Document:

Exhibit 10.1

 

Exhibit 10.1 Letter Agreement, dated December 23,
2008, including

Securities Purchase Agreement – Standard
Terms, between IBC and Treasury

 

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 its
common 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superseded by the terms set forth herein or in the Schedules hereto, the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) and the Securities Purchase Agreement (including the Annexes
thereto) 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.

 

* * *

 

 

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:

  	
  /s/ Neel Kashkari

  
	
   

  	
  Name: Neel Kashkari

  
	
   

  	
  Title:  Interim Secretary for Financial Stability

  

 

 

	
   

  	
  COMPANY: 

  
	
   

  	
   

  
	
   

  	
  INTERNATIONAL BANCSHARES 

  
	
   

  	
  CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Dennis E. Nixon

  
	
   

  	
   

  	
  Name:

  	
  Dennis E. Nixon

  
	
   

  	
   

  	
  Title:

  	
  President

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Date: 

  	
  December 23, 2008

  	
   

  
					

 

 

SCHEDULE A

 

ADDITIONAL TERMS AND CONDITIONS

 

	
  Company Information :

  	
   

  	
   

  
	
  Name of the Company:

  	
   

  	
  International Bancshares Corporation

  
	
  Corporate or other organizational form:

  	
   

  	
  Corporation

  
	
  Jurisdiction of Organization:

  	
   

  	
  Texas

  
	
  Appropriate Federal Banking Agency:

  	
   

  	
  Federal Reserve Bank of Dallas 

  
	
   

  	
   

  	
  (International Bank of Commerce - FDIC)

  
	
   

  	
   

  	
   

  
	
  Notice Information:

  	
   

  	
  With copies to :

  
	
  Dennis E. Nixon

  	
   

  	
  Cary Plotkin Kavy 

  
	
  President

  	
   

  	
  Cox Smith Matthews Incorporated 

  
	
  International Bancshares Corporation

  	
   

  	
  112 East Pecan Street, Suite 1800 

  
	
  1200 San Bernardo

  	
   

  	
  San Antonio, Texas 78205 

  
	
  Laredo, Texas 78040

  	
   

  	
  210-554-5250 (Phone)

  
	
  956-722-7611 (Phone)

  	
   

  	
  210-226-8395 (Fax)

  
	
  956- 726-6616 (Fax)

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Terms of the Purchase :

  	
   

  	
   

  
	
  Series of Preferred Stock Purchased: 

  	
   

  	
  Fixed Rate Cumulative Perpetual Preferred Stock, Series A 

  
	
  Per Share Liquidation Preference of Preferred Stock: 

  	
   

  	
  $1,000 

  
	
  Number of Shares of Preferred Stock Purchased:

  	
   

  	
  216,000 Shares

  
	
  Dividend Payment Dates on the Preferred Stock:

  	
   

  	
  February 15, May 15, August 15, November 15

  
	
  Number of Initial Warrant Shares:

  	
   

  	
  1,326,238

  
	
  Exercise Price of the Warrant:

  	
   

  	
  $24.43

  
	
  Purchase Price:

  	
   

  	
  $216,000,000

  
	
   

  	
   

  	
   

  
	
  Closing :

  	
   

  	
   

  
	
  Location of Closing:

  	
   

  	
  Hughes Hubbard & Reed LLP

  
	
   

  	
   

  	
  One Battery Park Plaza 

  
	
   

  	
   

  	
  New York, New York 10004-1482

  
	
  Time of Closing:

  	
   

  	
  9:00 a.m. (New York Time)

  
	
  Date of Closing:

  	
   

  	
  December 23, 2008

  
	
   

  	
   

  	
   

  
	
  Wire Information for Closing:

  	
   

  	
  ABA Number: XXXXXX

  
	
   

  	
   

  	
  Bank: International Bank of Commerce

  
	
   

  	
   

  	
  Account Name: International Bancshares Corporation

  
	
   

  	
   

  	
  Account Number: XXXXXX

  
	
   

  	
   

  	
  Beneficiary: International Bancshares Corporation

  
	
   

  	
   

  	
  Attn: Dennis E. Nixon, President

  
	
   

  	
   

  	
  Contact: Judy Wawroski or Eliza V. Gonzalez

  

 

 

SCHEDULE B

 

CAPITALIZATION

 

 

	
  Capitalization Date: November 30, 2008

  	
   

  	
   

  
	
  Common Stock

  	
   

  	
   

  
	
  Par value:

  	
   

  	
  $1.00 per share

  
	
  Total Authorized:

  	
   

  	
  275,000,000

  
	
  Outstanding:

  	
   

  	
  68,589,114

  
	
  Subject to warrants, options, convertible 

  	
   

  	
  1,217,906 (plus an additionalWarrant issued hereby)

  
	
       securities, etc.:

  	
   

  	
  1,326,238 shares in respect of the 

  
	
  Reserved for benefit plans and other 

  	
   

  	
  None

  
	
       issuances:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Remaining authorized but unissued:

  	
   

  	
  205,192,980 (less 1,326,238

  
	
   

  	
   

  	
  shares in respect of the Warrant 

  
	
   

  	
   

  	
  issued hereby)

  
	
   

  	
   

  	
   

  
	
  ShareShares issued after Capitalization Date (other than 

  	
   

  	
  None

  
	
  pursuant to warrants, options, convertible securities, 

  	
   

  	
   

  
	
  etc. as set forth above):

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Preferred Stock

  	
   

  	
   

  
	
  Par value:

  	
   

  	
  $0.01 per share

  
	
  Total Authorized:

  	
   

  	
  25,000,000

  
	
  Outstanding (by series):

  	
   

  	
  None

  
	
  Reserved for issuance:

  	
   

  	
  None

  
	
  Remaining authorized but unissued:

  	
   

  	
  25,000,000 (less 216,000 shares 

  
	
   

  	
   

  	
  of Fixed Rate Cumulative 

  
	
   

  	
   

  	
  Perpetual Preferred Stock, Series 

  
	
   

  	
   

  	
  A issued hereby)

  

 

 

SCHEDULE C

 

REQUIRED STOCKHOLDER APPROVALS

 

	
   

  	
   

  	
  Required (1)

  	
   

  	
  % Vote Required

  	
   

  
	
  Warrants — Common Stock Issuance

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Charter Amendment

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Stock Exchange Rules

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

If no stockholder approvals are required, please so indicate by
checking the box:   x.

 

(1) If stockholder
approval is required, indicate applicable class/series of capital stock that
are required to vote.

 

 

SCHEDULE D

 

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.

 

 

SCHEDULE E

 

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.

 

 

SCHEDULE F

 

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 A

 

SECURITIES
PURCHASE AGREEMENT

 

STANDARD TERMS

 

 

TABLE OF
CONTENTS

 

	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  Article I

  
	
   

  	
   

  	
   

  
	
  Purchase; Closing

  
	
   

  	
   

  	
   

  
	
  1.1

  	
  Purchase

  	
  2

  
	
  1.2

  	
  Closing

  	
  3

  
	
  1.3

  	
  Interpretation

  	
  5

  
	
   

  	
   

  	
   

  
	
  Article II

  
	
   

  	
   

  	
   

  
	
  Representations and Warranties

  
	
   

  	
   

  	
   

  
	
  2.1

  	
  Disclosure

  	
  5

  
	
  2.2

  	
  Representations and Warranties of the Company

  	
  6

  
	
   

  	
   

  	
   

  
	
  Article III

  
	
   

  	
   

  	
   

  
	
  Covenants

  
	
   

  	
   

  	
   

  
	
  3.1

  	
  Commercially Reasonable Efforts

  	
  14

  
	
  3.2

  	
  Expenses

  	
  15

  
	
  3.3

  	
  Sufficiency of Authorized Common Stock; Exchange Listing

  	
  15

  
	
  3.4

  	
  Certain Notifications Until Closing

  	
  16

  
	
  3.5

  	
  Access, Information and Confidentiality

  	
  16

  
	
   

  	
   

  	
   

  
	
  Article IV

  
	
   

  	
   

  	
   

  
	
  Additional Agreements

  
	
   

  	
   

  	
   

  
	
  4.1

  	
  Purchase for Investment

  	
  17

  
	
  4.2

  	
  Legends

  	
  17

  
	
  4.3

  	
  Certain Transactions

  	
  19

  
	
  4.4 

  	
  Transfer of Purchased Securities and Warrant Shares; Restrictions on
  Exercise of the Warrant 

  	
  19 

  
	
  4.5

  	
  Registration Rights

  	
  20

  
	
  4.6

  	
  Voting of Warrant Shares

  	
  31

  
	
  4.7

  	
  Depositary Shares

  	
  32

  
	
  4.8

  	
  Restriction on Dividends and Repurchases

  	
  32

  
	
  4.9

  	
  Repurchase of Investor Securities

  	
  33

  
	
  4.10

  	
  Executive Compensation

  	
  34

  

 

i

 

	
  Article V

  
	
   

  	
   

  	
   

  
	
  Miscellaneous

  
	
   

  	
   

  	
   

  
	
  5.1

  	
  Termination

  	
  35

  
	
  5.2

  	
  Survival of Representations and Warranties

  	
  35

  
	
  5.3

  	
  Amendment

  	
  35

  
	
  5.4

  	
  Waiver of Conditions

  	
  35

  
	
  5.5

  	
  Governing Law: Submission to Jurisdiction,
  Etc.

  	
  36

  
	
  5.6

  	
  Notices

  	
  36

  
	
  5.7

  	
  Definitions

  	
  36

  
	
  5.8

  	
  Assignment

  	
  37

  
	
  5.9

  	
  Severability

  	
  37

  
	
  5.10

  	
  No Third Party Beneficiaries

  	
  37

  

 

ii

 

LIST OF ANNEXES

 

	
  ANNEX A:

  	
   

  	
  FORM OF CERTIFICATE OF DESIGNATIONS FOR PREFERRED
  STOCK

  
	
   

  	
   

  	
   

  
	
  ANNEX B:

  	
   

  	
  FORM OF WAIVER

  
	
   

  	
   

  	
   

  
	
  ANNEX C:

  	
   

  	
  FORM OF OPINION

  
	
   

  	
   

  	
   

  
	
  ANNEX D:

  	
   

  	
  FORM OF WARRANT

  

 

iii

 

INDEX OF DEFINED TERMS 

 

	
  Term

  	
   

  	
  Location of

  Definition

  
	
  Affiliate

  	
   

  	
  5.7(b)

  
	
  Agreement

  	
   

  	
  Recitals

  
	
  Appraisal Procedure

  	
   

  	
  4.9(c)(i)

  
	
  Appropriate Federal Banking Agency

  	
   

  	
  2.2(s)

  
	
  Bankruptcy Exceptions

  	
   

  	
  2.2(d)

  
	
  Benefit Plans

  	
   

  	
  1.2(d)(iv)

  
	
  Board of Directors

  	
   

  	
  2.2(f)

  
	
  Business Combination

  	
   

  	
  4.4

  
	
  business day

  	
   

  	
  1.3

  
	
  Capitalization Date

  	
   

  	
  2.2(b)

  
	
  Certificate 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

  	
   

  	
  Recitals

  
	
  Company

  	
   

  	
  Recitals

  
	
  Company Financial Statements

  	
   

  	
  2.2(h)

  
	
  Company Material Adverse Effect

  	
   

  	
  2.1(a)

  
	
  Company Reports

  	
   

  	
  2.2(i)(i)

  
	
  Company Subsidiary; Company Subsidiaries

  	
   

  	
  2.2(i)(i)

  
	
  control; controlled by; under common control with

  	
   

  	
  5.7(b)

  
	
  Controlled Group

  	
   

  	
  2.2(n)

  
	
  CPP

  	
   

  	
  Recitals

  
	
  EESA

  	
   

  	
  1.2(d)(iv)

  
	
  ERISA

  	
   

  	
  2.2(n)

  
	
  Exchange Act

  	
   

  	
  2.1(b)

  
	
  Fair Market Value

  	
   

  	
  4.9(c)(ii)

  
	
  GAAP

  	
   

  	
  2.1(a)

  
	
  Governmental Entities

  	
   

  	
  1.2(c)

  
	
  Holder

  	
   

  	
  4.5(k)(i)

  
	
  Holders’ Counsel

  	
   

  	
  4.5(k)(ii)

  
	
  Indemnitee

  	
   

  	
  4.5(g)(i)

  
	
  Information

  	
   

  	
  3.5(b)

  
	
  Initial Warrant Shares

  	
   

  	
  Recitals

  
	
  Investor

  	
   

  	
  Recitals

  
	
  Junior Stock

  	
   

  	
  4.8(c)

  
	
  knowledge of the Company; Company’s knowledge

  	
   

  	
  5.7(c)

  
	
  Last Fiscal Year

  	
   

  	
  2.1(b)

  
	
  Letter Agreement

  	
   

  	
  Recitals

  
	
  officers

  	
   

  	
  5.7(c)

  

 

iv

 

	
  Term

  	
   

  	
  Location of

  Definition

  
	
  Parity Stock

  	
   

  	
  4.8(c)

  
	
  Pending Underwritten Offering

  	
   

  	
  4.5(l)

  
	
  Permitted Repurchases

  	
   

  	
  4.8(a)(ii)

  
	
  Piggyback Registration

  	
   

  	
  4.5(a)(iv)

  
	
  Plan

  	
   

  	
  2.2(n)

  
	
  Preferred Shares

  	
   

  	
  Recitals

  
	
  Preferred Stock

  	
   

  	
  Recitals

  
	
  Previously Disclosed

  	
   

  	
  2.1(b)

  
	
  Proprietary Rights

  	
   

