Document:

Unassociated Document

Exhibit 10.16

SUBLEASE AGREEMENT

LEASE INFORMATION

 

290 B Street, Suite 200

Santa Rosa, California 95401

 

	

DATE:

	

June 1, 2006

	

LANDLORD:

	

CITIBANK (WEST), FSB, a federal savings bank

	

TENANT:

	

CIRCLE BANK, a California corporation

	

RENTABLE AREA OF PREMISES:

	

1,471 sq.ft.

	

PREMISES:

	

Suite 200

	

TERM COMMENCEMENT:

	

September 1, 2006

	

TERM EXPIRATION:

	

November 30, 2010

	

BASIC RENT:

	

$3,162.65 per month

 

EXHIBITS:

 

A - MASTER LEASE

B - RULES AND REGULATIONS

C - PARKING RULES AND REGULATIONS

D - PREMISES

 

THIS LEASE INFORMATION SHALL BE READ AS ONE DOCUMENT WITH THE SUBLEASE AGREEMENT AND IN THE EVENT OF ANY CONFLICT BETWEEN THE LEASE INFORMATION AND THE SUBLEASE AGREEMENT, THE LATTER SHALL CONTROL.                                            

 

	TENANT:	LANDLORD:
	 	 
	CIRCLE BANK, 	CITIBANK (WEST), FSB,
	a California corporation 	a federal savings bank
	By: 	By:
	Name:   Kimberly A. Petrini  	Name:  Brad S. Thomas
	Title:     President/CEO 	Title:     Vice President
	 	 

  

 

  

 

 

SUBLEASE AGREEMENT

LEASE INFORMATION

 

290 B Street, Suite 200

Santa Rosa, California 95401

 

	

DATE:

	

June 1, 2006

	

LANDLORD:

	

CITIBANK (WEST), FSB, a federal savings bank

	

TENANT:

	

CIRCLE BANK, a CALIFORNIA CORPORATION

	

RENTABLE AREA OF PREMISES:

	

1,471 sq.ft.

	

PREMISES:

	

Suite 200

	

TERM COMMENCEMENT:

	

September 1, 2006

	

TERM EXPIRATION:

	

November 30, 2010

	

BASIC RENT:

	

$3,162.65 per month

 

EXHIBITS:

 

A - MASTER LEASE

B - RULES AND REGULATIONS

C - PARKING RULES AND REGULATIONS

D - PREMISES

 

THIS LEASE INFORMATION SHALL BE READ AS ONE DOCUMENT WITH THE SUBLEASE AGREEMENT AND IN THE EVENT OF ANY CONFLICT BETWEEN THE LEASE INFORMATION AND THE SUBLEASE AGREEMENT, THE LATTER SHALL CONTROL.

 

	

TENANT:

	

LANDLORD:

	 	 
	

CIRCLE BANK,

a California Corporation

	

CITIBANK (WEST), FSB,

a federal savings bank

	

By:

Name:   Kimberly A. Petrini

Title:     President/CEO

	

By:

Name:   Brad S. Thomas

Title:     Vice President

  

 

  

TABLE OF CONTENTS

 

1.           PARTIES

2.           MASTER LEASE

3.           PREMISES

4.           TERM; POSSESSION

         4.1           Initial Term

         4.2           Possession

         4.3           Occupancy Prior to Commencement Date

5.           RENT

         5.1           Basic Rent

         5.2           Annual Increase

         5.3           Partial Month

         5.4           Tenant Improvements

6.           OTHER CHARGES PAYABLE BY TENANT

         6.1           Common Area Expenses

         6.2           Additional Charges

         6.3           Personal Property Taxes

7.           SECURITY DEPOSIT

8.           USE

         8.1           Use

         8.2           Suitability

         8.3           Prohibited Uses

         8.4           Hazardous Materials

9.           SERVICES AND UTILITIES

         9.1           Landlord’s Obligations

         9.2           Tenant’s Obligations

         9.3           Utility Charges

         9.4           Tenant’s Additional Requirements

         9.5           Nonliability

10.           INSURANCE

         10.1         Coverage

         10.2         Insurance Policies

         10.3         Waiver of Subrogation

11.           MAINTENANCE AND REPAIRS

         11.1         Landlord’s Obligations

         11.2         Tenant’s Obligations

12.         ALTERATIONS AND ADDITIONS

 

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         12.1           Alterations

         12.2           Landlord Consent

         12.3           Alterations Are Property of Landlord

         12.4           Tenant’s Property

         12.5           Additional Work Triggered by Tenant Improvements

13.         INDEMNIFICATION

14.         LIENS

15.         ASSIGNMENT AND SUBLETTING

         15.1           Landlord’ s Consent Required

         15.2           Landlord’s Options

         15.3           Additional Conditions; Excess Rent

         15.4           Reasonable Disapproval

         15.5           No Release of Tenant

         15.6           Administrative and Attorneys’ Fees

         15.7           Material Inducement

16.         ENTRY BY LANDLORD

17.         HOLDING OVER

18.         DAMAGE OR DESTRUCTION

         18.1           Partial Damage - Insured

         18.2           Partial Damage - Uninsured

         18.3           Total Destruction

         18.4           Damage Near End of the Term

         18.5           Landlord’ s Obligations

19.         DEFAULT; REMEDIES

         19.1           Default by Tenant

         19.2           Remedies of Landlord

         19.3           Rights and Obligations Under the Bankruptcy Code

         19.4           Default by Landlord; Mortgage Protection

20.         CONDEMNATION

21.         LATE CHARGES

22.         LANDLORD’S PERFORMANCE OF TENANT’S OBLIGATIONS

23.         PARKING

24.         ESTOPPEL CERTIFICATE

25.         BROKERS

26.         NOTICES

27.         SUBORDINATION

 

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28.         FORCE MAJEURE

29.         SURRENDER OF PREMISES

30.         RULES AND REGULATIONS

31.         TRANSFER BY LANDLORD

32.         LIMITATION ON LANDLORD’S LIABILITY

33.    GENERAL PROVISIONS

         33.1           Waiver

         33.2           Time

         33.3           Severability

         33.4           Quiet Possession

         33.5           Successors and Assigns

         33.6           Attorneys’ Fees

         33.7           Cost of Suit

         33.8           Entire Agreement

         33.9           Light and Air Easement

         33.10         Governing Law

         33.11         Joint and Several Liability

         33.12         Headings; Exhibits

         33.13         Recording

         33.14         Financial Statements

         33.15         Tenant’s Authority

         33.16         Construction

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SUBLEASE AGREEMENT

 

    1.           PARTIES. This Sublease Agreement (the “Lease”) is dated, for reference purposes only, June 1, 2006 and is between Citibank (West), FSB, a federal savings bank (“Landlord”), and CIRCLE BANK, a Calif Corp. (“Tenant’’). This Lease is subject to the terms, covenants, conditions and agreements hereinafter set forth, to each and all of which Landlord and Tenant hereby mutually agree.

 

    2.           MASTER LEASE.

 

       (a)           Hoffman Investment Company, a California Limited Partnership, as landlord “Master Landlord”) and Landlord’s predecessor-in-interest, Glendale Federal Savings and Loan Association, as tenant, entered into that certain lease, dated April 4, 1979, as amended by the First Amendment to Lease dated December 16, 1983 (collectively, and as modified or amended, the “Master Lease”) for the real property located at 290 B Street, Santa Rosa, California (“Real Property”), copies of which are attached as Exhibit “A” hereto and incorporated herein by reference.

 

       (b)           Except as otherwise expressly provided below, the covenants, agreements, provisions and conditions of the Master Lease, are made a part of and incorporated into this Lease as if recited in full in this Lease, except that none of the rights set forth in the Master Lease shall accrue to or be enforceable by Tenant except as otherwise specifically set forth herein. Except as otherwise expressly modified in this Lease, this Lease is subject to all of the terms and conditions of the Master Lease. As applied to this Lease, the word “tenant” in the Master Lease will be deemed to refer to Tenant under this Lease. The obligations of the tenant under the Master Lease (other than the obligation to pay rent under the Master Lease) will be deemed the obligations of the Tenant under this Lease and the rights of the landlord under the Master Lease will be deemed the rights of the Landlord under this Lease. Tenant hereby assumes and agrees to perform the obligations of Landlord as tenant under the Master Lease to the extent such terms and conditions are applicable to the Premises leased pursuant to this Lease. As between the parties to this Lease only, in the event of a conflict between the terms of the Master Lease and this Lease, the terms of this Lease will control unless use of the Premises or any action or inaction taken in accordance with said terms may be the basis of a default under the Master Lease, in which case the conflict shall be resolved in favor of the Master Lease. Notwithstanding the foregoing, Landlord does not assume the obligations of Master Landlord under the provisions of the Master Lease, but shall, at Tenant’s cost and expense, use commercially reasonable efforts in attempting to cause Master Landlord to perform its obligations under the Master Lease upon Tenant’s written request; provided, however, Landlord shall have no obligation to commence any action at law or in equity in connection therewith.

 

       (c)     Tenant shall not commit or permit to be committed on the Premises any act or omission which would violate any term, covenant or condition of the Master Lease. In the event of the termination of Landlord’s interest as tenant under the Master Lease for any reason, then this Lease shall terminate automatically without any liability of Landlord to Tenant. Whenever the consent of Master Landlord is required under the Master Lease, the consent of Landlord shall also be required under this Lease. Tenant agrees that Landlord shall not have any duty or responsibility with respect to obtaining the consent of Master Landlord when the same is required or desired by Tenant, other than (i) the transmission by Landlord to Master Landlord of Tenant’s request for such consent and (ii) Landlord’s reasonable cooperation with Tenant to obtain such consent, provided that such cooperation does not require Landlord to pay any sum or incur any out-of-pocket expense (unless Tenant agrees to pay such sum or expense on behalf of Landlord) or to make any material performance or undertaking.

 

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       (d)           Tenant recognizes that Landlord is not in a position to render any of the services or to perform any of the obligations required of Master Landlord by the terms of the Master Lease, and Landlord’s sole obligation with respect to such performance shall be to use, at Tenant’s cost and expense, commercially reasonable efforts to obtain Master Landlord’s compliance with the Master Lease upon Tenant’s written request; provided, however, Landlord shall have no obligation to commence any action at law or in equity in connection therewith. Landlord will not be liable to Tenant for any default of the Master Landlord under the Master Lease, Tenant will not have any claim against Landlord based on the Master Landlord’s failure or refusal to comply with any of the provisions of the Master Lease unless that failure or refusal is a result of Landlord’s act or failure to act and Landlord is not prevented from performing the act due to Tenant’s act or failure to act. Despite Master Landlord’s failure or refusal to comply with any of those provisions of the Master Lease, this Lease will remain in full force and effect and Tenant will pay the Basic Rent (hereinafter defined) and all other charges provided for in this Lease without any abatement, deduction or setoff.

 

(e)           At any time and on prior notice to Tenant and with the written consent of Master Landlord, Landlord may elect to require Tenant to perform its obligations under this Lease directly to Master Landlord, and Tenant shall do so on Landlord’s election in which event Tenant shall send to Landlord from time to time copies of all notices and other communications it shall send to and secure from Master Landlord.

 

(f)           Landlord warrants that it has the authority under the Master Lease to enter into this Lease.

 

    3.           PREMISES. Landlord hereby leases to Tenant, and Tenant hereby leases from Landlord that certain office space known as Suite 200 and consisting of approximately 1,471 rentable square feet (the “Premises”) on the second (2nd) floor of the building known as 290 B Street, Santa Rosa, California (the “Building”). For purposes of this Lease, the parties agree that the Building contains approximately 11,247 rentable square feet. The Premises exclude the common stairways, stairwells, hallways, access ways and pipes, ducts, conduits, wires and appurtenant fixtures serving exclusively, or in common with, other parts of the Building. A diagram of the Premises is attached hereto as Exhibit “D” and incorporated herein by reference.

 

    4.           TERM; POSSESSION.

 

       4.1           Initial Term. The term of this Lease shall be for fifty-one (51) months commencing on September 1, 2006 (the “Commencement Date”), and unless sooner terminated as hereinafter provided, shall end on November 30, 2010. Tenant shall, upon the demand of Landlord, execute, acknowledge and deliver to Landlord an instrument in form reasonably satisfactory to Landlord confirming the Commencement Date and fixed expiration date of this Lease (the “Expiration Date”); provided, however, Tenant’s failure to execute, acknowledge and deliver such instrument shall not affect in any manner whatsoever the validity of the Commencement Date, the Expiration Date or Tenant’s obligations under this Lease.

 

       4.2           Possession. If Landlord for any reason whatsoever cannot deliver possession of the Premises to Tenant on the Commencement Date, this Lease shall not be void or voidable nor shall Landlord be liable to Tenant for any loss or damage resulting therefrom, nor shall the expiration date of the initial term of this Lease be in any way extended, but, in that event, all rent shall be abated during the period between the Commencement Date and the date on which Landlord delivers possession. In the event the commencement date of the term of this Lease is other than as provided above, then Landlord

 

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and Tenant shall execute a written acknowledgment of the date of commencement and shall attach it to this Lease as an exhibit.

 

       4.3    Occupancy Prior to Commencement Date. If Landlord permits Tenant to occupy the Premises prior to the Commencement Date, such occupancy shall be subject to all of the provisions of this Lease and said early possession shall not advance the termination date hereinabove provided. If Tenant occupies the Premises prior to the Commencement Date for the installation of Tenant trade fixtures and equipment in the Premises, or otherwise, such use or occupancy shall be pursuant to the express conditions that (a) Tenant’s early entry shall not interfere with Landlord’s work or construction or cause labor difficulty; (b) Tenant shall execute an indemnity agreement in favor of Landlord in form and substance satisfactory to Landlord; (c) Tenant shall pay for and provide evidence of insurance issued by an insurance carrier approved in writing by Landlord; and (d) Tenant shall pay utility charges reasonably allocated to Tenant by Landlord. Tenant shall not commence the operation of business prior to the Commencement Date without the prior written consent of Landlord.

 

    5.           RENT.

 

       5.1          Basic Rent. Tenant agrees to pay monthly in advance, without offset, deduction, prior notice, or demand a basic rental (“Basic Rent”) to Landlord at Citibank (West), FSB, Attn: Kathy Grimes, RE Administrator, 201 W. Lexington Dr., 3rd Floor, Glendale, California 91203 or such other address as Landlord may direct. One payment of the Basic Rent for the first (lst) month of this Lease shall be made concurrently upon the execution hereof and thereafter Tenant shall pay the Basic Rent on or before the first (lst) day of each calendar month succeeding the Commencement Date during the term of this Lease, unless otherwise provided for herein. Basic Rent shall be paid to Landlord in lawful money of the United States of America, which shall be legal tender at the time of payment. Tenant shall pay a monthly rent of Three Thousand One Hundred Sixty Two and 65/100 Dollars ($3,162.65) as Basic Rent. A “Lease Year” shall mean successive 12-month periods beginning with the Commencement Date. Notwithstanding the above, if Tenant commences the operation of business in the Premises prior to the Commencement Date, Tenant shall additionally pay, on or before the commencement of the operation of business, a prorated amount of Basic Rent from the date of commencement of the operation of business to the Commencement Date.

 

       5.2          Annual Increase. The Basic Rent provided for above shall be adjusted effective upon the first day of the month immediately following the expiration of twelve (12) months from the Commencement Date and upon the expiration of each twelve (12) months thereafter throughout the term (including any renewal terms) by an increase equal to three percent (3%) of the then otherwise applicable Basic Rent without giving effect to any abatements, setoffs or concessions.

 

       5.3          Partial Month. If the Commencement Date is not the first day of a month or if the Lease termination date is not the last day of the month, the rent payable hereunder shall be prorated on a daily basis, based on a 30-day month, at the then current rate for the fractional month during which this Leasecommences and/or terminates.

 

       5.4          Initial Tenant Improvements. No tenant improvements are contemplated under the terms of this Lease and Tenant accepts the Premises in its “as is” condition, subject to Landlord’s continuing maintenance and repair obligations, if any. Landlord is to perform no work in readying the Premises for Tenant’s occupancy.

 

    6.           OTHER CHARGES PAYABLE BY TENANT.

 

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            6.1   Common Area Expenses. For purposes of this Lease, the following terms shall have the meanings described below:(a) “Base Year” shall mean 2006;

 

       (b)           “Excess Taxes” with respect to any tax year shall mean the amount, if any, by which Real Estate Taxes for such Tax Year exceed the Real Estate Taxes for the Base Year;

 

       (c)           “Excess Expenses” with respect to any Expense Year shall mean the amount, if any, by which the Expenses for such Expense Year exceed the Expenses for the Base Year;

 

       (d)           “Tax Year” or “Expense Year” shall mean each twelve (12) consecutive month period commencing January 1st of each year during the term. Landlord, upon notice to Tenant, may change the Tax Year or Expense Year from time to time to any other twelve (12) consecutive month period;

 

       (e)           “Tenant’s Share” shall mean thirteen and 8/100 percent (13.08%). Tenant’s Share has been computed by dividing Landlord’s estimate of the rentable area of the Premises by Landlord’s estimate of the total rentable area within the Building and, in the event that either Landlord’s estimate of the rentable area of the Premises or Landlord’s estimate of the total rentable area within the Building is changed at any time, Tenant’s Share will be appropriately adjusted, and, as to the Tax Year or Expense Year in which such change occurs, for purposes of this Section, Tenant’s Share shall be determined on the basis of the number of days during such Tax Year and Expense Year at each such percentage;

 

       (f)           “Real Estate Taxes” shall mean all taxes, assessments and charges levied on or with respect to the Building, land and common areas or any personal property of Landlord used in the operation of the Building, or Landlord’s interest in the Building or such personal property. Real Estate Taxes shall include, without limitation, all general real property taxes and general and special assessments, charges, fees, or assessments for transit, housing, police, fire, or other governmental services or purported benefits to the Building, service payments in lieu of taxes, and any tax, fee, or excise on the act of entering into this Lease or any other lease of space in the Building, or on the use or occupancy of the Building or any part of the Building, or on the rent payable under any lease or in connection with the business of renting space in the Building, that are now or hereafter levied or assessed against Landlord by the United States of America, the State in which the Building is located, or any political subdivision, public corporation, district, or any other political or public entity, and shall also include any other tax, fee, charge or other excise however described, that may be levied or assessed as a substitute for, or as an addition to, in whole or in part, any other Real Estate Taxes, whether or not now customary or in the contemplation of the parties on the date of this Lease. Real Estate Taxes shall also include reasonable legal fees, costs, and disbursements incurred in connection with proceedings to contest, determine or reduce Real Estate Taxes. Real Estate Taxes shall not include franchise, transfer, inheritance or capital stock taxes or income taxes measured by the net income of Landlord from all sources unless, due to a change in the method of taxation, any of such taxes is levied or assessed against Landlord as a substitute for, or as an addition to, in whole or in part, any other tax that would otherwise constitute a Real Estate Tax; and

 

       (g)           “Expenses” shall mean the total costs and expenses paid or incurred by Landlord in connection with the management, operation, maintenance and repair of the Building, including, without limitation, all sums expended in connection with the common areas of the Building (“Common Area”), for all general maintenance, repairs, resurfacing or painting, re-striping, cleaning, sweeping and janitorial services; purchase, replacement and maintenance of trash receptacles; maintenance and repair of sidewalks, parking areas, lavatories, washrooms, curbs and Building signs, sprinkler systems, planting and landscaping; exterior window washing, including windows on the Premises; lighting and other

 

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utilities; directional signs and other markers or bumpers; maintenance and repair of any fire protection systems, lighting systems, storm drainage systems, and any other utility system; personnel to implement such services, including, if Landlord deems necessary, in its sole discretion, the cost of security guards; garbage, trash, rubbish and waste removal; any governmental imposition or surcharge imposed upon Landlord or assessed against any portion of the Building, the Premises and/or the Common Area, including, without limitation, any tax, assessment (general or special), fee or imposition or other charge on any parking space or parking lot or other facility (other than the Real Estate Taxes set forth in subsection (f) above); the cost to Landlord of any additional improvements made after commencement of the term or made as a labor saving device or to effect other economies in the operation or maintenance of the Building or that are required under any governmental law or regulation that was not applicable to the Premises or Building at the Commencement Date; such costs to be amortized over such period as Landlord may determine in its sole discretion, together with interest on the unamortized balance at the rate of ten percent (10%) per annum or at such higher rate as may have been paid by Landlord on funds borrowed for the purpose of constructing such capital improvements; all costs with respect to repairs and maintenance of utility facilities (including pipes and conduits) serving more than one tenant’s premises, unless caused by the intentional act of Landlord or the tenant within the premises wherein such repairs are required; public liability, property damage insurance, fire and extended coverage insurance and earthquake insurance, if any, on the Building, the Premises and/or the Common Area. In addition, Tenant shall pay a sum to Landlord for accounting, bookkeeping and collecting of the Expenses an amount equal to fifteen percent (15%) of the total of Tenant’s pro rata share of the Expenses for each calendar year. Landlord may cause any or all of the services to be provided by an independent contractor or contractors. Expenses shall not include the utility costs payable by Tenant.

 

       6.2           Additional Charges. Tenant shall pay to Landlord as Additional Charges: Tenant’s Share of Excess Taxes and Excess Expenses for each Tax Year and Expense Year within twenty (20) days after Landlord delivers Tenant a statement setting forth Tenant’s Share of Excess Taxes due for the previous Tax Year and Excess Expenses due for the previous Expense Year (“Landlord’s Tax and Expense Statement”); or, if Landlord elects, in its sole discretion, 1/12th of Tenant’s Share of Excess Taxes and Excess Expenses for each Tax Year and Expense Year on or before the first day of each month during the Tax Year or Expense Year, in advance, in an amount estimated by Landlord and billed by Landlord to Tenant, and Landlord shall have the right initially to determine monthly estimates and to revise such estimates from time to time. If the actual Excess Taxes or Excess Expenses exceed the estimated Excess Taxes or Excess Expenses paid by Tenant for such Tax Year or Expense Year, Tenant shall pay to Landlord the difference between the amount paid by Tenant and the actual Excess Taxes and Excess Expenses within twenty (20) days after the receipt of Landlord’s Tax and Expense Statement, and if the total amount paid by Tenant for any such Tax Year or Expense Year exceeds the actual Excess Taxes or Excess Expenses for such Tax Year or Expense Year, such excess shall be credited against the next installment of Excess Taxes and Excess Expenses due from Tenant to Landlord.

 

       6.3           Personal Property Taxes. Tenant hereby agrees to pay all taxes which may be levied with respect to Tenant’s personal property located in the Premises including, without limitation, the portion of the improvements to the Premises, if any, the cost of which was borne by Tenant, furniture, office equipment and other furnishings. Tenant agrees to use its best efforts to cause such personal property to be taxed or assessed separately from the Premises and not as a lien thereon.

 

   7.   SECURITY DEPOSIT.

 

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       (a)            Tenant shall not cause or permit any Hazardous Material, as defined below, to be brought upon, kept or used in or about the Premises by Tenant, its agents, employees, contractors or invitees, without the prior written consent of Landlord which may be granted or withheld in Landlord’s sole discretion. In the event that Tenant proposes to conduct any use or to operate any equipment which will or may utilize or generate a Hazardous Material other than as specified in the first sentence of this Section, Tenant shall first in writing submit such use or equipment to Landlord for approval. No approval by Landlord shall relieve Tenant of any obligation of Tenant pursuant to this Section, including the removal, clean-up and indemnification obligations imposed upon Tenant by this Section. Tenant shall, within five (5) days after receipt thereof, furnish to Landlord copies of all notices or other communications received by Tenant with respect to any actual or alleged release or discharge of any Hazardous Material in or about the Premises or the Building and shall, whether or not Tenant receives any such notice or communication, notify Landlord in writing of any discharge or release of Hazardous Material by Tenant or anyone for whom Tenant is responsible in or about the Premises or the Building. In the event that Tenant is required to maintain any Hazardous Materials license or permit in connection with any use conducted by Tenant or any equipment operated by Tenant in the Premises, copies of each such license or permit, each renewal or revocation thereof and any communication relating to suspension, renewal or revocation thereof shall be furnished to Landlord within five (5) days after receipt thereof by Tenant. Compliance by Tenant with the two immediately preceding sentences shall not relieve Tenant of any other obligation of Tenant pursuant to this Section.

 

       (b)           If Tenant breaches the obligations stated in this Section, or if the presence of Hazardous Material on the Premises or the Building caused or permitted by Tenant results in contamination of the Premises or the Building, or if contamination of the Premises or the Building by Hazardous Material otherwise occurs for which Tenant is legally liable to Landlord for damage resulting therefrom, then Tenant shall indemnify, defend, protect and hold Landlord harmless from any and all claims, judgments, damages, penalties, fines, costs, liabilities or losses (including, without limitation, diminution in value of the Premises or the Building, damages for the loss or restriction on use of rentable or usable space or of any amenity of the Premises or the Building, damages arising from any adverse impact on marketing of space in the Building, and sums paid in settlement of claims, attorneys’ fees, consultant fees and expert fees) which arise during or after the Lease term as a result of such contamination. This indemnification of Landlord by Tenant includes, without limitation, costs incurred in connection with any investigation of site conditions or any cleanup, remedial, removal or restoration work required by any federal, state or local governmental agency or political subdivision because of Hazardous Material present in the soil or ground water on or under the Building. Without limiting the foregoing, if the presence of any Hazardous Material in the Premises or in or under the Building caused or permitted by Tenant results in any contamination of the Premises or the Building, Tenant shall be obligated, at Tenant’s sole cost, to clean-up and remove from the Premises and Building all Hazardous Materials introduced into the Premises or the Building by Tenant or any person or entity for whom Tenant is responsible. Such clean-up and removal shall include all testing and investigation required by any governmental authorities having jurisdiction and preparation and implementation of any remedial action plan required by any governmental authorities having jurisdiction. All such clean-up and removal activities of Tenant shall, in each instance, be conducted to the satisfaction of Landlord and all

 

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governmental authorities having jurisdiction. Landlord’s right of entry shall include the right to enter and inspect the Premises for violations of Tenant’s covenants herein.

 

       (c)           Upon any violation of the foregoing covenants in this Section, Landlord shall be entitled to exercise all remedies available to a landlord against a defaulting tenant including but not limited to all those set forth in this Lease. Without limiting the generality of the foregoing, Tenant expressly agrees that upon any such violation Landlord may, at its option, (i) immediately terminate this Lease, or (ii) continue this Lease in effect until compliance by Tenant with its clean-up and removal covenant notwithstanding any earlier expiration date of the term of this Lease. No action by Landlord hereunder shall impair the obligations of Tenant pursuant to this Section.

