Document:

EXHIBIT 10.2

 

Exhibit A

 

Amended and Restated

 

BYLAWS OF

 

PONIARD PHARMACEUTICALS, INC.

 

(A corporation incorporated under the laws of the State of Washington)

 

SECTION 1

 

SHAREHOLDERS AND SHAREHOLDERS’ MEETINGS

 

1.1          Annual Meeting.  The annual meeting of the shareholders of the
corporation for the election of directors and for the transaction of such other
business as may properly come before the meeting, shall be held each year at
the principal office of the corporation, or at some other place, either within
or without the state of Washington as designated by the Board of Directors, on
the day and at the time specified in Exhibit A which is attached
hereto and incorporated herein by this reference (if such specified day is a
legal holiday, then on the next business day at the same time), or on such
other day and time as may be set by the Board of Directors.

 

1.2          Special Meetings.  Special meetings of the shareholders for any
purpose or purposes may be called at any time by the Board of Directors to be
held at such time and place as the Board of Directors may prescribe.

 

Upon
the request of the Chairman of the Board, the Chief Executive Officer, the
President, the Board of Directors, or of any shareholder or shareholders
holding in the aggregate one-tenth (1/10th) of the voting power of all
shareholders, it shall be the duty of the Secretary to call a special meeting
of the shareholders to be held at the principal office of the corporation or
such other convenient place and at such time as the Secretary may fix, not less
than ten (10) (or in the case of an amendment to the articles of
incorporation, a plan of merger or share exchange, a proposed sale, lease,
exchange, or other disposition of all or substantially all of the assets of the
corporation other than in the usual or regular course of business, or the
dissolution of the corporation, twenty (20)) nor more than sixty (60) days
after the receipt of said request, and if said Secretary shall neglect or
refuse to issue such call, those making the request may do so.

 

1.3          Notice of Meetings.  Written notice of the place, day and hour of
the annual shareholders’ meeting and written notice of the day, place, hour and
purpose or purpose of special shareholders’ meetings shall be delivered not
less than ten (10) (or in the case of an amendment to the articles of
incorporation, a plan of merger or share exchange, a proposed sale, lease,
exchange, or other disposition of all or substantially all of the assets of the
corporation other than in the usual or regular course of business, or the
dissolution of the corporation, twenty (20)) nor more than sixty (60) days
before the date of the meeting.  Notice
may be transmitted by: mail, private carrier, or personal delivery, telegraph
or teletype, or facsimile of the notice, and shall be given by or at the
direction of the Chief Executive Officer, the President, the Secretary or the
officer or persons calling the meeting, to each shareholder of record entitled
to vote at such meeting. If mailed, such notice shall be deemed to be delivered
when deposited in the United States mail addressed to the shareholder at his or
her address as it appears on the stock transfer books of the corporation, with
postage thereon prepaid.

 

1.4          Waiver of Notice.  Except where expressly prohibited by law or
the Articles of Incorporation, notice of the day, place, hour and purpose or
purposes of any shareholders’ meeting may be waived in writing by any
shareholder at any time, either before or after the meeting, and attendance at
the meeting in person or by proxy shall constitute a waiver of such notice of
the meeting unless such person in attendance asserts, if prior to

 

 

commencement
of such meeting, in writing to the Secretary, or if at the commencement of such
meeting, publicly to the Chairman, that proper notice was not given. A waiver
must be in writing, be signed by the shareholder entitled to notice, and be
delivered to the corporation for inclusion in the minutes or filing in the
corporate records. Any shareholder so waiving shall be bound by the proceedings
of any such meeting in all respects as if due notice thereof had been given.

 

1.5          Shareholders’ Action
Without a Meeting.  The
shareholders may take any action which they could properly take at a meeting
without a meeting if a consent in writing, setting forth the action so taken,
is signed by all of the shareholders entitled to vote with respect to the
subject matter thereof. Such consent shall have the same effect as a unanimous
vote. Action taken by unanimous written consent of the shareholders is
effective when all consents are in possession of the corporation, unless the
consent specifies a later effective date.

 

1.6          Telephone Meetings.  Shareholders may participate in a meeting of
shareholders by means of a conference telephone or similar communications
equipment by means of which all persons participating in the meeting can hear
each other participant, and participation by such means shall constitute
presence in person at a meeting.

 

1.7          List of Shareholders.  After fixing a record date for a
shareholders’ meeting, the corporation shall prepare an alphabetical list of
the names of all shareholders on the record date who are entitled to notice of
the shareholders’ meeting. The list shall be arranged by voting group, and
within each voting group by class or series of shares, and show the address of
and number of shares held by each shareholder. A shareholder, shareholder’s
agent, or a shareholder’s attorney may inspect the shareholders’ list,
beginning ten days prior to the shareholders’ meeting and continuing through
the meeting, at the corporation’s principal office or at a place identified in
the meeting notice in the city where the meeting will be held during regular
business hours and be at the shareholder’s expense. The shareholders’ list
shall be kept open for inspection during such meeting or any adjournment.

 

1.8          Quorum and Voting.  The holders of a majority of the votes
entitled to be cast on a matter by the holders of shares that, pursuant to the
Articles of Incorporation or the Washington Business Corporation Act, are
entitled to vote on that matter, represented in person or by proxy, shall
constitute a quorum of those shares at a meeting of shareholders.  Once a share is represented for any purpose
at a meeting other than solely to object to holding the meeting or transacting
business at the meeting, it is deemed present for quorum purposes for the
remainder of the meeting and any adjournment of that meeting unless a new
record date is or must be set for the adjourned meeting.

 

General Voting Requirements.  If a quorum is present, action on a matter,
other than the election of directors, shall be approved if the votes cast in
favor of the action by shares entitled to vote on the matter exceed the votes
cast against the action by shares entitled to vote thereon, unless the Articles
of Incorporation or the Washington Business Corporation Act requires a greater
number of affirmative votes or approval by separate voting groups.  Shares otherwise present at a meeting but for
which there is an abstention on a matter or as to which no authority or
discretion to vote on a matter is given or specified are not deemed to be votes
cast on such matter.

 

Voting for Directors.  Shareholders entitled to vote at an election
of directors are entitled to cumulate votes by multiplying the number of votes
they are entitled to cast by the number of directors for whom they are entitled
to vote and to cast the product for a single candidate or distribute the
product among one or more candidates. 
Unless otherwise provided in the Articles of Incorporation, the
candidates elected shall be those receiving the largest number of votes cast,
up to the number of directors to be elected.

 

1.9          Adjourned Meetings.  Whether for failure to obtain a quorum or
otherwise, an adjournment or adjournments of any shareholders’ meeting may be
taken to such date, time and place as the majority of the

 

 

shares
present or represented may determine without further notice if the new date, time or place
is announced at the meeting before adjournment.  Any business may be transacted at a
reconvened meeting that might have been transacted at the meeting as originally
called, if a quorum is present or represented at the meeting.

 

1.10        Proxies.  The holder of any proxy for a shareholder shall
present evidence of his or her appointment by an instrument in writing signed
by the shareholder or by his or her duly authorized attorney-in-fact. Such
proxy shall be filed with the Secretary of the corporation before or at the
time of the meeting. No proxy shall be valid after eleven (11) months from the
date of its execution unless otherwise provided in the proxy. Revocation of a
shareholder’s proxy shall not be effective until written notice thereof has
actually been received by the secretary of the corporation.

 

1.11        Director Nominations.  Nominations of candidates for election as
directors at any meeting of shareholders may be made (a) by, or at the
direction of, a majority of the Board of Directors or (b) by any
shareholder entitled to vote at such a meeting. Only persons nominated in
accordance with the procedures set forth in this Section 1.11 shall be
eligible for election as directors at such a meeting.