  	
  2.2(u)

  
	
  Purchase

  	
   

  	
  Recitals

  
	
  Purchase Price

  	
   

  	
  1.1

  
	
  Purchased Securities

  	
   

  	
  Recitals

  
	
  Qualified Equity Offering

  	
   

  	
  4.4

  
	
  register; registered; registration

  	
   

  	
  4.5(k)(iii)

  
	
  Registrable Securities

  	
   

  	
  4.5(k)(iv)

  
	
  Registration Expenses

  	
   

  	
  4.5(k)(v)

  
	
  Regulatory Agreement

  	
   

  	
  2.2(s)

  
	
  Rule 144; Rule 144A; Rule 159A;
  Rule 405; Rule 415

  	
   

  	
  4.5(k)(vi)

  
	
  Schedules

  	
   

  	
  Recitals

  
	
  SEC

  	
   

  	
  2.1(b)

  
	
  Securities Act

  	
   

  	
  2.2(a)

  
	
  Selling Expenses

  	
   

  	
  4.5(k)(vii)

  
	
  Senior Executive Officers

  	
   

  	
  4.10

  
	
  Share Dilution Amount

  	
   

  	
  4.8(a)(ii)

  
	
  Shelf Registration Statement

  	
   

  	
  4.5(a)(ii)

  
	
  Signing Date

  	
   

  	
  2.1(a)

  
	
  Special Registration

  	
   

  	
  4.5(i)

  
	
  Stockholder Proposals

  	
   

  	
  3.1(b)

  
	
  subsidiary

  	
   

  	
  5.8(a)

  
	
  Tax; Taxes

  	
   

  	
  2.2(o)

  
	
  Transfer

  	
   

  	
  4.4

  
	
  Warrant

  	
   

  	
  Recitals

  
	
  Warrant Shares

  	
   

  	
  2.2(d)

  

 

v

 

Exhibit
10.1 Letter Agreement, dated December 23, 2008, including 

Securities
Purchase Agreement – Standard Terms, between IBC and Treasury

 

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 its Common Stock (“Common Stock”) set forth on Schedule A
to the Letter Agreement (the “Initial
Warrant Shares”) (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”).

 

2

 

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 Company Material Adverse Effect and (B) the
Company shall have

 

3

 

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 amendment to its certificate or articles of
incorporation, articles of association, or similar organizational document (“Charter”) in substantially the form
attached hereto as Annex A (the “Certificate
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 B 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 C;

 

(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

 

4

 

(viii)        the Company shall have duly executed the
Warrant in substantially the form attached hereto as Annex D 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)           “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 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, (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

 

5

 

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 (D) changes in the market price or trading
volume of the Common Stock or any other equity, equity-related or debt
securities of the Company or its consolidated subsidiaries (it being understood
and agreed that the exception set forth in this clause (D) does not apply
to the underlying reason giving rise to or contributing to any such change); or
(ii) the ability of the Company to consummate the Purchase and the other
transactions contemplated by this Agreement and the Warrant and perform its
obligations hereunder or thereunder on a timely basis.

 

(b)           “Previously
Disclosed” means information set forth or incorporated in the
Company’s Annual Report on Form 10-K for the most recently completed
fiscal year of the Company filed with the Securities and Exchange Commission
(the “SEC”) prior to the Signing
Date (the “Last Fiscal Year”) or
in its other reports and forms filed with or furnished to the SEC under
Sections 13(a), 14(a) or 15(d) of the Securities Exchange Act of 1934
(the “Exchange Act”) on or after
the last day of the Last Fiscal Year and prior to the Signing Date.

 

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 is 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). Except as provided in the
Warrant, as of the Signing Date, the Company does not have outstanding any
securities or other obligations providing the holder the right to acquire Common
Stock that is not reserved for issuance as

 

6

 

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.

 

(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
Common 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, subject, if applicable, to the approvals of its stockholders
set forth on Schedule C.

 

(e)           Authorization, Enforceability.

 

(i)            The Company has the corporate power and
authority to execute and deliver this Agreement and the Warrant and, subject,
if applicable, to the approvals of its stockholders set forth on Schedule C,
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, subject, in each case, if applicable, to the approvals
of its stockholders set forth on Schedule C. 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.

 

(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

 

7

 

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 Company Subsidiary under any of the terms, conditions or
provisions of (i) subject, if applicable, to the approvals of the Company’s
stockholders set forth on Schedule C, 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 Certificate of
Designations with the Secretary of State of its jurisdiction of organization or
other applicable Governmental Entity, any current report on Form 8-K
required to be filed with the SEC, such filings and approvals as are required
to be made or obtained under any state “blue sky” laws, the filing of any proxy
statement contemplated by Section 3.1 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.  The Company has taken all
actions necessary to render any stockholders’ rights plan of the Company
inapplicable to this Agreement and the Warrant and the consummation of the
transactions contemplated hereby and thereby, including the exercise of the
Warrant by the Investor in accordance with its terms.

 

(g)           No Company Material Adverse Effect.
Since the last day of the last completed fiscal period for which the Company
has filed a Quarterly Report on Form 10-Q or an Annual

 

8

 

Report on Form 10-K with the SEC prior to the Signing Date, no
fact, circumstance, event, change, occurrence, condition or development has occurred
that, individually or in the aggregate, has had or would reasonably be expected
to have a Company Material Adverse Effect.

 

(h)           Company Financial Statements. Each of
the consolidated financial statements of the Company and its consolidated
subsidiaries (collectively the “Company
Financial Statements”) included or incorporated by reference in the
Company Reports filed with the SEC since December 31, 2006, present fairly
in all material respects the consolidated financial position of the Company and
its consolidated subsidiaries as of the dates indicated therein (or if amended
prior to the Signing Date, as of the date of such amendment) 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), (B) have been prepared from, and are in accordance with, the
books and records of the Company and the Company Subsidiaries and (C) complied
as to form, as of their respective dates of filing with the SEC, in all
material respects with the applicable accounting requirements and with the
published rules and regulations of the SEC with respect thereto.

 

(i)            Reports.

 

(i)            Since December 31, 2006, the Company
and each subsidiary of the Company (each a “Company
Subsidiary” and, collectively, the “Company
Subsidiaries”) has timely 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. 
In the case of each such Company Report filed with or furnished to the
SEC, such Company Report (A) did not, as of its date or if amended prior
to the Signing Date, as of the date of such amendment, contain an untrue
statement of a material fact or omit to state a material fact necessary in
order to make the statements made therein, in light of the circumstances under
which they were made, not misleading, and (B) complied as to form in all
material respects with the applicable requirements of the Securities Act and
the Exchange Act.  With respect to all
other Company Reports, the Company Reports were complete and accurate in all
material respects as of their respective dates. 
No executive officer of the Company or any Company Subsidiary has failed
in any respect to make the certifications required of him or her under Section 302
or 906 of the Sarbanes-Oxley Act of 2002.

 

(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

 

9

 

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 disclosure controls and
procedures (as defined in 

Rule 13a-15(e) of the Exchange Act) 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 over financial reporting (as defined
in Rule 13a-15(f) of the Exchange Act) 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
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 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 D 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

 

10

 

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 E, 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 E,
no Governmental Entity has placed any restriction on the business or properties
of the Company or any Company Subsidiary that 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

 

11

 

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 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.

 

12

 

(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.

 

(s)           Agreements with Regulatory Agencies.
Except as set forth on Schedule F, 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.

 

13

 

(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 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.

 

(a)           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.

 

(b)           If the Company is required to obtain any
stockholder approvals set forth on Schedule C, then the Company shall
comply with this Section 3.1(b) and Section 3.1(c). The Company
shall call a special meeting of its stockholders, as promptly as practicable
following the Closing, to vote on proposals (collectively, the “Stockholder Proposals”) to (i) approve
the exercise of the Warrant for Common Stock for purposes of the rules of
the national security exchange on which the Common Stock is listed and/or (ii) amend
the Company’s Charter to increase the number of authorized shares of Common
Stock to at least such number as shall be sufficient to permit the full
exercise of the Warrant for Common Stock and comply with the

 

14

 

other provisions of this Section 3.1(b) and Section 3.1(c).
The Board of Directors shall recommend to the Company’s stockholders that such
stockholders vote in favor of the Stockholder Proposals. In connection with
such meeting, the Company shall prepare (and the Investor will reasonably
cooperate with the Company to prepare) and file with the SEC as promptly as
practicable (but in no event more than ten business days after the Closing) a
preliminary proxy statement, shall use its reasonable best efforts to respond
to any comments of the SEC or its staff thereon and to cause a definitive proxy
statement related to such stockholders’ meeting to be mailed to the Company’s
stockholders not more than five business days after clearance thereof by the
SEC, and shall use its reasonable best efforts to solicit proxies for such
stockholder approval of the Stockholder Proposals.  The Company shall notify the Investor
promptly of the receipt of any comments from the SEC or its staff with respect
to the proxy statement and of any request by the SEC or its staff for amendments
or supplements to such proxy statement or for additional information and will
supply the Investor with copies of all correspondence between the Company or
any of its representatives, on the one hand, and the SEC or its staff, on the
other hand, with respect to such proxy statement.  If at any time prior to such stockholders’
meeting there shall occur any event that is required to be set forth in an
amendment or supplement to the proxy statement, the Company shall as promptly
as practicable prepare and mail to its stockholders such an amendment or
supplement.  Each of the Investor and the
Company agrees promptly to correct any information provided by it or on its
behalf for use in the proxy statement if and to the extent that such
information shall have become false or misleading in any material respect, and
the Company shall as promptly as practicable prepare and mail to its
stockholders an amendment or supplement to correct such information to the
extent required by applicable laws and regulations.  The Company shall consult with the Investor
prior to filing any proxy statement, or any amendment or supplement thereto,
and provide the Investor with a reasonable opportunity to comment thereon.  In the event that the approval of any of the
Stockholder Proposals is not obtained at such special stockholders meeting, the
Company shall include a proposal to approve (and the Board of Directors shall
recommend approval of) each such proposal at a meeting of its stockholders no
less than once in each subsequent six-month period beginning on January 1,
2009 until all such approvals are obtained or made.

 

(c)           None of the information supplied by the
Company or any of the Company Subsidiaries for inclusion in any proxy statement
in connection with any such stockholders meeting of the Company will, at the
date it is filed with the SEC, when first mailed to the Company’s stockholders
and at the time of any stockholders meeting, and at the time of any amendment
or supplement thereof, contain any untrue statement of a material fact or omit
to state any material fact necessary in order to make the statements therein,
in light of the circumstances under which they are made, not misleading.

 

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 Common Stock;
Exchange Listing.

 

15

 

(a)           During the period from the Closing Date (or,
if the approval of the Stockholder Proposals is required, the date of such
approval) 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. Nothing in this Section 3.3 shall preclude
the Company from satisfying its obligations in respect of the exercise of the
Warrant by delivery of shares of Common Stock which are held in the treasury of
the Company. As soon as reasonably practicable following the Closing, the
Company shall, at its expense, cause the Warrant Shares to be listed on the
same national securities exchange on which the Common Stock is listed, subject
to official notice of issuance, and shall maintain such listing for so long as
any Common Stock is listed on such exchange.

 

(b)           If requested by the Investor, the Company
shall promptly use its reasonable best efforts to cause the Preferred 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 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, 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

 

16

 

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)           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 non-public
records, books, contracts, instruments, computer data and other data and
information (collectively, “Information”)
concerning the Company furnished or made available to it by the Company or its
representatives pursuant to this Agreement (except to the extent that such
information can be shown to have been (i) previously known by such party
on a 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.

 

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 and the Warrant Shares will bear a
legend substantially to the following effect:

 

“THE SECURITIES REPRESENTED BY THIS INSTRUMENT HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE
SECURITIES LAWS OF ANY STATE AND MAY NOT BE TRANSFERRED, SOLD OR OTHERWISE
DISPOSED OF EXCEPT WHILE A REGISTRATION STATEMENT RELATING THERETO IS IN EFFECT
UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AN EXEMPTION
FROM REGISTRATION UNDER SUCH ACT OR SUCH LAWS.”

 

17

 

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

 

“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 addition, the Investor agrees that all
certificates or other instruments representing the Preferred 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 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

 

18

 

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.”

 

(d)           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 (c) above; provided that the Investor surrenders to the Company the
previously issued certificates or other instruments.  Upon Transfer of all or a portion of the
Warrant in compliance with Section 4.4, the Company shall issue new
certificates or other instruments representing the Warrant, which shall not
contain the applicable legend in Section 4.2(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 a portion or portions of the Warrant with respect to, and/or exercise
the Warrant for, more than one-half of the Initial Warrant Shares (as such
number may be adjusted from time to time pursuant to Section 13 thereof)
in the aggregate until the earlier of (a) the date on which the Company
(or any successor by Business Combination) has received aggregate gross
proceeds of not less than the Purchase Price (and the purchase price paid by
the Investor to any such successor for securities of such successor purchased
under the CPP) from one or more Qualified Equity Offerings (including Qualified
Equity Offerings of such successor) and (b) December 31, 2009.  “Qualified
Equity Offering” means the sale and issuance for cash by the Company
to persons other than the Company or any of the Company Subsidiaries after the
Closing Date of shares of perpetual Preferred Stock, Common Stock or any combination
of such stock, that, in each case, qualify as and may be included in Tier 1
capital of the Company at the time of issuance under the applicable risk-based
capital guidelines of the Company’s Appropriate Federal Banking Agency (other
than any such sales and issuances made pursuant to agreements or arrangements
entered into, or pursuant to financing plans which were publicly announced, on
or prior to October 13,

 

19

 

2008). “Business Combination”
means a merger, consolidation, statutory share exchange or similar transaction
that requires the approval of the Company’s stockholders.

