STOCK PURCHASE AGREEMENT

Exhibit 10.1

______________________________________________________________________________

Execution Copy

STOCK PURCHASE AGREEMENT

BETWEEN

FIRST GRAHAM DELAWARE CORPORATION

AND

SURETY CAPITAL CORPORATION

AND JOINED IN BY

SURETY BANK

DATED AS OF FEBRUARY 8, 2008

_____________________________________________________________________________

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SCHEDULES

INDEX OF DEFINED TERMS

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STOCK PURCHASE AGREEMENT

This STOCK PURCHASE AGREEMENT (this " Agreement ") is made and entered into as of the 8 ^th day of February, 2008, by and between First Graham Delaware Corporation, a Delaware corporation and registered bank holding company (the " Buyer "), and Surety Capital Corporation, a Delaware corporation and registered bank holding company (the " Seller "), and joined in by Surety Bank, a Texas state banking association (the " Bank ").

WITNESSETH:

WHEREAS , on December 21, 2007, the Seller filed in the United States Bankruptcy Court for the Northern District of Texas, Fort Worth Division (the " Bankruptcy Court "), a petition seeking voluntary relief pursuant to Chapter 11 of the United States Bankruptcy Code, which case is currently pending under case no. 07-45637-11, and is styled In re: Surety Capital Corporation (the " Chapter 11 Case ");

WHEREAS , the Seller owns all of the 3,708,195 issued and outstanding shares (the " Shares ") of the common stock, $0.91 par value per share, of the Bank (the " Common Stock ");

WHEREAS , the Buyer desires to purchase the Shares from the Seller, and the Seller desires to sell the Shares to the Buyer, on the terms and conditions set forth below (the " Acquisition "), with the result that, following the Acquisition, the Bank will become a wholly-owned subsidiary of the Buyer;

WHEREAS , the Buyer desires to acquire the Shares and the Seller desires to sell the shares in a transaction that is treated for federal income tax purposes as a deemed asset sale under section 338(h)(10) of the Internal Revenue Code of 1986, as amended (the " Code "); and

WHEREAS , the Bank desires to make certain representations, warranties, and covenants for the purpose of advancing the Acquisition and as an inducement to the execution and delivery of this Agreement;

NOW, THEREFORE , for and in consideration of the foregoing and of the mutual representations, warranties, covenants and agreements contained in this Agreement, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and subject to the conditions set forth below, the Buyer and the Seller and, as appropriate the Bank, intending to be legally bound, undertake, promise, covenant and agree with each other as follows:

ARTICLE I.
PURCHASE AND SALE OF THE SHARES

Section 1.01.

Acquisition and Sale of the Shares .  On the terms and subject to the conditions contained in this Agreement, the Buyer hereby agrees to purchase the Shares from the Seller, and the Seller hereby agrees to sell, convey, transfer and assign the Shares to the Buyer,

free and clear of all liens, security interests, pledges, encumbrances, adverse claims and demands of every kind, character and description whatsoever, for the Purchase Price (as hereinafter defined).

Section 1.02.

Purchase Price .  

(a)

The purchase price for the Shares (the " Purchase Price ") shall be an amount equal to the sum of (i) the Bank's "Shareholder's Equity" (as defined below), plus (ii) Three Million Dollars ($3,000,000.00).  

(b)

For purposes of this Agreement, " Shareholder's Equity " shall mean the amount of tangible equity capital of the Bank, calculated by the accounting firm of Lam Vinson & Company, determined on a basis consistent with generally accepted accounting principles (" GAAP ").  Shareholder's Equity shall be determined as of the close of the last Business Day (as defined in Section 14.11 ) of the month immediately preceding the Closing Date (as defined herein) and after normal adjusting entries to close-out the month-end and to accrue for any legal or other professional fees.  The Bank shall have, prior to the close of business on the last Business Day immediately preceding the Closing Date, accrued or paid all expenses and costs required to be reflected under GAAP, including, but not limited to, any payments due to officers or directors of the Bank pursuant to stay-put, severance, deferred compensation or change in control agreements, provided that the effect of the following amounts shall be excluded to the extent paid or accrued for between the date hereof and the Closing Date: (i) any expenses or costs of the Bank associated with obtaining the Tail Policy (as defined herein) and (ii) any increase in the Bank's Texas franchise Taxes (as defined in Section 14.11 ), ad valorem and property Taxes incurred as a result of the Acquisition.  

Section 1.03.

Tax Treatment of Acquisition .  The Acquisition is to be accounted for under Section 338(h)(10) of the Code and in accordance with Section 13.02 of this Agreement.  The parties to this Agreement agree to take such actions and execute such documents as may be reasonably necessary to effect an election under Section 338(h)(10) of the Code with respect to the Acquisition.

Section 1.04.

Alternative Structure .  Notwithstanding anything to the contrary contained in this Agreement, subject to consultation with the Seller, before the Closing, the Buyer may elect, subject to the filing of all necessary applications and the receipt of all required regulatory approvals, to modify the structure of the transactions contemplated by this Agreement, and the parties will enter into such alternative transactions as the Buyer may determine to effect the purposes of this Agreement, including entering into a merger transaction to effect the acquisition by the Buyer of the Shares, provided that any such change in structure does not (a) reduce the amount or alter or change the kind of consideration to be received by the Seller, (b) create adverse income tax consequences for or to the Seller, or (c) impede, delay or jeopardize receipt of any approval necessary to effect consummation of the transactions contemplated by this Agreement.  

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ARTICLE II.
CLOSING; CLOSING DATE

Section 2.01.

Closing and Closing Date .  Subject to the terms and conditions of this Agreement, the sale of the Shares to the Buyer shall be consummated at a closing to be held at 5:00 p.m. Fort Worth, Texas time on a date and at a place mutually agreed to in writing by the Buyer, the Seller, and the Bank, which date shall be not later than twenty-one (21) calendar days after the later of:  (i) the date upon which the Buyer receives the last of all necessary regulatory and corporate approvals for the consummation of the transactions described in this Agreement and the expiration of any mandatory waiting periods or (ii) the date after which the Sale Order (as defined herein) becomes a Final Order (as defined in Section 14.11 ).  The date and event of the sale and purchase of the Shares are hereinafter referred to as the " Closing Date " and the " Closing ", respectively.

Section 2.02.

Actions to be Taken at the Closing .  Subject to the terms and conditions of this Agreement, on or before the Closing Date, the following actions will be taken by the parties:

(a)

Deliveries by the Seller .  The Seller shall deliver or cause to be delivered:

(1)

Certificates evidencing and representing the Shares, duly endorsed in blank or accompanied by stock powers executed in blank.

(2)

A letter as of a recent date from the Federal Reserve System (the " Federal Reserve ") indicating that the Seller is a registered bank holding company under the Bank Holding Company Act of 1956, as amended (the " BHC Act ").

(3)

A certificate, dated as of the Closing Date, executed by the Secretary or an executive officer of the Seller, pursuant to which such officer shall certify (a) the due adoption by the Board of Directors of the Seller of corporate resolutions attached to such certificate authorizing the execution and delivery of this Agreement and the other agreements and documents contemplated hereby and the taking of all actions contemplated hereby and thereby; (b) the incumbency and true signatures of those officers of the Seller duly authorized to act on its behalf in connection with the Acquisition and to execute and deliver this Agreement and other agreements and documents contemplated hereby and the taking of all actions contemplated hereby and thereby on behalf of the Seller, and (c) that the copy of the Bylaws of the Seller attached to such certificate is true and correct and such Bylaws have not been amended except as reflected in such copy.

(4)

A certificate, dated as of the Closing Date, executed by an appropriate executive officer of the Seller, pursuant to which the executive officer shall certify to the best of his or her knowledge that the Seller has satisfied the conditions set forth in Section 10.01(a) and (b) applicable to the Seller.  

(5)

All other documents reasonably required to be delivered to the Buyer from the Seller under the provisions of this Agreement, and all other documents, certificates and instruments as are reasonably requested by the Buyer or its counsel.

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(b)

Deliveries by the Bank .  The Bank shall deliver or cause to be delivered:

(1)

True, correct and complete copies of the Bank's Articles of Association and all amendments thereto, duly certified as of a recent date by the Texas Department of Banking (the " TDB ").

(2)

Good standing and existence certificates for the Bank, dated as of a recent date, issued by the appropriate state officials, duly certifying as to the existence and good standing of the Bank in the State of Texas.