 

       (d)           As used herein, the term “Hazardous Material” means any hazardous or toxic substance, material or waste which is or becomes regulated by any local governmental authority, the State of California or the United States Government. The term “Hazardous Material” includes, without limitation, any material or substance which is (i) defined as a “hazardous waste,” “extremely hazardous waste” or “restricted hazardous waste” under Sections 25115, 25117 or 25122.7, or listed pursuant to Section 25140, of the California Health and Safety Code, Division 20, Chapter 6.5 (Hazardous Waste Control Law), (ii) defined as a “hazardous substance” under Section 25316 of the California Health and Safety Code, Division 20, Chapter 6.8 (Carpenter-Presley-Tanner Hazardous Substance Account Act), (iii) defined as a “hazardous material,” “hazardous substance,” or “hazardous waste” under Section 25501 of the California Health and Safety Code, Division 20, Chapter 6.95 (Hazardous Materials Release Response Plans and Inventory), (iv) defined as a “hazardous substance” under Section 25281 of the California Health and Safety Code, Division 20, Chapter 6.7 (Underground Storage of Hazardous Substances), (v) defined by any federal, state or local law as hazardous or toxic, (vi) petroleum, (vii) asbestos, (viii) listed under Article 9 or defined as hazardous or extremely hazardous pursuant to Article 11 of Title 22 of the California Administrative Code, Division 4, Chapter 20, (ix) designated as a “hazardous substance” pursuant to Section 311 of the Federal Water Pollution Control Act (33 U.S.C. § 1317), (x) defined as a “hazardous waste” pursuant to Section 1004 of the Federal Resource Conservation and Recovery Act, 42 U.S.C. § 6901 et seq. (42 U.S.C. § 6903), or (xi) defined as a “hazardous substance” pursuant to Section 101 of the Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C. § 9601 et seq. (42 U.S.C. § 9601).

 

    9.           SER VICES AND UTILITIES.

 

       9.1           Landlord’s Obligations. Landlord shall furnish to the Premises during reasonable hours of generally recognized business days to be determined by Landlord, and subject to the Rules and Regulations of the Building, water, gas and electricity, heat and air conditioning, and janitorial service required in Landlord’s judgment for the comfortable use and occupancy of the Premises, scavenger, exterior window washing, and security customary in similar buildings in the competing geographical areas. Landlord shall also maintain and keep lighted the common stairs, entries and toilet rooms in the Building.

 

       9.2           Tenant’s Obligations. Tenant shall pay for, prior to delinquency, all telephone, utility and janitorial services and other materials and services, not expressly required to be paid by Landlord, which may be furnished to or used in, on or about the Premises during the term of this Lease.

 

       9.3           Utility Charges. Landlord, in its sole discretion, may cause a water meter, gas meter or electric current meter to be installed in the Premises, so as to measure the amount of water, gas and electric current consumed. The cost of such meters and of installation, maintenance, and repair thereof shall be paid for by Tenant. Tenant agrees to pay Landlord promptly upon demand by Landlord for all such water, gas and electric current consumed as shown by said meters, at the rates charged for

 

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such services by the city in which the Building is located, the local public utility, or the service provider as the case may be, furnishing the same, plus any additional expense incurred in keeping account of water, gas and electric current so consumed.

 

       9.4           Tenant’s Additional Requirements.

 

       (a)           Tenant will not, without the prior written consent of Landlord and subject to any conditions which Landlord may impose, use any apparatus or device in the Premises, including, without limitation, machines using current in excess of 110 volts, which will in any way increase the amount of electricity, gas or water usually furnished or supplied for use of the Premises as general office space. Tenant shall not, without the prior written consent of Landlord and subject to any conditions which Landlord may impose, connect with electrical current except through existing electrical outlets in the Premises, or connect to water or gas pipes any apparatus or device for the purposes of using electric current, gas or water.

 

       (b)           If Tenant shall require water, gas or electric current in excess of that usually furnished or supplied for use of the Premises as general office space, Tenant shall first procure the consent of Landlord of the use thereof, which consent Landlord may grant or withhold in Landlord’s sole discretion. Should Tenant use such services to excess or request the use of such services at other than the usual business hours, Landlord reserves the right to charge Tenant for such services, which shall be payable as additional rent.

 

       (c)           Whatever heat generating machines or equipment are used in the Premises which affect the temperature otherwise maintained by the air conditioning system, Landlord reserves the right to install supplementary air conditioning units in the Premises and the cost, including the cost of installation, operation and maintenance thereof shall be paid by Tenant upon demand by Landlord.

 

       (d)           If at any time any utility or service is separately metered and billed to the Premises, Tenant shall during the term of this Lease promptly pay to the utility company or entity furnishing the same all costs and charges incurred for the use and consumption of such utilities and services with respect to the Premises.

 

       9.5           Nonliability. Landlord shall not be liable for, and Tenant shall not be entitled to, any abatement or reduction of rent by reason of Landlord’s failure to furnish any of the foregoing where such failure is caused by accidents, breakages, repairs, strikes, lockouts or other disturbances or labor disputes of any character, or by any other cause similar or dissimilar, beyond the reasonable control of Landlord. Landlord shall not be liable under any circumstances for loss of or injury to property, however occurring, through or in connection with or incidental to failure to furnish any of the foregoing.

 

    10.   INSURANCE.

 

      10.1   Coverage. Tenant shall assume the risk of damage to any fixtures, goods, inventory, merchandise, equipment, furniture and leasehold improvements and Landlord shall not be liable for injury to Tenant’s business or any loss of income therefrom relative to such damage. Tenant shall at all times during the term of this Lease, and at its own cost and expense, procure and continue in force the following insurance policies and/or endorsements (individually’ “Policy” and collectively the “Policies”):

 

       (a)    Commercial general liability insurance, including bodily injury and property damage, personal injury and contractual liability, with respect to all claims, demands or actions by any person or entity, in and arising from, related to, or connected with the conduct and operation of Tenant’s

 

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business in the Premises or Tenant’s use of the Premises, with a minimum limit of One Million and No/100 Dollars ($1,000,000.00) per occurrence with a Two Million and No/100 Dollars ($2,000,000.00) aggregate combined single limit;

 

       (b)           A policy of “all risk” coverage insurance covering all its personal property, tenant improvements, and alterations, in, on, or about the Premises to the extent of at least one hundred percent (100%) of their full replacement value. The proceeds from any such policy shall be used by Tenant for the replacement of personal property or the restoration of tenant improvements or alterations;

 

       (c)           Business interruption insurance with sufficient coverage to provide for payment of rent and other fixed costs for a period of not less than twelve (12) consecutive months during any interruption of Tenant’s business by reason of fire or other similar cause;

 

       (d)           Workers’ compensation insurance as required by law, including employer’s liability, with respect to all claims, demands or actions by any person or entity, in and arising from, related to, or connected with the operation of Tenant’s business; and

 

       (e)           Plate glass insurance covering the Premises.

 

       10.2           Insurance Policies.

 

       (a)           The limits of said Policies shall not, however, limit the liability of Tenant hereunder. Tenant may carry said insurance under blanket policies. If Tenant fails to procure and maintain said insurance, Landlord may, but shall not be required to, procure and maintain same, but at the expense of Tenant. Insurance required hereunder shall be in companies rated B+ or better in “Best’s Insurance Guide”.

 

       (b)           Tenant shall cause each of the Policies (except as to the Workers’ compensation insurance) to name Landlord, Landlord’s parent corporation (Citigroup Inc.), and their respective affiliates, officers, directors, employees, agents and assigns and Master Landlord (and any other parties if required pursuant to the Master Lease) as additional insureds. Each of the Policies shall be primary and noncontributing with respect to any coverage that Landlord or Master Landlord may carry. Each of the Policies shall (i) be issued by insurance companies licensed to do business in the State of California, (ii) include a waiver of subrogation by the insurer against Landlord, and Landlord’s parent corporation (Citigroup Inc.), and Master Landlord (and any other parties if required pursuant to the Master Lease), and (iii) contain an endorsement requiring thirty (30) days’ written notice from the insurance company to Tenant and Landlord before cancellation or change in the coverage, scope, or amount of any policy. On the Commencement Date and on renewal of any Policy and not less than thirty (30) days before expiration of the term of a Policy, Tenant shall deposit with Landlord a copy of each of the Policies, or a certificate of each of the Policies, together with evidence of payment of premiums.

 

       10.3           Waiver of Subrogation. The parties release each other, and their respective authorized representatives, from any claims for damage to any person or to the Premises and the Building and to the fixtures, personal property, tenant’s improvements, and alterations of either Landlord or Tenant in or on the Premises and the Building that are caused by or result from risks insured against under any insurance policies carried by the parties or required to be carried by either party under this Lease. Each party shall cause each insurance policy obtained by it to provide that the insurance company waives all right of recovery by way of subrogation against either party in connection with any damage covered by any policy. If any insurance policy cannot be obtained with a waiver of subrogation, or is obtainable only by the payment of an additional premium charged above that charged by insurance companies issuing policies without waiver of subrogation, the party undertaking to obtain the insurance shall notify the other

 

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party of this fact. The other party shall have a period of ten (10) days after receiving the notice either to place the insurance with a company that is reasonably satisfactory to the other party and that will carry the insurance with a waiver of subrogation, or to agree to pay the additional premium if such a policy is obtainable at additional cost. If the insurance cannot be obtained or the party in whose favor a waiver of subrogation is desired refuses to pay the additional premium, charged, the other party is relieved of the obligation to obtain a waiver of subrogation rights with respect to the particular matter involved.

 

    11.   MAINTENANCE AND REPAIRS.

 

       11.1            Landlord’s Obligations. To the extent required under the Master Lease, Landlord shall maintain in good order, condition and repair the Building and all other portions of the Premises not the obligation of the Tenant or any other tenant in the Building, including the basic plumbing, air conditioning, heating and electrical systems and all plumbing pipes, but not any plumbing in the Premises, electrical wiring, and switches installed or furnished by Tenant, unless such maintenance and repairs are caused in part or in whole by the act, neglect, fault or omissions of Tenant, its agents, servants, employees or invitees, in which case Tenant shall pay to Landlord the reasonable cost of such maintenance and repairs. Landlord shall not be liable for any failure to make any such repairs or to perform any maintenance unless such maintenance or repair is required under the Master Lease and such failure persists for an unreasonable time as determined by Landlord after written notice of the need for such repairs or maintenance is given to Landlord by Tenant. Except as specifically provided for herein, there shall be no abatement of rent and no liability of Landlord by reason of any injury to or interference with Tenant’s business arising from the making of any repairs, alterations or improvements in or to any portion of the Building or the Premises or in or to fixtures, appurtenances and equipment therein. Tenant waives the right to make repairs at Landlord’s expense under any law, statute or ordinance now or hereafter in effect.

 

       11.2           Tenant’s Obligations. By taking possession of the Premises, Tenant shall be deemed to have accepted the Premises as being in good, sanitary order, condition and repair, and Tenant’s obligation to preserve the Premises are as follows:

 

       (a)           Tenant at Tenant’s sole cost and expense, except for services furnished by Landlord as set forth herein, shall maintain the Premises in good order, condition and repair including the interior surfaces of the ceilings, light fixtures and light bulbs, plate glass, walls and floors, all doors, interior windows, exterior windows at or below street level, and special items in excess of building standard furnishings, and equipment installed by or at the expense of Tenant. Tenant expressly waives the benefits of any statute now or hereafter in affect which would otherwise afford Tenant the right to make repairs at Landlord’s expense or to terminate this Lease because of Landlord’s failure to keep the Premises in good order, condition and repair.

 

       (b)           Upon the expiration or earlier termination of this Lease, Tenant shall surrender the Premises in the same condition as received, ordinary wear and tear and damage by fire, earthquake, act of God or the elements alone excepted, and shall promptly remove or cause to be removed from the Premises and the Building at Tenant’s expense, any signs, notices and displays placed by Tenant.

 

       (c)           Tenant agrees to repair any damage to the Premises or the Building caused by or in connection with the removal of any articles of personal property, business or trade fixtures, machinery, equipment, furniture, or movable partitions, including, without limitation, repairing the floor and patching and painting the walls where required by Landlord to Landlord’s reasonable satisfaction, all at Tenant’s sole cost and expense. Tenant shall indemnify Landlord against any loss or liability resulting from delay by Tenant in so surrendering the Premises, including, without limitation, any claims made by any succeeding tenant founded on such delay.

 

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       (d)    If Tenant fails to maintain the Premises in good order, condition and repair, Landlord shall give Tenant notice to do such acts as are reasonably required to so maintain the Premises. If Tenant fails to promptly commence such work and diligently prosecute it to completion, then Landlord shall have the right to do such acts and expend such funds at the expense of Tenant as are reasonably required to perform such work. Any amount so expended by Landlord shall be paid by Tenant promptly after demand with interest at ten percent (10%) per annum from the date of such demand. Landlord shall have no liability to Tenant for any damage, inconvenience or interference with the use of the Premises by Tenant as a result of performing any such work.

 

    12.   ALTERATIONS AND ADDITIONS.

 

       12.1           Alterations. Landlord has no obligation to alter, remodel, decorate or improve the Premises or any part thereof, except as specifically set forth herein. Tenant shall make no alterations, additions of improvements to the Premises or any part thereof, without obtaining the prior written consent of Landlord. Unless Landlord agrees otherwise, Tenant shall be required to remove such items and restore the Premises upon removal provided that Tenant shall not be required to replace or install any floor covering if such covering is exposed by such removal, but Tenant shall cap any exposed wires. Landlord shall not be liable for any injury, loss or damage which may occur to any of the Tenant’s employees, agents, or invitees to the Premises or Tenant’s work or installations unless caused by the gross negligence or willful misconduct of Landlord, its agents or employees. Any damage to the Premises or the tenant improvements caused by Tenant or Tenant’s agents, employees, contractors, workmen or suppliers shall be the sole responsibility of Tenant.

 

       12.2           Landlord Consent. Landlord may impose as a condition to the aforesaid consent such requirements as Landlord may deem necessary in its sole discretion, including, without limitation, the manner in which the work is done, a right of approval of the licensed contractor by whom the work is to be performed, a right to require payment and performance bonds, the times during which it is to be accomplished, and the requirement that upon written request of Landlord prior to the expiration or earlier termination of the Lease, Tenant will remove any and all movable partitions, counters, personal property, equipment, fixtures and furniture. Tenant shall obtain all required governmental licenses, building permits, and approvals before commencing any tenant improvements and Tenant’s contractor shall be bonded.

 

       12.3           Alterations Are Property of Landlord. All such alterations, additions or improvements shall at the expiration or earlier termination of this Lease, become the property of Landlord and remain upon and be surrendered with the Premises, unless otherwise specified herein.

 

       12.4           Tenant’s Property. All articles of personal property and all business and trade fixtures, machinery and equipment, furniture and movable partitions owned by Tenant or installed by Tenant at its expense in the Premises shall be and remain the property of Tenant and may be removed by Tenant at any time during the Lease term when Tenant is not in default hereunder and shall be removed by Tenant from the Premises and the Building upon the expiration or earlier termination of this Lease.

 

       12.5           Additional Work Triggered by Tenant Improvements. If the Tenant’s alterations, additions or improvements trigger any federal, state, local or other requirements to modify, alter, improve or otherwise change the Premises, the Building, or the associated property, including but not limited to any requirements under the Americans with Disabilities Act (“ADA”), any state accessibility codes, and any environmental or hazardous materials requirements, then Tenant shall upon demand immediately indemnify Landlord in full for any and all costs and expenses (including but not limited to attorneys’ and experts’ fees and costs) required to comply with such requirements. Landlord, at its sole option and election, may treat such costs and expenses as additional rent due hereunder.

 

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    13.           INDEMNIFICATION. Tenant shall indemnify, defend, protect and hold harmless Landlord, Landlord’s agents, employees, officers and directors from and against any and all claims, demands, damages, costs or liability, including, without limitation attorney’s fees arising from (i) Tenant’s use of the Premises, or from the conduct of Tenant’s business or from any activity, work or things done, permitted or suffered by Tenant in or about the Premises or the Building, (ii) any and all claims arising from any breach or default in the performance of any obligation or covenant on the Tenant’s part to be performed under the terms of this Lease, or (iii) arising from any negligence of Tenant, or any of Tenant’s agents, contractors or employees, and from and against all costs, attorney’s fees, expense and liabilities incurred in the defense of any such claim or any action or proceeding brought thereon, and in case any action or proceeding is brought against Landlord by reason of any such claim, Tenant upon notice from Landlord shall defend the same at Tenant’s expense by counsel satisfactory to Landlord. Landlord shall not be liable for injury to the person of Tenant, Tenant’s employees, agents or contractors, whether such damage or injury is caused by or results from fire, steam, electricity, gas, water or rain, or from the breakage, leakage, obstruction or other defects of pipes, sprinklers, wires, appliances, plumbing, air conditioning or lighting fixtures, or from any other cause whether the said damage or injury results from conditions arising upon the Premises or from other sources or places and regardless of whether the cause of such damage or injury or the means of repairing the same is inaccessible to Tenant. Landlord shall not be liable to Tenant for any damages arising from any act or neglect of any other tenant of the Building.

 

    14.           LIENS. Tenant shall discharge any mechanic’s, materialmen’s, contractor’s or other lien that is filed against the Premises, the Building, the Real Property, or any portion thereof for work claimed to have been done for, or for materials claimed to have been furnished to, Tenant (or any person or entity claiming by, through or under Tenant) within ten (10) days after Tenant has received notice thereof, at Tenant’s sole cost and expense, by payment or filing the bond required by law. Tenant agrees to indemnify, defend, protect and hold Landlord harmless from any claims, demands, damages, costs or liability, including without limitation attorney’s fees in connection with any such liens. Tenant shall give Landlord no less than twenty (20) days prior notice in writing before commencing construction of any kind on the Premises so that Landlord may post notices of nonresponsibility.

 

    15.           ASSIGNMENT AND SUBLETTING.

 

       15.1            Landlord’s Consent Required. Tenant shall not assign, transfer, mortgage, pledge, hypothecate or encumber this Lease or any interest herein, whether voluntarily or by operation of law and shall not sublet the Premises or any part thereof, or permit the use or occupancy of the Premises by any party other than Tenant (any such assignment, encumbrance, sublease or the like shall sometimes be referred to as a “Transfer”), without the prior written consent of Landlord, which consent shall not be unreasonably withheld. Any Transfer without Landlord’s consent shall constitute a default by Tenant under this Lease, and in addition to all of Landlord’s other remedies at law, in equity or under this Lease, such Transfer shall be voidable at Landlord’s election. For purposes of this Section, if Tenant is a corporation, partnership or other entity, any transfer, assignment, encumbrance or hypothecation of twenty-five percent (25%) or more (individually or in the aggregate) of any stock or other ownership interest in such entity, and/or any transfer, assignment, hypothecation or encumbrance of any controlling ownership or voting interest in such entity, shall be deemed an assignment of this Lease and shall be subject to all of the restrictions and provisions contained in this Section. Notwithstanding the foregoing, the immediately preceding sentence shall not apply to any transfers of stock of Tenant if Tenant is a publicly-held corporation and such stock is transferred publicly over a recognized security exchange or over-the-counter market.

 

       15.2           Landlord’s Options. If at any time or from time to time during the term of this Lease, Tenant desires to effect a Transfer, Tenant shall deliver to Landlord written notice (“Transfer

 

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Notice”) setting forth the terms and provisions of the proposed Transfer and the identity of the proposed assignee, sublessee or other transferee (sometimes referred to hereinafter as a “Transferee”). Tenant shall also deliver to Landlord with the Transfer Notice, a current financial statement and financial statements for the preceding two (2) years of Transferee, and such other information concerning the business background and financial condition of the proposed Transferee as Landlord may reasonably request. Landlord shall have the option, exercisable by written notice delivered to Tenant within twenty (20) days after Landlord’s receipt of the Transfer Notice, such financial statements and other information, either to:

 

       (a)           approve or disapprove such Transfer, which approval shall not be unreasonably withheld; or

 

       (b)           sublet from Tenant that portion of the Premises which Tenant has requested to sublease at the rental and on the other terms set forth in this Lease for the term set forth in Tenant’s Notice, or, in the case of an assignment or encumbrance, terminate this Lease with respect to the entire Premises, which termination shall be effective thirty (30) days after Tenant’s receipt of Landlord’s notice.

 

       If Landlord exercises its option to sublease any such space from Tenant following Tenant’s request for Landlord’s approval of the proposed sublease of such space, (i) Landlord shall be responsible for the construction of any partitions which Landlord reasonably deems necessary to separate such space from the remainder of the Premises, and (ii) Landlord and any sub-subtenant or assignee of Landlord with respect to such subleased space shall have the right to use in common with Tenant all lavatories, corridors and lobbies which are within the Premises and which are reasonably required for the use of such space.

 

       15.3         Additional Conditions; Excess Rent. If Landlord does not exercise its sublease or termination option and instead approves of the proposed Transfer, Tenant may enter into the proposed Transfer with such proposed Transferee subject to the following further conditions:

 

       (a)           the Transfer shall be on the same terms set forth in the Transfer Notice delivered to Landlord (if the terms have changed, Tenant must submit a revised Transfer Notice to Landlord and Landlord shall have another twenty (20) days after receipt thereof to make the election specified above under Landlord’s Options);

 

       (b)           no Transfer shall be valid and no Transferee shall take possession of the Premises until an executed counterpart of the assignment, sublease or other instrument affecting the Transfer has been delivered to Landlord pursuant to which Transferee shall expressly assume all of Tenant’s obligation under this Lease (or with respect to a sublease of a portion of the Premises or for a portion of the term, all of Tenant’s obligations applicable to such portion);

 

       (c)           no Transferee shall have a further right to assign, encumber or sublet, except on the terms herein contained; and

 

       (d)           any rent or other economic consideration received by Tenant as a result of such Transfer which exceeds, in the aggregate, the total Rent which Tenant is obligated to pay Landlord under this Lease (prorated to reflect obligations allocable to any portion of the Premises subleased), shall be paid to Landlord within ten (10) days after receipt thereof as additional rent under this Lease, without affecting or reducing any other obligations of Tenant hereunder.

 

15.4           Reasonable Disapproval. Landlord and Tenant hereby acknowledge that Landlord’s disapproval of any proposed Transfer shall be deemed reasonably withheld if based upon any reasonable factor, including, without limitation, any or all of the following factors: (a) the proposed

 

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Transfer would result in more than two subleases of portions of the Premises being in effect at any one time during the term of this Lease; (b) the net effective rent payable by the Transferee (adjusted on a rentable square foot basis) is less than the net effective rent then being quoted by Landlord for new leases in the Building for comparable size space for a comparable period of time; (c) the proposed Transferee is an existing tenant of the Building or is negotiating with Landlord (or has negotiated with Landlord in the last six (6) months) for space in the Building; (d) the proposed Transferee is a governmental entity; (e) the portion of the Premises to be sublet or assigned is irregular in shape with inadequate means of ingress and egress; (f) the use of the Premises by Transferee (i) is not permitted by the use provisions specified in this Lease, or (ii) violates any exclusive use granted by Landlord to another tenant in the Building; (g) the Transfer would likely result in significant increase in the use of the parking areas or common areas by Transferee’s employees or visitors, and/or significant increase in the demand upon utilities and services to be provided by Landlord to the Premises; (h) Transferee does not, in Landlord’s reasonable judgment, have the financial capability to fulfill the obligations imposed by the Transfer; (i) the Transferee is not in Landlord’s reasonable opinion of reputable or good character or consistent with Landlord’s desired tenant mix; or (j) Transferee is a real estate developer or landlord or is acting directly or indirectly on behalf of a real estate developer or landlord. It shall not be unreasonable for Landlord to withhold its consent to any proposed Transfer, as defined herein, if (i) the proposed transferee’s anticipated use of the Premises involves the generation, storage, use, treatment or disposal of Hazardous Material, (ii) the Transferee has been required by any prior landlord, lender or governmental authority to take remedial action in connection with Hazardous Material contaminating a property if the contamination resulted from such transferee’s actions or use of the property in question, or (iii) the proposed transferee is subject to an enforcement order issued by any governmental authority in connection with the use, disposal or storage of a Hazardous Material.

 

       15.5           No Release of Tenant. No consent by Landlord to any assignment or subletting by Tenant shall relieve Tenant of any obligation to be performed by Tenant under this Lease, whether occurring before or after such consent, assignment or subletting. The consent by Landlord to any assignment or subletting shall not relieve Tenant from the obligation to obtain Landlord’s express prior written consent to any other assignment or subletting. The acceptance of rent by Landlord from any other persons shall not be deemed to be a waiver by Landlord of any provision of this Lease or to be a consent to any assignment, subletting or other transfer. Consent to one assignment, subletting or other transfer shall not be deemed to constitute consent to any subsequent assignment, subletting or other transfer. No sublease, once consented to by Landlord, shall be modified or terminated by Tenant without Landlord’s prior consent, which consent shall not be unreasonably withheld.

 

       15.6           Administrative and Attorneys’ Fees. If Tenant effects a Transfer or requests the consent of Landlord to any Transfer, then Tenant shall, without demand, pay Landlord a non-refundable administrative fee of Five Hundred Dollars ($500.00), plus upon demand any reasonable attorneys’ and paralegals’ fees incurred by Landlord in connection with such Transfer or request for consent (whether attributable to Landlord’s in-house attorneys or paralegals or otherwise). Acceptance of the $500.00 administrative fee and/or reimbursement of Landlord’s attorneys’ and paralegals’ fees shall in no event obligate Landlord to consent to any proposed Transfer.

 

       15.7           Material Inducement. Tenant understands, acknowledges and agrees that (a) Landlords’ option to sublease from Tenant any space which Tenant proposes to sublease or terminate this Lease upon any proposed assignment or encumbrance of this Lease by Tenant rather than approve the proposed sublease, assignment or encumbrance, and (b) Landlord’s right to receive any excess consideration paid by a Transferee in connection with an approved Transfer are a material inducement for Landlord’s agreement to lease the Premises to Tenant upon the terms and conditions herein set forth.

 

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    16.           ENTRY BY LANDLORD. Landlord reserves and shall have the right to enter the Premises upon reasonable advance notice (which notice may be oral and which notice shall not be necessary in an emergency), to inspect the same, to supply any service to be provided by Landlord to Tenant hereunder, to submit the Premises to prospective purchasers or tenants, to post notices of nonresponsibility and “for lease” signs, and to alter, improve or repair the Premises and any portion of the Building, provided that the business of Tenant shall not be interfered with unreasonably. For each of the aforesaid purposes, Landlord shall at all times have and retain a key with which to unlock all of the doors in, upon and about the Premises excluding Tenant’s vaults and safes, and Landlord shall have the right to use any and all means which Landlord may deem proper to open said doors in an emergency, in order to obtain entry to the Premises, and any entry to the Premises obtained by Landlord by any of said means or otherwise, shall not under any circumstances be construed or deemed to be a forcible or unlawful entry into, or a detainer of the Premises or an eviction of Tenant from the Premises or any portion thereof.

