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    NEITHER
THESE SECURITIES NOR THE SECURITIES ISSUABLE UPON EXERCISE OF THESE SECURITIES
HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE
SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES
ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO (I) (A)
AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR (B) AN AVAILABLE
EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE
SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO
SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE
COMPANY OR (II) RULE 144 OR RULE 144A UNDER THE SECURITIES ACT. NOTWITHSTANDING
THE FOREGOING, THESE SECURITIES AND THE SECURITIES ISSUABLE UPON EXERCISE OF
THESE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT
SECURED BY SUCH SECURITIES.

     

    INSPRO
TECHNOLOGIES CORPORATION

    

    WARRANT

     

    
      	
              Warrant
      No. HBDC-145

            	
              Date
      of Original Issuance: December 22,
  2010   

            

    

    

    InsPro Technologies
Corporation, a Delaware corporation (the “Company”), hereby certifies
that, for value received, The Co-Investment Fund II, L.P. or its registered
assigns (the “Holder”),
is entitled to purchase from the Company up to a total of 7,973,780 shares of
common stock, $0.001 par value per share (the “Common Stock”), of the
Company (each such share, a “Warrant Share” and all such
shares, the “Warrant
Shares”) at an exercise price equal to $0.15 per share (as adjusted from
time to time as provided herein, the “Exercise Price”), at any time
and from time to time on or after the date hereof and to and including the
earlier to occur of (a) the Call Event Expiration Date (as defined below) and
(b) December 22, 2015 (the earlier to occur of (a) and (b), the “Expiration Date”), and
subject to the terms and conditions set forth herein. This warrant and any
warrants issued in exchange, transfer or replacement hereof, are referred to
herein as the “Warrant.”

     

    1.           Definitions.  In
addition to the terms defined elsewhere in this Warrant, capitalized terms that
are not otherwise defined herein shall have the meanings given to such terms in
the Note Conversion Agreement dated as of December 22, 2010 by and between the
Company and the Holder (the “Note Conversion
Agreement”).

     

    2.           Registration of
Warrant.  The Company shall register this Warrant, upon records
to be maintained by the Company for that purpose (the “Warrant Register”), in the
name of the record Holder hereof from time to time.  The Company may
deem and treat the registered Holder of this Warrant as the absolute owner
hereof for the purpose of any exercise hereof or any distribution to the Holder,
and for all other purposes, absent actual notice to the
contrary.
 

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    3.           Registration of
Transfers.  The Company shall register the transfer of any
portion of this Warrant in the Warrant Register, upon surrender of this Warrant,
with the Form of Assignment attached hereto duly completed and signed, to the
Company at its address specified herein.  Upon any such registration
or transfer, a new Warrant to purchase Common Stock, in substantially the form
of this Warrant (any such new Warrant, a “New Warrant”), evidencing the
portion of this Warrant so transferred shall be issued to the transferee and a
New Warrant evidencing the remaining portion of this Warrant not so transferred,
if any, shall be issued to the transferring Holder. The acceptance of the New
Warrant by the transferee thereof shall be deemed the acceptance by such
transferee of all of the rights and obligations of a holder of a
Warrant.

     

    4.           Exercise and Duration of
Warrants.  This Warrant shall be exercisable by the registered
Holder at any time and from time to time on or after the date hereof to and
including the Expiration Date.  At 11:59 p.m., New York City time on
the Expiration Date, subject to Section 12, the portion of this Warrant not
exercised (or called) prior thereto shall be and become void and of no
value.

     

    5.           Delivery of Warrant Shares;
Disposition of Warrants and Warrant Shares.

     

    (a)           To
effect exercises hereunder, the Holder shall not be required to physically
surrender this Warrant. Execution and delivery via facsimile of the Exercise
Notice with respect to less than all of the Warrant Shares shall have the same
effect as cancellation of the original Warrant and issuance of a New Warrant
evidencing the right to purchase the remaining number of Warrant Shares.
Execution and delivery via facsimile of the Exercise Notice for all of the
Warrant Shares shall have the same effect as cancellation of the original
Warrant after delivery of the Warrant Shares. Upon such delivery of the attached
Exercise Notice to the Company (with the attached Warrant Shares Exercise Log)
at its address for notice set forth herein and upon (1) payment of the
then-applicable Exercise Price multiplied by the number of Warrant Shares that
the Holder intends to purchase hereunder or (2) notifying the Company that this
Warrant is being exercised pursuant to a Cashless Exercise (as defined below),
the Company shall on or before the third (3rd)
Trading Day after receipt thereof issue and deliver to the Holder, a certificate
for the Warrant Shares issuable upon such exercise. The Company shall, upon
request of the Holder and subsequent to the date on which a registration
statement covering the resale of the Warrant Shares has been declared effective
by the Securities and Exchange Commission, use commercially reasonable efforts
to deliver Warrant Shares hereunder electronically through the Depository Trust
Corporation or another established clearing corporation performing similar
functions (“DTC”), if
available, provided, that, the Company may, but will not, be required to change
its transfer agent if its current transfer agent cannot deliver Warrant Shares
electronically through the DTC. A “Date of Exercise” means the
date on which the Holder shall have delivered to the Company: (i) the Exercise
Notice (with the Warrant Exercise Log attached to it) via facsimile,
appropriately completed and duly signed and (ii) payment of the Exercise Price
for the number of Warrant Shares so indicated by the Holder to be purchased (or
notice of a Cashless Exercise) as provided above. On the Date of Exercise, the
Holder shall be deemed for all corporate purposes to have become the holder of
record of the Warrant Shares with respect to which this Warrant has been
exercised, irrespective of the date such Warrant Shares are credited to the
Holder’s DTC account or the date of delivery of the certificates evidencing such
Warrant Shares (as the case may be).
 

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    (b)           The
Company’s obligations to issue and deliver Warrant Shares in accordance with the
terms hereof are absolute and unconditional, irrespective of any action or
inaction by the Holder to enforce the same, any waiver or consent with respect
to any provision hereof, the recovery of any judgment against any Person or any
action to enforce the same, or any setoff, counterclaim, recoupment, limitation
or termination, or any breach or alleged breach by the Holder or any other
Person of any obligation to the Company or any violation or alleged violation of
law by the Holder or any other Person, and irrespective of any other
circumstance which might otherwise limit such obligation of the Company to the
Holder in connection with the issuance of Warrant Shares.  Nothing
herein shall limit a Holder’s right to pursue any other remedies available to it
hereunder, at law or in equity including, without limitation, a decree of
specific performance and/or injunctive relief with respect to the Company’s
failure to timely deliver certificates representing shares of Common Stock upon
exercise of this Warrant or to credit such shares to the Holder’s DTC account
(as the case may be) as required pursuant to the terms hereof.

     

    (c)           The
Warrants and Warrant Shares (collectively, the “Securities”) may only be
disposed of in compliance with state and federal securities laws and the
provisions related to transfer and other provisions related to the Securities
set forth in the Note Conversion Agreement, including without limitation,
Sections 4.2 and 4.14 thereof.

     

    (d)           The
Warrants shall contain the legend set forth above and the stock certificates
evidencing the Warrant Shares will contain the following legend, until such time
as they are not required under the conditions described in the Note Conversion
Agreement:

     

    THESE
SECURITIES HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION
OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES
ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO (I) (A)
AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR (B) AN AVAILABLE
EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE
SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO
SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE
COMPANY OR (II) RULE 144 OR RULE 144A UNDER THE SECURITIES ACT. NOTWITHSTANDING
THE FOREGOING, THESE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE
MARGIN ACCOUNT SECURED BY SUCH SECURITIES.

    

    6.           Charges, Taxes and
Expenses.  Issuance and delivery of certificates for shares of
Common Stock upon exercise of this Warrant shall be made without charge to the
Holder for any issue or transfer tax, transfer agent fee or other similar
incidental tax or expense in respect of the issuance of such certificates, all
of which such taxes and expenses shall be paid by the Company; provided,
however, that the Company shall not be required to pay any tax which may be
payable in respect of any transfer involved in the registration of any
certificates for Warrant Shares or Warrants in a name other than that of the
Holder or any of its affiliates. The Holder shall be responsible for all other
tax liability that may arise as a result of holding or transferring this Warrant
or receiving Warrant Shares upon exercise hereof.
 

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    7.           Replacement of
Warrant.  If this Warrant is mutilated, lost, stolen or
destroyed, the Company shall issue or cause to be issued in exchange and
substitution for and upon cancellation hereof, or in lieu of and substitution
for this Warrant, a New Warrant, but only upon receipt of evidence reasonably
satisfactory to the Company of such loss, theft or destruction and a customary
and reasonable indemnity (which shall not include a surety bond), if
requested.  Applicants for a New Warrant under such circumstances
shall also comply with such other reasonable procedures and pay such other
reasonable third-party costs as the Company may prescribe. If a New Warrant is
requested as a result of a mutilation of this Warrant, then the Holder shall
deliver such mutilated Warrant to the Company as a condition precedent to the
Company’s obligation to issue the New Warrant.

     

    8.           Reservation of Warrant
Shares.  The Company covenants that it will at all times
reserve and keep available out of the aggregate of its authorized but unissued
and otherwise unreserved Common Stock, solely for the purpose of enabling it to
issue Warrant Shares upon exercise of this Warrant as herein provided, the
number of Warrant Shares which are then issuable and deliverable upon the
exercise of this entire Warrant, free from preemptive rights or any other
contingent purchase rights of Persons other than the Holder (taking into account
the adjustments and restrictions of Section 9). The
Company covenants that all Warrant Shares so issuable and deliverable shall,
upon issuance and the payment of the applicable Exercise Price (or notice of a
Cashless Exercise) in accordance with the terms hereof, be duly and validly
authorized, issued and fully paid and nonassessable. If, notwithstanding the
foregoing, and not in limitation thereof, at any time while any of the Warrants
(as defined in the Note Conversion Agreement) remain outstanding the Company
does not have a sufficient number of authorized and unreserved shares of Common
Stock to satisfy its obligation to reserve for issuance upon exercise of the
Warrants at least a number of shares of Common Stock equal to the maximum number
of shares of Common Stock as shall from time to time be necessary to effect the
exercise of all of the Warrants then outstanding (the “Required Reserve Amount”) (an
“Authorized Share
Failure”), then the Company shall as promptly as practicable thereafter
take all action necessary to increase the Company’s authorized shares of Common
Stock to an amount sufficient to allow the Company to reserve the Required
Reserve Amount for the Warrants then outstanding.  Without limiting
the generality of the foregoing sentence, as promptly as practicable after the
date of the occurrence of an Authorized Share Failure, the Company shall hold a
meeting of its stockholders for the approval of an increase in the number of
authorized shares of Common Stock. In connection with such meeting, the Company
shall provide each stockholder with a proxy statement and shall use its
reasonable best efforts to solicit its stockholders’ approval of such increase
in authorized shares of Common Stock and to cause its Board of Directors to
recommend to the stockholders that they approve such proposal.

