ACQUISITION AGREEMENT

Asset Purchase Agreement

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EXCHANGE NATIONAL BANCSHARES, INC. | 2005 ACQUISITION COMPANY, INC. | DREXEL BANCSHARES, INC.

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Title: ACQUISITION AGREEMENT
Governing Law: Missouri Date: 3/1/2005
Industry: Regional Banks Law Firm: Stinson Morrison Hecker LLP; Holman Hansen & Colville, P.C. Sector: Financial

ACQUISITION AGREEMENT, Parties: exchange national bancshares inc. , 2005 acquisition company inc. , drexel bancshares inc.

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EXHIBIT 2.1

ACQUISITION AGREEMENT

among

EXCHANGE NATIONAL BANCSHARES, INC.

a Missouri corporation

and

2005 ACQUISITION COMPANY, INC.

a Missouri corporation,

and

DREXEL BANCSHARES, INC.,

a Missouri corporation,

and its shareholders as Sellers

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TABLE OF CONTENTS

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PAGE

----

ARTICLE I DEFINITIONS................................................... 1

ARTICLE II THE ACQUISITION TRANSACTION.................................. 3

2.01 The Acquisition Transaction.................................... 3

2.02 Closing........................................................ 4

2.03 Method of Effecting the Merger and Effective Time.............. 4

2.04 Articles and Bylaws............................................ 4

2.05 Board of Directors and Officers................................ 4

2.06 Additional Actions............................................. 4

2.07 Payment and Delivery of Merger Consideration................... 5

2.08 Reservation of Right to Revise Transaction..................... 5

2.09 Escrow Deposit by ENB.......................................... 5

2.10 Tax Consequences............................................... 6

ARTICLE III REPRESENTATIONS AND WARRANTIES OF SELLERS.................... 6

3.01 Organization and Authority..................................... 6

3.02 Corporate Authorization; Records............................... 7

3.03 Subsidiaries................................................... 7

3.04 Capitalization of The Bank and Bancshares...................... 8

3.05 Financial Statements........................................... 8

3.06 Reports........................................................ 9

3.07 Title to and Condition of Assets............................... 9

3.08 Real Property.................................................. 9

3.09 Loans, Commitments and Contracts............................... 10

3.10 Absence of Defaults............................................ 13

3.11 Absence of Undisclosed Liabilities............................. 13

3.12 Allowance for Loan and Lease Losses; Non-Performing Assets..... 13

3.13 Taxes.......................................................... 14

3.14 Material Adverse Change........................................ 14

3.15 Litigation and Other Proceedings............................... 14

3.16 Compliance with Laws........................................... 15

3.17 Labor.......................................................... 16

3.18 Employee Benefit Plans......................................... 16

3.19 Conduct of Bancshares's and the Bank's Businesses to Date...... 17

3.20 Full Disclosure................................................ 18

3.21 Brokers and Finders; Other Liabilities......................... 18

3.22 Interest Rate Risk Management Instruments...................... 18

3.23 Representations Concerning Shareholders........................ 18

ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE BUYER ENTITIES.......... 19

4.01 Organization and Authority..................................... 19

4.02 Corporate Authorization........................................ 19

4.03 Material Adverse Change........................................ 20

4.04 Full Disclosure................................................ 20

ARTICLE V CONDUCT OF BUSINESSES PRIOR TO THE EFFECTIVE TIME.............. 20

5.01 Conduct of Businesses Prior to the Closing Date................ 20

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5.02 Forbearances of Bancshares and the Bank........................ 20

