Document:

Exhibit 10.6.1

 

AMENDMENT TO EMPLOYMENT AGREEMENT

 

This Amendment (the “Amendment”) to the Employment Agreement (the “Agreement”)
dated as of January 28, 2005 between ETS Payphones, Inc. (the “Company”) and
Jeffrey E. Fennell (the “Executive”) is made effective April 1, 2006.

 

Whereas in consideration of the mutual agreements contained herein, and
for other good and valuable consideration the receipt and sufficiency of which
are hereby acknowledged, the Company and the Executive hereby agree that Section  4(c) of the
Agreement is hereby amended to delete “...and shall continue medical insurance
for the Executive and his dependents on the same terms as exist on the date of
termination for a period of one (1) year. After that one year period, Executive
shall be entitled to elect eighteen months of continuation coverage under COBRA”.
Such language shall be replaced by the following: “...and shall receive monthly
payments of  one thousand, five hundred
and sixty dollars and seventy-three cents ($1,560.73) less applicable state and
federal individual taxes as well as any taxes required to be paid by the
Company in respect of such payment for a period of one (1) year. Executive
agrees to waive election of continuation of coverage for the Executive and his
dependents under COBRA under the Company’s medical insurance plan now and
forever more.”

 

All other provisions of the Agreement not specifically amended by this
Amendment shall remain in full force and effect. All capitalized but undefined
terms used herein shall the meaning ascribed to them in the Agreement. This
Amendment may be executed simultaneously in two or more counterparts each of
which shall be deemed one and the same agreement. A photocopy or facsimile
reproduction of this Amendment and any signatures shall be deemed as effective
as the original.

 

IN WITNESS WHEREOF, the Company and the Executive have each executed
and delivered this Amendment as of the date first shown above.

 

	
   

  	
  COMPANY

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/  MICHAEL
  H. MCCLELLAN

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
  Director, Executive Vice President and Chief Financial Officer

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Date:

  	
  March 29, 2006

  	
   

  
	
   

  	
   

  
	
   

  	
  EXECUTIVE:

  
	
   

  	
   

  
	
   

  	
  /s/ JEFFREY E. FENNELL

  	
   

  
	
   

  	
   

  
	
   

  	
  Date:

  	
  March 29, 2006Exhibit 10.7.1

 

AMENDMENT DATED AS OF MARCH 29, 2006

TO THE JANUARY 28, 2005 CHANGE OF CONTROL
AGREEMENT

BETWEEN

ETS PAYPHONES, INC. and DAVID C. JONES

 

This Amendment to the Change of Control Agreement (the “Amendment”)
dated as of January 28, 2005 (the “Agreement”) between ETS Payphones, Inc. (the
“Company”) and David C. Jones (the “Employee”), is made effective as of March
29, 2006.

 

Whereas at the Annual Meeting of Stockholders, held on February 15,
2006, the stockholders of the Company approved, among other things, the
consummation of the Asset Sale Agreement between the Company and Empire
Payphones, Inc., dated as of November 1, 2005 (the “Asset Sale Agreement”) and
the transactions contemplated thereby and the dissolution and the winding down
of the Company’s operations following the closing (the “Closing”) of the Asset
Sale Agreement.

 

Whereas the Board of Directors of the Company has determined that it is
in the best interests of the Company that the change of control provisions of
the Agreement be amended to ensure that Employee continue to serve the Company
after the Closing, in order that the Closing and the dissolution and winding
down of the Company thereafter are efficiently administered.

 

In consideration of the mutual agreements herein contained, and for
other good and valuable consideration the receipt and sufficiency of which are
hereby acknowledged, the Company and the Employee hereby agree as follows:

 

1.                                       Section 1(f) of
the Agreement is deleted and replaced in its entirety by the following:

 

(f)            Reserved

 

2.                                       Section 2 of the
Agreement is deleted and replaced in its entirety by the following:

 

The Term of this Agreement shall commence on the Commencement Date and
shall continue in effect through the first anniversary of the Commencement Date,
provided, however, that if an Incentive Payment is paid to the Employee
pursuant to Section 3 of this Agreement, as amended, the Term shall expire
three months beyond the month in which such Incentive Payment is paid to the
Employee.

 

3.                                       Section 3 is deleted
and replaced in its entirety by the following:

 

In order to induce the Employee to remain in the employ of the Company
and in consideration of the Employee’s covenants set forth in Section 4 hereof,
the Company agrees, under the conditions described herein: (A) that the Company
shall pay to the Employee a lump sum (an “Incentive Payment”) equal to his base
salary for six (6) months based on the Employee’s annual base salary as of the
date of the payment of the Incentive Payment (the “Base Salary”) upon the
earlier of (i) May 16, 2006 or (ii) 60 days after the closing of the Asset Sale
Agreement between the Company and Empire Payphones, Inc., dated as of November
1, 2005 and (B) to continue medical insurance for the Employee and his
dependents on the same terms as exist on the date of termination of the
Employee for six (6) months following the date of termination of the Employee
and after that six (6) month period Employee shall be entitled to elect
eighteen (18) months of continuation coverage under COBRA, if the Company has
not terminated its medical insurance coverage plan. If the Company terminates
its medical insurance coverage plan, it shall reimburse the Employee for the
cost of obtaining substantially similar coverage as existed for the Employee on
the day prior to such termination for the six months of coverage following the
date of termination. It is understood by both parties hereto that upon payment
of the Incentive Payment, the Base Salary of the Employee shall be reduced to
one half of the Base Salary, effective as of the date of the payment of the
Incentive Payment. Nothing contained herein shall limit or impinge any other
rights or remedies of the Company or the 

 

1

 

Employee under any other agreement or plan to which the Employee is a
party or of which the Employee is a beneficiary.

 

This Agreement shall not be construed as creating an express or implied
contract of employment and, except as otherwise agreed in writing between the
Employee and the Company, the Employee shall not have any right to be retained
in the employ of the Company.

 

4.                                       Section 8 of the
agreement shall be amended to delete notice to Brian Gannon, Esq. and to
provide notice to the following:

 

Shannon Lowry Nagle, Esq.

Stroock & Stroock & Lavan LLP

180 Maiden Lane

New York, NY 10038

 

5.                                       All other
provisions of the Agreement not specifically amended by this Amendment shall
remain in full force and effect. All capitalized but undefined terms used
herein shall have the meaning ascribed to them in the Agreement. This Agreement
may be executed simultaneously in two or more counterparts each of which shall
be deemed an original and all of which shall be deemed one and the same
agreement. A photocopy or facsimile reproduction of this Amendment and any
signatures shall be deemed as effective as the original.

 

IN WITNESS WHEREOF, the Company and the Employee have each executed and
delivered this Agreement as of the effective date shown above.

 

	
   

  	
  COMPANY

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ GUY A. LONGOBARDO

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
  Director, President and Chief Executive Officer

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Date:

  	
  March 29, 2006

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/  MICHAEL
  H. MCCLELLAN

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
  Director, Executive Vice President and Chief Financial Officer

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Date:

  	
  March 29, 2006

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  EMPLOYEE

  
	
   

  	
   

  
	
   

  	
  /s/ DAVID C. JONES

  	
   

  
	
   

  	
  David C. Jones

  
											

 

2Exhibit 10.29

 

 

 

AGREEMENT OF MERGER AND PLAN OF REORGANIZATION

 

 

dated February 24, 2006

 

Among

 

Granite Exchange Services, LLC

Lonnie Nielson

Rob Awalt

Justin Swift

 

Sellers

 

and

 

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

 

Purchaser

 

 

 

 

TABLE OF CONTENTS

 

	
  1.

  	
  DEFINITIONS 

  	
  5

  
	
   

  	
   

  	
   

  	
   

  
	
  2.

  	
  THE MERGER 

  	
  9

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  2.1

  	
  The Merger 

  	
  9

  
	
   

  	
  2.2

  	
  Effect of
  Merger 

  	
  9

  
	
   

  	
  2.3

  	
  Articles of
  Incorporation 

  	
  9

  
	
   

  	
  2.4

  	
  Merger
  Consideration 

  	
   

  
	
   

  	
  2.5

  	
  Exchange
  Procedures 

  	
  10

  
	
   

  	
  2.6

  	
  Board of
  Directors of Granite, Inc. following the Effective Date

  	
  10

  
	
   

  	
   

  	
   

  	
   

  
	
  3.