     

    9.           Certain
Adjustments.  The Exercise Price and number of Warrant Shares
issuable upon exercise of this Warrant are subject to adjustment from time to
time as set forth in this Section 9.
 

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    (a)           Stock Dividends and
Splits.  If the Company, at any time while this Warrant is
outstanding, (i) pays a stock dividend on its Common Stock or otherwise makes a
distribution on any class of capital stock that is payable in shares of Common
Stock, (ii) subdivides outstanding shares of Common Stock into a larger number
of shares, or (iii) combines outstanding shares of Common Stock into a smaller
number of shares, then in each such case the Exercise Price shall be multiplied
by a fraction of which the numerator shall be the number of shares of Common
Stock outstanding immediately before such event and of which the denominator
shall be the number of shares of Common Stock outstanding immediately after such
event.  Any adjustment made pursuant to clause (i) of this paragraph
shall become effective immediately after the record date for the determination
of stockholders entitled to receive such dividend or distribution, and any
adjustment pursuant to clause (ii) or (iii) of this paragraph shall become
effective immediately after the effective date of such subdivision or
combination. If any event requiring an adjustment under this paragraph occurs
during the period that an Exercise Price is calculated hereunder, then the
calculation of such Exercise Price shall be adjusted appropriately to reflect
such event.

     

    (b)           Fundamental
Transactions.  If, at any time while this Warrant is
outstanding, (1) the Company effects any merger or consolidation of the Company
with or into another Person, (2) the Company effects any sale of all or
substantially all of its assets in one or a series of related transactions, (3)
any tender offer or exchange offer (whether by the Company or another Person) is
completed pursuant to which holders of Common Stock are permitted to tender or
exchange their shares for other securities, cash or property, or (4) the Company
effects any reclassification of the Common Stock or any compulsory share
exchange pursuant to which the Common Stock is effectively converted into or
exchanged for other securities, cash or property (in any such case, a “Fundamental Transaction”),
then the Holder shall have the right thereafter to receive, upon exercise of
this Warrant, the same amount and kind of securities, cash or property as it
would have been entitled to receive upon the occurrence of such Fundamental
Transaction if it had been, immediately prior to such Fundamental Transaction,
the holder of the number of Warrant Shares then issuable upon exercise in full
of this Warrant (the “Alternate
Consideration”).  For purposes of any such exercise, the
determination of the Exercise Price shall be appropriately adjusted to apply to
such Alternate Consideration based on the amount of Alternate Consideration
issuable in respect of one share of Common Stock in such Fundamental
Transaction, and the Company shall apportion the Exercise Price among the
Alternate Consideration in a reasonable manner reflecting the relative value of
any different components of the Alternate Consideration.  If holders
of Common Stock are given any choice as to the securities, cash or property to
be received in a Fundamental Transaction, then the Holder shall be given the
same choice as to the Alternate Consideration it receives upon any exercise of
this Warrant following such Fundamental Transaction.  The terms of any
agreement pursuant to which a Fundamental Transaction is effected shall include
terms requiring any such surviving entity to comply with the provisions of this
paragraph (b) and insuring that the Warrant (or any such replacement security)
will be similarly adjusted upon any subsequent transaction analogous to a
Fundamental Transaction.
 

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    (c)           Adjustment upon Issuance of
shares of Common Stock. If and whenever on or after the date of the Note
Conversion Agreement but prior to September 30, 2012, the Company issues or
sells, or in accordance with this Section 9 is deemed to have issued or sold,
any shares of Common Stock (including the issuance or sale of shares of Common
Stock owned or held by or for the account of the Company, but excluding any
Excluded Securities) for a consideration per share (the “New Issuance Price”) less than
a price (the “Applicable
Price”) equal to the Exercise Price in effect immediately prior to such
issue or sale or deemed issuance or sale (the foregoing a “Dilutive Issuance”), then
immediately after such Dilutive Issuance, the Exercise Price then in effect
shall be reduced to a price equal to the New Issuance Price.  For
purposes of determining the adjusted Exercise Price under this Section 9(c) the
following shall be applicable:

     

    (i)           Issuance of
Options.  If the Company in any manner grants or sells any
Options and the lowest price per share for which one share of Common Stock is
issuable upon the exercise of any such Option or upon conversion, exercise or
exchange of any Convertible Securities issuable upon exercise of any such Option
is less than the Applicable Price, then such share of Common Stock shall be
deemed to be outstanding and to have been issued and sold by the Company at the
time of the granting or sale of such Option for such price per share. For
purposes of this Section 9(c)(i), the “lowest price per share for which one
share of Common Stock is issuable upon the exercise of any such Options or upon
conversion, exercise or exchange of any Convertible Securities issuable upon
exercise of any such Option” shall be equal to the sum of the lowest amounts of
consideration (if any) received or receivable by the Company with respect to any
one share of Common Stock upon the granting or sale of the Option, upon exercise
of the Option and upon conversion, exercise or exchange of any Convertible
Security issuable upon exercise of such Option. Except as contemplated below, no
further adjustment of the Exercise Price shall be made upon the actual issuance
of such shares of Common Stock or of such Convertible Securities upon the
exercise of such Options or upon the actual issuance of such shares of Common
Stock upon conversion, exercise or exchange of such Convertible
Securities.

     

    (ii)           Issuance of Convertible
Securities.  If the Company in any manner issues or sells any
Convertible Securities and the lowest price per share for which one share of
Common Stock is issuable upon the conversion, exercise or exchange thereof is
less than the Applicable Price, then such share of Common Stock shall be deemed
to be outstanding and to have been issued and sold by the Company at the time of
the issuance or sale of such Convertible Securities for such price per
share.  For the purposes of this Section 9(c)(ii), the “lowest price
per share for which one share of Common Stock is issuable upon the conversion,
exercise or exchange thereof” shall be equal to the sum of the lowest amounts of
consideration (if any) received or receivable by the Company with respect to one
share of Common Stock upon the issuance or sale of the Convertible Security and
upon conversion, exercise or exchange of such Convertible
Security.  Except as contemplated below, no further adjustment of the
Exercise Price shall be made upon the actual issuance of such shares of Common
Stock upon conversion, exercise or exchange of such Convertible Securities, and
if any such issue or sale of such Convertible Securities is made upon exercise
of any Options for which adjustment of this Warrant has been or is to be made
pursuant to other provisions of this Section 9(c), except as contemplated below,
no further adjustment of the Exercise Price shall be made by reason of such
issue or sale.
 

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    (iii)           Change in Option Price or
Rate of Conversion. If the purchase or exercise price provided for in any
Options, the additional consideration, if any, payable upon the issue,
conversion, exercise or exchange of any Convertible Securities, or the rate at
which any Convertible Securities are convertible into or exercisable or
exchangeable for shares of Common Stock increases or decreases at any time, the
Exercise Price in effect at the time of such increase or decrease shall be
adjusted to the Exercise Price which would have been in effect at such time had
such Options or Convertible Securities provided for such increased or decreased
purchase price, additional consideration or increased or decreased conversion
rate, as the case may be, at the time initially granted, issued or
sold.  For purposes of this Section 9(c)(iii), if the terms of any
Option or Convertible Security that was outstanding as of the date of issuance
of this Warrant are increased or decreased in the manner described in the
immediately preceding sentence, then such Option or Convertible Security and the
shares of Common Stock deemed issuable upon exercise, conversion or exchange
thereof shall be deemed to have been issued as of the date of such increase or
decrease. No adjustment pursuant to this Section 9(c) shall be made if such
adjustment would result in an increase of the Exercise Price then in
effect.

     

    (iv)           Calculation of Consideration
Received. In case any Option is issued in connection with the issue or
sale of other securities of the Company, together comprising one integrated
transaction in which no specific consideration is allocated to such Options by
the parties thereto, the Options will be deemed to have been issued for a
consideration of $0.01.  If any shares of Common Stock, Options or
Convertible Securities are issued or sold or deemed to have been issued or sold
for cash, the consideration received therefor will be deemed to be the net
amount received by the Company therefor. If any shares of Common Stock, Options
or Convertible Securities are issued or sold for a consideration other than
cash, the amount of such consideration received by the Company will be the fair
value of such consideration, except where such consideration consists of
securities, in which case the amount of consideration received by the Company
for each such security will be the VWAP of such security for the five (5)
Trading Day Period immediately preceding the date of receipt. If any shares of
Common Stock, Options or Convertible Securities are issued to the owners of the
non-surviving entity in connection with any merger in which the Company is the
surviving entity, the amount of consideration therefor will be deemed to be the
fair value of such portion of the net assets and business of the non-surviving
entity as is attributable to such shares of Common Stock, Options or Convertible
Securities, as the case may be. The fair value of any consideration other than
cash or securities will be determined jointly by the Company and the Holder. If
such parties are unable to reach agreement within ten (10) days after the
occurrence of an event requiring valuation (the “Valuation Event”), the fair
value of such consideration will be determined within five (5) Trading Days
after the tenth (10th) day
following the Valuation Event by an independent, reputable appraiser jointly
selected by the Company and the Holder. The determination of such appraiser
shall be final and binding upon all parties absent manifest error and the fees
and expenses of such appraiser shall be borne by the Company.

     

    (v)           Record Date. If the
Company takes a record of the holders of shares of Common Stock for the purpose
of entitling them (A) to receive a dividend or other distribution payable
in shares of Common Stock, Options or in Convertible Securities or (B) to
subscribe for or purchase shares of Common Stock, Options or Convertible
Securities, then such record date will be deemed to be the date of the issue or
sale of the shares of Common Stock deemed to have been issued or sold upon the
declaration of such dividend or the making of such other distribution or the
date of the granting of such right of subscription or purchase (as the case may
be).
 