 

    17.           HOLDING OVER. This Lease shall terminate and become null and void without further notice upon the expiration of the term herein specified, and any holding over by Tenant after such expiration shall not constitute a renewal hereof or give Tenant any rights under this Lease, except as otherwise herein provided, it being understood and agreed that this Lease cannot be renewed, extended or in any manner modified except in writing signed by both parties hereto. If Tenant shall hold over for any period after the expiration of said term, Landlord may, at its option, exercised by written notice to Tenant, treat Tenant as a tenant from month-to-month commencing on the first day following the expiration of this Lease and subject to the terms and conditions herein contained at a rental in the amount of two hundred percent (200%) of the last monthly rental, plus all other charges payable hereunder. If Tenant fails to surrender the Premises upon the expiration of this Lease despite demand to do so by Landlord, Tenant shall indemnify, defend and hold Landlord harmless from any and all claims, demands, damages, costs or liability, including without limitation attorney’s fees arising out of Tenant’s failure to surrender the Premises, including without limitation, any claim made by any succeeding tenant founded on or resulting from such failure to surrender.

 

    18.           DAMAGE OR DESTRUCTION.

 

       18.1   Partial Damage - Insured. In the event the Premises are damaged by any casualty which is covered under fire and extended coverage insurance carried by Landlord, then Landlord shall restore such damage provided insurance proceeds are available to pay ninety percent (90%) or more of the cost of restoration and provided such restoration can be completed within sixty (60) days after the commencement of the work in the opinion of a registered architect or engineer appointed by Landlord. In such event this Lease shall continue in full force and effect, except that Tenant shall be entitled to a proportionate reduction of rent as determined by Landlord while such restoration takes place; such proportionate reduction to be based upon the extent to which the restoration efforts interfere with Tenant’s business in the Premises. Tenant shall not be entitled to any compensation or damages for loss of the use of the whole or any part of the Premises and/or any inconvenience or annoyance occasioned by any such damage, repair, reconstruction or restoration.

 

       18.2   Partial Damage - Uninsured. If the Premises are damaged by a risk not covered by Landlord’s insurance or the proceeds of available insurance are less than ninety percent (90%) of the cost of restoration, or if the restoration cannot be completed within sixty (60) days after the commencement of work in the opinion of the registered architect or engineer appointed by Landlord, then Landlord shall have the option either to (a) repair or restore such damage, this Lease continuing proportionately abated as provided above, or (b) give notice to Tenant (at any time within thirty (30) days after such damage) terminating this Lease as of a date to be specified in such notice, which date shall not be less than thirty (30) nor more than sixty (60) days after giving such notice. In the event of the giving of such notice, this Lease shall expire and all interest of Tenant in the Premises shall terminate on such

 

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date so specified in such notice and the rent, reduced by any proportionate reduction based upon the extent, if any to which said damage interfered with the use and occupancy of Tenant as determined above shall be paid to the date of such termination.

 

       18.3           Total Destruction. In the event the Premises are totally destroyed or the Premises cannot be restored as required herein under the applicable laws and regulations, notwithstanding the availability of insurance proceeds, this Lease shall be terminated effective the date of the damage.

 

       18.4           Damage Near End of the Term. Notwithstanding anything to the contrary contained in this Section, Landlord shall not have any obligation whatsoever to repair, reconstruct or restore the Premises when the damage resulting from any casualty covered under this Section occurs during the last twelve (12) months of the term of this Lease or any extension hereof.

 

       18.5           Landlord’s Obligations. Landlord shall not be required to repair any injury or  damage by fire or other cause or to make any restoration or replacement of any paneling, decorations, partitions, railings, floor covering, office fixtures or any other improvements or property installed in the Premises by Tenant or at the direct or indirect expense of Tenant. Tenant shall be required to restore or replace same in the event of damage. Except for abatement of rent, if any, Tenant shall have no claim against Landlord for any damages suffered by reason of any such damage, destruction, repair or restoration nor shall Tenant have the right to terminate this Lease as the result of any statutory provision now or hereafter in effect pertaining to the damage and destruction of the Premises except as expressly provided herein.

 

19. DEFAULT; REMEDIES.

 

       19.1   Default by Tenant. Tenant shall be deemed to be in default under this Lease upon the occurrence of any of the following events:

 

       (a)           Tenant shall fail to pay when due any Basic Rent, additional rent or any other amounts payable under this Lease (collectively “Rent”); or

 

       (b)           Tenant shall neglect or fail to perform or observe any of the other Lease covenants to be performed or observed by Tenant, and Tenant shall fail to remedy this failure or neglect within thirty (30) days after Landlord shall have given to Tenant written notice specifying such neglect or failure (or within such period, if any, as may be reasonably required to cure such default, if it is of such nature that it cannot be cured within this thirty (30) day period provided that Tenant shall have commenced to effect such cure and shall proceed with due diligence to complete such cure); or

 

       (c)           Tenant shall neglect or fail to perform or observe any of the Lease covenants (including, without limitation, the timely payment of Rent, or any other amounts payable hereunder) three or more times in any 12-month period, such third occurrence being agreed between Landlord and Tenant to be incurable; or

 

       (d)           The making by Tenant of any general assignment or general arrangement for the benefit of creditors; or the filing of any action by or against Tenant under any insolvency, bankruptcy, reorganization, moratorium, or other debtor relief statute, whether now or hereafter existing, (unless in the case of such action taken against Tenant, the same is dismissed within sixty (60) days); or the appointment of a trustee or a receiver to take possession of substantially all of Tenant’s assets located at the Premises or of Tenant’s interest in this Lease, where possession is not restored to Tenant within thirty (30) days; or the attachment, execution or other judicial seizure of substantially all of Tenant’s assets

 

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located at the Premises or of Tenant’s interest in this Lease, where such seizure is not discharged in ten (10) days; or the admission by Tenant in writing of the inability to pay its debts as they become due; or

 

       (e)    Any guarantor of Tenant’s obligations under this Lease revokes, or attempts to revoke, such guaranty.

 

       19.2 Remedies of Landlord. Upon default under this Lease by Tenant, Landlord shall have the following rights and remedies in addition to any other rights or remedies available to Landlord at law or in equity:

 

       (a)           The rights and remedies provided by California Civil Code Section 1951.2, including, but not limited to, recovery of the worth at the time of award of the amount by which the unpaid Rent for the balance of the Term after the time of award exceeds the amount of rental loss for the same period that the Tenant proves could be reasonably avoided, as computed pursuant to subsection (b) of California Civil Code Section 1951.2. The “worth at the time of award’’ shall be computed by discounting such amount at the discount rate of the Federal Reserve Bank of San Francisco at the time of the award plus one percent (1%);

 

       (b)           The rights and remedies provided by California Civil Code Section 1951.4, that allows Landlord to continue this Lease in effect and to enforce all of its rights and remedies under this Lease, including the right to recover Rent as it becomes due, for so long as Landlord does not terminate Tenant’s right to possession; provided, however, if Landlord elects to exercise its remedies described in this subsection (b) and Landlord does not terminate this Lease, and if Tenant requests Landlord’s consent to an assignment of this Lease or a sublease of the Premises at such time as Tenant is in default, Landlord shall not unreasonably withhold its consent to such assignment or sublease. Acts of maintenance or preservation, efforts to relet the Premises or the appointment of a receiver on Landlord’s initiative to protect its interest under this Lease shall not constitute a termination of Tenant’s right to possession;

 

       (c)           The right to terminate this Lease by giving notice to Tenant in accordance with applicable law;

 

       (d)           The right and power, as attorney-in-fact for Tenant, to enter the Premises and remove all persons and property, to store such property in a public warehouse or elsewhere for the account of Tenant, and to sell such property and apply such proceeds pursuant to applicable California law. Landlord, as attorney-in-fact for Tenant, may from time to time sublet the Premises or any part thereof for such term or terms (which may exceed the term of this Lease) and at such rent and such other terms as Landlord in its sole discretion may deem advisable, with the right to make alterations and repairs to the Premises. Upon each such subletting, (1) Tenant shall be immediately liable to pay to Landlord, in addition to indebtedness other than Rent due hereunder, the cost of such subletting and such alterations and repairs incurred by Landlord and the amount, if any, by which the Rent and additional charges due hereunder for the period of such subletting (to the extent such period does not exceed the term of this Lease) exceeds the amount to be paid as Rent for the Premises for such period or (2) at the option of Landlord, rents received from such subletting shall be applied first, to payment of any indebtedness other than Rent due from Tenant to Landlord; second, to the payment of any costs of such subletting and of such alterations and repairs; third, to payment of Rent due and unpaid; and the residue, if any, shall be held by Landlord and applied in payment of future Rent as it becomes due. If Tenant has been credited with any rentals to be received by such subletting under option (i) and such rentals shall not be promptly paid to Landlord by the subtenant(s), or if such rentals received from such subletting under option (ii) during any month be less than that to be paid during that month by Tenant, Tenant shall pay any such deficiency to Landlord. This deficiency shall be calculated and paid monthly. For all purposes set forth in this subsection (d), Landlord is hereby irrevocably appointed attorney-in-fact for Tenant, with power of

 

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substitution. The taking possession of the Premises by Landlord, as attorney-in-fact for Tenant, shall not be construed as an election on its part to terminate this Lease unless a written notice of such intention be given to Tenant. Notwithstanding any such subletting without termination, Landlord may at any time thereafter elect to terminate this Lease for such previous breach; and

 

       (e)    The right to have a receiver appointed for Tenant, upon application by Landlord, to take possession of the Premises and to apply any rent collected from the Premises and to exercise all other rights and remedies granted to Landlord as attorney-in-fact for Tenant pursuant to subsection (d) above.

 

       19.3        Rights and Obligations Under the Bankruptcy Code.

 

       (a)           Upon the filing of a petition by or against Tenant under the United States Bankruptcy Code, Tenant as debtor in possession, or any trustee who may be appointed agree as follows: (i) to perform each and every obligation of Tenant under this Lease until such time as this Lease is either rejected or assumed by order of the United States Bankruptcy Court or otherwise; (ii) to pay monthly in advance on the first day of each month, as reasonable compensation for use and occupancy of the Premises, Basic Rent and all additional charges otherwise due pursuant to this Lease; (iii) to reject or assume this Lease within sixty (60) days of the filing of such petition under Chapter 7 of the Bankruptcy Code or within one hundred twenty (120) days of the filing of a petition under any other Chapter; (iv) to give Landlord at least forty-five (45) days’ prior written notice of any abandonment or vacation of the Premises (and that such abandonment or vacation shall be deemed to be a rejection of this Lease); (v) to do all other things of benefit to Landlord otherwise required under the Bankruptcy Code; (vi) to be deemed to have rejected this Lease in the event of the failure to comply with any of the above; and (vii) to have consented to the entry of an order by an appropriate United States Bankruptcy Court providing all of the above.

 

       (b)           No default by Tenant under this Lease, either prior to or subsequent to the filing of a petition in the United States Bankruptcy Court, shall be deemed to have been waived unless Landlord expressly does so.

 

       (c)           Included within and in addition to any other conditions or obligations imposed upon Tenant or its successor in the event of assumption and/or assignment are the following: (i) the deposit of an additional sum equal to three (3) months’ Basic Rent to be held pursuant to the terms of Section 6 of this Lease as Security Deposit; (ii) that the use of the Premises shall be as set forth in Section 7 of this Lease; (iii) the demonstration in writing by the reorganized debtor, its assignee or trustee in bankruptcy that it has sufficient background including, but not limited to, substantial business experience in and financial ability to operate a business in the Premises in the manner contemplated in this Lease and meets all other reasonable criteria of Landlord as did Tenant upon execution of this Lease; (iv) the prior written consent of any mortgagee to whom this Lease has been assigned or hypothecated as collateral security; and (v) that the Premises, at all times, remain a single premises and no physical changes of any kind may be made to the Premises unless in compliance with the applicable provisions of this Lease.

 

       19.4        Default by Landlord; Mortgage Protection. Tenant shall not exercise any right or remedy available to it by reason of a default by Landlord under this Lease unless Tenant has first given written notice to Landlord (and to any lender or ground lessor of the Premises of which Tenant is given written notice) describing the nature of such default and has afforded to Landlord (and any such lender or ground lessor) a period of thirty. (30) days within which to cure such default or, in the event such default cannot reasonably be cured within such 30 day period, such longer period of time as may be necessary to effect such cure (including time to obtain possession of the Premises by judicial or non-judicial

 

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foreclosure, unlawful detainer or otherwise), provided that Landlord (or such lender or ground lessor) shall commence and diligently pursue such cure to completion.

 

    20.           CONDEMNATION. If all or any part of the Premises shall be taken or appropriated for public or quasi-public use by right of eminent domain with or without litigation or transferred by agreement in connection with such public or quasi-public use, either party hereto shall have the right at its option exercisable within thirty (30) days of receipt of notice of such taking to terminate this Lease as of the date possession is taken by the condemning authority provided, however, that before Tenant may terminate this Lease by reason of taking or appropriation as provided hereinabove, such taking or appropriation shall be of such an extent and nature as to substantially handicap, impede or impair Tenant’s use of the Premises. If any part of the Building other than the Premises shall be so taken or appropriated, Landlord shall have the right at its option to terminate this Lease. No award for any partial or entire taking shall be apportioned, and Tenant hereby assigns to Landlord any award which may be made in such taking or condemnation, together with any and all rights of Tenant now or hereafter arising in or to the same or any part thereof, provided, however, that nothing contained herein shall be deemed to give Landlord any interest in or to require Tenant to assign to Landlord any award made to Tenant for taking of personal property and fixtures belonging to Tenant and/or the interruption of or damage to Tenant’s business and/or Tenant’s unamortized cost of leasehold improvements. In the event of a partial taking which does not result in a termination of this Lease, rent shall be abated in the proportion which the part of the Premises so made unusable bears to the rented area of the Premises immediately prior to the taking. No temporary taking of the Premises and/or of Tenant’s rights herein or under this Lease shall terminate this Lease or give Tenant any right to any abatement of rent thereunder, any award made to Tenant by reason of any such temporary taking shall be entirely to Tenant and Landlord shall not be entitled to share therein.

 

    21.           LATE CHARGES. Tenant hereby acknowledges that late payment by Tenant to Landlord of rent and other sums due hereunder will cause Landlord to incur costs not contemplated by this Lease, the exact amount of which will be extremely difficult to ascertain. Such costs include, but are not limited to, processing and accounting charges, and late charges which may be imposed on Landlord by the terms of any mortgage or trust deed covering the Premises. Accordingly, in the event that Tenant shall fail to pay to Landlord within ten (10) days of the date when due any payment owing to Landlord pursuant to the terms of this Lease, such past due amount shall become subject to a service charge of ten percent (10%) of the amount due, and such service charge shall become immediately due and payable in addition to other amounts owed under this Lease.

 

    22.           LANDLORD’S PERFORMANCE OF TENANT’S OBLIGATIONS. Should Tenant fail to pay and discharge, when due and payable, any tax or assessment, or any premium or other charge in connection with any insurance policy or policies which Tenant is obligated to pay, or any lien or claim for labor or material employed or used in, or any claim for damages arising out of the repair, alteration, maintenance and use of the Premises as provided in this Lease, after fifteen (15) days written notice from Landlord, Landlord may, at its option, and without waiving or releasing Tenant from any of Tenant’s obligations hereunder, pay any such tax, assessment, lien, claim, insurance premium or charge, or settle or discharge any action therefore or satisfy any judgment thereon. All costs, expenses and other sums incurred or paid by Landlord in connection therewith, together with interest at the rate of ten percent (10%) per annum on such costs, expenses and sums from the date incurred or paid by Landlord, shall be deemed to be an additional charge hereunder and shall be paid by Tenant with and at the same time as the next installment of rent hereunder, and any default therein shall constitute a breach of the covenants and conditions of the Lease.

 

    23.           PARKING. Tenant and Tenant’s agents and employees are allotted up to three (3) marked reserved spaces in the parking facilities, subject to the rules and regulations of Landlord for such

 

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parking lot attached hereto as Exhibit “C” and incorporated herein by reference, as such rules and regulations may be changed from time to time by Landlord. Tenant acknowledges that Landlord occupies a portion of the Building and may allocate to itself the right to use parking spaces in the Building parking facilities which may be exclusive and/or more numerous than Tenant may have in relation to the relative square footage of the Premises and the space occupied by Landlord. Landlord reserves the right to assign and from time to time reassign the location of Tenant’s parking spaces.

 

    24.           ESTOPPEL CERTIFICATE. Tenant’s Certificates. Tenant, at any time and from time to time upon not less than ten (10) days prior written notice from Landlord, will execute, acknowledge and deliver to Landlord and, at Landlord’ request, to any prospective purchaser, ground or underlying lessor or mortgagee of the Premises or the Building, a certificate of Tenant stating: (a) that Tenant has accepted the Premises (or, if Tenant has not done so, that Tenant has not accepted the Premises and specifying the reasons therefor), (b) the Commencement Date and Expiration Date of this Lease, (c) that this Lease is unmodified and in full force and effect (or, if there have been modifications, that this Lease is in full force and effect as modified and stating the modifications), (d) whether or not there are then existing any defenses against the enforcement of any of the obligations of Tenant under this Lease (and, if so, specifying same), (e) the dates, if any, to which the Rent and other charges under this Lease have been paid, and (f) any other information that may reasonably be required by any of such persons. At the request of Landlord, Tenant will prepare and furnish to Landlord its most current and (if available) past three years’ annual financial statements for Landlord’s confidential use with proposed purchasers of or lenders on the Premises. Failure by Tenant to execute a certificate within this 10 day period shall constitute Landlord as Tenant’s special attorney-in-fact for the purpose of executing and delivering such a statement on Tenant’s behalf. It is acknowledged that such certificate may be relied upon by Landlord, any prospective purchaser, ground or underlying lessor or lender of the Building or the land on which the Building is located.

 

    25.           BROKERS.

 

       25.1           Landlord represents and warrants that, except for Landlord’s broker Shawn Johnson and Danny Jones of Keegan & Coppin Company, Inc. (“Landlord’s Broker”), Landlord has not dealt with any real estate broker, sales person, or finder in connection with this Lease, and no such person, except for Landlord’s Broker, initiated or participated in the negotiation of this Lease. Tenant represents and warrants that except for Tenant’s broker, Steven Leonard of Meridian Commercial (“Tenant’s Broker”), it has not dealt with any real estate broker, sales person, or finder in connection with this Lease, and no such person, except for Tenant’s Broker, initiated or participated in the negotiation of this Lease. Landlord hereby agrees to indemnify and hold harmless Tenant from and against any and all demands, damages, costs, liabilities and claims, including without limitation attorney’s fees, for commissions and fees arising out of a breach of the foregoing representation of Landlord. Tenant hereby agrees to indemnify and hold harmless Landlord from and against any and all demands, damages, costs, liabilities and claims, including without limitation attorney’s fees, for commissions and fees arising out of a breach of the foregoing representation of Tenant.

 

       25.2           Landlord agrees to pay a leasing commission to Landlord’s Broker pursuant to a separate agreement with such broker. Landlord shall have no obligation to pay any commission to Tenant’s Broker and no liability whatsoever with respect thereto. Any division of the commission, paid by Landlord to Landlord’s Broker, between Landlord’s Broker and Tenant’s Broker shall be pursuant to a separate agreement between Landlord’s Broker and Tenant’s Broker and shall be the sole responsibility of Landlord’s Broker. Upon receipt of such commission(s), Landlord’s Broker and Tenant’s Broker shall each release any and all claims for any commissions, finder’s fees or broker’s fees that arise out of or are in any way connected with this Lease. Each party shall indemnify, protect, defend and hold harmless the other party against all claims, demands, losses, liabilities, lawsuits, judgments, costs and expenses

 

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 (including reasonable attorney’s fees) for any leasing commission, finder’s fee or equivalent compensation alleged to be owing on account of the indemnifying party’s dealings with any real estate broker, agent or finder.

 

    26.   NOTICES. All notices, requests, demands and communications hereunder (collectively “Notices”) will be given by first class certified or registered United States Mail, return receipt requested, or by a nationally recognized overnight courier with verification of delivery, properly addressed with postage or delivery prepaid, to be effective when properly sent and received or refused or returned as undeliverable. Notices will be addressed to the parties as set forth below. Either party hereto may change the place for the giving of Notices to it by thirty (30) days written notice to the other party as provided herein.

 

	  	

If to Landlord:

	

Citigroup-CRS

One Sansome Street, 7th Floor

San Francisco, California 94104

Attn: Real Estate Director

	 	 	 
	  	  	

With a copy to:

	 	 	 
	  	  	

Citigroup-CRS

820 Stillwater Road, C-115

West Sacramento, California 95605

Attn: Lease Administration

	

-

	  	

Copies of any notices commencing or relating to any default by, or action, suit or proceeding against Landlord arising under this Lease shall also be sent to:

	 	 	 
	  	  	

Citigroup Inc.

Corporate Law Department

909 Third Avenue, 15th Floor

New York, New York 10022

Attn: Associate General Counsel Real Estate

	 	 	 
	  	

If to Tenant:

	

Circle Bank

290 B Street, Ste. 200

Santa Rosa, California 95401

Attn: KIMBERLY PETRINI

 

    27.   SUBORDINATION. Tenant covenants and agrees that it will execute without further consideration any and all instruments desired by Landlord or Landlord’s mortgagee subordinating this Lease in the manner requested by Landlord to all ground or underlying leases and the lien of any mortgage and/or any deed of trust or other encumbrance which may now or hereafter affect the Premises together with all renewals, modifications, consolidations, replacements or extensions thereof, provided that this Lease shall remain in full force and effect and Tenant shall not be disturbed in the event of sale or foreclosure so long as Tenant is not in default hereunder. Tenant agrees to attorn to the successor in interest of Landlord following any transfer of such interest either voluntarily or by operation of law and to recognize such successor as Landlord under this Lease. However, if Landlord or any such ground lessor

 

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or mortgagee so elects, this Lease shall be deemed prior in lien to any ground lease, mortgage, deed of trust or other encumbrance upon or including the Premises regardless of date of recording and Tenant will execute a statement in writing to such effect at Landlord’s request. Landlord is hereby irrevocably appointed and authorized as agent and attorney-in-fact of Tenant to execute said instruments within five (5) days after notice from Landlord demanding the execution thereof.

 

    28.           FORCE MAJEURE. If the performance of any act to be performed hereunder by either party is delayed for reasons beyond the control of the party responsible for such performance, including but not limited to acts of God (e.g., earthquake), war, acts of civil disobedience or strike, the time for performance shall be extended for a period of time equivalent to the period of such delay or delays; provided, however, that the time for performance shall in no event be extended due to financial or economic problems of either party, their architects, contractors, agents or employees, or delays caused by the inability of architects, contractors (except where caused by strike), suppliers or other employees and agents to meet deadline, delivery or contract dates, unless such inability is caused by an act of God, war, act of civil disobedience or strike. It shall be a condition of Tenant’s right to claim an extension of time as a result hereof that Tenant notify Landlord in writing within ten (10) days after the occurrence of such cause, specifying the nature thereof and the period of time contemplated or necessary for performance.

 

    29.           SURRENDER OF PREMISES. The voluntary or other surrender of this Lease by Tenant, or a mutual cancellation thereof, shall not work a merger, and shall, at the option of Landlord, terminate all or any existing subleases or subtenancies, or may, at the option of Landlord, operate as an assignment to it of any or all such subleases or subtenancies.

 

    30.           RULES AND REGULATIONS. Tenant, Tenant’s agents, servants, employees, visitors and licensees shall observe and comply fully and faithfully with all rules and regulations adopted by Landlord for the care, protection, cleanliness and operation of the Building and its tenants, including those rules and regulations attached hereto as Exhibit “B” and incorporated herein by reference, and any modification or addition thereto adopted by Landlord, provided Landlord shall give written notice thereof to Tenant. Landlord shall not be responsible to Tenant for the nonperformance by any other tenant or occupant of the Building of any rules and regulations.

 

    31.           TRANSFER BY LANDLORD. The term “Landlord” as used in this Lease, so far as covenants or obligations on the part of Landlord, are concerned, shall mean and include only the holder or holders of the tenant’s interest in the leasehold estate under the Master Lease at the time in question and in the event of any transfer or transfers of the title to the Premises, Landlord herein named (and in case of any subsequent transfers or conveyances, the then grantor), except as hereinafter provided, shall be automatically freed and relieved from and after the date of such transfer or conveyance, of all personal liability as respects the performance of any covenants or obligations on the part of Landlord contained in this Lease thereafter to be performed, provided that any funds in which Tenant has an interest which are in the hand of such landlord or the then grantor at the time of such transfer shall be turned over to the grantee, and the amount then due and payable to Tenant by Landlord or the then grantor under any provisions of this Lease shall be paid to Tenant. It is intended that the covenants and obligations contained in this Lease on the part of Landlord shall, subject to the foregoing, be binding on Landlord, its successors and assigns, only during and in respect of their respective successive periods of ownership.

 

    32.           LIMITATION ON LANDLORD’S LIABILITY. Notwithstanding anything contained in this Lease to the contrary, the obligations of Landlord under this Lease (including any actual or alleged breach or default by Landlord) do not constitute personal obligations of the individual partners, directors, officers or shareholders of Landlord or Landlord’s partners, and Tenant shall not seek recourse against the individual partners, directors, officers or shareholders of Landlord or Landlord’s partners, or any of their personal assets for satisfaction of any liability with respect to this Lease. In addition, in consideration of

 

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the benefits accruing hereunder to Tenant and notwithstanding anything contained in this Lease to the contrary, Tenant hereby covenants and agrees for itself and all of its successors and assigns that the liability of Landlord for its obligations under this Lease (including any liability as a result of any actual or alleged failure, breach or default hereunder by Landlord), shall be limited solely to, and Tenant’s and its successors’ and assigns’ sole and exclusive remedy shall be against, Landlord’s interest in the Building and the Premises, and no other assets of Landlord.

 

    33.   GENERAL PROVISIONS.

 

       33.1           Waiver. No waiver of any default or breach of any covenant by either party hereunder shall be implied from any omission by either party to take action on account of such default if such default persists or is repeated, and no express waiver shall affect any default other than the default specified in the waiver, and then said waiver shall be operative only for the time and to the extent therein stated. Waivers of any covenant, term or condition contained herein by either party shall not be construed as a waiver of any subsequent breach of the same covenant, term or condition. The consent or approval by either party to or of any act by either party requiring further consent or approval shall not be deemed to waive or render unnecessary their consent or approval to or of any subsequent similar acts. No payment by Tenant or receipt by Landlord of a lesser amount than the rent payment herein stipulated shall be deemed to be other than on account of the rent, nor shall any endorsement or statement on any check or any letter accompanying any check or payment as rent be deemed an accord and satisfaction, and Landlord may accept such check or payment without prejudice to Landlord’s right to recover the balance of such rent or pursue any other remedy provided in this Lease.

