Agreement and Plan of Merger

This Agreement and Plan of Merger  (this “ Agreement ”) is entered into as of December 30, 2005, (the “ Agreement Date ”) between  Bank of the Southwest , an Arizona state bank (the “ Bank ”), and Arizona Bank & Trust , an Arizona state bank (“ AB&T ”), and is joined in by Heartland Financial USA, Inc. , a Delaware corporation and the owner of a majority of the outstanding stock of AB&T (“ Acquiror ”).

A.   The parties to this Agreement desire to effect a reorganization whereby Acquiror desires to acquire control of the Bank through the merger (the " Merger ") of the Bank with and into AB&T with AB&T being the resulting bank.

B.   As a result of the Merger and at the time of the consummation thereof, each outstanding share of the capital stock of the Bank, which is comprised of one class of common stock, no par value per share (" Bank Stock "), will be cancelled and converted solely into the right to receive the amount of cash as provided below, and with each outstanding share of common stock of AB&T thereafter representing one share of common stock of the Resulting Bank (as defined below).

C.   The Bank’s board of directors, acting pursuant to a resolution adopted by the vote of a majority of its directors and pursuant to the Arizona State Revised Statutes, as amended (the “ Arizona Statutes ”), has approved the Merger and this Agreement and has recommended approval of the same to the holders of record of Bank Stock (the “ Bank Shareholders ”).

D.   AB&T’s board of directors, acting pursuant to a resolution adopted by the vote of a majority of its directors and pursuant to the Arizona Statutes, has approved the Merger and this Agreement and has recommended approval of the same to the holders of record of AB&T’s common stock (the “ AB&T Shareholders ”).

E.   The parties desire to make certain representations, warranties and agreements in connection with the Merger and the other transactions contemplated by this Agreement and also agree to certain prescribed conditions to the Merger and other transactions.

In consideration of the foregoing premises, which are incorporated herein by this reference, and the mutual promises, covenants and agreements hereinafter set forth, the parties hereto hereby agree as follows:

Article 1   

Section 1.1    Definitions . In addition to those terms defined throughout this Agreement, the following terms, when used herein, shall have the following meanings.

(a)    “ Adjusted Shareholders’ Equity ” means the consolidated tangible shareholders’ equity of the Bank, calculated in accordance with GAAP and this Agreement and reflecting, among other things, and except as described herein, the accrued income and expenses of the Bank for all periods ending on or prior to the Determination Date, and the recognition of or accrual for all expenses paid or incurred or projected to be paid or incurred by the Bank in connection with this Agreement and the Contemplated Transactions, including the Bank Transaction Expenses, and including all fees and expenses incurred in connection with obtaining shareholder approval and any attorneys, accountants, brokers, finders or investment bankers and any amounts paid or payable to any director, officer or employee of the Bank under any Contract or benefit plan as a result of the Contemplated Transactions, but adjusted to exclude:

(i)    any realized gains or losses resulting from sales of investment securities effected between June 30, 2005, and the Closing Date (as defined below);

(ii)    any realized gains on any extraordinary sales effected between June 30, 2005, and the Closing Date;

(iii)    any penalty or termination fee payable by the Bank to OSI, the Bank’s service provider, pursuant to the Contract between the Bank and OSI as a result of the Bank’s termination of such Contract;

(iv)    any adjustments made in accordance with Statement of Financial Accounting Standard No. 115; and

(v)    any expenses incurred or accounting or other adjustments made pursuant to Section 2.9 and Section 6.12 .

The Bank’s Adjusted Shareholders’ Equity shall be calculated by the Bank, in consultation with Acquiror, as of the close of business on the Determination Date using reasonable estimates of revenues and expenses where actual amounts are not available. If requested by Acquiror, such calculation shall be subject to verification and approval prior to the Closing (as defined below) by Acquiror’s independent accountants, which approval shall not be unreasonably withheld.

(b)    “ Affiliate ” means with respect to:

(i)    a particular individual: (A) each other member of such individual’s Family; (B) any Person that is directly or indirectly controlled by such individual or one or more members of such individual’s Family; (C) any Person in which such individual or members of such individual’s Family hold (individually or in the aggregate) a Material Interest; and (D) any Person with respect to which such individual or one or more members of such individual’s Family serves as a director, officer, partner, executor or trustee (or in a similar capacity); and

(ii)    a specified Person other than an individual: (A) any Person that directly or indirectly controls, is directly or indirectly controlled by, or is directly or indirectly under common control with such specified Person; (B) any Person that holds a Material Interest in such specified Person; (C) each Person that serves as a director, officer, partner, executor or trustee of such specified Person (or in a similar capacity); (D) any Person in which such specified Person holds a Material Interest; (E) any Person with respect to which such specified Person serves as a general partner or a trustee (or in a similar capacity); and (F) any Affiliate of any individual described in clauses (B) or (C) of this subsection (ii).

(c)    “ Bank Shareholders ” means the holders of record of the Outstanding Bank Shares.

(d)    “ Bank ISO ” means each of the 81,640 incentive stock options granted to officers or employees of the Bank prior to the date of this Agreement that is outstanding and which will be, by virtue of the Contemplated Transactions or otherwise, vested and fully exercisable immediately prior to the Effective Time.

(e)    “ Bank NQSO ” means each of the 83,578 non-tax qualified stock options granted to a Person by the Bank prior to the date of this Agreement that is outstanding and which will be, by virtue of the Contemplated Transactions or otherwise, vested and fully exercisable immediately prior to the Effective Time.

(f)    “ Best Efforts ” means the efforts that a prudent Person desirous of achieving a result would use in similar circumstances to ensure that such result is achieved as expeditiously as possible, provided, however , that an obligation to use Best Efforts under this Agreement does not require the Person subject to that obligation to take actions that would result in a materially adverse change in the benefits to such Person of this Agreement and the Merger.

(g)    “ Branch Sale ” means the sale by the Bank of certain of its assets to TrustBank, all as described in Section 2.9 .

(h)    “ Breach ” means with respect to a representation, warranty, covenant, obligation or other provision of this Agreement or any instrument delivered pursuant to this Agreement: (i) any inaccuracy in or breach of, or any failure to perform or comply with, such representation, warranty, covenant, obligation or other provision; or (ii) any claim (by any Person) or other occurrence or circumstance that is or was inconsistent with such representation, warranty, covenant, obligation or other provision.

(i)    “ Business Day ” means any day except Saturday, Sunday and any day on which the Bank is authorized or required by law or other government action to close.

(j)    “ Call Reports ” means the quarterly reports of income and condition filed by the Bank with Regulatory Authorities.

(k)    “ Certificate ” means a stock certificate representing a share or shares of Bank Stock.

(l)    “ Code ” means the Internal Revenue Code of 1986, as amended.

(m)    “ Contract ” means any agreement, contract, obligation, promise or understanding (whether written or oral and whether express or implied) that is legally binding: (i) under which a Person has or may acquire any rights; (ii) under which such Person has or may become subject to any obligation or liability; or (iii) by which such Person or any of the assets owned or used by such Person is or may become bound.

(n)    “Contemplated Transactions” means all of the transactions contemplated by this Agreement, including: (i) the Merger; (ii) the performance by Acquiror, AB&T and the Bank of their respective covenants and obligations under this Agreement; (iii) AB&T’s acquisition of control of the Bank; (iv) Acquiror’s payment of cash in exchange for shares of Bank Stock; and (v) if requested by Acquiror, the Branch Sale and the Office Relocation.

(o)    “ Determination Date ” means the close of business on the last Business Day preceding the Closing Date.

(p)    “ GAAP ” means generally accepted accounting principles in the United States consistent with those used in the preparation of the most recent consolidated financial statements of the Bank.

