Document:

fortworth_mergeragree.htm

    Exhibit
      10(a)
       

      

       

       

       

       

       

       

       

       

      
 

      

      Agreement
        and Plan of Merger

      

      

      

      By
        and
        Among

      

      Southside
        Bancshares, Inc.,

      

      Southside
        Merger Sub, Inc.

      

      and

      

      Fort
        Worth
        Bancshares, Inc.

      

      

      

      

      Dated
        as of
        May 17, 2007

      

      

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      
         

        
          	 	
                  Table
                    of Contents

                	 
	 	 	 
	 	 	
                  Page

                
	 	
                  Preamble

                	
                  1

                
	 	
                  ARTICLE
                    1 -
                    TRANSACTIONS AND TERMS OF MERGER

                	
                  1

                
	 	
                  1.1
                    Merger

                	
                  1

                
	 	
                  1.2
                    Time and
                    Place of Closing

                	
                  1

                
	 	
                  1.3
                    Effective
                    Time

                	
                  2

                
	 	
                  1.4
                    Conversion of Company Common Stock

                	
                  2

                
	 	
                  1.5
                    Merger
                    Sub Common Stock

                	
                  2

                
	 	
                  1.6
                    Parent
                    Common Stock

                	
                  2

                
	 	
                  1.7
                    Company
                    Options and Warrants

                	
                  3

                
	 	
                  1.8
                    Organizational Documents and Directors and Officers of Surviving
                    Corporation

                	
                  3

                
	 	
                  1.9
                    Purchase
                    Price Adjustment

                	
                  3

                
	 	
                  ARTICLE
                    2 –
                    DELIVERY OF MERGER CONSIDERATION

                	
                  4

                
	 	
                  2.1
                    Exchange
                    Procedures

                	
                  4

                
	 	
                  2.2
                    Rights of
                    Former Company Shareholders

                	
                  5

                
	 	
                  2.3
                    Dissenters’ Rights

                	
                  5

                
	 	
                  ARTICLE
                    3 –
                    REPRESENTATIONS AND WARRANTIES

                	
                  6

                
	 	
                  3.1
                    Company
                    Disclosure Letter

                	
                  6

                
	 	
                  3.2
                    Standards

                	
                  6

                
	 	
                  3.3
                    Representations and Warranties of the Company

                	
                  6

                
	 	
                  3.4
                    Representations and Warranties of Parent

                	
                  21

                
	 	
                  ARTICLE
                    4 –
                    COVENANTS AND ADDITIONAL AGREEMENTS OF THE PARTIES

                	
                  23

                
	 	
                  4.1
                    Conduct
                    of Business Prior to Effective Time

                	
                  23

                
	 	
                  4.2
                    Forbearances

                	
                  23

                
	 	
                  4.3
                    State
                    Filings

                	
                  25

                
	 	
                  4.4
                    Company
                    Shareholder Approval

                	
                  26

                
	 	
                  4.5
                    Reasonable Best Efforts

                	
                  26

                
	 	
                  4.6
                    Applications and Consents

                	
                  26

                
	 	
                  4.7
                    Notification of Certain Matters

                	
                  27

                
	 	
                  4.8
                    Investigation and Confidentiality

                	
                  27

                
	 	
                  4.9
                    Press
                    Releases; Publicity

                	
                  27

                
	 	
                  4.10
                    Acquisition Proposals

                	
                  28

                
	 	
                  4.11
                    Takeover
                    Laws

                	
                  28

                
	 	
                  4.12
                    Retention Bonuses; Change in Control Bonuses; Employee Benefits
                    and
                    Contracts

                	
                  28

                
	 	
                  4.13
                    Indemnification

                	
                  29

                
	 	
                  ARTICLE
                    5 –
                    CONDITIONS PRECEDENT TO OBLIGATIONS TO CONSUMMATE

                	
                  29

                
	 	
                  5.1
                    Conditions to Obligations of Each Party

                	
                  29

                
	 	
                  5.2
                    Conditions to Obligations of Parent

                	
                  30

                
	 	
                  5.3
                    Conditions to Obligations of The Company

                	
                  31

                
	 	
                  ARTICLE
                    6 –
                    TERMINATION

                	
                  32

                
	 	
                  6.1
                    Termination

                	
                  32

                
	 	
                  6.2
                    Effect of
                    Termination

                	
                  32

                
	 	
                  6.3
                    Termination Fee

                	
                  33

                

        

        

         

        

        
          
            
            

          

          
            
            

            
              

            

          

          
            
            

          

        

        

        

        
          	 	
                  ARTICLE
                    7 –
                    MISCELLANEOUS

                	
                  33

                
	 	
                  7.1
                    Definitions

                	
                  33

                
	 	
                  7.2
                    Non-Survival of Representations and Covenants

                	
                  41

                
	 	
                  7.3
                    Expenses

                	
                  41

                
	 	
                  7.4
                    Entire
                    Agreement

                	
                  42

                
	 	
                  7.5
                    Amendments

                	
                  42

                
	 	
                  7.6
                    Waivers

                	
                  42

                
	 	
                  7.7
                    Assignment

                	
                  42

                
	 	
                  7.8
                    Notices

                	
                  42

                
	 	
                  7.9
                    Governing
                    Law

                	
                  43

                
	 	
                  7.10
                    Counterparts

                	
                  43

                
	 	
                  7.11
                    Captions

                	
                  43

                
	 	
                  7.12
                    Interpretations

                	
                  43

                
	 	
                  7.13
                    Severability

                	
                  44

                
	 	
                  7.14
                    Waiver
                    of Jury Trial

                	
                  44

                

        

        

        
          
            
            

          

          
            
            

            
              

            

          

          
            
            

          

        

LIST
        OF
        EXHIBITS

      

      

      
        	
                Exhibit

              	
                Description

              	 	 
	 	 	 	 
	
                A

              	
                Form
                  of
                  Director Support Agreement

              	 	 
	 	 	 	 
	
                B

              	
                Form
                  of
                  Shareholder Support Agreement

              	 	 
	 	 	 	 
	
                C

              	
                Form
                  of
                  Retention Agreement

              	 	 
	 	 	 	 
	
                D

              	
                Form
                  of
                  Employment Agreement

              	 	 
	 	 	 	 
	 	 	 	 
	 	 	 	 

      

      

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      AGREEMENT
        AND PLAN OF MERGER

      Preamble

      

      THIS
        AGREEMENT AND PLAN OF
        MERGER (this “Agreement”) is made and entered into as of May 17,
        2007, by and among Southside Bancshares, Inc., a Texas
        corporation (“Parent”), Southside Merger Sub, Inc., a
        Texas corporation and wholly owned subsidiary of Parent (“Merger Sub”)
        and Fort Worth Bancshares, Inc., a Texas corporation (the
“Company”).

      

      The
        Boards of Directors of Parent, Merger Sub
        and the Company have approved this Agreement and the transactions described
        herein.  This Agreement provides for the acquisition of the Company by
        Parent pursuant to the merger of Merger Sub with and into the Company (the
        “Merger”), with the Company as the surviving corporation.

      

      Concurrently
        with
        the execution and delivery of this Agreement, as a condition and inducement
        to
        Parent’s willingness to enter into this Agreement, each of the directors who are
        not also officers has executed and delivered to Parent an agreement in
        substantially the form attached as Exhibit A hereto (the “Director
        Support Agreement”) and each of the beneficial holders of 5% or more of the
        outstanding shares of Company Common Stock who are not also directors has
        executed and delivered to Parent an agreement in substantially the form attached
        as Exhibit B hereto (the “Shareholder Support Agreement”),
        pursuant to which they have agreed, among other things, subject to the terms
        of
        such Shareholder Support Agreement, to vote the shares of Company Common
        Stock
        held of record by such Persons or as to which they otherwise have sole voting
        power to approve and adopt this Agreement.

      

      

      Certain
        terms used and not otherwise defined in
        this Agreement are defined in Section 7.1.

      

      NOW,
        THEREFORE, in
        consideration of the above and the mutual warranties, representations, covenants
        and agreements set forth herein, and for other good and valuable consideration,
        the receipt and sufficiency of which is hereby acknowledged, and intending
        to be
        legally bound hereby, the Parties agree as follows:

      

      ARTICLE
        1

      TRANSACTIONS
        AND TERMS OF MERGER

      

      1.1  Merger.  Subject
        to the terms and conditions of this Agreement, at the Effective Time, Merger
        Sub
        shall be merged with and into the Company in accordance with Sections 5.01
        and
        5.02 of the Texas Business Corporation Act (the “TBCA”) and with the
        effect provided in Section 5.06 of the TBCA.  The Company shall be the
        surviving corporation (the “Surviving Corporation”) resulting from the
        Merger and the separate corporate existence of Merger Sub shall thereupon
        cease.  The Company shall continue to be governed by the Laws of the
        State of Texas and the separate corporate existence of the Company with all
        of
        its rights, privileges, immunities, powers and franchises shall continue
        unaffected by the Merger; provided that, by virtue of the Merger, the
        Company shall become a wholly owned subsidiary of Parent.

      

      1.2  Time
        and
        Place of Closing.  Unless otherwise
        mutually agreed to by Parent and the Company, the closing of the Merger (the
        “Closing”) shall take place in the offices of Bracewell & Giuliani
        LLP, 1445 Ross Avenue, Suite 3800, Dallas, Texas 75202 at 10:00 a.m., Dallas
        time, on the date when the Effective Time is to occur (the “Closing
        Date”).

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      

      1.3  Effective
        Time.  Subject to the terms and
        conditions of this Agreement, on the Closing Date, the Parties will cause
        articles of merger to be filed with the Secretary of State of the State of
        Texas
        as provided in Section 5.04 of the TBCA (the “Articles of
        Merger”).  The Merger shall take effect when the Articles of
        Merger becomes effective (the “Effective Time”).  Subject to
        the terms and conditions hereof, the Parties shall use their reasonable best
        efforts to cause the Effective Time to occur on a mutually agreeable date
        following the date on which satisfaction or waiver of the conditions set
        forth
        in Article 5 has occurred (other than those conditions that by their nature
        are
        to be satisfied at the Closing, but subject to the fulfillment or waiver
        of
        those conditions).

      

      1.4  Conversion
        of Company Common Stock.

      

      (a)           At
        the Effective Time, in each case subject to Section 1.4(d), by virtue of
        the
        Merger and without any action on the part of the Parties or the holder thereof,
        each share of Company Common Stock that is issued and outstanding immediately
        prior to the Effective Time (other than the Excluded Shares) shall be converted
        into the right to receive an amount in cash, without interest, equal to the
        Per
        Share Purchase Price.

      

                            (b)           At
        the Effective Time, all shares of Company Common Stock shall no longer be
        outstanding and shall automatically be cancelled and retired and shall cease
        to
        exist as of the Effective Time, and each certificate or electronic book-entry
        previously representing any such shares of Company Common Stock (the “Company
        Certificates”) shall thereafter represent only the right to receive the Per
        Share Purchase Price, and any Dissenting Shares shall thereafter represent
        only
        the right to receive applicable payments as set forth in Section
        2.3.

      

      (c)           If,
        prior to the Effective Time, the issued and outstanding shares of Company
        Common
        Stock shall have been increased, decreased, changed into or exchanged for
        a
        different number or kind of shares or securities as a result of a
        reorganization, recapitalization, reclassification, stock dividend, stock
        split,
        reverse stock split, or other similar change in capitalization (which the
        parties agree does not include Company Common Stock issued upon the exercise
        of
        Company Options and Company Warrants), then an appropriate and proportionate
        adjustment shall be made to the Per Share Purchase Price.

      

      (d)           Each
        share of Company Common Stock issued and outstanding immediately prior to
        the
        Effective Time and owned by any of the Parties or their respective Subsidiaries
        (in each case other than shares of Company Common Stock held on behalf of
        third
        parties) shall, by virtue of the Merger and without any action on the part
        of
        the holder thereof, cease to be outstanding, shall be cancelled and retired
        without payment of any consideration therefor and shall cease to exist (together
        with the Dissenting Shares, the “Excluded Shares”).

      

      1.5  Merger
        Sub Common Stock.   At the
        Effective Time, by virtue of the Merger and without any action on the part
        of
        the Parties of the holder thereof, each share of the common stock of Merger
        Sub
        that is issued and outstanding immediately prior to the Effective Time shall
        be
        converted into one share of Company Common Stock.

      

      1.6  Parent
        Common Stock.   At and after the
        Effective Time, each share of Parent Common Stock issued and outstanding
        immediately prior to the Effective Time shall remain an issued and outstanding
        share of Parent Common Stock and shall not be affected by the
        Merger.

      
        
          
          

        

        
          2

          
            

          

        

        
          
          

        

      

      

      1.7  Company
        Options and Warrants.  No later than
        five Business Days prior to the Effective Time, the Company shall take all
        actions necessary to either (a) cause each outstanding Company Option or
        Company
        Warrant to be exercised in accordance with its terms; provided, that,
        the exercise of Company Options or Company Warrants shall not cause an
        adjustment to the Per Share Purchase Price pursuant to Section 1.4(c) hereof,
        or
        (b) terminate each outstanding Company Option and Company
        Warrant.  Each Company Option or Company Warrant that is not exercised
        prior to five Business Days prior to the Effective Time shall be terminated
        and
        converted into the right to receive an amount in cash, without interest,
        equal
        to (i) the Per Share Purchase Price, minus (ii) the exercise price of such
        Company Option or Company Warrant (the “Option Termination
        Payment”).  No later than five Business Days prior to the
        Effective Time, the Company shall also take all actions necessary to terminate
        the Company Stock Plans as of no less than five Business Days prior to the
        Effective Time and to cause the provisions in any other Company Benefit Plan
        providing for the issuance, transfer or grant of any capital stock of the
        Company or any interest in respect of any capital stock of the Company to
        terminate and be of no further force and effect as of no less than five Business
        Days prior to the Effective Time.  The Company shall ensure that no
        later than five Business Days prior to the Effective Time no holder of any
        Company Option or Company Warrant or any participant in any Company Stock
        Plan
        or other Company Benefit Plan shall have any right thereunder to acquire
        any
        capital stock of the Parties.

      

      1.8  Organizational
        Documents and Directors and Officers of Surviving
        Corporation.

      

      (a)           The
        Organizational Documents of the Company in effect immediately prior to the
        Effective Time shall be the Organizational Documents of the Surviving
        Corporation after the Effective Time until otherwise amended or
        repealed.

      

      (b)           The
        directors and officers of Merger Sub immediately prior to the Effective Time
        shall be the directors and officers, respectively, of the Surviving Corporation
        as of the Effective Time, until the earlier of their resignation or removal
        or
        otherwise ceasing to be a director or officer or until their respective
        successors are duly elected and qualified, as the case may be.

      

      1.9  Purchase
        Price Adjustment.  At least eight
        Business Days prior to the Closing Date, the Company shall deliver to Parent
        and
        Merger Sub a good faith estimate of the Company’s Net Shareholders’ Equity as of
        the close of business on the Measurement Date (the “Estimated Net
        Shareholders’ Equity”), together with supporting documentation for such
        estimate and any additional information relating thereto reasonably requested
        by
        Parent or Merger Sub. Parent and its accountants and advisors shall be given
        full access to all of the Company’s and its Subsidiaries’ books and records for
        purposes of evaluating the accuracy and completeness of the Estimated Net
        Shareholders’ Equity.  If Parent believes, in good faith, that the
        Estimated Net Shareholders’ Equity is in error, Parent may challenge the amount
        of the Estimated Net Shareholders’ Equity within four Business Days following
        delivery thereof by delivering a notice of disagreement to the
        Company.  If Parent does not timely deliver a notice of disagreement
        to the Company, the Per Share Purchase Price shall be based on the Estimated
        Net
        Shareholders’ Equity as delivered to Parent.  If Parent timely
        delivers a notice of disagreement to the Company, Parent and the Company
        shall
        use their good faith efforts to resolve any disputes with respect to the
        Estimated Net Shareholders’ Equity prior to the Closing Date, and the Per Share
        Purchase Price shall be based on the Net Shareholders’ Equity amount as mutually
        agreed to in writing by Parent and the Company. If Parent timely delivers
        a
        notice of disagreement to the Company but Parent and the Company are unable
        to
        resolve their dispute regarding the Estimated Net Shareholders’ Equity within
        ten Business Days of the delivery by Parent to the

      
        
          
          

        

        
          3

          
            

          

        

        
          
          

        

      

      1.10  Company
        of such
        notice of disagreement, then this Agreement shall be deemed terminated pursuant
        to Section 6.1(a) of this Agreement as of 11:59 p.m., Central time, on such
        tenth Business Day.

      

      ARTICLE
        2

      DELIVERY
        OF MERGER CONSIDERATION

      

      2.1  Exchange
        Procedures.

      

      (a)           Delivery
        of Transmittal Materials.  At least 20 days prior to the Effective
        Time, Southside Bank (the “Exchange Agent”) shall send to each holder of
        record of shares of Company Common Stock (each, a “Holder”) (excluding
        the holders, if any, of Excluded Shares) as of that date transmittal materials
        for use in exchanging such holder’s Company Certificates for the Per Share
        Purchase Price (which shall specify that delivery shall be effected, and
        risk of
        loss and title to the Company Certificates shall pass, only upon proper delivery
        of such Company Certificates (or an effective affidavit of loss in lieu thereof
        as provided in Section 2.1(e)) to the Exchange Agent).  With respect
        to holders of record of shares of Company Common Stock who have not delivered
        the Company Certificate representing such shares by the Closing Date, the
        Exchange Agent shall sent to each such holder (excluding the holders, if
        any, of
        Excluded Shares) transmittal materials transmittal materials for use in
        exchanging such holder’s Company Certificates for the Per Share Purchase Price
        (which shall specify that delivery shall be effected, and risk of loss and
        title
        to the Company Certificates shall pass, only upon proper delivery of such
        Company Certificates (or an effective affidavit of loss in lieu thereof as
        provided in Section 2.1(e)) to the Exchange Agent).

      

      (b)           Delivery
        of Merger Consideration.  After the Effective Time, following the
        surrender to the Exchange Agent of a Company Certificate (or an effective
        affidavit of loss in lieu thereof as provided in Section 2.1(e)) in accordance
        with the terms of a letter of transmittal duly executed, the holder of such
        Company Certificate shall be entitled to receive in exchange therefor the
        Per
        Share Purchase Price in respect of each of the shares of Company Common Stock
        represented by his, her or its Company Certificate or Certificates (the
“Merger Consideration”).  If any portion of the Merger
        Consideration is to be paid to a Person other than the Person in whose name
        a
        Company Certificate so surrendered is registered, it shall be a condition
        to
        such payment that such Company Certificate shall be properly endorsed or
        otherwise be in proper form for transfer, and the Person requesting such
        payment
        shall pay to the Exchange Agent any transfer or other similar Taxes required
        as
        a result of such payment to a Person other than the registered holder of
        such
        Company Certificate, or establish to the reasonable satisfaction of the Exchange
        Agent that such Tax has been paid or is not payable.  Payments to
        holders of Dissenting Shares shall be made as required by the TBCA.

      

      (c)           Payment
        of Taxes.  The Exchange Agent (or, after the agreement with the
        Exchange Agent is terminated, Parent) shall be entitled to deduct and withhold
        from the Merger Consideration otherwise payable pursuant to this Agreement
        to
        any holder of Company Common Stock such amounts as the Exchange Agent or
        Parent,
        as the case may be, is required to deduct and withhold under the Internal
        Revenue Code, or any provision of state, local or foreign Tax law, with respect
        to the making of such payment.  To the extent the amounts are so
        withheld by the Exchange Agent or Parent, as the case may be, such withheld
        amounts shall be treated for all purposes of this Agreement as having been
        paid
        to the holder of shares of Company Common Stock in respect of whom such
        deduction and withholding was made by the Exchange Agent or Parent, as the
        case
        may be.

      

      (d)           Return
        of Merger Consideration to Parent.  At any time upon request by
        Parent, Parent shall be entitled to require the Exchange Agent to deliver
        to it
        any remaining portion of the Merger

      
        
          
          

        

        
          4

          
            

          

        

        
          
          

        

      

      Consideration
        not
        distributed to holders of Company Certificates that was deposited with the
        Exchange Agent (the “Exchange Fund”) (including any interest received
        with respect thereto and other income resulting from investments by the Exchange
        Agent, as directed by Parent), and holders shall be entitled to look only
        to
        Parent (subject to abandoned property, escheat or other similar laws) with
        respect to the Merger Consideration payable upon due surrender of their Company
        Certificates, without any interest thereon. Notwithstanding the foregoing,
        neither Parent nor the Exchange Agent shall be liable to any holder of a
        Company
        Certificate for Merger Consideration or cash from the Exchange Fund in each
        case
        delivered to a public official pursuant to any applicable abandoned property,
        escheat or similar law.

      

      (e)           Lost
        Company Certificates.  In the event any Company Certificates shall
        have been lost, stolen or destroyed, upon the making of an affidavit of that
        fact by the Person claiming such Company Certificate(s) to be lost, stolen
        or
        destroyed and, if required by Parent or the Exchange Agent, the posting by
        such
        Person of a bond in such sum as Parent may reasonably direct as indemnity
        against any claim that may be made against the Company or Parent with respect
        to
        such Company Certificate(s), the Exchange Agent will issue the Merger
        Consideration deliverable in respect of the shares of Company Common Stock
        represented by such lost, stolen or destroyed Company
        Certificates.  Prior to the Effective Time, upon receipt of notice
        from any of its shareholders that a Company Certificate has been lost or
        destroyed, and prior to issuing a new certificate, the Company shall require
        such shareholder to post a bond in such sum as Parent may reasonably direct
        as
        indemnity against any claim that may be made against the Company or Parent
        with
        respect to such Company Certificate(s), unless Parent agrees to the waiver
        of
        the requirement that such bond be posted.