 

Nominations,
other than those made by, or at the direction of, the Board of Directors, shall
be made pursuant to timely notice in writing to the secretary of the
corporation as set forth in this Section 1.11. To be timely a
shareholder’s notice shall be delivered to, or mailed and received at, the
principal executive offices of the corporation not less than sixty (60) days
nor more than ninety (90) days prior to the date of a scheduled shareholders’
meeting, regardless of postponements, deferrals, or adjournments of that
meeting to a later date; provided, however, that if less than seventy (70) days’
notice or prior public disclosure of the scheduled date of such a meeting is
given or made, notice by the shareholder to be timely must be so delivered or
received not later than the close of business on the tenth (10th) day following
the earlier of the day on which such notice of the date of the scheduled
meeting was mailed or the day on which such public disclosure was made. Such
shareholder’s notice shall set forth (a) as to each person whom the
shareholder proposes to nominate for election or re-election as a director and
as to the shareholder giving the notice (i) the name, age, business
address and residence address of such person, (ii) the principal
occupation or employment of such person, (iii) the class and number of
shares of stock of the corporation which are beneficially owned by such person
on the date of such shareholder notice and (iv) any other information
relating to such person that is required to be disclosed in solicitations of
proxies with respect to nominees for election as directors, pursuant to
Regulation 14A under the Securities Exchange Act of 1934, as amended,
including, but not limited to, information required to be disclosed by Item 4(b) and
Item 6 of Schedule A of Regulation 14A and information which would be required
to be filed on Schedule B of Regulation 14A with the Securities and Exchange
Commission; and (b) as to the shareholder giving the notice (i) the
name and address, as they appear on the corporation’s books, of such
shareholder and any other shareholders known by such shareholder to be
supporting such nominees and (ii) the class and number of shares of stock
of the corporation which are beneficially owned by such shareholder on the date
of such shareholder notice and by any other shareholders known by such
shareholder to be supporting such nominees on the date of such shareholder
notice. At the request of the Board of Directors, any person nominated by, or
at the direction of, the Board for election as a director at a meeting of the
shareholders shall furnish to the secretary of the corporation that information
required to be set forth in a shareholder’s notice of nomination which pertains
to the nominee.

 

No
person shall be elected as a director of the corporation unless nominated in
accordance with the procedures set forth in this Section 1.11. Ballots
bearing the names of all the persons who have been nominated for election as
directors at a meeting of the shareholders in accordance with the procedures
set forth in this Section 1.11 shall be provided for use at the meeting.

 

The
Board of Directors may reject any nomination by a shareholder not timely made
in accordance with the requirements of this Section 1.11. If the Board of
Directors, or a designated committee thereof, determines that the information
provided in a shareholder’s notice does not satisfy the informational
requirements of this Section 1.11 in any material respect, the secretary
of the corporation shall promptly notify such shareholder of

 

 

the
deficiency in the notice. The shareholder shall have an opportunity to cure the
deficiency by providing additional information to the secretary within such
period of time, not to exceed five (5) days from the date such deficiency
notice is given to the shareholder, as the Board of Directors or such committee
shall reasonably determine. If the deficiency is not cured within such period,
or if the Board of Directors or such committee reasonably determines that the
additional information provided by the shareholder, together with information
previously provided, does not satisfy the requirements of this Section 1.11
in any material respect, then the Board of Directors may reject such
shareholder’s nomination. The secretary of the corporation shall notify a
shareholder in writing whether his nomination has been made in accordance with
the time and information requirements of this Section 1.11.
Notwithstanding the procedure set forth in this paragraph, if neither the Board
of Directors nor such committee makes a determination as to the validity of any
nominations by a shareholder, the presiding officer of the meeting of the
shareholders shall determine and declare at the meeting whether a nomination
was made in accordance with the terms of this Section 1.11. If the
presiding officer determines that a nomination was made in accordance with the
terms of this Section 1.11, he shall so declare at the meeting and ballots
shall be provided for use at the meeting with respect to such nominee. If the
presiding officer determines that a nomination was not made in accordance with
the terms of this Section 1.11, he shall so declare at the meeting and the
defective nomination shall be disregarded.

 

1.12        New Business.  At an annual meeting of shareholders, only
such new business shall be conducted, and only such proposals shall be acted
upon as shall have been brought before the annual meeting (a) by, or at
the direction of, the Board of Directors or (b) by any shareholder of the
corporation who complies with the notice procedures set forth in this Section 1.12.
For a proposal to be properly brought before an annual meeting by a
shareholder, the shareholder must have given timely notice thereof in writing
to the secretary of the corporation. To be timely, a shareholder’s notice must
be delivered to, or mailed and received at, the principal executive offices of
the corporation not less than sixty (60) days nor more than ninety (90) days
prior to the scheduled annual meeting, regardless of any postponements,
deferrals or adjournments of that meeting to a later date; provided, however,
that, if less than seventy (70) days’ notice or prior public disclosure of the
date of the scheduled annual meeting is given or made, notice by the
shareholder to be timely must be so delivered or received not later than the
close of business on the tenth (10th) day following the earlier of the date on
which such notice of the date of the scheduled annual meeting was mailed or the
day on which such public disclosure was made. A shareholder’s notice to the
secretary shall set forth as to each matter the shareholder proposes to bring
before the annual meeting (a) a brief description of the proposal desired
to be brought before the annual meeting and the reasons for conducting such
business at the annual meeting, (b) the name and address, as they appear
on the corporation’s books, of the shareholder proposing such business and any
other shareholders known by such shareholder to be supporting such proposal, (c) the
class and number of shares of stock of the corporation which are beneficially
owned by the shareholder on the date of such shareholder notice and by any
other shareholders known by such shareholder to be supporting such proposal on
the date of such shareholder notice, and (d) any financial interest of the
shareholder in such proposal.

 

The
Board of Directors may reject any shareholder proposal not timely made in
accordance with the terms of this Section 1.12. If the Board of Directors,
or a designated committee thereof, determines that the information provided in
a shareholder’s notice does not satisfy the informational requirements of this Section 1.12
in any material respect, the secretary of the corporation shall promptly notify
such shareholder of the deficiency in the notice. The shareholder shall have an
opportunity to cure the deficiency by providing additional information to the
secretary within such period of time, not to exceed five (5) days from the
date such deficiency notice is given to the shareholder, as the Board of
Directors or such committee shall reasonably determine. If the deficiency is
not cured within such period, or if the Board of Directors or such committee
determines that the additional information provided by the shareholder,
together with information previously provided, does not satisfy the
requirements of this Section 1.12 in any material respect, then the Board
of Directors may reject such shareholder’s proposal. The secretary of the
corporation shall notify a shareholder in writing whether his proposal has been
made in accordance with the time and informational requirements of this Section 1.12.
Notwithstanding the procedure set forth in this paragraph, if neither the Board
of Directors nor such committee makes a determination as to the validity of any
shareholder proposal, the presiding officer of the annual meeting

 

 

shall
determine and declare at the annual meeting whether the shareholder proposal
was made in accordance with the terms of this Section 1.12. If the
presiding officer determines that a shareholder proposal was made in accordance
with the terms of this Section 1.12, he shall so declare at the annual
meeting and ballots shall be provided for use at the meeting with respect to
any such proposal. If the presiding officer determines that a shareholder
proposal was not made in accordance with the terms of this Section 1.12,
he shall so declare at the annual meeting and any such proposal shall not be
acted upon at the annual meeting.

 

This
provision shall not prevent the consideration and approval or disapproval at
the annual meeting of reports of officers, directors and committees of the
Board of Directors, but, in connection with such reports, no new business shall
be acted upon at such annual meeting unless stated, filed and received as
herein provided.

 

SECTION 2

 

BOARD OF DIRECTORS

 

2.1          Number and
Qualification.  All corporate
powers shall be exercised by or under the authority of, and the business and
affairs of the corporation shall be managed under the direction of, a Board of
Directors, except as may be otherwise provided in these Bylaws, the Articles of
Incorporation or the Washington Business Corporation Act, as amended. The Board
of Directors shall be composed of not less than three nor more than twelve
directors, the specific number to be set by resolution of the Board of
Directors. The number of directors may be changed from time to time by
amendment to these Bylaws, but no decrease in the number of directors shall
have the effect of shortening the term of any incumbent director. Directors
need not be shareholders of the corporation or residents of the State of Washington
and need not meet any other qualifications.

 

2.2          Election—Term of
Office.  The directors shall be elected
by the shareholders at each annual shareholders’ meeting, to hold office until
the next annual shareholders’ meeting and until their respective successors are
elected and qualified unless removed in accordance with the laws of Washington.
In the event of failure to elect directors at any annual shareholders’ meeting,
or in the event of failure to hold any annual shareholders’ meeting as provided
by these Bylaws, directors may be elected at a special meeting of the
shareholders called for that purpose.

 

2.3          Vacancies.  Except as otherwise provided by law,
vacancies in the Board of Directors, whether caused by resignation, death,
retirement, disqualification, removal or otherwise, may be filled for the
remainder of the term by the affirmative vote of a majority of the remaining
directors though less than a quorum of the Board of Directors, except that
directors elected to fill vacancies occurring through an increase in the number
of directors shall serve until the next election of directors by the
shareholders.

 

2.4          Resignation.  Any director may resign at any time by
delivering written notice to the Board of Directors, its Chairman, the Chief
Executive, the President, or the Secretary of the corporation. A resignation
shall be effective when the notice is delivered unless the notice specifies a
later effective date.

 

2.5          Removal of Directors.  At a meeting of the shareholders called
expressly for that purpose, the entire Board of Directors, or any member
thereof, may be removed, with or without cause, by a vote of the holders of a
majority of shares then entitled to vote at an election of such directors.