ARTICLE VI ADDITIONAL COVENANTS........................................... 22

6.01 Access and Information; Due Diligence.......................... 22

6.02 Regulatory Matters............................................. 23

6.03 Shareholder Approvals.......................................... 23

6.04 Current Information............................................ 23

6.05 Environmental Reports.......................................... 23

6.06 Expenses....................................................... 24

6.07 Miscellaneous Agreements and Consents.......................... 24

6.08 Press Releases and Disclosure of Agreement..................... 24

6.09 Indemnification of Bancshares' and the Bank's Directors,

Officers and Employees...................................... 25

6.10 Employment Agreement........................................... 25

6.11 Regulatory Approvals........................................... 25

6.12 Breaches....................................................... 25

6.13 Consummation of Agreement...................................... 26

6.14 Noncompetition................................................. 26

6.15 Existence of the Bank.......................................... 27

ARTICLE VII CONDITIONS.................................................... 27

7.01 Conditions to Each Party's Obligation To Effect the

Merger...................................................... 27

7.02 Conditions to Obligations of the Sellers....................... 28

7.03 Conditions to Obligations of the Buyer Entities................ 28

ARTICLE VIII TERMINATION, AMENDMENT AND WAIVER............................ 30

8.01 Termination.................................................... 30

8.02 Effect of Termination.......................................... 31

8.03 Amendment...................................................... 31

8.04 Waiver......................................................... 31

ARTICLE IX INDEMNIFICATION................................................ 32

9.01 Indemnification................................................ 32

9.02 Claims......................................................... 32

9.03 Costs.......................................................... 32

9.04 Reimbursement.................................................. 33

9.05 Net Loss and De Minimis........................................ 33

9.06 Limitations.................................................... 33

ARTICLE X GENERAL PROVISIONS.............................................. 33

10.01 Survival of Representations, Warranties and Agreements......... 33

10.02 No Assignment; Successors and Assigns.......................... 33

10.03 Severability................................................... 33

10.04 No Implied Waiver.............................................. 34

10.05 Headings....................................................... 34

10.06 Entire Agreement............................................... 34

10.07 Counterparts................................................... 34

10.08 Notices........................................................ 34

10.09 Governing Law.................................................. 35

10.10 Authority of Shareholder Representative........................ 35

</TABLE>

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ACQUISITION AGREEMENT

This Acquisition Agreement (this "Agreement") is made and entered into as

of January 28, 2005, by and among EXCHANGE NATIONAL BANCSHARES, INC., a Missouri

corporation ("ENB"), 2005 ACQUISITION COMPANY, INC., a Missouri corporation

("Acquisition Company," and collectively with ENB, the "Buyer Entities"), DREXEL

BANCSHARES, INC., a Missouri corporation ("Bancshares"), and the undersigned

shareholders of Bancshares (collectively the "Shareholders," and, together with

Bancshares, the "Sellers").

WITNESSETH:

WHEREAS, ENB is the beneficial and record owner of one hundred percent

(100%) of the issued and outstanding shares of the common stock of Acquisition

Company;

WHEREAS, Bancshares is the beneficial and record owner of one hundred

percent (100%) of the issued and outstanding shares of the common stock ("Bank

Stock") of Bank 10, a Missouri bank (the "Bank");

WHEREAS, the Shareholders are the beneficial and record owners of one

hundred percent (100%) of the issued and outstanding shares of the voting and

non-voting common stock ("Bancshares Stock") of Bancshares;

WHEREAS, ENB desires to acquire one hundred percent (100%) of the issued

and outstanding shares of Bancshares Stock, and the Shareholders desire to sell

such shares to ENB, all pursuant to the terms herein set forth;

WHEREAS, in order to provide for the acquisition of the shares of

Bancshares Stock held by the Shareholders, ENB has organized Acquisition Company

into which it is proposed that Bancshares would merge as provided in this

Agreement and the Merger Agreement; and

WHEREAS, the Buyer Entities and the Sellers desire to provide for certain

undertakings, conditions, representations, warranties and covenants in

connection with the transactions contemplated by this Agreement.

NOW, THEREFORE, in consideration of the premises and the representations,

warranties and agreements herein contained, the parties agree as follows:

ARTICLE I

DEFINITIONS

1.01 "Acquisition Company" means 2005 Acquisition Company, Inc., a Missouri

corporation.

1.02 "Bancshares" means Drexel Bancshares, Inc., a Missouri corporation and

registered bank holding company.

1.03 "Bank" means Bank 10, a Missouri banking corporation that is a member

of the Federal Reserve System.

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1.04 "BHC Act" means the Bank Holding Company of 1956, as amended.

1.05 "Book Value" means (i) in the case of the Bank, an amount, determined

in accordance with GAAP, that is the sum of capital, surplus and undivided

profits of the Bank, except that there shall be no adjustment made for

unrealized gains or losses with respect to the investment securities portfolio

of the Bank, and (ii) in the case of Bancshares, an amount, determined in

accordance with GAAP, that is the shareholders' equity of Bancshares.

1.06 "Closing Date" means the date of the Closing as defined in Section

2.02 of this Agreement.

1.07 "Due Diligence Period" means the period of time commencing on the date

of execution of this Agreement and ending 30 days thereafter, or on such earlier

date as ENB shall have terminated such period by notice to the Sellers.

1.08 "Due Diligence Review" means the review by ENB during the Due

Diligence Period of Bancshares and the Bank and their respective operations,

business affairs, prospects and financial condition, including, without

limitation, those matters which are the subject of Bancshares' representations

and warranties included herein.

1.09 "Effective Time" means the date and the time that the Missouri

Secretary of State issues a certificate of merger with respect to the Merger.

1.10 "ENB" means Exchange National Bancshares, a Missouri corporation that

is a registered bank holding company.

1.11 "Equity Securities" means the capital stock or other equity securities

of an issuer, options, warrants, scrip, rights to subscribe to, calls or

commitments of any character whatsoever relating to, or securities or rights

convertible into, shares of any capital stock or other equity securities of such

issuer, or contracts, commitments, understandings or arrangements by which such

issuer is or may become bound to issue additional shares of its capital stock or

other equity securities of such issuer, or options, warrants, scrip or rights to

purchase, acquire, subscribe to, calls on or commitments for any shares of its

capital stock or other equity securities.

1.12 "Escrow Agent" means Citizens Union State Bank & Trust.

1.13 "Escrow Agreement" means the Escrow Agreement, dated the date hereof,

by and among ENB, Bancshares and Escrow Agent.

1.14 "FDI Act" means the Federal Deposit Insurance Act of 1950, as amended.

1.15 "FDIC" means the Federal Deposit Insurance Corporation.

1.16 "Federal Reserve Board" means the Board of Governors of the Federal

Reserve System.

1.17 "Financial Statements" has the meaning given to that term in Section

3.05(b) hereof.

