BANK OF SMITHTOWN SUBORDINATED NOTES DUE JULY 1, 2019 SMITHTOWN BANCORP, INC. WARRANTS TO PURCHASE COMMON SHARES SUBSCRIPTION AGREEMENT
EXHIBIT
10.1
BANK
OF SMITHTOWN
SUBORDINATED
NOTES
DUE
JULY 1, 2019
SMITHTOWN
BANCORP, INC.
WARRANTS
TO PURCHASE COMMON SHARES
THIS SUBSCRIPTION AGREEMENT (this “Subscription
Agreement”)
dated as of July 27, 2009 is made by and among the undersigned subscriber or
subscribers (the “Purchaser”),
Bank of Smithtown, a New York state-chartered bank (the “Bank”),
and Smithtown Bancorp, Inc., a corporation organized under the laws of the State
of New York (the “Company”,
and together with the Bank, the “Offerors”).
RECITALS:
A. The
Bank desires to issue 11% Subordinated Notes due July 1, 2019 (the “Notes”) in
an aggregate principal amount of $14,000,000, to be issued pursuant to one or
more Fiscal and Paying Agency Agreements (each a “Fiscal
Agreement”) by and between the Bank and Wilmington Trust Company, not in
its individual capacity, but solely as fiscal and paying agent (“WTC”);
and
B. The
Company proposes to issue warrants to purchase 350,000 shares of its common
stock, par value $0.01 per share (the “Common
Shares”), at a price of $11.50 per Common Share for a period of seven (7)
years, which issuance of warrants, together with the issuance of the Notes, is
referred to in this Subscription Agreement as the “Offering”;
and
C. The
Purchaser understands that the Offerors may in the future issue additional
securities similar to those sold in the Offering as well as other capital
raising instruments although the Offerors have not made any agreements to do so
as of the date hereof; and
D. In
consideration of the premises and the mutual representations and covenants
hereinafter set forth, the parties hereto agree as follows:
ARTICLE
I
PURCHASE
AND SALE OF SECURITIES
1.1 The
Purchaser hereby purchases from the Bank, Notes for an aggregate purchase price
(the “Notes
Purchase
Price”) all as set forth by the Purchaser on the signature page hereto
and the Bank hereby sells such Notes to the Purchaser for said Notes Purchase
Price. The Company further hereby agrees to issue warrants (the
“Warrants”)
to the Purchaser all as set forth on the signature page hereto. The
Notes and Warrants purchased pursuant to this Subscription Agreement are
referred to as the “Purchased
Securities”. The rights and preferences of the Notes are set
forth in the applicable Fiscal Agreement, including the form of Note appended
thereto. The terms of the Warrants are set forth in the applicable
form of Warrant. The purchase of the Notes and the issuance of the
Warrants is referred to in this Subscription Agreement as the “Purchase.”
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1.2 The
Purchaser has provided to the Bank by wire transfer immediately available funds
representing the aggregate Note Purchase Price.
1.3 This
Subscription Agreement shall be effective immediately upon acceptance by the
Company and the Bank of the Purchaser’s executed counterpart of this
Subscription Agreement.
ARTICLE
II
REPRESENTATIONS
AND WARRANTIES
2.1 Disclosure.
(a) “Material Adverse Effect”
means a material adverse effect on (1) the business, assets, liabilities,
results of operation or financial condition of the Company and its subsidiaries
taken as a whole; provided that Material
Adverse Effect shall not be deemed to include the effects, to the extent such
effects do not have a disproportionate impact on the Company as compared to
other depository institution holding companies, of (A) any facts,
circumstances, events, changes or occurrences generally affecting businesses and
industries in which the Company operates, companies engaged in such businesses
or industries or the economy, or the financial or securities markets and credit
markets in the United States or elsewhere in the world, including effects on
such businesses, industries, economy or markets resulting from any regulatory or
political conditions or developments, or any outbreak or escalation of
hostilities, declared or undeclared acts of war, terrorism, or work stoppages,
(B) changes or proposed changes in generally accepted accounting principles
in the United States (“GAAP”) or
regulatory accounting requirements applicable to depository institutions and
their holding companies generally (or authoritative interpretations thereof),
(C) changes or proposed changes in banking and other laws of general
applicability or related policies or interpretations of all United States
governmental or regulatory authorities (collectively, “Governmental
Entities”), or (D) changes in the market price or trading volume of
Common Shares (it being understood and agreed that the exception set forth in
this clause (D) does not apply to the underlying reason giving rise to or
contributing to any such change), or (2) the ability of the Company to
consummate timely the Purchase and the other transactions contemplated by this
Subscription Agreement and any other documents, agreements and instruments
delivered in connection herewith, including the Notes and Warrants
(collectively, the “Transaction
Documents”).
(b) “Previously Disclosed” means
(1) information contained in the Company’s Annual Report on Form 10-K
for the fiscal year ended December 31, 2008, or its other reports and forms
filed with the Securities and Exchange Commission (the “SEC”)
under Sections 13(a), 14(a) or 15(d) of the Securities Exchange Act of 1934
(the “Exchange
Act”) on or after January 1, 2009 (the “SEC
Reports”) and prior to the execution and delivery of this Agreement, (2)
information contained in the Company’s Registration Statement on Form S-3, as
amended (No. 333-153897), and any related prospectus or prospectus supplement,
filed with the SEC under the Securities Act of 1933, as amended (the “Securities
Act”), (including, without limitation, the prospectus supplement dated
May 14, 2009 and the prospectus dated December 1, 2008) (collectively, the
“Securities Act Filings”) and, if applicable, (3) information provided pursuant to any
confidentiality agreement between the Company and the Purchaser.
(c) Each
party acknowledges that it is not relying upon any representation or warranty
not set forth in the Transaction Documents. The Purchaser is aware that it will
bear the economic risk of an investment in the Purchased
Securities.
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(d) All
references to the “Knowledge” of the Company or
the Purchaser mean the actual knowledge after due inquiry of the Chief Executive
Officer or Chief Financial Officer of the Company or the Purchaser,
respectively.
2.2 Representations and
Warranties of the Company and the Bank. Except as Previously
Disclosed, the Company and the Bank, jointly and severally, represent and
warrant to the Purchaser that as of the date hereof (or such other date
specified herein):
(a) Organization, Authority and
Significant Subsidiaries. The Company has been duly incorporated and is
validly existing as a corporation in good standing under the laws of the State
of New York, with corporate power and authority to own its properties and
conduct its business in all material respects as currently conducted, and,
except as has not had or would not reasonably be expected to have a Material
Adverse Effect, has been duly qualified as a foreign corporation for the
transaction of business and is in good standing under the laws of each other
jurisdiction in which it owns or leases properties or conducts any business so
as to require such qualification; and each Subsidiary (as defined below) of the
Company that is a “significant subsidiary” within the meaning of
Rule 1-01(w) of Regulation S-X under the Securities Act of 1933, as
amended (the “Securities
Act”) (each, a “Significant
Subsidiary” and, collectively, the “Significant
Subsidiaries”) has been duly organized and is validly existing in good
standing under the laws of its jurisdiction of organization. The Bank
is duly organized and validly existing as a New York State chartered bank and,
except as has not had or would not reasonably be expected to have a Material
Adverse Effect, has been duly qualified as a foreign corporation for the
transaction of business and is in good standing under the laws of each other
jurisdiction in which it owns or leases properties or conducts any business so
as to require such qualification, and its deposit accounts are insured up to
applicable limits by the Federal Deposit Insurance Corporation (the “FDIC”),
and all premiums and assessments required to be paid in connection therewith
have been paid when due. The Bank has all corporate power and
authority to own its properties and conduct its business in all material
respects as currently conducted. When a reference is made in this
Subscription Agreement to a Subsidiary of a person, the term “Subsidiary” means
those corporations, banks, savings banks, associations and other entities of
which such person owns or controls more than 50% of the outstanding equity
securities either directly or through an unbroken chain of entities as to each
of which more than 50% of the outstanding equity securities is owned directly or
indirectly by its parent.