  	
  REPRESENTATIONS
  AND WARRANTIES OF GRANITE, LLC AND THE MEMBERS  

  	
   

  
	
   

  	
   

  	
   

  	
  10

  
	
   

  	
  3.1

  	
  Organization;
  Corporate Power: Etc.

  	
  10

  
	
   

  	
  3.2

  	
  Licenses and
  Permits 

  	
  10

  
	
   

  	
  3.3

  	
  Subsidiaries
  

  	
  11

  
	
   

  	
  3.4

  	
  Authorization
  of Agreement; No Conflicts 

  	
  11

  
	
   

  	
  3.5

  	
  Membership
  Structure 

  	
  11

  
	
   

  	
  3.6

  	
  Granite, LLC
  Filings  

  	
  12

  
	
   

  	
  3.7

  	
  Accuracy of
  Information Supplied  

  	
  12

  
	
   

  	
  3.8

  	
  Compliance
  with Applicable Laws 

  	
  13

  
	
   

  	
  3.9

  	
  Legal
  Proceedings  

  	
  13

  
	
   

  	
  3.10

  	
  Insurance  

  	
  14

  
	
   

  	
  3.11

  	
  Title to
  Assets other than Real Property  

  	
  14

  
	
   

  	
  3.12

  	
  Real
  Property  

  	
  14

  
	
   

  	
  3.13

  	
  Taxes  

  	
  15

  
	
   

  	
  3.14

  	
  Performance
  of Obligations 

  	
  16

  
	
   

  	
  3.15

  	
  Brokers and
  Finders 

  	
  16

  
	
   

  	
  3.16

  	
  Material
  Contracts

  	
  17

  
	
   

  	
  3.17

  	
  Absence of
  Material Adverse Effect 

  	
  17

  
	
   

  	
  3.18

  	
  Undisclosed
  Liabilities  

  	
  17

  
	
   

  	
  3.19

  	
  Employees; Employee
  Benefit Plans; ERISA 

  	
  17

  
	
   

  	
  3.20

  	
  Powers of
  Attorney 

  	
  20

  
	
   

  	
  3.21

  	
  Hazardous
  Materials  

  	
  20

  
	
   

  	
  3.22

  	
  Regulatory
  Approvals  

  	
  20

  
	
   

  	
  3.23

  	
  Books and
  Records  

  	
  20

  
	
   

  	
  3.24

  	
  Vote
  Requirement  

  	
  21

  
	
   

  	
  3.25

  	
  Effective
  Date of Representations, Warranties, Covenants and Agreements  

  	
  21

  
					

 

2

 

	
  4.

  	
  REPRESENTATIONS
  AND WARRANTIES OF TBH  

  	
  21

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  4.1

  	
  Organization;
  Corporate Power; Etc

  	
  21

  
	
   

  	
  4.2

  	
  Authorization
  of Agreement; No Conflicts 

  	
  21

  
	
   

  	
  4.3

  	
  Accuracy of
  Information Supplied  

  	
  22

  
	
   

  	
  4.4

  	
  Legal
  Proceedings  

  	
  22

  
	
   

  	
  4.5

  	
  Insurance 

  	
  23

  
	
   

  	
  4.6

  	
  Taxes  

  	
  23

  
	
   

  	
  4.7

  	
  Brokers and
  Finders 

  	
  23

  
	
   

  	
  4.8

  	
  Absence of
  Material Adverse Effect  

  	
  23

  
	
   

  	
  4.9

  	
  Undisclosed
  Liabilities 

  	
  24

  
	
   

  	
  4.10

  	
  Compliance
  with Applicable Laws  

  	
  24

  
	
   

  	
  4.11

  	
  Performance
  of Obligations  

  	
  24

  
	
   

  	
  4.12

  	
  Regulatory
  Approval 

  	
  24

  
	
   

  	
  4.13

  	
  Vote
  Requirement 

  	
  24

  
	
   

  	
  4.14

  	
  Effective
  Date of Representations, Warranties, Covenants and Agreements 

  	
  24

  
	
   

  	
   

  	
   

  	
   

  
	
  5.

  	
  ADDITIONAL
  AGREEMENTS 

  	
  24

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  5.1

  	
  Access to Information,
  Due Diligence, Etc.

  	
  24

  
	
   

  	
  5.2

  	
  Member
  Approval  

  	
  25

  
	
   

  	
  5.3

  	
  Taking of
  Necessary Action  

  	
  25

  
	
   

  	
  5.4

  	
  Applications  

  	
  25

  
	
   

  	
  5.5

  	
  Expenses 

  	
  26

  
	
   

  	
  5.6

  	
  Notification
  of Certain Events 

  	
   26

  
	
   

  	
  5.7

  	
  Closing
  Schedules  

  	
  26

  
	
   

  	
  5.8

  	
  No Other
  Representations  

  	
  27

  
	
   

  	
   

  	
   

  	
   

  
	
  6.

  	
  CONDUCT OF
  BUSINESS 

  	
  27

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.1

  	
  Affirmative
  Conduct of Granite, LLC  

  	
  27

  
	
   

  	
  6.2

  	
  Negative
  Covenants of Granite, LLC  

  	
  29

  
	
   

  	
  6.3

  	
  Affirmative
  Conduct of TBH  

  	
  31

  
	
   

  	
  6.4

  	
  Negative
  Covenants of TBH  

  	
  32

  
	
   

  	
   

  	
   

  	
   

  
	
  7.

  	
  CONDITIONS
  PRECEDENT TO CLOSING 

  	
  33

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  7.1

  	
  Conditions
  to the Parties’ Obligations  

  	
  33

  
	
   

  	
  7.2

  	
  Conditions
  to TBH’s Obligations 

  	
   34

  
	
   

  	
  7.3

  	
  Conditions
  to Granite, LLC’s Obligations  

  	
  35

  
	
   

  	
   

  	
   

  	
   

  
	
  8.

  	
  TERMINATION,
  AMENDMENTS AND WAIVERS  

  	
  36

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  8.1

  	
  Termination 

  	
  36

  
	
   

  	
  8.2

  	
  Effect of
  Termination; Survival  

  	
  37

  
	
   

  	
  8.3

  	
  Amendment 

  	
  37

  
	
   

  	
  8.4

  	
  Waiver 

  	
  37

  
					

 

3

 

	
   

  	
  8.5

  	
  Liquidated
  Damages; Cancellation Fee 

  	
  37

  
	
   

  	
   

  	
   

  	
   

  
	
  9.

  	
  GENERAL
  PROVISIONS  

  	
  37

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  9.1

  	
  No Survival
  of Representations and Warranties 

  	
  37

  
	
   

  	
  9.2

  	
  Notices  

  	
  37

  
	
   

  	
  9.3

  	
  Counterparts  

  	
  38

  
	
   

  	
  9.4

  	
  Entire
  Agreement/No Third Party Rights  

  	
  38

  
	
   

  	
  9.5

  	
  Nondisclosure
  of Agreement  

  	
  38

  
	
   

  	
  9.6

  	
  Assignment  

  	
  38

  
	
   

  	
  9.7

  	
  Governing
  Law  

  	
  39

  
	
   

  	
  9.8

  	
  Headings/Table
  of Contents 

  	
   39

  
	
   

  	
  9.9

  	
  Enforcement
  of Agreement 

  	
  39

  
	
   

  	
  9.10

  	
  Severability  

  	
  39

  
	
   

  	
  9.11

  	
  Arbitration 

  	
  39

  

 

4

 

AGREEMENT OF MERGER AND PLAN OF
REORGANIZATION

 

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

 

W I T N E S S E T H:

 

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

 

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

 

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

 

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

 

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

 

WHEREAS,
the parties desire to make certain representations, warranties and agreements
in connection with the Merger and also to prescribe certain conditions of the
Merger, and

 

WHEREAS,
the parties desire that the representations and warranties applicable to
Granite, LLC also, and to the extent practicable, apply to All-Star Exchange
Services, LLC.