 

4.5           Registration Rights.

 

(a)           Registration.

 

(i)            Subject to the terms and conditions of this
Agreement, the Company covenants and agrees that as promptly as practicable
after the Closing Date (and in any event no later than 30 days after the
Closing Date), 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).  So long as the Company is a well-known
seasoned issuer (as defined in Rule 405 under the Securities Act) at the
time of filing of the Shelf Registration Statement with the SEC, such Shelf
Registration Statement shall be designated by the Company as an automatic Shelf
Registration Statement.  Notwithstanding
the foregoing, if on the Signing Date 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(a)(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(c); 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 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.

 

20

 

(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(a):  (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(a)(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(a)(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(a)(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(a)(iv).  In such event, the right of Investor and all
other Holders to registration pursuant to Section 4.5(a) 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 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

 

21

 

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(a)(ii) or (y) a
Piggyback Registration under Section 4.5(a)(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(a)(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(a)(ii) or Section 4.5(a)(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.

 

(b)                                 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.

 

(c)                                  Obligations
of the Company. The Company shall use its reasonable best efforts, for so
long as there are Registrable Securities outstanding, to take such actions as
are under its control to not become an ineligible issuer (as defined in Rule 405
under the Securities Act) and to remain a well-known seasoned issuer (as
defined in Rule 405 under the Securities Act) if it has such status on the
Signing Date or becomes eligible for such status in the future.  In addition, 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 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 and keep

 

22

 

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;

 

23

 

(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 Common Stock 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(c)(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(c)(vi)(C) at
the earliest practicable time.

 

(viii)                      Upon the occurrence of any event
contemplated by Section 4.5(c)(v) or 4.5(c)(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(c)(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(a)(ii), enter into an
underwriting agreement in customary form, scope and substance and take all such

 

24

 

other actions
reasonably 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 efforts to cause all
such

 

25

 

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.

 

(d)                                 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.

 

(e)                                  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.

 

(f)                                    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(c) 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

 

26

 

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

 

(g)                                 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(g)(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

 

27

 

equitable
considerations. The relative 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(g)(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(g)(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.

 

(h)                                 Assignment
of Registration Rights. The rights of the Investor to registration of
Registrable Securities pursuant to Section 4.5(a) may be assigned by
the Investor to a transferee or assignee of Registrable Securities with a
liquidation preference or, in the case of Registrable Securities other than
Preferred Shares, a market value, 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. 
For purposes of this Section 4.5(h), “market value” per share of
Common Stock shall be the last reported sale price of the Common Stock on the
national securities exchange on which the Common Stock is listed or admitted to
trading on the last trading day prior to the proposed transfer, and the “market
value” for the Warrant (or any portion thereof) shall be the market value per
share of Common Stock into which the Warrant (or such portion) is exercisable
less the exercise price per share.

 

(i)                                     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, in the case of an underwritten offering of Common Stock or Warrants,
any of its equity securities or, in the case of an underwritten offering of
Preferred Shares, any Preferred Stock of the Company, or, in each case, any
securities convertible into or exchangeable or exercisable for such securities,
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,

 

28

 

customers, lenders or vendors of the Company or Company Subsidiaries or
in connection with dividend reinvestment plans.

 

(j)                                     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:

 

(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.

 

(k)                                  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 in compliance with the Securities Act and applicable rules and
regulations thereunder, and the declaration or ordering of effectiveness of
such registration statement or (B) filing a prospectus and/or

 

29

 

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(p)) 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, 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(o), 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).

 

(l)                                     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(a)(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(f) 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(l),
any underwritten offering of

 

30

 

Registrable Securities in which such Holder has advised the Company of
its intent to register its Registrable Securities either pursuant to Section 4.5(a)(ii) or
4.5(a)(iv) prior to the date of such Holder’s forfeiture.

 

(m)                               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 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.

 

(n)                                 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(a)(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.

 

(o)                                 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(a)(ii), clauses (iv), (ix) and (x)-(xii) of Section 4.5(c), Section 4.5(g) and
Section 4.5(i) 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.

 

(p)                                 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                                 Voting
of Warrant Shares. Notwithstanding anything in this Agreement to the
contrary, the Investor shall not exercise any voting rights with respect to the
Warrant Shares.

 

31

 

4.7                                 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 may be deposited and depositary shares, each representing a
fraction of a Preferred Share 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 pursuant thereto, the depositary shares issued pursuant
thereto shall be deemed “Preferred Shares” and, as applicable, “Registrable
Securities” for purposes of this Agreement.

 

4.8                                 Restriction
on Dividends and Repurchases.

 

(a)                                  Prior
to the earlier of (x) the third anniversary of the Closing Date and (y) the
date on which the Preferred Shares have been redeemed in whole or the Investor
has transferred all of the Preferred 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 the Common Stock (other than (A) regular
quarterly cash dividends of not more than the amount of the last quarterly cash
dividend per share declared or, if lower, publicly announced an intention to
declare, on the Common Stock prior to October 14, 2008, as adjusted for
any stock split, stock dividend, reverse stock split, reclassification or
similar transaction, (B) dividends payable solely in shares of Common
Stock and (C) dividends or distributions of rights or Junior Stock in
connection with a stockholders’ rights plan); or

 

(ii)                                  redeem, purchase or
acquire any shares of Common Stock or other capital stock or other equity
securities of any kind of the Company, or any trust preferred securities issued
by the Company or any Affiliate of the Company, other than (A) redemptions,
purchases or other acquisitions of the Preferred Shares, (B) redemptions,
purchases or other acquisitions of shares of Common Stock or other Junior
Stock, in each case in this clause (B) in connection with the
administration of any employee benefit plan in the ordinary course of business
(including purchases to offset the Share Dilution Amount (as defined below)
pursuant to a publicly announced repurchase plan) and consistent with past
practice; provided that any
purchases to offset the Share Dilution Amount shall in no event exceed the
Share Dilution Amount, (C) purchases or other acquisitions by a
broker-dealer subsidiary of the Company solely for the purpose of
market-making, stabilization or customer facilitation transactions in Junior
Stock or Parity Stock in the ordinary course of its business, (D) purchases
by a broker-dealer subsidiary of the Company of capital stock of the Company
for resale pursuant to an offering by the Company of such capital stock
underwritten by such broker-dealer subsidiary, (E) any redemption or
repurchase of rights pursuant to any stockholders’ rights plan, (F) the
acquisition by the Company or any of the Company Subsidiaries of record
ownership in Junior Stock 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, and (G) the exchange or conversion of
Junior Stock for or into

 

32

 

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 (G), 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 (C) and (F), collectively, the “Permitted Repurchases”). “Share Dilution Amount” means the increase
in the number of diluted shares outstanding (determined in accordance with
GAAP, and as measured from the date of the Company’s most recently filed
Company Financial Statements prior to the Closing Date) resulting from the
grant, vesting or exercise of equity-based compensation to employees and
equitably adjusted for any stock split, stock dividend, reverse stock split,
reclassification or similar transaction.

 

(b)                                 Until
such time as the Investor ceases to own any Preferred Shares, the Company shall
not repurchase any Preferred 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 then held by the Investor on the same terms and conditions.

 

(c)                                  “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).

 

4.9                                 Repurchase
of Investor Securities.

 

(a)                                  Following
the redemption in whole of the Preferred Shares held by the Investor or the
Transfer by the Investor of all of the Preferred Shares to one or more third
parties not affiliated with the Investor, the Company may repurchase, in whole
or in part, at any time any other equity securities of the Company purchased by
the Investor pursuant to this Agreement or the Warrant and then held by the
Investor, upon notice given as provided in clause (b) below, at the Fair
Market Value of the equity security.

 

(b)                                 Notice
of every repurchase of equity securities of the Company held by the Investor
shall be given at the address and in the manner set forth for such party in Section 5.6.  Each notice of repurchase given to the
Investor shall state: (i) the number and type of securities to be
repurchased, (ii) the Board of Director’s determination of Fair Market
Value of such securities and (iii) the place or places where certificates
representing such securities are to be surrendered for payment of the
repurchase price.  The repurchase of the
securities specified in the notice shall occur as soon as practicable following
the determination of the Fair Market Value of the securities.

 

33

 

(c)                                  As
used in this Section 4.9, the following terms shall have the following
respective meanings:

 

(i)                                     “Appraisal Procedure” means a procedure
whereby two independent appraisers, one chosen by the Company and one by the
Investor, shall mutually agree upon the Fair Market Value. Each party shall
deliver a notice to the other appointing its appraiser within 10 days after the
Appraisal Procedure is invoked.  If
within 30 days after appointment of the two appraisers they are unable to agree
upon the Fair Market Value, a third independent appraiser shall be chosen
within 10 days thereafter by the mutual consent of such first two appraisers.
The decision of the third appraiser so appointed and chosen shall be given
within 30 days after the selection of such third appraiser.  If three appraisers shall be appointed and
the determination of one appraiser is disparate from the middle determination
by more than twice the amount by which the other determination is disparate
from the middle determination, then the determination of such appraiser shall
be excluded, the remaining two determinations shall be averaged and such
average shall be binding and conclusive upon the Company and the Investor;
otherwise, the average of all three determinations shall be binding upon the
Company and the Investor.  The costs of
conducting any Appraisal Procedure shall be borne by the Company.

 

(ii)                                  “Fair Market Value” means, with respect to
any security, the fair market value of such security as determined by the Board
of Directors, acting in good faith in reliance on an opinion of a nationally
recognized independent investment banking firm retained by the Company for this
purpose and certified in a resolution to the Investor.  If the Investor does not agree with the Board
of Director’s determination, it may object in writing within 10 days of receipt
of the Board of Director’s determination. In the event of such an objection, an
authorized representative of the Investor and the chief executive officer of
the Company shall promptly meet to resolve the objection and to agree upon the
Fair Market Value. If the chief executive officer and the authorized representative
are unable to agree on the Fair Market Value during the 10-day period following
the delivery of the Investor’s objection, the Appraisal Procedure may be
invoked by either party to determine the Fair Market Value by delivery of a
written notification thereof not later than the 30th day after delivery of the Investor’s
objection.

 

4.10                           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.

 

34

 

Article V

Miscellaneous

 

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

 

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

 

35

 

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 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.

 

36

 

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

 

(c)                                  The
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 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 Section 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.

 

* * *

 

37

 

ANNEX A

 

FORM OF
CERTIFICATE OF DESIGNATIONS

 

OF

 

FIXED RATE
CUMULATIVE PERPETUAL PREFERRED STOCK, SERIES A

 

OF

 

INTERNATIONAL
BANCSHARES CORPORATION

 

International
Bancshares Corporation, a corporation organized and existing under the laws of
the State of Texas  (the “Corporation”),
in accordance with the provisions of Article 2.13 of the Texas Business
Corporation Act, does hereby certify:

 

The board of
directors of the Corporation (the “Board of Directors”) or an applicable
committee of the Board of Directors, in accordance with the articles of
incorporation and by-laws of the Corporation and applicable law, adopted the
following resolution on December 18, 2008 creating a series of 216,000
shares of Preferred Stock of the Corporation designated as “Fixed Rate
Cumulative Perpetual Preferred Stock, Series A”.

 

RESOLVED,
that pursuant to the provisions of the articles of incorporation and the
by-laws of the Corporation and applicable law, a series of Preferred Stock, par
value $0.01 per share, of the Corporation be and hereby is created, and that
the designation and number of shares of such series, and the voting and other
powers, preferences and relative, participating, optional or other rights, and
the qualifications, limitations and restrictions thereof, of the shares of such
series, are as follows:

 

Part 1.     Designation and Number of Shares.
There is hereby created out of the authorized and unissued shares of preferred
stock of the Corporation a series of preferred stock designated as the “Fixed
Rate Cumulative Perpetual Preferred Stock, Series A” (the “Designated
Preferred Stock”). The authorized number of shares of Designated Preferred
Stock shall be 216,000.

 

Part 2.     Standard Provisions. The Standard
Provisions contained in Annex A attached hereto are incorporated herein by
reference in their entirety and shall be deemed to be a part of this
Certificate of Designations to the same extent as if such provisions had been
set forth in full herein.

 

Part. 3.    Definitions. The following terms are
used in this Certificate of Designations (including the Standard Provisions in
Annex A hereto) as defined below:

 

(a)           “Common Stock” means the
common stock, par value $1.00 per share, of the Corporation.

 

(b)           “Dividend Payment Date” means February 15,
May 15, August 15 and November 15 of each year.

 

1

 

(c)           “Junior Stock” means the
Common Stock and any other class or series of stock of the Corporation the
terms of which expressly provide that it ranks junior to Designated Preferred
Stock as to dividend rights and/or as to rights on liquidation, dissolution or
winding up of the Corporation.

 

(d)           “Liquidation Amount” means
$1,000 per share of Designated Preferred Stock.

 

(e)           “Minimum Amount” means
$54,000,000.

 

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

 

(g)           “Signing Date” means the
Original Issue Date.

 

Part. 4.    Certain Voting Matters.  Holders of shares of Designated Preferred
Stock will be entitled to one vote for each such share on any matter on which
holders of Designated Preferred Stock are entitled to vote, including any
action by written consent.

 

[Remainder of Page Intentionally Left Blank]

 

 

IN WITNESS
WHEREOF, International Bancshares Corporation has caused this Certificate of
Designations to be signed by Dennis E. Nixon, its Chairman of the Board and
President, this 22nd day of December, 2008.