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    (d)           Number of Warrant
Shares. Simultaneously with any adjustment to the Exercise Price pursuant
to paragraphs (a) or (c) of this Section, unless waived in writing by the Holder
with respect to a particular adjustment, the number of Warrant Shares that may
be purchased upon exercise of this Warrant shall be increased or decreased
proportionately, so that after such adjustment the aggregate Exercise Price
payable hereunder for the adjusted number of Warrant Shares shall be the same as
the aggregate Exercise Price in effect immediately prior to such
adjustment.

     

    (e)           Calculations. All
calculations under this Section 9 shall be made to the nearest cent or the
nearest 1/100th of a
share, as applicable.  The number of shares of Common Stock
outstanding at any given time shall not include shares owned or held by or for
the account of the Company, and the disposition of any such shares shall be
considered an issue or sale of Common Stock.

     

    (f)           Notice of
Adjustments. Upon the occurrence of each adjustment pursuant to this
Section 9, the Company at its expense will promptly compute such adjustment in
accordance with the terms of this Warrant and promptly prepare a certificate
setting forth such adjustment, including a statement of the adjusted Exercise
Price and adjusted number or type of Warrant Shares or other securities issuable
upon exercise of this Warrant (as applicable), describing the transactions
giving rise to such adjustments and showing in detail the facts upon which such
adjustment is based. Upon written request of a Holder, the Company will promptly
deliver a copy of each such certificate to the Holder and to the Company’s
transfer agent.

     

    (g)           Notice of Corporate
Events.  If the Company (i) declares a dividend or any other
distribution of cash, securities or other property in respect of its Common
Stock, including, without limitation, any granting of rights or warrants to
subscribe for or purchase any capital stock of the Company or any subsidiary,
(ii) authorizes or approves, enters into any agreement contemplating or solicits
stockholder approval for any Fundamental Transaction or (iii) authorizes the
voluntary dissolution, liquidation or winding up of the affairs of the Company,
then the Company shall deliver to the Holder a notice describing the material
terms and conditions of such transaction, at least 10 calendar days prior to the
applicable record or effective date on which a Person would need to hold Common
Stock in order to participate in or vote with respect to such transaction, and
the Company will take all steps reasonably necessary in order to insure that the
Holder is given the practical opportunity to exercise this Warrant prior to such
time so as to participate in or vote with respect to such transaction; provided,
however, that the failure to deliver such notice or any defect therein shall not
affect the validity of the corporate action required to be described in such
notice. To the extent that any notice provided hereunder constitutes, or
contains, material, non-public information, the Company shall simultaneously
file such notice pursuant to a Current Report on Form 8-K.

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    10.         Payment of Exercise
Price. The Holder shall pay the Exercise Price by delivery to the Company
of immediately available funds. Notwithstanding
anything contained herein to the contrary, the Holder may, in its sole
discretion, unless a Preliminary Call Event has occurred prior to such Exercise
Date (and only for so long as such Preliminary Call Event is continuing) or the
Company has timely delivered an effective notice of a Call Event to the Holder
prior to the Exercise Date, exercise this Warrant in whole or in part and, in
lieu of making the cash payment otherwise contemplated to be made to the Company
upon such exercise in payment of the aggregate Exercise Price, elect instead to
receive upon such exercise the “Net Number” of shares of Common Stock determined
according to the following formula (a “Cashless
Exercise”):

     

    Net Number = (A x B) - (A x
C)

     

                                      
B

     

    For purposes of the foregoing
formula:

     

    A= the
total number of shares with respect to which this Warrant is then being
exercised.

     

    B= the
VWAP of the shares of Common Stock for the 5 Trading Day period immediately
preceding the date of the Exercise Notice.

     

    C= the
Exercise Price then in effect for the applicable Warrant Shares at the time of
such exercise.

    

    11.         No Rights as
Stockholder.  Until the exercise of this Warrant, the Holder
shall not have or exercise any rights by virtue hereof as a stockholder of the
Company. In addition, nothing contained in this Warrant shall be construed as
imposing any liabilities on the Holder to purchase any securities (upon exercise
of this Warrant or otherwise) or as a stockholder of the Company, whether such
liabilities are asserted by the Company or by creditors of the Company.
Notwithstanding this Section 11, the Company shall provide the Holder with
copies of the same notices and other information given to the stockholders of
the Company generally, contemporaneously with the giving thereof to the
stockholders.

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    12.           Call Event. At any
point after which the VWAP of the Common Stock for a minimum of 20 consecutive
Trading Days shall have been equal to at least eight times (8x) the Exercise
Price (a “Call Event”),
the Company may, at its option, provide written notice of such Call Event to
all, but not less than all, holders of Warrants (as defined in the Note
Conversion Agreement) within 10 Trading Days after the occurrence of the Call
Event, in which case, the  date that is ten business days after the
Company has provided such written notice to all such holders of a Call Event
shall be the “Call Event
Expiration Date.” For the avoidance of doubt, at 11:59 p.m., New York
City time on the Call Event Expiration Date, the portion of this Warrant not
exercised prior thereto shall be and become void and of no value as further set
forth below in this Section 12. Notwithstanding the foregoing, a notice of a
Call Event shall not be effective  with respect to the Holder unless
(i) one or more Registration Statement(s) covering all of the shares issuable
upon exercise of the Warrants held by the Holder is (or are, as the case may be)
effective and
is (or are, as the case may be) not then suspended and no stop order is in
effect with respect thereto, and the Holder is able to sell all such shares
pursuant to such Registration Statement(s) through the Call Event Expiration
Date, (ii) on each Trading Day during the thirty (30) Trading Day period
immediately preceding the Call Event Expiration Date (the “Requisite Period”), all of the
shares of Common Stock issuable upon exercise of the Warrants held by the Holder
are freely tradable, without restriction (subject to compliance with prospectus
delivery requirements to the extent applicable), on an Eligible Market (other
than such shares which are properly excluded from one or more Registration
Statements pursuant to the terms of the Registration Rights Agreement), (iii) on
each day during the Requisite Period, the shares of Common Stock issuable upon
exercise of the Warrants held by the Holder are designated for listing on an
Eligible Market and shall not have been suspended from trading on such exchange,
(iv) the Company shall have, at all times during the Requisite Period, delivered
shares of Common Stock upon exercise of the Warrants held by a Holder on a
timely basis in accordance with the provisions of the Note Conversion Agreement
and this Warrant, and (v) the Holder is able to sell all shares issuable upon
exercise of the Warrants held by the Holder at all times through the Call Event
Expiration Date without any liability under Section 16(b) of the Exchange Act.
For purposes of Section 10 hereof, “Preliminary Call Event” shall occur at any
point after which the VWAP of the Common Stock for a minimum of 10 consecutive
Trading Days shall have been equal to at least eight times (8x) the Exercise
Price and the other conditions of a Call Event set forth above capable of being
satisfied prior to such point are satisfied (including, without limitation, that
one or more Registration Statement(s) covering all of the shares issuable upon
exercise of the Warrants held by the Holder (other than such shares which are
properly excluded therefrom pursuant to the terms of the Registration Rights
Agreement) is (or are, as the case may be) effective and is (or are, as
the case may be) not then suspended and no stop order is in effect with respect
thereto).

     

    13.           No Fractional Shares.
No fractional shares of Warrant Shares will be issued in connection with any
exercise of this Warrant. In lieu of any fractional shares which would,
otherwise be issuable, the Company shall pay cash equal to the product of such
fraction multiplied by the VWAP of the shares of Common Stock for the 5 Trading
Day period immediately preceding the Date of Exercise.

     

    14.           Notices. Any and all
notices or other communications or deliveries hereunder (including, without
limitation, any Exercise Notice) shall be in writing and shall be deemed given
and effective on the earliest of (i) the date of transmission, if such notice or
communication is delivered via facsimile at the facsimile number specified in
this Section prior to 5:30 p.m. (New York City time) on a Trading Day, (ii) the
next Trading Day after the date of transmission, if such notice or communication
is delivered via facsimile at the facsimile number specified in this Section on
a day that is not a Trading Day or later than 5:30 p.m. (New York City time) on
any Trading Day, (iii) the Trading Day following the date of mailing, if sent by
nationally recognized overnight courier service with next day delivery
specified, or (iv) upon actual receipt by the party to whom such notice is
required to be given.  The addresses for such communications shall be:
(i) if to the Company, to InsPro Technologies Corporation, InsPro Technologies
Corporation, 150 N. Radnor-Chester Road, Radnor, PA 19087, Facsimile: (484)
654-2212, Attention: Vice President and Controller, or such other address as the
Company shall so notify the Holder, or (ii) if to the Holder, to the address or
facsimile number appearing on the Warrant Register or such other address or
facsimile number as the Holder may provide to the Company in accordance with
this Section.

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    15.           Warrant
Agent.  The Company shall serve as warrant agent under this
Warrant.  Upon 10 days’ notice to the Holder, the Company may appoint
a new warrant agent.  Any corporation into which the Company or any
new warrant agent may be merged or any corporation resulting from any
consolidation to which the Company or any new warrant agent shall be a party or
any corporation to which the Company or any new warrant agent transfers
substantially all of its corporate trust or shareholders services business shall
be a successor warrant agent under this Warrant without any further
act.  Any such successor warrant agent shall promptly cause notice of
its succession as warrant agent to be mailed (by first class mail, postage
prepaid) to the Holder at the Holder’s last address as shown on the Warrant
Register.

     

    16.           Additional
Definitions.  For purposes of this Warrant, the following terms
shall have the following meanings:

     

    (a)           “Bloomberg” means Bloomberg
Financial Markets.

     

    (b)           “Common Stock Deemed
Outstanding” means, at any given time, the number of shares of Common
Stock actually outstanding at such time, plus the number of shares of Common
Stock deemed to be outstanding pursuant to Sections 9(c))(i) and (ii) hereof
regardless of whether the Options or Convertible Securities are actually
exercisable at such time.

     

    (c)           “Convertible Securities” means
any stock or securities (other than Options) directly or indirectly convertible
into or exercisable or exchangeable for shares of Common Stock.