(q)    “ Knowledge ” with respect to:

(i)    an individual means that such person will be deemed to have “Knowledge” of a particular fact or other matter if: (A) such individual is actually aware of such fact or other matter; or (B) a prudent individual could be expected to discover or otherwise become aware of such fact or other matter in the Ordinary Course of Business; and

(ii)    a Person (other than an individual) means that such Person will be deemed to have “Knowledge” of a particular fact or other matter if any individual who is serving as a director, officer, partner, executor or trustee of such Person (or in any similar capacity) has, or at any time had, Knowledge of such fact or other matter.

(r)    “ Legal Requirement ” means any federal, state, local, municipal, foreign, international, multinational or other Order, constitution, law, ordinance, regulation, rule, policy statement, directive, statute or treaty.

(s)    “ Material Adverse Effect ” with respect to a Person (other than an individual) means a material adverse effect (whether or not required to be accrued or disclosed under Statement of Financial Accounting Standards No. 5): (i) on the condition (financial or otherwise), properties, assets, liabilities, businesses or results of operations of such Person; or (ii) on the ability of such Person to perform its obligations under this Agreement on a timely basis, provided, however , that a Material Adverse Effect with respect to any Person that is a party hereto shall not include: (A) a change with respect to, or effect on, that Person and its subsidiaries resulting from a change in law, rule, regulation, GAAP or regulatory accounting principles, as such would apply to the financial statements of such Person; (B) a change with respect to, or effect on, that Person or any of its subsidiaries resulting from any other matter affecting depository institutions generally (including financial institutions and their holding companies) including changes in general economic conditions and changes in prevailing interest and deposit rates; and (C) actions or omissions taken by that Person as required hereunder and actions or omissions by such Person with the prior written consent of the other parties hereto.

(t)    “ Merger Consideration ” means the amount of cash required to be paid to each Bank Shareholder pursuant to the terms of this Agreement.

(u)    “ Office Relocation ” means the relocation of the Bank’s main office, all as described in Section 2.9 .

(v)    “ Order ” means any award, decision, injunction, judgment, order, ruling, extraordinary supervisory letter, policy statement, memorandum of understanding, resolution, agreement, directive, subpoena or verdict entered, issued, made, rendered or required by any court, administrative or other governmental agency, including any Regulatory Authority, or by any arbitrator.

(w)    “ Ordinary Course of Business ” shall include any action taken by a Person only if such action:

(i)    is consistent with the past customs and practices of such Person, including with respect to quantity and frequency, and is taken in the ordinary course of the normal day-to-day operations of such Person;

(ii)    is not required to be authorized by the board of directors of such Person (or by any Person or group of Persons exercising similar authority), other than loan approvals for customers of a financial institution; and

(iii)    is similar in nature and magnitude to actions customarily taken, without any authorization by the board of directors (or by any Person or group of Persons exercising similar authority), other than loan approvals for customers of a financial institution, in the ordinary course of the normal day-to-day operations of other Persons that are in the same line of business as such Person.

(x)    “ Outstanding Bank Shares ” means the shares of Bank Stock issued and outstanding immediately prior to the Effective Time.

(y)    “ Paying Agent ” means any of Acquiror’s banking subsidiaries pursuant to its appointment described in Section 3.3 .

(z)    “ Person ” means any individual, corporation (including any non-profit corporation), general or limited partnership, limited liability company, joint venture, estate, trust, association, organization, labor union or other entity or any Regulatory Authority.

(aa)    “ Proceeding ” means any action, arbitration, audit, hearing, investigation, litigation or suit (whether civil, criminal, administrative, investigative or informal) commenced, brought, conducted or heard by or before, or otherwise involving, any judicial or governmental authority, including a Regulatory Authority, or arbitrator.

(bb)    “ Regulatory Authorities ” means any federal, state or local governmental body, agency or authority that, under applicable statutes and regulations: (i) has supervisory, judicial, administrative, police, taxing or other power or authority over the Bank, Acquiror or AB&T; (ii) is required to approve, or give its consent to, any of the Contemplated Transactions; or (iii) with which a filing must be made in connection therewith, including in any case, the Board of Governors of the Federal Reserve System (the “ Federal Reserve ”), the Department of Financial and Professional Regulation of the State of Illinois, the Arizona Banking Department (the “ Department ”) and the Federal Deposit Insurance Corporation (the “ FDIC ”).

(cc)    “ Representative ” means with respect to a particular Person, any director, officer, manager, employee, agent, consultant, advisor or other representative of such Person, including legal counsel, accountants and financial advisors.

(dd)    “ Tax ” means any tax (including any income tax, capital gains tax, value-added tax, sales tax, property tax, gift tax or estate tax), levy, assessment, tariff, duty (including any customs duty), deficiency or other fee, and any related charge or amount (including any fine, penalty, interest or addition to tax), imposed, assessed or collected by or under the authority of any Regulatory Authority or payable pursuant to any tax-sharing agreement or any other Contract relating to the sharing or payment of any such tax, levy, assessment, tariff, duty, deficiency or fee.

(ee)    “ Tax Return ” means any return (including any informational return), report, statement, schedule, notice, form or other document or information filed with or submitted to, or required to be filed with or submitted to, any Regulatory Authority in connection with the determination, assessment, collection or payment of any Tax or in connection with the administration, implementation or enforcement of or compliance with any Legal Requirement relating to any Tax.

(ff)    “ Threatened ” means a claim, Proceeding, dispute, action or other matter for which any demand or statement has been made (orally or in writing) or any notice has been given (orally or in writing), or if any other event has occurred or any other circumstances exist, that would lead a prudent Person to conclude that such a claim, Proceeding, dispute, action or other matter is likely to be asserted, commenced, taken or otherwise pursued in the future.

(gg)    “ TrustBank ” means TrustBank, an Illinois state bank with its main office located in Olney, Illinois.

Section 1.2    Principles of Construction .

(a)    In this Agreement, unless otherwise stated or the context otherwise requires, the following uses apply: (i) actions permitted under this Agreement may be taken at any time and from time to time in the actor’s sole discretion; (ii) references to a statute shall refer to the statute and any successor statute, and to all regulations promulgated under or implementing the statute or successor, as in effect at the relevant time; (iii) in computing periods from a specified date to a later specified date, the words “from” and “commencing on” (and the like) mean “from and including,” and the words “to,” “until” and “ending on” (and the like) mean “to, but excluding”; (iv) references to a governmental or quasi-governmental agency, authority or instrumentality shall also refer to a regulatory body that succeeds to the functions of the agency, authority or instrumentality; (v) indications of time of day mean Phoenix, Arizona, time; (vi) “including” means “including, but not limited to”; (vii) all references to sections, schedules and exhibits are to sections, schedules and exhibits in or to this Agreement unless otherwise specified; (viii) all words used in this Agreement will be construed to be of such gender or number as the circumstances require; and (ix) the captions and headings of articles, sections, schedules and exhibits appearing in or attached to this Agreement have been inserted solely for convenience of reference and shall not be considered a part of this Agreement nor shall any of them affect the meaning or interpretation of this Agreement or any of its provisions.

(b)    The disclosure schedules of the Bank (the “ Schedules ”) referred to in this Agreement consist of the agreements, lists, instruments and other documentation described or referred to in this Agreement with respect to the Bank, which Schedules are attached to this Agreement. The disclosures in the Schedules relate only to the representations and warranties in the Sections of this Agreement to which they expressly relate and not to any other representation or warranty in this Agreement. In the event of any inconsistency between the statements in the body of this Agreement and those in the Schedules (other than an exception expressly set forth as such in the Schedules with respect to a specifically identified representation or warranty), the statements in the body of this Agreement will control.

(c)    All accounting terms not specifically defined herein shall be construed in accordance with GAAP.