 

       33.2          Time. Time is of the essence hereof.

 

       33.3          Severability. If any term, covenant, condition or provision of this Lease, or the application thereof to any person or circumstance, shall to any extent be held by a court of competent jurisdiction to be invalid, void, or unenforceable, the remainder of the terms, covenants, conditions, or provisions of this Lease, or the application thereof to any person or circumstance, shall remain in full force and effect and shall in no way be affected, impaired or invalidated thereby.

 

       33.4          Quiet Possession. Provided Tenant has performed all of the terms, covenants, agreements and conditions of this Lease, including the payment of rental and all other sums due hereunder, Tenant shall peaceably and quietly hold and enjoy the Premises for the term herein described subject to the provisions and conditions of this Lease.

 

       33.5   Successors and Assigns. Subject to the restrictions on transfer contained herein, this Lease and each of its covenants and conditions shall be binding and shall inure to the benefit of the parties hereto and their respective heirs, successors and legal representatives and their respective assigns, subject to the provisions hereof. Whenever in this Lease a reference is made to Landlord, such reference shall be deemed to refer to the person in whom the interest of landlord shall be vested. Any successor or assignee of Tenant who accepts an assignment of or receives the benefit of this Lease and enters into possession or enjoyment hereunder shall thereby assume and agree to perform and be bound by the covenants and conditions hereof. Nothing herein contained shall be deemed in any manner to give a right of assignment to Tenant without the prior written consent of Landlord.

 

       33.6   Attorneys’ Fees. If any legal action, arbitration or other proceeding is commenced to enforce or interpret any provision of this Lease, the prevailing party shall be entitled to an award of its attorneys’ fees and expenses. The phrase “prevailing party” shall include a party who receives substantially the relief desired whether by dismissal, summary judgment, judgment or otherwise.

 

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       33.7           Cost of Suit. In the event that any action shall be instituted by either of the parties hereto for the enforcement of any of its rights or remedies in and under this Lease, or any facts based upon or involving same, the prevailing party, whether in court or by way of out-of-court settlement, shall be entitled to recover from the nonprevailing party or parties such prevailing party’s attorney’s fees, court costs, expert witness fees, and/or other expenses relating to such controversy including attorney’s fees, court costs and/or expenses on appeal, if any.

 

       33.8           Entire Agreement. This Lease contains the entire agreement between the parties regarding the Premises and supersedes all prior agreements, whether written or oral, between the parties regarding the same subject. This Lease may only be modified by subsequent written agreement signed by both parties.

 

       33.9           Light and Air Easement. Any diminution or shutting off of light or air by any structure which may be erected on lands adjacent to the Building shall in no way affect this Lease, abate rent or otherwise impose any liability on Landlord.

 

       33.10         Governing Law. This Lease and the legal relations between the parties hereto shall be governed by and construed in accordance with the laws of the state in which the Building is located.

 

       33.11         Joint and Several Liability. If more than one person or entity executes this Lease as Tenant: (a) each of them is and shall be jointly and severally liable for the covenants, conditions, provisions and agreements of this Lease to be kept, observed and performed by Tenant; and (b) the act or signature of, or notice from or to, any one or more of them with respect to this Lease shall be binding upon each and all of the persons and entities executing this Lease as Tenant with the same force and effect as if each and all of them had so acted or signed, or given or received such notice.

 

       33.12         Headings; Exhibits. The headings of the sections of this Lease are for convenience only and shall not be deemed to be relevant in resolving any question or construction of any section of this Lease. Exhibits attached hereto are deemed by attachment to constitute a part of this Lease and are incorporated herein.

 

       33.13         Recording. Neither Landlord nor Tenant shall record this Lease. In addition, neither party shall record a short form memorandum of this Lease without the prior written consent (and signature on the memorandum) of the other party, and provided that prior to recordation Tenant executes and delivers to Landlord, in recordable form, a properly acknowledged quitclaim deed or other instrument distinguishing all of Tenant’s rights and interest in and to the Building and the Premises, and designating Landlord as the transferee, which deed or other instrument shall be held by Landlord and may be recorded by Landlord once this Lease terminates or expires (but not prior thereto). If such short form memorandum is recorded in accordance with the foregoing, the party requesting the recording shall pay for all costs of or related to such recording, including, but not limited to, recording charges and documentary transfer taxes.

 

       33.14         Financial Statements. Upon ten (10) days prior written request from Landlord (which Landlord may make at any time during the term but not more often that two (2) times in any calendar year), Tenant shall deliver to Landlord (a) a current financial statement of Tenant and any guarantor of this Lease, and (b) financial statements of Tenant and such guarantor for the two (2) years prior to the current financial statement year. Such statements shall be prepared in accordance with generally acceptable accounting principles and certified as true in all material respects by Tenant (if Tenant is an individual) or by an authorized officer or general partner of Tenant (if Tenant is a corporation or partnership, respectively).

 

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       33.15           Tenant’s Authority. If Tenant executes this Lease as a partnership or corporation, then Tenant and the persons and/or entities executing this Lease on behalf of Tenant represent and warrant that: (a) Tenant is a duly authorized and existing partnership or corporation, as the case may be, and is qualified to do business in the state in which the Building is located; (b) such persons and/or entities executing this Lease are duly authorized to execute and deliver this Lease on Tenant’s behalf in accordance with the Tenant’s partnership agreement (if Tenant is a partnership), or a duly adopted resolution of Tenant’s board of directors and the Tenant’s by-laws (if Tenant is a corporation); and (c) this Lease is binding upon Tenant in accordance with its terms.

 

       33.16           Construction. It is acknowledged that both parties and their professional advisors have participated equally in the negotiation and drafting of this Lease and have had ample opportunity to review and comment upon the same prior to the execution hereof. Accordingly, any ambiguities herein shall be construed without regard to any rule of law providing for the resolution of contractual ambiguities against the party who drafted the applicable document.

 

    IN WITNESS WHEREOF, the parties hereto have executed this Lease as of the date first above written.

 

	

TENANT:

	

LANDLORD:

	

CIRCLE BANK,

a California Corporation

	

CITIBANK (WEST), FSB,

a federal savings bank

	

By:

Name:  Kimberly A. Petrini

Title:    President/CEO

	

By:

Name:  Brad S. Thomas

Title:    Vice President

 

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EXHIBIT A to LEASE

 

MASTER LEASE

 

* NOTHING INCLUDED or ATTACHED. *

 

A-1

  

 

  

EXHIBIT B to LEASE

 

LEASE AGREEMENT

 

RULES AND REGULATIONS

 

1.   Tenant shall not install, construct, or place signs or advertising in the windows, the door, or the exterior windows of the Premises without the prior written consent of Landlord, which may be withheld for any or no reason in Landlord’s sole discretion. Tenant shall not place anything or allow anything to be placed near the glass of any window, door, partition or wall which may appear unsightly from outside the Premises. All permitted signage shall also be subject to government approval. All approved signs or lettering on doors shall be printed, painted, affixed or inscribed at the expense of Tenant by a person approved of by Landlord. Landlord may in its sole discretion furnish and install a Building standard window covering for any or all exterior windows. Tenant shall not without prior written consent of Landlord sunscreen or otherwise block any window.

 

2.   Tenant shall not obtain for use upon the Premises, towel or other similar service or accept barbering or bootblacking services on the Premises, except from persons authorized by Landlord and at the hours and under regulations fixed by Landlord.

 

3.   The sidewalks, halls, passages, exits and entrances shall not be obstructed by any of the tenants or used by them for a purpose other than for ingress to and egress from their respective premises. The halls, passages, exits, entrances and roof are not for the use of the general public and Landlord shall in all cases retain the right of control and prevent access thereto by all persons whose presence in the judgment of Landlord shall be prejudicial to the safety, character, reputation and interest of the Building and its tenants, provided that nothing herein contained shall be construed to prevent such access to persons with whom Tenant normally deals in the ordinary course of Tenant’s business, unless such persons are engaged in illegal activities. No tenant and no employees or invitees of any tenant shall go upon the roof of the Building.

 

4.   Tenant shall not alter any lock or install any new or additional locks or any bolts on any door of the Premises without the written consent of Landlord.

 

5.   The toilet rooms, urinals, wash bowls and other apparatus shall not be used for any purpose other than that for which they were constructed and no foreign substance of any kind whatsoever shall be thrown therein and the expense of any breakage, stoppage or damage resulting from the violation of this rule shall be borne by the tenant who, or whose employees or invitees shall have caused it.

 

6.   Tenant shall not overload the floor of the Premises. Except during the construction of the Tenant Improvements pursuant to the Lease, Tenant shall not drive nails, screw or drill into the partitions, woodwork or plaster or in any way deface the Premises or any part thereof. No boring, cutting or stringing of wires or laying of linoleum or other similar floor coverings shall be permitted except with the prior written consent of the Landlord and as the Landlord may direct or during the construction of the Tenant Improvements pursuant to the Lease.

 

7.   No furniture, freight or equipment of any kind shall be brought into the Building without the consent of Landlord and all moving of the same into or out of the Building shall be done at such time and in such manner as Landlord shall designate. Landlord shall have the right to prescribe the weight, size and position of all safes and other heavy equipment brought into the Building and

 

B-1

  

 

  

also the times and manner of moving the same in and out of the Building. Safes or other heavy objects shall, if considered necessary by Landlord, stand on wood strips of such thickness as is necessary to properly distribute the weight. Landlord will not be responsible for loss of or damage to any such safe or property from any cause and all damage done to the Building by moving or maintaining any such safe or other property shall be repaired at the expense of Tenant. There shall not be used in any space, or in the public halls of the Building, either by Tenant or others, any hand trucks except those equipped with rubber tires and side guards.

 

8.   Tenant shall not employ any person or persons other than the janitor of Landlord for the purpose of cleaning the Premises unless otherwise agreed to by Landlord. Except with the written consent of Landlord, no person or persons other than those approved by Landlord shall be permitted to enter the Building for the purpose of cleaning the same. Tenant shall not cause any unnecessary labor by reason of Tenant’s carelessness or indifference in the preservation of good order and cleanliness. Landlord shall in no way be responsible to Tenant for any loss of property on the Premises, however occurring or for any damage done to the effects of Tenant by the janitor or any other employee or any other person.

 

9.        Tenant shall not use, keep or permit to be used or kept any foul or noxious gas or substance in the Premises, or permit or suffer the Premises to be occupied or used in a manner offensive or objectionable to Landlord or other occupants of the Building by reason of noise, odors and or vibrations, or interfere in any way with other tenants or those having business therein, nor shall any animals or birds be brought in or kept in or about the Premises or the Building. No Tenant shall make or permit to be made any unseemly or disrupting noises or disturb or interfere with occupants of this Building or neighboring buildings or Premises or those having business with them whether by the use of any musical instrument, radio, phonograph, unusual noise, or in any other way. No Tenant shall throw anything out of doors or down the passageways.

 

10.      Tenant shall not use or keep in the Premises or the Building any kerosene, gasoline or inflammable or combustible fluid or material, or use any method of heating or air conditioning other than that supplied by Landlord.

 

11.      Landlord will direct electricians as to where and how telephone and telegraph wires are to be introduced. Except during the construction of the Tenant Improvements pursuant to the Lease, no boring or cutting for wires will be allowed without the consent of Landlord. The location of telephones, call boxes and other office equipment affixed to the Premises shall be subject to the approval of Landlord.

 

12.      All keys to office, rooms and toilet rooms shall be obtained from Landlord’s representative and Tenant shall not from any other source duplicate, obtain keys or have keys made. Tenant, upon termination of the tenancy, shall deliver to Landlord the keys of the offices, rooms and toilet rooms which shall have been furnished or shall pay Landlord the cost of replacing same or of changing the lock or locks operated by such lost key if Landlord deems it necessary to make such change.

 

13.      Tenant shall not lay linoleum, tile, carpet or other similar floor covering so that the same shall be affixed to the floor of the Premises in any manner except as approved by Landlord. The expense of repairing any damage resulting from a violation of this rule or removal of any floor covering shall be borne by Tenant.

 

B-2

  

 

  

14.     No furniture, packages, supplies, equipment or merchandise will be received in the Building or carried up or down in the elevators, except between such hours and in such elevators as shall be designated by Landlord.

 

15.     On Sundays and legal holidays, and on other days between the hours of 6:00 p.m. and 8:00 a.m. the following day, access to the Building or to the halls or corridors in the Building, or to the Premises may be refused unless the person seeking access is known to the person or employee of the Building in charge, if any, and has a pass or is properly identified. Landlord shall in no case be liable for damages for any error with regard to the admission to or exclusion from the Building of any person. In the case of invasion, mob, public excitement, or other commotion; Landlord reserves the right to prevent access to the Building during the continuance of the same by closing of the doors or otherwise, for the safety of the tenants and protection of property in the Building.

 

16.     Tenant shall see that the doors of the Premises are closed and securely locked before leaving the Building and must observe strict care and caution that all water faucets or water apparatus are entirely shut off before Tenant or Tenant’s employees leave the Building, and that all electricity shall likewise be carefully shut off, so as to prevent waste or damage, and for any default or carelessness Tenant shall make good all injuries sustained by other tenants or occupants of the Building or Tenant.

 

17.     Landlord reserves the right to exclude or expel from the Building any person who, in the judgment of Landlord, is intoxicated or under the influence of liquor or drugs, or who shall in any manner do any act in violation of any of the rules and regulations of the Building.

 

18.     The requirements of Tenant will be attended to only upon application to the Landlord’s representative. Employees of Landlord shall not perform any work or do anything outside of their regular duties unless under special instructions from Landlord, and no employee will admit any person (Tenant or otherwise) to any office without specific instructions from Landlord.

 

19.     No vending machine or machines of any description shall be installed, maintained or operated upon the Premises without the written consent of the Landlord.

 

20.     Landlord shall have the right, exercisable without notice and without liability to Tenant, to change the name and the street address of the Building of which the Premises are a part.

 

21.     Tenant agrees that it shall comply with all fire and security regulations that may be issued from time to time by Landlord and Tenant also shall provide Landlord with the name of a designated responsible employee to represent Tenant in all matters pertaining to such fire or security regulations.

 

22.     Landlord reserves the right by written notice to Tenant, to rescind, alter or waive any rule or regulation at any time prescribed for the Building when, in Landlord’s judgment, it is necessary, desirable or proper for the best interest of the Building and its tenants.

 

23.     Tenants shall not disturb, solicit, or canvass any occupant of the Building and shall cooperate to prevent same.

 

24.     Without the written consent of Landlord, Tenant shall not use the name of the Building in connection with or in promoting or advertising the business of Tenant except as Tenant’s address.

 

B-3

  

 

  

25.     Landlord shall furnish heating and air conditioning during the hours of 7:00 a.m. to 6:00 p.m. Monday through Friday, except for holidays.

 

Landlord reserves the right to make such other and further rules and regulations as in its judgment may be for the safety, care and cleanliness of the Premises and for the preservation of good order therein. Tenant agrees to abide by all such rules and regulations hereinabove stated and additional rules and regulations which are adopted.

 

To the extent that any of the Rules and Regulations as set forth in the Master Lease are more stringent than those set forth above, the Rules and Regulations of the Master Lease shall be controlling.

 

B-4

  

 

  

EXHIBIT C to Lease

PARKING RULES AND REGULATIONS

 

1.       The assignment of parking spaces shall be at the discretion of Landlord.

 

2.       Tenant and its employees utilizing the parking facilities shall complete a parking information card which shall be kept on file with the Corporate Realty Services for the Building.

 

3.       Tenant and its employees agree to park in their assigned areas and to park only reasonable commuter vehicles in such assigned areas. At no time shall Tenant or its employees park in a space assigned to a Citibank (West), FSB Customer Parking Area, without prior approval.

 

4.       Tenant and its employees agree to park at their own risk and only during such hours designated by Landlord from time to time. Citibank (West), FSB, a federal savings bank, its parent corporation (Citigroup Inc.), and their respective affiliates, officers, directors, employees, agents, successors and assigns shall not be held liable for any damages incurred by Tenant, and its respective affiliates, officers, directors, employees, agents, contractors, successors, assigns, and invitees while parking on the premises.

 

5.       Tenant and its employees shall not use the parking area as a trash receptacle.

 

6.       Landlord shall not be liable to Tenant for any interruption of Tenant’s use of the parking facility due to any repairs, improvements, alterations or any security measures, or resulting from any cause beyond the control of Landlord or otherwise

 

7.       Landlord shall be entitled, without any attendant obligation, to tow away any vehicle that is improperly parked, at the vehicle owner’s sole cost and expense. In the event of such tow-away, Landlord shall have no liability therefore to Tenant or such vehicle owner.

 

8.       Tenant and its employees, by parking their vehicles in the parking facility, agree to abide by the Rules and Regulations governing the parking facility as determined and amended, from time to time, by Landlord.

 

C-1firstbancshares_exh10-1.htm

Exhibit 10.1

 

  

(CDFI Bank/Thrifts

Senior Preferred Stock)

 

 

UNITED STATES DEPARTMENT OF THE TREASURY

1500 PENNSYLVANIA AVENUE, NW

WASHINGTON, D.C. 20220

 

Dear Ladies and Gentlemen:

 

The company set forth on the signature page hereto (the “Company”) intends to issue the number of shares of a series of its preferred stock set forth on Schedule A hereto (the “CDCI Preferred Shares”) to the United States Department of the Treasury (the “Investor”) in exchange for the number of shares of preferred stock previously acquired by the Investor pursuant to the Company’s participation in the Troubled Asset Relief Program Capital Purchase Program set forth on Schedule A (the “CPP Preferred Shares”).

 

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

 

Each of the Company and the Investor hereby confirms its agreement with the other party with respect to the issuance by the Company of the CDCI Preferred Shares and the exchange of the “Preferred Shares” for the CPP Preferred Shares pursuant to this letter agreement and the Exchange Agreement on the terms specified on Schedule A hereto.

 

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

 

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

 

* * *

UST Sequence No. 511

  

  

  

 

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

 

	
  

	
UNITED STATES DEPARTMENT OF THE TREASURY

 

 

	
  

	
         

	 By:________________________________________

	
  

	
       Name:

	
  

	
      Title:

 

 

	
  

	
COMPANY:  THE FIRST BANCSHARES, INC.

 

	
  

	
 

	By:________________________________________ 	 	 

	
  

	
 

	
      Name:  M. Ray Cole, Jr.

	
  

	
 

	
      Title:    Chief Executive Officer

 

Date:_________________________

UST Sequence No. 511

  

  

 

 

  

EXHIBIT A

(CDFI Bank/Thrifts

Senior Preferred Stock)

EXCHANGE AGREEMENT

 

 

STANDARD TERMS

 

UST Sequence No. 511

  

  

  

 

TABLE OF CONTENTS

 

Page

 

 

ARTICLE I

 

THE CLOSING; THE EXCHANGE OF CDCI PREFERRED STOCK FOR CPP PREFERRED STOCK

 

	
  

	
Section 1.1

	
The CDCI Preferred Stock 

	
2

	
  

	
Section 1.2

	
The Closing 

	
2

 

ARTICLE II

 

EXCHANGE

 

	
  

	
Section 2.1

	
Exchange

	
6

	
  

	
Section 2.2

	
Exchange Documentation 

	
6

 

ARTICLE III

 

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

 

	
  

	
Section 3.1

	
Existence and Power 

	
6

	
  

	
Section 3.2

	
CDCI Preferred Shares 

	
7

	
  

	
Section 3.3

	
Community Development Financial Institution Status; Domestic Ownership 

	
7

	
  

	
Section 3.4

	
Authorization and Enforceability 

	
8

	
  

	
Section 3.5

	
Anti-Takeover Provisions and Rights Plan 

	
9

	
  

	
Section 3.6

	
No Company Material Adverse Effect 

	
9

	
  

	
Section 3.7

	
Company Financial Statements 

	
9

	
  

	
Section 3.8

	
No Undisclosed Liabilities 

	
9

	
  

	
Section 3.9

	
Offering of Securities 

	
9

	
  

	
Section 3.10

	
Litigation and Other Proceedings 

	
9

	
  

	
Section 3.11

	
Compliance with Laws 

	
10

	
  

	
Section 3.12

	
Employee Benefit Matters 

	
10

	
  

	
Section 3.13

	
Taxes 

	
11

	
  

	
Section 3.14

	
Properties and Leases 

	
11

	
  

	
Section 3.15

	
Environmental Liability 

	
11

	
  

	
Section 3.16

	
Risk Management Instruments 

	
12

	
  

	
Section 3.17

	
Agreements with Regulatory Agencies 

	
12

	
  

	
Section 3.18

	
Insurance 

	
12

	
  

	
Section 3.19

	
Intellectual Property 

	
13

	
  

	
Section 3.20

	
Brokers and Finders 

	
13

	
  

	
Section 3.21

	
Disclosure Schedule 

	
13

UST Sequence No. 511                                                                   --

  

i

  

	
  

	
Section 3.22

	
CPP Preferred Stock 

	
13

 

ARTICLE IV

 

COVENANTS

 

	
  

	
Section 4.1

	
Affirmative Covenants 

	
13

	
  

	
Section 4.2

	
Negative Covenants 

	
20

 

ARTICLE V

 

ADDITIONAL AGREEMENTS

 

	
  

	
Section 5.1

	
Purchase for Investment 

	
22

	
  

	
Section 5.2

	
Legends 

	
22

	
  

	
Section 5.3

	
Transfer of CDCI Preferred Shares 

	
24

	
  

	
Section 5.4

	
Rule 144; Rule 144A; 4(11⁄2) Transactions 

	
24

	
  

	
Section 5.5

	
Depositary Shares 

	
26

	
  

	
Section 5.6

	
Expenses and Further Assurances 

	
26

 

ARTICLE VI

 

MISCELLANEOUS

 

	
  

	
Section 6.1

	
Termination 

	
27

	
  

	
Section 6.2

	
Survival 

	
27

	
  

	
Section 6.3

	
Amendment 

	
28

	
  

	
Section 6.4

	
Waiver of Conditions 

	
28

	
  

	
Section 6.5

	
Governing Law; Submission to Jurisdiction, etc 

	
28

	
  

	
Section 6.6

	
Notices 

	
29

	
  

	
Section 6.7

	
Definitions, Interpretation 

	
29

	
  

	
Section 6.8

	
Interpretation 

	
32

	
  

	
Section 6.9

	
Assignment 

	
33

	
  

	
Section 6.10

	
Severability 

	
33

	
  

	
Section 6.11

	
No Third-Party Beneficiaries 

	
33

	
  

	
Section 6.12

	
Entire Agreement, etc 

	
33

	
  

	
Section 6.13

	
Specific Performance 

	
34

 

UST Sequence No. 511                                                                   --

  

ii

  

 

LIST OF ANNEXES

 

 

	
  

	
ANNEX A:  FORM OF OFFICER’S CERTIFICATE

 

	
  

	
ANNEX B:  FORM OF NEW CERTIFICATE OF DESIGNATIONS

 

	
  

	
ANNEX C:  FORM OF OPINION

 

	
  

	
ANNEX D:  FORM OF WAIVER

 

	
  

	
ANNEX E:  REGISTRATION RIGHTS

 

	
  

	
ANNEX F:  FORM OF OFFICER’S CERTIFICATE (CDFI REQUIREMENTS)

UST Sequence No. 511                                                                   --

  

iii

  

 

	
Defined Terms

	  
	
Affiliate

	
Section 6.7(a)(ii)

	
Agreement

	
Recitals

	
Appropriate Federal Banking Agency

	
Section 6.7(a)(iii)

	
Bank Holding Company

	
Section 6.7(a)(iv)

	
Bankruptcy Exceptions

	
Section 3.4(a)

	
Benefit Plans

	
Section 1.2(c)(vi)

	
Board of Directors

	
Section 3.5

	
Business Combination

	
Section 6.7(a)(v)

	
Capitalization Date

	
Section 3.1(b)

	
CDCI

	
Recitals

	
CDCI Preferred Shares

	
Recitals

	
CDCI Preferred Stock

	
Recitals

	
CDFI

	
Section 3.3

	
CDFI Application

	
Section 1.2(c)(xii)

	
CDFI Application Update

	
Section 1.2(c)(xii)

	
Certified Entity

	
Section 6.7 (a)(vi)

	
Charter

	
Section 1.2(c)(iv)

	
Closing

	
Section 1.2(a)

	
Closing Date

	
Section 1.2(a)

	
Code

	
Section 3.12

	
Common Stock

	
Section 3.1(b)

	
Company

	
Recitals

	
Company Financial Statements

	
Section 6.7(a)(vii)

	
Company Material Adverse Effect

	
Section 6.7(a)(viii)

	
Company Subsidiaries

	
Section 3.4(b)

	
Compensation Regulations

	
Section 1.2(c)(vi)

	
Controlled Group

	
Section 3.12

	
CPP

	
Recitals

	
CPP Preferred Shares

	
Recitals

	
CPP Preferred Stock

	
Recitals

	
CPP Securities

	
Section 6.12(b)

	
CPP Securities Purchase Agreement

	
Recitals

	
CPP Signing Date

	
Recitals

	
CPP Waiver

	
Section 1.2(c)(vii)

	
Designated Matters

	
Section 6.7(a)(ix)

	
Development Services

	
Section 4.1(d)(i)

	
Disclosure Schedule

	
Section 6.7(a)(x)

	
Disclosure Update

	
Section 1.2(c)(xi)

	
EAWA

	
Section 6.7(a)(xi)

	
EESA

	
Section 1.2(c)(vi)

	
ERISA

	
Section 3.12

	
Exchange

	
Recitals

UST Sequence No. 511                                                                   --

  

iv

  

	
Exchange Act

	
Section 5.3

	
Federal Reserve

	
Section 6.7(a)(iv)

	
Financial Products

	
Section 4.1(d)(i)

	
Fund

	
Section 1.2(c)(xii)

	
Governmental Entities

	
Section 1.2(c)

	
Holder

	
Section 5.4

	
Indemnitee

	
Section 5.4(b)

	
Information

	
Section 4.1(c)(iii)

	
Investment Area

	
Section 4.1(d)(i)

	
Investor

	
Recitals

	
Junior Stock

	
Section 6.7(a)(xii)

	
Letter Agreement

	
Recitals

	
MHA

	
Section 4.1(i)

	
New Certificate of Designations

	
Section 1.2(c)(iv)

	
Parity Stock

	
Section 6.7(a)(xiii)

	
Plan

	
Section 3.12

	
Previously Disclosed

	
Section 6.7(a)(xiv)

	
Proprietary Rights

	
Section 3.19

	
Regulatory Agreement

	
Section 3.17

	
Relevant Period

	
Section 1.2(c)(vi)

	
Savings and Loan Holding Company

	
Section 6.7(a)(xv)

	
Schedules

	
Recitals

	
SEC

	
Section 3.9

	
Section 4.1(e) Employee

	
Section 4.1(e)(ii)

	
Securities Act

	
Section 3.1(a)

	
Senior Executive Officers

	
Section 6.7(a)(xvi)

	
Share Dilution Amount

	
Section 6.7(a)(xvii)

	
Signing Date

	
Section 1.2(c)(xi)

	
subsidiary

	
Section 6.7(a)(i)

	
Target Market

	
Section 4.1(d)(i)

	
Targeted Populations

	
Section 4.1(d)(i)

	
Tax

	
Section 6.7(xviii)

	
Transfer

	
Section 5.3

UST Sequence No. 511                                                                   --

  

v

  

 

EXCHANGE AGREEMENT – STANDARD TERMS

 

 

Recitals:

 

WHEREAS, the United States Department of the Treasury (the “Investor”) has purchased shares of preferred stock or has acquired shares of preferred stock through the exercise of warrants or the exchange of other securities (collectively, the “CPP Preferred Stock”) from eligible financial institutions which elected to participate in the Troubled Asset Relief Program Capital Purchase Program (“CPP”);

 

WHEREAS, the Investor may from time to time agree to exchange the shares of CPP Preferred Stock it received from eligible financial institutions that participated in CPP for newly issued shares of preferred stock (“CDCI Preferred Stock”) from such eligible financial institutions to the extent they elect to participate in the Community Development Capital Initiative (“CDCI”);

 

WHEREAS, an eligible financial institution electing to participate in the CDCI  and exchange CPP Preferred Stock for CDCI Preferred Stock shall enter into a letter agreement (the “Letter Agreement”) with the Investor which incorporates this Exchange Agreement – Standard Terms (the eligible financial institution identified in the Letter Agreement, the “Company”);

 

WHEREAS, the Company issued the CPP Preferred Stock (or warrants exercised to acquire the CPP Preferred Stock or the securities exchanged for the CPP Preferred Stock) pursuant to that certain Securities Purchase Agreement – Standard Terms incorporated into a letter agreement, dated as of the date set forth on Schedule A to the Letter Agreement (the “CPP Signing Date”), as amended from time to time, between the Company and the Investor (the “CPP Securities Purchase Agreement”);

 

WHEREAS, the Company agrees to support the availability of credit and financial services to underserved populations and communities in the United States to promote the expansion of small businesses and the creation of jobs in such populations and communities;

 

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

 

WHEREAS, the Company intends to issue the number of shares of the series of its CDCI Preferred Stock set forth on Schedule A to the Letter Agreement (the “CDCI Preferred Shares”) to the Investor in exchange for (the “Exchange”) the number of shares of the CPP Preferred Stock set forth on Schedule A to the Letter Agreement (the “CPP Preferred Shares”); and

UST Sequence No. 511

  

1

  

 

 

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

 

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

 

ARTICLE I

 

THE CLOSING; THE EXCHANGE OF CDCI PREFERRED STOCK FOR CPP PREFERRED STOCK

 

Section 1.1 The CDCI Preferred Stock.

