10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2006

OR

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from              to             

Commission File Number 000-50652

PLACER SIERRA BANCSHARES

(Exact name of registrant as specified in its charter)

CALIFORNIA	94-3411134
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification Number)
525 J Street, Sacramento, California	95814
(Address of principal executive offices)	(Zip Code)

(916) 554-4750

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):    Large accelerated filer   ¨    Accelerated filer   x    Non –accelerated filer   ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).     Yes  ¨    No  x

As of August 2, 2006 there were 22,359,832 shares of the registrant’s common stock outstanding.

TABLE OF CONTENTS

		Page
PART I—FINANCIAL INFORMATION
ITEM 1.	Unaudited Condensed Consolidated Financial Statements	1
	Unaudited Condensed Consolidated Balance Sheet	1
	Unaudited Condensed Consolidated Statement of Income	2
	Unaudited Condensed Consolidated Statement of Changes in Shareholders’ Equity and Comprehensive Income	3
	Unaudited Condensed Consolidated Statement of Cash Flows	4
	Notes to Unaudited Condensed Consolidated Financial Statements	6
ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	16
ITEM 3.	Quantitative and Qualitative Disclosures about Market Risk	37
ITEM 4.	Controls and Procedures	37
PART II—OTHER INFORMATION
ITEM 1.	Legal Proceedings	37
ITEM 1A.	Risk Factors	38
ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	41
ITEM 3.	Defaults Upon Senior Securities	41
ITEM 4.	Submission of Matters to a Vote of Security Holders	41
ITEM 5.	Other Information	42
ITEM 6.	Exhibits	42
SIGNATURES		44

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PART I—FINANCIAL INFORMATION

ITEM 1. Unaudited Condensed Consolidated Financial Statements

PLACER SIERRA BANCSHARES AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEET

(Dollars in thousands)

	June 30, 2006			December 31, 2005
ASSETS
Cash and due from banks	$	227,828		$	55,768
Federal funds sold		80,917			1,500
Cash and cash equivalents		308,745			57,268
Interest bearing deposits with other banks		100			—
Investment securities available-for-sale, at fair value		250,960			228,379
Federal Reserve Bank and Federal Home Loan Bank stock		16,540			14,385
Loans held for sale		4,509			—
Loans and leases held for investment, net of allowance for loan and lease losses of $21,529 at June 30, 2006 and $16,714 at December 31, 2005		1,758,663			1,358,772
Premises and equipment, net		25,955			25,288
Cash surrender value of life insurance		54,639			44,330
Goodwill		216,465			103,260
Other intangible assets, net		23,821			11,589
Accrued interest receivable and other assets, net		35,573			17,191
Total assets	$	2,695,970		$	1,860,462
LIABILITIES AND SHAREHOLDERS’ EQUITY
Deposits:
Non-interest bearing	$	964,358		$	502,387
Interest bearing		1,242,747			1,070,495
Total deposits		2,207,105			1,572,882
Short-term borrowings		12,291			11,369
Accrued interest payable and other liabilities		21,562			13,319
Junior subordinated deferrable interest debentures		63,603			53,611
Total liabilities		2,304,561			1,651,181
Commitments and contingencies
Shareholders’ equity:
Preferred stock, 25,000,000 shares authorized; none issued or outstanding at June 30, 2006 or December 31, 2005		—			—
Common stock, no par value, 100,000,000 shares authorized, 22,359,832 (including 36,135 shares of restricted stock) and 15,042,981 shares issued and outstanding at June 30, 2006 and December 31, 2005, respectively		336,976			160,596
Retained earnings		59,010			50,948
Accumulated other comprehensive loss, net of taxes		(4,577	)		(2,263	)
Total shareholders’ equity		391,409			209,281
Total liabilities and shareholders’ equity	$	2,695,970		$	1,860,462

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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PLACER SIERRA BANCSHARES AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF INCOME

(Dollars in thousands, except per share data)

	Three Months Ended June 30,					Six Months Ended June 30,
	2006		2005			2006		2005
Interest income:
Interest on loans held for sale	$	52	$	—		$	52	$	—
Interest and fees on loans and leases held for investment		27,857		21,718			52,479		42,484
Interest on interest bearing deposits with other banks		—		1			—		2
Interest and dividends on investment securities:
Taxable		2,570		2,580			5,097		4,953
Tax-exempt		240		187			423		350
Interest on federal funds sold		255		228			556		354
Total interest income		30,974		24,714			58,607		48,143
Interest expense:
Interest on deposits		6,324		3,346			11,986		6,097
Interest on short-term borrowings		294		25			396		59
Interest on junior subordinated deferrable interest debentures		1,096		836			2,132		1,596
Total interest expense		7,714		4,207			14,514		7,752
Net interest income		23,260		20,507			44,093		40,391
Provision for the allowance for loan and lease losses		—		—			—		—
Net interest income after provision for the allowance for loan and lease losses		23,260		20,507			44,093		40,391
Non-interest income:
Service charges and fees on deposit accounts		2,017		2,006			3,847		3,731
Referral and other loan-related fees		924		1,018			1,656		1,536
Increase in cash surrender value of life insurance		425		430			831		844
Gain on sale of loans, net		405		—			405		—
Debit card and merchant discount fees		349		306			649		589
Revenues from sales of non-deposit investment products		317		175			513		366
Loan servicing income		39		105			139		238
Loss on sale of investment securities available-for-sale, net		—		(55	)		—		(55	)
Other		139		119			265		318
Total non-interest income		4,615		4,104			8,305		7,567
Non-interest expense:
Salaries and employee benefits		9,290		7,400			17,591		14,998
Occupancy and equipment		2,279		1,941			4,342		3,991
Other		6,142		5,193			11,224		10,469
Total non-interest expense		17,711		14,534			33,157		29,458
Income before provision for income taxes		10,164		10,077			19,241		18,500
Provision for income taxes		4,013		3,976			7,563		7,229
Net income	$	6,151	$	6,101		$	11,678	$	11,271
Earnings per share:
Basic	$	0.37	$	0.41		$	0.73	$	0.76
Diluted	$	0.36	$	0.40		$	0.72	$	0.74

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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PLACER SIERRA BANCSHARES AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN

SHAREHOLDERS’ EQUITY AND COMPREHENSIVE INCOME

(Dollars in thousands)

	Six Months Ended June 30, 2006
	Common Stock			Retained Earnings			Accumulated Other Comprehensive Loss			Total Shareholders’ Equity
	Shares	Amount
Balance, December 31, 2005	15,042,981	$	160,596	$	50,948		$	(2,263	)	$	209,281
Comprehensive income:
Net income					11,678						11,678
Net change in unrealized loss on investment securities available-for-sale, net of tax								(2,314	)		(2,314	)
Total comprehensive income											9,364
Stock options exercised, including tax benefit	51,806		809								809
Restricted stock awarded	36,135		—								—
Restricted stock award compensation expense			178								178
Stock option compensation expense			317								317
Stock issued, net of issuance costs	7,228,910		172,360								172,360
Warrants assumed, net of issuance costs			2,716								2,716
Cash dividends declared ($0.24 per share)					(3,616	)					(3,616	)
Balance, June 30, 2006	22,359,832	$	336,976	$	59,010		$	(4,577	)	$	391,409
	Six Months Ended June 30, 2005
	Common Stock			Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Total Shareholders’ Equity
	Shares	Amount
Balance, December 31, 2004	14,877,056	$	157,834	$	33,323		$	484		$	191,641
Comprehensive income:
Net income					11,271						11,271
Net change in unrealized gain (loss) on investment securities available-for-sale, net of tax								(492	)		(492	)
Total comprehensive income											10,779
Stock options exercised, including tax benefit	50,733		781								781
Cash dividends declared ($0.24 per share)					(3,577	)					(3,577	)
Balance, June 30, 2005	14,927,789	$	158,615	$	41,017		$	(8	)	$	199,624

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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PLACER SIERRA BANCSHARES AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

(Dollars in thousands)

	Six Months Ended June 30,
	2006			2005
Cash flows from operating activities:
Net income	$	11,678		$	11,271
Adjustments to reconcile net income to net cash provided by operations:
Accretion of investment security discounts/premiums, net		(70	)		(73	)
Accretion of fair value adjustment of loans acquired		(40	)		—
Amortization of other intangible assets		1,024			1,298
Amortization of fair value adjustment of trust preferred securities acquired		(7	)		—
Increase (decrease) in deferred loan fees, net		485			(160	)
Depreciation and amortization		1,623			1,570
Dividends received on FHLB and FRB stock		(385	)		(285	)
Loss on sale of investment securities available-for-sale, net		—			55
Loss on sale of other real estate		—			22
Loss on disposal of premises and equipment		9			—
Gain on sale of loans held for sale, net		(405	)		—
Proceeds from sale of loans held for sale		6,643			—
Stock-based compensation		495			—
Deferred tax benefit on stock based compensation		(208	)		—
Deferred income taxes		(638	)		(535	)
Increase in cash surrender value of life insurance		(831	)		(844	)
Net decrease in accrued interest receivable and other assets		7,861			642
Net decrease in accrued interest payable and other liabilities		(669	)		(5,287	)
Net cash provided by operating activities		26,565			7,674
Cash flows from investing activities:
Purchases of investment securities available-for-sale		(493	)		(31,974	)
Proceeds from the sale of investment securities available-for-sale		—			20,281
Proceeds from calls and maturities of investment securities available-for-sale		4,750			27,000
Proceeds from principal repayments of investment securities available-for-sale		—			148
Purchase of FHLB and FRB stock		(269	)		(3,707	)
Deposit on single premium cash surrender value life insurance		(292	)		(292	)
Net increase in loans and leases held for investment		(82,092	)		(32,445	)
Proceeds from recoveries of charged-off loans		954			1,325
Purchases of premises and equipment		(836	)		(1,669	)
Proceeds from sale of other real estate		—			635
Net decrease (increase) in interest bearing deposits with other banks		67			(2	)
Investment in limited partnership		(174	)		—
Net cash received in acquisition		233,114			—
Net cash provided by (used in) investing activities		154,729			(20,700	)

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PLACER SIERRA BANCSHARES AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS-(Continued)

(Dollars in thousands)

	Six Months Ended June 30,
	2006			2005
Cash flows from financing activities:
Net increase in demand, interest bearing and savings deposits		29,610			32,713
Net increase in time deposits		42,250			50,407
Net increase (decrease) in short-term borrowings		922			(2,817	)
Dividends paid		(3,616	)		(4,322	)
Exercise of stock options, including tax benefit		809			781
Deferred tax benefit on stock based compensation		208			—
Net cash provided by financing activities		70,183			76,762
Net increase in cash and cash equivalents		251,477			63,736
Cash and cash equivalents, beginning of period		57,268			39,616
Cash and cash equivalents, end of period	$	308,745		$	103,352
Non-cash financing activities:
Fair value of common stock issued in acquisition, net	$	172,360		$	—
Fair value of warrants assumed in acquisition, net	$	2,716		$	—

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements

5

PLACER SIERRA BANCSHARES AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Three and Six Months Ended June 30, 2006 and 2005

NOTE 1—BASIS OF PRESENTATION

Consolidation and Basis of Presentation

The interim condensed consolidated financial statements include the accounts of Placer Sierra Bancshares (the Company) and the consolidated accounts of its wholly-owned subsidiary, Placer Sierra Bank (PSB). All significant intercompany balances and transactions have been eliminated. The unaudited condensed consolidated financial statements of the Company have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission for interim reporting. Certain information and note disclosures normally included in the annual consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to those rules and regulations, although the Company believes that the disclosures made are adequate to make the information not misleading. The financial statements reflect all adjustments, consisting of only normal recurring adjustments, which are, in the opinion of management, necessary to present a fair statement of the results for the interim periods indicated. The results of operations for the three and six months ended June 30, 2006 are not necessarily indicative of the results of operations to be expected for the remainder of the year. These unaudited condensed consolidated financial statements should be read in conjunction with the financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2005.

For financial reporting purposes, the Company’s investments in Placer Statutory Trust III, Placer Statutory Trust II, Southland Statutory Trust I, First Financial Bancorp Statutory Trust I and Southwest Community Statutory Trust I are accounted for under the equity method and are included in other assets in the unaudited condensed consolidated balance sheet. The junior subordinated deferrable interest debentures issued and guaranteed by the Company and held by the trusts are reflected on the Company’s unaudited condensed consolidated balance sheet.

The preparation of condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates.

Management has determined that since all of the banking products and services offered by the Company are available in each branch of the bank, all branches are located within the state of California and management does not allocate resources based on the performance of different transaction activities, it is appropriate to aggregate the bank branches and report them as a single operating segment. No single customer accounts for more than 10% of the revenues of the Company or PSB.

Material estimates that are particularly susceptible to significant changes in the near-term, among other things, include the determination of the allowance for loan and lease losses, the determination of the carrying values of goodwill and other intangible assets, the valuation of stock-based compensation and the realization of deferred tax assets. In connection with the determination of the allowance for loan and lease losses, management obtains independent appraisals for significant properties, evaluates overall loan portfolio characteristics and delinquencies and monitors economic conditions.

Certain prior period amounts have been reclassified to conform to the current year’s presentation.

NOTE 2 –ACQUISITION

Southwest Community Bancorp and Southwest Community Bank Acquisition

As of the close of business on June 9, 2006, the Company completed the previously announced acquisition of Southwest Community Bancorp (Southwest) and its subsidiary Southwest Community Bank, a community bank with nine branches located in Southern California. We made this acquisition to expand our presence in Southern California. With the completion of this acquisition, Southwest Community Bank merged into Placer Sierra Bank, a wholly owned subsidiary of Placer Sierra Bancshares. In exchange for 100% of the outstanding common stock of Southwest, the shareholders received 7,228,910 shares of Placer Sierra Bancshares common stock valued at $172.4 million, net of issuance costs. Placer Sierra Bancshares assumed all outstanding warrants which are convertible into a total of 153,346 shares of common stock and were valued at $2.7 million, net

6

of issuance costs, on the date of acquisition. The fair value of the common stock issued and warrants assumed was determined based on the average market price of the Company’s common stock over the 5-day period before and after the exchange ratio was known. In addition to the issuance of common stock and assumption of warrants, the Company paid $4,000 in cash for partial shares outstanding after applying the exchange ratio to the outstanding Southwest shares.

The acquisition was accounted for under the purchase method of accounting and accordingly, the operating results of Southwest have been included in the consolidated financial statements from the date of acquisition.

A summary of the preliminary purchase price allocations for the Southwest acquisition follows. These purchase price allocations are based on estimates of fair values and are subject to change as more information becomes available. Accordingly, the final fair value amounts may be materially different from those presented in this report (dollars in thousands).

	Southwest
	(Unaudited)
Assets acquired:
Cash and cash equivalents	$	233,118
Interest bearing deposits with other banks		167
Investment securities		30,819
Loans, net		329,945
Premises and equipment		1,463
Goodwill		113,204
Other intangible assets		13,256
Cash surrender value of life insurance		9,186
Other assets		25,369
Total assets acquired	$	756,527
Liabilities assumed:
Non-interest bearing deposits	$	406,658
Interest bearing deposits		155,705
Junior subordinated deferrable interest debentures		9,999
Other liabilities		9,085
Total liabilities assumed	$	581,447
Fair value of stock issued and warrants assumed, net of issuance costs	$	175,076
Cash paid for partial shares after applying exchange ratio to outstanding Southwest shares		4
Total consideration paid	$	175,080

The following table presents the unaudited pro forma results of operations for the three and six months ended June 30, 2006 and 2005 as if the Southwest acquisition described above had been completed at the beginning of the respective periods. The unaudited pro forma results include: (1) the historical accounts of the Company and Southwest; and (2) pro forma adjustments, as may be required, including the amortization of intangibles with definite lives and the amortization or accretion of any premiums or discounts arising from fair value adjustments for assets acquired and liabilities assumed. The unaudited pro forma information is intended for informational purposes only and is not necessarily indicative of our operating results that would have occurred had this acquisition been completed at the beginning of 2005. No assumptions have been applied to the pro forma results of operations regarding possible revenue enhancements, operating efficiencies or asset dispositions and merger expenses of $2.4 million incurred by Southwest have been excluded (dollars in thousands, except per share data).

	For the Three Months Ended June 30,				For the Six Months Ended June 30,
	2006		2005		2006		2005
Revenues (net interest income plus noninterest income)	$	34,188	$	32,648	$	68,004	$	63,067
Net income	$	7,937	$	8,207	$	16,052	$	15,055
Earnings per share:
Basic	$	0.35	$	0.37	$	0.72	$	0.67
Diluted	$	0.35	$	0.37	$	0.71	$	0.67

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NOTE 3 – EARNINGS PER SHARE

Basic earnings per share (EPS), which excludes dilution, is computed by dividing income available to common shareholders by the weighted average number of common shares outstanding for the period. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock, such as stock options, restricted stock and warrants, result in the issuance of common stock which share in the earnings of the Company. The treasury stock method has been applied to determine the dilutive effect of stock options, restricted stock and warrants in computing diluted EPS.

A reconciliation of the numerators and denominators of the basic and diluted earnings per share computation is as follows (dollars in thousands, except per share data):

	For the Three Months Ended June 30,				For the Six Months Ended June 30,
	2006		2005		2006		2005
Basic
Net income	$	6,151	$	6,101	$	11,678	$	11,271
Weighted average shares outstanding		16,745,134		14,914,983		15,900,885		14,901,931
Earnings per share - basic	$	0.37	$	0.41	$	0.73	$	0.76
Diluted
Net income	$	6,151	$	6,101	$	11,678	$	11,271
Weighted average shares outstanding		17,012,998		15,209,930		16,170,269		15,206,857
Earnings per share - diluted	$	0.36	$	0.40	$	0.72	$	0.74

Nonvested restricted stock is not included in the computation of basic earnings per share until vested. For the three and six months ended June 30, 2006, 36,135 shares of nonvested restricted stock are not included in the computation of basic earnings per share.

For the three and six months ended June 30, 2006, 237,625 and 205,250 shares of common stock issuable under stock option agreements, respectively, were not included in the computation of diluted earnings per share because their effect would be anti-dilutive. In addition, 7,000 and 36,135 shares of common stock issuable under restricted stock agreements, respectively, were not included in the computation of diluted earnings per share for the three and six months ended June 30, 2006 because their effect would be anti-dilutive. For the three and six months ended June 30, 2005, 169,500 shares of common stock issuable under stock option agreements were not included in the computation of diluted earnings per share because their effect would be anti-dilutive.

NOTE 4 – STOCK-BASED COMPENSATION

Stock Option Plans

The Company currently has two stock option plans, the Placer Sierra Bancshares 2002 Amended and Restated Stock Option Plan and the Southland Capital Co. 2002 Stock Option Plan. Options in the Southland Capital Co. plan have been converted into options to purchase shares of the Company and no additional options will be granted under this plan. The Placer Sierra Bancshares 2002 Amended and Restated Stock Option Plan permits the grant of nonstatutory stock options, incentive stock options, stock appreciation rights and restricted stock awards. The Company has granted both nonstatutory stock options and restricted stock awards to date. At June 30, 2006, grants outstanding combined with shares available for future grants totaled 2,045,794 shares under these plans. The shares available for grant may be granted to anyone eligible to participate in the plan. The plan requires that the price may not be less than the fair market value of the Company’s common stock at the date of grant.

8

The options under the plans expire on dates determined by a committee of the Company’s Board of Directors, but not later than ten years from the date of grant. The vesting period is generally four or five years; however, the vesting period can be modified at the discretion of a committee of the Company’s Board of Directors. Outstanding options under the plans are exercisable until their expiration. In the event of a change in control, under certain conditions, all options, stock appreciation rights and restricted stock awards become immediately vested. In addition, participants holding restricted stock awards may be granted the right to exercise full voting rights with respect to those shares and may be credited with dividends paid with respect to the underlying shares, if a committee of the Board of Directors so determines. The Company issues new shares of common stock upon exercise of stock options and issuance of stock appreciation rights paid in stock and issuance of restricted stock.

Adoption of SFAS 123 (R)

Prior to January 1, 2006, the Company accounted for those plans under the recognition and measurement provisions of Accounting Principals Board Opinion No. 25 (APB 25), Accounting for Stock Issued to Employees, and related interpretations, as permitted by Financial Accounting Standards Board Statement No. 123 (SFAS 123), Accounting for Stock-Based Compensation and FASB Statement No. 148, Accounting for Stock-Based Compensation - Transition and Disclosure. For the three and six months ended June 30, 2005 no stock-based employee compensation cost was recognized in the unaudited condensed consolidated statement of income for options granted as all options granted under those plans had an exercise price equal to the market value of the underlying common stock on the date of grant. Effective January 1, 2006, the Company adopted the fair value recognition provisions of FASB Statement No. 123 (R), Share-Based Payment (SFAS 123 (R)), using the modified prospective transition method. Under that transition method, compensation cost recognized in fiscal year 2006 includes: (a) compensation cost for all share-based payments vesting during 2006 that were granted prior to, but not yet vested as of January 1, 2006, based on the grant-date fair value estimated in accordance with the original provisions of SFAS 123, and (b) compensation cost for all share-based payments vesting during 2006 that were granted subsequent to January 1, 2006, based on the grant-date fair value estimated in accordance with the provisions of SFAS 123(R). Results for prior periods have not been restated.

As a result of adopting SFAS 123(R) on January 1, 2006, the Company’s income before provision for income taxes and net income for the six months ended June 30, 2006 was $317,000 and $184,000 lower, respectively, than if it had continued to account for share-based compensation under APB 25. The Company’s income before provision for income taxes and net income for the three months ended June 30, 2006 was $177,000 and $103,000 lower, respectively, than if it had continued to account for share-based compensation under APB 25. Basic earnings per share for the three months ended June 30, 2006 had the Company not adopted SFAS 123(R) would have remained the same and for the six months ended June 30, 2006 would have been $0.02 higher than if the Company had continued to account for share-based compensation under APB 25. Diluted earnings per share for the three and six months ended June 30, 2006 had the Company not adopted SFAS 123(R) would have been $0.01 higher than if the Company had continued to account for share-based compensation under APB 25.

SFAS 123(R) requires the cash flows resulting from the realized tax benefit related to the excess of the deductible amount over the compensation cost recognized for stock-based compensation (excess tax benefits) to be classified as a cash flow from financing in the unaudited condensed consolidated statement of cash flows. The $208,000 excess tax benefits classified as a financing cash inflow for the six months ended June 30, 2006 would have been classified as an operating cash inflow if the Company had not adopted SFAS 123(R).

Determining Fair Value

Valuation and Amortization Method - The Company estimates the fair value of stock options granted using the Black-Scholes option-pricing formula. This fair value is then amortized on a straight-line basis over the requisite service periods of the awards, which is generally the vesting period.

Expected Term – The Company’s expected term represents the period that the Company’s stock-based awards are expected to be outstanding and was determined based on the “simplified” method as outlined in Staff Accounting Bulletin (SAB) No. 107, when using the Black-Scholes option-pricing formula to determine the fair value of options granted, since the Company’s common stock has been publicly traded for less than two years. Under this method, the expected term is determined by adding the vesting term to the original contractual term and dividing by two.

Expected Volatility - Since the Company’s common stock has been publicly traded for a shorter period than the expected term for the options, the Company uses the trading history of the common stock of an identified peer group in determining an estimated volatility factor when using the Black-Scholes option-pricing formula to determine the fair value of options granted.

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Expected Dividend – The Company estimates the expected dividend based on historical dividends declared per year, giving consideration for any anticipated changes and the estimated stock price over the expected term based on historical experience when using the Black-Scholes option-pricing formula to determine the fair value of options granted.

Risk-Free Interest Rate - The Company bases the risk-free interest rate used in the Black-Scholes option pricing formula on the implied yield currently available on U.S. Treasury zero-coupon issues with the same or substantially equivalent remaining term as the expected term of the option.

Estimated Forfeitures - When estimating forfeitures, the Company considers voluntary and involuntary termination behavior as well as analysis of actual option forfeitures.

Pro Forma

The following table illustrates the effect on net income and earnings per share for the three and six months ended June 30, 2005 if the Company had applied the fair value recognition provisions of SFAS 123 to options granted under the Company’s stock option plans. For purposes of this pro forma disclosure, the value of the options is estimated using a Black-Scholes option-pricing formula and amortized to expense over the options’ vesting periods (dollars in thousands, except per share data):

	For the Three Months Ended June 30, 2005			For the Six Months Ended June 30, 2005
Net income, as reported	$	6,101		$	11,271
Add: Stock-based compensation expense included in reported net income, net of related tax effect		—			—
Deduct: Total stock-based compensation expense determined under the fair value based method for all awards, net of related tax effect		(69	)		(123	)
Pro forma net income	$	6,032		$	11,148
Basic earnings per share – as reported	$	0.41		$	0.76
Diluted earnings per share – as reported	$	0.40		$	0.74
Basic earnings per share – pro forma	$	0.40		$	0.75
Diluted earnings per share – pro forma	$	0.40		$	0.73

The fair value of the options granted during the six months ended June 30, 2006 and 2005 are noted below and were based on the Black-Scholes option-pricing formula with the following assumptions:

	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2006			2005			2006			2005
Dividend yield		1.50	%		1.50	%		1.50	%		1.50	%
Expected volatility		30.00	%		25.00	%		28.72	%		25.00	%
Risk-free interest rate		4.98	%		3.83	%		4.89	%		3.88	%
Expected option life		4.20 years			5.00 years			4.28 years			5.00 years
Weighted average fair value of options granted during the period	$	6.62		$	6.50		$	6.67		$	6.33

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Stock Option Compensation Expense

The compensation cost that has been charged against income for stock options was $177,000 and $317,000 for the three and six months ended June 30, 2006, respectively. The total income tax benefit recognized in the income statement for stock options was $74,000 and $133,000 for the three and six months ended June 30, 2006, respectively.

Management estimated that forfeitures would not be significant and is recognizing compensation costs for all equity awards.

At June 30, 2006, the total compensation cost related to nonvested stock option awards granted to employees under the Company’s stock option plans but not yet recognized was $2.9 million. Stock option compensation expense is recognized on a straight-line basis over the vesting period of the option. This cost is expected to be recognized over a weighted average remaining period of 1.8 years and will be adjusted for subsequent changes in estimated forfeitures.

The total fair value of shares vested during the three months ended June 30, 2006 and 2005 was $101,000 and $54,000, respectively. The total fair value of shares vested during the six months ended June 30, 2006 and 2005 was $391,000 and $58,000, respectively.

Stock Option Activity

A summary of the option activity in the Placer Sierra Bancshares 2002 Amended and Restated Stock Option Plan is as follows:

	For the Six Months Ended June 30,
	2006				2005
	Shares		Weighted Average Exercise Price		Shares		Weighted Average Exercise Price
Options outstanding, beginning of period	705,472		$	16.99	591,031		$	12.40
Options granted	238,500		$	24.51	216,500		$	25.40
Options exercised	(20,092	)	$	9.00	(18,248	)	$	9.00
Options forfeited	(3,250	)	$	22.67	(20,243	)	$	14.85
Options outstanding, end of period	920,630		$	19.09	769,040		$	16.08
Options exercisable, end of period	381,024		$	13.02	337,987		$	9.70

The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying awards and the quoted price of the Company’s common stock for options that were in-the-money at June 30, 2006. The intrinsic value of options outstanding and exercisable relating to the above stock option plan was $4.9 million and $4.1 million, respectively, as of June 30, 2006. The weighted average remaining contractual term of options outstanding and exercisable relating to the above stock option plan was 7.0 and 6.7 years, respectively. During the six months ended June 30, 2006 and 2005, the aggregate intrinsic value of options exercised relating to the above stock option plan was $316,000 and $299,000, respectively.

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A summary of the activity in the Southland Capital Co. 2002 Stock Option Plan is as follows:

	For the Six Months Ended June 30,
	2006				2005
	Shares		Weighted Average Exercise Price		Shares		Weighted Average Exercise Price
Options outstanding, beginning of period	243,261		$	7.82	308,976		$	7.82
Options granted	—		$	—	—		$	—
Options exercised	(31,714	)	$	7.82	(25,900	)	$	7.82
Options forfeited	(3,595	)	$	7.82	(4,395	)	$	7.82
Options outstanding, end of period	207,952		$	7.82	278,681		$	7.82
Options exercisable, end of period	193,333		$	7.82	234,348		$	7.82

The intrinsic value of options outstanding and exercisable relating to the above stock option plan was $3.2 million and $3.0 million, respectively, as of June 30, 2006. The weighted average remaining contractual term for both options outstanding and exercisable relating to the above stock option plan was 6.2 years. During the six months ended June 30, 2006 and 2005, the aggregate intrinsic value of options exercised relating to the above stock option plan was $592,000 and $457,000, respectively.

In addition to the above plans, during 2002 stock options for 47,897 shares were granted to past directors and a former executive officer of PSB. No additional options have subsequently been granted outside the above plans. During the six months ended June 30, 2005, 6,585 options were exercised with an intrinsic value of $110,000. No options were canceled. As of June 30, 2005, a total of 12,336 options were outstanding and exercisable related to these grants. All of these options had either been exercised or canceled as of December 31, 2005.

Cash received from stock option exercises under all stock option plans for the six months ended June 30, 2006 and 2005 was $427,000 and $424,000, respectively. The actual tax benefit realized from stock option exercises under all stock option plans totaled $382,000 and $357,000 for the six months ended June 30, 2006 and 2005, respectively.

Restricted Common Stock Awards

On March 14, 2006, the Company granted 29,135 shares of restricted common stock to selected executive officers, which had a fair market value of $27.78 per share on the date of grant. These restricted common stock awards vest in two equal installments, on the first and second anniversaries of the grant date.

On May 15, 2006, the Company granted 7,000 shares of restricted stock to the directors, which had a fair market value of $24.43 per share on the date of grant. These restricted common stock awards vest on December 31, 2006.

The participants granted these restricted common stock awards were granted the right to dividend payments with respect to the underlying shares but were not granted voting rights on nonvested shares. The Company retains voting rights on the nonvested restricted stock. As of June 30, 2006, 36,135 shares of restricted stock are outstanding, nonvested and expected to vest.

The compensation cost that has been charged against income for restricted stock awards was $144,000 and $178,000 for the three and six months ended June 30, 2006, respectively. The total income tax benefit recognized in the income statement for restricted stock awards was $61,000 and $75,000 for the three and six months ended June 30, 2006, respectively.

At June 30, 2006, the total compensation cost related to nonvested restricted common stock but not yet recognized was $803,000. Restricted common stock compensation expense is recognized on a straight-line basis over the vesting period. This cost is expected to be recognized over a weighted average remaining period of approximately 0.8 years and will be adjusted for subsequent changes to estimated forfeitures. The intrinsic value of restricted common stock outstanding was $838,000 as of June 30, 2006.

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NOTE 5 - COMMITMENTS AND CONTINGENCIES

Legal Proceedings

In the ordinary course of our business, the Company is party to various legal actions, which the Company believes are incidental to the operation of its business. Although the ultimate outcome and amount of liability, if any, with respect to these legal actions to which the Company is currently a party cannot presently be ascertained with certainty, in the opinion of management, based upon information currently available to management, any resulting liability is not likely to have a material adverse effect on the Company’s consolidated financial position, results of operations or cash flows. This statement represents a forward-looking statement under the Private Securities Litigation Reform Act of 1995. Actual results could differ materially from management’s opinion based on a variety of factors, including the uncertainties involved in the proof of legal and factual matters in legal proceedings.

Cerritos Valley Dissenters

The Company was served with an appeal brief in February 2006, which appealed the judgment and satisfaction of judgment filed and entered by the Superior Court of the State of California for the County of Orange in a litigation matter, Bank of Orange County v. Azar. et al. The litigation matter involves Bank of Orange County, a division of PSB. Bank of Orange County v. Azar, et al, was originally filed on November 18, 2003. On June 23, 2005, Bank of Orange County received a notice of entry of judgment and satisfaction of judgment with respect to this matter. The litigation relates to a number of Cerritos Valley Bank shareholders who exercised their statutory right pursuant to Chapter 13 of the California Corporations Code to dissent from the 2002 merger of Cerritos Valley Bank with and into Bank of Orange County. Rather than accept the merger consideration of $9.79 per share of common stock paid to Cerritos Valley Bank shareholders who did not dissent from the merger, the dissenting shareholders claimed that the fair market value of their shares of common stock was $25.76 per share. Prior to consummation of the merger, Bank of Orange County deposited the sum of approximately $3.8 million with the exchange agent for the merger, representing $9.79 per share multiplied by the number of shares held by dissenting shareholders.

In January 2004, Bank of Orange County and the dissenting shareholders entered into a settlement agreement, which provided that the fair market value of the shares would be determined by an appraisal process. Under the terms of the agreement, each party’s appraiser valued the shares. After conducting the appraisal, each appraiser reached a different dollar amount. Because the difference between the two amounts exceeded a specified range, the settlement agreement provided that a third appraiser be selected by the two other appraisers, to determine the fair market value of the Cerritos Valley Bank common stock. The third appraiser determined that the fair market value of the shares held by the dissenting shareholders was $5.95. Based on the $5.95 valuation, Bank of Orange County paid the dissenting shareholders approximately $2.2 million. On June 20, 2005, the Superior Court of the State of California in Orange County entered judgment stating that the amount the Bank paid to the dissenting shareholders represented full satisfaction of both the settlement agreement and all amounts owed by Bank of Orange County pursuant to Chapter 13 of the California Corporations Code.

The appeal brief was filed in February 2006 by dissenting shareholders that hold a majority of the Cerritos Valley Bank common stock shares involved in the litigation. Shareholders holding the remaining Cerritos Valley Bank common stock shares involved in the litigation are not participating in the appeal. Bank of Orange County intends to continue to vigorously defend this action and filed a response to the appeal brief in June 2006.

ALC Bankruptcy Case

On October 27, 2005, the bankruptcy trustee of ALC Building Corporation filed an adversary action in the United States Bankruptcy Court, Central District of California against Bank of Orange County, a division of PSB in a matter entitled Peter C. Anderson, Trustee of ALC v. Bank of Orange County. ALC was a former vendor of Bank of Orange County that was retained to provide construction funding services. Creditors of ALC filed an involuntary Chapter 7 bankruptcy petition against ALC on March 5, 2004. The bankruptcy trustee sought damages in the amount of $577,853.30 from Bank of Orange County for all funds Bank of Orange County received from ALC in the 90-day period prior to the date the involuntary bankruptcy petition was filed against ALC, plus interest and costs. Bank of Orange County vigorously defended the action. However, the bankruptcy trustee filed a motion for summary judgment, which was granted on June 12, 2006 and judgment was entered against Bank of Orange County in the amount of $577,853.30, plus interest and costs. Bank of Orange County tendered a check in the amount of $613,372.87 at the beginning of August 2006 to satisfy the judgment. Bank of Orange County intends to file a proof of claim as an unsecured creditor in the Chapter 7 bankruptcy and estimates its net loss to be approximately $500,000.

Financial Instruments with Off-Balance-Sheet Risk

PSB is party to financial instruments with off-balance-sheet risk in the normal course of business in order to meet the financing needs of its customers. These financial instruments consist of commitments to extend credit and standby letters of credit. These instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the condensed consolidated balance sheet.

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PSB’s exposure to credit loss in the event of nonperformance by the other party for commitments to extend credit and letters of credit is represented by the contractual amount of those instruments. PSB uses the same credit policies in making commitments and letters of credit as it does for loans and leases included in the condensed consolidated balance sheet.

The following financial instruments represent off-balance-sheet credit risk (dollars in thousands):

	June 30, 2006		December 31, 2005
Commitments to extend credit	$	589,886	$	479,549
Standby letters of credit	$	16,048	$	9,333

        Commitments to extend credit consist primarily of unfunded home equity lines of credit, single-family residential and commercial real estate construction loans, and commercial revolving lines of credit. Home equity lines of credit are secured by deeds of trust, are generally limited by our loan policy to no more than $500,000 and are generally limited to a combined loan to value of 80%, although borrowers with the highest credit scores can borrow up to 85%. Construction loans are established under standard underwriting guidelines and policies and are secured by deeds of trust, with disbursements made over the course of construction. Commercial revolving lines of credit have a high degree of industry diversification. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitments are expected to expire without ever being fully drawn upon, the total commitment amounts do not necessarily represent future cash requirements.

Standby letters of credit are conditional commitments issued by PSB to guarantee the performance of a customer to a third party. The fair value of the liability related to these standby letters of credit, which represents the fees received for issuing the guarantees, was not considered to be material for recognition as a liability as of June 30, 2006 or December 31, 2005. The Company recognizes these fees as revenue over the term of the commitment, or when the commitment is used. Standby letters of credit are generally issued for one year or less and secured by certificates of deposit or are issued as sub-features under existing revolving credit commitments.

NOTE 6 - COMPREHENSIVE INCOME

Comprehensive income is a more inclusive financial reporting methodology that includes disclosure of other comprehensive income (loss) that historically has not been recognized in the calculation of net income. Unrealized gains and losses on the Company’s available-for-sale investment securities are included in other comprehensive income (loss). Total comprehensive income and the components of accumulated other comprehensive income (loss) for the six months ended June 30, 2006 are presented net of taxes in the unaudited condensed consolidated statement of changes in shareholders’ equity and comprehensive income. Total comprehensive income for the six months ended June 30, 2006 and 2005 was $9.4 million and $10.8 million, respectively.

The components of other comprehensive income (loss) are as follows (dollars in thousands):

	Before Tax			Tax Benefit			After Tax
For the Three Months Ended June 30, 2006
Other comprehensive loss:
Unrealized holding losses	$	(3,357	)	$	1,410		$	(1,947	)
Less: reclassification adjustment for net gains included in net income		—			—			—
Total other comprehensive loss	$	(3,357	)	$	1,410		$	(1,947	)
For the Three Months Ended June 30, 2005
Other comprehensive income:
Unrealized holding gains	$	3,050		$	(1,258	)	$	1,792
Less: reclassification adjustment for net losses included in net income		(55	)		23			(32	)
Total other comprehensive income	$	3,105		$	(1,281	)	$	1,824
For the Six Months Ended June 30, 2006
Other comprehensive loss:
Unrealized holding losses	$	(4,051	)	$	1,737		$	(2,314	)
Less: reclassification adjustment for net gains included in net income		—			—			—
Total other comprehensive loss	$	(4,051	)	$	1,737		$	(2,314	)
For the Six Months Ended June 30, 2005
Other comprehensive loss:
Unrealized holding losses	$	(886	)	$	362		$	(524	)
Less: reclassification adjustment for net losses included in net income		(55	)		23			(32	)
Total other comprehensive loss	$	(831	)	$	339		$	(492	)

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NOTE 7 - RECENT ACCOUNTING DEVELOPMENTS

Accounting for Servicing of Financial Assets

In March 2006, the Financial Accounting Standards Board (FASB) issued Statement No. 156 (SFAS 156), Accounting for Servicing of Financial Assets – An Amendment of FASB Statement No. 140. SFAS 156 requires that all separately recognized servicing assets and servicing liabilities be initially measured at fair value, if practicable, and permits, but does not require, the subsequent

measurement of servicing assets and servicing liabilities at fair value. Under SFAS 156, an entity can elect subsequent fair value measurement of its servicing assets and servicing liabilities by class. An entity should apply the requirements for recognition and initial measurement of servicing assets and servicing liabilities prospectively to all transactions after the effective date. SFAS 156 permits an entity to reclassify certain available-for-sale securities to trading securities provided that they are identified in some manner as offsetting the entity’s exposure to changes in fair value of servicing assets or servicing liabilities subsequently measured at fair value. The provisions of SFAS 156 are effective for an entity as of the beginning of its first fiscal year that begins after September 15, 2006. Management has not completed its evaluation of the impact that SFAS 156 will have.

Accounting for Uncertainty in Income Taxes

In July 2006, the FASB issued Financial Accounting Standards Interpretation No. 48 (FIN 48), Accounting for Uncertainty in Income Taxes. FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements in accordance with FASB Statement No. 109, Accounting for Income Taxes. FIN 48 prescribes a recognition threshold and measurement attributable for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. FIN 48 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosures and transitions. FIN 48 is effective for fiscal years beginning after December 15, 2006. Management has not completed its evaluation of the impact that FIN 48 will have.

NOTE 8 - SUBSEQUENT EVENTS

On July 27, 2006, the Company declared a common stock cash dividend of $0.15 per share for the third quarter of 2006. The dividend will be payable on or about August 28, 2006 to its shareholders of record on August 10, 2006.

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ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Discussions of certain matters contained in this Quarterly Report on Form 10-Q may constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities and Exchange Act of 1934, as amended (the Exchange Act), and as such, may involve risks and uncertainties. These forward-looking statements relate to, among other things, expectations of the business environment in which Placer Sierra Bancshares and its subsidiaries operates, projections of future performance, perceived opportunities in the market and statements regarding our mission and vision. Our actual results, performance and achievements may differ materially from the results, performance and achievements expressed or implied in such forward-looking statements. Factors that might cause such a difference include, but are not limited to: cost savings from acquisitions cannot be fully realized within the expected time frame; the integration of acquired businesses, including Southwest Community Bancorp, takes longer or is less successful than expected; revenues are lower than expected; potential or actual litigation occurs; and other factors discussed under Item 1A to our Annual Report on Form 10-K for the year ended December 31, 2005, and under Part II, Item 1A in this quarterly report on Form 10-Q and our other current and periodic filings with the Securities and Exchange Commission. We do not undertake and specifically disclaim any obligation to update such forward-looking statements to reflect occurrences or unanticipated events or circumstances after the date of such statements.

Overview

Who We Are

We are the bank holding company for Placer Sierra Bank (the bank), a California state-chartered commercial bank. Our bank conducts a portion of its banking business through the following divisions: Sacramento Commercial Bank, Bank of Lodi, Bank of Orange County and Southwest Community Bank. The bank has one active subsidiary, Central Square Company, Inc., which derives its commission income from a third-party provider of non-deposit investment products.

We own 100% of Placer Sierra Bank and 100% of the common stock of Placer Statutory Trust II, Placer Statutory Trust III, Southland Statutory Trust I, First Financial Bancorp Trust I and Southwest Community Statutory Trust I. The trusts were formed for the exclusive purpose of issuing and selling trust preferred securities. For financial reporting purposes our investments in the trusts are not consolidated.

Southwest Community Bancorp and Southwest Community Bank Acquisition

As of the close of business on June 9, 2006, the Company completed the previously announced acquisition of Southwest Community Bancorp (Southwest) and its subsidiary Southwest Community Bank, a community bank with nine branches located in Southern California. With the completion of this acquisition, Southwest Community Bank merged into Placer Sierra Bank, a wholly-owned subsidiary of Placer Sierra Bancshares. The fair value of assets acquired, including goodwill, totaled $756.6 million. Southwest Community Bancorp shareholders received 7,228,910 shares of Placer Sierra Bancshares common stock valued at $172.4 million, net of issuance costs. Placer Sierra Bancshares assumed all outstanding warrants which are convertible into a total of 153,346 shares of common stock valued at $2.7 million, net of issuance costs, on the date of acquisition.

How We Generate Revenues

Our bank derives its income primarily from interest on real estate-related loans, commercial loans and leases, consumer loans and interest on investment securities. To a lesser extent, we earn income from fees from the sale and referral of loans, fees received in connection with servicing loans and service charges on deposit accounts. We also earn income through a subsidiary, Central Square Company, Inc., which sells non-deposit investment products through a third-party provider. The bank’s major expenses are salaries and benefits, the interest it pays on deposits and borrowings and general operating expenses.

Information About Regulation

We conduct our business through the bank. The bank is subject to the laws of the state of California and federal regulations governing the financial services industry. We are registered as a bank holding company under the Bank Holding Company Act of 1956, as amended. Bank holding companies are subject to regulation and supervision by the Board of Governors of the Federal Reserve System.

Our Principal Products and Services and Locations of Operations

We provide banking and other financial services throughout our targeted Northern, Central and Southern California markets to consumers and to small- and medium-sized businesses, including the owners and employees of those businesses. We offer a broad range of banking products and services including many types of commercial and personal checking and savings accounts and other consumer banking products, including electronic banking products. We also originate a variety of loans including secured and unsecured commercial and consumer loans, commercial and residential real estate mortgage loans, SBA loans and construction loans, both commercial and residential.

How Economic Factors Impact Us

We are subject to competition from other financial institutions and our operating results, like those of other financial institutions operating in California, are significantly influenced by economic conditions in California, including the strength of the real estate market. In addition, both the fiscal and regulatory policies of the federal and state government and regulatory authorities that govern financial institutions and market interest rates impact our financial condition, results of operations and cash flows.

Our earnings and growth are subject to the influence of certain economic conditions, including inflation, recession and unemployment. Our earnings are affected not only by general economic conditions but also by the monetary and fiscal policies of the United States and federal agencies, particularly the Federal Reserve. The Federal Reserve can and does implement national monetary policy, such as seeking to curb inflation and combat recession, by its open market operations in United States Government securities and by its control of the discount rates applicable to borrowings by banks from the Federal Reserve. The actions of the Federal Reserve in these areas influence the growth of bank loans and leases, investments and deposits and affect the interest rates charged on loans and leases and paid on deposits. The Federal Reserve’s policies have had a significant effect on the operating results of commercial banks and are expected to continue to do so in the future. The nature and timing of any future changes in monetary policies are not predictable.

Our Opportunities, Challenges and Risks

Our strategy is to be a premier banking company in California for the long-term benefit of our shareholders, customers and employees. We believe we have opportunities for internal loan and deposit growth, because our primary operations are located in some of the strongest growth markets in Northern, Central and Southern California and we plan to position our company to take full advantage of these markets.

Despite our position of being in some of the best growth markets in California, we face the risk of being particularly sensitive to changes in the California economy. In particular, real estate values could be affected by earthquakes, fires and other natural disasters

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in California. If the economy weakens, it could cause loan demand to decline and also affect our core deposit growth. Geographic distance between our operations may also hinder our consistency and efficiency.

Critical Accounting Policies

Our accounting policies are integral to understanding the financial results reported. Our most complex accounting policies require management’s judgment to ascertain the valuation of assets, liabilities, commitments and contingencies. We have established detailed policies and control procedures that are intended to ensure valuation methods are appropriate and consistently applied from period to period. In addition, the policies and procedures are intended to ensure that the process for changing methodologies occurs in an appropriate manner. We have identified our policy for the allowance for loan and lease losses, our estimate of the fair value of financial instruments, our policy for deferred income taxes, our valuation of stock-based compensation and our valuation of goodwill as critical accounting policies. Please see the section entitled “Allowance for Loan and Lease Losses” for a discussion related to this policy. Our significant accounting policies and practices are described in further detail in Note 2 to our Consolidated Financial Statements filed with our Annual Report on Form 10-K for the year ended December 31, 2005.

Results of Operations

Key Performance Indicators

The following sections contain tables and data setting forth certain statistical information about us for the three and six months ended June 30, 2006 and 2005. This discussion should be read in conjunction with our unaudited condensed consolidated financial statements and notes thereto for the three and six months ended June 30, 2006 and 2005 included herein, and our audited consolidated financial statements and notes thereto for the year ended December 31, 2005 and the related discussion therein, filed with our Annual Report on Form 10-K.

As of June 30, 2006, we had total assets of $2.696 billion, total loans and leases held for investment, net of deferred fees and costs, of $1.780 billion, total deposits of $2.207 billion and shareholders’ equity of $391.4 million. For the six months ended June 30, 2006 average earning assets were $1.988 billion, average loans and leases held for investment, net of deferred fees and costs, were $1.446 billion, and average deposits were $1.655 billion. As of June 30, 2006, 22,359,832 shares of our common stock were outstanding, (including 36,135 shares of nonvested restricted stock) having a book value per share of $17.51.

For the three months ended June 30, 2006, we recorded net income of $6.2 million, or $0.36 per share on a diluted basis, and for the three months ended June 30, 2005, we recorded net income of $6.1 million, or $0.40 per share on a diluted basis.

For the six months ended June 30, 2006, we recorded net income of $11.7 million, or $0.72 per share on a diluted basis, and for the six months ended June 30, 2005, we recorded net income of $11.3 million, or $0.74 per share on a diluted basis.

The following table presents our key performance indicators on a GAAP basis for the three and six months ended June 30, 2006 and 2005 and the basis for calculating these indicators:

	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2006			2005			2006			2005
	(Dollars in thousands, except per share data)
Net interest income	$	23,260		$	20,507		$	44,093		$	40,391
Non-interest income		4,615			4,104			8,305			7,567
		27,875			24,611			52,398			47,958
Provision for the allowance for loan and lease losses		—			—			—			—
Non-interest expense		17,711			14,534			33,157			29,458
Provision for income taxes		4,013			3,976			7,563			7,229
Net income	$	6,151		$	6,101		$	11,678		$	11,271
Average assets	$	2,078,085		$	1,840,719		$	1,987,814		$	1,826,041
Average shareholders’ equity	$	255,595		$	195,303		$	234,363		$	193,581
Share Information:
Weighted average shares outstanding – basic		16,745,134			14,914,983			15,900,885			14,901,431
Weighted average shares outstanding – diluted		17,012,998			15,209,930			16,170,269			15,206,857
Profitability Measures:
GAAP earnings per share – basic	$	0.37		$	0.41		$	0.73		$	0.76
GAAP earnings per share – diluted	$	0.36		$	0.40		$	0.72		$	0.74
GAAP return on average assets		1.19	%		1.33	%		1.18	%		1.24	%
GAAP return on average shareholders’ equity		9.65	%		12.53	%		10.05	%		11.74	%
GAAP efficiency ratio		63.54	%		59.05	%		63.28	%		61.42	%

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Stock-Based Compensation

On January 1, 2006, the Company began expensing stock options in accordance with Statement of Financial Accounting Standards No. 123 (Revised 2004), Share-Based Payment. Prior to January 1, 2006, no compensation expense was recognized for stock options issued. As a result of this accounting change, the Company is utilizing other stock-based compensation arrangements, such as restricted stock, in addition to stock options as part of the overall compensation strategy for executive management and directors.

At June 30, 2006, the total compensation cost related to nonvested stock-based awards granted to employees under the Company’s stock option plans but not yet recognized was $2.9 million. This cost will be amortized on a straight-line basis over a weighted average period of approximately 1.8 years and will be adjusted for subsequent changes in estimated forfeitures.

The Company believes that the presentation of its operating earnings excluding the effects of stock-based compensation expense is important to gaining an understanding of the financial performance of its core banking operations. Accordingly, the following table shows operating earnings, exclusive of the impact of stock-based compensation expense, which is a non-GAAP basis presentation of the Company’s key performance indicators for the three and six months ended June 30, 2006 and comparative amounts as reported for the three and six months ended June 30, 2005:

	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2006			2005			2006			2005
	(Dollars in thousands, except per share data)
Net income	$	6,151		$	6,101		$	11,678		$	11,271
Restricted stock compensation expense, net of tax		83			—			103			—
Stock option compensation expense, net of tax		103			—			184			—
Operating earnings	$	6,337		$	6,101		$	11,965		$	11,271
Profitability Measures:
Operating earnings per share – basic	$	0.38		$	0.41		$	0.75		$	0.76
Operating earnings per share – diluted	$	0.37		$	0.40		$	0.74		$	0.74
Operating return on average assets		1.22	%		1.33	%		1.21	%		1.24	%
Operating return on average shareholders’ equity		9.94	%		12.53	%		10.30	%		11.74	%
Operating efficiency ratio		62.39	%		59.05	%		62.33	%		61.42	%

Three Month Analysis

Net income for the three months ended June 30, 2006 was $6.2 million, or $0.36 per diluted share. Net income for the three months ended June 30, 2005 was $6.1 million, or $0.40 per diluted share. Return on average assets for the three months ended June 30, 2006 was 1.19%, compared to 1.33% for the same period of 2005. Return on average equity for the three months ended June 30, 2006 was 9.65%, compared to 12.53% for the same period of 2005. Net income for the three months ended June 30, 2006 reflects two losses totaling $622,000 ($360,000 net of taxes), or $0.02 per diluted share, consisting of a $500,000 loss related to a preference claim in bankruptcy court relating to a vendor of Bank of Orange County and a $122,000 loss related to the settlement of a lawsuit filed against the Company. The decline in the yield on average assets and average equity is primarily due to a slower pace of increases in income as compared to our average assets and equity. (For further discussion of changes in income and average assets, see net interest income, non-interest income and non-interest expense discussions as follows.)

Net interest income for the three months ended June 30, 2006 was $23.3 million, an increase of 13.4% over net interest income of $20.5 million in the same period of 2005. The increase in net interest income reflects the growth in average interest earning asset balances of 12.1% for the second quarter of 2006 compared to the second quarter of 2005, along with an increase in the Company’s net interest margin.

The net interest margin increased to 5.25% for the second quarter of 2006 compared to 5.19% for the same period of 2005. The increase in the net interest margin is principally attributable to the addition of Southwest’s low-cost deposit base in the second quarter of 2006 and an increase in the yield earned and average balance of loans and leases held for investment, net of deferred fees and costs, partially offset by increased funding costs throughout the remainder of the Bank’s operations.

Total non-interest income for the three months ended June 30, 2006 was $4.6 million, compared to $4.1 million for the same period of 2005. The increase in non-interest income is primarily attributable to a $405,000 gain on the sale of loans from the Southwest SBA group in the second quarter of 2006.

18

The efficiency ratio is a measure of how effective we are at managing our non-interest expense dollars. A lower or declining ratio indicates improving efficiency. The efficiency ratio for the three months ended June 30, 2006 was 63.54%, compared to 59.05% for the same period of 2005. The increase in the efficiency ratio in the second quarter of 2006 compared to the same period of 2005 is primarily due to losses of $622,000 relating to the bankruptcy of a vendor and the settlement of a lawsuit, discussed above.

Six Month Analysis

Net income for the six months ended June 30, 2006 was $11.7 million, or $0.72 per diluted share. Net income for the six months ended June 30, 2005 was $11.3 million, or $0.74 per diluted share. Return on average assets for the six months ended June 30, 2006 was 1.18%, compared to 1.24% for the same period of 2005. Return on average equity for the six months ended June 30, 2006 was 10.05%, compared to 11.74% for the same period of 2005. Net income for the six months ended June 30, 2006 reflects two losses totaling $622,000 ($360,000 net of taxes), or $0.02 per diluted share, consisting of a $500,000 loss related to a preference claim in bankruptcy court relating to a vendor of Bank of Orange County and a $122,000 loss related to the settlement of a lawsuit filed against the Company. The decline in the yield on average assets and average equity is primarily due to a slower pace of increases in income as compared to our average assets and equity. (For further discussion of changes in income and average assets see net interest income, non-interest income and non-interest expense discussions as follows.)

Net interest income for the six months ended June 30, 2006 was $44.1 million, an increase of 9.2% over net interest income of $40.4 million in the same period of 2005. The increase in net interest income reflects the growth in average interest earning asset balances of 9.5% for the six months ended June 30, 2006 compared to the same period of 2005, offset by a slight decline in the Company’s net interest margin to 5.18% for the six months ended June 30, 2006 compared to 5.20% for the same period of 2005. The decline in the Company’s net interest margin is primarily the result of an increase in the cost of interest bearing liabilities, principally deposits, which outpaced the increases in yields on interest earning assets. The increased rates paid on interest bearing deposits during the year were made in response to market conditions and to attract funding to support loan growth and exceeded the pace of increases in interest rates across the yield curve. As short-term market rates rose in 2005, the Company did not proportionally increase interest rates paid on most deposit categories other than certificates of deposit. Accordingly, the increase in the rates paid on deposits had a greater effect on the change in the net interest margin during the six months ended June 30, 2006, than if the Company had increased rates proportionally throughout the previous year.

Total non-interest income for the six months ended June 30, 2006 was $8.3 million, compared to $7.6 million for the same period of 2005. The increase in non-interest income is primarily attributable to a $405,000 gain on the sale of loans from the Southwest SBA group in the second quarter of 2006.

The efficiency ratio for the six months ended June 30, 2006 was 63.28%, compared to 61.42% for the same period of 2005. The increase in the efficiency ratio in the six months ended June 30, 2006 compared to the same period of 2005 is primarily due to losses of $622,000 relating to the bankruptcy of a vendor and settlement of a lawsuit filed against the Company, discussed above.

Net Interest Income

Net interest income is the difference between interest earned on assets and interest paid on liabilities. Net interest margin is net interest income expressed as a percentage of average interest earning assets on an annualized basis. Our balance sheet is asset sensitive in an environment where the yield curve moves in a parallel fashion to changes in short term interest rates, and as a result, our net interest margin tends to expand in a rising interest rate environment and decline in a falling interest rate environment. The majority of our earning assets are tied to market rates, such as the prime rate, and therefore rates on our earning assets generally reprice along with a movement in market rates while interest bearing liabilities, mainly deposits, typically reprice more slowly and usually incorporate only a portion of the movement in market rates.

While short-term market rates have increased through 2005 and 2006, the Company’s net interest margin decreased slightly to 5.18% for the six months ended June 30, 2006 compared to 5.20% for the same period of 2005, rather than increased as would have been expected based on our asset sensitive balance sheet. The decline in the Company’s net interest margin is primarily the result of an increase in the cost of interest bearing liabilities during the six months ended June 30, 2006, principally deposits, which outpaced the increases in interest rates across the yield curve, and has had the effect of nullifying any positive effect of the asset sensitivity of our balance sheet. Beginning in 2006, we increased rates paid on deposit accounts to retain existing customers and attract new deposit customers.

The following tables present, for the periods indicated, the distribution of average assets, liabilities and shareholders’ equity, as well as the net interest income from average interest earning assets and the resultant yields expressed in percentages. Average balances are based on daily averages. Non-accrual loans are included in the calculation of average loans and leases while non-accrued interest thereon is excluded from the computation of yields earned.

19

	For the Three Months Ended June 30, 2006						For the Three Months Ended June 30, 2005
	Average Balance		Interest Income or Expense		Average Yield or Cost		Average Balance		Interest Income or Expense		Average Yield or Cost
	(Dollars in thousands)
ASSETS
Interest earning assets:
Loans held for sale	$	1,787	$	52	11.67	%	$	—	$	—	0.00	%
Loans and leases held for investment (1) (2) (3)		1,508,459		27,857	7.41	%		1,301,172		21,718	6.69	%
Investment securities:
Taxable		209,343		2,367	4.54	%		219,040		2,404	4.40	%
Tax-exempt (1)		22,406		240	4.30	%		18,252		187	4.11	%
Federal funds sold		21,004		255	4.87	%		33,490		228	2.73	%
Interest bearing deposits with other banks		36		—	0.00	%		126		1	3.18	%
Other earning assets (4)		15,127		203	5.38	%		13,449		176	5.25	%
Total interest earning assets		1,778,162		30,974	6.99	%		1,585,529		24,714	6.25	%
Non-interest earning assets:
Cash and due from banks		81,716						71,476
Other assets		218,207						183,714
Total assets	$	2,078,085					$	1,840,719
LIABILITIES AND SHAREHOLDERS’ EQUITY
Interest bearing liabilities:
Deposits:
Interest bearing demand	$	230,260		265	0.46	%	$	253,331		239	0.38	%
Money market		350,742		2,111	2.41	%		276,904		673	0.97	%
Savings		147,923		164	0.44	%		177,412		153	0.35	%
Time certificates of deposit		423,187		3,784	3.59	%		358,146		2,281	2.55	%
Total interest bearing deposits		1,152,112		6,324	2.20	%		1,065,793		3,346	1.26	%
FHLB borrowings		19,568		247	5.06	%		88		1	4.56	%
Repurchase agreements		14,282		47	1.32	%		13,160		24	0.73	%
Long-term debt		55,918		1,096	7.86	%		53,611		836	6.25	%
Total interest bearing liabilities		1,241,880		7,714	2.49	%		1,132,652		4,207	1.49	%
Non-interest bearing liabilities:
Demand deposits		563,338						494,825
Other liabilities		17,272						17,939
Total liabilities		1,822,490						1,645,416
Shareholders’ equity		255,595						195,303
Total liabilities and shareholders’ equity	$	2,078,085					$	1,840,719
Net interest income			$	23,260					$	20,507
Net interest margin (5)					5.25	%					5.19	%

(1) Yields on loans and leases and tax exempt securities have not been adjusted to a tax-equivalent basis because the impact is not material.

(2) Average non-accrual loans and leases of $1.7 million and $3.9 million for the three months ended June 30, 2006 and 2005, respectively, are included in the yield computations.

(3) Interest income includes net deferred loan and lease fees and costs of $530,000 and $528,000 for the three months ended June 30, 2006 and 2005, respectively.

(4) Includes Federal Reserve Bank stock and Federal Home Loan Bank stock.

(5) Net interest margin is computed by dividing annualized net interest income by total average earning assets.

20

	For the Six Months Ended June 30, 2006						For the Six Months Ended June 30, 2005
	Average Balance		Interest Income or Expense		Average Yield or Cost		Average Balance		Interest Income or Expense		Average Yield or Cost
	(Dollars in thousands)
ASSETS
Interest earning assets:
Loans held for sale	$	898	$	52	11.68	%	$	—	$	—	0.00	%
Loans and leases held for investment (1) (2) (3)		1,446,263		52,479	7.32	%		1,295,031		42,484	6.62	%
Investment securities:
Taxable		209,134		4,705	4.54	%		214,585		4,646	4.37	%
Tax-exempt (1)		20,081		423	4.25	%		18,409		350	3.83	%
Federal funds sold		24,191		556	4.63	%		26,715		354	2.67	%
Interest bearing deposits with other banks		18		—	0.00	%		126		2	3.20	%
Other earning assets (4)		14,765		392	5.35	%		11,948		307	5.18	%
Total interest earning assets		1,715,350		58,607	6.89	%		1,566,814		48,143	6.20	%
Non-interest earning assets:
Cash and due from banks		71,132						71,116
Other assets		201,332						188,111
Total assets	$	1,987,814					$	1,826,041
LIABILITIES AND SHAREHOLDERS’ EQUITY
Interest bearing liabilities:
Deposits:
Interest bearing demand	$	229,485		563	0.49	%	$	254,914		456	0.36	%
Money market		339,471		4,147	2.46	%		273,858		1,272	0.94	%
Savings		152,665		336	0.44	%		179,229		308	0.35	%
Time certificates of deposit		406,201		6,940	3.45	%		344,988		4,061	2.37	%
Total interest bearing deposits		1,127,822		11,986	2.14	%		1,052,989		6,097	1.17	%
FHLB Borrowings		13,423		326	4.90	%		960		12	2.52	%
Repurchase agreements		14,043		70	1.01	%		13,502		47	0.70	%
Long-term debt		54,771		2,132	7.85	%		53,611		1,596	6.00	%
Total interest bearing liabilities		1,210,059		14,514	2.42	%		1,121,062		7,752	1.39	%
Non-interest bearing liabilities:
Demand deposits		527,212						490,136
Other liabilities		16,180						21,262
Total liabilities		1,753,451						1,632,460
Shareholders’ equity		234,363						193,581
Total liabilities and shareholders’ equity	$	1,987,814					$	1,826,041
Net interest income			$	44,093					$	40,391
Net interest margin (5)					5.18	%					5.20	%

(1) Yields on loans and leases and tax exempt securities have not been adjusted to a tax-equivalent basis because the impact is not material.

(2) Average non-accrual loans and leases of $2.1 million and $3.3 million for the six months ended June 30, 2006 and 2005, respectively, are included in the yield computations.

(3) Interest income includes net deferred loan and lease fees and costs of $887,000 and $860,000 for the six months ended June 30, 2006 and 2005, respectively.

(4) Includes Federal Reserve Bank stock and Federal Home Loan Bank stock.

(5) Net interest margin is computed by dividing annualized net interest income by total average earning assets.

21

The following tables show the change in interest income and interest expense and the amount of change attributable to variances in volume, rates and the combination of volume and rates based on the relative changes of volume and rates:

	Three Months Ended June 30, 2006 Compared to Three Months Ended June 30, 2005
	Net Change			Rate		Volume			Mix
	(Dollars in thousands)
Interest income:
Loans held for sale	$	52		$	—	$	52		$	—
Loans and leases held for investment		6,139			2,311		3,460			368
Investment securities available-for-sale:
Taxable		(37	)		73		(106	)		(4	)
Tax-exempt		53			9		43			1
Federal funds sold		27			179		(85	)		(67	)
Interest bearing deposits with other banks		(1	)		—		(1	)		—
Other earning assets		27			4		22			1
Total interest income		6,260			2,576		3,385			299
Interest expense:
Interest bearing demand		26			53		(22	)		(5	)
Money market		1,438			994		179			265
Savings		11			44		(25	)		(8	)
Time certificates of deposit		1,503			921		414			168
FHLB borrowings		246			—		221			25
Repurchase agreements		23			19		2			2
Long-term debt		260			215		36			9
Total interest expense		3,507			2,246		805			456
Net interest income	$	2,753		$	330	$	2,580		$	(157	)
	Six Months Ended June 30, 2006 Compared to Six Months Ended June 30, 2005
	Net Change			Rate		Volume			Mix
	(Dollars in thousands)
Interest income:
Loans held for sale	$	52		$	—	$	52		$	—
Loans and leases held for investment		9,995			4,507		4,961			527
Investment securities available-for-sale:
Taxable		59			182		(118	)		(5	)
Tax-exempt		73			38		32			3
Federal funds sold		202			260		(33	)		(25	)
Interest bearing deposits with other banks		(2	)		—		(2	)		—
Other earning assets		85			10		72			3
Total interest income		10,464			4,997		4,964			503
Interest expense:
Interest bearing demand		107			169		(45	)		(17	)
Money market		2,875			2,073		305			497
Savings		28			86		(46	)		(12	)
Time certificates of deposit		2,879			1,833		721			325
FHLB borrowings		314			11		156			147
Repurchase agreements		23			20		2			1
Long-term debt		536			491		35			10
Total interest expense		6,762			4,683		1,128			951
Net interest income	$	3,702		$	314	$	3,836		$	(448	)

22

Three Month Analysis

Net interest income increased 13.4%, or $2.8 million, to $23.3 million for the second quarter of 2006, from $20.5 million for the same period of 2005. Average earning assets increased 12.1%, or $192.6 million, to $1.778 billion for the second quarter of 2006, from $1.586 billion for the same period of 2005. Average loans and leases held for investment, net of deferred fees and costs, increased by 15.9%, or $207.3 million, to $1.508 billion for the second quarter of 2006, from $1.301 billion for the same period of 2005. Average loans and leases held for investment, net of deferred fees and costs, increased as a result of the acquisition of Southwest along with our organic loan growth primarily in the residential real estate segment. Average core deposits (all deposit categories other than time certificates of deposit) increased 7.5%, or $89.8 million, to $1.292 billion for the second quarter of 2006, from $1.202 billion for the same period of 2005. Average core deposits increased primarily as a result of the acquisition of Southwest.

The net interest margin for the three months ended June 30, 2006 increased to 5.25% from 5.19% for the same period in 2005 which was primarily attributable to the addition of Southwest’s low-cost deposit base during the second quarter and an increase in the yield earned and average balance of loans and leases held for investment, net of deferred fees and costs, partially offset by increased funding costs throughout the remainder of the Bank’s operations.

Interest income increased 25.3%, or $6.3 million, to $31.0 million for the second quarter of 2006, from $24.7 million for the same period of 2005. Average loans and leases held for investment, net of deferred fees and costs, increased by 15.9% or $207.3 million, to $1.508 billion and yielded 7.41% for the second quarter of 2006, compared to 6.69% for the same period of 2005. The increase in the yields on average loans and leases primarily reflects the benefit of loans that re-priced during a period of rising short-term interest rates. The yield on investment securities increased to 4.51% for the second quarter of 2006, from 4.38% for the same period of 2005.

Interest expense on all interest bearing liabilities increased 83.4%, or $3.5 million, to $7.7 million for the second quarter of 2006, from $4.2 million in the same period of 2005. Total average interest bearing liabilities increased 9.6%, or $109.2 million, to $1.242 billion for the second quarter of 2006, from $1.133 billion for the same period of 2005. The cost of our interest bearing liabilities increased to 2.49% for the second quarter of 2006, from 1.49% for the same period of 2005. This increase was the result of an increase in deposit rates paid on all deposit types in the second quarter of 2006 in response to market conditions and to provide funding for loan growth, as well as higher rates paid on short-term borrowings and junior subordinated deferrable interest debentures. Interest rates and the average balance on short term borrowings increased as the Company borrowed from the Federal Home Loan Bank of San Francisco on a short-term basis to help fund additional loan growth during the period. Interest rates on junior subordinated deferrable interest debentures reset quarterly and are based on the 90-day LIBOR plus a margin.

Interest expense on interest bearing deposits increased 89.0%, or $3.0 million, to $6.3 million for the second quarter of 2006, from $3.3 million for the same period of 2005. The increase is primarily attributable to an increase in deposit rates paid on all deposit types in the second quarter of 2006 and a migration of deposits into higher rate accounts such as time deposit accounts and our new optimum money market account. In addition, the increase in interest rates paid on deposit accounts exceeded the pace of increases in rates across the yield curve to retain existing customers and attract new deposit customers. The overall cost of deposits increased to 1.48% for the second quarter of 2006, from 0.86% for the same period of 2005. As a percentage of average total deposits, time certificates of deposit increased to 24.7% for the second quarter of 2006, from 22.9% for the same period of 2005. A substantial percentage of our funding sources are non-interest bearing demand deposits, which represented approximately 32.8% of average total deposits for the second quarter of 2006, an increase from 31.7% for the same period of 2005.

Six Month Analysis

Net interest income increased 9.2%, or $3.7 million, to $44.1 million for the six months ended June 30, 2006, from $40.4 million for the same period of 2005. Average earning assets increased 9.5%, or $148.5 million, to $1.715 billion for the six months ended June 30, 2006, from $1.567 billion for the same period of 2005. Average loans and leases held for investment, net of deferred fees and costs, increased by 11.7%, or $151.2 million, to $1.446 billion for the six months ended June 30, 2006, from $1.295 billion for the same period of 2005. Average loans and leases held for investment, net of deferred fees and costs, increased as a result of the acquisition of Southwest along with our organic loan growth primarily in the residential real estate segment. Average core deposits (all deposit categories other than time certificates of deposit) increased 4.2%, or $50.7 million, to $1.249 billion for the six months ended June 30, 2006, from $1.198 billion for the same period of 2005. Average core deposits increased primarily as a result of the acquisition of Southwest.

23

The net interest margin for the six months ended June 30, 2006 decreased to 5.18% from 5.20% for the same period in 2005 which was primarily attributable to an increase in the cost of total interest bearing liabilities of 103 basis points to 2.42% for the six months ended June 30, 2006, from 1.39% for the same period in 2005, which was greater than the increase in yields on total interest earning assets of 69 basis points to 6.89% for the six months ended June 30, 2006, from 6.20% for the same period in 2005.

Interest income increased 21.7%, or $10.5 million, to $58.6 million for the six months ended June 30, 2006, from $48.1 million for the same period of 2005. Average loans and leases held for investment, net of deferred fees and costs, increased by 11.7%, or $151.2 million, to $1.446 billion and yielded 7.32% for the six months ended June 30, 2006, compared to 6.62% for the same period of 2005. The increase in the yields on average loans and leases primarily reflects the benefit of loans that re-priced during a period of rising short-term interest rates. The yield on investment securities increased to 4.51% for the six months ended June 30, 2006, from 4.32% for the same period of 2005.

Interest expense on all interest bearing liabilities increased 87.2%, or $6.8 million, to $14.5 million for the six months ended June 30, 2006, from $7.8 million in the same period of 2005. Total average interest bearing liabilities increased 7.9%, or $89.0 million, to $1.210 billion for the six months ended June 30, 2006, from $1.121 billion for the same period of 2005. This increase was the result of an increase in deposit rates paid on all deposit types in the six months ended June 30, 2006, as well as higher rates paid on short-term borrowings and on junior subordinated deferrable interest debentures. Interest rates and the average balance on short-term borrowings increased as the Company borrowed from the Federal Home Loan Bank of San Francisco on a short-term basis to help fund additional loan growth during the period. Interest rates on junior subordinated deferrable interest debentures reset quarterly and are based on the 90-day LIBOR plus a margin.

Interest expense on interest bearing deposits increased 96.6%, or $5.9 million, to $12.0 million for the six months ended June 30, 2006, from $6.1 million for the same period of 2005. The increase is primarily attributable to an increase in deposit rates paid on all deposit types in the six months ended June 30, 2006 and a migration of deposits into higher rate accounts such as time deposit accounts and our new optimum money market account. In addition, the increase in interest rates paid on deposit accounts exceeded the pace of increases in rates across the yield curve to retain existing customers and attract new deposit customers. The overall cost of deposits increased to 1.46% for the six months ended June 30, 2006, from 0.80% for the same period of 2005. As a percentage of average total deposits, time deposits increased to 24.5% for the six months ended June 30, 2006, from 22.4% for the same period of 2005. A substantial percentage of our funding sources are non-interest bearing demand deposits, which represented approximately 31.9% of average total deposits for the six months ended June 30, 2006, essentially unchanged from 31.8% for the same period of 2005.

Provision for Loan and Lease Losses

The provision for loan and lease losses is a charge against earnings of the period. The provision is that amount required to maintain the allowance for loan and lease losses at a level which, in management’s judgment, is appropriate based on loan and lease losses inherent in the loan and lease portfolio.

The Company’s overall credit quality remained strong during the second quarter of 2006. Non-performing loans to total loans and leases held for investment, net of deferred fees and costs, decreased to 0.17% at June 30, 2006 from 0.22% at December 31, 2005 and remained well within the Company’s target level of risk. As such, management determined that no provision for loan and lease losses was required for the three or six months ended June 30, 2006. The allowance for loan and lease losses increased to $21.5 million as of June 30, 2006 compared to $16.7 million at December 31, 2005. This increase primarily relates to the inclusion of $5.0 million in allowances relating to loans acquired from Southwest.

In the three months ended June 30, 2006, we experienced loan and lease charge-offs of $109,000 and recoveries of $98,000 compared to loan and lease charge-offs of $866,000 and recoveries of $603,000 for the same period of 2005. In the six months ended June 30, 2006, we experienced loan and lease charge-offs of $1.1 million and recoveries of $954,000, compared to loan and lease charge-offs of $1.1 million and recoveries of $1.3 million for the same period of 2005.

There were no other changes in loan and lease concentrations or terms during the periods indicated which significantly effected the provision or allowance for loan and lease losses.

24

Non-Interest Income

The following table summarizes non-interest income by category for the periods indicated:

	For the Three Months Ended June 30,					For the Six Months Ended June 30,
	2006		2005			2006		2005
	(Dollars in thousands)
Service charges and fees on deposit accounts	$	2,017	$	2,006		$	3,847	$	3,731
Referral and other loan-related fees		924		1,018			1,656		1,536
Increase in cash surrender value of life insurance		425		430			831		844
Gain on sale of loans, net		405		—			405		—
Debit card and merchant discount fees		349		306			649		589
Revenues from sales of non-deposit investment products		317		175			513		366
Loan servicing income		39		105			139		238
Loss on sale of investment securities, net		—		(55	)		—		(55	)
Other		139		119			265		318
Total non-interest income	$	4,615	$	4,104		$	8,305	$	7,567

Three Month Analysis

Non-interest income increased 12.5%, or $511,000, to $4.6 million for the second quarter of 2006, from $4.1 million for the same period of 2005.

Non-interest income increased primarily as a result of the addition of Southwest’s SBA group, which contributed a $405,000 gain on the sale of loans in the second quarter of 2006. There were no loans sold in 2005.

Revenues from sales of non-deposit investment products increased 81.1%, or $142,000, to $317,000 for the second quarter of 2006 from $175,000 for the same period of 2005. Sales of non-deposit investment products are highly transactional in nature and are subject to volatility from period to period.

There were no sales of investment securities for the three months ended June 30, 2006 as compared to a $55,000 loss on sales for the same period of 2005.

Loan servicing income decreased $66,000, or 62.9%, to $39,000 for the second quarter of 2006 from $105,000 for the same period of 2005. This decrease is primarily due to a few loans that paid off during the period prior to their contractual maturity that had significant servicing assets that were not fully amortized. Servicing assets relate to loans that have been sold but the Company retains servicing rights and are amortized over the contractual term of the loan and decrease loan servicing income over that period. When a loan is paid off prior to its maturity, the remaining servicing assets are written off.

Six Month Analysis

Non-interest income increased 9.8%, or $738,000, to $8.3 million for the six months ended June 30, 2006, from $7.6 million for the same period of 2005.

Non-interest income increased primarily as a result of the addition of Southwest’s SBA group, which contributed a $405,000 gain on the sale of loans in the second quarter of 2006. There were no loans sold in 2005.

Service charges and fees on deposit accounts increased 3.1%, or $116,000, to $3.8 million for the six months ended June 30, 2006 from $3.7 million for the same period of 2005 primarily due to a revised deposit fee structure initiated in May 2005.

Referral and other loan related fees increased 7.8%, or $120,000, to $1.7 million for the six months ended June 30, 2006 from $1.5 million for the same period of 2005, primarily due to an increase in real estate loans referred to third parties. Referral fees are highly transactional in nature and are subject to volatility from period to period based on the number of loans referred in a given period.

Revenues from sales of non-deposit investment products increased 40.2%, or $147,000, to $513,000 for the six months ended June 30, 2006 from $366,000 for the same period of 2005. Sales of non-deposit investment products are highly transactional in nature and are subject to volatility from period to period.

There were no sales of investment securities for the six months ended June 30, 2006 as compared to a $55,000 loss on sales for the same period of 2005.

25

Loan servicing income decreased $99,000, or 41.6%, to $139,000 for the six months ended June 30, 2006 from $238,000 for the same period of 2005. This decrease is primarily due to a few loans that paid off during the period prior to their contractual maturity that had significant servicing assets that were not fully amortized. Servicing assets relate to loans that have been sold but the Company retains servicing rights and are amortized over the contractual term of the loan and decrease loan servicing income over that period. When a loan is paid off prior to its maturity, the remaining servicing assets are written off.

Other non-interest income decreased 16.7%, or $53,000, to $265,000 for the six months ended June 30, 2006 from $318,000 for the same period in 2005, primarily due to a $63,000 reimbursement in 2005 of prior year expenses incurred in connection with estimated environmental remediation costs. There was no such amount in 2006.

Non-Interest Expense

The following table summarizes non-interest expense by category for the periods indicated:

	For the Three Months Ended June 30,				For the Six Months Ended June 30,
	2006		2005		2006		2005
	(Dollars in thousands)
Salaries and employee benefits	$	9,290	$	7,400	$	17,591	$	14,998
Occupancy and equipment		2,279		1,941		4,342		3,991
Data and item processing		1,316		1,266		2,646		2,647
Professional fees		787		667		1,450		1,253
Administration		591		478		1,082		1,008
Communication and postage		568		529		1,135		1,162
Amortization of core deposit intangible		555		649		1,025		1,298
Advertising and business development		323		309		666		595
Loan-related costs		231		272		477		509
Stationery and supplies		216		276		414		630
Other		1,555		747		2,329		1,367
Total non-interest expense	$	17,711	$	14,534	$	33,157	$	29,458

Three Month Analysis

Non-interest expense increased 21.9%, or $3.2 million, to $17.7 million for the second quarter of 2006, from $14.5 million for the same period of 2005.

Salaries and employee benefits expense increased 25.5%, or $1.9 million, to $9.3 million for the second quarter of 2006, from $7.4 million for the same period in 2005. This increase is the result of the acquisition of Southwest, a $626,000 increase in incentive compensation that supports our growth strategy, $177,000 in stock option compensation expense, resulting from the adoption of SFAS 123(R) as of January 1, 2006, and $144,000 in restricted stock compensation expense due to the grant of restricted stock to certain executives in the first quarter of 2006 and to the Company’s directors in the second quarter of 2006. Stock option compensation expense and restricted stock compensation expense is amortized over the vesting period of the option or restricted stock grant. The increase was offset by a $402,000 increase in deferred loan costs, which reduces salaries expense in the period which the loan is boarded, primarily due to an increase in the number of loans boarded in the three months ended June 30, 2006 compared to 2005 and an increase in the amount deferred for each loan based on an independent evaluation of loan origination costs which was effective January 1, 2006.

Occupancy and equipment expense increased 17.4%, or $338,000, to $2.3 million for the second quarter of 2006 from $1.9 million for the same period in 2005 principally due to increased remodeling and premises improvement costs spread across a number of branches and an increase in utility costs.

Professional fees increased 18.0%, or $120,000, to $787,000 for the second quarter of 2006 from $667,000 for the same period of 2005 principally due to $54,000 of consulting fees paid to the Company’s former Chief Credit Officer and a $122,000 settlement of a lawsuit filed against the Company.

Administration expense increased 23.6%, or $113,000, to $591,000 for the second quarter of 2006 from $478,000 for the same period in 2005 principally due to increased costs associated with SEC reporting.

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Amortization of core deposit intangible decreased 14.5%, or $94,000, to $555,000 for the second quarter of 2006 from $649,000 for the same period of 2005 due to the core deposit intangible related to Bank of Orange County being fully amortized in October of 2005. This amount will increase throughout the remainder of the year as the core deposit intangible related to Southwest is amortized.

Other non-interest expense increased 108.2%, or $808,000, to $1.6 million for the second quarter of 2006, from $747,000 for the same period in 2005, primarily as a result of an accrual of $500,000 for the estimated loss relating to the bankruptcy of a vendor and two operational losses totaling $91,000 during the second quarter of 2006.

Six Month Analysis

Non-interest expense increased 12.6%, or $3.7 million, to $33.2 million for six months ended June 30, 2006, from $29.5 million for the same period of 2005.

Salaries and employee benefits expense increased 17.3%, or $2.6 million, to $17.6 million for the six months ended 2006, from $15.0 million for the same period in 2005. This increase is the result of the acquisition of Southwest, a $1.1 million increase in incentive compensation that supports our growth strategy, $317,000 in stock option compensation expense, resulting from the adoption of SFAS 123(R) as of January 1, 2006, $178,000 in restricted stock compensation expense due to the grant of restricted stock to certain executives and to the Company’s directors and a $185,000 severance payment to a former employee. Stock option compensation expense and restricted stock compensation expense is amortized over the vesting period of the option or restricted stock grant. The increase was offset by a $775,000 increase in deferred loan costs, which reduces salaries expense in the period which the loan is boarded, primarily due to an increase in the number of loans boarded in the first six months of 2006 compared to 2005 and an increase in the amount deferred for each loan based on an independent evaluation of loan origination costs which was effective January 1, 2006.

Occupancy and equipment expense increased 8.8%, or $351,000, to $4.3 million for the six months ended June 30, 2006 from $4.0 million for the same period of 2005 principally due to increased remodeling and premises improvement costs spread across a number of branches and an increase in utility costs.

Professional fees increased 15.7%, or $197,000, to $1.5 million for the six months ended June 30, 2006 from $1.3 million for the same period of 2005 principally due to $195,000 of consulting fees paid to the Company’s former Chief Credit Officer and a $122,000 settlement of a lawsuit filed against the Company.

Stationery and supplies expense decreased 34.3%, or $216,000, to $414,000 for the six months ended June 30, 2006 from $630,000 for the same period of 2005 principally due to an effort to streamline forms used across the Company and renegotiated pricing with our vendors.

Amortization of core deposit intangible decreased 21.0%, or $273,000, to $1.0 million for the six months ended June 30, 2006 from $1.3 million for the same period of 2005 due to the core deposit intangible related to Bank of Orange County being fully amortized in October of 2005. This amount will increase throughout the remainder of the year as the core deposit intangible related to Southwest is amortized.

Other non-interest expense increased 70.4%, or $962,000, to $2.3 million for the six months ended June 30, 2006, from $1.4 million for the same period in 2005 as a result of an accrual of $500,000 for the estimated loss relating to the bankruptcy of a vendor, two operational losses totaling $91,000 during the second quarter of 2006 and $124,000 of recruiting fees paid in connection with restructuring the Company’s credit administration function and expanding the Company’s team of business development officers.

Provision for Income Taxes

Our statutory income tax rate is approximately 42.1%, representing a blend of the statutory Federal income tax rate of 35.0% and the California income tax rate of 10.8%. Due to the nontaxable nature of income from municipal securities, enterprise zone interest, and bank owned life insurance and the effect of the housing tax credit our actual effective income tax rate was 39.5% for both the three months ended June 30, 2006 and 2005 and 39.3% and 39.1% for the six months ended June 30, 2006 and 2005, respectively.

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Financial Condition

Our total assets at June 30, 2006 were $2.696 billion, an increase of 44.9%, compared to $1.860 billion at December 31, 2005. Our earning assets at June 30, 2006 totaled $2.133 billion, an increase of 31.7%, compared to $1.620 billion at December 31, 2005. Total deposits at June 30, 2006 were $2.207 billion, an increase of 40.3%, compared to $1.573 billion at December 31, 2005. The increase in total assets, earning assets and deposits is due to the acquisition of Southwest along with the organic growth of the Company.

Loans and Leases Held for Investment

The following table presents the balance of each major category of loans and leases held for investment at the end of each of the periods indicated:

	As of June 30, 2006					As of December 31, 2005
	Amount			Loans		Amount			Loans
	(Dollars in thousands)
Loans and leases held for investment
Real estate – mortgage	$	1,256,372		70.4	%	$	990,362		71.9	%
Real estate – construction		327,729		18.4			207,078		15.0
Commercial		169,676		9.5			147,830		10.7
Agricultural		4,940		0.3			5,779		0.4
Consumer		13,370		0.8			11,703		0.8
Leases receivable and other		11,288		0.6			15,431		1.2
Total gross loans and leases held for investment		1,783,375		100.0	%		1,378,183		100.0	%
Less: allowance for loan and lease losses		(21,529	)				(16,714	)
Deferred loan and lease fees, net		(3,183	)				(2,697	)
Total net loans and leases held for investment	$	1,758,663				$	1,358,772

Gross loans and leases held for investment increased 29.4%, or $405.2 million, to $1.783 billion at June 30, 2006, from $1.378 billion at December 31, 2005, due to the acquisition of Southwest along with our organic growth. Excluding the $324.3 million in loans held for investment associated with the acquisition of Southwest, loans and leases held for investment, net of deferred fees and costs, increased an annualized 11.9%, or $80.9 million, from December 31, 2005. We experienced increases of $266.0 million in real estate mortgages, $120.7 million in real estate construction, $21.8 million in commercial and $1.7 million in consumer partially offset by decreases of $839,000 and $4.1 million in agricultural and leases receivable and other loans, respectively. While we recorded $400.6 million of new loan commitments during the six months ended June 30, 2006, we also experienced early loan payoffs of $167.7 million.

Our loan portfolio has a high concentration of loans that are collateralized by real estate. Management believes that this concentration does not create undue risk as our credit policies and underwriting standards have been adopted with the recognition that we rely heavily on real estate related loans. However, a substantial decline in the performance of the economy in general or a decline in real estate values in the bank’s primary market areas could have an adverse impact on collectibility, increase the level of real estate-related non-performing loans, or have other adverse effects which alone or in the aggregate could have a material adverse effect on our business, financial condition, results of operations and cash flows.

Real Estate – Mortgage

The category of real estate – mortgage at June 30, 2006 totaled $1.256 billion and was comprised 67.0% of loans collateralized by commercial real estate and 33.0% of loans collateralized by 1-4 family real estate.

We set limitations on our exposure in commercial real estate lending activities and employ monitoring tools and reporting consistent with sound industry practices. We segment our commercial real estate mortgage and construction loan portfolio into low-to-moderate risk and higher risk loan categories and limit the aggregate of higher risk commercial real estate mortgage and construction loans outstanding to no more than 350% of the sum of the bank’s Tier 1 capital plus the allowance for loan and lease losses; at June 30, 2006, this ratio was 290%. We further limit our total commercial real estate loans to no more than 600% of the sum of the bank’s Tier 1 capital plus the allowance for loan and lease losses; at June 30, 2006, this ratio was 534%. Commercial real estate mortgages generally require debt service coverage ratios of 125% or greater and loan to value ratios of not more than 75%.

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During the second quarter of 2006, we stress tested all non-owner occupied commercial real estate mortgage term loans with outstanding balances of $750,000 or greater. Prior to stress testing, the tested loans had a current weighted average debt service coverage ratio of 1.78%. After shocking the portfolio for a 200 basis point rate increase, the debt service coverage ratio of the tested loans decreased to 1.70%. Alternatively, an assumed 15% decrease in net operating income (falling rents and/or rising vacancies) caused the debt service coverage ratio of the tested loans to decrease to 1.52%. Combining both events caused the ratio to decrease to 1.45%. The tested loans had a weighted average loan to value of 58.0%. Based on this stress testing, management has concluded that the bank’s commercial real estate mortgage loan portfolio could withstand such shocks reasonably well.

The portfolio of loans collateralized by 1-4 family residential real estate is comprised 41.0% of loans supported by first liens and 59.0% of loans supported by junior liens (primarily home equity lines of credit, or “HELOCs”). First lien loans are generally underwritten in accordance with FNMA/FHLMC guidelines for loans eligible for sale in the secondary mortgage market. The majority of HELOCs are limited to a combined loan to value of 80%, although borrowers with the highest credit scores can borrow up to 85%. Individual HELOCs are generally limited by our loan policy to no more than $500,000.

Real Estate – Construction

The category of real estate - construction at June 30, 2006 totaled $327.7 million, approximately 20% of which was comprised of loans to owner-occupants constructing their own residences. These loans are generally 30 year loans which include an interest only period during construction. Underwriting of these loans is generally done in accordance with FNMA/FHLMC guidelines for loans eligible for sale in the secondary mortgage market. The remaining 80% of real estate – construction was comprised of residential and commercial loans for a variety of property types to owner occupants, investors and developers. Our underwriting guidelines for these construction loans set minimum borrower equity and pre-leasing requirements for commercial projects and generally limit the number of units ahead of sales for residential projects.

Non-Performing Assets

Generally, loans and leases are placed on non-accrual status when they become 90 days or more past due or at such earlier time as management determines timely recognition of interest to be in doubt. Accrual of interest is discontinued on a loan or lease when management believes, after considering economic and business conditions and collection efforts that the borrower’s financial condition is such that collection of interest is doubtful. The following table summarizes the loans and leases for which the accrual of interest has been discontinued and loans and leases more than 90 days past due and still accruing interest, including those loans and leases that have been restructured and other real estate owned, which we refer to as OREO:

	As of June 30, 2006			As of December 31, 2005
	(Dollars in thousands)
Non-accrual loans and leases, not restructured	$	3,065		$	3,063
Accruing loans and leases past due 90 days or more		—			—
Restructured loans and leases		—			—
Total non-performing loans and leases (NPLs)		3,065			3,063
OREO		—			—
Total non-performing assets (NPAs)	$	3,065		$	3,063
Selected ratios:
NPLs to total loans and leases held for investment		0.17	%		0.22	%
NPAs to total assets		0.11	%		0.16	%

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Allowance for Loan and Lease Losses

The allowance for loan and lease losses is maintained at a level which, in management’s judgment, is based on loan and lease losses inherent in the loan and lease portfolio. The amount of the allowance is based on management’s evaluation of the collectibility of the loan and lease portfolio, historical loss experience and other significant factors affecting loan and lease portfolio collectibility. These other significant factors include the level and trends in delinquent, non-accrual and adversely classified loans and leases, trends in volume and terms of loans and leases, levels and trends in credit concentrations, effects of changes in underwriting standards, policies, procedures and practices, national and local economic trends and conditions, changes in capabilities and experience of lending management and staff and other external factors including industry conditions, competition and regulatory requirements.

Our methodology for evaluating the adequacy of the allowance for loan and lease losses has two basic elements: first the identification of impaired loans and leases and the measurement of impairment for each individual loan identified; and second, a method for estimating an allowance for all other loans and leases.

A loan or lease is considered impaired when it is probable that we will be unable to collect all contractual principal and interest payments due in accordance with terms of the loan or lease agreement. Losses on individually identified impaired loans or leases that are not collateral dependent are measured based on the present value of expected future cash flows discounted at the original effective interest rate of each loan or lease. For loans that are collateral dependent, impairment is measured based on the fair value of the collateral less estimated selling costs.

In estimating the general allowance for loan and lease losses, we group the balance of the loan and lease portfolio into segments that have common characteristics, such as loan or lease type, collateral type or risk rating. Loans typically segregated by risk rating are those that have been assigned risk ratings using regulatory definitions of “special mention,” “substandard,” and “doubtful.” Loans graded “loss” are generally charged off immediately.

For each general allowance portfolio segment, we apply loss factors to calculate the required allowance. These loss factors are based upon three years of historical loss rates, adjusted for qualitative factors affecting loan and lease portfolio collectibility as described above. Qualitative adjustment factors are expressed in basis points and adjust historical loss factors downward up to 40 basis points and upward up to 75 basis points.

The specific allowance for impaired loans and leases and the general allowance are combined to determine the required allowance for loan and lease losses. The amount calculated is compared to the actual allowance for loan and lease losses at each quarter end and any shortfall is covered by an additional provision for loan and lease losses. As a practical matter, our allowance methodology may show that an unallocated allowance exists at quarter end. Any such amounts exceeding a certain percentage of the allowance will be removed from the allowance for loan and lease losses by a reduction of the allowance for loan and lease losses as of quarter end.

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The following table presents the changes in our allowance for loan and lease losses for the periods indicated:

	As of or For the Three Months Ended June 30,						As of or For the Six Months Ended June 30,
	2006			2005			2006			2005
	(Dollars in thousands)
Balance at beginning of period	$	16,565		$	16,738		$	16,714		$	16,200
Balance from acquisition of Southwest		4,975			—			4,975			—
Charge-offs:
Real estate – mortgage		—			—			—			40
Real estate – construction		—			—			—			—
Commercial		81			207			88			296
Agricultural		—			—			—			—
Consumer		28			21			57			76
Leases receivable and other		—			638			969			638
Total		109			866			1,114			1,050
Recoveries:
Real estate – mortgage		1			11			3			85
Real estate – construction		—			—			—			—
Commercial		77			570			155			1,205
Agricultural		—			—			—			—
Consumer		11			9			18			12
Leases receivable and other		9			13			778			23
Total		98			603			954			1,325
Net loan and lease charge-offs (recoveries)		11			263			160			(275	)
Provision for the allowance for loan and lease losses		—			—			—			—
Balance at end of period	$	21,529		$	16,475		$	21,529		$	16,475
Loans and leases held for investment, net of deferred fees and costs	$	1,780,192		$	1,325,862		$	1,780,192		$	1,325,862
Average loans and leases held for investment	$	1,508,459		$	1,301,172		$	1,446,263		$	1,295,031
Non-performing loans and leases	$	3,065		$	3,125		$	3,065		$	3,125
Selected ratios:
Net charge-offs (recoveries) to average loans and leases held for investment		0.00	%		0.08	%		0.02	%		(0.04	)%
Provision for the allowance for loan and lease losses to average loans and leases held for investment		0.00	%		0.00	%		0.00	%		0.00	%
Allowance for loan and lease losses to loans and leases held for investment at end of period		1.21	%		1.24	%		1.21	%		1.24	%
Allowance for loan and lease losses to non-performing loans and leases at end of period		702.41	%		527.20	%		702.41	%		527.20	%

Investment Securities Available-for-Sale

The carrying value of our investment securities available-for-sale increased 9.9%, or $22.6 million, to $251.0 million, from $228.4 million at December 31, 2005 primarily as a result of the acquisition of Southwest. Our portfolio of investment securities consists primarily of U.S. Government agency securities and obligations of states and political subdivisions.

We manage our investment portfolio principally to provide liquidity and balance our overall interest rate risk. To a lesser extent, we manage our investment portfolio to provide earnings with a view to minimizing credit risk.

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The carrying value of our portfolio of investment securities at June 30, 2006 and December 31, 2005 was as follows:

	Fair Value
	As of June 30, 2006		As of December 31, 2005
	(Dollars in thousands)
U.S. Treasury securities	$	1,481	$	1,995
U.S. Government agencies		206,877		204,727
Obligations of states and political subdivisions		38,780		17,712
Other securities		3,822		3,945
Total available-for-sale investment securities	$	250,960	$	228,379

Deposits

The following table presents the balance of each major category of deposits at the dates indicated:

	As of June 30, 2006				As of December 31, 2005
	Amount		% of Deposits		Amount		% of Deposits
	(Dollars in thousands)
Non-interest bearing deposits	$	964,358	43.7	%	$	502,387	31.9	%
Interest bearing deposits:
Interest bearing demand		228,723	10.3			223,932	14.2
Money market		418,329	19.0			289,497	18.5
Savings		150,514	6.8			164,123	10.4
Time, under $100		204,973	9.3			211,029	13.4
Time, $100 or more		240,208	10.9			181,914	11.6
Total interest bearing deposits		1,242,747	56.3			1,070,495	68.1
Total deposits	$	2,207,105	100.0	%	$	1,572,882	100.0	%

Non-interest bearing deposits increased 90.9%, or $462.0 million, to $964.4 million, while total deposits increased 40.3%, or $634.2 million, to $2.207 billion as of June 30, 2006 from December 31, 2005. The growth in total deposits is due to the acquisition of Southwest along with the organic growth of the Company. Excluding the $562.4 million in deposits associated with the acquisition of Southwest, total deposits increased an annualized 9.2%, or $71.9 million from December 31, 2005. The increase in time deposits $100,000 or more is primarily due to the receipt of large deposits that were short-term in nature from one relationship-based customer. As of June 30, 2006, this customer accounted for $45.8 million of the balance in time deposits $100,000 or more. At December 31, 2005, this customer did not have significant balances in time deposit accounts. Approximately 36.7% of non-interest bearing deposits are concentrated in two relationships as of June 30, 2006. Approximately 19.9% of total deposits are concentrated in four relationships as of June 30, 2006.

Short-Term Borrowings

The Company has unsecured federal funds lines with its correspondent banks which, in the aggregate, amounted to $11.0 million at June 30, 2006 and December 31, 2005 at interest rates which vary with market conditions. The Company may borrow funds on a short-term or overnight basis under these lines. There were no borrowings outstanding under these lines of credit at June 30, 2006 or December 31, 2005. At June 30, 2006 and December 31, 2005, the Company could borrow up to $199.1 million and $156.0 million, respectively, from the Federal Home Loan Bank, secured by qualifying first mortgage loans. There were no borrowings outstanding from the Federal Home Loan Bank at June 30, 2006 or December 31, 2005.

We enter into sales of securities under agreements to repurchase which are short term in nature. Short-term borrowings increased 8.1%, or $922,000, to $12.3 million as of June 30, 2006, from $11.4 million at December 31, 2005.

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Junior Subordinated Deferrable Interest Debentures

We own the common stock of five business trusts that have issued $60.0 million in trust preferred securities fully and unconditionally guaranteed by us, including one trust that was assumed in the acquisition of Southwest. The entire proceeds of each respective issuance of trust preferred securities were invested by the separate business trusts into junior subordinated deferrable interest debentures, with identical maturity, repricing and payment terms as the respective issuance of trust preferred securities. The aggregate amount of junior subordinated debentures is $61.9 million, with the maturity dates for the respective debentures ranging from 2031 through 2034. We may redeem the respective junior subordinated deferrable interest debentures earlier than the maturity date, with certain of the debentures being redeemable beginning in 2006 and others being redeemable beginning in 2007 and 2009. For more information about the trust preferred securities and the debentures see Note 11 to our Notes to Consolidated Financial Statements filed with our Annual Report on Form 10-K for the year ended December 31, 2005.

In connection with the acquisition of Southwest we recorded a fair value adjustment of the junior subordinated deferrable interest debentures assumed, that increased the carrying value by $1.8 million. This amount will be amortized over the term of the debentures reducing interest expense. As of June 30, 2006, the remaining amount to be amortized is $1.7 million.

Capital Resources

Our primary source of capital has been the retention of net income. In order to ensure adequate levels of capital, we conduct an ongoing assessment of projected sources and uses of capital in conjunction with projected increases in assets and the level of risk. Shareholders’ equity at June 30, 2006 increased to $391.4 million from $209.3 million at December 31, 2005, primarily due to the issuance of stock and assumption of warrants in connection with the acquisition of Southwest. The holding company declared dividends of $0.12 per common share per quarter or $0.24 per common share for the six months ended June 30, 2006. Total dividends paid were $1.8 million and $3.6 million for the three and six months ended June 30, 2006, respectively.

Current risk-based regulatory capital standards generally require banks and bank holding companies to maintain a ratio of “core” or “Tier 1” capital (consisting principally of common equity and, for bank holding companies, a specified percentage of trust preferred securities) to risk-weighted assets of at least 4%, a ratio of Tier 1 capital to adjusted average assets (leverage ratio) of at least 4% and a ratio of total capital (which includes Tier 1 capital plus certain forms of subordinated debt, a portion of the allowance for loan and lease losses and preferred stock) to risk-weighted assets of at least 8%. Risk-weighted assets are calculated by multiplying the balance in each category of assets by a risk factor, which ranges from zero for cash assets and certain government obligations to 100% for some types of loans, and adding the products together.

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The regulatory capital guidelines as well as the actual capital ratios for Placer Sierra Bank and us as of June 30, 2006 are as follows:

Leverage Ratio
Placer Sierra Bancshares and Subsidiaries	12.2	%
Minimum regulatory requirement	4.0	%
Placer Sierra Bank	10.9	%
Minimum requirement for “Well-Capitalized” institution	5.0	%
Minimum regulatory requirement	4.0	%
Tier 1 Risk-Based Capital Ratio
Placer Sierra Bancshares and Subsidiaries	11.5	%
Minimum regulatory requirement	4.0	%
Placer Sierra Bank	10.3	%
Minimum requirement for “Well-Capitalized” institution	6.0	%
Minimum regulatory requirement	4.0	%
Total Risk-Based Capital Ratio
Placer Sierra Bancshares and Subsidiaries	12.6	%
Minimum regulatory requirement	8.0	%
Placer Sierra Bank	11.5	%
Minimum requirement for “Well-Capitalized” institution	10.0	%
Minimum regulatory requirement	8.0	%

As of June 30, 2006, we exceeded each of the minimum capital requirements and the bank exceeded each of the capital requirements to be considered “well-capitalized.” We own the common stock of five trusts that have issued $60.0 million of trust preferred securities. These securities are currently included in our Tier 1 capital for purposes of determining our Leverage, Tier 1 and Total Risk-Based capital ratios. Beginning June 30, 2009, we will be required to use a more restrictive formula to determine the amount of trust preferred securities that may be included in regulatory Tier 1 capital. At that time, we will be allowed to include in Tier 1 capital an amount of trust preferred securities equal to no more than 25% of the sum of all core capital elements, which generally is defined as shareholders’ equity, less goodwill and any related deferred income tax liability. The regulations currently in effect only limit the amount of trust preferred securities that may be included in Tier 1 capital to 25% of the sum of core capital elements without a deduction for goodwill. We have determined that our Tier 1 capital ratios would remain above the regulatory minimum had the modification of the capital regulations been in effect at June 30, 2006. For more information about the proposed regulations see our Annual Report on Form 10-K for the year ended December 31, 2005 “Item 1. BUSINESS. Supervision and Regulation.”

Contractual Obligations

Our significant contractual obligations and significant commitments at December 31, 2005 are included in our Annual Report on Form 10-K for the year ended December 31, 2005.

Since December 31, 2005, our junior subordinated deferrable interest debenture liability has increased from $53.6 million to $63.6 million and our deferred compensation and supplemental executive retirement liability has increased from $7.1 million to $11.2 million. In addition, our operating lease obligations have increased from $13.3 million to $20.4 million. The increases in our contractual obligations are primarily due to the acquisition of Southwest.

Since December 31, 2005, our commitments to extend credit have increased from $479.5 million to $589.9 million primarily due to the acquisition of Southwest and our standby letters of credit have increased from $9.3 million to $16.0 million, primarily due to the issuance of a new standby letter of credit for $4.3 million to an existing customer. For more information on commitments see Note 5 to our Unaudited Condensed Consolidated Financial Statements in this quarterly report.

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Liquidity

Management believes that the level of primary and secondary sources of liquidity is sufficient to meet our current and presently anticipated funding needs on a consolidated basis.

Placer Sierra Bancshares

On a stand-alone basis, we rely on dividends from the bank as our main source of liquidity. There are statutory and regulatory provisions that limit the ability of the bank to pay dividends to the holding company. Under such restrictions, the amount available for payment of dividends to the holding company totaled $18.7 million at June 30, 2006. However, such amount may be further restricted due to the fact that the bank must keep a certain amount of capital in order to be “well-capitalized.” The amount available for payment of dividends to the holding company by the bank for the bank to remain “well-capitalized” immediately thereafter totaled $29.0 million at June 30, 2006, which is greater than the statutory and regulatory provisions. Accordingly, the maximum amount available for payment to the holding company is $18.7 million without prior regulatory approval. We do not believe these restrictions will adversely impact the holding company’s ability to meet its ongoing cash obligations.

Placer Sierra Bank

The bank relies on deposits as the principal source of funds and, therefore, must be in a position to service depositors’ needs as they arise. Management attempts to maintain a loan-to-deposit ratio (total loans held for sale plus total loans and leases held for investment to total deposits) below 90% and a liquidity ratio (liquid assets, including cash and due from banks, Federal funds sold, investment securities not pledged as collateral less federal funds purchased expressed as a percentage of total deposits) above 15%. The loan-to-deposit ratio was 80.50% at June 30, 2006 and 87.24% at December 31, 2005. The liquidity ratio was 22.09% as of June 30, 2006 and 14.94% at December 31, 2005.

Our deposits tend to be cyclical, with slower growth at the beginning of each year and increasing growth over the balance of the year. In addition, while occasional fluctuations in the balances of a few large depositors may cause temporary increases and decreases in liquidity, we have not experienced difficulty in dealing with such fluctuations from existing liquidity sources. As of June 30, 2006, 36.7% of non-interest bearing deposits are concentrated in two relationships. As of June 30, 2006, approximately 19.9% of total deposits are concentrated in four relationships with 13.4% of total deposits concentrated in one relationship. One of these relationships consists of deposits totaling $45.8 million, or 2.1% of total deposits, that are short-term in nature.

Based upon our existing business plan, management believes that the level of liquid assets is sufficient to meet the bank’s current and presently anticipated funding needs. Liquid assets of the bank represented approximately 18.22% of total assets at June 30, 2006 and 12.74% at December 31, 2005. If the level of liquid assets (our primary liquidity) does not meet our liquidity needs, other available sources of liquid assets (our secondary liquidity), including the purchase of Federal funds, sales of securities under agreements to repurchase, sales of loans, discount window borrowings from the Federal Reserve Bank and $199.1 million under a line of credit with the Federal Home Loan Bank of San Francisco at June 30, 2006, could be employed to meet those current and presently anticipated funding needs.

Our liquidity may be impacted negatively, however, by several other factors, including expenses associated with unforeseen or pending litigation and seasonal fluctuations of deposits.

Qualitative and Quantitative Disclosures About Market Risk

Market risk is the risk of loss in a financial instrument arising from adverse changes in market prices and rates, foreign currency exchange rates, commodity prices and equity prices. Our market risk arises primarily from interest rate risk inherent in our lending and deposit taking activities. To that end, management actively monitors and manages our interest rate risk exposure. We do not have any market risk sensitive instruments entered into for trading purposes. We manage our interest rate sensitivity by matching the re-pricing opportunities on our earning assets to those on our funding liabilities. Management uses various asset/liability strategies to manage the re-pricing characteristics of our assets and liabilities designed to ensure that exposure to interest rate fluctuations is limited within our guidelines of acceptable levels of risk-taking. Economic hedging strategies, including the terms and pricing of loans and deposits and managing our securities portfolio are used to reduce mismatches in interest rate re-pricing opportunities of portfolio assets and their funding sources.

Interest rate risk is addressed by our Asset Liability Management Committee, or the ALCO, which is comprised of certain members of our senior management and six holding company board members that are independent directors as such term is used under the rules and regulations of the Nasdaq Stock Market. The ALCO monitors interest rate risk by analyzing the potential impact on the net portfolio of equity value and net interest income from potential changes in interest rates, and considers the impact of alternative strategies or changes in balance sheet structure. The ALCO manages our balance sheet in part to maintain the potential impact on net portfolio of equity value and net interest income within acceptable ranges despite changes in interest rates.