(d)    With regard to each and every term and condition of this Agreement and any and all agreements and instruments subject to the terms hereof, the parties hereto understand and agree that the same have or has been mutually negotiated, prepared and drafted, and that if at any time the parties hereto desire or are required to interpret or construe any such term or condition or any agreement or instrument subject hereto, no consideration shall be given to the issue of which party hereto actually prepared, drafted or requested any term or condition of this Agreement or any agreement or instrument subject hereto.

Article 2   

Section 2.1    The Merger . Provided that this Agreement shall not have been terminated in accordance with its express terms, upon the terms and subject to the conditions of this Agreement and in accordance with applicable Legal Requirements, including the receipt of all requisite regulatory and shareholder approvals, at the Effective Time (as defined below), the Bank shall be merged with and into AB&T pursuant to the provisions of, and with the effects provided in, the Arizona Statutes, the separate existence of the Bank shall thereupon cease and AB&T shall be the resulting bank in the Merger (the “ Resulting Bank ”). As a result of the Merger, each of the Outstanding Bank Shares, other than Dissenting Shares (as defined below), will be converted into the right to receive the Merger Consideration as provided in Article 3 .

Section 2.2    Closing; Effective Time .

(a)    The closing of the Merger (the “ Closing ”) shall occur on a date that is mutually agreed upon by the parties; provided that, in the absence of an agreement, the Closing shall occur as soon as practicable following the date on which the conditions set forth in Article 8 and Article 9 have been satisfied or waived, but in no event later than the tenth (10 ^th ) Business Day of the calendar month following the calendar month in which such date occurs (the “ Closing Date ”). The Closing shall occur through the mail or at a time and place that is mutually acceptable to Acquiror, AB&T and the Bank, or if they fail to agree, at 10:00 a.m. at the main office of AB&T. Subject to the provisions of Article 11 , failure to consummate the Contemplated Transactions on the date and time and at the place determined pursuant to this Section will not result in the termination of this Agreement and will not relieve any party of any obligation under this Agreement. The Merger shall become effective following satisfaction of all requirements of law and other conditions specified in this Agreement, or on such other date and time as may be agreed upon by the parties hereto, and in either case as set forth in an approval letter from the Department to the Resulting Bank (the “ Effective Time ”).

(b)    The parties hereto agree to file the appropriate plan of merger and articles of merger, as contemplated by Section 10-1105 of the Arizona Statutes, with the Arizona Corporation Commission, which articles of merger shall specify that the Merger shall be effective on the Closing Date at a time mutually agreed upon by the parties.

Section 2.3    Articles of Incorporation; Bylaws . At the Effective Time, each of the current articles of incorporation and bylaws of AB&T shall be the articles of incorporation and bylaws of the Resulting Bank. 

Section 2.4    Directors and Officers . The directors and officers of the Resulting Bank shall consist of the individuals serving as directors and officers of AB&T immediately prior to the Effective Time, until their successors have been duly elected or appointed in accordance with the bylaws of the Resulting Bank.

Section 2.5    Name and Place of Business . The business of the Resulting Bank shall be that of an Arizona state bank. The Resulting Bank shall conduct this business under the name of “Arizona Bank & Trust” at its main banking premises which shall be located at 1000 N. 54 ^th Street, Chandler, Arizona 85226, and at its legally established branches.

Section 2.6    Acquiror’s Deliveries at Closing . At the Closing, Acquiror shall deliver the following items to the Bank:

(a)    copies of resolutions of the board of directors of Acquiror authorizing and approving this Agreement and the consummation of the transactions contemplated herein, certified as of the Closing by the President or any Vice President of Acquiror;

(b)    copies of resolutions of the board of directors and the shareholders of AB&T authorizing and approving this Agreement and the consummation of the transactions contemplated herein, certified as of the Closing by the Cashier or the President or any Vice President of Acquiror;

(c)    a certificate executed by the President or any Vice President of Acquiror dated the Closing stating that: (i) all of the representations and warranties of Acquiror set forth in this Agreement are true and correct in all material respects with the same force and effect as if all of such representations and warranties were made at the Closing; and (ii) Acquiror has performed or complied in all material respects with all of the covenants and obligations to be performed or complied with by it under the terms of this Agreement on or prior to the Closing, provided, however, that to the extent any representations and warranties, or performance and compliance with any covenants and obligations, are subject in this Agreement to a standard of Knowledge, materiality, material adverse effect or similar standard, such representations and warranties shall be true and correct in all respects, and Acquiror shall have performed and complied in all respects with such covenants and obligations, in each case to the extent of the Knowledge, materiality, material adverse effect or similar standard set forth herein;

(d)    a certificate executed by the President or any Vice President of AB&T dated the Closing stating that: (i) all of the representations and warranties of AB&T set forth in this Agreement are true and correct in all material respects with the same force and effect as if all of such representations and warranties were made at the Closing; and (ii) AB&T has performed or complied in all material respects with all of the covenants and obligations to be performed or complied with by it under the terms of this Agreement on or prior to the Closing, provided, however, that to the extent any representations and warranties, or performance and compliance with any covenants and obligations, are subject in this Agreement to a standard of Knowledge, materiality, material adverse effect or similar standard, such representations and warranties shall be true and correct in all respects, and AB&T shall have performed and complied in all respects with such covenants and obligations, in each case to the extent of the Knowledge, materiality, material adverse effect or similar standard set forth herein; and

(e)    such other documents as the Bank or the Bank’s counsel shall reasonably request.

All of such items shall be reasonably satisfactory in form and substance to the Bank and its counsel.

Section 2.7    Bank’s Deliveries at Closing . At the Closing, the Bank shall deliver the following items to Acquiror:

(a)    a good standing certificate for the Bank issued by the Arizona Corporation Commission dated not more than fifteen (15) Business Days prior to the Closing;

(b)    a copy of the articles of incorporation of the Bank certified by the Arizona Corporation Commission and dated not more than fifteen (15) Business Days prior to the Closing;

(c)    a certificate of the Cashier or the President or any Vice President of the Bank dated the Closing certifying a copy of the bylaws of the Bank and stating that there have been no further amendments to the articles of incorporation of the Bank delivered pursuant to this Section;

(d)    copies of resolutions of the shareholders and the board of directors of the Bank authorizing and approving this Agreement and the consummation of the transactions contemplated herein, certified as of the Closing by the Cashier or the President or any Vice President of the Bank;

(e)    a list of the Bank Shareholders as of the Closing certified by the Cashier or the President or any Vice President of the Bank;

(f)    a certificate executed by the President and Cashier or any Vice President of the Bank dated the Closing stating that: (i) all of the representations and warranties of the Bank set forth in this Agreement are true and correct in all material respects with the same force and effect as if all of such representations and warranties were made at the Closing; and (ii) the Bank has performed or complied in all material respects with all of the covenants and obligations to be performed or complied with by it under the terms of this Agreement on or prior to the Closing, provided, however, that to the extent any representations and warranties, or performance and compliance with any covenants and obligations, are subject in this Agreement to a standard of Knowledge, materiality, material adverse effect or similar standard, such representations and warranties shall be true and correct in all respects, and the Bank shall have performed and complied in all respects with such covenants and obligations, in each case to the extent of the Knowledge, materiality, material adverse effect or similar standard set forth herein;

(g)    a certificate of each of the Bank’s legal counsel, accountants and financial advisor or investment banker, if any, representing that their respective fees and expenses incurred by the Bank prior to and including the Effective Time in connection with the transactions contemplated by this Agreement, including the Merger, have been paid in full or were fully accrued prior to the close of business on the day immediately preceding the Closing;

(h)    a legal opinion of counsel to the Bank dated the Closing to the effect set forth in Exhibit A ; and

(i)    such other documents as Acquiror or AB&T or their counsel shall reasonably request.