 

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

 

ARTICLE 1. DEFINITIONS.

 

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

 

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

 

5

 

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

 

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

 

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

 

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

 

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

 

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

 

“Awalt” shall
mean Rob Awalt

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

6

 

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

 

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

 

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

 

“Effective
Date” shall mean the date this Agreement is signed.

 

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

 

“Equipment/Personal
Property” shall mean all furniture, fixtures, equipment, software and any and
all other equipment and personal property owned by Granite, LLC and to be
acquired by Granite, Inc. at Book Value.

 

“FDIC” shall
mean the Federal Deposit Insurance Corporation.

 

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

 

“GAAP” shall
mean Generally Accepted Accounting Principles.

 

“Governmental
Entity” shall mean any court, federal, state, local or foreign government or
any administrative agency or commission or other governmental authority or
instrumentality whatsoever.

 

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

 

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

 

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

 

“Granite, LLC
Schedules” shall mean all schedules required to be provided by Granite, LLC per
this Agreement.

 

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

 

“Last
Regulatory Approval” shall mean the final Requisite Regulatory Approval
required, from any Governmental Entity under applicable federal laws of the
United States and laws of any state having jurisdiction, to permit the parties
to consummate the Agreement.

 

7

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

“Nevada
Revised Statutes” shall mean the General Corporation Law of the State of
Nevada.

 

“Nielson”
shall mean Lonnie Nielson

 

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

 

“Regulatory
Authority” shall mean any Governmental Entity, the approval of which is legally
require for consummation of the Merger.

 

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

 

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

 

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

 

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

 

“Swift” shall
mean Justin Swift

 

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

 

8

 

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

 

“TBH” shall
mean The Bank Holdings, a Nevada Corporation.

 

“Voting
Securities” or “Voting Stock” shall mean the stock or other securities or any
other interest entitling the holders thereof to vote in the election of the
directors, trustees or Persons performing similar functions of the Person in
question, including, without limitation, nonvoting securities that are
convertible or exchangeable into voting securities, but shall not include any
stock or other interests entitling the holders thereof to vote only upon the
happening of a contingency (other than a conversion) or exchange thereof into
voting securities), whether or not such contingency has occurred.

 

ARTICLE 2. THE MERGER

 

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

 

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

 

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

 

9

 

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

 

Section 2.4  Merger
Consideration. Each membership interest in Granite, LLC shall be converted
at the Effective Time of the Merger into and become the right to receive shares
of common stock of Granite, Inc. (“Merger Consideration”) with Nielson
receiving 34% of the common stock of Granite, Inc., Awalt receiving 46% of the
common stock of Granite, Inc., and Swift receiving 20% of the common stock of
Granite, Inc.

 

Section 2.5  Exchange
Procedures. On or as soon as practicable after the Effective Date of the
Merger, TBH and/or Granite, Inc. will deliver to each of the Members their
applicable Merger Consideration.

 

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

 

ARTICLE 3. REPRESENTATIONS AND WARRANTIES OF
GRANITE, LLC AND THE MEMBERS

 

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

 

Section 3.1  Organization;
Corporate Power; Etc. Granite, LLC is a limited liability company duly
organized, validly existing and in good standing under the laws of the state of
California and has all requisite power and authority to own, lease and operate
its properties and assets and to carry on its business substantially as it is
being conducted on the date of this Agreement. Granite, LLC has all requisite
power and authority to enter into this Agreement and, subject to obtaining all
Requisite Regulatory Approvals and approvals of Nielson, Awalt, and Swift of
the outstanding membership interests, Granite, LLC will have the requisite
power and authority to perform its obligations hereunder with respect to the
consummation of the transactions contemplated hereby. Granite, LLC maintains
and operates offices only in the State of California. Neither the scope of the
business of Granite, LLC, nor the location of any of its properties, requires
that Granite, LLC be licensed or qualified to conduct business in any
jurisdiction other than the State of California, where the failure to be so
licensed and qualified would have a Material Adverse Effect on Granite, LLC
taken as a whole.

 

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

 

10

 

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

 

Section 3.4  Authorization of
Agreement; No Conflicts.

 

3.4.1  The execution and delivery
of this Agreement by Granite, LLC, and the consummation of the transactions
contemplated hereby and thereby, have been duly authorized by all necessary
action on the part of Granite, LLC, subject only to the approval of this
Agreement by Granite, LLC members. This Agreement, upon the receipt of all
Requisite Regulatory Approvals and the due execution and filing of such
Agreement in accordance with the applicable provisions of the Nevada Revised
Statutes and the California Corporations Code, has been duly executed and
delivered by Granite, LLC and will constitute a legal, valid and binding
obligation of Granite, LLC, enforceable in accordance with its terms, except as
the enforceability thereof may be limited by bankruptcy, insolvency, moratorium
or other similar laws affecting the rights of creditors generally and by
general equitable principles.

 

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

 

3.4.3  No consent or approval of,
notice to or filing with any Governmental Entity having jurisdiction over any
aspect of the business or assets of Granite, LLC, and except as set forth in
Schedule 3.4, no consent or approval of or notice to any other person or entity
is required in connection with the execution and delivery by Granite, LLC of
this Agreement or the consummation by Granite, LLC of the transactions
contemplated hereunder, except for the necessity of obtaining Requisite
Regulatory Approvals and approval of the members of Granite, LLC.

 

Section 3.5  Membership
Structure. The membership structure of Granite, LLC at the Effective date
is 34% owned by Lonnie Nielson, 46% owned by Rob Awalt, and 20% owned by Justin
Swift. All Membership Interests are fully paid and non-assessable, have not
been assigned, pledged or hypothecated, and are free of all liens, claims and
encumbrances.

 

11

 

Section 3.6  Granite, LLC
Filings.

 

3.6.1  Since inception, Granite,
LLC has filed all reports, registrations and statements, together with any
amendments required to be made with respect thereto, that were required to be
filed with any applicable federal, state or local governmental or regulatory
authority. All such reports, registrations and filings, and all reports sent to
Granite, LLC’s members during the three-year period ended December 31, 2005
(whether or not filed with any Regulatory Authority), are collectively referred
to as the “Granite, LLC Filings”. Copies of the Granite, LLC Filings have been
made available to TBH. As of their respective filing or mailing dates, each of
the past Granite, LLC Filings (a) was true and complete in all material
respects (or was amended so as to be so promptly following discovery of any
discrepancy); and (b) complied in all material respects with all of the
statutes, rules and regulations enforced or promulgated by the governmental or
regulatory authority with which it was filed (or was amended so as to be so
promptly following discovery of any such noncompliance) and none contained any
untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading. The
Granite, LLC Financial Statements, together with the financial statements
contained in the Granite, LLC Filings have been prepared on the cash basis of
accounting, applied on a consistent basis during the periods involved (except
as may be indicated in the notes thereto) and fairly present (subject, in the
case of the unaudited statements, to recurring adjustments normal in nature and
amount) the financial position of Granite, LLC as of the dates thereof and the
results of its operations, cash flows and changes in shareholders’ equity for
the periods then ended.

 

Section 3.7  Accuracy of
Information Supplied.

 

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

 

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

 

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

 

12

 

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

 

Section 3.8  Compliance with
Applicable Laws. Except as disclosed on Schedule 3.8, to the best of
Granite, LLC’s Knowledge, the respective businesses of Granite, LLC is not
being conducted in violation of any law, ordinance or regulation, except for
violations which individually or in the aggregate would not have a Material
Adverse Effect on Granite, LLC, Granite, Inc. or TBH at or following the
Effective Time. Except as set forth in Schedule 3.8, no investigation or review
by any Governmental Entity with respect to Granite, LLC is pending or, to the
Knowledge of Granite, LLC threatened, nor has any Governmental Entity indicated
to Granite, LLC an intention to conduct the same.

 

Section 3.9  Legal Proceedings.