(b) Capitalization.
(1) As
of the date hereof, the Company has (i) 35,000,000 authorized Common
Shares, par value $0.01 per share, of which 14,858,522 shares are outstanding,
and (ii) 1,000,000 authorized shares of preferred stock, par value $0.01
per share, of which no shares are outstanding. As of the same date,
the Company had warrants outstanding to purchase 125,000 of its shares of common
stock at an exercise price of $11.50 per share.
(2) All
of the outstanding shares of capital stock of the Company have been duly and
validly authorized and issued and are fully paid and non-assessable and were not
issued in violation of any preemptive rights, resale rights, rights of first
refusal or similar rights.
(3) All
of the outstanding shares of capital stock of each Significant Subsidiary have
been duly and validly authorized and issued, are fully paid and non-assessable
and were not issued in violation of any preemptive rights, resale rights, rights
of first refusal or similar rights, and are owned
directly or indirectly by the Company, free and clear of all security interests,
liens, encumbrances, equities or claims.
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(4) Except
for the Rights (as hereinafter defined) issued pursuant to the Rights Agreement
(as hereinafter defined,) awards of restricted Common Shares pursuant to the
Company’s equity compensation and/or employee stock purchase plans, and as set
forth in paragraph (1) above, there are no options, warrants or other rights,
agreements, arrangements or commitments to which the Company is a party or by
which the Company is bound relating to the issued or unissued Common Shares of
the Company. For purposes of this Agreement, “Rights” means the rights to
purchase Common Shares of the Company issued pursuant to the Rights Agreement,
and “Rights Agreement”
means the Shareholder Protection Rights Agreement, dated as of September 23,
1997 and last amended as of February 6, 2008, by and between the Company and
Mellon Investor Services LLC, setting forth the rights of the holders of
Rights.
(c) Authorization of Common
Shares. The Common Shares to be issued upon the exercise of
the Warrants have been duly authorized for issuance by the Company and, when
duly issued and delivered by the Company against payment therefor in accordance
with the Warrant, will be duly and validly issued, fully paid and nonassessable,
and the issuance thereof will not be subject to any preemptive or other similar
rights.
(d) Authorization of
Warrants. The Warrants have been duly authorized for issuance by the
Company and, when issued and delivered as provided in this Subscription
Agreement, will be duly and validly issued, fully paid and non-assessable, and
the issuance thereof will not be subject to any preemptive or other similar
rights.
(e) Authorization of
Subordinated Note Securities. The Subordinated Note Securities
have been duly authorized for issuance by the Bank, and, when duly issued,
executed and authenticated in accordance with the Fiscal Agreement against
payment therefor as provided in this Subscription Agreement and in the Fiscal
Agreement, will constitute valid, legal and binding obligations of the Bank,
enforceable against the Bank in accordance with their terms, except to the
extent that enforceability may be limited by the Enforceability Exceptions (as
defined below).
(f) Authorization of this
Subscription Agreement. This Subscription Agreement has been
duly authorized, executed and delivered by each of the Offerors, and assuming
due authorization, execution and delivery of this Subscription Agreement by the
Purchaser, this Subscription Agreement will constitute a valid, legal and
binding agreement of each of the Offerors, enforceable against each of the
Offerors in accordance with its terms, except to the extent that enforceability
may be limited by (a) bankruptcy, insolvency, reorganization, moratorium,
fraudulent conveyance or other similar laws now or hereafter in effect relating
to creditors’ rights generally and (b) general principles of equity (regardless
of whether enforceability is considered in a proceeding at law or in equity)
(collectively, the “Enforceability
Exceptions”).
(g) Authorization of Fiscal
Agreement. The Fiscal Agreement has been duly authorized,
executed and delivered by the Bank, and assuming due authorization, execution
and delivery of the Fiscal Agreement by the Fiscal and Paying Agent, the Fiscal
Agreement will constitute a valid, legal and binding agreement of the Bank,
enforceable against the Bank in accordance with its terms, except to the extent
that enforceability may be limited by the Enforceability
Exceptions.
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(h) Company Financial
Statements. The consolidated financial statements of the Company and its
subsidiaries (including the related notes and supporting schedules) contained in
the SEC Reports comply in all material respects with applicable accounting
requirements and the rules and regulations of the SEC with respect thereto as in
effect at the time of filing (or to the extent corrected by a subsequent
restatement) and present fairly in all material respects the consolidated
financial position of the Company and its consolidated subsidiaries as of the
dates indicated therein and the consolidated results of their operations for the
periods specified therein; and except as stated therein, such financial
statements were prepared in conformity with GAAP applied on a consistent
basis.
(i) No Material Adverse
Effect. Since December 31, 2008, except as specifically disclosed in a
subsequent SEC Report filed prior to the date hereof, (i) no fact, circumstance,
event, change, occurrence, condition or development has occurred that,
individually or in the aggregate, has had or would reasonably be expected to
have a Material Adverse Effect, (ii) the Company has not incurred any material
liabilities (contingent or otherwise) other than (A) trade payables, accrued
expenses and other liabilities incurred in the ordinary course of business
consistent with past practice and (B) liabilities not required to be reflected
in the Company’s consolidated financial statements pursuant to GAAP or required
to be disclosed in filings made with the SEC, or (iii) the Company has not
altered materially its method of accounting or the manner in which it keeps its
accounting books and records.
(j) Proceedings. As of
the date of this Agreement, there is no litigation or similar proceeding or
governmental proceeding pending or, to the Company’s Knowledge, threatened to
which the Company or any of its subsidiaries is a party or of which any property
of the Company or any of its subsidiaries is the subject that the Company’s
management believes, individually or in the aggregate, has had or would
reasonably be expected to have a material adverse effect on the business,
results of operation or financial condition of the Company and its subsidiaries
taken as a whole. Neither the Company nor the Bank is subject to or
party to, or has received any notice or advice that either of them may become
subject to, any material cease and desist order, consent decree, memorandum of
understanding or other regulatory enforcement action, proceeding or order with
or by any bank regulatory authority. Neither the Company nor any of
its subsidiaries, nor any director or officer thereof, is or has been convicted
of, or held liable for, in any judicial or administrative proceeding, any
violation of federal or state securities laws or breach of fiduciary
duty.
(k) Compliance with Laws;
Permits.
(1) The
Company is a bank holding company registered under the Bank Holding Company Act
of 1956 (the “BHC Act”);
the Company and each of its subsidiaries have conducted their businesses in
compliance with all applicable federal, state and foreign laws, orders,
judgments, decrees, rules, regulations and applicable stock exchange
requirements, including all laws and regulations restricting activities of bank
holding companies and banking organizations, except for any noncompliance that,
individually or in the aggregate, has not had and would not be reasonably
expected to have a Material Adverse Effect.
(2) The
Company and each Subsidiary have all permits, licenses, authorizations, orders
and approvals of, and have made all filings, applications and registrations
with, any Governmental Entities that are required in order to carry on their
business as presently conducted, except where the failure to have such permits,
licenses, authorizations, orders and approvals or the failure
to make such filings, applications and registrations, individually or in the
aggregate, have not had and would not reasonably be expected to have a Material
Adverse Effect; and all such permits, licenses, certificates of authority,
orders and approvals are in full force and effect and, to the Knowledge of the
Company, no suspension or cancellation of any of them is threatened, and all
such filings, applications and registrations are current, except where such
absences, suspensions or cancellations, individually or in the aggregate, have
not had or would not reasonably be expected to have a Material Adverse
Effect.
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(l) Reports.
(1) Since
December 31, 2008, the Company has timely filed all SEC Reports and, as of
their respective filing or amendment dates, such reports complied as to form in
all material respects with the requirements of the Exchange Act and the rules
and regulations of the SEC promulgated thereunder and did not contain an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein in light of the
circumstances in which they were made not misleading.
