AGREEMENT AND PLAN OF MERGER AMONG KEYSTONE FINANCIAL CORPORATION

Agreement and Plan of Merger

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KEYSTONE FINANCIAL CORPORATION | FIRSTBANK CORPORATION

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Title: AGREEMENT AND PLAN OF MERGER AMONG KEYSTONE FINANCIAL CORPORATION
Governing Law: Michigan Date: 5/13/2005
Industry: Regional Banks Law Firm: Varnum, Riddering, Schmidt & Howlett Sector: Financial

Exhibit 2.1

AGREEMENT AND PLAN OF MERGER AMONG

KEYSTONE FINANCIAL CORPORATION

AND

FIRSTBANK CORPORATION

DATED AS OF MAY 11, 2005

Table of Contents


Preliminary Statement		1

ARTICLE I - THE TRANSACTION		1

1.1 Merger		1
1.2 The Closing		2
1.3 Effective Time of Merger		2
1.4 Additional Actions		2
1.5 Surviving Corporation		2

ARTICLE II - CONVERSION AND EXCHANGE OF SHARES		3

2.1 Conversion of Shares		3
2.2 Adjustments		4
2.3 Increase in Outstanding Shares of Keystone Common Stock		4
2.4 Cessation of Shareholder Status		5
2.5 Surrender of Old Certificates and Payment of Merger Consideration		5
2.6 Stock Options and Restricted Stock		7

ARTICLE III - ACQUIRER'S REPRESENTATIONS AND WARRANTIES		7

3.1 Authorization; No Conflicts, Etc		7
3.2 Organization and Good Standing		8
3.3 Subsidiaries		8
3.4 Capital Stock		9
3.5 Acquirer Common Stock		9
3.6 Financial Statements		9
3.7 Absence of Undisclosed Liabilities		10
3.8 Absence of Material Adverse Changes		10
3.9 Legal Proceedings		10
3.10 Regulatory Filings		10
3.11 No Indemnification Claims		11
3.12 Conduct of Business		11
3.13 Proxy Statement, Etc		12
3.14 Agreements with Bank Regulators		12
3.15 Tax Matters		13
3.16 Environmental Matters		13
3.17 Investment Bankers and Brokers		14
3.18 Necessary Capital		14
3.19 Reorganization		14
3.20 Allowance for Loan Losses		14

Table of Contents (continued)


3.21 Public Communications; Securities Offering		14
3.22 Fairness Opinion		15

ARTICLE IV - KEYSTONE REPRESENTATIONS AND WARRANTIES		15

4.1 Authorization, No Conflicts, Etc		15
4.2 Organization and Good Standing		16
4.3 Subsidiaries		16
4.4 Capital Stock		17
4.5 Financial Statements		17
4.6 Absence of Undisclosed Liabilities		18
4.7 Absence of Material Adverse Changes		18
4.8 Legal Proceedings		18
4.9 Regulatory Filings		19
4.10 No Indemnification Claims		19
4.11 Conduct of Business		19
4.12 Proxy Statement, Etc		20
4.13 Agreements with Bank Regulators		20
4.14 Tax Matters		21
4.15 Title to Properties		22
4.16 Condition of Real Property		22
4.17 Real and Personal Property Leases		23
4.18 Required Licenses, Permits, Etc		24
4.19 Material Contracts and Changes of Control		24
4.20 Certain Employment Matters		25
4.21 Employee Benefit Plans		27
4.22 Environmental Matters		28
4.23 Duties as Fiduciary		30
4.24 Investment Bankers and Brokers		30
4.25 Fairness Opinion		30
4.26 Keystone-Related Persons		30
4.27 Change in Business Relationships		31
4.28 Insurance		31
4.29 Books and Records		31
4.30 Loan Guarantees		32
4.31 Events Since January 1, 2005		32
4.32 Allowance for Loan Losses		33
4.33 Loans and Investments		33
4.34 Loan Origination and Servicing		33
4.35 Public Communications; Securities Offering		33
4.36 No Insider Trading		33
4.37 Joint Ventures; Strategic Alliances		34
4.38 Policies and Procedures		34

Table of Contents (continued)


ARTICLE V - COVENANTS PENDING CLOSING		34

5.1 Disclosure Statements; Additional Information		34
5.2 Changes Affecting Representations		34
5.3 Keystone's Conduct of Business Pending the Effective Time		35
5.4 Approval of Plan of Merger by Keystone Shareholders		38
5.5 Regular Dividends		39
5.6 Technology-Related Contracts		39
5.7 Indemnification and Insurance		40
5.8 Exclusive Commitment		41
5.9 Other Filings		42
5.10 Miscellaneous Agreements and Consents		42
5.11 Registration Statement		42
5.12 Access and Investigation		42
5.13 Confidentiality		43
5.14 Environmental Investigation		44
5.15 Termination of Employee Benefit Plan		44
5.16 Bank		45
5.17 Public Announcements		45
5.18 Regulatory and Shareholder Approvals		45
5.19 Update of Titles, Rights, Etc		45
5.20 Sarbanes-Oxley Certification of Financial Statements		45
5.21 Exchange of Financial Information		45
5.22 Certain Employment Covenants		46
5.23 Executive Agreements		46
5.24 Board Title, Board Seat and Local Board		47
5.25 Agreement to Vote Shares		47
5.26 Affiliates		47
5.27 NASDAQ Approval		47

ARTICLE VI - CONDITIONS PRECEDENT TO ACQUIRER'S OBLIGATIONS		47

6.1 Renewal of Representations and Warranties, Etc		47
6.2 Opinion of Legal Counsel		48
6.3 Required Regulatory Approvals		48
6.4 Shareholder Approval		48
6.5 Order, Decree, Etc		48
6.6 Proceedings		48
6.7 Certificate as to Outstanding Shares		48
6.8 Change of Control Waivers		48
6.9 Other Agreements		49

iii

Table of Contents (continued)


6.10 Fairness Opinion		49
6.11 Registration Statement		49
6.12 NASDAQ Approval		49

ARTICLE VII - CONDITIONS PRECEDENT TO KEYSTONE'S OBLIGATIONS		49

7.1 Renewal of Representations and Warranties, Etc		49
7.2 Opinion of Legal Counsel		50
7.3 Required Regulatory Approvals		50
7.4 Shareholder Approval		50
7.5 Order, Decree, Etc		50
7.6 Fairness Opinion		50
7.7 Registration Statement		50
7.8 NASDAQ Approval		50
7.9 Other Agreements		50

ARTICLE VIII - ABANDONMENT OF MERGER		51

8.1 Mutual Abandonment		51
8.2 Upset Date		51
8.3 Acquirer's Rights to Terminate		51
8.4 Keystone's Rights to Terminate		51
8.5 Effect of Termination		52

ARTICLE IX - MISCELLANEOUS		53

9.1 "Material Adverse Effect" Defined		53
9.2 "Knowledge" Defined; "Person" Defined; "Affiliate" Defined		54
9.3 Nonsurvival of Representations, Warranties and Agreements		54
9.4 Amendment		54
9.5 Expenses		54
9.6 Specific Enforcement		54
9.7 Jurisdiction; Venue; Jury		54
9.8 Waiver		54
9.9 Notices		55
9.10 Governing Law		55
9.11 Entire Agreement; Amendment		55
9.12 Third Party Beneficiaries		55
9.13 Counterparts		56
9.14 Headings, Etc		56
9.15 Calculation of Dates and Deadlines		56
9.16 Severability		56
9.17 Further Assurances; Privileges		56

GLOSSARY OF TERMS

Acquisition Proposal, 41
Acquisition Transaction, 41
Acquirer, 1
Acquirer Common Stock, 3
Acquirer Subsidiary, 51
Acquirer's Disclosure Statement, 7
Acquirer's Financial Statements, 9
Affiliate, 54
Affiliated, 54
Austin, 15
Bank, 15
Bank Consolidation, 44
Bank Consolidation Agreement, 44
Call Reports, 10
CERCLA, 14
Certificate of Merger, 2
Closing, 2
Closing Equity, 4
Code, 1
Constituent Corporation, 1
Control, 16
Designated Contracts, 49
Donnelly, 30
Effective Time, 2
Employee Benefit Plan, 27
Employment-Related Payments, 26
Environmental Laws, 14
ERISA, 27
Exchange Act, 51
Exchange Agent, 5
Excess Parachute Payment, 22
Federal Bank Holding Company Act, 8
Federal Reserve Board, 8
Fee Termination Event, 53
Fiduciary Event, 39
GAAP, 9
Hazardous Substance, 14
HIPAA, 11
Insurance Amount, 40
IRS, 21
Keystone, 1
Keystone Common Stock, 3