 

3.9.1  Except as set forth in
Schedule 3.9 there is no private or governmental suit, claim, action,
arbitration or proceeding pending, nor any private or governmental suit, claim,
action, arbitration or proceeding or to Granite, LLC’s knowledge threatened, nor
does Granite, LLC know of any facts or circumstances which would form a basis
for any such suit, claim, action, arbitration or proceeding against Granite,
LLC or against any of Granite, LLC’s members, contingent workers or employees
relating to the performance of their duties in such capacities, or against or
affecting any properties of Granite, LLC which individually, or in the
aggregate, could have a material Adverse Effect on this Agreement. As used
herein and throughout this Agreement, “Contingent Worker” means any individual
who performs services for Granite, LLC and (i) whose services are performed
under an agreement, contract, or other arrangement pursuant to which the
individual is characterized or classified by Granite, LLC as an independent contractor
(or as an employee of an independent contractor; (ii) the payments for whose
services have not been treated by Granite, LLC as subject to wage withholding
under the Code and Applicable Law; (iii) whom Granite, LLC has not classified
as its common law employee; (iv) whom Granite, LLC initially classified as a
leased employee (as defined in Section 414(n) of the Code); or (v) whom
Granite, LLC has leased from an entity that is the individual’s employer of
record. An individual shall, for example, be deemed to be a contingent worker
if he or she was engaged from a temporary help service, an employee leasing
agency, a technical services firm, or an outsourcing, managed services, or
master vendor firm. Except as set forth in Schedule 3.9, there are no judgments,
decrees, stipulations or orders against Granite, LLC enjoining Granite, LLC or
any of its respective members, contingent workers or employees in respect of,
or the effect of which is to prohibit, any business practice or the acquisition
of any property or the conduct of business in any area. Schedule 3.9 contains
(i) a true, correct and complete list, including identification of the
applicable insurance policy covering such litigation, if any, the applicable
deductible and the amount of any reserve therefore, of all pending litigation
in which Granite, LLC or any of Granite, LLC’s members, contingent workers or
employees relating to the performance of their duties in such capacities, is a
named party, and except as set forth in Schedule 3.9 all of the litigation
listed on such schedule is adequately covered by insurance in force, except for
applicable deductibles, or has been adequately reserved for in accordance with
Granite, LLC prior business practice; and (ii) summary reports of counsel
representing Granite, LLC on all pending litigation to which Granite, LLC or
any Granite, LLC’s respective members, contingent workers or employees relating
to the performance of their duties in such capacities, is a party and which
names Granite, LLC or any of such members, contingent workers or employees as a
defendant or cross-defendant.

 

13

 

3.9.2  Granite, LLC is not party
to, or otherwise subject to, any agreement or memorandum of understanding with
or order of any federal, state or foreign governmental or regulatory authority
charged with the supervision or regulation of bank holding companies or
national banks or engaged in the insurance of bank deposits, that restricts the
conduct of their respective businesses, or in any manner relates to capital
adequacy, credit or investment policies or management.

 

Section 3.10  Insurance. Except
as set forth in Schedule 3.10 Granite, LLC has and at all times since January
1, 1998 had in full force and effect policies of insurance and bonds with
respect to its assets and business and against casualties and contingencies
which in the judgment of Granite, LLC are adequate and appropriate to cover its
assets and business. Set forth in Schedule 3.10 is a schedule of all current policies
of insurance carried and owned by Granite, LLC, showing the name of the
insurance, a summary of the coverage, the amounts, the deductible features, the
annual premiums and the expiration dates. If any such policy is changed,
terminated or modified following the date of this Agreement, such termination,
change or modification shall be promptly disclosed to TBH in writing. Granite,
LLC is not in default under any such policy of insurance such that it could be
canceled, and all material claims thereunder have been filed in timely fashion.
Granite, LLC has filed claims with or given notice of claim to their insurers
with respect to all material matters and occurrences for which either believes
it has coverage.

 

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

 

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

 

14

 

under all material leases to which it is the lessee and all of such
leases are valid and in full force and effect, except as the enforceability
thereof may be limited by bankruptcy, insolvency, moratorium or other similar
laws affecting the rights of creditors generally and by general equitable
principles. The buildings and improvements on real properties owned or leased
by Granite, LLC are in good condition and repair, and do not require more than
normal and routine maintenance, to keep them in such condition, normal wear and
tear excepted.

 

Section 3.13  Taxes.

 

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

 

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

 

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

 

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

 

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

 

15

 

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

 

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

 

3.13.8  Tax Elections. No
new elections with respect to Taxes or any changes in current elections with
respect to Taxes affecting the assets owned by Granite, LLC shall be made after
the date of this Agreement without the prior written consent of TBH, which
shall not be unreasonably withheld. TBH shall be deemed to have consented in
writing to any election Granite, LLC shall desire to make if: (i) the electing
Person shall have notified the Chief Executive Officer of TBH in writing of its
desire to make such election, including in such notice a reasonably complete
summary of the election it desires to make and the reasons it desires to make
such election at least 20 Business Days prior to the due date (including
extensions thereof) for filing such election; and (ii) TBH shall not have
responded in writing to such notice by the fifth Business Day prior to the due
date (including extensions thereof) for filing such election.

 

3.13.9  IRC Section 382
Applicability. Granite, LLC, including any party joining in any
consolidated return to which Granite, LLC is a member, underwent an “ownership
change” as defined in IRC Section 382 within the “testing period” (as defined
in IRC Section 382) ending immediately before the Effective Time, and not
taking into account any transactions contemplated by this Agreement.

 

3.13.10  Disclosure
Information. Within 45 days of the date of this Agreement, Granite, LLC
will deliver to TBH a schedule setting forth the following information with
respect to Granite, LLC and as of the most recent practicable date (as well as
on an estimated pro forma basis as of the Closing giving effect to the
consummation of the transactions contemplated hereby): (a) Granite, LLC’s book
and tax basis in its assets with a listing of its liabilities and contingent
liabilities for which Granite, LLC or its Members have Knowledge; (b) the
amount of any net operating loss, net capital loss, unused investment or other
credit, unused foreign tax, or excess charitable contribution allocable to
Granite, LLC; and (c) the amount of any deferred gain or loss allocable to
Granite, LLC and arising out of any deferred intercompany transactions.

 

Section 3.14  Performance of
Obligations. Granite, LLC has performed all material obligations required
to be performed by it to date and is not in default under or in breach of any
term or provision of any covenant, contract, lease, indenture or any other
agreement, written or oral, to which any is a party, is subject or is otherwise
bound, and no event has occurred that, with the giving of notice or the passage
of time or both, would constitute such a default or breach, where such default
or breach or failure to perform would have a Material Adverse Effect on
Granite, LLC. To Granite, LLC’s Knowledge, no party with whom Granite, LLC has
an agreement that is of material importance to the businesses of Granite, LLC
is in default thereunder.

 

Section 3.15  Brokers and
Finders. Except as set forth on Schedule 3.15, Granite, LLC is not a party
to or obligated under any agreement with any broker or finder relating to the
transactions contemplated hereby, and neither the execution of this Agreement
nor the 

 

16

 

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

 

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

 

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

 

Section 3.18  Undisclosed
Liabilities. Except as disclosed on Schedule 3.18, Granite, LLC does not
have any liabilities or obligations, either accrued, contingent or otherwise,
that are material to Granite, LLC and that have not been: (a) reflected or
disclosed in the Granite, LLC Financial Statements; or (b) incurred subsequent
to December 31, 2005 in the ordinary course of business. Granite, LLC has no
Knowledge of any basis for the assertion against Granite, LLC, of any
liability, obligation or claim (including without limitation that of any
Governmental Entity) that will have or cause, or could reasonably be expected
to have or cause, a Material Adverse Effect on Granite, LLC that is not fully
and fairly reflected and disclosed in the Granite, LLC Financial Statements or
on Schedule 3.18.

 

Section 3.19  Employees;
Employee Benefit Plans; ERISA.