 

  The CDCI Preferred Shares are being issued to the Investor in the Exchange pursuant to Article II hereof.  The CPP Preferred Shares exchanged for the CDCI Preferred Shares pursuant to Article II hereof are being reacquired by the Company and shall have the status of authorized but unissued shares of preferred stock of the Company undesignated as to series and may be designated or redesignated and issued or reissued, as the case may be, as part of any series of preferred stock of the Company; provided that such shares shall not be reissued as shares of CPP Preferred Stock.

 

Section 1.2 The Closing.

 

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

 

(b) Subject to the fulfillment or waiver of the conditions to the Closing in this Section 1.2, at the Closing (i) the Company will deliver the CDCI Preferred Shares to the Investor, as evidenced by one or more certificates dated the Closing Date and registered in the name of the Investor or its designee(s) and (ii) the Investor will deliver the certificate representing the CPP Preferred Shares to the Company.

 

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

UST Sequence No. 511                                                                  --

  

2

  

 

(i) (A) any approvals or authorizations of all United States and other governmental, regulatory or judicial authorities (collectively, “Governmental Entities”) required for the consummation of the Exchange shall have been obtained or made in form and substance reasonably satisfactory to each party and shall be in full force and effect and all waiting periods required by United States and other applicable law, if any, shall have expired and (B) no provision of any applicable United States or other law and no judgment, injunction, order or decree of any Governmental Entity shall prohibit consummation of the Exchange as contemplated by this Agreement;

 

(ii)  (A) the representations and warranties of the Company set forth in Article III of this Agreement shall be true and correct in all respects as though made on and as of the Closing Date (other than representations and warranties that by their terms speak as of another date, which representations and warranties shall be true and correct in all respects as of such other date) and (B) the Company shall have performed in all respects all obligations required to be performed by it under this Agreement at or prior to the Closing;

 

(iii) the Company shall have delivered to the Investor a certificate signed on behalf of the Company by a Senior Executive Officer certifying to the effect that the conditions set forth in Section 1.2(c)(ii) have been satisfied, in substantially the form attached hereto as Annex A;

 

(iv) the Company shall have duly adopted and filed with the Secretary of State of its jurisdiction of organization or other applicable Governmental Entity an amendment to its certificate or articles of incorporation, articles of association, or similar organizational document (“Charter”) in substantially the form attached hereto as Annex B (the “New Certificate of Designations”) and the Company shall have delivered to the Investor a copy of the filed New Certificate of Designations with appropriate evidence from the Secretary of State or other applicable Governmental Entity that the filing has been accepted, or if a filed copy is unavailable, a certificate signed on behalf of the Company by a Senior Executive Officer certifying to the effect that the filing of the New Certificate of Designation has been accepted, in substantially the form attached hereto as Annex A;

 

(v) the Company shall have delivered to the Investor, a certificate signed on behalf of the Company by a Senior Executive Officer certifying to the effect that the Charter and bylaws of the Company delivered to the Investor pursuant to the CPP Securities Purchase Agreement remain true, complete and correct, in substantially the form attached hereto as Annex A; to the extent that the Charter and bylaws of the Company delivered to the Investor pursuant to the CPP Securities Purchase Agreement are no longer true, correct and complete, prior to the Closing Date, the Company shall deliver to Investor true, complete and correct certified copies of any amendments or supplements to the Charter or bylaws of the Company or the documentation necessary to make the Charter or bylaws of the Company delivered to the Investor true, correct and complete as of the Closing Date;

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(vi) (A) the Company shall have effected such changes to its compensation, bonus, incentive and other benefit plans, arrangements and agreements (including golden parachute, severance and employment agreements) (collectively, “Benefit Plans”) with respect to its Senior Executive Officers and any other employee of the Company or its Affiliates subject to Section 111 of the Emergency Economic Stabilization Act of 2008, as amended by the American Recovery and Reinvestment Act of 2009, or otherwise from time to time (“EESA”), as implemented by any guidance, rule or regulation thereunder, as the same shall be in effect from time to time (collectively, the “Compensation Regulations”) (and to the extent necessary for such changes to be legally enforceable, each of its Senior Executive Officers and other employees shall have duly consented in writing to such changes), as may be necessary, during the period in which any obligation of the Company arising from financial assistance under the Troubled Asset Relief Program remains outstanding (such period, as it may be further described in the Compensation Regulations, the “Relevant Period”), in order to comply with Section 111 of EESA or the Compensation Regulations and (B) the Investor shall have received a certificate signed on behalf of the Company by a Senior Executive Officer certifying to the effect that the condition set forth in Section 1.2(c)(vi)(A) has been satisfied, in substantially the form attached hereto as Annex A;

 

(vii) the Company shall have delivered to the Investor, a written waiver from each of the Company’s Senior Executive Officers and any other employee of the Company required to have delivered a waiver to Investor pursuant to Section 1.2(d)(v) of the CPP Securities Purchase Agreement (each, a “CPP Waiver”) and, to the extent that any Senior Executive Officer or any other employee of the Company or its Affiliates that are subject to Section 111 of EESA did not deliver a CPP Waiver, the Company shall cause each such Senior Executive Officer or other employee to have delivered to the Investor a written waiver in the form attached hereto as Annex D releasing the Investor and the Company from any claims that such Senior Executive Officer or other employee may otherwise have as a result of the modification of, or the agreement of the Company hereunder to modify, the terms of any Benefit Plans with respect to its Senior Executive Officers or other employees to eliminate any provisions of such Benefit Plans that would not be in compliance with the requirements of Section 111 of EESA as implemented by the Compensation Regulations;

 

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

 

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

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(x) the Company and the Company Subsidiaries shall have taken all necessary action to ensure that the Company and the Company Subsidiaries and their executive officers, respectively, are in compliance with (i) all guidelines put forth by the Investor with respect to transparency, reporting and monitoring and (ii) the provisions of EESA and any federal law respecting EESA, including the Employ American Workers Act (Section 1611 of Division A, Title XVI of the American Recovery and Reinvestment Act of 2009), Public Law No. 111-5, effective as of February 17, 2009, and all rules, regulations and guidance issued thereunder;

 

(xi) the Company shall have delivered to the Investor, a copy of the Disclosure Schedule on or prior to the date of the Letter Agreement (the “Signing Date”) and, to the extent that any information set forth on the Disclosure Schedule needs to be updated or supplemented to make it true, complete and correct as of the Closing Date, (i) the Company shall have delivered to the Investor an update to the Disclosure Schedule (the “Disclosure Update”), setting forth any information necessary to make the Disclosure Schedule true, correct and complete as of the Closing Date and (ii) the Investor, in its sole discretion, shall have approved the Disclosure Update, provided, however, that the delivery and acceptance of the Disclosure Update shall not limit or affect any rights of or remedies available to the Investor;

 

(xii) the Company shall have delivered to the Investor prior to the Signing Date either (i) a true, complete and correct certified copy of each CDFI Certification Application that each Certified Entity submitted to the Community Development Financial Institution Fund (the “Fund”)  in connection with its certification as a CDFI along with any updates to the CDFI Certification Application necessary to make it true, complete and correct as of the Signing Date or (ii), to the extent a copy of the CDFI Certification Application that any Certified Entity submitted to the Fund in connection with its certification as a CDFI is not available, a newly completed CDFI Certification Application with respect to such Certified Entity true, complete and correct as of the Signing Date (the CDFI Certification Application delivered to the Investor pursuant to this Section 1.2(c)(xii), the “CDFI Application”), and, to the extent any information set forth in the CDFI Application is not true, complete and correct as of the Closing Date, the Company shall have delivered to the Investor an update to the CDFI Application (the “CDFI Application Update”), setting forth any information necessary to make the information set forth in the CDFI Application true, correct and complete as of the Closing Date; and

 

(xiii) CPP/CDCI Securities.  The Company shall have paid to Investor all accrued and unpaid dividends or interest then due on the CPP Preferred Stock.

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ARTICLE II

 

EXCHANGE

 

Section 2.1 Exchange.

 

  On the terms and subject to the conditions set forth in this Agreement, the Company agrees to issue the CDCI Preferred Shares to the Investor in exchange for CPP Preferred Shares, and the Investor agrees to deliver to the Company the CPP Preferred Shares in exchange for the CDCI Preferred Shares.

 

Section 2.2 Exchange Documentation.

 

  Settlement of the Exchange will take place on the Closing Date, at which time the Investor will cause delivery of the CPP Preferred Shares to the Company or its designated agent and the Company will cause delivery of the CDCI Preferred Shares to the Investor or its designated agent.

 

ARTICLE III

 

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

 

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

 

Section 3.1 Existence and Power.

 

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

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(b) Capitalization.  The authorized capital stock of the Company, and the outstanding capital stock of the Company (including securities convertible into, or exercisable or exchangeable for, capital stock of the Company) as of the most recent fiscal month-end preceding the Signing Date (the “Capitalization Date”) is set forth on Schedule B.  The outstanding shares of capital stock of the Company have been duly authorized and are validly issued and outstanding, fully paid and nonassessable, and subject to no preemptive rights (and were not issued in violation of any preemptive rights).  As of the Signing Date, the Company does not have outstanding any securities or other obligations providing the holder the right to acquire common stock of the Company (“Common Stock”) or other capital stock that is not reserved for issuance as specified on Schedule B, and the Company has not made any other commitment to authorize, issue or sell any Common Stock or other capital stock.  Since the Capitalization Date, the Company has not issued any shares of Common Stock or other capital stock other than (i) shares issued upon the exercise of stock options or delivered under other equity-based awards or other convertible securities or warrants which were issued and outstanding on the Capitalization Date and disclosed on Schedule B and (ii) shares disclosed on Schedule B.  Each holder of 5% or more of any class of capital stock of the Company and such holder’s primary address are set forth on Schedule B.

 

Section 3.2 CDCI Preferred Shares.

 

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

 

Section 3.3 Community Development Financial Institution Status; Domestic Ownership.

 

(a)  The Company, collectively with all of its “Affiliates” (within the meaning of 12 C.F.R. 1805.104) satisfies the requirements of 12 C.F.R. 1805.200(b).

 

(b) Each Certified Entity (A) is a regulated community development financial institution (a “CDFI”) currently certified by the Fund of the United States Department of the Treasury pursuant to 12 C.F.R. 1805.201(a) as having satisfied the eligibility requirements of the Fund’s Community Development Financial Institutions Program and (B) satisfies the eligibility requirements for a CDFI set forth in 12 C.F.R. 1805.201(b)(1) – (6).

 

(c) The Company is not a Bank Holding Company, Savings and Loan Holding Company, bank or savings association controlled (within the meaning of the Bank Holding Company Act of 1956 (12 U.S.C. 1841(a)(2)) and 12 C.F.R. 225(a)(i) in the case of Bank Holding Companies and banks and the Home Owners’ Loan Act of 1933 (12 U.S.C. 1467a (a)(2)) and 12 C.F.R. 583.7 in the case of Savings and Loan Holding Companies and savings associations) by a foreign bank or company.

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Section 3.4 Authorization and Enforceability.

 

  (a) The Company has the corporate power and authority to execute and deliver this Agreement and to carry out its obligations hereunder (which includes the issuance of the CDCI Preferred Shares). The execution, delivery and performance by the Company of this Agreement and the consummation of the transactions contemplated hereby have been duly authorized by all necessary corporate action on the part of the Company and its stockholders, and no further approval or authorization is required on the part of the Company. This Agreement is a valid and binding obligation of the Company enforceable against the Company in accordance with its terms, subject to any limitations by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors’ rights generally and general equitable principles, regardless of whether such enforceability is considered in a proceeding at law or in equity (“Bankruptcy Exceptions”).

 

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

 

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

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Section 3.5 Anti-Takeover Provisions and Rights Plan.

 

  The Board of Directors of the Company (the “Board of Directors”) has taken all necessary action to ensure that the transactions contemplated by this Agreement and the consummation of the transactions contemplated hereby, will be exempt from any anti-takeover or similar provisions of the Company’s Charter and bylaws, and any other provisions of any applicable “moratorium”, “control share”, “fair price”, “interested stockholder” or other anti-takeover laws and regulations of any jurisdiction.

 

Section 3.6 No Company Material Adverse Effect.

 

  Since the CPP Signing Date, no fact, circumstance, event, change, occurrence, condition or development has occurred that, individually or in the aggregate, has had or would reasonably be expected to have a Company Material Adverse Effect, except as disclosed on Schedule C.

 

Section 3.7 Company Financial Statements.

 

  The Company Financial Statements present fairly in all material respects the consolidated financial position of the Company and its consolidated subsidiaries as of the dates indicated therein and the consolidated results of their operations for the periods specified therein; and except as stated therein, such financial statements (i) were prepared in conformity with GAAP applied on a consistent basis (except as may be noted therein) and (ii) have been prepared from, and are in accordance with, the books and records of the Company and the Company Subsidiaries.

 

Section 3.8 No Undisclosed Liabilities.

 

  Neither the Company nor any of the Company Subsidiaries has any liabilities or obligations of any nature (absolute, accrued, contingent or otherwise) which are not properly reflected or reserved against in the Company Financial Statements to the extent required to be so reflected or reserved against in accordance with GAAP, except for (i) liabilities that have arisen since the last fiscal year end in the ordinary and usual course of business and consistent with past practice and (ii) liabilities that, individually or in the aggregate, have not had and would not reasonably be expected to have a Company Material Adverse Effect.

 

Section 3.9 Offering of Securities.

 

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

 

Section 3.10 Litigation and Other Proceedings.

 

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

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Section 3.11 Compliance with Laws.

 

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

 

Section 3.12 Employee Benefit Matters.

 

Except as would not reasonably be expected to have, either individually or in the aggregate, a Company Material Adverse Effect: (i) each “employee benefit plan” (within the meaning of Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”)) providing benefits to any current or former employee, officer or director of the Company or any member of its “Controlled Group” (defined as any organization which is a member of a controlled group of corporations within the meaning of Section 414 of the Internal Revenue Code of 1986, as amended (the “Code”)) that is sponsored, maintained or contributed to by the Company or any member of its Controlled Group and for which the Company or any member of its Controlled Group would have any liability, whether actual or contingent (each, a “Plan”) has been maintained in compliance with its terms and with the requirements of all applicable statutes, rules and regulations, including ERISA and the Code; (ii) with respect to each Plan subject to Title IV of ERISA (including, for purposes of this clause (ii), any plan subject to Title IV of ERISA that the Company or any member of its Controlled Group previously maintained or contributed to in the six years prior to the Signing Date), (1) no “reportable event” (within the meaning of Section 4043(c) of ERISA), other than a reportable event for which the notice period referred to in Section 4043(c) of ERISA has been waived, has occurred in the three years prior to the Signing Date or is reasonably expected to occur, (2) no “accumulated funding deficiency” (within the meaning of Section 302 of ERISA or Section 412 of the Code), whether or not waived, has occurred in the three years prior to the Signing Date or is reasonably expected to occur, (3) the fair market value of the assets under each Plan exceeds the present value of all benefits accrued under such Plan (determined based on the assumptions used to fund such Plan) and (4) neither the Company nor any member of its Controlled Group has incurred in the six years prior to the Signing Date, or reasonably expects to incur, any liability under Title IV of

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ERISA (other than contributions to the Plan or premiums to the Pension Benefit Guaranty Corporation in the ordinary course and without default) in respect of a Plan (including any Plan that is a “multiemployer plan”, within the meaning of Section 4001(c)(3) of ERISA); and (iii) each Plan that is intended to be qualified under Section 401(a) of the Code has received a favorable determination letter from the Internal Revenue Service with respect to its qualified status that has not been revoked, or such a determination letter has been timely applied for but not received by the Signing Date, and nothing has occurred, whether by action or by failure to act, which could reasonably be expected to cause the loss, revocation or denial of such qualified status or favorable determination letter.

 

Section 3.13 Taxes.

 

 Except as would not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect, (i) the Company and the Company Subsidiaries have filed all federal, state, local and foreign income and franchise Tax returns (together with any schedules and attached thereto) required to be filed through the Signing Date, subject to permitted extensions, and have paid all Taxes due thereon, (ii) all such Tax returns (together with any schedules and attached thereto) are true, complete and correct in all material respects and were prepared in compliance with all applicable laws and (iii) no Tax deficiency has been determined adversely to the Company or any of the Company Subsidiaries, nor does the Company have any knowledge of any Tax deficiencies.

 

Section 3.14 Properties and Leases.

 

 Except as would not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect, the Company and the Company Subsidiaries have good and marketable title to all real properties and all other properties and assets owned by them, in each case free from liens (including, without limitation, liens for Taxes), encumbrances, claims and defects that would affect the value thereof or interfere with the use made or to be made thereof by them.  Except as would not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect, the Company and the Company Subsidiaries hold all leased real or personal property under valid and enforceable leases with no exceptions that would interfere with the use made or to be made thereof by them.

 

Section 3.15 Environmental Liability.

 

 Except as would not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect:

 

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

 

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

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

 

Section 3.16 Risk Management Instruments.

 

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

 

Section 3.17 Agreements with Regulatory Agencies.

 

 Except as set forth on Schedule F, neither the Company nor any Company Subsidiary is subject to any material cease-and-desist or other similar order or enforcement action issued by, or is a party to any material written agreement, consent agreement or memorandum of understanding with, or is a party to any commitment letter or similar undertaking to, or is subject to any capital directive by, or since December 31, 2006, has adopted any board resolutions at the request of, any Governmental Entity that currently restricts in any material respect the conduct of its business or that in any material manner relates to its capital adequacy, its liquidity and funding policies and practices, its ability to pay dividends, its credit, risk management or compliance policies or procedures, its internal controls, its management or its operations or business (each item in this sentence, a “Regulatory Agreement”), nor has the Company or any Company Subsidiary been advised since December 31, 2006 by any such Governmental Entity that it is considering issuing, initiating, ordering, or requesting any such Regulatory Agreement.  The Company and each Company Subsidiary is in compliance in all material respects with each Regulatory Agreement to which it is party or subject, and neither the Company nor any Company Subsidiary has received any notice from any Governmental Entity indicating that either the Company or any Company Subsidiary is not in compliance in all material respects with any such Regulatory Agreement.

 

Section 3.18 Insurance.

 

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

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Section 3.19 Intellectual Property.

 

 Except as would not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect, (i) the Company and each Company Subsidiary owns or otherwise has the right to use, all intellectual property rights, including all trademarks, trade dress, trade names, service marks, domain names, patents, inventions, trade secrets, know-how, works of authorship and copyrights therein, that are used in the conduct of their existing businesses and all rights relating to the plans, design and specifications of any of its branch facilities (“Proprietary Rights”) free and clear of all liens and any claims of ownership by current or former employees, contractors, designers or others and (ii) neither the Company nor any of the Company Subsidiaries is materially infringing, diluting, misappropriating or violating, nor has the Company or any of the Company Subsidiaries received any written (or, to the knowledge of the Company, oral) communications alleging that any of them has materially infringed, diluted, misappropriated or violated, any of the Proprietary Rights owned by any other person.  Except as would not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect, to the Company’s knowledge, no other person is infringing, diluting, misappropriating or violating, nor has the Company or any or the Company Subsidiaries sent any written communications since January 1, 2007 alleging that any person has infringed, diluted, misappropriated or violated, any of the Proprietary Rights owned by the Company and the Company Subsidiaries.

 

Section 3.20 Brokers and Finders.

 

  The Investor has no liability for any amounts that any broker, finder or investment banker is entitled to for any financial advisory, brokerage, finder’s or other fee or commission in connection with this Agreement or the transactions contemplated hereby based upon arrangements made by or on behalf of the Company or any Company Subsidiary.

 

Section 3.21 Disclosure Schedule.

 

  The Company has delivered the Disclosure Schedule and, if applicable, the Disclosure Update to the Investor and the information contained in the Disclosure Schedule, as modified by the information contained in the Disclosure Update, if applicable, is true, complete and correct.

 

Section 3.22 CPP Preferred Stock.

 

  The Company has (i) not breached any representation, warranty or covenant set forth in the CPP Securities Purchase Agreement or any of the other documents governing the CPP Preferred Stock and (ii) paid to Investor all accrued and unpaid dividends and/or interest then due on the CPP Preferred Stock.

 

ARTICLE IV

 

COVENANTS

 

Section 4.1 Affirmative Covenants.

 

  The Company hereby covenants and agrees with Investor that:

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

 

(b) Certain Notifications Until Closing.  From the Signing Date until the Closing, the Company shall promptly notify the Investor of (i) any fact, event or circumstance of which it is aware and which would reasonably be expected to cause any representation or warranty of the Company contained in this Agreement to be untrue or inaccurate in any material respect or to cause any covenant or agreement of the Company contained in this Agreement not to be complied with or satisfied in any material respect and (ii) except as Previously Disclosed, any fact, circumstance, event, change, occurrence, condition or development of which the Company is aware and which, individually or in the aggregate, has had or would reasonably be expected to have a  Company Material Adverse Effect; provided, however, that delivery of any notice pursuant to this Section 4.1(b) shall not limit or affect any rights of or remedies available to the Investor.

 

(c) Access, Information and Confidentiality.

 

(i) From the Signing Date until the date when the Investor owns an amount of CDCI Preferred Shares having an aggregate liquidation value of less than 10% of the aggregate liquidation value of the CDCI Preferred Shares as of the Closing Date, the Company will permit the Investor and its agents, consultants, contractors and advisors (A) acting through the Appropriate Federal Banking Agency, or otherwise to the extent necessary to evaluate, manage, or transfer its investment in the Company, to examine the corporate books, Tax returns (including all schedules and attached thereto) and other information reasonably requested by Investor relating to Taxes and make copies thereof and to discuss the affairs, finances and accounts of the Company and the Company Subsidiaries with the principal officers of the Company, all upon reasonable notice and at such reasonable times and as often as the Investor may reasonably request and (B) to review any information material to the Investor’s investment in the Company provided by the Company to its Appropriate Federal Banking Agency.  Any investigation pursuant to this Section 4.1(c) shall be conducted during normal business hours and in such manner as not to interfere unreasonably with the conduct of the business of the Company, and nothing herein shall require the Company or any Company Subsidiary to disclose any information to the Investor to the extent (x) prohibited by applicable law or regulation, or (y) that such disclosure would reasonably be expected to cause a violation of any agreement to which the Company or any Company Subsidiary is a party or would cause a risk of a loss of privilege to the Company or any Company Subsidiary (provided that the Company shall use commercially reasonable efforts to make appropriate substitute disclosure arrangements under circumstances where the restrictions in this clause (i) apply).

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

 

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

 

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

 

(C) as soon as available after the Company receives any assessment of the Company’s internal controls, a copy of such assessment;

 

(D) annually on a date specified by the Investor, a completed survey, in a form specified by the Investor, providing, among other things, a description of how the Company has utilized the funds the Company received in connection with the sale of the CPP Preferred Shares and the effects of such funds on the operations and status of the Company;

 

(E) as soon as such items become effective, any amendments to the Charter, bylaws or other organizational documents of the Company; and

 

(F) at the same time as such items are sent to any stockholders of the Company, copies of any information or documents sent by the Company to its stockholders.