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1.18 "GAAP" means generally accepted accounting principles.

1.19 "Merger" means the merger of Bancshares with and into Acquisition

Company, with Acquisition Company being the surviving corporation.

1.20 "Merger Agreement" means the Merger Agreement being executed

concurrently herewith by and between Bancshares and Acquisition Company, in the

form attached hereto as Exhibit A.

1.21 "Merger Consideration" means a cash amount equal to $32,862,000, plus

any amount by which the Book Value of Bancshares as of the business day

immediately preceding the Closing Date is greater than $13,144,800 or minus any

amount by which the Book Value of Bancshares as of the business day immediately

preceding the Closing Date is less than $13,144,800, as the case may be, subject

to further adjustment, if applicable, to eliminate any unrealized gain or loss

in the Bank's investment portfolio, to cause the Bank's reserve for loan losses

to be at least 1.1% of the amount of all of the Bank's loans then outstanding

and to reflect any adjustments contemplated by Section 6.05.

1.22 "Missouri Director of Finance" means the Division of Finance of the

Missouri Department of Economic Development.

1.23 "Regulatory Authority" means any federal, state, municipal or local

government, securities, banking, insurance and other governmental or regulatory

authority, and the agencies and staffs thereof (such entities being referred to

herein collectively as the "Regulatory Authorities").

1.24 "Shareholder Representative" means Joe D. Balentine, as representative

of the Shareholders.

1.25 "Surviving Corporation" means Acquisition Company, as the surviving

corporation of the Merger.

ARTICLE II

THE ACQUISITION TRANSACTION

2.01 The Acquisition Transaction. Subject to the terms and conditions of

this Agreement:

(a) Bancshares will merge with and into Acquisition Company under the

terms set forth in the Merger Agreement, with Acquisition Company being the

Surviving Corporation;

(b) the shareholders of Bancshares will be eligible to receive the

amount of cash that equals their respective percentage ownership interest in the

outstanding shares of Bancshares Stock as of the Effective Time multiplied by

the total amount of Merger Consideration payable in the Merger (on and after the

Effective Time, the holders of certificates which immediately prior to the

Effective Time represented outstanding shares of Bancshares

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Stock shall cease to have any rights as shareholders of Bancshares, except the

right to receive their respective percentage interest of the Merger

Consideration); and

of Bancshares will cease and Acquisition Company will be the Surviving

Corporation and will be the beneficial and record owner of one hundred percent

(100%) of the issued and outstanding Bank Stock.

2.02 Closing. The closing (the "Closing") of the Merger, unless the

parties hereto shall otherwise mutually agree, shall take place at the offices

of ENB's counsel in Kansas City, Missouri, at 10:00 a.m., local time, on a date

designated by ENB (the "Closing Date"), which shall be at least two (2) business

days and not more than thirty (30) business days following the receipt of all

requisite approvals of the Merger by the Federal Reserve Board, Missouri

Director of Finance and any other bank regulatory agency that may be necessary

or appropriate, and the expiration of any required waiting period.

2.03 Method of Effecting the Merger and Effective Time. On the Closing

Date, the parties hereto will cause the Merger to be consummated by delivering

to the Missouri Secretary of State, for filing, copies of the Merger Agreement

and related articles of merger in such form as is required by, and executed in

accordance with, the relevant provisions of Chapter 351 of the Missouri Revised

Statutes. The Merger shall be effective at the Effective Time.

2.04 Articles and Bylaws. The articles of incorporation and bylaws of

Acquisition Company in effect immediately prior to the Effective Time shall be

the articles of incorporation and bylaws of the Surviving Corporation, in each

case until amended in accordance with their respective provisions and applicable

law.

2.05 Board of Directors and Officers. At the Effective Time, (i) the

members of the Board of Directors of the Surviving Corporation and the terms of

these directors shall be as designated by ENB immediately prior to the Effective

Time, and (ii) the officers of the Surviving Corporation shall be the persons

designated by ENB immediately prior to the Effective Time, and such persons will

serve in their designated offices, thereafter, until their respective successors

are duly elected and qualified.

2.06 Additional Actions. If, at any time after the Effective Time, the

Surviving Corporation shall consider or be advised that any further deeds,

assignments or assurances in law or any other acts are necessary or desirable to

(a) vest, perfect or confirm, of record or otherwise, in the Surviving

Corporation its right, title or interest in, to, or under any of the rights,

properties or assets of Bancshares, or (b) otherwise carry out the purposes of

this Agreement or the Merger Agreement, Bancshares and its officers and

directors shall be deemed to have granted to the Surviving Corporation an

irrevocable power of attorney to execute and deliver all such deeds, assignments

or assurances in law and to do all acts necessary or proper to vest, perfect or

confirm title to and possession of such rights, properties or assets in the

Surviving Corporation and otherwise to carry out the purposes of this Agreement

or the Merger Agreement, and the officers and directors of the Surviving

Corporation are authorized in the name of Bancshares or otherwise to take any

and all such action.