 

3.19.1  All material obligations
of Granite, LLC for payment to trusts or other funds or to any Governmental
Entity or to any individual, director, officer, employee or agent (or his or
her heirs, legatees or legal representatives) with respect to unemployment
compensation benefits, profit-sharing, pension or retirement benefits or social
security benefits, whether arising by operation of law, by contract or by past
custom, have been properly accrued for the periods covered thereby on the
Granite, LLC Financial Statements and paid when due. All material obligations
of Granite, LLC, whether arising by operation of law, by contract or by past
custom for vacation or holiday pay, bonuses and other forms of compensation
which are payable to their respective directors, officers, employees or agents
have been properly accrued on the Granite, LLC Financial Statements for the
periods covered thereby and paid when due. Except as set forth on Schedule
3.19, there are no unfair labor practice complaints, strikes, slowdowns,
stoppages or other controversies pending or, to the Knowledge of Granite, LLC,
attempts to unionize or controversies threatened or relating to, any of
Granite, LLC’s employees that are likely to have a Material Adverse Effect on
Granite, LLC. Granite, LLC is not a party to any collective bargaining
agreement with respect to any of their employees and, except as set forth on
Schedule 3.19, Granite, LLC is not a party to a written employment contract
with any employees and there are no understandings with respect to the
employment of any officer or employee of Granite, LLC which are not terminable
by Granite, LLC without liability. Except as disclosed in the Granite, LLC 

 

17

 

Financial Statements for the periods covered thereby, all material sums
due for director, officer, contingent worker, and employee compensation have
been paid and all employer contributions for employee benefits, including
deferred compensation obligations, and all material benefit obligations under
any Employee Plan or any Benefit Arrangement have been duly and adequately paid
or provided for in accordance with plan documents. Except as set forth on
Schedule 3.19, no director, officer, contingent worker or employee of Granite,
LLC is entitled to receive any payment of any amount under any existing
agreement, severance plan or other benefit plan as a result of the consummation
of any transaction contemplated by this Agreement or the Merger Agreements. Granite,
LLC has materially complied with all applicable federal and state statutes and
regulations relating to employment, including, but not limited to, all civil
rights laws, Presidential Executive Order 1124, the Fair Labor Standards Act of
1938, as amended, and the Americans with Disabilities Act.

 

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

 

(a)           All Granite, LLC
Employee Plans and Granite, LLC Benefit Arrangements, including all plans or
practices providing for compensation, benefits or accruals for active or
retired directors, officers, employees or contingent workers, including, but
not limited to, all benefit plans, all pension, profit-sharing, retirement,
bonus, stock option, incentive, deferred compensation, severance, long-term
disability, medical, dental, health, hospitalization, life insurance or other
insurance plans or related benefits.

 

(b)           All current
employees and contingent workers of Granite, LLC together with each person’s
tenure with Granite, LLC, title or job classification, and the current annual
rate of compensation anticipated to be paid to each such employee or contingent
worker; and

 

(c)           All Granite, LLC
Employee Plans and Granite, LLC Benefit Arrangements, including all plans or
practices providing for compensation, benefits or accruals for active or
retired directors, officers, employees or contingent workers, including but not
limited to, all benefit plans, all pension, profit-sharing, retirement, bonus,
stock option, incentive, deferred compensation, severance, long-term
disability, medical, dental, health, hospitalization, life insurance or other
insurance plans or related benefits.

 

(d)           Except as disclosed
on Schedule 3.19 Granite, LLC does not maintain, administer or otherwise
contribute to any employee benefit plan or arrangement (including without
limitation any “employee benefit plan,” as defined in Section 3(3) of the
Employee Retirement Income Security Act of 1974 (‘ERISA”)) which covers any
director, officer, employee or contingent worker, whether active or retired, of
Granite, LLC (any such plan being herein referred to as a “Granite, LLC
Employee Plan”. True and complete copies of each such Granite, LLC employee
Plan, including amendments thereto, have been previously delivered to TBH,
together with (i) all agreements regarding plan assets with respect to such
Granite, LLC Employee Plans, (ii) a true and complete copy of the annual
reports for the most recent three years (Form 5500 Series including, if
applicable, Schedules A and B thereto) prepared in connection with any such
Granite, LLC Employee Plan, (iii) a true and complete copy of the actuarial
valuation reports for the most recent three years, if any, prepared in
connection with any such Granite, LLC Employee Plan, (iv) a copy of the most
recent summary plan description of each such Granite, LLC Employee Plan,
together with any modifications thereto, and (v) a copy of the most recent
favorable determination letter (if applicable) from the Internal Revenue
Service for each Granite, LLC Employee Plan. Granite, LLC Employee Plans are
not a “multiemployer plan” as defined in 

 

18

 

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

 

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

 

(f)            All Granite, LLC
Employee Plans and Granite, LLC Benefit Arrangements are operated in compliance
with the requirements of prescribed Applicable Law, including but not limited
to ERISA and the Code and any published authorities and regulations thereunder,
applicable thereto, and plan documents relating to any such plans or
arrangements, comply with or will be amended to comply with Applicable Law. No “prohibited
transaction” (as defined in Section 406 of ERISA and Section 4975 of the Code)
with respect to any Granite, LLC Employee Plan, or Granite, LLC Benefit
Arrangement have occurred; each “plan official” within the meaning of Section
412 of ERISA of each Granite, LLC Employee Plan is bonded to the extent
required by such Section 412; with respect to each Granite, LLC Employee Plan,
to Granite, LLC’s Knowledge, no employee of Granite, LLC, nor any fiduciary of
any Granite, LLC Employee Plan, Granite, LLC Benefit Arrangement, has engaged
in any breach of fiduciary duty as defined in part 4 of Subtitle B of title I
of ERISA which could subject Granite, LLC to liability if Granite, LLC is
obligated to indemnify such person against liability. Except as disclosed in
Schedule 3.19, Granite, LLC has not failed to make any material contribution or
pay any amount due and owning as required by Applicable Law or the terms of any
Granite, LLC Employee Plan or Granite, LLC Benefit Arrangement.

 

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

 

19

 

(h)           Each Granite, LLC
Benefit Arrangement which is a group health plan (within the meaning of such
term under Section 4980B(g)(2) of the Code) materially complies and has
materially complied with the requirements of Section 601 through 608 of ERISA
or Section 4980B of the Code governing continuation coverage requirements for employee-provided
group health plans. Each Granite, LLC Benefit Arrangement does not provide
coverage to retired or former Granite, LLC employees, except as required by the
aforementioned continuation coverage requirements.

 

(i)            Except as disclosed
in Schedule 3.19, Granite, LLC has not maintained any Granite, LLC Employee
Plan or Granite, LLC Benefit Arrangement pursuant to which any benefit or other
payment will be required to be made by Granite, LLC or pursuant to which any
other benefit will accrue or vest in any member, contingent worker or employee
of Granite, LLC as a result of the consummation of the transactions
contemplated by this Agreement.

 

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

 

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

 

Section 3.21  Hazardous
Materials. Except as set forth on Schedule 3.21 and except for ordinary and
necessary quantities of cleaning, pest control and office supplies, and other
small quantities of Hazardous Substances that are used in the ordinary course
of the business of Granite, LLC and in compliance with applicable Environmental
Laws.

 

Section 3.22  Regulatory
Approvals. To the best Knowledge of Granite, LLC there are no facts, events
or conditions applicable to Granite, LLC which will or reasonably could affect
the likelihood of securing the regulators approvals or consents of any
Governmental Entity to the Merger and transactions completed by this Agreement.

 

Section 3.23  Books and
Records.

 

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

 

20

 

Section
3.24  Vote Requirement. The
affirmative vote of 100% of the membership interests of Granite, LLC entitled
to vote on the Merger is the only vote necessary to approve the Agreement, and
the transactions contemplated herein.

 

Section 3.25  Effective Date
of Representations, Warranties, Covenants and Agreements. Each
representation, warranty, covenant and agreement of Granite, LLC set forth in
this Agreement shall be deemed to be made on and as of the date hereof and as
of the Closing Date.