 

2.6          Quorum and Voting.  At any meeting of the Board of Directors, the
presence in person of a majority of the authorized number of directors shall
constitute a quorum for the transaction of business, and if a quorum is
present, the act of a majority of the directors present at such meeting shall
be the act of the Board of Directors and of this corporation except as may be
otherwise specifically provided by statute (including without limitation RCW
23B.08.730 relating to transactions in which a director or an officer has a
conflicting interest), by the Articles of Incorporation, or by these Bylaws.
Abstention from voting on a motion by a director present at a meeting at which
there is a quorum shall be counted as a vote against the motion.

 

 

A
director of the corporation who is present at a meeting of the Board of
Directors at which action on any corporate matter is taken shall be presumed to
have assented to the action taken unless:

 

(a) 
The director objects at the beginning of the meeting, or promptly upon the
director’s arrival, to holding it or transacting business at the meeting;

 

(b) 
The director’s dissent or abstention from the action taken is entered in the
minutes of the meeting; or

 

(c) 
The director delivers written notice of the director’s dissent or abstention to
the presiding officer of the meeting before its adjournment or to the
corporation within a reasonable time after adjournment of the meeting.

 

The
right of dissent or abstention is not available to a director who votes in
favor of the action taken.

 

2.7          Annual Meeting.  The first meeting of each newly elected Board
of Directors shall be known as the annual meeting thereof, and shall be held
immediately after the annual shareholders’ meeting or any special shareholders’
meeting at which a Board of Directors is elected. Said meeting shall be held at
the same place as such shareholders’ meeting unless some other place shall be
specified by resolution of the shareholders or the Board of Directors.

 

2.8          Regular Meetings.  Regular meetings of the Board of Directors or
any committee thereof may be held at such place, day and hour as may from time
to time be fixed by resolution of the Board or the committee, as the case may
be, without notice other than such resolution.

 

2.9          Special Meetings.  Special meetings of the Board of Directors or
any committee thereof may be held at any place at any time whenever called by
the Chairman of the Board, the Chief Executive Officer, President, Vice
President, Secretary or Treasurer, or any two or more directors and, in the
case of any committee of the Board of Directors, by the chairman of such
committee.

 

2.10        Notice of Meetings.  Regular meetings of the Board of Directors or
any committee thereof may be held without notice of the date, time, place or
purpose of the meeting. Special meetings of the Board of Directors or any
committee thereof must be preceded by at least twenty-four (24) hours notice of
the date, time and place of the meeting. Notice may be delivered in the form of
a written or electronically transmitted record or orally.  Neither the business to be transacted at, nor
the purpose of, any special meeting need be specified in the notice of such
meeting.  Notice to directors in an
electronic transmission is effective only with respect to directors who have
consented, in the form of a written or electronically transmitted record, to
receive electronically transmitted notices and designated in the consent the
address, location or system to which these notices may be electronically
transmitted.  A director who has
consented to receipt of electronically transmitted notices may revoke the
consent by delivering a revocation to the corporation in the form of a written
or electronically transmitted record. 
Notice of any meeting of the Board of Directors or of any committee may
be waived in writing by any director at any time, either before or after such
meeting, and attendance at such meeting in person shall constitute a waiver of
notice of the time, day, place and purpose of such meeting, except where a
director attends for the express purpose of objecting to the transaction of any
business because the meeting was not lawfully convened.

 

2.11        Directors’ Action
Without a Meeting.  The Board of
Directors or a committee thereof may take any action which it could properly
take at a meeting without such a meeting if one of more consents setting forth
the action so taken shall be signed by all the directors, or by all the members
of the committee, as the case may be, either before or after the action is
taken, and delivered to the corporation for inclusion in the minutes or filing
with the corporate records, each of which consents shall be set forth either (a) in
an executed written record or (b) if the corporation has designated an
address, location or system to which the consents may be electronically
transmitted and the consent is electronically transmitted to the designated
address, location or

 

 

system
in an executed electronically transmitted record.  Action taken by consent of directors without
a meeting is effective when the last director executes the consent, unless the
consent specifies a later effective date.

 

2.12        Committees of the
Board.  The Board of Directors, by
resolutions adopted by a majority of the entire Board of Directors, may
designate from among its members an Executive Committee and one or more other
committees. Each such committee may exercise the authority of the Board of
Directors to the extent provided in such resolution and any subsequent
resolutions pertaining thereto and adopted in like manner, provided that the
authority of each such committee shall be subject to the limitations set forth
in RCW 23B.03.250 as now or hereafter amended. Such committees shall keep
regular minutes of their proceedings and report to the Board of Directors when
requested to do so.

 

2.13        Telephone Meetings.  Members of the Board of Directors or any
committee appointed by the Board of Directors may participate in a meeting of
such Board or committee by means of a conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other participant and participation by such means shall
constitute presence in person at a meeting.

 

2.14        Compensation.  Directors as such shall receive no
compensation for their services except such fees for attending meetings or a
stated salary or such other consideration as may be authorized by a majority of
the entire Board of Directors from time to time; provided, that this does not
preclude any director from serving the corporation in any other capacity and
receiving compensation therefor, nor does it preclude the Board of Directors
from authorizing the reimbursement of expenses incurred by directors in
attending meetings of the Board of Directors or of any committee created by the
Board of Directors.

 

SECTION 3

 

OFFICERS

 

3.1          Officers
Enumerated—Election.  The
officers of the corporation shall be a Chief Executive Officer, President, one
or more Vice Presidents, one or more Scientific Directors, a Secretary and a
Treasurer (together with one or more Assistant Secretaries and Assistant
Treasurers if such are desired by the Board of Directors), all of whom shall be
elected by the Board of Directors, to hold office at the pleasure of the Board
of Directors.

 

3.2          Qualifications.  None of the officers of the corporation need
be a director. Any two or more corporate offices may be held by the same
person.

 

3.3          The Chairman of the
Board.  The Board of Directors may
elect one of its members to the position of Chairman of the Board to act as
moderator of meetings of the Board of Directors and shareholders. The position
of Chairman of the Board shall not be deemed to be an executive office of the
corporation for any purpose.

 

3.4          The Chief Executive
Officer.  The Chief Executive Officer
shall be the chief executive officer of the corporation, shall preside over
meetings of the Board of Directors and shareholders in the absence of a
Chairman of the Board and, subject to the control of the Board of Directors,
shall supervise and control all of the assets, business and affairs of the corporation.  In general, the Chief Executive Officer shall
perform all duties incident to the office of Chief Executive Officer and such
other duties as are prescribed by the Board of Directors from time to time.

 

3.5          The President.  The President shall be the chief operating
officer of the corporation unless some other officer is so designated by the
Board of Directors and, in the event of the death of the Chief Executive
Officer or his or her inability to act, the President shall perform the duties
of the Chief Executive Officer, except as may be limited by resolution of the
Board of Directors, with all the powers of and subject to all the restrictions

 

 

upon
the Chief Executive Officer.  The
President shall perform such other duties as from time to time may be assigned
to him or her by the Chairman of the Board or by the Board of Directors.

 

3.6          The Vice President.  The Vice President shall act as President in
the absence or disability of the President and shall perform such other duties
as the directors may from time to time designate.

 

3.7          The Secretary.  The Secretary, personally or with the
assistance of others, shall prepare and keep minutes of the directors’ and
shareholders’ meetings; authenticate all records of the corporation; attest all
certificates of stock in the name of the corporation; keep the corporate seal,
if any, and affix the same to certificates of stock and other proper documents;
keep a record of the issuance of certificates of stock and the transfers of the
same; and perform such other duties as the Board of Directors may from time to
time designate.

 

3.8          The Treasurer.  The Treasurer shall have the care and
custody, and be responsible for, all funds and securities of the corporation,
and shall cause to be kept regular books of the account. The Treasurer shall
cause to be deposited all funds and other valuable effects in the name of the
corporation in such depositories as may be designated by the Board of
Directors. In general, the Treasurer shall perform all of the duties incident to
the office of Treasurer, and such other duties as from time to time may be
assigned by the Board of Directors.

 

3.9          Vacancies.  Vacancies in any office arising from any
cause may be filled by the Board of Directors at any regular or special
meeting.

 

3.10        Removal.  Any officer or agent may be removed by action
of the Board of Directors, but such removal shall be without prejudice to the
contract rights, if any, of the person so removed. Election or appointment of
an officer or agent shall not of itself create any contract rights.

 

3.11        Other Officers and
Agents.  The Board of Directors may
appoint such other officers and agents as it shall deem necessary or expedient,
who shall hold their office for such terms, and shall exercise such powers and
perform such duties, as shall be determined from time to time by the Board of
Directors.

