Pursuant to the Restated Agreement, the Company made certain representations and warranties to the Lender, and agreed to comply with certain affirmative and negative covenants with the Lender, which are substantially the same as the representations, warranties, and covenants that were included in the Prior Agreement. Among the affirmative covenants are provisions requiring that (a) the Company maintain the capital ratios of the Company and of its subsidiary bank(s) at levels that would be considered “well-capitalized” under the prompt corrective action regulations of the federal banking agencies, and (b) the Company maintain a consolidated ratio of (i) the sum of its non-performing loans plus other real estate owned (real estate that is neither used in the ordinary course of the business of the Company or its subsidiaries nor held for future use) (OREO) to (ii) the sum of the Company's loans plus OREO, of not greater than 3.25%. Among the Company’s negative covenants are provisions that generally prohibit the Company and its subsidiaries, without the consent of the Lender, from (a) becoming liable in respect of any indebtedness for borrowed money, other than in the ordinary course of business of the bank subsidiaries, (b) incurring liens on their assets, other than to secure borrowings in the ordinary course of business of the bank subsidiaries, (c) issuing trust preferred securities, and (d) acquiring other businesses in acquisition transactions that would be significant when measured by certain size restrictions described by the Restated Agreement.

Breaches of the Company’s representations or warranties may under certain circumstances constitute an event of default under the Restated Agreement. Additional events of default include, among others, (a) the failure to pay when due the obligations owing under the Restated Agreement, (b) the failure to perform and not timely remedy certain covenants, (c) certain cross defaults or cross accelerations, (d) the occurrence of certain bankruptcy or insolvency events, (e) certain administrative or judicial proceedings being commenced against the Company or certain of its affiliates or associates or certain adverse judgments arising against them, and (f) certain changes in ownership of the Company’s stock. Upon the occurrence of an event of default, the Lender may terminate the availability of future credit under the revolving loan facility and declare all amounts outstanding under the revolving loan and term loan to be due and payable in full. In addition, in certain limited circumstances defined by the Restated Agreement, an event of default may entitle the Lender to declare all amounts outstanding under the subordinated loan to be due and payable in full.

The Company may prepay amounts borrowed under the Restated Agreement in full with accrued interest without premium or penalty, pursuant to the terms and conditions established by the Agreed Upon Terms and Procedures that are related to the Restated Agreement; provided that the Company may not prepay the term loan below a principal balance of $500,000 unless it has paid or prepaid the entire amount owing under the subordinated loan, and the Company may not prepay the term loan without the Lender's prior consent unless all indebtedness and other obligations of the Company to the Lender have been paid.

For additional information regarding sources of parent company liquidity and regarding the Company's regulatory capital, see the discussions entitled "Management's Discussion and Analysis of Financial Condition and Results of Operations" that are included in each of the Company's reports on Form 10-Q and Form 10-K filed with the Securities and Exchange Commission since January 1, 2006.

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