 

ARTICLE 4. REPRESENTATIONS AND WARRANTIES OF
TBH

 

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

 

Section 4.1  Organization;
Corporate Power; Etc. TBH and Granite, Inc. are Nevada corporations duly
organized, validly existing and in good standing under the laws of the State of
Nevada and have all requisite corporate power and authority to own, lease and
operate its respective properties and assets and to carry on its respective
business substantially as it is being conducted on the date of this Agreement. TBH
and Granite, Inc. have all requisite corporate power and authority to enter
into this Agreement and, subject to obtaining all Requisite Regulatory
Approvals, TBH will have the requisite corporate power and authority to perform
its respective obligations hereunder with respect to the consummation of the
transactions contemplated hereby. TBH is the sole shareholder of Granite, Inc..
Neither the scope of business of TBH, nor the location of any of its respective
properties, requires that TBH be licensed to conduct business in any
jurisdiction other than those jurisdictions in which they are licensed or
qualified to do business as a foreign corporation, where the failure to be so
licensed or qualified would, individually or in the aggregate, have a Material
Adverse Effect on TBH taken as a whole.

 

Section 4.2  Authorization of
Agreement; No Conflicts.

 

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

 

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

 

21

 

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

 

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

 

Section 4.3  Accuracy of
Information Supplied.

 

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

 

4.3.2  None of the information
supplied or to be supplied by TBH or relating to TBH or Granite, Inc. which is
included or incorporated by reference the applications and forms to be filed
with securities or “blue sky” authorities, self regulatory authorities, or any
Governmental Entity in connection with the Merger, or any Requisite Regulatory
Approvals in connection with the Merger will, at the time filed or at the time
they become effective, contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading.

 

Section 4.4  Legal Proceedings.

 

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

 

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

 

22

 

governmental or regulatory authority charged with the supervision or
regulation of bank holding companies or banks engaged in the insurance of bank
deposits, that restricts the conduct of their respective businesses, or in any
manner relates to capital adequacy, credit or investment policies or
management.

 

Section 4.5  Insurance. Except
as set forth in Schedule 4.5 TBH and Granite, Inc. has and at all times since
inception had in full force and effect policies of insurance and bonds
(including without limitation bankers’ blanket bond, fidelity coverage,
director and officer liability, fire, third party liability, use and occupancy)
with respect to its assets and business and against casualties and
contingencies which in the judgment of TBH and Granite, Inc. are adequate and
appropriate to cover their assets and business. Set forth in Schedule 4.5 is a
schedule of all current policies of insurance and bonds (other than title or
credit insurance) carried and owned by TBH and Granite, Inc., showing the name
of the insurance or bonding company, a summary of the coverage, the amounts,
the deductible features, the annual premiums and the expiration dates. If any
such policy or bond is changed, terminated or modified following the date of
this Agreement, such termination, change or modification shall be promptly
disclosed to Granite, LLC in writing. TBH and Granite, Inc. are not in default
under any such policy of insurance or bond such that it could be canceled, and
all material claims thereunder have been filed in timely fashion. TBH and
Granite, Inc. has filed claims with or given notice of claim to their insurers
or bonding companies with respect to all material matters and occurrences for
which either believes it has coverage.

 

Section 4.6  Taxes.

 

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

 

4.6.2  Tax Elections. No
new elections with respect to Taxes or any changes in current elections with
respect to Taxes affecting the assets owned by Granite, Inc. shall be made
after the date of this Agreement without the prior written consent of Granite,
LLC and its members, which shall not be unreasonably withheld.

 

Section 4.7  Brokers and
Finders. Except as set forth on Schedule 4.7, TBH and Granite, Inc. is not
a party to or obligated under any agreement with any broker or finder relating
to the transactions contemplated hereby, and neither the execution of this
Agreement, nor the consummation of the transactions provided for herein, will
result in any liability to any broker or finder. TBH and Granite, Inc. agrees
to indemnify and hold harmless Granite, LLC, and to defend with counsel
selected by Granite, LLC and reasonably satisfactory to TBH and Granite, Inc.,
from and against any liability, cost or expense, including attorneys’ fees,
incurred in connection with a breach of this Section 4.7.

 

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

 

23

 

Section 4.9  Undisclosed
Liabilities. Except as disclosed on Schedule 4.9, TBH and Granite, Inc. do
not have any liabilities or obligations, either accrued, contingent or
otherwise, that are material to TBH and Granite, Inc. and that have not been:
(a) reflected or disclosed to Granite, LLC; or (b) incurred subsequent to December
31, 2005 in the ordinary course of business. TBH and Granite, Inc. have no
Knowledge of any basis for the assertion against TBH and Granite, Inc., of any
liability, obligation or claim (including without limitation that of any
Governmental Entity) that will have or cause, or could reasonably be expected
to have or cause, a Material Adverse Effect on TBH and Granite, Inc. that is
not fully and fairly reflected and disclosed to Granite, LLC or on

Schedule 4.9.

 

Section 4.10  Compliance with
Applicable Laws. Except as disclosed on Schedule 4.10, to the best of TBH’s
Knowledge, the respective businesses of TBH and its Subsidiaries are not being
conducted in violation of any law, ordinance or regulation, except for
violations which individually or in the aggregate would not have a Material
Adverse Effect on TBH and its Subsidiaries, taken as a whole. No investigation
or review by any Governmental Entity with respect to TBH is pending or, to the
Knowledge of TBH threatened, nor has any Governmental Entity indicated to TBH
an intention to conduct the same, other than those the outcome of which, as far
as can be reasonably foreseen, will not have a Material Adverse Effect on TBH
and its Subsidiaries, taken as a whole.

 

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

 

Section 4.12  Regulatory
Approval. Neither TBH nor Granite, Inc. is subject to any regulatory
enforcement agreement. To the best knowledge of TBH there is no fact, event or
condition applicable to TBH which will, or reasonably could be expected to, adversely
affect the likelihood of securing the required approval or consent of any
Governmental Entity to the Mergers and transaction completed by this Agreement.

 

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

 

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

 

ARTICLE 5. ADDITIONAL AGREEMENTS

 

Section 5.1  Access to
Information, Due Diligence, Etc.

 

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

 

24

 

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

 

Section 5.2  Member Approval.

 

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

 

Section 5.3  Taking of
Necessary Action.

 

5.3.1  Subject to the terms and
conditions of this Agreement, each of the parties hereto agrees, subject to
applicable laws and the fiduciary duties of Granite, LLC’s members, or TBH’s
and Granite, Inc.’s Boards of Directors, as advised in writing by their
respective counsel, to use all reasonable efforts promptly to take or cause to
be taken all action and promptly to do or cause to be done all things
necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated by this Agreement,
including, without limitation, the delivery of any certificate or other
document reasonably requested by counsel to a party to this Agreement. Without
limiting the foregoing, TBH, Granite, Inc. and Granite, LLC will use their
reasonable efforts to obtain all consents of third parties and Government
Entities necessary or, in the reasonable opinion of TBH, Granite, Inc. or
Granite, LLC advisable for the consummation of the transactions contemplated by
this Agreement. Without limiting the foregoing, TBH shall cause Granite, Inc.
to take all actions necessary to execute and file this Agreement and to effect
all transactions contemplated by this Agreement and Granite, LLC shall take all
actions necessary to effect all transactions contemplated by this Agreement. In
case at any time after the Effective Time, any further action is necessary or
desirable to carry out the purposes of this Agreement, or to vest the Surviving
Corporation with full title to all properties, assets, rights, approvals,
immunities and franchises of Granite, LLC, the proper officers or directors of
TBH or Members of Granite, LLC, as the case may be, shall take all such
necessary action.

 

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

 

Section 5.4  Applications.

 

5.4.1  TBH and Granite, Inc. will
prepare and file as promptly as practicable the statements, applications,
correspondence or forms to be filed with appropriate State securities law
regulatory authorities, and the statements, correspondence or applications to
be filed to obtain the Requisite Regulatory Approvals to consummate the
transactions contemplated by this Agreement.

 

5.4.2  Each party shall provide
to the other at the request of the other party: (i) immediately prior to the
filing thereof, copies of all material statements, applications, correspondence
or forms to be filed with state securities law regulatory authorities, and
other 

 

25

 

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

 

Section 5.5  Expenses.