(3)

A certificate, dated as of a recent date, issued by the Federal Deposit Insurance Corporation (the " FDIC "), duly certifying that the deposits of the Bank are insured by the FDIC pursuant to the Federal Deposit Insurance Act (the " FDIA ").

(4)

A certificate, dated as of the Closing Date, executed by the Secretary or Cashier of the Bank, pursuant to which such officer shall certify (a) the due adoption by the Board of Directors of the Bank of corporate resolutions attached to such certificate authorizing the execution and delivery of this Agreement and the other agreements and documents contemplated hereby and the taking of all actions contemplated hereby and thereby; (b) the incumbency and true signatures of those officers of the Bank duly authorized to act on its behalf in connection with the Acquisition and to execute and deliver this Agreement and other agreements and documents contemplated hereby and the taking of all actions contemplated hereby and thereby on behalf of the Bank, and (c) that the copy of the Bylaws of the Bank attached to such certificate is true and correct and such Bylaws have not been amended except as reflected in such copy.

(5)

A certificate, dated as of the Closing Date, executed by an appropriate executive officer of the Bank, pursuant to which the executive officer shall certify to the best of his or her knowledge that the Bank has satisfied the conditions set forth in Section 10.01(a) and (b) applicable to the Bank.

(6)

All other documents reasonably required to be delivered to the Buyer from the Bank under the provisions of this Agreement, and all other documents, certificates and instruments as are reasonably requested by the Buyer or its counsel.

(c)

Deliveries by the Buyer .  The Buyer shall deliver to the Seller:

(1)

The Purchase Price paid by delivery by the Buyer to the Seller of immediately available funds at the Closing in accordance with wire transfer instructions provided by the Seller to the Buyer.  

(2)

True, correct and complete copies of the Buyer's Certificate of Incorporation and all amendments thereto, duly certified as of a recent date by the Secretary of State of the State of Delaware.

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(3)

Good standing and existence certificates for the Buyer, dated as of a recent date, issued by the appropriate state officials, duly certifying as to the existence and good standing of the Buyer in the State of Delaware.

(4)

A letter as of a recent date from the Federal Reserve indicating that the Buyer is a registered bank holding company under the BHC Act.

(5)

A certificate, dated as of the Closing Date, executed by the Secretary or other appropriate executive officer of the Buyer pursuant to which such officer shall certify (a) the due adoption by the Board of Directors of the Buyer of corporate resolutions attached to such certificate authorizing the execution and delivery of this Agreement and the other agreements and documents contemplated hereby and the taking of all actions contemplated hereby and thereby; (b) the incumbency and true signatures of those officers of the Buyer duly authorized to act on its behalf in connection with the Acquisition and to execute and deliver this Agreement and other agreements and documents contemplated hereby and the taking of all actions contemplated hereby and thereby on behalf of the Buyer, and (c) that the copy of the Bylaws of the Buyer attached to such certificate is true and correct and such Bylaws have not been amended except as reflected in such copy.

(6)

A certificate, dated as of the Closing Date, executed by a duly authorized executive officer of the Buyer, pursuant to which the executive officer shall certify to the best of his or her knowledge that the Buyer has satisfied the conditions set forth in Section 9.01(a) and (b) .

(7)

All other documents reasonably required to be delivered to the Seller or the Bank by the Buyer under the provisions of this Agreement, and all other documents, certificates and instruments as are reasonably requested by the Seller, the Bank or its counsel.

ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF THE SELLER

The Seller hereby makes the following representations and warranties with respect to the Seller.  Furthermore, on or prior to the date hereof, the Seller has delivered to the Buyer disclosure schedules (the " Seller Disclosure Schedules ") setting forth, among other things, items the disclosure of which is necessary or appropriate either in response to an express disclosure requirement contained in a provision hereof or as an exception to one or more representations or warranties contained in Article III or to one or more of its covenants contained in Article VI ; provided that the mere inclusion of an item in the Seller Disclosure Schedules as an exception to a representation, warranty or covenant shall not be deemed an admission by a party that such item represents a material exception or fact, event or circumstance or that such item has had or is reasonably likely to result in a Material Adverse Change (as defined in Section 14.11 ) with respect to the disclosing party; provided, further , that a disclosure in any section of the Seller Disclosure Schedules shall be deemed to be a disclosure for all other sections of the Seller Disclosure Schedules in respect of which it is evident that such disclosure is applicable.  The Seller agrees to provide the Buyer at the Closing revised supplemental Seller Disclosure Schedules reflecting any material changes to the Seller Disclosure Schedules delivered on or prior to the date hereof.  The Seller Disclosure Schedules

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are "Subject Information" as provided for and subject to the provisions of Article XII  of this Agreement.

Section 3.01.

Organization, Qualification and Authority .  

(a)

The Seller is a Delaware corporation and a registered bank holding company under the BHC Act, is duly organized, validly existing and in good standing under the laws of the State of Delaware, and is subject to all laws, rules, and regulations applicable to bank holding companies.  

(b)

The Seller, as a debtor in possession under Chapter 11 of the Bankruptcy Code, has the requisite corporate power and authority (including all licenses, franchises, permits and other governmental authorizations as are legally required) to carry on its business as now being conducted, to own, lease and operate its properties and assets as now owned, leased or operated and to enter into and carry out its obligations under this Agreement (except where the failure to be so licensed, franchised, permitted or authorized would not be reasonably likely to affect the Seller's ability to enter into this Agreement or consummate the Acquisition).  The nature of the business of the Seller and its activities do not require it to be qualified to do business in any jurisdiction other than the State of Delaware or the State of Texas, as applicable (except where the failure to be so qualified would not be reasonably likely to affect the Seller's ability to enter into this Agreement or consummate the Acquisition).  

(c)

The Seller has full legal capacity and authority to execute, deliver and perform this Agreement and to consummate the transactions contemplated hereby.

(d)

The Seller does not own or control any Affiliate (as defined in Section 14.11 ) or Subsidiary (as defined in Section 14.11 ), other than the Bank.  

(e)

True and correct copies of the Certificate of Incorporation and Bylaws of the Seller (the " Seller Constituent Documents "), with all amendments thereto through the date of this Agreement, have been delivered to the Buyer.  

Section 3.02.

Ownership of the Shares .  The Seller is the sole record and beneficial owner of the Shares and it has good and marketable title to such Shares.  On the Closing Date, the Seller shall have the absolute right to sell, assign and transfer the Shares.  At Closing, the Seller will transfer good and marketable title to the Shares to the Buyer free and clear of all liens, security interests, pledges, encumbrances, adverse claims and demands, preemptive rights or restrictions of any kind, character and description whatsoever.

Section 3.03.

Execution and Delivery .  

(a)

The Seller has taken all corporate action necessary to authorize the execution, delivery and ( provided that the required regulatory and Bankruptcy Court approvals are obtained, including entry of the Final Order) performance of this Agreement and the other agreements and documents contemplated hereby to which it is a party.  

(b)

This Agreement has been, and the other agreements and documents contemplated hereby have been or at Closing will be, duly executed by the Seller and, assuming the due

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execution and delivery of this Agreement and the other agreements and documents contemplated hereby by the Bank, the Buyer and the other parties thereto, each constitutes the legal, valid and binding obligation of the Seller enforceable in accordance with its respective terms and conditions, except as enforceability may be limited by the Bankruptcy Exception (as defined in Section 14.11 ).

Section 3.04.

No Conflict with Other Instruments .   Provided that the required Bankruptcy Court approvals are obtained, including entry of the Final Order, the execution, delivery or performance of this Agreement and the consummation of the transactions contemplated hereby, will not (i) conflict with or violate any provision of the Seller Constituent Documents or (ii) assuming all regulatory approvals and consents and the consents of the third parties set forth in Seller Disclosure Schedule 3.05 are duly obtained will not result in a breach of the terms, conditions or provisions of, or constitute a default under any material agreement, indenture, instrument, lien, charge, encumbrance or undertaking to which the Seller is a party or by which any of the Properties of the Seller may be affected, excluding from the foregoing clause (ii) such violations, conflicts, breaches or defaults that would not be reasonably likely to affect the Seller's ability to enter into this Agreement or consummate the Acquisition.  

Section 3.05.

Consents and Approvals .