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Our exposure to interest rate risk is reviewed on at least a quarterly basis by the ALCO and our board of directors. Interest rate risk exposure is measured using interest rate sensitivity analysis to determine our change in net portfolio of equity value and net interest income in the event of hypothetical changes in interest rates. If potential changes to net portfolio of equity value and net interest income resulting from hypothetical interest rate changes are not within board-approved limits, the board may direct management to adjust the asset and liability mix to bring interest rate risk within board-approved limits.

Market risk sensitive instruments are generally defined as derivatives and other financial instruments. At June 30, 2006 and December 31, 2005, we had not used any derivatives to alter our interest rate risk profile. Our financial instruments include loans receivable, Federal funds sold, Federal Reserve Bank and Federal Home Loan Bank stock, investment securities, bank-owned life insurance, deposits, short term borrowings and junior subordinated deferrable interest debentures. At June 30, 2006, our interest-sensitive assets totaled approximately $2.133 billion while interest-sensitive liabilities totaled approximately $1.319 billion. At December 31, 2005, we had approximately $1.620 billion in interest-sensitive assets and approximately $1.135 billion in interest-sensitive liabilities.

The yield on interest-sensitive assets and the cost of interest-sensitive liabilities for the six months ended June 30, 2006 was 6.89% and 2.42%, respectively, compared to 6.20% and 1.39%, respectively, for the six months ended June 30, 2005. The increase in the yield on interest-sensitive assets is the result of the rising interest rate environment with yields on loans and leases held for investment, investment securities and federal funds sold increasing. The increase in the cost of our interest sensitive liabilities is primarily the result of higher rates paid on deposit products. Beginning in 2006, we increased rates paid on deposit accounts to retain existing customers and attract new deposit customers. As the short-term market rates increased throughout 2005, we did not proportionately increase interest rates paid on deposits. Accordingly, the increase in rates paid on deposits had a greater effect on the change in cost of interest sensitive liabilities during the six months ended June 30, 2006, than if we had increased rates proportionately throughout the previous year. The increase in the cost of our interest sensitive liabilities is also the result of higher interest paid on short-term borrowings and junior subordinated deferrable interest debentures.

Our interest sensitive assets and interest sensitive liabilities had estimated fair values of $2.081 billion and $1.241 billion, respectively, at June 30, 2006. At December 31, 2005, those amounts were $1.639 billion and $1.065 billion, respectively.

We evaluated the results of our net interest income simulation and market value of equity model prepared as of June 30, 2006 for interest rate risk management purposes. Overall, the model results indicate that our interest rate risk sensitivity is within limits set by the Board of Directors and our balance sheet is slightly asset sensitive. An asset sensitive balance sheet in an environment where the yield curve moves in a parallel fashion to changes in short term interest rates suggests that in a rising interest rate environment, our net interest margin would generally increase and during a falling interest rate environment, our net interest margin would generally decrease. As discussed above, for the six months ended June 30, 2006, our net interest margin decreased slightly even with our asset sensitive position as our funding costs increased faster than the movement in rates across the yield curve, which had the effect of nullifying any positive effect of the asset sensitivity of our balance sheet.

Net Interest Income Simulation

In order to measure interest rate risk, we use a simulation model to project changes in net interest income that result from forecasted changes in interest rates. This analysis calculates the difference between net interest income forecasted using a rising and a falling interest rate scenario and a net interest income forecast using a base market interest rate derived from the current treasury yield curve. The income simulation model includes various assumptions regarding the re-pricing relationships for each of our products. Many of our assets are floating rate loans, which are assumed to re-price immediately, and to the same extent as the change in market rates according to their contracted index. Some loans and investment vehicles include the opportunity of prepayment (embedded options), and accordingly, the simulation model uses national indexes to estimate these prepayments and reinvest their proceeds at current yields. Our non-term deposit products re-price more slowly, usually changing less than the change in market rates and at our discretion.

This analysis indicates the impact of changes in net interest income for the given set of rate changes and assumptions. It assumes no growth in the balance sheet and that its structure will remain similar to the structure at year end. It does not account for all factors that impact this analysis, including changes by management to mitigate the impact of interest rate changes or secondary impacts such as changes to our credit risk profile as interest rates change. Furthermore, loan prepayment rate estimates and spread relationships change regularly. Interest rate changes create changes in actual loan prepayment rates that will differ from the market estimates incorporated in this analysis. Changes that vary significantly from the assumptions may have significant effects on our net interest income.

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As of June 30, 2006, the following table presents forecasted net interest income and net interest margin using a base market rate and the estimated change to the base scenario given immediate and sustained upward and downward movement in interest rates of 100 basis points and 200 basis points:

Interest Rate Scenario	Adjusted Net Interest Income		Percentage Change from Base		Net Interest Margin Percent		Net Interest Margin Change (in basis points)
	(Dollars in thousands)
Up 200 basis points	$	127,467	6.38	%	5.98	%	36
Up 100 basis points	$	123,820	3.34	%	5.80	%	18
BASE CASE	$	119,817	0.00	%	5.62	%	—
Down 100 basis points	$	115,704	(3.43	)%	5.42	%	(20	)
Down 200 basis points	$	108,763	(9.23	)%	5.10	%	(52	)

Our simulation results as of June 30, 2006 indicate our interest rate risk position was asset sensitive as the simulated impact of an immediate upward movement in interest rates of 200 basis points would result in a 6.38% increase in net interest income over the subsequent 12 month period while an immediate downward movement in interest rates of 200 basis points would result in a 9.23% decrease in net interest income over the next 12 months. The simulation results indicate that a 200 basis point upward shift in interest rates would result in a 36 basis point increase in our net interest margin, assuming all other variables remained unchanged. Conversely, a 200 basis point decline in interest rates would cause a 52 basis point decrease in our net interest margin.

ITEM 3. Quantitative and Qualitative Disclosures about Market Risk

Please see the section above titled “Quantitative and Qualitative Disclosures About Market Risk” in “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations” which provides an update to our quantitative and qualitative disclosure about market risk. This analysis should be read in conjunction with text under the caption “Quantitative and Qualitative Disclosures About Market Risk” filed with our Annual Report on Form 10-K for the year ended December 31, 2005. Our analysis of market risk and market-sensitive financial information contains forward-looking statements and is subject to the disclosure at the beginning of Item 2 of this report regarding such forward-looking information.

ITEM 4. Controls and Procedures

In accordance with Rule 13a-15(b) of the Exchange Act, as of the quarter ended June 30, 2006, we carried out an evaluation under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures are effective as of the end of the period covered in this report.

During the quarter ended June 30, 2006, there have been no changes in our internal controls over financial reporting that has materially affected, or are reasonably likely to materially affect, these controls.

PART II—OTHER INFORMATION

ITEM 1. Legal Proceedings

In the ordinary course of our business, we are party to various legal actions, which we believe are incidental to the operation of our business. Although the ultimate outcome and amount of liability, if any, with respect to these legal actions to which we are currently a party cannot presently be ascertained with certainty, in the opinion of management, based upon information currently available to us, any resulting liability is not likely to have a material adverse effect on our consolidated financial position, results of operations or cash flows. This statement represents a forward-looking statement under the Private Securities Litigation Reform Act of 1995. Actual results could differ materially from management’s opinion based on a variety of factors, including the uncertainties involved in the proof of legal and factual matters in legal proceedings.

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Cerritos Valley Dissenters

We were served with an appeal brief in February 2006, which appealed the judgment and satisfaction of judgment filed and entered by the Superior Court of the State of California for the County of Orange in a litigation matter, Bank of Orange County v. Azar. et al. The litigation matter involves Bank of Orange County, a division of our bank. Bank of Orange County v. Azar et al, was originally filed on November 18, 2003. On June 23, 2005, Bank of Orange County received a notice of entry of judgment and satisfaction of judgment with respect to this matter. The litigation relates to a number of Cerritos Valley Bank shareholders who exercised their statutory right pursuant to Chapter 13 of the California Corporations Code to dissent from the 2002 merger of Cerritos Valley Bank with and into Bank of Orange County. Rather than accept the merger consideration of $9.79 per share of common stock paid to Cerritos Valley Bank shareholders who did not dissent from the merger, the dissenting shareholders claimed that the fair market value of their shares of common stock was $25.76 per share. Prior to consummation of the merger, Bank of Orange County deposited the sum of approximately $3.8 million with the exchange agent for the merger, representing $9.79 per share multiplied by the number of shares held by dissenting shareholders.

In January 2004, Bank of Orange County and the dissenting shareholders entered into a settlement agreement, which provided that the fair market value of the shares would be determined by an appraisal process. Under the terms of the agreement, each party’s appraiser valued the shares. After conducting the appraisal, each appraiser reached a different dollar amount. Because the difference between the two amounts exceeded a specified range, the settlement agreement provided that a third appraiser be selected by the two other appraisers, to determine the fair market value of the Cerritos Valley Bank common stock. The third appraiser determined that the fair market value of the shares held by the dissenting shareholders was $5.95. Based on the $5.95 valuation, the bank paid the dissenting shareholders approximately $2.2 million. On June 20, 2005, the Superior Court of the State of California in Orange County entered judgment stating that the amount the Bank paid to the dissenting shareholders represented full satisfaction of both the settlement agreement and all amounts owed by Bank of Orange County pursuant to Chapter 13 of the California Corporations Code.

The appeal brief was filed in February 2006 by dissenting shareholders that hold a majority of the Cerritos Valley Bank common stock shares involved in the litigation. Shareholders holding the remaining Cerritos Valley Bank common stock shares involved in the litigation are not participating in the appeal. Bank of Orange County intends to continue to vigorously defend this action and filed a response to the appeal brief in June 2006.

ALC Bankruptcy Case

On October 27, 2005, the bankruptcy trustee of ALC Building Corporation filed an adversary action in the United States Bankruptcy Court, Central District of California against Bank of Orange County, a division of our bank in a matter entitled Peter C. Anderson, Trustee of ALC v. Bank of Orange County. ALC was a former vendor of Bank of Orange County that was retained to provide construction funding services. Creditors of ALC filed an involuntary Chapter 7 bankruptcy petition against ALC on March 5, 2004. The bankruptcy trustee sought damages in the amount of $577,853.30 from Bank of Orange County for all funds Bank of Orange County received from ALC in the 90-day period prior to the date the involuntary bankruptcy petition was filed against ALC, plus interest and costs. Bank of Orange County vigorously defended the action. However, the bankruptcy trustee filed a motion for summary judgment, which was granted on June 12, 2006 and judgment was entered against Bank of Orange County in the amount of $577,853.30, plus interest and costs. Bank of Orange County tendered a check in the amount of $613,372.87 at the beginning of August 2006 to satisfy the judgment. Bank of Orange County intends to file a proof of claim as an unsecured creditor in the Chapter 7 bankruptcy and we estimate the net loss to be approximately $500,000.

I TEM 1A. Risk Factors

In addition to the other information set forth in this report and the risk factors set forth in our Annual Report on Form 10-K for the year ended December 31, 2005, you should carefully consider the factors set forth below, which have changed from the risk factors discussed in our Annual Report to set forth specific risks related to the acquisition of Southwest Community Bancorp and have also changed to reflect the Company’s strategy to grow internally rather than primarily growing through acquisitions. The risk factors have also changed to reflect our concentration of deposits. The risks described below are not the only risks facing our Company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results.

Our growth and expansion may strain our ability to manage our operations and our financial resources.

Our financial performance and profitability depend on our ability to execute our corporate growth strategy. In addition to seeking deposit and loan and lease growth in existing markets, we continually evaluate pursuing expansion opportunities through strategically placed new branches. Since 2004, we have also executed our corporate growth strategy by acquiring community banks in identified strategic markets. Continued growth, however, may present operating and other problems that could adversely affect our business, financial condition, results of operations and cash flows. Accordingly, there can be no assurance that Placer Sierra Bancshares will be able to execute our growth strategy or maintain the level of profitability that we have recently experienced.

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Our growth may also place a strain on our administrative, operational and financial resources and increase demands on our systems and controls. We plan to pursue opportunities to expand our business through internally generated growth and have also expanded our business through acquisitions. This business growth may require continued enhancements to and expansion of our operating and financial systems and controls and may strain or significantly challenge them. The process of consolidating the businesses and implementing the strategic integration of any acquired businesses, such as Southwest Community Bancorp and Southwest Community Bank, with our existing business may take a significant amount of time. It may also place additional strain on Placer Sierra Bancshares’ resources and could subject us to additional expenses. We cannot assure you that we will be able to integrate any acquired businesses successfully or in a timely manner. In addition, our existing operating and financial control systems and infrastructure may not be adequate to maintain and effectively monitor future growth.

Our continued growth may also increase the need for qualified personnel. We cannot assure you that we will be successful in attracting, integrating and retaining such personnel.

We face risks associated with the acquisition of Southwest Community Bancorp relating to difficulties in integrating combined operations, potential disruption of operations and related negative impact on earnings and incurrence of substantial expenses.

We recently acquired Southwest Community Bancorp. In connection with this acquisition, we face risks commonly encountered, including disruption of our ongoing business, difficulty in integrating acquired operations and personnel, inability of our management to maximize our financial and strategic position by the successful implementation of uniform product offerings and the incorporation of uniform technology into our product offerings and control system, and inability to maintain uniform standards, controls, procedures and policies and the impairment of relationships with employees and customers as a result of changes in management. We cannot assure you that we will be successful in overcoming these risks or any other problems encountered in connection with this acquisition. We cannot assure you that integration of acquired Southwest Community Bank’s or its branches’ operations will be successfully accomplished. The inability to improve the operating performance of Southwest Community Bank and its branches or to integrate successfully their operations could have a material adverse effect on our business, financial condition, results of operations and cash flows.

Our balance sheet is asset sensitive. Our business is subject to interest rate risk and variations in interest rates may negatively affect our financial performance.

A substantial portion of our income is derived from the differential or “spread” between the interest earned on loans, securities and other interest earning assets, and interest paid on deposits, borrowings and other interest bearing liabilities. At June 30, 2006 our balance sheet was asset sensitive in an environment where the yield curve moves in a parallel fashion to changes in short term interest rates, which means that our net interest margin tends to expand in a rising interest rate environment and decline in a falling interest rate environment. However, for the first six months of 2006, our funding costs have increased faster than the movement in rates across the yield curve, which has had the effect of nullifying any positive effect of the asset sensitivity of our balance sheet. Beginning in 2006, we increased rates paid on deposit accounts to retain existing customers and attract new deposit customers. As short-term rates continue to rise, retention of existing deposit customers and the attraction of new deposit customers may require us to continue increasing rates we pay on deposit accounts faster than increases in interest rates across the yield curve. Accordingly, changes in levels of market interest rates could materially and adversely affect our net interest spread, asset quality, loan origination volume, business, financial condition, results of operations and cash flows.

Because of the differences in the maturities and repricing characteristics of our interest earning assets and interest bearing liabilities, changes in interest rates do not produce equivalent changes in interest income earned on interest earning assets and interest paid on interest bearing liabilities. Accordingly, fluctuations in interest rates could adversely affect our interest rate spread and, in turn, our profitability. In addition, loan origination volumes are affected by market interest rates. Rising interest rates, generally, are associated with a lower volume of loan originations while lower interest rates are usually associated with higher loan originations. Conversely, in rising interest rate environments, loan repayment rates may decline and in falling interest rate environments, loan repayment rates may increase. Falling interest rate environments may cause additional refinancing of commercial real estate and 1-4 family residence loans, which may depress our loan volumes or cause rates on loans to decline. In addition, an increase in the general level of short-term interest rates on variable rate loans may adversely affect the ability of certain borrowers to pay the interest on and principal of their obligations or reduce the amount they wish to borrow.

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The types of loans in our portfolio have a higher degree of risk and a downturn in our real estate markets could hurt our business.

A downturn in our real estate markets could hurt our business because most of our loans are secured by real estate. Real estate values and real estate markets are generally affected by changes in national, regional or local economic conditions, fluctuations in interest rates and the availability of loans to potential purchasers, changes in tax laws and other governmental statutes, regulations and policies and acts of nature. If real estate prices decline, the value of real estate collateral securing our loans could be reduced. Our ability to recover on defaulted loans by foreclosing and selling the real estate collateral would then be diminished and we would be more likely to suffer losses on defaulted loans. As of June 30, 2006, approximately 88.9% of the book value of our loan portfolio consisted of loans collateralized by various types of real estate. Substantially all of our real estate collateral is located in California. If there is a significant decline in real estate values, especially in California, the collateral for our loans will provide less security. Real estate values could also be negatively affected by, among other things, earthquakes and other natural disasters particular to California. The median sales price of an existing single-family detached home in California increased 6.2% from June 2005 to June 2006, while the number of homes sold decreased 26.3% during the same period. Any such downturn could have a material adverse effect on our business, financial condition, results of operations and cash flows.

If we cannot attract deposits, our growth may be inhibited. A significant amount of our deposits are concentrated in a few customers and loss of any of these customers could significantly impact our growth and earnings.

We plan to increase significantly the level of our assets, including our loan portfolio. Our ability to increase our assets depends in large part on our ability to attract additional deposits at favorable rates. We intend to seek additional deposits by offering deposit products that are competitive with those offered by other financial institutions in our markets and by establishing personal relationships with our customers. We cannot assure you that these efforts will be successful. Our inability to attract additional deposits at competitive rates could have a material adverse effect on our business, financial condition, results of operations and cash flows.

A significant amount of our deposits are concentrated in a few customers. As of June 30, 2006, approximately 19.9% of total deposits are concentrated in four relationships with 13.4% of total deposits concentrated in one relationship. One of these relationships consists of deposits totaling $45.8 million, or 2.1%, of total deposits that are short-term in nature. Additionally, 36.7% of demand deposits are concentrated in two relationships. Loss of any of these customers could significantly impact our growth and earnings.

Our future ability to pay dividends is subject to restrictions. As a result, capital appreciation, if any, of our common stock may be your sole source of gains in the future.

Since we are a holding company with no significant assets other than the bank, we currently depend upon dividends from the bank for a substantial portion of our revenues. Our ability to pay dividends will continue to depend in large part upon our receipt of dividends or other capital distributions from the bank. Our ability to pay dividends is also subject to the restrictions of the California General Corporation Law.

The ability of the bank to pay dividends or make other capital distributions to us is subject to the regulatory authority of the Board of Governors of the Federal Reserve System, or the Federal Reserve, and the California Department of Financial Institutions or the DFI. As of June 30, 2006, the bank could have paid approximately $18.7 million in dividends without the prior approval of the Federal Reserve or the DFI. The amount the bank may pay in dividends may be further restricted due to the fact that the bank must maintain a certain minimum amount of capital to be considered a “well-capitalized” institution. Accordingly, the amount available for payment of dividends to us by the bank for the bank to remain “well-capitalized” immediately thereafter totaled $29.0 million at June 30, 2006. Accordingly, the maximum amount available for payment to the holding company is $18.7 million without prior regulatory approval.

From time to time, we may become a party to financing agreements or other contractual arrangements that have the effect of limiting or prohibiting us or the bank from declaring or paying dividends. Our holding company expenses and obligations with respect to our trust preferred securities and corresponding junior subordinated deferrable interest debenture issued by us may limit or impair our ability to declare or pay dividends. In addition, our ability to pay dividends is limited by certain covenants contained in the indentures pursuant to which we issued the subordinated deferrable interest debentures.

On a stand-alone basis, we rely on dividends from the bank as our sole source of liquidity.

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If we fail to maintain effective systems of internal and disclosure control, we may not be able to accurately report our financial results or prevent fraud. As a result, current and potential stockholders could lose confidence in our financial reporting, which would harm our business and the trading price of our securities.

Effective internal and disclosure controls are necessary for us to provide reliable financial reports and effectively prevent fraud and to operate successfully as a public company. If we cannot provide reliable financial reports or prevent fraud, our reputation and operating results would be harmed. As part of our ongoing monitoring of internal control we may discover material weaknesses or significant deficiencies in our internal control as defined under standards adopted by the Public Company Accounting Oversight Board, or PCAOB, that require remediation. Under the PCAOB standards, a “material weakness” is a significant deficiency or combination of significant deficiencies that results in more than a remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected. A “significant deficiency” is a control deficiency or combination of control deficiencies, that adversely affect a company’s ability to initiate, authorize, record, process, or report financial data reliably in accordance with generally accepted accounting principles such that there is a more than remote likelihood that a misstatement of a company’s annual or interim financial statements that is more than inconsequential will not be prevented or detected.

As a result of weaknesses that may be identified in our internal controls, we may also identify certain deficiencies in some of our disclosure controls and procedures that we believe require remediation. If we discover weaknesses, we will make efforts to improve our internal and disclosure controls. However, there is no assurance that we will be successful. Any failure to maintain effective controls or timely effect any necessary improvement of our internal and disclosure controls could harm operating results or cause us to fail to meet our reporting obligations, which could affect our ability to remain listed with the Nasdaq National Market. Ineffective internal and disclosure controls could also cause investors to lose confidence in our reported financial information, which would likely have a negative effect on the trading price of our securities.

ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds

None.

ITEM 3. Defaults Upon Senior Securities

None.

ITEM 4. Submission of Matters to a Vote of Security Holders

(a) We held our annual meeting of shareholders on May 31, 2006.

(b) The following directors were elected at the annual meeting to serve for a one-year term:

Ronald W. Bachli

Christi Black

Robert J. Kushner

Larry D. Mitchell

Dwayne A. Shackelford

William J. Slaton

Robert H. Smiley

Sandra R. Smoley

(c) At the annual meeting, the shareholders voted on the following proposals:

(1) to approve the principal terms of the Agreement and Plan of Merger and Reorganization, including the issuance of common stock described therein, by and between Placer Sierra Bancshares and Southwest Community Bancorp dated as of February 15, 2006, and the transactions contemplated thereby;

(2) to elect our directors;

(3) to approve an amendment to our Bylaws to change the authorized range of directors to seven (7) to thirteen (13) directors;

(4) to ratify the appointment of Perry-Smith LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2006; and

(5) to approve a proposal to grant discretionary authority to adjourn the annual meeting if necessary to permit further solicitation of proxies if there are not sufficient votes at the time of the annual meeting to approve the terms of the merger agreement.

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The results of the voting were as follows:

Matter	Votes For	Votes Against	Withheld	Abstentions	Broker Non-Votes
Approve Merger Agreement	13,034,362	14,900	N/A	21,800	813,917
Election of Directors
Ronald W. Bachli	13,631,424	N/A	253,575	N/A	N/A
Christi Black	13,865,456	N/A	19,543	N/A	N/A
Robert J. Kushner	13,715,690	N/A	169,309	N/A	N/A
Larry D. Mitchell	13,495,705	N/A	389,294	N/A	N/A
Dwayne A. Shackelford	13,811,090	N/A	73,909	N/A	N/A
William J. Slaton	13,769,756	N/A	115,243	N/A	N/A
Robert H. Smiley	13,769,711	N/A	115,288	N/A	N/A
Sandra R. Smoley	13,715,145	N/A	169,854	N/A	N/A
Bylaw Amendment	13,852,474	18,204	N/A	14,321	0
Independent Public Accountants	13,449,863	431,571	N/A	3,565	0
Authority to Adjourn Meeting	12,463,266	1,411,033	N/A	10,700	0

(d) Not applicable.

ITEM 5. Other Information

None.

ITEM 6. Exhibits

(d) Exhibits.

Exhibit Number	Exhibit Title or Description
3.1	Amended and Restated Bylaws of the Registrant as of May 31, 2006, as amended on June 14, 2006.
4.1	Warrant Agreement by and between Southwest Community Bank and U.S. Stock Transfer Corporation dated as of April 19, 2002.
4.1(a)	Assignment and Assumption Agreement by and between US Stock Transfer Corporation, Wells Fargo Bank, N.A., the Registrant, and Placer Sierra Bank dated June 9, 2006.
4.1(b)	First Amendment to Warrant Agreement by and between the Registrant and Wells Fargo Bank, N.A. dated June 12, 2006.
4.1 (c)	Form of Warrant.
4.3	Indenture dated as of April 22, 2003 by and between Southwest Community Bancorp and U.S. Bank National Association, as Trustee.
4.3(a)	Amended and Restated Declaration of Trust of Southwest Community Statutory Trust I dated as of April 22, 2003, among Southwest Community Bancorp, U.S. Bank National Association, as Institutional Trustee, and Frank J. Mercardante, James Lemery and Paul M. Weil, as Administrators.
4.3(b)	Guarantee Agreement dated as of April 22, 2003 between Southwest Community Bancorp, as Guarantor and U.S. Bank National Association, as Guarantee Trustee.

42

4.3	(c)	Form of Floating Rate Junior Subordinated Deferrable Interest Debentures (included as Exhibit A to Exhibit 4.3).
4.3	(d)	First Supplemental Indenture by and between U.S. Bank National Association and Placer Sierra Bancshares dated June 9, 2006.
4.3	(e)	Appointment of Successor Administrators dated as of June 9, 2006, among the Registrant, David E. Hooston, James A. Sundquist and Angelee J. Harris and U.S. Bank National Association.
10.1		2006 Executive Annual Incentive Plan of the Registrant (Exhibit 10.1 to Form 8-K filed with the SEC on June 5, 2006 and incorporated herein by reference).
10.2		Employment Agreement dated as of June 9, 2006 between Ronald W. Bachli and the Registrant.
10.3		Agreement for Severance Benefits, dated as of May 23, 2006, between Thomas Nations and Placer Sierra Bank.
10.4		Executive Supplemental Compensation Agreement, dated January 20, 2005 (as amended on April 28, 2005 and on April 19, 2006) between Southwest Community Bank and Alan J. Lane.
10.4	(a)	Life Insurance Endorsement Method Split Dollar Plan Agreement, dated June 15, 2005 (as amended on April 19, 2006), between Southwest Community Bank and Alan J. Lane.
10.5		Executive Supplemental Compensation Agreement, dated January 20, 2005 (as amended on October 29, 2004, April 19, 2006 and on May 23, 2006) between Southwest Community Bank and Stuart McFarland.
10.5	(a)	Life Insurance Endorsement Method Split Dollar Plan Agreement, dated January 6, 2003 (as amended on October 29, 2004 and April 19, 2006), between Southwest Community Bank and Stuart McFarland.
10.6		Executive Supplemental Compensation Agreement, dated October 17, 2001 (as amended on April 19, 2006) between Southwest Community Bank and Frank J. Mercardante.
10.6	(a)	Life Insurance Endorsement Method Split Dollar Plan Agreement, dated January 6, 2003 (as amended on April 19, 2006) between Southwest Community Bank and Frank J. Mercardante.
21.1		Subsidiaries of the Registrant.
31.1		Certification of Chief Executive Officer under Section 302 of the Sarbanes-Oxley Act of 2002.
31.2		Certification of Chief Financial Officer under Section 302 of the Sarbanes-Oxley Act of 2002.
32.1		Certification of Chief Executive Officer under Section 906 of the Sarbanes-Oxley Act of 2002.
32.2		Certification of Chief Financial Officer under Section 906 of the Sarbanes-Oxley Act of 2002.

43

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	PLACER SIERRA BANCSHARES
Dated: August 8, 2006	/s/ David E. Hooston
	David E. Hooston Chief Financial Officer

44

EX-3.1

Exhibit 3.1

AMENDED AND RESTATED BYLAWS

OF

PLACER SIERRA BANCSHARES

A California Corporation

Amended and Restated as of May 31, 2006

TABLE OF CONTENTS

		Page
ARTICLE I. Offices		3
Section 1.	Principal Office.	3
Section 2.	Other Offices.	3
ARTICLE II. Meetings of Shareholders		3
Section 3.	Place of Meetings.	3
Section 4.	Annual Meetings.	3
Section 5.	Special Meetings.	3
Section 6.	Notice of Shareholders’ Meetings.	4
Section 7.	Quorum.	4
Section 8.	Adjourned Meeting.	5
Section 9.	Waiver or Consent by Shareholders.	5
Section 10.	Action Without Meeting.	5
Section 11.	Voting Rights.	5
Section 12.	Proxies.	6
Section 13.	Voting by Joint Holders or Proxies.	6
Section 14.	Inspectors of Election.	7
Section 15.	Shareholder Proposals.	7
ARTICLE III. Directors; Management		8
Section 16.	Powers.	8
Section 17.	Number and Qualification of Directors.	8
Section 18.	Election and Term of Office.	9
Section 19.	Removal of Directors.	9
Section 20.	Vacancies.	9
Section 21.	Place of Meetings.	10
Section 22.	Organizational Meetings.	10
Section 23.	Other Regular Meetings.	10
Section 24.	Special Meetings.	10
Section 25.	Quorum.	10
Section 26.	Contents of Notice and Waiver of Notice.	11
Section 27.	Adjournment.	11
Section 28.	Notice of Adjournment.	11
Section 29.	Telephone Participation.	11
Section 30.	Action Without Meeting.	11
Section 31.	Fees and Compensation.	11

- i -

Section 32.	Audit Committee.	11
Section 33.	Compensation Committee.	11
Section 34.	Nominating and Corporate Governance Committee.	12
ARTICLE IV. Officers		12
Section 35.	Officers.	12
Section 36.	Election.	12
Section 37.	Subordinate Officers.	12
Section 38.	Removal and Resignation.	13
Section 39.	Vacancies.	13
Section 40.	Chairman of the Board.	13
Section 41.	President.	13
Section 42.	Vice President.	13
Section 43.	Secretary.	13
Section 44.	Chief Financial Officer.	14
ARTICLE V. General Corporate Matters		14
Section 45.	Record Date and Closing of Stock Books.	14
Section 46.	Corporate Records and Inspection by Shareholders.	15
Section 47.	Checks, Drafts, Evidences of Indebtedness.	15
Section 48.	Corporate Contracts and Instruments; How Executed.	15
Section 49.	Stock Certificates.	16
Section 50.	Lost Certificates.	16
Section 51.	Reports to Shareholders.	16
Section 52.	Indemnity of Officers, Directors, etc.	16
Section 53.	Fiscal Year.	16
Section 54.	Construction and Definitions.	16
ARTICLE VI. Amendments		17
Section 55.	Power to Amend.	17
Section 56.	Amendment Affecting Election of Directors.	17

- ii -

AMENDED AND RESTATED BYLAWS

OF

PLACER SIERRA BANCSHARES

(A California Corporation)

ARTICLE I.

Offices

Section 1. Principal Office. The Board of Directors shall fix the location of the principal executive office of the corporation at any place within or outside the State of California. If the principal executive office is located outside such state and the corporation has one or more business offices in such state, then the Board of Directors shall fix and designate a principal business office in the State of California.

The location of the principal executive office of the corporation shall be 525 J Street, Sacramento, California 95814, until changed by a resolution of the Board of Directors.

Section 2. Other Offices. One or more branches or other subordinate offices may at any time be fixed and located by the Board of Directors at such place or places within or without the State of California as it deems appropriate.

ARTICLE II.

Meetings of Shareholders

Section 3. Place of Meetings. Meetings of the shareholders shall be held at any place within the State of California that may be designated by the Board of Directors in accordance with these Amended and Restated Bylaws. If no such designation is made, the meetings shall be held at the principal office of the corporation.

Section 4. Annual Meetings. The annual meeting of the shareholders shall be held on the third Tuesday of May of each year. The exact date and time of such annual meeting shall be fixed by resolution of the Board of Directors; provided, however, that should such day fall on a legal holiday, then the meeting shall be held on the next succeeding business day, at which time the shareholders shall elect a Board of Directors, consider reports of the affairs of the corporation, and transact such other business as may properly be brought before the meeting.

If the annual meeting of shareholders shall not be held during the time above specified, the Board of Directors shall cause such a meeting to be held as soon thereafter as convenient and any business transacted or election held at such meeting shall be as valid as if transacted or held at an annual meeting during the time above specified.

Section 5. Special Meetings. Special meetings of the shareholders, for any purpose or purposes whatsoever, may be called at any time by a majority of the Board of Directors, the Chairman of the Board of Directors, the President, or by holders of shares entitled to cast not less than ten percent (10%) of the votes at the meeting.

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Section 6. Notice of Shareholders’ Meetings. Whenever shareholders are required or permitted to take any action at a meeting, a written notice of the meeting shall be given not less than 10 (or, if sent by third class mail, 30) nor more than 60 days before the date of the meeting to each shareholder entitled to vote thereat. Such notice shall state the place, date and hour of the meeting and (1) in the case of a special meeting, the general nature of the business to be transacted, and no other business may be transacted, or (2) in the case of the annual meeting, those matters which the Board of Directors, at the time of the mailing of the notice, intends to present for action by the shareholders, but, subject to the provisions of Section 601(f) of the California Corporations Code, any proper matter may be presented at the meeting for such action. The notice of any meeting at which directors are to be elected shall include the names of nominees intended at the time of the notice to be presented by management for election.

Notice of a shareholders’ meeting shall be given either personally or by first class mail, or, if the corporation has outstanding shares held of record by 500 or more persons (determined as provided in Section 605 of the California Corporations Code) on the record date for the shareholders’ meeting, notice may be sent by third class mail or other means of written communication, addressed to the shareholder at the address of such shareholder appearing on the books of the corporation or given by the shareholder to the corporation for the purpose of notice; or if no such address appears or is given, at the place where the principal office of the corporation is located. The notice shall be deemed to have been given at the time when delivered personally or deposited in the mail or sent by other means of written communication.

If any notice addressed to the shareholder at the address of such shareholder appearing on the books of the corporation is returned to the corporation by the United States Postal Service marked to indicate that the United States Postal Service is unable to deliver the notice to the shareholder at such address, all future notices shall be deemed to have been duly given without further mailing if the same shall be available for the shareholder upon written demand of the shareholder to the principal office of the corporation for a period of one year from the date of the giving of the notice to all other shareholders.

Upon request in writing to the Chairman of the Board of Directors, the President, or the Secretary by any person entitled to call a special meeting of shareholders, the officer forthwith shall cause notice to be given to the shareholders entitled to vote that a meeting will be held at a time requested by the person or persons calling the meeting, not less than 35 nor more than 60 days after the receipt of the request.

Section 7. Quorum. The presence at any meeting, in person or by proxy, of persons entitled to vote a majority of the voting shares of the corporation shall constitute a quorum for the transaction of business. Shareholders present at a valid meeting at which a quorum is initially present may continue to do business until adjournment notwithstanding the withdrawal of enough shareholders to leave less than a quorum, if any action taken (other than adjournment or as otherwise provided in the Amended and Restated Articles of Incorporation or these Amended and Restated Bylaws) is approved by at least a majority of the shares required to constitute a quorum.

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Section 8. Adjourned Meeting. Any annual or special shareholders’ meeting may be adjourned from time to time, even though a quorum is not present, by vote of the holders of a majority of the voting shares present at the meeting either in person or by proxy, provided that in the absence of a quorum, no other business may be transacted at the meeting except as provided in Section 7 of these Amended and Restated Bylaws.

Notice need not be given of the adjourned meeting if the time and place thereof are announced at the meeting at which the adjournment is taken. At the adjourned meeting, any business may be transacted which might have been transacted at the original meeting. If the adjournment is for more than 45 days or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each shareholder of record entitled to vote at the meeting.

Section 9. Waiver or Consent by Shareholders. The transactions of any meeting of shareholders, however called and noticed, and wherever held, are as valid as though had at a meeting duly held after regular call and notice, if a quorum is present either in person or by proxy, and if, either before or after the meeting, each of the persons entitled to vote, not present in person or by proxy, signs a written waiver of notice or a consent to the holding of the meeting or an approval of the minutes thereof. All such waivers, consents and approvals shall be filed with the corporate records or made a part of the minutes of the meeting. Attendance of a person at a meeting shall constitute a waiver of notice of and presence at such meeting, except when the person objects, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened and except that attendance at a meeting is not a waiver of any right to object to the consideration of matters required by Section 6 of these Amended and Restated Bylaws or Section 601(f) of the California Corporations Code to be included in the notice but not so included, if such objection is expressly made at the meeting. Neither the business to be transacted at nor the purpose of any regular or special meeting of shareholders need be specified in any written waiver of notice, consent to the holding of the meeting or approval of the minutes thereof, except as provided in Section 601(f) of the California Corporations Code.

Section 10. Action Without Meeting. Except as may be otherwise provided in the Amended and Restated Articles of Incorporation, no action by written consent of shareholders without a meeting shall be permitted and no such action by written consent shall be valid as approval of any matter by the shareholders.

Section 11. Voting Rights. Only persons in whose names shares entitled to vote stand on the stock records of the corporation at the close of business on the record date fixed by the Board of Directors as provided in Section 46 of these Amended and Restated Bylaws for the determination of shareholders of record shall be entitled to notice of and to vote at such meeting of shareholders.

Except as may be otherwise provided in these Amended and Restated Bylaws, each shareholder entitled to vote shall be entitled to one vote for each share held on each matter

5

submitted to a vote of shareholders. Except as may be otherwise provided in these Amended and Restated Bylaws, in the election of directors, each such shareholder complying with the following paragraph may cumulate such shareholder’s votes and give one candidate a number of votes equal to the number of directors to be elected multiplied by the number of votes to which the shareholder’s shares are normally entitled, or distribute the shareholder’s votes on the same principle among as many candidates as the shareholder thinks fit.

No shareholder shall be entitled to cumulate votes in favor of any candidate or candidates unless such candidate’ or candidates’ names have been placed in nomination prior to the voting and the shareholder has given notice at the meeting prior to the voting of the shareholder’s intention to cumulate the shareholder’s votes. If any one shareholder has given such notice, such fact shall be announced to all shareholders and proxies present, who may then cumulate their votes for candidates in nomination.

Voting may be by voice or ballot, provided that any election of directors must be by ballot upon the demand of any shareholder made at the meeting and before the voting begins.

In any election of directors, the candidates receiving the highest number of votes of the shares entitled to be voted for them, up to the number of directors to be elected by such shares, are elected.

Notwithstanding anything to the contrary in these Amended and Restated Bylaws, at the time that any outstanding shares of capital stock of the corporation are listed on the New York Stock Exchange or American Stock Exchange or any outstanding securities of the corporation are listed on the National Market System of the Nasdaq Stock Market (or any successor to that entity), no shareholder shall have the right to cumulate votes in the election of any directors. This restriction on cumulative voting shall become effective at the first election of directors following the date on which outstanding shares of capital stock or securities of the corporation are listed on one of the foregoing stock exchanges or markets.

Section 12. Proxies. Every person entitled to vote shares may authorize another person or persons to act by proxy with respect to such shares. All proxies must be in writing and must be signed by the shareholder confirming the proxy or his or her attorney-in-fact. No proxy shall be valid after the expiration of 11 months from the date thereof unless otherwise provided in the proxy. Every proxy continues in full force and effect until revoked by the person executing it prior to the vote pursuant thereto, except as otherwise provided in Section 705 of the California Corporations Code. Such revocation may be effected by a writing delivered to the corporation stating that the proxy is revoked or by a subsequent proxy executed by the person executing the prior proxy and presented to the meeting, or as to any meeting, by attendance at such meeting and voting in person by the person executing the proxy. The dates contained on the forms of proxy presumptively determine the order of execution, regardless of the postmark dates on the envelopes in which they are mailed.

Section 13. Voting by Joint Holders or Proxies. Shares or proxies standing in the names of two or more persons shall be voted or represented in accordance with the provisions of Section 704 of the California Corporations Code, so that, unless the Secretary of the Corporation is given written notice to the contrary, if only one of such persons is present in

6

person or by proxy, that person shall have the right to vote all such shares, and all of the shares standing in the names of such persons shall be deemed to be represented for the purpose of determining a quorum.

Section 14. Inspectors of Election. In advance of any meeting of shareholders the Board may appoint inspectors of election to act at the meeting and any adjournment thereof. If inspectors of election are not so appointed, or if any persons so appointed fail to appear or refuse to act, the Chairman of any meeting of shareholders may, and on the request of any shareholder or a shareholder’s proxy shall, appoint inspectors of election (or persons to replace those who so fail or refuse) at the meeting. The number of inspectors shall be either one or three. If appointed at a meeting on the request of one or more shareholders or proxies, the majority of shares represented in person or by proxy shall determine whether one or three inspectors are to be appointed. If there are three inspectors of election, the decision, act or certificate of a majority is effective in all respects as the decision, act or certificate of all.

The inspectors of election shall determine the number of shares outstanding and the voting power of each, the shares represented at the meeting, the existence of a quorum and the authenticity, validity and effect of proxies; receive votes, ballots or consents; hear and determine all challenges and questions in any way arising in connection with the right to vote; count and tabulate all votes or consents; determine when the polls shall close; determine the result and do such acts as may be proper to conduct the election or vote with fairness to all shareholders.

Section 15. Shareholder Proposals. No proposal for a shareholder vote on any matter shall be submitted to the corporation’s shareholders at a meeting of shareholders (whether an annual or special meeting) unless the shareholder submitting such proposal has submitted to the President of the corporation not less than 60 days prior to the meeting of shareholders a written notice setting forth with particularity (i) the name and address of the shareholder submitting such proposal and all persons acting in concert with such shareholder; (ii) the name and address of the persons identified in clause (i), as they appear on the corporation’s books (if they so appear); (iii) the class and number of shares of capital stock of the corporation beneficially owned by the persons identified in clause (i); (iv) a description of the proposal containing all material information relating thereto, including, without limitation, the reasons for submitting such proposal; and (v) such other information as the Board of Directors reasonably determines is necessary or appropriate to enable the Board of Directors and shareholders of the corporation to consider such proposal.

Only persons who are nominated in accordance with the procedures set forth in this Section 15 shall be eligible for election as directors. Nominations of persons for election to the Board of Directors of the corporation may be made at a meeting of shareholders by or at the direction of the Board of Directors or by any shareholder of the corporation entitled to vote for the election of directors at the meeting who complies with the notice procedures set forth in this Section 15. Such nominations, other than those made by or at the direction of the Board of Directors, shall be made pursuant to timely notice in writing to the Secretary of the corporation. To be timely, a shareholder’s notice shall be delivered to or mailed and received at the principal executive offices of the corporation not less than 60 days nor more than 90 days prior to the meeting; provided, however, that in the event that less than 21 days’ notice

7

of the date of the meeting is given to shareholders, notice by the shareholder to be timely must be so received not later than the close of business on the 10th day following the day on which such notice of the date of the meeting was mailed. Such shareholder’s notice shall set forth (a) as to each person whom the shareholder proposes to nominate for election or re-election as a director, (i) the name, age, business address and residence address of each such person; (ii) the principal occupation or employment of each such person; (iii) the class and number of shares of capital stock of the corporation beneficially owned by each such person; and (iv) any other information relating to such person that is required to be disclosed in solicitations of proxies for election of directors, or is otherwise required, in each case pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended (including without limitation such persons’ written consent to being named in the proxy statement as a nominee and to serving as a director if elected); and (b) as to the shareholder giving the notice, (i) the name and address, as they appear on the corporation’s books, of such shareholder and (ii) the class and number of shares of capital stock of the corporation beneficially owned by such shareholder. No person shall be eligible for election as a director of the corporation unless nominated in accordance with the procedures set forth in this Section 15. The Chairman of the meeting shall, if the facts warrant, determine that a nomination was not made in accordance with the procedures prescribed by the bylaws, and if he should so determine, he shall so declare to the meeting and the defective nomination shall be disregarded. A copy of this paragraph shall be set forth in a notice to shareholders of any annual or special meeting of the shareholders.

ARTICLE III.

Directors; Management

Section 16. Powers. Subject to any provisions of the Amended and Restated Articles of Incorporation, of the Amended and Restated Bylaws and of law limiting the powers of the Board of Directors or reserving powers to the shareholders, the Board of Directors shall, directly or by delegation, manage the business and affairs of the corporation and exercise all corporate powers permitted by law. The Board of Directors shall organize and operate the following standing committees: Audit, Compensation, Executive and Nominating and Corporate Governance. The Board of Directors may organize and operate any other committees deemed necessary and desirable by the Board of Directors.

Section 17. Number and Qualification of Directors. The number of directors of the corporation shall be not less than seven (7) and not more than thirteen (13). The exact number of directors shall be ten (10) until changed, within the limits specified above, by a resolution duly adopted by the Board of Directors or by the shareholders of the corporation. No reduction of the authorized number of directors shall have the effect of removing any director before his or her term of office expires.

Nomination for election of members of the Board of Directors may be made by the Board of Directors or by any shareholder of any outstanding class of capital stock of the corporation entitled to vote for the election of directors. Notice of intention to make any nominations by shareholders shall be made in writing as specified in Section 15 of these

8

Amended and Restated Bylaws. Nominations not made in accordance therewith or is otherwise not in accordance with law may, in the discretion of the Chairman of the meeting, be disregarded and upon the Chairman’s instructions, the inspectors of election can disregard all votes cast for each such nominee.

Section 18. Election and Term of Office. The directors shall be elected annually by the shareholders at the annual meeting of the shareholders; provided, that if for any reason, said annual meeting or an adjournment thereof is not held or the directors are not elected thereat, then the directors may be elected at any special meeting of the shareholders called and held for that purpose. The term of office of the directors shall, except as provided in Section 19 of these Amended and Restated Bylaws, begin immediately after their election and shall continue until their respective successors are elected and qualified.

Section 19. Removal of Directors. A director may be removed from office by the Board of Directors if he or she is declared of unsound mind by an order of court or convicted of a felony. Any or all of the directors may be removed from office without cause by a vote of shareholders holding a majority of the outstanding shares entitled to vote at an election of directors; however, unless the entire Board of Directors is removed, subject to any restriction on cumulative voting in Section 11 of these Amended and Restated Bylaws, an individual director shall not be removed if the votes cast against removal, or not consenting in writing to such removal (subject to Section 10 of these Amended and Restated Bylaws), would be sufficient to elect such director if voted cumulatively at an election at which the same total number of votes were cast, or, if such action is taken by written consent (subject to Section 10 of these Amended and Restated Bylaws), all shares entitled to vote were voted, and the entire number of directors authorized at the time of the director’s most recent election were then being elected. A director may also be removed from office by the Superior Court of the county in which the principal office is located, at the suit of shareholders holding at least ten percent (10%) of the number of outstanding shares of any class, in case of fraudulent or dishonest acts or gross abuse of authority or discretion with reference to the corporation, in the manner provided by law.

Section 20. Vacancies. A vacancy or vacancies on the Board of Directors shall exist on the death, resignation, or removal of any director, or if the authorized number of directors is increased or the shareholders fail to elect the full authorized number of directors.

Except for a vacancy created by the removal of a director, vacancies on the Board of Directors may be filled by a majority of the remaining directors although less than a quorum, or by a sole remaining director, and each director elected in this manner shall hold office until his or her successor is elected at an annual or special shareholders’ meeting.

The shareholders may elect a director at any time to fill any vacancy not filled by the directors.

Any director may resign effective upon giving written notice to the Chairman of the Board of Directors, the President, the Secretary or the Board of Directors of the corporation, unless the notice specifies a later time for the effectiveness of such resignation. If the resignation is effective at a future time, a successor may be elected to take office when the resignation becomes effective.

9

Section 21. Place of Meetings. Regular and special meetings of the Board of Directors shall be held at any place within the State of California that is designated by resolution of the Board or, either before or after the meeting, consented to in writing by all the Board members. If the place of a regular or special meeting is not fixed by resolution or written consents of the Board, it shall be held at the corporation’s principal office.

Section 22. Organizational Meetings. Immediately following each annual shareholders’ meeting, the Board of Directors shall hold a regular meeting to organize, elect officers, and transact other business. Notice of this meeting shall not be required.

Section 23. Other Regular Meetings. Other regular meetings of the Board of Directors shall be held at least once each calendar quarter at such time and place as the Board of Directors by resolution shall determine. Notice of these regular meetings shall not be required.

Section 24. Special Meetings. Special meetings of the Board of Directors for any purpose may be called at any time by the Chairman of the Board of Directors, or the President, or any Vice President, or the Secretary, or any two directors.

Special meetings of the Board shall be held upon four days’ notice by mail or 48 hours’ notice delivered personally or by telephone, including a voice messaging system or other technology designed to record and communicate messages, telegraph, facsimile, electronic mail or other electronic means. Notice by mail shall be deemed to have been given at the time a written notice is deposited in the United States Mails, postage prepaid. Any other written notice, including facsimile, telegram or electronic mail message, shall be deemed to have been given at the time it is personally delivered to the recipient or is delivered to a common carrier for transmission, or actually transmitted by the person giving the notice by electronic means, to the recipient. Oral notice shall be deemed to have been given at the time it is communicated, in person or by telephone, including a voice messaging system or other system or technology designed to record or communicate messages, or wireless, to the recipient, including the recipient’s designated voice mailbox or address on such system, or to a person at the office of the recipient who the person giving the notice has reason to believe will promptly communicate it to the recipient.

Section 25. Quorum. A majority of the authorized number of directors shall constitute a quorum for the transaction of business, except to adjourn a meeting under Section 27 of these Amended and Restated Bylaws. Every act done or decision made by a majority of the directors present at a meeting at which a quorum is present shall be regarded as the act of the Board of Directors, unless the vote of a greater number is required by law, the Amended and Restated Articles of Incorporation, or these Amended and Restated Bylaws, and subject to the provisions of Section 310 and Section 317(e) of the California Corporations Code. A meeting at which a quorum is initially present may continue to transact business notwithstanding the withdrawal of directors, if any action taken is approved by a majority of the required quorum for such meeting.

10

Section 26. Contents of Notice and Waiver of Notice. Neither the business to be transacted at, nor the purpose of, any regular or special Board meeting need be specified in the notice or waiver of notice of the meeting. Notice of a meeting need not be given to any director who signs a waiver of notice or a consent to holding the meeting or an approval of the minutes thereof, either before or after the meeting, or who attends the meeting without protesting, prior thereto or at its commencement, the lack of notice to said director. All such waivers, consents and approvals shall be filed with the corporate records or made a part of the minutes of the meeting.

Section 27. Adjournment. A majority of the directors present, whether or not a quorum is present, may adjourn any meeting to another time and place.

Section 28. Notice of Adjournment. Notice of the time and place of holding an adjourned meeting need not be given to absent directors if the time and place are fixed at the meeting being adjourned, except that if the meeting is adjourned for more than 24 hours such notice shall be given prior to the adjourned meeting to the directors who were not present at the time of the adjournment.

Section 29. Telephone Participation. Members of the Board may participate in a meeting through use of conference telephone or similar communications equipment, so long as all members participating in such meetings can hear one another. Such participation constitutes presence in person at such meeting.

Section 30. Action Without Meeting. The Board of Directors may take any action without a meeting that may be required or permitted to be taken by the Board at a meeting, if all members of the Board individually or collectively consent in writing to the action. The written consent or consents shall be filed in the minutes of the proceedings of the Board of Directors. Such action by written consent shall have the same effect as a unanimous vote of directors.

Section 31. Fees and Compensation. Directors and members of committees shall receive neither compensation for their services nor reimbursement for their expenses unless these payments are fixed by resolution of the Board. Unless otherwise prohibited by law or by the rules of the National Association of Securities Dealers, Inc., this Section 31 shall not be construed to preclude any director from serving the corporation in any other capacity as an officer, agent, employee or otherwise, and receiving compensation for those services.

Section 32. Audit Committee. The Audit Committee of the Board of Directors shall act on behalf of the Board of Directors to select and recommend accountants to conduct the annual audit of the corporation, shall receive reports of audits and other reviews or examinations of the activities and operations of the corporation, and such other powers and duties as are described in a charter adopted by majority vote of the Board of Directors.

Section 33. Compensation Committee. The Compensation Committee of the Board of Directors shall act on behalf of the Board of Directors in connection with such executive compensation issues, and shall have such powers and duties as are described in a charter adopted by majority vote of the Board of Directors.

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Section 34. Governance and Nominating Committee. If constituted by the Board of Directors, the Governance and Nominating Committee of the Board of Directors shall act on behalf of the Board of Directors to recommend to the Board of Directors the director nominees for the next annual meeting of shareholders and to develop and recommend to the Board of Directors sound corporate governance policies and procedures, and shall have such other powers and duties as are described in a charter adopted by majority vote of the Board of Directors.

ARTICLE IV.

Officers

Section 35. Officers. The officers of the corporation shall be a Chairman of the Board, a Chief Financial Officer and a Secretary. The corporation may also have, at the discretion of the Board of Directors, a Vice Chairman of the Board (who shall be chosen from the Board of Directors), a President, one or more Vice Presidents, one or more Assistant Vice Presidents, one or more Assistant Secretaries, one or more Assistant Financial Officers, and any other officers who may be appointed under Section 38 of these Amended and Restated Bylaws. Any two or more offices may be held by the same person, but no officer shall execute, acknowledge or verify any instrument in more than one capacity unless authorized to do so generally or in the specific instance by the Board of Directors.

Any officer of the corporation may be excluded by resolution of the Board of Directors or by a provision of these Bylaws from participation, other than in the capacity of a director, in major policy making functions of the corporation.

Upon direction by the Board of Directors, any officer or employee of the corporation so designated shall give bond of suitable amount with security to be approved by the Board of Directors, conditioned on the honest and faithful discharge of his or her duties as such officer or employee. At the discretion of the Board, such bonds may be schedule or blanket form and the premiums shall be paid by the corporation. The amount of such bonds, the form of coverage, and the name of the company providing the surety therefor shall be reviewed annually by the Board of Directors. Action shall be taken by the Board at that time approving the amount of the bond to be provided by each officer and employee of the corporation for the ensuing year.

Section 36. Election. The officers of the corporation, except those appointed under Section 38 of these Amended and Restated Bylaws, shall be chosen annually by the Board of Directors, and each shall hold his or her office until he or she resigns or is removed or otherwise disqualified to serve, or his or her successor is elected and qualified.

Section 37. Subordinate Officers. The Board of Directors may elect or appoint, and may authorize the President or the Chief Executive Officer to appoint, any other officers that the business of the corporation may require, each of whom shall hold office for the period, have the authority, and perform the duties specified in the Amended and Restated Bylaws or by the Board of Directors.

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Section 38. Removal and Resignation. Subject to the rights, if any, of an officer under any contract of employment, any officer may be removed with or without cause either by the Board of Directors at any time or, except for an officer chosen by the Board, by any officer on whom the power of removal may be conferred by the Board.

Any officer may resign at any time by giving written notice to the Board of Directors, the President or the Secretary of the corporation, but such notice shall not prejudice the rights, if any, of the corporation under any contract of employment to which the officer is a party. An officer’s resignation shall take effect when it is received or at any later time specified in the resignation. Unless the resignation specifies otherwise, its acceptance by the corporation shall not be necessary to make it effective.

Section 39. Vacancies. A vacancy in any office because of death, resignation, removal, disqualification, or any other cause shall be filled in the manner prescribed in the Amended and Restated Bylaws for regular election or appointment to the office.

Section 40. Chairman of the Board. The Board of Directors shall appoint one of its members to be the Chairman to serve at the pleasure of the Board of Directors. The Chairman shall be the corporation’s chief executive officer and as such shall, subject to the control of the Board of Directors, have general supervision, direction, and control over the corporation’s business and officers. The Chairman shall have general executive powers, shall be ex officio a member of all the standing committees except the Audit Committee, the Compensation Committee and the Nominating and Corporate Governance Committee, and shall have and may exercise any and all other powers and duties pertaining by law, regulation or practice, to the Office of Chairman. The Chairman shall also preside at all meetings of the Board of Directors; and, shall also have and may exercise such further powers and duties as from time to time may be conferred upon, or assigned by the Board of Directors.

Section 41. President. The President shall have only those powers prescribed by the Board of Directors.

Section 42. Vice President. If the Chairman is absent or is unable or refuses to act, the Vice Presidents in order of their rank as fixed by the Board of Directors or, if not ranked, the Vice President designated by the Board of Directors, shall perform all the duties of the Chairman, and when so acting shall have all the powers of, and be subject to all the restrictions on, the Chairman. Each Vice President shall have any other duties that are prescribed for said Vice President by the Board of Directors or the Amended and Restated Bylaws.

Section 43. Secretary. The Secretary shall keep or cause to be kept and shall make available at the principal office and any other place that the Board of Directors specifies, a book of minutes of all directors’ and shareholders’ meetings. The minutes of each meeting shall state the time and place that it was held; whether it was regular or special; if a special meeting, how it was authorized; the notice given; the names of those present or represented at shareholders’ meetings; and the proceedings of the meetings. A similar minute book shall be kept for each committee of the Board.

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The Secretary shall keep, or cause to be kept, at the principal office or at the office of the corporation’s transfer agent, a share register, or duplicate share register, showing the shareholders’ names and addresses, the number and classes of shares held by each, the number and date of each certificate issued for these shares, and the number and date of cancellation of each certificate surrendered for cancellation.

The Secretary shall give, or cause to be given, notice of all directors’ and shareholders’ meetings required to be given under these Amended and Restated Bylaws or by law, shall keep the corporate seal in safe custody, and shall have any other powers and perform any other duties that are prescribed by the Board of Directors or these Amended and Restated Bylaws.

The Secretary shall be deemed not to be an executive officer of the corporation and the Secretary shall be excluded from participation, other than in the capacity of director if the Secretary is also a director, in major policy making functions of the corporation.

Section 44. Chief Financial Officer. The Chief Financial Officer shall be the corporation’s chief financial officer and shall keep and maintain, or cause to be kept and maintained, adequate and correct accounts of the corporation’s properties and business transactions, including accounts of its assets, liabilities, receipts, disbursements, gains, losses, capital, retained earnings, and shares and shall file or cause to be filed all regulatory reports required pursuant to law or regulation. The books of account shall at all reasonable times be open to inspection by any director.

The Chief Financial Officer shall deposit all money and other valuables in the name and to the credit of the corporation with the depositories designated by the Board of Directors. The Chief Financial Officer shall disburse the corporation’s funds as ordered by the Board of Directors; shall render to the President and directors, whenever they request it, an account of all his transactions as Chief Financial Officer and of the corporation’s financial condition; and shall have any other powers and perform any other duties that are prescribed by the Board of Directors or Amended and Restated Bylaws.

If required by the Board of Directors, the Chief Financial Officer shall give the corporation a bond in the amount and with the surety or sureties specified by the Board for faithful performance of the duties of that person’s office and for restoration to the corporation of all its books, papers, vouchers, money, and other property of every kind in that person’s possession or under that person’s control on that person’s death, resignation, retirement, or removal from office.

ARTICLE V.

General Corporate Matters

Section 45. Record Date and Closing of Stock Books. The Board of Directors may fix a time in the future as a record date for determining shareholders entitled to notice of and to vote at any shareholders’ meeting; to receive any dividend, distribution, or allotment of rights; or to exercise rights in respect of any other lawful action, including change,

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conversion, or exchange of shares. The record date shall not, however, be more than 60 nor less than 10 days prior to the date of such meeting nor more than 60 days prior to any other action. If a record date is fixed for a particular meeting or event, only shareholders of record on that date are entitled to notice and to vote and to receive the dividend, distribution, or allotment of rights or to exercise the rights, as the case may be, notwithstanding any transfer of any shares on the books of the corporation after the record date.

A determination of shareholders of record entitled to notice of or to vote at a meeting of shareholders shall apply to any adjournment of the meeting unless the Board fixes a new record date for the adjourned meeting, but the Board shall fix a new record date if the meeting is adjourned for more than 45 days.

If no record date is fixed, the record date for determining shareholders entitled to notice of or to vote at a meeting of shareholders shall be at the close of business on the business day next preceding the day on which notice is given or, if notice is waived, at the close of business on the business day next preceding the day on which the meeting is held; the record date for determining shareholders entitled to give consent to corporate action in writing without a meeting, when no prior action by the Board has been taken, shall be the day on which the first written consent is given; and the record date for determining shareholders for any other purpose shall be at the close of business on the day on which the Board adopts the resolution relating thereto, or the 60th day prior to the date of such other action, whichever is later.

Section 46. Corporate Records and Inspection by Shareholders. Books and records of account and minutes of the proceedings of the shareholders, Board, and committees of the Board shall be kept available at the principal office for inspection by the shareholders to the extent required by Section 1601 of the California Corporations Code.

Every director shall have the absolute right at any reasonable time to inspect and copy all books, records and documents of every kind and to inspect the physical properties of the corporation and its subsidiary corporations, domestic or foreign. Such inspection by a director may be made in person or by agent or attorney and includes the right to copy and make extracts.

Section 47. Checks, Drafts, Evidences of Indebtedness. All checks, drafts, or other orders for payment of money, notes, and all mortgages, or other evidences of indebtedness, issued in the name of or payable to the corporation, and all assignments and endorsements of the foregoing, shall be signed or endorsed by the person or persons and in the manner specified by the Board of Directors.

Section 48. Corporate Contracts and Instruments; How Executed. Except as otherwise provided in the Amended and Restated Bylaws, officers, agents, or employees must be authorized by the Board of Directors to enter into any contract or execute any instrument in the corporation’s name and on its behalf. This authority may be general or confined to specific instances.

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Section 49. Stock Certificates. Shares of capital stock of the corporation may be issued in certificated or uncertificated form. One or more certificates for shares for the corporation’s capital stock shall be issued to each shareholder for any of such shareholder’s shares that are fully paid. The corporate seal or its facsimile may be fixed on certificates. All certificates shall be signed by the Chairman of the Board, President, Chief Financial Officer and Secretary, or Assistant Secretary. Any or all of the signatures on the certificate may be facsimile signatures.

Section 50. Lost Certificates. No new share certificate that replaces an old one shall be issued unless the old one is surrendered and canceled at the same time; provided, however, that if any share certificate is lost, stolen, mutilated or destroyed, the Board of Directors may authorize issuance of a new certificate replacing the old one on any terms and conditions, including reasonable arrangement for indemnification of the corporation, that the Board may specify.

Prior to the due presentment for registration of transfer in the stock transfer book of the corporation, the registered owner shall be treated as the person exclusively entitled to vote, to receive notifications and otherwise to exercise all the rights and powers of an owner, except as expressly provided otherwise by the laws of the State of California.

Section 51. Reports to Shareholders. The Board of Directors shall cause to be sent to the shareholders such annual or other periodic reports as the Board considers appropriate or as otherwise required by law.

If no annual report for the last fiscal year has been sent to shareholders, the corporation shall, upon the written request of any shareholder made more than 120 days after the close of such fiscal year, deliver or mail to the person making the request within 30 days thereafter the financial statements referred to in Section 1501(a) for such year.

Section 52. Indemnity of Officers, Directors, etc. The corporation shall indemnify its “agents,” as defined in Section 317 of the California Corporations Code, to the full extent permitted by said Section, as amended from time to time, or as permitted by any successor statute to said Section.

Section 53. Fiscal Year. The fiscal year of this corporation shall begin on the first day of January and end on the 31st day of December of each year.

Section 54. Construction and Definitions. Unless the context otherwise requires, the general provisions, rules of construction and definitions in the California Corporations Code shall govern the construction of these Amended and Restated Bylaws. Without limiting the generality of this provision, the singular includes the plural, the plural includes the singular and the term “person” includes both a corporation and a natural person.

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ARTICLE VI.

Amendments

Section 55. Power to Amend. Except as otherwise provided in the Amended and Restated Articles of Incorporation or the California General Corporation Law, these Amended and Restated Bylaws or any of them may be amended or repealed, in any respect, and new bylaws may be adopted, at any time, either (i) by the affirmative vote of the holders of a majority of the outstanding shares of the capital stock of the corporation entitled to vote in the election of directors or (ii) by the affirmative vote of a majority of the directors present at a meeting of the Board of Directors, in each case, in accordance with the terms of these Amended and Restated Bylaws. Except as otherwise provided in the Amended and Restated Articles of Incorporation, any bylaw adopted by the Board of Directors may be amended or repealed by the affirmative vote of a majority of the outstanding shares of the capital stock of the corporation entitled to vote in the election of directors.

Section 56. Amendment Affecting Election of Directors. If any bylaw regulating an impending election of directors is adopted, amended, or repealed by the Board, there shall be set forth in the notice of the next meeting of shareholders for the election of directors the bylaw so adopted, amended, or repealed, together with a concise statement of the changes made.

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SECRETARY’S CERTIFICATE

The undersigned Secretary of Placer Sierra Bancshares, hereby certifies that the Board of Directors of Placer Sierra Bancshares hereby adopted the following resolution by unanimous written consent dated June 14, 2006:

NOW, THEREFORE, BE IT RESOLVED, that Section 49 of the Bylaws of the Corporation be, and it hereby is, amended to read in full as follows:

Stock Certificates. Subject to Corporations Code Section 416(b), every holder of stock of the corporation shall be entitled to have a certificate, in such form as may be prescribed by law and by the Board of Directors, certifying the number and class of shares owned by the holder in the corporation. Each such certificate shall be signed by, or in the name of, the corporation by the Chairman or Vice-Chairman, if any, of the Board of Directors, or the President or a Vice President, and the Chief Financial Officer or an Assistant Treasurer or the Secretary or an Assistant Secretary. Any or all of the signatures on the certificate may be a facsimile.

IN WITNESS WHEREOF, I have set my hand as of the 15^th day of June, 2006.

/s/ Angelee J. Harris

Angelee J. Harris, Corporate Secretary

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EX-4.1

Exhibit 4.1

SOUTHWEST COMMUNITY BANK

AND

U.S. STOCK TRANSFER CORPORATION

WARRANT AGENT

WARRANT AGREEMENT

Dated as of April 19, 2002

TABLE OF CONTENTS

		Page
Section 1.	Appointment of Warrant Agent	1
Section 2.	Form of Warrant Certificates	1
Section 3.	Issuance of Warrant Certificates; Countersignature and Registration	2
Section 4.	Transfer, Split Up, Combination and Exchange of Warrant Certificates; Mutilated, Destroyed, Lost, or Stolen Warrant Certificates	2
Section 5.	Subsequent Issue of Warrant Certificates	3
Section 6.	Exercise of Warrants; Exercise Prices; Expiration Date of Warrants	3
Section 7.	Cancellation and Destruction of Warrant Certificates	4
Section 8.	Reservation and Availability of Shares of Common Stock	4
Section 9.	Transfer Taxes	5
Section 10.	Common Stock Record Date	5
Section 11.	Adjustment of Exercise Price, Number of Shares or Number of Warrants	5
Section 12.	Notices to Warrantholders	5
Section 13.	Obtaining of Governmental Approvals	6
Section 14.	Fractional Shares	6
Section 15.	Rights of Action	7
Section 16.	Agreement of Warrant Certificate Holders	7
Section 17.	The Warrant Agent	7
Section 18.	Change of Warrant Agent	8
Section 19.	Maintenance of Office	9
Section 20.	Issuance of New Warrant Certificates	9
Section 21.	Notices	9
Section 22.	Supplements and Amendments	10
Section 23.	Successors	10
Section 24.	Benefits of this Agreement	10
Section 25.	California Contract	10
Section 26.	Counterparts	11
Section 27.	Descriptive Headings	11

-i-

TABLE OF CONTENTS

(continued)

		Page
Exhibit
	Form of Warrant Certificate	Exhibit A
	Fee Schedule	Exhibit B

-ii-

WARRANT AGREEMENT

THIS AGREEMENT, dated as of April 19, 2002, between SOUTHWEST COMMUNITY BANK, a California corporation (the “Company”), and U.S. STOCK TRANSFER CORPORATION, a California corporation (the “Warrant Agent”), is made with reference to the following:

WITNESSETH:

WHEREAS, the Company proposes to issue warrants, as hereinafter described (the “Warrants”), to purchase up to 38,462 of its shares of its Common Stock in connection with a public offering of shares of its Common Stock and Warrants; and

WHEREAS, to provide for the appointment of a Warrant Agent, to provide for countersignature of the Warrants by the Warrant Agent, and to establish the terms and conditions of the Warrants, the Company in and by resolution of its Board of Directors has duly authorized the execution and delivery of this Warrant Agreement and the execution, issuance, and delivery of the Warrant Certificates (as hereinafter defined);

AGREEMENT:

NOW, THEREFORE, in consideration of the premises and the mutual agreements herein set forth, the parties hereby agree as follows:

Section 1. Appointment of Warrant Agent. The Company hereby appoints the Warrant Agent to act as agent for the Company in accordance with the terms and conditions hereinafter set forth in this Agreement and the Warrant Agent hereby accepts such appointment and agrees to perform the same upon the terms and conditions hereinafter set forth. The Company may from time to time, upon providing written notice to the warrant agent, appoint such additional or substitute warrant agents as it may deem necessary or desirable.

Section 2. Form of Warrant Certificates. The certificates evidencing the Warrants (the “Warrant Certificates”), including the Warrant Exercise Form and the Assignment of Warrant Form to be printed on the reverse thereof, to be delivered pursuant to this Agreement shall be in registered form only, shall be substantially in the form set forth in Exhibit A hereto, and may have such letters, numbers, or other marks of identification or designation and such legends, summaries, or endorsements, printed, lithographed, or engraved thereon as the Company may deem appropriate and as are not inconsistent with the provisions of this Warrant Agreement, or as may be required to comply with any applicable law or any rule or regulation made pursuant thereto or with any rule or regulation of any stock exchange or inter-dealer quotation system on which the Warrant Certificates may from tine to time be listed, or to conform to usage. Each Warrant Certificate shall be dated as of the date of issuance thereof by the Warrant Agent issuing such Warrant Certificate, either upon initial issuance or upon transfer or exchange, and on its face shall entitle the registered holder thereof to purchase one share of Common Stock for each Warrant evidenced by such Warrant Certificate, initially at the prices per share set forth therein, but the number of such shares and such prices per share shall be subject to adjustments as provided therein. For purposes of this Agreement, the date the Company commenced banking operations shall be deemed the date of initial issuance.

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The Warrant Certificate shall be exercisable and transferrable immediately upon issuance. Without limitation, any exercise shall comply with the provisions of Subsection 6(b) hereof.

Section 3. Issuance of Warrant Certificates; Countersignature and Registration. The Warrant Certificates shall be executed on behalf of the Company by its President or any Vice President, by facsimile signature and have affixed thereto a facsimile of the Company’s seal which shall be attested by the Secretary or an Assistant Secretary of the Company by facsimile signature. The Warrant Certificates shall be manually countersigned by the Warrant Agent (or by any successor as a Warrant Agent hereunder) and shall not be valid for any purpose unless so countersigned. In case any officer of the Company who shall have signed any Warrant Certificate shall cease to be such officer of the Company before countersignature by a Warrant Agent and issuance and delivery thereof, such Warrant Certificate, nevertheless, may be countersigned by the Warrant Agent, and issued and delivered with the same force and effect as though the person who signed such Warrant Certificate had not ceased to be such officer of the Company; and any Warrant Certificate may be signed on behalf of the Company by any person who, at the actual date of the execution of such Warrant Certificate, shall be a proper officer of the Company to sign such Warrant Certificate, although at the date of the execution of this Warrant Agreement any such person was not such an officer. Upon countersignature by the Warrant Agent and delivery, the Warrant Certificate shall be valid and binding upon the Company, and the holder thereof shall be entitled to all the benefits of this Agreement.

The Warrant Agent will keep or cause to be kept at its principal corporate trust office in Glendale, California, or elsewhere, books for registration and registration of transfer of the Warrant Certificates issued hereunder. Such books shall show the names and addresses of the respective holders of the Warrant Certificates, the number of Warrants evidenced on its face by each of the Warrant Certificates, and the date of each of the Warrant Certificates.

Section 4. Transfer, Split Up, Combination and Exchange of Warrant Certificates; Mutilated, Destroyed, Lost, or Stolen Warrant Certificates. Subject to the provisions of Section 14 hereof any Warrant Certificate, with or without other Warrant Certificates, may be transferred, split up, combined, or exchanged for another Warrant Certificate or Warrant Certificates representing in the aggregate a like number of Warrants. Subject to any restriction on transferability that may appear on a Warrant Certificate in accordance with the terms hereof, any registered holder desiring to register the transfer of, or to split up, combine, or exchange, any Warrant Certificate or Warrant Certificates shall make such request in writing delivered to the Warrant Agent and shall surrender such Warrant Certificate or Warrant Certificates to the Warrant Agent at its offices maintained for that purpose in Glendale, California, or elsewhere. Thereupon the Warrant Agent shall countersign and deliver to the person entitled thereto a Warrant Certificate or Warrant Certificates, as the case may be, as soon as required. The Company may require payment of a sum sufficient to cover any tax or governmental charge that may be imposed in connection with any transfer, split up, combination, or exchange of Warrant Certificates.

Upon receipt by the Company and the Warrant Agent of evidence reasonably satisfactory to them of the loss, theft, destruction, or mutilation of a Warrant Certificate, and, in case of loss, theft, or destruction, of indemnity or security reasonably satisfactory to them, and reimbursement

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to the Company and the Warrant Agent of all reasonable expenses incidental thereto, and upon surrender and cancellation of the Warrant Certificate if mutilated, the Company will direct the Warrant Agent to make a new Warrant Certificate of like tenor for the same number of Warrants and deliver such new Warrant Certificate to the registered owner in lieu of the Warrant Certificate so lost, stolen, destroyed or mutilated.

Section 5. Subsequent Issue of Warrant Certificates. Subsequent to their original issuance, no Warrant Certificates shall be issued except: (i) Warrant Certificates issued upon any transfer, combination, split up, or exchange of Warrants pursuant to Section 4 hereof; (ii) Warrant Certificates issued in replacement of mutilated, destroyed, lost or stolen Warrant Certificates pursuant to Section 4 hereof; (iii) Warrant Certificates issued pursuant to Section 6 hereof upon the partial exercise of any Warrant Certificate to evidence the unexercised portion of such Warrant Certificate; and (iv) Warrant Certificates issued pursuant to Sections 11 or 20 hereof.

Section 6. Exercise of Warrants; Exercise Prices; Expiration Date of Warrants.

(a) Each Warrant may be exercised on any business day beginning on the date of issuance and continuing until the close of business on April 30, 2007 (such date, as it may be changed, is herein called the “Expiration Date”). Each Warrant not exercised on or before the close of business on the Expiration Date shall automatically become void at 5:00 P.M. Pacific Time (which time shall be deemed the “close of business” for purposes of this Agreement, the Warrants and the Warrant Certificates), on the Expiration Date; each holder thereof shall thereafter have no further rights with respect thereto and the Company and the Warrant Agent shall thereafter have no further obligations with respect thereto.

(b) Subject to the provisions of this Agreement including Sections 11, 13 and 14, the holder of each Warrant shall have the right to purchase from the Company (and the Company shall issue and sell to such holder(s) of a Warrant) one fully paid share of Common Stock at the exercise prices per share set forth in the form of Warrant Certificate included herein, as such prices may be adjusted in accordance with the provisions hereof (such prices, as so adjusted, being herein called the “Exercise Price”), upon surrender to the Warrant Agent, at its offices maintained for that purpose in Glendale, California, or elsewhere, of the Warrant Certificate evidencing such Warrants with the Warrant Exercise Form on the reverse thereof duly completed and signed, and upon payment of the then applicable Exercise Price. Payment of the Exercise Price and any amounts described in Subsection 6(c) shall be: (i) in cash in United States dollars; or (ii) by certified or official bank check payable in United States dollars to the order of the Company.

(c) Upon receipt of a Warrant Certificate, with the Warrant Exercise Form duly executed, accompanied by payment of the Exercise Price-for the shares of Common Stock to be purchased and an amount (if required by Section 9 hereof) equal to any applicable transfer tax, the Warrant Agent shall thereupon promptly: (i) requisition from any transfer agent for the shares of Common Stock certificates evidencing ownership of the number of shares of Common Stock to be purchased; (ii) when appropriate, requisition from the Company the amount of cash to be paid in lieu of issuance of fractional shares of Common Stock; and (iii) promptly after receipt of such certificates cause the same to be delivered to or upon the order of the registered

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holder of such Warrant Certificate, registered in such name or names as may be designated by such holder, and, when appropriate after receipt promptly deliver such cash in lieu of fractions to or upon the order of the registered holder of such Warrant Certificate.

(d) In case the registered holder of any Warrant Certificate shall exercise fewer than all of the Warrants evidenced thereby, a new Warrant Certificate evidencing Warrants equivalent to the Warrants remaining unexercised shall be issued by the Warrant Agent to the registered holder of such Warrant Certificate or to his or her duly authorized assignee, subject to the provisions of Section 14 hereof.

(e) The Warrant Agent shall account promptly to the Company with respect to Warrants exercised, shares of Common Stock issued, and concurrently deliver to the Company all monies or checks for the purchase of shares of Common Stock.

Section 7. Cancellation and Destruction of Warrant Certificates. All Warrant Certificates surrendered for the purpose of exercise, conversion, exchange, substitution, or registration of transfer shall, if surrendered to the Company or to any of its agents, be delivered to the Warrant Agent for cancellation or in canceled form, or if surrendered to the Warrant Agent shall be canceled by it. The Company shall deliver to the Warrant Agent for cancellation and retirement and the Warrant Agent shall so cancel and retire, any other Warrant Certificate purchased or acquired by the Company otherwise than upon the exercise thereof. The Warrant Agent shall deliver all canceled Warrant Certificates to the Company, or shall, at the written request of the Company, destroy such canceled Warrant Certificates, and in such case shall deliver a certificate of destruction thereof to the Company.

Section 8. Reservation and Availability of Shares of Common Stock. The Company will at all times reserve and keep available, free from preemptive rights, out of the aggregate of its authorized but unissued shares of Common Stock, for the purpose of enabling it to satisfy any obligation to issue shares of Common Stock upon exercise or conversion of Warrants, the full number of shares of Common Stock deliverable upon the exercise or conversion of all outstanding Warrants.

Before taking any action which would cause an adjustment pursuant to Section 11 reducing the Exercise Price, the Company will take any corporate action which may, in the opinion of its counsel, be necessary in order that the Company may validly and legally issue fully paid and non-assessable shares of Common Stock at the Exercise Price as so adjusted.

The Company covenants that all shares of Common Stock which may be issued upon exercise of Warrants will upon issue be fully paid and non-assessable and free from all taxes, liens, charges and security interests with respect to the issue thereof.

The Warrant Agent is hereby authorized to requisition from time to time from any transfer agent for the shares of Common Stock, and any subsequent transfer agent of any of the Company’s securities issuable upon the exercise o f the Warrants, share certificates required to honor outstanding Warrants. The Company hereby authorizes and instructs its present and any future transfer agent to comply with all such requests. The Company will supply such transfer agent with duly executed share certificates for such purpose and will itself provide or otherwise make available any cash which may be payable as provided in Section 14.

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If and for so long as the outstanding shares of Common Stock may be listed on any securities exchange or inter-dealer quotation system in the United States, the Company shall use its best efforts to cause all shares reserved for issuance or conversion upon the exercise or conversion of Warrants to be listed on each such exchange or quotation system Upon official notice of issuance upon such exercise or conversion.

Section 9. Transfer Taxes. The Company further covenants and agrees that it will pay when due and payable any and all federal and state transfer taxes and charges which may be payable in respect of the issuance or delivery of the Warrant Certificates or of any shares of Common Stock upon the exercise or conversion of Warrants. The Company shall not, however, be required to pay any transfer tax which may be payable in respect of any transfer involved in the transfer or delivery of Warrant Certificates or the issuance or conversion or delivery of certificates for shares of Common Stock in a name other than that of the registered holder of the Warrant Certificate evidencing Warrants surrendered for exercise or to issue or deliver any certificates for shares of Common Stock upon the exercise or conversion of any Warrants until any such tax shall have been paid (any such tax being payable by the holder of such Warrant Certificate at the time of surrender) or until it has been established to the Company’s satisfaction that no such tax is due.

Section 10. Common Stock Record Date. Each person in whose name any certificate for shares of Common Stock is issued upon the exercise of Warrants shall for all purposes be deemed to have become the holder of record of the shares of Common Stock represented thereby on, and such certificate shall be dated, the date upon which the Warrant Certificate evidencing such Warrants was duly surrendered and payment of the Exercise Price (and any applicable transfer taxes) was made. Prior to the exercise of the Warrants evidenced thereby, the holder of a Warrant Certificate shall not be entitled to any rights of a shareholder of the Company with respect to shares for which the Warrants shall be exercisable, including, without limitation, the rights to vote, to receive dividends or other distributions (except as expressly set forth herein), or to exercise any preemptive rights, and shall not be entitled to receive any notice of any proceedings of the Company, except as expressly provided herein.

Section 11. Adjustment of Exercise Price, Number of Shares or Number of Warrants. The Exercise Price, the number and kind of securities purchasable upon the exercise of each Warrant and the number of Warrants outstanding shall be subject to adjustment from time to time upon the happening of the events enumerated in Section 9 of the Warrant Certificate.

Section 12. Notices to Warrantholders. Upon any adjustment of the Exercise Price pursuant to Section 11, the Company within 20 days thereafter shall: (i) cause to be filed with the Warrant Agent a certificate of a firm of independent public accountants of recognized standing (who may be the regular auditors of the Company) selected by the Board of Directors of the Company setting forth the Exercise Price after such adjustment and setting forth in reasonable detail the method of calculation and the facts upon which such calculation is based and setting forth the number of Warrants to be issued under Section 11 hereof, or the number of shares of Common Stock (or portion thereof) purchasable upon exercise of a Warrant after such

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adjustment in the Exercise Price, which certificate shall be conclusive evidence of the correctness of the matters set forth therein; and (ii) cause to be given to each of the holders of record of Warrant Certificates at their respective addresses appearing on the Warrant register written notice of such adjustment by first-class mail, postage prepaid. Where appropriate, such notice may be given in advance and included as a part of the notice required to be made under the provisions of Section 9.5 of the Warrant Certificate.

Section 13. Obtaining of Governmental Approvals. The Company will use its reasonable efforts to take such action which may be necessary from time to time to obtain and keep effective any and all permits, consents, and approvals of governmental agencies and authorities and to make all filings under federal and state securities laws which may be or become requisite in connection with the issuance, sale, transfer and delivery of the Warrant Certificates, the exercise of the Warrants, and the issuance, sale, transfer and delivery of the shares of Common Stock issuable upon exercise of the Warrants.

The Company will give written notice of the issuance of shares of Common Stock pursuant to the exercise of Warrants, at such times and in such detail as may be required, to each stock exchange and inter-dealer quotation system on which the shares of Common Stock are listed.

Notwithstanding any other provision of this Agreement or of the Warrants to the contrary: (i) the Warrants shall not be exercisable by the holder of any Warrant Certificate resident in a jurisdiction under the securities or blue sky laws of which the shares of Common Stock issuable upon exercise of such Warrant Certificate are not registered or qualified or exempt from registration or qualification or in which a current prospectus meeting the requirements of the laws of such jurisdiction cannot be lawfully delivered by or on behalf of the Company; and (ii) the Warrants shall not be exercisable by the holder of any Warrant Certificate if the shares of Common Stock issuable upon exercise of such Warrant Certificate are not the subject of a current registration statement filed with and declared effective by the Securities and Exchange Commission, the California Department of Financial Institutions, or such other appropriate securities agency, or exempt from such registration.

Section 14. Fractional Shares.

(a) The Company shall not be required to issue fractions of shares of Common Stock upon exercise of the Warrants or to distribute share certificates which evidence fractional shares of Common Stock. In lieu of fractional shares of Common Stock there shall be paid to the registered holders of Warrant Certificates at the time such Warrants are exercised as herein provided an amount in cash in United States dollars equal to the same fraction of the current market value of a share of Common Stock. For purposes of this Subsection 14(a), the current market value of a share of Common Stock shall be the Closing Price of a share of Common Stock for the trading day immediately prior to the date of such exercise.

(b) The holder of a Warrant, by the acceptance of the Warrant, expressly waives the holder’s right to receive any fractional share of Common Stock upon exercise of a Warrant.

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Section 15. Rights of Action. All rights of action in respect of this agreement are vested in the respective registered holders of the Warrant Certificates; and any registered holder of any Warrant Certificate, without the consent of the Warrant Agent or of the holder of any other Warrant Certificate, may, in such holder’s own behalf and for such holder’s own benefit, enforce, and may institute and maintain any suit, action, or proceeding against the Company to enforce, or otherwise act in respect of, such holder’s right to exercise the Warrants evidenced by such Warrant Certificate in the manner provided in such Warrant Certificate and in this agreement.

Section 16. Agreement of Warrant Certificate Holders. Every holder of a Warrant Certificate by accepting the same consents and agrees with the Company and the Warrant Agent and with every other holder of a Warrant Certificate that:

(a) Transfer of the Warrant Certificates shall be registered on the Warrant register only if surrendered at the principal corporate trust office or agency of the Warrant Agent as set forth in Section 4 hereof, duly endorsed or accompanied by a proper instrument of transfer; and

(b) Prior to due presentment for registration of transfer, the Company and the Warrant Agent may deem and treat the person in whose name the Warrant Certificate is registered as the absolute owner thereof and of the Warrants evidenced thereby (not withstanding any notations of ownership or writing on the Warrant Certificates made by anyone other than the Company or the Warrant Agent) for shall purposes whatsoever, and neither the Company nor the Warrant Agent shall be affected by any notice to the contrary.

Section 17. The Warrant Agent. The Warrant Agent undertakes the duties and obligations imposed by this Agreement upon the following terms and conditions, by all of which the Company and the holders of Warrants, by their acceptance thereof, shall be bound:

(a) The statements contained herein and in the Warrant Certificates shall be taken as statements of the Company and the Warrant Agent assumes no responsibility for the correctness of any of the same except such as describe the Warrant Agent or action taken or to be taken by it. The Warrant Agent assumes no responsibility with respect to the distribution of the Warrant Certificates except as herein otherwise provided.

(b) The Warrant Agent shall not be responsible for any failure of the Company to comply with any of the covenants contained in this Agreement or in the Warrant Certificates to be complied with by the Company.

(c) The Warrant Agent may consult at any time with counsel satisfactory to it (who may be counsel for the Company) and the Warrant Agent shall incur no liability or responsibility to the Company or to any holder of any Warrant Certificate in respect of any action taken in accordance with the opinion or the advice of such counsel provided the Warrant Agent shall have exercised reasonable care in the selection and continued employment of such counsel.

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(d) The Warrant Agent shall incur no liability or responsibility to the Company or to any holder of any Warrant Certificate for any action taken in reliance on any notice, resolution, waiver, consent, order, certificate, or other paper, document, or instrument believed by it to be genuine and to have been signed, sent, or presented by the proper party or parties.

(e) The Company agrees to pay to the Warrant Agent compensation for the services rendered by the Warrant Agent in the performance of this Agreement, in accordance with the Fee Schedule attached hereto as Exhibit B to reimburse the Warrant Agent for all expenses, taxes and governmental charges and other charges of any kind and nature incurred by the Warrant Agent in the performance of this Agreement and to indemnify the Warrant Agent and hold it harmless against any and all liabilities, including judgments, expenses, and counsel fees, for anything done or omitted by the Warrant Agent in the performance of this Agreement except as a result of the Warrant Agent’s negligence or bad faith.

(f) Except as otherwise provided by law, the Warrant Agent and any shareholder, director, officer, or employee of the Warrant Agent may buy, sell or deal in any of the Warrants or other securities of the Company or become pecuniarily interested in any transaction in which the Company may be interested, or contract with or lend money to or otherwise act as fully and freely as though it were not a Warrant Agent under this Agreement. Nothing herein shall preclude the Warrant Agent from acting in any other capacity for the Company or for any other legal entity.

(g) The Warrant Agent shall act hereunder solely as agent for the Company, and its duties shall be determined solely by the provisions hereof. The Warrant Agent shall not be liable for anything which it may do or refrain from doing in connection with this Agreement except for its own negligence, wilful misconduct or bad faith, provided, however, the Warrant Agent shall have no liability hereunder for failing to take any action which it is not specifically directed to take by the terms of this Agreement.

(h) The Warrant Agent is hereby authorized and directed to accept written instructions with respect to the performance of its duties hereunder from the President or any Vice President or the Treasurer or Chief Financial Officer of the Company, and to apply to such officers for written advice or instructions in connection with its duties, and it shall not be liable for any action taken or suffered to be taken by it in good faith in accordance with written instructions of any such officer.

Section 18. Change of Warrant Agent. The Warrant Agent may resign or be discharged from its duties under this Agreement by giving to the Company notice in writing, and by giving notice in writing by first class mail postage prepaid, to the registered holders of Warrant Certificates at their respective addresses appearing in the Warrant register, specifying a date when such resignation shall take effect, which notice shall be sent at least 30 days prior to the date so specified. The Company may remove the Warrant Agent or any successor warrant agent upon 30 days’ notice in writing, mailed to the Warrant Agent or any successor warrant agent and to each transfer agent of the shares of Common Stock by registered or certified mail, and to the registered holders of Warrant Certificates at their respective addresses appearing in the Warrant register. If the Warrant Agent shall resign or shall otherwise become incapable of

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acting, the Company shall appoint a successor to the Warrant Agent. If the Company shall fail to make such appointment within a period of 30 days after it has been notified in writing of such resignation or incapacity by the resigning or incapacitated Warrant Agent or by the registered holder of a Warrant Certificate, then the registered holder of any Warrant Certificate may apply to any court of competent jurisdiction for the appointment of a successor to the Warrant Agent. Pending appointment of a successor to the Warrant Agent, either by the Company or by such a court, the duties of the Warrant Agent shall be carried out by the Company. Any warrant agent that is to be the successor of the Warrant Agent or any of its successors, whether appointed by the Company or by such a court shall be a bank or trust company in good standing, incorporated under the laws of the State of California or of the United States of America, and having its principal office in California and having at the time of its appointment as warrant agent a combined capital and surplus of at least Ten Million Dollars ($10,000,000.00). After appointment, any successor warrant agent shall be vested with the same powers, rights, duties, and responsibilities as if it had been originally named as Warrant Agent without further act or deed, but the former War ant Agent shall deliver and transfer to the successor warrant agent any property at the time held by it hereunder and execute and deliver any further assurance, conveyance, act or deed necessary for the purpose. Failure to give any notice provided for in this Section 18, however, or any defect therein, shall not affect the legality or validity of the resignation or removal of the Warrant Agent or the appointment of the successor warrant agent, as the case may be.

Section 19. Maintenance of Office. As long as any of the Warrant Certificates remain unexercised or unconverted, the Company will maintain an office or agency in California where the Warrant Certificates may be presented for registration, transfer, exchange, or exercise pursuant to the terms of this Agreement, and where notices and demands to or upon the Company in respect of the Warrants, Warrant Certificates, or this Agreement may be served. The principal corporate trust office of the Warrant Agent in the City of Glendale shall be the office or agency for such purposes, which at the date hereof is:

U.S. Stock Transfer Corporation

1745 Gardena Avenue

Glendale, California 91204-2991

Attention: John Stein, President

Section 20. Issuance of New Warrant Certificates. Notwithstanding any of the provisions of this Agreement or of the Warrants or Warrant Certificates to the contrary, the Company may, at its option, issue new Warrant Certificates evidencing Warrants in such form as may be approved by its Board of Directors to reflect any adjustment or change in the Exercise Price and the number or kind or class of shares of stock or other securities or property purchasable under the several Warrant Certificates made in accordance with the provisions of this Agreement.

Section 21. Notices. Notices or demands authorized by this Agreement to be given or made by the Warrant Agent or by the holder of any Warrant Certificate to or on the Company shall be sufficiently given or made if sent by first class mail, postage prepaid, addressed (until another address is filed in writing with the Warrant Agent) as follows:

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Southwest Community Bank

5810 El Camino Real

Carlsbad, California 92008

Attention: Frank J. Mercardante, President

Subject to the provisions of Section 18, any notice or demand authorized by this Agreement to be given or made by the Company or by the holder of any Warrant Certificate to or on the Warrant Agent shall be sufficiently given or made, except as otherwise provided in this agreement with respect to a particular Section or Subsection, if sent by first class mail, postage prepaid, addressed (until another address is filed in writing with the Company) as follows:

U.S. Stock Transfer Corporation

1745 Gardena Avenue

Glendale. California 91204-2991

Attention: John Stein, President

Notice or demands authorized by this agreement to be given or made by the Company or the Warrant sent to the holder of any Warrant Certificate shall be sufficiently given or made if sent by first class mail, postage prepaid, addressed to such holder at the address of such holder as shown on the Warrant register and published at least once in The Wall Street Journal (national edition).

Section 22. Supplements and Amendments. The Company and the Warrant Agent may from time to time supplement or amend this Agreement without the approval of any holders of Warrant Certificates in order to cure any ambiguity, to correct or supplement any provision contained herein which may be defective or inconsistent with any provisions herein, or to make, any other provisions in regard to matters or questions arising hereunder which the Company and the Warrant Agent may deem necessary or desirable and which shall not adversely affect the interests of the holders of Warrant Certificates. Other than as provided in the preceding sentence, no, supplement or amendment to this Agreement shall be made without the affirmative vote or written consent of each of the Company, the Warrant Agent and the holders of a majority of the Warrants then outstanding.

Section 23. Successors. All of the covenants and provisions of this Agreement by or for the benefit of the Company or the Warrant Agent shall bind and inure to the benefit of their respective successors and assigns hereunder.

Section 24. Benefits of this Agreement. Nothing in this Agreement shall be construed to give to any person or entity other than the Company, the Warrant Agent, and the registered holders of the Warrant Certificates any legal or equitable right remedy, or claim under this Agreement but this Agreement shall be for the sole and exclusive benefit of the Company, the Warrant Agent, and the registered holders of the Warrant Certificates.

Section 25. California Contract. This Agreement and each Warrant Certificate issued hereunder shall be deemed to be a contract made under the laws of the State of California and for all purposes shall be governed by and construed in accordance with the laws of such state applicable to contracts to be made by residents of and to be performed entirely within such state.

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Section 26. Counterparts. This Agreement may be executed in any number of counterparts and each of such counterparts shall for all purposes be deemed to be an original, and all such counterparts shall together constitute but one and the same instrument.

Section 27. Descriptive Headings. Descriptive headings of the several Sections of this Agreement are inserted for convenience only and shall not control or affect the meaning or construction of any of the provisions hereof.

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be fully executed and attested, all as of the day and year first above written.

		The Company:
		SOUTHWEST COMMUNITY BANK
		By:	/s/ Frank Mercardante
			Frank Mercardante, President
/s/ Paul M. Weil
Paul M. Weil, Secretary
		The Warrant Agent
		U.S. STOCK TRANSFER CORPORATION
		By:	/s/ Rich Tilton
			Rich Tilton, Assistant Vice President
By:	/s/ James Hunter
	James Hunter, Senior Vice President & Secretary

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EXHIBIT A

[Face of Warrant]

NO. SWCB-WRT-	Warrants
CUSIP	To Purchase One Share Of Common Stock Each

SOUTHWEST COMMUNITY BANK

Organized Under the Laws of the State of California

THIS CERTIFIES THAT, for value received,

the registered holder hereof or registered assigns (the “Holder”), is entitled to purchase from Southwest Community Bank, a California banking corporation (the “Bank”), at the purchase price of $28.60 per share (the “Warrant Price”), one share of the Bank’s Common Stock, no par value (the “Common Stock”), for each Warrant comprising the aggregate number of Warrants set forth above. The number of shares purchasable upon exercise of this Warrant and the Warrant Price per share shall be subject to adjustment from time to time as set forth herein. This Warrant shall expire at 5:00 p.m. Pacific Time on April 30, 2007 (the “Expiration Date”), unless extended by the Bank, subject to regulatory approval.

This Warrant is one of a duly authorized issue of up to 38,462 Warrants evidencing the right to purchase an aggregate of up to 38,462 shares of Common Stock and is issued in connection with the Bank’s public offering consisting of up to 192,310 shares of Common Stock and one Warrant for every five shares of Common Stock purchased. The shares of Common Stock to be issued upon the exercise of Warrants are referred to herein as “Warrant Shares.” The offer and sale of the Warrants and the Warrant Shares has been made pursuant to a Permit issued by the California Department of Financial Institutions.

1. Exercise Period and Expiration Date. The Warrants are exercisable from issuance until the Expiration Date (the “Exercise Period”), unless extended. This Warrant shall expire in its entirety and no longer be exercisable at 5:00 p.m., Pacific Time, on the Expiration Date, unless extended. The Bank shall use its best efforts to qualify or register the Warrant Shares under the laws of the states in which the Holders reside and under applicable federal securities laws where no exemption from such registration or qualification is available.

2. Exercise of Warrants. This Warrant may be exercised at the Bank’s Administrative Office at 5810 El Camino Real, Carlsbad, California 92008, upon presentation and surrender hereof, with the Warrant Exercise Form on the reverse side hereof duly completed and signed, and upon payment to the Bank of the Warrant Price (as adjusted in accordance with the provisions of Section 9 hereof), for the number of Warrant Shares in respect of which such

Warrant is then exercised. Payment of the aggregate Warrant Price shall be made in cash in United States dollars, by certified or official bank check payable in United States dollars to the order of the Bank, or by any combination thereof.

The Bank shall not be required to issue fractional Warrant Shares on the exercise of Warrants. When Warrants shall be presented for exercise in full at the same time by the same Holder, the number of full Warrant Shares which shall be issuable upon the exercise thereof shall be computed on the basis of the aggregate number of Warrant Shares purchasable by such Holder on exercise of the Warrants so presented. If any fraction of a Warrant Share would be issuable on the exercise of any Warrants in full, the Bank shall pay an amount in cash equal to the then current market price per Warrant Share multiplied by such fraction. When Warrants shall be presented for exercise as to a specified portion, only full Warrant Shares shall be issuable and a new Warrant shall be issuable evidencing the remaining Warrant or Warrants.

Upon such surrender of Warrants and payment of the Warrant Price as aforesaid, the Bank or its Warrant Agent shall issue and cause to be delivered with all reasonable dispatch to or upon the written order of the Holder and in such name or names as the Holder may designate, a certificate or certificates for the number of full Warrant Shares so purchased upon the exercise of such Warrants, together with cash, as provided above in this Section 2, in respect of any fractional Warrant Share otherwise issuable upon such surrender. Such certificate or certificates shall be deemed to have been issued and any person so designated to be named therein shall be deemed to become a holder of record of such Warrant Shares as of the date of the surrender of such Warrants and payment of the Warrant Price, as aforesaid; provided, however, that if, at the date of surrender of such Warrants and payment of the Warrant Price, the transfer books for the Warrant Shares or other class of stock purchasable upon the exercise of such Warrants shall be closed, the certificates for the Warrant Shares in respect of which such Warrants are then exercised shall be issuable as of the date on which such books shall next be opened (whether before or after the Expiration Date) and until such date the Bank shall be under no duty to deliver any certificate for such Warrant Shares. The purchase rights represented by the Warrants shall be exercisable, at the election of the Holders thereof, either in full or from time to time in part and, in the event that a Warrant is exercised in respect of less than all of the Warrant Shares purchasable on such exercise at any time prior to the date of expiration of the Warrants, a new Warrant evidencing the remaining Warrant or Warrants will be issued. All Warrants surrendered in the exercise of the rights thereby evidenced shall be cancelled by the Bank.

3. Exchange of Warrants. This Warrant may be exchanged without charge for another Warrant(s) entitling the Holder thereof to purchase a like aggregate number of Warrant Shares as the Warrant(s) surrendered then entitle such Holder to purchase. Any Holder desiring to exchange a Warrant(s) shall make such request in writing delivered to the Bank or its Warrant Agent and shall surrender, properly endorsed, the Warrant(s) to be so exchanged. Thereupon, the Bank or its Warrant Agent shall deliver to the person(s) entitled thereto new Warrant(s) as so requested.

REFERENCE IS HEREBY MADE TO THE FURTHER PROVISIONS OF THIS WARRANT SET FORTH ON THE REVERSE HEREOF, WHICH FURTHER PROVISIONS SHALL FOR ALL PURPOSES HAVE THE SAME EFFECT AS IF SET FORTH AT THIS PLACE.

WITNESS, the facsimile seal of the Bank and the facsimile signatures of its duly authorized officers. This Warrant certificate is not valid until countersigned by the Warrant Agent.

SOUTHWEST COMMUNITY BANK,
a California corporation
By:	/s/ Illegible
	President
	/s/ Paul M. Weil
By:
[SOUTHWEST COMMUNITY BANK SEAL] Secretary
Dated:
Countersigned:
U.S. STOCK TRANSFER CORPORATION
As Warrant Agent
By:
	Authorized Officer

4. Transfer of Warrants. This Warrant shall be transferable only on the books of the Bank maintained by the Warrant Agent upon delivery hereof, with the Assignment of Warrant Form below duly endorsed with signatures properly guaranteed by a commercial bank or securities brokerage firm, or accompanied by proper evidence of succession, assignment or authority to transfer. Upon any registration of transfer, the Bank or its Warrant Agent shall deliver a new Warrant or Warrants to the person(s) entitled thereto.

5. Payment of Taxes. The Bank will pay all documentary stamp taxes, if any, attributable to the initial issuance of Warrant Shares upon the exercise of Warrants; provided, however, that the Bank shall not be required to pay any tax or taxes which may be payable in respect of any transfer involved in the issuance or delivery of any Warrants or certificates for Warrant Shares in a name other than that of the registered Holder of the Warrants, and in such case the Bank shall not be required to issue or deliver any certificates for shares of Common Stock or any Warrant until the person requesting the same has paid to the Bank the amount of such tax or has established to the Bank’s satisfaction that such tax has been paid.

6. Mutilated or Missing Warrants. In case any of the Warrants shall be mutilated, lost, stolen or destroyed, the Bank or its Warrant Agent may, at its discretion issue, upon cancellation of the mutilated Warrant, or in lieu of and in substitution for the Warrant lost, stolen or destroyed, a new Warrant of like tenor and representing an equivalent right or interest;

but only upon receipt of evidence satisfactory to the Bank or its Warrant Agent of such loss, theft or destruction of such Warrant and indemnity, if requested, also satisfactory to the Bank or its Warrant Agent. An applicant for such a substitute Warrant shall reimburse Bank and its Warrant Agent for all reasonable expenses and shall also comply with such other reasonable regulations as the Bank or its Warrant Agent may prescribe.

7. Reservation of Warrant Shares. The Bank shall at all times, while the Warrants are exercisable, keep reserved, out of its authorized Common Stock, a number of shares of Common Stock sufficient to provide for the exercise of the rights of purchase represented by the outstanding Warrants. Promptly after the date of expiration of the Warrants, no shares shall be subject to reservation in respect of such Warrants.

8. Cancellation of Warrants. The Bank or its Warrant Agent shall cancel any Warrants surrendered for exchange, substitution, transfer or exercise in whole or in part.

9. Adjustment of Warrant Price and Number of Warrant Shares. The number and kind of securities purchasable upon the exercise of each Warrant and the Warrant Price shall be subject to adjustments from time to time upon the happening of certain events, as hereinafter defined:

9.1 Mechanical Adjustments. The number of Warrant Shares purchasable upon the exercise of each Warrant and the Warrant Price shall be subject to adjustment as follows:

(a) In case the Bank shall: (i) pay a dividend in shares of Common Stock or make a distribution in shares of Common Stock; (ii) subdivide its outstanding shares of Common Stock into a greater number of shares; (iii) combine its outstanding shares of Common Stock into a smaller number of shares of Common Stock; or (iv) issue by reclassification of its shares of Common Stock or capital reorganization other securities of the Bank, the number of Warrant Shares purchasable upon exercise of each Warrant immediately prior thereto shall be adjusted so that the Holder of each Warrant shall be entitled to receive the kind and number of Warrant Shares or other securities of the Bank which the Holder would have owned or would have been entitled to receive after the happening of any of the events described above, had such Warrant been exercised immediately prior to the happening of such event or any record date with respect thereto. An adjustment made pursuant to this Paragraph (a) shall become effective immediately after the effective date of such event retroactive to the record date, if any, for such event.

(b) No adjustment in the number of Warrant Shares purchasable hereunder shall be required unless such adjustment would require an increase or decrease of at least one percent (1%) in the number of Warrant Shares purchasable upon the exercise of each Warrant; provided, however, that any adjustments which by reason of this Paragraph (b) are not required to be made shall be carried forward and taken into account in any subsequent adjustment(s). All calculations shall be made to the nearest one hundredth (1/100) of a share.

(c) Whenever the number of Warrant Shares purchasable upon the exercise of each Warrant is adjusted, as herein provided, each Warrant Price payable upon exercise of each Warrant shall be adjusted by multiplying the Warrant Price immediately prior to the adjustment by a fraction, of which the numerator shall be the number of Warrant Shares purchasable upon the exercise of each Warrant immediately prior to the adjustment, and of which the denominator shall be the number of Warrant Shares so purchasable immediately thereafter. All calculations shall be made to the nearest whole penny.

(d) For the purpose of this Subsection 9.1, the term “shares of Common Stock” shall mean: (i) the class of stock designated as the Common Stock of the Bank at the date of this Warrant: or (ii) any other class of stock resulting from successive changes or reclassifications of such shares consisting solely of changes in par value, or from par value to no par value, or from no par value to par value. In the event that at any time, as a result of an adjustment made pursuant to Paragraph (a) above, the Holder shall become entitled to purchase any shares of the Bank other than shares of Common Stock, thereafter the number of such other shares so purchasable upon exercise of each Warrant and the Warrant Price of such shares shall be subject to adjustment from time to time in a manner and on terms as nearly equivalent as practicable to the provisions with respect to the Warrant Shares contained in Paragraphs (a) through (c), inclusive, above, and the provisions of Sections 1 and 2 and Subsections 9.2 through 9.4, inclusive, with respect to the Warrant Shares, shall apply on like terms to any such other shares.

9.2 Voluntary Adjustment by the Bank. The Bank may at its option, at any time during the term of the Warrants, reduce the then current Warrant Price to any amount deemed appropriate by the Board of Directors of the Bank, subject to regulatory approval.

9.3 Notice of Adjustment. Whenever the number of Warrant Shares purchasable upon the exercise of each Warrant and the Warrant Price of such Warrant Shares are adjusted, as herein provided, the Bank shall cause to be mailed by First class mail, postage prepaid, to each Holder, notice of such adjustment or adjustments setting forth the number of Warrant Shares purchasable upon the exercise of each Warrant and the Warrant Price of such Warrant Shares after such adjustment, setting forth a brief statement of the facts requiring such adjustment and setting forth the computation by which such adjustment was made. Any failure by the Bank to give notice to any Holder or any defect therein shall not affect the validity of such adjustment or of the event resulting in the adjustment, nor of the Holder’s rights to such adjustment.

9.4 No Adjustment for Dividends or Distributions. Except as provided in Subsections 9.1 and 9.6, no adjustment in respect of any dividends or distributions shall be made during the term of a Warrant or upon the exercise of a Warrant.

9.5 Rights Upon Consolidation, Merger. etc.

(a) In the case of any consolidation of the Bank with or merger of the Bank into another corporation or in the case of any sale or conveyance to another corporation of the property of the Bank as an entirety or substantially as an entirety, such successor or purchasing corporation may assume the obligations hereunder, and may execute with the

Bank an agreement that each Holder shall have the right thereafter upon payment of the Warrant Price in effect immediately prior to such transaction to purchase upon exercise of each Warrant the kind and amount of shares and other securities and property (including cash) which each Holder would have owned or would have been entitled to receive after the happening of such consolidation, merger, sale or conveyance had such Warrant been exercised immediately prior to such action. The Bank shall mail by first class mail, postage prepaid, to each Holder, notice of the execution of any such agreement. Such agreement shall provide for adjustments, which shall be as nearly equivalent as may be practicable to the adjustments provided for in this Section 9. The provisions of this Subsection 9.5 shall similarly apply to successive consolidations, mergers, sales or conveyances.

(b) In the event that such successor corporation does not execute such an agreement with the Bank as provided in Paragraph (a), then each Holder shall be entitled to exercise outstanding Warrants, during a period of at least 30 days, which period shall terminate at least 5 days prior to consummation of the consolidation, merger, sale or conveyance, and thereby receive consideration in the transaction on the same basis as other previously outstanding shares of the same class as the Warrant Shares acquired upon exercise. The Bank shall use its best efforts to qualify or register the Warrant Shares issued pursuant to this Paragraph (b) under the laws of the states in which the holders reside and under applicable federal securities laws where no exemption from registration or qualification is available. Warrants not exercised in accordance with this Paragraph (b) before consummation of the transaction will be canceled and become null and void. The Bank shall mail by first class mail, postage prepaid, to each Holder, at least 10 days prior to the first date on which the Warrants shall become exercisable, notice of the proposed transaction setting forth the first and last date on which the Holder may exercise outstanding Warrants and a description of the terms of this Warrant providing for cancellation of the Warrants in the event that Warrants are not exercised by the prescribed date.

(c) The Bank’s failure to give any notice required by this Subsection 9.5 or any defect therein shall not affect the validity of any such agreement, consolidation, merger, sale or conveyance of property.