Keystone Disclosure Statement, 15
Keystone's Financial Statements, 17
Keystone's Leased Real Property, 22
Keystone's Leases, 23
Keystone Plan, 44
Keystone's Real Property, 22
Keystone Related Person, 30
Knowledge, 54
Merger, 1
Merger Consideration, 3
Michigan Act, 1
Michigan Banking Code, 8
Minimum Equity, 4
Nasdaq, 2
PBGC, 27
Per Share Cash Consideration, 3
Per Share Merger Consideration, 3
Per Share Stock Consideration, 3
Permitted Issuances, 5
Person, 54
Plan of Merger, 1
Premises, 28
Prospectus and Proxy Statement, 12
Old Certificates, 5
Option Plan, 4
Registration Statement, 12
Restricted Shares, 7
Shareholder Meeting, 12
Shareholder Meetings, 12
Subsidiary, 15
Subsidiaries, 15
Superior Proposal, 39
Surviving Corporation, 1
Tax Returns, 21
Taxes, 20
Technology-Related Contracts, 39
Termination Fee, 53
Total Merger Consideration, 4
Transaction Documents, 12
Unexercised Options, 7
Upset Date, 2

AGREEMENT AND PLAN OF MERGER

This Agreement and Plan of Merger (this “ Plan of Merger ”) is made as of May 11, 2005, by and among Keystone Financial Corporation, a Michigan corporation, located at 107 West Michigan Avenue, Kalamazoo, Michigan 49007 (“ Keystone ”) and Firstbank Corporation, a Michigan corporation, located at 311 Woodworth, Alma, Michigan 48801 (“ Acquirer ”).

PRELIMINARY STATEMENT

1. The Boards of Directors of Keystone and Acquirer have determined that it is in the best interests of their respective companies and their shareholders to consummate the strategic business combination transaction provided for in this Plan of Merger in which Keystone will, on the terms and subject to the conditions set forth in this Plan of Merger, merge with and into Acquirer (the “ Merger ”), so that Acquirer is the surviving corporation in the Merger; and

2. For federal income tax purposes, it is intended that the Merger shall qualify as a reorganization under the provisions of Section 368(a) of the Internal Revenue Code of 1986, as amended (the “ Code ”), and this Agreement is intended to be and is adopted as a “Plan of Reorganization” for the purposes of Section 354 and 361 of the Code; and

3. The parties desire to make certain representations, warranties and agreements in connection with the Merger and also to prescribe certain conditions to the Merger.

In consideration of the representations, warranties, mutual covenants and agreements contained in this Plan of Merger, the parties agree as follows:

ARTICLE I – THE TRANSACTION

Subject to the terms and conditions of this Plan of Merger, the Merger shall be carried out in the following manner:

1.1 Merger. Subject to the terms and conditions herein, at the Effective Time (defined below), Keystone shall be merged with and into Acquirer and the separate corporate existence of Keystone shall then cease. Keystone and Acquirer are each sometimes referred to as a “ Constituent Corporation ” prior to the Merger. At the Effective Time, the Constituent Corporations shall become a single corporation, which corporation shall be Acquirer (the “ Surviving Corporation ”). The effect of the Merger upon each of the Constituent Corporations and the Surviving Corporation shall be as provided in Chapter Seven of the Michigan Business Corporation Act of the State of Michigan, as amended (the “ Michigan Act ”) with respect to the merger of domestic corporations. If Acquirer is advised by its independent tax accountants that a different corporate structure for the transactions contemplated by this Plan of Merger would be more advantageous to Acquirer from a financial, tax, or accounting perspective, then Keystone shall cooperate with Acquirer to effect a restructuring of these transactions provided, that such restructuring is presented prior to the Shareholders’ Meeting (defined below), the Merger continues to qualify as a tax free reorganization under the Internal Revenue Code, the Effective Time of the Merger is not delayed by more than thirty (30) days and the alternative structure does not alter or change the amount of consideration or kind of consideration to be issued to Keystone’s shareholders.

1.2 The Closing. The “ Closing ” for the Merger shall be held at such time, date, and location as may be mutually agreed by the parties. In the absence of such agreement, the Closing shall be held at the offices of Varnum, Riddering, Schmidt & Howlett, LLP, commencing at 11 a.m. on a date specified by Keystone and Acquirer, but no later than upon five (5) Business Days’ (defined below) written notice after the last to occur of the following events: (a) receipt of all consents and approvals of government regulatory authorities, and the expiration of all related statutory waiting periods, legally required to consummate the Merger; and (b) approval of this Plan of Merger by the shareholders of Keystone. Scheduling or commencing the Closing shall not, however, constitute a waiver of the conditions precedent of either Acquirer or Keystone as set forth in Articles VI and VII, respectively. Upon completion of the Closing, Keystone and Acquirer shall each promptly execute and file the certificate of merger as required by the Michigan Act to effect the Merger (the “ Certificate of Merger”). No party shall take any action to revoke the Certificate of Merger after its filing without the written consent of the other party.

1.3 Effective Time of Merger. The Merger shall be consummated following the Closing by filing the Certificate of Merger in the manner required by law. The “ Effective Time ” of the Merger shall be as of the time and date when the Merger becomes effective as set forth in the Certificate of Merger, but not later than five (5) Business Days after the Closing occurs. As used in this Plan of Merger, the term “Business Day” means any day other than a day on which The Nasdaq Stock Market (“ Nasdaq ”) is closed. Keystone and Acquirer agree that the Effective Time shall not be later than November 30, 2005 (“ Upset Date ”), unless mutually agreed by Keystone and Acquirer.

1.4 Additional Actions. At any time after the Effective Time, the Surviving Corporation may determine that deeds, assignments, or assurances or any other acts are necessary or desirable to vest, perfect, or confirm, of record or otherwise, in the Surviving Corporation its rights, title, or interest in, to, or under any of the rights, properties, or assets of Keystone acquired or to be acquired by the Surviving Corporation as a result of, or in connection with, the Merger, or to otherwise carry out the purposes of this Plan of Merger. Keystone grants to the Surviving Corporation an irrevocable power of attorney to execute and deliver all such deeds, assignments, and assurances and to do all acts necessary, proper, or convenient to accomplish this purpose. This irrevocable power of attorney shall only be operative following the Effective Time and at such time, the officers and directors of the Surviving Corporation shall be fully authorized in the name of Keystone to take any and all such actions contemplated by this Plan of Merger.

1.5 Surviving Corporation. As of and immediately after the Effective Time, the Surviving Corporation shall have the following attributes until they are subsequently changed in the manner provided by law.

1.5.1 Name. The name of the Surviving Corporation shall be Acquirer.

1.5.2 Articles of Incorporation. The articles of incorporation of the Surviving Corporation shall be the articles of incorporation of Acquirer as in effect immediately prior to the Effective Time; without change.

1.5.3 Bylaws . The bylaws of the Surviving Corporation shall be the bylaws of Acquirer as in effect immediately prior to the Effective Time, without change.

1.5.4 Officers . The officers of Acquirer immediately prior to the Effective Time shall be the officers of the Surviving Corporation and shall hold with the Surviving Corporation the same offices as they hold with Acquirer.

1.5.5 Directors. Subject to Section 5.22, the directors of Acquirer immediately prior to the Effective Time shall be the directors of the Surviving Corporation.

ARTICLE II —CONVERSION AND EXCHANGE OF SHARES

Subject to the terms and conditions of this Plan of Merger and as a result of the Merger, all common stock, without par value, of Keystone (“ Keystone Common Stock ”) shall be converted into shares of common stock of Acquirer (“ Acquirer Common Stock ”) as follows:

2.1 Conversion of Shares . As of the Effective Time:

2.1.1 Conversion of Keystone Common Stock . Each Share of Keystone Common Stock issued and outstanding immediately prior to the Effective Time shall be converted into the right to receive the Per Share Merger Consideration (defined below). Per Share Merger Consideration shall mean the Per Share Cash Consideration (defined below) and the Per Share Stock Consideration (defined below). Per Share Stock Consideration shall mean one (1) share of validly issued, fully paid and non-assessable Acquirer Common Stock subject to adjustments set forth in Section 2.1.5, 2.2 and 2.3. Per Share Cash Consideration shall mean the cash amount of $19.35 subject to adjustments set forth in Section 2.1.5, 2.2 and 2.3 paid in the form of a check.

2.1.2 No Conversion of Acquirer's Common Stock . Each share of Acquirer Common Stock outstanding immediately prior to the Effective Time shall continue to be outstanding without any change.

2.1.3 Stock Held by Acquirer. Each share of Keystone Common Stock, if any, held by Acquirer or any of its subsidiaries for its own account, and not in a fiduciary or representative capacity for a person other than Acquirer, or any of its subsidiaries, shall be canceled and no consideration shall be payable with respect to any such share.

2.1.4 Keystone Common Stock No Longer Outstanding. Each share of Keystone Common Stock outstanding immediately prior to the Effective Time shall, as of the Effective Time, no longer be outstanding and each certificate previously representing such shares of Keystone Common Stock shall thereafter represent only the right to receive the Merger Consideration, together with any dividends and other distributions payable as provided in Section 2.6.4, but subject to payment of cash in lieu of fractional shares.