(2) Since
December 31, 2008, the Company and each Subsidiary have filed all reports,
registrations and statements, together with any required amendments thereto,
that it was required to file with the Board of Governors of the Federal Reserve
System (the “Federal
Reserve”), the FDIC, the New York State Banking Department and any other
applicable federal or state securities or banking authorities, except where the
failure to file any such report, registration or statement, individually or in
the aggregate, has not had and would not reasonably be expected to have a
Material Adverse Effect. As of their respective dates, each of the foregoing
reports complied with all applicable rules and regulations promulgated by the
Federal Reserve, the FDIC, the New York State Banking Department and any other
applicable foreign, federal or state securities or banking authorities, as the
case may be, except for any failures that, individually or in the aggregate,
have not had and would not reasonably be expected to have a Material Adverse
Effect.
(m) No General Solicitation or
General Advertising. Neither the Company nor any person acting on its
behalf has engaged or will engage in any form of general solicitation or general
advertising (within the meaning of Regulation D under the Securities Act)
in connection with any offer or sale of the Purchased Securities.
(n) Properties. The
Company and its subsidiaries have good and marketable title in fee simple to all
real property and good and marketable title to all personal property owned by
them, in each case free and clear of all mortgages, pledges, security interests,
claims, restrictions, liens, encumbrances and defects except such as are
described in the SEC Reports or such as do not materially affect the value of
such property and do not interfere with the use made and proposed to be made of
such property by the Company and its subsidiaries; and any real property and
buildings held under lease by the Company and its subsidiaries are held by them
under valid, subsisting and enforceable leases with such exceptions as are not
material and do not interfere with the use made and proposed to be made of such
property and buildings by the Company and its subsidiaries. Except as
would not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect, (i) the Company and each of its subsidiaries owns or
otherwise has the right to use, all intellectual property rights, including all
trademarks, trade names, service marks, domain names, patents, inventions, trade
secrets, know-how, works of authorship and copyrights therein, that are used in
the conduct of their existing business (“Proprietary
Rights”) and (ii) neither the Company nor any of its subsidiaries is
materially infringing, diluting, misappropriating or violating, nor has the
Company
or any of its subsidiaries received any written (or, to the knowledge of the
Company, oral) communications alleging that any of them has materially
infringed, diluted, misappropriated or violated, any of the Proprietary Rights
owned by any other person.
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(o) Non-contravention. The
issue and sale of the Purchased Securities by the Company and the Bank and the
compliance by the Company and the Bank with all of the provisions of this
Subscription Agreement and the consummation of the transactions herein
contemplated do not and will not, whether with or without the giving of notice
or passage of time or both, conflict with or result in a breach or violation of
any of the terms or provisions of, or constitute a default or result in a
Repayment Event (as defined below) under, any indenture, mortgage, deed of
trust, loan agreement or other agreement or instrument to which the Company or
any of its subsidiaries is a party or by which the Company or any of its
subsidiaries is bound or to which any of the property or assets of the Company
or any of its subsidiaries is subject, nor will such action result in any
violation of the provisions of the certificate of incorporation or
organizational certificate (as applicable) or bylaws of the Company or the Bank
or any statute or any order, rule or regulation of any federal, state, local or
foreign court or governmental agency (each a “Governmental Entity”) or body
having jurisdiction over the Company or any of its subsidiaries or any of their
properties, except for such conflicts, breaches, violations, defaults or
Repayment Events that would not result in a Material Adverse
Effect. As used herein, a “Repayment Event” means any event or
condition that gives the holder of any note, debenture or other evidence of
indebtedness (or any person acting on such holder’s behalf) the right to require
the repurchase, redemption or repayment of all or a portion of such indebtedness
by the Company or any subsidiary.
(p) Tax
Matters. The Bank and Company have timely filed (taking into
account any extensions of time within which to file) all federal, state and
local tax returns required to be filed by either of them on or prior to the date
hereof (all such returns being accurate and correct in all material respects)
and have duly paid or made provisions for the payment of all federal, state and
local taxes which have been incurred by or are due or claimed to be due from the
Bank and the Company by any taxing authority on or prior to the date hereof
other than taxes or other charges which (i) are not delinquent, (ii) are being
contested in good faith, or (iii) have not yet been fully
determined. As of the date of this Subscription Agreement, there is
no audit examination, deficiency assessment, tax investigation or refund
litigation with respect to any taxes of the Bank and the Company. The
Bank and the Company have not received written notice from any authority in a
jurisdiction where the Bank and the Company do not file tax returns that the
Bank and the Company are subject to taxation in that jurisdiction.
(q) Brokers. Except
for a placement agent fee payable to Sandler ▇’▇▇▇▇▇ & Partners, L.P., there
are no contracts, agreements or understandings between the Company and any
person that would give rise to a valid claim against the Company or the Bank for
a brokerage commission, finder’s fee or other like payment as a result of the
transactions contemplated by this Subscription Agreement.
(r) Internal Accounting
Controls. Except as disclosed in the SEC Reports, the Company
maintains a system of internal accounting controls sufficient to provide
reasonable assurance that (i) transactions are executed in accordance with
management's general or specific authorizations, (ii) transactions are recorded
as necessary to permit preparation of financial statements in conformity with
GAAP and to maintain asset and liability accountability, (iii) access to assets
or incurrence of liabilities is permitted only in accordance with management's
general or specific authorization, and (iv) the
recorded accountability for assets and liabilities is compared with the existing
assets and liabilities at reasonable intervals and appropriate action is taken
with respect to any differences.
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(s) ▇▇▇▇▇▇▇▇-▇▇▇▇▇; Disclosure
Controls. The Company is in compliance in all material respects with
all of the provisions of the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act of 2002 which are
applicable to it as of the date hereof. The Company has established disclosure
controls and procedures (as such term is defined in Rule 13a-15(e) and 15d-15(e)
under the Exchange Act) for the Company and designed such disclosure controls
and procedures to ensure that information required to be disclosed by the
Company in the reports it files or submits under the Exchange Act is recorded,
processed, summarized and reported, within the time periods specified in the
SEC’s rules and forms. The Company’s certifying officers have evaluated the
effectiveness of the Company’s disclosure controls and procedures as of the end
of the period covered by the Company’s most recently filed periodic report under
the Exchange Act (such date, the “Evaluation Date”). The Company presented in
its most recently filed periodic report under the Exchange Act the conclusions
of the certifying officers about the effectiveness of the disclosure controls
and procedures based on their evaluations as of the Evaluation Date. Since the
Evaluation Date, there have been no changes in the Company’s internal control
over financial reporting (as such term is defined in the Exchange Act) that has
materially affected, or is reasonably likely to materially affect, the Company’s
internal control over financial reporting.
(t) Listing
and Maintenance Requirements. The Company’s Common Stock is
registered pursuant to Section 12(b) or 12(g) of the Exchange Act, and the
Company has taken no action designed to terminate the registration of the Common
Stock under the Exchange Act nor has the Company received any notification that
the SEC is contemplating terminating such registration. The Company
has not, in the 12 months preceding the date hereof, received written notice
from the trading market on which the Common Stock is listed or quoted to the
effect that the Company is not in compliance with the listing or maintenance
requirements of such trading market. The Company is, and has no
reason to believe that it will not in the foreseeable future continue
to be, in compliance with all such listing and maintenance
requirements.
2.3 Representations And
Warranties Of The Purchaser. The Purchaser hereby represents and warrants
to the Offerors that as of the date hereof:
(a) The
Purchaser understands and acknowledges that the Notes and Warrants have not been
registered under the Securities Act of 1933, as amended (the “Securities
Act”), or any other applicable securities law, are being offered for sale
by the Offerors in one or more transactions not requiring registration under the
Securities Act and may not be offered, sold, pledged or otherwise transferred by
the Purchaser except in compliance with (i) the transfer restrictions set forth
in Article IV of this Subscription Agreement, and, in the case of the
Warrants, (ii) the registration requirements of the Securities Act or
any other applicable securities laws, pursuant to an exemption therefrom or in a
transaction not subject thereto.
(b) The
Purchaser represents and warrants that it is purchasing the Notes and Warrants
for its own account, for investment, and not with a view to, or for offer or
sale in connection with, any distribution thereof in violation of the Securities
Act or other applicable securities laws, subject to any requirement of law that
the disposition of its property be at all times within its control and subject
to its ability to resell such Notes and Warrants pursuant to an exemption from
registration available under the Securities Act or any other applicable
securities law.