(a)

Subject to receipt of the required Bankruptcy Court approvals, including entry of the Final Order, and except as disclosed on Seller Disclosure Schedule 3.05(a) , to the knowledge of the Seller, no consent, approval or order of any governmental or administrative board or body or any other third party is required to be obtained or made by the Seller for the execution, delivery and performance by the Seller of this Agreement and the transactions contemplated hereby.

(b)

As of the date of this Agreement, the Seller knows of no reason why all regulatory approvals from any regulatory agency required for consummation of the transactions contemplated by this Agreement should not be obtained on a timely basis.

Section 3.06.

Compliance with Applicable Laws, Permits and Instruments .  Except as otherwise provided in this Agreement or as set forth on Seller Disclosure Schedule 3.06 and provided that the required Bankruptcy Court approvals are obtained, including entry of the Final Order, the Seller is not in violation of the Seller Constituent Documents, and to the Seller's knowledge, the Seller is not (i) in violation of any applicable law, statute or regulation of any governmental agency, board, bureau or body relating to the conduct of its business and maintenance and operation of its Properties, (ii) in violation or default with respect to any order, writ, injunction, decree or demand of any court or other governmental or regulatory authority, any license or regulation of any governmental agency, or (iii) in default under any indenture, mortgage, lease, agreement or other instrument under which the Seller is obligated, excluding from the foregoing clauses (i), (ii) and (iii) such violations or matters that would not be reasonably likely to affect the Seller's ability to enter into this Agreement or consummate the Acquisition.  

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Section 3.07.

Regulatory Compliance .

(a)

Except as disclosed on Seller Disclosure Schedule 3.07(a) , all material reports, records, registrations, statements, notices and other documents or information required to be filed by the Seller with or pursuant to the laws and regulations of any federal or state regulatory authority including, without limitation, the Securities and Exchange Commission, Federal Reserve, the FDIC, the TDB and the Internal Revenue Service (the " IRS "), or with any stock exchange or have been duly and timely filed and all information and data contained in such reports, records or other documents are true, accurate, correct and complete in all material respects, to the extent such matters would be reasonably likely affect the Seller's ability to enter into this Agreement and consummate the Acquisition.  

(b)

Except for that certain Written Agreement with the Federal Reserve Bank of Dallas, dated October 11, 2005 (the " Written Agreement "), and except as disclosed on Seller Disclosure Schedule 3.07(b) , the Seller is not now nor has been within the last five (5) years subject to any memorandum of understanding, cease and desist order, written agreement or other formal or informal administrative action with the Federal Reserve, FDIC, TDB, the Office of the Comptroller of the Currency (" OCC ") or any other similar bank regulatory body (collectively the " Bank Regulators ").  Except as provided on Seller Disclosure Schedule 3.07(b) , the Seller is in substantial compliance with the requirements of the Written Agreement.

(c)

Except as set forth on Seller Disclosure Schedule 3.07(c) , there are no actions or proceedings pending or, to the knowledge of Seller, threatened in writing against the Seller by or before any Bank Regulators or any other nation, state or subdivision thereof, or any other entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government to the extent such matters would be reasonably likely affect the Seller's ability to enter into this Agreement and consummate the Acquisition.

Section 3.08.

Litigation .  

(a)

Seller Disclosure Schedule 3.08(a) contains a list, which is true and complete as of the date of this Agreement, of all actions, claims, suits, investigations, reviews or other legal, quasi-judicial or administrative proceedings of any kind or nature now pending or, to the knowledge of the Seller, threatened against or affecting the Seller, at law or in equity, or by or before any federal, state or municipal court or other governmental or administrative department, commission, board, bureau, agency or instrumentality, domestic or foreign, that in any manner involves the Seller or its Properties that might reasonably be anticipated to result in a Material Adverse Change or materially and adversely affect the transactions contemplated by this Agreement.  

(b)

Except as set forth on Seller Disclosure Schedule 3.08(b) , no legal action, suit or proceeding or judicial, administrative or governmental investigation is pending or, to the knowledge of the Seller, threatened against the Seller that questions or might question the validity of this Agreement or the agreements contemplated hereby or any actions taken or to be taken by the Seller pursuant hereto or seeks to enjoin or otherwise restrain the transactions contemplated hereby.

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Section 3.09.

Transactions with Certain Persons and Entities .  

(a)

Except as set forth Seller Disclosure Schedule 3.9(a) , to the knowledge of the Seller, the Bank does not owe any amount to (excluding deposit liabilities), or have any loan, contract, lease, commitment or other obligation with, from, or to any of the present or former directors or officers of the Seller, and none of such persons owes any amount to the Bank.  

(b)

Except as set forth on Seller Disclosure Schedule 3.9(b) , to the knowledge of the Seller, there are no agreements, instruments, commitments, extensions of credit, tax sharing or allocation agreements or other contractual agreements of any kind (i) between the Seller and the Bank or (ii) among the Seller, the Bank, and/or any present or former officers or directors of the Seller, which would obligate the Bank in any manner.

Section 3.10.

Absence of Certain Business Practices .  To the knowledge of the Seller, none of the Seller or any officer, employee or agent of the Seller, or any other person acting on their behalf, has, directly or indirectly, within the past three (3) years, given or agreed to give any gift or similar benefit to any customer, supplier, governmental employee or other person who is or may be in a position to help or hinder the business of the Bank (or assist the Bank in connection with any actual or proposed transaction) that (i) might subject the Bank to any damage or penalty in any civil, criminal or governmental litigation or proceeding, (ii) if not given in the past, might have resulted in a Material Adverse Change, or (iii) if not continued in the future might result in a Material Adverse Change or might subject the Bank to suit or penalty in any private or governmental litigation or proceeding.

Section 3.11.

Deposits .  Except as set forth on Seller Disclosure Schedule 3.11 , neither the Seller nor any of its officers and directors, has knowledge of any reason, be it personal, financial or otherwise, why any deposits maintained at the Bank as of the Closing Date, would be withdrawn from the Bank during the period beginning on the Closing Date and ending on the date that is one (1) year after the Closing Date, other than in the normal course of business.

Section 3.12.

Brokerage Fees and Commissions .  Neither the Seller nor any of its officers, directors or employees have employed any broker, finder, financial advisor or investment banker or incurred any liability for any brokerage, financial advisory, investment banking or other fees or commissions in connection with this Agreement and the transactions contemplated hereby other than as set forth on Seller Disclosure Schedule 3.12 and pursuant to letter agreements, true, complete and correct copies of which have been previously delivered to the Buyer.

Section 3.13.

Representations Not Misleading .  No representation or warranty by the Seller contained in this Agreement, nor any statement, exhibit or schedule furnished to the Buyer and the Bank by the Seller under and pursuant to, or in anticipation of this Agreement, contains or will contain on the Closing Date any untrue statement of a material fact or omits or will omit to state a material fact necessary to make the statements contained herein or therein, in light of the circumstances under which it was or will be made, not misleading and such representations and warranties would continue to be true and correct following disclosure to any governmental authority having jurisdiction over the Seller of the facts and circumstances upon which they were based.

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ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF THE BANK

The Bank hereby makes the following representations and warranties with respect to the Bank.  Furthermore, on or prior to the date hereof, the Bank has delivered to the Buyer disclosure schedules (the " Bank Disclosure Schedules ") setting forth, among other things, items the disclosure of which is necessary or appropriate either in response to an express disclosure requirement contained in a provision hereof or as an exception to one or more representations or warranties contained in Article IV or to one or more of its covenants contained in Article VII ; provided that the mere inclusion of an item in the Bank Disclosure Schedules as an exception to a representation, warranty or covenant shall not be deemed an admission by a party that such item represents a material exception or fact, event or circumstance or that such item has had or is reasonably likely to result in a Material Adverse Change with respect to the disclosing party; provided, further , that a disclosure in any section of the Bank Disclosure Schedules shall be deemed to be a disclosure for all other sections of the Bank Disclosure Schedules in respect of which it is evident that such disclosure is applicable.  The Bank agrees to provide the Buyer at the Closing revised supplemental Bank Disclosure Schedules reflecting any material changes to the Bank Disclosure Schedules delivered on or prior to the date hereof.  The Bank Disclosure Schedules are "Subject Information" as provided for and subject to the provisions of Article XII  of this Agreement.

Section 4.01.

Organization, Qualification and Authority .  

(a)

The Bank is a Texas state banking association, duly organized, validly existing and in good standing under the laws of the State of Texas.  