 

3.12        Compensation.  The compensation of all officers of the
corporation shall be fixed by the Board of Directors.

 

SECTION 4

 

SHARES AND CERTIFICATES OF SHARES

 

4.1          Share Certificates.  Share certificates shall be issued in
numerical order, and each shareholder shall be entitled to a certificate signed
by the Chief Executive Officer, the President or a Vice President, attested by
the Secretary, or an Assistant Secretary, and sealed with the corporate seal,
if any. Facsimiles of the signatures and seal may be used, as permitted by law.
Every share certificate shall state:

 

(a) 
The name of the corporation and that the corporation is organized under the
laws of the State of Washington;

 

(b) 
The name of the person to whom issued;

 

(c) 
The number, class and series (if any) of shares which this certificate
represents;

 

(d) 
If the corporation is authorized to issue shares of more than one class, that
upon request and without charge, the corporation will furnish any shareholder
with a full statement of the designations, preferences, limitations and
relative rights of the shares of each class.

 

 

4.2          Consideration for
Shares.  Shares of this corporation may
be issued for such consideration as shall be authorized by the Board of
Directors. The consideration for the issuance of shares may be paid in whole or
in part in cash, promissory notes, services performed, contracts for services
to be performed, or other tangible or intangible property. The reasonable
charges and expenses of organization or reorganization and the reasonable
expenses of and compensation for the sale or underwriting of its shares may be
paid or allowed by the corporation out of the consideration received by it in
payment for its shares without rendering the shares not fully paid or
assessable.

 

4.3          Transfers.  Shares may be transferred by delivery of the
certificate, accompanied either by an assignment in writing on the back of the
certificate, or by a written power of attorney to sell, assign and transfer the
same, signed by the record holder of the certificate. Except as otherwise
specifically provided in these Bylaws, no shares of stock shall be transferred
on the books of the corporation until the outstanding certificate therefor has
been surrendered to the corporation.

 

4.4          Loss or Destruction
of Certificates.  In the
event of the loss or destruction of any certificate, a new certificate may be
issued in lieu thereof upon satisfactory proof of such loss or destruction, and
upon the giving of security against loss to the corporation by bond, indemnity
or otherwise, to the extent deemed necessary by the Board of Directors or the
Secretary or Treasurer.

 

4.5          Fixing Record Date.  For the purpose of determining shareholders
entitled to notice of or to vote at any meeting of shareholders or any
adjournment thereof, or entitled to receive payment of any dividend, the Board
of Directors may fix in advance a date as the record date for any such
determination of shareholders, such date in any case to be not more than
seventy (70) days and, in case of a meeting of shareholders, not less than ten (10) (or
in case of an amendment to the articles of incorporation, a plan of merger or
share exchange, a proposed sale, lease, exchange, or other disposition of all
or substantially all of the assets of the corporation other than in the usual
or regular course of business, or the dissolution of the corporation, twenty
(20)) days prior to the date on which the particular action, requiring such
determination of shareholders, is to be taken. If no record date is fixed for
the determination of shareholders entitled to notice of or to vote at a meeting
of shareholders, or shareholders entitled to receive payment of a dividend, the
close of business on the day before the date on which notice of the meeting is
mailed or the date on which the resolution of the Board of Directors declaring
such dividend is adopted, as the case may be, shall be the record date for such
determination of shareholders. When a determination of shareholders entitled to
vote at any meeting of shareholders has been made as provided in this section,
such determination shall apply to any adjournment thereof.

 

4.6          Shares Without
Certificates. 
Notwithstanding any other provisions herein, the Board of Directors may
authorize the issuance of some or all of the shares of any or all of the
corporation’s classes or series without certificates.  The authorization does not affect shares
already represented by certificates until they are surrendered to the
corporation.  Within a reasonable time
after the issuance or transfer of shares without certificates, the corporation
shall send the shareholder a complete record containing the information
required on certificates by applicable Washington law.

 

SECTION 5

 

BOOKS. RECORDS AND REPORTS

 

5.1          Records of Corporate
Meetings and Share Registers.  The corporation shall keep complete records
of all proceedings of the Board of Directors and shareholders and shall keep at
its registered office or principal place of business or at the office of its
transfer agent or registrar, a record of its shareholders, giving the names and
addresses of all shareholders, the number and class of shares held by each and
the dates they acquired same.

 

5.2          Corporate Books and
Records.  The corporation shall keep a
copy of the following records at its principal office: (a) the Articles of
Incorporation or Restated Articles of Incorporation and all amendments to

 

 

them
currently in effect; (b) the Bylaws or Restated Bylaws, and all amendments
to them currently in effect; (c) the minutes of all shareholders’
meetings, and records of all actions taken by shareholders without a meeting,
for the past three (3) years; (d) its financial statements for the
past three years (3), including balance sheets showing in reasonable detail the
financial condition of the corporation as of the close of each fiscal year, and
an income statement showing the results of its operations during each fiscal
year prepared on a stated basis explained therein; (e) all written
communications to shareholders generally within the past three (3) years; (f) a
list of the names and business addresses of its current directors and officers;
(g) its most recent annual report delivered to the Secretary of State, and
(h) such other records as may be required under Washington law.

 

5.3          Copies of Resolutions.  Any person dealing with the corporation may
rely upon a copy of any of the records of the proceedings, resolutions, or
votes of the Board of Directors or shareholders, when certified by the Chief
Executive Officer, President, Vice President, Secretary or Assistant Secretary.

 

5.4          Books of Account.  The corporation shall keep appropriate and
complete books of account.

 

5.5          Inspection of Records
by Shareholders.

 

(a) 
Any shareholder of the corporation may inspect and copy, during regular
business hours at the corporation’s principal office, any of the following
records of the corporation provided the shareholder gives the corporation
written notice of the shareholder’s demand at least five (5) business days
before the date on which the shareholder wishes to inspect and copy such
records: (i) the Articles or Restated Articles of Incorporation, and all
amendments to them currently in effect; (ii) the Bylaws or Restated
Bylaws, and all amendments to them currently in effect (iii) the minutes
of all shareholder meetings, and records of all action taken by shareholders
without a meeting for the past three (3) years; (iv) the financial
statements for the corporation as required to be kept by the corporation under
Washington law for the past three (3) years; (v) all written
communications to shareholders generally within the past three (3) years; (vi) a
list of the names and business addresses of its current directors and officers;
and (vii) the corporation’s most recent annual report as delivered to the
Secretary of State.

 

(b) 
A shareholder of a corporation is entitled to inspect and copy, during regular
business hours at a reasonable location specified by the corporation, any of
the following records of the corporation provided the shareholder gives the
corporation written notice of the shareholder’s demand at least five (5) business
days before the date on which the shareholder wishes to inspect and copy such
records and the shareholder’s demand is made in good faith and for a proper
purpose, the shareholder describes with reasonable particularity the
shareholder’s purpose and the records the shareholder desires to inspect, and
the records are directly connected with the shareholder’s purpose: (i) Excerpts
from minutes of any meeting of the Board of Directors, records of any action of
a committee of the Board of Directors while exercising the authority of the
Board of Directors, minutes of the shareholders, and records of action taken by
the shareholders or the Board of Directors without a meeting; (ii) Accounting
records of the corporation; and (iii) The record of shareholders.

 

 

SECTION 6

 

REGISTERED OFFICE AND REGISTERED AGENT

 

The
registered office of the corporation shall be located in the state of
Washington at such place as may be fixed from time to time by the Board of
Directors upon filing of such notices as may be required by law, and the
registered agent shall have a business office identical with such registered
office. Any change in the registered agent or registered office shall be
effective upon filing such change with the office of the Secretary of State of
the state of Washington.

 

SECTION 7

 

FISCAL YEAR

 

The
fiscal year of the corporation shall be as set forth in Exhibit A
which is attached hereto and incorporated herein by this reference.

 

SECTION 8

 

CORPORATE SEAL

 

The
corporate seal of the corporation shall be in the form shown on Exhibit A.

 

SECTION 9

 

LOANS TO DIRECTORS AND OFFICERS

 

No
loans shall be made by the corporation to its officers or directors unless
first approved in the manner required by RCW 23B.08.700 through .08.730 or
other applicable law.

 

SECTION 10

 

MISCELLANEOUS PROCEDURAL PROVISIONS

 

The
Board of Directors may adopt rules of procedure to govern any meetings of
shareholders or directors to the extent not inconsistent with law, the
Corporation’s Articles of Incorporation, or these Bylaws, as they are in effect
from time to time. In the absence of any rules of procedure adopted by the
Board of Directors, the Chairman shall make all decisions regarding such
procedure for any meeting.

