Savings and
Loan Holding  Company,  as the case may be, for as long as the Investor owns any
Purchased  Securities or Warrant Shares.  The Company shall redeem all Purchased
Securities  and Warrant  Shares held by the Investor  prior to  terminating  its
status as a Bank  Holding  Company  or  Savings  and Loan  Holding  Company,  as
applicable.  "Bank Holding Company" means a company  registered as such with the
Board of  Governors  of the  Federal  Reserve  System  (the  "Federal  Reserve")
pursuant  to 12  U.S.C.  ss.1842  and the  regulations  of the  Federal  Reserve
promulgated  thereunder.  "Savings  and Loan  Holding  Company"  means a company
registered as such with the Office of Thrift  Supervision  pursuant to 12 U.S.C.
ss.1467(a) and the regulations of the Office of Thrift  Supervision  promulgated
thereunder.

         4.11  Predominantly  Financial.  For as long as the  Investor  owns any
Purchased  Securities or Warrant  Shares,  the Company,  to the extent it is not
itself an insured depository institution, agrees to remain predominantly engaged
in  financial  activities.  A company  is  predominantly  engaged  in  financial
activities  if the  annual  gross  revenues  derived  by  the  company  and  all
subsidiaries  of  the  company  (excluding   revenues  derived  from  subsidiary
depository  institutions),  on a consolidated basis, from engaging in activities
that are  financial in nature or are  incidental to a financial  activity  under
subsection  (k) of Section 4 of the Bank Holding  Company Act of 1956 (12 U.S.C.
1843(k)) represent at least 85 percent of the consolidated annual gross revenues
of the company.

                                    Article V
                                  Miscellaneous

         5.1 Termination.  This Agreement may be terminated at any time prior to
the Closing:

                                      -32-

<PAGE>

          (a) by either the  Investor or the  Company if the  Closing  shall not
have occurred by the 30th  calendar day  following  the Signing Date;  provided,
however,  that in the event the Closing has not  occurred by such 30th  calendar
day, the parties  will consult in good faith to determine  whether to extend the
term of this Agreement,  it being  understood that the parties shall be required
to  consult  only until the fifth day after  such 30th  calendar  day and not be
under any obligation to extend the term of this Agreement thereafter;  provided,
further,  that the right to terminate this  Agreement  under this Section 5.1(a)
shall not be  available  to any party  whose  breach  of any  representation  or
warranty or failure to perform any obligation  under this  Agreement  shall have
caused or  resulted  in the  failure of the Closing to occur on or prior to such
date; or

         (b) by  either  the  Investor  or the  Company  in the  event  that any
Governmental  Entity  shall have issued an order,  decree or ruling or taken any
other action  restraining,  enjoining or otherwise  prohibiting the transactions
contemplated  by this Agreement and such order,  decree,  ruling or other action
shall have become final and nonappealable; or

         (c) by the mutual written  consent of the Investor and the Company.  In
the event of termination of this Agreement as provided in this Section 5.1, this
Agreement  shall  forthwith  become void and there shall be no  liability on the
part of either party  hereto  except that nothing  herein shall  relieve  either
party from liability for any breach of this Agreement.

         5.2 Survival of  Representations  and  Warranties.  All  covenants  and
agreements,  other than  those  which by their  terms  apply in whole or in part
after the Closing,  shall terminate as of the Closing.  The  representations and
warranties  of the  Company  made  herein or in any  certificates  delivered  in
connection with the Closing shall survive the Closing without limitation.

         5.3 Amendment.  No amendment of any provision of this Agreement will be
effective  unless made in writing and signed by an officer or a duly  authorized
representative of each party;  provided that the Investor may unilaterally amend
any  provision  of this  Agreement  to the extent  required  to comply  with any
changes after the Signing Date in  applicable  federal  statutes.  No failure or
delay by any party in exercising any right,  power or privilege  hereunder shall
operate as a waiver  thereof  nor shall any single or partial  exercise  thereof
preclude any other or further  exercise of any other right,  power or privilege.
The rights and remedies  herein  provided  shall be  cumulative of any rights or
remedies provided by law.