 

(iii) The Investor will use reasonable best efforts to hold, and will use reasonable best efforts to cause its agents, consultants, contractors and advisors and United States executive branch officials and employees, to hold, in confidence all non-public records, books, contracts, instruments, computer data and other data and information (collectively, “Information”) concerning the Company furnished or made available to it by the Company or its representatives pursuant to this Agreement (except to the extent that such information can be shown to have been (A) previously known by such party on a non-confidential basis, (B) in the public domain through no fault of such party or (C) later lawfully acquired from other sources by the party to which it was furnished (and without violation of any other confidentiality obligation)); provided that nothing herein shall prevent the Investor from disclosing any Information to the extent

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required by applicable laws or regulations or by any subpoena or similar legal process.  The Investor understands that the Information may contain commercially sensitive confidential information entitled to an exception from a Freedom of Information Act request.

 

(iv) The Investor’s information rights pursuant to Section 4.1(c)(ii)(A), (B), (C), (E) and (F) and the Investor’s right to receive certifications from the Company pursuant to Section 4.1(d)(ii) may be assigned by the Investor to a transferee or assignee of the CDCI Preferred Shares with a liquidation preference of no less than an amount equal to 2% of the initial aggregate liquidation preference of the CDCI Preferred Shares.

 

(v) From the Signing Date until the date when the Investor no longer owns any CDCI Preferred Shares, the Company shall permit, and shall cause each of the Company’s Subsidiaries to permit (A) the Investor and its agents, consultants, contractors and advisors, (B) the Special Inspector General of the Troubled Asset Relief Program, and (C) the Comptroller General of the United States access to personnel and any books, papers, records or other data, in each case, to the extent relevant to ascertaining compliance with the financing terms and conditions; provided that prior to disclosing any information pursuant to clause (B) or (C), the Special Inspector General of the Troubled Asset Relief Program and the Comptroller General of the United States shall have agreed, with respect to documents obtained under this Agreement in furtherance of its function, to follow applicable law and regulation (and the applicable customary policies and procedures) regarding the dissemination of confidential materials, including redacting confidential information from the public version of its reports and soliciting the input from the Company as to information that should be afforded confidentiality, as appropriate.

 

(vi) Nothing in this Section shall be construed to limit the authority that the Special Inspector General of the Troubled Asset Relief Program, the Comptroller General of the United States or any other applicable regulatory authority has under law.

 

(d) CDFI Requirements.

 

(i) From the Signing Date until the date on which all of the CDCI Preferred Shares have been redeemed in whole, each Certified Entity shall (A) be certified by the Fund as a CDFI; (B) together with its Affiliates collectively meet the eligibility requirements of 12 C.F.R. 1805.200(b); (C) have a primary mission of promoting community development, as may be determined by Investor from time to time, based on criteria set forth in 12 C.F.R. 1805.201(b)(1); (D) provide Financial Products, Development Services, and/or other similar financing as a predominant business activity in arm’s-length transactions; (E) serve a Target Market by serving one or more Investment Areas and/or Targeted Populations as may be determined by Investor from time to time, substantially in the manner set forth in 12 C.F.R. 1805.201(b)(3); (F) provide Development Services in conjunction with its Financial Products, directly, through an Affiliate or through a contract with a third-party provider; (G) maintain

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accountability to residents of the applicable Investment Area(s) or Targeted Population(s) through representation on its governing Board of Directors or otherwise; and (H) remain a non-governmental entity which is not an agency or instrumentality of the United States of America, or any State or political subdivision thereof, as described in 12 C.F.R. 1805.201(b)(6) and within the meaning of any supplemental regulations or interpretations of 12 C.F.R. 1805.201(b)(6) or such supplemental regulations published by the Fund.  Notwithstanding any other provision hereof, as used in this Section 4.1(d), the terms “Affiliates”; “Financial Products”; “Development Services”; “Target Market”; “Investment Areas”; and “Targeted Populations” have the meanings ascribed to such terms in 12 C.F.R. 1805.104.

 

(ii) From the Signing Date until the date on which all of the CDCI Preferred Shares have been redeemed in whole, the Company shall deliver to Investor (1)(x) on the date that is 180 days after the Closing Date and (y) annually on the same date on which the Company delivers the documentation required under Section 4.1(c)(ii)(A) to the Investor, a certificate signed on behalf of the Company by a Senior Executive Officer, in substantially the form attached hereto as Annex F, certifying (A) that the Company and each Certified Entity remains in compliance with the covenants set forth in Section 4.1(d)(i); (B) that the information in the CDFI Application, as modified by any updates to the CDFI Application provided by the Company to the Investor on or prior to the date of such certificate, with respect to the covenants set forth in Section 4.1(d)(i)(B) and Section 4.1(d)(i)(D) remains true, correct and complete as of such date or, to the extent any information set forth in the CDFI Application, as modified by any updates to the CDFI Application provided by the Company to the Investor on or prior to the date of such certificate, with respect to such covenants needs to be updated or supplanted to make it true, complete and correct as of such date, that an updated narrative to the CDFI Application setting forth any information necessary to make the information set forth in the CDFI Application is true, complete and correct as of such date; (C) either (a) that the contracts and material agreements entered into by each Certified Entity with respect to Development Services previously disclosed to the Investor remain in effect or (b) that attached are any new contracts and material agreements entered into by the Certified Entity with respect to Development Services; (D) a list of the names and addresses of the individuals which comprise the board of directors of each Certified Entity as of such date and, to the extent any of such individuals was not a member of the board of directors of such Certified Entity as of the last certification to the Investor, a narrative describing such individual's relationship to the applicable Investment Area(s) and Targeted Population(s) or, if such Certified Entity maintains accountability to residents of the applicable Investment Area(s) or Target Population(s) through means other than representation on its governing board of directors and such means have changed since the date of the last certification to the Investor, a narrative describing such change; (E) that each Certified Entity is not an agency of the United States of America, or any State or political subdivision thereof, as described in 12 C.F.R. 1805.201(b)(6) and within the meaning of any supplemental regulations or interpretations of 12 C.F.R. 1805.201(b)(6) or such supplemental regulations published by the Fund and (F) that the Company remains in compliance with the covenants set forth in Section 4.1(f) and Section 4.1(l) and

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(2) within five (5) business days of receipt, copies of any notices, correspondence or other written communication between each Certified Entity and the Fund, including any form that such Certified Entity is required to provide to the Fund due to the occurrence of a “Material Event” within the meaning of the Fund’s CDFI Certification Procedures.

 

(iii) The Company shall immediately notify the Investor upon the occurrence of any breach of any of the covenants set forth in Section 4.1(d).

 

(e) Executive Compensation.

 

(i) Benefit Plans.  During the Relevant Period, the Company shall take all necessary action to ensure that the Benefit Plans of the Company and its Affiliates comply in all respects with, and shall take all other actions necessary to comply with, Section 111 of EESA, as implemented by the Compensation Regulations, and neither the Company nor any of its Affiliates shall adopt any new Benefit Plan (x) that does not comply therewith or (y) that does not expressly state and require that such Benefit Plan and any compensation thereunder shall be subject to any relevant Compensation Regulations adopted, issued or released on or after the date any such Benefit Plan is adopted. To the extent that EESA and/or the Compensation Regulations are amended or otherwise change during the Relevant Period in a manner that requires changes to then-existing Benefit Plans, or that requires other actions, the Company and its Affiliates shall effect such changes to its or their Benefit Plans, and take such other actions, as promptly as practicable after it has actual knowledge of such amendments or changes in order to be in compliance with this Section 4.1(e) (and shall be deemed to be in compliance for a reasonable period to effect such changes).  In addition, the Company and its Affiliates shall take all necessary action, other than to the extent prohibited by applicable law or regulation applicable outside of the United States, to ensure that the consummation of the transactions contemplated by this Agreement will not accelerate the vesting, payment or distribution of any equity-based awards, deferred cash awards or any nonqualified deferred compensation payable by the Company or any of its Affiliates.

 

(ii) Additional Waivers.  After the Closing Date, in connection with the hiring or promotion of a Section 4.1(e) Employee and/or the promulgation of applicable Compensation Regulations or otherwise, to the extent any Section 4.1(e) Employee shall not have executed a waiver in a form satisfactory to the Investor with respect to the application to such Section 4.1(e) Employee of the Compensation Regulations, the Company shall use its best efforts to (x) obtain from such Section 4.1(e) Employee a waiver in substantially the form attached hereto as Annex D and (y) deliver such waiver to the Investor as promptly as possible, in each case within sixty days of such Section 4.1(e) Employee becoming subject to the requirements of this Section. “Section 4.1(e) Employee” means (A) each Senior Executive Officer and (B) any other employee of the Company or any of its Affiliates determined at any time to be subject to Section 111 of  EESA as implemented by the Compensation Regulations.

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(iii) Clawback.  In the event that any Section 4.1(e) Employee receives a payment in contravention of the provisions of this Section 4.1(e), the Company shall promptly provide such individual with written notice that the amount of such payment must be repaid to the Company in full within fifteen business days following receipt of such notice or such earlier time as may be required by the Compensation Regulations and shall promptly inform the Investor (x) upon discovering that a payment in contravention of this Section 4.1(e) has been made and (y) following the repayment to the Company of such amount and shall take such other actions as may be necessary to comply with the Compensation Regulations.

 

(iv) Limitation on Deductions.  During the Relevant Period, the Company agrees that it shall not claim a deduction for remuneration for federal income tax purposes in excess of $500,000 for each Senior Executive Officer that would not be deductible if Section 162(m)(5) of the Code applied to the Company.

 

(v) Amendment to Prior Agreement.  The parties agree that, effective as of the date hereof, Section 4.10 of the CPP Securities Purchase Agreement shall be amended in its entirety by replacing such Section 4.10 with the provisions set forth in this Section 4.1(e) and any terms included in this Section 4.1(e) that are not otherwise defined in the CPP Securities Purchase Agreement shall have the meanings ascribed to such terms in this Agreement.

 

(f) Bank or Savings and Loan Holding Company Status.

 

 If the Company is a Bank Holding Company or a Savings and Loan Holding Company on the Signing Date, then the Company shall maintain its status as a Bank Holding Company or Savings and Loan Holding Company, as the case may be, for as long as the Investor owns any CDCI Preferred Shares.  The Company shall redeem all CDCI Preferred Shares held by the Investor prior to terminating its status as a Bank Holding Company or Savings and Loan Holding Company, as applicable.

 

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

 

(h) Capital Covenant.  From the Signing Date until the date on which all of the CDCI Preferred Shares have been redeemed in whole, the Company and the Company Subsidiaries shall maintain such capital as may be necessary to meet the minimum capital requirements of the Appropriate Federal Banking Agency, as in effect from time to time.

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(i) HAMP Modifications.  The Company shall take all necessary action to ensure that (i) from and after the date the Company or any Company Subsidiary that services residential mortgage loans has 100 or more residential mortgage loans not owned or guaranteed by Fannie Mae or Freddie Mac which have been past due for 60 or more days, the Company or such Company Subsidiary shall, to the extent such programs are open for participation, (A) participate in the United States Department of the Treasury’s Making Home Affordable (“MHA”) program, including MHA’s Second Lien Modification Program and, (B) immediately execute a Commitment to Purchase Financial Instrument and Servicer Participation Agreement (in such form as may be set forth on the MHA website at www.hmpadmin.com from time to time) with Fannie Mae (acting as the United States Department of the Treasury’s fiscal agent) and (ii) if the Company or any Company Subsidiary owns mortgage loans that are serviced by a non-affiliated mortgage servicer, the Company or such Company Subsidiary shall consent to any MHA modification request made by such mortgage servicer.

 

(j) Reporting Requirements.  Prior to the date on which all of the CDCI Preferred Shares have been redeemed in whole, the Company covenants and agrees that, at all times on or after the Closing Date, (i) to the extent it is subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act, it shall comply with the terms and conditions set forth in Annex E or (ii) as soon as practicable after the date that the Company becomes subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act, it shall comply with the terms and conditions set forth in Annex E.

 

(k) Compliance with Employ American Workers Act.  The Company shall agree to comply, and take all necessary action to ensure that any Company Subsidiary complies in all respects with the provisions of EESA and any federal law respecting EESA, including the Employ American Workers Act (Section 1611 of Division A, Title XVI of the American Recovery and Reinvestment Act of 2009), Public Law No. 111-5, effective as of February 17, 2009, as implemented by any rules, regulation or guidance thereunder, as such may be amended or supplemented from time to time, and any applicable guidance of the United States Department of the Treasury with respect thereto.

 

(l) Control by Foreign Bank or Company.  Prior to the date on which all of the CDCI Preferred Shares have been redeemed in whole, the Company shall not be controlled (within the meaning of the Bank Holding Company Act of 1956 (12 U.S.C. 1841(a)(2)) and 12 C.F.R. 225(a)(i) in the case of Bank Holding Companies and banks and the Home Owners’ Loan Act of 1933 (12 U.S.C. 1467a (a)(2)) and 12 C.F.R. 583.7 in the case of Savings and Loan Holding Companies and savings associations) by a foreign bank or company.

 

Section 4.2 Negative Covenants.

 

  The Company hereby covenants and agrees with the Investor that:

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(a) Certain Transactions.

 

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

 

(ii) Without the prior written consent of the Investor, until such time as the Investor shall cease to own any debt or equity securities of the Company acquired pursuant to this Agreement or the CPP Securities Purchase Agreement (including, for the avoidance of doubt, the CPP Preferred Shares or the CDCI Preferred Shares), the Company shall not permit any of its “significant subsidiaries” (as such term is defined in Rule 12b-2 promulgated under the Exchange Act) to (i) engage in any merger, consolidation, statutory share exchange or similar transaction following the consummation of which such significant subsidiary is not wholly-owned by the Company, (ii) dissolve or sell all or substantially all of its assets or property other than in connection with an internal reorganization or consolidation involving wholly-owned subsidiaries of the Company or (iii) issue or sell any shares of its capital stock or any securities convertible or exercisable for any such shares, other than issuances or sales in connection with an internal reorganization or consolidation involving wholly-owned subsidiaries of the Company.

 

(b) Restriction on Dividends and Repurchases.

 

(i) The Company covenants and agrees that it shall not violate any of the restrictions on dividends, distributions, redemptions, repurchases, acquisitions and related actions set forth in the New Certificate of Designations, which are incorporated by reference herein as if set forth in full.

 

(ii) During the period beginning on the eighth anniversary of the Closing and ending on the date on which the Investor no longer owns any of the CDCI Preferred Shares, neither the Company nor any Company Subsidiary shall, without the consent of the Investor, (A) declare or pay any dividend or make any distribution on capital stock or other equity securities of any kind of the Company or any Company Subsidiary; or (B) redeem, purchase or acquire any shares of Common Stock or other capital stock or other equity securities of any kind of the Company or any Company Subsidiary, or any trust preferred securities issued by the Company or any Affiliate of the Company, other than (1) redemptions, purchases or other acquisitions of the CDCI Preferred Shares, (2) regular dividends on shares of preferred stock in accordance with the terms thereof and which are permitted under the terms of the CDCI Preferred Shares, or (3) dividends or distributions by any wholly-owned Company Subsidiary.

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(c) Related Party Transactions.  Until such time as the Investor ceases to own any debt or equity securities of the Company, including the CDCI Preferred Shares, the Company and the Company Subsidiaries shall not enter into transactions with Affiliates or related persons (within the meaning of Item 404 under the SEC’s Regulation S-K) unless (A) such transactions are on terms no less favorable to the Company and the Company Subsidiaries than could be obtained from an unaffiliated third party, and (B) have been approved by the audit committee of the Board of Directors or comparable body of independent directors of the Company, or if there are no independent directors, the Board of Directors, provided that the Board of Directors shall maintain written documentation which supports its determination that the transaction meets the requirements of clause (A) of this Section 4.2(c).

 

(d) Restriction on Repurchase of CDCI Preferred Shares Not Held by Investor.  Prior to the date on which the Investor no longer owns any of the CDCI Preferred Shares the Company shall not repurchase, redeem, call or otherwise reacquire any CDCI Preferred Shares from any holder thereof, whether by means of open market purchase, negotiated transaction, or otherwise, unless it offers to repurchase, redeem, call or otherwise reacquire a ratable portion of the CDCI Preferred Shares, as the case may be, then held by the Investor on the same terms and conditions.

 

ARTICLE V

 

ADDITIONAL AGREEMENTS

 

Section 5.1 Purchase for Investment.

 

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

 

Section 5.2 Legends.

 

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

 

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

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THE SECURITIES REPRESENTED BY THIS INSTRUMENT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE TRANSFERRED, SOLD OR OTHERWISE DISPOSED OF EXCEPT WHILE A REGISTRATION STATEMENT RELATING THERETO IS IN EFFECT UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT OR SUCH LAWS. EACH PURCHASER OF THE SECURITIES REPRESENTED BY THIS INSTRUMENT IS NOTIFIED THAT THE SELLER MAY BE RELYING ON THE EXEMPTION FROM SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER.  ANY TRANSFEREE OF THE SECURITIES REPRESENTED BY THIS INSTRUMENT BY ITS ACCEPTANCE HEREOF (1) REPRESENTS THAT IT IS A “QUALIFIED INSTITUTIONAL BUYER” (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT), (2) AGREES THAT IT WILL NOT OFFER, SELL OR OTHERWISE TRANSFER THE SECURITIES REPRESENTED BY THIS INSTRUMENT EXCEPT (A) PURSUANT TO A REGISTRATION STATEMENT WHICH IS THEN EFFECTIVE UNDER THE SECURITIES ACT, (B) FOR SO LONG AS THE SECURITIES REPRESENTED BY THIS INSTRUMENT ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A, TO A PERSON IT REASONABLY BELIEVES IS A “QUALIFIED INSTITUTIONAL BUYER” AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (C) TO THE ISSUER OR (D) PURSUANT TO ANY OTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND (3) AGREES THAT IT WILL GIVE TO EACH PERSON TO WHOM THE SECURITIES REPRESENTED BY THIS INSTRUMENT ARE TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND.

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

 

(b) In the event that any CDCI Preferred Shares (i) become registered under the Securities Act or (ii) are eligible to be transferred without restriction in accordance with Rule 144 or another exemption from registration under the Securities Act (other than Rule 144A), the Company shall issue new certificates or other instruments representing such CDCI Preferred Shares, which shall not contain the applicable legends in Section 5.2(a) above; provided that the Investor surrenders to the Company the previously issued certificates or other instruments.

 

Section 5.3 Transfer of CDCI Preferred Shares.

 

  Subject to compliance with applicable securities laws, the Investor shall be permitted to transfer, sell, assign or otherwise dispose of (“Transfer”) all or a portion of the CDCI Preferred Shares at any time, and the Company shall take all steps as may be reasonably requested by the Investor to facilitate the Transfer of the CDCI Preferred Shares, including without limitation, as set forth in Section 5.4, provided that the Investor shall not Transfer any CDCI Preferred Shares if such transfer would require the Company to be subject to the periodic reporting requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934 (the “Exchange Act”) and the Company was not already subject to such requirements.  In furtherance of the foregoing, the Company shall provide reasonable cooperation to facilitate any Transfers of the CDCI Preferred Shares, including, as is reasonable under the circumstances, by furnishing such information concerning the Company and its business as a proposed transferee may reasonably request and making management of the Company reasonably available to respond to questions of a proposed transferee in accordance with customary practice, subject in all cases to the proposed transferee agreeing to a customary confidentiality agreement.

 

Section 5.4 Rule 144; Rule 144A; 4(11⁄2) Transactions.

 

  (a) At all times after the Signing Date, the Company covenants that (1) it will, upon the request of the Investor or any subsequent holders of the CDCI Preferred Shares (“Holders”), use its reasonable best efforts to (x), to the extent any Holder is relying on Rule 144 under the Securities Act to sell any of the CDCI Preferred Shares, make “current public information” available, as provided in Section (c)(1) of Rule 144 (if the Company is a “Reporting Issuer” within the meaning of Rule 144) or in Section (c)(2) of Rule 144 (if the Company is a “Non-Reporting Issuer” within the meaning of Rule 144), in either case for such time period as necessary to permit sales pursuant to Rule 144, (y), to the extent any Holder is relying on the so-called “Section 4(11⁄2)” exemption to sell any of its CDCI Preferred Shares, prepare and provide to such Holder such information, including the preparation of private offering memoranda or circulars or financial information, as the Holder may reasonably request to enable the sale of the CDCI

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Preferred Shares pursuant to such exemption, or (z) to the extent any Holder is relying on Rule 144A under the Securities Act to sell any of its CDCI Preferred Shares, prepare and provide to such Holder the information required pursuant to Rule 144A(d)(4), and (2) it will take such further action as any Holder may reasonably request from time to time to enable such Holder to sell CDCI Preferred Shares without registration under the Securities Act within the limitations of the exemptions provided by (i) the provisions of the Securities Act or any interpretations thereof or related thereto by the SEC, including transactions based on the so-called “Section 4(11⁄2)” and other similar transactions, (ii) Rule 144 or 144A under the Securities Act, as such rules may be amended from time to time, or (iii) any similar rule or regulation hereafter adopted by the SEC; provided that the Company shall not be required to take any action described in this Section 5.4(a) that would cause the Company to become subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act if the Company was not subject to such requirements prior to taking such action.  Upon the request of any Holder, the Company will deliver to such Holder a written statement as to whether it has complied with such requirements and, if not, the specifics thereof.

 

(b) The Company agrees to indemnify Investor, Investor’s officers, directors, employees, agents, representatives and Affiliates, and each person, if any, that controls Investor within the meaning of the Securities Act (each, an “Indemnitee”), against any and all losses, claims, damages, actions, liabilities, costs and expenses (including reasonable fees, expenses and disbursements of attorneys and other professionals incurred in connection with investigating, defending, settling, compromising or paying any such losses, claims, damages, actions, liabilities, costs and expenses), joint or several, arising out of or based upon any untrue statement or alleged untrue statement of material fact contained in any document or report provided by the Company pursuant to this Section 5.4 or any omission to state therein a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading.

 

(c) If the indemnification provided for in Section 5.4(b) is unavailable to an Indemnitee with respect to any losses, claims, damages, actions, liabilities, costs or expenses referred to therein or is insufficient to hold the Indemnitee harmless as contemplated therein, then the Company, in lieu of indemnifying such Indemnitee, shall contribute to the amount paid or payable by such Indemnitee as a result of such losses, claims, damages, actions, liabilities, costs or expenses in such proportion as is appropriate to reflect the relative fault of the Indemnitee, on the one hand, and the Company, on the other hand, in connection with the statements or omissions which resulted in such losses, claims, damages, actions, liabilities, costs or expenses as well as any other relevant equitable considerations.  The relative fault of the Company, on the one hand, and of the Indemnitee, on the other hand, shall be determined by reference to, among other factors, whether the untrue statement of a material fact or omission to state a material fact relates to information supplied by the Company or by the Indemnitee and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission;  the Company and Investor agree that it would not be just and equitable if contribution pursuant to this Section 5.4(c) were determined by pro rata allocation or by any other method of allocation that does not take account of the equitable considerations

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referred to in Section 5.4(b).  No Indemnitee guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from the Company if the Company was not guilty of such fraudulent misrepresentation.

 

Section 5.5 Depositary Shares.

 

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

 

Section 5.6 Expenses and Further Assurances.

 

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

 

(b) The Company shall, at the Company’s sole cost and expense, (i) furnish to the Investor all instruments, documents and other agreements required to be furnished by the Company pursuant to the terms of this Agreement, including, without limitation, any documents required to be delivered pursuant to Section 5.4 above, or which are reasonably requested by the Investor in connection therewith; (ii) execute and deliver to the Investor such documents, instruments, certificates, assignments and other writings, and do such other acts necessary or desirable, to evidence, preserve and/or protect the CDCI Preferred Shares purchased by the Investor, as Investor may reasonably require; and (iii) do and execute all and such further lawful and reasonable acts, conveyances and assurances for the better and more effective carrying out of the intents and purposes of this Agreement, as the Investor shall reasonably require from time to time.

 

Section 5.7 Repurchase of Investor Securities.  From and after the date of this Agreement, the agreements set forth in Section 4.9 of the CPP Securities Purchase Agreement shall be applicable following the redemption in whole of the CDCI Preferred Shares held by the Investor or the Transfer by the Investor of all of the CDCI Preferred Shares held by the Investor to one or more third parties not affiliated with the Investor.

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ARTICLE VI

 

MISCELLANEOUS

 

Section 6.1 Termination.

 

  This Agreement shall terminate upon the earliest to occur of:

 

(a) termination at any time prior to the Closing:

 

(i) by either the Investor or the Company if the Closing shall not have occurred by the 30th calendar day following the Signing Date; provided, however, that in the event the Closing has not occurred by such 30th calendar day, the parties will consult in good faith to determine whether to extend the term of this Agreement, it being understood that the parties shall be required to consult only until the fifth calendar day after such 30th calendar day and not be under any obligation to extend the term of this Agreement thereafter; provided, further, that the right to terminate this Agreement under this Section 6.1(a)(i) shall not be available to any party whose breach of any representation or warranty or failure to perform any obligation under this Agreement shall have caused or resulted in the failure of the Closing to occur on or prior to such date; or

 

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

 

(iii) by the mutual written consent of the Investor and the Company; or

 

(b) the date on which all of the CDCI Preferred Shares have been redeemed in whole; or

 

(c) the date on which the Investor has transferred all of the CDCI Preferred Shares to third parties which are not Affiliates of the Investor; or

 

(d) if the Closing shall not have occurred by September 30, 2010, on such date.

 

In the event of termination of this Agreement as provided in this Section 6.1, this Agreement shall forthwith become void and there shall be no liability on the part of either party hereto except that nothing herein shall relieve either party from liability for any breach of this Agreement.

 

Section 6.2 Survival.

 

  (a) This Agreement and all representations, warranties, covenants and agreements made herein shall survive the Closing without limitation.

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(b) The covenants set forth in Article IV and Annex E and the agreements set forth in Article V shall, to the extent such covenants do not explicitly terminate at such time as the Investor no longer owns any CDCI Preferred Shares, survive the termination of this Agreement pursuant to Section 6.1(c) hereof without limitation until the date on which all of the CDCI Preferred Shares have been redeemed in whole.

 

Section 6.3 Amendment.

 

  No amendment of any provision of this Agreement will be effective unless made in writing and signed by an officer or a duly authorized representative of each of the Company and the Investor; provided that for so long as the CDCI Preferred Shares are outstanding, the Investor may at any time and from time to time unilaterally amend Section 4.1(d) to the extent the Investor deems necessary, in its sole discretion, to comply with, or conform to, any changes after the Signing Date in any federal statutes, any rules and regulations promulgated thereunder and any other publications or interpretative releases of the Fund governing CDFIs, including, without limitation, any changes in the criteria for certification as a CDFI by the Fund.  No failure or delay by any party in exercising any right, power or privilege hereunder shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise of any other right, power or privilege.  The rights and remedies herein provided shall be cumulative of any rights or remedies provided by law.

 

Section 6.4 Waiver of Conditions.

 

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

 

Section 6.5 Governing Law; Submission to Jurisdiction, etc.