9.6 Rights Upon Liquidation. In case: (i) the Bank shall make any distribution of its assets to holders of its shares of Common Stock as a liquidation or partial liquidation dividend or by way of return of capital, or other than as a dividend payable out of capital and unimpaired surplus legally available for dividends under California law: or (ii) the Bank shall liquidate, dissolve or wind up its affairs (other than in connection with a consolidation, merger or sale of all or substantially all of its property, assets, and business as an entirety), then the Bank shall cause to be mailed to each Holder, by first class mail, postage prepaid, at least 20 days prior to the applicable record date, a notice stating the date on which such distribution, liquidation, dissolution or winding up is expected to become effective, and the date on which it is expected that holders of shares of Common Stock of record shall be entitled to exchange their shares of Common Stock for securities or other property or assets (including cash) deliverable upon such distribution, liquidation, dissolution or winding up. The Bank’s failure to give the notice required by this Subsection 9.6 or any defect therein shall not affect the validity of such distribution, liquidation, dissolution or winding up.

9.7 Statement on Warrant. Irrespective of any adjustments in the Warrant Price or the number or kind of shares purchasable upon the exercise of the Warrants. Warrants theretofore or thereafter issued may continue to express the same price and number and kind of shares as are stated in the Warrants initially issued.

10. No Rights as Stockholders. Nothing contained in this Warrant shall be construed as conferring upon the Holder hereof or the Holder’s transferees the right to vote or to receive dividends or to consent to or to receive notice as stockholders in respect of any meeting of stockholders for the election of directors of the Bank or any other matter, or any rights whatsoever as stockholders of the Bank.

11. Notices. Any notice pursuant to this Warrant by any Holder to the Bank or by the Bank to the Holder, shall be in writing and shall be mailed first class, postage prepaid, or delivered: (a) if to the Bank, at its Administrative Office at 5810 El Camino Real, Carlsbad, California 92008; or (b) if to the Holder, at the Holder’s respective address on the books of the Bank.

12. Applicable Law. This Warrant shall be governed by and construed in accordance with the laws of the State of California, without giving effect to principles of conflict of laws.

13. Captions. The captions of the Sections and Subsections of this Warrant have been inserted for convenience only and shall have no substantive effect.

ASSIGNMENT OF WARRANT

(To be signed only upon assignment or transfer of Warrant)

To:	SOUTHWEST COMMUNITY BANK 5810 El Camino Real Carlsbad, California 92008	Or to:	U.S. STOCK TRANSFER CORPORATION 1745 Gardena Avenue Glendale. California 91204
FOR VALUE RECEIVED the undersigned hereby sell(s), assign(s) and transfer(s) unto

PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE:______________________________________________________________________________________________________________________________________

(Name and Address of Assignee Must be Printed or Typewritten)

the within Warrant, hereby irrevocably constituting and appointing                                               Attorney to transfer said Warrant on the books of the Bank, with full power of substitution in the premises.

Dated:

Signature of Record Holder

Signature of Record Holder

NOTE: The above signatures(s) must correspond with the names(s) as written upon the face of this Warrant in every particular, without alteration or enlargement or any change whatsoever.

Signature(s) Guaranteed By:

WARRANT EXERCISE FORM

(To be signed only upon exercise of Warrant)

To: SOUTHWEST COMMUNITY BANK 5810 El Camino Real Carlsbad. California 92008

The undersigned hereby irrevocably elect(s) to exercise the right of purchase represented by the within Warrant for. and to purchase thereunder,                                  shares of the Bank’s Common Stock, and request(s) that certificates for such shares be issued in the name of:

Please print name and address:

Please provide Social Security or Federal Tax I.D. No.:

and, if said number of shares shall not be all the shares purchasable thereunder, that a new Warrant for the balance remaining of the whole number of shares purchasable under the within Warrant be registered in the name of the undersigned Holder or assignee as indicated below and delivered to the address stated below.

DATED:                             

Address:

Signature of Record Holder or Assignee

Signature of Record Holder or Assignee

NOTE: The above signatures(s) must correspond with the name(s) as written upon the face of this Warrant in every particular, without alteration or enlargement or any change whatsoever. unless this Warrant has been assigned.

Signature(s) Guaranteed By:                                                     

EXHIBIT B

FEE SCHEDULE

AS

WARRANT AGENT

FOR

SOUTHWEST COMMUNITY BANK

ACCEPTANCE OF APPOINTMENT AND REVIEW OF DOCUMENTATION		$1,500.00
WARRANT ISSUANCE FEE                             (MINIMUM FEE $500.00)	@$3.00	WILL BILL
MONTHLY WARRANT AGENT FEE	$300.00	WILL BILL
PROCESS WARRANT EXERCISES (INCLUDES POST-DOWN, ISSUE NEW STOCK AND MAIL 1ST CLASS)	@$8.50	WILL BILL
CURE IRREGULAR, INCOMPLETE ITEMS	@$10.00	WILL BILL
OUT OF POCKET EXPENSES AS INCURRED		WILL BILL

SERVICES AND/OR OUT OF POCKET NOT COVERED BY THE ABOVE FEES

WILL BE QUOTED AND BILLED AS REQUESTED UPON REVIEW

OF TASK TO BE PERFORMED.

U. S. STOCK TRANSFER CORPORATION

MARCH 8, 2002

EX-4.1(A)

Exhibit 4.1(a)

ASSIGNMENT AND ASSUMPTION AGREEMENT

THIS ASSIGNMENT AND ASSUMPTION AGREEMENT (the “Agreement”) is made and entered into as of the 9th day of June, 2006, by and between U.S. STOCK TRANSFER CORPORATION, a California corporation (“Warrant Agent” or the “Assignor”), WELLS FARGO BANK, N.A., a national banking association (“Wells Fargo” or the “Assignee”), PLACER SIERRA BANK, a California banking corporation (“PSB”) and PLACER SIERRA BANCSHARES, a California corporation (“PLSB”).

WITNESSETH:

WHEREAS, on April 19, 2002, SOUTHWEST COMMUNITY BANK, a California banking corporation (“Southwest Bank”) and Warrant Agent, entered into a Warrant Agreement (“Warrant Agreement”) which authorized Southwest Bank to issue warrants (the “Warrants”) to purchase up to 42,308 of its shares of common stock in connection with a public offering of shares of its common stock and warrants;

WHEREAS, on June 9, 2006 Southwest Bank completed a holding company reorganization pursuant to which each outstanding share of Southwest Bank common stock was converted into one outstanding share of Southwest Community Bancorp (“SWCB”) common stock pursuant to the adjustment terms contained in the certificates evidencing the Warrants;

WHEREAS, on February 15, 2006, PLSB and SWCB, parent of Southwest Bank, entered into an Agreement and Plan of Merger and Reorganization (“Reorganization Agreement”) providing for the merger of SWCB with and into PLSB with PLSB as the surviving corporation (the “Holding Company Merger”), the issuance of shares of the PLSB’s common stock, no par value (“Common Stock”) to the shareholders of SWCB, and the subsequent merger of Southwest Bank with and into PSB, a wholly-owned subsidiary of PLSB (the “Bank Merger”) with PSB as the surviving bank (the “Surviving Bank”) pursuant to an Agreement of Merger (the Holding Company Merger and the Bank Merger are collectively referred to as “Mergers”);

WHEREAS, pursuant to the terms of the Reorganization Agreement, PLSB shall at all times reserve out of its authorized by unissued but shares of Common Stock a sufficient number of such shares to issue to holders of SWCB common stock warrants upon the exercise of their warrants following the Effective Time (as defined in the Reorganization Agreement) of the Merger;

WHEREAS, Wells Fargo is the transfer agent for PLSB and will be administering the issuance of PLSB common stock to the former holders of SWCB shareholders and the issuance of PLSB common stock to the holders of Warrants;

WHEREAS, the parties are executing this Agreement in order to evidence the assignment and transfer by Assignor to Assignee of Assignor’s right, title and interest in and to the Warrant Agreement and the assignment and transfer by PSB to PLSB of PSB’s right, title and interest in and to the Warrant Agreement; and

WHEREAS, immediately prior hereto the Mergers have been consummated.

NOW, THEREFORE, in consideration of the premises and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Assignor and the Assignee hereby agree as follows:

1. Assignment by Assignor and PSB. Assignor hereby conveys, transfers and assigns to Assignee all of its right, title and interest in the Warrant Agreement. PSB hereby conveys, transfers and assigns to PLSB all of its right, title and interest in the Warrant Agreement.

2. Assumption by Assignee and PSB – Assigned Agreement. Assignee hereby accepts the transfer and assignment of all of Assignor’s right, title and interest in, to and under the Warrant Agreement and hereby assumes and agrees to fully and completely pay, perform and discharge all of the assignor’s liabilities and obligations thereunder, to the extent the same shall arise or be incurred, or which are required to be performed, on or after the date of this Agreement. PLSB hereby accepts the transfer and assignment of all of PSB’s right, title and interest in, to and under the Warrant Agreement and hereby assumes and agrees to fully and completely pay, perform and discharge all of the assignor’s liabilities and obligations there under, to the extent the same shall arise or be incurred, or which are required to be performed, on or after the date of this Agreement.

3. Assumption by Assignee – Assumed Liabilities. Assignee hereby assumes and agrees to fully and completely perform and discharge all of the Assignor’s liabilities and obligations under the Warrant Agreement. PLSB hereby assumes and agrees to fully and completely perform and discharge all of PSB’s liabilities and obligations under the Warrant Agreement.

4. Third Parties. Nothing herein expressed or implied is intended to, or shall be construed to, confer upon or give to any person or entity other than the parties hereto and their successors and permitted assigns, any rights or remedies under or by reason of this Agreement.

5. Miscellaneous. The provisions of this Agreement shall inure to the benefit of and shall be binding upon the respective successors and assigns of Assignor, Assignee, PSB and PLSB. This Agreement may be executed in several counterparts, each of which shall constitute an original, and all of which together shall constitute one and same instrument. This Agreement shall be governed and construed and enforced in accordance with the laws of the State of California, determined without reference to conflicts of laws.

IN WITNESS WHEREOF, Assignor, Assignee, PLSB and PSB have caused this Agreement to be executed by their duly authorized representative effective on and as of the day and year first above written.

U.S. STOCK TRANSFER CORPORATION
By:	/s/ Richard Tilton
Name:	Richard Tilton
Title:	Assistant Vice President
WELLS FARGO BANK, N.A.
By:	/s/ John D. Baker
Name:	John D. Baker
Title:	Vice President
PLACER SIERRA BANK
By:	/s/ Ronald W. Bachli
Name:	Ronald W. Bachli
Title:	Chairman & Chief Executive Officer
PLACER SIERRA BANCSHARES
By:	/s/ Ronald W. Bachli
Name:	Ronald W. Bachli
Title:	Chairman & Chief Executive Officer

EX-4.1(B)

Exhibit 4.1(b)

FIRST AMENDMENT TO WARRANT AGREEMENT

THIS FIRST AMENDMENT TO WARRANT AGREEMENT (the “First Amendment”) is made and entered into as of June 12, 2006, by and between PLACER SIERRA BANCSHARES (“PLSB”) and WELLS FARGO BANK, N.A., a national association (“Wells Fargo”), with reference to that certain Warrant Agreement dated April 19, 2002 between Southwest Community Bank (“Southwest Bank”) and U.S. Stock Transfer Corporation, a California corporation (“U.S. Stock”) (“Warrant Agreement”). PLSB and Wells Fargo are referred to herein as the “Parties.”

WHEREAS, U.S. Stock has previously assigned all of its rights and obligations under the Warrant Agreement to Wells Fargo pursuant to that certain Assignment and Assumption Agreement by and among U.S. Stock, Wells Fargo, PLSB and Placer Sierra Bank, a California banking corporation (“PSB”) dated as of June 9, 2006 (the “Assignment Agreement”);

WHEREAS, Placer Sierra Bank, as successor by merger to Southwest Community Bank, has assigned all of its rights and obligations under the Warrant Agreement to PLSB pursuant to the Assignment Agreement;

WHEREAS, the Parties desire to amend the Warrant Agreement as set forth in this First Amendment; and

WHEREAS, Section 22 of the Warrant Agreement permits the amendment of the Warrant Agreement without the consent of the holders of the Warrants if such amendment does not adversely affect the interests of the holders of Warrant Certificates, as defined in the Warrant Agreement.

NOW, THEREFORE, in consideration of the premises and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties, intending to be legally bound, hereby agree as follows:

1. The last sentence of Section 7 of the Warrant Agreement is hereby deleted in its entirety and amended to read as follows:

“In accordance with applicable law and regulation, the Warrant Agent shall maintain, in a retrievable database, electronic records of all cancelled or destroyed rights certificates which have been cancelled or destroyed by the Warrant Agent. The Warrant Agent shall maintain such electronic records or physical records for the time period required by applicable law and regulation. Upon written request of the Company, the Warrant Agent shall provide to the Company, copies of such electronic records or physical records relating to rights certificates cancelled or destroyed by the Warrant Agent.”

2. Section 12 of the Warrant Agreement is hereby amended in its entirety to read as follows:

“Section 12. Notices to Warrantholders. Upon any adjustment of the Exercise Price pursuant to Section 11, the Company within 20 days thereafter shall: (i) cause to be filed with the Warrant Agent a certificate of its Chief Financial Officer, Controller or the Manager of Financial Reporting setting forth the Exercise Price after such adjustment and setting forth in reasonable detail the method of calculation and the facts upon which such calculation is based and setting forth the number of Warrants to be issued under Section 11 hereof, or the number of shares of Common Stock (or portion thereof) purchasable upon exercise of a Warrant after such adjustment in the Exercise Price, which certificate shall be conclusive evidence of the correctness of the matters set forth therein; and (ii) cause to be given to each of the holders of record of Warrant Certificates at their respective addresses appearing on the Warrant register written notice of such adjustment by first-class mail, postage prepaid. Where appropriate, such notice may be given in advance and included as a part of the notice required to be made under the provisions of Section 9.5 of the Warrant Certificate.”

3. Section 19 of the Warrant Agreement is hereby amended in its entirety to read as follows:

“Section 19. Maintenance of Office. As long as any of the Warrant Certificates remain unexercised or unconverted, the Company will maintain an office or agency where the Warrant Certificates may be presented for registration, transfer, exchange, or exercise pursuant to the terms of the Agreement, and where notices and demands to or upon the Company in respect of the Warrants, Warrant Certificates, or this Agreement may be serviced. The principal corporate trust office of the Warrant Agent in the City of South St. Paul shall be the office or agency for such purposes, which at the date hereof is:

Wells Fargo Shareowner Services

161 North Concord Exchange

South St. Paul, MN 55075

Attn: Corporate Actions

4. Section 21 of the Warrant Agreement is amended to provide that demands and notices shall be sent to PLSB and the Warrant Agent at the following addresses:

Placer Sierra Bancshares

525 J. Street

Sacramento, California 95814

Attn: General Counsel

Wells Fargo Shareowner Services

161 North Concord Exchange

South St. Paul, MN 55075

Attn: Corporate Actions

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5. Exhibit B. The Fee Schedule attached hereto shall constitute the Fee Schedule for purposes of the Agreement.

6. Miscellaneous.

(a). Counterparts. This First Amendment may be executed in several counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

(b). Complete Agreement; Warrant Agreement; First Amended Warrant Agreement. The Warrant Agreement and the First Amendment together constitute the entire agreement between the Parties and supercede any prior understandings, agreements or representations and warranties by or between the Parties, written or oral, to the extent they relate in any way to the subject matter hereof. The Warrant Agreement, as amended hereby, may not be changed or modified in any manner, orally, or otherwise, except is a writing executed by each of the Parties hereto.

(c). Governing Law. This First Amendment shall be governed by and construed in accordance with the laws of the State of California without regard to conflicts of laws principles.

Remainder of Page Intentionally Left Blank

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IN WITNESS WHEREOF, the Parties hereto have executed this First Amended Warrant on the date first written above.

WELLS FARGO BANK, N.A.
By:	/s/ John D. Baker
Name:	John D. Baker
Title:	Vice President
PLACER SIERRA BANCSHARES
By:	/s/ David E. Hooston
	David E. Hooston
	Chief Financial Officer

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FEE SCHEDULE

5

EX-4.1(C)

Exhibit 4.1(c)

[Face of Warrant]

PLSB WRT NO:-	Warrants
CUSlP NO: 726079 11 4

PLACER SIERRA BANCSHARES

Organized Under the Laws of the State of California

THIS CERTIFIES THAT, for value received,

the registered holder hereof or registered assigns (the “Holder”), is entitled to purchase from Placer Sierra Bancshares, a California corporation (the “Company”), at the purchase price of $5.75 per share (the “Warrant Price”), 4.977 shares of the Company’s Common Stock, no par value (the “Common Stock”), for each Warrant comprising the aggregate number of Warrants set forth above. The number of shares purchasable upon exercise of this Warrant and the Warrant Price per share shall be subject to adjustment from time to time as set forth herein. This Warrant shall expire at 5:00 p.m. Pacific Time on April 30, 2007 (the “Expiration Date”), unless extended by the Company, subject to regulatory approval.

This Warrant is issued by the Company as a result of the merger of the Company and Southwest Community Bancorp. As a result of the merger, each Holders’ warrant, which was formerly convertible into 3.15 shares of Southwest Community Bancorp Common Stock, is now convertible into 4.977 shares of the Company’s Common Stock at a purchase price of $5.75 per share. The shares of Common Stock to be issued upon the exercise of Warrants are referred to herein as “Warrant Shares.”

1. Exercise Period and Expiration Date. The Warrants are exercisable from issuance until the Expiration Date (the “Exercise Period”), unless extended. This Warrant shall expire in its entirety and no longer be exercisable at 5:00 p.m., Pacific Time, on the Expiration Date, unless extended. The Company shall use its best efforts to qualify or register the Warrant Shares under the laws of the states in which the Holders reside and under applicable federal securities laws where no exemption from such registration or qualification is available.

2. Exercise of Warrants. This Warrant may be exercised at the Warrant Agent’s Office at 161 North Concord Exchange, South St. Paul, MN 55075 Attn: Corporate Actions, upon presentation and surrender hereof, with the Warrant Exercise Form on the reverse side hereof duly completed and signed, and upon payment to the Company of the Warrant Price (as adjusted in accordance with the provisions of Section 9 hereof), for the number of Warrant Shares in respect of which such Warrant is then exercised. Payment of the aggregate Warrant Price shall be made in cash in United States dollars, by certified or official bank check payable in United States dollars to the order of the Company, or by any combination thereof.

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The Company shall not be required to issue fractional Warrant Shares on the exercise of Warrants. When Warrants shall be presented for exercise in full at the same time by the same Holder, the number of full Warrant Shares which shall be issuable upon the exercise thereof shall be computed on the basis of the aggregate number of Warrant Shares purchasable by such Holder on exercise of the Warrants so presented. If any fraction of a Warrant Share would be issuable on the exercise of any Warrants in full, the Company shall pay an amount in cash equal to the then current market price per Warrant Share multiplied by such fraction. When Warrants shall be presented for exercise as to a specified portion, only full Warrant Shares shall be issuable and a new Warrant shall be issuable evidencing the remaining Warrant or Warrants.

Upon such surrender of Warrants and payment of the Warrant Price as aforesaid, the Company or its Warrant Agent shall issue and cause to be delivered with all reasonable dispatch to or upon the written order of the Holder and in such name or names as the Holder may designate, a certificate or certificates for the number of full Warrant Shares so purchased upon the exercise of such Warrants, together with cash, as provided above in this Section 2, in respect of any fractional Warrant Share otherwise issuable upon such surrender. Such certificate or certificates shall be deemed to have been issued and any person so designated to be named therein shall be deemed to become a holder of record of such Warrant Shares as of the date of the surrender of such Warrants and payment of the Warrant Price, as aforesaid; provided, however, that if, at the date of surrender of such Warrants and payment of the Warrant Price, the transfer books for the Warrant Shares or other class of stock purchasable upon the exercise of such Warrants shall be closed, the certificates for the Warrant Shares in respect of which such Warrants are then exercised shall be issuable as of the date on which such books shall next be opened (whether before or after the Expiration Date) and until such date the Company shall be under no duty to deliver any certificate for such Warrant Shares. The purchase rights represented by the Warrants shall be exercisable, at the election of the Holders thereof, either in full or from time to time in part and, in the event that a Warrant is exercised in respect of less than all of the Warrant Shares purchasable on such exercise at any time prior to the date of expiration of the Warrants, a new Warrant evidencing the remaining Warrant or Warrants will be issued. All Warrants surrendered in the exercise of the rights thereby evidenced shall be cancelled by the Company.

3. Exchange of Warrants. This Warrant may be exchanged without charge for another Warrant(s) entitling the Holder thereof to purchase a like aggregate number of Warrant Shares as the Warrant(s) surrendered then entitle such Holder to purchase. Any Holder desiring to exchange a Warrant(s) shall make such request in writing delivered to the Company or its Warrant Agent and shall surrender, properly endorsed, the Warrant(s) to be so exchanged. Thereupon, the Company or its Warrant Agent shall deliver to the person(s) entitled thereto new Warrant(s) as so requested.

REFERENCE IS HEREBY MADE TO THE FURTHER PROVISIONS OF THIS WARRANT SET FORTH ON THE REVERSE HEREOF, WHICH FURTHER PROVISIONS SHALL FOR ALL PURPOSES HAVE THE SAME EFFECT AS IF SET FORTH AT THIS PLACE.

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WITNESS, the facsimile seal of the Company and the facsimile signatures of its duly authorized officers. This Warrant certificate is not valid until countersigned by the Warrant Agent.

PLACER SIERRA BANCSHARES,
a California corporation
By:
	Ronald W. Bachli, President
By:
	Angelee J. Harris, Secretary

[PLSB SEAL]

Dated:
Countersigned:
WELLS FARGO BANK, N.A.
As Warrant Agent
By:
	Authorized Officer

4. Transfer of Warrants. This Warrant shall be transferable only on the books of the Company maintained by the Warrant Agent upon delivery hereof, with the Assignment of Warrant Form below duly endorsed with signatures properly guaranteed by a commercial bank or securities brokerage firm, or accompanied by proper evidence of succession, assignment or authority to transfer. Upon any registration of transfer, the Company or its Warrant Agent shall deliver a new Warrant or Warrants to the person(s) entitled thereto.

5. Payment of Taxes. The Company will pay all documentary stamp taxes, if any, attributable to the initial issuance of Warrant Shares upon the exercise of Warrants; provided, however, that the Company shall not be required to pay any tax or taxes which may be payable in respect of any transfer involved in the issuance or delivery of any Warrants or certificates for Warrant Shares in a name other than that of the registered Holder of the Warrants, and in such case the Company shall not be required to issue or deliver any certificates for shares of Common Stock or any Warrant until the person requesting the same has paid to the Company the amount of such tax or has established to the Company’s satisfaction that such tax has been paid.

6. Mutilated or Missing Warrants. In case any of the Warrants shall be mutilated, lost, stolen or destroyed, the Company or its Warrant Agent may, at its discretion issue, upon cancellation of the mutilated Warrant, or in lieu of and in substitution for the Warrant

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lost, stolen or destroyed, a new Warrant of like tenor and representing an equivalent right or interest; but only upon receipt of evidence satisfactory to the Company or its Warrant Agent of such loss, theft or destruction of such Warrant and indemnity, if requested, also satisfactory to the Company or its Warrant Agent. An applicant for such a substitute Warrant shall reimburse Company and its Warrant Agent for all reasonable expenses and shall also comply with such other reasonable regulations as the Company or its Warrant Agent may prescribe.

7. Reservation of Warrant Shares. The Company shall at all times, while the Warrants are exercisable, keep reserved, out of its authorized Common Stock, a number of shares of Common Stock sufficient to provide for the exercise of the rights of purchase represented by the outstanding Warrants. Promptly after the date of expiration of the Warrants, no shares shall be subject to reservation in respect of such Warrants.

8. Cancellation of Warrants. The Company or its Warrant Agent shall cancel any Warrants surrendered for exchange, substitution, transfer or exercise in whole or in part.

9. Adjustment of Warrant Price and Number of Warrant Shares. The number and kind of securities purchasable upon the exercise of each Warrant and the Warrant Price shall be subject to adjustments from time to time upon the happening of certain events, as hereinafter defined:

9.1 Mechanical Adjustments. The number of Warrant Shares purchasable upon the exercise of each Warrant and the Warrant Price shall be subject to adjustment as follows:

(a) In case the Company shall: (i) pay a dividend in shares of Common Stock or make a distribution in shares of Common Stock; (ii) subdivide its outstanding shares of Common Stock into a greater number of shares; (iii) combine its outstanding shares of Common Stock into a smaller number of shares of Common Stock; or (iv) issue by reclassification of its shares of Common Stock or capital reorganization other securities of the Company, the number of Warrant Shares purchasable upon exercise of each Warrant immediately prior thereto shall be adjusted so that the Holder of each Warrant shall be entitled to receive the kind and number of Warrant Shares or other securities of the Company which the Holder would have owned or would have been entitled to receive after the happening of any of the events described above, had such Warrant been exercised immediately prior to the happening of such event or any record date with respect thereto. An adjustment made pursuant to this Paragraph (a) shall become effective immediately after the effective date of such event retroactive to the record date, if any, for such event.

(b) No adjustment in the number of Warrant Shares purchasable hereunder shall be required unless such adjustment would require an increase or decrease of at least one percent (1%) in the number of Warrant Shares purchasable upon the exercise of each Warrant; provided, however, that any adjustments which by reason of this Paragraph (b) are not required to be made shall be carried forward and taken into account in any subsequent adjustment(s). All calculations shall be made to the nearest one hundredth (1/100) of a share.

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(c) Whenever the number of Warrant Shares purchasable upon the exercise of each Warrant is adjusted, as herein provided, each Warrant Price payable upon exercise of each Warrant shall be adjusted by multiplying the Warrant Price immediately prior to the adjustment by a fraction, of which the numerator shall be the number of Warrant Shares purchasable upon the exercise or each Warrant immediately prior to the adjustment, and of which the denominator shall be the number of Warrant Shares so purchasable immediately thereafter. All calculations shall be made to the nearest whole penny.

(d) For the purpose of this Subsection 9.1, the term “shares of Common Stock” shall mean: (i) the class of share designated as the Common Stock of the Company at the date of this Warrant; or (ii) any other class of share resulting from successive changes or reclassifications of such shares consisting solely of changes in par value, or from par value to no par value, or from no par value to par value. In the event that at any time, as a result of an adjustment made pursuant to Paragraph (a) above, the Holder shall become entitled to purchase any shares of the Company other than shares of Common Stock, thereafter the number of such other shares so purchasable upon exercise of each Warrant and the Warrant Price of such shares shall be subject to adjustment from time to time in a manner and on terms as nearly equivalent as practicable to the provisions with respect to the Warrant Shares contained in Paragraphs (a) through (c), inclusive, above, and the provisions of Sections 1 and 2 and Subsections 9.2 through 9.4, inclusive, with respect to the Warrant Shares, shall apply on like terms to any such other shares.

9.2 Voluntary Adjustment by the Company. The Company may at its option, at any time during the term of the Warrants, reduce the then current Warrant Price to any amount deemed appropriate by the Board of Directors of the Company, subject to regulatory approval.

9.3 Notice of Adjustment. Whenever the number of Warrant Shares purchasable upon the exercise of each Warrant and the Warrant Price of such Warrant Shares are adjusted, as herein provided, the Company shall cause to be mailed by first class mail, postage prepaid, to each Holder, notice of such adjustment or adjustments setting forth the number of Warrant Shares purchasable upon the exercise of each Warrant and the Warrant Price of such Warrant Shares after such adjustment, setting forth a brief statement of the facts requiring such adjustment and setting forth the computation by which such adjustment was made. Any failure by the Company to give notice to any Holder or any defect therein shall nor affect the validity of such adjustment or of the event resulting in the adjustment, nor of the Holder’s rights to such adjustment.

9.4 No Adjustment for Dividends or Distributions. Except as provided in Subsections 9.1 and 9.6, no adjustment in respect of any dividends or distributions shall be made during the term of a Warrant or upon the exercise of a Warrant.

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9.5 Rights Upon Consolidation, Merger, etc.

(a) In the case of any consolidation of the Company with or merger of the Company into another corporation or in the case of any sale or conveyance to another corporation of the property of the Company as an entirety or substantially as an entirety, such successor or purchasing corporation may assume the obligations hereunder, and may execute with the Company an agreement that each Holder shall have the right thereafter upon payment of the Warrant Price in effect immediately prior to such transaction to purchase upon exercise of each Warrant the kind and amount of shares and other securities and property (including cash) which each Holder would have owned or would have been entitled to receive after the happening of such consolidation, merger, sale or conveyance had such Warrant been exercised immediately prior to such action. The Company shall mail by first class mail, postage prepaid, to each Holder, notice of the execution of any such agreement. Such agreement shall provide for adjustments, which shall be as nearly equivalent as may be practicable to the adjustments provided for in this Section 9. The provisions of this Subsection 9.5 shall similarly apply to successive consolidations, mergers, sales or conveyances.

(b) In the event that such successor corporation does not execute such an agreement with the Company as provided in Paragraph (a), then each Holder shall be entitled to exercise outstanding Warrants, during a period of at least 30 days, which period shall terminate at least 5 days prior to consummation of the consolidation, merger, sale or conveyance, and thereby receive consideration in the transaction on the same basis as other previously outstanding shares of the same class as the Warrant Shares acquired upon exercise. The Company shall use its best efforts to qualify or register the Warrant Shares issued pursuant to this Paragraph (b) under the laws of the states in which the holders reside and under applicable federal securities laws where no exemption from registration or qualification is available. Warrants not exercised in accordance with this Paragraph (b) before consummation of the transaction will be canceled and become null and void. The Company shall mail by first class mail, postage prepaid, to each Holder, at least 10 days prior to the first date on which the Warrants shall become exercisable, notice of the proposed transaction setting forth the first and last date on which the Holder may exercise outstanding Warrants and a description of the terms of this Warrant providing for cancellation of the Warrants in the event that Warrants are not exercised by the prescribed date.

(c) The Company’s failure to give any notice required by this Subsection 9.5 or any defect therein shall not affect the validity of any such agreement, consolidation, merger, sale or conveyance of property.

9.6 Rights Upon Liquidation. In case: (i) the Company shall make any distribution of its assets to holders of its shares of Common Stock as a liquidation or partial liquidation dividend or by way of return of capital, or other than as a dividend payable out of capital and unimpaired surplus legally available for dividends under California law; or (ii) the Company shall liquidate, dissolve or wind up its affairs (other than in connection with a consolidation, merger or sale of all or substantially all of its property, assets, and business as an entirety), then the Company shall cause to be mailed to each Holder, by first class mail, postage prepaid, at least 20 days prior to

6

the applicable record date, a notice stating the date on which such distribution, liquidation, dissolution or winding up is expected to become effective, and the date on which it is expected that holders of shares of Common Stock of record shall be entitled to exchange their shares of Common Stock for securities or other property or assets (including cash) deliverable upon such distribution, liquidation, dissolution or winding up. The Company’s failure to give the notice required by this Subsection 9.6 or any defect therein shall not affect the validity of such distribution, liquidation, dissolution or winding up.

9.7 Statement on Warrant. Irrespective of any adjustments in the Warrant Price or the number or kind of shares purchasable upon the exercise of the Warrants, Warrants theretofore or thereafter issued may continue to express the same price and number and kind of shares as are stated in the Warrants initially issued.

10. No Rights as Shareholders. Nothing contained in this Warrant shall be construed as conferring upon the Holder hereof or the Holder’s transferees the right to vote or to receive dividends or to consent to or to receive notice as shareholders in respect of any meeting of shareholders for the election of directors of the Company or any other matter, or any rights whatsoever as shareholders of the Company.

11. Notices. Any notice pursuant to this Warrant by any Holder to the Company or by the Company to the Holder, shall be in writing and shall be mailed first class, postage prepaid, or delivered: (a) if to the Company, at its Administrative Office at 525 J Street, Sacramento, California 95814; or (b) if to the Holder; at the Holder’s respective address on the books of the Company.

12. Applicable Law. This Warrant shall be governed by and construed in accordance with the laws of the State of California, without giving effect to principles of conflict of laws.

13. Captions. The captions of the Sections and Subsections of this Warrant have been inserted for convenience only and shall have no substantive effect.

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ASSIGNMENT OF WARRANT

(To be signed only upon assignment or transfer of Warrant)

To: PLACER SIERRA BANCSHARES 525 J Street Sacramento, California 95814 Or to: WELLS FARGO SHAREHOLDER SERVICES. 161 North Concord Exchange South St. Paul, Minnesota 55075 Attn: Corporate Actions

FOR VALUE RECEIVED the undersigned hereby sell(s), assign(s) and transfer(s) unto

PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE: _________________________________________________________________________________________________________________________

(Name and Address of Assignee Must be Printed or Typewritten)

the within Warrant, hereby irrevocably constituting and appointing                                          Attorney to transfer said Warrant on the books of the Company, with full power of substitution in the premises.

Dated:                     

Signature of Record Holder

Signature of Record Holder

NOTE: The above signatures(s) must correspond with the names(s) as written upon the face of this Warrant in every particular, without alteration or enlargement or any change whatsoever.

Signature(s) Guaranteed By:

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WARRANT EXERCISE FORM

(To be signed only upon exercise of Warrant)

To: WELLS FARGO SHAREOWNER SERVICES 161 North Concord Exchange South St. Paul, MN 55075 Attn: Corporate Actions

The undersigned hereby irrevocably elect(s) to exercise the right of purchase represented by the within Warrant for, and to purchase thereunder,                      shares of the Company’s Common Stock, and request(s) that certificates for such shares be issued in the name of:

Please print name and address:

Please provide Social Security or Federal Tax I.D. No.:

and, if said number of shares shall not be all the shares purchasable thereunder, that a new Warrant for the balance remaining of the whole number of shares purchasable under the within Warrant be registered in the name of the undersigned Holder or assignee as indicated below and delivered to the address stated below.

DATED:                    

Address:

Signature of Record Holder or Assignee

Signature of Record Holder or Assignee

NOTE: The above signatures(s) must correspond with the name(s) as written upon the face of this Warrant in every particular, without alteration or enlargement or any change whatsoever, unless this Warrant has been assigned.

Signature(s) Guaranteed By:

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EX-4.3

Exhibit 4.3

SOUTHWEST COMMUNITY BANCORP,

AS ISSUER

INDENTURE

DATED AS OF APRIL 22, 2003

U.S. BANK NATIONAL ASSOCIATION,

AS TRUSTEE

FLOATING RATE JUNIOR SUBORDINATED DEFERRABLE INTEREST DEBENTURES

DUE 2033

TABLE OF CONTENTS

		Page
ARTICLE I. DEFINITIONS		1
Section 1.1.	Definitions	1
ARTICLE II. DEBENTURES		7
Section 2.1.	Authentication and Dating	7
Section 2.2.	Form of Trustee’s Certificate of Authentication	7
Section 2.3.	Form and Denomination of Debentures	8
Section 2.4.	Execution of Debentures	8
Section 2.5.	Exchange and Registration of Transfer of Debentures	8
Section 2.6.	Mutilated, Destroyed, Lost or Stolen Debentures	10
Section 2.7.	Temporary Debentures	11
Section 2.8.	Payment of Interest and Additional Interest	11
Section 2.9.	Cancellation of Debentures Paid, etc	12
Section 2.10.	Computation of Interest	13
Section 2.11.	Extension of Interest Payment Period	14
Section 2.12.	CUSIP Numbers	15
ARTICLE III. PARTICULAR COVENANTS OF THE COMPANY		15
Section 3.1.	Payment of Principal, Premium and Interest; Agreed Treatment of the Debentures	15
Section 3.2.	Offices for Notices and Payments, etc	16
Section 3.3.	Appointments to Fill Vacancies in Trustee’s Office	17
Section 3.4.	Provision as to Paying Agent	17
Section 3.5.	Certificate to Trustee	17
Section 3.6.	Additional Sums	18
Section 3.7.	Compliance with Consolidation Provisions	18
Section 3.8.	Limitation on Dividends	18
Section 3.9.	Covenants as to the Trust	19
Section 3.10.	Additional Junior Indebtedness	19
ARTICLE IV. SECURITYHOLDERS’ LISTS AND REPORTS BY THE COMPANY AND THE TRUSTEE		19
Section 4.1.	Securityholders’ Lists	19
Section 4.2.	Preservation and Disclosure of Lists	19
ARTICLE V. REMEDIES OF THE TRUSTEE AND SECURITYHOLDERS UPON AN EVENT OF DEFAULT		20
Section 5.1.	Events of Default	20
Section 5.2.	Payment of Debentures on Default; Suit Therefor	22
Section 5.3.	Application of Moneys Collected by Trustee	23
Section 5.4.	Proceedings by Securityholders	24
Section 5.5.	Proceedings by Trustee	24
Section 5.6.	Remedies Cumulative and Continuing; Delay or Omission Not a Waiver	24
Section 5.7.	Direction of Proceedings and Waiver of Defaults by Majority of Securityholders	24

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Section 5.8.	Notice of Defaults	25
Section 5.9.	Undertaking to Pay Costs	25
ARTICLE VI. CONCERNING THE TRUSTEE		26
Section 6.1.	Duties and Responsibilities of Trustee	26
Section 6.2.	Reliance on Documents, Opinions, etc	26
Section 6.3.	No Responsibility for Recitals, etc	27
Section 6.4.	Trustee, Authenticating Agent, Paying Agents, Transfer Agents or Registrar May Own Debentures	28
Section 6.5.	Moneys to be Held in Trust	28
Section 6.6.	Compensation and Expenses of Trustee	28
Section 6.7.	Officers’ Certificate as Evidence	29
Section 6.8.	Eligibility of Trustee	29
Section 6.9.	Resignation or Removal of Trustee	29
Section 6.10.	Acceptance by Successor Trustee	30
Section 6.11.	Succession by Merger, etc	31
Section 6.12.	Authenticating Agents	31
ARTICLE VII. CONCERNING THE SECURITYHOLDERS		32
Section 7.1.	Action by Securityholders	32
Section 7.2.	Proof of Execution by Securityholders	33
Section 7.3.	Who Are Deemed Absolute Owners	33
Section 7.4.	Debentures Owned by Company Deemed Not Outstanding	33
Section 7.5.	Revocation of Consents; Future Holders Bound	33
ARTICLE VIII. SECURITYHOLDERS’ MEETINGS		34
Section 8.1.	Purposes of Meetings	34
Section 8.2.	Call of Meetings by Trustee	34
Section 8.3.	Call of Meetings by Company or Securityholders	34
Section 8.4.	Qualifications for Voting	34
Section 8.5.	Regulations	34
Section 8.6.	Voting	35
Section 8.7.	Quorum; Actions	35
ARTICLE IX. SUPPLEMENTAL INDENTURES		36
Section 9.1.	Supplemental Indentures without Consent of Securityholders	36
Section 9.2.	Supplemental Indentures with Consent of Securityholders	37
Section 9.3.	Effect of Supplemental Indentures	38
Section 9.4.	Notation on Debentures	38
Section 9.5.	Evidence of Compliance of Supplemental Indenture to be Furnished to Trustee	38
ARTICLE X. REDEMPTION OF SECURITIES		38
Section 10.1.	Optional Redemption	38
Section 10.2.	Special Event Redemption	39
Section 10.3.	Notice of Redemption; Selection of Debentures	39
Section 10.4.	Payment of Debentures Called for Redemption	39

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ARTICLE XI. CONSOLIDATION, MERGER, SALE, CONVEYANCE AND LEASE		40
Section 11.1.	Company May Consolidate, etc., on Certain Terms	40
Section 11.2.	Successor Entity to be Substituted	40
Section 11.3.	Opinion of Counsel to be Given to Trustee	40
ARTICLE XII. SATISFACTION AND DISCHARGE OF INDENTURE		41
Section 12.1.	Discharge of Indenture	41
Section 12.2.	Deposited Moneys to be Held in Trust by Trustee	41
Section 12.3.	Paying Agent to Repay Moneys Held	41
Section 12.4.	Return of Unclaimed Moneys	42
ARTICLE XIII. IMMUNITY OF INCORPORATORS, STOCKHOLDERS, OFFICERS AND DIRECTORS		42
Section 13.1.	Indenture and Debentures Solely Corporate Obligations	42
ARTICLE XIV. MISCELLANEOUS PROVISIONS.		42
Section 14.1.	Successors	42
Section 14.2.	Official Acts by Successor Entity	42
Section 14.3.	Surrender of Company Powers	42
Section 14.4.	Addresses for Notices, etc	42
Section 14.5.	Governing Law	43
Section 14.6.	Evidence of Compliance with Conditions Precedent	43
Section 14.7.	Non-Business Days	43
Section 14.8.	Table of Contents, Headings, etc	43
Section 14.9.	Execution in Counterparts	43
Section 14.10.	Separability	43
Section 14.11.	Assignment	43
Section 14.12.	Acknowledgment of Rights	44
ARTICLE XV.	SUBORDINATION OF DEBENTURES	44
Section 15.1.	Agreement to Subordinate	44
Section 15.2.	Default on Senior Indebtedness	44
Section 15.3.	Liquidation, Dissolution, Bankruptcy	45
Section 15.4.	Subrogation	46
Section 15.5.	Trustee to Effectuate Subordination	46
Section 15.6.	Notice by the Company	46
Section 15.7.	Rights of the Trustee; Holders of Senior Indebtedness	47
Section 15.8.	Subordination May Not Be Impaired	47

Exhibit A Form of Floating Rate Junior Subordinated Deferrable Interest Debenture

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THIS INDENTURE, dated as of April 22, 2003, between Southwest Community Bancorp, a California corporation (the “Company”), and U.S. Bank National Association, a national banking association organized under the laws of the United States of America, as debenture trustee (the “Trustee”).

WITNESSETH:

WHEREAS, for its lawful corporate purposes, the Company has duly authorized the issuance of its Floating Rate Junior Subordinated Deferrable Interest Debentures due 2033 (the “Debentures”) under this Indenture to provide, among other things, for the execution and authentication, delivery and administration thereof, and the Company has duly authorized the execution of this Indenture; and

WHEREAS, all acts and things necessary to make this Indenture a valid agreement according to its terms, have been done and performed;

NOW, THEREFORE, This Indenture Witnesseth:

In consideration of the premises, and the purchase of the Debentures by the holders thereof, the Company covenants and agrees with the Trustee for the equal and proportionate benefit of the respective holders from time to time of the Debentures as follows:

ARTICLE I.

DEFINITIONS

SECTION 1.1. DEFINITIONS. The terms defined in this Section 1.1 (except as herein otherwise expressly provided or unless the context otherwise requires) for all purposes of this Indenture and of any indenture supplemental hereto shall have the respective meanings specified in this Section 1.1. All accounting terms used herein and not expressly defined shall have the meanings assigned to such terms in accordance with generally accepted accounting principles and the term “generally accepted accounting principles” means such accounting principles as are generally accepted in the United States at the time of any computation. The words “herein,” “hereof” and “hereunder” and other words of similar import refer to this Indenture as a whole and not to any particular Article, Section or other subdivision.

“Additional Interest” has the meaning set forth in Section 2.11.

“Additional Junior Indebtedness” means, without duplication and other than the Debentures, any indebtedness, liabilities or obligations of the Company, or any Subsidiary of the Company, under debt securities (or guarantees in respect of debt securities) initially issued after the date of this Indenture to any trust, or a trustee of a trust, partnership or other entity affiliated with the Company that is, directly or indirectly, a finance subsidiary (as such term is defined in Rule 3a-5 under the Investment Company Act of 1940) or other financing vehicle of the Company or any Subsidiary of the Company in connection with the issuance by that entity of preferred securities or other securities that are eligible to qualify for Tier 1 capital treatment (or its then equivalent) for purposes of the capital adequacy guidelines of the Federal Reserve, as then in effect and applicable to the Company (or, if the Company is not a bank holding company, such guidelines applied to the Company as if the Company were subject to such guidelines); provided, however, that the inability of the Company to treat all or any portion of the Additional Junior Indebtedness as Tier 1 capital shall not disqualify it as Additional Junior Indebtedness if such inability results from the Company having cumulative preferred stock, minority interests in consolidated subsidiaries, or any other class of security or interest which the Federal Reserve now or may hereafter accord Tier 1 capital treatment (including the Debentures) in excess of the amount which may qualify for treatment as Tier 1 capital under applicable capital adequacy guidelines.

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“Additional Sums” has the meaning set forth in Section 3.6.

“Affiliate” has the same meaning as given to that term in Rule 405 of the Securities Act or any successor rule thereunder.

“Authenticating Agent” means any agent or agents of the Trustee which at the time shall be appointed and acting pursuant to Section 6.12.

“Bankruptcy Law” means Title 11, U.S. Code, or any similar federal or state law for the relief of debtors.

“Board of Directors” means the board of directors or the executive committee or any other duly authorized designated officers of the Company.

“Board Resolution” means a copy of a resolution certified by the Secretary or an Assistant Secretary of the Company to have been duly adopted by the Board of Directors and to be in full force and effect on the date of such certification and delivered to the Trustee.

“Business Day” means any day other than a Saturday, Sunday or any other day on which banking institutions in New York City or Hartford, Connecticut are permitted or required by any applicable law to close.

“Capital Securities” means undivided beneficial interests in the assets of the Trust which rank pari passu with Common Securities issued by the Trust; provided, however, that upon the occurrence and continuance of an Event of Default (as defined in the Declaration), the rights of holders of such Common Securities to payment in respect of distributions and payments upon liquidation, redemption and otherwise are subordinated to the rights of holders of such Capital Securities.

“Capital Securities Guarantee” means the guarantee agreement that the Company enters into with U.S. Bank National Association, as guarantee trustee, or other Persons that operates directly or indirectly for the benefit of holders of Capital Securities of the Trust.

“Capital Treatment Event” means the receipt by the Company and the Trust of an opinion of counsel experienced in such matters to the effect that, as a result of the occurrence of any amendment to, or change (including any announced prospective change) in, the laws, rules or regulations of the United States or any political subdivision thereof or therein, or as the result of any official or administrative pronouncement or action or decision interpreting or applying such laws, rules or regulations, which amendment or change is effective or which pronouncement, action or decision is announced on or after the date of original issuance of the Debentures, there is more than an insubstantial risk that the Company will not, within 90 days of the date of such opinion, be entitled to treat an amount equal to the aggregate liquidation amount of the Capital Securities as “Tier 1 Capital” (or its then equivalent) for purposes of the capital adequacy guidelines of the Federal Reserve, as then in effect and applicable to the Company (or if the Company is not a bank holding company, such guidelines applied to the Company as if the Company were subject to such guidelines); provided, however, that the inability of the Company to treat all or any portion of the liquidation amount of the Capital Securities as Tier l Capital shall not constitute the basis for a Capital Treatment Event, if such inability results from the Company having cumulative preferred stock, minority interests in consolidated subsidiaries, or any other class of security or interest which the Federal Reserve or OTS, as applicable, may now or hereafter accord Tier 1 Capital treatment in excess of the amount which may now or hereafter qualify for treatment as Tier 1 Capital under applicable capital adequacy guidelines; provided further, however, that the distribution of Debentures in connection with the liquidation of the Trust shall not in and of itself constitute a Capital Treatment Event unless such liquidation shall have occurred in connection with a Tax Event or an Investment Company Event.

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“Certificate” means a certificate signed by any one of the principal executive officer, the principal financial officer or the principal accounting officer of the Company.

“Common Securities” means undivided beneficial interests in the assets of the Trust which rank pari passu with Capital Securities issued by the Trust; provided, however, that upon the occurrence and continuance of an Event of Default (as defined in the Declaration), the rights of holders of such Common Securities to payment in respect of distributions and payments upon liquidation, redemption and otherwise are subordinated to the rights of holders of such Capital Securities.

“Company” means Southwest Community Bancorp, a California corporation, and, subject to the provisions of Article XI, shall include its successors and assigns.

“Coupon Rate” has the meaning set forth in Section 2.8.

“Debenture” or “Debentures” has the meaning stated in the first recital of this Indenture.

“Debenture Register” has the meaning specified in Section 2.5.

“Declaration” means the Amended and Restated Declaration of Trust of the Trust, as amended or supplemented from time to time.

“Default” means any event, act or condition that with notice or lapse of time, or both, would constitute an Event of Default.

“Defaulted Interest” has the meaning set forth in Section 2.8.

“Distribution Period” has the meaning set forth in Section 2.8.

“Determination Date” has the meaning set forth in Section 2.10.

“Event of Default” means any event specified in Section 5.1, continued for the period of time, if any, and after the giving of the notice, if any, therein designated.

“Extension Period” has the meaning set forth in Section 2.11.

“Federal Reserve” means the Board of Governors of the Federal Reserve System and any successor federal agency that is primarily responsible for regulating the activities of bank holding companies.

“Indenture” means this instrument as originally executed or, if amended or supplemented as herein provided, as so amended or supplemented, or both.

“Institutional Trustee” has the meaning set forth in the Declaration.

“Interest Payment Date” means each March 26, June 26, September 26 and December 26 during the term of this Indenture, commencing on September 26, 2003.

“Interest Rate” means for the period beginning on (and including) the date of original issuance and ending on (but excluding) September 26, 2003 the rate per annum of 4.47% and for each Distribution Period thereafter, the Coupon Rate.

“Investment Company Event” means the receipt by the Company and the Trust of an opinion of counsel experienced in such matters to the effect that, as a result of the occurrence of a change in law or

3

regulation or written change (including any announced prospective change) in interpretation or application of law or regulation by any legislative body, court, governmental agency or regulatory authority, there is more than an insubstantial risk that the Trust is or, within 90 days of the date of such opinion will be considered an “investment company” that is required to be registered under the Investment Company Act of 1940, as amended which change or prospective change becomes effective or would become effective, as the case may be, on or after the date of the issuance of the Debentures.

“Liquidation Amount” means the stated amount of $1,000.00 per Trust Security.

“Maturity Date” means June 26, 2033.

“Officers’ Certificate” means a certificate signed by the Chairman of the Board, the Chief Executive Officer, the Vice Chairman, the President, any Managing Director or any Vice President, and by the Treasurer, an Assistant Treasurer, the Comptroller, an Assistant Comptroller, the Secretary or an Assistant Secretary of the Company, and delivered to the Trustee. Each such certificate shall include the statements provided for in Section 14.6 if and to the extent required by the provisions of such Section.

“Opinion of Counsel” means an opinion in writing signed by legal counsel, who may be an employee of or counsel to the Company, or may be other counsel reasonably satisfactory to the Trustee. Each such opinion shall include the statements provided for in Section 14.6 if and to the extent required by the provisions of such Section.

“OTS” means the Office of Thrift Supervision and any successor federal agency that is primarily responsible for regulating the activities of savings and loan holding companies.

The term “outstanding,” when used with reference to Debentures, means, subject to the provisions of Section 7.4, as of any particular time, all Debentures authenticated and delivered by the Trustee or the Authenticating Agent under this Indenture, except:

(a) Debentures theretofore canceled by the Trustee or the Authenticating Agent or delivered to the Trustee for cancellation;

(b) Debentures, or portions thereof, for the payment or redemption of which moneys in the necessary amount shall have been deposited in trust with the Trustee or with any paying agent (other than the Company) or shall have been set aside and segregated in trust by the Company (if the Company shall act as its own paying agent); provided, however, that, if such Debentures, or portions thereof, are to be redeemed prior to maturity thereof, notice of such redemption shall have been given as provided in Section 10.3 or provision satisfactory to the Trustee shall have been made for giving such notice; and

(c) Debentures paid pursuant to Section 2.6 or in lieu of or in substitution for which other Debentures shall have been authenticated and delivered pursuant to the terms of Section 2.6 unless proof satisfactory to the Company and the Trustee is presented that any such Debentures are held by bona fide holders in due course.

“Person” means any individual, corporation, limited liability company, partnership, joint venture, association, joint-stock company, trust, unincorporated organization or government or any agency or political subdivision thereof.

“Predecessor Security” of any particular Debenture means every previous Debenture evidencing all or a portion of the same debt as that evidenced by such particular Debenture; and, for purposes of this definition, any Debenture authenticated and delivered under Section 2.6 in lieu of a lost, destroyed or stolen Debenture shall be deemed to evidence the same debt as the lost, destroyed or stolen Debenture.

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“Principal Office of the Trustee,” or other similar term, means the office of the Trustee, at which at any particular time its corporate trust business shall be principally administered, which at the time of the execution of this Indenture shall be 225 Asylum Street, Goodwin Square, Hartford, Connecticut 06103.

“Redemption Date” has the meaning set forth in Section 10.1.

“Redemption Price” means 100% of the principal amount of the Debentures being redeemed, plus accrued and unpaid interest (including any Additional Interest) on such Debentures to the Redemption Date.

“Responsible Officer” means, with respect to the Trustee, any officer within the Principal Office of the Trustee, including any vice-president, any assistant vice-president, any secretary, any assistant secretary, the treasurer, any assistant treasurer, any trust officer or other officer of the Principal Trust Office of the Trustee customarily performing functions similar to those performed by any of the above designated officers and also means, with respect to a particular corporate trust matter, any other officer to whom such matter is referred because of that officer’s knowledge of and familiarity with the particular subject.

“Securities Act” means the Securities Act of 1933, as amended from time to time or any successor legislation.

“Securityholder,” “holder of Debentures,” or other similar terms, means any Person in whose name at the time a particular Debenture is registered on the register kept by the Company or the Trustee for that purpose in accordance with the terms hereof.

“Senior Indebtedness” means, with respect to the Company, (i) the principal, premium, if any, and interest in respect of (A) indebtedness of the Company for money borrowed and (B) indebtedness evidenced by securities, debentures, notes, bonds or other similar instruments issued by the Company; (ii) all capital lease obligations of the Company; (iii) all obligations of the Company issued or assumed as the deferred purchase price of property, all conditional sale obligations of the Company and all obligations of the Company under any title retention agreement; (iv) all obligations of the Company for the reimbursement of any letter of credit, any banker’s acceptance, any security purchase facility, any repurchase agreement or similar arrangement, any interest rate swap, any other hedging arrangement, any obligation under options or any similar credit or other transaction; (v) all obligations of the type referred to in clauses (i) through (iv) above of other Persons for the payment of which the Company is responsible or liable as obligor, guarantor or otherwise; and (vi) all obligations of the type referred to in clauses (i) through (v) above of other Persons secured by any lien on any property or asset of the Company (whether or not such obligation is assumed by the Company), whether incurred on or prior to the date of this Indenture or thereafter incurred. Notwithstanding the foregoing, “Senior Indebtedness” shall not include (1) any Additional Junior Indebtedness, (2) Debentures issued pursuant to this Indenture and guarantees in respect of such Debentures, (3) trade accounts payable of the Company arising in the ordinary course of business (such trade accounts payable being pari passu in right of payment to the Debentures), or (4) obligations with respect to which (a) in the instrument creating or evidencing the same or pursuant to which the same is outstanding, it is provided that such obligations are pari passu, junior or otherwise not superior in right of payment to the Debentures and (b) the Company, prior to the issuance thereof, has notified (and, if then required under the applicable guidelines of the regulating entity, has received approval from) the Federal Reserve (if the Company is a bank holding company) or the OTS (if the Company is a savings and loan holding company). Senior Indebtedness shall continue to be Senior Indebtedness and be entitled to the subordination provisions irrespective of any amendment, modification or waiver of any term of such Senior Indebtedness.

5

“Special Event” means any of a Capital Treatment Event, an Investment Company Event or a Tax Event.

“Special Redemption Date” has the meaning set forth in Section 10.2.

“Special Redemption Price” means (i) 107.5% of the principal amount of the Debentures being redeemed on a Special Redemption Date that occurs before June 26, 2008 and (ii) 100% of the principal amount of the Debentures being redeemed on a Special Redemption Date that occurs on June 26, 2008 or after, plus, in each case, accrued and unpaid interest (including any Additional Interest) on such Debentures to the Special Redemption Date.

“Subsidiary” means with respect to any Person, (i) any corporation at least a majority of the outstanding voting stock of which is owned, directly or indirectly, by such Person or by one or more of its Subsidiaries, or by such Person and one or more of its Subsidiaries, (ii) any general partnership, joint venture or similar entity, at least a majority of the outstanding partnership or similar interests of which shall at the time be owned by such Person, or by one or more of its Subsidiaries, or by such Person and one or more of its Subsidiaries and (iii) any limited partnership of which such Person or any of its Subsidiaries is a general partner. For the purposes of this definition, “voting stock” means shares, interests, participations or other equivalents in the equity interest (however designated) in such Person having ordinary voting power for the election of a majority of the directors (or the equivalent) of such Person, other than shares, interests, participations or other equivalents having such power only by reason of the occurrence of a contingency.

“Tax Event” means the receipt by the Company and the Trust of an opinion of counsel experienced in such matters to the effect that, as a result of any amendment to or change (including any announced prospective change) in the laws or any regulations thereunder of the United States or any political subdivision or taxing authority thereof or therein, or as a result of any official administrative pronouncement (including any private letter ruling, technical advice memorandum, field service advice, regulatory procedure, notice or announcement, including any notice or announcement of intent to adopt such procedures or regulations) (an “Administrative Action”) or judicial decision interpreting or applying such laws or regulations, regardless of whether such Administrative Action or judicial decision is issued to or in connection with a proceeding involving the Company or the Trust and whether or not subject to review or appeal, which amendment, clarification, change, Administrative Action or decision is enacted, promulgated or announced, in each case on or after the date of original issuance of the Debentures, there is more than an insubstantial risk that: (i) the Trust is, or will be within 90 days of the date of such opinion, subject to United States federal income tax with respect to income received or accrued on the Debentures; (ii) interest payable by the Company on the Debentures is not, or within 90 days of the date of such opinion, will not be, deductible by the Company, in whole or in part, for United States federal income tax purposes; or (iii) the Trust is, or will be within 90 days of the date of such opinion, subject to more than a de minimis amount of other taxes, duties or other governmental charges.

“3-Month LIBOR” has the meaning set forth in Section 2.10.

“Telerate Page 3750” has the meaning set forth in Section 2.10.

“Trust” shall mean Southwest Community Statutory Trust I, a Connecticut statutory trust, or any other similar trust created for the purpose of issuing Capital Securities in connection with the issuance of Debentures under this Indenture, of which the Company is the sponsor.

“Trust Securities” means Common Securities and Capital Securities of the Trust.

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“Trustee” means U.S. Bank National Association, and, subject to the provisions of Article VI hereof, shall also include its successors and assigns as Trustee hereunder.

ARTICLE II.

DEBENTURES

SECTION 2.1. AUTHENTICATION AND DATING. Upon the execution and delivery of this Indenture, or from time to time thereafter, Debentures in an aggregate principal amount not in excess of $8,248,000.00 may be executed and delivered by the Company to the Trustee for authentication, and the Trustee shall thereupon authenticate and make available for delivery said Debentures to or upon the written order of the Company, signed by its Chairman of the Board of Directors, Chief Executive Officer, Vice Chairman, the President, one of its Managing Directors or one of its Vice Presidents without any further action by the Company hereunder. In authenticating such Debentures, and accepting the additional responsibilities under this Indenture in relation to such Debentures, the Trustee shall be entitled to receive, and (subject to Section 6.1) shall be fully protected in relying upon:

(a) a copy of any Board Resolution or Board Resolutions relating thereto and, if applicable, an appropriate record of any action taken pursuant to such resolution, in each case certified by the Secretary or an Assistant Secretary of the Company, as the case may be; and

(b) an Opinion of Counsel prepared in accordance with Section 14.6 which shall also state:

(1) that such Debentures, when authenticated and delivered by the Trustee and issued by the Company in each case in the manner and subject to any conditions specified in such Opinion of Counsel, will constitute valid and legally binding obligations of the Company, subject to or limited by applicable bankruptcy, insolvency, reorganization, conservatorship, receivership, moratorium and other statutory or decisional laws relating to or affecting creditors’ rights or the reorganization of financial institutions (including, without limitation, preference and fraudulent conveyance or transfer laws), heretofore or hereafter enacted or in effect, affecting the rights of creditors generally; and

(2) that all laws and requirements in respect of the execution and delivery by the Company of the Debentures have been complied with and that authentication and delivery of the Debentures by the Trustee will not violate the terms of this Indenture.

The Trustee shall have the right to decline to authenticate and deliver any Debentures under this Section if the Trustee, being advised in writing by counsel, determines that such action may not lawfully be taken or if a Responsible Officer of the Trustee in good faith shall determine that such action would expose the Trustee to personal liability to existing holders.

The definitive Debentures shall be typed, printed, lithographed or engraved on steel engraved borders or may be produced in any other manner, all as determined by the officers executing such Debentures, as evidenced by their execution of such Debentures.

SECTION 2.2. FORM OF TRUSTEE’S CERTIFICATE OF AUTHENTICATION. The Trustee’s certificate of authentication on all Debentures shall be in substantially the following form:

This is one of the Debentures referred to in the within-mentioned Indenture.

U.S. Bank National Association, as Trustee

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By
	Authorized Signer

SECTION 2.3. FORM AND DENOMINATION OF DEBENTURES. The Debentures shall be substantially in the form of Exhibit A attached hereto. The Debentures shall be in registered, certificated form without coupons and in minimum denominations of $100,000.00 and any multiple of $1,000.00 in excess thereof. Any attempted transfer of the Debentures in a block having an aggregate principal amount of less than $100,000.00 shall be deemed to be void and of no legal effect whatsoever. Any such purported transferee shall be deemed not to be a holder of such Debentures for any purpose, including, but not limited to the receipt of payments on such Debentures, and such purported transferee shall be deemed to have no interest whatsoever in such Debentures. The Debentures shall be numbered, lettered, or otherwise distinguished in such manner or in accordance with such plans as the officers executing the same may determine with the approval of the Trustee as evidenced by the execution and authentication thereof.

SECTION 2.4. EXECUTION OF DEBENTURES. The Debentures shall be signed in the name and on behalf of the Company by the manual or facsimile signature of its Chairman of the Board of Directors, Chief Executive Officer, Vice Chairman, President, one of its Managing Directors or one of its Executive Vice Presidents, Senior Vice Presidents or Vice Presidents. Only such Debentures as shall bear thereon a certificate of authentication substantially in the form herein before recited, executed by the Trustee or the Authenticating Agent by the manual signature of an authorized signer, shall be entitled to the benefits of this Indenture or be valid or obligatory for any purpose. Such certificate by the Trustee or the Authenticating Agent upon any Debenture executed by the Company shall be conclusive evidence that the Debenture so authenticated has been duly authenticated and delivered hereunder and that the holder is entitled to the benefits of this Indenture.

In case any officer of the Company who shall have signed any of the Debentures shall cease to be such officer before the Debentures so signed shall have been authenticated and delivered by the Trustee or the Authenticating Agent, or disposed of by the Company, such Debentures nevertheless may be authenticated and delivered or disposed of as though the Person who signed such Debentures had not ceased to be such officer of the Company; and any Debenture may be signed on behalf of the Company by such Persons as, at the actual date of the execution of such Debenture, shall be the proper officers of the Company, although at the date of the execution of this Indenture any such person was not such an officer.

Every Debenture shall be dated the date of its authentication.

SECTION 2.5. EXCHANGE AND REGISTRATION OF TRANSFER OF DEBENTURES. The Company shall cause to be kept, at the office or agency maintained for the purpose of registration of transfer and for exchange as provided in Section 3.2, a register (the “Debenture Register”) for the Debentures issued hereunder in which, subject to such reasonable regulations as it may prescribe, the Company shall provide for the registration and transfer of all Debentures as in this Article II provided. The Debenture Register shall be in written form or in any other form capable of being converted into written form within a reasonable time.

Debentures to be exchanged may be surrendered at the Principal Office of the Trustee or at any office or agency to be maintained by the Company for such purpose as provided in Section 3.2, and the Company shall execute, the Company or the Trustee shall register and the Trustee or the Authenticating Agent shall authenticate and make available for delivery in exchange therefor the Debenture or Debentures which the Securityholder making the exchange shall be entitled to receive. Upon due presentment for registration of transfer of any Debenture at the Principal Office of the Trustee or at any office or agency of the Company maintained for such purpose as provided in Section 3.2, the Company shall execute, the Company or the Trustee shall register and the Trustee or the Authenticating Agent shall

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authenticate and make available for delivery in the name of the transferee or transferees a new Debenture for a like aggregate principal amount. Registration or registration of transfer of any Debenture by the Trustee or by any agent of the Company appointed pursuant to Section 3.2, and delivery of such Debenture, shall be deemed to complete the registration or registration of transfer of such Debenture.

All Debentures presented for registration of transfer or for exchange or payment shall (if so required by the Company or the Trustee or the Authenticating Agent) be duly endorsed by, or be accompanied by a written instrument or instruments of transfer in form satisfactory to the Company and the Trustee or the Authenticating Agent duly executed by the holder or his attorney duly authorized in writing.

No service charge shall be made for any exchange or registration of transfer of Debentures, but the Company or the Trustee may require payment of a sum sufficient to cover any tax, fee or other governmental charge that may be imposed in connection therewith.

The Company or the Trustee shall not be required to exchange or register a transfer of any Debenture for a period of 15 days next preceding the date of selection of Debentures for redemption.

Notwithstanding anything herein to the contrary, Debentures may not be transferred except in compliance with the restricted securities legend set forth below, unless otherwise determined by the Company, upon the advice of counsel expert in securities law, in accordance with applicable law:

THIS SECURITY IS NOT A SAVINGS ACCOUNT OR DEPOSIT AND IT IS NOT INSURED BY THE UNITED STATES OR ANY AGENCY OR FUND OF THE UNITED STATES, INCLUDING THE FEDERAL DEPOSIT INSURANCE CORPORATION.

THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), ANY STATE SECURITIES LAWS OR ANY OTHER APPLICABLE SECURITIES LAW. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS. THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR OTHERWISE TRANSFER THIS SECURITY ONLY (A) TO THE COMPANY, (B) PURSUANT TO A REGISTRATION STATEMENT THAT HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A SO LONG AS THIS SECURITY IS ELIGIBLE FOR RESALE PURSUANT TO RULE 144A IN ACCORDANCE WITH RULE 144A, (D) TO A NON-U.S. PERSON IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH RULE 903 OR RULE 904 (AS APPLICABLE) OF REGULATION S UNDER THE SECURITIES ACT, (E) TO AN INSTITUTIONAL “ACCREDITED INVESTOR” WITHIN THE MEANING OF SUBPARAGRAPH (A) OF RULE 501 UNDER THE SECURITIES ACT THAT IS ACQUIRING THIS SECURITY FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL ACCREDITED INVESTOR, FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, OR (F) PURSUANT TO ANY OTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE COMPANY’S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION

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SATISFACTORY TO IT IN ACCORDANCE WITH THE INDENTURE, A COPY OF WHICH MAY BE OBTAINED FROM THE COMPANY.

THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF ALSO AGREES, REPRESENTS AND WARRANTS THAT IT IS NOT AN EMPLOYEE BENEFIT, INDIVIDUAL RETIREMENT ACCOUNT OR OTHER PLAN OR ARRANGEMENT SUBJECT TO TITLE I OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED (“ERISA”), OR SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE “CODE”) (EACH A “PLAN”), OR AN ENTITY WHOSE UNDERLYING ASSETS INCLUDE “PLAN ASSETS” BY REASON OF ANY PLAN’S INVESTMENT IN THE ENTITY, AND NO PERSON INVESTING “PLAN ASSETS” OF ANY PLAN MAY ACQUIRE OR HOLD THE SECURITIES OR ANY INTEREST THEREIN, UNLESS SUCH PURCHASER OR HOLDER IS ELIGIBLE FOR EXEMPTIVE RELIEF AVAILABLE UNDER U.S. DEPARTMENT OF LABOR PROHIBITED TRANSACTION CLASS EXEMPTION 96-23, 95-60, 91-38, 90-1 OR 84-14 OR ANOTHER APPLICABLE EXEMPTION OR ITS PURCHASE AND HOLDING OF THIS SECURITY IS NOT PROHIBITED BY SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE WITH RESPECT TO SUCH PURCHASE OR HOLDING. ANY PURCHASER OR HOLDER OF THE SECURITIES OR ANY INTEREST THEREIN WILL BE DEEMED TO HAVE REPRESENTED BY ITS PURCHASE AND HOLDING THEREOF THAT EITHER (i) IT IS NOT AN EMPLOYEE BENEFIT PLAN WITHIN THE MEANING OF SECTION 3(3) OF ERISA, OR A PLAN TO WHICH SECTION 4975 OF THE CODE IS APPLICABLE, A TRUSTEE OR OTHER PERSON ACTING ON BEHALF OF AN EMPLOYEE BENEFIT PLAN OR PLAN, OR ANY OTHER PERSON OR ENTITY USING THE ASSETS OF ANY EMPLOYEE BENEFIT PLAN OR PLAN TO FINANCE SUCH PURCHASE, OR (ii) SUCH PURCHASE WILL NOT RESULT IN A PROHIBITED TRANSACTION UNDER SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE FOR WHICH THERE IS NO APPLICABLE STATUTORY OR ADMINISTRATIVE EXEMPTION.

THIS SECURITY WILL BE ISSUED AND MAY BE TRANSFERRED ONLY IN BLOCKS HAVING AN AGGREGATE PRINCIPAL AMOUNT OF NOT LESS THAN $100,000.00 AND MULTIPLES OF $1,000.00 IN EXCESS THEREOF. ANY ATTEMPTED TRANSFER OF THIS SECURITY IN A BLOCK HAVING AN AGGREGATE PRINCIPAL AMOUNT OF LESS THAN $100,000.00 SHALL BE DEEMED TO BE VOID AND OF NO LEGAL EFFECT WHATSOEVER.

THE HOLDER OF THIS SECURITY AGREES THAT IT WILL COMPLY WITH THE FOREGOING RESTRICTIONS.

SECTION 2.6. MUTILATED, DESTROYED, LOST OR STOLEN DEBENTURES. In case any Debenture shall become mutilated or be destroyed, lost or stolen, the Company shall execute, and upon its written request the Trustee shall authenticate and deliver, a new Debenture bearing a number not contemporaneously outstanding, in exchange and substitution for the mutilated Debenture, or in lieu of and in substitution for the Debenture so destroyed, lost or stolen. In every case the applicant for a substituted Debenture shall furnish to the Company and the Trustee such security or indemnity as may be required by them to save each of them harmless, and, in every case of destruction, loss or theft, the applicant shall also furnish to the Company and the Trustee evidence to their satisfaction of the destruction, loss or theft of such Debenture and of the ownership thereof.

The Trustee may authenticate any such substituted Debenture and deliver the same upon the written request or authorization of any officer of the Company. Upon the issuance of any substituted Debenture, the Company may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses connected therewith. In case any Debenture which has matured or is about to mature or has been called for redemption in full

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shall become mutilated or be destroyed, lost or stolen, the Company may, instead of issuing a substitute Debenture, pay or authorize the payment of the same (without surrender thereof except in the case of a mutilated Debenture) if the applicant for such payment shall furnish to the Company and the Trustee such security or indemnity as may be required by them to save each of them harmless and, in case of destruction, loss or theft, evidence satisfactory to the Company and to the Trustee of the destruction, loss or theft of such Debenture and of the ownership thereof.

Every substituted Debenture issued pursuant to the provisions of this Section 2.6 by virtue of the fact that any such Debenture is destroyed, lost or stolen shall constitute an additional contractual obligation of the Company, whether or not the destroyed, lost or stolen Debenture shall be found at any time, and shall be entitled to all the benefits of this Indenture equally and proportionately with any and all other Debentures duly issued hereunder. All Debentures shall be held and owned upon the express condition that, to the extent permitted by applicable law, the foregoing provisions are exclusive with respect to the replacement or payment of mutilated, destroyed, lost or stolen Debentures and shall preclude any and all other rights or remedies notwithstanding any law or statute existing or hereafter enacted to the contrary with respect to the replacement or payment of negotiable instruments or other securities without their surrender.

SECTION 2.7. TEMPORARY DEBENTURES. Pending the preparation of definitive Debentures, the Company may execute and the Trustee shall authenticate and make available for delivery temporary Debentures that are typed, printed or lithographed. Temporary Debentures shall be issuable in any authorized denomination, and substantially in the form of the definitive Debentures in lieu of which they are issued but with such omissions, insertions and variations as may be appropriate for temporary Debentures, all as may be determined by the Company. Every such temporary Debenture shall be executed by the Company and be authenticated by the Trustee upon the same conditions and in substantially the same manner, and with the same effect, as the definitive Debentures. Without unreasonable delay the Company will execute and deliver to the Trustee or the Authenticating Agent definitive Debentures and thereupon any or all temporary Debentures may be surrendered in exchange therefor, at the principal corporate trust office of the Trustee or at any office or agency maintained by the Company for such purpose as provided in Section 3.2, and the Trustee or the Authenticating Agent shall authenticate and make available for delivery in exchange for such temporary Debentures a like aggregate principal amount of such definitive Debentures. Such exchange shall be made by the Company at its own expense and without any charge therefor except that in case of any such exchange involving a registration of transfer the Company may require payment of a sum sufficient to cover any tax, fee or other governmental charge that may be imposed in relation thereto. Until so exchanged, the temporary Debentures shall in all respects be entitled to the same benefits under this Indenture as definitive Debentures authenticated and delivered hereunder.

SECTION 2.8. PAYMENT OF INTEREST AND ADDITIONAL INTEREST. Interest at the Interest Rate and any Additional Interest on any Debenture that is payable, and is punctually paid or duly provided for, on any Interest Payment Date for Debentures shall be paid to the Person in whose name said Debenture (or one or more Predecessor Securities) is registered at the close of business on the regular record date for such interest installment except that interest and any Additional Interest payable on the Maturity Date shall be paid to the Person to whom principal is paid.

Each Debenture shall bear interest for the period beginning on (and including) the date of original issuance and ending on (but excluding) September 26, 2003 at a rate per annum of 4.47%, and shall bear interest for each successive period beginning on (and including) September 26, 2003, and each succeeding Interest Payment Date, and ending on (but excluding) the next succeeding Interest Payment Date (each, a “Distribution Period”) at a rate per annum equal to the 3-Month LIBOR, determined as described in Section 2.10, plus 3.15% (the “Coupon Rate”); provided, however, that prior to June 26,

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2008, the Coupon Rate shall not exceed 11.75%, applied to the principal amount thereof, until the principal thereof becomes due and payable, and on any overdue principal and to the extent that payment of such interest is enforceable under applicable law (without duplication) on any overdue installment of interest (including Additional Interest) at the Interest Rate in effect for each applicable period compounded quarterly. Interest shall be payable (subject to any relevant Extension Period) quarterly in arrears on each Interest Payment Date with the first installment of interest to be paid on September 26, 2003.

Any interest on any Debenture, including Additional Interest, that is payable, but is not punctually paid or duly provided for, on any Interest Payment Date (herein called “Defaulted Interest”) shall forthwith cease to be payable to the registered holder on the relevant regular record date by virtue of having been such holder; and such Defaulted Interest shall be paid by the Company to the Persons in whose names such Debentures (or their respective Predecessor Securities) are registered at the close of business on a special record date for the payment of such Defaulted Interest, which shall be fixed in the following manner: the Company shall notify the Trustee in writing at least 25 days prior to the date of the proposed payment of the amount of Defaulted Interest proposed to be paid on each such Debenture and the date of the proposed payment, and at the same time the Company shall deposit with the Trustee an amount of money equal to the aggregate amount proposed to be paid in respect of such Defaulted Interest or shall make arrangements satisfactory to the Trustee for such deposit prior to the date of the proposed payment, such money when deposited to be held in trust for the benefit of the Persons entitled to such Defaulted Interest as in this clause provided. Thereupon the Trustee shall fix a special record date for the payment of such Defaulted Interest which shall not be more than 15 nor less than 10 days prior to the date of the proposed payment and not less than 10 days after the receipt by the Trustee of the notice of the proposed payment. The Trustee shall promptly notify the Company of such special record date and, in the name and at the expense of the Company, shall cause notice of the proposed payment of such Defaulted Interest and the special record date therefor to be mailed, first class postage prepaid, to each Securityholder at its address as it appears in the Debenture Register, not less than 10 days prior to such special record date. Notice of the proposed payment of such Defaulted Interest and the special record date therefor having been mailed as aforesaid, such Defaulted Interest shall be paid to the Persons in whose names such Debentures (or their respective Predecessor Securities) are registered on such special record date and shall be no longer payable.

The Company may make payment of any Defaulted Interest on any Debentures in any other lawful manner after notice given by the Company to the Trustee of the proposed payment method; provided, however, the Trustee in its sole discretion deems such payment method to be practical.

Any interest (including Additional Interest) scheduled to become payable on an Interest Payment Date occurring during an Extension Period shall not be Defaulted Interest and shall be payable on such other date as may be specified in the terms of such Debentures.

The term “regular record date” as used in this Section shall mean the close of business on the 15th calendar day next preceding the applicable Interest Payment Date.

Subject to the foregoing provisions of this Section, each Debenture delivered under this Indenture upon registration of transfer of or in exchange for or in lieu of any other Debenture shall carry the rights to interest accrued and unpaid, and to accrue, that were carried by such other Debenture.

SECTION 2.9. CANCELLATION OF DEBENTURES PAID, ETC. All Debentures surrendered for the purpose of payment, redemption, exchange or registration of transfer, shall, if surrendered to the Company or any paying agent, be surrendered to the Trustee and promptly canceled by it, or, if surrendered to the Trustee or any Authenticating Agent, shall be promptly canceled by it, and no Debentures shall be issued in lieu thereof except as expressly permitted by any of the provisions of this

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Indenture. All Debentures canceled by any Authenticating Agent shall be delivered to the Trustee. The Trustee shall destroy all canceled Debentures unless the Company otherwise directs the Trustee in writing. If the Company shall acquire any of the Debentures, however, such acquisition shall not operate as a redemption or satisfaction of the indebtedness represented by such Debentures unless and until the same are surrendered to the Trustee for cancellation.

SECTION 2.10. COMPUTATION OF INTEREST. The amount of interest payable on September 26, 2003 will be calculated by applying the Interest Rate to the principal amount outstanding as of the date hereof and multiplying such amount by the actual number of days elapsed from the date hereof to (but not including) September 26, 2003 divided by 360. The amount of interest payable for each succeeding Distribution Period will be calculated by applying the Interest Rate to the principal amount outstanding at the commencement of the Distribution Period and multiplying each such amount by the actual number of days in the Distribution Period concerned divided by 360. In the event that any date on which interest is payable on the Debentures is not a Business Day, then payment of interest payable on such date shall be made on the next succeeding day which is a Business Day (and without any interest or other payment in respect of any such delay), except that, if such Business Day is in the next succeeding calendar year, such payment shall be made on the immediately preceding Business Day, in each case with the same force and effect as if made on the date such payment was originally payable. All percentages resulting from any calculations on the Debentures will be rounded, if necessary, to the nearest one hundred-thousandth of a percentage point, with five one-millionths of a percentage point rounded upward (e.g., 9.876545% (or .09876545) being rounded to 9.87655% (or .0987655), and all dollar amounts used in or resulting from such calculation will be rounded to the nearest cent (with one-half cent being rounded upward)).

(a) “3-Month LIBOR” means the London interbank offered interest rate for three-month, U.S. dollar deposits determined by the Trustee in the following order of priority:

(1) the rate (expressed as a percentage per annum) for U.S. dollar deposits having a three-month maturity that appears on Telerate Page 3750 as of 11:00 a.m. (London time) on the related Determination Date (as defined below). “Telerate Page 3750” means the display designated as “Page 3750” on the Dow Jones Telerate Service or such other page as may replace Page 3750 on that service or such other service or services as may be nominated by the British Bankers’ Association as the information vendor for the purpose of displaying London interbank offered rates for U.S. dollar deposits;

(2) if such rate cannot be identified on the related Determination Date, the Trustee will request the principal London offices of four leading banks in the London interbank market to provide such banks’ offered quotations (expressed as percentages per annum) to prime banks in the London interbank market for U.S. dollar deposits having a three-month maturity as of 11:00 a.m. (London time) on such Determination Date. If at least two quotations are provided, 3-Month LIBOR will be the arithmetic mean of such quotations;

(3) if fewer than two such quotations are provided as requested in clause (2) above, the Trustee will request four major New York City banks to provide such banks’ offered quotations (expressed as percentages per annum) to leading European banks for loans in U.S. dollars as of 11:00 a.m. (London time) on such Determination Date. If at least two such quotations are provided, 3-Month LIBOR will be the arithmetic mean of such quotations; and

(4) if fewer than two such quotations are provided as requested in clause (3) above, 3-Month LIBOR will be a 3-Month LIBOR determined with respect to the Distribution Period immediately preceding such current Distribution Period.

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If the rate for U.S. dollar deposits having a three-month maturity that initially appears on Telerate Page 3750 as of 11:00 a.m. (London time) on the related Determination Date is superseded on the Telerate Page 3750 by a corrected rate by 12:00 noon (London time) on such Determination Date, then the corrected rate as so substituted on the applicable page will be the applicable 3-Month LIBOR for such Determination Date.

(b) The Interest Rate for any Distribution Period will at no time be higher than the maximum rate then permitted by New York law as the same may be modified by United States law.

(c) “Determination Date” means the date that is two London Banking Days (i.e., a business day in which dealings in deposits in U.S. dollars are transacted in the London interbank market) preceding the particular Distribution Period for which a Coupon Rate is being determined.

(d) The Trustee shall notify the Company, the Institutional Trustee and any securities exchange or interdealer quotation system on which the Capital Securities are listed, of the Coupon Rate and the Determination Date for each Distribution Period, in each case as soon as practicable after the determination thereof but in no event later than the thirtieth (30th) day of the relevant Distribution Period. Failure to notify the Company, the Institutional Trustee or any securities exchange or interdealer quotation system, or any defect in said notice, shall not affect the obligation of the Company to make payment on the Debentures at the applicable Coupon Rate. Any error in the calculation of the Coupon Rate by the Trustee may be corrected at any time by notice delivered as above provided. Upon the request of a holder of a Debenture, the Trustee shall provide the Coupon Rate then in effect and, if determined, the Coupon Rate for the next Distribution Period.

(e) Subject to the corrective rights set forth above, all certificates, communications, opinions, determinations, calculations, quotations and decisions given, expressed, made or obtained for the purposes of the provisions relating to the payment and calculation of interest on the Debentures and distributions on the Capital Securities by the Trustee or the Institutional Trustee will (in the absence of willful default, bad faith and manifest error) be final, conclusive and binding on the Trust, the Company and all of the holders of the Debentures and the Capital Securities, and no liability shall (in the absence of willful default, bad faith or manifest error) attach to the Trustee or the Institutional Trustee in connection with the exercise or non-exercise by either of them or their respective powers, duties and discretion.

SECTION 2.11. EXTENSION OF INTEREST PAYMENT PERIOD. So long as no Event of Default has occurred and is continuing, the Company shall have the right, from time to time, and without causing an Event of Default, to defer payments of interest on the Debentures by extending the interest payment period on the Debentures at any time and from time to time during the term of the Debentures, for up to 20 consecutive quarterly periods (each such extended interest payment period, an “Extension Period”), during which Extension Period no interest (including Additional Interest) shall be due and payable (except any Additional Sums that may be due and payable). No Extension Period may end on a date other than an Interest Payment Date. During an Extension Period, interest will continue to accrue on the Debentures, and interest on such accrued interest will accrue at an annual rate equal to the Interest Rate in effect for such Extension Period, compounded quarterly from the date such interest would have been payable were it not for the Extension Period, to the extent permitted by law (such interest referred to herein as “Additional Interest”).At the end of any such Extension Period the Company shall pay all interest then accrued and unpaid on the Debentures (together with Additional Interest thereon); provided, however, that no Extension Period may extend beyond the Maturity Date; provided further, however, that during any such Extension Period, the Company shall not and shall not permit any Affiliate to (i) declare or pay any dividends or distributions on, or redeem, purchase, acquire, or make a liquidation payment with respect to, any of the Company’s or such Affiliate’s capital stock (other than payments of dividends or distributions to the Company) or make any guarantee payments with respect to the foregoing or

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(ii) make any payment of principal of or interest or premium, if any, on or repay, repurchase or redeem any debt securities of the Company or any Affiliate that rank pari passu in all respects with or junior in interest to the Debentures (other than, with respect to clauses (i) or (ii) above, (a) repurchases, redemptions or other acquisitions of shares of capital stock of the Company in connection with any employment contract, benefit plan or other similar arrangement with or for the benefit of one or more employees, officers, directors or consultants, in connection with a dividend reinvestment or stockholder stock purchase plan or in connection with the issuance of capital stock of the Company (or securities convertible into or exercisable for such capital stock) as consideration in an acquisition transaction entered into prior to the applicable Extension Period, (b) as a result of any exchange or conversion of any class or series of the Company’s capital stock (or any capital stock of a subsidiary of the Company) for any class or series of the Company’s capital stock or of any class or series of the Company’s indebtedness for any class or series of the Company’s capital stock, (c) the purchase of fractional interests in shares of the Company’s capital stock pursuant to the conversion or exchange provisions of such capital stock or the security being converted or exchanged, (d) any declaration of a dividend in connection with any stockholders’ rights plan, or the issuance of rights, stock or other property under any stockholders’ rights plan, or the redemption or repurchase of rights pursuant thereto, (e) any dividend in the form of stock, warrants, options or other rights where the dividend stock or the stock issuable upon exercise of such warrants, options or other rights is the same stock as that on which the dividend is being paid or ranks pari passu with or junior to such stock and any cash payments in lieu of fractional shares issued in connection therewith, or (f) payments under the Capital Securities Guarantee). Prior to the termination of any Extension Period, the Company may further extend such period, provided that such period together with all such previous and further consecutive extensions thereof shall not exceed 20 consecutive quarterly periods, or extend beyond the Maturity Date. Upon the termination of any Extension Period and upon the payment of all accrued and unpaid interest and Additional Interest, the Company may commence a new Extension Period, subject to the foregoing requirements. No interest or Additional Interest shall be due and payable during an Extension Period, except at the end thereof, but each installment of interest that would otherwise have been due and payable during such Extension Period shall bear Additional Interest to the extent permitted by applicable law. The Company must give the Trustee notice of its election to begin or extend an Extension Period at least 5 Business Days prior to the regular record date (as such term is used in Section 2.8) immediately preceding the Interest Payment Date with respect to which interest on the Debentures would have been payable except for the election to begin or extend such Extension Period. The Trustee shall give notice of the Company’s election to begin a new Extension Period to the Securityholders.

SECTION 2.12. CUSIP NUMBERS. The Company in issuing the Debentures may use “CUSIP” numbers (if then generally in use), and, if so, the Trustee shall use CUSIP numbers in notices of redemption as a convenience to Securityholders; provided, however, that any such notice may state that no representation is made as to the correctness of such numbers either as printed on the Debentures or as contained in any notice of a redemption and that reliance may be placed only on the other identification numbers printed on the Debentures, and any such redemption shall not be affected by any defect in or omission of such numbers. The Company will promptly notify the Trustee in writing of any change in the CUSIP numbers.

ARTICLE III.

PARTICULAR COVENANTS OF THE COMPANY

SECTION 3.1. PAYMENT OF PRINCIPAL, PREMIUM AND INTEREST; AGREED TREATMENT OF THE DEBENTURES.

(a) The Company covenants and agrees that it will duly and punctually pay or cause to be paid the principal of and premium, if any, and interest and any Additional Interest and other payments on

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the Debentures at the place, at the respective times and in the manner provided in this Indenture and the Debentures. Each installment of interest on the Debentures may be paid (i) by mailing checks for such interest payable to the order of the holders of Debentures entitled thereto as they appear on the registry books of the Company if a request for a wire transfer has not been received by the Company or (ii) by wire transfer to any account with a banking institution located in the United States designated in writing by such Person to the paying agent no later than the related record date. Notwithstanding the foregoing, so long as the holder of this Debenture is the Institutional Trustee, the payment of the principal of and interest on this Debenture will be made in immediately available funds at such place and to such account as may be designated by the Institutional Trustee.

(b) The Company will treat the Debentures as indebtedness, and the amounts payable in respect of the principal amount of such Debentures as interest, for all United States federal income tax purposes. All payments in respect of such Debentures will be made free and clear of United States withholding tax to any beneficial owner thereof that has provided an Internal Revenue Service Form W8 BEN (or any substitute or successor form) establishing its non-United States status for United States federal income tax purposes.

(c) As of the date of this Indenture, the Company has no present intention to exercise its right under Section 2.11 to defer payments of interest on the Debentures by commencing an Extension Period.

(d) As of the date of this Indenture, the Company believes that the likelihood that it would exercise its right under Section 2.11 to defer payments of interest on the Debentures by commencing an Extension Period at any time during which the Debentures are outstanding is remote because of the restrictions that would be imposed on the Company’s ability to declare or pay dividends or distributions on, or to redeem, purchase or make a liquidation payment with respect to, any of its outstanding equity and on the Company’s ability to make any payments of principal of or interest on, or repurchase or redeem, any of its debt securities that rank pari passu in all respects with (or junior in interest to) the Debentures.

SECTION 3.2. OFFICES FOR NOTICES AND PAYMENTS, ETC. So long as any of the Debentures remain outstanding, the Company will maintain in Hartford, Connecticut, an office or agency where the Debentures may be presented for payment, an office or agency where the Debentures may be presented for registration of transfer and for exchange as in this Indenture provided and an office or agency where notices and demands to or upon the Company in respect of the Debentures or of this Indenture may be served. The Company will give to the Trustee written notice of the location of any such office or agency and of any change of location thereof. Until otherwise designated from time to time by the Company in a notice to the Trustee, or specified as contemplated by Section 2.5, such office or agency for all of the above purposes shall be the office or agency of the Trustee. In case the Company shall fail to maintain any such office or agency in Hartford, Connecticut, or shall fail to give such notice of the location or of any change in the location thereof, presentations and demands may be made and notices may be served at the Principal Office of the Trustee.

In addition to any such office or agency, the Company may from time to time designate one or more offices or agencies outside Hartford, Connecticut, where the Debentures may be presented for registration of transfer and for exchange in the manner provided in this Indenture, and the Company may from time to time rescind such designation, as the Company may deem desirable or expedient; provided, however, that no such designation or rescission shall in any manner relieve the Company of its obligation to maintain any such office or agency in Hartford, Connecticut, for the purposes above mentioned. The Company will give to the Trustee prompt written notice of any such designation or rescission thereof.

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SECTION 3.3. APPOINTMENTS TO FILL VACANCIES IN TRUSTEE’S OFFICE. The Company, whenever necessary to avoid or fill a vacancy in the office of Trustee, will appoint, in the manner provided in Section 6.9, a Trustee, so that there shall at all times be a Trustee hereunder.

SECTION 3.4. PROVISION AS TO PAYING AGENT.

(a) If the Company shall appoint a paying agent other than the Trustee, it will cause such paying agent to execute and deliver to the Trustee an instrument in which such agent shall agree with the Trustee, subject to the provision of this Section 3.4,

(1) that it will hold all sums held by it as such agent for the payment of the principal of and premium, if any, or interest, if any, on the Debentures (whether such sums have been paid to it by the Company or by any other obligor on the Debentures) in trust for the benefit of the holders of the Debentures;

(2) that it will give the Trustee prompt written notice of any failure by the Company (or by any other obligor on the Debentures) to make any payment of the principal of and premium, if any, or interest, if any, on the Debentures when the same shall be due and payable; and

(3) that it will, at any time during the continuance of any Event of Default, upon the written request of the Trustee, forthwith pay to the Trustee all sums so held in trust by such paying agent.

(b) If the Company shall act as its own paying agent, it will, on or before each due date of the principal of and premium, if any, or interest or other payments, if any, on the Debentures, set aside, segregate and hold in trust for the benefit of the holders of the Debentures a sum sufficient to pay such principal, premium, interest or other payments so becoming due and will notify the Trustee in writing of any failure to take such action and of any failure by the Company (or by any other obligor under the Debentures) to make any payment of the principal of and premium, if any, or interest or other payments, if any, on the Debentures when the same shall become due and payable.

Whenever the Company shall have one or more paying agents for the Debentures, it will, on or prior to each due date of the principal of and premium, if any, or interest, if any, on the Debentures, deposit with a paying agent a sum sufficient to pay the principal, premium, interest or other payments so becoming due, such sum to be held in trust for the benefit of the Persons entitled thereto and (unless such paying agent is the Trustee) the Company shall promptly notify the Trustee in writing of its action or failure to act.

(c) Anything in this Section 3.4 to the contrary notwithstanding, the Company may, at any time, for the purpose of obtaining a satisfaction and discharge with respect to the Debentures, or for any other reason, pay, or direct any paying agent to pay to the Trustee all sums held in trust by the Company or any such paying agent, such sums to be held by the Trustee upon the trusts herein contained.

(d) Anything in this Section 3.4 to the contrary notwithstanding, the agreement to hold sums in trust as provided in this Section 3.4 is subject to Sections 12.3 and 12.4.

SECTION 3.5. CERTIFICATE TO TRUSTEE. The Company will deliver to the Trustee on or before 120 days after the end of each fiscal year, so long as Debentures are outstanding hereunder, a Certificate stating that in the course of the performance by the signers of their duties as officers of the Company they would normally have knowledge of any default during such fiscal year by the Company in the performance of any covenants contained herein, stating whether or not they have knowledge of any such

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default and, if so, specifying each such default of which the signers have knowledge and the nature and status thereof.

SECTION 3.6. ADDITIONAL SUMS. If and for so long as the Trust is the holder of all Debentures and the Trust is required to pay any additional taxes (including withholding taxes), duties, assessments or other governmental charges as a result of a Tax Event, the Company will pay such additional amounts (“Additional Sums”) on the Debentures as shall be required so that the net amounts received and retained by the Trust after paying taxes (including withholding taxes), duties, assessments or other governmental charges will be equal to the amounts the Trust would have received if no such taxes, duties, assessments or other governmental charges had been imposed. Whenever in this Indenture or the Debentures there is a reference in any context to the payment of principal of or interest on the Debentures, such mention shall be deemed to include mention of payments of the Additional Sums provided for in this paragraph to the extent that, in such context, Additional Sums are, were or would be payable in respect thereof pursuant to the provisions of this paragraph and express mention of the payment of Additional Sums (if applicable) in any provisions hereof shall not be construed as excluding Additional Sums in those provisions hereof where such express mention is not made; provided, however, that the deferral of the payment of interest during an Extension Period pursuant to Section 2.11 shall not defer the payment of any Additional Sums that may be due and payable.

SECTION 3.7. COMPLIANCE WITH CONSOLIDATION PROVISIONS. The Company will not, while any of the Debentures remain outstanding, consolidate with, or merge into, or merge into itself, or sell or convey all or substantially all of its property to any other Person unless the provisions of Article XI hereof are complied with.

SECTION 3.8. LIMITATION ON DIVIDENDS. If Debentures are initially issued to the Trust or a trustee of such Trust in connection with the issuance of Trust Securities by the Trust (regardless of whether Debentures continue to be held by such Trust) and (i) there shall have occurred and be continuing an Event of Default, (ii) the Company shall be in default with respect to its payment of any obligations under the Capital Securities Guarantee, or (iii) the Company shall have given notice of its election to defer payments of interest on the Debentures by extending the interest payment period as provided herein and such period, or any extension thereof, shall be continuing, then the Company shall not, and shall not allow any Affiliate of the Company to, (x) declare or pay any dividends or distributions on, or redeem, purchase, acquire, or make a liquidation payment with respect to, any of the Company’s capital stock or its Affiliates’ capital stock (other than payments of dividends or distributions to the Company) or make any guarantee payments with respect to the foregoing or (y) make any payment of principal of or interest or premium, if any, on or repay, repurchase or redeem any debt securities of the Company or any Affiliate that rank pari passu in all respects with or junior in interest to the Debentures (other than, with respect to clauses (x) and (y) above, (1) repurchases, redemptions or other acquisitions of shares of capital stock of the Company in connection with any employment contract, benefit plan or other similar arrangement with or for the benefit of one or more employees, officers, directors or consultants, in connection with a dividend reinvestment or stockholder stock purchase plan or in connection with the issuance of capital stock of the Company (or securities convertible into or exercisable for such capital stock) as consideration in an acquisition transaction entered into prior to the applicable Extension Period, if any, (2) as a result of any exchange or conversion of any class or series of the Company’s capital stock (or any capital stock of a subsidiary of the Company) for any class or series of the Company’s capital stock or of any class or series of the Company’s indebtedness for any class or series of the Company’s capital stock, (3) the purchase of fractional interests in shares of the Company’s capital stock pursuant to the conversion or exchange provisions of such capital stock or the security being converted or exchanged, (4) any declaration of a dividend in connection with any stockholders’ rights plan, or the issuance of rights, stock or other property under any stockholders’ rights plan, or the redemption or repurchase of rights pursuant thereto, (5) any dividend in the form of stock, warrants, options or other rights where the dividend stock

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or the stock issuable upon exercise of such warrants, options or other rights is the same stock as that on which the dividend is being paid or ranks pari passu with or junior to such stock and any cash payments in lieu of fractional shares issued in connection therewith, or (6) payments under the Capital Securities Guarantee).

SECTION 3.9. COVENANTS AS TO THE TRUST. For so long as the Trust Securities remain outstanding, the Company shall maintain 100% ownership of the Common Securities; provided, however, that any permitted successor of the Company under this Indenture may succeed to the Company’s ownership of such Common Securities. The Company, as owner of the Common Securities, shall, except in connection with a distribution of Debentures to the holders of Trust Securities in liquidation of the Trust, the redemption of all of the Trust Securities or certain mergers, consolidations or amalgamations, each as permitted by the Declaration, cause the Trust (a) to remain a statutory trust, (b) to otherwise continue to be classified as a grantor trust for United States federal income tax purposes, and (c) to cause each holder of Trust Securities to be treated as owning an undivided beneficial interest in the Debentures.

SECTION 3.10. ADDITIONAL JUNIOR INDEBTEDNESS. The Company shall not, and it shall not cause or permit any Subsidiary of the Company to, incur, issue or be obligated on any Additional Junior Indebtedness, either directly or indirectly, by way of guarantee, suretyship or otherwise, other than Additional Junior Indebtedness (i) that, by its terms, is expressly stated to be either junior and subordinate or pari passu in all respects to the Debentures, and (ii) of which the Company has notified (and, if then required under the applicable guidelines of the regulating entity, has received approval from) the Federal Reserve, if the Company is a bank holding company, or the OTS, if the Company is a savings and loan holding company.

ARTICLE IV.

SECURITYHOLDERS’ LISTS AND REPORTS BY THE COMPANY AND THE TRUSTEE

SECTION 4.1. SECURITYHOLDERS’ LISTS. The Company covenants and agrees that it will furnish or caused to be furnished to the Trustee:

(a) on each regular record date for the Debentures, a list, in such form as the Trustee may reasonably require, of the names and addresses of the Securityholders of the Debentures as of such record date; and

(b) at such other times as the Trustee may request in writing, within 30 days after the receipt by the Company of any such request, a list of similar form and content as of a date not more than 15 days prior to the time such list is furnished;

except that no such lists need be furnished under this Section 4.1 so long as the Trustee is in possession thereof by reason of its acting as Debenture registrar.

SECTION 4.2. PRESERVATION AND DISCLOSURE OF LISTS.

(a) The Trustee shall preserve, in as current a form as is reasonably practicable, all information as to the names and addresses of the holders of Debentures (1) contained in the most recent list furnished to it as provided in Section 4.1 or (2) received by it in the capacity of Debentures registrar (if so acting) hereunder. The Trustee may destroy any list furnished to it as provided in Section 4.1 upon receipt of a new list so furnished.

(b) In case three or more holders of Debentures (hereinafter referred to as “applicants”) apply in writing to the Trustee and furnish to the Trustee reasonable proof that each such applicant has owned a

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Debenture for a period of at least 6 months preceding the date of such application, and such application states that the applicants desire to communicate with other holders of Debentures with respect to their rights under this Indenture or under such Debentures and is accompanied by a copy of the form of proxy or other communication which such applicants propose to transmit, then the Trustee shall within 5 Business Days after the receipt of such application, at its election, either:

(1) afford such applicants access to the information preserved at the time by the Trustee in accordance with the provisions of subsection (a) of this Section 4.2, or

(2) inform such applicants as to the approximate number of holders of Debentures whose names and addresses appear in the information preserved at the time by the Trustee in accordance with the provisions of subsection (a) of this Section 4.2, and as to the approximate cost of mailing to such Securityholders the form of proxy or other communication, if any, specified in such application.

If the Trustee shall elect not to afford such applicants access to such information, the Trustee shall, upon the written request of such applicants, mail to each Securityholder whose name and address appear in the information preserved at the time by the Trustee in accordance with the provisions of subsection (a) of this Section 4.2 a copy of the form of proxy or other communication which is specified in such request with reasonable promptness after a tender to the Trustee of the material to be mailed and of payment, or provision for the payment, of the reasonable expenses of mailing, unless within five days after such tender, the Trustee shall mail to such applicants and file with the Securities and Exchange Commission, if permitted or required by applicable law, together with a copy of the material to be mailed, a written statement to the effect that, in the opinion of the Trustee, such mailing would be contrary to the best interests of the holders of all Debentures, as the case may be, or would be in violation of applicable law. Such written statement shall specify the basis of such opinion. If said Commission, as permitted or required by applicable law, after opportunity for a hearing upon the objections specified in the written statement so filed, shall enter an order refusing to sustain any of such objections or if, after the entry of an order sustaining one or more of such objections, said Commission shall find, after notice and opportunity for hearing, that all the objections so sustained have been met and shall enter an order so declaring, the Trustee shall mail copies of such material to all such Securityholders with reasonable promptness after the entry of such order and the renewal of such tender; otherwise the Trustee shall be relieved of any obligation or duty to such applicants respecting their application.

(c) Each and every holder of Debentures, by receiving and holding the same, agrees with Company and the Trustee that neither the Company nor the Trustee nor any paying agent shall be held accountable by reason of the disclosure of any such information as to the names and addresses of the holders of Debentures in accordance with the provisions of subsection (b) of this Section 4.2, regardless of the source from which such information was derived, and that the Trustee shall not be held accountable by reason of mailing any material pursuant to a request made under said subsection (b).

ARTICLE V.

REMEDIES OF THE TRUSTEE AND SECURITYHOLDERS UPON AN EVENT OF DEFAULT

SECTION 5.1. EVENTS OF DEFAULT. “Event of Default,” wherever used herein, means any one of the following events (whatever the reason for such Event of Default and whether it shall be voluntary or involuntary or be effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body):

(a) the Company defaults in the payment of any interest upon any Debenture when it becomes due and payable, and fails to cure such default for a period of 30 days; provided, however, that a

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valid extension of an interest payment period by the Company in accordance with the terms of this Indenture shall not constitute a default in the payment of interest for this purpose; or

(b) the Company defaults in the payment of all or any part of the principal of (or premium, if any, on) any Debentures as and when the same shall become due and payable either at maturity, upon redemption, by declaration of acceleration or otherwise; or

(c) the Company defaults in the performance of, or breaches, any of its covenants or agreements in this Indenture or in the terms of the Debentures established as contemplated in this Indenture (other than a covenant or agreement a default in whose performance or whose breach is elsewhere in this Section specifically dealt with), and continuance of such default or breach for a period of 60 days after there has been given, by registered or certified mail, to the Company by the Trustee or to the Company and the Trustee by the holders of at least 25% in aggregate principal amount of the outstanding Debentures, a written notice specifying such default or breach and requiring it to be remedied and stating that such notice is a “Notice of Default” hereunder; or

(d) a court of competent jurisdiction shall enter a decree or order for relief in respect of the Company in an involuntary case under any applicable bankruptcy, insolvency, reorganization or other similar law now or hereafter in effect, or appointing a receiver, liquidator, assignee, custodian, trustee, sequestrator (or similar official) of the Company or for any substantial part of its property, or ordering the winding-up or liquidation of its affairs and such decree or order shall remain unstayed and in effect for a period of 90 consecutive days; or

(e) the Company shall commence a voluntary case under any applicable bankruptcy, insolvency, reorganization or other similar law now or hereafter in effect, shall consent to the entry of an order for relief in an involuntary case under any such law, or shall consent to the appointment of or taking possession by a receiver, liquidator, assignee, trustee, custodian, sequestrator (or other similar official) of the Company or of any substantial part of its property, or shall make any general assignment for the benefit of creditors, or shall fail generally to pay its debts as they become due; or

(f) the Trust shall have voluntarily or involuntarily liquidated, dissolved, wound-up its business or otherwise terminated its existence except in connection with (i) the distribution of the Debentures to holders of such Trust Securities in liquidation of their interests in the Trust, (ii) the redemption of all of the outstanding Trust Securities or (iii) certain mergers, consolidations or amalgamations, each as permitted by the Declaration.

If an Event of Default occurs and is continuing with respect to the Debentures, then, and in each and every such case, unless the principal of the Debentures shall have already become due and payable, either the Trustee or the holders of not less than 25% in aggregate principal amount of the Debentures then outstanding hereunder, by notice in writing to the Company (and to the Trustee if given by Securityholders), may declare the entire principal of the Debentures and the interest accrued thereon, if any, to be due and payable immediately, and upon any such declaration the same shall become immediately due and payable.

The foregoing provisions, however, are subject to the condition that if, at any time after the principal of the Debentures shall have been so declared due and payable, and before any judgment or decree for the payment of the moneys due shall have been obtained or entered as hereinafter provided, (i) the Company shall pay or shall deposit with the Trustee a sum sufficient to pay all matured installments of interest upon all the Debentures and the principal of and premium, if any, on the Debentures which shall have become due otherwise than by acceleration (with interest upon such principal and premium, if any, and Additional Interest) and such amount as shall be sufficient to cover reasonable compensation to the Trustee and each predecessor Trustee, their respective agents, attorneys

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and counsel, and all other amounts due to the Trustee pursuant to Section 6.6, if any, and (ii) all Events of Default under this Indenture, other than the non-payment of the principal of or premium, if any, on Debentures which shall have become due by acceleration, shall have been cured, waived or otherwise remedied as provided herein — then and in every such case the holders of a majority in aggregate principal amount of the Debentures then outstanding, by written notice to the Company and to the Trustee, may waive all defaults and rescind and annul such declaration and its consequences, but no such waiver or rescission and annulment shall extend to or shall affect any subsequent default or shall impair any right consequent thereon.

In case the Trustee shall have proceeded to enforce any right under this Indenture and such proceedings shall have been discontinued or abandoned because of such rescission or annulment or for any other reason or shall have been determined adversely to the Trustee, then and in every such case the Company, the Trustee and the holders of the Debentures shall be restored respectively to their several positions and rights hereunder, and all rights, remedies and powers of the Company, the Trustee and the holders of the Debentures shall continue as though no such proceeding had been taken.

SECTION 5.2. PAYMENT OF DEBENTURES ON DEFAULT; SUIT THEREFOR. The Company covenants that upon the occurrence of an Event of Default pursuant to Section 5.1(a) or Section 5.1(b) then, upon demand of the Trustee, the Company will pay to the Trustee, for the benefit of the holders of the Debentures the whole amount that then shall have become due and payable on all Debentures for principal and premium, if any, or interest, or both, as the case may be, with Additional Interest accrued on the Debentures (to the extent that payment of such interest is enforceable under applicable law and, if the Debentures are held by the Trust or a trustee of such Trust, without duplication of any other amounts paid by the Trust or a trustee in respect thereof); and, in addition thereto, such further amount as shall be sufficient to cover the costs and expenses of collection, including a reasonable compensation to the Trustee, its agents, attorneys and counsel, and any other amounts due to the Trustee under Section 6.6. In case the Company shall fail forthwith to pay such amounts upon such demand, the Trustee, in its own name and as trustee of an express trust, shall be entitled and empowered to institute any actions or proceedings at law or in equity for the collection of the sums so due and unpaid, and may prosecute any such action or proceeding to judgment or final decree, and may enforce any such judgment or final decree against the Company or any other obligor on such Debentures and collect in the manner provided by law out of the property of the Company or any other obligor on such Debentures wherever situated the moneys adjudged or decreed to be payable.