         5.4 Waiver of Conditions.  The conditions to each party's obligation to
consummate the Purchase are for the sole benefit of such party and may be waived
by such party in whole or in part to the extent  permitted by applicable law. No
waiver will be effective  unless it is in a writing signed by a duly  authorized
officer of the waiving  party that makes  express  reference to the provision or
provisions subject to such waiver.

         5.5 Governing Law: Submission to Jurisdiction, Etc. This Agreement will
be governed by and  construed in  accordance  with the federal law of the United
States if and to the extent such law is applicable,  and otherwise in accordance

                                      -33-

<PAGE>

with the laws of the State of New York  applicable  to contracts  made and to be
performed  entirely within such State.  Each of the parties hereto agrees (a) to
submit to the exclusive  jurisdiction  and venue of the United  States  District
Court for the District of Columbia and the United States Court of Federal Claims
for any and all civil actions,  suits or proceedings  arising out of or relating
to this  Agreement  or the Warrant or the  transactions  contemplated  hereby or
thereby,  and (b) that  notice may be served upon (i) the Company at the address
and in the manner set forth for  notices to the  Company in Section 5.6 and (ii)
the  Investor  in  accordance  with  federal  law.  To the extent  permitted  by
applicable law, each of the parties hereto hereby  unconditionally  waives trial
by jury in any civil legal action or  proceeding  relating to this  Agreement or
the Warrant or the transactions contemplated hereby or thereby.

         5.6 Notices. Any notice,  request,  instruction or other document to be
given  hereunder by any party to the other will be in writing and will be deemed
to have been duly given (a) on the date of delivery if delivered personally,  or
by facsimile,  upon  confirmation of receipt,  or (b) on the second business day
following  the date of dispatch if delivered  by a  recognized  next day courier
service.  All notices to the Company shall be delivered as set forth in Schedule
A, or pursuant to such other  instruction as may be designated in writing by the
Company to the Investor.  All notices to the Investor  shall be delivered as set
forth below,  or pursuant to such other  instructions  as may be  designated  in
writing by the Investor to the Company.

                   If to the Investor:

                                  United States Department of the Treasury
                                  1500 Pennsylvania Avenue, NW, Room 2312
                                  Washington, D.C. 20220
                                  Attention: Assistant General Counsel (Banking
                                  and Finance)
                                  Facsimile: (202) 622-1974

         5.7 Definitions

         (a) When a reference is made in this  Agreement  to a  subsidiary  of a
person, the term "subsidiary" means any corporation, partnership, joint venture,
limited  liability  company  or other  entity  (x) of  which  such  person  or a
subsidiary of such person is a general partner or (y) of which a majority of the
voting securities or other voting interests,  or a majority of the securities or
other  interests of which having by their terms ordinary voting power to elect a
majority of the board of directors or persons  performing similar functions with
respect to such entity,  is directly or  indirectly  owned by such person and/or
one or more subsidiaries thereof.

         (b) The term "Affiliate"  means, with respect to any person, any person
directly or indirectly controlling,  controlled by or under common control with,
such other person. For purposes of this definition,  "control" (including,  with
correlative meanings, the terms "controlled by" and "under common control with")
when  used  with  respect  to any  person,  means the  possession,  directly  or
indirectly, of the power to cause the direction of management and/or policies of

                                      -34-

<PAGE>

such person,  whether through the ownership of voting  securities by contract or
otherwise.

         (c) The terms "knowledge of the Company" or "Company's  knowledge" mean
the actual knowledge after reasonable and due inquiry of the "officers" (as such
term is defined in Rule 3b-2 under the  Exchange  Act,  but  excluding  any Vice
President or Secretary) of the Company.