(c) The
Purchaser represents and warrants that Sandler ▇’▇▇▇▇▇ & Partners, L.P.
(“Sandler
▇’▇▇▇▇▇” or the “Placement
Agent”) is not acting as a fiduciary or financial or investment
adviser
for the Purchaser. The Purchaser represents and warrants that the
Offerors are not acting as a fiduciary or financial or investment adviser for
the Purchaser.
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(d) The
Purchaser represents and warrants that it is not relying (for purposes of making
any investment decision or otherwise) upon any advice, counsel or
representations (whether written or oral) of the Offerors or of the Placement
Agent or their respective advisors and agents.
(e) The
Purchaser acknowledges that it has conducted a review and analysis of the
business, assets, condition, operations and prospects of the Offerors and their
subsidiaries, together with the representations and warranties of the Offerors
set forth in the Transaction Documents, that the Purchaser considers sufficient
for purposes of the Purchase. The Purchaser represents and warrants
that (a) it has consulted with its own legal, regulatory, tax, business,
investment, financial and accounting advisers in connection herewith to the
extent it has deemed necessary, (b) it has had a reasonable opportunity to
ask questions of and receive answers from officers and representatives of the
Bank and the Company concerning the Bank’s and the Company’s financial condition
and results of operations and the purchase of the Notes and Warrants, and any
such questions have been answered to its satisfaction, (c) it has had the
opportunity to review all publicly available records and filings concerning the
Offerors and it has carefully reviewed such records and filings that it
considers relevant to making an investment decision, and (d) it has made
its own investment decisions based upon its own judgment, due diligence and
advice from such advisers as it has deemed necessary.
(f) The
Purchaser represents and warrants that it is an institutional “accredited
investor” within the meaning of Rule 501(a)(1), (2), (3) or (7) under Regulation
D promulgated under the Securities Act, and that:
(1) the
information contained in the Purchaser’s Confidential Purchaser Questionnaire is
complete, accurate, and true in all respects.
(2) the
Purchaser has such knowledge and experience in financial and business matters
that it is capable of evaluating the merits and risks of an investment in the
Purchased Securities.
(3) the
Purchaser understands that no securities administrator of any state has made any
finding or determination relating to the fairness of this investment and that no
securities administrator of any state has recommended or endorsed, or will
recommend or endorse, the offering of the securities purchased
hereby.
(4) the
Purchaser acknowledges that no general solicitation or general advertising
(including communications published in any newspaper, magazine or other
broadcast) has been received by it and that no public solicitation or
advertisement with respect to the offering of the securities purchased hereby
has been made to it.
(5) no
person has made any direct or indirect representation or warranty of any kind to
the Purchaser with respect to the economic return which may accrue to the
Purchaser.
(6) the
Purchaser is not a participant-directed employee plan, such as a 401(k) plan, or
any other type of plan referred to in paragraph (a)(1)(i)(D) or
(a)(1)(i)(E) of Rule 144A promulgated under the Securities Act, or a trust
fund referred to in paragraph (a)(1)(i)(F) of Rule 144A
that holds the assets of such a plan, unless investment decisions with respect
to the plan are made solely by the fiduciary, trustee or sponsor of such
plan.
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(g) The
Purchaser represents and warrants that on each day from the date on which it
acquires any Purchased Securities through and including the date on which it
disposes of all such interests, either (i) it is not (a) an “employee
benefit plan” (as defined in Section 3(3) of the United States Employee
Retirement Income Security Act of 1974, as amended (“ERISA”))
which is subject to the provisions of Part 4 of Subtitle B of
Title I of ERISA, or any entity whose underlying assets include the assets
of any such plan (an “ERISA
Plan”), (b) any other “plan” (as defined in Section 4975(e)(1)
of the United States Internal Revenue Code of 1986, as amended (the “Code”))
which is subject to the provisions of Section 4975 of the Code or any
entity whose underlying assets include the assets of any such plan (a “Plan”),
(c) an entity whose underlying assets include the assets of any such ERISA
Plan or other Plan by reason of Department of Labor regulation
section 2510.3-101 or otherwise, or (d) a governmental or church plan
that is subject to any federal, state or local law which is substantially
similar to the provisions of Section 406 of ERISA or Section 4975 of
the Code (a “Similar
Law”); or (ii) the purchase, holding and disposition of any such
Notes by it will satisfy the requirements for exemptive relief under Prohibited
Transaction Class Exemption (“PTCE”)
▇▇-▇▇, ▇▇▇▇ ▇▇-▇, ▇▇▇▇ 91-38, ▇▇▇▇ ▇▇-▇▇, ▇▇▇▇ 96-23 or a similar exemption, or,
in the case of a plan subject to a Similar Law, will not result in a non-exempt
violation of such Similar Law.
(h) The
Purchaser represents and warrants that the execution, delivery, and performance
by the Purchaser of this Subscription Agreement are within the powers of the
Purchaser, have been duly authorized by all necessary action on the part of the
Purchaser, and will not constitute or result in a breach or default under, or
conflict with, any order, ruling or regulation of any court or other tribunal or
of any governmental commission or agency, or any agreement or other undertaking,
to which the Purchaser is a party or by which the Purchaser is bound; and, if
the Purchaser is not an individual, will not violate any provision of the
charter documents, bylaws, indenture of trust, or partnership agreement, as
applicable, of the Purchaser. The signatures on the Subscription Agreement are
genuine, and the signatory, if the Purchaser is an individual, has legal
competence and capacity to execute the same, or, if the Purchaser is not an
individual, the signatory has been duly authorized to execute the same; and the
Subscription Agreement constitutes the legal, valid and binding obligations of
the Purchaser, enforceable in accordance with its terms. To the
Purchaser’s Knowledge no notice to, filing with, exemption or review by, or
authorization, consent or approval of, any Governmental Entity is required to be
made or obtained by the Purchaser in connection with the consummation by the
Purchaser of the Purchase and the other transactions contemplated by the
Transaction Documents.
(i) The
Purchaser certifies that, after giving effect to the Purchase, as of the date
hereof, the Purchaser and all of its affiliates on an aggregate basis will not,
assuming the immediate exercise of the Warrants beneficially own, control or
have the power to vote 10% or more of the outstanding Common
Shares. The Purchaser does not have any agreement, arrangement or
understanding with any person (other than the Company and any Permitted
Transferee) to acquire, dispose of or vote any securities of the
Company.
(j) The
Purchaser represents and warrants that it has been given access to information
regarding the Offerors (including the opportunity to meet with officers of the
Offerors) and have utilized such access to its satisfaction for the purpose of
obtaining such information concerning the Offerors
and the Purchased Securities as the Purchaser has deemed necessary to make an
investment decision.
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ARTICLE
III
SURVIVAL
3.1 All
representations, warranties, and covenants contained in this Subscription
Agreement shall survive the delivery of the Purchased Securities to the
Purchaser.
ARTICLE
IV
TRANSFER
RESTRICTIONS
4.1 The
Purchaser shall not, directly or indirectly, transfer, sell, assign, pledge,
convey, hypothecate or otherwise encumber or dispose of, or engage in a Hedging
Transaction (as hereinafter defined) with respect to (collectively, “Transfer”),
any of the Purchased Securities. For purposes of this Agreement, “Hedging
Transaction” means any short sale (whether or not against the box) or any
purchase, sale or grant of any right (including any put or call option) with
respect to any security (other than a broad-based market basket or index) that
includes, relates to or derives any significant part of its value from the
Purchased Securities; provided, however, that the foregoing prohibition on any
Hedging Transaction shall not apply to transactions in the Company’s Common
Shares after the first anniversary of the date hereof.
