MERGER AGREEMENT "The Agreement hereof (hereinafter the ""Agreement"") has" been made on April (04) twenty second (22) of the year ninety ninty eight (1998). The Agreement has been made by and between: AS EESTI UHISPANK, code of the Commercial Register 10004252, place of location Tallinn, Tartu mnt. 13, in the person of the member of the management board Mr. Ain Hanschmidt, personal identification number 36111104718, who acts on the basis of law and the decision no. 52 of the management board, dated 21.04.1998 (hereinafter the """ACQUIRING BANK"" or the ""Party"");" and AS TALLINNA PANK, code of the Commercial Register 10031740, place of location Tallinn, Roosikrantsi 2, in the person of the member of the management board Mr. Rait Lukas, personal identification number 36905026019, who acts on the basis of law and the protocol of the management board no. 103, dated 22.04.1998 (hereinafter "the ""BANK BEING ACQUIRED"" or the ""Party"");" (the ACQUIRING BANK and the BANK BEING ACQUIRED are "jointly hereinafter referred to also as the ""Parties"")" in the following: I MERGER The ACQUIRING BANK merges the BANK BEING ACQUIRED on the basis of the Agreement in accordance with the Commercial Code, 391, section 1 and the Law on Credit Institutions, 33. The Parties shall undertake to make their best effort to conduct the merger in compliance with the requirements of law and as soon as possible. All the rights and obligations of the BANK BEING ACQUIRED shall transfer to the ACQUIRING BANK as from entry into force of the merger agreement, unless otherwise specified by the law. II SHARE EXCHANGE RATIO All the shares of the BANK BEING ACQUIRED, existing upon the moment of conclusion of the Agreement, shall be exchanged for the shares of the ACQUIRING BANK so that each share of the BANK BEING ACQUIRED gives the right to receive 0.84 shares of the ACQUIRING BANK. The BANK BEING ACQUIRED has at the current moment 11579104 shares. The general meeting of the shareholders of the BANK BEING ACQUIRED has decided to organise fund issue in the course of which the number of shares will be doubled. The fund issue shall become effective as from the entry of the increase of the share capital into the commercial register. After the fund issue the substitution ratio will be 1 share of the BANK BEING ACQUIRED : 0.42 shares of the ACQUIRING BANK, which shares are issued for the purpose of merger. No additional payments shall be made to the shareholders of the BANK BEING ACQUIRED. THE CONDITIONS FOR TRANSFER OF THE SHARES OF THE ACQUIRING BANK From the entry of merger into the Commercial Register in the place of location of the ACQUIRING BANK, the shares of the BANK BEING ACQUIRED shall be deemed exchanged for the shares of the ACQUIRING BANK in accordance with the exchange ratio provided for in the Agreement. The shares and parts of the shares of the BANK BEING ACQUIRED, owned by the shareholder of the BANK BEING ACQUIRED, which do not afford exchange under the Agreement for one share or larger integral number of shares of the ACQUIRING BANK, shall be deemed exchanged as joint ownership. The portion of joint ownership of each shareholder depends on the number of such shareholders and their shares or parts of the shares which could not be exchanged for an integral number of shares of the ACQUIRING BANK. (E.g., if each of the one hundred [100] shareholders of the BANK BEING ACQUIRED have zero point five [0.5] shares of the BANK BEING ACQUIRED which have remained unexchanged, each shareholder acquires one one- hundredth [1/100] intangible part of twenty one [21] shares of the ACQUIRING BANK [if exchange ratio is 1:0.42].) Promptly after becoming aware of the entry of the merger in the commercial register in the place of location of the ACQUIRING BANK, the ACQUIRING BANK shall organise entry of the holders of shares, given for substitution of the shares of the BANK BEING ACQUIRED, as the shareholders into the share register kept by the Estonian Central Depository of Securities. IV RIGHT TO A SHARE OF PROFIT The shares of the ACQUIRING BANK to be acquired under the Agreement shall provide the shareholders of the BANK BEING ACQUIRED with the right to a share of profit upon division of dividends of the 1998 financial year of the ACQUIRING BANK. RIGHTS TO BE GIVEN TO THE SHAREHOLDERS OF THE BANK BEING ACQUIRED The shares of the ACQUIRING BANK to be acquired under the Agreement shall provide the shareholders of the BANK BEING ACQUIRED with all the rights of the shareholder of the ACQUIRING BANK, unless otherwise provided for in the Agreement. The shareholders of the BANK BEING ACQUIRED have the right to nominate 3 candidates for membership to the supervisory board of the ACQUIRING BANK. The shareholders of the BANK BEING ACQUIRED make a resolution on appointment of the candidates for membership to the supervisory board at the general meeting approving the Agreement. The question regarding the