         5.8  Assignment.   Neither  this  Agreement  nor  any  right,   remedy,
obligation  nor  liability  arising  hereunder  or by  reason  hereof  shall  be
assignable by any party hereto  without the prior  written  consent of the other
party,  and any attempt to assign any right,  remedy,  obligation  or  liability
hereunder without such consent shall be void,  except (a) an assignment,  in the
case of a merger, consolidation, statutory share exchange or similar transaction
that  requires  the  approval  of  the  Company's   stockholders   (a  "Business
Combination")  where  such  party  is not  the  surviving  entity,  or a sale of
substantially  all of its assets,  to the entity  which is the  survivor of such
Business  Combination  or the  purchaser  in such  sale and (b) as  provided  in
Sections 3.5 and 4.5.

         5.9 Severability. If any provision of this Agreement or the Warrant, or
the application thereof to any person or circumstance,  is determined by a court
of competent  jurisdiction to be invalid,  void or unenforceable,  the remaining
provisions   hereof,  or  the  application  of  such  provision  to  persons  or
circumstances  other  than  those  as to  which  it has  been  held  invalid  or
unenforceable,  will  remain  in full  force and  effect  and shall in no way be
affected,  impaired or  invalidated  thereby,  so long as the  economic or legal
substance of the transactions  contemplated hereby is not affected in any manner
materially  adverse to any party.  Upon such  determination,  the parties  shall
negotiate  in good  faith in an effort to agree upon a  suitable  and  equitable
substitute provision to effect the original intent of the parties.

         5.10 No Third Party Beneficiaries. Nothing contained in this Agreement,
expressed or implied, is intended to confer upon any person or entity other than
the Company and the  Investor any  benefit,  right or remedies,  except that the
provisions of Section 4.5 shall inure to the benefit of the persons  referred to
in that Section.

                                      * * *

                                      -35-

<PAGE>

                                                                         ANNEX A

             FORM OF CERTIFICATE OF DESIGNATIONS FOR PREFERRED STOCK

                                 [SEE ATTACHED*]

*Exhibit 4.1(b) to Form 8-K filed January 12, 2009

<PAGE>

                                                                         ANNEX B

                       FORM OF CERTIFICATE OF DESIGNATIONS
                           FOR WARRANT PREFERRED STOCK

                                 [SEE ATTACHED*]

*Exhibit 4.1(b) to Form 8-K filed January 12, 2009

<PAGE>

                                                                         ANNEX C

                                 FORM OF WAIVER

In  consideration  for the benefits I will receive as a result of my  employer's
participation  in the United States  Department of the  Treasury's  TARP Capital
Purchase Program, I hereby voluntarily waive any claim against the United States
or my employer for any changes to my  compensation or benefits that are required
to comply  with the  regulation  issued by the  Department  of the  Treasury  as
published in the Federal Register on October 20, 2008.

I acknowledge that this regulation may require modification of the compensation,
bonus, incentive and other benefit plans, arrangements,  policies and agreements
(including so-called "golden parachute" agreements) that I have with my employer
or in which I  participate  as they relate to the period the United States holds
any equity or debt securities of my employer  acquired  through the TARP Capital
Purchase Program.

This waiver  includes all claims I may have under the laws of the United  States
or  any  state  related  to  the  requirements  imposed  by  the  aforementioned
regulation,  including without  limitation a claim for any compensation or other
payments I would otherwise  receive,  any challenge to the process by which this
regulation was adopted and any tort or constitutional  claim about the effect of
these regulations on my employment relationship.

<PAGE>

                                                                         ANNEX D

                                 FORM OF OPINION

         (a) The Company has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the state of its incorporation.

         (b) The Preferred  Shares have been duly and validly  authorized,  and,
when issued and delivered  pursuant to the Agreement,  the Preferred Shares will
be duly and validly issued and fully paid and non-assessable, will not be issued
in violation of any preemptive  rights,  and will rank pari passu with or senior
to all other  series or classes of  Preferred  Stock  issued on the Closing Date
with respect to the payment of dividends and the  distribution  of assets in the
event of any dissolution, liquidation or winding up of the Company.