2.1.5 Minimum Equity. "Closing Equity" shall mean the total Shareholder's equity of Keystone as determined under GAAP as of the end of the month immediately preceding the Closing Dateexcluding transaction costs of up to $600,000 and excluding any conforming adjustments requested by Acquirer. If the Closing Equity is less than $11,800,000 ( “Minimum Equity” ), then the Total Merger Consideration(defined below) shall be reduced dollar for dollar by the difference between the Minimum Equity and the Closing Equity . If the Closing Equity is greater than or equal to the Minimum Equity, then there will not be an adjustment to the Total Merger Consideration pursuant to this sub-section 2.1.5. “Total Merger Consideration” shall mean the Total per Share Stock Consideration and Per Share Cash Consideration for all issued and outstanding shares of Keystone Common Stock, plus the cash amount to be paid in settlement of Keystone’s unexercised options.

2.2 Adjustments . The Per Share Stock Consideration and Per Share Cash Consideration and the related computations described in Section 2.1.1 shall be adjusted in the manner provided in this Section upon the occurrence of any of the following events:

2.2.1 Stock Dividends. If either Keystone or Acquirer changes (or establishes a record date for changing) the number of shares of Acquirer Common Stock or the number of shares of Keystone Common Stock, issued and outstanding as of the date of this Plan of Merger as a result of a stock dividend, stock split, recapitalization, reclassification, combination or similar transaction with respect to such issued and outstanding shares, and the record date for such transaction is after the date of this Plan of Merger and prior to the Effective Time, then the Per Share Stock Consideration shall be appropriately and proportionately adjusted as such that the actual consideration to be paid by Acquirer to holders of shares of Keystone Common Stock pursuant to Section 2.1.1, above, would be the same as would have been paid if the Effective Time had been the close of business on the date of this Plan of Merger.

2.2.2 Authorized Issuances. Notwithstanding any other provisions of this Section, no adjustment shall be made in the event of the issuance of additional shares of Acquirer Common Stock pursuant to the dividend reinvestment plan of Acquirer, if any, pursuant to the exercise of stock options awarded under director or employee stock option plans of Acquirer, or upon the grant or sale of shares or rights to receive shares to, or for, the account of Acquirer’s directors or employees pursuant to their restricted stock, deferred stock compensation, thrift, employee stock purchase and other compensation or benefit plans of Acquirer, if any.

2.2.3 Changes in Capital. Subject only to making any adjustment provided above in related computations prescribed in this Section, nothing contained in this Plan of Merger shall preclude Acquirer from amending its articles of incorporation to change its capital structure or from issuing additional shares of Acquirer Common Stock, preferred stock, shares of other capital stock or securities that are convertible into shares of capital stock.

2.3 Increase in Outstanding Shares of Keystone Common Stock. If the number of shares of Keystone Common Stock outstanding is greater than 578,678 for any reason whatsoever (whether or not such increase constitutes a breach of this Plan of Merger), other than as a result of Permitted Issuances (defined below); then the Per Share Stock Consideration and Per Share Cash Consideration shall be adjusted by multiplying it by a fraction (a) the numerator of which shall be 578,678, and (b) the denominator of which shall be the total number of shares of Keystone Common Stock outstanding as of the Effective Time of the Merger, excluding Permitted Issuances (“ Permitted Issuances ” include and are limited to the issuance of not more than 33,500 shares upon exercise of currently outstanding Keystone stock options awarded under the Keystone Financial Corporation Stock Option and Restricted Stock Plan dated June 1, 2000 (the “ Option Plan ”)).

2.4 Cessation of Shareholder Status . As of the Effective Time, each record holder of shares of Keystone Common Stock outstanding immediately prior to the Effective Time shall cease to be a shareholder of Keystone and shall have no rights as a shareholder of Keystone. Each stock certificate representing shares of Keystone Common Stock outstanding immediately prior to the Effective Time (“ Old Certificates ”) shall then be considered to represent the right to receive the Merger Consideration as provided in this Plan of Merger.

2.5 Surrender of Old Certificates and Payment of Merger Consideration. After the Effective Time, Old Certificates shall be exchangeable by holders for the Merger Consideration to which such holders shall be entitled in the following manner:

2.5.1 Available Shares and Funds. At the Effective Time, Acquirer shall make available to Exchange Agent an amount of cash and a number of shares of Acquirer Common Stock sufficient to make payments of the Merger Consideration for each outstanding share of Keystone Common Stock.

2.5.2 Transmittal Materials. As soon as practicable after the Effective Time, but no later than five (5) Business Days after the Closing Date, Acquirer shall send or cause to be sent to each record holder of Keystone Common Stock as of the Effective Time transmittal materials for use in exchanging that holder’s Old Certificates and receiving the Merger Consideration.

2.5.3 Exchange Agent . On or prior to the Effective Time, Acquirer will deliver to Registrar and Transfer Company, or such other bank or trust company as Acquirer may designate (the “Exchange Agent” ), written notice of the number of shares of Acquirer Common Stock issuable in the Merger and a commitment to pay the amount of cash payable in the Merger when and as determined.

The Exchange Agent shall not be entitled to vote or exercise any rights of ownership with respect to such shares of Acquirer Common Stock, except that it shall receive and hold all dividends or other distributions paid or distributed with respect to such shares for the account of the record holders entitled to such shares.

2.5.4 New Stock Registrations. Acquirer shall cause the Exchange Agent to promptly cause to be paid to the persons entitled thereto a check in the amount of which the persons are entitled, after giving effect to any required tax withholding, and register the shares of Acquirer Common Stock issuable to former Keystone shareholders of record in such manner, in the names and to the addresses that appear on Keystone’s stock records as of the Effective Time, or in such other name or to such other address as may be specified by the shareholder of record in transmittal documents received by the Exchange Agent; provided, that with respect to each former Keystone shareholder, the Exchange Agent shall have received all of the Old Certificates held by that shareholder, or an affidavit of loss and indemnity bond for such certificate or certificates, together with properly executed transmittal materials; and such certificates, transmittal materials, affidavits, and bonds are in a form and condition reasonably acceptable to Acquirer and the Exchange Agent.

2.5.5 Dividends Pending Surrender. Whenever a dividend is declared by Acquirer on Acquirer Common Stock that is payable to shareholders of record of Acquirer’s Common Stock as of a record date after the Effective Time, the declaration shall include dividends on all shares issuable under this Plan of Merger. No former shareholder of Keystone shall be entitled to receive a distribution of any such dividend until the Exchange Agent has received all of that shareholders’ Old Certificates (or an affidavit of loss and indemnity bond for such certificates) pursuant to properly submitted transmittal materials. Upon the exchange of that shareholder’s Old Certificates (or an affidavit of loss and indemnity bond for such certificates), the shareholder shall be entitled to receive from Acquirer an amount equal to all such dividends (without interest thereon and less the amount of taxes, if any, that may have been imposed or paid thereon) declared and paid with respect to the shares of Acquirer Common Stock represented thereby. If such a shareholder has then elected to enroll in Acquirer’s dividend reinvestment program, such amount shall be credited as a cash purchase for investment at the plan’s next regular investment date.

2.5.6 Stock Transfers. After the Effective Time, there shall be no transfers on Keystone’s transfer books of the shares of Keystone Common Stock that were issued and outstanding immediately prior the Effective Time. If, after the Effective Time, Old Certificates are properly presented for transfer, they shall be canceled and exchanged for the shares of Acquirer Common Stock as provided in this Plan of Merger. After the Effective Time, ownership of such shares as represented by any Old Certificates may be transferred only on the stock records of Acquirer.

2.5.7 Exchange Agent's Discretion. The Exchange Agent shall have discretion to determine and apply reasonable terms and conditions as the Exchange Agent may impose to effect an orderly exchange in accordance with normal exchange practices.

2.5.8 Exchange Agent Expenses. Acquirer shall pay all charges and expenses, including those of the Exchange Agent, in connection with the payment of the Merger Consideration in exchange for the Keystone Common Stock.

2.5.9 No Fractional Shares. No certificates or scrip representing fractional shares \of Acquirer Common Stock shall be issued in the Merger upon the surrender of Old Certificates. No fractional interest in any share of Acquirer Common Stock resulting from the Merger shall be entitled to any part of a dividend, distribution or stock split with respect to shares of Acquirer Common Stock nor entitle the record holder to vote or exercise any rights of a shareholder with respect to that fractional interest. In lieu of issuing any fractional share, each holder of an Old Certificate who would otherwise have been entitled to a fractional share of Acquirer Common Stock upon surrender of all Old Certificates for exchange shall be paid an amount in cash (without interest) equal to such fraction of a share multiplied by $44.50. If the holder of record has elected to enroll in Acquirer’s dividend reinvestment program, then the cash in lieu of fractional shares shall be held for reinvestment at the plan’s next regular investment date.