In case there shall be pending proceedings for the bankruptcy or for the reorganization of the Company or any other obligor on the Debentures under Bankruptcy Law, or in case a receiver or trustee shall have been appointed for the property of the Company or such other obligor, or in the case of any other similar judicial proceedings relative to the Company or other obligor upon the Debentures, or to the creditors or property of the Company or such other obligor, the Trustee, irrespective of whether the principal of the Debentures shall then be due and payable as therein expressed or by declaration of acceleration or otherwise and irrespective of whether the Trustee shall have made any demand pursuant to the provisions of this Section 5.2, shall be entitled and empowered, by intervention in such proceedings or otherwise,

(i) to file and prove a claim or claims for the whole amount of principal and interest owing and unpaid in respect of the Debentures,

(ii) in case of any judicial proceedings, to file such proofs of claim and other papers or documents as may be necessary or advisable in order to have the claims of the Trustee (including any claim for reasonable compensation to the Trustee and each predecessor Trustee, and their respective agents, attorneys and counsel, and for reimbursement of all

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other amounts due to the Trustee under Section 6.6), and of the Securityholders allowed in such judicial proceedings relative to the Company or any other obligor on the Debentures, or to the creditors or property of the Company or such other obligor, unless prohibited by applicable law and regulations, to vote on behalf of the holders of the Debentures in any election of a trustee or a standby trustee in arrangement, reorganization, liquidation or other bankruptcy or insolvency proceedings or Person performing similar functions in comparable proceedings,

(iii) to collect and receive any moneys or other property payable or deliverable on any such claims, and

(iv) to distribute the same after the deduction of its charges and expenses.

Any receiver, assignee or trustee in bankruptcy or reorganization is hereby authorized by each of the Securityholders to make such payments to the Trustee, and, in the event that the Trustee shall consent to the making of such payments directly to the Securityholders, to pay to the Trustee such amounts as shall be sufficient to cover reasonable compensation to the Trustee, each predecessor Trustee and their respective agents, attorneys and counsel, and all other amounts due to the Trustee under Section 6.6.

Nothing herein contained shall be construed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Securityholder any plan of reorganization, arrangement, adjustment or composition affecting the Debentures or the rights of any holder thereof or to authorize the Trustee to vote in respect of the claim of any Securityholder in any such proceeding.

All rights of action and of asserting claims under this Indenture, or under any of the Debentures, may be enforced by the Trustee without the possession of any of the Debentures, or the production thereof at any trial or other proceeding relative thereto, and any such suit or proceeding instituted by the Trustee shall be brought in its own name as trustee of an express trust, and any recovery of judgment shall be for the ratable benefit of the holders of the Debentures.

In any proceedings brought by the Trustee (and also any proceedings involving the interpretation of any provision of this Indenture to which the Trustee shall be a party), the Trustee shall be held to represent all the holders of the Debentures, and it shall not be necessary to make any holders of the Debentures parties to any such proceedings.

SECTION 5.3. APPLICATION OF MONEYS COLLECTED BY TRUSTEE. Any moneys collected by the Trustee pursuant to this Article V shall be applied in the following order, at the date or dates fixed by the Trustee for the distribution of such moneys, upon presentation of the several Debentures in respect of which moneys have been collected, and stamping thereon the payment, if only partially paid, and upon surrender thereof if fully paid:

First: To the payment of costs and expenses incurred by, and reasonable fees of, the Trustee, its agents, attorneys and counsel, and of all other amounts due to the Trustee under Section 6.6;

Second: To the payment of all Senior Indebtedness of the Company if and to the extent required by Article XV;

Third: To the payment of the amounts then due and unpaid upon Debentures for principal (and premium, if any), and interest on the Debentures, in respect of which or for the benefit of which money has been collected, ratably, without preference or priority of any kind, according to the amounts due on such Debentures (including Additional Interest); and

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Fourth: The balance, if any, to the Company.

SECTION 5.4. PROCEEDINGS BY SECURITYHOLDERS. No holder of any Debenture shall have any right to institute any suit, action or proceeding for any remedy hereunder, unless such holder previously shall have given to the Trustee written notice of an Event of Default with respect to the Debentures and unless the holders of not less than 25% in aggregate principal amount of the Debentures then outstanding shall have given the Trustee a written request to institute such action, suit or proceeding and shall have offered to the Trustee such reasonable indemnity as it may require against the costs, expenses and liabilities to be incurred thereby, and the Trustee for 60 days after its receipt of such notice, request and offer of indemnity shall have failed to institute any such action, suit or proceeding.

Notwithstanding any other provisions in this Indenture, however, the right of any holder of any Debenture to receive payment of the principal of, premium, if any, and interest, on such Debenture when due, or to institute suit for the enforcement of any such payment, shall not be impaired or affected without the consent of such holder and by accepting a Debenture hereunder it is expressly understood, intended and covenanted by the taker and holder of every Debenture with every other such taker and holder and the Trustee, that no one or more holders of Debentures shall have any right in any manner whatsoever by virtue or by availing itself of any provision of this Indenture to affect, disturb or prejudice the rights of the holders of any other Debentures, or to obtain or seek to obtain priority over or preference to any other such holder, or to enforce any right under this Indenture, except in the manner herein provided and for the equal, ratable and common benefit of all holders of Debentures. For the protection and enforcement of the provisions of this Section, each and every Securityholder and the Trustee shall be entitled to such relief as can be given either at law or in equity.

SECTION 5.5. PROCEEDINGS BY TRUSTEE. In case of an Event of Default hereunder the Trustee may in its discretion proceed to protect and enforce the rights vested in it by this Indenture by such appropriate judicial proceedings as the Trustee shall deem most effectual to protect and enforce any of such rights, either by suit in equity or by action at law or by proceeding in bankruptcy or otherwise, whether for the specific enforcement of any covenant or agreement contained in this Indenture or in aid of the exercise of any power granted in this Indenture, or to enforce any other legal or equitable right vested in the Trustee by this Indenture or by law.

SECTION 5.6. REMEDIES CUMULATIVE AND CONTINUING; DELAY OR OMISSION NOT A WAIVER. Except as otherwise provided in Section 2.6, all powers and remedies given by this Article V to the Trustee or to the Securityholders shall, to the extent permitted by law, be deemed cumulative and not exclusive of any other powers and remedies available to the Trustee or the holders of the Debentures, by judicial proceedings or otherwise, to enforce the performance or observance of the covenants and agreements contained in this Indenture or otherwise established with respect to the Debentures, and no delay or omission of the Trustee or of any holder of any of the Debentures to exercise any right, remedy or power accruing upon any Event of Default occurring and continuing as aforesaid shall impair any such right, remedy or power, or shall be construed to be a waiver of any such default or an acquiescence therein; and, subject to the provisions of Section 5.4, every power and remedy given by this Article V or by law to the Trustee or to the Securityholders may be exercised from time to time, and as often as shall be deemed expedient, by the Trustee (in accordance with its duties under Section 6.1) or by the Securityholders.

SECTION 5.7. DIRECTION OF PROCEEDINGS AND WAIVER OF DEFAULTS BY MAJORITY OF SECURITYHOLDERS. The holders of a majority in aggregate principal amount of the Debentures affected (voting as one class) at the time outstanding shall have the right to direct the time, method, and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred on the Trustee with respect to such Debentures; provided, however, that (subject to the

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provisions of Section 6.1) the Trustee shall have the right to decline to follow any such direction if the Trustee shall determine that the action so directed would be unjustly prejudicial to the holders not taking part in such direction or if the Trustee being advised by counsel determines that the action or proceeding so directed may not lawfully be taken or if a Responsible Officer of the Trustee shall determine that the action or proceedings so directed would involve the Trustee in personal liability.

The holders of a majority in aggregate principal amount of the Debentures at the time outstanding may on behalf of the holders of all of the Debentures waive (or modify any previously granted waiver of) any past default or Event of Default, and its consequences, except a default (a) in the payment of principal of, premium, if any, or interest on any of the Debentures, (b) in respect of covenants or provisions hereof which cannot be modified or amended without the consent of the holder of each Debenture affected, or (c) in respect of the covenants contained in Section 3.9; provided, however, that if the Debentures are held by the Trust or a trustee of such trust, such waiver or modification to such waiver shall not be effective until the holders of a majority in Liquidation Amount of Trust Securities of the Trust shall have consented to such waiver or modification to such waiver, provided, further, that if the consent of the holder of each outstanding Debenture is required, such waiver shall not be effective until each holder of the Trust Securities of the Trust shall have consented to such waiver. Upon any such waiver, the default covered thereby shall be deemed to be cured for all purposes of this Indenture and the Company, the Trustee and the holders of the Debentures shall be restored to their former positions and rights hereunder, respectively; but no such waiver shall extend to any subsequent or other default or Event of Default or impair any right consequent thereon. Whenever any default or Event of Default hereunder shall have been waived as permitted by this Section, said default or Event of Default shall for all purposes of the Debentures and this Indenture be deemed to have been cured and to be not continuing.

SECTION 5.8. NOTICE OF DEFAULTS. The Trustee shall, within 90 days after the actual knowledge by a Responsible Officer of the Trustee of the occurrence of a default with respect to the Debentures, mail to all Securityholders, as the names and addresses of such holders appear upon the Debenture Register, notice of all defaults with respect to the Debentures known to the Trustee, unless such defaults shall have been cured before the giving of such notice (the term “defaults” for the purpose of this Section 5.8 being hereby defined to be the events specified in clauses (a), (b), (c), (d), (e) and (f) of Section 5.1, not including periods of grace, if any, provided for therein); provided, however, that, except in the case of default in the payment of the principal of, premium, if any, or interest on any of the Debentures, the Trustee shall be protected in withholding such notice if and so long as a Responsible Officer of the Trustee in good faith determines that the withholding of such notice is in the interests of the Securityholders.

SECTION 5.9. UNDERTAKING TO PAY COSTS. All parties to this Indenture agree, and each holder of any Debenture by his acceptance thereof shall be deemed to have agreed, that any court may in its discretion require, in any suit for the enforcement of any right or remedy under this Indenture, or in any suit against the Trustee for any action taken or omitted by it as Trustee, the filing by any party litigant in such suit of an undertaking to pay the costs of such suit, and that such court may in its discretion assess reasonable costs, including reasonable attorneys’ fees and expenses, against any party litigant in such suit, having due regard to the merits and good faith of the claims or defenses made by such party litigant; provided, however, that the provisions of this Section 5.9 shall not apply to any suit instituted by the Trustee, to any suit instituted by any Securityholder, or group of Securityholders, holding in the aggregate more than 10% in principal amount of the Debentures outstanding, or to any suit instituted by any Securityholder for the enforcement of the payment of the principal of (or premium, if any) or interest on any Debenture against the Company on or after the same shall have become due and payable.

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ARTICLE VI.

CONCERNING THE TRUSTEE

SECTION 6.1. DUTIES AND RESPONSIBILITIES OF TRUSTEE. With respect to the holders of Debentures issued hereunder, the Trustee, prior to the occurrence of an Event of Default with respect to the Debentures and after the curing or waiving of all Events of Default which may have occurred, with respect to the Debentures, undertakes to perform such duties and only such duties as are specifically set forth in this Indenture, and no implied covenants shall be read into this Indenture against the Trustee. In case an Event of Default with respect to the Debentures has occurred (which has not been cured or waived), the Trustee shall exercise such of the rights and powers vested in it by this Indenture, and use the same degree of care and skill in their exercise, as a prudent man would exercise or use under the circumstances in the conduct of his own affairs.

No provision of this Indenture shall be construed to relieve the Trustee from liability for its own negligent action, its own negligent failure to act or its own willful misconduct, except that:

(a) prior to the occurrence of an Event of Default with respect to Debentures and after the curing or waiving of all Events of Default which may have occurred

(1) the duties and obligations of the Trustee with respect to Debentures shall be determined solely by the express provisions of this Indenture, and the Trustee shall not be liable except for the performance of such duties and obligations with respect to the Debentures as are specifically set forth in this Indenture, and no implied covenants or obligations shall be read into this Indenture against the Trustee, and

(2) in the absence of bad faith on the part of the Trustee, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon any certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture; but, in the case of any such certificates or opinions which by any provision hereof are specifically required to be furnished to the Trustee, the Trustee shall be under a duty to examine the same to determine whether or not they conform to the requirements of this Indenture;

(b) the Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer or Officers of the Trustee, unless it shall be proved that the Trustee was negligent in ascertaining the pertinent facts; and

(c) the Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith, in accordance with the direction of the Securityholders pursuant to Section 5.7, relating to the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred upon the Trustee, under this Indenture.

None of the provisions contained in this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur personal financial liability in the performance of any of its duties or in the exercise of any of its rights or powers, if there is ground for believing that the repayment of such funds or liability is not assured to it under the terms of this Indenture or indemnity satisfactory to the Trustee against such risk is not reasonably assured to it.

SECTION 6.2. RELIANCE ON DOCUMENTS, OPINIONS, ETC. Except as otherwise provided in Section 6.1:

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(a) the Trustee may conclusively rely and shall be fully protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, consent, order, bond, note, debenture or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties;

(b) any request, direction, order or demand of the Company mentioned herein shall be sufficiently evidenced by an Officers’ Certificate (unless other evidence in respect thereof be herein specifically prescribed); and any Board Resolution may be evidenced to the Trustee by a copy thereof certified by the Secretary or an Assistant Secretary of the Company;

(c) the Trustee may consult with counsel of its selection and any advice or Opinion of Counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in accordance with such advice or Opinion of Counsel;

(d) the Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request, order or direction of any of the Securityholders, pursuant to the provisions of this Indenture, unless such Securityholders shall have offered to the Trustee reasonable security or indemnity against the costs, expenses and liabilities which may be incurred therein or thereby;

(e) the Trustee shall not be liable for any action taken or omitted by it in good faith and believed by it to be authorized or within the discretion or rights or powers conferred upon it by this Indenture; nothing contained herein shall, however, relieve the Trustee of the obligation, upon the occurrence of an Event of Default with respect to the Debentures (that has not been cured or waived) to exercise with respect to Debentures such of the rights and powers vested in it by this Indenture, and to use the same degree of care and skill in their exercise, as a prudent man would exercise or use under the circumstances in the conduct of his own affairs;

(f) the Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, consent, order, approval, bond, debenture, coupon or other paper or document, unless requested in writing to do so by the holders of not less than a majority in aggregate principal amount of the outstanding Debentures affected thereby; provided, however, that if the payment within a reasonable time to the Trustee of the costs, expenses or liabilities likely to be incurred by it in the making of such investigation is, in the opinion of the Trustee, not reasonably assured to the Trustee by the security afforded to it by the terms of this Indenture, the Trustee may require reasonable indemnity against such expense or liability as a condition to so proceeding;

(g) the Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents (including any Authenticating Agent) or attorneys, and the Trustee shall not be responsible for any misconduct or negligence on the part of any such agent or attorney appointed by it with due care; and

(h) with the exceptions of defaults under Sections 5.1(a) or 5.1(b), the Trustee shall not be charged with knowledge of any Default or Event of Default with respect to the Debentures unless a written notice of such Default or Event of Default shall have been given to the Trustee by the Company or any other obligor on the Debentures or by any holder of the Debentures.

SECTION 6.3. NO RESPONSIBILITY FOR RECITALS, ETC. The recitals contained herein and in the Debentures (except in the certificate of authentication of the Trustee or the Authenticating Agent) shall be taken as the statements of the Company, and the Trustee and the Authenticating Agent assume no responsibility for the correctness of the same. The Trustee and the Authenticating Agent make no representations as to the validity or sufficiency of this Indenture or of the Debentures. The Trustee and

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the Authenticating Agent shall not be accountable for the use or application by the Company of any Debentures or the proceeds of any Debentures authenticated and delivered by the Trustee or the Authenticating Agent in conformity with the provisions of this Indenture.

SECTION 6.4. TRUSTEE, AUTHENTICATING AGENT, PAYING AGENTS, TRANSFER AGENTS OR REGISTRAR MAY OWN Debentures. The Trustee or any Authenticating Agent or any paying agent or any transfer agent or any Debenture registrar, in its individual or any other capacity, may become the owner or pledgee of Debentures with the same rights it would have if it were not Trustee, Authenticating Agent, paying agent, transfer agent or Debenture registrar.

SECTION 6.5. MONEYS TO BE HELD IN TRUST. Subject to the provisions of Section 12.4, all moneys received by the Trustee or any paying agent shall, until used or applied as herein provided, be held in trust for the purpose for which they were received, but need not be segregated from other funds except to the extent required by law. The Trustee and any paying agent shall be under no liability for interest on any money received by it hereunder except as otherwise agreed in writing with the Company. So long as no Event of Default shall have occurred and be continuing, all interest allowed on any such moneys shall be paid from time to time upon the written order of the Company, signed by the Chairman of the Board of Directors, the Chief Executive Officer, the President, a Managing Director, a Vice President, the Treasurer or an Assistant Treasurer of the Company.

SECTION 6.6. COMPENSATION AND EXPENSES OF TRUSTEE. The Company covenants and agrees to pay or reimburse the Trustee upon its request for all reasonable expenses, disbursements and advances incurred or made by the Trustee in accordance with any of the provisions of this Indenture (including the reasonable compensation and the expenses and disbursements of its counsel and of all Persons not regularly in its employ) except any such expense, disbursement or advance as may arise from its negligence or willful misconduct. For purposes of clarification, this Section 6.6 does not contemplate the payment by the Company of acceptance or annual administration fees owing to the Trustee pursuant to the services to be provided by the Trustee under this Indenture or the fees and expenses of the Trustee’s counsel in connection with the closing of the transactions contemplated by this Indenture. The Company also covenants to indemnify each of the Trustee or any predecessor Trustee (and its officers, agents, directors and employees) for, and to hold it harmless against, any and all loss, damage, claim, liability or expense including taxes (other than taxes based on the income of the Trustee) incurred without negligence or willful misconduct on the part of the Trustee and arising out of or in connection with the acceptance or administration of this trust, including the costs and expenses of defending itself against any claim of liability. The obligations of the Company under this Section 6.6 to compensate and indemnify the Trustee and to pay or reimburse the Trustee for expenses, disbursements and advances shall constitute additional indebtedness hereunder. Such additional indebtedness shall be secured by a lien prior to that of the Debentures upon all property and funds held or collected by the Trustee as such, except funds held in trust for the benefit of the holders of particular Debentures.

Without prejudice to any other rights available to the Trustee under applicable law, when the Trustee incurs expenses or renders services in connection with an Event of Default specified in Section 5.1(d), Section 5.1(e) or Section 5.1(f), the expenses (including the reasonable charges and expenses of its counsel) and the compensation for the services are intended to constitute expenses of administration under any applicable federal or state bankruptcy, insolvency or other similar law.

The provisions of this Section shall survive the resignation or removal of the Trustee and the defeasance or other termination of this Indenture.

Notwithstanding anything in this Indenture or any Debenture to the contrary, the Trustee shall have no obligation whatsoever to advance funds to pay any principal of or interest on or other amounts with respect to the Debentures or otherwise advance funds to or on behalf of the Company.

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SECTION 6.7. OFFICERS’ CERTIFICATE AS EVIDENCE. Except as otherwise provided in Sections 6.1 and 6.2, whenever in the administration of the provisions of this Indenture the Trustee shall deem it necessary or desirable that a matter be proved or established prior to taking or omitting any action hereunder, such matter (unless other evidence in respect thereof be herein specifically prescribed) may, in the absence of negligence or willful misconduct on the part of the Trustee, be deemed to be conclusively proved and established by an Officers’ Certificate delivered to the Trustee, and such certificate, in the absence of negligence or willful misconduct on the part of the Trustee, shall be full warrant to the Trustee for any action taken or omitted by it under the provisions of this Indenture upon the faith thereof.

SECTION 6.8. ELIGIBILITY OF TRUSTEE. The Trustee hereunder shall at all times be a corporation organized and doing business under the laws of the United States of America or any state or territory thereof or of the District of Columbia or a corporation or other Person authorized under such laws to exercise corporate trust powers, having (or whose obligations under this Indenture are guaranteed by an affiliate having) a combined capital and surplus of at least 50 million U.S. dollars ($50,000,000.00) and subject to supervision or examination by federal, state, territorial, or District of Columbia authority. If such corporation publishes reports of condition at least annually, pursuant to law or to the requirements of the aforesaid supervising or examining authority, then for the purposes of this Section 6.8 the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent records of condition so published.

The Company may not, nor may any Person directly or indirectly controlling, controlled by, or under common control with the Company, serve as Trustee.

In case at any time the Trustee shall cease to be eligible in accordance with the provisions of this Section 6.8, the Trustee shall resign immediately in the manner and with the effect specified in Section 6.9.

If the Trustee has or shall acquire any “conflicting interest” within the meaning of Section 310(b) of the Trust Indenture Act of 1939, the Trustee shall either eliminate such interest or resign, to the extent and in the manner described by this Indenture.

SECTION 6.9. RESIGNATION OR REMOVAL OF TRUSTEE

(a) The Trustee, or any trustee or trustees hereafter appointed, may at any time resign by giving written notice of such resignation to the Company and by mailing notice thereof, at the Company’s expense, to the holders of the Debentures at their addresses as they shall appear on the Debenture Register. Upon receiving such notice of resignation, the Company shall promptly appoint a successor trustee or trustees by written instrument, in duplicate, executed by order of its Board of Directors, one copy of which instrument shall be delivered to the resigning Trustee and one copy to the successor Trustee. If no successor Trustee shall have been so appointed and have accepted appointment within 30 days after the mailing of such notice of resignation to the affected Securityholders, the resigning Trustee may petition any court of competent jurisdiction for the appointment of a successor Trustee, or any Securityholder who has been a bona fide holder of a Debenture or Debentures for at least six months may, subject to the provisions of Section 5.9, on behalf of himself and all others similarly situated, petition any such court for the appointment of a successor Trustee. Such court may thereupon, after such notice, if any, as it may deem proper and prescribe, appoint a successor Trustee.

(b) In case at any time any of the following shall occur —

(1) the Trustee shall fail to comply with the provisions of Section 6.8 after written request therefor by the Company or by any Securityholder who has been a bona fide holder of a Debenture or Debentures for at least 6 months, or

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(2) the Trustee shall cease to be eligible in accordance with the provisions of Section 6.8 and shall fail to resign after written request therefor by the Company or by any such Securityholder, or

(3) the Trustee shall become incapable of acting, or shall be adjudged as bankrupt or insolvent, or a receiver of the Trustee or of its property shall be appointed, or any public officer shall take charge or control of the Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation,

then, in any such case, the Company may remove the Trustee and appoint a successor Trustee by written instrument, in duplicate, executed by order of the Board of Directors, one copy of which instrument shall be delivered to the Trustee so removed and one copy to the successor Trustee, or, subject to the provisions of Section 5.9, any Securityholder who has been a bona fide holder of a Debenture or Debentures for at least 6 months may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee. Such court may thereupon, after such notice, if any, as it may deem proper and prescribe, remove the Trustee and appoint successor Trustee.

(c) Upon prior written notice to the Company and the Trustee, the holders of a majority in aggregate principal amount of the Debentures at the time outstanding may at any time remove the Trustee and nominate a successor Trustee, which shall be deemed appointed as successor Trustee unless within 10 Business Days after such nomination the Company objects thereto, in which case, or in the case of a failure by such holders to nominate a successor Trustee, the Trustee so removed or any Securityholder, upon the terms and conditions and otherwise as in subsection (a) of this Section 6.9 provided, may petition any court of competent jurisdiction for an appointment of a successor.

(d) Any resignation or removal of the Trustee and appointment of a successor Trustee pursuant to any of the provisions of this Section shall become effective upon acceptance of appointment by the successor Trustee as provided in Section 6.10.

SECTION 6.10. ACCEPTANCE BY SUCCESSOR TRUSTEE. Any successor Trustee appointed as provided in Section 6.9 shall execute, acknowledge and deliver to the Company and to its predecessor Trustee an instrument accepting such appointment hereunder, and thereupon the resignation or removal of the retiring Trustee shall become effective and such successor Trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, duties and obligations with respect to the Debentures of its predecessor hereunder, with like effect as if originally named as Trustee herein; but, nevertheless, on the written request of the Company or of the successor Trustee, the Trustee ceasing to act shall, upon payment of any amounts then due it pursuant to the provisions of Section 6.6, execute and deliver an instrument transferring to such successor Trustee all the rights and powers of the Trustee so ceasing to act and shall duly assign, transfer and deliver to such successor Trustee all property and money held by such retiring Trustee thereunder. Upon request of any such successor Trustee, the Company shall execute any and all instruments in writing for more fully and certainly vesting in and confirming to such successor Trustee all such rights and powers. Any Trustee ceasing to act shall, nevertheless, retain a lien upon all property or funds held or collected by such Trustee to secure any amounts then due it pursuant to the provisions of Section 6.6.

If a successor Trustee is appointed, the Company, the retiring Trustee and the successor Trustee shall execute and deliver an indenture supplemental hereto which shall contain such provisions as shall be deemed necessary or desirable to confirm that all the rights, powers, trusts and duties of the retiring Trustee with respect to the Debentures as to which the predecessor Trustee is not retiring shall continue to be vested in the predecessor Trustee, and shall add to or change any of the provisions of this Indenture as

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shall be necessary to provide for or facilitate the administration of the Trust hereunder by more than one Trustee, it being understood that nothing herein or in such supplemental indenture shall constitute such Trustees co-trustees of the same trust and that each such Trustee shall be Trustee of a trust or trusts hereunder separate and apart from any trust or trusts hereunder administered by any other such Trustee.

No successor Trustee shall accept appointment as provided in this Section unless at the time of such acceptance such successor Trustee shall be eligible under the provisions of Section 6.8.

In no event shall a retiring Trustee be liable for the acts or omissions of any successor Trustee hereunder.

Upon acceptance of appointment by a successor Trustee as provided in this Section 6.10, the Company shall mail notice of the succession of such Trustee hereunder to the holders of Debentures at their addresses as they shall appear on the Debenture Register. If the Company fails to mail such notice within 10 Business Days after the acceptance of appointment by the successor Trustee, the successor Trustee shall cause such notice to be mailed at the expense of the Company.

SECTION 6.11. SUCCESSION BY MERGER, ETC. Any corporation into which the Trustee may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which the Trustee shall be a party, or any corporation succeeding to all or substantially all of the corporate trust business of the Trustee, shall be the successor of the Trustee hereunder without the execution or filing of any paper or any further act on the part of any of the parties hereto; provided such corporation shall be otherwise eligible and qualified under this Article.

In case at the time such successor to the Trustee shall succeed to the trusts created by this Indenture any of the Debentures shall have been authenticated but not delivered, any such successor to the Trustee may adopt the certificate of authentication of any predecessor Trustee, and deliver such Debentures so authenticated; and in case at that time any of the Debentures shall not have been authenticated, any successor to the Trustee may authenticate such Debentures either in the name of any predecessor hereunder or in the name of the successor Trustee; and in all such cases such certificates shall have the full force which it is anywhere in the Debentures or in this Indenture provided that the certificate of the Trustee shall have; provided, however, that the right to adopt the certificate of authentication of any predecessor Trustee or authenticate Debentures in the name of any predecessor Trustee shall apply only to its successor or successors by merger, conversion or consolidation.

SECTION 6.12. AUTHENTICATING AGENTS. There may be one or more Authenticating Agents appointed by the Trustee upon the request of the Company with power to act on its behalf and subject to its direction in the authentication and delivery of Debentures issued upon exchange or registration of transfer thereof as fully to all intents and purposes as though any such Authenticating Agent had been expressly authorized to authenticate and deliver Debentures; provided, however, that the Trustee shall have no liability to the Company for any acts or omissions of the Authenticating Agent with respect to the authentication and delivery of Debentures. Any such Authenticating Agent shall at all times be a corporation organized and doing business under the laws of the United States or of any state or territory thereof or of the District of Columbia authorized under such laws to act as Authenticating Agent, having a combined capital and surplus of at least $50,000,000.00 and being subject to supervision or examination by federal, state, territorial or District of Columbia authority. If such corporation publishes reports of condition at least annually pursuant to law or the requirements of such authority, then for the purposes of this Section 6.12 the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. If at any time an Authenticating Agent shall cease to be eligible in accordance with the provisions of this Section, it shall resign immediately in the manner and with the effect herein specified in this Section.

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Any corporation into which any Authenticating Agent may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, consolidation or conversion to which any Authenticating Agent shall be a party, or any corporation succeeding to all or substantially all of the corporate trust business of any Authenticating Agent, shall be the successor of such Authenticating Agent hereunder, if such successor corporation is otherwise eligible under this Section 6.12 without the execution or filing of any paper or any further act on the part of the parties hereto or such Authenticating Agent.

Any Authenticating Agent may at any time resign by giving written notice of resignation to the Trustee and to the Company. The Trustee may at any time terminate the agency of any Authenticating Agent with respect to the Debentures by giving written notice of termination to such Authenticating Agent and to the Company. Upon receiving such a notice of resignation or upon such a termination, or in case at any time any Authenticating Agent shall cease to be eligible under this Section 6.12, the Trustee may, and upon the request of the Company shall, promptly appoint a successor Authenticating Agent eligible under this Section 6.12, shall give written notice of such appointment to the Company and shall mail notice of such appointment to all holders of Debentures as the names and addresses of such holders appear on the Debenture Register. Any successor Authenticating Agent upon acceptance of its appointment hereunder shall become vested with all rights, powers, duties and responsibilities with respect to the Debentures of its predecessor hereunder, with like effect as if originally named as Authenticating Agent herein.

The Company agrees to pay to any Authenticating Agent from time to time reasonable compensation for its services. Any Authenticating Agent shall have no responsibility or liability for any action taken by it as such in accordance with the directions of the Trustee.

ARTICLE VII.

CONCERNING THE SECURITYHOLDERS

SECTION 7.1. ACTION BY SECURITYHOLDERS. Whenever in this Indenture it is provided that the holders of a specified percentage in aggregate principal amount of the Debentures may take any action (including the making of any demand or request, the giving of any notice, consent or waiver or the taking of any other action) the fact that at the time of taking any such action the holders of such specified percentage have joined therein may be evidenced (a) by any instrument or any number of instruments of similar tenor executed by such Securityholders in person or by agent or proxy appointed in writing, or (b) by the record of such holders of Debentures voting in favor thereof at any meeting of such Securityholders duly called and held in accordance with the provisions of Article VIII, or (c) by a combination of such instrument or instruments and any such record of such a meeting of such Securityholders or (d) by any other method the Trustee deems satisfactory.

If the Company shall solicit from the Securityholders any request, demand, authorization, direction, notice, consent, waiver or other action or revocation of the same, the Company may, at its option, as evidenced by an Officers’ Certificate, fix in advance a record date for such Debentures for the determination of Securityholders entitled to give such request, demand, authorization, direction, notice, consent, waiver or other action or revocation of the same, but the Company shall have no obligation to do so. If such a record date is fixed, such request, demand, authorization, direction, notice, consent, waiver or other action or revocation of the same may be given before or after the record date, but only the Securityholders of record at the close of business on the record date shall be deemed to be Securityholders for the purposes of determining whether Securityholders of the requisite proportion of outstanding Debentures have authorized or agreed or consented to such request, demand, authorization, direction, notice, consent, waiver or other action or revocation of the same, and for that purpose the outstanding Debentures shall be computed as of the record date; provided, however, that no such authorization,

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agreement or consent by such Securityholders on the record date shall be deemed effective unless it shall become effective pursuant to the provisions of this Indenture not later than 6 months after the record date.

SECTION 7.2. PROOF OF EXECUTION BY SECURITYHOLDERS. Subject to the provisions of Section 6.1, 6.2 and 8.5, proof of the execution of any instrument by a Securityholder or his agent or proxy shall be sufficient if made in accordance with such reasonable rules and regulations as may be prescribed by the Trustee or in such manner as shall be satisfactory to the Trustee. The ownership of Debentures shall be proved by the Debenture Register or by a certificate of the Debenture registrar. The Trustee may require such additional proof of any matter referred to in this Section as it shall deem necessary.

The record of any Securityholders’ meeting shall be proved in the manner provided in Section 8.6.

SECTION 7.3. WHO ARE DEEMED ABSOLUTE OWNERS. Prior to due presentment for registration of transfer of any Debenture, the Company, the Trustee, any Authenticating Agent, any paying agent, any transfer agent and any Debenture registrar may deem the Person in whose name such Debenture shall be registered upon the Debenture Register to be, and may treat him as, the absolute owner of such Debenture (whether or not such Debenture shall be overdue) for the purpose of receiving payment of or on account of the principal of, premium, if any, and interest on such Debenture and for all other purposes; and neither the Company nor the Trustee nor any Authenticating Agent nor any paying agent nor any transfer agent nor any Debenture registrar shall be affected by any notice to the contrary. All such payments so made to any holder for the time being or upon his order shall be valid, and, to the extent of the sum or sums so paid, effectual to satisfy and discharge the liability for moneys payable upon any such Debenture.

SECTION 7.4. DEBENTURES OWNED BY COMPANY DEEMED NOT OUTSTANDING. In determining whether the holders of the requisite aggregate principal amount of Debentures have concurred in any direction, consent or waiver under this Indenture, Debentures which are owned by the Company or any other obligor on the Debentures or by any Person directly or indirectly controlling or controlled by or under direct or indirect common control with the Company or any other obligor on the Debentures shall be disregarded and deemed not to be outstanding for the purpose of any such determination; provided, however, that for the purposes of determining whether the Trustee shall be protected in relying on any such direction, consent or waiver, only Debentures which a Responsible Officer of the Trustee actually knows are so owned shall be so disregarded. Debentures so owned which have been pledged in good faith may be regarded as outstanding for the purposes of this Section 7.4 if the pledgee shall establish to the satisfaction of the Trustee the pledgee’s right to vote such Debentures and that the pledgee is not the Company or any such other obligor or Person directly or indirectly controlling or controlled by or under direct or indirect common control with the Company or any such other obligor. In the case of a dispute as to such right, any decision by the Trustee taken upon the advice of counsel shall be full protection to the Trustee.

SECTION 7.5. REVOCATION OF CONSENTS; FUTURE HOLDERS BOUND. At any time prior to (but not after) the evidencing to the Trustee, as provided in Section 7.1, of the taking of any action by the holders of the percentage in aggregate principal amount of the Debentures specified in this Indenture in connection with such action, any holder (in cases where no record date has been set pursuant to Section 7.1) or any holder as of an applicable record date (in cases where a record date has been set pursuant to Section 7.1) of a Debenture (or any Debenture issued in whole or in part in exchange or substitution therefor) the serial number of which is shown by the evidence to be included in the Debentures the holders of which have consented to such action may, by filing written notice with the Trustee at the Principal Office of the Trustee and upon proof of holding as provided in Section 7.2, revoke such action so far as concerns such Debenture (or so far as concerns the principal amount represented by

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any exchanged or substituted Debenture). Except as aforesaid any such action taken by the holder of any Debenture shall be conclusive and binding upon such holder and upon all future holders and owners of such Debenture, and of any Debenture issued in exchange or substitution therefor or on registration of transfer thereof, irrespective of whether or not any notation in regard thereto is made upon such Debenture or any Debenture issued in exchange or substitution therefor.

ARTICLE VIII.

SECURITYHOLDERS’ MEETINGS

SECTION 8.1. PURPOSES OF MEETINGS. A meeting of Securityholders may be called at any time and from time to time pursuant to the provisions of this Article VIII for any of the following purposes:

(a) to give any notice to the Company or to the Trustee, or to give any directions to the Trustee, or to consent to the waiving of any default hereunder and its consequences, or to take any other action authorized to be taken by Securityholders pursuant to any of the provisions of Article V;

(b) to remove the Trustee and nominate a successor trustee pursuant to the provisions of Article VI;

(c) to consent to the execution of an indenture or indentures supplemental hereto pursuant to the provisions of Section 9.2; or

(d) to take any other action authorized to be taken by or on behalf of the holders of any specified aggregate principal amount of such Debentures under any other provision of this Indenture or under applicable law.

SECTION 8.2. CALL OF MEETINGS BY TRUSTEE. The Trustee may at any time call a meeting of Securityholders to take any action specified in Section 8.1, to be held at such time and at such place as the Trustee shall determine. Notice of every meeting of the Securityholders, setting forth the time and the place of such meeting and in general terms the action proposed to be taken at such meeting, shall be mailed to holders of Debentures affected at their addresses as they shall appear on the Debentures Register and, if the Company is not a holder of Debentures, to the Company. Such notice shall be mailed not less than 20 nor more than 180 days prior to the date fixed for the meeting.

SECTION 8.3. CALL OF MEETINGS BY COMPANY OR SECURITYHOLDERS. In case at any time the Company pursuant to a Board Resolution, or the holders of at least 10% in aggregate principal amount of the Debentures, as the case may be, then outstanding, shall have requested the Trustee to call a meeting of Securityholders, by written request setting forth in reasonable detail the action proposed to be taken at the meeting, and the Trustee shall not have mailed the notice of such meeting within 20 days after receipt of such request, then the Company or such Securityholders may determine the time and the place for such meeting and may call such meeting to take any action authorized in Section 8.1, by mailing notice thereof as provided in Section 8.2.

SECTION 8.4. QUALIFICATIONS FOR VOTING. To be entitled to vote at any meeting of Securityholders a Person shall (a) be a holder of one or more Debentures with respect to which the meeting is being held or (b) a Person appointed by an instrument in writing as proxy by a holder of one or more such Debentures. The only Persons who shall be entitled to be present or to speak at any meeting of Securityholders shall be the Persons entitled to vote at such meeting and their counsel and any representatives of the Trustee and its counsel and any representatives of the Company and its counsel.

SECTION 8.5. REGULATIONS. Notwithstanding any other provisions of this Indenture, the Trustee may make such reasonable regulations as it may deem advisable for any meeting of Securityholders, in

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regard to proof of the holding of Debentures and of the appointment of proxies, and in regard to the appointment and duties of inspectors of votes, the submission and examination of proxies, certificates and other evidence of the right to vote, and such other matters concerning the conduct of the meeting as it shall think fit.

The Trustee shall, by an instrument in writing, appoint a temporary chairman of the meeting, unless the meeting shall have been called by the Company or by Securityholders as provided in Section 8.3, in which case the Company or the Securityholders calling the meeting, as the case may be, shall in like manner appoint a temporary chairman. A permanent chairman and a permanent secretary of the meeting shall be elected by majority vote of the meeting.

Subject to the provisions of Section 7.4, at any meeting each holder of Debentures with respect to which such meeting is being held or proxy therefor shall be entitled to one vote for each $1,000.00 principal amount of Debentures held or represented by him; provided, however, that no vote shall be cast or counted at any meeting in respect of any Debenture challenged as not outstanding and ruled by the chairman of the meeting to be not outstanding. The chairman of the meeting shall have no right to vote other than by virtue of Debentures held by him or instruments in writing as aforesaid duly designating him as the Person to vote on behalf of other Securityholders. Any meeting of Securityholders duly called pursuant to the provisions of Section 8.2 or 8.3 may be adjourned from time to time by a majority of those present, whether or not constituting a quorum, and the meeting may be held as so adjourned without further notice.

SECTION 8.6. VOTING. The vote upon any resolution submitted to any meeting of holders of Debentures with respect to which such meeting is being held shall be by written ballots on which shall be subscribed the signatures of such holders or of their representatives by proxy and the serial number or numbers of the Debentures held or represented by them. The permanent chairman of the meeting shall appoint two inspectors of votes who shall count all votes cast at the meeting for or against any resolution and who shall make and file with the secretary of the meeting their verified written reports in triplicate of all votes cast at the meeting. A record in duplicate of the proceedings of each meeting of Securityholders shall be prepared by the secretary of the meeting and there shall be attached to said record the original reports of the inspectors of votes on any vote by ballot taken thereat and affidavits by one or more Persons having knowledge of the facts setting forth a copy of the notice of the meeting and showing that said notice was mailed as provided in Section 8.2. The record shall show the serial numbers of the Debentures voting in favor of or against any resolution. The record shall be signed and verified by the affidavits of the permanent chairman and secretary of the meeting and one of the duplicates shall be delivered to the Company and the other to the Trustee to be preserved by the Trustee, the latter to have attached thereto the ballots voted at the meeting.

Any record so signed and verified shall be conclusive evidence of the matters therein stated.

SECTION 8.7. QUORUM; ACTIONS. The Persons entitled to vote a majority in principal amount of the Debentures then outstanding shall constitute a quorum for a meeting of Securityholders; provided, however, that if any action is to be taken at such meeting with respect to a consent, waiver, request, demand, notice, authorization, direction or other action which may be given by the holders of not less than a specified percentage in principal amount of the Debentures then outstanding, the Persons holding or representing such specified percentage in principal amount of the Debentures then outstanding will constitute a quorum. In the absence of a quorum within 30 minutes of the time appointed for any such meeting, the meeting shall, if convened at the request of Securityholders, be dissolved. In any other case the meeting may be adjourned for a period of not less than

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10 days as determined by the permanent chairman of the meeting prior to the adjournment of such meeting. In the absence of a quorum at any such adjourned meeting, such adjourned meeting may be further adjourned for a period of not less than 10 days as determined by the permanent chairman of the meeting prior to the adjournment of such adjourned meeting. Notice of the reconvening of any adjourned meeting shall be given as provided in Section 8.2, except that such notice need be given only once not less than 5 days prior to the date on which the meeting is scheduled to be reconvened. Notice of the reconvening of an adjourned meeting shall state expressly the percentage, as provided above, of the principal amount of the Debentures then outstanding which shall constitute a quorum.

Except as limited by the provisos in the first paragraph of Section 9.2, any resolution presented to a meeting or adjourned meeting duly reconvened at which a quorum is present as aforesaid may be adopted by the affirmative vote of the holders of a majority in principal amount of the Debentures then outstanding; provided, however, that, except as limited by the provisos in the first paragraph of Section 9.2, any resolution with respect to any consent, waiver, request, demand, notice, authorization, direction or other action which this Indenture expressly provides may be given by the holders of not less than a specified percentage in principal amount of the Debentures then outstanding may be adopted at a meeting or an adjourned meeting duly reconvened and at which a quorum is present as aforesaid only by the affirmative vote of the holders of a not less than such specified percentage in principal amount of the Debentures then outstanding.

Any resolution passed or decision taken at any meeting of holders of Debentures duly held in accordance with this Section shall be binding on all the Securityholders, whether or not present or represented at the meeting.

ARTICLE IX.

SUPPLEMENTAL INDENTURES

SECTION 9.1. SUPPLEMENTAL INDENTURES WITHOUT CONSENT OF SECURITYHOLDERS. The Company, when authorized by a Board Resolution, and the Trustee may from time to time and at any time enter into an indenture or indentures supplemental hereto, without the consent of the Securityholders, for one or more of the following purposes:

(a) to evidence the succession of another Person to the Company, or successive successions, and the assumption by the successor Person of the covenants, agreements and obligations of the Company, pursuant to Article XI hereof;

(b) to add to the covenants of the Company such further covenants, restrictions or conditions for the protection of the holders of Debentures as the Board of Directors shall consider to be for the protection of the holders of such Debentures, and to make the occurrence, or the occurrence and continuance, of a default in any of such additional covenants, restrictions or conditions a default or an Event of Default permitting the enforcement of all or any of the several remedies provided in this Indenture as herein set forth; provided, however, that in respect of any such additional covenant restriction or condition such supplemental indenture may provide for a particular period of grace after default (which period may be shorter or longer than that allowed in the case of other defaults) or may provide for an immediate enforcement upon such default or may limit the remedies available to the Trustee upon such default;

(c) to cure any ambiguity or to correct or supplement any provision contained herein or in any supplemental indenture which may be defective or inconsistent with any other provision contained herein or in any supplemental indenture, or to make such other provisions in regard to matters or questions arising under this Indenture; provided that any such action shall not materially adversely affect the interests of the holders of the Debentures;

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(d) to add to, delete from, or revise the terms of Debentures, including, without limitation, any terms relating to the issuance, exchange, registration or transfer of Debentures, including to provide for transfer procedures and restrictions substantially similar to those applicable to the Capital Securities as required by Section 2.5 (for purposes of assuring that no registration of Debentures is required under the Securities Act); provided, however, that any such action shall not adversely affect the interests of the holders of the Debentures then outstanding (it being understood, for purposes of this proviso, that transfer restrictions on Debentures substantially similar to those that were applicable to Capital Securities shall not be deemed to materially adversely affect the holders of the Debentures);

(e) to evidence and provide for the acceptance of appointment hereunder by a successor Trustee with respect to the Debentures and to add to or change any of the provisions of this Indenture as shall be necessary to provide for or facilitate the administration of the trusts hereunder by more than one Trustee;

(f) to make any change (other than as elsewhere provided in this paragraph) that does not adversely affect the rights of any Securityholder in any material respect; or

(g) to provide for the issuance of and establish the form and terms and conditions of the Debentures, to establish the form of any certifications required to be furnished pursuant to the terms of this Indenture or the Debentures, or to add to the rights of the holders of Debentures.

The Trustee is hereby authorized to join with the Company in the execution of any such supplemental indenture, to make any further appropriate agreements and stipulations which may be therein contained and to accept the conveyance, transfer and assignment of any property thereunder, but the Trustee shall not be obligated to, but may in its discretion, enter into any such supplemental indenture which affects the Trustee’s own rights, duties or immunities under this Indenture or otherwise.

Any supplemental indenture authorized by the provisions of this Section 9.1 may be executed by the Company and the Trustee without the consent of the holders of any of the Debentures at the time outstanding, notwithstanding any of the provisions of Section 9.2.

SECTION 9.2. SUPPLEMENTAL INDENTURES WITH CONSENT OF SECURITYHOLDERS. With the consent (evidenced as provided in Section 7.1) of the holders of not less than a majority in aggregate principal amount of the Debentures at the time outstanding affected by such supplemental indenture (voting as a class), the Company, when authorized by a Board Resolution, and the Trustee may from time to time and at any time enter into an indenture or indentures supplemental hereto for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Indenture or of any supplemental indenture or of modifying in any manner the rights of the holders of the Debentures; provided, however, that no such supplemental indenture shall without the consent of the holders of each Debenture then outstanding and affected thereby (i) change the fixed maturity of any Debenture, or reduce the principal amount thereof or any premium thereon, or reduce the rate or extend the time of payment of interest thereon, or reduce any amount payable on redemption thereof or make the principal thereof or any interest or premium thereon payable in any coin or currency other than that provided in the Debentures, or impair or affect the right of any Securityholder to institute suit for payment thereof or impair the right of repayment, if any, at the option of the holder, or (ii) reduce the aforesaid percentage of Debentures the holders of which are required to consent to any such supplemental indenture; provided further, however, that if the Debentures are held by a trust or a trustee of such trust, such supplemental indenture shall not be effective until the holders of a majority in Liquidation Amount of Trust Securities shall have consented to such supplemental indenture; provided further, however, that if the consent of the Securityholder of each outstanding Debenture is required, such supplemental indenture shall not be effective until each holder of the Trust Securities shall have consented to such supplemental indenture.

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Upon the request of the Company accompanied by a Board Resolution authorizing the execution of any such supplemental indenture, and upon the filing with the Trustee of evidence of the consent of Securityholders as aforesaid, the Trustee shall join with the Company in the execution of such supplemental indenture unless such supplemental indenture affects the Trustee’s own rights, duties or immunities under this Indenture or otherwise, in which case the Trustee may in its discretion, but shall not be obligated to, enter into such supplemental indenture.

Promptly after the execution by the Company and the Trustee of any supplemental indenture pursuant to the provisions of this Section, the Trustee shall transmit by mail, first class postage prepaid, a notice, prepared by the Company, setting forth in general terms the substance of such supplemental indenture, to the Securityholders as their names and addresses appear upon the Debenture Register. Any failure of the Trustee to mail such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any such supplemental indenture.

It shall not be necessary for the consent of the Securityholders under this Section 9.2 to approve the particular form of any proposed supplemental indenture, but it shall be sufficient if such consent shall approve the substance thereof.

SECTION 9.3. EFFECT OF SUPPLEMENTAL INDENTURES. Upon the execution of any supplemental indenture pursuant to the provisions of this Article IX, this Indenture shall be and be deemed to be modified and amended in accordance therewith and the respective rights, limitations of rights, obligations, duties and immunities under this Indenture of the Trustee, the Company and the holders of Debentures shall thereafter be determined, exercised and enforced hereunder subject in all respects to such modifications and amendments and all the terms and conditions of any such supplemental indenture shall be and be deemed to be part of the terms and conditions of this Indenture for any and all purposes.

SECTION 9.4. NOTATION ON DEBENTURES. Debentures authenticated and delivered after the execution of any supplemental indenture pursuant to the provisions of this Article IX may bear a notation as to any matter provided for in such supplemental indenture. If the Company or the Trustee shall so determine, new Debentures so modified as to conform, in the opinion of the Board of Directors of the Company, to any modification of this Indenture contained in any such supplemental indenture may be prepared and executed by the Company, authenticated by the Trustee or the Authenticating Agent and delivered in exchange for the Debentures then outstanding.

SECTION 9.5. EVIDENCE OF COMPLIANCE OF SUPPLEMENTAL INDENTURE TO BE FURNISHED TO TRUSTEE. The Trustee, subject to the provisions of Sections 6.1 and 6.2, shall, in addition to the documents required by Section 14.6, receive an Officers’ Certificate and an Opinion of Counsel as conclusive evidence that any supplemental indenture executed pursuant hereto complies with the requirements of this Article IX. The Trustee shall receive an Opinion of Counsel as conclusive evidence that any supplemental indenture executed pursuant to this Article IX is authorized or permitted by, and conforms to, the terms of this Article IX and that it is proper for the Trustee under the provisions of this Article IX to join in the execution thereof.

ARTICLE X.

REDEMPTION OF SECURITIES

SECTION 10.1. OPTIONAL REDEMPTION. The Company shall have the right (subject to the receipt by the Company of prior approval (i) if the Company is a bank holding company, from the Federal Reserve, if then required under applicable capital guidelines or policies of the Federal Reserve or (ii) if the Company is a savings and loan holding company, from the OTS, if then required under applicable capital guidelines or policies of the OTS) to redeem the Debentures, in whole or in part, but in all cases in

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a principal amount with integral multiples of $1,000.00, on any March 26, June 26, September 26 or December 26 on or after June 26, 2008 (the “Redemption Date”), at the Redemption Price.

SECTION 10.2. SPECIAL EVENT REDEMPTION. If a Special Event shall occur and be continuing, the Company shall have the right (subject to the receipt by the Company of prior approval (i) if the Company is a bank holding company, from the Federal Reserve, if then required under applicable capital guidelines or policies of the Federal Reserve or (ii) if the Company is a savings and loan holding company, from the OTS, if then required under applicable capital guidelines or policies of the OTS) to redeem the Debentures in whole, but not in part, at any Interest Payment Date, within 120 days following the occurrence of such Special Event (the “Special Redemption Date”) at the Special Redemption Price.

SECTION 10.3. NOTICE OF REDEMPTION; SELECTION OF DEBENTURES. In case the Company shall desire to exercise the right to redeem all, or, as the case may be, any part of the Debentures, it shall cause to be mailed a notice of such redemption at least 30 and not more than 60 days prior to the Redemption Date or the Special Redemption Date to the holders of Debentures so to be redeemed as a whole or in part at their last addresses as the same appear on the Debenture Register. Such mailing shall be by first class mail. The notice if mailed in the manner herein provided shall be conclusively presumed to have been duly given, whether or not the holder receives such notice. In any case, failure to give such notice by mail or any defect in the notice to the holder of any Debenture designated for redemption as a whole or in part shall not affect the validity of the proceedings for the redemption of any other Debenture.

Each such notice of redemption shall specify the CUSIP number, if any, of the Debentures to be redeemed, the Redemption Date or the Special Redemption Date, as applicable, the Redemption Price or the Special Redemption Price, as applicable, at which Debentures are to be redeemed, the place or places of payment, that payment will be made upon presentation and surrender of such Debentures, that interest accrued to the date fixed for redemption will be paid as specified in said notice, and that on and after said date interest thereon or on the portions thereof to be redeemed will cease to accrue. If less than all the Debentures are to be redeemed the notice of redemption shall specify the numbers of the Debentures to be redeemed. In case the Debentures are to be redeemed in part only, the notice of redemption shall state the portion of the principal amount thereof to be redeemed and shall state that on and after the date fixed for redemption, upon surrender of such Debenture, a new Debenture or Debentures in principal amount equal to the unredeemed portion thereof will be issued.

Prior to 10:00 a.m. New York City time on the Redemption Date or Special Redemption Date, as applicable, the Company will deposit with the Trustee or with one or more paying agents an amount of money sufficient to redeem on the Redemption Date or the Special Redemption Date, as applicable, all the Debentures so called for redemption at the appropriate Redemption Price or Special Redemption Price.

If all, or less than all, the Debentures are to be redeemed, the Company will give the Trustee notice not less than 45 nor more than 60 days, respectively, prior to the Redemption Date or Special Redemption Date, as applicable, as to the aggregate principal amount of Debentures to be redeemed and the Trustee shall select, in such manner as in its sole discretion it shall deem appropriate and fair, the Debentures or portions thereof (in integral multiples of $1,000.00) to be redeemed.

SECTION 10.4. PAYMENT OF DEBENTURES CALLED FOR REDEMPTION. If notice of redemption has been given as provided in Section 10.3, the Debentures or portions of Debentures with respect to which such notice has been given shall become due and payable on the Redemption Date or Special Redemption Date, as applicable, and at the place or places stated in such notice at the applicable Redemption Price or Special Redemption Price and on and after said date (unless the Company shall default in the payment of such Debentures at the Redemption Price or Special Redemption Price, as applicable) interest on the Debentures or portions of Debentures so called for redemption shall cease to accrue. On presentation and

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surrender of such Debentures at a place of payment specified in said notice, such Debentures or the specified portions thereof shall be paid and redeemed by the Company at the applicable Redemption Price or Special Redemption Price.

Upon presentation of any Debenture redeemed in part only, the Company shall execute and the Trustee shall authenticate and make available for delivery to the holder thereof, at the expense of the Company, a new Debenture or Debentures of authorized denominations, in principal amount equal to the unredeemed portion of the Debenture so presented.

ARTICLE XI.

CONSOLIDATION, MERGER, SALE, CONVEYANCE AND LEASE

SECTION 11.1. COMPANY MAY CONSOLIDATE, ETC., ON CERTAIN TERMS. Nothing contained in this Indenture or in the Debentures shall prevent any consolidation or merger of the Company with or into any other Person (whether or not affiliated with the Company) or successive consolidations or mergers in which the Company or its successor or successors shall be a party or parties, or shall prevent any sale, conveyance, transfer or other disposition of the property or capital stock of the Company or its successor or successors as an entirety, or substantially as an entirety, to any other Person (whether or not affiliated with the Company, or its successor or successors) authorized to acquire and operate the same; provided, however, that the Company hereby covenants and agrees that, upon any such consolidation, merger (where the Company is not the surviving corporation), sale, conveyance, transfer or other disposition, the due and punctual payment of the principal of (and premium, if any) and interest on all of the Debentures in accordance with their terms, according to their tenor, and the due and punctual performance and observance of all the covenants and conditions of this Indenture to be kept or performed by the Company, shall be expressly assumed by supplemental indenture satisfactory in form to the Trustee executed and delivered to the Trustee by the entity formed by such consolidation, or into which the Company shall have been merged, or by the entity which shall have acquired such property or capital stock.

SECTION 11.2. SUCCESSOR ENTITY TO BE SUBSTITUTED. In case of any such consolidation, merger, sale, conveyance, transfer or other disposition and upon the assumption by the successor entity, by supplemental indenture, executed and delivered to the Trustee and satisfactory in form to the Trustee, of the due and punctual payment of the principal of and premium, if any, and interest on all of the Debentures and the due and punctual performance and observance of all of the covenants and conditions of this Indenture to be performed or observed by the Company, such successor entity shall succeed to and be substituted for the Company, with the same effect as if it had been named herein as the Company, and thereupon the predecessor entity shall be relieved of any further liability or obligation hereunder or upon the Debentures. Such successor entity thereupon may cause to be signed, and may issue in its own name, any or all of the Debentures issuable hereunder which theretofore shall not have been signed by the Company and delivered to the Trustee or the Authenticating Agent; and, upon the order of such successor entity instead of the Company and subject to all the terms, conditions and limitations in this Indenture prescribed, the Trustee or the Authenticating Agent shall authenticate and deliver any Debentures which previously shall have been signed and delivered by the officers of the Company, to the Trustee or the Authenticating Agent for authentication, and any Debentures which such successor entity thereafter shall cause to be signed and delivered to the Trustee or the Authenticating Agent for that purpose. All the Debentures so issued shall in all respects have the same legal rank and benefit under this Indenture as the Debentures theretofore or thereafter issued in accordance with the terms of this Indenture as though all of such Debentures had been issued at the date of the execution hereof.

SECTION 11.3. OPINION OF COUNSEL TO BE GIVEN TO TRUSTEE. The Trustee, subject to the provisions of Sections 6.1 and 6.2, shall receive, in addition to the Opinion of Counsel required by Section 9.5, an Opinion of Counsel as conclusive evidence that any consolidation, merger, sale,

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conveyance, transfer or other disposition, and any assumption, permitted or required by the terms of this Article XI complies with the provisions of this Article XI.

ARTICLE XII.

SATISFACTION AND DISCHARGE OF INDENTURE

SECTION 12.1. DISCHARGE OF INDENTURE. When

(a) the Company shall deliver to the Trustee for cancellation all Debentures theretofore authenticated (other than any Debentures which shall have been destroyed, lost or stolen and which shall have been replaced or paid as provided in Section 2.6) and not theretofore canceled, or

(b) all the Debentures not theretofore canceled or delivered to the Trustee for cancellation shall have become due and payable, or are by their terms to become due and payable within 1 year or are to be called for redemption within 1 year under arrangements satisfactory to the Trustee for the giving of notice of redemption, and the Company shall deposit with the Trustee, in trust, funds, which shall be immediately due and payable, sufficient to pay at maturity or upon redemption all of the Debentures (other than any Debentures which shall have been destroyed, lost or stolen and which shall have been replaced or paid as provided in Section 2.6) not theretofore canceled or delivered to the Trustee for cancellation, including principal and premium, if any, and interest due or to become due to such date of maturity or redemption date, as the case may be, but excluding, however, the amount of any moneys for the payment of principal of, and premium, if any, or interest on the Debentures (1) theretofore repaid to the Company in accordance with the provisions of Section 12.4, or (2) paid to any state or to the District of Columbia pursuant to its unclaimed property or similar laws,

and if in the case of either clause (a) or clause (b) the Company shall also pay or cause to be paid all other sums payable hereunder by the Company, then this Indenture shall cease to be of further effect except for the provisions of Sections 2.5, 2.6, 2.8, 3.1, 3.2, 3.4, 6.6, 6.8, 6.9 and 12.4 hereof shall survive until such Debentures shall mature and be paid. Thereafter, Sections 6.6 and 12.4 shall survive, and the Trustee, on demand of the Company accompanied by an Officers’ Certificate and an Opinion of Counsel, each stating that all conditions precedent herein provided for relating to the satisfaction and discharge of this Indenture have been complied with, and at the cost and expense of the Company, shall execute proper instruments acknowledging satisfaction of and discharging this Indenture. The Company agrees to reimburse the Trustee for any costs or expenses thereafter reasonably and properly incurred by the Trustee in connection with this Indenture or the Debentures.

SECTION 12.2. DEPOSITED MONEYS TO BE HELD IN TRUST BY TRUSTEE. Subject to the provisions of Section 12.4, all moneys deposited with the Trustee pursuant to Section 12.1 shall be held in trust in a non-interest bearing account and applied by it to the payment, either directly or through any paying agent (including the Company if acting as its own paying agent), to the holders of the particular Debentures for the payment of which such moneys have been deposited with the Trustee, of all sums due and to become due thereon for principal, and premium, if any, and interest.

SECTION 12.3. PAYING AGENT TO REPAY MONEYS HELD. Upon the satisfaction and discharge of this Indenture all moneys then held by any paying agent of the Debentures (other than the Trustee) shall, upon demand of the Company, be repaid to it or paid to the Trustee, and thereupon such paying agent shall be released from all further liability with respect to such moneys.

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SECTION 12.4. RETURN OF UNCLAIMED MONEYS. Any moneys deposited with or paid to the Trustee or any paying agent for payment of the principal of, and premium, if any, or interest on Debentures and not applied but remaining unclaimed by the holders of Debentures for 2 years after the date upon which the principal of, and premium, if any, or interest on such Debentures, as the case may be, shall have become due and payable, shall, subject to applicable escheatment laws, be repaid to the Company by the Trustee or such paying agent on written demand; and the holder of any of the Debentures shall thereafter look only to the Company for any payment which such holder may be entitled to collect, and all liability of the Trustee or such paying agent with respect to such moneys shall thereupon cease.

ARTICLE XIII.

IMMUNITY OF INCORPORATORS, STOCKHOLDERS,

OFFICERS AND DIRECTORS

SECTION 13.1. INDENTURE AND DEBENTURES SOLELY CORPORATE OBLIGATIONS. No recourse for the payment of the principal of or premium, if any, or interest on any Debenture, or for any claim based thereon or otherwise in respect thereof, and no recourse under or upon any obligation, covenant or agreement of the Company in this Indenture or in any supplemental indenture, or in any such Debenture, or because of the creation of any indebtedness represented thereby, shall be had against any incorporator, stockholder, employee, officer or director, as such, past, present or future, of the Company or of any successor Person of the Company, either directly or through the Company or any successor Person of the Company, whether by virtue of any constitution, statute or rule of law, or by the enforcement of any assessment or penalty or otherwise, it being expressly understood that all such liability is hereby expressly waived and released as a condition of, and as a consideration for, the execution of this Indenture and the issue of the Debentures.

ARTICLE XIV.

MISCELLANEOUS PROVISIONS

SECTION 14.1. SUCCESSORS. All the covenants, stipulations, promises and agreements of the Company in this Indenture shall bind its successors and assigns whether so expressed or not.

SECTION 14.2. OFFICIAL ACTS BY SUCCESSOR ENTITY. Any act or proceeding by any provision of this Indenture authorized or required to be done or performed by any board, committee or officer of the Company shall and may be done and performed with like force and effect by the like board, committee, officer or other authorized Person of any entity that shall at the time be the lawful successor of the Company.

SECTION 14.3. SURRENDER OF COMPANY POWERS. The Company by instrument in writing executed by authority of at least 2/3 (two-thirds) of its Board of Directors and delivered to the Trustee may surrender any of the powers reserved to the Company and thereupon such power so surrendered shall terminate both as to the Company, and as to any permitted successor.

SECTION 14.4. ADDRESSES FOR NOTICES, ETC. Any notice, consent, direction, request, authorization, waiver or demand which by any provision of this Indenture is required or permitted to be given, made, furnished or served by the Trustee or by the Securityholders on or to the Company may be given or served in writing by being deposited postage prepaid by registered or certified mail in a post office letter box addressed (until another address is filed by the Company, with the Trustee for the purpose) to the Company, 5810 El Camino Real, Carlsbad, California 92008, Attention: Frank J. Mercardante. Any notice, consent, direction, request, authorization, waiver or demand by any Securityholder or the Company to or upon the Trustee shall be deemed to have been sufficiently given or made, for all purposes, if given or made in writing at the office of the Trustee, addressed to the Trustee, 225 Asylum Street, Goodwin Square, Hartford, Connecticut 06103 Attention: Vice President, Corporate

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Trust Services Division, with a copy to the Trustee, 1 Federal Street—3rd Floor, Boston, Massachusetts 02110, Attention: Paul D. Allen, Corporate Trust Services Division. Any notice, consent, direction, request, authorization, waiver or demand on or to any Securityholder shall be deemed to have been sufficiently given or made, for all purposes, if given or made in writing at the address set forth in the Debenture Register.

SECTION 14.5. GOVERNING LAW. This Indenture and each Debenture shall be deemed to be a contract made under the law of the State of New York, and for all purposes shall be governed by and construed in accordance with the law of said State, without regard to conflict of laws principles thereof.

SECTION 14.6. EVIDENCE OF COMPLIANCE WITH CONDITIONS PRECEDENT. Upon any application or demand by the Company to the Trustee to take any action under any of the provisions of this Indenture, the Company shall furnish to the Trustee an Officers’ Certificate stating that in the opinion of the signers all conditions precedent, if any, provided for in this Indenture relating to the proposed action have been complied with and an Opinion of Counsel stating that, in the opinion of such counsel, all such conditions precedent have been complied with.

Each certificate or opinion provided for in this Indenture and delivered to the Trustee with respect to compliance with a condition or covenant provided for in this Indenture shall include (1) a statement that the person making such certificate or opinion has read such covenant or condition; (2) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based; (3) a statement that, in the opinion of such person, he has made such examination or investigation as is necessary to enable him to express an informed opinion as to whether or not such covenant or condition has been complied with; and (4) a statement as to whether or not in the opinion of such person, such condition or covenant has been complied with.

SECTION 14.7. NON-BUSINESS DAYS. In any case where the date of payment of interest on or principal of the Debentures will be a day that is not a Business Day, the payment of such interest on or principal of the Debentures need not be made on such date but may be made on the next succeeding Business Day, except that, if such Business Day is in the next succeeding calendar year, such payment shall be made on the immediately preceding Business Day, in each case with the same force and effect as if made on the original date of payment, and no interest shall accrue for the period from and after such date.

SECTION 14.8. TABLE OF CONTENTS, HEADINGS, ETC. The table of contents and the titles and headings of the articles and sections of this Indenture have been inserted for convenience of reference only, are not to be considered a part hereof, and shall in no way modify or restrict any of the terms or provisions hereof.

SECTION 14.9. EXECUTION IN COUNTERPARTS. This Indenture may be executed in any number of counterparts, each of which shall be an original, but such counterparts shall together constitute but one and the same instrument.

SECTION 14.10. SEPARABILITY. In case any one or more of the provisions contained in this Indenture or in the Debentures shall for any reason be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provisions of this Indenture or of such Debentures, but this Indenture and such Debentures shall be construed as if such invalid or illegal or unenforceable provision had never been contained herein or therein.

SECTION 14.11. ASSIGNMENT. The Company will have the right at all times to assign any of its rights or obligations under this Indenture to a direct or indirect wholly owned Subsidiary of the Company,

43

provided that, in the event of any such assignment, the Company will remain liable for all such obligations. Subject to the foregoing, this Indenture is binding upon and inures to the benefit of the parties hereto and their respective successors and assigns. This Indenture may not otherwise be assigned by the parties hereto.

SECTION 14.12. ACKNOWLEDGMENT OF RIGHTS. The Company agrees that, with respect to any Debentures held by the Trust or the Institutional Trustee of the Trust, if the Institutional Trustee of the Trust fails to enforce its rights under this Indenture as the holder of Debentures held as the assets of such Trust after the holders of a majority in Liquidation Amount of the Capital Securities of such Trust have so directed such Institutional Trustee, a holder of record of such Capital Securities may, to the fullest extent permitted by law, institute legal proceedings directly against the Company to enforce such Institutional Trustee’s rights under this Indenture without first instituting any legal proceedings against such trustee or any other Person. Notwithstanding the foregoing, if an Event of Default has occurred and is continuing and such event is attributable to the failure of the Company to pay interest (or premium, if any) or principal on the Debentures on the date such interest (or premium, if any) or principal is otherwise payable (or in the case of redemption, on the redemption date), the Company agrees that a holder of record of Capital Securities of the Trust may directly institute a proceeding against the Company for enforcement of payment to such holder directly of the principal of (or premium, if any) or interest on the Debentures having an aggregate principal amount equal to the aggregate Liquidation Amount of the Capital Securities of such holder on or after the respective due date specified in the Debentures.

ARTICLE XV.

SUBORDINATION OF DEBENTURES

SECTION 15.1. AGREEMENT TO SUBORDINATE. The Company covenants and agrees, and each holder of Debentures by such Securityholder’s acceptance thereof likewise covenants and agrees, that all Debentures shall be issued subject to the provisions of this Article XV; and each holder of a Debenture, whether upon original issue or upon transfer or assignment thereof, accepts and agrees to be bound by such provisions.

The payment by the Company of the principal of, and premium, if any, and interest on all Debentures shall, to the extent and in the manner hereinafter set forth, be subordinated and junior in right of payment to the prior payment in full of all Senior Indebtedness of the Company, whether outstanding at the date of this Indenture or thereafter incurred.

No provision of this Article XV shall prevent the occurrence of any default or Event of Default hereunder.

SECTION 15.2. DEFAULT ON SENIOR INDEBTEDNESS. In the event and during the continuation of any default by the Company in the payment of principal, premium, interest or any other payment due on any Senior Indebtedness of the Company following any grace period, or in the event that the maturity of any Senior Indebtedness of the Company has been accelerated because of a default and such acceleration has not been rescinded or canceled and such Senior Indebtedness has not been paid in full, then, in either case, no payment shall be made by the Company with respect to the principal (including redemption) of, or premium, if any, or interest on the Debentures.

In the event that, notwithstanding the foregoing, any payment shall be received by the Trustee when such payment is prohibited by the preceding paragraph of this Section 15.2, such payment shall, subject to Section 15.7, be held in trust for the benefit of, and shall be paid over or delivered to, the holders of Senior Indebtedness or their respective representatives, or to the trustee or trustees under any indenture pursuant to which any of such Senior Indebtedness may have been issued, as their respective interests may appear, but only to the extent that the holders of the Senior Indebtedness (or their

44

representative or representatives or a trustee) notify the Trustee in writing within 90 days of such payment of the amounts then due and owing on the Senior Indebtedness and only the amounts specified in such notice to the Trustee shall be paid to the holders of Senior Indebtedness.

SECTION 15.3. LIQUIDATION, DISSOLUTION, BANKRUPTCY. Upon any payment by the Company or distribution of assets of the Company of any kind or character, whether in cash, property or securities, to creditors upon any dissolution or winding-up or liquidation or reorganization of the Company, whether voluntary or involuntary or in bankruptcy, insolvency, receivership or other proceedings, all amounts due upon all Senior Indebtedness of the Company shall first be paid in full, or payment thereof provided for in money in accordance with its terms, before any payment is made by the Company, on account of the principal (and premium, if any) or interest on the Debentures. Upon any such dissolution or winding-up or liquidation or reorganization, any payment by the Company, or distribution of assets of the Company of any kind or character, whether in cash, property or securities, to which the Securityholders or the Trustee would be entitled to receive from the Company, except for the provisions of this Article XV, shall be paid by the Company, or by any receiver, trustee in bankruptcy, liquidating trustee, agent or other Person making such payment or distribution, or by the Securityholders or by the Trustee under this Indenture if received by them or it, directly to the holders of Senior Indebtedness (pro rata to such holders on the basis of the respective amounts of Senior Indebtedness held by such holders, as calculated by the Company) or their representative or representatives, or to the trustee or trustees under any indenture pursuant to which any instruments evidencing such Senior Indebtedness may have been issued, as their respective interests may appear, to the extent necessary to pay such Senior Indebtedness in full, in money or money’s worth, after giving effect to any concurrent payment or distribution to or for the holders of such Senior Indebtedness, before any payment or distribution is made to the Securityholders or to the Trustee.

In the event that, notwithstanding the foregoing, any payment or distribution of assets of the Company of any kind or character, whether in cash, property or securities, prohibited by the foregoing, shall be received by the Trustee before all Senior Indebtedness is paid in full, or provision is made for such payment in money in accordance with its terms, such payment or distribution shall be held in trust for the benefit of and shall be paid over or delivered to the holders of such Senior Indebtedness or their representative or representatives, or to the trustee or trustees under any indenture pursuant to which any instruments evidencing such Senior Indebtedness may have been issued, as their respective interests may appear, as calculated by the Company, for application to the payment of all Senior Indebtedness, remaining unpaid to the extent necessary to pay such Senior Indebtedness in full in money in accordance with its terms, after giving effect to any concurrent payment or distribution to or for the benefit of the holders of such Senior Indebtedness.

For purposes of this Article XV, the words “cash, property or securities” shall not be deemed to include shares of stock of the Company as reorganized or readjusted, or securities of the Company or any other corporation provided for by a plan of reorganization or readjustment, the payment of which is subordinated at least to the extent provided in this Article XV with respect to the Debentures to the payment of all Senior Indebtedness, that may at the time be outstanding, provided that (i) such Senior Indebtedness is assumed by the new corporation, if any, resulting from any such reorganization or readjustment, and (ii) the rights of the holders of such Senior Indebtedness are not, without the consent of such holders, altered by such reorganization or readjustment. The consolidation of the Company with, or the merger of the Company into, another corporation or the liquidation or dissolution of the Company following the conveyance or transfer of its property as an entirety, or substantially as an entirety, to another corporation upon the terms and conditions provided for in Article XI of this Indenture shall not be deemed a dissolution, winding-up, liquidation or reorganization for the purposes of this Section if such other corporation shall, as a part of such consolidation, merger, conveyance or transfer, comply with the

45

conditions stated in Article XI of this Indenture. Nothing in Section 15.2 or in this Section shall apply to claims of, or payments to, the Trustee under or pursuant to Section 6.6 of this Indenture.

SECTION 15.4. SUBROGATION. Subject to the payment in full of all Senior Indebtedness, the Securityholders shall be subrogated to the rights of the holders of such Senior Indebtedness to receive payments or distributions of cash, property or securities of the Company, applicable to such Senior Indebtedness until the principal of (and premium, if any) and interest on the Debentures shall be paid in full. For the purposes of such subrogation, no payments or distributions to the holders of such Senior Indebtedness of any cash, property or securities to which the Securityholders or the Trustee would be entitled except for the provisions of this Article XV, and no payment over pursuant to the provisions of this Article XV to or for the benefit of the holders of such Senior Indebtedness by Securityholders or the Trustee, shall, as between the Company, its creditors other than holders of Senior Indebtedness of the Company, and the holders of the Debentures be deemed to be a payment or distribution by the Company to or on account of such Senior Indebtedness. It is understood that the provisions of this Article XV are and are intended solely for the purposes of defining the relative rights of the holders of the Securities, on the one hand, and the holders of such Senior Indebtedness, on the other hand.

Nothing contained in this Article XV or elsewhere in this Indenture or in the Debentures is intended to or shall impair, as between the Company, its creditors other than the holders of Senior Indebtedness, and the holders of the Debentures, the obligation of the Company, which is absolute and unconditional, to pay to the holders of the Debentures the principal of (and premium, if any) and interest on the Debentures as and when the same shall become due and payable in accordance with their terms, or is intended to or shall affect the relative rights of the holders of the Debentures and creditors of the Company, other than the holders of Senior Indebtedness, nor shall anything herein or therein prevent the Trustee or the holder of any Debenture from exercising all remedies otherwise permitted by applicable law upon default under this Indenture, subject to the rights, if any, under this Article XV of the holders of such Senior Indebtedness in respect of cash, property or securities of the Company, received upon the exercise of any such remedy.

Upon any payment or distribution of assets of the Company referred to in this Article XV, the Trustee, subject to the provisions of Article VI of this Indenture, and the Securityholders shall be entitled to conclusively rely upon any order or decree made by any court of competent jurisdiction in which such dissolution, winding-up, liquidation or reorganization proceedings are pending, or a certificate of the receiver, trustee in bankruptcy, liquidation trustee, agent or other Person making such payment or distribution, delivered to the Trustee or to the Securityholders, for the purposes of ascertaining the Persons entitled to participate in such distribution, the holders of Senior Indebtedness and other indebtedness of the Company, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Article XV.

SECTION 15.5. TRUSTEE TO EFFECTUATE SUBORDINATION. Each Securityholder by such Securityholder’s acceptance thereof authorizes and directs the Trustee on such Securityholder’s behalf to take such action as may be necessary or appropriate to effectuate the subordination provided in this Article XV and appoints the Trustee such Securityholder’s attorney-in-fact for any and all such purposes.

SECTION 15.6. NOTICE BY THE COMPANY. The Company shall give prompt written notice to a Responsible Officer of the Trustee at the Principal Office of the Trustee of any fact known to the Company that would prohibit the making of any payment of monies to or by the Trustee in respect of the Debentures pursuant to the provisions of this Article XV. Notwithstanding the provisions of this Article XV or any other provision of this Indenture, the Trustee shall not be charged with knowledge of the existence of any facts that would prohibit the making of any payment of monies to or by the Trustee in respect of the Debentures pursuant to the provisions of this Article XV, unless and until a Responsible

46

Officer of the Trustee at the Principal Office of the Trustee shall have received written notice thereof from the Company or a holder or holders of Senior Indebtedness or from any trustee therefor; and before the receipt of any such written notice, the Trustee, subject to the provisions of Article VI of this Indenture, shall be entitled in all respects to assume that no such facts exist; provided, however, that if the Trustee shall not have received the notice provided for in this Section at least 2 Business Days prior to the date upon which by the terms hereof any money may become payable for any purpose (including, without limitation, the payment of the principal of (or premium, if any) or interest on any Debenture), then, anything herein contained to the contrary notwithstanding, the Trustee shall have full power and authority to receive such money and to apply the same to the purposes for which they were received, and shall not be affected by any notice to the contrary that may be received by it within 2 Business Days prior to such date.

The Trustee, subject to the provisions of Article VI of this Indenture, shall be entitled to conclusively rely on the delivery to it of a written notice by a Person representing himself to be a holder of Senior Indebtedness (or a trustee or representative on behalf of such holder), to establish that such notice has been given by a holder of such Senior Indebtedness or a trustee or representative on behalf of any such holder or holders. In the event that the Trustee determines in good faith that further evidence is required with respect to the right of any Person as a holder of such Senior Indebtedness to participate in any payment or distribution pursuant to this Article XV, the Trustee may request such Person to furnish evidence to the reasonable satisfaction of the Trustee as to the amount of such Senior Indebtedness held by such Person, the extent to which such Person is entitled to participate in such payment or distribution and any other facts pertinent to the rights of such Person under this Article XV, and, if such evidence is not furnished, the Trustee may defer any payment to such Person pending judicial determination as to the right of such Person to receive such payment.

SECTION 15.7. RIGHTS OF THE TRUSTEE; HOLDERS OF SENIOR INDEBTEDNESS. The Trustee in its individual capacity shall be entitled to all the rights set forth in this Article XV in respect of any Senior Indebtedness at any time held by it, to the same extent as any other holder of Senior Indebtedness, and nothing in this Indenture shall deprive the Trustee of any of its rights as such holder.

With respect to the holders of Senior Indebtedness, the Trustee undertakes to perform or to observe only such of its covenants and obligations as are specifically set forth in this Article XV, and no implied covenants or obligations with respect to the holders of such Senior Indebtedness shall be read into this Indenture against the Trustee. The Trustee shall not be deemed to owe any fiduciary duty to the holders of such Senior Indebtedness and, subject to the provisions of Article VI of this Indenture, the Trustee shall not be liable to any holder of such Senior Indebtedness if it shall pay over or deliver to Securityholders, the Company or any other Person money or assets to which any holder of such Senior Indebtedness shall be entitled by virtue of this Article XV or otherwise.

Nothing in this Article XV shall apply to claims of, or payments to, the Trustee under or pursuant to Section 6.6.

SECTION 15.8. SUBORDINATION MAY NOT BE IMPAIRED. No right of any present or future holder of any Senior Indebtedness to enforce subordination as herein provided shall at any time in any way be prejudiced or impaired by any act or failure to act on the part of the Company, or by any act or failure to act, in good faith, by any such holder, or by any noncompliance by the Company, with the terms, provisions and covenants of this Indenture, regardless of any knowledge thereof that any such holder may have or otherwise be charged with.

Without in any way limiting the generality of the foregoing paragraph, the holders of Senior Indebtedness may, at any time and from time to time, without the consent of or notice to the Trustee or the Securityholders, without incurring responsibility to the Securityholders and without impairing or

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releasing the subordination provided in this Article XV or the obligations hereunder of the holders of the Debentures to the holders of such Senior Indebtedness, do any one or more of the following: (i) change the manner, place or terms of payment or extend the time of payment of, or renew or alter, such Senior Indebtedness, or otherwise amend or supplement in any manner such Senior Indebtedness or any instrument evidencing the same or any agreement under which such Senior Indebtedness is outstanding; (ii) sell, exchange, release or otherwise deal with any property pledged, mortgaged or otherwise securing such Senior Indebtedness; (iii) release any Person liable in any manner for the collection of such Senior Indebtedness; and (iv) exercise or refrain from exercising any rights against the Company, and any other Person.

Signatures appear on the following page

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IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed by their respective officers thereunto duly authorized, as of the day and year first above written.

SOUTHWEST COMMUNITY BANCORP
By	/s/ Frank J. Mercardante
Name:	Frank J. Mercardante
Title:	President & CFO
U.S. BANK NATIONAL ASSOCIATION, as Trustee
By:	/s/ Paul D. Allen
Name:	Paul D. Allen
Title:	Vice President

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EXHIBIT A

FORM OF FLOATING RATE JUNIOR SUBORDINATED DEFERRABLE INTEREST DEBENTURE

[FORM OF FACE OF SECURITY]

THIS SECURITY IS NOT A SAVINGS ACCOUNT OR DEPOSIT AND IT IS NOT INSURED BY THE UNITED STATES OR ANY AGENCY OR FUND OF THE UNITED STATES, INCLUDING THE FEDERAL DEPOSIT INSURANCE CORPORATION.

THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), ANY STATE SECURITIES LAWS OR ANY OTHER APPLICABLE SECURITIES LAW. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS. THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR OTHERWISE TRANSFER THIS SECURITY ONLY (A) TO THE COMPANY, (B) PURSUANT TO A REGISTRATION STATEMENT THAT HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A SO LONG AS THIS SECURITY IS ELIGIBLE FOR RESALE PURSUANT TO RULE 144A IN ACCORDANCE WITH RULE 144A, (D) TO A NON-U.S. PERSON IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH RULE 903 OR RULE 904 (AS APPLICABLE) OF REGULATION S UNDER THE SECURITIES ACT, (E) TO AN INSTITUTIONAL “ACCREDITED INVESTOR” WITHIN THE MEANING OF SUBPARAGRAPH (A) OF RULE 501 UNDER THE SECURITIES ACT THAT IS ACQUIRING THIS SECURITY FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL ACCREDITED INVESTOR, FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, OR (F) PURSUANT TO ANY OTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE COMPANY’S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO IT IN ACCORDANCE WITH THE INDENTURE, A COPY OF WHICH MAY BE OBTAINED FROM THE COMPANY.

THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF ALSO AGREES, REPRESENTS AND WARRANTS THAT IT IS NOT AN EMPLOYEE BENEFIT, INDIVIDUAL RETIREMENT ACCOUNT OR OTHER PLAN OR ARRANGEMENT SUBJECT TO TITLE I OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED (“ERISA”), OR SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE “CODE”) (EACH A “PLAN”), OR AN ENTITY WHOSE UNDERLYING ASSETS INCLUDE “PLAN ASSETS” BY REASON OF ANY PLAN’S INVESTMENT IN THE ENTITY, AND NO PERSON INVESTING “PLAN ASSETS” OF ANY PLAN MAY ACQUIRE OR HOLD THE SECURITIES OR ANY INTEREST THEREIN, UNLESS SUCH PURCHASER OR HOLDER IS ELIGIBLE FOR EXEMPTIVE RELIEF AVAILABLE UNDER U.S. DEPARTMENT OF LABOR PROHIBITED TRANSACTION CLASS EXEMPTION 96-23, 95-60, 91-38, 90-1 OR 84-14 OR ANOTHER APPLICABLE EXEMPTION OR ITS PURCHASE AND HOLDING OF THIS SECURITY IS NOT PROHIBITED BY

A-1

SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE WITH RESPECT TO SUCH PURCHASE OR HOLDING. ANY PURCHASER OR HOLDER OF THE SECURITIES OR ANY INTEREST THEREIN WILL BE DEEMED TO HAVE REPRESENTED BY ITS PURCHASE AND HOLDING THEREOF THAT EITHER (i) IT IS NOT AN EMPLOYEE BENEFIT PLAN WITHIN THE MEANING OF SECTION 3(3) OF ERISA, OR A PLAN TO WHICH SECTION 4975 OF THE CODE IS APPLICABLE, A TRUSTEE OR OTHER PERSON ACTING ON BEHALF OF AN EMPLOYEE BENEFIT PLAN OR PLAN, OR ANY OTHER PERSON OR ENTITY USING THE ASSETS OF ANY EMPLOYEE BENEFIT PLAN OR PLAN TO FINANCE SUCH PURCHASE, OR (ii) SUCH PURCHASE WILL NOT RESULT IN A PROHIBITED TRANSACTION UNDER SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE FOR WHICH THERE IS NO APPLICABLE STATUTORY OR ADMINISTRATIVE EXEMPTION.

THIS SECURITY WILL BE ISSUED AND MAY BE TRANSFERRED ONLY IN BLOCKS HAVING AN AGGREGATE PRINCIPAL AMOUNT OF NOT LESS THAN $100,000.00 AND MULTIPLES OF $1,000.00 IN EXCESS THEREOF. ANY ATTEMPTED TRANSFER OF THIS SECURITY IN A BLOCK HAVING AN AGGREGATE PRINCIPAL AMOUNT OF LESS THAN $100,000.00 SHALL BE DEEMED TO BE VOID AND OF NO LEGAL EFFECT WHATSOEVER.

THE HOLDER OF THIS SECURITY AGREES THAT IT WILL COMPLY WITH THE FOREGOING RESTRICTIONS.

IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO THE REGISTRAR AND TRANSFER AGENT SUCH CERTIFICATES AND OTHER INFORMATION AS MAY BE REQUIRED BY THE INDENTURE TO CONFIRM THAT THE TRANSFER COMPLIES WITH THE FOREGOING RESTRICTIONS.

Floating Rate Junior Subordinated Deferrable Interest Debenture

of

Southwest Community Bancorp

April 22, 2003

Southwest Community Bancorp, a California corporation (the “Company” which term includes any successor Person under the Indenture hereinafter referred to), for value received promises to pay to U.S. Bank National Association, not in its individual capacity but solely as Institutional Trustee for Southwest Community Statutory Trust I (the “Holder”) or registered assigns, the principal sum of eight million two hundred forty-eight thousand and 00/100 dollars ($8,248,000.00) on June 26, 2033, and to pay interest on said principal sum from April 22, 2003, or from the most recent interest payment date (each such date, an “Interest Payment Date”) to which interest has been paid or duly provided for, quarterly (subject to deferral as set forth herein) in arrears on March 26, June 26, September 26 and December 26 of each year commencing on September 26, 2003, at an annual rate equal to 4.47% beginning on (and including) the date of original issuance and ending on (but excluding) September 26, 2003 and at an annual rate for each successive period beginning on (and including) September 26, 2003, and each succeeding Interest Payment Date, and ending on (but excluding) the next succeeding Interest Payment Date (each a “Distribution Period”), equal to 3-Month LIBOR, determined as described below, plus 3.15% (the “Coupon Rate”); provided, however, that prior to June 26, 2008, the Coupon Rate shall not exceed 11.75%, applied to the principal amount hereof, until the principal hereof is paid or duly provided for or made available for payment, and on any overdue principal and (without duplication and to the extent that payment of such interest is enforceable under applicable law) on any overdue installment of interest (including Additional Interest) at the Interest Rate in effect for each applicable period,

A-2

compounded quarterly, from the dates such amounts are due until they are paid or made available for payment. The amount of interest payable for any period will be computed on the basis of the actual number of days in the Distribution Period concerned divided by 360. In the event that any date on which interest is payable on this Debenture is not a Business Day, then a payment of the interest payable on such date will be made on the next succeeding day which is a Business Day (and without any interest or other payment in respect of any such delay), except that, if such Business Day is in the next succeeding calendar year, such payment shall be made on the immediately preceding Business Day, in each case with the same force and effect as if made on the date the payment was originally payable. The interest installment so payable, and punctually paid or duly provided for, on any Interest Payment Date will, as provided in the Indenture, be paid to the Person in whose name this Debenture (or one or more Predecessor Securities) is registered at the close of business on the regular record date for such interest installment, which shall be fifteen days prior to the day on which the relevant Interest Payment Date occurs. Any such interest installment not so punctually paid or duly provided for shall forthwith cease to be payable to the Holder on such regular record date and may be paid to the Person in whose name this Debenture (or one or more Predecessor Securities) is registered at the close of business on a special record date.

“3-Month LIBOR” as used herein, means the London interbank offered interest rate for three-month U.S. dollar deposits determined by the Trustee in the following order of priority: (i) the rate (expressed as a percentage per annum) for U.S. dollar deposits having a three-month maturity that appears on Telerate Page 3750 as of 11:00 a.m. (London time) on the related Determination Date (“Telerate Page 3750” means the display designated as “Page 3750” on the Dow Jones Telerate Service or such other page as may replace Page 3750 on that service or such other service or services as may be nominated by the British Bankers’ Association as the information vendor for the purpose of displaying London interbank offered rates for U.S. dollar deposits); (ii) if such rate cannot be identified on the related Determination Date, the Trustee will request the principal London offices of four leading banks in the London interbank market to provide such banks’ offered quotations (expressed as percentages per annum) to prime banks in the London interbank market for U.S. dollar deposits having a three-month maturity as of 11:00 a.m. (London time) on such Determination Date. If at least two quotations are provided, 3-Month LIBOR will be the arithmetic mean of such quotations; (iii) if fewer than two such quotations are provided as requested in clause (ii) above, the Trustee will request four major New York City banks to provide such banks’ offered quotations (expressed as percentages per annum) to leading European banks for loans in U.S. dollars as of 11:00 a.m. (London time) on such Determination Date. If at least two such quotations are provided, 3-Month LIBOR will be the arithmetic mean of such quotations; and (iv) if fewer than two such quotations are provided as requested in clause (iii) above, 3-Month LIBOR will be a 3-Month LIBOR determined with respect to the Distribution Period immediately preceding such current Distribution Period. If the rate for U.S. dollar deposits having a three-month maturity that initially appears on Telerate Page 3750 as of 11:00 a.m. (London time) on the related Determination Date is superseded on the Telerate Page 3750 by a corrected rate by 12:00 noon (London time) on such Determination Date, then the corrected rate as so substituted on the applicable page will be the applicable 3-Month LIBOR for such Determination Date. As used herein, “Determination Date” means the date that is two London Banking Days (i.e., a business day in which dealings in deposits in U.S. dollars are transacted in the London interbank market) preceding the commencement of the relevant Distribution Period.

The Interest Rate for any Distribution Period will at no time be higher than the maximum rate then permitted by New York law as the same may be modified by United States law.

All percentages resulting from any calculations on the Debentures will be rounded, if necessary, to the nearest one hundred-thousandth of a percentage point, with five one-millionths of a percentage point rounded upward (e.g., 9.876545% (or .09876545) being rounded to 9.87655% (or .0987655), and all

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dollar amounts used in or resulting from such calculation will be rounded to the nearest cent (with one-half cent being rounded upward)).

The principal of and interest on this Debenture shall be payable at the office or agency of the Trustee (or other paying agent appointed by the Company) maintained for that purpose in any coin or currency of the United States of America that at the time of payment is legal tender for payment of public and private debts; provided, however, that payment of interest may be made by check mailed to the registered holder at such address as shall appear in the Debenture Register if a request for a wire transfer by such holder has not been received by the Company or by wire transfer to an account appropriately designated by the holder hereof. Notwithstanding the foregoing, so long as the holder of this Debenture is the Institutional Trustee, the payment of the principal of and interest on this Debenture will be made in immediately available funds at such place and to such account as may be designated by the Trustee.

So long as no Event of Default has occurred and is continuing, the Company shall have the right, from time to time, and without causing an Event of Default, to defer payments of interest on the Debentures by extending the interest payment period on the Debentures at any time and from time to time during the term of the Debentures, for up to 20 consecutive quarterly periods (each such extended interest payment period, an “Extension Period”), during which Extension Period no interest (including Additional Interest) shall be due and payable (except any Additional Sums that may be due and payable). No Extension Period may end on a date other than an Interest Payment Date. During an Extension Period, interest will continue to accrue on the Debentures, and interest on such accrued interest will accrue at an annual rate equal to the Interest Rate in effect for such Extension Period, compounded quarterly from the date such interest would have been payable were it not for the Extension Period, to the extent permitted by law (such interest referred to herein as “Additional Interest”). At the end of any such Extension Period the Company shall pay all interest then accrued and unpaid on the Debentures (together with Additional Interest thereon); provided, however, that no Extension Period may extend beyond the Maturity Date; provided further, however, that during any such Extension Period, the Company shall not and shall not permit any Affiliate to engage in any of the activities or transactions described on the reverse side hereof and in the Indenture. Prior to the termination of any Extension Period, the Company may further extend such period, provided that such period together with all such previous and further consecutive extensions thereof shall not exceed 20 consecutive quarterly periods, or extend beyond the Maturity Date. Upon the termination of any Extension Period and upon the payment of all accrued and unpaid interest and Additional Interest, the Company may commence a new Extension Period, subject to the foregoing requirements. No interest or Additional Interest shall be due and payable during an Extension Period, except at the end thereof, but each installment of interest that would otherwise have been due and payable during such Extension Period shall bear Additional Interest. The Company must give the Trustee notice of its election to begin or extend an Extension Period at least 5 Business Days prior to the regular record date (as such term is used in Section 2.8 of the Indenture) immediately preceding the Interest Payment Date with respect to which interest on the Debentures would have been payable except for the election to begin or extend such Extension Period.

The indebtedness evidenced by this Debenture is, to the extent provided in the Indenture, subordinate and junior in right of payment to the prior payment in full of all Senior Indebtedness, and this Debenture is issued subject to the provisions of the Indenture with respect thereto. Each holder of this Debenture, by accepting the same, (a) agrees to and shall be bound by such provisions, (b) authorizes and directs the Trustee on his or her behalf to take such action as may be necessary or appropriate to acknowledge or effectuate the subordination so provided and (c) appoints the Trustee his or her attorney-in-fact for any and all such purposes. Each holder hereof, by his or her acceptance hereof, hereby waives all notice of the acceptance of the subordination provisions contained herein and in the Indenture by each holder of Senior Indebtedness, whether now outstanding or hereafter incurred, and waives reliance by each such holder upon said provisions.

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This Debenture shall not be entitled to any benefit under the Indenture hereinafter referred to, be valid or become obligatory for any purpose until the certificate of authentication hereon shall have been signed by or on behalf of the Trustee.

The provisions of this Debenture are continued on the reverse side hereof and such provisions shall for all purposes have the same effect as though fully set forth at this place.

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IN WITNESS WHEREOF, the Company has duly executed this certificate.

SOUTHWEST COMMUNITY BANCORP

By

Name:

Title:

CERTIFICATE OF AUTHENTICATION

This is one of the Debentures referred to in the within-mentioned Indenture.

U.S. Bank National Association, as Trustee
By:
	Authorized Officer

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[FORM OF REVERSE OF DEBENTURE]

This Debenture is one of the floating rate junior subordinated deferrable interest debentures of the Company, all issued or to be issued under and pursuant to the Indenture dated as of April 22, 2003 (the “Indenture”), duly executed and delivered between the Company and the Trustee, to which Indenture reference is hereby made for a description of the rights, limitations of rights, obligations, duties and immunities thereunder of the Trustee, the Company and the holders of the Debentures. The Debentures are limited in aggregate principal amount as specified in the Indenture.

Upon the occurrence and continuation of a Special Event prior to June 26, 2008, the Company shall have the right to redeem the Debentures in whole, but not in part, at any Interest Payment Date, within 120 days following the occurrence of such Special Event, at the Special Redemption Price.

In addition, the Company shall have the right to redeem the Debentures, in whole or in part, but in all cases in a principal amount with integral multiples of $1,000.00, on any Interest Payment Date on or after June 26, 2008, at the Redemption Price.

Prior to 10:00 a.m. New York City time on the Redemption Date or Special Redemption Date, as applicable, the Company will deposit with the Trustee or with one or more paying agents an amount of money sufficient to redeem on the Redemption Date or the Special Redemption Date, as applicable, all the Debentures so called for redemption at the appropriate Redemption Price or Special Redemption Price.

If all, or less than all, the Debentures are to be redeemed, the Company will give the Trustee notice not less than 45 nor more than 60 days, respectively, prior to the Redemption Date or Special Redemption Date, as applicable, as to the aggregate principal amount of Debentures to be redeemed and the Trustee shall select, in such manner as in its sole discretion it shall deem appropriate and fair, the Debentures or portions thereof (in integral multiples of $1,000.00) to be redeemed.

Notwithstanding the foregoing, any redemption of Debentures by the Company shall be subject to the receipt of any and all required regulatory approvals.

In case an Event of Default shall have occurred and be continuing, upon demand of the Trustee, the principal of all of the Debentures shall become due and payable in the manner, with the effect and subject to the conditions provided in the Indenture.

The Indenture contains provisions permitting the Company and the Trustee, with the consent of the holders of not less than a majority in aggregate principal amount of the Debentures at the time outstanding, to execute supplemental indentures for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Indenture or of any supplemental indenture or of modifying in any manner the rights of the holders of the Debentures; provided, however, that no such supplemental indenture shall without the consent of the holders of each Debenture then outstanding and affected thereby (i) change the fixed maturity of any Debenture, or reduce the principal amount thereof or any premium thereon, or reduce the rate or extend the time of payment of interest thereon, or reduce any amount payable on redemption thereof or make the principal thereof or any interest or premium thereon payable in any coin or currency other than that provided in the Debentures, or impair or affect the right of any Securityholder to institute suit for payment thereof or impair the right of repayment, if any, at the option of the holder, or (ii) reduce the aforesaid percentage of Debentures the holders of which are required to consent to any such supplemental indenture.

The Indenture also contains provisions permitting the holders of a majority in aggregate principal amount of the Debentures at the time outstanding on behalf of the holders of all of the Debentures to

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waive (or modify any previously granted waiver of) any past default or Event of Default, and its consequences, except a default (a) in the payment of principal of, premium, if any, or interest on any of the Debentures, (b) in respect of covenants or provisions hereof or of the Indenture which cannot be modified or amended without the consent of the holder of each Debenture affected, or (c) in respect of the covenants contained in Section 3.9 of the Indenture; provided, however, that if the Debentures are held by the Trust or a trustee of such trust, such waiver or modification to such waiver shall not be effective until the holders of a majority in Liquidation Amount of Trust Securities of the Trust shall have consented to such waiver or modification to such waiver, provided, further, that if the consent of the holder of each outstanding Debenture is required, such waiver shall not be effective until each holder of the Trust Securities of the Trust shall have consented to such waiver. Upon any such waiver, the default covered thereby shall be deemed to be cured for all purposes of the Indenture and the Company, the Trustee and the holders of the Debentures shall be restored to their former positions and rights hereunder, respectively; but no such waiver shall extend to any subsequent or other default or Event of Default or impair any right consequent thereon. Whenever any default or Event of Default hereunder shall have been waived as permitted by the Indenture, said default or Event of Default shall for all purposes of the Debentures and the Indenture be deemed to have been cured and to be not continuing.

No reference herein to the Indenture and no provision of this Debenture or of the Indenture shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of and premium, if any, and interest, including Additional Interest, on this Debenture at the time and place and at the rate and in the money herein prescribed.

The Company has agreed that if Debentures are initially issued to the Trust or a trustee of such Trust in connection with the issuance of Trust Securities by the Trust (regardless of whether Debentures continue to be held by such Trust) and (i) there shall have occurred and be continuing an Event of Default, (ii) the Company shall be in default with respect to its payment of any obligations under the Capital Securities Guarantee, or (iii) the Company shall have given notice of its election to defer payments of interest on the Debentures by extending the interest payment period as provided herein and such Extension Period, or any extension thereof, shall be continuing, then the Company shall not, and shall not allow any Affiliate of the Company to, (x) declare or pay any dividends or distributions on, or redeem, purchase, acquire, or make a liquidation payment with respect to, any of the Company’s capital stock or its Affiliates’ capital stock (other than payments of dividends or distributions to the Company) or make any guarantee payments with respect to the foregoing or (y) make any payment of principal of or interest or premium, if any, on or repay, repurchase or redeem any debt securities of the Company or any Affiliate that rank pari passu in all respects with or junior in interest to the Debentures (other than, with respect to clauses (x) and (y) above, (1) repurchases, redemptions or other acquisitions of shares of capital stock of the Company in connection with any employment contract, benefit plan or other similar arrangement with or for the benefit of one or more employees, officers, directors or consultants, in connection with a dividend reinvestment or stockholder stock purchase plan or in connection with the issuance of capital stock of the Company (or securities convertible into or exercisable for such capital stock) as consideration in an acquisition transaction entered into prior to the applicable Extension Period, if any, (2) as a result of any exchange or conversion of any class or series of the Company’s capital stock (or any capital stock of a subsidiary of the Company) for any class or series of the Company’s capital stock or of any class or series of the Company’s indebtedness for any class or series of the Company’s capital stock, (3) the purchase of fractional interests in shares of the Company’s capital stock pursuant to the conversion or exchange provisions of such capital stock or the security being converted or exchanged, (4) any declaration of a dividend in connection with any stockholders’ rights plan, or the issuance of rights, stock or other property under any stockholders’ rights plan, or the redemption or repurchase of rights pursuant thereto, (5) any dividend in the form of stock, warrants, options or other rights where the dividend stock or the stock issuable upon exercise of such warrants, options or other rights is the same stock as that on which the dividend is being paid or ranks pari passu with or junior to such stock and any

A-8

cash payments in lieu of fractional shares issued in connection therewith, or (6) payments under the Capital Securities Guarantee).

The Debentures are issuable only in registered, certificated form without coupons and in minimum denominations of $100,000.00 and any multiple of $1,000.00 in excess thereof. As provided in the Indenture and subject to the transfer restrictions and limitations as may be contained herein and therein from time to time, this Debenture is transferable by the holder hereof on the Debenture Register of the Company. Upon due presentment for registration of transfer of any Debenture at the Principal Office of the Trustee or at any office or agency of the Company maintained for such purpose as provided in Section 3.2 of the Indenture, the Company shall execute, the Company or the Trustee shall register and the Trustee or the Authenticating Agent shall authenticate and make available for delivery in the name of the transferee or transferees a new Debenture for a like aggregate principal amount. All Debentures presented for registration of transfer or for exchange or payment shall (if so required by the Company or the Trustee or the Authenticating Agent) be duly endorsed by, or be accompanied by a written instrument or instruments of transfer in form satisfactory to, the Company and the Trustee or the Authenticating Agent duly executed by the holder or his attorney duly authorized in writing. No service charge shall be made for any exchange or registration of transfer of Debentures, but the Company or the Trustee may require payment of a sum sufficient to cover any tax, fee or other governmental charge that may be imposed in connection therewith.

Prior to due presentment for registration of transfer of any Debenture, the Company, the Trustee, any Authenticating Agent, any paying agent, any transfer agent and any Debenture registrar may deem the Person in whose name such Debenture shall be registered upon the Debenture Register to be, and may treat him as, the absolute owner of such Debenture (whether or not such Debenture shall be overdue) for the purpose of receiving payment of or on account of the principal of, premium, if any, and interest on such Debenture and for all other purposes; and neither the Company nor the Trustee nor any Authenticating Agent nor any paying agent nor any transfer agent nor any Debenture registrar shall be affected by any notice to the contrary. All such payments so made to any holder for the time being or upon his order shall be valid, and, to the extent of the sum or sums so paid, effectual to satisfy and discharge the liability for moneys payable upon any such Debenture.

No recourse for the payment of the principal of or premium, if any, or interest on any Debenture, or for any claim based thereon or otherwise in respect thereof, and no recourse under or upon any obligation, covenant or agreement of the Company in the Indenture or in any supplemental indenture, or in any such Debenture, or because of the creation of any indebtedness represented thereby, shall be had against any incorporator, stockholder, employee, officer or director, as such, past, present or future, of the Company or of any successor Person of the Company, either directly or through the Company or any successor Person of the Company, whether by virtue of any constitution, statute or rule of law, or by the enforcement of any assessment or penalty or otherwise, it being expressly understood that all such liability is hereby expressly waived and released as a condition of, and as a consideration for, the execution of the Indenture and the issue of the Debentures.

Capitalized terms used and not defined in this Debenture shall have the meanings assigned in the Indenture dated as of the date of original issuance of this Debenture between the Trustee and the Company.

THE INDENTURE AND THE DEBENTURES SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO CONFLICT OF LAW PRINCIPLES THEREOF.

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EX-4.3(A)

Exhibit 4.3(a)

AMENDED AND RESTATED DECLARATION

OF TRUST

BY AND AMONG

U.S. BANK NATIONAL ASSOCIATION,

AS INSTITUTIONAL TRUSTEE,

SOUTHWEST COMMUNITY BANCORP

AS SPONSOR,

AND

FRANK J. MERCARDANTE, JAMES LEMERY AND

PAUL M. WEIL

AS ADMINISTRATORS,

DATED AS OF APRIL 22, 2003

TABLE OF CONTENTS

			Page
ARTICLE I INTERPRETATION AND DEFINITIONS			1
	Section 1.1.	Definitions	1
ARTICLE II ORGANIZATION			7
	Section 2.1.	Name	7
	Section 2.2.	Office	7
	Section 2.3.	Purpose	7
	Section 2.4.	Authority	7
	Section 2.5.	Title to Property of the Trust	7
	Section 2.6.	Powers and Duties of the Institutional Trustee and the Administrators	8
	Section 2.7.	Prohibition of Actions by the Trust and the Institutional Trustee	11
	Section 2.8.	Powers and Duties of the Institutional Trustee	12
	Section 2.9.	Certain Duties and Responsibilities of the Institutional Trustee and Administrators	13
	Section 2.10.	Certain Rights of Institutional Trustee	14
	Section 2.11.	Execution of Documents	16
	Section 2.12.	Not Responsible for Recitals or Issuance of Securities	16
	Section 2.13.	Duration of Trust	16
	Section 2.14.	Mergers	16
ARTICLE III SPONSOR			18
	Section 3.1.	Sponsor’s Purchase of Common Securities	18
	Section 3.2.	Responsibilities of the Sponsor	18
	Section 3.3.	Expenses	18
	Section 3.4.	Right to Proceed	19
ARTICLE IV INSTITUTIONAL TRUSTEE AND ADMINISTRATORS			19
	Section 4.1.	Institutional Trustee; Eligibility	19
	Section 4.2.	Administrators	20
	Section 4.3.	Appointment, Removal and Resignation of Institutional Trustee and Administrators	20
	Section 4.4.	Institutional Trustee Vacancies	21
	Section 4.5.	Effect of Vacancies	21
	Section 4.6.	Meetings of the Institutional Trustee and the Administrators	21
	Section 4.7.	Delegation of Power	22
	Section 4.8.	Conversion, Consolidation or Succession to Business	22
ARTICLE V DISTRIBUTIONS			22
	Section 5.1.	Distributions	22
ARTICLE VI ISSUANCE OF SECURITIES			22
	Section 6.1.	General Provisions Regarding Securities	22
	Section 6.2.	Paying Agent, Transfer Agent and Registrar	23
	Section 6.3.	Form and Dating	23
	Section 6.4.	Mutilated, Destroyed, Lost or Stolen Certificates	24
	Section 6.5.	Temporary Securities	24
	Section 6.6.	Cancellation	24

i

	Section 6.7.	Rights of Holders; Waivers of Past Defaults	24
ARTICLE VII DISSOLUTION AND TERMINATION OF TRUST			26
	Section 7.1.	Dissolution and Termination of Trust	26
ARTICLE VIII TRANSFER OF INTERESTS			27
	Section 8.1.	General	27
	Section 8.2.	Transfer Procedures and Restrictions	28
	Section 8.3.	Deemed Security Holders	29
ARTICLE IX LIMITATION OF LIABILITY OF HOLDERS OF SECURITIES, INSTITUTIONAL TRUSTEE OR OTHERS			30
	Section 9.1.	Liability	30
	Section 9.2.	Exculpation	30
	Section 9.3.	Fiduciary Duty	31
	Section 9.4.	Indemnification	31
	Section 9.5.	Outside Businesses	33
	Section 9.6.	Compensation; Fee	33
ARTICLE X ACCOUNTING			34
	Section 10.1.	Fiscal Year	34
	Section 10.2.	Certain Accounting Matters	34
	Section 10.3.	Banking	34
	Section 10.4.	Withholding	34
ARTICLE XI AMENDMENTS AND MEETINGS			35
	Section 11.1.	Amendments	35
	Section 11.2.	Meetings of the Holders of Securities; Action by Written Consent	36
ARTICLE XII REPRESENTATIONS OF INSTITUTIONAL TRUSTEE			37
	Section 12.1.	Representations and Warranties of Institutional Trustee	37
ARTICLE XIII MISCELLANEOUS			38
	Section 13.1.	Notices	38
	Section 13.2.	Governing Law	39
	Section 13.3.	Intention of the Parties	39
	Section 13.4.	Headings	39
	Section 13.5.	Successors and Assigns	39
	Section 13.6.	Partial Enforceability	39
	Section 13.7.	Counterparts	39

Annex I	Terms of Securities
Exhibit A-1	Form of Capital Security Certificate
Exhibit A-2	Form of Common Security Certificate
Exhibit B	Specimen of Initial Debenture
Exhibit C	Placement Agreement

ii

AMENDED AND RESTATED

DECLARATION OF TRUST

OF

SOUTHWEST COMMUNITY STATUTORY TRUST I

APRIL 22, 2003

AMENDED AND RESTATED DECLARATION OF TRUST (“Declaration”) dated and effective as of April 22, 2003, by the Institutional Trustee (as defined herein), the Administrators (as defined herein), the Sponsor (as defined herein) and by the holders, from time to time, of undivided beneficial interests in the Trust (as defined herein) to be issued pursuant to this Declaration;

WHEREAS, the Institutional Trustee, the Administrators and the Sponsor established Southwest Community Statutory Trust I (the “Trust”), a statutory trust under the Statutory Trust Act (as defined herein) pursuant to a Declaration of Trust dated as of April 10, 2003 (the “Original Declaration”), and a Certificate of Trust filed with the Secretary of State of the State of Connecticut on April 10, 2003, for the sole purpose of issuing and selling certain securities representing undivided beneficial interests in the assets of the Trust and investing the proceeds thereof in certain debentures of the Debenture Issuer (as defined herein);

WHEREAS, as of the date hereof, no interests in the Trust have been issued; and

WHEREAS, the Institutional Trustee, the Administrators and the Sponsor, by this Declaration, amend and restate each and every term and provision of the Original Declaration;

NOW, THEREFORE, it being the intention of the parties hereto to continue the Trust as a statutory trust under the Statutory Trust Act and that this Declaration constitutes the governing instrument of such statutory trust, the Institutional Trustee declares that all assets contributed to the Trust will be held in trust for the benefit of the holders, from time to time, of the securities representing undivided beneficial interests in the assets of the Trust issued hereunder, subject to the provisions of this Declaration. The parties hereto hereby agree as follows:

ARTICLE I

INTERPRETATION AND DEFINITIONS

SECTION 1.1 DEFINITIONS.