         (c) The  Warrant  has been  duly  authorized  and,  when  executed  and
delivered as contemplated by the Agreement,  will constitute a valid and legally
binding obligation of the Company  enforceable against the Company in accordance
with its  terms,  except as the same may be limited  by  applicable  bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting the enforcement
of creditors' rights generally and general equitable  principles,  regardless of
whether such enforceability is considered in a proceeding at law or in equity.

         (d) The shares of Warrant Preferred Stock issuable upon exercise of the
Warrant have been duly authorized and reserved for issuance upon exercise of the
Warrant and when so issued in  accordance  with the terms of the Warrant will be
validly issued, fully paid and non-assessable,  and will rank pari passu with or
senior to all other series or classes of Preferred Stock,  whether or not issued
or outstanding, with respect to the payment of dividends and the distribution of
assets  in the  event  of any  dissolution,  liquidation  or  winding  up of the
Company.

         (e) The Company has the  corporate  power and  authority to execute and
deliver  the  Agreement  and  the  Warrant  and to  carry  out  its  obligations
thereunder  (which  includes the issuance of the Preferred  Shares,  Warrant and
Warrant Shares).

         (f) The  execution,  delivery  and  performance  by the  Company of the
Agreement and the Warrant and the consummation of the transactions  contemplated
thereby have been duly authorized by all necessary  corporate action on the part
of the Company and its stockholders, and no further approval or authorization is
required on the part of the Company.

         (g) The  Agreement  is a valid and  binding  obligation  of the Company
enforceable against the Company in accordance with its terms, except as the same
may be limited by applicable bankruptcy, insolvency, reorganization,  moratorium
or similar laws  affecting the  enforcement of creditors'  rights  generally and
general  equitable  principles,  regardless  of whether such  enforceability  is
considered in a proceeding at law or in equity; provided,  however, such counsel
need  express no opinion  with  respect  to Section  4.5(h) or the  severability
provisions of the Agreement insofar as Section 4.5(h) is concerned.

<PAGE>

                                                                         ANNEX E

                                 FORM OF WARRANT

                                 [SEE ATTACHED*]

*Exhibit 4.3 to Form 8-K filed January 12, 2009

<PAGE>

                                                                      SCHEDULE A

                         ADDITIONAL TERMS AND CONDITIONS

Company Information:

         Name of the Company:  GrandSouth Corporation

         Corporate or other organizational form:  Corporation

         Jurisdiction of Organization:  South Carolina

         Appropriate Federal Banking Agency:  Federal Deposit Insurance
                                              Corporation

Notice Information:        GrandSouth Bancorporation
                           381 Halton Road
                           Greenville, SC 29607
                           Attn:  President
                           Facsimile:  (864) 770-1081

Terms of the Purchase:

         Series of Preferred Stock Purchased:  Series T

         Per Share Liquidation Preference of Preferred Stock: $1,000.00

         Number of Shares of Preferred Stock Purchased:  9,000

         Dividend Payment Dates on the Preferred Stock:  February 15, May 15,
                                                         August 15 and
                                                         November 15

         Series of Warrant Preferred Stock:  Series W

         Number of Warrant Shares:  450.00450

         Number of Net Warrant Shares (after net settlement):  450

         Exercise Price of the Warrant:  $0.01

         Purchase Price:  $9,000,000.00

Closing:

         Location of Closing:  To be determined by the parties.

         Time of Closing:  To be determined by the parties.