     

    (d)           “Eligible Market” means the
Principal Market, The New York Stock Exchange, Inc., the Nasdaq Global Select
Market, the Nasdaq Global Market, the Nasdaq Capital Market or the American
Stock Exchange.

     

    (e)           “Excluded Securities” means
Options, Convertible Securities or Common Stock issued or issuable: (i) upon
exercise of the Warrants, (ii) upon conversion of any Options or Convertible
Securities which are outstanding on the date hereof, (iii) pursuant to any
equity compensation plan or arrangement, or (iv) in connection with mergers,
acquisitions, strategic business partnerships or alliances, joint ventures, bank
financings (or similar financings), vendor, supplier and consulting
arrangements, equipment or other leases or other transactions, the primary
purpose of which, in the reasonable judgment of the Company's Board of
Directors, is not to raise additional equity capital or convertible
debt.

     

    (f)           “Options” means any rights,
warrants or options to subscribe for or purchase shares of Common Stock or
Convertible Securities.

     

    (g)           “Person” means an individual, a
limited liability company, a partnership, a joint venture, a corporation, a
trust, an unincorporated organization, any other entity and a government or any
department or agency thereof.

     

    (h)           “Principal Market” means the
National Association of Securities Dealers, Inc. OTC Bulletin
Board.

     

    (i)           
“Successor Entity” means
the Person formed by, resulting from or surviving any Fundamental
Transaction.

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    (j)           “Trading Day” means any day on
which the Common Stock is traded on the Principal Market, or, if the Principal
Market is not the principal trading market for the Common Stock, then on the
principal securities exchange or securities market on which the Common Stock is
then traded; provided that “Trading Day” shall not include any day on which the
Common Stock is scheduled to trade on such exchange or market for less than 4.5
hours or any day that the Common Stock is suspended from trading during the
final hour of trading on such exchange or market (or if such exchange or market
does not designate in advance the closing time of trading on such exchange or
market, then during the hour ending at 4:00:00 p.m., New York
time).

     

    (k)           “VWAP” means, for any security
as of any date, the dollar volume-weighted average price for such security on
the Principal Market (or, if the Principal Market is not the principal trading
market for such security, then on the principal securities exchange or
securities market on which such security is then traded) during the period
beginning at 9:30:01 a.m., New York City Time, and ending at 4:00:00 p.m., New
York City Time, as reported by Bloomberg through its “Volume at Price” function
or, if the foregoing does not apply, the dollar volume-weighted average price of
such security in the over-the-counter market on the electronic bulletin board
for such security during the period beginning at 9:30:01 a.m., New York City
Time, and ending at 4:00:00 p.m., New York City Time, as reported by Bloomberg,
or, if no dollar volume-weighted average price is reported for such security by
Bloomberg for such hours, the average of the highest closing bid price and the
lowest closing ask price of any of the market makers for such security as
reported in the “pink sheets” by Pink Sheets LLC (formerly the National
Quotation Bureau, Inc.). If VWAP cannot be calculated for such security on such
date on any of the foregoing bases, the VWAP of such security on such date shall
be the fair market value as mutually determined by the Company and the Holder.
If the Company and the Holder are unable to agree upon the fair market value of
such security, then such dispute shall be resolved in accordance with the
procedures in Section 20. All such determinations shall be appropriately
adjusted for any share dividend, share split or other similar transaction during
such period.

     

    17.           Rights Upon Distribution of
Assets.  If the Company shall declare or make any dividend or
other distribution of its assets (or rights to acquire its assets) to holders of
shares of Common Stock, by way of return of capital or otherwise (including,
without limitation, any distribution of cash, stock or other securities,
property or options by way of a dividend, spin off, reclassification, corporate
rearrangement, scheme of arrangement or other similar transaction) (a “Distribution”), at any time
after the issuance of this Warrant, then, in each such case, the Holder will be
entitled to participate in such Distribution to the same extent that the Holder
would have participated therein if the Holder had held the number of shares of
Common Stock acquirable upon complete exercise of this Warrant immediately
before the date on which a record is taken for such Distribution, or, if no such
record is taken, the date as of which the record holders of shares of Common
Stock are to be determined for the participation in such
Distribution.

     

    18.           Purchase
Rights.  In addition to any adjustments pursuant to Section 9
above, if at any time the Company grants, issues or sells any Options,
Convertible Securities or rights to purchase stock, warrants, securities or
other property pro rata to the record holders of any class of shares of Common
Stock (the “Purchase
Rights”), then the Holder will be entitled to acquire, upon the terms
applicable to such Purchase Rights, the aggregate Purchase Rights which the
Holder could have acquired if the Holder had held the number of shares of Common
Stock acquirable upon complete exercise of this Warrant immediately before the
date on which a record is taken for the grant, issuance or sale of such Purchase
Rights, or, if no such record is taken, the date as of which the record holders
of shares of Common Stock are to be determined for the grant, issue or sale of
such Purchase Rights.
 

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    19.         Noncircumvention. The
Company hereby covenants and agrees that the Company will not, by amendment of
its Certificate of Incorporation, bylaws or through any reorganization, transfer
of assets, consolidation, merger, scheme of arrangement, 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 of this Warrant, and will at all
times in good faith carry out all the provisions of this Warrant and take all
action as may be required to protect the rights of the
Holder.  Without limiting the generality of the foregoing, the Company
(i) shall not increase the par value of any shares of Common Stock
receivable upon the exercise of this Warrant above the Exercise Price then in
effect, (ii) shall take all such actions as may be necessary or appropriate
in order that the Company may validly and legally issue fully paid and
nonassessable shares of Common Stock upon the exercise of this Warrant, and
(iii) shall, so long as any of the Warrants are outstanding, take all action
necessary to reserve and keep available out of its authorized and unissued
shares of Common Stock, solely for the purpose of effecting the exercise of the
Warrants, the maximum number of shares of Common Stock as shall from time to
time be necessary to effect the exercise of the Warrants then outstanding
(without regard to any limit on exercise contained therein).

     

    20.         Miscellaneous.

     

    (a)           This
Warrant shall be binding on and inure to the benefit of the parties hereto and
their respective permitted successors and assigns.  Subject to the
preceding sentence, nothing in this Warrant shall be construed to give to any
Person other than the Company and the Holder any legal or equitable right,
remedy or cause of action under this Warrant.  This Warrant may be
amended only in writing signed by the Company and the Holder and their
successors and assigns.

     

    (b)           All
questions concerning the construction, validity, enforcement and interpretation
of this Warrant shall be governed by and construed and enforced in accordance
with the internal laws of the State of Delaware, without regard to the
principles of conflicts of law thereof. Each party agrees that all legal
proceedings concerning the interpretations, enforcement and defense of this
Warrant and the transactions herein contemplated (“Proceedings”) (whether
brought against a party hereto or its respective Affiliates, employees or
agents) shall be commenced exclusively in the state and federal courts sitting
in the City of Wilmington, State of Delaware (the “Delaware Courts”). Each party
hereto hereby irrevocably submits to the exclusive jurisdiction of the Delaware
Courts for the adjudication of any dispute hereunder or in connection herewith
or with any transaction contemplated hereby or discussed herein, and hereby
irrevocably waives, and agrees not to assert in any Proceeding, any claim that
it is not personally subject to the jurisdiction of any Delaware Court, or that
such Proceeding has been commenced in an improper or inconvenient forum. Each
party hereto hereby irrevocably waives personal service of process and consents
to process being served in any such Proceeding by mailing a copy thereof via
registered or certified mail or overnight delivery (with evidence of delivery)
to such party at the address in effect for notices to it under this Warrant and
agrees that such service shall constitute good and sufficient service of process
and notice thereof.  Nothing contained herein shall be deemed to limit
in any way any right to serve process in any manner permitted by
law.  Each party hereto hereby irrevocably waives, to the fullest
extent permitted by applicable law, any and all right to trial by jury in any
legal proceeding arising out of or relating to this Warrant or the transactions
contemplated hereby. If either party shall commence a Proceeding to enforce any
provisions of this Warrant, then the prevailing party in such Proceeding shall
be reimbursed by the other party for its attorneys’ fees and other costs and
expenses incurred with the investigation, preparation and prosecution of such
Proceeding.
 

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    (c)           The
headings herein are for convenience only, do not constitute a part of this
Warrant and shall not be deemed to limit or affect any of the provisions
hereof.

     

    (d)           In
case any one or more of the provisions of this Warrant shall be invalid or
unenforceable in any respect, the validity and enforceability of the remaining
terms and provisions of this Warrant shall not in any way be affected or
impaired thereby and the parties will attempt in good faith to agree upon a
valid and enforceable provision which shall be a commercially reasonable
substitute therefor, and upon so agreeing, shall incorporate such substitute
provision in this Warrant.

     

    [SIGNATURE
PAGE FOLLOWS]
 

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    IN
WITNESS WHEREOF, the Company has caused this Warrant to be duly executed by its
authorized officer as of the date first indicated above.

     

    
      
        
          
            
              	 
      	
                      INSPRO
      TECHNOLOGIES CORPORATION

                    
	 	 	 
	 
      	
                      By:

                    	 
      
	 
      	
                      Name: 

                    	
                      Anthony
      R. Verdi

                    
	 
      	
                      Title: 

                    	
                      Acting
      Chief Executive Officer, Chief

                    
	 
      	
                      Operating
      Officer and Chief Financial
OfficerUNITED
STATES OF AMERICA

    DEPARTMENT
OF THE TREASURY

    COMPTROLLER
OF THE CURRENCY

    

    
      
        
          
            
              	
                      In
      the Matter of:

                    	
                        )

                    	
                      AA-EC-10-119

                    
	
                      Provident
      Community Bank, N.A.

                    	
                        )

                    	 
      
	
                      Rock
      Hill, South Carolina

                    	
                        )

                    	 
      

            

          

        

      

    

    

    CONSENT
ORDER

    

    WHEREAS, the Acting
Comptroller of the Currency of the United States of America (“Comptroller”),
through his National Bank Examiner, has supervisory authority over Provident
Community Bank, N.A., Rock Hill, South Carolina (“Bank”);

     

    WHEREAS, the Bank, by and
through its duly elected and acting Board of Directors (“Board”), has executed a
Stipulation and Consent to the Issuance of a Consent Order (“Stipulation and
Consent”), dated December 21, 2010, that is accepted by the Comptroller;
and

     

    WHEREAS, by this Stipulation
and Consent, which is incorporated by reference, the Bank, has consented to the
issuance of this Consent Order (“Order”) by the Comptroller.