4.2 Notwithstanding
Section 4.1, the Purchaser, and any other holder of the Purchased
Securities pursuant to a Transfer permitted hereunder (a “Permitted
Transferee”), shall be permitted to Transfer the Note or the Warrant only
to persons who are institutional “accredited investors” as defined in Rule
501(a)(1), (2), (3) or (7) (“Institutional
Accredited Investors”) of Regulation D promulgated by the Securities
Exchange Commission under the Securities Act. Any such Transfer must
be made in compliance with the registration requirements of the Securities Act
or any other applicable securities laws, pursuant to an exemption therefrom or
in a transaction not subject thereto. Any such Transfer shall be
subject to the requirement that the Purchaser provide evidence to the reasonable
satisfaction of the Offerors that the proposed transferee is an Institutional
Accredited Investor. A holder of Warrants must transfer such Warrants
only in whole, and not in part.
4.3 The
Purchaser understands and agrees that legends to the following effect will be
placed on any certificate evidencing Notes issued to the Purchaser:
THIS
OBLIGATION IS NOT A DEPOSIT AND IS NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION (THE “FDIC”) OR ANY OTHER GOVERNMENT AGENCY OR FUND.
THIS
OBLIGATION IS SUBORDINATED AND JUNIOR IN RIGHT OF PAYMENT TO THE OBLIGATIONS OF
BANK OF SMITHTOWN (THE “ISSUER”) TO ITS DEPOSITORS AND TO THE ISSUER’S OTHER
OBLIGATIONS TO ITS GENERAL AND SECURED CREDITORS, IS UNSECURED AND IS INELIGIBLE
AS COLLATERAL FOR A LOAN BY THE ISSUER.
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THE
ISSUER MAY NOT RETIRE ANY PART OF THIS OBLIGATION WITHOUT THE PRIOR WRITTEN
CONSENT OF THE FDIC AND THE SUPERINTENDENT OF THE NEW YORK BANKING
DEPARTMENT.
ANY
INSURED DEPOSITORY INSTITUTION WHICH SHALL BE A NOTEHOLDER OR WHICH OTHERWISE
SHALL HAVE ANY BENEFICIAL INTEREST IN THIS NOTE SHALL BY ITS ACCEPTANCE HEREOF
BE DEEMED TO HAVE WAIVED ANY RIGHT OF OFFSET WITH RESPECT TO THE INDEBTEDNESS
EVIDENCED HEREBY.
THE NOTES
WILL BE ISSUED AND MAY BE TRANSFERRED ONLY IN MINIMUM DENOMINATIONS OF $250,000
AND MULTIPLES OF $1,000 IN EXCESS THEREOF. ANY ATTEMPTED TRANSFER OF NOTES IN A
DENOMINATION OF LESS THAN $250,000 SHALL BE DEEMED TO BE VOID AND OF NO LEGAL
EFFECT WHATSOEVER. ANY SUCH PURPORTED TRANSFEREE SHALL BE DEEMED NOT TO BE THE
HOLDER OF SUCH NOTES FOR ANY PURPOSE, INCLUDING, BUT NOT LIMITED TO, THE RECEIPT
OF PAYMENTS ON SUCH NOTES, AND SUCH PURPORTED TRANSFEREE SHALL BE DEEMED TO HAVE
NO INTEREST WHATSOEVER IN SUCH NOTES.
THE NOTES
REPRESENTED BY THIS INSTRUMENT MAY BE SOLD ONLY IN COMPLIANCE WITH APPLICABLE
FEDERAL AND STATE SECURITIES LAWS. THIS INSTRUMENT IS ISSUED SUBJECT TO THE
RESTRICTIONS ON TRANSFER, EXERCISE AND OTHER PROVISIONS OF A SUBSCRIPTION
AGREEMENT DATED JULY 27, 2009 BETWEEN THE ISSUER OF THESE NOTES AND THE INVESTOR
REFERRED TO THEREIN, AND A FISCAL AND PAYING AGENCY AGREEMENT BETWEEN THE ISSUER
AND WILMINGTON TRUST COMPANY DATED JULY 27, 2009, COPIES OF WHICH ARE ON FILE
WITH THE ISSUER. THE NOTES REPRESENTED BY THIS INSTRUMENT MAY NOT BE TRANSFERRED
OR EXERCISED EXCEPT IN COMPLIANCE WITH SAID AGREEMENTS. ANY SALE OR OTHER
TRANSFER NOT IN COMPLIANCE WITH SAID AGREEMENTS WILL BE VOID.
CERTAIN ERISA
CONSIDERATIONS:
THE
HOLDER OF THIS NOTE, OR ANY INTEREST HEREIN, BY ITS ACCEPTANCE HEREOF OR THEREOF
ALSO AGREES, REPRESENTS AND WARRANTS THAT IT IS NOT AN EMPLOYEE BENEFIT PLAN,
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 THIS NOTE OR ANY INTEREST HEREIN, UNLESS SUCH
PURCHASER OR HOLDER IS ELIGIBLE FOR THE 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 NOTE, OR ANY INTEREST HEREIN, ARE
NOT PROHIBITED BY SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE WITH RESPECT
TO SUCH PURCHASE AND HOLDING. ANY PURCHASER OR HOLDER OF THIS NOTE OR
ANY INTEREST HEREIN WILL BE DEEMED TO HAVE REPRESENTED BY ITS PURCHASE AND
HOLDING THEREOF THAT EITHER (i) IT IS NOT AN EMPLOYEE BENEFIT PLAN OR OTHER PLAN
TO WHICH TITLE I OF ERISA OR SECTION 4975 OF THE CODE IS APPLICABLE, A TRUSTEE
OR OTHER PERSON ACTING ON BEHALF OF ANY SUCH EMPLOYEE BENEFIT PLAN OR PLAN, OR
ANY OTHER PERSON OR ENTITY USING THE “PLAN ASSETS” OF ANY SUCH EMPLOYEE BENEFIT
PLAN OR PLAN TO FINANCE SUCH PURCHASE, OR (ii) SUCH PURCHASE OR HOLDING WILL NOT
RESULT IN A PROHIBITED TRANSACTION UNDER SECTION 406 OF ERISA OR SECTION 4975 OF
THE CODE FOR WHICH FULL EXEMPTIVE RELIEF IS NOT AVAILABLE UNDER APPLICABLE
STATUTORY OR ADMINISTRATIVE EXEMPTION.
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ANY FIDUCIARY OF ANY PLAN
WHO IS CONSIDERING THE ACQUISITION OF ANY OF THESE SUBORDINATED NOTES SHOULD
CONSULT WITH HIS OR HER LEGAL COUNSEL PRIOR TO ACQUIRING SUCH SUBORDINATED
NOTES.
4.4 The
Purchaser understands and agrees that a legend to the following effect will be
placed on any certificate or other instrument evidencing Warrants issued to the
Purchaser:
THE
SECURITIES REPRESENTED BY THIS INSTRUMENT HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND MAY
NOT BE TRANSFERRED, SOLD OR OTHERWISE DISPOSED OF EXCEPT WHILE A REGISTRATION
STATEMENT RELATING THERETO IS IN EFFECT UNDER SUCH ACT AND APPLICABLE STATE
SECURITIES LAWS OR PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT OR
SUCH LAWS. THIS INSTRUMENT IS ISSUED SUBJECT TO THE RESTRICTIONS ON TRANSFER,
EXERCISE AND OTHER PROVISIONS OF A SUBSCRIPTION AGREEMENT DATED JULY 27, 2009
BETWEEN THE ISSUER OF THESE SECURITIES AND THE PURCHASER REFERRED TO THEREIN, A
COPY OF WHICH IS ON FILE WITH THE ISSUER. THE SECURITIES REPRESENTED BY THIS
INSTRUMENT MAY NOT BE TRANSFERRED OR EXERCISED EXCEPT IN COMPLIANCE WITH SAID
AGREEMENT. ANY SALE OR OTHER TRANSFER NOT IN COMPLIANCE WITH SAID AGREEMENT WILL
BE VOID AB INITIO.
4.5 The
Offerors may impose stop-transfer instructions with regard to the Notes and
Warrants subject to compliance by the Purchaser with the restrictions on
transfer set forth in foregoing sections of this Article IV.