 

 

SECTION 11

 

AMENDMENT OF BYLAWS

 

The
Board of Directors is expressly authorized to make, alter and repeal the Bylaws
of the corporation, subject to the power of the shareholders of the corporation
to change or repeal such Bylaws.

 

SECTION 12

 

INDEMNIFICATION OF DIRECTORS AND OFFICERS

 

12.1        Grant of
Indemnification.  Subject to Section 12.2,
each person who was or is made a party or is threatened to be made a party to
or is involved (including, without limitation, as a witness) in any threatened,
pending, or completed action, suit or proceedings, whether civil, criminal,
administrative or investigative, whether formal or informal (hereinafter a
“proceeding”), by reason of the fact that he or she is or was a director or
officer of this corporation or who, while a director or officer of this
corporation, is or was serving at the request of this corporation as a
director, officer, employee or agent of this or another corporation or of a
partnership, joint venture, trust, other enterprise, or employee benefit plan,
whether the basis of such proceeding is alleged action in an official capacity
as a director or officer or in any other capacity while serving as a director,
officer, employee or agent, shall be indemnified and held harmless by this
corporation to the fullest extent permitted by applicable law, as then in
effect, against all expense, liability and loss (including attorneys’ fees,
costs, judgments, fines, ERISA excise taxes or penalties and amounts to be paid
in settlement) reasonably incurred or suffered by such person in connection
therewith, and such indemnification shall continue as to a person who has
ceased to be a director or officer and shall inure to the benefit of his or her
heirs, executors and administrators. Indemnification under this Section 12
shall be conditioned on approval of such indemnification by the shareholders or
the Board of Directors, or a finding by independent legal counsel that such
indemnification is consistent with the Washington Business Corporation Act and
this Section 12, including but not limited to Section 12.2.

 

12.2        Limitations on
Indemnification. 
Notwithstanding Section 12.1, no indemnification shall be provided
hereunder to any such person to the extent that such indemnification would be
prohibited by the Washington Business Corporation Act or other applicable law
as then in effect, nor, except as provided in Section 12.4 with respect to
proceedings seeking to enforce rights to indemnification, shall this
corporation indemnify any such person seeking indemnification in connection
with a proceeding (or part thereof) initiated by such person except where such
proceeding (or part thereof) was authorized by the Board of Directors of this
corporation.

 

12.3        Advancement of
Expenses.  The right
to indemnification conferred in this Section 12 shall include the right to
be paid by this corporation the expenses incurred in defending any such
proceeding in advance of its final disposition, except where the Board of
Directors shall have adopted a resolution expressly disapproving such advance
of expenses; provided, however, that the payment of such expenses in advance of
the final disposition of a proceeding shall be made only upon delivery to this
corporation of an undertaking, by or on behalf of such director or officer, to
repay all amounts so advanced if it shall ultimately be determined that such
director or officer is not entitled to be indemnified under this Section or
otherwise.

 

12.4        Right to Enforce
Indemnification.  If a claim
under Section 12.1 is not paid in full by this corporation within sixty
(60) days after a written claim has been received by this corporation, or if a
claim for expenses incurred in defending a proceeding in advance of its final
disposition authorized under Section 12.3 is not paid within twenty (20)
days after a written claim has been received by this corporation, the claimant
may at any time thereafter bring suit against this corporation to recover the
unpaid amount of the claim and, to the extent successful in whole or in part,
the claimant shall be entitled to be paid also the expense of prosecuting such
claim. It shall be a defense to any such action (other than an action with
respect to expenses authorized under Section 12.3) that the claimant has
not met the standards of conduct which make it permissible hereunder

 

 

or
under the Washington Business Corporation Act for this corporation to indemnify
the claimant for the amount claimed. Neither the failure of this corporation
(including its Board of Directors, independent legal counsel, or its
shareholders) to have made a determination prior to the commencement of such
action that indemnification of or reimbursement or advancement of expenses to
the claimant is proper in the circumstances because he or she has met the
applicable standard of conduct set forth herein or in the Washington Business
Corporation Act nor (except as provided in section 12.3) an actual
determination by this corporation (including its Board of Directors,
independent legal counsel, or its shareholders) that the claimant is not
entitled to indemnification or to the reimbursement or advancement of expenses
shall be a defense to the action or create a presumption that the claimant is
not so entitled.

 

12.5        Nonexclusivity.  The right to indemnification and the payment
of expenses incurred in defending a proceeding in advance of its final
disposition conferred in this Section 12 shall not be exclusive of any
other right which any person may have or hereafter acquire under any statute,
provision of the Articles of Incorporation or the Bylaws, agreement, vote of
shareholders or disinterested directors or otherwise.

 

12.6        Indemnification of
Employees and Agents.  This
corporation may, by action of its Board of Directors from time to time, provide
indemnification and pay expenses in advance of the final disposition of a
proceeding to employees and agents of this corporation on the same terms and
with the same scope and effect as the provisions of this Section with
respect to the indemnification and advancement of expenses of directors and
officers of this corporation or pursuant to rights granted pursuant to, or
provided by, the Washington Business Corporation Act or on such other terms as
the Board may deem proper.

 

12.7        Insurance and Other
Security.  This
corporation may maintain insurance, at its expense, to protect itself and any
director, officer, employee or agent of this corporation or another
corporation, partnership, joint venture, trust or other enterprise against any
expense, liability or loss, whether or not this corporation would have the
power to indemnify such person against such expense, liability or loss under
the Washington Business Corporation Act. This corporation may enter into
contracts with any director or officer of this corporation in furtherance of
the provisions of this Section and may create a trust fund, grant a
security interest or use other means (including without limitation, a letter of
credit) to ensure the payment of such amounts as may be necessary to effect
indemnification as provided in this Section.

 

12.8        Amendment or
Modification.  This Section 12
may be altered or amended as provided in Section 11 at any time, but no
such amendment shall have the effect of diminishing the rights of any person
who is or was an officer or director as to any acts or omissions taken or
omitted to be taken prior to the effective date of such amendment.

 

12.9        Effect of Section.  The rights conferred by this Section 12
shall be deemed to be contract rights between this corporation and each person
who is or was a director or officer. This corporation expressly intends each
such person to rely on the rights conferred hereby in performing his or her
respective duties on behalf of this corporation.

 

SECTION 13

 

REPRESENTATION OF SHARES OF OTHER CORPORATIONS

 

The
Chief Executive Officer, the President, or any Vice President, and the
Secretary, or any Assistant Secretary, of the corporation are authorized to
vote, represent and exercise on behalf of the corporation all rights incident
to any and all shares of other corporations standing in the name of the
corporation. Said authority may be exercised by such officers either in person
or by proxy or power of attorney duly executed by any of said officers.

 

 

EXHIBIT A

 

1.1           Date and time of annual meeting:  third Tuesday in May

7              Fiscal year:  December 31

8              Corporate Seal

 

Date
Bylaws Adopted: May 23, 1984

Bylaws
Amended: September 24, 1984

Bylaws
Amended: December 3, 1986

Bylaws
Amended: February 27, 1987

Bylaws
Amended: April 1, 1987

Bylaws
Amended: September 25, 1987

Bylaws
Amended: February 11, 1988

Bylaws
Amended: March 3, 1988

Bylaws
Amended: April 22, 1988

Bylaws
Amended: February 27, 1989

Bylaws
Amended: August 2, 1990

Bylaws
Amended: November 15, 1990

Bylaws
Amended: December 16, 1991

Bylaws
Amended: September 10, 1992

Bylaws
Amended: July 7, 1993

Bylaws
Amended: August 4, 1993

Bylaws
Amended: November 5, 1993

Bylaws
Amended: August 15, 1994

Bylaws
Amended: March 28, 2006

Name
change effective 6/16/2006

Amended
and Restated effective 6/23/09

Amended
and Restated effective 6/9/10Exhibit 10.1

 

AGREEMENT BY AND BETWEEN

Southern First Bank, N.A.

Greenville, SC

and

The Comptroller of the Currency

 

Southern
First Bank, N.A., Greenville, SC (“Bank”) and the Comptroller of the Currency
of the United States of America (“Comptroller”) wish to protect the interests
of the depositors, other customers, and shareholders of the Bank, and, toward
that end, wish the Bank to operate safely and soundly and in accordance with
all applicable laws, rules and regulations.

 

The Comptroller, through his National Bank Examiner,
has examined the Bank and his findings are contained in the Report of
Examination (“ROE”) for the examination that commenced on June 1,
2009.  The Comptroller has found unsafe
and unsound banking practices relating to credit administration, credit risk
management and liquidity risk management at the Bank.