2.6 Stock Options and Restricted Stock.

2.6.1 Conversion of Options. Each unexercised stock option ("Unexercised Options") under the Option Plan outstanding at the Effective Time shall become, at the Effective Time, the right to receive the cash amount equal to the product of (i) the difference between $44.50 minus the per share exercise price of Keystone Common Stock under such option, and (ii) the number of shares of Keystone Common Stock subject to such Unexercised Option, as adjusted under Section 2.2. Upon conversion of the Unexercised Option to the cash consideration determined above, all rights under such Option Plan shall terminate. No later than five (5) Business Days after the Effective Time, Acquirer shall deliver to the holder of each Unexercised Option a check in the amount of which the owners of such Unexercised Options are entitled (as determined above) after giving effect to any required tax withholding. Acquirer may request the holder of such Unexercised Option to surrender to Acquirer the agreement and any related documentation evidencing the Unexercised Options that were converted.

2.6.2 No New Options. At the Effective Time, the Option Plan shall be terminated with respect to the granting of any additional options or option rights.

2.6.3 Conversion of Restricted Stock. Each share of restricted Keystone common stock (“ Restricted Shares ”) under the option plan shall become at the Effective Time, the right to receive the cash amount equal to the product of $44.50 and the number of Restricted Shares outstanding. There are 2,208 shares of Restricted Shares outstanding.

ARTICLE III –ACQUIRER’S REPRESENTATIONS AND WARRANTIES

Except as disclosed in a correspondingly numbered section of the disclosure schedule (the “Acquirer’s Disclosure Statement ”) delivered by Acquirer to Keystone prior to the execution of this Agreement, Acquirer represents and warrants to Keystone as follows; provided, however, the disclosure in the Acquirer’s Disclosure Statement of an item or matter in response or in reference to one provision or representation shall be deemed responsive to other provisions and representations where the applicability of such item or matter to other provision(s) is reasonably apparent:

3.1 Authorization, No Conflicts, Etc.

3.1.1 Authorization of Agreement. Acquirer has the requisite corporate power and authority to execute and deliver this Plan of Merger and to consummate the Merger. This Plan of Merger and consummation of the Merger have been duly authorized by the Board of Directors of Acquirer. The Board of Directors of Acquirer have determined that this Agreement and the transactions contemplated in this Plan of Merger are in the best interests of Acquirer and its stockholders and no other corporate proceedings on the part of Acquirer are necessary to authorize this Plan of Merger or to consummate the Merger. This Plan of Merger has been duly executed and delivered by, and (assuming due authorization, execution and delivery by Keystone) constitutes valid and binding obligations of Acquirer and is enforceable against Acquirer in accordance with its terms.

3.1.2 No Conflict, Breach, Violation, Etc. The execution, delivery, and performance of this Plan of Merger by Acquirer, and the consummation of the Merger by Acquirer, do not and will not violate, conflict with, or result in a breach of: (a) any provision of Acquirer’s restated articles of incorporation or bylaws; or (b) any statute, code, ordinance, rule, regulation, judgment, order, writ, memorandum of understanding, arbitral award, decree, or injunction applicable to Acquirer or its subsidiaries, assuming the timely receipt of each of the approvals referred to in this Section.

3.1.3 Regulatory Restrictions. The execution, delivery, and performance of this Plan of Merger by Acquirer, and the consummation of the Merger by Acquirer, do not and will not violate, conflict with, result in a breach of, constitute a default under, or require any consent, approval, waiver, extension, amendment, authorization, notice, or filing under, any memorandum of understanding or similar regulatory consent agreement to which Acquirer is a party or subject, or by which Acquirer is bound or affected.

3.1.4 Required Approvals. No notice to, filing with, authorization of, exemption by, or consent or approval of, any public body or authority is necessary for the consummation of the Merger by Acquirer other than in connection or compliance with the provisions of the Michigan Act, compliance with federal and state securities laws, compliance with bylaws and rules of the NASD, and receipt of approvals required under the Bank Holding Company Act of 1956, as amended (the “ Federal Bank Holding Company Act ”), the Federal Deposit Insurance Act, as amended (the “FDIA”), and the Michigan Banking Code of 1999 (the “ Michigan Banking Code ”). Acquirer knows of no reason why the regulatory approvals referred to in this Section cannot be obtained or why the process would be materially impeded.

3.2 Organization and Good Standing . Acquirer is a corporation duly organized, validly existing, and in good standing under the laws of the State of Michigan. Acquirer has all requisite corporate power and authority to own, operate, and lease its properties and assets and to carry on its business as it is now being conducted in all material respects, and is duly licensed or qualified to do business in each jurisdiction in which the nature of the business conducted by it or the character or location of the properties and assets owned or leased by it makes such licensing or qualification necessary. Acquirer is a bank holding company duly registered as such with the Board of Governors of the Federal Reserve System (the “ Federal Reserve Board ”) under the Federal Bank Holding Company Act.

3.3 Subsidiaries . Acquirer owns, directly or indirectly, all of the common stock of its subsidiaries indicated in Acquirer’s Financial Statements (as defined below) for the quarter ended March 31, 2005 free and clear of all claims, security interests, pledges, or liens of any kind. Each of Acquirer’s subsidiaries (i) is duly organized and validly existing under the laws of its jurisdiction of organization; (ii) is duly qualified to do business and in good standing in all jurisdictions (whether federal, state, local or foreign) where its ownership or leasing of property or the conduct of its business requires it to be so qualified, and (iii) has all requisite corporate power and authority to own or lease its properties and assets and to carry on its business as now conducted, except in each of (i) through (iii) as would not be reasonably likely to have either individually or in the aggregate a Material Adverse Effect on Acquirer.

3.4 Capital Stock.

3.4.1 Classes and Shares. The authorized capital stock of Acquirer consists of 20,000,000 shares of common stock, no par value, and 300,000 shares of preferred stock, no par value.

3.4.2 No Other Capital Stock. There is no security or class of securities outstanding that represents or is convertible into capital stock of Acquirer, except (i) as described in, or as contemplated by, this Plan of Merger; (ii) stock options ordered pursuant to stock option plans for directors, officers or employees of Acquirer or its affiliate(s); (iii) provisions for the grant or sale of shares or the right to receive shares to, or for the account of, employees and directors pursuant to restricted stock, deferred stock compensation, stock purchase and other benefit plans; (iv) shares of Acquirer Common Stock issuable under agreements entered into or in connection with mergers or acquisitions of direct or indirect subsidiaries or assets and transactions approved by Acquirer’s Board of Directors or a committee of such board; and (v) shares of Acquirer Common Stock issuable under dividend reinvestment and employee stock purchase plans, if any.

3.5 Acquirer Common Stock . The shares of Acquirer Common Stock to be issued in the Merger in accordance with this Plan of Merger, when issued as contemplated by this Plan of Merger, will be validly issued, fully paid, and nonassessable shares.

3.6 Financial Statements.

3.6.1 Financial Statements. The consolidated financial statements of Acquirer as of and for the each of three years ended December 31, 2004, 2003, and 2002, as reported on by Acquirer’s independent accountants, and the unaudited consolidated financial statements of Acquirer and its subsidiaries as of and for each month and quarter ended before the date of this Plan of Merger, including all schedules and notes relating to such statements, as previously delivered to Acquirer (collectively, “ Acquirer’s Financial Statements ”), fairly present, and the unaudited consolidated financial statements of Acquirer as of and for each quarter and month ending after the date of this Plan of Merger until the Effective Time, including all schedules and notes relating to such statements, will fairly present, the financial condition and the results of operations, changes in shareholders’ equity, and cash flows of Acquirer as of the respective dates of and for the periods referred to in such financial statements, all in accordance with accounting principles generally accepted in the United States, consistently applied (“ GAAP ”), subject, in the case of unaudited interim financial statements, to normal, recurring year-end adjustments (the effect of which would not, individually or in the aggregate, have a Material Adverse Effect on Acquirer) and the absence of notes (that, if presented, would not differ materially from those included in Acquirer’s Financial Statements). No financial statements of any entity or enterprise other than the Subsidiaries are required by GAAP to be included in the consolidated financial statements of Acquirer.

3.6.2 Call Reports. The following reports (including all related schedules, notes, and exhibits) were prepared and filed in conformity with applicable regulatory requirements and were correct and complete in all material respects when filed:

(a) The consolidated reports of condition and income of each of Acquirer’s subsidiary banks (including any amendments) as of and for each of the fiscal years ended December 31, 2004, 2003, and 2002, and as of and for the fiscal quarter ended March 31, 2005, as filed with the FDIC; and

(b) The FR Y-9C and FR Y-9LP (including any amendments) for Acquirer as of and for each of the fiscal years ended December 31, 2004, 2003, and 2002, as filed with the Federal Reserve Board.