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2.07 Payment and Delivery of Merger Consideration. At the Effective Time,

on the Closing Date, Acquisition Company shall deliver to each of the

shareholders of Bancshares the amount of cash that equals their respective

stockholder percentage ownership interest in the outstanding shares of

Bancshares Stock as of the Effective Time multiplied by the Merger

Consideration, which shall be computed as follows. Book Value of Bancshares for

purposes of calculating the Merger Consideration shall be determined by taking

the capital account from the Bank's Daily Statement for the business day

immediately preceding the Closing Date; entering that amount as Bancshares'

Investment in Subsidiary Bank on the books of Bancshares; taking the total

stockholder's equity amount from the financial statement of Bancshares for the

business day immediately preceding the Closing Date (without reflecting the

unrealized gains and losses of the subsidiary Bank) and utilizing that amount as

the Book Value of Bancshares for the business day immediately preceding the

Closing Date. The Book Value of Bancshares so computed shall then be used to

increase or decrease the $32,862,000 component of the Merger Consideration

depending on whether Bancshares' Book Value is greater than or less than

$13,144,800. Adjustments, if any, including adjustments for the Bank's reserve

for loan losses and as contemplated by Section 6.05 shall be made on the date

that is 30 days after the Closing Date, at which time the Merger Consideration

will be adjusted, if necessary. The delivery of the above Merger Consideration

shall be made upon the surrender by each of the shareholders of Bancshares to

the Surviving Corporation of all certificates representing the total number of

shares of Bancshares Stock owned by such shareholder. Within 30 days immediately

following the Closing Date, ENB and the Shareholder Representative mutually will

verify and reconcile the calculation of the aggregate Merger Consideration.

After completing such verification and reconciliation, any portion of the Merger

Consideration that remains to be paid by Acquisition Company to the Shareholders

promptly shall be paid to them and any amount that previously has been paid by

Acquisition Company to the Shareholders in excess of the Merger Consideration to

which they are entitled promptly shall be paid by the Shareholders to

Acquisition Company, as the case may be.

2.08 Reservation of Right to Revise Transaction. ENB may at any time

change the method of effecting the acquisition of Bancshares and the Bank by ENB

(including without limitation the provisions of this Article II) if and to the

extent ENB deems such change to be desirable; provided, however, that no such

change shall (a) alter or change the amount or kind of the Merger Consideration,

(b) in the reasonable opinion of the tax counsel or tax advisor of the Sellers,

adversely affect the tax treatment to the holders of Bancshares Stock as a

result of receiving the Merger Consideration, or (c) materially impede or delay

receipt of any approval referred to in Section 7.01(b) or the consummation of

the transactions contemplated by this Agreement, the Merger Agreement or any

other agreement executed in connection herewith.

2.09 Escrow Deposit by ENB. Pursuant to the terms of the Escrow Agreement,

substantially as set forth in Exhibit B hereto, at the date of execution of this

Agreement, ENB will deposit with the Escrow Agent the sum of $100,000 (the

"Escrow Deposit"), to be held and disbursed by the Escrow Agent in accordance

with the Escrow Agreement. In the event that the Closing does not occur by June

30, 2005, but the Buyer Entities are not in default under any of the terms of

this Agreement and are in compliance with all of the terms hereof applicable to

them, the Escrow Deposit shall be returned to ENB. In the event that there is no

Closing by June 30, 2005 because the Buyer Entities are in default under any of

the terms of this Agreement applicable to them, and Sellers are in compliance

with all of the terms hereof applicable to them,

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the Escrow Deposit shall be paid to Bancshares, on behalf of the Sellers, as

liquidated damages for the breach hereof by the Buyer Entities. At the Closing,

the Escrow Deposit will be paid to Acquisition Company for disbursement to the

shareholders of Bancshares upon their surrender to the Surviving Corporation of

the certificates representing the outstanding shares of Bancshares Stock

pursuant to Section 2.07.

2.10 Tax Consequences. The parties intend that for federal income tax

purposes the Merger shall be a sale by Bancshares and the Bank of all of their

assets to ENB, in exchange for the cash Merger Consideration. To effect the

parties' intended income taxation of the transaction, the parties agree to make

the elections provided in Internal Revenue Code Sections 338(a) and (g) and 338

(h)(10) and the Income Tax Regulations promulgated thereunder, including Section

1.338(h)(10)-1. The parties shall execute and timely file with the Internal

Revenue Service, and appropriate state taxing authorities if necessary, all

election statements, forms, or other information necessary or appropriate to

perfect the elections under Section 338(a) and 338(h)(10). The parties further

agree that the aggregate Merger Consideration shall be allocated among the

acquired assets consistent with Income Tax Regulation Sections 1.338-6 and

1.1060-1(c). The valuation of Bancshares' and the Bank's assets and liabilities

for purposes of the Asset Acquisition Statement (Form 8594) shall be as

determined by the mutual agreement of Bancshares and ENB prior to the Closing,

based on the parties' reasonable best judgment of the respective Book Values of

such assets and liabilities in accordance with GAAP, except that the Bank's

securities portfolio will be valued at market value, its loan portfolio will be

valued at book value net of the loan loss reserve, its real property and

improvements will be valued at their appraised value, and its furniture,

fixtures and equipment and software will be valued at depreciated tax book

value.