 

	
   

  	
  INTERNATIONAL
  BANCSHARES CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Dennis E.
  Nixon, Chairman of the Board and 

  President

  

 

 

 

ANNEX A

 

STANDARD
PROVISIONS

 

Section 1.               General Matters. Each
share of Designated Preferred Stock shall be identical in all respects to every
other share of Designated Preferred Stock. 
The Designated Preferred Stock shall be perpetual, subject to the
provisions of Section 5 of these Standard Provisions that form a part of
the Certificate of Designations.  The
Designated Preferred Stock shall rank equally with Parity Stock and shall rank
senior to Junior Stock with respect to the payment of dividends and the
distribution of assets in the event of any dissolution, liquidation or winding
up of the Corporation.

 

Section 2.
Standard Definitions. As used herein with respect to Designated Preferred
Stock:

 

(a)           “Applicable
Dividend Rate” means (i) during the period from the Original Issue
Date to, but excluding, the first day of the first Dividend Period commencing
on or after the fifth anniversary of the Original Issue Date, 5% per annum and (ii) from
and after the first day of the first Dividend Period commencing on or after the
fifth anniversary of the Original Issue Date, 9% per annum.

 

(b)           “Appropriate
Federal Banking Agency” means the “appropriate Federal banking agency” with
respect to the Corporation as defined in Section 3(q) of the Federal
Deposit Insurance Act (12 U.S.C. Section 1813(q)), or any successor
provision.

 

(c)           “Business
Combination” means a merger, consolidation, statutory share exchange or
similar transaction that requires the approval of the Corporation’s
stockholders.

 

(d)           “Business Day”
means 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.

 

(e)           “Bylaws”
means the bylaws of the Corporation, as they may be amended from time to time.

 

(f)            “Certificate of
Designations” means the Certificate of Designations or comparable
instrument relating to the Designated Preferred Stock, of which these Standard
Provisions form a part, as it may be amended from time to time.

 

(g)           “Charter”
means the Corporation’s certificate or articles of incorporation, articles of
association, or similar organizational document.

 

(h)           “Dividend Period”
has the meaning set forth in Section 3(a).

 

(i)            “Dividend Record
Date” has the meaning set forth in Section 3(a).

 

(j)            “Liquidation
Preference” has the meaning set forth in Section 4(a).

 

(k)           “Original Issue
Date” means the date on which shares of Designated Preferred Stock are
first issued.

 

 

(l)            “Preferred
Director” has the meaning set forth in Section 7(b).

 

(m)          “Preferred Stock”
means any and all series of preferred stock of the Corporation, including the
Designated Preferred Stock.

 

(n)           “Qualified Equity
Offering” means the sale and issuance for cash by the Corporation to
persons other than the Corporation or any of its subsidiaries after the
Original Issue Date of shares of perpetual Preferred Stock, Common Stock or any
combination of such stock, that, in each case, qualify as and may be included
in Tier 1 capital of the Corporation at the time of issuance under the
applicable risk-based capital guidelines of the Corporation’s Appropriate
Federal Banking Agency (other than any such sales and issuances made pursuant
to agreements or arrangements entered into, or pursuant to financing plans
which were publicly announced, on or prior to October 13, 2008).

 

(o)           “Share Dilution
Amount” has the meaning set forth in Section 3(b).

 

(p)           “Standard
Provisions” mean these Standard Provisions that form a part of the
Certificate of Designations relating to the Designated Preferred Stock.

 

(q)           “Successor
Preferred Stock” has the meaning set forth in Section 5(a).

 

(r)            “Voting Parity
Stock” means, with regard to any matter as to which the holders of
Designated Preferred Stock are entitled to vote as specified in Sections 7(a) and
7(b) of these Standard Provisions that form a part of the Certificate of
Designations, any and all series of Parity Stock upon which like voting rights
have been conferred and are exercisable with respect to such matter.

 

Section 3.
Dividends.

 

(a)           Rate.  Holders of Designated Preferred Stock shall
be entitled to receive, on each share of Designated Preferred Stock if, as and
when declared by the Board of Directors or any duly authorized committee of the
Board of Directors, but only out of assets legally available therefor,
cumulative cash dividends with respect to each Dividend Period (as defined
below) at a rate per annum equal to the Applicable Dividend Rate on (i) the
Liquidation Amount per share of Designated Preferred Stock and (ii) the
amount of accrued and unpaid dividends for any prior Dividend Period on such
share of Designated Preferred Stock, if any. 
Such dividends shall begin to accrue and be cumulative from the Original
Issue Date, shall compound on each subsequent Dividend Payment Date (i.e., no dividends shall accrue on other
dividends unless and until the first Dividend Payment Date for such other
dividends has passed without such other dividends having been paid on such
date) and shall be payable quarterly in arrears on each Dividend Payment Date,
commencing with the first such Dividend Payment Date to occur at least 20
calendar days after the Original Issue Date. 
In the event that any Dividend Payment Date would otherwise fall on a
day that is not a Business Day, the dividend payment due on that date will be
postponed to the next day that is a Business Day and no additional dividends
will accrue as a result of that postponement. The period from and including any
Dividend Payment Date to, but excluding, the next Dividend Payment Date is a “Dividend
Period”, provided that the initial Dividend Period shall be the period from
and including the Original Issue Date to, but excluding, the next Dividend Payment
Date.

 

Dividends that are payable on Designated
Preferred Stock in respect of any Dividend Period shall be computed on the
basis of a 360-day year consisting of twelve 30-day months. The amount of
dividends payable on Designated Preferred Stock on any date prior to the end of
a Dividend Period, and 

 

 

for the initial Dividend
Period, shall be computed on the basis of a 360-day year consisting of twelve
30-day months, and actual days elapsed over a 30-day month.

 

Dividends that are payable on Designated
Preferred Stock on any Dividend Payment Date will be payable to holders of
record of Designated Preferred Stock as they appear on the stock register of
the Corporation on the applicable record date, which shall be the 15th calendar
day immediately preceding such Dividend Payment Date or such other record date
fixed by the Board of Directors or any duly authorized committee of the Board
of Directors that is not more than 60 nor less than 10 days prior to such
Dividend Payment Date (each, a “Dividend Record Date”). Any such day
that is a Dividend Record Date shall be a Dividend Record Date whether or not
such day is a Business Day.

 

Holders of Designated Preferred Stock shall
not be entitled to any dividends, whether payable in cash, securities or other
property, other than dividends (if any) declared and payable on Designated
Preferred Stock as specified in this Section 3 (subject to the other
provisions of the Certificate of Designations).

 

(b)           Priority
of Dividends.  So long as any share
of Designated Preferred Stock remains outstanding, no dividend or distribution
shall be declared or paid on the Common Stock or any other shares of Junior
Stock (other than dividends payable solely in shares of Common Stock) or Parity
Stock, subject to the immediately following paragraph in the case of Parity
Stock, and no Common Stock, Junior Stock or Parity Stock shall be, directly or
indirectly,  purchased, redeemed or
otherwise acquired for consideration by the Corporation or any of its
subsidiaries unless all accrued and unpaid dividends for all past Dividend
Periods, including the latest completed Dividend Period (including, if
applicable as provided in Section 3(a) above, dividends on such
amount), on all outstanding shares of Designated Preferred Stock have been or
are contemporaneously declared and paid in full (or have been declared and a
sum sufficient for the payment thereof has been set aside for the benefit of
the holders of shares of Designated Preferred Stock on the applicable record
date).  The foregoing limitation shall
not apply to (i) redemptions, purchases or other acquisitions of shares of
Common Stock or other Junior Stock in connection with the administration of any
employee benefit plan in the ordinary course of business (including purchases
to offset the Share Dilution Amount (as defined below) pursuant to a publicly
announced repurchase plan) and consistent with past practice, provided that any purchases to offset the
Share Dilution Amount shall in no event exceed the Share Dilution Amount; (ii) purchases
or other acquisitions by a broker-dealer subsidiary of the Corporation solely
for the purpose of market-making, stabilization or customer facilitation
transactions in Junior Stock or Parity Stock in the ordinary course of its
business; (iii) purchases by a broker-dealer subsidiary of the Corporation
of capital stock of the Corporation for resale pursuant to an offering by the
Corporation of such capital stock underwritten by such broker-dealer
subsidiary; (iv) any dividends or distributions of rights or Junior Stock
in connection with a stockholders’ rights plan or any redemption or repurchase
of rights pursuant to any stockholders’ rights plan; (v) the acquisition
by the Corporation or any of its subsidiaries of record ownership in Junior
Stock or Parity Stock for the beneficial ownership of any other persons (other
than the Corporation or any of its subsidiaries), including as trustees or
custodians; and (vi) the exchange or conversion of Junior Stock for or
into other Junior Stock or of Parity Stock for or into other Parity Stock (with
the same or lesser aggregate liquidation amount) or Junior Stock, in each case,
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. “Share
Dilution Amount” means the increase in the number of diluted shares
outstanding (determined in accordance with generally accepted accounting
principles in the United States, and as

 

 

measured from the date of the Corporation’s consolidated financial
statements most recently filed with the Securities and Exchange Commission
prior to the Original Issue Date) resulting from the grant, vesting or exercise
of equity-based compensation to employees and equitably adjusted for any stock
split, stock dividend, reverse stock split, reclassification or similar
transaction.

 

When dividends are not paid (or declared and
a sum sufficient for payment thereof set aside for the benefit of the holders
thereof on the applicable record date) on any Dividend Payment Date (or, in the
case of Parity Stock having dividend payment dates different from the Dividend
Payment Dates, on a dividend payment date falling within a Dividend Period
related to such Dividend Payment Date) in full upon Designated Preferred Stock
and any shares of Parity Stock, all dividends declared on Designated Preferred
Stock and all such Parity Stock and payable on such Dividend Payment Date (or,
in the case of Parity Stock having dividend payment dates different from the
Dividend Payment Dates, on a dividend payment date falling within the Dividend
Period related to such Dividend Payment Date) shall be declared pro rata so that the respective amounts of
such dividends declared shall bear the same ratio to each other as all accrued
and unpaid dividends per share on the shares of Designated Preferred Stock
(including, if applicable as provided in Section 3(a) above,
dividends on such amount) and all Parity Stock payable on such Dividend Payment
Date (or, in the case of Parity Stock having dividend payment dates different
from the Dividend Payment Dates, on a dividend payment date falling within the
Dividend Period related to such Dividend Payment Date) (subject to their having
been declared by the Board of Directors or a duly authorized committee of the
Board of Directors out of legally available funds and including, in the case of
Parity Stock that bears cumulative dividends, all accrued but unpaid dividends)
bear to each other.  If the Board of
Directors or a duly authorized committee of the Board of Directors determines
not to pay any dividend or a full dividend on a Dividend Payment Date, the
Corporation will provide written notice to the holders of Designated Preferred
Stock prior to such Dividend Payment Date.

 

Subject to the foregoing, and not otherwise,
such dividends (payable in cash, securities or other property) as may be
determined by the Board of Directors or any duly authorized committee of the
Board of Directors may be declared and paid on any securities, including Common
Stock and other Junior Stock, from time to time out of any funds legally
available for such payment, and holders of Designated Preferred Stock shall not
be entitled to participate in any such dividends.

 

Section 4.               Liquidation Rights.

 

(a)           Voluntary or Involuntary
Liquidation.  In the event of any
liquidation, dissolution or winding up of the affairs of the Corporation,
whether voluntary or involuntary, holders of Designated Preferred Stock shall
be entitled to receive for each share of Designated Preferred Stock, out of the
assets of the Corporation or proceeds thereof (whether capital or surplus)
available for distribution to stockholders of the Corporation, subject to the
rights of any creditors of the Corporation, before any distribution of such
assets or proceeds is made to or set aside for the holders of Common Stock and
any other stock of the Corporation ranking junior to Designated Preferred Stock
as to such distribution, payment in full in an amount equal to the sum of (i) the
Liquidation Amount per share and (ii) the amount of any accrued and unpaid
dividends (including, if applicable as provided in Section 3(a) above,
dividends on such amount), whether or not declared, to the date of payment (such
amounts collectively, the “Liquidation Preference”).

 

(b)           Partial Payment.  If in any distribution described in Section 4(a) above
the assets of the Corporation or proceeds thereof are not sufficient to pay in
full the amounts payable with respect to all

 

 

outstanding shares of Designated Preferred Stock and the corresponding
amounts payable with respect of any other stock of the Corporation ranking
equally with Designated Preferred Stock as to such distribution, holders of
Designated Preferred Stock and the holders of such other stock shall share
ratably in any such distribution in proportion to the full respective
distributions to which they are entitled.

 

(c)           Residual
Distributions.  If the Liquidation
Preference has been paid in full to all holders of Designated Preferred Stock
and the corresponding amounts payable with respect of any other stock of the
Corporation ranking equally with Designated Preferred Stock as to such
distribution has been paid in full, the holders of other stock of the Corporation
shall be entitled to receive all remaining assets of the Corporation (or
proceeds thereof) according to their respective rights and preferences.

 

(d)           Merger,
Consolidation and Sale of Assets Not Liquidation.  For purposes of this Section 4, the
merger or consolidation of the Corporation with any other corporation or other
entity, including a merger or consolidation in which the holders of Designated
Preferred Stock receive cash, securities or other property for their shares, or
the sale, lease or exchange (for cash, securities or other property) of all or
substantially all of the assets of the Corporation, shall not constitute a
liquidation, dissolution or winding up of the Corporation.

 

Section 5.               Redemption.