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ARTICLE
V
REGISTRATION
RIGHTS
5.1 Subject
to the terms and conditions of this Subscription Agreement, the Company
covenants and agrees (A) to use commercially reasonable efforts to prepare
and file with the SEC a Shelf Registration Statement (as hereinafter defined)
including a “base” prospectus covering the resale of all Registrable Securities
(as hereinafter defined) no later than two months following the date hereof (the
“Filing
Date”),
(B) to use its best efforts to cause such Shelf Registration Statement to
become effective no later than fivemonths following the date hereof (the “Effectiveness
Deadline”), and
(C) to use its best efforts to keep such Shelf Registration Statement
continuously effective and in compliance with the Securities Act and usable for
resale of such Registrable Securities (including by filing post-effective
amendments to such Shelf Registration Statement (or a new Shelf Registration
Statement if the initial Shelf Registration Statement expires)) for a period
from the date of its initial effectiveness until the earlier of (x) 90 days
following the seventh anniversary of the date hereof and (y) such time as
there are no Registrable Securities remaining. For the purpose of
this Article V only, the term “Purchaser” shall include any person to whom the
Warrants have been validly transferred under the terms of this Subscription
Agreement and such Warrants.
5.1.1 Any
registration pursuant to this Section 5.1 shall be effected by means of a
shelf registration under the Securities Act (a “Shelf
Registration Statement”), and any such registration
shall be effected in accordance with the methods of distribution set forth in
the Shelf Registration Statement and Rule 415 under the Securities
Act.
5.1.2 The
Company shall not be required to effect a registration pursuant to this
Section 5.1: (A) with respect to securities that are not Registrable
Securities; (B) with respect to the issuance of the Registrable Securities
pursuant to the exercise of the Warrant; or (C) if the Company has notified the
Purchaser that in the good faith judgment of the Chief Executive Officer of the
Company, it would be materially detrimental to the Company or its
securityholders for such registration to be effected at such time until the
Chief Executive Officer of the Company shall have withdrawn such determination;
provided that the Company may not exercise its right pursuant to this clause
(C) for a continuous period of more than 45 days or for more than 90 days
in any calendar year.
5.2 All
Registration Expenses incurred in connection with any registration,
qualification or compliance under Section 5.1 shall be borne by the
Company. All Selling Expenses incurred in connection with any registrations
hereunder, shall be borne by the Purchaser.
5.3 Whenever
required to facilitate the resale of Registrable Securities from an effective
Shelf Registration Statement, the Company shall, as expeditiously as reasonably
practicable, use commercially reasonable efforts to:
5.3.1 (A) Prepare
and file with the SEC a prospectus supplement with respect to a proposed
offering of Registrable Securities pursuant to an effective Shelf Registration
Statement and (B) subject to this Section 5.3, keep such prospectus
supplement current for the period reasonably required to complete the
distribution of such Registrable Securities.
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5.3.2 Prepare
and file with the SEC such amendments and supplements to the applicable Shelf
Registration Statement and the prospectus or prospectus supplement used in
connection with such Shelf Registration Statement as may be necessary to comply
with the provisions of the Securities Act with respect to the disposition of all
such Registrable Securities.
5.3.3 Furnish
to the Purchaser and any underwriters such number of copies of the applicable
Shelf Registration Statement and each such amendment or supplement thereto
(including in each case all exhibits) and of a prospectus, including if
required, any preliminary prospectus, in conformity with the requirements of the
Securities Act, and such other documents as they may reasonably request in order
to facilitate the disposition of Registrable Securities to be resold by
them.
5.3.4 Register
and qualify the securities covered by such Shelf Registration Statement under
such other securities or Blue Sky laws of such jurisdictions in the United
States as shall be reasonably requested by the Purchaser or any managing
underwriter, to keep such registration or qualification in effect for so long as
such Shelf Registration Statement remains in effect, and to take any other
action which may be reasonably necessary to enable such seller to consummate the
disposition in such jurisdictions of the securities owned by the Purchaser;
provided that the
Company shall not be required in connection therewith or as a condition thereto
to qualify to do business or to file a general consent to service of process in
any such states or jurisdictions.
5.3.5 Notify
the Purchaser at any time when a prospectus relating to any Registrable
Securities is required to be delivered under the Securities Act of the happening
of any event as a result of which the applicable prospectus, as then in effect,
includes an untrue statement of a material fact or omits to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading in light of the circumstances then existing.
5.3.6 Give
prompt written notice to the Purchaser:
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(A)
|
when
any Shelf Registration Statement filed pursuant to Section 5.1 or any
amendment thereto has been filed with the SEC and when such Shelf
Registration Statement or any post-effective amendment thereto has become
effective;
|
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(B)
|
of
any request by the SEC for amendments or supplements to any Shelf
Registration Statement or the prospectus included therein or for
additional information;
|
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(C)
|
of
the issuance by the SEC of any stop order suspending the effectiveness of
any Shelf Registration Statement or the initiation of any proceedings for
that purpose;
|
|
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(D)
|
of
the receipt by the Company or its legal counsel of any notification with
respect to the suspension of the qualification of the Common Shares for
sale in any jurisdiction or the initiation or threatening of any
proceeding for such purpose; or
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(E)
|
of
the happening of any event that requires the Company to make changes in
any effective registration statement or the prospectus related to such
registration statement in order to make the statements
therein not misleading (which notice shall be accompanied by an
instruction to suspend the use of the prospectus until the requisite
changes have been made).
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5.3.7 Use
its commercially reasonable efforts to prevent the issuance or obtain the
withdrawal of any order suspending the effectiveness of any Shelf Registration
Statement referred to in Section 5.3.6 (C) at the earliest practicable
time.
5.3.8 Except
under the circumstances described in clause (A), (B) or (C) of
Section 5.1.2, upon the occurrence of any event contemplated by
Section 5.3.5 or 5.3.6 (E), prepare and furnish to the Purchaser, as soon
as reasonably practicable, a reasonable number of copies of a prospectus
supplemented or amended so that such prospectus shall conform in all material
respects to the applicable requirements of the Securities Act and the rules and
regulations of the SEC thereunder and shall not include an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading in light of the
circumstances then existing.
5.3.9 Procure
the cooperation of the Company’s transfer agent in settling any offering or sale
of Registrable Securities.
5.3.10 Cause
all such Registrable Securities to be listed on each securities exchange, if
any, on which Common Shares of the Company are then listed.
5.3.11 Timely
provide to its securityholders earning statements satisfying the provisions of
Section 11(a) of the Securities Act (which the Company may do by complying
with Rule 158 under the Securities Act).
5.4 Upon
receipt of written notice from the Company that a registration statement,
prospectus or prospectus supplement contains or may contain an untrue statement
of a material fact or omits to state a material fact required to be stated
therein or necessary to make the statements therein not misleading or that
circumstances exist that make use of such registration statement, prospectus or
prospectus supplement inadvisable, the Purchaser shall discontinue disposition
of Registrable Securities until the Purchaser has received copies of a
supplemented or amended prospectus or prospectus supplement, or until the
Purchaser is advised in writing by the Company that the use of the prospectus
and, if applicable, prospectus supplement may be resumed, and, if so directed by
the Company, the Purchaser shall deliver to the Company (at the Company’s
expense) all copies, other than permanent file copies then in the Purchaser’s
possession, of the prospectus and, if applicable, prospectus supplement covering
such Registrable Securities current at the time of receipt of such
notice.
5.5 The
Purchaser’s registration rights as to any securities held by the Purchaser (and
its Affiliates, partners, members and former members) shall not be available
unless such securities are Registrable Securities.
5.6 The
Purchaser shall not use any free writing prospectus (as defined in Rule 405
under the Securities Act) in connection with the sale of Registrable Securities
without the prior written consent of the Company.
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5.7 It
shall be a condition precedent to the obligations of the Company to take any
action pursuant to Section 5.1 that the Purchaser, and its underwriters, if
any, shall furnish to the Company a reasonable time before the Company’s
proposed filing date for the Shelf Registration Statement and any required
prospectus supplements such information regarding themselves, the Registrable
Securities held by them and the intended method of disposition of such
securities as shall be required to effect the registered offering of their
Registrable Securities.