Unless the context otherwise requires:

(a) Capitalized terms used in this Declaration but not defined in the preamble above have the respective meanings assigned to them in this Section 1.1;

(b) a term defined anywhere in this Declaration has the same meaning throughout;

(c) all references to “the Declaration” or “this Declaration” are to this Declaration as modified, supplemented or amended from time to time;

1

(d) all references in this Declaration to Articles and Sections and Annexes and Exhibits are to Articles and Sections of and Annexes and Exhibits to this Declaration unless otherwise specified; and

(e) a reference to the singular includes the plural and vice versa.

“Additional Interest” has the meaning set forth in the Indenture.

“Administrative Action” has the meaning set forth in paragraph 4(a) of Annex I.

“Administrators” means each of Frank J. Mercardante, James Lemery and Paul M. Weil, solely in such Person’s capacity as Administrator of the Trust created and continued hereunder and not in such Person’s individual capacity, or such Administrator’s successor in interest in such capacity, or any successor appointed as herein provided.

“Affiliate” has the same meaning as given to that term in Rule 405 of the Securities Act or any successor rule thereunder.

“Authorized Officer” of a Person means any Person that is authorized to bind such Person.

“Bankruptcy Event” means, with respect to any Person:

(a) a court having jurisdiction in the premises shall enter a decree or order for relief in respect of such Person in an involuntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, or appointing a receiver, liquidator, assignee, custodian, trustee, sequestrator (or similar official) of such Person or for any substantial part of its property, or ordering the winding-up or liquidation of its affairs and such decree or order shall remain unstayed and in effect for a period of 90 consecutive days; or

(b) such Person shall commence a voluntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, shall consent to the entry of an order for relief in an involuntary case under any such law, or shall consent to the appointment of or taking possession by a receiver, liquidator, assignee, trustee, custodian, sequestrator (or other similar official) of such Person of any substantial part of its property, or shall make any general assignment for the benefit of creditors, or shall fail generally to pay its debts as they become due.

“Business Day” means any day other than Saturday, Sunday or any other day on which banking institutions in New York City or Hartford, Connecticut are permitted or required by any applicable law to close.

“Capital Securities” has the meaning set forth in paragraph 1(a) of Annex I.

“Capital Security Certificate” means a definitive Certificate in fully registered form representing a Capital Security substantially in the form of Exhibit A-1.

“Capital Treatment Event” has the meaning set forth in paragraph 4(a) of Annex I.

“Certificate” means any certificate evidencing Securities.

“Closing Date” has the meaning set forth in the Placement Agreement.

“Code” means the Internal Revenue Code of 1986, as amended from time to time, or any successor legislation.

2

“Common Securities” has the meaning set forth in paragraph 1(b) of Annex I.

“Common Security Certificate” means a definitive Certificate in fully registered form representing a Common Security substantially in the form of Exhibit A-2.

“Company Indemnified Person” means (a) any Administrator; (b) any Affiliate of any Administrator; (c) any officers, directors, shareholders, members, partners, employees, representatives or agents of any Administrator; or (d) any officer, employee or agent of the Trust or its Affiliates.

“Corporate Trust Office” means the office of the Institutional Trustee at which the corporate trust business of the Institutional Trustee shall, at any particular time, be principally administered, which office at the date of execution of this Declaration is located at 225 Asylum Street, Goodwin Square, Hartford, Connecticut 06103.

“Coupon Rate” has the meaning set forth in paragraph 2(a) of Annex I.

“Covered Person” means: (a) any Administrator, officer, director, shareholder, partner, member, representative, employee or agent of (i) the Trust or (ii) any of the Trust’s Affiliates; and (b) any Holder of Securities.

“Creditor” has the meaning set forth in Section 3.3.

“Debenture Issuer” means Southwest Community Bancorp, a California corporation, in its capacity as issuer of the Debentures under the Indenture.

“Debenture Trustee” means U.S. Bank National Association, as trustee under the Indenture until a successor is appointed thereunder, and thereafter means such successor trustee.

“Debentures” means the Floating Rate Junior Subordinated Deferrable Interest Debentures due 2033 to be issued by the Debenture Issuer under the Indenture.

“Defaulted Interest” has the meaning set forth in the Indenture.

“Determination Date” has the meaning set forth in paragraph 4(a) of Annex I.

“Direct Action” has the meaning set forth in Section 2.8(d).

“Distribution” means a distribution payable to Holders of Securities in accordance with Section 5.1.

“Distribution Payment Date” has the meaning set forth in paragraph 2(b) of Annex I.

“Distribution Period” has the meaning set forth in paragraph 2(a) of Annex I.

“Distribution Rate” means, for the period beginning on (and including) the date of original issuance and ending on (but excluding) September 26, 2003, the rate per annum of 4.47%, and for the period beginning on (and including) September 26, 2003, and thereafter, the Coupon Rate.

“Event of Default” means any one of the following events (whatever the reason for such event and whether it shall be voluntary or involuntary or be effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body):

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(a) the occurrence of an Indenture Event of Default; or

(b) default by the Trust in the payment of any Redemption Price or Special Redemption Price of any Security when it becomes due and payable; or

(c) default in the performance, or breach, in any material respect, of any covenant or warranty of the Institutional Trustee in this Declaration (other than those specified in clause (a) or (b) above) and continuation of such default or breach for a period of 60 days after there has been given, by registered or certified mail to the Institutional Trustee and to the Sponsor by the Holders of at least 25% in aggregate liquidation amount of the outstanding Capital Securities, a written notice specifying such default or breach and requiring it to be remedied and stating that such notice is a “Notice of Default” hereunder; or

(d) the occurrence of a Bankruptcy Event with respect to the Institutional Trustee if a successor Institutional Trustee has not been appointed within 90 days thereof.

“Extension Period” has the meaning set forth in paragraph 2(b) of Annex I.

“Federal Reserve” has the meaning set forth in paragraph 3 of Annex I.

“Fiduciary Indemnified Person” shall mean the Institutional Trustee, any Affiliate of the Institutional Trustee and any officers, directors, shareholders, members, partners, employees, representatives, custodians, nominees or agents of the Institutional Trustee.

“Fiscal Year” has the meaning set forth in Section 10.1.

“Guarantee” means the guarantee agreement to be dated as of the Closing Date, of the Sponsor in respect of the Capital Securities.

“Holder” means a Person in whose name a Certificate representing a Security is registered, such Person being a beneficial owner within the meaning of the Statutory Trust Act.

“Indemnified Person” means a Company Indemnified Person or a Fiduciary Indemnified Person.

“Indenture” means the Indenture dated as of the Closing Date, between the Debenture Issuer and the Debenture Trustee, and any indenture supplemental thereto pursuant to which the Debentures are to be issued, as such Indenture and any supplemental indenture may be amended, supplemented or otherwise modified from time to time.

“Indenture Event of Default” means an “Event of Default” as defined in the Indenture.

“Institutional Trustee” means the Trustee meeting the eligibility requirements set forth in Section 4.1.

“Interest” means any interest due on the Debentures including any Additional Interest and Defaulted Interest.

“Investment Company” means an investment company as defined in the Investment Company Act.

“Investment Company Act” means the Investment Company Act of 1940, as amended from time to time, or any successor legislation.

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“Investment Company Event” has the meaning set forth in paragraph 4(a) of Annex I.

“Liquidation” has the meaning set forth in paragraph 3 of Annex I.

“Liquidation Distribution” has the meaning set forth in paragraph 3 of Annex I.

“Majority in liquidation amount of the Securities” means Holder(s) of outstanding Securities voting together as a single class or, as the context may require, Holders of outstanding Capital Securities or Holders of outstanding Common Securities voting separately as a class, who are the record owners of more than 50% of the aggregate liquidation amount (including the stated amount that would be paid on redemption, liquidation or otherwise, plus accrued and unpaid Distributions to the date upon which the voting percentages are determined) of all outstanding Securities of the relevant class.

“Maturity Date” has the meaning set forth in paragraph 4(a) of Annex I.

“Officers’ Certificates” means, with respect to any Person, a certificate signed by two Authorized Officers of such Person. Any Officers’ Certificate delivered with respect to compliance with a condition or covenant providing for it in this Declaration shall include:

(a) a statement that each officer signing the Certificate has read the covenant or condition and the definitions relating thereto;

(b) a brief statement of the nature and scope of the examination or investigation undertaken by each officer in rendering the Certificate;

(c) a statement that each such officer has made such examination or investigation as, in such officer’s opinion, is necessary to enable such officer to express an informed opinion as to whether or not such covenant or condition has been complied with; and

(d) a statement as to whether, in the opinion of each such officer, such condition or covenant has been complied with.

“OTS” has the meaning set forth in paragraph 3 of Annex I.

“Paying Agent” has the meaning specified in Section 6.2.

“Person” means a legal person, including any individual, corporation, estate, partnership, joint venture, association, joint stock company, limited liability company, trust, unincorporated association, or government or any agency or political subdivision thereof, or any other entity of whatever nature.

“Placement Agreement” means the Placement Agreement relating to the offering and sale of Capital Securities in the form of Exhibit C.

“Property Account” has the meaning set forth in Section 2.8(c).

“Pro Rata” has the meaning set forth in paragraph 8 of Annex I.

“Quorum” means a majority of the Administrators or, if there are only two Administrators, both of them.

“Redemption Date” has the meaning set forth in paragraph 4(a) of Annex I.

“Redemption/Distribution Notice” has the meaning set forth in paragraph 4(e) of Annex I.

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“Redemption Price” has the meaning set forth in paragraph 4(a) of Annex I.

“Registrar” has the meaning set forth in Section 6.2.

“Responsible Officer” means, with respect to the Institutional Trustee, any officer within the Corporate Trust Office of the Institutional Trustee, including any vice-president, any assistant vice-president, any assistant secretary, the treasurer, any assistant treasurer, any trust officer or other officer of the Corporate Trust Office of the Institutional Trustee customarily performing functions similar to those performed by any of the above designated officers and also means, with respect to a particular corporate trust matter, any other officer to whom such matter is referred because of that officer’s knowledge of and familiarity with the particular subject.

“Restricted Securities Legend” has the meaning set forth in Section 8.2(b).

“Rule 3a-5” means Rule 3a-5 under the Investment Company Act.

“Rule 3a-7” means Rule 3a-7 under the Investment Company Act.

“Securities” means the Common Securities and the Capital Securities.

“Securities Act” means the Securities Act of 1933, as amended from time to time, or any successor legislation.

“Special Event” has the meaning set forth in paragraph 4(a) of Annex I.

“Special Redemption Date” has the meaning set forth in paragraph 4(a) of Annex I.

“Special Redemption Price” has the meaning set forth in paragraph 4(a) of Annex I.

“Sponsor” means Southwest Community Bancorp, a California corporation, or any successor entity in a merger, consolidation or amalgamation, in its capacity as sponsor of the Trust.

“Statutory Trust Act” means Chapter 615 of Title 34 of the Connecticut General Statutes, Sections 500, et seq. as may be amended from time to time.

“Successor Entity” has the meaning set forth in Section 2.14(b).

“Successor Institutional Trustee” has the meaning set forth in Section 4.3(a).

“Successor Securities” has the meaning set forth in Section 2.14(b).

“Super Majority” has the meaning set forth in paragraph 5(b) of Annex I.

“Tax Event” has the meaning set forth in paragraph 4(a) of Annex I.

“10% in liquidation amount of the Securities” means Holder(s) of outstanding Securities voting together as a single class or, as the context may require, Holders of outstanding Capital Securities or Holders of outstanding Common Securities voting separately as a class, who are the record owners of 10% or more of the aggregate liquidation amount (including the stated amount that would be paid on redemption, liquidation or otherwise, plus accrued and unpaid Distributions to the date upon which the voting percentages are determined) of all outstanding Securities of the relevant class.

“3-Month LIBOR” has the meaning set forth in paragraph 4(a) of Annex I.

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“Transfer Agent” has the meaning set forth in Section 6.2.

“Treasury Regulations” means the income tax regulations, including temporary and proposed regulations, promulgated under the Code by the United States Treasury, as such regulations may be amended from time to time (including corresponding provisions of succeeding regulations).

“Trust Property” means (a) the Debentures, (b) any cash on deposit in, or owing to, the Property Account and (c) all proceeds and rights in respect of the foregoing and any other property and assets for the time being held or deemed to be held by the Institutional Trustee pursuant to the trusts of this Declaration.

“U.S. Person” means a United States Person as defined in Section 7701(a)(30) of the Code.

ARTICLE II

ORGANIZATION

SECTION 2.1. NAME. The Trust is named “Southwest Community Statutory Trust I,” as such name may be modified from time to time by the Administrators following written notice to the Holders of the Securities. The Trust’s activities may be conducted under the name of the Trust or any other name deemed advisable by the Administrators.

SECTION 2.2. OFFICE. The address of the principal office of the Trust is c/o U.S. Bank National Association, 225 Asylum Street, Goodwin Square, Hartford, Connecticut 06103. On at least 10 Business Days written notice to the Holders of the Securities, the Administrators may designate another principal office, which shall be in a state of the United States or in the District of Columbia.

SECTION 2.3. PURPOSE. The exclusive purposes and functions of the Trust are (a) to issue and sell the Securities representing undivided beneficial interests in the assets of the Trust, (b) to invest the gross proceeds from such sale to acquire the Debentures, (c) to facilitate direct investment in the assets of the Trust through issuance of the Common Securities and the Capital Securities and (d) except as otherwise limited herein, to engage in only those other activities necessary or incidental thereto. The Trust shall not borrow money, issue debt or reinvest proceeds derived from investments, pledge any of its assets, or otherwise undertake (or permit to be undertaken) any activity that would cause the Trust not to be classified for United States federal income tax purposes as a grantor trust.

SECTION 2.4. AUTHORITY. Except as specifically provided in this Declaration, the Institutional Trustee shall have exclusive and complete authority to carry out the purposes of the Trust. An action taken by the Institutional Trustee in accordance with its powers shall constitute the act of and serve to bind the Trust. In dealing with the Institutional Trustee acting on behalf of the Trust, no Person shall be required to inquire into the authority of the Institutional Trustee to bind the Trust. Persons dealing with the Trust are entitled to rely conclusively on the power and authority of the Institutional Trustee as set forth in this Declaration. The Administrators shall have only those ministerial duties set forth herein with respect to accomplishing the purposes of the Trust and are not intended to be trustees or fiduciaries with respect to the Trust or the Holders. The Institutional Trustee shall have the right, but shall not be obligated except as provided in Section 2.6, to perform those duties assigned to the Administrators.

SECTION 2.5. TITLE TO PROPERTY OF THE TRUST. Except as provided in Section 2.8 with respect to the Debentures and the Property Account or as otherwise provided in this Declaration, legal title to all assets of the Trust shall be vested in the Trust. The Holders shall not have legal title to any part of the assets of the Trust, but shall have an undivided beneficial interest in the assets of the Trust.

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SECTION 2.6. POWERS AND DUTIES OF THE INSTITUTIONAL TRUSTEE AND THE ADMINISTRATORS.

(a) The Institutional Trustee and the Administrators shall conduct the affairs of the Trust in accordance with the terms of this Declaration. Subject to the limitations set forth in paragraph (b) of this Section, and in accordance with the following provisions (i) and (ii), the Institutional Trustee and the Administrators shall have the authority to enter into all transactions and agreements determined by the Institutional Trustee to be appropriate in exercising the authority, express or implied, otherwise granted to the Institutional Trustee or the Administrators, as the case may be, under this Declaration, and to perform all acts in furtherance thereof, including without limitation, the following:

(i) Each Administrator shall have the power and authority to act on behalf of the Trust with respect to the following matters:

(A) the issuance and sale of the Securities;

(B) to cause the Trust to enter into, and to execute and deliver on behalf of the Trust, such agreements as may be necessary or desirable in connection with the purposes and function of the Trust, including agreements with the Paying Agent;

(C) ensuring compliance with the Securities Act, applicable state securities or blue sky laws;

(D) the sending of notices (other than notices of default), and other information regarding the Securities and the Debentures to the Holders in accordance with this Declaration;

(E) the consent to the appointment of a Paying Agent, Transfer Agent and Registrar in accordance with this Declaration, which consent shall not be unreasonably withheld or delayed;

(F) execution and delivery of the Securities in accordance with this Declaration;

(G) execution and delivery of closing certificates pursuant to the Placement Agreement and the application for a taxpayer identification number;

(H) unless otherwise determined by the Holders of a Majority in liquidation amount of the Securities or as otherwise required by the Statutory Trust Act, to execute on behalf of the Trust (either acting alone or together with any or all of the Administrators) any documents that the Administrators have the power to execute pursuant to this Declaration;

(I) the taking of any action incidental to the foregoing as the Institutional Trustee may from time to time determine is necessary or advisable to give effect to the terms of this Declaration for the benefit of the Holders (without consideration of the effect of any such action on any particular Holder);

(J) to establish a record date with respect to all actions to be taken hereunder that require a record date be established, including Distributions, voting rights, redemptions and exchanges, and to issue relevant notices to the Holders of Capital Securities and Holders of Common Securities as to such actions and applicable record dates; and

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(K) to duly prepare and file all applicable tax returns and tax information reports that are required to be filed with respect to the Trust on behalf of the Trust.

(ii) As among the Institutional Trustee and the Administrators, the Institutional Trustee shall have the power, duty and authority to act on behalf of the Trust with respect to the following matters:

(A) the establishment of the Property Account;

(B) the receipt of the Debentures;

(C) the collection of interest, principal and any other payments made in respect of the Debentures in the Property Account;

(D) the distribution through the Paying Agent of amounts owed to the Holders in respect of the Securities;

(E) the exercise of all of the rights, powers and privileges of a holder of the Debentures;

(F) the sending of notices of default and other information regarding the Securities and the Debentures to the Holders in accordance with this Declaration;

(G) the distribution of the Trust Property in accordance with the terms of this Declaration;

(H) to the extent provided in this Declaration, the winding up of the affairs of and liquidation of the Trust and the preparation, execution and filing of the certificate of cancellation with the Secretary of State of the State of Connecticut;

(I) after any Event of Default (provided that such Event of Default is not by or with respect to the Institutional Trustee) the taking of any action incidental to the foregoing as the Institutional Trustee may from time to time determine is necessary or advisable to give effect to the terms of this Declaration and protect and conserve the Trust Property for the benefit of the Holders (without consideration of the effect of any such action on any particular Holder); and

(J) to take all action that may be necessary for the preservation and the continuation of the Trust’s valid existence, rights, franchises and privileges as a statutory trust under the laws of the State of Connecticut and of each other jurisdiction in which such existence is necessary to protect the limited liability of the Holders of the Capital Securities or to enable the Trust to effect the purposes for which the Trust was created.

(iii) The Institutional Trustee shall have the power and authority to act on behalf of the Trust with respect to any of the duties, liabilities, powers or the authority of the Administrators set forth in Section 2.6(a)(i)(D), (E) and (F) herein but shall not have a duty to do any such act unless specifically requested to do so in writing by the Sponsor, and shall then be fully protected in acting pursuant to such written request; and in the event of a conflict between the action of the Administrators and the action of the Institutional Trustee, the action of the Institutional Trustee shall prevail.

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(b) So long as this Declaration remains in effect, the Trust (or the Institutional Trustee or Administrators acting on behalf of the Trust) shall not undertake any business, activities or transaction except as expressly provided herein or contemplated hereby. In particular, neither the Institutional Trustee nor the Administrators may cause the Trust to (i) acquire any investments or engage in any activities not authorized by this Declaration, (ii) sell, assign, transfer, exchange, mortgage, pledge, set-off or otherwise dispose of any of the Trust Property or interests therein, including to Holders, except as expressly provided herein, (iii) take any action that would reasonably be expected (x) to cause the Trust to fail or cease to qualify as a “grantor trust” for United States federal income tax purposes or (y) to require the trust to register as an Investment Company under the Investment Company Act, (iv) incur any indebtedness for borrowed money or issue any other debt or (v) take or consent to any action that would result in the placement of a lien on any of the Trust Property. The Institutional Trustee shall, at the sole cost and expense of the Trust, defend all claims and demands of all Persons at any time claiming any lien on any of the Trust Property adverse to the interest of the Trust or the Holders in their capacity as Holders.

(c) In connection with the issuance and sale of the Capital Securities, the Sponsor shall have the right and responsibility to assist the Trust with respect to, or effect on behalf of the Trust, the following (and any actions taken by the Sponsor in furtherance of the following prior to the date of this Declaration are hereby ratified and confirmed in all respects):

(i) the taking of any action necessary to obtain an exemption from the Securities Act;

(ii) the determination of the States in which to take appropriate action to qualify or register for sale all or part of the Capital Securities and the determination of any and all such acts, other than actions which must be taken by or on behalf of the Trust, and the advice to the Administrators of actions they must take on behalf of the Trust, and the preparation for execution and filing of any documents to be executed and filed by the Trust or on behalf of the Trust, as the Sponsor deems necessary or advisable in order to comply with the applicable laws of any such States in connection with the sale of the Capital Securities;

(iii) the negotiation of the terms of, and the execution and delivery of, the Placement Agreement providing for the sale of the Capital Securities; and

(iv) the taking of any other actions necessary or desirable to carry out any of the foregoing activities.

(d) Notwithstanding anything herein to the contrary, the Administrators and the Holders of a Majority in liquidation amount of the Common Securities are authorized and directed to conduct the affairs of the Trust and to operate the Trust so that the Trust will not (i) be deemed to be an Investment Company required to be registered under the Investment Company Act, and (ii) fail to be classified as a “grantor trust” for United States federal income tax purposes. The Administrators and the Holders of a Majority in liquidation amount of the Common Securities shall not take any action inconsistent with the treatment of the Debentures as indebtedness of the Debenture Issuer for United States federal income tax purposes. In this connection, the Administrators and the Holders of a Majority in liquidation amount of the Common Securities are authorized to take any action, not inconsistent with applicable laws, the Certificate of Trust or this Declaration, as amended from time to time, that each of the Administrators and the Holders of a Majority in liquidation amount of the Common Securities determines in their discretion to be necessary or desirable for such purposes.

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(e) All expenses incurred by the Administrators or the Institutional Trustee pursuant to this Section 2.6 shall be reimbursed by the Sponsor, and the Institutional Trustee and the Administrators shall have no obligations with respect to such expenses.

(f) The assets of the Trust shall consist of the Trust Property.

(g) Legal title to all Trust Property shall be vested at all times in the Institutional Trustee (in its capacity as such) and shall be held and administered by the Institutional Trustee and the Administrators for the benefit of the Trust in accordance with this Declaration.

(h) If the Institutional Trustee or any Holder has instituted any proceeding to enforce any right or remedy under this Declaration and such proceeding has been discontinued or abandoned for any reason, or has been determined adversely to the Institutional Trustee or to such Holder, then and in every such case the Sponsor, the Institutional Trustee and the Holders shall, subject to any determination in such proceeding, be restored severally and respectively to their former positions hereunder, and thereafter all rights and remedies of the Institutional Trustee and the Holders shall continue as though no such proceeding had been instituted.

SECTION 2.7. PROHIBITION OF ACTIONS BY THE TRUST AND THE INSTITUTIONAL TRUSTEE.

(a) The Trust shall not, and the Institutional Trustee shall cause the Trust not to, engage in any activity other than as required or authorized by this Declaration. In particular, the Trust shall not and the Institutional Trustee shall cause the Trust not to:

(i) invest any proceeds received by the Trust from holding the Debentures, but shall distribute all such proceeds to Holders of the Securities pursuant to the terms of this Declaration and of the Securities;

(ii) acquire any assets other than as expressly provided herein;

(iii) possess Trust Property for other than a Trust purpose;

(iv) make any loans or incur any indebtedness other than loans represented by the Debentures;

(v) possess any power or otherwise act in such a way as to vary the Trust assets or the terms of the Securities in any way whatsoever other than as expressly provided herein;

(vi) issue any securities or other evidences of beneficial ownership of, or beneficial interest in, the Trust other than the Securities;

(vii) carry on any “trade or business” as that phrase is used in the Code; or

(viii) other than as provided in this Declaration (including Annex I), (A) direct the time, method and place of exercising any trust or power conferred upon the Debenture Trustee with respect to the Debentures, (B) waive any past default that is waivable under the Indenture, (C) exercise any right to rescind or annul any declaration that the principal of all the Debentures shall be due and payable, or (D) consent to any amendment, modification or termination of the Indenture or the Debentures where such consent shall be required unless the Trust shall have received a written opinion of counsel to the effect that such modification will not cause the Trust to cease to be classified as a “grantor trust” for United States federal income tax purposes.

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SECTION 2.8. POWERS AND DUTIES OF THE INSTITUTIONAL TRUSTEE.

(a) The legal title to the Debentures shall be owned by and held of record in the name of the Institutional Trustee in trust for the benefit of the Trust and the Holders of the Securities. The right, title and interest of the Institutional Trustee to the Debentures shall vest automatically in each Person who may hereafter be appointed as Institutional Trustee in accordance with Section 4.3. Such vesting and cessation of title shall be effective whether or not conveyancing documents with regard to the Debentures have been executed and delivered.

(b) The Institutional Trustee shall not transfer its right, title and interest in the Debentures to the Administrators.

(c) The Institutional Trustee shall:

(i) establish and maintain a segregated non-interest bearing trust account (the “Property Account”) in the name of and under the exclusive control of the Institutional Trustee, and maintained in the Institutional Trustee’s trust department, on behalf of the Holders of the Securities and, upon the receipt of payments of funds made in respect of the Debentures held by the Institutional Trustee, deposit such funds into the Property Account and make payments, or cause the Paying Agent to make payments, to the Holders of the Capital Securities and Holders of the Common Securities from the Property Account in accordance with Section 5.1. Funds in the Property Account shall be held uninvested until disbursed in accordance with this Declaration;

(ii) engage in such ministerial activities as shall be necessary or appropriate to effect the redemption of the Capital Securities and the Common Securities to the extent the Debentures are redeemed or mature; and

(iii) upon written notice of distribution issued by the Administrators in accordance with the terms of the Securities, engage in such ministerial activities as shall be necessary or appropriate to effect the distribution of the Debentures to Holders of Securities upon the occurrence of certain circumstances pursuant to the terms of the Securities.

(d) The Institutional Trustee may bring or defend, pay, collect, compromise, arbitrate, resort to legal action with respect to, or otherwise adjust claims or demands of or against, the Trust which arises out of or in connection with an Event of Default of which a Responsible Officer of the Institutional Trustee has actual knowledge or arises out of the Institutional Trustee’s duties and obligations under this Declaration; provided, however, that if an Event of Default has occurred and is continuing and such event is attributable to the failure of the Debenture Issuer to pay interest or principal on the Debentures on the date such interest or principal is otherwise payable (or in the case of redemption, on the redemption date), then a Holder of the Capital Securities may directly institute a proceeding for enforcement of payment to such Holder of the principal of or interest on the Debentures having a principal amount equal to the aggregate liquidation amount of the Capital Securities of such Holder (a “Direct Action”) on or after the respective due date specified in the Debentures. In connection with such Direct Action, the rights of the Holders of the Common Securities will be subrogated to the rights of such Holder of the Capital Securities to the extent of any payment made by the Debenture Issuer to such Holder of the Capital Securities in such Direct Action; provided, however, that no Holder of the Common Securities may exercise such right of subrogation so long as an Event of Default with respect to the Capital Securities has occurred and is continuing.

(e) The Institutional Trustee shall continue to serve as a Trustee until either:

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(i) the Trust has been completely liquidated and the proceeds of the liquidation distributed to the Holders of the Securities pursuant to the terms of the Securities and this Declaration; or

(ii) a Successor Institutional Trustee has been appointed and has accepted that appointment in accordance with Section 4.3.

(f) The Institutional Trustee shall have the legal power to exercise all of the rights, powers and privileges of a Holder of the Debentures under the Indenture and, if an Event of Default occurs and is continuing, the Institutional Trustee may, for the benefit of Holders of the Securities, enforce its rights as holder of the Debentures subject to the rights of the Holders pursuant to this Declaration (including Annex I) and the terms of the Securities.

The Institutional Trustee must exercise the powers set forth in this Section 2.8 in a manner that is consistent with the purposes and functions of the Trust set out in Section 2.3, and the Institutional Trustee shall not take any action that is inconsistent with the purposes and functions of the Trust set out in Section 2.3.

SECTION 2.9. CERTAIN DUTIES AND RESPONSIBILITIES OF THE INSTITUTIONAL TRUSTEE AND ADMINISTRATORS.

(a) The Institutional Trustee, before the occurrence of any Event of Default and after the curing or waiving of all such Events of Default that may have occurred, shall undertake to perform only such duties as are specifically set forth in this Declaration and no implied covenants shall be read into this Declaration against the Institutional Trustee. In case an Event of Default has occurred (that has not been cured or waived pursuant to Section 6.7), the Institutional Trustee shall exercise such of the rights and powers vested in it by this Declaration, and use the same degree of care and skill in their exercise, as a prudent person would exercise or use under the circumstances in the conduct of his or her own affairs.

(b) The duties and responsibilities of the Institutional Trustee and the Administrators shall be as provided by this Declaration. Notwithstanding the foregoing, no provision of this Declaration shall require the Institutional Trustee or Administrators to expend or risk their own funds or otherwise incur any financial liability in the performance of any of their duties hereunder, or in the exercise of any of their rights or powers if it shall have reasonable grounds to believe that repayment of such funds or adequate protection against such risk of liability is not reasonably assured to it. Whether or not therein expressly so provided, every provision of this Declaration relating to the conduct or affecting the liability of or affording protection to the Institutional Trustee or Administrators shall be subject to the provisions of this Article. Nothing in this Declaration shall be construed to relieve an Administrator or the Institutional Trustee from liability for its own negligent act, its own negligent failure to act, or its own willful misconduct. To the extent that, at law or in equity, the Institutional Trustee or an Administrator has duties and liabilities relating to the Trust or to the Holders, the Institutional Trustee or such Administrator shall not be liable to the Trust or to any Holder for the Institutional Trustee’s or such Administrator’s good faith reliance on the provisions of this Declaration. The provisions of this Declaration, to the extent that they restrict the duties and liabilities of the Administrators or the Institutional Trustee otherwise existing at law or in equity, are agreed by the Sponsor and the Holders to replace such other duties and liabilities of the Administrators or the Institutional Trustee.

(c) All payments made by the Institutional Trustee or a Paying Agent in respect of the Securities shall be made only from the revenue and proceeds from the Trust Property and only to the extent that there shall be sufficient revenue or proceeds from the Trust Property to enable the Institutional Trustee or a Paying Agent to make payments in accordance with the terms hereof. Each Holder, by its acceptance of a Security, agrees that it will look solely to the revenue and proceeds from the Trust

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Property to the extent legally available for distribution to it as herein provided and that the Institutional Trustee and the Administrators are not personally liable to it for any amount distributable in respect of any Security or for any other liability in respect of any Security. This Section 2.9(c) does not limit the liability of the Institutional Trustee expressly set forth elsewhere in this Declaration.

(d) The Institutional Trustee shall not be liable for its own acts or omissions hereunder except as a result of its own negligent action, its own negligent failure to act, or its own willful misconduct, except that:

(i) the Institutional Trustee shall not be liable for any error of judgment made in good faith by an Authorized Officer of the Institutional Trustee, unless it shall be proved that the Institutional Trustee was negligent in ascertaining the pertinent facts;

(ii) the Institutional Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with the direction of the Holders of not less than a Majority in liquidation amount of the Capital Securities or the Common Securities, as applicable, relating to the time, method and place of conducting any proceeding for any remedy available to the Institutional Trustee, or exercising any trust or power conferred upon the Institutional Trustee under this Declaration;

(iii) the Institutional Trustee’s sole duty with respect to the custody, safekeeping and physical preservation of the Debentures and the Property Account shall be to deal with such property in a similar manner as the Institutional Trustee deals with similar property for its fiduciary accounts generally, subject to the protections and limitations on liability afforded to the Institutional Trustee under this Declaration;

(iv) the Institutional Trustee shall not be liable for any interest on any money received by it except as it may otherwise agree in writing with the Sponsor; and money held by the Institutional Trustee need not be segregated from other funds held by it except in relation to the Property Account maintained by the Institutional Trustee pursuant to Section 2.8(c)(i) and except to the extent otherwise required by law; and

(v) the Institutional Trustee shall not be responsible for monitoring the compliance by the Administrators or the Sponsor with their respective duties under this Declaration, nor shall the Institutional Trustee be liable for any default or misconduct of the Administrators or the Sponsor.

SECTION 2.10. CERTAIN RIGHTS OF INSTITUTIONAL TRUSTEE. Subject to the provisions of Section 2.9:

(a) the Institutional Trustee may conclusively rely and shall fully be protected in acting or refraining from acting in good faith upon any resolution, opinion of counsel, certificate, written representation of a Holder or transferee, certificate of auditors or any other certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, appraisal, bond, debenture, note, other evidence of indebtedness or other paper or document believed by it to be genuine and to have been signed, sent or presented by the proper party or parties;

(b) if (i) in performing its duties under this Declaration, the Institutional Trustee is required to decide between alternative courses of action, (ii) in construing any of the provisions of this Declaration, the Institutional Trustee finds the same ambiguous or inconsistent with any other provisions contained herein, or (iii) the Institutional Trustee is unsure of the application of any provision of this Declaration, then, except as to any matter as to which the Holders of Capital Securities are entitled to vote under the

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terms of this Declaration, the Institutional Trustee may deliver a notice to the Sponsor requesting the Sponsor’s written instructions as to the course of action to be taken and the Institutional Trustee shall take such action, or refrain from taking such action, as the Institutional Trustee shall be instructed in writing, in which event the Institutional Trustee shall have no liability except for its own negligence or willful misconduct;

(c) any direction or act of the Sponsor or the Administrators contemplated by this Declaration shall be sufficiently evidenced by an Officers’ Certificate;

(d) whenever in the administration of this Declaration, the Institutional Trustee shall deem it desirable that a matter be proved or established before undertaking, suffering or omitting any action hereunder, the Institutional Trustee (unless other evidence is herein specifically prescribed) may request and conclusively rely upon an Officers’ Certificate as to factual matters which, upon receipt of such request, shall be promptly delivered by the Sponsor or the Administrators;

(e) the Institutional Trustee shall have no duty to see to any recording, filing or registration of any instrument (including any financing or continuation statement or any filing under tax or securities laws) or any rerecording, refiling or reregistration thereof;

(f) the Institutional Trustee may consult with counsel of its selection (which counsel may be counsel to the Sponsor or any of its Affiliates) and the advice of such counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon and in accordance with such advice; the Institutional Trustee shall have the right at any time to seek instructions concerning the administration of this Declaration from any court of competent jurisdiction;

(g) the Institutional Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Declaration at the request or direction of any of the Holders pursuant to this Declaration, unless such Holders shall have offered to the Institutional Trustee security or indemnity reasonably satisfactory to it against the costs, expenses and liabilities which might be incurred by it in compliance with such request or direction; provided, that nothing contained in this Section 2.10(g) shall be taken to relieve the Institutional Trustee, subject to Section 2.9(b), upon the occurrence of an Event of Default (that has not been cured or waived pursuant to Section 6.7), to exercise such of the rights and powers vested in it by this Declaration, and use the same degree of care and skill in their exercise, as a prudent person would exercise or use under the circumstances in the conduct of his or her own affairs;

(h) the Institutional Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, consent, order, approval, bond, debenture, note or other evidence of indebtedness or other paper or document, unless requested in writing to do so by one or more Holders, but the Institutional Trustee may make such further inquiry or investigation into such facts or matters as it may see fit;

(i) the Institutional Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through its agents or attorneys and the Institutional Trustee shall not be responsible for any misconduct or negligence on the part of or for the supervision of, any such agent or attorney appointed with due care by it hereunder;

(j) whenever in the administration of this Declaration the Institutional Trustee shall deem it desirable to receive instructions with respect to enforcing any remedy or right or taking any other action hereunder the Institutional Trustee (i) may request instructions from the Holders of the Capital Securities which instructions may only be given by the Holders of the same proportion in liquidation amount of the Capital Securities as would be entitled to direct the Institutional Trustee under the terms of the Capital

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Securities in respect of such remedy, right or action, (ii) may refrain from enforcing such remedy or right or taking such other action until such instructions are received, and (iii) shall be fully protected in acting in accordance with such instructions;

(k) except as otherwise expressly provided in this Declaration, the Institutional Trustee shall not be under any obligation to take any action that is discretionary under the provisions of this Declaration;

(l) when the Institutional Trustee incurs expenses or renders services in connection with a Bankruptcy Event, such expenses (including the fees and expenses of its counsel) and the compensation for such services are intended to constitute expenses of administration under any bankruptcy law or law relating to creditors rights generally;

(m) the Institutional Trustee shall not be charged with knowledge of an Event of Default unless a Responsible Officer of the Institutional Trustee obtains actual knowledge of such event or the Institutional Trustee receives written notice of such event from any Holder, the Sponsor or the Debenture Trustee;

(n) any action taken by the Institutional Trustee or its agents hereunder shall bind the Trust and the Holders of the Securities, and the signature of the Institutional Trustee or its agents alone shall be sufficient and effective to perform any such action and no third party shall be required to inquire as to the authority of the Institutional Trustee to so act or as to its compliance with any of the terms and provisions of this Declaration, both of which shall be conclusively evidenced by the Institutional Trustee’s or its agent’s taking such action; and

(o) no provision of this Declaration shall be deemed to impose any duty or obligation on the Institutional Trustee to perform any act or acts or exercise any right, power, duty or obligation conferred or imposed on it, in any jurisdiction in which it shall be illegal, or in which the Institutional Trustee shall be unqualified or incompetent in accordance with applicable law, to perform any such act or acts, or to exercise any such right, power, duty or obligation. No permissive power or authority available to the Institutional Trustee shall be construed to be a duty.

SECTION 2.11. EXECUTION OF DOCUMENTS. Unless otherwise determined in writing by the Institutional Trustee, and except as otherwise required by the Statutory Trust Act, the Institutional Trustee, or any one or more of the Administrators, as the case may be, is authorized to execute on behalf of the Trust any documents that the Institutional Trustee or the Administrators, as the case may be, have the power and authority to execute pursuant to Section 2.6.

SECTION 2.12. NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF SECURITIES. The recitals contained in this Declaration and the Securities shall be taken as the statements of the Sponsor, and the Institutional Trustee does not assume any responsibility for their correctness. The Institutional Trustee makes no representations as to the value or condition of the property of the Trust or any part thereof. The Institutional Trustee makes no representations as to the validity or sufficiency of this Declaration, the Debentures or the Securities.

SECTION 2.13. DURATION OF TRUST. The Trust, unless earlier dissolved pursuant to the provisions of Article VII hereof, shall be in existence for 35 years from the Closing Date.

SECTION 2.14. MERGERS.

(a) The Trust may not consolidate, amalgamate, merge with or into, or be replaced by, or convey, transfer or lease its properties and assets substantially as an entirety to any corporation or other

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body, except as described in Section 2.14(b) and (c) and except in connection with the liquidation of the Trust and the distribution of the Debentures to Holders of Securities pursuant to Section 7.1(a)(iv) of the Declaration or Section 4 of Annex I.

(b) The Trust may, with the consent of the Institutional Trustee and without the consent of the Holders of the Capital Securities, consolidate, amalgamate, merge with or into, or be replaced by a trust organized as such under the laws of any state; provided that:

(i) if the Trust is not the surviving entity, such successor entity (the “Successor Entity”) either:

(A) expressly assumes all of the obligations of the Trust under the Securities; or

(B) substitutes for the Securities other securities having substantially the same terms as the Securities (the “Successor Securities”) so that the Successor Securities rank the same as the Securities rank with respect to Distributions and payments upon Liquidation, redemption and otherwise;

(ii) the Sponsor expressly appoints a trustee of the Successor Entity that possesses substantially the same powers and duties as the Institutional Trustee as the Holder of the Debentures;

(iii) such merger, consolidation, amalgamation or replacement does not adversely affect the rights, preferences and privileges of the Holders of the Securities (including any Successor Securities) in any material respect;

(iv) the Institutional Trustee receives written confirmation from Moody’s Investor Services, Inc. and any other nationally recognized statistical rating organization that rates securities issued by the initial purchaser of the Capital Securities that it will not reduce or withdraw the rating of any such securities because of such merger, conversion, consolidation, amalgamation or replacement;

(v) such Successor Entity has a purpose substantially identical to that of the Trust;

(vi) prior to such merger, consolidation, amalgamation or replacement, the Trust has received an opinion of a nationally recognized independent counsel to the Trust experienced in such matters to the effect that:

(A) such merger, consolidation, amalgamation or replacement does not adversely affect the rights, preferences and privileges of the Holders of the Securities (including any Successor Securities) in any material respect;

(B) following such merger, consolidation, amalgamation or replacement, neither the Trust nor the Successor Entity will be required to register as an Investment Company; and

(C) following such merger, consolidation, amalgamation or replacement, the Trust (or the Successor Entity) will continue to be classified as a “grantor trust” for United States federal income tax purposes;

(vii) the Sponsor guarantees the obligations of such Successor Entity under the Successor Securities at least to the extent provided by the Guarantee;

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(viii) the Sponsor owns 100% of the common securities of any Successor Entity; and

(ix) prior to such merger, consolidation, amalgamation or replacement, the Institutional Trustee shall have received an Officers’ Certificate of the Administrators and an opinion of counsel, each to the effect that all conditions precedent under this Section 2.14(b) to such transaction have been satisfied.

(c) Notwithstanding Section 2.14(b), the Trust shall not, except with the consent of Holders of 100% in aggregate liquidation amount of the Securities, consolidate, amalgamate, merge with or into, or be replaced by any other entity or permit any other entity to consolidate, amalgamate, merge with or into, or replace it if such consolidation, amalgamation, merger or replacement would cause the Trust or Successor Entity to be classified as other than a grantor trust for United States federal income tax purposes.

ARTICLE III

SPONSOR

SECTION 3.1. SPONSOR’S PURCHASE OF COMMON SECURITIES. On the Closing Date, the Sponsor will purchase all of the Common Securities issued by the Trust in an amount at least equal to 3% of the capital of the Trust, at the same time as the Capital Securities are sold.

SECTION 3.2. RESPONSIBILITIES OF THE SPONSOR. In connection with the issue and sale of the Capital Securities, the Sponsor shall have the exclusive right and responsibility to engage in, or direct the Administrators to engage in, the following activities:

(a) to determine the States in which to take appropriate action to qualify or register for sale all or part of the Capital Securities and to do any and all such acts, other than actions which must be taken by the Trust, and advise the Trust of actions it must take, and prepare for execution and filing any documents to be executed and filed by the Trust, as the Sponsor deems necessary or advisable in order to comply with the applicable laws of any such States; and

(b) to negotiate the terms of and/or execute on behalf of the Trust, the Placement Agreement and other related agreements providing for the sale of the Capital Securities.

SECTION 3.3. EXPENSES. In connection with the offering, sale and issuance of the Debentures to the Trust and in connection with the sale of the Securities by the Trust, the Sponsor, in its capacity as Debenture Issuer, shall:

(a) pay all reasonable costs and expenses owing to the Debenture Trustee pursuant to Section 6.6 of the Indenture;

(b) be responsible for and shall pay all debts and obligations (other than with respect to the Securities) and all costs and expenses of the Trust, the offering, sale and issuance of the Securities (including fees to the placement agents in connection therewith), the costs and expenses (including reasonable counsel fees and expenses) of the Institutional Trustee and the Administrators, the costs and expenses relating to the operation of the Trust, including, without limitation, costs and expenses of accountants, attorneys, statistical or bookkeeping services, expenses for printing and engraving and computing or accounting equipment, Paying Agents, Registrars, Transfer Agents, duplicating, travel and telephone and other telecommunications expenses and costs and expenses incurred in connection with the acquisition, financing, and disposition of Trust assets and the enforcement by the Institutional Trustee of the rights of the Holders (for purposes of clarification, this Section 3.3(b) does not contemplate the

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payment by the Sponsor of acceptance or annual administration fees owing to the Institutional Trustee pursuant to the services to be provided by the Institutional Trustee under this Declaration or the fees and expenses of the Institutional Trustee’s counsel in connection with the closing of the transactions contemplated by this Declaration); and

(c) pay any and all taxes (other than United States withholding taxes attributable to the Trust or its assets) and all liabilities, costs and expenses with respect to such taxes of the Trust.

The Sponsor’s obligations under this Section 3.3 shall be for the benefit of, and shall be enforceable by, any Person to whom such debts, obligations, costs, expenses and taxes are owed (a “Creditor”) whether or not such Creditor has received notice hereof. Any such Creditor may enforce the Sponsor’s obligations under this Section 3.3 directly against the Sponsor and the Sponsor irrevocably waives any right or remedy to require that any such Creditor take any action against the Trust or any other Person before proceeding against the Sponsor. The Sponsor agrees to execute such additional agreements as may be necessary or desirable in order to give full effect to the provisions of this Section 3.3.

SECTION 3.4. RIGHT TO PROCEED. The Sponsor acknowledges the rights of Holders to institute a Direct Action as set forth in Section 2.8(d) hereto.

ARTICLE IV

INSTITUTIONAL TRUSTEE AND ADMINISTRATORS

SECTION 4.1. INSTITUTIONAL TRUSTEE; ELIGIBILITY.

(a) There shall at all times be one Institutional Trustee which shall:

(i) not be an Affiliate of the Sponsor;

(ii) not offer or provide credit or credit enhancement to the Trust; and

(iii) be a banking corporation or trust company organized and doing business under the laws of the United States of America or any state thereof or the District of Columbia, authorized under such laws to exercise corporate trust powers, having a combined capital and surplus of at least 50 million U.S. dollars ($50,000,000.00), and subject to supervision or examination by Federal, state, or District of Columbia authority. If such corporation publishes reports of condition at least annually, pursuant to law or to the requirements of the supervising or examining authority referred to above, then for the purposes of this Section 4.1(a)(iii), the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published.

(b) If at any time the Institutional Trustee shall cease to be eligible to so act under Section 4.1(a), the Institutional Trustee shall immediately resign in the manner and with the effect set forth in Section 4.3(a).

(c) If the Institutional Trustee has or shall acquire any “conflicting interest” within the meaning of Section 310(b) of the Trust Indenture Act of 1939, as amended, the Institutional Trustee shall either eliminate such interest or resign, to the extent and in the manner provided by, and subject to this Declaration.

(d) The initial Institutional Trustee shall be U.S. Bank National Association.

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SECTION 4.2. ADMINISTRATORS. Each Administrator shall be a U.S. Person, 21 years of age or older and authorized to bind the Sponsor. The initial Administrators shall be Frank J. Mercardante, James Lemery and Paul M. Weil. There shall at all times be at least one Administrator. Except where a requirement for action by a specific number of Administrators is expressly set forth in this Declaration and except with respect to any action the taking of which is the subject of a meeting of the Administrators, any action required or permitted to be taken by the Administrators may be taken by, and any power of the Administrators may be exercised by, or with the consent of, any one such Administrator.

SECTION 4.3. APPOINTMENT, REMOVAL AND RESIGNATION OF INSTITUTIONAL TRUSTEE AND ADMINISTRATORS.

(a) Notwithstanding anything to the contrary in this Declaration, no resignation or removal of the Institutional Trustee and no appointment of a Successor Institutional Trustee pursuant to this Article shall become effective until the acceptance of appointment by the Successor Institutional Trustee in accordance with the applicable requirements of this Section 4.3.

Subject to the immediately preceding paragraph, the Institutional Trustee may resign at any time by giving written notice thereof to the Holders of the Securities and by appointing a Successor Institutional Trustee. Upon the resignation of the Institutional Trustee, the Institutional Trustee shall appoint a successor by requesting from at least three Persons meeting the eligibility requirements, its expenses and charges to serve as the successor Institutional Trustee on a form provided by the Administrators, and selecting the Person who agrees to the lowest expense and charges (the “Successor Institutional Trustee”). If the instrument of acceptance by the Successor Institutional Trustee required by this Section 4.3 shall not have been delivered to the Institutional Trustee within 60 days after the giving of such notice of resignation or delivery of the instrument of removal, the Institutional Trustee may petition, at the expense of the Trust, any Federal, state or District of Columbia court of competent jurisdiction for the appointment of a Successor Institutional Trustee. Such court may thereupon, after prescribing such notice, if any, as it may deem proper, appoint a Successor Institutional Trustee. The Institutional Trustee shall have no liability for the selection of such successor pursuant to this Section 4.3.

The Institutional Trustee may be removed by the act of the Holders of a Majority in liquidation amount of the Capital Securities, delivered to the Institutional Trustee (in its individual capacity and on behalf of the Trust) if an Event of Default shall have occurred and be continuing. If the Institutional Trustee shall be so removed, the Holders of Capital Securities, by act of the Holders of a Majority in liquidation amount of the Capital Securities then outstanding delivered to the Institutional Trustee, shall promptly appoint a Successor Institutional Trustee, and such Successor Institutional Trustee shall comply with the applicable requirements of this Section 4.3. If no Successor Institutional Trustee shall have been so appointed by the Holders of a Majority in liquidation amount of the Capital Securities and accepted appointment in the manner required by this Section 4.3, within 30 days after delivery of an instrument of removal, any Holder who has been a Holder of the Securities for at least 6 months may, on behalf of himself and all others similarly situated, petition any Federal, state or District of Columbia court of competent jurisdiction for the appointment of the Successor Institutional Trustee. Such court may thereupon, after prescribing such notice, if any, as it may deem proper, appoint a Successor Institutional Trustee.

The Institutional Trustee shall give notice of its resignation and removal and each appointment of a Successor Institutional Trustee to all Holders in the manner provided in Section 13.1(d) and shall give notice to the Sponsor. Each notice shall include the name of the Successor Institutional Trustee and the address of its Corporate Trust Office.

(b) In case of the appointment hereunder of a Successor Institutional Trustee, the retiring Institutional Trustee and the Successor Institutional Trustee shall execute and deliver an amendment

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hereto wherein the Successor Institutional Trustee shall accept such appointment and which (i) shall contain such provisions as shall be necessary or desirable to transfer and confirm to, and to vest in, the Successor Institutional Trustee all the rights, powers, trusts and duties of the retiring Institutional Trustee with respect to the Securities and the Trust and (ii) shall add to or change any of the provisions of this Declaration as shall be necessary to provide for or facilitate the administration of the Trust by more than one Institutional Trustee, it being understood that nothing herein or in such amendment shall constitute such Institutional Trustees co-trustees and upon the execution and delivery of such amendment the resignation or removal of the retiring Institutional Trustee shall become effective to the extent provided therein and each Successor Institutional Trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, trusts and duties of the retiring Institutional Trustee; but, on request of the Trust or any Successor Institutional Trustee such retiring Institutional Trustee shall duly assign, transfer and deliver to such Successor Institutional Trustee all Trust Property, all proceeds thereof and money held by such retiring Institutional Trustee hereunder with respect to the Securities and the Trust.

(c) No Institutional Trustee shall be liable for the acts or omissions to act of any Successor Institutional Trustee.

(d) The Holders of the Capital Securities will have no right to vote to appoint, remove or replace the Administrators, which voting rights are vested exclusively in the Holder of the Common Securities.

SECTION 4.4. INSTITUTIONAL TRUSTEE VACANCIES. If the Institutional Trustee ceases to hold office for any reason a vacancy shall occur. A resolution certifying the existence of such vacancy by the Institutional Trustee shall be conclusive evidence of the existence of such vacancy. The vacancy shall be filled with a trustee appointed in accordance with Section 4.3.

SECTION 4.5. EFFECT OF VACANCIES. The death, resignation, retirement, removal, bankruptcy, dissolution, liquidation, incompetence or incapacity to perform the duties of the Institutional Trustee shall not operate to dissolve, terminate or annul the Trust or terminate this Declaration.

SECTION 4.6. MEETINGS OF THE INSTITUTIONAL TRUSTEE AND THE ADMINISTRATORS. Meetings of the Administrators shall be held from time to time upon the call of an Administrator. Regular meetings of the Administrators may be held in person in the United States or by telephone, at a place (if applicable) and time fixed by resolution of the Administrators. Notice of any in-person meetings of the Institutional Trustee with the Administrators or meetings of the Administrators shall be hand delivered or otherwise delivered in writing (including by facsimile, with a hard copy by overnight courier) not less than 48 hours before such meeting. Notice of any telephonic meetings of the Institutional Trustee with the Administrators or meetings of the Administrators or any committee thereof shall be hand delivered or otherwise delivered in writing (including by facsimile, with a hard copy by overnight courier) not less than 24 hours before a meeting. Notices shall contain a brief statement of the time, place and anticipated purposes of the meeting. The presence (whether in person or by telephone) of the Institutional Trustee or an Administrator, as the case may be, at a meeting shall constitute a waiver of notice of such meeting except where the Institutional Trustee or an Administrator, as the case may be, attends a meeting for the express purpose of objecting to the transaction of any activity on the grounds that the meeting has not been lawfully called or convened. Unless provided otherwise in this Declaration, any action of the Institutional Trustee or the Administrators, as the case may be, may be taken at a meeting by vote of the Institutional Trustee or a majority vote of the Administrators present (whether in person or by telephone) and eligible to vote with respect to such matter, provided that a Quorum is present, or without a meeting by the unanimous written consent of the Institutional Trustee or the Administrators. Meetings of the

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Institutional Trustee and the Administrators together shall be held from time to time upon the call of the Institutional Trustee or an Administrator.

SECTION 4.7. DELEGATION OF POWER.

(a) Any Administrator may, by power of attorney consistent with applicable law, delegate to any other natural person over the age of 21 that is a U.S. Person his or her power for the purpose of executing any documents contemplated in Section 2.6; and

(b) the Administrators shall have power to delegate from time to time to such of their number the doing of such things and the execution of such instruments either in the name of the Trust or the names of the Administrators or otherwise as the Administrators may deem expedient, to the extent such delegation is not prohibited by applicable law or contrary to the provisions of the Trust, as set forth herein.

SECTION 4.8. CONVERSION, CONSOLIDATION OR SUCCESSION TO BUSINESS. Any Person into which the Institutional Trustee may be merged or converted or with which it may be consolidated, or any Person resulting from any merger, conversion or consolidation to which the Institutional Trustee shall be a party, or any Person succeeding to all or substantially all the corporate trust business of the Institutional Trustee shall be the successor of the Institutional Trustee hereunder, provided such Person shall be otherwise qualified and eligible under this Article, without the execution or filing of any paper or any further act on the part of any of the parties hereto.

ARTICLE V

DISTRIBUTIONS

SECTION 5.1. DISTRIBUTIONS. Holders shall receive Distributions in accordance with the applicable terms of the relevant Holder’s Securities. Distributions shall be made on the Capital Securities and the Common Securities in accordance with the preferences set forth in their respective terms. If and to the extent that the Debenture Issuer makes a payment of Interest or any principal on the Debentures held by the Institutional Trustee, the Institutional Trustee shall and is directed, to the extent funds are available for that purpose, to make a distribution (a “Distribution”) of such amounts to Holders.

ARTICLE VI

ISSUANCE OF SECURITIES

SECTION 6.1. GENERAL PROVISIONS REGARDING SECURITIES.

(a) The Administrators shall, on behalf of the Trust, issue one series of capital securities substantially in the form of Exhibit A-1 representing undivided beneficial interests in the assets of the Trust having such terms as are set forth in Annex I and one series of common securities representing undivided beneficial interests in the assets of the Trust having such terms as are set forth in Annex I. The Trust shall issue no securities or other interests in the assets of the Trust other than the Capital Securities and the Common Securities. The Capital Securities rank pari passu to, and payment thereon shall be made Pro Rata with, the Common Securities except that, where an Event of Default has occurred and is continuing, the rights of Holders of the Common Securities to payment in respect of Distributions and payments upon liquidation, redemption and otherwise are subordinated to the rights to payment of the Holders of the Capital Securities as set forth in Annex I.

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(b) The Certificates shall be signed on behalf of the Trust by one or more Administrators. Such signature shall be the facsimile or manual signature of any Administrator. In case any Administrator of the Trust who shall have signed any of the Securities shall cease to be such Administrator before the Certificates so signed shall be delivered by the Trust, such Certificates nevertheless may be delivered as though the person who signed such Certificates had not ceased to be such Administrator, and any Certificate may be signed on behalf of the Trust by such persons who, at the actual date of execution of such Security, shall be an Administrator of the Trust, although at the date of the execution and delivery of the Declaration any such person was not such an Administrator. A Capital Security shall not be valid until authenticated by the facsimile or manual signature of an Authorized Officer of the Institutional Trustee. Such signature shall be conclusive evidence that the Capital Security has been authenticated under this Declaration. Upon written order of the Trust signed by one Administrator, the Institutional Trustee shall authenticate the Capital Securities for original issue. The Institutional Trustee may appoint an authenticating agent that is a U.S. Person acceptable to the Trust to authenticate the Capital Securities. A Common Security need not be so authenticated.

(c) The consideration received by the Trust for the issuance of the Securities shall constitute a contribution to the capital of the Trust and shall not constitute a loan to the Trust. (d) Upon issuance of the Securities as provided in this Declaration, the Securities so issued shall be deemed to be validly issued, fully paid and, except as provided in Section 9.1(b) with respect to the Common Securities, non-assessable.

(e) Every Person, by virtue of having become a Holder in accordance with the terms of this Declaration, shall be deemed to have expressly assented and agreed to the terms of, and shall be bound by, this Declaration and the Guarantee.

SECTION 6.2. PAYING AGENT, TRANSFER AGENT AND REGISTRAR. The Trust shall maintain in Hartford, Connecticut, an office or agency where the Capital Securities may be presented for payment (“Paying Agent”), and an office or agency where Securities may be presented for registration of transfer or exchange (the “Transfer Agent”). The Trust shall keep or cause to be kept at such office or agency a register for the purpose of registering Securities, transfers and exchanges of Securities, such register to be held by a registrar (the “Registrar”). The Administrators may appoint the Paying Agent, the Registrar and the Transfer Agent and may appoint one or more additional Paying Agents or one or more co-Registrars, or one or more co-Transfer Agents in such other locations as it shall determine. The term “Paying Agent” includes any additional paying agent, the term “Registrar” includes any additional registrar or co-Registrar and the term “Transfer Agent” includes any additional transfer agent. The Administrators may change any Paying Agent, Transfer Agent or Registrar at any time without prior notice to any Holder. The Administrators shall notify the Institutional Trustee of the name and address of any Paying Agent, Transfer Agent and Registrar not a party to this Declaration. The Administrators hereby initially appoint the Institutional Trustee to act as Paying Agent, Transfer Agent and Registrar for the Capital Securities and the Common Securities. The Institutional Trustee or any of its Affiliates in the United States may act as Paying Agent, Transfer Agent or Registrar.

SECTION 6.3. FORM AND DATING. The Capital Securities and the Institutional Trustee’s certificate of authentication thereon shall be substantially in the form of Exhibit A-1, and the Common Securities shall be substantially in the form of Exhibit A-2, each of which is hereby incorporated in and expressly made a part of this Declaration. Certificates may be typed, printed, lithographed or engraved or may be produced in any other manner as is reasonably acceptable to the Administrators, as conclusively evidenced by their execution thereof. The Securities may have letters, numbers, notations or other marks of identification or designation and such legends or endorsements required by law, stock exchange rule, agreements to which the Trust is subject if any, or usage (provided that any such notation, legend or

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endorsement is in a form acceptable to the Sponsor). The Trust at the direction of the Sponsor shall furnish any such legend not contained in Exhibit A-1 to the Institutional Trustee in writing. Each Capital Security shall be dated on or before the date of its authentication. The terms and provisions of the Securities set forth in Annex I and the forms of Securities set forth in Exhibits A-1 and A-2 are part of the terms of this Declaration and to the extent applicable, the Institutional Trustee, the Administrators and the Sponsor, by their execution and delivery of this Declaration, expressly agree to such terms and provisions and to be bound thereby. Capital Securities will be issued only in blocks having a stated liquidation amount of not less than $100,000.00 and any multiple of $1,000.00 in excess thereof.

The Capital Securities are being offered and sold by the Trust pursuant to the Placement Agreement in definitive, registered form without coupons and with the Restricted Securities Legend.

SECTION 6.4. MUTILATED, DESTROYED, LOST OR STOLEN CERTIFICATES.

If:

(a) any mutilated Certificates should be surrendered to the Registrar, or if the Registrar shall receive evidence to its satisfaction of the destruction, loss or theft of any Certificate; and

(b) there shall be delivered to the Registrar, the Administrators and the Institutional Trustee such security or indemnity as may be required by them to keep each of them harmless;

then, in the absence of notice that such Certificate shall have been acquired by a protected purchaser, an Administrator on behalf of the Trust shall execute (and in the case of a Capital Security Certificate, the Institutional Trustee shall authenticate) and deliver, in exchange for or in lieu of any such mutilated, destroyed, lost or stolen Certificate, a new Certificate of like denomination. In connection with the issuance of any new Certificate under this Section 6.4, the Registrar or the Administrators may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection therewith. Any duplicate Certificate issued pursuant to this Section shall constitute conclusive evidence of an ownership interest in the relevant Securities, as if originally issued, whether or not the lost, stolen or destroyed Certificate shall be found at any time.

SECTION 6.5. TEMPORARY SECURITIES. Until definitive Securities are ready for delivery, the Administrators may prepare and, in the case of the Capital Securities, the Institutional Trustee shall authenticate, temporary Securities. Temporary Securities shall be substantially in the form of definitive Securities but may have variations that the Administrators consider appropriate for temporary Securities. Without unreasonable delay, the Administrators shall prepare and, in the case of the Capital Securities, the Institutional Trustee shall authenticate, definitive Securities in exchange for temporary Securities.

SECTION 6.6. CANCELLATION. The Administrators at any time may deliver Securities to the Institutional Trustee for cancellation. The Registrar shall forward to the Institutional Trustee any Securities surrendered to it for registration of transfer, redemption or payment. The Institutional Trustee shall promptly cancel all Securities surrendered for registration of transfer, payment, replacement or cancellation and shall dispose of such canceled Securities as the Administrators direct. The Administrators may not issue new Securities to replace Securities that have been paid or that have been delivered to the Institutional Trustee for cancellation.

SECTION 6.7. RIGHTS OF HOLDERS; WAIVERS OF PAST DEFAULTS.

(a) The legal title to the Trust Property is vested exclusively in the Institutional Trustee (in its capacity as such) in accordance with Section 2.5, and the Holders shall not have any right or title therein other than the undivided beneficial interest in the assets of the Trust conferred by their Securities

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and they shall have no right to call for any partition or division of property, profits or rights of the Trust except as described below. The Securities shall be personal property giving only the rights specifically set forth therein and in this Declaration. The Securities shall have no preemptive or similar rights.

(b) For so long as any Capital Securities remain outstanding, if upon an Indenture Event of Default, the Debenture Trustee fails or the holders of not less than 25% in principal amount of the outstanding Debentures fail to declare the principal of all of the Debentures to be immediately due and payable, the Holders of a Majority in liquidation amount of the Capital Securities then outstanding shall have the right to make such declaration by a notice in writing to the Institutional Trustee, the Sponsor and the Debenture Trustee.

At any time after a declaration of acceleration with respect to the Debentures has been made and before a judgment or decree for payment of the money due has been obtained by the Debenture Trustee as provided in the Indenture, if the Institutional Trustee, subject to the provisions hereof, fails to annul any such declaration and waive such default, the Holders of a Majority in liquidation amount of the Capital Securities, by written notice to the Institutional Trustee, the Sponsor and the Debenture Trustee, may rescind and annul such declaration and its consequences if:

(i) the Debenture Issuer has paid or deposited with the Debenture Trustee a sum sufficient to pay

(A) all overdue installments of interest on all of the Debentures,

(B) any accrued Additional Interest on all of the Debentures,

(C) the principal of (and premium, if any, on) any Debentures that have become due otherwise than by such declaration of acceleration and interest and Additional Interest thereon at the rate borne by the Debentures, and

(D) all sums paid or advanced by the Debenture Trustee under the Indenture and the reasonable compensation, expenses, disbursements and advances of the Debenture Trustee and the Institutional Trustee, their agents and counsel; and

(ii) all Events of Default with respect to the Debentures, other than the non-payment of the principal of the Debentures that has become due solely by such acceleration, have been cured or waived as provided in Section 5.7 of the Indenture.

The Holders of at least a Majority in liquidation amount of the Capital Securities may, on behalf of the Holders of all the Capital Securities, waive any past default under the Indenture or any Indenture Event of Default, except a default or Indenture Event of Default in the payment of principal or interest on the Debentures (unless such default or Indenture Event of Default has been cured and a sum sufficient to pay all matured installments of interest and principal due otherwise than by acceleration has been deposited with the Debenture Trustee) or a default under the Indenture or an Indenture Event of Default in respect of a covenant or provision that under the Indenture cannot be modified or amended without the consent of the holder of each outstanding Debenture. No such rescission shall affect any subsequent default or impair any right consequent thereon.

Upon receipt by the Institutional Trustee of written notice declaring such an acceleration, or rescission and annulment thereof, by Holders of any part of the Capital Securities, a record date shall be established for determining Holders of outstanding Capital Securities entitled to join in such notice, which record date shall be at the close of business on the day the Institutional Trustee receives such notice. The Holders on such record date, or their duly designated proxies, and only such Persons, shall be entitled to

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join in such notice, whether or not such Holders remain Holders after such record date; provided, that unless such declaration of acceleration, or rescission and annulment, as the case may be, shall have become effective by virtue of the requisite percentage having joined in such notice prior to the day that is 90 days after such record date, such notice of declaration of acceleration, or rescission and annulment, as the case may be, shall automatically and without further action by any Holder be canceled and of no further effect. Nothing in this paragraph shall prevent a Holder, or a proxy of a Holder, from giving, after expiration of such 90-day period, a new written notice of declaration of acceleration, or rescission and annulment thereof, as the case may be, that is identical to a written notice that has been canceled pursuant to the proviso to the preceding sentence, in which event a new record date shall be established pursuant to the provisions of this Section 6.7.

(c) Except as otherwise provided in paragraphs (a) and (b) of this Section 6.7, the Holders of at least a Majority in liquidation amount of the Capital Securities may, on behalf of the Holders of all the Capital Securities, waive any past default or Event of Default and its consequences. Upon such waiver, any such default or Event of Default shall cease to exist, and any default or Event of Default arising therefrom shall be deemed to have been cured, for every purpose of this Declaration, but no such waiver shall extend to any subsequent or other default or Event of Default or impair any right consequent thereon.

ARTICLE VII

DISSOLUTION AND TERMINATION OF TRUST

SECTION 7.1. DISSOLUTION AND TERMINATION OF TRUST.

(a) The Trust shall dissolve on the first to occur of:

(i) unless earlier dissolved, on June 26, 2038, the expiration of the term of the Trust;

(ii) upon a Bankruptcy Event with respect to the Sponsor, the Trust or the Debenture Issuer;

(iii) upon the filing of a certificate of dissolution or its equivalent with respect to the Sponsor (other than in connection with a merger, consolidation or similar transaction not prohibited by the Indenture, this Declaration or the Guarantee, as the case may be) or upon the revocation of the charter of the Sponsor and the expiration of 90 days after the date of revocation without a reinstatement thereof;

(iv) upon the distribution of the Debentures to the Holders of the Securities, upon exercise of the right of the Holder of all of the outstanding Common Securities to dissolve the Trust as provided in Annex I hereto;

(v) upon the entry of a decree of judicial dissolution of the Holder of the Common Securities, the Sponsor, the Trust or the Debenture Issuer;

(vi) when all of the Securities shall have been called for redemption and the amounts necessary for redemption thereof shall have been paid to the Holders in accordance with the terms of the Securities; or

(vii) before the issuance of any Securities, with the consent of the Institutional Trustee and the Sponsor.

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(b) As soon as is practicable after the occurrence of an event referred to in Section 7.1(a), and after satisfaction of liabilities to creditors of the Trust as required by applicable law, including of the Statutory Trust Act, and subject to the terms set forth in Annex I, the Institutional Trustee shall terminate the Trust by filing a certificate of cancellation with the Secretary of State of the State of Connecticut.

(c) The provisions of Section 2.9 and Article IX shall survive the termination of the Trust.

ARTICLE VIII

TRANSFER OF INTERESTS

SECTION 8.1. GENERAL.

(a) Subject to Section 8.1(c), where Capital Securities are presented to the Registrar or a co-registrar with a request to register a transfer or to exchange them for an equal number of Capital Securities represented by different certificates, the Registrar shall register the transfer or make the exchange if its requirements for such transactions are met. To permit registrations of transfer and exchanges, the Trust shall issue and the Institutional Trustee shall authenticate Capital Securities at the Registrar’s request.

(b) Upon issuance of the Common Securities, the Sponsor shall acquire and retain beneficial and record ownership of the Common Securities and for so long as the Securities remain outstanding, the Sponsor shall maintain 100% ownership of the Common Securities; provided, however, that any permitted successor of the Sponsor, in its capacity as Debenture Issuer, under the Indenture that is a U.S. Person may succeed to the Sponsor’s ownership of the Common Securities.

(c) Capital Securities may only be transferred, in whole or in part, in accordance with the terms and conditions set forth in this Declaration and in the terms of the Securities. To the fullest extent permitted by applicable law, any transfer or purported transfer of any Security not made in accordance with this Declaration shall be null and void and will be deemed to be of no legal effect whatsoever and any such transferee shall be deemed not to be the holder of such Capital Securities for any purpose, including but not limited to the receipt of Distributions on such Capital Securities, and such transferee shall be deemed to have no interest whatsoever in such Capital Securities.

(d) The Registrar shall provide for the registration of Securities and of transfers of Securities, which will be effected without charge but only upon payment (with such indemnity as the Registrar may require) in respect of any tax or other governmental charges that may be imposed in relation to it. Upon surrender for registration of transfer of any Securities, the Registrar shall cause one or more new Securities of the same tenor to be issued in the name of the designated transferee or transferees. Every Security surrendered for registration of transfer shall be accompanied by a written instrument of transfer in form satisfactory to the Registrar duly executed by the Holder or such Holder’s attorney duly authorized in writing. Each Security surrendered for registration of transfer shall be canceled by the Institutional Trustee pursuant to Section 6.6. A transferee of a Security shall be entitled to the rights and subject to the obligations of a Holder hereunder upon the receipt by such transferee of a Security. By acceptance of a Security, each transferee shall be deemed to have agreed to be bound by this Declaration.

(e) The Trust shall not be required (i) to issue, register the transfer of, or exchange any Securities during a period beginning at the opening of business 15 days before the day of any selection of Securities for redemption and ending at the close of business on the earliest date on which the relevant notice of redemption is deemed to have been given to all Holders of the Securities to be redeemed, or (ii) to register the transfer or exchange of any Security so selected for redemption in whole or in part, except the unredeemed portion of any Security being redeemed in part.

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SECTION 8.2. TRANSFER PROCEDURES AND RESTRICTIONS.

(a) The Capital Securities shall bear the Restricted Securities Legend, which shall not be removed unless there is delivered to the Trust such satisfactory evidence, which may include an opinion of counsel satisfactory to the Trustee, as may be reasonably required by the Trust, that neither the legend nor the restrictions on transfer set forth therein are required to ensure that transfers thereof comply with the provisions of the Securities Act. Upon provision of such satisfactory evidence, the Institutional Trustee, at the written direction of the Trust, shall authenticate and deliver Capital Securities that do not bear the legend.

(b) Except as permitted by Section 8.2(a), each Capital Security shall bear a legend (the “Restricted Securities Legend”) in substantially the following form and a Capital Security shall not be transferred except in compliance with such legend, unless otherwise determined by the Sponsor, upon the advice of counsel expert in securities law, in accordance with applicable law:

THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), ANY STATE SECURITIES LAWS OR ANY OTHER APPLICABLE SECURITIES LAW. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS. THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR OTHERWISE TRANSFER THIS SECURITY ONLY (A) TO THE SPONSOR OR THE TRUST, (B) PURSUANT TO A REGISTRATION STATEMENT THAT HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A SO LONG AS THIS SECURITY IS ELIGIBLE FOR RESALE PURSUANT TO RULE 144A IN ACCORDANCE WITH RULE 144A, (D) TO A NON-U.S. PERSON IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH RULE 903 OR RULE 904 (AS APPLICABLE) OF REGULATION S UNDER THE SECURITIES ACT, (E) TO AN INSTITUTIONAL “ACCREDITED INVESTOR” WITHIN THE MEANING OF SUBPARAGRAPH (A) OF RULE 501 UNDER THE SECURITIES ACT THAT IS ACQUIRING THIS CAPITAL SECURITY FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL ACCREDITED INVESTOR, FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, OR (F) PURSUANT TO ANY OTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE SPONSOR’S AND THE TRUST’S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM IN ACCORDANCE WITH THE DECLARATION OF TRUST, A COPY OF WHICH MAY BE OBTAINED FROM THE SPONSOR OR THE TRUST. HEDGING TRANSACTIONS INVOLVING THIS SECURITY MAY NOT BE CONDUCTED UNLESS IN COMPLIANCE WITH THE SECURITIES ACT.

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THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF ALSO AGREES, REPRESENTS AND WARRANTS THAT IT IS NOT AN EMPLOYEE BENEFIT, INDIVIDUAL RETIREMENT ACCOUNT OR OTHER PLAN OR ARRANGEMENT SUBJECT TO TITLE I OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED (“ERISA”), OR SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE “CODE”) (EACH A “PLAN”), OR AN ENTITY WHOSE UNDERLYING ASSETS INCLUDE “PLAN ASSETS” BY REASON OF ANY PLAN’S INVESTMENT IN THE ENTITY, AND NO PERSON INVESTING “PLAN ASSETS” OF ANY PLAN MAY ACQUIRE OR HOLD THE SECURITIES OR ANY INTEREST THEREIN, UNLESS SUCH PURCHASER OR HOLDER IS ELIGIBLE FOR EXEMPTIVE RELIEF AVAILABLE UNDER U.S. DEPARTMENT OF LABOR PROHIBITED TRANSACTION CLASS EXEMPTION 96-23, 95-60, 91-38, 90-1 OR 84-14 OR ANOTHER APPLICABLE EXEMPTION OR ITS PURCHASE AND HOLDING OF THIS SECURITY IS NOT PROHIBITED BY SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE WITH RESPECT TO SUCH PURCHASE OR HOLDING. ANY PURCHASER OR HOLDER OF THE SECURITIES OR ANY INTEREST THEREIN WILL BE DEEMED TO HAVE REPRESENTED BY ITS PURCHASE AND HOLDING THEREOF THAT EITHER (i) IT IS NOT AN EMPLOYEE BENEFIT PLAN WITHIN THE MEANING OF SECTION 3(3) OF ERISA, OR A PLAN TO WHICH SECTION 4975 OF THE CODE IS APPLICABLE, A TRUSTEE OR OTHER PERSON ACTING ON BEHALF OF AN EMPLOYEE BENEFIT PLAN OR PLAN, OR ANY OTHER PERSON OR ENTITY USING THE ASSETS OF ANY EMPLOYEE BENEFIT PLAN OR PLAN TO FINANCE SUCH PURCHASE, OR (ii) SUCH PURCHASE WILL NOT RESULT IN A PROHIBITED TRANSACTION UNDER SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE FOR WHICH THERE IS NO APPLICABLE STATUTORY OR ADMINISTRATIVE EXEMPTION.

THIS SECURITY WILL BE ISSUED AND MAY BE TRANSFERRED ONLY IN BLOCKS HAVING A LIQUIDATION AMOUNT OF NOT LESS THAN $100,000.00 (100 SECURITIES) AND MULTIPLES OF $1,000.00 IN EXCESS THEREOF. ANY ATTEMPTED TRANSFER OF SECURITIES IN A BLOCK HAVING A LIQUIDATION AMOUNT OF LESS THAN $100,000.00 SHALL BE DEEMED TO BE VOID AND OF NO LEGAL EFFECT WHATSOEVER.

THE HOLDER OF THIS SECURITY AGREES THAT IT WILL COMPLY WITH THE FOREGOING RESTRICTIONS.

(c) To permit registrations of transfers and exchanges, the Trust shall execute and the Institutional Trustee shall authenticate Capital Securities at the Registrar’s request.

(d) Registrations of transfers or exchanges will be effected without charge, but only upon payment (with such indemnity as the Registrar or the Sponsor may require) in respect of any tax or other governmental charge that may be imposed in relation to it.

(e) All Capital Securities issued upon any registration of transfer or exchange pursuant to the terms of this Declaration shall evidence the same security and shall be entitled to the same benefits under this Declaration as the Capital Securities surrendered upon such registration of transfer or exchange.

SECTION 8.3. DEEMED SECURITY HOLDERS. The Trust, the Administrators, the Institutional Trustee, the Paying Agent, the Transfer Agent or the Registrar may treat the Person in whose name any

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Certificate shall be registered on the books and records of the Trust as the sole holder of such Certificate and of the Securities represented by such Certificate for purposes of receiving Distributions and for all other purposes whatsoever and, accordingly, shall not be bound to recognize any equitable or other claim to or interest in such Certificate or in the Securities represented by such Certificate on the part of any Person, whether or not the Trust, the Administrators, the Institutional Trustee, the Paying Agent, the Transfer Agent or the Registrar shall have actual or other notice thereof.

ARTICLE IX

LIMITATION OF LIABILITY OF HOLDERS OF SECURITIES, INSTITUTIONAL TRUSTEE OR OTHERS

SECTION 9.1. LIABILITY.

(a) Except as expressly set forth in this Declaration, the Guarantee and the terms of the Securities, the Sponsor shall not be:

(i) personally liable for the return of any portion of the capital contributions (or any return thereon) of the Holders of the Securities which shall be made solely from assets of the Trust; or

(ii) required to pay to the Trust or to any Holder of the Securities any deficit upon dissolution of the Trust or otherwise.

(b) The Holder of the Common Securities shall be liable for all of the debts and obligations of the Trust (other than with respect to the Securities) to the extent not satisfied out of the Trust’s assets.

(c) Pursuant to the Statutory Trust Act, the Holders of the Capital Securities shall be entitled to the same limitation of personal liability extended to stockholders of private corporations for profit organized under the General Corporation Law of the State of Connecticut.

SECTION 9.2. EXCULPATION.

(a) No Indemnified Person shall be liable, responsible or accountable in damages or otherwise to the Trust or any Covered Person for any loss, damage or claim incurred by reason of any act or omission performed or omitted by such Indemnified Person in good faith on behalf of the Trust and in a manner such Indemnified Person reasonably believed to be within the scope of the authority conferred on such Indemnified Person by this Declaration or by law, except that an Indemnified Person shall be liable for any such loss, damage or claim incurred by reason of such Indemnified Person’s negligence or willful misconduct with respect to such acts or omissions.

(b) An Indemnified Person shall be fully protected in relying in good faith upon the records of the Trust and upon such information, opinions, reports or statements presented to the Trust by any Person as to matters the Indemnified Person reasonably believes are within such other Person’s professional or expert competence and, if selected by such Indemnified Person, has been selected by such Indemnified Person with reasonable care by or on behalf of the Trust, including information, opinions, reports or statements as to the value and amount of the assets, liabilities, profits, losses, or any other facts pertinent to the existence and amount of assets from which Distributions to Holders of Securities might properly be paid.

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SECTION 9.3. FIDUCIARY DUTY.

(a) To the extent that, at law or in equity, an Indemnified Person has duties (including fiduciary duties) and liabilities relating thereto to the Trust or to any other Covered Person, an Indemnified Person acting under this Declaration shall not be liable to the Trust or to any other Covered Person for its good faith reliance on the provisions of this Declaration. The provisions of this Declaration, to the extent that they restrict the duties and liabilities of an Indemnified Person otherwise existing at law or in equity, are agreed by the parties hereto to replace such other duties and liabilities of the Indemnified Person.

(b) Whenever in this Declaration an Indemnified Person is permitted or required to make a decision:

(i) in its “discretion” or under a grant of similar authority, the Indemnified Person shall be entitled to consider such interests and factors as it desires, including its own interests, and shall have no duty or obligation to give any consideration to any interest of or factors affecting the Trust or any other Person; or

(ii) in its “good faith” or under another express standard, the Indemnified Person shall act under such express standard and shall not be subject to any other or different standard imposed by this Declaration or by applicable law.

SECTION 9.4. INDEMNIFICATION.

(a) The Sponsor shall indemnify, to the full extent permitted by law, any Indemnified Person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the Trust) arising out of or in connection with the acceptance or administration of this Declaration by reason of the fact that he is or was an Indemnified Person against expenses (including reasonable attorneys’ fees and expenses), judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Trust, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the Indemnified Person did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the Trust, and, with respect to any criminal action or proceeding, had reasonable cause to believe that his conduct was unlawful.

(b) The Sponsor shall indemnify, to the full extent permitted by law, any Indemnified Person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the Trust to procure a judgment in its favor arising out of or in connection with the acceptance or administration of this Declaration by reason of the fact that he is or was an Indemnified Person against expenses (including reasonable attorneys’ fees and expenses) actually and reasonably incurred by him in connection with the defense or settlement of such action or suit if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Trust; provided, however, that no such indemnification shall be made in respect of any claim, issue or matter as to which such Indemnified Person shall have been adjudged to be liable to the Trust unless and only to the extent that the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which such court shall deem proper.

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(c) To the extent that an Indemnified Person shall be successful on the merits or otherwise (including dismissal of an action without prejudice or the settlement of an action without admission of liability) in defense of any action, suit or proceeding referred to in paragraphs (a) and (b) of this Section 9.4, or in defense of any claim, issue or matter therein, he shall be indemnified, to the full extent permitted by law, against expenses (including attorneys’ fees and expenses) actually and reasonably incurred by him in connection therewith.

(d) Any indemnification of an Administrator under paragraphs (a) and (b) of this Section 9.4 (unless ordered by a court) shall be made by the Sponsor only as authorized in the specific case upon a determination that indemnification of the Indemnified Person is proper in the circumstances because he has met the applicable standard of conduct set forth in paragraphs (a) and (b). Such determination shall be made (i) by the Administrators by a majority vote of a Quorum consisting of such Administrators who were not parties to such action, suit or proceeding, (ii) if such a Quorum is not obtainable, or, even if obtainable, if a Quorum of disinterested Administrators so directs, by independent legal counsel in a written opinion, or (iii) by the Common Security Holder of the Trust.

(e) To the fullest extent permitted by law, expenses (including reasonable attorneys’ fees and expenses) incurred by an Indemnified Person in defending a civil, criminal, administrative or investigative action, suit or proceeding referred to in paragraphs (a) and (b) of this Section 9.4 shall be paid by the Sponsor in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of such Indemnified Person to repay such amount if it shall ultimately be determined that he is not entitled to be indemnified by the Sponsor as authorized in this Section 9.4. Notwithstanding the foregoing, no advance shall be made by the Sponsor if a determination is reasonably and promptly made (i) by the Administrators by a majority vote of a Quorum of disinterested Administrators, (ii) if such a Quorum is not obtainable, or, even if obtainable, if a quorum of disinterested Administrators so directs, by independent legal counsel in a written opinion or (iii) by the Common Security Holder of the Trust, that, based upon the facts known to the Administrators, counsel or the Common Security Holder at the time such determination is made, such Indemnified Person acted in bad faith or in a manner that such Indemnified Person did not believe to be in the best interests of the Trust, or, with respect to any criminal proceeding, that such Indemnified Person believed or had reasonable cause to believe his conduct was unlawful. In no event shall any advance be made in instances where the Administrators, independent legal counsel or the Common Security Holder reasonably determine that such Indemnified Person deliberately breached his duty to the Trust or its Common or Capital Security Holders.

(f) The Institutional Trustee, at the sole cost and expense of the Sponsor, retains the right to representation by counsel of its own choosing in any action, suit or any other proceeding for which it is indemnified under paragraphs (a) and (b) of this Section 9.4, without affecting its right to indemnification hereunder or waiving any rights afforded to it under this Declaration or applicable law.

(g) The indemnification and advancement of expenses provided by, or granted pursuant to, the other paragraphs of this Section 9.4 shall not be deemed exclusive of any other rights to which those seeking indemnification and advancement of expenses may be entitled under any agreement, vote of stockholders or disinterested directors of the Sponsor or Capital Security Holders of the Trust or otherwise, both as to action in his official capacity and as to action in another capacity while holding such office. All rights to indemnification under this Section 9.4 shall be deemed to be provided by a contract between the Sponsor and each Indemnified Person who serves in such capacity at any time while this Section 9.4 is in effect. Any repeal or modification of this Section 9.4 shall not affect any rights or obligations then existing.

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(h) The Sponsor or the Trust may purchase and maintain insurance on behalf of any Person who is or was an Indemnified Person against any liability asserted against him and incurred by him in any such capacity, or arising out of his status as such, whether or not the Sponsor would have the power to indemnify him against such liability under the provisions of this Section 9.4.

(i) For purposes of this Section 9.4, references to “the Trust” shall include, in addition to the resulting or surviving entity, any constituent entity (including any constituent of a constituent) absorbed in a consolidation or merger, so that any Person who is or was a director, trustee, officer or employee of such constituent entity, or is or was serving at the request of such constituent entity as a director, trustee, officer, employee or agent of another entity, shall stand in the same position under the provisions of this Section 9.4 with respect to the resulting or surviving entity as he would have with respect to such constituent entity if its separate existence had continued.

(j) The indemnification and advancement of expenses provided by, or granted pursuant to, this Section 9.4 shall, unless otherwise provided when authorized or ratified, (i) continue as to a Person who has ceased to be an Indemnified Person and shall inure to the benefit of the heirs, executors and administrators of such a Person; and (ii) survive the termination or expiration of this Declaration or the earlier removal or resignation of an Indemnified Person.

SECTION 9.5. OUTSIDE BUSINESSES. Any Covered Person, the Sponsor and the Institutional Trustee may engage in or possess an interest in other business ventures of any nature or description, independently or with others, similar or dissimilar to the business of the Trust, and the Trust and the Holders of Securities shall have no rights by virtue of this Declaration in and to such independent ventures or the income or profits derived therefrom, and the pursuit of any such venture, even if competitive with the business of the Trust, shall not be deemed wrongful or improper. None of any Covered Person, the Sponsor or the Institutional Trustee shall be obligated to present any particular investment or other opportunity to the Trust even if such opportunity is of a character that, if presented to the Trust, could be taken by the Trust, and any Covered Person, the Sponsor and the Institutional Trustee shall have the right to take for its own account (individually or as a partner or fiduciary) or to recommend to others any such particular investment or other opportunity. Any Covered Person and the Institutional Trustee may engage or be interested in any financial or other transaction with the Sponsor or any Affiliate of the Sponsor, or may act as depositary for, trustee or agent for, or act on any committee or body of holders of, securities or other obligations of the Sponsor or its Affiliates.

SECTION 9.6. COMPENSATION; FEE. The Sponsor agrees:

(a) to pay to the Institutional Trustee from time to time such compensation for all services rendered by it hereunder as the parties shall agree from time to time (which compensation shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust); and

(b) except as otherwise expressly provided herein, to reimburse the Institutional Trustee upon request for all reasonable expenses, disbursements and advances incurred or made by the Institutional Trustee in accordance with any provision of this Declaration (including the reasonable compensation and the expenses and disbursements of their respective agents and counsel), except any such expense, disbursement or advance as may be attributable to its negligence, bad faith or willful misconduct.

The provisions of this Section 9.6 shall survive the dissolution of the Trust and the termination of this Declaration and the removal or resignation of the Institutional Trustee.

No Institutional Trustee may claim any lien or charge on any property of the Trust as a result of any amount due pursuant to this Section 9.6.

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ARTICLE X

ACCOUNTING

SECTION 10.1. FISCAL YEAR. The fiscal year (“Fiscal Year”) of the Trust shall be the calendar year, or such other year as is required by the Code.

SECTION 10.2. CERTAIN ACCOUNTING MATTERS.

(a) At all times during the existence of the Trust, the Administrators shall keep, or cause to be kept at the principal office of the Trust in the United States, as defined for purposes of Treasury Regulations section 301.7701-7, full books of account, records and supporting documents, which shall reflect in reasonable detail each transaction of the Trust. The books of account shall be maintained, at the Sponsor’s expense, in accordance with generally accepted accounting principles, consistently applied. The books of account and the records of the Trust shall be examined by and reported upon (either separately or as part of the Sponsor’s regularly prepared consolidated financial report) as of the end of each Fiscal Year of the Trust by a firm of independent certified public accountants selected by the Administrators.

(b) The Administrators shall cause to be duly prepared and delivered to each of the Holders of Securities Form 1099 or such other annual United States federal income tax information statement required by the Code, containing such information with regard to the Securities held by each Holder as is required by the Code and the Treasury Regulations. Notwithstanding any right under the Code to deliver any such statement at a later date, the Administrators shall endeavor to deliver all such statements within 30 days after the end of each Fiscal Year of the Trust.

(c) The Administrators, at the Sponsor’s expense, shall cause to be duly prepared at the principal office of the Sponsor in the United States, as ‘United States’ is defined in Section 7701(a)(9) of the Code (or at the principal office of the Trust if the Sponsor has no such principal office in the United States), and filed an annual United States federal income tax return on a Form 1041 or such other form required by United States federal income tax law, and any other annual income tax returns required to be filed by the Administrators on behalf of the Trust with any state or local taxing authority.

SECTION 10.3. BANKING. The Trust shall maintain in the United States, as defined for purposes of Treasury Regulations section 301.7701-7, one or more bank accounts in the name and for the sole benefit of the Trust; provided, however, that all payments of funds in respect of the Debentures held by the Institutional Trustee shall be made directly to the Property Account and no other funds of the Trust shall be deposited in the Property Account. The sole signatories for such accounts (including the Property Account) shall be designated by the Institutional Trustee.

SECTION 10.4. WITHHOLDING. The Institutional Trustee or any Paying Agent and the Administrators shall comply with all withholding requirements under United States federal, state and local law. The Institutional Trustee or any Paying Agent shall request, and each Holder shall provide to the Institutional Trustee or any Paying Agent, such forms or certificates as are necessary to establish an exemption from withholding with respect to the Holder, and any representations and forms as shall reasonably be requested by the Institutional Trustee or any Paying Agent to assist it in determining the extent of, and in fulfilling, its withholding obligations. The Administrators shall file required forms with applicable jurisdictions and, unless an exemption from withholding is properly established by a Holder, shall remit amounts withheld with respect to the Holder to applicable jurisdictions. To the extent that the Institutional Trustee or any Paying Agent is required to withhold and pay over any amounts to any authority with respect to distributions or allocations to any Holder, the amount withheld shall be deemed to be a Distribution in the amount of the withholding to the Holder. In the event of any claimed

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overwithholding, Holders shall be limited to an action against the applicable jurisdiction. If the amount required to be withheld was not withheld from actual Distributions made, the Institutional Trustee or any Paying Agent may reduce subsequent Distributions by the amount of such withholding.

ARTICLE XI

AMENDMENTS AND MEETINGS

SECTION 11.1. AMENDMENTS.

(a) Except as otherwise provided in this Declaration or by any applicable terms of the Securities, this Declaration may only be amended by a written instrument approved and executed by the Institutional Trustee.

(b) Notwithstanding any other provision of this Article XI, an amendment may be made, and any such purported amendment shall be valid and effective only if:

(i) the Institutional Trustee shall have first received

(A) an Officers’ Certificate from each of the Trust and the Sponsor that such amendment is permitted by, and conforms to, the terms of this Declaration (including the terms of the Securities); and

(B) an opinion of counsel (who may be counsel to the Sponsor or the Trust) that such amendment is permitted by, and conforms to, the terms of this Declaration (including the terms of the Securities); and

(ii) the result of such amendment would not be to

(A) cause the Trust to cease to be classified for purposes of United States federal income taxation as a grantor trust; or

(B) cause the Trust to be deemed to be an Investment Company required to be registered under the Investment Company Act.

(c) Except as provided in Section 11.1(d), (e) or (h), no amendment shall be made, and any such purported amendment shall be void and ineffective, unless the Holders of a Majority in liquidation amount of the Capital Securities shall have consented to such amendment.

(d) In addition to and notwithstanding any other provision in this Declaration, without the consent of each affected Holder, this Declaration may not be amended to (i) change the amount or timing of any Distribution on the Securities or otherwise adversely affect the amount of any Distribution required to be made in respect of the Securities as of a specified date or change any conversion or exchange provisions or (ii) restrict the right of a Holder to institute suit for the enforcement of any such payment on or after such date.

(e) Sections 9.1(b) and 9.1(c) and this Section 11.1 shall not be amended without the consent of all of the Holders of the Securities.

(f) Article III shall not be amended without the consent of the Holders of a Majority in liquidation amount of the Common Securities.

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(g) The rights of the Holders of the Capital Securities under Article IV to appoint and remove the Institutional Trustee shall not be amended without the consent of the Holders of a Majority in liquidation amount of the Capital Securities.

(h) This Declaration may be amended by the Institutional Trustee and the Holders of a Majority in liquidation amount of the Common Securities without the consent of the Holders of the Capital Securities to:

(i) cure any ambiguity;

(ii) correct or supplement any provision in this Declaration that may be defective or inconsistent with any other provision of this Declaration;

(iii) add to the covenants, restrictions or obligations of the Sponsor; or

(iv) modify, eliminate or add to any provision of this Declaration to such extent as may be necessary to ensure that the Trust will be classified for United States federal income tax purposes at all times as a grantor trust and will not be required to register as an Investment Company (including without limitation to conform to any change in Rule 3a-5, Rule 3a-7 or any other applicable rule under the Investment Company Act or written change in interpretation or application thereof by any legislative body, court, government agency or regulatory authority) which amendment does not have a material adverse effect on the rights, preferences or privileges of the Holders of Securities;

provided, however, that no such modification, elimination or addition referred to in clauses (i), (ii), (iii) or (iv) shall adversely affect in any material respect the powers, preferences or special rights of Holders of Capital Securities.

SECTION 11.2. MEETINGS OF THE HOLDERS OF SECURITIES; ACTION BY WRITTEN CONSENT.

(a) Meetings of the Holders of any class of Securities may be called at any time by the Administrators (or as provided in the terms of the Securities) to consider and act on any matter on which Holders of such class of Securities are entitled to act under the terms of this Declaration or the terms of the Securities. The Administrators shall call a meeting of the Holders of such class if directed to do so by the Holders of at least 10% in liquidation amount of such class of Securities. Such direction shall be given by delivering to the Administrators one or more calls in a writing stating that the signing Holders of the Securities wish to call a meeting and indicating the general or specific purpose for which the meeting is to be called. Any Holders of the Securities calling a meeting shall specify in writing the Certificates held by the Holders of the Securities exercising the right to call a meeting and only those Securities represented by such Certificates shall be counted for purposes of determining whether the required percentage set forth in the second sentence of this paragraph has been met.

(b) Except to the extent otherwise provided in the terms of the Securities, the following provisions shall apply to meetings of Holders of the Securities:

(i) notice of any such meeting shall be given to all the Holders of the Securities having a right to vote thereat at least 7 days and not more than 60 days before the date of such meeting. Whenever a vote, consent or approval of the Holders of the Securities is permitted or required under this Declaration, such vote, consent or approval may be given at a meeting of the Holders of the Securities. Any action that may be taken at a meeting of the Holders of the Securities may be taken without a meeting if a consent in writing setting forth the action so taken is signed by the Holders of the Securities owning not less than the minimum amount of Securities

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in liquidation amount that would be necessary to authorize or take such action at a meeting at which all Holders of the Securities having a right to vote thereon were present and voting. Prompt notice of the taking of action without a meeting shall be given to the Holders of the Securities entitled to vote who have not consented in writing. The Administrators may specify that any written ballot submitted to the Holders of the Securities for the purpose of taking any action without a meeting shall be returned to the Trust within the time specified by the Administrators;

(ii) each Holder of a Security may authorize any Person to act for it by proxy on all matters in which a Holder of Securities is entitled to participate, including waiving notice of any meeting, or voting or participating at a meeting. No proxy shall be valid after the expiration of 11 months from the date thereof unless otherwise provided in the proxy. Every proxy shall be revocable at the pleasure of the Holder of the Securities executing it. Except as otherwise provided herein, all matters relating to the giving, voting or validity of proxies shall be governed by the General Corporation Law of the State of Connecticut relating to proxies, and judicial interpretations thereunder, as if the Trust were a Connecticut corporation and the Holders of the Securities were stockholders of a Connecticut corporation; each meeting of the Holders of the Securities shall be conducted by the Administrators or by such other Person that the Administrators may designate; and

(iii) unless the Statutory Trust Act, this Declaration, or the terms of the Securities otherwise provides, the Administrators, in their sole discretion, shall establish all other provisions relating to meetings of Holders of Securities, including notice of the time, place or purpose of any meeting at which any matter is to be voted on by any Holders of the Securities, waiver of any such notice, action by consent without a meeting, the establishment of a record date, quorum requirements, voting in person or by proxy or any other matter with respect to the exercise of any such right to vote; provided, however, that each meeting shall be conducted in the United States (as that term is defined in Treasury Regulations section 301.7701-7).

ARTICLE XII

REPRESENTATIONS OF INSTITUTIONAL TRUSTEE

SECTION 12.1. REPRESENTATIONS AND WARRANTIES OF INSTITUTIONAL TRUSTEE. The initial Institutional Trustee represents and warrants to the Trust and to the Sponsor at the date of this Declaration, and each Successor Institutional Trustee represents and warrants to the Trust and the Sponsor at the time of the Successor Institutional Trustee’s acceptance of its appointment as Institutional Trustee, that:

(a) the Institutional Trustee is a national banking association with trust powers, duly organized and validly existing under the laws of the United States of America with trust power and authority to execute and deliver, and to carry out and perform its obligations under the terms of, this Declaration;

(b) the execution, delivery and performance by the Institutional Trustee of this Declaration has been duly authorized by all necessary corporate action on the part of the Institutional Trustee. This Declaration has been duly executed and delivered by the Institutional Trustee, and it constitutes a legal, valid and binding obligation of the Institutional Trustee, enforceable against it in accordance with its terms, subject to applicable bankruptcy, reorganization, moratorium, insolvency, and other similar laws affecting creditors’ rights generally and to general principles of equity (regardless of whether considered in a proceeding in equity or at law);

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(c) the execution, delivery and performance of this Declaration by the Institutional Trustee does not conflict with or constitute a breach of the charter or by-laws of the Institutional Trustee; and

(d) no consent, approval or authorization of, or registration with or notice to, any state or federal banking authority is required for the execution, delivery or performance by the Institutional Trustee of this Declaration.

ARTICLE XIII

MISCELLANEOUS

SECTION 13.1. NOTICES. All notices provided for in this Declaration shall be in writing, duly signed by the party giving such notice, and shall be delivered, telecopied (which telecopy shall be followed by notice delivered or mailed by first class mail) or mailed by first class mail, as follows:

(a) if given to the Trust, in care of the Administrators at the Trust’s mailing address set forth below (or such other address as the Trust may give notice of to the Holders of the Securities):

Southwest Community Statutory Trust I

c/o Southwest Community Bancorp

5810 El Camino Real

Carlsbad, California 92008

Attention: Frank J. Mercardante

Telecopy: 760-431-2164

(b) if given to the Institutional Trustee, at the Institutional Trustee’s mailing address set forth below (or such other address as the Institutional Trustee may give notice of to the Holders of the Securities):

U.S. Bank National Association

225 Asylum Street, Goodwin Square

Hartford, Connecticut 06103

Attention: Vice President, Corporate Trust Services Division

Telecopy: 860-244-1889

With a copy to:

U.S. Bank National Association

1 Federal Street - 3rd Floor

Boston, Massachusetts 02110

Attention: Paul D. Allen, Corporate Trust Services Division

Telecopy: 617-603-6665

(c) if given to the Holder of the Common Securities, at the mailing address of the Sponsor set forth below (or such other address as the Holder of the Common Securities may give notice of to the Trust):

Southwest Community Bancorp

5810 El Camino Real

Carlsbad, California 92008

Attention: Frank J. Mercardante

Telecopy: 760-431-2164

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(d) if given to any other Holder, at the address set forth on the books and records of the Trust.

All such notices shall be deemed to have been given when received in person, telecopied with receipt confirmed, or mailed by first class mail, postage prepaid except that if a notice or other document is refused delivery or cannot be delivered because of a changed address of which no notice was given, such notice or other document shall be deemed to have been delivered on the date of such refusal or inability to deliver.

SECTION 13.2. GOVERNING LAW. This Declaration and the rights of the parties hereunder shall be governed by and interpreted in accordance with the law of the State of Connecticut and all rights and remedies shall be governed by such laws without regard to the principles of conflict of laws of the State of Connecticut or any other jurisdiction that would call for the application of the law of any jurisdiction other than the State of Connecticut; provided, however, that there shall not be applicable to the Trust, the Institutional Trustee or this Declaration any provision of the laws (statutory or common) of the State of Connecticut pertaining to trusts that relate to or regulate, in a manner inconsistent with the terms hereof (a) the filing with any court or governmental body or agency of trustee accounts or schedules of trustee fees and charges, (b) affirmative requirements to post bonds for trustees, officers, agents or employees of a trust, (c) the necessity for obtaining court or other governmental approval concerning the acquisition, holding or disposition of real or personal property, (d) fees or other sums payable to trustees, officers, agents or employees of a trust, (e) the allocation of receipts and expenditures to income or principal, or (f) restrictions or limitations on the permissible nature, amount or concentration of trust investments or requirements relating to the titling, storage or other manner of holding or investing trust assets.

SECTION 13.3. INTENTION OF THE PARTIES. It is the intention of the parties hereto that the Trust be classified for United States federal income tax purposes as a grantor trust. The provisions of this Declaration shall be interpreted to further this intention of the parties.

SECTION 13.4. HEADINGS. Headings contained in this Declaration are inserted for convenience of reference only and do not affect the interpretation of this Declaration or any provision hereof.

SECTION 13.5. SUCCESSORS AND ASSIGNS. Whenever in this Declaration any of the parties hereto is named or referred to, the successors and assigns of such party shall be deemed to be included, and all covenants and agreements in this Declaration by the Sponsor and the Institutional Trustee shall bind and inure to the benefit of their respective successors and assigns, whether or not so expressed.

SECTION 13.6. PARTIAL ENFORCEABILITY. If any provision of this Declaration, or the application of such provision to any Person or circumstance, shall be held invalid, the remainder of this Declaration, or the application of such provision to persons or circumstances other than those to which it is held invalid, shall not be affected thereby.

SECTION 13.7. COUNTERPARTS. This Declaration may contain more than one counterpart of the signature page and this Declaration may be executed by the affixing of the signature of each of the Institutional Trustee and Administrators to any of such counterpart signature pages. All of such counterpart signature pages shall be read as though one, and they shall have the same force and effect as though all of the signers had signed a single signature page.

Signatures appear on the following page

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IN WITNESS WHEREOF, the undersigned have caused these presents to be executed as of the day and year first above written.

U.S. BANK NATIONAL ASSOCIATION,
as Institutional Trustee
By.	/s/ Paul D. Allen
Name:	Paul D. Allen
Title:	Vice President
SOUTHWEST COMMUNITY BANCORP, as Sponsor
By.	/s/ Frank J. Mercardante
Name:	Frank J. Mercardante
Title:	President & CEO
SOUTHWEST COMMUNITY STATUTORY
TRUST I
By.	/s/ Frank J. Mercardante
	Administrator
By.	/s/ James L. Lemery
	Administrator
By.	/s/ Paul M. Weil
	Administrator

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ANNEX I

TERMS OF SECURITIES

Pursuant to Section 6.1 of the Amended and Restated Declaration of Trust, dated as of April 22, 2003 (as amended from time to time, the “Declaration”), the designation, rights, privileges, restrictions, preferences and other terms and provisions of the Capital Securities and the Common Securities are set out below (each capitalized term used but not defined herein has the meaning set forth in the Declaration):

1. Designation and Number.

(a) 8,000 Floating Rate Capital Securities of Southwest Community Statutory Trust I (the “Trust”), with an aggregate stated liquidation amount with respect to the assets of the Trust of eight million dollars ($8,000,000.00) and a stated liquidation amount with respect to the assets of the Trust of $1,000.00 per Capital Security, are hereby designated for the purposes of identification only as the “Capital Securities”. The Capital Security Certificates evidencing the Capital Securities shall be substantially in the form of Exhibit A-1 to the Declaration, with such changes and additions thereto or deletions therefrom as may be required by ordinary usage, custom or practice.

(b) 248 Floating Rate Common Securities of the Trust (the “Common Securities”) will be evidenced by Common Security Certificates substantially in the form of Exhibit A-2 to the Declaration, with such changes and additions thereto or deletions therefrom as may be required by ordinary usage, custom or practice.

2. Distributions.

(a) Distributions will be payable on each Security for the period beginning on (and including) the date of original issuance and ending on (but excluding) September 26, 2003 at a rate per annum of 4.47% and shall bear interest for each successive period beginning on (and including) September 26, 2003, and each succeeding Distribution Payment Date, and ending on (but excluding) the next succeeding Distribution Payment Date (each, a “Distribution Period”) at a rate per annum equal to the 3-Month LIBOR, determined as described below, plus 3.15% (the “Coupon Rate”); provided, however, that prior to June 26, 2008, the Coupon Rate shall not exceed 11.75%, applied to the stated liquidation amount thereof, such rate being the rate of interest payable on the Debentures to be held by the Institutional Trustee. Distributions in arrears will bear interest thereon compounded quarterly at the applicable Distribution Rate (to the extent permitted by law). Distributions, as used herein, include cash distributions and any such compounded distributions unless otherwise noted. A Distribution is payable only to the extent that payments are made in respect of the Debentures held by the Institutional Trustee and to the extent the Institutional Trustee has funds available therefor. In the event that any date on which a Distribution is payable on the Securities is not a Business Day, then payment of the Distribution payable on such date shall be made on the next succeeding day which is a Business Day (and without any interest or other payment in respect of any such delay), except that, if such Business Day is in the next succeeding calendar year, such payment shall be made on the immediately preceding Business Day, in each case with the same force and effect as if made on the date such payment was originally payable. The amount of the Distribution payable for any Distribution Period will be calculated by applying the Distribution Rate to the stated liquidation amount outstanding at the commencement of the Distribution Period and multiplying each such amount by the actual number of days in the Distribution Period concerned divided by 360. All percentages resulting from any calculations on the Capital Securities will be rounded, if necessary, to the nearest one hundred-thousandth of a percentage point, with five one-millionths of a percentage point rounded upward (e.g., 9.876545% (or

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.09876545) being rounded to 9.87655% (or .0987655), and all dollar amounts used in or resulting from such calculation will be rounded to the nearest cent (with one-half cent being rounded upward)).