     

    NOW, THEREFORE, pursuant to
the authority vested in him by the Federal Deposit Insurance Act, as amended, 12
U.S.C. § 1818, the Comptroller hereby orders that:

     

    ARTICLE
I

     

    COMPLIANCE
COMMITTEE

     

    (1)
Within ten (10) days, the Board shall appoint a Compliance Committee of at least
three (3) directors, none of whom shall be employees or controlling shareholders
of the Bank or any of its affiliates (as the term “affiliate” is defined in 12
U.S.C. § 371c(b)(1)), or a family member of any such person. Upon appointment,
the names of the members of the Compliance Committee and, in the event of a
change of the membership, the name of any new member shall be immediately
submitted in writing to the Director for Special Supervision (“Director”). The
Compliance Committee shall be responsible for monitoring and coordinating the
Bank's adherence to the provisions of this Order.

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    

    (2)  The
Compliance Committee shall meet at least monthly.

     

    (3)  Within
thirty (30) days of the date of this Order and every thirty (30)
days  thereafter, the Compliance Committee shall submit a written
progress report to the Board setting forth in detail:

     

    
      
        	
                 
      

              	
                (a)

              	
                a
      description of the actions needed to achieve full compliance with each
      Article of this Order;

              
	 	 	 

      

    

    
      
        	
                 
      

              	
                (b)

              	
                actions
      taken to comply with each Article of this Order; and

              
	 	 	 

      

    

    
      	
               
      

            	
              (c)

            	
              the
      results and status of those
actions.

            

    

     

    (4)  The
Board shall forward a copy of the Compliance Committee's report, with any
additional comments by the Board, to the Director within ten (10) days of
receiving such report.

     

    (5)  All
reports or plans which the Bank or Board has agreed to submit to the Director
pursuant to this Order shall be forwarded, by overnight mail or via email, to
the following:

     

    
      
        	
                Director
      for Special Supervision

              	 
      	
                with a copy
      to:

              
	
                Comptroller
      of the Currency

              	 
      	
                Carolinas
      Field Office

              
	
                250
      E Street, S.W.

              	 
      	
                Comptroller
      of the Currency

              
	
                Mail
      Stop 7-4

              	 
      	
                212
      South Tryon Street, Suite 700

              
	
                Washington,
      DC  20219

              	
                  

              	
                Charlotte,
      NC  28281

              

      

    

    

    (6)  The
Board shall ensure that the Bank has sufficient processes, personnel, and
control systems to effectively implement and adhere to all provisions of this
Order, and that Bank personnel have sufficient training and authority to execute
their duties and responsibilities under this Order.

    
      
         

      

      
        2

        
          

        

      

      
         

      

    

    

    ARTICLE
II

     

    STRATEGIC
PLAN

     

    (1)  Within
sixty (60) days, the Board shall forward to the Director for his review,
pursuant to paragraph (5) of this Article, a written Strategic Plan for the Bank
covering at least a three-year period.  At the next Board meeting
following receipt of the Director’s written determination of no supervisory
objection, the Board shall adopt and the Bank (subject to Board review and
ongoing monitoring) shall implement and thereafter ensure adherence to the
Strategic Plan.  The Strategic Plan shall establish objectives for the
Bank's overall risk profile, earnings performance, growth, balance sheet mix,
off-balance sheet activities, liability structure, capital adequacy, reduction
in the volume of nonperforming assets, product line development, and market
segments that the Bank intends to promote or develop, together with strategies
to achieve those objectives, and shall, at a minimum, include:

     

    
      
        	
                 
      

              	
                (a)

              	
                a
      mission statement that forms the framework for the establishment of
      strategic goals and objectives;

              
	 	 	 

      

    

    
      
        	
                 
      

              	
                (b)

              	
                a
      description of the Bank's targeted market(s) and an assessment of the
      current and projected risks and competitive factors in its identified
      target market(s);

              
	 	 	 

      

    

    
      
        	
                 
      

              	
                (c)

              	
                the
      strategic goals and objectives to be accomplished;

              
	 	 	 

      

    

    
      
        	
                 
      

              	
                (d)

              	
                specific
      actions designed to improve Bank earnings and accomplish the identified
      strategic goals and objectives;

              
	 	 	 

      

    

    
      
        	
                 
      

              	
                (e)

              	
                identification
      of Bank personnel to be responsible and accountable for achieving each
      goal and objective of the Strategic Plan, including specific time
      frames;

              
	 	 	 

      

    

    
      	
               
      

            	
              (f)

            	
              a
      financial forecast, to include projections for major balance sheet and
      income statement accounts, targeted financial ratios, and growth
      projections over the period covered by the Strategic
  Plan;

            

    

    
      
         

      

      
        3

        
          

        

      

      
         

      

    

    

    
      
        	
                 
      

              	
                (g)

              	
                a
      description of the assumptions used to determine financial projections and
      growth targets;

              
	 	 	 

      

    

    
      
        	
                 
      

              	
                (h)

              	
                an
      identification and risk assessment of the Bank's present and planned
      future product lines (assets and liabilities) that will be utilized to
      accomplish the strategic goals and objectives established in the Strategic
      Plan, with the requirement that the risk assessment of new product lines
      must be completed prior to the offering of such product
    lines;

              
	 	 	 

      

    

    
      
        	
                 
      

              	
                (i)

              	
                a
      description of control systems to mitigate risks associated with planned
      new products, growth, or any proposed changes in the Bank's
      markets;

              
	 	 	 

      

    

    
      
        	
                 
      

              	
                (j)

              	
                an
      evaluation of the Bank's internal operations, staffing requirements, board
      and management information systems, and policies and procedures for their
      adequacy and contribution to the accomplishment of the goals and
      objectives established in the Strategic Plan;

              
	 	 	 

      

    

    
      
        	
                 
      

              	
                (k)

              	
                a
      management employment and succession program to promote the retention and
      continuity of capable management;

              
	 	 	 

      

    

    
      
        	
                 
      

              	
                (l)

              	
                assigned
      responsibilities and accountability for the strategic planning process,
      new products, growth goals, and proposed changes in the Bank's operating
      environment; and

              
	 	 	 

      

    

    
      	
               
      

            	
              (m)

            	
              a
      description of systems designed to monitor the Bank's progress in meeting
      the Strategic Plan's goals and
objectives.

            

    

     

    (2)  If
the Board’s Strategic Plan under paragraph (1) of this Article includes a sale
or merger of the Bank, the Strategic Plan shall, at a minimum, address the steps
that will be taken and the associated timeline.

    
      
         

      

      
        4

        
          

        

      

      
         

      

    

    

    (3)  At
least monthly, the Board shall review financial reports and earnings analyses
prepared by the Bank that evaluate the Bank's performance against the goals and
objectives established in the Strategic Plan, as well as the Bank’s written
explanation of significant differences between actual and projected balance
sheets, income statements, and expense accounts, including descriptions of
extraordinary and/or nonrecurring items.  Within ten (10) days of the
completion of its review, the Board shall submit a copy of the reports to the
Director.

     

    (4)  At
least quarterly, the Board shall prepare a written evaluation of the Bank's
performance against the Strategic Plan, based on the Bank’s monthly reports,
analyses, and written explanations of any differences between actual performance
and the Bank’s strategic goals and objectives, and shall include a description
of the actions the Board will require the Bank to take to address any
shortcomings, which shall be documented in the Board meeting
minutes.  Within ten (10) days of completing its evaluation, the Board
shall submit a copy to the Director.

     

    (5)  Prior
to adoption by the Board, a copy of the Strategic Plan, and any subsequent
amendments or revisions to the Strategic Plan, shall be forwarded to the
Director for review and prior written determination of no supervisory
objection.  Upon receiving a written determination of no supervisory
objection from the Director, the Board shall adopt and the Bank shall
immediately implement and adhere to the Strategic Plan.

     

    (6) The
Bank may not initiate any action that deviates significantly from the
Board-approved Strategic Plan without a written determination of no supervisory
objection from the Director. The Board must give the Director advance, written
notice of its intent to deviate significantly from the Strategic Plan, along
with an assessment of the impact of such change on the Bank's condition,
including a profitability analysis and an evaluation of the adequacy of the
Bank's organizational structure, staffing, management information systems,
internal controls, and written policies and procedures to identify, measure,
monitor, and control the risks associated with the change in the Strategic
Plan.

    
      
         

      

      
        5

        
          

        

      

      
         

      

    

    

    (7)  For
the purposes of this Article, changes that may constitute a significant
deviation from the Strategic Plan include, but are not limited to, a change in
the Bank's underwriting practices and standards, credit administration, account
management, collection strategies or operations, fee structure or pricing,
accounting processes and practices, or funding strategy, any of which, alone or
in aggregate, may have a material impact on the Bank's operations or financial
performance; or any other changes in personnel, operations, or external factors
that may have a material impact on the Bank's operations or financial
performance.

     

    ARTICLE
III

     

    CAPITAL PLAN AND HIGHER
MINIMUMS

    

    (1)  The
Bank shall within one hundred and twenty (120) days achieve and thereafter
maintain the following minimum capital ratios (as defined in 12 C.F.R. Part
3)1:

      

    
      
        	
                 
      

              	
                (a)

              	
                Tier
      1 capital at least equal to eight percent (8%) of adjusted total
      assets.2

              
	 	 	 

      

    

    
      	
               
      

            	
              (b)

            	
              Total
      capital at least equal to twelve percent (12%) of risk-weighted
      assets;

            

    

     

    (2)  Within
sixty (60) days, the Board shall forward to the Director for his review,
pursuant to paragraph (4) of this Article, a written Capital Plan for the Bank,
consistent with the Strategic Plan pursuant to Article II, covering at least a
three-year period.  At the next Board meeting following receipt of the
Director’s written determination of no supervisory objection, the Board shall
adopt and the Bank (subject to Board review and ongoing monitoring) shall
implement and thereafter ensure adherence to the Capital Plan.  While
this order is in effect the Capital Plan shall include:

    

      
        

      
 

    
      1 The
requirement in this Order to meet and maintain a specific capital level means
that the Bank may not be deemed to be "well capitalized" for purposes of
12 U.S.C. § 1831o and 12 C.F.R. Part 6, pursuant to
12 C.F.R. § 6.4(b)(1)(iv).