 

5.5.1 TBH and Granite, LLC will share equally the costs of drafting and
reviewing the Merger Agreement, and the Stock Purchase Agreement. These
agreements will be drafted by Randy C. Renfro and will be reviewed by TBH’s
attorney.

 

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

 

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

 

Section 5.6  Notification of Certain
Events.

 

5.6.1  Granite, LLC shall provide
to TBH, as soon as practicable, written notice (sent via facsimile and
overnight mail or courier) of the occurrence or failure to occur of any of the
events, circumstances or conditions that are the subject of Sections 6.1 and
6.2, which notice shall provide reasonable detail as to the subject matter
thereof.

 

5.6.2  TBH shall provide to
Granite, LLC, as soon as practicable, written notice (sent via facsimile and
overnight mail or courier) of the occurrence or failure to occur of any of the
events, circumstances or conditions that are the subject of Section 6.3 and
6.4, which notice shall provide reasonable detail as to the subject matter
thereof.

 

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

 

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

 

26

 

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

 

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

 

ARTICLE 6. CONDUCT OF BUSINESS

 

Section 6.1  Affirmative
Conduct of Granite, LLC. During the period from the date of execution of
this Agreement through the Effective Time, Granite, LLC shall carry on their
business, and in the ordinary course in substantially the manner in which
heretofore conducted, and use all commercially reasonable efforts to preserve
intact its business organization, and to maintain and preserve its relationship
and goodwill with customers, employees, contingent workers, and others having
business relationships with it, keep available the services of its officers and
employees, (other than terminations in the ordinary course of business) and
preserve its relationships with customers, suppliers and others having business
dealings with it; and, to these ends, shall fulfill each of the following:

 

6.1.1 Use its commercially reasonable efforts, or cooperate with
others, to expeditiously bring about the satisfaction of the conditions
specified in Article 7 hereof;

 

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

 

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

 

27

 

6.1.4  Use its commercially
reasonable efforts to maintain insurance or bonding coverage on all material
properties for which it is responsible and on its business operations, and
carry not less than the same coverage for fidelity, public liability, personal
injury, property damage and other risks equal to that which is in effect as of
the date of this Agreement; and notify TBH in writing promptly of any facts or
circumstances which could affect its ability to maintain such insurance or
bonding coverage;

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

28

 

be stated therein or necessary to make the statements therein, in light
of the circumstances under which they will be made, not misleading. Any
financial statement contained in any of such Granite, LLC Filings that is
intended to present the financial position of Granite, LLC during the periods
involved to which it relates will fairly present in all material respects the
financial position of Granite, LLC and will be prepared on a cash basis of
accounting;

 

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

 

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

 

Section 6.2  Negative
Covenants of Granite, LLC. During the period from the date of execution of
this Agreement through the Effective Time, Granite, LLC agrees that without TBH’s
prior written consent, it shall not:

 

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

 

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

 

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

 

6.2.4  Authorize or knowingly
permit any of its representatives, directly or indirectly, to solicit or
encourage any Acquisition Proposal (as hereinafter defined) or participate in
any discussions or negotiations with, or provide any nonpublic information to,
any Person or group of persons (other than TBH, and their representatives)
concerning any such solicited Acquisition Proposal. Granite, LLC shall notify
TBH immediately if any inquiry regarding an Acquisition Proposal is received by
Granite, LLC, including the terms thereof. For purposes of this Section 6.2.5, “Acquisition
Proposal” shall mean any (a) proposal pursuant to which any Person other than
TBH would acquire or participate in a merger or other business combination or
reorganization involving Granite, LLC; (b) proposal by which any Person or
group, other than TBH, would acquire the right to vote five percent (5%) or
more of the membership interests of Granite, LLC entitled to vote for the
election of directors; (c) acquisition of the assets of Granite, LLC other than
in the ordinary course of business; or (d) acquisition in excess of five
percent (5%) of the outstanding membership interests of Granite, LLC, other
than as contemplated by this Agreement. Notwithstanding the foregoing, nothing
contained in this Agreement shall prevent Granite, LLC’s Members from (i)
furnishing nonpublic information to, or entering into discussions or
negotiations with, any person or entity in connection with an unsolicited bona
fide written Acquisition Proposal by such person or entity, or recommending an
unsolicited bona fide written Acquisition Proposal to 

 

29

 

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

 

6.2.5  Acquire or agree to
acquire by merging, consolidating with, or by purchasing all or a substantial
portion of the assets of, or in any other manner, any business or any Person or
otherwise acquire or agree to acquire any assets which are material to Granite,
LLC, other than in the ordinary course of business consistent with prior
practice;

 

6.2.6  Sell, lease or otherwise
dispose of any of its assets which are material, individually or in the
aggregate, to Granite, LLC, except in the ordinary course of business
consistent with prior practice;

 

6.2.7  Incur any indebtedness for
borrowed money or guarantee any such indebtedness or issue or sell any debt
securities of Granite, LLC or guarantee any debt securities of others other
than in the ordinary course of business consistent with prior practice;

 

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

 

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

 

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

 

30

 

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

 

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

 

6.2.13  Renew, extend or amend
any existing employment contract or agreement, enter into any new employment
contract or agreement or make any bonus or any special or extraordinary
payments to any Person;

 

6.2.14  Except in the ordinary
course of business consistent with prior practice and in compliance with
applicable laws and regulations, make any material investments, by purchase of
stock or securities, contributions of capital, property transfers, purchases of
any property or assets or otherwise, in any other individual, corporation or
other entity;

 

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

 

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

 

6.2.17  Change its fiscal year or
methods of accounting in effect at December 31, 2005, except as required by
changes in accounting principles as concurred to by Granite, LLC’s independent
public accountants;

 

Section 6.3  Affirmative
Conduct of TBH. During the period from the date of execution of this Agreement
through the Effective Time, TBH agrees (except to the extent Granite, LLC shall
otherwise consent in writing) to do the following:

 

6.3.1 Use its commercially reasonable efforts, or cooperate with
others, to expeditiously bring about the satisfaction of the conditions
specified in Article 7 hereof;

 

6.3.2 Advise Granite, LLC promptly in writing of any change that would
have a Material Adverse Effect on its capital structure, consolidated financial
condition, consolidated assets, consolidated results of operations, business or
prospects or of any matter which would make the representations and warranties
set forth in Article 4 hereof not true and correct in any material respect as
of the Effective Time;

 

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

 

31

 

6.3.4  Use its commercially
reasonable efforts to maintain insurance or bonding coverage on all material
properties for which it is responsible and on its business operations, and
carry not less than the same coverage for fidelity, public liability, personal
injury, property damage and other risks equal to that which is in effect as of
the date of this Agreement; and notify Granite, LLC in writing promptly of any facts
or circumstances which could affect its ability to maintain such insurance or
bonding coverage;

 

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

 

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

 

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

 

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

 

6.3.9 Maintain reserves for contingent liabilities consistent with past
practices;

 

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

 

Section 6.4  Negative
Covenants of TBH. During the period from the date of execution of this
Agreement through the Effective Time, TBH agrees that without Granite, LLC’s
prior written consent, it shall not:

 

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

 

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

 

32

 

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

 

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

 

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

 

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

 

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

 

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

 

6.4.9  Except in the ordinary course
of business consistent with prior practice and in compliance with applicable
laws and regulations, make any material investments, by purchase of stock or
securities, contributions of capital, property transfers, purchases of any
property or assets or otherwise, in any other individual, corporation or other
entity on behalf of Granite, Inc.