All of such reports required to be filed prior to the Effective Time by Acquirer and/or the Bank will be prepared and filed in conformity with applicable regulatory requirements applied consistently throughout their respective periods (except as otherwise noted in such reports) and will be correct and complete in all material respects when filed. All of the reports identified in this Section are collectively referred to as the “ Call Reports .”

3.7 Absence of Undisclosed Liabilities. Except as and to the extent reflected or reserved against in Acquirer’s Financial Statements as of December 31, 2004, or March 31, 2005, neither Acquirer nor its subsidiaries had, as of such date, liabilities or obligations, secured or unsecured (whether accrued, absolute, or contingent) that, as of such date, would be reasonably likely to have a Material Adverse Effect on Acquirer.

3.8 Absence of Material Adverse Changes. Since December 31, 2004, there has been no change in the financial condition, income, expenses, assets, liabilities or business of Acquirer or any of its subsidiaries that had or in the future is reasonably likely to have a Material Adverse Effect on Acquirer, other than such changes that are caused by events and circumstances generally affecting the banking industry as a whole. No facts or circumstances have been discovered from which it reasonably appears that there is a reasonable probability that there will occur a change that could have a Material Adverse Effect on Acquirer, other than such changes that are caused by events and circumstances generally affecting the banking industry as a whole.

3.9 Legal Proceedings. There is no action, suit, proceeding, claim, arbitration, or investigation pending or to the knowledge of Acquirer threatened by any person, including without limitation any governmental or regulatory agency, against Acquirer or any of the Subsidiaries, or the assets or business of Acquirer or any of its subsidiaries, any of which is reasonably likely to have a Material Adverse Effect on Acquirer. There is no factual basis that presents a reasonable potential for any such action, suit, proceeding, claim, arbitration, or investigation.

3.10 Regulatory Filings. In the last four (4) years:

3.10.1 SEC Filings. Acquirer has filed, and will in the future continue to file, in a timely manner all material required filings with the SEC;

3.10.2 Regulatory Filings. Acquirer has filed in a timely manner all other material filings with other regulatory bodies for which filings are required; and

3.10.3 Complete and Accurate. All such filings, as of their respective filing dates, did not contain any untrue statement of a material fact or 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 were made, not misleading, except for any such misstatements or omissions that are not reasonably likely to have a Material Adverse Effect on Acquirer.

3.11 No Indemnification Claims . To the knowledge of Acquirer, there has been no event, action, or omission by or with respect to any director, officer, employee, trustee, agent, or other person who may be entitled to receive indemnification or reimbursement of any claim, loss, or expense under any agreement, contract, or arrangement providing for corporate indemnification or reimbursement of any such person.

3.12 Conduct of Business . Each of Acquirer and the subsidiaries has conducted its business and used its properties in compliance with all federal, state, and local laws, civil or common, ordinances and regulations, including without limitation applicable federal and state laws and regulations concerning banking, securities, truth-in-lending, truth-in-savings, mortgage origination and servicing, usury, fair credit reporting, consumer protection, occupational safety, fair lending, civil rights, employee protection, fair employment practices, fair labor standards, real estate settlement and procedures, and insurance; and Environmental Laws (defined below); except for violations (individually or in the aggregate) that would not have a Material Adverse Effect on Acquirer. Without limiting and notwithstanding the foregoing, neither Acquirer nor any Subsidiary, to Acquirer’s knowledge:

3.12.1 Privacy - Unaffiliated Third Parties. Has shared or will share non public personal information regarding consumers or customers with any unaffiliated third party except as would be permitted under Title V of the Financial Services Modernization Act and in compliance with the applicable privacy laws of any state, or other applicable laws, statutes, regulations or ordinances;

3.12.2 Privacy - Affiliates. Has shared or will share personal information regarding consumers or customers other than experience information, with any affiliated third party except as would be permitted under the Fair Credit Reporting Act and in compliance with the applicable privacy laws of any state, or other applicable laws, statutes, regulations or ordinances;

3.12.3 Privacy - HIPAA Compliance. Has or will (i) share or use, or permit its business associates to share or use, protected health information except as would be permitted under the Health Insurance Portability and Accountability Act of 1996 (“ HIPAA ”), or (ii) engaged in any business activities that would cause it to be a “covered entity” under HIPAA; and

3.12.4 Lending Practices. Has engaged in, or will engage in, lending practices that would violate the guidelines issued by Fannie Mae to combat predatory lending (#LL03-00), the Michigan Consumer Mortgage Protection Act, or the laws regarding lending practices of any state in which the property securing a loan is located;

in each case with respect to 3.12.1 through 3.12.4 where such violation would be reasonably likely to have a Material Adverse Effect on Acquirer.

3.13 Proxy Statement, Etc.

3.13.1 Transaction Documents. The term "Transaction Documents" shall collectively mean: (i) the Form S-4 registration statement to be filed by Acquirer with the SEC (the “ Registration Statement ”) in connection with the Acquirer Common Stock to be issued in the Merger; (ii) the prospectus and proxy statement (the “ Prospectus and Proxy Statement ”) to be mailed to Keystone shareholders in connection with its shareholder meeting to consider approval of the Merger (collectively “the Shareholder Meeting ”); and (iii) any other documents to be filed with the SEC, the Federal Reserve Board, the Michigan Office of Financial and Insurance Services, the State of Michigan, or any other regulatory agency in connection with the Merger.

3.13.2 Accurate Information. The information to be supplied by Acquirer for inclusion or incorporation by reference in any Transaction Document will not contain any untrue statement of material fact or 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 were made, not misleading (a) at the respective times such Transaction Documents are filed; (b) with respect to the Registration Statement, when it becomes effective; and (c) with respect to the Prospectus and Proxy Statement, when it is mailed and at the time of the meeting of the shareholders of Keystone with respect to the Merger (the “ Shareholder Meeting ”).

3.13.3 Compliance of Filings. All Transaction Documents that Acquirer is responsible for filing with the SEC or any regulatory agency in connection with the Merger will comply as to form in all material respects with the provisions of applicable law and regulation.

3.14 Agreements with Bank Regulators . Neither Acquirer nor any of its subsidiaries is a party to any agreement or memorandum of understanding with, or a party to any commitment letter, board resolution or similar undertaking to, or is subject to any order or directive by, or is a recipient of any extraordinary supervisory letter from, any governmental authority that restricts materially the conduct of its business, or is material and in any manner relates to its capital adequacy, its credit or reserve policies or its management, nor has Acquirer nor any of its subsidiaries have been advised by any governmental authority that it is contemplating issuing or requesting (or is considering the appropriateness of issuing or requesting) any such order, decree, agreement, memorandum of understanding, extraordinary supervisory letter, commitment letter or similar submission, except where such order, decree, agreement, memorandum of understanding, extraordinary supervisory letter, commitment letter or similar submission are not reasonably likely to have a Material Adverse Effect on Acquirer. Neither Acquirer nor any of its subsidiaries is required by applicable law to give prior notice to any Federal banking agency of the proposed addition of an individual to its board of directors or the employment of an individual as a senior or executive officer. As of the date of this Plan of Merger, Acquirer knows of no reason why the regulatory approvals referred to in Section 3.1.4 (Required Approvals) cannot be obtained or why the process would be materially impeded.

3.15 Tax Matters . Each of Acquirer and its subsidiaries has duly filed all federal, state, foreign and local information returns and Tax (defined below) returns required to be filed by it on or prior to the date this Plan of Merger (all such returns being accurate and complete in all material respects) and has duly paid or made provision for the payment of all Taxes that have been incurred or are due or claimed to be due from it by federal, state, foreign or local taxing authorities other than (i) Taxes or other governmental charges that are not yet delinquent or are being contested in good faith, have not been finally determined and have been adequately reserved against, or (ii) information returns, Tax returns or Taxes as to which the failure to file, pay or make provision for is not reasonably likely to have, either individually or in the aggregate, a Material Adverse Effect on Acquirer.

3.16 Environmental Matters.

3.16.1 Environmental Laws. Except for real estate held or administered in trust by any banking subsidiary of Acquirer, the real estate owned by or leased by Acquirer or any of its subsidiaries or used in the conduct of their businesses; and (ii) any other real estate owned by Acquirer or any of its subsidiaries (collectively, the “Acquirer Premises”) 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 on Acquirer.

3.16.2 Litigation. There is no litigation pending or threatened before any court, governmental agency, authority or other forum in which Acquirer, any of its subsidiaries, or any of the Acquirer Premises has been or, with respect to threatened litigation, is reasonably likely to be named as a defendant or potentially responsible party (i) for alleged noncompliance with any Environmental Law or (ii) relating to the release into the environment of any Hazardous Substance, except for such pending or threatened litigation that, if a judgment adverse to Acquirer or one of its subsidiaries were to be rendered in such litigation, would not be reasonably likely to have, individually or in the aggregate, a Material Adverse Effect on Acquirer. To the knowledge of Acquirer, there is no reasonable basis for any litigation of a type described above, except for such litigation as is not reasonably likely to have, individually or in the aggregate, a Material Adverse Effect.