    

      
      2 Adjusted
total assets is defined in 12 C.F.R. § 3.2(a) as the average total
asset figure used for call report purposes minus end-of-quarter intangible
assets.

    

    
      
         

      

      
        6

        
          

        

      

      
         

      

    

    

    
      
        	
                 
      

              	
                (a)

              	
                specific
      plans for the achievement and maintenance of adequate capital, which may
      in no event be less than the requirements of paragraph (1) of this
      Article;

              
	 	 	 

      

    

    
      
        	
                 
      

              	
                (b)

              	
                projections
      for growth and capital requirements, based upon a detailed analysis of the
      Bank's assets, liabilities, earnings, fixed assets, and off-balance sheet
      activities;

              
	 	 	 

      

    

    
      
        	
                 
      

              	
                (c)

              	
                projections
      of the sources and timing of additional capital to meet the Bank's future
      needs, as set forth in the Strategic Plan;

              
	 	 	 

      

    

    
      
        	
                 
      

              	
                (d)

              	
                identification
      of the primary sources from which the Bank will maintain an appropriate
      capital structure to meet the Bank's future needs, as set forth in the
      Strategic Plan;

              
	 	 	 

      

    

    
      
        	
                 
      

              	
                (e)

              	
                specific
      plans detailing how the Bank will comply with restrictions or requirements
      set forth in this Order and with 12 U.S.C. § 1831o, including
      the restrictions against brokered deposits in 12 C.F.R. § 337.6;
      and

              
	 	 	 

      

    

    
      	
               
      

            	
              (f)

            	
              contingency
      plans that identify alternative methods to strengthen capital, should the
      primary source(s) under paragraph (d) of this Article not be
      available.

            

    

     

    (3)  The
Bank may pay a dividend or make a capital distribution only:

    
      
         

      

      
        7

        
          

        

      

      
         

      

    

    

    
      
        	
                 
      

              	
                (a)

              	
                when
      the Bank is in compliance with the minimum capital ratios identified in
      paragraph (1) or this Article;

              
	 	 	 

      

    

    
      
        	
                 
      

              	
                (b)

              	
                when
      the Bank is in compliance with its approved Capital Plan and would remain
      in compliance with its approved Capital Plan immediately following the
      payment of any dividend;

              
	 	 	 

      

    

    
      
        	
                 
      

              	
                (c)

              	
                when
      the Bank is in compliance with 12 U.S.C. §§ 56 and 60;
      and

              
	 	 	 

      

    

    
      	
               
      

            	
              (d)

            	
              following
      the prior written determination of no supervisory objection by the
      Director.

            

    

     

    (4)  Prior
to adoption by the Board, a copy of the Capital Plan shall be submitted to the
Director for a prior written determination of no supervisory
objection.  Upon receiving a written determination of no supervisory
objection from the Director, the Board shall adopt and the Bank shall
immediately implement and adhere to the Capital Plan.  The Board shall
review and update the Bank's Capital Plan at least annually and more frequently
if necessary or if requested by the Director.  Revisions to the Bank’s
Capital Plan shall be submitted to the Director for a prior written
determination of no supervisory objection.

     

    ARTICLE
IV

     

    BOARD TO HIRE AND ENSURE
COMPETENT MANAGEMENT

     

    (1)  The
Board shall ensure that the Bank has competent management in place on a
full-time basis in all executive officer positions to carry out the Board's
policies; ensure compliance with this Order; ensure compliance with applicable
laws, rules, and regulations; and manage the day-to-day operations of the Bank
in a safe and sound manner.

    
      
         

      

      
        8

        
          

        

      

      
         

      

    

    (2)  Within
ninety (90) days, the Board (with the exception of any Bank executive officers)
shall prepare a written assessment of the capabilities of the Bank’s executive
officers to perform present and anticipated duties, taking into account the
findings contained in the most recent Report of Examination, and factoring in
the officer's past actual performance, experience, and qualifications, compared
to their position description, duties and responsibilities, with particular
emphasis on their proposed responsibilities to execute the Strategic Plan and
correct the concerns raised in the most recent Report of
Examination.  Upon completion, a copy of the written assessment shall
be submitted to the Director.

     

    (3)  If
the Board determines that an officer's performance, skills or abilities need
improvement, the Board will, within thirty (30) days following its
determination, require the Bank to develop and implement a written program, with
specific time frames, to improve the officer's performance, skills and
abilities.  Upon completion, a copy of the written program shall be
submitted to the Director.

     

    (4)  If
the Board determines that an officer will not continue in his/her position, the
Board shall document the reasons for this decision in its assessment performed
pursuant to paragraph (3) of this Article, and shall within sixty (60) days of
such vacancy identify and provide notice to the Director, pursuant to paragraph
(6) of this Article, of a qualified and capable candidate for the vacant
position who shall be vested with sufficient executive authority to ensure the
Bank's compliance with this Order and the safe and sound operation of functions
within the scope of that position's responsibility.

     

    (5)  Prior
to the appointment of any individual to an executive officer position, the Board
shall submit to the Director written notice, as required by 12 C.F.R.
§ 5.51 and in accordance with the Comptroller's Licensing
Manual.  The Director shall have the power to disapprove the
appointment of the proposed executive officer.  However, the failure
to exercise such veto power shall not constitute an approval or endorsement of
the proposed officer.  The requirement to submit information and the
prior disapproval provisions of this Article are based upon the authority of 12
U.S.C. § 1818(b) and do not require the Comptroller or the Director to complete
his review and act on any such information or authority within ninety (90)
days.

    
      
         

      

      
        9

        
          

        

      

      
         

      

    

    

    (6)  The
Board shall perform, at least annually, a written performance appraisal for each
Bank executive officer that establishes objectives by which the officer’s
effectiveness will be measured, evaluates performance according to the
position's description and responsibilities, and assesses accountability for
action plans to remedy issues raised in Reports of Examination or audit
reports.  Upon completion, copies of the performance appraisals shall
be submitted to the Director.  The Board shall ensure that the Bank
addresses any identified deficiencies in a manner consistent with paragraphs (4)
and (5) of this Article.

     

    ARTICLE
V

     

    LOAN PORTFOLIO
MANAGEMENT

     

    (1)  Within
sixty (60) days, Board shall adopt and the Bank (subject to Board review and
ongoing monitoring) shall implement and thereafter ensure adherence to a written
credit policy to improve the Bank's loan portfolio management.  The
credit policy shall include (but not be limited to):

     

    
      
        	
                 
      

              	
                (a)

              	
                a
      description of the types of credit information required from borrowers and
      guarantors, including (but not limited to) annual audited statements,
      interim financial statements, personal financial statements, and tax
      returns with supporting schedules;

              
	 	 	 

      

    

    
      	
               
      

            	
              (b)

            	
              procedures
      that require any extension of credit (new, maturity extension,
      modification, or renewal), including lot loans, is made only after
      obtaining and validating current credit information about the borrower and
      any guarantor sufficient to fully assess and analyze the borrower’s and
      guarantor’s cash flow, debt service requirements, contingent liabilities,
      and global liquidity condition, and only after the credit officer prepares
      a documented credit analysis;

            

    

    
      
         

      

      
        10

        
          

        

      

      
         

      

    

    

    
      
        	
                 
      

              	
                (c)

              	
                procedures
      that require any extension of credit (new, maturity extension,
      modification, or renewal), including lot loans, is made only after
      obtaining and documenting the current valuation of any supporting
      collateral, perfecting and verifying the Bank’s lien position, where
      applicable, and that reasonable limits are established on credit advances
      against collateral, based on a consideration of (but not limited to) a
      realistic assessment of the value of collateral, the ratio of loan to
      value, and overall debt service requirements;

              
	 	 	 

      

    

    
      
        	
                 
      

              	
                (d)

              	
                procedures
      to ensure that loans made for the purpose of constructing or developing
      real estate include (but are not limited to) requirements
    to:

              
	 	 	 

      

    

    
      
        	
                 
      

              	
                (i)

              	
                obtain
      and evaluate detailed project plans; detailed project budget; time frames
      for project completion; detailed market analysis; and sales projections,
      including projected absorption rates;

              
	 	 	 

      

    

    
      
        	
                 
      

              	
                (ii)

              	
                conduct
      stress testing of significant project and lending; and

              
	 	 	 

      

    

    
      
        	
                 
      

              	
                (iii)

              	
                obtain
      current documentation sufficient to support a detailed analysis of the
      financial condition of borrowers and significant
    guarantors.

              
	 	 	 

      

    

    
      
        	
                 
      

              	
                (e)

              	
                a
      requirement that borrowers and/or guarantors maintain any collateral
      margins established in the credit approval process;

              
	 	 	 

      

    

    
      	
               
      

            	
              (f)

            	
              procedures
      that prohibit the capitalization of accrued interest, payment of taxes or
      payment of principal on any extension of credit (new, maturity extension,
      modification, or renewal);

            

    

    
      
         

      

      
        11

        
          

        

      

      
         

      

    

    

    
      
        	
                 
      

              	
                (g)

              	
                procedures
      that prohibit, on any loan renewal, extension or modification, the
      establishment of a new interest reserve using the proceeds of any Bank
      loan to the same borrower or guarantor;

              
	 	 	 

      

    

    
      
        	
                 
      

              	
                (h)

              	
                procedures
      to ensure that all exceptions to the credit policy shall be clearly
      documented on the loan offering sheet, problem loan report, and other MIS;
      and approved by the Board or a committee thereof before the loan is funded
      or renewed;

              
	 	 	 

      

    

    
      
        	
                 
      

              	
                (i)

              	
                credit
      risk rating definitions consistent with applicable regulatory
      guidance;

              
	 	 	 

      

    

    
      
        	
                 
      

              	
                (j)

              	
                procedures
      for early problem loan identification, to ensure that credits are
      accurately risk rated at least monthly;

              
	 	 	 

      

    

    
      
        	
                 
      

              	
                (k)

              	
                procedures
      governing the identification and accounting for nonaccrual loans that are
      consistent with the requirements contained in the Call Report
      Instructions; and

              
	 	 	 

      

    

    
      	
               
      

            	
              (l)

            	
              prudent
      lending and approval limits for lending officers that are commensurate
      with their experience and qualifications, and that prohibit combining
      individual lending officers’ lending authority to increase
      limits.