 

  This Agreement and any claim, controversy or dispute arising under or related to this Agreement, the relationship of the parties, and/or the interpretation and enforcement of the rights and duties of the parties shall be enforced, governed, and construed in all respects (whether in contract or in tort) in accordance with the federal law of the United States if and to the extent such law is applicable, and otherwise in accordance with the laws of the State of New York applicable to contracts made and to be performed entirely within such State.  Each of the parties hereto agrees (a) to submit to the exclusive jurisdiction and venue of the United States District Court for the District of Columbia and the United States Court of Federal Claims for any and all civil actions, suits or proceedings arising out of or relating to this Agreement or the Exchange contemplated hereby and (b) that notice may be served upon (i) the Company at the address and in the manner set forth for notices to the Company in Section 6.6 and (ii) the Investor at the address and in the manner set forth for notices to the Company in Section 6.6, but otherwise in accordance with federal law.  TO THE EXTENT PERMITTED BY APPLICABLE LAW, EACH OF THE PARTIES HERETO HEREBY UNCONDITIONALLY WAIVES TRIAL BY JURY IN ANY CIVIL LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR THE EXCHANGE CONTEMPLATED HEREBY.

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Section 6.6 Notices.

 

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

 

If to the Company as set forth in Schedule A.

 

If to the Investor:

 

United States Department of the Treasury

1500 Pennsylvania Avenue, NW

Washington, D.C. 20220

Attention:  Chief Counsel, Office of Financial Stability

Facsimile: (202) 927-9225

E-mail: CDCINotice@do.treas.gov

with a copy to:

E-mail:  OFSChiefCounselNotices@do.treas.gov

 

Section 6.7 Definitions, Interpretation.

 

(a) Definitions.

 

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

 

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

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(iii) The term “Appropriate Federal Banking Agency” means the “appropriate Federal banking agency” with respect to the Company or such Company Subsidiaries, as applicable, as defined in Section 3(q) of the Federal Deposit Insurance Act (12 U.S.C. Section 1813(q)).

 

(iv) The term “Bank Holding Company” means a company registered as such with the Board of Governors of the Federal Reserve System (the “Federal Reserve”) pursuant to 12 U.S.C. §1842 and the regulations of the Federal Reserve promulgated thereunder.

 

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

 

(vi) The term “Certified Entity” means the Company or, if the Company itself has not been certified by the Fund as a CDFI, each Affiliate of the Company that has been certified by the CDFI and is specified on Schedule A of the Letter Agreement.

 

(vii) The term “Company Financial Statements” means the consolidated financial statements of the Company and its consolidated subsidiaries for each of the last three completed fiscal years of the Company (which shall be audited to the extent audited financial statements are available) and each completed quarterly period since the last completed fiscal year, required to be delivered to Investor pursuant to the CPP Securities Purchase Agreement.

 

(viii) The term “Company Material Adverse Effect” means a material adverse effect on (i) the business, results of operation or financial condition of the Company and its consolidated subsidiaries and each Certified Entity taken as a whole; provided, however, that Company Material Adverse Effect shall not be deemed to include the effects of (A) changes after the Signing Date in general business, economic or market conditions (including changes generally in prevailing interest rates, credit availability and liquidity, currency exchange rates and price levels or trading volumes in the United States or foreign securities or credit markets), or any outbreak or escalation of hostilities, declared or undeclared acts of war or terrorism, in each case generally affecting the industries in which the Company and its subsidiaries operate, (B) changes or proposed changes after the Signing Date in GAAP, or authoritative interpretations thereof, or (C) changes or proposed changes after the Signing Date in securities, banking and other laws of general applicability or related policies or interpretations of Governmental Entities (in the case of each of these clauses (A), (B) and (C), other than changes or occurrences to the extent that such changes or occurrences have or would reasonably be expected to have a materially disproportionate adverse effect on the Company and its consolidated subsidiaries taken as a whole relative to comparable U.S. banking or financial services organizations); or (ii) the ability of the Company to consummate the Exchange and the other transactions contemplated by this Agreement and perform its obligations hereunder or thereunder on a timely basis.

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(ix) The term “Designated Matters” means (i) the election and removal of directors, (ii) the approval of any Business Combination, (iii) the approval of a sale of all or substantially all of the assets or property of the Company, (iv) the approval of a dissolution of the Company, (v) the approval of any issuance of any securities of the Company on which holders of Common Stock are entitled to vote, (vi) the approval of any amendment to the Charter or bylaws of the Company on which holders of Common Stock are entitled to vote, (vii) any matters which require stockholder approval under any applicable national stock exchange rules and (viii) the approval of any other matters reasonably incidental to the matters set forth in subclauses (i) through (vii) as determined by the Investor.

 

(x) The term “Disclosure Schedule” means collectively, those certain schedules delivered to the Investor on or prior to (i) the CPP Signing Date, with respect to the “Disclosure Schedule” delivered in connection with the CPP Securities Purchase Agreement and (ii) the Signing Date with respect to the schedules required to be delivered under this Agreement, setting forth, among other things, items the disclosure of which is necessary or appropriate either in response to an express disclosure requirement contained in a provision hereof or as an exception to one or more representations or warranties contained in Section 2.2 of the CPP Securities Purchase Agreement or Article III hereof.

 

(xi) The term “EAWA” means the Employ American Workers Act (Section 1611 of Division A, Title XVI of the American Recovery and Reinvestment Act of 2009), Public Law No. 111-5, effective as of February 17, 2009, as may be amended and in effect from time to time.

 

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

 

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

 

(xiv) The term “Previously Disclosed” means information set forth on the Disclosure Schedule or the Disclosure Update, as applicable; provided, however, that disclosure in any section of such Disclosure Schedule or Disclosure Update, as applicable, shall apply only to the indicated section of this Agreement except to the extent that it is reasonably apparent from the face of such disclosure that such disclosure is relevant to another section of this Agreement; provided, further, that the existence of Previously Disclosed information, pursuant to a Disclosure Update, shall neither obligate the Investor to consummate the Exchange nor limit or affect any rights of or remedies available to the Investor.

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(xv) The term “Savings and Loan Holding Company” means a company registered as such with the Office of Thrift Supervision pursuant to 12 U.S.C. §1467(a) and the regulations of the Office of Thrift Supervision promulgated thereunder.

 

(xvi) The term “Senior Executive Officers” means the Company's “senior executive officers” as defined in Section 111 of the EESA and the Compensation Regulations.

 

(xvii) The term “Share Dilution Amount” means the increase in the number of diluted shares outstanding (determined in accordance with GAAP, and as measured from the date of the Company’s most recent consolidated financial statements prior to the Closing Date) resulting from the grant, vesting or exercise of equity-based compensation to employees and equitably adjusted for any stock split, stock dividend, reverse stock split, reclassification or similar transaction.

 

(xviii) The term “Tax” or “Taxes” means any federal, state, local or foreign income, gross receipts, property, sales, use, license, excise, franchise, employment, payroll, withholding, alternative or add on minimum, ad valorem, transfer or excise tax, or any other tax, custom, duty, governmental fee or other like assessment or charge of any kind whatsoever, together with any interest, penalty or addition imposed by any Governmental Entity.

 

(xix) To the extent any securities issued pursuant to this Agreement or the transactions contemplated hereby are registered in the name of a designee of the Investor pursuant to Section 1.2 or Section 6.9(c) or transferred to an Affiliate of the Investor, all references herein to the Investor holding or owning any debt or equity securities of the Company, CDCI Preferred Shares shall be deemed to refer to the Investor, together with such designees and/or Affiliates, holding or owning any debt or equity securities, CDCI Preferred Shares (and any like variations thereof), as applicable.

 

Section 6.8 Interpretation.

 

  When a reference is made in this Agreement to “Recitals”, “Articles”, “Sections”, “Annexes” or “Schedules” such reference shall be to a Recital, Article or Section of, or Annex or Schedule to, this Agreement, unless otherwise indicated.  The terms defined in the singular have a comparable meaning when used in the plural, and vice versa.  References to “herein”, “hereof”, “hereunder” and the like refer to this Agreement as a whole and not to any particular section or provision, unless the context requires otherwise.  The table of contents and headings contained in this Agreement are for reference purposes only and are not part of this Agreement.  Whenever the words “include”, “includes” or “including” are used in this Agreement, they shall be deemed followed by the words “without limitation.” No rule of construction against the draftsperson shall be applied in connection with the interpretation or enforcement of this Agreement, as this Agreement is entered into between sophisticated parties advised by counsel.  All references to “$” or “dollars” mean the lawful currency of the United States of America.  Except as expressly stated in this Agreement, all references to any statute, rule or regulation are to the statute, rule or regulation as amended, modified, supplemented or replaced from time to time (and, in the case of statutes, include any rules and regulations promulgated under the statute) and to any section of any statute, rule or

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regulation include any successor to the section.  References to a “business day” shall mean any day except Saturday, Sunday and any day on which banking institutions in the State of New York or the District of Columbia generally are authorized or required by law or other governmental actions to close.

 

Section 6.9 Assignment.

 

  Neither this Agreement nor any right, remedy, obligation nor liability arising hereunder or by reason hereof shall be assignable by any party hereto without the prior written consent of the other party, and any attempt to assign any right, remedy, obligation or liability hereunder without such consent shall be void, except (a) an assignment, in the case of a merger, consolidation, statutory share exchange or similar transaction that requires the approval of the Company’s stockholders where such party is not the surviving entity, or a sale of substantially all of its assets, to the entity which is the survivor of such Business Combination or the purchaser in such sale, (b) an assignment of certain rights as provided in Sections 4.1(c) or 4.1(j) or Annex E or (c) an assignment by the Investor of this Agreement to an Affiliate of the Investor; provided that if the Investor assigns this Agreement to an Affiliate, the Investor shall be relieved of its obligations under this Agreement but (i) all rights, remedies and obligations of the Investor hereunder shall continue and be enforceable by such Affiliate, (ii) the Company’s obligations and liabilities hereunder shall continue to be outstanding and (iii) all references to the Investor herein shall be deemed to be references to such Affiliate.

 

Section 6.10 Severability.

 

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

 

Section 6.11 No Third-Party Beneficiaries.

 

  Other than as expressly provided herein, nothing contained in this Agreement, expressed or implied, is intended to confer upon any person or entity other than the Company and the Investor (and any Indemnitee) any benefit, right or remedies.

 

Section 6.12 Entire Agreement, etc.

 

  (a) This Agreement (including the Annexes and Schedules hereto) constitutes the entire agreement, and supersedes all other prior agreements, understandings, representations and warranties, both written and oral, between the parties, with respect to the subject matter hereof.

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(b) For the avoidance of doubt, for so long as the Investor holds any outstanding CPP Preferred Stock or warrants issued by the Company to the Investor pursuant to the CPP Securities Purchase Agreement or any securities issuable upon the exercise thereof or exchanged therefor (collectively, the “CPP Securities”), the CPP Securities Purchase Agreement and the CPP Securities shall remain in full force and effect, other than as specifically modified herein.

 

Section 6.13 Specific Performance.

 

  The parties agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms.  It is accordingly agreed that the parties shall be entitled (without the necessity of posting a bond) to specific performance of the terms hereof, this being in addition to any other remedies to which they are entitled at law or equity.

 

[Remainder of Page Intentionally Left Blank]

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ANNEX A

 

FORM OF OFFICER’S CERTIFICATE

 

OFFICER’S CERTIFICATE

 

OF

 

[COMPANY]

 

 In connection with that certain letter agreement, dated [____________], 2010 (the “Agreement”) by and between [COMPANY] (the “Company”) and the United States Department of the Treasury which incorporates that certain Exchange Agreement – Standard Terms referred to therein (the “Standard Terms”), the undersigned does hereby certify as follows:

 

1.  I am a duly elected/appointed [____________] of the Company.

 

2.  The representations and warranties of the Company set forth in Article III of the Standard Terms are true and correct in all respects as though as of the date hereof (other than representations and warranties that by their terms speak as of another date, which representations and warranties shall be true and correct in all respects as of such other date) and the Company has performed in all material respects all obligations required to be performed by it under the Agreement.

 

3.  The New Certificate of Designations, a true, complete and correct copy of which is attached as Exhibit A hereto, has been filed with, and accepted by, the Secretary of State of the State of [___________].

 

4.  The Company has effected such changes to its Benefit Plans with respect to its Senior Executive Officers and any other employee of the Company or its Affiliates subject to Section 111 of EESA, as implemented by any Compensation Regulations (and to the extent necessary for such changes to be legally enforceable, each of its Senior Executive Officers and other employees has duly consented in writing to such changes), as may be necessary, during the Relevant Period, in order to comply with Section 111 of EESA or the Compensation Regulations.

 

5.  The Charter and bylaws of the Company delivered to the Investor pursuant to the CPP Securities Purchase Agreement are true, complete and correct as of the date hereof.

 

The foregoing certifications are made and delivered as of [_________] pursuant to Section 1.2 of the Standard Terms.

 

Capitalized terms used and not otherwise defined herein shall have the meanings assigned to them in the Standard Terms.

 

[SIGNATURE PAGE FOLLOWS]

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  Annex A-1

  

  

 

IN WITNESS WHEREOF, this Officer’s Certificate has been duly executed and delivered as of the [__] day of [__________], 20[__].

 

	
  

	
[COMPANY]

 

 

	
  

	
 

	 By:__________________________________

	
  

	
       Name:

	
  

	
       Title:

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Annex A-2

  

  

 

EXHIBIT A

 

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Annex A-3

  

  

 

ANNEX B

 

FORM OF NEW CERTIFICATE OF DESIGNATIONS

 

 

[SEE ATTACHED]

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Annex B-1

  

  

 

ANNEX C

 

FORM OF OPINION

 

(a)           The Company has been duly formed and is validly existing as a [TYPE OF ORGANIZATION] and is in good standing under the laws of the jurisdiction of its organization.  The Company has all necessary power and authority to own, operate and lease its properties and to carry on its business as it is being conducted.

 

(b)           The Company has been duly qualified as a foreign entity for the transaction of business and is in good standing under the laws of [_____________], [_____________] and [_____________].

 

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

 

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

 

(e)           The execution, delivery and performance by the Company of the Agreement and the consummation of the transactions contemplated thereby have been duly authorized by all necessary corporate action on the part of the Company and its stockholders, and no further approval or authorization is required on the part of the Company, including, without limitation, by any rule or requirement of any national stock exchange.

 

(f)           The Agreement is a valid and binding obligation of the Company enforceable against the Company in accordance with its terms, except as the same may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors’ rights generally and general equitable principles, regardless of whether such enforceability is considered in a proceeding at law or in equity.

 

(g)           The execution and delivery by the Company of this Agreement and the performance by the Company of its obligations thereunder (i) do not require any approval by any Governmental Entity to be obtained on the part of the Company, except those that have been obtained, (ii) do not violate or conflict with any provision of the Charter, (iii) do not violate, conflict with, or result in a breach of any provision of, or constitute a default (or an event which, with notice or lapse of time or both, would constitute a default) under, or result in the termination of, or accelerate the performance required by, or result in a right of termination or acceleration of, or result in the creation of, any lien, security interest, charge or encumbrance upon any of the properties or assets of the Company or any Company Subsidiary under any of the terms, conditions or provisions of its organizational documents or under any agreement, contract,

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Annex C-1

  

  

 

indenture, lease, mortgage, power of attorney, evidence of indebtedness, letter of credit, license, instrument, obligation, purchase or sales order, or other commitment, whether oral or written, to which it is a party or by which it or any of its properties is bound or (iv) do not conflict with, breach or result in a violation of, or default under any judgment, decree or order known to us that is applicable to the Company and, pursuant to any applicable laws, is issued by any Governmental Entity having jurisdiction over the Company.

 

(h)           Other than the filing of the New Certificate of Designations with the Secretary of State of its jurisdiction of organization or other applicable Governmental Entity, such filings and approvals as are required to be made or obtained under any state “blue sky” laws and such consents and approvals that have been made or obtained, no notice to, filing with, exemption or review by, or authorization, consent or approval of, any Governmental Entity is required to be made or obtained by the Company in connection with the consummation by the Company of the Exchange.

 

(i)           The Company is not nor, after giving effect to the issuance of the CDCI Preferred Shares pursuant to the Agreement, would be on the date hereof an “investment company” or an entity “controlled” by an “investment company,” as such terms are defined in the Investment Company Act of 1940, as amended.

 

(j)           Each Certified Entity (A) is a regulated community development financial institution (a “CDFI”) currently certified by the Community Development Financial Institution Fund (the “Fund”) of the United States Department of the Treasury pursuant to 12 C.F.R. 1805.201(a) and (B) satisfies all of the eligibility requirements of the Fund’s Community Development Financial Institutions Program for a CDFI.

 

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Annex C-2

  

  

 

ANNEX D

 

FORM OF WAIVER

 

In consideration for the benefits I will receive as a result of the participation of [____________________] (together with its subsidiaries and affiliates, the “Company”) in the United States Department of the Treasury’s (the “Treasury”) Capital Purchase Program, Community Development Capital Initiative and/or any other economic stabilization program implemented by the Treasury under the Emergency Economic Stabilization Act of 2008 (as amended, supplemented, or otherwise modified, the “EESA”) (any such program, including the Capital Purchase Program and the Community Development Capital Initiative, a “Program”), I hereby voluntarily waive any claim against the United States (and each of its departments and agencies) or the Company or any of its directors, officers, employees and agents for any changes to my compensation or benefits that are required to comply with the executive compensation and corporate governance requirements of Section 111 of the EESA, as implemented by any guidance or regulations issued and/or to be issued thereunder, including without limitation the provisions for the Capital Purchase Program, as implemented by any guidance or regulation thereunder, including the rules set forth in 31 C.F.R. Part 30, or any other guidance or regulations under the EESA and the applicable requirements of the Exchange Agreement by and among the Company and the Treasury dated as of _______ __, 2010, as amended (such requirements, the “Limitations”).

 

I acknowledge that the Limitations may require modification or termination of the employment, compensation, bonus, incentive, severance, retention and other benefit plans, arrangements, policies and agreements (including so-called “golden parachute” agreements), whether or not in writing, that I may have with the Company or in which I may participate as they relate to the period the United States holds any equity or debt securities of the Company acquired through a Program or for any other period applicable under such Program or Limitations, as the case may be, and I hereby consent to all such modifications.

 

This waiver includes all claims I may have under the laws of the United States or any other jurisdiction (whether or not in existence as of the date hereof) related to the requirements imposed by the Limitations, including without limitation, a claim for any compensation or other payments or benefits I would otherwise receive, any challenge to the process by which the Limitations are or were adopted and any tort or constitutional claim about the effect of these Limitations on my employment relationship and I hereby agree that I will not at any time initiate, or cause or permit to be initiated on my behalf, any such claim against the United States, the Company or its directors, officers, employees or agents in or before any local, state, federal or other agency, court or body.

 

I agree that, in the event and to the extent that the Compensation Committee of the Board of Directors of the Company or similar governing body (the “Committee”) reasonably determines that any compensatory payment and benefit provided to me, including any bonus or incentive compensation based on materially inaccurate financial statements or performance criteria, would

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Annex D-1

  

  

 

cause the Company to fail to be in compliance with the Limitations (such payment or benefit, an “Excess Payment”), upon notification from the Company, I shall repay such Excess Payment to the Company within 15 business days. In addition, I agree that the Company shall have the right to postpone any such payment or benefit for a reasonable period of time to enable the Committee to determine whether such payment or benefit would constitute an Excess Payment.

 

I understand that any determination by the Committee as to whether or not, including the manner in which, a payment or benefit needs to be modified, terminated or repaid in order for the Company to be in compliance with Section 111 of the EESA and/or the Limitations shall be a final and conclusive determination of the Committee which shall be binding upon me. I further understand that the Company is relying on this letter from me in connection with its participation in a Program.

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Annex D-2

  

  

 

IN WITNESS WHEREOF, I execute this waiver on my own behalf, thereby communicating my acceptance and acknowledgement to the provisions herein.

 

	
  

	
Respectfully,

 

                                                                                                                _____________________________________

        Name:

        Title:

        Date:

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Annex D-3

  

  

 

ANNEX E

 

REGISTRATION RIGHTS

 

 1.1           Definitions.  Terms not defined in this Annex shall have the meaning ascribed to such terms in the Agreement. As used in this Annex E, the following terms shall have the following respective meanings:

 

(a)   “Holder” means the Investor and any other holder of Registrable Securities to whom the registration rights conferred by this Agreement have been transferred in compliance with Section 1.9 hereof.

 

(b)   “Holders’ Counsel” means one counsel for the selling Holders chosen by Holders holding a majority interest in the Registrable Securities being registered.

 

(c)   “Pending Underwritten Offering” means, with respect to any Holder forfeiting its rights pursuant to Section 1.11 of this Annex E, any underwritten offering of Registrable Securities in which such Holder has advised the Company of its intent to register its Registrable Securities either pursuant to Section 1.2(b) or 1.2(d) of this Annex E prior to the date of such Holder’s forfeiture.

 

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

 

(e)   “Registrable Securities” means (A) all CDCI Preferred Shares and (B) any equity securities issued or issuable directly or indirectly with respect to the securities referred to in the foregoing clause (A) by way of conversion, exercise or exchange thereof, or share dividend or share split or in connection with a combination of shares, recapitalization, reclassification, merger, amalgamation, arrangement, consolidation or other reorganization, provided that, once issued, such securities will not be Registrable Securities when (1) they are sold pursuant to an effective registration statement under the Securities Act, (2) they shall have ceased to be outstanding or (3) they have been sold in any transaction in which the transferor’s rights under this Agreement are not assigned to the transferee of the securities.  No Registrable Securities may be registered under more than one registration statement at any one time.

 

(f)   “Registration Expenses” mean all expenses incurred by the Company in effecting any registration pursuant to this Agreement (whether or not any registration or prospectus becomes effective or final) or otherwise complying with its obligations under this Annex E, including all registration, filing and listing fees, printing expenses, fees and disbursements of counsel for the Company, blue sky fees and expenses, expenses incurred in connection with any “road show”, the reasonable fees and disbursements of Holders’ Counsel,

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and expenses of the Company’s independent accountants in connection with any regular or special reviews or audits incident to or required by any such registration, but shall not include Selling Expenses.

 

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

 

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

 

(i)   “Special Registration” means the registration of (A) equity securities and/or options or other rights in respect thereof solely registered on Form S-4 or Form S-8 (or successor form) or (B) shares of equity securities and/or options or other rights in respect thereof to be offered to directors, members of management, employees, consultants, customers, lenders or vendors of the Company or Company Subsidiaries or in connection with dividend reinvestment plans.

 

 1.2           Registration.

 

(a)   The Company covenants and agrees that as promptly as practicable after the date that the Company becomes subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act (and in any event no later than 30 days thereafter), the Company shall prepare and file with the SEC a Shelf Registration Statement covering all Registrable Securities (or otherwise designate an existing shelf registration on an appropriate form under Rule 415 under the Securities Act (a “Shelf Registration Statement”) filed with the SEC to cover the Registrable Securities), and, to the extent the Shelf Registration Statement has not theretofore been declared effective or is not automatically effective upon such filing, the Company shall use reasonable best efforts to cause such Shelf Registration Statement to be declared or become effective and to keep such Shelf Registration Statement continuously effective and in compliance with the Securities Act and usable for resale of such Registrable Securities for a period from the date of its initial effectiveness until such time as there are no Registrable Securities remaining (including by refiling such Shelf Registration Statement (or a new Shelf Registration Statement) if the initial Shelf Registration Statement expires).  Notwithstanding the foregoing, if the Company is not eligible to file a registration statement on Form S-3, then the Company shall not be obligated to file a Shelf Registration Statement unless and until requested to do so in writing by the Investor.

 

(b)   Any registration pursuant to Section 1.2(a) of this Annex E shall be effected by means of a Shelf Registration Statement on an appropriate form under Rule 415 under the Securities Act (a “Shelf Registration Statement”).  If the Investor or any other Holder intends to distribute any Registrable Securities by means of an underwritten offering it shall promptly so advise the Company and the Company shall take all reasonable steps to facilitate

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such distribution, including the actions required pursuant to Section 1.2(d) of this Annex E; provided that the Company shall not be required to facilitate an underwritten offering of Registrable Securities unless (i) the expected gross proceeds from such offering exceed $200,000 or (ii) such underwritten offering includes all of the outstanding Registrable Securities held by such Holder.  The lead underwriters in any such distribution shall be selected by the Holders of a majority of the Registrable Securities to be distributed.

 

(c)   The Company shall not be required to effect a registration (including a resale of Registrable Securities from an effective Shelf Registration Statement) or an underwritten offering pursuant to Section 1.2 of this Annex E:  (A) with respect to securities that are not Registrable Securities; or (B) if the Company has notified the Investor and all other Holders that in the good faith judgment of the Board of Directors, it would be materially detrimental to the Company or its securityholders for such registration or underwritten offering to be effected at such time, in which event the Company shall have the right to defer such registration for a period of not more than 45 days after receipt of the request of the Investor or any other Holder; provided that such right to delay a registration or underwritten offering shall be exercised by the Company (1) only if the Company has generally exercised (or is concurrently exercising) similar black-out rights against holders of similar securities that have registration rights and (2) not more than three times in any 12-month period and not more than 90 days in the aggregate in any 12-month period.

 

(d)   If during any period when an effective Shelf Registration Statement is not available, the Company proposes to register any of its equity securities, other than a registration pursuant to Section 1.2(a) of this Annex E or a Special Registration, and the registration form to be filed may be used for the registration or qualification for distribution of Registrable Securities, the Company will give prompt written notice to the Investor and all other Holders of its intention to effect such a registration (but in no event less than ten days prior to the anticipated filing date) and will include in such registration all Registrable Securities with respect to which the Company has received written requests for inclusion therein within ten business days after the date of the Company’s notice (a “Piggyback Registration”).  Any such person that has made such a written request may withdraw its Registrable Securities from such Piggyback Registration by giving written notice to the Company and the managing underwriter, if any, on or before the fifth business day prior to the planned effective date of such Piggyback Registration. The Company may terminate or withdraw any registration under this Section 1.2(d) prior to the effectiveness of such registration, whether or not Investor or any other Holders have elected to include Registrable Securities in such registration.