 

In consideration of the above premises, it is agreed,
between the Bank, by and through its duly elected and acting Board of Directors
(“Board”), and the Comptroller, through his authorized representative, that the
Bank shall operate at all times in compliance with the articles of this
Agreement.

 

ARTICLE I

 

JURISDICTION

 

(1)                                  This Agreement shall be construed to be a “written agreement
entered into with the agency” within the meaning of 12 U.S.C. §  1818(b)(1).

 

(2)                                  This Agreement shall be construed to be a “written agreement
between such depository institution and such agency” within the meaning of 12
U.S.C. § 1818(e)(1) and 12 U.S.C. § 1818(i)(2).

 

(3)                                  This Agreement shall be construed to be a “formal written
agreement” within the meaning of 12 C.F.R. § 5.51(c)(6)(ii).  See 12 U.S.C. § 1831i.

 

(4)                                  This Agreement shall be construed to be a “written agreement”
within the meaning of 12 U.S.C. § 1818(u)(1)(A).

 

(5)                                  All reports or plans which the Bank or Board has agreed to
submit to the Assistant Deputy Comptroller pursuant to this Agreement shall be
forwarded to the:

 

Assistant
Deputy Comptroller

Carolinas Field Office

212 South Tryon Street, Suite 700

Charlotte, NC 28281

 

 

ARTICLE II

 

COMPLIANCE COMMITTEE

 

(1) Within thirty (30) days of the date of this
Agreement, the Board shall appoint a Compliance Committee of at least five (5) directors,
of which no more than one (1) shall be an employee or controlling
shareholder of the Bank or any of its affiliates (as the term “affiliate” is
defined in 12 U.S.C. § 371c(b)(1)), or a family member of any such person.  Upon appointment, the names of the members of
the Compliance Committee and, in the event of a change of the membership, the
name of any new member shall be submitted in writing to the Assistant Deputy
Comptroller.  The Compliance Committee
shall be responsible for monitoring and coordinating the Bank’s adherence to
the provisions of this Agreement.

 

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

 

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

 

(a) a description of the action needed to achieve
full compliance with each Article of this Agreement;

 

(b) actions taken to comply with each Article of
this Agreement; and

 

(c) the results and status of those actions.

 

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

 

ARTICLE III

 

CRITICIZED ASSETS

 

(1) The Bank shall take immediate and continuing
action to protect its interest in those assets criticized in the ROE, in any
subsequent Report of Examination, by internal or external loan review, or in
any list provided to management by the National Bank Examiners during any
examination.

 

(2) Within sixty (60) days, the Board shall
adopt, implement, and thereafter ensure Bank adherence to an updated written
program designed to eliminate the basis of criticism of assets criticized in
the ROE, in any subsequent Report of Examination, or by any internal or
external loan review, or in any list provided to management by the National
Bank Examiners during any examination as “doubtful,” “substandard,” or “special
mention.”  This updated program shall
include, at a minimum:

 

(a) an identification of the expected sources of
repayment;

 

(b) the appraised value of supporting collateral
and the position of the Bank’s lien on such collateral where applicable;

 

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

 

(d) the proposed action to eliminate the basis of
criticism and the time frame for its accomplishment.

 

 

(3) Upon adoption, a copy of the updated program
for all criticized assets equal to or exceeding two hundred fifty thousand
dollars ($250,000) shall be forwarded to the Assistant Deputy Comptroller.

 

(4) The Board shall ensure that the Bank has
processes, personnel, and control systems to ensure implementation of and
adherence to the updated program developed pursuant to this Article.

 

(5) The Board, or a designated committee, shall
conduct a review, on at least a quarterly basis, to determine:

 

(a) the status of each criticized asset or
criticized portion thereof that equals or exceeds two hundred fifty thousand
dollars ($250,000);

 

(b) management’s adherence to the program adopted
pursuant to this Article;

 

(c) the status and effectiveness of the written
program; and

 

(d) the need to revise the program or take
alternative action.

 

(6) A copy of each review shall be forwarded to
the Assistant Deputy Comptroller on a quarterly basis (in a format similar to
Appendix A, attached hereto).

 

(7) The Bank may extend credit, directly or
indirectly, including renewals, extensions or capitalization of accrued
interest, to a borrower whose loans or other extensions of credit are
criticized in the ROE, in any subsequent Report of Examination, in any internal
or external loan review, or in any list provided to management by the National
Bank Examiners during any examination and whose aggregate loans or other
extensions exceed one hundred thousand dollars ($100,000) only if each of the
following conditions is met:

 

(a) the Board or designated committee finds that
the extension of additional credit is necessary to promote the best interests
of the Bank and that prior to renewing, extending or capitalizing any
additional credit, a majority of the full Board (or designated committee)
approves the credit extension and records, in writing, why such extension is
necessary to promote the best interests of the Bank; and

 

(b) a comparison to the written program adopted
pursuant to this Article shows that the Board’s formal plan to collect or
strengthen the criticized asset will not be compromised.

 

(8) A copy of the approval of the Board or of the
designated committee shall be maintained in the file of the affected borrower.

 

ARTICLE IV

 

CREDIT RISK

 

(1) Within ninety (90) days, the Board shall
develop, implement, and thereafter ensure Bank adherence to a written program
to reduce the high level of credit risk in the Bank.  The program shall include, but not be limited
to:

 

(a) procedures to strengthen credit underwriting,
particularly in the commercial real estate portfolio;

 

(b) procedures to ensure satisfactory and
perfected collateral documentation;

 

 

(c) procedures to ensure that extensions of
credit are granted, by renewal or otherwise, to any borrower only after
obtaining and analyzing current and satisfactory credit information;

 

(d) procedures to ensure pre- and post-funding
analysis is comprehensive and includes a complete analysis of the primary
source of repayment, guarantor support, and collateral value.  Analysis must include assessment and
verification of contingent liabilities, and liquid assets when consideration is
given as part of the loan approval decision;

 

(e) An action plan approved by the Board to
improve asset diversification and reduce the risk of any concentration of
credit deemed imprudent.  For purposes of
this Article, a concentration of credit is as defined in the “Loan Portfolio
Management” booklet of the Comptroller’s Handbook.

 

(f) procedures to ensure the re-appraisal of
property that defines the criteria for when a new or adjusted appraisal is
required based upon changes in market conditions, original project plans, or
loans subject to criticism.

 

(2) Within ninety (90) days, the Board shall
develop, implement, and thereafter ensure Bank adherence to systems which
provide for effective monitoring of:

 

(a) compliance with the Bank’s lending policies
and laws, rules, and regulations pertaining to the Bank’s lending function;

 

(b) adequacy of credit and collateral
documentation.

 

(3) The Board shall ensure that the Bank has
processes, personnel, and control systems to ensure implementation of and
adherence to the program and systems developed pursuant to this Article.

 

(4) At least quarterly, the Board shall prepare a
written assessment of the bank’s credit risk, which shall evaluate the Bank’s
progress under the aforementioned program. 
The Board shall submit a copy of this assessment to the Assistant Deputy
Comptroller.

 

ARTICLE V

 

CREDIT AND COLLATERAL EXCEPTIONS

 

(1) Within ninety (90) days the Board shall take
the necessary steps to obtain current and satisfactory credit information on
all loans lacking such information, including those listed in the ROE, in any
subsequent Report of Examination, in any internal or external loan review, or
in any listings of loans lacking such information provided to management by the
National Bank Examiners at the conclusion of an examination.

 

(2) Within ninety (90) days the Board shall take the
necessary steps to ensure proper collateral documentation is maintained on all
loans and correct each collateral exception listed in the ROE, in any
subsequent Report of Examination, in any internal or external loan review, or
in any listings of loans lacking such information provided to management by the
National Bank Examiners at the conclusion of an examination.

 

(3) If the Board is unable to obtain the credit
information or collateral documentation required by paragraphs (1) and (2) of
this Article within ninety (90) days, the Board shall document its efforts
to obtain such information or documentation, and maintain the documentation of
its efforts in the loan file.

 

 

(4) Effective immediately, the Bank may grant,
extend, renew, alter or restructure any loan or other extension of credit only
after:

 

(a) documenting the specific reason or purpose
for the extension of credit;

 

(b) identifying the expected source of repayment
in writing;

 

(c) structuring the repayment terms to coincide
with the expected source of repayment;

 

(d) obtaining and analyzing current and
satisfactory credit information, including cash flow analysis, where loans are
to be repaid from operations;

 

(i) Failure to obtain the
information in (3)(d) shall require a majority of the full Board (or a
delegated committee thereof) to certify in writing the specific reasons why
obtaining and analyzing the information in (3)(d) would be detrimental to
the best interests of the Bank.