 

(a)           Optional Redemption.  Except as provided below, the Designated
Preferred Stock may not be redeemed prior to the first Dividend Payment Date
falling on or after the third anniversary of the Original Issue Date. On or
after the first Dividend Payment Date falling on or after the third anniversary
of the Original Issue Date, the Corporation, at its option, subject to the
approval of the Appropriate Federal Banking Agency, may redeem, in whole or in
part, at any time and from time to time, out of funds legally available
therefor, the shares of Designated Preferred Stock at the time outstanding,
upon notice given as provided in Section 5(c) below, at a redemption
price equal to the sum of (i) the Liquidation Amount per share and (ii) except
as otherwise provided below, any accrued and unpaid dividends (including, if
applicable as provided in Section 3(a) above, dividends on such
amount) (regardless of whether any dividends are actually declared) to, but
excluding, the date fixed for redemption.

 

Notwithstanding the foregoing, prior to the
first Dividend Payment Date falling on or after the third anniversary of the
Original Issue Date, the Corporation, at its option, subject to the approval of
the Appropriate Federal Banking Agency, may redeem, in whole or in part, at any
time and from time to time, the shares of Designated Preferred Stock at the
time outstanding, upon notice given as provided in Section 5(c) below,
at a redemption price equal to the sum of (i) the Liquidation Amount per
share and (ii) except as otherwise provided below, any accrued and unpaid
dividends (including, if applicable as provided in Section 3(a) above,
dividends on such amount) (regardless of whether any dividends are actually
declared) to, but excluding, the date fixed for redemption; provided that (x) the Corporation (or
any successor by Business Combination) has received aggregate gross proceeds of
not less than the Minimum Amount (plus the “Minimum Amount” as defined in the
relevant certificate of designations for each other outstanding series of
preferred stock of such successor that was originally issued to the United
States Department of the Treasury (the “Successor Preferred Stock”) in
connection with the Troubled Asset Relief Program Capital Purchase Program)
from one or more Qualified Equity Offerings (including Qualified Equity
Offerings of such successor), and (y) the aggregate redemption price of
the Designated Preferred Stock (and any Successor Preferred Stock) redeemed
pursuant to this 

 

 

paragraph may not exceed the
aggregate net cash proceeds received by the Corporation (or any successor by
Business Combination) from such Qualified Equity Offerings (including Qualified
Equity Offerings of such successor).

 

The redemption price for any shares of
Designated Preferred Stock shall be payable on the redemption date to the
holder of such shares against surrender of the certificate(s) evidencing
such shares to the Corporation or its agent. Any declared but unpaid dividends
payable on a redemption date that occurs subsequent to the Dividend Record Date
for a Dividend Period shall not be paid to the holder entitled to receive the
redemption price on the redemption date, but rather shall be paid to the holder
of record of the redeemed shares on such Dividend Record Date relating to the
Dividend Payment Date as provided in Section 3 above.

 

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

 

(c)           Notice
of Redemption.  Notice of every
redemption of shares of Designated Preferred Stock shall be given by first
class mail, postage prepaid, addressed to the holders of record of the shares
to be redeemed at their respective last addresses appearing on the books of the
Corporation. Such mailing shall be at least 30 days and not more than 60 days
before the date fixed for redemption. Any notice mailed as provided in this
Subsection shall be conclusively presumed to have been duly given, whether or
not the holder receives such notice, but failure duly to give such notice by
mail, or any defect in such notice or in the mailing thereof, to any holder of
shares of Designated Preferred Stock designated for redemption shall not affect
the validity of the proceedings for the redemption of any other shares of
Designated Preferred Stock. Notwithstanding the foregoing, if shares of
Designated Preferred Stock are issued in book-entry form through The Depository
Trust Corporation or any other similar facility, notice of redemption may be
given to the holders of Designated Preferred Stock at such time and in any
manner permitted by such facility. Each notice of redemption given to a holder
shall state: (1) the redemption date; (2) the number of shares of
Designated Preferred Stock to be redeemed and, if less than all the shares held
by such holder are to be redeemed, the number of such shares to be redeemed
from such holder; (3) the redemption price; and (4) the place or
places where certificates for such shares are to be surrendered for payment of
the redemption price.

 

(d)           Partial
Redemption.  In case of any
redemption of part of the shares of Designated Preferred Stock at the time
outstanding, the shares to be redeemed shall be selected either pro rata or in such other manner as the
Board of Directors or a duly authorized committee thereof may determine to be
fair and equitable. Subject to the provisions hereof, the Board of Directors or
a duly authorized committee thereof shall have full power and authority to
prescribe the terms and conditions upon which shares of Designated Preferred
Stock shall be redeemed from time to time. If fewer than all the shares
represented by any certificate are redeemed, a new certificate shall be issued
representing the unredeemed shares without charge to the holder thereof.

 

(e)           Effectiveness
of Redemption. If notice of redemption has been duly given and if on or
before the redemption date specified in the notice all funds necessary for the
redemption have been deposited by the Corporation, in trust for the pro rata benefit of the holders of the
shares called for redemption, with a bank or trust company doing business in
the Borough of Manhattan, The City of New York, and having a capital and surplus
of at least $500 million and selected by the Board of Directors, so as to be
and continue to be available solely therefor, then, notwithstanding that any
certificate for any share so called for redemption has not been surrendered for
cancellation, on and after 

 

 

the redemption date dividends
shall cease to accrue on all shares so called for redemption, all shares so
called for redemption shall no longer be deemed outstanding and all rights with
respect to such shares shall forthwith on such redemption date cease and
terminate, except only the right of the holders thereof to receive the amount
payable on such redemption from such bank or trust company, without interest.
Any funds unclaimed at the end of three years from the redemption date shall,
to the extent permitted by law, be released to the Corporation, after which
time the holders of the shares so called for redemption shall look only to the
Corporation for payment of the redemption price of such shares.

 

(f)            Status of Redeemed Shares.  Shares of Designated Preferred Stock that are
redeemed, repurchased or otherwise acquired by the Corporation shall revert to
authorized but unissued shares of Preferred Stock (provided that any such cancelled shares of Designated
Preferred Stock may be reissued only as shares of any series of Preferred Stock
other than Designated Preferred Stock).

 

Section 6.               Conversion. 
Holders of Designated Preferred Stock shares shall have no right to
exchange or convert such shares into any other securities.

 

Section 7. Voting Rights.

 

(a)           General.  The holders of Designated Preferred Stock
shall not have any voting rights except as set forth below or as otherwise from
time to time required by law.

 

(b)           Preferred
Stock Directors.  Whenever, at any
time or times, dividends payable on the shares of Designated Preferred Stock
have not been paid for an aggregate of six quarterly Dividend Periods or more,
whether or not consecutive, the authorized number of directors of the
Corporation shall automatically be increased by two and the holders of the
Designated Preferred Stock shall have the right, with holders of shares of any
one or more other classes or series of Voting Parity Stock outstanding at the
time, voting together as a class, to elect two directors (hereinafter the “Preferred Directors” and each a “Preferred Director”)
to fill such newly created directorships at the Corporation’s next annual
meeting of stockholders (or at a special meeting called for that purpose prior
to such next annual meeting) and at each subsequent annual meeting of
stockholders until all accrued and unpaid dividends for all past Dividend
Periods, including the latest completed Dividend Period (including, if
applicable as provided in Section 3(a) above, dividends on such
amount), on all outstanding shares of Designated Preferred Stock have been
declared and paid in full at which time such right shall terminate with respect
to the Designated Preferred Stock, except as herein or by law expressly
provided, subject to revesting in the event of each and every subsequent
default of the character above mentioned; provided
that it shall be a qualification for election for any Preferred
Director that the election of such Preferred Director shall not cause the
Corporation to violate any corporate governance requirements of any securities
exchange or other trading facility on which securities of the Corporation may
then be listed or traded that listed or traded companies must have a majority
of independent directors. Upon any termination of the right of the holders of shares
of Designated Preferred Stock and Voting Parity Stock as a class to vote for
directors as provided above, the Preferred Directors shall cease to be
qualified as directors, the term of office of all Preferred Directors then in
office shall terminate immediately and the authorized number of directors shall
be reduced by the number of Preferred Directors elected pursuant hereto.  Any Preferred Director may be removed at any
time, with or without cause, and any vacancy created thereby may be filled,
only by the affirmative vote of the holders a majority of the shares of
Designated Preferred Stock at the time outstanding voting separately as a class
together with the holders of shares of Voting Parity Stock, to

 

 

the extent the voting rights of such holders described above are then
exercisable. If the office of any Preferred Director becomes vacant for any
reason other than removal from office as aforesaid, the remaining Preferred
Director may choose a successor who shall hold office for the unexpired term in
respect of which such vacancy occurred.

 

(c)           Class Voting
Rights as to Particular Matters. So long as any shares of Designated
Preferred Stock are outstanding, in addition to any other vote or consent of
stockholders required by law or by the Charter, the vote or consent of the
holders of at least 66 2/3% of the shares of Designated Preferred Stock at the
time outstanding, voting as a separate class, given in person or by proxy,
either in writing without a meeting or by vote at any meeting called for the
purpose, shall be necessary for effecting or validating:

 

(i)            Authorization of Senior Stock.
Any amendment or alteration of the Certificate of Designations for the
Designated Preferred Stock or the Charter to authorize or create or increase
the authorized amount of, or any issuance of, any shares of, or any securities
convertible into or exchangeable or exercisable for shares of, any class or
series of capital stock of the Corporation ranking senior to Designated
Preferred Stock with respect to either or both the payment of dividends and/or
the distribution of assets on any liquidation, dissolution or winding up of the
Corporation;

 

(ii)           Amendment of Designated Preferred
Stock.  Any amendment, alteration or
repeal of any provision of the Certificate of Designations for the Designated
Preferred Stock or the Charter (including, unless no vote on such merger or
consolidation is required by Section 7(c)(iii) below, any amendment,
alteration or repeal by means of a merger, consolidation or otherwise) so as to
adversely affect the rights, preferences, privileges or voting powers of the
Designated Preferred Stock; or

 

(iii)          Share Exchanges, Reclassifications,
Mergers and Consolidations.  Any
consummation of a binding share exchange or reclassification involving the
Designated Preferred Stock, or of a merger or consolidation of the Corporation
with another corporation or other entity, unless in each case (x) the
shares of Designated Preferred Stock remain outstanding or, in the case of any
such merger or consolidation with respect to which the Corporation is not the
surviving or resulting entity, are converted into or exchanged for preference
securities of the surviving or resulting entity or its ultimate parent, and (y) such
shares remaining outstanding or such preference securities, as the case may be,
have such rights, preferences, privileges and voting powers, and limitations
and restrictions thereof, taken as a whole, as are not materially less
favorable to the holders thereof than the rights, preferences, privileges and
voting powers, and limitations and restrictions thereof, of Designated
Preferred Stock immediately prior to such consummation, taken as a whole;

 

provided, however, that for all purposes of this Section 7(c),
any increase in the amount of the authorized Preferred Stock, including any
increase in the authorized amount of Designated Preferred Stock necessary to
satisfy preemptive or similar rights granted by the Corporation to other
persons prior to the Signing Date, or the creation and issuance, or an increase
in the authorized or issued amount, whether pursuant to preemptive or similar
rights or otherwise, of any other series of Preferred Stock, or any securities
convertible into or exchangeable or exercisable for any other series of
Preferred Stock, ranking equally with and/or junior to Designated Preferred
Stock with respect to the payment of dividends (whether such dividends are
cumulative or non-cumulative) and the distribution of assets upon liquidation,
dissolution or winding up of the Corporation will not be deemed to adversely
affect 

 

 

the rights, preferences, privileges or voting powers, and shall not
require the affirmative vote or consent of, the holders of outstanding shares
of the Designated Preferred Stock.

 

(d)           Changes
after Provision for Redemption.  No
vote or consent of the holders of Designated Preferred Stock shall be required
pursuant to Section 7(c) above if, at or prior to the time when any
such vote or consent would otherwise be required pursuant to such Section, all
outstanding shares of the Designated Preferred Stock shall have been redeemed,
or shall have been called for redemption upon proper notice and sufficient
funds shall have been deposited in trust for such redemption, in each case
pursuant to Section 5 above.

 

(e)           Procedures for Voting and Consents.  The rules and procedures for calling and
conducting any meeting of the holders of Designated Preferred Stock (including,
without limitation, the fixing of a record date in connection therewith), the
solicitation and use of proxies at such a meeting, the obtaining of written
consents and any other aspect or matter with regard to such a meeting or such
consents shall be governed by any rules of the Board of Directors or any
duly authorized committee of the Board of Directors, in its discretion, may
adopt from time to time, which rules and procedures shall conform to the
requirements of the Charter, the Bylaws, and applicable law and the rules of
any national securities exchange or other trading facility on which Designated
Preferred Stock is listed or traded at the time.

 

Section 8.               Record Holders. 
To the fullest extent permitted by applicable law, the Corporation and
the transfer agent for Designated Preferred Stock may deem and treat the record
holder of any share of Designated Preferred Stock as the true and lawful owner
thereof for all purposes, and neither the Corporation nor such transfer agent
shall be affected by any notice to the contrary.

 

Section 9.               Notices. 
All notices or communications in respect of Designated Preferred Stock
shall be sufficiently given if given in writing and delivered in person or by
first class mail, postage prepaid, or if given in such other manner as may be
permitted in this Certificate of Designations, in the Charter or Bylaws or by
applicable law. Notwithstanding the foregoing, if shares of Designated
Preferred Stock are issued in book-entry form through The Depository Trust
Corporation or any similar facility, such notices may be given to the holders
of Designated Preferred Stock in any manner permitted by such facility.