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF SELLERS

As an inducement to the Buyer Entities to enter into and perform their

respective obligations under this Agreement, and notwithstanding any

examinations, inspections, audits and other investigations made by the Buyer

Entities, the Sellers hereby jointly and severally represent and warrant to the

Buyer Entities as to the following matters, except that no party other than a

Shareholder shall be responsible for any warranties that relate solely to that

Shareholder.

3.01 Organization and Authority.

(a) Bancshares is a corporation duly organized, validly existing and

in good standing under the laws of the State of Missouri, is duly qualified to

do business, and is in good standing in all jurisdictions where its ownership,

leasing of property or the conduct of its business requires it to be so

qualified, and has the corporate power and authority to own its properties and

assets and to carry on its business as it is now being conducted. Bancshares is

registered as a bank holding company with the Federal Reserve Board under the

BHC Act. True and complete copies of the articles of incorporation and bylaws of

Bancshares, each as in effect on the date of this Agreement, are included in

Schedule 3.01(a) hereof.

(b) The Bank is a bank duly organized, validly existing and in good

standing under the laws of the State of Missouri. The deposits of the Bank are

insured by the FDIC under

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the FDI Act. The Bank is qualified to do business and is in good standing in all

jurisdictions where its ownership or leasing of property or the conduct of its

business requires it to be so qualified and has the corporate power and

authority to own and operate its properties and to carry out its business as and

where the same is now being conducted. True and complete copies of the articles

of agreement and bylaws of the Bank, each as in effect on the date of this

Agreement, are included in Schedule 3.01(b) hereof.

3.02 Corporate Authorization; Records.

(a) Bancshares has the corporate power and authority to enter into

this Agreement and the Merger Agreement and to carry out its obligations

hereunder and thereunder, subject to (i) the approval of this Agreement, the

Merger and the Merger Agreement by the shareholders of Bancshares, and (ii) such

approvals of governmental agencies and other governing boards having regulatory

authority over Bancshares and/or the Bank as may be required by applicable law,

rule or regulation.

(b) The only shareholder vote of Bancshares required to approve the

Merger is the affirmative vote of the holders of two thirds of the outstanding

shares of Bancshares Stock. The execution, delivery and performance of this

Agreement and the Merger Agreement by Bancshares have been duly authorized by

the Board of Directors of Bancshares. Subject to the approvals, as aforesaid,

this Agreement and the Merger Agreement are the valid and binding obligations of

Bancshares, enforceable against it in accordance with their respective terms.

delivery and performance by Bancshares of this Agreement or the Merger

Agreement, nor the consummation of the transactions contemplated thereby, nor

compliance by Bancshares with any of the provisions thereof will (i) violate,

conflict with or result in a breach of any provisions of, or constitute a

default (or an event which, with notice or lapse of time or both, would

constitute a default) under, or result in the termination of, or accelerate the

performance required by, or result in a right of termination or acceleration of,

or result in the creation of, any lien, security interest, charge or encumbrance

upon any of the properties or assets of Bancshares under any of the terms,

conditions or provisions of (A) its articles of incorporation or bylaws, or (B)

any note, bond, mortgage, indenture, deed of trust, license, lease, agreement or

other instrument or obligation to which Bancshares is a party or by which it may

be bound, or to which Bancshares or any of their respective properties or assets

may be subject, or (ii) subject to the receipt of the requisite approval of the

Merger by the Federal Reserve Board and the Missouri Director of Finance,

violate any judgment, ruling, order, writ, injunction, decree, statute, rule or

regulation applicable to Bancshares or any of its properties or assets.

(d) The minute books and stock records of Bancshares and the Bank are

complete and correct and accurately reflect all meetings, consents and other

actions of the shareholders, Board of Directors and committees of the Board of

Directors occurring since the organization of each.

3.03 Subsidiaries. Bancshares has no subsidiaries other than the Bank and

the Bank has no subsidiaries and does not control, or have any equity ownership

interest in, any other corporation, partnership, joint venture or other business

association, other than any interest

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pledged to the Bank in the ordinary course of its business as security for the

obligations of third parties to the Bank or held by the Bank as a consequence of

its exercise of rights and remedies in respect of any interest pledged as

security in respect of such obligation.

3.04 Capitalization of The Bank and Bancshares. The capital stock of the

Bank consists of 1,000 shares of common stock, $100 par value, 1,000 shares of

which are issued and outstanding as of the date hereof. The authorized capital

stock of Bancshares consists of (i) 3,000 shares of voting common stock, $10 par

value, 2,777 shares of which are issued and outstanding as of the date hereof

and 223 shares of which are held in treasury, and (ii) 27,000 shares of

non-voting common stock, $10 par value, 27,000 shares of which are issued and

outstanding as of the date hereof. Bancshares has and will have as of the

Effective Time good and marketable title to 1,000 shares, or 100% of the then

issued and outstanding shares of the Bank Stock and the Shareholders

collectively have and will have as of the Effective Time good and marketable

title to 29,777 shares, or 100% of the then issued and outstanding shares of the

Bancshares Stock, in each case, free and clear of any liens, claims, charges,

encumbrances and assessments of any kind or nature whatsoever. There are no

other shares of capital stock or other Equity Securities of Bancshares or the

Bank outstanding. All of the issued and outstanding shares of Bancshares Stock

and Bank Stock are validly issued, fully paid and nonassessable.