 

ARTICLE 7. CONDITIONS PRECEDENT TO CLOSING

 

Section 7.1  Conditions to the
Parties’ Obligations. The obligations of all the parties to this Agreement
to effect the Merger shall be subject to the fulfillment of the following
conditions:

 

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

 

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

 

33

 

permits, approvals and consents and the lapse of all such waiting periods
being referred to as the “Requisite Regulatory Approvals”), without the
imposition of any condition which in the reasonable judgment of any party to be
affected by such condition is materially burdensome upon such party or its
respective Affiliates or the Surviving Corporation;

 

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

 

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

 

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

 

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

 

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

 

7.2.2  There shall have been obtained,
without the imposition of any material burden or restriction on any of the
parties hereto not in existence on the date hereof, each consent to the
consummation of the Mergers required to be obtained from any Person under any
agreement, contract or license to which Granite, LLC is a party or by or under
which it is bound or licensed, the withholding of which might have a Material
Adverse Effect on Granite, LLC, the Surviving Corporation or TBH at or
following the Effective Time, or on the transactions contemplated by this
Agreement;

 

34

 

7.2.3  Granite, LLC shall have
delivered its Closing Schedules to TBH on the day immediately preceding the
Closing Date and none of such Closing Schedules shall reflect any item that was
not on the Granite, LLC Schedules (or in the Granite, LLC Financial Statements)
delivered on the date of execution of this Agreement that has had, would have,
or could be reasonably likely to have, a Material Adverse Effect on Granite, LLC,
the Surviving Corporation or TBH at or after the Effective Time, or on the
consummation of the transactions contemplated hereby;

 

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

 

7.2.5  Nielson shall have
delivered to Granite, Inc. a Non-Competition Agreement in a form agreed upon by
the parties;

 

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

 

7.2.7  Counsel for TBH shall have
approved, in the exercise of counsel’s reasonable discretion, the validity of
all transactions herein contemplated, as well as the form and substance of all
opinions, certificates, instruments of transfer and other documents to be
delivered to TBH hereunder or that are reasonably requested by such counsel;

 

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

 

7.2.9  Granite, LLC shall not be
subject to any memorandum of understanding, cease and desist order, or other
agreement with any Governmental Entity restricting the conduct of any of their
respective businesses, prospects and operations, so as to have a Material
Adverse Effect on TBH after the Effective Time;

 

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

 

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

 

7.3.1  Except as otherwise
provided in this Section 7.3, (a) the representations and warranties of TBH
contained in Article 4 shall be true in all material respects as of the
Effective Time as though made at the Effective Time, except to the extent they
expressly refer to an earlier time and except where the failure to be true,
individually or in the aggregate, would not have or would not be reasonably
likely to have, a Material Adverse Effect on TBH, taken as a whole, or upon
consummation of the transactions contemplated hereby; (b) TBH shall have duly
performed and complied in all material respects with all agreements and covenants
required by this Agreement to be performed or complied with it prior to or at
the Effective Time, except where the failure to so 

 

35

 

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

 

ARTICLE 8. TERMINATION, AMENDMENTS AND
WAIVERS

 

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

 

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

 

8.1.2  By TBH or Granite, LLC
upon the failure to satisfy any conditions specified in Section 7.1 if such
failure is not caused by any action or inaction of the party requesting
termination of this Agreement;

 

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

 

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

 

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

 

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

 

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

 

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

 

36

 

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

 

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

 

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

 

Section 8.2  Effect of
Termination; Survival. Except as provided in Section 8.5, no termination of
this Agreement as provided in Section 8.1 for any reason or in any manner shall
release, or be construed as so releasing, any party hereto from its obligations
pursuant to Sections 5.5, 8.5 or 9.5 hereof or from any liability or damage to
any other party hereto arising out of, in connection with, or otherwise
relating to, directly or indirectly, said party’s material breach, Default or
failure in performance of any of its covenants, agreements, duties or
obligations arising hereunder, or any breaches of any representation or
warranty contained herein arising prior to the date of termination of this
Agreement.

 

Section 8.3  Amendment. No
term or provision of this Agreement other than regulatory approval or any other
provision required by law, may be amended unless agreed to in writing by TBH
and Granite, LLC.

 

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

 

Section 8.5  Liquidated
Damages; Cancellation Fee. If either party Defaults under this Agreement
the non-defaulting party shall be entitled to declare this Agreement null and
void and shall be entitled to collect $50,000 from the defaulting party
hereunder as liquidated damages, whereupon the Agreement shall terminate and
neither party shall have any further claims against the other party. Both TBH
and Granite, LLC acknowledge that the actual damages sustained from such a
Default are difficult, if not impossible, to ascertain.

 

ARTICLE 9. GENERAL PROVISIONS

 

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

 

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

 

37

 

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

 

	
  If to Granite, LLC at:

  	
  The Law Offices of Randy C. Renfro

  
	
   

  	
  650 University Avenue, Suite 110

  
	
   

  	
  Sacramento, CA 95825

  
	
   

  	
   

  
	
  with a copy to:

  	
  Granite Exchange, Inc.

  
	
   

  	
  1400 Rocky Ridge Dr., Ste 280

  
	
   

  	
  Roseville, CA 95661

  
	
   

  	
  Attention: Justin Swift

  
	
   

  	
   

  
	
  If to Purchaser:

  	
  The Bank Holdings

  
	
   

  	
  9990 Double R Blvd.

  
	
   

  	
  Reno, NV 89521

  
	
   

  	
  Attention: Jack Buchold, CFO

  
	
   

  	
   

  
	
  with a copy to:

  	
  Gary Steven Findley & Associates

  
	
   

  	
  1470 North Hundley Street

  
	
   

  	
  Anaheim, CA 92806

  
	
   

  	
  Attention: Debra Barbin, Esq.

  

 

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

 

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

 

Section 9.5  Nondisclosure of
Agreement. The parties hereto agree, except as required by law, so long as
this Agreement is in effect, not to issue any public notice, disclosure or
press release with respect to the transactions contemplated by this Agreement
without seeking the consent of the other party, which consent shall not be
unreasonably withheld.

 

Section 9.6  Assignment. None
of the parties may assign their rights under this Agreement without prior
written consent of the other parties hereto.

 

38

 

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

 

Section
9.8  Headings/Table of Contents. The
table of contents and headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement. The Schedules annexed to this agreement are an integral part of
this agreement, and where there is any reference to this agreement it shall be
deemed to include said Schedules.

 

Section 9.9  Enforcement of
Agreement. The parties hereto agree that irreparable damage will occur in
the event that any of the provisions of this Agreement are not performed in
accordance with its specific terms or is otherwise breached. It is accordingly
agreed that the parties shall be entitled to an injunction or injunctions to
prevent breaches of this Agreement and to enforce specifically the terms and
provisions hereof in any court of the State of Nevada or any state having
jurisdiction, this being in addition to any remedy to which they are entitled
at law or in equity.

 

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

 

Section
9.11  Arbitration. Any dispute or
controversy arising among the parties hereto regarding any term, covenant or
condition of this Agreement or the breach thereof shall, upon written demand of
any party hereto, be submitted to and determined by arbitration before the
American Arbitration Association, in Reno, Nevada, by a panel of three
arbitrators, in accordance with the rules of the Association then in effect. Any
awarded rendered shall be made by means of a written opinion explaining the
arbitrators’ reasons for the award. The arbitrators may not amend or vary any
provision of this agreement. Judgment upon the award rendered by the arbitrators
may be entered in any court of competent jurisdiction, which court shall have
the power to review such award for compliance with this agreement.

 

39

 

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

 

 

	
   

  	
   /s/ Justin Swift

  	
   

  
	
   

  	
  Granite Exchange Services, LLC

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By: 

  	
  Managing Member

  	
   

  
	
   

  	
   

  	
  Title

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   /s/ Lonnie Nielson

  	
   

  
	
   

  	
  Lonnie Nielson

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   /s/ Rob Awalt

  	
   

  
	
   

  	
  Rob Awalt

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   /s/ Justin Swift

  	
   

  
	
   

  	
  Justin Swift

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   /s/ Hal Giomi

  	
   

  
	
   

  	
  The Bank Holdings

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By: 

  	
  Chief Executive Officer

  	
   

  
	
   

  	
   

  	
  Title

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  /s/ Hal Giomi

  	
   

  
	
   

  	
  Granite Exchange, Inc.

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By: 

  	
  Chief Executive Officer

  	
   

  
	
   

  	
  Title

  	
   

  

 

40

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