 

Section 10.             No Preemptive Rights. No share of Designated
Preferred Stock shall have any rights of preemption whatsoever as to any
securities of the Corporation, or any warrants, rights or options issued or
granted with respect thereto, regardless of how such securities, or such
warrants, rights or options, may be designated, issued or granted.

 

Section 11.             Replacement Certificates. The Corporation shall
replace any mutilated certificate at the holder’s expense upon surrender of
that certificate to the Corporation. The Corporation shall replace certificates
that become destroyed, stolen or lost at the holder’s expense upon delivery to
the Corporation of reasonably satisfactory evidence that the certificate has
been destroyed, stolen or lost, together with any indemnity that may be
reasonably required by the Corporation.

 

 

Section 12.             Other Rights. The shares of
Designated Preferred Stock shall not have any rights, preferences, privileges
or voting powers or relative, participating, optional or other special rights,
or qualifications, limitations or restrictions thereof, other than as set forth
herein or in the Charter or as provided by applicable law.

 

 

ANNEX B

 

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.

 

 

ANNEX C

 

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 Common 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.

 

(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(g) or
the severability provisions of the Agreement insofar as Section 4.5(g) is
concerned.

 

 

ANNEX D

 

FORM OF
WARRANT TO PURCHASE COMMON STOCK

 

THE SECURITIES REPRESENTED BY THIS INSTRUMENT HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY
STATE AND MAY NOT BE TRANSFERRED, SOLD OR OTHERWISE DISPOSED OF EXCEPT
WHILE A REGISTRATION STATEMENT RELATING THERETO IS IN EFFECT UNDER SUCH ACT AND
APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AN EXEMPTION FROM REGISTRATION
UNDER SUCH ACT OR SUCH LAWS.  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.

 

WARRANT

 

to
purchase 

1,326,238

 

Shares
of Common Stock

 

of
International Bancshares Corporation

 

Issue Date: December 23,
2008

 

1.             Definitions. Unless the
context otherwise requires, when used herein the following terms shall have the
meanings indicated.

 

“Affiliate” has the meaning ascribed to it
in the Purchase Agreement.

 

“Appraisal Procedure” means a procedure
whereby two independent appraisers, one chosen by the Company and one by the
Original Warrantholder, shall mutually agree upon the determinations then the
subject of appraisal.  Each party shall
deliver a notice to the other appointing its appraiser within 15 days after the
Appraisal Procedure is invoked.  If within
30 days after appointment of the two appraisers they are unable to agree upon
the amount in question, a third independent appraiser shall be chosen within 10
days thereafter by the mutual consent of such first two appraisers.  The decision of the third appraiser so
appointed and chosen shall be given within 30 days after the selection of such
third appraiser.  If three appraisers
shall be appointed and the determination of one appraiser is disparate from the
middle determination by more than twice the amount by which the other
determination is disparate from the middle determination, then the
determination of such appraiser shall be excluded, the remaining two
determinations shall be averaged and such average shall be binding and
conclusive upon the 

 

17

 

Company and the Original
Warrantholder; otherwise, the average of all three determinations shall be
binding upon the Company and the Original Warrantholder.  The costs of conducting any Appraisal Procedure
shall be borne by the Company.

 

“Board of Directors” means the board of
directors of the Company, including any duly authorized committee thereof.

 

“Business Combination” means a merger,
consolidation, statutory share exchange or similar transaction that requires
the approval of the Company’s stockholders.

 

“business day” means 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.

 

“Capital Stock” means (A) with respect
to any Person that is a corporation or company, any and all shares, interests,
participations or other equivalents (however designated) of capital or capital
stock of such Person and (B) with respect to any Person that is not a
corporation or company, any and all partnership or other equity interests of
such Person.

 

“Charter” means, with respect to any
Person, its certificate or articles of incorporation, articles of association,
or similar organizational document.

 

“Common Stock” has the meaning ascribed to
it in the Purchase Agreement.

 

“Company” means the Person whose name,
corporate or other organizational form and jurisdiction of organization is set
forth in Item 1 of Schedule A hereto.

 

“conversion” has the meaning set forth in Section 13(B).

 

“convertible securities” has the meaning
set forth in Section 13(B).

 

“CPP” has the meaning ascribed to it in the
Purchase Agreement.

 

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

 

“Exercise Price” means the amount set forth
in Item 2 of Schedule A hereto.

 

“Expiration Time” has the meaning set forth
in Section 3.

 

“Fair Market Value” means, with respect to
any security or other property, the fair market value of such security or other
property as determined by the Board of Directors, acting in good faith or, with
respect to Section 14, as determined by the Original Warrantholder acting
in good faith. For so long as the Original Warrantholder holds this Warrant or
any portion thereof, it may object in writing to the Board of Director’s
calculation of fair market value within 10 days of receipt of written notice
thereof.  If the Original Warrantholder
and the Company are unable to agree on fair market value during the 10-day
period following the delivery of the Original Warrantholder’s objection, the
Appraisal Procedure may be invoked by either party to 

 

 

determine Fair
Market Value by delivering written notification thereof not later than the 30th day after delivery of the Original
Warrantholder’s objection.

 

“Governmental Entities” has the meaning
ascribed to it in the Purchase Agreement.

 

“Initial Number” has the meaning set forth
in Section 13(B).

 

“Issue Date” means the date set forth in Item
3 of Schedule A hereto.

 

“Market Price” means, with respect to a
particular security, on any given day, the last reported sale price regular way
or, in case no such reported sale takes place on such day, the average of the
last closing bid and ask prices regular way, in either case on the principal
national securities exchange on which the applicable securities are listed or
admitted to trading, or if not listed or admitted to trading on any national
securities exchange, the average of the closing bid and ask prices as furnished
by two members of the Financial Industry Regulatory Authority, Inc.
selected from time to time by the Company for that purpose.  “Market Price” shall be determined without
reference to after hours or extended hours trading. If such security is not
listed and traded in a manner that the quotations referred to above are
available for the period required hereunder, the Market Price per share of
Common Stock shall be deemed to be (i) in the event that any portion of
the Warrant is held by the Original Warrantholder, the fair market value per
share of such security as determined in good faith by the Original
Warrantholder or (ii) in all other circumstances, the fair market value
per share of such security as determined in good faith by the Board of
Directors in reliance on an opinion of a nationally recognized independent
investment banking corporation retained by the Company for this purpose and
certified in a resolution to the Warrantholder. 
For the purposes of determining the Market Price of the Common Stock on
the “trading day” preceding, on or following the occurrence of an event, (i) that
trading day shall be deemed to commence immediately after the regular scheduled
closing time of trading on the New York Stock Exchange or, if trading is closed
at an earlier time, such earlier time and (ii) that trading day shall end
at the next regular scheduled closing time, or if trading is closed at an
earlier time, such earlier time (for the avoidance of doubt, and as an example,
if the Market Price is to be determined as of the last trading day preceding a
specified event and the closing time of trading on a particular day is 4:00 p.m.
and the specified event occurs at 5:00 p.m. on that day, the Market Price
would be determined by reference to such 4:00 p.m. closing price).

 

“Ordinary Cash Dividends” means a regular
quarterly cash dividend on shares of Common Stock out of surplus or net profits
legally available therefor (determined in accordance with generally accepted
accounting principles in effect from time to time), provided that Ordinary Cash Dividends shall not include any
cash dividends paid subsequent to the Issue Date to the extent the aggregate
per share dividends paid on the outstanding Common Stock in any quarter exceed
the amount set forth in Item 4 of Schedule A hereto, as adjusted for any stock
split, stock dividend, reverse stock split, reclassification or similar
transaction.

 

“Original Warrantholder” means the United
States Department of the Treasury.  Any
actions specified to be taken by the Original Warrantholder hereunder may only
be taken by such Person and not by any other Warrantholder.

 

 

“Permitted Transactions” has the meaning
set forth in Section 13(B).

 

“Person” has the meaning given to it in Section 3(a)(9) of
the Exchange Act and as used in Sections 13(d)(3) and 14(d)(2) of the
Exchange Act.

 

“Per Share Fair Market Value” has the
meaning set forth in Section 13(C).

 

“Preferred Shares” means the perpetual
preferred stock issued to the Original Warrantholder on the Issue Date pursuant
to the Purchase Agreement.

 

“Pro Rata Repurchases” means any purchase
of shares of Common Stock by the Company or any Affiliate thereof pursuant to (A) any
tender offer or exchange offer subject to Section 13(e) or 14(e) of
the Exchange Act or Regulation 14E promulgated thereunder or (B) any other
offer available to substantially all holders of Common Stock, in the case of
both (A) or (B), whether for cash, shares of Capital Stock of the Company,
other securities of the Company, evidences of indebtedness of the Company or
any other Person or any other property (including, without limitation, shares
of Capital Stock, other securities or evidences of indebtedness of a
subsidiary), or any combination thereof, effected while this Warrant is
outstanding.  The “Effective Date” of a Pro Rata Repurchase
shall mean the date of acceptance of shares for purchase or exchange by the
Company under any tender or exchange offer which is a Pro Rata Repurchase or
the date of purchase with respect to any Pro Rata Repurchase that is not a
tender or exchange offer.

 

“Purchase Agreement” means the Securities
Purchase Agreement — Standard Terms incorporated into the Letter Agreement,
dated as of the date set forth in Item 5 of Schedule A hereto, as amended from
time to time, between the Company and the United States Department of the
Treasury (the “Letter Agreement”),
including all annexes and schedules thereto.

 

“Qualified Equity Offering” has the meaning
ascribed to it in the Purchase Agreement.

 

“Regulatory Approvals” with respect to the
Warrantholder, means, to the extent applicable and required to permit the
Warrantholder to exercise this Warrant for shares of Common Stock and to own
such Common Stock without the Warrantholder being in violation of applicable
law, rule or regulation, the receipt of any necessary approvals and
authorizations of, filings and registrations with, notifications to, or
expiration or termination of any applicable waiting period under, the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules and
regulations thereunder.

 

“SEC” means the U.S. Securities and
Exchange Commission.

 

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

 

“Shares” has the meaning set forth in Section 2.

 

“trading day” means (A) if the shares of
Common Stock are not traded on any national or regional securities exchange or
association or over-the-counter market, 
a business day or (B) if the shares of Common Stock are traded on
any national or regional securities exchange or

 

 

association or
over-the-counter market, a business day on which such relevant exchange or
quotation system is scheduled to be open for business and on which the shares
of Common Stock (i) are not suspended from trading on any national or
regional securities exchange or association or over-the-counter market for any
period or periods aggregating one half hour or longer; and (ii) have
traded at least once on the national or regional securities exchange or
association or over-the-counter market that is the primary market for the
trading of the shares of Common Stock.

 

“U.S. GAAP” means United States generally
accepted accounting principles.

 

“Warrantholder” has the meaning set forth
in Section 2.

 

“Warrant” means this Warrant, issued
pursuant to the Purchase Agreement.

 

2.             Number of Shares; Exercise Price.
This certifies that, for value received, the United States Department of the
Treasury or its permitted assigns (the “Warrantholder”)
is entitled, upon the terms and subject to the conditions hereinafter set
forth, to acquire from the Company, in whole or in part, after the receipt of
all applicable Regulatory Approvals, if any, up to an aggregate of the number
of fully paid and nonassessable shares of Common Stock set forth in Item 6 of
Schedule A hereto, at a purchase price per share of Common Stock equal to the
Exercise Price.  The number of shares of
Common Stock (the “Shares”) and
the Exercise Price are subject to adjustment as provided herein, and all
references to “Common Stock,” “Shares” and “Exercise Price” herein shall be
deemed to include any such adjustment or series of adjustments.

 

3.             Exercise of Warrant; Term.
Subject to Section 2, to the extent permitted by applicable laws and
regulations, the right to purchase the Shares represented by this Warrant is
exercisable, in whole or in part by the Warrantholder, at any time or from time
to time after the execution and delivery of this Warrant by the Company on the
date hereof, but in no event later than 5:00 p.m., New York City time on
the tenth anniversary of the Issue Date (the “Expiration
Time”), by (A) the surrender of this Warrant and Notice of
Exercise annexed hereto, duly completed and executed on behalf of the
Warrantholder, at the principal executive office of the Company located at the
address set forth in Item 7 of Schedule A hereto (or such other office or
agency of the Company in the United States as it may designate by notice in
writing to the Warrantholder at the address of the Warrantholder appearing on
the books of the Company), and (B) payment of the Exercise Price for the
Shares thereby purchased:

 

(i)            by
having the Company withhold, from the shares of Common Stock that would
otherwise be delivered to the Warrantholder upon such exercise, shares of
Common stock issuable upon exercise of the Warrant equal in value to the
aggregate Exercise Price as to which this Warrant is so exercised based on the
Market Price of the Common Stock on the trading day on which this Warrant is
exercised and the Notice of Exercise is delivered to the Company pursuant to
this Section 3, or

 

(ii)           with the consent of
both the Company and the Warrantholder, by tendering in cash, by certified or
cashier’s check payable to the order of the Company, or by wire transfer of
immediately available funds to an account designated by the Company.

 

 

If the
Warrantholder does not exercise this Warrant in its entirety, the Warrantholder
will be entitled to receive from the Company within a reasonable time, and in
any event not exceeding three business days, a new warrant in substantially
identical form for the purchase of that number of Shares equal to the
difference between the number of Shares subject to this Warrant and the number
of Shares as to which this Warrant is so exercised.  Notwithstanding anything in this Warrant to
the contrary, the Warrantholder hereby acknowledges and agrees that its
exercise of this Warrant for Shares is subject to the condition that the Warrantholder
will have first received any applicable Regulatory Approvals.