      

      2.2  Rights
        of Former Company Shareholders.  At the
        Effective Time, the stock transfer books of the Company shall be closed as
        to
        holders of Company Common Stock and no transfer of Company Common Stock by
        any
        such holder shall thereafter be made or recognized.  Until surrendered
        for exchange in accordance with the provisions of Section 2.1, each Company
        Certificate (other than Company Certificates representing Excluded Shares)
        shall
        from and after the Effective Time represent for all purposes only the right
        to
        receive the Merger Consideration in exchange therefor.

      

      2.3  Dissenters’
        Rights.  Any Person who otherwise would
        be deemed a holder of Dissenting Shares (a “Dissenting Shareholder”)
        shall not be entitled to receive the applicable Merger Consideration with
        respect to the Dissenting Shares until such Person shall have failed to perfect
        or shall have effectively withdrawn or lost such holder’s right to dissent from
        the Merger under the TBCA.  Each Dissenting Shareholder shall be
        entitled to receive only the payment provided by Section 5.12 of the TBCA
        with
        respect to shares of Company Common Stock owned by such Dissenting Shareholder
        for which the Dissenting Shareholder perfected such holder’s dissenter’s
        rights.  The Company shall give Parent (a) prompt notice of any
        written demands for appraisal, attempted withdrawals of such demands, and
        any
        other instruments served pursuant to applicable Law received by the Company
        relating to shareholders’ rights of appraisal and (b) the opportunity to direct
        all negotiations and proceedings with respect to demand for appraisal under
        the
        TBCA.  The Company shall not, except with the prior written consent of
        Parent, voluntarily make any payment with respect to any demands for appraisals
        of Dissenting Shares, offer to settle or settle any such demands or approve
        any
        withdrawal of any such demands.

      

      
        
          
          

        

        
          5

          
            

          

        

        
          
          

        

      

      

      ARTICLE
        3

      REPRESENTATIONS
        AND WARRANTIES

      

      3.1  Company
        Disclosure Letter.  Prior to the
        execution and delivery of this Agreement, the Company has delivered to Parent
        a
        letter (the “Company Disclosure Letter”) 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 of the Company’s representations or warranties
        contained in this Article 3 or to one or more of its covenants contained
        in
        Article 4.  Any disclosures made with respect to a subsection of
        Section 3.3 shall be deemed to qualify any subsections of Section 3.3
        specifically referenced or cross-referenced with sufficient detail to enable
        a
        reasonable Person to recognize the relevance of such disclosure to such other
        subsections.

      

      3.2  Standards.

      

      (a)           No
        representation or warranty of any Party hereto contained in this Article
        3
        (other than the representations and warranties in (i) Section 3.3(c), which
        shall be true and correct in all respects (except for inaccuracies that are
        de minimis in amount), and (ii) Sections 3.3(b)(i), 3.3(b)(ii), 3.3(d)
        and 3.4(b)(i), which shall be true and correct in all material respects)
        shall
        be deemed untrue or incorrect, and no Party shall be deemed to have breached
        any
        of its representations or warranties, as a consequence of the existence or
        absence of any fact, circumstance or event unless such fact, circumstance
        or
        event, individually or taken together in the aggregate with all other facts,
        circumstances or events inconsistent with such Party’s representations or
        warranties contained in this Article 3, has had or is reasonably likely to
        have
        a Material Adverse Effect on such Party; provided, that, for purposes
        of Sections 5.2(a) and 5.3(a) only, the representations and warranties that
        are
        qualified by references to “material,” “Material Adverse Effect” or to the
“Knowledge” of any Party shall be deemed not to include such
        qualifications.

      

      (b)           Unless
        the context indicates specifically to the contrary, a “Material Adverse
        Effect” on a Party shall mean any change, event, violation, inaccuracy or
        circumstance the effect of which is a material adverse impact on (i) the
        condition (financial or otherwise), property, business, executive management
        team, assets (tangible or intangible) or results of operations or prospects
        of
        such Party and its subsidiaries taken as a whole or (ii) the ability of such
        Party to perform its obligations under this Agreement or to consummate the
        Merger or the other transactions contemplated by this
        Agreement; provided, however, that “Material
        Adverse Effect” shall not be deemed to include the impact of actions and
        omissions of a Party (or any of its subsidiaries) taken with the prior informed
        consent of the other Party in contemplation of the transactions contemplated
        hereby; provided, further, that general changes in the economy, as well
        as changes in laws or regulations affecting the banking industry, that do
        not
        have an effect on the Company or its subsidiaries that is disproportionate
        to
        the effect on similarly-situated financial institutions in Texas and contiguous
        states, shall not be deemed to have a Material Adverse Effect on the
        Company.

      

      3.3  Representations
        and Warranties of the Company.  Subject
        to and giving effect to Sections 3.1 and 3.2 and except as set forth in the
        Company Disclosure Letter, the Company hereby represents and warrants to
        Parent
        as follows:

      

      (a)           Organization,
        Standing, and Power.  Each Subsidiary of the Company is listed in
        Section 3.3(a) of the Company Disclosure Letter.  The Company and each
        of its Subsidiaries are duly

      
        
          
          

        

        
          6

          
            

          

        

        
          
          

        

      

      organized,
        validly
        existing, and, as applicable, are in good standing under the Laws of the
        jurisdictions of their respective formation.  The Company and each of
        its Subsidiaries have the requisite corporate power and authority to own,
        lease,
        and operate their properties and assets and to carry on their businesses
        as now
        conducted.  The Company and each of its Subsidiaries are duly
        qualified or licensed to do business and are in good standing in the States
        of
        the United States and foreign jurisdictions where the character of their
        assets
        or the nature or conduct of their businesses requires them to be so qualified
        or
        licensed.  Each of the Company and Fort Worth Bancorporation, Inc. is
        a bank holding company within the meaning of the BHC Act and is currently
        duly
        registered as such with the Federal Reserve Bank of Dallas.  Fort
        Worth National Bank (the “Bank”) is a national banking association in
        good standing with the OCC.  The Bank is an “insured institution” as
        defined in the Federal Deposit Insurance Act and applicable regulations
        thereunder and its deposits are insured by the Deposit Insurance
        Fund.

      

      (b)           Authority;
        No Breach of Agreement.

      

        
        (i)           The Company
        has the corporate power and authority necessary to execute, deliver, and
        perform
        its obligations under this Agreement and to consummate the transactions
        contemplated hereby.  The execution, delivery, and performance of this
        Agreement, and the consummation of the transactions contemplated hereby,
        have
        been duly and validly authorized by all necessary corporate action (including
        valid authorization and adoption of this Agreement by its duly constituted
        Board
        of Directors), subject only to the Company Shareholder Approval and such
        regulatory approvals as are required by law.  Subject to the Company
        Shareholder Approval and assuming due authorization, execution, and delivery
        of
        this Agreement by each of Parent and Merger Sub, this Agreement represents
        a
        legal, valid, and binding obligation of the Company enforceable against the
        Company in accordance with its terms (except in all cases as such enforceability
        may be limited by (A) bankruptcy, insolvency, reorganization, moratorium,
        receivership, conservatorship, and other laws now or hereafter in effect
        relating to or affecting the enforcement of creditors’ rights generally or the
        rights of creditors of insured depository institutions, (B) general equitable
        principles and (C) laws relating to the safety and soundness of insured
        depository institutions, and except that no representation is made as to
        the
        effect or availability of equitable remedies or injunctive relief (regardless
        of
        whether such enforceability is considered in a proceeding in equity or at
        law)
        and except that the availability of the equitable remedy of specific performance
        or injunctive relief is subject to the discretion of the court before which
        any
        proceeding may be brought).

      

        
        (ii)           As of the
        date hereof, the Company’s Board of Directors has (A) by the affirmative vote of
        all directors voting, which constitute at least a majority of the entire
        Board
        of Directors of the Company, duly approved and declared advisable this Agreement
        and the Merger and the other transactions contemplated hereby; (B) determined
        that this Agreement and the transactions contemplated hereby are advisable
        and
        in the best interests of the Company and the holders of Company Common Stock;
        (C) resolved to recommend adoption of this Agreement, the Merger and the
        other
        transactions contemplated hereby to the holders of shares of Company Common
        Stock (such recommendations being the “Company Directors’
Recommendation”); and (D) directed that this Agreement be submitted to the
        holders of shares of Company Common Stock for their adoption.

      

        
        (iii)           Neither
        the execution and delivery of this Agreement by the Company nor the consummation
        by the Company of the transactions contemplated hereby, nor compliance by
        it
        with any of the provisions hereof or thereof, will (A) violate, conflict
        with or
        result in a breach of any provision of the Company’s or its Subsidiaries’
Organizational Documents, (B) constitute or result in a Default under, or
        require any Consent pursuant to, or result in the creation of any Lien on
        any
        material assets of the Company or its Subsidiaries under, any Contract
        or

      
        
          
          

        

        
          7

          
            

          

        

        
          
          

        

      

      Permit,
        or (C)
        subject to receipt of the Regulatory Consents and the expiration of any waiting
        period required by Law, violate any Law or Order applicable to the Company
        or
        its Subsidiaries or any of their respective material assets.

      

        
        (iv)           Other than
        (A) the Regulatory Consents and (B) notices to or filings with the Internal
        Revenue Service or the Pension Benefit Guaranty Corporation or both with
        respect
        to any Benefit Plans, no notice to, filing with, or Consent of, any Governmental
        Authority is necessary in connection with the execution, delivery or performance
        of this Agreement and the consummation by the Company of the Merger and the
        other transactions contemplated by this Agreement.

      

      (c)           Capital
        Stock; Subsidiaries.  The Company’s authorized capital stock
        consists of (i) 1,500,000 shares of Company Common Stock,
        of which, as of the date of this Agreement, 650,202 shares are issued and
        outstanding, 35,599 shares are subject to Company Options, 19,866 are subject
        to
        Company Warrants and 11,998 shares are held in treasury, and (ii) 500,000
        shares
        of Company Preferred Stock, none of which are issued and
        outstanding.  Set forth in Section 3.3(c) of the Company Disclosure
        Letter is a true and complete schedule of all outstanding Rights to acquire
        shares of Company Common Stock, including grant date, vesting schedule, exercise
        price, expiration date and the name of the holder of such
        Rights.  Except as set forth in this Section 3.3(c) or in Section
        3.3(c) of the Company Disclosure Letter, there are no shares of Company Common
        Stock or other equity securities of the Company outstanding and no outstanding
        Rights relating to the Company Common Stock, and no Person has any Contract
        or
        any right or privilege (whether pre-emptive or contractual) capable of becoming
        a Contract or Right for the purchase, subscription or issuance of any securities
        of the Company.  All of the outstanding shares of Company Common Stock
        are duly and validly issued and outstanding and are fully paid and
        nonassessable.  None of the outstanding shares of Company Common Stock
        has been issued in violation of any preemptive rights of the current or past
        shareholders of the Company. There are no Contracts among the Company and
        its
        shareholders or by which the Company is bound with respect to the voting
        or
        transfer of Company Common Stock or the granting of registration rights to
        any
        holder thereof.  All of the outstanding shares of Company Capital
        Stock and all Rights to acquire shares of Company Capital Stock have been
        issued
        in compliance with all applicable federal and state Securities
        Laws.  All issued and outstanding shares of capital stock of its
        Subsidiaries have been duly authorized and are validly issued, fully paid
        and
        (except as provided in 12 U.S.C. Section 55) nonassessable.  All of
        the outstanding shares of capital stock of the Company’s Subsidiaries are owned
        by the Company or a wholly owned Subsidiary thereof, free and clear of all
        Liens.  None of the Company’s Subsidiaries has outstanding any Right
        to acquire any shares of its capital stock or any security convertible into
        such
        shares, or has any obligation or commitment to issue, sell or deliver any
        of the
        foregoing or any shares of its capital stock.  The outstanding capital
        stock of each of the Company’s Subsidiaries has been issued in compliance with
        all legal requirements and is not subject to any preemptive or similar
        rights.

      

      (d)           Financial
        Statements; Regulatory Reports; Proxy Statements.

      

        
        (i)           The Company
        has delivered to Parent true and complete copies of (A) the Company Financial
        Statements; (B) all monthly reports and financial statements of the Company
        and
        its Subsidiaries that were prepared for the Company’s or any of its
        Subsidiaries’ Board of Directors since January 1, 2006; (C) the annual report of
        Bank Holding Companies to the Federal Reserve Board for the year ended December
        31, 2006, of the Company and its Subsidiaries required to file such reports;
        (D)
        all call reports and consolidated and parent company only financial statements,
        including all amendments thereto, made to the Federal Reserve Board, the
        OCC,
        the FDIC and the Texas Department of Banking since January 1, 2006, of the
        Company’s and its Subsidiaries required to file such reports; and (E) all annual
        and quarterly reports and proxy or information statements (or similar materials)
        disseminated to the

      
        
          
          

        

        
          8

          
            

          

        

        
          
          

        

      

      Company’s
        shareholders or the shareholders of any of its Subsidiaries at any time since
        January 1, 2005.

      

        
        (ii)           The
        Company Financial Statements delivered prior to the date of this Agreement
        have
        been (and all Company Financial Statements to be delivered to Parent as required
        by this Agreement will be) prepared in accordance with GAAP.  The
        Company Financial Statements fairly present the financial position, results
        of
        operations, changes in shareholders’ equity and cash flows of the Company and
        its Subsidiaries as of the dates thereof and for the periods covered
        thereby.  All call and other regulatory reports referred to above have
        been filed on the appropriate form and prepared in all material respects
        in
        accordance with such forms’ instructions and the applicable rules and
        regulations of the regulating federal and/or state agency.  As of the
        date of the latest balance sheet forming part of the Company’s Financial
        Statements (the “Company Latest Balance Sheet”), none of the Company or
        its Subsidiaries has had, nor are any of such entities’ assets subject to, any
        material liability, commitment, indebtedness or obligation (of any kind
        whatsoever, whether absolute, accrued, contingent, known or unknown, matured
        or
        unmatured) that is not reflected and adequately provided for in accordance
        with
        GAAP.  No report, including any report filed with the FDIC, the OCC,
        the Texas Department of Banking, the Federal Reserve Board or other banking
        regulatory agency, and no report, proxy statement, registration statement
        or
        offering materials made or given to shareholders of the Company since January
        1,
        2005, as of the respective dates thereof, contained any untrue statement
        of a
        material fact or omitted to state a material fact required to be stated therein
        or necessary to make the statements therein, in light of the circumstances
        under
        which they were made, not misleading.  No report, including any report
        filed with the FDIC, the OCC, the Texas Department of Banking, the Federal
        Reserve Board, or other banking regulatory agency, and no report, proxy
        statement, registration statement or offering materials made or given to
        shareholders of the Company to be filed or disseminated after the date of
        this
        Agreement will contain any untrue statement of a material fact or will omit
        to
        state a material fact required to be stated therein or necessary to make
        the
        statements therein, in light of the circumstances under which they will be
        made,
        not misleading.  The Company’s Financial Statements are supported by
        and consistent with the general ledger and detailed trial balances of investment
        securities, loans and commitments, depositors’ accounts and cash balances on
        deposit with other institutions, copies of which have been made available
        to
        Parent.  The Company and its Subsidiaries have timely filed all
        reports and other documents required to be filed by them with the FDIC, the
        OCC,
        the Texas Department of Banking, and the Federal Reserve Board.

      

        
        (iii)           Each of
        the Company and each of its Subsidiaries maintains accurate books and records
        reflecting its assets and liabilities and maintains proper and adequate internal
        accounting controls, which provide assurance that (A) transactions are executed
        with management’s authorization; (B) transactions are recorded as necessary to
        permit preparation of the consolidated financial statements of the Company
        in
        accordance with GAAP and to maintain accountability for the Company’s
        consolidated assets; (C) access to the Company’s assets is permitted only in
        accordance with management’s authorization; (D) the reporting of the Company’s
        assets is compared with existing assets at regular intervals and (E) accounts,
        notes and other receivables and assets are recorded accurately, and proper
        and
        adequate procedures are implemented to effect the collection thereof on a
        current and timely basis.

      

        
        (iv)           Since
        January 1, 2005, neither the Company nor any Subsidiary nor any of their
        current
        directors or officers, nor to the Company’s Knowledge, any former officer or
        director or any current or former employee, auditor, accountant or
        representative of the Company or any Subsidiary has received or otherwise
        had or
        obtained Knowledge of any complaint, allegation, assertion or claim, whether
        written or oral, regarding a material weakness, significant

      
        
          
          

        

        
          9

          
            

          

        

        
          
          

        

      

      deficiency
        or other
        defect or failure in the accounting or auditing practices, procedures,
        methodologies or methods of the Company or any Subsidiary or their respective
        internal accounting controls.

      

        
        (v)           To the
        Company’s Knowledge, since January 1, 2005, there has not been (A) any
        significant deficiency in the design or operation of internal controls that
        could adversely affect the Company’s ability to record, process, summarize and
        report financial data or any material weaknesses in internal controls or
        (B) any
        fraud, whether or not material, that involves management or other employees
        who
        have a significant role in the Company’s internal controls.

      

        
        (vi)           None of
        the Company or any of its Subsidiaries has any Liabilities that are reasonably
        likely to have, individually or in the aggregate, a Material Adverse Effect
        on
        the Company and any of its Subsidiaries, taken as a whole, except Liabilities
        that are accrued or reserved against in the accounts set forth in the Company
        Latest Balance Sheet, included in the Company’s Financial Statements delivered
        prior to the date of this Agreement or reflected in the notes
        thereto.  None of the Company or its Subsidiaries has incurred or paid
        any Liability since December 31, 2006, except for such Liabilities incurred
        or
        paid (A) in the ordinary course of business consistent with past business
        practice and that are not reasonably likely to have, individually or in the
        aggregate, a Material Adverse Effect on the Company and its Subsidiaries,
        taken
        as a whole, or (B) in connection with the transactions contemplated by this
        Agreement.

      

      (e)           Absence
        of Certain Changes or Events.  Since December 31, 2006, except as
        disclosed in Section 3.3(e) of the Company Disclosure Letter, (i) the Company
        and each of its Subsidiaries have conducted their business only in the ordinary
        course, (ii) neither the Company nor any of its Subsidiaries has taken action
        that, if taken after the date of this Agreement, would constitute a breach
        of
        Section 4.1 or 4.2, and (iii) there have been no events, changes, or occurrences
        that have had, or are reasonably likely to have, individually or in the
        aggregate, a Material Adverse Effect on the Company and its Subsidiaries,
        taken
        as a whole.

      

      (f)           Tax
        Matters.

      

      (i)           All
        Taxes of the Company and each of its Subsidiaries that are or were due or
        payable (whether or not shown on any Tax Return) have been fully and timely
        paid.  The Company and each of its Subsidiaries have timely filed all
        Tax Returns in all jurisdictions in which Tax Returns are required to have
        been
        filed by them or on their behalf, and each such Tax Return is complete and
        accurate in all material respects.  Neither the Company nor any of its
        Subsidiaries is the beneficiary of any extension of time within which to
        file
        any Tax Return.  There have been no examinations or audits of any Tax
        Return by any Taxing Authority.  The Company and each of its
        Subsidiaries have made available to Parent true and correct copies of their
        United States federal and state income Tax Returns for each of the three
        most
        recent fiscal years ended on or before December 31, 2006.  No claim
        has ever been made by a Taxing Authority in a jurisdiction where the Company
        or
        any of its Subsidiaries does not file a Tax Return that the Company or any
        of
        its Subsidiaries may be subject to Taxes by that jurisdiction, and to the
        Company’s Knowledge, no basis for such a claim exists.

      

      (ii)           Neither
        the Company nor any of its Subsidiaries has received any notice of assessment
        or
        proposed assessment in connection with any Tax, and there is no threatened
        or
        pending dispute, action, suit, proceeding, claim, investigation, audit,
        examination, or other Litigation regarding any Tax of the Company, any of
        its
        Subsidiaries or the assets of the Company or any of its
        Subsidiaries.  No officer or employee responsible for Tax matters of
        the Company or any of its Subsidiaries expects any Taxing Authority to assess
        any additional Tax for

      
        
          
          

        

        
          10

          
            

          

        

        
          
          

        

      

      any
        period for
        which a Tax Return has been filed.  There are no agreements, waivers
        or other arrangements providing for an extension of time with respect to
        the
        assessment of any Tax or deficiency against the Company or any of its
        Subsidiaries, and neither the Company nor any of its Subsidiaries has waived
        or
        extended the applicable statute of limitations for the assessment or collection
        of any Tax or agreed to a Tax assessment or deficiency.  Neither the
        Company nor any of its Subsidiaries has received any notice of any contemplated
        or actual reassessment of any real property or any portion thereof for general
        real estate Tax purposes.