(b)

The Bank has all requisite corporate power and authority (including all licenses, franchises, permits and other governmental authorizations as are legally required) to carry on its business as now being conducted, to own, lease and operate its properties and assets as now owned, leased or operated and to enter into and carry out its obligations under this Agreement (except where the failure to be so licensed, franchised, permitted or authorized would not have a material adverse affect on the Bank).  The nature of the business of the Bank and its respective activities do not require it to be qualified to do business in any jurisdiction other than the State of Texas (except where the failure to be so qualified would not have a material adverse affect on the Bank).  

(c)

The Bank has full legal capacity and authority to execute, deliver and perform this Agreement and to consummate the transactions contemplated hereby.  

(d)

The Bank is an insured bank as defined in the FDIA and the Bank is not a member of the Federal Reserve.  

(e)

True and correct copies of the Articles of Association and Bylaws of the Bank, with all amendments thereto through the date of this Agreement, have been delivered to the Buyer.  

(f)

The Bank has no equity interest, direct or indirect, in any other bank or corporation or in any partnership, joint venture or other business enterprise or entity, except as

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acquired through settlement of indebtedness, foreclosure, the exercise of creditors' remedies or in a fiduciary capacity, and since December 31, 2004 the business carried on by the Bank has not been conducted through any other direct or indirect Subsidiary or Affiliate of the Bank.

Section 4.02.

Bank Capitalization .  

(a)

The entire authorized capital stock of the Bank consists solely of 6,000,000 shares of Common Stock of which 3,708,195 are issued and outstanding, all of which are held of record by the Seller.  

(b)

There are no: (i) other outstanding equity securities of any kind or character issued or granted by, or binding upon, the Bank, (ii) outstanding subscriptions, options, convertible securities, rights, warrants, calls or other agreements or commitments of any kind issued or granted by, or binding upon, the Bank to: (A) purchase or otherwise acquire any security of or equity interest in the Bank, or (B) issue any shares of, restricting the transfer of or otherwise relating to shares of the Bank's capital stock.  

(c)

All of the issued and outstanding shares of the Common Stock have been duly authorized, validly issued and are fully paid and nonassessable, and have not been issued in violation of the securities laws of the United States or any other applicable jurisdiction (" Securities Laws ") or in violation of the preemptive rights of any Person.

Section 4.03.

Execution and Delivery .  

(a)

The Bank has taken all corporate action necessary to authorize the execution, delivery and ( provided that the required regulatory and Bankruptcy Court approvals are obtained, including entry of the Final Order) performance of this Agreement and the other agreements and documents contemplated hereby to which it is a party.  

(b)

This Agreement has been, and the other agreements and documents contemplated hereby have been or at Closing will be, duly executed by the Bank and, assuming the due execution and delivery of this Agreement and the other agreements and documents contemplated hereby by the Seller, the Buyer and the other parties thereto, each constitutes the legal, valid and binding obligation of the Bank enforceable in accordance with its respective terms and conditions, except as enforceability may be limited by the Bankruptcy Exception.

Section 4.04.

No Conflict with Other Instruments .  The execution, delivery or performance of this Agreement and the consummation of the transactions contemplated hereby, will not (i) conflict with or violate any provision of the Bank's Articles of Association or Bylaws (the " Bank Constituent Documents ") or (ii) assuming all regulatory approvals and consents and the consents of the third parties set forth in Bank Disclosure Schedule 4.05 are duly obtained and subject to entry of the Final Order, will not result in a breach of the terms, conditions or provisions of, or constitute a default under any material agreement, indenture, instrument, lien, charge, encumbrance or undertaking to which the Bank is a party or by which any of the Properties of the Bank may be affected, excluding from the foregoing clause (ii) such violations, conflicts, breaches or defaults that  either individually or in the aggregate would not have constituted a Material Adverse Change with respect to the Bank.  

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Section 4.05.

Consents and Approvals .  

(a)

Except for bank regulatory approvals, Bankruptcy Court approval and as disclosed on Bank Disclosure Schedule 4.05 , to the knowledge of the Bank, no consent, approval or order of any governmental or administrative board or body or any other third party is required to be obtained or made by the Bank for the execution, delivery and performance by the Bank of this Agreement and the transactions contemplated hereby.

(b)

The Bank knows of no reason why all regulatory approvals from any regulatory agency required for the consummation of the transactions contemplated by this Agreement should not be obtained on a timely basis.

Section 4.06.

Compliance with Applicable Laws, Permits and Instruments .  Except as otherwise provided in this Agreement or as set forth on Bank Disclosure Schedule 4.06 , the Bank is not in violation of the Bank Constituent Documents, and to the Bank's knowledge, the Bank is not (i) in violation of any applicable law, statute or regulation of any governmental agency, board, bureau or body relating to the conduct of its business and maintenance and operation of its Properties, (ii) in violation or default with respect to any order, writ, injunction, decree or demand of any court or other governmental or regulatory authority, any license or regulation of any governmental agency, or (iii) in material default under any indenture, mortgage, lease, agreement or other instrument under which the Bank is obligated, excluding from the foregoing clauses (i), (ii) and (iii) such violations which either individually or in the aggregate would not have constituted a Material Adverse Change with respect to the Bank.

Section 4.07.

Bank Financial Statements and Call Reports .  

(a)

The Bank has provided or will provide the Buyer with true and complete copies of the unaudited balance sheet of the Bank as of December 31, 2007 and the related statements of income for the year ended December 31, 2007; the audited balance sheet of the Bank as of December 31, 2006 and the related statements of income for the year ended December 31, 2006; and (ii) the Reports of Condition and Income of the Bank as of and for the three months ended March 31, 2007, the six months ended June 30, 2007, and the nine months ended September 30, 2007 (the " Call Reports ").  The audited and unaudited financial information and the Call Reports referred to in this Section 4.07(a) are collectively referred to in this Agreement as the " Bank Financial Statements ".

(b)

Except as described in the notes to the Bank Financial Statements and the Call Reports, the Bank Financial Statements and Call Reports fairly present, in all material respects, the financial position of the Bank as of the respective dates thereof and the results of operations and changes in financial position of the Bank for the periods then ended, in conformity with GAAP or regulatory accounting principals (" RAP "), as applicable, applied on a basis consistent with prior periods, except as otherwise noted therein, subject, in the case of the unaudited interim financial statements, to normal year-end adjustments (which, in the aggregate are not material) and the fact that they do not contain all of the footnote disclosures required by GAAP.  

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(c)

The Bank has calculated its allowance for loan losses in accordance with the Interagency Policy Statement on the Allowance for Loan and Lease Losses and with RAP as applied to banking institutions and in accordance with all applicable state or federal banking rules and regulations.  To the knowledge of the Bank, the allowance for loan losses account for the Bank reflected in the Bank's Call Report as of September 30, 2007 or Call Reports of the Bank as of any date subsequent to the execution of this Agreement, will be, as of such dates, adequate to provide for all losses, net of recoveries relating to loans previously charged off, on all outstanding loans of the Bank; provided, however , that no representation or warranty is made as to the sufficiency of collateral securing or the collectability of such loans.

Section 4.08.

Undisclosed Liabilities .  Except as set forth on Bank Disclosure Schedule 4.08 or as otherwise disclosed in this Agreement, as of the dates of the Bank Financial Statements the Bank does not have any material debts, liabilities or obligations of any nature except for liabilities that are not reflected in or disclosed in Bank Financial Statements, except those liabilities, expenses and obligations incurred in the ordinary course of business since the dates of the applicable Bank Financial Statement.  

Section 4.09.

Tax Matters .  Except as disclosed on Bank Disclosure Schedule 4.09 :

(a)

The Bank has filed, or to the knowledge of the Bank has had filed on its behalf, in a timely manner (within any applicable extension periods) with the appropriate Taxing Authority all income, franchise or other material Tax Returns (as defined in Section 14.11 ) required to be filed with respect to Taxes of the Bank and all such Tax Returns are correct and complete in all material respects.  No claim has been made by a Taxing Authority (as defined in Section 14.11 ) in writing in a jurisdiction in which the Bank does not currently file a Tax Return that the Bank is or may be subject to taxation by that jurisdiction.

(b)

All Taxes due and payable by or with respect to the Bank have been paid in full.  All amounts of Taxes required to be withheld by the Bank have been withheld and have been duly and timely paid to the proper Taxing Authority.

(c)

There are no outstanding (i) agreements or waivers extending the statutory period of limitations applicable to any federal, state, local or foreign income, franchise or other material Tax Returns required to be filed, (ii) extensions for the assessment or collection of Taxes, which Taxes have not since been paid, or (iii) powers of attorney that are currently in force with respect to any Tax matter, in each case by or with respect to the Bank.