            

    

     

    (2)  The
Board shall ensure that Bank personnel performing credit analyses are adequately
trained in cash flow analysis, particularly analysis using information from tax
returns, and that processes are in place to ensure that additional training is
provided as needed.

     

    (3)  Within
sixty (60) days the Board shall establish a written performance appraisal and
salary administration process for loan officers that adequately considers
performance relative to job descriptions, policy compliance, documentation
standards, accuracy in credit grading, and other loan administration
matters.

     

    (4)  The
Board shall, at least on an annual basis, review the policy developed pursuant
to this Article, and revise it as appropriate.

    
      
         

      

      
        12

        
          

        

      

      
         

      

    

    

    
      ARTICLE
VI

       

    

    LOAN
REVIEW

     

    (1)  The
Bank shall maintain an effective, independent, and on-going loan review program
to review, at least quarterly, the Bank's loan and lease portfolios, to assure
the timely identification and categorization of problem credits.  The
program shall provide for a written report to be filed with the Board promptly
after each review, and the program shall employ a loan and lease rating system
consistent with the guidelines set forth in "Rating Credit Risk" and "Allowance
for Loan and Lease Losses," Booklets A-RCR and A-ALLL, respectively, of the
Comptroller's
Handbook.  Such reports shall include, at a
minimum:

     

    
      
        	
                 
      

              	
                (a)

              	
                the
      loan review scope and coverage parameters;

              
	 	 	 

      

    

    
      
        	
                 
      

              	
                (b)

              	
                conclusions
      regarding the overall quality of the loan and lease
      portfolios;

              
	 	 	 

      

    

    
      
        	
                 
      

              	
                (c)

              	
                the
      identification, type, rating, and amount of problem loans and
      leases;

              
	 	 	 

      

    

    
      
        	
                 
      

              	
                (d)

              	
                the
      identification and amount of delinquent loans and
  leases;

              
	 	 	 

      

    

    
      
        	
                 
      

              	
                (e)

              	
                credit
      and collateral documentation exceptions;

              
	 	 	 

      

    

    
      
        	
                 
      

              	
                (f)

              	
                loans
      meeting the criteria for non-accrual status;

              
	 	 	 

      

    

    
      
        	
                 
      

              	
                (g)

              	
                the
      identity of the loan officer(s) of each loan reported in accordance with
      subparagraphs (b) through (f);

              
	 	 	 

      

    

    
      
        	
                 
      

              	
                (h)

              	
                the
      identification and status of credit-related violations of law, rule, or
      regulation;

              
	 	 	 

      

    

    
      
        	
                 
      

              	
                (i)

              	
                concentrations
      of credit; and

              
	 	 	 

      

    

    
      	
               
      

            	
              (j)

            	
              loans
      and leases in nonconformance with the Bank's lending and leasing policies,
      and exceptions to the Bank's lending and leasing
  policies.

            

    

     

    (2)  At
least annually, and periodically throughout the calendar year, the portfolio of
lot loans shall be reviewed for appropriate risk ratings, underwriting,
modification activity and allowance for loan and lease loss
provisions.  The first review shall be performed within sixty (60)
days after the Directors sign this Consent Order and must include the entire lot
loan portfolio.

    
      
         

      

      
        13

        
          

        

      

      
         

      

    

    

    (3)  A
written description of the program required by Paragraph (1) of this Article
shall be forwarded to the Director immediately upon implementation.

     

    (4)  The
Board shall evaluate the loan and lease review report(s) and shall ensure that
immediate, adequate, and continuing remedial action, as appropriate, is taken
upon all findings noted in the report(s).  The Board shall also ensure
that the Bank preserves documentation of any actions to collect or strengthen
assets identified as problem credits.

     

    ARTICLE
VII

     

    ALLOWANCE FOR LOAN AND LEASE
LOSSES

     

    (1)  The
Board shall require and the Bank shall implement and thereafter adhere to a
program for the maintenance of an adequate Allowance for Loan and Lease Losses
("ALLL").  The program shall be consistent with the comments on
maintaining a proper ALLL found in the Interagency Policy Statement on the ALLL
contained in OCC Bulletin 2006-47 (December 13, 2006) and with "Allowance for
Loan and Lease Losses," booklet A-ALLL of the Comptroller's Handbook, and
any subsequent regulatory releases, and shall incorporate the
following:

     

    
      
        	
                 
      

              	
                (a)

              	
                internal
      risk ratings of loans;

              
	 	 	 

      

    

    
      
        	
                 
      

              	
                (b)

              	
                results
      of the Bank's independent loan review;

              
	 	 	 

      

    

    
      
        	
                 
      

              	
                (c)

              	
                criteria
      for determining which loans will be reviewed under Financial Accounting
      Standard ("FAS") 114, how impairment will be determined, and procedures to
      ensure that the analysis of loans complies with FAS 114
      requirements;

              
	 	 	 

      

    

    
      
        	
                 
      

              	
                (d)

              	
                criteria
      for determining FAS 5 loan pools and an analysis of those loan
      pools;

              
	 	 	 

      

    

    
      	
               
      

            	
              (e)

            	
              recognition
      of non-accrual loans in conformance with generally accepted accounting
      principles (“GAAP”) and regulatory
guidance;

            

    

    
      
         

      

      
        14

        
          

        

      

      
         

      

    

    

    
      
        	
                 
      

              	
                (f)

              	
                loan
      loss experience;

              
	 	 	 

      

    

    
      
        	
                 
      

              	
                (g)

              	
                trends
      of delinquent and non-accrual loans;

              
	 	 	 

      

    

    
      
        	
                 
      

              	
                (h)

              	
                concentrations
      of credit in the Bank; and

              
	 	 	 

      

    

    
      	
               
      

            	
              (i)

            	
              present
      and projected economic and market
conditions.

            

    

     

    (2)  The
program shall provide for a review of the ALLL by the Board at least once each
calendar quarter.  Any deficiency in the ALLL shall be remedied in the
quarter it is discovered, prior to filing the Consolidated Reports of Condition
and Income, by additional provisions from earnings.  Written
documentation shall be maintained of the factors considered and conclusions
reached by the Board in determining the adequacy of the ALLL and made available
for review by Bank Examiners.

     

    (3)  A
copy of the Board's ALLL program, and any subsequent revisions to the program,
shall be submitted to the Director.

     

    ARTICLE
VIII

     

    CRITICIZED
ASSETS

     

    (1)  Within
sixty (60) days, the Board shall adopt and the Bank (subject to Board review and
ongoing monitoring) shall implement and thereafter ensure adherence to a written
program designed to protect the Bank's interest in those assets criticized in
the most recent Report of Examination (“ROE”), in any subsequent ROE, by any
internal or external loan review, or in any list provided to management by the
National Bank Examiners during any examination as “doubtful,” “substandard,” or
“special mention.”  The program shall include the development of
Criticized Asset Reports (“CARs”) identifying all credit relationships and other
assets totaling in aggregate one hundred thousand dollars ($100,000) or more,
criticized as “doubtful,” “substandard,” or “special mention.”  The
CARs shall be updated and submitted to the Board and the Directors
monthly.  Each CAR shall cover an entire credit relationship and
include, at a minimum, analysis and documentation of the
following:

    
      
         

      

      
        15

        
          

        

      

      
         

      

    

    

    
      
        	
                 
      

              	
                (a)

              	
                the
      origination date and any renewal or extension dates, amount, purpose of
      the loan, and the originating and current loan
  officer(s);

              
	 	 	 

      

    

    
      
        	
                 
      

              	
                (b)

              	
                the
      expected primary and secondary sources of repayment, and an analysis of
      the adequacy of the repayment source;

              
	 	 	 

      

    

    
      
        	
                 
      

              	
                (c)

              	
                the
      appraised value of supporting collateral and the position of the Bank's
      lien on such collateral, where applicable, as well as other necessary
      documentation to support the current collateral
  valuation;

              
	 	 	 

      

    

    
      
        	
                 
      

              	
                (d)

              	
                an
      analysis of current and complete credit information, including cash flow
      analysis where loans are to be repaid from operations;

              
	 	 	 

      

    

    
      
        	
                 
      

              	
                (e)

              	
                results
      of any FAS 114 impairment analysis;

              
	 	 	 

      

    

    
      
        	
                 
      

              	
                (f)

              	
                significant
      developments, including a discussion of changes since the prior CAR, if
      any; and

              
	 	 	 

      

    

    
      	
               
      

            	
              (g)

            	
              the
      proposed action to eliminate the basis of criticism and the time frame for
      its accomplishment, including an appropriate exit
  strategy.

            

    

     

    (2)  The
Bank may not extend credit, directly or indirectly, including renewals,
modifications or extensions, to a borrower whose loans or other extensions of
credit are criticized in any ROE, in any internal or external loan review, or in
any list provided to management by the National Bank Examiners during any
examination, unless and until each of the following conditions is
met:

    
      
         

      

      
        16

        
          

        

      

      
         

      

    

      

    
      
        	
                 
      

              	
                (a)

              	
                the
      Board, or a designated committee thereof, finds that the extension of
      additional credit is necessary to promote the best interests of the Bank
      and that prior to renewing, modifying or extending any additional credit,
      a majority of the full Board (or designated committee) approves the credit
      extension and records, in writing, why such extension is necessary to
      promote the best interests of the Bank.  A copy of the findings
      and approval of the Board or designated committee shall be maintained in a
      centralized file as well as in the credit file of the affected borrower
      and made available for review by National Bank
  Examiners;

              
	 	 	 

      

    

    
      
        	
                 
      

              	
                (b)

              	
                the
      Bank performs a written credit and collateral analysis as required by
      paragraph (1)(d) of this Article and, if necessary, the proposed action
      referred to in paragraph (1)(g) of this Article is revised, as
      appropriate; and

              
	 	 	 

      

    

    
      	
               
      

            	
              (c)

            	
              the
      Board's formal plan to collect or strengthen the criticized asset will not
      be compromised by the extension of additional
  credit.