      

      (iii)           Neither
        the Company nor any of its Subsidiaries is a party to a Tax allocation, sharing,
        indemnification or similar agreement or any agreement pursuant to which it
        has
        any obligation to any Person with respect to Taxes, and neither the Company
        nor
        any of its Subsidiaries has been a member of an affiliated group filing a
        consolidated federal or state income Tax Return or any combined, affiliated
        or
        unitary group for any Tax purpose (other than the group of which it is currently
        a member), and neither the Company nor any of its Subsidiaries has any Tax
        liability under Treasury Regulation Section 1.1502-6 or any similar provision
        of
        Law, or as a transferee or successor, by contract or otherwise.

      

      (iv)           The
        proper and accurate amounts of Tax have been withheld by the Company and
        each of
        its Subsidiaries and timely paid to the appropriate Taxing Authority for
        all
        periods through the Effective Time in compliance with all Tax withholding
        provisions of all applicable federal, state, local and foreign Laws, rules
        and
        regulations, including Taxes required to have been withheld and paid in
        connection with amounts paid or owing to any employee or independent contractor,
        and Taxes required to be withheld and paid pursuant to Sections 1441, 1442
        and
        3406 of the Internal Revenue Code or similar provisions under state, local
        or
        foreign Law.

      

      (v)           Neither
        the Company nor any of its Subsidiaries has been a party to any distribution
        occurring during the five-year period ending on the date hereof in which
        the
        parties to such distribution treated the distribution as one to which Section
        355 of the Internal Revenue Code applied.  No Liens for Taxes exist
        with respect to any assets of the Company or any of its Subsidiaries, except
        for
        statutory Liens for Taxes not yet due and payable.

      

      (vi)           Neither
        the Company nor any of its Subsidiaries is a controlled foreign corporation
        within the meaning of the Internal Revenue Code.  The Company and each
        of its Subsidiaries has complied with all of the income inclusion and Tax
        reporting provisions of the U.S. anti-deferral Tax regimes, including the
        controlled foreign corporation, passive foreign investment company and foreign
        personal holding company regimes.

      

      (vii)           Neither
        the Company nor any of its Subsidiaries has made any payments, is obligated
        to
        make any payments, or is a party to any contract that could obligate it to
        make
        any payments that could be disallowed as a deduction under Section 280G or
        162(m) of the Internal Revenue Code or any comparable provision of state
        Tax
        Law.

      

      (viii)           Neither
        the Company nor any of its Subsidiaries is or has ever been a United States
        real
        property holding corporation within the meaning of Internal Revenue Code
        Section
        897(c) or any comparable provision of state Tax Law.  Neither the
        Company nor any of its Subsidiaries has been or will be required to include
        any
        adjustment in taxable income for any Tax period (or portion thereof) pursuant
        to
        Section 481 of the Internal Revenue Code or any comparable provision under
        state
        or foreign Tax Laws as a result of transactions or events occurring prior
        to the
        Effective Time.

      
        
          
          

        

        
          11

          
            

          

        

        
          
          

        

      

      

      (ix)           The
        Company and each of its Subsidiaries have disclosed on their respective Tax
        Returns any position taken for which substantial authority (within the meaning
        of Internal Revenue Code Section 6662(d)(2)(B)(i) or comparable provision
        of
        state Tax Law) did not exist at the time the return was
        filed.  Neither the Company nor any of its Subsidiaries has
        participated in any reportable transaction, as defined in Treasury Regulation
        Section 1.6011-4(b)(1) or any comparable provision of state Tax Law, or a
        transaction substantially similar to a reportable
        transaction.  Neither the Company nor any of its Subsidiaries is a
        party to any joint venture, partnership, or other arrangement or contract
        that
        could be treated as a partnership for federal income Tax purposes.

      

      (g)           Real
        Property.

      

      (i)  Section
        3.3(g)(i)
        of the Company Disclosure Letter contains a true and correct legal description
        of each parcel of Property owned by the Company or any of its Subsidiaries
        (the
“Owned Property”) and a summary description of all Facilities located
        thereon.  The Company and its Subsidiaries have good and marketable
        fee simple title to the Owned Property, free and clear of all Liens, other
        than
        Permitted Encumbrances.  To the Company’s Knowledge, the transactions
        contemplated herein will not cause a Default, or event of default under any
        of
        the Permitted Encumbrances.

      

      (ii)  Section
        3.3(g)(ii)
        of the Company Disclosure Letter describes all real property currently leased
        by
        the Company or any of its Subsidiaries (the “Leased Property”), the name
        of the lessor or sublessor, the lease term, the lease commencement date,
        the
        lease expiration date and the base annual rent (as well as any agreed upon
        prospective or other adjustments thereto).  The Company has provided
        to Parent a complete and accurate copy of each such lease, as
        amended.  All Leased Property, including the Facilities located
        thereon, is in good condition and repair, and is suitable for its use by
        the
        Company.  All leases of Leased Property are in good standing and are
        valid, binding and enforceable against the Company or its Subsidiaries, as
        the
        case may be, and to the Company’s Knowledge against the respective lessors, in
        accordance with their respective terms, and, there does not exist under any
        such
        lease of Leased Property any Default on the part of the Company or any of
        its
        Subsidiaries (or to the Company’s Knowledge, on the part of any lessor) or any
        event that, with notice or lapse of time or both, would constitute a
        Default.  To the Company’s Knowledge, the transactions contemplated
        herein will not cause a Default under any of the leases of Leased
        Property.

      

      (iii)  The
        Company and its
        Subsidiaries own each Owned Property and lease each Leased Property, in each
        case free and clear of any Liens, title defects,
        covenants,  reservations of interests in title, pending or threatened
        condemnations, planned public improvements, annexation, special assessments,
        zoning or subdivision changes, special assessments or fees or other material
        adverse claims (collectively, “Property Restrictions”), except for (A)
        Permitted Encumbrances, (ii) Property Restrictions imposed or promulgated
        by Law
        or by any Governmental Authority which are customary and typical for similar
        properties and (iii) Property Restrictions which do not materially interfere
        with the current use of the Property by the Company or its
        Subsidiaries.

      

      (iv)  The
        building
        systems and facilities at or servicing the Facilities or the Property,
        including, but not limited to, elevators, security systems, HVAC, utilities,
        electrical systems, plumbing and water systems, roofing, storm drainage,
        sewer
        systems, and telephone service (including any cellular or digital facilities)
        are, to the Company’s Knowledge, in good

      
        
          
          

        

        
          12

          
            

          

        

        
          
          

        

      

      (v)  condition
        and
        working order.  All Facilities on the Owned Property and the Leased
        Property conform in all material respects to all applicable state and local
        laws
        or use restrictions.

      

      (h)           Environmental
        Matters.

      

      (i)           The
        Company has delivered, or caused to be delivered to Parent, or provided Parent
        access to, true and complete copies of, all environmental site assessments,
        test
        results, analytical data, boring logs, and other environmental reports and
        studies held by the Company and each of its Subsidiaries relating to their
        respective Properties and Facilities.

      

      (ii)           The
        Company and each of its Subsidiaries and their respective Facilities and
        Properties are, and have been, in compliance with all Environmental Laws,
        except
        for violations that are not reasonably likely to have, individually or in
        the
        aggregate, a Material Adverse Effect, and there are no past or present events,
        conditions, circumstances, activities or plans related to the Properties
        or
        Facilities that did or would violate or prevent compliance or continued
        compliance with any of the Environmental Laws.

      

      (iii)           There
        is no Litigation pending or threatened before any Governmental Authority
        or
        other forum in which the Company or its Subsidiaries or any of their respective
        Properties or Facilities (including but not limited to properties and facilities
        that secure or secured loans made by the Company or its Subsidiaries and
        properties and facilities now or formerly held, directly or indirectly, in
        a
        fiduciary capacity by the Company or its Subsidiaries) has been or, with
        respect
        to threatened Litigation, may be named as a defendant (A) for alleged
        noncompliance (including by any predecessor) with or Liability under any
        Environmental Law or (B) relating to the release, discharge, spillage, or
        disposal into the environment of any Hazardous Material, whether or not
        occurring at, on, under, adjacent to, or affecting (or potentially affecting)
        any such Properties or Facilities.

      

      (iv)           During
        or prior to the period of (A) the Company’s or any of its Subsidiaries’
ownership or operation (including but not limited to ownership or operation,
        directly or indirectly, in a fiduciary capacity) of, or (B) the Company’s or any
        of its Subsidiaries’ participation in the management (including but not limited
        to such participation, directly or indirectly, in a fiduciary capacity) of
        any
        Property or Facility, there have been no releases, discharges, spillages,
        or
        disposals of Hazardous Material in, on, under, adjacent to, or affecting
        (or
        potentially affecting) such Properties or Facilities.

      

      (i)           Compliance
        with Permits, Laws and Orders.

      

        
        (i)           Each of the
        Company and its Subsidiaries has in effect all Permits and has made all filings,
        applications, and registrations with Governmental Authorities that are required
        for it to own, lease, or operate its material assets and to carry on its
        business as now conducted and there has occurred no Default under any Permit
        applicable to its business or employees conducting its respective
        business.

      

        
        (ii)           Neither
        the Company nor any of its Subsidiaries is in Default under any Laws or Orders
        applicable to its business or employees conducting its business.

      

        
        (iii)           Neither
        the Company nor any of its Subsidiaries has received any notification or
        communication from any Governmental Authority, (A) asserting that the Company
        or
        any of its Subsidiaries is in Default under any of the Permits, Laws or Orders,
        which such

      
        
          
          

        

        
          13

          
            

          

        

        
          
          

        

      

      Governmental
        Authority enforces, (B) threatening to revoke any Permits, (C) requiring
        or
        advising that it may require the Company or any of its Subsidiaries (x) to
        enter
        into or consent to the issuance of a cease and desist order, formal agreement,
        directive, commitment, or memorandum of understanding, or (y) to adopt any
        resolution of its Board of Directors or similar undertaking that restricts
        materially the conduct of its business or in any material manner relates
        to its
        management or (D) requiring or advising that it may prohibit or substantially
        delay the consummation of transactions of the sort contemplated by this
        Agreement.

      

              
         
(iv)           There (A)
        is no unresolved violation, criticism, or exception by any Governmental
        Authority with respect to any report or statement relating to any examinations
        or inspections of the Company or any of its Subsidiaries, (B) have been no
        formal or informal inquiries by, or disagreements or disputes with, any
        Governmental Authority with respect to the Company’s or any of its Subsidiaries’
businesses, operations, policies or procedures since January 1, 2005, and
        (C) is
        no pending or, to its Knowledge, threatened, nor has any Governmental Authority
        indicated an intention to conduct any, investigation or review of the Company
        or
        any of its Subsidiaries.

      

              
          
(v)           Neither the
        Company, nor any of its subsidiaries, nor any of their directors, officers,
        employees or Representatives acting on their behalf has offered, paid, or
        agreed
        to pay any Person, including any Government Authority, directly or indirectly,
        anything of value for the purpose of, or with the intent of obtaining or
        retaining any business in violation of applicable Laws, including (A) using
        any
        corporate funds for any unlawful contribution, gift, entertainment or other
        unlawful expense relating to political activity, (B) making any direct or
        indirect unlawful payment to any foreign or domestic government official
        or
        employee from corporate funds, (C) violating any provision of the Foreign
        Corrupt Practices Act of 1977, as amended, or (D) making any bribe, rebate,
        payoff, influence payment, kickback or other unlawful payment.

      

                 
        (vi)           Except as
        required by the Bank Secrecy Act, to the Company’s Knowledge, no employee of the
        Company or any of its Subsidiaries has provided or is providing information
        to
        any law enforcement agency regarding the commission or possible commission
        of
        any crime or the violation or possible violation of any applicable Law by
        the
        Company or any of its Subsidiaries or any employee thereof acting in such
        capacity.  Neither the Company nor any Subsidiary nor any officer,
        employee, contractor, subcontractor or agent of the Company or any Subsidiary
        has discharged, demoted, suspended, threatened, harassed or in any other
        manner
        discriminated against any employee of the Company or any of its Subsidiaries
        in
        the terms and conditions of employment because of any act of such employee
        described in 18 U.S.C. Section 1514A(a).

      
 

      (vii)           Since
        January 1, 2005, the Company and each of its Subsidiaries have filed all
        reports
        and statements, together with any amendments required to be made with respect
        thereto, that the Company and each of its Subsidiaries were required to file
        with any Governmental Authority and all other reports and statements required
        to
        be filed by the Company and each of its Subsidiaries since January 1, 2005,
        including any report or statement required to be filed pursuant to the Laws
        of
        the United States, any state or political subdivision, any foreign jurisdiction,
        or any other Governmental Authority have been so filed, and the Company and
        each
        of its Subsidiaries have paid all fees and assessments due and payable in
        connection therewith.

      

      (j)           Labor
        Relations.  Neither the Company nor any of its Subsidiaries is the
        subject of any Litigation asserting that the Company or any of its Subsidiaries
        has committed an unfair labor practice (within the meaning of the National
        Labor
        Relations Act or comparable state Law) or seeking to

      
        
          
          

        

        
          14

          
            

          

        

        
          
          

        

      

      compel
        the Company
        or any of its Subsidiaries to bargain with any labor organization as to wages
        or
        conditions of employment, nor is the Company or any of its Subsidiaries a
        party
        to or bound by any collective bargaining agreement, Contract, or other agreement
        or understanding with a labor union or labor organization, nor is there any
        strike or other labor dispute involving the Company or any of its Subsidiaries
        pending or, to the Company’s Knowledge, threatened, nor, to the Company’s
        Knowledge, is there any activity involving the Company or any of its
        Subsidiaries’ employees seeking to certify a collective bargaining unit or
        engaging in any other organization activity.

      

      (k)           Employee
        Benefit Plans.

      

        
        (i)           The Company
        has disclosed in Section 3.3(k)(i) of the Company Disclosure Letter, and
        has
        delivered or made available to Parent prior to the date of this Agreement,
        with
        respect to all of its Benefit Plans (including Benefit Plans maintained by
        the
        Bank), correct and complete copies of (A) the most recent plan documents
        (including all amendments thereto) of all Benefit Plans and other writings
        setting forth the terms of such Benefit Plans, (B) the most recent summary
        plan
        description, together with each summary of material modifications, and (C)
        written descriptions of plans for which a plan document or other writing
        is not
        required or available.  Neither the Company nor any of its
        Subsidiaries, nor any ERISA Affiliate has, or has at any time had, any
“obligation to contribute” (as defined in ERISA Section 4212) to a
“multiemployer plan” (as defined in ERISA Sections 4001(a)(3) and
        3(37)(A)).   Each “employee pension benefit plan,” as defined in
        Section 3(2) of ERISA, that was ever maintained by the Company or any of
        its
        Subsidiaries and that was intended to qualify under Section 401(a) of the
        Internal Revenue Code, is disclosed as such in Section 3.3(k)(i) of the Company
        Disclosure Letter.

      

        
        (ii)           The
        Company has delivered or made available to Parent prior to the date of this
        Agreement correct and complete copies of the following documents:  (A)
        all trust agreements or other funding arrangements for its Benefit Plans
        (including insurance Contracts), and all amendments thereto, (B) with respect
        to
        any such Benefit Plans or amendments, the most recent determination letters,
        and
        all material rulings, material opinion letters, material information letters,
        or
        material advisory opinions issued by the Internal Revenue Service, the United
        States Department of Labor, or the Pension Benefit Guaranty Corporation after
        December 31, 1996, (C) annual reports or returns, audited or unaudited financial
        statements, actuarial valuations and reports, and summary annual reports
        prepared for any Benefit Plans with respect to the most recent plan year,
        and
        (D) with respect to each Pension Plan, the most recent statement, whether
        or not
        audited, showing the fair market value of assets of such Pension Plan, and
        (E)
        the most recent summary plan descriptions and any material modifications
        thereto.

      

        
        (iii)           All of
        the Company’s and its Subsidiaries’ Benefit Plans are, and have at all times
        have been, in compliance with the applicable terms of ERISA, the Internal
        Revenue Code, and any other applicable Laws.  Each of the Company’s
        and its Subsidiaries’ ERISA Plans has received a favorable determination letter
        from the Internal Revenue Service and there are no circumstances that will
        or
        could reasonably result in revocation of any such favorable determination
        letter.  Each trust created under any of the Company’s or its
        Subsidiaries’ ERISA Plans has been determined to be exempt from Tax under
        Section 501(a) of the Internal Revenue Code and the Company is not aware
        of any
        circumstance that will or could reasonably result in revocation of such
        exemption.  With respect to each of the Company’s and its
        Subsidiaries’ Benefit Plans, to the Company’s Knowledge, no event has occurred
        that will or could reasonably give rise to a loss of any intended Tax
        consequences under the Internal Revenue Code or to any Tax under Section
        511 of
        the Internal Revenue Code that is reasonably likely, individually or in the
        aggregate, to have a Material Adverse Effect on the Company and its
        Subsidiaries, taken as a

      
        
          
          

        

        
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      whole.  There
        is no pending or, to the Company’s Knowledge, threatened Litigation relating to
        any Benefit Plans; there are no pending, or, to the Company’s Knowledge,
        threatened governmental audits or investigations with respect to any Benefit
        Plan; and there are no pending, or to the Company’s Knowledge, threatened,
        participant claims with respect to any Benefit Plan, other than claims for
        benefits I n the normal course of business.

      

        
        (iv)           Neither
        the Company nor any of its Subsidiaries has engaged in a transaction with
        respect to any of its Benefit Plans that, assuming the Taxable Period of
        such
        transaction expired as of the date of this Agreement or the Effective Time,
        would subject the Company or any of its Subsidiaries to a Tax or penalty
        imposed
        by either Section 4975 of the Internal Revenue Code or Section 502(i) of
        ERISA.  Neither the Company nor any administrator or fiduciary of any
        of the Company’s or its Subsidiaries’ Benefit Plans (or any agent of any of the
        foregoing) has engaged in any transaction, or acted or failed to act in any
        manner with respect to any of the Company’s or its Subsidiaries’ Benefit Plans
        that could subject the Company or any of its Subsidiaries to any direct or
        indirect Liability (by indemnity or otherwise) for breach of any fiduciary,
        co-fiduciary, or other duty under ERISA.  No oral or written
        representation or communication with respect to any aspect of any Benefit
        Plans
        of the Company or its Subsidiaries has been made to employees of the Company
        or
        any of its Subsidiaries that is not in conformity with the written or otherwise
        preexisting terms and provisions of such plans.

      

        
        (v)           Each of the
        Company’s and its Subsidiaries’ Pension Plans had, as of the date of its most
        recent actuarial valuation, assets measured at fair market value at least
        equal
        to its “current liability,” as that term is defined in Section 302(d)(7) of
        ERISA.  Since the date of the most recent actuarial valuation, no
        event has occurred that would be reasonably expected to adversely change
        any
        such funded status in a material way.  None of the Company’s or its
        Subsidiaries’ Pension Plans nor any “single-employer plan,” within the meaning
        of Section 4001(a)(15) of ERISA, currently maintained by the Company or any
        of
        its Subsidiaries, or the single-employer plan of any ERISA Affiliate has
        an
“accumulated funding deficiency” within the meaning of Section 412 of the
        Internal Revenue Code or Section 302 of ERISA.  All required
        contributions with respect to any of the Company or its Subsidiaries’ Pension
        Plans or any single-employer plan of any of the Company’s or its Subsidiaries’
ERISA Affiliates have been timely made and there is no Lien, nor is there
        expected to be a Lien, under Internal Revenue Code Section 412(n) or ERISA
        Section 302(f) or Tax under Internal Revenue Code Section
        4971.  Neither the Company nor any of its Subsidiaries has provided,
        or is required to provide, security to any of its Pension Plans or to any
        single-employer plan of any of its ERISA Affiliates pursuant to Section
        401(a)(29) of the Internal Revenue Code.  All premiums required to be
        paid under ERISA Section 4006 have been timely paid by the Company and its
        Subsidiaries.

      

        
        (vi)           No
        Liability under Title IV of ERISA has been or is expected to be incurred
        by the
        Company or any of its Subsidiaries with respect to any defined Benefit Plan
        currently or formerly maintained by any of them or by any of their ERISA
        Affiliates that has not been satisfied in full (other than Liability for
        Pension
        Benefit Guaranty Corporation premiums, which have been paid when
        due).

      

        
        (vii)           Neither
        the Company nor any of its Subsidiaries has any obligations for retiree health
        and retiree life benefits under any of its Benefit Plans other than with
        respect
        to benefit coverage mandated by applicable Law.

      

        
        (viii)           Except
        as set forth in Section 3.3(k)(viii) of the Company Disclosure Letter, no
        written, or, to the Company’s Knowledge, oral representation or communication
        with

      
        
          
          

        

        
          16

          
            

          

        

        
          
          

        

      

      respect
        to any
        aspect of a Benefit Plan has been made to any employee that is not in accordance
        with the written or otherwise pre-existing terms and provisions of such
        plans.

      

        
        (ix)           Except as
        set forth in Section 3.3(k)(ix) of the Company Disclosure Letter, the
        consummation of the transactions contemplated by this Agreement will not
        (or
        will not upon termination of employment within a fixed period of time following
        such consummation) (A) entitle any employee, director or consultant to severance
        pay, unemployment compensation or any other payment, or (B) accelerate the
        time
        of payment or vesting or increase the amount of payment with respect to any
        compensation due to any employee, director or consultant.

      

      (l)           Material
        Contracts.