All of such items shall be reasonably satisfactory in form and substance to Acquiror, AB&T and their counsel.

Section 2.8    Alternative Structure . Notwithstanding anything contained herein to the contrary, Acquiror may request for any reasonable business, tax or regulatory purpose that the Bank enter into transactions other than those described in this Agreement to effect the purposes of this Agreement, including the merger of the Bank with any other Affiliate of Acquiror, and if requested by Purchaser, the parties to this Agreement shall take all action necessary and appropriate to effect, or cause to be effected, such transactions; provided, however , that no such proposed change in the structure of the transactions contemplated by this Agreement shall delay the Closing (if such a date has already been firmly established) by more than thirty (30) Business Days or adversely affect the economic benefits, the form of consideration or the tax effect of the Merger at the Effective Time to the Bank Shareholders.

Section 2.9    Branch Sale . The parties acknowledge and agree that it is their intent as part of the Contemplated Transactions that concurrently with, or promptly after the execution of this Agreement, the Bank enter into an agreement (the “ Branch Sale Agreement ”) with TrustBank providing for the sale and transfer to TrustBank of certain of the Bank’s assets, including the Bank’s leasehold interest in its office located at 7910 South Kyrene Road, Suite 108, Tempe, Arizona, and the assumption by TrustBank of certain deposit liabilities of the Bank, all on terms and conditions mutually agreed upon by Acquiror, TrustBank and AB&T. Acquiror, AB&T and the Bank agree to take such steps as may be necessary to obtain all requisite regulatory, corporate and other approvals to effect the Branch Sale and the relocation of the Bank’s main office from its current Tempe location to the Bank’s office located at Camelback Road, Phoenix, Arizona (the “ Office Relocation ”), subject to the consummation of, and to be effective immediately after the Merger or as soon as practicable thereafter. The Branch Sale shall be accomplished pursuant to the Branch Sale Agreement which shall contain such terms and conditions as are ordinary and customary for branch sales and shall otherwise be in a form reasonably acceptable to Acquiror and the Bank. Notwithstanding anything contained herein to the contrary, the Office Relocation and the Branch Sale will be effective no earlier than the Effective Time.

Section 2.10    Absence of Control . Subject to any specific provisions of this Agreement, it is the intent of the parties to this Agreement that none of Acquiror, AB&T, TrustBank or the Bank by reason of this Agreement shall be deemed (until consummation of the Merger and the Branch Sale) to control, directly or indirectly, any other party and shall not exercise, or be deemed to exercise, directly or indirectly, a controlling influence over the management or policies of any such other party.

Article 3   

Section 3.1    Manner of Merger .

(a)    Subject to the provisions of this Agreement, including the possible adjustment set forth in this Section, each Outstanding Bank Share (other than shares of Bank Stock that are held by shareholders exercising appraisal rights pursuant to the Arizona Statutes (“ Dissenting Shareholders ”)) and each outstanding Bank NQSO and Bank ISO shall, ipso facto and without any action on the part of the holder thereof, become and be converted at the Effective Time as follows:

(i)    each share of common stock of AB&T that is issued and outstanding immediately prior to the Effective Time shall be converted into one validly issued, fully paid and non-assessable share of common stock of the Resulting Bank;

(ii)    each Outstanding Bank Share shall be converted into the right to receive cash in an amount equal to Ten Dollars and Twenty and One Half Cents ($10.205) (the “ Purchase Price Per Share ”), provided that there are no greater than 1,730,463 shares of Outstanding Bank Shares;

(iii)    each Bank NQSO shall, ipso facto and without any action on the part of holders thereof, become and be converted into the right to receive the difference between the Purchase Price Per Share and Six Dollars and Thirty One Cents ($6.31) (the “ NQSO   Option Spread ”), payable as provided herein and less any Tax withholding required under the Code or any provision of state or local law, and prior to the Effective Time, the Bank’s board of directors shall take such actions or make such determinations as may be required under the Bank’s stock option plan or plans, subject to the approval of Acquiror, to effect the provisions of this Agreement;

(iv)    each Bank ISO shall, ipso facto and without any action on the part of holders thereof, become and be converted into the right to receive the difference between the Purchase Price Per Share and Ten Dollars ($10.00) (the “ ISO Option Spread ”), payable as provided herein and less any Tax withholding required under the Code or any provision of state or local law, and prior to the Effective Time, the Bank’s board of directors shall take such actions or make such determinations as may be required under the Bank’s stock option plan or plans, subject to the approval of Acquiror, to effect the provisions of this Agreement; and

(v)    each share of Bank Stock held by the Bank as treasury stock shall not be converted into the right to receive cash, but instead shall be canceled as a result of the Merger.

(b)    For purposes of this Agreement, if the Adjusted Shareholders’ Equity is less than Eleven Million Two Hundred Thirty Five Thousand Dollars ($11,235,000), the total purchase price of Eighteen Million Dollars ($18,000,000) to be paid by Acquiror pursuant to this Agreement shall be reduced by any amount by which the Adjusted Shareholders’ Equity is less than Eleven Million Two Hundred Thirty Five Thousand Dollars ($11,235,000) (the “Adjusted Total Purchase Price”), and the Purchase Price Per Share and each of the ISO Option Spread and the NQSO Option Spread shall be adjusted as appropriate to take into account such adjustment in Acquiror’s total purchase price to be paid pursuant to this Agreement.

Section 3.2    Rights as Shareholders; Stock Transfers . At the Effective Time, the Bank Shareholders shall cease to be, and shall have no rights as, Bank Shareholders, other than to receive the Merger Consideration. All rights to receive the Merger Consideration in exchange for shares of Bank Stock shall be deemed to have been paid in full satisfaction of all rights pertaining to all Outstanding Bank Shares. After the Effective Time, there shall be no transfers on the stock transfer books of the Bank or the Resulting Bank of shares of Bank Stock. If Certificates are presented to the Paying Agent after the Effective Time, they shall be canceled and exchanged for the applicable Merger Consideration as provided in this Agreement.

Section 3.3    Steps of Transaction .

(a)    Upon the occurrence of the Closing and on the terms and conditions of this Agreement, AB&T will pay or cause to be paid to each holder of record of Bank Stock such holder’s pro rata share of the Merger Consideration in accordance with the procedures set forth in this Section.

(b)    AB&T or any of Acquiror’s banking subsidiaries selected by Acquiror shall serve as Paying Agent for the parties (the “ Paying Agent ”) to effect the surrender of the Certificates in exchange for cash, as provided in this Article, all pursuant to the terms of a Paying Agent Agreement in the form of Exhibit B .

(c)    As soon as is reasonably practicable, but in no event later than five (5) Business Days after the Closing Date, the Paying Agent shall mail to each holder of record of Bank Stock, instructions for use in effecting the surrender of the Certificates in exchange for the Merger Consideration (the “ Transmittal Letter ”), and shall specify that delivery shall be effected, and risk of loss and title to the certification, shall pass upon delivery of the certificates (or a lost certificate affidavit and a bond in a form reasonably acceptable to Acquiror). Upon proper surrender to the Paying Agent of a Certificate for exchange and cancellation, together with such properly completed and duly executed Transmittal Letter, the holder of such Certificates shall be entitled to receive in exchange therefore a check representing the amount of Merger Consideration that such holder is entitled to receive pursuant to this Article, and the Certificates so surrendered shall forthwith be cancelled.

(d)    The Paying Agent shall deliver to each Bank Shareholder who has submitted a completed Transmittal Letter, accompanied by the related Certificates, the Merger Consideration, without interest, to which he or she is entitled to receive pursuant to the terms of this Agreement.