(b) Distributions on the Securities will be cumulative, will accrue from the date of original issuance, and will be payable, subject to extension of distribution payment periods as described herein, quarterly in arrears on March 26, June 26, September 26 and December 26 of each year, commencing on September 26, 2003 (each a “Distribution Payment Date”) when, as and if available for payment. The Debenture Issuer has the right under the Indenture to defer payments of interest on the Debentures, so long as no Indenture Event of Default has occurred and is continuing, by deferring the payment of interest on the Debentures for up to 20 consecutive quarterly periods (each an “Extension Period”) at any time and from time to time, subject to the conditions described below, during which Extension Period no interest shall be due and payable. During any Extension Period, interest will continue to accrue on the Debentures, and interest on such accrued interest will accrue at an annual rate equal to the Distribution Rate in effect for each such Extension Period, compounded quarterly from the date such interest would have been payable were it not for the Extension Period, to the extent permitted by law (such interest referred to herein as “Additional Interest”). No Extension Period may end on a date other than a Distribution Payment Date. At the end of any such Extension Period, the Debenture Issuer shall pay all interest then accrued and unpaid on the Debentures (together with Additional Interest thereon); provided, however, that no Extension Period may extend beyond the Maturity Date and provided further, however, that during any such Extension Period, the Debenture Issuer and its Affiliates shall not (i) declare or pay any dividends or distributions on, or redeem, purchase, acquire, or make a liquidation payment with respect to, any of the Debenture Issuer’s or its Affiliates’ capital stock (other than payments of dividends or distributions to the Debenture Issuer) or make any guarantee payments with respect to the foregoing, or (ii) make any payment of principal of or interest or premium, if any, on or repay, repurchase or redeem any debt securities of the Debenture Issuer or any Affiliate that rank pari passu in all respects with or junior in interest to the Debentures (other than, with respect to clauses (i) and (ii) above, (a) repurchases, redemptions or other acquisitions of shares of capital stock of the Debenture Issuer in connection with any employment contract, benefit plan or other similar arrangement with or for the benefit of one or more employees, officers, directors or consultants, in connection with a dividend reinvestment or stockholder stock purchase plan or in connection with the issuance of capital stock of the Debenture Issuer (or securities convertible into or exercisable for such capital stock) as consideration in an acquisition transaction entered into prior to the applicable Extension Period, (b) as a result of any exchange or conversion of any class or series of the Debenture Issuer’s capital stock (or any capital stock of a subsidiary of the Debenture Issuer) for any class or series of the Debenture Issuer’s capital stock or of any class or series of the Debenture Issuer’s indebtedness for any class or series of the Debenture Issuer’s capital stock, (c) the purchase of fractional interests in shares of the Debenture Issuer’s capital stock pursuant to the conversion or exchange provisions of such capital stock or the security being converted or exchanged, (d) any declaration of a dividend in connection with any stockholders’ rights plan, or the issuance of rights, stock or other property under any stockholders’ rights plan, or the redemption or repurchase of rights pursuant thereto, (e) any dividend in the form of stock, warrants, options or other rights where the dividend stock or the stock issuable upon exercise of such warrants, options or other rights is the same stock as that on which the dividend is being paid or ranks pari passu with or junior to such stock and any cash payments in lieu of fractional shares issued in connection therewith, or (f) payments under the Capital Securities Guarantee). Prior to the termination of any Extension Period, the Debenture Issuer may further extend such period, provided that such period together with all such previous and further consecutive extensions thereof shall not exceed 20 consecutive quarterly periods, or extend beyond the Maturity Date. Upon the termination of any Extension Period and upon the payment of all accrued and unpaid interest and Additional Interest, the Debenture Issuer may commence a new Extension Period, subject to the foregoing requirements. No interest or Additional Interest shall be due and payable during an Extension Period, except at the end thereof, but each installment of interest that would otherwise have been due and payable during such Extension Period

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shall bear Additional Interest. During any Extension Period, Distributions on the Securities shall be deferred for a period equal to the Extension Period. If Distributions are deferred, the Distributions due shall be paid on the date that the related Extension Period terminates to Holders of the Securities as they appear on the books and records of the Trust on the record date immediately preceding such date. Distributions on the Securities must be paid on the dates payable (after giving effect to any Extension Period) to the extent that the Trust has funds available for the payment of such distributions in the Property Account of the Trust. The Trust’s funds available for Distribution to the Holders of the Securities will be limited to payments received from the Debenture Issuer. The payment of Distributions out of moneys held by the Trust is guaranteed by the Guarantor pursuant to the Guarantee.

(c) Distributions on the Securities will be payable to the Holders thereof as they appear on the books and records of the Trust on the relevant record dates. The relevant record dates shall be 15 days before the relevant Distribution Payment Date. Distributions payable on any Securities that are not punctually paid on any Distribution Payment Date, as a result of the Debenture Issuer having failed to make a payment under the Debentures, as the case may be, when due (taking into account any Extension Period), will cease to be payable to the Person in whose name such Securities are registered on the relevant record date, and such defaulted Distribution will instead be payable to the Person in whose name such Securities are registered on the special record date or other specified date determined in accordance with the Indenture. If any date on which Distributions are payable on the Securities is not a Business Day, then payment of the Distribution payable on such date will be made on the next succeeding day that is a Business Day (and without any interest or other payment in respect of any such delay) except that, if such Business Day is in the next succeeding calendar year, such payment shall be made on the immediately preceding Business Day, in each case with the same force and effect as if made on such payment date.

(d) In the event that there is any money or other property held by or for the Trust that is not accounted for hereunder, such property shall be distributed Pro Rata (as defined herein) among the Holders of the Securities.

3. Liquidation Distribution Upon Dissolution. In the event of the voluntary or involuntary liquidation, dissolution, winding-up or termination of the Trust (each a “Liquidation”) other than in connection with a redemption of the Debentures, the Holders of the Securities will be entitled to receive out of the assets of the Trust available for distribution to Holders of the Securities, after satisfaction of liabilities to creditors of the Trust (to the extent not satisfied by the Debenture Issuer), distributions equal to the aggregate of the stated liquidation amount of $1,000.00 per Security plus accrued and unpaid Distributions thereon to the date of payment (such amount being the “Liquidation Distribution”), unless in connection with such Liquidation, the Debentures in an aggregate stated principal amount equal to the aggregate stated liquidation amount of such Securities, with an interest rate equal to the Distribution Rate of, and bearing accrued and unpaid interest in an amount equal to the accrued and unpaid Distributions on, and having the same record date as, such Securities, after paying or making reasonable provision to pay all claims and obligations of the Trust in accordance with the Statutory Trust Act, shall be distributed on a Pro Rata basis to the Holders of the Securities in exchange for such Securities.

The Sponsor, as the Holder of all of the Common Securities, has the right at any time to dissolve the Trust (including, without limitation, upon the occurrence of a Special Event), subject to the receipt by the Debenture Issuer of prior approval from the Board of Governors of the Federal Reserve System and any successor federal agency that is primarily responsible for regulating the activities of the Sponsor (the “Federal Reserve”), if the Sponsor is a bank holding company, or from the Office of Thrift Supervision and any successor federal agency that is primarily responsible for regulating the activities of Sponsor, (the “OTS”) if the Sponsor is a savings and loan holding company, in either case if then required under applicable capital guidelines or policies of the Federal Reserve or OTS, as applicable, and, after

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satisfaction of liabilities to creditors of the Trust, cause the Debentures to be distributed to the Holders of the Securities on a Pro Rata basis in accordance with the aggregate stated liquidation amount thereof.

If a Liquidation of the Trust occurs as described in clause (i), (ii), (iii) or (v) in Section 7.1(a) of the Declaration, the Trust shall be liquidated by the Institutional Trustee as expeditiously as it determines to be possible by distributing, after satisfaction of liabilities to creditors of the Trust, to the Holders of the Securities, the Debentures on a Pro Rata basis to the extent not satisfied by the Debenture Issuer, unless such distribution is determined by the Institutional Trustee not to be practical, in which event such Holders will be entitled to receive out of the assets of the Trust available for distribution to the Holders, after satisfaction of liabilities of creditors of the Trust to the extent not satisfied by the Debenture Issuer, an amount equal to the Liquidation Distribution. An early Liquidation of the Trust pursuant to clause (iv) of Section 7.1(a) of the Declaration shall occur if the Institutional Trustee determines that such Liquidation is possible by distributing, after satisfaction of liabilities to creditors of the Trust, to the Holders of the Securities on a Pro Rata basis, the Debentures, and such distribution occurs.

If, upon any such Liquidation the Liquidation Distribution can be paid only in part because the Trust has insufficient assets available to pay in full the aggregate Liquidation Distribution, then the amounts payable directly by the Trust on such Capital Securities shall be paid to the Holders of the Trust Securities on a Pro Rata basis, except that if an Event of Default has occurred and is continuing, the Capital Securities shall have a preference over the Common Securities with regard to such distributions.

After the date for any distribution of the Debentures upon dissolution of the Trust (i) the Securities of the Trust will be deemed to be no longer outstanding, (ii) upon surrender of a Holder’s Securities certificate, such Holder of the Securities will receive a certificate representing the Debentures to be delivered upon such distribution, (iii) any certificates representing the Securities still outstanding will be deemed to represent undivided beneficial interests in such of the Debentures as have an aggregate principal amount equal to the aggregate stated liquidation amount with an interest rate identical to the Distribution Rate of, and bearing accrued and unpaid interest equal to accrued and unpaid distributions on, the Securities until such certificates are presented to the Debenture Issuer or its agent for transfer or reissuance (and until such certificates are so surrendered, no payments of interest or principal shall be made to Holders of Securities in respect of any payments due and payable under the Debentures; provided, however that such failure to pay shall not be deemed to be an Event of Default and shall not entitle the Holder to the benefits of the Guarantee), and (iv) all rights of Holders of Securities under the Declaration shall cease, except the right of such Holders to receive Debentures upon surrender of certificates representing such Securities.

4. Redemption and Distribution.

(a) The Debentures will mature on June 26, 2033. The Debentures may be redeemed by the Debenture Issuer, in whole or in part, at any Distribution Payment Date on or after June 26, 2008, at the Redemption Price. In addition, the Debentures may be redeemed by the Debenture Issuer at the Special Redemption Price, in whole but not in part, at any Distribution Payment Date, upon the occurrence and continuation of a Special Event within 120 days following the occurrence of such Special Event at the Special Redemption Price, upon not less than 30 nor more than 60 days’ notice to holders of such Debentures so long as such Special Event is continuing. In each case, the right of the Debenture Issuer to redeem the Debentures is subject to the Debenture Issuer having received prior approval from the Federal Reserve (if the Debenture Issuer is a bank holding company) or prior approval from the OTS (if the Debenture Issuer is a savings and loan holding company), in each case if then required under applicable capital guidelines or policies of the applicable federal agency.

“3-Month LIBOR” means the London interbank offered interest rate for three-month, U.S. dollar deposits determined by the Debenture Trustee in the following order of priority:

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(1) the rate (expressed as a percentage per annum) for U.S. dollar deposits having a three-month maturity that appears on Telerate Page 3750 as of 11:00 a.m. (London time) on the related Determination Date (as defined below). “Telerate Page 3750” means the display designated as “Page 3750” on the Dow Jones Telerate Service or such other page as may replace Page 3750 on that service or such other service or services as may be nominated by the British Bankers’ Association as the information vendor for the purpose of displaying London interbank offered rates for U.S. dollar deposits;

(2) if such rate cannot be identified on the related Determination Date, the Debenture Trustee will request the principal London offices of four leading banks in the London interbank market to provide such banks’ offered quotations (expressed as percentages per annum) to prime banks in the London interbank market for U.S. dollar deposits having a three-month maturity as of 11:00 a.m. (London time) on such Determination Date. If at least two quotations are provided, 3-Month LIBOR will be the arithmetic mean of such quotations;

(3) if fewer than two such quotations are provided as requested in clause (2) above, the Debenture Trustee will request four major New York City banks to provide such banks’ offered quotations (expressed as percentages per annum) to leading European banks for loans in U.S. dollars as of 11:00 a.m. (London time) on such Determination Date. If at least two such quotations are provided, 3-Month LIBOR will be the arithmetic mean of such quotations; and

(4) if fewer than two such quotations are provided as requested in clause (3) above, 3-Month LIBOR will be a 3-Month LIBOR determined with respect to the Distribution Period immediately preceding such current Distribution Period.

If the rate for U.S. dollar deposits having a three-month maturity that initially appears on Telerate Page 3750 as of 11:00 a.m. (London time) on the related Determination Date is superseded on the Telerate Page 3750 by a corrected rate by 12:00 noon (London time) on such Determination Date, then the corrected rate as so substituted on the applicable page will be the applicable 3-Month LIBOR for such Determination Date.

The Distribution Rate for any Distribution Period will at no time be higher than the maximum rate then permitted by New York law as the same may be modified by United States law.

“Capital Treatment Event” means the receipt by the Debenture Issuer and the Trust of an opinion of counsel experienced in such matters to the effect that, as a result of the occurrence of any amendment to, or change (including any announced prospective change) in, the laws, rules or regulations of the United States or any political subdivision thereof or therein, or as the result of any official or administrative pronouncement or action or decision interpreting or applying such laws, rules or regulations, which amendment or change is effective or which pronouncement, action or decision is announced on or after the date of original issuance of the Debentures, there is more than an insubstantial risk that the Sponsor will not, within 90 days of the date of such opinion, be entitled to treat an amount equal to the aggregate liquidation amount of the Capital Securities as “Tier 1 Capital” (or its then equivalent) for purposes of the capital adequacy guidelines of the Federal Reserve, as then in effect and applicable to the Sponsor (or if the Sponsor is not a bank holding company, such guidelines applied to the Sponsor as if the Sponsor were subject to such guidelines); provided, however, that the inability of the Sponsor to treat all or any portion of the liquidation amount of the Capital Securities as Tier l Capital shall not constitute the basis for a Capital Treatment Event, if such inability results from the Sponsor having cumulative preferred stock, minority interests in consolidated subsidiaries, or any other class of security or interest which the Federal Reserve or OTS, as applicable, may now or hereafter accord Tier 1 Capital treatment in excess of the amount which may now or hereafter qualify for treatment as Tier 1 Capital under applicable capital adequacy guidelines; provided further, however, that the distribution of

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Debentures in connection with the Liquidation of the Trust shall not in and of itself constitute a Capital Treatment Event unless such Liquidation shall have occurred in connection with a Tax Event or an Investment Company Event.

“Determination Date” means the date that is two London Banking Days (i.e., a business day in which dealings in deposits in U.S. dollars are transacted in the London interbank market) preceding the particular Distribution Period for which a Coupon Rate is being determined.

“Investment Company Event” means the receipt by the Debenture Issuer and the Trust of an opinion of counsel experienced in such matters to the effect that, as a result of the occurrence of a change in law or regulation or written change (including any announced prospective change) in interpretation or application of law or regulation by any legislative body, court, governmental agency or regulatory authority, there is more than an insubstantial risk that the Trust is or, within 90 days of the date of such opinion, will be considered an Investment Company that is required to be registered under the Investment Company Act which change or prospective change becomes effective or would become effective, as the case may be, on or after the date of the issuance of the Debentures.

“Maturity Date” means June 26, 2033.

“Redemption Date” shall mean the date fixed for the redemption of Capital Securities, which shall be any March 26, June 26, September 26 or December 26 commencing June 26, 2008.

“Redemption Price” means 100% of the principal amount of the Debentures being redeemed, plus accrued and unpaid Interest on such Debentures to the Redemption Date.

“Special Event” means a Tax Event, an Investment Company Event or a Capital Treatment Event.

“Special Redemption Date” means a date on which a Special Event redemption occurs, which shall be any March 26, June 26, September 26 or December 26, commencing September 26, 2003.

“Special Redemption Price” means (i) 107.5% of the principal amount of the Debentures being redeemed on a Special Redemption Date that occurs before June 26, 2008 and (ii) 100% of the principal amount of the Debentures being redeemed on a Special Redemption Date that occurs on June 26, 2008 or after, plus, in each case, accrued and unpaid Interest on such Debentures to the Special Redemption Date.

“Tax Event” means the receipt by the Debenture Issuer and the Trust of an opinion of counsel experienced in such matters to the effect that, as a result of any amendment to or change (including any announced prospective change) in the laws or any regulations thereunder of the United States or any political subdivision or taxing authority thereof or therein, or as a result of any official administrative pronouncement (including any private letter ruling, technical advice memorandum, field service advice, regulatory procedure, notice or announcement including any notice or announcement of intent to adopt such procedures or regulations) (an “Administrative Action”) or judicial decision interpreting or applying such laws or regulations, regardless of whether such Administrative Action or judicial decision is issued to or in connection with a proceeding involving the Debenture Issuer or the Trust and whether or not subject to review or appeal, which amendment, clarification, change, Administrative Action or decision is enacted, promulgated or announced, in each case on or after the date of original issuance of the Debentures, there is more than an insubstantial risk that: (i) the Trust is, or will be within 90 days of the date of such opinion, subject to United States federal income tax with respect to income received or accrued on the Debentures; (ii) interest payable by the Debenture Issuer on the Debentures is not, or within 90 days of the date of such opinion, will not be, deductible by the Debenture Issuer, in whole or in part, for United States federal income tax purposes; or (iii) the Trust is, or will be within 90 days of the

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date of such opinion, subject to more than a de minimis amount of other taxes, duties or other governmental charges.

(b) Upon the repayment in full at maturity or redemption in whole or in part of the Debentures (other than following the distribution of the Debentures to the Holders of the Securities), the proceeds from such repayment or payment shall concurrently be applied to redeem Pro Rata at the applicable Redemption Price or Special Redemption Price, as applicable, Securities having an aggregate liquidation amount equal to the aggregate principal amount of the Debentures so repaid or redeemed; provided, however, that holders of such Securities shall be given not less than 30 nor more than 60 days’ notice of such redemption (other than at the scheduled maturity of the Debentures).

(c) If fewer than all the outstanding Securities are to be so redeemed, the Common Securities and the Capital Securities will be redeemed Pro Rata and the Capital Securities to be redeemed will be redeemed Pro Rata from each Holder of Capital Securities.

(d) The Trust may not redeem fewer than all the outstanding Capital Securities unless all accrued and unpaid Distributions have been paid on all Capital Securities for all quarterly Distribution periods terminating on or before the date of redemption.

(e) Redemption or Distribution Procedures.

(i) Notice of any redemption of, or notice of distribution of the Debentures in exchange for, the Securities (a “Redemption/Distribution Notice”) will be given by the Trust by mail to each Holder of Securities to be redeemed or exchanged not fewer than 30 nor more than 60 days before the date fixed for redemption or exchange thereof which, in the case of a redemption, will be the date fixed for redemption of the Debentures. For purposes of the calculation of the date of redemption or exchange and the dates on which notices are given pursuant to this paragraph 4(e)(i), a Redemption/Distribution Notice shall be deemed to be given on the day such notice is first mailed by first-class mail, postage prepaid, to Holders of such Securities. Each Redemption/Distribution Notice shall be addressed to the Holders of such Securities at the address of each such Holder appearing on the books and records of the Trust. No defect in the Redemption/Distribution Notice or in the mailing thereof with respect to any Holder shall affect the validity of the redemption or exchange proceedings with respect to any other Holder.

(ii) If the Securities are to be redeemed and the Trust gives a Redemption/ Distribution Notice, which notice may only be issued if the Debentures are redeemed as set out in this paragraph 4 (which notice will be irrevocable), then, provided that the Institutional Trustee has a sufficient amount of cash in connection with the related redemption or maturity of the Debentures, the Institutional Trustee will pay the relevant Redemption Price or Special Redemption Price, as applicable, to the Holders of such Securities by check mailed to the address of each such Holder appearing on the books and records of the Trust on the Redemption Date. If a Redemption/Distribution Notice shall have been given and funds deposited as required then immediately prior to the close of business on the date of such deposit Distributions will cease to accrue on the Securities so called for redemption and all rights of Holders of such Securities so called for redemption will cease, except the right of the Holders of such Securities to receive the applicable Redemption Price or Special Redemption Price specified in paragraph 4(a), but without interest on such Redemption Price or Special Redemption Price. If any date fixed for redemption of Securities is not a Business Day, then payment of any such Redemption Price or Special Redemption Price payable on such date will be made on the next succeeding day that is a Business Day (and without any interest or other payment in respect of any such delay) except that, if such Business Day falls in the next calendar year, such payment will be made on the

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immediately preceding Business Day, in each case with the same force and effect as if made on such date fixed for redemption. If payment of the Redemption Price or Special Redemption Price in respect of any Securities is improperly withheld or refused and not paid either by the Trust or by the Debenture Issuer as guarantor pursuant to the Guarantee, Distributions on such Securities will continue to accrue at the Distribution Rate from the original Redemption Date to the actual date of payment, in which case the actual payment date will be considered the date fixed for redemption for purposes of calculating the Redemption Price or Special Redemption Price. In the event of any redemption of the Capital Securities issued by the Trust in part, the Trust shall not be required to (i) issue, register the transfer of or exchange any Security during a period beginning at the opening of business 15 days before any selection for redemption of the Capital Securities and ending at the close of business on the earliest date on which the relevant notice of redemption is deemed to have been given to all Holders of the Capital Securities to be so redeemed or (ii) register the transfer of or exchange any Capital Securities so selected for redemption, in whole or in part, except for the unredeemed portion of any Capital Securities being redeemed in part.

(iii) Redemption/Distribution Notices shall be sent by the Administrators on behalf of the Trust to (A) in respect of the Capital Securities, the Holders thereof and (B) in respect of the Common Securities, the Holder thereof.

(iv) Subject to the foregoing and applicable law (including, without limitation, United States federal securities laws), and provided that the acquiror is not the Holder of the Common Securities or the obligor under the Indenture, the Sponsor or any of its subsidiaries may at any time and from time to time purchase outstanding Capital Securities by tender, in the open market or by private agreement.

5. Voting Rights - Capital Securities.

(a) Except as provided under paragraphs 5(b) and 7 and as otherwise required by law and the Declaration, the Holders of the Capital Securities will have no voting rights. The Administrators are required to call a meeting of the Holders of the Capital Securities if directed to do so by Holders of at least 10% in liquidation amount of the Capital Securities.

(b) Subject to the requirements of obtaining a tax opinion by the Institutional Trustee in certain circumstances set forth in the last sentence of this paragraph, the Holders of a Majority in liquidation amount of the Capital Securities, voting separately as a class, have the right to direct the time, method, and place of conducting any proceeding for any remedy available to the Institutional Trustee, or exercising any trust or power conferred upon the Institutional Trustee under the Declaration, including the right to direct the Institutional Trustee, as holder of the Debentures, to (i) exercise the remedies available under the Indenture as the holder of the Debentures, (ii) waive any past default that is waivable under the Indenture, (iii) exercise any right to rescind or annul a declaration that the principal of all the Debentures shall be due and payable or (iv) consent on behalf of all the Holders of the Capital Securities to any amendment, modification or termination of the Indenture or the Debentures where such consent shall be required; provided, however, that, where a consent or action under the Indenture would require the consent or act of the holders of greater than a simple majority in aggregate principal amount of Debentures (a “Super Majority”) affected thereby, the Institutional Trustee may only give such consent or take such action at the written direction of the Holders of at least the proportion in liquidation amount of the Capital Securities outstanding which the relevant Super Majority represents of the aggregate principal amount of the Debentures outstanding. If the Institutional Trustee fails to enforce its rights under the Debentures after the Holders of a Majority in liquidation amount of such Capital Securities have so directed the Institutional Trustee, to the fullest extent permitted by law, a Holder of the Capital Securities may institute a legal proceeding directly against the Debenture Issuer to enforce the Institutional Trustee’s

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rights under the Debentures without first instituting any legal proceeding against the Institutional Trustee or any other person or entity. Notwithstanding the foregoing, if an Event of Default has occurred and is continuing and such event is attributable to the failure of the Debenture Issuer to pay interest or principal on the Debentures on the date the interest or principal is payable (or in the case of redemption, the Redemption Date or the Special Redemption Date, as applicable), then a Holder of record of the Capital Securities may directly institute a proceeding for enforcement of payment, on or after the respective due dates specified in the Debentures, to such Holder directly of the principal of or interest on the Debentures having an aggregate principal amount equal to the aggregate liquidation amount of the Capital Securities of such Holder. The Institutional Trustee shall notify all Holders of the Capital Securities of any default actually known to the Institutional Trustee with respect to the Debentures unless (x) such default has been cured prior to the giving of such notice or (y) the Institutional Trustee determines in good faith that the withholding of such notice is in the interest of the Holders of such Capital Securities, except where the default relates to the payment of principal of or interest on any of the Debentures. Such notice shall state that such Indenture Event of Default also constitutes an Event of Default hereunder. Except with respect to directing the time, method and place of conducting a proceeding for a remedy, the Institutional Trustee shall not take any of the actions described in clauses (i), (ii) or (iii) above unless the Institutional Trustee has obtained an opinion of tax counsel to the effect that, as a result of such action, the Trust will not be classified as other than a grantor trust for United States federal income tax purposes.

In the event the consent of the Institutional Trustee, as the holder of the Debentures, is required under the Indenture with respect to any amendment, modification or termination of the Indenture, the Institutional Trustee shall request the direction of the Holders of the Securities with respect to such amendment, modification or termination and shall vote with respect to such amendment, modification or termination as directed by a Majority in liquidation amount of the Securities voting together as a single class; provided, however, that where a consent under the Indenture would require the consent of a Super-Majority, the Institutional Trustee may only give such consent at the direction of the Holders of at least the proportion in liquidation amount of the Securities outstanding which the relevant Super-Majority represents of the aggregate principal amount of the Debentures outstanding. The Institutional Trustee shall not take any such action in accordance with the directions of the Holders of the Securities unless the Institutional Trustee has obtained an opinion of tax counsel to the effect that, as a result of such action, the Trust will not be classified as other than a grantor trust for United States federal income tax purposes.

A waiver of an Indenture Event of Default will constitute a waiver of the corresponding Event of Default hereunder. Any required approval or direction of Holders of the Capital Securities may be given at a separate meeting of Holders of the Capital Securities convened for such purpose, at a meeting of all of the Holders of the Securities in the Trust or pursuant to written consent. The Institutional Trustee will cause a notice of any meeting at which Holders of the Capital Securities are entitled to vote, or of any matter upon which action by written consent of such Holders is to be taken, to be mailed to each Holder of record of the Capital Securities. Each such notice will include a statement setting forth the following information (i) the date of such meeting or the date by which such action is to be taken, (ii) a description of any resolution proposed for adoption at such meeting on which such Holders are entitled to vote or of such matter upon which written consent is sought and (iii) instructions for the delivery of proxies or consents. No vote or consent of the Holders of the Capital Securities will be required for the Trust to redeem and cancel Capital Securities or to distribute the Debentures in accordance with the Declaration and the terms of the Securities.

Notwithstanding that Holders of the Capital Securities are entitled to vote or consent under any of the circumstances described above, any of the Capital Securities that are owned by the Sponsor or any Affiliate of the Sponsor shall not entitle the Holder thereof to vote or consent and shall, for purposes of such vote or consent, be treated as if such Capital Securities were not outstanding.

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In no event will Holders of the Capital Securities have the right to vote to appoint, remove or replace the Administrators, which voting rights are vested exclusively in the Sponsor as the Holder of all of the Common Securities of the Trust. Under certain circumstances as more fully described in the Declaration, Holders of Capital Securities have the right to vote to appoint, remove or replace the Institutional Trustee.

6. Voting Rights - Common Securities.

(a) Except as provided under paragraphs 6(b), 6(c) and 7 and as otherwise required by law and the Declaration, the Common Securities will have no voting rights.

(b) The Holders of the Common Securities are entitled, in accordance with Article IV of the Declaration, to vote to appoint, remove or replace any Administrators.

(c) Subject to Section 6.7 of the Declaration and only after each Event of Default (if any) with respect to the Capital Securities has been cured, waived, or otherwise eliminated and subject to the requirements of the second to last sentence of this paragraph, the Holders of a Majority in liquidation amount of the Common Securities, voting separately as a class, may direct the time, method, and place of conducting any proceeding for any remedy available to the Institutional Trustee, or exercising any trust or power conferred upon the Institutional Trustee under the Declaration, including (i) directing the time, method, place of conducting any proceeding for any remedy available to the Debenture Trustee, or exercising any trust or power conferred on the Debenture Trustee with respect to the Debentures, (ii) waiving any past default and its consequences that is waivable under the Indenture, or (iii) exercising any right to rescind or annul a declaration that the principal of all the Debentures shall be due and payable; provided, however, that, where a consent or action under the Indenture would require a Super Majority, the Institutional Trustee may only give such consent or take such action at the written direction of the Holders of at least the proportion in liquidation amount of the Common Securities which the relevant Super Majority represents of the aggregate principal amount of the Debentures outstanding. Notwithstanding this paragraph 6(c), the Institutional Trustee shall not revoke any action previously authorized or approved by a vote or consent of the Holders of the Capital Securities. Other than with respect to directing the time, method and place of conducting any proceeding for any remedy available to the Institutional Trustee or the Debenture Trustee as set forth above, the Institutional Trustee shall not take any action described in (i), (ii) or (iii) above, unless the Institutional Trustee has obtained an opinion of tax counsel to the effect that for the purposes of United States federal income tax the Trust will not be classified as other than a grantor trust on account of such action. If the Institutional Trustee fails to enforce its rights under the Declaration to the fullest extent permitted by law, any Holder of the Common Securities may institute a legal proceeding directly against any Person to enforce the Institutional Trustee’s rights under the Declaration, without first instituting a legal proceeding against the Institutional Trustee or any other Person.

Any approval or direction of Holders of the Common Securities may be given at a separate meeting of Holders of the Common Securities convened for such purpose, at a meeting of all of the Holders of the Securities in the Trust or pursuant to written consent. The Administrators will cause a notice of any meeting at which Holders of the Common Securities are entitled to vote, or of any matter upon which action by written consent of such Holders is to be taken, to be mailed to each Holder of the Common Securities. Each such notice will include a statement setting forth (i) the date of such meeting or the date by which such action is to be taken, (ii) a description of any resolution proposed for adoption at such meeting on which such Holders are entitled to vote or of such matter upon which written consent is sought and (iii) instructions for the delivery of proxies or consents.

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No vote or consent of the Holders of the Common Securities will be required for the Trust to redeem and cancel Common Securities or to distribute the Debentures in accordance with the Declaration and the terms of the Securities.

7. Amendments to Declaration and Indenture.

(a) In addition to any requirements under Section 11.1 of the Declaration, if any proposed amendment to the Declaration provides for, or the Institutional Trustee, Sponsor or Administrators otherwise propose to effect, (i) any action that would adversely affect the powers, preferences or special rights of the Securities, whether by way of amendment to the Declaration or otherwise, or (ii) the Liquidation of the Trust, other than as described in Section 7.1 of the Declaration, then the Holders of outstanding Securities, voting together as a single class, will be entitled to vote on such amendment or proposal and such amendment or proposal shall not be effective except with the approval of the Holders of at least a Majority in liquidation amount of the Securities, affected thereby; provided, however, if any amendment or proposal referred to in clause (i) above would adversely affect only the Capital Securities or only the Common Securities, then only the affected class will be entitled to vote on such amendment or proposal and such amendment or proposal shall not be effective except with the approval of a Majority in liquidation amount of such class of Securities.

(b) In the event the consent of the Institutional Trustee as the holder of the Debentures is required under the Indenture with respect to any amendment, modification or termination of the Indenture or the Debentures, the Institutional Trustee shall request the written direction of the Holders of the Securities with respect to such amendment, modification or termination and shall vote with respect to such amendment, modification, or termination as directed by a Majority in liquidation amount of the Securities voting together as a single class; provided, however, that where a consent under the Indenture would require a Super Majority, the Institutional Trustee may only give such consent at the direction of the Holders of at least the proportion in liquidation amount of the Securities which the relevant Super Majority represents of the aggregate principal amount of the Debentures outstanding.

(c) Notwithstanding the foregoing, no amendment or modification may be made to the Declaration if such amendment or modification would (i) cause the Trust to be classified for purposes of United States federal income taxation as other than a grantor trust, (ii) reduce or otherwise adversely affect the powers of the Institutional Trustee or (iii) cause the Trust to be deemed an Investment Company which is required to be registered under the Investment Company Act.

(d) Notwithstanding any provision of the Declaration, the right of any Holder of the Capital Securities to receive payment of distributions and other payments upon redemption or otherwise, on or after their respective due dates, or to institute a suit for the enforcement of any such payment on or after such respective dates, shall not be impaired or affected without the consent of such Holder. For the protection and enforcement of the foregoing provision, each and every Holder of the Capital Securities shall be entitled to such relief as can be given either at law or equity.

8. Pro Rata. A reference in these terms of the Securities to any payment, distribution or treatment as being “Pro Rata” shall mean pro rata to each Holder of the Securities according to the aggregate liquidation amount of the Securities held by the relevant Holder in relation to the aggregate liquidation amount of all Securities then outstanding unless, in relation to a payment, an Event of Default has occurred and is continuing, in which case any funds available to make such payment shall be paid first to each Holder of the Capital Securities Pro Rata according to the aggregate liquidation amount of the Capital Securities held by the relevant Holder relative to the aggregate liquidation amount of all Capital Securities outstanding, and only after satisfaction of all amounts owed to the Holders of the Capital Securities, to each Holder of the Common Securities Pro Rata according to the aggregate

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liquidation amount of the Common Securities held by the relevant Holder relative to the aggregate liquidation amount of all Common Securities outstanding.

9. Ranking. The Capital Securities rank pari passu with and payment thereon shall be made Pro Rata with the Common Securities except that, where an Event of Default has occurred and is continuing, the rights of Holders of the Common Securities to receive payment of Distributions and payments upon liquidation, redemption and otherwise are subordinated to the rights of the Holders of the Capital Securities with the result that no payment of any Distribution on, or Redemption Price (or Special Redemption Price) of, any Common Security, and no other payment on account of redemption, liquidation or other acquisition of Common Securities, shall be made unless payment in full in cash of all accumulated and unpaid Distributions on all outstanding Capital Securities for all distribution periods terminating on or prior thereto, or in the case of payment of the Redemption Price (or Special Redemption Price) the full amount of such Redemption Price (or Special Redemption Price) on all outstanding Capital Securities then called for redemption, shall have been made or provided for, and all funds immediately available to the Institutional Trustee shall first be applied to the payment in full in cash of all Distributions on, or the Redemption Price (or Special Redemption Price) of, the Capital Securities then due and payable.

10. Acceptance of Guarantee and Indenture. Each Holder of the Capital Securities and the Common Securities, by the acceptance of such Securities, agrees to the provisions of the Guarantee, including the subordination provisions therein and to the provisions of the Indenture.

11. No Preemptive Rights. The Holders of the Securities shall have no preemptive or similar rights to subscribe for any additional securities.

12. Miscellaneous. These terms constitute a part of the Declaration. The Sponsor will provide a copy of the Declaration, the Guarantee, and the Indenture to a Holder without charge on written request to the Sponsor at its principal place of business.

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EXHIBIT A-1

FORM OF CAPITAL SECURITY CERTIFICATE

[FORM OF FACE OF SECURITY]

THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), ANY STATE SECURITIES LAWS OR ANY OTHER APPLICABLE SECURITIES LAW. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS. THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR OTHERWISE TRANSFER THIS SECURITY ONLY (A) TO THE SPONSOR OR THE TRUST, (B) PURSUANT TO A REGISTRATION STATEMENT THAT HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A SO LONG AS THIS SECURITY IS ELIGIBLE FOR RESALE PURSUANT TO RULE 144A IN ACCORDANCE WITH RULE 144A, (D) TO A NON-U.S. PERSON IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH RULE 903 OR RULE 904 (AS APPLICABLE) OF REGULATION S UNDER THE SECURITIES ACT, (E) TO AN INSTITUTIONAL “ACCREDITED INVESTOR” WITHIN THE MEANING OF SUBPARAGRAPH (A) OF RULE 501 UNDER THE SECURITIES ACT THAT IS ACQUIRING THIS CAPITAL SECURITY FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL ACCREDITED INVESTOR, FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, OR (F) PURSUANT TO ANY OTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE SPONSOR’S AND THE TRUST’S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM IN ACCORDANCE WITH THE DECLARATION OF TRUST, A COPY OF WHICH MAY BE OBTAINED FROM THE SPONSOR OR THE TRUST. HEDGING TRANSACTIONS INVOLVING THIS SECURITY MAY NOT BE CONDUCTED UNLESS IN COMPLIANCE WITH THE SECURITIES ACT.

THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF ALSO AGREES, REPRESENTS AND WARRANTS THAT IT IS NOT AN EMPLOYEE BENEFIT, INDIVIDUAL RETIREMENT ACCOUNT OR OTHER PLAN OR ARRANGEMENT SUBJECT TO TITLE I OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED (“ERISA”), OR SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE “CODE”) (EACH A “PLAN”), OR AN ENTITY WHOSE UNDERLYING ASSETS INCLUDE “PLAN ASSETS” BY REASON OF ANY PLAN’S INVESTMENT IN THE ENTITY, AND NO PERSON INVESTING “PLAN ASSETS” OF ANY PLAN MAY ACQUIRE OR HOLD THE SECURITIES OR ANY INTEREST THEREIN, UNLESS SUCH PURCHASER OR HOLDER IS ELIGIBLE FOR EXEMPTIVE RELIEF AVAILABLE UNDER U.S. DEPARTMENT OF LABOR PROHIBITED TRANSACTION CLASS EXEMPTION 96-23, 95-60, 91-38, 90-1 OR 84-14 OR ANOTHER APPLICABLE EXEMPTION OR ITS PURCHASE AND HOLDING OF THIS SECURITY IS NOT PROHIBITED BY SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE WITH RESPECT TO SUCH PURCHASE OR HOLDING. ANY PURCHASER OR HOLDER OF THE SECURITIES OR ANY INTEREST THEREIN WILL BE DEEMED TO HAVE REPRESENTED BY ITS PURCHASE AND HOLDING THEREOF THAT EITHER (i) IT IS NOT AN EMPLOYEE BENEFIT PLAN WITHIN THE

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MEANING OF SECTION 3(3) OF ERISA, OR A PLAN TO WHICH SECTION 4975 OF THE CODE IS APPLICABLE, A TRUSTEE OR OTHER PERSON ACTING ON BEHALF OF AN EMPLOYEE BENEFIT PLAN OR PLAN, OR ANY OTHER PERSON OR ENTITY USING THE ASSETS OF ANY EMPLOYEE BENEFIT PLAN OR PLAN TO FINANCE SUCH PURCHASE, OR (ii) SUCH PURCHASE WILL NOT RESULT IN A PROHIBITED TRANSACTION UNDER SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE FOR WHICH THERE IS NO APPLICABLE STATUTORY OR ADMINISTRATIVE EXEMPTION.

THIS SECURITY WILL BE ISSUED AND MAY BE TRANSFERRED ONLY IN BLOCKS HAVING A LIQUIDATION AMOUNT OF NOT LESS THAN $100,000.00 (100 SECURITIES) AND MULTIPLES OF $1,000.00 IN EXCESS THEREOF. ANY ATTEMPTED TRANSFER OF SECURITIES IN A BLOCK HAVING A LIQUIDATION AMOUNT OF LESS THAN $100,000.00 SHALL BE DEEMED TO BE VOID AND OF NO LEGAL EFFECT WHATSOEVER.

THE HOLDER OF THIS SECURITY AGREES THAT IT WILL COMPLY WITH THE FOREGOING RESTRICTIONS.

IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO THE REGISTRAR AND TRANSFER AGENT SUCH CERTIFICATES AND OTHER INFORMATION AS MAY BE REQUIRED BY THE DECLARATION TO CONFIRM THAT THE TRANSFER COMPLIES WITH THE FOREGOING RESTRICTIONS.

        Certificate Number P-1 8,000 Capital Securities        

April 22, 2003

Certificate Evidencing Floating Rate Capital Securities

of

Southwest Community Statutory Trust I

(liquidation amount $1,000.00 per Capital Security)

Southwest Community Statutory Trust I, a statutory trust created under the laws of the State of Connecticut (the “Trust”), hereby certifies that First Tennessee Bank National Association is the registered owner of capital securities of the Trust representing undivided beneficial interests in the assets of the Trust, (liquidation amount $1,000.00 per capital security) (the “Capital Securities”). Subject to the Declaration (as defined below), the Capital Securities are transferable on the books and records of the Trust in person or by a duly authorized attorney, upon surrender of this Certificate duly endorsed and in proper form for transfer. The Capital Securities represented hereby are issued pursuant to, and the designation, rights, privileges, restrictions, preferences and other terms and provisions of the Capital Securities shall in all respects be subject to, the provisions of the Amended and Restated Declaration of Trust of the Trust dated as of April 22, 2003, among Frank J. Mercardante, James Lemery and Paul M. Weil, as Administrators, U.S. Bank National Association, as Institutional Trustee, Southwest Community Bancorp, as Sponsor, and the holders from time to time of undivided beneficial interests in the assets of the Trust, including the designation of the terms of the Capital Securities as set forth in Annex I to such amended and restated declaration as the same may be amended from time to time (the “Declaration”). Capitalized terms used herein but not defined shall have the meaning given them in the Declaration. The Holder is entitled to the benefits of the Guarantee to the extent provided therein. The Sponsor will provide a copy of the Declaration, the Guarantee, and the Indenture to the Holder without charge upon written request to the Sponsor at its principal place of business.

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Upon receipt of this Security, the Holder is bound by the Declaration and is entitled to the benefits thereunder.

By acceptance of this Security, the Holder agrees to treat, for United States federal income tax purposes, the Debentures as indebtedness and the Capital Securities as evidence of beneficial ownership in the Debentures.

This Capital Security is governed by, and construed in accordance with, the laws of the State of Connecticut, without regard to principles of conflict of laws.

Signatures appear on following page

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IN WITNESS WHEREOF, the Trust has duly executed this certificate.

SOUTHWEST COMMUNITY STATUTORY TRUST I
By:
Name:
Title:	Administrator

CERTIFICATE OF AUTHENTICATION

This is one of the Capital Securities referred to in the within-mentioned Declaration.

U.S. BANK NATIONAL ASSOCIATION,
as the Institutional Trustee
By:
	Authorized Officer

A-1-4

[FORM OF REVERSE OF CAPITAL SECURITY]

Distributions payable on each Capital Security will be payable at an annual rate equal to 4.47% beginning on (and including) the date of original issuance and ending on (but excluding) September 26, 2003 and at an annual rate for each successive period beginning on (and including) September 26, 2003, and each succeeding Distribution Payment Date, and ending on (but excluding) the next succeeding Distribution Payment Date (each a “Distribution Period”), equal to 3-Month LIBOR, determined as described below, plus 3.15% (the “Coupon Rate”); provided, however, that prior to June 26, 2008, the Coupon Rate shall not exceed 11.75%, applied to the stated liquidation amount of $1,000.00 per Capital Security, such rate being the rate of interest payable on the Debentures to be held by the Institutional Trustee. Distributions in arrears will bear interest thereon compounded quarterly at the Distribution Rate (to the extent permitted by applicable law). The term “Distributions” as used herein includes cash distributions and any such compounded distributions unless otherwise noted. A Distribution is payable only to the extent that payments are made in respect of the Debentures held by the Institutional Trustee and to the extent the Institutional Trustee has funds available therefor. As used herein, “Determination Date” means the date that is two London Banking Days (i.e., a business day in which dealings in deposits in U.S. dollars are transacted in the London interbank market) preceding the commencement of the relevant Distribution Period. In the event that any date on which a Distribution is payable on this Capital Security is not a Business Day, then a payment of the Distribution payable on such date will be made on the next succeeding day which is a Business Day (and without any interest or other payment in respect of any such delay), except that, if such Business Day is in the next succeeding calendar year, such payment shall be made on the immediately preceding Business Day, in each case with the same force and effect as if made on the date the payment was originally payable. The amount of the Distribution payable for any Distribution Period will be calculated by applying the Distribution Rate to the stated liquidation amount outstanding at the commencement of the Distribution Period and multiplying each such amount by the actual number of days in the Distribution Period concerned divided by 360.

“3-Month LIBOR” as used herein, means the London interbank offered interest rate for three-month U.S. dollar deposits determined by the Debenture Trustee in the following order of priority: (i) the rate (expressed as a percentage per annum) for U.S. dollar deposits having a three-month maturity that appears on Telerate Page 3750 as of 11:00 a.m. (London time) on the related Determination Date (“Telerate Page 3750” means the display designated as “Page 3750” on the Dow Jones Telerate Service or such other page as may replace Page 3750 on that service or such other service or services as may be nominated by the British Bankers’ Association as the information vendor for the purpose of displaying London interbank offered rates for U.S. dollar deposits); (ii) if such rate cannot be identified on the related Determination Date, the Debenture Trustee will request the principal London offices of four leading banks in the London interbank market to provide such banks’ offered quotations (expressed as percentages per annum) to prime banks in the London interbank market for U.S. dollar deposits having a three-month maturity as of 11:00 a.m. (London time) on such Determination Date. If at least two quotations are provided, 3-Month LIBOR will be the arithmetic mean of such quotations; (iii) if fewer than two such quotations are provided as requested in clause (ii) above, the Debenture Trustee will request four major New York City banks to provide such banks’ offered quotations (expressed as percentages per annum) to leading European banks for loans in U.S. dollars as of 11:00 a.m. (London time) on such Determination Date. If at least two such quotations are provided, 3-Month LIBOR will be the arithmetic mean of such quotations; and (iv) if fewer than two such quotations are provided as requested in clause (iii) above, 3-Month LIBOR will be a 3-Month LIBOR determined with respect to the Distribution Period immediately preceding such current Distribution Period. If the rate for U.S. dollar deposits having a three-month maturity that initially appears on Telerate Page 3750 as of 11:00 a.m. (London time) on the related Determination Date is superseded on the Telerate Page 3750 by a corrected rate by 12:00 noon (London time) on such Determination Date, then the corrected rate as so substituted on the applicable page will be the applicable 3-Month LIBOR for such Determination Date.

A-1-5

The Distribution Rate for any Distribution Period will at no time be higher than the maximum rate then permitted by New York law as the same may be modified by United States law.

All percentages resulting from any calculations on the Capital Securities will be rounded, if necessary, to the nearest one hundred-thousandth of a percentage point, with five one-millionths of a percentage point rounded upward (e.g., 9.876545% (or .09876545) being rounded to 9.87655% (or .0987655), and all dollar amounts used in or resulting from such calculation will be rounded to the nearest cent (with one-half cent being rounded upward)).

Except as otherwise described below, Distributions on the Capital Securities will be cumulative, will accrue from the date of original issuance and will be payable quarterly in arrears on March 26, June 26, September 26 and December 26 of each year, commencing on September 26, 2003. The Debenture Issuer has the right under the Indenture to defer payments of interest on the Debentures, so long as no Indenture Event of Default has occurred and is continuing, by extending the interest payment period for up to 20 consecutive quarterly periods (each an “Extension Period”) at any time and from time to time on the Debentures, subject to the conditions described below, during which Extension Period no interest shall be due and payable. During any Extension Period, interest will continue to accrue on the Debentures, and interest on such accrued interest will accrue at an annual rate equal to the Distribution Rate in effect for each such Extension Period, compounded quarterly from the date such interest would have been payable were it not for the Extension Period, to the extent permitted by law (such interest referred to herein as “Additional Interest”). No Extension Period may end on a date other than a Distribution Payment Date. At the end of any such Extension Period, the Debenture Issuer shall pay all interest then accrued and unpaid on the Debentures (together with Additional Interest thereon); provided, however, that no Extension Period may extend beyond the Maturity Date. Prior to the termination of any Extension Period, the Debenture Issuer may further extend such period, provided that such period together with all such previous and further consecutive extensions thereof shall not exceed 20 consecutive quarterly periods, or extend beyond the Maturity Date. Upon the termination of any Extension Period and upon the payment of all accrued and unpaid interest and Additional Interest, the Debenture Issuer may commence a new Extension Period, subject to the foregoing requirements. No interest or Additional Interest shall be due and payable during an Extension Period, except at the end thereof, but each installment of interest that would otherwise have been due and payable during such Extension Period shall bear Additional Interest. During any Extension Period, Distributions on the Capital Securities shall be deferred for a period equal to the Extension Period. If Distributions are deferred, the Distributions due shall be paid on the date that the related Extension Period terminates, to Holders of the Securities as they appear on the books and records of the Trust on the record date immediately preceding such date. Distributions on the Securities must be paid on the dates payable (after giving effect to any Extension Period) to the extent that the Trust has funds available for the payment of such distributions in the Property Account of the Trust. The Trust’s funds available for Distribution to the Holders of the Securities will be limited to payments received from the Debenture Issuer. The payment of Distributions out of moneys held by the Trust is guaranteed by the Guarantor pursuant to the Guarantee.

The Capital Securities shall be redeemable as provided in the Declaration.

A-1-6

ASSIGNMENT

FOR VALUE RECEIVED, the undersigned assigns and transfers this Capital Security Certificate to:

_______________________________________________________________________________________________________________

(Insert assignee’s social security or tax identification number)                                                                                                             

_______________________________________________________________________________________________________________

_______________________________________________________________________________________________________________

(Insert address and zip code of assignee) and irrevocably appoints

_______________________________________________________________________________________________________________

agent to transfer this Capital Security Certificate on the books of the Trust. The agent may substitute another to act for him or her.

Date:

Signature:

(Sign exactly as your name appears on the other side of this Capital Security Certificate)

Signature Guarantee:(1)

(1) Signature must be guaranteed by an “eligible guarantor institution” that is a bank, stockbroker, savings and loan association or credit union meeting the requirements of the Security registrar, which requirements include membership or participation in the Securities Transfer Agents Medallion Program (“STAMP”) or such other “signature guarantee program” as may be determined by the Security registrar in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended.

A-1-7

EXHIBIT A-2

FORM OF COMMON SECURITY CERTIFICATE

THIS COMMON SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EXEMPTION FROM REGISTRATION.

THIS CERTIFICATE IS NOT TRANSFERABLE EXCEPT IN COMPLIANCE WITH SECTION 8.1 OF THE DECLARATION.

Certificate Number C-1 248 Common Securities

April 22, 2003

Certificate Evidencing Floating Rate Common Securities

of

Southwest Community Statutory Trust I

Southwest Community Statutory Trust I, a statutory trust created under the laws of the State of Connecticut (the “Trust”), hereby certifies that Southwest Community Bancorp (the “Holder”) is the registered owner of common securities of the Trust representing undivided beneficial interests in the assets of the Trust (the “Common Securities”). The Common Securities represented hereby are issued pursuant to, and the designation, rights, privileges, restrictions, preferences and other terms and provisions of the Common Securities shall in all respects be subject to, the provisions of the Amended and Restated Declaration of Trust of the Trust dated as of April 22, 2003, among Frank J. Mercardante, James Lemery and Paul M. Weil, as Administrators, U.S. Bank National Association, as Institutional Trustee, Southwest Community Bancorp, as Sponsor, and the holders from time to time of undivided beneficial interest in the assets of the Trust including the designation of the terms of the Common Securities as set forth in Annex I to such amended and restated declaration, as the same may be amended from time to time (the “Declaration”). Capitalized terms used herein but not defined shall have the meaning given them in the Declaration. The Holder is entitled to the benefits of the Guarantee to the extent provided therein. The Sponsor will provide a copy of the Declaration, the Guarantee and the Indenture to the Holder without charge upon written request to the Sponsor at its principal place of business.

As set forth in the Declaration, when an Event of Default has occurred and is continuing, the rights of Holders of Common Securities to payment in respect of Distributions and payments upon Liquidation, redemption or otherwise are subordinated to the rights of payment of Holders of the Capital Securities.

Upon receipt of this Certificate, the Holder is bound by the Declaration and is entitled to the benefits thereunder.

By acceptance of this Certificate, the Holder agrees to treat, for United States federal income tax purposes, the Debentures as indebtedness and the Common Securities as evidence of undivided beneficial ownership in the Debentures.

This Common Security is governed by, and construed in accordance with, the laws of the State of Connecticut, without regard to principles of conflict of laws.

A-2-1

IN WITNESS WHEREOF, the Trust has duly executed this certificate.

SOUTHWEST COMMUNITY STATUTORY TRUST I
By:
Name:
Title:	Administrator

A-2-2

[FORM OF REVERSE OF COMMON SECURITY]

Distributions payable on each Common Security will be payable at an annual rate equal to 4.47% beginning on (and including) the date of original issuance and ending on (but excluding) September 26, 2003 and at an annual rate for each successive period beginning on (and including) September 26, 2003, and each succeeding Distribution Payment Date, and ending on (but excluding) the next succeeding Distribution Payment Date (each a “Distribution Period”), equal to 3-Month LIBOR, determined as described below, plus 3.15% (the “Coupon Rate”); provided, however, that prior to June 26, 2008, the Coupon Rate shall not exceed 11.75%, applied to the stated liquidation amount of $1,000.00 per Common Security, such rate being the rate of interest payable on the Debentures to be held by the Institutional Trustee. Distributions in arrears will bear interest thereon compounded quarterly at the Distribution Rate (to the extent permitted by applicable law). The term “Distributions” as used herein includes cash distributions and any such compounded distributions unless otherwise noted. A Distribution is payable only to the extent that payments are made in respect of the Debentures held by the Institutional Trustee and to the extent the Institutional Trustee has funds available therefor. As used herein, “Determination Date” means the date that is two London Banking Days (i.e., a business day in which dealings in deposits in U.S. dollars are transacted in the London interbank market) preceding the commencement of the relevant Distribution Period. In the event that any date on which a Distribution is payable on this Common Security is not a Business Day, then a payment of the Distribution payable on such date will be made on the next succeeding day which is a Business Day (and without any interest or other payment in respect of any such delay), except that, if such Business Day is in the next succeeding calendar year, such payment shall be made on the immediately preceding Business Day, in each case with the same force and effect as if made on the date the payment was originally payable. The amount of the Distribution payable for any Distribution Period will be calculated by applying the Distribution Rate to the stated liquidation amount outstanding at the commencement of the Distribution Period and multiplying each such amount by the actual number of days in the Distribution Period concerned divided by 360.

“3-Month LIBOR” as used herein, means the London interbank offered interest rate for three-month U.S. dollar deposits determined by the Debenture Trustee in the following order of priority: (i) the rate (expressed as a percentage per annum) for U.S. dollar deposits having a three-month maturity that appears on Telerate Page 3750 as of 11:00 a.m. (London time) on the related Determination Date (“Telerate Page 3750” means the display designated as “Page 3750” on the Dow Jones Telerate Service or such other page as may replace Page 3750 on that service or such other service or services as may be nominated by the British Bankers’ Association as the information vendor for the purpose of displaying London interbank offered rates for U.S. dollar deposits); (ii) if such rate cannot be identified on the related Determination Date, the Debenture Trustee will request the principal London offices of four leading banks in the London interbank market to provide such banks’ offered quotations (expressed as percentages per annum) to prime banks in the London interbank market for U.S. dollar deposits having a three-month maturity as of 11:00 a.m. (London time) on such Determination Date. If at least two quotations are provided, 3-Month LIBOR will be the arithmetic mean of such quotations; (iii) if fewer than two such quotations are provided as requested in clause (ii) above, the Debenture Trustee will request four major New York City banks to provide such banks’ offered quotations (expressed as percentages per annum) to leading European banks for loans in U.S. dollars as of 11:00 a.m. (London time) on such Determination Date. If at least two such quotations are provided, 3-Month LIBOR will be the arithmetic mean of such quotations; and (iv) if fewer than two such quotations are provided as requested in clause (iii) above, 3-Month LIBOR will be a 3-Month LIBOR determined with respect to the Distribution Period immediately preceding such current Distribution Period. If the rate for U.S. dollar deposits having a three-month maturity that initially appears on Telerate Page 3750 as of 11:00 a.m. (London time) on the related Determination Date is superseded on the Telerate Page 3750 by a corrected rate by 12:00 noon (London time) on such Determination Date, then the corrected rate as so substituted on the applicable page will be the applicable 3-Month LIBOR for such Determination Date.

A-2-3

The Distribution Rate for any Distribution Period will at no time be higher than the maximum rate then permitted by New York law as the same may be modified by United States law.

All percentages resulting from any calculations on the Common Securities will be rounded, if necessary, to the nearest one hundred-thousandth of a percentage point, with five one-millionths of a percentage point rounded upward (e.g., 9.876545% (or .09876545) being rounded to 9.87655% (or .0987655), and all dollar amounts used in or resulting from such calculation will be rounded to the nearest cent (with one-half cent being rounded upward)).

Except as otherwise described below, Distributions on the Common Securities will be cumulative, will accrue from the date of original issuance and will be payable quarterly in arrears on March 26, June 26, September 26 and December 26 of each year, commencing on September 26, 2003. The Debenture Issuer has the right under the Indenture to defer payments of interest on the Debentures, so long as no Indenture Event of Default has occurred and is continuing, by extending the interest payment period for up to 20 consecutive quarterly periods (each an “Extension Period”) at any time and from time to time on the Debentures, subject to the conditions described below, during which Extension Period no interest shall be due and payable. During any Extension Period, interest will continue to accrue on the Debentures, and interest on such accrued interest will accrue at an annual rate equal to the Distribution Rate in effect for each such Extension Period, compounded quarterly from the date such interest would have been payable were it not for the Extension Period, to the extent permitted by law (such interest referred to herein as “Additional Interest”). No Extension Period may end on a date other than a Distribution Payment Date. At the end of any such Extension Period, the Debenture Issuer shall pay all interest then accrued and unpaid on the Debentures (together with Additional Interest thereon); provided, however, that no Extension Period may extend beyond the Maturity Date. Prior to the termination of any Extension Period, the Debenture Issuer may further extend such period, provided that such period together with all such previous and further consecutive extensions thereof shall not exceed 20 consecutive quarterly periods, or extend beyond the Maturity Date. Upon the termination of any Extension Period and upon the payment of all accrued and unpaid interest and Additional Interest, the Debenture Issuer may commence a new Extension Period, subject to the foregoing requirements. No interest or Additional Interest shall be due and payable during an Extension Period, except at the end thereof, but each installment of interest that would otherwise have been due and payable during such Extension Period shall bear Additional Interest. During any Extension Period, Distributions on the Common Securities shall be deferred for a period equal to the Extension Period. If Distributions are deferred, the Distributions due shall be paid on the date that the related Extension Period terminates, to Holders of the Securities as they appear on the books and records of the Trust on the record date immediately preceding such date. Distributions on the Securities must be paid on the dates payable (after giving effect to any Extension Period) to the extent that the Trust has funds available for the payment of such distributions in the Property Account of the Trust. The Trust’s funds available for Distribution to the Holders of the Securities will be limited to payments received from the Debenture Issuer.

The Common Securities shall be redeemable as provided in the Declaration.

A-2-4

ASSIGNMENT

FOR VALUE RECEIVED, the undersigned assigns and transfers this Common Security Certificate to:

_______________________________________________________________________________________________________________

(Insert assignee’s social security or tax identification number)                                                                                                             

_______________________________________________________________________________________________________________

_______________________________________________________________________________________________________________

(Insert address and zip code of assignee) and irrevocably appoints

_______________________________________________________________________________________________________________

                                                  agent to transfer

this Common Security Certificate on the books of the Trust. The agent may substitute another to act for him or her.

Date:

Signature:

(Sign exactly as your name appears on the other side of this Common Security Certificate)

Signature:

(Sign exactly as your name appears on the other side of this Common Security Certificate)

Signature Guarantee(2)

(2) Signature must be guaranteed by an “eligible guarantor institution” that is a bank, stockbroker, savings and loan association or credit union, meeting the requirements of the Security registrar, which requirements include membership or participation in the Securities Transfer Agents Medallion Program (“STAMP”) or such other “signature guarantee program” as may be determined by the Security registrar in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended.

A-2-5

EXHIBIT B

SPECIMEN OF INITIAL DEBENTURE

(See Tab No. 16)

B-1

EXHIBIT C

PLACEMENT AGREEMENT

(See Tab No. 1)

C-1

EX-4.3(B)

Exhibit 4.3(b)

GUARANTEE AGREEMENT

BY AND BETWEEN

SOUTHWEST COMMUNITY BANCORP

AND

U.S. BANK NATIONAL ASSOCIATION

DATED AS OF APRIL 22, 2003

GUARANTEE AGREEMENT

This GUARANTEE AGREEMENT (this “Guarantee”), dated as of April 22, 2003, is executed and delivered by Southwest Community Bancorp, a California corporation (the “Guarantor”), and U.S. Bank National Association, a national banking association, organized under the laws of the United States of America, as trustee (the “Guarantee Trustee”), for the benefit of the Holders (as defined herein) from time to time of the Capital Securities (as defined herein) of Southwest Community Statutory Trust I, a Connecticut statutory trust (the “Issuer”).

WHEREAS, pursuant to an Amended and Restated Declaration of Trust (the “Declaration”), dated as of the date hereof among U.S. Bank National Association, not in its individual capacity but solely as institutional trustee, the administrators of the Issuer named therein, the Guarantor, as sponsor, and the holders from time to time of undivided beneficial interests in the assets of the Issuer, the Issuer is issuing on the date hereof those undivided beneficial interests, having an aggregate liquidation amount of $8,000,000.00 (the “Capital Securities”); and

WHEREAS, as incentive for the Holders to purchase the Capital Securities, the Guarantor desires irrevocably and unconditionally to agree, to the extent set forth in this Guarantee, to pay to the Holders of Capital Securities the Guarantee Payments (as defined herein) and to make certain other payments on the terms and conditions set forth herein;

NOW, THEREFORE, in consideration of the purchase by each Holder of the Capital Securities, which purchase the Guarantor hereby agrees shall benefit the Guarantor, the Guarantor executes and delivers this Guarantee for the benefit of the Holders.

ARTICLE I

DEFINITIONS AND INTERPRETATION

SECTION 1.1. DEFINITIONS AND INTERPRETATION. In this Guarantee, unless the context otherwise requires:

(a) capitalized terms used in this Guarantee but not defined in the preamble above have the respective meanings assigned to them in this Section 1.1;

(b) a term defined anywhere in this Guarantee has the same meaning throughout;

(c) all references to “the Guarantee” or “this Guarantee” are to this Guarantee as modified, supplemented or amended from time to time;

(d) all references in this Guarantee to “Articles” or “Sections” are to Articles or Sections of this Guarantee, unless otherwise specified;

(e) terms defined in the Declaration as at the date of execution of this Guarantee have the same meanings when used in this Guarantee, unless otherwise defined in this Guarantee or unless the context otherwise requires; and

(f) a reference to the singular includes the plural and vice versa.

“Affiliate” has the same meaning as given to that term in Rule 405 of the Securities Act of 1933, as amended, or any successor rule thereunder.

“Beneficiaries” means any Person to whom the Issuer is or hereafter becomes indebted or liable.

“Capital Securities” has the meaning set forth in the recitals to this Guarantee.

“Common Securities” means the common securities issued by the Issuer to the Guarantor pursuant to the Declaration.

“Corporate Trust Office” means the office of the Guarantee Trustee at which the corporate trust business of the Guarantee Trustee shall, at any particular time, be principally administered, which office at the date of execution of this Guarantee is located at 225 Asylum Street, Goodwin Square, Hartford, Connecticut 06103.

“Covered Person” means any Holder of Capital Securities.

“Debentures” means the debt securities of the Guarantor designated the Floating Rate Junior Subordinated Deferrable Interest Debentures due 2033 held by the Institutional Trustee (as defined in the Declaration) of the Issuer.

“Declaration Event of Default” means an “Event of Default” as defined in the Declaration.

“Event of Default” has the meaning set forth in Section 2.4(a).

“Guarantee Payments” means the following payments or distributions, without duplication, with respect to the Capital Securities, to the extent not paid or made by the Issuer: (i) any accrued and unpaid Distributions (as defined in the Declaration) which are required to be paid on such Capital Securities to the extent the Issuer shall have funds available therefor, (ii) the Redemption Price to the extent the Issuer has funds available therefor, with respect to any Capital Securities called for redemption by the Issuer, (iii) the Special Redemption Price to the extent the Issuer has funds available therefor, with respect to Capital Securities redeemed upon the occurrence of a Special Event, and (iv) upon a voluntary or involuntary liquidation, dissolution, winding-up or termination of the Issuer (other than in connection with the distribution of Debentures to the Holders of the Capital Securities in exchange therefor as provided in the Declaration), the lesser of (a) the aggregate of the liquidation amount and all accrued and unpaid Distributions on the Capital Securities to the date of payment, to the extent the Issuer shall have funds available therefor, and (b) the amount of assets of the Issuer remaining available for distribution to Holders in liquidation of the Issuer (in either case, the “Liquidation Distribution”).

“Guarantee Trustee” means U.S. Bank National Association, until a Successor Guarantee Trustee has been appointed and has accepted such appointment pursuant to the terms of this Guarantee and thereafter means each such Successor Guarantee Trustee.

“Guarantor” means Southwest Community Bancorp and each of its successors and assigns.

“Holder” means any holder, as registered on the books and records of the Issuer, of any Capital Securities; provided, however, that, in determining whether the Holders of the requisite percentage of Capital Securities have given any request, notice, consent or waiver hereunder, “Holder” shall not include the Guarantor or any Affiliate of the Guarantor.

“Indemnified Person” means the Guarantee Trustee, any Affiliate of the Guarantee Trustee, or any officers, directors, shareholders, members, partners, employees, representatives, nominees, custodians or agents of the Guarantee Trustee.

2

“Indenture” means the Indenture dated as of the date hereof between the Guarantor and U.S. Bank National Association, not in its individual capacity but solely as trustee, and any indenture supplemental thereto pursuant to which the Debentures are to be issued to the institutional trustee of the Issuer.

“Issuer” has the meaning set forth in the opening paragraph to this Guarantee.

“Liquidation Distribution” has the meaning set forth in the definition of “Guarantee Payments” herein.

“Majority in liquidation amount of the Capital Securities” means Holder(s) of outstanding Capital Securities, voting together as a class, but separately from the holders of Common Securities, of more than 50% of the aggregate liquidation amount (including the stated amount that would be paid on redemption, liquidation or otherwise, plus accrued and unpaid Distributions to the date upon which the voting percentages are determined) of all Capital Securities then outstanding.

“Obligations” means any costs, expenses or liabilities (but not including liabilities related to taxes) of the Issuer other than obligations of the Issuer to pay to holders of any Trust Securities the amounts due such holders pursuant to the terms of the Trust Securities.

“Officer’s Certificate” means, with respect to any Person, a certificate signed by one Authorized Officer of such Person. Any Officer’s Certificate delivered with respect to compliance with a condition or covenant provided for in this Guarantee shall include:

(a) a statement that the officer signing the Officer’s Certificate has read the covenant or condition and the definitions relating thereto;

(b) a brief statement of the nature and scope of the examination or investigation undertaken by the officer in rendering the Officer’s Certificate;

(c) a statement that the officer has made such examination or investigation as, in such officer’s opinion, is necessary to enable such officer to express an informed opinion as to whether or not such covenant or condition has been complied with; and

(d) a statement as to whether, in the opinion of the officer, such condition or covenant has been complied with.

“Person” means a legal person, including any individual, corporation, estate, partnership, joint venture, association, joint stock company, limited liability company, trust, unincorporated association, or government or any agency or political subdivision thereof, or any other entity of whatever nature.

“Redemption Price” has the meaning set forth in the Indenture.

“Responsible Officer” means, with respect to the Guarantee Trustee, any officer within the Corporate Trust Office of the Guarantee Trustee including any Vice President, Assistant Vice President, Secretary, Assistant Secretary or any other officer of the Guarantee Trustee customarily performing functions similar to those performed by any of the above designated officers and also, with respect to a particular corporate trust matter, any other officer to whom such matter is referred because of that officer’s knowledge of and familiarity with the particular subject.

“Special Event” has the meaning set forth in the Indenture.

3

“Special Redemption Price” has the meaning set forth in the Indenture.

“Successor Guarantee Trustee” means a successor Guarantee Trustee possessing the qualifications to act as Guarantee Trustee under Section 3.1.

“Trust Securities” means the Common Securities and the Capital Securities.

ARTICLE II

POWERS, DUTIES AND RIGHTS OF GUARANTEE TRUSTEE

SECTION 2.1. POWERS AND DUTIES OF THE GUARANTEE TRUSTEE.

(a) This Guarantee shall be held by the Guarantee Trustee for the benefit of the Holders of the Capital Securities, and the Guarantee Trustee shall not transfer this Guarantee to any Person except a Holder of Capital Securities exercising his or her rights pursuant to Section 4.4(b) or to a Successor Guarantee Trustee on acceptance by such Successor Guarantee Trustee of its appointment to act as Successor Guarantee Trustee. The right, title and interest of the Guarantee Trustee shall automatically vest in any Successor Guarantee Trustee, and such vesting and cessation of title shall be effective whether or not conveyancing documents have been executed and delivered pursuant to the appointment of such Successor Guarantee Trustee.

(b) If an Event of Default actually known to a Responsible Officer of the Guarantee Trustee has occurred and is continuing, the Guarantee Trustee shall enforce this Guarantee for the benefit of the Holders of the Capital Securities.

(c) The Guarantee Trustee, before the occurrence of any Event of Default and after curing all Events of Default that may have occurred, shall undertake to perform only such duties as are specifically set forth in this Guarantee, and no implied covenants shall be read into this Guarantee against the Guarantee Trustee. In case an Event of Default has occurred (that has not been waived pursuant to Section 2.4) and is actually known to a Responsible Officer of the Guarantee Trustee, the Guarantee Trustee shall exercise such of the rights and powers vested in it by this Guarantee, and use the same degree of care and skill in its exercise thereof, as a prudent person would exercise or use under the circumstances in the conduct of his or her own affairs.

(d) No provision of this Guarantee shall be construed to relieve the Guarantee Trustee from liability for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that:

(i) prior to the occurrence of any Event of Default and after the curing or waiving of all such Events of Default that may have occurred:

(A) the duties and obligations of the Guarantee Trustee shall be determined solely by the express provisions of this Guarantee, and the Guarantee Trustee shall not be liable except for the performance of such duties and obligations as are specifically set forth in this Guarantee, and no implied covenants or obligations shall be read into this Guarantee against the Guarantee Trustee; and

(B) in the absence of bad faith on the part of the Guarantee Trustee, the Guarantee Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon any certificates or opinions furnished

4

to the Guarantee Trustee and conforming to the requirements of this Guarantee; but in the case of any such certificates or opinions that by any provision hereof are specifically required to be furnished to the Guarantee Trustee, the Guarantee Trustee shall be under a duty to examine the same to determine whether or not they conform to the requirements of this Guarantee;

(ii) the Guarantee Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer of the Guarantee Trustee, unless it shall be proved that such Responsible Officer of the Guarantee Trustee or the Guarantee Trustee was negligent in ascertaining the pertinent facts upon which such judgment was made;

(iii) the Guarantee Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with the written direction of the Holders of not less than a Majority in liquidation amount of the Capital Securities relating to the time, method and place of conducting any proceeding for any remedy available to the Guarantee Trustee, or relating to the exercise of any trust or power conferred upon the Guarantee Trustee under this Guarantee; and

(iv) no provision of this Guarantee shall require the Guarantee Trustee to expend or risk its own funds or otherwise incur personal financial liability in the performance of any of its duties or in the exercise of any of its rights or powers, if the Guarantee Trustee shall have reasonable grounds for believing that the repayment of such funds is not reasonably assured to it under the terms of this Guarantee or security and indemnity, reasonably satisfactory to the Guarantee Trustee, against such risk or liability is not reasonably assured to it.

SECTION 2.2. CERTAIN RIGHTS OF GUARANTEE TRUSTEE.

(a) Subject to the provisions of Section 2.1:

(i) The Guarantee Trustee may conclusively rely, and shall be fully protected in acting or refraining from acting upon, any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document believed by it to be genuine and to have been signed, sent or presented by the proper party or parties.

(ii) Any direction or act of the Guarantor contemplated by this Guarantee shall be sufficiently evidenced by an Officer’s Certificate.

(iii) Whenever, in the administration of this Guarantee, the Guarantee Trustee shall deem it desirable that a matter be proved or established before taking, suffering or omitting any action hereunder, the Guarantee Trustee (unless other evidence is herein specifically prescribed) may, in the absence of bad faith on its part, request and conclusively rely upon an Officer’s Certificate of the Guarantor which, upon receipt of such request, shall be promptly delivered by the Guarantor.

(iv) The Guarantee Trustee shall have no duty to see to any recording, filing or registration of any instrument (or any re-recording, refiling or re-registration thereof).

(v) The Guarantee Trustee may consult with counsel of its selection, and the advice or opinion of such counsel with respect to legal matters shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and

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in accordance with such advice or opinion. Such counsel may be counsel to the Guarantor or any of its Affiliates and may include any of its employees. The Guarantee Trustee shall have the right at any time to seek instructions concerning the administration of this Guarantee from any court of competent jurisdiction.

(vi) The Guarantee Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Guarantee at the request or direction of any Holder, unless such Holder shall have provided to the Guarantee Trustee such security and indemnity, reasonably satisfactory to the Guarantee Trustee, against the costs, expenses (including attorneys’ fees and expenses and the expenses of the Guarantee Trustee’s agents, nominees or custodians) and liabilities that might be incurred by it in complying with such request or direction, including such reasonable advances as may be requested by the Guarantee Trustee; provided, however, that nothing contained in this Section 2.2(a)(vi) shall relieve the Guarantee Trustee, upon the occurrence of an Event of Default, of its obligation to exercise the rights and powers vested in it by this Guarantee.

(vii) The Guarantee Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document, but the Guarantee Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit.

(viii) The Guarantee Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents, nominees, custodians or attorneys, and the Guarantee Trustee shall not be responsible for any misconduct or negligence on the part of any agent or attorney appointed with due care by it hereunder.

(ix) Any action taken by the Guarantee Trustee or its agents hereunder shall bind the Holders of the Capital Securities, and the signature of the Guarantee Trustee or its agents alone shall be sufficient and effective to perform any such action. No third party shall be required to inquire as to the authority of the Guarantee Trustee to so act or as to its compliance with any of the terms and provisions of this Guarantee, both of which shall be conclusively evidenced by the Guarantee Trustee’s or its agent’s taking such action.

(x) Whenever in the administration of this Guarantee the Guarantee Trustee shall deem it desirable to receive instructions with respect to enforcing any remedy or right or taking any other action hereunder, the Guarantee Trustee (i) may request instructions from the Holders of a Majority in liquidation amount of the Capital Securities, (ii) may refrain from enforcing such remedy or right or taking such other action until such instructions are received, and (iii) shall be protected in conclusively relying on or acting in accordance with such instructions.

(xi) The Guarantee Trustee shall not be liable for any action taken, suffered, or omitted to be taken by it in good faith, without negligence, and reasonably believed by it to be authorized or within the discretion or rights or powers conferred upon it by this Guarantee.

(b) No provision of this Guarantee shall be deemed to impose any duty or obligation on the Guarantee Trustee to perform any act or acts or exercise any right, power, duty or obligation conferred or imposed on it, in any jurisdiction in which it shall be illegal or in which the Guarantee Trustee shall be unqualified or incompetent in accordance with applicable law to perform any such act or acts or to exercise any such right, power, duty or obligation. No permissive power or authority available to the Guarantee Trustee shall be construed to be a duty.

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SECTION 2.3. NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF GUARANTEE. The recitals contained in this Guarantee shall be taken as the statements of the Guarantor, and the Guarantee Trustee does not assume any responsibility for their correctness. The Guarantee Trustee makes no representation as to the validity or sufficiency of this Guarantee.

SECTION 2.4. EVENTS OF DEFAULT; WAIVER.

(a) An Event of Default under this Guarantee will occur upon the failure of the Guarantor to perform any of its payment or other obligations hereunder.

(b) The Holders of a Majority in liquidation amount of the Capital Securities may, voting or consenting as a class, on behalf of the Holders of all of the Capital Securities, waive any past Event of Default and its consequences. Upon such waiver, any such Event of Default shall cease to exist, and shall be deemed to have been cured, for every purpose of this Guarantee, but no such waiver shall extend to any subsequent or other default or Event of Default or impair any right consequent thereon.

SECTION 2.5. EVENTS OF DEFAULT; NOTICE.

(a) The Guarantee Trustee shall, within 90 days after the occurrence of an Event of Default, transmit by mail, first class postage prepaid, to the Holders of the Capital Securities and the Guarantor, notices of all Events of Default actually known to a Responsible Officer of the Guarantee Trustee, unless such defaults have been cured before the giving of such notice, provided, however, that the Guarantee Trustee shall be protected in withholding such notice if and so long as a Responsible Officer of the Guarantee Trustee in good faith determines that the withholding of such notice is in the interests of the Holders of the Capital Securities.

(b) The Guarantee Trustee shall not be deemed to have knowledge of any Event of Default unless the Guarantee Trustee shall have received written notice from the Guarantor or a Holder of the Capital Securities (except in the case of a payment default), or a Responsible Officer of the Guarantee Trustee charged with the administration of this Guarantee shall have obtained actual knowledge thereof.

ARTICLE III

GUARANTEE TRUSTEE

SECTION 3.1. GUARANTEE TRUSTEE; ELIGIBILITY.

(a) There shall at all times be a Guarantee Trustee which shall:

(i) not be an Affiliate of the Guarantor, and

(ii) be a corporation organized and doing business under the laws of the United States of America or any State or Territory thereof or of the District of Columbia, or Person authorized under such laws to exercise corporate trust powers, having a combined capital and surplus of at least 50 million U.S. dollars ($50,000,000), and subject to supervision or examination by Federal, State, Territorial or District of Columbia authority. If such corporation publishes reports of condition at least annually, pursuant to law or to the requirements of the supervising or examining authority referred to above, then, for the purposes of this Section 3.1(a)(ii), the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published.

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(b) If at any time the Guarantee Trustee shall cease to be eligible to so act under Section 3.1(a), the Guarantee Trustee shall immediately resign in the manner and with the effect set out in Section 3.2(c).

(c) If the Guarantee Trustee has or shall acquire any “conflicting interest” within the meaning of Section 310(b) of the Trust Indenture Act, the Guarantee Trustee shall either eliminate such interest or resign to the extent and in the manner provided by, and subject to this Guarantee.

SECTION 3.2. APPOINTMENT, REMOVAL AND RESIGNATION OF GUARANTEE TRUSTEE.

(a) Subject to Section 3.2(b), the Guarantee Trustee may be appointed or removed without cause at any time by the Guarantor except during an Event of Default.

(b) The Guarantee Trustee shall not be removed in accordance with Section 3.2(a) until a Successor Guarantee Trustee has been appointed and has accepted such appointment by written instrument executed by such Successor Guarantee Trustee and delivered to the Guarantor.

(c) The Guarantee Trustee appointed to office shall hold office until a Successor Guarantee Trustee shall have been appointed or until its removal or resignation. The Guarantee Trustee may resign from office (without need for prior or subsequent accounting) by an instrument in writing executed by the Guarantee Trustee and delivered to the Guarantor, which resignation shall not take effect until a Successor Guarantee Trustee has been appointed and has accepted such appointment by an instrument in writing executed by such Successor Guarantee Trustee and delivered to the Guarantor and the resigning Guarantee Trustee.

(d) If no Successor Guarantee Trustee shall have been appointed and accepted appointment as provided in this Section 3.2 within 60 days after delivery of an instrument of removal or resignation, the Guarantee Trustee resigning or being removed may petition any court of competent jurisdiction for appointment of a Successor Guarantee Trustee. Such court may thereupon, after prescribing such notice, if any, as it may deem proper, appoint a Successor Guarantee Trustee.

(e) No Guarantee Trustee shall be liable for the acts or omissions to act of any Successor Guarantee Trustee.

(f) Upon termination of this Guarantee or removal or resignation of the Guarantee Trustee pursuant to this Section 3.2, the Guarantor shall pay to the Guarantee Trustee all amounts owing to the Guarantee Trustee under Sections 7.2 and 7.3 accrued to the date of such termination, removal or resignation.

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ARTICLE IV

GUARANTEE

SECTION 4.1. GUARANTEE.

(a) The Guarantor irrevocably and unconditionally agrees to pay in full to the Holders the Guarantee Payments (without duplication of amounts theretofore paid by the Issuer), as and when due, regardless of any defense (except the defense of payment by the Issuer), right of set-off or counterclaim that the Issuer may have or assert. The Guarantor’s obligation to make a Guarantee Payment may be satisfied by direct payment of the required amounts by the Guarantor to the Holders or by causing the Issuer to pay such amounts to the Holders.

(b) The Guarantor hereby also agrees to assume any and all Obligations of the Issuer and in the event any such Obligation is not so assumed, subject to the terms and conditions hereof, the Guarantor hereby irrevocably and unconditionally guarantees to each Beneficiary the full payment, when and as due, of any and all Obligations to such Beneficiaries. This Guarantee is intended to be for the benefit of, and to be enforceable by, all such Beneficiaries, whether or not such Beneficiaries have received notice hereof.

SECTION 4.2. WAIVER OF NOTICE AND DEMAND. The Guarantor hereby waives notice of acceptance of this Guarantee and of any liability to which it applies or may apply, presentment, demand for payment, any right to require a proceeding first against the Issuer or any other Person before proceeding against the Guarantor, protest, notice of nonpayment, notice of dishonor, notice of redemption and all other notices and demands.

SECTION 4.3. OBLIGATIONS NOT AFFECTED. The obligations, covenants, agreements and duties of the Guarantor under this Guarantee shall in no way be affected or impaired by reason of the happening from time to time of any of the following:

(a) the release or waiver, by operation of law or otherwise, of the performance or observance by the Issuer of any express or implied agreement, covenant, term or condition relating to the Capital Securities to be performed or observed by the Issuer;

(b) the extension of time for the payment by the Issuer of all or any portion of the Distributions, Redemption Price, Special Redemption Price, Liquidation Distribution or any other sums payable under the terms of the Capital Securities or the extension of time for the performance of any other obligation under, arising out of or in connection with, the Capital Securities (other than an extension of time for payment of Distributions, Redemption Price, Special Redemption Price, Liquidation Distribution or other sum payable that results from the extension of any interest payment period on the Debentures or any extension of the maturity date of the Debentures permitted by the Indenture);

(c) any failure, omission, delay or lack of diligence on the part of the Holders to enforce, assert or exercise any right, privilege, power or remedy conferred on the Holders pursuant to the terms of the Capital Securities, or any action on the part of the Issuer granting indulgence or extension of any kind;

(d) the voluntary or involuntary liquidation, dissolution, sale of any collateral, receivership, insolvency, bankruptcy, assignment for the benefit of creditors, reorganization, arrangement, composition or readjustment of debt of, or other similar proceedings affecting, the Issuer or any of the assets of the Issuer;

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(e) any invalidity of, or defect or deficiency in, the Capital Securities;

(f) the settlement or compromise of any obligation guaranteed hereby or hereby incurred; or

(g) any other circumstance whatsoever that might otherwise constitute a legal or equitable discharge or defense of a guarantor, it being the intent of this Section 4.3 that the obligations of the Guarantor hereunder shall be absolute and unconditional under any and all circumstances.

There shall be no obligation of the Holders to give notice to, or obtain consent of, the Guarantor with respect to the happening of any of the foregoing.

SECTION 4.4. RIGHTS OF HOLDERS.

(a) The Holders of a Majority in liquidation amount of the Capital Securities have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Guarantee Trustee in respect of this Guarantee or to direct the exercise of any trust or power conferred upon the Guarantee Trustee under this Guarantee; provided, however, that (subject to Section 2.1) the Guarantee Trustee shall have the right to decline to follow any such direction if the Guarantee Trustee being advised by counsel determines that the action or proceeding so directed may not lawfully be taken or if the Guarantee Trustee in good faith by its board of directors or trustees, executive committees or a trust committee of directors or trustees and/or Responsible Officers shall determine that the action or proceedings so directed would involve the Guarantee Trustee in personal liability.

(b) Any Holder of Capital Securities may institute a legal proceeding directly against the Guarantor to enforce the Guarantee Trustee’s rights under this Guarantee, without first instituting a legal proceeding against the Issuer, the Guarantee Trustee or any other Person. The Guarantor waives any right or remedy to require that any such action be brought first against the Issuer, the Guarantee Trustee or any other Person before so proceeding directly against the Guarantor.

SECTION 4.5. GUARANTEE OF PAYMENT. This Guarantee creates a guarantee of payment and not of collection.

SECTION 4.6. SUBROGATION. The Guarantor shall be subrogated to all (if any) rights of the Holders of Capital Securities against the Issuer in respect of any amounts paid to such Holders by the Guarantor under this Guarantee; provided, however, that the Guarantor shall not (except to the extent required by mandatory provisions of law) be entitled to enforce or exercise any right that it may acquire by way of subrogation or any indemnity, reimbursement or other agreement, in all cases as a result of payment under this Guarantee, if, after giving effect to any such payment, any amounts are due and unpaid under this Guarantee. If any amount shall be paid to the Guarantor in violation of the preceding sentence, the Guarantor agrees to hold such amount in trust for the Holders and to pay over such amount to the Holders.

SECTION 4.7. INDEPENDENT OBLIGATIONS. The Guarantor acknowledges that its obligations hereunder are independent of the obligations of the Issuer with respect to the Capital Securities and that the Guarantor shall be liable as principal and as debtor hereunder to make Guarantee Payments pursuant to the terms of this Guarantee notwithstanding the occurrence of any event referred to in subsections (a) through (g), inclusive, of Section 4.3 hereof.

SECTION 4.8. ENFORCEMENT BY A BENEFICIARY. A Beneficiary may enforce the obligations of the Guarantor contained in Section 4.1(b) directly against the Guarantor and the Guarantor waives any right or remedy to require that any action be brought against the Issuer or any other person or entity

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before proceeding against the Guarantor. The Guarantor shall be subrogated to all rights (if any) of any Beneficiary against the Issuer in respect of any amounts paid to the Beneficiaries by the Guarantor under this Guarantee; provided, however, that the Guarantor shall not (except to the extent required by mandatory provisions of law) be entitled to enforce or exercise any rights that it may acquire by way of subrogation or any indemnity, reimbursement or other agreement, in all cases as a result of payment under this Guarantee, if at the time of any such payment, and after giving effect to such payment, any amounts are due and unpaid under this Guarantee.

ARTICLE V

LIMITATION OF TRANSACTIONS; SUBORDINATION

SECTION 5.1. LIMITATION OF TRANSACTIONS. So long as any Capital Securities remain outstanding, if (a) there shall have occurred and be continuing an Event of Default or a Declaration Event of Default or (b) the Guarantor shall have selected an Extension Period as provided in the Declaration and such period, or any extension thereof, shall have commenced and be continuing, then the Guarantor shall not and shall not permit any Affiliate to (x) declare or pay any dividends or distributions on, or redeem, purchase, acquire, or make a liquidation payment with respect to, any of the Guarantor’s or such Affiliate’s capital stock (other than payments of dividends or distributions to the Guarantor) or make any guarantee payments with respect to the foregoing or (y) make any payment of principal of or interest or premium, if any, on or repay, repurchase or redeem any debt securities of the Guarantor or any Affiliate that rank pari passu in all respects with or junior in interest to the Debentures (other than, with respect to clauses (x) and (y) above, (i) repurchases, redemptions or other acquisitions of shares of capital stock of the Guarantor in connection with any employment contract, benefit plan or other similar arrangement with or for the benefit of one or more employees, officers, directors or consultants, in connection with a dividend reinvestment or stockholder stock purchase plan or in connection with the issuance of capital stock of the Guarantor (or securities convertible into or exercisable for such capital stock) as consideration in an acquisition transaction entered into prior to the occurrence of the Event of Default, Declaration Event of Default or Extension Period, as applicable, (ii) as a result of any exchange or conversion of any class or series of the Guarantor’s capital stock (or any capital stock of a subsidiary of the Guarantor) for any class or series of the Guarantor’s capital stock or of any class or series of the Guarantor’s indebtedness for any class or series of the Guarantor’s capital stock, (iii) the purchase of fractional interests in shares of the Guarantor’s capital stock pursuant to the conversion or exchange provisions of such capital stock or the security being converted or exchanged, (iv) any declaration of a dividend in connection with any stockholders’ rights plan, or the issuance of rights, stock or other property under any stockholders’ rights plan, or the redemption or repurchase of rights pursuant thereto, (v) any dividend in the form of stock, warrants, options or other rights where the dividend stock or the stock issuable upon exercise of such warrants, options or other rights is the same stock as that on which the dividend is being paid or ranks pari passu with or junior to such stock and any cash payments in lieu of fractional shares issued in connection therewith, or (vi) payments under this Guarantee).

SECTION 5.2. RANKING. This Guarantee will constitute an unsecured obligation of the Guarantor and will rank subordinate and junior in right of payment to all present and future Senior Indebtedness (as defined in the Indenture) of the Guarantor. By their acceptance thereof, each Holder of Capital Securities agrees to the foregoing provisions of this Guarantee and the other terms set forth herein.

The right of the Guarantor to participate in any distribution of assets of any of its subsidiaries upon any such subsidiary’s liquidation or reorganization or otherwise is subject to the prior claims of creditors of that subsidiary, except to the extent the Guarantor may itself be recognized as a creditor of that subsidiary. Accordingly, the Guarantor’s obligations under this Guarantee will be effectively

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subordinated to all existing and future liabilities of the Guarantor’s subsidiaries, and claimants should look only to the assets of the Guarantor for payments hereunder. This Guarantee does not limit the incurrence or issuance of other secured or unsecured debt of the Guarantor, including Senior Indebtedness of the Guarantor, under any indenture that the Guarantor may enter into in the future or otherwise.

ARTICLE VI

TERMINATION

SECTION 6.1. TERMINATION. This Guarantee shall terminate as to the Capital Securities (i) upon full payment of the Redemption Price or Special Redemption Price of all Capital Securities then outstanding, (ii) upon the distribution of all of the Debentures to the Holders of all of the Capital Securities or (iii) upon full payment of the amounts payable in accordance with the Declaration upon dissolution of the Issuer. This Guarantee will continue to be effective or will be reinstated, as the case may be, if at any time any Holder of Capital Securities must restore payment of any sums paid under the Capital Securities or under this Guarantee.

ARTICLE VII

INDEMNIFICATION

SECTION 7.1. EXCULPATION.

(a) No Indemnified Person shall be liable, responsible or accountable in damages or otherwise to the Guarantor or any Covered Person for any loss, damage or claim incurred by reason of any act or omission performed or omitted by such Indemnified Person in good faith in accordance with this Guarantee and in a manner that such Indemnified Person reasonably believed to be within the scope of the authority conferred on such Indemnified Person by this Guarantee or by law, except that an Indemnified Person shall be liable for any such loss, damage or claim incurred by reason of such Indemnified Person’s negligence or willful misconduct with respect to such acts or omissions.

(b) An Indemnified Person shall be fully protected in relying in good faith upon the records of the Issuer or the Guarantor and upon such information, opinions, reports or statements presented to the Issuer or the Guarantor by any Person as to matters the Indemnified Person reasonably believes are within such other Person’s professional or expert competence and who, if selected by such Indemnified Person, has been selected with reasonable care by such Indemnified Person, including information, opinions, reports or statements as to the value and amount of the assets, liabilities, profits, losses, or any other facts pertinent to the existence and amount of assets from which Distributions to Holders of Capital Securities might properly be paid.

SECTION 7.2. INDEMNIFICATION.

(a) The Guarantor agrees to indemnify each Indemnified Person for, and to hold each Indemnified Person harmless against, any and all loss, liability, damage, claim or expense incurred without negligence or willful misconduct on the part of the Indemnified Person, arising out of or in connection with the acceptance or administration of the trust or trusts hereunder, including, but not limited to, the costs and expenses (including reasonable legal fees and expenses) of the Indemnified Person defending itself against, or investigating, any claim or liability in connection with the exercise or performance of any of the Indemnified Person’s powers or duties hereunder. The obligation to indemnify as set forth in this Section 7.2 shall survive the resignation or removal of the Guarantee Trustee and the termination of this Guarantee.

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(b) Promptly after receipt by an Indemnified Person under this Section 7.2 of notice of the commencement of any action, such Indemnified Person will, if a claim in respect thereof is to be made against the Guarantor under this Section 7.2, notify the Guarantor in writing of the commencement thereof; but the failure so to notify the Guarantor (i) will not relieve the Guarantor from liability under paragraph (a) above unless and to the extent that the Guarantor did not otherwise learn of such action and such failure results in the forfeiture by the Guarantor of substantial rights and defenses and (ii) will not, in any event, relieve the Guarantor from any obligations to any Indemnified Person other than the indemnification obligation provided in paragraph (a) above. The Guarantor shall be entitled to appoint counsel of the Guarantor’s choice at the Guarantor’s expense to represent the Indemnified Person in any action for which indemnification is sought (in which case the Guarantor shall not thereafter be responsible for the fees and expenses of any separate counsel retained by the Indemnified Person or Persons except as set forth below); provided, however, that such counsel shall be reasonably satisfactory to the Indemnified Person. Notwithstanding the Guarantor’s election to appoint counsel to represent the Guarantor in an action, the Indemnified Person shall have the right to employ separate counsel (including local counsel), and the Guarantor shall bear the reasonable fees, costs and expenses of such separate counsel if (i) the use of counsel chosen by the Guarantor to represent the Indemnified Person would present such counsel with a conflict of interest, (ii) the actual or potential defendants in, or targets of, any such action include both the Indemnified Person and the Guarantor and the Indemnified Person shall have reasonably concluded that there may be legal defenses available to it and/or other Indemnified Person(s) which are different from or additional to those available to the Guarantor, (iii) the Guarantor shall not have employed counsel satisfactory to the Indemnified Person to represent the Indemnified Person within a reasonable time after notice of the institution of such action or (iv) the Guarantor shall authorize the Indemnified Person to employ separate counsel at the expense of the Guarantor. The Guarantor will not, without the prior written consent of the Indemnified Persons, settle or compromise or consent to the entry of any judgment with respect to any pending or threatened claim, action, suit or proceeding in respect of which indemnification or contribution may be sought hereunder (whether or not the Indemnified Persons are actual or potential parties to such claim or action) unless such settlement, compromise or consent includes an unconditional release of each Indemnified Person from all liability arising out of such claim, action, suit or proceeding.

SECTION 7.3. COMPENSATION; REIMBURSEMENT OF EXPENSES. The Guarantor agrees:

(a) to pay to the Guarantee Trustee from time to time such compensation for all services rendered by it hereunder as the parties shall agree to from time to time (which compensation shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust); and

(b) except as otherwise expressly provided herein, to reimburse the Guarantee Trustee upon request for all reasonable expenses, disbursements and advances incurred or made by it in accordance with any provision of this Guarantee (including the reasonable compensation and the expenses and disbursements of its agents and counsel), except any such expense, disbursement or advance as may be attributable to its negligence or willful misconduct.

For purposes of clarification, this Section 7.3 does not contemplate the payment by the Guarantor of acceptance or annual administration fees owing to the Guarantee Trustee for services to be provided by the Guarantee Trustee under this Guarantee or the fees and expenses of the Guarantee Trustee’s counsel in connection with the closing of the transactions contemplated by this Guarantee. The provisions of this Section 7.3 shall survive the resignation or removal of the Guarantee Trustee and the termination of this Guarantee.

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ARTICLE VIII

MISCELLANEOUS

SECTION 8.1. SUCCESSORS AND ASSIGNS. All guarantees and agreements contained in this Guarantee shall bind the successors, assigns, receivers, trustees and representatives of the Guarantor and shall inure to the benefit of the Holders of the Capital Securities then outstanding. Except in connection with any merger or consolidation of the Guarantor with or into another entity or any sale, transfer or lease of the Guarantor’s assets to another entity, in each case, to the extent permitted under the Indenture, the Guarantor may not assign its rights or delegate its obligations under this Guarantee without the prior approval of the Holders of at least a Majority in liquidation amount of the Capital Securities.

SECTION 8.2. AMENDMENTS. Except with respect to any changes that do not adversely affect the rights of Holders of the Capital Securities in any material respect (in which case no consent of Holders will be required), this Guarantee may be amended only with the prior approval of the Holders of not less than a Majority in liquidation amount of the Capital Securities. The provisions of the Declaration with respect to amendments thereof apply to the giving of such approval.

SECTION 8.3. NOTICES. All notices provided for in this Guarantee shall be in writing, duly signed by the party giving such notice, and shall be delivered, telecopied or mailed by first class mail, as follows:

(a) If given to the Guarantee Trustee, at the Guarantee Trustee’s mailing address set forth below (or such other address as the Guarantee Trustee may give notice of to the Holders of the Capital Securities and the Guarantor):

U.S. Bank National Association

225 Asylum Street, Goodwin Square

Hartford, Connecticut 06103

Attention: Corporate Trust Services Division

Telecopy: 860-244-1889

With a copy to:

U.S. Bank National Association

1 Federal Street - 3rd Floor

Boston, Massachusetts 02110

Attention: Paul D. Allen, Corporate Trust Services Division

Telecopy: 617-603-6665

(b) If given to the Guarantor, at the Guarantor’s mailing address set forth below (or such other address as the Guarantor may give notice of to the Holders of the Capital Securities and to the Guarantee Trustee):

Southwest Community Bancorp

5810 El Camino Real Carlsbad,

California 92008

Attention: Frank J. Mercardante

Telecopy: 760-431-2164

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(c) If given to any Holder of the Capital Securities, at the address set forth on the books and records of the Issuer.

All such notices shall be deemed to have been given when received in person, telecopied with receipt confirmed, or mailed by first class mail, postage prepaid, except that if a notice or other document is refused delivery or cannot be delivered because of a changed address of which no notice was given, such notice or other document shall be deemed to have been delivered on the date of such refusal or inability to deliver.

SECTION 8.4. BENEFIT. This Guarantee is solely for the benefit of the Beneficiaries and, subject to Section 2.1(a), is not separately transferable from the Capital Securities.

SECTION 8.5. GOVERNING LAW. THIS GUARANTEE SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES THEREOF (OTHER THAN SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW).

SECTION 8.6. COUNTERPARTS. This Guarantee may be executed in one or more counterparts, each of which shall be an original, but all of which taken together shall constitute one and the same instrument.

SECTION 8.7 SEPARABILITY. In case one or more of the provisions contained in this Guarantee shall for any reason be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provisions of this Guarantee, but this Guarantee shall be construed as if such invalid or illegal or unenforceable provision had never been contained herein.

Signatures appear on the following page

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THIS GUARANTEE is executed as of the day and year first above written.

SOUTHWEST COMMUNITY BANCORP, as Guarantor
By:	/s/ Frank J. Mercardante
Name:	Frank J. Mercardante
Title:	President & CEO
U.S. BANK NATIONAL ASSOCIATION, as Guarantee Trustee
By:	/s/ Paul D. Allen
Name:	Paul D. Allen
Title:	Vice President

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EX-4.3(D)

Exhibit 4.3(d)

FIRST SUPPLEMENTAL INDENTURE

THIS FIRST SUPPLEMENTAL INDENTURE dated as of June 9, 2006 is by and between U.S. BANK NATIONAL ASSOCIATION (herein, together with its successors in trust, the “Trustee”), and Placer Sierra Bancshares (the “Successor Company”), a California corporation and the successor to Southwest Community Bancorp, a California corporation (the “Existing Issuer”) and the “Company” under the Indenture referred to below.

NOW, THEREFORE, in consideration of the premises set forth herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by the parties hereto, the Trustee and the Successor Company hereby agree as follows:

PRELIMINARY STATEMENTS

The Trustee and the Existing Issuer are parties to that certain Indenture dated as of April 22, 2003 (the “Indenture”), pursuant to which the Existing Issuer issued U.S. $8,248,000 of its Junior Subordinated Deferrable Interest Debentures due 2033.

As permitted by the terms of the Indenture, the Successor Company has, simultaneously with the effectiveness of this First Supplemental Indenture, merged with the Existing Issuer, (referred to herein as the “Transaction”) with the Successor Company as the surviving corporation. The parties hereto are entering into this First Supplemental Indenture pursuant to, and in accordance with, Section 11.2 of the Indenture.

SECTION 1. Definitions. All capitalized terms used herein which are defined in the Indenture, either directly or by reference therein, shall have the respective meanings assigned them in the Indenture except as otherwise provided herein or unless the context otherwise requires.

SECTION 2. Interpretation. (a) In this First Supplemental Indenture, unless a clear contrary intention appears:

(i) the singular number includes the plural number and vice versa;

(ii) the words “herein,” “hereof,” “hereto” and “hereunder” and other words of similar import refer to this First Supplemental Indenture as a whole and not to any particular Section or other subdivision;

(iii) reference to any Person includes such Persons’ successors and assigns but, if applicable, only if such successors and assigns are permitted by this First Supplemental Indenture or the Indenture, and reference to a Person in a particular capacity excludes such Person in any other capacity or individually; provided that nothing in this clause (iii) is intended to authorize any assignment not otherwise permitted by this First Supplemental Indenture or the Indenture;

(iv) reference to any agreement, document or instrument means such agreement, document or instrument as amended, supplemented or modified and in effect from time to time in accordance with the terms thereof and, if applicable, the terms hereof, as well as any substitution or replacement therefor and reference to any note includes modifications thereof and any note issued in extension or renewal thereof or in substitution or replacement therefor;

(v) reference to any Section means such Section of this First Supplemental Indenture; and

(vi) the word “including” (and with correlative meaning “include”) means including without limiting the generality of any description preceding such term.

(b) No provision in this First Supplemental Indenture shall be interpreted or construed against any Person because that Person or its legal representative drafted such provision.

SECTION 3. Assumption of Obligations.

(a) Pursuant to, and in compliance and accordance with, Section 11.2 of the Indenture, the Successor Company hereby expressly and unconditionally assumes the due and punctual payment of the principal of and premium, if any, and interest on, all of the Debentures in accordance with their terms and according to their tenor and the due and punctual performance and observance of each and every covenant and condition of the Company under the Indenture, all as if the Successor Company were the Company thereunder.

(b) Pursuant to Section 11.2 of the Indenture, the Successor Company shall succeed to, and be substituted for the Company, and may exercise every right and power of, the Company under the Indenture with the same effect as if the Successor Company had originally been the Company under the Indenture.

SECTION 4. Representations and Warranties. The Successor Company represents and warrants to the best of its knowledge that (a) it has all necessary power and authority to execute and deliver this First Supplemental Indenture and to perform the Indenture, (b) that it is the successor by merger of the Existing Issuer, (c) that it is a corporation organized and existing under the laws of the State of California, (d) that, both immediately before and after giving effect to this First Supplemental Indenture, no Default or Event of Default has occurred and is continuing, and (e) that this First Supplemental Indenture is executed and delivered pursuant to Section 9.1 of the Indenture and does not require the consent of the Securityholders.

SECTION 5. Conditions of Effectiveness. This First Supplemental Indenture shall become effective when, and only when:

(a) the Trustee shall have executed a counterpart of this First Supplemental Indenture and shall have received a counterpart of this First Supplemental Indenture executed by the Successor Company;

(b) the Trustee shall have received an Officers’ Certificate stating that the Transaction and this First Supplemental Indenture comply with Article XI of the Indenture; and

(c) the Trustee shall have received an Opinion of Counsel, in form and substance satisfactory to it, to the effect that the Transaction and the execution and delivery of this First Supplemental Indenture is permitted by and is effected in compliance with the Indenture.

SECTION 6. Reference to the Indenture. (a) Upon the effectiveness of this First Supplemental Indenture, each reference in the Indenture to “this Indenture,” “hereunder,” “herein” or words of like import shall mean and be a reference to the Indenture, as affected, amended and supplemented hereby.

(b) Upon the effectiveness of this First Supplemental Indenture, each reference in the Debentures to the Indenture, including each term defined by reference to the Indenture, shall mean and be a reference to the Indenture or such term, as the case may be, as affected, amended and supplemented hereby.

(c) The Indenture, as amended and supplemented by the amendment and supplement referred to above, shall remain in full force and effect and is hereby ratified and confirmed.

SECTION 7. Execution in Counterparts. This First Supplemental Indenture may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed to be an original and all of which when taken together shall constitute but one and the same instrument.

SECTION 8. Governing Law; Binding Effect. This First Supplemental Indenture shall be governed by and construed in accordance with the laws of the State of New York and shall be binding upon the parties hereto and their respective successors and assigns.

SECTION 9. The Trustee. The Trustee shall not be responsible in any manner whatsoever for or in respect of the validity or sufficiency of this First Supplemental Indenture or the due execution thereof by the Successor Company. The recitals of fact contained herein shall be taken as the statements solely of the Successor Company, and the Trustee assumes no responsibility for the correctness thereof.

[Signatures begin on following page]

IN WITNESS WHEREOF, the parties hereto have caused this First Supplemental Indenture to be executed and effective as of the date first stated herein, by their respective offices thereunto duly authorized.

THE SUCCESSOR COMPANY:
PLACER SIERRA BANCSHARES, a California corporation
By:	/s/ Ronald W. Bachli
Name:	Ronald W. Bachli
Title:	Chairman and Chief Executive Officer
By:	/s/ Angelee J. Harris
Name:	Angelee J. Harris
Title:	Executive Vice President, General Counsel and Secretary
THE TRUSTEE
U.S. BANK NATIONAL ASSOCIATION, as Trustee
By:	/s/ Paul D. Allen
Name:	Paul D. Allen
Title:	Vice President

EX-4.3(E)

Exhibit 4.3(e)

APPOINTMENT OF

SUCCESSOR ADMINISTRATORS

SOUTHWEST COMMUNITY STATUTORY TRUST I

This Appointment of Successor Administrators (this “Appointment”), is dated as of June 9, 2006 and is pursuant to Section 4.3(d) of the Amended and Restated Declaration of Trust between Southwest Community Bancorp, as Sponsor, U.S. Bank National Association as Institutional Trustee and the Administrators named therein, dated as of April 22, 2003 (the “Amended and Restated Trust Agreement”). Capitalized terms used herein and not otherwise defined herein have the respective meanings ascribed thereto in the Amended and Restated Trust Agreement.

WHEREAS, Frank J. Mercardante, James L. Lemery and Paul M. Weil, as Administrators of Southwest Community Statutory Trust I under the Amended and Restated Trust Agreement, are to be removed as Administrators by Placer Sierra Bancshares in its capacity as the Holder of Common Securities (the “Common Securityholder”) pursuant to Section 4.3(d) of the Amended and Restated Trust Agreement;

WHEREAS, the Common Securityholder wishes to appoint successor Administrators pursuant to Section 4.3(d) of the Amended and Restated Trust Agreement; and

WHEREAS, David E. Hooston, James Sundquist and Angelee J. Harris, each a natural person over the age of 21, and the persons whom the Common Securityholder wishes to appoint as successor Administrators, wish to accept such appointment pursuant to Section 4.3 of the Amended and Restated Trust Agreement.

1. Frank J. Mercardante, James L. Lemery and Paul M. Weil, Administrators under the Amended and Restated Trust Agreement, are hereby removed as Administrators pursuant to Section 4.3(d) of the Amended and Restated Trust Agreement by the Common Securityholder.

2. The Common Securityholder hereby appoints David E. Hooston, James Sundquist and Angelee J. Harris as successor Administrators. This Appointment, when executed and acknowledged by James Sundquist, Angelee J. Harris and David E. Hooston, the successor Administrators, and delivered to Southwest Community Statutory Trust I and the removed Administrators Frank J. Mercardante, James L. Lemery and Paul M. Weil, shall constitute the instrument accepting such appointment pursuant to Section 4.3(d) of the Amended and Restated Trust Agreement.

3. David E. Hooston, James Sundquist and Angelee J. Harris each hereby accept the appointment under the Amended and Restated Trust Agreement as successor Administrator, and accepts the rights, powers, trusts and duties of an Administrator with respect to the Capital Securities and the Trust, as if he/she were an original signatory in the capacity as Administrator (and not in an individual capacity) to the Amended and Restated Trust Agreement. This Appointment is executed and delivered by the retiring Administrators, the successor Administrators and the Common Securityholder pursuant to Section 4.3(d) of the Amended and Restated Trust Agreement.

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GENERAL PROVISIONS

All provisions of the Amended and Restated Trust Agreement shall remain unaffected by the foregoing amendment and shall remain in full force and effect.