      

        
        (i)           Except for
        Contracts listed in Section 3.3(l)(i) of the Company Disclosure Letter, as
        of
        the date of this Agreement, neither the Company nor any of its Subsidiaries,
        nor
        any of their respective assets, businesses, or operations is a party to,
        or is
        bound or affected by, or receives benefits under, (A) any employment, severance,
        termination, consulting, or retirement Contract, (B) any Contract relating
        to
        the borrowing of money by the Company or any of its Subsidiaries or the
        guarantee by the Company or any of its Subsidiaries of any such obligation
        (other than Contracts evidencing deposit liabilities, purchases of federal
        funds, fully-secured repurchase agreements, and Federal Home Loan Bank advances
        of the Bank or Contracts pertaining to trade payables incurred in the ordinary
        course of business), (C) any Contract containing covenants that limit the
        ability of the Company or any of its Subsidiaries to engage in any line of
        business or to compete in any line of business or with any Person, or that
        involve any restriction of the geographic area in which, or method by which,
        the
        Company or any of its Subsidiaries or Affiliates may carry on their respective
        businesses (other than as may be required by Law or any Governmental Authority),
        (D) any Contract or series of related Contracts for the purchase of materials,
        supplies, goods, services, equipment or other assets that (x) provides for
        or is
        reasonably likely to require annual payments by the Company or any of its
        Subsidiaries of $25,000 or more or (y) have a term exceeding 12 months in
        duration (except those entered into in the ordinary course of business with
        respect to loans, lines of credit, letters of credit, depositor agreements,
        certificates of deposit and similar routine banking activities and equipment
        maintenance agreements that are not material), (E) any Contract between or
        among
        the Company or any of its Subsidiaries, (F) any Contract involving Intellectual
        Property (excluding generally commercially available “off the shelf” software
        programs licensed pursuant to “shrink wrap” or “click and accept” licenses), (G)
        any Contract relating to the provision of data processing, network
        communications or other technical services to or by the Company or any of
        its
        Subsidiaries, (H) any Contract adversely affecting or otherwise restricting
        the
        Company’s use of, ownership of or leasehold interest in any of the Owned
        Property or Leased Property or (I) any other Contract or amendment thereto
        that
        would be required to be filed as an exhibit to a Form 10-K or Form 10-Q report
        under Items 601(b)(4) and 601(b)(10) of Regulation S-K of SEC Rules and
        Regulations if the Company were a SEC reporting company.  All
        indebtedness for money borrowed of the Company or its Subsidiaries is prepayable
        without penalty or premium.

      

        
        (ii)           All
        interest rate swaps, caps, floors, option agreements, futures and forward
        contracts, and other similar risk management arrangements, whether entered
        into
        for the Company’s own account or for the account of one or more of its
        Subsidiaries or their respective customers, were entered into (A) in accordance
        with prudent business practices and all applicable Laws and (B) with
        counterparties believed to be financially responsible, and each of them is
        enforceable in accordance with its terms (except in all cases as such
        enforceability may be limited by applicable bankruptcy, insolvency,
        reorganization, receivership, conservatorship, moratorium, or similar Laws
        affecting the enforcement of creditors’ rights generally and except that
        the

      
        
          
          

        

        
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      availability
        of the
        equitable remedy of specific performance or injunctive relief is subject
        to the
        discretion of the court before which any proceeding may be brought), and
        is in
        full force and effect.  Neither the Company nor any of its
        Subsidiaries, nor to the Company’s Knowledge, any other party thereto, is in
        breach of any of its obligations under any such agreement or
        arrangement.  The Company’s Financial Statements disclose the value of
        such agreements and arrangements on a mark-to-market basis in accordance
        with
        GAAP and, since January 1, 2005, there has not been a change in such value
        that,
        individually or in the aggregate, has resulted in a Material Adverse Effect
        on
        the Company and its Subsidiaries, taken as a whole.

      

      (m)           Legal
        Proceedings.  There is no Litigation pending or, to the Company’s
        Knowledge, threatened against the Company or any of its Subsidiaries or the
        Company’s or any of its Subsidiaries’ assets, interests, or rights, nor are
        there any Orders of any Governmental Authority or arbitrators outstanding
        against the Company or any of its Subsidiaries, nor do any facts or
        circumstances exist that would be likely to form the basis for any material
        claim against the Company or its Subsidiaries.  There is no
        Litigation, pending or, to the Company’s Knowledge, threatened, against any
        officer, director, advisory director or employee of the Company its
        Subsidiaries, in each case by reason of any person being or having been an
        officer, director, advisory director or employee of the Company or its
        Subsidiaries.

      

      (n)           Intellectual
        Property.

      

        
        (i)           The Company
        and each of its Subsidiaries own, or are licensed or otherwise possess legally
        enforceable and unencumbered rights to use, all Intellectual Property (including
        the Technology Systems) that is used by the Company or its Subsidiaries in
        the Company’s or its Subsidiaries’ businesses.  Neither the Company
        nor any of its Subsidiaries has (A) licensed to any Person in source code
        form
        any Intellectual Property owned by the Company or any of its Subsidiaries
        or (B)
        entered into any exclusive agreements relating to Intellectual Property owned
        by
        the Company or its Subsidiaries.

      

        
        (ii)           Section
        3.3(n)(ii) of the Company Disclosure Letter lists all patents and patent
        applications, all registered and unregistered trademarks and applications
        therefor, trade names and service marks, registered copyrights and applications
        therefor, domain names, web sites, and mask works owned by or exclusively
        licensed to the Company or its Subsidiaries included in its Intellectual
        Property, including the jurisdictions in which each such Intellectual Property
        right has been issued or registered or in which any application for such
        issuance and registration has been filed.  No royalties or other
        continuing payment obligations are due in respect of any third-party patents,
        trademarks or copyrights, including software.

      

        
        (iii)           All
        patents, registered trademarks, service marks and copyrights held by the
        Company
        and its Subsidiaries are valid and subsisting.  Since January 1, 2005,
        neither the Company nor any of its Subsidiaries (A) has, to the Company’s
        Knowledge, been sued in any Litigation that involves a claim of infringement
        of
        any patents, trademarks, service marks, copyrights or violation of any trade
        secret or other proprietary right of any third party or (B) has brought any
        Litigation for infringement of its Intellectual Property or breach of any
        license or other Contract involving its Intellectual Property against any
        third
        party.

      

                            (o)           Loan
        and Investment Portfolios.  All loans, discounts and financing
        leases in which the Company or any of its Subsidiaries is a lessor reflected
        on
        the Company Latest Balance Sheet were as of the date hereof, and with respect
        to
        the consolidated balance sheets delivered as of the dates subsequent to the
        execution of this Agreement will be as of the dates thereof, (i) at the time
        and
        under the circumstances in which made, made for good, valuable and adequate
        consideration in the ordinary course

      
        
          
          

        

        
          18

          
            

          

        

        
          
          

        

      

      of
        business of the
        Company and its Subsidiaries and are the legal, valid and binding obligations
        of
        the obligors thereof, (ii) evidenced by genuine notes, agreements or other
        evidences of indebtedness and (iii) to the extent secured, have been secured,
        to
        the Company’s Knowledge, by valid Liens that have been
        perfected.  Accurate lists of all loans, discounts and financing
        leases as of December 31, 2006, and on a monthly basis thereafter, and of
        the
        investment portfolios of the Company and each of its Subsidiaries as of such
        date, have been and will be delivered to Parent concurrently with the Company
        Disclosure Letter.  Except as specifically set forth on Section 3.3(n)
        of the Company Disclosure Letter, neither the Company nor any of its
        Subsidiaries is a party to any written or oral loan agreement, note or borrowing
        arrangement, including any loan guaranty, that was, as of the most recent
        month-end prior to the date of this Agreement (i) delinquent by more than
        30
        days in the payment of principal or interest, (ii) to the Company’s Knowledge,
        otherwise in material default for more than 30 days, (iii) classified as
        “substandard,” “doubtful,” “loss,” “other assets especially mentioned” or any
        comparable classification by the Company or any of its Subsidiaries or any
        Regulatory Authority having jurisdiction over the Company or any of its
        Subsidiaries, (iv) an obligation of any director, executive officer or 10%
        shareholder of the Company or any of its Subsidiaries who is subject to
        Regulation O of the Federal Reserve Board (12 C.F.R. Part 215), or any Person
        controlling, controlled by or under common control with any of the foregoing,
        or
        (v) in violation of any Law.

      

                            (p)           Adequacy
        of Allowances for Losses.  Each of the allowances for losses on
        loans, financing leases and other real estate included on the Company Latest
        Balance Sheet (along with any subsequent balance sheet required to be delivered
        hereunder) is, and with respect to the consolidated balance sheets delivered
        as
        of the dates subsequent to the execution of this Agreement will be as of
        the
        dates thereof, adequate in accordance with the policies of the Company,
        applicable regulatory guidelines, and GAAP, and, to the Company’s Knowledge,
        there are no facts or circumstances that are likely to require in accordance
        with applicable regulatory guidelines or GAAP a future material increase
        in any
        such provisions for losses or a material decrease in any of the allowances
        therefor.  Each of the allowances for losses on loans, financing
        leases and other real estate reflected on the books of the Company and its
        Subsidiaries at all times from and after the date of the Company Latest Balance
        Sheet is, and will be, adequate in accordance with the policies of the Company,
        applicable regulatory guidelines and GAAP, and, to the Company’s Knowledge,
        there are no facts or circumstances that are likely to require, in accordance
        with applicable regulatory guidelines or GAAP, a future material increase
        in any
        of such provisions for losses or a material decrease in any of the allowances
        therefor.

      

      (q)           Bank
        Secrecy Act; Money
        Laundering.                                                                           Neither
        the Company nor any of its Subsidiaries has any reason to believe that any
        facts
        or circumstances exist, which would cause the Company or any of its Subsidiaries
        to be deemed to be operating in violation in any material respect of the
        Bank
        Secrecy Act, the Uniting and Strengthening America by Providing Appropriate
        Tools Required to Interrupt and Obstruct Terrorism (USA Patriot Act), the
        Bank
        Protection Act, Financial Crimes Enforcement Network, any order or requirement
        issued with respect to anti-money laundering by the U.S. Department of the
        Treasury’s Office of Foreign Assets Control or any other applicable anti-money
        laundering Law.

      

                            (r)           Community
        Reinvestment Act.  The Bank has complied in all material respects
        with the provisions of the Community Reinvestment Act (“CRA”) and the
        rules and regulations thereunder, has, and at all times has had, a CRA rating
        of
        not less than “satisfactory,” has received no material criticism from regulators
        with respect to discriminatory lending practices, and the Company has no
        Knowledge of any conditions or circumstances that are likely to result in
        a CRA
        rating of less than “satisfactory” or material criticism from regulators with
        respect to discriminatory lending practices.

      
        
          
          

        

        
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                            (s)           Privacy
        of Customer Information.

      

        
        (i)           The Company
        and its Subsidiaries, as applicable, are the sole owners of all individually
        identifiable personal information (“IIPI”) relating to customers, former
        customers and prospective customers.  For purposes of this Section
        3.3(s), “IIPI” means any information relating to an identified or identifiable
        natural person.

      

        
        (ii)           The
        Company’s and its Subsidiaries’ collection and use of such IIPI, the transfer of
        IIPI to the Company or any of its Subsidiaries, and the use of such IIPI
        by
        Parent or any of its Affiliates after the consummation of the Merger complies
        or
        will comply with all applicable privacy policies, the Fair Credit Reporting
        Act,
        the Gramm-Leach-Bliley Act and all other applicable state, federal and foreign
        privacy Laws, and any contract or industry standard relating to
        privacy.

      

                            (t)           Technology
        Systems.

      

        
        (i)           No action
        will be necessary as a result of the transactions contemplated by this Agreement
        to enable use of the Technology Systems to continue by the Company and its
        Subsidiaries to the same extent and in the same manner that it has been used
        by
        the Company and its Subsidiaries prior to the Effective Time.

      

        
        (ii)           The
        Technology Systems (for a period of 18 months prior to the Effective Time)
        have
        not suffered any material unplanned disruption.  Except for ongoing
        payments due under Contracts with third parties, the Technology Systems are
        free
        from any Liens.  Access to business-critical parts of the Technology
        Systems is not shared with any third party.

      

        
        (iii)           Neither
        the Company nor any of its Subsidiaries has received notice of or is aware
        of
        any circumstances, including the execution of this Agreement, that would
        enable
        any third party to terminate, or increase or accelerate payment of amounts
        due
        under any of the Company’s or any of its Subsidiaries’ agreements or
        arrangements relating to the Technology Systems (including maintenance and
        support).

      

      (u)           Insurance
        Policies.  Each of the Company and its Subsidiaries maintains in
        full force and effect insurance policies and bonds in such amounts and against
        such liabilities and hazards of the types and amounts as (i) it reasonably
        believes to be adequate for its business and operations and the value of
        its
        properties and (ii) are comparable to those maintained by other banking
        organizations of similar size and complexity.  A complete and accurate
        list of all such insurance policies is attached as Section 3.3(u) of the
        Company
        Disclosure Letter.  Neither the Company nor any of its Subsidiaries is
        now liable for, nor has any such member received notice of, any material
        retroactive premium adjustment.  All policies are valid and
        enforceable and in full force and effect, and neither the Company nor any
        of its
        Subsidiaries has received any notice of a material premium increase or
        cancellation with respect to any of its insurance policies or
        bonds.  Within the last three years, neither the Company nor any of
        its Subsidiaries has been refused any basic insurance coverage sought or
        applied
        for (other than certain exclusions for coverage of certain events or
        circumstances as stated in such policies), and the Company does not have
        any
        reason to believe that the Company’s and its Subsidiaries’ existing insurance
        coverage cannot be renewed as and when the same shall expire, upon terms
        and
        conditions standard in the market at the time renewal is sought as favorable
        as
        those presently in effect.

      
        
          
          

        

        
          20

          
            

          

        

        
          
          

        

      

      

      (v)           Corporate
        Documents.  The Company has delivered to Parent, with respect to
        the Company and each of its Subsidiaries, true and correct copies of their
        Organizational Documents, and the charters of each of the committees of their
        respective Boards of Directors, all as amended and currently in effect, all
        of
        the corporate minutes and stock transfer records, all of which are listed
        in
        Section 3.3(v) of the Company Disclosure Letter.  All of the
        foregoing, and any such documents made available to Parent after the date
        hereof, are current, complete and correct in all material respects.

      

      (w)           State
        Takeover Laws.  The Company has taken all action required to be
        taken by it in order to exempt this Agreement and the transactions contemplated
        hereby from, and this Agreement and the transactions contemplated hereby
        are
        exempt from, the requirements of any “moratorium,” “control share,” “fair
        price,” “affiliate transaction,” “anti-greenmail,” “business combination” or
        other anti-takeover Laws of any jurisdiction, including Part 13 of the TBCA
        (collectively, “Takeover Laws”).  The Company has taken all
        action required to be taken by it in order to make this Agreement and the
        transactions contemplated hereby comply with, and this Agreement and the
        transactions contemplated hereby do comply with, the requirements of any
        provisions of its Organizational Documents concerning “business combination,”
“fair price,” “voting requirement,” “constituency requirement” or other related
        provisions.

      

      (x)           Certain
        Actions.  Neither the Company nor any of its Subsidiaries or
        Affiliates has taken or agreed to take any action, and the Company has no
        Knowledge of any fact or circumstance, that is reasonably likely to materially
        impede or delay receipt of any required Regulatory Consents.  To the
        Company’s Knowledge, there exists no fact, circumstance or reason that would
        cause any Regulatory Consent or other required Consent not to be received
        in a
        timely manner.

      

      (y)           Brokers
        and Finders.  Except for Hovde Financial, Inc., neither the
        Company nor any of its Subsidiaries, nor any of their respective directors,
        officers, employees or Representatives, has employed any broker or finder
        or
        incurred any Liability for any financial advisory fees, investment bankers’
fees, brokerage fees, commissions, or finders’ fees in connection with this
        Agreement or the transactions contemplated hereby.

      

      (z)           Fairness
        Opinion.  Prior to the execution of this Agreement,
        the Company has received an opinion of Hovde Financial, Inc. to the effect
        that
        as of the date thereof and based upon and subject to the matters set forth
        therein, the Merger Consideration is fair, from a financial point of view,
        to
        the shareholders of the Company and a signed copy of the opinion has been
        delivered to Parent.  Such opinion has not been amended or rescinded
        as of the date of this Agreement.

      

      (aa)           Accuracy
        of Statements.  No warranty or representation made or to be made
        by the Company in this Agreement or in any document furnished or to be furnished
        by the Company pursuant to this Agreement contains or will contain, as of
        the
        date of this Agreement and the Closing Date, an untrue statement of a material
        fact or an omission of a material fact necessary to make the statements
        contained herein and therein, in light of the circumstances in which they
        are
        made, not misleading.

      

      3.4  Representations
        and Warranties of Parent.  Subject to
        and giving effect to Section 3.2, Parent and Merger Sub, jointly and severally,
        hereby represent and warrant to the Company as follows:

      

      (a)           Organization,
        Standing, and Power.  Each of Parent and Merger Sub is duly
        organized, validly existing, and in good standing under the Laws of the State
        of
        Texas.  Parent is a bank holding company within the meaning of the BHC
        Act.

      
        
          
          

        

        
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      (b)           Authority;
        No Breach of Agreement.

      

        
        (i)           Parent and
        Merger Sub each have the corporate power and authority necessary to execute,
        deliver, and perform their obligations under this Agreement and to consummate
        the transactions contemplated hereby.  The execution, delivery, and
        performance of this Agreement, and the consummation of the transactions
        contemplated hereby have been duly and validly authorized by all necessary
        corporate action (including valid authorization and adoption of this Agreement
        by the duly constituted Board of Directors of each of Parent and Merger
        Sub).  Assuming due authorization, execution, and delivery of this
        Agreement by the Company, this Agreement represents a legal, valid, and binding
        obligation of each of Parent and Merger Sub, enforceable against each of
        Parent
        and Merger Sub in accordance with its terms (except in all cases as such
        enforceability may be limited by (A) bankruptcy, insolvency, reorganization,
        moratorium, receivership, conservatorship, and other laws now or hereafter
        in
        effect relating to or affecting the enforcement of creditors’ rights generally
        or the rights of creditors of insured depository institutions, (B) general
        equitable principles and (C) laws relating to the safety and soundness of
        insured depository institutions, and except that no representation is made
        as to
        the effect or availability of equitable remedies or injunctive relief
        (regardless of whether such enforceability is considered in a proceeding
        in
        equity or at law) and except that the availability of the equitable remedy
        of
        specific performance or injunctive relief is subject to the discretion of
        the
        court before which any proceeding may be brought).

      

        
        (ii)           Neither
        the execution and delivery of this Agreement by Parent or Merger Sub, nor
        the
        consummation by either of them of the transactions contemplated hereby, nor
        compliance by them with any of the provisions hereof, will (A) conflict with
        or
        result in a breach of any provision of their respective Organizational
        Documents, or (B) constitute or result in a Default under, or require any
        Consent pursuant to, or result in the creation of any Lien on any material
        asset
        under, any Contract or Permit, or (C) subject to receipt of the Required
        Consents and the expiration of any waiting period required by Law, violate
        any
        Law or Order applicable to Parent or Merger Sub or any of their respective
        material assets.

      

      (c)           Legal
        Proceedings.  There is no Litigation that would be required to be
        disclosed in a Form 10-K or Form 10-Q pursuant to Item 103 of Regulation
        S-K of
        SEC Rules and Regulations that are not so disclosed, pending or, to Parent’s
        Knowledge, threatened against Parent, or against any asset, interest, or
        right
        of Parent, nor are there any Orders of any Governmental Authority or arbitrators
        outstanding against Parent.

      

      (d)           Certain
        Actions.  Neither Parent nor any of its Subsidiaries or Affiliates
        has taken or agreed to take any action, and Parent has no Knowledge of any
        fact
        or circumstance, that is reasonably likely to materially impede or delay
        receipt
        of any required Regulatory Consents.  To Parent’s Knowledge, there
        exists no fact, circumstance or reason that would cause any Regulatory Consent
        or other required Consent not to be received in a timely manner.

      

      (e)           Brokers
        and Finders.  Neither Parent nor any of its Subsidiaries, nor any
        of their respective directors, officers, employees or Representatives, has
        employed any broker or finder or incurred any Liability for any financial
        advisory fees, investment bankers’ fees, brokerage fees, commissions, or
        finders’ fees in connection with this Agreement or the transactions contemplated
        hereby.

      

      (f)           Accuracy
        of Statements.  No warranty or representation made or to be made
        by Parent in this Agreement or in any document furnished or to be furnished
        by
        Parent pursuant to this Agreement contains or will contain, as of the date
        of
        this Agreement and the Closing Date, an untrue

      
        
          
          

        

        
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      statement
        of a
        material fact or an omission of a material fact necessary to make the statements
        contained herein and therein, in light of the circumstances in which they
        are
        made, not misleading.

      

      ARTICLE
        4

      COVENANTS
        AND ADDITIONAL AGREEMENTS OF THE PARTIES

      

      4.1  Conduct
        of Business Prior to Effective
        Time.  During the period from the date
        of this Agreement until the earlier of the termination of this Agreement
        pursuant to Article 6 or the Effective Time, except as expressly contemplated
        or
        permitted by this Agreement, the Company shall and shall cause each of its
        Subsidiaries to (a) conduct its respective business in the ordinary course,
        (b)
        use reasonable best efforts to maintain and preserve intact its respective
        business organization, employees and advantageous business relationships,
        (c)
        maintain its respective books, accounts and records in the usual manner on
        a
        basis consistent with that heretofore employed and (d) take no action that
        would
        adversely affect or delay the satisfaction of the conditions set forth in
        Section 5.1(a) or 5.1(b) or the ability of either Party to perform its covenants
        and agreements under this Agreement or to consummate the transactions
        contemplated hereby.