(e)    Neither the Paying Agent nor any party hereto shall be liable to any former Bank Shareholder for any amount properly delivered to a public official pursuant to applicable abandoned property, escheat or similar laws.

(f)    Each of the Paying Agent, the Resulting Bank and Acquiror shall be entitled to deduct and withhold from the consideration otherwise payable to any Person pursuant to this Article such amounts as it is required to deduct and withhold with respect to the making of such payment under any Legal Requirement. If the Paying Agent, the Resulting Bank or Acquiror, as the case may be, so withholds amounts, such amounts shall be treated for all purposes of this Agreement as having been paid to the Bank Shareholders by the Paying Agent.

(g)    If any Certificate shall have been lost, stolen or destroyed, upon the making of an affidavit of the fact by the Person claiming such Certificate to be lost, stolen or destroyed and the posting by such person of a bond, in such reasonable amount as the Paying Agent or the Resulting Bank may direct, as indemnity against any claim that may be made against it with respect to such Certificate, the Paying Agent will issue, in exchange for such lost, stolen or destroyed Certificate, the appropriate amount of cash, as provided in this Article, to be paid in respect of Bank Stock represented by such Certificate.

(h)    Any portion of the Merger Consideration that remains unclaimed by the Bank Shareholders on the six (6) month anniversary of the Effective Time shall be paid to Acquiror to be held for the benefit of holders of unsurrendered Certificates. Any Bank Shareholders who have not theretofore complied with this Article shall thereafter look only to Acquiror for payment of the Merger Consideration without any interest thereon.

(i)    If a check representing Merger Consideration is to be issued in a name other than that in which the Certificate surrendered in exchange therefor is registered, it shall be a condition of the issuance thereof that the Certificate so surrendered shall be properly endorsed, accompanied by all documents required to evidence and effect such transfer and otherwise in proper form for transfer and that the Person requesting such payment shall pay to Acquiror any transfer or other taxes required by reason of the issuance of a check for Merger Consideration in any name other than that of the registered holder of the Certificate surrendered, or otherwise required, or shall establish to the satisfaction of Acquiror that such tax has been paid or is not payable.

(j)    Immediately prior to the Effective Time, all outstanding Bank NQSOs and Bank ISOs shall become immediately exercisable and fully vested. At the Effective Time, all outstanding Bank NQSOs and Bank ISOs shall be converted into cash as provided in this Section. Immediately prior to the Effective Time, all outstanding Bank NQSOs and Bank ISOs shall be cancelled and, immediately after the Effective Time, AB&T shall pay each holder, for each Bank NQSO held, an amount in cash equal to the NQSO Option Spread, and for each Bank ISO held, an amount in cash equal to the ISO Option Spread, reduced in the case of all such payments, by any required Tax withholdings. The payment of the NQSO Option Spreads and the ISO Option Spreads pursuant to this Article shall be delivered and paid in full satisfaction of all rights pertaining to the outstanding Bank NQSOs and Bank ISOs, respectively.

Section 3.4    Dissenting Shares . Notwithstanding anything in this Agreement to the contrary, the shares of Bank Stock that are issued and outstanding immediately prior to the Effective Time and that are held by Dissenting Shareholders (the “ Dissenting Shares ”) shall not be converted into or be exchangeable for the right to receive the Merger Consideration pursuant to the provisions of this Article, unless and until such holder shall have failed to perfect or shall have effectively withdrawn the holder’s right to appraisal and payment under the Arizona Statutes. If such holder shall have so failed to perfect or shall have effectively withdrawn or lost such right, such Bank Stock shall thereupon be deemed to have been converted into and to have become exchangeable for, as of the Effective Time, the right to receive the consideration described in this Article, without any interest thereon. The Bank agrees to give Acquiror notice of any written demands for appraisal or notices of dissent with respect to any Bank Stock pursuant to the Arizona Statutes, or any withdrawal of any such demand, and any other instruments served and received by the Bank, and Acquiror shall have the right to participate in all negotiations and proceedings with respect to any demands for appraisal made by any Dissenting Shareholders. Prior to the Effective Time, the Bank shall not, except with the prior written consent of Acquiror, make any payment with respect to, or offer to settle, any such demands.

Article 4   

The Bank hereby represents and warrants to Acquiror and AB&T that the following are true and correct as of the Agreement Date, and will be true and correct as of the Effective Date:

Section 4.1    Bank Organization . The Bank is an Arizona corporation that holds a banking permit and is validly existing and in good standing under the laws of the State of Arizona. The Bank has full power and authority, corporate and otherwise, to own, operate and lease its properties as presently owned, operated and leased, and to carry on its business as it is now being conducted, and is duly qualified to do business and is in good standing in each jurisdiction in which the nature of the business conducted or the properties or assets owned or leased by it makes such qualification necessary. Copies of the articles of incorporation and bylaws of the Bank and all amendments thereto are set forth on Schedule 4.1 and are complete and correct.

Section 4.2    Authorization; Enforceability . 

(a)    The Bank has the requisite power and authority to enter into and perform its obligations under this Agreement. The execution, delivery and performance of this Agreement by the Bank, and the consummation by it of its obligations under this Agreement, have been authorized by all necessary corporate action, subject to shareholder approval, and this Agreement constitutes a legal, valid and binding obligation of the Bank enforceable in accordance with its terms, except as such enforcement may be limited by bankruptcy, insolvency, reorganization or other laws affecting creditors’ rights generally and subject to general principles of equity.

(b)    Except for ordinary corporate requirements, no “business combination,” “moratorium,” “control share” or other state anti-takeover statute or regulation or any provisions contained in the articles of incorporation or bylaws or similar organizational documents of the Bank: (i) prohibits or restricts the Bank’s ability to perform its obligations under this Agreement, or its ability to consummate the Contemplated Transactions; (ii) would have the effect of invalidating or voiding this Agreement, or any provision hereof; or (iii) would subject Acquiror or AB&T to any material impediment or condition in connection with the exercise of any of its rights under this Agreement. The board of directors of the Bank has unanimously approved the execution of, and performance by the Bank of its obligations under, this Agreement.

Section 4.3    No Conflict . Except as set forth on Schedule 4.3 , neither the execution nor delivery of this Agreement nor the consummation or performance of any of the Contemplated Transactions will, directly or indirectly (with or without notice or lapse of time): (a) contravene, conflict with or result in a violation of any provision of the articles of incorporation or bylaws (or similar organizational documents), each as in effect on the Agreement Date, or any currently effective resolution adopted by the board of directors or shareholders of the Bank; (b) contravene, conflict with or result in a violation of, or give any Regulatory Authority or other Person the valid and enforceable right to challenge any of the Contemplated Transactions or to exercise any remedy or obtain any relief under, any Legal Requirement or any Order to which the Bank, or any of their respective assets that are owned or used by them, may be subject, except for any contravention, conflict or violation that is permissible by virtue of obtaining the regulatory approvals necessitated by the Contemplated Transactions, including such approvals under the Federal Deposit Insurance Act, as amended (the “ FDIA ”) and the Arizona Statutes; (c) contravene, conflict with or result in a violation or breach of any provision of, or give any Person the right to declare a default or exercise any remedy under, or to accelerate the maturity or performance of, or to cancel, terminate or modify any material Contract to which the Bank is a party or by which any of their respective assets is bound; or (d) result in the creation of any lien, charge or encumbrance upon or with respect to any of the assets owned or used by the Bank or any subsidiary of the Bank. Except for the approvals referred to in Section 8.1 and the requisite approval of its shareholders, the Bank is not or will not be required to give any notice to or obtain any consent from any Person in connection with the execution and delivery of this Agreement or the consummation or performance of any of the Contemplated Transactions.

Section 4.4    Bank Capitalization .