3.05 Financial Statements.

(a) Delivered herewith as Schedule 3.05(a) are copies of the following

financial statements:

(i) Balance sheets of Bancshares as of December 31, 2001, 2002,

2003 and 2004, and related statements of income for the four (4) years

ended December 31, 2004;

(ii) Form FR Y-6 reports of Bancshares as of December 31, 2003

and 2002, and Form FR Y-9LP and Form FR Y-9C reports filed during the

year ended December 31, 2003 and the period ended September 30, 2004,

as furnished by Bancshares to the Federal Reserve Board; and

(iii) The Consolidated Reports of Condition and Income of the

Bank as of and for the years ended December 31, 2003 and 2002, and as

of and for the periods ended March 31, 2004, June 30, 2004 and

September 30, 2004, as filed by the Bank with the FDIC.

(b) The financial statements referenced in Section 3.05(a) are

referred to collectively as the "Financial Statements." The Financial Statements

have been prepared in accordance with the books and records of Bancshares and

the Bank in accordance with GAAP or, as to the financial statements referenced

in Sections 3.05(a)(ii) and 3.05(a)(iii) above, regulatory accounting

principles, consistently applied in both cases as applied to financial

institutions, and present fairly the consolidated financial positions of

Bancshares and the Bank, respectively, at the dates thereof and the consolidated

results of their respective operations (subject, in the case of interim

financial statements, to normal recurring year-end adjustments, none of which

will be material).

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through the date hereof true, correct and complete financial and other books and

records of their affairs which fairly reflect their respective financial

conditions, results of operations, businesses, assets, prospects or operations.

3.06 Reports. Since January 1, 2001, Bancshares and the Bank have filed

all reports, registrations and statements, together with any required amendments

thereto, that were required to be filed with any Regulatory Authority, having

jurisdiction over the affairs of each. All such reports and statements filed

with any such Regulatory Authority are collectively referred to herein as the

"Bancshares and Bank Reports." As of their respective dates, the Bancshares and

Bank Reports complied in all respects with all the rules and regulations

promulgated by the applicable Regulatory Authority. With respect to the

Bancshares and Bank Reports filed with the Regulatory Authorities, there is no

material unresolved violation, criticism or exception by any Regulatory

Authority with respect to any report or statement filed by, or any examination

of, the Bank or Bancshares.

3.07 Title to and Condition of Assets.

(a) Except as may be reflected in the Financial Statements or set

forth on Schedule 3.07(a) and excepting all real property (which is the subject

of Section 3.08), Bancshares and the Bank have, and at the Closing Date will

have, good and marketable title to their respective properties and assets,

including, without limitation, those reflected on the Financial Statements, free

and clear of any liens, charges, pledges, encumbrances, defects, claims or

rights of third parties, except for liens for taxes, assessments or other

governmental charges not yet delinquent.

(b) No assets reflected on the Financial Statements, which in the

aggregate exceed $10,000, have been sold, leased, transferred, assigned or

otherwise disposed of since September 30, 2004 except in the ordinary course of

business or as set forth in Schedule 3.07(b). All dispositions of assets since

September 30, 2004, regardless of amount, have been made at fair value.

computer software owned or used by Bancshares or the Bank, including any of such

items leased as a lessee and all facilities and improvements comprising part of

any owned or leased real property, taken as a whole, with no single such item

being deemed of importance, are in good order and repair, free of defects and in

good operating condition, subject only to normal wear and tear. The operation by

Bancshares or the Bank of such assets is in compliance in all material respects

with all applicable laws, ordinances and rules and regulations of any

governmental authorities having jurisdiction.

3.08 Real Property.

(a) Neither Bancshares nor the Bank is a lessee of real property,

except as set forth in Schedule 3.08(a). The legal description of each parcel of

real property owned by Bancshares or the Bank (other than real property acquired

in foreclosures or in lieu of foreclosure in the course of collection of its

loans and being held by the Bank for disposition as

<PAGE>

required by law) is set forth in Schedule 3.08(a) attached hereto (such real

property being herein referred to as the "Real Property").

(b) There is no pending dispute involving Bancshares or the Bank as to

the title of or the right to use any of its Real Property.

property except for the Bank's interests as a mortgagee, and except for real

property acquired in foreclosures or in lieu of foreclosure and being held for

disposition as required by law.

(d) None of the buildings, structures or other improvements located on

the Real Property encroaches upon or over any adjoining parcel or real estate or

any easement or right-of-way or "setback" line and all such buildings,

structures and improvements are located and constructed in conformity with all

applicable zoning ordinances and building codes.

(e) None of the buildings, structures or improvements located on the

Real Property are the subject of any official complaint or notice by any

governmental authority of violation of any applicable zoning ordinance or

building code, and there is no zoning ordinance, building code, use or occupancy

restriction or condemnation action or proceeding pending, or, to the best

knowledge of the Sellers, threatened, with respect to any such building,

structure or improvement. The Real Property is in generally good condition,

reasonable wear and tear excepted, and has been maintained in accordance with

reasonable and prudent business practices applicable to like facilities.