 

4.             Issuance
of Shares; Authorization; Listing. Certificates for Shares issued upon
exercise of this Warrant will be issued in such name or names as the
Warrantholder may designate and will be delivered to such named Person or
Persons within a reasonable time, not to exceed three business days after the
date on which this Warrant has been duly exercised in accordance with the terms
of this Warrant.  The Company hereby
represents and warrants that any Shares issued upon the exercise of this
Warrant in accordance with the provisions of Section 3 will be duly and
validly authorized and issued, fully paid and nonassessable and free from all
taxes, liens and charges (other than liens or charges created by the
Warrantholder, income and franchise taxes incurred in connection with the
exercise of the Warrant or taxes in respect of any transfer occurring
contemporaneously therewith). The Company agrees that the Shares so issued will
be deemed to have been issued to the Warrantholder as of the close of business
on the date on which this Warrant and payment of the Exercise Price are
delivered to the Company in accordance with the terms of this Warrant,
notwithstanding that the stock transfer books of the Company may then be closed
or certificates representing such Shares may not be actually delivered on such
date.  The Company will at all times
reserve and keep available, out of its authorized but unissued Common Stock,
solely for the purpose of providing for the exercise of this Warrant, the
aggregate number of shares of Common Stock then issuable upon exercise of this
Warrant at any time.  The Company will (A) procure,
at its sole expense, the listing of the Shares issuable upon exercise of this
Warrant at any time, subject to issuance or notice of issuance, on all
principal stock exchanges on which the Common Stock is then listed or traded
and (B) maintain such listings of such Shares at all times after
issuance.  The Company will use
reasonable best efforts to ensure that the Shares may be issued without
violation of any applicable law or regulation or of any requirement of any
securities exchange on which the Shares are listed or traded.

 

5.             No
Fractional Shares or Scrip. No fractional Shares or scrip representing
fractional Shares shall be issued upon any exercise of this Warrant.  In lieu of any fractional Share to which the
Warrantholder would otherwise be entitled, the Warrantholder shall be entitled
to receive a cash payment equal to the Market Price of the Common Stock on the
last trading day preceding the date of exercise less the pro-rated Exercise
Price for such fractional share.

 

6.             No
Rights as Stockholders; Transfer Books. This Warrant does not entitle the
Warrantholder to any voting rights or other rights as a stockholder of the
Company prior to the date of exercise hereof. The Company will at no time close
its transfer books against transfer of this Warrant in any manner which
interferes with the timely exercise of this Warrant.

 

 

7.             Charges, Taxes
and Expenses. Issuance of certificates for Shares to the Warrantholder upon
the exercise of this Warrant shall be made without charge to the Warrantholder
for any issue or transfer tax or other incidental expense in respect of the
issuance of such certificates, all of which taxes and expenses shall be paid by
the Company.

 

8.             Transfer/Assignment.

 

(A)          Subject to compliance with clause (B) of
this Section 8, this Warrant and all rights hereunder are transferable, in
whole or in part, upon the books of the Company by the registered holder hereof
in person or by duly authorized attorney, and a new warrant shall be made and
delivered by the Company, of the same tenor and date as this Warrant but
registered in the name of one or more transferees, upon surrender of this
Warrant, duly endorsed, to the office or agency of the Company described in Section 3.  All expenses (other than stock transfer
taxes) and other charges payable in connection with the preparation, execution
and delivery of the new warrants pursuant to this Section 8 shall be paid
by the Company.

 

(B)           The transfer of the
Warrant and the Shares issued upon exercise of the Warrant are subject to the
restrictions set forth in Section 4.4 of the Purchase Agreement.  If and for so long as required by the
Purchase Agreement, this Warrant shall contain the legends as set forth in
Sections 4.2(a) and 4.2(b) of the Purchase Agreement.

 

9.             Exchange and
Registry of Warrant. This Warrant is exchangeable, upon the surrender
hereof by the Warrantholder to the Company, for a new warrant or warrants of
like tenor and representing the right to purchase the same aggregate number of
Shares.  The Company shall maintain a
registry showing the name and address of the Warrantholder as the registered
holder of this Warrant. This Warrant may be surrendered for exchange or
exercise in accordance with its terms, at the office of the Company, and the
Company shall be entitled to rely in all respects, prior to written notice to
the contrary, upon such registry.

 

10.           Loss,
Theft, Destruction or Mutilation of Warrant. Upon receipt by the Company of
evidence reasonably satisfactory to it of the loss, theft, destruction or
mutilation of this Warrant, and in the case of any such loss, theft or
destruction, upon receipt of a bond, indemnity or security reasonably
satisfactory to the Company, or, in the case of any such mutilation, upon
surrender and cancellation of this Warrant, the Company shall make and deliver,
in lieu of such lost, stolen, destroyed or mutilated Warrant, a new Warrant of
like tenor and representing the right to purchase the same aggregate number of
Shares as provided for in such lost, stolen, destroyed or mutilated Warrant.

 

11.           Saturdays,
Sundays, Holidays, etc. If the last or appointed day for the taking of any
action or the expiration of any right required or granted herein shall not be a
business day, then such action may be taken or such right may be exercised on
the next succeeding day that is a business day.

 

12.           Rule 144
Information. The Company covenants that it will use its reasonable best
efforts to timely file all reports and other documents required to be filed by
it under the Securities Act and the Exchange Act and the rules and
regulations promulgated by the SEC thereunder (or, if the Company is not
required to file such reports, it will, upon the request of any

 

 

Warrantholder, make publicly available such information as necessary to
permit sales pursuant to Rule 144 under the Securities Act), and it will
use reasonable best efforts to take such further action as any Warrantholder
may reasonably request, in each case to the extent required from time to time
to enable such holder to, if permitted by the terms of this Warrant and the
Purchase Agreement, sell this Warrant without registration under the Securities
Act within the limitation of the exemptions provided by (A) Rule 144
under the Securities Act, as such rule may be amended from time to time,
or (B) any successor rule or regulation hereafter adopted by the SEC.
Upon the written request of any Warrantholder, the Company will deliver to such
Warrantholder a written statement that it has complied with such requirements.

 

13.           Adjustments and
Other Rights. The Exercise Price and the number of Shares issuable upon
exercise of this Warrant shall be subject to adjustment from time to time as
follows; provided, that if more
than one subsection of this Section 13 is applicable to a single event,
the subsection shall be applied that produces the largest adjustment and no
single event shall cause an adjustment under more than one subsection of this Section 13
so as to result in duplication:

 

(A)          Stock Splits,
Subdivisions, Reclassifications or Combinations. If the Company shall (i) declare
and pay a dividend or make a distribution on its Common Stock in shares of
Common Stock, (ii) subdivide or reclassify the outstanding shares of
Common Stock into a greater number of shares, or (iii) combine or
reclassify the outstanding shares of Common Stock into a smaller number of
shares, the number of Shares issuable upon exercise of this Warrant at the time
of the record date for such dividend or distribution or the effective date of
such subdivision, combination or reclassification shall be proportionately
adjusted so that the Warrantholder after such date shall be entitled to
purchase the number of shares of Common Stock which such holder would have
owned or been entitled to receive in respect of the shares of Common Stock
subject to this Warrant after such date had this Warrant been exercised
immediately prior to such date.  In such
event, the Exercise Price in effect at the time of the record date for such
dividend or distribution or the effective date of such subdivision, combination
or reclassification shall be adjusted to the number obtained by dividing (x) the
product of (1) the number of Shares issuable upon the exercise of this
Warrant before such adjustment and (2) the Exercise Price in effect
immediately prior to the record or effective date, as the case may be, for the
dividend, distribution, subdivision, combination or reclassification giving
rise to this adjustment by (y) the new number of Shares issuable upon
exercise of the Warrant determined pursuant to the immediately preceding
sentence.

 

(B)           Certain Issuances
of Common Shares or Convertible Securities. Until the earlier of (i) the
date on which the Original Warrantholder no longer holds this Warrant or any
portion thereof and (ii) the third anniversary of the Issue Date, if the
Company shall issue shares of Common Stock (or rights or warrants or other
securities exercisable or convertible into or exchangeable (collectively, a “conversion”) for shares of Common Stock)
(collectively, “convertible securities”)
(other than in Permitted Transactions (as defined below) or a transaction to
which subsection (A) of this Section 13 is applicable) without
consideration or at a consideration per share (or having a conversion price per
share) that is less than 90% of the Market Price on the last trading day
preceding the date of the agreement on pricing such shares (or such convertible
securities) then, in such event:

 

(A)          the
number of Shares issuable upon the exercise of this Warrant 

 

 

immediately prior to the date of the
agreement on pricing of such shares (or of such convertible securities) (the “Initial Number”) shall be increased to the
number obtained by multiplying the Initial Number by a fraction (A) the
numerator of which shall be the sum of (x) the number of shares of Common
Stock of the Company outstanding on such date and (y) the number of additional
shares of Common Stock issued (or into which convertible securities may be
exercised or convert) and (B) the denominator of which shall be the sum of
(I) the number of shares of Common Stock outstanding on such date and (II) the
number of shares of Common Stock which the aggregate consideration receivable
by the Company for the total number of shares of Common Stock so issued (or
into which convertible securities may be exercised or convert) would purchase
at the Market Price on the last trading day preceding the date of the agreement
on pricing such shares (or such convertible securities); and

 

(B)           the Exercise Price payable upon exercise of the Warrant
shall be adjusted by multiplying such Exercise Price in effect immediately
prior to the date of the agreement on pricing of such shares (or of such
convertible securities) by a fraction, the numerator of which shall be the
number of shares of Common Stock issuable upon exercise of this Warrant prior
to such date and the denominator of which shall be the number of shares of
Common Stock issuable upon exercise of this Warrant immediately after the
adjustment described in clause (A) above.

 

For purposes of the foregoing, the aggregate
consideration receivable by the Company in connection with the issuance of such
shares of Common Stock or convertible securities shall be deemed to be equal to
the sum of the net offering price (including the Fair Market Value of any
non-cash consideration and after deduction of any related expenses payable to
third parties) of all such securities plus the minimum aggregate amount, if
any, payable upon exercise or conversion of any such convertible securities
into shares of Common Stock; and “Permitted
Transactions” shall mean issuances (i) as consideration for or
to fund the acquisition of businesses and/or related assets, (ii) in
connection with employee benefit plans and compensation related arrangements in
the ordinary course and consistent with past practice approved by the Board of
Directors, (iii) in connection with a public or broadly marketed offering
and sale of Common Stock or convertible securities for cash conducted by the
Company or its affiliates pursuant to registration under the Securities Act or Rule 144A
thereunder on a basis consistent with capital raising transactions by
comparable financial institutions and (iv) in connection with the exercise
of preemptive rights on terms existing as of the Issue Date.  Any adjustment made pursuant to this Section 13(B) shall
become effective immediately upon the date of such issuance.

 

(C)           Other
Distributions. In case the Company shall fix a record date for the making
of a distribution to all holders of shares of its Common Stock of securities,
evidences of indebtedness, assets, cash, rights or warrants (excluding Ordinary
Cash Dividends, dividends of its Common Stock and other dividends or
distributions referred to in Section 13(A)), in each such case, the
Exercise Price in effect prior to such record date shall be reduced immediately
thereafter to the price determined by multiplying the Exercise Price in effect
immediately prior to the reduction by the quotient of (x) the Market Price
of the Common Stock on the last trading day preceding the first date on which
the Common Stock trades regular way on the principal  

 

 

national securities exchange on which the Common Stock is listed or
admitted to trading without the right to receive such distribution, minus the
amount of cash and/or the Fair Market Value of the securities, evidences of
indebtedness, assets, rights or warrants to be so distributed in respect of one
share of Common Stock (such amount and/or Fair Market Value, the “Per Share Fair Market Value”) divided by (y) such
Market Price on such date specified in clause (x); such adjustment shall be
made successively whenever such a record date is fixed.  In such event, the number of Shares issuable
upon the exercise of this Warrant shall be increased to the number obtained by
dividing (x) the product of (1) the number of Shares issuable upon
the exercise of this Warrant before such adjustment, and (2) the Exercise
Price in effect immediately prior to the distribution giving rise to this
adjustment by (y) the new Exercise Price determined in accordance with the
immediately preceding sentence.  In the
case of adjustment for a cash dividend that is, or is coincident with, a
regular quarterly cash dividend, the Per Share Fair Market Value would be
reduced by the per share amount of the portion of the cash dividend that would
constitute an Ordinary Cash Dividend. In the event that such distribution is
not so made, the Exercise Price and the number of Shares issuable upon exercise
of this Warrant then in effect shall be readjusted, effective as of the date
when the Board of Directors determines not to distribute such shares, evidences
of indebtedness, assets, rights, cash or warrants, as the case may be, to the
Exercise Price that would then be in effect and the number of Shares that would
then be issuable upon exercise of this Warrant if such record date had not been
fixed.

 

(D)          Certain
Repurchases of Common Stock. In case the Company effects a Pro Rata
Repurchase of Common Stock, then the Exercise Price shall be reduced to the
price determined by multiplying the Exercise Price in effect immediately prior
to the Effective Date of such Pro Rata Repurchase by a fraction of which the
numerator shall be (i) the product of (x) the number of shares of
Common Stock outstanding immediately before such Pro Rata Repurchase and (y) the
Market Price of a share of Common Stock on the trading day immediately
preceding the first public announcement by the Company or any of its Affiliates
of the intent to effect such Pro Rata Repurchase, minus (ii) the aggregate
purchase price of the Pro Rata Repurchase, and of which the denominator shall
be the product of (i) the number of shares of Common Stock outstanding
immediately prior to such Pro Rata Repurchase minus the number of shares of
Common Stock so repurchased and (ii) the Market Price per share of Common
Stock on the trading day immediately preceding the first public announcement by
the Company or any of its Affiliates of the intent to effect such Pro Rata
Repurchase.  In such event, the number of
shares of Common Stock issuable upon the exercise of this Warrant shall be
increased to the number obtained by dividing (x) the product of (1) the
number of Shares issuable upon the exercise of this Warrant before such
adjustment, and (2) the Exercise Price in effect immediately prior to the
Pro Rata Repurchase giving rise to this adjustment by (y) the new Exercise
Price determined in accordance with the immediately preceding sentence.  For the avoidance of doubt, no increase to
the Exercise Price or decrease in the number of Shares issuable upon exercise
of this Warrant shall be made pursuant to this Section 13(D).