            

    

     

    ARTICLE
IX

     

    CONCENTRATION RISK
MANAGEMENT

     

    (1)  Within
sixty (60) days, the Board shall adopt and the Bank (subject to Board review and
ongoing monitoring) shall implement and thereafter ensure Bank adherence to a
written concentration management program consistent with OCC Bulletin 2006-46
(December 6, 2006).  The program shall include, but not necessarily be
limited to, the following:

     

    
      
        	
                 
      

              	
                (a)

              	
                policy
      guidelines that address the level and nature of exposures acceptable to
      the institution and that set concentration limits, including limits on
      commitments to individual borrowers and appropriate
      sub-limits;

              
	 	 	 

      

    

    
      
        	
                 
      

              	
                (b)

              	
                ongoing
      risk assessments to identify potential concentrations in the portfolio,
      including exposures to similar or interrelated groups or
      borrowers;

              
	 	 	 

      

    

    
      	
               
      

            	
              (c)

            	
              portfolio
      management, to include internal lending guidelines and concentration
      limits that control the Bank's overall risk exposure and a contingency
      plan to reduce or mitigate concentrations in the event of adverse market
      conditions.

            

    

    
      
         

      

      
        17

        
          

        

      

      
         

      

    

    

    
      
        	
                 
      

              	
                (d)

              	
                periodic
      market analysis, to provide management and the Board with information to
      assess whether the lending strategy and policies continue to be
      appropriate in light of changes in market conditions;

              
	 	 	 

      

    

    
      
        	
                 
      

              	
                (e)

              	
                management
      information systems, to provide sufficient timely information to
      management to identify, measure, monitor, and manage concentration risk;
      and

              
	 	 	 

      

    

    
      
        	
                 
      

              	
                (f)

              	
                board
      and management oversight of concentrations, to include:

              
	 	 	 

      

    

    
      
        	
                 
      

              	
                (i)

              	
                policy
      guidelines and an overall lending strategy, including actions required
      when the Bank approaches the concentration limits in its
      guidelines;

              
	 	 	 

      

    

    
      
        	
                 
      

              	
                (ii)

              	
                procedures
      and controls to effectively adhere to and monitor compliance with the
      Bank's lending policies and strategies;

              
	 	 	 

      

    

    
      
        	
                 
      

              	
                (iii)

              	
                regular
      review of information and reports that identify, analyze, and quantify the
      nature and level of risk presented by concentrations;

              
	 	 	 

      

    

    
      
        	
                 
      

              	
                (iv)

              	
                periodic
      review and approval of risk exposure limits; and

              
	 	 	 

      

    

    
      	
               
      

            	
              (v)

            	
              procedures
      which require the development of an action plan, approved by the Board, to
      reduce the risk of any concentration deemed
  imprudent.

            

    

     

    (2) 
The Board shall forward a copy of any analysis performed on existing or
potential concentrations and any action plan approved by the Board to reduce the
risk of exposure to any concentration deemed imprudent after the analyses
required by paragraph (1) of this Article to the Director within ten (10) days
following such analysis or the Board’s approval of such action
plan.

    
      
         

      

      
        18

        
          

        

      

      
         

      

    

    

    ARTICLE
X

     

    LIQUIDITY RISK MANAGEMENT
PROGRAM

    

    (1) 
Within sixty (60) days, the Board shall revise and maintain a comprehensive
liquidity risk management program which assesses, on an ongoing basis, the
Bank's current and projected funding needs, and ensures that sufficient funds or
access to funds exist to meet those needs.  Such a program must
include effective methods to achieve and maintain sufficient liquidity and to
measure and monitor liquidity risk, and include:

     

    
      
        	
                 
      

              	
                (a)

              	
                A
      contingency funding plan that, on a monthly basis, forecasts funding
      needs, and funding sources under different stress scenarios which
      represent management's best estimate of balance sheet changes that may
      result from a liquidity or credit event.  The contingency
      funding plan shall include:

              
	 	 	 

      

    

    
      
        	
                 
      

              	
                (i)

              	
                specific
      plans detailing how the Bank will comply with restrictions or requirements
      set forth in this Order and 12 U.S.C. §1831o, including the
      restrictions against brokered deposits in 12 C.F.R. §337.6 (which
      plans may be subject to revision as may be appropriate upon the adoption,
      if any, of currently-proposed changes to 12
  C.F.R.337.6);

              
	 	 	 

      

    

    
      
        	
                 
      

              	
                (ii)

              	
                the
      preparation of reports which identify and quantify all sources of funding
      and funding obligations under best case and worst case scenarios,
      including asset funding, liability funding and off-balance sheet funding;
      and

              
	 	 	 

      

    

    
      	
               
      

            	
              (iii)

            	
              procedures
      which ensure that the Bank's contingency funding practices are consistent
      with the Board's guidance and risk
tolerances.

            

    

    
      
         

      

      
        19

        
          

        

      

      
         

      

    

    

    (2) 
The Board shall submit a copy of the comprehensive liquidity risk management
program, along with the reports required by this Article, to the Director for
review.

     

    ARTICLE
XI

     

    CALL REPORTS -
REFILE

     

    (1) 
Within thirty (30) days, the Board shall adopt and cause the Bank to implement
policies and procedures, in accordance with the Instructions for Preparation
of Consolidated Reports of Condition and Income, to ensure that all
official and regulatory reports filed by the Bank accurately reflect the Bank's
condition as of the date that such reports are submitted.  Thereafter
the Board shall ensure Bank adherence to the policies and procedures adopted
pursuant to this Article.

     

    (2) 
Upon completion of the policies, the Board shall submit a copy of the policies
to the Director.

     

    ARTICLE
XII

     

    VIOLATIONS OF
LAW

     

    (1) 
The Board shall require and the Bank shall immediately take all necessary steps
to correct any identified violation of law, rule, or regulation cited in the
most recent Report of Examination, any subsequent Report of Examination, or
brought to the Board’s or Bank’s attention in writing by management, regulators,
auditors, loan review, or other compliance efforts.  Within ninety
(90) days after the violation is cited or brought to the Board’s attention, the
Bank shall provide to the Board a list of any violations that have not been
corrected.  This list shall include an explanation of the actions
taken to correct the violation, the reasons why the violation has not yet been
corrected, and a plan to correct the violation by a specified
date.

    
      
         

      

      
        20

        
          

        

      

      
         

      

    

    

    (2) 
Within sixty (60) days of the date of this Order, the Board shall adopt and the
Bank (subject to Board review and ongoing monitoring) shall implement and
thereafter ensure adherence to:

     

    
      
        	
                 
      

              	
                (a)

              	
                specific
      procedures to prevent future violations as cited in the most recent Report
      of Examination; and

              
	 	 	 

      

    

    
      	
               
      

            	
              (b)

            	
              general
      procedures addressing compliance management that incorporate internal
      control systems and education of employees regarding laws, rules, and
      regulations applicable to their areas of
  responsibility.

            

    

     

    (3) 
Upon adoption, the Board shall forward a copy of these policies and procedures
to the Director.

     

    ARTICLE
XIII

     

    ADMINISTRATIVE APPEALS AND
EXTENSIONS OF TIME

     

    (1) 
If the Bank requires an extension of any timeframe within this Order, the Board
shall submit a written request to the Director asking for relief.  Any
written requests submitted pursuant to this Article shall include a statement
setting forth in detail the special circumstances that require an extension of a
timeframe within this Order.

     

    (2) 
All such requests shall be accompanied by relevant supporting documentation, and
any other facts upon which the Bank relies.

     

    ARTICLE
XIV

     

    OTHER
PROVISIONS

     

    (1) 
Although the Bank is required to submit certain proposed actions and programs
for the review or prior written determination of no supervisory objection of the
Director, the Board has the ultimate responsibility for proper and sound
management of the Bank and the completeness and accuracy of the Bank’s books and
records.

    
      
         

      

      
        21

        
          

        

      

      
         

      

    

    

    (2) 
It is expressly and clearly understood that if, at any time, the Comptroller
deems it appropriate in fulfilling the responsibilities placed upon him by the
several laws of the United States of America to undertake any action affecting
the Bank, nothing in this Order shall in any way inhibit, estop, bar, or
otherwise prevent the Comptroller from so doing.

     

    (3) 
Except as otherwise expressly provided herein, any time limitations imposed by
this Order shall begin to run from the effective date of this
Order.

     

    (4) 
The provisions of this Order are effective upon issuance of this Order by the
Comptroller, through his authorized representative whose signature appears
below, and shall remain effective and enforceable, except to the extent that,
and until such time as, any provisions of this Order shall have been amended,
suspended, waived, or terminated in writing by the Comptroller, or amended as
mutually agreed to by the Bank and the Comptroller.

     

    (5) 
In each instance in this Order in which the Board or a Board committee is
required to ensure adherence to and undertake to perform certain obligations of
the Bank, including the obligation to implement plans, policies or other
actions, it is intended to mean that the Board or Board committee
shall:

     

    
      
        	
                 
      

              	
                (a)

              	
                authorize
      and adopt such actions on behalf of the Bank as may be necessary for the
      Bank to perform its obligations and undertakings under the terms of this
      Order;

              
	 	 	 

      

    

    
      
        	
                 
      

              	
                (b)

              	
                require
      the timely reporting by Bank management of such actions directed by the
      Board to be taken under the terms of this Order;

              
	 	 	 

      

    

    
      
        	
                 
      

              	
                (c)

              	
                follow-up
      on any non-compliance with such actions in a timely and appropriate
      manner; and

              
	 	 	 

      

    

    
      	
               
      

            	
              (d)

            	
              require
      corrective action be taken in a timely manner on any non-compliance with
      such actions.

            

    

    
      
         

      

      
        22

        
          

        

      

      
         

      

    

    

    (6) 
This Order is intended to be, and shall be construed to be, a final order issued
pursuant to 12 U.S.C. § 1818, and expressly does not form, and may not be
construed to form, a contract binding on the Comptroller or the United
States.

     

    (7) 
The terms of this Order, including this paragraph, are not subject to amendment
or modification by any extraneous expression, prior agreements, or prior
arrangements between the parties, whether oral or written.

    

    IT IS SO
ORDERED, this 21st day of
December, 2010.

    

    
      
        
          	
                    

                	 
      
	
                  Henry
      Fleming

                  Director
      for Special Supervision

                	
                  Date

                   

                

        

      

    

    
      
         

      

      
        23

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