         Date of Closing:  January 9, 2009

         [Contact Information Omitted]

<PAGE>

                                                                      SCHEDULE B

                                 CAPITALIZATION

Capitalization Date:       December 31, 2008

Common Stock

         Par value:        None

         Total Authorized: 20,000,000 shares

         Outstanding:      3,573,695

         Subject to warrants, options, convertible
              securities, etc.:     217,412

         Reserved for benefit plans and other issuances:      560,918

         Remaining authorized but unissued: 15,647,975

         Shares issued after Capitalization Date (other
              than pursuant to warrants, options,
              convertible securities, etc. as set forth
              above):      None

Preferred Stock

         Par value:        None

         Total Authorized: None (20,000,000 shares on January 6, 2009)

         Outstanding (by series):   None

         Reserved for issuance:     None

         Remaining  authorized but unissued:  None (20,000,000 shares on January
6, 2009)

Holders of 5% or more of
any class of capital stock                      Primary Address
--------------------------                      ---------------

Mason Y. Garrett                       381 Halton Road, Greenville, SC 29607
Ronald K. Earnest                      381 Halton Road, Greenville, SC 29607

<PAGE>

                                                                      SCHEDULE C

                                   LITIGATION

List any exceptions to the  representation and warranty in Section 2.2(l) of the
Securities Purchase Agreement - Standard Terms.

If none, please so indicate by checking the box: |X|.

<PAGE>

                                                                      SCHEDULE D

                              COMPLIANCE WITH LAWS

List any exceptions to the representation and warranty in the second sentence of
Section 2.2(m) of the Securities Purchase Agreement - Standard Terms.

If none, please so indicate by checking the box: |X|.

List any exceptions to the  representation  and warranty in the last sentence of
Section 2.2(m) of the Securities Purchase Agreement - Standard Terms.

If none, please so indicate by checking the box: |X|.

<PAGE>

                                                                      SCHEDULE E

                              REGULATORY AGREEMENTS

List any exceptions to the  representation and warranty in Section 2.2(s) of the
Securities Purchase Agreement - Standard Terms.

If none, please so indicate by checking the box: |X|.Exhibit
10.1

     

    SECOND
AMENDMENT TO

    LOAN
AGREEMENT

    

    THIS SECOND AMENDMENT (this “Second Amendment”) is made as
of January 8, 2009 among PartnerRe Ltd., as Borrower, Citibank, N.A., as
Administrative Agent, and Citibank, N.A., as Lender.

    

    WHEREAS, the Borrower, the
Administrative Agent and the Lender are parties to a loan agreement dated as of
October 25, 2005 (the “Loan
Agreement”);

    

    WHEREAS, the Borrower, the
Administrative Agent and the Lender are parties to an Amendment to the Loan
Agreement dated as of July 31, 2008 (the “First
Amendment”);

    

    WHEREAS, the Borrower, for value
received, executed and issued a $400,000,000 promissory note to the Lender dated
October 31, 2005 pursuant to the Loan Agreement (the “Original Note”);

    

    WHEREAS, the Original Note was tendered
by the Lender to the Borrower for cancellation in exchange for two (2)
$200,000,000 promissory notes dated July 31, 2008 pursuant to the First
Amendment (the “Existing
Notes”);

    

    WHEREAS, the Borrower, the
Administrative Agent and the Lender wish to amend the Loan Agreement on the
terms and conditions set forth in this Second Amendment;

    

    NOW, THEREFORE, in consideration of
their mutual covenants herein contained, the Borrower, the Administrative Agent
and the Lender hereto agree as follows:

    

    Section 1. Terms Used but Not Defined
Herein. Capitalized terms used but not defined herein, except for the
term “Lender”, shall have the respective meanings given to them in the Loan
Agreement or the First Amendment and the term “Lender” shall have the meaning
given to it in the Existing Notes.

    

    Section 2. Second Amendment to the Loan
Agreement.  Section 2.3 of the Loan Agreement is hereby amended
and replaced in its entirety with the following:

    

    “2.3  Prepayment of
Advance.  This is not a demand loan, and subject to the rights
of the Lenders under Section 6.1 if an Event of Default shall have occurred and
be continuing, no Lender shall have any right to demand payment of the principal
hereof prior to the Maturity Date.