3.16.3 Loan Portfolio. With respect to any real estate securing any outstanding loan and any owned real estate acquired in full or partial satisfaction of a debt previously contracted, each of Acquirer and its subsidiaries has complied in all material respects with their policies (as such policies may have been in effect from time to time and as disclosed in the Acquirer Disclosure Statement), and all Environmental Laws (defined below) concerning the investigation of each such property to determine whether or not there exists or is reasonably likely to exist any Hazardous Substance (defined below) on, in, or under such property and whether or not a release of Hazardous Substances has occurred at or from such property, except for failures to comply with or violations of such policies or Environmental Laws that are not reasonably likely to have, individually or in the aggregate, a Material Adverse Effect on Acquirer.

3.16.4 Environmental Laws; Hazardous Substance. For purposes of this Plan of Merger, “Environmental Laws ” means all laws (civil or common), ordinances, rules, regulations, permits, guidelines, and orders that: (a) regulate the generation, manufacture, release, treatment, containment, storage, handling, transportation, disposal, or management of Hazardous Substances; (b) regulate or prescribe standards or requirements for the protection of air, water, or soil quality; (c) are intended to protect public health or the environment; or (d) establish liability for the investigation, removal, or cleanup of, or damage caused by, any Hazardous Substance, including without limitation the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended (“ CERCLA ”) and any analogous state law; and “ Hazardous Substance ” has the meaning set forth in Section 9601 of CERCLA and also includes any substance regulated by or subject to any Environmental Law and any other pollutant, contaminant, or waste, including, without limitation, petroleum, asbestos, radon, and polychlorinated biphenyls.

3.17 Investment Bankers and Brokers . Acquirer has not employed any broker, finder, or investment banker in connection with the Merger except Austin Associates, LLC. Acquirer has no other express or implied agreement with any other person or company relative to any commission or finder’s fee payable with respect to this Plan of Merger or the transactions contemplated by it.

3.18 Necessary Capital . Based on the financial condition of Acquirer as reflected in Acquirer’s Financial Statements, Acquirer has the necessary capital required by the regulations of the Federal Reserve Board and the Federal Deposit Insurance Corporation to consummate the transactions contemplated by this Plan of Merger and remain “well-capitalized” according to applicable banking laws and regulations. If external financing is required by Acquirer to consummate the transactions contemplated in this Plan of Merger, Acquirer has or will provide to Keystone sufficient adequate evidence of a binding commitment between Acquirer and its financing source.

3.19 Reorganization. Acquirer has no knowledge of any reason why the Merger would fail to qualify as a reorganization under Section 368(a) of the Internal Revenue Code.

3.20 Allowance for Loan Losses. The allowance for loan losses as reflected in Acquirer’s Financial Statements and Call Reports for the fiscal year ended December 31, 2004, and the fiscal quarter ended March 31, 2005, was in the reasonable opinion of management (a) adequate to meet all reasonably anticipated loan and lease losses, net of recoveries related to loans previously charged off as of those dates, and (b) consistent with GAAP and safe and sound banking practices.

3.21 Public Communications; Securities Offering . Each annual report, quarterly report, proxy material, press release, or other communication previously sent or released by Acquirer to Acquirer’s shareholders or the public did not contain any untrue statement of material fact or 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 were made, not misleading, except for any such misstatement or omission that is not reasonably likely to have a Material Adverse Effect on Acquirer.

3.22 Fairness Opinion. Acquirers’ board of directors have received an oral opinion of Austin Associates, LLC (“ Austin ”) in its capacity as Acquirer’s financial adviser, substantially to the effect that the terms of the Merger are fair to Acquirer’s shareholders and Austin shall deliver a written opinion containing substantially the same opinion as its oral opinion dated as of the date of this Plan of Merger and renewed as of a date of approximately the date of the Proxy Statement. A true and complete copy of the written opinion of Austin confirming the same will be provided to Keystone promptly upon receipt by Acquirer.

ARTICLE IV –KEYSTONE’S REPRESENTATIONS AND WARRANTIES

Except as disclosed in a correspondingly numbered section of the disclosure schedule (the “Keystone Disclosure Statement ”) delivered by Keystone to Acquirer prior to the execution of this Agreement, Keystone represents and warrants to Acquirer as follows; provided, however, the disclosure in the Keystone’s Disclosure Statement of an item or matter in response or in reference to one provision or representation shall be deemed responsive to other provisions and representations where the applicability of such item or matter to other provision(s) is reasonably apparent:

4.1 Authorization, No Conflicts, Etc.

4.1.1 Authorization of Agreement. Keystone has the requisite corporate power and authority to execute and deliver this Plan of Merger, and subject to adoption by Keystone’s shareholders, to consummate the Merger. This Plan of Merger has been duly adopted and the consummation of the Merger has been duly authorized by the Board of Directors of Keystone. The Board of Directors of Keystone have determined that this Plan of Merger and the transactions contemplated hereby are in the best interests of Keystone and have directed that this Plan of Merger and the transactions contemplated by this Plan of Merger be submitted to Keystone shareholders for adoption at a duly held meeting of such shareholders, and except for approval of this Plan of Merger and the transaction contemplated by this Plan of Merger, no other corporate proceedings on the part of Keystone are necessary to authorize this Plan of Merger or to consummate the Merger. This Plan of Merger has been duly executed and delivered by, and (assuming due authorization, execution and delivery by Acquirer) constitutes valid and binding obligations of, Keystone and is enforceable against Keystone in accordance with its terms.

4.1.2 No Conflict, Breach, Violation, Etc. The execution, delivery, and performance of this Plan of Merger by Keystone, and the consummation of the Merger, do not and will not violate, conflict with, or result in a breach of any provision of: (a) the articles of incorporation, charter, bylaws, or similar organizational documents of Keystone or Keystone’s direct or indirect wholly owned or partially owned subsidiaries, Keystone Community Bank (the “ Bank ”), Keystone Mortgage Services, LLC, Keystone Premium Finance, LLC, Keystone T.I. Sub, LLC, and KCB Title Insurance Agency, LLC (each a “ Subsidiary ,” and collectively, the “Subsidiaries ”); or (b) any statute, code, ordinance, rule, regulation, judgment, order, writ, memorandum of understanding, arbitral award, decree, or injunction applicable to Keystone or any Subsidiary, assuming the timely receipt of each of the approvals referred to in Section 4.1.4 (Required Approvals).

4.1.3 Regulatory Restrictions. The execution, delivery, and performance of this Plan of Merger by Keystone, and the consummation of the Merger, do not and will not violate, conflict with, result in a breach of, constitute a default under, or require any consent, approval, waiver, extension, amendment, authorization, notice, or filing under, any memorandum of understanding or any regulatory agreement or commitment to which Keystone or any Subsidiary is a party or subject, or by which it is bound or affected.

4.1.4 Required Approvals. No notice to, filing with, authorization of, exemption by, or consent or approval of, any public body or authority is necessary for the consummation of the Merger by Keystone other than in connection or compliance with the provisions of the Michigan Act, compliance with federal and state securities laws, and the consents, authorizations, approvals, or exemptions required under the Federal Bank Holding Company Act, the FDIA, and the Michigan Banking Code.

4.2 Organization and Good Standing . Keystone is a corporation duly organized, validly existing, and in good standing under the laws of the State of Michigan. Keystone has all requisite corporate power and authority to own, operate, and lease its properties and assets and to carry on its business as it is now being conducted in all material respects, and is duly licensed or qualified to do business in each jurisdiction in which the nature of the business conducted by it or the character or location of the properties and assets owned or leased by it makes such licensing or qualification necessary. Keystone is a financial holding company and a bank holding company duly registered as such with the Board of Governors of the Federal Reserve System (the “ Federal Reserve Board ”) under the Federal Bank Holding Company Act.

4.3 Subsidiaries . The only direct or indirect subsidiaries (i.e., direct or indirect equity interest of 20% or more) of Keystone are the Subsidiaries.