This Appointment shall become a legally effective and binding instrument as of the date hereof.

This Appointment may be executed in any number of counterparts, each of which so executed shall be deemed to be an original, but all of such counterparts shall together constitute one and the same instrument.

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IN WITNESS WHEREOF, the undersigned have executed this Appointment as of the day and year first above written.

PLACER SIERRA BANCSHARES
By:	/s/ Ronald W. Bachli
Name:	Ronald W. Bachli
Title:	Chairman and Chief Executive Officer

U.S. BANK NATIONAL ASSOCIATION, AS INSTITUTIONAL TRUSTEE
By:	/s/ Paul D. Allen
Name:	Paul D. Allen
Title:	Vice President
	/s/ David E. Hooston
	David E. Hooston, as successor Administrator
	/s/ Jame Sundquist
	James Sundquist, as successor Administrator
	/s/ Angelee J. Harris
	Angelee J. Harris, as successor Administrator
	/s/ Frank J. Mercardante
	Frank J. Mercardante, as removed Administrator
	/s/ Jame L. Lemery
	James L. Lemery, as removed Administrator
	/s/ Paul M. Weil
	Paul M. Weil, as removed Administrator

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EX-10.2

Exhibit 10.2

EMPLOYMENT AGREEMENT

THIS AMENDED AND RESTATED AGREEMENT (the “Agreement”) is made and entered into as of January 1, 2006 (the “Effective Date”) by and between PLACER SIERRA BANCSHARES, a California corporation (the “Company”) and RONALD W. BACHLI (the “Executive”) (collectively sometimes referred to as the “Parties”).

1. Employment Period. The Company hereby agrees to employ the Executive, and the Executive hereby agrees to enter into the employ of the Company, subject to the terms and conditions of this Agreement for a term of three (3) years commencing January 1, 2006, continuing until December 31, 2008, unless earlier terminated as provided in Section 3. The period of the Executive’s employment hereunder is herein referred to in this Agreement as the “Employment Period.”

2. Terms of Employment.

(a) Position and Duties.

(i) the Executive shall serve as a member of the Board of Directors of the Company and as Chairman of the Board and Chief Executive Officer of the Company, with such authority, duties and responsibilities as are commensurate and consistent with such position and as described in Exhibit B hereto;

(ii) the Executive’s services shall be performed primarily at the Company’s office in Sacramento, California;

(iii) the Executive shall also serve, without additional compensation, as Chairman of the Board and Chief Executive Officer of Placer Sierra Bank, a subsidiary of the Company, with such authority, duties and responsibilities as are commensurate and consistent with such position;

(iv) the Executive shall devote his full time, ability and attention to the business of the Company during the term of this Agreement, and shall neither directly nor indirectly render any services of a business, commercial or professional nature to any other person, firm, corporation or organization for compensation without the prior written consent of the Board of Directors of the Company (the “Board”). Notwithstanding the foregoing, it is also understood and agreed that the Executive currently serves and may continue to serve on boards of directors of other companies.

(b) Compensation.

(i) Base Salary. The Executive shall receive a base salary at an annual rate of [$600,000], subject to annual review at the discretion of the Board (the “Base Salary”). The Base Salary shall be payable in semi-monthly installments in accordance with the Company’s normal payroll procedures, and shall be reduced by payroll taxes and withholding required by federal, state or local law and any additional withholding to which the Executive agrees in writing.

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(ii) Stock Options. The Executive shall be granted an option to purchase 125,000 shares of the Company’s Common Stock at fair market value on the date of grant, which date shall be the date this Agreement is executed by Employee (the “Employee Stock Option”). The Employee Stock Option shall be granted for a term of six (6) years pursuant to the stock option plan of the Company and shall vest over a period of four (4) years. The vesting period of the Employee Stock Option shall commence on December 31, 2006 as to twenty percent (20%) of the underlying option shares and shall further vest in a twenty percent (20%) increment on December 31, 2007, as to a forty percent (40%) increment on December 31, 2008, and as to a twenty percent (20%) increment on December 31, 2009. In the event that, following the Employment Period, Employee is not retained as a director of the Company through December 31, 2009, then and in that event, the vesting of the last twenty percent (20%) increment shall accelerate and become fully exercisable at the end of the Employment Period. All other acceleration of vesting and the extension of the term of the Employee option shall be as described in this Agreement.

(iii) Other Employee Benefit Plans. The Executive shall be entitled to participate in all employee benefit, welfare and other plans, practices, policies and programs generally applicable to similarly situated executives of the Company as in effect from time to time. Notwithstanding the foregoing, the Executive shall not participate in the Company’s Executive Incentive Compensation Plan or any other plan which provides incentive compensation generally to executive officers or other employees of the Company.

(iv) General Expenses. The Company shall, upon submission and approval of written statements and bills in accordance with the then-regular procedures of the Company, pay or reimburse the Executive for any and all necessary, customary and usual expenses (including entertainment) incurred by the Executive while traveling for or on behalf of the Company, and any and all other necessary, customary or usual expenses incurred by the Executive for or on behalf of the Company in the normal course of business, as determined to be appropriate by the Company and which shall include monthly parking and member dues at the Sutter Club in Sacramento.

(v) Automobile Allowance. During the term of this Agreement, the Executive shall be entitled to an automobile allowance in the amount of $1,200 per month (less payroll taxes and withholding required by federal, state or local law). In addition, Company shall pay the amounts charged by Executive for this automobile allowance for fuel for business related travel on a credit card provided by Company to Executive. Except for this automobile allowance and payment of fuel charges, Company shall not be obligated to pay any other expenditure with respect to the ownership or operation of Executive’s automobile, and Executive will be responsible for all out-of-pocket expenses, including, but not limited to, registration, insurance, repairs and maintenance. The Executive shall procure and maintain an automobile liability insurance policy on the automobile, with coverage including the Executive for at least $100,000 for bodily injury or death to any one person, $300,000 for bodily injury or death in any one accident, and $50,000 for property damage in any one accident. The Company shall be named as an additional insured and the Executive shall provide the Company with copies of policies evidencing insurance and the Company’s inclusion as an additional insured.

(vi) Vacation. The Executive shall be entitled to four weeks (20 days) paid vacation leave per year, which shall accrue on a daily basis. Such vacation leave shall be taken at such time or times as are mutually agreed upon by the Executive and the Board and in accordance with the Company’s vacation leave policy, provided, that at least two (2) weeks of such vacation shall be taken consecutively. The Executive acknowledges that the requirement of two (2) consecutive weeks of vacation is required by sound banking practice. For each calendar year,

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the Board shall decide, in its discretion, either (1) to pay the Executive for any unused vacation time for such calendar year or (2) to carry over any unused vacation time for such calendar year to the next calendar year, provided, however, that the Executive shall not accrue additional vacation time at any time that the Executive has accrued and unused vacation time of seven (7) weeks.

(vii) Retirement. The Company shall pay to the Executive a retirement benefit of $200,000 per year for a period of ten years, commencing as of the later of: (1) the first day of the month following the Executive’s retirement from the Company, provided, however, that payments that otherwise would be made within the first 6 months following termination shall be made the first day of the seventh month following termination, or (2) January 1 following the Executive’s 67^th birthday provided that, except as expressly provided in section 4 herein below, such retirement benefits shall be deemed to be 80% vested as of the date of this Agreement and shall continue to vest at the rate of twenty percent (20%) per year commencing as of the effective date of this Agreement. The retirement benefits shall be payable in semi-monthly installments (calculated by multiplying the Executive’s vested percentage by $200,000) in accordance with the Company’s normal payroll procedures, less payroll taxes and withholding required by federal, state or local law and any additional withholding to which the Executive agrees in writing. The receipt of any benefit under this economic equivalent alternative will occur no earlier than would the first payment under the semi-monthly installment alternative. Notwithstanding the foregoing, upon the death or disability of the Executive during the Employment Period, the Executive’s retirement benefits shall begin on the first day of the month following such death or disability, provided, however, that payments that otherwise would be made within the first 6 months following such death or disability shall by made the first day of the seventh month following such death or disability. Payment of such retirement benefits in the event of the Executive’s death shall be made to Executive’s estate or beneficiary as provided in Section 4(c) hereof. The Company has designated specific corporate assets as the source from which payments under this Section 2(b)(vi) will be paid and such assets will remain under the Company’s dominion and control, and will be subject to the claims of its general creditors. The Company acknowledges that it has transferred such assets to a “rabbi trust” dated May 14, 2003 that satisfies the guidelines of Revenue Procedure 92-64, 1992-2 CB 422. If and to the extent the Company transfers such assets to a rabbi trust, it is the intention of the parties that such trust be treated as a “grantor” trust for federal income tax purposes, and that the income of the trust be treated as the Company’s income, pursuant to Subtitle A, Chapter 1, Subchapter J, Subpart E, of the Internal Revenue Code of 1986, as amended (the “Code”).

3. Termination of Employment.

(a) Death or Disability. The Executive’s employment shall terminate automatically upon the Executive’s death during the Employment Period. If the Company determines in good faith that the Disability of the Executive has occurred during the Employment Period (pursuant to the definition of Disability set forth below), it may give the Executive written notice in accordance with Section 17(e) of this Agreement of its intention to terminate the Executive’s employment. In such event, the Executive’s employment with the Company shall terminate effective on the 30^th day after receipt of such notice by the Executive (the “Disability Effective Date”), provided that, within the 30 days after such receipt, the Executive shall not have returned to full-time performance of the Executive’s duties. For purposes of this Agreement, the “Disability” of the Executive has occurred if the Executive is not able, as a result of an illness or other physical or mental disability, to perform the essential functions of his position as required by this Agreement for a period of ninety (90) consecutive days or in excess of one hundred eighty (180) days in any one (1) year period,

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notwithstanding reasonable accommodation by the Company to the Executive’s known physical or mental disability, solely in accordance with, and to the extent required by, the Americans with Disabilities Act, 29 U.S.C. sections 12101-213 or any other state or local law governing the employment of disabled persons (the “ADA”) provided such accommodation would not impose an undue hardship on the operation of the Company’s business or a direct threat to the Executive or others pursuant to the ADA.

(b) Cause. The Company may terminate the Executive’s employment for Cause or without Cause. For purposes of this Agreement, “Cause” shall mean:

(i) Any act of material dishonesty;

(ii) Any material breach of this Agreement;

(iii) Any breach of a fiduciary duty (involving personal profit);

(iv) Any habitual neglect of, or habitual negligence in carrying out, those duties contemplated under Sections 1 and 2 of this Agreement;

(v) Any willful violation of any law, rule or regulation, which, by virtue of bank regulatory restrictions imposed as a result thereof, would have a material adverse effect on the business or financial prospects of the Company;

(vi) Any conviction of any felony which may be reasonably interpreted to be harmful to the Company’s reputation;

(vii) The requirement to comply with any final cease-and-desist order or written agreement with any applicable state or federal bank regulatory authority which requests or orders the Executive’s dismissal or limits the Executive’s employment duties;

(viii) Any conduct which constitutes unfair competition with the Company or any parent company, shareholder, subsidiary, division or affiliate thereof;

(ix) The inducement of any client, customer, agent or employee to break any contract or terminate the agency or employment relationship with the Company or any parent company, shareholder, subsidiary, division or affiliate thereof; or

(x) Any willful engaging in illegal conduct or gross misconduct, which is materially and demonstrably injurious to the business or reputation of the Company or any of its subsidiaries. For purposes of this subsection (x), in determining whether cause exists, no act or failure to act on part of Employee shall be considered “willful” unless done, or omitted to be done, by Employee in bad faith and without reasonable belief that the action or omission was in, or not opposed to, the best interest of the Company or its affiliates. Any act, or failure to act, based upon authority given pursuant to a resolution duly adopted by the Board is conclusively presumed to be done, or omitted to be done, by Employee in good faith and in the best interest of the Company. The Company must notify Employee of any event constituting cause within ninety (90) days following the Company’s knowledge of its existence or such event shall not constitute cause for purpose of this subparagraph (x).

Termination for Cause by the Company shall not constitute a waiver of any remedies that may otherwise be available to the Company under law, equity, or this Agreement.

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(c) Good Reason. The Executive’s employment may be terminated by the Executive for Good Reason. For purposes of this Agreement, “Good Reason” shall mean in the absence of a written consent of the Executive:

(i) The assignment to the Executive of duties inconsistent with the Executive’s status as Chairman of the Board and Chief Executive Officer of the Company or a substantial adverse alteration in the nature or stature of the Executive’s responsibilities from those described herein, which is not cured by the Company within seven (7) business days after the Executive delivers written notice to the Company of such assignment or alteration;

(ii) A reduction by the Company of the Executive’s then current Base Salary;

(iii) Any material breach by the Company of any provisions of this Agreement, which breach is not cured by the Company within seven (7) business days after the Executive delivers written notice of such breach to the Company.

(iv) the Company’s requiring the Executive to be based at any office location outside of Sacramento, California;

(v) any purported termination by the Company of the Executive’s employment otherwise than as expressly permitted by this Agreement; and

(vi) any failure by the Company to comply with and satisfy Section 14 (c) of this Agreement.

(d) Change in Control. The Executive may terminate this Agreement upon a Change in Control of the Company, provided that the Executive provides Notice of Termination pursuant to Section 3(e) of this Agreement not later than two (2) years after the Change in Control occurs. “Change in Control” shall mean

(i) The consummation of a plan of dissolution or liquidation of the Company;

(ii) The consummation of a plan of reorganization, merger or consolidation involving the Company, except for a reorganization, merger or consolidation where (A) the shareholders of the Company immediately prior to such reorganization, merger or consolidation own directly or indirectly more than 50% of the combined voting power of the outstanding voting securities of the corporation resulting from such reorganization, merger or consolidation (the “Surviving Corporation”) and the individuals who were members of the Board immediately prior to the execution of the agreement providing for such reorganization, merger or consolidation constitute at least 50% of the members of the board of directors of the Surviving Corporation, or a corporation beneficially directly or indirectly owning a majority of the voting securities of the Surviving Corporation; or (B) the Company is reorganized, merged or consolidated with a corporation in which any shareholder owning at least 50% of the combined voting power of the outstanding voting securities of the Company immediately prior to such reorganization, merger or consolidation, owns at least 50% of the combined voting power of the outstanding voting securities of the corporation resulting from such reorganization, merger or consolidation;

(iii) The sale of all or substantially all of the assets of the Company to another person or entity;

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(iv) The acquisition of beneficial ownership of stock representing more than fifty percent (50%) of the voting power of the Company then outstanding by another person or entity.

(e) Notice of Termination. Any termination by the Company whether for Cause or otherwise, or by the Executive for Good Reason or otherwise, shall be communicated by Notice of Termination to the other Party hereto given in accordance with Section 17(e) of this Agreement. For purposes of this Agreement, a “Notice of Termination” means a written notice which (i) indicates the specific termination provision in this Agreement relied upon; and (ii) if the Date of Termination (as defined below) is other than the date of receipt of such notice, specifies the termination date (which date shall be not more than thirty (30) days after the giving of such notice). The failure by the Executive or the Company to set forth in the Notice of Termination any fact or circumstance which contributes to a showing of Good Reason or Cause shall not waive any right of the Executive or the Company, respectively, hereunder or preclude the Executive or the Company, respectively, from asserting such fact or circumstance in enforcing the Executive’s or the Company’s rights hereunder.

(f) Date of Termination. “Date of Termination” means (i) if the Executive’s employment is terminated by the Company for any reason other than death or Disability, or by the Executive for Good Reason or incident to a Change in Control, the date of receipt of the Notice of Termination or any later date specified therein within 30 days of such notice, as the case may be; (ii) if the Executive’s employment is terminated by reason of death or Disability, the Date of Termination shall be the date of death of the Executive or the Disability Effective Date, as the case may be; and (iii) if the Executive terminates his employment other than for Good Reason, the Date of Termination shall be 30 days after the date of Notice of Termination, unless the Company, at its option, chooses an earlier date.

4. Obligations of the Company upon Termination.

(a) Good Reason; Other Than for Cause, Change in Control, Death or Disability. If, during the Employment Period, the Company shall terminate the Executive’s employment other than for Cause, death or Disability or the Executive shall terminate employment for Good Reason (other than incident to a Change in Control):

(i) the Company shall pay to the Executive a lump sum payment calculated to consist of an amount one (1) times Executive’s then current Base Salary, as defined in Section 2(b)(i), (less payroll taxes and withholding required by any federal, state or local law, any additional withholding to which the Executive has agreed, and any outstanding obligations owed by the Executive to the Company). No portion of such amount shall be payable until eight days after delivery to the Company of a duly executed Release in the form of Exhibit “A” hereto. Notwithstanding the foregoing, the lump sum payment must be paid (if at all) no later than 10 weeks after the end of the year in which employment termination occurs.

(ii) the Company shall pay to the Executive the retirement benefit provided for pursuant to Section 2(b)(vi) hereof for a period of ten years (unless an election to receive the retirement benefit in some other manner is timely made in accordance with Section 2(b)(vi)), commencing as of the first day of the month following the termination of the Executive’s employment pursuant to Section 3(c) hereof. If the retirement benefits are paid under this Section 4(a)(ii), the vesting schedule provided in Section 2(b)(vi) hereof will be accelerated and the Executive shall become fully vested in such retirement benefits. The retirement benefits shall be payable in semi-monthly installments in accordance with the Company’s normal payroll procedures (unless an election to receive the retirement benefit in some other

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manner is timely made in accordance with Section 2(b)(vi)), less payroll taxes and withholding required by federal, state or local law and any additional withholding to which the Executive agrees in writing; provided, however, that the payments that otherwise would be made within the first 6 months following termination of employment shall by made the first day of the seventh month following such termination. No portion of the otherwise non-vested retirement benefit shall be payable until eight days after delivery to the Company of a duly executed Release in the form of Exhibit “A” hereto.

(iii) any and all stock options granted to the Executive under any stock option plan of the Company and held by the Executive at the Date of Termination shall become fully vested and shall be exercisable for a period of three (3) years after the Date of Termination. Not withstanding the foregoing, in the event Employee continues as a director of the Company following the date of termination, and during such period Employee remains a director of the Company, such stock options shall continue to vest in accordance with the vesting schedule described in this Agreement and shall be exercisable for a period of three (3) years after such directorship ceases. No stock options shall become fully vested pursuant to this Section 4(a) until eight days after delivery to the Company of a duly executed Release in the form of Exhibit “A” hereto.

(iv) the Executive shall receive those benefits, if any, that have vested by operation of state or federal law or under any written term of a plan (“Vested Benefits”), and

(v) the Executive shall be entitled to receive health care coverage continuation rights under the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“COBRA Rights”), which will be paid for at the Company’s expense while the COBRA Rights are available.

The benefits specified in Sections 4 (a)(i) through 4(a)(iii) above shall constitute liquidated damages in lieu of any and all claims by the Executive against the Company and each of its parent companies, shareholders, subsidiaries, divisions and affiliates, and each of their respective directors, partners, members, officers, employees and agents, arising out of this Agreement or out of the employment relationship or termination of the employment relationship between the Executive and the Company, and shall be in full and complete satisfaction of any and all rights which the Executive may enjoy hereunder, and are expressly conditioned upon receipt by the Company of an executed, unconditional Release from the Executive in the form of Exhibit “A”.

(b) Change in Control. In the event of a Change in Control and, during the two (2) year period following such Change in Control, the Executive terminates employment with the Company (pursuant to Section 3(d)):

(i) the Company shall pay to the Executive a single sum severance payment calculated to consist of an amount equal to two (2) times the Executive’s then current Base Salary, as defined in Section 2(b)(i) (less payroll taxes and withholding required by any federal, state or local law, any additional withholding to which the Executive has agreed, and any outstanding obligations owed by the Executive to the Company) No portion of such severance pay shall be payable until eight days after delivery to the Company of a duly executed Release in the form of Exhibit “A” hereto. Notwithstanding the foregoing, the lump sum must be paid (if at all) no later than 10 weeks after the end of the year in which employment termination occurs.

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(ii) the Company (or its successor) shall pay to the Executive the retirement benefit provided for pursuant to Section 2(b)(vi) hereof for a period of ten years (unless an election to receive the retirement benefit in some other manner is timely made in accordance with Section 2(b)(vi)), commencing as of the first day of the month following the termination of the Executive’s employment pursuant to Section 3(d). If the retirement benefits are paid under this Section 4(b)(ii), the vesting schedule provided in Section 2(b)(vi) hereof will be accelerated and the Executive shall become fully vested in such retirement benefits. The retirement benefits shall be payable in semi-monthly installments in accordance with the Company’s (or its successor’s) normal payroll procedures (unless an election to receive the retirement benefit in some other manner is timely made in accordance with Section 2(b)(vi)), less payroll taxes and withholding required by federal, state or local law and any additional withholding to which the Executive agrees in writing; provided, however, that the payments that otherwise would be made within the first 6 months following termination of employment shall by made the first day of the seventh month following such termination. No portion of the otherwise non-vested retirement benefit shall be payable until eight days after delivery to the Company of a duly executed Release in the form of Exhibit “A” hereto.

(iii) any and all stock options previously granted to the Executive under any stock option plan of the Company and held by the Executive at the Date of Termination shall become fully vested and shall be exercisable for a period of three (3) years after the Date of Termination. No stock options become fully vested pursuant to this Section 4(b) until eight days after delivery to the Company of a duly executed Release in the form of Exhibit “A” hereto.

(iv) the Executive shall receive Vested Benefits, as defined hereinabove; and

(v) the Executive shall be entitled to receive COBRA Rights, as defined hereinabove, which will be paid for at the Company’s expense while the COBRA Rights are available.

The payments specified in Sections 4 (b)(i) through 4(b)(iii) above shall constitute liquidated damages in lieu of any and all claims by the Executive against the Company and each of its parent companies, shareholders, subsidiaries, divisions and affiliates, and each of their respective directors, partners, members, officers, employees and agents, arising out of this Agreement or out of the employment relationship or termination of the employment relationship between the Executive and the Company, and shall be in full and complete satisfaction of any and all rights which the Executive may enjoy hereunder, and are expressly conditioned upon receipt by the Company of an executed, unconditional Release from the Executive in the form of Exhibit “A”.

(c) Death. If the Executive’s employment is terminated by reason of the Executive’s death during the Employment Period, this Agreement shall terminate without further obligations to the Executive’s legal representatives under this Agreement, other than for payment of accrued Base Salary and the retirement benefit provided for pursuant to Section 2(b)(vi) hereof. Accrued Base Salary shall be paid to the Executive’s estate or beneficiary, as applicable, in a lump sum in cash within 30 days of the Date of Termination. The Company shall pay to the Executive’s estate or beneficiary, as applicable, the entire retirement benefit provided for pursuant to Section 2(b)(vi) hereof in a lump sum payment in cash made the first day of the seventh month following Executive’s death, less payroll taxes and withholding required by federal, state or local law and any additional withholding to which the Executive has agreed in writing. If the retirement benefits are paid under this Section 4(c), the vesting schedule provided in Section 2(b)(vi) hereof will be accelerated and the Executive shall become fully vested in such retirement benefits. The Executive’s legal representatives shall also be entitled to receive Vested Benefits, as defined hereinabove, and COBRA rights, as defined hereinabove, to the extent allowed by law.

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(d) Disability. If the Executive’s employment is terminated by reason of the Executive’s Disability during the Employment Period, this Agreement shall terminate without further obligations to the Executive, other than for payment of accrued Base Salary and the retirement benefit provided for pursuant to Section 2(b)(vi) hereof. The Company shall pay to the Executive the retirement benefit provided for pursuant to Section 2(b)(vi) hereof for a period of ten years (unless an election to receive the retirement benefit in some other manner is timely made in accordance with Section 2(b)(vi)), commencing as of the first day of the month following the termination of the Executive’s employment for disability pursuant to Section 3(a). If the retirement benefits are paid under this Section 4(d), the vesting schedule provided in Section 2(b)(vi) hereof will be accelerated and the Executive shall become fully vested in such retirement benefits. The retirement benefits shall be payable in semi-monthly installments in accordance with the Company’s normal payroll procedures (unless an election to receive the retirement benefit in some other manner is timely made in accordance with Section 2(b)(vi)), less payroll taxes and withholding required by federal, state or local law and any additional withholding to which the Executive agrees in writing. Any and all stock options previously granted to the Executive under any stock option plan of the Company and held by the Executive at the Date of Termination shall become fully vested and shall be exercisable for a period of three (3) years after the Date of Termination. The Executive shall also be entitled to receive Vested Benefits, as defined hereinabove, and COBRA rights, as defined hereinabove.

(e) Cause; Other than for Good Reason. If the Executive’s employment shall be terminated for Cause or if the Executive terminates his employment without Good Reason during the Employment Period, this Agreement shall terminate without further obligations to the Executive other than the obligation to pay to the Executive (i) his Base Salary through the Date of Termination, (ii) retirement benefits specified in section 2(b)(vi) hereinabove, to the extent vested as specified therein, (iii) Vested Benefits, as defined hereinabove, and (iv) COBRA rights, as defined hereinabove.

5. No Duty to Mitigate. In no event shall the Executive be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to the Executive under any of the provisions of this Agreement and, such amounts shall not be reduced whether or not the Executive obtains other employment.

6. Certain Additional Payments by the Company.

(a) Anything in this Agreement to the contrary notwithstanding and except as set forth below, in the event it shall be determined that any payment or distribution by the Company to or for the benefit of the Executive (whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise, but determined without regard to any additional payments required under this Section 6) (a “Payment”) would be subject to the excise tax imposed by section 4999 of the Code or any interest or penalties are incurred by the Executive with respect to such excise tax (such excise tax, together with any such interest and penalties, are hereinafter collectively referred to as the “Excise Tax”), then the Executive shall be entitled to receive an additional payment (a “Gross-Up Payment”) in an amount such that after payment by the Executive of all taxes (including any interest or penalties imposed with respect to such taxes), including, without limitation, any income taxes and all other related payroll taxes (and any interest and penalties imposed with respect thereto) and Excise Tax imposed upon the Gross-Up Payment, the Executive retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payments. Notwithstanding the foregoing provisions of this Section 6(a), if it shall be determined that the Executive is entitled to a Gross-Up Payment, but that the Payments do not exceed the lesser of (a) 105% of the greatest amount (the “Reduced Amount”) that could be paid to the Executive such that

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the receipt of Payments would not give rise to any Excise Tax, or (b) $50,000; then no Gross-Up Payment shall be made to the Executive and the Payments, in the aggregate, shall be equal to the Reduced Amount.

(b) Subject to the provisions of Section 6(c), all determinations required to be made under this Section 6, including whether and when a Gross-Up Payment is required and the amount of such Gross-Up Payment and the assumptions to be utilized in arriving at such determination, shall be made by such certified public accounting firm reasonably acceptable to the Executive as may be designated by the Company (the “Accounting Firm”) which shall provide detailed supporting calculations both to the Company and the Executive within 15 business days of the receipt of notice from the Executive that there has been a Payment, or such earlier time as is requested by the Company. All fees and expenses of the Accounting Firm shall be borne solely by the Company. Any Gross-Up Payment, as determined pursuant to this Section 6, shall be paid by the Company to the Executive within five days of the later of (i) the due date for the payment of any Excise Tax; and (ii) the receipt of the Accounting Firm’s determination. Any determination by the Accounting Firm shall be binding upon the Company and the Executive. As a result of the uncertainty in the application of section 4999 of the Code at the time of the initial determination by the Accounting Firm hereunder, it is possible that Gross-Up Payments which will not have been made by the Company should have been made (“Underpayment”), consistent with the calculations required to be made hereunder. In the event that the Company exhausts its remedies pursuant to Section 6(c) and the Executive thereafter is required to make a payment of any Excise Tax, the Accounting Firm shall determine the amount of the Underpayment that has occurred and any such Underpayment shall be promptly paid by the Company to or for the benefit of the Executive.

(c) The Executive shall notify the Company in writing of any claim by the Internal Revenue Service that, if successful, would require the payment by the Company of the Gross-Up Payment. Such notification shall be given as soon as practicable but no later than ten business days after the Executive is informed in writing of such claim and shall apprise the Company of the nature of such claim and the date on which such claim is requested to be paid. The Executive shall not pay such claim prior to the expiration of the 30-day period following the date on which it gives such notice to the Company (or such shorter period ending on the date that any payment of taxes with respect to such claim is due). If the Company notifies the Executive in writing prior to the expiration of such period that it desires to contest such claim, the Executive shall:

(i) give the Company any information reasonably requested by the Company relating to such claim,

(ii) take such action in connection with contesting such claim as the Company shall reasonably request in writing from time to time, including, without limitation, accepting legal representation with respect to such claim by an attorney reasonably selected by the Company,

(iii) cooperate with the Company in good faith in order effectively to contest such claim, and

(iv) permit the Company to participate in any proceedings relating to such claim;

provided, however, that the Company shall bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with such contest and shall indemnify and hold the Executive harmless, on an after-tax basis, for any Excise Tax or income tax (including interest and penalties with respect thereto) imposed as a result of such representation and payment of costs and expenses. Without limitation on the foregoing provisions of this Section 6(c), the Company shall control

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all proceedings taken in connection with such contest and, at its sole option, may pursue or forgo any and all administrative appeals, proceedings, hearings and conferences with the taxing authority in respect of such claim and may, at its sole option, either direct the Executive to pay the tax claimed and sue for a refund or contest the claim in any permissible manner, and the Executive agrees to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as the Company shall determine; provided, however, that if the Company directs the Executive to pay such claim and sue for a refund, the Company shall advance the amount of such payment to the Executive, on an interest-free basis and shall indemnify and hold the Executive harmless, on an after-tax basis, from any Excise Tax or income tax (including interest or penalties with respect thereto) imposed with respect to such advance or with respect to any imputed income with respect to such advance; and further provided that any extension of the statute of limitations relating to payment of taxes for the taxable year of the Executive with respect to which such contested amount is claimed to be due is limited solely to such contested amount. Furthermore, the Company’s control of the contest shall be limited to issues with respect to which a Gross-Up Payment would be payable hereunder and the Executive shall be entitled to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority.

(d) If, after the receipt by the Executive of an amount advanced by the Company pursuant to Section 6(c), the Executive becomes entitled to receive any refund with respect to such claim, the Executive shall (subject to the Company’s complying with the requirements of Section 6(c)) promptly pay to the Company the amount of such refund (together with any interest paid or credited thereon after taxes applicable thereto). If, after the receipt by the Executive of an amount advanced by the Company pursuant to Section 6(c), a determination is made that the Executive shall not be entitled to any refund with respect to such claim and the Company does not notify the Executive in writing of its intent to contest such denial of refund prior to the expiration of 30 days after such determination, then such advance shall be forgiven and shall not be required to be repaid and the amount of such advance shall offset, to the extent thereof, the amount of Gross-Up Payment required to be paid.

7. Company Property. All records, financial statements and similar documents obtained, reviewed or compiled by the Executive in the course of the performance by him of services for the Company, whether or not confidential information or trade secrets, shall be the exclusive property of the Company. The Executive agrees to hold as the Company’s property, all memoranda, books, papers, letters, formulas and other data, and all copies thereof and therefrom, in any way relating to the Company’s business and affairs, whether made by him or otherwise coming into his possession, and on termination of his employment, or on demand of the Company, at any time to deliver the same to the Company. The Executive shall have no rights in such documents upon any termination of his employment.

8. Proprietary Information.

(a) The Executive recognizes and acknowledges that the Company and its parent companies, shareholders, subsidiaries, divisions and affiliates possess trade secrets and other confidential and/or proprietary information concerning their respective business affairs and methods of operation which constitute valuable, confidential, and unique assets of the business of the Company and its parent companies, shareholders, subsidiaries, divisions and affiliates (“Proprietary Information”), which the Company and its parent companies, shareholders, subsidiaries, divisions and affiliates have developed through a substantial expenditure of time and money and which are and will continue to be utilized in the business of the Company and its parent companies, shareholders, subsidiaries, divisions and affiliates and which are not generally known in the trade. As used herein, Propriety Information includes the following:

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(i) Customer lists, including information regarding the identity of clients and client contacts, client accounts, the business needs and preferences of clients, and information regarding business and contractual arrangements with clients. As used herein, “Customer List” is not limited to physical writing or compilations, and includes information which is contained in or reproduced from the memory of any employee.

(ii) Business plans, objectives and strategies, and marketing plans and information;

(iii) Financial information, sales information and pricing information, including information regarding vendors, suppliers and others doing business with the Company, or any parent company, shareholder, subsidiary, division or affiliate thereof;

(iv) Personal identities and information regarding skills and compensation of the personnel of the Company, or any parent company, shareholder, subsidiary, division or affiliate thereof;

(v) the Company’s manuals and handbooks, computer programs and data;

(vi) Any other confidential information which gives the Company, or any parent company, shareholder, subsidiary, division or affiliate thereof, an opportunity to claim a competitive advantage or has economic value.

(b) During his employment with the Company, the Executive will not use, copy, transmit or otherwise disclose the Company’s Proprietary Information for any purpose other than for the benefit of the Company, and the Executive will make all reasonable efforts to protect the confidential nature of such information. The Executive will not disclose the Company’s Proprietary Information to anyone not entitled to such disclosure without the advance written permission of the Chairman of the Executive Committee of the Board of Directors of the Company.

(c) Upon termination of his employment, the Executive will immediately deliver to the Company all of the Company’s Proprietary Information. The Executive will not retain any copies of the Company’s Proprietary Information after termination of his employment without the express written consent of the Chairman of the Executive Committee of the Board of Directors of the Company.

(d) After termination of his employment, the Executive will not use the Company’s Proprietary Information for any purpose, or disclose or communicate the same to any person, firm or corporation for any purpose.

(e) In the event the Executive should receive, during the Employment Term, or thereafter, any subpoena, search warrant or other court process requiring the Executive to produce any documents containing Proprietary Information as defined herein, the Executive shall immediately provide a copy of such request to the Company.

(f) Notwithstanding anything in this Agreement to the contrary, information (i) already in the public domain; (ii) independently developed by the Executive; (iii) obtained from a source not subject to a confidentiality obligation to the Company or a third party; or (iv) that becomes public knowledge (other than by acts of the Executive in violation of this Agreement), shall not be deemed to be Proprietary Information as described in this Section 8.

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9. Non-Solicitation. During his employment with the Company, and for a period of one year immediately following his employment with the Company, the Executive shall not, directly or indirectly, solicit or attempt to solicit any employee of the Company, or of any parent company, shareholder, subsidiary, division or affiliate thereof, to terminate his employment with said company, or to work for any other business, person or company.

10. Equitable Relief. The Executive acknowledges that any breach or threatened breach by him of the provisions of Sections 7, 8 and 9 of this Agreement will result in immediate and irreparable harm to the Company, for which there will be no adequate remedy at law, and that the Company will be entitled (subject to Section 18) to equitable relief to restrain the Executive from violating the terms of these sections, or to compel the Executive to cease and desist all unauthorized use and disclosure of the Confidential Information, without posting bond or other security. Nothing in this Section shall be construed as prohibiting the Company from pursuing any other remedies available to it for such breach or threatened breach, including recovery of damages from the Executive.

11. Property of Others. The Executive represents that his performance under this Agreement does not and will not breach any agreement to keep in confidence confidential information or trade secrets, if any, acquired by the Executive in confidence prior to this Agreement. There are no agreements, written or oral, conveying rights in any research conducted by the Executive. The Executive represents, as part of the consideration for entering into this Agreement, that he has not brought and will not bring to the Company or use in the performance of his responsibilities at the Company any equipment, supplies, facility or trade secret information of any current or former employer or organization with which he provided services which are not generally available to the public, unless he has obtained written authorization for their possession and use.

12. Compliance with the Company Policies. The Executive agrees to observe and comply with the rules and regulations of the Company respecting the performance of his duties and to carry out and perform orders, directions and policies communicated to his from time to time. The Executive agrees to comply with all rules and policies contained in any applicable Employee Handbook which has been or will be issued by the Company.

13.Survival of Obligations. The provisions of Sections 7, 8, 9 and 11 of this Agreement shall survive the Executive’s termination of employment and the termination of this Agreement. Other provisions of this Agreement shall survive any termination of the Executive’s employment to the extent necessary to the intended preservation of each Party’s respective rights and obligations.

14. Successors.

(a) This Agreement is personal to the Executive and without the prior written consent of the Company shall not be assignable by the Executive otherwise than by will or the laws of descent and distribution. This Agreement shall inure to the benefit of and be enforceable by the Executive’s legal representatives.

(b) This Agreement shall inure to the benefit of and be binding upon the Company and its successors and assigns.

(c) The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to assume expressly and agree to perform this Agreement in the same manner and to the same extent that the Company or any of its affiliated companies would be required to perform it if no such succession had taken place. As used in this Agreement, “the Company” shall mean the Company as

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hereinbefore defined and any successor to its business and/or assets as aforesaid which assumes and agrees to perform this Agreement by operation of law, or otherwise. As used in this Agreement, the term “affiliated companies” shall include any company controlled by, controlling or under common control with the Company.

15. Tax Consequences. The Executive is urged to review with his own tax advisors the federal and state tax consequences of the transactions contemplated by this Agreement. The Executive is relying solely on such advisors (if any) and not on any statements or representations of the Company or any of its agents.

16. Indemnification. The Company shall indemnify the Executive (and his legal representatives or other successors) to the fullest extent permitted by the laws of the State of California and its existing articles of incorporation and bylaws, and the Executive shall be entitled to the protection of an insurance policy the Company maintains for the benefit of its directors, officers and/or employees, against all costs, charges and expenses whatsoever incurred or sustained by his (or his legal representatives or other successors) in connection with any action, suit or proceeding to which he (or his legal representatives or other successors) may be a party by reason of his being or having been a director, officer and/or employee of the Company and/or its affiliated companies.

17. Miscellaneous.

(a) This Agreement shall be governed by and construed in accordance with the laws of the State of California, without reference to principles of conflict of laws.

(b) This Agreement shall be interpreted in accordance with the plain meaning of its terms and not strictly for or against any of the Parties hereto. The paragraph headings in this Agreement are inserted for convenience only, and shall in no way effect the interpretation of this Agreement.

(c) The Parties expressly agree that this document (together with the Restricted Stock Agreement) constitutes the entire agreement between the Parties hereto. This Agreement is executed without reliance on any promise, warranty or representation by any Party, or any representative of any Party, other than those, if any, expressly contained herein. It is the intent of this Agreement to constitute an integration of the entire Agreement between the Parties, superseding all the previous negotiations, promises, covenants, agreements and representations. Each Party understands that in the event of any subsequent litigation, controversy or dispute concerning any of the terms, conditions or provisions of this Agreement, no Party shall be permitted to offer or introduce any evidence concerning any collateral or oral agreements between the Parties.

(d) This Agreement may not be amended or modified otherwise than by a written agreement executed by the Parties hereto or their respective successors and legal representatives.

(e) All notices and other communications hereunder shall be in writing and shall be given by hand delivery to the other Party or by registered or certified mail, return receipt requested, postage prepaid, addressed as follows:

If to the Executive:

Ronald W. Bachli

40 Citrus Court

Hillsborough, CA 94010

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If to the Company:

Placer Sierra Bancshares

525 J Street

Sacramento, CA 95812

Attn: Robert J. Kushner

Chairman of the Compensation Committee

of the Board of Directors

or to such other address as either Party shall have furnished to the other in writing in accordance herewith. Notices delivered personally shall be deemed communicated as of actual receipt; mailed notices shall be deemed communicated as of three (3) days after mailing.

(f) The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement.

(g) The Company may withhold from any amounts payable under this Agreement such Federal, state, local or foreign taxes as shall be required to be withheld pursuant to any applicable law or regulation.

(h) The Executive’s or the Company’s failure to insist upon strict compliance with any provisions of this Agreement or the failure to assert any right the Executive or the Company may have hereunder, including without limitation, the right of the Executive to terminate employment for Good Reason pursuant to Section 3(c) of this Agreement, shall not be deemed to be a waiver of such provision or right or any other provision or right of this Agreement.

18. Arbitration. In the event of any dispute, claim or controversy between the Executive and the Company (or its directors, officers, employees or agents) arising out of this Agreement or the Executive’s employment with the Company, both Parties agree to submit such dispute, claim or controversy to final and binding arbitration before the American Arbitration Association (“AAA”) in accordance with the AAA National Rules for the Resolution of Employment Disputes. The claims governed by this arbitration provision include, but are not limited to, claims for breach of contract, civil torts and employment discrimination such as violation of the Fair Employment and Housing Act, Title VII of the Civil Rights Act, the Americans with Disabilities Act, the Age Discrimination in Employment Act, and other employment laws.

(a) The arbitration shall be conducted by a single arbitrator selected either by mutual agreement of the Executive and the Company or, if they cannot agree, from an odd-numbered list of experienced employment law arbitrators provided by the American Arbitration Association. Each Party shall strike one arbitrator from the list alternately until only one arbitrator remains.

(b) Each Party shall have the right to conduct reasonable discovery, as determined by the arbitrator.

(c) The arbitrator shall have all powers conferred by law and a judgment may be entered on the award by a court of law having jurisdiction. The arbitrator shall render a written arbitration award that contains the essential findings and conclusions on which the award is based. The award and judgment shall be binding and final on both Parties.

(d) The Company will advance the arbitrator’s fees and costs as well as any AAA administrative fees. The Parties shall each advance the fees of their own attorneys and the expenses

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of their own witnesses. To the extent permitted by law, the Arbitrator may in his or her discretion award the prevailing party the reasonable legal fees and expenses incurred in the arbitration.

(e) This agreement to arbitrate shall continue during the term of employment and thereafter regarding any employment-related disputes.

(f) The Executive and the Company understand that by signing this Agreement, they give up their right to a civil trial and their right to a trial by jury.

[SIGNATURE PAGE TO FOLLOW.]

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IN WITNESS WHEREOF, the Executive has hereunto set his hand and, pursuant to the authorization from the Board of Directors of the Company, the Company has caused these presents to be executed in its name on its behalf, all as of the day and year first above written.

PLACER SIERRA BANCSHARES
By:	/s/ Robert J. Kushner
Name:	Robert J. Kushner
Title:	Chairman of the Compensation Committee of the Board of Directors
Date:	June 9, 2006
	/s/ Ronald W. Bachli
	RONALD W. BACHLI
Date:	June 9, 2006

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EXHIBIT A

RELEASE AGREEMENT

This Release Agreement (“Release”) was given to me, RONALD W. BACHLI (“the Executive”), this                      day of                     , 200  , by PLACER SIERRA BANCSHARES, a California corporation (the “Company”). At such time as this Release becomes effective and enforceable (i.e., the revocation period set forth below has expired), and assuming such the Executive is otherwise eligible for payments under the terms of that certain Employment Agreement between the Executive and the Company effective as of January 1, 2003 (the “Agreement”), the Company agrees to pay the Executive, pursuant to the terms of the Agreement, (a) a single sum payment in the amount of $                     (less payroll taxes and withholding required by any federal, state or local law, any additional withholding to which the Executive has agreed, and any outstanding obligations owed by the Executive to the Company); and (b) the retirement benefit provided for pursuant to Section 2(b)(vi) of the Agreement (less payroll taxes and withholding required by any federal, state or local law, any additional withholding to which the Executive has agreed, and any outstanding obligations owed by the Executive to the Company) for a period of ten years (unless an election to receive the retirement benefit in some other manner is timely made in accordance with Section 2(b)(vi)), commencing as of the first day of the month following the termination of the Executive’s employment pursuant to Section 3(c) or 3(d) of the Agreement, such vesting schedule provided in Section 2(b)(vi) of the Agreement will be accelerated and the Executive shall become fully vested in the retirement benefits.

The Executive is also entitled to receive (i) those benefits, if any, that have vested by operation of state or federal law or under any written term of a plan (“Vested Benefits”), (ii) health care coverage continuation rights (at his own expense) under the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended; (iii) vesting of any stock options, as specified in the Agreement.

In consideration of the receipt of the promise to pay such amount, the Executive hereby agrees, for himself, his heirs, executors, administrators, successors and assigns (hereinafter referred to as the “Releasors”), to fully release and discharge the Company and each of its parent companies, shareholders, subsidiaries, divisions and affiliates, and each of their respective officers, partners, directors, members, managers, employees and agents, and each of their respective predecessors, successors, heirs and assigns (hereinafter referred to as the “Releasees”) from any and all claims, suits, causes of action, debts, obligations, costs, losses, liabilities, damages and demands under any federal, state or local law or laws, or contract, tort or common law, whether or not known, suspected or claimed, which the Releasors have, or hereafter may have, against the Releasees arising out of or in any way related to the Executive’s employment (or other contractual relationship) with the Company and/or the termination of that relationship. The claims released herein include claims under Title VII of the Civil Rights Act of 1964, the Age Discrimination in Employment Act, the Employee Retirement Income Security Act, the Americans with Disabilities Act, the U.S. Pregnancy Discrimination Act, the U.S. Family and Medical Leave Act, the U.S. Fair Labor Standards Act, the U.S. Equal Pay Act, The Workers Adjustment and Notification Act, the California Fair Employment and Housing Act, and the California Labor Code. Provided, however, that this Agreement does not waive rights or claims under the Age Discrimination in Employment Act that may arise after the date this Release is executed.

It is understood and agreed that this Release extends to all such claims and/or potential claims, and that the Executive, on behalf of the Releasors, hereby expressly waives all rights with respect to all such claims under California Civil Code section 1542, which provides as follows:

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A general release does not extend to claims which the creditor does not know or suspect to exist in his favor at the time of executing the release, which if known by him must have materially affected his settlement with the debtor.

The monies to be paid to the Executive in this Release are in addition to any sums to which he would be entitled without signing this Release.

The Executive acknowledges that he has read and does understand the provisions of this Release. The Executive acknowledges that he affixes his signature hereto voluntarily and without coercion, and that no promise or inducement has been made other than those set out in this Release and that he executes this Release without reliance on any representation by any Releasee.

The Executive understands that this Release involves the relinquishment of his legal rights, and that he has the right to, and has been given the opportunity to, consult with an attorney of his choice. The Executive acknowledges that he has been (and hereby is) advised by the Company that he should consult with an attorney prior to executing this Release.

This document does not constitute, and shall not be admissible as evidence of, an admission by any Releasee as to any fact or matter.

In case any part of this Release is later deemed to be invalid, illegal or otherwise unenforceable, the Executive agrees that the legality and enforceability of the remaining provisions of this Release will not be affected in any way.

The Executive acknowledges that he has been given a period of twenty-one (21) days from receipt of this Release within which to consider this Release and decide whether or not to execute this Release. If the Executive executes this Release at any time prior to the end of the 21 day period, such early execution was a knowing and voluntary waiver of the Executive’s right to consider this Release for at least 21 days, and was due to his belief that he had ample time in which to consider this Release.

The Executive may, within seven (7) days of his execution and delivery of this Release, revoke this Release by a written document received by the Company on or before the end of the seven (7) day period. The Release will not be effective until said revocation period has expired. No payments will be made hereunder if the Executive revokes this Release.

Dated:
	RONALD W. BACHLI

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EXHIBIT B

The Chief Executive Officer shall be responsible for overall direction of the Company to maximize income, return on equity and return on assets; providing leadership in establishing current and long-range objectives, strategies, policies and plans, subject to approval of the Board of Directors.

The Chief Executive Officer shall act as the principal representative of the Company with the press, investors, major customers, community and industry associations, other businesses and regulatory agencies, and shall directly supervise the Company’s senior officers.

The Chief Executive Officer shall manage investor relations and analyst presentations, identify and negotiate acquisitions, and provide training for the Company officers and directors.

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EX-10.3

Exhibit 10.3

AGREEMENT FOR SEVERANCE BENEFITS

This Agreement For Severance Benefits (the “Agreement”) is made and entered into by and between Placer Sierra Bank, a California banking association (“Bank”) and Thomas D. Nations (“Employee”) (collectively sometimes referred to as the “Parties”).

WHEREAS, effective June 1, 2006 the Employee will be employed by Bank as Executive Vice President, Chief Credit Officer, and

WHEREAS, effective June 1, 2006 the Bank desires to provide the following severance benefits to Employee in the event Employee’s employment with the Bank is hereafter terminated by Bank without Just Cause, or by Employee for Good Reason (as defined herein) of Bank.

1. Definitions

Whenever used in this Agreement, the following capitalized terms shall have the meanings set forth in this Section 1, certain other capitalized terms being defined elsewhere in this Agreement:

(a) “Bank” means Placer Sierra Bank, a California corporation, and any successor or assignee.

(b) “Base Salary” means the monthly salary regularly received by Employee at the time of termination, not including bonuses, commissions, incentive payments, stock options, expense reimbursements or benefits.

(c) “Disability” means an illness or other physical or mental disability which substantially impairs Employee’s ability to perform the essential functions of Employee’s position for a period of at least one hundred eighty (180) days in any two hundred seventy (270)) day period, notwithstanding reasonable accommodation by the Bank to Employee’s known physical or mental disability, solely in accordance with, and to the extent required by, the Americans with Disabilities Act, 29 U.S.C. Sections 12101-213, the California Fair Employment and Housing Act (California Government Code Sections 12900-12996, or any other state or local law governing the employment of disabled persons (provided such accommodation would not impose an undue hardship on the operation of the Bank’s business or a direct threat to Employee or others), and, as a result of such Disability, Employee has not returned to his or her full-time regular employment prior to termination.

(d) “Employee” has the meaning set forth in the introduction to this Agreement.

(e) “Good Reason” means, without Employee’s express written consent, any of the following events, provided that Employee gives the Bank at least thirty (30) days prior written notice of Employee’s termination with the Bank:

(i) a reduction by the Employer in the Base Salary as in effect immediately before such reduction;

(ii) A material and adverse change in Employee’s titles, duties or offices with the Bank which is not cured by Bank within ten (10) business days after Employee delivers written notice to Bank of any such alleged material adverse change.

1

An isolated, insubstantial and inadvertent action taken in good faith and which is remedied by the Bank within ten (10) days after receipt of notice thereof given by Employee shall not constitute Good Reason. Employee’s continued employment shall not constitute consent to, or a waiver of rights with respect to, any event or condition constituting Good Reason.

(f) “Just Cause” means:

(i) the willful and continued failure by Employee to perform substantially Employee’s duties with the Bank (other than any such failure resulting from Employee’s incapacity due to physical or mental illness or any such failure subsequent to the delivery to Employee of a notice of the Bank’s intent to terminate Employee’s employment without Just Cause or subsequent to Employee’s delivery to the Bank of a notice of Employee’s intent to terminate employment for Good Reason), and such willful and continued failure continues after a demand for substantial performance is delivered to Employee by the Bank which specifically identifies the manner in which Employee has not substantially performed Employee’s duties;

(ii) the willful engaging by Employee in illegal conduct or gross misconduct which is materially and demonstrably injurious to the business or reputation of the Bank or its Subsidiaries.

(g) For purposes of determining whether “Just Cause” exists, no act or failure to act on Employee’s part shall be considered “willful” unless done, or omitted to be done, by Employee in bad faith and without reasonable belief that the action or omission was in, or not opposed to, the best interests of the Bank and its Subsidiaries. Any act, or failure to act, based upon authority given pursuant to a resolution duly adopted by the Board, based upon the advice of counsel for the Bank or upon the instructions to Employee by a more senior officer of the Bank shall be conclusively presumed to be done, or omitted to be done, by Employee in good faith and in the best interests of the Bank. The Bank must notify Employee of any event constituting Just Cause within ninety (90) days following the Bank’s knowledge of its existence or such event shall not constitute Just Cause under this Agreement.

(h) “Release” means the Separation and General Release Agreement in the form attached hereto as Exhibit “A”.

(i) “Severance Payment” means the payment of severance compensation as provided in Sections 3 and 4 herein.

2. Right to Severance Payment; Release

Conditioned on the execution and delivery by Employee (or Employee’s beneficiary or personal representative, if applicable) of the Release, Employee shall be entitled to receive a Severance Payment from the Bank in the amount and manner provided in Sections 3 and 4 if Employee’s employment with the Bank terminates for any reason other than:

a. Death,

b. Disability,

c. Termination by the Bank for Just Cause,

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d. Retirement in accordance with the normal retirement policy of the Bank,

e. Voluntary termination by Employee for other than Good Reason, or

f. The sale by the Bank of the Subsidiary which employed Employee before such sale, if Employee has been offered employment with the purchaser of such Subsidiary on substantially the same terms and conditions under which such Employee worked for the Subsidiary before the sale.

3. Amount of Severance Payment

If Employee becomes entitled to a Severance Payment under this Agreement, the amount of Employee’s Severance Payment shall equal 12 months of Base Salary, plus any pro-rated bonus for a partial year of employment.

4. Payment of Severance Payment

The Severance Payment to which Employee is entitled shall be paid to Employee in a lump sum on the first regular payroll date after the later of (a) execution by Employee and delivery to Bank of the Release and (b) expiration of any applicable period for revocation provided in the Release.

5. Withholding of Taxes

The Bank may withhold from any amounts payable to Employee under this Agreement all federal, state, city or other taxes required by applicable law to be withheld by the Bank.

6. Other Benefits

Neither this Agreement nor the Severance Payment provided for hereunder shall reduce any amounts otherwise payable, or in any way diminish Employee’s rights as an employee, whether existing now or hereafter, under any employee benefit, incentive, retirement, welfare, stock option, stock bonus or stock-based, or stock purchase plan, program, policy or arrangement or any written employment agreement or other plan, program policy or arrangement not related to severance.

7. Employment Status

This Agreement does not constitute a contract of employment or impose on Employee any obligation to remain in the employ of the Bank, nor does it impose on the Bank any obligation to retain Employee in his or her present or any other position, nor does it change the status of Employee’s employment as an employee at will. Nothing in this Agreement shall in any way affect the right of the Bank in its absolute discretion to change or reduce Employee’s compensation at any time, or to change at any time one or more benefit plans, dental plans, health care plans, savings plans, bonus plans, vacation pay plans, disability plans, and the like.

8. Successor to the Bank

The Bank shall require any successor or assignee, whether direct or indirect, by purchase, merger, consolidation or otherwise, to all or substantially all the business or assets of the Bank, expressly and unconditionally to assume and agree to perform the Bank’s obligations under this Agreement, in the same manner and to the same extent that the Bank would be required to perform if no succession or assignment had taken place. In such event, the term “Bank”, as used in this Agreement, shall mean (from and after,

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but not before, the occurrence of such event) the Bank as hereinbefore defined and any successor or assignee to the business or assets which by reason hereof becomes bound by the terms and provisions of this Agreement.

9. Confidentiality

(a) Nondisclosure of Confidential Material

In the performance of Employee’s duties, Employee have previously had, and may in the future have, access to confidential records and information, including, but not limited to, development, marketing, purchasing, organizational, strategic, financial, managerial, administrative, manufacturing, production, distribution and sales information, data, specifications and processes presently owned or at any time hereafter developed by the Bank or its agents or consultants or used presently or at any time hereafter in the course of its business, that are not otherwise part of the public domain (collectively, the “Confidential Material”). All such Confidential Material is considered secret and has been and/or will be disclosed to Employee in confidence. By Employee’s acceptance of the Severance Payment under this Agreement, Employee shall be deemed to have acknowledged that the Confidential Material constitutes propriety information of the Bank which draws independent economic value, actual or potential, from not being generally known to the public or to other persons who could obtain economic value from its disclosure or use, and that the Bank has taken efforts reasonable under the circumstances, of which this Section 6 is an example, to maintain its secrecy. Except in the performance of Employee’s duties to the Bank, Employee shall not, directly or indirectly for any reason whatsoever, copy, transmit, disclose or use any such Confidential Material, and Employee will make all reasonable efforts to protect the confidential nature of Confidential Material. Nothing in this agreement shall prevent Employee from using or disclosing information that (i) has been publicly disclosed or was within Employee’s possession prior to its being furnished to Employee by the Bank or becomes available to Employee on a non-confidential basis from a third party (in any of such cases, not due to a breach by Employee of Employee’s obligations to the Bank or by breach of any other person of a confidential, fiduciary or confidential obligation, the breach of which Employee knows or reasonably should know), (ii) is required to be disclosed by Employee pursuant to applicable law, and Employee provides notice to the Bank of such requirement as promptly as possible, or (iii) was independently acquired or developed by Employee without violating any of the obligations under this Agreement and without relying on Confidential Material of the Bank. All records, files, drawings, documents, equipment and other tangible items, wherever located, relating in any way to the Confidential Material or otherwise to the Bank’s business, which Employee has prepared, used or encountered or shall in the future prepare, use or encounter, shall be and remain the Bank’s sole and exclusive property and shall be included in the Confidential Material. Upon Employee’s termination of employment with the Bank, or whenever requested by the Bank, Employee shall promptly deliver to the Bank any and all of the Confidential Material and copies thereof, not previously delivered to the Bank, that may be, or at any previous time has been, in Employee’s possession or under Employee’s control.

(b) Nonsolicitation of Employees

By Employee’s acceptance of the Severance Payment under this Agreement, Employee agrees that, for a period of two (2) years following Employee’s termination of employment with the Bank, neither Employee nor any Person or entity in which Employee has an interest shall solicit any person who was employed on the date of Employee’s termination of employment by the Bank, to leave the employ of the Bank. Nothing in this Section 6 (b) however, shall prohibit Employee or any Person or entity in Employee which Employee has an interest from placing advertisements in periodicals of general circulation soliciting applications for employment, or from employing any person who answers any such advertisement. For purposes of this Section 6(b), Employee shall not be deemed to have an interest in any

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corporation whose stock is publicly traded merely because Employee is the owner of not more than two percent (2%) of the outstanding shares of any class of stock of such corporation, provided Employee has no active participation in the business of such corporation (other than voting Employee’s stock) and Employee do not provide services to such corporation in any capacity (whether as an employee, an independent contractor or consultant, a board member, or otherwise).

(c) Equitable Relief

By Employee’s acceptance of the Severance Payment under this Agreement, Employee shall be deemed to have acknowledged that violation of Sections 6 (a) or 6 (b) would cause the Bank irreparable damage for which the Bank cannot be reasonably compensated in damages in an action at law, and that therefore in the event of any breach by Employee of Sections 6 (a) or 6 (b), the Bank shall be entitled to obtain from a court of competent jurisdiction for equitable relief by way of injunction or otherwise (without being required to post a bond). This provision shall not, however, be construed as a waiver of any of the rights which the Bank may have for damages under this Agreement or otherwise, and, except as limited in Article VII, all of the Bank’s rights and remedies shall be unrestricted.

10. Arbitration

Any controversy or claim between Employee and the Bank arising out of or relating to or concerning this Agreement (including the covenants contained in Section 6) and any dispute regarding Employee’s employment or the termination of Employee’s employment or any dispute regarding the application, interpretation or validity of this Agreement (each, an “Employment Matter”) will be finally settled by arbitration in a location determined by Employee (which location must be located within the County in which Employee primarily works or worked) and administered by the American Arbitration Association (“AAA”) in accordance with the AAA National Rules for the Resolution of Employment Disputes then in effect. In the event of any conflict between this Agreement and the rules of the American Arbitration Association, the provisions of this Agreement shall be determinative. If the Parties are unable to agree upon an arbitrator, they shall select a single arbitrator from a list of seven arbitrators designated by the office of the American Arbitration Association having responsibility for the location selected by Employee, all of whom shall be retired judges who are actively involved in hearing private cases or members of the National Academy of Arbitrators, and who, in either event, are residents of such forum. If the Parties are unable to agree upon an arbitrator from such list, they shall each strike names alternatively from the list, with the first to strike being determined by lot. After each Party has used three strikes, the remaining name on the list shall be the arbitrator. The AAA’s Employment Arbitration Rules will be modified in the following ways: (i) each arbitrator will agree to treat as confidential evidence and other information presented to them, (ii) there will be no authority to amend or modify the terms of this Agreement (iii) a decision must be rendered within ten business days of the Parties’ closing statements or submission of post-hearing briefs, and (iv) the arbitrator shall render a written arbitration award that contains the essential findings and conclusions on which the award is based. Each Party shall have the right to conduct reasonable discovery, as determined by the arbitrator. The Parties shall share equally the costs of the arbitrator and the arbitration forum unless a different fee payment arrangement is otherwise required by applicable law to preserve the enforceability of this arbitration provision; Bank will pay the costs of the arbitrator and the arbitration forum to the extent required by applicable law to preserve the enforceability of this arbitration provision. The Parties shall each pay the fees of their own attorneys and the expenses of their own witnesses. Employee or the Bank may bring an action or special proceeding in a state or federal court of competent jurisdiction sitting in Los Angeles County, California or such other jurisdiction as Employee may determine in Employee’s discretion to enforce any arbitration award under Article VII.

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11. Miscellaneous

(a) Applicable law

To the extent not preempted by the laws of the United States, the laws of the State of California shall be the controlling law in all matters relating to this agreement, regardless of the choice-of-law rules of the State of California or any other jurisdiction.

(b) Construction

No term or provision of this Agreement shall be construed so as to require the commission of any act contrary to law, and wherever there is any conflict between any provisions of this Agreement and any present or future statute law, ordinance, or regulation, the latter shall prevail, but in such event the affected provision of this Agreement shall be curtailed and limited only to the extent necessary to bring such provision with the requirements of the law.

(c) Severability

This Agreement shall be interpreted in such a manner as to be effective and valid under applicable law, but if any provision of this Agreement shall be held illegal or invalid, the illegality or invalidity shall not affect the remaining parts of this Agreement and this Agreement shall be construed and enforced as if the illegal or invalid provision had not been included. If any one or more of the provisions contained in this Agreement shall for any reason be held to be excessively broad as to duration, geographical scope, activity or subject, such provisions shall be construed by limiting and reducing it so as to be enforceable to the maximum extent permitted by applicable law and in its reduced form, such provision shall then be enforceable and shall be enforced.

(d) Headings

The Section headings in this Agreement are inserted only as a matter of convenience, and in no way define, limit, or extend or interpret the scope of this Agreement or of any particular Section.

(e) Assignability

Employee’s rights or interests under this Agreement shall not be assignable or transferable (whether by pledge, grant of a security interest, or otherwise) by Employee, Employee’s beneficiaries or legal representatives, except by will or by the laws of descent and distribution.

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(f) Notices

For purposes of this Agreement, notices and all other communications provided for herein shall be in writing and shall be deemed to have been duly given when personally delivered, telecopied, or sent by certified or overnight mail, return receipt requested, postage prepaid, addressed to the respective addresses, or sent to the respective telecopier numbers, last given by each Party to the other, provided that all notices to the Bank shall be directed to the attention of the Board of Directors with a copy to the General Counsel. All notices and communications shall be deemed to have been received on the date of delivery thereof if personally delivered, upon return confirmation if telecopied, on the third business day after the mailing thereof, or on the date after sending by overnight mail, except that notice of change of address shall be effective only upon actual receipt. No objection to the method of delivery may be made if the written notice or other communication is actually received.

“BANK”	“EMPLOYEE”
PLACER SIERRA BANK	Tom Nations
/s/ Ronald W. Bachli	/s/ Thomas D. Nations
By:      Ronald W. Bachli
Title:   Chief Executive Officer
Date:   May 23, 2006	May 23, 2006

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Exhibit A

Separation and General Release Agreement

In connection with the termination of your employment by Placer Sierra Bank (the “Bank”), effective                     , 200__, and in accordance with the terms and conditions of the Agreement for Severance Benefits between you and Bank dated                     , 200__, (the “Agreement”), the Bank agrees to provide you, contingent upon your execution of this Separation and General Release Agreement (“Release”), with the following severance payment and benefits:

A single lump severance payment (including prorated incentive bonus, if applicable) in the amount of $             (less payroll taxes and withholding required by any federal, state or local law, any additional withholding to which Employee has agreed, and any outstanding obligations owed by the Employee to Bank).

In consideration of the payment and benefits set forth above, you agree knowingly and voluntarily as follows:

You knowingly and voluntarily waive and release forever whatever claims you ever had, now have or hereafter may have against the Bank and any parent, subsidiary or affiliate of the Bank, any of their successors or assigns and any of their present and former employees, directors, officers and agents (collectively referred to as “Releasees”), based upon any matter, occurrence or event existing or occurring prior to the execution of this Release, including anything relating to your employment with the Bank and any of its parents, subsidiaries or affiliates or to the termination of such employment or to your status as a shareholder or creditor of the Bank.

This release and waiver includes but is not limited to any rights or claims under United States federal, state or local law and the national or local law of any foreign country (statutory or decisional), for wrongful or abusive discharge, for breach of any contract, for misrepresentation, for breach of any securities laws, or for discrimination based upon race, color, ethnicity, sex, age, national origin, religion, disability, sexual orientation, or any other unlawful criterion or circumstance, including rights or claims under the Age Discrimination in Employment Act of 1967 (“ADEA”)(except that you do not waive ADEA rights or claims that may arise after the date of this Release).

You agree never to institute any claim, suit or action at law or in equity against any Releasee in any way by reason of any claim you ever had, now have or hereafter may have relating to the matters described in the two preceding paragraphs. You hereby acknowledge that you are familiar with the provisions of California Civil Code Section 1542 and that you expressly waive and relinquish any and all rights or benefits you may have under said Section 1542, to the full extent permitted by law. Said Section 1542 states:

“A general release does not extend to claims which the creditor does not know or suspect to exist in his favor at the time of executing the release, which if known by him must have materially affected his settlement with the debtor.”

The payment and benefits described herein shall be in lieu of any and all other amounts to which you might be, are now or may become entitled from the Bank, its parents, subsidiaries and affiliates and, without limiting the generality of the foregoing, you hereby expressly waive any right or claim that you may have or assert to payment for salary, bonuses, medical, dental or hospitalization benefits, life insurance benefits or attorneys’ fees; provided, however, that notwithstanding any other provision of this Release, you do not waive any of your rights and the Bank shall comply with its obligations with respect

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to continuation coverage requirements under Section 4980B of the Internal Revenue Code of 1986, as amended (commonly referred to as “COBRA”).

Your signature below will also constitute confirmation that (i) you have been given at least twenty-one (21) days within which to consider this release and its consequences, (ii) you have been advised prior to signing this Release that you should consult with an attorney of your choice, and (iii) you have been advised that you may revoke this Release at any time during the seven (7) day period immediately following the date you signed this letter.

This Release shall be governed by the laws of State of California.

Please confirm by returning to                              the enclosed copy of this Release, signed in the place provided, that you have knowingly and voluntarily decided to accept and agree to the foregoing.

PLEASE READ CAREFULLY. THIS AGREEMENT CONTAINS A RELEASE OF ALL KNOWN AND UNKNOWN CLAIMS.

PLACER SIERRA BANK

Name:                                                                                            

Title:                                                                                              

Date:                                                                                              

AGREED AND ACKNOWLEDGED:

Name:                                                                                            

Date:                                                                                              

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EX-10.4

Exhibit 10.4

EXECUTIVE SUPPLEMENTAL COMPENSATION AGREEMENT

This Agreement is made and entered into effective as of January 20, 2005 by and between Southwest Community Bank, with its principal offices located in the City of Carlsbad, California (“the Bank”), and Alan J. Lane an individual residing in the State of California (“the Executive”).

R E C I T A L S

WHEREAS, the Executive is an employee of the Bank, serving since July 15, 2004;

WHEREAS, the Bank desires to establish a compensation benefit program as a fringe benefit for executive officers of the Bank in order to attract and retain individuals with extensive and valuable experience in the banking industry;

WHEREAS, the Executive’s experience and knowledge of the affairs of the Bank and the banking industry are extensive and valuable;

WHEREAS, it is deemed to be in the best interests of the Bank to provide the Executive with certain fringe benefits, on the terms and conditions set forth herein, in order to reasonably induce the Executive to remain in the Bank’s employment; and

WHEREAS, the Executive and the Bank wish to specify in writing the terms and conditions upon which this additional compensatory incentive will be provided to the Executive;

NOW, THEREFORE, in consideration of the services to be performed by the Executive in the future, as well as the mutual promises and covenants contained herein, the Executive and the Bank agree as follows:

A G R E E M E N T

1. Terms and Definitions.

1.1. Administrator. The Bank shall be the “Administrator” and, solely for the purposes of ERISA as defined in subparagraph 1.8 below, the “fiduciary” of this Agreement where a fiduciary is required by ERISA.

1.2. Applicable Percentage. The term “Applicable Percentage” shall mean that percentage listed on Schedule “A” attached hereto which is adjacent to the number of calendar years which shall have elapsed from the date of this Agreement and ending on the date payments are to first begin under the terms of this Agreement. However, if the Executive’s employment is terminated under subparagraph 5.1 (“Termination Without Cause”), then the Applicable Percentage from the preceding sentence is accelerated by two years (20%). Notwithstanding the foregoing or the percentages set forth on Schedule “A”, but subject to all other terms and conditions set forth herein, the “Applicable Percentage” shall be one hundred percent (100%) upon the Executive’s death, or upon the Executive’s termination of employment that is on account of or after a “Change in Control” (see subparagraphs 1.3 and 5.4). With regard to the Executive’s “Constructive Termination of Employment” (as defined in subparagraph 1.5), the preceding sentence only applies if the Constructive Termination of employment occurs within three hundred and sixty-five (365) days from the Change in Control, and the Executive has not accepted an employment contract with the new employer that is for a term of at least two (2) years.

1.3. Change in Control. The term “Change in Control” shall mean the occurrence of any of the following events with respect to the Bank (with the term “Bank” being defined for purposes of determining whether a “Change in Control” has occurred to include a Holding Company if one is formed in the future: (i) a change in control of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or in response to any other form or report to the regulatory agencies or governmental authorities having jurisdiction over the Bank or any stock exchange on which the Bank’s shares are listed which requires the reporting of a change in control; (ii) any merger, consolidation or reorganization of the Bank in which the Bank does not survive; (iii) any sale, lease, exchange, mortgage, pledge,

transfer or other disposition (in one transaction or a series of transactions) of any assets of the Bank having an aggregate fair market value of fifty percent (50%) of the total value of the assets of the Bank, reflected in the most recent balance sheet of the Bank; (iv) a transaction whereby any “person” (as such term is used in the Exchange Act) or any individual, corporation, partnership, trust or any other entity becomes the beneficial owner, directly or indirectly, of securities of the Bank representing twenty-five percent (25%) or more of the combined voting power of the Bank’s then outstanding securities; or (v) a situation where, in any one-year period, individuals who at the beginning of such period constitute the Board of Directors of the Bank cease for any reason to constitute at least a majority thereof, unless the election, or the nomination for election by the Bank’s shareholders, of each new Director is approved by a vote of at least three-quarters (3/4) of the Directors then still in office who were Directors at the beginning of the period. Notwithstanding the foregoing or anything else contained herein to the contrary, there shall not be a “Change of Control” for the purposes of this Agreement if the event which would otherwise come within the meaning of the term “Change of Control” involves an Employee Stock Ownership Plan sponsored by the Bank which is the party that acquires “control” or is the principal participant in the transaction constituting a “Change in Control,” as described above.

1.4. The Code. The “Code” shall mean the Internal Revenue Code of 1986, as amended (the “Code”).

1.5. Constructive Termination of Employment. The term “Constructive Termination of Employment” means termination of Employment by Executive because the working conditions are so intolerable or aggravated that a reasonable person in the Executive’s position would be compelled to resign, provided that the Executive advised the Bank of the conditions and the Bank failed to take timely reasonable actions to remedy the conditions.

1.6. Disability/Disabled. The term “Disability” or “Disabled” shall have the same meaning given such terms in any policy of disability insurance maintained by the Bank for the benefit of the Executive. In the absence of such a policy which extends coverage to the Executive in the event of disability, the terms shall mean bodily injury or disease (mental or physical) which wholly and continuously prevents the performance of duty for at least six (6) months.

1.7. Effective Date. The term “Effective Date” shall mean the date first written above.

1.8. ERISA. The term “ERISA” shall mean the Employee Retirement Income Security Act of 1974, as amended.

1.9. Executive Benefit. The term “Executive Benefit” or “Retirement Benefit Payments” shall mean the benefits determined pursuant to subparagraphs 3.1 and in accordance with Schedule “B”, and reduced or adjusted to the extent: (i) required under the other provisions of this Agreement, including, but not limited to, Paragraphs 5, 6, and 7 hereof; (ii) required by reason of the lawful order of any regulatory agency or body having jurisdiction over the Bank; or (iii) required in order for the Bank to properly comply with any and all applicable state and federal laws, including, but not limited to, income, employment and disability income tax laws (e.g., FICA, FUTA, SDI).

1.10. Normal Retirement Date. The term “Normal Retirement Date” shall mean the Retirement, as defined below, of the Executive upon attainment of age fifty-five (55).

1.11. Plan Year. The term “Plan Year” shall mean the Bank’s fiscal year.

1.12. Retirement. The term “Retirement” or “Retires” shall refer to the date which the Executive acknowledges in writing to Bank to be the last day the Executive will provide any significant personal services, whether as an employee or independent consultant or contractor, to the Bank. For purposes of this Agreement, the phrase “significant personal services” shall mean more than ten (10) hours of personal services rendered to one or more individuals or entities in any thirty (30) day period.

1.13. Termination for Cause. The term “Termination for Cause” shall mean termination of the employment of the Executive by reason of any of the following, and only by reason of any of the following:

(a) The Executive’s deliberate violation of (i) any state or federal banking or securities laws, or of the Bylaws, rules, policies or resolutions of the Bank, or (ii) of the rules or regulations of the California Department of Financial Institutions, the Federal Deposit Insurance Corporation, the Federal Reserve Board of Governors, the Office of the Comptroller of the Currency or any other regulatory agency or governmental authority having jurisdiction over the Bank, which has a material financial adverse effect upon the Bank; or

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(b) The Executive’s conviction of (i) any felony or (ii) a crime involving moral turpitude or a fraudulent or dishonest act which, in each case, has a material adverse effect on the Bank.

1.14. Year of Service. The term “Year of Service” shall mean any calendar year in which the Executive is employed by the Bank for at least six (6) months.

1.15. Accrued Liability Balance. The term “Accrued Liability Balance” shall mean the amount that has been accrued by the Employer on its financial statements to fund the retirement benefits expense of the Employee as of the end of the month preceding the Employee’s termination of employment.

2. Scope, Purpose and Effect.

2.1. Contract of Employment. Although this Agreement is intended to provide the Executive with an additional incentive to remain in the employ of the Bank, this Agreement shall not be deemed to constitute a contract of employment between the Executive and the Bank nor shall any provision of this Agreement restrict or expand the right of the Bank to terminate the Executive’s employment. This Agreement shall have no impact or effect upon any separate written Employment Agreement which the Executive may have with the Bank, it being the parties’ intention and agreement that unless this Agreement is specifically referenced in said Employment Agreement (or any modification thereto), this Agreement (and the Bank’s obligations hereunder) shall stand separate and apart and shall have no effect on or be affected by, the terms and provisions of said Employment Agreement.

2.2. Fringe Benefit. The benefits provided by this Agreement are granted by the Bank as a fringe benefit to the Executive and are not a part of any salary reduction plan or any arrangement deferring a bonus or a salary increase. The Executive has no option to take any current payments or bonus in lieu of the benefits provided by this Agreement.

2.3. Prohibited Payments. Notwithstanding anything in this Agreement to the contrary (and in particular in subparagraphs 1.8 or 3 hereof), if any payment made under this Agreement is a “golden parachute payment” as defined in Section 28(k) of the Federal Deposit Insurance Act (12 U.S.C. section 1828(k) and Part 359 of the Rules and Regulations of the Federal Deposit Insurance Corporation (collectively, the “FDIC Rules”) or is otherwise prohibited, restricted or subject to the prior approval of a Bank Regulator, then no payment shall be made hereunder without complying with said FDIC Rules.

3. Executive Benefits Payments.

3.1. Payments Commence Upon Normal Retirement Date. If the Executive shall remain in the continuous employment of the Bank until attaining fifty-five (55) years of age, the Executive shall be entitled to be paid the Applicable Percentage of the Executive Benefits, as defined in Schedule B, in substantially equal monthly installments on the first day of each month, beginning with the month following the month in which the Executive Retires or upon such later date as may be mutually agreed upon by the Executive and the Bank in advance of said Retirement date, payable for a period of one hundred and eighty (180) months.

3.3. Payments in the Event of the Executive’s Death. In the event of the Executive’s death, any payments under this, paragraph 3 shall be prorated to the date of death.

4. Payments in the Event Disability Occurs Prior to Retirement. In the event the Employee becomes Disabled at any time after the Effective Date of this Agreement but prior to Retirement, the Employee shall be entitled to be paid The Accrued Liability Balance as specified in Section 1.15 in sixty (60) substantially equal monthly installments on the first day of each month, beginning with the month following the month in which the Employee becomes Disabled.

5. Payments in the Event Executive Is Terminated Prior to Retirement. As indicated in subparagraph 2.1 above, the Bank reserves the right to terminate the Executive’s employment, with or without Cause but subject to any written employment agreement which may then exist, at any time prior to the Executive’s Retirement. In the event that the employment of the Executive shall be terminated,

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other than by reason of Disability or Retirement, then this Agreement shall terminate upon the date of such termination of employment; provided, however, that the Executive shall be entitled to the following benefits as may be applicable depending upon the circumstances surrounding the Executive’s termination:

5.1. Termination Without Cause. If the Executive’s employment is terminated by the Bank without cause, and such termination is not subject to the provisions of subparagraph 5.4 below, the Executive shall be entitled to be paid the Applicable Percentage of the Executive Benefits as defined above calculated as of the end of the year following the year the Employee was terminated, in substantially equal monthly installments on the first day of each month, beginning with the month following the month in which the Executive attains fifty-five (55) years of age, or any month thereafter, as requested in writing by the Executive and delivered to the Bank or its successor thirty (30) days prior to the commencement of installment payments.

5.2. Voluntary Termination by the Executive.

(a) If the Applicable Percentage is one hundred percent (100%), the Executive shall be entitled to be paid the Applicable Percentage of the Executive Benefits, as defined in Schedule B, in substantially equal monthly installments on the first day of each month, beginning with the month following the month in which the Executive attains fifty-five (55) years of age, or any month thereafter, as requested in writing by the Executive and delivered to the Bank or its successor thirty (30) days prior to the commencement of installment payments

(b) If the Executive’s employment is terminated by voluntary resignation prior to the date specified in Schedule A which corresponds to an Applicable Percentage equal to one hundred percent (100%) and such resignation is not subject to the provisions of subparagraph 5.4 below, then the Executive shall forfeit any and all rights and benefits he may have under the terms of this Agreement and shall have no right to be paid any of the amounts which would otherwise be due or paid to the Executive by the Bank pursuant to the terms of this Agreement.

(c) Termination of Employment of Executive that is a “Constructive Termination of Employment” (as defined in subparagraph 1.5) shall not be considered as a voluntary Termination by Executive but rather as a Termination of Employment by Bank without cause.

5.3. Termination for Cause. The Executive agrees that if his employment with the Bank is terminated “for cause,” as defined in subparagraph 1.13 of this Agreement, he shall forfeit any and all rights and benefits he may have under the terms of this Agreement and shall have no right to be paid any of the amounts which would otherwise be due or paid to the Executive by the Bank pursuant to the terms of this Agreement; provided however, if the Executive is terminated for disability, he shall be entitled to benefits under Section 4.

5.4. Termination on Account of or After a Change in Control. In the event the Executive’s employment with the Employer is terminated by the Employer in conjunction with, or by reason of, a “Change in Control” (as defined in subparagraph 1.3 above then the Executive shall be entitled to be paid the Applicable Percentage of the Executive Benefits, as defined above, in substantially equal monthly installments on the first day of each month, beginning with the month following the month in which the Change in Control has occurred, as requested in writing by the Executive and delivered to the Bank or its successor thirty (30) days prior to the commencement of installment payments; provided, however, that in the event the Executive does not request a commencement date as specified, such installments shall be paid on the first day of each month, beginning with the month following the month in which the Executive attains fifty-five (55) years of age. The installments shall be payable for a period of one hundred and eighty (180) months.

6. IRS Section 280G Issues. If all or any portion of the amounts payable to the Executive under this Agreement, either alone or together with other payments which the Executive has the right to receive from the Bank, constitute “excess parachute payments” within the meaning of Section 280G of the Internal Revenue Code of 1986, as amended (the “Code”), that are subject to the excise tax imposed by Section 4999 of the Code (or similar tax and/or assessment), Executive shall be responsible for the payment of such excise tax and Bank (and its successor) shall be responsible for any loss of deductibility related thereto; provided, however, that Bank and Executive shall cooperate with each other and use all reasonable efforts to minimize to the fullest extent possible the amount of excise tax imposed by Section 4999 of the Code. If, at a later date, it is determined (pursuant to final regulations or published rulings of the Internal Revenue Service, final judgment of a court of competent jurisdiction, or otherwise) that the amount of excise taxes payable by

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the Executive is greater than the amount initially so determined, then the Executive shall pay an amount equal to the sum of such additional excise taxes and any interest, fines and penalties resulting from such underpayment. The determination of the amount of any such excise taxes shall be made by the independent accounting firm employed by the Bank immediately prior to the change in control or such other independent accounting firm or advisor as may be mutually agreeable to Bank and Executive in the exercise of their reasonable good faith judgment.

7. Right To Determine Funding Methods. The Bank reserves the right to determine, in its sole and absolute discretion, whether, to what extent and by what method, if any, to provide for the payment of the amounts which may be payable to the Executive, under the terms of this Agreement. In the event that the Bank elects to fund this Agreement, in whole or in part, through the use of life insurance or annuities, or both, the Bank shall determine the ownership and beneficial interests of any such policy of life insurance or annuity. The Bank further reserves the right, in its sole and absolute discretion, to terminate any such policy, and any other devise used to fund its obligations under this Agreement, at any time, in whole or in part. Consistent with Paragraph 9 below, the Executive shall have no right, title or interest in or to any funding source or amount utilized by the Bank pursuant to this Agreement, and any such funding source or amount shall not constitute security for the performance of the Bank’s obligations pursuant to this Agreement. In connection with the foregoing, the Executive agrees to execute such documents and undergo such medical examinations or tests which the Bank may request and which may be reasonably necessary to facilitate any funding for this Agreement including, without limitation, the Bank’s acquisition of any policy of insurance or annuity.

8. Claims Procedure. The Bank shall, but only to the extent necessary to comply with ERISA, be designated as the named fiduciary under this Agreement and shall have authority to control and manage the operation and administration of this Agreement. Consistent therewith, the Bank shall make all determinations as to the rights to benefits under this Agreement. Any decision by the Bank denying a claim by the Executive for benefits under this Agreement shall be stated in writing and delivered or mailed, via registered or certified mail, to the Executive, the Executive’s spouse or the Executive’s beneficiaries, as the case may be. Such decision shall set forth the specific reasons for the denial of a claim. In addition, the Bank shall provide the Executive, or as applicable, the Executive’s spouse or beneficiaries, with a reasonable opportunity for a full and fair review of the decision denying such claim.

9. Status as an Unsecured General Creditor. Notwithstanding anything contained herein to the contrary: (i) the Executive shall have no legal or equitable rights, interests or claims in or to any specific property or assets of the Bank as a result of this Agreement; (ii) none of the Bank’s assets shall be held in or under any trust for the benefit of the Executive or held in any way as security for the fulfillment of the obligations of the Bank under this Agreement; (iii) all of the Bank’s assets shall be and remain the general unpledged and unrestricted assets of the Bank; (iv) the Bank’s obligation under this Agreement shall be that of an unfunded and unsecured promise by the Bank to pay money in the future; and (v) the Executive shall be an unsecured general creditor with respect to any benefits which may be payable under the terms of this Agreement.

Notwithstanding subparagraphs (i) through (v) above, the Bank and the Executive acknowledge and agree that, in the event of a Change in Control, upon request of the Executive, or in the Bank’s discretion if the Executive does not so request and the Bank nonetheless deems it appropriate, the Bank shall establish, not later than the effective date of the Change in Control, a Rabbi Trust or multiple Rabbi Trusts (the “Trust” or “Trusts”) upon such terms and conditions as the Bank, in its sole discretion, deems appropriate and in compliance with applicable provisions of the Code, in order to permit the Bank to make contributions and/or transfer assets to the Trust or Trusts to discharge its obligations pursuant to this Agreement. The principal of the Trust or Trusts and any earnings thereon shall be held separate and apart from other funds of the Bank to be used exclusively for discharge of the Bank’s obligations pursuant to this Agreement and shall continue to be subject to the claims of the Bank’s general creditors until paid to the Executive in such manner and at such times as specified in this Agreement.

10. Discretion of Board to Accelerate Payout. Notwithstanding any of the other provisions of this Agreement, the Board of Directors of the Bank or the Holding Company may, if determined in its sole and absolute discretion to be appropriate, accelerate the payment of the amounts due under the terms of this Agreement, provided that the Executive: (i) consents to the revised payout terms determined appropriate by the Board of Directors; and (ii) does not negotiate or in any way influence the terms of proposed altered/accelerated payout (said decision to be made solely by the Board of Directors and offered to the Executive on a “take it or leave it basis”).

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11. Miscellaneous.

11.1. Opportunity To Consult With Independent Advisors. The Executive acknowledges that he has been afforded the opportunity to consult with independent advisors of his choosing including, without limitation, accountants or tax advisors and counsel regarding both the benefits granted to him under the terms of this Agreement and the (i) terms and conditions which may affect the Executive’s right to these benefits and (ii) personal tax effects of such benefits including, without limitation, the effects of any federal or state taxes, Section 280G of the Code, and any other taxes, costs, expenses or liabilities whatsoever related to such benefits, which in any of the foregoing instances the Executive acknowledges and agrees shall be the sole responsibility of the Executive notwithstanding any other term or provision of this Agreement. The Executive further acknowledges and agrees that the Bank shall have no liability whatsoever related to any such personal tax effects or other personal costs, expenses, or liabilities applicable to the Executive and further specifically waives any right for himself or herself, and his or her heirs, beneficiaries, legal representatives, agents, successor and assign to claim or assert liability on the part of the Bank related to the matters described above in this subparagraph 11.1. The Executive further acknowledges that he has read, understands and consents to all of the terms and conditions of this Agreement, and that he enters into this Agreement with a full understanding of its terms and conditions.

11.2. Arbitration of Disputes. All claims, disputes and other matters in question arising out of or relating to this Agreement or the breach or interpretation thereof, other than those matters which are to be determined by the Bank in its sole and absolute discretion, shall be resolved by binding arbitration before a representative member, selected by the mutual agreement of the parties, of the Judicial Arbitration and Mediation Services, Inc. (“JAMS”), located in San Diego, California. In the event JAMS is unable or unwilling to conduct the arbitration provided for under the terms of this Paragraph, or has discontinued its business, the parties agree that a representative member, selected by the mutual agreement of the parties of the American Arbitration Association (“AAA”) located in San Diego, California, shall conduct the binding arbitration referred to in this Paragraph. Notice of the demand for arbitration shall be filed in writing with the other party to this Agreement and with JAMS (or AAA, if necessary). In no event shall the demand for arbitration be made after the date when institution of legal or equitable proceedings based on such claim, dispute or other matter in question would be barred by the applicable statute of limitations. The arbitration shall be subject to such rules of procedure used or established by JAMS, or if there are none, the rules of procedure used or established by AAA. Any award rendered by JAMS or AAA shall be final and binding upon the parties, and as applicable, their respective heirs, beneficiaries, legal representatives, agents, successors and assigns, and may be entered in any court having jurisdiction thereof. The obligation of the parties to arbitrate pursuant to this clause shall be specifically enforceable in accordance with, and shall be conducted consistently with, the provisions of Title 9 of Part 3 of the California Code of Civil Procedure. Any arbitration hereunder shall be conducted in San Diego, California, unless otherwise agreed to by the parties.

11.3. Attorneys’ Fees. In the event of any arbitration or litigation concerning any controversy, claim or dispute between the parties hereto, arising out of or relating to this Agreement or the breach hereof, or the interpretation hereof, the prevailing party shall be entitled to recover from the losing party reasonable expenses, attorneys’ fees and costs incurred in connection therewith or in the enforcement or collection of any judgment or award rendered therein. The “prevailing party” means the party determined by the arbitrator(s) or court, as the case may be, to have most nearly prevailed, even if such party did not prevail in all matters, not necessarily the one in whose favor a judgment is rendered.

11.4. Notice. Any notice required or permitted of either the Executive or the Bank under this Agreement shall be deemed to have been duly given, if by personal delivery, upon the date received by the party or its authorized representative; if by facsimile, upon transmission to a telephone number previously provided by the party to whom the facsimile is transmitted as reflected in the records of the party transmitting the facsimile and upon reasonable confirmation of such transmission; and if by mail, on the third (3rd) day after mailing via U.S. first class mail, registered or certified, postage prepaid and return receipt requested, and addressed to the party at the address given below for the receipt of notices, or such changed address as may be requested in writing by a party.

If to the Bank:	Southwest Community Bank
	5810 El Camino Real
	Suite D
	Carlsbad, CA 92013
	Attention: Chief Executive Officer

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If to the Executive:	Alan J. Lane
	41090 Avenida Verde
	Temecula, CA 92591
	and a copy to:
	Lawrence S. Branton, Esq.
	Branton & Wilson, APC
	701 B St., Suite 1255
	San Diego, CA 92101-8187

11.5. Assignment. The Executive shall have no power or right to transfer, assign, anticipate, hypothecate, modify or otherwise encumber any part or all of the amounts payable hereunder, nor, prior to payment in accordance with the terms of this Agreement, shall any portion of such amounts be: (i) subject to seizure by any creditor of the Executive, by a proceeding at law or in equity, for the payment of any debts, judgments, alimony or separate maintenance obligations which may be owed by the Executive; or (ii) transferable by operation of law in the event of bankruptcy, insolvency or otherwise. Any such attempted assignment or transfer shall be void.

11.6. Binding Effect/Merger or Reorganization. This Agreement shall be binding upon and inure to the benefit of the Executive and the Bank. Accordingly, the Bank shall not merge or consolidate into or with another corporation, or reorganize or sell substantially all of its assets to another corporation, firm or person, unless and until such succeeding or continuing corporation, firm or person agrees to assume and discharge the obligations of the Bank under this Agreement. In the alternative, the Holding Company may agree to assume and discharge the obligation of the Bank under this Agreement. Upon the occurrence of such event, the term “Bank” as used in this Agreement shall be deemed to refer to such surviving or successor firm, person, entity or corporation, or the Holding Company, as the case may be.

11.7. Nonwaiver. The failure of either party to enforce at any time or for any period of time any one or more of the terms or conditions of this Agreement shall not be a waiver of such term(s) or condition(s) or of that party’s right thereafter to enforce each and every term and condition of this Agreement.

11.8. Partial Invalidity. If any terms, provision, covenant, or condition of this Agreement is determined by an arbitrator or a court, as the case may be, to be invalid, void, or unenforceable, such determination shall not render any other term, provision, covenant or condition invalid, void or unenforceable, and the Agreement shall remain in full force and effect notwithstanding such partial invalidity.

11.9. Entire Agreement. This Agreement supersedes any and all other agreements, either oral or in writing, between the parties with respect to the subject matter of this Agreement and contains all of the covenants and agreements between the parties with respect thereto. Each party to this Agreement acknowledges that no other representations, inducements, promises, or agreements, oral or otherwise, have been made by any party, or anyone acting on behalf of any party, which are not set forth herein, and that no other agreement, statement, or promise not contained in this Agreement shall be valid or binding on either party.

11.10. Modifications. Any modification of this Agreement shall be effective only if it is in writing and signed by each party or such party’s authorized representative.

11.11. Paragraph Headings. The paragraph headings used in this Agreement are included solely for the convenience of the parties and shall not affect or be used in connection with the interpretation of this Agreement.

11.12. No Strict Construction. The language used in this Agreement shall be deemed to be the language chosen by the parties hereto to express their mutual intent, and no rule of strict construction will be applied against any person.

11.13. Governing Law. The laws of the State of California, other than those laws denominated choice of law rules, and where applicable, the rules and regulations of the Board of Governors of the Federal Reserve System, Federal Deposit Insurance Corporation, Office of the Comptroller of the Currency, or any other regulatory agency or governmental authority having jurisdiction over the Bank or its holding company, shall govern the validity, interpretation, construction and effect of this Agreement.

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IN WITNESS WHEREOF, the Bank and the Executive have executed this Agreement on the date first above-written in the City of Carlsbad, California.

SOUTHWEST COMMUNITY BANK		EXECUTIVE
By:	/s/ Frank J. Mercardante	/s/ Alan J. Lane
	Frank J. Mercardante	Alan J. Lane
	Chief Executive Officer
	/s/ Barbara S. Cavalluzzi	/s/ Paul M. Weil
	Witness	Witness

SCHEDULE A

CALENDAR YEAR	APPLICABLE PERCENTAGE
Inception of service to 04/19/2005:	7	%
04/20/2005 to 04/19/2006:	14	%
04/20/2006 to 04/19/2007:	21	%
04/20/2007 to 04/19/2008:	28	%
04/20/2008 to 04/19/2009:	35	%
04/20/2009 to 04/19/2010:	42	%
04/20/2010 to 04/19/2011:	49	%
04/20/2011 to 04/19/2012:	56	%
04/20/2012 to 04/19/2013:	63	%
04/20/2013 to 04/19/2014:	70	%
04/20/2014 to 04/19/2015:	77	%
04/20/2015 to 04/19/2016:	85	%
04/20/2016 to 04/19/2017:	92	%
04/20/2017 and beyond:	100	%

Beginning in the year 2006, the Executive shall be entitled to the Applicable Percentage increase for each calendar year, during which he is employed by the Bank for at least six months.

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SCHEDULE B

EXECUTIVE BENEFITS

Pursuant to the terms of this Agreement, The Bank shall pay to the Executive One Hundred Thousand Dollars ($100,000) per year, for a period of fifteen (15) years (180 months), payable in twelve equal monthly installments. The amount of Executive Benefits payable under the Agreement shall be adjusted each year from the date of commencement of payments of the Executive Benefits until the death of the Executive as follows:

a. The Executive Benefits shall be increased at the rate of three percent (3%) compounded each year.

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FIRST AMENDMENT

TO EXECUTIVE SUPPLEMENTAL COMPENSATION

AGREEMENT BY AND BETWEEN SOUTHWEST

COMMUNITY BANK AND ALAN J. LANE

This First Amendment To Executive Supplemental Compensation Agreement By and Between Southwest Community Bank and Alan J. Lane (hereinafter “Amendment”) is made and entered into effective this April 28, 2005, by and between Southwest Community Bank, with its principal offices located in the City of Carlsbad, California (hereinafter “the Bank”), and Alan J. Lane, an individual residing in the state of California, (hereinafter “the Executive”).

Because of an inconsistency with respect to vesting percentages as they appear in “Schedule A” to the Executive Supplemental Compensation Agreement, and reference to acceleration of vesting following a Termination Without Cause, the parties hereby agree to Amend the Executive Supplemental Compensation Agreement, effective as of January 20, 2005, by and between the Bank and the Executive, as follows:

To delete reference to the “(20%)” figure as it appears on page 1 of the Agreement, under the heading “1.2 Applicable Percentage”, at line 6 of that paragraph.

It is the intent of the Parties that the deletion of this “20%” figure shall eliminate any inconsistency or conflict between the intended vesting schedule appearing in Exhibit A to the underlying Agreement and any provisions thereto (including but not limited to Paragraph 1.2).

To the extent that any paragraph, term, or provision of the Executive Supplemental Compensation Agreement is not specifically amended herein, or in any other amendment thereto, said paragraph, term, or provision shall remain in full force and effect as set forth in said Agreement.

IN WITNESS WHEREOF, the Employee and a duly authorized Bank officer have signed this Agreement as of the written date.

Southwest Community Bank

By	/s/ Frank J. Mercardante	Date: 4/28/05
Title	Chief Executive Officer
/s/ Alan J. Lane		Date: 4/28/05
Alan J. Lane
/s/ Paul M. Weil		/s/ Barbara S. Cavalluzzi
Witness		Witness

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Southwest Community Bank

SECOND AMENDMENT TO

EXECUTIVE SUPPLEMENTAL COMPENSATION AGREEMENT

This Amendment dated April 19, 2006 amends the Executive Supplemental Compensation Agreement between Southwest Community Bank (the “Bank”) and Alan J. Lane (the “Executive”) dated January 20, 2005, as amended April 28, 2005 (the “Agreement”).

The parties desire to amend the Agreement so that it complies with Internal Revenue Code Section 409A, which was promulgated pursuant to the American Jobs Creation Act of 2004. Accordingly, the parties agree that the Agreement shall be amended as follows:

1. Subparagraph 1.2 shall be amended in its entirety to read:

“1.2 Applicable Percentage. The term “Applicable Percentage” shall mean that percentage listed on Schedule A attached hereto which is adjacent to the date range which includes the date on which payments are to commence under the terms of this Agreement. However, if the Executive’s employment is terminated without cause, then for purposes of calculating the benefit under subparagraph 5.1, the Applicable Percentage as shown on Schedule B shall be accelerated by two years. For purposes of the benefits under subparagraph 5.4 following a Change in Control, the Applicable Percentage shall be one hundred percent (100%). With regard to the Executive’s Constructive Termination of Employment following a Change in Control, the preceding sentence only applies if the Constructive Termination of Employment occurs within 365 days after the Change in Control and the Executive has not accepted an employment contract with the new employer that is for a term of at least two years.”

2. Subparagraph 1.6 shall be amended in its entirety to read:

“1.6 Disability/Disabled. The term “Disability” or “Disabled” shall mean the Executive (i) is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months, or (ii) is, by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months, receiving income replacement benefits for a period of not less than three (3) months under an accident and health plan covering employees of the Bank.”

3. Subparagraph 3.1 shall be amended in its entirety to read:

“3.1 Payments After Normal Retirement Age. If the Executive shall remain in the continuous employment of the Bank until attaining fifty-five (55) years of age, the Executive

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shall be entitled to be paid the Applicable Percentage of the Executive Benefits, as defined in Schedule B, in substantially equal monthly installments on the first day of each month, beginning with the month following the month in which the Executive Retires or is terminated by the Bank without cause, payable for a period of one hundred and eighty (180) months. The commencement date for payments is subject to Paragraph 10 below.”

4. Subparagraph 3.3, shall be renumbered as Subparagraph 3.2 and shall be amended in its entirety to read:

“3.2 Payments Terminate at Death. All payments under this Agreement shall be prorated for the year in which the Executive dies to the date of the Executive’s death and the prorated amount shall be paid on the next regular installment payment date. All installment payments thereafter shall cease.”

5. Subparagraph 5.1 shall be amended in its entirety to read:

“5.1 Termination Without Cause. If the Executive’s employment is terminated by the Bank without cause or by the Executive as a result of Constructive Termination of Employment, and such termination is not subject to the provisions of subparagraph 5.4 below, then the Executive shall be entitled to be paid the Applicable Percentage of the Executive Benefits, as defined above, calculated as of the end of the year following the year in which the Executive is terminated, as if the employment had continued to such date, in substantially equal monthly installments on the first day of each month, beginning with the month following the month in which the Executive attains fifty-five (55) years of age, payable for a period of one hundred and eighty (180) months. The commencement date for payments is subject to Paragraph 10 below.”

6. Subparagraph 5.2(a) shall be amended in its entirety to read:

“5.2 Voluntary Termination by the Executive

(a) If the Applicable Percentage is one hundred percent (100%), the Executive shall be entitled to be paid the Applicable Percentage of the Executive Benefits, as defined in Schedule B, in substantially equal monthly installments on the first day of each month, beginning with the month following the month in which the Executive attains fifty-five (55) years of age payable for a period of one hundred and eighty (180) months. The commencement date for payments is subject to Paragraph 10 below.”

7. Subparagraph 5.4 shall be amended in its entirety to read:

“5.4 Termination on Account of or After a Change in Control. In the event: (i) the Executive’s employment with the Bank is terminated by the Bank in conjunction with, or by reason of, a “Change in Control” (as defined in subparagraph 1.3 above) or (ii) there is a Constructive Termination of Employment after the Change in Control, then the Executive shall

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be entitled to be paid the Applicable Percentage of the Executive Benefits, as defined above, in substantially equal monthly installments on the first day of each month beginning the month following the termination of employment by the Bank or the Constructive Termination of Employment, payable for a period of one hundred and eighty (180) months. The commencement date for payments is subject to Paragraph 10 below.”

8. Paragraph 6 shall be amended to add the following sentence and shall otherwise remain in its entirety:

“All efforts by the Bank and the Executive to minimize the amount of excise tax imposed by Section 4999 of the Code shall be in accordance with Section 409A of the Code.”

9. Paragraph 10 shall be amended in its entirety to read:

“10 Delay of Payment if Specified Employee. Other than with respect to benefits paid in the event of Disability under Paragraph 4, if at the time the Executive’s employment terminates the Executive is a “specified employee,” as defined in Section 409A of Code, the Executive Benefits shall not commence until the later of (a) the commencement date otherwise set forth in the applicable paragraph of this Agreement or (b) a date which is six months after the date of Executive’s termination of employment with the Bank. Furthermore, for any Executive affected by this six (6) month delay in payment imposed by Section 409A of the Code, and when applicable, the aggregate amount of the first seven (7) months of installments shall be paid at the beginning of the seventh month following the date of termination of employment. Monthly installment payments shall continue thereafter as specified. If any provision of this Employment Agreement does not satisfy the requirements of Section 409A of the Code, such provision shall be applied in a manner consistent with those requirements.”

10. Subparagraph 11.10 shall be amended in its entirety to read:

“11.10 Amendments and Changes in Timing of Distributions. Any amendments or modifications of this Agreement shall be effective only if it is in writing and signed by each party or such party’s authorized representative. Notwithstanding the foregoing, this Agreement may not be amended to accelerate the timing of distributions of the Executive Benefits unless such acceleration is permissible under Section 409A of the Code. With the consent of the Bank, the Executive may elect a delay in the payment or a change in the form of payment, subject to the following limitations:

(a) the election may not take effect until at least twelve (12) months after the date on which the election is made;

(b) other than in the event of death or Disability, the first payment with respect to such election must be deferred for a period of at least five (5) years from the date such payment otherwise would have been made; and

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(c) an election related to a payment to made at a specified time may not be made less than twelve (12) months prior to the date of the first scheduled payment.”

11. Subparagraph 11.14 shall be added and read:

“11.14 IRC 409A Compliance. Notwithstanding any other provision of Agreement, it is intended that any payment or benefit which is provided pursuant to or in connection with this Agreement shall be provided and paid in a manner, and at such time and in such form, as complies with the applicable requirements of Section 409A of the Code to avoid the unfavorable tax consequences provided therein for non-compliance. Any provision in this Agreement that is determined to violate the requirements of Section 409A shall be void and without effect. To the extent permitted under Section 409A, the parties shall reform the provision, provided such reformation shall not subject the Executive to additional tax or interest and the Bank shall not be required to incur any additional compensation as a result of the reformation. In addition, any provision that is required to appear in this Agreement that is not expressly set forth shall be deemed to be set forth herein, and this Agreement shall be administered in all respects as if such provision were expressly set forth. References in this Agreement to Section 409A of the Code include rules, regulations, and guidance of general application issued by the Department of the Treasury under Internal Revenue Code Section 409A.”

12. Except as specifically amended herein, the Agreement shall remain in full force and effect.

[Signature Page to Follow]

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IN WITNESS WHEREOF, the parties have executed this Amendment as of the date first written above.

BANK:

Southwest Community Bank
By:	/s/ Howard B. Levenson
Name:	Howard B. Levenson
Its:	Chairman

THE EXECUTIVE:

/s/ Alan J. Lane

Alan J. Lane

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EX-10.4(A)

Exhibit 10.4(a)

LIFE INSURANCE

ENDORSEMENT METHOD SPLIT DOLLAR PLAN

AGREEMENT

Insurer/Policy Number:	Massachusetts Mutual Life Insurance Co. Policy No. 0066426
	New York Life Insurance Company Policy No. 56610020
Bank:	Southwest Community Bank
Insured:	Alan J. Lane
Relationship of Insured to Bank:	Executive
Date:	6-15-2005

The respective rights and duties of Southwest Community Bank (hereinafter the “Bank”) and Alan J. Lane (hereinafter the “Insured”) in the above policy(ies) (the “Policy” or Policies) shall be as follows:

I. DEFINITIONS

Refer to the Policy provisions for the definition of all terms in this Agreement.

II. POLICY TITLE AND OWNERSHIP

Title and ownership shall reside in the Bank for its use and for the use of the Insured all in accordance with this Agreement. The Bank alone may, to the extent of its interest, exercise the right to borrow or withdraw the Policy cash values. Where the Bank and the Insured (or the Insured’s beneficiary[ies] or assignee[s], with the consent of the Insured) mutually agree to exercise the right to increase the coverage under the subject split dollar Policy, then, in such event, the rights, duties and benefits of the parties to such increased coverage shall continue to be subject to the terms of this Agreement.

III. BENEFICIARY DESIGNATION RIGHTS

The Insured (or beneficiary[ies] or assignee[s]) shall have the right and power to designate a beneficiary or beneficiaries to receive his share of the proceeds payable upon the death of the Insured, and to elect and change a payment option for such beneficiary, subject to any right or interest the Bank may have in such proceeds, as provided in this Agreement.

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IV. PREMIUM PAYMENT METHOD

The Bank shall pay an amount equal to the planned premiums and any other premium payments that might become necessary to maintain the Policy in force.

V. TAXABLE BENEFIT

Annually the Insured will receive a taxable benefit equal to the assumed cost of insurance as required by the Internal Revenue Service. The Bank (or its administrator) will report to the Insured the amount of imputed income received each year on Form W-2 or its equivalent. The bank agrees to reimburse (“gross-up”) the Insured for taxes paid related to the receipt of this benefit based on the Table below, or as adjusted based on then prevailing income tax rates:

Federal Tax Rate	State Tax Rate	FICA Tax Rate	Medicare Tax Rate
39.60%	9.30%	7.65%*	1.45%

* The Social Security portion of the FICA tax only applies in years where the Employee has not otherwise reached the maximum tax. The Medicare tax only applies in years where the Employee has otherwise reached the maximum non- Medicare portion of the FICA tax.

VI. DIVISION OF DEATH PROCEEDS

Subject to Paragraph VII herein, the division of the death proceeds of the Policies is as follows:

1. If death occurs on or before the attainment of age seventy (70), the Insured’s beneficiary(ies), (designated in accordance with Paragraph III), shall be entitled to an amount equal to the lesser of one million dollars ($1,000,000), or one hundred percent (100%) of the net at risk insurance portion of the proceeds. If death occurs after age seventy (70) but on or before age eighty (80), the Insured’s beneficiary(ies) shall be entitled to the lesser of seven hundred thousand dollars ($700,000), or one hundred percent (100%) of the net at risk insurance proceeds. If death occurs after age eighty (80), the Insured’s beneficiaries shall be entitled to the lesser of four hundred thousand dollars ($400,000), or one hundred percent (100%) of the net at risk insurance proceeds. The net at risk insurance portion is the total proceeds less the cash value of the Policy.

2. Payment of the death benefit determined by the preceding paragraph shall be made and distributed from the Policies in the following order, with resort to each succeeding policy only to the extent that the proceeds of each prior listed Policy are insufficient to satisfy the specified death benefit in full: (a) Massachusetts Mutual Life Insurance Co. Policy No. 0066426; (b) New York Life Insurance Company Policy No. 56610020.

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3. The Bank and the Insured (or beneficiary[ies] or assignee[s]) shall share in any interest due on the death proceeds on a pro rata basis in the ratio that the proceeds due the Bank and the Insured, respectively, bears to the total proceeds, excluding any such interest.

4. In the event that the Policy is terminated other than as a result of (a) a termination of this Agreement pursuant to paragraph X or (b) any intentional act of the Insured which results in the termination of the Policy, then the Bank shall pay to the Insured’s beneficiary(ies) an amount which will provide a total after-tax death benefit equal to the benefit that the Insured would have received if the Policy had not been terminated.

VII. DIVISION OF CASH SURRENDER VALUE

The Bank shall at all times be entitled to an amount equal to the Policy’s cash value, as that term is defined in the Policy, less any Policy loans and unpaid interest or cash withdrawals previously incurred by the Bank and any applicable Policy surrender charges. Such cash value shall be determined as of the date of surrender of the Policy or death of the Insured as the case may be.

VIII. PREMIUM WAIVER

If the Policy contains a premium waiver provision, any such waived amounts shall be considered for all purposes of this Agreement as having been paid by the Bank.