increase of the number of members of the supervisory board and the election of three additional members shall be placed in the agenda of the general meeting of the ACQUIRING BANK discussing the approval of the Agreement. The supervisory board of the ACQUIRING BANK submits to the general meeting of the ACQUIRING BANK as the candidates of the three additional members of the supervisory board the candidates for the membership to the supervisory board elected earlier as such at the general meeting of the BANK BEING ACQUIRED. The general meeting of the ACQUIRING BANK shall be notified of the resolution of the general meeting of the BANK BEING ACQUIRED with regard to the three candidates for the membership to the supervisory board by the chairman of the management board, the chairman of the general meeting and the recorder of the minutes of the general meeting of the BANK BEING ACQUIRED who draw up jointly a written notice which shall be delivered to the chairman of the general meeting of the ACQUIRING BANK. CONSEQUENCES OF MERGER TO THE EMPLOYEES OF THE BANK BEING ACQUIRED The rights and obligations of the employees of the BANK BEING ACQUIRED arising from their employment agreements shall transfer to the ACQUIRING BANK. VII SPECIAL PROVISIONS After the merger the chairman of the management board of the ACQUIRING BANK shall make a proposal to the supervisory board of the merged bank for election of the new composition of the management board of the merged bank. Until the merger the Parties shall not change the amount of the share capital, distribute profit nor in any other way decrease the amount of the share capital or equity without the prior written consent of the other Party, unless it arises otherwise from the Agreement. This obligation shall extend to the Parties also in respect of their subsidiaries. VIII ENTRY INTO FORCE AND VALIDITY OF THE AGREEMENT The Agreement has been concluded as a conditional agreement. The Agreement shall come into force after being approved by the general meetings of the ACQUIRING BANK and the BANK BEING ACQUIRED, receipt of the permission of Eesti Pank for the merger and election of the three candidates for the membership to the supervisory board, elected at the general meeting of the BANK BEING ACQUIRED, to the supervisory board of the ACQUIRING BANK at the general meeting of the ACQUIRING BANK, where the Agreement is approved. Both Parties shall be entitled, without the right of the other Party to compensation for loss, to terminate the Agreement, by notifying the other Party thereof in writing 3 days in advance, if by March 1, 1999 the entry into force of the Agreement has not taken place in accordance with the clause 8.1. hereof. IX LIABILITY Either Party shall be liable with all its property for the loss to the other Party resulting from infringement or unduly performance of the Agreement. The Parties confirm that they have furnished each other all important information on its economic activity and legal status. The Parties confirm that they are satisfied with the information received from the other Party and that from conclusion of the Agreement they will renounce asserting of claims with regard to the other Party, other Party's members of the management board and supervisory board, arising from the loss due to the shortcomings appearing in the economic or legal state of the other Party, the state of its assets etc. X APPLICABLE LAW AND RESOLUTION OF DISPUTES Upon resolution of disputes arising out of or in connection with the Agreement, the laws of the Republic of Estonia shall be applied. The disputes arising out of or in connection with the Agreement shall be resolved in the Arbitration Court of the Chamber of Industry and Commerce of the Republic of Estonia in accordance with the procedural rules of the Arbitration Court applicable during the dispute. XI CONFIDENTIALITY The Parties shall undertake to maintain in confidence from all third persons any information received from the other Party in the course of merger on the economic activity, legal status etc. of the latter, except for the information published earlier and information the publication whereof is compulsory in accordance with applicable laws and regulations of the Tallinn Stock Exchange and other stock exchanges where the securities issued by the Parties are listed and regulations of the Estonian Central Depository of Securities. XII EXPLANATIONS OF THE NOTARY The Agreement has been concluded in three counterparts in the Estonian language, of which one shall remain with both Parties hereto, one to the notary certifying the Agreement. Counterparts certified by the notary shall be submitted one to Eesti Pank and one to the Register Department of Tallinn City Court. SIGNATURES OF THE REPRESENTATIVES OF THE PARTIES: Representative of Representative of AS Eesti Uhispank AS AS Tallinna Pank ______________________ ______________________ AIN HANSCHMIDT RAIT LUKAS