4.3.1 Ownership. Except as set forth above, Keystone does not have "Control" (as defined in Section 2(a)(2) of the Federal Bank Holding Company Act, using 5 percent rather than 25 percent), either directly or indirectly, of any corporation, general or limited partnership, limited liability company, trust or other entity engaged in an active trade or business or that holds any significant assets. Keystone owns all of the issued and outstanding shares of capital stock of the Bank, and 1% of the outstanding membership interests of Keystone Mortgage Services, LLC. The Bank owns all of the outstanding membership interests of Keystone T.I. Sub, LLC, 99% of the outstanding membership interests of Keystone Mortgage Services, LLC, and 90% of the outstanding membership interests of Keystone Premium Finance, LLC, free and clear of any claim, security, interest, pledge, or lien of any kind. Through its wholly-owned subsidiary, Keystone T.I. Sub, LLC, the Bank owns 50% of the outstanding membership interests of KCB Title Insurance Agency, LLC. Keystone Mortgage Services, LLC owns 10% of the outstanding membership interests of Keystone Premium Finance, LLC, free and clear of any claim, security, interest, pledge, or lien of any kind. There is no legally binding and enforceable subscription, option, warrant, right to acquire, or any other similar agreement pertaining to the capital stock or membership interest of any Subsidiary.

4.3.2 Qualification and Power of the Bank. The Bank is duly organized, validly existing, and in good standing as a bank under the laws of the State of Michigan. The Bank is qualified or admitted to conduct business in each state where such qualification or admission is required except that state or those states where the failure to be so qualified or admitted would not have a Material Adverse Effect on Keystone. The Bank has full corporate power and authority to carry on its business as and where it is now being conducted.

4.3.3 Deposit Insurance; Other Assessments. The Bank maintains in full force and effect deposit insurance through the Bank Insurance Fund and the Savings Association Insurance Fund of the FDIC. The Bank has fully paid to the FDIC as and when due all assessments with respect to its deposits as are required to maintain such deposit insurance in full force and effect. The Bank has paid as and when due all material fees, charges, assessments, and the like to each and every governmental or regulatory agency having jurisdiction as required by law, regulation, or rule.

4.4 Capital Stock.

4.4.1 Classes and Shares. The authorized capital stock of Keystone consists of 1,500,000 shares of common stock, without par value, all of which are designated as shares of common stock. As of the date of this Plan of Merger, a total of 578,678 shares of common stock were validly issued and outstanding, no shares of preferred stock are issued or outstanding, and 33,500 shares of common stock are subject to outstanding options under the Option Plans as of the date of this Plan of Merger.

4.4.2 No Other Capital Stock. There is no security or class of securities outstanding that represents or is convertible into capital stock of Keystone, except for stock options outstanding under the Option Plans. There is no outstanding subscription, option, warrant, or right to acquire any capital stock of Keystone, or any agreement to which Keystone is a party or by which it is or may be bound to issue capital stock, except for Permitted Issuances.

4.4.3 Issuance of Shares. After the date of this Plan of Merger, the number of issued and outstanding shares of Keystone Common Stock is not subject to change before the Effective Time, except for Permitted Issuances.

4.4.4 Voting Rights. Other than the shares of Keystone Common Stock described in this Section, neither Keystone nor the Subsidiaries have outstanding any security or issue of securities the holder or holders of which have the right to vote on the approval of the Merger or this Plan of Merger or that entitle the holder or holders to consent to, or withhold consent on, the Merger or this Plan of Merger.

4.5 Financial Statements.

4.5.1 Financial Statements. The consolidated financial statements of Keystone as of and for the each of three years ended December 31, 2004, 2003, and 2002, as reported on by Keystone’s independent accountants, and the unaudited consolidated financial statements of Keystone and its Subsidiaries as of and for each month and quarter ended before the date of this Plan of Merger, including all schedules and notes relating to such statements, as previously delivered to Acquirer (collectively, “ Keystone’s Financial Statements ”), fairly present, and the unaudited consolidated financial statements of Keystone as of and for each quarter and month ending after the date of this Plan of Merger until the Effective Time, including all schedules and notes relating to such statements, will fairly present, the financial condition and the results of operations, changes in shareholders’ equity, and cash flows of Keystone as of the respective dates of and for the periods referred to in such financial statements, all in accordance with GAAP, consistently applied, subject, in the case of unaudited interim financial statements, to normal, recurring year-end adjustments (the effect of which would not, individually or in the aggregate, have a Material Adverse Effect on Keystone) and the absence of notes (that, if presented, would not differ materially from those included in Keystone’s Financial Statements). No financial statements of any entity or enterprise other than the Subsidiaries are required by GAAP to be included in the consolidated financial statements of Keystone.

4.5.2 Call Reports. The following reports (including all related schedules, notes, and exhibits) were prepared and filed in conformity with applicable regulatory requirements and were correct and complete in all material respects when filed:

(a) The consolidated reports of condition and income of the Bank (including any amendments) as of and for each of the fiscal years ended December 31, 2004, 2003, and 2002, and as of and for the fiscal quarter ended March 31, 2005, as filed with the FDIC; and

(b) The FR Y-9SP (including any amendments) for Keystone as of and for each of the fiscal years ended December 31, 2004, 2003, and 2002, as filed with the Federal Reserve Board.

All of such reports required to be filed prior to the Effective Time by Keystone and/or the Bank will be prepared and filed in conformity with applicable regulatory requirements applied consistently throughout their respective periods (except as otherwise noted in such reports) and will be correct and complete in all material respects when filed. All of the reports identified in this Section are collectively referred to as the Call Reports.

4.6 Absence of Undisclosed Liabilities. Except as and to the extent reflected or reserved against in Keystone’s Financial Statements as of December 31, 2004, or March 31, 2005, neither Keystone nor the Subsidiaries had, as of such date, liabilities or obligations, secured or unsecured (whether accrued, absolute, or contingent) that, as of such date, would be reasonably likely to have a Material Adverse Effect on Keystone.

4.7 Absence of Material Adverse Changes. Since December 31, 2004, there has been no change in the financial condition, income, expenses, assets, liabilities or business of Keystone or any Subsidiary that had or in the future is reasonably likely to have a Material Adverse Effect on Keystone, other than such changes that are caused by events and circumstances generally affecting the banking industry as a whole. No facts or circumstances have been discovered from which it reasonably appears that there is a reasonable probability that there will occur a change that could have a Material Adverse Effect on Keystone, other than such changes that are caused by events and circumstances generally affecting the banking industry as a whole.

4.8 Legal Proceedings. There is no action, suit, proceeding, claim, arbitration, or investigation pending or to the knowledge of Keystone threatened by any person, including without limitation any governmental or regulatory agency, against Keystone or any of the Subsidiaries, or the assets or business of Keystone or any of the Subsidiaries, any of which is reasonably likely to have a Material Adverse Effect on Keystone. There is no factual basis that presents a reasonable potential for any such action, suit, proceeding, claim, arbitration, or investigation.

4.9 Regulatory Filings. In the last four (4) years:

4.9.1 Regulatory Filings. Keystone has filed in a timely manner all material filings with regulatory bodies for which filings are required; and

4.9.2 Complete and Accurate. All such filings, as of their respective filing dates, did not contain any untrue statement of a material fact or 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 were made, not misleading, except for any such misstatements or omissions that are not reasonably likely to have a Material Adverse Effect on Keystone.

4.10 No Indemnification Claims . To the knowledge of Keystone, there has been no event, action, or omission by or with respect to any director, officer, employee, trustee, agent, or other person who may be entitled to receive indemnification or reimbursement of any claim, loss, or expense under any agreement, contract, or arrangement providing for corporate indemnification or reimbursement of any such person.

4.11 Conduct of Business . Each of Keystone and the Subsidiaries has conducted its business and used its properties in compliance with all federal, state, and local laws, civil or common, ordinances and regulations, including without limitation applicable federal and state laws and regulations concerning banking, securities, truth-in-lending, truth-in-savings, mortgage origination and servicing, usury, fair credit reporting, consumer protection, occupational safety, fair lending, civil rights, employee protection, fair employment practices, fair labor standards, real estate settlement and procedures, and insurance; and Environmental Laws; except for violations (individually or in the aggregate) that would not have a Material Adverse Effect on Keystone. Without limiting and notwithstanding the foregoing, neither Keystone nor any Subsidiary, to Keystone’s knowledge:

4.11.1 Privacy - Unaffiliated Third Parties. Has shared or will share non public personal information regarding consumers or customers with any unaffiliated third party except as would be permitted under Title V of the Financial Services Modernization Act and in compliance with the applicable privacy laws of any state, or other applicable laws, statutes, regulations or ordinances;

4.11.2 Privacy - Affiliates. Has shared or will share personal information regarding consumers or customers other than experience information, with any affiliated third party except as would be permitted under the Fair Credit Reporting Act and in compliance with the applicable privacy laws of any state, or other applicable laws, statutes, regulations or ordinances;

4.11.3 Privacy - HIPAA Compliance. Has or will (i) share or use, or permit its business associates to share or use, protected health information except as would be permitted under the Health Insurance Portability and Accountability Act of 1996 (“HIPAA”), or (ii) engaged in any business activities that would cause it to be a “covered entity” under HIPAA; and

4.11.4 Lending Practices. Has engaged in, or will engage in, lending practices that would violate the guidelines issued by Fannie Mae to combat predatory lending (#LL03-00), the Michigan Consumer Mortgage Protection Act, or the laws regarding lending practices of any state in which the property securing a loan is located, in each case with respect to Sections 4.11.1 through 4.11.4 where such violation would be reasonably likely to have a Material Adverse Effect on Keystone.