      

      4.2  Forbearances.  During
        the period from the date of this Agreement until the earlier of the termination
        of this Agreement pursuant to Article 6 or the Effective Time, except as
        expressly contemplated or permitted by this Agreement or as otherwise indicated
        in this Section 4.2, the Company shall not, without the prior written consent
        of
        the chief executive officer or chief financial officer of Parent (which consent
        shall not be unreasonably withheld or delayed):

      

      (a)           amend
        the Company’s or its Subsidiaries’ Organizational Documents or any resolution or
        agreement concerning indemnification of their respective directors or
        officers;

      

      (b)           except
        for Permitted Issuances and except as provided in Section 4.3, (i) adjust,
        split, combine, subdivide or reclassify any capital stock, (ii) make, declare,
        set aside or pay any dividend or make any other distribution on, or directly
        or
        indirectly redeem, purchase or otherwise acquire, any shares of its capital
        stock or any securities or obligations convertible (whether currently
        convertible or convertible only after the passage of time or the occurrence
        of
        certain events) into or exchangeable for any shares of Company Capital Stock
        or
        capital stock of any of its Subsidiaries, (iii) grant any Company Options
        or
        other Rights, (iv) issue, sell, pledge, dispose of, grant, transfer, lease,
        license, guarantee, encumber, or authorize the issuance, sale, pledge,
        disposition, grant, transfer, lease, license, guarantee or encumbrance of,
        any
        shares of Company Capital Stock or capital stock of any of Company’s
        Subsidiaries, or (v) make any change in any instrument or Contract governing
        the
        terms of any of Company’s or its Subsidiaries’ securities;

      

      (c)           other
        than in the ordinary course of business or pursuant to Contracts in force
        at the
        date of, or permitted by, this Agreement, make any investment (either by
        purchase of stock or securities, contributions to capital, property transfers,
        or purchase of any property or assets) in any other Person;

      

      (d)           charge
        off (except as may otherwise be required by law or by regulatory authorities
        or
        by GAAP) or sell (except in the ordinary course of business consistent with
        past
        practices) any of its portfolio of loans, discounts or financing leases,
        or sell
        any asset held as other real estate or other foreclosed assets for an amount
        materially less than 100% of its book value;

      
        
          
          

        

        
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      (e)           terminate
        or allow to be terminated any of the policies of insurance the Company and
        its
        Subsidiaries maintain on their respective businesses or Properties, cancel
        any
        material indebtedness owing to the Company or its Subsidiaries or any claims
        that the Company or its Subsidiaries may have possessed, or waive any right
        of
        substantial value or discharge or satisfy any material noncurrent
        liability;

      

      (f)           enter
        into any new line of business, or change the Company’s or its Subsidiaries’
lending, investment, underwriting, risk and asset liability management, loan
        loss reserve and other banking and operating policies, except as required
        by
        applicable Laws or any policies imposed on it by any Governmental
        Authority;

      

      (g)           except
        in the ordinary course of business consistent with past practices: (i) lend
        any
        money or pledge any of the Company’s or its Subsidiaries’ credit in connection
        with any aspect of the Company’s or its Subsidiaries’ businesses whether as a
        guarantor, surety, issuer of a letter of credit or otherwise, (ii) mortgage
        or
        otherwise subject to any lien, encumbrance or other liability any of the
        Company’s or its Subsidiaries’ assets, (iii) sell, assign or transfer any of its
        assets in excess of $25,000 in the aggregate or (iv) incur any material
        liability, commitment, indebtedness or obligation (of any kind whatsoever,
        whether absolute or contingent), or cancel, release or assign any indebtedness
        of any Person or any claims against any Person, except (A) in the ordinary
        course of business or (B) pursuant to Contracts in force as of the date of
        this
        Agreement and disclosed in Section 4.2(g) of the Company Disclosure Letter
        or
        transfer, agree to transfer or grant, or agree to grant a license to, any
        of the
        Company’s or its Subsidiaries’ material Intellectual Property;

      

      (h)           other
        than in the ordinary course of business, incur any indebtedness for borrowed
        money other than short-term indebtedness incurred to refinance short-term
        indebtedness (it being understood that for purposes of this Section 4.2(h),
        “short-term” shall mean maturities of six months or less); assume, guarantee,
        endorse or otherwise as an accommodation become responsible for the obligations
        of any Person;

      

      (i)           other
        than in consultation with Parent, restructure or change its investment
        securities portfolio or its gap position, through purchases, sales or otherwise,
        or the manner in which the portfolio is classified or reported except in
        the
        ordinary course, consistent with past practices;

      

      (j)           enter
        into any Contract other than renewals of Contracts of terms for less than
        one
        year and without any other materially adverse change in terms and, other
        than in
        the ordinary course of business, terminate or waive any material provision
        of
        any Contract other than normal nonrenewals of Contracts in accordance with
        their
        terms;

      

      (k)           other
        than in the ordinary course of business or as required by Benefit Plans and
        Contracts as in effect at the date of this Agreement, (i) increase in any
        manner
        the compensation or fringe benefits of any of the Company’s or its Subsidiaries’
officers, employees or directors, (ii) pay any pension or retirement allowance
        not required by any existing Benefit Plan or Contract to any such officers,
        employees or directors, (iii) become a party to, amend or commit to any Benefit
        Plan or Contract (or any individual Contracts evidencing grants or awards
        thereunder) or employment agreement with or for the benefit of any such officer,
        employee or director, or (iv) accelerate the vesting of, or the lapsing of
        restrictions with respect to, Rights pursuant to any Company Stock
        Plan;

      

      (l)           settle
        any material Litigation;

      
        
          
          

        

        
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      (m)           revalue
        any of the Company’s or any of its Subsidiaries’ assets or materially change any
        method of accounting or accounting practice used by it or any of its
        Subsidiaries, other than changes required by GAAP;

      

      (n)           file
        or amend any Tax Return except in the ordinary course of business; settle
        or
        compromise any material Tax Liability; or make, change or revoke any material
        Tax election or change any method of Tax accounting, except as required by
        applicable Law;

      

      (o)           knowingly
        take, or knowingly omit to take, any action that is reasonably likely to
        result
        in any of the conditions to the Merger set forth in Article 5 not being
        satisfied, except as may be required by applicable Law;

      

      (p)           merge
        or consolidate the Company or any of its Subsidiaries with, or sell or otherwise
        transfer the issued and outstanding stock of the Company or any of its
        Subsidiaries to, any Person;

      

      (q)           acquire
        assets outside of the ordinary course of business not consistent with past
        practices from any other Person with a value or purchase price in the aggregate
        in excess of $50,000, other than purchase obligations pursuant to Contracts
        to
        the extent in effect immediately prior to the execution of this Agreement
        and
        described in Section 4.2(q) of the Company Disclosure Letter;

      

      (r)           make
        any adverse changes in the mix, rates, terms or maturities of the Bank’s
        deposits or other Liabilities;

      

      (s)           make
        any extension of credit that, when added to all other extensions of credit
        to a
        borrower and its affiliates, would exceed applicable regulatory lending
        limits;

      

      (t)           make
        any loans, or enter into any commitments to make loans, which vary other
        than in
        immaterial respects from its written loan policies, a true and correct copy
        of
        which policies has been provided to Parent; provided, that this
        covenant shall not prohibit the Bank from extending or renewing credit or
        loans
        in the ordinary course of business consistent with past lending practices
        or in
        connection with the workout or renegotiation of loans currently in its loan
        portfolio; provided further, that the Company will allow a
        representative of Parent to be present for informational purposes only at
        all
        meetings of the Board of Directors or any committee of the Bank at which
        the
        Board of Directors or any committee thereof will vote on proposed new or
        renewal
        loans or investments and such Parent representative shall not take part in
        discussions or voting on any matters presented at such meetings (in furtherance
        of which, the Company has, concurrently with the execution of this Agreement,
        provided to Parent a calendar of such board or committee meetings of the
        Bank,
        and will promptly provide to Parent any updates to such calendar after the
        date
        hereof);

      

      (u)           take
        any action that at the time of taking such action is reasonably likely to
        prevent, or would be reasonably likely to interfere with, the consummation
        of
        the Merger; or

      

      (v)           enter
        into any agreement or commitment to take any of the actions prohibited by
        this
        Section 4.2.

      

      4.3  State
        Filing.  Upon the terms and subject to
        the conditions of this Agreement and prior to or in connection with the Closing,
        the Company and Merger Sub shall execute and cause to be filed the Articles
        of
        Merger with the Secretary of State of the State of Texas.

      
        
          
          

        

        
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      4.4  Company
        Shareholder Approval.  The Company shall
        call a meeting of its shareholders to be held as soon as reasonably practicable
        for the purpose of obtaining the Company Shareholder Approval and such other
        matters as the Board of Directors of the Company may direct, and shall use
        its
        reasonable best efforts to cause such meeting to occur as soon as reasonably
        practicable.  Parent shall be entitled to have a representative attend
        such meeting of shareholders.  The Board of Directors of the Company
        shall make the Company Directors’ Recommendation to its shareholders and the
        Company Directors’ Recommendation shall be included in any proxy statement or
        other communication delivered to the Company’s shareholders in connection with
        such meeting.

      

      4.5  Reasonable
        Best Efforts.

      

      (a)           Subject
        to the terms and conditions of this Agreement, the Parties will use all
        reasonable best efforts to take, or cause to be taken, in good faith, all
        actions, and to do, or cause to be done, all things necessary, proper or
        desirable, or advisable under applicable Laws, including using its reasonable
        best efforts to lift or rescind any Order adversely affecting its ability
        to
        consummate the transactions contemplated hereby and to cause to be satisfied
        the
        conditions in Article 5, to permit consummation of the Merger as promptly
        as
        practicable and otherwise to enable consummation of the transactions
        contemplated hereby, and each will cooperate fully with and furnish information
        to, the other Party to that end, and obtain all consents of, and give all
        notices to and make all filings with, all Governmental Authorities and other
        third parties that may be or become necessary for the performance of its
        obligations under this Agreement and the consummation of the transactions
        contemplated hereby; provided, that nothing contained herein shall
        preclude any Party from exercising its rights under this Agreement.

      

      (b)           The
        Parties shall consult with respect to the character, amount and timing of
        restructuring charges to be taken by each of them in connection with the
        transactions contemplated hereby and shall take such charges in accordance
        with
        GAAP, as the Parties mutually agree upon.

      

      4.6  Applications
        and Consents.

      

      (a)           The
        Parties shall cooperate in seeking all Consents of Governmental Authorities
        and
        other Persons necessary to consummate the transactions contemplated
        hereby.

      

      (b)           Without
        limiting the foregoing, the Parties shall cooperate in (i) the filing of
        any
        required applications and notices with the Texas Department of Banking and
        the
        Federal Reserve Board under the BHC Act, and obtaining approval of such
        applications and notices, (ii) the filing of any required applications or
        notices with any foreign or state banking, insurance or other Regulatory
        Authorities and obtaining approval of such applications and notices, and
        (iii)
        making any filings with and obtaining any Consents in connection with compliance
        with the applicable provisions of the rules and regulations of any applicable
        industry self-regulatory organization, or that are required under consumer
        finance, mortgage banking and other similar Laws (collectively, the
“Regulatory Consents”).

      

      (c)           Each
        Party will promptly furnish to the other Party copies of applications filed
        with
        all Governmental Authorities and copies of written communications received
        by
        such Party from any Governmental Authorities with respect to the transactions
        contemplated hereby.  Each Party agrees that it will consult with the
        other Party with respect to the obtaining of all Regulatory Consents and
        other
        material Consents advisable to consummate the transactions contemplated by
        this
        Agreement and each Party will keep the other Party apprised of the status
        of
        material matters relating to completion of the transactions contemplated
        hereby.  All documents that the Parties or their respective
        Subsidiaries are

      
        
          
          

        

        
          26

          
            

          

        

        
          
          

        

      

      responsible
        for
        filing with any Governmental Authority in connection with the transactions
        contemplated hereby (including to obtain Regulatory Consents) will comply
        as to
        form in all material respects with the provisions of applicable
        Law.

      

      4.7  Notification
        of Certain Matters.  The Company will
        give prompt notice to Parent (and subsequently keep Parent informed on a
        current
        basis) upon its becoming aware of the occurrence or existence of any fact,
        event
        or circumstance that (a) is reasonably likely to result in any Material Adverse
        Effect on the Company and its Subsidiaries, taken as a whole, or (b) would
        cause
        or constitute a breach of any of its representations, warranties, covenants,
        or
        agreements contained herein; provided, that any failure
        to give notice in accordance with the foregoing with respect to any breach
        shall
        not be deemed to constitute the failure of any condition set forth in Section
        5.2(b) to be satisfied, or otherwise constitute a breach of this Agreement
        by
        the Company due to its failure to give such notice unless the underlying
        breach
        would independently result in a failure of the conditions set forth in Sections
        5.2(a) or 5.2(b) or give rise to a termination right under Section
        6.1.  The Company shall deliver to Parent a copy of each written
        opinion of its financial advisor, Hovde Financial, Inc., as soon as reasonably
        practicable after the Company’s receipt thereof.

      

      4.8  Investigation
        and Confidentiality.

      

      (a)           The
        Company shall permit Parent to make or cause to be made such investigation
        of
        the business and Properties of the Company and its Subsidiaries and of the
        Company’s and its Subsidiaries’ financial and legal conditions as Parent
        reasonably requests; provided, that such investigation
        shall be reasonably related to the transactions contemplated hereby and shall
        not interfere unnecessarily with normal operations; and provided
        further, that neither the Company nor any of its Subsidiaries shall be
        required to provide access to or to disclose information where such access
        or
        disclosure would jeopardize the attorney-client or other privilege with respect
        to such information, contravene any Law, Order, or Contract, or result in
        disclosure of any trade secrets of third parties, and the Parties will use
        their
        reasonable best efforts to make appropriate substitute disclosure arrangements,
        to the extent practicable, in circumstances in which the restrictions of
        the
        preceding clause apply.  No investigation by Parent shall affect the
        representations and warranties of the Company or the right of Parent to rely
        thereon.  Between the date hereof and the Effective Time, the Company
        shall permit Parent’s senior officers to meet with the financial officers of the
        Company and its Subsidiaries, including officers responsible for the Company’s
        Financial Statements, the internal controls of the Company its Subsidiaries
        and
        the disclosure controls and procedures of the Company and its Subsidiaries,
        to
        discuss such matters as Parent may deem reasonably necessary or appropriate
        for
        Parent to satisfy its obligations under Sections 302, 404 and 906 of the
        Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”).

      

      (b)           Each
        Party shall, and shall cause its directors, officers, employees and
        Representatives to, maintain the confidentiality of all confidential information
        furnished to it by the other Party concerning its and its Subsidiaries’
businesses, operations, and financial positions to the extent required by,
        and
        in accordance with, the Confidentiality Agreement, and shall not use such
        information for any purpose except in furtherance of the transactions
        contemplated by this Agreement.  If this Agreement is terminated prior
        to the Effective Time, each Party shall promptly return or certify the
        destruction of all documents and copies thereof, and all work papers containing
        confidential information received from the other Party.

      

      4.9  Press
        Releases; Publicity.  Prior to the
        Effective Time, the Company shall consult with Parent as to the form and
        substance of any Company press release, other public statement or shareholder
        communication related to or mentioning this Agreement and the transactions
        contemplated hereby prior to issuing such press release, public statement
        or
        shareholder communication or making any other public or shareholder disclosure
        related thereto; provided, that

      
        
          
          

        

        
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      4.10  nothing
        in this
        Section 4.9 shall be deemed to prohibit the Company from making any disclosure
        that its counsel deems reasonably necessary or advisable in order to satisfy
        the
        Company’s disclosure obligations imposed by Law.

      

      4.11  Acquisition
        Proposals.  The Company agrees that it
        will not, and will cause its directors, officers, employees and Representatives
        and Affiliates not to, (a) initiate, solicit, encourage or knowingly facilitate
        inquiries or proposals with respect to, (b) engage or participate in any
        negotiations concerning, or (c) provide any confidential or nonpublic
        information or data to, or have or participate in any discussions with, any
        Person relating to, any Acquisition Proposal.  The Company will
        immediately cease and cause to be terminated any activities, discussions
        or
        negotiations conducted before the date of this Agreement with any Persons
        other
        than Parent with respect to any Acquisition Proposal.  The Company
        shall promptly (and in any event within two Business Days) advise Parent
        following receipt of any Acquisition Proposal and the substance thereof
        (including the identity of the Person making such Acquisition Proposal),
        and
        will keep Parent apprised of any related developments, discussions and
        negotiations on a current basis.

      

      4.12  Takeover
        Laws.  If any Takeover Law may become,
        or may purport to be, applicable to the transactions contemplated hereby,
        the
        Company and the members of its Board of Directors will grant such approvals
        and
        take such actions as are necessary (other than any action requiring the approval
        of its shareholders (other than as contemplated by Section 4.4)) so that
        the
        transactions contemplated by this Agreement may be consummated as promptly
        as
        practicable on the terms contemplated hereby and otherwise act to eliminate
        or
        minimize the effects of any Takeover Law on any of the transactions contemplated
        by this Agreement.

      

      4.13  Retention
        Bonuses; Change in Control Bonuses; Employee Benefits and
        Contracts.

      

      (a)  Parent
        shall cause
        the Surviving Corporation to pay to the employees set forth on Section 4.12(a)
        of the Company Disclosure Letter  (the “Retention Bonus Eligible
        Employees”) (i) all amounts owed under the Company Critical Employee Bonus
        Plan in accordance with the terms thereof and as set forth in Section 4.12(a)
        of
        the Company Disclosure Letter, which amounts shall not, in the aggregate,
        exceed
        $190,000, and (ii) an aggregate amount of $40,000, 50% of which shall be
        payable
        on the date that is 18 months after the Closing Date and 50% of which shall
        be
        payable on the date that is 24 months after the Closing Date, in the same
        respective proportions as the Retention Bonus Eligible Employees are entitled
        to
        be paid under the Company Retention Bonus Plan; provided that Parent
        shall only be obligated to make payments to Retention Bonus Eligible Employees
        who are employees of the Bank as of such dates.

      

      (b)  The
        Company shall
        pay all change in control bonuses arising under employment agreements set
        forth
        on Section 4.12(b) of the Company Disclosure Letter in accordance with the
        terms
        thereof.

      

      (c)   All
        employees
        of the Company or any of its Subsidiaries shall remain employees of the Company
        and its Subsidiaries upon consummation of the Merger.  Following the
        Effective Time, any such employee may be terminated, and the job duties,
        compensation and authority of any such employee may be modified, subject
        to
        payment of any severance pay or other termination benefits due under terms
        of
        employment contracts with the Company or the Bank and any Parent Severance
        Payment to such employees who are terminated by the Company or by the Bank
        within the 12 month period following the Closing Date.

      
        
          
          

        

        
          28

          
            

          

        

        
          
          

        

      

      

      (d)  At
        the Effective
        Time, all retained employees shall remain on the existing Benefit Plans of
        the
        Company or its Subsidiaries.  Thereafter, at a time determined by
        Parent in its sole discretion, the retained employees shall be eligible for
        such
        employee benefits as are generally available to new employees, as of the
        date
        hereof, of Parent and its Subsidiaries having like tenure, officer status
        and
        compensation levels and such employees shall be given full credit for all
        prior
        service (including, but not limited to, credit towards satisfaction of any
        waiting periods under Parent’s health and welfare plans) as employees of the
        Company or any of its Subsidiaries.  To the extent permitted under the
        terms of such plans, Parent shall not make any exclusion of coverage for
        any
        pre-existing conditions under any of its healthcare plans, and Parent, through
        its medical and dental plan underwriters, shall use commercially reasonable
        efforts to provide retained employees and enrolled dependents credit for
        all
        eligible expenses incurred within the calendar year under plans maintained
        by
        the Company or any of its Subsidiaries for purposes of satisfying annual
        deductibles and out-of-pocket maximums under Parent’s healthcare
        plans.  Such employees are solely responsible for supplying
        satisfactory proof of previously incurred expenses to Parent’s plan
        underwriters.

      

      4.14  Indemnification.

      

      (a)           From
        and after the Effective Time, subject to applicable Law, the Surviving
        Corporation and its Subsidiaries shall, and Parent shall cause the Surviving
        Corporation and its Subsidiaries to, honor the Company’s and the Bank’s existing
        indemnification obligations, as reflected in their respective Organizational
        Documents and any indemnification agreement with the Company or its Subsidiaries
        in existence on the date of this Agreement and disclosed in Section 4.13(a)
        of
        the Company Disclosure Letter, for current or former directors, officers
        and
        employees, without time limitation, for matters arising out of the service
        of
        such persons with the Company or its Subsidiaries prior to the Effective
        Time.

      

      (b)           The
        Company, the Bank and Parent shall cooperate to obtain a directors’ and
        officers’ liability insurance policy to provide coverage for a period of six
        years from the Effective Time to all Persons who served as directors or officers
        of the Company or its Subsidiaries at or prior to the Effective Time, with
        respect to actions or omissions prior to the Effective Time.  The
        policy shall be purchased by the Party to whom the most favorable terms are
        available. The total premium under such policy shall not exceed 150% of the
        annual premium paid by the Company for its current directors’ and officers’
liability insurance policy (as set forth in Section 3.3(u) of the Company
        Disclosure Letter).