(d)

None of the Tax Returns of or with respect to the Bank is currently being audited or examined by any Taxing Authority and the Bank has no knowledge, nor has the Bank received any written notice, that any Taxing Authority intends to conduct an audit or investigation relating to the Tax Returns of the Bank.  

(e)

No material deficiency for any Taxes has been assessed with respect to Tax Returns filed by or that include the Bank that has not been abated or paid in full or adequately provided for on the Bank Financial Statements.   There are no liens other than liens as a result of any unpaid Taxes upon any of the assets of the Bank.

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(f)

The unpaid Taxes of the Bank (i) did not exceed the provisions for current or deferred Taxes on the Bank Financial Statements (excluding any reserve for deferred Taxes established to reflect timing differences between book and Tax income) and (ii) will not exceed the provisions for current or deferred Taxes on the Bank Financial Statements as of the Closing Date (excluding any reserve for deferred Taxes established to reflect timing differences between book and Tax income).

(g)

The Bank (i) is not nor has ever been a member of any affiliated group that filed or was required to file an affiliated, consolidated, combined or unitary Tax Return (other than a group which Seller is common parent), (ii) has no liability for the Taxes of another Person as transferee, successor or by contract or otherwise or under Treasury Regulation section 1.1502-6 (or any comparable provision of state, local or foreign law) or (iii) is not a party to any Tax allocation, sharing, indemnity or similar arrangement or agreement (whether or not written) that will survive Closing.

(h)

The Bank has not executed or entered into any written agreement with, or obtained or applied for any written consents or written clearances or any other Tax rulings from, nor has there been any written agreement executed or entered into on behalf of any of them with any Taxing Authority, relating to material Taxes, including any IRS private letter rulings or comparable rulings of any Taxing Authority and closing agreements pursuant to Section 7121 of the Code or any predecessor provision thereof or any similar provision of any Law.

(i)

The Bank has not constituted either a "distributing corporation" or a "controlled corporation" (within the meaning of Section 355(a)(1)(A) of the Code) in a distribution of stock qualifying for tax-free treatment under Section 355 of the Code (A) in the two (2) years prior to the date of this Agreement or (B) in a distribution which could otherwise constitute part of a "plan" or "series of related transactions" (within the meaning of Section 355(e) of the Code) in conjunction with the transactions contemplated by this Agreement.

(j)

The Bank has not engaged in any reportable transaction as defined in Treasury Regulation section 1.6011-4(b).

(k)

The Bank has not (i) either agreed to nor is required to make any adjustments pursuant to Section 481(a) of the Code or any similar provision of state, local or foreign law and, to the knowledge of Seller, no Taxing Authority has proposed any such adjustment, and (ii) any application pending with any Taxing Authority requesting permission for any changes in accounting methods.

Section 4.10.

Regulatory Compliance .  

(a)

Except as set forth on Bank Disclosure Schedule 4.10(a) , all material reports, records, registrations, statements, notices and other documents or information required to be filed by the Bank with any federal or state regulatory authority including, without limitation, the Federal Reserve, the FDIC, the TDB and the IRS have been duly and timely filed and all information and data contained in such reports, records or other documents are true, accurate, correct and complete in all material respects.  

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(b)

Except for (i) that certain Determination Letter issued to the Bank by the TDB dated June 1, 2005 (the " Determination Letter ") or (ii) as disclosed on Bank Disclosure Schedule 4.10(b) , the Bank is not now nor has been within the last five (5) years subject to any memorandum of understanding, cease and desist order, written agreement or other formal or informal administrative action with any Bank Regulator.  Except as provided on Bank Disclosure Schedule 4.10(b) , the Bank is in substantial compliance with the requirements of the Determination Letter and any such formal or information administrative document.  

(c)

The Bank does not have knowledge that any Bank Regulator has any present intent to place the Bank under any further administrative action.  Except as set forth on Bank Disclosure Schedule 4.10(c) , there are no actions or proceedings pending or, to the knowledge of the Bank, threatened against the Bank by or before any Bank Regulators or any other nation, state or subdivision thereof, or any other entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government.

Section 4.11.

Litigation .  

(a)

Bank Disclosure Schedule 4.11(a) contains a list, which is true and complete as of the date of this Agreement, of all actions, claims, suits, investigations, reviews or other legal, quasi judicial or administrative proceedings of any kind or nature now pending or, to the knowledge of the Bank, threatened against or affecting the Bank, at law or in equity, or by or before any federal, state or municipal court or other governmental or administrative department, commission, board, bureau, agency or instrumentality, domestic or foreign, that in any manner involves the Bank or its Properties or capital stock that might reasonably be anticipated to result in a Material Adverse Change to the Bank or materially and adversely affect the transactions contemplated by this Agreement.  

(b)

Except as set forth on Bank Disclosure Schedule 4.11(b) , no legal action, suit or proceeding or judicial, administrative or governmental investigation is pending or, to the knowledge of the Bank, threatened against the Bank that questions or might question the validity of this Agreement or the agreements contemplated hereby or any actions taken or to be taken by the Bank pursuant hereto or seeks to enjoin or otherwise restrain the transactions contemplated hereby.

Section 4.12.

Absence of Certain Changes or Events .  Except (i) as set forth on Bank Disclosure Schedule 4.12 , (ii) as otherwise contemplated by this Agreement and excluding the incurrence of expenses related to this Agreement and the transactions contemplated hereby, (iii) as reflected in the minutes of the meetings of the Board of Directors of the Bank, or (iv) as permitted in writing by the Buyer, since December 31, 2007 the Bank has conducted its business only in the ordinary course and has not, other than in the ordinary course of business and consistent with prudent practices:

(a)

Incurred any obligation or liability except deposits taken and federal funds purchased and current liabilities for trade or business obligations, which either individually or in the aggregate, has resulted in a Material Adverse Change;

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(b)

Discharged or satisfied any lien, charge or encumbrance or paid any obligation or liability;

(c)

Declared or paid any dividends or other distribution to its shareholders, purchased, retired or redeemed, or obligated itself to purchase, retire or redeem, any of its shares of capital stock or other securities;

(d)

Issued, reserved for issuance, granted, sold or authorized the issuance of any shares of its capital stock or other securities or subscriptions, options, warrants, calls, rights or commitments of any kind relating to the issuance thereto;

(e)

Acquired any capital stock or other equity securities or acquired any equity or ownership interest in any bank, corporation, partnership or other entity (except: (i) through settlement of indebtedness, foreclosure, or the exercise of creditors' remedies, or (ii) in a fiduciary capacity, the ownership of which does not expose it to any liability from the business, operations or liabilities of such Person);

(f)

Mortgaged, pledged or subjected to lien, charge, security interest or any other encumbrance or restriction any of its property, business or assets, except (i) as noted in the Bank Financial Statements, (ii) liens for taxes not yet due and payable or being contested in good faith that have been adequately reserved against on the books of the Bank, (iii) defects in title and liens, charges and encumbrances, if any, that do not materially detract from the value, or materially interfere with the present or proposed use, of the property or asset subject thereto or affected thereby, or otherwise materially impair the business operations of the Bank, (iv) pledges of assets in the ordinary course of business to secure public funds or deposits, and (v) those assets and properties disposed of for fair value in the ordinary course of business since the dates of the Bank Financial Statements;

(g)

Sold, transferred, leased to others or otherwise disposed of any of its assets (except for assets disposed of for fair value) or canceled or compromised any debt or claim, or waived or released any right or claim, except that the Bank may sell, transfer or dispose of the Mineral Rights (as defined in Section 14.11 ) as contemplated by Section 7.12 ;

(h)

Terminated, canceled or surrendered, or received any notice of or threat of termination or cancellation of any contract, lease or other agreement or suffered any damage, destruction or loss (whether or not constituting, or reasonably anticipated to constitute, a Material Adverse Change covered by insurance), which, either individually or in the aggregate, would reasonably be expected to result in a Material Adverse Change;

(i)

made any change in the rate of compensation, commission, bonus or other direct or indirect remuneration payable, or paid or agreed or orally promised to pay, conditionally or otherwise, any bonus, extra compensation, pension or severance or vacation pay, to or for the benefit of any of its shareholders, directors, officers, employees or agents, or entered into any employment or consulting contract or other agreement with any director, officer or employee or except as may be required by applicable law, adopted, amended in any material respect or terminated any pension, employee welfare, retirement, stock purchase, stock option, stock appreciation rights, termination, severance, income protection, golden parachute, savings or