 

(e)   If the registration referred to in Section 1.2(d) of this Annex E is proposed to be underwritten, the Company will so advise Investor and all other Holders as a part of the written notice given pursuant to Section 1.2(d) of this Annex E.  In such event, the right of Investor and all other Holders to registration pursuant to Section 1.2 of this Annex E will be conditioned upon such persons’ participation in such underwriting and the inclusion of such person’s Registrable Securities in the underwriting if such securities are of the same class of securities as the securities to be offered in the underwritten offering, and each such person will (together with the Company and the other persons distributing their securities through such underwriting) enter into an underwriting agreement in customary form with the underwriter or

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

 

(f)   If either (x) the Company grants “piggyback” registration rights to one or more third parties to include their securities in an underwritten offering under the Shelf Registration Statement pursuant to Section 1.2(b) of this Annex E or (y) a Piggyback Registration under Section 1.2(d) of this Annex E relates to an underwritten offering on behalf of the Company, and in either case the managing underwriters advise the Company that in their reasonable opinion the number of securities requested to be included in such offering exceeds the number which can be sold without adversely affecting the marketability of such offering (including an adverse effect on the per share offering price), the Company will include in such offering only such number of securities that in the reasonable opinion of such managing underwriters can be sold without adversely affecting the marketability of the offering (including an adverse effect on the per share offering price), which securities will be so included in the following order of priority: (A) first, in the case of a Piggyback Registration under Section 1.2(d) of this Annex E, the securities the Company proposes to sell, (B) then the Registrable Securities of the Investor and all other Holders who have requested inclusion of Registrable Securities pursuant to Section 1.2(b) or Section 1.2(d) of this Annex E, as applicable, pro rata on the basis of the aggregate number of such securities or shares owned by each such person and (C) lastly, any other securities of the Company that have been requested to be so included, subject to the terms of this Agreement; provided, however, that if the Company has, prior to the Signing Date, entered into an agreement with respect to its securities that is inconsistent with the order of priority contemplated hereby then it shall apply the order of priority in such conflicting agreement to the extent that it would otherwise result in a breach under such agreement.

 

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

 

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

 

(a)   Prepare and file with the SEC a prospectus supplement or post-effective amendment with respect to a proposed offering of Registrable Securities pursuant to an effective registration statement, subject to Section 1.4 of this Annex E, keep such registration statement effective and keep such prospectus supplement current until the securities described therein are no longer Registrable Securities.

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

 

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

 

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

 

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

 

(f)   Give written notice to the Holders:

 

(i)   when any registration statement filed pursuant to Section 4.1(j) of the Agreement or any amendment thereto has been filed with the SEC (except for any amendment effected by the filing of a document with the SEC pursuant to the Exchange Act) and when such registration statement or any post-effective amendment thereto has become effective;

 

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

 

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

 

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

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

 

(vi)   if at any time the representations and warranties of the Company contained in any underwriting agreement contemplated by Section 1.4(j) of this Annex E cease to be true and correct.

 

(g)   Use its reasonable best efforts to prevent the issuance or obtain the withdrawal of any order suspending the effectiveness of any registration statement referred to in Section 1.4(f)(iii) of this Annex E at the earliest practicable time.

 

(h)   Upon the occurrence of any event contemplated by Section 1.4(e) or 1.4(f)(v) of this Annex E, promptly prepare a post-effective amendment to such registration statement or a supplement to the related prospectus or file any other required document so that, as thereafter delivered to the Holders and any underwriters, the prospectus will not contain an untrue statement of a material fact or omit to state any material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading.  If the Company notifies the Holders in accordance with Section 1.4(f)(v) to suspend the use of the prospectus until the requisite changes to the prospectus have been made, then the Holders and any underwriters shall suspend use of such prospectus and use their reasonable best efforts to return to the Company all copies of such prospectus (at the Company’s expense) other than permanent file copies then in such Holders’ or underwriters’ possession.  The total number of days that any such suspension may be in effect in any 12-month period shall not exceed 90 days.

 

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

 

(j)   If an underwritten offering is requested pursuant to Section 1.2(b) of this Annex E, enter into an underwriting agreement in customary form, scope and substance and take all such other actions reasonably requested by the Holders of a majority of the Registrable Securities being sold in connection therewith or by the managing underwriter(s), if any, to expedite or facilitate the underwritten disposition of such Registrable Securities, and in connection therewith in any underwritten offering (including making members of management and executives of the Company available to participate in “road shows”, similar sales events and other marketing activities), (A) make such representations and warranties to the Holders that are selling stockholders and the managing underwriter(s), if any, with respect to the business of the Company and its subsidiaries, and the Shelf Registration Statement, prospectus and documents, if any, incorporated or deemed to be incorporated by reference therein, in each case, in customary form, substance and scope, and, if true, confirm the same if and when requested, (B) use its reasonable best efforts to furnish the underwriters with opinions of counsel to the Company, addressed to the managing underwriter(s), if any, covering the matters customarily

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covered in such opinions requested in underwritten offerings, (C) use its reasonable best efforts to obtain “cold comfort” letters from the independent certified public accountants of the Company (and, if necessary, any other independent certified public accountants of any business acquired by the Company for which financial statements and financial data are included in the Shelf Registration Statement) who have certified the financial statements included in such Shelf Registration Statement, addressed to each of the managing underwriter(s), if any, such letters to be in customary form and covering matters of the type customarily covered in “cold comfort” letters, (D) if an underwriting agreement is entered into, the same shall contain indemnification provisions and procedures customary in underwritten offerings (provided that the Investor shall not be obligated to provide any indemnity), and (E) deliver such documents and certificates as may be reasonably requested by the Holders of a majority of the Registrable Securities being sold in connection therewith, their counsel and the managing underwriter(s), if any, to evidence the continued validity of the representations and warranties made pursuant to clause (A) above and to evidence compliance with any customary conditions contained in the underwriting agreement or other agreement entered into by the Company.

 

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

 

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

 

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

 

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

 

1.5           Suspension of Sales.  Upon receipt of written notice from the Company that a registration statement, prospectus or prospectus supplement contains or may contain an untrue statement of a material fact or omits or may omit to state a material fact required to be

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

 

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

 

 1.7           Furnishing Information.

 

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

 

(b)   It shall be a condition precedent to the obligations of the Company to take any action pursuant to Section 1.4 of this Annex E that Investor and/or the selling Holders and the underwriters, if any, shall furnish to the Company such information regarding themselves, the Registrable Securities held by them and the intended method of disposition of such securities as shall be required to effect the registered offering of their Registrable Securities.

 

 1.8           Indemnification.

 

(a)   The Company agrees to indemnify each Holder and, if a Holder is a person other than an individual, such Holder’s officers, directors, employees, agents, representatives and Affiliates, and each person, if any, that controls a Holder within the meaning of the Securities Act (each, an “Indemnitee”), against any and all losses, claims, damages, actions, liabilities, costs and expenses (including reasonable fees, expenses and disbursements of attorneys and other professionals incurred in connection with investigating, defending, settling, compromising or paying any such losses, claims, damages, actions, liabilities, costs and expenses), joint or several, arising out of or based upon any untrue statement or alleged untrue statement of material fact contained in any registration statement, including any preliminary prospectus or final prospectus contained therein or any amendments or supplements thereto or any documents incorporated therein by reference or contained in any free writing prospectus (as such term is defined in Rule 405) prepared by the Company or authorized by it in writing for use by such Holder (or any amendment or supplement thereto); or any omission to state therein a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; provided, that the Company

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shall not be liable to such Indemnitee in any such case to the extent that any such loss, claim, damage, liability (or action or proceeding in respect thereof) or expense arises out of or is based upon (A) an untrue statement or omission made in such registration statement, including any such preliminary prospectus or final prospectus contained therein or any such amendments or supplements thereto or contained in any free writing prospectus (as such term is defined in Rule 405) prepared by the Company or authorized by it in writing for use by such Holder (or any amendment or supplement thereto), in reliance upon and in conformity with information regarding such Indemnitee or its plan of distribution or ownership interests which was furnished in writing to the Company by such Indemnitee for use in connection with such registration statement, including any such preliminary prospectus or final prospectus contained therein or any such amendments or supplements thereto, or (B)  offers or sales effected by or on behalf of such Indemnitee “by means of” (as defined in Rule 159A) a “free writing prospectus” (as defined in Rule 405) that was not authorized in writing by the Company.

 

(b)   If the indemnification provided for in Section 1.8(a) of this Annex E is unavailable to an Indemnitee with respect to any losses, claims, damages, actions, liabilities, costs or expenses referred to therein or is insufficient to hold the Indemnitee harmless as contemplated therein, then the Company, in lieu of indemnifying such Indemnitee, shall contribute to the amount paid or payable by such Indemnitee as a result of such losses, claims, damages, actions, liabilities, costs or expenses in such proportion as is appropriate to reflect the relative fault of the Indemnitee, on the one hand, and the Company, on the other hand, in connection with the statements or omissions which resulted in such losses, claims, damages, actions, liabilities, costs or expenses as well as any other relevant equitable considerations.  The relative fault of the Company, on the one hand, and of the Indemnitee, on the other hand, shall be determined by reference to, among other factors, whether the untrue statement of a material fact or omission to state a material fact relates to information supplied by the Company or by the Indemnitee and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission;  the Company and each Holder agree that it would not be just and equitable if contribution pursuant to this Section 1.8(b) of this Annex E were determined by pro rata allocation or by any other method of allocation that does not take account of the equitable considerations referred to in Section 1.8(a) of this Annex E.  No Indemnitee guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from the Company if the Company was not guilty of such fraudulent misrepresentation.

 

 1.9           Assignment of Registration Rights.  The rights of the Investor to registration of Registrable Securities pursuant to Section 1.2 of this Annex E may be assigned by the Investor to any transferee or assignee of Registrable Securities; provided, however, the transferor shall, within ten days after such transfer, furnish to the Company written notice of the name and address of such transferee or assignee and the number and type of Registrable Securities that are being assigned.

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 1.10           Clear Market.  With respect to any underwritten offering of Registrable Securities by the Investor or other Holders pursuant to this Annex E, the Company agrees not to effect (other than pursuant to such registration or pursuant to a Special Registration) any public sale or distribution, or to file any Shelf Registration Statement (other than such registration or a Special Registration) covering any preferred stock of the Company or any securities convertible into or exchangeable or exercisable for preferred stock of the Company, during the period not to exceed ten days prior and 60 days following the effective date of such offering or such longer period up to 90 days as may be requested by the managing underwriter for such underwritten offering.  The Company also agrees to cause such of its directors and senior executive officers to execute and deliver customary lock-up agreements in such form and for such time period up to 90 days as may be requested by the managing underwriter.

 

 1.11           Forfeiture of Rights.        At any time, any holder of Registrable Securities (including any Holder) may elect to forfeit its rights set forth in this Annex E from that date forward; provided, that a Holder forfeiting such rights shall nonetheless be entitled to participate under Section 1.2(d) – (f) of this Annex E in any Pending Underwritten Offering to the same extent that such Holder would have been entitled to if the holder had not withdrawn; and provided, further, that no such forfeiture shall terminate a Holder’s rights or obligations under Section 1.7 of this Annex E with respect to any prior registration or Pending Underwritten Offering.

 

 1.12           Specific Performance.  The parties hereto acknowledge that there would be no adequate remedy at law if the Company fails to perform any of its obligations under this Annex E and that the Investor and the Holders from time to time may be irreparably harmed by any such failure, and accordingly agree that the Investor and such Holders, in addition to any other remedy to which they may be entitled at law or in equity, to the fullest extent permitted and enforceable under applicable law shall be entitled to compel specific performance of the obligations of the Company under this Annex E in accordance with the terms and conditions of this Annex E.

 

 1.13           No Inconsistent Agreements.  The Company shall not, on or after the Signing Date, enter into any agreement with respect to its securities that may impair the rights granted to the Investor and the Holders under this Annex E or that otherwise conflicts with the provisions hereof in any manner that may impair the rights granted to the Investor and the Holders under this Annex E.  In the event the Company has, prior to the Signing Date, entered into any agreement with respect to its securities that is inconsistent with the rights granted to the Investor and the Holders under this Annex E (including agreements that are inconsistent with the order of priority contemplated by Section 1.2(f) of Annex E) or that may otherwise conflict with the provisions hereof, the Company shall use its reasonable best efforts to amend such agreements to ensure they are consistent with the provisions of this Annex E.

 

 1.14           Certain Offerings by the Investor.  An “underwritten” offering or other disposition shall include any distribution of such securities on behalf of the Investor by one or more broker-dealers, an “underwriting agreement” shall include any purchase agreement entered into by such broker-dealers, and any “registration statement” or “prospectus” shall include any offering document approved by the Company and used in connection with such distribution.

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ANNEX F

 

OFFICER’S CERTIFICATE

 

OF

 

[COMPANY]

 

 In connection with that certain letter agreement, dated [____________], 2010 (the “Agreement”) by and between [COMPANY] (the “Company”) and the United States Department of the Treasury (“Investor”) which incorporates that certain Exchange Agreement –Standard Terms referred to therein (the “Standard Terms”), the undersigned does hereby certify as follows:

 

1.  I am a duly elected/appointed [____________] of the Company.

 

2.  Each Certified Entity (as defined in the Standard Terms) (A) is certified by the Community Development Financial Institution Fund (the “Fund”) of the United States Department of the Treasury as a regulated community development financial institution (a “CDFI”); (B) together with its Affiliates collectively meets the eligibility requirements of 12 C.F.R. 1805.200(b); (C) has a primary mission of promoting community development, as may be determined by Investor from time to time, based on criteria set forth in 12 C.F.R. 1805.201(b)(1); (D) provides Financial Products, Development Services, and/or other similar financing as a predominant business activity in arm’s-length transactions; (E) serves a Target Market by serving one or more Investment Areas and/or Targeted Populations in the manner set forth in 12 C.F.R. 1805.201(b)(3); (F) provides Development Services in conjunction with its Financial Products, directly, through an Affiliate or through a contract with a third-party provider; (G) maintains accountability to residents of the applicable Investment Area(s) or Targeted Population(s) through representation on its governing Board of Directors or otherwise; and (H) remains a non-governmental entity which is not an agency or instrumentality of the United States of America, or any State or political subdivision thereof, as described in 12 C.F.R. 1805.201(b)(6) and within the meaning of any supplemental regulations or interpretations of 12 C.F.R. 1805.201(b)(6) or such supplemental regulations published by the Fund.  As used herein, the terms “Affiliates”; “Financial Products”; “Development Services”; “Target Market”; “Investment Areas”; and “Targeted Populations” have the meanings ascribed to such terms in 12 C.F.R. 1805.104.

 

3.  The information set forth in the CDFI Certification Application delivered to the Investor pursuant to Section 1.2(c)(xii) of the Standard Terms (the “CDFI Application”), as modified by any updates to the CDFI Application provided on [Insert Date(s)] by the Company to the Investor on or prior to the date hereof, with respect to the covenants set forth in Section 4.1(d)(i)(B) and Section 4.1(d)(i)(D) of the Standard Terms remains true, correct and complete as of the date hereof.

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4.  The contracts and material agreements entered into by each Certified Entity with respect to Development Services previously disclosed to the Investor remain in effect   and copies of any new contracts and material agreements entered into by the Certified Entity with respect to Development Services are attached hereto as Exhibit A.

 

5.  Attached hereto as Exhibit B is (A) a list of the names and addresses of the individuals which comprise the board of directors of each Certified Entity as of the date hereof, (B) to the extent any member of the board of directors listed on Exhibit B was not a member of the board of directors as of the last certification provided to the Investor pursuant to Section 4.1(d)(ii) of the Standard Terms, a narrative describing such individual’s relationship to the applicable Investment Area(s) and Targeted Population(s) and (C) to the extent any Certified Entity maintains accountability to residents of the applicable Investment Area(s) or Target Population(s) through means other than representation on its governing board of directors and such means have changed since the date of the last certification provided to the Investor pursuant to Section 4.1(d)(ii) of the Standard Terms on [Insert Date], a narrative describing such change.

 

6.  Each Certified Entity is not an agency of the United States of America, or any State or political subdivision thereof, as described in 12 C.F.R. 1805.201(b)(6) and within the meaning of any supplemental regulations or interpretations of 12 C.F.R. 1805.201(b)(6) or such supplemental regulations published by the Fund.

 

7.  [Insert if the Company was a Bank Holding Company or a Savings and Loan Holding Company on the Signing Date: The Company is and has been at all times since the date of the last certification provided to the Investor pursuant to Section 4.1(d)(ii) of the Standard Terms, a [Insert if the Company is a Bank Holding Company: Bank Holding Company] [Insert if the Company is a Savings and Loan Holding Company: Savings and Loan Holding Company].] The Company is not, and has not been at any time since the date of the last certification provided to the Investor pursuant to Section 4.1(d)(ii) of the Standard Terms on [Insert Date], controlled (within the meaning of [Insert for banks and Bank Holding Companies: the Bank Holding Company Act of 1956 (12 U.S.C. 1841(a)(2)) and 12 C.F.R. 225(a)(i)] [Insert for savings associations and Savings and Loan Holding Companies: the Home Owners’ Loan Act of 1933 (12 U.S.C. 1467a (a)(2)) and 12 C.F.R. 583.7]) by a foreign bank or company.

 

The foregoing certifications are made and delivered as of [_________] pursuant to Section 4.1(d)(ii) of the Standard Terms.

 

Capitalized terms used and not otherwise defined herein shall have the meanings assigned to them in the Standard Terms.

 

[SIGNATURE PAGE FOLLOWS]

UST Sequence No. 511                                                                   

F-2  

  

  

 

IN WITNESS WHEREOF, this Officer’s Certificate has been duly executed and delivered as of the [__] day of [__________], 20[__].

 

	
  

	
[COMPANY]

 

 

	
  

	
 

	 By:_________________________________

	
  

	
       Name:

	
  

	
       Title:

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EXHIBIT A

 

NEW CONTRACTS AND MATERIAL AGREEMENTS

UST Sequence No. 511                                                              

Exh. A-1

  

  

 

EXHIBIT B

 

BOARD OF DIRECTORS

 

CERTIFIED ENTITY: [CERTIFIED ENTITY]1

	
NAME

	
ADDRESS

	
NARRATIVE2

	  	  	  
	  	  	  
	  	  	  
	  	  	  
	  	  	  

 

 

  

 

1 Include chart for each Certified Entity.

  

2 To the extent (x) any of the individuals was not a member of the board of directors of such Certified Entity as of the last certification to the Investor, include a narrative describing such individual’s relationship to the applicable Investment Area(s) and Targeted Population(s) or, (y) if such Certified Entity maintains accountability to residents of the applicable Investment Area(s) or Target Population(s) through means other than representation on its governing board of directors and such means have changed since the date of the last certification to the Investor, a narrative describing such change.

UST Sequence No. 511                                                              

Exh. B-1

  

  

 

SCHEDULE A

 

ADDITIONAL TERMS AND CONDITIONS

 

Company Information:

 

Name of the Company:                                                                                     The First Bancshares, Inc.

 

Corporate or other organizational form of Company:                                   Corporation

 

Jurisdiction of Organization of Company:                                                      State of Mississippi

 

Appropriate Federal Banking Agency of Company:                                    Board of Governors of the Federal Reserve System

 

Name of Certified Entities:                                                                                 N/A

 

Corporate or other organizational form of each Certified Entity:

 

Jurisdiction of Organization of each Certified Entity:

 

Appropriate Federal Banking Agency of each Certified Entity:

 

	
  

	
Notice Information:

	
Dee Dee Lowery

	
  

	
The First Bancshares, Inc.

	
  

	
P. O. Box 15549

	
  

	
Hattiesburg, MS  39404

 

	
  

	
With a copy to:

	
Craig N. Landrum, Esq.

	
  

	
Watkins Ludlam Winter & Stennis, P.A.

	
  

	
Post Office Box 427

	
  

	
Jackson, MS  39205-0427

 

Terms of the Exchange:

 

	
  

	
Series of CDCI Preferred Stock Exchanged:

	
Fixed Rate Cumulative Perpetual Preferred Stock, Series CD

 

	
  

	
Per Share Liquidation Preference of

	
                    CDCI Preferred Stock:

	
$1,000 per share

 

Number of Shares of CDCI Preferred

Stock Exchanged:                                                                    5,000 shares

 

Dividend Payment Dates on the CDCI Preferred Stock: Payable quarterly in arrears on February 15, May 15, August 15 and  November 15 of each year.

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Series of CPP Preferred Stock Exchanged:

	
Fixed Rate Cumulative Perpetual Preferred Stock, Series UST

 

Number of Shares of CPP Preferred

Stock Exchanged:                                                                     5,000 shares

 

	
  

	
Date of Letter Agreement pursuant to which

	
                    CPP Preferred Shares were purchased:

	
February 6, 2009

 

Closing:

 

	
  

	
Location of Closing:

	
Cadwalader, Wickersham & Taft LLP

	
  

	
One World Financial Center

	
  

	
New York, NY 10281

 

	
  

	
Time of Closing:

	
9:00 a.m. Eastern Daylight Time

 

	
  

	
Date of Closing:

	
September 29, 2010

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SCHEDULE B

 

CAPITALIZATION

 

Capitalization Date: August 31, 2010

 

Common Stock

 

Par value:                                                                                      $1.00

 

Total Authorized:                                                                        10,000,000 shares

 

Outstanding:                                                                                3,019,869 shares

 

Subject to warrants, options, convertible

securities, etc.:                                                                             54,705 warrants

 

Reserved for benefit plans and other issuances:                   12,353 shares

 

Remaining authorized but unissued:                                       6,913,073 shares

 

	
  

	
Shares issued after Capitalization Date (other

	
  

	
than pursuant to warrants, options,

	
  

	
convertible securities, etc. as set forth

	
  

	
above):                                                                                 None

 

Preferred Stock

 

Par value:                                                                                    No par value

 

Total Authorized:                                                                     10,000,000 shares

 

Outstanding (by series):                                                         5,000 shares

 

Reserved for issuance:                                                           None

 

Remaining authorized but unissued:                                    9,995,000 shares

 

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

	
United States Department of the Treasury

	
Attention:  Chief Counsel, Office of Financial Stability

	
(100% of Preferred Stock)

	

1500 Pennsylvania Avenue, NW

	
 

	
Washington, D.C.  20220

 

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SCHEDULE C

 

MATERIAL ADVERSE EFFECT

 

List any exceptions to the representation and warranty in Section 3.6 of the Exchange Agreement – Standard Terms.

 

 

If none, please so indicate by checking the box:  x

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SCHEDULE D

 

LITIGATION

 

List any exceptions to the representation and warranty in Section 3.10 of the Exchange Agreement – Standard Terms.

 

 

If none, please so indicate by checking the box:  x

 

Welch Litigation

The litigation described below has been disclosed previously in the Company’s filings with the Securities and Exchange Commission, including the Company’s September 30, 2008, Form 10-Q filing, which was filed on November 14, 2008.  However, the Company has not yet filed its Annual Report on Form 10-K for the fiscal year ended December 31, 2008.  Because the definition of “Previously Disclosed” in Section 2.1(b) of the Securities Purchase Agreement encompasses only disclosures made in the Annual Report on Form 10-K for the Company’s most recently completed fiscal year (or subsequent filings), the Company makes the following disclosure pursuant to Section 2.2(l):

On October 8, 2007, The First Bancshares, Inc. (the “Company”) and its subsidiary, The First, A National Banking Association (the “Bank”) were formally named as defendants and served with a First Amended Complaint in litigation styled Nick D. Welch v. Oak Grove Land Company, Inc., Fred McMurry, David E. Johnson, J. Douglas Seidenburg, The First, a National Banking Association, The First Bancshares, Inc., and John Does 1 through 10, Civil Action No. 2006-236-CV4, pending in the Circuit Court of Jones County, Mississippi, Second Judicial District (the “First Amended Complaint”).  The First Amended Complaint was filed against the named defendants by Nick D. Welch (“Welch”), a former member of the Bank’s Advisory Board, and a shareholder of the Company who was until February 2, 2006, the largest individual holder of Company stock.

The First Amended Complaint served upon the Company and Bank is similar to a complaint filed by Welch against the other named defendants on April 11, 2006.  The other named defendants, each of whom deny any liability to Welch, include Oak Grove Land Company, Inc., a shareholder of the Company; Fred McMurry, Director of the Company and the Bank, and an affiliate of Oak Grove Land Company, Inc.; David E. Johnson, Director and Chairman of the Company and the Bank; and J. Douglas Seidenburg, Director of the Company and the Bank. The First Amended Complaint contains allegations of fraud in connection with Welch’s private sale of approximately 69,000 shares (representing approximately 5%) of the Company’s common stock to the

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named defendants (other than the Company or the Bank) in a privately negotiated transaction.  In summary the First Amended Complaint alleges that one or more of the named defendants withheld information concerning the Company’s potential NASDAQ listing and its 2-for-1 stock split, both of which were publicly announced by the Company on February 22, 2006.  The First Amended Complaint further alleges that Welch would not have sold his stock, or at least would not have sold his stock at the $2,005,785.00 ($29.00 per share) price negotiated by Welch, had he been informed of these potential events.

Welch filed his Second Amended Complaint on January 29, 2010, adding as defendant Kansas Bankers Surety Company, the insurance carrier providing Directors, Officers, and Employees Indemnity coverage for Messrs. McMurry, Johnson, and Seidenburg.  This Complaint requests a declaratory ruling that the subject policy provided by the Bank to its Board Members provides coverage for the claims made by Welch in the First and Second Amended Complaints.  The Second Amended Complaint does not allege any additional allegations against the Company or the Bank.

The allegations by Welch against the Company and the Bank include counts of 1) Intentional Misrepresentation and Omission; 2) Negligent Misrepresentation and/or Omission; 3) Breach of Fiduciary Duty; 4) Breach of Duty of Good Faith and Fair Dealing; and 5) Civil Conspiracy.  The First Amended Complaint served by Welch on October 8, 2007, added the Company and the Bank as defendants in this ongoing litigation.  The First Amended Complaint seeks damages from all the defendants, including $2,420,775.00 (representing the alleged difference between the price at which Welch sold his stock and the “high price” of the Company’s stock following the Company’s 2-for-1 stock split on March 15, 2006), annual dividends for the year 2006 in the amount of $.30 per share, punitive damages, and attorneys’ fees and costs.  Each of the Company and the Bank deny any liability to Welch, and they intend to defend vigorously against this lawsuit.

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SCHEDULE E

 

COMPLIANCE WITH LAWS

 

List any exceptions to the representation and warranty in the second sentence of Section 3.11 of the Exchange Agreement– Standard Terms.

 

 

If none, please so indicate by checking the box:  x

 

 

List any exceptions to the representation and warranty in the last sentence of Section 3.11 of the Exchange Agreement – Standard Terms.

 

 

If none, please so indicate by checking the box:  x

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SCHEDULE F

 

REGULATORY AGREEMENTS

 

List any exceptions to the representation and warranty in Section 3.17 of the Exchange Agreement – Standard Terms.

 

 

If none, please so indicate by checking the box:  x

 

 

Safety and Soundness Plan

 

The Company is a party to a commitment letter in the form of a Safety and Soundness Plan, the terms of which are confidential.

UST Sequence No. 511

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