(f) Except as may be reflected on the Financial Statements or with

respect to such easements, liens, defects or encumbrances of record, which to

the best knowledge of Sellers, do not individually or in the aggregate adversely

affect the use or value of the parcel of Real Property, Bancshares and the Bank

each has, and at the Closing Date will have, good and marketable title to the

Real Property owned by it, free and clear of any liens, charges, pledges,

encumbrances, defects, claims or rights of third parties, except as set forth in

Schedule 3.08(f).

3.09 Loans, Commitments and Contracts.

(a) Bancshares has no outstanding loans receivable nor any commitments

to lend. Schedule 3.09(a) contains a complete and accurate listing of all

contracts entered into with respect to deposits of $250,000 or more, by account

or other identifying number, and all loan agreements and commitments, notes,

security agreements, repurchase agreements, bankers' acceptances, outstanding

letters of credit and commitments to issue letters of credit, participation

agreements and other documents relating to or involving extensions of credit or

other commitments to extend credit by the Bank with respect to any one entity or

related group of entities in excess of $250,000, to which any of the foregoing

is a party or by which it is bound, by account or other identifying number, and,

where applicable, such other information as shall be necessary to identify any

related group of entities.

(b) Except for the contracts and agreements required to be listed on

Schedule 3.09(a) and except as set forth in Schedule 3.09(b) hereto, neither

Bancshares nor the Bank is a party to or bound by any:

<PAGE>

(i) agreement, contract, arrangement, understanding or commitment

with any labor union;

(ii) franchise or license agreement;

(iii) written employment, severance or termination pay, agency,

consulting or similar agreement, contract, arrangement, understanding

or commitment in respect of personal services;

(iv) material agreement, arrangement or commitment (A) not made

in the ordinary course of business, or (B) pursuant to which

Bancshares or the Bank is or may become obligated to invest in or

contribute other than pursuant to the Sellers Employee Plans (as that

term is defined in Section 3.18 hereof);

(v) agreement, indenture or other instrument not disclosed in the

Financial Statements relating to the borrowing of money by the Bank or

Bancshares or the guarantee by the Bank or Bancshares of any such

obligation (other than trade payables or instruments related to

transactions entered into in the ordinary course of business by the

Bank or Bancshares such as deposits, Fed Funds borrowings, Federal

Home Loan Bank Board advances and repurchase and reverse repurchase

agreements), other than such agreements, indentures or instruments

providing for annual payments of less than $50,000;

(vi) contract containing covenants which limit the ability of the

Bank or Bancshares to compete in any line of business or with any

person or which involves any restrictions on the geographical area in

which, or method by which, the Bank or Bancshares may carry on their

respective businesses (other than as may be required by law or any

applicable Regulatory Authority);

(vii) lease of personal property with annual rental payments

aggregating $25,000 or more;

(viii) loans or other obligations payable or owing to any

officer, director or employee except (A) salaries, wages and

directors' fees incurred and accrued in the ordinary course of

business and (B) obligations due in respect of any depository accounts

maintained by any of the foregoing at the Bank in the ordinary course

of business;

(ix) loans or debts payable or owing by any executive officer or

director of the Bank or Bancshares or any other person or entity

deemed an "executive officer" or a "related interest" of the Bank or

Bancshares, as such terms are defined by the FDIC in 12 C.F.R. Part

349;

(x) other agreements, contracts, arrangements, understandings or

commitments that involve obligations by the Bank or Bancshares of more

than $25,000 in the aggregate that extend beyond six months from the

date hereof and cannot be canceled without cost or penalty upon notice

of 30 days or less, other than contracts entered into in respect of

deposits, loan agreements and

<PAGE>

commitments, notes, security agreements, repurchase and reverse

repurchase agreements, bankers' acceptances, outstanding letters of

credit and commitments to issue letters of credit, participation

agreements and other documents relating to transactions entered into

by the Bank or Bancshares in the ordinary course of business and not

involving extensions of credit with respect to any one entity or

related group of entities in excess of $250,000.

directors and officer errors and omissions, products liability and other

insurance coverages as set forth in Schedule 3.09(c).

(d) True, correct and complete copies of the agreements, contracts,

leases, insurance policies and other documents referred to in Schedule 3.09(a),

Schedule 3.09(b), and Schedule 3.09(c) shall be furnished or made available to

the Buyer Entities.

(e) Each of the agreements, contracts, leases, insurance policies and

other documents referred to in Schedule 3.09(a), Schedule 3.09(b) and Schedule

3.09(c) is a valid, binding and enforceable obligation of the parties sought to

be bound thereby, except as the enforceability thereof against the parties

thereto (other than the Bank or Bancshares) may be limited by bankruptcy,

insolvency, reorganization, moratorium and other laws now or hereafter in effect

relating to the enforcement of creditors' rights generally, and except that

equitable principles may limit the right to obtain specific performance or other

equitable remedies. Each data processing agreement to which the Bank or

Bancshares is a party shall expire by its terms on or before October 31, 2005.