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profit sharing plan (including trust agreements and insurance contracts embodying such plans), any deferred compensation, or collective bargaining agreement, any group insurance contract or any other incentive, welfare or employee benefit plan or agreement maintained by it for the benefit of its directors, employees or former employees;

(j)

Except for improvements or betterments relating to the Bank's Properties, made any capital expenditures or capital additions or betterments in excess of an aggregate of $15,000;  

(k)

Instituted, had instituted against it, settled or agreed to settle any litigation, action or proceeding before any court or governmental body relating to its property other than routine collection suits instituted by it to collect amounts owed;

(l)

Suffered any change, event or condition that, in any case or in the aggregate, has caused or would reasonably be expected to result in a Material Adverse Change;

(m)

Except for the transactions contemplated by this Agreement or as otherwise permitted hereunder, entered into any transaction, or entered into, modified or amended any contract or commitment;

(n)

Entered into or given any promise, assurance or guarantee of the payment, discharge or fulfillment of any undertaking or promise made by any Person;

(o)

Sold, or knowingly disposed of, or otherwise knowingly divested itself of the ownership, possession, custody or control, of any corporate books or records of any nature that, in accordance with sound business practice, normally are retained for a period of time after their use, creation or receipt, except at the end of the normal retention period;

(p)

Made any, or acquiesced with any, change in any accounting methods, principles or material practices except as required by GAAP or RAP;

(q)

Sold or purchased any investment securities in an aggregate amount of $150,000;

(r)

Made, renewed, extended the maturity of, or altered any of the material terms of any loan to any single borrower and his related interests in excess of the principal amount of $50,000; or

(s)

Entered into any agreement or made any commitment whether in writing or otherwise to take any of the types of action described in subsections (a) through (r) above.

Section 4.13.

Leases, Contracts and Agreements .  

(a)

Bank Disclosure Schedule 4.13(a) sets forth an accurate and complete description as of the date hereof, of all leases, subleases, licenses, contracts and agreements to which the Bank is a party which obligate, or may obligate the Bank in the aggregate for an amount in excess of $25,000 over the entire term of any such agreement or related contracts of a similar nature which in the aggregate obligate or may obligate the Bank for an amount in excess of $25,000 over the entire term of such related contracts (the " Contracts ").  Upon the request of the Buyer, the Bank has delivered or will deliver to the Buyer true and correct

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copies of all the Contracts.  For the purposes of this Agreement, the term "Contracts" shall be deemed not to include (i) loans made by, (ii) repurchase agreements made by, (iii) spot foreign exchange transactions of, (iv) bankers acceptances of, (v) deposits by the Bank, or (vi) unfunded loan commitments and letters of credit issued by the Bank where the borrowers' total direct and indirect indebtedness to the Bank is less than $25,000.  

(b)

Except as set forth in Bank Disclosure Schedule 4.13(b) , no participations or loans have been sold which have buy back, recourse or guaranty provisions which create contingent or direct liabilities of the Bank.  

(c)

All of the Contracts are legal, valid and binding obligations of the parties to the Contracts, enforceable in accordance with their terms, subject to the Bankruptcy Exception.  

(d)

Except as described in Bank Disclosure Schedule 4.13(d) , all rent and other payments by the Bank under the Contracts are current, there are no existing defaults by the Bank under the Contracts and no termination, condition or other event has occurred which (whether with or without notice, lapse of time or the happening or occurrence of any other event) would constitute a default.  

(e)

The Bank has a good and marketable leasehold interest in each parcel of real property leased by it free and clear of all mortgages, pledges, liens, encumbrances and security interests.  

Section 4.14.

No Guaranties .  Except for items in process of collections in the ordinary course of business of the Bank, none of the obligations or liabilities of the Bank are guaranteed by any other Person, nor, except in the ordinary course of business, has the Bank guaranteed the obligations or liabilities of any other Person.

Section 4.15.

Employee Benefit Plans .  

(a)

Bank Disclosure Schedule 4.15(a) contains a true and complete list of each pension, retirement, savings and profit-sharing, bonus, incentive, deferred compensation, severance pay or any other employee benefit plan, fund or program, as those terms are defined in the Employee Retirement Income Security Act of 1974, as amended (" ERISA "), and any stock purchase agreement or arrangement, supplemental savings and profit sharing plan, bonus retention plan, non-qualified deferred compensation plan, change in control agreement, and all other plans contributed to, maintained or sponsored by, or on behalf of, the Bank, whether written or unwritten, whether or not subject to ERISA (each, " Employee Benefit Plans ") covering present and former employees of the Bank.  The Bank has, with respect to each Employee Benefit Plan, delivered or made available to the Buyer true and complete copies of: (i) all current plan texts and agreements and related trust agreements or annuity contracts and any amendments thereto; (ii) all current summary plan descriptions and material employee communications, (iii) the Form 5500 filed in each of the most recent three plan years (or such shorter period as the respective plan has been in existence, and including all schedules thereto and the opinions of independent accountants), if applicable; (iv) the most recent actuarial valuation (if any); (v) the most recent annual and periodic accounting of plan assets; (vi) if the plan is intended to qualify under Section 401(a) or 403(a) of the Code, the most

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recent determination letter received from the IRS; and (vii) all material communication with any governmental entity or agency (including, without limitation, the Department of Labor, IRS and the Pension Benefit Guaranty Corporation (" PBGC ")).

(b)

No Employee Benefit Plan is subject to Title IV of ERISA, and the Bank has not maintained, contributed to or incurred any material liability under a plan subject to Title IV of ERISA.

(c)

As of and through the date hereof, all required contributions to each Employee Benefit Plan have been made or accrued in the Bank Financial Statements or Call Reports of the Bank.

(d)

Each Employee Benefit Plan has been administered in compliance in all material respects with the applicable provisions of ERISA and the Code that are applicable, or intended to be applicable, including, but not limited to, COBRA, HIPAA and any applicable, similar state law, to such Employee Benefit Plans and the terms of such plans, except as would not reasonably be expected to result in a Material Adverse Change with respect to the Bank.  All amendments and actions required to bring the Employee Benefit Plans into conformity with all of the applicable provisions of the Code, ERISA and other applicable law have been made or taken, except to the extent that such amendments or actions are not required by law to be made as of the Closing Date.  For purposes of this Agreement, " COBRA " means the provision of Section 4980B of the Code and the regulations thereunder, and Part 6 of the Subtitle B of title I of ERISA and any regulations thereunder, and " HIPAA " means the provisions of the Code and ERISA as enacted by the Health Insurance Portability and Accountability Act of 1996.

(e)

No prohibited transaction (within the meaning of Section 406 of ERISA or Section 4975 of the Code and not exempt under Section 408 of ERISA) has occurred with respect to any Employee Benefit Plan which would result in the imposition, directly or indirectly, of a material excise tax under Section 4975 of the Code or a material civil penalty under Section 502(i) of ERISA on the Bank, and to the knowledge of the Bank, no actions have occurred which could result in the imposition of a material penalty on the Bank under any section or provision of ERISA.

(f)

Except as provided in Bank Disclosure Schedule 4.15(f) or as required by law or this Agreement, neither the execution and delivery of this Agreement nor the consummation of the transactions contemplated hereby will, (i) result in any payment (including, without limitation, severance, unemployment compensation, golden parachute or otherwise) becoming due to any director or any officer or employee of the Bank under any Employee Benefit Plan, (ii) increase any benefits otherwise payable under any Employee Benefit Plan or (iii) result in any acceleration of the time of payment or vesting of any such benefits.

(g)

There are no pending or, to the knowledge of the Bank, threatened actions, liens, suits or claims (other than routine claims for benefits) with respect to any Employee Benefit Plan or against the assets of any Employee Benefit Plan.  No assets of the Bank are subject to any lien under Section 302(f) of ERISA or Section 412(n) of the Code.  There are no pending or, to the

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knowledge of the Bank, threatened investigations or claims by the IRS, the Department of Labor, the PBGC or any other governmental agency relating to any of the Employee Benefit Plans.