 

(ii) A copy of the Board
certification shall be maintained in the credit file of the affected
borrower(s).  The certification will be
reviewed by this Office in subsequent examinations of the Bank; and

 

(e) documenting, with adequate supporting
material, the value of collateral and properly perfecting the Bank’s lien on it
where applicable.

 

ARTICLE VI

 

APPRAISALS
OF REAL PROPERTY

 

(1)                                  Within thirty (30) days, the Board shall engage the services
of an independent, professionally certified, or licensed appraiser(s) to
provide:

 

(a)                                  a written or updated appraisal, in accordance with 12 C.F.R. Part 34,
for each parcel of real property that represents primary collateral behind any
extension of credit where:

 

(i)                                    the loan was criticized in the ROE or by the Bank’s internal
loan review, and the most recent independent appraisal is more than
twelve (12) months old; or

 

(ii)                                 accrued interest or loan fees have been or will be added to
the outstanding principal balance, and the most recent independent
appraisal is more than twelve (12) months old.

 

(b)                                 a written appraisal on each parcel of Other Real Estate Owned
where it is needed to bring the Bank into conformity with the provisions of 12
C.F.R. Part 34.

 

(2)                                  The Board shall specifically instruct the appraiser(s) to
comply with the requirements of 12 C.F.R. Part 34.  The details surrounding any and all other
instructions given to the appraiser(s) by the Bank, whether written or
oral, shall be provided to the Assistant Deputy Comptroller for review prior to
the appraiser(s) undertaking the actual appraisals.

 

(3)                                  All such appraisals shall be completed within sixty (60)
days, and certification by the Board attesting to the completion of the
appraisals shall be forwarded to the Assistant Deputy Comptroller along 

 

 

with your quarterly progress reports.

 

(4)                                  The Board shall ensure that all appraisals are reviewed to
assess compliance with 12 C.F.R. Part 34, as well as any applicable bank
policies.  Appraisal reviews shall
include sufficient narratives to document why the reviewer concurs or does not
concur with the appraised value.  Written
documentation of all such reviews shall be maintained by the bank.

 

ARTICLE VII

 

LENDING POLICY

 

(1)                                  Within ninety (90) days, the Board shall review and revise
the Bank’s written loan policy.  In
revising this policy, the Board shall refer to “Loan Portfolio Management”
booklet of the Comptroller’s Handbook. 
This policy shall incorporate, but not necessarily be limited to, the
following:

 

(a)          a provision that current and satisfactory credit information
will be obtained on each borrower;

 

(b)         measures to correct the deficiencies in the Bank’s lending
procedures noted in any ROE;

 

(c)          guidelines consistent with Banking Circular 255, setting
forth the criteria under which renewals of extensions of credit may be
approved.  At a minimum the policy shall:

 

(i) ensure that
renewals are not made for the sole purpose of reducing the volume of loan
delinquencies; and

 

(ii) provide guidelines
and limitations on the capitalization of interest;

 

(d) guidelines governing lending standards for
all types of lending in which the bank is engaged;

 

(e) guidelines for periodic review of the Bank’s
adherence to the revised lending policy.

 

(2) Upon adoption, the policy shall be
implemented, the Board shall thereafter ensure Bank adherence to the policy,
and a copy of the policy shall be forwarded to the Assistant Deputy Comptroller
for review.

 

(3) The Board shall ensure that the Bank has
processes, personnel, and control systems to ensure implementation of and
adherence to the policy developed pursuant to this Article.

 

ARTICLE VIII

 

ALLOWANCE FOR LOAN AND LEASE LOSSES

 

(1)  
Within sixty (60) days, the Board shall adopt, implement, and thereafter
ensure adherence to updated written policies and procedures for maintaining an
adequate Allowance for Loan and Lease Losses (“ALLL”) in accordance with
generally accepted accounting principles. 
The ALLL policies and procedures shall be consistent with the guidance
set forth in the Federal Financial Institutions Examination Council’s “Interagency
Policy Statement on the Allowance for Loan and Lease Losses” dated December 13,
2006 (OCC Bulletin 2006-47) and with “Allowance for Loan and Lease Losses,”
booklet A-ALLL of the 

 

 

Comptroller’s Handbook, and shall at a minimum include:

 

(a)  procedures for
determining whether a loan is impaired and measuring the amount of impairment,
consistent with FASB Statement of Financial Accounting Standards No. 114,
Accounting by Creditors for Impairment of a Loan;

 

(b)  procedures for
segmenting the loan portfolio and estimating loss on groups of loans,
consistent with FASB Statement of Financial Accounting Standards No. 5,
Accounting for Contingencies.  The
following must be included in the procedures:

 

(i)  All FASB Statement
of Financial Accounting Standards No. 5 qualitative factors discussed in
OCC Bulletin 2006-47;

 

(ii) A process to track
and calculate the historical loss for each homogenous Statement of Financial
Accounting Standards No. 5  pool
of loans;

 

(d)         a process to adjust historical losses based on significant
factors that affect the collectability of loans in the portfolio.

 

(e)          procedures for validating the ALLL methodology; and

 

(f)            a process for summarizing and documenting, for the Board’s
review and approval, the amount to be reported in the Consolidated Reports of
Condition and Income (“Call Reports”) for the ALLL.

 

(2)          The Board shall ensure that the Bank has processes,
personnel, and control systems to ensure implementation of and adherence to the
policies and procedures developed pursuant to this Article.

 

(3)          A copy of the Board’s policies and procedures developed
pursuant to this Article shall be submitted to the Assistant Deputy
Comptroller for review and prior written determination of no supervisory
objection. Upon receiving a determination of no supervisory objection from the
Assistant Deputy Comptroller, the Bank shall implement and adhere to the
program.

 

(4) The policies and procedures developed
pursuant to this Article shall provide for a review of the Allowance by
the Board at least once each calendar quarter. 
Any deficiency in the Allowance shall be remedied in the quarter it is
discovered, prior to the filing of the Consolidated Reports of Condition and
Income, by additional provisions from earnings. 
Written documentation shall be maintained indicating the factors
considered and conclusions reached by the Board in determining the adequacy of
the Allowance.

 

ARTICLE IX

 

OTHER REAL ESTATE OWNED

 

(1)          Within thirty (30) days, the Board shall adopt, implement,
and thereafter ensure Bank adherence to a policy to ensure that Other Real
Estate Owned (“OREO”) is managed in accordance with 12 U.S.C. § 29 and 12
C.F.R. Part 34.  The policy shall
address:

 

 

(a)          responsibility and authority for OREO properties;

 

(b)         proper accounting procedures for OREO properties from transfer
to the Bank and until and upon sale to a third party;

 

(c)          procedures to require timely appraisals pursuant to 12 C.F.R.
§ 34.85 and 12 C.F.R. Part 34, Subpart C;

 

(d)         diligent sales efforts; and

 

(e)          reporting systems.

 

(2)          Upon adoption, the Board shall submit a copy of the policy to
the Assistant Deputy Comptroller for review.

 

(3)          The
Board shall ensure that the Bank has processes, personnel, and control systems
to ensure implementation of and adherence to the policy developed pursuant to
this Article.

 

ARTICLE X

 

DEPENDENCE ON WHOLESALE OR CREDIT
SENSITIVE LIABILITIES

 

(1) The Bank shall continue to improve the Bank’s
liquidity position, as of the date of the ROE, and maintain adequate sources of
stable funding given the Bank’ s anticipated liquidity and funding needs.  Such actions shall include, but not be
limited to:

 

(a) reduction of wholesale or credit sensitive
liabilities and/or increase of liquid assets;

 

(b) revision of the Bank’s strategic plan in
light of the requirement of this Article; and

 

(c) establishment of prudent limits on the nature
and amount of liquidity risk that can be taken.

 

ARTICLE XI

 

BROKERED DEPOSITS

 

(1) The Bank may accept, renew or rollover
Brokered Deposits (as defined by 12 C.F.R. § 337.6(a)(2)) for deposit at the Bank,
up to twenty five percent (25%) of total deposits (total deposits as reported
in the most recent Consolidated Report of Condition as of the date of this
Agreement), without obtaining prior written determination of no supervisory
objection from the Assistant Deputy Comptroller.

 

(2) The bank shall not exceed the twenty five
percent (25%) limitation on brokered deposits in paragraph (1) without
obtaining the prior written determination of no supervisory objection from the
Assistant Deputy Comptroller.

 

(3) The limitations of paragraphs (1) and (2) shall
include the acquisition of Brokered Deposits through any transfer, purchase, or
sale of assets, including Federal funds transactions administered through a
deposit broker.