(a)    The authorized capital stock of the Bank currently consists, and at the Closing will consist, exclusively of 10,000,000 shares of Bank Stock, 1,730,463 of which shares are duly issued, fully paid and non-assessable. The Bank acknowledges that the Merger Consideration was determined based upon the accuracy of the representations and warranties made in this Section with respect to the number of outstanding shares of Bank Stock and the absence of any options (except for the Bank NQSOs and the Bank ISOs) or other rights to purchase additional shares of Bank Stock, and acknowledges that any Breach of such representations and warranties shall be deemed to have a Material Adverse Effect on the Bank for purposes of this Agreement.

(b)    None of the shares of Bank Stock have been issued in violation of any federal or state securities laws or any other Legal Requirement. Since December 31, 2004, except as disclosed in or permitted by this Agreement or as provided on Schedule 4.4 , no shares of Bank Stock have been purchased, redeemed or otherwise acquired, directly or indirectly, by the Bank and no dividends or other distributions payable in any equity securities of the Bank have been declared, set aside, made or paid to the Bank Shareholders. To the Knowledge of the Bank, none of the shares of authorized capital stock of the Bank are, nor on the Closing will they be, subject to any claim of right inconsistent with this Agreement. Except for the Bank NQSOs and the Bank ISOs and as provided in the Arizona Statutes, as of the Agreement Date, there are no outstanding subscriptions, contracts, conversion privileges, options, warrants, calls or other rights obligating the Bank to issue, sell or otherwise dispose of, or to purchase, redeem or otherwise acquire, any shares of capital stock of the Bank, and except as provided in this Section or otherwise disclosed in this Agreement, the Bank is not a party to any Contract relating to the issuance, purchase, sale or transfer of any equity securities or other securities of the Bank. The Bank does not own or have any Contract to acquire any equity securities or other securities of any Person or any direct or indirect equity or ownership interest in any other business except for the capital stock of the Bank and as set forth in Schedule 4.4 .

Section 4.5    Financial Statements and Reports . True, correct and complete copies of Call Reports for the Bank as of the close of business on December 31, 2002, 2003 and 2004, and for the nine months ended September 30, 2005 (collectively, the “ Bank Financial Statements ”), are included in Schedule 4.5 . The Bank Financial Statements have been prepared on a basis consistent with past accounting practices and as required by applicable Legal Requirements and fairly present the Bank’s financial condition and results of operations at the dates and for the periods presented. The Bank Financial Statements are complete and correct in all material respects and fairly and accurately present the respective financial position, assets, liabilities and results of operations of the Bank as at the respective dates of, and for the periods referred to in, the Bank Financial Statements, subject to normal year-end non-material audit adjustments in amounts consistent with past practice. The Bank Financial Statements do not include any material assets or omit to state any material liabilities, absolute or contingent, or other facts, which inclusion or omission would render the Bank Financial Statements misleading in any material respect as of the respective dates and for the periods referred to in the respective Bank Financial Statements.

Section 4.6    Books and Records . The books of account, minute books, stock record books and other records of the Bank are complete and correct in all material respects and have been maintained in accordance with the Bank’s business practices and all applicable Legal Requirements, including the maintenance of any adequate system of internal controls required by the Legal Requirements. The minute books of the Bank contain accurate and complete records in all material respects of all meetings held of, and corporate action taken by, its respective shareholders, board of directors and committees of the board of directors. At the Closing, all of those books and records will be in the possession of the Bank.

Section 4.7    Title to Properties . The Bank has good and marketable title to all assets and properties, whether real or personal, tangible or intangible, that it purports to own, subject to no valid liens, mortgages, security interests, encumbrances or charges of any kind except: (a) as noted in the most recent Bank Financial Statement or on Schedule 4.7 ; (b) statutory liens for Taxes not yet delinquent or being contested in good faith by appropriate Proceedings and for which appropriate reserves have been established and reflected on the Bank Financial Statements; (c) pledges or liens required to be granted in connection with the acceptance of government deposits or granted in connection with repurchase or reverse repurchase agreements; and (d) minor defects and irregularities in title and encumbrances that do not materially impair the use thereof for the purposes for which they are held (all of such exceptions in clauses (a) through (d) are collectively referred to as “ Permitted Exceptions ”). Except as set forth on Schedule 4.7 , the Bank as lessee has the right under valid and existing leases to occupy, use, possess and control any and all of the respective property leased by it. Except where any failure would not reasonably be expected to have a Material Adverse Effect on the Bank, all buildings and structures owned by the Bank lie wholly within the boundaries of the real property owned or validly leased by it, and do not encroach upon the property of, or otherwise conflict with the property rights of, any other Person.

Section 4.8    Condition and Sufficiency of Assets . The buildings, structures and equipment of the Bank are structurally sound, are in good operating condition and repair, and are adequate for the uses to which they are being put, and none of such buildings, structures or equipment is in need of maintenance or repairs except for ordinary, routine maintenance and repairs that are not material in the aggregate in nature or in cost. Except where any failure would not reasonably be expected to have a Material Adverse Effect on the Bank, the real property, buildings, structures and equipment owned or leased by the Bank are in compliance with the Americans with Disabilities Act of 1990, as amended, and the regulations promulgated thereunder, and all other building and development codes and other restrictions, including subdivision regulations, building and construction regulations, drainage codes, health, fire and safety laws and regulations, utility tariffs and regulations, conservation laws and zoning laws and ordinances. The assets and properties, whether real or personal, tangible or intangible, that the Bank purports to own are sufficient for the continued conduct of the business of the Bank after the Closing in substantially the same manner as conducted prior to the Closing.

Section 4.9    Loans; Allowance for Loan and Lease Losses . Except as set forth in Schedule 4.9 , all loans and loan commitments extended by the Bank and any extensions, renewals or continuations of such loans and loan commitments (the “ Bank Loans ”) were made in accordance with the lending policies of the Bank in the Ordinary Course of Business. The Bank Loans are evidenced by appropriate and sufficient documentation and constitute valid and binding obligations to the Bank enforceable in accordance with their terms, except as enforceability may be limited by bankruptcy, insolvency, reorganization or other laws affecting creditors’ rights generally and subject to general principles of equity. All such Bank Loans are, and at the Closing will be, free and clear of any encumbrance or other charge (except for liens, if any, set forth on Schedule 4.7 ) and the Bank has complied, and at the Closing will have complied with all Legal Requirements relating to such Bank Loans, except where any such failure to comply would not reasonably be expected to have a Material Adverse Effect on the Bank. The allowance for loan and lease losses of the Bank is and will be on the Closing adequate in all material respects to provide for possible or specific losses, net of recoveries relating to loans previously charged off, and contains and will contain an additional amount of unallocated reserves for unanticipated future losses at an adequate level. To the Knowledge of the Bank: (i) none of the Bank Loans is subject to any material offset or claim of offset; and (ii) the aggregate loan balances in excess of the Bank’s allowance for loan and lease losses are, based on past loan loss experience, collectible in accordance with their terms (except as limited above) and all uncollectible loans have been charged off. 

Section 4.10    Undisclosed Liabilities; Adverse Changes . Except as set forth on Schedule 4.10 , the Bank has no material liabilities or obligations of any nature (whether absolute, accrued, contingent or otherwise), except for liabilities or obligations reflected or reserved against in the Bank Financial Statements and current liabilities incurred in the Ordinary Course of Business since the respective dates thereof. Except as set forth on Schedule 4.10 , since the date of the latest Bank Financial Statement, there has not been any change in the business, operations, properties, prospects, assets or condition of the Bank, and, to the Bank’s Knowledge, no event has occurred or circumstance exists, that has had or would reasonably be expected to have a Material Adverse Effect on the Bank. 