    

    (a) The
Borrower shall have the right to prepay at its option the 2008 Advance in whole
or in part (a “Prepayment”) ,without penalty,
upon three (3) Business Day’s written or fax notice.  All Prepayments
will be accompanied by payment of accrued and unpaid interest on the Prepayment
amount to, but not including, the date of the Prepayment.

    

    (b) The
Borrower shall not have the right to prepay at its option the 2010 Advance in
whole or in part.”

    

    Section 3.  Representations.  Each
of the parties hereto represents that (i) it has all necessary corporate power
and authority to execute, deliver and perform its obligations contemplated by
this Second Amendment, (ii) such execution, delivery and performance have been
duly authorized by all necessary corporate action, and this Second Amendment has
been duly and validly executed and delivered and constitutes its valid and
binding obligation, enforceable against it in accordance with its terms
hereunder, and (iii) this Second Amendment will not conflict with any agreement
or instrument to which it or any of its subsidiaries is a party or by which it
or any of its subsidiaries is bound.

    

    Section 4.  Effectiveness.  This
Second Amendment shall become effective upon execution by the parties
hereto.

    

    
      
         

      

      
         

        
          

        

      

      
         

      

       

    

    Section 5.  Counterparts.  This
Second Amendment may be signed in any number of counterparts, each of which
shall be an original, with the same effect as if all of the signatures thereto
and hereto were upon the same instrument.

    

    Section 6.  Governing
Law.  This Second Amendment shall be governed by, and construed
in accordance with, the law of the State of New York.  The Borrower
hereby submits to the nonexclusive jurisdiction of the United States District
Court for the Southern District of New York and of any New York state court
sitting in New York County for the purposes of all legal proceedings arising out
of or relating to this Second Amendment or the transactions contemplated in this
Second Amendment, the Loan Agreement and the Notes. The Borrower irrevocably
waives, to the fullest extent permitted by applicable law, any objection that it
may now or hereafter have to the laying of the venue of any such proceeding
brought in such a court and any claim that any such proceeding brought in such a
court has been brought in an inconvenient forum.  The Borrower hereby
irrevocably designates, appoints and empowers the Service of Process Agent, as
its designee, appointee and agent to receive, accept and acknowledge for and on
its behalf, and in respect of its property, service of any and all legal
process, summons, notices and documents which may be served in any such action
or proceeding referred to in this Section 7.  If for any reason such
designee, appointee and agent shall cease to be available to act as such, the
Borrower agrees to designate a new designee, appointee and agent on the terms
and for the purposes of this provision reasonably satisfactory to the
Administrative Agent.

    

    Section 7.  Waiver of Trial by
Jury.  EACH OF THE BORROWER AND THE LENDER 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 SECOND
AMENDMENT OR THE TRANSACTIONS CONTEMPLATED IN THIS SECOND AMENDMENT, THE LOAN
AGREEMENT AND THE NOTES.

    

    Section 8.  Effectiveness of the Loan
Agreement and the Notes.  Except as amended hereby, all the
terms of the Loan Agreement and the Notes shall remain and continue in full
force and effect and are hereby confirmed in all respects.

     

     

    
      
         

      

      
        2

        
          

        

      

      
         

      

       

    

    IN WITNESS WHEREOF, the parties have
signed this Second Amendment as of the date and year first above
written.

     

    
      	      
              PARTNERRE
      LTD.

            	 
	 	 	 	 
	 	 	 	 
	By:	/s/ Amanda
      R. Sodergren	 
	 	Name:	      
              Amanda
      R. Sodergren

            	 
	 	Title:	      
              Chief
      Legal Counsel

            	 

    

     

    Agreed and
accepted by:

    

    CITIBANK,
N.A.

    as
Administrative Agent

     

    
       

      
        	By:	/s/ Herman
      Hirsch	 

      

       

    

     

    CITIBANK,
N.A.

    as
Lender

     

    
      
         

        
          	By:	/s/ Herman
      Hirsch	 

        

         

         

        3

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