      

      (c)           If
        Surviving Corporation or any of its successors or assigns shall consolidate
        with
        or merge into any other Person and shall not be the continuing or surviving
        Person of such consolidation or merger or shall transfer all or substantially
        all of its assets to any Person, then and in each case, proper provision
        shall
        be made so that the successors and assigns of the Surviving Corporation as
        the
        surviving entities shall assume the obligations set forth in this Section
        4.13.

      

      (d)           The
        provisions of this Section 4.13 are intended to be for the benefit of and
        shall
        be enforceable by, each Indemnified Party and his or her heirs and
        representatives.

      

      

      ARTICLE
        5

      CONDITIONS
        PRECEDENT TO OBLIGATIONS TO CONSUMMATE

      

      5.1  Conditions
        to Obligations of Each Party.  The
        respective obligations of each Party to perform this Agreement and to consummate
        the

      
        
          
          

        

        
          29

          
            

          

        

        
          
          

        

      

      5.2  Merger
        and the
        other transactions contemplated hereby are subject to the satisfaction of
        the
        following conditions, unless waived by each Party pursuant to Section
        7.6:

      

      (a)           Shareholder
        Approval.  The Company shall have obtained the Company Shareholder
        Approval.

      

      (b)           Regulatory
        Approvals.  All Regulatory Consents required by law to consummate
        the transactions contemplated by this Agreement (the “Required Consents”)
        shall (i) have been obtained or made and be in full force and effect and
        all
        waiting periods required by Law shall have expired, and (ii) not be subject
        to
        any condition or consequence that would, after the Effective Time, have a
        material adverse effect on the financial position, results of operations
        or
        prospects of Parent or any of its Subsidiaries.

      

      (c)           No
        Orders or Restraints; Illegality.  No Order issued by any
        Governmental Authority (whether temporary, preliminary, or permanent) preventing
        the consummation of the Merger shall be in effect and no Law or Order shall
        have
        been enacted, entered, promulgated or enforced by any Governmental Authority
        that prohibits, restrains, or makes illegal the consummation of the
        Merger.

      

      5.3  Conditions
        to Obligations of Parent.  The
        obligations of Parent to perform this Agreement and consummate the Merger
        and
        the other transactions contemplated hereby are subject to the satisfaction
        of
        the following conditions, unless waived by Parent pursuant to Section
        7.6:

      

      (a)           Representations
        and Warranties.  The representations and warranties of the Company
        set forth in this Agreement, after giving effect to Sections 3.1 and 3.2,
        shall
        be true and correct as of the date of this Agreement and as of the Closing
        Date
        as though made at and as of the Closing Date (except that representations
        and
        warranties that by their terms speak specifically as of the date of this
        Agreement or some other date shall be true and correct as of such date),
        and
        Parent shall have received certificates, dated the Closing Date, signed on
        behalf of the Company by the chief executive officer and the chief financial
        officer of the Company, to such effect.

      

      (b)           Performance
        of Agreements and Covenants.  Each and all of the agreements and
        covenants of the Company to be performed and complied with pursuant to this
        Agreement prior to the Effective Time shall have been duly performed and
        complied with in all material respects and Parent shall have received
        certificates, dated the Closing Date, signed on behalf of the Company by
        the
        chief executive officer and the chief financial officer of the Company, to
        such
        effect.

      

      (c)           Corporate
        Authorization and Good Standing.  Parent shall have received from
        the Company (i) certified resolutions of its Board of Directors and shareholders
        authorizing the execution and delivery of this Agreement and the consummation
        of
        the transactions contemplated hereby; (ii) a certificate as to the incumbency
        and signatures of officers authorized to execute this Agreement; (iii) a
        certificate of good standing of the Company, dated not more than three Business
        Days before the Closing Date, from the Secretary of State of the State of
        Texas;
        (iv) a certificate of good standing of Fort Worth Bancorporation, Inc. dated
        not
        more than three Business Days before the Closing Date, from the Secretary
        of
        State of the State of Delaware; (v) an insured status certificate with respect
        to the Bank, dated not more than ten Business Days before the Closing Date,
        from
        the FDIC; (vi) a Certificate of Corporate Existence, dated not more than
        ten
        Business Days before the Closing Date, from the OCC; (vii) and a letter,
        dated
        not more than ten Business Days before the Closing Date, confirming the
        registration of each of the

      
        
          
          

        

        
          30

          
            

          

        

        
          
          

        

      

      Company
        and Fort
        Worth Bancorporation, Inc. as bank holding companies under the Bank Holding
        Company Act of 1956, from the Federal Reserve Bank of Dallas.

      

      (d)           Consents.  The
        Company shall have obtained all Consents required as a result of the
        transactions contemplated by this Agreement pursuant to the Contracts set
        forth
        in Section 3.3(l)(i) of the Company Disclosure Letter.

      

      (e)           Material
        Adverse Effect.  Since the date hereof, there shall not have
        occurred any fact, circumstance or event, individually or taken together
        with
        all other facts, circumstances or events that has had or is reasonably likely
        to
        have a Material Adverse Effect on the Company and its Subsidiaries, taken
        as a
        whole.

      

      (f)           Dissenting
        Shareholders. The holders of no more than 5% of the outstanding shares of
        Company Common Stock shall have given notice of their intent to exercise
        dissenters’ rights under the TBCA.

      

      (g)           Director
        Support Agreements.  Each of the Directors of the Bank shall have
        entered into a Director Support Agreement in substantially the form attached
        as
Exhibit A hereto.

      

      (h)           Retention
        Agreements.  Each of the Retention Bonus Eligible Employees shall
        have entered into a Retention Agreement in substantially the form attached
        as
Exhibit C hereto.

      

      (i)           Employment
        Agreements.  The employment agreements between the Company and
        each of the persons listed in Section 5.2(i) of the Company Disclosure Letter,
        shall have been terminated and the Company shall have paid the change in
        control
        bonuses due thereunder in full, and each such person shall have entered into
        an
        Employment Agreement in substantially the form attached as Exhibit D
        hereto.

      

      (j)           Payment
        of Advisor’s Fees.  All fees due to Hovde Financial, Inc. shall
        have been paid in full.

      

      (k)           Exercise
        or Termination of Company Options and Company Warrants.  All
        outstanding Company Options and Company Warrants shall have been exercised
        or
        terminated as provided in Section 1.6 and the Company’s Board of Directors and
        shareholders shall have taken all action necessary to terminate the Company
        Stock Plans effective prior to the Effective Time.  No Company Options
        or Company Warrants, whether vested or unvested, shall be outstanding as
        of five
        Business Days prior to the Effective Time.

      

      (l)           Net
        Shareholders’ Equity.  As of the Measurement Date, the Company’s
        Final Net Shareholders’ Equity shall not be less than the Target Amount by more
        than $100,000.

      

      5.4  Conditions
        to Obligations of the Company.  The
        obligations of the Company to perform this Agreement and consummate the Merger
        and the other transactions contemplated hereby are subject to the satisfaction
        of the following conditions, unless waived by the Company pursuant to Section
        7.6:

      

      (a)           Representations
        and Warranties.  The representations and warranties of Parent set
        forth in this Agreement, after giving effect to Section 3.2, shall be true
        and
        correct as of the date of this Agreement and as of the Closing Date as though
        made at and as of the Closing Date (except that representations and warranties
        that by their terms speak specifically as of the date of this Agreement or
        some
        other date shall be true and correct as of such date) and the
        Company

      
        
          
          

        

        
          31

          
            

          

        

        
          
          

        

      

      shall
        have received
        a certificate, dated the Closing Date, signed on behalf of Parent by an
        authorized officer of Parent, to such effect.

      

      (b)           Performance
        of Agreements and Covenants.  Each and all of the agreements and
        covenants of Parent to be performed and complied with pursuant to this Agreement
        prior to the Effective Time shall have been duly performed and complied with
        in
        all material respects and the Company shall have received a certificate,
        dated
        the Closing Date, signed on behalf of Parent by an authorized officer of
        Parent,
        to such effect.

      

      ARTICLE
        6

      TERMINATION

      

      6.1  Termination.  Notwithstanding
        any other provision of this Agreement, and notwithstanding Company Shareholder
        Approval, this Agreement may be terminated and the Merger abandoned at any
        time
        prior to the Effective Time:

      

      (a)           By
        mutual consent of the Board of Directors of the Company and the Board of
        Directors of Parent;

      

      (b)           By
        the Board of Directors of the Company or the Board of Directors of Parent
        in the
        event of a breach of any representation, warranty, covenant or agreement
        contained in this Agreement on the part of the other Party, which breach
        would
        result in, if occurring or continuing on the Closing Date, the failure of
        the
        conditions to the terminating Party’s obligations set forth in Sections 5.2 or
        5.3, as the case dictates, and that cannot be or has not been cured within
        30
        days after the giving of notice to the breaching Party of such breach, provided
        that the right to effect such cure shall not extend beyond the date set forth
        in
        subparagraph (d) below;

      

      (c)           By
        the Board of Directors of the Company or the Board of Directors of Parent
        in the
        event that (i) any Regulatory Consent required to be obtained from any
        Governmental Authority has been denied by final nonappealable action of such
        Governmental Authority, or (ii) Company Shareholder Approval has not been
        obtained by reason of the failure to obtain the required vote at the Company
        shareholders’ meeting where this Agreement was presented to such shareholders
        for approval and voted upon;

      

      (d)           By
        the Board of Directors of the Company or the Board of Directors of Parent
        in the
        event that the Merger has not been consummated by November 17, 2007, if the
        failure to consummate the transactions contemplated hereby on or before such
        date is not caused by any breach of this Agreement by the Party electing
        to
        terminate pursuant to this Section 6.1(d); or

      

      (e)           By
        the Board of Directors of Parent in the event that (i) the Company has
        withdrawn, qualified or modified the Company Directors’ Recommendation in a
        manner adverse to Parent or shall have resolved to do any of the foregoing,
        (ii)
        the Company has failed to substantially comply with its obligations under
        Sections 4.4 or 4.10, or (iii) the Board of Directors of the Company has
        recommended, endorsed, accepted or agreed to an Acquisition Proposal with
        any
        other Person.

      

      6.2  Effect
        of Termination.  In the event of the
        termination and abandonment of this Agreement pursuant to Section 6.1, this
        Agreement shall become void and have no effect, and neither Parent or its
        subsidiaries nor the Company or its Subsidiaries, or any of the officers
        or
        directors of any of them, shall have any Liability of any nature whatsoever
        hereunder or in conjunction with the transactions contemplated hereby, except
        that (a) the provisions of Section 4.8(b), Article 6 and Article 7 shall
        survive
        any such termination and abandonment, and (b) a termination of
        this

      
        
          
          

        

        
          32

          
            

          

        

        
          
          

        

      

      6.3  Agreement
        shall not
        relieve the breaching Party from Liability for an uncured willful breach
        of a
        representation, warranty, covenant, or agreement of such Party contained
        in this
        Agreement.

      

      6.3           Termination
        Fee.

      

      (a)           In
        the event that Parent terminates this Agreement pursuant to Section 6.1(e),
        the
        Company shall pay to Parent $1,500,000 (the “Termination Fee”) within
        five Business Days after the date this Agreement is terminated, by wire transfer
        of immediately available funds.

      

      (b)           In
        the event that either Parent or the Company terminates this Agreement pursuant
        to Section 6.1(c)(ii) and within 12 months following such termination an
        Acquisition Proposal is consummated or a definitive agreement or letter of
        intent is entered into by the Company with respect to an Acquisition Proposal,
        the Company shall pay Parent the Termination Fee within five Business Days
        after
        the date it becomes payable pursuant hereto, by wire transfer of immediately
        available funds.

      

      (c)           The
        Company hereby acknowledges that the agreements contained in this Section
        6.3
        are an integral part of the transactions contemplated by this Agreement and
        that, without these agreements, Parent would not enter into this
        Agreement.  In the event that the Company fails to pay when due any
        amount payable under this Section 6.3, then (i) the Company shall reimburse
        Parent for all costs and expenses (including disbursements and reasonable
        fees
        of counsel) incurred in connection with the collection of such overdue amount,
        and (ii) the Company shall pay to Parent interest on such overdue amount
        (for
        the period commencing as of the date such overdue amount was originally required
        to be paid and ending on the date such overdue amount is actually paid in
        full)
        at a rate per annum equal to three percent (3%) over the “prime rate” (as
        published in the “Money Rates” column in The Wall Street Journal or, if
        not published therein, in another national financial publication selected
        by
        Parent) in effect on the date such overdue amount was originally required
        to be
        paid.

      

      ARTICLE
        7

      MISCELLANEOUS

      

      7.1  Definitions.

      

      (a)           Except
        as otherwise provided herein, the capitalized terms set forth below shall
        have
        the following meanings:

      
 

           “1933
        Act” shall mean the Securities Act of 1933, as
        amended, and the rules and regulations promulgated thereunder.

      

           “1934
        Act” shall mean the Securities Exchange Act of
        1934, as amended, and the rules and regulations promulgated
        thereunder.

      

           “Acquisition
        Proposal” shall mean, other than the transactions contemplated by this
        Agreement, any offer, proposal or inquiry relating to, or any third party
        indication of interest in, (a) any acquisition or purchase, direct or indirect,
        of 15% or more of the consolidated assets of the Company and its Subsidiaries
        or
        15% or more of any class of equity or voting securities of the Company or
        any of
        its Subsidiaries whose assets, individually or in the aggregate, constitute
        more
        than 15% of the consolidated assets of the Company, (b) any tender offer
        (including a self-tender offer) or exchange offer that, if consummated, would
        result in such third party beneficially owning 15% or more of any class of
        equity or voting securities of the Company or any of its Subsidiaries whose
        assets, individually or in the aggregate, constitute more than 15% of the
        consolidated assets of the Company, (c) a merger, consolidation, share exchange,
        business

      
        
          
          

        

        
          33

          
            

          

        

        
          
          

        

      

      combination,
        reorganization, recapitalization, liquidation, dissolution or other similar
        transaction involving the Company or any of its Subsidiaries whose assets,
        individually or in the aggregate, constitute more than 15% of the consolidated
        assets of the Company, or (d) any other transaction the consummation of which
        could reasonably be expected to impede, interfere with, prevent or materially
        delay the Merger or that could reasonably be expected to dilute materially
        the
        benefits to Parent of the transactions contemplated hereby.

      

      “Adjustment
        Amount” shall mean the difference between the Target Amount and the
        Final Net Shareholders’ Equity as of the Measurement Date.

      

          “Affiliate” of
        a Person shall mean (a) any other Person directly, or indirectly through
        one or
        more intermediaries, controlling, controlled by or under common control with
        such Person or (b) any director, partner or officer of such Person or, for
        any
        Person that is a limited liability company, any manager or managing member
        thereof.  For purposes of this definition, “control” (and its
        derivatives) shall mean the possession, directly or indirectly, of the power
        to
        direct or cause the direction of the management and policies of a Person,
        whether through ownership of equity, voting or other interests, as trustee
        or
        executor, by contract or otherwise.

      

          “Benefit
        Plan” shall mean any pension, retirement, profit-sharing, deferred
        compensation, thrift, savings, equity, employee stock ownership, retention,
        severance pay, vacation, bonus, or other incentive plan, any other material
        written employee program or agreement, any medical, vision, dental, or other
        written health plan, any life insurance and any medical, vision, dental or
        other
        health plan, flexible spending account, cafeteria plan, holiday, disability,
        and
        any other employee benefit plan or fringe benefit plan, agreement, arrangement
        or commitment, whether written or unwritten, including any written “employee
        benefit plan” (as that term is defined in Section 3(3) of ERISA), maintained by,
        sponsored in whole or in part by, or contributed to by a Party or any of
        its
        Subsidiaries for the benefit of its and its Subsidiaries’ employees, retirees,
        dependents, spouses, directors, independent contractors, or other beneficiaries
        and under which such employees, retirees, dependents, spouses, directors,
        independent contractors, or other beneficiaries are eligible to
        participate.

      

         
 “BHC
        Act” shall mean the federal Bank Holding Company
        Act of 1956, as amended, and rules and regulations promulgated
        thereunder.

      

        
  “Business
        Day” shall mean any day that Nasdaq is normally open for
        trading for a full day and that is not a Saturday, a Sunday or a day on which
        banks in New York, New York or the State of Texas are authorized or required
        to
        close for regular banking business.

      

      “Company
        Capital Stock” shall mean the Company Common Stock and the Company
        Preferred Stock.

      

      “Company
        Common Stock” shall mean the $5.00 par value per
        share common stock of the Company.

      

      “Company
        Critical Employee Bonus Plan” shall mean that certain retention bonus
        plan adopted by the Board of Directors of the Company on September 21,
        2006.

      

        
  “Company
        Financial Statements” shall mean (i) the audited
        consolidated balance sheets (including related notes and schedules, if any)
        of
        the Company and its Subsidiaries as of December 31, 2004, 2005 and 2006,
        and the
        reports of its independent public accountants

      
        
          
          

        

        
          34

          
            

          

        

        
          
          

        

      

      with
        respect
        thereto and (ii) the consolidated balance sheets of the Company and its
        Subsidiaries (including related notes and schedules, if any), and related
        statements of operations, cash flows, and shareholders’ equity and comprehensive
        income (loss) (including related notes and schedules, if any) with respect
        to
        periods ended subsequent to December 31, 2006.

      

           
        “Company Option” shall mean an option to purchase a share or
        shares of Company Common Stock issued under a Company Stock Plan.

      

      “Company
        Preferred Stock” shall mean the $1.00 par value
        per share preferred stock of the Company.

      

      “Company
        Shareholder Approval” shall
        mean the approval of this Agreement by the holders of at
        least two-thirds of the outstanding shares of Company Common Stock.

      

          “Company
        Stock Plan” shall mean any equity compensation plan of the Company
        listed in Section 3.3(k)(i) of the Company Disclosure Letter.

      

      “Company
        Warrant” shall mean any warrant to purchase a share or shares of
        Company Common Stock issued by the Company.

      

          “Confidentiality
        Agreement” shall mean that certain
        Confidentiality Agreement, dated January 9, 2007, by and
        between the Company and Parent.

      

          “Consent” shall
        mean any consent, approval, authorization, clearance, exemption, waiver,
        or
        similar affirmation by any Person pursuant to any Contract, Law, Order, or
        Permit.

      

          “Contract” shall
        mean any written or oral agreement, arrangement, commitment, contract,
        indenture, instrument, lease, understanding, note, bond, license, mortgage,
        deed
        of trust or undertaking of any kind or character to which any Person is a
        party
        or that is binding on any Person or its capital stock, assets or
        business.

      

          “Data
        Processing Agreement” shall mean that certain Date Processing
        Agreement, dated as of February 1, 1999, by and between the Bank and Community
        Data Services.

      

          “Default” shall
        mean (a) any breach or violation of or default under any Contract, Law, Order,
        or Permit, (b) any occurrence of any event that with the passage of time
        or the
        giving of notice or both would constitute a breach or violation of or default
        under any Contract, Law, Order, or Permit, or (c) any occurrence of any event
        that with or without the passage of time or the giving of notice would give
        rise
        to a right to terminate or revoke, change the current terms of, or renegotiate,
        or to accelerate, increase, or impose any Liability under, any Contract,
        Law,
        Order, or Permit.

      

          “Dissenting
        Shares” shall mean shares of Company Common Stock that are owned by
        shareholders properly exercising their appraisal rights pursuant to Section
        5.12
        of the TBCA.

      

          “Environmental
        Laws” shall mean all Laws relating to pollution
        or protection of human health or the environment (including ambient air,
        surface
        water, ground water, land surface, or subsurface strata) and that are
        administered, interpreted, or enforced by the United States Environmental
        Protection Agency and state and local agencies with jurisdiction over,
        and

      
        
          
          

        

        
          35

          
            

          

        

        
          
          

        

      

      including
        common
        Law in respect of, pollution or protection of the environment, including
        the
        Comprehensive Environmental Response, Compensation and Liability Act, as
        amended, the Resource Conservation and Recovery Act, as amended, and other
        Laws
        relating to emissions, discharges, releases, or threatened releases of any
        Hazardous Material, or otherwise relating to the manufacture, processing,
        distribution, use, treatment, storage, disposal, transport, or handling of
        any
        Hazardous Material, including all requirements for permits, licenses and
        other
        authorizations that may be required.

      

           
        “ERISA” shall mean the Employee
        Retirement Income Security Act of 1974, as amended, and the rules and
        regulations promulgated thereunder.

      

      “ERISA
        Affiliate” of any Person means any entity that is, or at any relevant
        time was, a member of (a) a controlled group of corporations (as defined
        in
        Section 414(b) of the Internal Revenue Code), (b) a group of trades or
        businesses under common control (as defined in Section 414(c) of the Internal
        Revenue Code) or (c) an affiliated service group (as defined under Section
        414(m) of the Internal Revenue Code or the regulations under Section 414(o)
        of
        the Internal Revenue Code) with such Person.

      

      “ERISA
        Plan” shall mean any Benefit Plan that is an “employee welfare benefit
        plan,” as that term is defined in Section 3(l) of ERISA, or an “employee pension
        benefit plan,” as that term is defined in Section 3(2) of ERISA.