 

(E)           Business
Combinations. In case of any Business Combination or reclassification of
Common Stock (other than a reclassification of Common Stock referred to in Section 13(A)),
the Warrantholder’s right to receive Shares upon exercise of this Warrant shall
be converted into the right to exercise this Warrant to acquire the number of
shares of stock or other securities or property (including cash) which the
Common Stock issuable (at the time of such Business Combination or
reclassification) upon exercise of this Warrant immediately prior to such

 

 

Business Combination or reclassification would have been entitled to
receive upon consummation of such Business Combination or reclassification; and
in any such case, if necessary, the provisions set forth herein with respect to
the rights and interests thereafter of the Warrantholder shall be appropriately
adjusted so as to be applicable, as nearly as may reasonably be, to the
Warrantholder’s right to exercise this Warrant in exchange for any shares of
stock or other securities or property pursuant to this paragraph.  In determining the kind and amount of stock,
securities or the property receivable upon exercise of this Warrant following
the consummation of such Business Combination, if the holders of Common Stock
have the right to elect the kind or amount of consideration receivable upon
consummation of such Business Combination, then the consideration that the
Warrantholder shall be entitled to receive upon exercise shall be deemed to be
the types and amounts of consideration received by the majority of all holders
of the shares of common stock that affirmatively make an election (or of all
such holders if none make an election).

 

(F)           Rounding
of Calculations; Minimum Adjustments. All calculations under this Section 13
shall be made to the nearest one-tenth (1/10th) of a cent or to the nearest
one-hundredth (1/100th) of a share, as the case may be.  Any provision of this Section 13 to the
contrary notwithstanding, no adjustment in the Exercise Price or the number of
Shares into which this Warrant is exercisable shall be made if the amount of
such adjustment would be less than $0.01 or one-tenth (1/10th) of a share of
Common Stock, but any such amount shall be carried forward and an adjustment
with respect thereto shall be made at the time of and together with any
subsequent adjustment which, together with such amount and any other amount or
amounts so carried forward, shall aggregate $0.01 or 1/10th of a share of
Common Stock, or more.

 

(G)           Timing
of Issuance of Additional Common Stock Upon Certain Adjustments. In any
case in which the provisions of this Section 13 shall require that an
adjustment shall become effective immediately after a record date for an event,
the Company may defer until the occurrence of such event (i) issuing to
the Warrantholder of this Warrant exercised after such record date and before
the occurrence of such event the additional shares of Common Stock issuable
upon such exercise by reason of the adjustment required by such event over and
above the shares of Common Stock issuable upon such exercise before giving
effect to such adjustment and (ii) paying to such Warrantholder any amount
of cash in lieu of a fractional share of Common Stock; provided, however,
that the Company upon request shall deliver to such Warrantholder a due bill or
other appropriate instrument evidencing such Warrantholder’s right to receive
such additional shares, and such cash, upon the occurrence of the event
requiring such adjustment.

 

(H)          Completion of
Qualified Equity Offering. In the event the Company (or any successor by
Business Combination) completes one or more Qualified Equity Offerings on or
prior to December 31, 2009 that result in the Company (or any such successor )
receiving aggregate gross proceeds of not less than 100% of the aggregate
liquidation preference of the Preferred Shares (and any preferred stock issued
by any such successor to the Original Warrantholder under the CPP), the number
of shares of Common Stock underlying the portion of this Warrant then held by
the Original Warrantholder shall be thereafter reduced by a number of shares of
Common Stock equal to the product of (i) 0.5 and (ii) the number of
shares underlying 

 

 

the Warrant on the Issue Date (adjusted to take into account all other
theretofore made adjustments pursuant to this Section 13).

 

(I)            Other
Events. For so long as the Original Warrantholder holds this Warrant or any
portion thereof, if any event occurs as to which the provisions of this Section 13
are not strictly applicable or, if strictly applicable, would not, in the good
faith judgment of the Board of Directors of the Company, fairly and adequately
protect the purchase rights of the Warrants in accordance with the essential
intent and principles of such provisions, then the Board of Directors shall
make such adjustments in the application of such provisions, in accordance with
such essential intent and principles, as shall be reasonably necessary, in the
good faith opinion of the Board of Directors, to protect such purchase rights
as aforesaid.  The Exercise Price or the
number of Shares into which this Warrant is exercisable shall not be adjusted
in the event of a change in the par value of the Common Stock or a change in
the jurisdiction of incorporation of the Company.

 

(J)            Statement
Regarding Adjustments. Whenever the Exercise Price or the number of Shares
into which this Warrant is exercisable shall be adjusted as provided in Section 13,
the Company shall forthwith file at the principal office of the Company a statement
showing in reasonable detail the facts requiring such adjustment and the
Exercise Price that shall be in effect and the number of Shares into which this
Warrant shall be exercisable after such adjustment, and the Company shall also
cause a copy of such statement to be sent by mail, first class postage prepaid,
to each Warrantholder at the address appearing in the Company’s records.

 

(K)          Notice of
Adjustment Event. In the event that the Company shall propose to take any
action of the type described in this Section 13 (but only if the action of
the type described in this Section 13 would result in an adjustment in the
Exercise Price or the number of Shares into which this Warrant is exercisable
or a change in the type of securities or property to be delivered upon exercise
of this Warrant), the Company shall give notice to the Warrantholder, in the
manner set forth in Section 13(J), which notice shall specify the record
date, if any, with respect to any such action and the approximate date on which
such action is to take place.  Such
notice shall also set forth the facts with respect thereto as shall be
reasonably necessary to indicate the effect on the Exercise Price and the
number, kind or class of shares or other securities or property which shall be
deliverable upon exercise of this Warrant. 
In the case of any action which would require the fixing of a record
date, such notice shall be given at least 10 days prior to the date so fixed,
and in case of all other action, such notice shall be given at least 15 days
prior to the taking of such proposed action. Failure to give such notice, or
any defect therein, shall not affect the legality or validity of any such
action.

 

(L)           Proceedings
Prior to Any Action Requiring Adjustment. As a condition precedent to the
taking of any action which would require an adjustment pursuant to this Section 13,
the Company shall take any action which may be necessary, including obtaining
regulatory, New York Stock Exchange, NASDAQ Stock Market or other applicable
national securities exchange or stockholder approvals or exemptions, in order
that the Company may thereafter validly and legally issue as fully paid and
nonassessable all shares of Common Stock that the Warrantholder is entitled to
receive upon exercise of this Warrant pursuant to this Section 13.

 

 

(M)         Adjustment Rules.
Any adjustments pursuant to this Section 13 shall be made successively
whenever an event referred to herein shall occur.  If an adjustment in Exercise Price made
hereunder would reduce the Exercise Price to an amount below par value of the
Common Stock, then such adjustment in Exercise Price made hereunder shall
reduce the Exercise Price to the par value of the Common Stock.

 

14.           Exchange.
At any time following the date on which the shares of Common Stock of the
Company are no longer listed or admitted to trading on a national securities
exchange (other than in connection with any Business Combination), the Original
Warrantholder may cause the Company to exchange all or a portion of this
Warrant for an economic interest (to be determined by the Original
Warrantholder after consultation with the Company) of the Company classified as
permanent equity under U.S. GAAP having a value equal to the Fair Market Value
of the portion of the Warrant so exchanged. 
The Original Warrantholder shall calculate any Fair Market Value
required to be calculated pursuant to this Section 14, which shall not be
subject to the Appraisal Procedure.

 

15.           No
Impairment. The Company will not, by amendment of its Charter or through any
reorganization, transfer of assets, consolidation, merger, dissolution, issue
or sale of securities or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms to be observed or performed
hereunder by the Company, but will at all times in good faith assist in the
carrying out of all the provisions of this Warrant and in taking of all such
action as may be necessary or appropriate in order to protect the rights of the
Warrantholder.

 

16.           Governing
Law. This Warrant 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 with the laws of the
State of New York applicable to contracts made and to be performed entirely
within such State. Each of the Company and the Warrantholder agrees (a) to
submit to the exclusive jurisdiction and venue of the United States District
Court for the District of Columbia for any civil action, suit or proceeding
arising out of or relating to this Warrant or the transactions contemplated
hereby, and (b) that notice may be served upon the Company at the address
in Section 20 below and upon the Warrantholder at the address for the
Warrantholder set forth in the registry maintained by the Company pursuant to Section 9
hereof.  To the extent permitted by
applicable law, each of the Company and the Warrantholder hereby
unconditionally waives trial by jury in any civil legal action or proceeding
relating to the Warrant or the transactions contemplated hereby or thereby.

 

17            Binding
Effect. This Warrant shall be binding upon any successors or assigns of the
Company.

 

18.           Amendments.
This Warrant may be amended and the observance of any term of this Warrant may
be waived only with the written consent of the Company and the Warrantholder.

 

19.           Prohibited
Actions. The Company agrees that it will not take any action which would
entitle the Warrantholder to an adjustment of the Exercise Price if the total
number of shares of Common Stock issuable after such action upon exercise of
this Warrant, together with

 

 

all shares of Common Stock then outstanding and all shares of Common
Stock then issuable upon the exercise of all outstanding options, warrants,
conversion and other rights, would exceed the total number of shares of Common
Stock then authorized by its Charter.

 

20.           Notices.
Any notice, request, instruction or other document to be given hereunder by any
party to the other will be in writing and will be deemed to have been duly
given (a) on the date of delivery if delivered personally, or by
facsimile, upon confirmation of receipt, or (b) on the second business day
following the date of dispatch if delivered by a recognized next day courier
service. All notices hereunder shall be delivered as set forth in Item 8 of
Schedule A hereto, or pursuant to such other instructions as may be designated
in writing by the party to receive such notice.

 

21.           Entire Agreement.
This Warrant, the forms attached hereto and Schedule A hereto (the terms of
which are incorporated by reference herein), and the Letter Agreement
(including all documents incorporated therein), contain the entire agreement
between the parties with respect to the subject matter hereof and supersede all
prior and contemporaneous arrangements or undertakings with respect thereto.

 

[Remainder of page intentionally
left blank]

 

 

[Form of
Notice of Exercise]

 

	
  DATE:

  	
   

  	
   

  

 

	
  TO:

  	
  International Bancshares Corporation

  
	
   

  	
   

  
	
  RE:

  	
  Election to Purchase Common Stock

  

 

The undersigned, pursuant to the provisions set forth in the attached
Warrant, hereby agrees to subscribe for and purchase the number of shares of
the Common Stock set forth below covered by such Warrant.  The undersigned, in accordance with Section 3
of the Warrant, hereby agrees to pay the aggregate Exercise Price for such
shares of Common Stock in the manner set forth below. A new warrant evidencing
the remaining shares of Common Stock covered by such Warrant, but not yet
subscribed for and purchased, if any, should be issued in the name set forth
below.

 

	
  Number of Shares of Common Stock

  	
   

  	
   

  

 

	
  Method of Payment of Exercise Price (note
  if cashless exercise pursuant to Section 3(i) of the Warrant or
  cash exercise pursuant to

  
	
  Section 3(ii) of the Warrant,
  with consent of the Company and the Warrantholder)

  	
   

  

 

	
  Aggregate
  Exercise Price:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Holder:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  
										

 

 

IN WITNESS
WHEREOF, the Company has caused this Warrant to be duly executed by a duly
authorized officer.

 

	
  Dated:

  	
   

  	
   

  

 

	
   

  	
  COMPANY:

  
	
   

  	
   

  	
   

  
	
   

  	
  International
  Bancshares Corporation

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
  Dennis E.
  Nixon

  
	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
  President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Attest:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
  Imelda
  Navarro

  
	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
  Treasurer

  
									

 

[Signature Page to
Warrant]

 

 

SCHEDULE
A

 

 

Item 1

Name: International Bancshares Corporation

Corporate or other organizational form: Corporation

Jurisdiction of organization: Texas

 

Item 2:

Exercise Price: $24.43

 

Item 3:

Issue Date: December 23, 2008

 

Item 4

Amount of last dividend declared prior to the Issue Date: $0.33 per
share of Common stock paid on October 15, 2008.

 

Item 5

Date of Letter Agreement between the Company and the United States
Department of the Treasury: December 23, 2008

 

Item 6

Number of shares of Common Stock: 1,326,238

 

Item 7

Company’s address:

1200 San Bernardo

Laredo, Texas 78040

 

Item 8

Notice information:

 

Dennis E. Nixon

President

International Bancshares Corporation

1200 San Bernardo

Laredo, Texas 78040

956-722-7611 (Phone)

956- 726-6616 (Fax)

 

Cary Plotkin Kavy

Cox Smith Matthews Incorporated

112 East Pecan Street, Suite 1800

San Antonio, Texas 78205

210-554-5250 (Phone)

210-226-8395 (Fax)Exhibit 10.2

 

Exhibit
10.2 Form of Waiver Executed by Senior Executive Officers

 

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.

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