Section 4.11    Taxes . The Bank has duly filed all material Tax Returns required to be filed by it, and each such Tax Return is complete and accurate in all material respects. The Bank has paid, or made adequate provision for the payment of, all Taxes (whether or not reflected in Tax Returns as filed or to be filed) due and payable by the Bank, or claimed to be due and payable by any Regulatory Authority, and is not delinquent in the payment of any Tax, except such Taxes as are being contested in good faith and as to which adequate reserves have been provided. There is no claim or assessment pending or, to the Knowledge of the Bank, Threatened against the Bank for any Taxes owed by any of them. No audit, examination or investigation related to Taxes paid or payable by the Bank is presently being conducted or, to the Knowledge of the Bank, Threatened by any Regulatory Authority. The Bank has delivered or made available to Acquiror true, correct and complete copies of all Tax Returns filed with respect to the last three fiscal years by the Bank and any tax examination reports and statements of deficiencies assessed or agreed to for any such time period.

Section 4.12    Compliance with ERISA . Except as set forth on Schedule 4.12 , all employee benefit plans (as defined in Section   3(3) of ERISA) and all Bank Employee Benefit Plans established or maintained by the Bank or to which the Bank contributes, are in compliance with all applicable requirements of ERISA, and are in compliance with all applicable requirements (including qualification and non-discrimination requirements in effect as of the Closing) of the Code for obtaining the tax benefits the Code thereupon permits with respect to such employee benefit plans. No such employee benefit plan has any amount of unfunded benefit liabilities (as defined in Section   4001(a)(18) of ERISA) for which the Bank would be liable to any Person under Title IV of ERISA if any such employee benefit plan were terminated as of the Closing. Such employee benefit plans are funded in accordance with Section   412 of the Code (if applicable). There would be no obligations of the Bank under Title IV of ERISA relating to any such employee benefit plan that is a multi-employer plan if any such plan were terminated or if the Bank withdrew from any such plan as of the Closing. All contributions and premium payments that are due under any such benefit plans have been made.

Section 4.13    Compliance with Legal Requirements . The Bank holds all licenses, certificates, permits, franchises and rights from all appropriate Regulatory Authorities necessary for the conduct of its respective business. Except as set forth on Schedule 4.13 , the Bank is, and at all times since January 1, 2002, has been, in compliance with each Legal Requirement that is or was applicable to it or to the conduct or operation of its respective businesses or the ownership or use of any of its respective assets, except where the failure to comply would not reasonably be expected to have a Material Adverse Effect on the Bank. No event has occurred or circumstance exists that (with or without notice or lapse of time): (a) may constitute or result in a violation by the Bank of, or a failure on the part of the Bank to comply with, any Legal Requirement; or (b) may give rise to any obligation on the part of the Bank to undertake, or to bear all or any portion of the cost of, any remedial action of any nature in connection with a failure to comply with any Legal Requirement; except, in either case, where the failure to comply or the violation would not reasonably be expected to have a Material Adverse Effect on the Bank. Except as set forth on Schedule 4.13 , the Bank has not received, at any time since January 1, 2002, any notice or other communication (whether oral or written) from any Regulatory Authority or any other Person, nor does the Bank have any Knowledge regarding: (x) any actual, alleged, possible or potential violation of, or failure to comply with, any Legal Requirement; or (y) any actual, alleged, possible or potential obligation on the part of the Bank to undertake, or to bear all or any portion of the cost of, any remedial action of any nature in connection with a failure to comply with any Legal Requirement, except where any such violation, failure or obligation would not reasonably be expected to have a Material Adverse Effect on the Bank.

Section 4.14    Legal Proceedings; Orders . 

(a)    Schedule 4.14 is a true and correct list of all Proceedings and Orders pending, entered into or, to the Knowledge of the Bank, Threatened against, affecting or involving the Bank or any of their respective assets or businesses, or the Contemplated Transactions, since January 1, 2002, that has not been fully satisfied and terminated and that would reasonably be expected to have, a Material Adverse Effect on the Bank, and there is no fact to the Bank’s Knowledge that would provide a basis for any other Proceeding or Order. To the Knowledge of the Bank, no officer, director, agent or employee of the Bank is subject to any Order that prohibits such officer, director, agent or employee from engaging in or continuing any conduct, activity or practice relating to the businesses of the Bank as currently conducted.

(b)    Except as described on Schedule 4.14 , the Bank: (i) is not subject to any cease and desist or other Order or enforcement action issued by, or (ii) is not a party to any written agreement, consent agreement or memorandum of understanding with, or (iii) is not a party to any commitment letter or similar undertaking to, or (iv) is subject to any order or directive by, or (v) is subject to any supervisory letter from, or (vi) has not been ordered to pay any civil money penalty, which has not been paid, by, or (vii) ) has not adopted any policies, procedures or board resolutions at the request of, any Regulatory Authority that currently (w) restricts in any material respect the conduct of its business or (x) that in any material manner relates to its capital adequacy, or (y) restricts its ability to pay dividends, or (z) limits in any material manner its credit or risk management policies, its management or its business; nor has the Bank been advised by any Regulatory Authority that it is considering issuing, initiating, ordering or requesting any of the foregoing.

Section 4.15    Absence of Certain Changes and Events . Except as set forth on Schedule 4.15 , since December 31, 2004, the Bank has conducted its business only in the Ordinary Course of Business. Without limiting the foregoing, with respect to each, since December 31, 2004, there has not been any:

(a)    change in its authorized or issued capital stock; grant of any stock option or right to purchase shares of its capital stock; issuance of any security convertible into such capital stock or evidences of indebtedness (except in connection with customer deposits); grant of any registration rights; purchase, redemption, retirement or other acquisition by it of any shares of any such capital stock; or declaration or payment of any dividend or other distribution or payment in respect of shares of its capital stock;

(b)    amendment to its articles of incorporation or bylaws or adoption of any resolutions by its board of directors or shareholders with respect to the same;

(c)    payment or increase of any bonus, salary or other compensation to any of its shareholders, directors, officers or employees, except for normal increases in the Ordinary Course of Business or in accordance with any then existing Bank Employee Benefit Plan disclosed in the Schedules, or entry by it into any employment, consulting, non-competition, change in control, severance or similar Contract with any shareholder, director, officer or employee;

(d)    adoption, amendment (except for any amendment necessary to comply with any Legal Requirement) or termination of, or increase in the payments to or benefits under, any Bank Employee Benefit Plan;

(e)    damage to or destruction or loss of any of its assets or property, whether or not covered by insurance and where the resulting diminution in value individually or in the aggregate is greater than $10,000;

(f)    entry into, termination or extension of, or receipt of notice of termination of any joint venture or similar agreement pursuant to any Contract or any similar transaction;

(g)    except for this Agreement, entry into any new, or modification, amendment, renewal or extension (through action or inaction) of the terms of any existing, lease, Contract or license that has a term of more than one year or that involves the payment the Bank of more than $10,000 in the aggregate;

(h)    Bank Loan or commitment to make any Bank Loan other than in the Ordinary Course of Business;

(i)    Bank Loan or commitment to make, renew, extend the term or increase the amount of any Bank Loan to any Person if such Bank Loan or any other Bank Loans to such Person or an Affiliate of such Person is on the “watch list” or similar internal report of the Bank, or has been classified by the Bank or Regulatory Authority as “substandard,” “doubtful,” “loss,” or “other loans specially mentioned” or listed as a “potential problem loan”; provided, however , that nothing in this Section shall prohibit the Bank from honoring any contractual obligation in existence on the date of this Agreement;

(j)    incurrence by it of any obligation or liability (fixed or contingent) other than in the Ordinary Course of Business;