      

      “Exhibits” A
        through D, inclusive, shall mean the Exhibits so marked, copies of which
        are
        attached to this Agreement.  Such Exhibits are hereby incorporated by
        reference herein and made a part hereof, and may be referred to in this
        Agreement and any other related instrument or document without being attached
        hereto or thereto.

      

      “Facilities”
shall
        mean all
        buildings and improvements on the Property of the Company or its
        Subsidiaries.

      

      “FDIC”
shall
        mean the Federal
        Deposit Insurance Corporation.

      

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

      

      “Final
        Net
        Shareholders’ Equity” shall mean the calculation of the Net
        Shareholders’ Equity at the close of business on the Measurement Date as
        determined in the manner provided in Section 1.9.

      

                            “GAAP” shall
        mean accounting principles generally accepted in the United States of America,
        consistently applied during the periods involved.

      

          “Governmental
        Authority” shall mean each Regulatory Authority and any other domestic
        or foreign court, administrative agency, commission or other governmental
        authority or instrumentality (including the staff thereof), or any industry
        self-regulatory authority (including the staff thereof).

      

          “Hazardous
        Material” shall mean (a) any hazardous substance,
        hazardous material, hazardous waste, regulated substance, or toxic substance
        (as
        those terms are defined by any applicable Environmental Laws), and (b) any
        chemicals, pollutants, contaminants, petroleum, petroleum products that are
        or
        become regulated under any applicable local, state, or federal

      
        
          
          

        

        
          36

          
            

          

        

        
          
          

        

      

      Environmental
        Law
        (and specifically shall include asbestos requiring abatement, removal, or
        encapsulation pursuant to the requirements of Governmental Authorities and
        any
        polychlorinated biphenyls).

      

          “Intellectual
        Property” shall mean (a) any patents, copyrights, trademarks, service
        marks, maskworks or similar rights throughout the world, and applications
        or
        registrations for any of the foregoing, (b) any proprietary interest, whether
        registered or unregistered, in know-how, copyrights, trade secrets, database
        rights, data in databases, website content, inventions, invention disclosures
        or
        applications, software (including source and object code), operating and
        manufacturing procedures, designs, specifications and the like, (c) any
        proprietary interest in any similar intangible asset of a technical, scientific
        or creative nature, including slogans, logos and the like and (d) any
        proprietary interest in or to any documents or other tangible media containing
        any of the foregoing.

      

          “Internal
        Revenue Code” shall mean the Internal Revenue
        Code of 1986, as amended, any successor statute thereto, and the rules and
        regulations promulgated thereunder.

      

          “Knowledge”
        of any Party or “known to” a Party and any other phrases of
        similar import shall mean the actual knowledge of such Party’s Chairman of the
        Board, Chief Executive Officer, President, Chief Operating Officer, Chief
        Financial Officer or Chief Lending Officers (or persons performing comparable
        functions) of such matter or the knowledge of such matter that such Person
        would
        have had after reasonable inquiry, including inquiries of their direct
        subordinates who would be likely to have knowledge of such matter.

      

          “Law” shall
        mean any code, law (including any rule of common law), ordinance, regulation,
        rule, or statute applicable to a Person or its assets, Liabilities, or business,
        including those promulgated, interpreted or enforced by any Governmental
        Authority.

      

          “Liability” shall
        mean any direct or indirect, primary or secondary, liability, indebtedness,
        obligation, penalty, cost or expense (including costs of investigation,
        collection and defense), claim, deficiency or guaranty of any type, whether
        accrued, absolute or contingent, liquidated or unliquidated, matured or
        unmatured, or otherwise.

      

          “Lien” shall
        mean any mortgage, pledge, reservation, restriction (other than a restriction
        on
        transfers arising under the Securities Laws), security interest, lien or
        encumbrance of any nature whatsoever of, on, or with respect to any Property
        or
        Property interest, other than Liens for property Taxes not yet due and
        payable.

      

          “Litigation” shall
        mean any action, arbitration, cause of action, claim, complaint, criminal
        prosecution, demand letter, governmental or other examination or investigation,
        hearing, inquiry, administrative or other proceeding, or notice (written
        or
        oral) by any Person alleging potential Liability, but shall not include claims
        of entitlement under any Benefit Plans that are made or received in the ordinary
        course of business.

      

      “Measurement
        Date” shall mean the date that is 10 Business Days prior to the Closing
        Date.

      

      “NASD” shall
        mean the National Association of Securities Dealers, Inc.

      

          “Nasdaq”
        shall mean The Nasdaq Stock Market, Inc.

      
        
          
          

        

        
          37

          
            

          

        

        
          
          

        

      

      

      “Net
        Shareholders’ Equity” shall mean the consolidated shareholders’ equity
        of the Company as of the Measurement Date, as calculated in accordance with
        the
        books and records of the Company and its Subsidiaries, consistent with past
        practice, GAAP and all requirements of applicable Regulatory
        Authorities.  Net Shareholders Equity shall equal
        (i) consolidated shareholders’ equity as of the Measurement Date, less (ii)
        any unrealized net gain on available for sale securities as of the Measurement
        Date, plus (iii) any unrealized net loss on available for sale securities
        as of
        the Measurement Date, less (iii) to the extent not reflected in
        consolidated shareholders’ equity as of the Measurement Date, all costs, fees
        and charges, including fees and charges of the Company’s accountants, counsel
        and financial advisors, whether or not accrued or paid, that are related
        to the
        transactions contemplated by this Agreement, including an accrual in the
        amount
        of $324,000, before taking into account the tax effect thereof, for fees
        related
        to termination of the Data Processing Agreement, less (iv) any change in
        consolidated shareholders’ equity after March 31, 2007, related to stock options
        exercised or other stock transactions occurring after March 31,
        2007.

      

          “OCC”
        shall mean the Office of the Comptroller of the Currency.

      

          “Order” shall
        mean any administrative decision or award, decree, injunction, judgment,
        order,
        quasi-judicial decision or award, ruling, or writ of any federal, state,
        local,
        or foreign or other court, arbitrator, mediator, tribunal, administrative
        agency, Governmental Authority or Regulatory Authority.

      

      “Organizational
        Documents” shall mean the
        articles of incorporation, association or organization, certificate of
        incorporation, association or organization, charter, bylaws or other similar
        governing instruments, in each case as amended as of the date specified,
        of any
        Person.

      

      “Party”
        shall mean Parent and Merger Sub, on the one hand, or the Company, on the
        other
        hand, and “Parties” shall mean Parent, Merger Sub and the
        Company.

      

          “Pension
        Plan” shall mean any ERISA Plan that is also subject to Section 412 of
        the Internal Revenue Code or Section 302 of ERISA.

      

      “Per
        Share
        Purchase Price” shall mean an amount, rounded to the nearest whole
        cent, equal to $52.00, less the quotient obtained by dividing (x) the Adjustment
        Amount by (y) the sum of (i) the number of shares of Company Common
        Stock issued and outstanding immediately prior to the Effective Time (including
        shares issued or issuable upon exercise of outstanding Company Options and
        Company Warrants that are not terminated) and (ii) the number of shares
        that would be issued upon exercise of Company Options and Company Warrants
        that
        are terminated in exchange for an Option Termination Payment.

      

          “Permit” shall
        mean any federal, state, local and foreign governmental approval, authorization,
        certificate, easement, filing, franchise, license or permit from Governmental
        Authorities that are required for the operation of the businesses of a Person
        or
        its Subsidiaries.

      

      “Permitted
        Encumbrances” shall mean all easements, covenants, restrictions, rights
        of way and other matters of title which do not adversely affect the
        marketability of title.

      

      “Permitted
        Issuances” shall mean issuances of Company Common Stock upon exercise
        of outstanding Company Options or Company Warrants.

      
        
          
          

        

        
          38

          
            

          

        

        
          
          

        

      

      

      

      “Person” shall
        mean any natural person or any legal, commercial, or governmental entity,
        including, a corporation, general partnership, joint venture, limited
        partnership, limited liability company, trust, business association, or person
        acting in a representative capacity, as well as any syndicate or group that
        would be deemed to be a person under Section 13(d)(3) of the 1934
        Act.

      

          “Property”
        shall mean all real property leased or owned by the Company and its Subsidiaries
        or by Parent, either currently or in the past.

      

          “Regulatory
        Authorities” shall mean, collectively, the
        Federal Trade Commission, the United States Department of Justice, the Federal
        Reserve Board, the OCC, the FDIC, the Office of Thrift Supervision, the
        Texas Department of Banking, the Internal Revenue Service,
        all federal and state regulatory agencies having jurisdiction over the Company
        and its Subsidiaries and Parent, the NASD, Nasdaq and the SEC (including,
        in
        each case, the staff thereof).

      

          “Representative” shall
        mean any investment banker, financial advisor, attorney, accountant, consultant,
        agent or other representative of a Party.

      

          “Rights” shall
        mean, with respect to any Person, securities, or obligations convertible
        into or
        exercisable for, or giving any other Person any right to subscribe for or
        acquire, or any options, calls, restricted stock, deferred stock awards,
        stock
        units, phantom awards, dividend equivalents, or commitments relating to,
        or any
        stock appreciation right or other instrument the value of which is determined
        in
        whole or in part by reference to the market price or value of, shares of
        capital
        stock of such Person, whether vested or unvested or exercisable or
        unexercisable, and shall, in the case of the Company include Company Options
        and
        Company Warrants.

      

          “SEC” shall
        mean the United States Securities and Exchange Commission or any successor
        thereto.

      

          “Securities
        Laws” shall mean the 1933 Act, the 1934 Act, the
        Investment Company Act of 1940, the Investment Advisers Act of 1940, and
        the
        Trust Indenture Act of 1939, each as amended, state securities and “Blue Sky”
Laws, including in each case the rules and regulations promulgated
        thereunder.

      

      “Parent
        Severance Payment” shall mean a severance payment to any person who was
        an employee of the Company or any of its Subsidiaries immediately prior to
        the
        Closing and is terminated by the Bank or Parent within the 12 month period
        following the Closing Date, which shall be in addition to any severance payments
        described in Section 4.13 of the Company Disclosure Letter and shall be in
        an
        amount equal to the product of (i) the amount such terminated employee would
        have received for two weeks’ pay at the time of his/her termination, multiplied
        by (ii) the number of full years that such terminated employee was employed
        by
        the Company or any of its Subsidiaries.

      

      “Subsidiary”
        or “Subsidiaries” shall have the meaning
        assigned in Rule 1-02(x) of Regulation S-X of the SEC.

      

          “Target
        Amount” shall mean $11,013,179; provided that if
        the Measurement Date occurs prior to August 31, 2007, the Target Amount shall
        be
        reduced by $5,273 per day for

      
        
          
          

        

        
          39

          
            

          

        

        
          
          

        

      

      each
        day in the
        period commencing on the day following the Measurement Date and ending on
        August
        31, 2007, and if the Measurement Date occurs after August 31, 2007, the Target
        Amount shall be increased by $5,273 per day for each day in the period
        commencing on September 1, 2007, and ending on the Measurement
        Date.

      

      “Tax”
        or “Taxes” shall mean, as the
        context shall require, all federal, state, local, municipal and foreign taxes,
        charges, fees, levies, imposts, duties, or other like assessments, including
        assessments for unclaimed property, as well as income, gross receipts, excise,
        employment, sales, use, transfer, intangible, recording, license, payroll,
        franchise, severance, documentary, stamp, occupation, windfall profits,
        environmental, federal highway use, commercial rent, customs duties, capital
        stock, paid-up capital, profits, withholding, Social Security, single business
        and unemployment, disability, real property, personal property, registration,
        ad
        valorem, value added, alternative or add-on minimum, estimated or other tax
        or
        governmental fee of any kind whatsoever, imposed or required to be withheld
        by
        the United States or any state, local, municipal or foreign government or
        subdivision or agency thereof, whether disputed or not, including any related
        interest, penalties, and additions imposed thereon or with respect thereto,
        and
        including any liability for Taxes of another Person pursuant to a contract,
        as a
        transferee or successor, under Treasury Regulation Section 1.1502-6 or analogous
        provision of state, local or foreign Law or otherwise.

      

          “Tax
        Return” shall mean any report, return,
        information return or other information provided or required to be provided
        to a
        Taxing Authority in connection with Taxes, including any return of an Affiliated
        or combined or unitary group that includes a Party or its Subsidiaries and
        including without limitation any estimated Tax return.

      

           
        “Taxable Period” shall mean any period
        prescribed by any Taxing Authority.

      

      “Taxing
        Authority” shall mean any federal, state, local, municipal, foreign, or
        other Governmental Authority, instrumentality, commission, board or body
        having
        jurisdiction over the Parties to impose or collect any Tax.

      

      “Technology
        Systems” shall mean the electronic data processing, information, record
        keeping, communications, telecommunications, hardware, third-party software,
        networks, peripherals, portfolio trading and computer systems, including
        any
        outsourced systems and processes, and Intellectual Property used by the
        Company.

      

      (b)           The
        terms set forth below shall have the meanings ascribed thereto in the referenced
        sections:

      

      
        	
                Agreement

              	 	
                Preamble

              
	
                Articles
                  of
                  Merger

              	 	
                Section
                  1.3

              
	
                Bank

              	 	
                3.3(a)

              
	
                Closing

              	 	
                Section
                  1.2

              
	
                Closing
                  Date

              	 	
                Section
                  1.2

              
	
                Company

              	 	
                Preamble

              
	
                Company
                  Certificates

              	 	
                Section
                  1.4(b)

              
	
                Company
                  Directors’ Recommendation

              	 	
                Section
                  3.3(b)(ii)

              
	
                Company
                  Disclosure Letter

              	 	
                Section
                  3.1

              
	
                Company
                  Latest Balance Sheet

              	 	
                Section
                  3.3(d)(ii)

              

      

      
        
          
          

        

        
          40

          
            

          

        

        
          
          

        

      

      

      
        	
                CRA

              	 	
                Section
                  3.3(r)

              
	
                Dissenting
                  Shareholder

              	 	
                Section
                  2.3

              
	
                Effective
                  Time

              	 	
                Section
                  1.3

              
	
                Estimated
                  Net
                  Shareholders’ Equity

              	 	
                Section
                  1.9

              
	
                Exchange
                  Agent

              	 	
                Section
                  2.1(a)

              
	
                Exchange
                  Fund

              	 	
                Section
                  2.1(d)

              
	
                Excluded
                  Shares

              	 	
                Section
                  1.4(d)

              
	
                Holder

              	 	
                Section
                  2.1(a)

              
	
                IIPI

              	 	
                Section
                  3.3(s)(i)

              
	
                Leased
                  Property

              	 	
                Section
                  3.3(g)(ii)

              
	
                Material
                  Adverse Effect

              	 	
                Section
                  3.2(b)

              
	
                Merger

              	 	
                Preamble

              
	
                Merger
                  Consideration

              	 	
                Section
                  2.1(b)

              
	
                Merger
                  Sub

              	 	
                Preamble

              
	
                Option
                  Termination Payment

              	 	
                Section
                  1.7

              
	
                Owned
                  Property

              	 	
                Section
                  3.3(g)(i)

              
	
                Parent

              	 	
                Preamble

              
	
                Property
                  Restrictions

              	 	
                Section
                  3.3(g)(iii)

              
	
                Regulatory
                  Consents

              	 	
                Section
                  4.6(b)

              
	
                Required
                  Consents

              	 	
                Section
                  5.1(b)

              
	
                Retention
                  Bonus Eligible Employees

              	 	
                Section
                  4.12(a)

              
	
                Sarbanes-Oxley
                  Act

              	 	
                Section
                  4.8(a)

              
	
                Shareholder
                  Support Agreement

              	 	
                Preamble

              
	
                Surviving
                  Corporation

              	 	
                Section
                  1.1

              
	
                Takeover
                  Laws

              	 	
                Section
                  3.3(w)

              
	
                TBCA

              	 	
                Section
                  1.1

              
	
                Termination
                  Fee

              	 	
                Section
                  6.3

              

      

      

      (c)           Any
        singular term in this Agreement shall be deemed to include the plural, and
        any
        plural term the singular.  Whenever the words “include,” “includes,”
or “including” are used in this Agreement, they shall be deemed followed by the
        words “without limitation.”  The words “hereby,” “herein,” “hereof” or
“hereunder,” and similar terms are to be deemed to refer to this Agreement as a
        whole and not to any specific section.

      

      7.2  Non-Survival
        of Representations and
        Covenants.  Except for Articles 1 and 2,
        Sections 4.5(b), 4.8(b), 4.12 and 4.13 and this Article 7, the respective
        representations, warranties, obligations, covenants, and agreements of the
        Parties shall be deemed only to be conditions of the Merger and shall not
        survive the Effective Time.

      

      7.3  Expenses.

      

      (a)           Except
        as otherwise provided in this Section 7.3, each of the Parties shall bear
        and
        pay all direct costs and expenses incurred by it or on its behalf in connection
        with the transactions contemplated hereunder, including filing, registration,
        and application fees, printing fees, and fees and expenses of its own financial
        or other consultants, investment bankers, accountants, and
        counsel.  In addition, in any action at law or suit in equity to
        enforce this Agreement of the rights of any of the Parties, the prevailing
        Party
        in such action or suit shall be entitled to receive its reasonable attorneys’
fees and costs and expenses incurred in such action or suit.

      
        
          
          

        

        
          41

          
            

          

        

        
          
          

        

      

      

      (b)           Nothing
        contained in Section 6.3 or this Section 7.3 shall constitute or shall be
        deemed
        to constitute liquidated damages for the willful breach by a Party of the
        terms
        of this Agreement

      and
        nothing
        contained in this Section 7.3 shall be deemed to otherwise limit the rights
        of
        the non-breaching Party.

      

      7.4  Entire
        Agreement.  Except as otherwise
        expressly provided herein, this Agreement (including the Company Disclosure
        Letter and the Exhibits) constitutes the entire agreement between the Parties
        with respect to the transactions contemplated hereunder and supersedes all
        prior
        arrangements or understandings with respect thereto, written or oral, other
        than
        the Confidentiality Agreement, which shall remain in effect.  Nothing
        in this Agreement, expressed or implied, is intended to confer upon any Person,
        other than the Parties or their respective successors, any rights, remedies,
        obligations or liabilities under or by reason of this Agreement, except as
        expressly set forth in Section 4.13.

      

      7.5  Amendments.  Before
        the Effective Time, this Agreement (including the Company Disclosure Letter
        and
        the Exhibits) may be amended by a subsequent writing signed by each of the
        Parties, whether before or after the Company Shareholder Approval have been
        obtained, except to the extent that any such amendment would require the
        approval of the shareholders of the Company, unless such required approval
        is
        obtained.

      

      7.6  Waivers.

      

      (a)           Prior
        to or at the Effective Time, either Party shall have the right to waive any
        Default in the performance of any term of this Agreement by the other Party,
        to
        waive or extend the time for the compliance or fulfillment by the other Party
        of
        any and all of such other Party’s obligations under this Agreement, and to waive
        any or all of the conditions precedent to its obligations under this Agreement,
        except any condition that, if not satisfied, would result in the violation
        of
        any Law.  No waiver by a Party shall be effective unless in writing
        signed by a duly authorized officer of such Party.

      

      (b)           The
        failure of any Party at any time or times to require performance of any
        provision hereof shall in no manner affect the right of such Party at a later
        time to enforce the same or any other provision of this Agreement.  No
        waiver of any condition or of the breach of any term contained in this Agreement
        in one or more instances shall be deemed to be or construed as a further
        or
        continuing waiver of such condition or breach or a waiver of any other condition
        or of the breach of any other term of this Agreement.

      

      7.7  Assignment.  Except
        as expressly contemplated hereby, neither this Agreement nor any of the rights,
        interests, or obligations hereunder shall be assigned by any Party hereto
        (whether by operation of Law or otherwise) without the prior written consent
        of
        each other Party.  Subject to the preceding sentence, this Agreement
        will be binding upon, inure to the benefit of, and be enforceable by the
        Parties
        and their respective successors and assigns.

      

      7.8  Notices.  All
        notices or other communications that are required or permitted hereunder
        shall
        be in writing and sufficient if delivered by hand, by facsimile transmission,
        by
        registered or certified mail, postage pre-paid, or by courier or overnight
        carrier, to the Persons at the addresses set forth below (or at such other
        address as may be provided hereunder), and shall be deemed to have been
        delivered as of the date so delivered:

      
        
          
          

        

        
          42

          
            

          

        

        
          
          

        

      

      

      
        	
                 

              	
                Parent
                  or
                  Merger Sub:

              	
                Southside
                  Bancshares, Inc.

              

      

      
        	
                 

              	
                1201
                  South
                  Beckham Avenue

              

      

      
        	
                 

              	
                P.O.
                  Box
                  1079

              

      

      
        	
                 

              	
                Tyler,
                  Texas
                  75701

              

      

      
        	
                 

              	
                Telecopy
                  Number:   (903)
                  535-4508

              

      

      
        	
                 

              	
                Attention:  B.G.
                  Hartley

              

      

      

      
        	
                
                                      
                    Copy to Counsel (which

                

              	
                 

              

      

      
        	
                 

              	
                        
                  shall not constitute notice):

              	
                Alston
&
                  Bird LLP

              

      

      
        	
                 

              	
                The
                  Atlantic
                  Building

              

      

      
        	
                 

              	
                950
                  F Street,
                  N.W.

              

      

      
        	
                 

              	
                Washington,
                  D.C. 20004

              

      

      
        	
                 

              	
                Telecopy
                  Number:  (202)
                  654-4945

              

      

      
        	
                 

              	
                Attention:  David
                  E. Brown, Jr. 