5.8 Indemnification Related to
Registration.
5.8.1 If
the Purchaser has any Registrable Securities included in a Shelf Registration
Statement, the Company shall indemnify the Purchaser, each person who
participates as a sales or placement agent or as an underwriter and each person,
if any, that controls the Purchaser (including its directors and officers),
sales or placement agent or underwriter within the meaning of the Securities Act
(each, an “Investor
Indemnitee”), against any losses, claims, damages or liabilities, joint
or several, to which such Investor Indemnitee may become subject under the
Securities Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon an
untrue statement or alleged untrue statement of a material fact contained in
such Shelf Registration Statement or any preliminary, final or summary
prospectus contained therein or furnished by the Company to any such Investor
Indemnitee, or any amendment or supplement thereto, or arise out of or are based
upon the omission or alleged omission to state therein a material fact necessary
to make the statements therein not misleading, and will reimburse such Investor
Indemnitee for any legal or other expenses reasonably incurred by them in
connection with investigating or defending any such loss, claim, damage,
liability or action; provided that the
Company shall not be liable in any such case to the extent that any such loss,
claim, damage or liability arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission made in any of such
documents in reliance upon and in conformity with written information furnished
to the Company by such Investor Indemnitee expressly for use therein; and provided, further, that the
foregoing indemnity agreement contained in this Section 5.8.1 with respect
to such Shelf Registration Statement or any preliminary, final or summary
prospectus contained therein or furnished by the Company, or any amendment or
supplement thereto, shall not inure to the benefit of any Investor Indemnitee
from whom the person asserting any such losses, claims, damages or liabilities
purchased Registrable Securities, where (A) prior to the written confirmation of
the sale of Registrable Securities to such person (the “Applicable
Time”), the Company shall have notified such Investor Indemnitee that
such Shelf Registration Statement or prospectus contains an untrue statement of
a material fact or omits to state therein a material fact necessary in order to
make the statements therein not misleading, (B) such untrue statement or
omission of a material fact was corrected in a further amendment or supplement
to such Shelf Registration Statement or prospectus and such Shelf Registration
Statement or prospectus was provided to such Investor Indemnitee prior to the
Applicable Time, (C) such corrected Shelf Registration Statement or prospectus
(excluding any document incorporated by reference therein) was not conveyed by
the Investor Indemnitee to such person at or prior to the contract for sale of
the Registrable Securities to such person and (D) such loss, claim, damage or
liability would not have occurred had such corrected Shelf Registration
Statement or prospectus, or any amendment or supplement thereto (excluding any
document incorporated by reference therein) been conveyed to such person as
provided for in clause (C) above.
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5.8.2 The
Purchaser agrees to, and the Company may require, as a condition to including
any Registrable Securities in any Shelf Registration Statement filed pursuant to
Section 5.1 or to entering into any underwriting agreement with respect
thereto, that the Company shall have received
an undertaking reasonably satisfactory to it from each underwriter named in any
such underwriting agreement, severally and not jointly, to (A) indemnify
and hold harmless the Company, each of its directors, each of its officers who
have signed any Shelf Registration Statement and each person, if any, who
controls the Company within the meaning of the Securities Act and all other
holders of Registrable Securities (each, a “Company
Indemnitee”), against any and all losses, claims, damages or liabilities
to which any Company Indemnitee may become subject, under the Securities Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon an untrue statement or alleged
untrue statement of a material fact contained in such Shelf Registration
Statement, or any preliminary, final or summary prospectus contained therein or
furnished by the Company to the Purchaser or its agent or underwriter, or any
amendment or supplement thereto, or arise out of or are based upon the omission
or alleged omission to state therein a material fact necessary to make the
statements therein not misleading, in each case to the extent, but only to the
extent, that such untrue statement or alleged untrue statement or omission or
alleged omission was made in reliance upon and in conformity with written
information furnished to the Company by the Purchaser, or such agent or
underwriter expressly for use therein, and (B) reimburse such Company
Indemnitee for any legal or other expenses reasonably incurred by such Company
Indemnitee in connection with investigating or defending any such loss, claim,
damage, liability or action. In no event shall the liability of the
Purchaser be greater in amount than the dollar amount of the net proceeds
received by the Purchaser upon the sale of the Registrable Securities giving
rise to such indemnification obligation.
5.8.3. If
the indemnification provided for in Section 5.8.1 or 5.8.2 is unavailable
to an Investor Indemnitee or Company Indemnitee (each, an “Indemnitee”)
with respect to any losses, claims, damages, actions, liabilities, costs or
expenses referred to therein or is insufficient to hold such Indemnitee harmless
as contemplated therein, then each indemnifying party shall contribute to the
amount paid or payable by such Indemnitee as a result of such losses, claims,
damages, actions, liabilities, costs or expenses (or actions in respect thereof)
in such proportion as is appropriate to reflect the relative fault of the
indemnifying party and the Indemnitee in connection with the statements or
omissions that resulted in such losses, claims, damages, actions, liabilities,
costs or expenses (or actions in respect thereof), as well as any other relevant
equitable considerations. The relative fault of such indemnifying party and
Indemnitee shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or omission or alleged
omission to state a material fact relates to information supplied by such
indemnifying party or by such Indemnitee, and the parties’ relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission. The parties hereto agree that it would not be just and
equitable if contributions pursuant to this Section 5.8.3 were determined
by pro rata allocation
(even if the indemnifying party or any agents or underwriters or all of them
were treated as one entity for such purpose) or by any other method of
allocation that does not take account of the equitable considerations referred
to in this Section 5.8.3 The amount paid or payable by an indemnified party
as a result of the losses, claims, damages, actions, liabilities, costs or
expenses (or actions in respect thereof) referred to above shall be deemed to
include any legal or other fees or expenses reasonably incurred by such
Indemnitee in connection with investigating or defending any such action or
claim. Notwithstanding the provisions of this Section 5.8.3, neither the
Purchaser nor the Company shall be required to contribute any amount in excess
of the amount by which the dollar amount of the proceeds received by it from the
sale of any Registrable Securities (after deducting any fees, discounts and
commissions applicable thereto) exceeds the amount of any damages which it has
otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission, and no underwriter shall be required
to contribute any amount in excess of the amount by which the total price at
which the Registrable Securities underwritten and distributed by it exceeds
the amount of any damages which such underwriter has otherwise been required to
pay by reason of such untrue or alleged untrue statement or omission or alleged
omission. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to contribution
from any person who was not guilty of such fraudulent misrepresentation. The
Purchaser’s, the Company’s and any underwriters’ obligations in this
Section 5.8.3 to contribute shall be several in proportion to the principal
amount of Registrable Securities registered or underwritten, as the case may be,
by or on behalf of them and not joint.
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5.9 Rule 144
Reporting. With a view to making available to the Purchaser or a
Permitted Transferee the benefits of certain rules and regulations of the SEC
which may permit the sale of the Registrable Securities to the public without
registration, the Company agrees to use commercially reasonable efforts
to:
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(1)
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remain
in compliance with the reporting obligations under the Exchange Act;
and
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(2)
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so
long as the Purchaser or such Permitted Transferee owns any Registrable
Securities, furnish to the Purchaser or such Permitted Transferee promptly
upon request a written statement by the Company as to its compliance with
the reporting requirements under Exchange
Act.
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5.10 As
used in this Article V, the following terms shall have the following respective
meanings:
“Register,” “registered” and “registration” shall refer to
a registration effected by preparing and (1) filing a registration
statement in compliance with the Securities Act and applicable rules and
regulations thereunder, and the declaration or ordering of effectiveness of such
registration statement, or (2) filing a prospectus and/or prospectus
supplement in respect of an appropriate effective registration statement on
Form S-3.