 

 

(4) If the Bank seeks to acquire Brokered
Deposits exceeding the twenty five percent (25%) limitation on brokered
deposits in paragraph (1), the Board shall apply to the Assistant Deputy
Comptroller for written permission.  Such
application shall contain, at a minimum, the following:

 

(a) the dollar volume, maturities, and cost of
the Brokered Deposits to be acquired;

 

(b) the proposed use of the Brokered Deposits,
i.e., short-term liquidity or restructuring of liabilities to reduce cost;

 

(c) alternative funding sources available to the
Bank; and

 

(d) the reasons why the Bank believes that the
acceptance of the Brokered Deposits does not constitute an unsafe and unsound
practice in its particular circumstances.

 

(5)   The
Assistant Deputy Comptroller may require the submission of such additional
information as necessary to make an informed decision.  Upon consideration of the Bank’s application,
the Assistant Deputy Comptroller will determine whether the proposed
acquisition of Brokered Deposits may be accomplished in a safe and sound manner
and may condition the Bank’s acquisition as the Assistant Deputy Comptroller
shall deem appropriate.

 

ARTICLE XII

 

PROFIT PLAN

 

(1) Within sixty (60) days, the Board shall
develop, implement, and thereafter ensure Bank adherence to an updated written profit
plan to improve and sustain the earnings of the Bank at a level satisfactory to
support operations, the allowance for loan and lease losses, and augment
capital commensurate with the Bank’s risk profile.  This updated plan shall include, at minimum,
the following elements:

 

(a) identification of the major areas in and
means by which the Board will seek to improve the Bank’s operating performance;

 

(b) realistic and comprehensive budgets,
including projected balance sheets and year-end income statements;

 

(c) a budget review process to monitor both the
Bank’s income and expenses, and to compare actual figures with budgetary
projections; and

 

(d) a description of the operating assumptions
that form the basis for major projected income and expense components.

 

(2) The budgets and related documents required in
paragraph (1) above for 2010 shall be submitted to the Assistant Deputy
Comptroller upon completion.  The Board
shall submit to the Assistant Deputy Comptroller annual budgets as described in
paragraph (1) above for each year this Agreement remains in effect.  The budget for each year shall be submitted
on or before December 31, of the preceding year.

 

(3) The Board shall forward comparisons of its
balance sheet and profit and loss statement to the profit plan projections to
the Assistant Deputy Comptroller on a quarterly basis.

 

(4) The Board shall ensure that the Bank has
processes, personnel, and control systems to ensure 

 

 

implementation of and adherence to the plan developed
pursuant to this Article.

 

ARTICLE XIII

 

CLOSING

 

(1) Although the Board has agreed to submit
certain programs and reports to the Assistant Deputy Comptroller for review or
prior written determination of no supervisory objection, the Board has the
ultimate responsibility for proper and sound management of the Bank.

 

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

 

(3) Any time limitations imposed by this
Agreement shall begin to run from the effective date of this Agreement.  Such time requirements may be extended in
writing by the Assistant Deputy Comptroller for good cause upon written
application by the Board.

 

(4) The provisions of this Agreement shall be
effective upon execution by the parties hereto and its provisions shall
continue in full force and effect unless or until such provisions are amended
in writing by mutual consent of the parties to the Agreement or excepted,
waived, or terminated in writing by the Comptroller.

 

(5) In each instance in this Agreement in which
the Board is required to ensure adherence to, and undertake to perform certain
obligations of the Bank, it is intended to mean that the Board shall:

 

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

 

(b) require the timely reporting by Bank
management of such actions directed by the Board to be taken under the terms of
this Agreement;

 

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

 

(d) require corrective action be taken in a
timely manner of any non-compliance with such actions.

 

(6) This Agreement is intended to be, and shall
be construed to be, a supervisory “written agreement entered into with the
agency” as contemplated by 12 U.S.C. § 1818(b)(1), and expressly does not form,
and may not be construed to form, a contract binding on the Comptroller or the
United States.  Notwithstanding the
absence of mutuality of obligation, or of consideration, or of a contract, the
Comptroller may enforce any of the commitments or obligations herein undertaken
by the Bank under his supervisory powers, including 12 U.S.C. § 1818(b)(1), and
not as a matter of contract law.  The
Bank expressly acknowledges that neither the Bank nor the Comptroller has any
intention to enter into a contract.  The
Bank also expressly acknowledges that no officer or employee of the Office of
the Comptroller of the Currency has statutory or other authority to bind the
United States, the U.S. Treasury Department, the Comptroller, or any other
federal bank regulatory agency or entity, or any officer or employee of any of
those entities to a contract affecting the Comptroller’s exercise of his
supervisory responsibilities.  The terms
of this Agreement, including this paragraph, are not subject to amendment or
modification by any extraneous expression, prior agreements or prior
arrangements between the parties, whether oral or written.

 

 

IN TESTIMONY WHEREOF, the undersigned, authorized by
the Comptroller, has hereunto set his hand on behalf of the Comptroller.

 

 

	
  /S/Kent
  D. Stone

  	
   

  	
  June 8,
  2010

  
	
  Kent
  D. Stone

  Assistant Deputy Comptroller

  Carolinas Field Office

  	
   

  	
  Date

  

 

 

IN TESTIMONY WHEREOF, the undersigned, as the duly
elected and acting Board of Directors of the Bank, have hereunto set their
hands on behalf of the Bank.

 

 

	
  /s/Andrew B. Cajka

  	
   

  	
  June 8, 2010

  
	
  Andrew B. Cajka

  	
   

  	
  Date

  
	
   

  	
   

  	
   

  
	
  /s/Mark A. Cothran

  	
   

  	
  June 8, 2010

  
	
  Mark A. Cothran

  	
   

  	
  Date

  
	
   

  	
   

  	
   

  
	
  /s/Leighton M. Cubbage

  	
   

  	
  June 8, 2010

  
	
  Leighton M. Cubbage

  	
   

  	
  Date

  
	
   

  	
   

  	
   

  
	
  /s/Anne S. Ellefson

  	
   

  	
  June 8, 2010

  
	
  Anne S. Ellefson

  	
   

  	
  Date

  
	
   

  	
   

  	
   

  
	
  /s/David G. Ellison

  	
   

  	
  June 8, 2010

  
	
  David G. Ellison

  	
   

  	
  Date

  
	
   

  	
   

  	
   

  
	
  /s/Fred Gilmer, Jr.

  	
   

  	
  June 8, 2010

  
	
  Fred Gilmer, Jr.

  	
   

  	
  Date

  
	
   

  	
   

  	
   

  
	
  /s/Tecumseh Hooper, Jr.

  	
   

  	
  June 8, 2010

  
	
  Tecumseh Hooper, Jr.

  	
   

  	
  Date

  
	
   

  	
   

  	
   

  
	
  /s/Rudolph G. Johnstone, III. M.D.

  	
   

  	
  June 8, 2010

  
	
  Rudolph G. Johnstone, III. M.D.

  	
   

  	
  Date

  
	
   

  	
   

  	
   

  
	
  /s/James B. Orders, III

  	
   

  	
  June 8, 2010

  
	
  James B. Orders, III

  	
   

  	
  Date

  
	
   

  	
   

  	
   

  
	
  /s/R. Arthur Seaver, Jr.

  	
   

  	
  June 8, 2010

  
	
  R. Arthur Seaver, Jr.

  	
   

  	
  Date

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  William B. Sturgis

  	
   

  	
  Date

  

 

 

APPENDIX A

Southern First Bank, N.A.

Greenville, SC

 

CRITICIZED ASSET REPORT AS OF:

 

 

BORROWER(S):

 

ASSET BALANCE(S) AND OCC RATING (SM, SUBSTANDARD,
DOUBTFUL OR LOSS):

 

	
  $

  	
  CRITICISM

  	
   

  

 

AMOUNT CHARGED OFF TO DATE

 

FUTURE POTENTIAL CHARGE-OFF

 

 

PRESENT STATUS (Fully explain any increase in outstanding
balance; include past due status, nonperforming, significant progress or
deterioration, etc.):

 

 

FINANCIAL AND/OR COLLATERAL SUPPORT (include brief summary of
most current financial information, appraised value of collateral and/or
estimated value and date thereof, bank’s lien position and amount of available
equity, if any, guarantor(s) info, etc.):

 

 

PROPOSED PLAN OF ACTION TO ELIMINATE ASSET CRITICISM(S) AND
TIME FRAME FOR ITS ACCOMPLISHMENT:

 

 

IDENTIFIED SOURCE OF REPAYMENT AND DEFINED REPAYMENT PROGRAM
(repayment program should coincide with source of repayment):

 

 

Use this form for reporting each criticized asset that
exceeds two hundred fifty thousand dollars ($250,000) and retain the original
in the credit file for review by the examiners. 
Submit your reports quarterly until notified otherwise, in writing, by
the Assistant Deputy Comptroller.

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