(h)

Except as disclosed on Bank Disclosure Schedule 4.15(h) , each Employee Benefit Plan which is intended to qualify under Section 401(a) of the Code has received a favorable determination letter from the IRS (or if the plan is an adopted prototype plan, such prototype plan is currently approved by the IRS).  No event has occurred or circumstance exists that could reasonably be expected to give rise to a disqualification or loss of tax-exempt status of any such plan or its related trust.

(i)

No Employee Benefit Plan is a multiple employer plan within the meaning of Section 413(c) of the Code or Section 4063, 4064 or 4066 of ERISA.  No Employee Benefit Plan is a multiple employer welfare arrangement as defined in Section 3(40) of ERISA.

(j)

Each Employee Benefit Plan that is an employee pension benefit plan, as defined in Section 3(2) of ERISA, that is not qualified under Section 401(a) or 403(a) of the Code is exempt from Parts 2, 3 and 4 of Title I of ERISA as an unfunded plan that is maintained primarily for the purpose of providing deferred compensation for a select group of management or highly compensated employees, pursuant to Sections 201(2), 301(a)(3) and 401(a)(1) of ERISA.  No assets of the Bank are allocated to or held in a "rabbi trust" or similar funding vehicle.

(k)

Except as disclosed on Bank Disclosure Schedule 4.15(k) , no Employee Benefit Plan provides medical or life insurance benefits to any current or former employee of the Bank beyond retirement or other termination of service (other than coverage mandated by COBRA, the cost of which is fully paid by the current or former employee or his or her dependents).

(l)

Except as set forth on Bank Disclosure Schedule 4.15(l) , each Employee Benefit Plan may be amended or terminated at any time by the Bank subject only to regulations promulgated under the Code, ERISA, and the regulations of the PBGC.

Section 4.16.

Employee Relationships .  

(a)

The Bank has complied in all material respects with all applicable laws relating to its relationships with its employees, and the Bank believes that the relationships between the Bank and its employees are good.  

(b)

The Bank is not a party to any oral or written contracts or agreements granting benefits or rights to employees or any collective bargaining agreement or to any conciliation agreement with the Department of Labor, the Equal Employment Opportunity Commission or any federal, state or local agency that requires equal employment opportunities or affirmative action in employment.  

(c)

There are no unfair labor practice complaints pending against the Bank before the National Labor Relations Board and no similar claims pending before any similar state, local or foreign agency.  

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(d)

There is no activity or proceeding of any labor organization (or representative thereof) or employee group to organize any employees of the Bank, nor of any strikes, slowdowns, work stoppages, lockouts or threats thereof, by or with respect to any such employees.  

(e)

The Bank is in compliance in all material respects with all applicable laws respecting employment and employment practices, terms and conditions of employment and wages and hours, and the Bank is not engaged in any unfair labor practice.

Section 4.17.

No Claims .  Except as disclosed on Bank Disclosure Schedule 4.17 , the Bank has no knowledge that its directors, officers or employees have any claims against the Bank, except, if applicable, for deposits made in the ordinary course of business and accrued director's fees and salary in amounts reflected on the Bank Financial Statements.

Section 4.18.

Transactions with Certain Persons and Entities .  

(a)

Except as set forth on Bank Disclosure Schedule 4.18(a) and excluding deposit liabilities, there are no outstanding amounts payable to or receivable from, or advances by the Bank to, and the Bank is not otherwise a creditor to any director or executive officer of the Seller or the Bank nor is the Bank a debtor to any such person other than as part of the normal and customary terms of such person's employment or service as a director with the Bank.  

(b)

Except as set forth on Bank Disclosure Schedule 4.18(b) , the Bank does not use any asset owned by any shareholder or any present or former director or officer of the Bank, or any Affiliate thereof, in the operations (other than personal belongings of such officers and directors located in the Bank's premises, the removal of which would not result in a Material Adverse Change), nor do any of such persons own or have the right to use real property that is adjacent to property on which the Bank's facilities are located.  

(c)

Except as disclosed in Bank Disclosure Schedule 4.18(c) or Bank Disclosure Schedule 4.15 , the Bank is not a party to any transaction or agreement with any director or executive officer of the Seller or the Bank.

Section 4.19.

Title to Assets and Properties .  

(a)

The Bank has good and indefeasible title to all of the Properties and assets reflected as assets in the Bank Financial Statements or acquired after the date thereof free and clear of all liens, mortgages, pledges, encumbrances and charges of every kind except (i) as disclosed in Bank Disclosure Schedule 4.19(a) , (ii) as noted in the Bank Financial Statements, (iii) liens for taxes not yet due and payable or being contested in good faith that have been adequately reserved against on the books of the Bank, (iv) defects in title and liens, charges and encumbrances, if any, that do not materially detract from the value, or materially interfere with the use thereof, of the property or asset subject thereto or affected thereby for the purpose for which they are held, or otherwise materially impair the business operations of the Bank, (v) pledges of assets in the ordinary course of business to secure public funds or deposits, and (vi) those assets and properties disposed of for fair value in the ordinary course of business since the dates of the Bank Financial Statements.  

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(b)

True and complete copies of all existing deeds, leases and title insurance policies for all real property owned or leased by the Bank and all mortgages, deeds of trust, security agreements and other documents describing encumbrances to which such property is subject have been made available to the Buyer.  

Section 4.20.

Condition of Assets .  All material tangible assets used by the Bank are in good operating condition, ordinary wear and tear excepted, and conform with all applicable ordinances, regulations, zoning and other laws.  None of the Bank's premises or equipment are in need of maintenance or repairs other than ordinary routine maintenance and repairs that are not material in nature or cost.

Section 4.21.

Environmental Compliance .  To the knowledge of the Bank, and except as disclosed on Bank Disclosure Schedule 4.21 :

(a)

The Bank, its respective operations and its respective Properties are in material compliance with all applicable Environmental Laws (as defined in Section 14.11 ).  The Seller is not aware of, nor has it received written notice of, any past or present conditions, events, activities, practices or incidents that may prevent the material compliance of the Bank with all applicable Environmental Laws.

(b)

The Bank has obtained all material permits, licenses and authorizations that are required for its existing operations under all applicable Environmental Laws.

(c)

No Hazardous Materials (as defined in Section 14.11 ) exist on, about or within any of the Properties, nor have any Hazardous Materials previously existed on, about or within or been used, generated, stored, transported, disposed of, on or released from any of the Properties in violation of any applicable Environmental Laws.  The use that the Bank has made and intends to make of the Properties has not and will not result in the use, generation, storage, transportation, accumulation, disposal or release of any Hazardous Material on, in or from any of the Properties.

(d)

There is no action, suit, proceeding, investigation, or inquiry before any court, administrative agency or other governmental authority pending or threatened in writing against the Bank relating in any way to any Environmental Law.  The Bank has no liability for remedial action under any applicable Environmental Law that would reasonably be expected to cause a Material Adverse Change with respect to the Bank.  The Bank has not received any written request for information from any governmental authority with respect to the condition, use or operation of any of the Properties, nor has the Bank received any written notice of any kind from any governmental authority or other person with respect to any violation by the Bank of, or claimed or potential liability of the Bank under any applicable Environmental Law.  

(e)

The representations and warranties set forth in this Section 4.21(e) are the only representations and warranties the Bank makes relating to Environmental Law, with regard to environmental matters or relating in any way to Hazardous Materials.

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Section 4.22.

Insurance .  

(a)

Bank Disclosure Schedule 4.22(a) contains an accurate and complete list and brief description of all policies of insurance, including fidelity and bond insurance, owned or held by or on behalf of the Bank as of the date of this Agreement.  All such policies (i) are sufficient for compliance by the Bank with all requirements of law and all agreements to which the Bank is a party, (ii) are valid, outstanding and enforceable in accordance with their terms subject to the Bankruptcy Exception, and (iii) are presently in full force and effect, no notice has been received of the cancellation, or threatened or proposed cancellation, of any such policy and there are no unpaid premiums due thereon.  

(b)

The Bank is not in default with respect to the provisions of any such policy and has not failed to give any notice or present any claim thereunder in a due and timely fashion.  

(c)

Except as set forth on Bank Disclosure Schedule 4.22(c) , the Bank has not been refused any insurance with respect to its assets or operations, nor has its insurance been limited by any insurance carrier to which the Bank has applied for any such insurance since December 31, 2004.  Each property of Bank is insured for the benefit of the Bank in amounts deemed adequate by management of the Bank against risks customarily insured against.  