(k)    sale (other than any sale in the Ordinary Course of Business), lease or other disposition of any of its assets or properties, or mortgage, pledge or imposition of any lien or other encumbrance upon any of its material assets or properties, except for tax and other liens that arise by operation of law and with respect to which payment is not past due, and except for pledges or liens: (i) required to be granted in connection with the acceptance by the Bank of government deposits; (ii) granted in connection with repurchase or reverse repurchase agreements; or (iii) otherwise incurred in the Ordinary Course of Business;

(l)    cancellation or waiver by it of any claims or rights with a value in excess of $5,000;

(m)    any investment by it of a capital nature exceeding $10,000 or aggregate investments of a capital nature exceeding $50,000;

(n)    except for the Contemplated Transactions, merger or consolidation with or into any other Person, or acquisition of any stock, equity interest or business of any other Person;

(o)    transaction for the borrowing or loaning of monies, or any increase in any outstanding indebtedness, other than in the Ordinary Course of Business;

(p)    material change in any policies and practices with respect to liquidity management and cash flow planning, marketing, deposit origination, lending, budgeting, profit and tax planning, accounting or any other material aspect of its business or operations, except for such changes as may be required in the opinion of the management of the Bank to respond to then current market or economic conditions or as may be required by any Regulatory Authorities;

(q)    filing of any applications for additional branches, opening of any new office or branch, closing of any current office or branch, or relocation of operations from existing locations;

(r)    discharge or satisfaction of any material lien or encumbrance on its assets or repayment of any material indebtedness for borrowed money, except for obligations incurred and repaid in the Ordinary Course of Business;

(s)    entry into any Contract or agreement to buy, sell, exchange or otherwise deal in any assets or series of assets in a single transaction in excess of $10,000 in aggregate value, except for sales by the Bank of “other real estate owned” and other repossessed properties or the acceptance of a deed in lieu of foreclosure;

(t)    purchase or other acquisition of any investments, direct or indirect, in any derivative securities, financial futures or commodities or entry into any interest rate swap, floors and option agreements, or other similar interest rate management agreements;

(u)    hiring of any employee with an annual salary in excess of $25,000, except for employees at will who are hired to replace employees who have resigned or whose employment has otherwise been terminated; or

(v)    agreement, whether oral or written, by it to do any of the foregoing.

Section 4.16    Properties, Contracts and Employee Benefit Plans . Except for Contracts evidencing Bank Loans made by the Bank in the Ordinary Course of Business, Schedule 4.16 lists or describes the following with respect to the Bank:

(a)    all real property owned by the Bank and the principal buildings and structures located thereon, together with the address of such real estate, and each lease of real property to which the Bank is a party, identifying the parties thereto, the annual rental payable, the expiration date thereof and a brief description of the property covered, and in each case of either owned or leased real property, the proper identification, if applicable, of each such property as a branch or main office or other office of the Bank;

(b)    all loan and credit agreements, conditional sales contracts or other title retention agreements or security agreements relating to money borrowed by the Bank, exclusive of deposit agreements with customers of the Bank entered into in the Ordinary Course of Business, agreements for the purchase of federal funds and repurchase agreements;

(c)    each Contract that involves performance of services or delivery of goods or materials by the Bank of an amount or value in excess of $10,000;

(d)    each Contract that was not entered into in the Ordinary Course of Business and that involves expenditures or receipts of the Bank in excess of $10,000;

(e)    each Contract not referred to elsewhere in this Section that:

(i)    relates to the future purchase of goods or services that materially exceeds the requirements of its respective business at current levels or for normal operating purposes; or

(ii)    materially affects the business or financial condition of the Bank;

(f)    each lease, rental, license, installment and conditional sale agreement and other Contract affecting the ownership of, leasing of, title to or use of, any personal property (except personal property leases and installment and conditional sales agreements having a value per item or aggregate payments of less than $10,000 or with terms of less than one year);

(g)    each licensing agreement or other Contract with respect to patents, trademarks, copyrights, or other intellectual property (collectively, “ Intellectual Property Assets ”), including agreements with current or former employees, consultants or contractors regarding the appropriation or the non-disclosure of any of the Intellectual Property Assets of the Bank;

(h)    each collective bargaining agreement and other Contract to or with any labor union or other employee representative of a group of employees;

(i)    each joint venture, partnership and other Contract (however named) involving a sharing of profits, losses, costs or liabilities by the Bank with any other Person;

(j)    each Contract containing covenants that in any way purport to restrict the business activity of the Bank or any Affiliate of any of the foregoing, or limit the ability of the Bank or any Affiliate of the foregoing to engage in any line of business or to compete with any Person;

(k)    each Contract providing for payments to or by any Person based on sales, purchases or profits, other than direct payments for goods;

(l)    the name and annual salary of each director, officer or employee of the Bank, and the profit sharing, bonus or other form of compensation (other than salary) paid or payable by the Bank to or for the benefit of each such person in question for the year ended December 31, 2004, and for the current fiscal year, and any employment agreement, consulting agreement, non-competition, severance or change in control agreement or similar arrangement or plan with respect to each such person;

(m)    each profit sharing, group insurance, hospitalization, stock option, pension, retirement, bonus, severance, change of control, deferred compensation, stock bonus, stock purchase, employee stock ownership or other employee welfare or benefit agreements, plans or arrangements established, maintained, sponsored or undertaken by the Bank for the benefit of the officers, directors or employees of the Bank, including each trust or other agreement with any custodian or any trustee for funds held under any such agreement, plan or arrangement, and all other Contracts or arrangements under which pensions, deferred compensation or other retirement benefits are being paid or may become payable by the Bank for the benefit of the employees of the Bank (collectively, the “ Bank Employee Benefit Plans ”), and, in respect to any of them, the latest reports or forms, if any, filed with the Department of Labor and Pension Benefit Guaranty Corporation under ERISA, any current financial or actuarial reports and any currently effective Internal Revenue Service private rulings or determination letters obtained by or for the benefit of the Bank;

(n)    the name of each Person who is or would be entitled pursuant to any Contract or Bank Employee Benefit Plan to receive any payment from the Bank as a result of the consummation of the Contemplated Transactions (including any payment that is or would be due as a result of any actual or constructive termination of a Person’s employment or position following such consummation) and the maximum amount of such payment;

(o)    each Contract entered into other than in the Ordinary Course of Business that contains or provides for an express undertaking by the Bank to be responsible for consequential damages;

(p)    each Contract for capital expenditures in excess of $10,000;

(q)    each warranty, guaranty or other similar undertaking with respect to contractual performance extended by the Bank other than in the Ordinary Course of Business; and

(r)    each amendment, supplement and modification in respect of any of the foregoing.

Copies of each document, plan or Contract listed and described on Schedule 4.16 are appended to such Schedule.

Section 4.17    No Defaults . Except as set forth on Schedule 4.17 , to the Knowledge of the Bank, each Contract identified or required to be identified on Schedule 4.16 is in full force and effect and is valid and enforceable in accordance with its terms, except as such enforcement may be limited by bankruptcy, insolvency, reorganization or other laws affecting creditors’ rights generally and subject to general principles of equity. The Bank is, and at all times since January 1, 2002, has been, in full compliance with all applicable terms and requirements of each Contract under which the Bank has or had any obligation or liability or by which the Bank or any asset owned or used by it is or was bound, except where the failure to be in full compliance would not reasonably be expected to have a Material Adverse Effect on the Bank. To the knowledge of the Bank, each other Person that has or had any obligation or liability under any such Contract under which the Bank has or had any rights is, and at all times since January 1, 2002, has been, in full compliance with all applicable terms and requirements of such Contract, except where the failure to be in full compliance would not reasonably be expected to have a Material Adverse Effect on the Bank. No event has occurred or circumstance exists that (with or without notice or lapse of time) may contravene, conflict with or result in a material violation or breach of, or give the Bank or other P