“Registration Expenses” means
all expenses incurred by the Company in effecting any registration pursuant to
this Agreement (whether or not any registration or prospectus becomes effective
or final) or otherwise complying with its obligations under this Article V,
including all registration, filing and listing fees, printing expenses, fees and
disbursements of counsel for the Company, blue sky fees and expenses, expenses
incurred in connection with any “road show” and expenses of the Company’s
independent accountants (including a commercially reasonable comfort letter to
the extent the Registrable Securities are sold in an underwritten public
offering), but shall not include Selling Expenses and the compensation of
regular employees of the Company, which shall be paid in any event by the
Company.
“Selling Expenses” means all
discounts, selling commissions, stock transfer taxes and fees and disbursements
of counsel for the Purchaser applicable to the sale of Registrable
Securities.
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5.11 At
any time, the Purchaser may elect to forfeit its rights set forth in this
Article V from that date forward; provided that no such
forfeiture shall terminate the Purchaser’s rights or obligations under
Section 5.6 or Section 5.7.
5.12 The rights of the Purchaser to
registration of Registrable Securities pursuant to this Article V may be
assigned by the Purchaser to any person to whom the Warrants have been validly
transferred under the terms of such Warrants.
ARTICLE
VII
MISCELLANEOUS
6.1 Any
notice or other communication given hereunder shall be deemed sufficient if in
writing and sent by registered or certified mail, return receipt requested,
international courier or delivered by hand against written receipt therefor, or
by confirmed facsimile transmission, to the following addresses, or such other
address as may be furnished to the other parties as herein
provided:
To the
Offeror :
Bank of
Smithtown
▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇,
▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention:
▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Chief
Financial Officer
Fax: (▇▇▇)
▇▇▇-▇▇▇▇
To the
Purchaser:
At the
address set forth on the signature page hereto.
Unless
otherwise expressly provided herein, notices shall be deemed to have been given
on the date of mailing, except notice of change of address, which shall be
deemed to have been given when received.
6.2 This
Subscription Agreement shall not be changed, modified or amended except in
writing and signed by the parties to be charged, and this Subscription Agreement
may not be discharged except by performance in accordance with its terms or by a
writing signed by the party to be
charged.
6.3 Except
as otherwise provided herein, this Subscription Agreement shall be binding upon
and inure to the benefit of the parties hereto and their heirs, executors,
administrators, successors, legal representatives and assigns. If the Purchaser
is more than one person, the obligation of such Purchaser shall be joint and
several and the agreements, representations, warranties, covenants and
acknowledgments herein contained shall be deemed to be made by and be binding
upon each such person and his or her heirs, executors, administrators,
successors and legal representatives. The obligations of the parties
may not be assigned except in the event of a merger, consolidation or other
reorganization undertaken for a reason other than to assign a party’s
obligation, under this Agreement. Nothing in this Subscription
Agreement, express or implied, is intended to confer upon any party other than
the parties hereto or their respective permitted successors and assigns any
rights, remedies, obligations, or liabilities under or by reason of this
Subscription Agreement, except as expressly provided herein.
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6.4 This
Subscription Agreement, together with the Note and the Warrant issued to the
Purchaser, contains the entire agreement of the parties with respect to the
matters set forth herein and there are no representations, covenants or other
agreements except as stated or referred to herein; provided, however, that, if
applicable, any confidentiality agreement between the Company and/or the Bank
and the Purchaser shall remain in full force and effect except to the extent
inconsistent with this Subscription Agreement.
6.5 The
parties irrevocably consent to the jurisdiction of the courts of the State of
New York and of any Federal court in or for the Eastern District of New York in
connection with any action or proceeding arising out of or relating to this
Subscription Agreement.
6.6 The
Offerors will use their best efforts to keep the information provided in the
Confidential Purchaser Questionnaire and this Subscription Agreement strictly
confidential. The Offerors may present this Subscription Agreement and the
information provided in the Confidential Purchaser Questionnaire to such parties
as it deems advisable if compelled by law or called upon to establish the
availability under any Federal or state securities laws of an exemption from
registration of the Offering or if the contents hereof are relevant to any issue
in any action, suit, or proceeding to which the Offerors are parties or by which
the Offerors are or may be bound.
6.7 In
the event of a dispute regarding this Subscription Agreement that results in
litigation or arbitration, the prevailing party, as determined by the finder of
facts, shall be entitled to an award of reasonable attorneys’ fees.
6.8 NOTWITHSTANDING
THE PLACE WHERE THIS SUBSCRIPTION AGREEMENT MAY BE EXECUTED BY ANY OF THE
PARTIES HERETO, THE PARTIES EXPRESSLY AGREE THAT ALL THE TERMS AND PROVISIONS
HEREOF SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE
STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW OTHER THAN
SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATION LAW.
6.9 The
parties agree to execute and deliver all such further documents, agreements and
instruments and take such other and further action as may be necessary or
appropriate to carry out the purposes and intent of this Subscription
Agreement.
6.10 This
Subscription Agreement may be executed in one or more counterparts each of which
shall be deemed an original, but all of which shall together constitute one and
the same instrument.
6.11 In
the event that any one or more of the provisions contained herein, or the
application thereof in any circumstances, is held invalid, illegal or
unenforceable in any respect for any reason, the validity, legality and
enforceability of any such provision in every other respect and of the remaining
provisions hereof shall not be in any way impaired or affected, it being
intended that the Offerors’ and the Purchaser’s rights and privileges shall be
enforceable to the fullest extent permitted by law.
6.12 Except
as required by law, no public release or announcement concerning the
transactions contemplated hereby shall be issued by the Purchaser without the
prior consent of the Company. The Company shall use commercially
reasonable efforts to file with the SEC, as promptly as practicable after
counter-execution and deliver of this Agreement by the Company, but no later
than the
time required by SEC Form 8-K, the material terms of this Agreement if that
constitutes material non-public information with respect to the Company within
the meaning of United States federal securities laws.
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6.13 The
Bank and the Company each agree that if, prior to August 1, 2009, the Bank and
the Company shall issue (a “Subsequent Issuance”) to any unaffiliated investor a
package of subordinated notes and warrants which includes either (i)
subordinated notes carrying an interest rate in excess of 11% or (ii) warrants
carrying an exercise price lower than $11.50, then the Bank and Company shall
notify the Purchaser within five business days of such issuance that a
Subsequent Issuance has occurred and provide the Purchaser with the opportunity
during the 10-business day period following such notice to instruct the Offerors
to modify Purchaser’s Notes and Warrants so that they contain terms which are
substantially similar to those in the Notes and Warrants issued in the
Subsequent Issuance.
Signatures
appear on the following page
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IN WITNESS WHEREOF, the
undersigned has executed this Subscription Agreement as of the ___ day of
_____________, 2009.
Total
principal amount of Notes subscribed for:
$_____________________.
(fill in
dollar amount)
(minimum
subscription $250,000)
Total
Warrants to be issued based upon 25,000 Warrants per $1,000,000 of
Notes: ________
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Signature
of Purchaser
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Signature
of Co-Purchaser, if any
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(By
Authorized Representative)
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Typed/Printed
Name of Purchaser
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Typed/Printed
Name of Co-Purchaser
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Address
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Address
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City,
State and Zip Code
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City,
State and Zip Code
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Social
Security or Federal Tax
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Identification
Number of Purchaser
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Type
of Ownership
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(Check
One):
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Entities:
______ Corporation
______ Limited
Liability Company
______ Limited
Partnership
______ Trust
______ Pension
or Profit Sharing Plan or Trust
______ Individual
Retirement Account
______ Tax
Exempt Organization
______ Estate
______ Other
(Specify):
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Subscription
as to Notes having an aggregate principal amount of $________________ accepted
as of the ___ day of ___________, 2009.
(fill in dollar amount)
Total
Warrants to be issued based upon 25,000 Warrants per $1,000,000 of
Notes: _____________
BANK
OF SMITHTOWN
By:
▇▇▇▇▇▇▇
▇. Rock
Chairman,
President and Chief Executive Officer
SMITHTOWN
BANCORP, INC.
By:
▇▇▇▇▇▇▇
▇. Rock
Chairman,
President and Chief Executive Officer