(d)

Except as set forth on Bank Disclosure Schedule 4.22(d) , there has been no single claim in excess of $10,000 under any fidelity bond and there have been no claims in the aggregate in excess of $50,000 under any fidelity bonds of the Bank within the last three (3) years, and the Seller and the Bank are not aware of any facts that would form the basis of a claim under such bonds.  

Section 4.23.

Evidences of Indebtedness .  

(a)

Except as disclosed in Bank Disclosure Schedule 4.23(a) , all evidences of indebtedness and leases that are reflected as assets of the Bank in the Bank Financial Statements and all currently outstanding loans and leases are legal, valid and binding obligations of the respective obligors thereof, enforceable in accordance with their respective terms (except as limited by the Bankruptcy Exception) and are not subject to any known or threatened defenses, offsets or counterclaims that may be asserted against the Bank or the present holder thereof; provided, however , that the foregoing sentence shall not be deemed to be a representation or warranty of collateral securing or the collectibility of any of the assets.  

(b)

The credit files of the Bank contain all material information (excluding general, local or national industry, economic or similar conditions) known to the Bank that is reasonably required to evaluate in accordance with generally prevailing practices in the banking industry the collectibility of the loan portfolio of the Bank (including loans that will be outstanding if any of them advances funds they are obligated to advance).  

(c)

The Bank has disclosed all of the substandard, doubtful, loss, nonperforming or loans identified by the Bank as problem loans on the internal watch list of the Bank, a copy of which as of December 31, 2007, has been provided to the Buyer.  

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(d)

With respect to any loan or other evidence of indebtedness all or a portion of which has been sold by the Bank to or guaranteed by any governmental authority, including the Small Business Administration, each of such loans was made in compliance and conformity with all relevant laws, rules, regulations and procedures such that such governmental authority's guaranty of such loan is effective during the term of such loan in all material respects.

Section 4.24.

No Derivative Contracts .  The Bank is not a party to, nor has the Bank agreed to enter into, an exchange-traded or over-the-counter swap, forward, future, option, cap, floor or collar financial contract or agreement, or any other contract or agreement not included in the Bank Financial Statements which is a financial derivative contract (including various combinations thereof), including contracts relating to mortgage-servicing assets.

Section 4.25.

Privacy .  The Bank has a privacy policy (" Privacy Policy ") regarding the collection and use of nonpublic personally-identifiable information (" Customer Information ") and has a written agreement with any third party with which the Bank shares any Customer Information requiring that such information be kept confidential and used only as permitted by the Bank or the customer (" Privacy Agreement "), copies of which have been provided or have been made available to the Buyer.  The Bank has not collected any Customer Information in an unlawful manner or in violation of its Privacy Policy, and the Bank has not used any Customer Information in an unlawful manner or in a manner that in any way violates its Privacy Policy, a Privacy Agreement, or the privacy rights of its customers or third parties.  The Bank regularly distributes copies of its Privacy Policy to its customers.  The Bank has adequate security measures in place to protect the Customer Information it receives from illegal or unauthorized use by its personnel or third parties or use by its personnel or third parties in a manner that violates the privacy rights of its customers.  The consummation of the transactions contemplated by this Agreement and the transfer of the Customer Information pursuant thereto do not and shall not violate the Privacy Policy and information security measures of the Bank as they currently exist or as they existed at any time during which any of the Customer Information was collected or obtained nor any laws relating to privacy rights.

Section 4.26.

Patents, Trademarks and Copyrights .  Except as set forth on Bank Disclosure Schedule 4.26 , the Bank does not own or require the use of any patent, patent application, patent right, invention, process, trademark (whether registered or unregistered), trademark application, trademark right, trade name, service name, service mark, copyright or any trade secret (" Proprietary Rights ") for the business or operations of the Bank.  The Bank is not infringing upon or otherwise acting adversely to, and have not in the past three (3) years infringed upon or otherwise acted adversely to, any Proprietary Right owned by any other Persons.  There is no claim or action by any such Person pending or, to the knowledge of the Bank, threatened, with respect thereto.

Section 4.27.

Forms of Instruments, Etc .  The Bank has made, and will make, available to the Buyer copies of all standard forms of notes, mortgages, deeds of trust and other routine documents of a like nature used on a regular and recurring basis by the Bank in the ordinary course of its business.

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Section 4.28.

Fiduciary Responsibilities .  The Bank has performed in all material respects all of its duties as a trustee, custodian, guardian or as an escrow agent in a manner that complies in all material respects with all applicable laws, regulations, orders, agreements, instruments and common law standards.

Section 4.29.

Books and Records .  Except as set forth on Bank Disclosure Schedule 4.29 , the minute books, stock certificate books and stock transfer ledgers of the Bank are complete and correct, and there have been no transactions involving the business of the Bank that were required to have been set forth therein and that have not been accurately so set forth.  

Section 4.30.

Absence of Certain Business Practices .  To the knowledge of the Bank, neither the Bank nor any officer, employee or agent of the Bank, nor any other person acting on their behalf, has, directly or indirectly, within the past three (3) years, given or agreed to give any gift or similar benefit to any customer, supplier, governmental employee or other person who is or may be in a position to help or hinder the business of the Bank (or assist the Bank in connection with any actual or proposed transaction) that (i) might subject the Bank to any damage or penalty in any civil, criminal or governmental litigation or proceeding, (ii) if not given in the past, might have resulted in a Material Adverse Change to the Bank or (iii) if not continued in the future might result in a Material Adverse Change to the Bank or might subject the Bank to suit or penalty in any private or governmental litigation or proceeding.

Section 4.31.

Brokerage Fees and Commissions .  Neither the Bank nor any of its officers, directors or employees have employed any broker, finder, financial advisor or investment banker or incurred any liability for any brokerage, financial advisory, investment banking or other fees or commissions in connection with this Agreement and the transactions contemplated hereby other than as set forth on Bank Disclosure Schedule 4.31 and pursuant to letter agreements, true, complete and correct copies of which have been previously delivered to the Buyer.

Section 4.32.

Representations Not Misleading .  No representation or warranty by the Bank contained in this Agreement, nor any statement, exhibit or schedule furnished to the Buyer by the Bank under and pursuant to, or in anticipation of this Agreement, contains or will contain on the Closing Date any untrue statement of a material fact or omits or will omit to state a material fact necessary to make the statements contained herein or therein, in light of the circumstances under which it was or will be made, not misleading and such representations and warranties would continue to be true and correct following disclosure to any governmental authority having jurisdiction over the Bank of the facts and circumstances upon which they were based.

ARTICLE V.
REPRESENTATIONS AND WARRANTIES OF THE BUYER

The Buyer hereby makes the following representations and warranties to the Seller:

Section 5.01.

Organization, Qualification and Authority .  

(a)

The Buyer is a bank holding company registered under the BHC Act.  

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(b)

The Buyer is a corporation, duly organized, validly existing under the laws of the State of Delaware, and in good standing under all laws, rules, and regulations applicable to corporations located in the State of Delaware.  

(c)

The Buyer has all requisite corporate power and authority (including all licenses, franchises, permits and other governmental authorizations as are legally required) to carry on its business as now being conducted, to own, lease and operate its properties and assets as now owned, leased or operated and to enter into and carry out its obligations under this Agreement.  

(d)

The Buyer has full legal capacity and authority to execute, deliver and perform this Agreement and to consummate the transactions contemplated hereby.  

Section 5.02.

Execution and Delivery .  

(a)

The Buyer has taken all corporate action necessary to authorize the execution, delivery and ( provided the required regulatory approvals are obtained) performance of this Agreement and the other agreements and documents contemplated hereby to which it is a party.  

(b)

This Agreement has been, and the other agreements and documents contemplated hereby have been or at Closing will be, duly executed by the Buyer and, assuming due execution of this Agreement by the Seller and the Bank, each constitutes the valid and binding obligation of the Buyer, enforceable in accordance with its respective terms and conditions, except as enforceability may be limited by the Bankruptcy Exception.

Section 5.03.

No Conflict with Other Instruments .  Neither the execution, delivery or performance of this Agreement, nor the consummation of the transactions contemplated hereby, nor the fulfillment of the terms thereof, will conflict with, or result in a breach of the terms, conditions or provisions of, or constitute a default under (i) the Certificate of Incorporation or Bylaws of the Buyer or (ii) any material agreement, indenture, instrument, lien, charge, encumbrance or undertaking to which the Buyer is a party or by which any of the Properties of the Buyer may be bound or affected excluding from foregoing clause (ii) such conflicts, breach