              

      

      

      
        	
                 

              	
                Company:

              	
                Fort
                  Worth
                  Bancshares, Inc.

              

      

      
        	
                 

              	
                701
                  W.
                  Magnolia

              

      

      
        	
                 

              	
                Fort
                  Worth,
                  Texas 76104

              

      

      
        	
                 

              	
                Telecopy
                  Number:   (817)
                  927-7423

              

      

      
        	
                 

              	
                Attention:  Thomas
                  B. Reynolds

              

      

      

      
        	
                
                                       
                    Copy to Counsel (which

                

              	
                 

              

      

      
        	
                 

              	
                         
                  shall not constitute notice):

              	
                Bracewell
                  & Giuliani LLP

              

      

      
        	
                 

              	
                1445
                  Ross
                  Avenue, Suite 3800

              

      

      
        	
                 

              	
                Dallas,
                  Texas
                  75202

              

      

      
        	
                 

              	
                Telecopy
                  Number:   (214)
                  468-3888

              

      

      
        	
                 

              	
                Attention:  Sanford
                  M. Brown

              

      

      

      7.9  Governing
        Law.  This Agreement shall be governed
        by and construed in accordance with the Laws of the State of Texas, without
        regard to any applicable principles of conflicts of Laws that would result
        in
        the application of the law of another jurisdiction.

      

      7.10  Counterparts.  This
        Agreement may be executed in two or more counterparts, each of which shall
        be
        deemed to be an original, but all of which together shall constitute one
        and the
        same instrument.  The exchange of copies of this Agreement and of
        signature pages by facsimile or electronic transmission shall constitute
        effective execution and delivery of this Agreement as to the Parties and
        may be
        used in lieu of the original Agreement for all purposes.  Signatures
        of the Parties transmitted by facsimile or electronic transmission shall
        be
        deemed to be their original signatures for all purposes.

      

      7.11  Captions.  The
        captions contained in this Agreement are for reference purposes only and
        are not
        part of this Agreement.

      

      7.12  Interpretations.  Neither
        this Agreement nor any uncertainty or ambiguity herein shall be construed
        or
        resolved against any Party, whether under any rule of construction or
        otherwise.  No Party to this Agreement shall be considered the
        draftsman.  The Parties acknowledge and agree that this Agreement has
        been reviewed, negotiated and accepted by all Parties and their attorneys
        and
        shall be construed and interpreted according to the ordinary meaning of the
        words used so as fairly to accomplish the purposes and intentions of the
        Parties.

      
        
          
          

        

        
          43

          
            

          

        

        
          
          

        

      

      

      7.13  Severability.  If
        any term or provision of this Agreement 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, shall remain
        in full force and effect and 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.  If any provision of
        this Agreement is so broad as to be unenforceable, the provision shall be
        interpreted to be only so broad as is enforceable.

      

      7.14  Waiver
        of Jury Trial.   THE PARTIES HEREBY
        KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHT THAT ANY PARTY MAY
        HAVE
        TO TRIAL BY JURY IN RESPECT OF ANY PROCEEDING, LITIGATION OR COUNTERCLAIM
        BASED
        ON, OR ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY
        COURSE
        OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR
        ACTIONS
        OF ANY PARTY.  IF THE SUBJECT MATTER OF ANY LAWSUIT IS ONE IN WHICH
        THE WAIVER OF JURY TRIAL IS PROHIBITED, NO PARTY TO THIS AGREEMENT SHALL
        PRESENT
        AS A NONCOMPULSORY COUNTERCLAIM IN ANY SUCH LAWSUIT ANY CLAIM BASED ON, OR
        ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS
        AGREEMENT.  FURTHERMORE, NO PARTY TO THIS AGREEMENT SHALL SEEK TO
        CONSOLIDATE ANY SUCH ACTION IN WHICH A JURY TRIAL CANNOT BE
        WAIVED.

      
        
          
          

        

        
          44

          
            

          

        

        
          
          

        

      

      IN
        WITNESS WHEREOF, each of
        the Parties has caused this Agreement to be executed by their respective
        officers thereunto duly authorized as of the day and year first above
        written.

      

      
        	 	
                SOUTHSIDE
                  BANCSHARES, INC.

                 

                 

                By: /s/   B.G.
                  Hartley

                B.G.
                  Hartley

                Chief
                  Executive
                  Officer

              
	 	
                 

                SOUTHSIDE
                  MERGER SUB, INC.

                 

                 

                By: /s/   Sam
                  Dawson

                Sam
                  Dawson

                President

                 

              
	 	
                 

                FORT
                  WORTH BANCSHARES, INC.

                 

                 

                By:  /s/   Bruce
                  M. Davis

                Bruce
                  M. Davis

                President
                  and Chief Executive
                  Officer

              

      

      

      

      

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      

       

      AMENDMENT
        NO. 1 TO AGREEMENT AND PLAN OF MERGER

       

      THIS
        AMENDMENT NO. 1 TO AGREEMENT AND PLAN OF
        MERGER (this “Amendment”), is made
        and entered into as of September 28, 2007, by and among Southside
        Bancshares, Inc., a Delaware corporation (“Parent”),
Southside Merger Sub, Inc., a Texas corporation and wholly
        owned subsidiary of Parent (“Merger Sub”), and Fort Worth
        Bancshares, Inc., a Texas corporation (the
“Company”).

       

       

      RECITALS

       

      WHEREAS,
        Parent, Merger Sub and the Company are parties to that certain Agreement
        and
        Plan of Merger, dated as of May 17, 2007 (the “Merger Agreement”),
        pursuant to which Parent agreed to acquire all of the outstanding stock of
        the
        Company by means of a merger of Merger Sub with and into the
        Company;

       

      WHEREAS,
        Section 7.5 of the Merger Agreement provides that, before the Effective Time,
        the Agreement may be amended by a subsequent writing signed by each of the
        Parties, except to the extent any such amendment would require the approval
        of
        the shareholders of the Company;

       

      WHEREAS,
        the Parties desire to amend the Merger Agreement, the Effective
        Time
        has not occurred, and the Parties have determined that the amendments to
        the
        Merger Agreement contemplated by this Amendment do not require the approval
        of
        the shareholders of the Company;

       

      NOW,
        THEREFORE, in consideration of the premises set forth herein
        and for other good and valuable consideration, the receipt and sufficiency
        of
        which are hereby acknowledged, and intending to be legally bound hereby,
        the
        Parties agree as follows:

       

      Section
        1.  Amendments.

       

      (a)  Section
        1.7 of the
        Merger Agreement is hereby amended by striking out Section 1.7 in its entirety
        and by substituting in lieu thereof the following:

       

      “1.7           Company
        Options and Warrants.  No later than five Business Days prior to
        the Effective Time, the Company shall take all actions necessary to either
        (a)
        cause each outstanding Company Option or Company Warrant to be exercised
        in
        accordance with its terms; provided, that, the exercise of Company Options
        or
        Company Warrants shall not cause an adjustment to the Per Share Purchase
        Price
        pursuant to Section 1.4(c) hereof, or (b) terminate each outstanding Company
        Option and Company Warrant.  Each Company Option and Company Warrant
        that is not exercised prior to five Business Days prior to the Effective
        Time
        shall be terminated and converted into the right to receive an amount in
        cash,
        without interest, equal to the number of shares of Company Common Stock that
        are
        the subject of each such Company Option or Company Warrant multiplied by
        the
        difference between (i) the Per Share Purchase Price and (ii) the exercise
        price
        of such Company Option or Company Warrant (the “Option Termination
        Payment”).  No later than five Business Days prior to the Effective
        Time, the Company shall also take all actions necessary to terminate the
        Company
        Stock Plans as of no less than five Business Days prior to the Effective
        Time
        and to cause the provisions in any other Company Benefit Plan providing for
        the
        issuance, transfer or grant of any capital stock of the Company or any interest
        in respect of any capital stock of the Company to terminate and be of no
        further
        force and effect as of no less than five Business Days prior to the Effective
        Time.  The Company shall ensure that no later than five Business Days
        prior to the Effective Time no holder of any Company Option or Company Warrant
        or any participant in any Company Stock Plan or other Company Benefit Plan
        shall
        have any right thereunder to acquire any capital stock of the
        Parties.

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      (b)  Section
        5.2(i) of
        the Merger Agreement is hereby amended by striking out Section 5.2(i) in
        its
        entirety and by substituting in lieu thereof the following:

       

      “(i)           Employment
        Agreements.  (i) The employment agreements between the Company and
        each of the persons listed in Section 5.2(i) of the Company Disclosure Letter
        (other than Deborah J. Coke) shall have been terminated, (ii) the Company
        shall
        have paid the change in control bonuses due thereunder in full (to persons
        other
        than Deborah J. Coke), and (iii) each such person (other than Deborah J.
        Coke)
        shall have entered into an Employment Agreement in substantially the form
        attached as Exhibit D hereto.”

       

      (c)  Section
        5.2 of the
        Merger Agreement is hereby amended by adding the following immediately following
        Section 5.2(l):

       

      “(m)           Settlement
        Agreement.  Parent, Merger Sub, the Company, the Bank and Deborah
        J. Coke shall have entered into a settlement agreement with respect to the
        complaint, styled Deborah Coke v. Southside Bancshares, Inc., Southside
        Merger Sub, Inc., Fort Worth National Bank and Fort Worth Bancshares, Inc.,
        Cause No. 348-225567-07, filed in the District Court for Tarrant County,
        Texas,
        on August 14, 2007.

       

      Section
        2.  Deborah
        J. Coke
        Settlement.  The Parties acknowledge that Parent, Merger Sub, the
        Company, the Bank and Deborah J. Coke (“Coke”), a former employee of the
        Bank, have entered into a settlement agreement (the “Settlement
        Agreement”) with respect to the complaint, styled Deborah Coke v.
        Southside Bancshares, Inc., Southside Merger Sub, Inc., Fort Worth National
        Bank
        and Fort Worth Bancshares, Inc., Cause No. 348-225567-07, filed in the
        District Court for Tarrant County, Texas, on August 14, 2007 (the
“Complaint”).  A signed copy of the Settlement Agreement is
        attached hereto as Schedule 1.  ’  With respect to
        the Complaint and the Settlement Agreement, the Parties agree as
        follows:

       

      
        
          
          

        

        
          2

          
            

          

        

        
          
          

        

      

      (a)  The
        Settlement
        Agreement contains all of the agreements and understandings between the parties
        thereto with respect to the Complaint, and the Parties have made, and hereby
        make, no additional promises, representations or warranties whatsoever, express
        or implied, not contained in this Amendment, with respect to the Complaint
        or
        the Settlement Agreement. ’

       

      (b)  The
        formal
        dismissal of the Complaint prior to the Closing shall not constitute a condition
        to Closing, and the fact that the Complaint shall not have been formally
        dismissed shall not constitute  a breach of or default under the
        Agreement; and

       

      (c)  The
        termination of
        Coke’s employment with the Bank does not constitute a failure to satisfy a
        condition precedent to the Closing or a breach of or default under the
        Agreement.

       

      Section
        3.  Closing
        Date.  The Parties agree that the Closing shall be consummated not
        earlier than the eighth (8th) day
        following the
        execution of the Settlement Agreement and not later than Tuesday, October
        23,
        2007, on any such date at 10:00 a.m., Texas time, at the offices of Bracewell
        & Giuliani LLP, 1445 Ross Avenue, Suite 3800, Dallas, Texas
        75202.

       

      Section
        4.  Confirmation.  Except
        as specifically set forth herein, all other terms and conditions of the Merger
        Agreement shall remain unmodified and in full force and effect, the same
        being
        confirmed, ratified, reaffirmed and republished hereby.

       

      Section
        5.  Defined
        Terms.  Capitalized terms not defined herein shall have the
        meanings assigned them in the Merger Agreement.

       

      Section
        6.  Counterparts.  This
        Amendment may be executed in two or more counterparts, each of which shall
        be
        deemed an original, but all of which together shall constitute one and the
        same
        instrument.  The exchange of copies of this Amendment and of signature
        pages by facsimile or electronic transmission shall constitute effective
        execution and delivery of this Agreement as to the Parties and may be used
        in
        lieu of the original Amendment for all purposes.  Signatures of the
        Parties transmitted by facsimile or electronic transmission shall be deemed
        to
        be their original signatures for all purposes.

       

      

      

      
        
          
          

        

        
          3

          
            

          

        

        
          
          

        

      

      IN
        WITNESS
        WHEREOF, each of the Parties has caused this Amendment to be executed
        by their respective officers thereunto duly authorized as of the day and
        year
        first above written.

      

      
        	 	
                SOUTHSIDE
                  BANCSHARES, INC.

                 

                By: /s/   B.G.
                  Hartley

                B.G.
                  Hartley

                Chief
                  Executive
                  Officer

              
	 	
                 

                SOUTHSIDE
                  MERGER SUB, INC.

                 

                By:
                  /s/   Sam Dawson

                Sam
                  Dawson

                President

              
	 	
                 

                FORT
                  WORTH BANCSHARES, INC.

                 

                By:
                  /s/   Bruce M. Davis

                Bruce
                  M. Davis

                President
                  and Chief Executive
                  Officer

              

      

      

      

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      SCHEDULE
        1

      

      Executed
        Settlement
        Agreementexh10-5.htm

    
      Exhibit
        10.5

       

      CONFIDENTIAL
        MATERIALS OMITTED AND FILED SEPARATELY WITH

      

      THE
        SECURITIES AND EXCHANGE COMMISSION. ASTERISKS DENOTE OMISSIONS

      

      AMENDMENT
        NO. 1 TO

      PRODUCT
        LICENSE AND ASSIGNMENT AGREEMENT

      

      This
        Amendment No. 1 to that certain Product License and Assignment Agreement
        (this
“Amendment”) is made and entered into as of August 30, 2007 by and among CYTOGEN
        CORPORATION, a Delaware corporation having an address at 650 College Road
        East,
        Suite 3100, Princeton, New Jersey 08540, United States (“Cytogen”),
        INPHARMA AS, a Norwegian company having an address at Pb 2030 (Konnerudgt.
        27),
        3003 Drammen, Norway (“Inpharma Norway”),  and INPHARMA, INC.,
        a Delaware corporation having an address at 101 Federal Street, Suite 1900,
        Boston, Massachusetts 02110 (“Inpharma USA,” together with Inpharma
        Norway, “Inpharma”).

      

      RECITALS

      

      
        	
                A.

              	
                Cytogen
                  and Inpharma entered into a Product License and Assignment Agreement
                  dated
                  as of October 11, 2006 (the “License
                  Agreement”).

              

      

      

      
        	
                B.

              	
                Cytogen
                  and Inpharma wish to amend the terms of the License Agreement as
                  set forth
                  below in accordance with Section 9.05 of the License
                  Agreement.

              

      

      

      NOW,
        THEREFORE, in consideration of the foregoing, the mutual covenants and
        agreements herein contained and other good and valuable consideration, the
        receipt and adequacy of which is hereby acknowledged, the Parties, intending
        to
        be legally bound, hereby agree as follows:

      

      
        	
                 

              	
                1.

              	
                Any
                  defined terms utilized herein and not otherwise defined herein
                  shall have
                  the meaning ascribed thereto in the License
                  Agreement.

              

      

       

      
        	
                 

              	
                2.

              	
                The
                  first sentence of Section 2.04(a) is hereby amended to provide
                  in its
                  entirety as follows: “Inpharma hereby grants to Cytogen the exclusive
                  options to acquire the exclusive licenses to market, distribute,
                  sell and
                  otherwise commercialize and Exploit the Product in each of Europe
                  and Asia
                  (the “Options”).”

              

      

       

      
        	
                 

              	
                3.

              	
                Section
                  3.04 of the License Agreement is hereby amended to provide in its
                  entirety
                  as follows:

              

      

       

      Section
        3.04   Option Payments.

       

      Cytogen
        shall pay Inpharma the following consideration for the Options granted under
        Section 2.04(a):

       

      (a)           As
        consideration for the grant of the Option, on the Effective Date Cytogen
        shall
        pay Inpharma a fee of [**] (the “Upfront Option
        Fee”).   The exercise price for the option for Asia shall be
        [**], against which [**] of the Upfront Option Fee shall be
        credited.  Cytogen may, at its sole discretion, exercise its Option
        for either Europe or Asia or both territories, and the fees set forth above
        shall be independent of each other.

       

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

       

      (b)           If
        Cytogen exercises the Option for Asia, future milestone payments shall be
        payable by Cytogen to Inpharma as follows:

       

      (i)           Cytogen
        shall make a one-time additional payment of [**] to Inpharma if and when
        Net
        Sales to third parties in Asia equal or exceed [**] in any Year for the first
        time;

       

      (ii)          Cytogen
        shall make a one-time additional payment of [**] to Inpharma if and when
        Net
        Sales to third parties in Asia reach [**] in any Year for a second time;
        and

       

      (iii)         Cytogen
        shall pay to Inpharma [**] of any upfront license fees and milestone payments
        (but not royalties) received by Cytogen or its Affiliates in consideration
        of
        the grant by Cytogen or its Affiliates of the license or equivalent right
        to
        Exploit the Product in any country or countries in Asia, to the extent such
        upfront license fees and milestone payments are in excess of the amount paid
        by
        Cytogen to Inpharma for such rights pursuant to 3.04(a).  For the
        purposes of this Section 3.04, the term “upfront license fees” means
        [**].

       

      (c)           The
        exercise price for the option for Europe shall be [**] which represents [**]
        of
        the upfront license fees received by Cytogen or its Affiliates in consideration
        of the grant by Cytogen or its Affiliates of the license or equivalent right
        to
        Exploit the Product in any country or countries in Europe.

       

      (d)           Cytogen
        shall pay to Inpharma [**] of any sales milestone payments (but not royalties)
        received by Cytogen or its Affiliates in consideration of the grant by Cytogen
        or its Affiliates of the license or equivalent right to Exploit the Product
        in
        any country or countries in Europe.  The Parties agree that the sales
        milestones payments receivable by Cytogen or its Affiliates for the grant
        of
        rights in Europe are as follows:

       

      (i)           a
        one-time additional payment of [**] to Cytogen in the event net sales of
        the
        Product by the licensee to unaffiliated third parties within Europe in any
        twelve-month period reach [**] for the first time;

       

      (ii)           a
        one-time additional payment of [**] to Cytogen in the event net sales of
        the
        Product by the licensee to unaffiliated third parties within Europe in any
        twelve-month period reach [**] for the first time;

       

      (iii)           a
        one-time additional payment of [**] to Cytogen in the event net sales of
        the
        Product by the licensee to unaffiliated third parties within Europe in any
        twelve-month period reach [**] for the first time;

       

      (iv)           a
        one-time additional payment of [**] to Cytogen in the event net sales of
        the
        Product by the licensee to unaffiliated third

       

       

       

      
        
          
          

        

        
          2

          
            

          

        

        
          
          

        

      

       

       

       parties
        within Europe in any twelve-month period reach [**] for the first time;
        and

       

      (v)           a
        one-time additional payment of [**] to Cytogen in the event net sales of
        the
        Product by the licensee to unaffiliated third parties within Europe in any
        twelve-month period reach [**] for the first time.

       

      (e)           The
        amounts payable by Cytogen to Inpharma under Sections 3.04 (c) and (d) shall
        not
        exceed [**] in the aggregate.

       

      (f)           In
        the event the Options for Europe or Asia is not exercised by Cytogen and
        any of
        such Options expire, Cytogen shall provide to Inpharma [**].

       

      
        	
                 

              	
                4.

              	
                The
                  Parties understand and agree that the execution of this Amendment
                  does not
                  extend the term of the Options set forth in Section 2.04 of the
                  License
                  Agreement beyond [**].

              

      

       

      
        	
                 

              	
                5.

              	
                Except
                  as expressly provided in this Amendment, all other terms, conditions
                  and
                  provisions of the License Agreement shall continue in full force
                  and
                  effect as provided therein. Any reference to the License Agreement
                  in any
                  instrument or agreement shall mean and include the License Agreement
                  as
                  amended by this Amendment.  In the event of any conflict between
                  the terms of the License Agreement and the terms of this Amendment,
                  the
                  terms of this Amendment shall govern and
                  control.

              

      

       

      
        	
                 

              	
                6.

              	
                The
                  License Agreement and this Amendment constitute the entire understanding
                  between the parties, except as expressly set forth herein, and
                  supersede
                  any contracts, agreements or understanding (oral or written) of
                  the
                  parties with respect to the subject matter hereof.  No term of
                  this Amendment may be amended except upon written agreement of
                  both
                  parties.

              

      

       

      
        	
                 

              	
                7.

              	
                This
                  Amendment may be executed in one or more counterparts, each of
                  which will
                  be deemed an original but all of which together will constitute
                  one and
                  the same instrument.

              

      

       

      IN
        WITNESS WHEREOF, Cytogen and Inpharma have entered into this Amendment effective
        as of the date first set forth above.

      

      CYTOGEN
        CORPORATION

      

      By
/s/
        Michael D. Becker

      Michael
        D. Becker

      President
        and Chief Executive Officer

      

      

      INPHARMA
        AS

      

      By
/s/
        Asbjorn R. Hansen

      Name:
        Asbjorn R. Hansen

      Title:
        President and CEO

       

       

      
        
          
          

        

        
          3

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