IX. RIGHTS OF PARTIES WHERE POLICY ENDOWMENT OR ANNUITY ELECTION EXISTS

In the event the Policy involves an endowment or annuity element, the Bank’s right and interest in any endowment proceeds or annuity benefits shall be determined under the provisions of this Agreement by regarding such endowment proceeds or the commuted value of such annuity benefits as the Policy’s cash value. Such endowment proceeds or annuity benefits shall be treated like death proceeds for the purposes of division under this Agreement.

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X. TERMINATION OF AGREEMENT

This Agreement shall terminate at the option of the Bank following thirty (30) days written notice to the Insured upon the happening of any one of the following:

1. The Insured’s right to receive benefits under that certain Executive Supplemental Compensation Agreement effective as of January 20, 2005 shall terminate for any reason other than the Insured’s death, or

2. The Insured shall be discharged from service with the Bank for cause. The term “for cause” shall mean:

(a) The Employee’s deliberate violation of (i) any state or federal banking or securities laws, or of the Bylaws, rules, policies or resolutions of the Employer, or (ii) of the rules or regulations of the California Department of Financial Institutions, the Federal Deposit Insurance Corporation, the Federal Reserve Board of Governors, the Office of the Comptroller of the Currency or any other regulatory agency or governmental authority having jurisdiction over the Employer, which has a material adverse effect upon the Employer; or

(b) The Employee’s conviction of (i) any felony or (ii) a crime involving moral turpitude or a fraudulent or dishonest act which, in each case, has a material adverse effect on the Employer.

Upon such termination, the Insured (or beneficiary[ies] or assignee[s]) shall have a ninety (90) day option to receive from the Bank an absolute assignment of the Policy in consideration of a cash payment to the Bank, whereupon this Agreement shall terminate. Such cash payment shall be the greater of:

3. The Bank’s share of the cash value of the Policy on the date of such assignment, as defined in this Agreement.

4. The amount of the premiums which have been paid by the Bank prior to the date of such assignment.

Should the Insured (or beneficiary[ies] or assignee[s]) fail to exercise this option within the prescribed ninety (90) day period, the Insured (or beneficiary[ies] or assignee[s]) agrees that all of his or her rights, interest and claims in the Policy shall terminate as of the date of the termination of this Agreement.

Except as provided above, this Agreement shall terminate upon distribution of the death benefit proceeds in accordance with Paragraph VI above.

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XI. INSURED’S OR ASSIGNEE’S ASSIGNMENT RIGHTS

The Insured may not, without the prior written consent of the Bank, assign to any individual, trust or other organization, any right, title or interest in the Policy nor any rights, options, privileges or duties created under this Agreement.

XII. AGREEMENT BINDING UPON THE PARTIES

This Agreement shall be binding upon the Insured and the Bank, and their respective heirs, successors, personal representatives and assigns, as applicable.

XIII. NAMED FIDUCIARY AND PLAN ADMINISTRATOR

The Bank is hereby designated the “Named Fiduciary” until resignation or removal by its Board of Directors. As Named Fiduciary, the Bank shall be responsible for the management, control, and administration of this Agreement as established herein. The Named Fiduciary may allocate to others certain aspects of the management and operations responsibilities of this Agreement, including the employment of advisors and the delegation of any ministerial duties to qualified individuals.

XIV. FUNDING POLICY

The funding Policy for this Agreement shall be to maintain the Policy in force by paying, when due, all premiums required.

XV. CLAIM PROCEDURES

Claim forms or claim information as to the subject Policy can be obtained by contacting Benmark. Inc. (800-544-6079). When the Named Fiduciary has a claim which may be covered under the provisions described in the Policy, it should contact the office named above, and they will either complete a claim form and forward it to an authorized representative of the Insurer or advise the named Fiduciary what further requirements are necessary. The Insurer will evaluate and make a decision as to payment. If the claim is payable, a benefit check will be issued to the Named Fiduciary.

In the event that a claim is not eligible under the Policy, the Insurer will notify the Named Fiduciary of the denial pursuant to the requirements under the terms of the Policy. If the Named Fiduciary is dissatisfied with the denial of the claim and wishes to contest such claim denial, it should contact the office named above and they will assist in making inquiry to the Insurer. All objections to the Insurer’s actions should be in writing and submitted to the office named above for transmittal to the Insurer.

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XVI. GENDER

Whenever in this Agreement words are used in the masculine or neuter gender, they shall be read and construed as in the masculine, feminine or neuter gender, whenever they should so apply.

XVII. INSURANCE COMPANY NOT A PARTY TO THIS AGREEMENT

The Insurer shall not be deemed a party to this Agreement, but will respect the rights of the parties as set forth herein upon receiving an executed copy of this Agreement. Payment or other performance in accordance with the Policy provisions shall fully discharge the Insurer from any and all liability.

IN WITNESS WHEREOF, the Insured and a duly authorized Bank officer have signed this Agreement as of the above written date.

SOUTHWEST COMMUNITY BANK	INSURED
/s/ Frank J. Mercardante	/s/ Alan J. Lane
Frank J. Mercardante President and CEO	Alan J. Lane

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Southwest Community Bank

AMENDMENT TO

LIFE INSURANCE ENDORSEMENT METHOD SPLIT DOLLAR PLAN AGREEMENT

This Amendment dated April 19, 2006 amends the Life Insurance Endorsement Method Split Dollar Plan Agreement between Southwest Community Bank (the “Bank”) and Alan J. Lane (the “Insured”) dated June 15, 2005 (the “Agreement”).

1. Notwithstanding any other provision of the Policy or the Agreement, it is intended that any payment or benefit which is provided to the Insured pursuant to or in connection with the Policy or this Agreement which is considered to be nonqualified deferred compensation subject to Section 409A of the Code shall be provided and paid in a manner, and at such time and in such form, as complies with the applicable requirements of Section 409A of the Code to avoid the unfavorable tax consequences provided therein for noncompliance.

2. The Agreement shall otherwise remain in full force and effect as written.

IN WITNESS WHEREOF, the parties have executed this Amendment as of the date first written above.

BANK:

Southwest Community Bank

By:	/s/ Howard B. Levenson
Name:	Howard B. Levenson
Its:	Chairman

INSURED:

/s/ Alan J. Lane

Alan J. Lane

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EX-10.5

Exhibit 10.5

EXECUTIVE SUPPLEMENTAL COMPENSATION AGREEMENT

This Agreement is made and entered into effective as of October 1, 2002, by and between Southwest Community Bank, with its principal offices located in the City of Carlsbad, California (“the Bank”), and Stuart McFarland, an individual residing in the State of California (“the Executive”).

R E C I T A L S

WHEREAS, the Executive is an employee of the Bank, serving since February 8, 1999;

WHEREAS, the Bank desires to establish a compensation benefit program as a fringe benefit for executive officers of the Bank in order to attract and retain individuals with extensive and valuable experience in the banking industry;

WHEREAS, the Executive’s experience and knowledge of the affairs of the Bank and the banking industry are extensive and valuable;

WHEREAS, it is deemed to be in the best interests of the Bank to provide the Executive with certain fringe benefits, on the terms and conditions set forth herein, in order to reasonably induce the Executive to remain in the Bank’s employment; and

WHEREAS, the Executive and the Bank wish to specify in writing. The terms and conditions upon which this additional compensatory incentive will be provided to the Executive;

NOW, THEREFORE, in consideration of the services to be performed by the Executive in the future, as well as the mutual promises and covenants contained herein, the Executive and the Bank agree as follows:

A G R E E M E N T

1. Terms and Definitions.

1. Administrator. The Bank shall be the “Administrator” and, solely for the purposes of ERISA as defined in subparagraph 1.8 below, the “fiduciary” of this Agreement where a fiduciary is required by ERISA.

1.2. Applicable Percentage. The term “Applicable Percentage” shall mean that percentage listed on Schedule “A” attached hereto which is adjacent to the number of calendar years which shall have elapsed from the date of this Agreement and ending on the date payments are to first begin under the terms of this Agreement. However, if the Executive’s employment is terminated under subparagraph 5.1 (“Termination Without Cause”), then the Applicable Percentage from the preceding sentence is accelerated by two years (20%). Notwithstanding the foregoing or the percentages set forth on Schedule “A”, but subject to all other terms and conditions set forth herein, the Applicable Percentage shall be one hundred percent (100%) upon

the Executive’s death, or upon Executive’s termination of employment that is on account of or after a “Change in Control” (see subparagraphs 1.3 and 5.4). With regard to the Executive’s “Constructive Termination of Employment” (as defined in subparagraph 1.5), the preceding sentence only applies if the Constructive Termination of Employment occurs within 365 days from the Change in Control, and the Executive has not accepted an employment contract with the new Employer that is for a term of at least two years.

1.3. Change in Control. The term “Change in Control” shall mean the occurrence of any of the following events with respect to the Bank (with the term “Bank” being defined for purposes of determining whether a Change in Control has occurred to include a Holding Company if one is formed in the future: (i) a change in control of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or in response to any other form or report to the regulatory agencies or governmental authorities having jurisdiction over the Bank or any stock exchange on which the Bank’s shares are listed which requires the reporting of a change in control; (ii) any merger, consolidation or reorganization of the Bank in which the Bank does not survive; (iii) any sale, lease, exchange, mortgage, pledge, transfer or other disposition (in one transaction or a series of transactions) of any assets of the Bank having an aggregate fair market value of fifty percent (50%) of the total value of the assets of the Bank, reflected in the most recent balance sheet of the Bank; (iv) a transaction whereby any “person” (as such term is used in the Exchange Act) or any individual, corporation, partnership, trust or any other entity becomes the beneficial owner, directly or indirectly, of securities of the Bank representing twenty-five percent (25%) or more of the combined voting power of the Bank’s then outstanding securities; or (v) a situation where, in any one-year period, individuals who at the beginning of such period constitute the Board of Directors of the Bank cease for any reason to constitute at least a majority thereof, unless the election, or the nomination for election by the Bank’s shareholders, of each new Director is approved by a vote of at least three-quarters (3/4) of the Directors then still in office who were Directors at the beginning of the period. Notwithstanding the foregoing or anything else contained herein to the contrary, there shall not be a Change of Control for the purposes of this Agreement if the event which would otherwise come within the meaning of the term Change of Control involves an Employee Stock Ownership Plan sponsored by the Bank which is the party that acquires “control” or is the principal participant in the transaction constituting a Change in Control, as described above.

1.4. The Code. The “Code” shall mean the Internal Revenue Code of 1986, as amended (the “Code”).

1.5. Construction Termination of Employment. The term “Constructive Termination of Employment” means termination of Employment by Executive because the working conditions are so intolerable or aggravated that a reasonable person in the Executive’s position would be compelled to resign, provided that the Executive advised the Bank/Employer of the conditions and the Bank/Employer failed to take timely reasonable actions to remedy the conditions.

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1.6. Disability /Disabled. The term “Disability” or “Disabled” shall have the same meaning given such terms in any policy of disability insurance maintained by the Bank for the benefit of the Executive. In the absence of such a policy which extends coverage to the Executive in the event of disability, the terms shall mean bodily injury or disease (mental or physical) which wholly and continuously prevents the performance of duty for at least six months.

1.7. Effective Date. The term “Effective Date” shall mean the date first written above.

1.8. ERISA. The term “ERISA” shall mean the Employee Retirement Income Security Act of 1974, as amended.

1.9. Executive Benefit. The term “Executive Benefit” or “Retirement Benefit Payments” shall mean the benefits determined pursuant to subparagraph 3.1 and in accordance with Schedule “B”, and reduced or adjusted to the extent: (i) required under the other provisions of this Agreement, including, but not limited to, Paragraphs 5, 6, and 7 hereof; (ii) required by reason of the lawful order of any regulatory agency or body having jurisdiction over the Bank; or (iii) required in order for the Bank to properly comply with any and all applicable state and federal laws, including, but not limited to, income, employment and disability income tax laws (e.g., FICA, FUTA, SDI).

1.10. Normal Retirement Date. The term “Normal Retirement Date” shall mean the Retirement, as defined below, of the Executive upon attainment of age sixty-two (62).

1.11. Plan Year. The term “Plan Year” shall mean the Bank’s fiscal year.

1.12. Retirement. The term “Retirement” or “Retires” shall refer to the date which the Executive acknowledges in writing to Bank to be the last day the Executive will provide any significant personal services, whether as an employee or independent consultant or contractor, to the Bank. For purposes of this Agreement, the phrase “significant personal services” shall mean more than ten (10) hours of personal services rendered to one or more individuals or entities in any thirty (30) day period.

1.13. Termination for Cause. The term “Termination for Cause” shall mean termination of the employment of the Executive by reason of any of the following, and only by reason of any of the following:

(a) The Executive’s deliberate violation of (i) any state or federal banking or securities laws, or of the Bylaws, rules, policies or resolutions of the Bank, or (ii) of the rules or regulations of the California Department of Financial Institutions, the Federal Deposit Insurance Corporation, the Federal Reserve Board of Governors, the Office of the Comptroller of the Currency or any other regulatory agency or governmental authority having jurisdiction over the Bank, which has a material financial adverse effect upon the Bank; or

(b) The Executive’s conviction of (i) any felony or (ii) a crime involving moral turpitude or a fraudulent or dishonest act which, in each case, has a material adverse effect on the Bank.

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1.14. Year of Service. The term “Year of Service” shall mean any calendar year in which the Executive is employed by the Bank for at least six months.

1.15. Accrued Liability Balance. The term “Accrued Liability Balance” shall mean the amount that has been accrued by the Employer on its financial statements to fund the retirement benefits expense of the Employee as of the end of the month preceding the Employee’s termination of employment.

2. Scope, Purpose and Effect.

2.1. Contract of Employment. Although this Agreement is intended to provide the Executive with an additional incentive to remain in the employ of the Bank, this Agreement shall not be deemed to constitute a contract of employment between the Executive and the Bank nor shall any provision of this Agreement restrict or expand the right of the Bank to terminate the Executive’s employment. This Agreement shall have no impact or effect upon any separate written Employment Agreement which the Executive may have with the Bank, it being the parties’ intention and agreement that unless this Agreement is specifically referenced in said Employment Agreement (or any modification thereto), this Agreement (and the Bank’s obligations hereunder) shall stand separate and apart and shall have no effect on or be affected by, the terms and provisions of said Employment Agreement.

2.2. Fringe Benefit. The benefits provided by this Agreement are granted by the Bank as a fringe benefit to the Executive and are not a part of any salary reduction plan or any arrangement deferring a bonus or a salary increase. The Executive has no option to take any current payments or bonus in lieu of the benefits provided by this Agreement.

2.3. Prohibited Payments. Notwithstanding anything in this Agreement to the contrary (and in particular in subparagraphs 1.8 or 3 hereof), if any payment made under this Agreement is a “golden parachute payment” as defined in Section 28(k) of the Federal Deposit Insurance Act (12 U.S.C. section 1828(k) and Part .359 of the Rules of Regulations of the Federal Deposit Insurance Corporation (collectively, the “FDIC Rules”) or is otherwise prohibited, restricted or subject to the prior approval of a bank regulator, then no payment shall be made hereunder without complying with said FDIC Rules.

3. Executive Benefits Payments

3.1. Payments Commence Upon Normal Retirement Date. If the Executive shall remain in the continuous employment of the Bank until attaining sixty-two (62) years of age, the Executive shall be entitled to be paid the Applicable Percentage of the Executive Benefits, as defined in Schedule B, in substantially equal monthly installments on the first day of each month, beginning with the month following the month in which the Executive Retires or upon such later date as may be mutually agreed upon by the Executive and the Bank in advance of said Retirement date, payable until the Executive’s death.

3.2 Payments in the Event of the Executive’s Death. In the event of the Executive’s death, any payments under this, paragraph 3 shall be prorated to the date of death.

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4. Payments in the Event Disability Occurs Prior to Retirement. In the event Employee becomes Disabled at any time after the Effective Date of this Agreement but prior to Retirement, the Employee shall be entitled to be paid the Accrued Liability Balance as specified in subparagraph 1.15 in sixty substantially equal monthly installments on the first day of each month, beginning with the month following the month in which the Employee becomes Disabled.

5. Payments in the Event Executive is Terminated Prior to Retirement. As indicated in subparagraph 2.1 above, the Bank reserves the right to terminate the Executive’s employment, with or without Cause but subject to any written employment agreement which may then exist, at any time prior to the Executive’s Retirement. In the event that the employment of the Executive shall be terminated, other than by reason of Disability or Retirement, then this Agreement shall terminate upon the date of such termination of employment; provided, however, that the Executive shall be entitled to the following benefits as may be applicable depending upon the circumstances surrounding the Executive’s termination:

5.1. Termination Without Cause. If the Executive’s employment is terminated by the Bank without cause, and such termination is not subject to the provisions of subparagraph 5.4 below, then the Executive shall be entitled to be paid the Applicable Percentage of the Executive Benefits as defined above calculated as of the end of the year following the year the Employee was terminated, in substantially equal monthly installments on the first day of each month, beginning with the month following the month in which the Executive attains sixty-two (62) years of age, or any month thereafter, as requested in writing by the Executive and delivered to the Bank or its successor thirty (30) days prior to the commencement of installment payments.

5.2. Voluntary Termination by the Executive.

(a) If the Applicable Percentage is one hundred percent (100%), the Executive shall be entitled to be paid the Applicable Percentage of the Executive Benefits, as defined in Schedule B, in substantially equal monthly installments on the first day of each month, beginning with the month following the month in which the Executive attains sixty-two (62) years of age, or any month thereafter, as requested in writing by the Executive and delivered to the Bank or its successor thirty (30) days prior to the commencement of installment payments.

(b) If the Executive’s employment is terminated by voluntary resignation prior to the date specified in Schedule A which corresponds to an Applicable Percentage equal to one hundred percent (100%) and such resignation is not subject to the provisions of subparagraph 5.4 below, then the Executive shall forfeit any and all rights and benefits he may have under the terms of this Agreement and shall have no right to be paid any of the amounts which would otherwise be due or paid to the Executive by the Bank pursuant to the terms of this Agreement.

(c) Termination of Employment of Executive that is a Constructive Termination of Employment (as defined in subparagraph 1.5) shall not be considered as a voluntary Termination by Executive but rather as a Termination of Employment by Bank without cause.

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5.3. Termination for Cause. The Executive agrees that if his employment with the Bank is terminated “for cause,” as defined in subparagraph 1.13 of this Agreement, he shall forfeit any and all rights and benefits he may have under the terms of this Agreement and shall have no right to be paid any of the amounts which would otherwise be due or paid to the Executive by the Bank pursuant to the terms of this Agreement; provided however, if the Executive is terminated for Disability, he shall be entitled to benefits under subparagraph 4.

5.4. Termination on account of or After a Change in Control. In the event the Executive’s employment with the Employer is terminated by the Employer in conjunction with, or by reason of, a Change in Control (as defined in subparagraph 1.3, above), then the Executive shall be entitled to be paid the Applicable Percentage of the Executive Benefits, as defined above, in substantially equal monthly installments on the first day of each month, beginning with the month following the month in which the Change in Control has occurred, as requested in writing by the Executive and delivered to the Bank or its successor thirty (30) days prior to the commencement of installment payments; provided, however, that in the event the Executive does not request a commencement date as specified, such installments shall be paid on the first day of each month, beginning with the month following the month in which the Executive attains sixty-two (62) years of age. The installments shall be payable until the Executive’s death.

6. IRS Section 280G Issues. If all or any portion of the amounts payable to the Executive under this Agreement, either alone or together with other payments which the Executive has the right to receive from the Bank, constitute “excess parachute payments” within the meaning of Section 280G of the Internal Revenue Code of 1986, as amended (the “Code”), that are subject to the excise tax imposed by Section 4999 of the Code (or similar tax and/or assessment), Executive shall be responsible for the payment of such excise tax and Bank (and its successor) shall be responsible for any loss of deductibility related thereto; provided, however, that Bank and Executive shall cooperate with each other and use all reasonable efforts to minimize to the fullest extent possible the amount of excise tax imposed by Section 4999 of the Code. If, at a later date, it is determined (pursuant to final regulations or published rulings of the Internal Revenue Service, final judgment of a court of competent jurisdiction, or otherwise) that the amount of excise taxes payable by the Executive is greater than the amount initially so determined, then the Executive shall pay an amount equal to the sum of such additional excise taxes and any interest, fines and penalties resulting from such underpayment. The determination of the amount of any such excise taxes shall be made by the independent accounting firm employee by the Bank immediately prior to the change in control or such other independent accounting firm or advisor as may be mutually agreeable to Bank and Executive in the exercise of their reasonable good faith judgment.

7. Right to Determine Funding Methods. The Bank reserves the right to determine, in its sole and absolute discretion, whether, to what extent and by what method, if any, to provide for the payment of the amounts which may be payable to the Executive, under the terms of this Agreement. In the event that the Bank elects to fund this Agreement, in whole or in part, through the use of life insurance or annuities, or both, the Bank shall determine the ownership and beneficial interests of any such policy of life insurance or annuity. The Bank further reserves the right, in its sole and absolute discretion, to terminate any such policy, and any other devise used to fund its obligations under this Agreement, at any time, in whole or in part. Consistent with

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Paragraph 9 below, the Executive shall have no right, title or interest in or to any funding source or amount utilized by the Bank pursuant to this Agreement, and any such funding source or amount shall not constitute security for the performance of’ the Bank’s obligations pursuant to this Agreement. In connection with the foregoing, the Executive agrees to execute such documents and undergo such medical examinations or tests which the Bank may request and which may be reasonably necessary to facilitate any funding for this Agreement including, without limitation, the Bank’s acquisition of any policy of insurance or annuity.

8. Claims Procedure. The Bank shall, but only to the extent necessary to comply with ERISA, be designated as the named fiduciary under this Agreement and shall have authority to control and manage the operation and administration of this Agreement. Consistent therewith, the Bank shall make all determinations as to the rights to benefits under this Agreement. Any decision by the Bank denying a claim by the Executive for benefits under this Agreement shall be stated in writing and delivered or mailed, via registered or certified mail, to the Executive, the Executive’s spouse or the Executive’s beneficiaries, as the case may be. Such decision shall set forth the specific reasons for the denial of a claim. In addition, the Bank shall provide the Executive, or as applicable, the Executive’s spouse or beneficiaries, with a reasonable opportunity for a full and fair review of the decision denying such claim.

9. Status as an Unsecured General Creditor. Notwithstanding anything contained herein to the contrary: (i) the Executive shall have no legal or equitable rights, interests or claims in or to any specific property or assets of the Bank as a result of this Agreement;, (ii) none of the Bank’s assets shall be held in or under any trust for the benefit of the Executive or held in any way as security for the fulfillment of the obligations of the Bank under this Agreement; (iii) all of the Bank’s assets shall be and remain the general unpledged and unrestricted assets of the Bank; (iv) the Bank’s obligation under this Agreement shall be that of an unfunded and unsecured promise by the Bank to pay money in the future; and (v) the Executive shall be an unsecured general creditor with respect to any benefits which may be payable under the terms of this Agreement.

Notwithstanding subparagraphs (i) through (v) above, the Bank and the Executive acknowledge and agree that, in the event of a Change in Control, upon request of the Executive, or in the Bank’s discretion if the Executive does not so request and the Bank nonetheless deems it appropriate, the Bank shall establish, not later than the effective date of the Change in Control, a Rabbi Trust or multiple Rabbi Trusts (the “Trust” or “Trusts”) upon such terms and conditions as the Bank, in its sole discretion, deems appropriate and in compliance with applicable provisions of the Code, in order to permit the Bank to make contributions and/or transfer assets to the Trust or Trusts to discharge its obligations pursuant to this Agreement. The principal of the Trust or Trusts and any earnings thereon shall be held separate and apart from other funds of the Bank to be used exclusively for discharge of the Bank’s obligations pursuant to this Agreement and shall continue to be subject to the claims of the Bank’s general creditors until paid to the Executive in such manner and at such times as specified in this Agreement.

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10. Discretion of Board to Accelerate Payout. Notwithstanding any of the other provisions of this Agreement, the Board of Directors of the Bank or the holding Company may, if determined in its sole and absolute discretion to be appropriate, accelerate the payment of the amounts due under the terms of this Agreement, provided that the Executive: (i) consents to the revised payout terms determined appropriate by the Board of Directors; and (ii) does not negotiate or in any way influence the terms of proposed altered/accelerated payout (said decision to be made solely by the Board of Directors and offered to the Executive on a “take it or leave it basis”).

11. Miscellaneous.

11.1. Opportunity to Consult With Independent Advisors. The Executive acknowledges that he has been afforded the opportunity to consult with independent advisors of his choosing including, without limitation, accountants or tax advisors and counsel regarding both the benefits granted to him under the terms of this Agreement and the (i) terms and conditions which may affect the Executive’s right to these benefits and (ii) personal tax effects of such benefits including; without limitation, the effects of any federal or state taxes, Section 280G of the Code, and any other taxes, costs, expenses or liabilities whatsoever related to such benefits, which in any of the foregoing instances the Executive acknowledges and agrees shall be the sole responsibility of the Executive notwithstanding any other term or provision of this Agreement. The Executive further acknowledges and agrees that the Bank shall have no liability whatsoever related to any such personal tax effects or other personal costs, expenses, or liabilities applicable to the Executive and further specifically waives any right for himself or herself, and his or her heirs, beneficiaries, legal representatives, agents, successor and assign to claim or assert liability on the part of the Bank related to the matters described above in this subparagraph 11.1. The Executive further acknowledges that he has read, understands and consents to all of the terms and conditions of this Agreement, and that he enters into this Agreement with a full understanding of its terms and conditions.

11.2. Arbitration of Disputes. All claims, disputes and other matters in question arising out of or relating to this Agreement or the breach or interpretation thereof, other than those matters which are to be determined by the Bank in its sole and absolute discretion, shall be resolved by binding arbitration before a representative member, selected by the mutual agreement of the parties, of the Judicial Arbitration and Mediation Services, Inc. (“JAMS”), located in San Diego, California. In the event JAMS is unable or unwilling to conduct the arbitration provided for under the terms of this Paragraph, or has discontinued its business, the parties agree that a representative member, selected by the mutual agreement of the parties of the American Arbitration Association (“AAA”) located in San Diego, California, shall conduct the binding arbitration referred to in this Paragraph. Notice of the demand for arbitration shall be filed in writing with the other party to this Agreement and with JAMS (or AAA, if necessary). In no event shall the demand for arbitration be made after the date when institution of legal or equitable proceedings based on such claim, dispute or other matter in question would be barred by the applicable statute of limitations. The arbitration shall be subject to such rules of procedure used or established by JAMS, or if there are none, the rules of procedure used or established by AAA. Any award rendered by JAMS or AAA shall be final and binding upon the parties, and as applicable, their respective heirs, beneficiaries, legal representatives, agents, successors and

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assigns, and may be entered in any court having jurisdiction thereof. The obligation of the parties to arbitrate pursuant to this clause shall be specifically enforceable in accordance with, and shall be conducted consistently with, the provisions of Title 9 of Part 3 of the California Code of Civil Procedure. Any arbitration hereunder shall be conducted in San Diego, California, unless otherwise agreed to by the parties.

11.3. Attorneys’ Fees. In the event of any arbitration or litigation concerning any controversy, claim or dispute between the parties hereto, arising out of or relating to this Agreement or the breach hereof, or the interpretation hereof, the prevailing party shall be entitled to recover from the losing party reasonable expenses, attorneys’ fees and costs incurred in connection therewith or in the enforcement or collection of any judgment or award rendered therein. The “prevailing party” means the party determined by the arbitrator(s) or court, as the case may be, to have most nearly prevailed, even if such party did not prevail in all matters, not necessarily the one in whose favor a judgment is rendered.

11.4. Notice. Any notice required or permitted of either the Executive or the Bank under this Agreement shall be deemed to have been duly given, if by personal delivery, upon the date received by the party or its authorized representative; if by facsimile, upon transmission to a telephone number previously provided by the party to whom the facsimile is transmitted as reflected in the records of the party transmitting the facsimile and upon reasonable confirmation of such transmission; and if by mail, on the third day after mailing via U.S. first class mail, registered or certified, postage prepaid and return receipt requested, and addressed to the party at the address given below for the receipt of notices, or such changed address as may be requested in writing by a party.

If to the Bank	Southwest Community Bank
	5810 El Camino Real
	Suite D
	Carlsbad, CA 92013
	Attention: President
If to the Executive:	Stuart McFarland
	P. O Box 28504
	San Diego, CA 92198
	and a copy to:
	Lawrence S. Branton, Esq.
	Branton & Wilson, APC
	701 B St., Suite 1255
	San Diego, CA 92101-8187

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11.5. Assignment. The Executive shall have no power or right to transfer, assign, anticipate, hypothecate, modify or otherwise encumber any part or all of the amounts payable hereunder, nor, prior to payment in accordance with the terms of this Agreement, shall any portion of such amounts be: (i) subject to seizure by any creditor of the Executive, by a proceeding at law or in equity, for the payment of any debts, judgments, alimony or separate maintenance obligations which may be owed by the Executive; or (ii) transferable by operation of law in the event of bankruptcy, insolvency or otherwise. Any such attempted assignment or transfer shall be void.

11.6. Binding Effect/Merger or Reorganization. This Agreement shall be binding upon and inure to the benefit of the Executive and the Bank. Accordingly, the Bank shall not merge or consolidate into or with another corporation, or reorganize or sell substantially all of its assets to another corporation, firm or person, unless and until such succeeding or continuing corporation, firm or person agrees to assume and discharge the obligations of the Bank under this Agreement. In the alternative, the Holding Company may agree to assume and discharge the obligation of the Bank under this Agreement. Upon the occurrence of such event, the term “Bank” as used in this Agreement shall be deemed to refer to such surviving or successor firm, person, entity or corporation, or the Holding Company, as the case may be.

11.7. Nonwaiver. The failure of either party to enforce at any time or for any period of time any one or more of the terms or conditions of this Agreement shall not be a waiver of such term(s) or condition(s) or of that party’s right thereafter to enforce each and every term and condition of this Agreement.

11.8. Partial Invalidity. If any terms, provision, covenant, or condition of this Agreement is determined by an arbitrator or a court, as the case may be, to be invalid, void, or unenforceable, such determination shall not render any other term, provision, covenant or condition invalid, void or unenforceable, and the Agreement shall remain in full force and effect notwithstanding such partial invalidity.

11.9. Entire Agreement. This Agreement supersedes any and all other agreements, either oral or in writing, between the parties with respect to the subject matter of this Agreement and contains all of the covenants and agreements between the parties with respect thereto. Each party to this Agreement acknowledges that no other representations, inducements, promises, or agreements, oral or otherwise, have been made by any party, or anyone acting on behalf of any party, which are not set forth herein, and that no other agreement, statement, or promise not contained in this Agreement shall be valid or binding on either party.

11.10. Modifications. Any modification of this Agreement shall be effective only if it is in writing and signed by each party or such party’s authorized representative.

11.11. Paragraph Headings. The paragraph headings used in this Agreement are included solely for the convenience of the parties and shall not affect or be used in connection with the interpretation of this Agreement.

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11.12. No Strict Construction. The language used in this Agreement shall be deemed to be the language chosen by the parties hereto to express their mutual intent, and no rule of strict construction will be applied against any person.

11.13. Governing Law. The laws of the State of California, other than those laws denominated choice of law rules, and where applicable, the rules and regulations of the Board of Governors of the Federal Reserve System, Federal Deposit Insurance Corporation, Office of the Comptroller of the Currency, or any other regulatory agency or governmental authority having jurisdiction over the Bank or the Holding Company, shall govern the validity, interpretation, construction and effect of this Agreement.

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IN WITNESS WHEREOF, the Bank and the Executive have executed this Agreement on the date first above-written in the City of Carlsbad, California.

BANK		EXECUTIVE
Southwest Community Bank
By:	/s/ Frank J. Mercardante	/s/ Stuart McFarland
	Frank J. Mercardante President and CEO	Stuart McFarland

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SCHEDULE A
CALENDAR YEAR	APPLICABLE PERCENTAGE
[Inception of service to 11/18/02	0.00	%
11/18/02 to 11/17/03	10.00	%
11/18/03 to 11/17/04	20.00	%
11/18/04 to 11/17/05	30.00	%
11/18/05 to 11/17/06	40.00	%
11/18/06 to 11/17/07	50.00	%
11/18/07 to 11/17/08	60.00	%
11/18/08 to 11/17/09	70.00	%
11/18/09 to 11/17/10	80.00	%
11/18/10 to 11/17/11	90.00	%
11/18/11 and beyond	100.00	%

Beginning in the year 2003, the Executive shall be entitled to the Applicable Percentage increase for each calendar year, during which he is employed by the Bank for at least six months.

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SCHEDULE B

EXECUTIVE BENEFITS

The Bank shall pay to the Executive pursuant to the Agreement during the Executive’s lifetime FIFTY THOUSAND DOLLARS ($50,000) per year, payable in twelve equal monthly installments. The amount of Executive Benefits payable under the Agreement shall be adjusted each year from the date of commencement of payments of the Executive Benefits until the death of the Executive as follows:

a. The Executive Benefits shall be increased at the rate of three percent (3%) compounded each year.

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FIRST AMENDMENT

TO THE EXECUTIVE SUPPLEMENTAL COMPENSATION AGREEMENT BY AND BETWEEN

SOUTHWEST COMMUNITY BANK AND STUART McFARLAND

This First Amendment (“Amendment”) is made and entered into effective this October 29, 2004, by and between Southwest Community Bank, with its principal offices located in the City of Carlsbad, California, (hereinafter the “Bank”) and Stuart F. McFarland, (hereinafter “the Executive”). This First Amendment hereby amends the Executive Supplemental Compensation Agreement, effective as of October 1, 2002, by and between the Bank and the Executive, as follows:

1.) Reference to the “Fifty Thousand Dollar ($50,000)” per year Executive Benefit amount as it appears in line two of Schedule B (attached and incorporated into the October 1, 2002 Executive Supplemental Compensation Agreement), shall be deleted, and such amount shall be replaced with a new Executive Benefit Amount of “One-Hundred Thousand Dollars per year ($100,000.00)” per year.

To the extent that any paragraph, term, or provision of the Executive Supplemental Compensation Agreement is not specifically amended herein, or in any other amendment thereto, said paragraph, term, or provision shall remain in full force and effect as set forth in said Agreement.

IN WITNESS WHEREOF, the Insured and a duly authorized Bank officer have signed this Agreement as of the written date.

SOUTHWEST COMMUNITY BANK
By:	/s/ Frank J. Mercardante	Date: 10/29/04
	Frank J. Mercardante
	Chief Executive Officer
By:	/s/ Stuart F. McFarland	Date: 10/29/04
	Stuart F. McFarland
/s/ Barbara S. Cavalluzzi		/s/ Paul M. Weil
Witness		Witness

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Southwest Community Bank

SECOND AMENDMENT TO

EXECUTIVE SUPPLEMENTAL COMPENSATION AGREEMENT

This Amendment dated April 19, 2006 amends the Executive Supplemental Compensation Agreement between Southwest Community Bank (the “Bank”) and Stuart McFarland (the “Executive”) dated October 1, 2002, as amended October 29, 2004 (the “Agreement”).

The parties desire to amend the Agreement so that it complies with Internal Revenue Code Section 409A, which was promulgated pursuant to the American Jobs Creation Act of 2004. Accordingly, the parties agree that the Agreement shall be amended as follows:

1. Subparagraph 1.2 shall be amended in its entirety to read:

“1.2 Applicable Percentage. The term “Applicable Percentage” shall mean that percentage listed on Schedule A attached hereto which is adjacent to the date range which includes the date on which payments are to commence under the terms of this Agreement. However, if the Executive’s employment is terminated without cause, then for purposes of calculating the benefit under subparagraph 5.1, the Applicable Percentage as shown on Schedule B shall be accelerated by two years. For purposes of the benefits under subparagraph 5.4 following a Change in Control, the Applicable Percentage shall be one hundred percent (100%). With regard to the Executive’s Constructive Termination of Employment following a Change in Control, the preceding sentence only applies if the Constructive Termination of Employment occurs within 365 days after the Change in Control and the Executive has not accepted an employment contract with the new employer that is for a term of at least two years.”

2. Subparagraph 1.6 shall be amended in its entirety to read:

“1.6 Disability/Disabled. The term “Disability” or “Disabled” shall mean the Executive (i) is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months, or (ii) is, by reason of any medically determinable physical or mental impairment

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which can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months, receiving income replacement benefits for a period of not less than three (3) months under an accident and health plan covering employees of the Bank.”

3. Subparagraph 3.1 shall be amended in its entirety to read:

“3.1 Payments After Normal Retirement Age. If the Executive remains in the continuous employment of the Bank until attaining sixty-two (62) years of age, the Executive shall be entitled to be paid the Applicable Percentage of the Executive Benefits, as defined in Schedule B, in substantially equal monthly installments on the first day of each month, beginning with the month following the month in which the Executive Retires or is terminated by the Bank without cause, payable until the Executive’s death. The commencement date for payments is subject to Paragraph 10 below.”

4. Subparagraph 5.1 shall be amended in its entirety to read:

“5.1 Termination Without Cause. If the Executive’s employment is terminated by the Bank without cause or by the Executive as a result of a Constructive Termination of Employment, and such termination is not subject to the provisions of subparagraph 5.4 below, then the Executive shall be entitled to be paid the Applicable Percentage of the Executive Benefits, as defined above, calculated as of the end of the year following the year in which the Executive is terminated, as if the employment had continued to such date, in substantially equal monthly installments on the first day of each month, beginning with the month following the month in which the Executive attains sixty-two (62) years of age. The commencement date for payments is subject to Paragraph 10 below.”

5. Subparagraph 5.2(a) shall be amended in its entirety to read:

“5.2 Voluntary Termination by Executive.

(a) If the Applicable Percentage is one hundred percent (100%), the Executive shall be entitled to be paid the Applicable Percentage of the Executive Benefits, as defined in Schedule B, in substantially equal monthly installments on the first day of each month, beginning with the month following the month in which the Executive attains sixty-two (62) years of age. The commencement date for payments is subject to Paragraph 10 below.”

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6. Subparagraph 5.4 shall be amended in its entirety to read:

“5.4 Termination on Account of or After a Change in Control. In the event: (i) the Executive’s employment with the Bank is terminated by the Bank in conjunction with, or by reason of, a “Change in Control” (as defined in subparagraph 1.3 above) or (ii) there is a Constructive Termination of Employment after the Change in Control, then the Executive shall be entitled to be paid the Applicable Percentage of the Executive Benefits, as described in Schedule B, in substantially equal monthly installments on the first day of each month, beginning the month following the termination of employment by the Bank or the Constructive Termination of Employment, payable until the Executive’s death. The commencement date for payments is subject to Paragraph 10 below.”

7. Paragraph 6 shall be amended to add the following sentence and shall otherwise remain in its entirety:

“All efforts by the Bank and the Executive to minimize the amount of excise tax imposed by Section 4999 of the Code shall be in accordance with Section 409A of the Code.”

8. Paragraph 10 shall be amended in its entirety to read:

“10 Delay of Payment if Specified Employee. Other than with respect to benefits paid in the event of Disability under Paragraph 4, if at the time the Executive’s employment terminates the Executive is a “specified employee,” as defined in Section 409A of Code, the Executive Benefits shall not commence until the later of (a) the commencement date otherwise set forth in the applicable paragraph of this Agreement or (b) a date which is six months after the date of Executive’s termination of employment with the Bank. Furthermore, for any Executive affected by this six (6) month delay in payment imposed by Section 409A of the Code, and when applicable, the aggregate amount of the first seven (7) months of installments shall be paid at the beginning of the seventh month following the date of termination of employment. Monthly installment payments shall continue thereafter as specified. If any provision of this Employment Agreement does not satisfy the requirements of Section 409A of the Code, such provision shall be applied in a manner consistent with those requirements.”

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9. Subparagraph 11.10 shall be amended in its entirety to read:

“11.10 Amendments and Changes in Timing of Distributions. Any amendments or modifications of this Agreement shall be effective only if it is in writing and signed by each party or such party’s authorized representative. Notwithstanding the foregoing, this Agreement may not be amended to accelerate the timing of distributions of the Executive Benefits unless such acceleration is permissible under Section 409A of the Code. With the consent of the Bank, the Executive may elect a delay in the payment or a change in the form of payment, subject to the following limitations:

(a) the election may not take effect until at least twelve (12) months after the date on which the election is made;

(b) other than in the event of death or Disability, the first payment with respect to such election must be deferred for a period of at least five (5) years from the date such payment otherwise would have been made; and

(c) an election related to a payment to made at a specified time may not be made less than twelve (12) months prior to the date of the first scheduled payment.”

10. Subparagraph 11.14 shall be added and read:

“11.14 IRC 409A Compliance. Notwithstanding any other provision of Agreement, it is intended that any payment or benefit which is provided pursuant to or in connection with this Agreement shall be provided and paid in a manner, and at such time and in such form, as complies with the applicable requirements of Section 409A of the Code to avoid the unfavorable tax consequences provided therein for non-compliance. Any provision in this Agreement that is determined to violate the requirements of Section 409A shall be void and without effect. To the extent permitted under Section 409A, the parties shall reform the provision, provided such reformation shall not subject the Executive to additional tax or interest and the Bank shall not be required to incur any additional compensation as a result of the reformation. In addition, any provision that is required to appear in this Agreement that is not expressly set forth shall be deemed to be set forth herein, and this Agreement shall be administered in all respects as if such provision were expressly set forth. References in this Agreement to Section 409A of the Code include rules, regulations, and guidance of general application issued by the Department of the Treasury under Internal Revenue Code Section 409A.”10. Except as specifically amended herein, the Agreement shall remain in full force and effect.

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11. Except as specifically amended herein, the Agreement shall remain in full force and effect.

[Signature Page to Follow]

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IN WITNESS WHEREOF, the parties have executed this Amendment as of the date first written above.

BANK:
Southwest Community Bank
By:	/s/ Howard B. Levenson
Name:	Howard B. Levenson
Its:	Chairman
THE EXECUTIVE:
/s/ Stuart McFarland
Stuart McFarland

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Southwest Community Bank

THIRD AMENDMENT TO

EXECUTIVE SUPPLEMENTAL COMPENSATION AGREEMENT

This Amendment dated May 23, 2006, amends the Executive Supplemental Compensation Agreement by and between Southwest Community Bank (the “Bank”) and Stuart McFarland (the “Executive”) dated October 1, 2002, as previously amended (the “Agreement”).

The parties agree that the Agreement is amended as follows:

1. Schedule A to the Agreement is amended in its entirety as set forth in the attachment hereto.

2. All other terms and conditions of the Agreement shall remain in full force and effect.

The Bank:
SOUTHWEST COMMUNITY BANK
By:	/s/ Frank J. Mercardante
Name:	Frank J. Mercardante
Its:	Chief Executive Officer
The Executive:
/s/ Stuart McFarland
STUART McFARLAND

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SCHEDULE A
DATE RANGE	APPLICABLE PERCENTAGE
[Inception of service to 11/18/2002]	0.00	%
11/18/2002 to 11/17/2003	10.00	%
11/18/2003 to 11/17/2004	20.00	%
11/18/2004 to 11/17/2005	30.00	%
11/18/2005 to 11/17/2006	40.00	%
11/18/2006 to 11/17/2007	60.00	%
11/18/2007 to 11/17/2008	80.00	%
11/18/2008 and beyond	100.00	%

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EX-10.5(A)

Exhibit 10.5(a)

LIFE INSURANCE

ENDORSEMENT METHOD SPLIT DOLLAR PLAN

AGREEMENT

Insurer/Policy Number:	Beneficial Life Insurance Company/BL2114939 Northwestern Mutual Life Insurance Company/16232160
Bank:	Southwest Community Bank
Insured:	Stuart F. McFarland
Relationship of Insured to Bank:	Executive Officer
Date:	January 6, 2003

The respective rights and duties of the Bank and the Insured in the above policy(ies) (the “Policy” or Policies) shall be as follows:

I. DEFINITIONS

Refer to the Policy provisions for the definition of all terms in this Agreement.

II. POLICY TITLE AND OWNERSHIP

Title and ownership shall reside in the Bank for its use and for the use of the Insured all in accordance with this Agreement. The Bank alone may, to the extent of its interest, exercise the right to borrow or withdraw the Policy cash values. Where the Bank and the Insured (or the Insured’s beneficiary[ies] or assignee[s], with the consent of the Insured) mutually agree to exercise the right to increase the coverage under the subject split dollar Policy, then, in such event, the rights, duties and benefits of the parties to such increased coverage shall continue to be subject to the terms of this Agreement.

III. BENEFICIARY DESIGNATION RIGHTS

The Insured (or beneficiary[ies] or assignee[s]) shall have the right and power to designate a beneficiary or beneficiaries to receive his hare of the proceeds payable upon the death of the Insured, and to elect and change a payment option for such beneficiary, subject to any right or interest the Bank may have in such proceeds, as provided in this Agreement.

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IV. PREMIUM PAYMENT METHOD

The Bank shall pay an amount equal to the planned premiums and any other premium payments that might become necessary to maintain the Policy in force.

V. TAXABLE BENEFIT

Annually the Insured will receive a taxable benefit equal to the assumed cost of insurance as required by the internal Revenue Service plus the amount of any taxes paid and taxes on taxes paid (collectively “Taxes”) related to the receipt of such benefit (“gross-up”) based on the Table below, or as adjusted based on then prevailing income tax rates:

FEDERAL TAX RATE	STATE TAX RATE		FICA TAX RATE		MEDICARE TAX RATE
39.60%	9.30	%	7.65	%*	1.45	%

* The Social Security portion of the FICA tax only applies in years where the Employee has not otherwise reached the maximum tax. The Medicare tax only applies in years where the Employee has otherwise reached the maximum non-Medicare portion of the FICA tax.

The Bank (or its administrator) will report to the Insured the amount of imputed income received each year on Form W-2 or its equivalent.

VI. DIVISION OF DEATH PROCEEDS

Subject to Paragraph VII herein, the division of the death proceeds of the Policies is as follows:

1. If death occurs on or before the attainment of age seventy (70), the Insured’s beneficiary(ies), (designated in accordance with Paragraph III), shall be entitled to an amount equal to the lesser of $500,000, or one hundred percent (100%) of the net at risk insurance portion of the proceeds. If death occurs after age seventy (70) but on or before age eighty (80), the Insured’s beneficiaries shall be entitled to the lesser of $350,000, or one hundred percent (100%) of the net at risk insurance proceeds. If death occurs after age eighty (80), the Insured’s beneficiaries shall be entitled to the lesser of $200,000, or one hundred percent (100%) of the net at risk insurance proceeds. The net at risk insurance portion is the total proceeds less the cash value of the Policy.

2. Payment of the death benefit determined by the preceding paragraph shall be made and distributed from the Policies in the following order, with resort to each succeeding policy only to the extent that the proceeds of each prior listed Policy are insufficient to satisfy the specified death benefit in full: (a) Northwestern Mutual Life/16232160 (b) Beneficial Life/BL2114939.

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3. The Bank and the Insured (or the Insured’s beneficiary[ies] or assignee[s]) shall share in any interest due on the death proceeds on a pro rata basis in the ratio that the proceeds due the Bank and the Insured, respectively, bears to the total proceeds, excluding any such interest.

4. In the event that the Policy is terminated other than as a result of (a) a termination of this Agreement pursuant to paragraph X or (b) any intentional act of the Insured which results in the termination of the Policy, then the Bank shall pay to the Insured’s beneficiary(ies) an amount which will provide a total after-tax death benefit equal to the benefit that the Insured would have received if the Policy had not been terminated.

VII. DIVISION OF CASH SURRENDER VALUE

The Bank shall at all times be entitled to an amount equal to the Policy’s cash value, as that term is defined in the Policy, less any Policy loans and unpaid interest or cash withdrawals previously incurred by the Bank and any applicable Policy surrender charges. Such cash value shall be determined as of the date of surrender of the Policy or death of the Insured as the case may be.

VIII. PREMIUM WAIVER

If the Policy contains a premium waiver provision, any such waived amounts shall be considered for all purposes of this Agreement as having been paid by the Bank.

IX. RIGHTS OF PARTIES WHERE POLICY ENDOWMENT OR ANNUITY ELECTION EXISTS

In the event the Policy involves an endowment or annuity element, the Bank’s right and interest in any endowment proceeds or annuity benefits shall be determined under the provisions of this Agreement by regarding such endowment proceeds or the commuted value of such annuity benefits as the Policy’s cash value. Such endowment proceeds or annuity benefits shall be treated like death proceeds for the purposes of division under this Agreement.

X. TERMINATION OF AGREEMENT

This Agreement shall terminate at the option of the Bank following thirty (30) days written notice to the Insured upon the happening of any one of the following:

1. The Insured’s right to receive benefits under that certain Executive Supplemental Compensation Agreement effective as of October 1, 2002 shall terminate for any reason other than the Insured’s death, or

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2 The Insured shall be discharged from service with the Bank for cause. The term “for cause” shall mean:

(a) The Insured’s deliberate violation of (i) any state or federal banking or securities laws, or of the Bylaws, rules, policies or resolutions of the Bank, or (ii) of the rules or regulations of the California Department of Financial Institutions, the Federal Deposit Insurance Corporation, the Federal Reserve Board of Governors, the Office of the Comptroller of the Currency or any other regulatory agency or governmental authority having jurisdiction over the Employer, which has a material adverse effect upon the Bank; or

(b) The Insured’s conviction of (i) any felony or (ii) a crime involving moral turpitude or a fraudulent or dishonest act which, in each case, has a material adverse effect on the Insured.

Upon such termination, the Insured (or the Insured’s beneficiary[ies] or assignee[s]) shall have a ninety (90) day option to receive from the Bank an absolute assignment of the Policy[ies) in consideration of a cash payment to the Bank, whereupon this Agreement shall terminate. Such cash payment shall be an amount equal to the Policy’s[ies’] cash value, as that term is defined in such Policy[ies], and shall not take into account any amount of premiums that have been paid by the Bank:

(i) The Bank’s share of the cash value of the Policy on the date of such assignment, as defined in this Agreement.

(ii) The amount of the premiums which have been paid by the Bank prior to the date of such assignment.

Should the Insured (or the Insured’s beneficiary[ies] or assignee[s]) fail to exercise this option within the prescribed ninety (90) day period, the Insured (or the Insured’s beneficiary[ies] or assignee[s]) agrees that all of his or her rights, interest and claims in the Policy shall terminate as of the date of the termination of this Agreement.

Except as provided above, this Agreement shall terminate upon distribution of the death benefit proceeds in accordance with Paragraph VI above.

XI. INSURED’S OR ASSIGNEE’S ASSIGNMENT RIGHTS

Except as otherwise provided in Paragraph III above, the Insured may not, without the prior written consent of the Bank, assign to any individual, trust or other organization, any right, title or interest in the Policy nor any rights, options, privileges or duties created under this Agreement.

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XII. AGREEMENT BINDING UPON THE PARTIES

This Agreement shall be binding upon the Insured and the Bank, and their respective heirs, successors, personal representatives and assigns, as applicable.

XIII. NAMED FIDUCIARY AND PLAN ADMINISTRATOR

The Bank is hereby designated the “Named Fiduciary” until resignation or removal by its Board of Directors. As Named Fiduciary, the Bank shall be responsible for the management, control, and administration of this Agreement as established herein. The Named Fiduciary may allocate to others certain aspects of the management and operations responsibilities of this Agreement, including the employment of advisors and the delegation of any ministerial duties to qualified individuals.

XIV. FUNDING POLICY

The funding Policy for this Agreement shall be to maintain the Policy in force by paying, when due, all premiums required.

XV. CLAIM PROCEDURES

Claim forms or claim information as to the subject Policy[ies] can be obtained by contacting The Benefit Marketing Group, Inc. (770-952-1529). When the Named Fiduciary has a claim which may be covered under the provisions described in the Policy[ies], it should contact the office named above, and they will either complete a claim form and forward it to an authorized representative of the Insurer or advise the named Fiduciary what further requirements are necessary. The Insurer will evaluate and make a decision as to payment. If the claim is payable, a benefit check will be issued to the Named Fiduciary.

In the event that a claim is not eligible under the Policy[ies], the Insurer will notify the Named Fiduciary of the denial pursuant to the requirements under the terms of the Policy[ies]. If the Named Fiduciary is dissatisfied with the denial of the claim and wishes to contest such claim denial, it should contact the office named above and they will assist in making inquiry to the Insurer. All objections to the Insurer’s actions should be in writing and submitted to the office named above for transmittal to the Insurer.

XVI. GENDER

Whenever in this Agreement words are used in the masculine or neuter gender, they shall be read and construed as in the masculine, feminine or neuter gender, whenever they should so apply.

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XVII. INSURANCE COMPANY NOT A PARTY TO THIS AGREEMENT

The Insurer shall not be deemed a party to this Agreement, but will respect the rights of the parties as set forth herein upon receiving an executed copy of this Agreement. Payment or other performance in accordance with the Policy[ies provisions shall fully discharge the Insurer from any and all liability.

IN WITNESS WHEREOF, the Insured and a duly authorized Bank officer have signed this Agreement as of the above written date.

SOUTHWEST COMMUNITY BANK	INSURED
/s/ Frank J. Mercardante	/s/ Stuart F. McFarland
Frank J. Mercardante	Stuart F. McFarland

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BENEFICIARY DESIGNATION FORM

Primary Designation:

Name	Relationship
Michelle J. McFarland	Wife
Contingent Designation:

January 6, 2003
Signed:	/s/ Stuart F. McFarland
	Stuart F. McFarland

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BENEFICIARY DESIGNATION FORM

PRIMARY DESIGNATION:

NAME	RELATIONSHIP
Stuart F. McFarland and Michelle J. McFarland	Trust
as trustees under the S&M McFarland Family
Trust dated 12-22-2002.

CONTINGENT DESIGNATION:

February 6, 2003

Signed:	/s/ Stuart F. McFarland
	Stuart F. McFarland

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FIRST AMENDMENT

TO THE LIFE INSURANCE ENDORSEMENT METHOD SPLIT DOLLAR

PLAN AGREEMENT BY AND BETWEEN

SOUTHWEST COMMUNITY BANK AND STUART McFARLAND

This First Amendment (“Amendment”) is made and entered into effective this October 29, 2004, by and between Southwest Community Bank, with its principal offices located in the City of Carlsbad, California, (hereinafter the “Bank”) and Stuart F. McFarland, (hereinafter “the Executive”). This First Amendment hereby amends the Life Insurance Endorsement Method Split Dollar Plan Agreement, effective as of January 6, 2003, by and between the Bank and the Executive, as follows:

1) The following policy shall be added under the heading “Insurer/Policy Number:”, immediately following the Northwestern Mutual Life Insurance policy identified:

Language Inserted: Security Life of Denver Insurance Company/1572293.

2) Under Section VI, “Division of Death Proceeds”, the entire Paragraph number 1, beginning with the words “ If Death occurs on or before. . .”, and continuing through “. . . value of the Policy”, shall be deleted and shall be replaced with the following language:

Replacement Language: If death occurs on or before the attainment of age seventy (70), the Insured’s beneficiary(ies), (designated in accordance with Paragraph III), shall be entitled to an amount equal to the lesser of one million dollars ($1,000,000), or one hundred percent (100%) of the net at risk insurance portion of the proceeds. If death occurs after age seventy (70) but on or before age eighty (80), the Insured’s beneficiary (ies) shall be entitled to the lesser of seven hundred thousand dollars ($700,000), or one hundred percent (100%) of the net at risk insurance proceeds. If death occurs after age eighty (80), the Insured’s beneficiaries shall be entitled to the lesser of four hundred thousand dollars ($400,000), or one hundred percent (100%) of the net at risk insurance proceeds. The net at risk insurance portion is the total proceeds less the cash value of the Policy.

3) Under Section VI, “Division of Death Proceeds”, Paragraph number 2, the following policy shall be added to the end of that paragraph:

Language Inserted: Security Life of Denver Insurance Company/1572293.

Paragraph 2 at Section VI shall now read as follows: Payment of the death benefit determined by the preceding paragraph shall be made and distributed from the Policies in the following order, with resort to each succeeding policy only to the extent that the proceeds of each prior listed Policy are insufficient to satisfy the

9

specified death benefit in full: (a) Northwestern Mutual Life/16232160 (b) Beneficial Life/BL2114939 (c) Security Life of Denver Insurance Company/1572293.

To the extent that any paragraph, term, or provision of the Life Insurance Endorsement Method Split Dollar Plan Agreement is not specifically amended herein, or in any other amendment thereto, said paragraph, term, or provision shall remain in full force and effect as set forth in said Agreement.

IN WITNESS WHEREOF, the Insured and a duly authorized Bank officer have signed this Agreement as of the written date.

SOUTHWEST COMMUNITY BANK
By:	/s/ Frank J. Mercardante	Date: 10/29/04
	Frank J. Mercardante
	Chief Executive Officer
By:	/s/ Stuart F, McFarland	Date:10/29/04
	Stuart F. McFarland
/s/ Barbara S. Cavalluzzi		/s/ Paul M. Weil
Witness		Witness

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Southwest Community Bank

AMENDMENT TO

ENDORSEMENT METHOD SPLIT DOLLAR PLAN AGREEMENT

This Amendment dated April 19, 2006 amends the Endorsement Method Split Dollar Plan Agreement between Southwest Community Bank (the “Bank”) and Stuart McFarland (the “Insured”) dated January 6, 2003 (the “Agreement”).

1. Notwithstanding any other provision of the Policy or the Agreement, it is intended that any payment or benefit which is provided to the Insured pursuant to or in connection with the Policy or this Agreement which is considered to be nonqualified deferred compensation subject to Section 409A of the Code shall be provided and paid in a manner, and at such time and in such form, as complies with the applicable requirements of Section 409A of the Code to avoid the unfavorable tax consequences provided therein for noncompliance.

2. The Agreement shall otherwise remain in full force and effect as written.

IN WITNESS WHEREOF, the parties have executed this Amendment as of the date first written above.

BANK:

Southwest Community Bank
By:	/s/ Howard B. Levenson
Name:	Howard B. Levenson
Its:	Chairman
INSURED:
/s/ Stuart McFarland
Stuart McFarland

11

EX-10.6

EXHIBIT 10.6

EXECUTIVE SUPPLEMENTAL COMPENSATION AGREEMENT

This Agreement is made and entered into effective as of October 17, 2001, by and between Southwest Community Bank, with its principal offices located in the City of Carlsbad, California (“the Bank”), and Frank J. Mercardante, an individual residing in the State of California (“the Executive”).

R E C I T A L S

WHEREAS, the Executive is an employee of the Bank, serving since March 1, 1998;

WHEREAS, the Bank desires to establish a compensation benefit program as a fringe benefit for executive officers of the Bank in order to attract and retain individuals with extensive and valuable experience in the banking industry;

WHEREAS, the Executive’s experience and knowledge of the affairs of the Bank and the banking industry are extensive and valuable;

WHEREAS, it is deemed to be in the best interests of the Bank to provide the Executive with certain fringe benefits, on the terms and conditions set forth herein, in order to reasonably induce the Executive to remain in the Bank’s employment; and

WHEREAS, the Executive and the Bank wish to specify in writing the terms and conditions upon which this additional compensatory incentive will be provided to the Executive;

NOW, THEREFORE, in consideration of the services to be performed by the Executive in the future, as well as the mutual promises and covenants contained herein, the Executive and the Bank agree as follows:

A G R E E M E N T

1. Terms and Definitions

1.1. Administrator. The Bank shall be the “Administrator” and, solely for the purposes of ERISA as defined in subparagraph 1.8 below, the “fiduciary” of this Agreement where a fiduciary is required by ERISA.

1.2. Applicable Percentage. The term “Applicable Percentage” shall mean that percentage listed on Schedule “A” attached hereto which is adjacent to the number of calendar years which shall have elapsed from the date of this Agreement and ending on the date payments are to first begin under the terms of this Agreement. Notwithstanding the foregoing or the percentages set forth on Schedule “A”, but subject to all other terms and conditions set forth herein, the “Applicable Percentage” shall be: One hundred percent (100%) pursuant to subparagraph 5.4 upon the occurrence of a “Change in

Control” as defined in subparagraph 13 below, or the Executive’s Death. In the event Executive becomes Disabled pursuant to subparagraph 1.6 below, the Applicable Percentage shall be calculated as of the end of three years following the year in which the Executive is Disabled.

1.3. Change in Control. The term “Change in Control” shall mean the occurrence of any of the following events with respect to the Bank (with the term “Bank” being defined for purposes of determining whether a “Change in Control” has occurred to include a Holding Company if one is formed in the future: (i) a change in control of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or in response to any other form or report to the regulatory agencies or governmental authorities having jurisdiction over the Bank or any stock exchange on which the Bank’s shares are listed which requires the reporting of a change in control; (ii) any merger, consolidation or reorganization of the Bank in which the Bank does not survive; (iii) any sale, lease, exchange, mortgage, pledge, transfer or other disposition (in one transaction or a series of transactions) of any assets of the Bank having an aggregate fair market value of fifty percent (50%) of the total value of the assets of the Bank, reflected in the most recent balance sheet of the Bank; (iv) a transaction whereby any “person” (as such term is used in the Exchange Act) or any individual, corporation, partnership, trust or any other entity becomes the beneficial owner, directly or indirectly, of securities of the Bank representing twenty-five percent (25%) or more of the combined voting power of the Bank’s then outstanding securities; or (v) a situation where, in any one-year period, individuals who at the beginning of such period constitute the Board of Directors of the Bank cease for any reason to constitute at least a majority thereof, unless the election, or the nomination for election by the Bank’s shareholders, of each new Director is approved by a vote of at least three-quarters (3/4) of the Directors then still in office who were Directors at the beginning of the period. Notwithstanding the foregoing or anything else contained herein to the contrary, there shall not be a “Change of Control” for the purposes of this Agreement if the event which would otherwise come within the meaning of the term “Change of Control” involves an Employee Stock Ownership Plan sponsored by the Bank which is the party that acquires “control” or is the principal participant in the transaction constituting a “Change in Control,” as described above.

1.4. The Code. The “Code” shall mean the Internal Revenue Code of 1986, as amended (the “Code”).

1.5. Constructive Termination of Employment. The term “Constructive Termination of Employment” shall mean termination of Employment by Executive because the working conditions are so intolerable or aggravated that a reasonable person in the Executive’s position would be compelled to resign, provided that the Executive advised the Bank of the conditions and the Bank failed to take timely reasonable actions to remedy the conditions.

1.6 Disability/Disabled. The term “Disability” or “Disabled” shall have the same meaning given such terms in any policy of disability insurance maintained by the Bank for the benefit of the Executive. In the absence of such a policy which extends coverage to the Executive in the event of disability, the terms shall mean bodily injury or disease (mental or physical) which wholly and continuously prevents the performance of duty for at least six months.

1.7. Effective Date. The term “Effective Date” shall mean the date first written above.

1.8. ERISA. The term “ERISA” shall mean the Employee Retirement Income Security Act of 1974, as amended.

1.9. Executive Benefit. The term “Executive Benefit” or “Retirement Benefit Payments” shall mean the benefits determined pursuant to subparagraphs 3.1 or 3.2 and in accordance with Schedule “B”, and reduced or adjusted to the extent: (i) required under the other provisions of this Agreement, including, but not limited to, Paragraphs 5,6, and 7 hereof; (ii) required by reason of the lawful order of any regulatory agency or body having jurisdiction over the Bank; or (iii) required in order for the Bank to properly comply with any and all applicable state and federal laws, including, but not limited to, income, employment and disability income tax laws (e.g., FICA, FUTA, SDI).

1.10. Normal Retirement Date. The term “Normal Retirement Date” shall mean the Retirement, as defined below, of the Executive upon attainment of age sixty-two (62).

1.11. Early Retirement Date. The term “Early Retirement Date” shall mean Retirement, as defined below, of the Executive after the attainment of age fifty-five (55), provided the Applicable Percentage equals one-hundred percent (100%).

1.12. Plan Year. The term “Plan Year” shall mean the Bank’s fiscal year.

1.13. Retirement. The term “Retirement” or “Retires” shall refer to the date which the Executive acknowledges in writing to Bank to be the last day the Executive will provide any significant personal services, whether as an employee or independent consultant or contractor, to the Bank. For purposes of this Agreement, the phrase “significant personal services” shall mean more than ten (10) hours of personal services rendered to one or more individuals or entities in any thirty (30) day period.

1.14. Termination for Cause. The term “Termination for Cause” shall mean termination of the employment of the Executive by reason of any of the following, and only by reason of any of the following:

(a) The Executive’s deliberate violation of (i) any state or federal banking or securities laws, or of the Bylaws, rules, policies or resolutions of the Bank, or (ii) of the rules or regulations of the California Department of Financial Institutions, the

Federal Deposit Insurance Corporation, the Federal Reserve Board of Governors, the Office of the Comptroller of the Currency or any other regulatory agency or governmental authority having jurisdiction over the Bank, which has a material financial adverse effect upon the Bank; or

(b) The Executive’s conviction of (i) any felony or (ii) a crime involving moral turpitude or a fraudulent or dishonest act which, in each case, has a material financial adverse effect on the Bank.

1.15. Year of Service. The term “Year of Service” shall mean any calendar year in which the Executive is employed by the Bank for at least six months.

2. Scope, Purpose and Effect.

2.1. Contract of Employment. Although this Agreement is intended to provide the Executive with an additional incentive to remain in the employ of the Bank, this Agreement shall not be deemed to constitute a contract of employment between the Executive and the Bank nor shall any provision of this Agreement restrict or expand the right of the Bank to terminate the Executive’s employment. This Agreement shall have no impact or effect upon any separate written Employment Agreement which the Executive may have with the Bank, it being the parties’ intention and agreement that unless this Agreement is specifically referenced in said Employment Agreement (or any modification thereto), this Agreement (and the Bank’s obligations hereunder) shall stand separate and apart and shall have no effect on or be affected by, the terms and provisions of said Employment Agreement.

2.2. Fringe Benefit. The benefits provided by this Agreement are granted by the Bank as a fringe benefit to the Executive and are not a part of any salary reduction plan or any arrangement deferring a bonus or a salary increase. The Executive has no option to take any current payments or bonus in lieu of the benefits provided by this Agreement.

2.3. Prohibited Payments. Notwithstanding anything in this Agreement to the contrary (and in particular in section 1.8 or section 3 hereof), if any payment made under this Agreement is a “golden parachute payment” as defined in Section 28(k) of the Federal Deposit Insurance Act (12 U.S.C. section 1828(k) and Part 359 of the Rules and Regulations of the Federal Deposit Insurance Corporation (collectively, the “FDIC Rules”) or is otherwise prohibited, restricted or subject to the prior approval of a Bank Regulator (as defined in section 1.14 (d) herein), no payment shall be made hereunder without complying with said FDIC Rules.

3. Executive Benefits Payments.

3.1. Payments Commence Upon Early Retirement Date. In the event the Executive elects to Retire on a date which constitutes an Early Retirement Date, as defined in subparagraph 1.11 above, the Executive shall be entitled to be paid the

Applicable Percentage of the Executive Benefits as described in Schedule B, in substantially equal monthly installments on the first day of each month, beginning with the month following the month in which the Early Retirement Date occurs or upon such later date as may be mutually agreed upon by the Executive and the Bank in advance of said Early Retirement Date, payable until the Executive’s death.

3.2. Payments Commence Upon Normal Retirement Date. If the Executive shall remain in the continuous employment of the Bank until attaining sixty-two (62) years of age, the Executive shall be entitled to be paid the Applicable Percentage of the Executive Benefits, as defined in Schedule B, in substantially equal monthly installments on the first day of each month, beginning with the month following the month in which the Executive Retires or upon such later date as may be mutually agreed upon by the Executive and the Bank in advance of said Retirement date, payable until the Executive’s death.

3.3. Payments in the Event of the Executive’s Death. In the event of the Executive’s death, any payments under this, paragraph 3 shall be prorated to the date of death.

4. Payments in the Event Disability Occurs Prior to Retirement. In the event the Executive becomes Disabled while actively employed by the Bank at any time after the Effective Date of this Agreement but prior to Retirement, the Executive shall be entitled to be paid the Applicable Percentage of the Executive Benefits, as defined above, in substantially equal monthly installments on the first day of each month, beginning with the month following the month in which the Executive becomes Disabled, payable until the Executive’s death.

5. Payments in the Event Executive is Terminated Prior to Retirement. As indicated in subparagraph 2.1 above, the Bank reserves the right to terminate the Executive’s employment, with or without Cause but subject to any written employment agreement which may then exist, at any time prior to the Executive’s Retirement. In the event that the employment of the Executive shall be terminated, other than by reason of Disability or Retirement, then this Agreement shall terminate upon the date of such termination of employment; provided, however, that the Executive shall be entitled to the following benefits as may be applicable depending upon the circumstances surrounding the Executive’s termination:

5.1. Termination Without Cause. If the Executive’s employment is terminated by the Bank without cause, and such termination is not subject to the provisions of subparagraph 5.4 below, the Executive shall be entitled to be paid the Applicable Percentage of the Executive Benefits as defined above calculated as of the end of the year following the year the Executive was terminated, as if the employment had continued to such date, in substantially equal monthly installments on the first day of each month, beginning with the month following the month in which the Executive attains sixty two (62) years of age, or any month thereafter, as requested in writing by the Executive and delivered to the Bank or its successor thirty (30) days prior to the commencement of installment payments.

5.2 Voluntary Termination by the Executive.

a) If the Applicable Percentage is one hundred percent (100%), the Executive shall be entitled to be paid the Applicable Percentage of the Executive Benefits, as defined in Schedule B, in substantially equal monthly installments on the first day of each month, beginning with the month following the month in which the Executive attains sixty two (62) years of age, or any month thereafter, as requested in writing by the Executive and delivered to the Bank or its successor thirty (30) days prior to the commencement of installment payments

(b) If the Executive’s employment is terminated by voluntary resignation prior to the date specified in Schedule A which corresponds to an Applicable Percentage equal to one hundred percent (100%) and such resignation is not subject to the provisions of subparagraph 5.4 below, the Executive shall forfeit any and all rights and benefits he may have under the terms of this Agreement and shall have no right to be paid any of the amounts which would otherwise be due or paid to the Executive by the Bank pursuant to the terms of this Agreement.

(c) Termination of Employment of Executive that is a “Constructive Termination of Employment” shall not be considered as a voluntary Termination by Executive but rather as a Termination of Employment by Bank without cause.

5.3. Termination for Cause. The Executive agrees that if his employment with the Bank is terminated “for cause,” as defined in subparagraph 1.13 of this Agreement, he shall forfeit any and all rights and benefits he may have under the terms of this Agreement and shall have no right to be paid any of the amounts which would otherwise be due or paid to the Executive by the Bank pursuant to the terms of this Agreement; provided however, if the Executive is terminated for disability, he shall be entitled to benefits under Section 4.

5.4. Termination on Account of or After a Change in Control. In the event: (i) the Executive’s employment with the Employer is terminated by the Employer in conjunction with, or by reason of, a “Change in Control” (as defined in subparagraph 1.3 above); or (ii) by reason of the Employer’s actions any adverse and material change occurs in the scope of the Executive’s position, responsibilities, duties, salary, benefits, or location of employment after a Change in Control occurs; or (iii) the Employer causes an event to occur which reasonably constitutes or results in a demotion, a significant diminution of responsibilities or authority, or a constructive termination (by forcing a resignation or otherwise) of the Executive’s employment after a Change in Control occurs, then the Executive shall be entitled to be paid the Applicable Percentage of the Executive Benefits, as defined above, in substantially equal monthly installments on the first day of each month, beginning with the month following the month in which the Change in Control has occurred, as requested in writing by the Executive and delivered to

the Bank or its successor thirty (30) days prior to the commencement of installment payments; provided, however, that in the event the Executive does not request a commencement date as specified, such installments shall be paid on the first day or each month, beginning with the month following the month in which the Executive attains sixty-two (62) years of age. The installments shall be payable until the Executive’s death.

6. IRS Section 280G Issues. If all or any portion of the amounts payable to the Executive under this Agreement, either alone or together with other payments which the Executive has the right to receive from the Bank, constitute “excess parachute payments” within the meaning of Section 280G of the Internal Revenue Code of 1986, as amended (the “Code”), that are subject to the excise tax imposed by Section 4999 of the Code (or similar tax and/or assessment), Executive shall be responsible for the payment of such excise tax and Bank (and its successor) shall be responsible for any loss of deductibility related thereto; provided, however, that Bank and Executive shall cooperate with each other and use all reasonable efforts to minimize to the fullest extent possible the amount of excise tax imposed by Section 4999 of the Code. If, at a later date, it is determined (pursuant to final regulations or published rulings of the Internal Revenue Service, final judgment of a court of competent jurisdiction, or otherwise) that the amount of excise taxes payable by the Executive is greater than the amount initially so determined, then the Executive shall pay an amount equal to the sum of such additional excise taxes and any interest, fines and penalties resulting from such underpayment. The determination of the amount of any such excise taxes shall be made by the independent accounting firm employed by the Bank immediately prior to the change in control or such other independent accounting firm or advisor as may be mutually agreeable to Bank and Executive in the exercise of their reasonable good faith judgment.

7. Right to Determine Funding Methods. The Bank reserves the right to determine, in its sole and absolute discretion, whether, to what extent and by what method, if any, to provide for the payment of the amounts which may be payable to the Executive, under the terms of this Agreement. In the event that the Bank elects to fund this Agreement, in whole or in part, through the use of life insurance or annuities, or both, the Bank shall determine the ownership and beneficial interests of any such policy of life insurance or annuity. The Bank further reserves the right, in its sole and absolute discretion, to terminate any such policy, and any other devise used to fund its obligations under this Agreement, at any time, in whole or in part. Consistent with Paragraph 8 below, the Executive shall have no right, title or interest in or to any funding source or amount utilized by the Bank pursuant to this Agreement, and any such funding source or amount shall not constitute security for the performance of the Bank’s obligations pursuant to this Agreement. In connection with the foregoing, the Executive agrees to execute such documents and undergo such medical examinations or tests which the Bank may request and which may be reasonably necessary to facilitate any funding for this Agreement including, without limitation, the Bank’s acquisition of any policy of insurance or annuity.

8. Claims Procedure. The Bank shall, but only to the extent necessary to comply with ERISA, be designated as the named fiduciary under this Agreement and shall have

authority to control and manage the operation and administration of this Agreement. Consistent therewith, the Bank shall make all determinations as to the rights to benefits under this Agreement. Any decision by the Bank denying a claim by the Executive for benefits under this Agreement shall be stated in writing and delivered or mailed, via registered or certified mail, to the Executive, the Executive’s spouse or the Executive’s beneficiaries, as the case may be. Such decision shall set forth the specific reasons for the denial of a claim. In addition, the Bank shall provide the Executive, or as applicable, the Executive’s spouse or beneficiaries, with a reasonable opportunity for a full and fair review of the decision denying such claim.

9. Status as an Unsecured General Creditor. Notwithstanding anything contained herein to the contrary: (i) the Executive shall have no legal or equitable rights, interests or claims in or to any specific property or assets of the Bank as a result of this Agreement; (ii) none of the Bank’s assets shall be held in or under any trust for the benefit of the Executive or held in any way as security for the fulfillment of the obligations of the Bank under this Agreement; (iii) all of the Bank’s assets shall be and remain the general unpledged and unrestricted assets of the Bank; (iv) the Bank’s obligation under this Agreement shall be that of an unfunded and unsecured promise by the Bank to pay money in the future; and (v) the Executive shall be an unsecured general creditor with respect to any benefits which may be payable under the terms of this Agreement.

Notwithstanding subparagraphs (i) through (v) above, the Bank and the Executive acknowledge and agree that, in the event of a Change in Control, upon request of the Executive, or in the Bank’s discretion if the Executive does not so request and the Bank nonetheless deems it appropriate, the Bank shall establish, not later than the effective date of the Change in Control, a Rabbi Trust or multiple Rabbi Trusts (the “Trust” or “Trusts”) upon such terms and conditions as the Bank, in its sole discretion, deems appropriate and in compliance with applicable provisions of the Code, in order to permit the Bank to make contributions and/or transfer assets to the Trust or Trusts to discharge its obligations pursuant to this Agreement. The principal of the Trust or Trusts and any earnings thereon shall be held separate and apart from other funds of the Bank to be used exclusively for discharge of the Bank’s obligations pursuant to this Agreement and shall continue to be subject to the claims of the Bank’s general creditors until paid to the Executive in such manner and at such times as specified in this Agreement.

10. Discretion of Board to Accelerate Payout. Notwithstanding any of the other provisions of this Agreement, the Board of Directors of the Bank or the Holding Company may, if determined in its sole and absolute discretion to be appropriate, accelerate the payment of the amounts due under the terms of this Agreement, provided that the Executive: (i) consents to the revised payout terms determined appropriate by the Board of Directors; and (ii) does not negotiate or in any way influence the terms of proposed altered/accelerated payout (said decision to be made solely by the Board of Directors and offered to the Executive on a “take it or leave it basis”).

11. Miscellaneous.

11.1. Opportunity to Consult With Independent Advisors. The Executive acknowledges that he has been afforded the opportunity to consult with independent advisors of his choosing including, without limitation, accountants or tax advisors and counsel regarding both the benefits granted to him under the terms of this Agreement and the (i) terms and conditions which may affect the Executive’s right to these benefits and (ii) personal tax effects of such benefits including, without limitation, the effects of any federal or state taxes, Section 280G of the Code, and any other taxes, costs, expenses or liabilities whatsoever related to such benefits, which in any of the foregoing instances the Executive acknowledges and agrees shall be the sole responsibility of the Executive notwithstanding any other term or provision of this Agreement. The Executive further acknowledges and agrees that the Bank shall have no liability whatsoever related to any such personal tax effects or other personal costs, expenses, or liabilities applicable to the Executive and further specifically waives any right for himself or herself, and his or her heirs, beneficiaries, legal representatives, agents, successor and assign to claim or assert liability on the part of the Bank related to the matters described above in this subparagraph 11.1. The Executive further acknowledges that he has read, understands and consents to all of the terms and conditions of this Agreement, and that he enters into this Agreement with a full understanding of its terms and conditions.

11.2. Arbitration of Disputes. All claims, disputes and other matters in question arising out of or relating to this Agreement or the breach or interpretation thereof, other than those matters which are to be determined by the Bank in its sole and absolute discretion, shall be resolved by binding arbitration before a representative member, selected by the mutual agreement of the parties, of the Judicial Arbitration and Mediation Services, Inc. (“JAMS”), located in San Diego, California. In the event JAMS is unable or unwilling to conduct the arbitration provided for under the terms of this Paragraph, or has discontinued its business, the parties agree that a representative member, selected by the mutual agreement of the parties of the American Arbitration Association (“AAA”) located in San Diego, California, shall conduct the binding arbitration referred to in this Paragraph. Notice of the demand for arbitration shall be filed in writing with the other party to this Agreement and with JAMS (or AAA, if necessary). In no event shall the demand for arbitration be made after the date when institution of legal or equitable proceedings based on such claim, dispute or other matter in question would be barred by the applicable statute of limitations. The arbitration shall be subject to such rules of procedure used or established by JAMS, or if there are none, the rules of procedure used or established by AAA. Any award rendered by JAMS or AAA shall be final and binding upon the parties, and as applicable, their respective heirs, beneficiaries, legal representatives, agents, successors and assigns, and may be entered in any court having jurisdiction thereof. The obligation of the parties to arbitrate pursuant to this clause shall be specifically enforceable in accordance with, and shall be conducted consistently with, the provisions of Title 9 of Part 3 of the California Code of Civil Procedure. Any arbitration hereunder shall be conducted in San Diego, California, unless otherwise agreed to by the parties.

11.3. Attorneys’ Fees. In the event of any arbitration or litigation concerning any controversy, claim or dispute between the parties hereto, arising out of or relating to this Agreement or the breach hereof, or the interpretation hereof, the prevailing party shall be entitled to recover from the losing party reasonable expenses, attorneys’ fees and costs incurred in connection therewith or in the enforcement or collection of any judgment or award rendered therein. The “prevailing party” means the party determined by the arbitrator(s) or court, as the case may be, to have most nearly prevailed, even if such party did not prevail in all matters, not necessarily the one in whose favor a judgment is rendered.

11.4. Notice. Any notice required or permitted of either the Executive or the Bank under this Agreement shall be deemed to have been duly given, if by personal delivery, upon the date received by the party or its authorized representative; if by facsimile, upon transmission to a telephone number previously provided by the party to whom the facsimile is transmitted as reflected in the records of the party transmitting the facsimile and upon reasonable confirmation of such transmission; and if by mail, on the third day after mailing via U.S. first class mail, registered or certified, postage prepaid and return receipt requested, and addressed to the party at the address given below for the receipt of notices, or such changed address as may be requested in writing by a party.

If to the Bank:	Southwest Community Bank
		5810 El Camino Real
		Suite D
		Carlsbad, CA 92013
		Attention: President
If to the Executive:	Frank J. Mercardante
		_________________________
		_________________________
and a copy to:
		Lawrence S. Branton, Esq.
		Branton & Wilson, APC
		701 B St., Suite 1255
		San Diego, CA 92101-8187

11.5. Assignment. The Executive shall have no power or right to transfer, assign, anticipate, hypothecate, modify or otherwise encumber any part or all of the amounts payable hereunder, nor, prior to payment in accordance with the terms of this Agreement, shall any portion of such amounts be: (i) subject to seizure by any creditor of the Executive, by a proceeding at law or in equity, for the payment of any debts, judgments, alimony or separate maintenance obligations which may be owed by the Executive; or (ii) transferable. by operation of law in the event bankruptcy, insolvency or otherwise. Any such attempted assignment or transfer shall be void.

11.6. Binding Effect/Merger or Reorganization. This Agreement shall be binding upon and inure to the benefit of the Executive and the Bank. Accordingly, the Bank shall not merge or consolidate into or with another corporation, or reorganize or sell substantially all of its assets to another corporation, firm or person, unless and until such succeeding or continuing corporation, firm or person agrees to assume and discharge the obligations of the Bank under this Agreement. In the alternative, the Holding Company may agree to assume and discharge the obligation of the Bank under this Agreement. Upon the occurrence of such event, the term “Bank” as used in this Agreement shall be deemed to refer to such surviving or successor firm, person, entity or corporation, or the Holding Company, as the case may be.

11.7. Nonwaiver. The failure of either party to enforce at any time or for any period of time any one or more of the terms or conditions of this Agreement shall not be a waiver of such term(s) or condition(s) or of that party’s right thereafter to enforce each and every term and condition of this Agreement.

11.8. Partial Invalidity. If any terms, provision, covenant, or condition of this Agreement is determined by an arbitrator or a court, as the case may be, to be invalid, void, or unenforceable, such determination shall not render any other term, provision, covenant or condition invalid, void or unenforceable, and the Agreement shall remain in full force and effect notwithstanding such partial invalidity.

11.9. Entire Agreement. This Agreement supersedes any and all other agreements, either oral or in writing, between the parties with respect to the subject matter of this Agreement and contains all of the covenants and agreements between the parties with respect thereto. Each party to this Agreement acknowledges that no other representations, inducements, promises, or agreements, oral or otherwise, have been made by any party, or anyone acting on behalf of any party, which are not set forth herein, and that no other agreement, statement, or promise not contained in this Agreement shall be valid or binding on either party.

11.10. Modifications. Any modification of this Agreement shall be effective only if it is in writing and signed by each party or such party’s authorized representative.

11.11. Paragraph Headings. The paragraph headings used in this Agreement are included solely for the convenience of the parties and shall not affect or be used in connection with the interpretation of this Agreement.

11.12. No Strict Construction. The language used in this Agreement shall be deemed to be the language chosen by the parties hereto to express their mutual intent, and no rule of strict construction will be applied against any person.

11.13. Governing Law. The laws of the State of California, other than those laws denominated choice of law rules, and where applicable, the rules and regulations of the Board of Governors of the Federal Reserve System, Federal Deposit Insurance Corporation, Office of the Comptroller of the Currency, or any other regulatory agency or governmental authority having jurisdiction over the Bank or the Holding Company, shall govern the validity, interpretation, construction and effect of this Agreement.

IN WITNESS WHEREOF, the Bank and the Executive have executed this Agreement on the date first above-written in the City of Carlsbad, California.

BANK		EXECUTIVE
Southwest Community Bank
By:	/s/ Howard B. Levenson	/s/Frank J. Mercardante
	Howard B. Levenson	Frank J. Mercardante
	Chairman

SCHEDULE A

CALENDAR YEAR PERCENTAGE	APPLICABLE
[Inception of service to 12/31/01]	30	%
01/01/02 to 12/31/02:	38.75	%
01/01/03 to 12/31/03:	47.50	%
01/01/04 to 12/31/04:	56.25	%
01/01/05 to 12/31/05:	65	%
01/01/06 to 12/31/06:	73.75	%
01/01/07 to 12/31/07:	82.50	%
01/01/08 to 12/31/08:	91.25	%
01/01/09 and beyond:	100	%

Beginning in the year 2002, the Executive shall be entitled to the Applicable Percentage increase for each calendar year, during which he is employed by the Bank for at least six months.

SCHEDULE B

EXECUTIVE BENEFITS

The Bank shall pay to the Executive pursuant to the Agreement during the Executive’s lifetime One Hundred Forty Thousand Dollars ($140,000) per year, payable in twelve equal monthly installments. The amount of Executive Benefits payable under the Agreement shall be adjusted each year from the date of commencement of payments of the Executive Benefits until the death of the Executive as follows:

a. The Executive Benefits shall be increased at the rate of three percent (3%) each year, subject to further adjustment for an Early Retirement.

b. If the Executive elects Early Retirement, the Executive Benefits shall be decreased by a percentage calculated by subtracting the Executive’s age at Early Retirement from the Normal Retirement Age of 62 and multiplying the result by a factor of seven. For example, assuming the Applicable Percentage equals 100%, a 35% reduction of the Executive Benefits would occur if the Executive’s Early Retirement Age is 57, based on the following calculation: 62-57=5x7=35%.

Southwest Community Bank

AMENDMENT TO

EXECUTIVE SUPPLEMENTAL COMPENSATION AGREEMENT

This Amendment dated April 19, 2006 amends the Executive Supplemental Compensation Agreement between Southwest Community Bank (the “Bank”) and Frank J. Mercardante (the “Executive”) dated October 17, 2001 (the “Agreement”).

The parties desire to amend the Agreement so that it complies with Internal Revenue Code Section 409A, which was promulgated pursuant to the American Jobs Creation Act of 2004. Accordingly, the parties agree that the Agreement shall be amended as follows:

1. Subparagraph 1.2 shall be amended in its entirety to read:

“1.2 Applicable Percentage. The term “Applicable Percentage” shall mean that percentage listed on Schedule A attached hereto which is adjacent to the date range which includes the date on which payments are to commence under the terms of this Agreement. Notwithstanding the foregoing or the percentages set forth on Schedule A, for purposes of calculating the Executive Benefit under subparagraph 5.4, the Applicable Percentage shall be one hundred percent (100%). In the event the Executive becomes Disabled, as defined in subparagraph 1.6 below, the Applicable Percentage shall be calculated as of the end of three years following the year in which the Executive becomes Disabled.”

2. Subparagraph 1.5 shall be amended in its entirety to read:

“1.5 Constructive Termination of Employment. The term “Constructive Termination of Employment” shall mean termination of Employment by Executive because the working conditions are so intolerable or aggravated that a reasonable person in the Executive’s position would be compelled to resign, provided that the Executive advised the Bank of the conditions and the Bank failed to take timely reasonable action to remedy the conditions. Following a Change in Control, a material adverse change in the Executive’s position, responsibilities, duties, salary, benefits or location of employment are per se intolerable working conditions.”

3. Subparagraph 1.6 shall be amended in its entirety to read:

“1.6 Disability/Disabled. The term “Disability” or “Disabled” shall mean the Executive (i) is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental

impairment which can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months, or (ii) is, by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months, receiving income replacement benefits for a period of not less than three (3) months under an accident and health plan covering employees of the Bank.”

4. Subparagraph 3.1 shall be amended in its entirety to read:

“3.1 Payments Commence Upon Early Retirement Date. In the event the Executive elects to Retire on a date which constitutes an Early Retirement Date, the Executive shall be entitled to be paid the Applicable Percentage of the Executive Benefits, as described in Schedule B, in substantially equal monthly installments on the first day of each month, beginning with the month following the month in which the Early Retirement Date occurs, payable until the Executive’s death. The commencement date for payments is subject to Paragraph 10 below.”

5. Subparagraph 3.2 shall be amended in its entirety to read:

“3.2 Payments After Normal Retirement Age. If the Executive remains in the continuous employment of the Bank until attaining sixty-two (62) years of age, the Executive shall be entitled to be paid the Applicable Percentage of the Executive Benefits, as described in Schedule B, in substantially equal monthly installments on the first day of each month, beginning with the month following the month in which the Executive Retires or is terminated by the Bank without cause, payable until the Executive’s death. The commencement date for payments is subject to Paragraph 10 below.”

6. Subparagraph 5.1 shall be amended in its entirety to read:

“5.1 Termination Without Cause. If the Executive’s employment is terminated by the Bank without cause or by the Executive due to a Constructive Termination of Employment, and such termination is not subject to the provisions of subparagraph 5.4 below, the Executive shall be entitled to be paid the Applicable Percentage of the Executive Benefits calculated as of the end of the year following the year in which the Executive is terminated, as if the employment had continued to such date, in substantially equal monthly installments on the first day of each month, beginning with the month following the month in which the Executive attains sixty-two (62) years of age. The commencement date for payments is subject to Paragraph 10 below.”

7. Subparagraph 5.2(a) shall be amended in its entirety to read:

“5.2 Voluntary Termination by the Executive.

(a) If the Applicable Percentage is one hundred percent (100%), the Executive shall be entitled to be paid the Applicable Percentage of the Executive Benefits, as defined in Schedule B, in substantially equal monthly installments on the first day of each month, beginning with the month following the month in which the Executive attains sixty-two (62) years of age. The commencement date for payments is subject to Paragraph 10 below.”

8. Subparagraph 5.4 shall be amended in its entirety to read:

“5.4 Termination on Account of or After a Change in Control. In the event: (1) the Executive’s employment with the Bank is terminated by the Bank in conjunction with, or by reason of, a Change in Control; or (ii) after a Change in Control, there is a Constructive Termination of Employment, then the Executive shall be entitled to be paid the Applicable Percentage of the Executive Benefits, as described on Schedule B, in substantially equal monthly installments on the first day of each month, beginning the month following termination of employment by the Bank or the Constructive Termination of Employment. The commencement date for payments is subject to Paragraph 10 below.”

9. Paragraph 6 shall be amended to add the following sentence and shall otherwise remain in its entirety:

“All efforts by the Bank and the Executive to minimize the amount of excise tax imposed by Section 4999 of the Code shall be in accordance with Section 409A of the Code.”

10. Paragraph 10 shall be amended in its entirety to read:

“10 Delay of Payment if Specified Employee. Other than with respect to benefits paid in the event of Disability under Paragraph 4, if at the time the Executive’s employment terminates the Executive is a “specified employee,” as defined in Section 409A of Code, the Executive Benefits shall not commence until the later of (a) the commencement date otherwise set forth in the applicable paragraph of this Agreement or (b) a date which is six months after the date of Executive’s termination of employment with the Bank. Furthermore, for any Executive affected by this six (6) month delay in payment imposed by Section 409A of the Code, and when applicable, the aggregate amount of the first seven (7) months of installments shall be paid at the beginning of the seventh month following the date of termination of employment. Monthly installment payments shall continue thereafter as specified. If any provision of this Employment

Agreement does not satisfy the requirements of Section 409A of the Code, such provision shall be applied in a manner consistent with those requirements.”

11. Subparagraph 11.10 shall be amended in its entirety to read:

“11.10 Amendments and Changes in Timing of Distributions. Any amendments or modifications of this Agreement shall be effective only if it is in writing and signed by each party or such party’s authorized representative. Notwithstanding the foregoing, this Agreement may not be amended to accelerate the timing of distributions of the Executive Benefits unless such acceleration is permissible under Section 409A of the Code. With the consent of the Bank, the Executive may elect a delay in the payment or a change in the form of payment, subject to the following limitations:

(a) the election may not take effect until at least twelve (12) months after the date on which the election is made;

(b) other than in the event of death or Disability, the first payment with respect to such election must be deferred for a period of at least five (5) years from the date such payment otherwise would have been made; and

(c) an election related to a payment to made at a specified time may not be made less than twelve (12) months prior to the date of the first scheduled payment.”

12. Subparagraph 11.14 shall be added and read:

“11.1 IRC 409A Compliance. Notwithstanding any other provision of Agreement, it is intended that any payment or benefit which is provided pursuant to or in connection with this Agreement shall be provided and paid in a manner, and at such time and in such form, as complies with the applicable requirements of Section 409A of the Code to avoid the unfavorable tax consequences provided therein for non-compliance. Any provision in this Agreement that is determined to violate the requirements of Section 409A shall be void and without effect. To the extent permitted under Section 409A, the parties shall reform the provision, provided such reformation shall not subject the Executive to additional tax or interest and the Bank shall not be required to incur any additional compensation as a result of the reformation. In addition, any provision that is required to appear in this Agreement that is not expressly set forth shall be deemed to be set forth herein, and this Agreement shall be administered in all respects as if such provision were expressly set forth. References in this Agreement to Section 409A of the Code include rules, regulations, and guidance of general application issued by the Department of the Treasury under Internal Revenue Code Section 409A.”

13. Except as specifically amended herein, the Agreement shall remain in full force and effect.

[Signature Page to Follow]

IN WITNESS WHEREOF, the parties have executed this Amendment as of the date first written above.

BANK:
Southwest Community Bank
By:	/s/ Howard B. Levenson
Name:	Howard B. Levenson
Its:	Chairman
THE EXECUTIVE:
/s/ Frank J. Mercardante
Frank J. Mercardante

EX-10.6(A)

Exhibit 10.6(a)

LIFE INSURANCE

ENDORSEMENT METHOD SPLIT DOLLAR PLAN

AGREEMENT

Insurer/Policy Number:	Beneficial Life Insurance #BL2103238
	Jefferson Pilot Insurance #JP5195818
	Massachusetts Mutual Life
	Insurance #0045169

Bank:	Southwest Community Bank
Insured:	Frank J. Mercardante

Relationship of Insured to Bank: Executive Officer

Date:

The respective rights and duties of the Bank, the Mercardante 2001 Irrevocable Trust (the “Trust”) and the Insured in the above policy(ies) (the “Policy” or Policies) shall be as follows:

I. DEFINITIONS

Refer to the Policy provisions for the definition of all terms in this Agreement.

II. POLICY TITLE AND OWNERSHIP

Title and ownership shall reside in the Bank for its use and for the use of the Trust all in accordance with this Agreement. The Bank alone may, to the extent of its interest, exercise the right to borrow or withdraw the Policy cash values. Where the Bank and the Trust, with the consent of the Insured, mutually agree to exercise the right to increase the coverage under the subject split dollar Policy, then, in such event, the rights, duties and benefits of the parties to such increased coverage shall continue to be subject to the terms of this Agreement.

III. BENEFICIARY DESIGNATION RIGHTS

The Insured shall have the right and power to require the Bank to designate a beneficiary or beneficiaries to receive the proceeds payable upon the death of the Insured, subject to any right or interest the Bank may have in such proceeds, as provided in this Agreement. Pursuant to said right, the Insured irrevocably directs the Bank and the Bank agrees to designate the Trust as beneficiary of the Policy. Said designation shall be irrevocable and thus may not be changed by anyone, except in the event the Agreement terminates as provided under Article X herein and the Policy is not assigned to the Trust.

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IV. PREMIUM PAYMENT METHOD

The Bank shall pay an amount equal to the planned premiums and any other premium payments that might become necessary to maintain the Policy in force.

V. TAXABLE BENEFIT

Annually the Insured will receive additional compensation equal to the assumed cost of insurance as required by the Internal Revenue Service plus the amount of any taxes paid and taxes on taxes paid (collectively Taxes”) related to the receipt of the benefit (“gross up”). This amount shall not exceed $8,620 per year. For example:

If the taxable income is $10,000 and the highest combined marginal Federal and California income tax bracket plus FICA taxes and the Medicare tax is 40%, then the Taxes would be $10,000 multiplied by 40% ($4,000) divided by .60 = $6,667. The Bank (or its administrator) will report to the Insured the amount of imputed income received each year on Form W-2 or its equivalent.

VI. DIVISION OF DEATH PROCEEDS

Subject to Paragraph VII herein, the division of the death proceeds of the Policy is as follows:

1. If death occurs on or before the attainment of age sixty-five (65), the Trust shall be entitled to an amount equal to the lesser of $1,820,000, or one hundred percent (100%) of the net at risk insurance portion of the proceeds. If death occurs after age sixty-five (65) but on or before age seventy (70), the Trust shall be entitled to the lesser of $1,400,000, or one hundred percent (100%) of the net at risk insurance proceeds. If death occurs after age seventy (70) but on or before age eighty (80), the Trust shall be entitled to the lesser of $980,000, or one hundred percent (100%) of the net at risk insurance proceeds. If death occurs after age eighty (80), the Trust shall be entitled to the lesser of $560,000, or one hundred percent (100%) of the net at risk insurance proceeds. The net at risk insurance portion is the total proceeds less the cash value of the Policy.

2. The Bank and the Trust shall share in any interest due on the. death proceeds on a pro rata basis in the ratio that the proceeds due the Bank and the Trust, respectively, bears to the total proceeds, excluding any such interest.

3. In the event that the Policy is terminated other than as a result of (a) a termination of this Agreement pursuant to paragraph X or (b) any intentional act of the Insured which results in the termination of the policy, then the Bank shall pay to the Trust an amount which will provide a total after-tax death benefit equal to the benefit that the Insured would have received if the Policy had not been terminated.

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4. In the event that the Policy is terminated other than as a result of (a) a termination of this Agreement pursuant to paragraph X or (b) any intentional act of the Insured which results in the termination of the Policy, then the Bank shall pay to the trust an amount which will provide a total after-tax death benefit equal to the benefit that the Insured would have received if the Policy had not been terminated.

VII DIVISION OF CASH SURRENDER VALUE

The Bank shall at all times be entitled to an amount equal to the Policy’s cash value, as that term is defined in the Policy, less any Policy loans and unpaid interest or cash withdrawals previously incurred by the Bank and any applicable Policy surrender charges. Such cash value shall be determined as of the date of surrender of the Policy or death of the Insured as the case may be.

VIII PREMIUM WAIVER

If the Policy contains a premium waiver provision, any such waived amounts shall be considered for all purposes of this Agreement as having been paid by the Bank.

IX. RIGHTS OF PARTIES WHERE POLICY ENDOWMENT OR ANNUITY ELECTION EXISTS

In the event the Policy involves an endowment or annuity element, the Bank’s right and interest in any endowment proceeds or annuity benefits shall be determined under the provisions of this Agreement by regarding such endowment proceeds or the commuted value of such annuity benefits as the Policy’s cash value. Such endowment proceeds or annuity benefits ‘shall be treated like death proceeds for the purposes of division under this Agreement.

X. TERMINATION OF AGREEMENT

This Agreement shall terminate at the option of the Bank following thirty (30) days written notice to the Insured and the Trust upon the happening of any one of the following:

    1. The Insured’s right to receive benefits under that certain Executive Supplemental Compensation Agreement effective as of October 17, 2001 shall terminate for any reason other than the Insured’s death, or

    2. The Insured shall be discharged from service with the Bank for cause. The term “for cause” shall mean:

(a) The Insured’s deliberate violation of (i) any state or federal banking or securities laws, or of the Bylaws, rules, policies or resolutions of the Employer, or (ii) of the rules or regulations of the California Department of Financial Institutions, the Federal Deposit

3

Insurance Corporation, the Federal Reserve Board of Governors, the Office of the Comptroller of the Currency or any other regulatory agency or governmental authority having jurisdiction over the Bank, which has a material adverse financial effect upon the Bank; or

(b) The Insured’s conviction of (i) any felony or (ii) a crime involving moral turpitude or a fraudulent or dishonest act which, in each case, has a material adverse financial effect on the Employer.

Upon such termination, the Trust shall have a ninety (90) day option to receive from the Bank an absolute assignment of the Policy in consideration of a cash payment to the Bank, whereupon this Agreement shall terminate. Such cash payment shall be an amount equal to the Policy’s cash value, as that term is defined in the Policy, and shall not take into account the amount of any premiums that have been paid by the Bank.

Should the Trust fail to exercise this option within the prescribed ninety (90) day period, the Trust agrees that all of its rights, interest and claims in the Policy shall terminate as of the date of the termination of this Agreement.

Except as provided above, this Agreement shall terminate upon distribution of the death benefit proceeds in accordance with Paragraph VI above.

XI. INSURED’S OR ASSIGNEE’S ASSIGNMENT RIGHTS

Neither the Insured nor the Trust may assign to any individual, trust or other organization, any right, title or interest in the Policy nor any rights, options, privileges or duties created under this Agreement.

XII. AGREEMENT BINDING UPON THE PARTIES

This Agreement shall be binding upon the Insured, the Trust, and the Bank, and their respective heirs, successors, personal representatives and assigns, as applicable.

XIII. NAMED FIDUCIARY AND PLAN ADMINISTRATOR

The Bank is hereby designated the “Named Fiduciary” until resignation or removal by its Board of Directors. As Named Fiduciary, the Bank shall be responsible for the management, control, and administration of this Agreement as established herein. The Named Fiduciary may allocate to others certain aspects of the management and operations responsibilities of this Agreement, including the employment of advisors and the delegation of any ministerial duties to qualified individuals.

XIV. FUNDING POLICY

The funding Policy for this Agreement shall be to maintain the Policy in force by paying, when due, all premiums required.

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XV. CLAIM PROCEDURES

Claim forms or claim information as to the subject Policy can be obtained by contacting The Benefit Marketing Group, Inc. (770-952-1529). When the Named Fiduciary has a claim which may be covered under the provisions described in the Policy it should contact the office named above, and they will either complete a claim form and forward it to an authorized representative of the Insurer or advise the named Fiduciary what further requirements are necessary. The Insurer will evaluate and make a decision as to payment. If the claim is payable, a benefit check will be issued to the Named Fiduciary.

In the event that a claim is not eligible under the Policy, the Insurer will notify the Named Fiduciary of the denial pursuant to the requirements under the terms of the Policy. If the Named Fiduciary is dissatisfied with the denial of the claim and wishes to contest such claim denial, it should contact the office flamed above and they will assist in making inquiry to the Insurer. All objections to the Insurer’s actions should be in writing and submitted to the office named above for transmittal to the Insurer.

XVI. GENDER

Whenever in this Agreement words are used in the masculine or neuter gender, they shall be read and construed as in the masculine, feminine or neuter gender, whenever they should so apply.

XVII. INSURANCE COMPANY NOT A PARTY TO THIS AGREEMENT

The Insurer shall not be deemed a party to this Agreement, but will respect the rights of the parties as set forth herein upon receiving an executed copy of this Agreement. Payment or other performance in accordance with the Policy provisions shall fully discharge the Insurer from any and all liability.

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IN WITNESS WHEREOF, the Insured and a duly authorized Bank officer have signed this Agreement as of the above written date.

SOUTHWEST COMMUNITY BANK		INSURED
/s/ Howard B. Levenson		/s/ Frank J. Mercardante
Howard B. Levenson		Frank J. Mercardante
Chairman
THE MERCARDANTE 2001 IRREVOCABLE TRUST
By:	/s/ Patick C. Mercardante
	Trustee

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IRREVOCABLE BENEFICIARY DESIGNATION FORM

Name

The Mercardante 2001 Irrevocable Trust
By:	/s/ Patick C. Mercardante
	Southwest Community Bank
By:	/s/ Howard B. Levenson
	Howard B. Levenson
	Chairman

1

Southwest Community Bank

AMENDMENT TO

ENDORSEMENT METHOD SPLIT DOLLAR PLAN AGREEMENT

This Amendment dated April 19, 2006 amends the Endorsement Method Split Dollar Plan Agreement between Southwest Community Bank (the “Bank”) and Frank J. Mercardante (the “Insured”) executed November 20, 2001 (the “Agreement”).

1. Notwithstanding any other provision of the Policy or the Agreement, it is intended that any payment or benefit which is provided to the Insured pursuant to or in connection with the Policy or this Agreement which is considered to be nonqualified deferred compensation subject to Section 409A of the Code shall be provided and paid in a manner, and at such time and in such form, as complies with the applicable requirements of Section 409A of the Code to avoid the unfavorable tax consequences provided therein for noncompliance.

2. The Agreement shall otherwise remain in full force and effect as written.

IN WITNESS WHEREOF, the parties have executed this Amendment as of the date first written above.

BANK:
Southwest Community Bank
By:	/s/ Howard B. Levenson
Name:	Howard B. Levenson
Its:	Chairman
INSURED:
/s/ Frank J. Mercardante
Frank J. Mercardante

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EX-21.1

EXHIBIT 21.1

Subsidiaries of Placer Sierra Bancshares

Placer Sierra Bancshares has six direct subsidiaries:

1. Placer Sierra Bank, a California corporation.

2. Placer Statutory Trust II, a Connecticut statutory business trust.

3. Southland Statutory Trust I, a Connecticut statutory business trust.

4. First Financial Bancorp Statutory Trust I, a Connecticut statutory business trust.

5. Placer Statutory Trust III, a Delaware statutory business trust.

6. Southwest Community Statutory Trust I, a Connecticut statutory trust.

Placer Sierra Bank has five direct subsidiaries of its own, only one of which is active:

1. Central Square Company, Inc., a California corporation.

The other remaining subsidiaries are: PIB Mortgage Company, SCB Investment Company, SCB Financial Software, Inc. and FDS Liquidation Corporation.

EX-31.1

Exhibit 31.1

Rule 13a-14(a)/15d-14(a) Certification

Pursuant to Section 302 of the

Sarbanes-Oxley Act of 2002

I, Ronald W. Bachli, certify that:

1. I have reviewed this quarterly report on Form 10-Q for the quarter ended June 30, 2006 of Placer Sierra Bancshares;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involve management or other employees who have a significant role in the registrant’s internal control over financial reporting.

	PLACER SIERRA BANCSHARES
Dated: August 8, 2006	/S/    RONALD W. BACHLI
	Ronald W. Bachli Chief Executive Officer

EX-31.2

Exhibit 31.2

Rule 13a-14(a)/15d-14(a) Certification

Pursuant to Section 302 of the

Sarbanes-Oxley Act of 2002

I, David E. Hooston, certify that:

1. I have reviewed this quarterly report on Form 10-Q for the quarter ended June 30, 2006 of Placer Sierra Bancshares;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal controls over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involve management or other employees who have a significant role in the registrant’s internal control over financial reporting.

	PLACER SIERRA BANCSHARES
Date: August 8, 2006	/S/ DAVID E. HOOSTON
	David E. Hooston Chief Financial Officer

EX-32.1

Exhibit 32.1

Certification

Pursuant to the requirement set forth in Section 906 of the Sarbanes-Oxley Act of 2002, Ronald W. Bachli hereby certifies as follows:

1. He is the duly appointed Chief Executive Officer of Placer Sierra Bancshares, a California corporation (the “Company”).

2. Based on his knowledge, the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2006, and to which this Certification is attached as Exhibit 32.1 (the “Periodic Report”), fully complies with the requirements of section 13(a) or section 15(d), of the Securities Exchange Act of 1934 and that the information contained in the Periodic Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

IN WITNESS WHEREOF, the undersigned has set his hand hereto as of this 8th day of August 2006.

	PLACER SIERRA BANCSHARES
Dated: August 8, 2006	/S/    RONALD W. BACHLI
	Ronald W. Bachli Chief Executive Officer

EX-32.2

Exhibit 32.2

Certification

Pursuant to the requirement set forth in Section 906 of the Sarbanes-Oxley Act of 2002, David E. Hooston hereby certifies as follows:

1. He is the duly appointed Chief Financial Officer of Placer Sierra Bancshares, a California corporation (the “Company”).

2. Based on his knowledge, the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2006, and to which this Certification is attached as Exhibit 32.2 (the “Periodic Report”), fully complies with the requirements of section 13(a) or section 15(d), of the Securities Exchange Act of 1934 and that the information contained in the Periodic Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

IN WITNESS WHEREOF, the undersigned has set his hand hereto as of this 8th day of August 2006.

	PLACER SIERRA BANCSHARES
Dated: August 8, 2006	/S/    DAVID E. HOOSTON
	David E. Hooston Chief Financial Officer