4.12 Proxy Statement. Etc.

4.12.1 Accurate Information. The information to be supplied by Keystone for inclusion or incorporation by reference in any Transaction Document will not contain any untrue statement of material fact or 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 were made, not misleading (a) at the respective times such Transaction Documents are filed; and (b) with respect to the Proxy Statement, when it is mailed and at the time of the Shareholders’ Meeting.

4.12.2 Compliance of Filings. All documents that Keystone or any Subsidiary is responsible for filing with any regulatory agency in connection with the Merger will comply as to form in all material respects with the provisions of applicable law and regulation.

4.13 Agreements with Bank Regulators . Neither Keystone nor any Subsidiary is a party to any agreement or memorandum of understanding with, or a party to any commitment letter, board resolution or similar undertaking to, or is subject to any order or directive by, or is a recipient of any extraordinary supervisory letter from, any governmental authority that restricts materially the conduct of its business, or is material and in any manner relates to its capital adequacy, its credit or reserve policies or its management, nor has Keystone nor any Subsidiary have been advised by any governmental authority that it is contemplating issuing or requesting (or is considering the appropriateness of issuing or requesting) any such order, decree, agreement, memorandum of understanding, extraordinary supervisory letter, commitment letter or similar submission, except where such order, decree, agreement, memorandum of understanding, extraordinary supervisor letter, commitment letter or similar submission would not have a Material Adverse Effect on Keystone. Neither Keystone nor any Subsidiary is required by applicable law to give prior notice to any Federal banking agency of the proposed addition of an individual to its board of directors or the employment of an individual as a senior or executive officer. As of the date of this Plan of Merger, Keystone knows of no reason why the regulatory approvals referred to in Section 4.1.4 (Required Approvals) cannot be obtained or why the process would be materially impeded.

4.14 Tax Matters.

4.14.1 Taxes Defined. "Taxes" means any federal, state, county, local, or foreign taxes, charges, assessments, levies, deficiencies, or charges, or amounts required to be collected, withheld, or paid to any government, agency, or political subdivision of any government in respect of any tax, together with any penalties, additions to tax or interest, due under any applicable law, regulation, rule, or ordinance to any governmental unit or agency, including, without limitation, taxes with respect to income, profits, gross receipts, value added, ad valorem, employment, unemployment, withholding, backup withholding, nonresident alien withholding, social security, real property, personal property, sales, use, excise, intangibles, license, franchise, capital stock, and disability, and payments based on occupation, services rendered, real property, personal property or transfer.

4.14.2 Tax Returns. Keystone and each Subsidiary have each duly and timely filed or delivered, and if necessary amended, all of collateral and foreign income tax returns, all state and local franchise and income tax, real and personal property tax, sales use tax, premium tax, excise tax and other tax returns required to be filed, including information returns, estimates, declarations, reports, statements and other filings that are required by law, regulation, rule, or ordinance (collectively, “ Tax Returns ”). Each such Tax Return, as amended, is correct, complete and complies in all material respects with all applicable laws, regulations, rules, and ordinances. Keystone and the Subsidiaries have each maintained all necessary and appropriate accounting records to support the positions taken on all filed Tax Returns and all exemptions from filing Tax Returns.

4.14.3 Tax Assessments and Payments. All material Taxes due and payable by Keystone and the Subsidiaries have been paid or deposited in full as and when due, including applicable extension periods. Each of Keystone and the Subsidiaries has withheld and paid over all material Taxes required to have been withheld and paid over, and complied with all information reporting and backup withholding requirements, including maintenance of required records with respect thereto, in connection with amounts paid or owing to any employee, creditor, independent contractor or other third parties. The provisions made for Taxes on Keystone’s Financial Statements as of December 31, 2004, are sufficient for the payment of all accrued but unpaid Taxes as of the date indicated, whether or not disputed, with respect to all periods through December 31, 2004. There is no lien on any of Keystone’s or the Subsidiaries’ assets or properties with respect to Taxes, except for liens for Taxes not yet due and payable.

4.14.4 Tax Audits. None of the Tax Returns of Keystone and the Subsidiaries filed for any tax year has been audited by the Internal Revenue Service (the “ IRS ”) or any state or local taxing authority. There is no tax audit or legal or administrative proceeding concerning the accuracy of tax or information returns or the assessment or collection of Taxes pending or, to Keystone’s knowledge, threatened with respect to Keystone or any Subsidiary. No claim concerning the calculation, assessment or collection of taxes has been asserted with respect to Keystone or any Subsidiary except for any claim that has been fully resolved and the costs of such resolution reflected in Keystone’s Financial Statements. No waiver or extension of any statute of limitations is in effect with respect to Taxes or Tax Returns of Keystone or any Subsidiary.

4.14.5 Tax Accounting. Neither Keystone nor any Subsidiary have been required to include in income any adjustment pursuant to Section 481 of the Internal Revenue Code by reason of a voluntary change in accounting method initiated by Keystone or a Subsidiary and the IRS has not initiated or proposed any such adjustment or change in accounting method. Neither Keystone nor any Subsidiary have entered into a transaction which is being accounted for as an installment obligation under Section 453 of the Internal Revenue Code.

4.14.6 Excess Parachute Payments. To its knowledge, no compensation that could be payable (whether in cash, stock, options, or other property or the vesting of property or other rights) by Keystone, any Subsidiary, their affiliates, or any of their respective successors under any employment, option, benefit plan, severance, termination or other compensation arrangement currently in effect is, or will be, an “excess parachute payment ” (as defined in Section 280G of the Internal Revenue Code).

4.14.7 Bad Debt Deductions. Any federal income liability for its bad debt deductions are recorded in Keystone’s Financial Statements.

4.14.8 Tax Positions. The tax and audit positions taken by Keystone and the Subsidiaries in connection with Tax Returns were reasonable and asserted in good faith.

4.15 Title to Properties . Keystone and the Subsidiaries have good, sufficient, and marketable title to all of their properties and assets, whether real, personal, or a combination thereof, reflected in their books and records as being owned (including those reflected in Keystone’s Financial Statements as of December 31, 2004, except as since disposed of in the ordinary course of business), free and clear of all liens and encumbrances, except:

4.15.1 Reflected on Balance Sheet. As reflected on Keystone's Financial Statements as of March 31, 2005;

4.15.2 Normal to Business. Liens for current Taxes not yet delinquent, and liens or encumbrances that are normal to the business of Keystone and that would not have a Material Adverse Effect on Keystone;

4.15.3 Immaterial Imperfections. Such imperfections of title, easements, restrictions, and encumbrances, if any, as are not material in character, amount, or extent, and do not materially detract from the value, or materially interfere with the present use, of the properties subject thereto or affected thereby; and

4.15.4 Public Easements; Etc. Such public easements, public rights of way, and interests of units of government of record, if any, as are not material in character, amount, or extent, and do not materially detract from the value, or materially interfere with the present use, of the properties subject thereto or affected thereby.

4.16 Condition of Real Property . With respect to each parcel of real property owned, legally or beneficially, by Keystone or any Subsidiary, including other real estate owned (“ Keystone’s Real Property ”) and also with respect to each parcel of real property leased by Keystone or any Subsidiary (“Keystone’s Leased Real Property ”), to its knowledge:

4.16.1 No Encroachments. Except for encroachments that have been insured over by a title insurance policy, no building or improvement to Keystone’s Real Property or Keystone’s Leased Real Property encroaches on any easement or property owned by another person. No building or property owned by another person encroaches on Keystone’s Real Property or Keystone’s Leased Real Property or on any easement benefiting Keystone’s Real Property or Keystone’s Leased Real Property. None of the boundaries of Keystone’s Real Property or Keystone’s Leased Real Property deviates substantially from those shown on the survey of such property, if any, included with the Keystone Disclosure Statement or from what the boundaries appear to be through visual inspection. No claim of encroachment has been asserted by any person with respect to any of Keystone’s Real Property or Keystone’s Leased Real Property.

4.16.2 Zoning. None of Keystone, the Subsidiaries, Keystone's Real Property, or Keystone’s Leased Real Property is in material violation of any applicable zoning regulation, building restriction, restrictive covenant, ordinance, or other law, order, regulation, or requirement.

4.16.3 Buildings. All buildings and improvements to Keystone's Real Property and Keystone’s Leased Real Property are in good condition (normal wear and tear excepted), are structurally sound and are not in need of material repairs, are fit for their intended purposes, and are adequately serviced by all utilities necessary for the effective operation of business as presently conducted at that location.

4.16.4 No Condemnation. None of Keystone's Real Property or Keystone's Leased Real Property is the subject of any condemnation

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