(f) Schedule 3.09(f) contains a true, correct and complete listing, as

of the date of this Agreement, by account or other identifying number, of (i)

all loans in excess of $100,000 of the Bank which have been accelerated during

the past twelve months which have not, to date, been repaid or written off, (ii)

all loan commitments or lines of credit of the Bank in excess of $100,000 which

have been terminated by the Bank during the past twelve months by reason of

default or adverse developments in the condition of the borrower or other events

or circumstances affecting the credit of the borrower which have not, to date,

been repaid or written off, (iii) all loans, lines of credit and loan

commitments in excess of $100,000 as to which the Bank has given written notice

to the borrower or customer of the Bank's intent to terminate during the past

twelve months which have not, to date, been repaid or written off, (iv) with

respect to all loans in excess of $100,000, all notification letters and other

written communications from the Bank to any of its borrowers, customers or other

parties during the past twelve months wherein the Bank has requested or demanded

that actions be taken to correct existing material defaults or material facts or

circumstances which may become defaults, (v) each borrower, customer or other

party which has notified the Bank during the past twelve months of, or asserted

against the Bank, in writing, any "lender liability" or similar claim, and each

borrower, customer or other party which has given the Bank any oral notification

of, or asserted against the Bank, any such claim, and (vi) all loans in excess

of $50,000 (1) that are contractually past due 90 days or more in the payment of

principal and/or interest, (2) that are on non-accrual status, (3) where a

reasonable doubt exists as to the timely future collectibility of future

principal and interest, whether or not interest is still accruing or the loan is

less than 90 days past due, (4) the interest rate terms have been reduced and/or

the maturity dates have been

<PAGE>

extended subsequent to the agreement under which the loan was originally created

due to concerns regarding the borrower's ability to pay in accordance with such

initial terms, (5) where a specific reserve allocation exists in connection

therewith, or (6) that have been classified "substandard," "doubtful" or "loss"

or the equivalent thereof by any Regulatory Authority.

3.10 Absence of Defaults. Except as set forth in Schedule 3.10, there are

no pending disputes between the Bank or Bancshares and the other parties to the

agreements, contracts, leases, insurance policies and other documents referred

to in Schedule 3.09(a), Schedule 3.09(b), and Schedule 3.09(c), and to the best

knowledge of the Sellers, all such agreements, contracts, leases, insurance

policies and other documents are in full force and effect and not in default

with respect to the Bank or Bancshares or any other party thereto, and will

continue in full force and effect immediately after the Closing Date.

3.11 Absence of Undisclosed Liabilities. Except as disclosed in Schedule

3.11 or in any other Schedule delivered herewith:

(a) As of the date hereof, neither the Bank nor Bancshares has any

debts, liabilities or obligations, equal to or exceeding $25,000, individually,

or $50,000, in the aggregate, whether accrued, absolute, contingent or otherwise

and whether due or to become due, which are required to be reflected in the

Financial Statements or the notes thereto in accordance with GAAP consistently

applied except:

(i) liabilities reflected in the Financial Statements;

(ii) deposits, debts, liabilities or obligations incurred since

September 30, 2004 in the ordinary and usual course of its businesses,

none of which are for breach of contract, breach of warranty, torts,

infringements or lawsuits, and none of which adversely affect their

respective financial positions or results of operations, businesses,

assets, prospects or operations; and

(iii) liabilities incurred for legal, accounting, financial

advising fees and out-of-pocket expenses in connection with the Merger

and the transactions related thereto.

(b) Neither the Bank nor Bancshares was, as of September 30, 2004, and

since such date to the date hereof has become a party to, any contract or

agreement, excluding deposits, loan agreements and commitments, notes, security

agreements, repurchase and reverse repurchase agreements, bankers' acceptances,

outstanding letters of credit and commitments to issue letters of credit,

participation agreements and other documents relating to transactions entered

into by the Bank or Bancshares in the ordinary course of business which

affected, affects or may reasonably be expected to affect, materially and

adversely, its financial position, results of operations, business, assets or

operations.

3.12 Allowance for Loan and Lease Losses; Non-Performing Assets.

(a) All of the accounts, notes and other receivables which are

reflected in the balance sheet of the Bank as of September 30, 2004 were

acquired in the ordinary course of business and are to the best knowledge of

Sellers collectible in full in the ordinary course of

<PAGE>

business, except for possible loan and lease losses for which reserves have been

made on the financial statements in accordance with regulatory requirements in

the allowance for loan and lease losses in such balance sheet.

(b) The allowance for loan losses contained in the balance sheet of

the Bank as of September 30, 2004 was established in accordance with the past

practices and experiences of the Bank and such allowance was adequate in all

material respects under applicable regulatory requirements to provide for

possible losses on loans and leases (including, without limitation, accrued

interest receivable) and credit commitments (including, without limitation,

stand-by letters of credit) as of the date of such balance sheet.

assets classified as real estate acquired through foreclosure, including

in-substance foreclosed real estate ("Non-Performing Assets").

3.13 Taxes. Bancshares is a duly qualified "S Corporation" and the Bank is

a duly qualified "Qualified Subchapter S Subsidiary" within the meaning of

Section 1361 of the Code and each has been so duly qualified since the S

Corporation status of Bancshares was first elected. Bancshares has timely filed

all tax returns required to be filed by it and its subsidiaries and all taxes

shown on such returns or required to be shown on such returns have been paid in

full or adequate reserves for the payment thereof have been established by

Bancshares. The Bancshares financial statements reflect an adequate reserve for

all taxes payable by Bancs

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